<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 2)
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 28, 1999
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)
================================================================================
<PAGE>
ITEM 7 is hereby replaced as follows:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Combined financial statements of Miller Enterprises, Inc. and
Peninsular Petroleum Company as of April 2, 1997 and April 1, 1998 and for each
of the three years in the period ended April 1, 1998, and the notes thereto;
unaudited combined financial statements of Miller Enterprises, Inc and
Peninsular Petroleum Company as of December 30, 1998 and for the nine-month
periods ended December 25, 1997 and December 30, 1998, and the notes thereto;
and the statement of net assets acquired from Miller Brothers and Circle
Investments, Ltd. as of January 28, 1999 and the notes thereto, were each
previously filed, within the meaning of Rule 12b-2 promulgated under the
Securities Exchange Act of 1934, as amended, in the Company's Registration
Statement on Form S-1, filed with the Securities and Exchange Commission on
March 11, 1999, as amended on June 4, 1999 (the "Registration Statement").
(b) PRO FORMA FINANCIAL INFORMATION.
The unaudited pro forma consolidated financial data provided below
have been derived by the application of pro forma adjustments to the historical
financial statements of The Pantry for the periods indicated. The adjustments,
which include adjustments reflecting the acquisition of Miller and the
acquisition on February 25, 1999 of the assets of Taylor Oil Company ("Taylor
Oil"), are described in the accompanying notes. The unaudited pro forma
consolidated financial data also give effect to (i) the estimated net proceeds
from the proposed public offering of common stock as contemplated in the
Registration Statement; (ii) other acquisitions by the Company in fiscal 1998
and fiscal 1999; and (iii) certain financing transactions in fiscal 1998 and
fiscal 1999 (each as described more fully in Items (1), (3) and (6) below). The
following unaudited pro forma consolidated financial data are provided below:
1) Introduction to Unaudited Pro Forma Financial Data
2) Unaudited Pro Forma Balance Sheet Data as of December 24, 1998
3) Notes to Unaudited Pro Forma Balance Sheet Data
4) Unaudited Pro Forma Statement of Operations Data for the
Quarter Ended December 24, 1998
5) Unaudited Pro Forma Statement of Operations Data for the Year
Ended September 24, 1998
6) Notes to Unaudited Pro Forma Statement of Operations Data
-2-
<PAGE>
INTRODUCTION TO UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated financial data have been
derived by the application of pro forma adjustments to the historical financial
statements of The Pantry, Inc. ("The Pantry") for the periods indicated. The
adjustments are described in the accompanying notes.
On January 28, 1999, The Pantry acquired 100% of the outstanding capital
stock of Miller Enterprises, Inc. ("Miller Enterprises"), and certain other real
estate assets of Miller Brothers and Circle Investments, Ltd., affiliates of
Miller Enterprises (collectively referred to as "Miller Enterprises and
Affiliates"). Miller Enterprises is a leading operator of convenience stores
operating one hundred twenty-one (121) stores under the name "Handy Way" and
located primarily in central Florida. The purchase price was $82,000,000 in cash
plus certain working capital and other adjustments. The Company intends to
continue to operate the assets of Miller Enterprises and Affiliates as they have
historically been operated. The source of funds for the acquisition was the 1999
Credit Facility (as defined below) and cash on hand.
On February 25, 1999, The Pantry acquired 60 convenience stores and
related assets from Taylor Oil Company ("Taylor Oil"). The real property on
which the stores are located has been leased or subleased from Taylor Oil or
affiliated parties. Of the 60 leases, 51 are for terms of 15 years with four
five-year renewal options. The remaining nine subleases are for terms ranging
from three to 18 years, exclusive of renewal options. The acquired convenience
stores are located in North Carolina and Virginia. The purchase price was
approximately $22,850,000 in cash plus certain adjustments. The Company intends
to continue to operate the assets of Taylor Oil as they have historically been
operated. The source of funds for the acquisition was The Pantry's 1999 Credit
Facility and cash on hand.
On March 11, 1999, The Pantry filed a Registration Statement on Form S-1,
as amended on June 4, 1999 (the "Registration Statement"), relating to the
offering of 6,250,000 shares of common stock at an assumed offering price of
$16.00 per share. The unaudited pro forma financial data reflect estimated net
proceeds from the proposed offering of $92.0 million and the application of such
proceeds to (1) repay outstanding indebtedness under our Amended Credit Facility
of $19.0 million and (2) redeem preferred stock of $17.5 million and pay accrued
dividends of $5.1 million.
The unaudited pro forma financial data also give effect to the following:
Other Fiscal 1999 Acquisitions:
<TABLE>
<CAPTION>
Number
of
Date Acquired Company Trade Name Locations Stores
- ----------------- --------------------------- --------------- --------------------------------- --------
<S> <C> <C> <C> <C>
November 5, 1998 Express Stop, Inc. Express Stop Southeast North Carolina, Eastern
South Carolina 22
October 22, 1998 A.G. Lee Oil Company, Inc. Dash-N East-central North Carolina 10
</TABLE>
The approximate cost of the Other 1999 acquisitions and the sources of
funding are as follows:
<TABLE>
<CAPTION>
Company Acquisition Cost Funding Sources
- ---------------------- ------------------ ---------------------------------
(in thousands)
<S> <C> <C>
Express Stop $21,800 Proceeds of $16.0 million from
our 1998 bank credit facility
and cash on hand
A.G. Lee Oil 3,750 Cash on hand
</TABLE>
3
<PAGE>
Fiscal 1999 Financing Transactions:
. January 28, 1999--we entered into a new bank credit facility and used the
proceeds of $245.0 million plus cash on hand to:
. repay $94.0 million of existing debt under our 1998 bank credit
facility
. redeem $49.0 million of outstanding senior notes and pay $2.0 million
of related premium costs
. finance $95.0 million of the Miller Enterprises and affiliates
acquisition price and
. pay related fees and accrued and unpaid interest
Fiscal 1998 Acquisitions:
<TABLE>
<CAPTION>
Number
of
Date Acquired Company Trade Name Locations Stores
- ----------------- ---------------------------- ---------- ----------------------------------- ------
<S> <C> <C> <C> <C>
July 15, 1998 Stallings Oil Company, Inc. Zip Mart Central North Carolina, Virginia 42
July 2, 1998 Quick Stop Food Mart, Inc. Quick Stop Southeast North Carolina, Coastal
South Carolina 75
May 2, 1998 United Fuels Corporation, Inc. Sprint Gainesville, Florida 10
March 19, 1998 Wooten Oil Company, Inc. Kwik Mart Eastern North Carolina 23
October 23, 1997 Lil' Champ Food Stores, Inc. Lil' Champ Northeast Florida 440(a)
- --------
(a) Net of the disposition of 48 convenience stores located throughout eastern Georgia.
The approximate cost of the 1998 acquisitions and the sources of funding are as follows:
Company Acquisition Cost Funding Sources
----------------------- ---------------- -------------------------------------------------------
Stallings Oil $29,300 Proceeds of $25.0 million from our 1998 bank credit
facility and cash on hand
Quick Stop 56,000 Proceeds of $25.0 million from the sale of 43,478 shares of
our common stock to existing shareholders, $25.0 million
from our 1998 bank credit facility and cash on hand
United Fuels 18,300 Proceeds of $19.0 million from our 1998 bank credit
facility
Wooten Oil 9,000 Proceeds of $9.0 million from our 1998 bank credit facility
Lil' Champ 136,400 Proceeds from the issuance of $200.0 million of senior
subordinated notes
</TABLE>
Fiscal 1998 Financing Transactions
. October 23, 1997--we issued $200.0 million of senior subordinated
notes at an interest rate of 10.25%
. October 23, 1997--we repurchased $51.0 million of senior notes with
an interest rate of 12.5% and paid related costs including a 10%
repurchase premium, consent fee, accrued interest and other expenses.
This issuance of new debt and retirement of existing debt, which
results in an annual reduction in interest costs of approximately
$1,148 million was an integral part of our plan to acquire Lil'
Champ.
. March 19, 1998 through July 15, 1998--we borrowed $78.0 million
under our bank credit facility
Pro Forma Adjustments:
The unaudited pro forma balance sheet gives also effect to the offering of
our common stock and the repayment of $19.0 million of our long-term debt. The
unaudited pro forma balance sheet also gives effect to the Miller Enterprises
and Affiliates and Taylor Oil acquisitions and the fiscal 1999 financing
transactions. The fiscal 1998 acquisitions, the Dash-N and Express Stop
acquisitions and the 1998 financing transactions are reflected in our historical
unaudited balance sheet data as of December 24, 1998.
The unaudited pro forma statement of operations for the three months ended
December 24, 1998 gives effect to the fiscal 1999 acquisitions and the fiscal
1999 financing transactions as if such events occurred at the beginning of
fiscal 1998. The fiscal 1998 acquisitions and fiscal 1998 financing transactions
are included in our historical results of operations for the three month period.
The periods for which the fiscal 1999 acquisitions have been included in the pro
forma statement of operations are as follows:
. Taylor Oil--the three-month period from October 1, 1998 through
December 31, 1998
. Miller Enterprises--the three-month period from October 1, 1998
through December 30, 1998
. Express Stop--the one-month period from October 1, 1998 through
October 31, 1998
. A.G. Lee Oil--the one-month period from October 1, 1998 through
October 22, 1998
The unaudited pro forma statement of operations for the year ended
September 24, 1998 gives effect to the 1998 acquisitions and disposition, the
1998 financing transactions, the fiscal 1999 acquisitions and the 1999 financing
transactions as if such events occurred at the beginning of fiscal 1998. The
periods for which the fiscal 1998 and 1999 acquisitions have been included in
the pro forma statement of operations are as follows:
1998 Acquisitions and Disposition:
. Stallings Oil--the nine-month period from October 1, 1997 through
June 30, 1998
. Quick Stop--the nine-month period from October 1, 1997 through
June 30, 1998
. United Fuels--the six-month period from October 1, 1997 through
March 31, 1998
. Wooten Oil--the five-month period from October 1, 1997 through
February 28, 1998
. Lil' Champ--the one-month period from September 28, 1997 through
October 23, 1997
. Lil' Champ disposition--the disposition of 48 convenience stores
located throughout eastern Georgia for the eleven-month period from
October 25, 1997 through August 31, 1998
1999 Acquisitions:
. Taylor Oil--the twelve-month period from January 1, 1998 through
December 31, 1998
. Miller Enterprises--the twelve-month period from October 1, 1997
through September 30, 1998
. Express Stop--the twelve-month period from October 1, 1997 through
September 30, 1998
. A.G. Lee Oil--the twelve-month period from October 1, 1997 through
September 30, 1998
In connection with the Stallings Oil and Express Stop acquisitions, we did
not acquire certain operations of these entities, relating primarily to a
truckstop owned, operated and retained by Stallings Oil, and equity in earnings
of certain affiliates of Express Stop, Inc.
The unaudited pro forma financial data are provided for informational
purposes only and do not represent our results of operations or financial
position had the transactions occurred on such dates, nor are they indicative of
our results of operations or financial position as of any future date or period.
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 or incorporated by reference in
this Form 8-K/A. The financial statements of the following immaterial acquired
entities were not audited or reviewed by independent pubic accountants. The
information relating to these immaterial acquired entities is generally based on
internal financial statements prepared by the entity:
. Wooten Oil
. United Fuels
. A.G. Lee Oil
4
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET DATA
December 24, 1998
<TABLE>
<CAPTION>
Historical
-----------------------------------------------------------
Miller
Enterprises
and Miller Bros.
The Pantry Peninsular and Circle
Petroleum Investments, Ltd. Taylor Oil 1999
December 24, December 30, December 30, December 31, Financing
1998 1998 1998 1998 Adjustments
------------ ------------- ------------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........... $ 15,069 $ 10,649 $ -- $ 70 $95,711 (a)
Receivables, net....... 13,393 5,508 -- 702 --
Inventories............ 53,546 5,862 -- 2,707 --
Prepaid expenses....... 1,338 1,363 -- 61 --
Property held for
sale.................. 2,971 -- -- -- --
Deferred income taxes.. 3,521 491 -- -- --
-------- -------- -------- -------- --------
Total current
assets............... 89,838 23,873 -- 3,540 95,711
-------- -------- -------- -------- --------
Property and equipment,
net.................... 328,037 30,809 48,668 5,398 --
Other assets:
Goodwill, net.......... 119,534 -- -- -- --
Deferred lease cost,
net................... 258 -- -- -- --
Deferred financing
cost, net............. 14,025 -- -- -- 3,210 (a)
(3,406)(b)
Environmental
receivables, net...... 12,783 -- -- -- --
Other.................. 4,085 3,435 -- -- --
-------- -------- -------- -------- --------
Total other assets.... 150,685 3,435 -- -- (196)
-------- -------- -------- -------- --------
Total assets........ $568,560 $58,117 $48,668 $ 8,938 $95,515
======== ======== ======== ======== ========
<CAPTION>
Taylor Oil and
Miller Enterprises
and Affiliates IPO Total
Adjustments Subtotal Adjustments Pro Forma
------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents........... $(95,000)(c) $22,649 $50,397(g) $ 73,046
(3,850)(d)
Receivables, net....... -- 19,603 -- 19,603
Inventories............ -- 62,115 -- 62,115
Prepaid expenses....... -- 2,762 -- 2,762
Property held for
sale.................. -- 2,971 -- 2,971
Deferred income taxes.. -- 4,012 -- 4,012
---------- -------- ------- --------
Total current
assets............... (98,850) 114,112 50,397 164,509
--------- -------- ------- --------
Property and equipment,
net.................... -- 412,912 -- 412,912
Other assets:
Goodwill, net.......... 33,317 (e) 152,851 -- 152,851
Deferred lease cost,
net................... -- 258 -- 258
Deferred financing
cost, net............. -- 13,829 -- 13,829
Environmental
receivables, net...... -- 12,783 -- 12,783
Other.................. (2,918)(d) 4,602 -- 4,602
-------- -------- ------- --------
Total other assets.... 30,399 184,323 -- 184,323
-------- -------- ------- --------
Total assets........ $(68,451) $711,347 $50,397 $761,744
======== ======== ======= ========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet Data
5
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET DATA
December 24, 1998
<TABLE>
<CAPTION>
Historical
---------------------------------------
Miller
Enterprises Miller Bros.
and and
Peninsular Circle
The Pantry Petroleum Investments Ltd. Taylor Oil 1999
December 24, December 30, December 31, December 31, Financing
1998 1998 1999 1998 Adjustments
------------ ----------- ---------------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Liabilities and
Shareholders' Equity
Current liabilities:
Current maturities of
long-term debt......... $ 39 $ 1,531 $ -- $ -- $ --
Current maturities of
capital lease
obligations............ 1,240 -- -- -- --
Revolving credit........ 2,000 -- -- -- 5,000 (a)
Accounts payable........ 55,320 12,543 -- -- --
Accrued expenses........ 49,359 8,085 -- -- (630)(a)
(454)(a)
-------- -------- -------- -------- --------
Total current
liabilities........... 107,958 22,159 -- -- 3,916
-------- -------- -------- -------- --------
Senior subordinated
notes.................. 200,000 -- -- -- --
Senior notes payable ... 48,995 -- -- -- (48,995)(a)
Credit facility......... 94,000 -- -- -- (94,000)(a)
Amended credit
facility............... -- -- -- -- 240,000 (a)
Other long-term debt.... 265 9,762 -- -- --
-------- -------- --------- -------- --------
Total long-term debt... 343,260 9,762 -- -- 97,005
-------- -------- --------- -------- --------
Other non-current
liabilities:
Environmental reserve... 17,291 -- -- -- --
Capital lease
obligations............ 11,806 -- -- -- --
Employment obligations.. 842 -- -- -- --
Accrued dividends on
preferred stock........ 5,103 -- -- -- --
Deferred income taxes... 19,927 1,567 2,218 -- (2,162)(f)
Other non-current
liabilities............ 21,628 3,859 -- -- --
-------- -------- -------- -------- --------
Total other non-current
liabilities........... 76,597 5,426 2,218 -- (2,162)
-------- -------- -------- -------- --------
Shareholders' equity:
Preferred stock......... -- -- -- -- --
Common stock............ 2 6,163 -- -- --
Additional paid-in
capital................ 69,925 1,020 -- -- --
Shareholder loan........ (937) (4,784) -- -- --
Retained earnings....... (28,245) 18,371 46,450 8,938 (2,000)(a)
(3,406)(b)
2,162 (f)
-------- -------- --------- -------- --------
Total shareholders'
equity................ 40,745 20,770 46,450 8,938 (3,244)
-------- -------- -------- -------- --------
Total liabilities and
shareholders' equity.. $568,560 $58,117 $48,668 $ 8,938 $ 95,515
======== ======== ======== ======== ========
<CAPTION>
Taylor Oil and
Miller
Enterprises
and
Affiliates IPO Total
Adjustments Subtotal Adjustments Pro Forma
------------- -------- ----------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Liabilities and
Shareholders' Equity
Current liabilities:
Current maturities of
long-term debt......... $(1,531)(d) $ 39 $ -- $ 39
Current maturities of
capital lease
obligations............ -- 1,240 -- 1,240
Revolving credit........ -- 7,000 -- 7,000
Accounts payable........ -- 67,863 -- 67,863
Accrued expenses........ -- 56,360 -- 56,360
------- --------- -------- ---------
Total current
liabilities........... (1,531) 132,502 -- 132,502
------- -------- -------- --------
Senior subordinated
notes.................. -- 200,000 -- 200,000
Senior notes payable ... -- -- -- --
Credit facility......... -- -- -- --
Amended credit
facility............... 19,000 (c) 259,000 (19,000)(g) 240,000
Other long-term debt.... (9,762)(d) 265 -- 265
------- -------- -------- --------
Total long-term debt... 9,238 459,265 (19,000) 440,265
------- -------- -------- --------
Other non-current
liabilities:
Environmental reserve... -- 17,291 -- 17,291
Capital lease
obligations............ -- 11,806 -- 11,806
Employment obligations.. -- 842 -- 842
Accrued dividends on
preferred stock........ -- 5,103 (5,103)(g) --
Deferred income taxes... -- 21,550 -- 21,550
Other non-current
liabilities............ -- 25,487 -- 25,487
------- -------- -------- --------
Total other non-current
liabilities........... -- 82,079 (5,103) 76,976
------- -------- -------- --------
Shareholders' equity:
Preferred stock......... -- -- -- --
Common stock............ (6,163) 2 62 64
Additional paid-in
capital................ (1,020) 69,925 91,938 (g) 144,363
(17,500)(g)
Shareholder loan........ 4,784 (937) -- (937)
Retained earnings....... (73,759) (31,489) -- (31,489)
-------- -------- -------- --------
Total shareholders'
equity................ (76,158)(e) 37,501 74,500 112,001
-------- -------- -------- --------
Total liabilities and
shareholders' equity.. $(68,451) $711,347 $ 50,397 $761,744
======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Balance Sheet Data
6
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET DATA
(dollars in thousands)
(a) Sources and Uses
<TABLE>
<S> <C>
Sources:
Revolving credit ................................................. $ 5,000
Amended credit facility........................................... 240,000
--------
Total sources.................................................... $245,000
========
Uses:
Redemption of senior notes........................................ $ 48,995
Refinance credit facility......................................... 94,000
Accrued interest--senior notes.................................... 630
Accrued interest--credit facility................................. 454
Redemption premium................................................ 2,000
Deferred financing cost........................................... 3,210
--------
Total uses...................................................... $149,289
========
Increase in cash and cash equivalents............................. $ 95,711
========
</TABLE>
(b) Write-off of $3,406 of unamortized deferred financing costs related to our
bank credit facility and our senior notes, which have been redeemed.
(c) Reflects payment of acquisition costs of Miller Enterprises and Affiliates
funded by cash of $95,000 and borrowings under our bank credit facility of
$19,000 to fund the acquisition (see note a).
(d) Reflects the elimination of certain assets and liabilities we did not
acquire in connection with the Miller Enterprises and Affiliates
acquisitions:
Miller
Enterprises
and
Affiliates
-----------
Cash...................................... $ --
Receivables............................... --
Prepaid expenses.......................... --
Property and equipment.................... --
Other assets.............................. (2,918)
Current maturities of long-term debt...... 1,531
Accounts payable.......................... --
Other accrued liabilities................. --
Other long-term debt...................... 9,762
-----------
Total................................... $ 8,375
===========
Additionally, we used approximately $3,850 of cash on hand to partially
fund the Taylor Oil acquisition.
(e) Goodwill related to the Taylor Oil and Miller Enterprises and Affiliates
acquisitions has been determined as follows:
Miller
Enterprises
and Taylor
Affiliates Oil Total
----------- -------- ---------
Aggregate purchase price................. $ 95,000 $ 22,850 $ 117,850
Less shareholders' equity................ (67,220) (8,938) (76,158)
Elimination of certain net assets not
acquired by The Pantry (see note d)..... (8,375) -- (8,375)
-------- -------- ---------
Total.................................. $ 19,405 $ 13,912 $ 33,317
======== ======== =========
(f) Reflects a $2,162 tax benefit related to the premium paid in connection
with the redemption of our senior notes and the write-off of unamortized
deferred financing costs (see notes a and b).
(g) Reflects estimated net proceeds from the proposed offering of $92,000 and
the application of such proceeds to (1) repay outstanding indebtedness under
our Amended Credit Facility of $19,000 and (2) redeem preferred stock of
$17,500 and pay accrued dividends of $5,103.
7
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
Quarter Ended December 24, 1998
<TABLE>
<CAPTION>
Historical
--------------------------------------------------------
Three Months
Quarter Ended Three Months
Ended December 30, Ended Other Acquisition
December 24, 1998 December 31, Fiscal and
1998 Miller 1998 1999 Financing IPO Total
The Pantry Enterprises Taylor Oil Acquisitions(a) Adjustments Subtotal Adjustments Pro Forma
------------ -------------- ------------ --------------- ------------ -------- ----------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Merchandise sales...... $139,390 $27,818 $ 6,732 $2,313 $ -- $176,253 $ -- $176,253
Gasoline sales......... 171,789 35,003 21,414 3,442 -- 231,648 -- 231,648
Commissions............ 4,428 510 61 249 -- 5,248 -- 5,248
-------- ------- ------- ------ ------- -------- ------ --------
Total revenue......... 315,607 63,331 28,207 6,004 -- 413,149 -- 413,149
-------- ------- ------- ------- ------- -------- ------ --------
Cost of Sales:
Merchandise............ 94,453 17,013 4,331 1,693 -- 117,490 -- 117,490
Gasoline............... 148,774 30,611 18,727 3,141 -- 201,253 -- 201,253
-------- ------- ------- ------ ------- -------- ------ --------
Total cost of sales... 243,227 47,624 23,058 4,834 -- 318,743 -- 318,743
-------- ------- ------- ------ ------- -------- ------ --------
Gross profit............ 72,380 15,707 5,149 1,170 -- 94,406 -- 94,406
-------- ------- ------- ------ ------- -------- ------ --------
Store operating
expenses............... 43,729 11,007 2,881 682 (1,106)(b) 57,802 -- 57,802
609 (c)
General and
administrative
expenses............... 9,968 2,666 600 113 -- 13,347 -- 13,347
Impairment of long-lived
assets................. -- -- 55 -- -- 55 -- 55
Depreciation and
amortization........... 8,190 946 497 70 424 (d) 10,435 -- 10,435
370 (e)
(62)(f)
-------- ------- ------- ------ ------- -------- ------ --------
Total operating
expense............... 61,887 14,619 4,033 865 235 81,639 -- 81,639
-------- ------- ------- ------ ------- -------- ------ --------
Income from operations.. 10,493 1,088 1,116 305 (235) 12,767 -- 12,767
-------- ------- ------- ------ ------- -------- ------ --------
Other Income (Expense):
Interest............... (8,912) (91) -- (5) (1,989)(g) (10,997) 392 (k) (10,605)
Miscellaneous.......... (184) 2 -- 23 (13)(h) (172) -- (172)(l)
-------- ------- ------- ------ ------- -------- ------ --------
Total other expense... (9,096) (89) -- 18 (2,002) (11,169) 392 (10,777)
-------- ------- ------- ------ ------- -------- ------ --------
Income (loss) before
income taxes........... 1,397 999 1,116 323 (2,237) 1,598 392 1,990
Income tax expense
(benefit).............. 332 385 -- -- (78)(i) 639 157 (i) 796
-------- ------- ------- ------- ------- -------- ------ --------
Net income (loss) before
extraordinary item..... $ 1,065 $ 614 $1,116 $ 323 $(2,159)(j) $ 959 $ 235 $ 1,194
======== ======= ======= ======= ======== ======== ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations Data
8
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
Year Ended September 24, 1998
<TABLE>
<CAPTION>
Historical
---------------------------------------------------------------------
Latest Twelve
Year Ended 1998 Months Ended Year Ended Other
September 24, Acquisitions September 30, December 31, Fiscal Acquisition and
1998 and 1998 1998 1999 Financing
The Pantry Disposition(m) Miller Enterprises Taylor Oil Acquisitions(n) Adjustments
------------- --------------- ------------------ ------------ --------------- ---------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Merchandise sales...... $460,798 $ 75,593 $100,338 $ 25,587 $ 30,302 $ (402)(h)
Gasoline sales......... 509,958 181,814 139,734 84,592 44,693 (15,823)(h)
Commissions............ 14,128 3,633 1,988 267 2,962 (467)(h)
-------- -------- -------- -------- -------- --------
Total revenues...... 984,884 261,040 242,060 110,446 77,957 (16,692)
-------- -------- -------- -------- -------- --------
Cost of Sales:
Merchandise............ 303,968 54,219 63,387 17,022 22,688 (207)(h)
Gasoline............... 447,565 161,074 124,258 74,422 40,213 (13,004)(h)
-------- -------- -------- -------- -------- --------
Total cost of
sales.............. 751,533 215,293 187,645 91,444 62,901 (13,211)
-------- -------- -------- -------- -------- --------
Gross profit............ 233,351 45,747 54,415 19,002 15,056 (3,481)
-------- -------- -------- -------- -------- --------
Store operating
expenses............... 140,089 27,164 40,173 11,110 8,713 (4,424)(b)
2,725 (c)
(3,015)(h)
General and
administrative
expenses............... 32,761 7,506 8,703 1,927 1,541 (356)(h)
(42)(p)
Restructuring charges... 1,016 -- -- -- -- --
Impairment of long-lived
assets................. -- -- -- 219 -- --
Depreciation and
amortization........... 27,642 5,189 3,214 1,987 903 3,180 (d)
(324)(e)
(451)(f)
(169)(h)
-------- -------- -------- -------- -------- --------
Total operating
expense................ 201,508 39,859 52,090 15,243 11,157 (2,876)
-------- -------- -------- -------- -------- --------
Income from operations.. 31,843 5,888 2,325 3,759 3,899 (605)
-------- -------- -------- -------- -------- --------
Other Income (Expense):
Interest............... (28,946) (1,687) (305) -- (125) (12,483)(g)
Miscellaneous.......... 1,776 137 356 -- 271 (193)(h)
-------- -------- -------- -------- -------- --------
Total other
expense............ (27,170) (1,550) 51 -- 146 (12,676)
-------- -------- -------- -------- -------- --------
Income (loss) before
income taxes........... 4,673 4,338 2,376 3,759 4,045 (13,281)
Income tax expense...... -- 364 915 -- -- 1,085 (i)
-------- -------- -------- -------- -------- --------
Net income (loss) before
extraordinary item..... $ 4,673 $ 3,974 $ 1,461 $ 3,759 $ 4,045 $(14,366)(j)
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
IPO Total
Subtotal Adjustments Pro Forma
-------- ----------- ---------
(dollars in thousands except per share data)
<S> <C> <C> <C>
Revenues:
Merchandise sales...... $ 692,216 $ -- $ 692,216
Gasoline sales......... 944,968 -- 944,968
Commissions............ 22,511 -- 22,511
---------- ------ ----------
Total revenues...... 1,659,695 -- 1,659,695
---------- ------ ----------
Cost of Sales:
Merchandise............ 461,077 -- 461,077
Gasoline............... 834,528 -- 834,528
---------- ------ ----------
Total cost of
sales.............. 1,295,605 -- 1,295,605
---------- ------ ----------
Gross profit............ 364,090 -- 364,090
---------- ------ ----------
Store operating
expenses............... 222,535 -- 222,535
General and
administrative
expenses............... 52,040 -- 52,040
Restructuring charges... 1,016 -- 1,016
Impairment of long-lived
assets................. 219 -- 219
Depreciation and
amortization........... 41,171 -- 41,171
---------- ------ ----------
Total operating
expense................ 316,981 -- 316,981
---------- ------ ----------
Income from operations.. 47,109 -- 47,109
---------- ------ ----------
Other Income (Expense):
Interest............... (43,546) 1,568 (k) (41,978)
Miscellaneous.......... 2,347 -- 2,347 (1)
---------- ------ ----------
Total other
expense............ (41,199) 1,568 (39,631)
---------- ------ ----------
Income (loss) before
income taxes........... 5,910 1,568 7,478
Income tax expense...... 2,364 627 (i) 2,991
---------- ------ ----------
Net income (loss) before
extraordinary item..... $ 3,546 $ 941 $ 4,487
========== ====== ==========
</TABLE>
See Notes to Unaudited Pro Forma Statement of Operations Data
9
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS DATA
(dollars in thousands)
(a) The fiscal 1999 acquisitions included in the unaudited pro forma statement
of operations for the three months ended December 24, 1998 consist of the
historical financial statements of the following entities:
<TABLE>
<CAPTION>
One-month
period
October 1,
1998
through
October 31,
1998
----------- Total Other
Express Other 1999 Fiscal 1999
Stop Acquisitions Acquisitions
----------- ------------ ------------
<S> <C> <C> <C>
Revenue:
Merchandise sales.............. $1,698 $ 615 $2,313
Gasoline sales................. 2,407 1,035 3,442
Commissions.................... 191 58 249
------ ------ ------
Total revenue................ 4,296 1,708 6,004
------ ------ ------
Cost of Sales:
Merchandise.................... 1,232 461 1,693
Gasoline....................... 2,184 957 3,141
------ ------ ------
Total cost of sales.......... 3,416 1,418 4,834
------ ------ ------
Gross profit..................... 880 290 1,170
------ ------ ------
Store operating expenses......... 433 249 682
General and administrative
expenses....................... 105 8 113
Depreciation and amortization... 61 9 70
------ ------ ------
Total operating expense...... 599 266 865
------ ------ ------
Income (loss) from operations.... 281 24 305
------ ------ ------
Other Income (Expense):
Interest....................... (5) -- (5)
Miscellaneous.................. 13 10 23
------ ------ ------
Total other.................. 8 10 18
------ ------ ------
Income (loss) before income
taxes.......................... 289 34 323
Income tax expense (benefit)..... -- -- --
------ ------ ------
Net income (loss) before
extraordinary item............. $ 289 $ 34 $ 323
====== ====== ======
</TABLE>
(b) Historically, Miller Enterprises incurred rental expense related to stores
leased from its affiliates. These stores were acquired by us in connection
with the Miller Enterprises and Affiliates acquisition and all leases with
Miller Enterprises affiliates were terminated. As a result, rental expenses
of $1,106 for the quarter ended December 24, 1998 and $4,424 for the year
ended September 24, 1998 have been eliminated.
