-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BjDPxzmJP6t1zjL/Y49LB0WEEhC7redsTBJPnEFC6nel3Ervt5Wv+6lOch1BBykB rZBgTerin8NJrZ0iHnBqPg== 0000950129-97-001517.txt : 19970414 0000950129-97-001517.hdr.sgml : 19970414 ACCESSION NUMBER: 0000950129-97-001517 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 29 CONFORMED PERIOD OF REPORT: 19961229 FILED AS OF DATE: 19970411 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: E Z SERVE CORPORATION CENTRAL INDEX KEY: 0000868575 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO DEALERS & GASOLINE STATIONS [5500] IRS NUMBER: 752168773 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-10717 FILM NUMBER: 97578664 BUSINESS ADDRESS: STREET 1: 2550 N LOOP W STE 600 CITY: HOUSTON STATE: TX ZIP: 77092 BUSINESS PHONE: 7136844300 MAIL ADDRESS: STREET 1: 2550 NORTH LOOP WEST STREET 2: STE 600 CITY: HOUSTON STATE: TX ZIP: 77092 FORMER COMPANY: FORMER CONFORMED NAME: FRONTIER REFINING & MARKETING CO DATE OF NAME CHANGE: 19600201 10-K405 1 E-Z SERVE CORPORATION - DATED 12/29/96 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-K --------------- [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 29, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-10717 E-Z SERVE CORPORATION (Exact name of Registrant as specified in its charter) Delaware 75-2168773 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification number) 2550 North Loop West, Suite 600, Houston, TX 77092 (Address of principal executive offices, including ZIP code) 713/684-4300 (Registrant's telephone number, including area code) ------------------------ Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common Stock, $0.01 par value American Stock Exchange 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 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 The aggregate market value of the Common Stock held by non-affiliates of the Registrant at March 31, 1997, based upon the closing price of these shares on the American Stock Exchange, was $7,221,095. Common Stock 69,319,530 (Number of shares outstanding as of March 31, 1997) ================================================================================ 2 E-Z SERVE CORPORATION AND SUBSIDIARIES FORM 10-K FOR THE YEAR ENDED DECEMBER 29, 1996 INDEX
Item Number Page Part I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . 11 Part II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . 12 Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 14 Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . 21 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . 41 Part III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . 42 Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . 42 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3 PART I ITEM 1. BUSINESS General Background E-Z Serve Corporation, through its wholly-owned subsidiaries (the "Company"), operated 692 and franchised 10 convenience stores, mini marts, and gas marts at December 29, 1996 primarily under the names E-Z Serve, Majik Market and Taylor Food Mart. The Company also retailed motor fuels at 661 of its convenience stores and at 174 non-company operated retail outlets ("Marketers") under its proprietary brand name E-Z Serve and a number of major brands such as Citgo, Conoco, Texaco and Chevron. In addition to marketing motor fuels, company operated convenience stores are engaged in retail merchandising of traditional grocery and non-grocery lines associated with such stores. The Company was organized in 1971 and until 1986 operated a motor fuels wholesale business, a motor fuels supply and trading business and approximately 800 Marketers in non-urban locations in about 20 states. In 1986, Harken Energy Corporation ("Harken") acquired the Company from its former owners, and during 1988 and 1989 the Company acquired 49 convenience stores. In 1991, pursuant to a rights offering, the Company became independent from Harken, and, under new management, developed a strategic business plan intended to refocus the Company's resources towards becoming a leader in the convenience store industry. In 1992, the Company acquired Taylor Petroleum, Inc. ("Taylor") and E-Z Serve Convenience Stores, Inc. ("EZCON"), bringing the company operated convenience store total to 523 and dramatically increasing the Company's presence in metropolitan markets. In January 1995, the Company acquired Time Saver Stores, Inc. ("Time Saver"), a chain of 116 convenience stores (14 of which were franchised) located primarily in New Orleans, and, in July 1995, the Company acquired Sunshine Jr. Stores, Inc. ("SJS"), a chain of 205 convenience stores with a strong concentration in the Florida Panhandle. During 1995 and 1996, the Company disposed of or closed 17 and 45 company operated locations, respectively, and 40 and 30 Marketer locations, respectively, that did not meet operating objectives. The following table shows the states in which the Company conducted business as of December 29, 1996:
Company Non-Company Operated Operated State Locations Locations Total ------------ ------------ ------------ -------- Florida 161 - 161 Louisiana 128 71 199 Texas 97 27 124 Georgia 71 - 71 Alabama 68 1 69 South Carolina 46 - 46 Mississippi 43 16 59 Tennessee 25 3 28 North Carolina 21 1 22 Kansas 13 - 13 Missouri 8 - 8 Oklahoma 4 8 12 Kentucky 4 8 12 New Mexico 2 - 2 Arkansas 1 2 3 Ohio - 32 32 Other States (4) - 5 5 --- --- --- Total 692 174 866 --- --- ---
1 4 E-Z Serve Corporation is incorporated in Delaware and maintains its principal corporate offices at 2550 North Loop West, Suite 600, Houston, Texas 77092; its telephone number is (713) 684-4300. Substantially all of the Company's operations are conducted by its wholly-owned subsidiaries, EZCON (for convenience stores) and by E-Z Serve Petroleum Marketing Company ("EZPET") (for Marketers). Unless the context indicates otherwise, the term "the Company" as used herein should be understood to include subsidiaries of E-Z Serve Corporation and predecessor corporations. Business Strategy Prior to 1992, in excess of 50% of the Company's gross profit was derived from the sale of motor fuels. In 1992, the Company redefined its strategy to increase per store profitability and growth through the acquisition of convenience stores. This strategy was intended to increase the proportion of gross profit derived from convenience store merchandise versus motor fuels and was established for two reasons. First, merchandise gross margins are consistently higher and less volatile than gasoline margins, and second, merchandise sales are less cyclical and less likely to be influenced by national and international political and economic vagaries. Although the Company conducts convenience store operations in 15 states, its primary market area is the southeastern United States and Texas. A major component of the Company's business strategy is to increase its presence in this area as evidenced by the acquisitions of Time Saver and SJS. In addition, the Company plans to divest certain locations outside of its primary marketing area. Discussions are currently being held with interested parties regarding these divestitures. Further, each location, whether part of the primary market area or not, will continually be evaluated to determine if its economic contribution meets the Company's objectives. Locations that fall short of minimum requirements will be disposed of or closed. In this regard, the Company discontinued operations at 45 convenience stores and 30 Marketer locations during 1996. Four franchise locations were converted to company operated locations in 1996. The Company continues to evaluate acquisition opportunities that fit with its strategy and are available at costs that provide acceptable rates of return. In evaluating any acquisition, the Company reviews the operating history and future potential of each unit on the basis of location, competition, cash flow, demographic trends, and merchandising capability. Additionally, prior to an acquisition, the Company reviews the environmental compliance of each location. Depending on the results of such review, the Company will choose not to acquire the site, negotiate an acceptable indemnification, or factor into the purchase price of the location the estimated costs required to bring the location into compliance with existing environmental laws. The Company's ability to expand further is dependent upon several factors, including adequacy of acquisition opportunities and availability of sufficient capital resources. The Company believes that possible acquisition candidates will continue to exist as the industry continues to consolidate to reduce costs and as smaller independent operators have difficulty meeting environmental deadlines. While cash flow and capital availability are currently sufficient to fund operations, it will be necessary for the Company to fund any identified acquisitions with new capital which may not be available on terms acceptable to the Company. 2 5 Convenience Store Operations In 1996, convenience store merchandise sales accounted for approximately 37% of the Company's consolidated operating revenues, and motor fuel sales at company operated convenience stores comprised approximately 53% of consolidated operating revenues. Average monthly per store merchandise sales were approximately $37,400, and average monthly convenience store motor fuel sales were approximately 48,700 gallons. Merchandise sales and gasoline gallons at comparable locations increased 4.6% and 3.9%, respectively, in 1996 from 1995 levels. Configuration and Operations At December 29, 1996, the Company operated 692 and franchised 10 convenience stores throughout three zones (Eastern, Central and Southern) in 15 states under the names E-Z Serve (438 locations), Majik Market (118 locations), Taylor Food Mart (76 locations), and various other names (70 locations). Of these, 223 are owned in fee and 479 are operated under long-term operating lease arrangements. Most of the stores are located in the southern United States, with the largest concentration in Florida, Louisiana, Texas and Georgia. The stores operate seven days a week; 440 are open 24 hours, and the remainder are generally open from 6 a.m. to 12 a.m. At December 29, 1996, the Company operated 567 full-size convenience stores (2000-2800 square feet), 103 mini marts (1200-2000 square feet) and 22 gas marts (400-1200 square feet). Convenience to the customer is emphasized through location of the store, accessible parking, merchandise selection, and service. The majority of the stores (661) market self-service motor fuel with 63 of the locations featuring "pay at the pump" credit card readers. The stores do not provide automobile maintenance service, nor do they sell tires, batteries, or other automotive accessories other than motor oil, antifreeze, and windshield washer fluid. Of the 661 stores that retail motor fuels, branding arrangements are as follows: Citgo (345); Texaco (53); Diamond Shamrock (20); Conoco (8); and unbranded (235). Retail gasoline purchases are generally concluded inside the store where the customer is encouraged to make additional purchases. Credit card sales account for approximately 20% of total motor fuel sales. Merchandising Store merchandise offered for sale is selected to provide the best response to customer preferences. Each full-size convenience store typically stocks a combination of nationally recognized brands and local product selections. This product mix normally consists of food and non-food items including dry grocery items, dairy products, candy, bakery goods, alcoholic and non-alcoholic beverages, tobacco products, health and beauty aids, general merchandise and periodicals. Offerings will typically include a combination of takeout packages and immediately consumable products including coffee, fountain beverages and snacks. Other services include pay telephones, phone cards and copiers in stores where these items are economical. In addition, virtually all stores offer money order services, 481 sell lottery tickets, 247 have ATM's or scrip machines, 52 have hot food delis, 10 offer branded fast food service and 280 have cappuccino machines. Convenience stores generate higher margins than grocery stores and many other retail outlets. Monthly promotions in key categories such as beer and soft drinks are normally linked to supplier price reductions, thus providing additional value to the customer without a dramatic reduction in store margins. Advertising is conducted through local media (television, radio, newspaper) and store level signage. In 1996, the Company continued its comprehensive media advertising program in the greater New Orleans and Gulf Coast markets. This program provided for the cost to be shared between the Company and those vendors whose products were promoted. Merchandise pricing is based on consumer demand and the competitive environment within guidelines established on a cost of goods basis. Estimated 3 6 sales percentages by principle categories of products sold at company operated stores in 1996 were as follows:
1996 1995 ---- ---- Gasoline 58% 58% Tobacco Products 11 11 Beer/Wine 9 10 Soft Drinks 5 5 Food Service 3 3 Groceries 3 2 Salty Snacks 2 2 Candy 2 2 Publications 1 2 Health/Beauty Aids 1 1 Dairy 1 1 Other 4 3 ---- ---- 100% 100% ==== ====
New merchandising initiatives for 1997 include a category management approach to marketing which will utilize consumer data to determine product mix and inventory levels for items within that mix. Improved technology allows quicker, more accurate processing of information from the stores (See Management Information Systems). This information coupled with consumer data supplied by vendor partners and research firms will be used to improve both product selection and inventory turns on a store-by-store basis. Budgets for categories, and eventually, individual items within each category will be used in 1997 to measure the effectiveness of this approach. Management and Training Each store is staffed with a manager who is responsible for, among other things, recruiting and supervising store employees, store safety, cleanliness, inventory display, in-store advertising, customer service and reporting to the territory supervisor. Territory supervisors are generally responsible for eight to ten stores and ensure that the store managers maintain the Company's uniform standards for the above items. Further, the territory supervisor oversees the accuracy of operating results reported from the store level. In addition to their salaries, the store managers participate in a cash incentive program based on merchandise sales improvement, control of key expense items, store profitability, and customer service. The territory supervisor's incentive program is based on store-level earnings less supervisory expenses. All newly hired store level employees are given mandatory in-store training by the store manager. This training includes customer service, safety, alcohol and tobacco sales awareness, robbery and crime prevention, and on-the-job operational issues. Employees who demonstrate managerial ability are given additional training and become qualified for promotion to store manager upon recommendation by an internal review board. Marketer Operations In 1996, Marketer operations accounted for approximately 8% of the Company's total revenues and average monthly motor fuel sales per location were 27,200 gallons. Motor fuel gallons sold at comparable locations decreased 0.1% in 1996 from 1995. 4 7 At December 29, 1996, the Company had 174 operating Marketer locations. The following table shows, by state, the operating locations selling motor fuels under the E-Z Serve brand or under a major brand:
E-Z Serve Major Brand Total State Locations Locations Locations ---------------- --------- ----------- --------- Kentucky 7 1 8 Louisiana 24 47 71 Mississippi 9 7 16 Ohio 32 - 32 Oklahoma 7 1 8 Texas 15 12 27 Nine Other States 10 2 12 --- --- --- Total 104 70 174 === === ===
Of the 70 major brand locations, 40 are Conoco, 25 are Chevron and 5 are CITGO. Gasoline Sales Station Agreements At the majority of its Marketer outlets, the Company entered into gasoline sales station agreements ("GSSA") with independent operators of convenience stores and other retail facilities pursuant to which the Company installs equipment used for the sale of retail gasoline products. Historically, a GSSA had a term of ten years with two five-year renewals at the option of the Company. Under a GSSA, the operator of the facility provides all labor necessary for gasoline sales. A GSSA also provides that the operator of the facility receive compensation under various terms, normally based on gallons sold or a percentage of gross profit margin. The Company is responsible for all maintenance costs to its equipment during the term of the agreement and has the right to remove its equipment from the premises upon termination of the GSSA. Downsizing the Marketer Business In 1991, the Company evaluated the strategic importance and profit contribution potential of each of its Marketer locations. As a result of this study, the Company offered for sale all of its California and Arizona locations, as well as selected locations in several other states. Between 1992 and 1996, the Company sold 92 of these locations for a combination of cash and notes totaling approximately $2,960,000 and closed an additional 194 locations. Closed locations, if unsalable, are abandoned after completion of any environmental clean-up obligations. In certain circumstances, the Company retains fuel supply commitments on sold locations and lease payment commitments on vacated locations. At December 29, 1996, the Company had two fuel supply commitments. The Company is currently discussing the sale of the Marketer business with several potential buyers. Seasonal Trends Traditionally, motor fuel sales volumes are higher between April and September and peak in July and August. Convenience store merchandise sales follow a similar pattern, but the swings are not as dramatic. This seasonality at the Company's locations is diminished somewhat compared to national norms since most of the Company's convenience stores are located in the southern U.S. where the climate is temperate. As stated previously, the Company's ongoing strategy of increasing the proportion of gross profit from merchandise sales 5 8 should also help moderate seasonal variations. However, it is likely that the Company will continue to experience higher revenues and profit margins in the second and third quarters than in the first and fourth. Suppliers During 1996, the Company purchased approximately 49% of its store merchandise from one large wholesale supplier under a seven-year agreement which expires in December 2001. This relationship allows the Company to enhance rebate and purchase discount programs provided by national brand manufacturers. Additionally, the Company believes that it receives better pricing and greater flexibility with product quantities and mix. Certain products such as alcoholic beverages, soft drinks, dairy products, and baked goods are purchased directly from either local suppliers or from the manufacturers' distribution networks due to legal and trade restrictions and industry practice concerning the distribution of these products. These suppliers typically have their own distribution networks and quality control systems. Motor fuel supply is obtained from two primary sources. Locations that sell motor fuels under a major brand are supplied through term agreements with major oil companies. These agreements provide reliable, but not guaranteed, product supply, competitive pricing (i.e. posted rack which is related to the spot market), national advertising support, associated brand recognition, and customer perception of quality. The major oil companies also provide continuing support for location upgrades and credit card programs which enhance fuel sales. Locations that sell motor fuels under the Company's trade names (primarily E-Z Serve and Majik Market) obtain product on a spot basis based upon the lowest rack price postings at terminals located near these outlets. At December 29, 1996, approximately 65% of the Company's motor fuel supply requirement was under contract with five branded suppliers, but the Company has available, and utilizes, over 40 suppliers. The Company discontinued the private transport of motor fuel for its own account in May, 1995. All motor fuel supply is now transported by contracted common carriers from refineries or product terminals to the Company's retail locations. There are alternative wholesale merchandise supply sources available to the Company and management believes that merchandise supply is stable and that other sources could be obtained if necessary. Motor fuel suppliers in recent years have had no difficulty meeting the Company's needs; however national or international events could cause a supply interruption which, if extended in duration, could have a material adverse effect on the Company's operations and earnings. Competition The Company's business, particularly motor fuel sales, is highly competitive. In the convenience store merchandise market, the primary competitors are locally operated convenience or grocery stores (in rural areas) and national or regional chain operators (in urban areas). Most convenience stores market similar classes of products, typically stocking over 3,000 items. Competitive factors include location, advertising, product mix and presentation, promotions, pricing, and customer service. The Company has established policies and procedures which address each of these areas, and, as properly implemented by its management team, allow the Company to effectively compete in its markets. Motor fuel competitors include local dealers and jobbers, independent retailers, independent and chain convenience stores, and integrated oil 6 9 companies. The principal competitive factors affecting the Company's business are location, product price and quality, facility appearance, and brand identification. Product differentiation is problematic except in the case of specific brand preferences. Since most locations offer similar equipment and service levels, it is difficult to create a perceived value enhancement for the Company's products. Accordingly, gasoline marketers tend to compete primarily on the basis of price. Prices are typically advertised on highly visible signage, thus offering the customer the opportunity to compare and shop prices at competing locations while still in his or her car. These factors tend to make motor fuel prices much less stable than convenience store merchandise prices. The Company believes that several additional factors allow it to operate competitively. First, by operating 692 stores, the Company spreads its corporate overhead over more locations than smaller chains. Secondly, as the Company has grown in size, it has reduced its product cost through discounts and rebates associated with volume purchasing. Lastly, in areas such as New Orleans and the Florida Panhandle, where the Company is a market share leader, the Company can effectively employ media advertising campaigns intended to increase sales. Employees At December 29, 1996, the Company employed 4,845 people (including part-time employees), of which 4,460 were employees in convenience stores, 117 were in territory supervision, and 268 were in management, administrative, and clerical positions. The Company is not party to any collective bargaining agreements and has experienced no work stoppages or strikes as a result of labor disputes. The Company experiences the high rate of turnover of store employees that is common in the convenience store industry. The Company provides competitive wage scales and benefits, and considers relations with employees to be satisfactory. Management Information Systems In 1994, the Company implemented a three-phase plan to upgrade its information systems. Phase I involved the installation of home office hardware and software to serve as the foundation for the new system. Phase II, which was completed in early 1996, included the installation of personal computers at all store locations. With the personal computers, store managers now input operating results and transmit daily to the corporate office for processing. Further, this system allows the Company to control prices electronically at the zone level rather than manually at the store level and provides for quicker decimination of information to decision-makers. In addition, all field operating management have computers that can transmit or retrieve data from the host system in the corporate office. Phase II also provided the necessary base hardware and software for future implementation of point-of-sale ("POS") product management. Phase III will entail the installation of POS hardware (e.g. cash registers integrated to the personal computer and additional price look up capability and possibly scanners) and software. When completed, this phase will provide enhanced product category sales management, significantly enhance inventory controls and reduce the store personnel's clerical requirements thereby allowing each store to direct more attention to sales and profitability. Initial implementation of Phase III is expected by the end of 1997. 7 10 During 1996 and early 1997, the Company also installed software in the personal computers to print money orders and payroll checks at the stores. This eliminates the cost of separate money order dispensers and the need to maintain money order stock at the stores. The printing of weekly payroll checks at the stores eliminates the cost of overnight mailing from the corporate office. Trademarks The trade names "E-Z Serve," "Majik Market", "Taylor Food Marts", "Time Saver", and "Jr. Food Stores" are registered with the U.S. Patent and Trademark Office. The Company believes that these service marks are of significant value in the promotion of the Company's business. Government Regulation Regulation of Underground Storage Tanks At December 29, 1996, the Company owned approximately 2,600 underground storage tanks ("USTs") that are used for the storage of refined products at its retail units. The ownership and/or operation of USTs is subject to federal, state, and local laws and regulations. Federal regulations issued in 1988 establish requirements for (i) maintaining leak detection systems, (ii) upgrading tank systems, (iii) taking corrective action in response to leakage, (iv) closing tanks to prevent future leakage, (v) keeping appropriate records, and (vi) maintaining evidence of financial responsibility for taking corrective action and compensating third parties for bodily injury and property damage resulting from leakage. These regulations provide that the states may take primary responsibility for administering and enforcing regulatory programs by adopting requirements that are at least as stringent as the federal standards. Several states in which the Company operates or has operated (i.e., California) have adopted programs that are more stringent than the federal requirements. Violations of the federal regulations may be subject to enforcement orders by the Environmental Protection Agency ("EPA") or the applicable state agency, as the case may be, and owners and operators of USTs who fail to comply with an EPA order alleging a violation of the regulations may be subject to a $25,000 per day civil penalty. A civil penalty of $10,000 per tank per day may also be imposed by the EPA upon any UST owner who knowingly fails to file any required notification forms or submits false information with respect thereto or who fails to comply with any requirement or standard promulgated by the EPA under these federal regulations. In some situations, the Company can be liable for cleanup costs, even if the contamination resulted from previous conduct of the Company that was lawful at the time, or from improper conduct of, or conditions caused by, previous property owners, lessees or other persons not associated with the Company. From time to time, claims are made and litigation is brought against the Company under these and other laws. Each UST is governed by different sections of the regulations which allow for implementation of these requirements during varying periods of up to ten years based on type and age of the individual UST. All new tanks must be corrosion protected, overfill/spill protected, and have leak detection when installed. All existing USTs must be upgraded to provide corrosion and overfill/spill protection by December 22, 1998. The existing USTs can meet corrosion standards by complying with the standards applicable to new tanks or by being protected on the interior with an approved coating or a cathodic protection system. Additionally, all USTs had to meet leak detection standards by December 22, 1993. The Company has chosen, in most cases, to meet the leak detection requirements by utilizing Statistical Inventory Reconciliation with 8 11 daily inventory reconciliations. At December 29, 1996, the Company was in complete compliance with leak detection standards and 50% completed with the tank upgrade requirements. The Company estimates that it will make capital expenditures of $3,183,000 and $2,641,000 in 1997 and 1998, respectively, to be in full compliance with the regulations by the 1998 deadline. Additionally, the Company estimates that the total future cost of performing remediation on contaminated sites will be approximately $41,588,000, of which approximately $34,180,000 is expected to be reimbursed by state trust funds. Also, the Company anticipates incurring approximately $2,331,000 for the costs of removing USTs at abandoned locations. During 1995, the Company entered into an agreement with an environmental consulting firm whereby the consulting firm assumes responsibility for the cleanup of contaminated sites at approximately 80% of the Company's locations. Under this agreement ("Direct Bill Agreement"), the consulting firm remediates the sites at its cost and files for reimbursement from the state. The Company experiences no cash cost for these sites, other than the cost of the deductible, unless the state does not reimburse the consulting firm within a period of twenty-four months in which case the Company is obligated to reimburse the consulting firm. With the Direct Bill Agreement, assuming full reimbursement by the states to the consulting firm, the future cash cost to the Company for remediating contaminated sites decreases to approximately $9,446,000, of which, approximately $5,396,000 is expected to be reimbursed by state funds. At December 29, 1996, for work largely completed prior to the Direct Bill Agreement, the Company had completed the necessary remediation and has reimbursement claims totaling approximately $7,371,000 with the various states in which it operates. The assumptions related to the cost estimates and viability of state trust funds may not prove accurate, and, unanticipated events and circumstances may occur. Therefore, the actual cost of complying with these requirements may be substantially lower or higher than the estimated costs. The Company is required under EPA regulations to maintain evidence of financial responsibility for taking corrective action and compensating third parties for bodily injury and property damage resulting from leakage from USTs. The Company has elected to satisfy this requirement by the authorized alternative of self-insuring. In addition, the Company must comply with the necessary Occupational Safety and Health Administration regulations and the regulations of various state agencies, including air quality control boards. The Company has an environmental department that is responsible for management and adherence to local, state, and federal environmental regulations. Other Regulations The sale of alcoholic beverages by the Company is subject to the approval of state and local regulatory agencies, which approval can be revoked if substantial or persistent noncompliance with regulations governing the sale of alcoholic beverages occurs. In addition, retailers of alcoholic beverages may be held liable for damages caused by individuals that become intoxicated from consuming beverages purchased from the retailer. Although the Company has experienced no material liability to date, and has installed policies and procedures to lessen the potential exposure, there can be no assurance that any future liability that may arise will not have a material adverse effect on the Company's operations and earnings. The U.S. Food and Drug Administration, along with state and local governments, has undertaken a high degree of enforcement activity with regard to the sale of certain tobacco products to underage persons. Although the Company has experienced no material liability to date, substantial or persistent noncompliance with regulations concerning such sales could lead to revocation of tobacco sales licenses. 9 12 Executive Officers The following named persons serve as executive officers of the Company as of March 31, 1997:
Name Age Position - ---------------------- --- ------------------------------------ Neil H. McLaurin 52 Chairman of the Board and Chief Executive Officer Kathleen Callahan-Guion 45 President and Chief Operating Officer John T. Miller 50 Senior Vice President, Chief Financial Officer, and Secretary Harold E. Lambert 58 Vice President - Legal and Assistant Secretary
A brief description of each executive officer is provided below: Neil H. McLaurin has been Chairman of the Board of Directors and Chief Executive Officer of the Company since October 1990. He also served as President of the Company from October 1990 until March 1997. From 1988 to 1990, Mr. McLaurin served as a consultant for L. B. Consulting Co., an investment company in Houston, Texas. From 1966 to 1988, Mr. McLaurin was employed by Tenneco, Inc., an integrated oil and gas company, in various positions, including Vice President of Wholesale Marketing from 1987 to 1988, and Vice President of Retail Marketing from 1983 to 1987. Kathleen Callahan-Guion has been President and Chief Operating Officer of the Company since March 1997. From 1979 to 1997 Ms. Callahan-Guion was employed by The Southland Corporation, a convenience store chain, in various operating positions of increasing responsibility including the most recent position of Vice President, Chesapeake Division. From 1969 to 1979 Ms. Callahan-Guion was employed by Jewel Food Stores in various positions including Service Manager. John T. Miller has been Senior Vice President, Chief Financial Officer, and Secretary of the Company since May, 1989. Mr. Miller's previous experience was as Controller for GOTCO Ltd., a worldwide manufacturer and marketer of lubricants, from 1984 to 1989; in various positions including Assistant Controller for exploration and production of Gulf Oil Corporation from 1974 to 1984; and as a senior auditor with Ernst & Young LLP from 1971 to 1974. Harold E. Lambert has been Vice President - Legal, and Assistant Secretary of the Company since August, 1992. Mr. Lambert's prior experience includes serving as Vice President and Corporate Counsel of EZCON prior to EZCON's acquisition by the Company, ten years as General Counsel for Munford, Inc., a New York Stock Exchange listed company which owned and operated 800 convenience stores, and positions with Service Merchandise Company, Top Value Enterprises, and the National Soft Drink Association. 10 13 ITEM 2. PROPERTIES Substantially all property and equipment owned by the Company is subject to liens under various collateral agreements with its lenders. Convenience Stores The Company leases the real property and owns the equipment at 479 of its convenience store locations and owns in fee simple the real property, improvements and equipment at 223 of its locations. The leases generally have initial terms of 10 years with two five-year renewals at the option of the Company. At December 29, 1996, the Company estimates the average remaining term of its convenience store leases, including option periods, to be approximately eleven years. Marketer Locations The Company owns and maintains substantially all of the equipment (including storage tanks, piping, pumps, meters, canopies, signs, lighting, wiring, and remote control consoles) used to sell refined motor fuels at its Marketer locations. The Company is granted certain rights to operate and maintain access to this equipment under marketing agreements with the owners or operators of the individual locations. At December 29, 1996, the Company estimates the average remaining term of its Marketer leases to be less than three years. Corporate Offices The Company's corporate offices are located in northwest Houston, Texas where it leases approximately 39,000 square feet of office space through November 2002. All of the principal executive, accounting and administrative functions are conducted at the Houston location. ITEM 3. LEGAL PROCEEDINGS The Company and its subsidiaries are involved in various lawsuits incidental to its businesses. The Company's internal legal counsel monitors all such claims, and the Company has accrued for those which it believes are probable of payment. In management's opinion, an adverse determination against the Company or any of its subsidiaries relating to these suits would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. In the case of administrative proceedings related to environmental matters involving governmental authorities, management does not believe that any imposition of monetary sanctions would exceed $100,000. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the quarter ended December 29, 1996. 11 14 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information for Common Stock The Company's common stock, par value $0.01 per share ("Common Stock"), is traded on the American Stock Exchange (Symbol: EZS). The following table reflects the range of high and low sales prices by quarter as reported by the American Stock Exchange from December 26, 1994 through December 29, 1996.
1996 --------------------------- High Low ---------- --------- First Quarter . . . . . . . . . . . . . . . . . . $1 7/16 $1 3/16 Second Quarter . . . . . . . . . . . . . . . . . 2 3/8 1 1/4 Third Quarter . . . . . . . . . . . . . . . . . . 2 11/16 1 11/16 Fourth Quarter . . . . . . . . . . . . . . . . . 1 7/8 1 1/16
1995 -------------------------- High Low --------- --------- First Quarter . . . . . . . . . . . . . . . . . . $1 1/2 $15/16 Second Quarter . . . . . . . . . . . . . . . . . 1 7/16 15/16 Third Quarter . . . . . . . . . . . . . . . . . . 1 3/4 15/16 Fourth Quarter . . . . . . . . . . . . . . . . . 1 7/16 1 1/4
Holders of Record At February 28, 1997, there were approximately 195 holders of record of the Common Stock. Dividends The Company has never declared dividends on its Common Stock. The Company is restricted from paying dividends by certain of its bank debt covenants (see Note 6 - Long-Term Obligations and Credit Arrangements in the Notes to Consolidated Financial Statements). The Company intends to retain any earnings for internal investment and debt reduction, and does not intend to declare dividends on its Common Stock in the foreseeable future. 12 15 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected financial information derived from the audited Consolidated Financial Statements of the Company, and should be read in conjunction with the Company's Consolidated Financial Statements and notes thereto (Item 8 herein) and Management's Discussion and Analysis of Financial Condition and Results of Operations (Item 7 herein):
Year Ended (a) -------------------------------------------------------------------------------- December 29, December 31, December 25, December 26, December 27, 1996 1995 1994 1993 1992 ------------- ------------ ------------ ------------ ------------ (In thousands, except per share data) OPERATIONS: (b)(c) Revenues $861,642 $748,152 $563,191 $605,695 $ 434,314 Income (loss) from operations $(15,075) (d) $ 5,264 $ 5,087 $ 3,329 $ (25,664)(d) Fully diluted earnings (loss) per common and common equivalent share $ (.23) $ .07 $ .07 $ .05 $ (2.62) ASSETS: (b)(c) Current assets $ 64,887 $ 81,355 $ 55,712 $ 44,112 $ 51,075 Current liabilities $ 73,606 $ 79,707 $ 48,138 $ 44,655 $ 46,030 -------- -------- -------- --------- -------- Working capital (deficit) $ (8,719) (g) $ 1,648 (f) $ 7,574 (e) $ (543) $ 5,045 ======== ======== ======== ========= ======== Total assets $240,405 $263,346 $150,554 $126,645 $140,979 ======== ======== ======== ========= ======== LONG-TERM OBLIGATIONS AND EQUITY: (b)(c) Long-term obligations: Long-term debt $ 72,395 $ 76,157 (h) $ 14,627 $ 15,867 (h) $ 44,639 Indebtedness to related parties - 25 25 25 4,541 Other long-term obligations $ 39,120 $ 37,297 (i) $ 25,189 (i) $ 11,541 (i) $ 15,134 -------- -------- -------- ---------- -------- Total long-term obligations $111,515 $113,479 $ 39,841 $ 27,433 $ 64,314 ======== ======== ======== ========= ======== Stockholders' equity $ 55,284 $ 70,160 $ 62,575 $ 54,557 (j) $ 30,635 ======== ======== ======== ========= ========
(a) The Company's fiscal year ends on the last Sunday on or before December 31. This normally provides a 52-week fiscal year, but occasionally (e.g. 1995) provides a 53-week fiscal year. (b) The increases in 1993 operations reflect the Taylor (March, 1992) and EZCON (July, 1992) acquisitions. The increases in 1995 and 1996 operations and 1995 assets and liabilities reflect the Time Saver (January, 1995) and SJS (July, 1995) acquisitions. The 1996 assets include an SFAS 121 impairment provision related to the write-down of EZPET to fair value. (c) Certain amounts in prior years have been reclassified to conform to the presentation used in 1996. (d) The operating loss in 1992 includes non-recurring charges against operations of $19,007,000. The 1996 operating loss includes non-recurring charges against operations of $10,272,000. (e) The increase in working capital reflects a decrease in current portion of long-term debt due to the January, 1995 refinancing, and an increase in receivables from settlements reached with certain of the Company's insurance carriers regarding California environmental claims. (f) The decrease in working capital in 1995 reflects the increase in current maturities from the new debt related to the Time Saver and SJS acquisitions and the collection of receivables discussed in (e). (g) The decrease in working capital in 1996 primarily reflects principal payments on the Term Loan and an increase in the current portion of long term debt. (h) The decrease in 1993 reflects the April 1993 debt restructuring and the increase in 1995 reflects the new debt related to the Time Saver and SJS acquisitions. (i) The decrease in 1993 is due to conversion of EZCON redeemable preferred stock into the Company's Common Stock. Prior to 1994, the Company accounted for environmental liabilities net of state trust fund reimbursement; the increase in 1994 is due to reporting gross environmental liabilities and receivables, and the increase in 1995 is due to the Time Saver and SJS acquisitions. (j) The increase in 1993 reflects issuance of Common Stock and Preferred Stock of the Company to effect the Taylor and EZCON acquisitions. 13 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations The following is Management's discussion and analysis of certain significant factors which have affected the Company's results of operations and balance sheet during the periods included in the accompanying consolidated financial statements: Results of Operations (In thousands except store counts, per gallon prices and margins)
Year Ended ------------------------------------------------------ December 29, December 31, December 25, 1996 1995 1994 ------------ ----------- ------------ CONVENIENCE STORE OPERATIONS (1) - --------------------------------- Merchandise: Average number of merchandise stores during the period 704 618 463 Merchandise sales $316,318 $267,045 $181,129 Merchandise sales per location per month $ 37.4 $ 36.0 $ 32.6 Gross profit $ 92,704 $ 82,833 $ 54,925 Gross profit per location per month $ 11.0 $ 11.2 $ 9.9 Gross profit percentage 29.31% 31.02% 30.32% Motor Fuels: Average number of motor fuel stores during the period 678 574 415 Gallons sold 396,568 353,430 274,238 Gallons sold per location per month 48.7 51.3 55.1 Revenues $459,705 $382,038 $282,530 Price per gallon $ 1.159 $ 1.081 $ 1.030 Gross profit $ 46,302 $ 46,183 $ 32,839 Gross profit per gallon $ 0.1168 $ 0.1307 $ 0.1197 Gross profit per location per month $ 5.7 $ 6.7 $ 6.6 MARKETER OPERATIONS (2) - ----------------------- Average number of operating locations during the period 189 228 258 Gallons sold 61,748 73,333 83,418 Gallons sold per location per month 27.2 26.8 26.9 Revenues $ 73,174 $ 82,006 $ 90,926 Price per gallon $ 1.185 $ 1.118 $ 1.090 Gross profit (3) $ 7,329 $ 9,853 $ 11,629 Gross profit per gallon $ 0.119 $ 0.1343 $ 0.1394 Gross profit per location per month $ 3.2 $ 3.6 $ 3.8
- -------------------------------------------------------------------------------- (1) At December 29, 1996, there were 692 company operated convenience stores (661 of which sold motor fuels) and 10 franchised convenience stores. (2) Represents non-company operated motor fuel retail outlets. (3) Gross profit is shown before deducting compensation paid to operators of locations not operated by the Company of $3,336, $4,579 and $4,503 for the years 1996, 1995 and 1994, respectively. 14 17 The following table sets forth the percentage to total revenue of certain items in the Consolidated Statements of Operations: Percentage of Total Revenue
Year Ended -------------------------------------------------- December 29, December 31, December 25, 1996 1995 1994 ------------ ------------ ----------- Revenues: Motor fuels 61.8% 62.0% 66.3% Convenience store 36.7 35.7 32.2 Other income 1.5 2.3 1.5 ----- ----- ---- 100.0 100.0 100.0 ----- ----- ---- Costs and Expenses: Cost of sales: Motor fuels 55.6 54.6 58.5 Convenience store 26.0 24.6 22.4 Operating expenses 13.6 13.5 12.8 Selling, general, and administrative expenses 3.1 3.5 3.6 Depreciation, amortization and asset impairment 2.5 1.9 1.0 Interest expense 1.0 0.8 0.3 ----- ----- ----- 101.8 98.9 98.6 ----- ----- ----- Income (loss) before income taxes (1.8) 1.1 1.4 Income tax expense - 0.1 - Provision in lieu of taxes - 0.3 0.5 ----- ----- ----- Net Income (loss) (1.8) 0.7 0.9 ===== ===== =====
Overview The Company reported a net loss of $15,075,000 and net income of $5,264,000 and $5,087,000 for the years ended December 29, 1996, December 31, 1995, and December 25, 1994, respectively. Included in the net loss for fiscal year 1996, is $10,272,000 of non-recurring expense items, $8,870,000 of which were non-cash. These items include an additional asset impairment provision pursuant to Statement of Financial Accounting Standards No. 121 ("SFAS 121") and other costs of $7,393,000 related to the write-down of EZPET to fair value and the accrual of $2,879,000 for severance and other restructuring costs. Fiscal 1995 included a non-recurring gain of $3,614,000 (net of tax effect) related to insurance settlements in the Company's favor. In addition, in the fourth quarter of 1995, the Company adopted SFAS 121; as a result, 1995 included an asset impairment provision of $2,706,000 (net of tax effect) related to certain of the Company's fixed asset groups. Fiscal 1994 included $700,000 (net of tax effect) for a non-recurring gain from insurance settlements. Without these non-recurring items, net income (loss) in 1996, 1995, and 1994 would have been $(4,803,000), $4,356,000, and $4,387,000, respectively. Revenues, operating expenses and depreciation expenses increased in 1996 reflecting a full year of operations from the SJS acquisition. Interest expense also increased in 1996 resulting from the additional debt associated with the Time Saver and SJS acquisitions. Revenues and operating expenses increased in 1995 from the 1994 levels due to the acquisition of Time Saver and SJS. 15 18 Operating Gross Profit Convenience store merchandise sales increased 18.5% in 1996 compared to 1995 primarily due to the acquisition in July 1995 of SJS. Merchandise sales per location increased 3.9% over 1995, principally due to the acquisition of SJS stores which have higher per store average merchandise sales, and partially due to the Company's on-going program of closing or selling under-performing locations. In 1995, total merchandise sales increased 47.4% from 1994 due to the acquisitions of Time Saver and SJS. Management's goal has been, since 1992, to increase the revenue contribution from convenience store merchandise which has higher and less volatile profit margins than motor fuel. For 1996, merchandise revenue comprised 36.7% of the Company's total revenue as compared to 35.7% for 1995 and 32.2% for 1994. The merchandise gross profit margin decreased to 29.31% in 1996 from 31.02% in 1995, reflecting a shift by the Company to a more aggressive pricing strategy designed to increase customer traffic count. The 1995 margin increase to 31.02% was principally due to the addition of Time Saver and SJS which increased the Company's purchasing power, thereby increasing the amount of volume discounts and rebates. Merchandise sales at comparable stores increased 4.6% and 0.2% in 1996 and 1995, respectively. In 1996, gross profit per gallon of motor fuel sold at convenience stores decreased 10.6% to 11.68 cents per gallon from 13.07 cents per gallon in 1995, and total gross profit per location from motor fuel sales decreased 14.9%. These reductions were due to lower industry margins resulting from increased wholesale prices caused by higher crude costs and lower than normal gasoline inventories. Due to competitive pressures, the Company was not able to fully reflect these increased costs in its selling prices. During 1995, motor fuel gross profit per gallon increased 9.2% to 13.07 cents per gallon, primarily due to more favorable market conditions. The average number of gallons sold per location decreased 5.1% in 1996 and 6.9% in 1995, primarily due to the acquisition of Time Saver and SJS which sell lower volumes per store. However, motor fuel gallons sold at comparable stores increased 3.9% and 0.2% in 1996 and 1995, respectively. Other Income Other income (which includes money order sales income, gross profit from the sale of lottery tickets, telephone commissions, rental income, interest income, franchise fee income, and other) decreased 27.1% as compared to 1995, primarily due to reduced franchise fee income and a 1995 non-recurring gain of $5,475,000 ($3,614,000 net of tax effect) from favorable insurance settlements related to the Company's California locations. Expenses In 1996, operating expenses increased 16.2% from 1995, due primarily to the increased number of average operating locations. Operating expenses, as a percentage of total revenues, were 13.6% in 1996 as compared to 13.5% in 1995 and 12.8% in 1994. These increases were principally attributable to the Time Saver and SJS acquisitions because those stores, on average, have a higher percentage of revenue derived from merchandise sales and therefore, are more labor intensive than the average of the Company's stores prior to the acquisitions. Selling, general and administrative expenses increased $100,000, or 0.4%, in 1996 over 1995 and $6,019,000 or 29.6%, in 1995 over 1994. The increase in 1996 is primarily due to $2,029,000 of severance and other restructuring costs. Without these non-recurring expenses, S G & A expenses would have decreased by 7.3% in 1996 primarily due to cost reductions associated with the new corporate system and lower 16 19 incentive bonuses. The increase in 1995 over 1994 reflects the Time Saver and SJS acquisitions. Depreciation, amortization and asset impairment expense increased $7,101,000 or 48.8% in 1996 from 1995 primarily due to an additional SFAS 121 impairment provision of $7,146,000 resulting from the write-down of EZPET to fair value. Depreciation and amortization expense increased $4,694,000, or 81.4%, in 1995 from 1994 primarily due to the Time Saver and SJS acquisitions. The 1995 amount also includes a $4,100,000 asset impairment resulting from the adoption of SFAS 121. Interest expense in 1996 increased $2,677,000 or 45% as compared to 1995; and increased $4,324,000 or 265% in 1995 as compared to 1994, due to the increased level of outstanding debt as a result of the Time Saver and SJS acquisitions. Inflation The Company believes inflation has not had a material effect on its results of operations for the past three years. The Company does, however, experience short term fluctuations in its motor fuel gross profit margins as a result of changing market conditions for the supply and demand of gasoline. Liquidity and Capital Resources The following table sets forth key balance sheet amounts and corresponding ratios for periods included in the accompanying consolidated financial statements:
December 29, December 31, 1996 1995 ------------ ------------ Current assets . . . . . . . . . . . . . . . . . $64,887,000 $81,355,000 Current liabilities . . . . . . . . . . . . . . . $73,606,000 $79,707,000 Current ratio . . . . . . . . . . . . . . . . . . 0.88:1 1.02:1 Long-term obligations (including related parties and other) . . . . . . . . . . . 72,395,000 $76,182,000 Stockholders' equity . . . . . . . . . . . . . . 55,284,000 $70,160,000 Debt to equity ratio . . . . . . . . . . . . . . 1.31:1 1.09:1 Common shares outstanding . . . . . . . . . . . . 69,119,530 67,854,159
Liquidity Due to the nature of the Company's business, most sales are for cash, and cash provided by operations is the Company's primary source of liquidity. Receivables relate to undeposited sales by Marketers, credit card sales, lottery and lotto redemptions, manufacturer rebates and other receivables. In addition, the Company finances its inventory requirements primarily through normal trade credit terms. This condition allows the Company to operate with a low level of cash and working capital. The Company had a working capital deficit of $8,719,000 at December 29, 1996, as compared to $1,648,000 of positive working capital at year end 1995. The change is primarily due to $6,011,000 in principal payments on the Term Loan and an increase in the current portion of long term debt. As of December 29, 1996, EZCON had $8,971,000 available on its bank line of credit. 17 20 During 1996, the Company received the following major non-recurring cash proceeds: sale of fixed assets of $1,146,000 and proceeds from legal settlements of $784,000. Major non-recurring expenditures included: $12,083,000 for capital and environmental equipment; $2,512,000 for environmental remediation; and $808,000 for removal of underground storage tanks. Approximately 62% of the Company's revenues are derived from motor fuel sales and, because the Company acquires 100% of its product on a virtual spot basis, gross margins are subject to sudden changes whenever a disproportionate movement between purchase costs and retail selling prices occurs. Frequently these movements are not in line with each other, which leads to unusually wide or narrow margins. In addition, attempts by the major oil companies to gain market share have placed added pressure on the margins and volumes of independent marketers. Without stability in the marketplace, the Company may temporarily experience operating results that are unprofitable before considering depreciation and debt service. The Company believes that cash flow from operations and available working capital will provide the Company with sufficient liquidity to conduct its business in an ordinary manner. However, unanticipated events or a prolonged motor fuel margin squeeze could occur which may cause cash shortfalls to exist and require the Company to borrow on its revolving line of credit to a greater extent than currently anticipated, to seek additional debt financing or to seek additional equity capital which may or may not be available. In addition, in accordance with the terms of the C & G Agreement - Amendment No. 2 (see Capital Resources), the Company has the option to apply a portion of the proceeds received from sales of assets to the July 1997 and January 1998 scheduled principal payments. Capital Resources As discussed in Note 6 - Long-Term Obligations and Credit Arrangements in the Notes to Consolidated Financial Statements, on January 17, 1995, EZCON entered into a Credit and Guaranty Agreement ("C & G Agreement") with a group of banks (the "Lenders") including Societe Generale as the agent (the "Agent"). The C & G Agreement provided for a term loan of $45,000,000 ("Term Loan") and a $15,000,000 revolving line of credit ("Revolver"). At closing, the Term Loan was fully drawn and the proceeds were used (a) to repay in full the outstanding amounts owed under the Company's previous credit agreement, (b) to finance the initial payment for the Time Saver acquisition, and (c) for working capital purposes. On July 21, 1995, the C & G Agreement was amended whereby the Lenders increased the Term Loan available to the Company to $60,400,000. The Company fully drew the additional $15,400,000 and the proceeds were used for the acquisition of SJS. With the acquisition, the Company assumed the indebtedness of SJS. On October 2, 1995, the C & G Agreement was amended and restated ("Amended C & G Agreement") wherein the Term Loan was increased to $80,000,000 and the Revolver was increased to $25,000,000. The Company drew the additional $19,600,000 available on the Term Loan and used the proceeds to retire the outstanding debt of SJS. As a result of financial covenant violations incurred by the Company in 1996, an amendment to the Amended C & G Agreement ("C & G Agreement - Amendment No. 2") was entered into on March 27, 1997. Under the terms of the C & G Agreement - Amendment No. 2, the Term Loan and the Revolver mature on October 1, 1998. Both loans bear interest at the prime rate plus 1.75%, and, with proper notice to the Agent, both can be converted to LIBOR loans at LIBOR plus 3.0%. The Company made principal payments of $2,000,000, $3,550,000 and $3,550,000 in January 1996, July 1996, and January 1997, respectively. In addition, in accordance with the terms of the Amended C & G Agreement, proceeds from the sale of assets provided additional principal payments of $461,000 in 1996 and $70,000 in 1997. The outstanding Term Loan balance as of March 31, 1997 was $70,369,000. The Term Loan 18 21 requires additional semi-annual principal payments of $4,820,000 on July 24, 1997, $5,780,000 on January 24, 1998 and $6,280,000 on July 24, 1998. Also, the C & G Agreement - Amendment No. 2 requires that 100% of certain transaction proceeds, as defined, be immediately applied as a mandatory prepayment of the Term Loan in the inverse order of maturity. However, 50% of the first $10,600,000 of any asset sales can be applied pro rata to the scheduled Term Loan principal payments due July 1997 and January 1998. Further, in accordance with the C & G Agreement - Amendment No. 2, the aggregate outstanding principal amount of the Term Loan must be reduced to $60,000,000 by September 30, 1997, $55,000,000 by December 31, 1997 and $45,000,000 by February 28, 1998. In order to facilitate these reductions, the Company plans to divest certain locations outside of its primary market area. Discussions are currently being held with interested parties regarding these divestitures. The Revolver can be used for working capital purposes and for issuance of a maximum of $15,000,000 of letters of credit. The Revolver has a "clean-down" provision whereby, under the C & G Agreement - Amendment No. 2, during a five consecutive calendar day period of each calendar month, the aggregate outstanding borrowing cannot exceed certain defined levels. At December 29, 1996, there were $5,200,000 of the outstanding borrowings under the Revolver and there were $9,845,000 of outstanding letters of credit issued primarily for workers compensation claims. The Term Loan and Revolver are secured by the Company's pledge of all of the capital stock of its subsidiaries. Further, the C & G Agreement - Amendment No. 2 grants the Lenders, among other things, a security interest in substantially all of the Company's real property, buildings and improvements, fixtures, equipment, inventories and receivables. Provisions of the C & G Agreement - Amendment No. 2 require the Company to remain within the limits of certain defined financial covenants, and impose various restrictions on distributions, business transactions, contractual obligations, capital expenditures and lease obligations. On January 27, 1997, the Company entered into a Securities Purchase Agreement, ("Purchase Agreement") whereby the Company issued and sold 140,000 shares of Series H Preferred Stock to one of its major stockholders. Net proceeds of $8,359,000 from the sale were used to redeem all of the Company's 75,656 outstanding shares of Series C Preferred Stock and net proceeds of $5,081,000 were used for general corporate purposes, including paying down a portion of amounts outstanding under the Company's Revolver. Due to capital constraints brought about largely by operating losses and by the environmental expenditure requirements discussed above, the Company was unable to properly upgrade its facilities prior to 1994. However, as a result of improved operating results, the Company made discretionary capital expenditures of $7,768,000, $10,936,000, and $4,682,000 in 1996, 1995, and 1994, respectively. However, according to the terms of the Amended C & G Agreement, if projected levels of profitability are not maintained, the Company's capital expenditures can be constrained. In this regard, based on reduced cash flow in 1996, discretionary capital expenditures were essentially halted in mid-year and remain constrained. Although this curtailment will reduce the intended level of high return discretionary expenditures into 1997, the Company believes that it will be able to generate sufficient cash flow to meet its obligations. However, the Company must seek alternate sources of capital if it is to remain competitive in the marketplace in the future. As discussed in Item 1, the Company's business strategy is to grow through acquisitions. The Company's ability to expand further is dependent upon several factors, including adequacy of acquisition opportunities and sufficient capital resources. The Company believes that possible acquisition candidates will continue to exist as the industry continues to consolidate to reduce costs, and as small independent operators have difficulty meeting environmental deadlines. While cash flow and capital availability are currently sufficient to fund operations, it will be necessary for the Company to fund any identified acquisitions with new capital which may not be available on terms acceptable to the Company. 19 22 Current federal law mandates that, by December 22, 1998, all USTs must be corrosion protected, overfill/spill protected, and have a method of leak detection installed. Each UST is governed by different sections of the regulations which allow for implementation of these requirements during varying periods of up to ten years based on type and age of the individual UST. All existing USTs must be upgraded to provide corrosion and overfill/spill protection by December 22, 1998; additionally, all USTs had to meet leak detection standards by December 22, 1993. As of December 29, 1996, the Company was in complete compliance with leak detection standards and 50% completed with the corrosion and overfill/spill requirements. The Company estimates that additional expenditures of $5,824,000 will be necessary to meet these upgrade standards. Additionally, the Company estimates that expenditures of approximately $4,050,000 (net of anticipated reimbursements from state environmental trust funds) will be necessary to perform remediation on contaminated sites. This estimate is based upon assumptions as to the number of tanks to be replaced and certain other factors. The assumptions on which the cost estimates are based may not materialize, and unanticipated events and circumstances may occur. As a result, the actual cost of complying with these requirements may be substantially lower or higher than the estimated costs. The Company anticipates that required expenditures relating to compliance with these regulations will be funded from cash flow from its current operations. Under federal tax law, the amount and availability of net operating loss carryforwards ("NOL") are subject to a variety of interpretations and restrictive tests under which the utilization of such NOL carryforwards could be limited or effectively lost upon certain changes in ownership. After an ownership change, utilization of a loss corporation's NOL is limited annually to a prescribed rate times the value of a loss corporation's stock immediately before the ownership change. During 1992, the Company experienced an "ownership change" as defined by the Internal Revenue Code of 1986. The Company's NOL available under the ownership change rules was approximately $43,000,000 at December 29, 1996. The NOL will expire if not utilized between 2005 and 2011. Approximately $19,000,000 of the NOL was acquired with the acquisitions of EZCON and SJS and can only be used to offset future income of EZCON. In addition, the Company has alternative minimum tax NOL carryforwards of approximately $43,000,000 which are available over an indefinite period and can be utilized should the Company's alternative minimum tax liability exceed its regular tax liability. Disclosure Regarding Forward Looking Statements Item 7 of this document includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Although the Company believes that the expectations reflected in such forward looking statements are based upon reasonable assumptions, the Company can give no assurance that these expectations will be achieved. Important factors that could cause actual results to differ materially from the Company's expectations include general economic, business and market conditions, the volatility of the price of oil, competition, development and operating costs and the factors that are disclosed in conjunction with the forward looking statements included herein (collectively the "Cautionary Disclosures"). Subsequent written and oral forward looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Disclosures. 20 23 ITEM 8. FINANCIAL STATEMENTS Index to Financial Statements
Page Consolidated Financial Statements of E-Z Serve Corporation and Subsidiaries Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Consolidated Balance Sheets - December 29, 1996 and December 31, 1995 . . . . . . . . . . . . . . . . . . 23 Consolidated Statements of Operations - Years ended December 29, 1996, December 31, 1995, and December 25, 1994 . . . . . . . . . . . . . . . 24 Consolidated Statements of Stockholders' Equity - Years ended December 29, 1996, December 31, 1995, and December 25, 1994 . . . . . . . . . . . . . . . . 25 Consolidated Statements of Cash Flows - Years ended December 29, 1996, December 31, 1995, and December 25, 1994 . . . . . . . . . . . . . . . . 26 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
21 24 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders E-Z Serve Corporation We have audited the consolidated financial statements of E-Z Serve Corporation and subsidiaries as listed in the accompanying index. 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 financial statements referred to above present fairly, in all material respects, the financial position of E-Z Serve Corporation and subsidiaries as of December 29, 1996 and December 31, 1995, and the results of its operations and its cash flows for the fifty-two week period ended December 29, 1996, the fifty-three week period ended December 31, 1995, and the fifty-two week period ended December 25, 1994, in conformity with generally accepted accounting principles. As discussed in notes 1 and 4 to the consolidated financial statements, in 1995 the Company adopted the provisions of the Statement of Financial Accounting Standards No.121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of". KPMG Peat Marwick LLP Houston, Texas March 27, 1997 22 25 E-Z SERVE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands)
December 29, December 31, 1996 1995 ------------ ------------ ASSETS - ------ Current Assets: Cash and cash equivalents $ 6,333 $ 15,759 Receivables, net of allowance for doubtful accounts of $180 and $185 as of December 29, 1996 and December 31, 1995, respectively 8,764 9,136 Inventory 40,070 39,849 Environmental receivables (Note 7) 7,246 13,828 Prepaid expenses and other current assets 2,474 2,783 -------- -------- Total Current Assets 64,887 81,355 Property and equipment, net of accumulated depreciation and impairment provision (Notes 1 and 4) 137,298 143,144 Environmental receivables (Note 7) 34,305 32,428 Other assets 3,915 6,419 -------- -------- $240,405 $263,346 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities: Trade payables $ 29,563 $ 31,729 Accrued liabilities and other (Note 5) 26,265 28,127 Current portion of environmental liability (Note 7) 9,017 14,057 Current portion of long-term obligations (Note 6) 8,761 5,794 -------- -------- Total Current Liabilities 73,606 79,707 Long-term Obligations (Note 6): Payable to banks, net of current portion 70,819 74,450 Payable to related parties, including interest - 25 Obligations under capital leases 1,338 1,389 Other, net of current portion 238 318 Environmental liability (Note 7) 32,571 30,043 Other liabilities, net of current portion 6,549 7,254 Commitments and contingencies (Note 7) - - -------- -------- Total Long-Term Liabilities 111,515 113,479 Stockholders' Equity: (Notes 2 and 8) Preferred stock, $0.01 par value; authorized 3,000,000 shares; 75,656 shares Series C issued and outstanding at December 29, 1996 and December 31, 1995, respectively; 1 1 Common stock, $0.01 par value; authorized 100,000,000 shares; 69,119,530 and 67,854,159 shares issued at December 29, 1996 and December 31, 1995, respectively 691 679 Additional paid-in capital 56,527 56,340 Retained earnings (accumulated deficit) subsequent to March 28, 1993, date of quasi-reorganization (total deficit eliminated $86,034) (1,935) 13,140 -------- -------- Total Stockholders' Equity 55,284 70,160 -------- -------- $240,405 $263,346 ======== ========
The accompanying Notes to Consolidated Financial Statements are an integral part of these Statements. 23 26 E-Z SERVE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts)
Year Ended ----------------------------------------------------------- December 29, December 31, December 25, 1996 1995 1994 ------------ ------------ ------------ Revenues: Motor fuels (includes excise taxes of approximately $156,081, $145,551 and $128,800 for years 1996, 1995 and 1994, respectively) $ 532,879 $ 464,044 $ 373,456 Convenience store 316,318 267,045 181,129 Other income (Note 7) 12,445 17,063 8,606 ----------- ----------- ----------- 861,642 748,152 563,191 Costs and Expenses: Cost of sales: Motor fuels 479,248 408,008 328,988 Convenience store 223,614 184,212 126,204 Operating expenses 117,434 101,087 72,193 Selling, general and administrative expenses 26,474 26,374 20,355 Depreciation, amortization and asset impairment (Notes 1 and 4) 21,660 14,559 5,765 Interest expense 8,630 5,953 1,629 ----------- ----------- ----------- 877,060 740,193 555,134 ----------- ----------- ----------- Income (loss) before income taxes (15,418) 7,959 8,057 Income tax expense (benefit) (343) 568 231 Provision in lieu of taxes (Notes 2 and 11) - 2,127 2,739 ----------- ----------- ----------- Net income (loss) $ (15,075) $ 5,264 $ 5,087 =========== =========== =========== Primary earnings (loss) per common and common equivalent share (Note 1) $ (.23) $ .07 $ .07 =========== =========== =========== Fully diluted earnings (loss) per common and common equivalent share (Note 1) $ (.23) $ .07 $ .07 =========== =========== =========== Weighted average common and common equivalent shares outstanding: Primary 68,684,760 77,489,093 73,752,492 =========== =========== =========== Fully diluted 68,684,760 78,005,045 73,752,492 =========== =========== ===========
The accompanying Notes to Consolidated Financial Statements are an integral part of these Statements. 24 27 E-Z SERVE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands)
Additional Retained Preferred Common Paid-In Earnings Stock Stock Capital (Deficit) Total --------- ------ ---------- --------- ------- Balance, December 26, 1993 $ 1 $670 $50,004 $ 3,882 $54,557 Net income - - - 5,087 $5,087 Exercise of stock options - - 3 - 3 Deferred compensation - stock options - - 189 - 189 Conversion of Series C Preferred Stock to Common Stock - 3 (3) - - Provision in lieu of taxes - - 2,739 - 2,739 --- ---- ------- -------- ------- Balance, December 25, 1994 1 673 52,932 8,969 62,575 Net income - - - 5,264 5,264 Exercise of stock options - 1 5 - 6 Deferred compensation - stock options - - 188 - 188 Conversion of Series C Preferred Stock to Common Stock - 5 (5) - - Series C Preferred Stock Dividend - - 1,093 (1,093) - Provision in lieu of taxes - - 2,127 - 2,127 --- ---- ------- -------- ------ Balance, December 31, 1995 1 679 56,340 13,140 70,160 Net loss - - - (15,075) (15,075) Exercise of stock options - 1 57 - 58 Exercise of stock warrants - 11 (13) - (2) Deferred compensation stock options - - 143 - 143 --- ---- ------- ------- ------- Balance, December 29, 1996 $ 1 $691 $56,527 $(1,935) $55,284 === ==== ======= ======= =======
The accompanying Notes to Consolidated Financial Statements are an integral part of these Statements. 25 28 E-Z SERVE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Year Ended --------------------------------------------------- December 29, December 31, December 25, 1996 1995 1994 ------------ ------------ ------------ Cash flows from operating activities: Net income (loss) $(15,075) $ 5,264 $ 5,087 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization - Fixed Assets 14,513 10,459 5,765 Amortization - Deferred Financial Cost 1,082 317 - Provision for asset impairment 7,146 4,100 - Payments for environmental remediation (2,512) (2,716) (1,717) Payments for removal of underground storage tanks (808) (463) (755) Provision for doubtful accounts (5) 50 109 Stock option expense 143 188 189 Provision in lieu of taxes - 2,127 2,739 (Gain) loss on sales of assets 1,022 (99) (147) Change in current assets and liabilities: (Increase) decrease in accounts & notes receivable 377 (1,846) (3,431) (Increase) decrease in inventory (221) (439) 278 (Increase) decrease in prepaid expenses and other 309 (408) (99) Decrease in trade payables and accruals (4,028) (1,150) (1,839) Proceeds from environmental settlement - 5,740 1,600 Other - net 728 (1,326) 3,010 -------- -------- ------- Net cash provided by operating activities 2,671 19,798 10,789 Cash flows from investing activities: Proceeds from sale of assets 1,146 2,309 2,021 Payments for purchase of companies, net of cash acquired - (46,361) - Capital expenditures and other asset additions (12,083) (16,124) (8,541) -------- -------- ------- Net cash used in investing activities (10,937) (60,176) (6,520) Cash flows from financing activities: Issuance of common stock 56 6 3 Proceeds from long-term debt 5,563 80,181 - Payments of long-term debt (6,383) (33,218) (5,679) Payments of deferred financing costs (396) (3,795) - -------- -------- ------- Net cash provided by (used in) financing activities (1,160) 43,174 (5,676) -------- -------- ------- Net increase (decrease)in cash & cash equivalents (9,426) 2,796 (1,407) Cash and cash equivalents at beginning of period 15,759 12,963 14,370 -------- -------- ------- Cash and cash equivalents at end of period $ 6,333 $15,759 $12,963 ======== ======== =======
The accompanying Notes to Consolidated Financial Statements are an Integral part of these Statements. 26 29 E-Z SERVE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (In thousands)
Year Ended --------------------------------------------------- December 29, December 31, December 25, 1996 1995 1994 ------------ ------------ ------------ Noncash investing and financing activities: Conversion of Series C Preferred Stock to Common Stock $ - $ (5) $ (3) Issuance of Series C Preferred Stock - 1,093 - Dividends on Series C Preferred Stock - (1,093) Issuance of Common Stock - 5 3 ------ ------ ------ $ - $ - $ - ====== ====== ====== Supplemental disclosures of cash flow information: Cash paid during the period for: Income taxes $ - $ 511 $ 346 Interest 8,821 4,529 1,545
The accompanying Notes to Consolidated Financial Statements are an integral part of these Statements. 27 30 E-Z SERVE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in Thousands) NOTE (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of E-Z Serve Corporation and its wholly-owned operating subsidiaries, E-Z Serve Petroleum Marketing Company ("EZPET"), and E-Z Serve Convenience Stores, Inc. ("EZCON"). The Statement of Operations for 1995 includes the results of Time Saver Stores, Inc. ("Time Saver") since January 17, 1995, and Sunshine-Jr. Stores, Inc. ("SJS") since July 20, 1995. Unless the context indicates to the contrary, the term the "Company" as used herein should be understood to include subsidiaries of E-Z Serve Corporation and predecessor corporations. All significant intercompany accounts and transactions have been eliminated in consolidation. Cash and Cash Equivalents For purposes of the Consolidated Statements of Cash Flows, all highly liquid investments with original maturities of less than 90 days are considered to be cash equivalents. Off Balance Sheet Risk The Company has not entered into any contracts or obligations that expose the Company to off balance sheet risk. Accounts Receivable The Company maintains an allowance for potential losses in collection of its receivables. Inventory Refined product and convenience store merchandise inventories are stated principally at average cost which approximates market value. Fair Value of Financial Instruments The carrying values of cash and cash equivalents, receivables and trade payables, and accrued liabilities are considered to approximate fair value due to the short term nature of these instruments. The carrying value of long term debt is estimated to approximate fair value based on the Company's incremental borrowing rate for similar types of borrowing arrangements, except for a notional amount which is required by the lender to be rate protected. (See Note 6 - Long- Term Obligations and Credit Agreements) 28 31 Property and Equipment Property and equipment are carried at cost. Retail station equipment, convenience store buildings and equipment, and other property are depreciated on the straight-line method over their estimated useful lives, ranging from five to twenty years. Asset Impairment The Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of" ("SFAS 121"). This standard requires that long-lived assets held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. As a result of the adoption of SFAS 121, in 1995, the Company recorded an asset impairment write-down of $4,100 related to the Marketer business fixed asset groups. Additionally, in 1996, a further impairment provision of $7,146 ($4,013 for Property and Equipment and $3,133 for Environmental Receivables) was recorded for certain long-lived assets. (See Note 4 - Property and Equipment) Environmental Costs Costs incurred to comply with federal and state environmental regulations are accounted for as follows: - - Annual fees for tank registration and environmental compliance testing are expensed as incurred. - - Expenditures for upgrading and corrosion protection for tank systems and installation of leak detectors and overfill/spill devices are capitalized and depreciated over the remaining life of the location lease term or the expected useful life of the equipment, whichever is less. - - The tank removal costs associated with retail locations which provide no significant growth potential and that the Company plans to sell or dispose of in the near future have been estimated and a liability established through a charge to expense. The costs to remove tanks at all other retail locations are expensed as incurred. - - Future remediation costs of contaminated sites related to gasoline underground storage tanks are estimated and a liability is established. Amounts reimbursable from the state trust funds are recognized as a receivable. The adequacy of the liability is evaluated at least annually and adjustments are made based on updated experience and changes in government policy. Income Taxes The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to 29 32 taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Stock-Based Compensation Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123") was issued in October 1995. SFAS 123, which is effective for fiscal years beginning after December 15, 1995, prescribes the "fair value" method of measuring compensation expense for its stock-based compensation plans. However, SFAS 123 allows for the continuation of the measurement method as defined by Accounting Principles Board Opinion No. 25 ("APB No. 25") with pro forma disclosures of the effect on net income and earnings per share as if the fair value-based method had been applied in measuring compensation expense. The Company has decided to continue under APB No. 25 and provide pro forma disclosure. (See Note 10 - Stock Option Plans) Earnings per Share The computation of earnings per common share is based upon the weighted average number of common shares outstanding during the period plus (in periods in which they have a dilutive effect) the effect of common equivalent shares arising from convertible preferred stock using the if-converted method, and dilutive stock options and warrants using the treasury stock method. The net loss for 1996 is increased by unpaid, cumulative preferred stock dividends in calculating net loss attributable to common shareholders. 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, the 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. Basis of Presentation Certain reclassifications have been made in the 1995 and 1994 financial statements to conform with the 1996 presentation. NOTE (2) QUASI-REORGANIZATION With the acquisitions of Taylor and EZCON in 1992, the Company's primary business changed from that of a gasoline marketer to a convenience store operator. Accordingly, effective March 28, 1993, the Company's Board of Directors authorized management to effect a quasi-reorganization. As part of the quasi-reorganization, the deficit in retained earnings was eliminated against additional paid-in capital. Retained earnings in the future will be dated to reflect only the results of operations subsequent to March 28, 1993. Any future tax benefits of operating loss and tax credit carryforward items which arose prior to the quasi-reorganization will be reported as a direct credit to paid-in capital. (See Note 11 - Income Taxes) 30 33 NOTE (3) BUSINESS ACQUISITIONS All acquisitions have been accounted for using the purchase method. Time Saver On January 17, 1995, the Company, through it's wholly-owned subsidiary EZCON, acquired all of the capital stock of Time Saver from Dillon Companies, Inc. At the date of acquisition, Time Saver operated 102 and franchised 14 convenience stores in the New Orleans, Louisiana area, and was the dominant independent convenience store chain in New Orleans. Under the terms of the agreement with the seller, EZCON made a payment at closing of $29,960 for the properties and, based on Time Saver's closing balance sheet, made an additional payment of $7,000 on February 28, 1995 for the non- property net assets. The Company financed the transaction through a new Credit and Guaranty Agreement with a group of banks (See Note 6 - Long Term Obligations and Credit Arrangements). On March 31, 1995, Time Saver was merged into EZCON. SJS On June 15, 1995, the Company, its wholly-owned subsidiary EZS Acquisition Corporation ("EZS") and SJS entered into an Agreement and Plan of Merger whereby EZS agreed to make a tender offer for all 1,701,650 outstanding shares of common stock of SJS at $12.00 per share net to the sellers in cash for an aggregate purchase price of $20,420. The tender offer expired on July 20, 1995, which was the effective date of the acquisition. Effective July 21, 1995, EZS merged with and into SJS thereby converting all shares of SJS not tendered into the right to receive $12.00 per share, net in cash. At such time, SJS became a wholly-owned subsidiary of the Company. At the date of acquisition, SJS operated 205 convenience stores in five states with 120 of the stores in Florida, 52 stores in Alabama, 27 stores in Mississippi, 5 stores in Georgia, and 1 store in Louisiana. EZS obtained the funds necessary for the acquisition from a capital contribution by the Company. The Company, through its subsidiary EZCON, obtained $15,400 of the acquisition price pursuant to an amendment to its Credit and Guaranty Agreement (See Note 6 - Long-Term Obligations and Credit Arrangements) with the remainder coming from funds generated internally by the Company and its subsidiaries. On October 2, 1995, SJS was merged into EZCON. NOTE (4) PROPERTY AND EQUIPMENT A summary of property and equipment follows:
December 29, December 31, 1996 1995 ------------ ------------ Land and Buildings $ 62,424 $ 72,528 Assets under capital leases 22,677 22,258 Equipment and Fixtures 64,522 61,908 Other property 15,817 12,572 Less accumulated depreciation and amortization (28,142) (26,122) -------- -------- $137,298 $143,144 ======== ========
31 34 In the fourth quarter of 1995, the Company adopted SFAS 121. In applying the provisions of SFAS 121, the Company determined that it had 27 convenience store asset groupings and an additional Marketer group. The future cash flows from each asset grouping, except the Marketer group, exceeded the carrying value of the respective asset groupings; consequently, the Company recognized an impairment provision of $4,100 to reduce the carrying value of the Marketer group to the amount of its estimated discounted future cash flows. The $4,100 impairment provision was calculated using discounted future cash flow, less cash out flows necessary to maintain or abandon the assets and is included with the caption "Depreciation, amortization and asset impairment" on the Consolidated Statement of Operations. In December 1996, the Company, in conjunction with its effort to sell EZPET, recognized an additional SFAS 121 asset impairment of $4,013 for property and equipment. The impairment decreases the carrying value to estimated fair value. The fair value was determined by bids received by the Company. There have been no other circumstances, as defined by SFAS 121, that would cause the recoverability of the carrying value of any other long-lived assets to be in question. NOTE (5) ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES Accrued liabilities and other current liabilities consist of the following:
December 29, December 31, 1996 1995 ------------ ------------ Insurance accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,387 $ 7,170 Accrued taxes due to local and federal governments . . . . . . . . . . . 9,543 13,299 Accrued salary and benefits . . . . . . . . . . . . . . . . . . . . . . . 2,638 3,024 Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,589 1,780 Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 5,108 2,854 ------- ------- $26,265 $28,127 ======= =======
NOTE (6) LONG-TERM OBLIGATIONS AND CREDIT ARRANGEMENTS Long-term obligations consist of the following:
December 29, December 31, 1996 1995 ------------ ------------ Notes payable to bank under revolving lines of credit . . . . . . . . . . . . . . . . . . . . . $ 5,200 $ - Term notes payable to banks . . . . . . . . . . . . . . . 73,989 80,000 Current portion . . . . . . . . . . . . . . . (8,370) (5,550) ------- ------- 70,819 74,450 ------- ------- Notes payable to major stockholders . . . . . . . . . . . 25 25 Current portion . . . . . . . . . . . . . . . (25) - ------- ------- - 25 ------- ------- Capital lease obligations . . . . . . . . . . . . . . . . 1,624 1,557 Current portion . . . . . . . . . . . . . . . (286) (168) ------- ------- 1,338 1,389 ------- ------- Long-term debt - other . . . . . . . . . . . . . . . . . 318 394 Current portion . . . . . . . . . . . . . . . (80) (76) ------- ------- 238 318 ------- ------- Total long-term debt obligations . . . . . . . . . . . . $72,395 $76,182 ======= =======
