SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 26, 1996
COMMISSION FILE NUMBER 33-72574
THE PANTRY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 56-1574463
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1801 DOUGLAS DRIVE, SANFORD, NORTH CAROLINA
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
27330
(ZIP CODE)
(919) 774-6700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
COMMON STOCK, $0.01 PAR VALUE 114,029 SHARES
(CLASS) (OUTSTANDING AT FEBRUARY 10, 1997)
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- -
THE PANTRY, INC.
FORM 10-Q
DECEMBER 26, 1996
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets (Unaudited).........................2
Consolidated Statements of Operations (Unaudited)...............4
Consolidated Statements of Cash Flows (Unaudited)...............5
Notes to Unaudited Consolidated Financial Statements............7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................8
PART II - OTHER INFORMATION
ITEM 2. Changes in Securities...........................................11
ITEM 5. Other Information...............................................11
ITEM 6. Exhibits and Reports on Form 8-K................................11
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PART I - FINANCIAL INFORMATION.
Item 1. Financial Statements.
THE PANTRY, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 26, December 26,
1996 1996
(Audited) (Unaudited)
ASSETS
Current assets:
Cash $ 5,338 $ 4,514
Receivables 2,860 2,912
Inventories 13,223 13,183
Prepaid expenses 775 628
Income taxes receivable 63 441
Property held for sale 2,816 2,827
Deferred income taxes 879 879
Total current assets 25,954 25,384
Property and equipment, net 65,455 64,751
Other assets:
Goodwill, net 16,852 16,678
Deferred lease cost, net 359 347
Deferred financing cost, net 5,940 5,657
Environmental receivables, net 5,162 5,162
Deferred income taxes 790 790
Other 368 410
Total other assets 29,471 29,044
$ $120,880 $ 119,179
2
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THE PANTRY, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
September 26, December 26,
1996 1996
(Audited) (Unaudited)
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 16 $ 16
Current maturities of capital lease obligations 285 285
Line of credit -- 5,610
Accounts payable:
Trade 15,666 13,828
Money orders 2,788 1,964
Accrued interest 4,416 1,385
Accrued compensation and related taxes 2,338 2,730
Other accrued taxes 2,135 991
Accrued insurance 3,629 3,923
Other accrued liabilities 1,194 1,090
Total current liabilities 32,467 31,822
Long-term debt 100,148 100,144
Other non-current liabilities:
Environmental reserve 6,232 6,373
Capital lease obligations 982 907
Employment obligations 2,039 1,846
Accrued dividends on preferred stock 2,654 3,489
Other 3,905 4,363
Total other non-current liabilities 15,812 16,978
Shareholders' deficit:
Preferred stock, $.01 par value, 150,000 shares
authorized; 25,999 issued and outstanding -- --
Common stock, $.01 par value, 300,000 shares
authorized; 114,029 issued and outstanding 1 1
Additional paid in capital (10,557) (10,557)
Accumulated deficit (16,991) (19,209)
Total shareholders' deficit (27,547) (29,765)
$ 120,880 $ 119,179
3
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THE PANTRY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
Three Months Ended
December 28, December 26,
1995 1996
(13 weeks) (13 weeks)
Revenues:
Merchandise $ 43,949 $ 47,384
Gasoline 45,699 51,838
Commissions 1,029 1,109
Total revenues 90,677 100,331
Cost of sales:
Merchandise 28,919 31,504
Gasoline 39,574 46,627
Total cost of sales 68,493 78,131
Gross profit 22,184 22,200
Operating expenses:
Store expenses 14,778 14,508
General and administrative expenses 4,690 4,083
Depreciation and amortization 2,166 2,263
Total operating expenses 21,634 20,854
Income from operations 550 1,346
Other income (expense):
Interest (3,064) (3,141)
Miscellaneous 153 67
Total other expense (2,911) (3,074)
Income (loss) before income taxes (2,361) (1,728)
Income tax benefit (expense) 534 345
Net income (loss) $ (1,827) $ (1,383)
4
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THE PANTRY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
December 28, December 26,
1995 1996
(13 weeks) (13 weeks)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,827) (1,383)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 2,166 2,263
(Gain) loss on sale of property and equipment 125 22
Reserves for environmental issues 7 15
Reserves for closed stores 15 15
Write-off of property held for sale - 9
Amortization of deferred revenues (673) (361)
(Increase) decrease in:
Receivables (67) (1)
Inventories (419) 41
Prepaid expenses 130 148
Income taxes receivable (6) (370)
Other assets 248 7
Increase (decrease) in:
Accounts payable - trade 2,412 (1,837)
Accounts payable - money orders (603) (824)
Accrued interest (2,997) (2,965)
Accrued compensation and related taxes (330) 392
Income taxes payable (607) (7)
Other accrued taxes (732) (1,145)
Accrued insurance (129) 293
Employment obligations (166) (193)
Other accrued liabilities (49) (170)
Other liabilities 326 904
Net cash provided by (used in) operating activities (3,176) (5,147)
5
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THE PANTRY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Three Months Ended
December 28, December 26,
1995 1996
(13 weeks) (13 weeks)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property held for sale $ (1,655) $ (50)
Additions to property and equipment (2,107) (1,193)
Proceeds from sale of property held for sale 300 30
Proceeds from sale of property and equipment 374 136
Net cash provided by (used in) investing activities (3,088) (1,077)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under capital lease obligations (89) (76)
Principal payments on long-term debt (4) (4)
Proceeds from issuance of long-term debt -- --
Proceeds from line of credit, net 2,700 5,610
Net payments related to equity issue 1,444 (53)
Other financing costs (2,671) (77)
Net cash provided by (used in) financing activities 1,380 5,400
Net increase (decrease) in cash (4,884) (824)
CASH AT BEGINNING OF PERIOD 10,999 5,338
CASH AT END OF PERIOD $ 6,115 $ 4,514
6
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THE PANTRY, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. The interim consolidated financial
statements have been prepared from the accounting records of The Pantry,
Inc. and its subsidiaries (the Company) and all amounts at December 26,
1996 and for the comparative three month period are unaudited. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The information furnished
reflects all adjustments which are, in the opinion of management,
necessary for a fair statement of the results for the interim periods
presented, and which are of a normal, recurring nature. It is suggested
that these interim financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's annual report on Form 10-K for the year ended September 26,
1996.