10
<PAGE>
(c) Reflects an increase in store rental expense of $609 for Taylor Oil for the
three months ended December 24, 1998 and $288 for Quick Stop and $2,437 for
Taylor Oil for the year ended September 24, 1998 in connection with an
obligation to lease certain stores from the former owners of Quick Stop and
Taylor Oil at current market values at the dates of acquisition. The rent
increases were effective concurrent with the Quick Stop acquisition, which
occurred on July 2, 1998, and the Taylor Oil acquisition, which occurred on
February 25, 1999.
(d) The 1998 and 1999 acquisitions have been accounted for using the purchase
method of accounting. Purchase price allocations for the Lil' Champ
acquisition, the Wooten Oil acquisition and the United Fuels acquisition
have been finalized. Purchase price allocations for all other 1998 and 1999
acquisitions have not been finalized and are based on available information,
internal estimates and certain assumptions we believe are reasonable.
For each acquisition, the purchase price will be allocated to the tangible
and intangible assets acquired and liabilities assumed based upon their
respective fair values at the time the acquisitions were consummated,
pending completion of appraisals of property and equipment acquired. The
excess of the purchase price over the historical basis of the net assets
acquired has been allocated to the net assets acquired based on preliminary
estimates. 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 pending the completion of appraisals and
other purchase price adjustments.
The purchase price of the Miller Enterprises and affiliates acquisition is
subject to working capital and capital expenditure adjustments pending the
completion of a closing balance sheet audit of Miller Enterprises as of
January 28, 1999.
In the Express Stop acquisition, $2,500 of the purchase price was subject to
an escrow agreement until March 1999, and was to be forfeited upon the
occurrence of specific events or conditions relating to the operations of
video poker machines in South Carolina. The events or conditions specified
in the purchase agreement did not occur, and the $2,500 million held in
escrow was paid to Express Stop in March 1999.
The following table summarizes the additional amortization expense to be
incurred in connection with the various 1998 and 1999 transactions described
above:
<TABLE>
<CAPTION>
Estimated Three Months Ended Year Ended
Recorded Useful Life December 24, September 24,
Acquisitions Goodwill (in years) 1998 1998
------------ -------- ----------- ------------------ -------------
<S> <C> <C> <C> <C>
1998 acquisitions:
Lil' Champ......................... $ 42,622 30 $ -- $ 118
Wooten Oil......................... 126 30 -- --
United Fuels....................... 7,386 30 -- 123
Quick Stop......................... 35,928 30 -- 898
Stallings Oil...................... 15,505 30 -- 388
1999 acquisitions:
A.G. Lee Oil....................... 355 30 12
Express Stop....................... 17,689 30 147 590
Miller Enterprises and affiliates.. 19,405 30 161 647
Taylor Oil......................... 13,912 30 116 464
-------- ---- -----
$152,928 424 3,240
========
Less historical recorded predecessor
amounts............................. -- 60
---- -----
Adjustment.......................... $424 $3,180
==== ======
</TABLE>
(e) Reflects additional depreciation expense in connection with the various 1998
and 1999 acquisition and financing transactions as follows:
<TABLE>
<CAPTION>
Recorded
Fair Value of
Property and Estimated Three Months Ended Year Ended
Equipment Useful Life December 24, September 24,
Acquisitions Acquired (in years) 1998 1998
------------ ----------- ----------- ------------------ -------------
<S> <C> <C> <C> <C>
1998 acquisitions:
Lil' Champ....................... $155,382 10-35 $ -- $ 985
Wooten Oil....................... 7,600 10 -- 317
United Fuels..................... 15,400 10 -- 770
Quick Stop....................... 15,000 10-35 -- 1,125
Stallings Oil.................... 10,313 10-35 -- 773
Georgia stores disposition....... -- -- (516)
1999 acquisitions:
A.G. Lee Oil..................... 2,500 10 63 250
Express Stop..................... 2,250 10 118 226
Miller Enterprises and affiliates 79,335 10-35 1,567 6,270
Taylor Oil....................... 5,398 10 135 540
-------- ------ -------
$293,178 1,883 10,740
======== ------ -------
Less historical recorded
predecessor amounts.............. 1,513 11,064
------ -------
Adjustment....................... $ 370 $ (324)
====== =======
</TABLE>
As noted in note (h), The Pantry did not acquire a truckstop owned,
operated, and retained by Stallings Oil. Included in the historical
financial statements of Stallings Oil for the nine months ended June 30,
1998 is $169 of depreciation expense related to the truckstop, which has
been eliminated.
11
<PAGE>
(f) Reflects additional amortization of deferred financing costs resulting from
entering into our 1999 bank credit facility and the removal of deferred
financing costs associated with the repayment of our 1998 bank credit
facility and the repurchase of our senior notes as follows:
<TABLE>
<CAPTION>
Financing Straight-line Three Months
Costs Amortization Ended Year Ended
Incurred Period December 24, September 24,
Transaction (Written-off) (in years) 1998 1998
----------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Issuance of $200 million senior subordinated
notes and 1998 bank credit facility........... $14,044 7 $ -- $ 167
Repurchase of $51 million of senior notes....... (2,006) 7 -- (24)
Entering into 1999 bank credit facility......... 3,210 6 134 535
Repurchase of $49 million of outstanding senior
notes and repayment of 1998 bank credit
facility...................................... (3,972) 7 (196) (1,129)
----- -------
Adjustment...................................... $ (62) $ (451)
===== =======
</TABLE>
Deferred financing costs relating to the issuance of our $200 million senior
subordinated notes and our 1998 credit facility are amortized using the straight
line method over the terms of the instruments because the instruments either
require interim payments of interest only or require interim interest payments
computed using variable interest rates which are periodically revised based on
current market conditions. For purposes of the unaudited pro forma financial
statements, deferred financing costs related to the 1999 credit facility are
amortized using the straight line method, which approximates the results that
would be computed using the effective interest method.
(g) Reflects additional interest expense in connection with the various 1998 and
1999 financing and acquisitions transactions as follows:
<TABLE>
<CAPTION>
Principal Interest Three Months Ended Year Ended
Borrowed Rate December 24, September 24,
Acquisition/Financing (Retired) (per annum) 1998 1998
- --------------------- --------- ----------- ------------------ -------------
<S> <C> <C> <C> <C>
Issuance of senior subordinated notes...... $200,000 10.25% $ -- $ 1,708
Redemption of senior notes in Lil' Champ
acquisition.............................. (51,000) 12.50 -- (531)
1998 acquisitions.......................... 78,000 8.25 -- 4,187
1999 acquisitions and proceeds to redeem
outstanding senior notes................. 186,000 8.25 3,616 15,361
Redemption of senior notes from proceeds
of 1999 bank credit facility............. (49,000) 12.50 (1,531) (6,125)
------- -------
Subtotal............................... 2,085 14,600
Less historical recorded amounts related
to indebtedness not assumed.............. 96 2,117
------- -------
Adjustment................................. $ 1,989 $12,483
======= =======
</TABLE>
In connection with the 1998 and 1999 acquisitions, The Pantry did not assume
debt obligations of the acquired entities totaling approximately $54,700
and having interest rates ranging from 5.75% to 8.75%.
The interest rates disclosed above are based on the current weighted-average
interest rates for which The Pantry has an obligation. Assuming a 0.125%
increase or decrease in the variable rate bank credit facility, interest
expense, net of taxes, would increase or decrease by $45 for the three months
ended December 24, 1998 and $179 for the year ended September 24, 1998.
(h) Reflects the elimination of operations not acquired. These operations relate
to a truckstop owned, operated and retained by Stallings Oil and equity in
earnings of affiliates of Express Stop which were not acquired by The Pantry.
<TABLE>
<CAPTION>
Quarter Ended Year Ended
December 24, September 24,
1998 1998
-------------------- --------------------
Decrease in expenses (decrease in income)
<S> <C> <C>
Fiscal 1998 Acquisitions:
Merchandise sales.......... $ -- $ (402)
Gasoline sales............. -- (15,823)
Commissions................ -- (467)
Merchandise cost of sales.. -- 207
Gasoline cost of sales..... -- 13,004
Store operating expenses... -- 3,015
General and administrative
expenses.................. -- 356
Depreciation and
amortization.............. -- 169
Fiscal 1999 Acquisitions:
Miscellaneous income...... (13) (193)
</TABLE>
(i) Adjusts income tax expense for an assumed tax rate of 40% for each of the
periods presented.
(j) For each period presented, net income (loss) excludes an extraordinary loss
of $3,557 related to the redemption of $48,995 of senior notes and the
amendment of our bank credit facility. In addition, net income (loss) before
extraordinary items for the year ended September 24, 1998 excludes an
extraordinary loss of $7,998 incurred related to the costs of the redemption
of $51,000 of senior notes.
(k) Reflects the application of net proceeds of approximately $19,000 to repay
outstanding indebtedness at the weighted-average rate of 8.25%.
(l) Does not reflect estimated interest income of $544 for the three months
ended December 24, 1998 and $2,217 for the year ended September 24, 1998
from investment of the estimated remaining offering proceeds of $50,397
at an assumed interest rate of 4.4%.
(m) The fiscal 1998 acquisitions and disposition included in the unaudited pro
forma statement of operations for the year ended September 24, 1998 consist
of the historical financial statements of the following entities:
<TABLE>
<CAPTION>
One-month Eleven-month
period Nine-month Nine-month period
September 28, period period October 1, 1997
1997 through October 1, 1997 October 1, 1997 through
October 23, through through August 31, 1998
1997 June 30, 1998 June 30, 1998 Lil' Champ Total 1998
------------- --------------- --------------- Other 1998 Disposition Acquisitions and
Lil' Champ Quick Stop Stallings Oil Acquisitions (48 Stores) Disposition
------------- --------------- --------------- ------------ --------------- -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Merchandise sales......... $17,752 $ 45,623 $ 20,029 $ 7,265 $(15,076) $ 75,593
Gasoline sales............ 21,397 69,277 88,452 16,525 (13,837) 181,814
Commissions............... 570 2,278 1,806 379 (1,400) 3,633
------- -------- -------- ------- -------- --------
Total revenue........... 39,719 117,178 110,287 24,169 (30,313) 261,040
------- -------- -------- ------- -------- --------
Cost of Sales:
Merchandise............... 11,421 34,108 14,357 5,018 (10,685) 54,219
Gasoline.................. 18,682 62,691 78,289 13,535 (12,123) 161,074
------- -------- -------- ------- -------- --------
Total cost of sales..... 30,103 96,799 92,646 18,553 (22,808) 215,293
------- -------- -------- ------- -------- --------
Gross profit................ 9,616 20,379 17,641 5,616 (7,505) 45,747
------- -------- -------- ------- -------- --------
Store operating expenses.... 5,957 12,029 12,784 2,429 (6,035) 27,164
General and administrative
expenses.................. 1,698 2,771 1,334 1,703 -- 7,506
Depreciation and
amortization.............. 952 2,233 2,029 491 (516) 5,189
------- -------- -------- ------- -------- --------
Total operating
expenses.............. 8,607 17,033 16,147 4,623 (6,551) 39,859
------- -------- -------- ------- -------- --------
Income from operations...... 1,009 3,346 1,494 993 (954) 5,888
------- -------- -------- ------- -------- --------
Other Income (Expense):
Interest................ (121) (497) (1,055) (14) -- (1,687)
Miscellaneous........... -- 137 -- -- -- 137
------- -------- -------- ------- -------- --------
Total other expense... (121) (360) (1,055) (14) -- (1,550)
------- -------- -------- ------- -------- --------
Income before income taxes.. 888 2,986 439 979 (954) 4,338
Income tax expense
(benefit)................. 364 -- -- -- -- 364
------- -------- -------- ------- -------- --------
Net income before
extraordinary item........ $ 524 $ 2,986 $ 439 $ 979 $ (954) $ 3,974
======= ======== ======== ======= ======== ========
</TABLE>
In connection with the October 23, 1997 acquisition of Lil' Champ and as
contemplated at the consummation date, The Pantry sold all 48 Lil' Champ store
operations and idle property in the state of Georgia. The sale was completed on
September 1, 1998. As required by Statement of Financial Accounting Standards
No. 121, these assets were measured at fair value less costs to sell during the
allocation period following the consummation date of the acquisition. The Pantry
received cash proceeds of $2,500 from the disposition, which approximated the
carrying value of the assets. Accordingly, no gain or loss was recorded on the
disposition.
(n) The other fiscal 1999 acquisitions included in the unaudited pro forma
statement of operations for the year ended September 24, 1998 consist of the
historical financial statements of the following entities:
<TABLE>
<CAPTION>
Twelve-month
period
October 1,
1997 through
September 30,
1998 Total
------------- Other 1999 Fiscal 1999
Express Stop Acquisitions Acquisitions
------------- ------------ ------------
(dollars in thousands)
<S> <C> <C> <C>
Revenue:
Merchandise sales......... $20,720 $ 9,582 $ 30,302
Gasoline sales............ 27,736 16,957 44,693
Commissions............... 2,209 753 2,962
------- -------- --------
Total revenue........... 50,665 27,292 77,957
------- -------- --------
Cost of Sales:
Merchandise............... 15,747 6,941 22,688
Gasoline.................. 24,765 15,448 40,213
------- -------- --------
Total cost of sales..... 40,512 22,389 62,901
------- -------- --------
Gross profit................ 10,153 4,903 15,056
------- -------- --------
Store operating expenses.... 5,284 3,429 8,713
General and administrative
expenses.................. 968 573 1,541
Restructuring charges....... -- -- --
Impairment of long-lived
assets...................... -- -- --
Depreciation and
amortization.............. 788 115 903
------- -------- --------
Total operating
expense............... 7,040 4,117 11,157
------- -------- --------
Income from operations...... 3,113 786 3,899
------- -------- --------
Other Income (Expense):
Interest................ (116) (9) (125)
Miscellaneous........... 181 90 271
------- -------- --------
Total other........... 65 81 146
------- -------- --------
Income (loss) before income
taxes..................... 3,178 867 4,045
Income tax expense
(benefit)................. -- -- --
------- -------- --------
Net income (loss) before
extraordinary item........ $ 3,178 $ 867 $ 4,045
======= ======== ========
</TABLE>
(p) Historically, Lil' Champ paid Docks U.S.A., Inc., Lil' Champ's parent
company, service agreement fees. The service agreement was terminated
concurrent with the acquisition of Lil' Champ. Consequently, $42 of service
agreement fees have been eliminated for the year ended September 24, 1998.
12
<PAGE>
(c) EXHIBITS.
Exhibit No. Description of Exhibit
----------- ----------------------
2.1 Purchase Agreement dated November 30, 1998 among Lil
Champ Food Stores, Inc. and the Selling Shareholders of
Miller: Thomas A. Miller, Joseph E. Miller, The Miller
Investments Trust U/A dated October 11, 1995 and the
George C. Miller, Jr. Estate Trust U/A dated June 30,
1989, and Miller Brothers and Circle Investments, Ltd.
and Miller (asterisks located within the exhibit denote
information which has been deleted pursuant to an order
of the Securities and Exchange Commission granting
confidential treatment)
2.2* List of Exhibits and Schedules omitted from the Purchase
Agreement referenced in Exhibit 2.1 hereof
10.1* Amended and Restated Credit Agreement dated as of January
28, 1999 among the Company, the Lenders, First Union, as
administrative agent, and CIBC, as syndication agent for
the Lenders
- ------------
* Previously Filed.
-13-
<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: June 4, 1999
THE PANTRY, INC.
By: /s/ William T. Flyg
-------------------------------------------
William T. Flyg
Senior Vice President Finance and Secretary
-14-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
2.1 Purchase Agreement dated November 30, 1998 among Lil Champ Food
Stores, Inc. and the Selling Shareholders of Miller: Thomas A.
Miller, Joseph E. Miller, The Miller Investments Trust U/A dated
October 11, 1995 and the George C. Miller, Jr. Estate Trust U/A
dated June 30, 1989, and Miller Brothers and Circle Investments,
Ltd. and Miller (asterisks located within the exhibit denote
information which has been deleted pursuant to an order of the
Securities and Exchange Commission granting confidential treatment)
2.2* List of Exhibits and Schedules omitted from the Purchase Agreement
referenced in Exhibit 2.1 hereof
10.1* Amended and Restated Credit Agreement dated as of January 28, 1999
among the Company, the Lenders, First Union, as administrative
agent, and CIBC, as syndication agent for the Lenders
- ------------
* Previously Filed.
-15-
<PAGE>
Exhibit 2.1
PURCHASE AGREEMENT
AMONG
LIL CHAMP FOOD STORES, INC.
AND
THE SELLING SHAREHOLDERS OF MILLER ENTERPRISES, INC.:
THOMAS A. MILLER,
JOSEPH E. MILLER,
THE MILLER INVESTMENTS TRUST U/A DATED OCTOBER 11, 1995
AND
THE GEORGE C. MILLER, JR. ESTATE TRUST U/A DATED JUNE 30, 1989,
AND
MILLER BROTHERS
AND
CIRCLE INVESTMENTS, LTD.
AND
MILLER ENTERPRISES, INC.
November 30, 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
<TABLE>
<CAPTION>
<S> <C>
1. Definitions..............................................................................................2
2. Purchase and Sale of MEI Shares, CI Real Property and MB Real Property...................................8
(a) Basic Transaction...............................................................................8
(b) Preliminary Purchase Price......................................................................8
(c) The Closing.....................................................................................9
(d) Deliveries at the Closing.......................................................................9
(e) Adjustment to Preliminary Purchase Price For Certain **** and
Estimated Closing Date Net Working Capital......................................................9
(f) Preparation of Draft Closing Date Financial Material...........................................10
(g) Adjustment to Preliminary Purchase Price.......................................................12
3. Representations and Warranties Concerning the Transaction...............................................13
(a) Representations and Warranties Concerning Sellers..............................................13
(b) Representations and Warranties of Buyer........................................................15
4. Representations and Warranties Concerning MEI...........................................................17
(a) Organization, Qualification and Corporate Power................................................17
(b) Capitalization.................................................................................17
(c) Authority; Noncontravention....................................................................17
(d) Brokers' Fees..................................................................................18
(e) Title to Tangible Assets.......................................................................18
(f) Subsidiaries...................................................................................18
(g) Financial Statements...........................................................................18
(h) Events Subsequent to Most Recent Fiscal Year End...............................................19
(i) Legal Compliance...............................................................................20
(j) Tax Matters....................................................................................20
(k) Real Property..................................................................................22
(l) Intellectual Property..........................................................................22
(m) Contracts......................................................................................23
(n) Powers of Attorney.............................................................................24
(o) Litigation.....................................................................................24
(p) Employee Benefits..............................................................................24
(q) Environmental..................................................................................26
(r) FIRPTA.........................................................................................28
(s) Insurance......................................................................................28
(t) Affiliated Transactions........................................................................28
(u) Inventory......................................................................................28
(v) Labor Matters..................................................................................29
</TABLE>
* 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>
<TABLE>
<CAPTION>
<S> <C>
(w) Bank Accounts..................................................................................29
(x) Property.......................................................................................29
5. Representations and Warranties Concerning PPC...........................................................29
(a) Organization, Qualification and Corporate Power................................................29
(b) Capitalization.................................................................................30
(c) Noncontravention...............................................................................30
(d) Brokers' Fees..................................................................................30
(e) Title to Tangible Assets.......................................................................31
(f) Subsidiaries...................................................................................31
(g) PPC Financial Statements.......................................................................31
(h) Events Subsequent to PPC Most Recent Fiscal Year End...........................................31
(i) Legal Compliance...............................................................................32
(j) Tax Matters....................................................................................33
(k) Real Property..................................................................................34
(l) Intellectual Property..........................................................................34
(m) Contracts......................................................................................35
(n) Powers of Attorney.............................................................................36
(o) Litigation.....................................................................................36
(p) Employee Benefits..............................................................................36
(q) Environmental..................................................................................38
(r) FIRPTA.........................................................................................40
(s) Insurance......................................................................................40
(t) Affiliated Transactions........................................................................40
(u) Inventory......................................................................................40
6. Representations and Warranties Concerning Circle Investments............................................41
(a) Organization, Qualification and Power..........................................................41
(b) Subsidiaries...................................................................................41
(c) Legal Compliance...............................................................................41
(d) Real Property..................................................................................41
(e) Litigation.....................................................................................41
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(f) Environmental..................................................................................42
(g) FIRPTA.........................................................................................44
(h) Noncontravention...............................................................................44
(i) Brokers' Fees..................................................................................44
7. Representations and Warranties Concerning Miller Brothers...............................................44
(a) Organization, Qualification and Power..........................................................44
(b) Subsidiaries...................................................................................45
(c) Legal Compliance...............................................................................45
(d) Real Property..................................................................................45
(e) Litigation.....................................................................................45
(f) FIRPTA.........................................................................................46
(g) Environmental..................................................................................46
(h) Noncontravention...............................................................................48
(i) Brokers' Fees..................................................................................48
8. Pre-Closing Covenants...................................................................................48
(a) General........................................................................................48
(b) Notices and Consents...........................................................................49
(c) Operation of Business..........................................................................49
(d) Full Access....................................................................................52
(e) Notice of Developments.........................................................................52
(f) Acquisition Proposals..........................................................................53
(g) Survey Matters.................................................................................53
(h) Financing......................................................................................54
(i) Approvals......................................................................................54
(j) Testing........................................................................................54
(k) Finalization of Disclosure Schedules...........................................................54
9. Post-Closing Covenants..................................................................................55
(a) General........................................................................................55
(b) Litigation Support.............................................................................55
(c) Covenant Not to Compete........................................................................55
(d) Employee Benefits..............................................................................56
(e) Acquisition of PPC.............................................................................56
10. Conditions to Obligation to Close.......................................................................56
(a) Conditions to Obligation of Buyer..............................................................56
(b) Conditions to Obligation of Sellers............................................................61
11. Remedies for Breaches of This Agreement.................................................................62
(a) Survival of Representations and Warranties.....................................................62
(b) Indemnification Provisions for Benefit of Buyer................................................63
(c) Indemnification Provisions for Benefit of Sellers..............................................64
(d) Matters Involving Third Parties................................................................64
(e) Determination of Adverse Consequences..........................................................65
(f) Recoupment and Setoff under Escrow Agreement...................................................65
(g) Other Indemnification Provisions...............................................................66
12. Taxes...................................................................................................66
(a) Tax Indemnity..................................................................................66
(b) Apportionment of Taxes.........................................................................66
(c) Section 338(h)(10) for PPC.....................................................................67
(d) Contests.......................................................................................68
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
(e) Time of Payment................................................................................68
(f) Termination of the Shareholders' Indemnity Obligations for Taxes...............................69
(g) Tax Elections..................................................................................69
13. Termination.............................................................................................69
(a) Termination of Agreement.......................................................................69
(b) Effect of Termination..........................................................................70
14. Miscellaneous...........................................................................................70
(a) Incorporation of Exhibits, Annexes and Schedules...............................................70
(b) Press Releases and Public Announcements........................................................70
(c) No Third-Party Beneficiaries...................................................................71
(d) Entire Agreement...............................................................................71
(e) Succession and Assignment......................................................................71
(f) Counterparts...................................................................................71
(g) Headings.......................................................................................71
(h) Notices........................................................................................71
(i) Governing Law..................................................................................72
(j) Amendments and Waivers.........................................................................72
(k) Severability...................................................................................73
(l) Expenses.......................................................................................73
(m) Construction...................................................................................73
</TABLE>
Exhibit A=MEI Budget
Exhibit B=Historical MEI Financial Statements
Exhibit C=Historical PPC Financial Statements
Buyer's Disclosure Schedule = Exceptions to the Buyer's Representations and
Warranties Concerning the Transaction
Disclosure Schedule = Exceptions to Representations and Warranties Concerning
the Transaction, MEI, PPC, Circle Investments and Miller Brothers
-iv-
<PAGE>
PURCHASE AGREEMENT
This purchase agreement (the "Agreement") is entered into effective as
of November 30, 1998, by and among Lil Champ Food Stores, Inc., a Florida
corporation (the "Buyer"); and the selling shareholders of Miller Enterprises,
Inc., a Florida corporation ("MEI"): Thomas A. Miller, Joseph E. Miller, The
Miller Investments Trust u/a dated October 11, 1995 and The George C. Miller,
Jr. Estate Trust u/a dated June 30, 1989, (collectively the "Selling
Shareholders"); and Miller Brothers, a Florida general partnership ("Miller
Brothers"); and Circle Investments, Ltd., a Florida limited partnership ("Circle
Investments"). Selling Shareholders, Miller Brothers and Circle Investments are
referred to collectively herein as the "Sellers", and MEI Buyer and Sellers are
referred to collectively herein as the "Parties".