32 35 On January 17, 1995, EZCON entered into a Credit and Guaranty Agreement ("C & G Agreement") with a group of banks (the "Lenders") including Societe Generale as Agent. This C & G Agreement replaced the credit facilities utilized by the Company at December 25, 1994. The C & G Agreement provided for a term loan of $45,000 ("Term Loan") and a $15,000 revolving line of credit ("Revolver"). At closing, the Term Loan was fully drawn and the proceeds were used (a) to repay in full the outstanding amounts owed under the previous credit agreement, (b) to finance the initial payment for the Time Saver acquisition, and (c) for working capital purposes. On July 21, 1995 the C & G Agreement was amended whereby the Lenders increased the Term Loan available to the Company to $60,400. The Company fully drew the additional $15,400 and the proceeds were used for the acquisition of SJS. With the acquisition of SJS, the Company assumed the indebtedness of SJS. On October 2, 1995, the Amended and Restated Credit and Guaranty Agreement ("Amended C & G Agreement") was entered into and the Term Loan was increased to $80,000, the Revolver was increased to $25,000 and the letter of credit sub-limit was increased to $15,000. The Company fully drew the additional $19,600 available on the Term Loan and used the proceeds to retire all of the outstanding debt of SJS. Concurrently with the signing of the Amended C & G Agreement, SJS was merged into EZCON. As a result of financial covenant violations incurred by the Company in 1996, an amendment to the Amended C & G Agreement ("C & G Agreement - Amendment No. 2") was entered into on March 27, 1997. Under the terms of the C & G Agreement - - Amendment No. 2, the Term Loan and the Revolver mature on October 1, 1998. Both loans bear interest at the prime rate plus 1.75%, and, with proper notice to the Agent, both can be converted to LIBOR loans at LIBOR plus 3.0%. During 1996 and 1995, the Term Loan was converted to a LIBOR loan at average interest rates of 8.06% and 8.60%, respectively. The Amended C & G Agreement requires that a notional amount of at least $20,000 of the Term Loan be rate protected, as defined, through January 17, 1998. In this regard, the Company entered into a three-year interest rate swap in the notional amount of $20,000. The swap agreement is a contract to exchange floating interest rate payments for fixed rate payments without the exchange of the underlying notional amount. The notional amount is used to measure interest to be paid or received and does not represent an exposure to credit loss. The Agreement effectively changes $20,000 of the Company's Term Loan to a fixed rate of 9.35% through April, 1998. The Company made principal payments of $2,000, $3,550 and $3,550 in January 1996, July 1996, and January 1997, respectively. In addition, in accordance with the terms of the Amended C & G Agreement, proceeds from the sale of 33 36 assets provided additional principal payments of $461 in 1996 and $70 in 1997. The outstanding Term Loan balance as of March 31, 1997 was $70,369. The Term Loan requires additional semi-annual principal payments of $4,820 on July 24, 1997, $5,780 on January 24, 1998 and $6,280 on July 24, 1998. Also, the C & G Agreement - Amendment No. 2 requires that 100% of certain transaction proceeds, as defined, be immediately applied as a mandatory prepayment of the Term Loan in the inverse order of maturity. However, 50% of the first $10,600 of any asset sales can be applied pro rata to the scheduled Term Loan principal payments due July 1997 and January 1998. Further, in accordance with the C & G Agreement - Amendment No. 2, the aggregate outstanding principal amount of the Term Loan must be reduced to $60,000 by September 30, 1997, $55,000 by December 31, 1997 and $45,000 by February 28,1998. In order to facilitate these reductions, the Company plans to divest certain locations outside of its primary market area. Discussions are currently being held with interested parties regarding these divestitures. The Revolver can be used for working capital purposes and for issuance of a maximum of $15,000 of letters of credit. The Revolver has a "clean-down" provision whereby, under the C & G Agreement - Amendment No. 2, during a five consecutive calendar day period of each calendar month, the aggregate outstanding borrowing cannot exceed certain defined levels. At December 29, 1996, there were $5,200 of the outstanding borrowings under the Revolver and there were $9,845 of outstanding letters of credit issued primarily for workers compensation claims. The Term Loan and Revolver are secured by the Company's pledge of all of the capital stock of its subsidiaries and also by guaranties from EZPET. Further, the C & G Agreement - Amendment No. 2 grants the Lenders, among other things, a security interest in substantially all of the Company's real property, buildings and improvements, fixtures, equipment, inventories and receivables. Provisions of the C & G Agreement - Amendment No. 2 require the Company to remain within the limits of certain defined financial covenants, and impose various restrictions on distributions, business transactions, contractual obligations, capital expenditures and lease obligations. NOTE (7) COMMITMENTS AND CONTINGENCIES The Environmental Protection Agency issued regulations in 1988 that established certain requirements for underground storage tanks ("USTs") that affect various aspects of the Company's retail gasoline operations. The regulations require assurances of insurance or financial responsibility and will require the Company to replace or upgrade a certain number of its USTs with systems to protect against corrosion and overfill/spills and to detect leaks. The Company has elected to self-insure to meet the financial responsibility aspects of these regulations. By December 22, 1998, all USTs must be corrosion protected, overfill/spill protected. Additionally, by December 1993, all USTs had to have a method of leak detection installed. As of December 29, 1996, the Company was in complete compliance with leak detection standards and 50% completed with the corrosion and overfill/spill requirements. The Company estimates that it will make additional capital expenditures of $3,183 and $2,641 in 1997 and 1998 respectively, to be in full compliance with the regulations by the 1998 deadline. Additionally, the Company estimates that the total future cost of performing remediation on contaminated sites will be approximately $41,588, of which approximately $34,180 is expected to be reimbursed by state trust funds. Also, the Company anticipates incurring approximately $2,331 for the costs of removing USTs at abandoned locations. During 1995, the Company entered into an agreement with an environmental consulting firm whereby the consulting firm assumes responsibility for the cleanup of contaminated sites at approximately 80% of the Company's locations. Under this agreement ("Direct Bill 34 37 Agreement"), the consulting firm remediates the sites at its cost and files for reimbursement from the state. The Company experiences no cash cost for these sites, other than the cost of the deductible, unless the state does not reimburse the consulting firm within a period of twenty-four months in which case the Company is obligated to reimburse the consulting firm. With the Direct Bill Agreement, assuming full reimbursement by the states to the consulting firm, the future cash cost to the Company for remediating contaminated sites drops to approximately $9,446, of which, approximately $5,396 is expected to be reimbursed by state funds. At December 29, 1996, for work largely completed prior to the Direct Bill Agreement, the Company had completed the necessary remediation and has reimbursement claims totaling approximately $7,371 with the various states in which it operates. Such estimates are based on current regulations, historical results, assumptions as to the number of tanks to be replaced, and certain other factors. The actual cost of remediating contaminated sites and removing tanks may be substantially lower or higher than reserved due to the difficulty in estimating such costs and due to potential changes in regulations or state reimbursement programs. In connection with environmental conditions at certain of the Company's California locations, legal proceedings have been brought by third parties against the Company generally alleging that releases of refined products at these locations have caused damages to the third parties. The Company's position has been that its general liability insurance policies cover legal defense costs and damages related to these claims, but the Company's insurance carriers have generally argued that the policies do not provide for such coverage. After several years of legal actions, the Company began settlement discussions with certain of the insurance carriers and, in 1994, the Company agreed to accept cash payments totaling $5,050 ($2,525 recognized in earnings in 1994) in settlement of all outstanding disputes with five of the carriers. During 1995, the Company accepted $3,650 ($700 recognized in earnings in 1994 and $1,375 recognized in earnings in 1995) in settlement of outstanding disputes with three additional carriers. The Company had reserved a total of $4,100 of these receipts to cover any future environmental or other contingencies related to claims made by the State of California Water Resources Control Board. During the fourth quarter of 1995, the Company received notification from the Water Resources Control Board that the Board relinquished any claim to the settlement funds. Accordingly, in December, 1995, the Company recognized the $4,100 as other income. In March 1997, the Company received a cash settlement of $610 for another claim; one unsettled claim remains. The Company leases office space in various locations and has operating leases on certain retail outlets and computer equipment. Total operating lease expense for the Company during 1996, 1995, and 1994 was approximately $13,878, $12,413, and $9,614, respectively. Future minimum rental payments required under all leases which have primary or remaining noncancellable terms in excess of one year as of December 29, 1996 are as follows: 1997 . . . . . . . . . . . . . . . . . . 11,228 1998 . . . . . . . . . . . . . . . . . . 10,077 1999 . . . . . . . . . . . . . . . . . . 8,375 2000 . . . . . . . . . . . . . . . . . . 7,383 2001 . . . . . . . . . . . . . . . . . . 6,285 Thereafter . . . . . . . . . . . . . . . 7,676 ------- Total $51,024 =======
Additionally, the Company is party to certain long-term capital leases with future minimum payments at December 29, 1996 as follows: 35 38
Year Principal Interest Total - ----------- --------- -------- ----- 1997 $ 286 $ 304 $ 590 1998 266 261 527 1999 278 216 494 2000 293 167 460 2001 239 136 375 Thereafter 262 359 621 ------ ------ ------ Total $1,624 $1,443 $3,067 ====== ====== ======
The Company and its subsidiaries are involved in various lawsuits incidental to its businesses. The Company's internal counsel monitors all such claims and the Company has made accruals for those which it believes are probable of payment. In management's opinion, an adverse determination would not have a material effect on the Company and its subsidiaries, individually or taken as a whole. In the case of administrative proceedings regarding environmental matters involving governmental authorities, management does not believe that any imposition of monetary sanctions would exceed $100. NOTE (8) STOCKHOLDERS' EQUITY On February 28, 1995, Harken Energy Company ("Harken"), the Company's former parent, entered into an agreement with a major stockholder of the Company whereby Harken sold 63,937 shares of the Company's $6.00 Convertible Preferred Stock, Series C ("Series C Preferred Stock"), along with the right to all accrued but unpaid dividends thereon, to such stockholder. In addition, Harken sold its remaining 817 shares of the Series C Preferred Stock, along with the right to all accrued but unpaid dividends thereon, to a director of the Company. On April 1, 1995, the Company issued an additional 10,902 shares of its Series C Preferred Stock to the holders of the Series C Preferred Stock in payment of all cumulative but unpaid dividends through March 31, 1995. (See Note 13 - Subsequent Events.) The Series C Preferred Stock ranks senior to the common stock or any other capital stock in right of payment of dividends or distributions. It is also exempt from anti-dilution provisions from the sale or conversion of certain previously issued preferred stock or warrants to purchase common stock or preferred stock. As of December 29, 1996 and December 31, 1995, the Company had cumulative but unpaid dividends on the Series C Preferred Stock of $757 and $228, respectively. In May 1996, two warrant holders exercised warrants and purchased a combined total of 1,210,001 shares of the Company's common stock. NOTE (9) EMPLOYEE BENEFIT PLAN The Company does not provide post-retirement benefits for its employees. The Company has a 401(k) retirement savings plan (the "Plan") covering all employees meeting minimum age and service requirements. The Company will match 50% of tax deferred employee contributions up to 6% of the employee's compensation. The Board of Directors of the Company may also elect to make additional contributions to be allocated among all eligible participants in accordance with the provisions of the Plan. There were approximately 435, 352 and 310 participants in the Plan at year end 1996, 1995 and 1994, respectively. Company contributions, which are funded currently, were $229, $96, and $102 for 1996, 1995 and 1994, respectively. 36 39 NOTE (10) STOCK OPTION PLANS On May 30, 1991, the Board of Directors of the Company adopted the 1991 Stock Option Plan, which received stockholder approval at a Special Meeting held on August 9, 1991 (the "1991 Plan"). The 1991 Plan provides for issuance of options to purchase up to 1,900,000 shares of the Company's common stock to key employees and directors. The 1991 Plan requires that the purchase price of each share of stock, subject to an incentive stock option, equals at least 100% of the fair market value of the stock on the date the option is granted. The Compensation Committee of the Board, which administers the 1991 Plan, may also grant non-qualified stock options which are exercisable at a price as low as 50% of the fair market value of the stock on the date the option is granted. At an October 29, 1993 Special Meeting, the stockholders approved (i) an amendment to the 1991 Plan to increase the number of shares of common stock subject to the 1991 Plan from 1,900,000 to 2,500,000; (ii) an amendment to the 1991 Plan that permits the Compensation Committee of the Board of Directors to authorize periodic exchange programs whereby holders of non-qualified stock options could exchange their current options for new options which contain different option prices and new vesting periods; and lastly (iii) a plan of exchange whereby nonqualified stock options at a price of $1.00 per share of common stock would be issued in exchange for currently outstanding nonqualified stock options having an exercise price of $1.50. All of the options having an exercise price of $1.50 were exchanged for the options that have an exercise price of $1.00. The aggregate compensation expense related to the issuance of non-qualified stock options and the exchange of the $1.50 stock options under the 1991 Plan is $741, and is being amortized over vesting periods through July 1998. The Company recognized expense related to stock options of $143, $188, and $189 in 1996, 1995, and 1994, respectively. Information regarding the 1991 Plan is as follows:
Number of Shares --------------------------------------------------- 1996 1995 1994 ----------- ----------- ----------- Outstanding at beginning of period 2,375,000 2,295,000 2,305,000 Granted at $1.00 to $1.50 per share 50,000 135,000 20,000 Exercised at $1.50 per share - - - Exercised at $1.00 per share (40,000) (5,000) (3,000) Canceled (95,000) (50,000) (27,000) --------- --------- --------- Balance at end of period 2,290,000 2,375,000 2,295,000 ========= ========= ========= Exercisable at end of period 2,002,503 1,764,004 1,279,003 ========= ========= ========= Available for grant at end of period 152,000 107,000 192,000 ========= ========= =========
In March 1997, the 1991 Plan was amended by the Board of Directors, subject to shareholder approval, to increase the number of shares of Common Stock subject thereto from 2,500,000 to 3,500,000. On February 9, 1994, the Board of Directors adopted the 1994 Stock Option Plan (the "1994 Plan"). The 1994 Plan provides for the issuance of options to purchase up to 6,750,000 shares of the Company's common stock at an exercise price of $0.40 per share. The option period is ten years from the date of grant and options granted under the 1994 Plan vest proportionately, as defined in the 1994 Plan, but only upon the occurrence of one of the following three events: 37 40 Upon the consummation of an underwritten public offering of the Company's common stock, pursuant to a registration statement wherein the aggregate net proceeds to the Company's stockholders is at least $10,000; Upon the transfer in a private transaction which could have the effect of transferring to the transferee beneficial ownership (as defined) of a number of shares of common stock that, in the aggregate, is equal to or greater than 10% of the then outstanding shares of common stock; or Upon the sale of all or substantially all of the assets of the Company. On March 25, 1994, grants representing 6,500,000 shares of common stock were awarded to key officers of the Company. The 1994 Plan was approved at the Company's 1994 Annual Meeting of Stockholders on June 17, 1994. In September 1996 and March 1997, the 1994 Plan was amended by the Board of Directors, subject to stockholder approval, (i) to increase the number of shares of Common Stock subject thereto from 6,750,000 to 8,000,000 and (ii) to avoid certain detrimental tax consequences to the option holder that could occur if certain vesting events occur. As of December 29, 1996, grants representing 6,350,000 shares of common stock awarded to key officers of the Company remain outstanding. In October 1995 the FASB issued Statement No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123, which is effective for fiscal years beginning after December 15, 1995, allows companies either to continue to measure compensation cost based on the method prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25") or adopt a "fair value" method of accounting for all employee stock-based compensation. The Company has elected to continue utilizing the accounting for stock issued to employees prescribed by APB No. 25. However, proforma disclosures for options granted after January 1,1995, as if the Company adopted the cost recognition requirements under SFAS 123 in 1996, are presented below:
1996 1995 --------------------- ------------------- As As Reported Proforma Reported Proforma --------- --------- --------- -------- Net income (loss) $(15,075) $(14,964) $ 5,264 $ 5,430 Earnings per share $ (.23) $ (.23) $ (.07) $ (.07)
The fair value of each option granted is estimated on the grant date using the Black-Scholes Model. The following assumptions were made in estimating fair value: ASSUMPTIONS: Dividend yield 0.00% Risk-free interest rate 6.11% Expected volatility 85.79% Expected life 8 years
NOTE (11) INCOME TAXES As discussed in Note 1 - Summary of Significant Accounting Policies, the Company adopted SFAS 109 effective as of December 28, 1992 on a prospective basis. There was no cumulative effect of this change in accounting principle as of December 28, 1992. 38 41 As discussed in Note 2 - Quasi-Reorganization, the Company is required to credit the tax benefits realized from the utilization of net operating loss carryforwards which arose prior to the quasi-reorganization directly to paid-in capital. In this regard, the Company recognized a provision in lieu of taxes and credited paid-in capital for $0, $2,127, and $2,739 during 1996, 1995 and 1994, respectively. This is a non-cash provision and does not represent deferred taxes. Total income tax expense (benefit) was allocated as follows:
Years Ended -------------------------------------------------- December 29, December 31, December 25, 1996 1995 1994 ------------ ----------- ------------ Income (loss) from operations $(343) $ 568 $ 231 Stockholders' equity of recognition of tax benefits of net operating loss carryforwards - 2,127 2,739 ----- ------ ------ $(343) $2,695 $2,970 ===== ====== ======
Income tax expense (benefit) attributable to income from operations consists of:
Years Ended -------------------------------------------------- December 29, December 31, December 25, 1996 1995 1994 ------------ ------------ ------------ U.S. Federal $(343) $ 366 $ 206 State - 202 25 ----- ----- ----- $(343) $ 568 $ 231 ===== ===== =====
Income tax benefit is related to the reduction of the deferred tax liability created by the differences between the assigned values for purchase accounting and tax basis of assets and liabilities acquired in the SJS acquisition. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
Years Ended ----------------------------------- December 29, December 31, 1996 1995 ------------ ------------ Deferred tax assets: Accounts receivable, principally due to allowance for doubtful accounts $ 61 $ 63 Environmental remediation accruals 470 - Insurance accruals 3,401 3,376 Unearned revenue 79 467 Other accruals 1,014 823 Net operating loss carryforwards 14,669 11,772 Alternative Minimum Tax credit carryforwards 1,114 1,483 ------- ------- Total gross deferred tax assets 20,808 17,984 Less valuation allowance (4,480) (2,758) ------- ------- Net deferred tax assets 16,328 15,226 Deferred tax liabilities: LIFO Reserve 424 565 Environmental Receivable - 524 Plant and equipment, principally due to differences in depreciation and basis of assets 15,904 14,137 ------- ------- Total gross deferred tax liabilities 16,328 15,226 ------- ------- Net deferred tax liability $ - $ - ======= =======
39 42 The valuation allowance for the deferred tax assets as of December 25, 1994 was $12,598. The net change in the total valuation allowance for the fiscal year ended December 29, 1996 and December 31, 1995 was an increase of $1,722 and a decrease of $9,840, respectively. Net Operating Loss Carryforwards Under federal tax law, the amount and availability of net operating loss carryforwards ("NOL") are subject to a variety of interpretations and restrictive tests under which the utilization of such NOL carryforwards could be limited or effectively lost upon certain changes in ownership. After an ownership change, utilization of a loss corporation's NOL is limited annually to a prescribed rate times the value of a loss corporation's stock immediately before the ownership change. During 1992, the Company experienced an "ownership change" as defined by the Internal Revenue Code of 1986. The Company's NOL available under the ownership change rules is approximately $43,000 at December 29, 1996. The NOL will expire if not utilized between 2005 and 2011. Approximately $19,000 of the NOL was acquired with the acquisitions of EZCON and SJS and can only be used to offset future income of EZCON. In addition, the Company has alternative minimum tax NOL carryforwards of approximately $43,000, which are available over an indefinite period, that can be utilized should the Company's alternative minimum tax liability exceed its regular tax liability. NOTE (12) UNAUDITED QUARTERLY FINANCIAL INFORMATION The following is a summary of the unaudited quarterly results of operations for the years ended December 29, 1996 and December 31, 1995:
Quarter Ended --------------------------------------------------------------------- (In thousands except per share data) 1996 March 31 June 30 September 29 December 29 ---------- --------- ------------ ----------- Revenues $194,760 $232,469 $225,293 $209,120 Gross Profit 36,061 45,114 42,946 34,659 Net Income (loss) (2,569) 1,690 1,494 (15,690) Net Income (loss) Per Common Share (.04) .02 .02 (.24)
40 43
Quarter Ended --------------------------------------------------------------------- (In thousands except per share data) 1995 March 26 June 25 September 24 December 31 ---------- --------- ------------ ----------- Revenues $148,427 $176,015 $205,346 $218,364 Gross Profit 30,506 33,930 44,793 46,703 Net Income 609 1,695 2,648 312 Net Income Per Common Share .01 .02 .03 .01
NOTE (13) SUBSEQUENT EVENTS On January 27, 1997 the Company sold 140,000 shares of its newly issued Series H Redeemable Preferred Stock, ("Series H Preferred Stock") to the same major stockholder that held substantially all of the Company's Series C Preferred Stock. The Series H Preferred Stock is entitled to receive semi-annual dividends at the rate of 13% per annum paid in additional shares of Series H Preferred Stock. In an event of default, as defined, the dividend rate increases to 23% and the holders can elect one director. The Series H Preferred Stock has no voting rights, but ranks senior to any capital stock or other equity securities of the Company. It can be redeemed by the Company at any time, but is mandatorily redeemable upon the earlier of (a) the third anniversary of the date of issuance, (b) the occurrence of a change of ownership, as defined, or (c) the occurrence of a fundamental change, as defined. Warrants representing the purchase of 960,000 shares of the Company's common stock at a nominal exercise price were also issued as part of this transaction. Additional warrants are issuable on each anniversary that the Series H Preferred Stock remains outstanding. The liquidation value is estimated to be approximately $14,000. Net proceeds of $8,359 from the sale of the Series H Preferred Stock were used by the Company to redeem all of the 83,591 outstanding shares, including shares for unpaid dividends, of the Series C Preferred Stock, and net proceeds of $5,081 were used for general corporate purposes, including paying down a portion of amounts outstanding under the Revolver. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 41 44 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this item is incorporated by reference from the Registrant's definitive proxy statement, pursuant to Regulation 14A, to be filed with the Commission not later than 120 days after the close of the Company's fiscal year. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference from the Registrant's definitive proxy statement, pursuant to Regulation 14A, to be filed with the Commission not later than 120 days after the close of the Company's fiscal year. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated by reference from the Registrant's definitive proxy statement, pursuant to Regulation 14A, to be filed with the Commission not later than 120 days after the close of the Company's fiscal year. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference from the Registrant's definitive proxy statement, pursuant to Regulation 14A, to be filed with the Commission not later than 120 days after the close of the Company's fiscal year. 42 45 PART IV ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits Exhibit Number Description of Exhibit 3.1.1(a) Amended and Restated Certificate of Incorporation of the Company dated December 6, 1990. 3.1.2(a) Certificate of Amendment of Certificate of Incorporation of the Company filed July 2, 1992. 3.1.3(a) Certificate of Amendment of Certificate of Incorporation of the Company filed February 26, 1993. 3.1.4(a) Certificate of Amendment of Certificate of Incorporation of the Company filed November 1, 1993. 3.1.5 Certificate of Designation, Preferences and Rights of Series H Preferred Stock filed January 24, 1997 - incorporated by reference from Exhibit 4.1 of the Company's Current Report on Form 8-K dated January 27, 1997. 3.2(a) Bylaws of the Company restated as of March 25, 1992. 4.1(a)(b) 1991 Stock Option Plan of the Company, as amended. 4.2(a)(b) Amended and Restated 1994 Stock Option Plan of the Company. 4.3.1(a) Registration Rights Agreement dated March 25, 1992 among the Company, Phemus Corporation and Intercontinental Mining & Resources Limited. 4.3.2(a) Amendment to Registration Rights Agreement dated July 31, 1992, among the Company, Phemus Corporation and Intercontinental Mining & Resouces Limited. 4.3.3(a) Second Amendment to Registration Rights Agreement dated April 21, 1993, among the Company, Phemus Corporation, Quadrant Capital Corp. and Intercontinental Mining & Resources Incorporated. 4.3.4 Third Amendment to Registration Rights Agreement dated as of January 27, 1997, among the Company, Phemus Corporation and Intercontinental Mining & Resources Incorporated - incorporated by reference from Exhibit 4.4 of the Company's Current Report on Form 8-K dated January 27, 1997. 4.4.1(a) Registration Rights Agreement dated July 31, 1992, between the Company and Tenacqco Bridge Partnership, L.P. 4.4.2(a) Amendment to Registration Rights Agreement dated April 21, 1993, among the Company, Tenacqco Bridge Partnership, L.P. and DLJ Capital Corporation. 43 46 4.5.1(a) Amended and Restated Stockholders Agreement dated June 1, 1994, among DLJ Capital Corporation, Tenacqco Bridge Partnership, L.P., Phemus Corporation, Intercontinental Mining & Resources Incorporated, Quadrant Capital Corp., and the Company. 4.5.2 Amendment No. 1 to Stockholders Agreement dated as of January 27, 1997, among DLJ Capital Corporation, Tenacqco Bridge Partnership, L.P., Phemus Corporation, Intercontinental Mining & Resources Incorporated and the Company - incorporated by reference from Exhibit 4.3 of the Company's Current Report on Form 8- K dated January 27, 1997. 4.5.3(a) Revised Schedule 1 to Stockholders Agreement dated as of March 28, 1997. 4.6(a) Stockholders Letter of Understanding dated January 17, 1995, among the Company, DLJ Capital Corporation, Phemus Corporation, Tenacqco Bridge Partnership, L.P., Intercontinental Mining & Resources Incorporated, Quadrant Capital Corp. and Societe Generale, as agent. 4.7 Form of Common Stock Purchase Warrant of the Company issued pursuant to the Securities Purchase Agreement dated January 27, 1997, between the Company and Phemus Corporation - incorporated by reference from Exhibit 4.5 of the Company's Current Report on Form 8-K dated January 27, 1997. 10.1(a) Stock Acquisition Agreement dated March 25, 1992, among the Company, Larry Jack Taylor, April Michele Taylor Trust and Kerri Denise Taylor Trust. 10.2(a) Form of Lease executed by Taylor Petroleum, Inc. as Tenant. 10.3(a) Agreement Regarding Leases effective as of March 1, 1992, among the Company, Anadarko Development Company, Dakota Land Company, Salt Fork Company, Inc., Larry Jack Taylor, and First National Bank of Boston. 10.4(a) Stock Acquisition Agreement dated March 31, 1994, between the Company and ESCM & Associates, Inc. regarding the sale of Amber Refining, Inc. and Amber Pipeline, Inc. 10.5.1(a) Amended and Restated Credit and Guaranty Agreement dated October 2, 1995, among E-Z Serve Convenience Stores, Inc., the Company, the lenders party thereto, and Societe Generale, as agent for the lenders. 10.5.2 Amendment and Waiver No.1 to Amended and Restated Credit and Guaranty Agreement dated April 30, 1996, among E-Z Serve Convenience Stores, Inc., the Company, the lenders party thereto, and Societe Generale, as agent for the lenders - incorporated by reference from Exhibit 10.1 of the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1996. 10.5.3(a) Amendment and Waiver No. 2 to Amended and Restated Credit and Guaranty Agreement dated March 27, 1997, among E-Z Serve Convenience Stores, Inc., the Company, the lenders party thereto, and Societe Generale, as agent for the lenders. 10.6.1(a) Agreement Between Dillon Companies, Inc. and E-Z Serve Convenience Stores, Inc. dated December 2, 1994. 44 47 10.6.2(a) Amendment to Agreement between Dillon Companies, Inc. and E-Z Serve Convenience Stores, Inc. dated December 28, 1994. 10.6.3(a) Second Amendment to agreement between Dillon Companies, Inc. and E-Z Serve Convenience Stores, Inc. dated January 17, 1995. 10.7 Agreement and Plan of Merger by and among the Company, EZS Acquisition Corporation and Sunshine dated June 15, 1995 - incorporated by reference from Exhibit 99.(c)(1) of the Company's Tender Offer Statement on Schedule 14D-1 dated June 19, 1995. 10.8 Offer of Purchase by EZS Acquisition Corporation dated June 19, 1995 - incorporated by reference from Exhibit 99.(a)(1) of the Company's Tender Offer Statement on Schedule 14D-1 dated June 19, 1995. 10.9 Securities Purchase Agreement dated January 27, 1997, between the Company and Phemus Corporation - incorporated by reference from Exhibit 99.1 of the Company's Current Report on Form 8-K dated January 27, 1997. 10.10(a)(b) Employment Agreement dated March 4, 1997, between Kathleen Callahan-Guion and the Company. 21(a) Subsidiaries of the Registrant. 23(a) Consent of KPMG Peat Marwick LLP to the incorporation of their report, included in this Form 10-K for the year ended December 29, 1996, into the Company's previously filed Registration Statements on Forms S-8. 27(a) Financial Data Schedule for the period ended December 29, 1996. - ------------------- (a) filed herewith (b) Management contract or compensatory plan or arrangement. 45 48 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. E-Z SERVE CORPORATION (Registrant) By: /s/ NEIL H. MCLAURIN ------------------------- Neil H. McLaurin Chairman of the Board and Chief Executive Officer Date: April 11, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ NEIL H. MCLAURIN Chairman of the Board and Date: April 11, 1997 - ------------------------ Chief Executive Officer ------------------- NEIL H. MCLAURIN /s/ JOHN T. MILLER Sr. Vice President, Date: April 11, 1997 - ------------------------ Chief Financial Officer and ------------------- JOHN T. MILLER Principal Accounting Officer /s/ DONALD D. BEANE Director Date: April 11, 1997 - ------------------------ ------------------- DONALD D. BEANE /s/ SHELBY R. GIBBS Director Date: April 11, 1997 - ------------------------ ------------------- SHELBY R. GIBBS /s/ JOHN M. SALLAY Director Date: April 11, 1997 - ------------------------ ------------------- JOHN M. SALLAY /s/ JOHN R. SCHOEMER Director Date: April 11, 1997 - ------------------------ ------------------- JOHN R. SCHOEMER /s/ LARRY J. TAYLOR Director Date: April 11, 1997 - ------------------------ ------------------- LARRY J. TAYLOR /s/ PAUL THOMPSON III Director Date: April 11, 1997 - ------------------------- ------------------- PAUL THOMPSON III
46 49 INDEX TO EXHIBITS Exhibit Number Description of Exhibit 3.1.1(a) Amended and Restated Certificate of Incorporation of the Company dated December 6, 1990. 3.1.2(a) Certificate of Amendment of Certificate of Incorporation of the Company filed July 2, 1992. 3.1.3(a) Certificate of Amendment of Certificate of Incorporation of the Company filed February 26, 1993. 3.1.4(a) Certificate of Amendment of Certificate of Incorporation of the Company filed November 1, 1993. 3.1.5 Certificate of Designation, Preferences and Rights of Series H Preferred Stock filed January 24, 1997 - incorporated by reference from Exhibit 4.1 of the Company's Current Report on Form 8-K dated January 27, 1997. 3.2(a) Bylaws of the Company restated as of March 25, 1992. 4.1(a)(b) 1991 Stock Option Plan of the Company, as amended. 4.2(a)(b) Amended and Restated 1994 Stock Option Plan of the Company. 4.3.1(a) Registration Rights Agreement dated March 25, 1992 among the Company, Phemus Corporation and Intercontinental Mining & Resources Limited. 4.3.2(a) Amendment to Registration Rights Agreement dated July 31, 1992, among the Company, Phemus Corporation and Intercontinental Mining & Resouces Limited. 4.3.3(a) Second Amendment to Registration Rights Agreement dated April 21, 1993, among the Company, Phemus Corporation, Quadrant Capital Corp. and Intercontinental Mining & Resources Incorporated. 4.3.4 Third Amendment to Registration Rights Agreement dated as of January 27, 1997, among the Company, Phemus Corporation and Intercontinental Mining & Resources Incorporated - incorporated by reference from Exhibit 4.4 of the Company's Current Report on Form 8-K dated January 27, 1997. 4.4.1(a) Registration Rights Agreement dated July 31, 1992, between the Company and Tenacqco Bridge Partnership, L.P. 4.4.2(a) Amendment to Registration Rights Agreement dated April 21, 1993, among the Company, Tenacqco Bridge Partnership, L.P. and DLJ Capital Corporation. 50 4.5.1(a) Amended and Restated Stockholders Agreement dated June 1, 1994, among DLJ Capital Corporation, Tenacqco Bridge Partnership, L.P., Phemus Corporation, Intercontinental Mining & Resources Incorporated, Quadrant Capital Corp., and the Company. 4.5.2 Amendment No. 1 to Stockholders Agreement dated as of January 27, 1997, among DLJ Capital Corporation, Tenacqco Bridge Partnership, L.P., Phemus Corporation, Intercontinental Mining & Resources Incorporated and the Company - incorporated by reference from Exhibit 4.3 of the Company's Current Report on Form 8- K dated January 27, 1997. 4.5.3(a) Revised Schedule 1 to Stockholders Agreement dated as of March 28, 1997. 4.6(a) Stockholders Letter of Understanding dated January 17, 1995, among the Company, DLJ Capital Corporation, Phemus Corporation, Tenacqco Bridge Partnership, L.P., Intercontinental Mining & Resources Incorporated, Quadrant Capital Corp. and Societe Generale, as agent. 4.7 Form of Common Stock Purchase Warrant of the Company issued pursuant to the Securities Purchase Agreement dated January 27, 1997, between the Company and Phemus Corporation - incorporated by reference from Exhibit 4.5 of the Company's Current Report on Form 8-K dated January 27, 1997. 10.1(a) Stock Acquisition Agreement dated March 25, 1992, among the Company, Larry Jack Taylor, April Michele Taylor Trust and Kerri Denise Taylor Trust. 10.2(a) Form of Lease executed by Taylor Petroleum, Inc. as Tenant. 10.3(a) Agreement Regarding Leases effective as of March 1, 1992, among the Company, Anadarko Development Company, Dakota Land Company, Salt Fork Company, Inc., Larry Jack Taylor, and First National Bank of Boston. 10.4(a) Stock Acquisition Agreement dated March 31, 1994, between the Company and ESCM & Associates, Inc. regarding the sale of Amber Refining, Inc. and Amber Pipeline, Inc. 10.5.1(a) Amended and Restated Credit and Guaranty Agreement dated October 2, 1995, among E-Z Serve Convenience Stores, Inc., the Company, the lenders party thereto, and Societe Generale, as agent for the lenders. 10.5.2 Amendment and Waiver No.1 to Amended and Restated Credit and Guaranty Agreement dated April 30, 1996, among E-Z Serve Convenience Stores, Inc., the Company, the lenders party thereto, and Societe Generale, as agent for the lenders - incorporated by reference from Exhibit 10.1 of the Company's quarterly report on Form 10-Q for the quarter ended March 31, 1996. 10.5.3(a) Amendment and Waiver No. 2 to Amended and Restated Credit and Guaranty Agreement dated March 27, 1997, among E-Z Serve Convenience Stores, Inc., the Company, the lenders party thereto, and Societe Generale, as agent for the lenders. 10.6.1(a) Agreement Between Dillon Companies, Inc. and E-Z Serve Convenience Stores, Inc. dated December 2, 1994. 51 10.6.2(a) Amendment to Agreement between Dillon Companies, Inc. and E-Z Serve Convenience Stores, Inc. dated December 28, 1994. 10.6.3(a) Second Amendment to agreement between Dillon Companies, Inc. and E-Z Serve Convenience Stores, Inc. dated January 17, 1995. 10.7 Agreement and Plan of Merger by and among the Company, EZS Acquisition Corporation and Sunshine dated June 15, 1995 - incorporated by reference from Exhibit 99.(c)(1) of the Company's Tender Offer Statement on Schedule 14D-1 dated June 19, 1995. 10.8 Offer of Purchase by EZS Acquisition Corporation dated June 19, 1995 - incorporated by reference from Exhibit 99.(a)(1) of the Company's Tender Offer Statement on Schedule 14D-1 dated June 19, 1995. 10.9 Securities Purchase Agreement dated January 27, 1997, between the Company and Phemus Corporation - incorporated by reference from Exhibit 99.1 of the Company's Current Report on Form 8-K dated January 27, 1997. 10.10(a)(b) Employment Agreement dated March 4, 1997, between Kathleen Callahan-Guion and the Company. 21(a) Subsidiaries of the Registrant. 23(a) Consent of KPMG Peat Marwick LLP to the incorporation of their report, included in this Form 10-K for the year ended December 29, 1996, into the Company's previously filed Registration Statements on Forms S-8. 27(a) Financial Data Schedule for the period ended December 29, 1996. - ------------------- (a) filed herewith (b) Management contract or compensatory plan or arrangement. EX-3.1.1 2 AMENDED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.1.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF E-Z SERVE HOLDING COMPANY, INC. E-Z Serve Holding Company, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the corporation shall now and in the future be E-Z Serve Corporation. The name under which the corporation was originally incorporated was E-Z Serve Holding Company, Inc. The date of filing of its original Certificate of Incorporation with the Secretary of State was December 9, 1986. 2. This Amended and Restated Certificate of Incorporation restates and integrates and further amends the Certificate of Incorporation of this corporation. The text of the Certificate of Incorporation as amended or supplemented heretofore is further amended and restated as herein set forth: "AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF E-Z SERVE CORPORATION ******** ARTICLE ONE The name of the corporation is E-Z SERVE CORPORATION (the "Corporation"). ARTICLE TWO The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 2 ARTICLE THREE The nature of the business, or objects or purposes to be transacted, promoted or carried on are to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE FOUR The aggregate number of shares which the Corporation shall have the authority to issue is one hundred ten million (110,000,000), of which one hundred million (100,000,000) shares shall be designated as Common Stock of the par value of one cent ($0.01) per share ($1,000,000); and ten million (10,000,000) shall be designated as Preferred Stock of the par value of one cent ($0.01) per share ($100,000). The following is a statement of the designations and the powers, preferences, and rights, and the qualifications, limitations, or restrictions thereof, in respect of the classes of stock of the Corporation, and the authority with respect thereto which is expressly vested in the Board of Directors of the Corporation: Part I - Common Stock (1) Each share of Common Stock of the Corporation shall be equal in all respects to each other share of Common Stock. The holders of shares of Common Stock shall be entitled to vote upon all matters submitted to a vote of the stockholders of the Corporation and shall be entitled to one vote for each share of Common Stock held. (2) Subject to the preferential dividend rights applicable to shares of Preferred Stock, if any, the holders of shares of the Common Stock shall be entitled to receive such dividends (payable -2- 3 in cash, stock or otherwise) as may be declared by the Board of Directors at any time or from time to time out of any funds legally available therefor. (3) In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation and subject to distribution of the preferential amounts to be distributed to the holders of shares of the Preferred Stock, if any, or a sum sufficient for such distribution shall have been set aside, the holders of shares of the Common Stock shall be entitled to receive all of the remaining assets of the Corporation available for distribution to its stockholders. Part II - Preferred Stock (1) Shares of Preferred Stock may be issued from time to time in one or more classes or series (hereinafter referred to collectively as "series"), the shares of each series to have such voting powers, full or limited, or no voting powers, and such other designations, preferences, and relative, participating, optional, or other special rights, and qualifications, limitations, or restrictions thereof, as shall be stated and expressed in a resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation. The Board of Directors of the Corporation is hereby expressly authorized, subject to the limitations provided by law, to establish and designate series of the Preferred Stock, to fix the number of shares constituting such series, and to fix the designations and the relative powers, rights, preferences, and limitations of the shares of each series and the variations in the relative rights, powers, preferences, and limitations as between series, and to increase and to decrease, but not below the number of shares then outstanding, the number of shares constituting each series. The authority of the Board of Directors of the Corporation with -3- 4 respect to each series shall include, but shall not be limited to, the authority to determine the following: (a) The designation of such series. (b) The number of shares initially constituting such series. (c) The increase, and the decrease to a number not less than the number of outstanding shares of such series, of the number of shares constituting such series, theretofore fixed. (d) The rate or rates and the times at which dividends on the shares of such series shall be paid, and whether or not such dividends shall be cumulative, and, if such dividends shall be cumulative, the date or dates from after which they shall accumulate. (e) Whether or not the shares of such series shall be redeemable, and if such shares shall be redeemable, the terms and conditions of such redemption, including, but not limited to, the date or dates upon or after which such shares shall be redeemable and the amount per share which shall be payable upon such redemption, which amount may vary under different conditions and at different redemption dates. (f) The amount payable on the shares of such series in the event of the voluntary or the involuntary liquidation, dissolution or winding up of the Corporation and whether a liquidation, dissolution or winding up of the Corporation as such terms are used in this subparagraph (f) shall be deemed to be occasioned by or to include any consolidation or merger of the Corporation with or into any other corporation or corporations or a sale, lease, or conveyance of all or a part of its assets. (g) Whether or not the shares of such series shall have voting rights, in addition to the voting rights provided by law, and, if such shares shall have voting rights, the terms and conditions thereof, including, but not limited to, the right of the holders of such shares to vote as a separate class either alone or with the holders of shares of one or more other series of Preferred Stock and the right to have more (or less) than one vote per share. (h) Whether or not a sinking fund shall be provided for the redemption of the shares of such series, and if such a sinking fund shall be provided, the terms and conditions thereof. -4- 5 (i) Whether or not a purchase fund shall be provided for the shares of such series, and if such a purchase fund shall be provided, the terms and conditions thereof. (j) Whether or not the shares of such series shall have conversion privileges, and if such shares have conversion privileges, the terms and conditions of conversion, including, but not limited to, any provision for the adjustment of the conversion rate or of the conversion price. (k) Any other powers, preferences, and relative, participating, optional, or other special rights or qualifications, limitations, or restrictions thereof, as shall not be inconsistent with the provisions of this Article Four or the limitations provided by law. ARTICLE FIVE In furtherance and not in limitation of the powers conferred by statue, the Board of Directors is expressly authorized: To make, alter or repeal the by-laws of the Corporation. To authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation. To set apart out of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. By resolution passed by a majority of the whole board, to designate one or more committees, each committee to consist of one or more of the directors of the Corporation, which, to extent provided in the resolution or in the by-laws of the Corporation, and not inconsistent with the Delaware General Corporation Law, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or -5- 6 committees shall have such name or names as may be stated in the by-laws of the Corporation or as may be determined from time to time by resolution adopted by the Board of Directors. ARTICLE SIX Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. -6- 7 ARTICLE SEVEN Directors, Officers and employees of the Corporation shall be entitled to indemnification by the Corporation for the performance of their duties to the Corporation as may be set out in the Bylaws of the Corporation. Any repeal or limitation of any indemnification as set out in the Bylaws shall be prospective only from the date of repeal or limitation of the indemnification and shall not adversely affect any rights granted to any Director, Officer or employee prior to the date of any repeal or limitation of indemnification previously granted. ARTICLE EIGHT No contract or transaction between the Corporation and one or more of its Directors or Officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of the Corporation's Directors or Officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the Director or Officer is present at or participates in the meeting of the Board or Committee which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if (i) the material facts as to this relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the Committee, and the Board or Committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or (ii) the material facts as to this relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (iii) the contract or transaction is fair as to the -7- 8 Corporation as of the time it is authorized, approved, or ratified by the Board of Directors or of a Committee which authorizes the contract or transaction. Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a Committee which authorizes the contract or transactions. ARTICLE NINE No holder of any securities of the Corporation shall, as such holder, have any preemptive or preferential right to receive, purchase, or subscribe for (a) any unissued or treasury shares of any class of stock (whether now or hereafter authorized) of the Corporation, (b) any obligations, evidences of indebtedness, or other securities of the Corporation convertible into or exchangeable for, or carrying or accompanied by any rights to receive, purchase, or substitute for, any such unissued or treasury shares, (c) any right of subscription to or to receive, or any warrant or option for the purchase of, any of the foregoing securities, or (d) any other securities that may be issued or sold by the Corporation, other than such right or rights (if any) as the Board of Directors or the Corporation, in its sole and absolute discretion, may determine at any time or from time to time. ARTICLE TEN The Corporation reserves the right to amend, alter, or repeal any provisions contained in this Certificate of Incorporation in the manner now or hereafter prescribed by statute; provided, however, that any alteration, repeal, change, or amendment to the Certificate of Incorporation (other than by means of a certificate or designation as contemplated by Part II of Article Fourth) shall require the approval of the majority of the outstanding stock entitled to vote thereon and a majority of the -8- 9 outstanding stock of each class of stock entitled to vote thereon as a class; and all the rights conferred upon stockholders herein are granted subject to this reservation. By-Laws of the Corporation may be adopted, amended, or repealed by the affirmative vote of a majority of the Board of Directors or by the affirmative vote of the holders of a majority of the voting power of the Corporation's stock outstanding and entitled to vote thereon. Such by-laws may contain any provision for the regulation and management of the affairs of the Corporation and the rights or powers of its stockholders, directors, officers, or employees not inconsistent with the laws of the State of Delaware. ARTICLE ELEVEN The number of directors of the Corporation shall be fixed by the by-laws of the Corporation. The term of the directors shall continue until the election and qualification of their successors. Subject to the rights of the holders of any series of Preferred Stock then outstanding, and any limitations provided by law, any director or the entire Board of Directors may be removed at any time upon the affirmative vote of the holders of a majority of the voting power of all of the stock of the Corporation entitled to vote in the election of directors. ARTICLE TWELVE To the fullest extent permitted by the Delaware General Corporation Law as it now exists or may hereafter be amended, a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or limitation of this paragraph by the stockholders of the Corporation shall be prospective only and -9- 10 shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or limitation. ARTICLE THIRTEEN Meetings of stockholders may be held within or without the State of Delaware, as the by-laws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the by-laws of the Corporation. Elections of directors need not be by written ballot unless the by-laws of the Corporation so provide." 3. The Amended and Restated Certificate of Incorporation was duly adopted by the Board of Directors in accordance with Section 245 of the General Corporation Law of the State of Delaware. 4. The Restated Certificate of Incorporation was duly adopted by unanimous written consent of the stockholders in accordance with the applicable provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Bruce N. Huff, its Senior Vice President, and attested by Larry E. Cummings, its Secretary, on this the 6th day of December, 1990. ATTEST: E-Z SERVE HOLDING COMPANY, INC. By: /s/ Larry E. Cummings By: /s/ Bruce N. Huff ------------------------------- ------------------------------ Larry E. Cummings Bruce N. Huff Secretary Senior Vice President -10- EX-3.1.2 3 CERT. OF AMEND. OF CERT. OF INCORP. - 07/02/92 1 EXHIBIT 3.1.2 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF E-Z SERVE CORPORATION E-Z Serve Corporation, a Delaware corporation (the "Corporation"), hereby certifies that: FIRST: At a meeting of the Board of Directors of the Corporation, resolutions were duly adopted setting forth a proposed amendment of the Amended and Restated Certificate of Incorporation of the Corporation, declaring the amendment to be advisable and putting forth such amendment for consideration at the annual meeting of the stockholders. The resolution setting forth the proposed amendment is as follows: RESOLVED, that the first paragraph of Article Four of the Corporation's Amended and Restated Certificate of Incorporation is hereby amended in its entirety to read as follows: "The aggregate number of shares which the Corporation shall have the authority to issue is twenty-eight million (28,000,000), of which twenty-five million (25,000,000) shares shall be designated as Common Stock of the par value of one cent ($0.01) per share ($250,000); and three million (3,000,000) shall be designated as Preferred Stock of the par value of one cent ($0.01) per share ($30,000)." SECOND: Pursuant to a resolution of the Corporation's Board of Directors, the annual meeting of the stockholders of the Corporation was duly called and held on June 26, 1992, upon notice in accordance with the Delaware General Corporation Law at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: The amendment was duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law. IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by Neil H. McLaurin, its President, and attested to by John T. Miller, its Secretary, on June 30, 1992. E-Z SERVE CORPORATION By: /s/ Neil H. McLaurin ---------------------------------- Name: Neil H. McLaurin Title: President 2 Attest: By: /s/ John T. Miller --------------------------- Name: John T. Miller Title: Secretary -2- EX-3.1.3 4 CERT. OF AMEND. OF CERT. OF INCORP. - 02/26/93 1 EXHIBIT 3.1.3 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF E-Z SERVE CORPORATION E-Z Serve Corporation, a Delaware corporation (the "Corporation"), hereby certifies that: FIRST: At a meeting of the Board of Directors of the Corporation, resolutions were duly adopted setting forth proposed amendments to the Amended and Restated Certificate of Incorporation of the Corporation, declaring the amendments to be advisable and putting forth such amendments for consideration at the special meeting of the stockholders. The resolutions setting forth the proposed amendments are as follows: RESOLVED, that the first paragraph of Article Four of the Corporation's Amended and Restated Certificate of Incorporation is hereby amended in its entirety to read as follows: "The aggregate number of shares which the Corporation shall have the authority to issue is fifty-three million (53,000,000) of which fifty million (50,000,000) shares shall be designated as Common Stock of the par value of one cent ($0.01) per share ($500,000); and three million (3,000,000) shall be designated as Preferred Stock of the par value of one cent ($0.01) per share ($30,000)." ; and further RESOLVED, that the first sentence of the first paragraph of Section 10 of the Certificate of Designation, Preferences and Rights of $6.00 Convertible Preferred Stock, Series C ("Series C Designation") contained as part of the Corporation's Amended and Restated Certificate of Incorporation is hereby amended in its entirety to read as follows, with the rest of such paragraph to remain as it presently exists: "SECTION 10--Conversion--All or any part of the shares of Series C Preferred Stock shall be convertible at the option of the holders of Series C Preferred Stock at any time at the principal office of the Corporation located in Houston, Texas, or at the offices of such duly appointed transfer agents for the Series C Preferred Stock, if any, as the Board of Directors of the Corporation may determine, into fully paid and non-assessable shares (calculated to the nearest 1/100 of a share) of Common Stock of the Corporation at the rate of 52.63 shares of Common Stock for each share of Series C Preferred Stock; provided, however, that if the holder has, as provided in the next succeeding paragraph, given 2 written notice of conversion and the Corporation, within 30 days following such notice, has given notice of redemption of the shares of Series C Preferred Stock to be converted, such right of conversion shall cease and terminate as to the shares called for redemption, unless default shall be made in the payment of the redemption price, in which case the shares shall then be immediately convertible without the giving of any further notice; and provided, further, that if notice of redemption is given by the Corporation at any time other than within the 30 days following the Corporation's receipt of a holder's notice of conversion, the right of conversion shall cease and terminate, as to the shares called for redemption, at the close of business on the business day immediately preceding the date fixed for redemption, unless default shall be made in the payment of the redemption price." ; and further RESOLVED, that the second paragraph of Section 10 of the Series C Designation is hereby amended in its entirety to read as follows: "Before any holder of Series C Preferred Stock shall be entitled to convert the same into Common Stock, he shall (i) give written notice to the Corporation at the principal office of the Corporation that such holder elects so to convert said Series C Preferred Stock on a day specified therein that is at least 30 days subsequent to the Corporation's receipt of such written notice and shall also state therein the name or names in which such holder wishes the certificate or certificates for Common Stock to be issued, and (ii) on the day specified by the holder in its written notice for conversion, surrender the certificate or certificates for such Series C Preferred Stock at the principal office of the Corporation or at the office of any transfer agent appointed as aforesaid, which certificate or certificates, if the Corporation shall so request, shall be duly endorsed to the Corporation or in blank." ; and further RESOLVED, that the third paragraph of Section 10 of the Series C Designation is hereby deleted in its entirety. SECOND: Pursuant to a resolution of the Corporation's Board of Directors, the special meeting of the stockholders of the Corporation was duly called and held on February 26, 1993, upon notice in accordance with the Delaware General Corporation Law at which meeting the necessary number of shares as required by statute were voted in favor of the amendments. -2- 3 THIRD: The amendments were duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law. IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by Neil H. McLaurin, its President, and attested to by John T. Miller, its Secretary, on February 26, 1993. E-Z SERVE CORPORATION By: /s/ Neil H. McLaurin ------------------------------ Name: Neil H. McLaurin Title: President Attest: By: /s/ John T. Miller ----------------------- Name: John T. Miller Title: Secretary -3- EX-3.1.4 5 CERT. OF AMEND. OF CERT. OF INCORP. - 11/01/93 1 EXHIBIT 3.1.4 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF E-Z SERVE CORPORATION E-Z Serve Corporation, a Delaware corporation (the "Corporation"), hereby certifies that: FIRST: At a meeting of the Board of Directors of the Corporation, resolutions were duly adopted setting forth proposed amendments to the Amended and Restated Certificate of Incorporation of the Corporation, declaring the amendments to be advisable and putting forth such amendments for consideration at the special meeting of the stockholders. The resolutions setting forth the proposed amendments are as follows: RESOLVED, that the first paragraph of Article Four of the Company's Amended and Restated Certificate of Incorporation be amended in its entirety to read as follows: "The aggregate number of shares which the Corporation shall have the authority to issue is one hundred three million (103,000,000) of which one hundred million (100,000,000) shares shall be designated as Common Stock, par value $0.01 per share; and three million (3,000,000) shall be designated as Preferred Stock, par value $0.01 per share." ; and further RESOLVED, that the Certificate of Designation, Preferences and Rights of $6.00 Convertible Preferred Stock, Series C ("Series C Designation") contained as part of the Company's Amended and Restated Certificate of Incorporation be amended as follows: 2 a. The first sentence of the first paragraph of Section 7 of the Series C Designation is hereby amended in its entirety to read as follows, with the rest of such paragraph to remain as it presently exists: "SECTION 7--Ranking--The Series C Preferred Stock shall rank in right of payment of dividends and as to distributions in the event of a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, senior to the Corporation's currently authorized Common Stock or any other capital stock ranking junior to the Series C Preferred Stock (the capital stock referenced in this clause collectively referred to herein as the "Other Capital Stock")." b. The second sentence of Section 10(e) of the Series C Designation is hereby amended in its entirety to read as follows, with the rest of such paragraph to remain as it presently exists: "Notwithstanding the foregoing, no adjustment of the number of shares of Common Stock into which each share of the Series C Preferred Stock is convertible shall be made in connection with the issuance or sale by the Corporation of any shares of Common Stock issued or sold (A) upon exercise of any stock options granted by the Corporation pursuant to any stock option plan of the Corporation, or otherwise issued or sold as compensation to any officer, director or employee of the Corporation or any of its subsidiaries, (B) pursuant to the Consulting Agreement between the Corporation and Herbert Hitchings, (C) upon the sale of the Corporation's Series B Convertible Preferred Stock, Series D Convertible Preferred Stock, Series E Convertible Preferred Stock or Series F Convertible Preferred Stock ("Preferred Stock") or the conversion of the Preferred Stock -2- 3 into shares of Common Stock, (D) upon the sale or exercise of warrants to purchase Series D Convertible Preferred Stock and upon the issuance of Common Stock for the accrued but unpaid dividends on the shares of Series B Preferred Stock of TOC Retail, Inc. in connection with the exercise of such warrants, or (E) upon the exercise of warrants issued pursuant to that certain Warrant Subscription Agreement dated as of April 21, 1993, among the Company, Phemus Corporation and Intercontinental Mining & Resources Incorporated." SECOND: Pursuant to a resolution of the Corporation's Board of Directors, the special meeting of the stockholders of the Corporation was duly called and held on October 29, 1993, upon notice in accordance with the Delaware General Corporation Law at which meeting the necessary number of shares as required by statute were voted in favor of the amendments. THIRD: The amendments were duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law. IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by Neil H. McLaurin, its President, and attested to by John T. Miller, its Secretary, on October 29, 1993. E-Z SERVE CORPORATION By: /s/ Neil H. McLaurin -------------------------- Name: Neil H. McLaurin Title: President -3- 4 Attest: By: /s/ John T. Miller ------------------------ Name: John T. Miller Title: Secretary -4- EX-3.2 6 BYLAWS OF THE COMPANY 1 EXHIBIT 3.2 E-Z SERVE CORPORATION (A Delaware corporation) BY-LAWS ARTICLE I OFFICES SECTION 1.1. REGISTERED OFFICE. The initial registered office and address of the corporation is Corporation Trust Center, 1209 Orange Street in the city of Wilmington, county of New Castle, state of Delaware. The name of its registered agent at such place shall be The Corporation Trust Company. The Board of Directors may change the corporation's registered office or registered agent, or both, in the manner set forth under the Delaware General Corporation Laws (hereinafter called the "Act"). SECTION 1.2. OTHER OFFICES. The corporation may also have offices at such other places, both within and without the State of Texas, as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS SECTION 2.1. PLACE OF MEETINGS. All meetings of the shareholders shall be held at Bedford, Texas, or at such other place and at such address as shall be specified in the notice of such meeting. SECTION 2.2. ANNUAL MEETINGS. Annual meetings of the shareholders shall be held each year at a place and time called by a majority of the Board of Directors. Such meetings to be held at 10:00 a.m. Central Standard Time or such other hour as the Board of Directors may prescribe and shall be held for the purpose of electing Directors for the ensuing year and for the transaction of such other business as may properly come before the meeting. SECTION 2.3. SPECIAL MEETINGS. Special Meetings of the Shareholders, for any purpose(s), unless otherwise prescribed by the Act or by the Articles of Incorporation, may be called by the Chairman of the Board, the President or Secretary, and shall be called by the Chairman of the Board, the President or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of the 2 holders owning at least one-tenth (1/10) in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose(s) of the proposed meeting. Business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice. SECTION 2.4. NOTICES. Written or printed notice of the annual or any special meeting stating the place, day, and hour of the meeting and, in the case of a special meeting, the purpose(s) for which the meeting is called, shall be delivered to each shareholder of record entitled to vote not less than ten (10) nor more than sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the chairman of the board, the president, the secretary or the officer or person calling the meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at the address as it appears on the stock transfer books of the corporation, with postage thereon prepaid. SECTION 2.5. VOTING LIST. The officer who has charge of the stock transfer books of the corporation shall make, at least ten (10) days before every meeting of shareholders, a complete list of the shareholders entitled to vote at said meeting or any adjournment thereof, arranged in alphabetical order, with address of and the number of shares held by each. Such list shall be kept on file at the registered office of the corporation for a period of ten (10) days prior to such meeting and shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original stock transfer books shall be prima facie evidence as to who are shareholders entitled to examine such list or transfer books and to vote at any meeting of shareholders. SECTION 2.6. QUORUM AND ADJOURNMENT. (a) The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by the Act or by the Articles of Incorporation. Without regard to whether such quorum shall be present or represented at the meeting of the shareholders, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting. At such adjourned meeting at which quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified. -2- 3 (b) When a quorum is present at any meeting, the vote of the holders of a majority of the shares having voting power present in person or represented by proxy, shall decide any question brought before such meeting. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. SECTION 2.7. VOTING RIGHTS. At any meeting of the shareholders -- (a) Each outstanding share, regardless of class, shall be entitled to one (1) vote on each matter submitted to a vote, except to the extent that the voting rights of the shares of any class or classes are limited or denied by the Articles of Incorporation or by specific resolutions all as permitted by the Act. (b) Treasury shares and shares of stock held by this corporation in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time. (c) A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. No proxy shall be voted after eleven (11) months from the date of its execution unless otherwise provided in the proxy. Each proxy shall be revocable unless expressly provided therein to be irrevocable, and unless otherwise made irrevocable by law. (d) At all elections of directors no holder of stock entitled to vote shall be permitted to cumulate his shares. (e) Shares standing in the name of another corporation, domestic or foreign, may be voted on by such officer, agent, or proxy as the bylaws of such corporation may authorize or, in the absence of such authorization, as the Board of Directors of such corporation may determine. (f) Shares held by an administrator, guardian or conservator may be voted by him so long as such shares forming part of an estate being served by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name as trustee. (g) Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be -3- 4 voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. (h) A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares as transferred. SECTION 2.8. METHOD OF VOTING. Voting on any question or in any election may be by voice vote or show of hands unless the presiding officer shall order, or the holders of at least ten percent (10%) of the shares entitled to vote shall demand that voting be by written ballot. SECTION 2.9. ACTION WITHOUT MEETINGS. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken by stockholders for or in connection with any corporate action may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. If action is taken by unanimous consent of stockholders, the writing or writings comprising such unanimous consent shall be filed with the records of the meetings of stockholders. If action is taken by less than unanimous consent of stockholders and in accordance with the foregoing, there shall be filed with the records of the meetings of stockholders the writing or writings comprising such less than unanimous consent. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those who have not consented in writing, and a certificate signed and attested to by the secretary that such notice was given shall be filed with the records of the meetings of the stockholders. In the event that the action which is consented to is such as would have required the filing of a certificate under any of the provisions of the General Corporation Law of Delaware, if such action had been voted upon by the stockholders at a meeting thereof, the certificate filed under such provision shall state that written consent has been given under Section 228 of said General Corporation Law in lieu of stating that the stockholders have voted upon the corporate action in question, if such last mentioned statement is required thereby. -4- 5 ARTICLE III DIRECTORS SECTION 3.1. NUMBER. The number of directors which shall constitute the whole Board shall not be less than 2 nor more than 9 in number. Thereafter, within the foregoing limits the stockholders at the annual meeting shall determine the number of directors and shall elect the number of directors as determined. Within the foregoing limits, the number of directors may be increased at any time or from time to time by the stockholders or by the directors by vote of a majority of the directors then in office. The number of directors may be decreased to any number permitted by the foregoing at any time, either by the stockholders or by the directors by vote of a majority of the directors then in office, but only to eliminate vacancies existing by reason of the death, resignation or removal of one or more directors. Directors need not be stockholders. SECTION 3.2. TENURE. Except as otherwise provided by law, by the Certificate of Incorporation or by these Bylaws, each director shall hold office until the next annual meeting and until his successor is elected and qualified, or until he sooner dies, resigns, is removed or becomes disqualified. SECTION 3.3. POWERS. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors, who shall have and may exercise all the powers of the corporation and do all such lawful acts and things as are not by law, the Certificate of Incorporation or these Bylaws directed or required to be exercised or done by the stockholders. SECTION 3.4. VACANCIES. Vacancies and any newly created directorships resulting from any increase in the number of directors may be filled by vote of the stockholders at a meeting called for the purpose, or by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. When one or more directors shall resign from the Board, effective at a future date, a majority of the Directors then in office, including those who have resigned, shall have power to fill such vacancy or vacancies, the vote or action by writing thereon to take effect when such resignation or resignations shall become effective. The directors shall have and may exercise all their powers notwithstanding the existence of one or more vacancies in their number subject to any requirements of law, or of the Certificate of Incorporation or of these Bylaws as to the number of directors required for a quorum or for any vote or other actions. SECTION 3.5. REMOVAL. Any director may only be removed for cause and only in accordance with the provisions of the Certificate of Incorporation of the Company. -5- 6 SECTION 3.6. COMPENSATION OF DIRECTORS. The Directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. SECTION 3.7. MEETINGS OF THE BOARD OF DIRECTORS. (a) PLACE. The Board of Directors of the corporation may hold meetings, both regular and special, either within or without the State of Texas. (b) ANNUAL MEETING. The Board of Directors shall meet each year immediately after the annual meeting of shareholders at the place where such meeting of shareholders was held, unless a different time and place be fixed by the vote of the shareholders at the annual meetings for the purpose of organization, election of officers and consideration of any other business that may properly be brought before the meeting. No notice of such meeting shall be necessary to either old or new members of the Board of Directors. In the event such meeting is not held immediately following the annual meeting or at the time and place as fixed by the shareholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors. (c) REGULAR MEETINGS. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the board by resolution. (d) SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by the Chairman of the Board or by the President, and shall be called by the President or Secretary upon the written request of two (2) directors. Written notice of special meetings of the Board of Directors shall be given to each director at least 48 hours before the date of each meeting. (e) QUORUM. A majority of the number of directors fixed by the Bylaws shall constitute a quorum for the transaction of business. The act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by the Act or by the Articles of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting -6- 7 from time to time without notice other than announcement at the meeting until a quorum shall be present. (f) TELEPHONE MEETING. Annual, regular and special meetings of the Board of Directors, upon proper notice or waiver thereof, may be held by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at the meeting, except where a director participates in the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called or convened. (g) ACTION WITHOUT A MEETING. Any action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting if a consent in writing setting forth the action so taken is signed by all the members of the Board of Directors and such unanimous consent shall have the same force and effect as a unanimous vote at a meeting of the Board of Directors. SECTION 3.8. INTERESTED DIRECTORS AND OFFICERS. (a) No contract or transaction between the corporation and one or more of its directors or officers or between the corporation and any other corporation, partnership, association or other organization in which one or more of the corporation's directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorized the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. -7- 8 (b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IV EXECUTIVE COMMITTEE SECTION 4.1. DESIGNATION OF EXECUTIVE COMMITTEE. The Board of Directors by resolution adopted by a majority of the number of directors fixed by the Bylaws may designate two (2) or more directors to constitute an Executive Committee. The designation of such Executive Committee and the delegation of authority herein granted shall not operate to relieve the Board of Directors or any member thereof of any responsibility imposed upon it or him by law. No member of the Executive Committee shall continue to be a member thereof after he ceases to be a director of the corporation. The Board of Directors shall have the power at any time to increase or decrease the number of members of the executive committee to fill vacancies thereon, to change any member thereof, and to change the functions or terminate the existence thereof. SECTION 4.2. POWERS OF THE EXECUTIVE COMMITTEE. During the interval between meetings of the Board of Directors, the Executive Committee shall have and may exercise all of the authority of the Board of Directors in the business and affairs of the corporation except where action of the Board of Directors is specified by the Act or other applicable law, including power to authorize the seal of the corporation to be affixed to all papers which may require it. The Executive Committee may also from time to time formulate and recommend to the Board of Directors for approval general policies regarding the management of the business and affairs of the corporation. All minutes of meetings of the Executive Committee shall be submitted to the next succeeding meeting of the Board of Directors for approval; the failure to submit the same or to receive the approval thereof shall not invalidate any completed or incompleted action taken by the corporation upon authorization by the Executive Committee prior to the time at which the same should have been, or was submitted as above provided. SECTION 4.3. CHAIRMAN AND PROCEDURE. Upon the designation of an executive committee by the Board of Directors, such Executive Committee shall elect one of its members as chairman and may elect one of its members as vice chairman and shall adopt rules of procedure providing, among other things, for the manner of calling meetings, giving notices thereof, quorum requirements therefor, and the methods of conducting same. -8- 9 ARTICLE V OFFICERS SECTION 5.1. ENUMERATION. The officers of the corporation shall be appointed by the Board of Directors, and shall be a chairman of the board, president, senior vice president, one or more vice presidents (with or without such descriptive titles as the Board of Directors may deem appropriate), a secretary, a treasurer and a controller. The Board may also appoint any one or more of the following officers: assistant secretaries and assistant treasurers. Any two or more offices may be held by the same person except the offices of president and secretary. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. SECTION 5.2. GENERAL DUTIES. All officers and agents of the corporation, as between themselves and the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided in the Bylaws, or as may be determined by resolutions of the Board of Directors not inconsistent with the Bylaws. SECTION 5.3. ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of shareholders, or as soon thereafter as conveniently as vacancies may be filled or new offices filled at any meeting of the Board of Directors. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner provided in Section 5.04 herein. SECTION 5.4. REMOVAL. Any office or agent elected or appointed by the Board of Directors or the executive committee may be removed by the Board of Directors whenever in its judgment the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 5.5. RESIGNATIONS. Any officer may resign at any time by giving notice to the Board of Directors, or to the Chairman of the Board, President or Secretary. Such resignation shall take effect a the time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 5.6. VACANCIES. Any vacancy in any office because of death, resignation, removal, or other cause shall be filled for the unexpired portion of the term in the manner prescribed in the Bylaws for the election or appointment to such office. -9- 10 SECTION 5.7. SALARIES. The salaries of the officers shall be fixed from time to time by the Board of Directors. No officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation. SECTION 5.8. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be chosen from among the directors and shall preside at all meetings of the Board of Directors and of the shareholders and shall have such other authority and responsibility as is designated to him by the Board of Directors from time to time. SECTION 5.9. PRESIDENT. The president shall be the chief executive officer of the corporation and shall have general supervision over its business and affairs, subject to the control of the Board of Directors. As Chief Executive Officer of the corporation, the President shall have general supervision over the subordinate officers and shall delegate and determine their duties. He shall, at the discretion of or in the absence of the Chairman of the Board, preside at meetings of the shareholders and in the absence of the Chairman of the Board at meetings of the Board of Directors. SECTION 5.10. VICE PRESIDENTS. The Vice Presidents in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President. If one of the vice presidents be designated as executive vice president, he shall be the senior vice president. They shall generally assist the president and exercise such other powers and perform such other duties as are delegated to them by the President and as the Board of Directors may prescribe. SECTION 5.11. SECRETARY. The Secretary Shall attend all meetings of the Board of Directors and all meetings of the shareholders and shall keep or cause to be kept in books provided for that purpose the minutes of all meetings of the Board of Directors and all meetings of shareholders and shall perform like duties for the standing committees when required. He shall see that all notices are duly given in accordance with the provisions of these Bylaws and as required by law. He shall be custodian of the records (other than financial records) and the seal of the corporation and, when authorized by the Board of Directors, shall affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature or by the signature of the treasurer or an assistant secretary, any of which signatures may be facsimile. In general, he shall perform all duties incident to the office of secretary and such other duties as may, from time to time, be assigned to him by the Board of Directors, the chairman of the board, or the president. SECTION 5.12. ASSISTANT SECRETARIES. The Assistant Secretaries in the order of their seniority, unless otherwise determined by the Board of -10- 11 Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary. They shall perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board or the President may from time to time prescribe. SECTION 5.13. TREASURER. The Treasurer shall be the financial officer of the corporation, shall have charge and custody of, and be responsible for all funds and securities of the corporation; shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation in such banks or other depositories as shall be designated by the Board of Directors. In general, he shall perform all the duties incident to the office of Treasurer and such other duties as, from time to time, may be designated to him by the Board of Directors, the chairman of the board or the president. He shall render to the president and the Board of Directors, whenever the same shall be required, an account of all his transactions as Treasurer and of the financial condition of the corporation. SECTION 5.14. ASSISTANT TREASURERS. The Assistant Treasurers in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. They shall perform such other duties and have such other powers as the Board of Directors, the chairman of the board or the president may from time to time prescribe. SECTION 5.15. CONTROLLER. The Controller shall be a financial officer of the corporation and assist the Treasurer in the discharge of his duties as described in Section 5.13 above, and perform any and all duties designated to him by the Board of Directors, the Chairman of the Board, the President or the Treasurer. SECTION 5.16. BONDING. If required by the Board of Directors, all or any one or more of the officers (and particularly the Treasurer and Assistant Treasurers) shall give the corporation a bond in such amount with such surety or sureties and subject to such renewal requirements, as may be ordered by the Board of Directors for the faithful performance of the duties of his office and for the restoration to the corporation in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. ARTICLE VI GENERAL COUNSEL -11- 12 The Board of Directors may appoint a general counsel for the corporation at compensation to be set by the board. The general counsel as such shall not be an officer of the corporation unless the Board of Directors shall so designate him in the resolution of appointment, but the person designated as general counsel may hold any other office to which he is elected. The board may appoint an individual lawyer or a law firm as the general counsel of the corporation as it may elect. If a law firm should be selected, then one member thereof shall be designated as the particular lawyer in such firm whose personal service are contemplated. The general counsel shall, when called upon, counsel and advise with the officers of this corporation on any legal matters which may arise in the conduct of the corporation's business, shall handle all claims and litigation involving the corporation and shall perform such further legal services as may be contemplated in the contract of employment. ARTICLE VII INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES SECTION 7.1 INDEMNIFICATION RIGHTS. Each person who was or is made a party or is threatened to be made a party to, or is involved in any, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is or was the legal representative, director or officer of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, excise taxes under the Employee Retirement Income Security Act of 1974, as amended, or penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such person in connection with such proceeding, and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 7.2 hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors. The right to indemnification -12- 13 conferred in this Section shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation service to an employee benefit plan) in advance of the final disposition of the proceeding, shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. The corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers. SECTION 7.2 SUIT AGAINST THE CORPORATION. If a claim under Section 7.1 is not paid in full by the corporation within thirty days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the corporation to indemnify the claimant of the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. SECTION 7.3 INDEMNIFICATION NOT EXCLUSIVE RIGHT. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of -13- 14 Incorporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise. SECTION 7.4 INSURANCE. The corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. ARTICLE VIII CAPITAL STOCK SECTION 8.1. CERTIFICATES REPRESENTING SHARES. The share of capital stock of the corporation shall be represented by certificates signed by or in the name of the corporation by the president or vice president and the secretary or an assistant secretary of the corporation and shall be sealed with the seal of the corporation or a facsimile thereof. If the corporation shall be authorized to issue more than one class of stock, the designation, preferences, limitations and relative rights and preferences of each series of any preferred or special class of stock shall be set forth upon the face or back thereof in full or summary form or be incorporated by reference on the face or back of the certificate in accordance with the provisions of the Act. SECTION 8.2. FACSIMILE SIGNATURES. If the certificate is countersigned by a transfer agent, or registered by a registrar other than the corporation itself or an employee of the corporation, the signature of the president, vice president, secretary or assistant secretary may be facsimile. In case any officer(s) who have signed or whose facsimile signature(s) have been placed upon such certificate(s) shall have ceased to be such officer(s) of the corporation whether because of death, resignation or otherwise, before such certificate(s) is issued by the corporation, such certificate(s) may be issued and delivered as though the person(s) who signed such certificate(s) or whose facsimile signature(s) have been placed thereon were such officer(s) at the date of its issuance. SECTION 8.3. LOST, STOLEN OR DESTROYED CERTIFICATES. The corporation may issue a new certificate(s) in the place of any certificate(s) theretofore issued by the corporation alleged to have been lost, stolen or destroyed, but the Board of Directors may require the owner of such lost, stolen or destroyed certificate or his legal representative to furnish affidavit as to such loss, theft, or destruction, and to give a bond in such form and substance, and with such surety or sureties with fixed or open penalty as it may direct, to indemnify the corporation, the transfer agent, and the registrar against -14- 15 any claim that may be made on account of the alleged loss, theft or destruction of such certificate. The Board of Directors may establish with the transfer agent a blanket bond procedure. SECTION 8.4. TRANSFERS OF STOCK. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for share duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate and record the transaction upon its books. SECTION 8.5. REGISTERED SHAREHOLDERS. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share(s) on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. SECTION 8.6. RIGHT OF INSPECTION. Any Person who shall have been a shareholder of record for at least six (6) months immediately preceding his demand, or who shall be the holder of record of at least five percent (5%) of all the outstanding share of the corporation, upon written demand stating the purpose thereof, shall have the right to examine, in person or by agent or attorney, at any reasonable time or times during business hours, for any proper purpose, the corporation's books and records of account, minutes and records of shareholders, and shall be entitled to make extracts therefrom. SECTION 8.7. STOCK OPTIONS AND AGREEMENTS. Any share-holder of this corporation may enter into agreements giving to any other shareholder(s) or any third party an option to purchase any of this stock in the corporation; and such shares of stock shall thereupon be subject to such agreement and transferable only upon proof of compliance therewith; provided, however, that a copy of such agreement be filed with the corporation and reference thereto placed upon the certificate representing said shares of stock. ARTICLE IX GENERAL PROVISIONS -- SPECIAL CORPORATE ACTS SECTION 9.1. NOTICE OF MEETINGS. Notice to directors and shareholders shall be written or printed and delivered personally or mailed, with postage prepaid thereon, to the directors or shareholders at their addresses appearing on the books of the corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram. Neither the business to be transacted at or the purpose of any regular or special meeting of -15- 16 the Board of Directors need be specified in the notice or waiver of notice of such meeting. SECTION 9.2. WAIVER OF NOTICE OF MEETING. Whenever any notice is required to be given under the provisions of the Act or by the Articles of Incorporation or by these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of a director at a meeting shall constitute waiver of notice of such meeting except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. SECTION 9.3. CLOSING OF TRANSFER BOOKS - RECORD DATE. For the purpose of determining shareholders entitled to notice of or to vote at any meting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for stated period but not to exceed, in any case, sixty (60) days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten (10) days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as a record date for any such determination of shareholders, such date in any case to be not more than sixty (60) days, and in the case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders has been made as provided in this Section 9.03., such determination shall apply to any adjournment thereof; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 9.4. DIVIDENDS. Dividends upon the capital stock of the corporation, subject to the provisions of the Articles of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Articles of Incorporation and Section 170 of the Act. -16- 17 SECTION 9.5. EXECUTION OF DEEDS, CONTRACTS, ETC. Subject always to the specific directions of the Board of Directors, all deeds and mortgages made by the corporation and all other written contracts and agreements to which the corporation shall be party shall be executed in its name by the chairman of the board, the president or one of the vice presidents; and the secretary or an assistant secretary, when necessary or required, shall affix and attest the corporate seal thereto. SECTION 9.6. ENDORSEMENT OF STOCK CERTIFICATES. Subject always to the specific directions of the Board of Directors, any share(s) of stock issued by any other corporation and owned by the corporation (including reacquired shares of stock of the corporation), may, for sale or transfer, be endorsed in the name of the corporation by the chairman of the board, the president or one of its vice presidents and attested by the secretary or an assistant secretary either with or without affixing thereto the corporate seal. SECTION 9.7. VOTING OF SHARES OWNED BY CORPORATION. Subject always to the specific directions of the Board of Directors, any share(s) of stock issued by any other corporation and owned or controlled by the corporation may be voted at any shareholders' meeting of such other corporation by the chairman of the board, the president of the corporation, if either be present, or in the absence of the chairman of the board and the president, by any vice president of the corporation, who may be present. Whenever, in the judgment of the chairman of the board, the president, or in the absence of the chairman of the board and the president, of any vice president, it is desirable for the corporation to execute a proxy or give a shareholder's consent in respect to any share(s) of stock issued by any other corporation and owned by the corporation, such proxy or consent shall be executed in the name of the corporation by the chairman of the board, the president or one of the vice presidents of the corporation and shall be attested by the secretary or an assistant secretary of the corporation under the corporate seal without necessity of any authorization by the Board of Directors. Any person or persons designated in the manner above stated as the proxy or proxies of the corporation shall have full right, power and authority to vote the share(s) of stock issued by such other corporation and owned by the corporation the same as such share(s) might be voted by the corporation. SECTION 9.8. ANNUAL STATEMENT. The Board of Directors shall present at each Annual Meeting, and when called for by the vote of shareholders at any special meeting of the shareholders, a full and clear statement of the business and condition of the corporation. SECTION 9.9. FISCAL YEAR. The fiscal year of the corporation shall be fixed by resolution of the Board of Directors. -17- 18 SECTION 9.10. SEAL. The corporate seal shall have inscribed thereon the name of the corporation, the words "Corporate Seal, Texas" and may have inscribed thereon the year of the organization. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE X AMENDMENTS TO BYLAWS The Board of Directors, by the affirmative vote of a majority of the directors, may at any meeting, alter, amend, or repeal any of these Bylaws, or may adopt new Bylaws, subject, however, to the right of the shareholders to repeal or change any such action by the Board of Directors. CERTIFICATE The undersigned secretary of E-Z Serve Corporation, a Delaware corporation, hereby certifies that the foregoing by-laws are the by-laws of the Corporation authorized and adopted by the Board of Directors of the Corporation, effective on the date hereof. Dated: March 25, 1992. /s/ John T. Miller ------------------- Secretary -18- EX-4.1 7 1991 STOCK OPTION PLAN OF COMPANY 1 EXHIBIT 4.1 1991 STOCK OPTION PLAN OF E-Z SERVE CORPORATION 1. PURPOSE OF PLAN This 1991 Stock Option Plan (the "Plan") is intended as an incentive (a) to retain in the employ of E-Z Serve Corporation (the "Company") and its Affiliates (as defined below) persons of training, experience and ability, (b) to attract new employees whose services are considered unusually valuable, (c) to attract and retain the services of experienced and knowledgeable directors, (d) to encourage the sense of proprietorship of such persons, and (e) to stimulate the active interest of such persons in the development and financial success of the Company. It is further intended that the options issued pursuant to this Plan (the "Options") may constitute incentive stock options ("incentive stock options") within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), while certain other options granted under this Plan will be nonqualified options ("nonqualified stock options") within the meaning of Section 83 of the Code. 2. ADMINISTRATION OF PLAN (a) The Board of Directors shall appoint and maintain as administrator of this Plan the Compensation Committee (the "Committee") which shall consist of at least two members of the Board of Directors, each of whom shall be a "nonemployee director" within the meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission (the "Commission") pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Each member of the Committee shall serve at the pleasure of the Board of Directors. The Committee shall have full power and authority to designate participants, to determine the terms and provisions of respective option agreements (which need not be identical) and to interpret the provisions and supervise the administration of this Plan. All decisions and selections made by the Committee pursuant to the provisions of this Plan shall be made by a majority of its members. Any decision reduced to writing and signed by all of the members shall be fully effective as if it had been made by a majority at a meeting duly held. (b) All Options granted under this Plan are subject to, and may not be exercised before, the approval of this Plan at the 1992 Annual Meeting of Stockholders, or at a special meeting of stockholders called for that purpose prior to the 1992 Annual Meeting, by the affirmative vote of the holders of a majority of the outstanding shares of the Company 2 present, or represented by proxy, and entitled to vote thereat, or by the written consent of the holders of a majority of the outstanding shares of the Company entitled to vote; provided that if such approval by the stockholders of the Company is not forthcoming, all Options previously granted under this Plan shall be void. (c) The Committee shall have the authority to designate which Options granted under this Plan shall be incentive stock options and which shall be nonqualified stock options. The Committee, in its sole discretion, may determine that all the Options granted under this Plan may be incentive or nonqualified stock options. 3. DEFINITIONS. For purposes of this Plan, the following definitions shall apply: (a) "Affiliates" means any Parent of the Company and any Subsidiary of the Company within the meaning of Sections 424(e) and (f) of the Code, respectively. (b) "Cause" shall mean: (i) for an Optionee who is not a Senior Executive, an Optionee's actual fraud, gross negligence or willful or wanton misconduct; or (ii) for an Optionee who is a Senior Executive, a Senior Executive's (a) actual fraud, gross negligence or willful or wanton misconduct, (b) fraud, embezzlement or other material dishonesty with respect to the Company or any of its Affiliates, (c) conviction of, or a plea of nolo contendere to, a felony, (d) conduct that is materially harmful to the business, interest or reputation of the Company, (e) intentional failure to comply with any material instructions of the Board contained in a duly adopted resolution of the Board, or (f) failure to devote, other than by reason of disability, such of the Senior Executive's entire time, attention, business judgment, skill, energies and business efforts to his duties as an executive of the Company as are reasonably necessary to carry out his duties. (c) "Common Stock" shall mean the common stock of the Company, par value $0.01 per share. (d) "Senior Executive" shall mean any of the senior executive officers of the Company identified in a specific resolution of the Committee to be included within the definition of this term. -2- 3 (e) "Senior Executive Termination" shall mean (i) a Senior Executive's permanent disability, as determined in the sole discretion of the Committee, or death, (ii) the termination of a Senior Executive's employment by the Company for reasons other than for Cause, or (iii) a Senior Executive's voluntary termination of employment within 90 days after a significant diminution of both the Senior Executive's responsibility and base salary by the Company. 4. DESIGNATION OF PARTICIPANTS The persons eligible for participation in this Plan as recipients of Options shall include key employees of the Company and its Affiliates. Directors of the Company shall also be eligible to participate, but no director who is otherwise not an employee shall be eligible to be granted any incentive stock options. A person who has been granted an Option hereunder ("Optionee") may be granted an additional Option or Options, if the Committee shall so determine. 5. STOCK RESERVED Subject to adjustment as provided in Paragraph 9, a total of 3,500,000 shares ("Stock") of Common Stock shall be subject to this Plan. The shares of Stock subject to this Plan shall consist of unissued shares or previously issued shares reacquired and held by the Company or its Affiliates, and such number of shares shall be and is hereby reserved for sale for such purpose. Any of such shares which may remain unsold and which are not subject to outstanding Options at the expiration of this Plan shall cease to be reserved for the purpose of this Plan, but until termination of this Plan and the expiration, exercise or lapse of all Options granted hereunder, the Company shall at all times reserve a sufficient number of shares to meet the requirements of this Plan. Should any Option expire or be cancelled prior to its exercise, the shares theretofore subject to such Option may again be subject to an Option under this Plan. 6. OPTION PRICE (a) The purchase price of each share of Stock subject to an incentive stock option under this Plan shall be 100% of the fair market value of such share on the date the Option is granted. The purchase price of each share of Stock subject to a nonqualified stock option under this Plan shall be determined by the Committee prior to granting the Option. However, in the case of an incentive stock option granted to an employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of the Company's then outstanding securities ("Ten Percent Stockholder"), the price shall not be -3- 4 less than 110% of the fair market value of a share of Stock on the date the Option is granted. The Committee shall set the purchase price for each share subject to a nonqualified stock option at either the fair market value of each share on the date the Option is granted, or at such other price as the Committee in its sole discretion shall determine; provided, however, that in no event shall the purchase price of a share subject to a nonqualified stock option under this Plan be less than 50% of the fair market value of such share on the date the Option is granted. (b) The fair market value of a share of Stock on a particular date shall be deemed to be the average (mean) of the reported "high" and "low" sales price for such shares as reported in The Wall Street Journal's American Stock Exchange Composite Transactions listing for such day (corrected for obvious typographical errors), or if such shares are not reported in such listing, then the average of the reported "high" and "low" sales prices on the largest national securities exchange (based on the aggregate dollar value of securities listed) on which such shares are listed or traded, or if such shares are not listed or traded on any national securities exchange, then the average of the reported "high" and "low" sales prices for such shares in the over-the-counter market, as reported on the National Association of Securities Dealers Automated Quotations System, or, if such prices shall not be reported thereon, the average between the closing bid and asked prices so reported, or, if such prices shall not be reported, then the average closing bid and asked prices reported by the National Quotation Bureau Incorporated, or, in all other cases, the value established by the Board of Directors of the Company in good faith. (c) In order to restore the incentive value of any options previously granted under this Plan and to continue to provide meaningful incentives to the Optionees, the Compensation Committee may grant new nonqualified stock options in accordance with the terms of this Plan in exchange for the cancellation of some or all of the options previously granted to the Optionees, subject to the approval of such exchange by the stockholders of the Company. The new nonqualified stock options may be granted at a lower exercise price than the cancelled options, subject to the other terms of this Paragraph 6, and the Compensation Committee shall have the discretion to determine the terms and provisions of any such exchange in accordance with this Plan. 7. OPTION PERIOD Each Option granted under this Plan shall terminate and be of no force and effect with respect to any shares not previously taken up by the Optionee upon the expiration of ten years from the date of granting of such Option or such earlier date as the Committee, in its sole discretion, may prescribe at the date of grant. However, in the case of an incentive stock -4- 5 option granted to a Ten Percent Stockholder, the option period shall not exceed five years from the date of grant. No incentive stock option shall be granted after the tenth anniversary of the effective date of this Plan. 8. EXERCISE OF OPTIONS (a) The Committee, in granting Options hereunder, shall have discretion to determine the terms upon which such Options shall be exercisable, subject to the applicable provisions of this Plan. The Committee may determine to permit any Option granted hereunder to be exercisable immediately upon the date of grant or at any time thereafter. Any Optionee who (i) was granted stock options or stock purchase grants by Harken Energy Corporation ("HEC") prior to the Company's rights offering (as a result of which the Company was no longer a wholly-owned subsidiary of HEC), and (ii) has been continuously employed by HEC (prior to the rights offering) and/or any Affiliate thereof since June 1, 1989, will be given credit towards his vesting of the Option for past employment equal to two years. (b) The aggregate fair market value (determined in accordance with Section 6(b) of this Plan at the time the Option is granted) of the Stock with respect to which incentive stock options may be exercisable for the first time by any Optionee during any calendar year shall not exceed $100,000. (c) Options may be exercised solely by the Optionee during his lifetime or after his death by the person or persons entitled thereto under his will or the laws of descent and distribution. (d) In the event of termination of employment for any reason other than death, disability or retirement, Options may be exercised only with respect to the number of shares purchasable at the time of such termination, unless the Committee shall otherwise approve on a case by case basis. (e) In the event of the death or disability of the Optionee following the date of grant and while in the employ of the Company or any of its Affiliates, and while Options granted hereunder are still in force and unexpired under the terms of Paragraph 7, any unmatured installments of the Options shall be accelerated. Such acceleration shall be effective as of the date of death or disability, as the case may be. The Options outstanding in the name of the Optionee shall thereupon be exercisable in full without regard to any installment exercise provisions. -5- 6 (f) In the event the Optionee terminates his employment because of retirement under any retirement plan of the Company or any of its Affiliates while Options granted hereunder are still in force and unexpired under the terms of Paragraph 7, the Committee shall have discretion to permit any unmatured installments of the Options to be accelerated as of the date of retirement and the Options shall thereupon be exercisable in full without regard to any installment exercise provisions. (g) The purchase price of the shares as to which an Option is exercised shall be paid in full at the time of the exercise. Such purchase price shall be payable in cash (including certified check, bank draft and postal or express money order payable to the order of the Company), or at the option of the holder of such Option, in Common Stock theretofore owned by such holder (or any combination of cash and Common Stock). For purposes of determining the amount, if any, of the purchase price satisfied by payment of Common Stock, such Common Stock shall be valued at its fair market value on the date of exercise in accordance with Paragraph 6(b). Any Common Stock delivered in satisfaction of all or a portion of the purchase price shall be appropriately endorsed for transfer and assigned to the Company. The Committee may, in its discretion and to the extent permitted by the laws of the State of Delaware, determine to permit the holder of an Option to satisfy the purchase price of the shares as to which an Option is exercised by delivery of the Option holder's promissory note, such note to be subject to such terms and conditions as the Committee may determine. The Committee may, in its discretion and to the extent permitted by the laws of the State of Delaware, determine to cause the Company to lend to the holder of an Option funds, on such terms and conditions as the Committee may determine to be appropriate, sufficient for the holder of an Option to pay the purchase price of the shares as to which an Option is to be exercised. No holder of an Option shall be, or have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares shall have been issued by the Company to such holder. (h) The option agreement evidencing any incentive stock option granted under this Plan shall provide that if the Optionee makes a disposition, within the meaning of Section 424(c) of the Code and the regulations promulgated thereunder, of any share or shares of Stock issued to him pursuant to his exercise of an Option granted under this Plan within the two-year period commencing on the day after the date of the grant of such Option or within a one-year period commencing on the day after the date of transfer of the share or shares to him pursuant to the exercise of such Option, he shall, within ten days of such disposition, notify the Company thereof and immediately deliver to the Company any amount of federal income tax withholding required by law. -6- 7 (i) Upon a Senior Executive Termination, 100% of the applicable Senior Executive's outstanding unvested shares of Stock subject to the Options shall vest. (j) Within 60 days of a Senior Executive Termination, the Company will provide to the Senior Executive an offer to pay the Senior Executive an amount payable in cash in exchange for the Senior Executive's relinquishment of all of such Senior Executive's Options. Within 30 days of the Senior Executive's receipt of the Company's offer, the Senior Executive, or his heirs or legal representatives in the event of death or disability, will have one of the following alternatives: (i) Accept the Company's offer and relinquish the Senior Executive's Options for the cash amount offered; or (ii) In lieu of purchasing the shares of Stock subject to purchase under the Options, relinquish the Options for a number of shares of Common Stock to be determined as follows: the number of shares of Common Stock issuable pursuant to such relinquishment shall be a number equal to the quotient obtained by dividing the Appreciated Value by the current Stock Value (both as defined below); or (iii) Continue to hold the Options and exercise them prior to the earlier of five years from the date of the Senior Executive Termination or such earlier date as the period for exercise of the Options would end pursuant to the terms of the Plan. As used in this Section 8, "Appreciated Value" shall mean the excess of (i) the aggregate current Stock Value of the shares of Common Stock covered by the Options over (ii) the aggregate purchase price for such shares specified in such Options. As used in this Section 8, "Stock Value" of a share of Common Stock shall mean (i) on a consolidated basis, the sum of (x) the Company's earnings before interest, taxes, depreciation and amortization for the four reported fiscal quarters prior to the date of the Senior Executive Termination (the "Period") multiplied by 6, plus (y) the Company's average cash during the Period, minus (z) the Company's average debt during the Period, (ii) divided by the weighted average number of shares of Common Stock outstanding during the Period. 9. STOCK DIVIDENDS, STOCK SPLITS AND CERTAIN OTHER CORPORATION TRANSACTIONS (a) The existence of this Plan and Options granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of -7- 8 bonds, debentures or preferred or preference stocks ranking prior to or affecting the Common Stock or the rights attendant thereto, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of the Company's assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. (b) The shares with respect to which Options may be granted hereunder are shares of Common Stock of the Company as presently constituted. If, and whenever, prior to the delivery by the Company of all of the shares of the Stock which are subject to Options granted hereunder, the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, a stock split, a combination of shares, a recapitalization or other increase or reduction of the number of shares of the Common Stock outstanding without receiving consideration therefor in money, services or property, the number of shares of Stock available under this Plan and the number of shares of Stock with respect to which Options granted hereunder may thereafter be exercised shall (i) in the event of an increase in the number of outstanding shares, be proportionately increased, and the cash consideration payable per share shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding shares, be proportionately reduced, and the cash consideration payable per share shall be proportionately increased. (c) If the Company is reorganized, merged or consolidated or is otherwise a party to a plan of exchange with another corporation pursuant to which reorganization, merger, consolidation or plan of exchange stockholders of the Company receive any shares of common stock or other securities or if the Company shall distribute ("Spin Off") securities of another corporation to its stockholders, there shall be substituted for the shares subject to the unexercised portions of outstanding Options an appropriate number of shares of (i) each class of stock or other securities which were distributed to the stockholders of the Company in respect of such shares in the case of a reorganization, merger, consolidation or plan of exchange, or (ii) in the case of a Spin Off, the securities distributed to stockholders of the Company together with shares of Stock, such number of shares or securities to be determined in accordance with the provisions of Section 424 of the Code (or other applicable provisions of the Code or regulations issued thereunder which may from time to time govern the treatment of incentive stock options in such a transaction); provided, however, that all such Options may be cancelled by the Company as of the effective date of (x) a reorganization, merger, consolidation, plan of exchange or Spin Off or (y) any dissolution or liquidation of the Company, by giving notice to each holder thereof or his personal representative of its intention to do so and by permitting the purchase for a period of at least thirty days during the sixty days next preceding such effective date of all of the shares subject to such outstanding Options, without regard to the installment provisions set forth in the option agreements; and provided further that in the event of a Spin Off, the Company may, in lieu -8- 9 of substituting securities or accelerating and cancelling Options as contemplated above, elect (i) to reduce the purchase price for each share of Stock subject to an outstanding Option by an amount equal to the fair market value, as determined in accordance with the provisions of Paragraph 6(b), of the securities distributed in respect of each outstanding share of Common Stock in the Spin Off or (ii) to reduce proportionately the purchase price per share and to increase proportionately the number of shares of Stock subject to each Option in order to reflect the economic benefits inuring to the stockholders of the Company as a result of the Spin Off. (d) Except as hereinbefore expressly provided the issue by the Company of shares of stock of any class, or securities convertible into or exchangeable for shares of stock of any class, for cash or property, or for labor or services, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into or exchangeable for shares of stock of any class shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to Options granted hereunder. (e) The Committee may, in its sole discretion, provide that an Option shall become fully exercisable upon a Change in Control of the Company (as defined in the next sentence). "Change in Control" of the Company shall be conclusively deemed to have occurred if (and only if) any of the following shall have taken place: (i) a change in control is reported by the Company in response to either Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act or Item 1 of Form 8-K promulgated under the Exchange Act; (ii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent or more of the combined voting power of the Company's then outstanding securities; or (iii) any "person" (as defined in clause (ii) above), other than HEC, who is, at the time of the effective date of this Plan, the "beneficial owner" (as defined in clause (ii) above) of more than five percent of the combined voting power of the Company's then outstanding securities, acquires, or disposes of, beneficial ownership (as defined in clause (iii) above) of 33% or more of the combined voting power of the Company's then outstanding securities. 10. PURCHASE FOR INVESTMENT Unless the Options and shares of Stock covered by this Plan have been registered under the Securities Act of 1933, as amended, or the Company has determined that such registration is unnecessary, each person exercising an Option under this Plan may be required by the Company to give a representation in writing that he is acquiring such shares for his -9- 10 own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof. 11. TAXES (a) The Company may make such provisions as it may deem appropriate for the withholding of any taxes which it determines is required in connection with any Options granted under this Plan. (b) Notwithstanding the terms of Paragraph 11(a), any Optionee may pay all or any portion of the taxes required to be withheld by the Company or paid by him in connection with the exercise of a nonqualified stock option by electing to have the Company withhold shares of Stock, or by delivering previously owned shares of Common Stock, having a fair market value, determined in accordance with Paragraph 6(b), equal to the amount required to be withheld or paid. An Optionee must make the foregoing election on or before the date that the amount of tax to be withheld is determined. All such elections are subject to prior approval of the Committee. 12. EFFECTIVE DATE OF PLAN This Plan shall be effective as of May 30, 1991. 13. AMENDMENT OR TERMINATION The Board of Directors may amend, alter or discontinue this Plan, except that no amendment or alteration shall be made which would impair the rights of any Optionee under any Option theretofore granted, without his consent, and except that no amendment or alteration shall be made which, without the approval of the stockholders, would: -10- 11 (a) Increase the total number of shares reserved for the purposes of this Plan or decrease the option price provided for in Paragraph 6, except in each case as provided in Paragraph 9 or 6(c) as applicable, or change the class of employees eligible to participate in this Plan as provided in Paragraph 4; (b) Extend the option period provided for in Paragraph 7; (c) Materially increase the benefits accruing to Optionees under this Plan; or (d) Materially modify the requirements as to eligibility for participation in this Plan. 14. GOVERNMENT REGULATIONS This Plan, and the grant and exercise of Options thereunder, and the obligation of the Company to sell and deliver shares under such Options, shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 15. NOT A CONTRACT. The Plan shall not be deemed to constitute a contract between the Company and any employee or to be a consideration or an inducement for the employment of any employee. No part of any employee's payments under the Plan shall be used as a basis for calculation of retirement or any other benefits to which such employee might be entitled under any other benefit plans which are or may in the future be in place at the Company. Nothing contained in the Plan shall be deemed to give any employee the right to be retained in the service of the Company or to interfere with the right of the Company to discharge any employee at any time regardless of the effect which such discharge shall have upon him as a participant of the Plan. 16. INDEMNIFICATION. In the event any claim, suit or proceeding is brought regarding the Plan established hereunder to which the Committee, or any member thereof, or any person or agent acting for or at the instruction or request of the Committee, may be a party, the Committee and such members, persons or agents shall be entitled to be reimbursed by the Company for any and all costs, attorney's fees, and other expenses pertaining thereto incurred by them for which they shall have become liable. -11- 12 17. COMPANY RECORDS. No person shall, as a result of the existence of the Plan or such person's participation therein, be entitled to review or have access to the Company's books and records. 18. MISCELLANEOUS. The headings of the Sections herein are inserted only for convenience of reference and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. Any reference herein to the masculine gender includes the feminine gender and any singular or plural reference includes the other where the context requires. -12- 13 E-Z SERVE CORPORATION By: /s/ Neil H. McLaurin ------------------------ Neil H. McLaurin President ATTEST: /s/ John T. Miller - ----------------------- John T. Miller Senior Vice President -13- EX-4.2 8 AMENDED 1994 STOCK OPTION PLAN 1 EXHIBIT 4.2 AMENDED AND RESTATED 1994 STOCK OPTION PLAN OF E-Z SERVE CORPORATION 1. PURPOSE OF PLAN. This 1994 Stock Option Plan (the "Plan") is intended to act as an incentive (a) to retain key management employees of E-Z Serve Corporation (the "Company") and its Affiliates (as defined below), (b) to stimulate the active interest of such persons in the development and financial success of the Company, and (c) to provide a financial benefit to such persons at the same time as the stockholders of the Company receive financial consideration based on certain events as set forth herein. The options issued pursuant to this Plan (the "Options") are not intended to qualify as incentive stock options ("nonqualified stock options") under Section 422 of the Internal Revenue Code of 1986, as amended ("Code"). 2. ADMINISTRATION OF PLAN (a) The Board of Directors shall appoint and maintain as administrator of this Plan the Compensation Committee (the "Committee") which shall consist of at least two members of the Board of Directors, each of whom shall be a "nonemployee director" within the meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Each member of the Committee shall serve at the pleasure of the Board of Directors of the Company ("Board"). (b) The Committee shall administer the Plan in accordance with its terms as in effect from time to time and shall have the power to determine all questions arising in connection with the administration, interpretation, and application of the Plan. The Committee is authorized to make any and all decisions and determinations as it may, in its discretion, determine to make under or with respect to the Plan. Any such decision or determination by the Committee shall be conclusive and binding upon all persons. The Committee may establish procedures, correct any defect, supply any information, or reconcile any inconsistency in such manner and to such extent as it shall deem necessary or advisable to carry out the purpose of the Plan. The Committee shall have all powers necessary or appropriate to accomplish its duties under the Plan. 2 (c) The Committee shall be charged with the duties of the general administration of the Plan, including, but not limited to, the following: (i) to determine all questions relating to the eligibility of key employees to participate or remain eligible to participate hereunder; (ii) to grant Options pursuant to this Plan; (iii) to interpret the provisions of the Plan and to make and publish such rules for regulation of the Plan as are not inconsistent with the terms hereof; and (iv) to assist any employee regarding his rights, benefits, or elections available under the Plan. (d) The Committee shall keep or cause to be kept all books of account, records, and other data (not including the general accounting records of the Company) that may be necessary for proper administration of the Plan. (e) All decisions and selections made by the Committee pursuant to the provisions of this Plan shall be made by a majority of its members. Any decision reduced to writing and signed by a majority of the members shall be fully effective as if it had been made by a majority at a meeting duly held. 3. DEFINITIONS. For purposes of this Plan, the following definitions shall apply: (a) "Affiliates" means any Parent of the Company and any Subsidiary of the Company within the meaning of Sections 424(e) and (f) of the Code, respectively. (b) "Cause" shall mean: (i) for an Optionee who is not a Senior Executive, an Optionee's actual fraud, gross negligence or willful or wanton misconduct in the course of his employment by the Company or any of its Affiliates; or (ii) for an Optionee who is a Senior Executive, a Senior Executive's (a) actual fraud, gross negligence or willful or wanton misconduct in the course of his employment by the Company or any of its Affiliates, (b) fraud, embezzlement or other material dishonesty with respect to the Company or -2- 3 any of its Affiliates, (c) conviction of, or a plea of nolo contendere to, a felony, (d) conduct that is materially harmful to the business, interest or reputation of the Company, (e) intentional failure to comply with any material instructions of the Board contained in a duly adopted resolution of the Board, or (f) failure to devote, other than by reason of disability, such of the Senior Executive's entire time, attention, business judgment, skill, energies and business efforts to his duties as an executive of the Company as are reasonably necessary to carry out his duties. (c) "Common Stock" shall mean the common stock of the Company, par value $0.01 per share. (d) "Senior Executive" shall mean any of the senior executive officers of the Company identified in a specific resolution of the Committee to be included within the definition of this term. (e) "Senior Executive Termination" shall mean (i) a Senior Executive's permanent disability, as determined in the sole discretion of the Committee, or death, (ii) the termination of a Senior Executive's employment by the Company for reasons other than for Cause, or (iii) a Senior Executive's voluntary termination of employment within 90 days after a significant diminution of both the Senior Executive's responsibility and base salary by the Company. (f) "Fair Market Value" shall be determined as follows: First, determine the average (mean) price for each of the thirty days preceding the date of determination on which the Common Stock traded as follows: (i) the reported "high" and "low" sales price of the Common Stock as reported in The Wall Street Journal's American Stock Exchange Composite Transactions listing (corrected for obvious typographical errors), (ii) if the Common Stock is not reported in such listing, then the reported "high" and "low" sales prices on the largest national securities exchange (based on the aggregate dollar value of securities listed) on which the Common Stock is listed or traded, (iii) if the Common Stock is not listed or traded on any national securities exchange, then the reported "high" and "low" sales prices for the Common -3- 4 Stock in the over-the-counter market, as reported on the National Association of Securities Dealers Automated Quotations System, or, (iv) if such prices shall not be reported thereon, the closing bid and asked prices so reported, or, if such prices shall not be reported, then the closing bid and asked prices reported by the National Quotation Bureau Incorporated; Second, the relevant thirty-day average determined pursuant to clause (i), (ii), (iii) or (iv) above shall then be multiplied by the total number of shares of Common Stock traded on each date used to determine such average (the "Value of Shares Traded Daily"); and Third, the Value of Shares Traded Daily for each of the thirty days shall be added together and the sum shall be divided by the total number of shares of Common Stock traded during the thirty days, which result shall be the Fair Market Value. 4. DESIGNATION OF PARTICIPANTS. The persons eligible for participation in this Plan as recipients of Options shall be such key employees of the Company or its Affiliates as designated by the Committee. A person who has been granted an Option hereunder ("Optionee") may be granted an additional Option or Options, if the Committee shall so determine. 5. STOCK RESERVED Subject to adjustment as provided in Section 10, a total of 8,000,000 shares ("Stock") of Common Stock shall be subject to this Plan. The shares of Stock subject to this Plan shall consist of unissued shares or previously issued shares reacquired and held by the Company and such number of shares shall be and is hereby reserved for sale for such purpose. Any of such shares which may remain unsold and which are not subject to outstanding Options at the expiration of this Plan shall cease to be reserved for the purpose of this Plan, but until termination of this Plan and the expiration, exercise or lapse of all Options granted hereunder, the Company shall at all times reserve a sufficient number of shares to meet the requirements of this Plan. Should any Option expire or be canceled prior to its exercise, the shares theretofore subject to such Option may again be subject to an Option under this Plan. -4- 5 6. OPTION PRICE The purchase price of each share of Stock subject to an Option granted under this Plan prior to September 17, 1996 shall be $0.40. The purchase price of each share of Stock subject to an Option granted under this Plan after September 17, 1996 shall be determined by the Committee prior to granting the Option, which may be any amount the Committee shall determine in its sole discretion. 7. OPTION AND SALE PERIOD No Options may be granted after December 31, 1997. Each Option granted under this Plan shall terminate and be of no force and effect with respect to any Stock not purchased upon exercise by the Optionee upon the expiration of ten years from the date of granting of such Option or such earlier date as the Committee, in its sole discretion, may prescribe at the date of grant. In addition, any Stock purchased upon exercise of an Option but unable to be sold pursuant to the terms of this Plan before the expiration of ten years from the date of granting of the Option under which such Stock was purchased shall be repurchased by the Company at the purchase price paid per share by the Optionee as soon as practicable after such expiration date. 8. VESTING OF OPTIONS. Each Option granted under this Plan shall be evidenced by an agreement, in a form approved by the Committee, which shall be subject to the express terms and conditions stated in this Plan and to such other terms and conditions as the Committee may deem appropriate, including, but not limited to terms and conditions related to the ability of an Optionee to exercise an Option and sell any Stock purchased upon exercise of an Option. The Committee may provide in the option agreement that an Option may be exercised in whole, immediately, or is to be exercisable in increments. As of September 17, 1996, all options outstanding under this Plan shall be fully vested and exercisable, subject to approval of such vesting by the stockholders of the Company at any time prior to September 17, 1997. All Options granted subsequent to September 17, 1996 shall be fully vested and exercisable upon grant. 9. EXERCISE OF OPTIONS. (a) Options may be exercised solely by the Optionee during his lifetime or after his death by the person or persons entitled thereto under his will or the laws of descent and distribution. -5- 6 (b) In the event of termination of employment of an Optionee (other than in the case of a Senior Executive Termination) for any reason other than death or permanent disability, an Option may be exercised only with respect to the number of shares of Stock that could be sold (pursuant to Section 12 hereof) and any Options with respect to shares of Stock that could not be sold (pursuant to Section 12) at that time shall lapse, unless the Committee shall otherwise approve on a case by case basis; provided, that if the termination of employment was for Cause, all Options held by such Optionee shall be forfeited upon the termination of employment, and no exercise of the Option shall be permitted; and provided further, that if the termination was not for Cause, the Optionee must exercise the Options (and such exercise may be made only to the extent that the underlying Stock may be sold pursuant to Section 12) within 60 days of the termination of employment at which time any unexercised Options shall be forfeited, unless the Committee shall otherwise approve on a case by case basis. Whether or not a termination of employment is for Cause shall be determined in the sole discretion of the Committee. (c) In the event of the death or permanent disability (whether or not someone is permanently disabled shall be determined in the sole discretion of the Committee) of an Optionee (other than a Senior Executive) following the date of grant of any Option and while in the employ of the Company or any of its Affiliates, and while Options granted hereunder are still in force and unexpired under the terms of Section 7, the entire Option (except for the portion of the Option for which shares of Stock subject to the Option held by such Optionee could, if the Option had been exercised, be sold at such time due to the provisions of Section 12) shall be forfeited except for a portion of the Option to acquire a number of shares of Stock equal to AxB, where: A = the number of shares of Stock subject to the Option granted to the Optionee that, if the Option had been exercised by the Optionee prior to his death or permanent disability, could not have been sold pursuant to Section 12 B = the number of months elapsed (but not greater than 60) from January 1, 1993, until Optionee's death or permanent disability divided by 60. (d) The purchase price of the shares of Stock as to which an Option is exercised shall be paid in full at the time of the exercise. Such purchase price shall be payable in cash (including certified check, bank draft and postal or express money order payable to the order of the Company). -6- 7 The Committee may, in its discretion and to the extent permitted by the laws of the State of Delaware, determine to permit the holder of an Option to satisfy the purchase price of the shares as to which an Option is exercised by delivery of the Option holder's promissory note, such note to be subject to such terms and conditions as the Committee may determine. The Committee may, in its discretion and to the extent permitted by the laws of the State of Delaware, determine to cause the Company to lend to the holder of an Option funds, on such terms and conditions as the Committee may determine to be appropriate, sufficient for the holder of an Option to pay the purchase price of the shares as to which an Option is to be exercised. No holder of an Option shall be, or have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares shall have been issued by the Company to such holder. (e) Within 60 days of a Senior Executive Termination, the Company will provide to the Senior Executive an offer to pay the Senior Executive an amount payable in cash in exchange for the Senior Executive's relinquishment of all of such Senior Executive's Options. Within 30 days of the Senior Executive's receipt of the Company's offer, the Senior Executive, or his heirs or legal representatives in the event of death or disability, must exercise one of the following alternatives: (i) Accept the Company's offer and relinquish the Senior Executive's Options for the cash amount offered; or (ii) In lieu of purchasing the shares of Stock subject to purchase under the Options, relinquish the Options for a number of shares of Common Stock to be determined as follows: the number of shares of Common Stock issuable pursuant to such relinquishment shall be a number equal to the quotient obtained by dividing the Appreciated Value by the Stock Value (both as defined below); or (iii) Continue to hold the Options and exercise them prior to the earlier of five years from the date of the Senior Executive Termination or such earlier date as the period for exercise of the Options would end pursuant to the terms of the Plan. As used in this Section 9, "Appreciated Value" shall mean the excess of (i) the Stock Value times the number of shares of Common Stock covered by the Options over (ii) the purchase price for each share specified in such Options times the number of shares of Common Stock -7- 8 covered by the Options. As used in this Section 9, "Stock Value" of a share of Common Stock shall mean (i) on a consolidated basis, the sum of (x) the Company's earnings before interest, taxes, depreciation and amortization for the four reported fiscal quarters prior to the date of the Senior Executive Termination (the "Period") multiplied by 6, plus (y) the Company's average cash during the Period, minus (z) the Company's average debt during the Period, (ii) divided by the average number of shares of Common Stock outstanding during the Period. 10. STOCK DIVIDENDS, STOCK SPLITS AND CERTAIN OTHER CORPORATION TRANSACTIONS (a) The existence of this Plan and Options granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures or preferred or preference stocks ranking prior to or affecting the Common Stock or the rights attendant thereto, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of the Company's assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. (b) The shares with respect to which Options may be granted hereunder are shares of Common Stock of the Company as presently constituted. If, and whenever, prior to the delivery by the Company of all of the shares of the Stock which are subject to Options granted hereunder, the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, a stock split, a combination of shares, a recapitalization or other increase or reduction of the number of shares of Common Stock outstanding without receiving consideration therefor in money, services or property, the number of shares of Stock available under this Plan and the number of shares of Stock with respect to which Options granted hereunder may thereafter be exercised shall (i) in the event of an increase in the number of outstanding shares, be proportionately increased, and the cash consideration payable per share shall be proportionately reduced, and (ii) in the event of a reduction in the number of outstanding shares, be proportionately reduced, and the cash consideration payable per share shall be proportionately increased. (c) If the Company is reorganized, merged or consolidated or is otherwise a party to a plan of exchange with another corporation pursuant to which reorganization, merger, consolidation or plan of exchange the holders of Common Stock receive any -8- 9 shares of Common Stock or other securities or if the Company shall distribute ("Spin Off") securities of another corporation to the holders of Common Stock, there shall be substituted for the shares subject to the unexercised portions of outstanding Options an appropriate number of shares of (i) each class of stock or other securities which were distributed to the holders of Common Stock in respect of such shares in the case of a reorganization, merger, consolidation or plan of exchange, or (ii) in the case of a Spin Off, the securities distributed to the holders of Common Stock together with shares of Stock; provided, however, that all such Options may be canceled by the Company as of the effective date of (x) a reorganization, merger, consolidation, plan of exchange or Spin Off or (y) any dissolution or liquidation of the Company, by giving notice to each holder thereof or his personal representative of its intention to do so and by permitting the purchase for a period of at least thirty days during the sixty days next preceding such effective date of all of the shares subject to such outstanding exercisable Options; and provided further that in the event of a Spin Off, the Company may, in lieu of substituting securities or accelerating and canceling Options as contemplated above, elect (i) to reduce the purchase price for each share of Stock subject to an outstanding Option by an amount equal to the fair market value (as determined by the Board) of the securities distributed in respect of each outstanding share of Common Stock in the Spin Off or (ii) to reduce proportionately the purchase price per share and to increase proportionately the number of shares of Stock subject to each Option in order to reflect the economic benefits inuring to the holders of Stock as a result of the Spin Off. (d) Except as hereinbefore expressly provided the issue by the Company of shares of stock of any class, or securities convertible into or exchangeable for shares of stock of any class, for cash or property, or for labor or services, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into or exchangeable for shares of stock of any class shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to Options granted hereunder. 11. PURCHASE FOR INVESTMENT Unless the Options and shares of Stock covered by this Plan have been registered under the Securities Act of 1933, as amended, or the Company has determined that such registration is unnecessary, each person exercising an Option under this Plan may be required by the Company to give a representation in writing that he is acquiring such shares for his -9- 10 own account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof. 12. SALE OF COMMON STOCK AFTER EXERCISE OF OPTION. Upon the exercise of an Option by an Optionee in accordance with Section 9(d) of this Plan, the Company shall deliver to the Optionee certificates for the number of shares of Common Stock with respect to which such Option has been so exercised, issued in the name of the Optionee; provided, however, that such delivery shall be deemed effected for all purposes when a stock transfer agent of the Company shall have deposited such certificates in the United States mail, addressed to the Optionee at the Optionee's last known address. Once delivery of the shares of Common Stock have been deemed delivered to the Optionee, the Optionee may sell, pledge, hypothecate or otherwise encumber (for purposes of this Plan, any such act referred to as a "sale" or being "sold") such shares of Common Stock purchased through the exercise of an Option only as follows: (a) Persons Entitled to Sell. Stock may be sold solely by the Optionee during his lifetime or after his death by the person or persons entitled thereto under his will or the laws of descent and distribution. (b) Secondary Offering. Upon the consummation of each underwritten public offering of Common Stock pursuant to a registration statement wherein the aggregate net proceeds (after deducting all costs, discounts, commissions and other expenses of the offering) to the Company's stockholders are at least $10,000,000 ("Secondary Offering"), then: (i) a percentage of all Stock subject to this Plan (on a pro rata basis per Option granted under this Plan) shall be able to be sold equal to a ratio determined by the number of shares of Common Stock sold in the Secondary Offering divided by the number of outstanding shares of Common Stock, on a fully diluted basis, existing prior to the Secondary Offering; and (ii) regardless of any previous ability to sell due to a previous offering under this clause (b), a percentage of all remaining shares of Stock shall be able to be sold on the last day of each month from the effective date of the Secondary Offering until December 1997 equal to the number of months that have elapsed since the effective date of the registration statement divided by the total number of months between the effective date of the registration statement and December 31, 1997; provided, that if no Secondary Offering -10- 11 has occurred prior to December 31, 1997, all shares of Stock shall be able to be sold upon the consummation of any Secondary Offering occurring after such date. (c) Private Sale of Common Stock. Upon each transfer or series of related transfers in a private transaction which would have the effect of transferring to any transferee or group (as defined for purposes of Section 13(d)(3) of the Exchange Act of persons beneficial ownership (as defined in Rule 13(d)(3) of the Exchange Act) of a number of shares of Common Stock that, in the aggregate is equal to or greater than 10% of the then outstanding shares of Common Stock on a fully diluted basis, a number of shares of all Stock subject to this Plan (on a pro rata basis per Option granted under this Plan) shall be able to be sold equal to the number of shares of Common Stock transferred multiplied by 9%; provided, however, that shares of Stock purchased or purchasable through the exercise of an Option may not be sold by the Optionee upon any transfer to: (i) a person or entity who is the beneficial owner (as defined in Rule 13(d)(3) of the Exchange Act) of 5% or more of the Common Stock on the Effective Date (as defined below), or (ii) any person or entity controlling, controlled by or under common control with any person or entity who is the beneficial owner of 5% or more of the Common Stock on the Effective Date. For purposes of this clause (ii), "control" (including the terms "controlling," "controlled by" and "under common control with") shall mean the direct or indirect possession of the power to direct or cause the direction of the management and policies of a person or entity, whether through the ownership of voting securities, by contract or otherwise. (d) Asset Sale. Upon the sale of all or substantially all of the assets of the Company or its subsidiary E-Z Serve Convenience Stores, Inc. (or whichever Affiliated subsidiary holds substantially all of the assets related to the Company's convenience store business), 100% of the Stock purchased or purchasable through the exercise of an Option may be sold by the Optionee. (e) Senior Executive Termination. Upon a Senior Executive Termination, 100% of the applicable Senior Executive's Stock purchased through the exercise of an Option may be sold by such Senior Executive without restriction under this Plan. -11- 12 (f) Termination other than Senior Executive Termination. In the event of termination of employment of an Optionee (other than in the case of a Senior Executive Termination) for any reason other than death or permanent disability, Stock purchased upon exercise of an Option may be sold only with respect to the number of shares of Stock able to sold at the time of such termination pursuant to Sections 12(b), (c) or (d). Any shares of Stock purchased upon exercise of an Option and not able to be sold at the time of termination shall be repurchased by the Company at the purchase price paid per share by such Optionee as soon as practicable, unless the Committee shall otherwise approve on a case by case basis; provided, that if the termination of employment was for Cause, all shares of Stock held by such Optionee shall be purchased by the Company at the purchase price paid per share by such Optionee as soon as practicable and no sale of the Stock to anyone other than the Company shall be permitted. Whether or not a termination of employment is for Cause shall be determined in the sole discretion of the Committee. (g) Death or Disability. In the event of the death or permanent disability (whether or not someone is permanently disabled shall be determined in the sole discretion of the Committee) of an Optionee (other than a Senior Executive) following the date of grant of any Option and while in the employ of the Company or any of its Affiliates, and prior to such time as 100% of the Stock may be sold, the Company shall repurchase any shares of Stock purchased by an Optionee upon exercise of an Option that are unable to be sold due to the provisions of Section 12, at the purchase price paid per share by such Optionee as soon as practicable except for such number of shares of Stock equal to CxD, where: C = the number of shares of Stock subject to the Option purchased by the Optionee that were not able to be sold by the Optionee prior to his death or permanent disability due to the provisions of Section 12 D = the number of months elapsed (but not greater than 60) from January 1, 1993, until Optionee's death or permanent disability divided by 60. Any shares of Stock that are unable to be sold and may be retained by the Optionee in accordance with this clause (g) shall continue to be subject to the limitation on the ability to sell such shares of Stock in accordance with the provisions of this Plan while held by the persons entitled thereto in clause (a) of this Section 12. 13. LEGEND. All certificates representing Stock issued upon exercise of Options shall be endorsed on the reverse side thereof substantially as follows: -12- 13 BY THE TERMS OF THE AMENDED AND RESTATED 1994 STOCK OPTION PLAN OF THE COMPANY, CERTAIN RESTRICTIONS HAVE BEEN PLACED UPON THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE. THE COMPANY WILL FURNISH A COPY OF SUCH PLAN TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE. The Company shall also inform the transfer agent of the Common Stock to place stop transfer instructions with respect to such shares of Stock in the Common Stock transfer records for such purpose. Upon the occurrence of any event listed in Section 12, an Optionee may request the Company and the transfer agent for the Common Stock to remove such legend from the certificate representing the applicable number of shares of Stock. 14. TAXES The Company may make such provisions as it may deem appropriate for the withholding of any taxes which it determines is required in connection with any Options granted under this Plan. 15. EFFECTIVE DATE OF PLAN This Plan shall be effective as of February 9, 1994 ("Effective Date"). 16. AMENDMENT OR TERMINATION The Board of Directors may amend, alter or discontinue this Plan, except that no amendment or alteration shall be made which would impair the rights of any Optionee under any Option theretofore granted, without his consent, and except that no amendment or alteration shall be made which, without the approval of the stockholders, would: (a) Increase the total number of shares reserved for the purposes of this Plan or decrease the Option price provided for in Section 6, except in each case as provided in Section 10, or change the class of employees eligible to participate in this Plan as provided in Section 4; (b) Extend the Option period provided for in Section 7; (c) Materially increase the benefits accruing to Optionees under this Plan; or -13- 14 (d) Materially modify the requirements as to eligibility for participation in this Plan. 17. GOVERNMENT REGULATIONS This Plan, and the grant and exercise of Options thereunder, and the obligation of the Company to sell and deliver shares under such Options, shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. 18. STOCKHOLDER APPROVAL. All Options granted under this Plan are subject to, and may not be exercised before, the approval of this Plan at the 1994 Annual Meeting of Stockholders, or at a special meeting of stockholders called for that purpose prior to the 1994 Annual Meeting, by the affirmative vote of the holders of a majority of the outstanding shares of the Company present, or represented by proxy, and entitled to vote thereat, or by the written consent of the holders of a majority of the outstanding shares of the Company entitled to vote; provided that if such approval by the stockholders of the Company is not forthcoming, all Options previously granted under this Plan shall be void. 19. NOT A CONTRACT. The Plan shall not be deemed to constitute a contract between the Company and any employee or to be a consideration or an inducement for the employment of any employee. No part of any employee's payments under the Plan shall be used as a basis for calculation of retirement or any other benefits to which such employee might be entitled under any other benefit plans which are or may in the future be in place at the Company. Nothing contained in the Plan shall be deemed to give any employee the right to be retained in the service of the Company or to interfere with the right of the Company to discharge any employee at any time regardless of the effect which such discharge shall have upon him as a participant of the Plan. 20. INDEMNIFICATION. In the event any claim, suit or proceeding is brought regarding the Plan established hereunder to which the Committee, or any member thereof, or any person or agent acting for or at the instruction or request of the Committee, may be a party, the Committee and such members, persons or agents shall be entitled to be reimbursed by the Company for any and -14- 15 all costs, attorney's fees, and other expenses pertaining thereto incurred by them for which they shall have become liable. 21. COMPANY RECORDS. No person shall, as a result of the existence of the Plan or such person's participation therein, be entitled to review or have access to the Company's books and records. 22. MISCELLANEOUS. The headings of the Sections herein are inserted only for convenience of reference and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. Any reference herein to the masculine gender includes the feminine gender and any singular or plural reference includes the other where the context requires. ATTEST: E-Z SERVE CORPORATION /s/ JOHN T. MILLER By: /s/ NEIL H. McLAURIN - ---------------------------------- ------------------------------- John T. Miller Neil H. McLaurin Senior Vice President President -15- EX-4.3.1 9 REGISTRATION RIGHTS AGREEMENT - 03/25/92 1 EXHIBIT 4.3.1 REGISTRATION RIGHTS AGREEMENT This AGREEMENT (the "Agreement") is made as of March 25, 1992 by and among E-Z SERVE CORPORATION, a Delaware Corporation (the "Company") and the investors listed on Exhibit A hereto, (the "Investors"). WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Company and the Investors have entered into a Series B Convertible Preferred Stock Purchase Agreement dated the date hereof (the "Purchase Agreement") in connection with the issuance and sale of certain shares of Series B Convertible Preferred Stock of the Company (the "Shares"); WHEREAS, each Share issued in accordance with the Purchase Agreement is convertible into the number of shares of Common Stock, $.01 par value (the "Common Stock"), of the Company as set forth in the Certificate of Designation of the Company attached to the Purchase Agreement as Exhibit B; and WHEREAS, it is a condition to the purchase of the Shares pursuant to the Purchase Agreement that the Company and the Investors enter into this Agreement; NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. Registration Rights. 1.1 Definitions. (a) The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act of 1933, as amended (the "1933 Act"), and the automatic effectiveness or the declaration or ordering of effectiveness of such registration statement or document; (b) The term "Registrable Securities" means (1) the Common Stock issued or issuable the conversion of the Shares and (2) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right, or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such securities described in (1) of this paragraph; provided, however, that any shares previously sold to the public pursuant to a registered public offering or pursuant 2 to an exemption from the registration requirements of the 1933 Act shall cease to be Registrable Securities; (c) The number of shares of "Registrable Securities then outstanding" shall be determined by adding the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which upon issuance would be, Registrable Securities; (d) The term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.11 hereof; (e) The terms "Form S-3," "Form S-4" and "Form S-8"mean such respective forms under the 1933 Act as in effect on the date hereof or any successor registration forms to Form S-3, Form S-4 and Form S-8, respectively, under the 1933 Act subsequently adopted by the Securities and Exchange Commission ("SEC"). 1.2 Request for Registration. (a) If the Company shall receive at any time a written request from the Holders of at least 50% of the Registrable Securities then outstanding and entitled to registration rights under this Section 1 (the "Initiating Holders") that the Company effect the registration under the 1933 Act of the lesser of (i) 20% of the Registrable Securities then outstanding or (ii) the number of Registrable Securities whose aggregate offering price is expected to be at least $3,000,000, then the Company shall, within five days of the receipt thereof, give written notice of such request to all Holders and shall, subject to the limitations of this Section 1.2, use its best efforts to effect such a registration as soon as practicable and in any event to file within 120 days of the receipt of such request a registration statement under the 1933 Act covering all the Registrable Securities which the Holders shall in writing request (given within 20 days of receipt of the notice given by the Company pursuant to this Section 1.2(a)) to be included in such registration and to use its best efforts to have such registration statement become effective. (b) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company's part of their request made pursuant to this Section 1.2 and the Company shall include such information in the written notice referred to in subsection 1.2(a). In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.4(d)) enter into an underwriting agreement -2- 3 in customary form with the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders after consultation with the Company: provided, however, that the consent of the Company is not required. Notwithstanding any other provision of this Section 1.2, if, in the case of a registration requested pursuant to Section 1.2(a), the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated pro rata among all Holders thereof desiring to participate in such underwriting (according to the number of Registrable Securities then held by each Holder). No Registrable Securities requested by a Holder to be included in a registration pursuant to Section 1.2(a) shall be excluded from the underwriting unless all securities other than Registrable Securities are first excluded. (c) The Company is obligated to effect only one registration pursuant to Section 1.2(a). (d) Notwithstanding the foregoing, (i) the Company shall not be obligated to effect the filing of a registration statement pursuant to this Section 1.2 during the six months following the effective date of a registration statement pertaining to the underwritten public offering of securities for the account of the Company, or (ii) if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2 a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would not be in the best interests of the Company and its stockholders generally for such registration statement to be filed, the Company shall have the right to defer such filing for a period of not more than 90 days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize the right set forth in this subsection (d)(ii) more than once in any twelve-month period. 1.3 Company Registration. If (but without any obligation to do so) the Company proposes to register(including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its capital stock or other securities under the 1933 Act in connection with the public offering of such securities solely for cash (other than a registration on Form S-8 , or a registration on Form S-4 or any successor form), the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of any Holder given within 20 days after mailing of such notice by the Company the Company shall, subject to the provisions of Section 1.7, use its best efforts to cause a registration statement covering all of the Registrable Securities that each such Holder has requested to be registered to become effective under the 1933 Act. The Company shall be under no obligation to complete any offering of its securities it proposes to make and shall incur no liability to any Holder for its failure to do so. -3- 4 1.4 Obligations of the Company. Whenever required under this Section 1 to use its best efforts to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to 180 days or until the Holders have informed the Company in writing that the distribution of their securities has been completed; and shall: (a) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement, and use its best efforts to cause each such amendment to become effective, as may be necessary to (comply with the provisions of the 1933 Act with respect to the disposition of all securities covered by such registration statement. (b) Furnish to the Holders such reasonable number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the 1933 Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (c) Use its best efforts to register or qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Molders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or Jurisdiction. (d) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement, including furnishing any opinion of counsel or entering into a lock-up agreement reasonably requested by the managing underwriter. (e) Notify each Holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto covered by such registration statement is required to be delivered under the 1933 Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and promptly file such amendments and supplements which may be required pursuant to subparagraph (b) of this Section 1.4 on account of such event and use its best efforts to cause each such amendment and supplement to become effective. -4- 5 (f) Furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 1, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 1, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given by company counsel to the underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities, if any, and (ii) a letter dated such date, from the independent certified public accountant of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities. (g) Apply for listing and use its best efforts to list the Registrable Securities, if any, being registered on any national securities exchange on which a class of the Company's equity securities is listed or, if the Company does not have a class of equity securities listed on a national securities exchange, apply for qualification and use its best efforts to qualify the Registrable Securities, if any, being registered for inclusion on the automated quotation system of the National Association of Securities Dealers, Inc. 1.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 in respect of the Registrable Securities of any selling Holder that such selling Holders, if any, shall furnish to the Company such information regarding themselves, the Registrable Securities held by them, and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities. 1.6 Expenses of Demand Registration. All expenses other than underwriting discounts and commissions relating to Registrable Securities incurred in connection with each registration, filings or qualifications pursuant to Section 1.2(a) and each registration in any six-month period, filing or qualification pursuant to Section 1.10, including (without limitation) all registration, filing and qualification fees, printing and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of one counsel for the selling Holders shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2(a) if the registration request is subsequently withdrawn at any time at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 1.2(a); provided further, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders of a majority of the Registrable Securities -5- 6 then outstanding at the time of their request that makes the proposed offering unreasonable in the good faith judgment of a majority in interest of the Holders of the Registrable Securities then the Holders shall not be required to pay any of such expenses and the right to one demand registration pursuant to Section 1.2(a) shall not be forfeited. Underwriting discounts and commissions relating to Registrable Securities will be borne and paid ratably by the Holders of such Registrable Securities. 1.7 Underwriting Requirements. In connection with any offering involving an underwriting of securities being issued by the Company, the Company shall not be required under Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it, and then only in such quantity, if any, as will not, in the opinion of the underwriters, jeopardize the success of the offering by the Company. If the managing underwriter for the offering shall advise the Company in writing that the total amount of securities, including Registrable Securities, requested by shareholders to be included in such offering exceeds the amount of securities to be sold other than by the Company that can be successfully offered, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the managing underwriter believes will not jeopardize the success of the offering, provided, however, that the number of Registrable Securities to be included in the offering shall not be reduced unless the securities to be included in such offering for the account of any person other than the Company are also reduced on a pro rata basis; provided, however, that in no event shall the amount of securities of the selling Holders included in the offering be reduced below 50% (fifty percent) of the total amount of securities included in such offering. For purposes of apportionment pursuant to this Section 1.7, for any selling shareholder which is a Holder of Registrable Securities and which is a partnership or a corporation, the partners, retired partners and shareholders of such holder, or the estates and family members of such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall collectively be deemed to be a 'selling shareholder', and any pro rata reduction with respect to such 'selling shareholder' shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such 'selling shareholder' as defined in this sentence. 1.8 Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 1: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the officers, directors, partners, agents and employees of each Holder, any underwriter (as defined in the 1933 Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the 1933 Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (a "Violation"): (i) any untrue statement or alleged untrue statement -6- 7 of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any state securities law or any rule or regulation promulgated under the 1933 Act, the 1934 Act or any state securities law. The Company will reimburse each such Holder, officer, director, partner, agent, employee, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action. The indemnity agreement contained in this subsection 1.8(a) shall not apply to amounts paid in settlement of any loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to a Holder in any such case for any such loss, claim, damage, liability, or action (i) to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by or on behalf of such Holder, underwriter or controlling person or (ii) in the case of a sale directly by a Holder of Registrable Securities (including a sale of such Registrable Securities through any underwriter retained by such Holder to engage in a distribution solely on behalf of such Holder), such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary prospectus and corrected in a final or amended prospectus, and such Holder failed to deliver a copy of the final or amended prospectus at or prior to the confirmation of the sale of the Registrable Securities to the person asserting any such loss, claim, damage or liability in any case where such delivery is required by the Securities Act. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the registration statement, each person, if any, who controls the Company within the meaning of the 1933 Act, each agent and any underwriter for the Company, and any other Holder selling securities in such registration statement or any of its directors, officers, partners, agents or employees or any person who controls such Holder or underwriter, against any losses, claims, damages, or liabilities (joint or several) to which the Company or any such director, officer, controlling person, agent, or underwriter or controlling person, or other such Holder or director, officer or controlling person may become subject, under the 1933 Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by or on behalf of such Holder expressly for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, agent or underwriter or controlling person, other Holder, officer, director, partner, -7- 8 agent, employee, or controlling person in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the liability of any Holder hereunder shall be limited to the amount of proceeds received by such Holder in the offering giving rise to the Violation; and provided further that the indemnity agreement contained in this subsection 1.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld nor, in the case of a sale directly by the Company of its securities (including a sale of such securities through any underwriter retained by the Company to engage in a distribution solely on behalf of the Company), shall the Molder be liable to the Company in any case in which such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary prospectus and corrected in a final or amended prospectus, and the Company failed to deliver a copy of the final or amended prospectus at or prior to the confirmation of the sale of the securities to the person asserting any such loss, claim, damage or liability in any case where such delivery is required by the 1933 Act. (c) Promptly after receipt by an indemnified party under this Section 1.8 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume and control the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests, as reasonably determined by either party, between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.8 to the extent of such prejudice, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.8. (d) The obligations of the Company, the Molders under this Section 1.8 shall survive the conversion, if any, of the Shares and the completion of any offering of Registrable Securities in a registration statement whether under this Section 1 or otherwise. 1.9 Reports Under Securities Exchange Act of 1934. With a view to making available to the Holders the benefits of Rule 144 and 144A promulgated under the 1933 Act and any other rule or regulation of the SEC that may at any time permit a Molder to sell securities of the Company to -8- 9 the public without registration, and with a view to making it possible for Holders to register the Registrable Securities pursuant to a registration on Form S-3, the Company agrees to: (a) use its best efforts to make and keep public information available, as those terms are understood and defined in Rule 144, at all times after 90 days after the effective date of the first registration statement filed by-the Company for the offering of its securities to the general public; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities; (c) use its best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act; (d) furnish to any Holder, so long as the Molder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or as to its qualification as a registrant whose securities may be resold pursuant to Form S-3 (at any time it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Molder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form; and (e) at all times during which the Company is neither subject to the reporting requirements of Section 13 or 15(d) of the 1934 Act, nor exempt from reporting pursuant to Rule 12g3-2(b) under the 1934 Act, provide in written form, upon the written request of any Holder, or a prospective purchaser of securities of the Company from such Molder, all information required by Rule 144A(d)(4)(i) of the General Regulations promulgated by the SEC under the 1933 Act ("144A Information"); the Company further agrees, upon written request, to cooperate with and assist any Holder or any member of the National Association of Securities Dealers, Inc. system for Private Offerings Resales and Trading through Automated Linkages ("PORTAL") in applying to designate and thereafter maintaining the eligibility of the Company's securities for trading through PORTAL. With respect to each Holder, the Company's obligations under this Section 1.10(e) shall at all times be contingent upon such Holder's obtaining from a prospective purchaser an agreement to take all reasonable precautions to safeguard the 144A Information from disclosure to anyone other than employees of the prospective purchaser who require access to the 144A Information for the sole purpose of evaluating its purchase of the Company's securities. -9- 10 1.10 Form S-3 Registration. In case the Company shall receive from any Holder or Holders a written request or requests that the Company effect a registration on Form S-3 (or on any successor form to Form S-3 regardless of its designation) and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will: (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (b) use its best efforts to effect, as soon as practicable, such registration, qualification or compliance as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within 20 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.10 if: (1) Form S-3 (or any successor form to Form S-3 regardless of its designation), is not available for such offering by the Holders: (2) the aggregate net offering price (after deduction of underwriting discounts and commissions) of the Registrable Securities specified in such request is not at least $500,000; (3) the Company has already affected one registration on Form S-3 within the previous six-month period (exclusive of registrations affected pursuant to Sections 1.2 or 1.3 hereof).; or (4) the Company shall furnish to the Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would not be in the best interests of the Company and its stockholders for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration for a period of not more than 90 days after receipt of the request of the Holder or Holders under this Section 1.10, provided, however, that the Company shall not utilize this right more than once in any twelve-month period. 1.11 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned by any Holder to (i) a transferee of at least 500 shares of Registrable Securities or some lesser number of Registrable Securities if such lesser number represents all of the Registrable Securities issued to such Holder, or (ii) to an affiliate, partner or stockholder of such Investor or transferee or an account managed or advised by the manager or adviser of such investor or transferee. 1.12 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company relating to registration rights unless such agreement includes: (a) to the extent the agreement would allow such holder or prospective holder -10- 11 to include such securities in any registration filed under Section 1.2 or 1.3 hereof, a provision that such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of its securities will not reduce the amount of the Registrable Securities of the Holders which would otherwise be included; (b) to the extent the agreement would allow such holder or prospective holder to include such securities in any registration effected pursuant to Section 1.2 or 1.3 hereof, a provision that the rights of such holder to participate in such registration shall permit participation on no greater level than that of the Holders; and (C) no provision which would allow such holder or prospective holder to make a demand registration which could result in such registration statement being declared effective prior to the earlier of the dates set forth in subsection 1.2(a) or within six months after the effective date of any registration effected pursuant to Section 1. 2. Miscellaneous. 2.1 Legend. Each certificate representing Registrable Securities shall state therein: THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF MARCH 25, 1992 BY AND AMONG THE CORPORATION AND THE INVESTORS NAMED THEREIN, A COPY OF WHICH IS ON| FILE AT THE OFFICES OF THE CORPORATION. 2.2 Notices. All notices, requests, consents and demands shall be in writing and shall be personally delivered, mailed, postage prepaid, telecopied or telegraphed, to the Company at: E-Z Serve Corporation 10700 North Interstate 45 Suite 500 Houston, Texas 77037 Telecopy: (713) 847-4739 Attn: Neil H. McLaurin with a copy to: Bracewell & Patterson, L.L.P. 2900 South Tower 711 Louisiana Street, Suite 2900 Houston, Texas 77002 Telecopy: (713) 221-1212 Attn: John L. Keffer, Esq. -11- 12 to each Investor at its address set out on Exhibit A hereto with a copy to: Larry Jordan Rowe, Esq. Ropes & Gray One International Place Boston, Massachusetts 02110 Telecopy: (617) 951-7050 and a copy to: Jeff Fromm, Esq. Intercontinental Mining & Resources Limited c/o Quadrant Management Inc. 127 East 73rd Street New York, New York 10021 Telecopy: (212) 439-9450 or such other address as may be furnished in writing to the other parties hereto. All such notices, requests, demands and other communication shall, when mailed (registered or certified mail, return receipt requested, postage prepaid), personally delivered, or telegraphed, be effective four days after deposit in the mails, when personally delivered, or when delivered to the telegraph company, respectively, addressed as aforesaid, unless otherwise provided herein and, when telecopied, shall be effective upon actual receipt. 2.3 Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the matters contemplated herein. This Agreement supersedes any and all prior understandings or agreements as to the subject matter of this Agreement. 2.4 Amendments, Waivers and Consents. Any provision in this Agreement to the contrary notwithstanding, changes in or additions to this Agreement may be made, and compliance with any covenant or provision herein set forth may be omitted or waived, if the Company (i) shall obtain consent thereto in writing from persons holding or having the right to acquire an aggregate of at least sixty-six and two-thirds percent (66 2/3%) of the aggregate of the Registrable Securities then outstanding and (ii) shall, in each such case, deliver copies of such consent in writing to any Holders who did not execute the same. 2.5 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the personal representatives, successors and assigns of the respective parties hereto. The Company shall not have the right to assign its obligations hereunder or any interest herein without obtaining the prior written consent of the Holders in accordance with Section 2.4. -12- 13 2.6 General. The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. In this Agreement the singular includes the plural, the plural, the singular, the masculine gender includes the neuter, masculine and feminine genders. This Agreement shall be governed by and construed under the laws of the State of Texas. 2.7 Severability. If any provisions of this Agreement shall be found by any court of competent jurisdiction to be invalid or unenforceable, the parties hereby waive such provision to the extent that it is found to be invalid or unenforceable. Such provision shall, to the maximum extent allowable by law, be modified by such court so that it becomes enforceable, and, as modified, shall be enforced as any other provision hereof, all the other provisions hereof continuing in full force and effect. 2.8 Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute one and the same instrument. 