2. The results of operations for the quarter ended December 26, 1996 are
not necessarily indicative of results to be expected for the full
fiscal year. The convenience store industry in the Company's marketing
areas experiences higher levels of revenues and profit margins during
the summer months than during the winter months. Historically, the
Company has achieved higher earnings in its third and fourth quarters.
3. Inventories are stated at the lower of last-in, first-out (LIFO) cost or
market. Inventories consisted of the following (in thousands):
September 26, December 26,
1996 1996
Inventories at FIFO cost:
Merchandise $ 13,841 $ 13,898
Gasoline 4,013 4,199
-------------- ------------
17,854 18,097
Less adjustment to LIFO cost:
Merchandise (4,012) (4,126)
Gasoline (619) (788)
------------- -------------
Inventories at LIFO cost $ 13,223 $ 13,183
============= ============
4. The December 26, 1996 environmental reserve of $6.4 million represents
estimates for future expenditures for remediation, tank removal and
litigation associated with all known contaminated sites as a result of
releases (e.g., overfills, spills and underground storage tank releases)
and are based on current regulations, historical results and certain
other factors. The Company anticipates that it will be reimbursed for a
portion of these expenditures from state insurance funds and private
insurance. These anticipated reimbursements of $5.2 million are recorded
as long-term environmental receivables.
5. Under the terms of the Series A Preferred Stock, holders of the
outstanding shares are entitled to receive cumulative dividends in an
amount equal to sixty dollars ($60) per share per semi-annual calendar
period plus an amount determined by applying a 12% annual rate compounded
semi-annually to any accrued but unpaid dividend amount from the last day
of the semi-annual calendar period when such dividend accrues to the
actual date of payment of such dividend. In accordance with these terms,
the Company has accrued $3,489,014 of Series A Preferred Stock dividends
as of December 26, 1996.
6. On December 30, 1996, the Company issued 17,500 shares of Series B
Preferred Stock, $0.01 par value, for $17.5 million (see Liquidity and
Capital Resources; Preferred and Common Stock). The Company intends to
use the net proceeds of $16 million to fund existing store remodels, new
store development and future acquisitions.
7
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
REVENUES. Total revenues in the quarter ended December 26, 1996 ("first
fiscal quarter 1997") were 11% higher than the comparable period in the quarter
ended December 28, 1995 ("first fiscal quarter 1996"), despite a 5% decline in
average store count. Same store merchandise revenues increased 11%. The increase
in merchandise sales can be attributed to improved volume in major product
categories, enhanced store merchandising and increased promotional activity.
Gasoline revenues increased 13% over the first fiscal quarter 1996 due primarily
to an increase in retail price. The average retail price per gallon was $1.25 in
the first fiscal quarter 1997 compared to $1.11 in the first fiscal quarter
1996; which is indicative of the general rise in oil and gasoline wholesale
prices dating to September 1996, its impact on retail prices and the competitive
environment during both periods. Same store gasoline volume (gallons) decreased
1%. Commission revenues increased 8% over the comparable period due to increases
in money order, amusement and other miscellaneous commission income.
GROSS PROFIT. Gross profit for the first fiscal quarter 1997 was flat
compared to the first fiscal quarter 1996 as the revenue increase discussed
above was offset by a decline in gross margin in both merchandise and gasoline.
The decrease in merchandise gross margin reflects a decision in fiscal 1996 to
marginally lower retail prices in order to increase volume and same store
merchandise sales. The decrease in merchandise margin was more than offset by
the merchandise sales increase, resulting in an increase in merchandise gross
profit. The decline in gasoline margin per gallon is the result of general
gasoline market conditions and price competition from other gasoline marketers.
STORE OPERATING AND GENERAL AND ADMINISTRATIVE EXPENSES. Store
operating and general and administrative expenses for the first fiscal quarter
1997 decreased over the first fiscal quarter 1996, both in total dollars and as
a percent to merchandise sales. Store operating expenses declined as a result of
improved control of major expenditure categories including repair and
maintenance, store advertising and other controllable expenses. The decline in
general and administrative expenses was primarily due to lower employee related
expenses and lower general office expenses.
INCOME FROM OPERATIONS. Income from operations for the first fiscal
quarter 1997 increased from the first fiscal quarter 1996 which is due to
increased merchandise and commission revenues, lower store operating expenses
and lower administrative expenses as noted above.
INTEREST EXPENSE (see Liquidity and Capital Resources; Long-Term Debt).
Interest expense is primarily interest on the Notes which is due and payable
semi-annually on May 15 and November 15. Interest expense increased slightly as
the usage of the line of credit facility was greater in the first fiscal quarter
1997 than in the first fiscal quarter 1996.