RECITALS
A. Selling Shareholders will at Closing (as defined below) own in the
aggregate all of the outstanding capital stock of MEI.
B. George C. Miller, Jr. ("GCM") currently owns all of the outstanding
capital stock of Peninsular Petroleum Company, a Florida corporation ("PPC"),
that MEI intends to acquire immediately after the effectiveness of Closing.
C. Miller Brothers has certain interests in the real property (the "MB
Real Property") described in Section 7(d) of the Disclosure Schedule (as defined
below).
D. At the Closing, Circle Investments will have certain interests in
the real property (the "CI Real Property") described in Section 6(d) of the
Disclosure Schedule.
E. This Agreement contemplates the following transactions: (i) Buyer
will purchase from Selling Shareholders, and Selling Shareholders will sell to
Buyer, all of the capital stock of MEI outstanding at Closing, (ii) Buyer will
purchase from Miller Brothers, and Miller Brothers will sell to Buyer, all of
Miller Brothers' interest in the MB Real Property, (iii) Buyer will purchase
from Circle Investments, and Circle Investments will sell to Buyer, all of
Circle Investments' interest in the CI Real Property, all such transactions in
return for the consideration set forth herein, and (iv) GCM will sell to MEI all
of the outstanding capital stock of PPC.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties agree as follows:
1
<PAGE>
1. Definitions.
"Actual Closing Date Net Working Capital" means an amount determined as
of the Closing Date based upon the Final Balance Sheet as follows:
(a) the current assets of MEI and PPC, as determined in accordance with
GAAP, less the current portion of MEI's and PPC's deferred tax assets, less the
remaining amount owed under any new borrowings or advances of MEI from McLane
Company, Inc. or Citgo Petroleum Corporation made on or after April 1, 1998, and
less and the $620,000 to be paid to GCM for transfer of the PPC Shares
immediately after Closing, plus MEI's LIFO reserve determined in accordance with
GAAP that relates to MEI's inventory; less
(b) the current liabilities of MEI and PPC, as determined in accordance
with GAAP, less the current portion of MEI's and PPC's deferred tax liability,
except that the current maturity of long-term indebtedness and the current
portion of capital leases and any remaining amount owed to Citgo Petroleum
Corporation under the Promissory Note dated March 31, 1997 or advances or to
McLane Company, Inc. under any new borrowings or advances from McLane Company,
Inc. made on or after April 1, 1998 (to the extent such amounts are included in
current liabilities) shall be excluded.
In addition, Actual Closing Date Net Working Capital shall reflect the following
events, to the extent taken on the Closing Date, as if they had occurred on the
day prior to the Closing Date: (i) amounts paid for redemption of MEI capital
stock pursuant to clause (x) of ss 8(c); (ii) amounts paid as "staying bonuses"
to MEI employees pursuant to confidential key associate agreements; (iii)
amounts paid to obtain a new D&O insurance policy, or an endorsement to or
modification of its existing D&O insurance policy, to provide for "run-off"
coverage pursuant to clause (w) of ss 8(c); (iv) the distribution of the notes
related to the transfer of certain real estate to shareholders, the current
portion of MEI's accounts receivable relating to certain insurance premiums due
from one or more shareholders of MEI and any other Excluded Properties as
permitted pursuant to ss8(c); and (v) a payment to GCM to terminate his existing
consulting contract with MEI. Actual Closing Date Net Working Capital shall also
take into account any tax benefits immediately realized by MEI as a result of
the foregoing events, provided that if the tax benefits are not immediately
realized by MEI, such tax benefit amounts shall not adjust Actual Closing Date
Net Working Capital at Closing, but shall adjust Actual Closing Date Net Working
Capital when realized by MEI or PPC (including adjustments in periods following
the Closing) and shall then be paid to the Selling Shareholders. Any adjustments
based on net working capital shall not give effect to (i) any intercompany
transfers of assets or (ii) any reclassification of Citgo or McLane borrowings
or rebates to current liabilities on the Final Balance Sheet.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, liabilities,
obligations, taxes, liens, losses, expenses and fees, including court costs and
reasonable attorneys' fees and expenses.
2
<PAGE>
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Sec. 1504.
"Applicable Rate" means the prime rate of interest published from time
to time in The Wall Street Journal.
"Base Net Working Capital" means $7,241,237.
"Business" means the ownership and operation of the HandyWay Food
Stores convenience store chain.
"Buyer" has the meaning set forth in the preface above.
"Capital Expenditures" means all items of MEI that constitute capital
expenditures under GAAP and with no change in MEI's capitalization policies and
practices, with respect to (1) stores planned or under construction but not
opened as of July 1, 1998 (exclusive of Store #5115) and (2) store and gas
remodeling expenditures, to the extent such expenditures are included in the
budget provided to Buyer by MEI and attached hereto as Exhibit A; provided that
all such items are actually incurred and paid between January 1, 1998 and
Closing.
"Cash" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"CI Real Property" has the meaning set forth in the recitals above.
"Circle Investments" has the meaning set forth in the preface above.
"Class A Common Stock" means the Common Stock, Class A, par value $0.01
per share, of MEI.
"Class B Common Stock" means the Common Stock, Class B, par value $0.01
per share, of MEI.
"Closing" has the meaning set forth in Section 2(c) below.
"Closing Date" has the meaning set forth in Section 2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock Selling Shareholders" means Thomas A. Miller and Joseph
E. Miller.
3
<PAGE>
"Confidential Information" means any information concerning the
businesses and affairs of MEI, PPC or the Sellers that is not already generally
available to the public.
"Disclosure Schedule" has the meaning set forth in Section 3(a) below.
"Draft Closing Date Financial Material" has the meaning set forth in
Section 2(f)(i) below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement that is an Employee Pension
Benefit Plan, (b) qualified retirement plan or arrangement that is an Employee
Pension Benefit Plan, (c) Employee Welfare Benefit Plan or (d) any other
material employee benefit plan, program, arrangement or payroll practice,
including, without limitation, any severance pay, sick leave, vacation pay,
salary continuation, bonus, restricted stock, stock option, stock purchase, or
stock appreciation rights plan, program, arrangement or payroll practice (but
specifically excluding any workers' compensation insurance or similar program).
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Sec.
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Sec.
3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and the Resource Conservation and
Recovery Act of 1976, each as amended, together with all other federal, state
and local laws and regulations concerning pollution or protection of the
environment, or health and safety, including laws and regulations relating to
solid wastes, emissions, discharges, releases or threatened releases of
pollutants, contaminants, petroleum, petroleum-based products, asbestos, PCBs,
or chemical, industrial, hazardous, or toxic materials or wastes into ambient
air, surface water, ground water or lands or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, or chemical, industrial,
hazardous or toxic materials or wastes.
"Estimated Closing Date Net Working Capital" has the meaning set forth
in Section 2(e)(iii) below.
"Excluded Properties" means that real and personal property set forth
in Section 1 of the Disclosure Schedule, as well as all obligations and
liabilities related thereto.
"Final Balance Sheet" means a combined balance sheet prepared by MEI
and reviewed by Arthur Andersen LLP and reviewed by Deloitte & Touche based upon
(i) an audited balance sheet of MEI and (ii) an unaudited balance sheet of PPC,
each as of the Closing Date and prepared in accordance with Section 2(f) below.
"Financial Statements" has the meaning set forth in Section 4(g) below.
4
<PAGE>
"GAAP" means United States generally accepted accounting principles
consistently applied.
"GCM" has the meaning set forth in the recitals above.
"Governmental Body" means any foreign, federal, state, local or other
governmental authority or regulatory body.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 11(d) below.
"Indemnifying Party" has the meaning set forth in Section 11(d) below.
"Knowledge" means (i) with respect to a Selling Shareholder, the actual
knowledge of Selling Shareholders based on a reasonable inquiry of the executive
officers or partners of MEI, PPC, Miller Brothers and Circle Investments and of
other employees of MEI and PPC that are reasonably believed to be responsible
for such area of inquiry, (ii) with respect to a Seller other than a Selling
Shareholder, the knowledge of such Seller based on a reasonable inquiry of the
executive officers or partners of Miller Brothers or Circle Investments, and of
other employees of Miller Brothers or Circle Investments that are reasonably
believed to be responsible for such area of inquiry, and (iii) with respect to
Buyer, the knowledge of Buyer's executive officers.
"Lines of Credit" means the following existing three extensions of
credit to MEI, collectively: (i) the $5,000,000 line of credit from Nations Bank
N.A.; (ii) the $4,000,000 revolving credit facility from SouthTrust Bank, N.A.;
and (iii) the $4,200,000 master loan from SouthTrust Bank, N.A. (as the same may
be expended or renewed from time to time on substantially similar terms with no
prohibition on termination by MEI).
"Material Adverse Effect" means any matters, circumstances or
occurrences resulting, individually or in the aggregate, in a material adverse
effect (i) with respect to matters relating to MEI and/or PPC, on the business,
operations, assets, financial condition or results of operations of MEI and PPC,
taken as a whole, (ii) with respect to matters relating to Circle Investments,
on the CI Real Property, (iii) with respect to matters relating to Miller
Brothers, on the MB Real Property or (iv) in all cases, on the Business.
"Material Survey Matter" means a matter depicted on a survey but not
disclosed on the Disclosure Schedules that would reasonably be expected to cost
in excess of $25,000 to cure and: (i) would, after Closing, have a material
adverse effect upon Buyer's ability to continue the current use of the parcel or
leasehold; or (ii) reflects a store building or gas island not being located
within the boundary of the surveyed parcel. The following shall not be deemed a
Material Survey Matter: (x) public utility overhead power line encroachments;
(y) fence, sign and pavement encroachments onto the insured property or onto
adjoining property to the extent such encroachments lie within 24 inches of the
boundary of the insured property; and (z) unrecorded and implied dedications of
road right-of-ways under Section 95.361 Florida Statutes.
5
<PAGE>
"MB Real Property" has the meaning set forth in the recitals above.
"MEI" has the meaning set forth in the recitals above.
"MEI Real Property" has the meaning set forth in Section 4(k)(i).
"MEI Share" means any share of the Class A Common Stock, Class B Common
Stock or Preferred Stock.
"Miller Brothers" has the meaning set forth in the preface above.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(g)
below.
"Most Recent Financial Statements" has the meaning set forth in Section
4(g) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"Permits" has the meaning specified in Section 4(s).
"Person" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"PPC" has the meaning set forth in the recitals above.
"PPC Most Recent Financial Statements" has the meaning as set forth in
Section 5(g).
"PPC Most Recent Fiscal Year End" has the meaning as set forth in
Section 5(g).
"PPC Real Property" has the meaning as set forth in Section 5(k).
"PPC Share" means any share of the Common Stock, par value $1.00 per
share, of PPC.
"Preferred Stock" means the Preferred Stock, par value $10.00 per
share, of MEI.
"Preliminary Purchase Price" has the meaning set forth in Section 2(b)
below.
"Purchase Price" has the meaning set forth in Section 2(g) below.
6
<PAGE>
"Purchase Price Adjustment Allocable Portion" means with respect to the
following Common Stock Selling Shareholders the following percentages:
Common Stock Selling Shareholder Percentage
-------------------------------- ----------
Thomas A. Miller 50%
Joseph E. Miller 50%
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
claim, charge or other security interest, other than (a) mechanic's,
materialmen's and similar liens, (b) liens for taxes not yet due and payable or
for taxes that the taxpayer is contesting in good faith through appropriate
proceedings, and (c) liens securing rental payments under capital lease
arrangements.
"Seller" has the meaning set forth in the preface above.
"Sellers' Representative" means Thomas A. Miller.
"Selling Shareholder" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tax" means any federal, state, local, or foreign income, payroll, real
estate, tangible personal property, sales, use or other excise tax or other tax
or similar governmental charge of any kind plus any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto.
"Third Party Claim" has the meaning set forth in Section 11(d) below.
2 Purchase and Sale of MEI Shares, CI Real Property and MB Real
Property.
(a) Basic Transaction.
(i) MEI Shares. On and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from each of
Selling Shareholders, and each of Selling Shareholders agrees to sell
to Buyer, all of his or its MEI Shares for the consideration specified
in this Section 2.
7
<PAGE>
(ii) CI Real Property. On and subject to the terms
and conditions of this Agreement, Buyer agrees to purchase from Circle
Investments, and Circle Investments agrees to sell and convey to Buyer
or its designee, all of Circle Investments' interests in the CI Real
Property for the consideration specified in this Section 2.
(iii) MB Real Property. On and subject to the terms
and conditions of this Agreement, Buyer agrees to purchase from Miller
Brothers, and Miller Brothers agrees to sell and convey to Buyer or its
designee, all of Miller Brothers' interests in the MB Real Property for
the consideration specified in this Section 2.
(b) Preliminary Purchase Price. Buyer agrees to pay to Sellers
at the Closing $82,000,000.00 (the "Preliminary Purchase Price"), as adjusted
herein, by delivery of (i) $3,000,000.00 deposited by Buyer with SunTrust Bank,
N.A. as escrow agent pursuant to an escrow agreement in form and substance
satisfactory to Buyer and Sellers' Representative that provides for one-third of
such escrowed funds to be released on each of the first and second anniversary
of the Closing Date and one-third of such escrowed funds to be released on the
fourth anniversary of the Closing Date (provided that the funds subject to the
escrow during the final year of the escrow will be available to satisfy an
indemnification claim only under a portion of Section 12(a)(ii)) (the "Escrow
Agreement") and (ii) cash for the balance of the Preliminary Purchase Price
payable by wire transfer or delivery of other immediately available funds as
directed in writing by Sellers' Representative (consistent with the allocation
set forth herein). The Preliminary Purchase Price shall be allocated among
Sellers as set forth in Section 2(b) of the Disclosure Schedule (the "Allocation
Schedule"). Each of Buyer and Seller shall sign and timely submit all necessary
forms (including IRS Form 8594) to report the transactions contemplated hereby
for federal and state Tax purposes in accordance with the Allocation Schedule,
and shall not take any position for Tax purposes inconsistent therewith.
Consistent with the Allocation Schedule, Buyer and Seller shall allocate the
Purchase Price among the individual MB Real Properties and the individual CI
Real Properties in accordance with their fair market values as Buyer shall
determine, subject to the reasonable agreement of Seller's Representative;
provided that Buyer and Seller's Representative shall mutually agree on the
allocation of Purchase Price to those stores set forth on Schedule 2(b).
(c) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Holland &
Knight LLP, in Tampa, Florida, commencing at 10:00 a.m. local time on the later
of January 28, 1999 or, the first Thursday following the satisfaction or waiver
of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such other date as
Buyer and Sellers' Representative may mutually determine (the "Closing Date").
The Closing shall be deemed effective as of the closing of business on the
Closing Date.
(d) Deliveries at the Closing. At the Closing, (i) Sellers
will deliver to Buyer the various certificates, instruments, and documents
referred to in Section 10(a) below, (ii) Buyer will deliver to Sellers the
various certificates, instruments, and documents referred to in Section 10(b)
below, (iii) each
8
<PAGE>
of Selling Shareholders will deliver to Buyer stock certificates representing
all of his or its MEI Shares, endorsed in blank or accompanied by duly executed
assignment documents, and (iv) Buyer will deliver to each of Sellers and the
escrow agent under the Escrow Agreement, as applicable, the consideration
specified in Section 2(b) above and Section 2(e) below.
(e) Adjustment to Preliminary Purchase Price for Certain
**** and Estimated Closing Date Net Working Capital.
(i) As an additional part of the Preliminary
Purchase Price for the purchase of the MEI Shares. Buyer shall pay the
Common Stock Selling Shareholders an additional amount equal to the
amount of the estimated **** of MEI. At least ten (10) business days
prior to the Closing Date, Sellers' Representative shall deliver to
Buyer a good faith written determination of the **** of MEI made from
and including January 1, 1998 through the Closing Date, together with
reasonably detailed supporting documentation showing that such amounts
were actually incurred and paid in such period, which shall be subject
to Buyers reasonable reviews and reasonable approval. At Closing, Buyer
shall pay the amounts set forth in such reasonably approved written
determination for MEI to the Common Stock Selling Shareholders, in
proportion to their Purchase Price Adjustment Allocable Portion.
(ii) As an additional part of the Preliminary
Purchase Price for the purchase of the MEI Shares, Buyer shall pay the
Common Stock Selling Shareholders an additional $10,619,788. The
Preliminary Purchase Price shall be further adjusted in accordance with
this ss 2(e)(ii) in order to increase the Purchase Price if Actual
Closing Date Net Working Capital is greater than the Base Net Working
Capital and to decrease the Purchase Price if the Actual Closing Date
Net Working Capital is less than Base Net Working Capital, in each
instance as calculated in accordance with ss 2(g). At least ten (10)
business days prior to the Closing Date, Seller's Representative shall
deliver to Buyer a good faith written estimate of the Actual Closing
Date Net Working Capital (the "Estimated Closing Date Net Working
Capital"), which shall be subject to Buyer's reasonable review and
reasonable approval. The Selling Shareholders shall provide supporting
documentation reasonably requested by Buyer in connection with such
review and approval. If the Estimated Closing Date Net Working Capital
is more positive than Base Net Working Capital Buyer shall pay such
excess to Common Stock Selling Shareholders at Closing as an additional
amount of the Preliminary Purchase Price in proportion to their
Purchase Price Adjustment Allocable Portion. If the Estimated Closing
Date Net Working Capital is less than Base Net Working Capital, the
shortfall amount shall reduce the Preliminary Purchase Price of MEI at
Closing.
(f) Preparation of Draft Closing Date Financial Material.
(i) Within 60 days after the Closing Date, Buyer will
prepare and deliver to Common Stock Selling Shareholders, draft written
statements of (A) the Final Balance Sheet, (B) the Actual Closing Date
Net Working Capital as of the close of business on the
* 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."
9
<PAGE>
date immediately preceding the Closing Date, and (C) the Capital
Expenditures of MEI (the statements set forth in (A), (B) and (C),
collectively, the "Draft Closing Date Financial Material"). The Actual
Closing Date Net Working Capital and Final Balance Sheet shall be
determined consistent with the same methods, principles, practices and
procedures as those utilized in preparing the financial statements of
MEI and PPC with respect to its items affecting Actual Closing Date Net
Working Capital, including the same historical methods, principles,
practices and procedures used to estimate reserves, accruals,
allowances, all inventories, income and any adjustments, but only to
the extent that such methods, principles, practices and procedures are
consistent with GAAP. Capital Expenditures shall be determined
consistent with the same methods, principles, practices and procedures
as those utilized by the applicable Party with respect to such items
prior to Closing, to the extent that such methods, principles,
practices and procedures are consistent with GAAP. The calculation of
Actual Closing Date Net Working Capital is being made solely to reflect
certain changes in the financial condition of MEI and PPC as a result
of the operations of MEI and PPC between April 1, 1998 and the Closing
Date inclusive of all transactions and all changes in facts and
circumstances actually occurring between those two dates.
(ii) If Sellers' Representative has any objections to
the Draft Closing Date Financial Material, he will deliver a written
statement describing his objections in reasonable detail to Buyer
within 30 days after receiving the Draft Closing Date Financial
Material. Buyer and Sellers' Representative will use commercially
reasonable efforts to resolve any such objections themselves. If a
final resolution of such objections is not made within 30 days after
Buyer has received the statement of objections, however, Buyer and
Sellers' Representative will select an accounting firm mutually
acceptable to them to resolve any remaining objections. If Buyer and
Sellers' Representative are unable to agree on the choice of an
accounting firm, they will select a nationally-recognized accounting
firm by lot (after excluding the independent accounting firms providing
services to Buyer, Sellers or MEI). The determination of any accounting
firm so selected will be set forth in writing and will be conclusive
and binding upon the Parties absent manifest error. Buyer and Seller's
Representative will jointly revise the Draft Closing Date Financial
Material as appropriate to reflect the resolution of any objections
thereto pursuant to this Section 2(f)(ii). The "Closing Date Statement"
shall mean the draft Closing Date Statement provided by Buyer to
Sellers' Representative pursuant to Section 2(f)(i), together with any
revisions thereto pursuant to this Section 2(f)(ii). The "Final Balance
Sheet" shall mean the draft Financial Balance Sheet provided by Buyer
to Sellers' Representative pursuant to Section 2(f)(i), together with
any revisions, pursuant to this Section 2(f)(ii). The "Capital
Expenditures" shall mean the draft statement of Capital Expenditures
provided by Buyer to Sellers' Representative pursuant to Section
2(f)(i), together with any revisions, pursuant to this Section
2(f)(ii).
(iii) In the event the Parties submit any unresolved
objections to an accounting firm for resolution as provided in Section
2(f)(ii) above, Buyer and Sellers will share responsibility for the
fees and expenses of the accounting firm as follows:
10
<PAGE>
(A) if the accounting firm resolves all of
the remaining objections in favor of Buyer's statement of the
Actual Closing Date Net Working Capital and Capital
Expenditures (the "Low Value"), Selling Shareholders will be
responsible for all of the fees and expenses of the accounting
firm;
(B) if the accounting firm resolves all of
the remaining objections in favor of Selling Shareholders'
statement of the Actual Closing Date Net Working Capital and
Capital Expenditures (the "High Value"), Buyer will be
responsible for all of the fees and expenses of the accounting
firm; and
(C) if the accounting firm resolves some of
the remaining objections in favor of Buyer and other remaining
objections in favor of Sellers (the Actual Closing Date Net
Working Capital and Capital Expenditures so determined is
referred to herein as the "Actual Value"), Selling
Shareholders will be responsible for that fraction of the fees
and expenses of the accounting firm equal to (x) the
difference between the High Value and the Actual Value over
(y) the difference between the High Value and the Low Value,
and Buyer will be responsible for the remainder of the fees
and expenses.
(iv) Buyer will make the work papers and back-up
materials used in preparing the Draft Closing Date Financial Materials,
and the books, records, and the current and then-existing financial
staff of MEI (if then employed by MEI, Buyer or their Affiliates),
available to Selling Shareholders and their accountants and other
representatives at reasonable times and upon reasonable notice at any
time during (A) the review by Selling Shareholders of the Draft Closing
Date Financial Materials and (B) the resolution by the Parties of any
objections thereto.
(g) Adjustment to Preliminary Purchase Price. The Preliminary
Purchase Price will be adjusted by ss 12 (h) and as follows (the Preliminary
Purchase Price as so adjusted is referred the herein as the "Purchase Price"):
(i) If Estimated Closing Date Net Working Capital
was less than Actual Closing Date Net Working Capital, Buyer shall pay
the excess of the Actual Closing Date Net Working Capital over the
Estimated Closing Date Net Working Capital to Common Stock Selling
Shareholders within three business days after the date on which the
Actual Closing Date Net Working Capital is agreed or finally determined
pursuant to ss 2(f). This additional amount shall be allocated among
Common Stock Selling Shareholders in proportion to their Purchase Price
Adjustment Allocable Portion.
(ii) If the Estimated Closing Date Net Working
Capital was greater than Actual Closing Date Net Working Capital,
Common Stock Selling Shareholders shall pay the excess of the Estimated
Closing Date Net Working Capital over the Actual Closing Date Net
Working Capital to Buyer within three business days after the date on
which the Actual Closing Date Net Working Capital is agreed or finally
determined pursuant to ss 2(f). Common Stock Selling Shareholders shall
be obligated to make such payment in proportion to their Purchase
Price Adjustment Allocable Portion.
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(iii) If the **** of MEI are more than the amount
paid to Common Stock Selling Shareholders at Closing pursuant to ss
2(e)(ii), Buyer shall pay such excess to Common Stock Selling
Shareholders within three (3) days after the date on which such ****
are agreed or finally determined. The additional amount shall be
allocated amongst Common Stock Selling Shareholders in proportion to
their Purchase Price Adjustment Allocable Portion.
(iv) If the **** of MEI are less than the amount
paid to Common Stock Selling Shareholders at Closing pursuant to ss
2(e)(ii). Common Stock Selling Shareholders shall pay such deficit to
Buyer within three (3) days after the date on which such **** are
agreed or finally determined. Common Stock Selling Shareholders shall
be obligated to make such payment in proportion to their Purchase Price
Adjustment Allocable Portion.
(v) The Preliminary Purchase Price shall be reduced
at Closing, and the Purchase Price shall be reduced, by the amount of
all indebtedness for borrowed money of MEI and PPC existing at Closing
(including any prepayment penalties or termination fees), which
indebtedness shall specifically exclude (i) the capital leases of MEI
and PPC existing at Closing and that are specifically identified as
such in the Disclosure Schedule, (ii) the remaining amounts owed to
Citgo Petroleum Corporation under the Promissory Note dated March 31,
1997, (iii) the remaining amounts owed to McLane Company, Inc., (iv)
any new borrowings from Citgo Petroleum Corporation or McLane Company,
Inc. made on or after April 1, 1998, and (v) the unamortized liability
of Sellers to Citgo Petroleum Corporation pursuant to MEI's Distributor
Franchise Agreement with Citgo Petroleum Corporation and all agreements
and contracts related thereto (in the event that Buyer decides to
attempt to terminate or otherwise revise any such agreement).
(vi) Any amounts payable pursuant to this ss 2(g)
shall bear interest from and including the Closing Date to but
excluding the date of payment at the Applicable Rate.
3 Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties Concerning Sellers. Each
Common Stock Selling Shareholder represents and warrants to Buyer jointly and
severally that the statements contained in this Section 3(a) are correct and
complete as of the date of this Agreement, except as set forth in the disclosure
schedule delivered by Sellers to Buyer on the date hereof and initialed by Buyer
and Sellers' Representative (the "Disclosure Schedule").
