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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 5, 1998
THE PANTRY, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-72574 56-1574463
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification Number)
1801 Douglas Drive, P.O. Box 1410, Sanford, North Carolina 27330
(Address of principal executive offices)
(919) 774-6700
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
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<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 5, 1998, The Pantry, Inc. (the "Company") acquired, in a
negotiated acquisition, certain of the assets of each of Express Stop, Inc.
("Express Stop"), Bryan Oil Company, Inc. ("Bryan Oil"), Market Express of
Shallote, Inc. ("Market Express") and Lennon Oil Company ("Lennon Oil," along
with Express Stop, Bryan Oil and Market Express, sometimes referred to herein
collectively as the "Sellers") including, but not limited to, twenty-two (22)
convenience stores located in North Carolina and South Carolina. The purchase
price was $20,280,000 in cash plus Inventory at Cost (as those terms are defined
in the Asset Purchase Agreement dated September 28, 1998, as amended on November
5, 1998, by and among Express Stop, Bryan Oil, Market Express, Lennon Oil and
the Company (the "Asset Purchase Agreement")). The Company intends to continue
to operate the assets of the Sellers as they have historically been operated.
The source of funds for the acquisition of the Sellers was (i) the Company's
bank credit facility (the "Credit Facility") and (ii) cash on hand.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
1) Express Stop Financial Statements as of December 31,
1997 and the year then ended and Unaudited Interim
Financial Statements as of June 30, 1998 and for the
six-month periods ended June 30, 1998 and 1997:
a) Report of Independent Auditors
b) Balance Sheet
c) Statement of Income
d) Statement of Retained Earnings
e) Statement of Cash Flows
f) Notes to Financial Statements
(b) PRO FORMA FINANCIAL INFORMATION.
1) Introduction to Unaudited Pro Forma Financial Data
2) Unaudited Pro Forma Balance Sheet Data as of June 25,
1998 and Accompanying Notes
3) Unaudited Pro Forma Statement of Operations Data for the
Nine-Months Ended June 25, 1998
4) Unaudited Pro Forma Statement of Operations Data for the
Year Ended September 25, 1997 and Accompanying Notes
(c) EXHIBITS.
Exhibit No. Description of Exhibit
2.1 Asset Purchase Agreement dated September 28, 1998,
as amended on November 5, 1998, by and among
Express Stop, Bryan Oil, Market Express, Lennon
Oil and the Company (asterisks located within the
exhibit denote information which has been deleted
pursuant to a request for confidential treatment
filed with the Securities and Exchange Commission)
2.2 List of Exhibits and Schedules omitted from the
Asset Purchase Agreement referenced in Exhibit 2.1
hereof (asterisks located within the exhibit
denote information which has been deleted
-2-
<PAGE>
pursuant to a request for confidential treatment
filed with the Securities and Exchange Commission)
-3-
<PAGE>
EXPRESS STOP, INC.
FINANCIAL REPORT
DECEMBER 31, 1997
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
REPORT OF INDEPENDENT AUDITORS 1
FINANCIAL STATEMENTS
Balance sheet 2
Statement of income 3
Statement of retained earnings 3
Statement of cash flows 4
Notes to financial statements 5 - 10
<PAGE>
1
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Express Stop, Inc.
Fayetteville, North Carolina
We have audited the accompanying balance sheet of Express Stop, Inc. as of
December 31, 1997, and the related statement of income, retained earnings, and
cash flows for the year then ended. These financial statements are the
representation of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Express Stop, Inc. as of
December 31, 1997 and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ GRIFFIN, MAXWELL, & FRAZELLE, P.A.
Fayetteville, North Carolina
September 25, 1998
<PAGE>
EXPRESS STOP, INC.
BALANCE SHEET
(dollars in thousands)
June 30,
December 31, 1998
ASSETS 1997 (Unaudited)
----------- -----------
CURRENT ASSETS
Cash and cash equivalents (Note 2) $ 1,654 $ 1,527
Certificates of deposit 279 283
Accounts receivable: (Note 5)
Trade 36 114
Merchandise distributors 353 396
Credit cards 190 70
Inventories (Notes 3 and 5) 1,364 1,260
Prepaid expenses and other 34 113
----------- -----------
Total current assets 3,910 3,763
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LONG-TERM RECEIVABLES AND OTHER ASSETS
Environmental remediation receivables (Note 11) 1,100 1,100
Advances to affiliated companies, unsecured 116 247
Investment in partnership (Note 4) 109 125
Other (Note 12) 77 283
----------- -----------
1,402 1,755
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PROPERTY AND EQUIPMENT (Note 5)
Equipment 4,387 4,219
Vehicles 160 137
Leasehold improvements 914 816
Construction and equipment installations in
progress - 484
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5,461 5,656
Less accumulated depreciation and amortization 3,337 3,392
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2,124 2,264
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$ 7,436 $ 7,782
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See Notes to Financial Statements.
<PAGE>
2
June 30,
December 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 (Unaudited)
----------- -----------
CURRENT LIABILITIES
Current maturities of long-term debt (Note 5) $ 177 $ 189
Accounts payable:
Trade 2,151 2,266
Other 69 69
Accrued expenses:
Salaries 185 100
Profit sharing 25 -
Other 58 65
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Total current liabilities 2,665 2,689
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LONG-TERM DEBT, less current maturities (Note 5) 1,073 1,159
----------- -----------
OTHER NONCURRENT LIABILITIES
Environmental remediation liabilities (Note 11) 1,100 1,100
Deferred income, net (Note 7) 81 79
Other 56 56
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1,237 1 235
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COMMITMENTS AND CONTINGENCIES
(Notes 9 and 11)
STOCKHOLDERS' EQUITY
Common stock, par value $15 per share,
authorized and issued 2,000 shares 30 30
Retained earnings 2,431 2,669
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2,461 2,699
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$ 7,436 $ 7,782
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<PAGE>
EXPRESS STOP, INC. 3
STATEMENT OF INCOME
(dollars in thousands)
Six Months Ended
------------------------
June 30, June 30,
December 31, 1998 1997
1997 (Unaudited) (Unaudited)
----------- ----------- -----------
Revenues:
Merchandise sales $ 18,439 $ 10,455 $ 8,553
Fuel sales (Note 6) 29,984 13,670 14,820
Video sales 1,432 778 650
Commissions and other (Note 10) 347 214 185
----------- ----------- -----------
50,202 25,117 24,208
----------- ----------- -----------
Cost of sales:
Merchandise 13,960 7,971 6,419
Fuel (Note 6) 27,222 12,421 13,626
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41,182 20,392 20,045
----------- ----------- -----------
Gross Profit 9,020 4,725 4,163
----------- ----------- -----------
Operating expenses: (Notes 7, 8, 9
and 10)
Store expenses 5,291 2,469 2,514
General and administrative 851 430 407
Depreciation and amortization 753 391 342
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6,895 3,290 3,263
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Income from operations 2,125 1,435 900
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Financial revenue (expense):
Interest and dividends 49 42 18
Interest expense (122) (49) (66)
Gain on sale of equipment 5 43 8
Equity in partnership earnings
(Note 4) 42 16 19
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(26) 52 (21)
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Net income $ 2,099 $ 1,487 $ 879
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EXPRESS STOP, INC.
STATEMENT OF RETAINED EARNINGS
(dollars in thousands)
Six Months Ended
------------------------
June 30, June 30,
December 31, 1998 1997
1997 (Unaudited) (Unaudited)
----------- ----------- -----------
Balance, beginning $ 1,370 $ 2,431 $ 1,370
Net income 2,099 1,487 879
Less cash dividends on common stock,
$519.00, $625.00, and $244.00 per
share, respectively (1,038) (1,249) (487)
----------- ----------- -----------
Balance, ending $ 2,431 $ 2,669 $ 1,762
=========== =========== ===========
See Notes to Financial Statements.
<PAGE>
EXPRESS STOP, INC.
STATEMENT OF CASH FLOWS
(dollars in thousands)
Six Months Ended
-------------------------
June 30, June 30,
December 31, 1998 1997
1997 (Unaudited) (Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 49,723 $ 24,900 $ 23,870
Cash paid to suppliers and employees (47,037) (23,247) (22,708)
Other operating revenue 347 214 214
Interest and dividends received 49 42 18
Interest paid (122) (49) (66)
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Net cash provided by
operating activities 2,960 1,860 1,328
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of certificates of deposit (161) (4) (7)
Advances to affiliated companies (26) (131) (58)
Purchase of property and equipment (689) (744) (391)
Proceeds from sale of equipment 19 104 5
Partnership distributions received 42 - 15
Other - (61) 12
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Net cash used in
investing activities (815) (836) (424)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings - 391 190
Principal payments on long-term
borrowings (81) (293) (127)
Repayments to affiliates (195) - -
Dividend payments to shareholders (1,038) (1,249) (487)
----------- ----------- -----------
Net cash used in
financing activities (1,314) (1,151) (424)
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 831 (127) 480
Cash and cash equivalents at beginning
of period 823 1,654 823
----------- ----------- -----------
Cash and cash equivalents at end of
period $ 1,654 $ 1,527 $ 1,303
=========== =========== ===========
See Notes to Financial Statements.
<PAGE>
4
Six Months Ended
------------------------
June 30, June 30,
December 31, 1998 1997
1997 (Unaudited) (Unaudited)
----------- ----------- -----------
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Net income $ 2,099 $ 1,487 $ 879
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 773 398 352
Distributive share of partnership
income (42) (16) (19)
Gain on sale of assets (5) (43) (8)
Change in assets and liabilities:
Accounts receivable (257) (1) (124)
Inventory (208) 104 (28)
Prepaid expenses 29 (79) 23
Deposits 134 - -
Other assets (43) - -
Accounts payable 410 115 293
Accrued expenses 37 (103) (40)
Deferred income 33 (2) -
----------- ----------- -----------
Net cash provided by
operating activities $ 2,960 $ 1,860 $ 1,328
=========== =========== ===========
<PAGE>
EXPRESS STOP, INC. 5
NOTES TO FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies
Nature of business:
The Company's operations consist primarily of the operation of
convenience stores located in North and South Carolina.
A summary of the Company's significant accounting policies follows:
Estimates:
The presentation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Statements of cash flows:
For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments purchased with a
maturity date of three months or less to be cash equivalents.
Financial instruments:
The carrying value of cash, receivables and accounts payable
approximate fair value due to the short maturity of these
instruments. The fair value of investment in partnership is not
subject to estimation because of its illiquid nature. The fair
values of long-term debt, which are approximately equal to their
carrying values, are estimated based on interest rates
commercially available for the same or similar debt.
Inventories:
Inventories are valued at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method.
Property and equipment:
Property and equipment is stated at cost, less accumulated
depreciation and amortization. Depreciation is provided
primarily by the use of accelerated methods over the estimated
useful lives of the assets.
Impairment of assets:
The Company reviews long-lived assets on a store-by-store basis
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If an
evaluation were required, the projected future undiscounted cash
flows attributable to each store would be compared to the
carrying value of the long-lived assets of that store to
determine if a write-down to fair value is required.
Investment in partnership:
Investment in partnership is accounted for using the equity
method. The initial investment was recorded at cost.
Subsequently, the carrying amount has been increased to reflect
the Company's share of income, and has been reduced to reflect
the Company's share of losses and cash distributions.
<PAGE>
6
NOTES TO FINANCIAL STATEMENTS
Advertising:
The Company expenses advertising as incurred. Advertising
expense was $57,000 for the year ended December, 31, 1997.
Income taxes:
The Company, with the consent of its stockholders, has elected
to be taxed under sections of the federal and state income tax
law, which provide that, in lieu of corporation income taxes,
the stockholders separately account for their pro rata shares of
the Company's items of income, deductions, losses and credits.
Therefore, these statements do not include any provision for
corporation income taxes.
Unaudited interim financial statements
The unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for
interim financial information. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
Note 2. Cash
The Company maintains cash deposits in several commercial banks. The
amounts on deposit at December 31, 1997 exceeded the insurance
limits provided by the Federal Deposit Insurance Corporation by
approximately $1,667,000.
Note 3. Inventories
Inventories consist of the following: (in thousands)
June 30,
December 31, 1998
1997 (Unaudited)
----------- -----------
Merchandise $ 987 $ 905
Fuel 377 355
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$ 1,364 $ 1,260
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Note 4. Investment in Partnership
The Company owns a 50% interest in a general partnership (Mexican
Express) which sells branded food items in two of the Company's
store locations. The Company has included $43,000 of income in the
statement of operations for the year ended December 31, 1997.
Note 5. Line of Credit and Long-Term Debt
The Company, its stockholders and an affiliated partnership have
been granted a financing arrangement which provides for 1) a term
loan up to $1,700,000, payable $23,500 per month including interest;
2) a term loan up to $950,000, payable $12,500 per month including
interest; 3) a term loan up to $750,000, payable $9,900 per month
including interest; and 4) a line of credit of up to $500,000
payable accrued interest only per month with credit line due upon
demand. Interest on the first two advances is calculated at LIBOR
rate plus 2.15%. Interest on the third and fourth advances is
calculated at LIBOR rate plus 2.00%. Collateral includes equipment
with a cost of $2,719,000 and a book value of $1,103,000, inventory
<PAGE>
7
NOTES TO FINANCIAL STATEMENTS
with a book value of $575,000, accounts receivable of $288,000, deed
of trust on property owned by affiliates, and the personal guarantee
of the stockholders. Total advances to all parties to this agreement
amounted to $1,805,000 as of December 31, 1997. All of these
advances were made subject to the term loan agreements described in
1) and 2) above.
Long-term debt consists of the following as of December 31, 1997:
(in thousands)
Outstanding advances under the above
financing agreement $ 1,190
Note payable to bank, due in monthly
installments of $435 including
interest at 7.59% to September, 2006
collateralized by equipment with a
book value of $61,000 and a deed of
trust on real estate owned by the
stockholders 33
Note payable to utility company, due
in monthly installments of $1,082
including interest at 7% to March,
2000. Collateralized by equipment
with a book value of $22,000 27
-----------
1,250
Less current maturities 177
-----------
$ 1,073
===========
The prime rate of interest was 8.50% and the LIBOR rate was 5.95% as
of December 31, 1997.
Approximate principal maturities of long-term debt for the years
following December 31, 1997 are as follows: (in thousands)
1998 $ 177
1999 192
2000 197
2001 210
2002 227
Later 247
-----------
$ 1,250
===========
As of June 30, 1998, the Company and its stockholders and affiliates
had borrowed $750,000 subject to the term loan agreement described
in 3) above and $300,000 subject to the line of credit described in
4) above, to finance the construction and equipping of two
additional stores. (Unaudited)
Note 6. Excise and Use Taxes
The Company collects and remits various Federal and State excise and
use taxes on petroleum products. Sales and cost of sales included
approximately $9,655,000 of such taxes for the year ended December
31, 1997.
<PAGE>
8
NOTES TO FINANCIAL STATEMENTS
Note 7. Deferred Income
The Company has received funds from a major oil company in
conjunction with a modernization assistance program to help pay for
new or newly modernized retail outlets. The Company opened one such
outlet in 1994, two in 1996, and one in 1997. Amounts received are
amortized over 15 years. The unamortized amount is refundable to the
oil company if the Company changes brands of gasoline carried. As of
December 31, 1997 accumulated amortization was $12,500, and $7,000
was credited to expense in 1997.
Note 8. Defined Contribution Retirement Plan
The Company has adopted a defined contribution retirement plan
covering all employees who have completed three years of service.
Contributions totaled $25,000 for the year ended December 31, 1997.
Note 9. Lease Commitments and Rental Expense
The Company leases store buildings, land, store equipment and office
facilities under operating leases. The real estate leases require
the payment by the Company of property taxes, utilities and routine
maintenance.
Rent expense for operating leases of real estate and equipment
amounted to $725,000 and $257,000, respectively for the year ended
December 31, 1997.
Future minimum lease payments as of December 31, 1997 for operating
leases with an initial or remaining term in excess of one year are
as follows: (in thousands)
Real Estate Equipment
----------- -----------
1998 $ 700 $ 160
1999 521 107
2000 437 7
2001 437 -
2002 408 -
Thereafter 2,031 -
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$ 4,534 $ 274
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Note 10. Related Party Transactions
The majority of the above leases are with the stockholders or with
entities controlled by the stockholders. Rents paid under these real
estate and equipment leases amounted to $583,000 and $195,000,
respectively for the year ended December 31, 1997.
Commissions and other income include $80,000 paid to the Company by
entities controlled by the stockholders, for accounting, data
processing and administrative services provided.
Note 11. Commitments and Contingencies
The State of South Carolina Administrative Law Judge Division has
affirmed a decision by the Department of Revenue to revoke the
business license of one of the Company's stores because of an
alleged violation of the South Carolina Video Games Machine Act. The
Company has appealed this action, and the order has been stayed by
the Court of Common Pleas for Richmond County, South Carolina. No
further action has been taken or is expected, and the Company does
not anticipate that any material loss will be incurred.
<PAGE>
9
NOTES TO FINANCIAL STATEMENTS
The South Carolina Department of Health and Environmental Control
has made inquiries about a third party settlement received by the
Company for damages incurred by the faulty supply and installation
of petroleum tanks and equipment at one of its stores. The purpose
of the inquiry is to determine if any outside funding source would
have to be exhausted prior to payment of future remediation costs at
this site. No action has been taken or is expected to be commenced,
and the Company intends to vigorously contest this matter if it is
asserted in the future. The Company has deferred $56,000 of the
settlement received from the third party. Legal counsel has
estimated that the potential loss, although unlikely, could range
from $0 to $82,000 in excess of the deferral.
The Company is involved in certain other legal proceedings arising
in the course of normal business activities. In the opinion of
management, the ultimate settlement of these proceedings will not
have a material adverse effect on the financial statements.
The shareholders have contracted for the construction of two new
store buildings in the total amount of $1,335,000. None of these
funds were expended as of December 31, 1997.
The Company is subject to Federal and state environmental laws and
regulations governing the use and maintenance of underground storage
tanks (USTs). These laws and regulations require expenditures for
compliance, and establish requirements for the installation and
upgrading of tank systems, continual monitoring and inspection,
recordkeeping, identification of leaking or otherwise defective tank
systems, and possible corrective actions.
The Environmental Protection Agency has required that leak detection
procedures be implemented at all stores, and that corrosion
protection and overfill/spill prevention devices be installed by the
end of 1998. The Company anticipates that it will meet the 1998
deadline for all of its USTs.
North and South Carolina have established trust funds for the
sharing, recovery, and reimbursement of costs incurred as a result
of releases from USTs. The Company participates in these programs by
virtue of the payment of registration fees on each UST and taxes on
the purchase of motor fuels. The trust funds essentially provide
insurance of up to $1,000,000 per site for cleanup of environmental
contamination, exclusive of per-site deductibles, contamination
which occurred prior to the establishment of the trusts, and the
removal and disposal of defective USTs.
As of December 31, 1997, the Company is responsible for the
remediation of contamination at six sites. $1,100,000 has been
accrued for these estimated future remediation costs. The Company
expects to recover all of these expenditures from either trust funds
($750,000) or insurance companies ($350,000). Reimbursement from the
state trust funds will be dependent on the continued financial
viability of the funds.
Although the Company is not aware of releases or contamination at
other locations which it operates, any such event could require
material remediation costs, some or all of which may not be
reimbursable from trust funds, insurance or other third parties.
<PAGE>
10
NOTES TO FINANCIAL STATEMENTS
Note 12. Subsequent Events
In May 1998, the Company sold its store operation located in Mebane,
North Carolina to an unrelated third party. The sales price was
$240,000 for fixtures and equipment and $50,000 for inventory, and a
gain of $33,000 was realized upon completion of the transaction. The
Company took a note receivable from the buyer, collateralized by a
security agreement on the assets acquired, in the amount of
$145,000, repayable in sixty monthly installments of $2,940
including interest at 8.00%.