INCOME TAX BENEFIT (EXPENSE). Income tax benefit for the first fiscal
quarter 1997 decreased due to lower pre-tax losses in the first fiscal quarter
1997 than in the first fiscal quarter 1996.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
("EBITDA"). EBITDA represents income (loss) before interest expense, income
tax benefit (expense) and depreciation and amortization. EBITDA increased for
the first fiscal quarter 1997 primarily as a result of the increase in income
from operations discussed above.
Liquidity and Capital Resources
CASH FLOWS FROM OPERATIONS. Due to the nature of the Company's
business, substantially all sales are for cash, and cash provided by operations
is the Company's primary source of liquidity. Currently, capital expenditures
and interest expense represent the primary use of Company funds. Cash provided
by operating activities in the first fiscal quarter 1997 decreased $1.9 million
from the first fiscal quarter 1996. The primary reason for the decrease was the
decrease in the Company's accounts payable reflecting normal seasonal purchasing
patterns. The accounts payable increase in the first fiscal quarter 1996 was due
to $1.4 million of expenses related to equity transactions that were paid in
January 1996 and higher trade accounts payable balances as of December 28, 1995.
LINE AND LETTER OF CREDIT FACILITY. To supplement cash on hand and cash
provided by operating activities, the Company has a $25 million credit facility,
which will expire on January 31, 1998 consisting of a $10 million working
capital line of credit and a $15 million line of credit for issuance of standby
letters of credit to vendors, insurance companies, federal and state regulatory
agencies for self-insurance of workers compensation and for other letter of
credit needs. Up to $2.5 million of the standby letter of credit facility can be
used as an additional working capital line of credit. As of December 26, 1996,
there were borrowings of $5.6 million outstanding under the $10 million working
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capital line of credit and approximately $10.4 million of letters of credit were
issued under the standby letter of credit facility.
CAPITAL EXPENDITURES. As of December 26, 1996, capital expenditures
totaled $1.2 million, primarily comprised of expenditures for store equipment
and existing store improvements.
LONG-TERM DEBT. The Company's long-term debt consists primarily of $100
million of the Company's 12% Senior Notes due 2000 (the "Notes"). The interest
payments on the Notes are due May 15 and November 15. The Indenture, which
governs the Notes, contains restrictive covenants that affect the ability of the
Company to expand its business. A Supplemental Indenture, executed on December
4, 1995, by the Company and IBJ Schroder Bank & Trust Company, as Trustee,
became effective on December 30, 1996, when the Company issued additional
Qualified Capital Stock (as defined in the Indenture) raising the total
Qualified Capital Stock proceeds received since December 1995 to over $22.6
million on or before December 31, 1996. The issuance of the additional Qualified
Capital Stock caused the Supplemental Indenture to become effective.
The Supplemental Indenture amends the Indenture as follows: (i)
permitted borrowings under Section 4.10(b) of the Indenture are increased from
$25 million to $35 million and the purposes for which such borrowings can be
used is expanded; (ii) borrowings permitted under Section 4.10(d) of the
Indenture are increased from $5 million to $10 million, the purposes for which
such borrowings can be used are expanded to include capital expenditures
generally (rather than furniture, fixtures and equipment) and the restriction
that all such borrowings be non-recourse to the Company is removed; (iii) the
time period in which proceeds of Asset Sales (as defined in the Indenture) can
be reinvested is increased and the amount of Asset Sales for which no prepayment
of the Notes is required under Section 4.13 of the Indenture is increased to
facilitate potential sale/leaseback transactions; (iv) the limitations on
Restricted Payments (as defined in the Indenture) are modified to allow the
Company to make loans to employees to purchase Company stock and to allow the
Company to repurchase stock from employees when their employment with the
Company terminates; (v) the Company is required to own a minimum of 112
convenience store properties at all times; and (vi) the interest rate payable on
the Notes will increase if the Consolidated Fixed Charge Coverage Ratio falls
for a Measurement Period ("the Coverage Ratio", as defined in the Indenture)
below 1.63 to 1.
The Company's Consolidated Fixed Charge Coverage Ratio for the
Measurement Period for the twelve months ending December 26, 1996 was .93 to 1,
resulting in an increase in the interest rate on the Notes from 12% to 12.5% for
the period beginning December 27, 1996 and ending June 26, 1997. The Second
Measurement Period ends June 26, 1997, at which time the Coverage Ratio will
again be calculated. If the Coverage Ratio at that time is equal to or exceeds
1.63 to 1, the interest rate on the Notes will revert to 12%; if not, the
interest rate will continue to be 12.5% through December 1997. The incremental
0.5% interest accruing through May 15, 1997 will be paid on May 15 while the
incremental interest accruing from May 16 through June 26, 1997 will be paid on
November 15, 1997.
PREFERRED AND COMMON STOCK. In a series of transactions during fiscal
1996, Freeman Spogli & Co. Incorporated, through its affiliates, FS Equity
Partners III, L.P., a Delaware limited partnership ("FSEP III") and FS Equity
Partners International, L.P., a Delaware limited partnership ("FSEP
International," collectively with FSEP III, "the FS Group," the FS Group
collectively with Freeman Spogli & Co. Incorporated, "FS&Co.") and Chase
Manhattan Capital Corporation ("Chase") purchased all of the outstanding
preferred stock and 95.4% of the common stock of the Company. A partnership of
which Mr. Christopher C. Behrens, a director of the Company and an affiliate of
Chase, is a partner owns 4.6% of the common stock. As of December 26, 1996, the
Company had issued (i) 114,029 shares of common stock, and (ii) 25,999 shares of
Series A Preferred Stock, all of which were outstanding
On December 30, 1996, subsequent to the end of the Company's first
quarter fiscal 1997, the Company issued and FS&Co. purchased 17,500 shares of
Series B Preferred Stock for $17.5 million. The Company intends to use the net
proceeds of $16 million to fund existing store remodels, new store development
and future acquisitions. As a result of this transaction, the Company has now
issued (i) 114,029 shares of common stock, (ii) 25,999 shares of Series A
Preferred Stock, and (iii) 17,500 shares of Series B Preferred Stock, all of
which are outstanding
SHAREHOLDERS' DEFICIT. The Company's shareholders' deficit was $29.8
million as of December 26, 1996. This deficit is due primarily to the accounting
treatment applied to a 1987 leveraged buyout of the Company's outstanding common
stock which resulted in a debit to additional paid in capital of $17.1 million.