(i) Organization of Certain Sellers. If Seller is a
corporation, partnership or trust, such Seller is duly organized,
validly existing, and in good standing under the laws of the
jurisdiction governing it, with all requisite power and authority to
own, operate and
* 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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lease its properties and to carry on its business as it is now being
conducted, and is qualified or licensed to do business and is in good
standing in each jurisdiction set forth in Section 3(a) of the
Disclosure Schedule, which are all of the jurisdictions in which the
failure to be so qualified or licensed could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(ii) Authorization of Transaction. Each Seller has
full power and authority to execute and deliver this Agreement and each
other agreement contemplated hereby and to perform his or its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereunder and thereunder. This Agreement constitutes the
valid and legally binding obligation of each Seller, enforceable in
accordance with its terms and conditions. No Seller need give any
notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency or any third party
in order to consummate the transactions contemplated by this Agreement.
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, law, injunction, judgment, order, decree, ruling,
writ, charge, or other restriction of any government, governmental
agency, or court to which a Seller is subject and, if a Seller is an
entity, any provision of its organic documents or (B) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any approval, consent or
notice or give rise to any right of first refusal (or similar right)
under any agreement, contract, lease, license, instrument, indenture,
mortgage, lien, order, judgment, ordinance, regulation, decree, permit,
franchise, or other arrangement to which any Seller is a party or by
which he or it is bound or to which any of his or its assets is
subject, except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation or failure to
give notice would not have a material adverse effect on the applicable
Seller.
(iv) Brokers' Fees. No Seller has any liability or
obligation to pay any fees or commissions to any broker, finder,
investment banker, agent or other intermediary with respect to the
transactions contemplated by this Agreement for which Buyer, MEI, PPC
or the Business could become liable or obligated.
(v) MEI Shares. All of the MEI Shares have been duly
authorized and are validly issued and outstanding, fully paid and
nonassessable. Each Selling Shareholder holds of record, owns
beneficially and has good title to the number of MEI Shares set forth
next to his or its name in Section 4(b) of the Disclosure Schedule,
free and clear of any restrictions on transfer (other than restrictions
under the Securities Act and state securities laws), taxes, Security
Interests (without giving effect to the exceptions contained in the
defined term "Security Interests"), options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands that shall
survive Closing. No Selling Shareholder is a party to any option,
warrant, purchase right, preemptive right, subscription right or
similar rights of any
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kind that are convertible into or exchangeable for MEI Shares or other
contract or commitment that could require such Selling Shareholder to
sell, transfer, or otherwise dispose of any capital stock of MEI (other
than this Agreement) that shall survive Closing. No Selling Shareholder
is a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of MEI
that will survive Closing. All dividends, distributions and redemptions
made or to be made with respect to the shares of MEI capital stock at
or prior to Closing have complied or will comply with applicable law.
(vi) PPC Shares. All of the PPC Shares have been duly
authorized and are validly issued and outstanding, fully paid and
nonassessable. GCM currently holds of record, owns beneficially and has
good title to all of the issued and outstanding PPC Shares, free and
clear of any restrictions on transfer (other than restrictions under
the Securities Act and state securities laws), taxes, Security
Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. GCM is not a party to any option,
warrant, purchase right, or other contract or commitment that could
require GCM to sell, transfer, or otherwise dispose of any capital
stock of PPC that will survive Closing. GCM is not a party to any
voting trust, proxy, or other agreement or understanding with respect
to the voting of any capital stock of PPC that will survive Closing.
All dividends, distributions and redemptions made or to be made with
respect to the shares of PPC capital stock at or prior to Closing have
complied or will comply with applicable law.
(b) Representations and Warranties of Buyer. Buyer represents
and warrants to Sellers that the statements contained in this Section 3(b) are
correct and complete as of the date of this Agreement, except as set forth in
Buyer's disclosure schedule delivered by Buyer to Sellers on the date hereof and
initialed by Sellers' Representative and Buyer (the "Buyers Disclosure
Schedule").
(i) Organization of Buyer. Buyer is a corporation
duly organized, validly existing, and in good standing under the laws
of the State of Florida with all requisite power and authority to own,
operate and lease its properties and to carry on its business as it is
now being conducted, and is qualified to or licensed to do business and
is in good standing in each jurisdiction set forth in Section 3(b) of
the Buyer's Disclosure Schedule, which are all of the jurisdictions in
which the failure to be so qualified or licensed could reasonably be
expected, individually or in the aggregate, to have a material adverse
effect on the business operations, assets, financial condition or
results of operations of Buyer.
(ii) Authorization of Transaction. Buyer has full
corporate power and authority to execute and deliver this Agreement and
each other agreement contemplated hereby and to perform its obligations
hereunder and thereunder and to consummate the transactions
contemplated hereunder and thereunder. This Agreement constitutes the
valid and legally binding obligation of Buyer, enforceable in
accordance with its terms and conditions. Buyer need not give any
notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency or any other
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third party in order to consummate the transactions contemplated by
this Agreement except for the filing of a pre-merger notification
report under the HSR Act.
(iii) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, law, injunction, judgment, order, decree, ruling,
writ, charge, or other restriction of any government, governmental
agency, or court to which Buyer is subject or any provision of its
charter or bylaws or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any consent, approval or notice or give rise to any right of
first refusal (or similar right) under any agreement, contract, lease,
license, instrument, indenture, mortgage, lien, order, judgment,
ordinance, regulation, decree, permit, franchise or other arrangement
to which Buyer is a party or by which it is bound or to which any of
its assets is subject, except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation or
failure to give notice would not have a material adverse effect on the
business operations, assets, financial condition or results of
operation of Buyer.
(iv) Brokers' Fees. Buyer has no liability or
obligation to pay any fees or commissions to any broker, finder,
investment banker, agent or other intermediary with respect to the
transactions contemplated by this Agreement for which any Seller could
become liable or obligated.
(v) Investment.
(A) Buyer, by reason of its business and
financial experience, is capable of evaluating the risks and
merits of purchasing the MEI Shares and of protecting its own
interests in connection with such purchase.
(B) Buyer is not acquiring MEI Shares with a
view to or for sale in connection with any distribution
thereof in violation of the Securities Act. Buyer acknowledges
that the MEI Shares have not been registered under the
Securities Act or the securities laws of any state.
(C) Buyer has had an opportunity to ask
questions and receive answers from the other Parties and the
persons involved in managing the business and affairs of MEI,
PPC, Miller Brothers and Circle Investments regarding the
terms and conditions of acquisition of the MEI Shares and
other transactions contemplated hereby and regarding the
proposed business, financial affairs and other aspects of MEI,
PPC, Miller Brothers and Circle Investments and has further
had the opportunity to obtain the information that Buyer deems
necessary to evaluate its investment in those shares and enter
into the transactions contemplated hereby. Buyer is relying
solely upon its own due diligence and independent
investigation of the assets, proposed business, financial
affairs and other aspects of MEI, PPC, Miller
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<PAGE>
Brothers and Circle Investments, and upon the express
representations, warranties and covenants set forth in this
Agreement, and any of the conveyance documents contemplated
hereby, and not any written or oral information provided or
made available to Buyer in connection with this transaction
(other than that expressly set forth in this Agreement). Any
investigation by Buyer shall not affect in any manner the
representations and warranties set forth herein except as
otherwise expressly provided in Section 11(b)(i)(y).
(vi) Financing. Buyer has received a letter from
Canadian Imperial Bank of Commerce, First Union National Bank and
Nationsbank N.A. stating that they will use their best efforts to
organize a syndicate of lenders to provide financing sufficient to
consummate the transactions contemplated hereby and to pay all related
fees and expenses. Buyer has provided Sellers' Representative with a
true and complete copy of such letter.
4 Representations and Warranties Concerning MEI. Each Common Stock
Selling Shareholder represents and warrants to Buyer jointly and severally that
the statements contained in this Section 4 are correct and complete as of the
date of this Agreement, except as set forth in the Disclosure Schedule.
(a) Organization, Qualification and Corporate Power. MEI is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Florida, with all requisite corporate power and authority
to own, operate and lease its properties and to carry on its business as it is
now being conducted, and is qualified or licensed to do business and is in good
standing in each jurisdiction set forth in Section 4(a) of the Disclosure
Schedule, which are all of the jurisdictions in which the failure to be so
qualified or licensed could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Section 4(a) of the Disclosure
Schedule lists the directors and officers of MEI. The Buyer has received true
and complete copies of the charter and bylaws of MEI.
(b) Capitalization. The entire authorized capital stock of MEI
at Closing will consist of (i) 2,500,000 shares of Class A Common Stock and
2,500,000 shares of Class B Common Stock, of which 245,002 shares of Class A
Common Stock will be issued and outstanding at the Closing and (ii) 760,000
shares of Preferred Stock, of which 600,000 shares will be issued and
outstanding at the Closing. All of the issued and outstanding MEI Shares have
been duly authorized, are validly issued, fully paid, and nonassessable, and
will be held of record at Closing by the respective Selling Shareholders as set
forth in Section 4(b) of the Disclosure Schedule. There are no outstanding or
authorized options, warrants, purchase rights, preemptive rights, subscription
rights, securities or similar rights of any kind that are convertible into or
exchangeable for capital stock of MEI, or other contracts or commitments that
could require MEI to issue, sell, or otherwise cause to become outstanding any
of its capital stock except as set forth in Section 4(b) of the Disclosure
Schedule. Except as set forth on Section 4(b) of the Disclosure Schedule there
are no voting trusts, proxies or other agreements or understandings with respect
to the voting of any capital stock of MEI. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to MEI. All dividends, distributions and redemptions made or
to be made with respect to the capital stock of MEI at or prior to Closing have
complied or will comply with applicable law.
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(c) Authority; Noncontravention. MEI has full corporate power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of MEI, enforceable in accordance with its terms and conditions.
Neither the execution and the delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, will (i) violate any constitution,
statute, regulation, rule, law, injunction, judgment, order, decree, ruling,
writ, charge, or other restriction of any government, governmental agency, or
court to which MEI is subject or any provision of the charter or bylaws of MEI
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any consent, approval or notice or give rise to
any right of first refusal (or similar right) under any agreement, contract,
lease, license, instrument, indenture, mortgage, lien, order, judgment,
ordinance, regulation, decree, permit, franchise or other arrangement to which
MEI is a party or by which it is bound or to which any of its assets is subject
(or result in the imposition of any Security Interest upon any of its assets),
except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, failure to give notice or Security
Interest would not have a Material Adverse Effect or as set forth in Section
4(c) of the Disclosure Schedule. MEI does not need to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency or other third party in order for the Parties
to consummate the transactions contemplated by this Agreement, except where the
failure to give notice, to file, or to obtain any authorization, consent, or
approval would not have a Material Adverse Effect or as set forth in Section
4(c) of the Disclosure Schedule.
(d) Brokers' Fees. MEI has no liability or obligation to pay
any fees or commissions to any broker, finder, investment banker, agent or other
intermediary with respect to the transactions contemplated by this Agreement for
which Buyer, MEI, PPC or the Business could become liable or obligated.
(e) Title to Tangible Assets. MEI has good title to, a valid
leasehold interest in, or the legal right to use, the material tangible personal
property of every kind and character used in, necessary for or relating to the
Business (collectively, the "MEI Assets"). The MEI Assets, together with the MEI
Real Property, the leased real property identified in Section 4(k)(ii) of the
Disclosure Schedule, the MB Real Property, the CI Real Property and the MEI
Trademarks, constitute all assets necessary for the conduct of the Business.
Except as set forth in Section 4(e) of the Disclosure Schedule and for tangible
personal property provided to MEI for use to store and display goods and
services held for sale, none of the MEI Assets are subject to any Security
Interest that shall survive Closing. ALL SUCH ASSETS ARE BEING TRANSFERRED IN
THEIR "AS IS" CONDITION WITH ALL FAULTS. OTHER THAN THE REPRESENTATIONS MADE IN
THIS Section 4(E), NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY
NATURE IS BEING MADE BY ANY SELLER WITH RESPECT TO SUCH MEI ASSETS, INCLUDING,
BUT NOT LIMITED TO, SUCH MEI ASSETS' MERCHANTABILITY, DESIGN OR USE FOR A
PARTICULAR PURPOSE.
(f) Subsidiaries. MEI has no Subsidiaries.
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(g) Financial Statements. Attached hereto as Exhibit B are the
following financial statements of MEI (collectively the "MEI Financial
Statements"): (i) audited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal years ended March
27, 1996, April 2, 1997, and April 1, 1998 (the "Most Recent Fiscal Year End");
and (ii) unaudited balance sheets and statements of income, changes in
stockholders' equity, and cash flow (the "MEI Most Recent Financial Statements")
as of and for the six months ended September 30, 1998. The MEI Financial
Statements (including the notes thereto) (i) were prepared in accordance with
the books and records of MEI, (ii) were prepared in accordance with MEI's
historic accounting policies and principles, (iii) are in accordance with GAAP
applied on a consistent basis, and (iv) present fairly the financial condition
and results of operations of MEI at the dates and for the periods covered
thereby; provided, however, that the MEI Most Recent Financial Statements are
subject to normal year-end adjustments and lack footnotes and other presentation
items required or permitted by GAAP. Except as set forth in Section 4(g) of the
Disclosure Schedule, MEI has no unamortized liabilities for purchase rebates or
purchase allowances, including, under any MEI Contract with any of MEI's
suppliers.
(h) Events Subsequent to Most Recent Fiscal Year End. Since
the Most Recent Fiscal Year End, MEI has conducted its business in the Ordinary
Course of Business and there has not been any:
(i) material adverse change in the financial
condition, assets, liabilities, operations or results of operations of
MEI taken as a whole;
(ii) addition to or modification of Employee Benefits
Plans, increase in the compensation of officers or employees (including
any such increase pursuant to any bonus, pensions, profit sharing or
other plan or commitment) or granting of any severance or termination
pay, except for increases in compensation with respect to non-officer
employees in the Ordinary Course of Business or as required by law or
any existing agreement identified in Section 4(p) of the Disclosure
Schedule, or granting of any bonus, incentive compensation, award or
other like benefit to any officer or employee except in accordance with
plans or arrangements disclosed in Section 4(p) of the Disclosure
Schedule;
(iii) sale, assignment or transfer of any of the
material assets of MEI;
(iv) cancellation of any indebtedness owed to MEI in
an aggregate amount greater than $100,000, or waiver of any rights of
similar value to MEI relating to any of its business activities or
properties;
(v) incurrence of indebtedness for borrowed money by
MEI or any commitment to incur indebtedness for borrowed money entered
into by MEI, or any loans made or agreed to be made by MEI, or the
incurrence of any Security Interest by MEI, material singly or in the
aggregate, or failure to repay any material obligation of MEI when due;
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(vi) material amendment, cancellation or termination
of any MEI Contract (as defined in Section 4(m)) or license or permit
material to MEI;
(vii) change in accounting methods, principles or
practices by MEI materially affecting its assets, liabilities, results
of operations or business or material revaluation by MEI of any of its
assets, including without limitation, any material write-offs, material
increases in any reserves or any write-up of the value of inventory,
property, plant, equipment or any other asset;
(viii) material damage, destruction or loss to any
store or other facility maintained by MEI or any other material asset
of MEI and resulting in a loss, whether or not covered by insurance, in
excess of $100,000;
(ix) material change in MEI's maintenance,
remediation, advertising, expansion, capital expenditure or inventory
programs or practices;
(x) declaration, setting aside or payment of any
dividend or other distribution or payment (whether in cash, stock or
property) with respect to the capital stock or other equity securities
of MEI or any redemption, purchase or other acquisition of any of the
securities of MEI, or any other payment to any stockholder of MEI in
its capacity as a stockholder; or issuance by MEI of, or commitment by
it to issue, any capital stock or other equity securities or
obligations or any securities convertible into or exchangeable or
exercisable for capital stock or other equity interests; or
(xi) incurrence of other single or series of related
liabilities involving $250,000 or more, or any increase or change in
any assumptions underlying, or methods of calculating, any bad debt,
contingency or other reserves.
(i) Legal Compliance. MEI has complied, and all of MEI's
assets are in compliance, with all, and have no liability under any, applicable
laws, statutes and regulations (including, without limitation, any applicable
franchise, building, zoning or labor relations rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings and charges thereunder, but
excluding any Environmental Laws) of federal, state, local and foreign
governments (and all agencies thereof), except where the failure to comply would
not have a Material Adverse Effect.
(j) Tax Matters.
(i) MEI has timely filed all Tax Returns that it was
required to file, and has paid all Taxes shown thereon. All of the Tax
Returns are true, current and complete.
(ii) Section 4(j) of the Disclosure Schedule lists
all income Tax Returns filed with respect to MEI for taxable periods
ended on or after December 31, 1993, indicates those income Tax Returns
that have been audited, and indicates those income Tax Returns that
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currently are the subject of audit. Selling Shareholders have delivered
to Buyer correct and complete copies of all federal and state income
Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by MEI since December 31, 1993.
(iii) MEI has not waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to
an Tax assessment or deficiency.
(iv) MEI is not a party to any income Tax allocation
or sharing agreement.
(v) Other than ad valorem property tax matters and an
oral notice of a likely Florida sales tax audit, there is no action,
suit, investigation, audit, claim or assessment pending, proposed or to
Selling Shareholders' Knowledge threatened with respect to Taxes of
MEI.
(vi) All monies required to be withheld by MEI from
all persons properly characterized as employees for federal, state or
local tax purposes, including income Taxes and social security and
other payroll Taxes, have been collected or withheld as required by
applicable law, and either paid to the respective taxing authorities,
set aside in accounts for such purpose or accrued, reserved against and
entered upon the books and records of MEI and, to the extent so set
aside, accrued or received, taken into account in determining Actual
Closing Date Net Working Capital.
(vii) Following the Closing Date, pursuant to any
agreement or arrangement entered into by MEI on or prior to the Closing
Date, neither MEI nor Buyer will be obligated to make a payment to an
individual that would be a "parachute payment" to a "disqualified
individual" as those terms are defined in Section 280G of the Code,
without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
(viii) All deficiencies asserted or assessments made
as a result of any examination of the Tax Returns referred to in (i)
have been paid in full, other than those being contested in good faith
through appropriate proceedings.
(ix) There are no liens for Taxes upon the assets of
MEI except liens relating to current Taxes not yet due.
(x) Within the last ten years, MEI has not been a
member of any group of corporations filing as a consolidated group for
federal or state income tax purposes, and MEI has not had any direct or
indirect ownership in any corporation, partnership, joint venture or
other entity other than the interest in PPC that will be acquired
immediately after the Closing Date.
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(xi) The accruals for deferred Taxes reflected in the
Financial Statements are adequate to cover any deferred Tax liability
of MEI determined in accordance with GAAP through the date thereof.
(xii) Within the last ten years, no claim has been
made by a Tax authority in a jurisdiction where MEI has never paid
Taxes or filed Tax Returns asserting that MEI is or may be subject to
Taxes assessed by such jurisdiction.
(k) Real Property.
(i) Other than the Excluded Properties, Section
4(k)(i) of the Disclosure Schedule lists each parcel of real property
in which MEI has, or at Closing shall have, a fee interest (the "MEI
Real Property"). With respect to each such parcel of MEI Real Property,
except for matters that would not have a Material Adverse Effect and
the matters set forth in Schedule 10(a)(xv) hereof:
(A) there are no leases or subleases
granting to any Person the right to use or occupancy of any
portion of the MEI Real Property that shall survive Closing;
and
(B) there are no outstanding options or
rights of first refusal to purchase any parcel of MEI Real
Property, or any portion thereof or interest therein, that
shall survive Closing.
(ii) Section 4(k)(ii) of the Disclosure Schedule
lists all real property leased or subleased to MEI that shall survive
Closing. Buyer has been delivered correct and complete copies of the
leases and subleases listed in Section 4(k)(ii) of the Disclosure
Schedule (as amended to date). Except for matters that would not have a
Material Adverse Effect, each lease and sublease listed in Section
4(k)(ii) of the Disclosure Schedule is legal, valid, binding,
enforceable and in full force and effect, MEI is not in default of any
of its obligations thereunder such that the landlord thereunder would
be able to terminate MEI's lease and interest therein as a result
thereof, and, to the Knowledge of each Selling Shareholder, no other
party is in material default of any of its obligations thereunder.
(iii) Section 4(k)(iii) of the Disclosure Schedule
lists the MEI Real Property locations that are currently the subject of
construction.
(l) Intellectual Property. Section 4(l) of the Disclosure
Schedule sets forth a complete list of all material trademarks, trade names,
product identifiers and/or trade dresses of any type whatsoever that are
presently used in the business of MEI, other than such items that identify
products or services of third parties that are sold by MEI in the Ordinary
Course of Business (the "MEI Trademarks"), and all licenses it has with respect
to any intellectual property of a third party used in the business of MEI (other
than shrink-wrap software licenses) and indicates each MEI Trademark that is
registered in the name of MEI on the Principal Register of the United States
Patent
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and Trademark Office. To the Knowledge of each Selling Shareholder, there is no
infringement of the MEI Trademarks by others. To the Knowledge of each Selling
Shareholder, the use of the MEI Trademarks in the business of MEI (as the
business is now being conducted by MEI) does not result in any infringement of
the rights of others. MEI is the sole and legal owner of the MEI Trademarks and
there is no claim by any other person that such other person is the legal owner
of such MEI Trademarks. MEI has not granted any license or right to use any MEI
Trademark to any other person.
(m) Contracts. Section 4(m) of the Disclosure Schedule lists,
whether written or oral, together with all amendments and modifications thereto,
the following agreements and contracts of MEI:
(i) all contracts and agreements, whether or not
fully performed, pursuant to which MEI has since January 1, 1997
acquired or disposed of more than $500,000 worth of its business or
assets;
(ii) all agreements containing (A) covenants not to
compete on the part of MEI or other similar restrictions on the ability
of MEI to engage in its business, (B) rights of first refusal, (C)
exclusive dealing or minimum purchase provisions or (D) prepayment or
termination penalties;
(iii) all notes, mortgages, indentures, letters of
credit, guarantees, performance bonds, security agreements and other
agreements and instruments for lending or borrowing (including assumed
debt) entered into by MEI or pursuant to which any properties or assets
of MEI are pledged or mortgaged as collateral;
(iv) any employment or consulting agreement with any
present or former director, officer or employee of MEI;
(v) all joint venture or partnership agreements to
which MEI is a party or bound;
(vi) all agreements pursuant to which MEI pays
royalties in excess of $25,000 per year;
(vii) all area development agreements, construction
agreements and franchise agreements to which MEI is a party or bound;
(viii) all product or service purchasing and supplier
agreements to which MEI is a party or bound, pursuant to which MEI has
purchased or committed to purchase more than $250,000 of products,
services or supplies during the last year or during the next twelve
(12) months; and
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(ix) any other contracts and agreements of MEI, the
performance of which will involve consideration in excess of $100,000
and are not terminable by MEI without penalty upon not more than 60
days notice.
The foregoing are hereinafter referred to as the "MEI Contracts." Buyer
has been delivered a correct and complete copy of each MEI Contract or other
agreement listed in Section 4(m) of the Disclosure Schedule (as amended to
date). No Seller knows of any material defense to the validity or enforceability
of any MEI Contract. Neither MEI nor any Seller has received written notice that
MEI is in material default and MEI has not materially defaulted under any MEI
Contract. MEI has not waived any material rights under any MEI Contract. MEI has
not received or given notice of any breach or default in connection with any MEI
Contract.
(n) Powers of Attorney. Except for any powers of attorney
contained in any written contracts or other written agreements set forth in the
Disclosure Schedule, there are no outstanding powers of attorney executed on
behalf of MEI that will survive Closing.
(o) Litigation. There is no pending, or to the Knowledge of
the Selling Shareholders, threatened, claim, suit, arbitration proceeding,
governmental (including, without limitation, foreign) proceeding or
investigation or other proceeding of any character against any Seller or MEI or
any of their respective assets that could reasonably be expected to have a
Material Adverse Effect or to prevent, hinder or delay consummation of the
transactions contemplated by this Agreement, declare the same unlawful, or cause
the rescission thereof, and, to the Knowledge of the Selling Shareholders, there
is no basis for any such claim, suit, proceeding or investigation. There are no
judgments, decrees, injunctions or orders of any court or governmental authority
against MEI, any of MEI's assets, or any Seller (that could affect MEI or the
Business) that could reasonably be expected to have a Material Adverse Effect.
(p) Employee Benefits.
(i) Section 4(p) of the Disclosure Schedule lists
each Employee Benefit Plan that MEI maintains or to which MEI
contributes ("MEI Plans"). An arrangement will not fail to be an
Employee Benefit Plan simply because it only covers one individual. For
purposes of this Paragraph (p), the term "MEI" includes any entity that
is aggregated with MEI under Code Section 414.
(ii) Each MEI Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code, and all
other applicable laws.
(iii) All contributions (including all employer
contributions and employee salary reduction contributions) that are due
have been paid to each MEI Plan in a timely manner, and are fully
deductible in the year for which they were paid. All amounts properly
accrued to date as liabilities of MEI under or with respect to each MEI
Plan (including administrative expenses and incurred but not reported
claims) for the current plan year of the
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plan have been recorded on the books of MEI. There will be no liability
of MEI under any insurance policy or similar arrangement procured in
connection with any MEI Plan in the nature of a retroactive rate
adjustment, loss sharing arrangement, or other liability arising wholly
or partially out of events occurring before the Closing Date.
(iv) Each MEI Plan that is an Employee Pension
Benefit Plan has received a determination letter from the Internal
Revenue Service to the effect that it meets the requirements of Code
Sec. 401(a) and nothing has occurred before or since the date of such
determination letter that would have a material adverse effect on such
qualification.
(v) As of the last day of the most recent prior plan
year, the market value of assets under each MEI Plan that is an
Employee Pension Benefit Plan equaled or exceeded the present value of
liabilities thereunder, whether or not they are vested (determined in
accordance with then current funding assumptions).
(vi) Buyer has been delivered current, correct and
complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal Revenue
Service, the two most recent Form 5500 Annual Reports, and all related
trust agreements, insurance contracts, and other funding agreements
that implement each MEI Plan, and any related financial statements,
actuarial reports or audit reports.
(vii) No action, suit, proceeding, hearing, audit, or
investigation with respect to the administration or the investment of
the assets of any MEI Plan (other than routine claims for benefits) or
relating to Qualified Domestic Relations Orders) is pending, and to the
Knowledge of each Seller, no such action, suit, proceeding, hearing,
audit, or investigation has been threatened. No "prohibited
transactions" (within the meaning of Section 406 of ERISA or Code Sec.
4975) has occurred with respect to any MEI Plan.
(viii) MEI does not now and has never in the past
been obligated to contribute to or otherwise participate in an Employee
Pension Benefit Plan subject to Title IV of ERISA.
(ix) MEI has complied in all material respects with
the health care continuation requirements of Part 6 of Title I of
ERISA.
(x) MEI has no obligation under any MEI Plan or
otherwise to provide health or other welfare benefits to any
participant or beneficiary of a participant after such participant's
termination of employment, except as required by Part 6 of Title I of
ERISA.
(xi) The consummation of the transactions
contemplated by this Agreement will not result in the payment of any
amounts or an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any compensation or
benefits payable to or in respect of any present or former employee or
consultant.
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(xii) None of the persons performing services for MEI
have been improperly classified as independent contractors, leased
employees, or as being exempt from the payment of wages for overtime.
(xiii) None of the MEI Plans are part of a Multiple
Employer Welfare Arrangement, as that term is defined in ERISA Section
3(40).
(q) Environmental.