At September 25, 1998, the Company has reached an agreement in
principal to sell substantially all of its operating assets to The
Pantry, Inc. The sales price is $20,300,000 plus the cost of
inventory acquired. $2,500,000 of the purchase price is subject to
an escrow agreement until March 2006, and may be forfeited upon the
occurrence of specific events or conditions relating to the
operating of video poker machines in the State of South Carolina.
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated financial data (the "Unaudited
Pro Forma Financial Data") of the Company have been derived by the application
of pro forma adjustments to the historical financial statements of The Pantry
for the periods indicated. The adjustments are described in the accompanying
notes.
The Unaudited Pro Forma Financial Data give effect to the November 5, 1998
acquisition of certain assets of Express Stop, Inc. ("Express Stop") and certain
affiliated companies (Bryan Oil Company, Inc., Market Express of Shallotte, Inc.
and Lennon Oil Company, collectively referred to "Affiliates") (the "Express
Stop Acquisition") including, but not limited to, twenty-two (22) convenient
stores located throughout North Carolina and South Carolina. Total consideration
paid was approximately $21.7 million. The purchase price of the Express Stop
Acquisition was financed by the proceeds of $7.0 million from the Company's
existing bank credit facility (the "Credit Facility"), cash on hand, and
proceeds from sale-leaseback transactions totaling approximately $9.0 million.
The Unaudited Pro Forma Financial Data also give effect to the following:
o The July 16, 1998 acquisition of certain assets of Stallings Oil Company,
Inc. ("Stallings") including, but not limited to, forty-one (41)
convenience stores located throughout North Carolina and Virginia (the
"Stallings Acquisition"). Total consideration paid was approximately $28.6
million.
o The July 2, 1998 acquisition of certain assets of Quick Stop Food Mart,
Inc. ("Quick Stop") including, but not limited to, seventy-five (75)
convenience stores located throughout North Carolina and South Carolina
(the "Quick Stop Acquisition"). Total consideration paid was approximately
$54.8 million.
The Quick Stop and Stallings Acquisitions were financed by proceeds of
$50.0 million from the Credit Facility, cash on hand, and an equity
contribution of $25.0 million in the aggregate by existing shareholders of
the Company (the "Equity Investment").
o The October 23, 1997 purchase of all of the common stock of Lil' Champ Food
Stores, Inc. ("Lil' Champ") for $135.9 million (net of cash acquired),
including the repayment of $10.7 million in outstanding indebtedness of
Lil' Champ (the "Lil' Champ Acquisition"). Lil' Champ is a leading operator
of convenience stores in Florida and the largest convenience store operator
in northern Florida. Lil' Champ's 479 stores are located primarily in
northern Florida and Georgia. The purchase price, the refinancing of
existing Lil' Champ debt, and the fees and expense of the Lil' Champ
acquisition were financed with the proceeds from the offering of $200.0
million, 10 1/4% Senior Subordinated Notes due 2007 (the "Offering"), cash
on hand and the purchase by existing stockholders and management of the
Company of an additional $32.4 million of the Company's capital stock in
connection with the Lil' Champ Acquisition.
Additionally, the Unaudited Pro Forma Financial Data also give effect to October
23, 1997 purchase of $51.0 million in principal amount of the Company's 12%
Series B Senior Notes due 2000 (the "Senior Notes") at a purchase price of 110%
of the aggregate principal amount of each tendered Senior Note plus accrued and
unpaid interest up to, but not including, the date of purchase (the "Tender
Offer"). The Company obtained consents (the "Consent Solicitation") from the
holders of the Senior Notes.
<PAGE>
The Unaudited Pro Forma Balance Sheet Data gives effect to the Express Stop
Acquisition, Stallings Acquisition and Quick Stop Acquisition and the Equity
Investment as if these transactions occurred as of June 25, 1998. The Unaudited
Pro Forma Statement of Operations Data gives effect to the Express Stop
Acquisition, Stallings Acquisition, Quick Stop Acquisition, Lil' Champ
Acquisition, Offering, Tender Offer and Consent Solicitation and those discussed
in the accompanying notes as if the transactions occurred at the beginning of
each period presented. The Unaudited Pro Forma Financial Data do not give effect
to any transactions other than the Express Stop Acquisition, Stallings
Acquisition, Quick Stop Acquisition, Lil' Champ Acquisition, Offering, Equity
Investment, Tender Offer and Consent Solicitation and those discussed in the
accompanying notes. The Unaudited Pro Forma Financial Data are provided for
informational purposes only and do not purport to represent the results of
operations or financial position of the Company had the transactions in fact
occurred on such dates, nor do they purport to be indicative of the financial
position or results of operations as of any future date or for any future
period.
The Express Stop Acquisition, Stallings Acquisition, Quick Stop Acquisition, and
Lil' Champ Acquisitions will be (or have been) accounted for using the purchase
method of accounting. The total cost of the acquisitions will be allocated to
the tangible and intangible assets acquired and liabilities assumed based upon
their respective fair values as of the time the acquisitions were consummated.
The excess of the purchase price over the historical basis of the net assets
acquired has not been allocated in the accompanying Unaudited Pro Forma
Financial Data. The pro forma adjustments are based upon available information
and upon certain assumptions that management believes are reasonable. The actual
allocation of the purchase cost, however, and the resulting effect on income
from operations may differ significantly from the pro forma amounts included
herein.
The Unaudited Pro Forma Financial Data and accompanying notes should be read in
conjunction with the financial statements and accompanying notes thereto and the
other financial information included elsewhere in this filing on Form 8-K.
UNAUDITED PRO FORMA BALANCE SHEET DATA
June 25, 1998
(dollars in thousands)
<TABLE>
<CAPTION>
Historical
------------------------------------
The Pantry Quick Stop Stallings Acquisition/
June 25, June 30, June 30, Financing
1998 1998 1998 Adjustments Subtotal
--------- -------- ------- ------------ ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 21,450 $ 2,209 $ 586 $ (11,120) (a) $ 13,125
Receivables, net 7,738 965 2,751 (1,516) (e) 9,938
Inventories 39,274 3,334 2,802 1,318 (e) 46,728
Prepaid expenses 1,869 293 1,841 (1,841) (e) 2,162
Property held for sale 4,265 - - - 4,265
Deferred income taxes 1,142 - - - 1,142
--------- -------- ------- ------- ---------
Total current assets 75,738 6,801 7,980 (13,159) 77,360
--------- -------- ------- ------- ---------
Property and equipment, net 248,658 20,583 26,618 (27,560) (e) 268,299
Other assets:
Goodwill, net 73,529 138 - 54,635 (b) 128,302
Deferred lease cost, net 280 - - - 280
Deferred financing cost, net 13,587 - - - 13,587
Environmental receivables, net 7,603 - 247 (247) (e) 7,603
Cash surrender value of life insurance - 1,576 87 (1,663) (e) -
Other 4,436 1,286 642 (1,928) (e) 4,436
--------- -------- ------- ------- ---------
Total other assets 99,435 3,000 976 50,797 154,208
--------- -------- ------- ------- ---------
TOTAL ASSETS $423,831 $30,384 $35,574 $10,078 $499,867
========= ======== ======= ======= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 56 $ 1,405 $ 2,020 ( 3,425 ) (e) $ 56
Current maturities of capital lease obligations 1,312 - 44 ( 44 ) (e) 1,312
Line of credit - 2,200 ( 2,200 ) (e) -
Accounts payable 44,774 3,436 8,467 ( 11,903 ) (e) 44,774
Accrued expenses 31,533 2,153 2,993 ( 4,150 ) (e) 32,529
--------- -------- ------- ------- ---------
Total current liabilities 77,675 9,194 13,524 ( 21,722 ) 78,671
--------- -------- ------- ------- ---------
Senior notes payable, 12%, due November 15, 2000 277,272 - - - 277,272
Acquisition facility - - - 50,000 (c) 50,000
Other long-term debt - 5,863 13,008 ( 18,871 ) (e) -
--------- -------- ------- ------- ---------
Total long-term debt 277,272 5,863 13,008 31,129 327,272
--------- -------- ------- ------- ---------
Other non-current liabilities:
Environmental reserve 11,048 - - - 11,048
Capital lease obligations 11,488 - - - 11,488
Employment obligations 1,064 - - - 1,064
Accrued dividends on preferred stock 3,702 - - - 3,702
Deferred income taxes 7,360 - - - 7,360
Other 21,863 - - - 21,863
--------- -------- ------- ------- ---------
Total other non-current liabilities 56,525 - - - 56,525
--------- -------- ------- ------- ---------
Shareholders' equity:
Preferred stock - - - -
Common stock 2 1 42 207 (d) 252
Additional paid-in capital 43,116 886 3,280 20,584 (d) 67,866
Shareholder loan ( 215 ) - - - ( 215 )
Retained earnings (deficit) (30,544) 14,440 5,720 (20,120) (d) (30,504)
--------- -------- ------- ------- ---------
Total shareholders' equity 12,359 15,327 9,042 671 37,399
--------- -------- ------- ------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 423,831 $ 30,384 $35,574 $10,078 $ 499,867
========= ======== ======= ======= =========
<CAPTION>
Historical
-----------------------
Express Stop Affiliates Acquisition/
June 30, June 30, Financing Pro Forma
1998 1998 Adjustments Subtotal Combined
------- ------- ----------- ------- --------
<C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,810 $ 668 $ (8,091) (a) (5,613) $ 7,512
Receivables, net 580 10 (590) (e) - 9,938
Inventories 1,260 143 - 1,403 48,131
Prepaid expenses 113 63 (50) (e) 126 2,288
Property held for sale - - - - 4,265
Deferred income taxes - - - - 1,142
------- ------- ------------- ------- --------
Total current assets 3,763 884 (8,731) (4,084) 73,276
------- ------- ------------- ------- --------
-
Property and equipment, net 2,264 331 (9,340) (e)(f) (6,745) 261,554
-
Other assets: -
Goodwill, net - - 17,689 (b) 17,689 145,991
Deferred lease cost, net - - - - 280
Deferred financing cost, net - - - - 13,587
Environmental receivables, net 1,100 - (1,100) (e) - 7,603
Cash surrender value of life insurance - - - - -
Other 655 536 (1,051) (e) 140 4,576
------- ------- -------------- ------- --------
Total other assets 1,755 536 15,538 17,829 172,037
------- ------- -------------- ------- --------
-
TOTAL ASSETS $7,782 $1,751 $(2,533) $7,000 $506,867
======= ======= ============== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 189 $ 71 $ ( 260 ) (e) - $ 56
Current maturities of capital lease obligations - - - - 1,312
Line of credit - - - - -
Accounts payable 2,335 307 ( 2,642 ) (e) - 44,774
Accrued expenses 165 7 ( 172 ) (e) - 32,529
------- ------- -------------- ------- --------
Total current liabilities 2,689 385 ( 3,074 ) - 78,671
------- ------- -------------- ------- --------
-
Senior notes payable, 12%, due November 15, 2000 - - - - 277,272
Acquisition facility - - 7,000 (c) 7,000 57,000
Other long-term debt 1,159 16 ( 1,175 ) (e) - -
------- ------- -------------- ------- --------
Total long-term debt 1,159 16 5,825 7,000 334,272
------- ------- -------------- ------- --------
-
Other non-current liabilities: -
Environmental reserve 1,100 - ( 1,100 ) (e) - 11,048
Capital lease obligations - - - - 11,488
Employment obligations - - - - 1,064
Accrued dividends on preferred stock - - - - 3,702
Deferred income taxes - - - - 7,360
Other 135 - ( 135 ) (e) - 21,863
------- ------- --------------- ------- --------
Total other non-current liabilities 1,235 - ( 1,235 ) - 56,525
------- ------- --------------- ------- --------
-
Shareholders' equity: -
Preferred stock - - - - -
Common stock 30 115 ( 145 ) (d) - 252
Additional paid-in capital - 379 ( 379 ) (d) - 67,866
Shareholder loan - - - - ( 215 )
Retained earnings (deficit) 2,669 856 (3,525) (d) - (30,504)
------- ------- -------------- ------- --------
Total shareholders' equity 2,699 1,350 ( 4,049 ) - 37,399
------- ------- -------------- ------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,782 $ 1,751 $ (2,533 ) $ 7,000 $506,867
======= ======= ============== ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet Data
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET DATA
(a) Reflects the following:
Stallings
and Quick Express
Stop Stop
Acquisitions Acquisition
Cash Inflows:
Proceeds from issuance of Credit
Facility $50,000 $7,000
Proceeds from Equity Investment 25,000 -
Proceeds from the sale-leaseback
transactions - 9,000
------------ -----------
Total cash inflows 75,000 16,000
------------ -----------
Cash Outflows:
Purchase price of Stallings and Quick
Stop 83,384 -
Purchase price of Express Stop - 21,683
To eliminate cash not acquired by
The Pantry 2,736 2,408
------------ -----------
Total cash outflows 86,120 24,091
============ ===========
Net cash outflows $ 11,120 $ 8,091
============ ===========
(b) For purposes of the pro forma information, the excess of the purchase
price over the historical net assets of Express Stop, Stallings and
Quick Stop has been considered to be goodwill and other intangible
assets, pending the completion of appraisals and other purchase price
allocation adjustments. Goodwill has been determined as follows:
Stallings
and Quick Express
Stop Stop
Acquisitions Acquisition
Purchase price $83,384 $21,683
Elimination of historical
stockholders' equity (21,160) (3,525)
Elimination of certain net assets not
acquired by The Pantry (7,589) (469)
------------ -----------
$54,635 $17,689
============ ===========
(c) Reflects the proceeds from the Credit Facility to partially fund
the acquisitions of Quick Stop and Stallings ($50.0 million) and
Express Stop ($7.0 million).
<PAGE>
(d) Reflects the proceeds from the additional equity investment ($25.0
million) to partially fund the acquisitions of Quick Stop and Stallings
and the elimination of the net assets of the acquired companies as
follows:
Stallings
and Quick Express
Stop Stop
Acquisitions Acquisition
Proceeds from the Equity Investment $ 25,000 $ -
Elimination of historical
stockholders' equity (24,329) (4,049)
------------ -----------
$ 671 $(4,049)
============ ===========
(e) Reflects the elimination of certain assets and liabilities of Express
Stop and affiliates, Quick Stop, and Stallings not acquired by The
Pantry.
(f) Includes the disposal of approximately $9.0 million of property and
equipment in sale-leaseback transactions to provide proceeds for
partial funding of the Express Stop Acquisition.
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
Nine Months Ended June 25, 1998
(dollars in thousands)
<TABLE>
<CAPTION>
Historical
-------------------------------------------
Nine-Month One-Month Nine-Month
Period Ended Period Ended Period Ended
June 25, October 23, June 30, 1998 Acquisition/ Other
1998 1997 Quick Stop and Financing Acquisition
The Pantry Lil' Champ Stallings Adjustments Adjustments(g) Subtotal
--------- -------- -------------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Merchandise sales $ 316,873 $ 17,752 $ 65,478 $ - $ (402 ) $399,701
Gasoline sales 343,498 21,397 157,729 - (15,823 ) 506,801
Commissions, video, and other 10,047 570 4,402 - (467 ) 14,552
--------- -------- -------- ----------- ------ --------
Total revenues 670,418 39,719 227,609 - (16,692 ) 921,054
--------- -------- -------- ----------- ------ --------
Cost of Sales:
Merchandise 207,265 11,421 48,465 - (207) 266,944
Gasoline 304,136 18,682 140,980 - (13,004) 450,794
--------- -------- -------- ----------- ------ --------
Total cost of sales 511,401 30,103 189,445 - (13,211) 717,738
--------- -------- -------- ----------- ------ --------
Gross profit 159,017 9,616 38,164 - (3,481 ) 203,316
--------- -------- -------- ----------- ------ --------
Store operating expenses 97,435 5,957 24,813 288 (a) (3,015) 125,478
General and administrative expenses 23,406 1,698 4,106 (42) (b) (356) 28,812
Depreciation and amortization 18,525 952 4,262 1,639 (c) (169) 25,209
--------- -------- -------- ----------- ------ --------
Total operating expenses 139,366 8,607 33,181 1,885 (3,540) 179,499
--------- -------- -------- ----------- ------ --------
Income from operations 19,651 1,009 4,983 (1,885 ) 59 23,817
--------- -------- -------- ----------- ------ --------
Other income (expense):
Interest expense (20,353 ) (121 ) (1,551 ) (2,569 ) (d) - (24,594 )
Miscellaneous 1,253 - - - - 1,253
--------- -------- -------- ----------- ------ --------
Total other expenses (19,100 ) (121 ) (1,551 ) (2,569 ) - (23,341 )
--------- -------- -------- ----------- ------ --------
Income (loss) before income taxes 551 888 3,432 (4,454 ) 59 476
Income tax benefit (expense) - (364 ) - 364 (e) - -
--------- -------- -------- ----------- ------ --------
Net income (loss) before
extraordinary items $ 551 $ 524 $ 3,432 $ (4,090 ) (f) $ 59 $ 476
========= ======== ======== =========== ====== ========
<CAPTION>
Historical
-------------------------
Nine-Month Nine-Month
Period Ended Period Ended
June 30, June 30, Acquisition/ Other
1998 1998 Financing Acquisition Pro Forma
Express Stop Affiliates Adjustments Adjustments(g) Subtotal Combined
----------- ---------- ------------ ------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Merchandise sales $ 15,265 $ 1,543 $ - $ - $16,808 $ 416,509
Gasoline sales 21,022 2,067 - - 23,089 529,890
Commissions, video, and other 1,624 485 - (84 ) 2,025 16,577
-------- ------- -------- -------- ------- ---------
Total revenues 37,911 4,095 - (84 ) 41,922 962,976
-------- ------- -------- -------- ------- ---------
Cost of Sales:
Merchandise 11,690 1,156 - - 12,846 279,790
Gasoline 18,929 1,901 - - 20,830 471,624
-------- ------- -------- -------- ------- ---------
Total cost of sales 30,619 3,057 - - 33,676 751,414
-------- ------- -------- -------- ------- ---------
Gross profit 7,292 1,038 - (84 ) 8,246 211,562
-------- ------- -------- -------- ------- ---------
Store operating expenses 3,865 397 - - 4,262 129,740
General and administrative expenses 677 189 - - 866 29,678
Depreciation and amortization 607 73 458 (c) - 1,138 26,347
-------- ------- -------- -------- ------- ---------
Total operating expenses 5,149 659 458 - 6,266 185,765
-------- ------- -------- --------- ------- ---------
Income from operations 2,143 379 (458 ) (84 ) 1,980 25,797
-------- ------- -------- -------- ------- ---------
Other income (expense):
Interest expense (76 ) (9 ) (344 ) (d) - (429 ) (25,023 )
Miscellaneous 69 121 - (190 ) - 1,253
-------- ------- ------- -------- ------- ---------
Total other expenses (7 ) 112 (344 ) (190 ) (429 ) (23,770 )
-------- ------- ------- -------- ------- ---------
Income (loss) before income taxes 2,136 491 (802 ) (274 ) 1,551 2,027
Income tax benefit (expense) - - - (e) - - -
-------- ------- -------- -------- ------- ---------
Net income (loss) before
extraordinary items $ 2,136 $ 491 $ (802 ) $ (274 ) $ 1,551 $ 2,027
======== ======= ======== ======== ======= =========
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations Data.
