SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1996 Commission File Number 33-88526
GRIFFITH CONSUMERS COMPANY
CARL KING, INC.
FREDERICK TERMINALS, INC.
(Exact name of registrants as specified in their charters)
Delaware 52-1887726
Delaware 04-2941998
Maryland 52-1863759
(State or other jurisdiction of (I.R.S. Employer No.)
incorporation or organization)
Griffith Consumers Company Carl King, Inc.
Frederick Terminals, Inc. 109 South Main Street
2510 Schuster Drive Camden, Delaware 19934
Cheverly, Maryland 20781 (302) 697-3251
(301) 322-3111
(Address, including zip code, and telephone number, including
area code, of registrants' principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
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 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. [X] Yes [_] No
As of February 14, 1997, the Issuers had the following number of shares of
common stock outstanding:
Griffith Consumers Company : 1,000 shares
Carl King, Inc. : 1,000 shares
Frederick Terminals, Inc. : 500 shares
<PAGE>
Griffith Consumers Company and Subsidiaries
December 31, 1996
Index
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
A. Consolidated Balance Sheets December 31,
1996 and June 30, 1996 3 - 4
B. Consolidated Statements of Operations
Three months and six months ended
December 31, 1996 and 1995 5 - 6
C. Consolidated Statements of Changes in
Shareholder's Equity 7
D. Consolidated Statements of Cash Flows
Six months ended December 31, 1996 and
1995 8
E. Notes to Consolidated Financial
Statements 9 - 16
Item 2. Management's Discussion and Analysis 17 - 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 2. Changes in Securities 23
Item 3. Defaults upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
2
<PAGE>
GRIFFITH CONSUMERS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30,
ASSETS: 1996 1996
- --------------------------------------------------------------------------------
CURRENT ASSETS
CASH $ 1,633,375 $ 1,687,443
ACCOUNTS AND NOTES RECEIVABLE,
LESS ALLOWANCE FOR BAD DEBTS 15,901,092 11,813,211
PETROLEUM PRODUCTS INVENTORY 2,302,314 1,228,347
REPAIR PARTS AND SUPPLIES INVENTORY 3,511,123 1,662,048
PREPAID EXPENSES AND OTHER 1,752,268 1,320,055
REFUNDABLE INCOME TAXES 1,566,049 --
------------ ------------
TOTAL CURRENT ASSETS 26,666,221 17,711,104
PROPERTY, PLANT AND EQUIPMENT
LAND $ 5,612,870 $ 5,533,870
BUILDINGS 3,343,624 1,844,358
MACHINERY AND EQUIPMENT 21,535,743 16,152,930
------------ ------------
30,492,237 23,531,158
LESS: ALLOWANCE FOR DEPRECIATION 8,488,131 6,019,263
------------ ------------
22,004,106 17,511,895
INTANGIBLES - NOTE C
CUSTOMER AND SERVICE ACCOUNTS 39,842,186 37,063,186
COVENANTS NOT TO COMPETE 3,286,824 2,936,824
GOODWILL 48,147,347 39,000,867
OTHER INTANGIBLES 836,344 836,344
------------ ------------
92,112,701 79,837,221
LESS: ALLOWANCE FOR AMORTIZATION 15,045,762 11,304,362
------------ ------------
77,066,939 68,532,859
LONG-TERM NOTES RECEIVABLE 945,394 1,054,816
DEFERRED DEBT COSTS & OTHER 4,604,087 3,759,756
------------ ------------
TOTAL ASSETS $131,286,747 $108,570,430
============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
GRIFFITH CONSUMERS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JUNE 30,
LIABILITIES AND SHAREHOLDER'S EQUITY: 1996 1996
- --------------------------------------------------------------------------------
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 10,627,510 $ 7,581,065
ACCRUED EXPENSES 3,405,542 3,560,374
DEFERRED REVENUE 2,955,087 2,471,880
INCOME TAXES PAYABLE -- 73,103
OTHER TAXES PAYABLE 1,021,816 198,517
CURRENT PORTION OF LONG-TERM DEBT-NOTE F 4,730,893 4,240,893
------------- -------------
TOTAL CURRENT LIABILITIES 22,740,848 18,125,832
LONG-TERM DEBT, LESS CURRENT PORTION-NOTE F 88,378,319 65,350,995
DEFERRED INCOME TAXES 7,189,189 7,993,849
POST-RETIREMENT EMPLOYEE BENEFITS
AND OTHER 1,541,330 1,541,330
------------- -------------
TOTAL LIABILITIES 119,849,686 93,012,006
SHAREHOLDER'S EQUITY
COMMON STOCK, par value $.01 per share,
100 shares, authorized, issued and
outstanding 1 1
ADDITIONAL PAID-IN CAPITAL 20,691,323 20,691,323
RETAINED DEFICIT (9,254,263) (5,132,900)
------------- -------------
TOTAL SHAREHOLDER'S EQUITY 11,437,061 15,558,424
------------- -------------
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY $ 131,286,747 $ 108,570,430
============= =============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
GRIFFITH CONSUMERS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
------------- -------------
OCT 1, 1996 - OCT 1, 1995 -
DEC 31, 1996 DEC 31, 1995
------------- -------------
SALES FROM PETROLEUM PRODUCTS $ 62,719,576 $ 45,310,147
SERVICE, EQUIPMENT, AND OTHER SALES 11,905,908 5,057,709
------------- -------------
TOTAL SALES 74,625,484 50,367,856
COST OF SALES 60,001,084 38,538,499
------------- -------------
GROSS PROFIT 14,624,400 11,829,357
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES 11,278,632 7,389,545
DEPRECIATION EXPENSE 1,284,180 1,000,111
AMORTIZATION EXPENSE 1,947,899 1,626,509
------------- -------------
OPERATING PROFIT 113,689 1,813,192
INTEREST EXPENSE 2,693,786 2,326,295
OTHER INCOME 382,495 111,970
------------- -------------
LOSS BEFORE INCOME TAX (2,197,602) (401,133)
INCOME TAX BENEFIT (765,777) (194,771)
------------- -------------
NET LOSS $ (1,431,825) $ (206,362)
============= =============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
GRIFFITH CONSUMERS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
------------- -------------
JUL 1, 1996 - JUL 1, 1995 -
DEC 31, 1996 DEC 31, 1995
------------- -------------
SALES FROM PETROLEUM PRODUCTS $ 110,722,953 $ 78,180,762
SERVICE, EQUIPMENT, AND OTHER SALES 24,444,065 10,346,626
------------- -------------
TOTAL SALES 135,167,018 88,527,388
COST OF SALES 109,998,891 69,871,383
------------- -------------
GROSS PROFIT 25,168,127 18,656,005
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES 20,647,089 13,715,626
DEPRECIATION EXPENSE 2,576,462 2,009,994
AMORTIZATION EXPENSE 3,890,383 3,383,844
------------- -------------
OPERATING LOSS (1,945,807) (453,459)