(i) Except where a failure to comply would not have a
Material Adverse Effect, and except as otherwise set forth in
Disclosure Schedule Section 4(q)(ii): (A) MEI and each of the MEI Real
Properties and the properties set forth in Section 4(k)(ii) of the
Disclosure Schedule is in compliance with, and MEI has no liability
(other than to a third party that is not a Governmental Body) under the
Environmental Laws (and no governmental action, suit, proceeding or
hearing has been filed or commenced or threatened against any of them
alleging any such failure to comply or liability), and (B) MEI has
obtained and been in compliance with all of the terms and conditions of
all permits, licenses, and other authorizations that are required under
the Environmental Laws all of which are in full force and effect. To
the Knowledge of each Seller, except for any liability which would not
have a Material Adverse Effect, MEI has no liability under any
Environmental Laws to any third party that is not a Governmental Body.
(ii) A petroleum discharge exceeding applicable
standards under Environmental Laws has occurred at each of the
facilities identified in Section 4(q)(ii) of the Disclosure Schedule.
To the Knowledge of each Seller, no reportable discharge has occurred
at any current Real Property except as identified in Section 4(q)(ii)
of the Disclosure Schedule.
(iii) For each of the facilities identified in
Section 4(q)(ii) of the Disclosure Schedule, MEI, PPC, a Seller or
other Person has qualified the petroleum discharge at such facilities
for state-funded remediation assistance under Section 376.305(6),
Section 376.3071 or Section 376.3072, Florida Statutes, the ("Trust
Funds"), except for the facilities listed on Section 4(q)(iii) of the
Disclosure Schedule whose discharges are being processed for
qualification under Section 376.3072, Florida Statutes. To the
Knowledge of each Seller, all of the applicable requirements under the
Trust Funds for such facilities have been satisfied and there are no
grounds for rescission, withdrawal of coverage or demand for return of
prior payments from any of the Trust Funds. Section 4(q)(ii) of the
Disclosure Schedule lists each MEI Real Property and real property
leased by MEI where a known petroleum discharge has occurred.
(iv) In the last five (5) years, MEI has not: (i)
entered into any outstanding consent decree, compliance order, or
administrative order with respect to the Real Property or any
facilities or operations thereon the future compliance with that would
have a Material Adverse Effect; or (ii) as of the date hereof, received
any notice, complaint or claim from any
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governmental authority alleging violation of or non-compliance with any
Environmental Condition. MEI is not subject to any outstanding consent
order.
(v) Except as otherwise identified in Section
4(q)(ii) of the Disclosure Schedule, there has been no release,
disposal, treatment, storage or presence of any Hazardous Material at,
in, on, under or about the Real Property that could reasonably be
expected to have a Material Adverse Effect.
(vi) MEI has not received any notice, complaint or
claim from any governmental authority that MEI and/or any Real Property
is not in compliance with any applicable Environmental Laws, including
those relating to: (i) the maintenance of records of Hazardous Material
handled at or transported from each Real Property; (ii) reporting,
monitoring, inspections, and compliance with the manifest system for
tracking the movement of Hazardous Material; (iii) operating methods,
techniques, and practices for treating, storing, and disposing of
Hazardous Material; (iv) the location, design, and construction of the
Real Property; (v) contingency plans for minimizing unanticipated
damage from Hazardous Material treatment, storage, or disposal
activities; (vi) maintenance and operation of each Real Property,
including qualifications with respect to ownership, continuity of
operation, personnel training, financial responsibility and closure;
and (vii) RCRA permit requirements.
(vii) Except as set forth on the Disclosure Schedule,
to the Knowledge of each Seller, all of the underground storage tanks
and related piping and dispensers (the "USTs") located at the current
Real Property comply with applicable U.S. Environmental Protection
Agency and Florida Department of Environmental Protection ("FDEP")
requirements set forth in Florida Administrative Code Section 62-761
and such USTs are registered with the FDEP.
(viii) Section 4(q)(viii) of the Disclosure Schedule
discloses all contracts and agreements with third parties for the
assessment and/or remediation of Environmental Conditions at the Real
Properties that will survive the Closing. Sellers have delivered to
Buyer true, correct and complete copies of each of such contracts and
agreements.
(ix) For the purposes of this section, the following
words and phrases shall have the following meanings:
"Environmental Condition" means any
condition relating to the presence, release, disposal, storage or
treatment of Hazardous Materials in, at, on, under or about (i) the
Real Property, or (ii) the environment beyond the Real Property, which
Hazardous Materials migrated or emanated from the Real Property, or
(iii) the disposal of Hazardous Materials at any property.
"Hazardous Material" means any pollutant,
contaminant, toxic substance, hazardous waste, hazardous material,
hazardous substance, petroleum or petroleum
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product, asbestos, polychlorinated biphenyls, and the contents of
underground storage tanks including, without limitation, any such
materials regulated pursuant to any Environmental Law.
"Real Property" means any real property or
"facility" (as defined in the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq. ("RCRA")) currently or formerly owned,
operated, leased or occupied by MEI.
(r) FIRPTA. Each Selling Shareholder is not a foreign Person
and no tax is required to be withheld pursuant to Section 1445 of the Code as a
result of any of the transfers contemplated by this Agreement.
(s) Insurance. Section 4(s) of the Disclosure Schedule sets
forth a list and certain information (including nature of coverage, insurer,
policy number, limits, deductibles and premiums with respect to each policy)
relating to all material policies of insurance maintained, owned or held by MEI
on the date hereof. All of such policies are sufficient for compliance with all
requirements of law and all contracts, leases and other agreements to which MEI
is a party. Such policies are in full force and effect on the date hereof. MEI
has complied with its obligations under each of such insurance policies and has
not failed to give any notice with respect to any material claim thereunder in a
due and timely manner. MEI has made available to Buyer correct and complete
copies of the most recent inspection reports, if any, received from insurance
underwriters and the loss experience for the most recent five years with respect
to each such policy.
(t) Affiliated Transactions. Section 4(t) of the Disclosure
Schedule sets forth all business arrangements, relationships and transactions
involving any of Sellers, their Affiliates or any member of such persons'
immediate family and MEI that are currently in effect, except for the leasing of
real property from CI Real Property or MB Real Property. Except for the Excluded
Properties, none of the Sellers or their Affiliates will own in the aggregate
material assets after the Closing that are currently used in the business of
MEI. MEI is not a party to any agreement or arrangement with any of Sellers,
their Affiliates or any member of such persons' family that is not on an
"arms-length" basis.
(u) Inventory. The value at which the inventory of MEI is
carried on the MEI's most recent balance sheet included in the Financial
Statements reflects the customary inventory valuation policy of MEI and is in
accordance with GAAP consistently applied. MEI's current inventory consists of
items of a quality that are saleable in the Ordinary Course of Business at
prevailing prices except for amounts of inventory that could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
and is in a quantity sufficient to service the operations of the business of MEI
at MEI's current level of operations. Since January 1, 1998, MEI has continued
to replenish its inventory in the Ordinary Course of Business.
(v) Labor Matters. MEI is not a party to or bound by any
collective bargaining agreements or other agreements with labor unions. MEI has
not violated any laws, regulations, orders or contract terms, affecting the
collective bargaining rights of employees, equal opportunity employment, or
employees' health, safety, welfare, wages and hours, the default or violation of
which
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could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. There are no labor disputes existing, or to the Selling
Stockholders Knowledge, threatened, involving strikes, slow-downs, work
stoppages, job actions or lockouts of any employees of MEI, there are no unfair
labor practices or petitions for election pending before the National Labor
relations Board or any other federal or state Labor Commission relating to the
employees of MEI, and no demand for recognition heretofore made by any labor
organization is pending with respect to MEI.
(w) Bank Accounts. Section 4(w) of the Disclosure Schedule
sets forth the name and address of all banks, trust companies, savings and loan
associations, brokerage houses and other financial institutions at which MEI
maintains accounts or safety deposit boxes of any nature, the account number and
the names of all persons authorized to draw thereon or make withdrawals
therefrom.
(x) Property. The MEI Real Property, the leased real property
identified in Section 4(k)(ii) of the Disclosure Schedule, the MB Real Property,
the CI Real Property and the PPC Real Property constitute all of the real
property interests necessary in connection with the business of MEI. The
Excluded Properties are not necessary for the operation of the Business.
5. Representations and Warranties Concerning PPC. Each Common Stock
Selling Shareholder represents and warrants to Buyer jointly and severally that
the statements contained in this Section 5 are correct and complete as of the
date of this Agreement, except as set forth in the Disclosure Schedule.
(a) Organization, Qualification and Corporate Power. PPC is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Florida with all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as it is now
being conducted, and is qualified or licensed to do business and is in good
standing in each jurisdiction set forth in Section 5(a) of the Disclosure
Schedule, which are all of the jurisdictions in which the failure to be so
qualified or licensed could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Section 5(a) of the Disclosure
Schedule lists the directors and officers of PPC. The Buyer has received true
and complete copies of the charter and Bylaws of PPC.
(b) Capitalization. The entire authorized capital stock of PPC
consists of (i) 100,000 shares of Common Stock, of which 10,000 shares are
issued and outstanding, and (ii) 300,000 shares of Preferred Stock, of which no
shares are issued and outstanding. All of the issued and outstanding PPC Shares
have been duly authorized, are validly issued, fully paid and nonassessable, and
are all held of record by GCM. There are no outstanding or authorized options,
warrants, purchase rights, preemptive rights, subscription rights, securities or
similar rights of any kind that are convertible into or exchangeable for capital
stock of PPC, or other contracts or commitments that could require PPC to issue,
sell, or otherwise cause to become outstanding any of its capital stock that
will survive the Closing. Except as set forth on Section 5(b) of the Disclosure
Schedule, there are no voting trusts, proxies or other agreements or
understandings with respect to
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the voting of any capital stock of PPC. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to PPC. All dividends, distributions and redemptions made with respect
to the capital stock of PPC at or prior to closing have complied or will comply
with applicable law.
(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, law, injunction,
judgment, order, decree, ruling, writ, charge, or other restriction of any
government, governmental agency, or court to which PPC is subject or any
provision of the charter or bylaws of PPC or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
consent, approval or notice or give rise to any right of first refusal (or
similar right) under any agreement, contract, lease, license, instrument,
indenture, mortgage, lien, order, judgment, ordinance, regulation, decree,
permit, franchise or other arrangement to which PPC is a party or by which it is
bound or to which any of its assets is subject (or result in the imposition of
any Security Interest upon any of its assets), except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
Material Adverse Effect or as set forth in Section 5(c) of the Disclosure
Schedule. PPC does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency or any other third party in order for the Parties to consummate the
transactions contemplated by this Agreement, except where the failure to give
notice, to file, or to obtain any authorization, consent, or approval would not
have a Material Adverse Effect and as set forth in Section 5(c) of the
Disclosure Schedule.
(d) Brokers' Fees. PPC has no liability or obligation to pay
any fees or commissions to any broker, finder, investment banker, agent or other
intermediary with respect to the transactions contemplated by this Agreement for
which Buyer, MEI, PPC or the Business could become liable or obligated.
(e) Title to Tangible Assets. PPC has good title to, a valid
leasehold interest in, or a legal right to use, the material tangible personal
property of every kind and character used in, necessary for or relating to the
business of PPC (collectively, the "PPC Assets"). Except as set forth in Section
5(e) of the Disclosure Schedule, none of the PPC Assets are subject to any
Security Interests that shall survive Closing. ALL SUCH ASSETS ARE BEING
TRANSFERRED IN THEIR "AS IS" CONDITION WITH ALL FAULTS. OTHER THAN THE
REPRESENTATION MADE IN THE FIRST SENTENCE OF THIS Section 5(E), NO
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY NATURE IS BEING MADE BY
ANY SELLER WITH RESPECT TO SUCH PPC ASSETS, INCLUDING, BUT NOT LIMITED TO, SUCH
PPC ASSETS' MERCHANTABILITY, DESIGN OR USE FOR A PARTICULAR PURPOSE.
(f) Subsidiaries. PPC has no Subsidiaries.
(g) PPC Financial Statements. Attached hereto as Exhibit C are
the following financial statements of PPC (collectively the "PPC Financial
Statements"): (i) unaudited balance
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sheets and statements of income, changes in stockholders' equity, and cash flow
as of and for the fiscal years ended December 31, 1995, December 31, 1996, and
December 31, 1997 (the "PPC Most Recent Fiscal Year End"), and (ii) unaudited
balance sheets and statements of income, changes in stockholders' equity, and
cash flow (the "PPC Most Recent Financial Statements") as of and for the nine
months ended September 30, 1998. The PPC Financial Statements (including the
notes thereto) (i) were prepared in accordance with the books and records of
PPC, (ii) were prepared in accordance with PPC's accounting policies and
principles, (iii) are in accordance with GAAP applied on a consistent basis, and
(iv) present fairly the financial position and results of operations of PPC at
the dates and for the periods; covered thereby; provided, however, that the PPC
Most Recent Financial Statements are subject to normal year-end adjustments and
lack footnotes and other presentation items required or permitted by GAAP.
(h) Events Subsequent to PPC Most Recent Fiscal Year End.
Since the PPC Most Recent Fiscal Year End, PPC has conducted its business in the
Ordinary Course of Business and there has not been any:
(i) material adverse change in the financial
condition, assets, liabilities, operations or results of operations of
PPC;
(ii) addition to or modification of Employee Benefits
Plans, increase in the compensation of officers or employees (including
any such increase pursuant to any bonus, pensions, profit sharing or
other plan or commitment) or granting of any severance or termination
pay, except for increases in compensation with respect to non-officer
employees in the Ordinary Course of Business or as required by law or
any existing agreement identified in Section 5(p) of the Disclosure
Schedule, or granting of any bonus, incentive compensation, award or
other like benefit to any officer or employee except in accordance with
plans or arrangements disclosed in Section 5(p) of the Disclosure
Schedule;
(iii) sale, assignment or transfer of any of the
material assets of PPC;
(iv) cancellation of any indebtedness owed to PPC in
an aggregate amount greater than $25,000, or waiver of any rights of
similar value to PPC relating to any of its business activities or
properties;
(v) incurrence of indebtedness for borrowed money by
PPC or any commitment to incur indebtedness for borrowed money entered
into by PPC, or any loans made or agreed to be made by PPC, or
incurrence of any Security Interest by PPC, material singly or in the
aggregate, or failure to repay any material obligation of PPC when due;
(vi) material amendment, cancellation or termination
of any PPC Contract (as defined in Section 5(m)), license or permit
material to MEI;
(vii) change in accounting methods, principles or
practices by PPC materially affecting its assets, liabilities, results
of operations or business or material revaluation by PPC of any of its
assets, including without limitation, any material write-offs,
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material increases in any reserves or any write-up of the value of
inventory, property, plant, equipment or any other asset;
(viii) material damage, destruction or loss to any
facility maintained by PPC or any other material asset of PPC and
resulting in a loss, whether or not covered by insurance, in excess of
$25,000;
(ix) material change in PPC's maintenance,
remediation, advertising, expansion, capital expenditure or inventory
programs or practices;
(x) declaration, setting aside or payment of any
dividend or other distribution or payment (whether in cash, stock or
property) with respect to the capital stock or other equity securities
of PPC or any redemption, purchase or other acquisition of any of the
securities of PPC, or any other payment to any stockholder of PPC in
its capacity as a stockholder; or issuance by PPC of, or commitment by
it to issue, any capital stock or other equity securities or
obligations or any securities convertible into or exchangeable or
exercisable for capital stock or other equity interests; or
(xi) incurrence of other single or series of related
liabilities involving $250,000 or more, or any increase or change in
any assumptions underlying, or methods of calculating, any bad debt,
contingency or other reserves.
(i) Legal Compliance. PPC has complied, and all of PPC's
assets comply, with all, and have no liability under any, applicable laws,
statutes and regulations (including, without limitation, any applicable
franchise, building, zoning or labor relations rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings and charges thereunder, but
excluding any Environmental Laws) of federal, state, local and foreign
governments (and all agencies thereof), except where the failure to comply would
not have a Material Adverse Effect.
(j) Tax Matters.
(i) PPC has timely filed all Tax Returns that it was
required to file, and has paid all Taxes shown thereon. All of the Tax
Returns are true, current and complete.
(ii) Section 5(j) of the Disclosure Schedule lists
all income Tax Returns filed with respect to PPC for taxable periods
ended on or after December 31, 1993, indicates those income Tax Returns
that have been audited, and indicates those income Tax Returns that
currently are the subject of audit. Selling Shareholders have delivered
to Buyer correct and complete copies of all federal and state income
Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by PPC since December 31, 1993.
(iii) PPC has not waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to
an Tax assessment or deficiency.
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(iv) PPC is not a party to any income Tax allocation
or sharing agreement.
(v) Other than ad valorem property tax matters and an
oral notice of a likely Florida sales tax audit, there is no action,
suit, investigation, audit, claim or assessment pending, proposed or to
Selling Shareholders' Knowledge threatened with respect to Taxes of PPC
that would have a Material Adverse Effect.
(vi) All monies required to be withheld by PPC from
persons properly characterized as employees for federal, state or local
tax purposes, including income Taxes and social security and other
payroll Taxes, have been collected or withheld as required by
applicable law, and either paid to the respective taxing authorities,
set aside in accounts for such purpose or accrued, reserved against and
entered upon the books and records of PPC and, to the extent so set
aside, accrued or reserved, taken into account in determining Actual
Closing Date Net Working Capital.
(vii) Following the Closing Date, pursuant to any
agreement or arrangement entered into by PPC on or prior to the Closing
Date, neither PPC nor Buyer will be obligated to make a payment to an
individual that would be a "parachute payment" to a "disqualified
individual" as those terms are defined in Section 280G of the Code,
without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
(viii) All deficiencies asserted or assessments made
as a result of any examination of the Tax Returns referred to in (i)
have been paid in full, other than those being contested in good faith
through appropriate proceedings.
(ix) There are no liens for Taxes upon the assets of
PPC except liens relating to current Taxes not yet due.
(x) Within the last ten years, PPC has not been a
member of any group of corporations filing as a consolidated group for
federal or state income tax purposes, and PPC has not had any direct or
indirect ownership in any corporation, partnership, joint venture or
other entity other than MEI prior to the Closing Date.
(xi) The accruals for deferred Taxes reflected in the
Financial Statements are adequate to cover any deferred Tax liability
of PPC determined in accordance with GAAP through the date thereof.
(xii) Within the last ten years no claim has been
made by a Tax authority in a jurisdiction where PPC has never paid
Taxes or filed Tax Returns asserting that PPC is or may be subject to
Taxes assessed by such jurisdiction.
(k) Real Property. Section 5(k) of the Disclosure Schedule
lists each parcel of real property in which PPC has a fee interest (the "PPC
Real Property"). With respect to each such parcel
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of PPC Real Property, except for matters that would not have a Material Adverse
Effect and the matters set forth in Schedule Section 10(a)(xvi) hereof:
(i) there are no leases or subleases granting to any
Person the right to use or occupancy of any portion of the PPC Real
Property that shall survive Closing; and
(ii) there are no outstanding options or rights of
first refusal to purchase any parcel of PPC Real Property, or any
portion thereof or interest therein, that shall survive Closing.
PPC does not lease any Real Property, other than a portion of the CI Real
Property.
(l) Intellectual Property. Section 5(l) of the Disclosure
Schedule sets forth a complete list of all material trademarks, trade names,
product identifiers and/or trade dresses of any type whatsoever that are
presently used in the business of PPC the "PPC Trademarks") and all licenses it
has with respect to any intellectual property of a third party used in the
business of PPC (other than shrink-wrap software licenses) and indicates each
PPC Trademark that is registered in the name of PPC on the Principal Register of
the United States Patent and Trademark Office. To the Knowledge of each Selling
Shareholder, there is no infringement of the PPC Trademarks by others. To the
Knowledge of each Selling Shareholder, the use of the PPC Trademarks in the
business of PPC (as the business is now being conducted by PPC) does not result
in any infringement of the rights of others. PPC is the sole and legal owner of
the PPC Trademarks and there is no claim by any other Person that such other
Person is the legal owner of such PPC Trademarks. PPC has not granted any
license or right to use any PPC Trademark to any other Person.
(m) Contracts. Section 5(m) of the Disclosure Schedule lists,
whether written or oral, together with all amendments and modifications thereto,
the following agreements and contracts of PPC:
(i) all contracts and agreements, whether or not
fully performed, pursuant to which PPC has since January 1, 1997
acquired or disposed of more than $500,000 worth of its business or
assets;
(ii) all agreements containing (A) covenants not to
compete on the part of PPC or other similar restrictions on the ability
of PPC to engage in its business, (B) rights of first refusal, (C)
exclusive dealing or minimum purchase provisions or (D) prepayment or
termination penalties;
(iii) all notes, mortgages, indentures, letters of
credit, guarantees, performance bonds, security agreements and other
agreements and instruments for lending or borrowing (including assumed
debt) entered into by PPC or pursuant to which any properties or assets
of PPC are pledged or mortgaged as collateral;
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(iv) any employment or consulting agreement with any
present or former director, officer or employee of PPC;
(v) all joint venture or partnership agreements to
which PPC is a party or bound;
(vi) all agreements pursuant to which PPC pays
royalties in excess of $25,000 per year;
(vii) all area development agreements, construction
agreements and franchise agreements to which PPC is a party or bound;
(viii) all product or service purchasing and supplier
agreements to which PPC is a party or bound pursuant to which PPC has
purchased or committed to purchase more than $250,000 of products,
services or supplies during the last year or during the next twelve
(12) months; and
(ix) any other contracts and agreements of PPC, the
performance of which will involved consideration in excess of $100,000
or that are not terminable by PPC without penalty upon not more than 60
days notice.
The foregoing are hereinafter referred to as the "PPC Contracts." Buyer
has been delivered a correct and complete copy of each PPC Contract or other
agreement listed in Section 5(m) of the Disclosure Schedule (as amended to
date). No Seller knows of any material defense to the validity or enforceability
of any PPC Contract. Neither PPC nor any Seller has received written notice that
PPC is in material default and PPC has not materially defaulted under any PPC
Contract. PPC has not waived any material rights under any PPC Contract. PPC has
not received or given notice of any breach or default in connection with any PPC
Contract.
(n) Powers of Attorney. Except for any powers of attorney
contained in any written contracts or other written agreements set forth in the
Disclosure Schedule, there are no outstanding powers of attorney executed on
behalf of PPC that will survive Closing.
(o) Litigation. There is no pending, or to the Knowledge of
the Selling Shareholders, threatened, claim, suit, arbitration proceeding,
governmental (including, without limitation, foreign) proceeding or
investigation or other proceeding of any character against any Seller or PPC or
any of their respective assets that could reasonably be expected to have a
Material Adverse Effect or to prevent, hinder or delay consummation of the
transactions contemplated by this Agreement, declare the same unlawful, or cause
the rescission thereof, and, to the Knowledge of Selling Shareholders, there is
no basis for any such claim, suit, proceeding or investigation. There are no
judgments, decrees, injunctions or orders of any court or governmental authority
against PPC, any of PPC's assets, or any Seller (that could affect PPC or the
Business) that could reasonably be expected to have a Material Adverse Effect.
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(p) Employee Benefits.
(i) Section 5(p) of the Disclosure Schedule lists
each Employee Benefit Plan that PPC maintains or to which PPC
contributes ("PPC Plans"). An arrangement will not fail to be an
Employee Benefit Plan simply because it only covers one individual. For
purposes of this Paragraph (p), the term "PPC" includes any entity that
is aggregated with PPC under Code Section 414.
(ii) Each PPC Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code, and all
other applicable laws.
(iii) All contributions (including all employer
contributions and employee salary reduction contributions) that are due
have been paid to each PPC Plan in a timely manner, and are fully
deductible in the year for which they were paid. All amounts properly
accrued to date as liabilities of PPC under or with respect to each PPC
Plan (including administrative expenses and incurred but not reported
claims) for the current plan year of the plan have been recorded on the
books of PPC. There will be no liability of PPC under any insurance
policy or similar arrangement procured in connection with any PPC Plan
in the nature of a retroactive rate adjustment, loss sharing
arrangement, or other liability arising wholly or partially out of
events occurring before the Closing Date.
(iv) Each PPC Plan that is an Employee Pension
Benefit Plan has received a determination letter from the Internal
Revenue Service to the effect that it meets the requirements of Code
Sec. 401(a) and nothing has occurred before or since the date of such
determination letter that would have a material adverse effect on such
qualification.
(v) As of the last day of the most recent prior plan
year, the market value of assets under each PPC Plan that is an
Employee Pension Benefit Plan equaled or exceeded the present value of
liabilities thereunder, whether or not they are vested (determined in
accordance with then current funding assumptions).
(vi) Buyer has been delivered current, correct and
complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal Revenue
Service, the two most recent Form 5500 Annual Reports, and all related
trust agreements, insurance contracts, and other funding agreements
that implement each PPC Plan, and any related financial statements,
actuarial reports or audit reports.
(vii) No action, suit, proceeding, hearing, audit, or
investigation with respect to the administration or the investment of
the assets of any PPC Plan (other than routine claims for benefits or
relating to Qualified Domestic Relations Orders) is pending, and to the
Knowledge of each Seller, no such action, suit, proceeding, hearing,
audit, or investigation has been threatened. No "prohibited
transaction" (within the meaning of Section 406 of ERISA or Code Sec.
4975) has occurred with respect to any PPC Plan.
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(viii) PPC does not now and has never in the past
been obligated to contribute to or otherwise participate in an Employee
Pension Benefit Plan subject to Title IV of ERISA or any other
Multiemployer Plan.
(ix) PPC has complied in all material respects with
the health care continuation requirements of Part 6 of Title I of
ERISA.
(x) PPC has no obligation under any PPC Plan or
otherwise to provide health or other welfare benefits to any
participant or beneficiary of a participant after such participant's
termination of employment, except as required by Part 6 of Title I of
ERISA.
(xi) The consummation of the transactions
contemplated by this Agreement will not result in the payment of any
amounts or an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any compensation or
benefits payable to or in respect of any present or former employee or
consultant.
(xii) None of the Persons performing services for PPC
have been improperly classified as independent contractors, leased
employees, or as being exempt from the payment of wages for overtime.
(xiii) None of the PPC Plans are part of a Multiple
Employer Welfare Arrangement, as the term is defined in ERISA Section
3(40).
(q) Environmental.
(i) Except where a failure to comply would not have a
Material Adverse Effect, and except as otherwise set forth in
Disclosure Schedule Section 5(q)(ii): (A) PPC and each of the PPC Real
Properties is in compliance with, and PPC has no liability (other than
to a third party that is not a Governmental Body) under the
Environmental Laws (and no governmental action, suit, proceeding or
hearing has been filed or commenced or threatened against any of them
alleging any such failure to comply or liability), and (B) PPC has
obtained and been in compliance with all of the terms and conditions of
all permits, licenses, and other authorizations that are required under
the Environmental Laws all of which are in full force and effect. To
the Knowledge of each Seller, except for any liability which would not
have a Material Adverse Effect, PPC has no liability under any
Environmental Laws to any third party that is not a Governmental Body.
(ii) A petroleum discharge exceeding applicable
standards under Environmental Laws has occurred at each of the
facilities identified in Section 5(q)(ii) of the Disclosure Schedule.
To the Knowledge of each Seller, no reportable discharge has occurred
at any current Real Property except as identified in Section 5(q)(ii)
of the Disclosure Schedule.