2.9 Specific Performance. The Company recognizes that the rights of the Holders under this Agreement are unique, and, accordingly, the Holders shall, in addition to such other remedies as may be available to them at law or in equity, have the right to enforce their rights hereunder by actions for injunctive relief and specific performance to the extent permitted by law. This Agreement is not intended to limit or abridge any rights of the Holders which may exist apart from this Agreement. -13- 14 IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly executed as of the date first above written. E-Z SERVE CORPORATION By: /s/ John T. Miller ------------------------------------- Name: John T. Miller Title: Senior Vice President INVESTORS PHEMUS CORPORATION By: /s/ Michael Eisenson ------------------------------------- Title: Authorized Signatory ---------------------------------- By: ------------------------------------- Title: Authorized Signatory ---------------------------------- INTERCONTINENTAL MINING & RESOURCES LIMITED By: /s/ Jeffrey A. Fromm ------------------------------------- Name: Jeffrey A. Fromm ----------------------------------- Title: Vice President ---------------------------------- -14- 15 EXHIBIT A INVESTORS Phemus Corporation 600 Atlantic Avenue, 26th Floor Boston, Massachusetts 02210 Telecopy: (617) 523-1063 Attn: Michael R. Eisenson Intercontinental Mining & Resources Limited c/o Quadrant Management, Inc. 127 East 73rd Street New York, New York 10021 Telecopy: (212) 439-9450 Attn: Alan G. Quasha EX-4.3.2 10 AMEND. TO REGISTRATION RIGHTS AGMT. - 07/31/92 1 EXHIBIT 4.3.2 AMENDMENT TO REGISTRATION RIGHTS AGREEMENT This Amendment to Registration Rights Agreement ("Amendment") is made as of July 31, 1992, by and among E-Z Serve Corporation, a Delaware Corporation (the "Company"), and Phemus Corporation, a Massachusetts corporation ("Phemus") and Intercontinental Mining & Resources Limited, a British Virgin Islands limited partnership ("IMR Limited"). WHEREAS, the Company, Phemus and IMR Limited entered into that certain Registration Rights Agreement dated as of March 25, 1992 (the "Agreement"); WHEREAS, the Company has issued to Phemus and IMR warrants (the "D Warrants") to purchase an aggregate of 30,000 shares of the Company's Series D Convertible Preferred Stock, par value $0.01 per share (the "Series D Preferred") and the D Warrants also provide for the issuance to Phemus and IMR of the Company's Common Stock, par value $0.01 per share; WHEREAS, the parties desire to amend the Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. Section 1.1(b) of the Agreement is hereby amended in its entirety to be as follows: (b) The term "Registrable Securities" means (1) the Common Stock issued or issuable upon the conversion of the Shares, (2) the Common Stock issued or issuable upon the exercise of the Warrants issued pursuant to that certain Warrant Purchase Agreement dated as of July 15, 1992, by and among the Company, Phemus, and Intercontinental Mining & Resources Incorporated, a British Virgin Islands corporation ("IMR Inc."), (3) the Common Stock issued or issuable upon the conversion of the Series D Preferred which is issued or issuable upon the exercise of the D Warrants, (4) the Common Stock issued or issuable pursuant to the D Warrants, and (5) any Common Stock of the Company issued (or issuable upon the conversion or exercise of any warrant, right, or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such securities described in (1), (2), (3) or (4) of this paragraph; provided, however, that any shares previously sold to the public pursuant to a registered public offering or 2 pursuant to an exemption from the registration requirements of the 1933 Act shall cease to be Registrable Securities; 2. Section 1.7 of the Agreement is hereby amended in its entirety to be as follows: 1.7 Underwriting Requirements. In connection with any offering involving an underwriting of securities being issued by the Company, the Company shall not be required under Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it, and then only in such quantity, if any, as will not, in the opinion of the underwriters, jeopardize the success of the offering by the Company. If the managing underwriter for the offering shall advise the Company in writing that the total amount of securities, including Registrable Securities, requested by shareholders to be included in such offering exceeds the amount of securities to be sold other than by the Company that can be successfully offered, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the managing underwriter believes will not jeopardize the success of the offering, provided, however, that the number of Registrable Securities to be included in the offering shall not be reduced unless the securities to be included in such offering for the account of any person other than the Company are also reduced on a pro rata basis provided, however, that in no event shall the amount of securities of (i) the selling Holders and (ii) any other parties pursuant to Section 1.7 of the Registration Rights Agreement dated July 31, 1992, between the Company and Tenacqco Bridge Partnership as in effect on the date hereof, included in the offering be reduced below 50% (fifty percent) of the total amount of securities included in such offering. For purposes of apportionment pursuant to this Section 1.7, for any selling Holder which is a partnership or a corporation, the partners, retired partners and shareholders of such Holder, or the estates and family members of such partners and retired partners and any trusts for the benefit of any of the foregoing persons, shall collectively with such Holder be deemed to be one 'selling Holder', and any pro rata reduction with respect to such 'selling Holder' shall be based upon the aggregate amount of shares carrying registration rights owned by entities and individuals included in such 'selling Holder', as defined in this sentence. 3. Exhibit A to the Agreement is hereby amended to include IMR Inc., and IMR Inc. will be considered an "Investor" for all -2- 3 purposes under the Agreement, entitled to all benefits and subject to all obligations thereunder as are other Investors. Except as expressly amended herein, the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date first above written. E-Z SERVE CORPORATION By: /s/ John T. Miller ---------------------------------------- Name: John T. Miller Title: Senior Vice President PHEMUS CORPORATION By: /s/ Michael Eisenson ---------------------------------------- Name: Michael Eisenson By: ---------------------------------------- Name: -------------------------------------- INTERCONTINENTAL MINING & RESOURCES LIMITED By: /s/ Jeffrey A. Fromm ---------------------------------------- Name: Jeffrey A. Fromm Title: Vice President -3- EX-4.3.3 11 2ND AMEND. TO REGISTRATION RIGHTS AGMT. - 04/21/93 1 EXHIBIT 4.3.3 SECOND AMENDMENT TO REGISTRATION RIGHTS AGREEMENT This Second Amendment to Registration Rights Agreement ("Amendment") is made as of April 21, 1993, by and between E-Z Serve Corporation, a Delaware Corporation (the "Company"), Phemus Corporation, a Massachusetts corporation ("Phemus"), Intercontinental Mining & Resources Incorporated, a British Virgin Islands corporation ("IMR"), and Quadrant Capital Corp., a Delaware corporation, formerly named Intercontinental Mining & Resources Limited ("QCC"). Phemus, IMR and QCC are referred to herein together as the "Investors." WHEREAS, the Company and the Investors entered into that certain Registration Rights Agreement dated as of March 25, 1992, as amended on July 31, 1992 (the "Agreement"); WHEREAS, the Company has issued to Phemus and IMR 105,820 and 94,180 shares, respectively, of the Company's Series F Convertible Preferred Stock, par value $0.01 per share (the "Series F Preferred") and the shares of Series F Preferred are convertible into shares of the Company's common stock, par value $0.01 per share ("Common Stock"); WHEREAS, the parties desire to amend the Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. Section 1.1(b) of the Agreement is hereby amended in its entirety to be as follows: (b) The term "Registrable Securities" means (1) the Common Stock issued or issuable upon the conversion of the Shares, (2) the Common Stock issued or issuable upon the conversion of the Series D Preferred which is issued or issuable upon the exercise of the D Warrants, (3) the Common Stock issued or issuable pursuant to the D Warrants, (4) the Common Stock issued or issuable upon 2 the conversion of the shares of the Company's Series F Convertible Preferred Stock issued to Phemus Corporation and Intercontinental Mining & Resources Incorporated on April 20, 1993, (5) the Common Stock issued or issuable upon the exercise of the warrants issued to Phemus Corporation and Intercontinental Mining & Resources Incorporated on April 20, 1993, and (6) any Common Stock of the Company issued (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such securities described in (1), (2), (3), (4) or (5) of this paragraph; provided, however, that any shares previously sold to the public pursuant to a registered public offering or pursuant to an exemption from the registration requirements of the 1933 Act shall cease to be Registrable Securities; Except as expressly amended herein, the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date first above written. E-Z SERVE CORPORATION By: /s/ John T. Miller -------------------------------- Name: John T. Miller Title: Senior Vice President PHEMUS CORPORATION By: /s/ Michael Eisenson -------------------------------- Name: Michael Eisenson By: -------------------------------- Name: ------------------------------ -2- 3 QUADRANT CAPITAL CORP. By: /s/ John Schoemer -------------------------------- Name: John Schoemer Title: Vice President INTERCONTINENTAL MINING & RESOURCES INCORPORATED By: /s/ John Schoemer -------------------------------- Name: John Schoemer Title: Attorney-in-Fact -3- EX-4.4.1 12 REGISTRATION RIGHTS AGREEMENT - 07/31/92 1 EXHIBIT 4.4.1 REGISTRATION RIGHTS AGREEMENT This Agreement (the "Agreement") is made as of July 31, 1992 by and among E-Z Serve Corporation, a Delaware corporation (the "Company"), and Tenacqco Bridge Partnership, a partnership formed under the laws of New York (the "Investor"). WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Company and the Investor have entered into an Amended and Restated Stock Purchase Agreement dated as of the date hereof (the "Amended Purchase Agreement") in connection with the issuance and sale of certain shares of (i) Common Stock, $ .01 par value (the "Common Stock") and (ii) Series E Convertible Preferred Stock and Series D Convertible Preferred Stock (together, the "Preferred Stock"), of the Company (collectively, the "Shares") and the issuance of certain Warrants, as defined below, in consideration of the contribution of funds by the Investor to the Company and the sale by the Investor to the Company of all of the Investor's interest in the TOC Securities (as defined in the Amended Purchase Agreement); WHEREAS, each share of Preferred Stock issued in accordance with the Amended Purchase Agreement is convertible into the number of shares of Common Stock of the Company set forth in the Certificate of Designation of the Preferred Stock; and WHEREAS, it is a condition to the purchase of the Shares pursuant to the Amended Purchase Agreement that the Company and the Investor enter into this Agreement; NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. Registration Rights. 1.1 Definitions. (a) The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act of 1933, as amended (the "1933 Act"), and the automatic effectiveness or the declaration or ordering of effectiveness of such registration statement or document; (b) The term "Registrable Securities" means (1) the shares of Common Stock issued pursuant to the Amended Purchase Agreement, (2) the Common Stock issued in exchange for the accrued but unpaid 2 dividends on TOC Retail, Inc.'s Series B Preferred Stock pursuant to the warrants to purchase the Company's Series D Convertible Preferred Stock ("Warrants") which are issued pursuant to the Amended Purchase Agreement (3) the Common Stock issued or issuable upon the conversion of the shares of Preferred Stock and (4) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right, or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such securities described in (1),(2), and (3) of this paragraph; provided, however, that any shares of Common Stock previously sold to the public pursuant to a registered public offering or pursuant to an exemption from the registration requirements of the 1933 Act shall cease to be Registrable Securities; (c) The number of shares of "Registrable Securities then outstanding" shall be determined by adding the number of shares of Common Stock outstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which upon issuance would be, Registrable Securities; (d) The term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.11 hereof; (e) The terms "Form S-3", "Form S-4" and "Form S-8" mean such respective forms under the 1933 Act as in effect on the date hereof or any successor registration forms to Form S-3, Form S-4 and Form S-8, respectively, under the 1933 Act subsequently adopted by the Securities and Exchange Commission ("SEC"). 1.2 Request for Registration. (a) If the Company shall receive at any time a written request from the Holders of at least 50% of the Registrable Securities then outstanding and entitled to registration rights under this Section 1 (the "Initiating Holders") that the Company effect the registration under the 1933 Act of not less than the lesser of (i) 20% of the Registrable Securities then outstanding or (ii) the number of Registrable Securities whose aggregate offering price is expected to be at least $3,000,000, then the Company shall, within five days of the receipt thereof, give written notice of such request to all Holders and shall, subject to the limitations of this Section 1.2, use its best efforts to effect such a registration as soon as practicable and in any event to file within 120 days of the receipt of such request a registration statement under the 1933 Act covering all the Registrable Securities which the Holders shall in writing request (such request to be made within 20 days of receipt -2- 3 of the notice given by the Company pursuant to this Section 1.2(a)) to be included in such registration and to use its best efforts to have such registration statement become effective. (b) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as part of their request made pursuant to this Section 1.2 and the Company shall include such information in the written notice referred to in subsection 1.2(a). In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.4(d)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders after consultation with the Company, provided, however, that the consent of the Company is not required. Notwithstanding any other provision of this Section 1.2, if, in the case of a registration requested pursuant to Section 1.2(a), the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated pro rata among all Holders thereof desiring to participate in such underwriting (according to the number of Registrable Securities then held by each Holder). No Registrable Securities requested by a Holder to be included in a registration pursuant to Section 1.2(a) shall be excluded from the underwriting unless all securities other than Registrable Securities are first excluded. (c) The Company is obligated to effect only one registration pursuant to Section 1.2(a). (d) Notwithstanding the foregoing, (i) the Company shall not be obligated to effect the filing of a registration statement pursuant to this Section 1.2 during the six months following the effective date of a registration statement pertaining to the underwritten public offering of securities for the account of the Company, or (ii) if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2 a certificate signed by the President of the Company stating that in the good -3- 4 faith judgment of the Board of Directors of the Company, it would not be in the best interests of the Company or its stockholders generally for such registration statement to be filed, the Company shall have the right to defer such filing for a period of not more than 90 days after receipt of the request of the Initiating Holders; provided, however, that the Company may not utilize the right set forth in this subsection (d)(ii) more than once in any twelve-month period. 1.3 Company Registration. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its capital stock or other securities under the 1933 Act in connection with the public offering of such securities solely for cash (other than a registration on Form S-8, or a registration on Form S-4 or any successor form), the Company shall, at such time, promptly give each Holder written notice of such registration but in no event less than 15 days before the anticipated filing date. Upon the written request of any Holder given within 20 days after mailing of such notice by the Company the Company shall, subject to the provisions of Section 1.7, use its best efforts to cause a registration statement covering all of the Registrable Securities that each such Holder has requested to be registered to become effective under the 1933 Act. The Company shall be under no obligation to complete any offering of its securities it proposes to make pursuant to this Section 1.3 and shall incur no liability to any Holder for its failure to do so. 1.4 Obligations of the Company. Whenever required under this Section 1 to use its best efforts to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible, prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to 180 days or until the Holders have informed the Company in writing that the distribution of their securities has been completed; and shall: (a) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement, and use its best efforts to cause each such amendment to become effective, as may be necessary to comply with the provisions of the 1933 Act with respect to the disposition of all securities covered by such registration statement. (b) Furnish to the Holders and each underwriter such reasonable number of copies of a prospectus, including a preliminary -4- 5 prospectus, in conformity with the requirements of the 1933 Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (c) Use its best efforts to (i) register or qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders and (ii) cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be reasonably necessary or advisable to enable the selling Holders to consummate the registration of their Registrable Securities; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such state or jurisdiction. (d) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement, including furnishing any opinion of counsel or entering into a lock-up agreement reasonably requested by the managing underwriter. (e) Notify each Holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto covered by such registration statement is required to be delivered under the 1933 Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing and promptly file such amendments and supplements which may be required pursuant to subparagraph (b) of this Section 1.4 on account of such event and use its best efforts to cause each such amendment and supplement to become effective. (f) Furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 1, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 1, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated -5- 6 such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given by company counsel to the underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities, if any, and (ii) a letter dated such date, from the independent certified public accountant of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities. (g) Apply for listing and use its best efforts to list the Registrable Securities, if any, being registered on any national securities exchange on which a class of the Company's equity securities is listed or, if the Company does not have a class of equity securities listed on a national securities exchange, apply for qualification and use its best efforts to qualify the Registrable Securities, if any, being registered for inclusion on the automated quotation system of the National Association of Securities Dealers, Inc. (h) After the filing of the registration statement, promptly notify the Holders of any stop order issued or threatened by the SEC and take all reasonable steps required to prevent the entry of such stop order and to remove it if entered. (i) Enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the registration of such Registrable Securities. 1.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 in respect of the Registrable Securities of any selling Holder that such selling Holders, if any, shall furnish to the Company such information regarding themselves, the Registrable Securities held by them, and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities. 1.6 Expenses of Demand Registration. All expenses other than underwriting discounts and commissions relating to Registrable Securities incurred in connection with each registration, filings or qualifications pursuant to Section 1.2(a) and each registration, filing or qualification pursuant to Section 1.10, including (without limitation) all registration, filing and qualification fees, printing and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of one counsel for the selling Holders shall be borne by the -6- 7 Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2(a) if the registration request is subsequently withdrawn at any time at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one demand registration pursuant to Section 1.2(a); provided further, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders of a majority of the Registrable Securities then outstanding at the time of their request that makes the proposed offering unreasonable in the good faith judgment of a majority in interest of the Holders of the Registrable Securities then the Holders shall not be required to pay any of such expenses and the right to one demand registration pursuant to Section 1.2(a) shall not be forfeited. Underwriting discounts and commissions relating to Registrable Securities will be borne and paid ratably by the Holders of such Registrable Securities. 1.7 Underwriting Requirements. In connection with any offering involving an underwriting of securities being issued by the Company, the Company shall not be required under Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it, and then only in such quantity, if any, as will not, in the opinion of the underwriters, jeopardize the success of the offering by the Company. If the managing underwriter for the offering shall advise the Company in writing that the total amount of securities, including Registrable Securities, requested by shareholders to be included in such offering exceeds the amount of securities to be sold other than by the Company that can be successfully offered, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the managing underwriter believes will not jeopardize the success of the offering, provided, however, that the number of Registrable Securities to be included in the offering shall not be reduced unless the securities to be included in such offering for the account of any person other than the Company are also reduced on a pro rata basis provided, however, that in no event shall the amount of securities of (i) the selling Holders and (ii) those parties pursuant to Section 1.7 of the Registration Rights Agreement dated March 25, 1992, between the Company and the Investors named therein, included in the offering be reduced below 50% (fifty percent) of the total amount of securities included in such offering. For purposes of apportionment pursuant to this Section 1.7, for any selling Holder which is a partnership or a corporation, the partners, retired partners and shareholders of such Holder, or the estates and family members of such partners and retired partners and any trusts for the benefit of any of the foregoing persons, shall collectively with such Holder be deemed to be one -7- 8 'selling Holder', and any pro rata reduction with respect to such 'selling Holder' shall be based upon the aggregate amount of shares carrying registration rights owned by entities and individuals included in such 'selling Holder', as defined in this sentence. 1.8 Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 1: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, the officers, directors, partners, agents and employees of each Holder, any underwriter (as defined in the 1933 Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934 Act"), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the 1933 Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any state securities law or any rule or regulation promulgated under the 1933 Act, the 1934 Act or any state securities law. The Company will reimburse each such Holder, officer, director, partner, agent, employee, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action. The indemnity agreement contained in this subsection 1.8(a) shall not apply to amounts paid in settlement of any loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to a Holder in any such case for any such loss, claim, damage, liability, or action (i) to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by or on behalf of such Holder, underwriter or controlling person or (ii) in the case of a sale directly by a Holder of Registrable Securities (including a sale of such Registrable Securities through any underwriter retained by such Holder to engage in a distribution solely on behalf of such Holder), -8- 9 such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary prospectus and corrected in a final or amended prospectus, and such Holder failed to deliver a copy of the final or amended prospectus at or prior to the confirmation of the sale of the Registrable Securities to the person asserting any such loss, claim, damage or liability in any case where such delivery is required by the Securities Act. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the registration statement, each person, if any, who controls the Company within the meaning of the 1933 Act, each agent and any underwriter for the Company, and any other Holder selling securities in such registration statement or any of its directors, officers, partners, agents or employees or any person who controls such Holder or underwriter, against any losses, claims, damages, or liabilities (joint or several) to which the Company or any such director, officer, controlling person, agent, or underwriter or controlling person, or other such Holder or director, officer or controlling person may become subject, under the 1933 Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by or on behalf of such Holder expressly for use in connection with such registration; and each such Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, controlling person, agent or underwriter or controlling person, other Holder, officer, director, partner, agent, employee, or controlling person in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the liability of any Holder hereunder shall be limited to the amount of proceeds received by such Holder in the offering giving rise to the Violation; and provided further that the indemnity agreement contained in this subsection 1.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld nor, in the case of a sale directly by the Company of its securities (including a sale of such securities through any underwriter retained by the Company to engage in a distribution solely on behalf of the Company), shall the Holder be liable to the Company in any case in which such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary prospectus and corrected in a final or amended prospectus, and the Company failed to deliver a copy of the final or amended prospectus at or prior to the confirmation of the sale of -9- 10 the securities to the person asserting any such loss, claim, damage or liability in any case where such delivery is required by the 1933 Act. (c) Promptly after receipt by an indemnified party under this Section 1.8 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.8, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume and control the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests, as reasonably determined by either party, between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.8 to the extent of such prejudice, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.8. (d) The obligations of the Company and the Holders under this Section 1.8 shall survive the conversion, if any, of the Shares of Preferred Stock and the completion of any offering of Registrable Securities in a registration statement whether under this Section 1 or otherwise. 1.9 Reports Under Securities Exchange Act of 1934. With a view to making available to the Holders the benefits of Rule 144 and 144A promulgated under the 1933 Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration, and with a view to making it possible for Holders to register the Registrable Securities pursuant to a registration on Form S-3, the Company agrees to: (a) use its best efforts to make and keep public information available, as those terms are understood and defined in Rule 144, at all times after 90 days after the effective date of the first -10- 11 registration statement filed by the Company for the offering of its securities to the general public; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities; (c) use its best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act; (d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company as to its compliance with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or as to its qualification as a registrant whose securities may be resold pursuant to Form S-3 (at any time it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form; and (e) at all times during which the Company is neither subject to the reporting requirements of Section 13 or 15(d) of the 1934 Act, nor exempt from reporting pursuant to Rule 12g3-2(b) under the 1934 Act, provide in written form, upon the written request of any Holder, or a prospective purchaser of securities of the Company from such Holder, all information required by Rule 144A(d)(4)(i) of the General Regulations promulgated by the SEC under the 1933 Act ("144A Information"); the Company further agrees, upon written request, to cooperate with and assist any Holder or any member of the National Association of Securities Dealers, Inc. system for Private Offerings Resales and Trading through Automated Linkages ("PORTAL") in applying to designate and thereafter maintaining the eligibility of the Company's securities for trading through PORTAL. With respect to each Holder, the Company's obligations under this Section 1.09(e) shall at all times be contingent upon such Holder's obtaining from a prospective purchaser an agreement to take all reasonable precautions to safeguard the 144A Information from disclosure to anyone other than employees of the prospective purchaser who require access to the 144A Information for the sole purpose of evaluating its purchase of the Company's securities. -11- 12 1.10 Form S-3 Registration. In case the Company shall receive from any Holder or Holders a written request or requests that the Company effect a registration on Form S-3 (or on any successor form to Form S-3 regardless of its designation) and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will: (a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (b) use its best efforts to effect, as soon as practicable, such registration, qualification or compliance as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within 20 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.10 if: (1) Form S-3 (or any successor form to Form S-3 regardless of its designation), is not available for such offering by the Holders; (2) the aggregate net offering price (after deduction of underwriting discounts and commissions) of the Registrable Securities specified in such request is not at least $500,000; (3) the Company has already effected one registration on Form S-3 within the previous six-month period (exclusive of registrations effected pursuant to Section 1.2 or 1.3 hereof); or (4) the Company shall furnish to the Holders a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would not be in the best interests of the Company or its stockholders generally for such Form S-3 registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration for a period of not more than 90 days after receipt of the request of the Holder or Holders under this Section 1.10, provided, however, that the Company shall not utilize this right more than once in any twelve-month period. 1.11 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned by any Holder to (i) a transferee of at least 500 shares of Registrable Securities or some lesser number of Registrable Securities if such lesser number represents all of the Registrable Securities issued to such Holder, or (ii) an affiliate, partner or stockholder of such Holder -12- 13 or such transferee or an account managed or advised by the manager or adviser of such Holder or such transferee. 1.12 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company relating to registration rights unless such agreement includes: (a) to the extent the agreement would allow such holder or prospective holder to include such securities in any registration filed under Section 1.2 or 1.3 hereof, a provision that such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of its securities will not reduce the amount of the Registrable Securities of the Holders which would otherwise be included; (b) to the extent the agreement would allow such holder or prospective holder to include such securities in any registration effected pursuant to Section 1.2 or 1.3 hereof, a provision that the rights of such holder to participate in such registration shall permit participation on no greater level than that of the Holders; and (c) no provision which would allow such holder or prospective holder to make a demand registration which could result in such registration statement being declared effective prior to the earlier of the dates set forth in subsection 1.2(a) or within six months after the effective date of any registration effected pursuant to Section 1. 2. Miscellaneous. 2.1 Legend. Each certificate representing Registrable Securities shall state therein: THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF JULY 31, 1992, BY AND BETWEEN THE CORPORATION AND THE INVESTOR NAMED THEREIN, A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE CORPORATION. 2.2 Notices. All notices, requests, consents and demands shall be in writing and shall be personally delivered, mailed, postage prepaid, telecopied or telegraphed, to the Company at: E-Z Serve Corporation Suite 500 10700 North Freeway Houston, Texas 77037 Telecopy: (713) 591-9884 Attn: Neil McLaurin -13- 14 with a copy to: Bracewell & Patterson 2900 South Tower Pennzoil Place Houston, Texas 77002 Telecopy: (713) 221-1212 Attn: John L. Keffer to the Investor at: DLJ Bridge Finance, L.P. 140 Broadway New York, New York 10005 Telecopy: (212) 504-4991 with a copy to: Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Telecopy: (212) 450-4800 Attn: Joseph Rinaldi or such other address as may be furnished in writing to the other parties hereto. All such notices, requests, demands and other communication shall, when mailed (registered or certified mail, return receipt requested, postage prepaid), personally delivered, or telegraphed, be effective four days after deposit in the mails, when personally delivered, or when delivered to the telegraph company, respectively, addressed as aforesaid, unless otherwise provided herein and, when telecopied, shall be effective upon actual receipt. 2.3 Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the matters contemplated herein. This Agreement supersedes any and all prior understandings or agreements as to the subject matter of this Agreement. 2.4 Amendments, Waivers and Consents. Any provision in this Agreement to the contrary notwithstanding, changes in or additions to this Agreement may be made, and compliance with any covenant or provision herein set forth may be omitted or waived, if the Company (i) shall obtain consent thereto in writing from persons holding or having the right to acquire an aggregate of at least sixty-six and two-thirds percent (66 2/3%) of the aggregate of the Registrable Securities then outstanding and (ii) shall, in each such case, deliver copies of such consent in writing to any Holders who did not execute the same. -14- 15 2.5 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the personal representatives, successors and assigns of the respective parties hereto. The Company shall not have the right to assign its obligations hereunder or any interest herein without obtaining the prior written consent of the Holders in accordance with Section 2.4. 2.6 General. The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. In this Agreement the singular includes the plural, the plural includes the singular, the masculine gender includes the neuter, masculine and feminine genders. This Agreement shall be governed by and construed under the laws of the State of Texas. 2.7 Severability. If any provisions of this Agreement shall be found by any court of competent jurisdiction to be invalid or unenforceable, the parties hereby waive such provision to the extent that it is found to be invalid or unenforceable. Such provision shall, to the maximum extent allowable by law, be modified by such court so that it becomes enforceable, and, as modified, shall be enforced as any other provision hereof, all the other provisions hereof continuing in full force and effect. 2.8 Counterparts. This Agreement may be executed in counterparts, all of which together shall constitute one and the same instrument. 2.9 Specific Performance. The Company recognizes that the rights of the Holders under this Agreement are unique, and, accordingly, the Holders shall, in addition to such other remedies as may be available to them at law or in equity, have the right to enforce their rights hereunder by actions for injunctive relief and specific performance to the extent permitted by law. This Agreement is not intended to limit or abridge any rights of the Holders which may exist apart from this Agreement. IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly executed as of the date first above written. E-Z SERVE CORPORATION By: /s/ John T. Miller ------------------------------- Title: Senior Vice President TENACQCO BRIDGE PARTNERSHIP By: DLJ CAPITAL CORP. as General Partner By: /s/ Paul Thompson III ------------------------------- Title: Vice President -15- EX-4.4.2 13 AMEND. TO REGISTRATION RIGHTS AGREEMENT - 04/21/93 1 EXHIBIT 4.4.2 AMENDMENT TO REGISTRATION RIGHTS AGREEMENT This Amendment to Registration Rights Agreement ("Amendment") is made as of April 22, 1993, by and between E-Z Serve Corporation, a Delaware Corporation (the "Company"), DLJ Capital Corp., a Delaware corporation (the "DLJ"), and Tenacqco Bridge Partnership, a partnership formed under the laws of New York ("Tenacqco"). WHEREAS, the Company and Tenacqco entered into that certain Registration Rights Agreement dated as of July 31, 1992 (the "Agreement"); WHEREAS, the Company has issued to DLJ 200,000 shares of the Company's Series F Convertible Preferred Stock, par value $0.01 per share (the "Series F Preferred") and the shares of Series F Preferred are convertible into shares of the Company's common stock, par value $0.01 per share ("Common Stock"); WHEREAS, the parties desire to amend the Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. The term "Investor" shall be deemed to include DLJ. 2. Section 1.1(b) of the Agreement is hereby amended in its entirety to be as follows: (b) The term "Registrable Securities" means (1) the shares of Common Stock issued pursuant to the Amended Purchase Agreement, (2) the Common Stock issued in exchange for the accrued but unpaid dividends on TOC Retail, Inc.'s Series B Preferred Stock pursuant to the warrants to purchase the Company's Series D Convertible 2 Preferred Stock ("Warrants") which are issued pursuant to the Amended Purchase Agreement, (3) the Common Stock issued or issuable upon the conversion of the shares of Preferred Stock, (4) the Common Stock issued or issuable upon the conversion of the shares of the Company's Series F Convertible Preferred Stock issued to DLJ Capital Corp. on April 20, 1993, and (5) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such securities described in (1),(2), (3) or (4) of this paragraph; provided, however, that any shares of Common Stock previously sold to the public pursuant to a registered public offering or pursuant to an exemption from the registration requirements of the 1933 Act shall cease to be Registrable Securities. 3. Section 2.2 of the Agreement is hereby amended by replacing the words "DLJ Bridge Finance, L.P." with the words "DLJ Capital Corp." Except as expressly amended herein, the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed as of the date first above written. E-Z SERVE CORPORATION By: /s/ John T. Miller ------------------------------------- Name: John T. Miller Title: Senior Vice President -2- 3 DLJ CAPITAL CORP. for itself and as General Partner of TENACQCO BRIDGE PARTNERSHIP By: /s/ Paul Thompson, III ------------------------------------- Name: Paul Thompson, III Title: Vice President -3- EX-4.5.1 14 AMENDED STOCKHOLDERS AGMT. - 06/01/94 1 EXHIBIT 4.5.1 AMENDED AND RESTATED STOCKHOLDERS AGREEMENT AMONG DLJ CAPITAL CORPORATION TENACQCO BRIDGE PARTNERSHIP PHEMUS CORPORATION INTERCONTINENTAL MINING & RESOURCES INCORPORATED QUADRANT CAPITAL CORP. E-Z SERVE CORPORATION AND CERTAIN EMPLOYEES OF E-Z SERVE CORPORATION Dated June 1, 1994 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE 2 TRANSFER RESTRICTIONS SECTION 2.1. General Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 2.2. Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 2.3. Improper Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 2.4. Right to Compel Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 2.5. Tag Along Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 2.6. No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE 3 GOVERNANCE SECTION 3.1. Board of Directors of the Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 3.2. Actions Requiring Consent of the Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ARTICLE 4 MISCELLANEOUS SECTION 4.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 SECTION 4.2. Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 4.3. Frustration of Purpose; Administration of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 4.4. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 SECTION 4.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
-i- 3 SECTION 4.6. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 4.7. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 4.8. Successors, Assigns, Transferees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 4.9. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 4.10. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 4.11. Recapitalization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 4.12. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 4.13. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 4.14. Adoption Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 4.15. Appointment of Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
-ii- 4 AMENDED AND RESTATED STOCKHOLDERS AGREEMENT This Amended and Restated Stockholders Agreement (the "Agreement") is made as of June 1, 1994, by and among DLJ Capital Corporation, a Delaware corporation ("DLJ Capital"), Tenacqco Bridge Partnership, a New York partnership ("Tenacqco"), Phemus Corporation, a Massachusetts corporation ("Phemus"), Intercontinental Mining & Resources Incorporated, a British Virgin Islands corporation ("IMR"), Quadrant Capital Corp., a Delaware corporation ("Quadrant"), E-Z Serve Corporation , a Delaware corporation (the "Issuer"), and certain key employees of the Issuer. WHEREAS, Tenacqco, Phemus, IMR, Quadrant and the Issuer entered into that certain Stockholders Agreement dated as of July 31, 1992 ("Stockholders Agreement"); WHEREAS, DLJ Capital was added as a party to the Stockholders Agreement pursuant to an Amendment to Stockholders Agreement dated April 20, 1993, among the parties hereto other than the Employees (as defined below); WHEREAS, Schedule 1 to the Stockholders Agreement was amended pursuant to a Second Amendment to Stockholders Agreement dated May 11, 1993, among the parties hereto other than the Employees; WHEREAS, the parties desire to amend and restate the Stockholders Agreement, as amended, in its entirety to include the Employees as parties thereto and to provide to such Employees certain limited rights and obligations; and WHEREAS, the parties hereto desire to provide for certain rights and obligations relating to the Common Stock certain rights to acquire Common Stock and certain matters relating to the affairs of the Issuer following the Effective Date (as defined in Section 4.13). NOW THEREFORE, the parties hereto agree as follows: -1- 5 ARTICLE 1 DEFINITIONS SECTION 1.1. Definitions. (a) The following terms, as used herein, have the following meanings: "Affiliate" shall have the meaning given to such term in Rule 12b-2 promulgated under the Exchange Act. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in the City of New York are authorized by law to close. "Commission" means the Securities and Exchange Commission and any successor commission or agency having similar powers. "Common Stock" means the shares of common stock, par value $0.01 per share, of the Issuer. With respect to the Employees, "Common Stock" means only such shares of Common Stock issued upon exercise of an Option held by such Employee but does not include shares of Common Stock held by an Employee Transferee. "Employee" or "Employees" means any key employee of the Issuer or any subsidiary thereof who is the beneficial owner of an Option granted pursuant to the Plan, and includes an Employee Transferee. "Employee Transferee" means any Person who, as permitted by the terms of the Plan, becomes the beneficial owner of an Option granted under the Plan. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Holder" means each of DLJ Capital, Tenacqco, Phemus, IMR and Quadrant, including each of their respective Affiliates who may from time to time hold shares of Common Stock or Options and who, for purposes of Sections 2.1, 2.4, 2.5, 3.1, -2- 6 3.2 and 4.2, is obligated to act or vote with and through Tenacqco, Phemus, IMR and Quadrant respectively, except that (i) IMR and Quadrant, and each of their respective Affiliates, shall together be treated as a single Holder, and (ii) DLJ Capital and Tenacqco, and each of their respective Affiliates, shall together be treated as a single Holder. "Irrevocable Proxies" means the irrevocable proxies dated as of July 31, 1992 of each of Phemus, Quadrant and IMR. "Options" means any options, warrants, convertible securities or other rights upon exercise of which the Issuer is obligated to issue shares of Common Stock to the holder thereof. With respect to an Employee, "Options" means only (i) with respect to a sale to a Compelled Sale Purchaser, all vested Options and such Options that will vest upon consummation of the sale to the Compelled Sale Purchaser granted to such Employee pursuant to the terms of the Plan, and (ii) with respect to a Tag Along Sale, such Options that, pursuant to the terms of the Plan, will vest upon consummation of the Tag Along Sale. "Person" means an individual, partnership, corporation, trust, joint stock company, association, joint venture, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means the Issuer's 1994 Stock Option Plan, as in effect on the date hereof. "Public Offering" means any public offering of equity securities (or securities convertible into equity securities) of the Issuer pursuant to an effective registration statement under the Securities Act other than pursuant to a registration statement on Form S-8 or any successor or similar form. "Securities Act" means the Securities Act of 1933, as amended. -3- 7 "Stock Purchase Agreement" means the Stock Purchase Agreement dated July 18, 1992, amended July 21, 1992, and further amended and restated as of July 31, 1992 among DLJ Bridge Finance, L.P., Tenacqco and the Issuer. "Transfer" means with respect to any shares of Common Stock, Options or other property, the sale, assignment, granting of a participation in, pledge, disposition or other transfer, directly or indirectly, of such shares of Common Stock, Options or property. (b) Each of the following terms is defined in the Section set forth opposite such terms:
Terms Section ----- ------- Agreement Preamble Buyer(s) 3.2(c) Buy-Sell 3.2(b) Buy-Sell Response 3.2(c) Compelled Sale Notice 2.4(b) Compelled Sale Offer 2.4(a) Compelled Sale Purchaser 2.4(a) Consenting Holder(s) 3.2(b) Disposing Holder 2.5 Effective Date 4.13 Fundamental Action 3.2(b) Holder Nominee 3.1(b) Non-Consenting Holder(s) 3.2(b) Participating Holders 2.5 Remaining Holder 2.4(a) Sale Notice 2.5(a) Schedule 1 2.1(b) Seller(s) 3.2(c) Selling Holders 2.4(a) Selling Shares 2.5 Tag Along Sale 2.5 Triggering Holder(s) 3.2(b) Trigger Price 3.2(b)
-4- 8 ARTICLE 2 TRANSFER RESTRICTIONS SECTION 2.1. General Restrictions. (a) Each Holder agrees that it will not offer or Transfer any shares of Common Stock or Options except, in each case, in compliance with the Securities Act and this Agreement. (b) Each Holder agrees that, except for sales of shares of Common Stock or Options (i) in a Public Offering, (ii) pursuant to Section 2.4 or 2.5, (iii) pursuant to Rule 144 promulgated by the Commission under the Securities Act or (iv) with the prior written consent of all Holders, it will not offer or Transfer any shares of Common Stock or Options to any Person, other than an Affiliate of such Holder, if as a result of such Transfer any such Holder would at any time be entitled to cast less than 70% of the votes the number of fully-diluted shares of Common Stock set forth opposite its name on Schedule 1 attached hereto ("Schedule 1") carries, without the prior written consent of the other Holders. (c) Except for the Irrevocable Proxies and except as provided in this Agreement, no Holder shall (i) grant any proxy or enter into or agree to be bound by any voting trust or other voting agreement with respect to the shares of Common Stock owned by it (or that would be owned by it upon exercise or conversion of any Option) or (ii) enter into any agreement or arrangement of any kind with any Person with respect to the shares of Common Stock or any Option (including, but not limited to, agreements or arrangements with respect to the Transfer of the shares of Common Stock or Options) inconsistent with the provisions of this Agreement. SECTION 2.2. Legends. Each certificate evidencing outstanding shares of Common Stock or Options held by or issued to any Holder shall bear a legend in substantially the following form: -5- 9 THE SHARES OR OPTIONS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCKHOLDERS AGREEMENT DATED AS OF JULY 31, 1992, AS AMENDED OR RESTATED, COPIES OF WHICH WILL BE FURNISHED BY E-Z SERVE CORPORATION AND ANY SUCCESSOR THERETO UPON REQUEST AND WITHOUT CHARGE. Each certificate evidencing shares of Common Stock or Options issued to a Holder on or after the Effective Date (including certificates issued in substitution for or replacement of such shares of Common Stock or Options but excluding certificates issued on or after the Effective Date in substitution for or replacement of shares of Common Stock or Options which were issued pursuant to a Public Offering or in compliance with Rule 144 under the Securities Act) shall also bear the following legend: THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144(k) OR RULE 144A OF SUCH ACT. SECTION 2.3. Improper Transfer. Any attempt by a Holder to Transfer any shares of Common Stock or Options not in compliance with this Agreement shall be null and void and neither the Issuer nor any transfer agent shall give any effect in the Issuer's stock records to such attempted Transfer. SECTION 2.4. Right to Compel Sale. (a) If any two Holders (including their respective Affiliates) holding more than an aggregate of 30% of the shares of Common Stock then -6- 10 outstanding (calculated on a fully diluted basis) (the "Selling Holders") propose to sell to any Person, other than an Affiliate of such Holder (the "Compelled Sale Purchaser"), all of the shares of Common Stock and Options held by such Selling Holders (the "Compelled Sale Offer"), then such Selling Holders shall have the right, exercisable as set forth below, to require the remaining Holder (the "Remaining Holder") and if the Selling Holders also elect, each of the Employees, to sell all, but not less than all, of the shares of Common Stock and Options then held by such Remaining Holder and Employees to the Compelled Sale Purchaser. Any sale pursuant to this Section 2.4 will be for the same consideration per share of Common Stock and Option and otherwise on the same terms and conditions upon which the Selling Holders sell their respective shares of Common Stock and Options; provided that (i) each Option held by the Remaining Holder will be purchased by the Compelled Sale Purchaser (and thereafter cancelled) for an amount (payable in the same form of consideration as the consideration paid to the Selling Holders) equal to the excess, if any, of the price per share of Common Stock being offered by the Compelled Sale Purchaser over the exercise or conversion price per share of Common Stock underlying the Option, multiplied by the number of shares of Common Stock for which the Option is exercisable or convertible, and (ii) the Options held by the Employees shall be exercised contemporaneously with the sale to the Compelled Sale Purchaser and the Common Stock received as a result of such exercise shall be included in the sale to the Compelled Sale Purchaser. For the purpose of this Section 2.4, any reasonable and customary investment banking or advisory fees paid by the Compelled Sale Purchaser to the Selling Holders or any Affiliate of any Selling Holder shall not be included in determining the amount of consideration paid by the Compelled Sale Purchaser for the shares of Common Stock and Options held by the Selling Holders and Employees. (b) If the Selling Holders elect to exercise their right to compel sale pursuant to this Section 2.4, they shall deliver written notice (a "Compelled Sale Notice") of any Compelled Sale Offer to the Remaining Holder, the Employees -7- 11 and the Issuer, setting forth the consideration per share of Common Stock and Option and other material terms and conditions thereof. The Remaining Holder and the Employees shall deliver to each of the Selling Holders, prior to the expiration of the 10 Business Day period commencing on the date of the applicable Compelled Sale Notice, the certificate or certificates representing the number of shares of Common Stock and Options held by such Remaining Holder and the Employees, duly endorsed, together with all other documents which are necessary in order to effect such Compelled Sale Offer. If such Remaining Holder or any Employee fails to deliver such certificates to the Selling Holders, the Issuer shall cause the books and records of the Issuer to show that such shares of Common Stock and Options are bound by the provisions of this Section 2.4 and that such shares of Common Stock and Options shall not thereafter be transferable except to the Compelled Sale Purchaser pursuant to the Compelled Sale Offer. (c) The Selling Holders shall have 60 days from the date of delivery of a Compelled Sale Notice to sell to the Compelled Sale Purchaser all the shares of Common Stock and Options subject to the Compelled Sale Offer. Promptly after completion of any sale pursuant to this Section 2.4, the Selling Holders shall notify the Issuer, the Employees and the Remaining Holder of such completion and shall furnish evidence of such sale (including time of completion) and of the terms thereof as the Issuer, the Employees or such Remaining Holder may request. The Selling Holders shall also promptly remit to the Employees and such Remaining Holder the proceeds of such sale attributable to the sale of the Employees' and such Remaining Holder's shares of Common Stock and Options. (d) If any Compelled Sale Offer is withdrawn, or terminated for any reason other than for the failure of the Remaining Holder or an Employee to comply with the obligations hereunder, the Selling Holders shall, without prejudice to their rights hereunder to deliver a subsequent Compelled Sale Notice, return to such Remaining Holder and Employees all certificates representing the shares of Common Stock and -8- 12 Options or other instruments or documents which such Remaining Holder or Employees previously delivered to the Selling Holders in connection with such Compelled Sale Offer and notify the Issuer that the Compelled Sale Offer is withdrawn. SECTION 2.5. Tag Along Rights. If any Holder (a "Disposing Holder") proposes to sell, in one transaction or in a series of related transactions (a "Tag Along Sale") more than 3% of its shares of Common Stock (the "Selling Shares") (calculated on a fully diluted basis) and Options to a Person other than an Affiliate of such Disposing Holder, then the other Holders (the "Participating Holders") and the Employees (in the case of the Employees, only if the Selling Shares constitute 10% or more of all of the Issuer's then outstanding shares of Common Stock on a fully diluted basis and the proposed sale is not to another Holder, in which case the Employees shall be included within the definition of "Participating Holders") shall have the right to participate in such Tag Along Sale on the following terms: (a) At least 15 days prior to the closing of such Tag Along Sale, the Disposing Holder shall give written notice (the "Sale Notice") to each Participating Holder and the Issuer. The Sale Notice shall specify the Selling Shares and Options, the price offered for such Selling Shares and Options, all other material terms and conditions of the Tag Along Sale and, if the consideration payable pursuant to the Tag Along Sale consists in whole or in part of consideration other than cash, such information relating to such other consideration as such Disposing Holder may reasonably determine. (b) Each Participating Holder may participate in the Tag Along Sale and offer to sell a portion of shares of Common Stock or Options held by such Participating Holder (rounded to the nearest whole number) equal to the lesser of (i) the amount specified by such Participating Holder in the notice provided pursuant to the next sentence, and (ii) an amount equal to the product of (x) the total number of shares of Common Stock and Options to be sold pursuant to such Tag -9- 13 Along Sale times (y) a fraction, the numerator of which shall be the total number of shares of Common Stock and Options held by such Participating Holder, and the denominator of which shall be the aggregate number of shares of Common Stock and Options held by all the Holders and all of the Employees (all such numbers of shares of Common Stock and Options to be calculated on a fully diluted basis). Such Participating Holder shall be entitled to receive pursuant to such Tag Along Sale the same consideration per share of Common Stock and Options and on the same terms and conditions, to the extent possible, as the Disposing Holder receives in the Tag Along Sale. Such Participating Holder must exercise their respective tag along right by giving written notice to the Disposing Holder within 10 Business Days of the date of the Sale Notice, specifying the number of shares of Common Stock and Options such Participating Holder desires to include in the Tag Along Sale and by delivering to such Disposing Holder, together with such written notice, the certificate or certificates representing such Participating Holder's shares of Common Stock and Options, duly endorsed, and all other documents required to be executed by such Participating Holder in connection with such Tag Along Sale. (c) The Disposing Holder shall have 60 days from the date of the Sale Notice to close the Tag Along Sale. If such Tag Along Sale does not close within such 60 day period, such Disposing Holder shall return to each Participating Holder all certificates representing the shares of Common Stock and Options or other instruments or documents which such Participating Holder previously delivered to such Disposing Holder in connection with such Tag Along Sale and notify the Issuer that such Tag Along Sale is withdrawn. SECTION 2.6. No Liability. There shall be no liability on the part of any Holder to any other Holder any Employee or on the part of any Employee to any Holder if any proposed Compelled Sale Offer or Tag Along Sale is not consummated for whatever reason. It is understood that, subject to the terms of this Agreement, each Holder and each Employee, in its or his sole discretion, shall determine whether to effect a sale -10- 14 of any or all of the shares of Common Stock and Options held by it or him and has no duty to consider the interest of other Holders or other Employees in deciding whether, when and on what terms to effect any such sale or whether, when and on what terms to sell to any Compelled Sale Purchaser pursuant to Section 2.4 or to any Person in a Tag Along Sale pursuant to Section 2.5. ARTICLE 3 GOVERNANCE SECTION 3.1. Board of Directors of the Issuer. (a) The Board of Directors shall be composed of seven members. (b) Each Holder shall be entitled to designate in the manner set forth below one member of the Board of Directors (each, a "Holder Nominee" and collectively, the "Holder Nominees"). Each Holder agrees that it will vote all of its shares of Common Stock and Options, at any regular or special meeting of the stockholders of the Issuer called for the purpose of filling positions of the Directors, or in any written consent executed in lieu of such a meeting of stockholders, and shall take all actions necessary, to ensure the election to the Board of Directors of each Holder's Holder Nominee. (c) Each Holder hereby agrees to (i) use such Holder's best efforts to call, or cause the appropriate officers and directors of the Issuer to call, a special meeting of stockholders of the Issuer and agrees to vote all of the shares of Common Stock and Options owned or held of record by such Holder for, or to take all actions by written consent in lieu of any such meeting necessary to cause, the removal (with or without cause) of any Holder Nominee if the Holder who designated such Holder Nominee requests his shares of Common Stock and Options in favor of the removal of any Holder Nominee unless requested to do so by the Holder who designated such Holder Nominee. Each Holder shall have the -11- 15 right to designate a new nominee if such Holder's Holder Nominee shall vacate its directorship for any reason. SECTION 3.2. Actions Requiring Consent of the Holders. (a) The Issuer agrees that, without the consent of each of the Holders, the Issuer will not (i) amend the Certificate of Incorporation of the Issuer, except for any filing of a Certificate of Elimination to eliminate any previously outstanding series of the Issuer's preferred stock that has been converted or redeemed and which is no longer outstanding; (ii) adopt an agreement of merger or consolidation; (iii) sell, lease or transfer all or substantially all of the Issuer's property and assets; (iv) recommend to the stockholders a dissolution of the Issuer or a revocation of dissolution; (v) amend the Bylaws of the Issuer; or (vi) increase or decrease the number of members of the Board of Directors other than the increase contemplated herein. (b) Each of the Holders agrees that in the event that (i) one Holder shall have withheld its consent (the "Non-Consenting Holder") to any of the actions specified in (a) above which shall have been the basis of a bona fide proposal by a Holder (each, a "Fundamental Action"), and each of the other Holders shall have given its consent (the "Consenting Holders") to such Fundamental Action or (ii) two Holders shall have withheld their consent (the "Non-Consenting Holders") to a Fundamental Action and the remaining Holder shall have given its consent (the "Consenting Holder") to such Fundamental Action, then the respective persons described below shall have the right to invoke the buy- sell mechanism (the "Buy-Sell") set forth below; provided, however, that, in the case of (b) (i) above, if the action proposed is an action described in (a)(i), (a)(v) or (a)(vi) above, the Buy-Sell shall not invoked (x) by a Non- Consenting Holder that would not have been materially adversely affected by the taking of such action or (y) by Consenting Holders that would not have been materially adversely affected by the failure to take such action and, in the case of (b)(ii) above, if the action proposed is an action described in (a)(i), (a)(v) or (a)(vi) above, the Buy-Sell shall not be invoked (x) by a Consenting -12- 16 Holder that would not have been materially adversely affected by the failure to take such action or (y) by Non- Consenting Holders that would not have been materially adversely affected by taking such action. If the Buy-Sell is invoked in accordance with the preceding sentence, then, in the case of (i) above, either the Consenting Holders, acting as one, or the Non-Consenting Holders shall have the right to set a cash price (the "Trigger Price") at which such price-setting Holder(s) (the "Triggering Holder(s)") would buy all the shares of Common Stock and Options owned by the other Holder or Holders or would sell all of the shares of Common Stock and Options owned by it or them, as the case may be, to the other Holder or Holders, and, in the case of (ii) above, either the Consenting Holder, or the Non-Consenting Holders acting as one, shall have the right to set the Trigger Price at which the Triggering Holder(s) would buy all the shares of Common Stock and Options owned by the other Holder or Holders or would sell all of the shares of Common Stock and Options owned by the Triggering Holder(s) to the other Holder or Holders. (c) The Triggering Holder(s) shall give written notice of the Trigger Price to the other Holder or Holders and the other Holder or Holders must respond with a written response (the "Buy-Sell Response") specifying a date not later than 10 days following the setting of the price pursuant to the preceding paragraph on which it promises to buy all the shares of Common Stock and Options owned by the Triggering Holder(s) or to sell all of the shares of Common Stock and Options owned by such Holder or Holders to the Triggering Holder or if there is more than one Triggering Holder, to the Triggering Holders, pro rata. Upon the date specified in the Buy-Sell Response, the selling Holder or Holders (the "Seller" or "Sellers") shall deliver to the buying Holders or Holder (the "Buyers" or "Buyer") certificates, duly endorsed for transfer, representing all the Seller's or Sellers' shares of Common Stock and Options, and, if there is more than one Buyer, the certificates shall represent such number of shares of Common Stock and Options allocated as the buyers may request. Such delivery shall be made against payment of the Trigger Price to the Seller or Sellers in immediately -13- 17 available funds, whereupon the Issuer shall register such transfer of ownership upon notification thereof. ARTICLE 4 MISCELLANEOUS SECTION 4.1. Termination. This Agreement shall terminate and be of no further force or effect as to all Holders and Employees at the close of business on December 31, 1997. Notwithstanding the above stated termination date, this Agreement shall terminate and be of no further force and effect (i) as to any Holder at such time as such Holder ceases to own at least 10% of the shares of Common Stock and Options then outstanding, calculated on a fully diluted basis, and (ii) as to any Employee at such time as such Employee ceases to be employed by the Issuer or any subsidiary thereof; provided, however, that any Employee Transferee shall continue to be subject to the terms and provisions of this Agreement until such Employee Transferee ceases to own any Options granted under the Plan. SECTION 4.2. Amendments; Waivers. (a) Any term of this Agreement may be amended or waived only with the written consent of each of the Holders. (b) Sections 2.4 and 2.5, and any other term of this Agreement that affects the rights and obligations of any Employee hereunder, to the extent such waiver or consent would affect the rights of such Employee hereunder, may be amended or waived only with the written consent of each of the Employees. (c) No failure or delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof. SECTION 4.3. Frustration of Purpose; Administration of Agreement. No Holder may do directly or indirectly that which -14- 18 is prohibited by this Agreement. The Board of Directors shall have general authority to take such action as may be necessary to give effect to this Agreement. SECTION 4.4. Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties hereto with respect to the subject matter hereof. SECTION 4.5. Notices. Any notice, request, instruction or other document to be given hereunder by any party hereto to another party hereto shall be in writing (including telex, telecopier or similar writing) and shall be given to such party at the address set forth listed on the signature page hereto (or, in the case of transferees, at the address set forth in the records of the Issuer), or to such other address as the party to whom notice is to be given may provide in a written notice to the party giving such notice, a copy of which written notice shall be on file with the Secretary (or other executive officer) of the Issuer. Each such notice, request or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified by such party on the signature page of this Agreement or (ii) if given by mail, three business days after being sent to the address specified in this Section 4.5 or (iii) if given by any other means, when delivered at the address specified in this Section 4.5. SECTION 4.6. Applicable Law. This Agreement will be governed by the laws of the State of New York. SECTION 4.7. Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and -15- 19 obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law. SECTION 4.8. Successors, Assigns, Transferees. The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. Notwithstanding the foregoing, neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Issuer, any Holder or any Employee (other than to an Employee Transferee pursuant to the terms of the Plan). This Agreement shall be binding upon the Issuer, each Holder, each Employee and their respective successors and permitted assigns. Neither this Agreement nor any provision hereof shall be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their respective successors and permitted assigns. SECTION 4.9. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 4.10. Attorneys' Fees. In any action or proceeding brought to enforce any provision of this Agreement, or where any provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys' fees in addition to any other available remedy. SECTION 4.11. Recapitalization, etc. In the event that any capital stock or other securities are issued in respect of, in exchange for, or in substitution of, any shares of Common Stock and Options by reason of any reorganization, recapitalization, reclassification, merger, consolidation, spin-off, partial or complete liquidation, stock dividend, split-up, sale of assets, distribution to stockholders or combination of the shares of Common Stock and Options or any other change in capital structure of the Issuer, appropriate adjustments shall be made with respect to the relevant -16- 20 provisions of this Agreement so as to fairly and equitably preserve, as far as practicable, the original rights and obligations of the parties hereto under this Agreement. SECTION 4.12. Remedies. The parties hereby acknowledge that it is impossible to measure in money the damages which will accrue to a party hereto by reason of a failure to perform any of the obligations under this Agreement. Therefore, if any party hereto shall institute any action or proceeding to enforce the provisions hereof, any Person against whom such action or proceeding is brought hereby waives the claim or defense therein that such party has an adequate remedy at law, and such Person shall not claim in any such action or proceeding the claim or defense that such remedy at law exists. SECTION 4.13. Effectiveness. This Agreement shall be effective (the "Effective Date") on the date of, and simultaneously with, the closing of the transactions under the Stock Purchase Agreement. SECTION 4.14. Adoption Agreement. Any Person who after the date hereof is granted options to purchase Common Stock pursuant to the Plan may become a party to this Agreement by executing an Adoption Agreement in the form of Exhibit "A" attached hereto or in any other form satisfactory to the Issuer, whereupon such Person shall be deemed an "Employee" under this Agreement and shall have all of the rights and obligations of an "Employee" under this Agreement. Each Holder and each Employee who is a party to this Agreement hereby agrees that such Adoption Agreement when executed by the Issuer is binding upon them and such adopting Person shall be deemed an "Employee" under this Agreement as if such Person was originally a party hereto. After the execution of any such Adoption Agreement, the Issuer shall promptly deliver a copy thereof or amendment to Schedule 1 to the Holders and the Employees. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. -17- 21 DLJ CAPITAL CORPORATION By: /s/ Paul Thompson, III ------------------------------------- Name: Paul Thompson, III Title: Vice President Address: 140 Broadway New York, NY 10005 Telephone: (212) 504-3661 Telecopier: (212) 504-4991 TENACQCO BRIDGE PARTNERSHIP By: DLJ Capital Corporation, as General Partner By: /s/ Paul Thompson, III ------------------------------------- Name: Paul Thompson, III Title: Vice President Address: 140 Broadway New York, NY 10005 Telephone: (212) 504-3661 Telecopier: (212) 504-4991 -18- 22 PHEMUS CORPORATION By: /s/ John M. Sallay ------------------------------------- Name: John M. Sallay By: /s/ Michael R. Eisenson ------------------------------------- Name: Michael R. Eisenson Address: c/o Harvard Management Company 600 Atlantic Avenue Boston, MA 02210 Telephone: (617) 523-4400 Telecopier: (617) 523-1063 INTERCONTINENTAL MINING & RESOURCES INCORPORATED By: /s/ John R. Schoemer ------------------------------------- Name: John R. Schoemer Title: Attorney in Fact Address: c/o P.M.M. Services (B.V.I.) Limited P. O. Box 438 Tropic Isle Building Wickhams Cay Road Town, Tortola British Virgin Islands Telephone: Telecopier: -19- 23 QUADRANT CAPITAL CORP. By: /s/ Alan G. Quasha ------------------------------------- Name: Alan G. Quasha Title: President Address: c/o Quadrant Management, Inc. 127 East 73rd Street New York, NY 10021 Telephone: (212) 439-9292 Telecopier: (212) 439-9435 E-Z SERVE CORPORATION By: /s/ Neil H. McLaurin ------------------------------------- Name: Neil H. McLaurin Title: President Address: 2550 North Loop West Suite 600 Houston, TX 77092 Telephone: (713) 684-4300 Telecopier: (713) 684-4367 -20- 24 EMPLOYEES: /s/ Neil H. McLaurin --------------------------- Name: Neil H. McLaurin Address: -------------------------------- ---------------------------------------- ---------------------------------------- /s/ John T. Miller --------------------------- Name: John T. Miller Address: -------------------------------- ---------------------------------------- ---------------------------------------- /s/ Thomas L. Davis --------------------------- Name: Thomas L. Davis Address: -------------------------------- ---------------------------------------- ---------------------------------------- /s/ Robert L. Howell --------------------------- Name: Robert L. Howell Address: -------------------------------- ---------------------------------------- ---------------------------------------- -21- 25 /s/ H. E. Lambert --------------------------- Name: H. E. Lambert Address: -------------------------------- ---------------------------------------- ---------------------------------------- /s/ Scott Shafer --------------------------- Name: Scott Shafer Address: -------------------------------- ---------------------------------------- ---------------------------------------- /s/ L. May Dyer --------------------------- Name: L. May Dyer Address: -------------------------------- ---------------------------------------- ---------------------------------------- /s/ Glen O. Willis --------------------------- Name:Glen O. Willis Address: -------------------------------- ---------------------------------------- ---------------------------------------- -22- 26 /s/ John A. Robinson --------------------------- Name: John A. Robinson Address: -------------------------------- ---------------------------------------- ---------------------------------------- /s/ John R. Corbett --------------------------- Name: John R. Corbett Address: -------------------------------- ---------------------------------------- ---------------------------------------- /s/ Marion H. Blackmon --------------------------- Name: Marion H. Blackmon Address: -------------------------------- ---------------------------------------- ---------------------------------------- /s/ D.D. Waters. Jr. --------------------------- Name: D.D. Waters. Jr. Address: -------------------------------- ---------------------------------------- ---------------------------------------- /s/ D. R. Anderson --------------------------- Name: D. R. Anderson Address: -------------------------------- ---------------------------------------- ---------------------------------------- -23- 27 EXHIBIT A ADOPTION AGREEMENT This Adoption Agreement ("Agreement") is executed by the person named as "Employee" below pursuant to the terms of the Amended and Restated Stockholders Agreement dated as of June 1, 1994, as it may be amended ("Stockholders Agreement"). 1. Acknowledgement. Employee acknowledges that Employee has acquired options granted to him or her pursuant to the 1994 Stock Option Plan of E-Z Serve Corporation, a Delaware corporation (the "Issuer"). 2. Agreement. Employee (1) agrees that Employee shall be bound by and subject to the terms of the Stockholders Agreement, and (2) adopts the Stockholders Agreement with the same force and effect as if Employee were originally a party thereto. 3. Notice. Any notice required or permitted by the Stockholders Agreement shall be given to Employee at the address of the Issuer. This Agreement is executed by Employee on ________ __, 199_. EMPLOYEE: ------------------------------- Name: -------------------------- -24- 28 Agreed to on behalf of the Issuer, the Holder and the Employees on _____________ __, 199_. E-Z SERVE CORPORATION By: ----------------------- Name: --------------------- Title: -------------------- -25- 29 SCHEDULE 1
Number of Shares of Common Stock on a Holder Fully Diluted Basis ------ ------------------- DLJ Capital / Tenacqco 29,715,364 Phemus 16,700,457 IMR / Quadrant 14,802,325
-26- EX-4.5.3 15 REV. SCHEDULE 1 TO STOCKHOLDERS AGREEMENT 1 EXHIBIT 4.5.3 SCHEDULE 1 TO AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, AS AMENDED OF E-Z SERVE CORPORATION (as of March 28,1997) Holder Number of Shares of Common Stock ------ on a Fully Diluted Basis ------------------------ DLJ Capital/Tenacqco 29,715,364 Phemus 17,350,006 IMR/Quadrant 14,961,480 EX-4.6 16 STOCKHOLDERS LETTER OF UNDERSTANDING 1 EXHIBIT 4.6 January 17, 1995 The Lenders (as defined below) and Societe Generale, as Agent 1221 Avenue of Americas New York, New York 10019 Attention: David I. Brunson Re: Letter of Understanding Regarding Amended and Restated Stockholders Agreement Dear Sirs: Reference is made to (a) the Credit and Guaranty Agreement, dated as of January 17, 1995 (together with all amendments and modifications thereto from time to time, the "Credit Agreement"), among E-Z Serve Convenience Stores, Inc., a Delaware corporation (the "Borrower"), E-Z Serve Corporation, a Delaware corporation (the "Parent"), the various financial institutions as are or may become parties thereto (collectively, the "Lenders") and Societe Generale ("SG"), as agent (in such capacity, the "Agent") for the Lenders and (b) the Amended and Restated Stockholders Agreement, dated as of June 1, 1994 (the "Stockholders Agreement"), among the Parent, DLJ Capital Corporation, Phemus Corporation, Tenacqco Bridge Partnership, Intercontinental Mining & Resources Incorporated, Quadrant Capital Corp. (collectively, the "Stockholders") and certain employees of the Parent. In order to induce the Lenders and the Agent to execute the Credit Agreement and consummate the transactions contemplated thereby, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Stockholders and the Parent (each, an "Agreeing Party") each severally, but not jointly, agree to the following: 1. Notwithstanding any term or provision thereof to the contrary, including Section 4.1 thereof, the Stockholders Agreement, as modified hereby and as it applies to the Stockholders, shall not terminate and shall remain in full force and effect until all obligations (monetary or otherwise) of the Parent and each of its Subsidiaries (including without limitation the Borrower) arising under or 2 in connection with the Credit Agreement, the Notes issued thereunder (the "Notes") and each other Loan Document executed pursuant thereto (including without limitation as to letters of credit ("Letters of Credit")) have been paid in cash in full and all Commitments (as defined in the Credit Agreement) have expired or terminated; 2. Each Agreeing Party agrees that it will not (a) amend, supplement or otherwise modify the Stockholders Agreement without the prior written consent of the Agent, which consent shall not be unreasonably withheld, or (b) amend, supplement or otherwise modify this Letter of Understanding without the prior written consent of the Agent; 3. Notwithstanding any term or provision of the Stockholders Agreement (including without limitation any permissions, exceptions, rights to compel, tag along rights and buy-sell rights contained therein), each Stockholder agrees that it will not sell, offer or otherwise Transfer (as defined in the Stockholders Agreement) any shares of Common Stock (as defined in the Stockholders Agreement) or Options (as defined in the Stockholders Agreement) if, as a result of such action, such Holder (as defined in the Stockholders Agreement) would at any time (a) be entitled to cast less than 70% of the votes the number of fully-diluted shares of Common Stock set forth opposite its name on Schedule I attached to the Stockholders Agreement carries or (b) have ownership and control, free and clear of all liens, security interests and other encumbrances (other than non-consensual liens and encumbrances that arise by operation of law and that would not reasonably be expected to result in a Transfer of such Common Stock), of less than 70% of the number of fully-diluted shares of Common Stock set forth opposite its name on Schedule I attached to the Stockholders Agreement, in each case without the prior written consent of the Agent; 4. Subject to paragraph 3 above, each Stockholder agrees that it will maintain its ownership interest in the Parent without any lien, security interest or other encumbrance thereon, in whole or in part (other than non-consensual liens and encumbrances that arise by operation of law and that would not reasonably be expected to result in a Transfer of such Common Stock); 5. Such Agreeing Party will strictly comply with all provisions of the Stockholders Agreement, as modified hereby, and in any event any attempt by a Holder to Transfer any shares of Common Stock or Options not in compliance with -2- 3 the Stockholders Agreement, as modified hereby, shall be null and void; 6. The Parent shall maintain a copy of this letter agreement together with the Stockholders Agreement at its executive office and its registered office in the State of Delaware and shall comply with any other requirements, if any, applicable to this letter agreement under the Delaware General Corporation Law and, in any event, each Stockholder agrees that it shall duly legend its shares of Common Stock with a legend to the effect that such shares are subject to this letter and shall supply the Agent with satisfactory evidence thereof within 10 days after the date hereof; and 7. Each Agreeing Party hereby represents and warrants that (a) this letter agreement constitutes a legal, valid and binding obligation of such Agreeing Party, enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, moratorium and other similar laws affecting the rights of creditors generally and except for limitations imposed by general principles of equity and (b) the Stockholders Agreement has become effective and is in full force and effect. This letter agreement constitutes a Loan Document (as defined in the Credit Agreement) and, notwithstanding the provisions of Section 4.8 of the Stockholders Agreement, shall inure to the benefit of the Agent and the Lenders. The parties hereto acknowledge that any breach of this letter agreement or the Stockholders Agreement will result in an immediate Event of Default under the Credit Agreement. The parties hereto hereby further agree that money damages would not be a sufficient remedy for any breach of this letter agreement and that the Agent shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach, and the parties hereto further agree to waive any requirement for the securing or posting of any bond in connection with such remedy. Such remedy shall not be deemed to be the exclusive remedy for breach of this agreement, but shall be in addition to all other remedies available at law or equity. In any action or proceeding brought to enforce any provision of this letter, the Agent, if successful, shall be entitled to recover reasonable attorney's fees and expenses from the party against which enforcement is sought. This letter is intended to create several, and not joint, obligations and no Agreeing Party shall be responsible for any act or omission, or any breach of a representation, warranty or covenant, by any other Agreeing Party. -3- 4 Please acknowledge your agreement with the foregoing terms by executing in the space provided below and delivering to the Agent a counterpart of this letter. This letter (together with the Stockholders Agreement) constitutes the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and may be executed in separate counterparts, shall be binding upon and inure to the benefit of successors and assigns of the parties hereto AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. The obligations of the parties under this letter shall terminate when all principal and interest on the Notes or payable under the Credit Agreement, all amounts with respect to the Letters of Credit and all fees and expenses payable under the Credit Agreement have been paid in full in cash and all Commitments have expired or terminated. Very truly yours, E-Z SERVE CORPORATION By:/s/ John T. Miller ------------------------------------- Title: Senior Vice President DLJ CAPITAL CORPORATION By:/s/ Paul Thompson III ------------------------------------- Title: Vice President PHEMUS CORPORATION By:/s/ Michael R. Eisenson ------------------------------------- Title: Authorized Signatory TENACQCO BRIDGE PARTNERSHIP By: DLJ Capital Corporation, as General Partner By:/s/ Paul Thompson III ------------------------------------- Title: Vice President -4- 5 INTERCONTINENTAL MINING & RESOURCES INCORPORATED By:/s/ John R. Schoemer ------------------------------------- Title: Attorney-in-Fact QUADRANT CAPITAL CORP. By:/s/ John R. Schoemer ------------------------------------- Title: Vice President Agreed, Accepted and Acknowledged This 17th Day of January, 1995: SOCIETE GENERALE, as Agent By:/s/ David I. Brunson ---------------------------------- Title: First Vice President -5- EX-10.1 17 STOCK ACQUISITION AGREEMENT 1 EXHIBIT 10.1 STOCK ACQUISITION AGREEMENT dated as of March 25, 1992 by and among E-Z SERVE CORPORATION and LARRY JACK TAYLOR, APRIL MICHELE TAYLOR TRUST and KERRI DENISE TAYLOR TRUST 2 TABLE OF CONTENTS
Page ARTICLE 1 The Acquisition 1.1 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.2 The Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE 2 Representations and Warranties by the Shareholders 2.1 Organization and Existence of Dart; Capitalization . . . . . . . . . . . . . . . . . . . . . . . 3 2.2 Organization and Existence of TPI; Capitalization . . . . . . . . . . . . . . . . . . . . . . . 4 2.3 Organization and Existence of Titan; Capitalization . . . . . . . . . . . . . . . . . . . . . . 5 2.4 Qualification of the Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.6 No Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.7 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 2.11 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.12 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 2.13 Authority and Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2.14 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.15 Brokerage Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 2.16 No Misleading Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 3 Representations and warranties by E-Z Serve 3.1 Organization and Existence of E-Z Serve; Capitalization . . . . . . . . . . . . . . . . . . . . 16 3.2 Qualification of E-Z Serve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.3 Authority and Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 3.4 E-Z Serve Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.6 No Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 3.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.8 Brokerage Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.9 No Misleading Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3 ARTICLE 4 Certain Covenants and Agreements 4.1 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 4.2 Permits and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 4.3 Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 4.4 UST Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 4.5 Personal Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 ARTICLE 5 Conditions to Closing 5.1 E-Z Serve's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 5.2 Obligations of the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 ARTICLE 6 Tax Matters 6.1 Liability for Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 6.2 Tax Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 6.3 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 6.4 Survival of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 6.5 Limitation on Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 6.6 Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 ARTICLE 7 Indemnification 7.1 Indemnification of the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 7.2 Indemnification of E-Z Serve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 7.3 Demands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 7.4 Right to Contest and Defend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 7.5 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 7.6 Right to Participate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 7.7 Payment of Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 7.8 Limitations on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 ARTICLE 8 Arbitration 8.1 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 ARTICLE 9 Miscellaneous 9.1 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 9.2 Post-Closing Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 9.3 Public Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 9.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 9.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