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
Year Ended September 25, 1997
(dollars in thousands)
<TABLE>
<CAPTION>
Historical
-----------------------------------------------
Latest Twelve Year Ended
Year Ended Months Ended December 31,
September 25, September 27, 1997 Acquisition/ Other
1997 1997 Quick Stop and Financing Acquisition
The Pantry Lil' Champ Stallings Adjustments Adjustments (g) Subtotal
----------- ----------- --------------- ------------ -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Merchandise sales $ 202,440 $ 232,250 $ 85,572 $ - $ (481 ) $ 519,781
Gasoline sales 220,166 286,373 215,655 - (15,897 ) 706,297
Commissions, video, and other 4,787 8,156 12,623 - (5,048 ) 20,518
--------- --------- -------- ----------- ------ ---------
Total revenues 427,393 526,779 313,850 - (21,426 ) 1,246,596
--------- --------- -------- ----------- ------ ---------
Cost of Sales:
Merchandise 132,846 152,847 63,523 - (254) 348,962
Gasoline 197,268 259,003 199,898 - (16,415) 639,754
--------- --------- -------- ----------- ------ ---------
Total cost of sales 330,114 411,850 263,421 - (16,669) 988,716
--------- --------- -------- ----------- ------ ---------
Gross profit 97,279 114,929 50,429 - (4,757 ) 257,880
--------- --------- -------- ----------- ------ ---------
Store operating expenses 60,208 74,574 34,266 383 (a) (3,980) 165,451
General and administrative expenses 16,796 15,375 5,623 (500) (b) (482) 36,812
Environmental remediation charge - 3,381 - - - 3,381
Depreciation and amortization 9,504 11,911 5,111 4,800 (c) (229) 31,097
--------- --------- -------- ----------- ------ ---------
Total operating expenses 86,508 105,241 45,000 4,683 (4,691) 236,741
--------- --------- -------- ----------- ------ ---------
Income from operations 10,771 9,688 5,429 (4,683 ) (66 ) 21,139
Other income (expense):
Interest (13,039 ) (2,388 ) (1,835 ) (15,292 ) (d) - (32,554 )
Miscellaneous 1,293 1,370 (119 ) - - 2,544
--------- --------- -------- ----------- ------ ---------
Total other expenses (11,746 ) (1,018 ) (1,954 ) (15,292 ) - (30,010 )
--------- --------- -------- ----------- ------ ---------
Income (loss) before income taxes (975 ) 8,670 3,475 (19,975 ) (66 ) (8,871 )
Income tax benefit (expense) - (3,582 ) - 3,582 (e) - -
--------- --------- -------- ----------- ------ ---------
Net income (loss) before extraordinary items $ (975 ) $ 5,088 $ 3,475 $ (16,393 ) (f) $ (66 ) $ (8,871 )
========= ========= ======== =========== ====== =========
<CAPTION>
Historical
---------------------------
Year Ended Year Ended
December 31, December 31, Acquisition/ Other
1997 1997 Financing Acquisition Pro Forma
Express Stop Affiliates Adjustments Adjustments (g) Subtotal Combined
------------ ---------- ------------ -------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Merchandise sales $ 18,439 $ 1,968 $ - $ - $ 20,407 $ 540,188
Gasoline sales 29,984 2,989 - - 32,973 739,270
Commissions, video, and other 1,779 602 - (97 ) 2,284 22,802
-------- ------- --------- ------- -------- ---------
Total revenues 50,202 5,559 - (97 ) 55,664 1,302,260
-------- ------- --------- ------- -------- ---------
Cost of Sales:
Merchandise 13,960 1,471 - - 15,431 364,393
Gasoline 27,222 2,747 - - 29,969 669,723
-------- ------- --------- ------- -------- ---------
Total cost of sales 41,182 4,218 - - 45,400 1,034,116
-------- ------- --------- ------- -------- ---------
Gross profit 9,020 1,341 - (97 ) 10,264 268,144
-------- ------- --------- ------- -------- ---------
Store operating expenses 5,291 538 - - 5,829 171,280
General and administrative expenses 851 212 - - 1,063 37,875
Environmental remediation charge - - - - - 3,381
Depreciation and amortization 753 111 611 (c) - 1,475 32,572
-------- ------- --------- ------- -------- ---------
Total operating expenses 6,895 861 611 - 8,367 245,108
-------- ------- --------- ------- -------- ---------
Income from operations 2,125 480 (611 ) (97 ) 1,897 23,036
Other income (expense):
Interest (74 ) (21 ) (429 ) (d) - (524 ) (33,078 )
Miscellaneous 48 145 - (193 ) - 2,544
-------- ------- --------- ------- -------- ---------
Total other expenses (26 ) 124 (429 ) (193 ) (524 ) (30,534 )
-------- ------- --------- ------- -------- ---------
Income (loss) before income taxes 2,099 604 (1,040 ) (290 ) 1,373 (7,498 )
Income tax benefit (expense) - - - (e) - - -
-------- ------- --------- ------- -------- ---------
Net income (loss) before extraordinary items $ 2,099 $ 604 $ (1,040 ) $ (290 ) $ 1,373 $ (7,498 )
======== ======= ========= ======= ======== =========
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations Data.
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
(a) Reflects increase in store rental expense related to stores to be leased
from Quick Stop. The rental increase was effective concurrent with the
Quick Stop Acquisition.
(b) Historically, Lil' Champ paid Docks U.S.A., Inc., Lil' Champ's parent
company, service agreement fees. The service agreement was terminated
concurrently with the Lil' Champ Acquisition and not replaced by a
similar arrangement.
(c) The Express Stop, Quick Stop, Stallings and Lil' Champ Acquisitions will
be (or have been) accounted for under the purchase method accounting.
Under the purchase method of accounting, the total purchase price will be
allocated to the tangible and intangible assets acquired and liabilities
assumed by The Pantry based on their respective fair values as of the
acquisition date based upon valuations and other studies not yet
available. For purposes of the pro forma information, the excess of the
purchase price over the historical net assets acquired has been
considered to be goodwill and other intangible assets, pending the
completion of appraisals and other purchase price allocation adjustments.
Assuming the pro forma remaining excess purchase costs to be allocated
will be amortized over a weighted-average period of approximately 30
years, the resulting amortization attributable to the Lil' Champ, Quick
Stop, and Stallings Acquisitions is approximately $1.5 million for the
nine months ended June 25, 1998 and $3.2 million for the year ended
September 25, 1997. The resulting amortization attributable to the
Express Stop Acquisition is approximately $.5 million for the nine months
ended June 25, 1998 and $.6 million for the year ended September 25,
1997. Additionally, deferred financing costs incurred in connection with
the Offering will be amortized over a weighted-average period of 6.5
years. The resulting amortization is approximately $0.1 million for the
nine months ended June 25, 1998 and $1.6 million for the year ended
September 25, 1997.
(d) Reflects additional interest expense to be incurred by the Company in
connection with the Offering, and reductions in interest expense for the
repayment of existing Lil' Champ debt and the repurchase of Senior Notes
as follows:
Nine Months Ended Year Ended
June 25, 1998 September 25, 1997
Principal Interest Principal Interest
--------- ------ --------- --------
(dollars in thousands)
Offering $ 200,000 $1,708 $ 200,000 $ 20,500
Repayment of existing Lil'
<PAGE>
Champ Debt (10,700) (121) (10,700) (1,140)
Repurchase of Senior
Notes (51,000) (531) (51,000) (6,318)
Increase in Acquisition
Facility for Quick Stop &
Stallings Acquisition 50,000 3,064 50,000 4,085
Increase in Acquisition
Facility for Express Stop
Acquisition 7,000 429 7,000 572
Elimination of Quick Stop
interest expense - (497) - (553)
Elimination of Stallings
interest expense - (1,054) - (1,282)
Elimination of Express
Stop & Affiliates
interest expense - (85) - (143)
------- --------
$2,913 $ 15,721
======= ========
(e) Adjusts income tax benefit for assumed tax effect of pro forma adjustments
using estimated tax rates (net of a valuation allowance). For the nine
months ended June 25, 1998, there is no pro forma income tax expense due
to the assumed utilization of federal and state loss carryforwards.
(f) Net income (loss) before extraordinary items excludes the effect of
charges, net of tax, related to the costs of the Tender Offer and
write-off of deferred financing costs in connection with the repurchase of
$51.0 of the Senior Notes ($4.9 million and $1.6 million, respectively).
(g) Reflects the elimination of certain operations of Stallings and Express
Stop and Affiliates that were not acquired in the respective Acquisitons.
(h) Reflects the results of operations for Lil' Champ for the one-month period
ended October 23, 1997. Results of operation for Lil' Champ subsequent to
October 23, 1997 are included in The Pantry's results of operations for
the nine months ended June 25, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 6, 1998
THE PANTRY, INC.
By: /s/ William T. Flyg
-------------------------------------------
William T. Flyg
Senior Vice President Finance and Secretary
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
2.1 Asset Purchase Agreement dated September 28, 1998, as amended
on November 5, 1998, by and among Express Stop, Bryan Oil,
Market Express, Lennon Oil and the Company (asterisks located
within the exhibit denote information which has been deleted
pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission)
2.2 List of Exhibits and Schedules omitted from the Asset Purchase
Agreement referenced in Exhibit 2.1 hereof (asterisks located
within the exhibit denote information which has been deleted
pursuant to a request for confidential treatment filed with
the Securities and Exchange Commission)
ASSET PURCHASE AGREEMENT
between
EXPRESS STOP, INC.,
BRYAN OIL COMPANY, INC.
LENNON OIL COMPANY,
and
MARKET EXPRESS OF SHALLOTTE, INC.,
as Sellers,
and
THE PANTRY, INC.,
as Purchaser
Dated as of September 28, 1998
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
<PAGE>
Table of Contents
-----------------
Page
----
ARTICLE I
DEFINITIONS
1.1 Defined Terms..........................................................1
ARTICLE II
PURCHASE AND SALE OF ASSETS AND
ASSUMPTION OF LIABILITIES; PURCHASE PRICE
2.1 Purchase and Sale of Assets............................................8
2.2 Excluded Assets........................................................9
2.3 Assumption of Liabilities.............................................10
2.4 Excluded Liabilities..................................................10
******************************************************************************
******************************************************************************
******************************************************************************
******************************************************************************
2.9 Employees.............................................................12
ARTICLE III
THE CLOSING
3.1 Time and Place of Closing.............................................13
3.2 Instruments of Transfer...............................................13
3.3 Further Assurances....................................................13
3.4 Transfer Taxes........................................................13
ARTICLE IV
TERMINATION
4.1 Termination...........................................................13
4.2 Effect of Termination.................................................14
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
i
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
5.1 Organization and Good Standing........................................14
5.2 Power and Authority...................................................15
5.3 No Violation..........................................................15
******************************************************************************
5.5 Approvals.............................................................16
5.6 Compliance with Laws and Orders.......................................17
5.7 Financial Statements..................................................17
5.8 Absence of Certain Changes or Events..................................17
5.9 Title to Transferred Assets...........................................18
5.10 Inventory.............................................................18
5.11 Real Property.........................................................18
5.12 Third Party Leases....................................................19
5.13 Insurance.............................................................20
5.14 Contracts.............................................................20
5.15 Employment Law Matters................................................20
5.16 Environmental Matters.................................................21
5.17 Property of Others....................................................22
5.18 Equipment, Etc........................................................23
******************************************************************************
******************************************************************************
5.21 Tax Matters...........................................................23
5.22 Finders or Brokers....................................................24
5.23 Disclosure of Material Facts..........................................24
5.24 Certain Interests; Affiliate Transactions.............................25
5.25 Employee Benefit Plans................................................25
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
6.1 Organization and Good Standing........................................25
6.2 Power and Authority...................................................25
6.3 No Violation..........................................................26
6.4 No Actions............................................................26
6.5 Approvals.............................................................26
6.6 Disclosure of Material Facts..........................................26
6.7 Finders or Brokers....................................................26
ARTICLE VII
CERTAIN OBLIGATIONS OF THE SELLER PRIOR TO THE CLOSING
OR EARLIER TERMINATION OF THIS AGREEMENT
7.1 Conduct of Business...................................................27
7.2 Restricted Activities and Transactions................................27
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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7.3 Cooperation...........................................................28
7.4 Employee Benefit Plans................................................28
7.5 No Negotiations.......................................................28
7.6 Access to the Business................................................29
7.7 Disclosure Regarding the Sellers......................................29
7.8 Confidentiality.......................................................29
7.9 Real Property.........................................................30
ARTICLE VIII
CERTAIN OBLIGATIONS OF THE PURCHASER PRIOR
TO THE CLOSING OR EARLIER TERMINATION OF THIS AGREEMENT
8.1 Cooperation...........................................................30
8.2 Disclosure Regarding the Purchaser....................................30
8.3 Confidentiality.......................................................30
8.4 Restricted Activities.................................................30
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER
9.1 Representations and Warranties True...................................31
9.2 Performance...........................................................31
9.3 No Adverse Changes....................................................31
9.4 Approvals.............................................................31
9.5 Estoppel Certificates.................................................31
9.6 Subordination, Non-Disturbance and Attornment Agreements..............32
9.7 Deliveries............................................................32
9.8 Proceedings...........................................................33
9.9 Absence of Litigation.................................................33
9.10 Environmental Matters.................................................33
9.11 Due Diligence Reviews.................................................33
9.12 Construction Status...................................................33
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER
10.1 Representations and Warranties True...................................34
10.2 Performance...........................................................34
10.3 Approvals.............................................................34
10.4 Deliveries............................................................35
10.5 Proceedings...........................................................35
10.6 Absence of Litigation.................................................35
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ARTICLE XI
CERTAIN POST-CLOSING COVENANTS
11.1 Confidentiality.......................................................36
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11.3 Specific Performance; Injunctive Relief...............................37
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11.5 Change of Seller's Name...............................................38
11.6 WIP Stores Located in Florence, South Carolina, and Wilmington
North Carolina........................................................38
ARTICLE XII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
12.1 Survival of Representations and Warranties............................38
12.2 Indemnification.......................................................39
12.3 Notice and Payment of Claims..........................................39
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12.5 Mitigation of Damages.................................................41
12.6 Joint and Several Indemnity...........................................41
ARTICLE XIII
MISCELLANEOUS
13.1 Fees and Expenses.....................................................42
13.2 Notices...............................................................42
13.3 Amendment; Waiver.....................................................43
13.4 Assignment............................................................43
13.5 Governing Law.........................................................43
13.6 Severability..........................................................44
13.7 No Third Party Beneficiaries..........................................44
13.8 Public Announcements..................................................44
13.9 Singular and Plural Forms.............................................44
13.10 References............................................................44
13.11 Headings..............................................................44
13.12 Entire Agreement......................................................44
13.13 Counterparts..........................................................44
EXHIBITS:
Exhibit A...Form of Leases
Exhibit B...Form of Third Party Lease Assignments
Exhibit C...Form of Escrow Agreement
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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Exhibit D-1 Form of Opinion of Seller's Counsel
Exhibit D-2 Form of Opinion of Purchaser's Counsel
SCHEDULES:
1.1 Stores
2.1(e) Change Fund by Store
2.1(f) Contracts
2.1(j) Vehicles
2.3(c) Unamortized Oil Company Rebates and Allowances
3.2 Terms for Affiliate Leases
5.4(a) Material Actions
5.4(b) Other Actions
5.5(a) Transaction Approvals
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5.6 Compliance with Laws Generally
5.7 Financial Statements
5.8 Certain Changes
5.9 Exceptions to Title
5.11(a) Seller Fee Property
5.11(b) Affiliate Fee Property
5.11(c) Third Party Real Property
5.11(e) Options or Rights of First Refusal Relating to Real Property
5.11(j) Tax Lots
5.12 Third Party Leases
5.14 Contract Assignments Requiring Approval
5.15(a) Unfair Labor Practices
5.15(b) Labor Union Matters
5.16(a) Tanks
5.16(b) Tank Approvals
5.16(d) Violations
5.16(e) Hazardous Material
5.16(f) Environmental Judicial Proceedings
5.18(a) Sellers Equipment
5.18(b) Third Party Equipment
5.19 Violations of Law/Transferred Assets
5.20 Exceptions to Sufficiency of Assets
5.21 Tax Matters
5.24 Affiliate Transactions
5.25 Employee Benefit Plans
9.6 Mortgagees and Their Interests
11.6 Sketches and Designs
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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ASSET PURCHASE AGREEMENT
Asset Purchase Agreement, dated as of the 28th day of September, 1998, by
and among EXPRESS STOP, INC., a North Carolina corporation, BRYAN OIL COMPANY,
INC., a North Carolina corporation, MARKET EXPRESS OF SHALLOTTE, INC., a North
Carolina corporation, and LENNON OIL COMPANY, a North Carolina corporation, as
Sellers, and THE PANTRY, INC., a Delaware corporation, as Purchaser. Capitalized
terms used herein are defined as set forth in Article I hereof.
WITNESSETH:
WHEREAS, the Sellers operate twenty one (21) Stores, and Express Stop is
in the process of constructing a new Store in Wilmington, North Carolina; and
WHEREAS, the Sellers desire to Transfer to the Purchaser, and the
Purchaser desires to acquire and accept from the Sellers, certain assets of the
Sellers relating to the Business, upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, for and in consideration of the premises, mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. The following terms, as used in this Agreement,
shall have the following meanings:
"Action" shall mean any action, claim (whether valid or not), proceeding,
suit or investigation, or any appeal therefrom.
"Affiliate" shall mean, with respect to any Person, any Person which,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. Without limiting
the foregoing definition, the term "Affiliate," as it relates to each Seller,
shall include the following Persons: John M. Lennon, Robert E. Bryan Jr., Lennon
Family Limited Partnership, and The Bryan Family Limited Partnership.
"Affiliate Fee Property" shall mean the real property owned by an
Affiliate and more particularly described on Schedule 5.11(b) hereto.
"Affiliate Leases" shall mean leases for each of the Store properties
identified under the heading "Affiliate Leases" on Schedule 3.2.
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"Agreement" shall mean this Asset Purchase Agreement, and all amendments,
modifications and supplements hereto, and shall include all of the Schedules and
Exhibits attached hereto.
"Approval" shall mean any approval, authorization, clearance, expiration
of waiting period, consent, license, franchise, order or permit of or by, or
filing with, any Governmental Authority or other Person.
"Assumed Liabilities" shall have the meaning ascribed to such term in
Section 2.3 hereof.
"Audit" shall mean a physical audit or count of all of the Inventory to be
conducted jointly by Sellers and Purchaser at each Store on the Closing Date and
on the two (2) days prior thereto, commencing at 7:00 a.m.
"Bryan Oil" shall mean Bryan Oil Company, Inc., a North Carolina
corporation, and its successors.
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"Business Day" shall mean any day that is not a Saturday, Sunday, or legal
or banking holiday in North Carolina.
"Change Fund" shall mean the normal change fund for each Store in the
amount maintained in the ordinary course of business consistent with past
practice, as set forth on Schedule 2.1(e).
"Claim" shall have the meaning ascribed to such term in Section
12.3(a) hereof.
"Claim Notice" shall have the meaning ascribed to such term in Section
12.3(a) hereof.
"Closing" shall mean the consummation of the transactions contemplated by
this Agreement, effective as of 7:00 a.m. on the date that all of the conditions
set forth in Articles IX and X hereof are fully satisfied or waived by the
appropriate party or parties hereto.
"Closing Date" shall mean October 30, 1998 or as soon thereafter as the
Closing occurs, but not later than December 31, 1998.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and shall
include all of the rules and regulations promulgated thereunder.
"Condition" shall mean, collectively, the business, properties, assets,
operations, prospects, results of operations and condition (financial or
otherwise).
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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"Contracts" shall mean the contracts and agreements, including Third Party
Leases, of the Sellers relating to the Business and which will be assigned to
and assumed by the Purchaser, as identified on Schedule 2.1(f).
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"Damages" shall mean any fine, penalty, claim, loss, deficiency,
Liability, cost or expense (including, without limitation, reasonable attorneys'
and accountants' fees, costs and expenses) or environmental assessment,
monitoring or remediation expense, diminution in property value, or damage of
any kind or nature whatsoever.
"DHEC" shall mean the South Carolina Department of Health and
Environmental Control.
"Employee Benefit Plan" shall mean any employee benefit plan, arrangement,
policy or commitment (including any employee benefit plan within the meaning
ascribed to such term in Section 3(3) of ERISA) including, without limitation,
any employment, consulting or deferred compensation agreement, executive
compensation, bonus, incentive, pension, profit-sharing, savings, retirement,
stock option, stock purchase or severance pay plan, any life, health,
disability, accident or insurance plan or any holiday, vacation or other
employee practice, policy or benefit.