INTEREST EXPENSE 5,282,234 4,666,783
OTHER INCOME 827,410 303,311
------------- -------------
LOSS BEFORE INCOME TAX (6,400,631) (4,816,931)
INCOME TAX BENEFIT (2,279,268) (1,886,776)
------------- -------------
NET LOSS $ (4,121,363) $ (2,930,155)
============= =============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
GRIFFITH CONSUMERS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
Additional Retained Total
Common Paid-In Earnings Shareholder's
Shares Stock Capital (Deficit) Equity
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance June 30, 1995 100 1 20,691,323 (1,467,768) 19,223,556
Net Loss -- -- -- (3,665,132) (3,665,132)
---------- ----------- ----------- ------------ ------------
Balance June 30, 1996 100 1 20,691,323 (5,132,900) 15,558,424
Net Loss -- -- -- (4,121,363) (4,121,363)
Balance December 31, 1996 100 1 20,691,323 (9,254,263) 11,437,061
============================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
<PAGE>
GRIFFITH CONSUMERS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
----------------- -----------------
July 1, 1996 July 1, 1995
through through
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Operating activities
Net loss $ (4,121,363) $ (2,930,155)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 2,576,462 2,009,994
Amortization 3,890,383 3,383,844
Provision for bad debts 143,514 143,000
Amortization of bond discount 91,054 91,053
Gain on sale of property, plant, equipment, and intangibles (86,523) (93,726)
Changes in operating assets and liabilities
Net of effects of change in working capital:
Accounts and notes receivable (4,121,973) (8,273,747)
Inventory (2,923,042) (6,748)
Prepaid expenses and other (218,213) 91,662
Refundable Income taxes, net (1,639,152) (257,995)
Other assets 826,207 (435,689)
Accounts payable 3,046,445 4,139,636
Accrued expenses (154,832) 53,860
Deferred revenue 483,207 (72,618)
Other liabilities 18,638 (325,467)
------------ ------------
Net cash used in operating activities (2,189,188) (2,483,096)
Investing activities
Purchases of property, plant, and equipment (1,263,931) (1,143,266)
Purchases of intangible assets -- --
Proceeds from sale of property, plant, and equipment,
and intangible assets 329,938 587,789
Acquisition of business:
Property, plant, and equipment (6,048,157) --
Intangibles (12,259,000) --
Acquisition costs (2,050,000) --
------------ ------------
Net cash used in investing activities (21,291,150) (555,477)
Financing activities
Proceeds from line of credit 4,000,000 5,500,000
Proceeds from term loans 21,850,000 --
Payments on long-term debt (2,423,730) (1,850,000)
------------ ------------
Net cash provided by financing activities 23,426,270 3,650,000
------------ ------------
(Decrease) Increase in cash (54,068) 611,427
Cash at beginning of period 1,687,443 803,085
------------ ------------
Cash at end of period $ 1,633,375 $ 1,414,512
============ ============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8
<PAGE>
Griffith Consumers Company And Subsidiaries
December 31, 1996
Notes to Consolidated Financial Statements
Note A--Introduction
On December 15, 1994, the transaction contemplated by the merger agreement
("Merger Agreement") dated August 26, 1994 between Griffith Consumers Company
("Griffith", and together with its consolidated subsidiaries, the "Company") and
Griffith Holdings, Inc. ("GHI"), a corporation previously unrelated to the
Company, closed, whereby GHI acquired all of Griffith's 2,360,000 outstanding
shares of common stock (the "Common Stock") for $23.00 cash per share. Pursuant
to the Merger Agreement, ABC Acquisition Corp. ("ABC"), a wholly owned
subsidiary of GHI, merged with and into Griffith, and each share of Griffith's
common stock was converted into the right to receive $23.00 in cash (the "1994
Acquisition"). As a result of the 1994 Acquisition, Griffith became a wholly
owned subsidiary of GHI.
The 1994 Acquisition has been accounted for under the purchase method of
accounting as of December 16, 1994. Accordingly, GHI has allocated its total
purchase cost of approximately $54,280,000 to the assets and liabilities of the
Company based upon the fair value of these assets and liabilities. The fair
values assigned on the December 16, 1994 balance sheet were adjusted when
valuation studies were completed.
On July 11, 1996, the Company acquired certain assets used in the operations of
a chain of convenience stores and retail gasoline stations within the states of
Maryland, Delaware, and Virginia under the "Shore Stop" trade name and a dealer
petroleum sales business at two facilities located in Virginia and Maryland (the
"Shore Stop Acquisition") from Regent Investments, Inc., Delaware Investments,
Inc., and Mid-Atlantic Investments, Inc., each a Virginia corporation
(collectively, the "Sellers"). The Company intends to continue using the
acquired assets as convenience stores, retail gas stations and a dealer
petroleum sales business, respectively. The Company paid the Sellers $17,000,000
(plus the purchase price of certain inventory), subject to certain adjustments,
of which $1,500,000 was in the form of a promissory note (the "Regent Note")
secured by first priority mortgages or deeds of trust on certain stores and
assumed $350,000 of debt. The acquisition was financed through an amendment and
restatement of the Company's then existing credit agreement. See Note F - Debt.
Note B--Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting
9
<PAGE>
principles ("GAAP") for interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments considered necessary
for the fair presentation of the consolidated financial statements have been
included and are of a normal and recurring nature.
Operating results for the six months ended December 31, 1996 do not necessarily
indicate the results that may be expected for the fiscal year ending June 30,
1997. For further information with respect to the effect of seasonality on the
Company's financial results, please refer to the financial statements and
footnotes included in the Company's Form 10-K for the year ended June 30, 1996.