In addition, the cumulative effect of dividends, accounting changes,
extraordinary items and interest expense has resulted in net losses which have
added to the shareholders' deficit.
ENVIRONMENTAL CONSIDERATIONS. The Company is subject to various
federal, state and local environmental laws. Federal, state, and local
regulatory agencies have adopted regulations governing underground petroleum
storage
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tanks ("USTs") that require the Company to make certain expenditures for
compliance. Regulations enacted by the EPA in 1988 established requirements for
(i) installing UST systems; (ii) upgrading UST systems; (iii) taking corrective
action in response to releases; (iv) closing UST systems; (v) keeping
appropriate records; and (vi) maintaining evidence of financial responsibility
for taking corrective action and compensating third parties for bodily injury
and property damage resulting from releases. UST systems upgrading consists of:
installing and employing leak detection equipment and systems, upgrading UST
systems for corrosion protection and installing overfill/spill prevention
devices.
In addition to the technical standards, the Company is required by
federal and state regulations to maintain evidence of financial responsibility
for taking corrective action and compensating third parties in the event of a
release from its UST systems. In order to comply with the applicable
requirements, the Company maintains a letter of credit in the aggregate amount
of $2.1 million issued by a commercial bank in favor of state environmental
agencies in the states of North Carolina, South Carolina, Tennessee, Kentucky
and Indiana and relies upon the reimbursement provisions of applicable state
trust funds.
The Company believes it is in full or substantial compliance with
the leak detection requirements applicable to its USTs. The Company anticipates
that it will meet the 1998 deadline for installing corrosion protection and
spill/overfill equipment for all of its USTs and has budgeted approximately $2.0
million of capital expenditures for these purposes over the next two years.
Additional regulations or amendments to the existing UST regulations could
result in future revisions to the estimated upgrade compliance and remediation
costs outlined above.
All states in which the Company operates or has operated UST systems
have established trust funds for the sharing, recovering and reimbursing of
certain cleanup costs and liabilities incurred as a result of releases from UST
systems. These trust funds, which essentially provide coverage for taking
corrective action and compensating third parties in the event of a release from
its UST systems, are funded by a UST registration fee and a tax on the wholesale
purchase of motor fuels within each state. The Company has paid UST registration
fees and gasoline taxes to each state where it operates to participate in these
trust programs and the Company has filed claims and received reimbursement in
North Carolina, South Carolina, Tennessee and Kentucky. The coverage afforded by
each state fund varies but generally provides for up to $1 million per site for
the cleanup of environmental contamination, and most provide coverage for third
party liability subject to applicable deductibles. Costs for which the Company
does not receive reimbursement include but are not limited to: (i) the per-site
deductible; (ii) costs incurred in connection with releases occurring or
reported to trust funds prior to their inception; (iii) removal and disposal of
UST systems; and (iv) costs incurred in connection with sites otherwise
ineligible for reimbursement from the trust funds. The trust funds require the
Company to pay deductibles ranging from $10,000 to $100,000 per occurrence
depending on the upgrade status of its UST system, the date the release is
discovered/reported and the type of cost for which reimbursement is sought.
Reimbursements from state trust funds will be dependent upon the continued
maintenance and solvency of the various funds.
---------------------------------------
While no assurances can be given in this regard, management believes
that cash on hand, together with cash flow anticipated to be generated from
operations, short-term borrowing for seasonal working capital needs, sale and
leaseback programs, permitted borrowings under the Indenture and by its
Unrestricted Subsidiary will be adequate to fund existing store remodels, new
store development, future acquisitions, its debt service requirements and the
other operating requirements of the Company over the next twelve months.
10
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PART II - OTHER INFORMATION.
ITEM 2. CHANGES IN SECURITIES.
As previously reported, a Supplemental Indenture, executed on
December 4, 1995, by the Company and IBJ Schroder Bank & Trust
Company, as Trustee, became effective on December 30, 1996, when
the Company issued additional Qualified Capital Stock (as defined
in the Indenture) raising the total Qualified Capital Stock
proceeds received since December 1995 to over $22.6 million on or
before December 31, 1996. The Supplemental Indenture amends the
Indenture, which governs the Notes in certain respects. For a
summary of the effects of the amendment see "Part I. Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources" in this
Form 10-Q.
ITEM 5. OTHER INFORMATION.
On January 28, 1997, the Board of Directors appointed the
following individuals to serve as the officers of the Company in
the following positions:
NAME POSITION
----------------------- ------------------------------------------------
Peter J. Sodini President and Chief Executive Officer
Dennis R. Crook Senior Vice President Administration and Gasoline
Marketing
Douglas M. Sweeney Senior Vice President Operations
William T. Flyg Senior Vice President Finance and Secretary
John H. Hearne Vice President Real Estate
Daniel J. McCormack Vice President Merchandise
Joseph J. Duncan Assistant Secretary
Mark C. King Assistant Secretary
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
3.1 Certificate of Designation of Preferences of the
Series B Preferred Stock of The Pantry, Inc.
