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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1997
Commission file number 1-13018
PETRO STOPPING CENTERS, L.P.
(Exact name of the registrant as specified in its charter)
Delaware 74-2628339
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6080 Surety Dr. 79905
El Paso, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (915) 779-4711
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock and non-voting common
equity held by non-affiliates of the registrant.
Not Applicable
DOCUMENTS INCORPORATED BY REFERENCE: Portions of Item 14 of Part IV are
incorporated by reference to: Petro Stopping Centers, L.P.'s Registration
Statement No. 33-76154, filed on April 26, 1994; Petro Stopping Centers, L.P.'s
Quarterly Report on Form 10-Q for the quarter ended March 30, 1994, filed on
July 1, 1994; Petro Stopping Centers, L.P.'s Quarterly Report on Form 10-Q for
the quarter ended March 31, 1995, filed on May 15, 1995 ; Petro Stopping
Centers, L.P.'s Annual Report on Form 10-K for the fiscal year ended December
29, 1995, filed on March 28, 1996 ; Petro Stopping Centers, L.P.'s Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, filed on April 14,
1996; and Petro Stopping Centers, L.P.'s Current Report on Form 8-K filed on
September 3, 1997, as amended on Form 8-K/A, filed on September 11, 1997.
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PART I
ITEM 1. Business
General
Petro Stopping Centers, L.P. (the "Company") is a leading operator of
large, full-service truck stops with a nationwide network of 46 facilities known
as Petro Stopping Centers ("Stopping Centers"), located in 29 states. The
Company has built its reputation by providing a high level of customer service
in a consistently clean and friendly environment. Each Stopping Center offers a
broad range of products, services and amenities, including diesel fuel,
gasoline, home-style restaurants, truck preventive maintenance centers
("Petro:Lubes") and travel and convenience stores to commercial truck drivers,
other highway motorists and local residents. Of the 46 Stopping Centers, 18 are
operated by franchisees who are required to meet the Company's high standards of
quality and service.
The Company's primary customers are commercial and private trucking fleets
and professional truck drivers that comprise the long-haul sector of the
trucking industry. The Company sells diesel fuel to over 10,600 trucking
accounts. By serving the needs of this customer base, the Company has continued
to grow its revenues and generate stable cash flow.
The Company's facilities are designed to offer a number of benefits to
truck fleet operators and drivers. These advantages generally include well-lit
and fenced parking lots to enhance security for drivers, trucks and freight;
spacious parking areas and well-designed traffic flow to reduce truck stop
accidents; and fewer stops and out-of-route miles through the use of the
Company's one-stop, multi-service facilities. As trucking fleets consolidate
and outsource their fueling as well as maintenance requirements, the Company's
facilities continue to experience sizable growth in diesel fuel volume and
preventive maintenance revenues.
The Company's business was founded by Jack Cardwell, who opened the
Company's first truck stop in El Paso, Texas in 1975. Until 1992, the Company
conducted its operations through a variety of entities owned by Mr. Cardwell and
members of his family. Effective as of April 30, 1992, Fremont Group, Inc.
("Fremont"), an affiliate of Bechtel Group, Inc. and then named Bechtel
Investments, Inc., made an equity investment in the business through two
Delaware limited partnerships, Petro PSC Properties, L.P. ("Petro Properties")
and Petro PSC, L.P. ("Petro PSC"). In the transaction, Fremont and Roadside,
Inc. ("Roadside"), which is a wholly owned subsidiary of Fremont and was one of
the general partners of Petro Properties and Petro PSC, invested $25,000,000 in
the partnerships and Mr. Cardwell, his son and entities controlled by them, as
well as Arcadian Management Corporation ("Arcadian"), a corporation wholly owned
by a former executive officer of the Company, contributed most of the real
estate assets of the business to Petro Properties and the operating and other
assets of the business to Petro PSC. The contributions made by the members of
the Cardwell Group (as defined) and Arcadian were valued at $45,570,000 by the
partners of Petro Properties. The Cardwell Group's contribution to Petro
Properties was recorded at the Cardwell Group's amortized cost of the related
assets and liabilities. Thereafter, Fremont and Roadside made additional equity
investments in the partnerships totaling $10,000,000. Effective December 31,
1994, Petro Properties and its principal operating subsidiary, Petro PSC, were
merged and the name of the surviving partnership was changed to Petro Stopping
Centers, L.P., a Delaware limited partnership.
In October 1996, Jack Cardwell, Jim Cardwell, JAJCO II, Inc. ("JAJCO"),
Petro Inc. (together with Jack Cardwell, Jim Cardwell, and JAJCO, collectively,
the "Cardwell Group"), Mobil Long Haul Inc. ("Mobil Long Haul"), wholly owned by
Mobil Oil Corporation ("Mobil"), Petro Holdings GP Corp. ("Holdings GP"), Petro
Holdings LP Corp. ("Holdings LP") and together with Holdings GP, "Chartwell,"
both of which were newly formed affiliates of Chartwell Investments Inc.
("Chartwell Investments") and the Company, entered into the Omnibus Agreement
pursuant to which the parties thereto agreed, among other matters, that
Chartwell and Mobil Long Haul would acquire the general and limited partnership
interests of the Company owned by Sequoia Ventures, Inc. ("SVI") and Roadside
(and together with SVI, the "Fremont Partners") and invest in the Company. On
January 30, 1997, the Company consummated the Omnibus Agreement transaction in
which Chartwell and Mobil Long Haul invested $20,700,000 and $15,000,000,
respectively (the "Equity Investment"), and directly acquired the partnership
interest of the Fremont Partners for approximately $25,600,000 and invested
approximately $10,100,000 in the Company. The Cardwell Group maintained their
capital investment in the Company. Kirschner Investments ("Kirschner"), a
Company franchisee, invested $1,000,000 in the Company (the "Kirschner
Investment"). Following their Equity Investment and the Kirschner Investment,
the common partnership interests of the Company are owned by Chartwell
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(approximately 50.6%), the Cardwell Group (approximately 39.7%), Mobil Long Haul
(approximately 7.3%), and Kirschner (2.4%), and the mandatorily redeemable
preferred partnership interests of the Company are owned by Mobil Long Haul
($12,000,000) and the Cardwell Group ($7,600,000). Chartwell and the Cardwell
Group own both general and limited partnership interests in the Company, and
Mobil Long Haul and Kirschner own only limited partnership interests in the
Company. Mobil and the Company also entered into certain supply and marketing
agreements in connection with the Recapitalization (as defined).
As part of the Recapitalization, the Company issued $135,000,000 of 10 1/2%
Senior Notes due 2007, (the "New Notes") and made a tender offer (the "Tender
Offer") for all of, and repurchased approximately 94% of, its 12 1/2% Senior
Notes due 2002 (the "Old Notes") and 100% of the outstanding debt warrants (the
"Debt Warrants").
The Company also amended its senior collateralized credit facility (the
"Old Credit Agreement" and, as amended, the "New Credit Agreement"). The New
Credit Agreement consists of a $25,000,000 revolving credit facility (the
"Revolving Credit Facility"), a $14,000,000 Term Loan A, a $30,000,000 Term Loan
B and a $40,000,000 Expansion Facility (the "Expansion Facility"). The New
Credit Agreement is collateralized by substantially all of the Company's assets
and the partnership interests of Mobil Long Haul and Chartwell and guaranteed by
each of the Company's subsidiaries, whose guarantees in turn are collateralized
by substantially all of such subsidiaries' assets.
The Recapitalization consists of the Equity Investment, the Tender Offer,
the Kirschner Investment, the issuance of the New Notes and the entering into of
the New Credit Agreement.
Petro Stopping Centers
There are 28 Company-operated Stopping Centers, of which 25 are full-size
locations and three are Petro :2 Centers ("Petro:2 Centers"). There are 18
franchised facilities, of which 14 are "full-service" locations and four are
Petro:2 Centers. Petro:2 Centers provide the same basic fuel, non-fuel, and
restaurant services as full-sized Stopping Centers, but on a smaller scale and
with fewer amenities. A typical full-size Stopping Center is built on 15 to 30
acres with separate entrances and parking areas for trucks and automobiles.
Parking areas typically accommodate 200 to 300 trucks and 100 to 175 cars or
recreational vehicles, and are well lit and fenced to maximize customer safety.
Petro Stopping Centers are open 24 hours a day and typically consist of the
following:
Fuel
Each Stopping Center has a diesel fuel island which is a self-service
facility for professional drivers that typically consists of eight to 16
fueling lanes. The fuel dispensers are computer driven, high speed units. Each
fueling lane permits simultaneous fueling of each of the truck's two tanks.
Pursuant to its strategic alliance with Mobil, the Company converted to selling
Mobil branded diesel fuel with the Company's proprietary Petro Power Plus fuel
additive at all of the Company-operated diesel fuel islands during 1997. All
Company-operated diesel fuel islands and dispensers carry signage with both the
"Petro" and "Mobil" brand names.
In addition to the diesel fuel island for professional drivers, gasoline and
automobile diesel fuel are sold from a separate auto fuel island at 27 of the
Company's 28 locations. The auto fuel islands are accessed by separate "auto-
only" entrances which help to separate auto and truck traffic at the facility.
The typical auto fuel island is equipped with four to 12 fuel dispensers for
convenient and efficient fueling.
Non-fuel
In 1983 the Company opened its first Petro:Lube facility to provide "while-
you-wait" preventive maintenance service for trucks. Since that time,
Petro:Lubes have been introduced at all of the Company-operated full-size
Stopping Centers and at two of its three Petro:2 Centers. Petro:Lube facilities
offer oil and filter changes, lubrication and new, used and retread tires, as
well as tire repair. The Company was the first truck stop chain to offer service
to truckers on an express basis.
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Each Petro:Lube sells a limited number of high-quality brands such as Mobil
Delvac, Shell Rotella and Chevron Delo heavy duty motor oils and Kelly,
Bridgestone and Firestone tires. Under the marketing agreements entered into
with Mobil, Petro:Lube locations feature Mobil's Delvac brand lubricants and
have developed marketing programs and strategies with Mobil. See Item 13
"Certain Relationships and Related Transactions." Each Petro:Lube honors
manufacturers' warranties as well as the Company's warranties for work performed
at any Petro:Lube throughout the country.
Petro:Lube services are primarily utilized by owner/operators and small
fleets, but larger fleets are increasingly looking to outsource their
maintenance needs. In addition to Stopping Center locations, the Company opened
a stand-alone Petro:Lube in 1996.
To attract the business of drivers seeking a quick refueling stop, each
diesel fuel island includes a "mini-mart" offering an array of deli take out
food, snack foods, beverages, toiletries and a basic selection of trucker
accessories and supplies. In addition, other services including certified
scales, check cashing, money wire services, permit services, faxing and copying
are available. These facilities enable the driver seeking a quick refueling stop
to purchase consumables and services while refueling.
Each Stopping Center also includes a Travel Store featuring merchandise
specifically selected to cater to a professional truck driver's shopping needs
during the long periods typically spent away from home. Merchandise categories
include clothing, electronics such as televisions, mobile satellite dishes,
VCR's and CB radios as well as toiletries, gifts and truck accessories such as
cables, fuses, reflectors and antennae. A travel store typically carries
approximately 7,500 SKUs and averages 1,900 square feet of selling space.
To meet the personal and business needs of commercial drivers and other
motorists, the Company provides numerous additional services at its Stopping
Centers. At the typical Stopping Center, customers have access to telephone, fax
and other communications services, overnight express drop boxes and ATMs.
Professional drivers have convenient on-site access to a certified truck
weighing scale and a truck wash operated by a third-party at most locations. In
addition, they can receive their paychecks and cash advances. For a driver's
comfort and relaxation, Stopping Centers provide laundry facilities, game rooms,
television viewing rooms and at certain Stopping Centers, movie theaters.
Each full-size Stopping Center features 12 to 18 private shower facilities.
The showers are fully tiled for easy maintenance and are professionally cleaned
after each use. Each shower room is equipped with a lock to provide privacy and
security. The Company also leases retail space at its Stopping Centers to
independent merchants.
Since June 1993, the Stopping Centers located in Hammond and Shreveport,
Louisiana have featured video poker operations. The primary customers for these
activities are local area residents. The video poker operations at each of these
sites feature 50 machines and are conducted in a stand-alone building, separated
from other Stopping Center facilities. A third-party operator manages the video
poker operations and incurs substantially all related expenses while paying a
portion of each machine's "winnings" to the Company. During 1996, Louisiana
enacted a statute requiring the cessation of video poker operations unless the
parish in which the operations were conducted voted to allow the continued
operations of video poker machines. On November 5, 1996, the parish in which the
Shreveport facility is located voted to continue to allow video poker
operations, while the parish in which the Hammond facility is located voted to
disallow video poker operations. The video poker operations at the Hammond
facility are required to be phased out by the end of June 1999.
Restaurants
Each full-size Stopping Center includes the Company's trademarked "Iron
Skillet" restaurant. This home-style, sit down restaurant typically seats
approximately 180 customers, and features counter and waitress service, a soup
and salad bar and three "All-You-Can-Eat" buffets per day. The Iron Skillet
prides itself on the "home cooked" items prepared fresh at each location.
Recipes developed at the Company's test kitchen in El Paso are accessible from
each location by computer. In addition, two of the Company operated Petro:2
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Centers currently contain a "Quick! Skillet" restaurant, which offers a narrower
menu selection than the Iron Skillet restaurant at full-sized Stopping Centers.
Iron Skillet restaurants are open 24 hours per day, 365 days per year and
have "drivers only" sections. Public telephones are generally available
throughout the dining area for customer convenience.
The Company has introduced nationally branded fast food concepts at several
of its locations. The Company currently operates one Wendy's, two Blimpie Subs &
Salads and three Pizza Hut Express units and plans to expand its fast food
program during the next several years. In addition, the Company has introduced
its own branded deli program within the locations known as "The Filling
Station." At December 31, 1997, the Company had three locations and plans to
expand the concept in the future.
Competition
The U.S. truck stop industry is large and highly fragmented. According to
industry data, which is limited, there are approximately 2,200 truck stops
located on interstate highways. Management believes that approximately 30% are
operated by eight major national or regional truck stop chains. Long-haul trucks
can obtain diesel fuel from a wide variety of sources, including their own
fueling terminals, chains of large, high-quality truck stops, limited service
fueling facilities and some large service stations. The Company believes that,
while it competes with all truck stops, its principal competitors are
increasingly large, multi-service truck stop chains. Management believes that
eight chains accounted for approximately 45% of the 13.0 billion gallons of
over-the-road diesel fuel sold in 1996 in the United States and that the market
share of these large chains continues to increase as fleets look to do business
with fewer, more nationally represented providers to meet their needs. Trucking
fleets typically place a limited number of truck stop chains in their approved
fuel networks in an attempt to consolidate and leverage purchasing power.
Certain of the Company's competitors have substantially greater financial and
marketing resources than the Company.
The Company prices its diesel fuel competitively. A number of other large,
multi-service truck stop chains build somewhat smaller and less expensive
facilities, emphasizing low-priced diesel fuel and fast food restaurants. Many
of the other truck stop chains employ discount pricing of diesel fuel to
compete. At the same time, increased competition and over capacity among
trucking companies in recent years have increased truck fleet owners' focus on
reducing their operating costs. This has put increased pressure on diesel fuel
margins for the Company and its competitors. In recent years, a number of the
larger fleets have also opened proprietary terminals along their most-traveled
routes. In addition, from time to time, the Company is subject to intense price
competition in certain of its markets.
Fuel Suppliers
Historically, the Company has not entered into significant long-term
contracts with fuel suppliers and engaged in only limited hedging activities. On
occasion the Company has purchased fuel in the forward contract market. In
connection with the Recapitalization, the Company has entered into 10-year
supply agreements with Mobil Oil Corp. ("Mobil") under which Mobil will supply
the Company-operated Stopping Centers' diesel fuel requirements as well as a
portion of their lubricant and gasoline requirements. The diesel fuel sold at
all Company-operated Stopping Centers is branded Mobil Diesel, and the Company-
operated Petro:Lubes feature Mobil Delvac lubricants. Under the diesel fuel and
gasoline supply agreement dated January 30, 1997(the "Supply Agreement"), the
Company has agreed to purchase from Mobil specified distribution terminals a
minimum number of gallons of diesel fuel and gasoline on a monthly basis and on
an annual basis, subject to product availability and reductions by Mobil under
certain described circumstances and subject to existing gasoline supply
contractual obligations. As a result of the Supply Agreement and in order to
comply with the laws governing the branding of diesel fuel, Mobil Diesel Supply
Corp. ("MDS"), a wholly owned subsidiary of Mobil, was formed. MDS purchases
diesel fuel from third-party suppliers and then sells it back to the Company at
cost, given that Mobil cannot supply 100% of the Company's diesel fuel demand
due to limited product availability and restrictions on the amount of diesel
fuel that the Company is allowed to purchase from Mobil. The Company's fuel
purchase arrangement with MDS enables the Company to meet its
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diesel fuel demand and to comply with branding laws, which require Mobil to
first take possession of the fuel before it can be branded as Mobil Diesel.
The Supply Agreement allows the Company to continue to negotiate for the
purchase of diesel fuel with third-party suppliers approved by MDS. If the
Company is able to obtain a lower diesel fuel price from a third-party supplier
in a particular market area, the Company may request that Mobil meet such lower
price or allow a portion of the Company's diesel fuel requirements to be
supplied from such MDS approved third-party supplier, in which case MDS would
purchase the diesel fuel from the supplier and resell the product to the
Company. Any change in supply source, however, does not affect the Company's
requirement to purchase the annual minimum number of gallons from Mobil
specified distribution terminals fixed by the Supply Agreement. The Supply
Agreement also places a monthly limit on the maximum number of gallons of diesel
fuel and gasoline that the Company may lift from Mobil specified distribution
terminals. See Item 13. "Certain Relationships and Related Transactions."
The Company purchases diesel fuel for each of its Company-operated Stopping
Centers on a daily basis. Each location typically maintains a one to three day
inventory of fuel. During 1997, the Company purchased the majority of its diesel
fuel from two key suppliers. The Company purchased approximately 40% and 27% of
diesel fuel from MDS and Mobil, respectively, during 1997.
Trademarks and Trade Names
The Company is the owner in the United States of various trademarks and
service marks. The Company grants franchisees the non-exclusive right to use
the proprietary marks at franchised locations. The Company regards its
trademarks and service marks as valuable assets and believes that they have
significant value in the marketing of its products and services.
Governmental Regulation
Environmental Regulation
The Company's operations and property are subject to extensive federal and
state legislation and regulations relating to environmental matters. The Company
uses underground and above ground storage tanks to store petroleum products and
waste oils. Statutory and regulatory requirements for underground storage tank
("UST") systems include requirements for tank construction, integrity testing,
leak detection and monitoring, overfill and spill control, and mandate
corrective action in case of a release from an UST into the environment. The
Company is also subject to regulations in certain locations relating to vapor
recovery and discharges into water. Management believes that all of its USTs are
currently in compliance with applicable requirements and that it is currently in
compliance with all other applicable environmental laws and regulations. Some
existing laws and regulations relating to USTs do not become applicable
immediately and have future compliance schedules. The Company is currently in
the process of installing cathodic protection and overfill equipment or devices
on its older USTs (those installed before 1988) and plans to complete that work
on or before the dates required to achieve compliance under the current
regulations. The Company plans to spend approximately $390,000 in 1998 in
connection with this work. If additional requirements are imposed, additional
expenditures may be required. During 1995, 1996, and 1997, the Company's
expenditures for environmental matters were $261,000, $180,000, and $154,000,
respectively. See Note 2 to the Company's Consolidated Financial Statements for
the year ended December 31, 1997 for a discussion of its accounting policies
relating to environmental matters.
In connection with its ownership of the properties and operation of its
business, the Company may also be subject to liability under various federal,
state and local environmental laws, ordinances and regulations relating to
cleanup and removal of hazardous substances (which may include petroleum or
petroleum products) on, under or in such property. Certain laws typically impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. Persons who arrange, or are
deemed to have arranged, for the disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at the disposal or treatment site, regardless of whether such site is
owned or operated by such person. The Company is not involved in any litigation
or other proceedings seeking to impose such liability. Where required or
believed by the Company to be warranted, the Company takes action at Company-
operated locations to correct the effects on the environment of prior disposal
practices or releases of chemical or petroleum substances by the Company or
other parties. In light of the business of the Company and the quantity of
petroleum products that it handles, there can be no assurance that hazardous
substance contamination does not exist or that material liability will not be
imposed in the future.
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Other Regulation
The Company is also subject to local licensing ordinances. The issuance of
permits for service station and lubrication operations is generally a matter of
discretion and is subject to the underlying requirement that the granting of the
permit be consistent with health, safety and moral welfare of the community.
Although the Company believes that careful planning and site selection reduces
the likelihood of significant zoning opposition, significant opposition to the
construction of a Stopping Center, if encountered, may cause the Company to
incur substantial expenses and delay.
The Company's restaurant operations are subject to federal, state and local
regulations concerning health standards, sanitation, fire and general safety,
noncompliance with which could result in temporary or permanent curtailment or
termination of a restaurant's operations. In addition, difficulties in obtaining
the required licensing or approvals could result in delays or cancellations in
the openings of new restaurant facilities.
In addition, the Company's video poker operations are subject to oversight
at the state and local level. During 1996, Louisiana enacted a statute requiring
the cessation of video poker operations unless the parish in which the
operations were conducted voted to allow the continued operations of video poker
machines. On November 5, 1996, the parish in which the Shreveport facility is
located voted to continue to allow video poker operations, while the parish in
which the Hammond facility is located voted to disallow video poker operations.
The video poker operations at the Hammond facility are required to be phased out
by the end of June 1999.
The Louisiana State Police, who administer the gaming licensing process in
Louisiana, issued citations in February 1998, against the licensee of video
poker at the two Petro Truck Stops in Louisiana, alleging failure to file
complete license application forms for the business. An administrative hearing
officer of the Louisiana Gaming Control Board issued a recommendation that the
video poker business be suspended at both locations for a period of 30 days.
This recommendation is being appealed to the Louisiana Gaming Control Board.
Management believes that mitigating circumstances exist to justify overturning
on appeal the hearing officer's recommendation. Management does not believe
that the ultimate outcome of this matter will have a material adverse effect on
the business or financial condition of the Company.
The Company as a franchisor is also subject to federal and state regulation
in the states in which it offers franchises or where franchised Stopping Centers
are currently operating. Federal regulations require that the Company provide
each perspective franchisee with a disclosure document that provides information
regarding the Company and the relevant provisions of the franchise agreement and
other ancillary contracts. In addition, certain state regulations require that
the franchisor be registered or be exempt from the applicable registration
requirements. Federal and state franchising laws prohibit certain "deceptive
trade practices" and, in some cases, impose fairness and "anti-discrimination"
standards on the Company.
In addition to the franchise regulations outlined immediately above, the
Company's operations are subject to the Petroleum Marketing Practices Act
("PMPA"). PMPA is a federal law that prohibits a franchisor engaged in the sale,
consignment or distribution of refiner-branded motor fuels from terminating or
failing to renew a "franchise" or "franchise relationship," except on specified
grounds and only after compliance with the statute's notification provisions.
PMPA expressly preempts state law concerning the termination, nonrenewal and
notice thereof with respect to motor fuel franchises. PMPA is enforced
judicially through cases interpreting the statute.
The Company is also a franchisor under the PMPA because it distributes and
sells diesel fuel and gasoline under Mobil's trademarks to its franchisees.
Thus, the Company is subject, as a franchisor, to PMPA's termination, nonrenewal
and notice requirements in each of its individual motor fuel contracts with its
franchisees. At the same time, the Company is entitled to PMPA's protections in
its branded supply agreements with Mobil, as well as other branded suppliers.
The Company is not party to any PMPA litigation.
Under the Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. While the Company believes its facilities
are in compliance with these requirements, a determination that the Company is
not in compliance with the ADA could result in the imposition of fines or an
award of damages, which could adversely affect the Company.
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The Company believes that all of its Stopping Centers are in compliance with
existing laws and regulations. However, new laws and regulations could require
the Company to incur significant additional costs.
Employees
At December 31, 1997, the Company had a total of 3,691 employees, of which
3,408 were full-time and 283 were part time. At that date, 515 of the Company's
employees were salaried and performed executive, management or administrative
functions and the remaining 3,176 employees were hourly employees. Almost 95%
of the Company's employees worked at the Stopping Centers and most employees at
the Stopping Centers work on an hourly basis.
The Company has never had a work stoppage and none of its employees is
represented by a labor organization. The Company believes that it provides
working conditions, wages and benefits that are competitive with other providers
of the kinds of products and services offered by the Company.
ITEM 2. Properties
The Company's corporate headquarters is located in a three-story building in
El Paso, Texas, which contains approximately 30,000 square feet of space. The
Company leases the entire building from a member of the Cardwell Group. The
Company's lease of the building expires in December 2005 and provides for annual
rental payments of $336,000, plus taxes, maintenance and operating expenses. See
Item 13 "Certain Relationships and Related Transactions."
The Company owns 24 of its 28 Stopping Centers in their entirety, owns all
but four acres of the West Memphis Stopping Center site, owns the facility and
leases the land at the Hammond, Louisiana site and leases both the Effingham,
Illinois and North Baltimore, Ohio Stopping Centers sites in their entirety.
The Company owns a site in Green River, Wyoming which is suitable for the
construction of a new Stopping Center. The Company also has options, which
expire in December 2006, to purchase vacant land owned by the Cardwell Group
that is located adjacent to four existing Stopping Centers: Shreveport,
Louisiana (7 acres subject to option); Weatherford, Texas (34 acres); Beaumont,
Texas (17 acres); and Oklahoma City, Oklahoma (30 acres). See Item 13 "Certain
Relationships and Related Transactions."
The Stopping Center located in Effingham, Illinois is leased from an entity
owned by current and former employees of the Company. The lease expires in May
2006 and provides for adjustable rental payments tied to interest rates (the
"Basic Rent"), which currently are approximately $89,000 per month, plus taxes
and operating expenses. The Company has three consecutive options to renew this
lease for terms of five years each at rental rates equal to the Basic Rent, plus
certain adjustments at the time of renewal and a right of first refusal to
purchase the Stopping Center complex. See Item 13 "Certain Relationships and
Related Transactions."
The land at the Hammond, Louisiana and a small portion (approximately
four acres) of the West Memphis, Arkansas Stopping Centers are subject to ground
leases. The Hammond ground lease expires in September 1998 and provides for
annual rental payments of $109,000, plus taxes. The Company has an option to
renew the ground lease for an additional six years at the current annual rent
increased by the percentage increase in the consumer price index from the
commencement date of the lease to the commencement of the first option, provided
that such increase shall not exceed 10%. The Company has the option, which
expires at the end of the lease term, to purchase the entire 21 acre tract of
land for $4.53 per square foot. If the Company elects to purchase less than all
of the property, the price shall be at a price to be determined according to a
formula specified in the lease. The Company's ground lease at the West Memphis
site expires in April 2005, and the Company has two additional options to renew
the ground lease for 10 years each, with scheduled rent increases every five
years, and a right of first refusal to purchase the land. Under the lease, the
Company makes annual rental payments of approximately $40,000 plus taxes.
The Stopping Center located in North Baltimore, Ohio is leased in its
entirety. The lease expires in August 2001 and provides for annual rental
payments of $560,000, plus taxes. The Company has four renewal options of five
years each with rental adjustment based on the Consumer Price Index. The
Company also has a purchase option on the property which may be exercised at any
time during the lease.
7
<PAGE>
The following table outlines the Company-operated Stopping Centers at
December 31, 1997:
<TABLE>
<CAPTION>
Approximate
-----------------------------------------------
Stopping Total Size of Main
Location Center Acreage at Building
-------- Date Opened Acreage Location (Sq. Ft.)
----------- ------- -------- --------
<S> <C> <C> <C> <C>
Company - operated
El Paso, Texas .................. Apr. 1975 31 51 20,000
Weatherford, Texas .............. Sept. 1977 25 25 21,000
Beaumont, Texas ................. May 1981 20 20 12,300
San Antonio, Texas .............. Sept. 1982 21 21 13,200
Eloy/Casa Grande, Arizona ....... June 1984 23 36 12,300
Corning, California ............. May 1985 18 18 12,300
Amarillo, Texas.................. June 1985 20 32 13,800
Shreveport, Louisiana............ Nov. 1985 18 21 13,800
Hammond, Louisiana (a) .......... Jan. 1986 16 21 12,300
West Memphis, Arkansas (a) ...... Aug. 1986 24 63 13,800
Milan, New Mexico ............... Nov. 1986 23 30 13,800
Knoxville, Tennessee ............ Mar. 1987 25 25 13,800
Kingman, Arizona ................ Dec. 1987 38 67 14,600
Oklahoma City, Oklahoma ......... May 1988 30 30 14,600
Perrysburg/Toledo, Ohio ......... Aug. 1988 33 74 20,000
Kingdom City, Missouri .......... Feb. 1989 25 35 20,500
Bucksville, Alabama ............. Feb. 1990 48 51 14,400
Girard/Youngstown, Ohio ......... May 1990 29 98 20,000
Vinton, Texas.................... Jan. 1991 8 19 4,800
Effingham, Illinois (b) ......... Mar. 1991 30 30 20,000
Kingston Springs, Tennessee ..... Sept. 1991 9 12 6,900
Shorter, Alabama ................ Sept. 1991 9 9 12,700
Atlanta, Georgia................. Mar. 1992 64 69 21,500
Laramie, Wyoming ................ Oct. 1993 35 50 15,500
Ocala, Florida................... Jun. 1995 37 170 20,500
Medford, Oregon ................. Jan. 1995 15 15 11,500
North Baltimore, Oregon (a) ..... Aug. 1997 17 40 29,000
North Little Rock, Arkansas ..... Sept. 1997 17 24 16,000
</TABLE>
- ------------
(a) The North Baltimore, Ohio facility is leased in its entirety, and the
Hammond, Louisiana and four acres of West Memphis, Arkansas units are
subject to ground leases.
(b) As discussed above, the Effingham, Illinois facility is owned by one
present and five former Company employees and leased to the Company.
8
<PAGE>
Franchises
Since 1985, the Company has franchised others to operate Stopping Centers in
particular markets. The following table sets forth information on the Company's
18 franchising arrangements at December 31, 1997.
<TABLE>
<CAPTION>
Date Center Expiration of
Location Opened Franchise (1)
-------- ------ -------------
<S> <C> <C>
Elkton, Maryland Sept. 1985 Mar. 1998
Ft. Chiswell, Virginia Mar. 1986 Mar. 1998
Portage, Wisconsin Sept. 1986 Dec. 2001
Joplin, Missouri Oct. 1987 Mar. 1998
Lake Station, Indiana Oct. 1987 Mar. 1998
Ruther Glen, Virginia Mar. 1988 Mar. 1998
New Paris, Ohio Oct. 1989 Oct. 1999
Florence, South Carolina Feb. 1991 Feb. 2001
Rochelle, Illinois Apr. 1992 Apr. 2002
Fargo, North Dakota Nov. 1994 Nov. 2004
Carnesville, Georgia Jan. 1995 Jan. 2005
Bordentown, New Jersey(2) May 1989 Dec. 2005
York, Nebraska Dec. 1996 Dec. 2006
Scranton, Pennsylvania May 1997 May 2007
Benton Harbor, Michigan July 1989 July 1999
Salina, Kansas Feb. 1990 Feb. 2000
Jerome/Twin Falls, Idaho Dec. 1990 Dec. 2000
Claysville, Pennsylvania Nov. 1997 Nov. 2017
</TABLE>
_________
(1) All franchise agreements with the exception of one are for an initial ten-
year term and are automatically renewed for two five-year terms subject to
the satisfaction of certain conditions, unless the franchisee gives a
termination notice at least 12 months prior to expirations. The franchise
agreement for the Portage, Wisconsin location has been amended so that its
initial term is approximately 15 years (expiring on December 2001) and it
provides for only one five year renewal. All franchise agreements are in
their initial term including the Elkton, Ft. Chiswell, Joplin and Lake
Station agreements, whose initial terms have been extended from their
initial termination dates of September 1995, March 1996, June 1997 and
October 1997, respectively, until March 1998 by letter agreements. The
Company is currently in the process of attempting to obtain a first renewal
of such agreements.
(2) Bordentown, New Jersey was a licensee from the date of opening to December
1995, at which time it became a franchised location.
One franchisee operates four locations, two operate three locations and
nine operate one location each. All of the franchisees are unaffiliated with
the Company, except Highway Service Ventures Inc., (See Item 13 "Certain
Relationships and Related Transactions"), which operates the Elkton, Maryland,
Ruther Glen, Virginia, Florence, South Carolina and Carnesville, Georgia
locations.
Each existing franchise agreement grants to the franchisee the right and
license to operate a Stopping Center in a specified territory. The franchise
agreements require that the franchisee build, at its own expense, and operate
the Stopping Center in accordance with certain requirements, standards and
specifications prescribed by the Company, including site approval, and that the
franchisee purchase certain products from suppliers approved by the Company.
The Company, in turn, is obligated to provide the franchisee with, among other
things, advisory assistance in the operation of the franchised Stopping Center
and assistance in connection with advertising and promotional programs.
The agreements require the franchisee to pay the Company (subject to certain
exceptions), in addition to certain initial fees and training fees, a monthly
royalty fee and a monthly advertising fee (administered through an advertising
fund for national and regional advertising). During 1997, the
9
<PAGE>
Company's revenues from its franchisees totaled $3,954,000. In addition,
franchisees contributed $306,000 to advertising programs sponsored by the
Company.
While a majority of diesel purchases at Stopping Centers are paid for by
third-party billing companies, a portion of diesel fuel purchases are paid for
through direct billing arrangements with particular trucking companies. As
provided in the franchise agreements, the Company purchases all of the
receivables generated by the franchisees from customers using direct billing
arrangements. These purchases are on a non-recourse basis to the franchisee.
In addition, upon termination or expiration of the franchise agreement in
the event that the franchisee wishes to accept an offer from a third party to
purchase its facility, each franchise agreement grants the Company a right of
first refusal to purchase the facility, at the price offered by the third party.
Similarly, in nine cases, the Company has the right to purchase the franchise
for fair market value, as determined by the parties or an independent appraiser,
upon termination or expiration of the franchise agreement. Each franchise
agreement also contains a three-year covenant by the franchisee not to compete
with the Company at any other location in the area upon termination or
expiration of the franchise agreement.
ITEM 3. Legal Proceedings
The Company is from time to time involved in ordinary routine litigation
incidental to its operations. The Company believes that the litigation
currently pending or threatened against it will not have a material adverse
effect on its consolidated financial condition or results of operations.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
All of the Company's general and limited partnership interests are owned by
the Cardwell Group, Chartwell, Mobil Long Haul and Kirschner. See Note 1 to the
Company's Consolidated Financial Statements included elsewhere herein.
Consequently, there is no established public trading market for the Company's
equity.
ITEM 6. Selected Financial Data
The information set forth below should be read in conjunction with the
consolidated financial statements and notes thereto included at Item 8 herein.
The selected consolidated financial data as of and for the years ended December
31, 1997, December 31, 1996, December 29, 1995, December 30, 1994 and December
31, 1993 have been derived from the audited financial statements of the Company.
The unaudited financial data presented include, in the opinion of management,
all necessary adjustments required for fair presentation of such data. In 1994,
the Company adopted a 52/53 week fiscal year, which ended on the Friday closest
to December 31. Beginning in 1996, the Company adopted a calendar year fiscal
year, which ends on December 31. The acquisition, by the Company, of its
operating properties during the periods reflected in the following selected
financial data materially affect the comparability of such data from one period
to another.
10
<PAGE>
ITEM 6. Selected Financial Data (continued)
<TABLE>
<CAPTION>
Year ended Year ended Year ended Year ended Year ended
December 31, December 30, December 29, December 31, December 31,
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(dollars in thousands)
--------------------
<S> <C> <C> <C> <C> <C>
Net revenues (including motor fuel taxes):
Fuel .................................................. $ 340,044 $ 350,570 $ 385,181 $ 478,312 $ 513,571
Non-Fuel .............................................. 80,740 93,446 100,447 111,410 122,609
Restaurant ............................................ 41,819 43,877 47,387 47,335 49,549
--------- --------- --------- --------- ---------
Total net revenues .................................. 462,603 487,893 533,015 637,057 685,729
--------- --------- --------- --------- ---------
Costs and expenses:
Cost of sales (including motor fuel taxes) ........... 353,761 373,436 411,893 511,431 546,581
Operating expenses .................................... 66,706 64,968 73,052 81,522 85,560
General and administrative ............................ 12,933 11,448 12,053 13,925 17,035
Employee severance, benefit and placement expenses .... -- -- -- 2,534 --
Depreciation and amortization (1) ..................... 7,819 8,851 11,144 12,204 14,502
--------- --------- --------- --------- ---------
Total costs and expenses ............................ 441,219 458,703 508,142 621,616 663,678
--------- --------- --------- --------- ---------
Operating income ........................................ 21,384 29,190 24,873 15,441 22,051
Recapitalization costs .................................. -- -- -- 2,938 --
Interest expense, net ................................... 15,515 18,711 21,098 21,263 20,292
--------- --------- --------- --------- ---------
Income (loss) before extraordinary item and cumulative
effect of a change in accounting principle .......... 5,869 10,479 3,775 (8,760) 1,759
Extraordinary item (2) .................................. -- 5,250 -- -- 12,745
Minority interest ....................................... 52 191 -- -- --
Cumulative effect of a change in accounting principle (7) -- -- -- -- 1,579
--------- --------- --------- --------- ---------
Net income (loss) (3) ................................... $ 5,817 $ 5,038 $ 3,775 $ (8,760) $ (12,565)
========= ========= ========= ========= =========
Other Data:
- ----------
EBITDA, as defined(4)(5) ................................ $ 29,203 $ 38,041 $ 36,017 $ 32,108 $ 36,553
Capital expenditures(6) ................................. 10,665 8,428 19,508 5,523 15,870
Balance Sheet Data:
- ------------------
Total assets ............................................ $ 190,848 $ 206,148 $ 221,699 $ 209,100 $ 239,666
Total debt ............................................. 143,843 161,459 168,392 166,727 183,190
Mandatorily redeemable preferred partnership interests .. -- -- -- -- 21,202
Total partners' capital (deficit) ....................... 3,042 7,968 11,925 3,165 (19,555)
Cash Flow Presentation:
- ----------------------
Cash provided by operating activities ................... $ 14,792 $ 13,084 $ 12,766 $ 14,668 $ 30,328
Cash used in investing activities ....................... (11,045) (18,915) (21,130) (5,337) (15,779)
Cash provided by (used in) financing activities ......... 938 2,441 10,229 (11,837) 7,065
</TABLE>
(1) Includes depreciation and amortization relating to the Company's Stopping
Centers. Amortization of deferred debt issuance costs is classified as
interest expense.
(2) Extraordinary item reflects write-off of debt restructuring costs
associated with retired debt.
(3) No provision for income taxes is reflected in the financial statements as
the Company is a partnership for which taxable income and tax deductions
are passed through to the individual partners.
(4) EBITDA, as defined, represents operating income before deducting
depreciation, amortization and net interest. EBITDA data, which are not a
measure of financial performance under generally accepted accounting
principles, are presented because such data are used by certain investors
to determine a company's ability to meet historical debt service
requirements. Such data should not be considered as an alternative to net
income, as an indicator of the Company's operating performance or as an
alternative to cash flows as a measure of liquidity.
(5) EBITDA, as defined, results for fiscal 1996 excludes certain one-time
charges related to the Recapitalization and the change in management and
operations. Included in the one-time charges were $2.5 million related to
severance and hiring costs; $1.4 million in obsolete inventory reserves,
included in cost of sales; and $.5 million in insurance related costs.
(6) Capital expenditures primarily represent the cost of new Stopping Centers
and renovations of existing Stopping Centers.
(7) Cumulative effect of a change in accounting principle reflects expensing of
costs related to process reengineering activities as required by EITF Issue
No. 97-13 in the fourth quarter of 1997.
11
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Certain sections of this Form 10-K, including "Business" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
contain various forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934 which represent the Company's expectations
or beliefs concerning future events that involve risks and uncertainties. All
statements other than statements of historical facts included in this Form 10-K
may be considered forward-looking statements. The Company cautions that these
statements are further qualified by important factors that could cause actual
results to differ materially from those in the forward-looking statements. Such
factors include without limitation, general economic change, legislative
regulation and market change.
The forward-looking statements are included in, without limitation,
"Business--Governmental Regulation", "--Liquidity and Capital Resources", "--
Environmental", and "--Recently Issued Accounting Pronouncements." The Company,
in the preparation of its financial statements, also makes various estimates and
assumptions that are forward-looking statements.
General
Recapitalization
As discussed in Item 1. "Business," as part of the Recapitalization, in the
first quarter of 1997, the Company issued $135,000,000 of 10 1/2% Senior Notes
due 2007 and made a tender offer for all of, and repurchased approximately 94%
of, its 12 1/2% Senior Notes due 2002 and 100% of the outstanding debt warrants.
The Company also amended its senior collateralized credit facility in
the first quarter of 1997. The New Credit Agreement consists of a $25,000,000
revolving credit facility (the "Revolving Credit Facility"), a $14,000,000 Term
Loan A, a $30,000,000 million Term Loan B and a $40,000,000 Expansion Facility.
The New Credit Agreement is collateralized by substantially all of the Company's
assets and the partnership interests of Mobil Long Haul and Chartwell and
guaranteed by each of the Company's subsidiaries, whose guarantees in turn are
collateralized by substantially all of such subsidiaries' assets.
As part of the Recapitalization in the first quarter of 1997, the Company
recognized an extraordinary charge of $12,745,000 relating to the amendment of
the Old Credit Agreement, retirement of the Old Notes and Debt Warrants and the
write-off of deferred financing costs.
Ongoing Operations
The following table sets forth the development of the Company's Stopping Center
network since 1993.
<TABLE>
<CAPTION>
Open at the end of
------------------------------------
1993 1994 1995 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Company-operated Stopping Centers............ 24 24 26 26 28
Franchised................................... 12 13 15 16 18
Independently operated....................... 1 1 - - -
---- ---- ---- ---- ----
Total Stopping Centers..................... 37 38 41 42 46
==== ==== ==== ==== ====
</TABLE>
The following table sets forth information on Stopping Centers opened since
January 1, 1993, all but one of which are full-sized facilities.
Location Date Opened
---------------------------------- -----------
Company-operated Stopping Centers:
Laramie, Wyoming October 1993
Medford, Oregon January 1995
Ocala, Florida June 1995
N. Baltimore, Ohio August 1997
N. Little Rock, Arkansas September 1997
Franchised:
Fargo, North Dakota November 1994
Carnesville, Georgia January 1995
York, Nebraska December 1996
Scranton, Pennsylvania May 1997
Claysville, Pennsylvania November 1997
12
<PAGE>
During 1997, the Company acquired two locations. The new sites acquired
were North Baltimore, Ohio and North Little Rock, Arkansas. The sites acquired
were existing truck stops. The North Baltimore site is leased at $560,000 per
year. The North Little Rock site was purchased for $5,500,000. The Company
opened a stand-alone Petro:Lube in Franklin, Kentucky in August 1996, in
addition to new Petro:Lubes at its San Antonio, Beaumont and Medford locations
in June 1994, January 1995 and April 1996, respectively. At December 31, 1997,
the Company had no new Stopping Centers under construction. The approximate
construction cost of a new Stopping Center (exclusive of land) is between
$7,000,000 and $9,500,000.
The Company operates 28 truck stop facilities selling diesel fuel, 27 of
which also sell gasoline. Of these facilities, 25 are full size facilities.
Full-sized facilities include a Diesel Fuel Island, the Iron Skillet Restaurant,
a Petro:Lube and a Travel Store. In addition, eight of the 25 facilities also
have separate convenience stores. The Company also operates three Petro:2
facilities which are a smaller version of the full size facility with various
fast food offerings. The Company has 18 additional locations which operate
under franchise agreements. On February 19, 1998 and March 19, 1998, the
Company added two franchise locations at Breezewood, Pennsylvania and Milton,
Pennsylvania, respectively. The Company believes it will add additional
franchise locations during 1998.
Historically, the Company's revenues at each of its full-sized Stopping
Centers were recorded through the following divisions: diesel fuel island,
restaurant, Petro:Lube and travel and convenience store. Beginning with the
first quarter of 1997 and in connection with new management, the presentation
format for results of operation has been changed to reflect revenues from fuel,
non-fuel and restaurant. The Company derives its revenues from the sale of
fuels, diesel and gasoline, non-fuel items including the sale of merchandise and
offering of services including truck tire sales and preventative maintenance,
weighing scales, showers, laundry, video games and other operations, and its
restaurant operations which includes Iron Skillet and certain fast-food
operations. The presentation will allow management to focus more closely on the
major sources of revenues of the business. The other operations included in
non-fuel revenue includes franchise royalties, rental revenue from video poker
operations in Louisiana and a motel and RV park in Oregon.
The Company's fuel revenues and cost of sales include federal and state
motor fuel taxes. Such taxes were $150,360,000, $175,873,000 and $192,650,000
for the years ended December 29, 1995, December 31, 1996 and December 31, 1997,
respectively.
Taxes. No provision for income taxes is reflected in the financial
statements as the Company is a partnership for which taxable income and tax
deductions are passed through to the individual partners.
Results of Operations
Year ended December 31, 1997 Compared to Year ended December 31, 1996
Overview. The Company's net revenues increased $48,672,000 or 7.6% to
$685,729,000 for the year ended December 31, 1997. Revenues from comparable
units contributed 80.8% of the increase. A Stopping Center is considered a
"comparable unit" as to a particular period in the current year if it was open
during the same period of the prior year. The increase was due principally to a
10.1% increase in fuel gallons and increases of 10.1% and 4.7% in non-fuel and
restaurant sales, respectively, from the prior year. The increases in revenues
were offset by product costs associated with higher levels of revenue and
higher general and administrative and operating expenses over the prior year.
General and administrative expenses increased 22.3% to approximately $17,035,000
from $13,925,000 for the same period in the prior year. This increase was
principally due to an increase in certain employee expenses, certain transition
costs for new programs, and professional and travel related expenses in the
current year.
Fuel. Revenues increased 7.4% to $513,571,000 in 1997 from $478,312,000
in 1996. Fuel revenues increased due to a 10.1% increase in fuel volumes. On a
comparable unit basis, fuel volumes increased 8.7%. Fuel costs were up in the
first quarter, but declined in the latter quarters. On a per gallon basis,
margins remained relatively flat compared to fuel margins in the prior year.
13
<PAGE>
Non-Fuel. Revenues increased 10.1% to $122,609,000 in 1997 from
$111,410,000 in 1996. On a comparable unit basis, sales increased 8.8%. Gross
margins increased 14.7% to $66,499,000 in 1997 from $57,991,000 in 1996. This
increase was due to improved cost management and lower margins in 1996 due to
establishment of inventory reserves.
Restaurant. Revenues increased 4.7% to $49,549,000 in 1997 from
$47,335,000 in 1996. On a comparable unit basis, revenues increased 2.0%.
Management implemented certain menu changes at its Iron Skillet Restaurants in
the first quarter designed to enhance revenues, which is contributing to the
increased sales. Gross margin in the restaurants improved by approximately 5.5%
in total and approximately 2.9% on a comparable unit basis. The improvement is
due in part to management focus on costs and implementation of menu changes.
Costs and Expenses. Total costs and expenses increased 6.8% to
$663,778,000 in 1997 from $621,616,000 in 1996. On a comparable unit basis,
total costs and expenses increased 5.0% in 1997. Costs of sales increased
$35,150,000 or 6.9% in 1997 from 1996. The increase is due to higher fuel and
product costs for both fuel and non-fuel revenue streams. Operating expenses
increased $4,038,000 or 5% to $85,560,000 in 1997. The increase is primarily
due to employee related expenses. General and administrative expenses increased
22.3% to approximately $17,035,000 from $13,925,000 in the prior year. This
increase was principally due to an increase in certain employee expenses,
certain transition costs for new programs, and professional and travel related
expenses in the current year.
Interest Expense, net. Interest expense decreased $971,000 or 4.6% to
$20,292,000 in 1997 compared to 1996 due to lower interest rates combined with a
reduction in amortization of deferred debt issuance costs and higher interest
income from short term investments. These items were partially offset by a
higher level of debt outstanding.
Extraordinary item. Extraordinary item reflects a charge to earnings of
$12,745,000 for the write-off of debt restructuring costs relating to the
Recapitalization.
Cumulative effect of a change in accounting principle. Cumulative effect
of a change in accounting principle reflects the write-off of $1,579,000 of
costs, previously allowed to be capitalized. These costs are related to process
reengineering activities and, as required by EITF Issue No. 97-13, were written
off during the fourth quarter of 1997.
Year ended December 31, 1996 Compared to Year ended December 29, 1995
Overview. The Company's net revenues increased $104,042,000 or 19.5% to
$637,057,000 for the year ended December 31, 1996. Revenues from comparable
units contributed 90.6% of the increase. A Stopping Center is considered a
"comparable unit" as to a particular period in the current year if it was open
during the same period of the prior year. The increase in 1996 net revenues was
due principally to a 13.3% increase in diesel gallons sold, an 11.2% increase in
fuel sales price per diesel gallon sold and a 21.8% increase in Petro:Lube
sales.
Fuel. Revenues increased 24.2% to $478,312,000 in 1996 from $385,181,000
in 1995. Fuel revenues increased due to a 13.2% increase in fuel volumes
combined with a higher selling price per gallon which increased 9.3%. On a
comparable unit basis, fuel volumes increased 11.6%.
Non-Fuel. Revenues increased 10.9% to $111,410,000 in 1996 from
$100,447,000 in 1995. On a comparable unit basis, revenues increased 8.9%.
Gross margins increased 4.0% to $56,951,000 in 1996 from $54,782,000 in 1995.
Restaurant. Revenues of $47,335,000 were flat compared to 1995.
Revenues from new locations in Ocala and Medford contributed $901,000, while
revenues from comparable units were down a similar amount.
Costs and Expenses. Total costs and expenses increased 22.3% to
$621,616,000 in 1996 from $508,142,000 in 1995. The increase related to higher
cost of sales due to higher fuel costs, costs associated with new locations,
increase in general and administrative expense, increase in depreciation and
14
<PAGE>
amortization and employee severance, benefit and placement expenses. The
increase in cost of sales was attributable in part to adjustments related to
establishment of inventory reserves of approximately $1,400,000. General and
administrative expenses increased $1,872,000 or 15.5% due to increased employee
expense and professional fees associated with the management changes.
Depreciation and amortization increased due to additional 1996 capital
expenditures combined with full year depreciation of the Medford and Ocala
locations. Employee severance, benefit and placement expenses relate primarily
to severance costs of existing management and placement and relocation of new
management as a result of the sale of the partnership interest.
Recapitalization Costs. This represents costs incurred by the Company
in 1996 associated with the sale of the Fremont partnership interest. Costs
include legal and professional fees combined with the investment banking fees
paid with respect to the issuance of debt.
Interest Expense. Interest expense of $21,263,000 in 1996 was flat
compared to 1995, due to lower average level of debt outstanding offset by an
increase in the interest rate.
Liquidity and Capital Resources
Capital expenditures totaled $15,870,000 for 1997 and $5,523,000 for 1996.
Included in the capital expenditures for 1997 were funds spent on the
acquisition of the North Baltimore, Ohio and North Little Rock, Arkansas
locations. Additional expenditures were due to refurbishing certain locations,
fuel automation at certain locations and improving the Company's information
systems. Capital expenditures for 1996 included funds spent on the construction
of the new Petro:Lube facilities in Medford, Oregon and Franklin, Kentucky.
As noted in Item 1. "Business," in connection with the Recapitalization,
the Old Credit Agreement was amended and borrowings thereunder, 94% of existing
Old Notes and approximately 100% of outstanding Debt Warrants, were repaid with
borrowings under the New Credit Agreement, the net proceeds from the sale of the
New Notes, a portion of the proceeds of the Equity Investment and the proceeds
of the Kirschner Investment. The New Credit Agreement provides for a $25,000,000
revolving credit facility (the "Revolving Credit Facility"), a $40,000,000
Expansion Facility, a $14,000,000 Term Loan A and a $30,000,000 Term Loan B.
The Revolving Credit Facility permits the Company to borrow, repay and
reborrow up to $25,000,000 at any time until the fifth anniversary of the date
from the Recapitalization, the proceeds of which may be used for working capital
and other corporate purposes. Up to $5,000,000 of the Revolving Credit Facility
is available for the issuance of standby and documentary letters of credit. The
Expansion Facility permits the Company to borrow, repay and reborrow up to
$40,000,000 for the acquisition and development of new Stopping Centers and
stand-alone Petro:Lubes at any time until the third anniversary from the date of
the Recapitalization.
The term loans made to the Company under the Credit Facility Agreement
require the Company to make quarterly payments of principal. Aggregate yearly
term loan principal payments under the New Credit Agreement are as follows: (i)
$3.0 million in 1998; (ii) $4.5 million in 1999; (iii) $5.5 million in 2000;
(iv) $1.5 million in 2001; (v) $13.5 million in 2002; and (vi) $14.0 million in
2003. Term Loan A is repayable in 18 quarterly installments, the first of which
was made on September 30, 1997. Term Loan B is repayable in 26 quarterly
installments, the first of which was made on September 30, 1997.
Borrowings under the New Credit Agreement are collateralized by
substantially all of the Company's assets and the partnership interests of Mobil
Long Haul and Chartwell and guaranteed by each of the Company's subsidiaries,
which guarantees in turn are collateralized by substantially all of such
subsidiaries' assets. The Indentures for the New Notes and those under the New
Credit Agreement each contain certain covenants. At December 31, 1997 the
Company was in compliance with all debt covenants.
At December 31, 1997, the Company had standby letters of credit issued
for approximately $3,927,000, resulting in an availability of approximately
$21,073,000 on the Revolving Credit Facility. As of December 31, 1997, there
were no borrowings on the Revolving Credit Facility or the Expansion Facility.
15
<PAGE>
The Company had working capital of $3,850,000 at December 31, 1997 and
negative working capital of $13,863,000 at December 31, 1996. Negative working
capital is normal in the truckstop industry; however, due to the
Recapitalization and reclassification of land held for sale, the Company
currently has positive working capital. Diesel fuel inventory turns every two to
three days, which is significantly faster than payment is required. The
truckstop business is an industry that generates a large amount of cash business
with relatively low levels of inventories and receivables as a percentage of
revenues. A substantial majority of the Company's sales are cash (or the
equivalent in the case of credit card sales or sales paid for by check on a
daily basis by third-party billing companies).
Accrual of dividends on mandatorily redeemable preferred partnership
interests amounted to $1,602,000 for the year ended December 31, 1997. The
dividends are only payable in cash if permitted by the Company's then existing
debt instruments. The Indenture governing the New Notes and New Credit
Agreement restrict payment of dividends on mandatorily redeemable preferred
partnership interests.
Insurance. The Company, up to certain limits, pays its own workers'
compensation and general liability claims. During 1997, the Company paid claims
aggregating $1,828,000 and $707,000 relating to workers compensation and general
liability claims, respectively. The Company believes it provides an accrual
adequate to cover both known and incurred but not reported claims.
Acquisitions. In 1997, the Company acquired two existing truck stops,
North Baltimore, Ohio in August and North Little Rock, Arkansas in September.
The North Baltimore, Ohio site is a leased facility and the North Little Rock,
Arkansas facility is owned.
Expansion. In June 1996, the Company opened its first stand-alone
Petro:Lube operation. The construction costs of the stand-alone Petro:Lube was
funded by a combination of borrowing and internally generated funds.
Year 2000. The Company recognizes the need to ensure that its
operations will not be adversely impacted by Year 2000 software failures. The
Year 2000 issue arises because most computer systems and programs were designed
to handle only a two-digit year, not a four-digit year. When the year 2000
begins, these computers may interpret "00" as the year 1900 (e.g., 1997 is seen
as "97") and either stop processing date-related computations or process them
incorrectly. Policies and procedures have been established for evaluating and
managing the risks and costs associated with this issue. The Company is in the
process of communicating with suppliers, dealers, financial institutions and
others with which it does business to identify and determine appropriate action.
Management does not currently anticipate a material effect on customers or
disruption of business operations as a result of year 2000 software failures.
The Company is currently upgrading or replacing many of its information systems,
which will effectively solve internal Year 2000 issues. The total cost of
achieving Year 2000 compliance is estimated to be approximately $6 million,
which includes the cost of software upgrades and replacements the Company is
currently making, and will be incurred through fiscal 1999.