Note C--Significant Accounting Policies
Intangible Assets: Customer and service accounts obtained through acquisitions
are amortized over their estimated useful lives of eight years. Other
intangibles are amortized over periods not exceeding ten years. Covenants not to
compete are amortized over the period stated in the agreements. Goodwill was
amortized over a period of fifteen years for the Company before the 1994
Acquisition (the "Predecessor") and is amortized over a thirty year period for
the Company after the 1994 Acquisition (the "Successor"). All intangible assets
are amortized using the straight-line method. The Company evaluates the
potential impairment of intangibles and other longlived assets by comparing the
related discounted cash flow from operations to the net book value of such
assets. Any impairment would be the excess of net book value over discounted
future cash flow from operations. For these purposes, the related cash flow is
the earnings before taxes, depreciation, amortization, and interest attributable
to the intangibles and other long-lived assets whose impairment is being
assessed.
Debt Issuance Costs: The costs associated with the issuance of debt are
amortized utilizing the effective interest method over the term of the
underlying debt instrument. The terms of the Company's existing debt, incurred
in 1994 and 1996, range from six to ten years.
Income Taxes: Deferred income taxes are provided for the temporary differences
between the financial statements and the tax basis of assets and liabilities,
except for goodwill which is not deductible for tax purposes. Deferred income
taxes relate primarily to depreciation associated with property, plant, and
equipment, allowances for bad debts and various accruals of salaries and related
benefits.
10
<PAGE>
Note D--1996 Acquisitions--Allocation of Purchase Price
In addition to the Shore Stop Acquisition, the Company acquired certain assets
of various retail heating oil companies and gasoline stations. These
acquisitions and the Shore Stop Acquisition were accounted for as purchase
transactions and, therefore, the financial statements include the results of
operations of the acquired assets from their acquisition dates. The cost of the
acquisitions consummated during the six months ended December 31, 1996 were
allocated as follows:
Six Months Ended
December 31,
----------------------
1996 1995
----------------------
Land $ 170,000 --
Fixed assets 5,878,157
Customer and service
accounts 2,779,000 --
Covenants not to compete 350,000 --
Goodwill 9,130,000 --
----------- ---------
18,307,157 $ --
=========== =========
Number of Acquisitions 9 0
Note E--Shore Stop Acquisition--Unaudited Pro Forma
The following condensed presentation of unaudited pro forma information was
prepared to illustrate the estimated effects of the Shore Stop Acquisition on
the Company with the assumption that the Shore Stop Acquisition occurred at July
1, 1995:
(000's)
Unaudited
Six Months Ended
December 31,
------------------------
1996 1995
------------------------
Total Sales $138,036 $ 132,821
Net Loss (4,117) (1,095)
11
<PAGE>
Note F -- Debt
In connection with the 1994 Acquisition, the Company retired the Predecessor's
existing operating line of credit and primary bank term loan and negotiated a
new term loan and operating line of credit with the Company's primary bank
lender (the "Prior Credit Agreement"). Mortgage notes (the "Mortgage Notes") on
several properties located in Delaware, Maryland and West Virginia were assumed
by the Successor. As of July 8, 1996, in connection with funding of the Shore
Stop Acquisition, the Company amended and restated the Prior Credit Agreement
(as amended and restated, the "Credit Agreement" ) to increase the amount of
term loan borrowings outstanding thereunder from $34,450,000 to $54,450,000 and
the amount of revolving credit facility borrowings available from $12,000,000 to
$13,000,000. Borrowings under the Credit Agreement are secured by a first lien
on substantially all the assets of the Company, except those properties located
in Delaware, Maryland and West Virginia securing the Mortgage Notes and those
properties located in Delaware, Maryland, and Virginia securing the Regent Note.
Borrowings under the Credit Agreement are subordinated to the Mortgage Notes and
Regent Note on these properties. As of December 31, 1996, the amount of the
revolving credit facility borrowings outstanding was $6,600,000. During fiscal
year 1997, the Company has paid $2,381,000 of interest and $2,300,000 of
principal on the term loan under the Credit Agreement.
The Credit Agreement contains various provisions regarding events of default and
restrictive covenants, including, among others, restrictions on new liens and
indebtedness, restrictions on the sale of assets, restrictions on mergers and
consolidations, and a prohibition on the payment of dividends. In addition, at
the end of each quarter and/or fiscal year-end, the Company is required to
maintain a certain cumulative cash flow coverage ratio, minimum tangible net
worth, minimum working capital, specified maximum ratio of funded debt to
earnings before interest, taxes, depreciation and amortization ("EBITDA") and
debt service coverage ratio.
In addition to the Credit Agreement, the Company financed the 1994 Acquisition
with $34 million of 14 1/2% Senior Subordinated Notes due December 15, 2004 (the
"Notes"). Interest on the Notes is payable semiannually on June 15 and December
15 of each year. The Notes are subordinated to all existing and future senior
indebtedness of the Company. The Indenture governing the Notes (the "Indenture")
contains certain restrictive covenants and financial covenants similar to the
Credit Agreement.
The Company entered into four amendments to the Prior Credit Agreement during
1995 and 1996, two amendments to the Indenture, including an amendment in
connection with the Shore Stop Acquisition during 1995 and 1996, and an
amendment to the Credit Agreement in 1996, which, among other things, revised
certain
12
<PAGE>
financial covenants contained therein. The Company is in compliance with the
Indenture and the Credit Agreement as amended.
Note G--Related Party Transactions
A management and consulting fee and expense reimbursements are paid to entities
owned by certain of the current directors and controlling shareholders. The
Company paid $75,000 of management and consulting fees quarterly for a total of
$150,000 for the first six months of fiscal years 1995 and 1996.
Note H--Seasonality of Revenue and Cost of Goods Sold
The Company's heating oil sales volume is highly seasonal. Sales volume of motor
fuels is also seasonal, although it varies less than heating oil on a month to
month basis. The seasonality affects both revenue and cost of goods sold;
therefore, interim results are not indicative of the estimated results for a
full year.
Note I--Environmental Regulations
Management believes that the environmental reserve is sufficient to cover all
known liabilities under which it is probable that the Company will be obligated
to undertake remediation. Management's assessment of the environmental liability
is based, in part, on two comprehensive environmental studies by independent
environmental consultants that were completed during fiscal year 1995 and fiscal
year 1996. Management is not aware of any additional significant environmental
exposures since the completion of the fiscal year 1996 study.
The Company maintains a program to routinely detect releases of gasoline or
other regulated substances from underground storage tanks it owns or operates.
The Company employs groundwater monitoring wells and/or sophisticated in-tank
monitoring devices at a majority of its Company operated stations and this
information is available on-line through the computer at the Company's
headquarters. Management believes that contingent liabilities other than those
recorded in the financial statements will not have a material adverse effect on
the Company's financial position or results of operations.