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(iii) For each of the facilities identified in
Section 5(q)(ii) of the Disclosure Schedule, MEI, PPC, a Seller or
other Person has qualified the petroleum discharge at such facilities
for state-funded remediation assistance under the Trust Funds, except
for the facilities listed on Section 5(q)(iii) of the Disclosure
Schedule whose discharges are being processed for qualification under
Section 376.3072, Florida Statutes. To the Knowledge of each Seller,
all of the applicable requirements under the Trust Funds for such
facilities have been satisfied and there are no grounds for rescission,
withdrawal of coverage or demand for return of prior payments from any
of the Trust Funds. Section 5(q)(ii) of the Disclosure Schedule lists
each PPC Real Property and real property leased by PPC where a known
petroleum discharge has occurred.
(iv) In the last five (5) years, PPC has not: (i)
entered into any outstanding consent decree, compliance order, or
administrative order with respect to the Real Property or any
facilities or operations thereon the future compliance with that would
have a Material Adverse Effect; or (ii) as of the date hereof, received
any notice, complaint or claim from any governmental authority alleging
violation of or non-compliance with any Environmental Condition. PPC is
not subject to any outstanding consent order.
(v) Except as otherwise identified in Section
5(q)(ii) of the Disclosure Schedule, there has been no release,
disposal, treatment, storage or presence of any Hazardous Material at,
in, on, under or about the Real Property that could reasonably be
expected to have a Material Adverse Effect.
(vi) PPC has not received any notice, complaint or
claim from any governmental authority that PPC and/or any Real Property
is not in compliance with any applicable Environmental Laws, including
those relating to: (i) the maintenance of records of Hazardous Material
handled at or transported from each Real Property; (ii) reporting,
monitoring, inspections, and compliance with the manifest system for
tracking the movement of Hazardous Material; (iii) operating methods,
techniques, and practices for treating, storing, and disposing of
Hazardous Material; (iv) the location, design, and construction of the
Real Property; (v) contingency plans for minimizing unanticipated
damage from Hazardous Material treatment, storage, or disposal
activities; (vi) maintenance and operation of each Real Property,
including qualifications with respect to ownership, continuity of
operation, Personnel training, financial responsibility and closure;
and (vii) RCRA permit requirements.
(vii) Except as set forth on the Disclosure Schedule,
to the Knowledge of each Seller, all of the underground storage tanks
and related piping and dispensers (the "PPC USTs") located at the
current Real Property comply with applicable U.S. Environmental
Protection Agency and FDEP requirements set forth in Florida
Administrative Code Section 62-761 and such PPC USTs are registered
with the FDEP.
(viii) Section 5(q)(viii) of the Disclosure Schedule
discloses all contracts and agreements with third parties for the
assessment and/or remediation of Environmental
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Conditions at the Real Properties that will survive the Closing.
Sellers have delivered to Buyer true, correct and complete copies of
each of such contracts and agreements.
(ix) For the purposes of this section, the following
words and phrases shall have the following meanings:
"Environmental Condition" means any
condition relating to the presence, release, disposal, storage or
treatment of Hazardous Materials in, at, on, under or about (i) the
Real Property, or (ii) the environment beyond the Real Property, which
Hazardous Materials migrated or emanated from the Real Property, or
(iii) the disposal of Hazardous Materials at any property.
"Hazardous Material" means any pollutant,
contaminant, toxic substance, hazardous waste, hazardous material,
hazardous substance, petroleum or petroleum product, asbestos,
polychlorinated biphenyls, and the contents of underground storage
tanks including, without limitation, any such materials regulated
pursuant to any Environmental Law.
"Real Property" means any real property or
"facility" (as defined in the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq. ("RCRA")) currently or formerly owned,
operated, leased or occupied by PPC.
(r) FIRPTA. GCM is not a foreign Person and no tax is required
to be withheld pursuant to Section 1445 of the Code as a result of any of the
transfers contemplated by this Agreement.
(s) Insurance. Section 5(s) of the Disclosure Schedule sets
forth a list and certain information (including nature of coverage, insurer,
policy number, limits, deductibles and premiums with respect to each policy)
relating to all material policies of insurance maintained, owned or held by PPC
on the date hereof. All of such policies are sufficient for compliance with all
requirements of law and all contracts, leases and other agreements to which PPC
is a party. Such policies are in full force and effect on the date hereof. PPC
has complied with its obligations under each of such insurance policies and has
not failed to give any notice with respect to any material claim thereunder in a
due and timely manner. PPC has made available to Buyer correct and complete
copies of the most recent inspection reports, if any, received from insurance
underwriters and the loss experience for the most recent five years with respect
to each such policy.
(t) Affiliated Transactions. Section 5(t) of the Disclosure
Schedule sets forth all business arrangements, relationships and transactions
involving any of Sellers, their Affiliates or any member of such Persons'
immediate family and PPC that are currently in effect, except for the leasing of
real property from CI Real Property or MB Real Property. None of the Sellers or
their Affiliates will own in the aggregate material assets after the Closing
that are currently used in the business of PPC. PPC is not a party to any
agreement or arrangement with any of Sellers, their Affiliates or any member of
such persons' family that is not on an "arms-length" basis.
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(u) Inventory. The value at which the inventory of PPC is
carried on the PPC's most recent balance sheet included in the Financial
Statements reflects the customary inventory valuation policy of PPC and is in
accordance with GAAP consistently applied. PPC's current inventory consists of
items of a quality that are saleable in the Ordinary Course of Business at
prevailing prices except for amounts of inventory that could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
and is in a quantity sufficient to service the operations of the business of PPC
at PPC's current level of operations. Since January 1, 1998, PPC has continued
to replenish its inventory in the Ordinary Course of Business.
6. Representations and Warranties Concerning Circle Investments. Each
Common Stock Selling Shareholder represents and warrants to Buyer jointly and
severally that the statements contained in this Section 6 are correct and
complete as of the date of this Agreement, except as set forth in the Disclosure
Schedule.
(a) Organization, Qualification and Power. Circle Investments
is a limited partnership duly organized, validly existing and in good standing
under the laws of the State of Florida, with all its requisite power and
authority to own, operate and lease its properties and to carry on its business
as it is now being conducted, and is qualified or licensed to do business and is
in good standing in each jurisdiction set forth in Section 6(a) of the
Disclosure Schedule, which are all of the jurisdictions in which the failure to
be so qualified or licensed could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Section 6(a) of the Disclosure
Schedule lists the general and limited partners of Circle Investments.
(b) Subsidiaries. Circle Investments has no Subsidiaries.
(c) Legal Compliance. Circle Investments has complied, and all
of the CI Real Properties are in compliance with all, and have no liability
under any applicable laws, statutes and regulations (including, without
limitation, any applicable franchise, building, zoning or labor relations rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder, but excluding any Environmental Laws) of federal, state,
local, and foreign governments (and all agencies thereof), except where the
failure to comply would not have a Material Adverse Effect.
(d) Real Property. Section 6(d) of the Disclosure Schedule
lists each parcel of CI Real Property. With respect to each such parcel of CI
Real Property, except for matters that would not have a Material Adverse Effect
and the matters set forth in Schedule 10(a)(xiii) hereof:
(i) there are no leases or subleases granting to any
Person other than MEI the right to use or occupancy of any portion of
the CI Real Property that shall survive Closing; and
(ii) there are no outstanding options or rights of
first refusal to purchase any parcel of CI Real Property, or any
portion thereof or interest therein, that shall survive Closing.
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<PAGE>
(e) Litigation. There is no pending, or to the Knowledge of
the Selling Shareholders, threatened, claim, suit, arbitration proceeding,
governmental (including, without limitation, foreign) proceeding or
investigation or other proceeding of any character against any Circle
Investments, or any CI Real Property that could reasonably be expected to have a
Material Adverse Effect or to prevent, hinder or delay consummation of the
transactions contemplated by this Agreement, declare the same unlawful, or cause
the rescission thereof, and, to the Knowledge of the Selling Shareholders, there
is no basis for any such claim, suit, proceeding or investigation. There are no
judgments, decrees, injunctions or orders of any court or governmental authority
against Circle Investments, any CI Real Property or any Seller (which could
affect Circle Investments or the Business) that could reasonably be expected to
have a Material Adverse Effect.
(f) Environmental.
(i) Except where a failure to comply would not have a
Material Adverse Effect, and except as otherwise set forth in
Disclosure Schedule Section 6(f)(ii): (A) Circle Investments and each
CI Real Property and each of its assets is in compliance with, and
Circle Investments has no liability (other than to a third party that
is not a Governmental Body) under the Environmental Laws (and no
governmental action, suit, proceeding or hearing has been filed,
commenced or threatened against any of them alleging any such failure
to comply or liability), and (B) with respect to CI Real Property,
Circle Investments has obtained and been in compliance with all the
terms and conditions of all permits, licenses, and other authorizations
that are required under the Environmental Laws all of which are in full
force and effect. To the Knowledge of each Seller, except for any
liability which would not have a Material Adverse Effect, Circle
Investments has no liability under any Environmental Laws to any third
party that is not a Governmental Body.
(ii) A petroleum discharge exceeding applicable
standards under Environmental Laws has occurred at each of the
facilities identified in Section 6(f)(ii) of the Disclosure Schedule.
To the Knowledge of each Seller, no reportable discharge has occurred
at any CI Real Property except as identified in Section 6(f)(ii) of the
Disclosure Schedule.
(iii) For each of the facilities identified in
Section 6(f)(ii) of the Disclosure Schedule, MEI, Circle Investments, a
Seller or other Person has qualified the petroleum discharge at such
facilities for state-funded remediation assistance under Trust Funds,
except for the facilities listed on Section 6(f)(iii) of the Disclosure
Schedule whose discharges are being processed for qualification under
Section 376.3072, Florida Statutes. To the Knowledge of each Seller,
all of the applicable requirements under the Trust Funds for such
facilities have been satisfied and there are no grounds for rescission,
withdrawal of coverage or demand for return of prior payments from any
of the Trust Funds. Section 6(f)(ii) of the Disclosure Schedule list
each CI Real Property where a known petroleum discharge has occurred.
(iv) In the last five (5) years, Circle Investments
has not: (i) entered into any outstanding consent decree, compliance
order, or administrative order with respect to the
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CI Real Property or any facilities or operations thereon the future
compliance with which would have a Material Adverse Effect; or (ii) as
of the date hereof, received any notice, complaint or claim from any
governmental authority alleging violation of or non-compliance with any
Environmental Condition. Circle Investments is not subject to any
outstanding consent order.
(v) Except as otherwise identified in Section
6(f)(ii) of the Disclosure Schedules, there has been no release,
disposal, treatment, storage or presence of any Hazardous Material at,
in, on, under or about the CI Real Property that could reasonably be
expected to have a Material Adverse Effect.
(vi) Circle Investments has not received any notice,
complaint or claim from any governmental authority that Circle
Investments and/or any CI Real Property is not in compliance with any
applicable Environmental Laws, including those relating to: (i) the
maintenance of records of Hazardous Material handled at or transported
from each CI Real Property; (ii) reporting, monitoring, inspections,
and compliance with the manifest system for tracking the movement of
Hazardous Material; (iii) operating methods, techniques, and practices
for treating, storing, and disposing of Hazardous Material; (iv) the
location, design, and construction of the CI Real Property; (v)
contingency plans for minimizing unanticipated damage from Hazardous
Material treatment, storage, or disposal activities; (vi) maintenance
and operation of each CI Real Property, including qualifications with
respect to ownership, continuity of operation, Personnel training,
financial responsibility and closure; and (vii) RCRA permit
requirements.
(vii) Except as set forth on the Disclosure Schedule,
to the Knowledge of each Seller, all of the underground storage tanks
and related piping and dispensers (the "CI USTs") located at the CI
Real Property comply with applicable U.S. Environmental Protection
Agency and FDEP requirements set forth in Florida Administrative Code
Section 62-761 and such CI USTs are registered with the FDEP.
(viii) Section 6(f)(viii) of the Disclosure Schedule
discloses all contracts and agreements with third parties for the
assessment and/or remediation of Environmental Conditions at the CI
Real Properties that will survive the Closing. Sellers have delivered
to Buyer true, correct and complete copies of each of such contracts
and agreements.
(ix) For the purposes of this section, the following
words and phrases shall have the following meanings:
"Environmental Condition" means any
condition relating to the presence, release, disposal, storage or treatment of
Hazardous Materials in, at, on, under or about (i) the CI Real Property, or (ii)
the environment beyond the CI Real Property, which Hazardous Materials migrated
or emanated from the CI Real Property, or (iii) the disposal of Hazardous
Materials at any property.
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"Hazardous Material" means any pollutant,
contaminant, toxic substance, hazardous waste, hazardous material, hazardous
substance, petroleum or petroleum product, asbestos, polychlorinated biphenyls,
and the contents of underground storage tanks including, without limitation, any
such materials regulated pursuant to any Environmental Law.
(g) FIRPTA. Neither Circle Investments nor any applicable
owner of a CI Real Property is a foreign Person and no tax is required to be
withheld pursuant to Section 1445 of the Code as a result of any of the
transfers contemplated by this Agreement.
(h) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, law, injunction,
judgment, order, decree, ruling, writ, charge, or other restriction of any
government, governmental agency, or court to which Circle Investments is subject
or any provision of the partnership agreement of Circle Investments or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any consent, approval or notice or give rise to any right
of first refusal (or similar right) under any material agreement, contract,
lease, license, instrument, indenture, mortgage, lien, order, judgment,
ordinance, regulation, decree, permit, franchise or other arrangement to which
Circle Investments is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security Interest upon any
of its assets), except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, failure to give notice,
or Security Interest would not have a Material Adverse Effect or as set forth in
Section 6(h) of the Disclosure Schedule. Circle Investments does not need to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency or any other third party in
order for the Parties to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a Material Adverse Effect and
as set forth in Section 6(h) of the Disclosure Schedule.
(i) Brokers' Fees. Circle Investments has no liability or
obligation to pay any fees or commissions to any broker, finder, investment
banker, agent or other intermediary with respect to the transactions
contemplated by this Agreement for that Buyer, MEI, PPC or the Business could
become liable or obligated.
7. Representations and Warranties Concerning Miller Brothers. Each
Common Stock Selling Shareholder represents and warrants to Buyer jointly and
severally that the statements contained in this Section 7 are correct and
complete as of the date of this Agreement, except as set forth in the Disclosure
Schedule.
(a) Organization, Qualification and Power. Miller Brothers is
a partnership duly organized, validly existing and in good standing under the
laws of Florida with all requisite power and authority to own, operate and lease
its properties and to carry on its business as it is now being conducted, and is
qualified or licensed to do business and is in good standing in each
jurisdiction set forth in Section 7(a) of the Disclosure Statement, which are
all of the jurisdictions in which the failure to
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be so qualified or licensed could reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Section 7(a) of the Disclosure
Schedule lists the general partners of Miller Brothers at Closing.
(b) Subsidiaries. Miller Brothers has no Subsidiaries.
(c) Legal Compliance. Miller Brothers (and/or the applicable
owner of the MB Real Property) has complied, and all of the MB Real Properties
in compliance, with all, and have no liability under any, applicable laws,
statutes and regulations (including, without limitation, any applicable
franchise, building, zoning or labor relations rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder, but
excluding any Environmental Laws) of federal, state, local, and foreign
governments (and all agencies thereof), except where the failure to comply would
have a Material Adverse Effect.
(d) Real Property.
(i) Section 7(d) of the Disclosure Schedule lists
each parcel of MB Real Property. With respect to each such parcel of MB
Real Property, except for matters that would not have a Material
Adverse Effect and the matters set forth in Schedule 10(a)(xiv) hereof:
(A) there are no leases or subleases
granting to any Person other than MEI the right to use or
occupancy of any portion of the MB Real Property that shall
survive Closing; and
(B) there are no outstanding options or
rights of first refusal to purchase any parcel of MB Real
Property, or any portion thereof or interest therein, that
shall survive Closing.
(ii) Section 7(d)(ii) of the Disclosure Schedule
lists the MB Real Property locations that are currently the subject of
construction.
(e) Litigation. There is no pending, or to the Knowledge of
the Selling Shareholders, threatened, claim, suit, arbitration proceeding,
governmental (including, without limitation, foreign) proceeding or
investigation or other proceeding of any character against Miller Brothers or
any MB Real Property that could reasonably be expected to have a Material
Adverse Effect or to prevent, hinder or delay consummation of the transactions
contemplated by this Agreement, declare the same unlawful, or cause the
rescission thereof, and, to the Knowledge of the Selling Shareholders, there is
no basis for any such claim, suit, proceeding or investigation. There are no
judgments, decrees, injunctions or orders of any court or governmental authority
against Miller Brothers, any MB Real Property or any Seller (that could affect
Miller Brothers or the Business) that could reasonably be expected to have a
Material Adverse Effect.
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(f) FIRPTA. Neither Miller Brothers nor any applicable owner
of a MB Real Property is a foreign Person and no tax is required to be withheld
pursuant to Section 1445 of the Code as a result of any of the transfers
contemplated by this Agreement.
(g) Environmental.
(i) Except where a failure to comply would not have a
Material Adverse Effect, and except as otherwise set forth in
Disclosure Schedule Section 7(g)(ii): (A) Miller Brothers and each MB
Real Property and each of its assets is in compliance with, and MB has
no liability (other than to a third party that is not a Governmental
Body) under the Environmental Laws (and no governmental action, suit,
proceeding or hearing has been filed, commenced or threatened against
any of them alleging any such failure to comply or liability), and (B)
with respect to MB Real Property, Miller Brothers has obtained and been
in compliance with all of the terms and conditions of all permits,
licenses, and other authorizations that are required under the
Environmental Laws all of which are in full force and effect. To the
Knowledge of each Seller, except for any liability which would not have
a Material Adverse Effect, MB has no liability under any Environmental
Laws to any third party that is not a Governmental Body.
(ii) A petroleum discharge exceeding applicable
standards under Environmental Laws has occurred at each of the
facilities identified in Section 7(g)(ii) of the Disclosure Schedule.
To the Knowledge of each Seller, no reportable discharge has occurred
at any current Real Property except as identified in Section 7(g)(ii)
of the Disclosure Schedule.
(iii) For each of the facilities identified in
Section 7(g)(ii) of the Disclosure Schedule, MEI, Miller Brothers, a
Seller or other Person has qualified the petroleum discharge at such
facilities for state-funded remediation assistance under the Trust
Funds, except for the facilities listed on Section 7(g)(iii) of the
Disclosure Schedule whose discharges are being processed for
qualification under Section 376.3072, Florida Statutes. To the
Knowledge of each Seller, all of the applicable requirements under the
Trust Funds for such facilities have been satisfied and there are no
grounds for recission, withdrawal of coverage or demand for return of
prior payments from any of the Trust Funds. Section 7(g)(ii) of the
Disclosure Schedule lists each MB Real Property where a known petroleum
discharge has occurred.
(iv) In the last five (5) years, Miller Brothers has
not: (i) entered into any outstanding consent decree, compliance order,
or administrative order with respect to the MB Real Property or any
facilities or operations thereon the future compliance with which would
have a Material Adverse Effect; or (ii) as of the date hereof, received
any notice, complaint or claim from any governmental authority alleging
violation of or non-compliance with any Environmental Condition. MB is
not subject to any outstanding consent order.
(v) Except as otherwise identified in Section
7(g)(ii) of the Disclosure Schedule, there has been no release,
disposal, treatment, storage or presence of any Hazardous Material
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at, in, on, under or about the MB Real Property that could reasonably
be expected to have a Material Adverse Effect.
(vi) Miller Brothers has not received any notice,
complaint or claim from any governmental authority that Miller Brothers
and/or any MB Real Property is not in compliance with any applicable
Environmental Laws, including those relating to: (i) the maintenance of
records of Hazardous Material handled at or transported from each MB
Real Property; (ii) reporting, monitoring, inspections, and compliance
with the manifest system for tracking the movement of Hazardous
Material; (iii) operating methods, techniques, and practices for
treating, storing, and disposing of Hazardous Material; (iv) the
location, design, and construction of the MB Real Property; (v)
contingency plans for minimizing unanticipated damage from Hazardous
Material treatment, storage, or disposal activities; (vi) maintenance
and operation of each MB Real Property, including qualifications with
respect to ownership, continuity of operation, Personnel training,
financial responsibility and closure; and (vii) RCRA permit
requirements.
(vii) Except as set forth on the Disclosure Schedule,
to the Knowledge of each Seller, all of the underground storage tanks
and related piping and dispensers (the "MB USTs") located at the MB
Real Property comply with applicable U.S. Environmental Protection
Agency and FDEP requirements set forth in Florida Administrative Code
Section 62-761 and such USTs are registered with the FDEP.
(viii) Section 7(g)(viii) of the Disclosure Schedule
discloses all contracts and agreements with third parties for the
assessment and/or remediation of Environmental Conditions at the MB
Real Properties that will survive the Closing. Sellers have delivered
to Buyer true, correct and complete copies of each of such contracts
and agreements.
(ix) For the purposes of this section, the following
words and phrases shall have the following meanings:
"Environmental Condition" means any
condition relating to the presence, release, disposal, storage or treatment of
Hazardous Materials in, at, on, under or about (i) the MB Real Property, or (ii)
the environment beyond the MB Real Property, which Hazardous Materials migrated
or emanated from the MB Real Property, or (iii) the disposal of Hazardous
Materials at any property.
"Hazardous Material" means any pollutant,
contaminant, toxic substance, hazardous waste, hazardous material, hazardous
substance, petroleum or petroleum product, asbestos, polychlorinated biphenyls,
and the contents of underground storage tanks including, without limitation, any
such materials regulated pursuant to any Environmental Law.
"Miller Brothers" means the applicable owner
of the MB Real Property.
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(h) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, law, injunction,
judgment, order, decree, ruling, writ, charge, or other restriction of any
government, governmental agency, or court to which Miller Brothers is subject or
any provision of the charter or bylaws of Miller Brothers or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any consent, approval or notice or give rise to any right of first
refusal (or similar right) under any material agreement, contract, lease,
license, instrument, indenture, mortgage, lien, order, judgment, ordinance,
regulation, decree, permit, franchise or other arrangement to which Miller
Brothers is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets), except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, failure to give notice, or Security
Interest would not have a Material Adverse Effect or as set forth in Section
7(h) of the Disclosure Schedule. Miller Brothers does not need to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency or any other third party in
order for the Parties to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a Material Adverse Effect and
as set forth in Section 7(h) of the Disclosure Schedule.
(i) Brokers' Fees. Miller Brothers has no liability or
obligation to pay any fees or commissions to any broker, finder, investment
banker, agent or other intermediary with respect to the transactions
contemplated by this Agreement for that Buyer, MEI, PPC or the Business could
become liable or obligated.
8. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its
commercially reasonable efforts to take all action and to do all things
necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not
waiver, of the closing conditions set forth in Section 10 below) for which such
party is responsible.
(b) Notices and Consents. Selling Shareholders will cause MEI
to give any notices to third parties, and will cause MEI to use its commercially
reasonable efforts to obtain any third party consents, that Buyer reasonably may
request in connection with the matters referred to in Section 4(c) above. In
connection therewith, Sellers or MEI may not offer or consent to any
modification or amendment of any contract (other than any modification or
amendment solely to reflect such third party's consent) or grant any concessions
without Buyer's prior written consent. MEI and Sellers agree to transmit the
consents to the appropriate parties for approval promptly after the execution
hereof, which consents shall be subject to the reasonable approval of Buyer and
Sellers' Representative. Each such Party shall keep the other advised of their
progress in obtaining such consents. Each of the Parties will (and Selling
Shareholders will cause MEI and PPC to) give any notices to, make any filings
with, and use its commercially reasonable efforts to obtain any
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authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Section 3(a)(ii), Section
3(b)(ii), Section 4(c), Section 5(c), Section 6(g) and Section 7(g) above.
Without limiting the generality of the foregoing, each of the Parties will file
(and Selling Shareholders will cause MEI and PPC to file) any Notification and
Report Forms and related material that he or it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use his or its
commercially reasonable efforts to obtain (and Selling Shareholders will cause
MEI and PPC to use its commercially reasonable efforts to obtain) a waiver from
the applicable waiting period, and will make (and Selling Shareholders will
cause MEI and PPC to make) any further filings pursuant thereto that may be
necessary in connection therewith.
(c) Operation of Business. Except as permitted by this
Agreement or on Section 8(c) to the Disclosure Schedule, Selling Shareholders
will not cause or permit MEI or PPC to engage in any practice, take any action,
or enter into any transaction outside the Ordinary Course of Business, or to:
(i) fail to carry on the Business in a manner
consistent with prior practice and in the Ordinary Course of Business,
and Selling Shareholders will use commercially reasonable efforts to
preserve intact the present business organization, goodwill and
reputation of the Business, to keep available the services of its
officers and employees and to preserve the relationships with
customers, suppliers, distributors and other Persons having business
dealings with the Business;
(ii) fail to maintain their respective books,
accounts and records consistent with past practices and policies and in
accordance with GAAP, or change, or permit MEI or PPC to change, any of
MEI's or PPC's (A) accounting principles or practices or make any
material revaluation of any of their respective assets, including
without limitation, any material write-offs, increases in any reserves
(including any reserve for taxes payable) or any write-off of the value
of inventory, property, plant, equipment or any other asset or
materially increase or change any assumptions underlying, or methods of
calculating, any bad debt, contingency or other reserves, (B) rebate or
discount programs, (C) inventory policies or practices, or (D) fail to
maintain any store or to provide for advertising, credit and promotions
in accordance with past policies and practices;
(iii) make or adopt any change in their respective
organizational documents as in force and effect on the date hereof;
(iv) issue, redeem or purchase any shares of their
respective capital stock or issue any options or other rights to
purchase any shares of such capital stock, any securities convertible
or exchangeable for such capital stock, or declare, set aside, pay or
make any dividend, distribution or redemption in respect of shares of
their respective capital stock, or commit to do any of the foregoing;
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(v) Other than salary increases in the Ordinary
Course of Business for employees of MEI and PPC that are not Selling
Shareholders, with no single employee receiving a annual salary
increase of more than 10% and such salary increases in the aggregate
for all such employees not exceeding 5% (provided that all increases
are subject to reasonable prior consultation with Buyer), enter into or
amend any employment, severance, consulting or compensatory contract or
agreement with any former, existing or prospective employee or
institute any increase in any profit-sharing, bonus, incentive,
deferred compensation, insurance, pension, retirement, medical,
hospital, disability, welfare or other Employee Benefit Plan with
respect to employees of MEI or PPC;
(vi) sell or otherwise dispose of, or enter into any
agreement for the sale, lease or disposition of, or mortgage or
encumber or permit to exist any liens, claims or security interests on
(other than pursuant to the Lines of Credit), any of its material
assets or properties, except for sales of inventory and obsolete
equipment in the Ordinary Course of Business and except with respect to
the Excluded Properties;
(vii) fail to use reasonable best efforts to maintain
all existing insurance policies with respect to the Business, unless
comparable insurance is substituted therefor, and no action shall be
taken to terminate or modify those insurance policies;
(viii) (A) fail to use reasonable best efforts to
observe and perform, and remain in material compliance with, their
respective obligations in agreements and contracts, and (B) not enter
into, amend or terminate any agreements or contracts or incur any
liabilities, commitments or obligations that would either (i) require
payments by MEI or PPC of more than $100,000 over any period of twelve
months or (ii) have a term of more than 60 days and not be terminable
on 60 or less days notice without penalty to MEI or PPC or that would
otherwise fall within the definition of "MEI Contract" or "PPC
Contract";
(ix) make any investment in any Person or entity
whether by loan or advance, purchase of stock or other securities or
contribution to capital;
(x) enter into or commit to enter into any
transaction between them, on the one hand, and any Seller or Affiliate
of any Seller, on the other hand;
(xi) guaranty the obligations of any third party;
(xii) without Buyer's consent, which shall not be
unreasonably withheld, alter MEI's expansion, capital expenditure,
remediation and retrofit programs and budget in any way or enter into
any contract for the purchase or sale of real property outside MEI's
expansion and capital expenditure program and budget as set forth on
Exhibit A hereto;
(xiii) cancel any debts owed to or claims held by MEI
or PPC (including the settlement of any claims or litigation) in excess
of $100,000;
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(xiv) create, incur or assume, or agree to create,
incur or assume, any indebtedness for borrowed money, other than under
the Lines of Credit or enter into, as lessee, any capitalized lease
obligations (as defined in Statement of Financial Accounting Standards
No. 13) or accept any advances other than those payable under the
current Citgo contracts (as in effect on the date hereof);
(xv) accelerate or delay collection of any notes or
accounts receivable generated by MEI or PPC in advance of or beyond
their regular due dates or the dates when the same would have been
collected in the Ordinary Course of Business;
(xvi) delay or accelerate payment of any account
payable or other liability of MEI or PPC beyond or in advance of its
due date or the date when such liability would have been paid in the
Ordinary Course of Business;
(xvii) allow the levels of inventory of MEI or PPC to
vary in any material respect from the levels maintained in the Ordinary
Course of Business;
(xviii) except as set forth on Exhibit A or Section
8(c) to the Disclosure Schedule open or close any store, or other
facility, except in the event of casualty or as the result of the
expiration of any lease; and
(xix) enter into any agreement, plan or commitment to
do any of the foregoing.