Management of the Company believes that internally generated funds,
together with amounts available under the Revolving Credit Facility, will be
sufficient to satisfy its cash requirements for operations through 1998 and the
foreseeable future thereafter. The Company also expects that expansion and
future acquisitions would be financed from funds generated from operations,
borrowings under the Revolving Credit Facility and the Expansion Facility and
additional financings.
Environmental
Accruals for environmental matters are recorded in operating expenses
when it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. The measurement of environmental
liabilities is based on an evaluation of currently available facts with respect
to each individual site and considers factors such as existing technology,
presently enacted laws and regulations and prior experience in remediation of
contaminated sites. Such liabilities are exclusive of claims against third
parties and are not discounted.
16
<PAGE>
The Company is subject to contingencies pursuant to environmental laws
and regulations that in the future may require the Company to take action to
correct the effects on the environment of prior disposal practices or releases
of chemical or petroleum substances by the Company or other parties. The
Company has accrued for certain environmental remediation activities consistent
with the policy set forth in Note 2 to the consolidated financial statements.
At December 31, 1996 and 1997, such accrual amounted to approximately $217,000
and $187,000, respectively, and in management's opinion, was appropriate based
on existing facts and circumstances. Under the most adverse circumstances,
however, this potential liability could be significantly higher. In the event
that future remediation expenditures are in excess of amounts accrued,
management does not anticipate that they will have a material adverse effect on
the consolidated financial position or results of operations of the Company. At
December 31, 1996 and 1997, the Company has recognized approximately $256,000
and $262,000, respectively, in the consolidated balance sheet related to
recoveries of certain remediation costs from third parties.
Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS No. 130"). Adoption is required for interim and annual periods
beginning after December 15, 1997. SFAS No. 130 requires that comprehensive
income and its components, as defined in the Statement, be reported in a
company's financial statements. Management does not believe that the adoption
of this statement will have a significant impact on the Company.
Also in June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131"). Adoption is
required for financial statements for periods beginning after December 15, 1997,
although it need not be applied to interim financial statements in its initial
year of application. SFAS No. 131 requires disclosure of certain segment
financial information, explanations of segment measurements, reconciliations to
consolidated amounts, and information about products and services and major
customers on an enterprise-wide basis. Management does not believe that the
adoption of this statement will have a significant impact on the Company's
financial statements or related disclosures.
In February 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-1 "Accounting for the Cost of
Computer Software Developed or Obtained for Internal-Use" ("SOP 98-1").
Adoption is required for fiscal years beginning after December 15, 1998.
SOP 98-1 provides guidance on accounting for the costs of computer software
developed or obtained for internal-use and identifies the characteristics of
internal-use software. Management does not believe the adoption will be material
to its financial statements or results of operations.
17
<PAGE>
Item 8. Financial Statements and Supplementary Data
PETRO STOPPING CENTERS, L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1996 1997
---- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,182 24,796
Trade accounts receivable, net of allowance for uncollectible accounts
of $321 in 1996 and $330 in 1997 10,401 12,548
Inventories, net 15,195 16,362
Other current assets 1,404 2,551
Due from affiliates 2,091 980
Land held for sale - 4,442
-------- -------
Total current assets 32,273 61,679
Property and equipment, net 159,539 153,363
Deferred debt issuance costs and Company organization costs, net of
accumulated amortization of $6,728 in 1996 and $5,489 in 1997 11,305 16,353
Other assets 5,983 8,271
-------- -------
Total assets $209,100 239,666
======== =======
Liabilities and Partners' Capital (Deficit)
Current liabilities:
Current portion of long-term debt $ 6,928 3,000
Trade accounts payable 15,723 9,350
Accrued expenses and other liabilities 21,160 26,491
Due to affiliates 2,325 18,988
-------- -------
Total current liabilities 46,136 57,829
Notes payable 21,639 -
Long-term debt, excluding current portion 138,160 180,190
-------- -------
Total liabilities 205,935 238,019
-------- -------
Commitments and contingencies
Mandatorily redeemable preferred partnership interests - 21,202
Partners' capital (deficit):
General partners (8,477) (8,848)
Limited partners 11,642 (10,707)
-------- -------
Total partners' capital (deficit) 3,165 (19,555)
-------- -------
Total liabilities and partners' capital (deficit) $209,100 239,666
======== =======
</TABLE>
See accompanying notes to consolidated financial statements
18
<PAGE>
PETRO STOPPING CENTERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 29, December 31, December 31,
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net revenues (including motor fuel taxes):
Fuel $385,181 478,312 513,571
Non-fuel 100,447 111,410 122,609
Restaurant 47,387 47,335 49,549
-------- ------- -------
Total net revenues 533,015 637,057 685,729
Costs and expenses:
Cost of sales (including motor fuel taxes) 411,893 511,431 546,581
Operating expenses 73,052 81,522 85,560
General and administrative 12,053 13,925 17,035
Employee severance, benefit and placement expenses - 2,534 -
Depreciation and amortization 11,144 12,204 14,502
-------- ------- -------
Total costs and expenses 508,142 621,616 663,678
-------- ------- -------
Operating income 24,873 15,441 22,051
Recapitalization costs - 2,938 -
Interest expense, net 21,098 21,263 20,292
-------- ------- -------
Income (loss) before extraordinary item and cumulative
effect of a change in accounting principle 3,775 (8,760) 1,759
Extraordinary item - write off of debt
restructuring costs associated with retired debt - - 12,745
Cumulative effect of a change in accounting principle - - 1,579
-------- ------- -------
Net income (loss) $ 3,775 (8,760) (12,565)
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
19
<PAGE>
PETRO STOPPING CENTERS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL(DEFICIT)
Years ended December 29, 1995, December 31, 1996 and 1997
(in thousands)
<TABLE>
<CAPTION>
General Limited Total
Partners' Partners' Partners'
Capital Capital Capital
(Deficit) (Deficit) (Deficit)
--------- --------- ---------
<S> <C> <C> <C>
Balances, December 30, 1994 $(8,240) 16,208 7,968
Conversion of minority interest 506 - 506
Distributions (15) (309) (324)
Net income 545 3,230 3,775
------- ------- -------
Balances, December 29, 1995 (7,204) 19,129 11,925
Net loss (1,273) (7,487) (8,760)
------- ------- -------
Balances, December 31, 1996 (8,477) 11,642 3,165
------- ------- -------
Capital contributions - 11,047 11,047
Assignment of mandatorily redeemable preferred
partnership interests - (19,600) (19,600)
Accrual of preferred return on mandatorily
redeemable preferred partnership interests - (1,602) (1,602)
Net loss (371) (12,194) (12,565)
------- ------- -------
Balances, December 31, 1997 $(8,848) (10,707) (19,555)
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements
20
<PAGE>
PETRO STOPPING CENTERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 29, December 31, December 31,
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net income (loss) $ 3,775 (8,760) (12,565)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 11,144 12,204 14,502
Extraordinary item-write off of debt
restructuring costs associated with retired debt - - 12,745
Cumulative effect of a change in accounting principle - - 1,579
Deferred debt issuance cost amortization 1,056 1,485 1,749
Accretion of original issue discount 845 978 47
Provision for losses on accounts receivable 297 215 271
Increase (decrease) from changes in:
Accounts receivable (2,361) 852 (2,418)
Inventories (1,838) 1,124 (1,167)
Other current assets (118) 324 (1,147)
Due from affiliates (545) (571) 1,111
Due to affiliates 436 297 16,663
Trade accounts payable 270 1,535 (6,373)
Accrued expenses and other liabilities (195) 4,985 5,331
-------- ------- --------
Net cash provided by operating activities 12,766 14,668 30,328
-------- ------- --------
Cash flows provided by (used in) investing activities:
Purchase of property and equipment (19,508) (5,523) (15,870)
Proceeds from sale of property - - 3,102
(Increase) decrease in other assets, net (1,622) 186 (3,011)
-------- ------- --------
Net cash used in investing activities (21,130) (5,337) (15,779)
-------- ------- --------
Cash flows provided by (used in) financing activities:
Repayments of notes payable (59,422) (25,000) (23,639)
Proceeds from notes payable 69,000 26,061 2,000
Repayments of long-term debt (3,491) (3,704) (152,800)
Proceeds from issuance of long-term debt - - 185,190
Distributions to partners (324) - -
Capital contributions - - 11,047
Payment of debt issuance costs (190) (203) (14,733)
Increase (decrease) in cash overdrafts 4,656 (8,991) -
-------- ------- --------
Net cash provided by (used in) financing activities 10,229 (11,837) 7,065
-------- ------- --------
Net increase (decrease) in cash and cash equivalents 1,865 (2,506) 21,614
Cash and cash equivalents, beginning of period 3,823 5,688 3,182
-------- ------- --------
Cash and cash equivalents, end of period $ 5,688 3,182 24,796
======== ======= ========
- --------------------------------------------------------------------------------------------------------------
Supplemental cash flow information--
Interest paid during the period, net of capitalized interest of
$515, $80 and $0 in 1995, 1996 and 1997 $ 19,785 18,364 14,028
Non-cash transactions-
Minority interest converted to partners' capital 506 - -
Preferred return on mandatorily redeemable
preferred partnership interests - - 1,602
</TABLE>
See accompanying notes to consolidated financial statements
21
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(1) Company Formation and Description of Business
Company Formation
Petro Stopping Centers, L.P. (the "Company"), a Delaware limited
partnership, was formed effective April 30, 1992 for the ownership, operation,
management and development of the Petro Stopping Centers network. The partners
are as follows:
General Partners
Petro, Inc.
Petro Holding GP Corp., an entity owned by Chartwell Investments, Inc.
Limited Partners
Various individuals and entities affiliated with the Cardwell Group
Mobil Long Haul, Inc., an entity owned by Mobil Oil Corporation
Petro Holdings LP Corp. an entity owned by Chartwell Investments, Inc.
Petro, Inc. and the various individuals and entities affiliated with
Petro, Inc. are collectively referred to herein as the "Cardwell Group".
Petro Holdings GP Corp. and Petro Holdings LP Corp. are collectively referred to
herein as "Chartwell".
Recapitalization
On January 30, 1997, the Company consummated a transaction entered into in
October 1996, under which Chartwell and Mobil Long Haul invested $20,700,000 and
$15,000,000, respectively (the "Equity Investment"), to directly acquire the
partnership interests of the Company owned by the Fremont Partners for
approximately $25,600,000 and invest approximately $10,100,000 in the Company.
The Cardwell Group maintained its capital investment in the Company. Kirschner
Investments ("Kirschner"), a Company franchisee, invested $1,000,000 in the
Company (the "Kirschner Investment"). Following the Equity Investment and the
Kirschner Investment, the common partnership interests of the Company are owned
by Chartwell (approximately 50.6%), the Cardwell Group (approximately 39.7%),
Mobil Long Haul (approximately 7.3%), and Kirschner (approximately 2.4%), and
the preferred partnership interests are owned by Mobil Long Haul ($12,000,000)
and the Cardwell Group ($7,600,000). Chartwell and the Cardwell Group own both
general and limited partnership interests and Mobil Long Haul and Kirschner own
only limited partnership interests. Mobil Oil Company and the Company also
entered into certain supply and marketing agreements.
As part of the Recapitalization, the Company issued $135,000,000 of 10
1/2% Senior unsecured notes due 2007, (the "New Notes") and repurchased
approximately 94% of the Existing 12 1/2% Senior Notes due 2002 and
approximately 100% of outstanding Debt Warrants. In connection with the issuance
of the New Notes, the Company capitalized approximately $14,500,000 of debt
issuance costs and wrote off, as an extraordinary item, $12,745,000 of debt
restructuring costs associated with the retired debt.
The Company also amended its senior collateralized credit facility (the
"Old Credit Agreement" and, as amended, the "New Credit Agreement"). The New
Credit Agreement consists of a $25,000,000 revolving credit facility (the
"Revolving Credit Facility"), a $14,000,000 Term Loan A, a $30,000,000 Term Loan
B and a $40,000,000 Expansion Facility (the "Expansion Facility").
Description of Business
The Company operates large, multi-service truck stops in the United
States. The Company's facilities, which are known as "Petro Stopping Centers"
(the "Stopping Centers"), are located along interstate highways and typically
offer diesel fuel, gasoline, home-style restaurants, truck preventative
maintenance centers, travel and convenience stores and a range of other
products, services and amenities to commercial truck drivers, as well as other
highway motorists and local residents. At December 31, 1997, the Company's
network consisted of 46 Stopping Centers located in 29 states, of which 28 were
operated by the Company and 18 were franchised.
22
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements of the Company include
the consolidated balance sheets, statements of operations, changes in partners'
capital and cash flows of Petro Stopping Centers, L.P. and its wholly-owned
subsidiaries, Petro Financial Corporation and Petro Distributing, Inc.. All
significant intercompany balances have been eliminated in consolidation.
Beginning in 1994, the Company adopted a 52/53 week fiscal year, which
ended on the Friday closest to December 31. The Company converted back to a
calendar fiscal year, ending on December 31, at the beginning of 1996.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and accounts
receivable. Accounts receivable are primarily due from national and regional
commercial trucking companies, and include accounts receivable purchased at a
discount from the Company's franchisees. The receivables are not
collateralized, however the risk is limited due to the large number of entities
comprising the Company's customer base and their dispersion across geographic
regions. At December 31, 1997, the Company had no significant concentrations of
credit risk.
Cash and Cash Equivalents
The Company considers as cash equivalents all highly liquid investments
with an original maturity of three months or less.
Allowance for Uncollectible Accounts
Accounts receivable are reviewed on a regular basis and the allowance for
uncollectible accounts is established to reserve for specific accounts believed
to be uncollectible. In addition, the allowance provides a reserve for the
remaining accounts not specifically identified.
Inventories
Inventories are stated at the lower of cost or market as determined by the
first-in, first-out method.
Land Held for Sale
In the fourth quarter of 1997, the Company's management committed to a plan
to dispose of certain real estate holdings. Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" requires that long-lived assets held for
sale be reported at the lower of carrying amount or fair value less cost to
sell. At December 31, 1997 the Company reported land held for sale at its net
book value of $8,102,000. The land held for sale consists of several parcels of
undeveloped land, $4,442,000 of which management believes will be sold and
converted to cash during 1998. The remainder of $3,660,000, which management
believes will be sold in the subsequent year, is included in other assets in the
accompanying consolidated balance sheet. These amounts were previously reported
in property and equipment in the Company's consolidated balance sheet.
Property and Equipment
Property and equipment are recorded at historical cost. Depreciation and
amortization are generally provided using the straight-line method over the
estimated useful lives of the respective assets. Repairs and maintenance are
charged to expense as incurred, and amounted to $2,893,000, $2,785,000 and
$3,486,000 for the years ended December 29, 1995, December 31, 1996 and December
31, 1997, respectively. Renewals and betterments are capitalized. Gains or
losses on disposal of property and equipment are credited or charged to income.
23
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies (continued)
Facilities under development are recorded at cost, and include capitalized
interest costs associated with the development of a project. These costs are
classified as facilities under development until the project is completed, at
which time the costs are transferred to the appropriate property and equipment
accounts.
Organization Costs
Costs incurred in connection with the formation of the Company, which
primarily include legal expenses, private placement fees and other due diligence
expenditures, are being amortized using the straight-line method over a ten-year
period.
Debt Issuance Costs
Costs incurred in obtaining long-term financing are amortized over the
life of the related debt using a method that approximates the interest method.
Self Insurance
The Company is self-insured for general liability, workers' compensation,
and group health benefit claims, up to stop-loss amounts ranging from $75,000 to
$250,000 on a per-occurrence basis. Provisions for these self-insurance
programs are made for both estimated losses on known claims and claims incurred
but not reported, based on claims history.
Advertising and Promotion
Costs incurred in connection with advertising and promotion are expensed
as incurred, net of reimbursements from franchisees. Net advertising and
promotion expenses of $1,688,000, $2,156,000 and $2,479,000 were incurred for
the years ended December 29, 1995, December 31, 1996 and December 31, 1997,
respectively, and are included in operating expenses in the accompanying
consolidated statements of operations. Advertising and promotion
reimbursements from franchisees totaled $306,000, $292,000 and $334,000 for the
years ended December 29, 1995, December 31, 1996 and December 31, 1997.
Motor Fuel Taxes
Certain motor fuel taxes are collected from consumers and remitted to
governmental agencies by the Company. Such taxes were $150,360,000,
$175,873,000 and $192,650,000 for the years ended December 29, 1995, December
31, 1996 and December 31, 1997, respectively, and are included in net revenues
and cost of sales in the accompanying consolidated statements of operations.
Environmental Liabilities and Expenditures
Accruals for environmental matters are recorded in operating expenses when
it is probable that a liability has been incurred and the amount of the
liability can be reasonably estimated. The measurement of environmental
liabilities is based on an evaluation of currently available facts with respect
to each individual site and considers factors such as existing technology,
presently enacted laws and regulations and prior experience in remediation of
contaminated sites. Such liabilities are exclusive of claims against third
parties and are not discounted.
Franchise Revenues
The Company recognizes net revenue from individual franchises and initial
training fees when substantially all significant services to be provided by the
Company have been performed. Continuing franchise fees, which are based
generally upon a percentage of the franchisees' sales, are recognized monthly as
earned. Fees earned from franchises aggregated $2,926,000, $3,397,000 and
$3,858,000 during the years ended December 29, 1995, December 31, 1996 and
December 31, 1997, respectively.
Financial Instruments with Off-Balance Sheet Risk
The Company occasionally utilizes futures and options contracts with the
objective of minimizing fuel cost risk due to market fluctuations. Gains and
losses resulting from changes in the market value of these contracts are
recognized when the related inventory is sold. The Company also may
occasionally enter into futures and options contracts that are not specific
hedges and gains or losses resulting from changes in market value of these types
of futures contracts are recognized in income currently. At December 31, 1997
the Company was not a party to any futures or options contracts. Interest rate
swap agreements are utilized from time to time to manage interest rate
exposures. The amount to be paid or
24
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(2) Summary of Significant Accounting Policies (continued)
received on these agreements is accrued as interest rates change and is
recognized over the lives of the respective agreements.
Income Taxes
The Company is not subject to federal or state income taxes. Results of
operations are allocated to the partners in accordance with the provisions of
the Company's Partnership Agreement and reported by each partner on their
respective federal and state income tax returns. The taxable income or loss
allocated to the partners in any one year generally varies substantially from
income or loss for financial reporting purposes due to differences between the
periods in which such items are reported for financial reporting and income tax
purposes.
Development Costs/Preopening Costs
The Company incurs costs associated with the development and opening of
new sites which are separately identifiable and incremental to normal operating
expenses. The costs are capitalized as incurred and are amortized over a 12
month period following the opening of the location.
Change in Accounting Policies
In the fourth quarter of 1997 the Financial Accounting Standards Board
issued, and the Company adopted, Emerging Issues Task Force Issue No. 97-13,
"Accounting for Costs Incurred in Connection with a Consulting Contract that
Combines Business Process Reengineering and Information Technology
Transformation" ("EITF 97-13"). EITF 97-13 required the immediate write off,
during the Company's fourth quarter, of cumulative costs related to process
reengineering activities that were previously allowed to be capitalized.
Prospective costs of a similar nature are also required to be expensed as
incurred. The adoption of EITF 97-13 resulted in a charge to income of
$1,579,000 and is presented as a cumulative effect of a change in accounting
principle, as required.
Reclassifications
Certain prior year amounts have been reclassified to conform to current
year presentation.
(3) Inventories
The following is a summary of inventories at December 31, 1996 and
December 31, 1997:
1996 1997
--------- -------
(in thousands)
Motor fuels and lubricants $ 5,074 5,207
Tires and tubes 2,993 3,387
Merchandise and accessories 7,531 7,476
Restaurant and other 726 1,420
Less reserve for obsolescence (1,129) (1,128)
------- ------
Inventories, net $15,195 16,362
======= ======
25
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(4) Property and Equipment
Property and equipment is summarized at December 31, 1996 and December
31, 1997 as follows:
<TABLE>
<CAPTION>
Estimated
Useful
Lives
(years) 1996 1997
------- ---- ----
(in thousands)
<S> <C> <C> <C>
Land - $ 34,970 26,526
Buildings and improvements 30 94,244 99,361
Furniture and equipment 3-10 40,396 48,350
Leasehold improvements 7-30 20,238 20,234
Facilities under development - 141 148
-------- -------
189,989 194,619
Less accumulated depreciation and amortization (30,450) (41,256)
-------- -------
Property and equipment, net $159,539 153,363
======== =======
</TABLE>
Facilities under development includes costs associated with new facilities
and major renovations of existing facilities. There were no future construction
commitments at December 31, 1997.
(5) Operating Leases
The Company is party to various operating leases. The operating leases are
for the leases on two Stopping Center locations, an office building, truck
leases and various equipment leases. The leases contain renewal options varying
from automatic annual renewals to multiple five-year options.
A summary of future minimum rental payments on operating leases which have
initial or remaining noncancellable lease terms in excess of one year as of
December 31, 1997, follows:
<TABLE>
<CAPTION>
Related Third
Fiscal Year ending Party Party Total
- ------------------ ----- ----- -----
<S> <C> <C> <C>
(in thousands)
1998 $ 1,494 821 2,315
1999 1,422 601 2,023
2000 1,422 560 1,982
2001 1,422 560 1,982
2002 1,422 - 1,422
Later years 3,241 - 3,241
------- ----- ------
Total minimum lease payments $10,423 2,542 12,965
======= ===== ======
</TABLE>
Rent expense under all operating leases was $2,004,000, $2,201,000 and
$2,034,000 for the years ended December 29, 1995, December 31, 1996 and December
31, 1997, respectively. Of these rentals, $1,488,000, $1,487,000 and $1,481,000
were paid to related parties for the respective years ended 1995, 1996 and 1997.
(6) Notes Payable
Notes payable at December 31, 1996 consisted of a five-year revolving
credit facility under which up to $35,000,000 was available. The balance
outstanding on the credit facility was $21,639,000 as of December 31, 1996 and
was paid-off as part of the Recapitalization in January 1997 and a new credit
facility established.
At December 31, 1997 the Company has available a $25,000,000 five year
revolving credit facility (the "Credit Facility") which may be used for working
capital and other corporate uses. The Credit Facility matures in January 2002
and interest on drawn funds is paid monthly at 1.5% above the bank's base rate
or 2.75% over the Eurodollar rate (the rate is determined at time of borrowing
at the Company's option). Fees of 2.75% on drawn funds and commitment fees of
one-half of one percent ( 1/2%) on undrawn
26
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(6) Notes Payable (continued)
funds are paid quarterly. At December 31, 1997, the Company did not have a
balance outstanding on the Credit Facility.
The Company did have standby letters of credit outstanding under the
respective revolving credit facilities at December 31, 1996 and 1997. For both
years, the standby letters of credit principally related to unfunded insurance
claims in the amount of $3,150,000 and various other standby letters of credit
in the amount of $500,000 and $777,000 at December 31, 1996 and 1997,
respectively.
Also as part of the Recapitalization, the Company has available a
$40,000,000 three year Expansion Facility which may be used to fund the
acquisition and development of new Stopping Centers and stand-alone Petro:Lubes.
The Expansion Facility matures in January 2000 and interest on drawn funds is
paid monthly at 1.5% above the bank's base rate or 2.75% over the Eurodollar
rate (the rate is determined at time of borrowing at the Company's option).
Fees of 2.75% on drawn funds and commitment fees of one-half of one percent (
1/2%) on undrawn funds are paid quarterly. At December 31, 1997, the Company did
not have a balance outstanding on the Expansion Facility.
Any funds drawn on both the Credit Facility or Expansion Facility are secured by
substantially all of the Company's assets and the partnership interests of Mobil
Long Haul and Chartwell and guaranteed by each of the Company's subsidiaries,
whose guarantees in turn are collateralized by substantially all of such
subsidiaries' assets.
27
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(7) Long-Term Debt
Long-term debt at December 31, 1996 and December 31, 1997 is presented
below.
<TABLE>
<CAPTION>
1996 1997
-------- -------
(in thousands)
-----------------
<S> <C> <C>
Five-year term note to a bank in an original amount of $25,000,000 maturing
June 30, 1999. The note was payable in 16 consecutive quarterly installments
commencing June 30, 1995. Interest at either the bank's prime rate plus 1.5%
or the Eurodollar rate plus 2.75% is payable monthly. The rate was 8.68% at
December 31, 1996. The note was refinanced January 30, 1997. $ 19,794 -
Four-year term note to a bank in an original amount of $20,000,000 maturing
September 30, 2001. The note is payable in 18 consecutive quarterly installments
varying from $625,000 to $3,500,000 commencing September 30, 1997. In accordance
with the debt agreements entered into as part of the Recapitalization, proceeds not
used to retire the 12 1/2% Senior Notes were to be used to paydown this term note.
Accordingly, the Company retired approximately $6,000,000 of this note in addition
to the quarterly installments due during 1997. Interest at either the bank's prime
rate plus 1.5% or the Eurodollar rate plus 2.75% is payable monthly. The rate was
8.4375% at December 31, 1997. The note is collateralized by substantially all of
the Company's assets. - 12,500
Seven-year term note to a bank in an original amount of $25,000,000 maturing June
30, 2001. The note was payable in 24 consecutive quarterly installments commencing
June 30, 1995. Interest at either the bank's prime rate plus 2% or the Eurodollar
rate plus 3.25% was payable monthly. The effective rate was 9.1172% at December
31, 1996 as a result of an interest swap agreement (the "Swap") with the lender as
required under the loan agreement. The Swap was to expire on June 30, 1999. The
notes were refinanced and the swap extinguished January 30, 1997. 23,010 -
Six-year term note to a bank in an original amount of $30,000,000 maturing September
30, 2003. The note is payable in 26 consecutive quarterly installments varying from
$125,000 to $3,500,000 commencing September 30, 1997 which aggregated $500,000
during 1997. Interest at either the bank's prime rate plus 2% or the Eurodollar
rate plus 3.25% is payable monthly. The effective rate was 8.9688% at December 31,
1997 as a result of an interest swap agreement (the "Swap") with the lender as
required under the loan agreement. The Swap expires on February 12, 2000. The
note is collateralized by substantially all of the Company's assets. - 29,500
12 1/2% Senior Notes due 2002 (the "Notes") in an original aggregate principal
amount of $100,000,000, net of original issue discount. As part of the
Recapitalization, approximately 94% of the Notes were retired during 1997.
Interest on the Notes is payable on June 1 and December 1 of each year beginning
December 1, 1994. 97,173 6,190
10 1/2% Senior Notes due 2007 (the "New Notes") in an original aggregate principal
amount of $135,000,000. Interest on the New Notes is payable on February 1 and
August 1 of each year, beginning August 1, 1997. The New Notes will be effectively
subordinated to the loans outstanding under the New Credit Agreement to the extent
of the value of the assets securing such loans. - 135,000
100,000 Exchangeable Debt Warrants (the "Warrants"), net of original issue
discount. As part of the Recapitalization, substantially all of the Warrants were
repurchased by the Company during 1997. 5,111 -
-------- -------
Total long-term debt 145,088 183,190
Less current portion 6,928 3,000
-------- -------
Long-term debt, excluding current portion $138,160 180,190
======== =======
</TABLE>
28
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(7) Long-Term Debt (continued)
The Indentures for the Long-Term Debt and the Credit Facility agreement
each contain certain covenants, including without limitation, covenants with
respect to the following matters: (i) limitation on indebtedness; (ii)
limitation on restricted payments; (iii) limitation on sales of restricted
subsidiary stock; (iv) limitation on transactions with affiliates; (v)
limitation on liens; (vi) limitation on disposition of proceeds of asset sales;
(vii) limitation on distributions and other payment restrictions affecting
restricted subsidiaries; (viii) restrictions on mergers and certain transfers
of assets and (ix) in the case of the Credit Facility financial covenants
covering leverage, cash flows, capital expenditures, EBITDA(as defined)/interest
coverage, and minimum net worth. At December 31, 1996 and 1997 the Company was
in compliance with all debt covenants.
Estimated principal payment requirements on long-term debt are as follows:
<TABLE>
<CAPTION>
Fiscal Year ending (in thousands)
--------------
<S> <C>
1998 $ 3,000
1999 4,500
2000 5,500
2001 1,500
2002 19,690
Thereafter 149,000
--------
Total $183,190
========
</TABLE>
(8) Accrued Expenses and Other Liabilities
The following is a summary of accrued expenses and other liabilities at
December 31, 1996 and December 31, 1997:
<TABLE>
<CAPTION>
1996 1997
------- ------------
(in thousands)
--------------
<S> <C> <C>
Accrued expenses:
Employee related expenses $ 7,748 10,071
Taxes payable-sales, fuel and property 5,088 2,935
Other 4,497 8,424
Due to franchisees 3,827 5,061
------- ------
Total $21,160 26,491
======= ======
</TABLE>
(9) Related Party Transactions
Amounts due to and from affiliates as of December 31, 1996 and December 31,
1997 consist of the following:
<TABLE>
<CAPTION>
1996 1997
------- ------
(in thousands)
---------------
Due from affiliates:
<S> <C> <C>
C&R Distributing, Inc. $1,370 105
Petro Truckstops, Inc. 336 196
Highway Service Ventures, Inc. 35 114
Cardwell Properties, Inc. - 412
Other 350 153
------ ------
Total $2,091 980
====== ======
Due to affiliates:
El Paso Amusement Company $ 194 221
Highway Service Ventures, Inc. 1,524 1,471
C&R Distributing, Inc. 213 167
Mobil Diesel Supply Corp. - 13,792
Mobil Oil Corp. - 3,337
Other 394 -
------ ------
Total $2,325 18,988
====== ======
</TABLE>
29
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(9) Related Party Transactions (continued)
In connection with the Recapitalization, the Company has entered into 10-
year supply agreements (the "Supply Agreement") with Mobil Oil Corp. ("Mobil")
under which Mobil will supply the Company operated Stopping Centers' diesel fuel
requirements as well as a portion of their lubricant and gasoline requirements.
The diesel fuel sold at all Company-operated Stopping Centers is branded Mobil
Diesel, and the Company operated Petro:Lubes feature Mobil Delvac lubricants.
Under the diesel fuel and gasoline Supply Agreement, the Company has agreed to
purchase from Mobil specified distribution terminals a minimum number of gallons
of diesel fuel and gasoline on a monthly basis and on an annual basis, subject
to product availability and reductions by Mobil under certain described
circumstances and subject to existing gasoline supply contractual obligations.
As a result of the Supply Agreement and in order to comply with the laws
governing the branding of diesel fuel, Mobil Diesel Supply Corp. ("MDS"), a
wholly owned subsidiary of Mobil was formed. MDS purchases diesel fuel from
third party suppliers and then sells it back to the Company at cost, given that
Mobil cannot supply 100% of the Company's diesel fuel demand because of product
availability and restrictions on the amount of diesel fuel the Company is
allowed to purchase from Mobil. The transactions with MDS are done in order to
meet the Company's diesel fuel demand and comply with branding laws, which
require Mobil to take possession of the fuel first, before it can be branded
Mobil Diesel.
The Supply Agreement allows the Company to continue to negotiate for the
purchase of diesel fuel with third-party suppliers approved by MDS. If the
Company is able to obtain a lower diesel fuel price from a third-party supplier
in a particular market area, the Company may request that Mobil meet such lower
price or allow a portion of the Company's diesel fuel requirements to be
supplied from such MDS approved third-party supplier, in which case MDS would
purchase the diesel fuel from the supplier and resell the product to the
Company. Any change in supply source, however, does not affect the Company's
requirement to purchase the annual minimum number of gallons from Mobil
specified distribution terminals fixed by the Supply Agreement. The Supply
Agreement also places a monthly limit on the maximum number of gallons of diesel
fuel and gasoline that the Company may lift from Mobil specified distribution
terminals.
The Company purchased approximately 40% and 27% of diesel fuel from MDS
and Mobil, respectively during 1997. Management does not believe this
concentration in fuel supply provides any significant additional risks, as the
Supply Agreement with Mobil allows the Company to continue to negotiate with
third-party suppliers in order to obtain market prices for fuel.
The Company entered into an agreement with Chartwell Investments,
providing for the payment of fees and reimbursement of certain expenses to
Chartwell Investments for acting as financial advisor with respect to the
Recapitalization, including soliciting, structuring and arranging the financing
of the Recapitalization. The fees, totaling approximately $3,000,000, equal to
1% of the total capitalization of the Company plus 1/2 of 1% of the Expansion
Facility and the reimbursement of certain expenses, were paid at the closing.
Fuel sales aggregating $4,022,000, $4,567,000 and $3,315,000 for the years
ended December 29, 1995, December 31, 1996 and December 31, 1997, respectively,
were made to C&R Distributing, Inc. ("C&R") at the Company's cost. C&R sales of
fuel and lubricants and truck hauling fees, aggregating $7,857,000, $11,432,000
and $5,079,000 for the years ended December 29, 1995, December 31, 1996 and
December 31, 1997, respectively, were charged to the Company.
Since June 1993, the two Stopping Centers located in Louisiana have
featured video poker games housed in a separate on-site facility and operated by
a third party, Petro Truckstops, Inc., an affiliate who, under terms of a
contract, turns over a specified portion of the revenue generated from the
machines. Petro Truckstops, Inc. pays 95% of revenue collected to the Company
and retains 5% for operating expenses in accordance with a lease agreement.
Payments to the Company under this arrangement aggregated $2,383,000 during
1995, $1,979,000 during 1996 and $2,103,000 during 1997. During 1996, Louisiana
enacted a statute requiring the cessation of video poker operations unless the
parish in which the operations were conducted voted to allow the continued
operation of video poker machines. On November 5, 1996, the parish in which the
Shreveport unit is located voted to continue to allow video poker operations,
while the parish in which the Hammond unit is located voted to disallow video
poker operations. The phase out
30
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(9) Related Party Transactions (continued)
period for the Hammond location is through June 1999. During the year ended
December 31, 1997, the Hammond location generated approximately $1,025,000 of
revenue from video poker.
Management fees of $250,000 were earned by the Fremont Group for each of
the years ended December 29, 1995, December 31, 1996. During 1997 management
fees of $600,000 and $300,000 were earned by Chartwell and Mobil Oil,
respectively, in accordance with terms of the Company's Partnership Agreement.
Each of the affiliates, with exception of Mobil Diesel Supply Corporation
and Mobil Oil Corporation , is owned or controlled to some degree by a member or
members of the Cardwell Group. Related party transactions, other than those
specifically discussed above, generally arise in the ordinary course of business
as a result of the Company's purchase of trade accounts receivable or receipt of
franchisee fees from certain related parties who own properties which are part
of the Company's network. All significant related party transactions have been
appropriately reflected in these footnotes and accompanying consolidated
financial statements.
In order to comply with applicable Internal Revenue Code and Treasury
Regulation provisions dealing with recourse debt, certain Cardwell entities and
Arcadian Management Corporation each entered into an indemnity agreement under
which each has agreed to indemnify the Company, the general partners and certain
limited partners in the event that the indemnified party is required to pay
certain of the Company's indebtedness after a default, acceleration by the
creditor and exhaustion of any collateral securing the credit facility. In May
1994, certain Cardwell entities and Arcadian Management Corporation amended
their original indemnity agreements in connection with the May 1994 financing.
No payments have been made under these agreements.
(10) Partners' Capital
Ownership
As discussed in Note 1, effective January 30, 1997, the Company
consummated a transaction under which Chartwell and Mobil Long Haul invested to
directly acquire the partnership interests of the Company and invest in the
Company. The Cardwell Group maintained its capital investment in the Company.
Kirschner Investments, a Company franchisee, also invested in the Company.
Immediately following the transaction, the common partnership interests of the
Company are owned by Chartwell (approximately 50.6%), the Cardwell Group
(approximately 39.7%), Mobil Long Haul (approximately 7.3%), and Kirschner
(approximately 2.4%), and the preferred partnership interests are owned by Mobil
Long Haul ($12,000,000) and the Cardwell Group ($7,600,000). Chartwell and the
Cardwell Group own both general and limited partnership interests and Mobil Long
Haul and Kirschner own only limited partnership interests.
Under the Company's Partnership Agreement ("the Agreement"), the general
partners delegated management authority to a committee of the partners
representatives ("the Board" or "Board of Directors"). Both the Cardwell Group
and Mobil Long Haul have the right to appoint two persons each to the Board and
Chartwell may appoint four persons. Additionally, each of these partners
(subject to maintaining certain ownership percentages, as detailed in the
Agreement) also has the right to veto most actions by the Board.
Mandatorily Redeemable Preferred Partnership Interests
The mandatorily redeemable preferred partnership interests are entitled to
cumulative preferred returns of 9.5% for preferred interests owned by Mobil Long
Haul and 8.0% for preferred interests owned by the Cardwell Group, and are
subject to mandatory redemption 270 days after the tenth anniversary of the date
of closing of the Recapitalization, which is subsequent to the maturity date of
the New Notes.
The preferred returns on the mandatorily redeemable preferred partnership
interest accrue, but are only payable in cash if permitted by the Company's then
existing debt instruments. The Indenture governing the New Notes and the New
Credit Agreement restrict the payment of dividends on mandatorily redeemable
preferred partnership interests.
31
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(10) Partners' Capital (continued)
At December 31, 1997, the Company had accrued preferred returns on the
mandatorily redeemable preferred partnership interests amounting to $1,602,000,
with a corresponding increase in partners' deficit.
Distributions
Under the terms of the Agreement, the Company is required to distribute to
the partners, on a pro rata basis in accordance with ownership percentage
interests, an amount calculated based upon allocated taxable income using
certain state and federal tax rates ("Minimum Tax Distribution"). The payments
are to be made on or before the estimated tax payment dates, which are April 15,
June 15, September 15 and December 15. Debt agreements restrict distributions
upon certain debt covenant violations.
As of December 31, 1997, the historical net book value of assets and
liabilities was approximately $34,000,000 greater than the associated net tax
basis of those assets and liabilities.
Occasionally, the Company's Board of Directors may elect to make
distributions (subject to loan covenants in effect at that time) to the
partners. After the preference given to the Minimum Tax Distribution described
above, in general, distributions, including any liquidating distributions, are
first made to partners in proportion to their preferred ownership, in an amount
equal to any unpaid and accrued return on the manditorily redeemable partnership
interests. Next, distributions may be made to common or preferred partners
(with preference given to the preferred interests), in proportion to their
respective ownership, equal to any unrecovered capital. Finally, remaining
distributions may be given to the partners in accordance with their positive
capital account balances.
(11) Employee Benefits
The Company sponsors a defined contribution retirement plan under Internal
Revenue Code Section 401(k) covering substantially all of its employees.
Company contributions equal 50% of the participants' contributions up to 2% of
the participants' annual salary and aggregated approximately $133,000, $138,000
and $189,000 for the years ended December 29, 1995, December 31, 1996 and
December 31, 1997, respectively. At December 31, 1996 and 1997 there were no
other post employment or retirement plans.
(12) Partnership Interests Option Plan
The Company has established an equity incentive plan to attract and retain
key personnel, including senior management, and to enhance their interest in the
Company's continued success. The Company anticipates that the aggregate equity
issued pursuant to such plans and any future plans will be between 5% and 10% of
the fully diluted equity of the Company. At December 31, 1997, options covering
6.0% of the partnership interests in the Company were outstanding. No options
were vested at December 31, 1997 and, accordingly, none were exercised during
1997.
(13) Commitments and Contingencies
The Company is involved in various litigation incidental to the business
for which estimates of losses have been accrued, when appropriate. In the
opinion of management, such proceedings will not have a material adverse effect
on the consolidated financial position or results of operations.
(14) Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is presented in accordance with the requirements of Statement of
Financial Accounting Standards No. 107 "Disclosures about Fair Value of
Financial Instruments". The estimated fair value amounts have been determined by
the Company using available market information and valuation methodologies.
As of December 31, 1996 and December 31, 1997, the carrying amounts of
certain financial instruments employed by the Company, including cash and cash
equivalents, accounts receivable, trade accounts payable and amounts due from/to
affiliates are representative of fair value because of the short-term maturity
of these instruments. The carrying amount of notes payable approximate fair
value due to the floating nature of the interest rate. The fair value of both
series of senior notes has been estimated based on quoted market prices for the
same or similar issues or by discounting the future cash flows using
32
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(14) Financial Instruments (continued)
rates currently available for debt of similar terms and maturity. The fair
value of all derivative financial instruments is the amount at which they could
be settled, based on quoted market prices or estimates obtained from dealers.
The following table reflects the carrying amount and estimated fair value
of the Company's financial instruments:
<TABLE>
<CAPTION>
Year Ended,
1996 1997
Carrying Carrying
Amount Fair Value Amount Fair Value
-------- ----------- -------- -----------
(in thousands)
<S> <C> <C> <C> <C>
Balance sheet financial instruments
Long-term debt $145,088 $142,825 $183,190 $191,088
Other financial instruments
Interest rate swap agreements - (535) - (154)
</TABLE>
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company uses
derivatives to manage well-defined interest rate risks. At December 31, 1997,
the Company was party to an interest rate swap agreement with an aggregate
notional principal amount of $30,000,000. Under the agreement, the Company pays
a fixed rate of 6.15% and receives a floating rate based on LIBOR on the
aggregate principal amount as determined in three month intervals. The
transaction effectively changes a portion of the Company's interest rate
exposure from a floating rate to a fixed rate basis. The effect of the swap
was to increase the rate by .5% which resulted in additional interest expense of
approximately $154,000.
The primary risks associated with swaps are the exposure to movements in
interest rates and the ability of the counterparties to meet the terms of the
contracts. Based on review and assessment of counterparty risk, the Company
does not anticipate non-performance by the other party. The Company does not
obtain collateral or other security to support financial instruments subject to
credit risk, but monitors the credit standing of counterparties.
(15) Environmental Matters
The Company is subject to contingencies pursuant to environmental laws and
regulations that in the future may require the Company to take action to correct
the effects on the environment of prior disposal practices or releases of
chemical or petroleum substances by the Company or other parties. The Company
has accrued for certain environmental remediation activities consistent with the
policy set forth in Note 2. At December 31, 1996 and 1997, such accrual
amounted to approximately $217,000 and $187,000, respectively, and in
management's opinion, was appropriate based on existing facts and circumstances.
Under the most adverse circumstances, however, this potential liability could be
significantly higher. In the event that future remediation expenditures are in
excess of amounts accrued, management does not anticipate that they will have a
material adverse effect on the consolidated financial position or results of
operations of the Company. At December 31, 1996 and 1997 the Company has
recognized approximately $256,000 and $262,000, respectively, in the
consolidated balance sheet related to recoveries of certain remediation costs
from third parties.
(16) Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"). Adoption is required for interim and annual periods beginning after
December 15, 1997. SFAS No. 130 requires that comprehensive income and its
components, as defined in the Statement, be reported in a company's financial
statements. Management does not believe that the adoption of this statement
will have a significant impact on the Company.
33
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(16) Recently Issued Accounting Pronouncements (continued)
Also, in June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131"). Adoption is
required for financial statements for periods beginning after December 15, 1997,
although it need not be applied to interim financial statements in its initial
year of application. SFAS No. 131 requires disclosure of certain segment
financial information, explanations of segment measurements, reconciliations to
consolidated amounts, and information about products and services and major
customers on an enterprise-wide basis. Management does not believe that the
adoption of this statement will have a significant impact on the Company's
financial statements or related disclosures.
In February 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 "Accounting for the Cost of Computer Software
Developed or Obtained for Internal-Use" ("SOP 98-1"). Adoption is required for
fiscal years beginning after December 15, 1998. SOP 98-1 provides guidance on
accounting for the costs of computer software developed or obtained for
internal-use and identifies the characteristics of internal-use software.
Management does not believe the adoption will be material to its financial
statements or results of operations.
34
<PAGE>
Petro Stopping Centers, L.P.
Notes to Consolidated Financial Statements
(17) Selected Quarterly Financial Data (unaudited)
(in thousands)
--------------
First Second Third Fourth
Quarter Quarter Quarter Quarter(a)
------- ------- ------- ----------
1996
- ----
Net revenues $147,925 156,077 160,530 172,525
Operating income 4,655 5,924 6,216 (1,354)
Net income (loss) (675) 626 969 (9,680)
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1997
- ----
Net revenues $162,565 160,759 168,209 194,196
Operating income 3,680 6,418 7,241 4,712
Net income (loss) (14,135)(b) 1,073 2,119 (1,622)(c)
(a) Fourth quarter of 1996 decline in operating income and net income is due
principally to the following items: (1) Earnings reflect the impact due to
lack of management direction and focus on the business during the change in
management structure that was in process as a result of the
Recapitalization and sale of the partnership interest. (2) In addition to
the decline in performance in the fourth quarter, the quarter also reflects
adjustments relating to establishment of inventory reserves, insurance
reserves, employee severance, benefit and placement expenses as well as
recapitalization costs amounting to approximately $1,400,000, $500,000,
$2,534,000, and $2,938,000 respectively.
(b) Approximately $12,745,000 of this net loss is due to the Company charging,
as an extraordinary item, debt restructuring costs in conjunction with the
Recapitalization.
(c) Approximately $1,900,000 of this net loss is due to additional depreciation
expense recorded as a result of revising the service life of certain
computer equipment. Furthermore, a charge of $1,579,000 was recorded in the
fourth quarter as a result of the adoption of EITF No. 97-13, which
required the write-off of certain costs related to process reengineering
activities that were previously allowed to be capitalized. In accordance
with EITF 97-13, the charge was recorded as a cumulative effect of a change
in accounting principle.
35
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
The Board of Directors and Partners
Petro Stopping Centers, L.P.
We have audited the accompanying consolidated balance sheet of Petro Stopping
Centers, L.P. (a Delaware limited partnership) as of December 31, 1997, and the
related statements of operations, changes in partners' capital(deficit) and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Petro Stopping
Centers, L.P. as of December 31, 1997, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
As discussed in Note 2, the Company adopted Emerging Issues Task Force Issue No.
97-13, "Accounting for Costs Incurred in Connection with a Consulting Contract
that Combines Business Process Reengineering and Information Technology
Transformation," during the fourth quarter of 1997.
ARTHUR ANDERSEN LLP
Dallas, Texas
February 23, 1998
36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
The Board of Directors and Partners
Petro Stopping Centers, L.P.
We have audited the accompanying consolidated balance sheet of Petro Stopping
Centers, L.P. as of December 31, 1996 and the related consolidated statements of
operations, changes in partners' capital(deficit) and cash flows for each of the
two years in the period ended December 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Petro
Stopping Centers, L.P. as of December 31, 1996 and the consolidated results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
El Paso, Texas
March 28, 1997
37
<PAGE>
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On August 27, 1997, the Registrant notified Coopers & Lybrand LLP (El
Paso, Texas office) of its decision to dismiss Coopers & Lybrand LLP and to
retain Arthur Andersen LLP (Dallas, Texas office) for the audit of its financial
statements for fiscal year ended December 31, 1997. The change in the
independent accountants was recommended by the Audit Committee of the Board of
Directors.
During the last two most recent fiscal years and interim periods through
August 27, 1997, there were no disagreements with Coopers & Lybrand LLP on
matters of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure which disagreement(s), if not resolved to the
satisfaction of Coopers & Lybrand LLP, would have caused them to make reference
to the subject matter of the disagreement(s) in connection with their report.
In addition, during such period, there have been no "reportable events" with
Coopers & Lybrand LLP as described in Items 304 (a)(I)(v) of Regulation S-K.
During the last two most recent calendar years and through September 3,
1997, the Company did not consult Arthur Andersen LLP on either the application
of accounting principles to a complete or proposed specific transaction, or on
the type of audit opinion that might be rendered on the Company's financial
statements.
38
<PAGE>
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The following sets forth certain information with respect to the persons who
are members of the Company's Board of Directors, Executive Committee, Operating
Committee and senior management team as of February 1, 1998.
Name Age Position
---- --- --------
James A. Cardwell, Sr. 66 Chairman, Chief Executive Officer, President,
Member of the Executive Committee, Operating
Committee and Director
Larry Zine 43 Executive Vice President, Chief Financial
Officer and Member of Operating Committee
Evan Brudahl 42 Senior Vice President of Operating of
Strategic Planning Committee and and
Development, Member Director
James A. Cardwell, Jr. 38 Senior Vice President and Director of
Operations, Member of Operating Committee
Travis R. Roberts 62 Vice President of Real Estate Services and
Member of Operating Committee
David Latimer 39 Vice President of Petro:Lube
David A. Haug 37 Vice President of Finance and Treasurer
Todd R. Berman 40 Member of the Executive Committee and Director
Lynne Lachenmyer 39 Member of the Executive Committee, Audit
Committee and Director
Michael S. Shein 34 Member of Operating Committee, Audit Committee
and Director
Malcolm Lassman 59 Member of the Executive Committee, Audit
Committee and Director
James A. (Jack) Cardwell, Sr. -- Jack Cardwell founded the Company in 1975 and
has been serving as the Chief Executive Officer since May 1992 and has been a
member of the Board of Directors since its formation in 1992. He is the Chairman
and President of the Company with responsibility for the Company's overall
performance, while defining Petro's image in the marketplace and identifying
growth opportunities and overseeing employee and customer retention. He served
as the Chairman of the National Association of Truck Stop Operators ("NATSO") in
1983 and 1984 and has worked on various committees of NATSO since that time. He
currently serves as a trustee for Security Capital Pacific Trust (a New York
Stock Exchange Company). Jack Cardwell is the father of Jim Cardwell.
Larry Zine -- Larry Zine was hired in December 1996 as Executive Vice
President and Chief Financial Officer and is responsible for all financial,
accounting, management information and insurance and benefit services for the
Company. Mr. Zine was the Executive Vice President and Chief Financial Officer
for The Circle K Corporation, the second largest chain of convenience stores in
the United States, from 1988 to 1996. Mr. Zine was an integral part of The
Circle K Corporation's reorganization from bankruptcy in July 1993, its initial
public offering in March 1995 and subsequent sale in June 1996. Mr. Zine had
worked for The Circle K Corporation for 15 years in various capacities including
the last eight years as Chief Financial Officer. Mr. Zine has been a director of
Morris Material Handling, Inc., since March 1998. He was educated at the
University of North Dakota and holds an M.S. degree in Accounting and a B.S.B.A.
in Marketing.
Evan Brudahl -- Evan Brudahl, a Mobil Oil employee, is the Senior Vice
President of Strategic Planning and Development and a director. Mr. Brudahl is
responsible for strategic planning and business development functions of the
Company. This includes overseeing field support services, advertising, travel
store operations, corporate planning and franchise operations. Mr. Brudahl was
most recently the Manager of U.S. Diesel Retail Marketing and Travel Center
Business at Mobil Oil and has worked for Mobil Oil for 19 years. He has held the
positions of District Manager, Manager of U.S. company-operated Gasoline
Stations Operations, Company Operations Accounting Manager, and various other
positions in U.S. Marketing and Administrative areas. He received a B.B.A. in
Marketing from the University of Wisconsin at Whitewater.
James A. (Jim) Cardwell, Jr. -- Jim Cardwell is Senior Vice President of
Operations and Marketing with responsibility for the Company's operations and
fuel purchasing. Mr. Cardwell has been involved with the Company full time for
14 years and has held various positions including profit center management and
was Vice President of Operations from 1986 to 1992. Prior to his current
position, he served as Vice President of National Sales and Promotions from June
1993 to January 1997. Mr. Cardwell studied Management and
39
<PAGE>
Finance at the University of North Texas. Currently he serves on the board of
NATSO, and is Chairman of the Board of the NATSO Foundation. He is also a member
of the Young Presidents Organization. Jim Cardwell is the son of Jack Cardwell.
Travis Roberts -- Travis Roberts is Vice President of Real Estate Services.
Mr. Roberts manages support services related to maintenance at existing sites,
capital projects at existing sites, new site acquisition and construction,
franchisee support, and new site selection. Mr. Roberts served as Vice
President of Maintenance and Development. Mr. Roberts joined the Company at its
inception in 1975. He was Vice President of Development from 1985 to 1992.
David Latimer -- David Latimer has been serving as Vice President of
Petro:Lube since April 1995, prior to which he served as Vice President of
Operations from 1993 to 1995. Mr. Latimer joined the Company in 1983 and was
instrumental in the introduction and development of the Petro:Lube Express Truck
Service Center business. Mr. Latimer served for 4 years on the
Bridgestone/Firestone Dealer Board and is a current member of the Kelly
Springfield Advisory Council. Mr. Latimer also serves as the Company
representative to the National Tire Dealers and Retreaders Association and The
Maintenance Council.
David A. Haug -- David A. Haug is Vice President of Finance and Treasurer of
the Company. Prior to his current position, he served as the Controller for the
Company, a position he held since April 1990. Prior to that, he was an audit
manager with Lauterbach, Borschow and Company, Certified Public Accountants from
1982 to 1990. He received a B.A. in Accounting from New Mexico State University
and is a Certified Public Accountant in the state of Texas.
Todd R. Berman -- Todd Berman has been a director of the Company since January
30, 1997. Mr. Berman is the founder and President of Chartwell Investments. Mr.
Berman has served as Chairman of the Board of Griffith Consumers Company, one of
the nation's largest independent distributors of heating oil and other petroleum
products, since December 1994, as Chairman of Carl King, Inc., the leading
operator of gas stations and convenience stores in the Delmarva peninsula
(Delaware, Maryland, Virginia), since 1994; and as Chairman of the Board of
Morris Material Handling Inc., since March 1998. Mr. Berman has been with
Chartwell or its predecessor since 1992. Mr. Berman received an A.B. from Brown
University and an M.B.A. from Columbia University Graduate School of Business.
Lynne Lachenmyer -- Lynne Lachenmyer has been a director of the Company since
June 25, 1997. Ms. Lachenmyer currently serves as Manager of the North
American Distillate Business for Mobil Oil Corporation and has since April 1997.
Prior to this role, from 1995 to 1997, she was Manager of Chemical Global
Aromatics Business for Mobil Oil. Ms. Lachenmyer also served as Manager of
Strategic Planning and Investments for Mobil Chemical from 1994 through 1995 and
has held various management positions with Mobil Oil Corp. since 1991.
Michael S. Shein -- Mr. Shein has been a director of the Company since January
30, 1997. Mr. Shein, a managing director and co-founder of Chartwell
Investments, has been with Chartwell Investments or its predecessor since 1992.
Mr. Shein has been a director of Griffith Consumers Company, one of the nation's
largest independent distributors of heating oil and other petroleum products,
since December 1994; a director of Carl King, Inc., the leading operator of gas
stations and convenience stores in the Delmarva Peninsula (Delaware, Maryland,
Virginia), since December 1994; and a director of Morris Material Handling,
Inc., since March 1998. He received a B.S. summa cum laude from The Wharton
School at the University of Pennsylvania.
Malcolm Lassman -- Mr. Lassman has been a director of the Company since
September 23, 1997. Mr. Lassman is a managing partner of the Washington, D.C.
office of the law firm Akin, Gump, Strauss, Hauer & Feld, L.L.P., where he has
practiced law since 1971. Mr. Lassman currently serves as a director of Project
NorthStar, a company committed to assisting underprivileged children. Mr.
Lassman received a B.A. in Economics from Washington & Lee University and a
L.L.B. cum laude from Washington & Lee University.
40
<PAGE>
ITEM 11. Executive Compensation
Executive Compensation
The following table presents information concerning compensation paid for
services to the Company during 1995, 1996 and 1997 to the Chief Executive
Officer of the Company and the four other most highly paid executive officers
employed by the Company at the end of 1997, collectively, the "Named Executive
Officers."
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------ ------------
Awards
Name and Other Annual Options All Other
Principal Position Year Salary Bonus Compensation (% Interest)(12) Compensation
- ------------------ ---- ------ ----- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
James A. Cardwell- 1997 $362,700 - 247,177(2)
Chief Executive 1996 363,686 - 247,037
Officer 1995 363,685 - 259,850
Larry Zine - 1997(5) $290,000 174,000 2.75(8) 64,728(9)
Executive Vice
President & Chief
Financial Officer
Joseph R. Schillaci- 1997 $ 31,277(7) - 458,314(3)(10)
President & Chief 1996 274,189 - 10,586
Operating Officer 1995 272,602 30,000 2.90(1) 11,325
Walter A. Fitzgerald , Jr. 1997 $ 16,730(7) - 197,696(10)(11)
Vice President- 1996 145,514 - 960
Operations 1995 128,133 20,000 .70(1) 24,176(4)
Evan Brudahl- 1997(5) $135,000 81,000 .90
Senior Vice President-
Strategic Planing and
Development
James A. Cardwell, Jr.- 1997 $135,000 81,000 .90 1,326(6)
Vice President - 1996 107,882 - 1,179
National Sales and 1995 101,642 10,000 1,500
Promotions
David Latimer- 1997 $128,516 90,959 .25 3,166(6)
Vice President- 1996 123,296 - 2,767
Lube Operations 1995 117,491 20,000 .40(1) 3,498
</TABLE>
- -------------------
(1) Options held by the Named Executive Officers in the Company, expressed as a
percent of the partnership equity. All of such options were terminated
upon consummation of the Recapitalization at no cost to the Company.