Note J--Subsidiaries, Condensed Financial Statement Data
Griffith's wholly owned subsidiaries, Carl King, Inc. ("King"), Frederick
Terminals, Inc. ("Frederick"), and Shore Stop Corporation ("Shore Stop" and,
collectively with King and Frederick, the "Subsidiaries") are full,
unconditional joint and several guarantors on the Notes. The only subsidiaries
of Griffith are King,
13
<PAGE>
Frederick, Shore Stop, and Regent Transport, Inc. This footnote sets forth the
combined condensed balance sheet of King, Frederick, and Shore Stop as of
December 31, 1996 and June 30, 1996, the combined condensed statements of
operations and cash flows for the periods July 1, 1996 through December 31, 1996
and the statement of changes in shareholder's equity from June 30, 1994 to
December 31, 1996.
In accordance with Staff Accounting Bulletin No. 55, the separate financial
statement data reflects all of the expenses that the Company incurred on each
Subsidiary's behalf. In the opinion of the management of the Company,
presentation of separate financial statements of the guarantors is not material
to investors. Except for certain general and administrative expenses and income
taxes, expenses are separately identifiable and, therefore, charged directly to
the respective Subsidiary. Common general and administrative expenses are
allocated based on management's assessment of the actual costs associated with
the operations; and income tax expense is provided in the financial data on a
separate return basis. Management believes that the methods used to allocate
expenses to each Subsidiary are reasonable.
14
<PAGE>
CARL KING, INC., FREDERICK TERMINALS, INC., AND SHORE STOP CORPORATION
COMBINED CONDENSED BALANCE SHEETS
------------- -------------
December 31 June 30
ASSETS: 1996 1996
------------- -------------
Current assets $ 8,854,606 $ 5,215,700
Net property, plant and equipment 18,033,739 13,500,023
Net intangibles 23,761,843 12,496,263
Other 2,453,080 566,783
------------- -------------
$ 53,103,268 $ 31,778,769
============= =============
Liabilities and Shareholder's Equity:
Current liabilities $ 9,797,938 $ 5,940,506
Due to Parents 3,101,019 5,335,763
Long-term debt, less current portion 35,824,472 15,143,539
Other liabilities 1,336,445 1,555,511
Shareholder's equity 3,043,394 3,803,450
------------- -------------
$ 53,103,268 $ 31,778,769
============= =============
CARL KING, INC., FREDERICK TERMINALS, INC., AND SHORE STOP CORPORATION
COMBINED CONDENSED STATEMENTS OF OPERATIONS
------------- -------------
Jul 1, 1996 - Jul 1, 1995 -
Dec 31, 1996 Dec 31, 1995
------------- -------------
Total sales $ 91,229,827 $ 47,970,969
Cost of sales 77,409,674 41,239,400
------------- -------------
Gross profit 13,820,153 6,731,569
Selling, general, and administrative
expenses 10,565,527 4,091,441
Depreciation expense 1,864,835 1,402,427
Amortization expense 1,070,876 418,607
------------- -------------
Operating income 318,915 819,094
Interest expense 2,049,774 1,143,914
Other income 514,150 261,925
------------- -------------
Loss before income tax benefit (1,216,709) (62,895)
Income tax benefit (456,653) (21,245)
------------- -------------
Net loss $ (760,056) $ (41,650)
============= =============
15
<PAGE>
CARL KING, INC., FREDERICK TERMINALS, INC., AND SHORE STOP CORPORATION
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
Investment Retained Total
By Earnings Shareholder's
Parent (Deficit) Equity
------------------------------------------
Balance June 30, 1995 5,792,610 (1,051,191) 4,741,419
Net loss -- (937,969) (937,969)
---------- ----------- -----------
Balance June 30, 1996 $5,792,610 ($1,989,160) $ 3,803,450
Net loss -- (760,056) (760,056)
December 31, 1996 $5,792,610 ($2,749,216) $ 3,043,394
========== =========== ===========
CARL KING, INC., FREDERICK TERMINALS, INC., AND SHORE STOP CORPORATION
COMBINED CONDENSED STATEMENTS OF CASH FLOWS
------------- -------------
Jul 1, 1996 - Jul 1, 1995 -
Dec 31, 1996 Dec 31, 1995
------------- -------------
Operating activities ($ 765,491) $ 459,644
Investment activities (20,708,002) 6,960
Financing activities 21,134,000 (466,604)
------------ ---------
Decrease in cash (339,493) --
Cash at beginning of year 953,234 --
------------ ---------
Cash at end of year $ 613,741 --
============ =========
16
<PAGE>
Griffith Consumers Company and Subsidiaries
December 31, 1996
Management's Discussion and Analysis of
Financial Conditions and Results of Operations
The fiscal year of Griffith Consumers Company ("Griffith", and together with its
subsidiaries, the "Company" or "Successor") ends June 30.
Overview
In analyzing the results of the Company's operations, consideration should be
given to the seasonal nature of the heating oil business and prevailing weather
conditions, growth by acquisition, world oil market conditions and the ability
to pass on variations in wholesale petroleum costs to customers. Financial
results may vary from year-to-year as a result of these factors.
The Company's heating oil operations are highly seasonal with approximately 75%
of heating oil revenues generated in the quarters ending December and March.
Sales from the Company's motor fuel operations are more evenly spread throughout
the year with some seasonal increases in the summer months. The Company's
heating oil sales volume fluctuates depending upon weather conditions. Colder
winter temperatures increase consumer demand.
In December 1994, Griffith Holdings, Inc. ("GHI"), a corporation previously
unrelated to the Company, acquired all of the 2,360,000 outstanding shares of
common stock of Griffith Consumers Company, a Maryland corporation ("Griffith
Maryland" and together with its consolidated subsidiaries, "Predecessor"), the
predecessor to Griffith. Pursuant to a merger agreement, ABC Acquisition Corp.,
a Maryland corporation ("ABC") and a wholly-owned subsidiary of GHI, merged with
and into Griffith Maryland. As a result of the merger, Griffith Maryland became
a wholly-owned subsidiary of GHI (the "1994 Acquisition"). Immediately
thereafter, Griffith Maryland merged with and into Griffith with Griffith as the
surviving corporation.