-ii- 4 9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 9.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 9.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 9.9 Modifications and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 9.10 Controlling Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 9.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 9.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 9.13 Combined Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
-iii- 5 STOCK ACQUISITION AGREEMENT This STOCK ACQUISITION AGREEMENT (the "Agreement"), made as of the 25th day of March, 1992, by and among E-Z Serve CORPORATION, a corporation organized under the laws of the State of Delaware ("E-Z Serve"), LARRY JACK TAYLOR ("Taylor"), an individual, HERBERT W. HITCHINGS, as trustee of the APRIL MICHELE TAYLOR TRUST (who enters into this Agreement solely in its capacity as trustee of, and on behalf of, such trust, but not individually) (the "April Trust"), and HERBERT W. HITCHINGS, as trustee of the KERRI DENISE TAYLOR TRUST (who enters into this Agreement solely in its capacity as trustee of, and on behalf of, such trust, but not individually) (the "Kerri Trust"), (Taylor, the April Trust and the Kerri Trust are collectively referred to herein as the "Shareholders"). W I T N E S S E T H : WHEREAS, Taylor is the owner of (a) all of the issued and outstanding capital stock of Dart Investment Company, a corporation organized under the laws of the State of Texas ("Dart"), and (b) 50% of the issued and outstanding capital stock of Titan Energy, Inc., a corporation organized under the laws of the State of Texas ("Titan"); and WHEREAS, the April Trust is the owner of 25% of the issued and outstanding capital stock of Titan; and WHEREAS, the Kerri Trust is the owner of 25% of the issued and outstanding capital stock of Titan; and 6 WHEREAS, Dart is the owner of all of the issued and outstanding capital stock of Taylor Petroleum, Inc., a corporation organized under the laws of the State of Texas ("TPI"); and WHEREAS, the Shareholders deem it desirable and in their respective best interests for E-Z Serve to acquire from the Shareholders and for the Shareholders to transfer to E-Z Serve all of the issued and outstanding capital stock of Titan and Dart; NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements herein contained, the parties hereto agree as follows: ARTICLE 1 The Acquisition 1.1 The Closing. Pursuant to the terms, covenants and conditions of this Agreement, on the Closing Date (as hereinafter defined): (a) E-Z Serve shall acquire from Taylor, and Taylor shall transfer to E-Z Serve, 1,000 shares of common stock of Dart, par value $10 per share, which constitutes all of the issued and outstanding shares of Dart (the "Dart Stock"), solely in exchange for 1,600,000 shares of voting common stock, $.01 par value per share, of E-Z Serve (the "E-Z Serve Stock"). (b) E-Z Serve shall purchase from the Shareholders, and the Shareholders shall sell to E-Z Serve, 100 shares of Common Stock of Titan, par value $10 per share, which constitutes all of the issued and outstanding shares of Titan (the "Titan Stock") for $800,000 payable in immediately available funds at the Closing (as hereinafter defined) as -2- 7 follows: (i) $400,000 to Taylor; (ii) $200,000 to the April Trust; and (iii) $200,000 to the Kerri Trust. 1.2 The Closing Date. The closing (the "Closing") shall take place at the offices of Bracewell & Patterson, 2900 South Tower Pennzoil Place, Houston, Texas 77002, at 10:00 a.m. (Central Standard Time) on March 25, 1992 or such other date or time as E-Z Serve and the Shareholders may agree to in writing (the "Closing Date"). All of the actions taken and documents executed and delivered at the Closing shall be deemed to be taken, executed and delivered simultaneously. ARTICLE 2 Representations and Warranties by the Shareholders The Shareholders hereby, jointly and severally, represent and warrant to E-Z Serve as follows: 2.1 Organization and Existence of Dart; Capitalization. Dart is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas. The total authorized capital stock of Dart consists of 100,000 shares of common stock, par value $10 per share, of which 1,000 shares are outstanding, validly issued, fully paid and nonassessable and beneficially owned by Taylor, free and clear of all security interests, liens, charges, encumbrances and rights of others. Except as set forth in Schedule 2.1, there are no outstanding subscriptions, options, voting trusts, rights, warrants, calls, restrictions, commitments or agreements relating to shares of the capital stock of Dart to which Dart or Taylor is a party. Except as set forth in -3- 8 Schedule 2.1, there are no preemptive rights, preferential rights to purchase or other restrictions or encumbrances on the transfer, issuance, sale or voting of any shares of the capital stock of Dart. In the event that any such rights or restrictions exist, Taylor shall deliver to E-Z Serve at the Closing documents evidencing the removal or permanent waiver of such rights or restrictions. Other than as set forth in Schedule 2.1, there are no existing rights with respect to registration under the Securities Act of 1933, as amended (the "Securities Act"), of any of the capital stock of Dart. No shares of capital stock of Dart that have been issued were issued in violation of the preemptive or other restrictive rights of any person. 2.2 Organization and Existence of TPI; Capitalization. TPI is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas. The total authorized capital stock of TPI consists of 5,000 shares of common stock, par value $100 per share, of which 2,550 shares are outstanding, all of which are fully paid and non-assessable and owned beneficially and of record by Dart. There are no outstanding subscriptions, options, voting trusts, rights, warrants, calls, restrictions, encumbrances, commitments or agreements relating to shares of the capital stock of TPI, except as set forth in Schedule 2.2. Except as set forth in Schedule 2.2, Dart does not own or control any capital stock, bonds, or other securities of, and does not have any proprietary interest in, any other corporation or business entity; and, other than TPI, Dart does not control the management or policies of any corporation or business entity or "control" any corporation or business entity -4- 9 within the meaning of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 2.3 Organization and Existence of Titan; Capitalization. Titan is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas. The total authorized capital stock of Titan consists of 50,000 shares of common stock, $10 par value per share, of which 100 shares are outstanding, validly issued, fully paid and nonassessable and beneficially owned by the Shareholders, free and clear of all security interests, liens, charges, encumbrances and rights of others. Except as set forth in Schedule 2.3, there are no outstanding subscriptions, options, voting trusts, rights, warrants, calls, restrictions, commitments or agreements relating to shares of the capital stock of Titan or to which Titan or any of the Shareholders is a party. Except as set forth in Schedule 2.3, there are no preemptive rights, preferential rights to purchase or other restrictions or encumbrance on the transfer, issuance, sale or voting of any shares of the capital stock of Titan. In the event that any such rights or restrictions exist, the Shareholders shall deliver to E-Z Serve at the Closing documents evidencing the removal or permanent waiver of such rights or restrictions. Other than as set forth in Schedule 2.3, there are no existing rights with respect to registration under the Securities Act of any of the capital stock of Titan. No shares of capital stock of Titan that have been issued were issued in violation of the preemptive or other restrictive rights of any person. Except as set forth in Schedule 2.3, Titan does not own or control any capital stock, bonds, or other securities of, and does not have any proprietary interest in, any corporation or business entity; and Titan does not -5- 10 control the management or policies of any corporation or business entity or "control" any corporation or business entity within the meaning of the Exchange Act. 2.4 Qualification of the Companies. Each of Dart, Titan and TPI (hereinafter sometimes referred to, collectively, as the "Companies" and, individually, as the "Company") does business in the states listed in Schedule 2.4 and is duly qualified to do business and is in good standing under the laws of such states. Each Company has full corporate power and lawful corporate authority to carry on its business as presently conducted and to own and operate its assets and business. The copies of the charter documents of each Company and all amendments thereto (certified by the Secretary of State of Texas) and of its by-laws, as amended to date (certified by its secretary), which have been delivered to E-Z Serve, are true, complete and correct. 2.5 Financial Statements. Attached hereto as Schedule 2.5 are copies of the following described financial statements: the separate unconsolidated and audited combined balance sheets of the Taylor Companies with supporting schedules on each of the Companies as at October 31, 1991, and the related statements of income or loss, and stockholders' equity of the Companies for the twelve months ended October 31, 1991, together with an unqualified report thereon by KPMG Peat Marwick (the "Financial Statements"). Such Financial Statements present fairly the financial position of the Companies as of the periods indicated, all in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods indicated. -6- 11 2.6 No Adverse Changes. Except as set forth in Schedule 2.6, there has not been since April 30, 1991: (a) any changes in the financial condition or business of any of the Companies except changes in the ordinary course of business which have not in any one case or in the aggregate been Materially adverse to any of the Companies or any of their operations; (b) any damage, destruction or loss (whether or not covered by insurance) Materially and adversely affecting any of the assets or business of any of the Companies; (c) any change in the accounting methods or practices followed by any of the Companies or any change in depreciation, amortization or inventory valuation policies or rates theretofore used or adopted; (d) any sale, lease, transfer, mortgage, pledge, hypothecation, license, abandonment or other disposition by any of the Companies of any interest in real, personal or intellectual property (including, but not limited to, any patent, technology, software or trademark), or of any vehicle, machinery, equipment or other operating property with book value or sale price (whichever is greater) of $10,000 or more, except in the ordinary course of business; (e) any declaration, setting aside or payment of any dividend or other distribution on or in respect of shares of the capital stock of any of the Companies or any direct or indirect redemption, retirement, purchase or other acquisition by any of the Companies of any such shares or of any option or other right to acquire any such shares; -7- 12 (f) any grant of options or other rights to purchase shares of capital stock of any of the Companies; (g) any other occurrences or events which, alone or in the aggregate, have Materially and adversely affected or may Materially and adversely affect any of the assets, operations or businesses of any of the Companies. For purposes of this Agreement, "Materially", "Material" and any derivation thereof means in reference to items, occurrences, claims or matters, those items, occurrences, claims or matters that are, singly or in the aggregate, in excess of $50,000; or (h) any change in any of the working capital management, policies or practices of the Companies, including, but not limited to, any acceleration in the collection of receivables or delay in the payment of payables. 2.7 Fees. Except for the fees paid to KPMG Peat Marwick for the audit of the Financial Statements described in Section 2.5, which audit shall be paid for by the Companies, and except for such other fees set forth on Schedule 2.7, which fees will be paid by the Companies, none of the Companies has any liability or obligation for, or has made any payments for, accounting, consulting, investment banking or legal fees, or other fees, expenses or charges of professional advisors in connection with the negotiation, preparation, execution or performance of this Agreement or the transactions contemplated hereby. Except as set forth in this Section 2.7, any such fees shall be paid by the Shareholders. -8- 13 2.8 Taxes. The Companies have duly and timely filed all federal, state and local tax reports and returns required to be filed by the Companies, and all taxes and levies of every kind, character or description, shown by such reports or returns to be due and payable, and all other taxes and levies which are otherwise due and payable, have been paid when due. 2.9 Litigation. There are no actions, suits or proceedings pending or, except as set forth in Schedule 2.9, threatened against the Companies at law or in equity or before or by any governmental authority or instrumentality, or before any arbitrator of any kind, either with respect to any of the transactions contemplated hereby or which, if adversely determined, would have a Material adverse effect on the Companies. 2.10 Compliance with Laws. Except as set forth in Schedule 2.10, each of the Companies has complied with all laws and governmental regulations and orders (including, but not limited to those promulgated by the U.S. Immigration and Naturalization Service and those relating to the employment of aliens) relating to any of the property (real or personal, tangible or intangible) owned, leased or used by it, or applicable to its business, including, but not limited to, the labor, equal employment opportunity, occupational safety and health, environmental and antitrust laws. 2.11 No Default. Except as set forth on Schedule 2.11, the execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, will not (a) result in the breach of any of the terms of, or constitute a default under, the charter documents or by-laws of any of the Companies, or (b) result in the breach of any of the terms of, or constitute a -9- 14 default under, any contract, agreement, commitment, lease or other obligation which any of the Companies is now a party or by which it or any of its assets may be bound or affected, except as indicated on any Schedule hereto with respect to the need for any consent by any other party to any such contract, agreement, commitment, lease or other obligation. 2.12 Real Property. The leases of real property listed on Schedule 2.12 to which any of the Companies is a party are legally valid and binding and in full force and effect, and there are no defaults thereunder that will result in payments by any of the Companies (whether for costs of correction, damages or otherwise) in excess of $10,000 in the aggregate. No party to any such lease has threatened to terminate it on account of any breach (actual or alleged). Except as set forth in Schedule 2.12, the Companies have the right to quiet enjoyment of all real property leased to them for the full term of such lease and any renewal option relating thereto, and no leasehold or other interest of any of the Companies, relating to or affecting real property or any interest therein, is subject or subordinate to any security interest or mortgage, or subject to any other easement, covenant, restriction, encroachment or burden except for items that do not Materially and adversely detract from the value to any of the Companies of such property for the purposes for which it is now used. None of the rights of any of the Companies under any leasehold or other interest in real property listed in Schedule 2.12, will be impaired by the consummation of the transactions contemplated by this Agreement, and all of such rights will be enforceable by the Companies after the Closing without the consent or agreement -10- 15 of any other person, except consents and agreements specifically described in Schedule 2.12. 2.13 Authority and Approval. Except as set forth in Schedule 2.13: (i) each of Taylor, the April Trust and the Kerri Trust has the power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, (ii) the execution and delivery of this Agreement by the April Trust and the Kerri Trust and the consummation of the transactions contemplated hereby have been duly authorized and approved, and no other act, approval or proceedings on the part of Taylor, the April Trust or the Kerri Trust is required to authorize the execution and delivery of this Agreement by them or the consummation of the transactions contemplated hereby, and (iii) this Agreement constitutes the valid and binding obligation of Taylor, the April Trust and the Kerri Trust enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors' rights generally and by general principles of equity (whether applied in a proceeding at law or in equity). 2.14 Investment. Taylor represents and warrants to, and covenants and agrees with, E-Z Serve that the E-Z Serve Stock to be acquired by him hereunder is being acquired for his own account and with no intention of distributing or reselling the E-Z Serve Stock in any transaction which would be in violation of the securities laws of the United States of America or any state thereof, without prejudice, however, to Taylor's right at all times to sell or otherwise dispose of all or any part of the E-Z Serve Stock under a registration statement under -11- 16 the Securities Act or under an exemption from such registration available under the Securities Act and subject, nevertheless, to the disposition of Taylor's property being at all times within his control. If Taylor should in the future decide to dispose of any of the E-Z Serve Stock, Taylor understands and agrees that he may do so only if he obtains an opinion of counsel, satisfactory to E-Z Serve, that such transfer will not cause E-Z Serve's acquisition of the stock of Dart to be disqualified from treatment as a tax-free reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code"), and (i) that he may do so only (A) in compliance with the Securities Act, as then in effect, and (B) in the manner contemplated by any registration statement pursuant to which such securities are being offered, and (ii) that stop-transfer instructions to that effect will be in effect with respect to such securities. Taylor agrees to the imprinting, so long as appropriate, of the legends set forth below: THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED SECURITIES. EXCEPT FOR SALES OR OTHER DISPOSITIONS PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS (THE "ACTS"), SUCH SHARES MAY NOT BE SOLD OR OTHERWISE DISPOSED OF BY ANY HOLDER HEREOF UNLESS PRIOR TO SELLING OR OTHERWISE DISPOSING OF ANY SUCH SHARES, SUCH HOLDER DELIVERS TO THE COMPANY PRIOR TO THE DISPOSITION AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE ACTS. Taylor represents and warrants to, and covenants and agrees with, E-Z Serve that by reason of his business and financial experience he has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the E-Z Serve Stock, is able to bear the economic risk of such investment and would -12- 17 be able to afford a complete loss of such investment. Taylor represents and warrants to E-Z Serve that he has received and reviewed (i) E-Z Serve's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on October 3, 1990, as amended, and the Prospectus dated March 22, 1991 constituting a part of such Registration Statement, (ii) each of E-Z Serve's Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and Schedule 13Ds that E-Z Serve is required to file pursuant to the Exchange Act and E-Z Serve's Annual Report on Form 10-K for the year ended December 31, 1991 (the documents listed in clauses (i) and (ii) are hereinafter collectively referred to as the "E-Z Serve Documents"), and (b) all of the other information, if any, requested by Taylor from E-Z Serve, and that Taylor believes that the E-Z Serve Documents and such other information are sufficient to enable Taylor to make an informed decision with respect to his investment in the E-Z Serve Stock. 2.15 Brokerage Arrangements. The Shareholders have not entered (directly or indirectly) into any agreement with any person, firm or corporation that would obligate E-Z Serve or, except as set forth in Section 2.7, any of the Companies to pay any commission, brokerage or "finder's fee" in connection with the transactions contemplated herein. 2.16 No Misleading Statements. The representations and warranties of the Shareholders contained in this Agreement, the Schedules hereto and all other documents and information furnished to E-Z Serve and its representatives pursuant hereto do not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. -13- 18 ARTICLE 3 Representations and warranties by E-Z Serve E-Z Serve hereby represents and warrants to each of the Shareholders as follows: 3.1 Organization and Existence of E-Z Serve; Capitalization. E-Z Serve is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The total authorized capital stock of E-Z Serve consists of (a) 100,000,000 shares of common stock, par value $0.01 per share, of which as of the Closing Date, 9,609,234 shares were outstanding and issued, (b) 10,000,000 shares of preferred stock, $0.01 par value per share, of which (i) 200,000 shares have been designated as $6.00 Convertible Preferred Stock, Series C ("Series C Stock"), of which 66,924 shares of Series C Stock are issued and outstanding as of the Closing Date, (ii) 25,000 shares have been designated as Series B Convertible Preferred Stock, of which as of the Closing Date, all will be issued and outstanding and (iii) 100,000 shares have been designated as $6.00 Convertible Preferred Stock, Series A ("Series A Stock"), of which as of the Closing Date none will be issued and outstanding. Except as set forth in the E-Z Serve Documents, the Series B Convertible Preferred Stock Purchase Agreement dated as of the date hereof among E-Z Serve and the investors named therein, and the Preferred Stock Exchange Agreement dated the date hereof between the Company and Harken Energy Corporation (the "Exchange Agreement"), there are no (i) outstanding subscriptions, options, voting trusts, rights, warrants, calls, restrictions, commitments or agreements relating to shares of the capital stock of E-Z Serve to which E-Z Serve is a party or (ii) preemptive -14- 19 rights, preferential rights to purchase or other restrictions or encumbrances on the transfer, issuance, sale or voting of any shares of the authorized capital stock of E-Z Serve. Other than as set forth in the E-Z Serve Documents, the Registration Rights Agreement dated as of the date hereof among E-Z Serve and the other parties named therein, the Common Stock Registration Rights Agreement dated as of the date hereof between E-Z Serve and Taylor, the Common Stock Registration Rights Agreement between E-Z Serve and Herbert W. Hitchings and the Exchange Agreement, there are no existing rights with respect to registration under the Securities Act of any of the capital stock of E-Z Serve. No shares of capital stock of E-Z Serve that have been issued were issued in violation of the preemptive or other restrictive rights of any person. 3.2 Qualification of E-Z Serve. E-Z Serve does business in the states listed in Schedule 3.2 and is duly qualified to do business and is in good standing under the laws of such states. E-Z Serve has full corporate power and lawful corporate authority to carry on its business as presently conducted and to own and operate its assets and business. The copies of the charter documents of E-Z Serve and all amendments thereto (certified by the Secretary of State of Delaware) and of its by-laws, as amended to date (certified by its secretary), which have been delivered to the Shareholders, are true, complete and correct. 3.3 Authority and Approval. E-Z Serve has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. E-Z Serve is acquiring the Dart Stock and the Titan Stock for its own account for investment purposes and not with a view to distribution. The execution and delivery of this Agreement by E-Z Serve and the -15- 20 consummation of the transactions contemplated hereby have been duly authorized and approved by its Board of Directors. No other act, approval or proceedings on the part of E-Z Serve or the holders of any class of its equity securities is required to authorize the execution and delivery of this Agreement by E-Z Serve or consummation of the transactions contemplated hereby. This Agreement constitutes the valid and binding obligation of E-Z Serve enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors' rights generally and by general principles of equity (whether applied in a proceeding at law or in equity). 3.4 E-Z Serve Stock. The E-Z Serve Stock to be issued to the Shareholders hereunder has been duly authorized for issuance by all necessary corporate action on the part of E-Z Serve. Such shares of E-Z Serve Stock will be fully paid and non-assessable, free and clear from any liens or encumbrances except as specifically set forth in Section 3.1. 3.5 Litigation. There are no actions, suits or proceedings pending or, except as set forth in Schedule 3.5, threatened against E-Z Serve at law or in equity or before or by any governmental authority or instrumentality, or before any arbitrator of any kind, either with respect to any of the transactions contemplated hereby or which, if adversely determined, would have a Material adverse effect on E-Z Serve. 3.6 No Adverse Changes. Except as set forth in Schedule 3.6, there has not been since E-Z Serve's third fiscal quarter ended September 30, 1991: -16- 21 (a) any changes in the financial condition or business of E-Z Serve except changes in the ordinary course of business which have not in any one case or in the aggregate been Materially adverse to E-Z Serve or any of its operations; (b) any damage, destruction or loss (whether or not covered by insurance) Materially and adversely affecting any of the assets or business of E-Z Serve; (c) any change in the accounting methods or practices followed by E-Z Serve or any change in depreciation, amortization or inventory valuation policies or rates theretofore used or adopted; (d) any sale, lease, transfer, mortgage, pledge, hypothecation, license, abandonment or other disposition by E-Z Serve of any material interest in real, personal or intellectual property (including, but not limited to, any patent, technology, software or trademark), or of any vehicle, machinery, equipment or other operating property with book value or sale price (whichever is greater) of $10,000 or more, except in the ordinary course of business; (e) any declaration, setting aside or payment of any dividend or other distribution on or in respect of shares of the capital stock of E-Z Serve or any direct or indirect redemption, retirement, purchase or other acquisition by E-Z Serve of any such shares or of any option or other right to acquire any such shares; (f) any grant of options or other rights to purchase shares of capital stock of E-Z Serve; or -17- 22 (g) any other occurrences or events which, alone or in the aggregate, have Materially and adversely affected or may Materially and adversely affect any of the assets, operations or businesses of E-Z Serve. 3.7 No Default. Except as set forth on Schedule 3.7, the execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, will not (a) result in the breach of any of the terms of, or constitute a default under, the charter documents or by-laws of E-Z Serve, or (b) result in the breach of any of the terms of, or constitute a default under, any contract, agreement, commitment, or other obligation which E-Z Serve is now a party or by which it or any of its assets may be bound or affected, except as indicated on any Schedule hereto with respect to the need for any consent by any other party to any such contract, agreement, commitment, or other obligation. 3.8 Brokerage Arrangements. E-Z Serve has not entered (directly or indirectly) into any agreement with any person, firm or corporation that would obligate the Shareholders to pay any commission, brokerage or "finder's fee" in connection with the transactions contemplated herein. 3.9 No Misleading Statements. The representations and warranties of E-Z Serve contained in this Agreement, the Schedules hereto and all other documents and information furnished to the Shareholders and their representatives pursuant hereto do not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. -18- 23 3.10 Compliance with Laws. Except as set forth in Schedule 3.10, E-Z Serve has complied with all laws and governmental regulations and orders (including, but not limited to those promulgated by the U.S. Immigration and Naturalization Service and those relating to the employment of aliens) relating to any of the property (real or personal, tangible or intangible) owned, leased or used by it, or applicable to its business, including, but not limited to, the labor, equal employment opportunity, occupational safety and health, environmental and antitrust laws. ARTICLE 4 Certain Covenants and Agreements 4.1 Access. Each party hereto agrees that they will, upon reasonable notice, give to the other parties, their counsel, accountants and employees who need access to such information, full access, during normal business hours throughout the period prior to the Closing Date, to the properties, books, contracts and records of the other relating to their assets or business operations. Each party agrees that it will, and will cause its employees to, hold in strict confidence all information so obtained hereby, agrees that such information is proprietary to the other party and if the transactions herein provided for are not consummated as contemplated herein, agrees that it shall not disclose such information to any third parties or use such information for itself or on behalf of others, or allow its employees to use or disclose any of such information, except to the extent that such information is otherwise publicly known or as required by law to be disclosed. Each party further agrees that it shall require its employees, agents and representatives having access to such -19- 24 information to comply with these obligations and to return promptly all such information. 4.2 Permits and Licenses. The Shareholders will comply with required procedures and cooperate with E-Z Serve to enable E-Z Serve to obtain licenses and permits to sell liquor, beer and wine at the retail gasoline marketing locations and convenience stores owned or leased by any of the Companies or to which any of the Companies has certain operating rights, as listed on Schedule 4.2 hereto (the "Locations"), as soon as possible after the Closing Date. Taylor and E-Z Serve shall cooperate in effecting the transfer to E-Z Serve, or its designee, of inventories of beer and wine located at each Location. 4.3 Title to Properties. No later than 90 days after the Closing Date, the Shareholders shall, at their own cost and expense, with respect to each property leased by any of the Companies (the "Properties"), furnish or cause to be furnished to the Companies a "nothing further certificate" showing changes to the title to such properties from the date of issuance of the Owner's Policy of Title Insurance held by the then current owner of such properties. The Shareholders shall during a period of 120 days after the Closing Date (a) cure any title defect that is a lien on any of the Properties, and (b) have the option to cure any other type of title defect, encumbrance or objection identified by E-Z Serve that adversely affects, in the opinion of E-Z Serve, any of the Properties. If the Shareholders have not, to the satisfaction of E-Z Serve, cured any title defect, encumbrance or objection (a "Defect") within such 120-day period, E-Z Serve may elect (x) in the case of a lease that has a Defect and of which any of the Shareholders is a lessor, to terminate such lease without any -20- 25 further obligation to the Companies, and (y) in all other cases, to assign any lease that has a Defect to any Shareholder or its assignee without retaining any obligation therefor. E-Z Serve shall give notice of such termination or assignment to the Shareholders and the Shareholders shall, within 10 days of such notice, transfer such number of shares of E-Z Serve Stock as shall equal in value the value of the property to which the terminated or assigned lease relates. For the purposes of this Section, (a) the value of the E-Z Serve Stock shall be deemed to be $1.90 per share, and (b) the value of each of the Properties shall be such as is set forth on Schedule 4.3. 4.4 UST Registration. Within 30 days following the Closing Date, the Shareholders shall take, at their own cost and expense, such action as may be necessary to cause the underground storage tanks relating to properties not being leased by E-Z Serve or any of the Companies not to be registered in the name of E-Z Serve or any of the Companies. 4.5 Personal Guarantee. Taylor shall, upon the written request of E-Z Serve, issue a personal guarantee for the benefit of any of the Companies' suppliers of motor fuels that are not, prior to the Closing Date, suppliers of E-Z Serve; provided, however, that no such personal guarantee, which shall be in such form as is acceptable to the suppliers for whose benefit it is issued, shall extend beyond the first anniversary date of the issuance of such personal guarantee. -21- 26 ARTICLE 5 Conditions to Closing 5.1 E-Z Serve's Obligations. The obligations of E-Z Serve at the Closing are subject to the following conditions: (a) The representations and warranties of the Shareholders shall be true, complete and correct when made, and, in addition, shall be true, complete and correct on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date; (b) Each of the Shareholders shall have performed all obligations and agreements and complied with all covenants and conditions contained in this Agreement to be performed and complied with by them on or prior to the Closing Date and E-Z Serve shall have received a certificate from each of the Shareholders, dated the Closing Date, to such effect; (c) E-Z Serve shall have received a favorable opinion of Gibson, Ochsner & Adkins, L.L.P., counsel to the Shareholders, dated the Closing Date, in form and substance reasonably satisfactory to E-Z Serve and its counsel; (d) Taylor shall have executed and delivered a Consulting Agreement, which contains a non-competition covenant; (e) The consents, waivers, approvals, licenses and authorizations of third parties or governmental authorities or any amendments or modifications to existing agreements with third parties required to consummate the transactions contemplated hereby that are -22- 27 listed in Schedule 5.1(e) shall have been duly obtained on terms and conditions reasonably satisfactory to E-Z Serve; (f) The leases of the real and personal properties listed on Schedule 5.1(f) shall have been cancelled and new leases of such properties shall have been executed by the respective lessors and TPI as lessee, and delivered at the Closing to E-Z Serve (the "New Leases"); (g) The Shareholders shall have delivered to E-Z Serve, at the Closing, certificates or other documentation evidencing that none of the Companies are guarantors of, nor are otherwise obligated under, any mortgages, bank loans, or other indebtedness relating to any loans or other obligations of the Shareholders, or related to the Locations or other properties of the Companies; (h) The Companies shall not have any bank indebtedness exceeding in the aggregate $2 million; (i) No shares of capital stock of Salt Fork Company, Inc. ("Salt Fork") shall be owned by Dart; (j) Dart shall have transferred its intercompany accounts to Salt Fork as a contribution to capital; and (k) TPI shall have transferred its wholesale gasoline business, including, except as set forth in the Receivables Agreement of even date herewith between TPI and Salt Fork, all assets and liabilities associated therewith, to Salt Fork. 5.2 Obligations of the Shareholders. The obligations of the Shareholders at the Closing are subject to the following conditions: -23- 28 (a) The representations and warranties of E-Z Serve shall be true, complete and correct when made, and, in addition, shall be true, complete and correct on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date; (b) E-Z Serve shall have performed all obligations and agreements and complied with all covenants and conditions contained in this Agreement to be performed and complied with by E-Z Serve on or prior to the Closing Date and the Shareholders shall have received a certificate from E-Z Serve, dated the Closing Date, to such effect; (c) The Shareholders shall have received a favorable opinion of Bracewell & Patterson, dated the Closing Date, in form and substance reasonably satisfactory to the Shareholders and their counsel; (d) The consents, waivers, approvals, licenses and authorizations of third parties or governmental authorities or any amendments or modifications to existing agreements with third parties required to consummate the transactions contemplated hereby that are listed in Schedule 5.2(d) shall have been duly obtained on terms and conditions reasonably satisfactory to the Shareholders; and (e) The leases of the real and personal properties listed on Schedule 5.1(f) shall have been cancelled and the New Leases shall have been executed and delivered at the Closing. -24- 29 ARTICLE 6 Tax Matters 6.1 Liability for Taxes. (a) For purposes of this Agreement, "Taxes" means (i) all federal, foreign, state or local net or gross income, gross receipts, sales, use, real property gains or transfer, ad valorem, property, value-added, franchise, production, severance, windfall profit, withholding, payroll, employment, excise or similar taxes, assessments, duties, fees, levies or other governmental charges, together with any interest thereon, any penalties, additions to tax or additional amounts with respect thereto and any interest in respect of such penalties, additions or additional amounts, and (ii) liability for the payment of any consolidated or combined tax (including, without limitation, any liability imposed pursuant to Treasury Regulations Section 1.1502-6 as a result of being a member of the Seller Group), together with any interest thereon, any penalties, additions to tax or additional amounts with respect thereto and any interest in respect of such penalties, additions or additional amounts, of the type described in clause (i) above. (b) The Shareholders shall be liable for, and shall indemnify and hold E-Z Serve and its affiliates harmless from, (1) any Taxes caused by or resulting from the transfer of the Dart Stock and the sale of the Titan Stock, (2) any Taxes (other than Taxes described in clause (1) above) imposed on or incurred by the Companies for any taxable period ending on or before March 1, 1992 (the "Effective Date") (or the portion, determined as described in clause (d) of this Section 6.1, of any such Taxes imposed on or -25- 30 incurred by the Companies for any taxable period beginning on or before and ending after the Effective Date which is allocable to the portion of such period occurring on or before the Effective Date (the "Pre-Effective Date Period")), excluding (i) any such Taxes caused by or resulting from any actual or deemed election pursuant to Section 338 of the Code with regard to the transfer of the Dart Stock and the sale of the Titan Stock, (ii) any such Taxes that have been reflected as current accrued tax liabilities on the balance sheet of the Companies as of the Effective Date, and (iii) any Taxes caused by or resulting from the satisfaction of the condition set forth in Section 5.1(i), (3) any attorneys' fees or other litigation costs incurred by E-Z Serve, the Companies, or any affiliate thereof in connection with any payment from the Shareholders under this clause (b) of Section 6.1, (4) any Taxes payable as a result of any breach by the Shareholders of any representation set forth herein and (5) any sales, use, real property transfer or gain or similar Taxes arising from the transactions contemplated in this Agreement. (c) E-Z Serve shall be liable for, and shall indemnify and hold the Shareholders harmless from, (1) any Taxes caused by or resulting from any actual or deemed election pursuant to Section 338 of the Code with regard to the acquisition of the Dart Stock and Titan Stock (2) any Taxes imposed on or incurred by the Companies for which the Shareholders are not liable under clause (b) of this Section 6.1 and (3) any attorneys' fees or other litigation costs incurred by the Shareholders in connection with any payment from E-Z Serve under this clause (c) of Section 6.1. -26- 31 (d) Whenever it is necessary for purposes of clause (b) or (c) of this Section 6.1 to determine the portion of any Taxes imposed on or incurred by the Companies for a taxable period beginning on or before and ending after the Effective Date which is allocable to the Pre-Effective Date Period, the determination shall be made, in the case of property or ad valorem Taxes or franchise Taxes (which are not measured by, or based upon, net income), on a per diem basis and, in the case of other Taxes, by assuming that the Pre-Effective Date Period constitutes a separate taxable period of the Companies and by taking into account the actual taxable events occurring during such period (except that exemptions, allowances and deductions for a taxable period beginning on or before and ending after the Effective Date that are calculated on an annual or periodic basis, such as the deduction for depreciation, shall be apportioned to the Pre-Effective Date Period ratably on a per diem basis). 6.2 Tax Proceedings. In the event E-Z Serve or any of its affiliates receives notice (the "Proceeding Notice") of any examination, claim, adjustment, or other proceeding with respect to the liability of the Companies for Taxes for any period for which the Shareholders are or may be liable under clause (b) of Section 6.1, E-Z Serve shall notify the Shareholders in writing thereof (the "E-Z Serve Notice") no later than the earlier of (i) 30 days after the receipt by E-Z Serve or any of its affiliates of the Proceeding Notice or (ii) ten days prior to the deadline for responding to the Proceeding Notice. As to any such Taxes for which the Shareholders are solely liable under clause (b) of Section 6.1, the Shareholders shall be entitled at their expense to control or settle the contest of such examination, claim, adjustment, or other proceeding, provided (a) it -27- 32 notifies E-Z Serve in writing that it desires to do so no later than the earlier of (i) 30 days after receipt of the E-Z Serve Notice or (ii) five days prior to the deadline for responding to the Proceeding Notice and (b) it may not, without the consent of E-Z Serve, agree to any settlement which could result in an increase in the amount of Taxes for which E-Z Serve is liable under clause (c) of Section 6.1. The parties shall cooperate with each other and with their respective affiliates, and will consult with each other, in the negotiation and settlement of any proceeding described in this Section 6.2. E-Z Serve will provide, or cause to be provided, to the Shareholders necessary authorizations, including powers of attorney, to control any proceedings which the Shareholders are entitled to control pursuant to this Section 6.2. 6.3 Payment of Taxes. All Taxes with respect to the Companies shall be paid by the party that is legally responsible therefor. Except as otherwise provided in this Article 6, any amount to which a party is entitled under this Article 6 shall be promptly paid to such party by the party obligated to make such payment following written notice to the party so obligated stating that the Taxes to which such amount relates have been paid or incurred and providing details supporting the calculation of such amount. 6.4 Survival of Obligations. The obligations of the parties set forth in this Article 6 shall be unconditional and absolute and shall remain in effect without limitation as to time. 6.5 Limitation on Tax Indemnity. E-Z Serve shall not be liable for any amount of Taxes that may be payable pursuant to Section 6.1(b)(2)(iii) that exceed in the aggregate $1 million. -28- 33 6.6 Conflict. In the event of a conflict between the provisions of this Article 6 and any other provisions of this Agreement, the provisions of this Article 6 shall control. The provisions of Article 7 shall not apply to any Taxes for which any party is liable under this Article 6. ARTICLE 7 Indemnification 7.1 Indemnification of the Shareholders. E-Z Serve, from and after the Closing Date, shall indemnify and hold the Shareholders harmless from and against any and all damages (including exemplary damages and penalties), losses, deficiencies, costs, expenses, obligations, fines, expenditures, claims and liabilities, including reasonable counsel fees and reasonable expenses of investigation, defending and prosecuting litigation (collectively, the "Damages"), suffered by the Shareholders as a result of, caused by, arising out of, or in any way relating to (a) any misrepresentation, breach of warranty, or nonfulfillment of any agreement or covenant on the part of E-Z Serve under this Agreement or any misrepresentation in or omission from any list, schedule, certificate, or other instrument furnished or to be furnished to the Shareholders by E-Z Serve pursuant to the terms of this Agreement, and (b) any liability or obligation (other than those for which E-Z Serve is being indemnified by the Shareholders hereunder) which pertains to the ownership, operation or conduct of the businesses or affairs of the Companies arising from any acts, omissions, events, conditions or circumstances occurring after the Effective Date. 7.2 Indemnification of E-Z Serve. The Shareholders, from and after the Closing Date, shall indemnify and hold the Companies and E-Z Serve harmless -29- 34 from and against any and all Damages suffered by any of the Companies or E-Z Serve as a result of, caused by, arising out of, or in any way relating to: (a) any misrepresentation, breach of warranty, or nonfulfillment of any agreement or covenant on the part of the Shareholders under this Agreement or any misrepresentation in or omission from any list, schedule, certificate, or other instrument furnished or to be furnished to E-Z Serve by any of the Shareholders or any of the Companies pursuant to the terms of this Agreement; (b) any liability or obligation which pertains to the ownership, operation or conduct of the business or affairs of the Companies arising from any acts, omissions, events, conditions or circumstances occurring or existing on or prior to the Effective Date, including, without limitation, those matters disclosed on any Schedule hereto, other than (i) any liability reserved for or recorded on the Financial Statements and (ii) any liability incurred since October 31, 1991 in the ordinary course of business for the purchase of goods or services; (c) an assignment of any lease pursuant to Section 4.3; and (d) any Environmental Cleanup Liability (as hereinafter defined). 7.3 Demands. Each indemnified party hereunder agrees that promptly upon its discovery of facts giving rise to a claim for indemnity under the provisions of this Agreement, including receipt by it of notice of any demand, assertion, claim, action or proceeding, judicial or otherwise, by any third party (such third party actions being collectively referred to herein as the "Claim"), with respect to any matter as to which it claims to be entitled to indemnity under the provisions of this Agreement, it will give prompt notice thereof in writing to the indemnifying party, together with a statement of such information -30- 35 respecting any of the foregoing as it shall have. Such notice shall include a formal demand for indemnification under this Agreement. The indemnifying party shall not be obligated to indemnify the indemnified party with respect to any Claim if the indemnified party knowingly failed to notify the indemnifying party thereof in accordance with the provisions of this Agreement in sufficient time to permit the indemnifying party or its counsel to defend against such matter and to make a timely response thereto including, without limitation, any responsive motion or answer to a complaint, petition, notice or other legal, equitable or administrative process relating to the Claim, only insofar as such knowing failure to notify the indemnifying party has actually resulted in prejudice or damage to the indemnifying party. The Shareholders hereby acknowledge notice of indemnity from E-Z Serve and the Companies with regards to the Claims set forth in the Schedules attached to this Agreement. 7.4 Right to Contest and Defend. The indemnifying party is entitled at its cost and expense to contest and defend by all appropriate legal proceedings any Claim with respect to which it is called upon to indemnify the indemnified party under the provisions of this Agreement; provided, that notice of the intention so to contest shall be delivered by the indemnifying party to the indemnified party within 20 days from the date of receipt by the indemnifying party of notice by the indemnified party of the assertion of the Claim. Any such contest may be conducted in the name and on behalf of the indemnifying party or the indemnified party as may be appropriate. Such contest shall be conducted by reputable counsel employed by the indemnifying party, but the indemnified party shall have the right but not the obligation to participate in such proceedings -31- 36 and to be represented by counsel of its own choosing at its sole cost and expense. The indemnifying party shall have full authority to determine all action to be taken with respect thereto; provided, however, that the indemnifying party will not have the authority to subject the indemnified party to any obligation whatsoever, other than the performance of purely ministerial tasks or obligations not involving material expense. If the indemnifying party does not elect to contest any such claim, the indemnifying party shall be bound by the result obtained with respect thereto by the indemnified party. At any time after the commencement of the defense of any Claim, the indemnifying party may request the indemnified party to agree in writing to the abandonment of such contest or to the payment or compromise by the indemnified party of the asserted Claim, whereupon such action shall be taken unless the indemnified party determines that the contest should be continued, and so notifies the indemnifying party in writing within 15 days of such request from the indemnifying party. If the indemnified party determines that the contest should be continued, the indemnifying party shall be liable hereunder only to the extent of the amount that the other party to the contested Claim had agreed unconditionally to accept in payment or compromise as of the time the indemnifying party made its request therefor to the indemnified party. 7.5 Cooperation. If requested by the indemnifying party, the indemnified party agrees to cooperate with the indemnifying party and its counsel in contesting any Claim that the indemnifying party elects to contest or, if appropriate, in making any counterclaim against the person asserting the Claim, or any cross-complaint against any person, but the indemnifying party will -32- 37 reimburse the indemnified party for any third party expenses incurred by it in so cooperating. At no cost or expense to the indemnified party, the indemnifying party shall cooperate with the indemnified party and its counsel in contesting any Claim. 7.6 Right to Participate. The indemnified party agrees to afford the indemnifying party and its counsel the opportunity to be present at, and to participate in, conferences with all persons, including governmental authorities, asserting any Claim against the indemnified party or conferences with representatives of or counsel for such persons. 7.7 Payment of Damages. The indemnifying party shall pay to the indemnified party in immediately available funds any amounts to which the indemnified party may become entitled by reason of the provisions of this Agreement, such payment to be made within five days after any such amounts are finally determined either by mutual agreement of the parties hereto or pursuant to the award of the arbitrator; provided, however, that with respect to any Damages that may be owed by the Shareholders, the Shareholders may, at their option, credit such amount of Damages to the payments owed by any of the Companies pursuant to the New Leases. In the event the Shareholders should, within such period of time, fail either to pay the amounts in immediately available funds or so credit the New Leases, then any of the Companies may offset such amounts from the amounts payable under the New Leases. 7.8 Limitations on Indemnification. (a) In connection with any Environmental Cleanup Liability (as hereinafter defined), the Shareholders shall not be liable for the amount -33- 38 of Damages that exceed in the aggregate $300,000. Further, with respect to any Environmental Cleanup Liability that arises in connection with underground storage tanks at any of the Locations that are located in a State that has an underground storage tank remediation reimbursement fund, the liability of the Shareholders for Damages shall be limited to the amounts not reimbursed to E-Z Serve pursuant to such fund. (b) The liability of the Shareholders for the breach of any of the representations and warranties by the Shareholders set forth in Article 2 shall be limited to claims for which E-Z Serve delivers written notice to the Shareholders on or before the third anniversary date of the Closing Date. (c) For purposes of this Agreement, "Environmental Cleanup Liability" means any cost or expense of any nature whatsoever incurred to contain, remove, remedy, clean up, or abate any deposit, emission, discharge, release or threatened release of hazardous substances, pollutants or contaminants from or on any of the Locations, including, without limitation, (i) any direct costs or expenses for investigation, study, assessment, legal representation, cost recovery by governmental agencies, or on-going monitoring in connection therewith, and (ii) any cost, expense, loss or damage incurred with respect to any of the Locations or its operation as a result of actions or measures necessary to implement or effectuate any such containment, removal, remediation, cleanup or abatement. -34- 39 (d) With regards to any Damages arising from the matters discussed under the captions "Sean P. Johnson vs. TPI," "Estate of Lorena Haynes" and "Estate of Barney Hudson" in Schedule 2.6(b), the liability of the Shareholders shall not exceed in the aggregate $2 million. (e) In determining the amount of any Damages for which any party is entitled to indemnification under this Agreement, the amount thereof will be reduced by any insurance proceeds realized by the indemnified party net of any insurance premium that becomes due as a result of the claim for which indemnity is sought. ARTICLE 8 Arbitration 8.1 Arbitration. The parties hereto agree that any controversy or claim arising out of or relating to a disagreement or dispute under this Agreement shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the "AAA"), and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof and shall be binding upon the parties hereto. The parties hereto agree that (a) any decision of the arbitrator shall be final, nonappealable and binding, (b) any arbitration proceeding or hearings in connection with any dispute hereunder shall be held in Houston, Texas and the hearing will commence within 30 days after receipt by the AAA of an arbitration notice, and (c) any fees of arbitration, reasonable attorneys' fees of the prevailing party and transcript costs, shall be paid by the unsuccessful party in the arbitration, unless otherwise determined by the arbitrator. The -35- 40 arbitration notice shall be sent from either the Shareholders to E-Z Serve or E-Z Serve to the Shareholders expressing the intention to arbitrate with the AAA a disagreement and the nature of the disagreement. Simultaneously therewith, the Shareholders or E-Z Serve, as the case may be, shall transmit three copies of the arbitration notice to the regional office of the AAA which includes within its boundaries Houston, Texas, along with three copies of this Agreement and the appropriate administrative fee, thereby submitting such dispute for arbitration. ARTICLE 9 Miscellaneous 9.1 Fees and Expenses. Whether or not the transactions contemplated hereby are consummated, each party shall bear its own fees and expenses incident to the negotiation, preparation and execution of this Agreement and the consummation of the transactions contemplated hereby, including the fees and expenses of its own counsel, accountants and other professionals. 9.2 Post-Closing Access. For a period of five years after the Closing, Taylor will have reasonable access to the records of any of the Companies covering any period prior to the Closing, at reasonable times during normal business hours and for any proper business purpose, at his sole cost and expense. 9.3 Public Statements. No party hereto shall, without the prior consent of the other parties hereto, issue or make any public announcement or statement regarding this Agreement and the transactions contemplated hereby unless required to do so in order to comply with requirements of applicable law, rule or regulation. In the event any party hereto is required to make any such -36- 41 public announcement or statement, it shall furnish a proposed text thereof to the other parties for their review and comments. 9.4 Interpretation. Wherever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under any applicable law, such provision shall be in effect only to the extent of such prohibition or invalidation, without invalidating the remainder of this Agreement. 9.5 Entire Agreement. This Agreement, including the Schedules hereto, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, among the parties hereto with respect to the subject matter hereof. 9.6 Notices. All notices which are required or may be given pursuant to the terms of this Agreement shall be in writing and shall be sufficient in all respects if given in writing and delivered by hand or express delivery service or mailed by registered or certified mail, postage prepaid, as follows: If to each Shareholder: Larry Jack Taylor 1515 Alabama Street Amarillo, Texas 79102 -37- 42 If to E-Z Serve: E-Z Serve Corporation 10700 North Freeway, Suite 500 Houston, Texas 77037 Attention: President or such other address as any party hereto shall have designated by notice in writing to the other parties hereto. All such notices given in compliance with the provisions of this Section shall be deemed to have been given when delivered or mailed. 9.7 Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. Neither this Agreement nor any of the parties' rights hereunder shall be assignable without the prior written consent of the other parties hereto. Notwithstanding the foregoing, at or after the Closing Date the Shareholders may assign their rights hereunder and under other documents and instruments contemplated herein to The First National Bank of Boston (the "Bank"); and provided further, that upon foreclosure or sale in lieu of foreclosure of the E-Z Serve Stock or a substantial portion thereof by or to the Bank, the warranties, representations, obligations, agreements and indemnities of the Shareholders and in the other documents and instruments contemplated herein shall inure to the benefit of the Bank or any purchaser or grantee of such E-Z Serve Stock. Notwithstanding any other provision of this Agreement, no stockholder, director, officer, employee or Trustee of any of the parties hereto shall have any liability under or by reason of this Agreement or the transactions contemplated hereby. -38- 43 9.8 Headings. The headings and titles to the Articles and Sections of this Agreement are inserted for convenience only and shall not be deemed a part hereof or affect the construction or interpretation of any provision hereof. 9.9 Modifications and Waivers. No termination, cancellation, modification, amendment, deletion, addition or other change in this Agreement or any provision thereof, or waiver of any right or remedy herein provided, shall be effective for any purpose unless specifically set forth in a writing signed by the party or parties to be bound thereby. The waiver of any right or remedy in respect of any occurrence or event on one occasion shall not be deemed a waiver of such right or remedy in respect of such occurrence or event on any other occasion. 9.10 Controlling Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 9.11 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which counterparts collectively shall constitute one instrument representing the agreement among the parties hereto. 9.12 Further Assurances. Each party hereto shall execute and deliver such instruments and take such other actions as any other party hereto may reasonably request in order to carry out the intent of this Agreement. 9.13 Combined Working Capital. For purposes of this Agreement, the parties have estimated that as at the Effective Date, the Combined Working Capital (as hereinafter defined) of the Companies was at least $(125,000). For the purposes of this Agreement, "Combined Working Capital" means the sum of the -39- 44 Companies' cash and cash equivalents, accounts receivable (minus reserves therefor), inventories, prepaid expenses and other current assets as at the Effective Date, less the sum of the Companies' current liabilities as at the Effective Date, all as determined in accordance with generally accepted accounting principles employed by the Companies on a basis consistent with prior periods and exclusive of any intercompany accounts. E-Z Serve shall have up until 60 days after the Closing Date during which to verify the accuracy of the Combined Working Capital. If E-Z Serve shall have failed to notify the Shareholders within 60 days after the Closing Date of any dispute with respect to the amount of such Combined Working Capital, then such amount shall be conclusively considered to be true and correct. In the event the Combined Working Capital is found to be less than $(125,000), then the Shareholders shall pay to E-Z Serve such difference in cash within five days of E-Z Serve's notice to the Shareholders that such is the case. If E-Z Serve and the Shareholders are unable to agree upon the determination of the actual Combined Working Capital, an accounting firm selected in the manner hereinafter provided shall be requested to audit and determine such amount. The selection of the accounting firm shall be made by the Shareholders from a list of three nationally recognized independent accounting firms submitted by E-Z Serve. The decision of the independent accounting firm shall be binding upon the Shareholders and E-Z Serve, and the fees and expenses of such independent accounting firm shall be borne one-half by E-Z Serve and one-half by the Shareholders. -40- 45 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of the date first above written. /s/ Larry Jack Taylor ---------------------------------------- Larry Jack Taylor KERRI DENISE TAYLOR TRUST By: Herbert W. Hitchings, Trustee By: /s/ Herbert W. Hitchings ------------------------------------- Name: Herbert W. Hitchings APRIL MICHELE TAYLOR TRUST By: Herbert W. Hitchings, Trustee By: /s/ Herbert W. Hitchings ------------------------------------- Name: Herbert W. Hitchings E-Z SERVE CORPORATION By: /s/ John T. Miller ------------------------------------ Name: John T. Miller Title: Senior Vice President The undersigned, being the spouse of Larry Jack Taylor, joins in the execution of this Agreement to evidence her knowledge of its existence and content, to acknowledge that this Agreement is fair, equitable and in her best interests, and to bind her community interest, if any, and her heirs, beneficiaries, assigns, executors, administrators and legal representatives to -41- 46 the covenants, agreements, terms and conditions contained in this Agreement, as it may be amended from time to time. /s/ Billie Jean Taylor ---------------------------------------- Billie Jean Taylor -42- EX-10.2 18 FORM OF LEASE (TAYLOR PETROLEUM, INC.) 1 EXHIBIT 10.2 TAYLOR PETROLEUM, INC. LEASE AGREEMENT TABLE OF CONTENTS ARTICLE I Leased Premises Section 1.01 Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 1.02 Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE II Term Section 2.01 Length of Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.02 Extension Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.03 Holding Over by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE III Rent Section 3.01 Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 A. Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 B. Rental Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 C. Leased Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 D. Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 E. Rent for Extension Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 3.02 Terms of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3.03 Taxes and Utility Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3.04 Proration of Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 3.05 Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE IV USE OF LEASED PREMISES Section 4.01 Use of Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 A. Exclusive Right to Sell Motor Fuel and Use the Leased Equipment . . . . . . . . . . 9 B. Use of Leased Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 C. Option to Purchase Leased Equipment . . . . . . . . . . . . . . . . . . . . . . . . 10 D. Removal of Leased Equipment and/or Tenant's Capital Equipment . . . . . . . . . . . 10
2 E. Regulatory Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 F. Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE V Landlord Improvements Section 5.01 Ownership of Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5.02 Repairs and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5.03 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE VI Insurance Section 6.01 Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 6.02 Property of Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 6.03 Fire and Special Extended Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 6.04 Environmental Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 6.05 Certificates of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE VII Damage or Destruction to Landlord's Improvements Section 7.01 Destruction to Landlord's Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 7.02 Rent Abatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 7.03 Restoration Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE VIII Eminent Domain Section 8.01 Effect of Non-Interfering Partial Taking . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 8.02 Effect of Interfering Partial or Entire Taking . . . . . . . . . . . . . . . . . . . . . . 15 Section 8.03 Allocation of Compensation Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE IX Encumbrance of this Lease Section 9.01 Right to Pledge Leasehold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 9.02 Subordination of this Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 9.03 Attornment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-ii- 3 Section 9.04 Landlord to Obtain Mortgagee-Tenant Non-Disturbance and Attornment Agreement . . . . . . . 17 ARTICLE X Assignment and Subletting Section 10.01 Assignment and Subletting by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 10.02 Assignment by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE XI Quiet Enjoyment Entry and Return Section 11.01 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11.02 Right of Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 11.03 Return of Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE XII Default Section 12.01 Default by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 12.02 Bankruptcy by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 12.03 Taylor's Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 12.04 Default by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 12.05 Waiver of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE XIII Remedies Section 13.01 Landlord's Remedies for Tenant's Default . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE XIV First Right of Refusal and Purchase Option Section 14.01 Tenant's Right of Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 14.02 Tenant's Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 14.03 Tenant's Closing of Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 14.04 Adjustments to Stated Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 14.05 Covenants Run with Title to Leased Premises . . . . . . . . . . . . . . . . . . . . . . . . 26
-iii- 4 ARTICLE XV Arbitration of Certain Bonafide Disputes Section 15.01 Bonafide Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 15.02 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 ARTICLE XVI Miscellaneous Section 16.01 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 16.02 Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 16.03 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 16.04 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 16.05 Legal Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 16.06 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 16.07 Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 16.08 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 16.09 Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 16.10 Texas Law to Apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 16.11 Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 16.12 Waiver of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 16.13 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 16.14 Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 16.15 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 EXHIBIT A - Legal Description B - Leased Equipment C - Tenant's Capital Equipment D - Mortgagee - Tenant Non-Disturbance and Attornment Agreement E - Tenant Estoppel Certificate F - Taylor Leases G - Rental Reduction calculation H - Memorandum of Lease
-iv- 5 LEASE AGREEMENT STATE OF ____________ ) LOCATION NO. ___ ) COUNTY OF __________ ) This LEASE AGREEMENT ("Lease") is made and entered into on this the St. day of March, 1992 by and between __________________________, a Texas corporation, hereinafter referred to as "Landlord," and TAYLOR PETROLEUM, INC., a Texas corporation, hereinafter referred to as "Tenant." ARTICLE I Leased Premises Section 1.01 Description of Property. For and in consideration of the agreement, covenants and obligations hereinafter set out, Landlord does hereby lease and let unto Tenant, and Tenant does hereby lease from Landlord, the following described real property: SEE EXHIBIT "A" ATTACHED HERETO Together with all buildings, structures, fixtures and other improvements constructed thereon as well as, all personal property including but not limited to the certain convenience store equipment and motor fuel sales, storage and dispensing equipment (more particularly described on Exhibit "B" attached hereto) and all and singular the rights, easements and appurtenances pertaining to the foregoing real property and usually had and enjoyed therewith, including but not limited to any right, title and interest of Landlord in and to adjacent streets, alleys, shopping centers, common areas, parking lots, other space or rights-of-way. Section 1.02 Definition. The real property, buildings, rights, easements and appurtenances described in Section 1.01 and Exhibit "A" are hereinafter collectively referred to as the "Leased Premises" and the personal property belonging to Landlord including motor fuel storage and dispensing equipment and convenience store equipment, more particularly described in Exhibit "B" is hereinafter referred to as the "Leased Equipment". The Leased Premises and the Leased Equipment are hereinafter collectively referred to as the "Leased Material". 6 ARTICLE II Term Section 2.01 Length of Term. This Lease shall be for a primary term of ten (10) years, beginning on March 1,1992, and ending on February 28, 2002, subject to the other provisions of this Lease. Section 2.02 Extension Term. If Tenant is not then in default under any provision hereof, the term of this Lease shall be automatically extended for each of three (3) consecutive additional five (5) year terms upon the same terms and conditions contained herein unless Tenant gives Landlord at least ninety (90) days' prior written notice of its intent to terminate this Lease at the end of the primary ten-year term or any of the five-year extensions thereof. Section 2.03 Holding Over by Tenant. Except as provided in Section 4.01 B and C, if Tenant remains in possession of any portion of the Leased Premises after the expiration of this Lease as to that portion, or any extension thereof, Tenant shall be deemed to be occupying that portion of the Leased Premises as a Tenant from month-to-month, subject to all of the agreements, covenants and obligations of this Lease insofar as same are applicable to a month-to- month tenancy. ARTICLE III Rent Section 3.01 Rent. A. Leased Premises. As rental for the Leased Premises, Tenant agrees to pay Landlord the sum of $________ for the primary term of this Lease payable in installments of $________ per month, payable without demand; said rent and monthly installments being subject to downward adjustment in accordance with the provision of Subparagraph B hereinbelow. B. Rental Reduction. Landlord(s) and Tenant understand and agree that the Landlord(s) of this and the other Taylor Leases (as listed on Exhibit "F") have incurred indebtedness to The First National Bank of Boston, Metropolitan Life Capital and may have mortgaged, pledged assigned or encumbered the Taylor Leases and/or the real and personal property belonging to said Landlord(s) and referred to in each Lease as the Leased Premises or Leased Equipment to secure such indebtedness (the "Indebtedness"). Tenant's monthly rental under this Lease and in the Taylor Leases was set in relation to Landlord(s) monthly debt service obligation. After execution of the Taylor Leases, Landlord(s) intend to refinance the Indebtedness, meaning that Landlord(s) intend to find new or additional lenders; negotiate new loan agreements with existing lenders or reorganize or retire the Indebtedness in whole or in part. In the event Landlord(s) refinance the Indebtedness -2- 7 and obtain a reduction in the monthly debt service amount it is agreed by each Landlord(s) that Tenant will receive the benefit of a rental reduction to be determined in accordance with the terms and provisions hereof. It is the intent of Landlord(s) and Tenant that Tenant will be entitled to a rental reduction to the extent of one-half of the reduction, if any, in Landlord(s) principal payments due on the Indebtedness a result of such refinancing. In no event will Tenant's monthly rental be increased due to Landlord(s) refinancing of the Indebtedness. Landlord(s) shall calculate the rental reduction on July 31 and January 31 of each year beginning July 31, 1992 and ending January 31, 1995 and within thirty (30) days of any such refinancing(s) involving at least $1.0 Million in the aggregate of the Indebtedness during the period commencing with the execution of the Lease and ending January 31, 1995. Tenant shall be entitled to a total aggregate rental reduction equal to the total current straight-line principal payment required to be made by Landlord(s) (i.e. the total principal installment payments excluding any prepayments, deposits or end of term balloon payments; as of March 1, 1992 this amount is $95,111), the straight-line principal payments to be made under any new loan or refinanced part of the Indebtedness, multiplied by 0.5. For this calculation any current or refinanced loan or mortgage amortization principal payment excluding end of term balloon payments, will be converted to a straight-line amortization principal payment excluding end of term balloon payments using stated current interest rate and term of refinanced loan (see example calculation attached as Exhibit "G"). The total aggregate rental reductions will be rounded to the nearest whole dollar amount and will become effective on the first day of the month next following such calculation. The total aggregate rental reduction shall be allocated to each of the Taylor Leases in proportion that each such Lease's monthly rental payment bears to the current total rental payment on the Taylor Leases which is $164,471 as of March 1, 1992. This Lease's proportional allocation factor is __________ as of March 1, 1992 and the rental reduction for this Lease shall be determined by multiplying any total rental reduction by the allocation factor corresponding to this Lease as set forth above. Landlord(s) and Tenant agree to execute a written certificate confirming the new monthly rental amount due under each of the Taylor Leases within thirty (30) days of each such rental reduction. C. Leased Equipment. As rental for the Leased Equipment, Tenant agrees to pay Landlord the sum of $_______ for the primary term of this Lease payable in installments of $________ per month. D. Proration. All rent for the first or last month shall be prorated on a calendar day basis if the term begins on other than the first of the month. E. Rent for Extension Terms. The monthly rental amount for the first five (5) year extended term' if any, as provided in Section 2.02 hereof shall be 110% of the monthly rental amount set forth in Paragraph A of this Section 3.01. Similarly, the monthly rental amount for each of the -3- 8 two other successive five (5) year extended terms hereof, if any, shall be 115.5% and 121.3% respectively of said rental amount set forth in Paragraph A of this Section 3.01. All other terms and conditions of this Lease shall remain the same for any extension terms. Section 3.02 Terms of Payment. Rent. Rent for the Leased Premises and Leased Equipment shall be payable on or before the first day of each month during the term of this Lease to Landlord at P.O. Box 9000, Amarillo, Texas, 79105-9000, Attention: Larry Jack Taylor, or at such other place as Landlord may from time to time designate. Section 3.03 Taxes and Utility Charges. Landlord covenants and agrees to provide the facilities necessary to enable Tenant to obtain and enjoy all necessary utilities for the Leased Premises. Tenant agrees to pay as due all ad valorem or real property taxes assessed or levied on the Leased Premises and all personal property taxes on the Leased Equipment located on the Leased Premises during the term hereof except that Tenant may (but shall not be required to) dispute or contest any such assessment or levy in which case the disputed item need not be paid until finally adjudged to be valid. Landlord represents and warrants that all taxes affecting the Leased Premises for periods prior to the term hereof have been paid and Landlord further agrees to provide Tenant with copies of all tax assessments and bills on a timely basis. Tenant agrees to pay all utility charges incurred by Tenant on said premises, including charges for water, gas, heat, light, sewer, waste water, garbage removal and telephone service. Section 3.04 Proration of Charges. Real and personal property taxes, insurance premiums and utility charges assessed or to be assessed for the years in which the term of this Lease shall commence or terminate shall be prorated as of the date of commencement and termination of this Lease. Landlord shall be obligated to pay Tenant promptly for that part of real property tax attributable to the portion of any tax year which is not included in the term of this Lease and which has been paid by Tenant. Section 3.05 Right of Offset. Landlord agrees that in addition to any and all other remedies that may be available to Tenant by law or otherwise, Tenant may offset against any present or future obligations to make payments to Landlord under this Lease, any claim, damage, liability or expense from any cause or any other amount that becomes due Tenant pursuant to the terms of that certain Stock Acquisition Agreement dated March ____, 1992 (the "Stock Acquisition Agreement") or pursuant to the terms of this Lease. Similarly, Tenant agrees that Landlord may offset against any present or future obligations to make payments to Tenant under this Lease any claim, damage, liability or expense from any cause or any other amount that becomes due Landlord pursuant to the terms of that certain Stock Acquisition Agreement. -4- 9 ARTICLE IV USE OF LEASED PREMISES Section 4.01 Use of Leased Premises. Tenant shall be entitled to use and occupy the Leased Premises during the term of this Lease for any lawful purpose including, but not necessarily limited to, the operating of a drive-in grocery with motor fuel sales facilities, which may include the sale and offering for sale of all the goods, foods, wares and merchandise including alcoholic beverages and tobacco products and the performance of such services as are usually incident to such business. Tenant may at any time during the term of this Lease change the nature of the business operation conducted on the Leased Premises or Tenant may at any time cease business operations in whole or in part, temporarily or permanently, as it may deem necessary or prudent; provided, however, Tenant shall continue to maintain the Leased Premises and shall keep the Leased Premises insured as provided herein. Landlord and Tenant agree to cooperate with each other and to execute any additional documents reasonably necessary to assure Tenant's use and enjoyment of the Leased Premises. A. Exclusive Right to Sell Motor Fuel and Use the Leased Equipment. Landlord hereby grants Tenant the exclusive right to store and sell motor fuels at the Leased Premises. Landlord has heretofore installed or acquired certain motor fuel storage, selling and dispensing equipment on the Leased Premises and Landlord consents to Tenant's exclusive use, occupancy, operation, maintenance, repair, alteration, relocation, removal, disposal, modification, addition to or replacement of such motor fuel equipment being part of the Leased Equipment as defined herein. B. Use of Leased Equipment. Landlord has heretofore installed or acquired the "Leased Equipment". Landlord hereby consents to Tenant's exclusive use, occupancy, operation, maintenance, repair, alteration, relocation, removal, disposal, modification, addition to or replacement of the Leased Equipment including but not limited to the repair or replacement of underground storage tank; lines, dispenser; leak detector; pump; hoses, piping, wiring, canopies, kiosks, lights and monitoring devices. The Leased Equipment and any repairs thereto which may be made from time to time during the term of this Lease are and shall continue to be the sole and exclusive property of Landlord subject, however, to Tenant's Purchase Option Rights as Set forth in Subparagraph C of this Section 4.01; provided, however, Tenant may, in its sole discretion and without prior consent of Landlord remove and/or dispose of all or any item of the Leased Equipment and install Tenant': own equipment, apparatus, devices or other assets on the Leased Premises which may be in replacement of or in addition to the Leased Equipment and such replacement or additional equipment of the general type, character or nature of the items set forth on attached Exhibit "C' shall hereinafter be referred to as "Tenant's Capital Equipment" and shall be and remain the sole and exclusive property of Tenant (except in the case in which Tenant fails to cure a default hereunder and Landlord terminates this Lease as a result thereof pursuant to the provisions of Article XII, in which event title to replacement equipment installed inside the convenience store building shall be -5- 10 vested in Landlord subject the provisions of Section 9.01) which may be removed from the Leased Premises upon the expiration or termination of this Lease as provided in Subparagraph D hereof Notwithstanding the foregoing and Subparagraph A above, it is understood and agreed that any Leased Equipment that is removed or disposed of by Tenant during the term of this Lease shall be replaced by Tenant with comparable equipment which shall be and remain the personal property of Tenant and shall constitute Tenant's Capital Equipment Tenant shall maintain appropriate records of any part or parts of the Leased Equipment that may be removed from the Leased Premises, relocated to another site or otherwise disposed of and shall routinely provide Landlord with notice of the removal and disposal or relocation of any portion of the Leased Equipment and/or make its records of any such equipment removal, disposal, relocation or transfers available to Landlord upon reasonable request. C. Option to Purchase Leased Equipment. Landlord hereby grants Tenant an option to purchase the Leased Equipment at any time during the term of this Lease after March 1, 1995, (unless Tenant exercises its purchase option rights as provided in Sections 14.01 and 14.02 hereof in which case Tenant may purchase the Leased Equipment contemporaneously with such purchase of the real property) for a purchase price of $_______ if said option is exercised during the first year of the term of this Lease, or thereafter for a price which is reduced each year on the anniversary of the commencement date hereof by an amount which is 10% of the price set forth in this Subparagraph C of Section 4.01. Therefore, in the fourth year of the initial term hereof (March 1, 1995 to February 29, 1996), the purchase option price for the Leased Equipment shall be reduced to 70% of the price set forth above; in the fifth year, 60% of such price and so on; provided, however, if this Lease is extended beyond the initial ten-year term hereof, Tenant may acquire tide to the Leased Equipment by notifying Landlord of its desire to take title and tendering payment of the sum of $1.00 to Landlord. The option to purchase the Leased Equipment may be exercised by Tenant (or its designee) by giving Landlord written notice of its desire to purchase the Leased Equipment and the tendering of payment in the amount determined pursuant to the provisions hereof. Upon receipt of such notice and payment, Landlord shall promptly execute and deliver to Tenant a Bill of Sale evidencing transfer to Tenant of good unencumbered title to the Leased Equipment Landlord and Tenant agree to cooperate with each other in connection with conducting any tightness testing of the underground storage tanks and lines or taking environmental samples from the area surrounding the underground storage tanks and lines prior to completion of such sale. In the event Tenant exercises its purchase option rights with respect to the Leased Equipment, Tenant's obligation to pay the monthly Leased Equipment rental amount hereunder shall be automatically terminated, released and waived. D. Removal of Leased Equipment and/or Tenant's Capital Equipment. If Tenant exercises its purchase option and acquires title to the Leased Equipment and/or installs Tenant's Capital Equipment as provided herein, Landlord agrees that no part of the purchased Leased Equipment or Tenant's Capital Equipment shall become or be deemed to be a fixture or a part of the -6- 11 realty under any circumstance whatsoever. At any time after March 1, 1995 (unless Tenant exercises its purchase option rights as provided in Article XIV hereof in which case Tenant may remove any purchased Leased Equipment or Tenant's Capital Equipment at any time thereafter) and prior to the final expiration or termination of this Lease, Tenant shall have the right at its sole discretion to enter the Leased Premises and remove the purchased Leased Equipment and Tenant's Capital Equipment, or any part thereof, or take whatever action it deems necessary or advisable with respect thereto. Any such removal shall be accomplished in a good and workmanlike manner at Tenant's sole cost and expense. Any excavations will be filled to grade level but Tenant will not be required to repave unless otherwise specifically requested by Landlord in writing within ten (10) days of Tenant's notice of intention to excavate and remove any such buried equipment. Tenant may, by paying one or more additional months' rental, extend the period during which it may enter the Leased Premises and remove its equipment but not to exceed a total of ninety (90) days. Any Leased Equipment or Tenant Capital Equipment Dot removed prior to the expiration of the term of this Lease or the ninety (90)-day holdover period if Tenant so elects as provided herein shall be forfeited and shall become the personal property of Landlord. E. Regulatory Compliance. Landlord represents and warrants that to the best of its knowledge, the Leased Equipment has been operated prior to the term hereof in compliance with the appropriate federal, state and local statutes, ordinances, regulations or requirements and is currently in compliance therewith. Tenant agrees to use its best efforts to maintain the operation of the Leased Equipment in compliance with the appropriate Federal, state and local statutes, ordinances, regulations or requirements throughout the term of this Lease. If any investigation or monitoring of site conditions or any clean-up, containment, restoration, removal, or other remedial work (collectively the "remedial work") is required under any applicable federal, state, or local law or regulation, by any judicial order, or by any governmental entity, Tenant shall perform or cause to be performed the remedial work in compliance with such law, regulation, order or agreement; provided, that Tenant may withhold such compliance pursuant to a good faith dispute regarding the application, interpretation, or validity of the law, regulation, order or agreement. if Tenant shall fall to timely commence, or cause to be commenced, or fails to diligently prosecute to completion, such remedial work, Landlord may, but shall not be required to cause such remedial work to be performed, and all reasonable costs and expenses thereof, or reasonably incurred in connection therewith shall be paid by Tenant. AU such costs shall be due and payable upon demand therefor by Landlord. Notwithstanding any provision of this Lease to the contrary, Tenant will be permitted to contest or cause to be contested, subject to compliance with the requirements of this paragraph, by appropriate action any remedial work requirement, and Landlord shall not perform such requirement on its own or Tenant's behalf, so long as no default under this Lease has occurred and is continuing under this Lease and Tenant has given Landlord written notice that Tenant is contesting or shall contest or cause to be