(2) Represents employer contributions to the Company's 401(k) Plan of $3,637,
$3,497 and $3,295 in 1997, 1996 and 1995, respectively, and life insurance
premiums paid by the Company for the benefit of Mr. Cardwell in the amounts
of $243,540, $243,540 and $256,555 in 1997, 1996 and 1995, respectively.
(3) Represents insurance premiums of $0, $7,653 and $7,653 paid by the Company
for the benefit of Mr. Schillaci in 1997, 1996 and 1995, respectively, and
$314, $2,933 and $3,672 of employer contributions to the Company's 401(k)
Plan for 1997, 1996 and 1995, respectively.
(4) Represents $23,663 of payments in connection with relocation expenses
incurred by Mr. Fitzgerald.
41
<PAGE>
(5) Mr. Zine's employment with the Company commenced December 1996 and Mr.
Brudahl's commenced January 30, 1997.
(6) Represents employer contributions to the Company's 401(k) Plan.
(7) Mr. Schillaci's and Mr. Fitzgerald's employment was terminated in January
1997.
(8) Represents options to purchase 2.75% of the common partnership interests of
the Company granted pursuant to the terms of his employment agreement. 25%
of the options become exercisable on each of December 31, 1997, 1998, 1999,
and 2000.
(9) Represents payments in connection with relocation expenses incurred by Mr.
Zine.
(10) Amount includes $458,000 and $194,000 of payments related to the buyout of
Mr. Schillaci's employment contract and Mr. Fitzgerald's severance letter,
respectively.
(11) Represents $3,696, $960 and $513 of employer contributions to the Company's
401(k) Plan in 1997, 1996 and 1995, respectively.
(12) Options held by the Named Executive Officers in the Company, expressed as a
percent of the partnership equity.
The following table sets forth certain information concerning options to
purchase partnership interests granted by the Company to the Named Executive
Officers during 1997.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Partnership Interest
Price Appreciation for
Individual Grants the Option Term
---------------------------------------------------------- ----------------------
% of Total
Options Exercise
Options Granted to or Base
Granted Employees Price Expiration
Name (% Interest) in Fiscal Year ($/1% Interest) Date 5% ($) 10% ($)
- --------------- ----------- -------------- -------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Larry Zine(1) 2.75% 31.4% $400,000 12/31/2006 $691,784 $1,753,117
Evan C. .90 10.3 400,000 1/30/2007 226,402 573,747
Brudahl(2)
James A. .90 10.3 400,000 1/30/2007 226,402 573,747
Cardwell(2)
David .25 2.9 400,000 1/30/2007 62,889 159,374
Latimer(2)
</TABLE>
- ----------------
(1) In accordance with Mr. Zine's Employment Agreement (the "Agreement"), dated
December 31, 1996, Mr. Zine received options to purchase 2.75% of the
common partnership interests of the Company. 25% of the options become
exercisable on each of December 31, 1997, 1998, 1999 and 2000. As of
December 31, 1997, no options had been exercised.
The options become immediately exercisable upon a Change of Control (as
defined in the Agreement). Upon the termination of Mr. Zine's employment
with the Company, at his request, the Company must purchase the options and
any partnership interests issued upon exercise of the options (if permitted
under the Company's existing debt instruments) at the fair market value of
the securities at such time as determined under the Agreement.
(2) Pursuant to the Company's 1997 Class B Limited Partnership Interest Option
Plan (the "Option Plan"), these Named Executive Officers were granted ten-
year options (the "Options") to purchase Class B Limited Partnership
Interests of the Company. The Options granted to Messrs. Brudahl, Cardwell
and
42
<PAGE>
Latimer vest in equal installments of 25% on each of the first four
anniversaries of the date of the closing of the Recapitalization.
At December 31, 1997, Options covering 6.0% of the partnership interests in
the Company were outstanding, of which none were exercisable. Accordingly,
no Options were exercised in 1997.
Participants become fully vested upon the occurrence of a Change in Control
(as defined in the Option Plan), upon a sale of substantially all of the
assets of the Partnership, upon the liquidation of the Partnership, or upon
the Partnership's consummation or adoption of a plan to make an
Extraordinary Distribution or Redemption (as defined in the Plan). Options
may be exercised at any time, to the extent that such options are
exercisable. All Options expire on the earlier to occur of (i) the tenth
anniversary of the date the Option was granted, (ii) one year after the
participant ceases to be an employee of the Partnership due to retirement,
death or disability, (iii) immediately, if the participant ceases to be an
employee of the Partnership for cause, or (iv) ninety days after the
occurrence of the termination of the participant's employment with the
Partnership, for any reason other than (ii) or (iii) above.
Fiscal Year End Option Values
Partnership interests in the Company are not registered or publicly traded
and, therefore, a public market price of the partnership interests is not
available. While a formal valuation of the Company's partnership interests has
not been undertaken recently, the Company believes that the exercise price of
the Options held by the Named Executive Officers at December 31, 1997 was in
each case greater than or equal to the fair market value of the underlying
partnership interests as of such date.
Partnership Interests Option Plan
The Company has established an equity incentive plan to attract and retain
key personnel, including senior management, and to enhance their interest in the
Company's continued success. The Company anticipates that the aggregate equity
issued pursuant to such plans and any future plans will be between 5% and 10% of
the fully diluted equity of the Company. At December 31, 1997, options covering
6.0% of the partnership interests in the Company were outstanding. No options
were vested at December 31, 1997 and, accordingly, none were exercised during
1997.
Compensation of Members of the Board of Directors
Outside members of the Board of Directors receive a payment of $3,500 per
meeting from the Company for their services. Members who are employees of the
Company or employees of affiliates of the Company do not receive a salary or any
other payment for their services on the Board of Directors.
Compensation Committee
The Company does not maintain a formal Compensation Committee. The Vice
President of Administration of the Company administers the compensation program
in conjunction with the Chief Executive Officer, the President and the Board of
Directors. The Chief Executive Officer's salary is determined by the Executive
Committee of the Board of Directors.
Employment Agreements
The Company entered into employment agreements with Jack Cardwell and Jim
Cardwell on January 30, 1997 and, effective December 16, 1996, entered into an
employment agreement with Mr. Zine (collectively the "Employment Agreements").
The Employment Agreements commenced on the date of execution and expire on
December 31, 1999. Under the Employment Agreements, the annual base salaries of
Jack Cardwell, Jim Cardwell and Mr. Zine (the "Executives") are $362,700,
$135,000 and $290,000, respectively, and are subject to review and may be
increased by the Company's Board of Directors (or compensation committee, if one
is elected). Jack Cardwell and Jim Cardwell are also entitled to participate in
any bonus plan approved by the Board of Directors of the Company. Mr. Zine is
eligible to receive an annual
43
<PAGE>
cash bonus, based on parameters to be established by Jack Cardwell and Mr. Zine
and approved by the Board of Directors.
On January 30, 1997, Mr. Zine received options to purchase (at an exercise
price per share of approximately $400,000 per 1%) 2.75% of the Company's common
partnership interests, on a fully diluted basis.
If the Company terminates any of the Employment Agreements without cause or
because the officer has been incapacitated for three consecutive months, or the
Executive terminates his Employment Agreement for "good reason" (as defined in
each Employment Agreement), then the terminated officer will be entitled to
continue to receive his salary, plus certain benefits, for twelve months from
the date of the notice of termination. The Employment Agreements contain certain
customary nonsolicitation provisions upon termination of such agreements.
The Company and Joseph R. Schillaci, the Company's former President and
Chief Operating Officer, entered into an employment agreement dated as of
January 1, 1993 (the "Employment Agreement"). The Company terminated the
Employment Agreement at the closing of the Recapitalization. Pursuant to the
terms of the Employment Agreement, at the closing, the Company: (i) paid Mr.
Schillaci a lump sum of $300,000; and (ii) paid Mr. Schillaci for reasonable
expenses in connection with his relocation and out-placement assistance.
Secondment Letter Agreement
The Company entered into an agreement with Mobil Oil providing for the
temporary secondment (or loan) of one of Mobil Oil's employees, Evan C. Brudahl,
to the Company. The period of secondment commenced on January 30, 1997 and is
contemplated to continue until July 1, 2000, subject to certain termination
rights, including the right of Mobil Oil or Mr. Brudahl to terminate the
agreement at their discretion. Under the agreement, the Company has the right,
if Mr. Brudahl is performing at an unacceptable level, to terminate the
secondment period on 120 days' notice. During the secondment period, the loaned
employee, Mr. Brudahl, will continue as an employee of Mobil Oil but will be
under the day-to-day supervision of the Company. The Company will be responsible
for all compensation, benefit and other expenses relating to the secondment of
Mr. Brudahl to the Company.
Employee Benefits Plans
The Company sponsors a defined contribution retirement plan under Internal
Revenue Code Section 401(k) covering substantially all of its employees.
Company contributions equal 50% of the participants' contributions up to 2% of
the participants' annual salary and aggregated $133,000, $138,000 and $189,000
for the years ended December 29, 1995, December 31, 1996 and December 31, 1997,
respectively.
On December 19, 1996, the Company filed with the Internal Revenue Service
("IRS"), pursuant to IRS Rev. Proc. 94-62, a request for a compliance statement
with respect to the Petro Stopping Centers, L.P. 401(k) Plan (the "Plan"). The
compliance statement request relates to the Plan's failure (i) to allocate
participant forfeitures pursuant to the terms of the Plan and (ii) to correctly
apply the actual deferral percentage test and the actual contribution percentage
test (items (i) and (ii) hereafter collectively referred to as the "Operational
Defects"). The Operational Defects relate to Plan years 1990 through 1995. The
Company does not believe that the existence or resolution of the Operational
Defects are material to its business.
44
<PAGE>
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of the Company's common partnership interests by each general partner,
each limited partner who owns more than 5% of the Company's common partnership
interests, each director who beneficially owns partnership interests, each
executive officer who beneficially owns partnership interests and all directors
and executive officers of the Company as a group. Except as set forth in the
footnotes to the table, each partner listed below has informed the Company that
such partner will have (i) sole voting and investment power with respect to such
partner's partnership interests, except to the extent that authority is shared
by spouses under applicable law and (ii) record and beneficial ownership with
respect to such partner's partnership interests.
<TABLE>
<CAPTION>
Type of Class of Capital Percentage
Names Interest Interest Contribution of Class
- ----------------------------- --------------- -------- --------------- --------------
<S> <C> <C> <C> <C>
James A. Cardwell, Sr. General Partner Common $ 485,560(1) 1.1843%(2)
6080 Surety Drive Limited Partner Common 14,143,493(1) 34.4963 (2)
El Paso, Texas 79905
Chartwell L.P.(3) General Partner Common 400,000 0.9756
c/o Maples & Calder Limited Partner Common 20,330,000 49.5854
Ugland House
P.O. Box 309
George Town, Grand Cayman
Cayman Islands (B.W.I.)
James A. Cardwell, Jr. Limited Partner Common 1,640,947(1) 4.0023(4)
6080 Surety Drive
El Paso, Texas 79905
Mobil Long Haul Inc. Limited Partner Common 3,000,000 7.3171
3225 Gallows Road
Fairfax, Virginia 22037
--------
97.5610%
All directors and officers
as a group (10 persons) 39.6829%
</TABLE>
- ------------
(1) Represents the implied carryover value of the Cardwell Group in the Company
after the consummation of the Recapitalization. The Cardwell Group did not
receive or invest any cash in the Recapitalization. For purposes of the
Recapitalization, its partnership interests were given an implied value of
approximately $23.9 million, of which $7.6 million was the face value of
preferred partnership interests and approximately $16.3 million was the
implied value of common partnership interests. The value of the Cardwell
Group's partnership interests has been implied based on the partnership
interest purchase price paid and capital contributions to the Company made
by Chartwell and Mobil Long Haul in the Recapitalization.
(2) Includes partnership interests owned of record by Petro, Inc. Petro, Inc.
is a wholly owned subsidiary of Nevada Trio, Inc., a Nevada corporation,
which is a wholly owned subsidiary of Card Partners, L.P., a Texas limited
partnership of which Jack Cardwell and Mrs. Jack Cardwell are limited
partners and of which Texas Mec, Inc., a Texas corporation, is the general
partner. Jack Cardwell is the sole shareholder of Texas Mec, Inc.
Accordingly, Jack Cardwell may be deemed to have beneficial ownership of
the partnership interests owned by Petro, Inc.
(3) Represents partnership interests owned of record by Petro Holdings GP Corp.
and Petro Holdings LP Corp. Petro Holdings GP Corp., a Delaware
corporation, is a wholly owned subsidiary of Petro Holdings LP Corp., which
is a wholly owned subsidiary of Petro Holdings L.L.C., a Delaware limited
liability company. Chartwell L.P., a Cayman Islands limited partnership, is
the
45
<PAGE>
majority shareholder of Petro Holdings L.L.C. Todd R. Berman, who is a
Director and a member of the Executive Committee of the Company, is a
limited partner of Chartwell L.P. Michael S. Shein, who is a Director and a
member of the Operating Committee of the Company, is also a limited partner
of Chartwell L.P. Mr. Berman and Mr. Shein are the Managers of Petro
Holdings L.L.C. Other minority shareholders include an affiliate of CIBC
Wood Gundy Securities Corp. and The First National Bank of Boston, the
agent and a lender under the New Credit Agreement.
(4) Includes partnership interests owned of record by JAJCO II, Inc. Jim
Cardwell is the sole shareholder of JAJCO II, Inc. and may be deemed to
have beneficial ownership of the partnership interest owned by JAJCO II,
Inc.
ITEM 13. Certain Relationships and Related Transactions
Tax Reimbursements
The Restated Partnership Agreement requires the Company to make
distributions to each of its partners in an amount sufficient to allow each
partner to pay federal, state and local income taxes with respect to allocations
of taxable income to such partner by the Company. Historically, aggregate tax
distributions to the Company's partners were based on the Company's taxable
income. For the fiscal years ended December 29, 1995, December 31, 1996 and
December 31, 1997, tax distributions made to the Company's partners were
$326,236, $0 and $0, respectively. Because tax distributions will in the future
be based on separate allocations of taxable income of the Company's partners
rather than the taxable income of the Company, the aggregate tax distribution
likely will increase by up to approximately $1.2 million per year. Under certain
circumstances, the Company's partners receiving tax distributions with respect
to allocations of taxable income under the Restated Partnership Agreement will
be obligated to repay the portion of such tax distribution that exceeds the
amount of a tax distribution that would have been made had tax distributions
been based on the Company's taxable income.
Principal Executive Offices
The office building in which the Company's principal executive offices are
located is owned by Jack Cardwell, the Chief Executive Officer and a Director of
the Company. The Company leases the entire building under a lease expiring on
December 31, 2005. Under the lease, the Company pays monthly rent totaling
$336,000 per year, as well as taxes, maintenance and other operating expenses.
For each of the fiscal years ended December 29, 1995, December 31, 1996 and
December 31, 1997, the Company made annual rental payments of $336,000.
Effingham, Illinois Stopping Center
The Stopping Center located in Effingham, Illinois is owned by Truck Stop
Property Owners, Inc. ("Truck Stop"), which is owned by Travis Roberts, who is a
current officer of the Company, and five former employees of the Company. Mr.
Roberts owns 22% of the stock of Truck Stop. The Company leases the Effingham
Center under a lease expiring in May 2006, which provides for adjustable rental
payments tied to interest rates (the "Basic Rent"), plus taxes and operating
expenses. The Company has three consecutive options to renew the lease for terms
of five years each at rental rates equal to the Basic Rent, plus certain
adjustments at the time of renewal. The Company also has a right of first
refusal to purchase the Stopping Center at a purchase price agreed upon between
Truck Stop and a third party. For the fiscal years ended December 29, 1995,
December 31, 1996 and December 31, 1997, the Company made rental payments to
Truck Stop of $1,086,000, $1,080,000 and $1,073,000, respectively.
Bordentown Stopping Center
The Stopping Center located in Bordentown, New Jersey is owned by an entity
(the "Bordentown Venture") in which Jack Cardwell held a 50% interest in 1994.
In May 1995, Jack Cardwell sold his interest in the Bordentown Venture to his
partner. The Bordentown location became a franchisee effective December 1995.
46
<PAGE>
Highway Service Ventures, Inc.
Highway Service Ventures, Inc. ("HSV"), a corporation in which Jack
Cardwell owns a 32.5% interest, operates four franchised Stopping Centers
located in Elkton, Maryland; Ruther Glen, Virginia; Florence, South Carolina;
and Carnesville, Georgia pursuant to franchise agreements with the Company. The
initial term of each of these franchise agreements is ten years and they are
automatically renewed for two five-year terms unless terminated by the
franchisee. The initial term of the Elkton, Maryland franchise agreement expired
in September 1995, but such term has been extended by letter agreement through
March 1998. The initial terms of the remaining three franchise agreements will
expire in March 1998, February 2001 and January 2005, respectively. None of
these franchise agreements contain terms that are any more favorable to the
franchisee than the terms in any of the Company's other franchise agreements.
Petro:Tread
In May 1992, the Company leased a facility in El Paso, Texas from a trust,
in which Jack Cardwell is a 50% beneficiary, to operate the Company's retread
plant, which produces retread tires for sale at Stopping Centers (including
franchisees) and to others. The lease, which expired in October 1995, provided
for two consecutive renewal options for terms of five years each. The Company
exercised its first renewal option in October 1995 to renew the lease for five
years commencing November 1, 1995. The Company made lease payments of $67,000,
$72,000 and $72,000, respectively, for the fiscal years ended December 29, 1995,
December 31, 1996 and December 31, 1997. In addition, the Company sells retread
tires to El Paso Tire Center, Inc., a corporation in which Jack Cardwell owns
100%. Such sales amounted to $288,000, $153,000 and $47,000 in 1995, 1996 and
1997, respectively.
Product Services Agreement and Fuel Sales Agreement
The Company currently purchases Chevron branded gasoline and motor oils at
cost for three of its Auto Fuel Islands pursuant to a sales agreement with C&R
Distributing, Inc. ("C&R"), a corporation in which Jack Cardwell is the sole
shareholder. In addition, in May 1992, C&R and the Company entered into a
product services agreement terminating in 1999, under which C&R provides the
Company with fuel hauling and fuel pump maintenance and services within the El
Paso, Texas metropolitan area, if requested by the Company. The agreement
provides that C&R will charge the Company for these services at the lowest rates
charged by C&R for similar services and, in any event, at rates that will not
exceed rates available from unrelated parties providing similar services. During
fiscal years 1995, 1996 and 1997, the Company's purchases from C&R under these
two agreements aggregated $7,857,000, $10,771,000 and $5,079,000, respectively.
Furthermore, the Company and C&R agreed to notify the other if either party had
petroleum products for sale with no obligation on either party to purchase any
portion of such products. During fiscal years 1995, 1996 and 1997, the Company
made sales to C&R under this agreement aggregating $4,022,000, $3,950,000 and
$3,315,000, respectively. The term of the agreements with C&R have been extended
through December 31, 2004. Notwithstanding the extension, the Company has the
option of not purchasing products or services from C&R if the Company can
purchase such products or services more economically from third parties.
Option and Right of First Refusal Agreement
In connection with the formation of the Company in May 1992 under an Option
and Right of First Refusal Agreement, Jack Cardwell and Jim Cardwell, officers
and members of the Board of Directors of the Company, granted to the Company and
Roadside options, which expire in December 2006, to purchase certain properties
owned by the Cardwells that are located near or adjacent to the Company's
Stopping Centers located in Shreveport, Louisiana (7 acres subject to option),
Weatherford, Texas (34 acres), Beaumont, Texas (17 acres) and Oklahoma City,
Oklahoma (30 acres) (the "Option Properties"), and a right of first refusal on
each of the Option Properties. At the closing of the Recapitalization, Roadside
assigned all of its rights under the Option and Right of First Refusal Agreement
to Mobil Long Haul, Holdings GP and Holdings LP. The price at which an Option
Property may be purchased will be equal to the fair market value of the property
when the option is exercised as determined by an appraisal.
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Alcohol Sales and Servicing Agreements
In order to continue engaging in retail sales of beer, wine or wine coolers
at a limited number of its facilities after the formation of the Company in May
1992, the Company entered into agreements with CYMA Development Corporation
("CYMA"), C and PPR, Inc. ("C&PPR"), Petro Truckstops, Inc. ("Petro Truckstops")
and Petro Beverage, Inc., which collectively hold permits or licenses to sell
alcoholic beverages in the states of Louisiana, Texas and Oregon. Jack Cardwell,
Jim Cardwell and Mrs. Jack Cardwell own 60%, 30% and 10%, respectively, of the
stock of C&PPR. Jack Cardwell is the sole shareholder of CYMA and Jim Cardwell
is the sole shareholder of Petro Truckstops and Petro Beverage, Inc. The
agreements continue in effect until terminated by either party. Under the
agreements with CYMA and C&PPR, the Company agreed to operate the alcohol sales
business at these locations in exchange for 10% of the gross receipts generated
from alcoholic beverage sales, plus reimbursement of all operating expenses.
Under a similar agreement with Petro Truckstops, dated April 8, 1994, and Petro
Beverage, Inc., dated February 10, 1995, each of which has a one year initial
term and continues in effect until terminated by either party, the Company
receives 15% of gross receipts generated from alcoholic beverage sales. In each
of the agreements the net payments to the Company are approximately equal to the
gross profit received by the above entities.
Motor Media Arrangements
In connection with the formation of the Company in May 1992, Motor Media,
Inc., a company owned 100% by Jim Cardwell ("Motor Media"), entered into a five-
year agreement with the Company (the "Motor Media Agreement"), under which Motor
Media leases floor and wall space at all Stopping Centers operated by the
Company and sells space for in-store advertising to third parties. Under the
agreement, the Company and Motor Media are entitled to 25% and 75%,
respectively, of the gross revenues generated. Motor Media received $170,000,
$214,000 and $234,000, respectively, before its selling, maintenance and
administrative expenses for the fiscal years ended December 29, 1995, December
31, 1996, and December 31, 1997, representing its share of the gross receipts
generated. Motor Media has entered into similar floor and wall space leases with
other truck stops nationwide. The Company and Motor Media have extended the term
of the Motor Media Agreement through April 2002.
Amusement and Video Poker Games Agreements
Under an existing agreement (the "Amusement Agreement") between El Paso
Vending and Amusement Company ("EPAC"), of which Jack Cardwell and Jim Cardwell
own 99% and 1%, respectively, and the Company, EPAC furnishes video and other
games to four of the Company's Stopping Centers and services these games.
Pursuant to the Amusement Agreement, which expires in May 2002 or until earlier
terminated by either party, the Company paid 60% of the revenues generated by
the games to EPAC and retained the remaining 40%. Beginning November 1994, the
arrangement was modified to pay 50% of the revenue generated by the games to
EPAC and 50% to the Company. The Company amended the Amusement Agreement to
cause EPAC to contract directly with the Company to furnish and service video
and other games at an additional 12 Stopping Centers. Subsequent thereto, EPAC
began furnishing and servicing games at an additional five Stopping Centers
under the terms of the Amusement Agreement. EPAC received $1,880,000, $2,021,000
and $2,421,000 in revenues, respectively, generated from the furnishing and
servicing games located at the Stopping Centers for the fiscal years ended
December 29, 1995, December 31, 1996 and December 31, 1997. Since June 1993, the
two Company-operated Stopping Centers located in Louisiana have featured video
poker games operated by a third party. Under the terms of agreements relating to
the operation of, and distribution of revenues derived from the video poker
operations, the Company is entitled to a specified portion of the revenues of
each machine. Under these arrangements, the operator turns over a share of the
revenues to Petro Truckstops, a corporation in which Jim Cardwell is the sole
shareholder, which in turn forwards 95% of these revenues to the Company. The
Amusement Agreement has been amended to extend its term through May 2002.
Fremont Partners' Annual Fee
Pursuant to the Company's former partnership agreement, the Fremont
Partners provided various services to the Company, including tax and legal
services, and paid the directors' fees for the outside members of the Company's
Board of Directors. In consideration for these services, the partnership
agreement provided that the Fremont Partners were entitled to an annual
management fee of $250,000 per year. Upon closing of
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the Recapitalization, the partnership agreement was restated. Such services are
no longer rendered by the Fremont Partners and no further fees will be paid to
the Fremont Partners.
Indemnity Agreements
In order to comply with applicable Internal Revenue Code and Treasury
Regulation provisions dealing with recourse debt, Jack Cardwell, Jim Cardwell,
Texas JIMCO, Inc., JAJCO, Inc., JAJCO II Inc., and Arcadian Management
Corporation each entered into an indemnity agreement under which each has agreed
to indemnify the Company, the general partners and certain limited partners in
the event that the indemnified party is required to pay certain of the Company's
indebtedness after a default, acceleration by the creditor and exhaustion of any
collateral securing the credit facility. In May 1994, Jack Cardwell, Jim
Cardwell, Texas JIMCO, Inc., JAJCO, Inc., JAJCO II Inc., and Arcadian Management
Corporation amended their original indemnity agreements in connection with the
May 1994 financing. No payments have been made under these agreements.
Motor Fuels Franchise Agreement
On January 30, 1997, the Company and Mobil Oil entered into a 10-year Motor
Fuels Franchise Agreement whereby the Company has agreed to purchase Mobil
branded diesel fuel and gasoline for sale and distribution under Mobil Oil's
trademarks at the Company-operated truckstops. The agreement requires the
Company to purchase from Mobil Oil certain minimum monthly and annual quantities
of diesel fuel and gasoline available at Mobil Oil's specified delivery
terminals subject to product availability and reductions by Mobil Oil under
certain described circumstances and subject to existing gasoline supply
contractual obligations. The agreement allows the Company to continue to
negotiate for the purchase of diesel fuel with third-party suppliers approved by
Mobil Oil. If the Company is able to obtain a lower diesel fuel price from a
third-party supplier approved by Mobil in a particular market area, the Company
may request that Mobil Oil meet such lower price or a portion of the diesel fuel
requirements would be supplied from such Mobil Oil approved third-party
supplier, in which case Mobil Oil would purchase the diesel fuel from the
supplier and resell the product to the Company. Any change in supply source,
however, does not affect the Company's requirement to purchase the annual
minimum number of gallons from Mobil Oil specified delivery terminals fixed by
the agreement. The Company is also limited to certain monthly maximum purchase
quantities from each Mobil Oil specified delivery terminal. Prices charged for
Mobil Oil fuel sold to the Company during the term are based on certain
referenced prices plus or minus discounts or premiums. Subject to certain
adjustments based upon fuel availability at specified Mobil Oil supply
terminals, beginning with the calendar year January 1, 1997, and each succeeding
calendar year thereafter, to the extent the Company purchases from Mobil Oil
quantities of diesel fuel below the minimum amount required by the agreement,
the Company is required to pay Mobil Oil a fee based on the shortfall.
Master Supply Contract for Resale of Oils and Greases
Mobil Oil and the Company have also entered into a 10-year supply
agreement, commencing January 30, 1997, whereby the Company will purchase and
feature certain Mobil Delvac branded oils and lubricants at the truckstop
locations operated by the Company.
Marketing Services Agreement
On January 30, 1997, Mobil Oil and the Company entered into a ten-year
Marketing Services Agreement whereby Mobil Oil provides advice and assistance to
the Company on matters concerning the distribution and marketing of fuels and
petroleum products, including certain personnel support. In connection
therewith, the Company will pay to Mobil Oil an annual marketing services fee of
$300,000, payable in two semi-annual installments, and additionally will pay or
directly reimburse Mobil Oil for all costs of certain personnel support,
including salary compensation, benefits, travel and other out-of-pocket expenses
incurred by certain Mobil Oil employees in connection with the Company's
business.
Joint Project Development Agreement
Mobil Oil and the Company have entered into a letter of intent, commencing
January 30, 1997, that contemplates definitive agreements with respect to
certain projects related to the Company or negotiations in
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good faith with respect to items which do not by their terms contemplate the
execution of a definitive agreement, including: the joint development of a truck
stop payment card; an on-and-off site fleet billing system for the Company's
customers; and establishment of a joint products supply company.
Secondment Letter Agreement
On January 30, 1997, the Company has entered into an agreement with Mobil
Oil, providing for the temporary secondment (or loan) of one of Mobil Oil's
employees, Evan C. Brudahl, to the Company. The period of secondment commenced
upon the closing of the Recapitalization and is contemplated to continue until
July 1, 2000 subject to certain termination rights, including the right of Mobil
Oil or the employee to terminate the agreement at their discretion. Under the
agreement, the Company has the right, if the employee is performing at an
unacceptable level, to terminate the secondment period on 120 days' notice.
During the secondment period, the loaned employee will continue as an employee
of Mobil Oil but will be under the day-to-day supervision of the Company. The
Company is responsible for all compensation, benefit and other expenses relating
to the secondment of the employee to the Company.
Chartwell Financial Advisory Agreement
The Company entered into an agreement with Chartwell Investments,
commencing January 30, 1997, providing for the payment of fees and reimbursement
of certain expenses to Chartwell Investments for acting as financial advisor
with respect to the Recapitalization, including soliciting, structuring and
arranging the financing of the Recapitalization. The fees, totaling
approximately $3,000,000, equal to 1% of the total capitalization of the Company
plus 1/2 of 1% of the Expansion Facility and the reimbursement of certain
expenses, were paid at the closing of the Recapitalization. Mr. Berman and Mr.
Shein are directors of the Company and are officers and directors of Chartwell
Investments.
Chartwell Management Consulting Agreement
The Company has entered into a management consulting agreement with
Chartwell Investments, commencing January 30, 1997, pursuant to which Chartwell
Investments will provide the Company with certain management, advisory and
consulting services for a fee of $600,000 for each fiscal year of the Company
during the term of the agreement, with up to an additional $100,000 payable for
each fiscal year, provided that EBITDA is at least $45 million, plus
reimbursement of certain expenses. The term of the management consulting
agreement is ten years and is renewable for additional one year periods unless
the Board of Directors of the Company gives prior written notice of non-renewal
to Chartwell Investments. Mr. Berman and Mr. Shein are directors of the Company
and are officers and directors of Chartwell Investments. During 1997, the
Company paid Chartwell Investments $600,000 under this agreement.
Certain Business Relationships
Mr. Lassman, a director of the Company since September 23, 1997, is a
managing partner of Akin, Gump, Strauss, Hauer & Feld, L.L.P., which has
provided legal services to the Company during 1997 and will continue to provide
legal services to the Company during 1998.
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PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as a part of this report:
1. Financial statements
The following consolidated financial statements of the Company are included in
Part II, Item 8 of this report:
Page
----
Consolidated Balance Sheets 18
Consolidated Statements of Operations 19
Consolidated Statements of Changes in Partners' Capital(Deficit) 20
Consolidated Statements of Cash Flows 21
Notes to Consolidated Financial Statements 22
Reports of Independent Accountants 36-37
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the audited
consolidated financial statements or notes thereto.
2. Exhibits
Incorporated herein by reference is a list of Exhibits contained in the
Exhibit Index on pages 53 through 57 of this Annual Report.
(b) Reports on Form 8-K: None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Petro Stopping Centers, L.P. has duly caused this report
to be signed on its behalf by undersigned, thereunto duly authorized.
PETRO STOPPING CENTERS, L.P.
Registrant
By /s/ James A. Cardwell, Sr.
-------------------------------
James A. Cardwell, Sr.
Chairman of the Board of Directors,
March 30, 1998 President and Chief Executive Officer
(Date)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of Petro
Stopping Centers, L.P. and in the capacities on the date indicated:
Signature Title Date
--------- ----- ----
/s/ James A. Cardwell, Sr. Chairman of the Board of
- --------------------------- Directors, President and Chief March 30, 1998
(James A. Cardwell, Sr.) Executive Officer (Principal
Executive Officer)
/s/ Larry J. Zine Executive Vice President and
- --------------------------- Chief Financial Officer March 30, 1998
(Larry J. Zine) (Principal Financial Officer)
/s/ David A. Haug Vice President of Finance,
- --------------------------- Treasurer and Chief Accounting March 30, 1998
(David A. Haug) Officer
/s/ Evan Brudahl Member of the Board of Directors
- --------------------------- and Sr. Vice President of Planning March 30, 1998
(Evan Brudahl) and Administration
/s/ James A. Cardwell, Jr. Member of the Board of Directors
- --------------------------- and Sr. Vice President of March 30, 1998
(James A. Cardwell, Jr.) Operations
/s/ Todd R. Berman Member of the Board of Directors
- --------------------------- March 30, 1998
(Todd R. Berman)
/s/ Lynne Lachenmyer Member of the Board of Directors
- --------------------------- and Audit Committee March 30, 1998
(Lynne Lachenmyer)
/s/ Michael S. Shein Member of the Board of Directors
- ---------------------------- and Audit Committee March 30, 1998
(Michael S. Shein)
/s/ Malcolm Lassman Member of the Board of Directors
- ---------------------------- and Audit Committee March 30, 1998
(Malcolm Lassman)
52
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PETRO STOPPING CENTERS, L.P.
Exhibit Index
3.1(aa) Amended and Restated Certificate of Limited Partnership of the
Company dated as of January 30, 1997.
3.2(aa) Third Amended and Restated Limited Partnership Agreement of the
Company, dated as of January 30, 1997, by and among the Petro,
Inc., James A. Cardwell, Sr., James A. Cardwell, Jr., JAJCO II,
Inc., Petro Holdings GP Corp, Petro Holdings LP Corp., Mobil Long
Haul Inc. and Kirschner Investments.
3.3(bb) Certificate of Incorporation of Petro Financial Corporation.
3.4(bb) Bylaws of Petro Financial Corporation.
4.1(cc) Indenture, dated as of May 24, 1994, among the Company, Petro
Financial Corporation and First Trust National Association, as
trustee, for the Company's $100,000,000 principal amount 12 1/2%
Senior Notes due 2002.
4.2(cc) Form of 12 1/2% Senior Note due 2002.
4.3(cc) Guarantee Agreement, dated as of May 24, 1994, between the Company
and First Trust National Association.
4.4(cc) Warrant Agreement, dated as of May 24, 1994, among the Company,
Petro Financial Corporation and First Trust National Association.
4.5(cc) Specimen of Exchangeable Debt Warrant
4.6(aa) Indenture dated as of January 30, 1997 among the Company, Petro
Financial Corporation and State Street Bank and Trust Company, as
trustee, relating to the Company's $135,000,000 principal amount
10 1/2% Senior Notes due 2007.
4.7(aa) Form of 10 1/2% Senior Note due 2007.
4.8(aa) Note Registration Rights Agreement, dated as of January 30, 1997,
by and among the Company, Petro Financial Corporation and CIBC
Wood Gundy Securities Corp. and Morgan Stanley Incorporated.
4.9(aa) Amended and Restated Revolving Credit and Term Loan Agreement,
dated as of January 30, 1997, among the Company, the Lenders party
thereto, and The First National Bank of Boston, as Agent.
4.10(aa) First Amendment to Amended and Restated Revolving Credit and Term
Loan Agreement and Limited Waiver, dated as of February 12, 1997,
among the Company, the Lenders party thereto, and The First
National Bank of Boston, as Agent.
10.1* Form of the Company's Franchise Agreement.
10.2* Schedule of Existing Franchise Agreements (including franchises in
which James A. Cardwell has an interest: Florence, SC; Elkton, MD;
Ruther Glen, VA; and Carnesville, GA).
10.3(bb) Surety Drive Lease Agreement, dated April 30, 1992, between James
A. Cardwell and the Company.
10.4(bb) Agreement relating to trademark license for Bordentown, New
Jersey, dated April 30, 1992, between the Company and Petro, Inc.
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<PAGE>
10.5(bb) Petro:Tread Lease Agreement, dated April 30, 1992, between James
Arthur Lyle and the Company.
10.6(bb) Lease Agreement relating to Louisiana liquor sales, dated April
30, 1992, between the Company and Petro, Inc.
10.7(bb) Servicing Agreement relating to Louisiana liquor sales, dated
April 30, 1992, between the Company and Petro, Inc.
10.8(bb) Lease Agreement relating to Arlington, Texas liquor sales, dated
April 30, 1992, between the Company and CYMA Development
Corporation.
10.9(bb) Servicing Agreement relating to Arlington, Texas liquor sales,
dated April 30, 1992, between the Company and CYMA Development
Corporation.
10.10(bb) Lease Agreement relating to Texas convenience store liquor sales,
dated April 30, 1992, between the Company and C and PPR, Inc.
10.11(bb) Servicing Agreement relating to Texas convenience store liquor
sales, dated April 30, 1992, between the Company and C and PPR,
Inc.
10.12(bb) Sublease and Services Agreement relating to Shreveport, Louisiana
liquor sales, dated April 8, 1994, between the Company and Petro
Truckstops, Inc.
10.13(bb) Sublease and Services Agreement relating to Shorter, Alabama
liquor sales, dated April 13, 1994, between the Company and
Petro, Inc.
10.14(bb) Lease relating to the Effingham, Illinois Stopping Center, dated
May 23, 1990, between Truck Stop Property Owners, Inc. and Petro,
Inc.
10.15(bb) Lease with Option to Purchase, dated September 9, 1983, among
Vaughn O. Seale, Francine S. Dodson, Hazel S. Darouse and Metro
Hammond, Inc.
10.16(bb) Profit Participation Agreement, dated March 1, 1993, between
Pelican Gaming, Inc. and Petro Truckstops, Inc.
10.17(bb) Amended and Restated Sublease and Services Agreement dated to be
effective as of February 26, 1993, between the Company and Petro
Truckstops, Inc.
10.18(bb) Agreement and General Release, dated February 22, 1993, among
the Company, Petro PSC Properties, L.P., Petro, Inc., Arcadian
Management Corporation and William J. La Croix.
10.19(bb) Agreement relating to the purchase of Chevron brand and other
petroleum products of Chevron U.S.A. Products Company for the
Shorter, Alabama convenience store (facility no. 13929), between
the Company and C&R Distributing, Inc.
10.20(bb) Agreement relating to the purchase of Chevron brand and other
petroleum products of Chevron U.S.A. Products Company for the
Bucksville, Alabama convenience store (facility no.13817),
between the Company and C&R Distributing, Inc.
10.21(bb) Agreement relating to the purchase of Chevron brand and other
petroleum products of Chevron U.S.A. Products Company for the
Kingston Springs, Tennessee convenience store (facility no.
13928), between the Company and C&R Distributing, Inc.
54
<PAGE>
10.22(bb) Agreement relating to the purchase of Chevron brand and other
petroleum products of Chevron U.S.A. Products Company for the
Vinton, Texas convenience store (facility no. 7-5661), between
the Company and C&R Distributing, Inc.
10.23(bb) Agreement relating to the purchase of Chevron brand and other
petroleum products of Chevron U.S.A. Products Company for the El
Paso, Texas convenience store (facility no. 20-1602), between the
Company and C&R Distributing, Inc.
10.24(aa) Distributor Sales Agreement (Branded) Renewal Offer dated
November 1, 1996, between Exxon Company, U.S.A. and the Company.
10.25(aa) Amended Split Dollar Life Insurance Agreement, dated as of May 1,
1995, among the Company, James A. Cardwell, Jr., Trustee of the
James A. and Evonne Cardwell Trust Number Two and James A.
Cardwell, Jr., Trustee of the James A. Cardwell Trust No. Three.
10.26(dd) Lease and Services Agreement, dated January 26, 1995, between the
Company and Petro Truckstops, Inc.
10.27(dd) Lease and Services Agreement, dated February 10, 1995, between
the Company and Petro Beverage, Inc.
10.28(aa) Omnibus Agreement by and among the James A. Cardwell, Sr., James
A. Cardwell, Jr. JAJCO II, Petro Inc., Mobil Long Haul Inc.,
Petro Holdings GP Corp., Petro Holdings LP Corp., the Company and
Kirschner Investments Company dated as of October 18, 1996 (the
"Omnibus Agreement").
10.29(aa) Amendment No. 1 to the Omnibus Agreement, dated as of January
30, 1997.
10.30(aa) Employment Agreement, dated January 30, 1997, by and between
James A. Cardwell, Sr. and the Company.
10.31(aa) Employment Agreement, dated January 30, 1997, by and between
James A. Cardwell, Jr. and the Company.
10.32(aa) Employment Agreement, dated December 16, 1996, by and between
Larry Zine and the Company.
10.33(aa) PMPA Distributor Motor Fuels Franchise Agreement, dated January
30, 1997, by and between Mobil Oil and the Company.
10.34(aa) Marketing Services Agreement, dated January 30, 1997, by and
between Mobil Oil and the Company.
10.35(aa) Memorandum of Understanding - Joint Project Development, dated
January 30, 1997, by and between Mobil Oil and the Company.
10.36(aa) Secondment Agreement, dated January 30, 1997, by and between
Mobil Oil and the Company
10.37(aa) Master Supply Contract for Resale of Oils and Greases, dated
January 30, 1997, by and between Mobil Oil and the Company.
10.38(aa) Financial Advisory Agreement, dated January 30, 1997, by and
between Chartwell Investment and the Company.
55
<PAGE>
10.39(aa) Management Consulting Agreement, dated January 30, 1997, by and
between Chartwell Investment and the Company.
10.40(aa) Product Services Agreement, dated January 30, 1997, by and
between C&R Distributing, Inc., a Texas corporation, and the
Company.
10.41(aa) Petro/El Paso Amusement Services Agreement, dated January 30,
1997, by and between El Paso Vending and Amusement Company and
the Company.
10.42(aa) Display Space Agreement, dated January 30, 1997, by and between
Motor Media, Inc. and the Company.
10.43(aa) Second Amended and Restated Indemnity and Hold Harmless
Agreement, dated January 30, 1997, by James A. Cardwell, Sr. for
the benefit of Petro Holdings GP Corp., Petro, Inc., the Company
and Petro Financial Corporation.
10.44(aa) Second Amended and Restated Indemnity and Hold Harmless
Agreement, dated January 30, 1997, by James A. Cardwell, Jr. and
for the benefit of Petro Holdings GP Corp., Petro, Inc., the
Company and Petro Financial Corporation.
10.45(aa) Second Amended and Restated Indemnity and Hold Harmless
Agreement, dated January 30, 1997, by JAJCO II for the benefit of
Petro Holdings GP Corp., Petro, Inc., the Company and Petro
Financial Corporation.
10.46(aa) Indemnity and Hold Harmless Agreement, dated January 30, 1997, by
Petro, Inc. for the benefit of Petro Holdings GP Corp., Petro,
Inc., the Company and Petro Financial Corporation.
10.47(aa) Second Amended and Restated Indemnity and Hold Harmless
Agreement, dated January 30, 1997, by Arcadian Management
Corporation, a Colorado corporation, for the benefit of Petro
Holdings GP Corp., Petro, Inc., the Company and Petro Financial
Corporation.
10.48(aa) Interest Purchase Agreement among Sequoia Ventures Inc.,
Roadside, Inc., Chartwell, Mobil Long Haul and the Company dated
as of October 18, 1997.
10.49(bb) Southwestern Bell Telephone Company Multi-State License Agreement
for placement of Public Telephone Equipment, dated April 1, 1993,
between the Company and Southwestern Bell Telephone Company.
10.50(bb) Southwestern Bell Telephone Company Public Telephone License
Agreement, dated May 16, 1990, between Southwestern Bell
Telephone Company and Petro, Inc.
10.51(ee) Form of Key Employee Incentive Compensation Plan.
10.52(aa) 1996 Management Incentive Plan.
10.53* Purchase and Sale Agreement dated October 27, 1997 between Dr.
Jung Y. Park and Wife, Kyung Hee Park and Petro Stopping Centers,
L.P.
10.54* Amendment No. 1 dated November 3, 1997 to Purchase and Sale
Agreement between Dr. Jung Y. Park and Wife, Kyung Hee Park and
Petro Stopping Centers, L.P.
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<PAGE>
16.1(ff) Letter, dated September 3, 1997, from Coopers & Lybrand L.L.P.,
Regarding Change in Certifying Acountants.
16.2(ff) Letter, dated September 3, 1997, from Arthur Andersen LLP,
Regarding Change in Certifying Acountants.
16.3(gg) Letter, dated September 11, 1997, from Coopers & Lybrand L.L.P.,
Regarding Change in Certifying Accountants.
21(aa) Subsidiaries of the Company
27* Financial Data Schedule
* Filed herewith.
(aa) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996.
(bb) Incorporated by reference to the Company's Registration Statement on Form
S-1 (Registration No. 33-76154).
(cc) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 30, 1994.
(dd) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995.
(ee) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 29, 1995.
(ff) Incorporated by reference to the Company's Current Report on Form 8-K,
filed on September 3, 1997.
(gg) Incorporated by reference to the Company's Current Report on Form 8-K/A,
filed on September 11, 1997.
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EXHIBIT 10.1
1997
STANDARD FRANCHISE AGREEMENT
<PAGE>
PETRO STOPPING CENTERS, L.P.
FRANCHISE AGREEMENT
<PAGE>
TABLE OF CONTENTS
PAGE
----
SECTION 1. GRANT OF FRANCHISE............................................... 2
1.1. Grant and Location of Franchise.................................. 2
1.2. Franchisee's Use of Proprietary Marks............................ 2
1.3. Franchisee's Exclusive Area...................................... 2
1.4. Franchisee's Rights Restricted to Franchised Location............ 3
1.5. Franchise Granted is Nonexclusive................................ 3
1.6. Franchisee's Rights and License Nontransferable.................. 3
1.7. Covenant Not to Compete.......................................... 3
SECTION 2. TERM AND RENEWAL RIGHTS.......................................... 4
2.1. Initial Term..................................................... 4
2.2. Renewals......................................................... 4
2.3. Loss of Premises................................................. 5
2.4. Lease of Premises................................................ 6
SECTION 3. IMPROVEMENTS ON AND MAINTENANCE OF PREMISES...................... 7
3.1. Construction or Remodeling....................................... 7
3.2. Commencement and Completion of Construction...................... 8
3.3. Maintenance and Renovation of Premises........................... 8
3.4. Signs............................................................ 9
3.5. Franchisor's Remedies Upon Franchisee's Default..................10
SECTION 4. FEES AND PAYMENTS................................................10
4.1. Initial Franchise Fee............................................10
4.2. Initial Training Fee.............................................10
4.3. Initial Legal, Design and Merchandise Set-up Fees................11
4.4. Reimbursement of Franchisor Expenses.............................11
4.5. Monthly Royalty Fee..............................................11
4.6. Determination of "Non-fuel Gross Sales" and "Fuel Sales".........12
4.7. Advertising and Other Fees.......................................12
4.8. Time for Making Payments.........................................13
4.9. Franchisor's Right of Set Off....................................13
SECTION 5. TRAINING.........................................................13
5.1. Training Programs................................................13
5.2. Completion of Manager Training...................................13
SECTION 6. OPERATING ASSISTANCE.............................................14
6.1. Advisory Assistance..............................................14
6.2. Confidential Operating Manual....................................14
6.3. Directory of Travel Center Facilities............................14
6.4. Inspections......................................................14
6.5. No Liability of Franchisor.......................................14
6.6. Advertising Programs.............................................14
6.7. Franchisor's Billing Program.....................................14
6.8. Special Promotional Products and Services........................15
6.9. Assistance in Establishing Franchisee's Business.................15
6.10. Assistance During Term of Franchise Agreement....................16
6.11. Committees.......................................................16
SECTION 7. ADDITIONAL OBLIGATIONS OF FRANCHISEE.............................16
7.1. Compliance with Franchise System.................................16
7.2. Sales and Advertising Activities.................................17
7.3. Hours of Operation...............................................17
7.4. Standards, Techniques and Procedures;
Prevention of Certain Acts.......................................17
7.5. Equipment, Supplies and Products.................................18
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7.6. Minimum Inventory Amount.........................................19
7.7. Inspections by Franchisor........................................19
7.8. Franchisee's Employees...........................................19
7.9. Management by Franchisee.........................................20
7.10. Photographs by Franchisor........................................20
7.11. Promotion by Franchisee of All Travel Center Facilities .........20
7.12. Menu and Service.................................................20
7.13. Required Inventory and Other Items...............................20
7.14. Compliance with Laws.............................................21
7.15. Notice to Suppliers of Franchisor's Non-liability................21
7.16. No Changes Without Franchisor's Consent..........................21
7.17. Opinion of Franchisee's Counsel..................................21
7.18. Time Devoted by Franchisee to Business...........................22
7.19. No Other Business................................................22
7.20. Standards of Operation...........................................23
7.21. Services Offered.................................................23
7.22. Compliance With Federal, State and Local Laws....................23
7.23. Franchise Operated Independently.................................23
7.24. Long Distance Telephone Services.................................23
SECTION 8. PROPRIETARY MARKS................................................24
8.1. Franchisor's Representations.....................................24
8.2. Restrictions on and Conditions of Franchisee's Use
of Franchisor's Proprietary Marks................................24
8.3. Further Understandings and Undertakings of Franchisee............25
8.4. Franchisee's Advertising.........................................26
8.5. Franchisor's Protection of Proprietary Marks.....................26
SECTION 9. CONFIDENTIAL INFORMATION.........................................26
9.1. Confidential Relationship and Information........................26
9.2. Use of Confidential Information by Franchisee....................26
9.3. Franchisee's Employees and Agents................................27
9.4. Permitted Disclosure by Franchisee...............................37
9.5. Equitable Relief.................................................28
9.6. Information Developed by Franchisee..............................28
9.7. Architectural Plans and Drawings, Etc............................28
9.8. Computer Software................................................28
9.9. Further Obligations..............................................28
SECTION 10. CONFIDENTIAL OPERATING MANUAL....................................29
10.1. Operating Manual.................................................29
10.2. Information Confidential.........................................29
10.3. Revisions and Updating...........................................29
SECTION 11. ACCOUNTING AND RECORDS...........................................29
11.1. Preservation of Franchisee's Records.............................29
11.2. Monthly Statements...............................................30
11.3. Annual Report Based upon Agreed-Upon Procedures..................30
11.4. Other Information................................................30
11.5. Tax Returns......................................................31
11.6. Franchisor's Right of Inspection.................................31
11.7. Audit by Franchisor..............................................31
11.8. Definition of "Records.".........................................31
11.9. Conformity to Franchisor's Accounting and Control Systems........32
11.10. Limitation on Claims.............................................32
SECTION 12. ADVERTISING AND GRAND OPENING....................................32
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12.1. Grand Opening....................................................32
12.2. Advertising, Marketing and Customer Service Programs Established by
Franchisor.......................................................32
SECTION 13. INSURANCE; INDEMNIFICATION.......................................33
13.1. Required Insurance...............................................33
13.2. Coverage.........................................................34
13.3. Insurance in Name of Franchisee Entity, Notice to
Franchisor, Renewal Certificates.................................35
13.4. Franchisee's Obligation Not Limited by Franchisor's
Own Insurance....................................................35
13.5. Failure of Franchisee to Obtain or Maintain Insurance............35
13.6. Franchisor's Non-liability and Indemnity.........................35
SECTION 14. TRANSFERABILITY OF INTEREST......................................38
14.1. Transfer by Franchisor...........................................38
14.2. Transfer by Franchisee...........................................38
14.3. Transfer to Franchisee's Corporation,
Partnership or Other Entity......................................39
14.4. Ownership of Franchisee..........................................40
14.5. Restrictions on Transfer of Equity Interest in Franchisee........40
14.6. Franchisor's Right of First Refusal..............................40
14.7. Transfer Upon Death or Permanent Incapacity......................41
14.8. Non-waiver of Claims.............................................42
14.9. Franchise Agreement Shall Not be Retained as Security............42
14.10. Assignment of Franchise Agreement or Granting a
Security Interest to Obtain Financing............................42
SECTION 15. DEFAULT AND TERMINATION..........................................43
15.1. Provisions of Applicable Law Shall Control.......................43
15.2. Automatic Termination............................................43
15.3. Termination at Franchisor's Option
Without Opportunity to Cure Default..............................43
15.4. Termination by Franchisor After Notice
and Opportunity to Cure Default..................................44
SECTION 16. OBLIGATIONS UPON TERMINATION OR EXPIRATION; REPURCHASE
BY FRANCHISOR....................................................46
SECTION 17. CORPORATE OR OTHER AUTHORITY.....................................48
SECTION 18. TITLE, LIENS AND LAWSUITS........................................48
18.1. Title and Liens..................................................48
18.2. Legal Proceedings................................................49
SECTION 19. TAXES, PERMITS AND INDEBTEDNESS..................................49
19.1. Taxes and Assessments............................................49
19.2. Employee Taxes and Benefits......................................49
19.3. Compliance with Applicable Laws..................................49
19.4. Contested Taxes or Indebtedness..................................49
SECTION 20. INDEPENDENT CONTRACTOR RELATIONSHIP..............................50
20.1. Franchisee Is Independent Contractor.............................50
20.2. No Agency........................................................50
SECTION 21. APPROVALS AND WAIVERS............................................50
SECTION 22. MISCELLANEOUS....................................................51
22.1. Notices..........................................................51
22.2. Survival of Warranties, Continuing Obligations...................51
22.3. Construction.....................................................51
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22.4. Entire Agreement.................................................52
22.5. Severability.....................................................52
22.6. Binding Effect...................................................52
22.7. Applicable Law...................................................52
22.8. Remedies Nonexclusive............................................53
22.9. Equitable Relief.................................................53
22.10. Investigation and Review of Documents by Franchisee;
Acknowledgments..................................................53
22.11. Cost of Enforcement; Franchisor's Right to Cause Compliance;
Right of Set Off for Amounts Due or to be Reimbursed.............54
22.12. Arbitration......................................................54
22.13. Consent to Jurisdiction..........................................55
22.14. Headings.........................................................55
22.15. Includes.........................................................55
22.16. Waiver of Punitive Damages and Jury Trial........................55
22.17. Limitation of Claims.............................................55
22.18. Option to Convert to New Agreement...............................55
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<PAGE>
EXHIBITS TO AGREEMENT
Exhibit Description Section
- ------- ----------- -------
A Description of Franchised Business 1.1
B Franchised Location/Franchise Area 1.1, 1.3
C Memorandum of Lease 2.4
D Billing Program Agreement 6.9
E Proprietary Marks of Franchisor 8.2
E-1 Proprietary Marks Which Franchisee
is Licensed to Use 8.2
F Title to and Liens Against Franchised
Location 18.1
G Legal Proceedings Against Franchisee 18.2
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<PAGE>
FRANCHISE AGREEMENT
THIS AGREEMENT is made and entered into this _____ day of _______________,
19__, by and between PETRO STOPPING CENTERS, L.P., a Delaware limited
partnership, d/b/a ______________________________________, with its principal
office located at 6080 Surety Drive, El Paso, Texas 79905 ("Franchisor"), and
__________________________________________("Franchisee").
WITNESSETH:
WHEREAS, Franchisor is the owner of a unique system relating to the
operation of full-facility truck/auto travel centers ("travel centers")
comprised of fueling, merchandising, restaurant and preventive maintenance
operations (the "Franchise System"), which has been developed as a result of
Franchisor's investment and expenditure of time, skill, effort and money; and
WHEREAS, the Franchise System is characterized and distinguished by
Franchisor's unique and distinctive interior and exterior layouts; standards and
specifications for equipment; equipment layout; preventive maintenance
facilities and services; uniforms; operating procedures for sanitation,
maintenance, fueling, food processing and service, and repair work; special
marketing and sales techniques; methods and techniques for inventory and cost
controls, record keeping and reporting, billing services, personnel management,
purchasing and advertising; and such other features as are conceived or
developed by Franchisor for authorized use as a part of the Franchise System;
and
WHEREAS, Franchisor identifies the Franchise System by means of certain
trademarks, trade names, service marks, proprietary marks and other marks,
logotypes, commercial symbols, emblems and other indicia of origin which are set
forth in Exhibit E hereto (collectively, the "Proprietary Marks"), including,
but not limited to, the trade names "Petro Stopping Center," "Petro:2" and "Iron
Skillet." Franchisor claims common law and Federal rights to the use of the
marks set forth in Exhibit E. Certain of the Proprietary Marks of Franchisor
and the Proprietary Marks licensed hereunder to Franchisee are set forth in
Exhibit E-1 and in a Confidential Operating Manual (the "Operating Manual") or
otherwise by Franchisor in writing as being authorized for use by Franchisee and
by other franchisees of the Franchise System in order to identify uniformly for
the public the source of the services rendered in accordance with the Franchise
System and the high standards of quality attendant thereto; and
WHEREAS, Franchisee, having been advised as to the nature of the Franchise
System and understanding and acknowledging the necessity of operating in strict
accordance with the standards and specifications established by Franchisor,
desires to receive the benefits to be derived from operating under the Franchise
System and from using the Proprietary Marks, and thus desires to be franchised
under this Agreement to operate a full-facility travel center business
identified by the trade name "Petro Stopping Center" or "Petro:2" and/or such
other Proprietary Marks as are franchised by this Agreement, including
Proprietary Marks for a restaurant, lube and repair facility, a convenience
store, travel store and other facilities as described herein.