On July 11, 1996, the Company, through its wholly-owned subsidiary Shore Stop
Corporation, acquired (the "Shore Stop Acquisition") certain assets used in the
operations of a chain of 49 convenience stores and retail gasoline stations
within the states of Maryland, Delaware, and Virginia, under the "Shore Stop"
trade name and a dealer petroleum sales business supplying 31 dealers from two
facilities located in Virginia and Maryland (the "Shore Stop Operations") from
Regent Investments, Inc., Delaware Investments, Inc. and Mid-Atlantic
Investments, Inc., each a Virginia corporation (collectively, the "Sellers").
The Company intends to
17
<PAGE>
continue using the acquired assets as convenience stores and a dealer petroleum
sales business. The Company paid the Sellers $17,000,000 (plus the purchase
price of certain inventory), subject to certain adjustments, of which $1,500,000
was in the form of a promissory note secured by first priority mortgages or
deeds of trust on certain stores, and assumed $350,000 of debt. As a result of
the Shore Stop Acquisition, the financial statements for the six months ended
December 31, 1996 are not directly comparable to the consolidated financial
statements of the Company for the six month period ended December 31, 1995. The
following discussion should be read in connection with the historical financial
information included in the consolidated financial statements of the Company.
Results of Operations for Three Months Ended December 31 of 1996
Versus 1995
References to particular years unless otherwise indicated are references to the
second quarter of the fiscal year for the year end indicated.
The net loss for 1997 was $1,432,000, compared to a net loss of $206,000 for the
same period in 1996 for the reasons outlined below.
Total sales increased by $24,257,000 or 48% to $74,625,000 for 1997, from
$50,368,000 during 1996. Sales increased primarily as a result of the
acquisition of Shore Stop Operations as well as 28% and 16% increases in the
sales price per gallon of heating oil and motor fuels, respectively. The
increase, however, was partially offset by a 20% decrease in heating oil volume.
Cost of sales for 1997 was $60,001,000, an increase of $21,463,000, or 56%, from
1996. The increase in cost of sales was primarily due to the Shore Stop
Operations as well as 30% and 21% increases in heating oil and motor fuel costs
per gallon, respectively.
Gross profit for 1997 was $14,624,000, an increase of $2,795,000, or 24%, from
1996. The increase was primarily due to the Shore Stop Operations. The increase
was reduced by lower gross profits from the existing operations of Griffith and
Carl King.
Selling, general and administrative expenses ("SG&A") were $11,279,000, an
increase of $3,889,000, or 53%, compared to 1996. The increase was due primarily
to operating costs related to the Shore Stop Operations.
Depreciation expense for 1997 was $1,284,000, an increase of $284,000, or 28%,
from 1996. Amortization expense for 1997 increased by $321,000, or 20%, to
$1,948,000 in 1997. The increases were primarily related to the additional
depreciation
18
<PAGE>
and amortization on the fixed assets and intangible assets respectively,
resulting from the Shore Stop Acquisition. Additionally, depreciation increased
from capital expenditures made in the previous twelve months.
Interest expense increased 16%, to $2,694,000. The increase is primarily related
to interest related to the debt used to fund the Shore Stop Acquisition.
Other income for 1997 was $382,000, an increase of $270,000 or 241%, from
$112,000 in 1996. This increase is primarily related to other income from Shore
Stop Operations.
Results of Operations for Six Months Ended December 31 of 1996 Versus 1995
References to particular years unless otherwise indicated are references to the
first six months of the fiscal year for the year end indicated.
The net loss for 1997 was $4,121,000, compared to a net loss of $2,930,000 for
the same period in 1996 for the reasons outlined below.
Total sales increased by $46,640,000 or 53% to $135,167,000 for 1997, from
$88,527,000 during 1996. Sales increased primarily as a result of the
acquisition of Shore Stop Operations as well as 26% and 11% increases in the
sales price per gallon of heating oil and motor fuels, respectively. The
increase, however, was partially offset by a 19% decrease in heating oil volume.
Cost of sales for 1997 was $109,999,000, an increase of $40,128,000, or 57%,
from 1996. The increase in cost of sales was primarily due to the Shore Stop
Operations as well as 29% and 14% increases in heating oil and motor fuel costs
per gallon, respectively.
Gross profit for 1997 was $25,168,000, an increase of $6,512,000, or 35%, from
1996. The increase was primarily due to the Shore Stop Operations. The increase
was partially offset by lower gross profits at the existing operations of
Griffith and Carl King.
Selling, general and administrative expenses ("SG&A") were $20,647,000, an
increase of $6,931,000, or 51%, compared to 1996. The increase was due primarily
to operating costs related to the Shore Stop Operations.
Depreciation expense for 1997 was $2,576,000, an increase of $566,000, or 28%,
from 1996. Amortization expense for 1997 increased by $507,000, or 15%, to
$3,890,000 in 1997. The increases were primarily related to the additional
depreciation and amortization on the fixed assets and intangible assets
19
<PAGE>
respectively, resulting from the Shore Stop Acquisition. Depreciation increased,
additionally, from capital expenditures made in the previous twelve months.
Interest expense increased 13%, to $5,282,000. The increase is primarily related
to interest related to the debt used to fund the Shore Stop Acquisition.
Other income for 1997 was $827,000, an increase of $524,000 or 173%, from
$303,000 in 1996. This increase is primarily related to other income from Shore
Stop Operations.
Financial Condition
Substantially all of the line items of the financial statements have increased
from June 30, 1996 because of the Shore Stop Acquisition. The following
discussion will focus on increases or decreases unrelated to the Shore Stop
Acquisition and items which require further explanation.
Accounts receivables increased $4,088,000, or 35%, to $15,902,000 from June 30.
The increase is due to the seasonal nature of the business. Generally, at fiscal
year end, the accounts receivable balance is at a low point for the year and
increases during the second quarter of the year.
Refundable income taxes increased $1,639,000 from a payable of $73,000 to a
refund due of $1,566,000 due to the income tax benefit related to the loss for
the first six months of fiscal year 1997.
Accrued expenses decreased by $155,000 to $3,406,000. The decrease is related to
accrued payroll and expenditures incurred at year end relating to the Shore Stop
Acquisition.
Deferred income taxes decreased $805,000, or 10%, from $7,994,000 to $7,189,000
related primarily to the amortization of intangible assets relating to the 1994
Acquisition.
Liquidity and Capital Resources
The Company's cash requirements consist principally of working capital, payments
of principal and interest on its outstanding indebtedness, capital expenditures
and expenditures for acquisitions.