"Environmental Law" shall have the meaning ascribed to such term in
Section 5.16(c) hereof.
"Equipment" shall mean the Petroleum Equipment and the Store Equipment.
"Equity Interests" of any Person, shall mean any and all shares,
partnership and other interests (general or limited), rights to purchase,
warrants, option, participations or other equivalents of or interests in
(however designated) the equity of such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agreement" shall mean the Escrow Agreement, substantially in the
form of Exhibit C hereto.
"Escrowed Amount" shall have the meaning ascribed to such term in Section
2.6 hereof.
"Excluded Assets" shall have the meaning ascribed to such term in Section
2.2 hereof.
"Excluded Liabilities" shall have the meaning ascribed to such term in
Section 2.4 hereof.
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
3
<PAGE>
"Express Stop" shall mean Express Stop, Inc., a North Carolina
corporation, and its successors.
"Financial Statements" shall have the meaning ascribed to such term in
Section 5.7 hereof.
"GAAP" shall mean generally accepted accounting principles in the United
States consistently applied.
"Global Communications" shall mean Global Communications, Inc., a South
Carolina corporation.
"Global Communications Stock" shall have the meaning ascribed to such term
in Section 5.1(b) hereof.
"Governmental Authority" shall mean any foreign, Federal, state, local or
other governmental, administrative or regulatory authority, body, agency, court,
tribunal or similar entity.
"Hazardous Material" shall have the meaning ascribed to such term in
Section 5.16(e) hereof.
"Indemnified Party" shall have the meaning ascribed to such term in
Section 12.2 hereof.
"Indemnifying Party" shall have the meaning ascribed to such term in
Section 12.2(g) hereof.
"Insurance Policies" shall have the meaning ascribed to such term in
Section 5.13 hereof.
"Inventory" or "Inventories" shall mean collectively the Merchandise
Inventory and the Petroleum Inventory.
"Inventory Estimate" shall have the meaning ascribed to such term in
Section 2.6 hereof.
"Knowledge" shall mean (i) the actual knowledge, after due inquiry and
investigation, of each Seller's officers and directors and (ii) the existence of
facts, events, occurrences or matters with respect to which any of the Persons
referred to in clause (i) immediately above should reasonably be expected to
have knowledge in the ordinary conduct of his or her duties.
"Law" shall mean any Federal, state, local or foreign law, statute, rule,
regulation, ordinance, standard, requirement, administrative ruling, policy,
order or process (including, without limitation, any zoning or land use law or
ordinance, building code or environmental law, any securities, blue sky, civil
rights or occupational health and safety law or regulation, and any law or
regulation relating to the distribution or sale of food products, beer, wine,
cigarettes, gasoline or other motor fuel) and any court or arbitrator's order or
process.
"Lease" and "Leases" shall mean the Affiliate Leases and the Seller
Leases.
4
<PAGE>
"Lennon Oil" shall mean Lennon Oil Company, a North Carolina corporation,
and its successors.
"Liability" shall mean any debt, liability, commitment or obligation of
any kind, character or nature whatsoever, whether known or unknown, secured or
unsecured, accrued, fixed, absolute, contingent or otherwise, and whether due or
to become due.
"Lien" shall mean any lien, statutory lien (including, without limitation,
any lien, restriction or right arising under any article of the North Carolina
or South Carolina Uniform Commercial Code), tax lien, pledge, mortgage, security
interest, charge, encumbrance, easement, right of way, assessment (pending or
confirmed), covenant, claim, restriction, right, option, conditional sale or
other title retention agreement, warrant or equity of any kind or nature.
"Market Express" shall mean Market Express of Shallotte, Inc., a North
Carolina corporation, and its successors.
"Merchandise Inventory" shall mean all foodstuffs, beverages, tobacco
products, magazines, books, household products, automotive products or
accessories, and any other products of the Business of whatever nature held for
retail sale out of the Stores, but excluding Petroleum Inventory.
"Mexican Express" shall mean Mexican Express, a South Carolina general
partnership.
"Multiemployer Plan" shall have the meaning ascribed to such term in
Section 5.25(b) hereof.
"NCDENR" shall mean the North Carolina Department of Environmental and
Natural Resources.
"Permitted Liens" shall mean (i) liens for Taxes that are not yet
delinquent or are being contested in good faith by appropriate proceedings and
for which there are adequate reserves on the books, (ii) workers or unemployment
compensation liens arising in the ordinary course of business; (iii) mechanic's,
materialman's, suppliers, vendor's or similar liens arising in the ordinary
course of business securing amounts that are not delinquent, (iv) laws,
ordinances and governmental regulations regulating the use or occupancy of the
Real Property or the character, dimensions or locations of the improvements
thereon, provided that none of the same are or would be violated by the
continued use of any portion of the Real Property for the purposes for which it
has been customarily used by or in the Business; and (v) exceptions discovered
by an inspection or survey or other imperfections of title that do not make
title unmarketable; provided, however, that no Permitted Lien shall be so
substantial as to impair the value of or materially interfere with the continued
or contemplated use of any material portion of the Real Property or Transferred
Assets for the purposes for which they have been used by or in the Business.
"Person" shall mean any individual, partnership, corporation, limited
liability company, association, business trust, joint venture, governmental
entity, business entity or other entity of any kind or nature.
5
<PAGE>
"Petroleum Equipment" shall mean all petroleum marketing equipment,
including, but not limited to, pumps, gasoline dispensers, gasoline consoles,
gasoline canopies, canopy structures, lights, Registered Tanks, lines,
environmental monitoring and upgrade equipment, controllers and communications
equipment, and any related equipment or apparatus located at the Real Property.
"Petroleum Inventory" shall mean all gasoline, diesel and kerosene
products of the Business measured in gallons.
"Petroleum Products" shall have the meaning ascribed to such term in
Section 5.16 hereof.
"Phase II Testing" shall have the meaning ascribed to such term in Section
7.6 hereof.
"Purchase Price" shall have the meaning ascribed to such term in Section
2.5 hereof.
"Purchaser" shall mean The Pantry, Inc., a Delaware corporation.
"Purchaser Group" shall have the meaning ascribed to such term in Section
7.6 hereof.
"Real Property" shall mean, collectively, the Seller Fee Property, the
Affiliate Fee Property and the Third Party Real Property.
"Registered Tanks" shall mean those Tanks that are properly registered in
accordance with all applicable Laws and for which all fees have been paid that
would otherwise be due.
"Representative" shall mean any employee, officer, director, stockholder,
partner, accountant, attorney, investment banker, broker, finder, investor,
subcontractor, consultant or other authorized agent or representative of a
Person.
"Seller Leases" shall mean leases for each of the Store properties
identified under the heading "Seller Leases" on Schedule 3.2.
"Seller Fee Property" shall mean the real property more particularly
described on Schedule 5.11(a) hereto.
"Sellers" shall mean Express Stop, Bryan Oil, Market Express and Lennon
Oil.
"SNDA" shall have the meaning ascribed to such term in Section 9.6 hereof.
"Store Equipment" shall mean all convenience store fixtures, machinery and
equipment, including, but not limited to, walk-in coolers, store fixtures,
counters, shelving, refrigeration equipment, cash registers and POS equipment,
safes, fountain dispensing equipment, ATM machines, coffee equipment, ice
machines, all QSR and food service equipment (including any equipment used in
connection with Blimpie and Subway), personal computers, tables and any other
fixtures or equipment necessary for, or used in connection with, the operation
of a convenience store and located at any of the Stores, regardless of whether
such items are
6
<PAGE>
permanently attached to the Real Property, and including pole lights, pole signs
or other personal property attached, appurtenant to or located in or around the
buildings or improvements located at the Real Property.
"Store Supplies" shall mean cups, napkins, paper towels, toilet paper,
janitorial supplies and similar non-Inventory items that are used in the
operation or maintenance of the Stores.
"Stores" shall mean the twenty one (21) convenience stores operated, and
the convenience store being constructed, by the Sellers and identified on
Schedule 1.1, each being a "Store."
"Tanks" shall have the meaning ascribed to such term in Section
5.16(a) hereof.
"Tax" shall mean any foreign, Federal, state or local income, gross
receipts, license, severance, occupation, premium, environmental (including
taxes under Code Section 59A), customs, duties, profits, disability,
registration, alternative or add-on minimum, estimated, withholding, payroll,
employment, unemployment insurance, social security (or similar), excise, sales,
use, value-added, occupancy, franchise, real property, personal property, gas,
petroleum marketing business and occupation, mercantile, windfall profits,
capital stock, stamp, transfer, workmen's compensation or other tax, fee or
imposition of any kind whatsoever, including any interest, penalties, addition,
assessments or deferred Liability with respect thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for refund,
information return, statement, or other similar document relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereto.
"Third Party Leases" shall mean those leases described on Schedule 5.12.
"Third Party Lease Assignments" shall have the meaning ascribed to such
term in Section 3.2 hereof.
"Third Party Real Property" shall mean the real property more particularly
described on Schedule 5.11(c).
"Transaction Documents" shall mean, collectively, this Agreement, the
Escrow Agreement, the Leases, the Third Party Lease Assignments, and all
agreements, instruments, certificates and other documents executed and/or
delivered in connection herewith or therewith.
"Transfer" shall mean any sale, transfer, conveyance, assignment, delivery
or other disposition.
"Transferred Assets" shall have the meaning ascribed to such term in
Section 2.1 hereof.
"Trust Fund" shall have the meaning ascribed to such term in Section
2.1(h) hereof.
"Vehicles" shall mean the motor vehicles listed on Schedule 2.1(j).
7
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1.2 Additional Definitions. In addition to the foregoing defined terms,
other capitalized terms appearing in this Agreement shall have the respective
meanings ascribed to such terms where they first appear in the text of this
Agreement.
ARTICLE II
PURCHASE AND SALE OF ASSETS AND
ASSUMPTION OF LIABILITIES; PURCHASE PRICE
2.1 Purchase and Sale of Assets. Subject to the terms and conditions of
this Agreement, at the Closing the Sellers shall Transfer to the Purchaser, and
the Purchaser shall acquire and accept from the Sellers, all of the Sellers'
right, title and interest in, to and under all of the furniture, fixtures,
equipment, Inventory and other assets, used or located at the Stores and
relating to the Business, less and except the Excluded Assets (after giving
effect to the exclusion of the Excluded Assets, such assets, together with all
right, title and interest as tenant or lessee pursuant to the Leases and the
Third Party Lease Assignments, being hereinafter collectively referred to as the
"Transferred Assets"), free and clear of any and all Liens (except Permitted
Liens), such Transferred Assets to include, without limitation:
(a) all of Sellers' rights and interests under the Third Party Leases
assigned pursuant to Section 3.2(c) hereof;
(b) the Store Equipment;
(c) the Petroleum Equipment;
(d) the Inventory;
(e) the Change Fund as set forth on Schedule 2.1(e);
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
8
<PAGE>
(f) any and all rights and interests of the Sellers in, to or under
those Contracts identified on Schedule 2.1(f) (such Contracts being assumed by
Purchaser in its sole discretion);
(g) all computer hardware and computer software documentation (subject
to applicable license agreements and excluding the Oasis software) utilized in,
or in connection with, the Stores or the Business, including source code and
systems documentation and telephone switches related to point-of-sale and
petroleum dispensing equipment and the host communications server.
(h) all rights, interests and claims under the North Carolina Commercial
Leaking Petroleum Underground Storage Tank Cleanup Fund and the South Carolina
SUPERB Account and SUPERB Financial Responsibility Fund (individually or
collectively, as applicable, the "Trust Fund"), or any other fund, program, or
insurance policy relating to payment or reimbursement of costs, expenses or
damages related to releases from underground storage tanks;
(i) the name "Express Stop," all variations thereof and the good will
associated therewith and with the Business;
(j) the motor vehicles identified on Schedule 2.1(j);
(k) all Store Supplies;
(l) all Global Communications Stock;
(m) all of the Sellers' rights and interests in the Mexican Express
Equity Interests;
(n) the building's and other improvements at Express Stop Stores 9, 10
and 22; and
(o) to the extent that the Sellers fail to indemnify the Purchaser under
Section 12.2(g) with respect to Store No. 11, all claims for reimbursement and
other rights with respect to the insurance policy from International Insurance
Co., Policy #GAS001 601, and any other rights and claims against third Persons
in connection with the environmental conditions listed on Schedules 5.16(d), (e)
and (f).
2.2 Excluded Assets. Notwithstanding anything in Section 2.1 hereof to
the contrary, the Sellers shall retain all of their right, title and interest
in, to and under all, and shall not Transfer to the Purchaser any, of the
following assets, rights or properties (the "Excluded Assets"):
(a) all bank accounts, cash and cash equivalents, except the Change
Fund;
(b) all accounts and notes receivable of the Business (including
miscellaneous receivables and rebates due from oil companies) arising from
products sold or services rendered by the Sellers, Global Communications and
Mexican Express prior to the Closing;
(c) all Federal, state, local and foreign income tax deposits (to the
extent not refunded) paid by the Sellers, Global Communications and Mexican
Express in connection with
9
<PAGE>
the income or operations of the Business with respect to any period ending on or
prior to the Closing;
(d) any assets not relating to the Business, including, without
limitation, any such assets owned by Bryan Oil;
(e) all minute books and stock books of the Sellers and other corporate
information not necessary for the operation of the Stores;
(f) any assets relating to any Employee Benefit Plan;
(g) all underground storage tanks not constituting Registered Tanks and
all above-ground storage tanks, unless Purchaser specifically elects in writing
to acquire any of such tanks.
(h) all Hazardous Substances, hazardous wastes, PCBs and PCB-containing
materials, asbestos-containing materials, and waste oil;
(i) all life insurance policies;
(j) motor vehicles, other than the Vehicles;
(k) real property owned by any Seller, subject, however, to the Seller
Leases;
(l) non-transferable licenses and permits; and
(m) all assets of any of the Sellers located at Express Stop's chief
executive office in Fayetteville, North Carolina, other than the host
communications server.
2.3 Assumption of Liabilities. Subject to the terms and conditions of
this Agreement, at the Closing the Purchaser shall assume and agree to pay,
perform and discharge when due only the following Liabilities (collectively, the
"Assumed Liabilities"):
(a) all Liabilities incurred or accruing from and after the Closing
under the Third-Party Leases assigned pursuant to Section 3.2(c) hereof;
(b) all Liabilities incurred or accruing from and after the Closing
under the Contracts; and
(c) all Liabilities for repayment of unamortized oil company rebates and
allowances; provided that such unamortized oil company rebates and allowances
are set forth in reasonable detail on Schedule 2.3(c) hereto; and provided,
further, that the aggregate amount of all Liabilities assumed by the Purchaser
under this Section 2.3(c) shall not exceed $250,000.
2.4 Excluded Liabilities. The Purchaser shall neither assume nor have
any Liability for any, and the Sellers shall remain fully liable for, and shall
pay, perform and discharge, (a) all Liabilities of the Sellers, Global
Communications, Mexican Express or any Business arising out of any act or
omission occurring or state of facts existing prior to the Closing (except for
the
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Assumed Liabilities specified in Section 2.3), including, without limitation,
Global Communications' obligations under its promissory notes listed on Schedule
5.24, (b) all Liabilities of Sellers arising out of any act or omission
occurring after the Closing to the extent that such Liabilities described in
this clause (b) do not arise out of the operation of the Business by Purchaser,
its successors or assigns, (c) all Liabilities arising from or pursuant to
Permitted Liens incurred or accruing with respect to the period prior to
Closing, (d) all Liabilities related to the construction of the new Store in
Wilmington, North Carolina, and the rebuilding of Store number 8 in Florence,
South Carolina, continuing through and until each Store is fully completed,
equipped, and ready to be opened, and (e) all Liabilities for payment or
otherwise with respect to any Taxes arising out of, attributable to or affecting
the Transferred Assets, Global Communications, Mexican Express or the conduct of
the Business through the Closing (collectively, the "Excluded Liabilities").
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*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
11
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2.9 Employees. The Purchaser shall be free to hire such Persons, whether
or not employees of any Seller or the Business, on such terms and conditions of
employment as the Purchaser shall determine in the exercise of its sole
discretion, and nothing in this Agreement shall establish any obligation or
commitment on the part of the Purchaser for any right of Claim (legal or
equitable) of any Person other than the parties hereto, including, without
limitation, any employee of any Seller or the Business or any beneficiary of
such employee. Any claim, including any claim for benefits, asserted by or on
behalf of any Person with respect to such Person's employment by the Purchaser
shall be governed solely by applicable employment policies and employee benefit
plans, if any, that the Purchaser may adopt after the Closing. The Sellers have
delivered to the Purchaser a true and complete list (including names, titles,
job descriptions, compensation, date of hire, and full vs. part-time status) of
all employees of the Business as of the date such list is delivered. At least
seven (7) days prior to the Closing Date, the Purchaser shall notify Express
Stop in writing which of such employees (if any) the Purchaser does not intend
to hire after the Closing. The Sellers shall be fully liable for the employment
(or termination or severance thereof) of any Persons listed in such Purchaser's
notice. In addition, the Sellers shall be liable for, and shall pay, all wages,
salaries, payroll taxes and employee benefits, including without limitation,
vacation pay or benefits, due, owing or accrued for all employees of the
Business through the Closing. All claims incurred or liabilities asserted under
Sellers' Employee Benefit Plans (including any such claims resulting from
Sellers' termination of any Employee Benefit Plan) shall be the responsibility
of Sellers, and Purchaser shall not have any Liability with respect to such
claims or liabilities.
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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ARTICLE III
THE CLOSING
3.1 Time and Place of Closing. The Closing shall take place at 10:00
a.m. on the Closing Date at the office of Womble Carlyle Sandridge & Rice, or at
such other time or place as may be mutually agreed upon by the parties hereto.
3.2 Instruments of Transfer. At the Closing, the Sellers shall deliver
to the Purchaser such bills of sale, assignments, powers of attorney, stock
powers, certificates, motor vehicle titles, and other good and sufficient
instruments of Transfer, in form and substance reasonably satisfactory to the
Purchaser and its counsel, as shall be effective to vest in the Purchaser all of
the Sellers' right, title and interest in, to and under the Transferred Assets.
In addition, (a) the appropriate Affiliate and the Purchaser shall execute and
deliver the Affiliate Leases; (b) the appropriate Seller and the Purchaser shall
execute and deliver the Seller Leases; and (c) the appropriate Seller and the
Purchaser shall execute and deliver assignment and assumption agreements (the
"Third Party Lease Assignments") of the rights granted and obligations imposed
in the Third Party Leases identified in Schedule 2.1(f) as those to be assigned.
The Seller Leases and the Affiliate Leases shall be substantially in the form of
Exhibit A hereto upon the terms (including annual rent) identified in Schedule
3.2 hereto. The Third Party Lease Assignments shall be substantially in the form
of Exhibit B.
3.3 Further Assurances. In addition to the actions, documents and
instruments specifically required to be taken or delivered by this Agreement, at
the Closing or from time to time thereafter, and without further consideration,
the parties hereto shall take such other actions, and execute and deliver such
other documents and instruments, including, without limitation, resale
certificates for Inventory, as the other party or parties hereto or their
respective counsel may reasonably request in order to effectuate and perfect the
transactions contemplated by this Agreement.
3.4 Transfer Taxes. Except for all transfer taxes and fees, if any,
which shall be borne and paid solely by the Sellers, each party hereto shall pay
any and all taxes incurred by such party in connection with the transactions
contemplated by this Agreement.