NOW, THEREFORE, for and in consideration of the foregoing and the
undertakings and commitments of each party to the other as set forth in this
Agreement, the sufficiency of which is hereby acknowledged, the parties hereto
mutually agree as follows:
<PAGE>
SECTION 1. GRANT OF FRANCHISE
1.1. GRANT AND LOCATION OF FRANCHISE.
Franchisor hereby grants to Franchisee, upon the terms and conditions
contained in this Agreement, the limited right, license and franchise
(collectively, the "Franchise"), and Franchisee hereby undertakes the
obligation, to operate a Type One full facility or Type Two limited facility, as
more fully described in Exhibit A attached to this Agreement (the "Franchised
Business") under the mark "Petro Stopping Centers" or "Petro:2", and/or under
such other Proprietary Marks as may be designated by Franchisor, including a
restaurant located thereon identified by the name and under the mark as may be
designated by Franchisor (the "Restaurant" or the "Restaurant Business"), and
merchandising facilities located thereon identified by the name and under such
mark as may be designated in writing by Franchisor (the "Stores"), and such
other facilities as may be specified by Franchisor in writing and to operate the
Franchised Business solely in accordance with the Franchise System, as it may be
changed, improved and further developed from time to time, and only at the
following location:
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
such location (the "Franchised Location") being more specifically shown on
Exhibit B attached to this Agreement.
1.2. FRANCHISEE'S USE OF PROPRIETARY MARKS.
Franchisor grants to Franchisee, during the term of this Agreement, and
subject to the terms and conditions thereof, provided Franchisee has not
breached any of the terms and conditions of the Agreement, the right to use in
connection with Franchisee's Franchised Business such of Franchisor's
Proprietary Marks, including, but not limited to, one or more of the marks
"Petro Stopping Center," "Petro:2" and "Iron Skillet" as are currently being
used or hereafter applied for or put into use, as may be designated for
Franchisee's use in Exhibit E-1 attached hereto. Franchisee acknowledges
Franchisor's right to use such Proprietary Marks, and nothing contained in this
Agreement shall be construed to vest in Franchisee any right, title or interest
in or to the Proprietary Marks or the goodwill now or hereafter associated
therewith other than the rights and license expressly granted herein.
1.3. FRANCHISEE'S EXCLUSIVE AREA.
During the term of this Agreement, Franchisor will not, directly or
indirectly, establish, or grant to any other party a license or franchise to
establish, any full facility travel center under the Franchise System, or the
use of or license to use the "Petro Stopping Center" or "Petro:2" mark, within
the territory described in Exhibit B attached hereto (the "Franchise Area"),
without the prior written consent of Franchisee. Franchisor shall be permitted
to own and/or operate in the Franchise Area free-standing express preventive
maintenance centers bearing the "Petro:Lube" or any other mark. The rights
granted to Franchisee in this Section 1.3 shall not be construed or interpreted
as granting to Franchisee the right to own, operate or license or otherwise
maintain any additional travel center within such Franchise Area. However,
notwithstanding anything in the foregoing to the contrary, in the event that
Franchisee fails to meet the minimum monthly gross sales of diesel fuel (the
"Minimum Sales Volume") for any period specified below, then Franchisor shall
perform a review to determine the cause of Franchisee's failure to meet the
Minimum Sales Volume. If such failure is
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due to external factors, such as product allocation, acts of God, fire, riots,
strikes, inability to obtain equipment due to governmental order or action, or
by failure of carriers to transport equipment, or by regulation of state or
Federal action, Franchisor may adjust the Minimum Sales Volume. If, however,
Franchisee's failure is due to factors other than those stated above, then the
foregoing limitations upon Franchisor in this Section 1.3 shall be null and
void. Franchisor shall have the right permanently thereafter to franchise or
establish other travel centers within the Franchise Area, whether under the
Franchise System or using the Proprietary Marks or otherwise.
Franchisee must achieve minimum monthly gross sales of diesel fuel of
___________ gallons per month. Whether Franchisee has achieved such minimum
monthly gross sales shall be determined on the basis of a running average of
actual sales for the preceding six (6) calendar months.
1.4. FRANCHISEE'S RIGHTS RESTRICTED TO FRANCHISED LOCATION.
Franchisee expressly acknowledges and agrees that this Franchise relates
solely to the Franchised Location, and no additional locations or travel centers
shall be permitted under this Agreement without the prior written approval of
Franchisor, which approval shall be granted or denied at the sole discretion of
Franchisor. Franchisee hereby acknowledges that no representations or
warranties have been made by Franchisor with respect to the grant of any other
franchises or permission to operate a Franchised Business or other travel center
from an additional or other location, whether within or without the Franchise
Area.
1.5. FRANCHISE GRANTED IS NONEXCLUSIVE.
Except as provided in Section 1.3, the Franchise herein granted to
Franchisee is nonexclusive. Franchisor reserves all rights to grant and sell
similar franchises and licenses to others to operate, and to own or operate for
its own account or with others, other travel centers using the Franchise System
and Proprietary Marks at any locations whatsoever.
1.6. FRANCHISEE'S RIGHTS AND LICENSE NONTRANSFERABLE.
Franchisee may pledge, hypothecate or assign the right and license herein
granted only for the purpose of securing financing or as provided in Section 14
hereof. Franchisee may not, directly or indirectly, sublicense or subfranchise
any other person, firm, corporation, partnership or other entity to own or
operate the Franchised Business or any other travel center utilizing the
Franchise System or the Proprietary Marks, or to utilize in any way all or any
part of the Franchise System. Further, except as provided herein and in Section
14, Franchisee shall not sell, assign or transfer said Franchise, or any right,
license or interest therein without the prior written consent of Franchisor and
such consent shall not be unreasonably withheld by Franchisor. Further,
Franchisor's consent shall be subject to the requirement that all costs and
expenses incurred by Franchisor and its counsel in connection therewith shall be
borne solely by Franchisee.
1.7. COVENANT NOT TO COMPETE.
(a) (1) During the term of this Agreement, Franchisee shall not, without
Franchisor's prior written consent, (i) employ or seek to employ any person who
is at that time employed by Franchisor or any other franchisee of Franchisor or
to otherwise, directly or indirectly, induce such person to leave his or her
employment; (ii) own or operate any non-Franchisor branded truckstop or travel
center; or (iii) own or operate any component, including the restaurant,
preventive maintenance or fueling components, of a full facility travel center,
as herein described or as may be hereafter expanded or changed pursuant to the
Franchise System, outside of the Franchise Area.
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(2) For a period of three (3) years following the non-renewal or
termination of this Agreement, Franchisee shall not, without Franchisor's
written consent, (i) employ or seek to employ any person who is at that time
employed by Franchisor or any other franchisee of Franchisor or to otherwise,
directly or indirectly, induce such person to leave his or her employment; or
(ii) otherwise, directly or indirectly, conduct, own or operate, or be employed
by or associated in any way with, any travel center within the United States,
Mexico or Canada which, as reasonably determined by Franchisor, is in
competition with any travel center owned, operated or franchised by Franchisor,
its partners or affiliates, as that business is now defined or may hereafter be
defined by Franchisor.
(b) The parties hereto recognize and agree that in the event of breach by
Franchisee of this Section 1.7, money damages would not be an adequate remedy to
Franchisor for such breach and, even if money damages were adequate, it would be
impossible to ascertain or measure with any degree of accuracy the damages
sustained by Franchisor therefrom. Accordingly, if there should be a breach or
a threatened breach by Franchisee of the provisions of this Section 1.7,
Franchisor shall be entitled to an injunction restraining Franchisee from any
breach, without showing or proving actual damage sustained by Franchisor.
Notwithstanding the foregoing, to the extent that Franchisee obtains, directly
or indirectly, any profit or personal benefit resulting from any violation of
this Section 1.7, Franchisee shall be obligated to pay or deliver forthwith such
profit or personal benefit to Franchisor as liquidated damages.
(c) The parties hereto recognize and agree that the scope, time and
geographical restrictions contained herein are reasonably and fairly related to
the business operations and geographic coverage of the business of Franchisor
and are necessary to protect Franchisor's investment in its business and travel
center and express preventive maintenance center franchise system, and in
consideration of the special training and knowledge that Franchisor is providing
to Franchisee and the value of such training and knowledge to the Franchise
System and to Franchisee's operation of the Franchised Business.
(d) The provisions of this Section 1.7 shall be binding upon Franchisee
and the officers, directors, shareholders, managers and others holding
beneficial interests in or key employment or management positions with
Franchisee and any direct or indirect parent company of Franchisee, and
Franchisee, upon execution of this Agreement, shall furnish to Franchisor a
written undertaking by each such person or entity to Franchisor to be bound by
and comply with the provisions of this Section 1.7.
SECTION 2. TERM AND RENEWAL RIGHTS
2.1. INITIAL TERM.
Except as otherwise provided in this Agreement, the initial term of this
Agreement shall be for a period of ten (10) years commencing on the date
Franchisee's Franchised Business shall open for business and terminating ten
(10) years thereafter (the "Initial Term"). However, this Agreement and the
Franchise and license granted hereunder shall expire upon the termination of
Franchisee's lease, if any, or its right to possession of the Franchised
Location for any reason whatsoever, except as provided in Section 2.3 of this
Agreement.
2.2. RENEWALS.
This Franchise shall be automatically renewed for two (2) additional
consecutive five (5) year periods, with the first renewal period to terminate
fifteen (15) years after Franchisee's Franchised Business opens for business,
and the second and last renewal period to terminate twenty (20) years after
Franchisee's Franchised Business opens for business, unless the Franchisee gives
the
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Franchisor written notice of its desire to terminate the Franchise Agreement
not more than eighteen (18) months nor less than twelve (12) months prior to the
end of the Initial Term, or, if applicable, the end of the first renewal period.
This Franchise shall be automatically renewed, as set forth herein, only if the
following terms and conditions are satisfied:
(a) Franchisee is not in default of any provision of this Agreement,
any amendment to it or any successor agreement, or any other agreement
between Franchisee and Franchisor or its partners and affiliates, and
Franchisee has substantially complied with all the terms and conditions of
such agreements during their respective terms;
(b) Franchisee shall execute, upon renewal, Franchisor's then-current
form of agreements ancillary to the franchise agreement (including, but not
limited to, the Arbitration Agreement, the Billing Program Agreement, the
Security Agreement, the Guaranty, and the Memorandum of Right of First
Refusal and Option to Purchase), whose terms may differ, including
providing for increased fees, from the terms of the original agreements
ancillary hereto. This Franchise Agreement will remain in effect for the
renewal term unless the Franchisor and Franchisee mutually agree otherwise;
(c) Franchisee shall execute a general release, in a form prescribed
by Franchisor, of any and all claims against Franchisor and its partners
and affiliates, and their respective officers, directors, agents and
employees, arising out of or relating to this Agreement and all other
agreements then existing between Franchisor and Franchisee or any of their
respective affiliates or subsidiaries;
(d) Franchisee shall have complied with Franchisor's then-current
qualifications, operating procedures and training requirements;
(e) Franchisee shall have complied with Franchisor's then current
marketing programs and systems; and
(f) Franchisee shall have made, or shall have entered into a written
agreement with Franchisor which requires Franchisee, within the time
specified by Franchisor, to make, at its sole expense, such alterations and
improvements to its premises, including additions, extensive structural
changes, remodeling and renovation, as may be necessary to comply with
Franchisor's then-current standards; provided at least seventy-five percent
(75%) of the Franchisor operated travel center facilities which are the
same type as the Franchised Business, comply with such standards. It is
understood that such standards may be upgraded or changed from time to
time.
References in this Agreement to the "term of this Agreement," or
words of like import, shall include any renewal period hereunder.
2.3. LOSS OF PREMISES.
In the event Franchisee occupies the Franchised Location pursuant to a
lease ("Lease") and such Lease expires or is terminated prior to the expiration
of the term of this Agreement and Franchisee is not permitted by the terms of
the Lease to extend the term thereof, or if Franchisee is permanently prevented
from doing business at the Franchised Location because of condemnation of land,
or destruction by fire, flood or other cause, Franchisee shall be permitted to
relocate the Franchised Business at another location within the Franchise Area
described in Section 1.3 hereof, subject however to Franchisor's approval, as
described below, and to all of the terms of this Agreement, including, but not
limited to, the terms of Section 3.2 hereof relating to commencement and
completion of construction. Further, the right to relocate said business in any
such event shall
5
<PAGE>
be specifically conditioned upon Franchisee's complying with the following
requirements, except to the extent waived by Franchisor in writing:
(a) Franchisee shall not at such time be in default of any term or
condition of this Agreement or any other agreement with Franchisor;
(b) Franchisee shall not at such time be in default of any terms or
conditions of the Lease, if any, relating to the Franchised Location;
(c) Franchisee shall pay, and be solely responsible for, all costs of
relocating the Franchised Business, including, but not limited to, all
improvements required on the new location; and
(d) The site of the new location shall be approved in writing by
Franchisor as to location within the Franchise Area (which approval may be
based on a number of factors, including whether, in the sole opinion of the
Franchisor, the new proposed site is capable of supporting the Minimum
Sales Volume described in Section 1.3 herein) and shall conform to all of
Franchisor's then-current specifications.
The rights herein granted in this Section 2.3 shall not be construed or
interpreted as extending the term of this Agreement.
2.4. LEASE OF PREMISES.
If Franchisee occupies or will occupy the Franchised Location pursuant to a
Lease, Franchisee shall at all times perform all requirements binding upon
Franchisee in the Lease and keep the Lease in full force and effect and such
Lease shall provide for:
(a) The right of Franchisor to approve the Lease and any and all
modifications or amendments thereto, a true and correct copy of each of
which shall be delivered to Franchisor at least thirty (30) days prior to
the execution thereof. In addition, a fully executed copy of the Lease
shall be delivered to Franchisor promptly upon the execution thereof;
(b) An initial term of not less than ten (10) years commencing on the
date Franchisee's Franchised Business opens for business;
(c) Options to extend such term for two (2) additional consecutive
five (5) year periods;
(d) The right, but not the obligation, on the part of Franchisor if
it so elects, to succeed to Franchisee's interest under the Lease in the
event of a termination or expiration of this Agreement. Franchisee agrees
that Franchisor shall have the right, upon written notice to Franchisee and
to Franchisee's landlord of Franchisor's election, to succeed to
Franchisee's rights as lessee under the Lease in the event of such a
termination or non-renewal of this Agreement. Such right shall be
conditioned on the exercise by Franchisor of its option to purchase the
Franchised Business and/or the Franchised Location upon such termination or
expiration pursuant to Section 16 of this Agreement. If such event shall
occur, Franchisee hereby irrevocably appoints any officer of Franchisor as
its attorney-in-fact to execute an assignment and all other documents and
instruments which Franchisor may deem necessary or appropriate in
connection therewith;
(e) The right on the part of Franchisor to receive notice from
Franchisee's landlord of any default by Franchisee under the Lease
simultaneously with notice to
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Franchisee, but in any event, not less than thirty (30) days prior to the
termination of the Lease, and the right of Franchisor, but not the
obligation, to cure any such default prior to such termination and to
succeed to the rights of Franchisee under the Lease. The cost to
Franchisor under the Lease shall be due and payable to Franchisor by
Franchisee upon demand. Franchisee agrees that Franchisor shall have the
right, upon written notice to Franchisee and to Franchisee's landlord of
Franchisor's election, to so succeed to Franchisee's rights as lessee under
the Lease in the event of such a default by Franchisee. If such event
shall occur, Franchisee hereby irrevocably appoints any officer of
Franchisor as its attorney-in-fact to execute an assignment and all other
documents and instruments which Franchisor may deem necessary or
appropriate in connection therewith;
(f) The right on the part of Franchisor to receive notice and
disclosure from Franchisee's landlord of any other information or
notification that the landlord is required to provide to Franchisee under
the terms of the Lease; and
(g) The execution of a Memorandum of Lease by the landlord and
Franchisee, which Memorandum of Lease shall be substantially in the form
attached hereto as Exhibit D, and which shall state the name and address of
the landlord and tenant under the Lease, the term of the Lease, the renewal
options under the Lease, and the rights of Franchisor under the Lease. The
Memorandum of Lease shall be filed in the appropriate real estate and/or
deed records for the county and the state in which the Franchised Location
is located.
SECTION 3. IMPROVEMENTS ON AND
MAINTENANCE OF PREMISES
3.1. CONSTRUCTION OR REMODELING.
After execution of this Franchise Agreement by Franchisee and within thirty
(30) days after receipt by Franchisor of all certificates of insurance required
to be delivered by Franchisee pursuant to Section 13.3 hereof, Franchisor shall
provide Franchisee with all architectural plans and specifications, including
modifications thereto (the "Plans and Specifications"), which Plans and
Specifications include the characteristics listed on Exhibit A attached hereto
and otherwise specified by Franchisor in writing, for the construction,
equipping and furnishing of a new travel center facility, if the Franchised
Location is unimproved, or for the remodeling, equipping and furnishing of an
existing travel center facility to be operated as a "Petro Stopping Center" or
"Petro:2" facility, as the case may be, on the Franchised Location. Within one
hundred twenty (120) days following (i) execution of this Agreement, (ii)
delivery to Franchisor by Franchisee of all information needed by Franchisor
regarding the Franchised Location, (iii) payment to Franchisor of fifty percent
(50%) of the Initial Franchise Fee (as hereinafter defined), and (iv) receipt by
Franchisor of all certificates of insurance required to be delivered by
Franchisee pursuant to Section 13.3 hereof, Franchisor and Franchisee shall have
finalized and Franchisor shall have approved the Plans and Specifications (the
"Plan Approval"). Said Plans and Specifications may include Plans and
Specifications related to site layout, landscaping and interior and exterior
designs, decorations and colors; however, to the extent specifications for such
items are not included in said Plans and Specifications, all such items must
nonetheless be approved in writing by Franchisor prior to Plan Approval; and the
term "Plans and Specifications" shall be deemed to include all such items. The
Plans and Specifications shall at all times remain the sole and exclusive
property of Franchisor, and Franchisee's use of said Plans and Specifications
shall be subject to the terms and conditions of Section 9 of this Agreement.
Franchisee shall review and approve and, at its expense, shall make any
modifications of such Plans and Specifications as required for the Franchised
Location, subject to the written approval of Franchisor. Upon Plan Approval,
Franchisee, at its sole expense, shall construct and maintain such improvements
as required by said Plans and Specifications, as modified, or by any other
reasonable requirements or instructions of Franchisor and shall install such
equipment, fixtures, furniture,
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landscaping and signs as may be required by Franchisor, including, but not
limited to, the fixtures and equipment listed in the Operating Manual to be
provided to Franchisee. Franchisee shall engage a licensed architect (who may be
the same person or firm as the person or firm engaged by Franchisor to prepare
the standard Plans and Specifications furnished by Franchisor to Franchisee) to
review and approve all such Plans and Specifications and to serve as
Franchisee's architect in supervising construction of the new travel center, or
the remodeling of the existing travel center, as the case may be. Franchisor
shall not be liable, and Franchisee agrees to indemnify, defend and hold
Franchisor harmless from and against any liability, claim, action, proceeding or
demand arising from or pertaining to the Plans and Specifications or
Franchisee's improvements to, or modification of existing improvements on, the
Franchised Location.
3.2. COMMENCEMENT AND COMPLETION OF CONSTRUCTION.
Franchisee shall secure all necessary licenses and permits required to
commence construction of the travel center or remodeling of the existing travel
center facility on the Franchised Location according to the Plans and
Specifications provided by Franchisor. Notwithstanding any other provisions
contained herein, Franchisee shall commence construction or remodeling no later
than one (1) year from the date of execution by Franchisee of the Franchise
Agreement, and Franchisee shall continuously and diligently engage in such
construction or remodeling and use its best efforts to complete same as soon as
reasonably practicable thereafter, but in no event later than one (1) year after
the date of commencement of construction or remodeling. Until such construction
or remodeling is completed and Franchisor has evaluated and approved
Franchisee's operations, Franchisee will not be allowed to use Franchisor's
Proprietary Marks or operating systems. Franchisee may not thereafter modify
the facility (including any part thereof which relates to any Plans and
Specifications referred to in Section 3.1) except upon the prior written
approval of Franchisor and in compliance with the terms of this Section 3.
3.3. MAINTENANCE AND RENOVATION OF PREMISES.
(a) Franchisee agrees to maintain all furniture, fixtures and equipment
located at the Franchised Location in accordance with factory and/or
manufacturers' specifications and, generally, in good and safe working order,
and to replace, at Franchisee's expense, all worn, damaged or unsafe furniture,
fixtures and equipment with new replacement items of equal or better quality
which have a similar appearance and design as the furniture, fixtures and
equipment originally specified and required by Franchisor pursuant to this
Agreement, or as such specifications may be modified by Franchisor from time to
time, or required by any Federal, state or local occupational health and safety
regulatory or other authorities. Franchisee shall install and use only such
furnishings, fixtures and equipment as shall conform to specifications of
design, color, quality, performance and utility designated or approved in
writing by Franchisor, including, but not limited to, those specifications
listed in the Operating Manual to be provided to Franchisee.
(b) Franchisee, at its expense, shall maintain the interior and exterior
of the improvements, including, but not limited to, exteriors of all buildings
and all asphalt, concrete, curbing and signs and all landscaping on the
Franchised Location in a clean, orderly, safe, sanitary and aesthetically
pleasing condition reasonably satisfactory to Franchisor and shall make such
repairs and replacements as are necessary to maintain an aesthetically pleasing
appearance and a clean, orderly, safe and sanitary condition of the premises and
to remain in compliance with the Plans and Specifications. All modifications
and remodeling and all major repairs at the Franchised Location shall be made
only after Franchisee has received the prior written approval of Franchisor.
(c) Franchisee shall, at its expense, be required make capital
improvements, which shall include, but it not limited to, updating, refurbishing
and remodeling the Franchised Business and its fixtures, furnishings, signs and
equipment and shall also make such additions, extensive structural
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changes, remodeling and redecoration and such modifications to existing
improvements as may be necessary to do so, prior to each five (5) year renewal,
but not prior to the initial ten (10) year term in the case of site remodeling
or renovation. Any capital improvement described above shall be based upon
upgrades and improvements performed at a company operation of a similar age.
(d) With respect to new retail marketing concepts, processes, equipment
and signs, which may be implemented during the term of the Franchise Agreement,
Franchisee shall, at its expense, complete such upgrades or implement such
changes within six (6) months after the upgrades or changes have been
implemented at seventy-five percent (75%) of the Franchisor-operated travel
center facilities.
(e) In addition to the above requirements, Franchisee shall, at its
expense, update, refurbish and remodel the Franchised Business and its fixtures,
furnishings, signs and equipment upon Franchisor's request to conform to the
then-current standards of Franchisor, including, without limitation, such
additions, extensive structural changes, remodeling and redecoration and such
modifications to existing improvements as may be necessary to do so, the
standards for which shall be in general conformity with the standards then
utilized for Franchisor-operated travel center facilities; provided, however,
that extensive additions, structural changes, remodeling and renovation shall
not be required prior to the expiration of the Initial Term ten (10) years of
the Franchise Agreement.
(f) Franchisor or a representative of Franchisor shall have the right to
enter upon the Franchised Location for the purpose of conducting an inspection
to determine whether Franchisee is in compliance with Subparagraphs (a), (b),
(c), (d) and (e) of this Section 3.3. If, pursuant to such inspection,
Franchisor determines that replacement, repair or other cure is required,
Franchisor shall so notify Franchisee in writing. Franchisee shall have thirty
(30) days from the date of receipt of said notice to effect such cure; provided,
however, that if Franchisor determines that such cure must be made prior to the
end of said thirty (30) day period or that such cure cannot be effected within
said thirty (30) day period, Franchisor shall notify Franchisee of the
appropriate reasonable period within which said cure must be accomplished.
3.4. SIGNS.
Franchisee shall order from Franchisor and install at such times as
required by Franchisor, which shall be at least thirty (30) days prior to
opening of the Franchised Business, Franchisor's standard "Petro Stopping
Center" or "Petro:2" advertisement sign, depending on the type of facility being
franchised, or other sign designated in writing by Franchisor to be located on
the Franchised Location at a site designated by Franchisor. Franchisee shall
also install, at its expense, such other signs as shall be required by
Franchisor. Franchisee shall not install or use any sign, or any design, color
or decoration on any sign, whether on the exterior or interior of the Franchised
Location, which has not received the prior written approval of Franchisor. At
the termination or expiration of this Agreement, unless notified in writing by
Franchisor otherwise, Franchisee shall completely cover, within twenty-four (24)
hours, and remove within fifteen (15) days, any and all signs bearing the word
"Petro" or any other Proprietary Marks and shall cease to use the word "Petro"
or any other Proprietary Marks for any business purpose. In the event that
Franchisee fails to cover or remove such signs within the time periods stated
above, Franchisor shall have the immediate right to cover, remove or cause the
covering or removal of, such signs, and Franchisor shall not incur any liability
for the exercise of such right. In addition, Franchisor shall be fully
reimbursed for any and all expenses incurred for the cover and/or removal of
such signs. As used herein, the term "sign" shall be interpreted in its
broadest sense and shall include all displays, cards, window advertising and
promotional material.
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3.5. FRANCHISOR'S REMEDIES UPON FRANCHISEE'S DEFAULT.
If, within thirty (30) days after notice of default of any of the
provisions of this Section 3, Franchisee shall fail to cure such default, then,
in addition to any other relief available to Franchisor, Franchisor or any
persons authorized by Franchisor, without liability to Franchisor, may enter at
any time upon the Franchised Location and perform any act deemed necessary by
Franchisor to cure such default, and Franchisee shall immediately reimburse
Franchisor for any cost reasonably incurred by Franchisor to cure such default.
SECTION 4. FEES AND PAYMENTS
4.1. INITIAL FRANCHISE FEE.
Franchisee shall pay to Franchisor an initial, nonrecurring, nonrefundable
franchise fee of $50,000 (the "Initial Franchise Fee"). The first $25,000 of the
Initial Franchise Fee shall be paid upon execution of the Franchise Agreement
and the remaining $25,000 is due thirty (30) days after the opening of the
Franchised Business. The Initial Franchise Fee shall be consideration for the
Franchise Area granted to Franchisee and Franchisor's lost or deferred
opportunity to franchise others. The Initial Franchise Fee shall be in addition
to the monthly royalty fees payable to Franchisor under Section 4.5 and shall be
in addition to any and all other sums required to be paid to Franchisor by
Franchisee pursuant to any other provisions of this Agreement. Said Initial
Franchisee Fee is not refundable in whole or in part under any circumstances,
including, without limitation, any termination of this Agreement.
4.2. INITIAL TRAINING FEE.
In addition to the Initial Franchise Fee, Franchisee shall pay, a one time,
nonrecurring, nonrefundable training fee estimated at $45,000 - $150,000
dependent upon the type of facility the Franchised Business will be and upon
certain other factors, including those listed below. Fifty percent (50%) of
this estimated training fee shall be payable upon execution of the Franchise
Agreement. The estimated initial training fee for this site is $______________.
The estimated initial training fee may be adjusted upward or downward as
determined by Franchisor based upon the following:
(a) Franchisor's evaluation of Franchisee's personnel and operations
prior to the opening of the Franchised Location. If Franchisor determines that
additional training is required before the Franchised Location can satisfy
Franchisor's standards and begin operating as part of the Franchise System, the
estimated fee may be adjusted upwards; and
(b) Franchisor's actual costs incurred for training including,
without limitation:
(i) off-site training of Franchisee's employees;
(ii) on-site training of Franchisee's employees;
(iii) on-site assistance prior to opening; and
(iv) on-site assistance not to exceed two weeks after the
opening of the Franchised Location.
The remainder of the training fee will be determined in accordance with the
foregoing, and shall be due and payable within thirty (30) days following the
opening of the Franchised Business.
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4.3. INITIAL LEGAL, DESIGN AND MERCHANDISE SET UP FEES.
In addition to the Initial Franchise Fee, the Franchisee shall pay an
initial estimated fee of $50,000 to $164,000 for legal costs, construction,
design and architectural costs, and merchandise set up costs incurred by
Franchisor relating to the Franchised Business. Franchisee shall pay fifty
percent (50%) of this fee upon the execution of this Agreement and the remainder
within thirty (30) days following the opening of the Franchised Business. The
estimated initial legal, design, and merchandise set up fees for this site are
$___________________. The estimated initial legal, design, and merchandising set
up fees may be adjusted upwards or downwards based on actual costs incurred by
Franchisor.
4.4. REIMBURSEMENT OF FRANCHISOR EXPENSES.
Additionally, at the request of Franchisee, Franchisor may train additional
employees of Franchisee upon payment of a reasonable training fee that shall be
in addition to the training fee set forth in Section 4.2 above. After
commencement and during the term of this Agreement, Franchisee shall reimburse
Franchisor for all legal fees incurred in connection with any consent, request,
amendment or other action requested of Franchisor by Franchisee.
4.5. MONTHLY ROYALTY FEE.
In addition to the Initial Franchise Fee set forth in Section 4.1 hereof,
Franchisee in the case of a ground up construction site, agrees to pay
Franchisor a continuing monthly royalty fee during the term of this Agreement in
an amount equal to:
(a) 4.0% of Franchisee's Non-fuel Gross Sales (as defined in Section
4.6);
(b) 2.0% of Franchisee's branded or unbranded Quick Service
Restaurant Sales located in the main building and operated by
Franchisee or an affiliate of Franchisee;
(c) If the Franchised Business is a "Petro:2", 2.0% of Franchisee's
non-Franchisor branded Full Service Restaurant Sales if operated
by Franchisee or an affiliate of Franchisee;
(d) $.003 per gallon of Fuel Sales.
If Franchisee is building a ground-up facility and is in compliance with
all Franchisor's requirements and standards, including, but not limited to,
required training, proper operating procedures, and grand opening requirements
as described in Section 12.1, Franchisor shall rebate the monthly royalty fees
for the first ninety (90) days of operation of the Franchised Location.
In the case of an existing operation converting to the Franchised System
the base year sales (defined as the average sales for the twelve (12) months
prior to this Agreement) on which the royalties described in 4.4(a) and (b) will
be calculated are:
1st year 50% of base year sales excluded from royalties
2nd year 35% of base year sales excluded from royalties
3rd year 15% of base year sales excluded from royalties
4th year and thereafter 0% of base year sales excluded from royalties
At the conclusion of the third year, the royalty fee shall be payable as
set forth in Section 4.5 (a) through (d) on all sales.
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The royalty fee shall be paid on or before the twenty-fifth (25th) day of
each month and shall be based on Non-fuel Gross Sales and Fuel Sales
(hereinafter defined) during the preceding calendar month. Along with said
payment, Franchisee shall furnish Franchisor with written reports signed by
Franchisee, on forms provided by Franchisor for this purpose, stating Non-fuel
Gross Sales and total gallons of Fuel Sales for such preceding calendar month
and showing the calculation of the monthly royalty fee due for such month.
"Quick Service Restaurant Sales" shall mean the sales derived from quick
service restaurant concepts or branded or unbranded fast food operations
operated by Franchisee or an affiliate of Franchisee and located in the main
building on the Franchised Location as approved by Franchisor.
4.6. DETERMINATION OF "NON-FUEL GROSS SALES" AND "FUEL SALES."
(a) The term "Non-fuel Gross Sales" as used in this Agreement shall mean
all non-fuel revenues received by Franchisee, directly or indirectly, from the
Franchised Business and any other business conducted or located on the
Franchised Location, other than branded fast food facilities located outside the
main building or truck wash facilities, but including any business which may be
franchised or licensed by an entity other than the Franchisor, whether such
revenues be evidenced by check, cash, credit, charge account or otherwise, and
shall include, but not be limited to, (i) the amounts received from the sale of
goods, wares, merchandise (including sales of food and beverages) and tangible
property of every kind and nature, promotional and otherwise, and (ii) for any
services performed by Franchisee or affiliated companies, partnerships or the
other entities, including the operation of weighing scales and rental income.
However, the term Non-fuel Gross Sales shall not include revenues received from
the following:
- tobacco products,
- lottery commissions,
- vending of food products,
- redemption machines (e.g., ticket redemption and/or monetary
award gaming devices),
- phone commissions,
- copier, facsimile and automated teller machine charges,
- money order fees, and
- check cashing fees.
Each charge or sale upon credit shall be treated as a sale for the full
price in the calendar month during which such charge or sale shall be made,
irrespective of the time when Franchisee shall receive payment (whether full or
partial) therefor. Non-fuel Gross Sales shall not include (i) the amount of any
sales tax, excise tax or inspection fees imposed by any Federal, state,
municipal or other governmental authority directly on sales and collected from
customers, provided that the amount thereof is added to the selling price as
absorbed therein and is actually paid by Franchisee to such governmental
authority, or (ii) refunds to customers for merchandise, provided that the
amount received for such merchandise shall have previously been included in Non-
fuel Gross Sales.
(b) The term "Fuel Sales" shall include gasoline, diesel fuel, and liquid
propane gas sales. In determining the gallons or pounds of fuel sales, each
charge or sale, whether for cash or on credit, shall be treated as a sale in the
calendar month during which such charge or sale shall be made, irrespective of
whether, or of the time when, Franchisee shall receive payment therefor.
4.7. ADVERTISING AND OTHER FEES.
In addition to the payment specified in Section 12.1 herein, Franchisee
shall also pay to Franchisor, on a monthly basis, a flat fee of One Thousand
Seven Hundred Fifty Dollars ($1,750) for a Type One "Petro Stopping Center"
Facility or Nine Hundred Dollars ($900) for a Type Two "Petro:2"
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Facility for use for marketing and advertising, which may be adjusted annually
at a rate of 5% compounded on the then current flat fee amount. The collection
rate for this fee shall not exceed one-quarter of one percent (.25%) of all Non-
Fuel Gross Sales and Fuel Sales of the Franchised Business for the preceding
calendar month. The collection rate may be adjusted annually. Subject to the
foregoing limitations, Franchisor may vary the required payment by written
notice to Franchisee from time to time. Additionally, Franchisor shall provide
Franchisee with an annual accounting by the end of the first quarter of the
following year for all such advertising expenditures and collections. The
monthly advertising fee is nonrefundable.
4.8. TIME FOR MAKING PAYMENTS.
All monthly payments required by this Section 4 shall be due to Franchisor
by the twenty-fifth (25th) day of each month for the preceding calendar month
and shall be submitted to Franchisor together with any statement(s) required
under Sections 4.5 and 11.2 of this Agreement. Any payment or report not
actually received by Franchisor on or before one (1) day after it is due shall
be deemed overdue if not postmarked at least five (5) days prior to the day it
was due. If any payment is overdue, Franchisee shall pay to Franchisor, in
addition to the overdue amount, interest on such amount from the date it was due
until paid, at the maximum rate permitted by law. Entitlement to such interest
shall be in addition to any other remedies Franchisor may have.
4.9. FRANCHISOR'S RIGHT OF SET OFF.
In the event Franchisee fails to pay promptly any amount due Franchisor
under the terms of this Agreement, Franchisor shall have the right of set off as
described in Section 22.11 herein.
SECTION 5. TRAINING
5.1. TRAINING PROGRAMS.
Franchisor will make available to Franchisee the Franchisor's training
programs concerning the operation of Franchised Businesses. The training
programs shall be conducted at such time and such place as Franchisor shall
determine. Franchisee, its key managers and additional personnel, if any,
designated by Franchisor, shall be required to attend and complete to
Franchisor's satisfaction all initial and mandatory additional training programs
and shall attend such training programs within thirty (30) days after Franchisor
gives Franchisee notice of this requirement. Certain mandatory additional
training programs, for which Franchisor may charge a fee, may be required by
Franchisor for Franchisee and any of Franchisee's personnel as a result of
conditions observed by Franchisor in connection with inspections of the
Franchised Business or otherwise. Franchisor shall provide and pay only for
training instructors, training facilities and training materials. All other
expenses incurred in such training, including, without limitation, the cost of
travel, room, board and wages and salaries, shall be borne by Franchisee.
5.2. COMPLETION OF MANAGER TRAINING.
Franchisee, or a manager designated by Franchisee and approved by
Franchisor (whose approval shall not be unreasonably withheld), must
successfully complete the travel center training program to Franchisor's
reasonable satisfaction prior to the opening of the Franchised Business.
Additionally, before and after the opening of the Franchised Business, each
manager from a profit center of the Franchised Business, including but not
limited to, the Diesel Fuel Island, the Iron Skillet, the Travel Store, the
Convenience Store, if applicable, and Petro:Lube profit centers, must
successfully complete the applicable profit center training program. If, during
any training program, Franchisor determines that a travel center manager or
profit center manager selected by Franchisee
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is not suitable as a travel center manager or profit center manager under the
Franchise System, or he does not successfully complete the training program,
Franchisor shall have the right and option to require Franchisee to select
another manager. Franchisor shall train such other manager without payment of
any additional training fee by Franchisee.
SECTION 6. OPERATING ASSISTANCE
6.1. ADVISORY ASSISTANCE.
Franchisor shall provide Franchisee with continuing advisory assistance in
the operation of the Franchised Business. Franchisor shall from time to time
offer Franchisee materials and bulletins on sales, marketing developments and
operating techniques.
6.2. CONFIDENTIAL OPERATING MANUAL.
Franchisor shall loan to Franchisee one (1) copy of the Operating Manual,
which may be several volumes, for each of Franchisee's Franchised Locations, as
more fully described in Section 10 of this Agreement, the contents of which may
be amended by Franchisor from time to time.
6.3. DIRECTORY OF TRAVEL CENTER FACILITIES.
Franchisor shall include Franchisee's name and location in any appropriate
national or regional directory which lists travel centers operating under the
trade names and marks "Petro Stopping Center," "Petro:2" or such other mark as
may be franchised hereunder and which may hereafter be published by Franchisor.
6.4. INSPECTIONS.
Franchisor shall continue its efforts to maintain the image, quality and
service associated with the Franchise System, and to that end shall conduct, as
it deems advisable, inspections of the Franchised Business and the Franchised
Location, evaluations of services rendered hereunder, and inspections of
equipment and inventory maintained hereunder by Franchisee.
6.5. NO LIABILITY OF FRANCHISOR.
Franchisor shall not, by virtue of or because of any approvals, advice or
services provided to Franchisee, assume responsibility or liability to
Franchisee or to any third parties.
6.6. ADVERTISING PROGRAMS.
Subject to limitations of applicable law, the extent of which limitations
shall be determined by Franchisor, in its sole discretion, Franchisor shall
permit Franchisee, to the extent possible, to participate in any special
national or regional advertising programs or promotions in which Franchisor and
any of its own locations or other franchisees are participating.
6.7. FRANCHISOR'S BILLING PROGRAM.
Franchisor shall offer Franchisee the nonassignable, nonexclusive right to
use Franchisor's billing program so long as Franchisor may be offering such
program. In the event Franchisee elects to participate in the billing program,
Franchisee shall comply with the terms and conditions of such program as set
forth in the form of Billing Program Agreement attached hereto as Exhibit D.
Franchisor reserves the right at any time and from time to time to amend any
term or provision of
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the billing program agreement, including the percentage charged thereunder, by
giving thirty (30) days' written notice to Franchisee. The billing program
agreement entered into between Franchisor and Franchisee may be terminated by
Franchisor or Franchisee upon thirty (30) days' prior written notice to the
other party. Upon termination of the billing program agreement, Franchisee shall
return any and all equipment, documents and other supplies related to or
utilized in connection with the billing program.
6.8. SPECIAL PROMOTIONAL PRODUCTS AND SERVICES.
Franchisor may from time to time offer certain special promotional products
and services, in addition to the services enumerated herein, which are not part
of the Franchise System, to some or all of the Franchisees upon such price,
terms and conditions as Franchisor may determine. Franchisor is not obligated
to offer any such special promotional products or services as part of the
Franchise System and any such products and/or programs shall be offered subject
to limitations of applicable law, the extent of which limitations shall be
determined by Franchisor, in its sole discretion. Franchisee is not required to
purchase any such special promotional products or services from or through
Franchisor.
6.9. ASSISTANCE IN ESTABLISHING FRANCHISEE'S BUSINESS.
Franchisor shall assist Franchisee in establishing Franchisee's business by
providing the following:
(a) Franchisor's business start-up and site selection guidance
regarding selection of a suitable location and evaluation of locations, if
any, proposed by Franchisee;
(b) Franchisor's standard design specifications and architectural
Plans and Specifications and guidance regarding design and layout of
Franchisee's Franchised Location, as provided in Section 3.1;
(c) guidance regarding selection of equipment, furnishings, supplies,
and merchandising of the Travel Store;
(d) guidance regarding Franchisee's recruitment, selection and
training of employees; and
(e) initial supplies of reports, orders, requisitions and such other
standard forms as may be used within Franchisor's Franchise System and a
copy of Franchisor's Operating Manual, which shall be updated from time to
time and which shall at all times remain the sole and exclusive property of
Franchisor, as set forth more fully in Section 10 herein;
provided, however, that with respect to any assistance provided by Franchisor,
Franchisee hereby acknowledges and agrees that neither Franchisor's approval of
a site for the Franchised Business nor Franchisor's assistance in any of the
matters or respects listed in this Section 6.9, Section 6.10 below, or in any
other section of this Agreement or any agreement to which Franchisee and
Franchisor are parties, shall in any way constitute an assurance, representation
or warranty of any kind, expressed or implied, as to the suitability of the site
for a travel center or for any other purpose or the success or failure, or any
level thereof, to be anticipated at any location or the suitability of any Plans
and Specifications with respect to a particular location or of the suitability
of any other matter as to which assistance is provided and Franchisee
acknowledges that there can be no assurance of any level of success at any
location or of any such suitability. Franchisee further acknowledges (a) that
the application of criteria that have been effective with respect to other sites
may not be predictive of the potential for the Franchised Business; and (b)
that, subsequent to Franchisor's
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approval of the site, demographic and/or economic factors, such as competition
from other similar businesses, included in or excluded from Franchisor's
criteria could change, thereby altering the potential of the site. Such factors
are unpredictable and are beyond Franchisor's control, and Franchisor shall not
be responsible for the failure of the site to meet Franchisee's expectations as
to revenue or operational performance. Franchisee further acknowledges and
agrees that its acceptance of a franchise for the operation of the travel center
at the site is based on its own independent financial projections and
investigation of the suitability of the site, the final decision to operate a
Franchised Business at a particular site being the ultimate responsibility of
Franchisee.
6.10 ASSISTANCE DURING TERM OF FRANCHISE AGREEMENT.
During the term of this Agreement, Franchisor shall provide to Franchisee,
in support of Franchisee's operations, the following:
(a) Assistance to Franchisee at the Franchised Location for one (1)
week during Franchisee's opening of business with the implementation of the
Franchise System;
(b) Purchasing lists showing all products, supplies and services
available to Franchisee from Franchisor or suppliers;
(c) Counseling and guidance in connection with merchandising,
advertising and promotional programs;
(d) Advice and guidance concerning operating problems, new techniques
or operating methods disclosed by reports submitted to or inspections made
by Franchisor;
(e) Such other assistance, including on site assistance and
recommendations for improving Franchisee's operations, as Franchisor, in
its sole discretion, may deem to be necessary.
6.11. COMMITTEES.
Franchisor has or will establish committees with Franchisee input and
participation thereon, which are advisory in nature to share best business
practices and to validate marketing concepts. Franchisee's participation in
such committees shall be at Franchisee's sole cost.
SECTION 7. ADDITIONAL OBLIGATIONS OF FRANCHISEE
7.1. COMPLIANCE WITH FRANCHISE SYSTEM.
Franchisee understands and acknowledges the importance of maintaining the
excellent reputation in the industry of Franchisor, the Proprietary Marks and
the Franchise System, and recognizes the need to, and hereby agrees to, comply
with every detail of the Franchise System, and Franchisee acknowledges and
agrees that such compliance is important to Franchisee, Franchisor and other
franchisees in order to develop and maintain high and uniform operating
standards and to protect Franchisor's reputation and goodwill. It is understood
and agreed that Franchisor may from time to time revise, modify or change the
Franchise System or any part of the Franchise System in order to maintain the
reputation of the Franchise System, the reputation of Franchisor and its
franchisees, and to comply with changes that may take place in the industry.
Franchisor reserves the right, from time to time, by adoption or amendment
of system standards to add, amend, modify, delete or enhance any portion of the
Franchise System (including
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any of the Proprietary Marks and system or operating standards) as may be
necessary in Franchisor's sole judgment to change, maintain or enhance the
Proprietary Marks or the reputation, efficiency, competitiveness and/or quality
of the Franchise System, or to adapt it to new conditions, materials or
technology, or to better serve the public. Franchisee will, at its expense,
fully comply with all such additions or modifications designated by Franchisor.
7.2. SALES AND ADVERTISING ACTIVITIES.
All sales and advertising activities of Franchisee in connection with this
Franchise shall conform to the standards, methods and procedures prescribed from
time to time by Franchisor in writing. Franchisee shall maintain a sufficient
supply of, and use at all times in its operation hereunder, only such
promotional, sales and marketing supplies and materials as conform with
Franchisor's image, standards and such specifications as Franchisor may
prescribe from time to time. Franchisee shall obtain prior written approval
from Franchisor for any advertising materials utilizing Franchisor's marks, or
promoting the Franchised Location or component thereof. All permanent (more
than 30 days) internal and external signs and billboards used in connection with
the Franchised Location, including messages, graphics, and placement, must have
Franchisor's prior written approval.
7.3. HOURS OF OPERATION.
Franchisee agrees to keep the Franchised Business open and in normal
operation twenty-four (24) hours a day every day of the year.
7.4. STANDARDS, TECHNIQUES AND PROCEDURES; PREVENTION OF CERTAIN ACTS.
Franchisee shall maintain and operate the Franchised Business as a full
facility travel center in conformity with such standards, techniques and
procedures as Franchisor may from time to time prescribe in writing. To this
end, Franchisee agrees to prevent the occurrence of acts on the Franchised
Location which Franchisor deems are inconsistent with the image associated with
the Franchise System, including, but not limited to, the following:
(a) the sale or display of literature, magazines, books, pictorials,
devices, video tapes or similar items that are, in Franchisor's sole
opinion, pornographic and/or immoral in content, use or intent;
(b) except as otherwise provided in the Operating Manual, the sale,
on the Franchised Location or adjoining properties owned in part or
controlled by Franchisee, of alcoholic beverages, notwithstanding the fact
that Franchisee may possess a valid license to sell such beverages;
(c) the sale, on the Franchised Location or adjoining properties
owned in part or controlled by Franchisee, of illegal substances;
(d) the solicitation or occurrence of acts of prostitution;
(e) acts of gambling, or the operation of games of chance or devices
for gambling purposes on or about the Franchised Location, except as
permitted by state law and then only with the express written consent of
Franchisor;
(f) false, deceptive or misleading advertising practices;
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(g) rendering inaccurate service bills or knowingly permitting bill
padding or any other similar practice to occur; and
(h) engaging, assisting, aiding or abetting in any act which
constitutes a violation of law which is a felony under the laws of the
State of Texas, the laws of the state in which the Franchised Location is
located, or any other laws applicable to Franchisee, or is a violation of
the laws of the United States.
7.5. EQUIPMENT, SUPPLIES AND PRODUCTS.
Except as otherwise provided in the last sentence of this paragraph,
Franchisee may obtain equipment, supplies and other products and materials
required for or used in the operation of the Franchised Business, including such
other items as may be designated by Franchisor in the Operating Manual, from any
suppliers approved by Franchisor. However, such suppliers must have the ability
to meet Franchisor's reasonable standards and specifications for such items. In
choosing suppliers, Franchisee should take into account the supplier's quality
controls and capacity to supply Franchisee's needs promptly and reliably.
Franchisee agrees to enter into a PMPA Motor Fuels Franchise Agreement
contemporaneously with this Agreement pursuant to which Franchisee will be
required to purchase its branded diesel fuel and diesel fuel additives from
Franchisor pursuant to the terms and conditions of that Agreement. If the PMPA
Motor Fuels Franchise Agreement also requires the purchase of Mobil branded
gasoline, Franchisee shall purchase its gasoline from Franchisor pursuant to the
terms and conditions of that Agreement.
Franchisee shall be required to purchase and use electronic cash register
and computer systems, including hardware and software, in the operation of the
Franchised Business. The required software for the "Petro:Lube" is Petro:Lube
POS/Inventory ("Petro:Lube POS") which is written and maintained by the
Franchisor. The Fuel Island Reconciliation System for Trendar ("FIRST") is also
written and maintained by the Franchisor.
Franchisee will be obligated to provide and support the Franchisor's
account customer interfaces. The formats, frequency and compatibility of these
interfaces is specific and mandatory and Franchisee must stay within the
specifications of ticket level interfaces.
FIRST and Petro:Lube POS/Inventory systems software are the proprietary
property of Franchisor. Franchisor may, in its sole discretion, charge fees for
upgrades and updates to such software at fees determined by Franchisor.
Franchisor has no obligation to provide ongoing maintenance, repair, upgrades or
updates. Franchisee is required to upgrade and update this software during the
term of the franchise and there are no limitations on the frequency and costs of
this obligation. If Franchisee fails to install such upgrades or updates and
needs assistance on an older version of the software or if Franchisee requires
any modifications to the Franchisor's proprietary software, Franchisor is not
obligated to provide same but, in the event such services are provided, will
charge Franchisee for such services at a rate determined from time to time by
Franchisor. There are no limitations on Franchisor's right to access the
information and data generated by such software systems. In the event that the
Franchisor's requirements for standard software change, on- going maintenance,
if provided by Franchisor, and Franchisor has no obligation to provide such
maintenance, on non-standard software will be provided at the rates determined
by Franchisor from time to time.
The recommended hardware configurations which the Franchisor requires, as
specified in the Confidential Operating Manual or otherwise by Franchisor may
change at any time and Franchisee will be required, at the expense of
Franchisee, to upgrade and update existing hardware and software systems to
Franchisor's standards at any time requested by Franchisor.
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The hardware configurations for the FIRST and "Petro:Lube" systems are
provided as a minimum requirement. Franchisor staff may assist in the setup and
support of certain equipment purchased by Franchisee based on configuration
standards set by Franchisor and may charge Franchisee a fee for such services.
Specific software is approved to run in conjunction with the supplied software.
Systems that are not setup and maintained within these specifications may be
supported by the Franchisor but the Franchisee will be required to pay for such
services at a rate set from time to time by Franchisor.
In addition to computer and cash register hardware and software Franchisee
will be required and Franchisee's expense, to upgrade, update, including
replacing such equipment if required, any and all equipment and systems
associated with the Franchised Business at any time required by Franchisor.
7.6. MINIMUM INVENTORY AMOUNT.
Franchisee agrees to maintain a minimum representative inventory of the
brand, type, quality and quantity of such approved products and items as
Franchisor may specify from time to time in writing. The required inventory of
diesel fuel and the use of diesel fuel additives shall be governed by the terms
and conditions of the PMPA Motor Fuels Franchise Agreement entered into by
Franchisor and Franchisee contemporaneously with this Agreement. If the PMPA
Motor Fuels Franchise Agreement also requires the purchase of gasoline, the
brand type, quality and quantity of gasoline shall be governed by the terms and
conditions of the PMPA Fuel Motor Fuels Franchise Agreement.
7.7. INSPECTIONS BY FRANCHISOR.
Franchisee shall permit Franchisor and its agents to enter the Franchised
Location and the Franchised Business, at any reasonable time and as often as
Franchisor may elect, for the purpose of conducting inspections relating to any
and all aspects of compliance with the Franchise Agreement, including
inspections of all of Franchisee's books and records. Franchisee shall permit
Franchisor to conduct or observe any physical count of Franchisee's inventory.
Franchisee shall cooperate fully with Franchisor's representatives in such
inspections and/or physical inventory counts by rendering such assistance as
they may reasonably request; and, upon notice from Franchisor or its agents, and
without limiting Franchisor's other rights under this Agreement, shall
immediately take such steps as may be necessary to correct any deficiencies
detected during such inspections and physical inventory counts, including
completing any and all training and/or improvements, repairs or renovations as
may be required.
7.8. FRANCHISEE'S EMPLOYEES.
Franchisee agrees that its employees, while working at the Franchised
Business, will wear uniforms of such color, design and other specifications as
Franchisor may designate in writing. Franchisee's employees will present a neat
and clean appearance at all times and will render competent and courteous
service to customers of the Franchised Business. Franchisee further agrees to
train its employees to meet Franchisor's performance standards included in the
job description for each employee as specified by Franchisor in writing, and
shall require its employees on a timely basis to view and review educational
material which sets forth Franchisor's performance standards for the job
description of the employee. The manager selected by Franchisee shall be
selected solely by Franchisee. Franchisee shall permit Franchisor to interview
Franchisee's employees and customers at any reasonable time and place.
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7.9. MANAGEMENT BY FRANCHISEE.
Except and only to the extent agreed upon in writing by Franchisor,
Franchisee agrees that the entire operation of the Franchised Business and all
aspects thereof shall be under the direct management of Franchisee. Franchisee
shall not subcontract the operation of its Restaurant, fuel islands or any part
or equipment incident thereto without the prior written consent of Franchisor.
7.10. PHOTOGRAPHS BY FRANCHISOR.
Franchisee agrees during the term of this Agreement to permit Franchisor to
photograph and videotape and publish photographs and videotapes of the
Franchised Business and to identify the Franchised Location and name of the
Franchised Business for any purpose deemed appropriate by Franchisor, and
Franchisor's use of such photographs and videotapes shall be without any charge
to Franchisor.
7.11. PROMOTION BY FRANCHISEE OF ALL TRAVEL CENTER FACILITIES.
Franchisee agrees to actively promote and encourage the patronage by the
traveling public, particularly commercial motor carriers, of all travel centers
of Franchisor and its franchisees. Franchisee further agrees to maintain and
advance the Proprietary Marks, Franchise System and travel center network of
Franchisor in accordance with the highest of industry standards, as determined
by Franchisor.
7.12. MENU AND SERVICE.
Franchisee agrees to serve menu items specified by Franchisor for the "Iron
Skillet" or "Petro Filling Station You'll Never Leave Hungry" Restaurants, to
follow all specifications and formula of Franchisor as to contents and weight of
unit products served, and to sell no other food or drink item or any other
merchandise of any kind without the prior written approval of Franchisor.
Franchisee must obtain the prior written approval of Franchisor for any changes
by Franchisee to the menu, with the exception of regional food offerings.
Franchisee agrees that all food and drink items will be served in containers
which either bear accurate reproductions of Franchisor's service marks and
trademarks or which are completely free of any distinguishable service marks,
trademarks or logos. Such imprinted items shall be purchased by Franchisee
through Franchisor or through a supplier or manufacturer approved in writing by
Franchisor. Franchisor agrees to assist Franchisee in establishing approved
sources of supply of meat, bakery and other food items and properly imprinted
containers. Franchisee agrees that it will operate its Restaurant in accordance
with the standards, specifications and procedures set forth in the Operating
Manual. Franchisee agrees further that changes in such standards,
specifications and procedures may become necessary from time to time and agrees
to accept as reasonable such modifications, revisions and additions to the
Operating Manual with respect to the operation of the Restaurant which
Franchisor, in the good faith exercise of its judgment, believes to be
necessary. Franchisee agrees not to deviate from the standards of cleanliness
and sanitation as set and maintained by Franchisor in the operation of its
restaurants. In the case of an existing operation converting to the Franchised
System, if the full service restaurant is not an "Iron Skillet" Restaurant,
Franchisee shall obtain the prior written approval of Franchisor for such
restaurant. Such restaurant must meet minimum food specifications as prescribed
by Franchisor.