Net cash used in operating activities was $2,189,000 for the six months ended
December 31, 1996 compared to $2,483,000 of net cash used in operating
activities for the six months ended December 31, 1995, a decrease of $294,000.
The decrease is due primarily to increased cash flow resulting from the Shore
Stop Operations and a less significant decrease in net assets, partially offset
by a decrease in cash flow from the existing operations of the Company during
the six months ended December 31, 1996.
20
<PAGE>
Net cash used in investing activities increased by $20,736,000 from $555,000 for
the six months ended December 31, 1995 to $21,291,000 for the six months
December 31, 1996. The increase was primarily the result of the Shore Stop
Acquisition which occurred in 1996.
Net cash provided by financing activities increased $19,776,000 to $23,426,000
for the six months ended December 31, 1996. The increase was primarily the
result of the financing of the Shore Stop Acquisition in 1996.
The Company believes that cash flow from operating activities, cash on hand and
periodic borrowings, if necessary, will be adequate to meet its operating cash
requirements for the foreseeable future. In addition to its existing working
capital facilities, the Company may enter into additional financing facilities
to fund future acquisitions and for other purposes, to the extent such
facilities are permitted under the terms of the Indenture (the "Indenture")
governing the Company's 14 1/2% Senior Subordinated Notes due December 15, 2004
(the "Notes") and the Company's then existing credit agreement.
As of July 8, 1996, in connection with the Shore Stop Acquisition, the Company
amended and restated its then existing credit agreement (the "Prior Credit
Agreement"; and as amended and restated, the "Credit Agreement") to, among other
things, increase the revolving credit facility thereunder from $12,000,000 to
$13,000,000 and the term loan thereunder from $34,450,000 to $54,450,000. The
Credit Agreement was amended by an amendment dated as of December 31, 1996 to,
among other things, increase the amount of the revolving credit facility
provided thereunder from $13,000,000 to $16,000,000 during the period from
February 12, 1997 through March 31,1997 and to revise certain financial
covenants contained therein. The Company is in compliance with the financial
covenants contained in the Capital Agreement, as amended, as of the date hereof.
In 1996, the Company's peak usage of the revolving credit facility was
approximately $10,800,000. At January 31, 1997, there was $5,500,000 outstanding
with respect to the revolving credit facility. The revolving portion of the
Credit Agreement expires in 1999 and the Company may be required to replace the
revolving portion at such time.
Prior to the July 1996 amendment and restatement of the Prior Credit Agreement,
the Company entered into three amendments to the Prior Credit Agreement and,
during 1995 and 1996, entered into two amendments to the Indenture that revised
certain of the definitions and/or certain financial covenants contained therein.
The Company is in compliance with the financial covenants contained in the
Indenture, as amended, as of the date hereof.
21
<PAGE>
The Company purchases petroleum products as necessary to meet the delivery
demands of its customers on a short-term basis. Thus, the Company carries
relatively small amounts of petroleum in inventory.
22
<PAGE>
Griffith Consumers Company and Subsidiaries
December 31, 1996
PART II. OTHER INFORMATION
1. Legal Proceedings
None
2. Changes in Securities
None
3. Defaults upon Senior Securities
None
4. Submission of Matters to a Vote of Security Holders
None
5. Other Information
None
6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.20 First Amendment to Fourth Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of December 31, 1996, by and among
Griffith Consumers Company, Carl King, Inc., The First National Bank
of Boston, The Travelers Insurance Company, The Travelers Indemnity
Company, Senior Debt Portfolio, Riggs Bank, N.A., and the First
National Bank of Boston as Agent.
(b) Report on Form 8-K
None
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized on the 14th day of February 1997.
GRIFFITH CONSUMERS COMPANY
Registrant
/S/ Raymond R. McKenzie, Jr.
- ----------------------------
Raymond R. McKenzie, Jr., Vice
President Finance (Authorized Officer and
Principal Financial Officer)
CARL KING, INC.
Registrant
/S/ Raymond R. McKenzie, Jr.
- ----------------------------
Raymond R. McKenzie, Jr., Vice
President (Authorized Officer and
Principal Financial Officer)
FREDERICK TERMINALS, INC.
Registrant
/S/ Raymond R. McKenzie, Jr.
- ----------------------------
Raymond R. McKenzie, Jr., Secretary
Authorized Officer and Principal
Financial Officer)
24
FIRST AMENDMENT TO
FOURTH AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This FIRST AMENDMENT, dated as of December 31, 1996, by and among (a)
Griffith Consumers Company, Carl King, Inc., and Shore Stop Corporation, each a
Delaware corporation, (collectively, the "Borrowers"), (b) The First National
Bank of Boston, The Travelers Insurance Company, The Travelers Indemnity
Company, Senior Debt Portfolio and Riggs Bank N.A. (collectively, the "Banks"),
and (c) The First National Bank of Boston as agent for the Banks (the "Agent").
WHEREAS, the Borrowers, the Banks and the Agent are parties to that
certain Fourth Amended and Restated Revolving Credit and Term Loan Agreement
dated as of July 8, 1996 (the "Credit Agreement"); and
WHEREAS, the Borrowers have requested and the Banks have agreed, subject
to the terms and conditions set forth herein, to modify certain provisions of
the Credit Agreement;
NOW, THEREFORE, the Borrowers, the Banks and the Agent hereby covenant and
agree as follows:
ss.1. Defined Terms. Capitalized terms which are used herein
without definition and which are defined in the Credit Agreement
shall have the same meanings herein as in the Credit Agreement.
ss.2. Amendment to the Credit Agreement.
(a) Section 1.1 of the Credit Agreement is hereby further amended by
adding the following new terms in the appropriate place in the alphabetical
sequence thereof:
Additional Note Maturity Date. March 31, 1997, as such date may be
extended for up to an additional 45 days with the consent of each of the
Banks listed on Schedule 1(a) hereto.
Overadvance Amount. (a) For the period from February 12,
1997 through the Overadvance Expiration Date, $2,000,000 and
(b) at all other time, $0.
Overadvance Expiration Date. February 15, 1997, as such date may be
extended for up to an additional 45 days with the consent of each of the
Banks listed on Schedule 1(a) hereto.
<PAGE>
(b) Section 2.1(a) of the Credit Agreement is hereby amended by replacing
clause (ii) in the first sentence thereof with the following:
(ii) the sum of the Borrowing Base plus the Overadvance
Amount.