(the "Company").
10.1 Amended and Restated Registration Rights
Agreement with respect to Common Shares
of the Company.
10.2 Amended and Restated Registration Rights
Agreement with respect to Series A
Preferred Shares of the Company.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
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EXHIBIT INDEX
Exhibit No. Description of Document
3.1 Certificate of Designation of Preferences of the Series B Preferred
Stock of The Pantry, Inc. (the "Company").
10.1 Amended and Restated Registration Rights Agreement with respect to
Common Shares of the Company.
10.2 Amended and Restated Registration Rights Agreement with respect to
Series A Preferred Shares of the Company.
27.1 Financial Data Schedule.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE PANTRY, INC.
Date: February 10, 1997 By:/s/ William T. Flyg
-------------------
William T. Flyg
Senior Vice President Finance and Secretary
(Authorized Officer and Principal
Financial Officer)
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EXHIBIT 3.1
CERTIFICATE OF DESIGNATION OF
PREFERENCES OF THE
SERIES B PREFERRED STOCK
OF THE PANTRY, INC.
Pursuant to Section 151 of the
General Corporation Law of the
State of Delaware
The undersigned, Peter J. Sodini and Mark C. King, do hereby
certify as follows:
A. That Peter J. Sodini is, and at all times herein mentioned
was, the duly elected and acting Chief Executive Officer of The Pantry, Inc., a
Delaware corporation (the "Corporation"), and that Mark C. King is, and at all
times herein mentioned was, the duly elected and acting Secretary of the
Corporation.
B. -That the following resolution was duly adopted by the Board
of Directors of the Corporation (the "Board"):
RESOLVED, that pursuant to authority conferred upon the Board
of Directors by the Certificate of Incorporation of the Corporation, there is
hereby created a series of preferred stock of the Corporation, designated as
"Series B Preferred Stock", which series shall consist of Twenty Five Thousand
(25,000) shares, $0.01 par value per share. In addition to those set forth in
the Certificate of Incorporation of the Corporation, the shares of Series B
Preferred Stock shall have the powers and preferences, the participating,
optional or other special rights, and the qualifications, limitations or
restrictions set forth below:
1. Definitions. As used in this resolution, the following terms
shall have the meanings indicated:
(a) "Board" shall mean the Board of Directors of the
Corporation.
(b) "Common Stock" shall mean the Common Stock, $0.01
par value, per share issued or to be issued by the Corporation.
(c) "Corporation" shall mean The Pantry, Inc.
(d) "Liquidation Event" shall mean any transaction or
series of related transactions that result in the sale of fifty percent (50%) or
more of the capital stock of the Corporation or of all or substantially all of
the assets thereof and any merger, consolidation or similar transaction.
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(e) "Original Issue Date" shall mean the date of the
original issuance of any shares of Series B Preferred Stock.
(f) "Series A Certificate" shall mean the Certificate
of Designation of Preferences of the Series A Preferred Stock, as filed with the
Secretary of State of the State of Delaware on November 30, 1995.
(g) "Series A Preferred Stock" shall mean the Series
A Preferred Stock, $0.01 par value per share, issued by the Corporation pursuant
to the Series A Certificate.
(h) "Series B Preferred Stock" shall mean the Series
B Preferred Stock, $0.01 par value per share, issued or to be issued by the
Corporation.
2. Dividends.
(a) The holders of shares of Series B Preferred Stock
then outstanding shall be entitled to receive, when, as and if declared by the
Board, out of funds legally available for the payment of dividends, cumulative
dividends in an amount equal to Thirty-Two Dollars and Fifty Cents ($32.50) per
share per quarterly period, plus an amount determined by applying a thirteen
percent (13%) annual rate compounded quarterly to any accrued but unpaid
dividend amount from the last day of the quarterly period when such dividend
accrues to the actual date of payment of such dividend, and no more. Such
dividends on the outstanding shares of Series B Preferred Stock shall be payable
at such intervals as the Board may from time to time determine (each of such
dates being a "dividend payment date") to the persons who are holders of record
of outstanding shares of Series B Preferred Stock on each of the respective
dividend payment dates. Each of such quarterly dividends shall be fully
cumulative and shall accrue from day to day (whether or not declared) from the
first (1st) day of each quarterly period in which such dividend may be payable
as herein provided, except that with respect to the first quarterly dividend due
on the Series B Preferred Stock, such dividend shall accrue from the Original
Issue Date. Dividends, when, as and if declared, may, at the discretion of the
Board, be payable in cash or by issuing additional shares, including fractional
shares, of Series B Preferred Stock to the holders of record of outstanding
shares of Series B Preferred Stock, at the rate of one share for each One
Thousand Dollars ($1,000) of dividend, and the issuance of such additional
shares shall constitute full payment of such dividends, with all holders
entitled to receive the same proportions of cash and shares of Series B
Preferred Stock if a dividend is payable in cash and shares or Series B
Preferred Stock. No dividend shall be declared, set aside or paid to holders of
any of the outstanding shares of the capital stock of the Corporation, including
without limitation, any outstanding shares of Series A Preferred Stock or Common
Stock, unless at the same time a dividend in an amount equal to all accrued but
unpaid dividends as set forth above is declared and paid to the holders of
outstanding shares of Series B Preferred Stock.
2.
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(b) All dividends paid with respect to the
outstanding shares of Series B Preferred Stock pursuant to subparagraph 2(a)
shall be paid pro rata to the holders entitled thereto.