ARTICLE IV
TERMINATION
4.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual written consent of the Sellers and the Purchaser;
(b) by the Sellers or the Purchaser, upon written notice describing the
breach in reasonable detail, if there shall have been a material breach by the
other party or parties of any of the terms or provisions of this Agreement or
any of the Transaction Documents, and such breach
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shall not have been cured within five (5) Business Days after such breaching
party or parties shall have received notice of the non-breaching party's or
parties' intent to terminate this Agreement pursuant to this subsection (b);
(c) by the Sellers or the Purchaser if any court of competent
jurisdiction or other Governmental Authority shall have issued an order, decree
or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and non-appealable; or
(d) by the Sellers or the Purchaser if Closing shall not have occurred
by December 31, 1998, so long as the delay in Closing shall not have resulted
from the intentional act of the party seeking to terminate.
4.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 4.1(a), (c) or (d) hereof, such termination shall
be the sole remedy, this Agreement shall forthwith become void (except for
Sections 7.8, 8.3 and 11.1 (Confidentiality) and 13.1 (Fees and Expenses)
hereof) and there shall be no Liability on the part of any of the parties
hereto, any of their respective Affiliates or any of the Representatives of any
of them; provided, however, that if such termination shall result from the
breach by a party hereto (including any termination pursuant to Section 4.1(b)
hereof) of its obligations under this Agreement, such party shall be fully
liable for any and all Damages sustained or incurred by the other party or
parties as a result of such breach and such other party or parties shall be
entitled to pursue any remedies available at Law or in equity.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers hereby represent and warrant to the Purchaser as follows:
5.1 Organization and Good Standing.
(a) Each of the Sellers, Global Communications and Mexican Express is a
corporation or general partnership duly organized or formed, as the case may be,
validly existing and in good standing under the Laws of the State of its
incorporation or formation, as the case may be, is qualified to do business in
each state in which any Store owned by any such Seller is located, and has all
requisite power and authority, corporate or otherwise, to own, operate and lease
its properties and assets and to conduct the Business.
(b) The authorized Equity Interests of Global Communications consist of
100 shares of common stock, no par value (the "Global Communications Stock"),
all of which shares are outstanding and held by Express Stop. There are no other
Equity Interests of Global Communications that are issued or authorized. There
are no contracts or commitments to issue any such Equity Interests, and there is
no shareholder, voting trust or similar agreement affecting any of the Global
Communications Stock. All of the shares of Global Communications Stock have been
duly and validly issued, are fully paid and nonassessable, and have been offered
and
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sold in compliance with all applicable federal and state securities Laws. No
Global Communications Stock has been issued in violation of the preemptive
rights of any present or former shareholder of Global Communications.
(c) The Mexican Express Equity Interests are owned directly, in equal
amounts, by Express Stop and Gebhardt-White Foods, Inc. There are no other
Equity Interests of Mexican Express that are issued or authorized. Except with
respect to the right of first refusal granted to Gebhardt-White Foods, Inc,
pursuant to the Mexican Express partnership agreement, there are no contracts or
commitments to issue any such options, warrants, convertible rights, calls, puts
or other rights or commitments, and there is no shareholder, voting trust or
similar agreement affecting any of the Mexican Express Equity Interests. All of
the Mexican Express Equity Interests have been duly and validly issued, are
fully paid and nonassessable, and have been offered and sold in compliance with
all applicable federal and state securities Laws. None of the Mexican Express
Equity Interests have been issued in violation of the preemptive rights of any
present or former equity holder of Mexican Express.
5.2 Power and Authority. Each Seller has all requisite power and
authority to enter into and deliver this Agreement and the other Transaction
Documents, perform its obligations hereunder and consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the other
Transaction Documents, the performance by it of its obligations hereunder and
thereunder and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all corporate and other actions on the part
of each Seller required by applicable Law, its Articles of Incorporation, its
bylaws or otherwise. This Agreement and the other Transaction Documents
constitute the legal, valid and binding obligation of each Seller, enforceable
against such Seller in accordance with their terms, except as the same may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar
Laws now or hereafter in effect relating to creditors' rights generally and (b)
general equitable principles.
5.3 No Violation. Subject to Approvals required by Schedule 5.5, neither
the execution and delivery by the Sellers of this Agreement and the other
Transaction Documents, the performance by them of their obligations hereunder
and thereunder, nor the consummation of the transactions contemplated hereby and
thereby, will (a) contravene any provision of the articles of incorporation,
bylaws or other organic documents of any of the Sellers, Global Communications
and Mexican Express; (b) violate any Contract or material agreement or
instrument to which any of the Sellers, Global Communications or Mexican Express
is a party or by which any of them or any of their assets or properties may be
bound; or (c) violate any material Law or any judgment, decree or order of any
court or other Governmental Authority or any arbitration award to which any of
them is subject or by which any of their assets or properties may be bound.
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*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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5.5 Approvals. (a) Except as set forth in this Agreement and Schedule
5.5(a), neither any declaration, filing or registration with, notice to, nor
Approval of, any Governmental Authority or other Person is required to be made,
obtained or given by or with respect to any Seller, any Affiliate of any Seller
(including Global Communications and Mexican Express), or the Business in
connection with the execution, delivery or performance of this Agreement or the
Transaction Documents or the consummation of the transactions contemplated
hereby or thereby. Each of the Sellers, Global Communications and Mexican
Express has all Approvals of any Governmental Authority required for the lawful
operation of the Business and the use and ownership or leasing of its properties
and assets as it is currently operated. All such Approvals are valid, in full
force and effect and in good standing, except to the extent that any lack of
such force and effect does not, in the aggregate, have a material adverse effect
on the Condition of any of the Sellers, Global Communications or Mexican Express
or the Business. There is no Action pending or, to the Knowledge of each Seller,
threatened that disputes the validity of any such Approval or that may result in
the revocation, cancellation or suspension, or any adverse modification of, any
such Approval. The Sellers will make available to the Purchaser true and
complete copies of all such Approvals.
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*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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5.6 Compliance with Laws and Orders. Except as described on Schedule
5.6, (a) each of the Sellers, Global Communications and Mexican Express has
complied in all material respects with all Laws applicable to it and to the
operation of the Business, (b) none of the Sellers, Global Communications and
Mexican Express has been charged with or, to the Knowledge of any Seller,
threatened with any charge concerning or under any investigation with respect
to, any violation of any provision of any Law applicable to or materially
affecting any Seller, the Business or the Real Property, and (c) none of the
Sellers, Global Communications and Mexican Express is in violation of or in
material default under, and no event has occurred that, with the lapse of time
or the giving of notice or both, could result in the violation of or default
under, the terms of any judgment, decree, order, injunction or writ of any court
or other Governmental Authority applicable to any of the Sellers, Global
Communications and Mexican Express, any asset or properties of any of the
Sellers, Global Communications or Mexican Express, any Store, or the Business.
5.7 Financial Statements. Express Stop has delivered to Purchaser
unaudited financial statements for each of the Sellers, Global Communications
and Mexican Express for the twelve (12) months ended December 31, 1995, 1996 and
1997 and unaudited interim financial statements for each of the Sellers, Global
Communications and Mexican Express for the four (4) months ended April 30, 1998,
copies of which are attached as Schedule 5.7 (the "Financial Statements"). The
Financial Statements fairly present the financial condition of each of the
Sellers, Global Communications and Mexican Express for the periods indicated and
the results of the operations of each of the Sellers, Global Communications and
Mexican Express for such periods, in conformity with GAAP, subject to fixed
asset and related depreciation, applied on a basis consistent with prior
periods.
5.8 Absence of Certain Changes or Events. Except as described on
Schedule 5.8 hereto, since April 30, 1998, each of the Sellers, Global
Communications and Mexican Express has conducted the Business in the ordinary
course and consistent with past practice and:
(a) there has not occurred (i) any material adverse change in the
Condition of the Business or any of the Stores or (ii) any event, circumstance
or combination thereof, whether arising prior to or after April 30, 1998, that
might reasonably be expected to result in any material adverse change in the
Condition of the Business or any of the Stores before, on or after the Closing
Date; and
(b) none of the Sellers, Global Communication and Mexican Express has
(i) suffered any damage, destruction or loss, whether covered by insurance or
not, materially and adversely affecting the Condition of the Business or any
Store, (ii) entered into any material agreement, undertaking, commitment or
transaction (including, without limitation, any borrowing or capital
expenditure) affecting or relating to the Business not in the ordinary course of
business consistent with past practice, (iii) Transferred any of the assets of
the Business except in the ordinary course of business consistent with past
practice, (iv) granted or agreed to grant any increase in the compensation of
any employee of the Business (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any employee of the Business,
except for those granted in the
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ordinary course of business consistent with past practice, or (v) entered into
or agreed (whether in writing or otherwise) to enter into any agreement or other
arrangement to take any action referred to in this Section 5.8, including,
without limitation, any agreement or arrangement granting any preferential right
to purchase any of the assets of the Business (including, without limitation,
the Transferred Assets) or requiring the consent of any Person to the Transfer
of any such assets.
5.9 Title to Transferred Assets.
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(b) Express Stop has good and valid title to the Global Communications
Stock and the Mexican Express Equity Interests owned by it, free and clear of
all Liens (except for the right of first refusal granted to Gebhardt-White
Foods, Inc. in the Mexican Express partnership agreement) and has full right,
power and authority to sell, transfer and deliver the Global Communications
Stock and such Mexican Express Equity Interests to Purchaser (except for the
right of first refusal granted to Gebhardt-White Foods, Inc. in the Mexican
Express partnership agreement) and, upon delivery of the certificates therefor
pursuant to Section 3.2 hereof, and Purchaser's acceptance thereof, will have
Transferred to Purchaser good, marketable and valid title thereto, free and
clear of any Lien.
(c) Upon the delivery of the instruments of Transfer described in
Section 3.2 hereof to the Purchaser at the Closing, the Transferred Assets shall
have been Transferred to the Purchaser, free and clear of any Liens of any kind
whatsoever, other than Permitted Liens.
5.10 Inventory. The Inventories are in good and merchantable condition
and constitute a customary supply and product mix, consistent with Sellers' past
practice, of Merchandise Inventory and Petroleum Inventory currently saleable at
usual and customary prices, consistent with Sellers' past practices, in the
ordinary course of business of the Business. The parties shall conduct an Audit
of all Inventories on the two days immediately prior to and on the day of the
Closing. The cost of the Audit shall be borne equally by the Sellers, on one
hand, and the Purchaser, on the other hand.
5.11 Real Property.
(a) Schedule 5.11(a) hereto contains a true and complete list and
description of all of the Seller Fee Property.
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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(b) Schedule 5.11(b) hereto contains a true and complete list and
description of all of the Affiliate Fee Property.
(c) Schedule 5.11(c) hereto contains a true and complete list and
description of all of the Third Party Real Property.
(d) The Real Property includes all land, easements, rights-of-way,
buildings, structures and other improvements used by the Sellers in the
operation of the Stores and conduct of the Business as it is currently being
conducted.
(e) Except as set forth on Schedule 5.11(e), neither any Seller, any
Affiliate of any Seller nor, to each Seller's Knowledge, any owner of Third
Party Real Property owns, holds or is obligated under or a party to any option,
right of first refusal or other contractual right to acquire or sell any of the
Real Property or any interest therein.
(f) To each Seller's Knowledge, no portion of the Real Property
encroaches in any material respect upon any property belonging to any other
Person, and no portion of any other Person's property encroaches in any material
respect upon any of the Real Property.
(g) To each Seller's Knowledge, with respect to the Real Property, there
does not exist and has not occurred (i) any pending or threatened condemnation
proceeding, (ii) any pending or threatened Action, or (iii) any other matter
materially and adversely affecting the value thereof.
(h) To each Seller's Knowledge, all maps and surveys heretofore
delivered by the Seller to the Purchaser are true and complete copies of such
documents.
(i) No parcel of the Real Property is located in a special flood hazard
area designated by a Governmental Authority.
(j) Each of the Sellers, the Affiliates of any Seller and, to each
Seller's Knowledge, the owners of Third Party Real Property, has paid, and will
continue to pay through Closing, all taxes, assessments, charges, fees, levies
and impositions owing by each or any of them with respect to the Real Property.
Except as set forth on Schedule 5.11(j), each of the parcels of Real Property is
assessed for real estate tax purposes as a wholly independent tax lot, separate
from any adjoining land or improvements. There is no actual or, to the Seller's
Knowledge, pending imposition of any assessments or public betterments, and no
improvements have been constructed or planned which would be paid for by means
of assessments upon the Real Property.
5.12 Third Party Leases.
(a) Schedule 5.12 hereto contains a true and complete list of each of
the Third-Party Leases, including annual rent, the expiration date and all
renewal options with respect thereto. Each applicable Seller's interest in each
of the Third Party Leases is free and clear of any Lien
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whatsoever. The Sellers have delivered to the Purchaser true and complete copies
of all of the Third Party Leases and of all related options, if any, to purchase
the Third Party Real Property.
(b) Each Third Party Lease and each related option to purchase is valid
and binding on the applicable Seller or Affiliate, as the case may be, and to
each Seller's Knowledge, on the landlord or lessor, and is in full force and
effect, subject only to bankruptcy, insolvency or similar Laws of general
application, and there are no existing defaults by any Seller or Affiliate of
any Seller under, or, to the Knowledge of each Seller, by any other party to,
any Third Party Lease or any related option to purchase the Third Party Real
Property, or any condition, event or act known to such Seller that, with notice
or lapse of time or both, would constitute a material default. Without limiting
the foregoing, no Seller has received any notice from any Person asserting that
any Seller or Affiliate of any Seller is in default under any Third Party Lease,
or under any related option to purchase, nor does any Seller have any Knowledge
of a default by it or an Affiliate of any Seller under any Third Party Lease, or
under any related option to purchase. Each applicable Seller or Affiliate, as
the case may be, currently enjoys peaceful and undisturbed possession of the
Third Party Real Property under each of the Third Party Leases.
5.13 Insurance. The Sellers, Global Communication and Mexican Express
currently have in effect policies of fire, liability, worker's compensation and
other forms of insurance which provide coverage for the Stores and the Business
(collectively, the "Insurance Policies"). All presently effective Insurance
Policies are and will remain in full force and effect through the Closing Date.
There is no notice of or basis for any modification, suspension, termination or
cancellation of any Insurance Policy or of any claim thereunder.
5.14 Contracts. Each of the Contracts specified on Schedule 2.1(f) is, to
the Knowledge of each Seller, valid and in full force and effect and has been
entered into in the ordinary course of business and, to the Knowledge of each
Seller, none of them is in default in any material respect. The Sellers have
delivered to the Purchaser true and complete copies of each of the Contracts.
Except as set forth on Schedule 5.14 hereto, each Contract that is being
assigned by the Sellers to the Purchaser hereunder may be so assigned without
the Approval of any Person.
5.15 Employment Law Matters.
(a) With respect to the Business, to each Seller's Knowledge, (i) each
of the Sellers, Global Communications and Mexican Express is in compliance with
all applicable Laws respecting employment, employment practices, terms and
conditions of employment, wages and hours and the employment of aliens or
similar immigration matters where such noncompliance would not have a material
adverse effect on the Business, any Store or the transactions contemplated by
this Agreement or the other Transaction Documents, and (ii) except as set forth
on Schedule 5.15(a), none of the Sellers, Global Communications and Mexican
Express is engaged in any unfair labor practice.
(b) There is no strike, labor dispute, slowdown or work stoppage pending
or, to the Knowledge of each Seller, threatened, against or affecting the
Business.
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(c) Except as set forth on Schedule 5.15(b) hereto, none of the current
employees of the Business is represented by a labor union, and no petition has
been filed or proceedings instituted by any employee or group of employees of
the Business with any labor relations board seeking recognition of a bargaining
representative at any time. There are no controversies or disputes (including
any union grievances or arbitration proceedings) pending or, to the Knowledge of
each Seller, threatened, between any of the Sellers, Global Communications and
Mexican Express and any of the employees of the Business (or any union or other
representative of such employees), except for such controversies and disputes
which do not and will not, individually or in the aggregate, have a material
adverse effect on the Condition of the Business or any Store.
(d) None of Global Communications or Mexican Express has employees.
5.16 Environmental Matters.
(a) Schedule 5.16(a) hereto contains a true and complete list and
description of every underground storage tank on the Real Property (each, a
"Tank") for the storage of gasoline and other petroleum products, by-products
and constituents ("Petroleum Products"). Each Tank is a Registered Tank
(including being registered with NCDENR or DHEC) and Sellers have satisfied all
applicable requirements for eligibility under the Trust Fund for all of the
Tanks and each of them. Except as set forth on Schedule 5.16(a), the Tanks and
related equipment and apparatus meet the requirements of 40 C.F.R. ss. 280.21
that underground storage tank systems must meet not later than
December 22, 1998.
(b) The Sellers have all Approvals necessary to enable the continued
operation of the Tanks, Petroleum Equipment and Stores as presently conducted
and operated. Schedule 5.16(b) includes a true and complete list of such
Approvals. The Sellers have delivered to Purchaser true and complete copies of
each such Approval. Such Approvals shall be transferred or reissued to Purchaser
without adverse changes in connection with Closing, and each Seller agrees to
take all actions necessary to effect such transfer or re-issuance.
(c) The Sellers have complied in all material respects with (i) the
Approvals, and (ii) all applicable Environmental Laws, as defined below. The
Stores, Tanks, Petroleum Equipment, Real Property and Business are in compliance
with all applicable Environmental Laws. As used herein, "Environmental Law"
shall mean any federal, state or local Law, statute, ordinance, rule,
regulation, order, or other legal requirement relating to the protection of
safety, human health or the environment, including, but not limited to, any
requirement pertaining to the distribution, use, treatment, storage, disposal,
transportation, handling, reporting, licensing, permitting, investigation or
remediation of gasoline and petroleum products.
(d) Except as shown on Schedule 5.16(d), no Seller has received any
notice of violation, alleged violation, non-compliance, Liability or potential
Liability regarding environmental matters or compliance with Environmental Laws
with regard to the Tanks, Petroleum Equipment, Real Property, Stores or
Business.
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(e) No Hazardous Material, as defined below, has been transported to or
from the Stores, Tanks, Petroleum Equipment or Real Property in violation of, or
to Sellers' Knowledge, in a manner or to a location that could give rise to
Liability under, any applicable Environmental Law. Except as set forth in
Schedule 5.16(e), no Hazardous Material has been present, generated, treated,
stored, released or disposed of at, in, on, about, under, to or from any of the
Stores, Tanks, Petroleum Equipment or Real Property in violation of, or in a
manner that gives rise to Liability under, any applicable Environmental Law. As
used herein, "Hazardous Material" means any substance or material meeting any
one or more of the following criteria: (i) it is or contains a material
designated as a hazardous waste, hazardous substance, hazardous material,
pollutant, contaminant or toxic substance under any Environmental Law; (ii) its
presence at some quantity requires investigation, notification or remediation
under any Environmental Law; and/or (iii) it is or contains, without limiting
the foregoing, asbestos, polychlorinated biphenyls, petroleum hydrocarbons,
petroleum derived substances or wastes, crude oil or any fraction thereof, or
MTBE or other gasoline additives.
(f) Except as set forth on Schedule 5.16(f), there are no judicial
proceedings or governmental or administrative actions pending or, to the
Knowledge of each Seller, threatened under any Environmental Law to which any
Seller is or will be named as a party, or with respect to the Business, Stores,
Tanks, Petroleum Equipment or Real Property. There are no consent decrees or
other decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements, outstanding under any Environmental Law
with respect to the Sellers, Business, Stores, Tanks, Petroleum Equipment or
Real Property.
(g) Except as set forth on Schedule 5.16(e), there has been no release
or threat of release of Hazardous Materials at or from the Tanks, Petroleum
Equipment, Stores or Real Property, in amounts or in a manner that, individually
or in the aggregate, could reasonably be expected to require investigation,
notification, or remediation under any Environmental Law. The releases set forth
on Schedule 5.16(e) (if any) are currently being investigated and/or remediated
by the contractors listed on Schedule 5.16(e), and the cost of such
investigations and remediation are fully reimbursable under a Trust Fund,
subject only to the deductible (if any) set forth on Schedule 5.16(e).