(c) Section 2.4 of the Credit Agreement is hereby amended by adding the
following to the end of the first sentence thereof:
, and, for the period from February 12, 1997 through the Additional Note
Maturity Date, by separate additional promissory notes of the Borrowers in
substantially the form of Exhibit H-1 hereto dated February 12, 1997 (with
the term "Revolving Credit Note" also including such additional
promissory notes during such period).
(d) Section 3.2 of the Credit Agreement is hereby amended by (1) replacing
the word "and" between clauses (i) and (ii) thereof with a comma and (2)
replacing clause (ii) in the first sentence thereof with the following:
(ii) the sum of the Borrowing Base plus the Overadvance Amount, or (iii)
the amount permitted to be outstanding pursuant to Section 4.09 of the
Indenture dated as of December 15, 1994, among the Borrowers, Frederick
and The Bank of New York as successor trustee, as amended,
(e) Section 5.1.1 of the Credit Agreement is hereby amended by replacing
clause (B) at the end of the first proviso of the first sentence thereof with
the following:
(B) the sum of the Borrowing Base plus the Overadvance Amount,
(f) Section 9.4 of the Credit Agreement is hereby amended by adding the
following new paragraph at the end of such section:
In addition, during the period from February 12, 1997 through the
Additional Note Maturity Date, the Borrowers will deliver to each of the
Banks, simultaneously with the delivery of each of the Borrowing Base
Reports referred to in subsection (d) above during such period, a
Borrowing Base Report calculated in accordance with the definition of
"Borrowing Base" in the Subordinated Debt Documents.
(g) Section 11.1 of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:
11.1 Debt Service Coverage Ratio. For each period of four
consecutive fiscal quarters, commencing with the period of four
consecutive fiscal quarters ending June 30, 1996, the Borrowers will not
permit the Debt Service Coverage Ratio for
-2-
<PAGE>
such period of four consecutive fiscal quarters of the Borrowers to be
less than (a) 1.10 to 1.00 for the period of four consecutive fiscal
quarters ending June 30, 1996 and September 30, 1996, (b) 1.00 to 1.00 for
the period of four consecutive fiscal quarters ending December 31, 1996
and March 31, 1997 and (c) 1.10 to 1.00 for each period of four
consecutive fiscal quarters ending after March 31, 1997.
(h) Section 11.2 of the Credit Agreement is hereby amended and restated in
its entirety to read as follows:
11.2 Cash Flow Ratio. For each period of four consecutive fiscal
quarters ending during the period set forth in the table below, commencing
with the period of four consecutive fiscal quarters ending June 30, 1996,
the Borrowers will not permit the ratio of (a) Consolidated Net Earnings
Available for Debt Service calculated for the period of four consecutive
fiscal quarters then ended plus (i) the aggregate proceeds from all
Indebtedness which is permitted under ss.10.1(g) and (h) which is incurred
by the Borrowers during such period to the extent that in accordance with
generally accepted accounting principles the acquisition or Capitalized
Lease in connection with which such Indebtedness arises was treated as a
Capital Expenditure plus, (ii) subject to the limitation set forth below
in this ss.11.2, for each period of four consecutive fiscal quarters which
include one or more fiscal quarters which end in Fiscal Year 1997, Fiscal
Year 1998 or Fiscal Year 1999, the amount of Capital Expenditures actually
made in such period of four consecutive fiscal quarters in excess of
$3,500,000, (provided that the Borrowers may, at their option, elect not
to add back such excess amount of any period of four consecutive fiscal
quarters if such fiscal quarters do not occur in a single Fiscal Year) to
(b) Consolidated Debt Service calculated for such period plus
Discretionary Capital Expenditures made by the Borrowers and their
Subsidiaries during such period, to be less than the amount set forth
opposite such date in the table below:
-3-
<PAGE>
================================================================================
Period Ratio
- --------------------------------------------------------------------------------
6/30/96 to 9/30/96 (inclusive) 1.000:1.00
- --------------------------------------------------------------------------------
12/31/96 to 3/31/97
(inclusive) 0.850:1.00
- --------------------------------------------------------------------------------
6/30/97 0.925:1.00
- --------------------------------------------------------------------------------
9/30/97 to 3/31/00 (inclusive) 1.000:1.00
- --------------------------------------------------------------------------------
6/30/00 and thereafter 1.100:1.00
(inclusive)
================================================================================
Notwithstanding the foregoing, for purposes of calculating
compliance with this covenant, the Borrowers may not add back Capital
Expenditures pursuant to clause (a) (ii) of this ss.11.2 in an aggregate
amount in excess of $5,000,000. For purposes of calculating compliance
with this limitation, the aggregate amount of Capital Expenditures added
back pursuant to clause (a) (ii) above shall be equal to the aggregate of
the add back amounts attributed (as provided below) to each fiscal quarter
(without duplication for each of the four times such fiscal quarter
appears in the rolling four quarter periods for which compliance hereunder
is calculated). The add back of Capital Expenditures shall be attributable
to the fiscal quarter which is the last fiscal quarter in the period of
four consecutive fiscal quarters with respect to which such add back first
occurs.
(i) Schedule 1(a) to the Credit Agreement is hereby deleted in its
entirety and Schedule 1(a) hereto is substituted therefor.
(j) Exhibit H-1 attached hereto is hereby added to the Credit Agreement as
Exhibit H-1 thereto.
ss.3. Additional Notes. The Borrowers shall execute and deliver to each of
the Banks listed on Schedule 1(a) to the Credit Agreement an Additional Note in
the form of Exhibit H-1 to the Credit Agreement (each, an "Additional Note") in
an amount equal to such Bank's Revolving Credit Commitment Percentage of
$3,000,000.
ss.4. Conditions to Effectiveness. This Amendment shall become
effective upon satisfaction of each of the following conditions
precedent:
(a) receipt by the Agent of this Amendment, executed and
delivered by each of the Borrowers, the Agent and the Banks;
-4-
<PAGE>
(b) receipt by each of the Banks listed on Schedule 1(a) to the Credit
Agreement of the Additional Note payable to such Bank, executed by the
Borrowers;
(c) an opinion of counsel to the Borrowers, in form and
substance satisfactory to the Agent;
(d) a certificate of the Secretary of State of Delaware as to
the legal existence and good standing of each Borrower;
(e) a certificate of an officer of each of the Borrowers certifying as to
(i) no changes to such Borrower's charter and bylaws since July 8, 1996, (ii)
the resolutions of the Board of Directors of such Borrower authorizing and
approving the execution, delivery and performance of this Amendment and the
other documents contemplated hereby and (iii) the incumbency and signature of
officers authorized to execute and deliver this Amendment and the other
documents contemplated hereby; and
(f) receipt by the Agent of (i) a Borrowing Base Report dated as of the
date hereof pursuant to the Credit Agreement and (ii) a Borrowing Base Report
dated as of the date hereof calculated in accordance with the definition of
"Borrowing Base" in the Subordinated Debt Documents.