(c) Holders of outstanding fractional shares of
Series B Preferred Stock shall be entitled to a ratably proportionate amount of
all dividends accruing with respect to each outstanding share of Series B
Preferred Stock pursuant to subparagraph 2(a), and all of such dividends with
respect to such outstanding fractional shares shall be fully cumulative and
shall accrue (whether or not declared) and shall be payable in the same manner
and at such times as provided for in subparagraph 2(a).
3. Liquidation Rights of Series B Preferred Stock.
(a) In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
outstanding shares of Series B Preferred Stock, shall be entitled to be paid out
of the assets of the Corporation available for distribution to its stockholders,
whether such assets are capital, surplus or earnings, before any payment or
declaration and setting apart for payment of any amount shall be made in respect
of the outstanding shares of any other class or series of the Corporation's
capital stock, including without limitation, shares of Series A Preferred Stock
and of Common Stock, an amount equal to One Thousand Dollars ($1,000) per share
of Series B Preferred Stock then outstanding, plus all accrued but unpaid
dividends thereon to the date fixed for liquidation (whether or not declared),
and no more. If upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of the outstanding shares of Series B Preferred Stock shall be
insufficient to permit the payment to such stockholders of the full preferential
amounts aforesaid, then the entire assets of the Corporation to be distributed
shall be distributed ratably among the holders of outstanding shares of Series B
Preferred Stock based on the full preferential amounts for the number of
outstanding shares of Series B Preferred Stock held by each holder.
(b) After the payment or setting apart of the payment
to the holders of outstanding shares of Series B Preferred Stock of the
preferential amounts aforesaid, the holders of outstanding shares of any other
class or series of the capital stock of the Corporation shall be entitled to
receive the remaining assets of the Corporation ratably, in order of seniority
thereof.
(c) Following a Liquidation Event, the holder of a
majority of the outstanding shares of Series B Preferred Stock may, in the
discretion thereof, deem such Liquidation Event a liquidation, dissolution or
winding up of the Corporation that triggers the rights of such holders, as
further set forth in Section 3(a) above.
(d) The payment of preferential amounts pursuant to
this paragraph 3 with respect to each outstanding fractional share of Series B
Preferred Stock shall be equal to a ratably proportionate amount of the
preferential amount payable with respect to each outstanding share of Series B
Preferred Stock.
3.
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4. Voting Rights. At all meetings of the stockholders of the
Corporation and in the case of any actions of stockholders in lieu of a meeting,
each holder of shares of Series B Preferred Stock shall be entitled to ten (10)
votes per share of Series B Stock held thereby. Except as otherwise expressly
provided in Section 5 below or as required by law, the holders of Common Stock
and Series B Preferred Stock shall vote together as a single class in accordance
with the preceding sentence, and neither the Common Stock nor the Series B
Preferred Stock shall be entitled to vote as a separate class on any matter to
be voted on by stockholders of the Corporation.
5. Restrictions and Limitations.
(a) The Corporation shall not, without the consent of
the holders of a majority of the outstanding shares of Series B Preferred Stock,
voting separately as a single class:
(i) Issue any securities with equal or
superior rights with respect to dividends or liquidation
preference;
(ii) Repurchase any shares of, make any
dividend or distribution to, or any reclassification with
respect to any of the Corporation's outstanding shares of
capital stock, except that no such vote shall be required with
respect to any such action taken in accordance with the Series
A Certificate with respect to shares of Series A Preferred
Stock;
(iii) Amend or modify the Corporation's
Articles of Incorporation or Bylaws so as to adversely affect
the relative rights, preferences, qualification, limitations
or restrictions or the Series B Preferred Stock; and
(iv) Amend this paragraph 5(a).
(b) Except as otherwise expressly provided in this
paragraph 5, any changes or amendments to the powers, preferences, and relative,
participating, optional or other special rights, or the qualifications,
limitations or restrictions thereof, with respect to the outstanding shares of
Series B Preferred Stock may be made in accordance with applicable law.
4.
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IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designation of Preferences of the Series B Preferred Stock of the
Corporation to be signed and attested by its duly authorized officers this 26th
day of December, 1996.
/s/ Peter J. Sodini
______________________________
Peter J. Sodini
Chief Executive Officer
Attest:
/s/ Mark C. King
_____________________________
Mark C. King
Secretary
5.
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EXHIBIT 10.1 EXECUTION
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of August 19, 1996 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
International, L.P., a Delaware limited partnership ("FSEP International;" FSEP
III and FSEP International are sometimes collectively referred to herein as the
"FS Entities"), Chase Manhattan Capital Corporation, a Delaware corporation
("Chase"), and Baseball Partners, a New York general partnership ("BP;" Chase
and BP are sometimes collectively referred to herein as the "Chase Entities").