contested the application, interpretation, or validity of the governmental law, regulation, order, or agreement pertaining to the remedial work by appropriate proceedings conducted in good faith with due diligence; provided, such contest shall not subject Landlord or any -7- 12 assignee of its interest (including any person having a beneficial interest) in the Leased Premises to civil liability. F. Signs. Tenant shall have the right to erect signs on any portion of the Leased Premises, including but not limited to exterior walls of Landlord's Improvements, subject to all applicable laws. Landlord shall cooperate with Tenant if necessary to obtain permits to erect such signs. Tenant shall repair any damage to the Leased Premises due to removal of such signs. ARTICLE V Landlord Improvements Section 5.01 Ownership of Improvements. Tenant acknowledges that Landlord has installed and erected certain improvements including buildings, plumbing, wiring, driveways, parking lots, and sidewalks which are affixed to the real property leased hereunder and have become a part thereof and are herein referred to as "Landlord's Improvements". Landlord represents and warrants that to the best of Landlord's knowledge, Landlord's Improvements are in compliance with appropriate building and zoning codes and all federal, state and local statutes, ordinances, regulations or requirements, if any, are in good working order and are suitable for their intended purpose. All Landlord's Improvements shall remain upon and be surrendered with the Leased Premises upon termination of this Lease. Unless otherwise agreed, any alterations or additions to Landlord Improvements installed by Tenant pursuant to the provisions of Section 5.03 hereof shall also remain upon and be surrendered with the Leased Premises upon termination of this Lease; provided, however, Tenant at its own expense may remove (within the removal or holdover period provided in Section 4.01) any trade fixtures which it may have installed upon these Leased Premises during the term of the Lease. Tenant shall, at its sole expense, make reasonable repairs to any portion of Landlord's Improvements, the Leased Premises and Leased Equipment damaged by the removal of said trade fixtures and signs and to restore them to their condition prior to such removal subject to ordinary wear, tear and effects of the elements. Section 5.02 Repairs and Maintenance. Tenant, at its own expense shall maintain and keep the Leased Material in good repair, provided, however, that Landlord shall be responsible for repair and maintenance of the structural aspects of Landlord's Improvements including but not limited to the foundation and walls. Tenant shall maintain routine maintenance of driveways and parking areas. Landlord will be responsible to repair/replace driveways and parking areas when repairs over 50% of the area is required. Tenant shall be responsible for painting parking stripes on the driveway and parking area. Tenant shall maintain the roof, windows, plumbing, pipes, wiring, doors, air conditioning and heating equipment and interior walls in good repair. In the event Tenant shall neglect to reasonably maintain the Leased Material after receiving thirty (30) days' prior written notice of the necessity of any such repair, Landlord shall have the right to cause such repairs or -8- 13 corrections to be made and to charge the reasonable cost thereof to Tenant as additional rental. If total replacement of heating or air conditioning equipment is required during the term hereof, Landlord shall bear such expense. if estimated repair costs exceed 70% of estimated replacement costs such repair shall be deemed to be a total replacement. For purposes of this provision, unless otherwise agreed, cost estimates will be provided by at least three contractors reasonably acceptable to Landlord and Tenant. Section 5.03 Alterations. Tenant shall have the right to make changes or alterations to Landlord's Improvements or Leased Equipment on the Leased Premises; provided, however, that any such changes or alterations shall be made in all cases subject to the following conditions which Tenant agrees to observe and perform: A. No change or alterations to Landlord's Improvements shall at any time be made which shall impair the structural soundness of the Landlord's Improvements and any alterations involving a structural change shall require Landlord's prior written consent which shall not be unreasonably withheld or delayed. B. No changes or alterations to Landlord's Improvements shall be undertaken until Tenant shall have procured and paid for all required municipal and other governmental permits and authorizations of the various municipal departments and governmental subdivisions having jurisdiction. C. All work done in connection with any change or alteration to Landlord's Improvements or Leased Equipment shall be done in a good and workmanlike manner. D. Tenant shall use its best efforts to perform such alterations without subjecting the Leased Premises to mechanic's and/or materialmen's liens and Tenant will promptly pay or cause to be released any such lien that may be filed. ARTICLE VI Insurance Section 6.01 Liability Insurance. Tenant covenants and agrees that it will at all times during the term of this Lease, or any extension thereof, at its own expense maintain and keep in force public liability insurance in an amount of at least $1,000,000, against liability for claims through the public use of or arising out of accidents occurring in, on, or around the Leased Premises, naming Landlord as an additional insured. Section 6.02 Property of Tenant. Tenant assumes all risk of damage to the Leased Equipment, Tenant's Capital Equipment and other personal property belonging to Tenant and located -9- 14 on the Leased Premises arising from any cause other than the willful or negligent acts or omissions of Landlord, its agents or assigns and including without limitation, loss by theft, fire and acts of God. Section 6.03 Fire and Special Extended Coverage. Tenant covenants and agrees to maintain in force, at all times during the term of this Lease at its own expense, a policy or policies of fire and extended special coverage insurance, in an amount equal to not less than ninety (90%) percent of the actual cash value of Landlord's Improvements and Leased Equipment on the Leased Premises. Such policy or policies shall name both Landlord and Tenant as named insureds and the financial lending institutions of Landlord provided, however, that all insurance proceeds shall be used to reconstruct the Leased Material unless otherwise mutually agreed by Landlord and Tenant. Section 6.04 Environmental Insurance. Tenant agrees to provide insurance if required by law or provide other assurances as specified by regulations or statutes of its ability to fulfill its responsibilities under applicable federal, state or other laws regarding the protection of the environment. if a policy of environmental liability insurance is provided by Tenant, such policy will name Landlord as an additional insured. Section 6.05 Certificates of Insurance. Tenant shall furnish Landlord with certificates of all insurance required in the foregoing paragraphs. The insurance is to be carried by one or more insurance companies licensed to do business in the state where the Leased Premises is located, or having a Best rating of "A" or better, or one of the Lloyds of London Companies, or is mutually approved by Landlord and Tenant. All of the insurance policies required in the foregoing paragraphs shall provide that they may not be cancelled before the expiration date thereof without giving fifteen (15) days prior written notice to Landlord and the financial lending institution of Landlord named as an insured in the insurance policies. if Tenant does not provide such certificates upon Landlord's delivery of possession to Tenant, or if Tenant allows any insurance required under the foregoing paragraphs to lapse, Landlord may, if Tenant is in default and after notice and chance to cure as provided herein, at Landlord's option, take out and pay the premiums on the necessary insurance to comply with Tenant's obligations under the provisions of the foregoing paragraphs. Landlord is entitled to reimbursement from Tenant for all amounts spent by Landlord to procure and maintain such insurance. ARTICLE VII Damage or Destruction to Landlord's Improvements Section 7.01 Destruction to Landlord's Improvements. In the event any of Landlord's Improvements are partially or wholly damaged or destroyed or any other portion of the Leased Premises are totally or partially destroyed by fire, hurricane, storm, explosion or any other unavoidable casualty for which insurance coverage is required by this Lease, Tenant shall give notice to Landlord of such damage or destruction and Tenant shall employ reasonable efforts to restore said -10- 15 Landlord Improvements and/or Leased Premises to good condition and fitness for occupancy, to the extent that the insurance proceeds provided under section 6.03 shall permit. Landlord acknowledges that all insurance proceeds received shall be available to Tenant for reconstruction except for insurance proceeds related to Tenant's personal property which may be retained by Tenant. If the insurance proceeds are insufficient to cover the cost of reconstruction of the Landlord's Improvements to a condition similar to that existing immediately prior to the damage or destruction the building or reconstruction costs in excess of said insurance proceeds shall be borne by Tenant. If Landlord requests that the Landlord Improvements be reconstructed in a manner which enlarges or enhances the nature of said Landlord Improvements when compared to that existing prior to the damage or destruction, the building or reconstruction costs in excess of said insurance proceeds shall be borne by Landlord and shall be payable to Tenant immediately upon demand. Section 7.02 Rent Abatement. During the period in which any reconstruction or repair is being performed, and until such repair or reconstruction is substantially completed, the Rent due Landlord shall be apportioned from the day following the casualty according to the portion of the Leased Premises or Led Equipment which remains usable to Tenant; provided, however, the total rental abatement for Tenant for any particular reconstruction or repair shall not exceed a period of 180 days or a period of 90 days after receipt of final insurance settlement payment, whichever first occurs. Section 7.03 Restoration Work. All work done in restoring the Landlord's Improvements shall be done in a good and workmanlike manner and in compliance with all laws, ordinances and requirements of all federal, state and municipal governments. All work done by Tenant in restoring the Leased Premises shall be done only after submitting to Landlord for their approval, which approval shall not be unreasonably withheld or delayed, written plans and specifications for all such work. ARTICLE VIII Eminent Domain Section 8.01 Effect of Non-Interfering Partial Taking. Eminent domain proceedings resulting in condemnation of part of the Leased Premises that leave the rest usable by Tenant without any significant operational disadvantages or interference for purposes of the business for which the Leased Premises are being used, will not terminate this Lease. The effect of partial condemnation will be to terminate the Lease as to the portion of the Leased Premises condemned and to reduce proportionately the Rent. Section 8.02 Effect of Interfering Partial or Entire Taking. In the event a partial taking of a portion of the Leased Premises or the entire Leased Premises through eminent domain proceedings results in Tenant being unable to continue its desired business operation as a practical matter or to -11- 16 operate such business profitably, Tenant shall have the right to terminate this Lease. Such termination of the Lease shall result in relieving the Tenant of any further obligations under this Lease except any outstanding obligations. Section 8.03 Allocation of Compensation Award. The compensation awarded for diminution of value of the Leased Premises in the eminent domain proceedings as a result of condemnation shall belong to the Landlord. Tenant shall be entitled to any portion of the condemnation award attributable to Tenant's loss of business, diminution in value of Tenant's leasehold interest and/or the cost of relocating Leased Equipment, Tenant's Capital Equipment or other personal property and business endeavor. ARTICLE IX Encumbrance of this Lease Section 9.01 Right to Pledge Leasehold. Landlord grants, acknowledges, and consents to Tenant's right from time to time during the term hereof to mortgage, pledge, assign or otherwise encumber the leasehold interest herein granted to Tenant by landlord or any other of Tenant's property as long as Tenant is not in default hereof at the time of such encumbrance. Landlord hereby subordinates any statutory and contractual landlord liens with respect to Tenant's Capital Equipment and other personal property located on the Leased Premises to any such mortgage, pledge, lien, or encumbrance granted by Tenant hereunder or any modification, replacement, renewal, or extension thereof, provided, however, if and to the extent any such mortgagee, pledgee, or assignee of Tenant is given notice to cure a default by Tenant in payment of rent due under this Lease, and fails to cure such default for a period of three (3) consecutive months from the date of receipt of such notice, then with respect to Tenant's Capital Equipment and Leasehold interest (excluding inventory) Landlord's subordination of its statutory and contractual landlord liens shall be deemed to have been waived and released. Section 9.02 Subordination of this Lease. This Lease and Tenant's rights under this Lease are subject and subordinate to any deed of trust or mortgage ("lien") currently in existence and provided landlord complies with the provisions of Section 9.04 below, all renewals, extensions, modifications, consolidations, and replacements of such lien, now or hereafter affecting or placed, charged, or enforced against the Leased Material or all or any portion of the building or any interest of Landlord in them or landlord's interest in this Lease and the leasehold estate created by this Lease. This provision will be self-operative and no further instrument of subordination will be required in order to effect it. Nevertheless, Tenant will execute, acknowledge, and deliver to landlord, at any time and from time to time, upon demand by Landlord, at Landlord's sole cost and expense such documents as may be requested by Landlord, or any mortgagee, to confirm or effect any such subordination, provided that Tenant receives a non-disturbance agreement described in Section 9.04 (a "Mortgagee-Tenant Non-Disturbance and Attornment Agreement"). If Tenant fails or refuses to -12- 17 execute, acknowledge, and deliver any such document within twenty (20) working days after written demand, Landlord, Landlord's successors and assigns, will be entitled to execute, acknowledge, and deliver any and all such documents for and on behalf of Tenant as attorney-in-fact for Tenant, coupled with an interest. Tenant, by this paragraph, constitutes and irrevocably appoints Landlord, Landlord's successors and assigns, as Tenant's attorney-in-fact to execute, acknowledge, and deliver any and all documents described in this Section for and on behalf of Tenant as provided in this Section. Any attorney-in-fact under this Section shall require that any document executed by the attorney-in-fact for Tenant shall be delivered conditioned upon Tenant receiving a Mortgagee-Tenant Non-Disturbance and Attornment Agreement from the holder of the lien for which the subordination or other document is delivered. Section 9.03 Attornment. Tenant agrees that if any holder of any lien encumbering any part of the Leased Premises (the "Purchaser") succeeds to Landlord's interest in the Leased Premises, after receipt of written notice, Tenant will pay to the Purchaser all rents subsequently payable under this Lease. Tenant agrees that in the event of enforcement by the trustee or the beneficiary under or holder or owner of any such lien of the remedies provided for by law or by such lien, Tenant will, upon request of the Purchaser, automatically become the tenant of and attorn to the Purchaser without change in the terms or provisions of this Lease. Upon request by Landlord or the Purchaser, and without cost to Tenant, Tenant will execute, acknowledge, and deliver an instrument or instruments confirming the attornment or acknowledging the agreement to so attorn, provided that Tenant receives a Mortgagee-Tenant Non-Disturbance and Attornment Agreement as provided for in Section 9.04 below. If Tenant fails or refuses to execute, acknowledge, and deliver any such document within twenty (20) days after written demand, landlord or the Purchaser will be entitled to execute; acknowledge, and deliver any and all such documents for and on behalf of Tenant as attorney-in-fact for Tenant, coupled with an interest. Tenant, by this paragraph, constitutes and irrevocably appoints Landlord or the Purchaser, as Tenant's attorney-in-fact, to execute, acknowledge, and deliver any and all documents described in this Section for and on behalf of Tenant, as provided in this Section. Any attorney-in-fact under this Section shall require that any document executed by the attorney-in-fact for Tenant shall be delivered conditioned upon Tenant receiving a Mortgagee- Tenant Non-Disturbance and Attornment Agreement. Section 9.04 Landlord to Obtain Mortgagee-Tenant Non-Disturbance and Attornment Agreement. If landlord has granted or hereafter grants a deed of trust or mortgage lien on the Leased Premises and/or Leased Equipment to a bank, lending institution, or otherwise ("Mortgagee"), landlord agrees to obtain from Mortgagee or its assigns a written attornment and non-disturbance agreement expressly providing for the recognition of the validity and continuance of this Lease in the event of foreclosure of landlord's interest or in the event of conveyance in lieu of foreclosure, as long as Tenant has not defaulted on the terms hereof and substantially in form of the attached Exhibit "D". -13- 18 ARTICLE X Assignment and Subletting Section 10.01 Assignment and Subletting by Tenant. Tenant shall have the right to assign this Lease or sublet the Leased Premises and/or Leased Equipment in whole or in part, from time to time during the term hereof, without the written consent of Landlord; provided, however, Tenant shall remain primarily liable for its obligations as Tenant hereunder. In the event Tenant so requests and Landlord consents and executes a written release Tenant shall be released from any further obligation hereunder when an assignment of this Lease is made. It is understood that Landlord's consent to any such requested release may be withheld for any reason. Section 10.02 Assignment by Landlord. Landlord shall have the right to assign this Lease without Tenant's consent; provided however, that Tenant may continue to make rental payments and deliver notices and demands to original landlord until proper notice of such assignment and the identity of landlord's assignee has been received by Tenant. ARTICLE XI Quiet Enjoyment Entry and Return Section 11.01 Quiet Enjoyment. Landlord covenants, represents and warrants that it has full right and power to execute and perform this Lease and to grant the leasehold estate demised herein and that Tenant upon payment of the rent herein provided and performance of the obligations contained herein, shall peaceably and quietly have, hold and enjoy the Leased Premises during the full term of this Lease and any extension or renewal thereof without hindrance or molestation by Landlord or any person claiming under Landlord. Section 11.02 Right of Entry. Upon at least twenty-four (24) hours notice, Landlord shall have the right to enter upon the Leased Premises during Tenant's normal business hours for the purpose of inspecting same, exhibiting the premises for sale or rent, and making necessary repairs to Landlord's Improvements; provided, however, that Landlord's exercise of such rights of entry shall not inhibit, interfere with or adversely affect Tenant's normal business operation. Section 11.03 Return of Leased Premises. Upon the final termination of this Lease, Tenant agrees to surrender the Leased Premises to Landlord in as good condition as it was received by Tenant, ordinary wear, tear, effects of the elements and Landlord's repair and maintenance obligations as set forth in Section 5.02 excepted. -14- 19 ARTICLE XII Default Section 12.01 Default by Tenant. Any one or more of the following shall be deemed to be an Event of Default (herein so called) by Tenant under this Lease: A. Tenant shall fail to pay to Landlord as and when due any installment of rent or any other payment hereunder for a period of ten (10) days after written notice to Tenant of such failure; B. Tenant shall fail to comply with any term, provision, or covenant of this Lease, other than the payment of rent or other monetary payment required pursuant to this Lease, and the failure is not cured within thirty (30) days after written notice to Tenant or if the failure cannot be cured within thirty (30) days and Tenant fails to commence and diligently pursue curing the failure within the thirty (30) days to a conclusion reasonably satisfactory to Landlord within a reasonable time after Such notice; C. Tenant shall file in any court a petition for relief under the United States Bankruptcy Code 11 U.S.C. Sections 101, et seq. (the "Code"); D. An involuntary petition for relief under the Code shall be filed against Tenant, and such petition shall not be denied, dismissed, or withdrawn within one hundred twenty (120) days after the date of filing thereof; E. Tenant shall make an assignment for the benefit of creditors; F. A receiver shall be appointed for any properly of Tenant by order of a court of competent jurisdiction in a judicial case or proceeding commenced by Tenant; G. A receiver shall be appointed for any property of Tenant by order of a court of competent jurisdiction in a judicial case or proceeding commenced against Tenant, and such receivership shall not be dismissed or withdrawn within one hundred twenty (120) days from the date of such appointment; H. A trustee, receiver, or agent under applicable law or under a contract, or other "custodian" within the meaning of Section 101(11), of the Code, is appointed by a court having lawful jurisdiction or authorized to take charge of property of Tenant for the purpose of enforcing a lien against such property or for the purpose of general administration of such property for the benefit of Tenant's creditors; or I. Tenant or its trustee shall "reject" within the meaning of Section 365 of the Code: -15- 20 1. Between March 1, 1992, and February 28, 1995, Tenant rejects any of the Taylor Leases (defined in Section 12.03); 2. Between March 1, 1995, and February 29, 1996, Tenant rejects more than 30% of the Taylor Leases; 3. Between March 1, 1996' and February 28, 1997, Tenant rejects more than 50% of the Taylor Leases; or 4. After March 1, 1997, this Lease. J. Cross-default provisions: 1. Between March 1, 1992, and February 28, 1995, the occurrence and continuation beyond the applicable cure period of an Event of Default on the part of Tenant (except for a Bonafide Dispute as defined in Article XV) under any of the Taylor Leases shall be an Event of Default under this Lease. 2. Between March 1, 1995, and February 29, 1996, the occurrence and continuation beyond the applicable cure period of an Event of Default on the part of Tenant (except for a Bonafide Dispute as defined in Article XV) in more than 30% of the Taylor shall be an Event of Default under this Lease. 3. Between March 1, 1996, and February 28, 1997, the occurrence and continuation beyond the applicable cure period of an Event of Default on the part of Tenant (except for a Bonafide Dispute as defined in Article XV) in more than 50% of the Taylor Leases shall be an Event of Default under this Lease. 4. After March 1, 1997, the occurrence and continuation beyond the applicable cure period of an Event of Default under any other Taylor Lease shall not be an Event of Default under this Lease. Section 12.02 Bankruptcy by Tenant. In the event Tenant shall, voluntary or involuntarily, become a debtor in a case under the Code, Tenant and Landlord agree that the following provisions shall apply: A. From the date of the order for relief, Tenant or its trustee shall timely perform all of Tenant's obligations under this Lease, except those Events of Default specified in subsections C and D of Section 12.01, arising from and after the order for relief until this Lease is assumed or rejected. Tenant or its trustee shall in accordance with the Code and the Federal Rules of Bankruptcy -16- 21 Procedure provide to Landlord all notices relating to: (1) assumption or rejection of this Lease or any of the Taylor Leases; (2) any intention to abandon the Lease or any of the Taylor Leases; and (3) all other pleadings, motions, proceedings, and orders that may affect Tenant's performance of this Lease or any of the Taylor Leases and recovery by Landlord of all amounts due it under this Lease or any of the Taylor Leases. B. Tenant or its trustee shall assume or reject this Lease and all of the Taylor Leases promptly in accordance with the Code or such longer time as the Bankruptcy Court may permit. C. If Tenant or its trustee wishes to assume this Lease or any of the Taylor Leases, Tenant or its trustee shall: 1. Cure, or provide Adequate Assurance (as hereinafter defined) that Tenant or its trustee will promptly cure the Events of Default under this Lease and all of the Taylor Leases that are required to be cured in accordance with the Code; 2. In accordance with the Code, compensate, or provide Adequate Assurance that Tenant or its trustee will promptly compensate, Landlord for all actual pecuniary loss to Landlord resulting from each Event of Default, including, without limitation, all accrued but unpaid interest, reasonable attorneys' fees costs, and expenses if allowed by the Code; and 3. Provide Adequate Assurance of future performance by Tenant or its trustee under this Lease and all of the Taylor Leases. D. Tenant or its trustee shall not assign this Lease or any of the Taylor Leases without prior approval of the Bankruptcy Court and provided that: 1. Tenant or its trustee has first assumed this Lease and all of the Taylor Leases in accordance with the provisions of Section 12.02; and 2. The assignee of this Lease and all of the Taylor Leases has first provided Adequate Assurance to Landlord of such assignee's future performance of this Lease and all of the Taylor Leases, whether or not there has been an Event of Default in this Lease or any of the Taylor Leases. E. As used in this Section 12.02, the term "Adequate Assurance", unless otherwise determined by the Bankruptcy Court means, with respect to either Tenant or its trustee or assignee of this Lease or any of the Taylor Leases, as the case may be, that such party has and will continue to have sufficient unencumbered assets after the payment of all secured obligations and -17- 22 administrative expenses to assure Landlord that the obligations of Tenant under this Lease and all of the Taylor Leases will be fully and timely performed and that the Leased Premises will at all times be stocked with merchandise and properly staffed with sufficient employees to conduct a fully operational, actively promoted business in the Leased Premises. Section 12.03 Taylor's Leases. Landlord and Tenant acknowledge that on the same date as this Lease, Tenant has entered into various other leases with Landlord, Landlord's affiliates and other; containing similar terms as this Lease and more particularly described in Exhibit "F" attached hereto (the "Taylor Leases"), all being done pursuant to the provisions of the Stock Acquisition Agreement. Section 12.04 Default by Landlord. If Landlord should fail to keep and perform any of the covenants and agreements of this Lease, other than those included in the definition of Bonafide Dispute in Section 15.01, Tenant shall give written notice of such default to Landlord. Should such default continue to exist at the -ration of thirty (30) days after such notice has been given, or should Landlord not be proceeding with due diligence to correct same or if failure cannot be cured within thirty (30) days and Landlord fails to commence and diligently pursue curing the failure within the thirty (30) days to a conclusion reasonably satisfactory to Tenant within a reasonable time after such notice, then Tenant may correct such default at Landlord's expense, including reasonable attorney's fees which may be incurred by Tenant in enforcing the provisions of this Lease. Any payment due under this Section shall be paid upon ten (10) days notice. If such payment is not so paid, Tenant may set off same against the rent as provided in Section 3.05. Section 12.05 Waiver of Default. Any assent or waiver, express or implied, by Landlord or Tenant to any breach of any agreement, covenant, or obligation herein contained, shall operate as such only in the specific instance and shall not be construed as an assent or waiver of any such agreement, covenant, or obligation generally, or of any subsequent breach thereof. The various rights, powers, elections, and remedies of Landlord and Tenant contained in this Lease shall be construed as cumulative, and no one of them is exclusive of the other, or exclusive of any rights or priorities, allowed by law, and no rights shall be exhausted by being exercised on one or more occasions. ARTICLE XIII Remedies Section 13.01 Landlord's Remedies for Tenant's Default. Upon the occurrence of an Event of Default by Tenant and the continuance of the Event of Default beyond the applicable cure periods, Landlord shall have the option during such~continuance to pursue any one or more of the remedies set forth below without any additional notice or demand: -18- 23 A. Landlord may enter upon and take possession of the Leased Material in accordance with applicable law, by picking or changing locks if not prohibited thereby, and lock out, expel, or remove Tenant and any other person who may be occupying or using all or any part of the Leased Material without being liable for any claim for damages except those resulting from Landlord's willful misconduct or negligent acts and without terminating this Lease, and relet the Leased Material on behalf of Tenant and receive directly the rent by reason of the reletting. Tenant agrees to pay Landlord on demand as and when due all rent and other sums due Landlord under this Lease less all sums received by Landlord by reason of reletting after deducting all expenses incurred by Landlord that may arise by reason of any reletting of the Leased Material (the Deficiency"); provided, however, Tenant's obligation to pay any Deficiency shall be limited as follows: (I) if the occurrence of an Event of Default which prompts Landlord to take possession of the Leased Material occurs prior to February 28, 1993, Tenant's obligation to pay any Deficiency shall terminate on February 28, 1997; or (ii) if the occurrence of an Event of Default which prompts Landlord to take possession of the Leased Material occurs after February 28,1995, Tenant's obligation to pay Deficiencies shall cease 24 months after the occurrence of such Event of Default or the expiration of the term of this Lease, whichever first occurs. If Landlord fails to relet the Leased Premises within 24 months from the occurrence of an Event of Default which prompts Landlord to such taking of possession of the Leased Material, then this Lease shall be deemed to have been terminated and shall be of no further force or effect after such 24 month period or on February 28,1997, whichever last occurs; and/or B. Landlord may terminate this Lease, in which event, Tenant shall immediately surrender the Leased Material to Landlord, and if Tenant fails to surrender the Leased Material, Landlord may, without prejudice to any other remedy which Landlord may have for possession or arrearages in rent, enter upon and take possession of the Leased Material, in accordance with applicable law by picking or changing locks if not prohibited thereby, and lock out, expel, or remove Tenant and any other person who may be occupying all or any part of the Leased Material without being liable for any claim for damages except those resulting from Landlord's willful misconduct or negligent acts. Tenant agrees to pay Landlord on demand as and when due any Deficiency that may arise by reason of such termination; provided, however, Tenant's obligation to pay any Deficiency shall be limited as follows: (I) if the occurrence of an Event of Default which prompts Landlord to terminate this Lease occurs prior to February 28, 1995, Tenant's obligations to pay any Deficiency shall terminate on February 28, 1997; or (ii) if the occurrence of an Event of Default which prompts Landlord to terminate this Lease occurs after February 28,1995, Tenant's obligation to pay any Deficiency shall cease 24 months after the occurrence of such Event of Default or the expiration of the this Lease, whichever first occurs. If Landlord fails to relet the Leased Material within 24 months from the occurrence of an Event of Default which prompts Landlord to terminate the Lease, then this Lease shall be deemed to have been terminated and shall be of no further force or effect after such 24 month period or on February 28, 1997, whichever last occurs. -19- 24 ARTICLE XIV First Right of Refusal and Purchase Option Section 14.01 Tenant's Right of Refusal. At any time or times during the term of this Lease or any extensions thereof, if Landlord receives a bona fide offer for the purchase or acquisition in any form of all or any part of its interest in the Leased Material, Landlord shall either refuse such offer or give Tenant written notice setting out the full details of such offer, which notice, among other things, shall specify the name of the offeror, the terms of payment, whether cash or credit, and, if on credit, the time and interest rate, type of conveyance documents, as well as, any and all other consideration being received or paid in connection with such proposed transaction, as well as any and all other terms, conditions, and details of such offer. Upon receipt of the notice with respect to such offer, Tenant, if not in default under this Lease at the time it exercises said option, shall have the exclusive right and option exercisable at any time during a period of thirty (30) days from Landlord's notice, to purchase or acquire the Leased Material at the same price and on the same terms and conditions of the offer as set out in such notice. If Tenant decides to exercise the option, it shall give written notification to this effect to Landlord within such thirty (30) day period, and said sale and purchase (or acquisition) shall be closed within ninety (90) days thereafter. If Tenant does not elect to exercise its option, Landlord shall be so notified in writing within such thirty (30) day period and Landlord shall be free to sell the Leased Material, but only within one hundred fifty (150) days after Tenant's notice of refusal. Such sale, if permitted, shall be made at the price or any higher price and substantially upon the terms and conditions and to the person described in the re-red notice. Section 14.02 Tenant's Purchase Option. In consideration of Tenant entering into this Lease, Landlord hereby grants Tenant the right to purchase fee simple title to the Leased Premises at any time during the initial or any extended term of this Lease for a total aggregate price of $________ (the "Stated Price') or the appraised price provided below; provided Tenant is not in default under this Lease at the time it exercises said option. In the event Tenant desires to so execute this option to purchase the Leased Premises, it shall so notify Landlord of its intent to so purchase. The notice to Landlord shall state whether or not Tenant is willing to purchase the Leased Premises at the Stated Price. If Tenant is not willing to purchase the Leased Premises at the Stated Price, Tenant shall set forth in the notice the price it is willing to pay (the "Suggested Price") for the Leased Premises. If Tenant and Landlord are willing to purchase and sell the Leased Premises at the Stated Price or the Suggested Price, the sale of the Leased Premises shall be completed as set forth in Section 14.03. if Landlord does not agree to sell the Leased Premises for the Stated Price or the Suggested Price, Landlord shall give Tenant notice of such refusal. Tenant shall then have the Leased Premises appraised ("Tenant's Appraisal") and deliver the written appraisal to Landlord. If Landlord is not willing to sell the Leased Premises at the value shown in Tenant's Appraisal, Landlord shall have the Leased Premises appraised ("Landlord's Appraisal"). If the value of the Leased Premises shown in Landlord's Appraisal is within five percent (5.0%) of the value shown in Tenant's Appraisal, the purchase price of the Leased Premises shall be equal to the average of the two (2) appraisals. If there is more than five percent (5.0%) variance between the two (2) appraisals, then the two (2) appraisers -20- 25 shall select a third appraiser to appraise the Leased Premises. After the third appraiser has completed his appraisal, the appraisers shall all attempt to agree on the fair market value of the Leased Premises. If any two (2) of the appraisers agree on the fair market value of the Leased Premises, they shall issue a written report and deliver it to Landlord and Tenant stating the agreed fair market value of the Leased Premises which shall be the price to be paid by Tenant to Landlord for the Leased Premises. If two (2) of the appraisers are unable to agree as to the fair market value for the Leased Premises, the two (2) original appraisers shall select another appraiser who shall appraise the Leased Premises and go through the same process to determine the fair market value for the Leased Premises. This process shall be repeated until at least two (2) of the appraisers, including at least one of the original appraiser; agree on the fair market value of the Leased Premises which shall be the price to be paid by Tenant to Landlord for the Leased Premises. If and when the fair market value of the Leased Premises is determined by the appraisal method set forth above, the sale of the Leased Premises shall be completed as set forth in Section 14.03. All appraisers appraising the Leased Premises shall have MAN and State Certified Real Estate Appraiser designations and shall be familiar with appraising real estate similar to the Leased Premises. The phrase "fair market value" as used above shall mean the sum of money a willing buyer and seller would be willing to pay and accept for the purchase and sale of the Led Premises taking into account all factors that the appraiser deems relevant. Section 14.03 Tenant's Closing of Purchase. Within thirty (30) days after the purchase price of the Leased Premises has been determined as set forth in Section 14.02, unless otherwise agreed, Landlord shall deliver a special warranty deed conveying good title to the Leased Premises free and clear from any and all encumbrances except easements or encumbrances existing as of the date of this Lease other than those for indebtedness, and Tenant shall tender payment in good funds of the purchase price as determined in Section 14.02. Landlord agrees to provide a survey and an owner's policy of title insurance covering the Leased Premises in the amount as determined in Section 14.02. Closing cost and expenses of the sale of the Leased Premises shall be borne as follows: A. Landlord shall be obligated for and shall pay (i) premium for owner's policy of title insurance; (ii) one-half of any escrow fee, if any; (iii) Landlord's attorney's fees; (iv) up to $200.00 on survey costs; (v) title curative matter; if any; (vi) cost of Landlord's Appraisal, if any; and (vii) one-half of the cost of appraisals other than Tenant's Appraisal, if any. B. Tenant shall be obligated for and shall pay (i) costs of recording the deed and deed of trust, if any; (ii) one-half of escrow fees, if any; (iii) Tenant's attorney's fees; (iv) survey costs in excess of $200.00; (v) cost of Tenant's Appraisal, if any; and (vi) one-half of the cost of appraisals other than Landlord's Appraisal, if any. C. Rentals shall be prorated as of the date title to the Leased Premises is vested in Tenant. -21- 26 Section 14.04 Adjustments to Stated Price. if Landlord consummates a sale of the Leased Premises to a third party, in accordance with the express provisions set forth in Sections 14.01 or 14.02, then the Stated Price as defined in Section 14.02 shall be automatically adjusted upward or downward to be 103% of the actual price paid by the third party purchaser for said Leased Premises in such consummated sales transaction. Landlord shall notify Tenant as to the amount of such price and provide satisfactory documentation such as the closing statement corresponding to such transaction. Such adjusted Stated Price shall be effective prospectively as if originally set forth in said Section 14.02 until the occurrence of any subsequent adjustment thereto pursuant to the terms hereof. Section 14.05 Covenants Run with Title to Leased Premises. The covenants set forth in Sections 14.01-14.04 shall remain in full force and effect and any sale of the Leased Premises by Landlord to a third party shall be made subject to the terms and conditions of these covenants. These covenants shall run with the land and bind Landlord, his heirs, successors and assigns and shall remain in full force and effect until exercised by Tenant or until this Lease expires by its terms or is otherwise terminated in accordance with the terms and conditions hereof. ARTICLE XV Arbitration of Certain Bonafide Disputes Section 15.01 Bonafide Disputes. Landlord and Tenant agree that there may arise genuine differences of opinion and legitimate disputes of a substantial and material nature regarding matters such as Tenant's offset rights, Landlord's maintenance responsibilities, reconstruction of damaged or destroyed Landlord's improvements, allocation of a compensation award in connection with an eminent domain proceeding, Tenant's first right of refusal or purchase option and certain other matters under the Lease, more particularly, controversies or claims arising out of or relating to a disagreement or dispute under Sections 3.05, 4.01, 5.02, 7.01, 14.01, 14.02 and &03 of this Lease. Therefore, Landlord and Tenant hereby agree that either Landlord or Tenant may submit a claim or controversy arising under the above- referenced Sections of this Lease which involves an amount in dispute of at least $2,000 to arbitration in accordance with the rules of the American Arbitration Association (the "AAA"), and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof and shall be binding upon the parties hereto subject to the additional provisions of Section 15.02 hereinbelow. If Tenant believes in good faith that Landlord has failed to perform any duty or obligation under the above-referenced Sections of the Lease or if Landlord believes in good faith that Tenant has failed to perform any duty or obligation set forth in the above-referenced Sections of the Lease, and the amount in controversy is at least $2,000, then either parry may elect to notify the other in writing of such alleged failure to perform and set forth in reasonable detail the particulars of such allegation, thereby constituting such claim or controversy as a "Bonafide Dispute". Landlord and Tenant agree to meet if necessary and to discuss or negotiate in good faith in order to attempt to resolve any such Bonafide Dispute for a period of ten (10) days after the sending of any such notice. If no resolution is forthcoming either party may then submit -22- 27 such Bonafide Dispute to arbitration as provided in Section 15.02 hereof. During the pendency of such Bonafide Dispute, that is, from the initiation thereof until it is finally resolved by the parties whereby an arbitration award, neither Landlord nor Tenant shall be considered to be in default" under the terms of this Lease due to any act or omission directly related to a Bonafide Dispute nor shall such act or omission be construed as an Event of Default hereunder. Section 15.02 Arbitration. In the event either Landlord or Tenant submits a claim or controversy to the AAA as provided in Section 15.01, Landlord and Tenant hereby agree that (a) any decision of the arbitrators shall be final, nonappealable and binding, (b) any arbitration proceeding or hearings in connection with any dispute hereunder shall be held in Houston, Texas and the hearing will commence within thirty (30) days after receipt by the AAA of an arbitration notice, and (C) any fees of arbitration, attorneys' fees of the prevailing party and transcript cost, shall be paid by the unsuccessful party in the arbitration, unless otherwise determined by the arbitrators. The arbitration notice shall be sent from either the Landlord to Tenant or Tenant to the Landlord expressing the intention to arbitrate with the AAA a disagreement and the nature of the disagreement. Simultaneously therewith, the Landlord or Tenant, as the case may be, shall transmit two copies of the arbitration notice to the regional office of the AAA which includes within its boundaries Houston, Texas, along with a copy of this Lease, thereby submitting such dispute for arbitration. The failure by Landlord or Tenant to comply with the terms of an arbitrator's award shall constitute a default under the terms of this Lease. ARTICLE XVI Miscellaneous Section 16.01 Notice. Whenever under this Lease a provision is made for notice of any kind, it shall be deemed sufficient notice and service thereof of such notice to the Tenant if in writing addressed to the Tenant at 10700 North Freeway, Suite 500, Houston, Texas 77037, Attention: Attention: John D. Hemphill, and deposited in the mail, postage prepaid, registered or certified mail, return receipt requested and if such notice is to the Landlord in writing addressed to the Landlord at P.O. Box 9000, Amarillo, Texas, 79105-9000 and deposited in the mail with postage prepaid, registered or certified mail, return receipt requested, with any notice of change of address and in the same manner as above described. Section 16.02 Estoppel Certificate. Landlord and Tenant mutually agree to cooperate with each other regarding requests for estoppel certificates and without cost to the responding party each will, at any time and from time to time, upon not less than ten (10) days prior request by the other, execute, acknowledge, and deliver to the requesting party a statement in writing executed by Landlord or Tenant as appropriate, certifying that this Lease is unmodified and in full effect (or, if there have been modifications, that this Lease is in full effect as modified, setting forth such modifications) and the date to which the rent has been paid, and either stating that to the knowledge of the signer of such certificate, no default exists hereunder or specifying each such default of which -23- 28 the signer may have knowledge; it being intended that any such statement by the signer may be relied upon by any prospective purchaser or mortgagee of the Leased Premises or any leasehold interest therein. Any Tenant Estoppel Certificate requested by Landlord shall be substantially in the form of the attached Exhibit"E". Section 16.03 Binding Effect. It is further covenanted and agreed that each and every one of the terms, agreements, covenants and obligations herein contained shall be binding upon all the parties hereto and their respective successors and permitted assigns. The execution and delivery of, and performance by Landlord and Tenant under this Lease have been duly authorized by all requisite corporate action; are not in contravention of any applicable law or the terms of Landlord's or Tenant's Articles of Incorporation, Bylaws, or other charter documents. This Lease, when executed and delivered by Landlord and Tenant, will constitute the valid, legal, and binding obligation of Landlord and Tenant enforceable against them in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, reorganization, or other similar laws relating to or affecting the enforcement of creditors' rights generally. Section 16.04 No Partnership. The relationship between Landlord and Tenant at all times shall remain solely that of "Landlord and Tenant" and not be deemed a partnership or joint venture. Section 16.05 Legal Construction. In case anyone or more of the provisions contained in this agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision thereof and this agreement shall he construed as if such invalid, illegal, or unenforceable provision had never been contained herein. Section 16.06 Entire Agreement. It is mutually agreed that the terms, agreements, covenants and obligations herein are the full and complete terms of this Lease; and, that no alterations, amendments or modifications of said terms shall be binding unless first reduced to writing and signed by both parties hereto. Section 16.07 Memorandum of Lease. Landlord and Tenant agree at any time, on request of either party, to execute a short form or memorandum of this Lease in a form substantially similar to that attached as Exhibit "H", permitting its recording in the real estate records of the counties where the Leased Premises are located. Section 16.08 Interest. All sums of money not paid by Tenant when due and all sums of money paid by Landlord which are due by Tenant shall bear interest from the due date or from the date paid by Landlord at the lesser of the highest legal rate of interest or eighteen percent (18.0%) per annum. All sums of money not paid by Landlord when due and all sums of money paid by Tenant which are due by Landlord shall bear interest from the due date or from the date paid by Tenant at the lesser of the highest legal rate of interest or eighteen percent (18.0%) per annum. -24- 29 Section 16.09 Attorney's Fees. If any action at jaw or in equity, including an action for declaratory relief, is brought to enforce or interpret the provisions of this Lease, the prevailing party shall be entitled to recover reasonable attorney's fees from the other party, which fees may be set by the Court in the trial of such action or may be enforced in a separate action brought for that purpose, and which fees shall be in addition to any other relief which may be awarded. Section 16.10 Texas Law to Apply. This Lease shall be construed under, and in accordance with the laws of the State of Texas. In the event a lawsuit is filed to enforce the provisions of this Lease, venue shall be proper in Dallas County, Texas. Section 16.11 Rights and Remedies Cumulative. The rights and remedies provided by this Lease are cumulative, and the use of any one right or remedy by either party shall not preclude or waive its right to use any or all other remedies. These rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance, or otherwise. Section 16.12 Waiver of Default. No waiver by either party of any default or breach of any term, condition, or covenant of this Lease shall be deemed to be waiver of any other breach of the same or any other term, condition, or covenant of this Lease. Section 16.13 Time of Essence. Time is of the essence of this Lease. Section 16.14 Gender. Whenever used, the singular shall include the plural, the plural the singular, and the use of any gender shall include all genders. Section 16.15 Captions. The paragraph captions and titles are included only for convenience and shall not be used to define or construe any portion of this Lease. IN WITNESS WHEREOF, the Lease Agreement is executed in triplicate, any copy of which shall constitute an original, effective as of the St. day of March, 1992. LANDLORD: TENANT: SALT FORK COMPANY, INC. TAYLOR PETROLEUM, INC. By: By: ----------------------- ------------------------- Larry Jack Taylor Larry Jack Taylor President President -25- 30 THE STATE OF TEXAS ) ) COUNTY OF HARRIS ) Before me, the undersigned authority, on this day personally appeared Larry Jack Taylor, President of Salt Fork Company, Inc., a corporation, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said corporation. Given under my hand and seal of office this the __ day of _________________,1992. ________________________________________ Notary Public, State of Texas My Commission Expires: ______________________ THE STATE OF TEXAS ) ) COUNTY OF HARRIS ) Before me, the undersigned authority, on this day personally appeared Larry Jack Taylor, President of Taylor Petroleum, Inc., a corporation, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said corporation. Given under my hand and seal of office this the ___________ day of ___________,1992. ________________________________________ Notary Public, State of Texas My Commission Expires: ______________________ -26- EX-10.3 19 AGMT. REGARDING LEASES - 03/01/92 1 EXHIBIT 10.3 AGREEMENT REGARDING LEASES THIS AGREEMENT dated as of the Effective Date, is by and among SALT FORK COMPANY, INC. ("Salt Fork"), a Texas corporation, ANADARKO DEVELOPMENT COMPANY ("Anadarko"), a Texas corporation, DAKOTA LAND COMPANY ("Dakota"), a Texas corporation (Anadarko, Salt Fork and Dakota collectively referred to as "Landlord"), TAYLOR PETROLEUM, INC. ("Tenant"), a Texas corporation, and THE FIRST NATIONAL BANK OF BOSTON, a national banking association (the "Bank"), and executed by E-Z SERVE CORPORATION ("E-Z Serve"), a Delaware corporation, and LARRY J. TAYLOR ("Mr. Taylor"). WITNESSETH: WHEREAS, the real property and personal property located on the real property described more fully on Exhibit A attached hereto and incorporated herein for all purposes (individually a "Mortgaged Property" and collectively the "Mortgaged Properties") is subject to first and prior liens and security interests in favor of the Bank to secure certain indebtedness and other obligations from Landlord to the Bank; and WHEREAS, Landlord and Tenant have entered into certain lease agreements covering the Mortgaged Properties, and in connection with such leases, Landlord and the Bank have executed that certain Assignment of Leases and Rents of even date herewith covering the leases between Landlord and Tenant described more fully on Exhibit A (the "Assigned Leases"); and WHEREAS, Landlord, Tenant and the Bank wish to agree among themselves as to certain matters concerning rights and obligations as to the Mortgaged Properties and the Assigned Leases. NOW, THEREFORE, for and in consideration of the mutual covenants and conditions herein contained, the receipt and sufficiency of which are hereby acknowledged, Landlord, Tenant and the Bank have agreed that during the term hereof: 1. NO OFFSET RIGHTS. Tenant will not exercise any right, including but not limited to rights under Section 3.05 of any of the Assigned Leases, it might have to offset any present or future obligations to make payments to Landlord under the Assigned Leases. 2. NOTICES. The Bank shall be provided with copies of all exhibits, notices, records, schedules and lists, including but not limited to those specified in Sections 1.01, 1.02, 4.01, 5.02, 6.05, 7.01, 9.02, 9.03, 9.04, 10.01, 10.02, 12.01, 12.04, 14.01, 14.02, 15.01, 16.02 and 16.07 of any of the Assigned Leases, that either Landlord or Tenant provide to the other under the Assigned Leases, or 2 that is to be attached to any of the Assigned Leases. The party required under the Assigned Leases to provide such exhibits, notices, records, schedules and lists shall provide a copy to the Bank. 3. ASSIGNMENT OR SUBLEASE. In the event tenant assigns its rights under any Assigned Lease or sublets the leased premises to any Assigned Lease, in whole or in part, Tenant shall not be released from any further obligation under any such Assigned Lease unless it first obtains the express written consent of the Bank. 4. PURCHASE OPTION. In the event Tenant exercises the purchase option as to a Mortgaged Property provided in the Assigned Leases (as defined therein) and the purchase price for such Mortgaged Property is less than forty-five (45) times the monthly base rent payable under the Assigned Lease applicable to that Mortgaged Property, the Bank shall not be required to release its lien against the Mortgaged Property. 5. SUBORDINATION. Subject to the provisions of the Mortgagee-Tenant Non-Disturbance and Attornment Agreement executed by and among Landlord, Tenant and the Bank, all rights of Tenant under the Assigned Leases, including but not limited to Sections 14.01, 14.02 and 14.03, shall be subordinate to the lien of the Bank. 6. COLLATERAL ACCOUNT. Until further written notice from Landlord and the Bank, all payments of rent under the Assigned Leases shall be made from Tenant directly into an account at the Bank in the name of the Bank. As long as payments are made in accordance with this agreement or other written instructions of both Landlord and Bank, Landlord shall have no claim against Tenant for non-payment of rent. 7. FORECLOSURE OR DEED IN LIEU. The acquisition by the Bank or other party of a Mortgaged Property, whether by foreclosure, deed in lieu or otherwise, shall not be an offer for the purchase or acquisition of such Mortgaged Property and will not give rise to any right of tenant to acquire such Mortgaged Property pursuant to the provisions of the Assigned Leases. 8. SALE OR REFINANCING. When and as a Mortgaged Property is sold or refinanced so that it no longer is subject to the liens and security interests of the Bank, such Mortgaged Property and the Assigned Lease covering such Mortgaged Property shall no longer be subject to terms of this agreement. This provision shall not be deemed to authorize any sale or refinance that is contrary to the terms of any of the documents evidencing the Bank's liens and security interests against the Mortgaged Properties or the indebtedness secured thereby. 9. NOTICES. Except as otherwise specifically provided in this agreement, any notice or other information required to be given by a party shall be in writing and shall be sufficient if personally delivered or sent certified mail, return receipt requested, postage prepaid to the following addresses: -2- 3 LANDLORD AND MR. TAYLOR: P.O. Box 10000 Amarillo, Texas 79116 TENANT AND E-Z SERVE: 10700 North Freeway Suite 500 Houston, Texas 77037 BANK: Loan Review Department Mail Stop 02-12-04 100 Federal Street Boston, Massachusetts 02110 ATTN: Robert S. Allen Any notice shall be deemed delivered on the date mailed in the manner set out above. The designation or address of the person to be notified may be changed at any time by delivery of notice of that change to the other parties. 10. MISREPRESENTATION. As to each of the Assigned Leases, an additional event of default shall be if any representation or warranty made by or on behalf of E-Z Serve to either Landlord or the Bank shall be proved to have been knowingly or intentionally (i) false, (ii) misleading or (iii) incorrect in any material respect when made. 11. EXECUTION BY MR. TAYLOR AND E-Z SERVE. Mr. Taylor and E-Z Serve have guaranteed the obligations of the Tenant under the Assigned Leases and execute this agreement solely in connection with their capacity as a guarantor of the obligations of Tenant under the Assigned Leases. 12. SEVERABILITY. Should any clause, sentence, paragraph or provision of this agreement be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this agreement, and the parties hereto agree that the part or parts of this agreement so held to be invalid, unenforceable, or void shall be deemed to have been stricken herefrom by the parties hereto, and the remainder will have the same force and effect as if such stricken part or parts have never been included herein. 13. NO CLOUD ON TITLE. As to any party to this agreement in whom title to the Mortgaged Property or any part thereof is not vested, the execution of this agreement by such party shall not Constitute a claim of title by such party against a Mortgaged Property or any owner thereof. 14. INUREMENT. The agreement shall be binding upon and inure to the benefit of the parties, their respective heirs, successors and permitted assigns. -3- 4 15. EFFECTIVE DATE AND TERM. The effective date of this agreement is March 1, 1992 ("Effective Date"). This agreement shall remain in full force and effect as to all paragraphs except paragraphs 2, 3, 6 and 7 until August 31, 1993. This Agreement shall remain in full force and effect as to Paragraph 2, 3, 6 and 7 as to an Assigned Lease for so long as the Bank has a lien and security interest in the Mortgaged Property applicable to that Assigned Lease. The expiration of this Agreement (except for paragraphs 2, 3, 6 and 7 hereof) on August 31, 1993, shall in no manner be interpreted or construed to amend or modify the Credit Agreement by and between Landlord and Bank or to reduce or limit the rights of the Bank under the security documents relating to the Credit Agreement. ATTEST: [SEAL] SALT FORK COMPANY, INC., a Texas corporation By: /s/ Herbert Hitchings By: /s/ Larry J. Taylor ------------------------------- ---------------------------------- , Secretary Larry J. Taylor, President -------------------- TAYLOR PETROLEUM, INC., a Texas Corporation By: /s/ Larry J. Taylor ---------------------------------- Name: Larry J. Taylor Title: President E-Z SERVE CORPORATION, a Delaware corporation By: /s/ John T. Miller ---------------------------------- Name: John T. Miller Title: Senior Vice President -4- 5 THE FIRST NATIONAL BANK OF BOSTON, a national banking association By: /s/ Thomas Sommerfield ---------------------------------- Name: Thomas Sommerfield Title: Vice President -5- 6 ATTEST: [SEAL] ANADARKO DEVELOPMENT COMPANY, a Texas corporation By: /s/ Herbert Hitchings By: /s/ Larry J. Taylor ------------------------------- ---------------------------------- , Secretary Larry J. Taylor, President -------------------- ATTEST: [SEAL] DAKOTA LAND COMPANY, a Texas corporation By: /s/ Herbert Hitchings By: /s/ Larry . Taylor ------------------------------- ---------------------------------- Assistant , Secretary Larry J. Taylor, President -------------------- /s/ Larry J. Taylor ------------------------------------- Larry J. Taylor -6- EX-10.4 20 STOCK ACQUISITION AGMT. - 03/31/94 1 EXHIBIT 10.4 STOCK ACQUISITION AGREEMENT This STOCK ACQUISITION AGREEMENT (the "Agreement"), made as of the 31st day of March, 1994, between E-Z SERVE PETROLEUM MARKETING COMPANY, a Delaware corporation ("E-Z Serve"), and ESCM & ASSOCIATES, INC., a Georgia, corporation (ESCM). ARTICLE 1 THE ACQUISITION 1.1 The Closing. On the Closing Date (as hereinafter defined): E-Z Serve shall sell and ESCM shall purchase all of the issued and outstanding stock of Amber Refining, Inc., a North Carolina corporation, (Refining) and Amber Pipeline, Inc., a Texas corporation (Pipeline). 1.2 The Closing Date. The closing (the "Closing") shall take place at the offices of E-Z Serve, 2550 North Loop West, Suite 600, Houston, Texas 77092, at 10:00 a.m. (Central Standard Time) on March 31, 1994, or such other date or time as E-Z Serve and ESCM may agree to in writing (the "Closing Date"). 1.3 Purchase Price. At Closing, ESCM shall pay to E-Z Serve the sum of SEVEN HUNDRED FIFTY AND 00/100 DOLLARS ($750.00), for the stock of Refining and TWO HUNDRED FIFTY AND NO/100 DOLLARS ($250.00), for the stock of Pipeline, which payments shall total ONE THOUSAND AND 00/100 DOLLARS ($1,000.00). As further consideration ESCM agrees to provide funding for Environmental Cleanup Liability of Refining and Pipeline (hereinafter sometimes referred to collectively as the "Companies" and individually as the "Company*), as hereunder defined. ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF E-Z SERVE E-Z Serve represents and warrants to ESCM as follows: 2.1 Organization and Existence of Refining. Refining is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina. The total authorized capital stock of Refining consists of 100,000 shares of common stock, par value $1.00 per share, of which 100,0000 shares are outstanding, validly issued, fully paid and nonassessable and owned by E-Z Serve. 2.2 Organization .and Existence of Pipeline. Pipeline is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas. The total authorized capital stock of Pipeline consists of 100,000 shares of common stock, par value $1.00 per share, of which 100,000 shares are outstanding, all of which are fully paid and non-assessable and owned by E-Z Serve. 2 2.3 Qualification of the Companies. The Companies are duly qualified to do business and in good standing where required under the laws of the states in which they conduct business. Each Company has full corporate power and lawful corporate authority to carry on its business as presently conducted and to own and operate its assets and business. 2.4 Financial Statements. Attached hereto as Schedule 2.4 are copies of the following described financial statements: the separate unconsolidated and combined balance sheets of the Companies as of December 26, 1993, and the related statements of income or loss, and stockholders' equity of the Companies for the twelve fiscal periods ended December 26, 1993. 2.5 Taxes. The Companies have duly and timely filed all federal, state and local tax reports and returns required to be filed by the Companies, and paid all taxes and levies as same have become due and owing. 2.6 Litigation. Except as set forth in Schedule 2.6, E-Z Serve is not aware of any actions, suits or proceedings pending or, threatened against the Companies with respect to any of the transactions contemplated hereby or which, if adversely determined, would have a Material adverse effect on the Companies. 2.7 Real Property. Schedule 2.7 contains a list of all real property owned by each Company, and a list of real property easements held by Pipeline. 2.8 Authority and Approval. E-Z Serve has the power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF ESCM ESCM hereby represents and warrants to E-Z Serve as follows: 3.1 Organization and Existence of ESCM. ESCM is a corporation duly organized, validity existing and in good standing under the laws of the State of Georgia. 3.2 Authority and Approval. ESCM has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. ESCM is acquiring the Refining Stock and the Pipeline Stock for its own account for investment purposes and not with a view to public distribution. No other act, approval or proceedings on the part of ESCM or the holders of any class of its equity securities is required to authorize the execution and delivery of this Agreement by ESCM or consummation of the transactions contemplated hereby. -2- 3 3.3 Litigation. There are no actions, suits or proceedings pending or threatened against ESCM at law or in equity or before or by any governmental authority or instrumentality, or before any arbitrator of any kind, either with respect to any of the transactions contemplated hereby or which, if adversely determined, would have a Material adverse effect on ESCM. ARTICLE 4 CERTAIN COVENANTS AND AGREEMENTS 4.1 Access. Each party hereto agrees that it will, upon reasonable notice, give to the other party full access, during normal business hours throughout the period prior to the Closing Date, to the properties, books, contracts and records relating to this transaction. Each party agrees that it will, and will cause its employees to, hold in strict confidence all information so obtained hereby, agrees that such information is proprietary to the other party and if the transactions herein provided for are not consummated as contemplated herein, agrees that it shall not disclose such information to any third parties or use such information for itself or on behalf of others. ARTICLE 5 CONDITIONS TO CLOSING 5.1 ESCM's Obligations. The obligations of ESCM at the Closing are subject to the following conditions: (a) The representations and warranties of E-Z Serve shall be true, complete and correct when made, and, in addition, shall be true, complete and correct on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date; (b) E-Z Serve shall have performed all obligations and agreements and complied with all covenants and conditions contained in this Agreement to be performed and complied with by E-Z Serve on or prior to the Closing Date. 5.2 E-Z Serve's Obligations. The obligations of E-Z Serve at the Closing are subject to the following conditions: (a) The representations and warranties of ESCM shall be true, complete and correct when made, and, in addition, shall be true, complete and correct on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date; -3- 4 (b) ESCM shall have performed all obligations and agreements and complied with all covenants and conditions contained in this Agreement to be performed and complied with by ESCM on or prior to the Closing Date. ARTICLE 6 INDEMNIFICATION 6.1 Indemnification of E-Z Serve. ESCM, from and after the Closing Date, shall indemnify and hold E-Z Serve harmless from and against any and all damages (including exemplary damages and penalties), losses, deficiencies, costs, expenses, obligations, fines, expenditures, claims and liabilities, including reasonable counsel fees and reasonable expenses of investigation, defending and prosecuting litigation (collectively, the "Damages"), suffered by E-Z Serve as a result of, caused by, arising out of, or in any way relating to (a) any misrepresentation, breach of warranty, or nonfulfillment of any agreement or covenant on the part of ESCM under this Agreement or any misrepresentation in or omission from any list, schedule, certificate, or other instrument furnished or to be furnished to E-Z Serve by ESCM pursuant to the terms of this Agreement; and (b) Environmental Cleanup Liability (as hereinafter defined) excepting those funding responsibilities for environmental matters which E-Z Serve has assumed pursuant to Article 7, hereto. 6.2 Indemnification of ESCM. E-Z Serve, from and after the Closing Date, shall indemnify and hold the Companies and FSCM harmless from and against any and all Damages suffered by any of the Companies or FSCM as a result of, caused by, arising out of, or in any way relating to: (a) any misrepresentation, breach of warranty, or nonfulfillment of any agreement or covenant on the part of E-Z Serve under this Agreement or any misrepresentation in or omission from any list, schedule, certificate, or other instrument furnished or to be furnished to ESCM by E-Z Serve or any of the Companies pursuant to the terms of this Agreement; (b) any liability or obligation which pertains to the ownership, operation or conduct of the business or affairs of the Companies arising from any acts, omissions, events, conditions or circumstances occurring or existing on, or prior to, the Closing Date, including, without limitation, those matters disclosed on any Schedule hereto but excepting Environmental Cleanup Liability for which FSCM is indemnifying E-Z Serve pursuant to paragraph 6.1, above; and (C) those matters listed in Article 7 hereof, for which E-Z Serve has assumed funding responsibilities pursuant to this Agreement. 6.3 Limitations on Indemnification. (a) The liability of either party for the breach of' any of the representations and warranties set forth in Article 2, shall be limited to claims for which written notice to the indemnifying party by the party seeking indemnification is delivered on or before the second anniversary date of the Closing Date; and shall further be limited to those claims for which the party -4- 5 claiming indemnification gives the indemnifying party prompt notice and permits the indemnifying party full participation in the adjustment and/or resolution of said claim(s). (b) For purposes of this Agreement, "Environmental Cleanup Liability" means any cost or expense of any nature whatsoever incurred to contain, remove, remedy, clean up, or abate any deposit, emission, discharge, release or threatened release of hazardous substances, pollutants or contaminants from or on any of the properties owned by or on which the Companies hold a property interest, including without limitation, easement fights, as of the date of dosing including, without limitation, (i) any direct costs or expenses for investigation, study, assessment, legal representation, cost recovery by governmental agencies, or on-going monitoring in connection therewith, and (ii) any cost, expense, loss or damage incurred with respect to any of the properties owned by, or on which the Companies hold a property interest, including without limitation, easement fights, as of the date of closing, or with respect to their operation as a result of actions or measures necessary to implement or effectuate any such containment, removal, remediation, cleanup or abatement. (c) In determining the amount of any Damages for which any party is entitled to indemnification under this Agreement, the amount thereof will be reduced by any insurance proceeds realized by the indemnified party net of any insurance premium that becomes due as a result of the claim for which indemnity is sought. ARTICLE 7 ADDITIONAL DUTIES OF E-Z SERVE 7.1 Upon Closing, E-Z Serve shall: (a) pay to ESCM an amount equal to real property, personal property and ad valorem taxes levied against any of the properties of Refinery for the period before and through September 30, 1994, provided that E-Z Serve shall not be required to pay any sums hereunder which exceed in the aggregate ONE HUNDRED THOUSAND AND 00/100 DOLLARS($100,000.00). See paragraph 9.7. (b) pay to ESCM an amount equal to real property, personal property and ad valorem taxes levied against any of the properties of Pipeline for the period before and through the calendar year, 1994. (c) pay to ESCM an amount equal to environmental assessment expenses incurred by Refinery at its property located in Fort Worth, Texas, up to a maximum reimbursement of NINETY THOUSAND AND 00/100 ($90,000.00). -5- 6 (d) pay to ESCM an amount equal to payments for which Refinery is obligated pursuant to a demolition contact dated December 1, 1992, between Refinery and ESCM. (e) pay to ESCM an amount equal to costs incurred by ESCM and/or Refinery in disposal of hazardous liquids currently stored at Refinery's property in Fort Worth, Texas, up to a maximum payment of SIXTEEN THOUSAND AND 00/100 DOLLARS ($16,000.00). (f) pay to ESCM an amount equal to costs incurred by Refinery in renewing and obtaining operating licenses and permits for the current year up to a maximum payment of FIFTEEN HUNDRED AND 00/100 DOLLARS ($1,500.00). (g) pay to ESCM an amount equal to Refinery's 1993 Hazardous Waste Facility Fee and a pro-rata share (as of the date of Closing) of the 1994 Fee up to a maximum reimbursement of SEVEN THOUSAND FIVE HUNDRED AND 00/100 DOLLARS ($7,500.00). (h) pay to ESCM an amount equal to a pro-rata share (as of the date of dosing) of the 1994 Texas Franchise Tax up to a maximum reimbursement of SEVEN THOUSAND AND 00/100 DOLLARS ($7,000.00) (i) pay to ESCM an amount equal to. Pipeline's and or ESCM's reasonable costs for Environmental Cleanup Liability at the following three locations: (i) Amber Pipeline Mustang Drive Crossing at High School Grapevine, Texas (ii) Amber Pipeline Caldwell Addition (iii) Amber Pipeline Exposed Pipe in Farmer's Held for purposes hereof "reasonable costs" shall not exceed (a) those costs for work that is determined to be necessary by applicable authorities or in a court of law, including fines penalties or judgments, unless such fines, penalties or judgments are occasioned solely by the activities of ESCM and/or Pipeline subsequent to the date of closing, and (b) in an amount which would be charged by a duly qualified contractor retained by E-Z Serve to accomplish said tasks. (j) pay to ESCM an mount equal to the costs for the Environmental. Cleanup Liability of existing Pipeline real property easements that exceed the proceeds of sales of said Pipeline properties and easements as outlined in Article 8, below, provided that the obligation of E-Z Serve under this subparagraph (i) shall cease and be of no further force and effect as of June 1, 2004, -6- 7 and further provided that under no condition shall E-Z Serve be responsible for contamination created or occurring after the date of Closing. ARTICLE 8 ADDITIONAL DUTIES OF ESCM 8.1 Upon Closing, FSCM shall: (a) use its best efforts, and cause Pipeline to use its best efforts, to sell or lease Pipeline's real property and real property easements. (b) cause Pipeline to give E-Z Serve a right of first refusal to purchase or lease any properties for which Pipeline has received a bona fide offer to purchase or lease. E-Z Serve shall have thirty (30) days from the date of notification by Pipeline in which to purchase or lease the respective property upon the same terms and conditions at which Pipeline proposes to sell or lease said property. In the event E-Z Serve declines said offer or fails to respond within said thirty day period, Pipeline shall be free to proceed with the transaction. (c) establish or cause Pipeline to establish an escrow account with an attorney or escrow agent mutually approved by ESCM and E-Z Serve and to place therein all funds received from a sale or lease of Pipeline properties. (d) disburse or cause Pipeline to disburse funds from the escrow account referenced above only for bona fide expenses incurred for Environmental Cleanup Liability of Pipeline properties; and on the sooner of June 1, 2004, or the date when no further Environmental Cleanup Liability of Pipeline properties exists, cause said escrow account to be disbursed fifty percent (50%) to ESCM and fifty percent (50%) to E-Z Serve. ARTICLE 9 TAX CONSIDERATIONS 9.1 It is understood that as of December 26, 1993, Refining had net operating loss carry forwards (NOUS), as that term is defined in Section 172 of the Internal Revenue Code of 1986 ("IRC"), in an amount of approximately TWO MILLION EIGHT HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($2,850,000). E-Z Serve and Refining have agreed that 100% of the NOL'S generated by Refining through and including the 1994 short-period return ending on the date of acquisition will no longer be available for the benefit of Refining but will be reattributed to E-Z Serve under the election described in Treasury Regulation Section 1502-20(g) (1). This election to retribute losses will be prepared by E-Z Serve and filed in its 1994 federal consolidated income tax -7- 8 return due on or before September 15, 1995. E-Z Serve agrees to deliver a copy of the election to Refining and Refining agrees to sign and return the election to E-Z Serve prior to September 1, 1995, and Refining agrees to include a copy of the election in its federal income tax return for the first year ending after September 15, 1995. 9.2 It is understood that as of December 26, 1993, Pipeline had net operating loss carry forwards (NOL'S), as that term is defined in IRC Section 172, in an amount of approximately EIGHTY THOUSAND AND 00/DOLLARS ($80,000). E-Z Serve and Pipeline have agreed that 100% of the NOUS generated by Pipeline through and including the 1994 short-period return ending on the date of acquisition will no longer be available for the benefit of Pipeline but will be reattributed to E-Z Serve under the election described in Treasury Regulation Section 1502-20 (g) (1). This election to retribute losses will be prepared by E-Z Serve and filed in its 1994 federal consolidated income tax return due on or before September 15, 1995. E-Z Serve agrees to deliver a copy of the election to Pipeline and Pipeline agrees to sign and return the election to E-Z Serve prior to September 1, 1995 and Pipeline agrees to include a copy of the election in its federal income tax return for the first year ending after September 15, 1995. 9.3 It is understood that E-Z Serve will not make the election under Treasury Regulation 1.1502-95 to apportion any of its consolidated Section 382 limitation to Refining. 9.4 It is understood that E-Z Serve will not make the election under Treasury Regulation 1.1502-95 to apportion any of its consolidated Section 382 limitation to Pipeline. 9.5 ESCM understands and agrees that on March 28, 1994, Refining forgave an indebtedness owed by E-Z Serve to Refining in the approximate amount of FOUR MILLION SIX HUNDRED NINETY-ONE THOUSAND AND 00/100 DOLLARS ($4,691,000.00). The exact amount of the debt forgiveness will be determined within sixty (60) days of closing. Said debt forgiveness to be effected by a distribution from Refining to E-Z Serve of indebtedness in the amount of TWO MILLION AND 00/100 DOLLARS ($2,000,000.00) pursuant to IRC Section 301(c)(2). The remainder of the debt forgiveness to be effected by a cancellation of indebtedness pursuant to IRC Section 166. 9.6 ESCM understands and agrees that on March 28, 1994, Pipeline forgave an indebtedness owed by E-Z Serve to Pipeline in the approximate amount of ONE MILLION FOUR HUNDRED NINETY FIVE THOUSAND AND 00/100 DOLLARS ($1,495,000.00). The exact amount of the debt forgiveness will be determined within sixty (60) days of closing. Said debt forgiveness to be effected by a cancellation of indebtedness pursuant to IRC Section 166. -8- 9 9.7 Notwithstanding anything herein to the contrary, it is understood that E-Z Serve shall retain complete control over litigation listed on Schedule 2.6 entitled Amber Refining, Inc. v. Tarrant Appraisal District. E-Z Serve may, at its option, continue to discontinue said litigation. ESCM and Refining will cooperate with any continuation of said litigation insofar as reasonably necessary. Any tax refunds received by Refining and/or ESCM as the result of said litigation for tax payment made by Refining for the period through September 30, 1994, shall be promptly remitted to E-Z Serve. All costs associated with this litigation shall be borne by E-Z Serve. ARTICLE 10 MISCELLANEOUS 10.1 Fees and Expenses. Each party shall bear its own fees and expenses incident to the negotiation, preparation and execution of this Agreement and the consummation of the transactions contemplated hereby. 10.2 Post-Closing Access. For a period of five (5) years after the Closing, E-Z Serve will have reasonable access to the records of any of the Companies covering any period prior to the Closing, at reasonable times during normal business hours. 10.3 Entire Agreement. This Agreement, including the Schedules hereto, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, among the parties hereto with respect to the subject matter hereof. 10.4 Notices. All notices which are required or may be given pursuant to the terms of this Agreement shall be in writing and shall be delivered by hand or express delivery service or mailed by registered or certified mail, postage prepaid, as follows: If to ESCM: ESCM Associates, Inc. P. O. Box 7487 Athens, Georgia 30604 Attn: President If to E-Z Serve: E-Z Serve Corporation 2550 North Loop West, Suite 600 Houston, Texas 77092 Attention: President -9- 10 or such other address as any party hereto shall have designated by notice in writing to the other parties hereto. All such notices given in compliance with the provisions of this Section shaft be deemed to have been given when delivered or mailed. 10.5 Modifications and Waivers. No termination, cancellation, modification, amendment, or other change in this Agreement, or waiver of any right or remedy herein provided, shall be effective for any purpose unless specifically set forth in a writing signed by the party or parties to be bound thereby. The waiver of any right or remedy in respect of any occurrence or event on one occasion shall not be deemed a waiver of such right or remedy in respect of such occurrence or event on any other occasion. 10.6 Agreement Binding. This Agreement shall be binding upon the heirs, successors and assigns of the parties hereto. ESCM shall not sell, pledge or alienate the stock of Pipeline or Refinery unless the holder thereof specifically agrees to accept the terms and conditions of this Agreement, and any purported sale pledge or alienation in contravention of this clause shall be null and void. 10.7 Controlling Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 10.8 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but all of which counterparts collectively shall constitute one instrument representing the agreement among the parties hereto. 10.9 Further Assurances. Each party hereto shall execute and deliver such instruments and take such other actions as any other party hereto may reasonably request in order to carry out the intent of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of the date first above written. ATTEST: ESCM AND ASSOCIATES, INC. /s/ Malia M. Shaw By: /s/ Edward A. Shaw - ------------------------------ ------------------------------------- Secretary Name: Edward A. Shaw ----------------------------------- Title: Vice President ---------------------------------- -10- 11 ATTEST: E-Z SERVE PETROLEUM MARKETING CO. /s/ Bob Bailey By: /s/ Marion H. Blackmon - ------------------------------ ------------------------------------- Assistant Secretary Name: Marion H. Blackmon ----------------------------------- Title: Senior Vice President ---------------------------------- -11- EX-10.5.1 21 AMENDED CREDIT AND GUARANTY AGMT. - 10/02/95 1 EXHIBIT 10.5.1 U.S.$105,000,000 AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT, dated as of October 2, 1995, (amending and restating the Credit and Guaranty Agreement dated as of January 17, 1995) among E-Z SERVE CONVENIENCE STORES, INC. as Borrower, E-Z SERVE CORPORATION, as Guarantor, CERTAIN FINANCIAL INSTITUTIONS, as Lenders, and SOCIETE GENERALE, as Agent for the Lenders. 2
ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS 4.1. LIBO Rate Lending Unlawful . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 4.2. Deposits Unavailable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 4.3. Increased Costs, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 4.4. Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 4.5. Increased Capital Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 4.6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 4.7. Payments, Computations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 4.8. Sharing of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 4.9. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 4.10. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE V CONDITIONS TO EFFECTIVENESS AND CREDIT EXTENSIONS 5.1. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 5.1.1. Resolutions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 5.1.2. Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 5.1.3. Delivery of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 5.1.4. Beverage License Certification Date; Merger of Sunshine and the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 5.1.5. Required Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 5.1.6. Termination of Sunshine Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 5.1.7. Transfer of Sunshine Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 5.1.8. Financial Information, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 5.1.9. Affirmation and Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 5.1.10. UCC Search Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 5.1.11. Amendment to Borrower Security Agreement, Filings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 5.1.12. Solvency Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 5.1.13. Closing Date Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 5.1.14. Evidence of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 5.1.15. Payment of Outstanding Indebtedness, Payment of Fees and Interest, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 5.1.16. Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 5.1.17. Agent's Closing Fees, Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 5.1.18. Borrowing Base Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 5.1.19. Effective Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 5.1.20. Stockholders' Acknowledgment and Confirmation . . . . . . . . . . . . . . . . . . . . . . . . . 61 5.1.21. Satisfactory Legal Form, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 5.2. Conditions to Credit Extensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 5.2.1. Compliance with Warranties, No Default, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 61 5.2.2. Credit Extension Request, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 ARTICLE VI REPRESENTATIONS AND WARRANTIES 6.1. Organization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 6.2. Due Authorization, Non-Contravention, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 6.3. Government Approval, Regulation, Compliance
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SECTION PAGE - ------- ---- with Law, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 6.4. Validity, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 6.5. Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 6.6. No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 6.7. Litigation, Labor Controversies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 6.8. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 6.9. Ownership of Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 6.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 6.11. Pension and Welfare Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 6.12. Environmental Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 6.13. Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 6.14. Confirmation of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 70 6.15. Expropriation and Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 6.16. Intellectual Property Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 6.17. Ownership of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 6.18. Absence of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 6.19. Regulations G, U and X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 6.20. Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 6.21. Burdensome Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 6.22. List of Guaranty Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 ARTICLE VII COVENANTS 7.1. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 7.1.1. Financial Information, Reports, Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 73 7.1.2. Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 7.1.3. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 7.1.4. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 7.1.5. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 7.1.6. Environmental Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 7.1.7. As to Intellectual Property Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 7.1.8. Future Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 7.1.9. Springing Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 7.1.10. Gasoline Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 7.1.11. Rate Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 7.1.12. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 7.2. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 7.2.1. Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 7.2.2. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 7.2.3. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 7.2.4. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 7.2.5. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 7.2.6. Restricted Payments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 7.2.7. Capital Expenditures, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 7.2.8. Rental Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 7.2.9. Take or Pay Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 7.2.10. Consolidation, Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 7.2.11. Asset Dispositions, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 7.2.12. Modification of Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