5.17 Property of Others. To each Seller's Knowledge, no shortage exists
in (a) any inventory or finished goods owned by suppliers of the Business and
stored upon its premises or otherwise or (b) any other item of personal property
owned by another for which the Business is accountable to another. Without
limiting the foregoing, all items of personal property for which the Business is
accountable under any consignment contract, or otherwise are fully accounted for
with no shortages or missing or lost items, are in workable, usable and saleable
condition and have suffered no damage or deterioration, normal wear and tear
excepted. Should shortages exist at Closing, the appropriate Seller shall be
responsible for any required compensation or replenishment.
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5.18 Equipment, Etc.
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(b) Schedule 5.18(b) contains a true and complete list of all Petroleum
Equipment and Store Equipment owned by third parties and used in the Business.
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5.21 Tax Matters.
(a) Purchaser shall not have any Liability for payment or otherwise with
respect to any Taxes arising out of, attributable to or affecting the
Transferred Assets or the conduct of the Business through the Closing. There
does not exist and will not exist any Liability for Taxes that may be asserted
by any taxing authority against the Transferred Assets or the conduct of the
Business through the Closing for which Purchaser will have any Liability for
payment or otherwise, and no lien or other encumbrance for such Taxes has or
will attach to the Transferred Assets through the Closing. The Sellers shall pay
when due any sales or transfer Taxes incurred in connection with the
transactions contemplated by this Agreement.
(b) (i) Each of Global Communications and Mexican Express has timely
filed, or will have timely filed (in the case of this representation being made
on the date of this Agreement),
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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all Tax Returns required to be filed by it with respect to Taxes for any period
ending on or before the Closing, (ii) all Taxes shown to be due and payable on
each such Tax Return have been paid; and (iii) each such Tax Return has been
prepared properly in accordance with the requirements of applicable Law in all
material respects. The amounts recorded on the Financial Statements of Global
Communications and Mexican Express for Taxes are sufficient in all material
respects for payment of all accrued and unpaid Taxes for the periods then ended
and all prior periods. Neither Global Communications nor Mexican Express is the
beneficiary of any extension of time within which to file any Tax Return, and no
claim has been made by any Governmental Authority in a jurisdiction where Global
Communications or Mexican Express, as the case may be, does not file Tax Returns
that Global Communications or Mexican Express, as applicable, is or may be
subject to taxation by that jurisdiction. There are no existing Liens on any of
the assets of Global Communications or Mexican Express that arose in connection
with any failure or alleged failure by Global Communications or Mexican Express,
as the case may be, to pay Taxes. All Taxes which Global Communications or
Mexican Express, as the case may be, is or was required by Law to withhold or
collect with respect to its business, including, without limitation, sales,
unemployment and payroll taxes, have been duly withheld and collected and paid
over to the proper Governmental Authority or held by Global Communications or
Mexican Express, as applicable, in separate bank accounts for such payments.
Neither Global Communications nor Mexican Express has granted an extension of
the statute of limitations on assessments of any Taxes. To Express Stop's
Knowledge, there are no audits or examinations in progress by any Governmental
Authority with respect to either Global Communications or Mexican Express.
Neither Global Communications nor Mexican Express has received any notice from
any Governmental Authority of additional Taxes owed, adjustments being
considered or audits to be commenced. There are no agreements or understandings
between Global Communications or Mexican Express and any Governmental Authority,
whether oral or written, with respect to the payment of any Taxes or any matter
required or permitted to be included or excluded from any Tax Return. All
tax-sharing agreements involving Global Communications or Mexican Express have
been terminated and will be of no future effect following the Closing.
5.22 Finders or Brokers. No Seller has employed any investment banker,
broker, finder or intermediary in connection with the transactions contemplated
hereby who is entitled to any fee or commission in connection with the execution
or delivery of this Agreement or any of the other Transaction Documents or the
consummation of the transactions contemplated hereby or thereby.
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*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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5.24 Certain Interests; Affiliate Transactions. Schedule 5.24 hereto sets
forth a true and complete list of all written and material unwritten agreements,
commitments, obligations and understandings binding upon or relating to the
Business which provide for or reflect the sale by any Seller or the Business to,
or the purchase by any Seller or the Business from, any Affiliate of any Seller
of any products, goods, supplies, equipment or services. Except as described in
detail on Schedule 5.24 hereto, the termination of any such agreement,
commitment or understanding would not have a material adverse effect on the
Condition of the Business.
5.25 Employee Benefit Plans.
(a) Schedule 5.25 lists all Employee Benefit Plans for employees of the
Business participated in or maintained by any Seller or with respect to which
any Seller has made contributions or has or in the future could have any
Liability. For purposes of this Section 5.25, Seller includes any other entity
or business that is treated as a single employer with any Seller pursuant to
Section 414(b), (c), (m) or (o) of the Code. Each Seller has made available to
Purchaser true, correct and complete copies of all such written Employee Benefit
Plans and descriptions of any such unwritten Employee Benefit Plans.
(b) No Seller has had any complete or partial withdrawal from any
"multiemployer plan" (as defined in Section 3(37) or 4001(a)(3) of ERISA)
("Multiemployer Plan") that could result, directly or indirectly, in any
withdrawal Liability under Subtitle E of Title IV of ERISA. No Seller
participates in or contributes to, and no Seller has participated in or
contributed to, any Multiemployer Plan or any "employee pension benefit plan" as
defined in Section 3(2) of ERISA that is subject to Title IV of ERISA.
(c) Neither Global Communications nor Mexican Express maintains or
contributes to, or has an obligation to maintain or contribute to, any Employee
Benefit Plan.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Sellers as follows:
6.1 Organization and Good Standing. The Purchaser is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, and is authorized to transact business in the States of North Carolina
and South Carolina.
6.2 Power and Authority. The Purchaser has all requisite power and
authority to enter into and deliver this Agreement and the other Transaction
Documents, perform its obligations hereunder and consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the other Transaction Documents by it, the performance by it of its
obligations hereunder and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all corporate,
stockholder and other actions on its part required by applicable Law, its
certificate of incorporation or by-laws, or otherwise.
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This Agreement and the other Transaction Documents constitute the legal,
valid and binding obligations of the Purchaser, enforceable against it in
accordance with their terms, except (i) as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
equitable principles.
6.3 No Violation. Neither the execution and delivery by the Purchaser of
this Agreement or the other Transaction Documents, the performance by it of its
obligations hereunder and thereunder, nor the consummation of the transactions
contemplated hereby and thereby, will (i) contravene any provision of its
certificate of incorporation or bylaws; (ii) violate any material agreement or
instrument to which it is a party or by which it or any of its assets or
properties may be bound; (iii) violate any material Law or any judgment, decree
or order of any court or other Governmental Authority or any arbitration award
to which it is subject or by which it or any of its assets or properties may be
bound; or (iv) have a material adverse effect on the Purchaser's business or
operations.
6.4 No Actions. There is no Action pending or, to the knowledge of the
Purchaser, threatened, against it or any of its assets, properties or rights
before any court or other Governmental Authority which (i) questions or
challenges the validity of this Agreement or any action taken or proposed to be
taken by it pursuant hereto or in connection with the transactions contemplated
hereby or (ii) could, if adversely determined, have a material adverse effect on
the transactions contemplated hereby.
6.5 Approvals. To the knowledge of the Purchaser, neither any
declaration, filing or registration with, nor any Approval of, any Governmental
Authority is required to be made or obtained by or with respect to it in
connection with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby, except such Approval as
may be required under the Hart-Scott-Rodino Antitrust Improvements Act, as
amended.
6.6 Disclosure of Material Facts. To the knowledge of the Purchaser, no
provision of this Agreement, including exhibits and schedules, contains or will
contain at Closing any untrue statement of a material fact with respect to it or
omits or will omit at Closing to state a material fact with respect to it
necessary in order to make the statements herein or therein not misleading.
6.7 Finders or Brokers. The Purchaser has not employed any investment
banker, broker, finder or intermediary in connection with the transactions
contemplated hereby who is entitled to any fee or commission in connection with
the execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby.
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ARTICLE VII
CERTAIN OBLIGATIONS OF THE SELLERS PRIOR TO THE CLOSING
OR EARLIER TERMINATION OF THIS AGREEMENT
Each Seller hereby covenants that, except as otherwise consented to in
writing by the Purchaser, from and after the date hereof until the Closing or
the earlier termination of this Agreement:
7.1 Conduct of Business. Each of the Sellers, Global Communications and
Mexican Express shall carry on the Business and operations of the Business only
in the ordinary course and in the same manner as heretofore conducted,
including, without limitation: (a) performing in all material respects all of
its material obligations under all contracts and agreements to which it is a
party or by which it or any of its assets or properties are bound and which
relate to or affect the Business; (b) using its reasonable efforts to maintain
and preserve (i) all of the properties, equipment, and other assets of the
Business in good repair, working order and condition (except for ordinary wear
and tear), (ii) the present workforce of the Business (including, without
limitation, those key employees who have been and through the Closing Date will
be responsible for operating, administering and managing the Business), (iii)
all of the Approvals relating to or affecting the Business in good standing and
(iv) its present relationships with, and the good will of, the agents,
suppliers, and customers of the Business and others with which it has business
relations which relate to or affect the Business; and (c) keeping in full force
and effect insurance with respect to the Business comparable in amount and scope
of coverage to that currently maintained by it with respect to the Business.
Each Seller shall consult with the Purchaser from time to time, upon the
reasonable request of the Purchaser, with respect to the conduct of the
Business.
7.2 Restricted Activities and Transactions. Without the prior written
consent of the Purchaser, which consent will not be unreasonably withheld, none
of the Sellers, Global Communications and Mexican Express shall engage in any
one or more of the following activities or transactions with respect to the
Business: (a) directly or indirectly create, incur, assume, or permit to be
created, any Lien, other than Permitted Liens, on or with respect to any
property or asset (including any document or instrument in respect of goods) of
the Business, whether now owned or hereafter acquired, or any income or profits
therefrom; (b) Transfer, or agree to Transfer, any part of the Business's
assets, properties or rights, other than in the ordinary course of the business
of the Business in accordance with past practice; (c) enter or agree to enter
into any agreement or arrangement granting any right to purchase any of the
Business's assets, properties or rights (including, without limitation, the
Transferred Assets) or requiring the consent of any party to the Transfer of any
such assets, properties or rights; (d) make or permit to be made any amendment
to or termination of any Contract or any Approval relating to the Business,
other than in the ordinary course of the business of the Business in accordance
with past practice; (e) make any change in any profit-sharing, pension,
retirement, long-term disability, hospitalization, insurance or other Employee
Benefit Plan, payment or arrangement, except in the ordinary course consistent
with past practice or as required by Law; (f) enter into
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any collective bargaining agreement; (g) enter into any contract or agreement
except in the ordinary course of business in accordance with past practice; (h)
enter into any compromise or settlement of any Action affecting or relating to
the Business or any of its properties, assets or businesses; or (i) otherwise
take any other action or permit any other event to occur which that result in a
breach of any of the representations or warranties set forth in Article V
hereof.
7.3 Cooperation. The Sellers shall use their best efforts to cause the
transactions contemplated by this Agreement to be consummated. Without limiting
the generality of the foregoing, each Seller shall (a) obtain, or cause to be
obtained, all Approvals of, make all filings with and give all notices to, all
such Governmental Authorities and other Persons as may be necessary or
reasonably requested by the Purchaser in order to consummate the transactions
contemplated by this Agreement (including, without limitation, all of the
Approvals referred to on Schedules 5.5(a) and (b), 5.14 and 5.16(b) hereof) and
(b) give prompt notice to the Purchaser of (i) any notice of, or other
communication relating to, any default, or any event which, with the giving of
notice or the lapse of time or both, would become a default, under, any contract
to which such Seller, Global Communications or Mexican Express is a party or by
which it or its assets or properties are bound and which affects or relates to
the Business and (ii) any notice or other communication from any Person alleging
that the consent or approval of such Person is or may be required in connection
with the execution and delivery of this Agreement or the transactions
contemplated hereby or that the transactions contemplated hereby are
inconsistent with or are prohibited by any contract. In addition, each Seller
shall take such action as is reasonably requested by Purchaser to enable
Purchaser to obtain all necessary licenses, Tank registrations and other
Approvals for the Stores and the Business as of the Closing Date.
7.4 Employee Benefit Plans. Each Seller shall take any and all actions
necessary or desirable to cause all Employee Benefit Plans and any other plans
or programs relating to employee benefits maintained by such Seller for the
benefit of employees of the Business to be continued in full force and effect,
except as required pursuant to the terms and provisions of such plans or
programs in the ordinary course of business in accordance with past practice.
Notwithstanding the foregoing, the Sellers shall the right to terminate their
401(k) plan prior to closing to allow distributions after the approval of the
IRS.
7.5 No Negotiations. Except with respect to triggering the right of
first refusal given to Gebhardt-White Foods, Inc. under the Mexican Express
partnership agreement, until December 31, 1998 or earlier termination pursuant
to Section 4.1 hereof, neither the Sellers, any of their Affiliates, nor any of
the Representatives of any of them, shall, directly or indirectly, in any way
contact, initiate, enter into or conduct any discussions or negotiations, or
enter into any agreements, whether written or oral, or seek to do any of the
foregoing with any Person with respect to the sale or transfer of the Business
or all or any significant portion of the assets of any of the Sellers, Global
Communications and Mexican Express used in connection with the Business, whether
by sale, merger, sale of stock of a Seller, Global Communications or Mexican
Express, or otherwise. Each Seller shall, immediately upon receipt thereof by it
or any of its respective Affiliates or Representatives, notify the Purchaser of
any offer by any Person to make any such purchase or enter into any such
agreement.
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7.6 Access to the Business. The Sellers hereby agree that the Purchaser,
its Affiliates, and their respective Representatives (collectively, the
"Purchaser Group") may continue their due diligence investigation of the
business, operations and affairs of the Business as soon as Purchaser is
conveniently able, and may continue such through and until the Closing. The due
diligence investigation will consist of general business investigations,
examinations of accounting, sales, legal, real estate, and environmental matters
of the Business. Each Seller and its Affiliates and Representatives shall
cooperate fully with such investigation and, upon reasonable prior notice, shall
afford the Purchaser Group reasonable access, at reasonable times mutually
agreed upon, to all records and documents of the Business, including, without
limitation, the sales records (for 1995, 1996, 1997 and 1998 year-to-date) and
current personnel records, at the Stores and other facilities of the Business in
order that the Purchaser Group may have the opportunity to make such
investigations thereof as it shall deem necessary or desirable. The Sellers
shall furnish the Purchaser Group with any applications or statements to be made
to any Governmental Authority in connection with the transactions contemplated
by this Agreement. Further, the Sellers shall assist the Purchaser Group in
contacting and communicating with their independent accountants, suppliers and
other Persons having dealings relating to the Business. None of the information
furnished hereunder or obtained by the Purchaser Group during its due diligence
investigation of the Business shall in any way release any Seller from, or
modify, limit, or restrict, representations and warranties made by any Seller in
this Agreement.
Commencing on the day following the date of this Agreement, Purchaser and
its Representatives shall be allowed to conduct Phase I environmental
investigations, as Purchaser shall, in its sole discretion, deem appropriate.
Prior to conducting any soil or groundwater testing ("Phase II Testing"),
however, the Purchaser shall provide the appropriate Seller with the proposed
scope of work of any Phase II Testing and request such Seller's consent to such
scope of work prior to conducting such testing. Such consent shall not limit
Purchaser's rights under Section 9.10 hereof. Purchaser shall bear any cost of
such investigation, analysis and testing. The Sellers warrant and represent that
they have delivered to the Purchaser copies of all environmental reports, copies
of all environmental claims, inquiries or requests for information by any
Person, and copies of all correspondence with environmental regulatory agencies
regarding each Store.
7.7 Disclosure Regarding the Sellers. Each Seller shall, upon reasonable
request, provide the Purchaser Group with such information and documentation
concerning such Seller as may be reasonably necessary for the Purchaser Group to
verify performance of and compliance with the representations, warranties,
covenants and conditions of such Seller contained herein.
7.8 Confidentiality. Each Seller shall, and shall cause its Affiliates
and the Representatives of any of them to keep confidential, and not disclose to
others, the existence of this Agreement and all negotiations and other
communications in connection herewith, any proprietary information used or
usable by or relating to, and obtained from, the Purchaser, any of its
Affiliates or any of the Representatives of any of them, to the extent that such
information is not or does not become readily available to the public or is not
required to be disclosed by applicable Law or court order.
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7.9 Real Property. Within five (5) Business Days after the Sellers'
execution of this Agreement, each Seller shall deliver to Purchaser copies of
all title information, surveys, environmental and other inspection reports,
leases and recorded memorandum of leases in such Seller's possession or
available to such Seller regarding the Real Property.
ARTICLE VIII
CERTAIN OBLIGATIONS OF THE PURCHASER PRIOR
TO THE CLOSING OR EARLIER TERMINATION OF THIS AGREEMENT
The Purchaser hereby covenants that, except as otherwise consented to in
writing by the Sellers, from and after the date hereof until the Closing or the
earlier termination of this Agreement:
8.1 Cooperation. The Purchaser shall use its best efforts to cause the
transactions contemplated by this Agreement to be consummated. Without limiting
the generality of the foregoing, the Purchaser shall obtain all Approvals of,
make all filings with and give all notices to, all such Governmental Authorities
and other Persons as may be necessary or reasonably requested by the Sellers in
order to consummate the transactions contemplated by this Agreement (other than
the Approvals referred to on Schedules 5.5(a) and (b) and 5.14 hereof).
8.2 Disclosure Regarding the Purchaser. The Purchaser shall, upon
reasonable request, provide the Sellers with such information and documentation
concerning the Purchaser as may be reasonably necessary for the Sellers to
verify performance of and compliance with the representations, warranties,
covenants and conditions of the Purchaser contained herein.
8.3 Confidentiality. The Purchaser shall, and shall cause each of its
Affiliates and the Representatives of each of them to, keep confidential, and
not disclose to others, any information used or usable by or relating to, and
obtained from, any Seller, any of its Affiliates or any of the Representatives
of any of them and specifically identified as confidential, to the extent that
such Information is not or does not become readily available to the public or is
not required to be disclosed by applicable Law or court order.
8.4 Restricted Activities. Without the prior written consent of the
Sellers, which consent will not be unreasonably withheld, the Purchaser will not
take any action that would result in a breach of any of the representations or
warranties set forth in Article VI hereof.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER
Each and every obligation of the Purchaser under this Agreement to be
performed at or before the Closing shall be subject to the satisfaction, at the
Closing, of each of the following conditions:
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9.1 Representations and Warranties True. The representations and
warranties of the Sellers contained in this Agreement or in any of the other
Transaction Documents shall be true and correct as of the Closing Date with the
same effect as if made on and as of the Closing Date.
9.2 Performance. The Sellers, Global Communications and Mexican Express
shall have performed and complied in all material respects with all agreements,
covenants, obligations and conditions required by this Agreement or any of the
other Transaction Documents to be performed or complied with by it at or prior
to the Closing.
9.3 No Adverse Changes.
(a) None of the Stores or other assets or properties material to the
operation or business of the Business shall have been damaged, destroyed,
seized, revoked, shut-down, or taken by condemnation or eminent domain
proceeding to such an extent that operation of the Business at any Store cannot
continue substantially as conducted during the four-month period ending April
30, 1998.
(b) No material adverse change shall have occurred in the Condition of
the Business since the date of this Agreement.
(c) No Seller shall have done or permitted to occur any of the things
referred to in Section 5.8 hereof.
9.4 Approvals. All filings, declarations and registrations with and
Approvals from all Governmental Authorities and other Persons required by
applicable Law, any Contract, or otherwise to permit consummation of the
transactions contemplated hereby (including, without limitation, all of the
Approvals referred to on Schedules 5.5(a) and (b), 5.14 and 5.16(b) hereto) and
the operation of the Business by the Purchase shall have been made or obtained
and shall be in full force and effect.