The FS Entities and the Chase Entities are sometimes collectively referred to as
the "Holders" and individually as the "Holder." This Agreement is entered into
concurrently with the execution of that certain Stockholders' Agreement dated
August 19, 1996 entered into by and among the parties hereto (the "Stockholders'
Agreement"), and amends and restates that certain Registration Rights Agreement
dated November 30, 1995 by and between the Company, the FS Entities and Chase
(the "Registration Rights Agreement") entered into in connection with that
certain Stock Purchase Agreement (the "FS Stock Purchase Agreement") dated
November 30, 1995 entered into by and among the Company, the FS Entities,
Montrose Value Fund Limited Partnership and Montrose Financial No. 6 Limited
Partnership (Pantry) (collectively, "The Montrose Group"), W. Clay Hamner
("Hamner") and Wayne M. Rogers ("Rogers") and that certain Stock Purchase
Agreement (the "Chase Stock Purchase Agreement") dated November 30, 1995 by and
among the Company, Chase, The Montrose Group, Hamner and Rogers. This Agreement
is entered into to provide registration rights equivalent to those provided with
respect to the shares of the Company's common stock, par value $0.01 per share
(the "Common Stock") purchased under the FS Stock Purchase Agreement and the
Chase Stock Purchase Agreement for Fifty Four Thousand Eight Hundred
Twenty-Eight (54,828) shares of Common Stock purchased from The Montrose Group
pursuant to the terms and conditions of that certain Settlement Agreement dated
July 16, 1996, by and between Freeman Spogli & Co., Incorporated, FSEP III, FSEP
International, Chase, The Montrose Group, Hamner, Rogers and the Company (the
"Settlement Agreement") (all such shares of Common Stock purchased pursuant to
the FS Stock Purchase Agreement, the Chase Stock Purchase Agreement or the
Settlement 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"). Terms not otherwise defined herein shall have the
same meaning given them in the Stockholders' Agreement.
1. 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
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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 2
of this Agreement), or until registration of such Registrable Securities under
the Securities Act has become effective.
2. 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.
(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) entities
that are controlled Affiliates (as defined in the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of Chase and (iii) 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 the Stockholders'
Agreement.
3. 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 5(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
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entitled, by written notice to the Company and subject to Section 4(a) hereof,
to include shares of Registrable Securities in any registration prepared by the
Company pursuant to this Section 3(a). The Company shall not be obligated to
effect more than two (2) demand registrations pursuant to this Section 3(a).
(b) In addition to the registration rights provided
pursuant to Section 3(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.
(c) Whenever the Company shall be requested by the
Initiating Holders pursuant to Section 3(a) or by a Holder pursuant to Section
3(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 3(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 3(a) or (b), if the Initiating
Holders or a Holder in the case of Section 3(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 3(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 (A) not
being underwritten and the Holders of a majority of the Registrable Securities
requesting registration consent to such inclusion in writing or (B) 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 3(f) and sold on the same terms and conditions as apply to
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<PAGE>
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 3(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 3(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
securities requested to be registered by such holders and (iii) third, such
other securities being offered by the Company.
4
<PAGE>
4."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 4(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 4(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.
5
<PAGE>
5. 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 5(a) and provided that in
any event the Company's obligations under this Section 5(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;
6
<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 5(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.
6. Payment of Registration Expenses. The costs and
expenses of all "piggyback" registrations and qualifications under the
Securities Act pursuant to Section 4 hereof, all registrations and
qualifications under the Securities Act pursuant to Section 3(b) hereof and two
(2) demand registrations and qualifications under the Securities Act pursuant to
Section 3(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.
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<PAGE>
7. 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.
8. 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 4 hereof.
9. Participation in Underwritten Registrations. No
Holder may participate in any underwritten registration hereunder unless such
Holder (a) agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders and (b) 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 (i) if FSEP III, FSEP
International 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 (ii) the liability of FSEP III, FSEP International 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.
10. 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
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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 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.
11. 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.
9
<PAGE>
12. 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 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.
13. 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
10
<PAGE>
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.
14. 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.
15. 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 15 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
11
<PAGE>
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 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 15.
(d) The rights granted to a Holder under this
Section 15 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.
16. Other Registration Rights. Except for the
Registration Rights Agreement amended and restated hereby, the Company has not
previously entered into and will not hereafter enter into any agreement granting
registration rights with respect to its securities which is in conflict or
inconsistent with the rights of the Holders set forth in this Agreement.
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
12
<PAGE>
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 of even date herewith.
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 and does hereby supersede
and restate entirely in all respects the Registration Rights Agreement.
13
<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
--------------------------------
Peter J. Sodini
President and Cheif Executive Officer
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
--------------------------
Charles P. Rullman
Managing Director
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
-------------------------
Charles P. Rullman
Managing Director
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
14
<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
CHASE MANHATTAN CAPITAL CORPORATION,
a Delaware corporation
By: /s/ Christopher C. Behrens
---------------------------
Christopher C. Behrens
Principal
BASEBALL PARTNERS,
a New York general partnership
By: /s/ Christopher C. Behrens
---------------------------
Christopher C. Behrens
General Partner
15
<PAGE>
EXHIBIT 10.2 EXECUTION
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (this
"Agreement") is made and entered into as of August 19, 1996, 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
International, L.P., a Delaware limited partnership ("FSEP International;" FSEP
III and FSEP International are sometimes collectively referred to herein as the
"FS Entities"), Chase Manhattan Capital Corporation, a Delaware corporation
("Chase"), and Baseball Partners, a New York general partnership ("BP;" Chase
and BP are sometimes collectively referred to herein as the "Chase Entities").