7.13. REQUIRED INVENTORY AND OTHER ITEMS.
Franchisee agrees to maintain an inventory of items listed in the Operating
Manual with respect to product lines and specific products which will be offered
for sale or use by Franchisee in the Franchised Business. The lists of required
inventory items in the Operating Manual can and will
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be modified from time to time by Franchisor. Franchisee will be required to use
fuel additives where required by Franchisor, except as may be limited by
applicable law, which limitations shall be determined by Franchisor in its sole
discretion. Franchisee will be required to maintain an inventory of Mobil
branded diesel fuel and diesel fuel additives. The required inventory of diesel
fuel and the use of diesel fuel additives shall be governed by the terms and
conditions of the PMPA Motor Fuels Franchise Agreement entered into by
Franchisor and Franchisee contemporaneously with this Agreement. If the PMPA
Motor Fuels Franchise Agreement also requires the purchase of gasoline, the
brand type, quality and quantity of gasoline shall be governed by the terms and
conditions of the PMPA Fuel Motor Fuels Franchise Agreement.
7.14. COMPLIANCE WITH LAWS.
Franchisee agrees to comply fully with all present and future Federal,
state or local laws, rules, regulations or orders, including, but not limited
to, all rules and regulations of the Environmental Protection Agency or any
similar state agency, which relate either directly or indirectly to the
operation of the Franchised Business.
7.15. NOTICE TO SUPPLIERS OF FRANCHISOR'S NON-LIABILITY.
Franchisee agrees to notify all of its suppliers that Franchisor does not
own the Franchised Location or the Franchised Business and that Franchisor is
not liable for any of Franchisee's debts.
7.16. NO CHANGES WITHOUT FRANCHISOR'S CONSENT.
Franchisee agrees that it shall not, without the prior written approval of
Franchisor, undertake any material change in the physical or operating emphasis
of the Franchised Business which would (1) reduce the size or capability of the
Franchised Business to supply services below the size and capability standard in
existence on the date this Agreement is executed, (2) change the marketing
emphasis of the Franchised Business, or (3) increase the liability exposure of
the facility unless Franchisee agrees in advance to increase insurance coverage
to the level which, in Franchisor's opinion, is necessary to cover said
increased exposure.
7.17. OPINION OF FRANCHISEE'S COUNSEL.
Franchisee shall furnish to Franchisor, prior to or contemporaneously with
the execution of this Agreement, an opinion of Franchisee's counsel,
satisfactory in form and substance to Franchisor and its counsel, dated as of
the date of execution of this Agreement. Such opinion shall be, in each case to
the extent applicable, to the effect that (1) Franchisee is a corporation,
partnership or other entity, as the case may be, duly organized, validly
existing and in good standing under the laws of its state of incorporation or
organization, is qualified and in good standing in every other state in which
the nature of its business requires qualification, and has all necessary
corporate power, or power granted under a partnership agreement or applicable
law, and authority to execute, deliver and perform the Franchise Agreement and
to carry on the Franchised Business and to own the properties incident thereto;
(2) the execution and delivery of this Agreement and the carrying on of the
Franchised Business will not result in or constitute (A) a default or an event
that, with notice or lapse of time or both, would be a default, breach or
violation of the articles of incorporation or bylaws, partnership agreement or
certificate, or other organizational document, of Franchisee or any subsidiary
or related entity of Franchisee, or any lease, license, promissory note,
conditional sales contract, commitment, indenture, mortgage, deed of trust or
other agreement, instrument or arrangement to which Franchisee or any of its
subsidiaries or related entities is a party or by which any of them or the
property of any of them is bound, (B) an event that would permit any party to
terminate any agreement or to accelerate the maturity of any indebtedness or
other obligation of Franchisee or any of its subsidiaries or related entities,
or (C) the creation or imposition of any lien,
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charge or encumbrance on any of the properties of Franchisee or any of its
subsidiaries or related entities; (3) Franchisee has the right, power, legal
capacity and authority to execute, deliver and perform its obligations under
this Agreement, and no approvals or consents of any other persons, firms,
corporations or governmental entities are necessary in connection therewith; (4)
this Agreement has been duly and validly authorized and, when executed and
delivered by Franchisee, will be valid and binding on Franchisee and enforceable
in accordance with its terms, except as limited by applicable bankruptcy and
insolvency laws and by other laws affecting the rights of creditors generally;
(5) Franchisee is the fee simple owner of the real property on which the
Franchised Business is to be conducted, or, if Franchisee is not the fee simple
owner of such real estate, the title or interest Franchisee holds shall be fully
described in detail, along with such counsel's opinion that the execution of the
Franchise Agreement and the carrying on of the Franchised Business will not be a
violation or a default under the terms of the interest held by Franchisee to
said real estate; (6) attached to such opinion is a list of all liens, mortgages
and encumbrances of whatever nature on the aforementioned real property,
receivables and the personal property of Franchisee known to such counsel; (7)
to the best of such counsel's knowledge, all local building, zoning and health
regulations have been and are currently being complied with and that the
execution of this Agreement and the carrying on of the Franchised Business will
not violate same; and (8) there are currently no pending or threatened lawsuits
or other legal proceedings, administrative actions by any governmental body or
outstanding judgments against Franchisee known to such counsel.
7.18. TIME DEVOTED BY FRANCHISEE TO BUSINESS.
Franchisee covenants that during the term of this Agreement, except as
otherwise expressly approved in writing by Franchisor, Franchisee shall (and
shall require its designated managers to) devote full time, energy and best
efforts to the management and operation of the Franchised Business; provided,
however, that if Franchisee is a corporation, either an officer or a majority
shareholder shall devote fifty percent (50%) of his or her time and best efforts
to the management and operation of the Franchised Business, and Franchisee shall
require its designated manager to devote full time, energy and best efforts to
the management and operation of the Franchised Business. Unless otherwise
specified, the term "Franchisee" as used in this Section 7.18 shall include,
collectively and individually, all officers, directors and holders, directly or
indirectly (and any officers or directors of any such holder), of any beneficial
interest in Franchisee.
7.19. NO OTHER BUSINESS.
Franchisee shall not, nor shall Franchisee allow any company controlling,
controlled by or under common control with Franchisee or otherwise affiliated
with Franchisee (an "Affiliate") to, without the prior written consent of
Franchisor, which consent shall be given or withheld at Franchisor's sole
discretion, directly or indirectly, construct facilities, operate any business,
provide any service or conduct any activities on or within the Franchised
Location. Franchisee will not, and will not allow any Affiliate of Franchisee
to, directly or indirectly, construct facilities, operate any business, provide
any service or conduct any activities on or within the adjacent property to the
Franchised Location ("Adjacent Property Businesses") unless Franchisee has
obtained Franchisor's prior written consent therefor, which consent shall be
given or withheld at Franchisor's sole discretion, and unless such facilities
and/or services do not compete with or detract from the Franchised Business. In
any event, Franchisee must construct and maintain any such Adjacent Property
Businesses in accordance with the architectural standards set forth under this
Agreement for construction of Franchisee's travel center and the maintenance
standards thereunder and any such Adjacent Property Businesses shall maintain
the same quality, standards and insurance and be subject to the same
prohibitions regarding prohibited activities, as required for the Franchised
Business pursuant to this Agreement and Franchisee shall indemnify Franchisor
for all matters
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arising in connection with such Adjacent Property Businesses to the same extent
as required by this agreement for activities conducted on the Franchised
Location.
7.20. STANDARDS OF OPERATION.
The foundation of the Franchise System, and the essence of the Franchise
granted herein, is the adherence by Franchisee to, and Franchisee hereby agrees
to adhere to, standards and policies of Franchisor providing for the uniform
operation of Franchised Businesses within the Franchise System, including, but
not limited to, offering only those products and services which are specified by
Franchisor, utilizing only prescribed or approved equipment, building and site
layouts and designs, maintaining the Franchised Business and the Franchised
Location within the standards, guidelines and specifications of Franchisor,
emphasizing prompt and courteous service in a clean and wholesome atmosphere,
strictly adhering to Franchisor's operating policies, and utilizing Franchisor's
quality control program to maintain Franchisor's standards of quality.
Franchisee further agrees to participate in customer service measurement
programs as designated by Franchisor, for which there may be an additional fee.
7.21. SERVICES OFFERED.
Franchisee shall offer all products and services which Franchisor may
uniformly require of all Franchised Businesses. With respect to new products or
services which may be required during the term of the Franchise Agreement,
Franchisee shall, at its expense, offer such products and services within six
(6) months after seventy-five percent (75%) of the Franchisor-operated travel
center facilities offer such products and services. Franchisee shall purchase
said products in accordance with the provisions of Section 7.5 of this Franchise
Agreement. Franchisee shall perform all services in strict conformity with
Franchisor's standards and specifications, and, in addition, Franchisee shall
comply with all applicable laws and regulations relating to such services.
Franchisee shall not offer any product or service to which Franchisor has not
given prior written consent or which is prohibited by law or applicable
regulation.
7.22. COMPLIANCE WITH FEDERAL, STATE AND LOCAL LAWS.
Franchisee shall comply with all Federal, state and local health, building,
zoning, environmental and other laws applicable to the construction and
operation of its Franchised Business, and shall make prompt and timely payments
of all taxes related to or arising from Franchisee's operation of the Franchise
and the Franchised Business. Franchisee shall keep in force and effect all
local, state and national licenses which may be required for the lawful
operations of its Franchise.
7.23. FRANCHISE OPERATED INDEPENDENTLY.
Franchisee shall conspicuously post at its Franchised Business a sign
provided by Franchisor and placed as designated by Franchisor to the effect that
the business is a Franchised Business operated independently of Franchisor.
7.24. LONG DISTANCE TELEPHONE SERVICES.
Franchisor shall provide Franchisee recommendations on telephone and other
communications equipment to be installed and the providers of long distance
telephone services for the Franchised Location.
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SECTION 8. PROPRIETARY MARKS
8.1. FRANCHISOR'S REPRESENTATIONS.
Franchisor represents with respect to the Proprietary Marks that:
(a) Franchisor is the owner of all right, title and interest in and
to the Proprietary Marks; and
(b) Franchisor has taken and will take all steps necessary and
advisable, in Franchisor's sole discretion, to preserve and protect the
ownership and validity of such Proprietary Marks.
8.2. RESTRICTIONS ON AND CONDITIONS OF FRANCHISEE'S USE OF FRANCHISOR'S
PROPRIETARY MARKS.
With respect to Franchisee's use of the Proprietary Marks franchised
pursuant to this Agreement, Franchisee agrees that:
(a) Exhibit E hereto lists those Proprietary Marks of Franchisor used
by Franchisor in connection with its travel center and preventive
maintenance businesses. Exhibit E-1 hereto lists those Proprietary Marks
which Franchisee is hereby licensed to use. Franchisee shall use only the
Proprietary Marks listed by Franchisor in Exhibit E-1 and/or provided to
Franchisee by Franchisor in the form of a written document expressly
designating certain additional Proprietary Marks as available for use by
Franchisee. Franchisee shall use all such Proprietary Marks only in the
manner authorized and permitted, in writing, by Franchisor and Franchisor
specifically prohibits the use of the Marks by Franchisee in connection
with any service or product to be sold or given away unless specifically
approved in writing by Franchisor in advance. Each list of additional
Proprietary Marks provided by Franchisor to Franchisee shall be deemed a
part of Exhibit E-1 and incorporated therein the same as if fully set forth
therein. Franchisor reserves the right in its sole discretion to require
that Franchisee (i) discontinue or modify use of any Proprietary Mark at
any time and substitute for it such mark as shall be designated in writing
by Franchisor; and/or (ii) use such additional or different Proprietary
Marks as shall be designated in writing by Franchisor. Franchisor shall
have no obligation to compensate Franchisee for compliance with this
obligation.
(b) Franchisee shall use the Proprietary Marks only for the operation
of the Franchised Business and, unless otherwise agreed upon in writing,
only at the Franchised Location or for off-site advertising of Franchisee's
Franchised Business.
(c) During the term of this Agreement and any renewal hereof,
Franchisee shall identify himself as the owner of the Franchised Business
in conjunction with any use of the Proprietary Marks, including, but not
limited to, advertisements, invoices, order forms, receipts and contracts,
as well as at such conspicuous locations on the premises of the Franchised
Business as Franchisor shall designate in writing. The identification
shall be in the form which specifies Franchisee's name, followed by the
term "Owner/Operator," or such other identification as shall be approved by
Franchisor.
(d) Franchisee's right to use the Proprietary Marks is limited to
such uses as are authorized under this Agreement, as may be amended from
time to time by Franchisor, and any unauthorized use thereof shall
constitute an infringement of Franchisor's rights.
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(e) Franchisee shall not use the Proprietary Marks to incur any
obligation or indebtedness on behalf of Franchisor.
(f) Franchisee shall not use the Proprietary Marks or any portion of
the Proprietary Marks as part of its corporate, partnership, joint venture
or other legal name.
(g) Franchisee shall comply with Franchisor's instructions in filing
and maintaining the requisite trade name or fictitious name registrations,
and shall execute any documents deemed necessary by Franchisor or its
counsel to obtain protection for the Proprietary Marks or to maintain their
continued validity and enforceability.
8.3. FURTHER UNDERSTANDINGS AND UNDERTAKINGS OF FRANCHISEE.
Franchisee expressly understands and acknowledges that:
(a) Franchisor is the owner of all right, title and interest in and
to the Proprietary Marks and the goodwill associated with and symbolized by
them.
(b) The Proprietary Marks are valid and serve to identify the
Franchise System and those Franchised Businesses operating under the
Franchise System.
(c) Franchisee shall not, directly or indirectly, contest the
validity or the ownership of the Proprietary Marks.
(d) Franchisee's use of the Proprietary Marks pursuant to this
Agreement shall inure solely and exclusively to the benefit of Franchisor
and such use shall not give Franchisee any ownership interest or other
interest in or to the Proprietary Marks, except the nonexclusive Franchise
granted herein.
(e) Any and all goodwill arising from Franchisee's use of the
Proprietary Marks in its Franchised Business under the Franchise System
shall inure solely and exclusively to Franchisor's benefit, and upon
expiration or termination of this Agreement and the Franchise herein
granted, no monetary amount shall be assigned as attributable to any
goodwill associated with Franchisee's use of the Franchise System or the
Proprietary Marks.
(f) The right to and franchise of the Proprietary Marks granted
hereunder to Franchisee is nonexclusive, and Franchisor thus may:
(1) Itself use, and grant franchises to others for, the
Proprietary Marks, subject only to the provisions of Section
1 of this Agreement; and
(2) Establish, develop and franchise other systems, different
from the Franchise System franchised herein, without offering
or providing Franchisee with any rights in, to or under such
other systems, subject only to the provisions of Section 1 of
this Agreement.
(g) In the event that Franchisee desires to use the Proprietary Marks
in connection with any goods or services for which Franchisor has not
federally registered or filed an application to register the Proprietary
Marks in the United States, or which are not presently contemplated by the
parties, or which are not customarily used in connection with the services
to be rendered under the present franchise, Franchisee shall seek written
permission from Franchisor to make such use, which permission shall be
granted or withheld in Franchisor's sole discretion. If Franchisor agrees
to such expanded use of the Proprietary Marks, Franchisor will thereafter
seek Federal registration of such Proprietary Marks for such additional
goods or services and all such expanded uses of the Proprietary Marks by
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Franchisee shall inure to the benefit of Franchisor, and shall come within
the provisions of this Agreement.
8.4. FRANCHISEE'S ADVERTISING.
Franchisee agrees to operate in the name of, and to emphasize in the
operation of the Franchised Business and in all advertising matter (subject to
Franchisor's approval under the terms of Section 12.2 of this Agreement), the
Proprietary Marks designated for use by Franchisee in Exhibit E-1 attached
hereto, in substantially the same combination, arrangement and manner as
displayed and used in other travel centers operated, leased or franchised by
Franchisor under the same names and marks in and around the United States, so
that Franchisee's business will be readily recognized by the public as part of
the "Petro Stopping Center" and "Petro:2" travel center system.
8.5. FRANCHISOR'S PROTECTION OF PROPRIETARY MARKS.
(a) Franchisee shall immediately notify Franchisor of any action instituted
by or against Franchisee relating to any alleged infringement of any Proprietary
Marks, and shall notify Franchisor of any suspected infringement by third
parties of which Franchisee is aware.
(b) Trademark infringement and unfair competition causes of action arising
from or in connection with use by others of names, symbols and/or devices
consisting of, or confusingly similar to, the Proprietary Marks may be
prosecuted at the sole option of Franchisor. In any such cause of action
instituted by Franchisor, Franchisee shall render its fullest cooperation and
assistance to Franchisor as may be required.
(c) Franchisee shall not commence or prosecute any litigation involving
any Proprietary Marks, or enter into any settlement agreement with any third
party in any way related to any Proprietary Marks, without the prior written
approval of Franchisor.
(d) Provided Franchisee has used the Proprietary Marks in accordance with
this Agreement and is not in default of this Agreement, Franchisor will defend
Franchisee against any third party claims, suits or demands related to
Franchisee's use of the Proprietary Marks.
SECTION 9. CONFIDENTIAL INFORMATION
9.1. CONFIDENTIAL RELATIONSHIP AND INFORMATION.
The parties expressly understand and agree that the relationship
established between Franchisee and Franchisor by this Agreement is one of
confidence and trust and that, as a result, Franchisor will be disclosing and
transmitting to Franchisee certain confidential and proprietary information
concerning the Franchise System, including, but not limited to, procedures,
operations and data used in the Franchise System as well as know-how, practices,
methods of promotion, advertising and production, forms, Plans and
Specifications, drawings, manuals, films, tapes, computer software, technical
information and combinations of information used in the Franchise System which
gives Franchisor and Franchisee an opportunity to obtain an advantage over
competitors and would-be competitors who do not know such confidential and
proprietary information or how to use it. All of such proprietary information
is collectively referred to herein as the "Confidential Information."
9.2. USE OF CONFIDENTIAL INFORMATION BY FRANCHISEE.
Franchisee agrees that during and after the term of this Agreement
Franchisee will hold secret and confidential, and will not disclose, make known,
divulge, communicate to any person
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(except to such of its own employees as are required to use the information, and
then only under obligation of secrecy binding upon such employees) or physically
remove from the Franchised Location, any of the Confidential Information which
Franchisee or any of its officers, representatives, agents or employees may
acquire from Franchisor under and pursuant to this Agreement. Franchisee agrees
to treat and maintain such Confidential Information as Franchisor's private
property, to use the information only for the purposes of operation of the
Franchised Business and to refrain from disclosing it to others, except to
Franchisee's employees as provided in Section 9.3. Information or techniques
prepared, compiled or developed by Franchisor, its employees or agents during
the term of this Agreement and relating to performance or operation of the
Franchise System or the Franchised Business shall be considered as part of
Franchisor's Confidential Information.
9.3. FRANCHISEE'S EMPLOYEES AND AGENTS.
Franchisee agrees to restrict the knowledge of Franchisor's Confidential
Information to Franchisee's employees or agents who are directly connected with
the performance of the work which requires such knowledge, provided that:
(a) Franchisee shall advise such employees or agents of the
confidential nature of such Confidential Information and the requirements
for nondisclosure;
(b) Such employees and agents shall assume the same obligations of
secrecy and confidentiality as are imposed on Franchisee under this
Agreement, which obligations (to the extent legally permissible) shall be
for the benefit of Franchisor as well as Franchisee;
(c) Such employees and agents shall agree not to use the aforesaid
Confidential Information or any part thereof except while in the employ of
Franchisee during the term of this Agreement; and
(d) Each such employee or agent shall execute a written contract of
employment or other written undertaking including the matters embraced in
(b) and (c) of this Section 9.3, which written contract of employment or
undertaking shall have been first approved by Franchisor (which approval
shall not be unreasonably withheld), and a copy of the executed document
shall be furnished to Franchisor.
However, a single violation by an employee, including an officer who is not
a shareholder or other equity owner of Franchisee, of his obligation of secrecy,
provided such violation is not a material violation, shall not in and of itself
be deemed to be a breach by Franchisee of its obligations under this Section 9.
9.4. PERMITTED DISCLOSURE BY FRANCHISEE.
The provisions of this Agreement shall not prevent Franchisee from
disclosing to others or using in any manner information which Franchisee can
show (1) has been published and has become a part of the public domain other
than by acts or omissions of Franchisee, its employees or agents; or (2) has
been furnished or made known to Franchisee by third parties (other than
those acting directly or indirectly for or on behalf of Franchisor or a
franchisee of Franchisor) as a matter of right and without restriction on
disclosure. No information obtained by Franchisee from Franchisor shall be
deemed to be in the public domain, or in the prior possession of Franchisee,
unless such information is set forth in a printed publication available to the
general public and unless Franchisee can prove that it obtained such printed
publication as of a particular date, which date shall establish, in the case of
Franchisee, its agents or employees and the date the information came into the
public domain.
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9.5. EQUITABLE RELIEF.
The parties hereto recognize and agree that, in the event of breach by
Franchisee of this Section 9, money damages would not be an adequate remedy to
Franchisor for such breach and, even if money damages were adequate, it would be
impossible to ascertain or measure with any degree of accuracy the damages
sustained by Franchisor therefrom. Accordingly, if there should be a breach or
a threatened breach by Franchisee of the provisions of this Section 9,
Franchisor shall be entitled to an injunction restraining Franchisee or the
person to whom such information is disclosed or threatened to be disclosed, or
both such persons, from any such breach, without showing or proving actual
damage sustained by Franchisor.
9.6. INFORMATION DEVELOPED BY FRANCHISEE.
Franchisee grants to Franchisor, without royalty, a nonexclusive license to
make, have made, use and sell or lease any improvements or modifications
effected by Franchisee to the Confidential Information or any other related
practices or materials during the term of this Agreement.
9.7. ARCHITECTURAL PLANS AND DRAWINGS, ETC.
Franchisee may employ the architectural plans and drawings, site selection
guide, construction guide and business start-up guide belonging to Franchisor
and furnished by Franchisor strictly for the development of "Petro Stopping
Center" facilities that are owned or franchised by Franchisor. All materials
mentioned above and any other such materials furnished by Franchisor to
Franchisee for the development of the Franchised Business are the property of
Franchisor at all times and will be returned to Franchisor immediately upon
demand without retaining any copies thereof. Changes or improvements made to
such material will immediately become the property of Franchisor and may not be
used by Franchisee without first furnishing Franchisor an exact set of changes,
modifications or improvements with all related specifications and securing
written permission from Franchisor to use such changes. If Franchisee loses or
damages any materials furnished by Franchisor, Franchisee will be charged a
reasonable fee for replacement of same.
9.8. COMPUTER SOFTWARE.
Franchisee may employ Franchisor's computer software and programs developed
thereunder and other documents and related items belonging to Franchisor and
furnished by Franchisor strictly for the use of "Petro Stopping Center" and
"Petro:2" facilities that are operated or franchised by Franchisor. All
materials mentioned above and any other such materials or related materials
furnished by Franchisor to Franchisee for use in the Franchised Business are the
property of Franchisor at all times, will be returned to Franchisor immediately
upon demand and the Franchisor reserves the right to charge a fee, the amount of
which shall be determined in the sole discretion of the Franchisor, for the use
of any and all such material whether currently in use, contemplated or hereafter
developed. All applicable rights to patents, copyrights, trademarks and trade
secrets related to such items shall remain with Franchisor. Changes or
improvements made to such material will immediately become the property of
Franchisor and may not be used by Franchisee without first furnishing Franchisor
an exact set of changes, modifications or improvements with all related
specifications and securing written permission from Franchisor to use such
changes. If Franchisee loses or damages any materials furnished by Franchisor,
Franchisee will be charged a reasonable fee for replacement of same.
9.9. FURTHER OBLIGATIONS.
Franchisor has taken, and will continue to take, all reasonable security
measures to protect the confidentiality of all Confidential Information. All
employees, franchisees, affiliates and related parties of Franchisor and any
other persons who have invented, discovered, designed or otherwise
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developed the technical information, trade secrets and systems included in the
Confidential Information or who otherwise have knowledge of or access to said
Confidential Information have been adequately notified that all such
Confidential Information is proprietary to Franchisor and is not to be divulged.
Franchisor agrees not to disclose the Confidential Information to anyone other
than Franchisee, other franchisees, employees, agents and affiliates of
Franchisor under the same terms and conditions contained in this Section 9. The
parties agree that this information is valuable only as long as it remains
secret. Accordingly, parties agree to take all steps reasonably necessary to
protect the Confidential Information and to prevent such Confidential
Information from entering the public domain or falling into the hands of others
not bound by this Agreement. All technical information in documentary form and
all copies of it must be returned promptly to Franchisor, without retaining
copies thereof, upon termination or expiration of this Agreement. No
Confidential Information may be used for any purpose by Franchisee after
termination or expiration of this Agreement.
SECTION 10. CONFIDENTIAL OPERATING MANUAL
10.1. OPERATING MANUAL.
In order to protect the reputation and goodwill of Franchisor and to
maintain uniform standards of operation under Franchisor's Proprietary Marks,
Franchisee shall conduct its business in accordance with Franchisor's Operating
Manual, which Manual may consist of several volumes and related materials, as
identified by the Franchisor. Franchisee acknowledges receipt of one copy of
the Operating Manual on loan from Franchisor for the term of this Agreement.
The Operating Manual shall at all times remain the sole property of Franchisor.
10.2. INFORMATION CONFIDENTIAL.
The Operating Manual is part of the Confidential Information referred to in
Section 9. Franchisee shall not at any time, without Franchisor's prior written
consent, copy, duplicate, record or otherwise reproduce the Operating Manual, in
whole or in part, nor otherwise make the same available to any unauthorized
person or physically remove the Operating Manual from the Franchised Location.
10.3. REVISIONS AND UPDATING.
Franchisor may from time to time revise the contents of said Operating
Manual and other operational directives referred to herein, and Franchisee
expressly agrees to comply promptly with each new or changed standard provision.
Franchisee shall at all times insure that its copies of said Operating Manual
and other operational directives are kept current and up-to-date. In the event
of any disputes as to the contents thereof, the terms of the master copy
maintained by Franchisor at Franchisor's home office shall be controlling.
SECTION 11. ACCOUNTING AND RECORDS
11.1 PRESERVATION OF FRANCHISEE'S RECORDS.
During the term of this Agreement, Franchisee shall maintain and preserve,
for at least five (5) years from the dates of their preparation or as required
by state or federal laws, full, complete and accurate books, records and
accounts in accordance with generally accepted accounting principles and in the
form and manner prescribed by Franchisor in the Operating Manual and as may be
prescribed by Franchisor from time to time in writing. Such books, records and
accounts shall be maintained and preserved and made available to Franchisor
after the termination or expiration
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of this Agreement for so long as Franchisor may reasonably request. Franchisor
(including its officers and directors, partners, employees and agents) shall
maintain the confidentiality of all records and reports provided to Franchisor
by Franchisee.
11.2. MONTHLY STATEMENTS.
Franchisee shall submit to Franchisor, no later than the twenty-fifth
(25th) day of each month during the term of this Agreement, a signed statement
on the forms prescribed by Franchisor, accurately reflecting all Fuel Sales and
Non-fuel Gross Sales at the Franchised Location during the preceding month and
such other data or information as Franchisor may require.
11.3. ANNUAL REPORT BASED UPON AGREED-UPON PROCEDURES.
Within one hundred twenty (120) days after the end of each calendar year,
Franchisee shall submit to Franchisor a report whereby an independent certified
public accountant satisfactory to Franchisor has performed the procedures
enumerated below with respect to the franchise fees payable as determined under
the Franchise Agreement.
A. Procedures:
1. Examine the weekly cash and sales reports for the year.
These reports should show information on gross sales (including Fuel
Sales and Non-fuel Gross Sales), register and meter readings, sales
and other taxes, returns and allowances, and other information.
2. Compare monthly summarizations of these reports with the
general ledger and test receipts as shown in the weekly cash and sales
reports.
3. Report on Fuel Sales and Non-fuel Gross Sales, as defined
in Section 5.4 herein.
4. Examine the computation made by Franchisee of franchise
fees payable to Franchisor and report on the amount of fees payable in
accordance with Section 5.3 herein.
B. Include a statement of findings on procedures performed by the
independent certified public accountant.
Type of Report to be Issued by Franchisee's Certified Public Accountant:
- ---- -- ------ -- -- ------ -- ------------ --------- ------ ----------
The report to be issued by the independent certified public accountant will
be based upon The American Institute of Certified Public Accountants (AICPA)
Statement on Auditing Standards No. 35 entitled "Special Reports Applying
Agreed-Upon Procedures to Specified Elements, Accounts, or Items of A Financial
Statement."
The scope of the work by the certified public accountant in the engagement
is not to be directed toward the expression of an opinion but the performing of
certain procedures requested by Franchisor and a statement of the accountants'
findings.
11.4. OTHER INFORMATION.
Franchisee shall also submit to Franchisor for review or auditing such
other forms, reports, records, information and data as Franchisor may reasonably
designate, in the form and at the times
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and places reasonably required by Franchisor, upon request and as specified from
time to time by Franchisor in writing.
11.5. TAX RETURNS.
Franchisee agrees to furnish to Franchisor upon request a copy of
Franchisee's sales tax returns and such portions of Franchisee's Federal and
state income tax returns as relate to the operations of the Franchised Business,
within thirty (30) days after Franchisor's request for such tax returns.
11.6. FRANCHISOR'S RIGHT OF INSPECTION.
Franchisee shall keep and maintain, for at least five (5) years from the
date the subject material was created or as required by state and federal laws,
all books, records and tax returns relating to the Franchised Business at the
Franchised Location or at the principal office of Franchisee. Franchisor or its
designated agents shall have the right at all reasonable times to examine, and
to copy at its expense, and Franchisee shall make available, at the Franchised
Location or at the principal office of Franchisee, all books, records and tax
returns of Franchisee relating to the Franchised Business.
11.7. AUDIT BY FRANCHISOR.
Franchisor shall at any time or times be entitled to an audit of the
previous five years from the then current year of Franchisee's Fuel Sales and
Non-fuel Gross Sales (as defined in Section 4.5) to be conducted by Franchisor,
its employees, representatives or agents. Such audit shall be limited to the
determination of Non-fuel Gross Sales and Fuel Sales and shall be conducted
during normal business hours either at the Franchised Location or at the
principal place of business of Franchisee. Franchisee agrees to supply
Franchisor or its designated agent with all information, data and records
reasonably necessary to complete said audit. If it is determined as a result of
such audit that there has been a deficiency in the payments made to Franchisor,
then such deficiency shall become immediately due and payable with interest at
the maximum legal rate from the date when such payment should have been made.
In addition, if any of Franchisee's reports shall be found to have understated
either Non-fuel Gross Sales or Fuel Sales by more than two percent (2%), then,
in addition to any royalties due Franchisor, Franchisee shall pay all of
Franchisor's reasonable costs and expenses connected with said audit. If it is
determined as a result of such audit that there has been an overpayment, then
Franchisee shall be entitled to a refund for such overpayment, and Franchisor
shall credit such refund against Franchisee's next-succeeding royalty payment or
payments. If such audit discloses that any of Franchisee's reports have
understated either Non-fuel Gross Sales or Fuel Sales by more than three percent
(3%), Franchisor may, in addition to any other remedies, terminate this
Agreement pursuant to Section 15.3 within thirty (30) days following discovery
of such understatement. Any information gained from such audit shall be kept
confidential by Franchisor and shall not be disclosed, except to carry out the
purpose hereof or, if necessary, for purposes of litigation or arbitration.
Franchisee shall also be required to pay all of Franchisor's reasonable costs
and expenses connected with an audit if Franchisee shall fail to furnish to
Franchisor on a timely basis any information, statements, reports or returns
required to be furnished to Franchisor by this Section 11 of the Agreement.
11.8. DEFINITION OF "RECORDS."
The term "records," as used in this Section 11, shall include, but shall
not be limited to, cash register recordings, fuel dispenser meter readings, fuel
storage tank readings, purchase records, bank statements, employment records,
financial statements, sales records, and other records normally maintained by
such a business.
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11.9. CONFORMITY TO FRANCHISOR'S ACCOUNTING AND CONTROL SYSTEMS.
Franchisee hereby agrees to obtain at Franchisee's expense, such cash
registers, data terminals, printers and supplies as required by Franchisor for
operation of the management, accounting and control systems as may be prescribed
by Franchisor from time to time for Franchisor to obtain certain daily
information deemed necessary or desirable by Franchisor in fulfilling
Franchisee's obligations under Section 11.l above. If requested by Franchisor,
Franchisee also agrees to obtain, at Franchisee's expense, all modems, data
phone lines and necessary hardware, software and technical assistance to allow
data communication between Franchisor's host computer, if any, and Franchisee's
equipment.
In addition, Franchisee agrees to use the standard chart of accounts in all
of its bookkeeping and such other standard accounting procedures as may be
prescribed from time to time by Franchisor and will adopt and use a fiscal
calendar which is prescribed by the Franchisor.
11.10. LIMITATION ON CLAIMS.
Franchisor, except as provided in Section 11.7, and Franchisee may only
bring claims for the miscalculation of royalties or billings which occur in the
18 months prior to the then current date.
SECTION 12. ADVERTISING AND GRAND OPENING
Recognizing the value of advertising, and the importance of the
standardization of advertising programs to further the goodwill and public image
of the Franchise System and the need for compliance with this Agreement and the
Franchise System, the parties agree as follows:
12.1. GRAND OPENING.
Franchisee shall spend, for grand opening advertising, promotional
materials and opening expenses a minimum sum of Five Thousand Dollars ($5,000).
Franchisor shall contribute Two Thousand Five Hundred Dollars ($2,500) toward
the minimum sum of Five Thousand Dollars ($5,000). Any amounts expended in
excess of Five Thousand Dollars ($5,000) shall be paid by Franchisee. This
requirement shall be in addition to any marketing contributions that may be
required under Section 4.6 of this Agreement. The grand opening shall be held
within sixty (60) days after the opening of the site.
Franchisee agrees not to open the Franchised Business for business until:
(1) it has received written notice from Franchisor that Franchisor has
determined that all of Franchisee's obligations which must be fulfilled prior to
such opening have been fulfilled; (2) preopening training has been completed;
(3) all amounts then due to Franchisor have been paid; and (4) Franchisor has
been furnished with copies of all insurance policies required pursuant to this
Agreement, or such other evidence of insurance coverage and payment of premiums
as Franchisor requests. Franchisee agrees to comply with these conditions and
shall open the Franchised Business for business not later than thirty (30) days
after construction of the Franchised Business is complete. Franchisee further
agrees to open the Franchised Business for business and commence conduct of
business at the Franchised Business pursuant to this Agreement within five (5)
days after Franchisor gives notice to Franchisee that the Franchised Business is
ready for opening.
12.2. ADVERTISING, MARKETING AND CUSTOMER SERVICE PROGRAMS ESTABLISHED BY
FRANCHISOR.
Franchisee agrees that Franchisor shall have the right, in its sole
discretion, to establish, for such periods of time as Franchisor shall deem
appropriate, regional and/or national advertising
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program(s) for the Franchise System. Franchisee also agrees that Franchisor may
at its sole discretion discontinue any national or regional program(s) which it
may have established. Franchisee further agrees that Franchisee shall make
contributions to any such program(s) as required under Section 4.6 of this
Agreement and that each such program shall be maintained and administered by
Franchisor or its designee, as follows:
(a) Franchisor shall direct all such advertising, marketing and
customer service programs, with sole discretion over the creative concepts,
materials and media used in such programs and the placement and allocation
thereof. Franchisee agrees and acknowledges that any such program is
intended to maximize general public recognition and acceptance of the
Proprietary Marks for the benefit of the Franchise System, and that
Franchisor and its designee undertake no obligation in administering the
program to make expenditures for Franchisee which are equivalent or
proportionate to its contribution, or to ensure that any particular
franchisee benefits directly or pro rata from the placement of advertising.
--- ----
(b) Franchisee agrees that the funds may be used to meet any and all
costs of engaging in advertising, marketing, promotional, and customer
service activities, creating and producing advertising and promotional
programs and resources and maintaining, administering, directing and
preparing advertising and marketing, including, without limitation,
preparing and conducting television, radio, magazine and newspaper
advertising campaigns and other public relations activities; employing
advertising agencies to assist therein; research and development costs for
new programs; providing promotional brochures and other marketing materials
to franchisees in the Franchise System, retail sales promotion, point-of-
purchase materials, publicity and public relations, collateral
materials (e.g. brochures, network maps, etc.) trade shows and events and
to support the Franchisor's fleet sales effort on behalf of the entire
network of travel centers, including company-owned and franchised travel
centers. All sums paid by Franchisee as monthly advertising fees shall be
accounted for separately from the other funds of Franchisor and shall not
be used to defray any of Franchisor's general operating expenses, except
for such reasonable administrative costs and overhead for the
administration or direction of the advertising program(s), including
collecting and accounting for assessments for the program(s).
SECTION 13. INSURANCE; INDEMNIFICATION
13.1. REQUIRED INSURANCE.
Franchisee shall obtain according to the schedule below, and maintain in
full force and effect during the term of this Agreement, at Franchisee's
expense, insurance policies protecting Franchisee and Franchisor, and their
respective officers, directors, partners and employees, against any loss,
liability, personal injury, death, property damage or expense whatsoever arising
or occurring upon the Franchised Location or in connection with the Franchised
Business, as well as such other insurance applicable to such other special risks
created by Franchisee's affiliated businesses, if any, as Franchisor may
reasonably require for its own and Franchisee's protection. Where permitted by
law and as further outlined below, Franchisor shall be named an Additional
Insured in such policies, or policies shall contain waivers of subrogation by
Franchisee and its insurance carrier in favor of Franchisor. All such policies
shall be written by insurance companies satisfactory to Franchisor and in
accordance with the standards and specifications set forth in this agreement and
shall include at a minimum (except as additional coverages and higher policy
limits may reasonably be specified for all franchisees from time to time by
Franchisor in writing) the coverages described in Section 13.2 below.
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13.2. COVERAGE.
(a) Franchisee must purchase the following insurance concurrent with the
execution of this Agreement and must provide certificates of insurance to
Franchisor evidencing such purchase within thirty days after execution of this
Agreement:
Commercial General Liability $1,000,000 Each Occurrence
(Occurrence Basis)with all $2,000,000 Aggregate
coverage being required
in the specified amounts
for each travel center
location franchised
(insurance for a location
may not be combined with
other insurance for other
locations to meet the aggregate
requirement)
Franchisor to be named as
Additional Insured
Automobile (Bodily Injury and $1,000,000 Combined Single Limit
Property Damage)
Owned, Hired and Non-owned
Franchisor to be named as
Additional Insured
Workers' Compensation Statutory Limit
With Waiver of Subrogation
in favor of Franchisor
Employers' Liability $1,000,000 Each Accident
With Waiver of Subrogation 1,000,000 Disease Policy Limit
in favor of Franchisor 1,000,000 Disease Each Employee
Umbrella $10,000,000 Each Occurrence
Bodily Injury and Property 10,000,000 Aggregate
Damage
(Occurrence Basis)
Franchisor to be named as
Additional Insured.
Franchisor will not be obligated to furnish plans for construction until thirty
(30) days after receiving insurance certificates for the insurance listed above.
(b) In addition to coverages listed above, Pollution Liability Insurance
must be purchased by Franchisee prior to first filling of any tanks on the
-----
Franchised Location (certificate of insurance must be furnished to Franchisor
prior to first filling of tanks):
- -------------------------------
Pollution Liability Insurance with limits of not less than the minimum
amount of financial responsibility and capability required under the Resource
Conservation and Recovery Act, as amended by the Hazardous and Solid Waste
Amendments of 1984 (collectively called "RCRA"), and regulations promulgated
thereunder or under other environmental statutes and regulations in both Federal
law and the laws of the state in which the Franchised Business is located, in
any event not less than Two Million Dollars ($2,000,000) per occurrence, Two
Million Dollars ($2,000,000) in the aggregate per year and carrying no more than
a One Hundred Thousand Dollar ($100,000)
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deductible, unless some other amount is approved, in writing, by the Franchisor.
Said Pollution Liability Insurance shall name Franchisor as Additional Insured
and shall protect Franchisee and Franchisor against environmental remediation,
third party actions and defense costs.
Regardless of any coverage which may be applicable pursuant to an
environmental clean-up fund of any State Franchisee will be required to purchase
the commercial pollution liability insurance as outlined above.
13.3. INSURANCE IN NAME OF FRANCHISEE ENTITY, NOTICE TO FRANCHISOR, RENEWAL
CERTIFICATES.
Insurance written under these provisions must be issued to the Franchisee
entity.
Certificates of insurance furnished to Franchisor under this provision must
provide that sixty (60) days' prior written notice will be given to Franchisor
by the insurance carrier prior to cancellation. In addition, Franchisee shall
provide sixty (60) days' prior written notice to Franchisor in the event the
insurance carrier proposes non-renewal or any material change in coverage.
Timely insurance renewal certificates shall be furnished by Franchisee or
its insurance agent to Franchisor as coverage is renewed.
13.4. FRANCHISEE'S OBLIGATION NOT LIMITED BY FRANCHISOR'S OWN INSURANCE.
Franchisee's obligation to obtain and maintain the foregoing policy or
policies in the amounts specified shall not be limited in any way by reason of
any insurance which may be maintained by Franchisor, nor shall Franchisee's
performance of that obligation relieve it of liability under the indemnity
provisions set forth in Section 13.6 of this Agreement.
13.5. FAILURE OF FRANCHISEE TO OBTAIN OR MAINTAIN INSURANCE.
Should Franchisee, for any reason, fail to obtain or maintain the insurance
required by this Agreement, as revised from time to time in writing, Franchisor
shall have the right and authority (without, however, any obligation to do so)
immediately to (1) obtain such insurance and to charge Franchisee for such
insurance (these charges, together with a reasonable fee, which may equal ten
percent (10%) of the cost of the premiums for such insurance for Franchisor's
expenses, time and effort, shall be payable by Franchisee immediately upon
notice) and all such costs and charges shall be subject to the right of set off
granted to Franchisor pursuant to Section 22.11 herein; or (2) terminate this
Agreement as provided in Section 15.4.
13.6. FRANCHISOR'S NON-LIABILITY AND INDEMNITY.
(a) Franchisee shall indemnify and save harmless each of Franchisor, and
its successors, assigns, officers, members of its board of directors, partners,
agents and servants and their respective successors, assigns, officers,
partners, shareholders, agents and servants (collectively, the "Indemnitees"),
against and from any and all liabilities, obligations, losses, damages,
penalties, claims (including, without limitation, claims involving strict or
absolute liability and all claims arising from the use, discharge, storage or
disposal of any Hazardous Material in, over, adjacent to or about the Franchised
Location or any part thereof or the soil or water supply underneath or adjacent
to the Franchised Location or any part thereof, or the air supply in, over,
adjacent to or about the Franchised Location or any part thereof), actions,
suits, costs, expenses and disbursements (including attorneys' fees and
expenses) of any kind and nature whatsoever (collectively, "Claims") which may
be imposed on, incurred by or asserted against any Indemnitee (whether because
of an action or omission by such Indemnitee or otherwise and whether or not
otherwise indemnified) by or on behalf of any person arising from the
construction, conduct,
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management, operation, owning, holding or leasing of, or from any work or thing
whatsoever done or failed to be done in and on the Franchised Location or any
part thereof, and shall also indemnify and save each such Indemnitee harmless
against and from any and all Claims arising from any condition of the Franchised
Location or any part thereof, or any sidewalk adjoining the Franchised Location
or any part thereof, or of any vaults, passageways or space therein or
appurtenant thereto, or of the soil or water supply underneath or adjacent to
the Franchised Location or any part thereof, or of the air supply in, over,
adjacent to or about the Franchised Location or any part thereof, or arising
from any breach or default on the part of Franchisee in the performance of any
covenant or agreement on the part of Franchisee to be performed pursuant to or
arising out of the Franchise Agreement or any other Agreement incident thereto
or payments made pursuant thereto or any other transactions contemplated
thereby, or arising out of the manufacture, financing, construction, purchase,
acceptance, rejection, ownership, acquisition, delivery, nondelivery, lease,
sublease, assignment, preparation, installation, storage, maintenance, repair,
transportation, transfer of title, abandonment, possession, rental, use,
operation, condition, sale, return, importation, exportation or other
application or disposition of all or any part of any interest in the Franchised
Location, or arising from any violation by Franchisee of any contract or
agreement to which Franchisee is a party or violation of any restriction or
legal requirement, or any claim for patent, trademark or copyright infringement
(except as otherwise provided in Section 8.5 herein) in each case affecting the
Franchised Location or any part thereof or the ownership, occupancy or use
thereof, or arising from any act of active or passive negligence or alleged act
of active or passive negligence of any Franchisee, or of its officers,
directors, agents, contractors, servants, employees, invitees, licensees or of
trespassers or arising from any accident, injury or damage whatsoever caused to
any person or property occurring in or about the Franchised Location, or upon or
under the sidewalks and the land adjacent thereto, or in or about the soil or
water supply underneath or adjacent to the Franchised Location or any part
thereof, or in or about the air supply in, over, adjacent to or about the
Franchised Location or any part thereof, and from and against all judgments,
costs, expenses (including attorneys' fees and expenses) and liabilities
incurred in or about any such Claim or action or proceeding brought therein.
(b) Franchisee hereby releases indemnitees from any liability for damages
arising out of or based upon this Agreement including, but not limited to,
training, establishment of procedures, the plans an specifications for
construction or remodeling, and products distributed but not manufactured by
indemnitees, to the fullest extend that Franchisee may legally agree to release
indemnitees from liability for such damages; provided, however, that Franchisee
does not release indemnities from any liability arising solely from the wilful
misconduct or gross negligence of indemnitees (unless attributed or imputed to
indemnitees by reason of any act or omission of Franchisee, whether as agent for
indemnitees or otherwise.)
(c) In case any action or proceeding be brought against any such
Indemnitee by reason of any Claim, Franchisee upon notice from such Indemnitee
shall defend such action or proceeding by counsel reasonably satisfactory to
such Indemnitee and shall pay all reasonable expenses in respect of such action
or proceeding. Should Franchisee fail or refuse to secure such counsel,
Franchisee agrees that it shall be responsible for and pay all legal fees and
expenses incurred by such Indemnitee in defending such action or proceeding. If
any such action or proceeding is settled or if there be final judgment for the
claimant in any such action or proceeding, Franchisee shall indemnify and hold
harmless each Indemnitee from and against any loss or liability by reason of
such settlement or judgment. Franchisee may appeal any such judgment by posting
bond pending appeal. Such bond must be posted in favor of Franchisor and in an
amount sufficient to satisfy the pending judgment.
(d) The obligations of Franchisee under this Section shall survive any
termination of the Franchise Agreement with respect to all events described in
this Section which occur or relate to periods prior to the termination of this
Franchise Agreement. Payments due from Franchisee to each Indemnitee pursuant
to this Section shall be made directly to such Indemnitee. This Section
constitutes a separate agreement with respect to each Indemnitee. The rights
and indemnities of
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each Indemnitee hereunder are expressly made for the benefit of and shall be
enforceable by such Indemnitee notwithstanding the fact that such Indemnitee is
no longer a party to this Franchise Agreement or was not a party to this
Franchise Agreement at the outset. In the event Franchisee is required to make
any payment under this Section, Franchisee shall pay to the person indemnified
an amount which, on an after-tax basis, shall be equal to the amount of such
payment. To the extent that the foregoing undertakings may be unenforceable for
any reason, Franchisee agrees to make the maximum contribution to the payment
and satisfaction of each of the Claims which is permissible under applicable
law.
(e) Without limiting the generality of the preceding paragraphs, Franchisee
hereby agrees to indemnify each of the Indemnitees and agrees to hold each of
the Indemnitees harmless from and against any and all Claims paid, incurred or
suffered by, or asserted against, any of the Indemnitees for, with respect to,
or as a direct or indirect result of, the presence on or under or the escape,
seepage, leakage, spillage, discharge, emission, or release from the Franchised
Location of any Hazardous Material, including, without limitation, any Claims
asserted or arising under any Environmental Law, regardless of whether or not
caused by, or within the control of, Franchisee. Franchisee further agrees to
indemnify each of the Indemnitees and agrees to hold each of the Indemnitees
harmless from and against any and all Claims paid, incurred or suffered by, or
asserted against, any of the Indemnitees for, with respect to, or as a direct or
indirect result of, any ground water or soil contamination under, adjacent to,
or in the vicinity of the Franchised Location including, without limitation, any
Claims asserted or arising under any Environmental Law. As used in this
Franchise Agreement, the term "Environmental Law" means the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), RCRA, the
Federal Water Pollution Control Act ("FWPCA"), the Clean Air Act ("CAA"), any
so-called "Superfund" or "Superlien" law, or any other Federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct concerning, any
hazardous, toxic or dangerous waste, substance or material, as now or at any
time hereafter in effect, and the term "Hazardous Material" means and includes
(i) any asbestos or insulation or other material composed of or containing
asbestos, wherever contained or located on the Franchised Location, or (ii) any
hazardous, toxic or dangerous waste, substance or material defined as such in
(or for purposes of) CERCLA, RCRA, FWPCA, CAA, any so-called "Superfund" or
"Superlien" law, or any other Federal, state or local statute, law, ordinance,
code, rule, regulation, order or decree regulating, relating to, or imposing
liability or standards of conduct concerning, any hazardous, toxic or dangerous
waste, substance or material, as now or at any time hereafter in effect.
(f) SUCH AGREEMENTS BY FRANCHISEE TO INDEMNIFY AND SAVE HARMLESS EACH
INDEMNITEE UNDER THIS SECTION COVER AND INCLUDE, BUT ARE NOT LIMITED TO, EACH
AND EVERY CLAIM THAT:
(i) RESULTS FROM THE SOLE ACTS, OMISSIONS OR NEGLIGENCE OF
FRANCHISEE;
(ii) RESULTS, AS A WHOLE OR IN PART, FROM THE CONCURRENT ACTS,
OMISSIONS OR NEGLIGENCE OF FRANCHISEE AND THE INDEMNITEE SEEKING
INDEMNIFICATION;
(iii) RESULTS, AS A WHOLE OR IN PART, FROM THE CONCURRENT ACTS,
OMISSIONS OR NEGLIGENCE OF THE INDEMNITEE SEEKING INDEMNIFICATION AND
EITHER THE FRANCHISEE OR ANY PERSON OTHER THAN THE INDEMNITEE SEEKING
INDEMNIFICATION; OR
(iv) RESULTS FROM THE SOLE ACTS, OMISSIONS OR NEGLIGENCE OF THE
INDEMNITEE SEEKING INDEMNIFICATION;
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WITH AN EXCLUSION ONLY WITH RESPECT TO ANY CLAIM RESULTING SOLELY FROM ANY ACT
WHICH CONSTITUTES THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNITEE
SEEKING INDEMNIFICATION; SUCH AGREEMENTS REQUIRE FRANCHISEE TO INDEMNIFY AND
SAVE HARMLESS EACH INDEMNITEE FOR ACTS OR OMISSIONS INVOLVING OR RESULTING FROM
THE INDEMNITEE'S OWN NEGLIGENCE.
Notwithstanding anything to the contrary contained in this Section,
Franchisee shall not be required to indemnify any Indemnitee with respect to any
event which occurs as a result of causes or activities relating to periods
subsequent to the termination of this Franchise Agreement, such termination not
caused by an Event of Default.
SECTION 14. TRANSFERABILITY OF INTEREST
14.1. TRANSFER BY FRANCHISOR.
Franchisor shall have the right to delegate, transfer or assign all or any
part of its rights or obligations herein to any person or legal entity.
14.2. TRANSFER BY FRANCHISEE.
(a) Franchisee understands and acknowledges that the rights and duties set
forth in this Agreement are personal to Franchisee and that Franchisor has
granted this Franchise in reliance on Franchisee's business skill and financial
capacity. Accordingly, Franchisee shall not sell, assign, transfer, convey, give
away, pledge, mortgage or otherwise encumber any interest in this Agreement, the
Franchise and/or license granted hereunder, any direct or indirect interest in
Franchisee (if Franchisee is an entity) or any material asset or assets or real
property connected with the Franchised Business without the prior written
consent of Franchisor, which consent shall not be unreasonably withheld, except
for the purpose of obtaining financing for the construction and/or operation of
the Franchised Location. Any purported assignment or transfer, by operation of
law or otherwise, not having the prior written consent of Franchisor, shall
constitute a material breach of this Agreement, for which Franchisor may then
terminate, without opportunity to cure, pursuant to Section 15.3 of this
Agreement, and pursue any other right or remedy available to Franchisor for such
breach.
(b) Franchisor shall, in its sole discretion, consent or withhold consent
to a transfer of any interest in Franchisee, this Franchise or any other
interest described in Section 14.2 above as a transfer requiring Franchisor
approval and, prior to the time of transfer, Franchisor will consider the
following criteria in determining the approval of a transfer:
(1) all of Franchisee's accrued monetary obligations to Franchisor and
all other outstanding obligations related to the Franchised Business shall
have been satisfied;
(2) the transferee shall demonstrate to Franchisor's satisfaction
that it meets Franchisor's managerial and business standards; possesses a
good moral character and business reputation, and satisfactory credit
rating; has the aptitude and ability to conduct the business franchised
herein (as may be evidenced by prior related business experience or
otherwise); and has adequate financial resources and capital to operate the
business;
(3) the transferee shall demonstrate to Franchisor's satisfaction
that it will not conduct, own, operate or be employed by or associated with
in any way, any business which is in direct or indirect competition with
any travel center owned, operated or franchised by Franchisor, its partners
or affiliates or any other of Franchisor's businesses or franchised
businesses;
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(4) demonstrate the willingness and ability to complete Franchisor's
training course;
(5) Franchisor will not approve a transfer to an entity which owns or
operates nationally or regionally branded truckstops or travel centers as
may be determined in Franchisor's discretion.
(c) The following items will be required, if transfer is approved by the
Franchisor:
(1) the transferee shall execute (and/or, upon Franchisor's request,
cause all interested parties to execute) Franchisor's then-current form of
franchise agreement and Franchisor's then-current form of agreements
ancillary to the franchise agreement (including, but not limited to, the
Arbitration Agreement, the Billing Program Agreement, the Security
Agreement, the Guaranty, the Memorandum of Right of First Refusal and
Option to Purchase) and the PMPA Motor Fuels Franchise Agreement, whose
terms may differ, including providing for increased fees, from the terms of
this Agreement and the original agreements ancillary hereto; however, such
terms will not require the payment of an additional Initial Franchise Fee
and the nature and scope of Franchisee's Franchise Area shall remain the
same, provided Franchisee has complied with the Franchise Agreement and met
the minimum monthly gross sales, as set forth herein, and such agreements
shall be for a term ending on the date of expiration of this Agreement;
(2) at the transferee's expense and upon such other terms and
conditions as Franchisor may reasonably require, the transferee or the
transferee's manager and other employees of transferee shall successfully
complete Franchisor's training course then in effect for Franchisees; and
(3) Franchisee shall pay to Franchisor a transfer fee of $10,000 plus
an amount necessary to reimburse Franchisor for all reasonable costs and
expenses, including training costs and attorneys' fees, incurred in
connection with any transfer of any interest in Franchisee or in this
Franchise or any such proposed transaction;
(4) Franchisee shall have executed a general release under seal, in a
form satisfactory to Franchisor, of any and all claims against Franchisor
and its officers, directors, shareholders and employees, in their corporate
and individual capacities, including, without limitation, claims arising
under Federal, state and local laws, rules and ordinances, arising out of
or connected with the performance of this Agreement;
(5) the transferee shall enter into a written agreement, in form and
substance satisfactory to Franchisor, assuming and agreeing to discharge
all of Franchisee's obligations under this Agreement.
14.3. TRANSFER TO FRANCHISEE'S CORPORATION, PARTNERSHIP OR OTHER ENTITY.
In the event the proposed transfer is to a corporation, partnership or
other entity formed by Franchisee solely for the convenience of ownership, then,
in addition to the conditions under Section 14.2 of this Agreement, Franchisor's
consent to such transfer may, in its sole discretion, be conditioned on the
following requirements:
(a) The transferee shall be newly organized and its charter,
certificate, agreement or other organizational document shall provide that
its activities are confined exclusively to operating the Franchised
Business;
(b) Franchisee shall not diminish its proportionate ownership
interest in the transferee except as may be required by law, and shall act
as its principal executive officer;
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(c) Each stock certificate or other evidence of ownership of the
transferee shall have conspicuously endorsed upon its face or back a legend
as provided in Section 14.5;
(d) Copies of the transferee's Articles of Incorporation, Bylaws and
the other governing documents, including the resolutions, or other evidence
of authorization, of the Board of Directors or other governing body
authorizing entry into this Agreement, shall be promptly furnished to
Franchisor;
(e) Transferee shall agree in writing satisfactory to Franchisor to
assume all of Franchisee's obligations hereunder as well as agreeing to be
bound by all the terms, conditions and covenants of this Agreement and the
performance of this Agreement shall be unconditionally guaranteed by the
shareholders or other equity owners of the corporation, partnership or
other entity by written guaranty satisfactory in form and substance to
Franchisor and its counsel; and
(f) Franchisee shall remain responsible for the performance of all
Franchisee's obligations and duties under this Agreement.