9.5 Estoppel Certificates. Except with respect to Store No. 10 and the
prime lease for Store No. 12, the Sellers shall have delivered to the Purchaser
executed estoppel certificates from the lessor named in each of the Third Party
Leases, dated not more than twenty (20) days prior to the Closing Date, stating,
with respect to each such lease the following (or in such other form as may be
reasonably acceptable to Purchaser and its counsel): (a) whether there have been
any amendments, modifications or supplements of any kind to such lease; (b) that
such lease is in full force and effect; (c) the commencement and expiration
dates of such lease; (d) that the applicable Seller or Affiliate is not in
violation of or in default under such lease and that the lessor thereunder has
no claims against such Seller or Affiliate; (e) the amount of and the date
through which all fixed rent and any additional rent have been paid under such
lease; (f) that no fixed rent or additional rent has been prepaid for more than
one month in advance; (g) that such lessor consents to the assignment of such
lease to the Purchaser (if such consent is required) and consents to the
assignment of an option to purchase (if such consent is required); and (h) such
other matters as the Purchaser may reasonably request.
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9.6 Subordination, Non-Disturbance and Attornment Agreements. The
Sellers shall have delivered to the Purchaser Subordination, Non-Disturbance and
Attornment Agreements ("SNDAs") executed by each mortgagee holding a beneficial
interest in any of the Real Property, each as more particularly described on
Schedule 9.6, and the owner of such Real Property, in form and substance
reasonably acceptable to Purchaser and its counsel.
9.7 Deliveries. The Sellers shall have delivered to the Purchaser, at
or prior to the Closing, the following:
(a) the instruments of Transfer referred to in Section 3.2 hereof;
(b) (i) all of the books and records of the Sellers (except corporate
books) relating to the Business, including, without limitation, sales records
(for 1995, 1996, 1997 and 1998 year-to-date), current personnel records, and all
underground storage tank and environmental records and (ii) all of the books and
records of Global Communications and Mexican Express (including stock books,
stock ledgers, minute books, partnership records and corporate seals, as
applicable);
(c) a certificate of existence or good standing, as applicable, for each
of the Sellers, Global Communications, and Mexican Express, dated not earlier
than twenty (20) days prior to the Closing Date, of each of (i) the Secretary of
State of North Carolina; (ii) the North Carolina Department of Revenue; (iii)
the Secretary of State of South Carolina; and (iv) the South Carolina Department
of Revenue.
(d) (i) resolutions, articles of incorporation and bylaws, certified as
of the Closing Date by the Secretary or Assistant Secretary of each Seller and
any applicable Affiliate, adopted by the Board of Directors and the shareholders
of such Seller and any applicable Affiliate, as the case may be, and authorizing
the execution and delivery by such Seller or such applicable Affiliate, as the
case may be, of this Agreement and the other Transaction Documents to which it
is a party, the performance by it of its obligations hereunder and thereunder
and the consummation by it of the transactions contemplated hereby and thereby,
and (ii) a certificate of the secretary (or equivalent thereof), confirmed by
John M. Lennon or Robert E. Bryan Jr., certifying as to, and attaching copies
thereof, articles of incorporation (or any equivalent thereof) and bylaws (or
any equivalent thereof) of Global Communications and Mexican Express,
respectively;
(e) such certificates of the President of each Seller to evidence
compliance with the conditions set forth in Sections 9.1 through 9.4, and 9.8
and 9.9 hereof, and any other certificates to evidence compliance with the
conditions set forth in this Article IX as may be reasonably requested by the
Purchaser;
(f) the opinion of legal counsel to the Sellers and their Affiliates,
dated the Closing Date and addressed to the Purchaser, in the form of Exhibit
D-1 hereto;
(g) executed Seller Leases, Affiliate Leases and Third Party Lease
Assignments;
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(h) the Escrow Agreement, duly executed and delivered by the Sellers and
the escrow agent named therein;
(i) powers of attorney, in form and substance reasonably satisfactory to
Purchaser, assigning all rights, interests and claims referred to in Section
2.1(h) hereof;
(j) flood certificates with respect to the Stores identified on Schedule
5.11(i);
(k) the written resignations of the directors of Global Communications;
(l) such other documents or certificates as shall be reasonably
requested by the Purchaser;
(m) evidence satisfactory to the Purchaser that any Lien that would
otherwise be attached on the Closing Date to any of the Transferred Assets or
any asset owned by Global Communications has been released and any related UCC
or real estate filings terminated of record (or arrangements thereof
satisfactory to the Purchaser); and
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9.8 Proceedings. All corporate and other proceedings in connection with
the transactions contemplated by this Agreement and the other Transaction
Documents shall be in form and substance reasonably satisfactory to the
Purchaser, and the Purchaser shall have received all such originals or certified
or other copies of such documents as it shall have reasonably requested.
9.9 Absence of Litigation. There shall be no Action pending or
threatened before any court or other Governmental Authority which seeks to (a)
invalidate or set aside, in whole or in part, this Agreement or any of the other
Transaction Documents, (b) restrain, prohibit, invalidate or set aside, in whole
or in part, the consummation of the transactions contemplated hereby or thereby
or (c) obtain substantial Damages in connection therewith.
9.10 Environmental Matters. The Purchaser shall, in its sole discretion,
be satisfied with the results of any and all environmental analyses referred to
in Section 7.6 hereof. If Express Stop receives written notice from the
Purchaser regarding its dissatisfaction with any environmental analysis, the
Sellers or the Purchaser shall be entitled to terminate this Agreement by
written notice to the other and the effect of such termination shall be the same
as a termination pursuant to Section 4.1(a) hereof.
9.11 Due Diligence Reviews. The Purchaser shall, in its sole discretion,
be satisfied with its business, accounting, sales, legal and real estate due
diligence reviews referred to in Section 7.6 hereof.
9.12 Construction Status. The Purchaser shall, in its reasonable opinion,
be satisfied with the results and status of (i) the construction by the Sellers
of the Store currently under
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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construction in Wilmington, North Carolina and (ii) the rebuilding of Store
Number 8, located in Florence, South Carolina.
9.13 Environmental Clean-up Matters. The Sellers shall have completed the
following clean-up matters, to the Purchaser's reasonable satisfaction, (i)
remove two 55 gallon drums (including their contents) located at Store No. 2,
(ii) register, and pay all tank fees in connection therewith, the kerosene tank
located at Store No. 4 so that such UST is a Registered Tank, (iii) with respect
to Store No. 7, (A) cathodically protect, or otherwise upgrade, the product
lines so that they meet 1998 technical standards and (B) remove the 1,000 gallon
UST on the surface, (iv) take corrective action with respect to the NOV issued
by the NCDENR on May 7, 1998 for failure to collect soil samples at Store No. 9,
(v) correct the NCDENR's records regarding the removal of a heating oil tank at
Store No. 14, and (vi) obtain and post a new tank registration certificate for
Store No. 22.
9.14 Surveys. The Sellers shall have completed surveys, or otherwise
produced legal descriptions, in form and substance reasonably satisfactory to
the Purchaser, for Store No.s 3 and 12.
ARTICLE X
CONDITIONS PRECEDENT TO
THE OBLIGATIONS OF THE SELLERS
Each and every obligation of the Sellers under this Agreement to be
performed at or before the Closing shall be subject to the satisfaction, at the
Closing, of each of the following conditions:
10.1 Representations and Warranties True. The representations and
warranties of the Purchaser contained in this Agreement or in any of the other
Transaction Documents shall be true and correct as of the date of this Agreement
and as of the Closing Date with the same effect as if made on and as of the
Closing Date.
10.2 Performance. The Purchaser shall have performed and complied in all
material respects with all agreements, covenants, obligations and conditions
required by this Agreement or any of the other Transaction Documents to be
performed or complied with by it at or prior to the Closing.
10.3 Approvals. All filings, declarations and registrations with and
Approvals from all Governmental Authorities and other Persons required by
applicable Law for the consummation of the transactions contemplated hereby
(except the Approvals referred to on Schedules 5.5(a) and (b), 5.14 and 5.16(b)
hereto, which the Sellers shall be solely responsible for obtaining) shall have
been made or obtained and shall be in full force and effect.
34
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10.4 Deliveries. The Purchaser shall have delivered to the Sellers or
the Escrow Agent, at or prior to the Closing, the following:
(a) the Purchase Price, as described in Section 2.6 hereof;
(b) an instrument of assignment and assumption relating to the
Contracts;
(c) a good standing certificate, dated not earlier than twenty (20) days
prior to the Closing Date, of the Secretary of State of Delaware, as to the good
standing of the Purchaser in Delaware, and a certificate of authorization, dated
not earlier than twenty (20) days prior to the Closing Date, of the Secretary of
State of North Carolina and the Secretary of State of South Carolina, as to the
Purchaser's authorization to transact business in North Carolina and South
Carolina, respectively;
(d) resolutions, certified as of the Closing Date by the Secretary or
Assistant Secretary of the Purchaser, adopted by the Board of Directors of the
Purchaser and authorizing the execution and delivery by the Purchaser of this
Agreement and the other Transaction Documents, the performance by it of its
obligations hereunder and thereunder and the consummation by it of the
transactions contemplated hereby and thereby;
(e) such certificates of the President or Vice President of the
Purchaser to evidence compliance with the conditions set forth in Sections 10.1,
10.2, and 10.3 hereof and any other certificates to evidence compliance with the
conditions set forth in this Article X as may be reasonably requested by the
Sellers or their counsel;
(f) the opinion of Robinson, Bradshaw & Hinson, P.A., counsel to the
Purchaser, dated the Closing Date and addressed to the Sellers, in the form of
Exhibit D-2 hereto;
(g) the executed Seller Leases, Affiliate Leases and Third Party Lease
Assignments;
(h) the executed SNDAs that the Sellers have delivered pursuant to
Section 9.6 hereof;
(i) the Escrow Agreement, duly executed and delivered by the Purchaser;
and
(j) such other documents or certificates as shall be reasonably
requested by the Sellers or their counsel.
10.5 Proceedings. All corporate and other proceedings in connection with
the transactions contemplated by this Agreement and the other Transaction
Documents shall be in form and substance reasonably satisfactory to the Sellers,
and the Sellers shall have received all such originals or certified or other
copies of such documents as they shall have reasonably requested.
10.6 Absence of Litigation. There shall be no Action pending or
threatened before any court or other Governmental Authority which seeks to (a)
invalidate or set aside, in whole or in part, this Agreement or any of the other
Transaction Documents, (b) restrain, prohibit,
35
<PAGE>
invalidate or set aside, in whole or in part, the consummation of the
transactions contemplated hereby or thereby or (c) obtain substantial Damages in
connection therewith.
ARTICLE XI
CERTAIN POST-CLOSING COVENANTS
11.1 Confidentiality.
(a) From and after the Closing, the Purchaser shall, and shall cause its
Representatives to, hold in strict confidence and, except as required by
applicable Law, not disclose to others (except its Representatives) or use for
any reason whatsoever without the prior written consent of the Sellers, any
information (unless previously known to the Purchaser or any of its Affiliates
from sources other than the Sellers or any of their respective Affiliates or
ascertainable from public or published information or trade sources) received by
the Purchaser or any of its Affiliates from the Sellers concerning the Sellers
and not relating to the Transferred Assets or the Business.
(b) From and after the Closing, each Seller shall, and shall cause its
Representatives to, hold in strict confidence and, except as required by
applicable Law, not disclose to others (except their Representatives) or use for
any reason whatsoever without the prior written consent of the Purchaser, (i)
any information (unless previously known to the Sellers or any of their
Affiliates from sources other than the Purchaser or any of its Affiliates or
ascertainable from public or published information or trade sources) received by
any Seller or any of their respective Affiliates from the Purchaser or any of
its Affiliates concerning the Purchaser or its Affiliates, or (ii) any
information (unless ascertainable from public or published information or trade
sources) concerning the Transferred Assets or the Business.
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*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
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11.3 Specific Performance; Injunctive Relief. Each of the parties hereto
acknowledges and understands that any breach or threatened breach by it of
Section 11.1 hereof or, with respect to John M. Lennon and Robert E. Bryan Jr.,
Section 11.2 hereof will cause irreparable injury to the non-breaching party or
parties and their respective Affiliates and that money damages will not provide
an adequate remedy therefor. Accordingly, in the event of any such breach or
threatened breach, the non-breaching party or parties shall have the right and
remedy (in addition to any others available at law or in equity) to have the
provisions of Sections 11.1 and 11.2 hereof specifically enforced by, and to
seek injunctive relief and other equitable remedies in, any court having
competent jurisdiction.
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11.5 Change of Seller's Name. Within three (3) Business Days after the
Closing Date, Express Stop shall amend its articles of incorporation to provide
for the change of its corporate name to a name other than, and one not similar
to, "Express Stop, Inc." and shall effect such name change in each other
jurisdiction in which it is authorized to transact business. Express Stop shall
promptly thereafter deliver to the Purchaser true and complete copies of Express
Stop's articles of incorporation, as so amended, certified by the Secretary of
State of North Carolina, and certificates of the Secretary of State of each
other jurisdiction in which it is authorized to transact business, evidencing
the good standing of Express Stop in each such other jurisdiction under its new
name. Notwithstanding the foregoing, Express Stop may, for a reasonable period
of time, use its current supply of printed checks and stationery.
11.6 WIP Stores Located in Florence, South Carolina, and Wilmington,
North Carolina. The Sellers shall be responsible for completing the construction
of, and upfitting and equipping, the Store presently under construction in
Wilmington, North Carolina, along with completing the rebuild of Store No. 8 in
Florence, South Carolina, consistent with the sketches and designs set forth on
Schedule 11.6 and with Sellers' customary standards for the Business.
ARTICLE XII
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
12.1 Survival of Representations and Warranties. Notwithstanding (a) the
making of this Agreement, (b) any examination or investigation made by or on
behalf of the parties hereto and (c) the Closing hereunder, (i) the
representations and warranties of the parties hereto contained in this Agreement
shall survive the execution and delivery of this Agreement and the Closing until
March 31, 2000, except for (A) the representations and warranties contained in
Sections 5.21 (Tax Matters) and 5.25 (Employee Benefit Plans) hereof, which
shall survive until the expiration of the applicable statute of limitations with
respect to a Claim or any Damage arising from a situation or event contrary to
such representations and warranties and (B) the representations and warranties
contained in Section 5.16 (Environmental Matters) hereof, which shall survive
until no Damage could be incurred by the Purchaser arising from a situation or
event contrary to such representations and warranties, and (ii) the covenants
and agreements of the parties hereto contained in this Agreement shall survive
until fully performed or fulfilled (unless non-compliance with such covenants or
agreements is waived in writing by the party or parties hereto entitled to such
performance). No claim for indemnification pursuant to Section 12.2 hereof may
be brought with respect thereto after the applicable expiration date; provided,
however, that if prior to such date a party hereto has notified the other party
or parties hereto in
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
38
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writing of a claim for indemnification under this Article XII (whether or not
formal legal action shall have been commenced based upon such claim), such claim
shall continue to be subject to indemnification in accordance with this Article
XII.
12.2 Indemnification. Subject to Sections 12.1, 12.4 and 12.5 hereof,
from and after the Closing, each of the parties hereto and their respective
successors and assigns (each being an "Indemnifying Party") shall indemnify and
hold harmless the other party or parties hereto, their respective Affiliates,
successors and assigns, and the Representatives of each of them (each being an
"Indemnified Party"), from and against any and all Damages incurred thereby or
caused thereto arising out of or relating to (a) any breach or violation of, or
failure to properly perform, any covenant or agreement made by such Indemnifying
Party in this Agreement or any of the other Transaction Documents, unless waived
in writing by the Indemnified Party; (b) any breach of any of the
representations or warranties made by such Indemnifying Party in this Agreement
or any of the other Transaction Documents and not waived in writing by the
Indemnified Party; (c) with respect to the Sellers, its failure to pay, perform
or satisfy when due any of the Excluded Liabilities; (d) with respect to the
Purchaser, its failure to pay, perform or satisfy when due any of the Assumed
Liabilities or any Liability or Damages to the extent arising out of its
operation of the Business after Closing; (e) with respect to the Sellers,
Sellers' failure to comply with applicable provisions of the North Carolina or
South Carolina Uniform Commercial Code, including Article VI thereof; (f) with
respect to Sellers', any transport or disposal of a Hazardous Material to or
from the Stores, Tanks, Petroleum Equipment or Real Property prior to Closing in
a manner or to a location that gives rise to Liability under any Environmental
Law; (g) with respect to the Sellers, any Liability incurred by the Purchaser,
direct or indirect, in connection with those matters set forth on Schedules
5.16(d), (e) and (f); (h) with respect to the Sellers, any Liability incurred by
the Purchaser in connection with the EEOC Claims listed on Schedule 5.4(b) as
matter numbers 2 through 5; and (i) with respect to the Sellers, any Liability
incurred by the Purchaser for Sellers' failure to obtain a consent and estoppel
certificate from the prime lessor for Store No. 12. Except as otherwise
expressly provided in Section 11.2 hereof, no Indemnified Party shall have any
recourse of any kind or nature whatsoever against any of the Representatives of
any Indemnifying Party.
12.3 Notice and Payment of Claims.
(a) Promptly after receipt by any Indemnified Party of notice of the
commencement of any action, the assertion by any third party of any claim, or
any other matter otherwise giving rise to indemnification as provided in this
Article XII (collectively, a "Claim"), the Indemnified Party receiving such
notice (the "Claim Notice") shall notify the Indemnifying Party in writing of
the assertion of such Claim; provided, however, that failure to give such notice
shall not affect the right to indemnification hereunder except to the extent the
Indemnifying Party can demonstrate it has been actually prejudiced by such
failure. The Indemnifying Party shall have the option, and shall notify the
Indemnified Party in writing within ten (10) Business Days after the date of the
Claim Notice of its election, either (i) to participate (at its own expense) in
the defense of such Claim (in which case the defense of such Claim shall be
controlled by the Indemnified Party) or (ii) to take charge of and control the
defense of such Claim. The Indemnifying Party's failure to respond shall not
relieve the Indemnifying Party of, or its
39
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indemnification obligations under, this Section 12.3. If the Indemnifying Party
assumes the defense, each Indemnified Party shall have the right to employ
separate counsel and participate in the defense of such Claim, but the fees and
expenses of such counsel shall be at the expense of the Indemnified Party
unless: (1) the employment of such counsel shall have been specifically
authorized in writing by the Indemnifying Party or (2) the named parties in such
Claim (including any impleaded parties) include both the Indemnified Party and
the Indemnifying Party and representation of both parties would be inappropriate
due to actual or potential conflicts of interest between them, it being
understood, however, that the Indemnified Party shall not, in connection with
such Claim, be liable for the fees and expenses of more than one separate firm
of attorneys (in addition to any local counsel) and that all such fees and
expenses shall be reimbursed as they are incurred.
(b) If the Indemnifying Party elects (or is deemed to have elected) not
to assume the defense of a Claim in accordance with the preceding Section, then
the Indemnified Party may defend and settle such Claim without the written
consent of the Indemnifying Party and the Indemnifying Party agrees to indemnify
and hold the Indemnified Party harmless from and against any such Claim settled
without its written consent. As to any claim settled with the Indemnifying
Party's written consent, the Indemnifying Party agrees to indemnify and hold the
Indemnified Party harmless from and against any such Claim by reason of such
settlement, according to the obligations of the Indemnifying Party hereunder.
(c) The Indemnified Party shall provide to the Indemnifying Party, as
soon as practicable after the date of the Claim Notice, all information and
documentation necessary to support and verify any Damages that the Indemnified
Party shall have determined have given or could give rise to a Claim hereunder,
and the Indemnifying Party shall be given access to all books and records in the
possession or under the control of the Indemnified Party which the Indemnifying
Party reasonably determines to be related to such Action.