Neither Circle Investments nor Miller Brothers will engage in any practice, take
any action, or enter into any transaction outside the Ordinary Course of
Business, provided, however, that Miller Brothers may take any and all actions
as are necessary or appropriate to redeem certain of its outstanding partnership
interests held by George C. Miller, III. Notwithstanding the foregoing, MEI
shall be permitted to take the following actions prior to Closing: (u) pay GCM
an amount not to exceed $425,000 as consideration for his termination as a
consultant by the MEI and in lieu of any remaining payments due him under his
consulting agreement with MEI; (v) enter into new "stay-bonus" agreements with
employees of MEI in form and substance reasonably satisfactory to Buyer; (w)
obtain a new D&O insurance policy, or an endorsement to or modification of its
existing D&O insurance policy, to provide for "run-off" coverage; (x) redeem the
shares of Class B Common Stock owned by Thomas Miller, Joseph Miller, Richard
Hamrick, Richard Daviduke, Daniel L. Miller and Class A Common Stock and
Preferred Stock shares owned by the John W. Miller Estate Trust; (y) transfer
the Excluded Properties to the Selling Shareholders or such other parties
designated by Sellers' Representatives, at Selling Shareholders' expense; and
(z) transfer to one or more of the Selling Shareholders the life insurance
policies identified in Section 1 of the Disclosure Schedule (including the
rights to the cash surrender value thereof), and the receivable for certain life
insurance premiums due from Selling Shareholders set forth in such schedule for
no consideration.
(d) Full Access. Each of Sellers will permit, and Sellers will
cause MEI and PPC to permit, representatives of Buyer to have full access at all
reasonable times, and in a manner so as
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not to interfere unreasonably with the normal business operations of MEI, PPC,
Circle Investments, and Miller Brothers, to all premises, properties, Personnel,
books, records (including tax records), contracts, and documents of or
pertaining to the Business, MEI, PPC, Circle Investments and Miller Brothers to,
among other things, conduct such environmental and other studies and
investigations as Buyer may require. Buyer shall indemnify, defend and hold
harmless each Seller and MEI from and against any damage or injury to any person
or property caused by Buyer or its representatives. If Buyer fails to close for
any reason, Buyer shall fully repair any damage resulting from such actions of
Buyer. Buyer will treat and hold as confidential any Confidential Information it
receives from any of Sellers, MEI and PPC in the course of the reviews
contemplated by this Section 8(d), will not use any of the Confidential
Information except in connection with this Agreement, and, if this Agreement is
terminated for any reason whatsoever, will return to Seller, MEI and PPC, all
tangible embodiments (and all copies) of the Confidential Information that are
in its possession.
(e) Notice of Developments.
(i) Any of Sellers may elect at any time to notify
Buyer both orally and in writing of any development causing a breach of
any of the representations and warranties in Section 4, Section 5,
Section 6 or Section 7 above. Unless Buyer terminates this Agreement
pursuant to Section 13(a)(ii) below by reason of the development and
exercises that right within the period of fifteen (15) business days
referred to in Section 13(a)(ii) below, the written notice pursuant to
this Section 8(e)(i) will be deemed to have amended the Disclosure
Schedule, to have qualified the representations and warranties
contained in Sections 4-7 above with respect to the matter indicated in
the notice, and to have cured any misrepresentation or breach of
warranty that otherwise might have existed hereunder by reason of the
development.
(ii) Each Party will give prompt written notice to
the others of any material adverse development causing a breach of any
of his or its own representations and warranties in Section 3 above. No
disclosure by any Party pursuant to this Section 8(e)(ii), however,
shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation or breach of warranty.
(f) Acquisition Proposals. Following the execution of this
Agreement and prior to the earliest to occur of Closing, February 11, 1999 or
the termination of this Agreement, neither MEI, Sellers, any Affiliate of MEI or
Sellers, nor any other representative or agent of Sellers shall, directly or
indirectly, communicate, solicit, initiate, encourage or participate (including
furnishing non-public information concerning the Business, its properties or
assets) in any discussions or negotiations with regard to any proposal to
acquire, directly or indirectly, any shares of the capital stock of MEI or PPC
or the assets of any Seller or, to invest any funds in the MEI, PPC or the
Business, whether such proposal, acquisition, investment or other transaction
involves a stock sale, a tender offer, exchange offer, merger or other business
combination involving MEI, PPC or the Business, or for the acquisition of a
substantial portion of the assets of MEI, PPC or the Business, including,
without limited, any sale of the MB Real Property, the CI Real Property or the
PPC Real Property (an "Acquisition Proposal"). Sellers will promptly communicate
to Buyer the identity of
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such other party and the initial terms of any proposal it may receive from any
other party in respect of an Acquisition Proposal.
(g) Survey Matters. Section 8(g) of the Disclosure
Schedule lists those parcels of real property that may be transferred to Buyer
pursuant hereto for which Buyer has reviewed and approved surveys thereof and
agrees to accept title thereto subject to matters depicted in those surveys (the
"Surveyed Parcels"). Buyer may obtain prior to Closing, and if obtained shall
simultaneously cause to be delivered to Sellers' Representative, a survey
prepared by licensed Florida surveyors performed in accordance with Rule 61G17-6
of the Florida Administrative Code of each parcel of real property to be
transferred to Buyer pursuant hereto (including parcels in which Buyer will
receive leasehold interests) (each such survey herein referred to as a "New
Survey"). Sellers shall use commercially reasonable efforts to review all New
Surveys received prior to Closing and to cause the title insurance policy to
include on Schedule B matters depicted in such New Survey. If any New Survey
shows a Material Survey Matter on any such parcel, Buyer shall notify Sellers'
Representative in writing, specifically identifying such Material Survey Matter,
within five (5) days after Buyer's receipt of such New Survey but in no event
later than thirty (30) days after the date of this Agreement (the "Survey
Notice"). Any Material Survey Matter disclosed in a New Survey, or that might be
disclosed by an accurate survey, but not objected to by a timely Survey Notice
shall be deemed accepted by Buyer. In the event a Survey Notice identifies a
Material Survey Matter, Sellers' Representative shall, within ten (10) days
following receipt of such Survey Notice, elect to either (i) cure such Material
Survey Matter as promptly as reasonably possible, either before or after
Closing, or (ii) notify Buyer that such Material Survey Matter shall not be
cured, in which case Buyer shall notify Seller's Representative within five (5)
days following receipt of such notices either (i) Buyer waives such Material
Survey Matters or (ii) Buyer is terminating this Agreement,
(h) Financing. MEI, PPC and Sellers shall reasonably cooperate
with Buyer and use commercially reasonable efforts to take, at no cost to Buyer,
all action reasonably requested by Buyer in connection with the financing of the
transactions contemplated by this Agreement, including, without limitation, to
assist Buyer with any presentation to accountants, financing sources and any
regulatory authority. Buyer shall use its commercially reasonable efforts to
pursue, obtain and close on the financing referenced in Section 3(b)(vi).
(i) Approvals. Sellers shall have obtained the approval of
each general partner of Miller Brothers or Circle Investments to the sale of MB
Real Property or CI Real Property, as applicable, on the terms set forth herein.
(j) Testing. Subject to the provisions of Section 8(d) above,
Buyer and its representatives shall have the right to conduct such environmental
studies and investigations as Buyer may require at the properties identified in
Section 8(j) of the Disclosure Schedule. If the results of any such
environmental investigations disclose a petroleum discharge exceeding applicable
standards under Environmental Laws, then Seller shall exercise its best efforts
to cause the petroleum discharge at any such facilities (a "Discharge Site") to
qualify for state-funded remediation assistance under the Trust Funds. With
respect to each Discharge Site, no later than the Closing, Seller shall deposit
in escrow the applicable deductible amount pertaining to the relevant Trust
Fund. Such
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deductible shall be held in escrow until such time as payment thereof is
required to be made to the applicable governmental authority; provided, however,
if such payment is not required to be made to the applicable governmental
authority within three (3) years after the Closing, then any undisbursed
deductibles shall be released to Seller at such time. The escrow shall be
established pursuant to an escrow agreement mutually acceptable to the Parties.
(k) Finalization of Disclosure Schedules. Notwithstanding
anything to the contrary in this Agreement, the Parties acknowledge and agree
that the disclosure schedules relating to Sections 4, 5, 6, 7 and 10 hereof are
in draft form and not complete. By 5:00 P.M. Eastern Standard Time on December
3, 1998, Sellers shall deliver to Buyer Sellers' final proposed versions of such
disclosure schedules (marked to show changes from the version previously
delivered to Buyer) by electronic mail to [email protected], [email protected]
and [email protected], with a facsimile of any supporting documentation. Buyer
shall have until 5:00 P.M., Eastern Standard Time on December 7, 1998 to review
the same. If such final proposed versions of such disclosure schedules contain
items not included with the disclosure schedules attached hereto and Buyer has
any objection thereto, Buyer shall notify Sellers within such review period of
such objection and, unless by noon Eastern Standard Time on December 9, 1998
Sellers shall have resolved such objection to the reasonable satisfaction of
Buyer, Buyer may elect to terminate this Agreement, whereupon all rights and
obligations of the Parties shall terminate without any liability of any Party to
any other Party. If Buyer has no objection to the final proposed versions of
such disclosure schedules or any objection it may have is resolved to its
satisfaction as a result of the provisions of this subparagraph, such final
proposed versions of such disclosure schedules, with any changes made that may
have resolved any objection of Buyer shall be deemed to be the final version of
the Disclosure Schedules hereto and shall be substituted in their entirety for
the final proposed versions of the disclosure schedules attached hereto. Each
Party agrees to execute and deliver any reasonable document or instrument
necessary or desirable to memorialize any such finalization of the Disclosure
Schedules.
9. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further
action is necessary to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 11
below). If from and after the Closing any of the Sellers or their respective
Affiliates receive any reimbursements or other funds from any of the Trust Funds
with respect to any of the USTs, the PPC USTs, the CI USTs, or the MB USTs, that
relate to the PPC Real Property, CI Real Property, MB Real Property, MEI Real
Property or leased real property identified in Section 4(k)(ii) of the
Disclosure Schedule, then such Seller or its Affiliates shall promptly deliver
such reimbursements or funds to MEI.
(b) Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge,
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complaint, claim, or demand in connection with (i) any transaction contemplated
under this Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to the Closing Date involving MEI or
PPC, each of the other Parties shall cooperate with him or it and his or its
counsel in the defense or contest, make available their personnel, and provide
such testimony and access to their books and records as shall be reasonably
necessary in connection with the defense or contest, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under Section 11 below); provided
that such cooperation shall not cause any disruption in or to MEI's, PPC's or
Buyer's business or operations.
(c) Covenant Not to Compete. For a period of three years from
the Closing Date (the "Covered Period"), neither Thomas A. Miller or Joseph E.
Miller (the "Covered Persons") will (i) engage directly or indirectly in the
retail petroleum or convenience store business within a five-mile radius of any
Handy Way or Li'l Champ convenience store by acting as an officer, director,
partner, consultant or employee of, or through any debt or equity ownership
interest in, any person or entity so engaged, or otherwise or (ii) induce or
attempt to induce any Person then engaged or employed (whether part-time or
full-time) by MEI or PPC to become an officer, employee, consultant, agent,
adviser or independent contractor, directly or indirectly of a Covered Person or
any entity in which a Covered Person has an interest; provided, however, that no
owner of less than 1% of the outstanding stock of any publicly traded
corporation shall be deemed to engage solely by reason thereof in any of its
businesses. If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section 9(c) is invalid or unenforceable, the
Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed. The Covered Persons acknowledge and agree that their
agreement in this Section 9(c) is a material inducement to Buyer to enter into
this Agreement and that conduct in violation of this Section 9(c) would
substantially detriment the Buyer and MEI.
(d) Employee Benefits. Buyer shall cause all employees of MEI
and PPC that are employed after Closing by MEI or PPC to have coverage under
Employee Benefit Plans, other than tax qualified defined contribution retirement
plans, as currently maintained by MEI or PPC until the end of each such Employee
Benefit Plan year in which the Closing occurs. At the end of each such plan
year, Buyer presently intends to transfer such employees to a corresponding
Employee Benefit Plans of Buyer (or its Parent) if a corresponding plan exists.
For purposes of participation or vesting of benefits under any benefit plan,
program or policy maintained by Buyer, employees of MEI and PPC shall receive
credit for all years of service with MEI, PPC or their predecessors. During the
two years following the Closing Date, Buyer shall cause MEI to provide at MEI's
expense health insurance coverage that is similar to the coverage then provided
to employees of MEI and PPC to Tom and Joe Miller. Except as contemplated by
Sections 10(a)(vi) and 10(b)(vi), nothing in this Agreement shall create any
obligation on the part of Buyer to continue the employment of any employee for
any definite period following the Closing Date or, except as provided in the
first
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sentence of this Section provide any specific benefits or levels of benefits to
any employees for any period following the Closing Date. MEI and PPC shall,
effective immediately prior to Closing, terminate each tax qualified defined
contribution retirement plan sponsored, maintained and contributed to or by MEI
or PPC.
(e) Acquisition of PPC. MEI shall acquire all of the PPC
Shares immediately following the effectiveness of Closing.
10. Conditions to Obligation to Close.
(a) Conditions to Obligation of Buyer. The obligation of Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 3(a) and Sections 4-7 above shall be true and correct at and as
of the Closing Date as if made on the Closing Date;
(ii) MEI and the Sellers shall have performed and
complied with all of their covenants hereunder in all material respects
through the Closing;
(iii) there shall not be any injunction, judgment,
order, decree, or ruling in effect preventing consummation of any of
the transactions contemplated by this Agreement, no condition or
restriction of any governmental or regulatory authority shall be in
effect and no claim, action, suit, investigation of other proceeding
shall be pending or threatened before any court or governmental or
regulatory authority that presents a substantial risk of the restraint
or prohibition of the transactions contemplated by this Agreement or
the obtaining of material damages or other relief in connection
therewith;
(iv) Sellers' Representative shall have delivered to
Buyer a certificate to the effect that each of the conditions specified
above in Section 10(a)(i)-(iii) is satisfied in all respects;
(v) all applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired
or otherwise been terminated and the Parties and MEI shall have
received all other authorizations, consents, and approvals of
governments, governmental agencies referred to in Section 3(a)(ii),
Section 3(b)(ii), Section 4(c), Section 5(c), Section 6(g) and Section
7(g) above, and other third parties other than those that the failure
to obtain would not, individually or in the aggregate, have a Material
Adverse Effect; provided that the consents and waivers listed on Annex
I hereto shall have been obtained;
(vi) Thomas Miller, Richard Daviduke and Richard
Hamrick shall have entered into employment agreements with Buyer or MEI
in form and substance satisfactory
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to Buyer and the same shall be in full force and effect and shall be in
lieu of all existing agreements between MEI and Miller, Daviduke and
Hamrick;
(vii) GCM shall have executed and delivered documents
to effect the transfer of the PPC Shares to MEI effective immediately
after Closing for a cash payment of $620,000 (which payment shall be
subtracted from the Actual Closing Date Net Working Capital
Calculation, notwithstanding that it is paid after Closing by MEI);
(viii) Buyer shall have received from counsel to
Sellers an opinion in form and substance satisfactory to Buyer,
addressed to Buyer, and dated as of the Closing Date;
(ix) all actions to be taken by MEI and Sellers in
connection with consummation of the transactions contemplated hereby
and all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be
reasonably satisfactory in form and substance to Buyer;
(x) the directors of MEI and PPC shall have delivered
their resignations;
(xi) Buyer, Sellers and the escrow agent thereunder
shall have entered into the Escrow Agreement;
(xii) each of the Sellers and applicable owners of
the MB Real Property, CI Real Property and GCM shall have provided to
Buyer a certificate, in compliance with Section 1445 of the Code and
the Treasury regulations thereunder, that, as of the Closing Date, he
or it is not a foreign Person;
(xiii) at Closing, Circle Investments shall have
caused at Buyer's expense title insurance policies to be issued
insuring marketable, record title in fee simple to the parcels listed
in Section 6(d) of the Disclosure Schedule, subject only to the matters
set forth in Schedule 10(a)(xiii) hereto and in connection therewith
Circle Investments shall have provided such affidavits and certificates
as may be reasonably required by the title company to issue such
policies;
(xiv) at Closing, Miller Brothers shall have caused
at Buyer's expense title insurance policies to be issued insuring
marketable, record title in fee simple to the parcels listed in Section
7(d) of the Disclosure Schedule, subject only to the matters set forth
in Schedule 10(a)(xiv) hereto and in connection therewith Miller
Brothers or the applicable owners of the MB Real Property shall have
provided such affidavits and certificates as may be reasonably required
by the title company to issue such policies;
(xv) at Closing, MEI shall have caused at Buyer's
expense title insurance policies to be issued insuring marketable,
record title in fee simple to the parcels listed in Section 4(k)(i) of
the Disclosure Schedule, subject only to the matters set forth in
Schedule 10(a)(xv) hereto and in connection therewith MEI shall have
provided such affidavits and certificates as may be reasonably required
by the title company to issue such policies;
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(xvi) at Closing, PPC shall have caused at Buyer's
expense, title insurance policies to be issued insuring marketable,
record title in fee simple to the parcels listed in Section 5(k) of the
Disclosure Schedule, subject only to the matters set forth in Schedule
10(a)(xvi) hereto and in connection therewith PPC shall have provided
such affidavits and certificates as may be reasonably required by the
title company to issue such policies;
(xvii) at Closing, Selling Shareholders shall have
caused at Buyer's expense leasehold title insurance policies to be
issued insuring MEI's leasehold interest in to the parcels listed in
Section 4(k)(ii) of the Disclosure Schedule, subject only to the
matters set forth in Schedule 10(a)(xvii) hereto. Additionally,
promptly after the execution of this Agreement, the Selling
Shareholders shall cause to be mailed to each landlord of such parcels
an estoppel letter and, with respect to each such parcel that is shown
as being subject to a mortgage on Section 4(k)(ii) of the Disclosure
Schedule, a non-disturbance agreement, both in a form reasonably
approved by Buyer and Seller's representative promptly after the
execution of this Agreement.
(xviii) Sellers shall have terminated the agreements
and plans listed on Annex II effective prior to or at Closing, and any
leases between MEI and Miller Brothers or Circle Investments shall be
terminated with each party thereto releasing the other from any further
obligations under such lease agreements;
(xix) MEI shall have redeemed for cash in a manner
reasonably satisfactory to Buyer (including that Buyer is reasonably
satisfied that the manner of such redemption, the approval thereof by
the MEI Shareholders and the reporting and other treatment thereof is
in accord with the tax effects of the redemption payments under Section
2) the shares of MEI capital stock owned by Richard Hamrick, Richard
Daviduke, Daniel L. Miller, Thomas A. Miller, Joseph E. Miller and the
John W. Miller Estate Trust prior to Closing;
(xx) No material adverse change shall have occurred
in the business, operations, assets, prospects, financial condition or
results of operations of MEI;
(xxi) Buyer shall have obtained the financing
described in Section 3(b)(vi) hereof;
(xxii) Except for MEI's indebtedness to Citgo
Petroleum Corporation and McLane Company, Inc., all obligations of MEI
or PPC for borrowed money shall be paid in full and terminated;
provided, however, that Seller's Representative may elect not to so pay
in full all or a portion of one or more of the facilities included
within the Lines of Credit if MEI has a payoff letter from the lender
under such facility in form reasonably satisfactory to Buyer setting
forth the amount remaining due and owing to such lender thereunder
through the Closing Date with an agreement by such lender to release
any Security Interest it has in a property securing MEI's obligations
relating thereto, in which case the Preliminary
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Purchase Price shall be reduced by the amount remaining due and
outstanding under such facilities as of the Closing Date (including any
prepayment penalties and termination fees);
(xxiii) Sellers shall have caused to be recorded such
utility and access easements and agreements against the Excluded Properties as
Buyer may reasonably require to insure access and utility services to any
properties to be acquired pursuant to the terms of this Agreement. The form,
substance and location of such easements and agreements shall be mutually
acceptable to Buyer and Seller;
(xxiv) Sellers shall have caused to be recorded
restrictive covenants against the Excluded Properties limiting the use of such
properties. The form and substance of such restrictive covenants shall be
mutually acceptable to Buyer and Seller;
(xxv) Seller shall have executed and delivered the
escrow agreements contemplated by Sections 8(j), 10(a)(xxvi), 10(a)(xxvii) and
10(a)(xxviii);
(xxvi) Seller shall deposit in escrow the sum of
$50,000 which represents the deductible amounts pertaining to the Trust Funds
for store numbers 1430, 3799, 1655, 3804 and 3003. Such deductibles shall be
held in escrow until such time as payment thereof is required to be made to the
applicable governmental authority; provided, however, if such payment is not
required to be made to the applicable governmental authority within three years
after the Closing, then any undisbursed deductibles shall be released to Seller
at such time. The escrow shall be established pursuant to an escrow agreement
mutually acceptable to the parties;
(xxvii) At the Closing, Seller shall cause, at
Buyer's expense, the title insurance company (the "Title Company") to issue the
title insurance policies (the "Title Policies") set forth in Sections
10(a)(xiii) through (xvii). Seller shall, at Seller's sole cost and expense,
exercise its reasonable best efforts to cause the Title Company to exclude from
the applicable Title Policies each of the matters set forth on Disclosure
Schedule Section 10(a)(xxvii) (the "Title Issues"). If despite the exercise of
such reasonable best efforts, Seller is unable to cause the Title Company to
exclude the Title Issues from the applicable Title Policies to be issued at the
Closing, then with respect to each property which has an unresolved Title Issue,
Seller shall deposit in escrow the sum of $100,000. Such escrow shall be
established pursuant to an escrow agreement mutually acceptable to the parties.
From and after the Closing, Seller shall, at Seller's sole cost and expense,
exercise its reasonable best efforts to cause any remaining Title Issues to be
resolved and removed as an exception to title, and cause the Title Company to
issue a new title insurance policy subject only to the exceptions to title set
forth in the applicable Disclosure Schedule, except that such resolved Title
Issue shall not be an exception to title (the "New Title Policy"). If Seller is
successful in resolving all Title Issues with respect to a particular property
and delivers the appropriate New Title Policy to Buyer within three (3) years
after the Closing, then upon Buyer's receipt of the New Title Policy, Seller
shall be entitled to a release of the escrowed amount with respect to such
property. If Seller is unable to cause a Title Issue to be resolved with respect
to a particular property and to cause the delivery of the appropriate New Title
Policy to Buyer within three (3) years after the Closing, then Seller shall
cause to be released to Buyer the amount escrowed with respect to such property
as of
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such date, whereupon Seller shall have no further responsibility to cause the
removal of any remaining Title Issues with respect to such property. If prior to
the resolution of a Title Issue and the issuance of the appropriate New Title
Policy with respect to a particular property, a Third Party Claim is made with
respect to such Title Issue, then the Common Stock Selling Shareholders shall
jointly and severally indemnify, defend and hold harmless Buyer and the
applicable lessee or owner of such property from and against any Adverse
Consequences relating to such Third Party Claim; provided, however, the Common
Stock Selling Shareholders' obligations under this sentence be satisfied from
the escrow and shall not exceed the sum of $100,000 per property;
(xxviii) At the Closing, Seller shall deposit in
escrow the sum of $250,000 with respect to the Environmental Conditions
pertaining to Store 3006. Such escrow shall be established pursuant to an escrow
agreement mutually acceptable to the parties. Notwithstanding anything to the
contrary contained in this Agreement, if any Third Party Claim is made with
respect to the Environmental Conditions pertaining to Store 3006, then Buyer or
MEI (without duplication), shall, from time to time, be entitled to a release of
funds from such escrow in an amount equal to the Adverse Consequences suffered
by Buyer or MEI in connection with such Third Party Claim. Any undisbursed
amounts in escrow shall be released to the Seller upon the later to occur of (1)
the date which is three (3) years after the Closing, or (2) if any Third Party
Claims have been asserted or are outstanding as of the date which is three (3)
years after the Closing, the date of the full and final resolution and discharge
of such Third Party Claims and the release of funds to Buyer or MEI pursuant to
the immediately preceding sentence; and
(xxix) All outstanding stock options, warrants or
rights and benefit plans with respect to the capital stock of MEI or
PPC shall be terminated.
Buyer may waive any condition specified in this Section 10(a) if it executes a
writing so stating at or prior to the Closing.
(b) Conditions to Obligation of Sellers. The obligation of
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 3(b) above shall be true and correct at and as of the Closing
Date;
(ii) Buyer shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any injunction, judgment,
order, decree, or ruling in effect preventing consummation of any of
the transactions contemplated by this Agreement;
(iv) Buyer shall have delivered to Sellers a
certificate to the effect that each of the conditions specified above
in Section 10(b)(i)-(iii) is satisfied in all respects;
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(v) all applicable waiting periods (and any
extensions thereof) under the Hart-Scott-Rodino Act shall have expired
or otherwise been terminated and the Parties and MEI shall have
received all other authorizations, consents, and approvals of
governments and governmental agencies referred to in Section 3(a)(ii),
Section 3(b)(ii), Section 4(c), Section 5(c), Section 6(g) and Section
7(g) above;
(vi) Thomas Miller, Richard Daviduke and Richard
Hamrick shall have entered into employment agreements with Buyer or MEI
and the same shall be in full force and effect;
(vii) Sellers shall have obtained the releases of
guarantees in favor of MEI or PPC issued by any Selling Shareholder or
George C. Miller, Jr. that are identified in writing by the Seller
Representative within ten (10) business days of the date of this
Agreement;
(viii) Sellers shall have received from counsel to
Buyer an opinion in form and substance satisfactory to Sellers,
addressed to the Sellers, and dated as of the Closing Date;
(ix) MEI shall have redeemed the shares of MEI
capital stock owned by Richard Hamrick, Richard Daviduke, Daniel L.