14.4. OWNERSHIP OF FRANCHISEE.
If Franchisee itself is a corporation, partnership or other entity, or if
with the consent of Franchisor under the terms of Section 14.3 of this Agreement
the rights of Franchisee hereunder are assigned to a corporation, partnership or
other entity, then in such event______________________________________________
_________ shall remain the owner(s) of not less than fifty-one percent (51%) of
the total equity interest thereof, during the entire term of this Agreement,
with the effective unencumbered right to control the voting and disposition of
such interest. The loss or surrender of said ownership or effective unencumbered
right, by any means whatever, shall constitute a breach of this Agreement.
14.5. RESTRICTIONS ON TRANSFER OF EQUITY INTEREST IN FRANCHISEE.
If Franchisee or its transferee is a corporation, partnership or other
entity, no portion of the equity interest thereof may be sold, assigned,
transferred, pledged, mortgaged or encumbered without the prior written consent
of Franchisor (whose consent shall not be unreasonably withheld). Any such
purported sale, assignment, transfer, pledge, mortgage or encumbrance without
the prior written consent of Franchisor shall constitute a material breach of
this Agreement for which Franchisor may then terminate this Agreement and pursue
any other right or remedy available to Franchisor for such breach. All stock
certificates or other evidences of ownership for interests in Franchisee shall
bear the following legend, which shall be printed legibly and conspicuously on
the face or back of each stock certificate or other evidence of ownership:
"THE TRANSFER OF THE INTEREST REPRESENTED BY THIS CERTIFICATE OR DOCUMENT
IS SUBJECT TO THE TERMS AND CONDITIONS OF A FRANCHISE AGREEMENT BETWEEN
THIS ENTITY AND PETRO STOPPING CENTERS, L.P., D/B/A
__________________________________________, DATED AS OF _______________,
19__, A COUNTERPART OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE AND THE
REGISTERED OFFICE OF THIS ENTITY."
14.6. FRANCHISOR'S RIGHT OF FIRST REFUSAL.
Franchisor shall have a Right of First Refusal to purchase the Franchised
Business and/or the Franchised Location unless Franchisor consents to the
transfer under Section 14.2, 14.3 or 14.7 of this Agreement. If Franchisor does
not consent to the proposed transfer, Franchisor will not excercise its Right of
First Refusal provided Franchisee agrees to terminate the proposed transfer.
In the event that Franchisee desires to sell the Franchised Business and/or the
Franchised Location,
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Franchisee shall give written notice to Franchisor of (a) Franchisee's intent to
offer the Franchised Business and/or the Franchised Location for sale, and the
terms on which Franchisee intends to sell the Franchised Business and/or the
Franchised Location, or (b) the receipt by Franchisee of an offer to purchase
the Franchised Business and/or the Franchised Location, and a copy of the offer
to purchase or the Purchase Agreement as the case may be.
In the event of Franchisee's notice of intent to offer the Franchised
Business and/or the Franchised Location for sale, Franchisor shall have thirty
(30) days after receipt of such notice to send written notice to the Franchisee
that Franchisor intends to purchase the Franchised Business and/or Franchised
Location upon the same terms and conditions contained in the offer to sell.
Franchisor shall have one hundred twenty (120) days from receipt of Franchisee's
notice (or such longer period as may be permitted under the terms of the offer)
in which to close the sale.
In the event that Franchisee should give written notice to Franchisor of
the receipt by Franchisee of an offer to purchase the Franchised Business and/or
Franchised Location, which offer Franchisee desires to accept, Franchisor shall
have thirty (30) days after receipt of such notice to send written notice to the
Franchisee that Franchisor intends to purchase the Franchised Business and/or
Franchised Location upon the same terms and conditions contained in the offer to
purchase. Franchisor shall have one hundred twenty (120) days from receipt of
Franchisee's notice (or such longer period as may be permitted under the terms
of the offer) in which to close the sale. Franchisee's notice to Franchisor
shall be accompanied by a term sheet of the terms and conditions of the offer to
purchase received by Franchisee.
If Franchisor shall fail to enter into a contract to purchase the Franchise
Business and/or Franchised Location from Franchisee within either of the time
periods set forth above, then Franchisee may consummate his or its sale of the
Franchised Business and/or Franchised Location to a third party at any time
within one hundred twenty (120) days thereafter. Franchisee may not consummate
a sale thereafter upon said terms, nor consummate a sale upon terms which are
more favorable to the purchaser, without first reoffering the sale to Franchisor
in the manner set forth above. In the event Franchisee fails to consummate a
sale to any such third party as provided above, Franchisor shall again have the
Right of First Refusal with regard to any future proposed sale of the Franchised
Business and/or Franchised Location. Failure of Franchisor to exercise the
option afforded by this Section 14.6 shall not constitute a waiver of any other
provision of this Agreement, including all of the requirements of this Section
14 of this Agreement, with respect to a proposed transfer.
In addition, in the event any interest in the Franchised Location and/or
the Franchised Business is to be sold or transferred in a transaction or event,
including a foreclosure sale, not involving either (i) a bona fide offer from a
third party or (ii) a transfer upon death or permanent incapacity of the type
described in Section 14.7 herein, then Franchisee must immediately notify
Franchisor in writing of such transaction or event and Franchisor shall have the
right and option, but no obligation, exercisable within thirty (30) days of
receipt of such notification to purchase such interest being transferred. The
purchase price on the exercise of such option shall be the fair market value and
treatment of goodwill and other intangibles determined in accordance with
Section 16(A) of this Agreement.
14.7. TRANSFER UPON DEATH OR PERMANENT INCAPACITY.
Upon the death or permanent incapacity of any person with any interest in
this Franchise or in Franchisee or stock in a corporate Franchisee, and upon the
dissolution of a Franchisee that is a partnership or corporation, the executor,
administrator, personal representative or trustee of such person or entity shall
(i) employ a manager for the Franchised Business who shall be approved in
writing by Franchisor and shall complete to Franchisor's satisfaction such
training, at Franchisee's expense, as deemed necessary by Franchisor unless
there is no change in management of the Franchised Business and such management
has previously been approved in writing by Franchisor
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and (ii) transfer his or its interest to a third party approved by Franchisor
within a reasonable time. Such transfers, including, without limitation,
transfers by devise or inheritance, shall be subject to the same conditions as
any transfer between living persons. If the heirs or beneficiaries of any such
person are unable to meet the conditions set forth in Section 14.2 of this
Agreement, the personal representative of such person shall have a reasonable
time to dispose of the deceased's interest in the Franchise. Such disposition
shall be subject to all the terms and conditions for transfers contained in this
Agreement. Franchisor shall provide Franchisee ninety (90) days' prior written
notice of the date Franchisor deems to be the end of said reasonable period of
time.
14.8. NON-WAIVER OF CLAIMS.
Franchisor's consent to a transfer of any interest in the Franchise granted
herein shall not constitute a waiver of any claims it may have against the
transferring party, nor shall it be deemed a waiver of Franchisor's right to
demand exact compliance with any of the terms of this Agreement by the
transferee.
14.9. FRANCHISE AGREEMENT SHALL NOT BE RETAINED AS SECURITY.
Neither this Agreement nor any of the rights conferred on Franchisee hereby
shall be retained by Franchisee as security for the payment of any obligation
that may arise by reason of any transfer of the Franchise or any of Franchisee's
rights under this Agreement or of the Franchised Business.
14.10. ASSIGNMENT OF FRANCHISE AGREEMENT OR GRANTING A SECURITY INTEREST TO
OBTAIN FINANCING.
In the event Franchisee desires to pledge, mortgage, collaterally assign,
grant a security interest in or otherwise encumber the Franchised Business,
Franchised Location or this Franchise Agreement and the Franchise and license
granted hereunder, or any real or personal property utilized in the Franchised
Business for the purpose of obtaining financing for the construction and/or
operation of the Franchised Business or for any other purpose, Franchisor, in
its sole discretion, may require as conditions precedent to granting its consent
that:
(a) The terms and conditions of the financing documents shall be
acceptable to Franchisor, including, but not limited to a requirement that
the terms of the financing documents and the rights of the person providing
the financing be subordinate to and subject to Franchisor's Right of First
Refusal under Section 14.6 of the Franchise Agreement, Franchisor's Option
to Purchase under Section 16 of the Franchise Agreement and Franchisor's
option to assume any lease pursuant to Section 2.4 of the Franchise
Agreement;
(b) The financing documents provide that thirty (30) days' written
notice of any default by Franchisee under the financing documents be
provided to Franchisor; and
(c) In the event of default by Franchisee under the financing
documents, Franchisor has the option, but not the obligation, to cure such
default.
Furthermore, in the event that Franchisee shall obtain financing the terms or
provisions of which, directly or indirectly, affect Franchisor's rights or
obligations under this Agreement or require that Franchisor be made a party to
any document or agreement relating to such financing, Franchisor retains the
right to approve, in advance, any terms and provisions affecting Franchisor
contained in any financing document or agreement, and any document or agreement
to which Franchisor is to be made a party pursuant to such financing shall be in
form and substance satisfactory to Franchisor and its counsel. In addition, any
and all costs and expenses incurred by Franchisor and its counsel in connection
with the review and negotiation thereof shall be reimbursed to Franchisor by
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Franchisee. Such expense reimbursement shall be in addition to and not limited
by any legal expense reimbursement pursuant to Section 5.1.
SECTION 15. DEFAULT AND TERMINATION
15.1. PROVISIONS OF APPLICABLE LAW SHALL CONTROL.
If any applicable law or rule requires a greater prior notice of
termination, cancellation, nonrenewal and/or the like, the prior notice required
by such rule or law shall be substituted for the notice requirements set forth
in this Agreement. If any applicable rule or law provides for causes for
Franchisor's right to terminate, cancel, or refuse to renew this Agreement
and/or imposes restrictions on the enforceability of a covenant not to compete
or requirements regarding executing any release and the requirements of such
rule or law are more favorable to Franchisee than the corresponding provisions
set forth in this Agreement, the requirements of such rule or law shall be
substituted for those set forth in this Agreement to the extent required by such
law or rule.
15.2. AUTOMATIC TERMINATION.
Franchisee shall be deemed to be in default under this Agreement, and all
rights granted Franchisee herein shall automatically terminate without notice to
Franchisee, if Franchisee shall become insolvent or make a general assignment
for the benefit of creditors; or if a petition in bankruptcy is filed by
Franchisee or such a petition is filed against and consented to by Franchisee;
or if Franchisee is adjudicated a bankrupt; or if a bill in equity or other
proceeding for the appointment of a receiver of Franchisee or other custodian
for Franchisee's business or assets is filed and consented to by Franchisee; or
if a receiver or other custodian (permanent or temporary) of Franchisee's assets
or property, or any part thereof, is appointed by any court of competent
jurisdiction; or if proceedings for a composition with creditors under any state
or Federal law should be instituted by or against Franchisee; or if a final
judgment remains unsatisfied or of record for thirty (30) days or longer (unless
supersedeas bond is filed); or if execution is levied against Franchisee's
business or property; or suit to foreclose any lien or mortgage against the
Franchised Location, the Franchised Business or the equipment thereon is
instituted against Franchisee and not dismissed within thirty (30) days; or if
the real or personal property of Franchisee's business shall be sold after levy
thereupon by any sheriff, marshal or constable.
15.3. TERMINATION AT FRANCHISOR'S OPTION WITHOUT OPPORTUNITY TO CURE
DEFAULT.
Franchisee shall be deemed to be in default and Franchisor may, at its
option, terminate this Agreement and all rights granted hereunder, without
affording Franchisee any opportunity to cure the default, effective immediately
upon receipt of notice by Franchisee, upon the occurrence of any of the
following events:
(a) If Franchisee ceases to operate or otherwise abandons the
Franchised Business; provided, however, that Franchisor shall not have such
right to terminate if any such loss of possession results from the
governmental exercise of the power of eminent domain, or if the premises of
the Franchised Business are completely or substantially destroyed and
Franchisee gives prompt written notice (within thirty (30) days) following
such destruction, taking or damage of the premises of its intent to rebuild
the Franchised Business to conform to the specifications of the previous
facility and if, in fact, Franchisee substantially completes such
rebuilding to meet or exceed such specifications within nine (9) months
following the date of Franchisee's notice to rebuild;
(b) If Franchisee is convicted of a felony, a crime involving moral
turpitude, or any other crime or offense that is reasonably likely, in the
sole opinion of Franchisor, to adversely
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affect the Franchise System, the Proprietary Marks, the goodwill associated
therewith, or Franchisor's interest therein; for purposes of this
subsection, "Franchisee" shall include and apply to each of the managers or
key employees of Franchisee and to each of the officers, directors and
principal shareholders (i.e., shareholders owning or having the power to
vote or direct the voting of ten percent (10%) of the stock of the
corporation) of a corporate Franchisee, to each member, manager and officer
of a Franchisee that is a limited liability company, and to each general
partner of a Franchisee that is a partnership;
(c) If Franchisee purports to transfer any rights or obligations
under this Agreement without Franchisor's prior written consent, contrary
to the terms of Section 14 of this Agreement;
(d) If Franchisee discloses or divulges the contents of the Operating
Manual or other trade secrets or Confidential Information provided to
Franchisee by Franchisor, contrary to Sections 9 or 10 of this Agreement;
for purposes of this subsection, "Franchisee" shall include and apply to
each of the managers or key employees of Franchisee and to each of the
officers, directors and principal shareholders (i.e., shareholders owning
or having the power to vote or direct the voting of ten percent (10%) of
the stock of the corporation) of a corporate Franchisee, to each member,
manager and officer of a Franchisee that is a limited liability company,
and to each general partner of a Franchisee that is a partnership;
(e) If an approved transfer is not effected within a reasonable time
following Franchisee's death or permanent incapacity, as required by
Section 14.7 of this Agreement;
(f) If Franchisee fails to comply with the provisions of Section 1.7
herein; for purposes of this subsection, "Franchisee" shall include and
apply to each of the managers or key employees of Franchisee and to each of
the officers, directors and principal shareholders (i.e., shareholders
owning or having the power to vote or direct the voting of ten percent
(10%) of the stock of the corporation) of a corporate Franchisee, to each
member, manager and officer of a Franchisee that is a limited liability
company, and to each general partner of a Franchisee that is a partnership;
(g) If Franchisee knowingly maintains falsified books or records, or
submits false reports to Franchisor;
(h) If Franchisee shall be in default under any lease or loan
agreement in connection with the Franchised Business and/or the Franchised
Location, which default is not cured within the time required by such lease
or loan agreement, as the case may be; or
(i) If Franchisee fails to pay any amounts when due under the PMPA
Motor Fuels Franchise Agreement by and between Franchisor, or its
affiliates and Franchisee dated ________________________, 1997, as same may
be amended, modified, supplemented, restated or replaced from time to time
(the "PMPA Agreement") and such failure continues after the giving of any
notice or expiration of the applicable grace period, if any, specified in
the PMPA Agreement.
15.4. TERMINATION BY FRANCHISOR AFTER NOTICE AND OPPORTUNITY TO CURE
DEFAULT.
Except as provided in Sections 15.2 and 15.3 of this Agreement, Franchisee
shall have thirty (30) days after its receipt from Franchisor of a written
Notice of Termination within which to remedy any default hereunder and to
provide evidence thereof to Franchisor. If any such default is not cured within
that time, or such longer period as applicable law may require, this Agreement
shall terminate without further notice to Franchisee, effective immediately upon
the expiration of the thirty (30) day period or such longer period as applicable
law may require. Franchisee shall be in default hereunder for any failure to
substantially comply with any of the requirements imposed by this Agreement, as
it may from time to time reasonably be supplemented in writing by Franchisor, or
to carry out the
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terms of this Agreement in good faith. Such defaults shall include, for example,
without limitation, the occurrence of any of the following events:
(a) if Franchisee fails promptly to pay any monies owing to
Franchisor or its subsidiaries or affiliates when due, or to submit the
financial or other information required by Franchisor under this Agreement;
(b) if Franchisee fails to maintain the standards that Franchisor has
specified in the Operating Manual or otherwise in writing, including but
not limited to, location appearance standards and customer service levels;
(c) if Franchisee fails, refuses or neglects to obtain Franchisor's
prior written approval or consent as required by this Agreement;
(d) if Franchisee misuses or makes any unauthorized use of the
Proprietary Marks or otherwise materially impairs the goodwill associated
therewith or Franchisor's rights therein;
(e) if Franchisee or any person acting on behalf of Franchisee has
misstated material facts in, omitted material facts from, or materially
breaches any of the agreements contained in, the Franchise Application
Agreement, the Prospective Franchise Suitability Questionnaire or any
related documents;
(f) if Franchisee fails to maintain the Franchisor's specifications
relating to location appearances and customer service levels;
(g) if Franchisee fails to use Franchisor approved signs and approved
location of signs;
(h) if Franchisee fails to obtain or maintain the insurance required
by Section 13 of this Agreement;
(i) if a threat or danger to public health or safety results from
Franchisee's operation of the Franchised Business;
(j) if Franchisee engages in conduct which is deleterious to or
reflects unfavorably on or tends to diminish the reputation of Franchisee,
the Franchised Business or the Franchise System in the eyes of the public;
for purposes of this subsection, "Franchisee" shall include and apply to
each of the managers and key employees of Franchisee and each of the
officers, directors and principal shareholders (i.e., shareholders owning
or having the power to vote or direct the voting of ten percent (10%) of
the stock of the corporation) of a corporate Franchisee, to each member,
manager and officer of a Franchisee that is a limited liability company,
and to each general partner of a Franchisee that is a partnership;
(k) if Franchisee fails to maintain a responsible credit rating by
failing to make prompt payment of undisputed bills, invoices and statements
from suppliers of goods and services;
(l) if Franchisee breaches or fails to comply with any other
provision(s) of this Agreement or any agreement to which Franchisee and
Franchisor are parties; or
(m) if Franchisee fails at any time to comply with the requirements
for commencement and completion of construction or remodeling set forth in
Section 3.2 herein or the requirements for opening for business set forth
in Section 12.1 herein or approved
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signs and location of such signs set forth in Section 3.4 herein; provided
that Franchisor shall not unreasonably terminate a Franchise Agreement
pursuant to this provision nor shall Franchisor be liable in any event for
any costs, damages or expenses of Franchisee as a result of any such
termination.
(n) If Franchisee shall be in violation of any of the provisions of
Section 7.4(a) through 7.4(h) herein;
SECTION 16. OBLIGATIONS UPON TERMINATION
OR EXPIRATION; REPURCHASE BY FRANCHISOR
If this Franchise Agreement is not renewed, expires under its terms, or is
terminated pursuant to Section 15 of this Franchise Agreement, Franchisor shall
have the Right to Buy (as defined and based on the formula indicated below),
along with other rights as outlined in this Agreement and the ancillary
agreements.
The term "Right to Buy" shall mean that Franchisor shall have the right to
buy Franchisee's interest in the Franchised Business at fair market value which
shall be determined by Franchisor and Franchisee each selecting an appraiser to
determine the purchase price. If the two appraisals are more than five percent
(5%) apart, then Franchisor and Franchisee's appraisers shall select a third
appraiser to provide a third appraisal. If any two (2) appraisals are within
five percent (5%) of each other the purchase price shall be the average of the
two (2) appraisals. Such purchase price shall include the value of goodwill and
other intangibles which can be directly related to Franchisee's efforts in
operating the Franchised Business. However, no value shall be given for goodwill
or intangibles associated with the Franchisor marks.
If Franchisee shall not remain a Franchisee as indicated above or this
Agreement is not renewed, the following rights and privileges granted hereunder
to Franchisee shall forthwith terminate, and:
(a) Franchisee shall immediately cease operating under the Franchise
System and the Proprietary Marks.
(b) Franchisee's name shall be withdrawn from all published lists of
persons operating Franchised Businesses of Franchisor. Franchisee shall
not hold itself out to the public as a present or former franchisee of
Franchisor.
(c) Franchisee will cease and terminate all use in any manner
whatsoever of the trade name and mark "Petro Stopping Center" or "Petro:2,"
as applicable, and any other Proprietary Marks franchised hereunder, or
colorable imitation thereof, and will take any steps necessary to
disassociate itself from said marks, including the withdrawal of all
advertising matter, the destruction of all letterheads, and the complete
covering (so that lettering is not visible), within twenty-four (24) hours,
and removal, within fifteen (15) days, unless otherwise instructed by
Franchisor in writing, of all signs and any other articles which display
the Proprietary Marks or trade dress associated with the Franchise System.
Should Franchisee fail to cover and/or remove such signs and other items
within the time(s) required, Franchisor or its agents have the express
right to come upon Franchisee's premises and cover and/or remove the signs
and any other articles which display the Proprietary Marks or trade dress
associated with the Franchise System at Franchisee's expense.
(d) In the event that Franchisee continues to operate any business,
Franchisee agrees not to use any reproduction, counterfeit, copy or
colorable imitation of the Proprietary
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Marks, either in connection with such other business or the promotion
thereof, which is likely to cause confusion, mistake or deception, or which
is likely to dilute Franchisor's exclusive rights in and to the Proprietary
Marks, and Franchisee further agrees not to utilize any designation of
origin or description or representation which falsely suggests or
represents an association or connection with Franchisor so as to constitute
unfair competition. Franchisee shall, unless otherwise instructed in
writing by Franchisor, make such modifications or alterations to the
premises operated hereunder immediately upon termination or expiration of
this Agreement as may be necessary to prevent the operation of any business
thereon by itself or others in derogation of this Section 16, and shall
make such specific additional changes thereto as Franchisor may reasonably
request for that purpose. In the event Franchisee fails or refuses to
comply with the requirements of this Section 16, Franchisor or its agents
shall have the right to enter upon the premises where Franchisee's
Franchised Business was conducted, without being guilty of trespass or any
other tort, for the purpose of making or causing to be made such changes as
may be required, at the expense of Franchisee, which expense Franchisee
agrees to pay upon demand.
(e) Franchisee shall promptly pay all sums owing to Franchisor and
its partners and affiliates. Franchisee shall not be entitled, under any
circumstances, to a refund of any part of the Initial Franchise Fee,
Training Fees, royalty fees or any other fees which have been properly
assessed against, and paid by, the Franchisee through the date of
termination or expiration. In the event of termination for any default of
Franchisee, such sums shall include all damages, costs and expenses,
including reasonable attorneys' fees, incurred by Franchisor as a result of
the default, which obligation shall give rise to and remain, until paid in
full, a lien in favor of Franchisor against any and all of the personal
property, machinery, fixtures and equipment owned by Franchisee and used in
the Franchised Business at the time of default.
(f) Franchisee shall pay to Franchisor all damages, costs and
expenses, including reasonable attorneys' fees, incurred by Franchisor
subsequent to the termination or expiration of the Franchise granted herein
in obtaining injunctive or other relief for the enforcement of any
provisions of this Section 16.
(g) Franchisee shall immediately turn over to Franchisor all manuals,
records, files, instructions, correspondence, and promotional material or
other documentary material using the Proprietary Marks, and any and all
other materials relating to the operation of the Franchise System,
including any and all computer software programs related to the Franchised
Business in Franchisee's possession, and all copies thereof (all of which
are acknowledged to be Franchisor's property), and shall retain no copy or
record of any of the foregoing, excepting only Franchisee's copy of this
Agreement and of any correspondence between the parties, and any other
documents which Franchisee reasonably needs for compliance with any
provision of law.
(h) Franchisee shall take such action as shall be necessary to cancel
any assumed name or equivalent registration which contains the trade name
and mark "Petro Stopping Center" or any other Proprietary Mark of
Franchisor, and Franchisee shall furnish Franchisor with evidence
satisfactory to Franchisor of compliance with this obligation within thirty
(30) days after termination or expiration of this Agreement. If Franchisee
fails to take such action within the prescribed time, it will be deemed to
have appointed Franchisor as its agent with authorization to take such
action on Franchisee's behalf.
(i) Franchisee shall comply with the covenants contained in Sections
1.7, 9, 10 and 11.1 of this Agreement.
(j) Franchisor shall have the right (but not the duty) to be
exercised by notice of intent to do so within thirty (30) days after
termination or expiration, to purchase any
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advertising material, inventory or other items bearing Franchisor's
Proprietary Marks, at Franchisee's cost or fair market value, whichever is
less. If the parties cannot agree on fair market value within a reasonable
time, an independent appraiser shall be designated by Franchisor, and his
determination shall be binding. If Franchisor elects to exercise any option
to purchase herein provided, it shall have the right to set off all amounts
due from Franchisee under this Agreement, and the cost of the appraisal, if
any, against any payment thereof.
(k) Franchisee shall consent to the transfer of the Franchisee's
telephone numbers to the Franchisor; or, if Franchisor shall refuse or
neglect to consent, Franchisor may, through any officer or director of
Franchisor, each of which persons is appointed an attorney-in-fact for
Franchisee for the purposes set forth in this Section 16(l), take such
action or cause to be taken such action as is necessary to effectuate the
transfer of such telephone numbers.
SECTION 17. CORPORATE OR OTHER AUTHORITY
Franchisee represents and warrants that:
(a) Franchisee is a ________________________________________
(corporation/partnership/other entity) duly organized, validly existing and in
good standing under the laws of such state.
(b) Said corporation, partnership or other entity is qualified and in good
standing in every other state in which the nature of its business requires
qualification.
(c) Franchisee has the corporate power, or power granted under a
partnership agreement or applicable law, and authority to execute, deliver and
perform the transactions contemplated by this Agreement.
(d) The execution, delivery and performance of this Agreement has been
duly authorized by the Board of Directors or other governing body of Franchisee,
as the case may be, and this Agreement constitutes Franchisee's legal, valid and
binding obligation enforceable in accordance with its terms.
(e) The execution, delivery and performance of this Agreement does not and
will not violate any provision of Franchisee's corporate charter or bylaws,
partnership agreement or certificate, or other organizational document, or
violate, conflict with, result in the breach or termination of, constitute a
default under or result in the creation of any lien, charge or encumbrance upon
any of its properties or assets or the properties or assets of any of its
subsidiaries or related entities pursuant to any agreement or instrument to
which Franchisee or any of its subsidiaries or related entities is a party.
SECTION 18. TITLE, LIENS AND LAWSUITS
18.1. TITLE AND LIENS.
It is understood and agreed that one of the principal conditions on which
Franchisor granted this Franchise to Franchisee is the financial condition of
Franchisee. Franchisee represents and warrants that it has good and marketable
title to, and/or a valid leasehold interest in, the Franchised Location, such
title being fully described in Exhibit F, free and clear of any mortgage,
pledge, lien, encumbrance or charge other than those set forth in Exhibit F.
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It is hereby agreed that Franchisee will not mortgage, pledge, collaterally
assign, grant a security interest in or otherwise encumber the Franchised
Location without the prior written consent of Franchisor. Further, as specified
in Section 14.10, in the event that Franchisee shall obtain financing from a
lender the terms or provisions of which, directly or indirectly, affect
Franchisor's rights or obligations under this Agreement or require that
Franchisor be made a party to any document or agreement relating to such
financing, Franchisor retains the right to approve, in advance, any terms and
provisions affecting Franchisor contained in any financing document or
agreement, and any document or agreement to which Franchisor is to be made a
party pursuant to such financing shall be in form and substance satisfactory to
Franchisor and its counsel.
18.2. LEGAL PROCEEDINGS.
Franchisee further represents and warrants that, except as set forth in
Exhibit G, (1) no judicial or administrative proceedings are pending or
threatened against Franchisee, and (2) no outstanding claims in the aggregate of
$100,000 (other than claims arising under this Agreement or incurred in the
ordinary course of business) are existing against Franchisee as of the date of
this Agreement.
SECTION 19. TAXES, PERMITS AND INDEBTEDNESS
19.1. TAXES AND ASSESSMENTS.
Franchisee shall pay all Federal, state or local franchise, real and
personal property, sales and use, retailers, occupational, gross receipts, added
value and net income taxes and any other taxes, charges or assessments of any
nature whatsoever relating directly or indirectly to the Franchised Location or
the operation of the Franchised Business, the equipment contained therein or
services provided thereby or revenues derived from such facilities, directly to
the appropriate taxing authority when due (excluding payments which are disputed
in good faith, provided that, at Franchisor's request, Franchisee shall, at its
sole cost and expense, place a reasonable bond for such payments). This
paragraph shall in no way be construed to make Franchisee liable for any taxes,
charges or assessments which (1) are directly the liability of the Franchisor
and (2) are in no way related to the Franchised Location or the operation of the
Franchised Business, the equipment contained therein or services provided
thereby or revenues derived from such facilities.
19.2. EMPLOYEE TAXES AND BENEFITS.
Franchisee acknowledges that it is responsible for, and shall pay to the
appropriate authority, any and all Federal or state payroll tax, FICA,
unemployment tax, state unemployment compensation contribution, disability
benefit payments, insurance costs and any other assessments or charges which
relate directly or indirectly to the employment by Franchisee of employees to
operate the Franchised Business.
19.3. COMPLIANCE WITH APPLICABLE LAWS.
Franchisee shall comply with all Federal, state, and local laws, rules and
regulations, and shall timely obtain and maintain any and all permits,
certificates or licenses necessary for the full and proper conduct of the
Franchised Business, including, without limitation, licenses to do business and
fictitious name registrations, sales tax permits, and fire clearances.
19.4. CONTESTED TAXES OR INDEBTEDNESS.
In the event of any bona fide dispute as to liability for taxes assessed or
other indebtedness, Franchisee may contest the validity or the amount of the tax
or indebtedness in accordance with
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procedures of the taxing authority or applicable law; however, in no event shall
Franchisee permit a tax sale or seizure by levy of execution or similar writ or
warrant, or attachment by a creditor, to occur against the Franchised Business
or the Franchised Location, or any improvements thereon.
SECTION 20. INDEPENDENT CONTRACTOR RELATIONSHIP
20.1. FRANCHISEE IS INDEPENDENT CONTRACTOR.
It is understood and agreed by the parties hereto that this Agreement does
not create a fiduciary relationship between them, that Franchisee shall be an
independent contractor, and that nothing in this Agreement is intended to
constitute either party an agent, legal representative, subsidiary, joint
venturer, partner, employee or servant of the other for any purpose whatsoever.
20.2. NO AGENCY.
It is understood and agreed that nothing in this Agreement authorizes
Franchisee to make any contract, agreement, warranty or representation on
Franchisor's behalf, or to incur any debt or other obligation in Franchisor's
name, and that Franchisor shall in no event assume liability for, or be deemed
liable hereunder as a result of, any such action, or by reason of any act or
omission of Franchisee in its conduct of the Franchised Business or any claim or
judgment arising therefrom against Franchisor.
SECTION 21. APPROVALS AND WAIVERS
(a) Whenever this Agreement requires the prior approval or consent of
Franchisor, Franchisee shall make a timely written request to Franchisor
therefor, and such approval or consent shall be obtained in writing.
(b) Franchisor makes no warranties or guaranties upon which Franchisee may
rely, and assumes no liability or obligation to Franchisee, by providing any
waiver, approval, consent or suggestion to Franchisee in connection with this
Agreement, or by reason of any neglect, delay or denial of any request therefor.
(c) No failure of Franchisor to execute any power reserved to it by this
Agreement, or to insist upon strict compliance by Franchisee with any obligation
or condition hereunder, and no custom or practice of the parties at variance
with the terms hereof, shall constitute a waiver of Franchisor's right to demand
exact compliance with any of the terms herein. Waiver by Franchisor of any
particular default by Franchisee shall not affect or impair Franchisor's rights
with respect to any subsequent default of the same, similar or different nature;
nor shall any delay, forbearance or omission of Franchisor to exercise any power
or right arising out of any breach or default by Franchisee of any of the terms,
provisions or covenants hereof, affect or impair Franchisor's right to exercise
the same; nor shall such constitute a waiver by Franchisor of any right
hereunder, or the right to declare any subsequent breach or default and to
terminate this Franchise prior to the expiration of its term. Subsequent
acceptance by Franchisor of any payments due to it hereunder shall not be deemed
to be a waiver by Franchisor of any preceding breach by Franchisee of any terms,
covenants or conditions of this Agreement.
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SECTION 22. MISCELLANEOUS
22.1. NOTICES.
Any notice required or permitted to be given hereunder shall be in writing
and may be given by personal service, by facsimile or by depositing a copy
thereof in United States certified or registered mail, with postage thereon
fully prepaid and any such notice or document shall be deemed to have been
received on the date of delivery if delivered personally or sent via facsimile
or three (3) days after the date such notice is delivered, properly addressed,
to the U.S. mails if mailed. Notice to Franchisee shall be addressed as follows:
----------------------------
----------------------------
----------------------------
----------------------------
Fax Number:
----------------------------
Notice to Franchisor shall be addressed as follows:
Legal Department
Petro Stopping Centers, L.P.
6080 Surety Drive
El Paso, Texas 79905
Fax Number: 915-774-7366
with a copy to: Kemp, Smith, Duncan & Hammond, P.C.
2000 Norwest Plaza
El Paso, Texas 79901
Attention: Matt Henry
Fax Number: 915-546-5360
The addresses hereby given may be changed at any time by either party through
written notice to the other in accordance with the procedure set forth in this
Section 22.1.
22.2. SURVIVAL OF WARRANTIES, CONTINUING OBLIGATIONS.
The representations and warranties of Franchisee shall survive the
termination of this Agreement. All obligations of Franchisor and Franchisee
under this Agreement which expressly or by their nature survive or are intended
to survive the expiration or termination of this Agreement shall continue in
full force and effect subsequent to and notwithstanding its expiration or
termination and until they are satisfied in full or by their nature expire.
22.3. CONSTRUCTION.
All reference herein in the singular shall be construed to include the
plural where applicable, and the masculine to include the feminine and neuter
genders, and all covenants, agreements, and obligations herein assumed by
Franchisee shall be deemed to be joint and several covenants, agreements and
obligations of the several persons named herein as Franchisee. All captions in
the Agreement are intended solely for the convenience of the parties, and none
shall be deemed to
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affect the meaning or construction of any provision hereof. This Agreement may
be executed in triplicate, and each copy so executed shall be deemed an
original.
22.4. ENTIRE AGREEMENT.
This Agreement, along with the Guaranty, the Security Agreement, the
Billing Agreement and/or any other written agreements relating to this
Agreement, when fully executed shall constitute the entire agreement between the
parties hereto with respect to the subject matter hereof, and contains all of
the covenants and agreements between said parties with respect to the subject
matter hereof. Any waiver, amendment or modification of this Agreement or any
other ancillary documents or agreements in connection herewith is invalid unless
made in writing, specifying with particularity the nature of such waiver,
modification or amendment and signed by the parties hereto or thereto.
Franchisee acknowledges that neither Franchisor nor anyone on behalf of
Franchisor has made any representations, inducements, promises or agreements,
orally or otherwise, respecting the subject matter of this Agreement or any
other ancillary documents or agreements in connection herewith which are not
embodied herein or therein, and that no other representations induced Franchisee
to execute this Agreement or any other ancillary documents or agreements in
connection herewith. The parties each agree to execute any power of attorney or
other documents necessary to effectuate any provision of this Agreement or any
other ancillary documents or agreements in connection herewith. Notwithstanding
the foregoing, in the event of any conflict between this Agreement and any other
document or agreement in connection herewith, the provisions of this Agreement
shall prevail. All Exhibits hereto are hereby made a part of this Agreement.
22.5. SEVERABILITY.
Except as expressly provided to the contrary herein, each section, part,
term and/or provision of this Agreement shall be considered severable; and if,
for any reason, any section, part, term and/or provision herein is determined to
be invalid and contrary to, or in conflict with, any existing or future law or
regulation by a court or agency having valid jurisdiction, such shall not impair
the operation of, or have any other effect upon, such other portions, sections,
parts, terms and/or provisions of this Agreement as may remain otherwise
intelligible, and the latter shall continue to be given full force and effect
and bind the parties hereto; and said invalid sections, parts, terms and/or
provisions shall be deemed not to be a part of this Agreement.
Franchisee expressly agrees to be bound by any promise or covenant imposing
the maximum duty permitted by law which is subsumed within the terms of any
provision hereof, as though it were separately articulated in and made a part of
this Agreement, that may result from striking from any of the provisions hereof
any portions which a court may hold to be unreasonable and unenforceable in a
final decision to which Franchisor is a party, or from reducing the scope of any
promise or covenant to the extent required to comply with such a court order, as
though it were separately articulated in and made a part of this Agreement.
22.6. BINDING EFFECT.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective executors, administrators, heirs, assigns
and successors in interest; provided that, with respect to Franchisee, this
Agreement shall only inure to the benefit of such of its successors and assigns
as may be permitted by Section 14 hereof.
22.7. APPLICABLE LAW.
THIS AGREEMENT TAKES EFFECT UPON ITS ACCEPTANCE AND EXECUTION BY FRANCHISOR
IN TEXAS, AND SHALL BE GOVERNED BY AND INTERPRETED AND CONSTRUED IN ACCORDANCE
WITH THE LAWS THEREOF, WHICH LAWS SHALL PREVAIL IN THE EVENT OF ANY CONFLICT OF
LAW.
52
<PAGE>
22.8. REMEDIES NONEXCLUSIVE.
No right or remedy conferred upon or reserved to Franchisor or Franchisee
by this Agreement is intended to be, nor shall be deemed, exclusive of any other
right or remedy herein or by law or equity provided or permitted, but each shall
be cumulative of every other right or remedy.
22.9. EQUITABLE RELIEF.
Nothing herein contained shall bar Franchisee's or Franchisor's right to
obtain injunctive relief against threatened conduct which will cause it loss or
damage, under the usual equity rules, including the applicable rules for
obtaining restraining orders and preliminary injunctions.
22.10. INVESTIGATION AND REVIEW OF DOCUMENTS BY FRANCHISEE;
ACKNOWLEDGMENTS.
(a) Franchisee acknowledges that it has conducted an independent
investigation of the business franchised hereunder, and recognizes that the
business venture contemplated by this Agreement involves business risks and that
its success will be largely dependent upon the ability of Franchisee as an
independent businessman. Franchisor expressly disclaims the making of, and
Franchisee acknowledges that it has not received, any warranty or guarantee,
express or implied, as to the potential volume, profits or success of the
business venture contemplated by this Agreement.
(b) Franchisee acknowledges that it has received, that it and each officer,
director and principal shareholder (i.e., a shareholder owning or having the
power to vote or direct the voting of ten percent (10%) of the shares of a
corporation) of a corporate Franchisee, each member, manager and officer of a
Franchisee that is a limited liability company, and each general partner of a
Franchisee that is a partnership has read and understood this Agreement, the
Exhibits hereto, and the current Uniform Franchise Offering Circular of
Franchisor and exhibits thereto (the "UFOC"); that Franchisor has fully and
adequately explained the provisions of each to Franchisee's satisfaction; and
that Franchisor has accorded Franchisee ample time and opportunity to consult
with advisors of its own choosing about the potential benefits and risks of
entering into this Agreement.
(c) Franchisee acknowledges that it has no knowledge of any representations
about this franchise by Franchisor, its officers, directors, shareholders,
employees or agents, other than those contained in the Franchise Agreement or
the UFOC and represents and warrants that in deciding to enter into this
Franchise Agreement it has relied solely on the representations about the
franchise contained in this Franchise Agreement or in the UFOC and further
represents to Franchisor, as an inducement to its entry into this Franchise
Agreement, that Franchisee has made no misrepresentation in obtaining this
franchise.
(d) Franchisee acknowledges that it received this Agreement, the Exhibits
hereto and agreements relating hereto, if any, at least ten (10) business days
prior to the date on which this Agreement is executed and received completed
copies of same at least five (5) business days prior to the date on which this
Agreement is executed.
(e) Franchisee acknowledges that it has been offered certain products and
services in connection with this franchise by Franchisor or its affiliates and
understands that all franchisees are free to obtain these and any other products
or services used in the Franchised Business from sources of their own choosing,
subject only to compliance with the standards and specifications set forth in
the Operating Manual and Franchisor's applicable requirements of supplier
approval.
53
<PAGE>
22.11. COST OF ENFORCEMENT; FRANCHISOR'S RIGHT TO CAUSE COMPLIANCE; RIGHT
OF SET OFF FOR AMOUNTS DUE OR TO BE REIMBURSED.
(a) If Franchisor is required to defend or elects to institute any action
at law or equity in a judicial or arbitration proceeding against Franchisee to
secure or protect any of Franchisor's rights hereunder or to enforce the terms
of this Agreement, in addition to any judgment entered in Franchisor's favor,
Franchisor shall be entitled to recover from Franchisee such reasonable
attorneys' fees incurred by Franchisor together with court costs and expenses
including, without limitation, reasonable accountants', attorneys', attorneys
assistants', arbitrators and expert witness fees, cost of investigation and
proof of facts, court costs, other litigation expenses and travel and living
expenses, whether incurred prior to, in preparation for or in contemplation of
the filing of any such proceeding. In addition, if Franchisor is required to
engage legal counsel in connection with any failure by Franchisee to comply with
this Agreement or any agreement to which Franchisee and Franchisor are parties,
Franchisee shall reimburse Franchisor for any of the above-listed costs and
expenses incurred by it, whether or not any litigation or arbitration
proceedings are instituted.
(b) If Franchisee is required to defend or elects to institute any action
at law or equity against Franchisor to secure or protect any of Franchisee's
rights hereunder or to enforce the terms of this Agreement, in addition to any
judgment entered in Franchisee's favor, Franchisee shall be entitled to recover
from Franchisor such reasonable attorneys' fees incurred by Franchisee together
with court costs and expenses of litigation.
(c) Should Franchisee fail, within the applicable time(s) required, to
take any action required to be taken by, or breach any provision of, this
Agreement or any agreement to which Franchisee and Franchisor are parties,
Franchisor, or its agents or any person to which Franchisor delegates its
authority hereunder, shall have the express right, but no obligation, to come
upon Franchisee's premises and take any and all actions which it deems necessary
or advisable to cause Franchisee to come into compliance with the agreement or
provision breached or not complied with by Franchisee and Franchisor shall have
no liability, and Franchisee shall hold Franchisor harmless and indemnify
Franchisor pursuant to the terms set forth in Section 13.6 herein, with respect
to any claims, causes of action, damages or liabilities in connection with such
actions taken by Franchisor or its agents or others to which it has delegated
authority. Franchisee shall promptly reimburse Franchisor for any and all costs
associated with taking any action of the type described in this Section 22.11(c)
and such costs may include a fee to compensate Franchisor for its time and
efforts in connection with taking such action, which fee may be ten percent
(10%) of the cost of taking the action required or deemed advisable.
(d) In the event Franchisee fails to pay promptly any amount due
Franchisor under the terms of this Agreement or any agreement entered into in
connection with this Agreement or to which Franchisee and Franchisor are a
party, or in the event Franchisee fails to promptly reimburse Franchisor for any
amount which Franchisor notifies Franchisee is due to be reimbursed to
Franchisor, Franchisor shall have the right, exercisable at its sole option, to
set off and apply against the amount due from Franchisee or due to be reimbursed
by Franchisee any and all amounts due, at any time, from Franchisor to
Franchisee or held by Franchisor for the account or on behalf of Franchisee,
including, without limitation, amounts due in connection with the Billing
Program Agreement.
22.12. ARBITRATION.
ANY CONTROVERSY, DISPUTE, QUESTION OR CLAIM (WHETHER SUCH CLAIM SOUNDS IN
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, IN CONNECTION WITH, OR IN RELATION
TO THIS AGREEMENT OR AGREEMENTS ANCILLARY HERETO (INCLUDING, BUT NOT LIMITED TO
THE FRANCHISE APPLICATION AGREEMENT, THE BILLING PROGRAM AGREEMENT, THE SECURITY
AGREEMENT, THE GUARANTY, THE MEMORANDUM OF RIGHT OF FIRST REFUSAL AND OPTION TO
PURCHASE, AND THE ARBITRATION AGREEMENT) OR THEIR
54
<PAGE>
INTERPRETATION, PERFORMANCE OR NONPERFORMANCE, OR ANY BREACH THEREOF OR THE
COMMERCIAL OR ECONOMIC RELATIONSHIP OF THE PARTIES THERETO, SHALL BE DETERMINED
BY ARBITRATION CONDUCTED IN EL PASO, TEXAS, IN ACCORDANCE WITH THE ARBITRATION
AGREEMENT (THE "ARBITRATION AGREEMENT") WHICH IS ATTACHED TO THE UFOC AS EXHIBIT
"H" AND MADE A PART OF THIS AGREEMENT FOR ALL PURPOSES, AND JUDGMENT UPON ANY
AWARD, WHICH MAY INCLUDE AN AWARD OF DAMAGES, MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION. NOTHING CONTAINED HEREIN OR IN THE ARBITRATION AGREEMENT SHALL IN
ANY WAY DEPRIVE FRANCHISOR OR FRANCHISEE OF THEIR RESPECTIVE RIGHT TO OBTAIN
INJUNCTIVE OR OTHER EQUITABLE RELIEF AS PREVIOUSLY SET FORTH HEREIN.
22.13. CONSENT TO JURISDICTION.
The Franchisee hereby agrees to submit to the non-exclusive jurisdiction of
the courts in and of the State of Texas for any controversy, dispute or question
that is not determinable by arbitration in accordance with Section 22.12 above,
and consents that service of process with respect to all courts in and of the
State of Texas may be made by registered mail to it at its address set forth in
Section 22.1 hereof.
22.14. HEADINGS.
The subject headings in this Agreement are included for purposes of
convenience only and shall not affect the construction or interpretation of any
of its provisions.
22.15. INCLUDES.
The verb "to include", in all of its form, tenses, and variations, is
always used in the nonexclusive tense.
22.16. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.
Franchisee hereby waives, to the fullest extent permitted by law, any right
or claim for any punitive or exemplary damages against Franchisor and agrees
that in the event of a dispute between the parties hereto, Franchisee shall be
limited to the recovery of actual damages sustained by it. Franchisee
irrevocably waives trial by jury on any action, proceeding or counterclaim,
whether at law or equity, brought by either Franchisee or Franchisor.
22.17. LIMITATION OF CLAIMS.
Any and all claims of Franchisee arising out of or relating to this
Agreement or the relationship of Franchisor and Franchisee pursuant hereto shall
be barred unless an action or proceeding is commenced within one (1) year from
the date on which Franchisee knew or should have known, in the exercise of
reasonable diligence, of the facts giving rise to such claims.
22.18. OPTION TO CONVERT TO NEW AGREEMENT
Franchisor is currently negotiating with its existing franchisees a new
Standard Franchise Agreement (the "New Agreement") to replace the existing
franchise agreements. If a New Agreement is reached, as soon as practicable
thereafter, Franchisor shall offer Franchisee the opportunity to convert this
Franchise to the New Agreement; provided (a) Franchisee is in compliance with
this Agreement and all other agreements with Franchisor and (b) Franchisee
satisfies all terms and conditions imposed by the New Agreement. Franchisee
shall have thirty (30) days after a copy of the New Agreement is provided to the
Franchisee to decide whether Franchisee wishes to convert to the New Agreement
by providing notice to Franchisor of Franchisee's election. If Franchisee fails
to provide notice of its election to Franchisor within such thirty (30) day
period, Franchisee shall be deemed to have decided not to convert to the New
Agreement, and this
55
<PAGE>
Agreement shall continue and remain in full force and effect in accordance with
its terms and conditions.
Franchisor and Franchisee shall execute and deliver the New Agreement and
all related agreements as soon as practicable after Franchisor's receipt of
Franchisee's notice and compliance with appropriate federal and state laws and
regulations. Upon execution and delivery of the New Agreement between
Franchisor and Franchisee, this Agreement, except for the provisions of Section
1.7, 9, 10, 11.1 and 13.6 (with respect to events which occur or relate to
periods prior to termination), hereof, and all other obligations of Franchisor
and Franchisee under this Agreement which expressly or by their nature survive
or are intended to survive termination, shall become void and have no effect.
Subject to and until Franchisor and Franchisee execute and deliver the New
Agreement, this Agreement shall continue to full force and effect. Nothing in
this Section 22.18 shall relieve Franchisee of liability for a material breach
of any provision of this Agreement occurring prior to termination.
This Section 22.18 is not an offer of the New Agreement, and no offer of
the New Agreement will or can be made prior to the satisfaction of the terms
and conditions set forth above and compliance with all applicable federal and
state laws and regulations.
56
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands and seals on
the day and year first above written.
FRANCHISOR:
PETRO STOPPING CENTERS, L.P.,
a Delaware Limited Partnership
d/b/a ____________________________________________
By:_______________________________________________
Name:________________________________________
Title:_______________________________________
FRANCHISEE:
_________________________________________________
d/b/a ____________________________________________
By:_______________________________________________
Title:_________________________________________
STATE OF TEXAS )
)
COUNTY OF EL PASO )
This instrument was acknowledged before me on _______________, 19___, by
__________________________, ___________________________________ of PETRO
STOPPING CENTERS, L.P., a Delaware limited partnership, d/b/a
_________________________, on behalf of said limited partnership, and in said
capacity.
____________________________________________
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
My commission expires:
_________________________
57
<PAGE>
STATE OF _____________ )
)
COUNTY OF __________ )
This instrument was acknowledged before me on _______________, 19__, by
_________________________, _________________________ of _____________________, a
corporation, d/b/a ______________________, on behalf of said corporation, and in
said capacity.
____________________________________________
NOTARY PUBLIC IN AND FOR
THE STATE OF ___________
My commission expires:
_________________________
STATE OF ______________ )
)
COUNTY OF ___________ )
This instrument was acknowledged before me on _______________, 19__, by
_________________________, _________________________ of
_________________________, a partnership, on behalf of said partnership, and in
said capacity.
____________________________________________
NOTARY PUBLIC IN AND FOR
THE STATE OF ___________
My commission expires:
_________________________
58
<PAGE>
STATE OF _____________ )
)
COUNTY OF __________ )
This instrument was acknowledged before me on _______________, 19__, by
_________________________, _________________________ and
_________________________.
____________________________________________
NOTARY PUBLIC IN AND FOR
THE STATE OF ___________
My commission expires:
_________________________
59
<PAGE>
EXHIBIT 10.2
FRANCHISE AGREEMENTS
1. Franchisee:
----------
Welsh, Inc., formerly known as Crossroads of Virginia, Inc.
P.O. Box 10725
Merrillville, Indiana 46411
Franchised Location:
-------------------
Petro Stopping Center #52
Interstate 81 and U.S. Route 52 (Exit 25)
Fort Chiswell, Virginia 24360
a. Franchise Agreement and Amendments: Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of March 4, 1985 (expiration date:
March 7, 1996)
(2) Supplement to Franchise Agreement dated as of March 4, 1985
(3) Amendment to Franchise Agreement dated as of February 1, 1991
(4) Second Amendment to Franchise Agreement dated as of November 25,
1991
(5) Third Amendment to Franchise Agreement dated March 1, 1995
(6) Renewal Extension Letter dated March 13, 1995 extending renewal
to May 31, 1995
(7) Renewal Extension Letter dated May 29, 1996 extending renewal to
August 31, 1995
<PAGE>
(8) Renewal Extension Letter dated August 29, 1996 extending renewal
to December 31, 1996
(9) Billing Program Agreement dated as of September 24, 1991
(expiration date: March 7, 1996)
(10) Arbitration Agreement dated as of November 25, 1991
(11) Software License Agreement dated June 8, 1995
b. Exclusive Territory:
-------------------
The exclusive territory covers the area from Wytheville, Virginia to
the following points:
(1) North on Interstate 81 in a northeasterly direction to the
intersection of Highway 211;
(2) South on Interstate 81 in a south-southwesterly direction to the
point that is an intersection of Interstate 40 and Interstate
81;
(3) North on State Highway 77 to Ripley, West Virginia; and
(4) South on Highway 77 to Statesville, North Carolina.
c. Deposits and Fees Payable:
-------------------------
(1) $1,000 Application Fee
(2) $75,000 Initial Franchise Fee
2
<PAGE>
(3) Monthly Royalty Fee equal to 3.5% of Gross Sales plus $.0035 per
gallon of Fuel Sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising fee of up to .25% of gross sales for the preceding
calendar month.
d. Variations to Deposits and Fee Payable Pursuant to Franchise
------------------------------------------------------------
Agreement:
(1) Royalty fee Waived for first four months of operation
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location Upon Termination**: No.
-------------------------------------------------------
2. Franchisee:
----------
Highway Service Ventures, Inc.
100 Harbor Oak Drive, Suite 106
Ashland, Virginia 23005
Franchised Location:
-------------------
Petro Stopping Center #51
Interstate-95 & Md. 279 (Exit 109A)
Elkton, Maryland 21921
a. Franchise Agreement and Amendments: Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of August 9, 1985 (expiration date:
September 29, 1995)
3
<PAGE>
(2) Supplement to Franchise Agreement dated as of August 9, 1985
(3) Second Supplement to Franchise Agreement dated as of April 28,
1987
(4) Amendment to Franchise Agreement dated as of August 21, 1991
(5) Renewal Extension letter dated September 29, 1995 extending
renewal to December 31, 1995
(6) Renewal Extension letter dated February 16, 1996 extending
renewal to March 31, 1996
(7) Renewal Extension letter dated March 29, 1996 extending renewal
to May 31, 1996
(8) Renewal Extension letter dated May 28, 1996 extending renewal to
August 31, 1996
(9) Renewal Extension letter dated August 29, 1996 extending period
to December 31, 1996
(10) Billing Program Agreement dated as of October 30, 1991
(expiration date: September 29, 1995)
(11) Arbitration Agreement dated as of October 30, 1991
(12) Software License Agreement dated April 26, 1995
b. Exclusive Territory:
-------------------
4
<PAGE>
The exclusive territory covers an area including the right-of-way of
Highway I-95 and extending one (1) mile from both sides of the
right-of-way of Highway I-95 from a point on Highway I-95 located one
hundred (100) miles north of the Franchised Location to a point on
Highway I-95 located (20) miles south of the District of Columbia.
c. Deposits and Fees Payable:
-------------------------
(1) $1,000 Application Fee
(2) $75,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 3.5% of Gross Sales plus $.0035 per
gallon of Fuel Sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertise ment plus a Monthly
Advertising Fee of up to .25% of gross sales for the preceding
calendar month
d. Variations from Deposits and Fees Payable Pursuant to Franchise
Agreement
(1) Initial Franchise Fee - $15,000
(2) Fuel Royalty Fee shall relate to on-premise sales of diesel only
and such royalty fee shall be a maximum of $175,000 for one year, from date
business opens and such maximum royalty fee for date business opens shall
increase by 1/2 of increase in CPI for applicable year for ten years for
date business opens
5
<PAGE>
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location Upon Termination**: No.
-------------------------------------------------------
3. Franchisee:
----------
Goetz Associates Truckstop, Inc.
P.O. Box 489
Portage, Wisconsin 53901
Franchised Location:
-------------------
Petro Travel Plaza #53
Interstate-90/Interstate-94 (Exit 108) at Highway 78
Portage, Wisconsin 53901
a. Franchise Agreement and Amendments: Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of October 15, 1985 (expiration
date: December 1, 2001)
(2) Amendment to Franchise Agreement dated as of December 1, 1986
(3) Second Amendment to Franchise Agreement dated as of November 18,
1991
(4) Billing Program Agreement dated September 18, 1991 (expiration
date: September 2, 1996)
(5) Arbitration Agreement dated as of November 18, 1991
(6) Assignment and Agreement Regarding Franchise Agreement dated as
of May 25, 1995
6
<PAGE>
(7) Third Amendment to Franchise Agreement dated February 23, 1993
(8) Fourth Amendment to Franchise Agreement dated December 30, 1994
(9) Fifth Amendment to Franchise Agreement dated November 27, 1995
(Dairy Queen)
(10) Fifth Amendment to Franchise Agreement dated February 19, 1996
(Little Caesar's)
(11) Software License Agreement dated April 26, 1996 between Goetz
Companies, Inc. and Petro Stopping Centers, L.P.
b. Exclusive Territory:
-------------------
The exclusive territory covers an area including the right-of-way of
the following-described portions of Interstate Highways 90, 94 and
90/94, and extending in width one mile from either side of such
Highways: Beginning in length from the north side of the intersection
of State Highway 11 and Interstate Highway 90 ("IH 90"), and extending
north and northwest along IH 90 until IH 90 intersects with
Interstate Highway 94 ("IH 94"), where IH 90 becomes Interstate 90/94
("IH 90/94"); and continuing northwest along IH 90/94 to a point where
IH 94 continues northwest and IH 90 continues west; and continuing
north along IH 94 to the southern side of the intersection of IH 94
and State Highway 54 near Black River Falls, Wisconsin, and continuing
west along IH 90 to the east side of the intersection of IH 90 and
U.S. Highway 53 near La Crosse, Wisconsin.