(d) All Claims under this Article XII shall be paid by the Indemnifying
Party on demand in immediately available funds in U.S. dollars after the
Liability for Damages thereunder have been finally determined. The Liability for
Damages under any such Claim shall be deemed to be "finally determined" for
purposes of this Article XII when the parties to an Action have so determined by
mutual agreement or, if disputed, when a final non-appealable order of a court
having competent jurisdiction has been entered.
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*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
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12.5 Mitigation of Damages. If any event shall occur which would
otherwise entitle a party hereto to indemnification hereunder, no Damages shall
be deemed to have been sustained by it to the extent of (a) any tax savings
realized by it with respect thereto or (b) any proceeds received by it from any
insurance policy with respect thereto.
12.6 Joint and Several Indemnity. (a) Each Seller shall have joint and
several liability for the Purchaser's Damages pursuant to this Article XII;
provided, that (i) Bryan Oil's liability hereunder shall not exceed $728,770,
(ii) Lennon Oil's liability hereunder shall not exceed $37,555, and (iii) Market
Express' liability hereunder shall not exceed $209,090. The obligations of the
Sellers under this Agreement are independent of each other, and a separate
action or actions may be brought and prosecuted against any Seller to enforce
this Agreement, irrespective of whether any action is brought against any other
Seller or whether any other Seller is joined in any such action or actions.
(b) To the fullest extent permitted under applicable law, each Seller
hereby waives marshalling of assets and liabilities and sale in inverse order of
alienation and waives presentment to, demand of payment from and protest to any
other Seller. Each Seller hereby waives and releases any and all rights of
contribution from the other Sellers for payment of Damages to the fullest extent
permitted under applicable law. Each Seller hereby consents and agrees to each
of the following to the fullest extent permitted by law, and agrees that such
Seller's obligations under this Article XII shall not be released, diminished,
impaired, reduced or adversely affected by any of the following, and waives any
rights (including rights to notice) which such Seller might otherwise have as a
result of or in connection with any of the following:
(i) any adjustment, indulgence, forbearance or compromise that might
be granted or given by the Purchaser to any Seller or any other Person
liable for any Damages; or the failure of the Purchaser to assert any
demand or to exercise any right or remedy against any Seller under the
provisions of this Article XII or otherwise; or any recission, waiver,
amendment or modification of, or any release from any of the terms or
provisions of, this Agreement or any Transaction Document; and
(ii) any full or partial release of the liability of any Seller with
respect to Damages under this Article XII or any part thereof, of Seller
or Affiliate of any Seller now or hereafter liable, whether directly or
indirectly, jointly, severally, or jointly and severally, to pay, perform
the payment of any Damages incurred by the Purchaser under this Article
XII, it being recognized, acknowledged and agreed by each Seller that such
Seller may be required to pay Damages in full (except with respect to
Bryan Oil, as provided in the first sentence of this Section 12.6) without
assistance or support of any other Person.
*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
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ARTICLE XIII
MISCELLANEOUS
13.1 Fees and Expenses. Except as otherwise expressly provided in this
Agreement, each of the parties hereto shall bear and pay all fees, costs and
expenses incurred by it in connection with the origin, preparation, negotiation,
execution and delivery of this Agreement, the other Transaction Documents and
the transactions contemplated hereby or thereby (whether or not such
transactions are consummated), including, without limitation, any fees, expenses
or commissions of its attorneys, accountants and other representatives;
provided, however, the Purchaser hereby agrees to reimburse the Sellers for
their fees and expenses incurred in connection with the audit performed by
Griffin, Maxwell & Frazelle and required to satisfy certain securities reporting
requirements imposed upon the Purchaser.
13.2 Notices.
(a) All notices, requests, demands and other communications required or
permitted under this Agreement shall be in writing (including facsimile,
telegraphic, telex or cable communication) and mailed, faxed, telegraphed,
telexed, cabled or delivered:
(i) If to the Sellers, to:
Express Stop, Inc.
2557 Raven Hill Road, Suite 1-C
Fayetteville, North Carolina 28304
Facsimile No.: (910) 323-5910
Attention: John M. Lennon
with a copy to:
Kenneth G. Carroll
Womble Carlyle Sandridge & Rice
2505 Meridian Parkway, Suite 300
Durham, North Carolina 27713
Facsimile No.: (919) 484-2368
(ii) If to Purchaser, to:
The Pantry, Inc.
1801 Douglas Drive
Sanford, North Carolina 27330
Facsimile No.: (919) 774-3329
Attention: Chief Financial Officer
42
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with a copy to:
Peter C. Buck
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Facsimile No.: (704) 378-4000
(b) All notices and other communications required or permitted under this
Agreement which are addressed as provided in this Section 13.2 (i) if delivered
personally against proper receipt or by confirmed facsimile or telex, shall be
effective upon delivery and (ii) if delivered (A) by certified or registered
mail with postage prepaid, (B) by Federal Express or similar courier service
with courier fees paid by the sender or (C) by telegraph or cable, shall be
effective two (2) Business Days following the date when mailed, couriered,
telegraphed or cabled, as the case may be. The parties hereto may from time to
time change their respective addresses for the purpose of notices to that party
by a similar notice specifying a new address, but no such change shall be deemed
to have been given until it is actually received by the party sought to be
charged with its contents.
13.3 Amendment; Waiver. Neither this Agreement, nor any of the terms or
provisions hereof, may be amended, modified, supplemented or waived except by a
written instrument signed by all of the parties hereto (or, in the case of a
waiver, by the party or parties granting such waiver). No waiver of any of the
provisions of this Agreement shall be deemed to be or shall constitute a waiver
of any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver. No failure of a party hereto to insist upon
strict compliance by another party hereto with any obligation, covenant,
agreement or condition contained in this Agreement shall operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of a party hereto, such
consent shall be given in a manner consistent with the requirements for a waiver
of compliance as set forth in this Section 13.3.
13.4 Assignment. This Agreement and all of the terms and provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations of the parties hereunder may be assigned
by any of the parties hereto without the prior written consent of the other
parties; provided, however, that the Purchaser may assign this Agreement and its
rights and obligations hereunder to any of its Affiliates which has assumed such
obligations without the prior written consent of the Sellers, but such
assignment shall not release Purchaser from its obligations hereunder or under
the Affiliate Leases or any Third Party Lease Assignments. Any assignment that
contravenes this Section 13.4 shall be void ab initio.
13.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal Laws of the State of North Carolina, without giving
effect to the conflicts of Laws principles thereof.
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13.6 Severability. Each term and provision of this Agreement constitutes a
separate and distinct undertaking, covenant, term and/or provision hereof. In
the event that any term or provision hereof shall be determined to be
unenforceable, invalid or illegal in any respect, such unenforceability,
invalidity or illegality shall not affect any other term or provision hereof,
but this Agreement shall be construed as if such unenforceable, invalid or
illegal term or provision had never been contained herein. Moreover, if any term
or provision hereof shall for any reason be held to be excessively broad as to
time, duration, activity, scope or subject, it shall be construed, by limiting
and reducing it, so as to be enforceable to the extent permitted under
applicable Law as it shall then exist.
13.7 No Third Party Beneficiaries. Except as and to the extent provided in
Article XII hereof, nothing in this Agreement is intended, nor shall anything
herein be construed, to confer any rights, legal or equitable, in any Person or
entity other than the parties hereto and their respective successors and
permitted assigns.
13.8 Public Announcements. Except as required by applicable Law or
judicial order, none of the parties hereto, nor any of their respective
Affiliates, successors or assigns, shall issue any press release or make any
public announcement or disclosure with respect to this Agreement or the
transactions contemplated hereby without the prior consent of the other party or
parties hereto, which consent shall not be unreasonably withheld.
13.9 Singular and Plural Forms. The use herein of the singular form shall
also denote the plural form, and the use of the plural form shall denote the
singular form, as in each case the context may require.
13.10 References. All references herein to Articles, Sections and Exhibits
shall be to Articles and Sections of and Exhibits to this Agreement.
13.11 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not constitute a part hereof or define,
limit or otherwise affect the meaning of any of the terms or provisions hereof.
13.12 Entire Agreement. This Agreement, together with the schedules and
exhibits hereto, constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior understandings,
agreements and arrangements, both oral and written, between the parties with
respect to the subject matter hereof.
13.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which, when
taken together, shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, and John M. Lennon and Robert E. Bryan Jr. have executed this
Agreement for the limited purposes of acknowledging their obligations pursuant
to Sections 11.2 and 11.3 hereof, as of the day and year first above written.
EXPRESS STOP, INC.
Attest:
/s/ Catherine B. Brown By: /s/ John M. Lennon
- ------------------------- -------------------------
Secretary Name: John M. Lennon
Title: President
(Corporate Seal)
BRYAN OIL COMPANY, INC.
Attest:
/s/ Catherine B. Brown By: /s/ Robert E. Bryan, Jr.
- ------------------------- -------------------------
Secretary Name: Robert E. Bryan, Jr.
Title: President
(Corporate Seal)
MARKET EXPRESS OF SHALLOTTE, INC.
Attest:
/s/ Catherine B. Brown By: /s/ Robert E. Bryan, Jr.
- ------------------------- -------------------------
Secretary Name: Robert E. Bryan, Jr.
Title: President
(Corporate Seal)
LENNON OIL COMPANY
Attest:
/s/ Judith S. Lennon By: /s/ John M. Lennon
- ------------------------- -------------------------
Secretary Name: John M. Lennon
Title: President
(Corporate Seal)
S-1
<PAGE>
/s/ John M. Lennon
------------------------------------------
John M. Lennon
/s/ Robert E. Bryan Jr.
------------------------------------------
Robert E. Bryan Jr.
THE PANTRY, INC.
By: /s/ W. T. Flyg
-------------------------
Name: William T. Flyg
Title: Senior Vice President
S-2
<PAGE>
FIRST AMENDMENT TO
ASSET PURCHASE AGREEEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT (this "Amendment") is
made as of the 5th day of November, 1998, by and among EXPRESS STOP, INC., a
North Carolina corporation, BRYAN OIL COMPANY, INC., a North Carolina
corporation, MARKET EXPRESS OF SHALLOTTE, INC., a North Carolina corporation,
and LENNON OIL COMPANY, a North Carolina corporation (collectively, the
"Sellers"), and THE PANTRY, INC., a Delaware corporation, (the "Purchaser").
W I T N E S S E T H
WHEREAS, Sellers and Purchaser entered into an Asset Purchase Agreement
dated as of September 28, 1998 (the "Asset Purchase Agreement"), pursuant to
which Purchaser will purchase Sellers' convenience store businesses and related
assets, as therein provided; and
WHEREAS, Sellers and Purchaser wish to modify and amend, in certain
respects, the Asset Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual premises contained herein,
and other good and valuable consideration, the legal sufficiency of which is
hereby acknowledged, Sellers and Purchaser agree as follows.
All capitalized terms used herein without definition shall have the
meaning given to them in the Asset Purchase Agreement.
1. Section 2.1:
(a) Section 2.1(e) is hereby amended by inserting the phrase ",
together with all other change for each Store at Closing" immediately after the
reference therein to "Schedule 2.1(e)"; and
<PAGE>
(b) Section 2.1(n) of the Asset Purchase Agreement is hereby amended
by replacing the word "building's" with the word "buildings".
2. Section 2.5: Section 2.5 of the Asset Purchase Agreement is hereby
amended by (i) replacing the amount of "Twenty Million Three Hundred Thousand
Dollars ($20,300,000)" with the amount of "Twenty Million Two Hundred Eighty
Thousand Dollars ($20,280,000)" and replacing the amount of "Seventeen Million
Eight Hundred Thousand Dollars ($17,800,000)" with the amount of "Seventeen
Million Seven Hundred Eighty Thousand Dollars ($17,780,000)" and (ii) inserting
the phrase "plus an amount equal to the excess of (A) the total amount of change
located in the Stores at Closing over (B) the amount of the Change Fund"
immediately after the term "Inventory at Cost" located on the fifth line
thereof.
3. Section 2.6: Section 2.6 of the Asset Purchase Agreement is hereby
deleted in its entirety and replaced with the following:
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*Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIAL TREATMENT."
2
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making any such payment to Express Stop in accordance with this Section
2.6, the other Sellers hereby agree that the Purchaser shall have
satisfied its payment obligations to such Sellers for that payment."
4. Section 2.7: Section 2.7 of the Asset Purchase Agreement is hereby
amended by adding the phrase "and all other change purchased pursuant to Section
2.1(e)" after the term "Change Fund" located on the second line thereof.
5. Section 9.7: Section 9.7 of the Asset Purchase Agreement is hereby
amended by striking clause (j) thereto and relettering clauses (k), (l), (m) and
(n) as clauses (j), (k), (l) and (m), respectively.
6. Article XI: Article XI is hereby amended by adding a new Sections 11.7
and 11.8 to read in full as follows:
"Section 11.7. To the extent that Sellers have failed to (i) obtain
any Approvals necessary for the consummation of the transactions
contemplated by this Agreement, (ii) deliver fully executed and delivered
memoranda of lease for all Real Properties and evidence of recording with
respect to all Third Party Leases, and (iii) deliver the survey for Store
#12, in each case, by the Closing Date, Sellers will work in good faith
and use their reasonable best efforts to obtain such Approvals, memoranda
of lease, evidence of recording of such Third Party Leases and such survey
as soon as practically possible after the Closing Date.
"Section 11.8. With respect to the soil contamination revealed by
the Purchaser's Phase II environmental site assessment for Store #4, the
Purchaser shall be responsible for qualifying such soil contamination for
coverage (including, without limitation, the payment or waiver of
applicable deductibles) under the Trust Fund. The Purchaser shall update
Express Stop regarding the payment of such deductibles for coverage under
the Trust Fund as such payments are made. If the aggregate amount of all
such deductible payments is less than Twenty Thousand Dollars ($20,000) on
May 5, 2000, then the Purchaser shall pay to Express Stop an amount equal
to the excess of (A) Twenty Thousand Dollars ($20,000) over (B) the
aggregate amount of all such deductible payments made.
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7. Section 12.2: Section 12.2 of the Asset Purchase Agreement is hereby
amended by striking the word "and" immediately before clause (i) thereto and
adding new clauses (j) and (k) to read in full as follows:
"(j) any and all claims, losses, liabilities, penalties, costs and
damages, including attorneys' fees, incurred by the Purchaser and not
actually indemnified for by Quality Oil Company, arising out of any leaks,
releases, spills or discharges of gasoline and other petroleum products
that have occurred prior to Closing at the premises for the convenience
store known as Express Stop #19 in Rockingham, North Carolina; and
(k) any and all claims, losses, liabilities, penalties, costs and
damages, including attorney's fees, incurred by the Purchaser for the
Sellers' failure to deliver any item referred to in Section 11.7."
8. Schedules:
(a) Schedule 2.1(f) to the Asset Purchase Agreement is hereby
replaced with a new Schedule 2.1(f), a copy of which is attached hereto as
Exhibit A;
(b) Schedule 3.2 to the Asset Purchase Agreement is hereby amended
by adding the information set forth on Exhibit B attached hereto;
(c) Schedule 5.11(b) to the Asset Purchase Agreement is hereby
replaced with a new Schedule 5.11(b), a copy of which is attached hereto
as Exhibit C;
(d) Schedule 5.11(c) to the Asset Purchase Agreement is hereby
replaced with a new Schedule 5.11(c), a copy of which is attached hereto
as Exhibit D;
(e) Schedule 5.12 to the Asset Purchase Agreement is hereby replaced
with a new Schedule 5.12, a copy of which is attached hereto as Exhibit E;
(f) Schedule 5.14 to the Asset Purchase Agreement is hereby replaced
with a new Schedule 5.14, a copy of which is attached hereto as Exhibit F;
and
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(g) Schedule 9.6 to the Asset Purchase Agreement is hereby amended
by adding the following information to the corresponding columns for such
schedule:
Name of Beneficiary Amount of Original
or Mortgagee Loan Document(s) Status
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Small Business
Administration $126,000 Deed of Trust Outstanding
--------------------------------------------------------------------------
9. All other terms and provisions of the Asset Purchase Agreement shall
continue in full force and effect and unchanged and are hereby confirmed in all
respects.
10. This Amendment shall be governed by and construed and enforced in
accordance with the laws of the State of North Carolina (without regard to the
conflicts of law provisions thereof). This Amendment may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.
11. This Amendment will become effective when signed by all the parties
hereto. Upon the effectiveness of this Amendment, the Asset Purchase Agreement
will be automatically amended as set forth herein, and the rights and
obligations of the parties hereto shall be governed by the Asset Purchase
Agreement as amended by this Amendment.
[Signatures begin on next page.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers as of the date first written above.
THE PANTRY, INC.
By: /s/ W. T. Flyg
------------------------------------
Name: William T. Flyg
------------------------------
Title: Senior Vice President
------------------------------
EXPRESS STOP, INC.
By: /s/ John M. Lennon
------------------------------------
Name: John M. Lennon
------------------------------
Title: President
------------------------------
BRYAN OIL COMPANY, INC.
By: /s/ Robert E. Bryan, Jr.
------------------------------------
Name: Robert E. Bryan, Jr.
-----------------------------
Title: President
------------------------------
LENNON OIL COMPANY
By: /s/ John M. Lennon
------------------------------------
Name: John M. Lennon
-----------------------------
Title: President
-----------------------------
S-1
<PAGE>
MARKET EXPRESS OF SHALLOTTE, INC.
By: /s/ Robert E. Bryan, Jr.
------------------------------------
Name: Robert E. Bryan, Jr.
-----------------------------
Title: President
-----------------------------
S-2
Exhibit 2.2
List of Exhibits and Schedules Omitted from the Asset Purchase Agreement
Referenced in Exhibit 2.1 Hereof
Pursuant to Regulation S-K, Item 601(b)(2), the Exhibits and Schedules to
the Express Stop Asset Purchase Agreement, as listed below, have not been filed.
The Registrant agrees to furnish supplementally a copy of any omitted Exhibit or
Schedule to the Commission upon request; provided, however, that the Registrant
may request confidential treatment of omitted items.
EXHIBITS
Exhibit A Form of Leases
Exhibit B Form of Third Party Lease Assignments
Exhibit C Form of Escrow Agreement
Exhibit D-1 Form of Opinion of Seller's Counsel
Exhibit D-2 Form of Opinion of Purchaser's Counsel
SCHEDULES
1.1 Stores
2.1(e) Change Fund by Store
2.1(f) Contracts
2.1(j) Vehicles
2.3(c) Unamortized Oil Company Rebates and Allowances
3.2 Terms for Affiliate Leases
5.4(a) Material Actions
5.4(b) Other Actions
5.5(a) Transaction Approvals
5.5(b) *
5.6 Compliance with Laws Generally
5.7 Financial Statements
5.8 Certain Changes
5.9 Exceptions to Title
5.11(a) Seller Fee Property
5.11(b) Affiliate Fee Property
5.11(c) Third Party Real Property
5.11(e) Options or Rights of First Refusal Relating to Real Property
5.11(j) Tax Lots
5.12 Third Party Leases
5.14 Contract Assignments Requiring Approval
5.15(a) Unfair Labor Practices
5.15(b) Labor Union Matters
5.16(a) Tanks
5.16(b) Tank Approvals
5.16(d) Violations
5.16(e) Hazardous Material
5.16(f) Environmental Judicial Proceedings
5.18(a) Sellers Equipment
5.18(b) Third Party Equipment
5.19 Violations of Law/Transferred Assets
5.20 Exceptions to Sufficiency of Assets
<PAGE>
5.21 Tax Matters
5.24 Affiliate Transactions
5.25 Employee Benefit Plans
9.6 Mortgagees and Their Interests
11.6 Sketches and Designs
- -------------------
* Selected portions have been deleted as confidential pursuant to Rule 24b-2.
Complete copies of the entire exhibit have been filed separately with the
Securities and Exchange Commission and marked "CONFIDENTIALTREATMENT."