Miller, Thomas A. Miller, Joseph E. Miller and the John W. Miller
Estate Trust prior to Closing;
(x) all actions to be taken by Buyer in connection
with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Sellers' Representative;
(xi) Buyer, Sellers and the escrow agent thereunder
shall have entered into the Escrow Agreement; and
(xii) the parent of Buyer shall have entered into a
guaranty of Buyer's indemnification obligations hereunder in form and substance
as shall be mutually acceptable to Buyer, Buyer's parent and Sellers.
Sellers' Representative may waive any condition specified in this Section 10(b)
if he executes a writing so stating at or prior to the Closing.
11. Remedies for Breaches of This Agreement.
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(a) Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained in Sections 3-7 above
and the covenants contained in Section 8 above shall survive the Closing
hereunder and continue in full force and effect for a period of three years
thereafter, except that the representations and warranties set forth in Sections
4(d) and (j) and 5(d) and (j) shall survive until expiration of the applicable
statute of limitations with respect to such matters; provided that any claim for
a breach of a representation or warranty that is properly made in a timely
manner shall survive until the claim with respect thereto has been finally
resolved; and provided further that all of the representations and warranties of
the Sellers contained in Sections 3(a)(v) and (vi) above shall survive the
Closing and continue in full force and effect forever thereafter (subject to any
applicable statutes of limitations). The covenant contained in Section 9(d)
shall survive two (2) years from the Closing Date and the other covenants of the
Parties contained elsewhere in this Agreement will survive until satisfied in
accordance with their terms.
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(b) Indemnification Provisions for Benefit of Buyer.
(i) Any breach of representations and warranties
contained in Section 4(j) and 5(j) shall be dealt with exclusively in
Section 12. In the event any Seller breaches any of its representations
and warranties contained herein or breaches or any Seller or MEI fails
to perform any of its covenants contained herein, and, if there is an
applicable survival period pursuant to Section 11(a) above, provided
that Buyer makes a written claim for indemnification against Common
Stock Selling Shareholders pursuant to Section 14(h) below within such
survival period, then each Common Stock Selling Shareholder jointly and
severally agrees to indemnify, defend and hold harmless Buyer from and
against any Adverse Consequences Buyer or MEI (without duplication)
shall suffer through and after the date of the claim for
indemnification caused by the breach or failure; provided, however,
that (i) such Common Stock Selling Shareholders shall not have any
obligation to indemnify Buyer from and against any such Adverse
Consequences for breaches of representations and warranties until Buyer
has suffered Adverse Consequences by reason of all such breaches of
representations and warranties and covenants (other than those set
forth in Sections 3(a)(v) and (vi), 4(d) and (j) and 5(d) and (j),
which shall not be so limited) in an amount exceeding a $300,000
aggregate deductible (after which point Common Stock Selling
Shareholders will be obligated only to indemnify Buyer from and against
Adverse Consequences in excess of such amount in accordance with this
Section 11(b)(i)), and (ii) the aggregate liability of the Common Stock
Selling Shareholders for breaches of representations and warranties
(other than those set forth in Sections 3(a)(v) and (vi), 4(d) and (j)
and 5(d) and (j) which shall not be so limited) shall in no event
exceed the amounts contained in the escrow account established by the
Escrow Agreement which shall be the exclusive source of funds for the
payment of claims relating to such representations and warranties and
(iii) except as set forth in Section 10(a)(xxvii), the exclusive source
of funds for the payment of claims relating to title to owned and
leased real property of MEI, Miller Brothers or Circle Investments
shall be any title insurance policies issued to Buyer, MEI and/or PPC
at the Closing with respect to such properties, provided further,
however, that such Selling Shareholders shall not have any obligation
to indemnify Buyer from and against any Adverse Consequences relating
to or arising out of (x) any matter disclosed in the Schedules to this
Agreement, (y) any matter related to a breach of a representation or
warranty contained in Sections 4(p) or 5(p) of which executive officers
of Buyer had actual knowledge prior to the Closing and (z) any item or
matter to the extent that the Adverse Consequences resulting therefrom
do not exceed the amounts specifically shown or reserved for such item
or matter in MEI's most recent audited financial statements or PPC's
most recent unaudited financial statements (including the notes
thereto) and reflected on the Final Balance Sheet.
(ii) Notwithstanding the foregoing, Common Stock
Selling Shareholders agree jointly and severally to indemnify, defend
and hold harmless Buyer, MEI and PPC from and against any claim for the
legal and broker costs, fees and expenses of Sellers, MEI and PPC
payable in connection with the transactions contemplated hereby
(including the expenses payable by the Selling Shareholders pursuant to
Section 14(1)) and for any Adverse Consequences relating to the
Excluded Properties or their transfer pursuant to this Agreement
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other than a Third Party Claim relating to an Environmental Condition
originating at the MEI Real Property, the Miller Brothers Real
Property, the CI Real Property or the real property leased by MEI.
(c) Indemnification Provisions for Benefit of Sellers.
(i) In the event Buyer breaches any of its
representations, warranties, and covenants contained herein, and, if
there is an applicable survival period pursuant to Section 11(a) above,
provided that any of Sellers makes a written claim for indemnification
against Buyer pursuant to Section 14(h) below within such survival
period, then Buyer and MEI agree jointly and severally to indemnify
each of Sellers from and against the entirety of any Adverse
Consequences Seller shall suffer through and after the date of the
claim for indemnification proximately caused by the breach.
(ii) Buyer and MEI agree, jointly and severally, to
indemnify Sellers from and against any Adverse Consequences Sellers
shall suffer arising after the Closing Date from the operation of the
Business or its ownership of the MB Real Property and CI Real Property,
in each case after the Closing Date.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
that may give rise to a claim for indemnification against any other
Party (the "Indemnifying Party") under this Section 11, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof
in writing, provided that failure to so notify shall not affect any
rights or remedies hereunder with respect to indemnification for
Adverse Consequences except to the extent that the Indemnifying Party
is materially prejudiced thereby.
(ii) Any Indemnifying Party will have the right to
assume and thereafter conduct the defense of the Third Party Claim at
his or its sole cost and expense with counsel of his or its choice,
which counsel must be reasonably satisfactory to the Indemnified Party,
provided that it or he thereafter diligently conducts the defense
thereof; provided, however, that the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of
the Indemnified Party (not to be withheld unreasonably). The
Indemnifying Party shall give notice of its or his intention is
assuming the defense of a third party claim within thirty (30) days of
receipt of notice of such claim from the Indemnified Party.
(iii) The Indemnified Party shall be entitled to
participate in (but not control) the defense of any such action, with
its counsel and at its own expense. If the Indemnifying Party does not
assume or fails to conduct in a diligent manner the defense of any such
claim or litigation resulting therefrom, the Indemnified Party may
defend against such claim or litigation, all at the expense of the
Indemnifying Party, subject to the limits on
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the Indemnifying Party's obligations under this Section 11, who shall
promptly reimburse all such reasonable costs and expenses as incurred
by the Indemnified Party (including settlement costs). Each party
agrees to cooperate fully with the other, such cooperation to include,
without limitation, attendance at depositions and the provision of
relevant documents as may be reasonably requested by the Indemnifying
Party, provided that the Indemnifying Party will hold the Indemnified
Party harmless from all of its reasonable expenses, including
reasonable attorney's fees, incurred in connection with such
cooperation by the Indemnified Party. Notwithstanding the foregoing, in
the event that the Indemnified Party reasonably determines in good
faith that its interest with respect to such claim cannot appropriately
be represented by the Indemnifying Party due to an actual conflict of
interest, such Indemnified Party shall have the right to assume control
of the defense of, and to compromise or settle, such claim (exercising
reasonable business judgment) at the Indemnifying Party's expense;
provided; however, that any compromise or settlement shall be subject
to the Indemnifying Party's consent, which consent shall not be
unreasonably withheld, and the limits on the Indemnifying Party's
obligations under this Section 11.
(iv) In no event will the Indemnified Party consent
to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of each of
the Indemnifying Parties (not to be withheld unreasonably).
(e) Determination of Adverse Consequences. The Parties shall
make appropriate adjustments for tax benefits actually realized and insurance
coverage actually recovered (which shall be deemed to include all title
insurance policies issued at Closing pursuant to Section 10(a) above) (net of
reasonable expenses and costs of collection) in determining Adverse Consequences
for purposes of this Section 11. MEI will use its commercially reasonable
efforts to make and pursue claims for insurance coverage under the occurrence
based insurance policies with respect to occurrences arising prior to Closing
and for which claims may be made after Closing. All indemnification payments
under this Section 11 shall be deemed adjustments to the Purchase Price.
(f) Recoupment and Setoff under Escrow Agreement. To the
extent that Buyer is entitled to indemnification from any Selling Shareholder
pursuant to Section 11(b) from and against any Adverse Consequences for breaches
of representations and warranties (other than those set forth in Sections
3(a)(v) and (vi), 4(d), (j) and (p) and 5(d), (j) and (p)), Buyer shall recoup
and setoff its indemnifiable Adverse Consequences by exercising its rights
pursuant to the Escrow Agreement in accordance with the terms thereof prior to
seeking any recovery directly from a Common Stock Selling Shareholder pursuant
to this Section 11.
(g) Other Indemnification Provisions. After Closing, the
indemnification provisions in this Section 11 and in Section 10 and Section 12
are the exclusive remedy any Party may have for any breach of a representation
or warranty herein, or for any other remedy any Party may have in connection
with the transactions contemplated hereby, except that the foregoing shall not
impair any Party's right to adjust the Purchase Price in accordance with Section
2(g).
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12. Taxes.
(a) Tax Indemnity. From and after the Closing Date, the Common
Stock Selling Shareholders shall each jointly and severally indemnify and hold
harmless Buyer and MEI or PPC, as the case may be, against the following Taxes
and, against any loss, damage, liability or expense, including, but not limited
to (and except as provided in Section 12(d) hereof), reasonable fees for
attorneys and other outside consultants incurred in contesting any such Taxes,
in lieu of any other remedy Buyer may have and in full satisfaction of any
liability and obligations of the Common Stock Selling Shareholders under this
Agreement: (i) Taxes imposed on MEI or PPC, as the case may be, with respect to
any taxable years or periods ending on or before the Closing Date; (ii) Any
reduction (other than by application against Taxes due and payable) of prepaid
Tax, a Tax receivable, a Tax refund, or other Tax benefit included as an asset,
or otherwise taken into account, in determining the Actual Closing Date Net
Working Capital of MEI and PPC; (iii) Taxes or additional Taxes imposed on MEI
or PPC, as the case may be, that are allocable, pursuant to Section 12(b) below,
to the portion of such taxable years or periods ending on the Closing Date (an
"Interim Period") but only to the extent that any liability for Taxes for such
periods exceeds the amount of any accrual for current taxes payable that is
taken into account in determining the Actual Closing Date Net Working Capital
(Interim Periods and any taxable years or periods that end on or prior to the
Closing Date being referred to collectively hereinafter as "Pre-Closing
Periods"); (iv) Taxes or additional Taxes imposed on MEI or PPC, as the case may
be, or Buyer for any Pre-Closing Periods as a result of a breach of the
representations and warranties set forth in Section 4(j) with respect to MEI and
Section 5(j) with respect to PPC of this Agreement or of the covenants contained
in this Section 12; and (v) Taxes or other payments required to be made after
the date hereof by MEI or PPC, as the case may be, or Buyer for any Pre-Closing
Period to any party under any Tax sharing, indemnity or allocation agreement
(whether or not written) and (vi) to the extent not otherwise indemnified under
clauses (i) and (iii) above, Taxes imposed as a result of the distribution or
transfer of the Excluded Properties to the Selling Shareholders or other
Parties. Common Stock Selling Shareholders' obligations under this Section 12
shall be adjusted for any tax savings, reduction or benefit actually realized by
MEI or PPC (or their successors and assigns) in connection with the matter
subject to the indemnification claim.
(b) Apportionment of Taxes. In order to apportion,
appropriately, any Taxes relating to any taxable year or period that includes an
Interim Period, the parties hereto shall, to the extent permitted under
applicable law, elect with the relevant Tax authority to treat for all purposes
the Closing Date as the last day of the taxable year or period of MEI or PPC, as
the case may be, and such Interim Period shall be treated as a short taxable
year and a Pre-Closing Period for purposes of this Section 12(b). In any case
where applicable law does not permit MEI or PPC, as the case may be, to treat
the Closing Date as the last day of the taxable year or period of MEI or PPC, as
the case may be, with respect to Taxes that are payable with respect to an
Interim Period, the portion of any such Tax that is allocable to the portion of
the Interim Period ending on the Closing Date shall be:
(i) In the case of Taxes that are either (1) Income
Taxes, or (2) imposed in connection with any sale or other transfer or
assignment of property (real or personal,
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tangible or intangible) including all Taxes incurred through the
Closing Date as a result of the transfers contemplated hereunder, other
than sales or use taxes covered by Section 14(l), an amount equal to
the amount that would be payable if the taxable year or period ended on
the Closing Date (except that solely for purposes of determining the
effective tax rate applicable to income or receipts during such period
in a jurisdiction in which such tax rate depends upon the level of
income or receipts, annualized income or receipts may be taken into
account, if appropriate, for an equitable sharing of such Taxes); and
(ii) In the case of Taxes not described in
subparagraph ((i)) above that are imposed on a periodic basis and
measured by the level of any item, an amount equal to the amount of
such Taxes for the entire period (or, in the case of such Taxes
determined on an arrears basis, the amount of such Taxes for the
immediately preceding period) multiplied by a fraction the numerator of
which is the number of calendar days in the Interim Period ending on
the Closing Date and the denominator of which is the number of calendar
days in the entire relevant period. The Buyer shall not receive an
indemnity for any ad valorem taxes attributable to any increase in the
assessed value of MEI's or PPC's property that is proposed after the
Closing Date for an Interim Period nor shall MEI or PPC receive a
benefit for any decrease in such assessed value.
(c) Section 338(h)(10) for PPC. At the request of Buyer, the
Common Stock Selling Shareholders shall cause George C. Miller ("GCM") to
execute, and to file with his Tax Returns for federal, state and local income
tax purposes, forms of election under Section 338(h)(10) of the Code with
respect to the sale of the stock of PPC to Buyer and any substantially
equivalent provisions under state or local income tax law, which forms of
election shall be prepared by Buyer and shall allocate the purchase price of the
stock of PPC among the assets of PPC in accordance with the fair market value of
such assets as Buyer shall reasonably determine. If the Tax liability of GCM is
increased as a result of this election under Section 338(h)(10), upon receipt by
Buyer of reasonable evidence of such increased Tax liability, Buyer shall
increase the purchase price of the PPC Stock by such an amount so that GCM would
realize the same after-tax amount from the sale of stock of PPC as if such
election under Section 338(h)(10) of the Code had not been made.
(d) Contests. Buyer shall promptly notify the Sellers'
Representatives in writing of any written request by a Governmental Authority to
audit MEI or PPC (and their successors), and any written notice of a proposed
assessment or claim in an audit or administrative or judicial proceeding
involving MEI or PPC (and their successors), as the case may be, which, if
determined adversely to the taxpayer, would be grounds for indemnification under
this Section 12; provided, however, that a failure to give such notice will not
affect Buyer's right to indemnification hereunder, except to the extent, if any,
that, but for such failure, the Selling Shareholders or GCM, as the case may be,
could have timely contested the Tax liability in question. In the case of an
audit or administrative or judicial proceeding that relates to any Pre-Closing
Period other than the Interim Period, the Common Stock Selling Shareholders,
with respect to MEI, or GCM or his designee, with respect to PPC, shall have the
right at the Selling Shareholders' or GCM's expense (as the case may be) to
control the conduct of such audit or proceeding, provided that within 60 days
after such Person receives the written notice from Buyer required under this
Section 12 and prior to taking any such
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action with respect to such audit or administrative or judicial proceeding, the
Common Stock Selling Shareholders or GCM acknowledge in writing that they have
the indemnification obligation under this Section 12 to indemnify Buyer and MEI
and PPC, as the case may be, against the full amount of any adjustment that may
be made as a result of such audit or proceeding. Notwithstanding the foregoing,
neither the Common Stock Selling Shareholders nor GCM shall settle or otherwise
compromise any issue or matter without the Buyer's prior written consent (which
consent shall not be unreasonably withheld) if such issue or matter will have a
material effect on the liability for Taxes of the Buyer or MEI and PPC, as the
case may be, for a post-Closing taxable year or period (or for an Interim
Period). Buyer also may participate in any such audit or proceeding at its own
expense and, if the Common Stock Selling Shareholders or GCM, as the case may
be, do not assume the defense of any such audit or proceeding, Buyer may,
without any effect to its or MEI's or PPC's, right to indemnification under this
Section 12, defend the same in such manner as it may deem appropriate,
including, but not limited to, settling such audit or proceeding with Common
Stock Selling Shareholders' or GCM's consent, as applicable, which consent shall
not be unreasonably withheld.
(e) Time of Payment. Payment of any amounts due under this
Section 12 in respect of Taxes shall be made by the Common Stock Selling
Shareholders with respect to MEI or GCM with respect of PPC, at least three
business days before the due date of the applicable estimated or final Tax
Return required to be filed by Buyer or that is required to be reported income
for an Interim Period for which such shareholders are responsible under this
Agreement without regard to whether the Tax Return shows overall net income or
loss for such period, or, with respect to indemnity payments due under Section
12(a) of this Agreement, within three Business Days following a settlement or
compromise of an assessment of a Tax by a taxing authority or a "determination"
as defined in Section 1313(a) of the Code. If liability under this Section 12 is
in respect of costs or expenses other than Taxes, payment by the Common Stock
Selling Shareholders or GCM of any amounts due under this Section 12 shall be
made within five Business Days after the date that such the Common Stock Selling
Shareholders, as the case may be, have been notified by Buyer that such Persons
have liability for a determinable amount under this Section 12 and are provided
with calculations or other materials supporting such liability.
(f) Termination of the Shareholders' Indemnity Obligations for
Taxes. Notwithstanding any provision herein to the contrary, the Common Stock
Selling Shareholders obligations to indemnify and hold harmless Buyer, MEI, and
PPC, as the case may be, pursuant to this Section 12 shall terminate at the
close of business on the 120th day following the expiration of the applicable
statute of limitations with respect to the liability for Taxes in question (but
giving effect to any waiver, mitigation or extension thereof authorized by the
Common Stock Selling Shareholders). Buyer, PPC and MEI may not extend a statute
of limitations applicable to a Pre-Closing Period (other than an Interim Period)
without Common Stock Selling Shareholders' or GCM's consent.
(g) Tax Elections. From and after the date hereof, MEI and
PPC, shall not, without the prior written consent of Buyer (that may not
unreasonably withhold such consent), make
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or revoke, or cause or permit to be made or revoked, any election with respect
to Taxes, or adopt or change any method of accounting, that would adversely
affect MEI and PPC, as the case may be.
(h) Further Adjustments. If the actual amount of prepaid Tax,
Tax receivable, Tax refund or other Tax benefit (including amounts payable after
the Closing to the Common Stock Selling Shareholders under the Actual Closing
Date Working Capital definition) of MEI for Pre-Closing Periods (related solely
to tax events from Pre-Closing Periods, and not by way of carryback or other
adjustment from periods or partial periods ending after the Pre-Closing Periods)
is greater than the amount of prepaid Tax, Tax receivable, Tax refund or other
Tax benefit taken into account in determining the Actual Closing Date Net
Working Capital of MEI, Buyer shall offset any amounts due Buyer hereunder, and
if no such amounts are due, Buyer shall make the appropriate payment to the
Common Stock Selling Shareholders within ten business days following receipt or
utilization of such greater amount of prepaid Tax, Tax receivable, Tax refund or
other Tax benefit.
(i) Intent. It is the intent of this Section 12 and the Actual
Closing Date Net Working Capital payments under Section 2 that the Selling
Shareholders shall be responsible and liable for all Taxes of MEI and PPC for
Pre-Closing Periods, but without double payment by the Selling Shareholders of
such Taxes under such provisions.
13. Termination.
(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) Buyer and Sellers' Representative may terminate
this Agreement by mutual written consent at any time prior to the
Closing;
(ii) Buyer may terminate this Agreement by giving
written notice to Sellers' Representative at any time prior to the
Closing if any of Sellers has within the then previous fifteen (15)
business days given Buyer any notice pursuant to Section 8(e)(i) above;
(iii) Buyer may terminate this Agreement by giving
written notice to Sellers' Representative at any time prior to the
Closing if (A) any of Sellers is in breach of any representation,
warranty, or covenant contained in this Agreement in any material
respect, Buyer has notified Sellers' Representative of the breach, and
the breach has continued without cure for a period of 30 days after the
notice of breach, or (B) the Closing shall not have occurred on or
before February 11, 1999, by reason of the failure of any condition
precedent under Section 10(a) hereof (unless the failure results
primarily from Buyer itself breaching any representation, warranty, or
covenant contained in this Agreement);
(iv) Sellers' Representative may terminate this
Agreement by giving written notice to Buyer at any time prior to the
Closing if (A) Buyer has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, any of
Sellers has notified Buyer of the breach, and the breach has continued
without cure
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for a period of 30 days after the notice of breach, or (B) the Closing
shall not have occurred on or before February 11, 1999, by reason of
the failure of any condition precedent under Section 10(b) hereof
(unless the failure results primarily from any of Sellers themselves
breaching any representation, warranty, or covenant contained in this
Agreement); and
(v) Buyer may terminate this Agreement pursuant to
Section 8(g).
(b) Effect of Termination. If any Party terminates this
Agreement pursuant to Section 13(a) above, all rights and obligations of the
Parties hereunder shall terminate without any liability of any Party to any
other Party (except for any liability of any Party then in breach); provided,
however, that the confidentiality provisions contained in Section 8(d) above
shall survive termination.
14. Miscellaneous.
(a) Incorporation of Exhibits, Annexes and Schedules. The
Exhibits, Annexes, and Schedules and Disclosure Schedules identified in this
Agreement are incorporated herein by reference and made a part hereof.
(b) Press Releases and Public Announcements. No Party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written approval
of Buyer and the Sellers' Representative, unless required by applicable law. In
addition, no Party shall issue a press release or publicly announce the
Preliminary Purchase Price, the Purchase Price or any component thereof, unless
such Party is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities to make such disclosure (in which case
the disclosing Party will use its commercially reasonable efforts to advise the
other Parties prior to making the disclosure).
(c) No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they have related in any way to the
subject matter hereof.
(e) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors, heirs, Personal representatives and permitted assigns. No Party may
assign either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of Buyer and Sellers'
Representative; provided, however, that Buyer may (i) assign any or all of its
rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
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(f) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Sellers: Copy to:
331 Central Avenue Holland & Knight LLP
Crescent City, FL 32112 400 N. Ashley Dr., Suite 2050
Attention: Thomas A. Miller Tampa, Florida 33602
Attention: Chester E. Bacheller, Esq.
If to Buyer: Copy to:
Li'l Champ Food Stores Inc. Riordan & McKinzie
c/o The Pantry, Inc. 300 S. Grand Ave., 29th Floor
1801 Douglas Drive Los Angeles, CA 90071
Sanford, NC 27330 Attention: Cynthia M. Dunnett, Esq.
Attention: Peter J. Sodini
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including Personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Florida without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Florida or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Florida. The Parties
hereto, acting for themselves and for their respective successors and assigns,
without regard to domicile, citizenship or residence, hereby expressly and
irrevocably (i) consent and subject themselves to the exclusive jurisdiction of
the United States District Court of the Middle District of
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Florida or any Florida State court sitting in Tampa in respect of any and all
matters arising under or in connection with this Agreement, (ii) agree that all
claims, actions and proceedings arising under or relating to this Agreement may
be heard and determined in any such court, (iii) agree not to bring any action
or proceeding arising out of or relating to this Agreement in any other forum,
and (iv) agree to the enforcement of any judgment rendered by any such court in
any court in the United States or foreign jurisdiction, in accordance with the
laws governing enforcement of judgments in that jurisdiction. Each of the
parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought. Service of process, notices and demands of any
such court may be made upon any Party by Personal service at any place where it
may be bound or by mailing copies of such process, notices, demands and
communications by certified or registered mail, postage prepaid and return
receipt requested, to the address of such Party herein above set forth.
(j) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Buyer and Sellers' Representative. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(l) Expenses. Buyer will pay the following costs and expenses
incurred by the Parties in connection with this Agreement and the transactions
contemplated hereby: (i) all Hart-Scott-Rodino Act filing fees of all Parties;
(ii) all survey costs; (iii) except as provided in Section 10(a)(xxvii), all
title insurance search fees and premiums and related reasonable costs and
expenses of the title insurance company; and (iv) all real estate recording fees
and transfer taxes and all sales, transfers, documentary and similar taxes,
stamps, fees, assessments and costs, all sales and use taxes, permit fees,
documentary, stamps, and environmental assessment fees, if any, payable in
connection with the sale, conveyance, assignment, transfers and deliveries made
in connection with this Agreement, but excluding any other legal fees of any
other Party; provided, however, that any Florida documentary stamps on deeds for
the transfer of the MB Real Property and the CI Real Property shall be paid
one-half by Buyer and one-half by Sellers. Sellers will pay all investment
banking fees payable in connection with this Agreement., including those
described in Section 4(d) of the Disclosure Schedules. Each Party shall be
responsible for its own legal fees. Notwithstanding the foregoing, Sellers shall
be responsible for all costs and expenses relating to the transfer of the
Excluded Properties.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the
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provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement to
be effective the date first above written.
LIL CHAMP FOOD STORES, INC.
By: /s/ Peter J. Sodini
----------------------------------------
Title: President/CEO
-------------------------------------
MILLER ENTERPRISES, INC.
By: /s/ Thomas A. Miller
----------------------------------------
Title: President
-------------------------------------
SELLING SHAREHOLDERS:
/s/ Thomas A. Miller
-------------------------------------------
Thomas A. Miller
/s/ Joseph E. Miller
-------------------------------------------
Joseph E. Miller
THE MILLER INVESTMENTS TRUST U/A
DATED OCTOBER 11, 1995
By: /s/ Thomas A. Miller
----------------------------------------
Thomas A. Miller, Trustee
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THE GEORGE C. MILLER, JR, ESTATE
TRUST U/A DATED JUNE 30,1989
By: /s/ Thomas A. Miller
----------------------------------------
Thomas A. Miller, Trustee
MILLER BROTHERS
By: /s/ Thomas A. Miller
----------------------------------------
Thomas A. Miller, Partner
By: /s/ Joseph E. Miller
----------------------------------------
Joseph E. Miller, Partner
CIRCLE INVESTMENTS, LTD.
By: Circle Management, Inc.
Its: General Partner
By: /s/ Thomas A. Miller
----------------------------------------
Thomas A. Miller, President
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