ss.5. Affirmation of the Borrowers. Each of the Borrowers hereby affirms
all of its obligations under the Credit Agreement, as amended hereby, the Notes
(including the Additional Notes delivered pursuant hereto) and under each of the
other Loan Documents to which it is party and hereby affirms its absolute and
unconditional promise to pay to the Banks the Loans and all other amounts due
under the Credit Agreement, as amended hereby. Each of the Borrowers hereby
represents, warrants and confirms that the Obligations, as amended hereby, are
and remain secured pursuant to the Security Documents.
ss.6. Representations and Warranties. Each of the Borrowers
hereby represents and warrants to the Banks and the Agent as
follows:
(a) Representations and Warranties. The representations and warranties
contained in ss.8 of the Credit Agreement were true and correct in all material
respects when made. The representations and warranties contained in ss.8 of the
Credit Agreement, after giving effect to this Amendment, are true and correct on
the date hereof, except (i) for those representations and warranties which
relate specifically to a particular date, which representations and warranties
were true and correct as of such date and (ii) as otherwise disclosed in writing
by the Borrowers to each of the Banks and the Agent subsequent to the Closing
Date.
-5-
<PAGE>
(b) Authority. The execution and delivery by each Borrower of this
Amendment and the Additional Notes, and the performance by each Borrower of this
Amendment, the Additional Notes and the Credit Agreement, as amended hereby, (i)
are within the corporate authority of such Borrower, (ii) have been duly
authorized by all necessary corporate proceedings, (iii) do not conflict with or
result in any breach or contravention of any provision of law, statute, rule or
regulation to which such Borrower is subject or any judgment, order, writ,
injunction, license or permit applicable to such Borrower, and (iv) do not
conflict with any provision of the corporate charter or bylaws of such Borrower
or any agreement or other instrument binding upon such Borrower.
(c) Enforceability. This Amendment, the Additional Notes and the Credit
Agreement, as amended hereby, are valid and legally binding obligations of each
Borrower, enforceable against such Borrower in accordance with their respective
terms and provisions, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditor's rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor may
be brought.
(d) No Default. No Default or Event of Default exists or
will exist after giving effect to the execution and delivery of
this Amendment.
ss.7. No Other Amendments. Except as expressly provided in this Amendment,
all of the terms and conditions of the Credit Agreement and the other Loan
Documents remain unchanged, and the terms and conditions of the Credit Agreement
as amended hereby and the other Loan Documents remain in full force and effect.
ss.8. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by each party on a separate counterpart, each of
which when so executed and delivered shall be an original, but all of which
together shall constitute one instrument. In proving this Amendment, it shall
not be necessary to produce or account for more than one such counterpart signed
by the party against whom enforcement is sought.
ss.9. Miscellaneous. This Amendment shall be deemed to be a contract under
seal under the laws of The Commonwealth of Massachusetts and shall for all
purposes be construed in accordance with and governed by the laws of The
Commonwealth of Massachusetts. The captions in this Amendment are for
convenience of reference only and shall not define or limit the provisions
hereof. The Borrowers agree to pay to the Agent, on demand by the Agent, all
reasonable out-of-pocket costs and expenses incurred or sustained by the Agent
in connection with the preparation of this Amendment, including reasonable legal
fees.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
GRIFFITH CONSUMERS COMPANY
By:/s/ Raymond R. McKenzie, Jr.
----------------------------------------
Title: Vice President, Secretary and
Treasurer
CARL KING, INC.
By:/s/ Raymond R. McKenzie, Jr.
----------------------------------------
Title: Vice President
SHORE STOP CORPORATION
By:/s/ Raymond R. McKenzie, Jr.
----------------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON,
individually and as Agent
By:/s/ Michael P. Hannon
----------------------------------------
Title: Director
THE TRAVELERS INSURANCE COMPANY
By:/s/ Allen R. Cantrell
----------------------------------------
Title: Investment Officer
THE TRAVELERS INDEMNITY COMPANY
By:/s/ Allen R. Cantrell
----------------------------------------
Title: Investment Officer
SENIOR DEBT PORTFOLIO
By:/s/ Scott H. Page
----------------------------------------
Title: Vice President and Portfolio Manager
RIGGS BANK N.A.
By:/s/ Ana J. Tejblum
----------------------------------------
Title: Vice President
-7-
<PAGE>
Each of the undersigned hereby (i) acknowledges the provisions of the foregoing
Amendment (including the temporary increase in the Revolving Credit Commitments)
and (ii) ratifies and confirms all of its obligations under each of the Loan
Documents to which it is a party.
GRIFFITH HOLDINGS, INC.
By:/s/ Michael S. Shein
----------------------------------------
Title: Vice President
FREDERICK TERMINALS, INC.
By:/s/ Raymond R. McKenzie, Jr.
----------------------------------------
Title: Secretary and Treasurer
REGENT TRANSPORT, INC.
By:/s/ Raymond R. McKenzie, Jr.
----------------------------------------
Title: Vice President
-8-
<PAGE>
SCHEDULE 1(a)
Revolving Credit Commitment;
Revolving Credit Commitment Percentage
For the period from January 2, 1997 through the Additional Note Maturity Date:
================================================================================
Revolving
Revolving Credit
Credit Commitment
Bank Commitment Percentage
- --------------------------------------------------------------------------------
The First National
Bank of Boston $10,461,536 65.3846%
- --------------------------------------------------------------------------------
Riggs Bank N.A. $ 5,538,464 34.6154%
================================================================================
$16,000,000 100%
For the period from the Additional Note Maturity Date through the Revolving
Credit Maturity Date:
================================================================================
Revolving
Revolving Credit
Credit Commitment
Bank Commitment Percentage
- --------------------------------------------------------------------------------
The First National
Bank of Boston $ 8,500,000 65.3846%
- --------------------------------------------------------------------------------
Riggs Bank N.A. $ 4,500,000 34.6154%
================================================================================
$13,000,000 100%
-9-