7
<PAGE>
c. Deposits and Fees Payable:
-------------------------
(1) $1,000 Application Fee
(2) $75,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 3.5% of Gross Sales plus $.0035 per
gallon of Fuel Sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of all gross sales for the preced
ing calendar month
d. Variations to Deposits and Fees Payable Pursuant to Franchise
--------------------------------------------------------------
Agreement:
---------
(1) Monthly Minimums Gross Sales changed: 1 through 6 months 500,000
gallons; 6 through 18 months 500,000 gallons and 18 through
termination 700,000 gallons
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location upon Termination**: No.
-------------------------------------------------------
4. Franchisee:
----------
Truckstop Distributors, Inc.
P.O. Box 639
Walcott, Iowa 52773
Franchised Location:
-------------------
Petro Stopping Center #54
Interstate-44 and State 43 South (Exit 4)
Joplin, Missouri 64804
8
<PAGE>
a. Franchise Agreement and Amendments: Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of January 2, 1987 (expiration date:
October 11, 1997)
(2) Amendment to Franchise Agreement dated as of January 2, 1987
(3) Amendment to Franchise Agreement dated as of March 11, 1987.
(4) Amendment to Franchise Agreement dated as of January 29, 1991
(5) Fourth Amendment to Franchise Agreement dated as of January 16, 1992
(6) Billing Program Agreement dated as of December 2, 1990 (expiration
date: October 11, 1993)
b. Exclusive Territory:
-------------------
The exclusive territory covers an area includ ing the right-of-way of
the following described portions of U.S. Interstate Highway 44
("I-44") and U.S. Federal Highway 69 ("U.S. 69") and extending in
width one mile from either side of such Highways and an area including
the right-of-way of the following described portions of U.S.
Interstate Highway 270 ("Loop 270") and U.S. Interstate Highway 255
("Loop 255") and extending in width one-half mile from either side of
such Highways:
(1) From the Franchised Location northeast along I-44 to St. Louis,
Missouri to a point where I-44 intersects with Loop 270
9
<PAGE>
and continuing southeast to the point at which Loop 270 becomes
Loop 255, and from that point, east to the Illinois State line;
(2) From the Franchised Location west along I-44 to Tulsa, Oklahoma
to the point where I-44 reaches the west side of the existing (at
the date of the Franchise Agreement) city limits of Tulsa,
Oklahoma; and
(3) From the Franchised Location southwest along U.S. 69 to the
nearest point on U.S. 69 to McAlester, Oklahoma.
c. Deposits and Fees Payable:
-------------------------
(1) $1,000 Application Fee
(2) $75,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 3.5% of Gross Sales plus $.0035 per
gallon of Fuel Sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of all gross sales for the
preceding calendar month
d. Variations to Deposits and Fees Payable Pursuant to Franchise
--------------------------------------------------------------
Agreement:
---------
(1) Limitation of monthly Gross Sales at Trucker's Stores of $100,000
until monthly sales at all Trucker's stores, company-owned and
franchised, exceed $100,000
10
<PAGE>
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location upon Termination**: No.
-------------------------------------------------------
5. Franchisee:
----------
Highway Service Ventures, Inc.
100 Harbor Oak Drive, Suite 106
Ashland, Virginia 23005
Franchised Location:
-------------------
Petro Stopping Center #56
Interstate-95 & Route 207 (Exit 41)
Ruther Glen, Virginia 22546
a. Franchise Agreement and Amendments: Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of April 15, 1987 (expiration date:
March 13, 1998)
(2) Supplement to Franchise Agreement dated as of April 28, 1987
(3) Amendment to Franchise Agreement dated as of August 21, 1991
(4) Billing Program Agreement dated as of October 30, 1991
(expiration date: March 13, 1998)
(5) Arbitration Agreement dated as of October 30, 1991
b. Exclusive Territory:
-------------------
The exclusive territory covers an area includ ing the right-of-way of
the following described portions of U.S. Interstate Highway 95
("I-95")
11
<PAGE>
and U.S. Interstate Highway 85 ("I-85") and extending in width one
mile from the right-of-way line of both sides of such Highways:
(1) From the Franchised Location north along I-95 to the southern
side of the boundary of the Franchise Area for the Elkton,
Maryland franchise (approximately 20 miles from the city limits
of Washington, D.C.); and
(2) From the Franchised Location south along I-95 to the point on
I-95 nearest Rocky Mount, North Carolina; and
(3) From the point south of Richmond, Virginia where I-85 and I-95
split, south along I-85 to the North Carolina State line.
c. Deposits and Fees Payable:
-------------------------
(1) $1,000 Application Fee (credited against Initial Franchise Fee)
(2) $75,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 3.5% of Gross Sales plus $.0035 per
gallon of Fuel Sales
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of all gross sales for the
preceding Calendar Month
d. Variations to Deposits and Fees Payable Pursuant to Franchise
-------------------------------------------------------------
Agreement:
---------
12
<PAGE>
(1) Fuel sales exclude bulk fuel sales and relating only to on-
premises sales of diesel fuel with a maximum royalty fee of
$175,000 for one year, commencing on the date the Franchised
Location opens for business, increasing each year during the
initial term by 1/2 of the increase in the Consumer Price Index
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location Upon Termination**: No.
-------------------------------------------------------
6. Franchisee:
----------
Welsh, Inc.
P.O. Box 10725
Merrillville, Indiana 46411
Franchised Location:
-------------------
Petro Stopping Center #55
1401 Ripley Street
Lake Station, Indiana 46405
a. Franchise Agreement and Amendments: Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of October 8, 1987 (expiration date:
October 14, 1997)
(2) Supplement to Franchise Agreement dated as of October 8, 1987
(3) First Amendment to Franchise Agreement dated as of May 3, 1990
(4) Second Amendment to Franchise Agreement dated as of November 25,
1991
13
<PAGE>
(5) Third Amendment to Franchise Agreement dated March 15, 1995
(6) Billing Program Agreement dated as of September 24, 1991
(expiration date: October 14, 1997)
(7) Arbitration Agreement dated as of November 25, 1991
b. Exclusive Territory:
-------------------
The exclusive territory covers an area including the right-of-way of
the following described portions of United States Interstate
Highways 80/90, 94, 65, 80 and 90 (referred to herein as "I-80/90,"
"I-94," "I-65," "I-80" and "I-90," respectively) and extending in
width one mile from either side of such Highways:
(1) From the Franchised Location east along I-80/I-90 to the western
side of the inter section of I-80/I-90 and I-65;
(2) From the Franchised Location east along I-94 to the Indiana-
Michigan State line;
(3) From the Franchised Location sought along I-65 to the northern
side of the intersection of Indiana Highway 28 and I-65;
(4) From the Franchised Location west along I-80 to the eastern city
limits of LaSalle, Illinois;
(5) From the Franchised Location north along I-94 to the Wisconsin
State line; and
14
<PAGE>
(6) From the Franchised Location north along I-90 to where I-90
intersects United States Federal Highway 51.
c. Deposits and Fees Payable:
-------------------------
(1) $1,000 Application Fee
(2) $75,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 3.5% of Gross Sales plus $.0035 per
gallon of Fuel Sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of all gross sales for the
preceding calendar month
d. Variations to Deposits and Fees payable pursuant to Franchise
--------------------------------------------------------------
Agreement:
---------
(1) Royalty fee waived for the first 8 months commencing on the date
gasoline fuel island and restaurant open for business; after such
8 months have elapsed full royalties shall be payable thereafter.
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location Upon Termination**: No.
-------------------------------------------------------
15
<PAGE>
7. Franchisee:
----------
Petro of Richmond, Inc.
500 Graves Blvd.
P.O. Box 856
Salina, Kansas 67402
Franchised Location:
-------------------
Petro Stopping Center #57
6400 National Road East at U.S. 40
New Paris, Ohio 45347
a. Franchise Agreement and Amendments: Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of September 1, 1988 (expiration
date: October 29, 1999)
(2) Supplement to Franchise Agreement dated as of September 1, 1988
(3) Amendment to Franchise Agreement dated as of August 7, 1991
(4) Billing Program Agreement dated as of October 1, 1991 (expiration
date: October 29, 1999)
(5) Security Agreement dated September 1, 1988
(6) Guaranty dated September 1, 1988
(7) Consent and Subordination Agreement dated June 23, 1993
(8) Arbitration Agreement dated as of October 1, 1991
16
<PAGE>
(9) Software License Agreement dated June 8, 1995
b. Exclusive Territory:
-------------------
The exclusive territory covers an area including the Franchised
Location and the right-of-way of the following described portions of
Interstate Highway 70 ("I-70"), Ohio State Highway 56 ("Ohio 56") and
Indiana State Highway 3 ("Indiana 3") and extending in width one
mile from either side of I-70:
(1) From the Ohio/Indiana State line east along I-70 to the west side
of the interchange of I-70 and Ohio 56; and
(2) From the Ohio/Indiana State line west along I-70 to the east side
of the interchange of I-70 and Indiana 3.
c. Deposits and Fees Payable:
-------------------------
(1) $5,000 Application Fee
(2) $100,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 4.0% of Nonfuel Gross Sales plus
$.004 per gallon of Fuel Sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of monthly Nonfuel Gross Sales and
Fuel Sales for the preceding calendar month
17
<PAGE>
d. Variations to Deposits and Fees payable pursuant to Franchise
--------------------------------------------------------------
Agreement: None.
---------
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location Upon Termination**: Yes.
-------------------------------------------------------
8. Franchisee:
----------
CTM, Inc.
P.O. Box 856
Salina, Kansas 67402
Franchised Location:
-------------------
Petro:2 #81
Interstate-70 at N. 9th Street
Salina, Kansas 67401
a. Franchise Agreement and Amendments: Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of February 2, 1990 (expiration
date: February 27, 2000)
(2) Amendment to Franchise Agreement dated as of August 7, 1991
(3) Billing Program Agreement dated as of October 1, 1991 (expiration
date: February 28, 2000)
(4) Second Amendment to Franchise Agreement dated March 19, 1996
(5) Arbitration Agreement dated as of October 1, 1991
(6) Security Agreement dated February 2, 1990
18
<PAGE>
(7) Guaranty dated as of October 1, 1991
b. Exclusive Territory:
-------------------
The exclusive territory covers an area including the Franchised
Location and the right-of-way of the following described portions of
Interstate Highways 70 and 135 (referred to herein as "I-70" and
"I-35," respectively) and United States Highway 81 (referred to as
"U.S. 81"):
(1) From the Franchised Location east on I-70 to Exit 330 just east
of Kansas High way 99;
(2) From the Franchised Location west on I-70 to State Highway 183 at
Hays, Kansas;
(3) From the Franchised Location sought on I-135 to Exit 34 north of
Newton, Kansas; and
(4) From the Franchised Location north on U.S. 81 to Kansas Highway 9
at Concordia, Kansas.
c. Deposits and Fees Payable:
-------------------------
(1) $5,000 Application Fee
(2) $20,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 4.0% of Nonfuel Gross Sales plus
$.004 per gallon of Fuel Sales (excluding bulk fuel sales)
(4) Initial Training Fee waived
19
<PAGE>
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of monthly Nonfuel Gross Sales and
Fuel Sales
d. Variations to Deposits and Fees payable pursuant to Franchise
--------------------------------------------------------------
Agreement: None.
---------
e. Variations from Deposits and Fees Payable Pursuant to the Franchise
--------------------------------------------------------------------
Agreement: None.
---------
f. Right of First Refusal**: Yes.
----------------------
g. Option to Purchase Franchised Location Upon Termination**: Yes.
-------------------------------------------------------
9. Franchisee:
----------
Highway Service Ventures, Inc.
100 Harbor Oak Drive, Suite 106
Ashland Virginia 23005
Franchised Location:
-------------------
Petro Stopping Center #58
3001 TV Road
Florence, South Carolina 29501
a. Franchise Agreement and Amendments: Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of May 11, 1990 (expiration date:
February 10, 2001)
(2) Amendment to Franchise Agreement dated as of August 21, 1991
(3) Billing Program Agreement dated as of October 30, 1991
(expiration date: February 10, 2001)
20
<PAGE>
(4) Arbitration Agreement dated as of October 1, 1991
b. Exclusive Territory:
-------------------
The exclusive territory covers an area including the right-of-way of
the following described portions of United States Interstate
Highways 95 and 20 (referred to herein as "I-95" and "I-20,"
respectively) and extending in width one mile from either side of such
Highways:
(1) From the Franchised Location north on I-95 to Exit 33 at St.
Pauls, North Carolina;
(2) From the Franchised Location south on I-95 to the South
Carolina/Georgia State line; and
(3) From the Franchised Location west on I-20 to Exit 92 at Lugoff,
South Carolina.
c. Deposits and Fees Payable:
-------------------------
(1) $5,000 Application Fee
(2) $95,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 4.0% of the Nonfuel Gross Sales plus
$.004 per gallon of Fuel Sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of monthly Nonfuel Gross Sales and
Fuel Sales
21
<PAGE>
d. Variations from Deposits and Fees payable pursuant to Franchise
---------------------------------------------------------------
Agreement: None.
---------
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location Upon Termination**: Yes.
-------------------------------------------------------
10. Franchisee:
----------
Crossroads of Idaho, Inc.
d/b/a Crossroads of Idaho Stopping Center
P.O. Box 394
Twin Falls, Idaho 83303
Franchised Location:
-------------------
Petro:2 #82
Interstate-84 at U.S. Highway 93
Jerome, Idaho 83338
a. Franchise Agreement and Amendments: Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of November 8, 1989 (expiration
date: December 16, 2000)
(2) Letter Amendment dated as of November 8, 1989 granting franchisee
right of first refusal, subject to the terms and conditions of
such agreement, for an area including the following described
portions of Interstate Highways 84 and 86 ("IH 84" and "IH 86,"
respectively): From Exit 64 on IH 84 (near Boise, Idaho) north
and west on IH 84 to Exit 374 on IH 84 (near Ontario, Oregon;
from Exit 52 on IH 86 (near Pocatello, Idaho) east on IH 86 to
the intersection of IH 86 and IH 15 and from such intersection
north on Interstate
22
<PAGE>
Highway 15 and U.S. Highway 20 (near Idaho Falls, Idaho); and
from the Idaho/Utah border on IH 84 south on IH 84 to Exit 46 on
IH 84 (near Tremonton, Utah)
(3) Amendment to Franchise Agreement dated as of January 27, 1992
(4) Billing Program Agreement dated as of October 1, 1991 (expiration
date: December 16, 2000)
(5) Arbitration Agreement dated as of Janu ary 27, 1992
(6) Security Agreement dated November 8, 1989
(7) Guaranty dated November 8, 1989
(8) Assignment of Petro Franchise Agreement dated July 22, 1991
(9) Consent and Subordination Agreement dated July 22, 1991
(10) Assignment of Petro Franchise Agreement dated November 15, 1995
(11) Consent and Subordination Agreement dated November 15, 1995
b. Exclusive Territory:
-------------------
The exclusive territory covers an area including the following
described portions of Interstate Highways 84 and 86 ("IH 84" and
"IH 86," respectively):
23
<PAGE>
(1) From Exit 64 on IH 84 (near Boise, Idaho) south and east on IH 84
to the border of Idaho and Utah; and
(2) From the intersection of IH 84 and IH 86 north and east on IH 86
to Exit 52 on IH 86 (near Pocatello, Idaho).
c. Deposits and Fees Payable:
-------------------------
(1) $5,000 Application Fee
(2) $45,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 4.0% of Nonfuel Gross Sales plus
$.004 per gallon of Fuel Sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of monthly Nonfuel Gross Sales and
Fuel Sales
d. Variations from Deposits and Fees Payable Pursuant to the Franchise
-------------------------------------------------------------------
Agreement:
----------
(1) No Royalties on Gasoline and restaurant sales from January 1,
1994 through November 30, 1999
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location Upon Termination**: Yes.
-------------------------------------------------------
24
<PAGE>
11. Franchisee:
-----------
Welsh, Inc.
P.O. Box 10725
Merrillville, Indiana 46411
Franchised Location:
-------------------
Petro:2 #80
Interstate-94 and E. Napier Road (Exit 30)
Benton Harbor, Michigan 49022
a. Franchise Agreement and Amendments: Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of May 3, 1990 (expiration date:
June 30, 1999)
(2) Supplement to Franchise Agreement dated as of May 3, 1990
(3) Amendment to Franchise Agreement dated as of November 25, 1991
(4) Second Amendment to Franchise Agreement dated March 15, 1995
(5) Billing Program dated as of September 24, 1991 (expiration date:
June 30, 1999)
(6) Arbitration Agreement dated as of November 25, 1991
b. Exclusive Territory:
-------------------
The exclusive territory covers an area including the right-of-way of
the following described portions of United States Interstate Highways
94 and 196 (referred to herein as "I-94" and "I-196," respectively)
and extending in
25
<PAGE>
width one mile from either side of such highways:
(1) From the Franchised Location east along I-94 to the intersection
of I-196 and then north along I-196 to the western side of the
intersection of I-196 and I-94;
(2) From the Franchised Location east along I-94 to five miles beyond
the intersection of I-94 and Michigan Highway 127; and
(3) From the Franchised Location west along I-94 to the Michigan-
Indiana State line.
c. Deposits and Fees Payable:
-------------------------
(1) No Application Fee Paid
(2) $25,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 4.0% of Nonfuel Gross Sales plus
$.004 per gallon of Fuel Sales (excluding bulk fuel sales);
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of monthly Nonfuel Gross Sales and
Fuel Sales
d. Variations from Deposits and Fees Payable Pursuant to the Franchise
-------------------------------------------------------------------
Agreement:
---------
(1) Training Fee reduced to $25,000
(2) Initial Franchise Fee reduced to $25,000
26
<PAGE>
(3) Royalty Fee Waived from opening for business through September
30, 1990 and after such period royalties shall not be payable
with respect to the first: 300,000 gallons of diesel fuel sold
per month; $20,000 of restaurant food sales per month; $25,000 of
travel stores sales per month; and $2,250 of scale income per
month.
(4) Monthly Advertising and Marketing Fees shall first be payable
beginning the seventh month of opening of business
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location Upon Termination**: Yes.
-------------------------------------------------------
12. Franchisee:
----------
Rochelle Travel Plaza, Inc.
P.O. Box 317
Rochelle, Illinois 61068
Franchised Location:
-------------------
Petro Stopping Center
Interstate 39 and Illinois Highway 38
Rochelle, Illinois 61068
a. Franchise Agreement and Amendment: Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of March 29, 1991 (expiration date:
April 26, 2002)
(2) Supplement to Franchise Agreement dated March 28, 1991
(3) Second supplement to Franchise Agreement dated as of March 26,
1992
27
<PAGE>
(4) Billing Program Agreement dated as of January 20, 1992
(expiration date: April 26, 2002)
(5) Security Agreement dated March 28, 1991
(6) Guaranty dated as of March 28, 1991
(7) Arbitration Agreement dated as of January 2, 1992
(8) Consent and Subordination Agreement dated April 10, 1991
(9) Consent, Subordination and Intercreditor Agreement dated as of
March 26, 1992
(10) Software License Agreement dated July 20, 1995
b. Exclusive Territory:
-------------------
The exclusive territory covers an area including the Franchised
Location and the right-of-way of the following described portions of
Interstate Highway 39 ("I-39"), U.S. Highway 51 ("U.S. 51"), Toll Road
5, and Interstate Highway 88 ("I-88") and extending in width one
mile from either side of such Highways:
(1) From the Franchise Location north along I-39 and U.S. 51 to the
Illinois-Wisconsin State line;
(2) From the Franchised Location south along I-39 and U.S. 51 to the
north side of Interchange Number 135 of U.S. 51 and Interstate
Highway 74 south of Bloomington, Illinois;
28
<PAGE>
(3) From the interchange of I-39 and I-88/Toll Road 5 west to the
east side of the interchange of I-88 and Illinois State Highway
92 near Joslin, Illinois; and
(4) From the interchange of I-39 and I-88/Toll Road 5 East to the
west side of the interchange of I-88/Toll Road 5 and Illinois
State Highway 31 near Aurora, Illinois.
c. Deposits and Fees Payable:
-------------------------
(1) $5,000 Application Fee
(2) $70,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 4.0% of Nonfuel Gross Sales plus
$.004 per gallon of Fuel Sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of monthly Nonfuel Gross Sales and
Fuel Sales
d. Variations from Deposits and Fees Payable Pursuant to the Franchise
-------------------------------------------------------------------
Agreement: None.
---------
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location Upon Termination**: Yes.
-------------------------------------------------------
29
<PAGE>
13. Franchisee:
----------
Fargo Stopping Center, L.L.C.
P.O. Box 2129
Minot, North Dakota 58702
Franchised Location:
-------------------
Petro Stopping Center
Interstate Highway 94 at 45th Street and 19th Avenue
Fargo, North Dakota 58108
a. Franchise Agreement and Amendments Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of January 31, 1994 (expiration date:
November 27, 2004)
(2) Supplement to Franchise Agreement dated January 31, 1994
(3) Billing Program Agreement dated as of January 31, 1994 (expiration
date: November 27, 2004)
(4) Arbitration Agreement dated as of January 31, 1994
(5) Security Agreement dated as of January 31, 1994
(6) Guaranty dated as of January 31, 1994
(7) Software License Agreement dated May 9, 1995
30
<PAGE>
b. Exclusive Territory:
-------------------
The exclusive territory covers an area including the Franchised
Location and the right-of-way of the following described portions of
Interstate Highway 94 ("I-94"), and Interstate Highway 29 ("I-29") and
extending in width one mile from either side of such Highways:
(1) From the Franchised Location east along I-94 to the west side of
the interchange of Highway 71 and I-94 at I-94 exit number 127
near Sauk Centre, Minnesota;
(2) From the Franchised Location west along I-94 to the east side of
the interchange of Highway 85 and I-94 at I-94 exit number 10 near
Belfield, North Dakota;
(3) From the interchange of I-94 and I-29 north along I-29 to the
south side of the interchange of Highway 81 and I-29 at I-29 exit
number 203 near Joliette, North Dakota; and
(4) From the interchange of I-94 and I-29 south along I-29 to the
north side of the interchange of Highway 12 and I-29 at I-29 exit
number 207 near Summit, South Dakota.
c. Deposits and Fees Payable:
-------------------------
(1) $25,000 Application Fee (credited against Initial Franchise Fee)
(2) $75,000 Initial Franchise Fee
31
<PAGE>
(3) Monthly Royalty Fee equal to 4.0% of Nonfuel Gross Sales plus
$.004 per gallon of Fuel Sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of monthly Nonfuel Gross Sales and
Fuel Sales
d. Variations from Deposits and Fees Payable Pursuant to the Franchise
-------------------------------------------------------------------
Agreement:
---------
(1) Letter temporarily reducing royalty fees from: Non-fuel Sales to
1% and Diesel and gasoline to .001% for the months of July,
August, September and October of 1995.
(2) Letter temporarily reducing royalty fees from: Non-fuel Sales to
1% and Diesel and gasoline to .001% for the months of May, June,
July and August of 1996.
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location Upon Termination**: Yes.
-------------------------------------------------------
14. Franchisee:
----------
Highway Service Ventures, Inc.
100 Harbor Oak Drive, Suite 106
Ashland, Virginia 23005
Franchised Location:
-------------------
Petro Stopping Center #60
10200 Old Federal Road
Carnesville, George 30521
32
<PAGE>
a. Franchise Agreement and Amendments; Expiration Date*:
---------------------------------------------------
(1) Franchise Agreement dated as of May 3, 1994 (expiration date:
January 15, 2005)
(2) Supplement to Franchise Agreement dated May 3, 1994
(3) Billing Program Agreement dated as of May 3, 1994 (expiration
date: January 15, 2005)
(4) Arbitration Agreement dated as of May 3, 1994
(5) Security Agreement dated as of May 3, 1994
(6) Supplemental Acknowledgment, Consent and Agreement of Petro dated
April 3, 1994
b. Exclusive Territory:
-------------------
The Exclusive Territory covers an area including the Franchised
Location and the right-of-way of the following described portions of
Interstate Highway 85 ("I-85") and extending in width one mile from
either side of such highway.
(1) From the Franchised Location east along I-85 to the west side of
exit number 27 near Belmont, North Carolina.
(2) From the Franchised Location west along I-85 to the east side of
the interchange of I-85 and Loop I-285.
33
<PAGE>
c. Deposits and Fees Payable:
-------------------------
(1) $25,000 Application Fee (credited against initial Franchise Fee)
(2) $100,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 4.0% of Nonfuel Gross Sales plus
$.004 per gallon of fuel sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertise ment plus a Monthly
Advertising Fee of up to .25% of monthly Nonfuel Gross Sales and
Fuel Sales
d. Variations from Deposits and Fees Payable Pursuant to the Franchise
-------------------------------------------------------------------
Agreement:
---------
(1) Letter temporarily reducing royalty fees for diesel fuel sales to
1% for the months of July, August, September and October of 1995
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location Upon Termination**: Yes.
-------------------------------------------------------
15. Franchisee:
----------
Bordentown Junction Truckstop
Junction Venture***
200 Four Falls Corporate Center, Suite 115
West Conshohocken, PA 19428
34
<PAGE>
Franchised Location:
-------------------
Petro Stopping Center #14
Rising Sun Square Road
Bordentown, New Jersey 08505
a. Franchise Agreement and Amendments: Expiration Date*:
----------------------------------------------------
(1) Franchise Agreement dated as of December 29, 1995 (expiration
date: December 28, 2005)
(2) Billing Program Agreement dated as of April 17, 1996 (expiration
date: Dec. 28, 2005)
(3) Arbitration Agreement dated as of December 29, 1995
(4) Security Agreement dated as of December 29, 1995
(5) Letter Agreement dated December 29, 1995
(6) Subordination Agreement dated December 29, 1995
b. Exclusive Territory:
-------------------
The exclusive Territory covers an area including the Franchised
Location and the following described portions.
(1) From the Franchised Location (Exit 7) South on the New Jersey
Turnpike (I-95) to the Delaware/New Jersey State Line at the
Delaware River
35
<PAGE>
(2) From the Franchised Location (Exit 7) North on the New Jersey
Turnpike (I-95) to Exit 15E to Highway 1 and 9
(3) From Highway 130 South on I-295 to Exit 2 at the New Jersey
Turnpike (I-95)
(4) From Highway 206 North on Highway 130 to Highway 1
(5) From Highway 206 North on Highway 1 to I-287
(6) From Highway 206 South on Highway 130 to State Road 42
(7) From Highway 1 North on Highway 206 to I-78
(8) From the Franchised Location (Exit 7) South on Highway 206 to
Highway 30
c. Deposits and Fees Payable:
-------------------------
(1) $25,000 Application Fee waived
(2) $100,000 Initial Franchise Fee waived
(3) Monthly Royalty Fee equal to 4.0% of Nonfuel Gross Sales plus
$.004 per gallon of fuel Sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee (waived)
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of monthly Nonfuel Gross Sales and
Fuel Sales (grand opening expenses waived)
36
<PAGE>
d. Variations from Deposits and Fees Payable Pursuant to the Franchise
-------------------------------------------------------------------
Agreement: None.
---------
e. Right of First Refusal**: Yes.
----------------------
16. Franchisee:
----------
135-80 Travel Plaza, Inc.
500 Graves Boulevard
Salina, Kansas 67401
Franchised Location:
-------------------
Petro Stopping Center
4600 South Lincoln
York, Nebraska 68467
a. Franchise Agreement and Amendments; Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of December 29, 1995 (expiration
date: December 16, 2005)
(2) First Amendment to Franchise Agreement dated March 22, 1996
(3) Billing Program Agreement dated as of De cember 29, 1995
(expiration date: December 16, 2005)
(4) Arbitration Agreement dated as of December 29, 1995
(5) Security Agreement dated as of December 29, 1995.
37
<PAGE>
b. Exclusive Territory:
-------------------
The Exclusive Territory covers an area including the Franchised
Location and the following described portions.
(1) From the Franchised Location East on I-80 to Iowa Highway 71 at
Lorah, Iowa (Exit 60)
(2) From the Franchised Location West on I-80 to Hershey, Nebraska
(Exit 164)
(3) From the Franchised Location South on Highway 81 to Concordia,
Kansas (which joins Petro:2 territory)
(4) From the Franchised Location North on Highway 81 to Highway 275 at
Norfolk, Nebraska
c. Deposits and Fees Payable:
-------------------------
(1) Application Fee waived
(2) $100,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 4.0% of Nonfuel Gross Sales plus
$.004 per gallon of fuel Sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of monthly Nonfuel Gross Sale and
Fuel Sales
38
<PAGE>
d. Variations from Deposits and Fees Payable Pursuant to the Franchise
-------------------------------------------------------------------
Agreement: None.
---------
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location Upon Termination**: Yes.
-------------------------------------------------------
17. Franchisee:
----------
Big Ten Truckstop, Inc.
1 Grove Street
Dupont, Pennsylvania 18641
Franchised Location:
-------------------
Petro Stopping Center
1 Grove Street
Dupont, Pennsylvania 18641
a. Franchise Agreement and Amendments; Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of June 7, 1996 (expiration date:
Not opened yet)
(2) First Amendment to Franchise Agreement dated June 7, 1996.
(3) Billing Program Agreement dated as of June 7, 1996 (expiration
date: Not opened yet)
(4) Arbitration Agreement dated as of June 7, 1996
(5) Security Agreement dated as of June 7, 1996
(6) Guaranty dated as of June 7, 1996
39
<PAGE>
b. Exclusive Territory:
-------------------
The exclusive territory covers an area including the Franchised
Location and the following described portions:
(1) From the Franchised Location North on I-81 to New York State Line;
(2) From the Franchised Location South on I-81 to I-80 Interchange;
(3) From the Franchised Location South on Pennsylvania 380 to I-80;
(4) From the Franchised Location East on I-84 to Exit 11 at Port
Jervis, Pennsylvania;
(5) From the Franchised Location North on Toll Road 9 to I-81 at
Dickson City, Pennsylvania;
(6) From the Franchised Location South on Toll Road 9 to Exit 35 near
I-80.
c. Deposits and Fees Payable:
-------------------------
(1) $25,000 Application Fee (credited against initial Franchise Fee)
(2) $100,000 Initial Franchise Fee
(3) Monthly Royalty Fee equal to 4.0% of Nonfuel Gross Sales plus
$.004 per gallon of fuel Sales (excluding bulk fuel sales)
(4) $50,000 Initial Training Fee
40
<PAGE>
(5) Up to $10,000 for grand opening advertisement plus a Monthly
Advertising Fee of up to .25% of monthly Nonfuel Gross Sales and
Fuel Sales
d. Variations from Deposits and Fees Payable Pursuant to the Franchise
-------------------------------------------------------------------
Agreement: None.
---------
e. Right of First Refusal**: Yes.
----------------------
f. Option to Purchase Franchised Location Upon Termination**: Yes.
-------------------------------------------------------
18. Franchisee:
----------
Consolidated Truck Stops, Inc.
I-70, Exit Two
Claysville, Pennsylvania 15323
Franchised Location:
-------------------
Petro Stopping Center
I-70, Exit Two
Claysville, Pennsylvania 15323
a. Franchise Agreement and Amendments; Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of September 30, 1997 (expiration
date: October 31, 2007)
(2) First Addendum to Franchise Agreement dated September 30, 1997.
(3) Billing Program Agreement dated as of September 30, 1997
(expiration date: October 31, 1997)
(4) Arbitration Agreement dated as of September 30, 1997
41
<PAGE>
(5) Security Agreement dated as of September 30, 1997
(6) Guaranty dated as of September 30, 1997
(7) Franchise Application Agreement dated as of September 30, 1997
(8) Memorandum of Right of First Refusal and Right to Buy dated as of
September 30, 1997
(9) Confidentiality Agreement dated September 30, 1997
(10) PMPA Motor Fuels Franchise Agreement dated as of September 30,
1997
b. Exclusive Territory:
-------------------
The exclusive territory covers an area includ ing the Franchised
Location and the following described portions:
(1) From the Franchised Location West on I-70 to Ohio Exit 202
(2) From the Franchised Location East on I-70 to Exit 26
(3) From the Franchised Location North on I-70/I-79 interchange to
Exit 17
(4) From the Franchised Location South on I-70/I-79 interchange to
Exit 4
c. Deposits and Fees Payable:
-------------------------
(1) $50,000 Initial Franchise Fee
42
<PAGE>
(2) Monthly Royalty Fee equal to 4.0% of Nonfuel Gross Sales plus
$.003 per gallon of fuel Sales; 2.0% of branded or unbranded Quick
Service Restaurant Sales located in the main building and operated
by Franchisee; 2.0% of Franchisee's non-Franchisor branded Full
Service Restaurant Sales if operated by Franchisee (Petro:2)
Existing operation conversion base year (defined as average sales
for the 12 months prior to the Franchise Agreement) royalties
calculation:
1st year - 50% of base year sales exc.from royalties
2nd year - 35% of base year sales exc.from royalties
3rd year - 15% of base year sales exc.from royalties
4th year and thereafter - 0% of base year sale exc.from royalties
(3) $20,870 Initial Training Fee
(4) $5,000 Initial Legal, Design and Merchandise Set Up Fees
(5) Annual Administration Fee of $7,500
(6) minimum of $5,000 for grand opening advertisement with
contribution of $2,500 by Franchisor; Monthly Advertising Fee
collected at a rate of .25% of monthly Nonfuel Gross Sales and
Fuel Sales, subject to a $900 cap which may be adjusted annually
43
<PAGE>
d. Variations from Deposits and Fees Payable Pursuant to the Franchise
-------------------------------------------------------------------
Agreement: None.
---------
e. Right of First Refusal**: Yes.
----------------------
f. Right to Buy Franchised Location Upon Termina tion or Expiration**:
----------------------------------------------------------------
Yes.
19. Franchisee:
----------
Quint Ltd. dba Windy City South
I-57 & Monee Road
Monee, Illinois 60449
Franchised Location:
-------------------
Petro Stopping Center
I-57 & Monee Road
Monee, Illinois 60449
a. Franchise Agreement and Amendments; Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of January 28, 1998(expiration date:
Not Opened Yet)
(2) Addendum to Franchise Agreement dated January 28, 1998
(3) Billing Program Agreement dated as of January 28, 1998
(expiration date: Not Opened Yet)
(4) Arbitration Agreement dated as of January 28, 1998
(5) Security Agreement dated as of January 28, 1998
(6) Guaranty dated as of January 28, 1998
44
<PAGE>
(7) Franchise Application Agreement dated as of January 28, 1998
(8) Memorandum of Right of First Refusal and Right to Buy dated as
of January 28, 1998
(9) Confidentiality Agreement dated January 28, 1998
(10) PMPA Motor Fuels Franchise Agreement dated as of January 28,
1998
b. Exclusive Territory:
-------------------
The exclusive territory covers an area including the Franchised
Location and the following described portions:
(1) From the Franchised Location South on I-57 to Exit 240
(2) From the Franchised Location North on I-57 to one mile South
of I-80
c. Deposits and Fees Payable:
-------------------------
(1) $50,000 Initial Franchise Fee
(2) Monthly Royalty Fee equal to 4.0% of Nonfuel Gross Sales plus
$.003 per gallon of fuel Sales; 2.0% of branded or unbranded
Quick Service Restaurant Sales located in the main building and
operated by Franchisee; 2.0% of Franchisee's non-Franchisor
branded Full Service Restaurant Sales if operated by Franchisee
(Petro:2)
Existing operation conversion base year (defined as average
sales for the 12
45
<PAGE>
months prior to the Franchise Agreement) royalties calculation:
1st year - 50% of base year sales exc.from royalties
2nd year - 35% of base year sales exc.from royalties
3rd year - 15% of base year sales exc.from royalties
4th year and thereafter - 0% of base year sale exc.from royalties
(3) $100,000 Initial Training Fee
(4) $41,000 Initial Legal, Design and Merchandise Set Up Fees
(5) Annual Administration Fee of $10,000
(6) minimum of $5,000 for grand opening advertisement with
contribution of $2,500 by Franchisor; Monthly Advertising Fee
collected at a rate of .25% of monthly Nonfuel Gross Sales and
Fuel Sales, subject to a $1,850 cap which may be adjusted
annually
d. Variations from Deposits and Fees Payable Pursuant to the Franchise
-------------------------------------------------------------------
Agreement: None.
---------
e. Right of First Refusal**: Yes.
----------------------
f. Right to Buy Franchised Location Upon Termination or Expiration**:
----------------------------------------------------------------
Yes.
20. Franchisee:
----------
All American, Inc.
I-78 and PA Route 645 (Exit 2)
Bethel, Pennsylvania 17067
46
<PAGE>
Franchised Location:
-------------------
Petro Stopping Center
I-70 & PA Turnpike, Exit 12
Breezewood, Pennsylvania 15533
a. Franchise Agreement and Amendments; Expiration Dates*:
----------------------------------------------------
(1) Franchise Agreement dated as of January 30, 1998 (expiration date:
February 18, 2008)
(2) Billing Program Agreement dated as of January 30, 1998 (expiration
date: February 18, 1998)
(3) Arbitration Agreement dated as of January 30, 1998
(4) Franchise Application Agreement dated as of January 30, 1998
(5) Confidentiality Agreement dated January 5, 1998
(6) PMPA Motor Fuels Franchise Agreement dated as of January 30, 1998
b. Exclusive Territory:
-------------------
The exclusive territory covers an area including the Franchised
Location and the following described portions:
(1) From Franchised Location on I-76 West to Ohio/Pennsylvania State
Line, but not including West on I-70
47
<PAGE>
(2) From Franchised Location on I-76 East to Exit 25 at I-476
(3) From Franchised Location on I-70 South to Exit 26 at I-81
c. Deposits and Fees Payable:
-------------------------
(1) Waived Initial Franchise Fee
(2) Monthly Royalty Fee equal to 4.0% of Nonfuel Gross Sales plus
$.003 per gallon of fuel Sales; 2.0% of branded or unbranded
Quick Service Restaurant Sales located in the main building and
operated by Franchisee; 2.0% of Franchisee's non-Franchisor
branded Full Service Restaurant Sales if operated by Franchisee
(Petro:2); no royalties paid on existing Perkins franchise
restaurant; no royalties paid on combined sales from current
"fast food" franchises below a combined annual sales volume of
$240,000
Existing operation conversion base year (defined as average sales
for the 12 months prior to the Franchise Agreement) royalties
calculation:
1st year - 50% of base year sales exc.from royalties
2nd year - 35% of base year sales exc.from royalties
3rd year - 15% of base year sales exc.from royalties
4th year and thereafter - 0% of base year sale exc.from royalties
(3) $25,000 Initial Training Fee
48
<PAGE>
(4) $21,000 Initial Legal, Design and Merchandise Set Up Fees
(5) Annual Administration Fee of $7,500
(6) minimum of $5,000 for grand opening advertisement with
contribution of $2,500 by Franchisor; Monthly Advertising Fee
collected at a rate of .25% of monthly Nonfuel Gross Sales and
Fuel Sales, subject to a $1,000 cap which may be adjusted annually
d. Variations from Deposits and Fees Payable Pursuant to the Franchise
-------------------------------------------------------------------
Agreement: Yes.
---------
e. Right of First Refusal: Yes.
----------------------
f. Right to Buy Franchised Location Upon Termination or Expiration: Yes.
---------------------------------------------------------------
* All franchise agreements are automatically renewable for two additional
five-year terms subject to satisfaction of certain conditions
** Where indicated, the franchise agreement gives the franchisee a right of
first refusal and/or option (o right to buy) to purchase the franchised
location upon termination of the franchise agreement. A separate memorandum
of right of first refusal and option to purchase or, alternatively,
memorandum of right of first refusal only, a form of which is attached to
the franchise agreement, had been executed and filed in the appropriate
jurisdiction
*** The initial fees were waived for this franchisee due to the fact that this
franchisee was a licensee of the Company operating a Petro Stopping Center
prior to becoming a franchisee.
49
<PAGE>
EXHIBIT 10.53
PURCHASE AND SALE AGREEMENT
BETWEEN
DR. JUNG Y. PARK AND WIFE, KYUNG HEE PARK
AND
PETRO STOPPING CENTERS, L.P.
Dated: October 27, 1997
<PAGE>
TABLE OF CONTENTS
PURCHASE AND SALE AGREEMENT
Page
----
ARTICLE I.
GENERAL
1.01 Definitions. . . . . . . . . . . . . . . . . . . . . 1
1.02 Agreement to Purchase and Sell . . . . . . . . . . . 4
1.03 Purchase Price . . . . . . . . . . . . . . . . . . . 5
1.04 Assumption of Certain Liabilities; Adjustments
at Closing . . . . . . . . . . . . . . . . . . . . . 6
1.05 Instruments of Transfer; Further Assurances. . . . . 7
1.06 Value Assigned to the Assets . . . . . . . . . . . . 7
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.01 Representations and Warranties of Seller . . . . . . 7
2.02 Representations and Warranties of Purchaser. . . . . 11
ARTICLE III.
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING
3.01 Access to Records and Properties; Confidentiality. . 13
3.02 Operation of Business. . . . . . . . . . . . . . . . 14
3.03 No Public Announcements. . . . . . . . . . . . . . . 14
3.04 Best Efforts to Satisfy Conditions . . . . . . . . . 15
3.05 Insurance. . . . . . . . . . . . . . . . . . . . . . 15
3.06 Title Commitment, Title Policy and Survey. . . . . . 15
3.07 Update to Seller's Disclosures . . . . . . . . . . . 16
3.08 Assignment by Purchaser. . . . . . . . . . . . . . . 16
3.09 No Business Shutdown or Layoffs. . . . . . . . . . . 17
3.10 Utility Easements. . . . . . . . . . . . . . . . . . 17
3.11 Sign . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE IV.
CONDITIONS OF CLOSING
4.01 Conditions of Obligations of Purchaser . . . . . . . 17
4.02 Conditions of Obligations of Seller. . . . . . . . . 19
4.03 Opportunity to Cure. . . . . . . . . . . . . . . . . 19
ARTICLE V.
CLOSING DATE AND TERMINATION OF AGREEMENT
5.01 Closing Date . . . . . . . . . . . . . . . . . . . . 19
5.02 Termination of Agreement . . . . . . . . . . . . . . 20
ARTICLE VI.
i
<PAGE>
Page
----
INDEMNIFICATION
6.01 Indemnity. . . . . . . . . . . . . . . . . . . . . . 21
6.02 Notice, Participation and Duration . . . . . . . . . 22
6.03 Reimbursement. . . . . . . . . . . . . . . . . . . . 22
6.04 No Third Party Beneficiaries . . . . . . . . . . . . 22
ARTICLE VII.
MISCELLANEOUS
7.01 Further Actions. . . . . . . . . . . . . . . . . . . 23
7.02 Broker . . . . . . . . . . . . . . . . . . . . . . . 23
7.03 Expenses . . . . . . . . . . . . . . . . . . . . . . 23
7.04 Entire Agreement . . . . . . . . . . . . . . . . . . 23
7.05 Descriptive Headings; Gender . . . . . . . . . . . . 24
7.06 Notices. . . . . . . . . . . . . . . . . . . . . . . 24
7.07 Governing Law. . . . . . . . . . . . . . . . . . . . 25
7.08 Assignability. . . . . . . . . . . . . . . . . . . . 25
7.09 Waivers and Amendments . . . . . . . . . . . . . . . 25
7.10 Third Party Rights . . . . . . . . . . . . . . . . . 25
7.11 Illegalities . . . . . . . . . . . . . . . . . . . . 25
7.12 Counterparts . . . . . . . . . . . . . . . . . . . . 25
7.13 Employees. . . . . . . . . . . . . . . . . . . . . . 25
7.14 Access to Records. . . . . . . . . . . . . . . . . . 26
7.15 Cost of Litigation . . . . . . . . . . . . . . . . . 26
7.16 Waiver of Trial by Jury. . . . . . . . . . . . . . . 27
7.17 Joint Preparation. . . . . . . . . . . . . . . . . . 27
7.18 Post-Closing Consultation. . . . . . . . . . . . . . 27
APPENDICES
Appendix 1.01-1
Appendix 1.02(b)(1)
Appendix 1.02(b)(4)
Appendix 1.02(b)(7)
Appendix 2.01(b)
Appendix 2.01(e)
Appendix 2.01(f)(2)
Appendix 2.01(g)
EXHIBITS
1.05-1 General Conveyance, Transfer and Assignment
1.05-2 Assumption Agreement
3.08 Exchange Agreement
ii
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered
into as of this 27th day of October, 1997, by and between DR. JUNG Y. PARK AND
WIFE, KYUNG HEE PARK, residents of Albany, Oregon (together, "Purchaser"), and
PETRO STOPPING CENTERS, L.P., a Delaware limited partnership ("Seller"), having
its executive offices in El Paso, Texas.
WHEREAS, Seller desires to sell to Purchaser the real property and certain
of the other assets as described herein constituting the Pear Tree Motel and RV
Park located in Phoenix, Oregon, owned by Seller (such real property and assets
being collectively referred to as the "Business"), and Purchaser desires to
purchase the Business, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual benefits to be derived and
the representations and warranties, conditions and promises herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I.
GENERAL
1.01 Definitions. Unless otherwise stated in this Agreement, the following
terms shall have the following meanings (the following definitions to be equally
applicable to both the singular and plural forms of any of the terms herein
defined):
"AFFILIATE": Any Person that, directly or indirectly, controls, or is
controlled by or under common control with, another Person. For the purposes of
this definition, "control" (including the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the power to
direct or cause the direction of the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities or by
contract or otherwise.
"AGREEMENT": As defined in the first paragraph hereof.
"ASSETS": As defined in Section 1.02(a).
"ASSUMPTION AGREEMENT": As defined in Section 1.05(b).
"ASSUMED OBLIGATIONS": The duties, obligations, debts and liabilities of
Seller assumed by Purchaser under Section 1.04.
"BUSINESS": As defined in the recitals of this Agreement.
<PAGE>
"CERCLA": The Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. (S) 9601, et seq.
"CLAIM": As defined in Section 6.02(a).
"CLOSING": As defined in Section 5.01(a).
"CLOSING DATE": As defined in Section 5.01(a).
"COMMITMENT": As defined in Section 3.06(a).
"DAMAGES": As defined in Section 6.01(a).
"DEED": The special warranty deed, in form and substance satisfactory to
Purchaser, by which Seller shall transfer title to the Property to Purchaser.
"EFFECTIVE TIME OF CLOSING": As defined in Section 5.01(b).
"ENVIRONMENTAL LAWS": As defined in Section 2.01(f).
"EQUIPMENT": As defined in Section 1.02(b)(4).
"FIXTURES AND IMPROVEMENTS": As defined in Section 1.02(b)(2).
"GENERAL CONVEYANCE, TRANSFER AND ASSIGNMENT": As defined in Section
1.05(a).
"GOVERNMENTAL BODY": Any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
"INDEMNITEE": As defined in Section 6.02(a).
"INDEMNITOR": As defined in Section 6.02(a).
"KNOWN" or "KNOWLEDGE": Whenever a statement regarding the existence or
absence of facts in this Agreement is qualified by a phrase such as "to such
Person's knowledge" or "known to such Person," it is intended by the parties
that the only information to be attributed to such Person is information
actually known to (a) the Person in the case of an individual or (b) in the case
of a corporation or other entity a current officer or employee who devoted
substantive attention to matters of such nature during the ordinary course of
his employment. Unless otherwise provided in this Agreement, no such Person is
represented to have undertaken a separate investigation in connection with the
transactions contemplated hereby to determine the existence or absence of facts
in any statement qualified by "known by" or "to the knowledge of" any Person.
"LETTER OF INTENT": As defined in Section 3.01(b).
2
<PAGE>
"LIEN": All mortgages, deeds of trust, liens, security interests, pledges,
conditional sale contracts, claims, rights of first refusal, options, charges,
agreements, liberties, easements, rights-of-way, limitations, reservations,
restrictions and other encumbrances of any kind.
"MATERIAL ADVERSE EFFECT": "Material Adverse Effect" means (a) any change,
development or effect (individually or in the aggregate) in the general affairs,
management, business, results of operations, condition (financial or otherwise),
assets, liabilities or prospects (whether or not the result thereof would be
covered by insurance) that would be material and adverse to Seller and
Subsidiary, taken as whole, or (b) any fact or development that would
(individually or in the aggregate), impair Seller's ability or obligations to
perform on a timely basis any material obligations it has under this Agreement.
"OPERATIVE DOCUMENTS": This Agreement and all other agreements,
instruments, documents, and certificates executed and delivered by or on behalf
of Seller or Purchaser at or before the Closing pursuant to this Agreement.
"ORDER": Any order, writ, injunction, decree, judgment, award or
determination of any court or Governmental Body.
"PERMITTED ENCUMBRANCES": (a) The Liens described or referred to in
Appendix 1.01-1 to this Agreement, (b) Liens for current Taxes and assessments
not yet due and payable, including, but not limited to, Liens for nondelinquent
ad valorem Taxes, nondelinquent statutory Liens arising other than by reason of
any default on the part of Seller, (c) all matters that shall be considered
"Permitted Exceptions" under Section 3.06(a) of this Agreement, and (d) such
liens, minor imperfections of title, or easements on real property, leasehold
estates, or personalty as do not in any material respect detract from the value
thereof and do not interfere with the present use of the property subject
thereto.
"PERMITTED EXCEPTIONS": As defined in Section 3.06(a).
"PERSON": An individual, partnership, joint venture, corporation, bank,
trust, unincorporated organization or a Governmental Body.
"PROPERTY": As defined in Section 1.02(b)(1).
"PURCHASE PRICE": As defined in Section 1.03(a).
"PURCHASER": As defined in the opening paragraph of this
Agreement.
"PURCHASER INDEMNITEES": As defined in Section 6.01(a).
"PURCHASER REPRESENTATIVE": As defined in Section 3.01(b).
3
<PAGE>
"RCRA": The Resource Conservation and Recovery Act, as amended, 42 U.S.C.
(S)(S) 6921-6939b.
"REAL PROPERTY": The Property and the Fixtures and Improvements and Realty
Rights pertaining thereto.
"REALTY RIGHTS": As defined in Section 1.02(b)(3).
"SCHEDULED CONTRACTS": As defined in Section 1.02(b)(7).
"SELLER INDEMNITEES": As defined in Section 6.01(b).
"SELLER": As defined in the opening paragraph of this Agreement.
"SURVEY": As defined in Section 3.06(b).
"TAXES": Any federal, state, local or foreign income, sales, real or
personal property or other taxes, assessments, fees, levies, imposts, duties,
deductions or other charges of any nature whatsoever (including without
limitation interest and penalties) imposed by any law, rule or regulation.
"TITLE POLICY": As defined in Section 4.01(c).
"TRANSACTION": The sale and purchase of the Assets, assignment and
assumption of certain liabilities, and performance of covenants, in each case as
contemplated by this Agreement.
1.02 Agreement to Purchase and Sell.
(a) On and subject to the terms and conditions of this Agreement, Seller
agrees to sell, convey, transfer, assign and deliver to Purchaser, and Purchaser
agrees to purchase from Seller, the assets, rights, and properties described in
Section 1.02(b) (all such assets, rights, and properties being herein
collectively referred to as the "Assets" and individually referred to as an
"Asset") free and clear of all Liens other than Permitted Encumbrances.
(b) The Assets shall consist of the assets of the Business at the Effective
Time of Closing described in the following clauses (1) through (8):
(1) Property. The parcels of real property described in Appendix
1.02(b)(1) to this Agreement (the "Property").
(2) Fixtures and Improvements. All estates, rights, titles and
interests in and to all buildings, works, structures, fixtures, landings,
improvements, betterments, installations and additions constructed, erected
or located on or attached or affixed to the Property (the "Fixtures and
Improvements").
4
<PAGE>
(3) Realty Rights. All estates, rights, titles and interests in and to
all tenements, hereditaments, easements, rights-of-way, rights, licenses,
rights of ingress and egress, privileges and appurtenances belonging,
pertaining or relating to the Property, and the entire right, title and
interest of Seller, if any, in, to and under all streets, ways, alleys,
passages, sewers, sewer rights, ditches, waters, water courses, water
rights and powers, air rights, railroad sidings, minerals, mineral rights
and mineral interests upon, above, in or under the Property.
(4) Equipment. The furniture, furnishings, equipment, machinery,
apparatus, tools, appliances, implements, spare parts, supplies and other
tangible personal property described or listed on an Appendix 1.02(b)(4) to
this Agreement to be delivered by Seller to Purchaser as soon as possible
after the date of this Agreement but no later than 14 days of such date
(the "Equipment").
(5) Permits. All right, title and interest of Seller in, to and under
all Permits relating to the Business or all or any of the Assets.
(6) Goodwill. The goodwill and going concern value of the Business.
(7) Scheduled Contracts. All right, title and interest of Seller in,
to and under the contracts and agreements described in an Appendix
1.02(b)(7) to this Agreement (the "Scheduled Contracts") which shall be
delivered by Seller to Purchaser as soon as possible after the date of this
Agreement but no later than 14 days of such date, and all rights (including
rights of refund and offset), privileges, deposits, claims, causes of
action and options relating or pertaining to the Scheduled Contracts or any
thereof.
(8) Names and Telephone Numbers. The name "Pear Tree Motel and RV
Park" and all rights of Seller to the telephone numbers currently utilized
by those businesses, to the extent that such telephone numbers are not used
by Seller for its truck stop business conducted on property adjacent to the
Property.
1.03 Purchase Price.
The purchase price for the Assets (the "Purchase Price") shall be
$2,280,000, payable to Seller as follows:
(1) $100,000 cash earnest money to be paid to Seller in cash or other
form of immediately available funds by Purchaser upon execution and
delivery of this Agreement and deposited by Seller in escrow with the Title
Company; and
5
<PAGE>
(2) $2,280,000, including the $100,000 earnest money, payable upon the
Closing to Seller by wire transfer of immediately available funds pursuant
to written instructions delivered by Seller to Purchaser and Title Company
at least one business day prior to the Closing Date.
1.04 Assumption of Certain Liabilities; Adjustments at Closing.
(a) Purchaser assumes:
(1) the obligations of Seller to perform the Scheduled Contracts
specifically set forth in Appendix 1.02(b)(7) to this Agreement to the
extent the Scheduled Contracts have not been performed at the Effective
Time of Closing; and
(2) ad valorem or similar Taxes upon any of the Assets to be prorated
pursuant to Section 1.04(b).
(b) Seller and Purchaser shall each pay its respective pro rata portion of
all 1997 ad valorem or similar Taxes upon any property included in the Assets.
Seller shall pay to Purchaser at the Closing estimated ad valorem or similar
Taxes for the current year (based on the prior year's Taxes or current year's
Taxes if available) prorated to the date of the Closing; Seller shall make
available to Purchaser copies of all statements and assessments reflecting such
prior year's Taxes. Purchaser shall pay such sums to the appropriate taxing
authorities when due, prior to becoming delinquent. Purchaser shall promptly
forward to Seller after receipt by Purchaser copies of all 1997 Tax assessments
under any such property or lease. If the 1997 Taxes shall be readjusted such
that the amounts payable are greater than the prior year's Taxes, Seller shall
pay its pro rata share of any difference promptly upon written notice of such
Taxes having been paid by Purchaser. If such 1997 Taxes shall be readjusted such
that the amounts payable are less than the prior years' Taxes, Purchaser shall
refund to Seller its pro rata share of such reduction upon notice of such Taxes
having been paid by Purchaser. Except as provided in Section 1.04(a) hereof,
Purchaser shall have no other liability for Taxes payable by Seller (including
income Taxes) relating to the operations of the Business or the transactions
contemplated hereunder.
(c) All other items of income and expense of the Business shall be prorated
between Seller and Purchaser as of the Closing Date, including, without
limitation, utility charges, rents, and advance payments or prepaid amounts
under the Scheduled Contracts. All customer deposits, if any, held by Seller on
the Closing Date will be delivered to Purchaser. Purchaser shall pay Seller in
cash on the Closing Date the amount of (i) any deposits made by Seller under the
Scheduled Contracts, if any, to be retained thereunder after Closing, (ii) any
refunds or offsets owing to Seller under the Scheduled Contracts, and (iii) any
other cash deposits by
6
<PAGE>
Seller or other rights of Seller to cash payments inuring to the benefit of
Purchaser at and after Closing.