The FS Entities and the Chase Entities are sometimes collectively referred to as
the "Holders" and individually as the "Holder." This Agreement is entered into
concurrently with the execution of that certain Stockholders' Agreement dated
August 19, 1996 entered into by and among the parties hereto (the "Stockholders'
Agreement"), and amends and restates that certain Registration Rights Agreement
dated November 30, 1995 by and between the Company, the FS Entities and Chase
(the "Registration Rights Agreement") entered into in connection with that
certain Stock Purchase Agreement (the "FS Stock Purchase Agreement") dated
November 30, 1995 entered into by and among the Company, the FS Entities,
Montrose Value Fund Limited Partnership and Montrose Financial No. 6 Limited
Partnership (Pantry) (collectively, "The Montrose Group"), W. Clay Hamner
("Hamner") and Wayne M. Rogers ("Rogers") and that certain Stock Purchase
Agreement (the "Chase Stock Purchase Agreement") dated November 30, 1995 by and
among the Company, Chase, The Montrose Group, Hamner and Rogers. This Agreement
is entered into to provide registration rights equivalent to those provided with
respect to the shares of the Company's Series A Preferred Stock, par value $0.01
per share (the "Preferred Stock") purchased under the FS Stock Purchase
Agreement and the Chase Stock Purchase Agreement for Twelve Thousand Five
Hundred and Seven Hundred Eighty-Four Thousandths (12,500.784) shares of
Preferred Stock purchased from The Montrose Group pursuant to the terms and
conditions of that certain Settlement Agreement dated July 16, 1996, by and
between Freeman Spogli & Co., Incorporated, FSEP III, FSEP International, Chase,
The Montrose Group, Hamner, Rogers and the Company (the "Settlement Agreement")
(all such shares of Preferred Stock purchased pursuant to the FS Stock Purchase
Agreement, the Chase Stock Purchase Agreement or the Settlement 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").
Terms not otherwise defined herein shall have the same meaning given them in the
Stockholders' Agreement.
1. 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
<PAGE>
"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 2 of this Agreement), or until registration of such Registrable
Securities under the Securities Act has become effective.
2. 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.
(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)
entities that are controlled Affiliates (as defined in the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) of Chase and (iii) 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 the Stockholders'
Agreement.
3. 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 5(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
2.
<PAGE>
<PAGE>
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
4(a) hereof, to include shares of Registrable Securities in any registration
prepared by the Company pursuant to this Section 3(a). The Company shall not be
obligated to effect more than one (1) demand registration pursuant to this
Section 3(a).
(b) In addition to the registration rights
provided pursuant to Section 3(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 Preferred 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.
(c) Whenever the Company shall be requested by
the Initiating Holders pursuant to Section 3(a) or by a Holder pursuant to
Section 3(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 3(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 3(a) or (b), if the Initiating
Holders, or a Holder in the case of Section 3(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 any securities of the Company 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 3(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 (A) not being underwritten and the Holders of a majority of the
Registrable Securities requesting registration consent to such inclusion in
writing or (B) a firm commitment underwriting and the managing underwriter has
informed the Holders that inclusion of such securities will not
3.
<PAGE>
adversely affect the price range or the probability of success of the offering
and such securities are allocated as provided in Section 3(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
3(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 3(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 securities requested to be registered by such holders
and (iii) third, such other securities being offered by the Company.
4.
<PAGE>
4. "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 Preferred 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 equity securities
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 4(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 4(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
5.
<PAGE>
Holder shall also be permitted to include a pro rata portion of the Registrable
Securities held thereby.
5. 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 5(a) and provided that in
any event the Company's obligations under this Section 5(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;
6.
<PAGE>
(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;
(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 5(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.
<PAGE>
6. Payment of Registration Expenses. The costs and
expenses of all "piggyback" registrations and qualifications under the
Securities Act pursuant to Section 4 hereof, all registrations and
qualifications under the Securities Act pursuant to Section 3(b) hereof and one
(1) demand registration and qualification under the Securities Act pursuant to
Section 3(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.
7. 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.
8. 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 4 hereof.
9. Participation in Underwritten Registrations. No
Holder may participate in any underwritten registration hereunder unless such
Holder (a) agrees to sell such Holder's securities on the basis provided in any
underwriting arrangements approved by the Holders and (b) 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 (i) if FSEP III, FSEP
International 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 (ii) the liability of FSEP III, FSEP International or any of
their Affiliates, and the Chase Entities or any of their Affiliates
8.
<PAGE>
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.
10. 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 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.
11. 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
9.
<PAGE>
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.
12. 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 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.
10.
<PAGE>
13. Contribution.
(a) If the indemnification provided for in
this Agreement from the indemnifying party is unawailable 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.
14. Public Information. At any time after the Company
has completed its initial public offering of equity securities, 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 Preferred 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
11.
<PAGE>
and will promptly furnish to each Holder, upon request, a written statement that
the Company has complied with all such reporting requirements.
15. Other Registration Rights. Except for the
Registration Rights Agreement amended and restated hereby, the Company has not
previously entered into and will not hereafter enter into any agreement granting
registration rights with respect to its securities which is in conflict or
inconsistent with the rights of the Holders set forth in this Agreement.
16. 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.
17. 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 Shareholders Agreement of even date herewith.
18. 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.
19. 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.
20. 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
and restate entirely in all respects the Registration Rights Agreement.
12.
<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
--------------------------------------
Peter J. Sodini
President and Cheif Executive Officer
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
-------------------------------
Charles P. Rullman
Managing Director
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
-----------------------------
Charles P. Rullman
Managing Director
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
13.
<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
CHASE MANHATTAN CAPITAL CORPORATION,
a Delaware corporation
By: /s/ Christopher C. Behrens
-------------------------------------------
Christopher C. Behrens
Principal
BASEBALL PARTNERS,
a New York general partnership
By: /s/ Christopher C. Behrens
---------------------------
Christopher C. Behrens
General Partner
14.
<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-25-1997
<PERIOD-START> SEP-27-1996
<PERIOD-END> JUN-27-1996
<CASH> 4,514
<SECURITIES> 0
<RECEIVABLES> 2,912
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<INVENTORY> 13,183
<CURRENT-ASSETS> 25,384
<PP&E> 117,978
<DEPRECIATION> (53,227)
<TOTAL-ASSETS> 119,179
<CURRENT-LIABILITIES> 31,882
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 119,179
<SALES> 100,331
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