1.05 Instruments of Transfer; Further Assurances. In order to consummate
the transactions contemplated hereby, at the Closing Seller shall execute and
deliver to Purchaser the Deed covering the Real Property, and Seller and
Purchaser shall deliver to each other (a) a completed General Conveyance,
Transfer and Assignment, in the form attached as Exhibit 1.05-1 hereto ("General
Conveyance, Transfer and Assignment"), covering all of the Assets other than the
Real Property, and (b) an Assumption Agreement in the form attached as Exhibit
1.05-2 hereto ("Assumption Agreement"). At the Closing, and at all times
thereafter as may be necessary, Seller shall execute and deliver to Purchaser
(1) such other instruments of transfer as shall be reasonably necessary or
appropriate to vest in Purchaser title to the Assets and to comply with the
purposes and intent of this Agreement and (2) such other instruments as shall be
reasonably necessary or appropriate to evidence the assignment by Seller and
assumption by Purchaser of the Scheduled Contracts, and certain other
liabilities to the extent provided in Section 1.04(a).
1.06 Value Assigned to the Assets. On or before the Closing Date, Purchaser
and Seller shall agree on the proportion of the consideration to be allocated to
each of the Assets purchased pursuant to this Agreement. Purchaser and Sellers
agree that they shall not thereafter take any position or action inconsistent
with such allocation in the filing of any income Tax returns.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.01 Representations and Warranties of Seller. Seller, represents and
warrants to Purchaser that the following are true and correct on and as of the
date of this Agreement and will be true and correct through the Effective Time
of Closing as if made on and as of that date:
(a) Organization and Good Standing of Seller. Seller is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware and is qualified to transact business and is in good
standing as a foreign limited partnership in the jurisdictions where it is
required to qualify in order to conduct its businesses as presently conducted
except where the failure to be qualified would not have a Material Adverse
Effect.
Seller has the partnership power and authority to own, lease or operate all
properties and assets now owned, leased or operated by it and to carry on its
businesses as now conducted.
(b) Consents, Authorizations and Binding Effect.
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(1) Seller may execute, deliver and perform this Agreement (including
without limitation execution, delivery and performance of the Operative
Documents to which it is a party) without the necessity of Seller obtaining
any consent, approval, authorization or waiver or giving any notice or
otherwise, except for such consents, approvals, authorizations, waivers and
notices:
(i) which have been obtained and are unconditional and are in
full force and effect and such notices which have been given, or
(ii) which are described on Appendix 2.01(b) to this Agreement.
(2) Seller has the partnership power to enter into this Agreement and
to carry out its respective obligations hereunder. This Agreement has been
duly authorized, executed and delivered by Seller and constitutes the
legal, valid and binding obligation of Seller, enforceable against it in
accordance with its terms, except as may be limited by bankruptcy,
reorganization, fraudulent conveyance, insolvency and similar laws of
general application relating to or affecting the enforcement of rights of
creditors and subject to general principles of equity.
(3) The execution, delivery and performance of this Agreement by
Seller does not and will not:
(i) constitute a violation of its Certificate of Limited
Partnership, as amended, or its Partnership Agreement, as amended,
(ii) result in any Lien against the Assets,
(iii) constitute a violation of any statute, judgment, order,
decree or regulation or rule of any Governmental Body known to Seller
applicable or relating to Seller or the Assets or the Business (except
for those which, singly or in the aggregate, would not create or
result in a Material Adverse Effect), or
(4) Without limiting the foregoing, the execution, delivery and
performance of the Operative Documents, and consummation of the
transactions contemplated thereby, have been duly authorized and approved
by the Board of Directors of Seller.
(c) Title and Condition of Assets. Seller has good and indefeasible title
to the Real Property (in fee simple), and interests in the tangible and
intangible personal property owned by it that comprise the Assets, free and
clear of Liens, other than:
(1) Permitted Encumbrances, and
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(2) Liens which will be released or discharged at or prior to the
Effective Time of Closing.
During the time that Seller has owned the Real Property, no improvement or
structure on the Real Property has been damaged by any casualty or act of God,
or been subject to any condemnation proceedings which, singularly or in the
aggregate, would have a Material Adverse Effect.
Seller has no actual knowledge of material structural defects in any
improvement or structure on the Real Property, and all equipment, electrical
wiring, heating, cooling and plumbing systems for the improvements on the Real
Property are in working order and the balance of the tangible personal property
included in the Assets, including the grounds, are substantially in the
condition that such property was in at the date of the Letter of Intent.
Since the date of the Letter of Intent, Seller has not sold, transferred,
leased, distributed or otherwise disposed of any of the assets used in the
operation of the Business and included in this Transaction, or agreed to do so,
except for the disposition of assets in the ordinary course of business or which
in the reasonable judgment of Seller are not necessary or advisable to the
efficient operations of the Business.
(d) Scheduled Contracts in Full Force and Effect. The Scheduled Contracts
are valid, binding and in full force and effect, have not been amended or
supplemented in any manner or respect except as disclosed on Appendix 1.02(b)(7)
to this Agreement, and upon assignment and assumption, with applicable consents
if necessary, will be enforceable by Purchaser in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, fraudulent
conveyance, and similar laws of general application relating to or affecting the
enforcement of rights of creditors and subject to general principles of equity.
There are no defaults by Seller thereunder and Seller knows of no defaults
thereunder by any other party thereto, and, to Sellers' knowledge, no event has
occurred that with the lapse of time or action or inaction by any party thereto
would result in a violation thereof or a default thereunder.
(e) Real Property.
(1) Seller has not received notice of any Liens to be assessed against
the Real Property by any Governmental Body other than Liens for current
year Taxes upon the Property and Assets not yet due and payable. Seller has
not received notice from any Governmental Body that the Real Property
violates in any material respect any provisions of any applicable building
code, fire, health or safety regulations, or other governmental ordinances,
orders or regulations.
(2) To the best of Seller's knowledge, there is no pending or
threatened condemnation or similar proceeding or assessment affecting the
Real Property, or any part thereof.
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(3) The Real Property has full and free access to and from public
highways, streets or roads and, to the best knowledge and belief of Seller,
there is no pending or threatened proceeding by any Governmental Body which
would impair or result in the termination of such access, except as the
proceedings described on Appendix 2.01(e) to this Agreement may impair or
result in the termination of such access.
(f) Environmental Matters.
(1) No portion of the Real Property, during the period of Seller's
ownership of the Real Property, has ever been used as a dump site for
trash, garbage, junk, toxic or hazardous waste, within the meaning of
applicable Environmental Laws, or as a sanitary or other landfill, nor has
the Real Property during the period of Seller's ownership of the Real
Property ever been used to generate, manufacture, refine, treat, store,
handle or dispose of hazardous waste or toxic materials, within the meaning
of applicable Environmental Laws.
(2) Seller has not received any summons, directive, citation, letter
or other written communication of any kind from any Governmental Body
concerning any action on the part of Seller resulting in the releasing,
spilling, leaking, pumping, pouring, emitting, emptying or dumping of
hazardous substances, hazardous waste or toxic materials, within the
meaning of applicable Environmental Laws, into waters on the Real Property
or property adjacent thereto or onto the Real Property or property adjacent
thereto, except as may be described in Appendix 2.01(f) to this Agreement.
As used in this Agreement, "Environmental Laws" means any applicable federal,
state, or local laws, rules, or regulations, common law or strict liability
provisions, and any judicial or administrative interpretations thereof,
including any judicial or administrative orders or judgments, relating to
health, safety, industrial hygiene, pollution or environmental matters in effect
as of the date of this Agreement.
(g) Financial Information. Seller has delivered to Purchaser the financial
information pertaining to the operations of the Business described on Appendix
2.01(g) to this Agreement and will deliver to Purchaser income and expense
statements for the months of October and November 1997, to the extent that same
are available prior to Closing. Such financial information that has been or will
be delivered is in accordance with the books and records of Seller, and the
copies thereof furnished to Purchaser are and will be true, correct and complete
copies thereof; such financial information fairly presents and will fairly
present in all material respects the operations of the Business for the periods
covered thereby. Except as described in Appendix 2.01(g) since September 30,
1997, there has been no material adverse change in the results of operations of
the Business.
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2.02 Representations and Warranties of Purchaser. Purchaser jointly and
severally represents and warrants to Seller that the following are true and
correct on and as of the date of this Agreement and will be true and correct
through the Effective Time of Closing as if made on and as of that date:
(a) Purchasers are husband and wife and have the individual capacity to
enter into this Agreement and to carry out their respective obligations
hereunder.
(b) Purchaser may execute, deliver and perform this Agreement without the
necessity of Purchaser obtaining any consents approval, authorization or waiver
or giving any notice or otherwise, except for such consents, approvals,
authorizations, waivers and notices which have been obtained and are
unconditional and are in full force and effect and such notices which have been
given.
(c) The execution, delivery and performance of this Agreement do not and
will not
(1) constitute a violation of any statute, judgment, order, decree or
regulation or rule of any court, governmental authority or arbitrator
applicable or relating to Purchaser, or
(2) constitute a default under any contract to which Purchaser is a
party except where such default would not have a Material Adverse Effect
upon the ability of Purchaser to perform its obligations under this
Agreement.
(d) This Agreement has been duly authorized, executed and delivered by
Purchaser. This Agreement constitutes the legal, valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except as may be limited by
bankruptcy, reorganization, insolvency and similar laws of general application
relating to or affecting the enforcement of rights of creditors and subject to
general principles of equity.
(e) PURCHASER ACKNOWLEDGES THAT IT HAS SUFFICIENT KNOWLEDGE AND EXPERTISE
IN BUSINESS AND FINANCIAL MATTERS TO EVALUATE THE MERITS AND RISKS ASSOCIATED
WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND THAT THEY HAVE
CONSULTED WITH SUCH ADVISORS TO THEM CONCERNING THE LEGAL, FINANCIAL, TAX AND
OTHER MATTERS CONCERNING THIS TRANSACTION AS PURCHASERS HAVE DEEMED NECESSARY.
PURCHASER HAS MADE ITS DECISION TO ENTER INTO THIS AGREEMENT AND TO CONSUMMATE
THE TRANSACTIONS CONTEMPLATED HEREBY WITHOUT RELYING UPON ANY EXPRESS OR IMPLIED
REPRESENTATIONS FROM SELLER EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT.
SPECIFICALLY, AND WITHOUT LIMITING THE FOREGOING, PURCHASER ACKNOWLEDGES AND
AGREES THAT, EXCEPT AS MAY BE SPECIFICALLY SET FORTH TO THE CONTRARY IN THIS
AGREEMENT, IT IS PURCHASING THE REAL PROPERTY AND OTHER ASSETS IN AN "AS-IS" AND
"WHERE-IS" CONDITION "WITH ALL FAULTS" AND ALL PHYSICAL LATENT OR PATENT
DEFECTS, SPECIFICALLY AND, EXCEPT FOR THE REPRESENTATIONS BY SELLER SPECIFICALLY
SET FORTH IN THIS AGREEMENT, EXPRESSLY WITHOUT WARRANTIES, REPRESENTATIONS OR
GUARANTEES OF ANY
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KIND, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF: CONDITION; MERCHANTABILITY;
HABITABILITY; FITNESS FOR A PARTICULAR USE; VALUE; PROFITABILITY OR
MARKETABILITY OF ANY OF THE ASSETS. PURCHASER ACKNOWLEDGES THAT, EXCEPT FOR THE
REPRESENTATIONS OF SELLER SPECIFICALLY SET FORTH IN THIS AGREEMENT, PURCHASER IS
NOT RELYING AND HAS NOT RELIED UPON ANY INFORMATION, DOCUMENT, BROCHURE OR OTHER
LITERATURE, MAP, SKETCH, PROJECTION, PROFORMA, STATEMENT, REPRESENTATION,
GUARANTEE OR WARRANTY THAT MAY HAVE BEEN GIVEN BY OR MADE BY OR ON BEHALF OF
SELLER AND THAT IT IS PURCHASER'S SOLE RESPONSIBILITY TO UNDERTAKE SUCH DUE
DILIGENCE AND TO MAKE SUCH LEGAL, FACTUAL AND OTHER INQUIRIES AND INVESTIGATIONS
AS PURCHASER DEEMS NECESSARY, DESIRABLE OR APPROPRIATE WITH RESPECT TO ACQUIRING
THE ASSETS. ON THE CLOSING DATE, PURCHASER HEREBY RELEASES SELLER OF AND FROM
ALL LIABILITIES, OBLIGATIONS AND CLAIMS, KNOWN OR UNKNOWN, THAT PURCHASER MAY
HAVE AGAINST THE SELLER OR THAT ARISE IN THE FUTURE BASED IN WHOLE OR IN PART
UPON THE PRESENCE OF TOXIC OR HAZARDOUS SUBSTANCES OR OTHER ENVIRONMENTAL
CONTAMINATION ON OR WITHIN THE PROPERTY AS SUCH TERMS OR CONDITIONS MAY NOW OR
HEREAFTER BE DEFINED OR REGULATED BY ANY ENVIRONMENTAL LAWS INCLUDING, BUT NOT
LIMITED TO CERCLA AND RCRA, OR OTHERWISE, EXCEPT FOR THE INDEMNITY OBLIGATION OF
SELLER SET FORTH IN SECTION 6.01(a) OF THIS AGREEMENT. PURCHASER ACKNOWLEDGES
THAT IT IS NOT RELYING AND HAS NOT RELIED UPON THE SELLER OR ANY REPRESENTATIVE
OF SELLER, EXCEPT AS TO THE SPECIFIC REPRESENTATIONS OF SELLER SET FORTH IN THIS
AGREEMENT AS TO: (1) THE QUALITY, NATURE, ADEQUACY OR PHYSICAL CONDITION OF ANY
OF THE ASSETS; (2) THE QUALIFY, NATURE, ADEQUACY OR CONDITION OF SOILS OR
GROUNDWATER AT THE PROPERTY; (3) THE EXISTENCE, QUALITY, NATURE, ADEQUACY OR
CONDITION OF ANY UTILITIES AT OR NEAR THE PROPERTY; (4) THE DEVELOPMENT
POTENTIAL OF ANY OF THE ASSETS, THEIR HABITABILITY, MERCHANTABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE; (5) THE ZONING OR OTHER LEGAL STATUS OF THE
PROPERTY, INCLUDING BUT NOT LIMITED TO, CONDEMNATION OR THREAT OF CONDEMNATION;
(6) THE ASSETS' OR BUSINESS'S COMPLIANCE WITH ANY LAW, RULE, REGULATION OR
ORDINANCE (INCLUDING THE AMERICANS WITH DISABILITIES ACT), COVENANT, CONDITION
OR RESTRICTION, LABOR LAW OR BUILDING CODE CONCERNING LABOR AND MATERIAL USED OR
INCORPORATED INTO OR OTHERWISE RELATING TO ANY OF THE ASSETS; OR (7) THE
CONDITION OF TITLE TO ANY OF THE ASSETS OR THE NATURE, STATUS AND EXTENT OF ANY
EASEMENT, RIGHT OF WAY, ENCUMBRANCE, LICENSE, RESERVATION OR ANY OTHER MATTER
AFFECTING TITLE TO THE PROPERTY EXCEPT AS MAY BE SET FORTH IN THE COMMITMENT
DELIVERED TO PURCHASER. WITHOUT IN ANY WAY LIMITING THE GENERALITY OF THE
PRECEDING, EXCEPT FOR THE INDEMNITY OBLIGATION OF SELLER SET FORTH IN SECTION
6.01(a) OF THIS AGREEMENT, PURCHASER HEREBY WAIVES, RELEASES AND DISCHARGES ANY
CLAIM IT HAS, MIGHT HAVE HAD OR MAY HAVE AGAINST SELLER RELATING TO THE
CONDITION OF ANY OF THE ASSETS, EITHER PATENT OR LATENT, AS WELL AS PURCHASER'S
ABILITY OR INABILITY TO OBTAIN OR MAINTAIN BUILDING PERMITS, CERTIFICATES OF
OCCUPANCY OR OTHER LICENSES FOR THE USE OR OPERATION OF ANY OF THE ASSETS,
AND/OR CERTIFICATES OF COMPLIANCE THEREFOR, THE ACTUAL OR POTENTIAL INCOME OR
PROFITS TO BE DERIVED FROM THE ASSETS, THE REAL ESTATE TAXES OR ASSESSMENTS NOW
OR HEREAFTER PAYABLE THEREON, THE COMPLIANCE WITH ANY ENVIRONMENTAL OR LAND USE
LAWS, RULES, REGULATIONS OR REQUIREMENTS, AND ANY OTHER STATE OF FACTS WHICH
EXISTS WITH RESPECT TO THE ASSETS. THE PROVISIONS OF THIS SECTION
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2.02(e) SHALL SURVIVE THE CLOSING AND THE TRANSFER OF TITLE TO THE ASSETS TO
PURCHASER.
ARTICLE III.
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING
3.01 Access to Records and Properties; Confidentiality.
(a) Between the date of this Agreement and the expiration of the thirtieth
(30th) day thereafter, Seller shall give to Purchaser and its advisors such
access to the Assets and premises as Purchaser shall from time to time
reasonably request. Without limiting the generality of the foregoing, Seller
shall give to Purchaser and its representatives access during normal business
hours to the facilities and operations of the Business so that Purchaser may at
Purchaser's cost (1) obtain evaluations of the Assets and (2) perform any and
all assessing, testing, monitoring and investigating that Purchaser deems
necessary in its sole discretion with respect to environmental matters
concerning the Real Property and operation of the Business. Any investigation
pursuant to this Section 3.01 shall be conducted at Purchaser's cost (other than
the usual salary of employees of Seller, overhead expenses of Seller and the
fees and expenses of counsel and independent public accountants for Seller) and
in such manner as not to interfere unreasonably with the business and operations
of Seller. Purchaser, jointly and severally, shall indemnify and hold Seller and
Seller Indemnitees harmless in accordance with Article VI of this Agreement from
any Damages arising out of Purchaser's entry upon or access to the Property or
other Assets.
(b) In connection with the transactions contemplated by this Agreement, in
addition to, and not by way of limitation of, any other obligations of Purchaser
under or pursuant to any other agreement, whether written or oral, with Seller
or any other obligations of Purchaser at law or in equity, all information
furnished to Purchaser or to any other Person for the benefit of Purchaser will
be kept confidential by Purchaser, such other Person and their respective
associates, Affiliates, agents, employees, consultants and advisors
(collectively, "Purchaser Representatives") prior to the Closing Date, or in the
event the closing does not occur at all times, and will not be used in any
manner adverse to the furnishing party. During such time, Purchaser will hold
and will cause the Purchaser Representatives to hold in strict confidence,
unless compelled to disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of law, all documents and
information concerning Seller furnished to Purchaser or any Purchaser
Representative by Seller or any of its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information can be shown to have been (1) previously available to the Person to
which it was furnished on a non-confidential basis prior to its disclosure, (2)
in the public domain or (3) available on a non-confidential basis from a Person
other than a Person not bound by any confidentiality agreement).
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Purchaser may release or disclose such information to any Purchaser
Representative in connection with this Agreement prior to the Closing Date or in
the event the Closing does not occur only if the Purchaser Representatives are
informed of the confidential nature of such information and they agree in
writing (substantially similar in substance to the matters contained in this
Section 3.01(b)) to such confidential treatment of all such information. If the
transactions contemplated by this Agreement are not consummated, Purchaser
agrees to remain bound by the confidentiality of information and nonsolicitation
and nonemployment and nonengagement of employees of Seller obligations set forth
in paragraph 7 of the Letter of Intent dated September 25, 1997, previously
executed by Purchaser and Seller (the "Letter of Intent") and incorporated
herein for all purposes. Notwithstanding the foregoing, if a Person has been
requested or is required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any information, the Person so being required will promptly
notify Seller so that Seller may seek an appropriate protective order. Each
Purchaser warrants that Purchaser and each Purchaser Representative will
cooperate fully with Seller in seeking such a protective order.
3.02 Operation of Business. Between the date hereof and the Effective Time
of Closing, except as contemplated herein or except with the prior consent of
Purchaser, which consent will not be unreasonably withheld, Seller shall
(a) operate the Business as presently operated, only in the ordinary
course, and in compliance with all laws, regulations, writs, injunctions,
decrees or orders applicable to Seller and the Assets, including without
limitation all environmental, safety and health, antitrust, consumer protection,
labor, equal opportunity or discrimination laws, rules and regulations,
(b) cause the tangible Assets to be maintained and repaired in accordance
with past practices of Seller, and
(c) not dispose of, or commit to dispose of, any Assets (other than in the
ordinary and customary course of business).
Seller shall use best efforts to operate and maintain, or to cause to be
operated and maintained, the Business and the Assets in such a manner so that
the representations and warranties of Seller contained herein shall continue to
be true and correct in all material respects on and as of the Effective Time of
Closing as if made on and as of the Effective Time of Closing.
3.03 No Public Announcements. The parties hereto shall not issue any press
release or make any public statement regarding the transactions contemplated by
this Agreement without obtaining the prior consent of the other party, which
consent shall not be unreasonably withheld.
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3.04 Best Efforts to Satisfy Conditions. Seller shall use its reasonable
best efforts to cause the conditions to the obligations of Purchaser contained
in Section 4.01 to be satisfied to the extent that the satisfaction of such
conditions is reasonably in the control of Sellers, and Purchaser shall use its
reasonably best efforts to cause the conditions to the obligations of Sellers
contained in Section 4.02 to be satisfied to the extent that the satisfaction of
such conditions is reasonably in the control of Purchaser.
3.05 Insurance. As of the Effective Time of Closing, Seller shall cease to
be covered with respect to any occurrence after the Effective Time of Closing
under the insurance policies obtained and maintained by Seller covering the
business, property and employees of Seller.
Following the Effective Time of Closing, Purchaser shall give to Seller
prompt notice of the assertion by any Person of any claim against Seller which
might be subject to the insurance coverage described in this Section 3.05.
Purchaser shall cooperate with Seller and any applicable insurance carrier in
any investigation by Seller or any applicable insurance carrier of any such
claim and shall give to Seller and any applicable insurance carrier reasonable
access to the books, records and personnel formerly of Seller to the extent
reasonably necessary to enable Seller and any applicable insurance carrier to
investigate such claim.
3.06 Title Commitment, Title Policy and Survey.
(a) Seller has caused Jackson County Title Division of Oregon Title
Insurance Company (the "Title Company") to issue a preliminary title report and
commitment for title insurance (the "Commitment") to Purchaser covering the
Property, accompanied by copies of all recorded documents relating to easements,
rights-of-way, and other matters affecting the Property. The Commitment contains
an irrevocable commitment by the Title Company to issue the Title Policy
(defined in Section 4.01(c) of this Agreement) on the Closing Date. Purchaser
shall give Seller written notice on or before November 7, 1997, that the
condition of title as set forth in the Commitment and the matters shown on the
Survey provided for in paragraph (b) of this Section 3.06 are satisfactory or
are not satisfactory and not in accordance with the terms and conditions of
Section 4.01(c) of this Agreement, and if Purchaser states that the condition of
title or any matter shown on the Survey are not satisfactory and not in
accordance with the terms and conditions of Section 4.01(c) of this Agreement,
Seller shall, at its sole cost and expense, promptly use its reasonable best
efforts to eliminate or modify all such matters to the reasonable satisfaction
of Purchaser. If Seller is unable to eliminate or modify all such matters to the
reasonable satisfaction of Purchaser, Purchaser may, at its option, (i) accept
title subject to any and all such matters not so eliminated or modified, without
an adjustment in the Purchase Price, in which event, all such matters shall be
deemed to be waived for all purposes, or (ii) terminate this Agreement, and this
Agreement shall be of no further force or effect. All
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standard exceptions, exclusions, conditions and stipulations which are part of
the form of Title Policy called for under Section 4.01(c) of this Agreement and
matters that are accepted or waived by Purchaser shall be considered "Permitted
Exceptions."
(b) Purchaser, at its sole cost and expense, shall cause to be delivered to
Purchaser and Seller and to the Title Company, a current land title survey of
the Property (the "Survey"), prepared by a duly licensed land surveyor
acceptable to Purchaser and the reasonable satisfaction of Seller. The survey
shall:
(1) Set forth an accurate metes and bounds description of the
Property;
(2) Locate all existing easements (setting forth the recording
information for such easements), all alleys, streets and roads, signs,
driveways, storm drains, sanitary sewers, drainage ways, and all utilities
utilized in the operation of the Property and located on property adjacent
thereto owned by Seller, if any;
(3) Show all encroachments upon the Property;
(4) Show all existing improvements, parking lots, power lines, fences,
landscaping and other improvements;
(5) Show all dedicated public streets providing access to the Property
and whether such access is paved to the Property line of the Property; and
(6) Contain the surveyor's certificate to Purchaser and Seller that
there are no encroachments upon the Property except as shown and that the
Survey is correct.
3.07 Update to Seller's Disclosures. Seller shall deliver to Purchaser a
supplement to any of the appendices of Seller to this Agreement promptly after
any Seller becomes aware of any event which changes any representation or
warranty made by Seller in this Agreement or any statement made in any previous
supplement.
3.08 Assignment by Purchaser. Purchaser may within a reasonable period of
time prior to the Closing assign its rights under this Agreement to acquire the
Assets to LTC Exchange Company ("Assignee") under the Exchange Agreement between
Purchaser and Assignee, dated June 12, 1997, a copy of which is attached hereto
as Exhibit 3.08, provided (i) that such assignment shall in no manner or way
release Purchaser from the performance of any of its obligations under this
Agreement or any of its liabilities hereunder or alter those obligations or
liabilities in any manner or way, (ii) Purchaser shall remain fully liable for
the performance of all such obligations and the satisfaction of all such
liabilities notwithstanding such assignment, (iii) Seller makes no
representation or warranty of any kind in respect to such assignment or the
intended Tax consequences thereof, (iv) should any dispute arise in connection
with this Agreement, the
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contemplated Transaction or the assignment to Assignee, such dispute shall be
resolved as if there had been no such assignment to Assignee, to the effect that
Seller shall have no liability to Assignee, Purchaser or any other party by
virtue of the assignment other than to perform Seller's obligations under this
Agreement, and (v) Purchaser, jointly and severally, hereby indemnifies Seller
and Seller Indemnitees agrees to hold Seller and Seller Indemnitees harmless
from any and all such liability on the terms and conditions provided in Article
VI of this Agreement.
3.09 No Business Shutdown or Layoffs. Purchaser shall not shut down the
Business or lay off employees of Seller engaged in the operation of the Business
prior to Closing or take any other action which could subject Seller to any
Damages under state or federal plant closing or mass layoffs laws or any law of
similar import.
3.10 Utility Easements. If the Survey reveals that the Property is serviced
by private utility easements across the property owned by Seller adjacent to the
Property, Seller and Purchaser shall work in good faith together during the due
diligence period provided for in Section 3.01(a) of this Agreement to reach
agreement upon mutually satisfactory forms of easements on such adjacent
property of Seller to service the Property, such easements to be in recordable
form and on mutually satisfactory terms and conditions. If Seller and Purchaser
are unable to agree upon such forms of easements, Purchaser may, at its option,
either waive its requirement for any such easement or on or before the
expiration of such due diligence period terminate this Agreement.
3.11 Sign. Seller agrees to permit Purchaser to continue in use during the
one-year period following Closing the sign advertising the Business existing on
the roof of a building on Seller's adjacent truck stop property. All maintenance
and repair of the sign shall be at the cost and expense of Purchaser. At the end
of the one-year period, Seller may cause the sign to be removed, and Purchaser
shall be entitled to possession of the sign or such salvageable parts thereof as
may exist after removal. Seller shall not be liable or responsible for any
damage or destruction to the sign caused by removal.
ARTICLE IV.
CONDITIONS OF CLOSING
4.01 Conditions of Obligations of Purchaser. The obligations of Purchaser
to consummate the purchase and sale under this Agreement are subject to the
satisfaction of the following conditions, each of which may be waived in writing
by Purchaser:
(a) Representations and Warranties; Performance of Obligations.
(1) The representations and warranties of Seller set forth in Section
2.01 hereof subject to such changes as
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contemplated herein on the Closing Date shall have been and shall be true
and correct in all material respects on and as of the date of this
Agreement and shall be true and correct in all material respects on and as
of the Closing Date, as though made on and as of the Closing Date.
(2) Seller shall have performed in all material respects the
covenants, agreements and obligations required to be performed by it under
this Agreement prior to and on the Closing Date.
(3) Seller shall have delivered to Purchaser its certificate
confirming the satisfaction of the conditions set forth in subparagraphs
(1) and (2) above.
(b) Delivery of Instruments. Seller shall have delivered to Purchaser the
duly authorized and executed Deed, the General Conveyance, Transfer and
Assignment, and such other conveyance documents that Purchaser may reasonably
request to effect the transfer and conveyance of the Assets to Purchaser.
(c) Title Policy. At Closing, Seller shall deliver to Purchaser either (1)
an ALTA owner's title policy (1987) issued, at the sole cost and expense of
Seller, by the Title Company or (2) on the conditions that (a) Purchaser be
solely responsible for the payment of any additional premium therefor, (b) the
Survey is satisfactory in form and scope for the issuance thereof, (c) Purchaser
provides all information required in connection therewith, and (d) Seller incurs
no extra cost or expense or liability in connection therewith, then Seller shall
deliver to Purchaser at Closing an extended coverage ALTA owners title policy
issued by the Title Company. If an extended coverage ALTA owners title policy is
called for by the foregoing terms and conditions, Seller will pay the basic
insurance rate for an ALTA owner's title policy, and Purchaser shall pay any and
all additional premium required to modify or eliminate any standard exceptions
desired by Purchaser to be modified or eliminated. The form of Title Policy
called for under this Section 4.01(c) is referred to in this Agreement as the
"Title Policy". The Title Policy shall be in the amount of $2,000,000, insuring
that Purchaser owns fee simple title to the Property, subject to no exceptions
other than (i) the Permitted Exceptions; (ii) if an extended coverage ALTA
owners title policy is called for by the terms and conditions of this Section
4.01(c), such of the standard exceptions as Purchaser shall not pay the
additional premium required to eliminate or modify such exceptions or as to
which modification or elimination thereof cannot be accomplished because of
nonsatisfaction of one or more of the conditions of this Section 4.01(c); (iii)
the exception as to taxes which shall have inserted the year 1997-1998; and (iv)
other exceptions which Purchaser approves in writing.
(d) Consents, Notices and Approvals. All consents and approvals of all
Persons necessary for the consummation of the Transaction under any agreement,
permit, law or regulation shall have been received and delivered to Purchaser,
all notices to any
18
<PAGE>
Person required by any of the foregoing to be given in respect of the
Transaction prior to Closing shall have been duly given, and all necessary
action shall have been taken to assign to Purchaser the Scheduled Contracts.
4.02 Conditions of Obligations of Seller. The obligations of Seller to
consummate the sale and purchaser under this Agreement are subject to the
satisfaction of the following conditions, each of which may be waived in writing
by Seller:
(a) Representations and Warranties; Performance of obligations. The
representations and warranties of Purchaser set forth in Section 2.02 hereof on
the Closing Date shall have been and be true and correct in all material
respects on and as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date.
Purchaser shall have performed in all material respects the covenants,
agreements and obligations necessary to be performed by it under this Agreement
prior to the Closing Date. Purchaser shall have delivered to Seller their
certificate confirming the satisfaction of the conditions set forth in this
subparagraph (a).
(b) Purchase Price. Purchaser shall have delivered to Seller the Purchase
Price in the form required by Section 1.03(a) of this Agreement.
4.03 Opportunity to Cure. In the event that Purchaser shall notify Sellers,
or Sellers shall notify Purchaser, of its decision not to consummate the sale
and purchase of the Business hereunder due to the failure of any of the
conditions contained in Sections 4.01 or 4.02 hereof to be satisfied, Sellers,
or Purchaser, as the case may be, shall have the opportunity for a reasonable
period of time to take such actions as may be necessary to remedy the
circumstances which have resulted in the failure of such condition or conditions
to be satisfied.
ARTICLE V.
CLOSING DATE AND TERMINATION OF AGREEMENT
5.01 Closing Date.
(a) Subject to the right of (1) Seller and (2) Purchaser to terminate this
Agreement pursuant to Section 5.02 hereof, the closing for the consummation of
the purchase and sale contemplated by this Agreement (the "Closing") shall,
unless another date or place is agreed to in writing by Seller and Purchaser,
take place at the offices of the Title Company at 502 West Main Street, Medford,
Oregon, at 10:00 a.m., Oregon time on December 5, 1997, or such other date as
the parties may agree upon (the "Closing Date").
(b) For all purposes hereof, the term "the Effective Time of Closing" shall
occur upon the delivery to Purchaser of the Deed,
19
<PAGE>
the General conveyance, Transfer and Assignment, and the other Operative
Documents as contemplated herein on the Closing Date.
5.02 Termination of Agreement.
(a) This Agreement may, by written notice given prior to Closing strictly
at the terms and in the manner hereinafter provided, be terminated or abandoned:
(1) In the event that the Effective Time of Closing shall not have
occurred on or before December 11, 1997, by Seller or by Purchaser;
(2) By Purchaser (i) pursuant to Section 3.06(a) or if a material
default or breach shall be made by Seller with respect to the due and
timely performance of any of its covenants and agreements contained herein,
or with respect to the correctness of or due compliance with any of its
representations and warranties contained in Article II hereof, and such
default cannot be cured and has not been waived (if Seller notifies
Purchaser of any default or breach by Seller hereunder and Purchaser
chooses not to terminate this Agreement, Purchaser shall be deemed to have
waived such default or breach); (ii) by written notice given to Seller on
or before the thirtieth (30th) day after the date of this Agreement,
specifying (a) in reasonable detail the reason or reasons that Purchaser is
not satisfied with the results of its investigation provided for in Section
3.01(a) of this Agreement or not satisfied with the information disclosed
in Appendix 1.02(b)(4) or Appendix 1.02(b)(7) to this Agreement and/or (b)
that Purchaser elects to terminate pursuant to Section 3.10 of this
Agreement; and (iii) by written notice given to Seller on or before
November 21, 1997 to the effect that, despite its best efforts to do so,
Purchaser has been unable to obtain acceptable financing for its purchase
of the Assets pursuant to this Agreement, as determined by Purchaser in its
sole judgment;
(3) By Seller if a material default or breach shall be made by
Purchaser with respect to the due and timely performance of any of its
covenants and agreements contained herein, or with respect to the
correctness of or due compliance with any of its representations and
warranties contained in Article II hereof, and such default cannot be cured
and has not been waived (if Purchaser notifies Seller of any default or
breach by Purchaser hereunder and Seller chooses not to terminate this
Agreement, Seller shall be deemed to have waived such default or breach);
(4) By mutual consent of Seller and Purchaser; or
(5) by Purchaser if any supplement to the Seller's disclosures
provided for by Section 3.07 of this Agreement contains disclosures of any
fact or condition which makes untrue, or shows to have been untrue, any
representation or
20
<PAGE>
warranty by Seller in this Agreement or any statement made in appendices of
Seller unless concurrently with the delivery of the supplement Seller
represents and warrants that the disclosed fact or condition can and will
be corrected at Seller's expense prior to Closing.
(b) In the event this Agreement is terminated in accordance with and
pursuant to Section 5.02(a), the $100,000 earnest money portion of the Purchase
Price shall except as otherwise provided in the proviso of this subparagraph (b)
be returned to Purchaser and all further obligations of the parties hereunder
shall terminate, except that the obligations set forth in Sections 3.01(b), 7.02
and 7.03 shall survive; provided, however, that if this Agreement is so
terminated by Seller because one or more of the conditions to Seller's
obligations hereunder is not satisfied as a result of the Purchaser's failure to
comply with Section 3.04 or any of its obligations under any other provision of
this Agreement, it is expressly agreed and understood that the $100,000 earnest
money portion of the Purchase Price shall be immediately paid to Seller upon
demand therefor by Seller, and provided, however, further that the terminating
party shall, despite its termination of this Agreement, continue to have the
right to pursue all legal remedies for breach of contract and damages which
shall survive such termination unimpaired.
ARTICLE VI.
INDEMNIFICATION
6.01 Indemnity.
(a) Seller agrees to indemnify and hold Purchaser harmless from any and all
liabilities, payments, obligations, penalties, claims, costs, disbursements or
expenses (including without limitation, fees, disbursements and expenses of
attorneys and other professional advisors) of any kind or nature whatsoever
(collectively "Damages"), resulting from or relating to any remedial obligation
imposed upon Purchaser arising under, any Environmental Laws as the result of
any event, condition, circumstance, activity, practice, incident, action or plan
existing or occurring prior to the Effective Time of Closing and relating in any
way to the Assets (including without limitation the ownership, operation or use
of the Assets and the conduct of the Business prior to the Effective Time of
Closing but excluding any remedial obligation arising under any Environmental
Laws that is attributable to a change by Purchaser in the structure, use or
condition of any of the Assets after the Effective Time of Closing). In no event
whatsoever shall the aggregate liability of Seller under this indemnity
(including all costs, expenses and attorneys' fees paid or incurred by Seller in
connection therewith) exceed the amount of the Purchase Price. Seller shall have
no obligation to pay Damages to Purchaser as a result of Environmental Laws
which were not in effect at or prior to the Effective Time of Closing.
21
<PAGE>
(b) Purchaser, jointly and severally, shall indemnify and hold Seller and
Seller's officers, directors, employees, affiliates and partners ("Seller
Indemnitees") harmless from, any and all Damages resulting from, arising out of
or relating to the shut down or closing of the Business after Closing or layoff
of employees of the Business after Closing which could result in any Damages to
Seller or Seller Indemnitees under applicable law as a result thereof.
6.02 Notice, Participation and Duration.
(a) If a claim by a third party is made against a party indemnified
pursuant to this Article VI ("Indemnitee"), and if such Indemnitee intends to
seek indemnity with respect thereto under this Article VI, the Indemnitee shall
promptly, and in any event within 60 days after the assertion of any claim for
indemnification under this Agreement ("Claim"), notify the party or parties from
whom indemnification is sought ("Indemnitor") of such Claim. In the event of any
Claim, Indemnitor, at its option, may assume (with legal counsel reasonably
acceptable to the Indemnitee) the defense of any claim, demand, lawsuit or other
proceeding in connection with the Indemnitee's Claim, and may assert any defense
of Indemnitee or Indemnitor; provided that Indemnitee shall have the right at
its own expense to participate jointly with Indemnitor in the defense of any
claim, demand, lawsuit or other proceeding in connection with the Indemnitee's
Claim. In the event that Indemnitor elects to undertake the defense of any Claim
hereunder, Indemnitee shall cooperate with Indemnitor to the fullest extent
possible in regard to all matters relating to the Claim (including, without
limitation, corrective actions required by applicable law, assertion of defenses
and the determination, mitigation, negotiation and settlement of all amounts,
costs, actions, penalties, damages and the like related thereto) so as to permit
Indemnitor's management of same with regard to the amount of Damages payable by
the Indemnitor hereunder. Neither Purchaser nor any Seller shall be entitled to
settle any Claim without the prior written consent of the other, which consent
shall not unreasonably be withheld.
(b) No Claim for indemnification under this Section 6.02 may be made after
the seventh anniversary of the Effective Time of Closing; provided, however,
that the foregoing shall not affect any claim made in good faith prior to the
date of such expiration.
6.03 Reimbursement. In the event that the Indemnitor shall undertake,
conduct or control the defense or settlement of any Claim and it is later
determined that such Claim was not a Claim for which the Indemnitor is required
to indemnify the Indemnitee under this Article VI, the Indemnitee shall
reimburse the Indemnitor for all its costs and expenses with respect to such
settlement or defense, including reasonable attorneys' fees and disbursements.
6.04 No Third Party Beneficiaries. The foregoing indemnification is given
solely for the purpose of protecting the
22
<PAGE>
parties to this Agreement and the Seller Indemnitees and shall not be deemed
extended to, or interpreted in a manner to confer any benefit, right or cause of
action upon, any other Person.
ARTICLE VII.
MISCELLANEOUS
7.01 Further Actions. From time to time, as and when requested by Purchaser
or Seller, Seller or Purchaser shall execute and deliver, or cause to be
executed and delivered, such documents and instruments and shall take, or cause
to be taken, such further or other actions as may be reasonably necessary to
transfer, assign and deliver to Purchaser or its permitted assigns the Assets
(or to evidence the foregoing) and to consummate and to effect the other
transactions expressly required to be performed hereunder.
7.02 Broker. Sellers and Purchaser represent and warrant to the other that
they have no obligation or liability to any broker or finder by reason of the
transactions which are the subject of this Agreement, except Purchaser
acknowledges that it has agreed to pay a fee of $70,000 to Goode Realty Group,
Beaverton, Oregon by reason of such transactions. Each of (a) Seller and (b)
Purchaser agree to indemnify the other against, and to hold the other, jointly
and severally, harmless from, at all times after the date hereof, any and all
liabilities and expenses (including without limitation legal fees) resulting
from, related to or arising out of any claim by any Person for brokerage
commissions or finder's fees, or rights to compensation, on account of services
rendered or purportedly rendered on behalf of Seller or Purchaser, as the case
may be, in connection with this Agreement or the transactions contemplated
hereby. Goode Realty Group, by its signature to this Agreement, acknowledges
that it is not the agent or representative of the Seller and that the Seller is
in no way responsible or liable to Goode Realty Group for any fee or other
compensation. Goode Realty Group further agrees that it shall have no right or
claim to any portion of the $100,000 earnest money deposit portion of the
Purchase Price.
7.03 Expenses. Except as otherwise specifically provided herein, Seller and
Purchaser shall each bear their own legal fees, accounting fees and other costs
and expenses with respect to the negotiation, execution and the delivery of this
Agreement and the consummation of the transactions hereunder. Seller shall pay
all sales, transfer and documentary Taxes incident to the sale of the Business.
7.04 Entire Agreement. This Agreement, the Exhibits hereto, the Seller's
appendices hereto and any supplement thereto contain, and are intended by the
parties as a final expression of, the entire agreement between Seller and
Purchaser with respect to the transactions contemplated by this Agreement and,
except as provided in Section 3.01(b), supersede all prior oral or written
agreements, arrangements or understandings with respect thereto, including
23
<PAGE>
without limitation the Letter of Intent (except to the extent provided in
Section 3.01(b)).
7.05 Descriptive Headings; Gender. The descriptive headings of this
Agreement are for convenience only and shall not control or affect the meaning
or construction of any provision of this Agreement. Words used herein,
regardless of the number and gender specifically used, shall be deemed and
construed to include any other number, singular or plural, and any other gender,
masculine, feminine, or neuter, as the context requires.
7.06 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and shall be delivered either personally
or by telegram, telex, telecopy or similar facsimile means, by registered or
certified mail (postage prepaid and return receipt requested), or by express
courier or delivery service, addressed as follows:
If to Seller:
Petro Stopping Centers, L.P.
6080 Surety Drive
P.O. Box 26808 (79926)
El Paso, Texas 79905
Attention: Legal Department
Telecopy No. 915-774-7366
With a copy to:
Seller's Counsel
Dane George, Esq.
Kemp, Smith, Duncan & Hammond, P.C.
2000 Norwest Plaza
P.O. Box 2800 (79999-2800)
El Paso, Texas 79901
Telecopy No. (915) 546-5360
If to Purchaser:
Dr. Jung Y. Park and Kyung Hee Park
1090 Linnwood Drive N.E.
Albany, Oregon 97321
With copies to:
Purchaser's Counsel
James H. Jordan, Esq.
P.O. Box 983
Two Rivers Market, Second Floor
250 Broadalbin Street S.W., Suite 255
After March 1, 1998, the street address will change to
100 Calapooia Street, S.W.
Albany, Oregon 97321-0369
Telecopy No. 541-928-7370
24
<PAGE>
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner hereinabove
set forth. Notices shall be deemed given when received, if sent by telegram,
telex, telecopy or similar facsimile means (confirmation of such receipt by
confirmed facsimile transmission being deemed receipt of communications sent by
telex, telecopy or other facsimile means); and when delivered and receipted for
(or upon the date of attempted delivery where delivery is refused), if hand-
delivered, sent by express courier or delivery service, or sent by certified or
registered mail.
7.07 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Oregon (other than the choice of law
principles thereof).
7.08 Assignability. This Agreement shall not be assignable otherwise than
as permitted by Section 3.08 by any party without the prior written consent of
the other parties, and any purported assignment by any party without the prior
written consent of the other parties shall be void.
7.09 Waivers and Amendments. Any waiver of any term or condition of this
Agreement, or any amendment or supplementation of this Agreement, shall be
effective only if in writing. A waiver of any breach or failure to enforce any
of the terms or conditions of this Agreement shall not in any way affect, limit
or waive a party's rights hereunder at any time to enforce strict compliance
thereafter with every term or condition of this Agreement.
7.10 Third Party Rights. Notwithstanding any other provision of this
Agreement, this Agreement shall not create benefits on behalf of any Person
other than Seller and Purchaser (including without limitation any broker or
finder, notwithstanding the provisions of Section 7.02 hereof), and this
Agreement shall be effective only as between Purchaser and Seller, their
successors and permitted assigns; provided, however, that Seller Indemnitees are
intended third party beneficiaries hereof to the extent provided in Sections
6.01 and 6.04.
7.11 Illegalities. In the event that any provision contained in this
Agreement shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and the remaining provisions of this Agreement
shall not, at the election of the party for whose benefit the provision exists,
be in any way impaired.
7.12 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
Agreement.
7.13 Employees.
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<PAGE>
(a) Subject to the obligations of Purchaser under Section 3.09 of this
Agreement, Purchaser may offer employment to some or all of the Employees prior
to or on the Effective Time of Closing. Purchaser will inform Sellers of the
names of any Employees who are offered employment and of any Employees whom it
employs. Subject to the obligations of Purchaser under Section 3.09 of this
Agreement, Purchaser shall have full and absolute discretion in determining the
terms, conditions and benefits relating to such employment.
(b) Except for the obligations of Purchaser under Section 3.09 of this
Agreement, nothing contained in this Agreement shall obligate Purchaser to
continue the employment of any Employee. Nothing in this Section 7.13 is
intended to create any claim or right on the part of any employee of Sellers and
no such employee shall be entitled to assert any claim or right hereunder.
7.14 Access to Records.
(a) Following the Effective Time of Closing, Purchaser shall give to Seller
free and unrestricted access to (and the right to make copies at the expense of
Seller) the Records and to the extent that such were purchased by Purchaser
hereunder and relate to the business, operations, income, expenses and Assets
existing on, accruing or arising prior to or occurring prior to Effective Time
of Closing, but any access pursuant to this Section 7.14 shall be conducted in
such manner as not to interfere unreasonably with the operations of the Business
following the Effective Time of Closing.
(b) Following the Effective Time of Closing, Seller shall give to Purchaser
free and unrestricted access to (and the right to make copies at the expense of
Purchaser) the books, files, records and Tax returns and supporting schedules
and work papers of Seller to the extent that such relate to the business,
operations, income, expenses and Assets existing on, accruing or arising prior
to or occurring prior to the Effective Time of Closing, but any access pursuant
to this Section 7.14 shall be conducted in such manner as not to interfere
unreasonably with the operations of the business of Sellers following the
Effective Time of Closing.
(c) Any access to Records pursuant to this Section shall be subject to the
confidentiality obligations stated in Sections 3.01(b).
7.15 Cost of Litigation. If any legal action or other proceeding is brought
for the enforcement of this Agreement or because of an alleged dispute, breach,
default or misrepresentation in connection with this Agreement or the
transactions contemplated hereby, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in connection with such action or proceeding, in addition to any other relief to
which it or they may be entitled, subject to Section 6.01.
26
<PAGE>
7.16 Waiver of Trial by Jury. Purchaser and Seller hereby irrevocably waive
all right to trial by jury in any action, proceeding or counterclaim arising out
of or relating to this Agreement or any of the Operative Documents, the
transactions contemplated by any thereof or the actions of any of the parties or
their representatives in connection with the making, performance or enforcement
thereof or hereof.
7.17 Joint Preparation. This Agreement shall be deemed to have been
prepared jointly by all parties hereto, and no ambiguity herein shall be
construed against any party based upon the identity of the author of this
Agreement or any portion thereof.
7.18 Post-Closing Consultation. Seller will use its best efforts to cause
its employee, Mr. Bill Nelson, to be available to Purchaser during the first
three weeks following the Closing to answer such questions of Purchaser and
provide such consultation to Purchaser concerning the operations of the Business
as Mr. Nelson can reasonably provide at such times as shall be convenient for
him and only to such extent as he can provide during his normal work day for
Seller without materially interfering with the performance of his duties and
obligations as an employee of Seller. Seller makes no representation as to any
consultation that shall be provided by Mr. Nelson, and neither Seller nor Mr.
Nelson shall be liable in any manner for any consultation or assistance Mr.
Nelson shall provide to Purchaser, such consultation and assistance being
extended only as an accommodation to Purchaser. Neither Seller nor Mr. Nelson
shall be liable to Purchaser for the failure to provide any minimum level of
consultation, it being the agreement that Mr. Nelson will be available to
provide only such consultation as he can reasonably provide subject to his
performance of his duties and obligations as an employee of Seller. Purchaser
hereby jointly and severally indemnifies Seller, Seller Indemnitees and Mr.
Nelson and agrees to hold each of them harmless from any Damages arising out of
or relating to any consultation or assistance Mr. Nelson provides to Purchaser
under this Section 7.18.
THE ASSETS, INCLUDING THE PROPERTY, DESCRIBED IN THIS INSTRUMENT MAY NOT BE
WITHIN A FIRE PROTECTION DISTRICT PROTECTING STRUCTURES. THE ASSETS, INCLUDING
THE PROPERTY IS SUBJECT TO LAND USE LAWS AND REGULATIONS WHICH, IN FARM OR
FOREST ZONES, MAY NOT AUTHORIZE CONSTRUCTION OR SITING OF A RESIDENCE AND WHICH
LIMIT LAWSUITS AGAINST FARMING OR FOREST PRACTICES AS DEFINED IN ORS 30.930 IN
ALL ZONES. BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE
TITLE TO THE PROPERTY SHOULD CHECK WITHIN THE APPROPRIATE CITY OR COUNTY
PLANNING DEPARTMENT TO VERIFY APPROVED USES AND EXISTENCE OF FIRE PROTECTION FOR
STRUCTURES.
27
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
SELLER:
PETRO STOPPING CENTERS, L.P.
By: /s/ LARRY J. ZINE
---------------------------------------
Name: Larry J. Zine
Title: Executive Vice President
PURCHASER:
/s/ DR. JUNG Y. PARK
-------------------------------------------
Dr. Jung Y. Park
/s/ KYUNG HEE PARK
-------------------------------------------
Kyung Hee Park
The undersigned, Goode Realty Group, hereby signs below to evidence its
agreement to the provisions of Section 7.02 hereof as applicable to the
undersigned.
GOODE REALTY GROUP
By: /s/ WILLIAM GOODE
-----------------------------------------
William Goode
ACKNOWLEDGMENT BY TITLE COMPANY
JACKSON COUNTY TITLE DIVISION OF OREGON TITLE INSURANCE COMPANY hereby
acknowledges receipt of the $100,000 earnest money required under Section
1.03(1) of the foregoing Agreement and agrees to hold such earnest money and
deliver it to Purchaser or Seller in accordance with the terms and provisions of
such Agreement.
JACKSON COUNTY TITLE DIVISION OF
OREGON TITLE INSURANCE COMPANY
By: /s/ PHYLLIS N. LLOYD
-------------------------------------
Name: Phyllis N. Lloyd
Title: Escrow Officer
Date: October 24, 1997
28
<PAGE>
EXHIBIT 10.54
AMENDMENT NO. 1
DATED AS OF NOVEMBER 3, 1997
TO
PURCHASE AND SALE AGREEMENT
THIS AMENDMENT NO. 1 ("Amendment No. 1") is made and entered into as of
November 3, 1997, to the PURCHASE AND SALE AGREEMENT ("Agreement") made and
entered into as of the 27th day of October, 1997, by and between DR. JUNG Y.
PARK AND WIFE, KYUNG HEE PARK, residents of Albany, Oregon (together,
"Purchaser"), and PETRO STOPPING CENTERS, L.P., a Delaware limited partnership
("Seller"), having its executive offices in El Paso, Texas. Defined Terms used
in this Amendment No. 1 which are not defined herein shall have the meanings
ascribed to such terms in the Agreement.
WHEREAS, Purchaser has requested an amendment to the Agreement as set forth
in this Amendment No. 1, and Seller is agreeable therewith.
NOW THEREFORE, in consideration of the mutual benefits to be derived and
the representations and warranties, conditions and promises contained herein and
in the Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Section 1.03 of the Agreement is hereby amended in its
entirety to read as follows:
1.03 Purchase Price.
The purchase price for the Assets (the "Purchase Price") shall be
$2,300,000, payable as follows:
(1) $100,000 cash earnest money to be paid to Seller in cash or other
form of immediately available funds by Purchaser upon execution and
delivery of this Agreement and deposited by Seller in escrow with the Title
Company; and
(2) $20,000 cash to be deposited by Purchaser in escrow with the Title
Company and to be paid by the Title Company to Purchaser upon Closing of
the Transaction as funds for the construction of a new sign for the
Business in recognition of the fact that the existing sign will
<PAGE>
not be utilized following Closing except during the one-year period
provided for in Section 3.11 of the Agreement; and
(3) $2,280,000, including the $100,000 earnest money, payable upon the
Closing to Seller by wire transfer of immediately available funds pursuant
to written instructions delivered by Seller to Purchaser and Title Company
at least one business day prior to the Closing Date.
2. The amendments to the Agreement made by this Amendment No. 1 shall be
effective as of the date of the Agreement.
3. The Agreement shall remain and continue in full force and
effect between the parties in accordance with the terms and
conditions thereof, except for the express amendments thereto made
by this Amendment No. 1.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
SELLER:
PETRO STOPPING CENTERS, L.P.
By: /s/ Larry J. Zine
-----------------------------------------
Name: Larry J. Zine
---------------------------------------
Title: Executive Vice President
--------------------------------------
PURCHASER:
Dr. Jung Y. Park
---------------------------------------------
Dr. Jung Y. Park
Kyung Hee Park
---------------------------------------------
Kyung Hee Park
The undersigned, Goode Realty Group, hereby signs below to evidence its
receipt of an executed copy of the foregoing Amendment No. 1 to the Agreement.
GOODE REALTY GROUP
By: /s/ William Goode
------------------------------------------
William Goode
ACKNOWLEDGMENT BY TITLE COMPANY
JACKSON COUNTY TITLE DIVISION OF OREGON TITLE INSURANCE COMPANY hereby
acknowledges receipt of the $20,000 cash escrow deposit required under Section
1.03(2) of the Agreement, as amended by the foregoing Amendment No. 1, and
agrees to hold such $20,000 cash escrow deposit in an escrow, separate and apart
from the $100,000 earnest money presently held by the Title Company pursuant
3
<PAGE>
to Section 1.03(1) of the Agreement, as amended by Amendment No. 1, and deliver
such $20,000 cash escrow deposit to Purchaser in accordance with the terms and
provisions of the Agreement.
JACKSON COUNTY TITLE DIVISION OF
OREGON TITLE INSURANCE COMPANY
By: /s/ Phyllis S. Lloyd
-----------------------------------------
Name: Phyllis S. Lloyd
---------------------------------------
Title: Escrow Officer
--------------------------------------
Date: December 5, 1997
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<CASH> 24,796
<SECURITIES> 0
<RECEIVABLES> 12,878
<ALLOWANCES> 330
<INVENTORY> 16,362
<CURRENT-ASSETS> 65,339
<PP&E> 194,619
<DEPRECIATION> 41,256
<TOTAL-ASSETS> 239,666
<CURRENT-LIABILITIES> 57,829
<BONDS> 0<F1>
21,202
0
<COMMON> 0
<OTHER-SE> (19,555)
<TOTAL-LIABILITY-AND-EQUITY> 239,666
<SALES> 0
<TOTAL-REVENUES> 685,729
<CGS> 546,581
<TOTAL-COSTS> 632,141
<OTHER-EXPENSES> 17,035
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 20,292
<INCOME-PRETAX> 1,759
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,759
<DISCONTINUED> 0
<EXTRAORDINARY> (12,745)
<CHANGES> (1,579)
<NET-INCOME> (12,565)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>NOT SEPARATELY IDENTIFIED IN THE CURRENT FINANCIAL STATEMENTS OR
ACCOMPANYING NOTES THERETO
</FN>
</TABLE>