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SECTION PAGE - ------- ---- 7.2.13. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 7.2.14. Negative Pledges, Restrictive Agreements, etc. . . . . . . . . . . . . . . . . . . . . . . . . . 95 7.2.15. Management and Director Fees, Expenses, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 96 7.2.16. Environmental Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 7.2.17. Fiscal Year End . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 7.2.18. Activities of the Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 7.2.19. Activities of Certain Subsidiaries of the Parent . . . . . . . . . . . . . . . . . . . . . . . . 97 ARTICLE VIII EVENTS OF DEFAULT 8.1. Listing of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 8.1.1. Non-Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 8.1.2. Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 8.1.3. Non-Performance of Certain Covenants and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 8.1.4. Non-Performance of Other Covenants and Obligations . . . . . . . . . . . . . . . . . . . . . . . 98 8.1.5. Default on Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 8.1.6. Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 8.1.7. Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 8.1.8. Change in Control; Stockholders Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 8.1.9. Bankruptcy, Insolvency, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 8.1.10. Impairment of Security, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 8.1.11. Beverage Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 8.2. Action if Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 8.3. Action if Other Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 ARTICLE IX GUARANTY 9.1. The Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 9.2. Guaranty Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 9.3. Reinstatement in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 9.4. Waiver by the Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 9.5. Postponement of Subrogation, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 9.6. Stay of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 ARTICLE X THE AGENT 10.1. Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 10.2. Funding Reliance, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 10.3. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 10.4. Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 10.5. Credit Extensions by SG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 10.6. Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 10.7. Loan Documents, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 10.8. Copies, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
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SECTION PAGE - ------- ---- ARTICLE XI MISCELLANEOUS PROVISIONS 11.1. Waivers, Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 11.2. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 11.3. Payment of Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 11.4. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 11.5. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 11.6. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 11.7. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 11.8. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 11.9. Governing Law; Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 11.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 11.11. Sale and Transfer of Loans and Notes; Participations in Loans and Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 11.11.1. Assignments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 11.11.2. Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 11.11.3. Certain Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 11.12. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 11.13. Certain Collateral and Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 11.14. Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 11.15. Forum Selection and Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . 117 11.16. Waiver of Jury Trial, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 11.17. Re-Allocation of Loans, Letters of Credit Outstanding and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
SCHEDULE I - Disclosure Schedule SCHEDULE II - Percentages SCHEDULE III - Capital Expenditure Levels II and III SCHEDULE IV - Administrative Information SCHEDULE V - Sunshine United States Trademarks EXHIBIT A - Form of Revolving Note EXHIBIT B - Form of Term Note EXHIBIT C-1 - Form of Borrowing Request EXHIBIT C-2 - Form of Continuation/Conversion Notice EXHIBIT D - Form of Issuance Request EXHIBIT E - Form of Borrowing Base Certificate EXHIBIT F - Form of Compliance Certificate EXHIBIT G-1 - Conformed copy of Parent Pledge Agreement EXHIBIT G-2 - Conformed copy of Borrower Pledge Agreement EXHIBIT H-1 - Conformed copy of Borrower Security Agreement EXHIBIT H-2 - Conformed copy of Petroleum Security Agreement EXHIBIT H-3 - Conformed copy of Parent Security Agreement EXHIBIT I - Amendment No. 1 to Security Agreement (Trademark) EXHIBIT J - Conformed copy of Petroleum Guaranty -v- 6 EXHIBIT K-1 - Conformed copy of Petroleum Note EXHIBIT K-2 - Conformed copy of Parent Inter-Company Note EXHIBIT L - Form of Closing Date Certificate EXHIBIT M - Form of CFO/CEO Solvency Certificates EXHIBIT N - Conformed copy of Stockholders Letter of Understanding EXHIBIT O - Form of Lender Assignment Agreement EXHIBIT P - Form of Affirmation and Acknowledgement EXHIBIT Q - Form of Opinion of Counsel to the Obligors EXHIBIT R - Form of Bankruptcy Court Order EXHIBIT S - Form of Sunshine Letter of Credit EXHIBIT T - Form of Amendment to Borrower Security Agreement -vi- 7 AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT, dated as of October 2, 1995 (amending and restating the Credit and Guaranty Agreement, dated as of January 17, 1995), among E-Z SERVE CONVENIENCE STORES, INC., a Delaware corporation (the "Borrower"), E-Z SERVE CORPORATION, a Delaware corporation (the "Parent"), the various financial institutions as are or may become parties hereto (collectively, the "Lenders") and SOCIETE GENERALE ("SG"), as agent (in such capacity, the "Agent") for the Lenders. W I T N E S S E T H: WHEREAS, the Borrower is a direct, wholly-owned Subsidiary (such capitalized term and other capitalized terms used in these recitals without definition shall have the meanings provided for in Section 1.1) of the Parent which also owns, as a direct, wholly-owned Subsidiary, E-Z Serve Petroleum Marketing Inc., a Delaware corporation ("Petroleum"); and WHEREAS, the Borrower is engaged in the business of owning and operating convenience stores and Petroleum is engaged in the business of owning and operating gasoline stations, some of which also house convenience stores; and WHEREAS, the Borrower entered into the Credit and Guaranty Agreement, dated as of January 17, 1995, among the Borrower, the Parent, the Lenders party thereto and the Agent (the "Original Credit Agreement"), pursuant to which the Borrower obtained commitments to make credit extensions comprised of loans and letters of credit in an aggregate principal and stated amount not to exceed $60,000,000 at any one time outstanding; and WHEREAS, such commitments provided financing to, among other things, enable the Borrower to acquire Time Saver Stores, Inc., from Dillon Companies, Inc.; and WHEREAS, the Original Credit Agreement has been amended and otherwise modified by (a) Amendment No. 1, dated as of April 27, 1995, (b) Amendment No. 2 and Waiver No. 1, dated as of June 15, 1995 and (c) Amendment No. 3 and Waiver No. 2 ("Amendment No. 3"), dated as of July 21, 1995 (the Original Credit Agreement, as amended and modified by all of the foregoing, is hereafter referred to as the "Existing Credit Agreement"); and WHEREAS, the Parent and EZS Acquisition Corporation, a Delaware corporation and a direct wholly-owned subsidiary of the Parent ("Acquisition"), entered into the Agreement and Plan of Merger (the "Merger Agreement"), dated as of June 15, 1995, with 8 Sunshine-Jr. Stores, Inc., a Florida corporation ("Sunshine"); and WHEREAS, pursuant to the Merger Agreement, the Parent caused Acquisition to make a tender offer to acquire all of the 1,701,650 outstanding shares of common stock, par value $.10 per share, of Sunshine; and WHEREAS, pursuant to Amendment No. 3, the Borrower obtained Tender Loans (as defined therein) on the date of the consummation of such tender offer in an aggregate principal amount of $15,136,984 to finance the purchase by Acquisition of over 97% of the outstanding shares of Sunshine pursuant to such tender offer; and WHEREAS, upon consummation of such tender offer, the Parent caused Acquisition to merge with and into Sunshine, with Sunshine being the survivor of such merger (and a direct wholly-owned Subsidiary of the Parent) in accordance with the terms and conditions of the Merger Agreement (the "First Merger"); and WHEREAS, concurrently with the First Merger, each then outstanding share of Sunshine (other than shares owned by the Parent or any of its Subsidiaries) was converted into the right to receive $12.00 in cash; and WHEREAS, pursuant to Amendment No. 3, the Borrower obtained First Merger Loans (as defined therein) in an aggregate principal amount of $15,400,000 which, among other things, refinanced the Tender Loans (as defined therein) on the date of the consummation of the First Merger; and WHEREAS, the Borrower now desires to merge Sunshine with and into the Borrower, with the Borrower being the surviving corporation (the "Merger"), and, in connection therewith, to (a) obtain $20 million to (i) refinance approximately $12 million in Indebtedness of Sunshine (net of cash on hand at Sunshine), (ii) refinance $5 million in cash supplied by the Borrower in connection with the Sunshine tender offer, and (iii) pay fees and expenses not yet paid in connection with such tender offer, the First Merger and the Merger (so long as the aggregate of such fees and expenses does not exceed $3,000,000) and (b) to restate all of the Indebtedness and commitments under the Existing Credit Agreement such that: (i) new Term Loans will be made to the Borrower on the date the Merger is consummated in an aggregate principal amount not to exceed $20,000,000 solely for the purposes of refinancing Indebtedness of Sunshine outstanding immediately prior to the Merger and for the other purposes set forth in clause (a) of the immediately preceding recital, and such Term Loans shall be consolidated with the $45 million in -2- 9 Term Loans outstanding under the Existing Credit Agreement and $15 million of the First Merger Loans outstanding under the Existing Credit Agreement so that Term Loans in an aggregate principal amount of $80,000,000 shall be outstanding hereunder with a revised amortization schedule as set forth herein; (ii) Revolving Loan Commitments will be extended by the Lenders pursuant to which Revolving Loans will be made from time to time in a maximum aggregate principal amount at any one time outstanding not to exceed the lesser of $25,000,000 (of which $400,000, and no more than $400,000, may be used to refinance a portion of the First Merger Loans) and the Borrowing Base Amount in effect at such time for the Borrower's working capital purposes; and (iii) Letter of Credit Commitments pursuant to which the Issuer will issue Letters of Credit from time to time for the account of the Borrower for the Borrower's ordinary course of business purposes and for the purpose of submitting the Sunshine Letter of Credit to the Bankruptcy Court, all of such Letters of Credit to be in a maximum aggregate Stated Amount at any one time outstanding not to exceed $15,000,000; provided that, in any event, the aggregate outstanding principal amount of all Revolving Loans, together with the aggregate amount of all Letter of Credit Outstandings, shall not at any one time exceed the lesser of $25,000,000 and the Borrowing Base Amount plus the Letter of Credit Outstandings in respect of the Sunshine Letter of Credit in effect at such time; and WHEREAS, the Borrower and the Parent have also requested that certain covenants and other provisions of the Existing Credit Agreement be modified as set forth herein; and WHEREAS, the Lenders and the Issuer are willing, on the terms and subject to the conditions hereinafter set forth (including that the Bankruptcy Court shall have duly issued the Bankruptcy Court Order, which order shall be in full force and effect and shall not have been stayed, and including all other conditions contained in Article V), to extend such Commitments and make such Loans to the Borrower and issue (or participate in) Letters of Credit for the account of the Borrower and to make such modifications to the covenants and other provisions contained in the Existing Credit Agreement; and -3- 10 WHEREAS, pursuant to the Existing Credit Agreement, the Parent and the Borrower and certain of their Subsidiaries granted to the Agent for the benefit of the Lenders certain guaranties and first priority, perfected pledges and security interests and/or liens in the collateral delivered pursuant to certain Security Agreements, Pledge Agreements and Guaranties and in certain other Loan Documents, all as more particularly set forth in such Loan Documents; and WHEREAS, in order to induce the Lenders, each Issuer and the Agent to amend and restate the Existing Credit Agreement and to make Credit Extensions hereunder, the Borrower desires, and it is a condition to the effectiveness hereof, that the Guarantor and its Subsidiaries and the Borrower and its Subsidiaries confirm their respective grants to the Agent for the benefit of the Lenders of the aforementioned first priority, perfected pledges and security interests and/or liens in such collateral to secure all Obligations under and in connection with this Agreement and the documents executed in connection herewith and confirm all related guaranties and pledge agreements, and grant certain additional collateral, all as more particularly set forth in the Loan Documents; and WHEREAS, the outstanding Loans and Commitments of certain of the Lenders under the Existing Credit Agreement have been re-allocated among the credit facilities provided for hereunder, and certain new Lenders have become parties to this Agreement, so that after giving effect thereto the Percentages of all Lenders are as set forth on Schedule II hereto; NOW, THEREFORE, the parties hereto hereby agree to amend the Existing Credit Agreement in its entirety, and to restate the Existing Credit Agreement as so amended, as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Defined Terms. The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof): "Account" means any "account" (as that term is defined in Section 9-106 of the U.C.C.). "Account Debtor" is defined in clause (d) of the definition of "Eligible Account". "Acquisition" is defined in the sixth recital. -4- 11 "Affiliate" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to be "controlled by" any other Person if such other Person has, directly or indirectly, (a) power to vote 10% or more of the securities (on a fully diluted basis) or other interests having ordinary voting power for the election of directors or managing general partners; (b) power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise; or (c) beneficial ownership of 10% or more of any class of the voting stock of such Person or 10% or more of all outstanding equity interests in such Person. For purposes of this Agreement and the other Loan Documents, DLJ and its Affiliates shall be Affiliates of the Borrower. "Affirmation and Acknowledgement" means the Affirmation and Acknowledgement, substantially in the form of Exhibit P hereto, as amended, supplemented, restated of otherwise modified from time to time. "Agent" is defined in the preamble and includes each other Person as shall have subsequently been appointed as the successor Agent pursuant to Section 10.4. "Agreement" means the Existing Credit Agreement, as amended and restated by this Amended and Restated Credit and Guaranty Agreement and as further amended, supplemented, restated or otherwise modified from time to time. "Amendment No. 3" is defined in the fifth recital. "Authorized Officer" means, relative to any Obligor, those of its officers whose signatures and incumbency shall have been certified to the Agent and the Lenders pursuant to Section 5.1.1. "Bankruptcy Court" means the United States Bankruptcy Court for the Middle District of Florida (Tampa Division). "Bankruptcy Court Order" means a duly issued order of the Bankruptcy Court in the form of Exhibit R hereto. "Base Rate Loan" means a Loan bearing interest at a fluctuating interest rate determined by reference to the SG Base Rate. -5- 12 "Beverage License" means any authorization, permit, consent, approval, franchise, concession, ordinance, registration, certificate, license, agreement or other right filed with, granted by, or entered into by a federal, state or local governmental authority which permits or authorizes the sale or distribution of any alcoholic beverage. "Beverage License Certification Date" means the date as of which (a) the Borrower and, to the extent required by applicable law, the Parent have all or substantially all Beverage Licenses necessary to permit, at the convenience stores owned or operated by Sunshine prior to the Merger, the sale and distribution of the alcoholic beverages sold or distributed at such convenience stores as of the Effective Date, including all consents and approvals, if any, necessary to take into account effectuation of the Merger, and (b) the Agent shall have received (i) a certificate duly executed by the chief financial Authorized Officer of the Parent certifying the foregoing, together with (ii) all documents related thereto that the Agent may reasonably request. For the purposes of the preceding clause (a), "substantially all Beverage Licenses" shall not be construed to mean less than all the Beverage Licenses necessary to permit, at 90% of the convenience stores owned or operated by Sunshine immediately prior to the Effective Date, the sale and distribution of the alcoholic beverages sold or distributed at such convenience stores as of the Effective Date; provided that such 90% may include each convenience store as to which the Borrower, after the exercise of its best efforts, has not obtained all such Beverage Licenses, to the extent (i) the applicable governmental authority has represented to and assured the Borrower that any such Beverage Licenses are forthcoming, (ii) such convenience store has not suffered any interruption in its sales of alcoholic beverages as a result thereof and (iii) the Borrower has represented the foregoing in the certificate referred to in clause (b) of the preceding sentence. "Borrower" is defined in the preamble. "Borrower Pledge Agreement" means the Pledge Agreement, executed and delivered pursuant to the Existing Credit Agreement, dated as of January 17, 1995, a conformed copy of which is attached as Exhibit G-2 hereto, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Borrower Security Agreement" means the Borrower Security Agreement, executed and delivered pursuant to the Existing Credit Agreement, dated as of January 17, 1995, a conformed copy of which is attached as Exhibit H-1 hereto, together with the Security Agreement (Trademark) related thereto, a conformed copy of which is attached to such Borrower Security Agreement and Amendment No. 1 to such Security Agreement (Trademark) substantially in the form of Exhibit I attached hereto, in each -6- 13 case as amended, supplemented, restated or otherwise modified from time to time. "Borrowing" means the Loans of the same type and, in the case of LIBO Rate Loans, having the same Interest Period, made by all Lenders on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.1. "Borrowing Base Amount" means, at any time, an amount equal to the sum of, without duplication, (a) 80% of the aggregate amount of all Eligible Accounts at such time; and (b) 50% of the aggregate amount of all Eligible Inventory at such time. The Borrowing Base Amount shall initially be computed by the Borrower in each Borrowing Base Certificate delivered from time to time to the Agent pursuant to Section 5.1.18 and clause (d) of Section 7.1.1. The Agent shall have the right to review such computations and if, in the Agent's reasonable judgment, such computations have not been computed in accordance with the terms of this Agreement, the Agent shall have the right to adjust such computations. "Borrowing Base Certificate" means a certificate duly completed and executed by the chief accounting or financial Authorized Officer of the Borrower, substantially in the form of Exhibit E hereto, together with such changes thereto as the Agent may from time to time reasonably request for the purpose of monitoring the Borrower's compliance therewith. "Borrowing Request" means a loan request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit C-1 hereto. "Business Acquisition" means (a) any Investment in the capital stock of any Person or (b) any acquisition of the assets of any Person pursuant to a transaction not in the ordinary course of such Person's business. "Business Day" means (a) any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in New York, New York or New Orleans, Louisiana; and (b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loan, any day which is a Business Day described in clause (a) above and which is also a day on -7- 14 which dealings in Dollars are carried on in the interbank eurodollar market of the Agent's LIBOR Office. "Capital Expenditure Level" means, with respect to any Fiscal Year and for purposes of Section 7.2.7, Capital Expenditure Level I, Capital Expenditure Level II, Capital Expenditure Level III or Capital Expenditure Level IV, based on the Fixed Charge Coverage Ratio as of the last day of such Fiscal Year and EBITDA for such Fiscal Year, in accordance with the following clauses (a) and (b): (a) with respect to any Fiscal Year, if EBITDA for such Fiscal Year is equal to or greater than the amount set forth below opposite such Fiscal Year, Capital Expenditure Level I shall be applicable to such Fiscal Year so long as the Fixed Charge Coverage Ratio as of the last day of such Fiscal Year is equal to or greater than the ratio set forth below opposite such Fiscal Year:
Minimum EBITDA for Capital Minimum Fixed Charge Coverage Ratio Expenditure for Capital Expenditure Fiscal Year Level I Level I ----------- -------------- ----------------------------------- 1995 $26,100,000 1.00:1.00 1996 37,700,000 1.05:1.00 1997 41,500,000 1.15:1.00 1998 45,000,000 1.25:1.00 1999 48,400,000 1.35:1.00 2000 52,400,000 1.45:1.00 2001 57,100,000 1.45:1.00
(b) if Capital Expenditure Level I shall not be applicable to a Fiscal Year in accordance with the preceding clause (a), then (i) the Capital Expenditure Level set forth opposite the highest level of EBITDA set forth in Schedule III hereto with respect to such Fiscal Year that has been met by the Parent and its Subsidiaries with respect to such Fiscal Year shall be applicable to such Fiscal Year so long as the Fixed Charge Coverage Ratio as of the last day of such Fiscal Year (the "Subject Fixed Charge Coverage Ratio") is equal to or greater than the ratio set forth in Schedule III hereto opposite such Capital Expenditure Level; provided that, if such Subject Fixed Charge Coverage Ratio is not equal to or greater than such ratio set forth in Schedule III hereto, then Capital Expenditure Level IV shall be applicable to such Fiscal Year. -8- 15 "Capital Expenditures" means, for any period, without duplication, the sum of (a) the aggregate amount of all expenditures of the Parent and its Subsidiaries (including the Borrower and its Subsidiaries) (i) for fixed or capital assets made during such period which, in accordance with GAAP, would be classified as capital expenditures and (ii) to the extent not included in the preceding subclause (i), in respect of Business Acquisitions made during such period; and (b) the aggregate amount of all Capitalized Lease Liabilities incurred during such period. "Capitalized Lease Liabilities" means all monetary obligations of the Parent or any of its Subsidiaries (including the Borrower and its Subsidiaries) under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Cash Equivalent Investment" means, at any time: (a) any evidence of Indebtedness, maturing not more than one year after the date of issuance, issued or guaranteed by the United States Government; (b) commercial paper, maturing not more than nine months from the date of issuance and rated at least A-1 by Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or P-1 by Moody's Investors Service, Inc., which is issued by (i) a corporation (other than an Affiliate of any Obligor) organized under the laws of any state of the United States or of the District of Columbia, or (ii) any Lender or any Affiliate thereof; (c) any certificate of deposit or bankers acceptance, maturing not more than one year after such time, which is issued by (i) a Lender or (ii) a commercial banking institution that (A) is a member of the Federal Reserve System, (B) has a combined capital and surplus and undivided profits of not less than $1,000,000,000 and (C) has outstanding short-term debt securities which are rated at least A-1 by Standard & Poor's Ratings Services, a division -9- 16 of The McGraw-Hill Companies, Inc., or P-1 by Moody's Investors Services, Inc.; (d) any repurchase agreement entered into with any Lender (or other commercial banking institution of the stature referred to in clause (c)) secured by a fully perfected Lien in any obligation thereunder of the type described in any of clauses (a) through (c), having a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation thereunder of such Lender or other commercial banking institution; or (e) any money market mutual fund with a daily right of redemption and a net asset value of $1.00 per share substantially all the assets of which are comprised of investments of the types described in the preceding clauses (a) through (d). "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended. "CERCLIS" means the Comprehensive Environmental Response Compensation Liability Information System List. "Change in Control" means (a) the failure of the Stockholders at any time (i) to own beneficially free and clear of all Liens at all times, at least 52.35% of the issued and outstanding shares of common stock of the Parent (both voting and non-voting), on a fully diluted basis, and (ii) to have and exercise voting power for the election of at least a majority of the board of directors of the Parent; (b) the direct or indirect acquisition by any Person or a group (as such term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), other than the Stockholders, of beneficial ownership (as such term is defined in Rule 13D-3 promulgated under the Securities Exchange Act of 1934, as amended) of 25% or more of the outstanding shares of common stock of the Parent; (c) the failure of the Parent at any time to own beneficially 100% of the issued and outstanding shares of common stock of the Borrower (both voting and non-voting) free and clear of all Liens (other than Liens in favor of the Agent arising pursuant to the Parent Pledge Agreement), on a fully diluted basis; or -10- 17 (d) a change in the majority of the board of directors of the Parent unless approved by the then majority of the board of directors of the Parent. "Class 7 Claimants" means each of the Class 7 Claimants listed on Annex A to the Sunshine Letter of Credit. "Clean-Down Period" is defined in Section 3.1.2(e). "Code" means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time. "Collateral" means any assets of the Borrower or any of its Subsidiaries or of any other Obligor subject to a Lien pursuant to any Loan Document. "Commitment" means, as the context may require, a Lender's Revolving Loan Commitment, Term Loan Commitment or Letter of Credit Commitment. "Commitment Amount" means, as the context may require, either the Revolving Loan Commitment Amount, the Term Loan Commitment Amount or the Letter of Credit Commitment Amount. "Commitment Termination Event" means (a) the occurrence of any Default described in clauses (b) through (d) of Section 8.1.9; or (b) the occurrence and continuance of any other Event of Default and either (i) the declaration of the Loans to be due and payable pursuant to Section 8.3, or (ii) the giving of notice by the Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated. "Compliance Certificate" means a certificate duly executed by the chief accounting or financial Authorized Officer of the Parent, substantially in the form of Exhibit F hereto, together with such changes thereto as the Agent may from time to time reasonably request for the purpose of monitoring the Borrower's and the Parent's compliance with the financial covenants contained herein. "Contingent Liability" means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or -11- 18 otherwise to assure a creditor against loss) the indebtedness, obligation or any other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person. The principal amount of any Person's obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the debt, obligation or other liability guaranteed thereby. "Continuation/Conversion Notice" means a notice duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit C-2 hereto. "Controlled Group" means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Parent or any Subsidiary, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA. "Credit Extension" means, as the context may require, (a) the making of a Loan by a Lender; or (b) the issuance of any Letter of Credit, the extension of any Stated Expiry Date of any existing Letter of Credit or the increase in the Stated Amount of any existing Letter of Credit, in each case by an Issuer. "Credit Extension Request" means, as the context may require, any Borrowing Request or Issuance Request. "Default" means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "Delight" means Delight Distributing and Sales Co., Inc., a Louisiana corporation. "Disbursement" is defined in Section 2.7.2. "Disbursement Date" is defined in Section 2.7.2. "Disclosure Schedule" means the Disclosure Schedule attached hereto as Schedule I, as it may be amended, supplemented or otherwise modified from time to time by the Borrower with the written consent of the Agent and the Required Lenders. "DLJ" means DLJ Capital Corporation. -12- 19 "Dollar" and the symbol "$" mean lawful money of the United States. "Domestic Office" means, relative to any Lender, the office of such Lender designated as such on Schedule IV hereto or designated in a Lender Assignment Agreement, or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender to each other Person party hereto. "EBIT" means, for any period, the sum, without duplication, of (a) Net Income for such period; plus (b) the amounts deducted, in determining Net Income for such period, for (i) all income taxes paid by, or accrued to be paid by, the Parent and its Subsidiaries during such period in respect of such period (assuming utilization of all available Net Operating Losses to the extent permitted by the Code), plus (ii) Interest Expense for such period. "EBITDA" means, for any period, the sum, without duplication, for such period, of (a) EBIT; plus (b) the amount deducted, in determining Net Income for such period, for amortization and depreciation of assets of the Parent and its Subsidiaries during such period. "Effective Date" means the date this Agreement becomes effective pursuant to Section 5.1. "Eligible Account" means, at any time of determination thereof, any Account of the Borrower or any other Subsidiary of the Parent as to which each of the following requirements has been fulfilled to the reasonable satisfaction of the Agent: (a) the Borrower or such Subsidiary has lawful and absolute title to such Account, free and clear of all Liens -13- 20 other than the Liens in favor of the Agent for the benefit of the Lenders; (b) the Agent has a security interest in such Account, which security interest is legal, valid, binding, perfected and first priority under the U.C.C.; provided, however, that (i) no Account as to which any United States federal or state governmental agency or instrumentality is the Account Debtor may be an Eligible Account, except to the extent the Borrower or such Subsidiary has complied with the Assignment of Claims Act of 1940, as amended (31 U.S.C. Section 3727; 41 U.S.C. Section 15), by delivering to the Agent a notice of assignment in favor of the Agent under such Act and in compliance with applicable provisions of 31 C.F.R. Section 7-103.8 and 41 C.F.R. Section 1-30.7, or with similar state law; and (ii) no Account as to which any other government or agency of such government (including any foreign governmental authority or agency) is the Account Debtor may be an Eligible Account; (c) the Borrower or such Subsidiary has the full and unqualified right to assign and grant a Lien in such Account to the Agent; (d) such Account is payable in Dollars and is a legal, valid, binding and enforceable obligation of the Person who is obligated under such Account (the "Account Debtor"); (e) if such Account is subject to any dispute, setoff, counterclaim or other claim or defense on the part of the Account Debtor denying liability under such Account, the portion of such Account so subject shall be excluded from Eligible Accounts; (f) such Account is evidenced by an invoice or marketer's sales report rendered to the Account Debtor and evidences monetary obligations; (g) such Account is a bona fide Account which arose in the ordinary course of business, and with respect to which, (i) in the case of an Account arising from the sale of goods, such goods have been shipped or delivered to and not rejected by the Account Debtor, such Account was created as a result of a sale on an absolute basis and not on a consignment, approval or sale-and-return basis and all other actions necessary to create a binding obligation on the part of the Account Debtor for such Account have been taken, and -14- 21 (ii) in the case of an Account relating to the sale of services, such services have been performed or completed and not rejected by the Account Debtor and all other actions necessary to create a binding obligation on the part of the Account Debtor have been taken; (h) with respect to such Account, the Account Debtor is not (i) an Affiliate of the Borrower, the Parent or any of their respective Subsidiaries, (ii) organized or located in a jurisdiction other than the United States, or (iii) the subject of any reorganization, bankruptcy, receivership, custodianship or insolvency or any other condition of the type described in clauses (b) through (d) of Section 8.1.9; (i) such Account is not outstanding more than 60 days past the due date with respect thereto; (j) no payment with respect to such Account made by check has been returned for insufficient funds; (k) such Account has not been placed with a lawyer or other agent for collection; (l) if the Borrower, the Parent or any of their respective Subsidiaries is indebted to such Account Debtor, unless the Borrower, the Parent or the relevant Subsidiary, (as the case may be) on the one hand, and such Account Debtor, on the other hand, have entered into an agreement whereby the Account Debtor is prohibited from exercising any right of setoff with respect to the Accounts of the Borrower and the other Subsidiaries of the Parent, Eligible Accounts shall exclude an amount equal to the amount of such indebtedness; and (m) such Account has such other characteristics or criteria as the Agent, in its reasonable discretion, may specify in writing to the Borrower from time to time. "Eligible Inventory" means, at any time of determination thereof, any Inventory of the Borrower or any other Subsidiary of the Parent arising in the ordinary course of business and as to which each of the following requirements has been fulfilled to the reasonable satisfaction of the Agent: (a) such Inventory is located in the United States; -15- 22 (b) the Borrower or such Subsidiary has full and unqualified right to assign and grant a Lien in such Inventory to the Agent for the benefit of the Lenders; (c) the Borrower or such Subsidiary has full and lawful title to such Inventory, free and clear of all Liens, other than any Liens in favor of the Agent for the benefit of the Lenders; (d) the Agent has a security interest in such Inventory, which security interest is legal, valid, binding, perfected and first priority under the U.C.C.; (e) none of such Inventory shall consist of (i) items in the custody of third parties for processing or manufacture, (ii) items in the Borrower's or such Subsidiary's possession but intended by the Borrower or such Subsidiary for return to the suppliers thereof, (iii) items belonging to third parties that have been consigned to the Borrower or such Subsidiary or are otherwise in the Borrower's or such Subsidiary's custody or possession or (iv) items in the Borrower's or such Subsidiary's custody and possession on a sale-on-approval or sale-or-return basis or subject to any other repurchase or return agreement; and (f) none of such Inventory (i) is obsolete, unsalable, damaged or otherwise unfit for sale or further processing in the ordinary course of business or (ii) has remained unsold in inventory for more than three months or beyond the manufacturer's expiration or "sale by" or similar date. "Environmental Laws" means all applicable federal, state, county, parish or local statutes, laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to public health and safety and protection of the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections. "Event of Default" is defined in Section 8.1. "Excess Cash Flow" means, for any Fiscal Year, the excess for such Fiscal Year of (a) the sum, determined for such Fiscal Year, of (i) EBITDA; -16- 23 plus (ii) the aggregate proceeds received by the Parent and its Subsidiaries during such Fiscal Year on account of business interruption insurance, to the extent not included in EBITDA; over (b) the sum, determined for such Fiscal Year, of (i) Capital Expenditures permitted by Section 7.2.7 made or incurred by the Parent and its Subsidiaries and paid in cash during such Fiscal Year; plus (ii) all prepayments and repayments of Term Loans made pursuant to Section 3.1.1 or 3.1.2 (other than pursuant to Section 3.1.2(c)(ii)(B)); plus (iii) all income taxes paid by the Parent and its Subsidiaries in cash during such Fiscal Year in respect of such Fiscal Year; plus (iv) Interest Expense paid in cash during such Fiscal Year; plus (v) to the extent not reflected in EBITDA and to the extent previously reserved against on the consolidated financial statements of the Parent and its Subsidiaries, the excess of (A) the aggregate amount of payments made by the Parent and its Subsidiaries during such Fiscal Year in respect of environmental remediation over (B) the aggregate amount of payments received by the Parent and its Subsidiaries from governmental authorities administering any trust or similar fund relating to protection of the environment. "Excess Insurance Proceeds" means the insurance proceeds received by the Agent pursuant to clause (d) of Section 7.1.4. "Existing Credit Agreement" is defined in the fifth recital. "Facility" means (a) any real property, fixture or appurtenance owned or operated by the Parent or any of its -17- 24 Subsidiaries (including the Borrower or any of its Subsidiaries) or predecessors in interest, (b) any stationary source of air pollution or any air pollution control equipment owned or operated by the Parent or any of its Subsidiaries or predecessors in interest, (c) any source of water pollution (including indirect sources to sewer systems) or any water pollution control equipment owned or operated by the Parent or any of its Subsidiaries or predecessors in interest, (d) all contiguous property under the control of the Parent or any of its Subsidiaries or predecessors in interest, (e) any building, structure, installation, equipment, pipe or pipeline (including any pipe into a sewer or publicly owned treatment works), well, pit, pond, lagoon, impoundment, ditch, landfill, storage container, motor vehicle, rolling stock, or aircraft owned or operated by the Parent or any of its Subsidiaries or predecessors in interest, and (f) any site or area where a hazardous substance provided to or generated by the Parent or any of its Subsidiaries or predecessors in interest has been deposited, stored, disposed of, or placed, or otherwise come to be located; but does not include any consumer product in consumer use or any vessel. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York; or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by SG from three federal funds brokers of recognized standing selected by it. "Fee Letter" means the confidential fee letter, dated June 30, 1995, from SG, addressed to, and agreed and accepted by, the Borrower and the Parent. "First Merger" is defined in the ninth recital. "Fiscal Quarter" means any quarter of a Fiscal Year. "Fiscal Year" means any period of twelve consecutive calendar months ending on the last Sunday of each December. References to a Fiscal Year with a number corresponding to any calendar year (e.g., "Fiscal Year 1995") refer to the Fiscal Year ending during such calendar year. "Fixed Charge Coverage Ratio" means, as of the last day of any Fiscal Quarter, the ratio of: -18- 25 (a) EBITDA for the Rolling Period ending on such day minus all Capital Expenditures of the Parent and its Subsidiaries incurred or committed to be incurred during such Rolling Period; to (b) the sum of (i) Interest Expense for such Rolling Period; plus (ii) all scheduled repayments of Term Loans made pursuant to Section 3.1.2(b) during such Rolling Period; plus (iii) all income taxes paid by the Parent and its Subsidiaries during such Rolling Period in respect of such Rolling Period (assuming utilization of all available Net Operating Losses (to the extent permitted by the Code)). "F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "Funded Debt" means, as of any date of determination, (a) the Stated Amount of the Sunshine Letter of Credit and (b) any Indebtedness of the Parent and its Subsidiaries of a type described in clause (a), (b) (to the extent actually drawn) or (c) of the definition of Indebtedness, or any Contingent Liability of the Borrower or any of its Subsidiaries in respect of any such type of Indebtedness, which (i) is in respect of the Term Loans; (ii) matures more than one year from such date of determination; (iii) matures within one year from such date of determination but is renewable or extendible, at the option of the Borrower or any such Subsidiary, as the case may be, to a date more than one year from such date; or (iv) arises under a revolving credit or similar agreement which obligates the lender or lenders thereof to extend such Indebtedness during a period of more than one year from such date. -19- 26 "Funded Debt to EBITDA Ratio" means, as of the last day of any Rolling Period, the ratio of: (a) Funded Debt as at the last day of such Rolling Period; to (b) EBITDA for such Rolling Period. "GAAP" is defined in Section 1.4. "Gross Profit Margin" means, as of the last day of any Fiscal Quarter, the percentage obtained by dividing (a) the excess of total sales of the Parent and its Subsidiaries for the Rolling Period ending on such day over cost of goods sold of the Parent and its Subsidiaries for such Rolling Period (in each case, as determined in accordance with GAAP) by (b) total sales of the Parent and its Subsidiaries for such Rolling Period (as determined in accordance with GAAP). "Gross Transaction Proceeds" means gross cash payments received by the Parent or any of its Subsidiaries pursuant to the Purchase Agreement in excess of $250,000 in the aggregate (including any cash payments received by way of any adjustment to the purchase price provided for therein and any indemnity payments), other than any such cash payments in respect of indemnity payments which reimburse the Parent or any of its Subsidiaries for liabilities and costs previously paid by the Parent or such Subsidiary. "Guaranteed Obligations" is defined in Section 9.1. "Guarantor" means the Parent. "Hazardous Material" means (a) any "hazardous substance", as defined by CERCLA; (b) any "hazardous waste", as defined by the Resource Conservation and Recovery Act, as amended; (c) any petroleum product; or (d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other applicable federal, state or local law, regulation, ordinance or requirement (including consent decrees and administrative orders) relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, all as amended or hereafter amended. -20- 27 "Hedging Obligations" means, with respect to any Person, all liabilities of such Person under Rate Protection Agreements. "herein", "hereof", "hereto", "hereunder" and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document. "Impermissible Qualification" means, relative to the opinion or certification of any independent public accountant as to any financial statement of any Obligor, any qualification or exception to such opinion or certification (a) which is of a "going concern" or similar nature; (b) which relates to the limited scope of examination of matters relevant to such financial statement; or (c) which relates to the treatment or classification of any item in such financial statement and which, as a condition to its removal, would require an adjustment to such item the effect of which would be to cause such Obligor to be in default of any of its obligations under Section 7.2.4. "including" means including without limiting the generality of any description preceding such term, and, for purposes of this Agreement and each other Loan Document, the parties hereto agree that the rule of contract interpretation to the effect that where general words are followed by a specific listing of items the general words shall not be given their widest meaning, shall not be applicable to limit a general statement, which is followed by or referable to an enumeration of specific matters, to matters similar to the matters specifically mentioned. "Indebtedness" of any Person means, without duplication: (a) all obligations of such Person for borrowed money, all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments and all capital stock which has redemption provisions exercisable at the option of the holder thereof in whole or in part for cash; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person; -21- 28 (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities; (d) all other items which, in accordance with GAAP, would be included as liabilities on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined; (e) net liabilities of such Person with respect to each Hedging Obligation; (f) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; and (g) all Contingent Liabilities of such Person in respect of any of the foregoing. For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner thereof or has direct liability in the nature of a general partner. "Indemnified Liabilities" is defined in Section 11.4. "Indemnified Parties" is defined in Section 11.4. "Intellectual Property Collateral" has the meaning provided for such term in the Security Agreements. "Interest Coverage Ratio" means, as of the last day of any Fiscal Quarter, the ratio of: (a) EBITDA for the Rolling Period ending on such day, to (b) Interest Expense for such Rolling Period. "Interest Expense" means, for any period, the aggregate consolidated interest expense of the Parent and its Subsidiaries for such period, as determined in accordance with GAAP, including, without duplication, net obligations of the Parent and its Subsidiaries (including fees) in respect of Rate Protection Agreements and the portion of any Capitalized Lease Liabilities -22- 29 of the Parent and its Subsidiaries allocable to interest expense, in each case paid or payable during such period. "Interest Period" means, relative to any LIBO Rate Loan, the period beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.4 or 2.5 and ending on (but excluding) the day which is one, three or six months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), as the Borrower may select in its relevant notice pursuant to Section 2.4 or 2.5; provided, however, that (a) the Borrower shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than five different dates; (b) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless such next following Business Day is the first Business Day of a month, in which case such Interest Period shall end on the Business Day next preceding the day on which such Interest Period would otherwise end); and (c) the Borrower shall not be permitted to select, and there shall not be applicable, any Interest Period that would be broken by reason of a mandatory payment of Term Loans required pursuant to clause (b) of Section 3.1.2 or any Interest Period for any Loan which would end later than the Stated Maturity Date for such Loan. "Inventory" means any "inventory" (as defined in Section 9-109(4) of the U.C.C.) of any Person. "Investment" means, relative to any Person, (a) any loan or advance made by such Person to any other Person (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business); (b) any Contingent Liability of such Person incurred in connection with loans or advances made by others to such Person; and (c) any ownership or similar interest held by such Person in any other Person. The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial -23- 30 condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property. "Issuance Request" means a Letter of Credit request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit D hereto. "Issuer" means SG in its capacity as issuer of the Letters of Credit. At the request of SG, another Lender or an Affiliate of SG may, but shall not be obligated to, issue one or more Letters of Credit hereunder, in which case the term "Issuer" as used herein shall refer to each of SG, any such Lender and any such Affiliate of SG. "Lender Assignment Agreement" means a lender assignment agreement in substantially the form of Exhibit O hereto. "Lender" is defined in the preamble. "Letter of Credit" is defined in clause (a) of Section 2.1.3. "Letter of Credit Commitment" means, with respect to the Issuer, the Issuer's obligation to issue Letters of Credit pursuant to Section 2.7 and, with respect to each of the other Lenders, the obligations of each such Lender to participate in such Letters of Credit pursuant to Section 2.7.1. "Letter of Credit Commitment Amount" means, on any date, $15,000,000, as such amount may be permanently reduced from time to time pursuant to Section 2.3; provided, however, that only $2,700,000 will be available in respect of the Sunshine Letter of Credit. "Letter of Credit Outstandings" means, on any date, an amount equal to the sum of (a) the then aggregate amount which is undrawn and available under all issued and outstanding Letters of Credit; plus (b) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations. "LIBO Rate" is defined in Section 3.2.1. -24- 31 "LIBO Rate Loan" means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to the LIBO Rate (Reserve Adjusted). "LIBO Rate (Reserve Adjusted)" is defined in Section 3.2.1. "LIBOR Office" means, relative to any Lender, the office of such Lender designated as such on Schedule IV hereto or designated in a Lender Assignment Agreement, or such other office of a Lender as designated from time to time by notice from such Lender to the Borrower and the Agent, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans of such Lender hereunder. "LIBOR Reserve Percentage" is defined in Section 3.2.1. "Lien" means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever. "Loan" means, as the context may require, either a Revolving Loan or a Term Loan. "Loan Document" means this Agreement, the Notes, the Affirmation and Acknowledgement, the Petroleum Note, the Parent Inter-Company Note, the Letters of Credit, the Fee Letter, the Borrower Security Agreement, the Parent Security Agreement, the Petroleum Security Agreement, the Parent Pledge Agreement, the Borrower Pledge Agreement, the Petroleum Guaranty, the Stockholders Letter of Understanding, each Rate Protection Agreement with a Lender, each Lender Assignment Agreement and each other agreement, instrument or document executed and delivered pursuant to or in connection with this Agreement and the other Loan Documents (including the agreements executed from time to time by Subsidiaries of the Borrower pursuant to Section 7.1.8, the agreements executed from time to time by Borrower and its Subsidiaries pursuant to Section 7.1.9 and the promissory notes evidencing Indebtedness permitted by clause (h) of Section 7.2.2). "Marketers" means those business locations as to which Petroleum or any other Subsidiary of the Parent only operates or owns the equipment and inventory relating to the sale and distribution of gasoline products. "Memorandum" means the Confidential Memorandum, dated July, 1995, with respect to the Borrower, compiled by the Agent from -25- 32 information supplied by the Parent and the Borrower and heretofore delivered to each Lender. "Merger" is defined in the twelfth recital. "Merger Agreement" is defined in the sixth recital. "Merger Certificate" is defined in Section 5.1.4. "Net Debt Proceeds" means, in the case of the issuance, incurrence, placement or sale of any Indebtedness (other than Indebtedness in respect of the Notes) of the type referred to in clause (a) of the definition thereof (whether pursuant to a public or private offering), permitted to be outstanding pursuant to Section 7.2.2 or otherwise permitted with the prior consent of the Required Lenders from and after the effective date of the Original Credit Agreement, the excess of (a) the gross cash proceeds received by the Parent or any of its Subsidiaries from such issuance, incurrence, placement or sale of permitted Indebtedness (including any cash payments received by way of deferred payment of principal pursuant to a permitted promissory note or installment receivable or otherwise, but only as and when received); over (b) in connection with the issuance, incurrence, placement or sale of permitted Indebtedness, (i) all reasonable and customary fees and expenses actually paid by the Parent or its Subsidiaries (except as provided in clause (ii)) and (ii) underwriters' discounts and commissions not payable to the Parent, any of its Subsidiaries or any of their Affiliates (other than underwriters' discounts and commissions payable (x) to DLJ or any of its Affiliates if such discounts and commissions are the same as the usual and customary discounts and commissions of DLJ and its Affiliates to Persons which are not their Affiliates or (y) to any other Stockholder or its Affiliates if such discounts and commissions would be reasonable and customary if charged in arm's length transactions by recognized investment banking institutions which provide underwriting and placement services in the ordinary course of their business). "Net Disposition Proceeds" means the excess of (a) the gross cash proceeds (other than proceeds from any sale of Inventory of the Parent or any of its Subsidiaries in the ordinary course of their business) received by the Parent or any of its Subsidiaries from any -26- 33 Permitted Disposition with a purchase price in excess of $250,000 (such purchase price to be determined in the same manner as the purchase price of a Permitted Business Acquisition (as set forth in clause (b) of the definition thereof)), including any cash payments received by way of a deferred payment of principal pursuant to a permitted note or installment receivable or otherwise, but only when and as received; over (b) (i) all reasonable and customary fees and expenses with respect to legal, investment banking, brokerage, accounting and other professional fees actually incurred by the Parent and its Subsidiaries in connection with such Permitted Disposition which have not been paid to Affiliates of the Parent or any of its Subsidiaries (other than fees and expenses payable (x) to DLJ or any of its Affiliates if such fees and expenses are the same as the usual and customary fees and expenses of DLJ and its Affiliates to Persons which are not their Affiliates or (y) to any other Stockholder or its Affiliates if such fees and expenses would be reasonable and customary if charged in arm's length transactions by recognized investment banking institutions which provide merger and acquisition advice and services in the ordinary course of their business), (ii) all taxes actually paid or estimated by the Parent (in good faith) to be payable in cash in connection with such Permitted Disposition; provided, however, that if, after the payment of all taxes with respect to such Permitted Disposition, the amount of estimated taxes, if any, pursuant to clause (ii) above exceeded the amount of taxes actually paid in cash in respect of such Permitted Disposition, the aggregate amount of such excess shall be immediately payable, pursuant to clause (c) of Section 3.1.2, as Net Disposition Proceeds, and (iii) if permitted hereunder or otherwise by the Required Lenders, the aggregate amount of any Indebtedness of the type referred to in clause (a) of the definition thereof which is secured by such asset and required to be repaid from such gross cash proceeds; provided, however, that such cash proceeds shall not constitute Net Disposition Proceeds to the extent the Parent or its applicable Subsidiary uses such proceeds within 365 days of the closing date of such Permitted Disposition to replace the assets disposed in such Permitted Disposition or to reinvest in other capital assets reasonably related to the ownership and operation of convenience stores. "Net Equity Proceeds" means, in the case of the issuance, placement or sale of equity securities (whether pursuant to a -27- 34 public or private offering) from and after the effective date of the Original Credit Agreement, the excess of (a) the gross cash proceeds received by the Parent or any of its Subsidiaries or any corporation of which the Parent is a Subsidiary from such issuance, placement or sale of equity securities (including any cash payments received by way of deferred payment of principal pursuant to a permitted promissory note or installment receivable or otherwise, but only as and when received); over (b) in connection with such issuance, placement or sale of such equity securities, all (i) reasonable and customary fees and expenses actually paid by the Parent or its Subsidiaries or the Parent or any corporation of which the Parent is a Subsidiary (except as provided in clause (ii)) and (ii) underwriters' discounts and commissions not payable to the Parent, any of its Subsidiaries or any of their Affiliates (other than underwriters' discounts and commissions payable (x) to DLJ or any of its Affiliates if such discounts and commissions are the same as the usual and customary discounts and commissions of DLJ and its Affiliates to Persons which are not their Affiliates or (y) to any other Stockholder or its Affiliates if such discounts and commissions would be reasonable and customary if charged in arm's length transactions by recognized investment banking institutions which provide underwriting and placement services in the ordinary course of their business). "Net Income" means, for any period, all amounts (exclusive of all amounts in respect of any extraordinary gains or losses) which, in accordance with GAAP, would be included as net income on the consolidated statements of income of the Parent and its Subsidiaries for such period. "Net Operating Loss" means all net operating losses incurred by the Parent and its Subsidiaries, as shown on any federal tax return (as amended or otherwise modified) filed or to be filed by the Parent. "Note" means, as the context may require, either a Revolving Note or a Term Note. "Obligations" means all obligations (monetary or otherwise) of the Borrower and each other Obligor arising under or in connection with this Agreement, the Notes and each other Loan Document. -28- 35 "Obligor" means the Parent and any of its Subsidiaries (including the Borrower and any of its Subsidiaries). "Organic Document" means, relative to any Obligor, its articles or certificate of incorporation, its by-laws and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized shares of capital stock. "Original Credit Agreement" is defined in the third recital. "Parent" is defined in the preamble. "Parent Inter-Company Note" means the $20,400,000 promissory note of the Parent payable to the Borrower, dated July 25, 1995 (and delivered to the Agent in connection with Amendment No. 3), executed, delivered and pledged to the Agent pursuant to the Borrower Pledge Agreement, a conformed copy of which is attached as Exhibit K-2 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time subject to the terms of the Borrower Pledge Agreement), and also means all other promissory notes issued from time to time in substitution therefor or renewal thereof subject to the terms of the Borrower Pledge Agreement. "Parent Pledge Agreement" means the Pledge Agreement (Parent), executed and delivered pursuant to the Existing Credit Agreement, dated as of January 17, 1995, a conformed copy of which is attached as Exhibit G-1 hereto, as the same may be amended, supplemented, restated or otherwise modified from time to time. "Parent Security Agreement" means the Parent Security Agreement, executed and delivered pursuant to the Existing Credit Agreement, dated as of January 17, 1995, a conformed copy of which is attached as Exhibit H-3 hereto, together with the Security Agreement (Trademark) related thereto, a conformed copy of which is attached to such Parent Security Agreement, in each case as amended, supplemented, restated or otherwise modified from time to time. "Participant" is defined in Section 11.11. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Pension Plan" means a "pension plan", as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the Parent or any Subsidiary or any corporation, trade or business that is, along with the Parent or any Subsidiary, a member of a Controlled Group, may have liability, including any liability by reason of having been -29- 36 a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA. "Percentage" means, relative to any Lender, the percentage set forth opposite the name of such Lender on Schedule II hereto or set forth in a duly executed Lender Assignment Agreement, as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered pursuant to Section 11.11. "Permitted Business Acquisition" means any Business Acquisition pursuant to which: (a) (i) the Borrower acquires all of the capital stock of a Person engaged solely in the business of owning and operating one or more convenience stores, (ii) a Subsidiary of the Borrower acquires assets comprising one or more convenience stores or (iii) with the prior written consent of the Agent, the Borrower acquires assets comprising one or more convenience stores (provided that such consent shall not be required to the extent such assets will be acquired in a single transaction or series of related transactions (each such transaction, a "Threshold Acquisition") which relate to five or fewer locations and do not have a purchase price in excess of $1,000,000 (such purchase price to be determined in the same manner as provided in the immediately succeeding clause (b)); (b) the purchase price with respect to such Business Acquisition (inclusive of any deferred portion thereof (which shall, for the purposes of this clause (b), equal the present value thereof based on a discount factor equal to the sum of the SG Base Rate and 1.25% on the closing date of such Business Acquisition) and any securities or other assets issued or transferred and liabilities (other than current liabilities) assumed), when added to the aggregate purchase price of all Permitted Business Acquisitions consummated during the Fiscal Year in which such Business Acquisition would be consummated, does not exceed $5,000,000; (c) the Agent shall have received, other than in the case of a Threshold Acquisition, a certificate executed by the chief financial Authorized Officer of the Borrower (i) stating that no Default has occurred and is continuing or would occur upon consummation of such Business Acquisition and (ii) showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Agent) compliance for the succeeding four fiscal quarters (the fiscal quarter in which such Business -30- 37 Acquisition would be consummated being the first such fiscal quarter) with the covenants set forth in Section 7.2.4 on a prospective pro forma basis (after giving effect to such Business Acquisition and all transactions related thereto); and (d) the Borrower has complied with the provisions of Section 7.1.8 to the extent such provisions are applicable to the Persons party to, or otherwise subject to, such Business Acquisition. "Permitted Disposition" means any sale, lease, transfer or other disposition of assets of the Borrower or any other Subsidiary of the Parent to the extent that (a) the Borrower or such other Subsidiary shall receive only cash consideration therefor, provided that (i) the Borrower or such other Subsidiary may receive promissory notes having terms that are customary for seller-financed transactions, to the extent the aggregate principal amount of all such promissory notes received by the Borrower and such other Subsidiaries in any Fiscal Year does not exceed $250,000 and (ii) in the event of a sale of assets comprised of convenience stores or marketers, the Borrower or such other Subsidiary may obtain in exchange therefor convenience stores (or, if the assets sold are marketers, convenience stores or marketers), to the extent the number of convenience stores so sold does not exceed 15% of the convenience stores operated by the Borrower and the other Subsidiaries of the Parent as of the Effective Date and the number of marketers so sold does not exceed 15% of the marketers operated by such other Subsidiaries of the Parent as of the Effective Date (each such transaction, an "Exchange Transaction"); (b) the aggregate fair market value of all such dispositions (exclusive of any such disposition effectuated as an Exchange Transaction to the extent of the fair market value of the capital assets obtained by the Borrower or other such Subsidiary in respect of such Exchange Transaction) shall not exceed $2,500,000 in any Fiscal Year; (c) the Borrower and such other Subsidiaries shall have received fair value therefor; and (d) at the time of each such disposition, no Event of Default shall have occurred and be continuing. "Permitted Encumbrances" means Liens permitted under Section 7.2.3. -31- 38 "Person" means any natural person, corporation, partnership, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity. "Petroleum" is defined in the first recital. "Petroleum Guaranty" means the Guaranty (Petroleum), executed and delivered pursuant to the Existing Credit Agreement, dated as of January 17, 1995, a conformed copy of which is attached as Exhibit J hereto, as the same may be amended, supplemented or otherwise restated from time to time. "Petroleum Note" means the revolving promissory note of Petroleum payable to the Borrower, executed, delivered and pledged to the Agent pursuant to the Borrower Pledge Agreement, a conformed copy of which is attached as Exhibit K-1 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time subject to the terms of the Borrower Pledge Agreement), and also means all other promissory notes issued from time to time in substitution therefor or renewal thereof subject to the terms of the Borrower Pledge Agreement. "Petroleum of California" means E-Z Serve Petroleum Marketing Company of California, a California corporation. "Petroleum Security Agreement" means the Petroleum Security Agreement executed and delivered pursuant to the Existing Credit Agreement, dated as of January 17, 1995, a conformed copy of which is attached hereto as Exhibit H-2 hereto, together with the Security Agreement (Trademark) related thereto, in each case as amended, supplemented, restated or otherwise modified from time to time. "Plan" means any Pension Plan or Welfare Plan. "Pledge Agreements" means, as the context may require, the Parent Pledge Agreement or the Borrower Pledge Agreement. "Purchase Agreement" means the Purchase Agreement, dated as of December 1, 1994, between Dillon Companies, Inc., a Kansas corporation (the "Seller"), and the Borrower, pursuant to which the Borrower acquired all of the issued and outstanding shares of capital stock of Time Saver Stores, Inc., a Kansas corporation, which was a wholly-owned Subsidiary of the Seller. "Quarterly Payment Date" means the 24th day of each March, June, September and December or, if any such day is not a Business Day, the next succeeding Business Day. "Rate Protection Agreement" means any interest rate swap agreement, interest rate cap agreement, interest rate collar -32- 39 agreement, currency swap or exchange agreement or any similar arrangement designed to protect a Person against fluctuations in interest rates or currency fluctuations and entered into, from time to time, by the Parent or any of its Subsidiaries. "Realty" means all right, title and interest of the Borrower, the Parent and their respective Subsidiaries in any land, buildings, improvements, fixtures, other interests in real estate and any leasehold interest in any of the foregoing. "Reimbursement Obligation" is defined in Section 2.7.3. "Release" means any spilling, leaking, pumping, pouring emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing of any Hazardous Material or pollutant or contaminant into the environment (including the abandonment or discarding of barrels, containers, and other closed receptacles containing any Hazardous Material or pollutant or contaminant). "Required Lenders" means, at the time any determination thereof is to be made, Lenders holding more than 50% of the aggregate of (a) the then aggregate unpaid principal amount of the Term Notes and (b) the Revolving Loan Commitments (or, if the Revolving Loan Commitments are no longer in effect, the aggregate unpaid principal amount, if any, of Revolving Notes and Letter of Credit Outstandings). "Resource Conservation and Recovery Act" means the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as in effect from time to time. "Revolving Loan" is defined in Section 2.1.2. "Revolving Loan Commitment" means, relative to any Lender, such Lender's obligation to make Revolving Loans pursuant to Section 2.1.2. "Revolving Loan Commitment Amount" means, on any date, $25,000,000, as such amount is reduced from time to time pursuant to Section 2.3. "Revolving Loan Commitment Termination Date" means the earliest of (a) January 24, 1998; (b) the date on which the Revolving Loan Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.3; (c) the date on which the principal amount of Term Loans are repaid in full; and -33- 40 (d) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described above, the Revolving Loan Commitments shall terminate automatically and without any further action. "Revolving Note" means a promissory note of the Borrower payable to any Lender, in the form of Exhibit A hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Revolving Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Rolling Period" means, as of any date of calculation, the immediately preceding four full Fiscal Quarters; provided, however, that prior to the first four full Fiscal Quarters following the date of the initial credit extension under the Original Credit Agreement until the fourth Fiscal Quarter of the 1995 Fiscal Year, the "Rolling Period" as of any date of calculation shall mean the period from the date of the initial credit extension under the Original Credit Agreement to such date of calculation. "Security Agreements" means, as the context may require, the Parent Security Agreement, the Borrower Security Agreement and the Petroleum Security Agreement. "Series C Preferred Stock" means the $6.00 Convertible Preferred Stock, Series C, of the Parent, par value $.01 per share. "SG" is defined in the preamble. "SGA Margin" means, as of the last day of any Fiscal Quarter, the percentage obtained by dividing (a) selling, general and administrative expenses (as determined in accordance with GAAP) of the Parent and its Subsidiaries for the Rolling Period ending on such day by (b) total sales (as determined in accordance with GAAP) by the Parent and its Subsidiaries for such Rolling Period. "SG Base Rate" means, on any date and with respect to all Base Rate Loans, a fluctuating rate of interest per annum equal to the higher of (a) the SG Rate in effect on such day; and (b) the Federal Funds Rate in effect on such day plus 1/2 of 1%. -34- 41 The SG Base Rate is not necessarily intended to be the lowest rate of interest determined by SG in connection with extensions of credit. Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the SG Base Rate. The Agent will give notice promptly to the Borrower and the Lenders of changes in the SG Base Rate. "SG Rate" means, at any time, the rate of interest then most recently established by SG in New York, New York as its base rate for U.S. dollars loaned in the United States. "State" means the several states of the United States of America, including the District of Columbia, and their political subdivisions. "Stated Amount" of each Letter of Credit means the total amount available to be drawn under such Letter of Credit upon the issuance thereof. "Stated Expiry Date" is defined in Section 2.7. "Stated Maturity Date" means (a) in the case of any Term Loan, January 24, 2002 and (b) in the case of any Revolving Loan, January 24, 1998. "Stockholders" means DLJ, Phemus Corporation, Tenacqco Bridge Partnership, Intercontinental Mining & Resources Incorporated and Quadrant Capital Corp. "Stockholders Agreement" means the Amended and Restated Stockholders Agreement, dated as of June 1, 1994, among the Stockholders, certain employees of the Obligors and the Parent. "Stockholders Letter of Understanding" means the Stockholders Letter of Understanding, executed and delivered pursuant to the Existing Credit Agreement, dated as of January 17, 1995, a conformed copy of which is attached as Exhibit N hereto, together with all amendments, supplements and modifications, if any, thereto. "Subsidiary" means, with respect to any Person, (a) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect the board of directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by such Person, by such Person and one or more Subsidiaries of such Person, or by one or more other Subsidiaries of such Person, or (b) any partnership, joint venture, or other entity as to which such Person, such Person and one or more of its -35- 42 Subsidiaries or one or more Subsidiaries of such Person owns more than a 50% ownership, equity or similar interest or has power to direct or cause the direction of management and policies, or the power to elect the managing partner (or the equivalent), of such partnership, joint venture or other entity, as the case may be. "Sunshine" is defined in the sixth recital. "Sunshine Indenture" means the Trust Indenture, dated June 21, 1994, between Sunshine and NationsBank of Florida, N.A., as Trustee. "Sunshine Letter of Credit" means the Letter of Credit, substantially in the form of Exhibit S hereto, to be issued in the Stated Amount of $2,700,000 to Rydberg & Goldstein, P.A., as distribution agent for the Class 7 Claimants. "Tangible Net Worth" means, at any time, the sum of all amounts (without duplication) which, in accordance with GAAP, would be included under paid-in capital and retained earnings on a balance sheet of the Parent and its Subsidiaries on a consolidated basis at such time after subtracting therefrom the aggregate amount of any intangible assets of the Parent and its Subsidiaries, including goodwill, franchises, licenses, patents, trademarks, trade names, copyrights, service marks and brand names. "Taxes" means all federal, state, local or foreign income, gross receipts, windfall profits, severance, real and personal property, production, sales, use, license, excise, franchise, stamp, leasing, lease, value added, employment, withholding, transfer, registration, alternative or add-on minimum, estimated, unemployment, social security, payroll, capital stock or similar taxes, charges, fees, duties, levies, or other assessments, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties. "Term Loan" is defined in Section 2.1.1. "Term Loan Commitment" means, relative to any Lender, such Lender's obligation to make Term Loans pursuant to Section 2.1.1. "Term Loan Commitment Amount" means, on any date prior to the Term Loan Commitment Termination Date, $80,000,000. "Term Loan Commitment Termination Date" means the earlier of (a) immediately after the making of the initial Credit Extension after the Effective Date; and -36- 43 (b) the date on which any Commitment Termination Event occurs. Upon the occurrence of any event described in clause (a) or (b), the Term Loan Commitments shall terminate automatically and without any further action. "Term Note" means a promissory note of the Borrower payable to any Lender, in the form of Exhibit B hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from outstanding Term Loans, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof. "Total Commitment Amount" means the sum, without duplication, of the Term Loan Commitment Amount and the Revolving Loan Commitment Amount. "type" means, relative to any Loan, that part of such Loan being maintained as a Base Rate Loan or a LIBO Rate Loan. "U.C.C." means the Uniform Commercial Code as from time to time in effect in the State of New York. "United States" or "U.S." means the United States of America, its fifty States and the District of Columbia. "Welfare Plan" means a "welfare plan" (as such term is defined in Section 3(1) of ERISA), maintained by the Borrower or for which the Borrower or any of its Subsidiaries has any contractual liability. SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in the Disclosure Schedule and each other Loan Document. SECTION 1.3. Cross-References. Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. SECTION 1.4. Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under Section 7.2.4) shall be made, and all financial -37- 44 statements required to be delivered hereunder or thereunder shall be prepared in accordance with, those generally accepted accounting principles ("GAAP") applied in the preparation of the financial statements referred to in Section 6.5. ARTICLE II COMMITMENTS, BORROWING PROCEDURES, LETTERS OF CREDIT AND NOTES SECTION 2.1. Commitments. On the terms and subject to the conditions of this Agreement (including Article V), each Lender severally agrees to make Loans pursuant to the Commitments described in this Section 2.1. SECTION 2.1.1. Term Loan Commitment. On the Business Day the Merger is consummated (but only if the Term Loans are requested to be made on, or prior to, the Term Loan Commitment Termination Date), each Lender agrees to make a term loan to the Borrower equal to such Lender's Percentage of the aggregate amount of the Borrowing of term loans requested by the Borrower to be made on such day and to amend and restate and consolidate all term loans and First Merger Loans outstanding under the Existing Credit Agreement, together with the term loans requested on the date of the Merger, into term loans hereunder (relative to each Lender, its "Term Loan") in accordance with each Lender's Percentage of such Term Loans. The Commitment of each Lender described in this Section is herein referred to as its "Term Loan Commitment". No amounts paid or prepaid with respect to Term Loans may be reborrowed. SECTION 2.1.2. Revolving Loan Commitment. From time to time on any Business Day occurring prior to the Revolving Loan Commitment Termination Date, each Lender agrees to make Loans (relative to such Lender, its "Revolving Loans") to the Borrower equal to such Lender's Percentage of the aggregate amount of the Borrowing of Revolving Loans requested by the Borrower to be made on such day. The Commitment of each Lender described in this Section is herein referred to as its "Revolving Loan Commitment". On the terms and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow the Revolving Loans. All Revolving Loans outstanding under the Existing Agreement shall, from and after the Effective Date, be deemed to be outstanding under this Agreement in accordance with each Lender's Percentage of such Revolving Loans. SECTION 2.1.3. Letter of Credit Commitment. From time to time on any Business Day occurring prior to the Revolving Loan Commitment Termination Date, the Issuer will (a) issue one or more standby letters of credit (relative to such Issuer, its "Letter of Credit") for the -38- 45 account of the Borrower in respect of obligations of the Borrower or Petroleum in Stated Amounts requested by the Borrower on such day with a Stated Expiry Date not later than one year from such requested date of issuance, provided that any Letter of Credit requested to be issued to satisfy the Bankruptcy Court Order shall comprise the Sunshine Letter of Credit; or (b) extend the Stated Expiry Date of an existing Letter of Credit previously issued hereunder to a date not later than the earlier of (i) the Revolving Loan Commitment Termination Date and (ii) one year from the date of such extension. All Letters of Credit outstanding under the Existing Agreement shall, from and after the Effective Date, be deemed to be outstanding under this Agreement in accordance with each Lender's Percentage of such Letters of Credit. SECTION 2.2. Lenders Not Permitted or Required To Make Credit Extensions. No Lender shall be permitted or required to make any Loan, and no Issuer shall be obligated to issue or extend any Letter of Credit, under any circumstance described below in this Section. SECTION 2.2.1. Term Loans. No Borrowing of Term Loans shall be made if, after giving effect thereto, the aggregate outstanding principal amount of all the Term Loans (a) of all Lenders would exceed the Term Loan Commitment Amount or (b) of such Lender would exceed such Lender's Percentage of the Term Loan Commitment Amount. SECTION 2.2.2. Revolving Loans. No Borrowing of Revolving Loans shall be made if, after giving effect thereto, the aggregate outstanding principal amount of all the Revolving Loans, together with the aggregate amount of all Letter of Credit Outstandings, (a) of all the Lenders would exceed the lesser of (i) the Revolving Loan Commitment Amount or (ii) the then existing Borrowing Base Amount plus the Letter of Credit Outstandings in respect of the Sunshine Letter of Credit, or (b) of such Lender would exceed such Lender's Percentage of the lesser of (i) the Revolving Loan Commitment Amount or (ii) such Lender's Percentage of the then existing Borrowing Base Amount plus such Lender's Percentage of the Letter of Credit Outstandings in respect of the Sunshine Letter of Credit. SECTION 2.2.3. Letters of Credit. No issuance or extension of a Letter of Credit shall be made if, after giving effect thereto, (a) the aggregate amount of all Letter of Credit Outstandings would exceed the Letter of Credit Commitment Amount or (b) the aggregate amount of all Letter of Credit Outstandings together with the aggregate outstanding principal amount of all -39- 46 Revolving Loans, would exceed the lesser of (i) the Revolving Loan Commitment Amount or (ii) the then existing Borrowing Base Amount plus the Letter of Credit Outstandings in respect of the Sunshine Letter of Credit, provided, however, that the issuance of the Sunshine Letter of Credit shall not be subject to the foregoing Borrowing Base calculation. SECTION 2.3. Optional Reduction of the Commitment Amounts. The Borrower may, from time to time on any Business Day occurring after the time of the initial Credit Extension hereunder, voluntarily reduce the unused amount of the Revolving Loan Commitment Amount; provided, however, that all such reductions shall require at least one Business Days' prior notice to the Agent and be permanent, and any partial reduction of the unused amount of the Revolving Loan Commitment Amount shall be in a minimum amount of $1,000,000 and in an integral multiple of $500,000. SECTION 2.4. Borrowing Procedure. By delivering a Borrowing Request to the Agent on or before 10:00 a.m. (New York City time) on a Business Day, the Borrower may from time to time irrevocably request that Base Rate Loans be made on such Business Day or on another Business Day within five Business Days of such Business Day, or that LIBO Rate Loans be made on any Business Day not less than three nor more than five Business Days thereafter. All Loans shall be made in a minimum aggregate amount of $1,000,000 and an aggregate integral multiple of $100,000 or, if less, in the unused amount of the applicable Commitment, and the proceeds of all Loans shall be used solely for the purposes described in Section 4.10. On the terms and subject to the conditions of this Agreement, each Borrowing shall be made on the Business Day specified in such Borrowing Request. On or before 1:00 p.m. (New York City time) on such Business Day, each Lender shall deposit with the Agent same day funds in an amount equal to such Lender's Percentage of the requested Borrowing. Such deposit will be made to an account which the Agent shall specify from time to time by notice to the Lenders. To the extent funds are received from the Lenders, the Agent shall make such funds available to the Borrower by wire transfer to the accounts the Borrower shall have specified in its Borrowing Request. No Lender's obligation to make any Loan shall be affected by any other Lender's failure to make any Loan. As to all Credit Extensions on the Effective Date, only Base Rate Loans will be available. SECTION 2.5. Continuation and Conversion Elections. By delivering a Continuation/Conversion Notice to the Agent on or before 10:00 a.m. (New York City time) on a Business Day, the Borrower may from time to time irrevocably elect, on not less than one Business Day's notice in the case of conversions to Base Rate Loans, or three Business Days' notice in the case of conversions to or continuations of LIBO Rate Loans, and in either -40- 47 case not more than five Business Days' notice, that all, or any portion in an aggregate minimum aggregate amount of $1,000,000 and an aggregate integral multiple of $100,000 be, in the case of Base Rate Loans converted into LIBO Rate Loans or be, in the case of LIBO Rate Loans converted into Base Rate Loans or continued as LIBO Rate Loans (in the absence of delivery of a Continuation/Conversion Notice with respect to any LIBO Rate Loan at least three Business Days (but not more than five Business Days) before the last day of the then current Interest Period with respect thereto, such LIBO Rate Loan shall, on such last day, automatically convert to a Base Rate Loan); provided, however, that (a) each such conversion or continuation shall be prorated among the applicable outstanding Loans of all Lenders and (b) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, LIBO Rate Loans when any Default or any Event of Default has occurred and is continuing (unless the Required Lenders otherwise agree in writing). SECTION 2.6. Funding. Each Lender may, if it so elects, fulfill its obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan; provided, however, that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such LIBO Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility. In addition, the Borrower hereby consents and agrees that, for purposes of any determination to be made for purposes of Sections 4.1 through 4.5, it shall be conclusively assumed that each Lender elected to fund all LIBO Rate Loans by purchasing Dollar deposits in its LIBOR Office's interbank eurodollar market. SECTION 2.7. Issuance Procedures. By delivering to the Agent an Issuance Request on or before 10:00 a.m., New York City time, on a Business Day, the Borrower may, from time to time irrevocably request, on not less than three nor more than 15 Business Days' notice, that the Issuer issue, increase the Stated Amount of, or extend the Stated Expiry Date of, as the case may be, a Letter of Credit in such form as may be requested by the Borrower and approved by the Issuer, such Letter of Credit to be used solely for the purposes described in Section 4.10. Each Letter of Credit shall by its terms be stated to expire on a date (its "Stated Expiry Date") no later than the earlier of (a) one year (or, in the case of the Letter of Credit issued under the Existing Credit Agreement to Bankers Trust Company, up to 15 months) from the date of issuance (or, if extendable beyond such period, cancelable upon at least 30 days' notice given by the Issuer to the beneficiary of such Letters of Credit) and (b) the Revolving Loan Commitment Termination Date. The Issuer will make available to the beneficiary thereof the original of each Letter -41- 48 of Credit which it issues hereunder. Unless notified in writing by the Required Banks before it issues a Letter of Credit that a Default or Event of Default exists, the Issuer may issue the requested Letter of Credit in accordance with the Issuer's customary practices. SECTION 2.7.1. Other Lenders' Participation. Upon the issuance of each Letter of Credit issued by the Issuer pursuant hereto, and without further action, each Lender (other than the Issuer) shall be deemed to have irrevocably and unconditionally purchased (without recourse, representation or warranty), to the extent of its Percentage, a participation interest in such Letter of Credit (including the Contingent Liability and any Reimbursement Obligation with respect thereto), and such Lender shall, to the extent of its Percentage, be responsible for reimbursing promptly (and in any event within one Business Day together with interest at the Federal Funds Rate (rounded upward, if necessary, to the next highest 1/16 of 1%) for each day until reimbursement is made) the Issuer for Reimbursement Obligations which have not been reimbursed by the Borrower in accordance with Section 2.7.3 or which have been reimbursed by the Borrower but have been required to be returned or disgorged by the Issuer. In addition, such Lender shall, to the extent of its Percentage and so long as it shall have complied with its obligations under this Section and Section 2.7.3, be entitled to receive a ratable portion of the Letter of Credit fees payable pursuant to Section 3.3.2 with respect to each Letter of Credit and of interest payable pursuant to Section 3.2 with respect to any Reimbursement Obligation. SECTION 2.7.2. Disbursements. The Issuer will notify the Borrower and the Agent promptly of the presentment for payment of any Letter of Credit issued by the Issuer, together with notice of the date (the "Disbursement Date") such payment shall be made (each such payment, a "Disbursement"). Subject to the terms and provisions of such Letter of Credit and this Agreement, the Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit. Prior to 11:00 a.m. (New York City time) on the first Business Day following the Disbursement Date, the Borrower will reimburse the Agent, for the account of the Issuer, for all amounts which the Issuer has disbursed under such Letter of Credit, together with interest thereon at a rate per annum equal to the highest rate per annum then in effect pursuant to Section 3.2 for the period from the Disbursement Date through the date of such reimbursement. SECTION 2.7.3. Reimbursement. The obligation (a "Reimbursement Obligation") of the Borrower under Section 2.7.2 to reimburse the Issuer with respect to each Disbursement (including interest thereon), and, upon the failure of the Borrower to reimburse the Issuer (or if any reimbursement by the Borrower must be returned or disgorged by the Issuer for any -42- 49 reason), each Lender's obligation under Section 2.7.1 to reimburse the Issuer, shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower or such Lender, as the case may be, may have or have had against the Issuer or any Lender, including any defense based upon the failure of any Disbursement to conform to the terms of the applicable Letter of Credit or any non-application or misapplication by the beneficiary of the proceeds of such Letter of Credit; provided, however, that after paying in full its Reimbursement Obligation hereunder, nothing herein shall adversely affect the right of the Borrower or such Lender, as the case may be, to commence any proceeding against the Issuer for any wrongful Disbursement made by the Issuer under a Letter of Credit as a result of acts or omissions constituting gross negligence or wilful misconduct on the part of such Issuer. SECTION 2.7.4. Deemed Disbursements. Upon the occurrence and during the continuation of any Default of the type described in Section 8.1.9 or, with notice from the Agent, upon the occurrence and during the continuation of any other Event of Default (a) an amount equal to that portion of all Letter of Credit Outstandings attributable to the then aggregate amount which is undrawn and available under all Letters of Credit issued and outstanding for the account of the Borrower shall, without demand upon or notice to the Borrower, be deemed to have been paid or disbursed by the Issuer under such Letters of Credit (notwithstanding that such amount may not in fact have been so paid or disbursed); and (b) upon notification by the Agent to the Borrower of its obligations under this Section, the Borrower shall be immediately obligated to reimburse the Issuer for the amount deemed to have been so paid or disbursed by such Issuer. Any amounts so payable by the Borrower pursuant to this Section shall be deposited in cash in an account under the sole control of the Agent and otherwise on terms satisfactory to the Agent and held as collateral security for the Obligations in connection with the Letters of Credit issued by the Issuers. In the case of any such deemed disbursement resulting from the occurrence of a Default or Event of Default, if such Default or Event of Default has been cured or waived, the Agent shall return to the Borrower all amounts then on deposit with the Agent pursuant to this Section which have not been applied to the partial satisfaction of such Obligations. SECTION 2.7.5. Nature of Reimbursement Obligations. The Borrower and, to the extent set forth in Section 2.7.1, each -43- 50 Lender shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof. The Issuer shall not be responsible for: (a) the form, validity, sufficiency, accuracy, genuineness or legal effect of any Letter of Credit or any document submitted by any party in connection with the application for and issuance of a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (b) the form, validity, sufficiency, accuracy, genuineness or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or the proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (c) failure of the beneficiary to comply fully with conditions required in order to demand payment under a Letter of Credit; (d) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise; or (e) any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under a Letter of Credit. None of the foregoing shall affect, impair or prevent the vesting of any of the rights or powers granted to the Issuer or any Lender hereunder. In furtherance and extension and not in limitation or derogation of any of the foregoing, any action taken or omitted to be taken by an Issuer in good faith shall be binding upon the Borrower and each such Lender, and shall not put such Issuer under any resulting liability to the Borrower or any such Lender, as the case may be. SECTION 2.8. Notes. Each Lender's Loans under a Commitment shall be evidenced by a Note payable to the order of such Lender in a maximum principal amount equal to such Lender's Percentage of the original applicable Commitment Amount. The Borrower hereby irrevocably authorizes each Lender to make (or cause to be made) appropriate notations on the grid attached to such Lender's Notes (or on any continuation of such grid), which notations, if made, shall evidence, inter alia, the date of, the outstanding principal of, and the interest rate applicable to, the Loans evidenced thereby. Such notations shall be rebuttable presumptive evidence of the matters evidenced thereby; provided, however, that the failure of any Lender to make any such -44- 51 notations shall not limit or otherwise affect any Obligations of the Borrower or any other Obligor. ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES SECTION 3.1. Repayments and Prepayments. The Borrower shall repay in full the unpaid principal amount of each Loan upon the Stated Maturity Date therefor and pursuant to Section 8.2 and Section 8.3. Prior thereto, repayments and prepayments of Loans shall be made as set forth in this Section 3.1. SECTION 3.1.1. Voluntary Prepayments. Prior to the Stated Maturity Date, the Borrower may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of all Term Loans or Revolving Loans; provided, however, that (a) any such prepayments shall be made pro rata among Loans of the same type and, if applicable, having the same Interest Period of all the Lenders; (b) all such voluntary prepayments shall require written notice prior to 10:00 a.m. (New York City time) on any Business Day but no more than five Business Days' prior written notice to the Agent; and (c) all such voluntary partial prepayments shall be in an aggregate minimum amount of (i) $1,000,000 and an integral multiple of $500,000 for Term Loans, and (ii) $1,000,000 and an integral multiple of $100,000 for Revolving Loans. Each voluntary prepayment of Term Loans made pursuant to this Section, shall be applied, to the extent of such prepayment, in the inverse order of the scheduled repayments of the Term Loans set forth in clause (b) of Section 3.1.2 and shall be applied first to any Base Rate Loans outstanding prior to being applied to any LIBO Rate Loans outstanding. Each prepayment of any Loans made pursuant to this Section shall be without premium or penalty but subject to Section 4.4. SECTION 3.1.2. Mandatory Prepayments. Prior to the Stated Maturity Date, (a) the Borrower shall, on each date when the sum of (x) the aggregate outstanding principal amount of all Revolving Loans and (y) Letter of Credit Outstandings exceeds the lesser of (i) the Revolving Loan Commitment Amount (as it may be reduced from time to time) and (ii) the then existing Borrowing Base Amount plusthe Letter of -45- 52 Credit Outstandings in respect of the Sunshine Letter of Credit, make a mandatory prepayment of all Revolving Loans in an amount equal to such excess; (b) the Borrower shall, on each date set forth below, make a scheduled repayment of the aggregate outstanding principal amount of all Term Loans in the amount set forth opposite each such date:
Amount of Required Repayment Date Principal Repayment -------------- ------------------- January 24, 1996 $2,000,000 July 24, 1996 $3,550,000 January 24, 1997 $3,550,000 July 24, 1997 $4,820,000 January 24, 1998 $5,780,000 July 24, 1998 $6,280,000 January 24, 1999 $6,670,000 July 24, 1999 $6,920,000 January 24, 2000 $7,110,000 July 24, 2000 $7,110,000 January 24, 2001 $7,110,000 July 24, 2001 $7,600,000 January 24, 2002 $11,500,000;
(c) the Parent or the Borrower, as the case may be, shall, (i) on the date of receipt by it or any of its Subsidiaries of any Gross Transaction Proceeds, Net Disposition Proceeds, Net Equity Proceeds, Net Debt Proceeds or Excess Insurance Proceeds and (ii) on the date of delivery of the audited financial statements pursuant to clause (b) of Section 7.1.1 (and, in any event, on the date 90 days after the end of each Fiscal Year), in the case of Excess Cash Flow, apply (A) 100% of all such Gross Transaction Proceeds, Net Disposition Proceeds, Net Equity Proceeds, Excess Insurance Proceeds and Net Debt Proceeds, as the case may be, and (B) 75% of all such Excess Cash Flow, to make a mandatory prepayment of the Term Loans to be applied to the installments thereof in the inverse order of the scheduled repayments of the Term Loans; and -46- 53 (d) the Borrower shall, immediately upon any acceleration of the Stated Maturity Date of any Loans pursuant to Section 8.2 or Section 8.3, repay all (or if only a portion of the Loans are accelerated thereunder, such portion of) the Loans; and (e) the Borrower shall prepay Revolving Loans so that the aggregate outstanding principal amount of all Revolving Loans outstanding does not exceed $4,000,000 during a five consecutive calendar day period during each calendar month (each such period, a "Clean-Down Period"). Each prepayment of any Loans made pursuant to this Section shall be made without premium or penalty, except as specified herein. SECTION 3.2. Interest Provisions. Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this Section 3.2. SECTION 3.2.1. Rates. Subject to Sections 2.4 and 2.5, the Borrower may elect, pursuant to an appropriately delivered Borrowing Request or Continuation/Conversion Notice, that Loans comprising a Borrowing accrue interest at a rate per annum: (a) on that portion maintained from time to time as Base Rate Loans, equal to the sum of the SG Base Rate from time to time in effect plus 1.25%; and (b) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus 2.5%. "LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be made, continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined pursuant to the following formula:
LIBO Rate = LIBO Rate ----------------------------- (Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Agent on the basis of the LIBOR Reserve Percentage in effect on, and the applicable rates furnished to and received by the Agent from SG, two Business Days before the first day of such Interest Period. "LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans, the rate of interest equal to the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates -47- 54 per annum at which Dollar deposits in immediately available funds are offered to SG's LIBOR Office in the London, England interbank market at or about 11:00 a.m. (London, England time) two Business Days prior to the beginning of such Interest Period for delivery on the first day of such Interest Period, and in an amount approximately equal to the amount of SG's LIBO Rate Loan and for a period approximately equal to such Interest Period. "LIBOR Reserve Percentage" means, relative to any Interest Period for LIBO Rate Loans, the reserve requirements (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of or including "Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period. All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan. SECTION 3.2.2. Post-Default Rates. From and after the occurrence of any Event of Default, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on such amounts at a rate per annum equal to the rate per annum otherwise in effect plus a further margin of 2% per annum. SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be payable, without duplication: (a) on the Stated Maturity Date therefor; (b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan on the principal amount so paid or prepaid; (c) with respect to Base Rate Loans, on each Quarterly Payment Date occurring after the Effective Date; (d) with respect to LIBO Rate Loans, on the last day of each applicable Interest Period (and, if such Interest Period shall exceed 90 days, on the 90th day of such Interest Period); and (e) on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such acceleration. -48- 55 Interest accrued on Loans or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Stated Maturity Date therefor, upon acceleration or otherwise) shall be payable upon demand. SECTION 3.3. Fees. The Borrower agrees to pay the fees set forth in this Section 3.3. All such fees shall be non-refundable. SECTION 3.3.1. Commitment Fee. The Borrower agrees to pay to the Agent, for the pro rata account of each Lender of Revolving Loans, for the period (including any portion thereof when the Revolving Loan Commitment is suspended by reason of the Borrower's inability to satisfy any condition of Article V) commencing on the Effective Date and continuing through the Revolving Loan Commitment Termination Date, a commitment fee at the rate of 1/2 of 1% per annum on such Lender's Percentage of the sum of the average daily undrawn and unused portion of the Revolving Loan Commitment Amount. The Revolving Loan Commitment shall be considered to be used by the amount of the Letter of Credit Outstandings. Such commitment fees shall be payable by the Borrower in arrears on each Quarterly Payment Date, commencing with the first Quarterly Payment Date following the Effective Date, and on the Revolving Loan Commitment Termination Date. SECTION 3.3.2. Letter of Credit Fee. The Borrower agrees to pay to the Agent, for the pro rata account of the Issuer and each other Lender of Revolving Loans, a Letter of Credit fee in an amount equal to 2.5% multiplied by the Stated Amount of all Letters of Credit outstanding, such fee to be paid quarterly in arrears on each Quarterly Payment Date and on the Revolving Loan Commitment Termination Date. The Borrower further agrees to pay to the Issuer (a) on the date of (x) the issuance of each Letter of Credit, (y) each increase in the Stated Amount thereof and (z) each extension (automatic or otherwise) of the Stated Expiry Date thereof, an issuance fee in an amount equal to the greater of (i) $500 and (ii) 1/4 of 1% of the Stated Amount thereof (or increase in such Stated Amount) and (b) all costs and expenses incurred by the Issuer in connection with such Letter of Credit. SECTION 3.3.3. Agent's Fees, etc. The Borrower agrees to pay to the Agent for its own account, fees in the amounts, on the dates and in the manner set forth in the Fee Letter. -49- 56 ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS SECTION 4.1. LIBO Rate Lending Unlawful. If any Lender shall determine (which determination shall, upon notice thereof to the Borrower and the Agent, be conclusive and binding on the Borrower) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, the obligations of such Lender to make, continue, maintain or convert any such LIBO Rate Loan shall, upon such determination, forthwith be suspended until such Lender shall notify the Agent that the circumstances causing such suspension no longer exist, and all outstanding LIBO Rate Loans of such Lender shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion. SECTION 4.2. Deposits Unavailable. If the Agent shall have determined that (a) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to SG in its relevant market; or (b) by reason of circumstances affecting SG's relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans, then, upon notice from the Agent to the Borrower and the Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4 to make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist. SECTION 4.3. Increased Costs, etc. (a) The Borrower agrees to reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans (including but not limited to any imposition or effectiveness of reserve requirements not already included in the LIBO Rate Reserve Percentage but excluding increases in Taxes and taxes expressly excluded from Taxes pursuant to the first sentence of Section 4.6, as to which the provisions of Section 4.6 shall control) that arise in connection with any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in, after the Effective Date, of, any law or regulation, directive, guideline, decision -50- 57 or request (whether or not having the force of law) of any court, central bank, regulator or other governmental authority. Such Lender shall promptly notify the Agent and the Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Lender for such increased cost or reduced amount. Such additional amounts shall be paid by the Borrower directly to such Lender promptly (and, in any event, within 15 Business Days of receipt of such notice), and such notice shall, in the absence of manifest error, be conclusive and binding on the Borrower. (b) If at any time the introduction or effectiveness of or any change in any applicable law, rule or regulation (including without limitation those announced or published prior to the date of this Agreement), or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by any Lender with any request or directive issued by any such authority (whether or not having the force of law) shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against letters of credit issued, or participated in, by any Issuer or Lender, or (ii) impose on any Issuer or Lender any other conditions affecting this Agreement or any Letter of Credit; and the result of any of the foregoing is to increase the cost to any Issuer or Lender of issuing, maintaining or participating in any Letter of Credit, or reduce the amount of any sum received or receivable by any Issuer or Lender hereunder with respect to Letters of Credit, then, within ten days of the receipt of the notice referred to below (which notice shall be given by the respective Issuer or Lender promptly after it determines such increased cost or reduction is applicable to Letters of Credit or its participation therein) to the Borrower by the respective Issuer or Lender (a copy of which notice shall be sent by such Issuer or Lender to the Agent), the Borrower shall pay to such Issuer or Lender such additional amount or amounts as will compensate such Issuer or Lender for such increased cost or reduction. A notice submitted to the Borrower by such Issuer or Lender, setting forth the basis for the calculation of such additional amount or amounts necessary to compensate such Issuer or Lender as aforesaid shall be conclusive and binding on the Borrower absent manifest error. SECTION 4.4. Funding Losses. In the event any Lender shall incur any loss or expense (including any loss (other than the loss of any payments in respect of the 1.25% and 2.5% margins referred to in clauses (a) and (b), respectively, of Section 3.2.1) or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan) as a result of -51- 58 (a) any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise; (b) any Loans not being made as LIBO Rate Loans in accordance with the Borrowing Request therefor as a result of the conditions precedent to such Loans not being satisfied or as a result of the Borrower attempting to revoke such Borrowing Request; or (c) any Loans not being continued as, or converted into LIBO Rate Loans in accordance with the Continuation/Conversion Notice therefor, then, upon the written notice of such Lender to the Borrower (with a copy to the Agent), the Borrower shall promptly (and, in any event, within 15 Business Days of receipt of such notice) pay directly to such Lender such amount as will (in the determination of such Lender) reimburse such Lender for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrower. SECTION 4.5. Increased Capital Costs. If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other governmental authority affects or would affect the amount of capital required or expected to be maintained by any Lender or Issuer or any Person controlling such Lender or Issuer, and such Lender or Issuer determines (in its sole and absolute discretion) that the rate of return on its or such controlling Person's capital as a consequence of its Commitments or the Loans made by such Lender or (to the extent, if any, not covered by Section 4.3(b) hereof) Letters of Credit issued or participated in by such Lender or Issuer is reduced to a level below that which such Lender, Issuer or such controlling Person (to the extent, if any, not covered by Section 4.3(b) hereof) could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Lender or Issuer to the Borrower, the Borrower shall immediately pay directly to such Lender or Issuer additional amounts sufficient to compensate such Lender or Issuer or such controlling Person for such reduction in rate of return. A statement of such Lender or Issuer as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Borrower. In determining such amount, such Lender or Issuer may use any method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable. -52- 59 SECTION 4.6. Taxes. All payments by the Borrower hereunder and under all other Loan Documents shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties or withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes, taxes imposed on or measured by any Lender's net income or receipts or similar taxes (such non-excluded items, solely for purposes of this Section, being called "Charges"). In the event that any withholding or deduction from any payment to be made by the Borrower hereunder is required in respect of any Charges pursuant to any applicable law, rule or regulation (whether such law, rule or regulation is in effect at the Effective Date or is enacted or implemented at any time thereafter), then the Borrower will (i) pay directly to the relevant authority the full amount required to be so withheld or deducted; (ii) promptly forward to the Agent an official receipt or other documentation satisfactory to the Agent evidencing such payment to such authority; and (iii) pay to the Agent for the account of the Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction been required. Moreover, if any Charges are directly asserted against the Agent, any Lender or any Issuer with respect to any payment received by the Agent, such Lender or such Issuer hereunder, the Agent or such Lender may pay such Charges and the Borrower will promptly pay such additional amounts (including any penalties, interest or expenses) as is necessary in order that the net amount received by such person after the payment of such Charges (including any Charges on such additional amount) shall equal the amount such person would have received had not such Charges been asserted. If the Borrower fails to pay any Charges when due to the appropriate taxing authority or fails to remit to the Agent, for the account of the respective Lenders and the Issuer, the required receipts or other required documentary evidence, the Borrower shall indemnify the Lenders and the Issuer for any incremental Charges, interest or penalties that may become payable by any Lender as a result of any such failure. For purposes of this Section, a distribution hereunder by the Agent or any Lender or the Issuer to or for the account of any Lender or the Issuer shall be deemed a payment by the Borrower. Each Lender which is not a United States Person for Federal income tax purposes agrees, to the extent that (i) all income realized by such Lender in respect of any loan or this Agreement -53- 60 is, or is expected to be, effectively connected with the conduct by such Lender of a trade or business in the United States and is includable in gross income of such Lender for the relevant tax year or (ii) such Lender is entitled to a total or partial exemption from withholding that is required to be evidenced by United States Internal Revenue Service Form 1001 or 4224, to deliver to the Agent and the Borrower, from time to time as requested to the Agent and the Borrower, such Form 1001 or 4224 ("Exemption Certificate") or any applicable successor form thereto, completed in a manner reasonably satisfactory to the Agent and the Borrower. If a Lender which is not a United States person for federal income tax purposes has not delivered an Exemption Certificate to the Borrower on or before its first participation as Lender hereunder or within a reasonable period of time thereafter, then the Borrower shall not have any obligation to indemnify such Lender for charges (including related penalties, interest and expenses) imposed by the United States or any political subdivision thereof pursuant to this section. SECTION 4.7. Payments, Computations, etc. Unless otherwise expressly provided, all payments by the Borrower pursuant to or in respect of this Agreement, the Notes, each Letter of Credit or any other Loan Document shall be made by the Borrower to the Agent for the pro rata account of the Lenders entitled to receive such payment. All such payments required to be made to the Agent shall be made, without setoff, deduction or counterclaim, not later than 11:00 a.m. (New York City time), on the date due, in same day or immediately available funds, to such account as the Agent shall specify from time to time by notice to the Borrower. Funds received after that time shall be deemed to have been received by the Agent on the next succeeding Business Day. The Agent shall promptly remit in same day funds to each Lender its share, if any, of such payments received by the Agent for the account of such Lender. All interest and fees (including any Post-Default Rate interest payments made pursuant to Section 3.2.2) shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days (or, in the case of interest on Base Rate Loans, 365 days or, if appropriate, 366 days). Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clause (c) of the definition of the term "Interest Period" with respect to LIBO Rate Loans) be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment. The Agent is authorized to charge any account maintained by the Borrower with it for any Obligations owing to it or any of the Lenders. -54- 61 SECTION 4.8. Sharing of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan (other than pursuant to the terms of Sections 4.3, 4.4, 4.5 and 4.6) in excess of its pro rata share of payments pursuant to Section 4.7, then or therewith obtained by all Lenders, such Lender shall purchase from the other Lenders such participations in Credit Extensions made by them (without recourse, representation or warranty) as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender's ratable share (according to the proportion of (a) the amount of such selling Lender's required repayment to the purchasing Lender to (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.9) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section to share in the benefits of any recovery on such secured claim. SECTION 4.9. Setoff. Each Lender shall, upon the occurrence of any Event of Default and with the consent of the Required Lenders, to the extent permitted under applicable law, appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) each of the Borrower and the Parent hereby grants to each Lender a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of the Borrower and the Parent then or thereafter maintained with such Lender; provided, however, that any such appropriation and application shall be subject to the provisions of Section 4.8 (each Lender agreeing promptly to notify the Borrower or the Parent, as the case may be, and the Agent after any such setoff and application made by such Lender; but the failure to give such notice shall not affect the validity of such setoff and application). The rights of each Lender under this Section are in addition to other -55- 62 rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have. SECTION 4.10. Use of Proceeds. The Borrower shall apply all the proceeds of the Credit Extensions made on the Effective Date in accordance with the twelfth recital. The proceeds from all subsequent Credit Extensions shall be applied (a) for working capital and general corporate purposes of the Borrower, (b) to make revolving loans from time to time by the Borrower to Petroleum, and (c) for issuing Letters of Credit for working capital and general corporate purposes of the Borrower and its Subsidiaries and Petroleum. ARTICLE V CONDITIONS TO EFFECTIVENESS AND CREDIT EXTENSIONS SECTION 5.1. Effectiveness. This Amended and Restated Credit Agreement shall become effective on the date (the "Effective Date") that each of the conditions precedent set forth in this Section 5.1 shall be fulfilled to the satisfaction of the Agent. SECTION 5.1.1. Resolutions, etc. The Agent shall have received from the Parent, the Borrower, Petroleum and each other Obligor party to a Loan Document, a certificate, dated the date of the initial Credit Extension, of its Secretary or Assistant Secretary as to (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Agreement, the Notes and each other Loan Document to be executed by it; (b) each Organic Document of the Parent, the Borrower, Petroleum and each such other Obligor; and (c) the incumbency and signatures of the officers of the Parent, the Borrower, Petroleum and each such other Obligor authorized to act with respect to this Agreement, the Notes and each other Loan Document as is to be executed by it, upon which certificate each Lender may conclusively rely until it shall have received a further certificate of the Secretary or Assistant Secretary of the Parent, the Borrower, Petroleum and each other Obligor canceling or amending such prior certificate. SECTION 5.1.2. Agreement. The Agent shall have received, with counterparts for each Lender identified on the signature pages hereto, this Agreement duly executed by each Lender, the -56- 63 Agent and an Authorized Officer of each of the Borrower and the Parent. SECTION 5.1.3. Delivery of Notes. The First Merger Loans and the Term Loans (as such terms are defined in the Existing Credit Agreement) shall have been restated and consolidated in full with the Term Loans made hereunder and Lenders holding First Merger Notes and Term Notes (as such terms are defined in the Existing Credit Agreement) shall have returned such Notes for replacement to the Agent. In addition, the Agent shall have received, for the account of each Lender entitled thereto, its Term Note and Revolving Note, dated the Effective Date, and duly executed and delivered by an Authorized Officer of the Borrower. SECTION 5.1.4. Beverage License Certification Date; Merger of Sunshine and the Borrower. The Beverage License Certification Date shall have occurred and the Merger shall contemporaneously with the making of the initial Credit Extension on the Effective Date, have been consummated pursuant to applicable law and a certificate of merger (the "Merger Certificate"), in a manner reasonably satisfactory to the Agent. In addition, the Borrower shall have delivered or caused to be delivered to the Agent counterparts for each Lender of the following: (a) Resolutions. Resolutions of the Boards of Directors and, to the extent required by applicable law, stockholders of each party to the Merger Certificate, each certified by the Secretary or an Assistant Secretary of such party, duly adopted and in full force and effect on the date of the Merger, authorizing the execution, delivery and performance by such party of the Merger Certificate and all other agreements, documents and instruments being delivered in connection therewith. (b) Certificates. A certificate from an Authorized Officer of the Borrower to the effect that attached thereto are true and correct copies of the Merger Certificate. (c) Merger Certificate, etc. A true copy of the Merger Certificate that has been duly completed and stamp filed by the Secretary of State of Delaware and Florida. (d) Opinions of Counsel. Opinions of legal counsel for the Borrower and Sunshine relating to the Merger, which legal opinions shall be in form and substance reasonably satisfactory to the Agent. SECTION 5.1.5. Required Consents and Approvals. All required consents and approvals shall have been obtained and be in full force and effect with respect to the transactions contemplated hereby and the Merger from (a) all relevant governmental authorities and regulatory bodies and (b) any other -57- 64 Person whose consent or approval the Agent reasonably deems necessary or appropriate to effect the transactions contemplated hereby and by the Merger. SECTION 5.1.6. Termination of Sunshine Indenture. All Class 7 Claimants of Sunshine shall have been paid in full or duly provided for pursuant to a duly entered final Bankruptcy Court Order issued by the Bankruptcy Court which has not been stayed and through the issuance of the Sunshine Letter of Credit, and all holders of notes under the Sunshine Indenture shall have been paid in full (after first applying all cash on hand at Sunshine to the payment thereof) and the Sunshine Indenture shall have been terminated and be of no further force or effect. SECTION 5.1.7. Transfer of Sunshine Trademarks. The Borrower shall have all right and title in the Sunshine United States Trademarks listed on Schedule V hereto, free and clear of all Liens, charges or claims (other than Permitted Encumbrances), and the Agent shall have received a duly perfected first Lien therein in a manner and pursuant to legal documentation (including legal opinions) reasonably satisfactory to the Agent. SECTION 5.1.8. Financial Information, etc. The Agent shall have received prior to the Effective Date, with counterparts for each Lender, (a) audited financial statements for the Parent and its Subsidiaries for the fiscal year ending December 25, 1994 and for their prior two fiscal years, in each case prepared in accordance with GAAP consistently applied and free of any Impermissible Qualification; (b) unaudited financial statements for the Parent and its Subsidiaries for the seven-month period ending in July of 1995 and unaudited financial statements of Sunshine for the fiscal quarter ending on or about June 30, 1995, certified by the chief financial Authorized Officer of each such Person, in each case prepared in accordance with GAAP consistently applied (subject to normal year-end audit adjustments); and (c) a pro forma consolidated balance sheet for the Parent and its Subsidiaries (including Sunshine) satisfactory in form and substance to the Agent and the Lenders, certified by the chief financial Authorized Officer of the Borrower and the Parent, as the case may be, giving effect to the consummation of the Merger and all the transactions contemplated by this Agreement and the other Loan Documents. SECTION 5.1.9. Affirmation and Acknowledgement. The Agent shall have received an Affirmation and Acknowledgement, dated as -58- 65 of the Effective Date, substantially in the form of Exhibit P hereto, duly executed and delivered by each Obligor that is a party to the Security Agreements, the Pledge Agreements, the Petroleum Guaranty and each other Loan Document which was executed and delivered pursuant to the Existing Credit Agreement. SECTION 5.1.10. UCC Search Results. The Agent shall have received certified copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Agent, dated a date reasonably near (but prior to) the Effective Date, listing all effective financing statements, tax liens and judgment liens which name Sunshine, as the debtor and which are filed in the jurisdictions in which filings are to be made pursuant to this Agreement and the other Loan Documents, and in such other jurisdictions as the Agent may reasonably request, together with copies of such financing statements (none of which (other than financing statements (i) filed pursuant to the terms hereof in favor of the Agent, if such Form UCC-11 or search report, as the case may be, is current enough to list such financing statements, (ii) being terminated or (iii) in respect of protective filings or Liens permitted under Section 7.2.3) shall cover any of the Collateral). SECTION 5.1.11. Amendment to Borrower Security Agreement, Filings, etc. The Agent shall have received executed counterparts of an Amendment to the Borrower Security Agreement, dated as of the Effective Date and duly executed by the Borrower, substantially in the form of Exhibit T hereto, together with executed copies of U.C.C. financing statements naming the Borrower as the debtor and the Agent as the secured party, filed under the U.C.C. of all jurisdictions (including the locations of all Sunshine stores) as may be necessary or, in the opinion of the Agent, desirable to perfect the first priority security interest of the Agent pursuant to the Borrower Security Agreements, together with evidence satisfactory to the Agent of the filing (or delivery for filing) of the appropriate trademarks. SECTION 5.1.12. Solvency Certificates. The Agent shall have received, with copies for each Lender, solvency certificates in substantially the form of Exhibit M attached hereto, duly executed by the chief executive officer and chief financial Authorized Officer of the Borrower, Petroleum and the Parent, dated the Effective Date and expressly permitting the Agent and the Lenders to rely thereon. SECTION 5.1.13. Closing Date Certificates. The Agent shall have received, with copies for each Lender, a closing date certificate in substantially the form of Exhibit L attached hereto, duly executed by the chief financial or executive Authorized Officer of the Borrower and the Parent, and dated the -59- 66 Effective Date, in which certificate the Borrower and the Parent shall agree and acknowledge that the statements made therein shall be true and correct representations and warranties of the Borrower and the Parent as of such date. All documents and agreements appended to such Closing Date Certificate shall be in form and substance satisfactory to the Agent and the Required Lenders. SECTION 5.1.14. Evidence of Insurance. The Agent shall have received evidence of the insurance coverage required to be maintained pursuant to Section 7.1.4, which insurance shall have been reviewed by one or more of the Agent's risk managers and be satisfactory to the same, together with a satisfactory insurance broker's letter or letters as to the compliance of the same with the requirements of this Agreement. SECTION 5.1.15. Payment of Outstanding Indebtedness, Payment of Fees and Interest, etc. The Agent shall have received satisfactory evidence that all Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the Disclosure Schedule, together with all interest, all prepayment premiums and other amounts due and payable with respect thereto, have been paid in full and all obligations with respect thereto have been terminated and that all Liens securing such payment of any Indebtedness have been released. In addition, the Agent shall have received all Uniform Commercial Code Form UCC-3 termination statements and mortgage releases, if any, or other instruments as may be suitable or appropriate in connection with the foregoing. Furthermore, all accrued interest and fees under the Existing Credit Agreement shall have been paid in full. SECTION 5.1.16. Opinions of Counsel. The Agent shall have received opinions, dated the Effective Date and addressed to the Agent and all the Lenders, from (a) Bracewell & Patterson, L.L.P., counsel to the Obligors, substantially in the form of Exhibit Q hereto; and (b) Florida local counsel for matters related to the Merger and personal property matters in form and substance satisfactory to the Agent. SECTION 5.1.17. Agent's Closing Fees, Expenses, etc. The Agent shall have received for its own account, and for the account of each Lender, as the case may be, all fees, costs and expenses due and payable pursuant to Sections 3.3 and, if then invoiced, 10.3. SECTION 5.1.18. Borrowing Base Certificate. The Agent shall have received, with counterparts for each Lender, an initial Borrowing Base Certificate from the Borrower, dated the date of the initial Credit Extension and calculated as of a -60- 67 recent date satisfactory to the Agent, duly executed and delivered by an Authorized Officer of the Borrower. SECTION 5.1.19. Effective Date. The Effective Date shall have occurred by October 31, 1995. SECTION 5.1.20. Stockholders' Acknowledgment and Confirmation. The Agent shall have received, with a copy for each Lender, a duly executed acknowledgment and agreement with respect to the Stockholders' Letter of Understanding acknowledging the terms and conditions of this Agreement, and agreeing that the terms and provisions thereof remain in full force and effect, and otherwise in form and substance reasonably satisfactory to the Agent. SECTION 5.1.21. Satisfactory Legal Form, etc. All documents executed or submitted pursuant hereto on or prior to the Effective Date by or on behalf of the Borrower or any of its Subsidiaries or any other Obligors shall be satisfactory in form and substance to the Agent, the Lenders and their counsel; the Agent, the Lenders and their counsel shall have received all information, approvals, opinions, documents or instruments as the Agent, the Lenders or their counsel may reasonably request. SECTION 5.2. Conditions to Credit Extensions. The obligation of each Lender and Issuer to make any Credit Extension (including the initial Credit Extension and including any issuance of the Sunshine Letter of Credit) shall be subject to the fulfillment of each of the conditions precedent set forth in this Section 5.2 to the satisfaction of the Agent: SECTION 5.2.1. Compliance with Warranties, No Default, etc. Both before and after giving effect to any Credit Extension, the following statements shall be true and correct: (a) the representations and warranties set forth in Article VI (excluding, however, those contained in Section 6.7) and those set forth in the other Loan Documents shall be true and correct in all material respects with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date); (b) except as disclosed by the Borrower to the Agent and the Lenders pursuant to Section 6.7, (i) no labor controversy, litigation, arbitration or governmental investigation or proceeding shall be pending or, to the knowledge (after due inquiry) of the Parent or the Borrower, threatened against the Parent or any of its Subsidiaries (including the Borrower or -61- 68 any of its Subsidiaries) which has a reasonable likelihood of materially and adversely affecting the Parent's or the Borrower's consolidated business, operations, assets, revenues, properties or prospects, which purports to affect the legality, validity or enforceability of this Agreement, the Notes or any other Loan Document or, in the case of the initial Credit Extension, seeks to restrain, enjoin or otherwise prevent the consummation of, or to recover damages or obtain relief as a result of, the transactions contemplated by or in connection with the Merger, this Agreement or the other Loan Documents; and (ii) no development shall have occurred in any labor controversy, litigation, arbitration or governmental investigation or proceeding disclosed pursuant to Section 6.7 which has a reasonable likelihood of materially and adversely affecting the consolidated businesses, operations, assets, revenues, properties or prospects of the Parent and its Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken as a whole; (c) the sum of the (i) aggregate outstanding principal amount of all Revolving Loans and (ii) aggregate amount of Letter of Credit Outstandings does not exceed the lesser of the Revolving Loan Commitment Amount (as such amount may be reduced from time to time) and the Borrowing Base Amount in effect at such time; and (d) no Default shall have then occurred and be continuing. SECTION 5.2.2. Credit Extension Request, etc. The Agent shall have received a Borrowing Request if Loans are being requested or an Issuance Request if a Letter of Credit is being requested or extended. Each of the delivery of a Borrowing Request or Issuance Request and the acceptance by the Borrower of the proceeds of such Credit Extension shall constitute a representation and warranty by the Borrower that on the date of such Credit Extension (both immediately before and after giving effect to such Credit Extension and the application of the proceeds thereof) the statements made in Section 5.2.1 are true and correct. ARTICLE VI REPRESENTATIONS AND WARRANTIES In order to induce the Lenders, each Issuer and the Agent to amend and restate the Existing Credit Agreement and to make Credit Extensions hereunder, the Borrower and the Parent jointly -62- 69 and severally represent and warrant to the Agent, each Issuer and each Lender as set forth in this Article VI. SECTION 6.1. Organization, etc. The Borrower and each of its Subsidiaries and each other Obligor (a) is a corporation validly organized and existing and in good standing under the laws of the jurisdiction of its incorporation and (b) is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business requires such qualification except where the failure to be so qualified or in good standing could not reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole, and has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under this Agreement, the Notes and each other Loan Document to which it is a party, to consummate the Merger and to own and hold under lease its property and to conduct its business substantially as currently conducted by it except where the failure to hold a governmental license, permit, or other approval to own or hold under lease its property and to conduct its business substantially as currently conducted could not reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole. SECTION 6.2. Due Authorization, Non-Contravention, etc. The execution, delivery and performance by the Borrower and the Parent of this Agreement, the Notes and each other Loan Document executed or to be executed by it, and the execution, delivery and performance by each other Obligor of each Loan Document executed or to be executed by it, and the consummation of the Merger, are within the Borrower's, the Parent's and each such Obligor's corporate powers, have been duly authorized by all necessary corporate action, and do not (a) contravene or result in a default under the Borrower's, the Parent's or any such Obligor's Organic Documents; (b) contravene or result in a default under any contractual restriction, law or governmental regulation or court decree or order binding on the Borrower, the Parent or any such Obligor; or (c) result in, or require the creation or imposition of, any Lien on any of any Obligor's properties other than the Liens created under the Loan Documents in favor of the Agent. -63- 70 SECTION 6.3. Government Approval, Regulation, Compliance with Law, etc. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person (other than the filing of UCC-1 financing statements in the appropriate jurisdictions) is required for (a) the due execution, delivery or performance by the Borrower, the Parent or any other Obligor of this Agreement, the Notes or any other Loan Document to which it is a party or the consummation of the Merger, (b) the grant by the Borrower and each applicable Obligor of the security interests, pledges and Liens granted by the Loan Documents, or (c) the perfection of or the exercise by the Agent of its rights and remedies under this Agreement or any other Loan Document. SECTION 6.4. Validity, etc. This Agreement and each of the Notes has been duly executed and delivered, and each other Loan Document executed by the Borrower, and the Parent, as the case may be, will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Borrower, and the Parent, as the case may be, enforceable in accordance with their respective terms; and each Loan Document executed pursuant hereto by each other Obligor will, on the due execution and delivery thereof by such Obligor, be the legal, valid and binding obligation of such Obligor enforceable in accordance with its terms, such enforceability being subject in each case to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally, and subject to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law). Each of the Loan Documents which purports to create a security interest creates a valid first priority security interest in the Collateral subject thereto, subject only to Liens permitted by Section 7.2.3, securing the payment of the Obligations. SECTION 6.5. Financial Information. The financial statements delivered pursuant to Sections 5.1.8(a) and (b) have been prepared in accordance with GAAP consistently applied (including application of Financial Accounting Statement No. 106) and such financial statements and the pro forma balance sheets delivered pursuant to clause (c) of Section 5.1.8 present fairly the financial condition of the corporations covered thereby as at the dates thereof and the results of their operations for the periods then ended. The Parent and its Subsidiaries have no material liabilities, including as to contingencies and unusual or forward commitments, that are not disclosed in the foregoing financial statements or the footnotes thereto or set forth in Item 6.5 ("Certain Material Liabilities") of the Disclosure Schedule. The pro forma balance sheet delivered pursuant to clause (c) of Section 5.1.8 have been prepared in accordance with the requirements of GAAP for the preparation of pro forma financial statements. -64- 71 SECTION 6.6. No Material Adverse Change. (a) As of the Effective Date, from and after June 25, 1995, there has been no material adverse change in the financial condition, operations, assets, business, properties, revenues or prospects of Sunshine or the Parent and its Subsidiaries or the Borrower and its Subsidiaries, in each case taken as a whole. (b) For the period after the Effective Date, since the Effective Date there has been no material adverse change in the financial condition, operations, assets, business, properties, revenues or prospects of the Parent and its Subsidiaries or the Borrower and its Subsidiaries, in each case taken as a whole. SECTION 6.7. Litigation, Labor Controversies, etc. There is no pending or, to the knowledge of the Borrower, threatened litigation, action, proceeding, or labor controversy affecting the Parent or any of its Subsidiaries (including the Borrower or any of its Subsidiaries) or any other Obligor, or any of their respective properties, businesses, assets or revenues, which could reasonably be expected to materially adversely affect the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole, except as disclosed in Item 6.7 ("Litigation") of the Disclosure Schedule, or which purports to affect the legality, validity or enforceability of this Agreement, the Notes or any other Loan Document. SECTION 6.8. Subsidiaries. The Parent has no direct Subsidiaries except the Borrower and Petroleum. The Borrower has no Subsidiaries except Delight and those Subsidiaries, if any, which it may acquire or create after the date of the initial Credit Extension in accordance with the provisions hereof. Petroleum has no Subsidiaries except Petroleum of California. SECTION 6.9. Ownership of Properties; Liens. Except as set forth in Item 6.9 ("Ownership of Properties") of the Disclosure Schedule, the Borrower and the Parent, and each of their respective Subsidiaries, own good and marketable title to all of their properties and assets, and have valid fee or leasehold interests in all property, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like which could interfere in the conduct of their businesses as currently conducted) except to the extent expressly permitted by Section 7.2.3. -65- 72 SECTION 6.10. Taxes. The Parent and each of its Subsidiaries (including the Borrower and its Subsidiaries) have filed (a) all returns and reports required by law to have been filed by or with respect to it in connection with federal, state and local income taxes (including any predecessor or prior consolidated group of which it may have been a member) and (b) all other returns and reports with respect to Taxes required by law to have been filed to the extent (as to this clause (b)) the failure to do so could reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Parent and its Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken as a whole. All federal, state and local income taxes (as described above) that are owing have been paid in full and all other Taxes and governmental charges that are owing have been paid in full to the extent the failure to do so could reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business, properties or prospects the Parent and its Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken as a whole, except in each such case any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. SECTION 6.11. Pension and Welfare Plans. During the twelve-consecutive-month period prior to the date of the execution and delivery of this Agreement and prior to the date of any Credit Extension hereunder, no steps have been taken to terminate any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which might result in the incurrence by the Borrower or any member of the Controlled Group of any material liability, fine or penalty. Except as disclosed in Item 6.11 ("Employee Benefit Plans") of the Disclosure Schedule, neither the Borrower nor any member of the Controlled Group or any other Obligor has any contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Title I of ERISA. SECTION 6.12. Environmental Warranties. Except as set forth in Item 6.12 ("Environmental Matters") of the Disclosure Schedule: (a) all facilities and property (including underlying groundwater) owned or leased by the Borrower, the Parent or any of their respective Subsidiaries have been, and continue to be, owned or leased by the Borrower, the Parent and such Subsidiaries in compliance in all material respects with all Environmental Laws; -66- 73 (b) there have been no past, and there are no pending or, to the best knowledge of the Parent and the Borrower, threatened (i) claims, complaints, notices or requests for information received by the Borrower, the Parent or any of their respective Subsidiaries with respect to any alleged violation of any Environmental Law, as to which the Agent has not received written notice, or (ii) complaints, notices or inquiries to the Borrower, the Parent or any of their respective Subsidiaries regarding potential liability under any Environmental Law or, with regard to contamination, any common or civil law, as to which the Agent has not received written notice; (c) there is no claim, complaint, notice, request for information or inquiry that has been received by or made to the Borrower, the Parent or any of their respective Subsidiaries with respect to any alleged violation of any Environmental Law or regarding potential liability under any Environmental Law or, with regard to contamination, any common or civil law, which, singly or in aggregate, could reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole; (d) there have been no Releases of Hazardous Materials at, on or under any property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries that, singly or in the aggregate, could reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole; (e) the Borrower, the Parent and their respective Subsidiaries have been issued and are in compliance in all material respects with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary or desirable for their businesses; (f) no property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries is listed or proposed for listing (with respect to owned property only) on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list of sites requiring investigation or clean-up; -67- 74 (g) there are no underground storage tanks (including petroleum storage tanks) that are abandoned or that have been inactive for greater than one year on or under any property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries; (h) there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries that do not have leak detection systems as required by and in compliance in all material respects with all Environmental Law; (i) there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries that have Released or suffered Release(s) of Hazardous Materials that, singly or in the aggregate, could reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole; (j) there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries that have Released Hazardous Materials and have not or would not qualify and be eligible for the funding (subject to applicable deductibles) of the cleanup of Release(s) and third party liability by a State fund; (k) there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries that have Release(s) the cleanup of which will or is reasonably expected to exceed the maximum funding of cleanup by a State fund; (l) there are no septic systems, cess pools, underground systems or underground injection wells on or under any property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries that have Released or suffered Releases of Hazardous Materials which, singly or in the aggregate, could reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its -68- 75 Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole; (m) there are no fuel pumps, underground storage tanks, or above ground storage tanks, including petroleum storage tanks, on or under any property now owned or leased by the Borrower, the Parent or any of their respective Subsidiaries that required or are reasonably expected to be required to be modified, upgraded or replaced to include emission control devices in a manner (including as to costs and expenses) that, singly or in the aggregate, could reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole; (n) any tank or pump replacement program of the Borrower, the Parent or any of their respective Subsidiaries, singly or in the aggregate, is not reasonably expected to have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of Borrower and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole; (o) neither the Parent nor any Subsidiary of the Parent (including the Borrower and its Subsidiaries) has directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list or which is the subject of federal, state or local enforcement actions or other investigations which may lead to material claims against the Parent or such Subsidiary thereof for any remedial work, damage to natural resources or personal injury, including claims under CERCLA; (p) there are no polychlorinated biphenyls or friable asbestos present at any property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries that, singly or in the aggregate, have, or may reasonably be expected to have, a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole; and (q) no conditions (other than those covered in the preceding clauses (a) through (p)) exist at, on or under any property now or previously owned or leased by the Borrower, the Parent or any of their respective Subsidiaries which, -69- 76 with the passage of time, or the giving of notice or both, would give rise to any material liability under any Environmental Law. SECTION 6.13. Accuracy of Information. (a) All factual information heretofore or contemporaneously furnished by or on behalf of the Borrower and the Parent in writing to the Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such factual information hereafter furnished by or on behalf of the Borrower and the Parent to the Agent or any Lender, will be, when taken as a whole true and accurate in every material respect on the date as of which such information is dated or certified and, as to information delivered before the Effective Date, as of the date of execution and delivery of this Agreement by the Agent and such Lender, and such information is not, when taken as whole or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading. (b) All written information prepared by any consultant or professional advisor on behalf of the Parent or any of its Subsidiaries which was furnished to the Agent or any Lender in connection with the preparation, execution and delivery of this Agreement (including, without limitation, the Memorandum) has been reviewed by the Borrower and the Parent, and nothing has come to the attention of the Borrower and the Parent in the context of such review which would lead it to believe that such information (or the assumptions on which such information is based) is not, taken as a whole, true and correct in all material respects or that such information, taken as a whole, omits to state any material fact necessary to make such information not misleading in any material respect. (c) Insofar as any of the information described above includes assumptions, estimates, projections or opinions, the Borrower and the Parent have reviewed such matters and nothing has come to the attention of the Borrower and the Parent in the context of such review which would lead it to believe that such assumptions, estimates, projections or opinions, omit to state any material fact necessary to make such assumptions, estimates, projections or opinions not reasonable or not misleading in any material respect. All projections and estimates have been prepared in good faith on the basis of reasonable assumptions and represent the best estimate of future performance by the party supplying the same. SECTION 6.14. Confirmation of Representations and Warranties. Each of the representations and warranties contained in the Existing Credit Agreement (including without limitation those contained in Amendment No. 3) is hereby confirmed and restated in all material respects as of the date when made. -70- 77 SECTION 6.15. Expropriation and Condemnation. Not more than fifteen locations as to which any Realty is located is the subject of a condemnation, expropriation or other taking by any federal, state, provincial, municipal or other competent authority or a notice or proceeding in respect thereof. SECTION 6.16. Intellectual Property Collateral. With respect to any Intellectual Property Collateral the loss, impairment or infringement of which might have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its Subsidiaries taken as whole or the Parent and its Subsidiaries taken as a whole: (a) such Intellectual Property Collateral is subsisting and has not been adjudged invalid or unenforceable, in whole or in part; (b) such Intellectual Property Collateral is valid and enforceable; (c) the Borrower and the other Subsidiaries of the Parent have made all necessary filings and recordations to protect their respective interests in such Intellectual Property Collateral, including recordations of all such interests in the Intellectual Property Collateral in the United States Patent and Trademark Office and/or the United States Copyright Office; (d) the Borrower and the other Subsidiaries of the Parent are the exclusive owners of the entire and unencumbered right, title and interest in and to such Intellectual Property Collateral (except for Liens created under the Loan Documents) and no claim has been made that the use of such Intellectual Property Collateral does or may violate the asserted rights of any third party except for claims that could not reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole; and (e) the Borrower and the other Subsidiaries of the Parent have performed and will continue to perform all acts and has paid and will continue to pay all required fees and taxes to maintain each and every item of such Intellectual Property Collateral in full force and effect in the United States. SECTION 6.17. Ownership of Stock. The Parent owns free and clear of all Liens (other than any Lien pursuant to the Parent -71- 78 Pledge Agreement), 100% of the outstanding shares of common stock (whether voting or non-voting) of the Borrower and Petroleum on a fully diluted basis. The Borrower owns free and clear of all Liens 100% of the outstanding shares of common stock (whether voting or non-voting) of Delight on a fully diluted basis. There are no outstanding options, warrants or convertible securities with respect to the shares of common stock of the Borrower. SECTION 6.18. Absence of Default. Neither the Parent nor any of its Subsidiaries is (i) in default as of the Effective Date in the payment of (or in the performance of any obligation applicable to) any Indebtedness, except as disclosed in Item 6.18 ("Absence of Default") in the Disclosure Schedule or (ii) in violation of any law or governmental regulation or court decree or order, except where such violation could not reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole. SECTION 6.19. Regulations G, U and X. Neither the Parent nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying "margin stock". None of the proceeds of any Loan or any Letter of Credit will be used for the purpose of, or be made available by the Borrower in any manner to any other Person to enable or assist such Person in, directly or indirectly purchasing or carrying "margin stock". Terms for which meanings are provided in F.R.S. Board Regulation G, U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings. SECTION 6.20. Government Regulation. Neither the Parent nor any of its Subsidiaries is an "investment company" nor a "company controlled by an investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 6.21. Burdensome Agreements. Neither the Parent nor any of its Subsidiaries is or will be a party to any instrument or subject to any charter or other corporate restriction which could have a materially adverse effect on its financial condition, operations, assets, business, properties, revenues or prospects. -72- 79 SECTION 6.22. List of Guaranty Beneficiaries. Set forth in Item 7.2.2(j) ("E-Z Serve Corporation Outstanding Corporate Guaranties") of the Disclosure Schedule is a list of each of the beneficiaries of the corporate guaranties referred to in Section 7.2.2 (j) as of the Effective Date. ARTICLE VII COVENANTS SECTION 7.1. Affirmative Covenants. The Borrower and the Parent jointly and severally agree with the Agent, each Issuer and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower and the Parent will perform the obligations set forth in this Section 7.1. SECTION 7.1.1. Financial Information, Reports, Notices, etc. The Borrower and the Parent will furnish, or will cause to be furnished, to each Lender and the Agent copies of the following financial statements, reports, notices and information: (a) as soon as available and in any event within 35 days after the end of each month of each Fiscal Year of the Parent, (i) a monthly financial report for such month and consolidated balance sheets of the Parent and its Subsidiaries as of the end of such month and consolidated statements of earnings of the Parent and its Subsidiaries for such month and for the period commencing at the end of the previous Fiscal Year and ending with the end of such month, setting forth in each case in comparative form the consolidated figures for the corresponding periods of the previous Fiscal Year (it being acknowledged that such figures for corresponding periods of the previous Fiscal Year shall not include the operations of Time Saver until delivery of the financial statements for February of 1996 and Sunshine until delivery of the financial statements for September of 1996), certified by the chief financial Authorized Officer of the Parent in a manner acceptable to the Agent and (ii) a certificate, executed by the chief financial Authorized Officer of the Parent showing the amount of intercompany Indebtedness outstanding at the end of such month. (b)(i) as soon as available and in any event within 90 days after the end of each Fiscal Year of the Parent, a copy of the annual audit report for such Fiscal Year for the Parent and its Subsidiaries, including therein consolidated and consolidating balance sheets of the Parent and its Subsidiaries as of the end of such Fiscal Year and consolidated and consolidating statements of earnings and consolidated statements of cash flow of the Parent and its -73- 80 Subsidiaries for such Fiscal Year, in each case certified (without any Impermissible Qualification) by KPMG Peat Marwick or other independent public accountants of nationally recognized standing as fairly presenting, in accordance with GAAP consistently applied, the financial condition, results of operations and cash flows of the Parent and its Subsidiaries at the end of such Fiscal Year and for the Fiscal Year then ended, together with a certificate, executed by the chief financial Authorized Officer of the Borrower, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Agent) the calculation of Excess Cash Flow, and (ii) as soon as available and in any event within 120 days after the end of each Fiscal Year of the Parent, all management letters and internal control and similar memoranda prepared by the accountants certifying the financial statements of the Parent for such Fiscal Year; (c) as soon as available and in any event within 45 days after the end of each Fiscal Quarter of each Fiscal Year of the Parent, (i) a quarterly financial report and consolidated balance sheets of the Parent and its Subsidiaries as of the end of such Fiscal Quarter and consolidated statements of earnings and consolidated statements of cash flow of the Parent and its Subsidiaries for such Fiscal Quarter and for the period commencing at the end of the previous Fiscal Year and ending with the end of such Fiscal Quarter, setting forth in each case in comparative form the consolidated figures for the corresponding periods of the previous Fiscal Year (it being acknowledged that such figures for corresponding periods of the previous Fiscal Year shall not include the operations of Time Saver until delivery of the financial statements for the first Fiscal Quarter of the 1996 Fiscal Year and Sunshine until delivery of the financial statements for the third Fiscal Quarter of the 1996 Fiscal Year) certified by the chief financial Authorized Officer of the Parent in a manner acceptable to the Agent and (ii) a Compliance Certificate, executed by the chief financial Authorized Officer of the Parent, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Agent) compliance with the financial covenants set forth in Section 7.2.4; (d) as soon as available and in any event within 15 days after the end of each calendar month, a Borrowing Base Certificate calculated as of the last day of the immediately preceding month; (e) as soon as possible and in any event within three Business Days after knowledge of an Authorized Officer of the occurrence of any Default, a statement of the chief -74- 81 financial Authorized Officer of the Borrower setting forth details of such Default and the action which the Borrower has taken and proposes to take with respect thereto; (f) as soon as possible and in any event within three Business Days after (x) the occurrence of any materially adverse development with respect to any litigation, action, proceeding, or labor controversy described in Section 6.7 or (y) the commencement of any labor controversy, litigation, action, proceeding of the type described in Section 6.7, notice thereof and, at the Agent's request, copies of all documentation relating thereto; (g) promptly after the sending or filing thereof, copies of all reports which the Borrower sends to any class of its security holders generally, in their capacities as such, and all reports and registration statements which the Borrower or any of its Subsidiaries files with the Securities Exchange Commission or any securities exchange; (h) immediately upon becoming aware of the institution of any steps by the Borrower or any other Person to terminate any Pension Plan, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under Section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Borrower furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in the incurrence by the Borrower of any material liability, fine or penalty, or any material increase in the contingent liability of the Borrower with respect to any post-retirement Welfare Plan benefit, notice thereof and copies of all documentation relating thereto; (i) promptly when available and, in any event, (x) at least 30 days prior to the last day of each Fiscal Year, a preliminary budget in form and scope reasonably satisfactory to the Agent for the next succeeding Fiscal Year, and (y) within 30 days after the beginning of each Fiscal Year, a definitive budget in form and scope satisfactory to the Agent for such Fiscal Year, in each case in reasonable detail for the relevant Fiscal Year and setting forth the principal assumptions upon which such budget is based; and (j) such other information respecting the condition or operations, financial or otherwise, of the Borrower or any of its Subsidiaries or the Parent or any of its Subsidiaries as any Lender through the Agent may from time to time reasonably request, including in respect of establishing the eligibility of the Accounts and Inventory comprising the -75- 82 Eligible Accounts and Eligible Inventory included in each Borrowing Base Certificate delivered pursuant to this Agreement. SECTION 7.1.2. Compliance with Laws, etc. The Borrower and the Parent will, and will cause each of their respective Subsidiaries to: (a) comply in all respects with all governmental rules and regulations and all other applicable laws, rules, regulations and orders (except where the failure to so comply could not reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole), such compliance to include the maintenance and preservation of its corporate existence (except to the extent permitted under Section 7.2.10) and qualification as a foreign corporation in any jurisdiction where the Borrower or the other Subsidiaries of the Parent have assets or conduct business, except where failure to maintain and preserve such existence or qualification would not materially adversely affect the Borrower's or the Parent's consolidated financial condition, operations, assets, business, revenues, properties or prospects; and (b) comply in all material respects with all governmental rules and regulations and all other material applicable laws, rules, regulations and orders relating to taxation, including the payment, before the same become delinquent, of (i) all federal, state and local income taxes and (ii) all other taxes, assessments and governmental charges except in each such case to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. The Parent will continue to file a consolidated federal income tax return of the "affiliated group" of corporations of which the Parent is the "common parent corporation" (as such terms are defined in Section 1504(a)(1) of the Code) for each taxable year of the Parent and will cause each of its Subsidiaries to consent to each such filing. SECTION 7.1.3. Maintenance of Properties. The Borrower and the Parent will, and will cause each of their respective Subsidiaries to, maintain, preserve, protect and keep their respective properties in good repair, working order and condition (except to the extent sold, transferred or otherwise disposed of pursuant to a Permitted Disposition), and make necessary and proper repairs, renewals (including lease payments on leasehold -76- 83 properties) and replacements so that the business carried on in connection therewith may be properly conducted at all times (including the maintenance of convenience stores consistent with the specifications set forth in the Memorandum), unless the Borrower or the Parent, as the case may be, determines in good faith that the continued maintenance of any of its properties is no longer economically desirable (provided that any such determination with respect to any property material to the operations of the Borrower or any other Subsidiary of the Parent shall be made only after consultation with the Agent). Without limiting the effect of any provision contained in the immediately preceding sentence, and in furtherance thereof, the Borrower and the Parent, unless otherwise directed by the Required Lenders, will, and will cause each of their respective Subsidiaries to, make Capital Expenditures for each Fiscal Year set forth below in an aggregate amount equal to or greater than (subject to Section 7.2.7) the amount set forth opposite such Fiscal Year:
Fiscal Year Capital Expenditures ----------- -------------------- 1995 $11,400,000 1996 $ 9,800,000 1997 $ 8,800,000 1998 $ 8,900,000 1999 $ 6,000,000 2000 $ 6,100,000 2001 $ 6,200,000
SECTION 7.1.4. Insurance. (a) The Borrower and the Parent shall maintain, and shall cause each of their respective Subsidiaries to maintain, with responsible and reputable insurance carriers licensed to write insurance, insurance with respect to all their property, business and assets against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses. (b) All premiums on insurance policies required under this Section shall be paid by the Parent and its Subsidiaries. Each policy for property insurance maintained by the Parent and its Subsidiaries shall (i) name the Agent (as Agent for the Lenders) as loss payee under a lenders loss payable clause, (ii) provide that no cancellation, reduction in amount or material change in coverage thereof or any portion thereof shall be effective until at least 30 days after receipt by the Agent of written notice thereof, (iii) provide that any notice under such policies relating to cancellation, reduction or material change in coverage or the occurrence of any loss in excess of $250,000 shall be simultaneously delivered to the Agent and (iv) be -77- 84 reasonably satisfactory in all other respects to the Agent. Each policy for liability insurance maintained by the Parent and its Subsidiaries shall (i) name the Agent as an additional insured, (ii) provide that no cancellation, reduction in amount or material change in coverage thereof or any portion thereof shall occur by reason of any breach of any representation or warranty, nor shall any thereof be effective until at least 30 days after receipt by the Agent of written notice thereof, (iii) provide that any notice under such policies relating to cancellation, reduction or material change in coverage or the occurrence of any loss in excess of $250,000 shall be simultaneously delivered to the Agent and (iv) be reasonably satisfactory in all other respects to the Agent. (c) The Borrower will deliver, and the Parent will cause its Subsidiaries to deliver, to the Agent, promptly upon request, (i) the originals of all policies evidencing all insurance required to be maintained under clause (a) or certificates thereof by the insurers together with a counterpart of each policy, (ii) a satisfactory insurance broker's letter as to the adequacy of the insurance being maintained by the Parent and its Subsidiaries and as to the compliance of the same with the requirements of this Section and (iii) evidence as to the payment of all premiums then due thereon (or with respect to any insurance policies providing for payment other than by a single lump sum, all installments for the current year due thereon to such date), provided that neither the Agent nor any Lender shall be deemed by reason of its custody of such policies to have knowledge of the contents thereof. The Borrower will also deliver, and the Parent will also cause its Subsidiaries to deliver, to the Agent not later than five days prior to the expiration of any policy a binder or certificate of the insurer evidencing the replacement thereof. (d) If a Default or Event of Default has not occurred and is continuing, all proceeds of property insurance (other than any such proceeds which reimburse the Borrower or any other applicable Subsidiary of the Parent for environmental liabilities or remediation costs previously paid by the Borrower or such Subsidiary) paid on account of the loss of or damage to any property or asset of the Parent or any of its Subsidiaries shall be paid to the Borrower or other applicable Subsidiary of the Parent, and the Borrower or such Subsidiary shall use such proceeds within 365 days thereafter to repair, restore or replace such property or asset or to reinvest in other capital assets reasonably related to the ownership and operation of convenience stores. With respect to any casualty or other covered occurrence in which the aggregate proceeds of property insurance receivable by the Borrower or any other applicable Subsidiary of the Parent (other than any such proceeds which reimburse the Borrower or such Subsidiary for environmental liabilities or remediation costs previously paid by the Borrower or such Subsidiary) exceeds -78- 85 $250,000, to the extent the Borrower or such Subsidiary elects not to apply such insurance proceeds for the repair, replacement or restoration of such property or asset or for reinvestment in capital assets reasonably related to the ownership and operation of convenience stores, or such insurance proceeds are not in fact so applied within 365 days, all of such unutilized insurance proceeds shall be delivered by the Borrower or such Subsidiary (and the Parent shall cause such Subsidiary to so deliver) to the Agent and shall constitute "Excess Insurance Proceeds," to be applied as a mandatory prepayment of the Term Loans pursuant to clause (c) of Section 3.1.2. Notwithstanding any provision to the contrary in this Agreement or any other Loan Document, if an Event of Default has occurred and is continuing, all proceeds of property insurance (including business interruption insurance) shall be payable directly to the Agent and the Agent in its sole discretion may treat such proceeds as "Excess Insurance Proceeds" or, subject to the consent of the Required Lenders, permit the use of such proceeds to repair, restore or replace the property or asset which suffered the loss for which such proceeds are being paid. SECTION 7.1.5. Books and Records. (a) The Borrower and the Parent will, and will cause each of their respective Subsidiaries to, keep books and records which accurately reflect all of their respective business affairs and transactions. (b) The Borrower and the Parent will, and will cause each of their respective Subsidiaries to, permit the Agent and each Lender or any of their representatives, at reasonable times and intervals and upon reasonable notice, to visit all of their respective offices, to discuss their respective financial matters with their respective officers and independent public accountant and consultants (and the Borrower and the Parent hereby authorize such independent public accountant and consultants to discuss such financial matters with each Lender or its representatives whether or not any representative of the Borrower or Parent is present) and to examine (and, at the expense of the Borrower, copy extracts from) any of their respective books or other corporate records (including computer records). (c) The Borrower shall pay any fees of such independent public accountant and consultants incurred in connection with the Agent's or any Lender's exercise of its rights pursuant to this Section. The Agent, in its sole discretion and at the sole expense of the Borrower, may conduct such audits and examinations of the books and records of the Parent and its Subsidiaries as the Agent reasonably deems necessary or advisable. SECTION 7.1.6. Environmental Covenant. The Borrower and the Parent will, and will cause each of their respective Subsidiaries to, -79- 86 (a) use and operate all of its facilities and properties in compliance in all material respects with all Environmental Laws, keep (and, when applicable, obtain in a timely manner) all necessary material permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in compliance in all material respects therewith, and handle all Hazardous Materials (including the disposition and storing thereof) in compliance in all material respects with all applicable Environmental Laws; (b) respond to all Releases in accordance with law and in a manner that assures and will assure that, to the maximum extent commercially practicable, State funds pay for the response to Releases; (c) promptly notify the Agent and provide copies upon receipt of all written claims, complaints, notices or inquiries relating to the condition of its facilities and properties or compliance with Environmental Laws; and (d) provide such information and certifications which the Agent may reasonably request from time to time to evidence compliance with this Section. SECTION 7.1.7. As to Intellectual Property Collateral. (a) The Borrower shall not, and the Parent shall not permit any of its other Subsidiaries to, unless the Borrower or such Subsidiary shall reasonably and in good faith determine that any of its Intellectual Property Collateral is of negligible economic value to it (provided that any such determination with respect to any trademark or other mark used in connection with the name of any convenience store or gasoline station shall be made only after consultation with the Agent), do any act, or omit to do any act, whereby any of such Intellectual Property Collateral may lapse or become abandoned or dedicated to the public or unenforceable. (b) The Borrower or the Parent shall notify the Agent immediately if it knows, or has reason to know, that any application or registration relating to any material item of the Intellectual Property Collateral may become abandoned or dedicated to the public or placed in the public domain or invalid or unenforceable, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any foreign counterpart thereof or any court) regarding the ownership of the Borrower or any other Subsidiary of the Parent of any material item of the Intellectual Property Collateral or the Borrower's or such Subsidiary's right to register the same or to keep and maintain and enforce the same. -80- 87 (c) In no event shall the Borrower or any other Subsidiary of the Parent, or any of their respective agents, employees, designees or licensees, file an application for the registration of any Intellectual Property Collateral with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, unless it promptly informs the Agent, and upon request of the Agent, executes and delivers any and all agreements, instruments, documents and papers as the Agent may reasonably request to evidence the Agent's security interest in such Intellectual Property Collateral and the goodwill and general intangibles of the Borrower or such Subsidiary relating thereto or represented thereby. (d) The Borrower shall take, and the Parent shall cause its Subsidiaries to take, all necessary steps, including in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office, to maintain and pursue any application (and to obtain the relevant registration) filed with respect to, and to maintain any registration of, any material item of the Intellectual Property Collateral, including the filing of applications for renewal, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings and the payment of fees and taxes (except to the extent that dedication, abandonment or invalidation is permitted under the foregoing clauses (a), (b) and (c)). SECTION 7.1.8. Future Subsidiaries. Without limiting the effect of any provision contained herein (including Section 7.2.5), upon any Person becoming, after the Effective Date, either a direct or indirect Subsidiary of the Borrower, or upon the Parent or the Borrower acquiring additional capital stock of any existing Subsidiary having voting rights or contingent voting rights (a) such Person shall become a party to (x) a guaranty in substantially the form of the Petroleum Guaranty delivered pursuant to the Original Credit Agreement, and (y) a security agreement in substantially the form of the Petroleum Security Agreement delivered pursuant to the Original Credit Agreement, if not already a party to any of the foregoing, with such modifications as the Agent may reasonably request, in a manner satisfactory to the Agent; (b) the Borrower and the applicable Subsidiary shall, pursuant to the Borrower Pledge Agreement, or the Parent and the applicable Subsidiary shall, pursuant to the Parent Pledge Agreement, as the case may be, pledge to the Agent (i) all of the outstanding shares of such capital stock of such Subsidiary owned directly by it, along with undated stock powers for such certificates, -81- 88 executed in blank (or, if any such shares of capital stock are uncertificated, confirmation and evidence satisfactory to the Agent that the security interest in such uncertificated securities has been perfected by the Agent in accordance with Section 8-313 and Section 8-321 of the U.C.C. or any similar law which may be applicable); and (ii) all notes (if any) evidencing intercompany Indebtedness in favor of the Borrower and each such Subsidiary (which shall be in substantially the form of Attachment A to the Borrower Pledge Agreement), as the case may be; (c) the Agent shall have received from each such Subsidiary certified copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Agent, dated a date reasonably near (but prior to) the date of any such Person becoming a direct or indirect Subsidiary of the Borrower, listing all effective financing statements, tax liens and judgment liens which name such Person as the debtor and which are filed in the jurisdictions in which filings are to be made pursuant to this Agreement and the other Loan Documents, and in such other jurisdictions as the Agent may reasonably request, together with copies of such financing statements (none of which (other than financing statements (i) filed pursuant to the terms hereof in favor of the Agent, if such Form UCC-11 or search report, as the case may be, is current enough to list such financing statements, (ii) being terminated pursuant to termination statements that are to be delivered on or prior to the date such Person becomes such Subsidiary or (iii) in respect of protective filings or Liens permitted under Section 7.2.3) shall cover any of the Collateral); and (d) the Agent shall have received from each such Subsidiary executed copies of U.C.C. financing statements naming each such Subsidiary as the debtor and the Agent as the secured party, suitable for filing under the U.C.C. of all jurisdictions as may be necessary or, in the reasonable opinion of the Agent, desirable to perfect the first priority security interest of the Agent pursuant to the security agreement entered into by such Subsidiary, together with evidence satisfactory to the Agent of the filing (or delivery for filing) of appropriate trademark, copyright and patent security supplements, together, in each case, with such opinions of legal counsel for the Borrower relating thereto, which legal opinions shall be in form and substance reasonably satisfactory to the Agent. -82- 89 SECTION 7.1.9. Springing Liens. Within 60 days after (a) any judgment or order for the payment of money is rendered against the Borrower or any of its Subsidiaries or any other Obligor and an amount in excess of $1,000,000 in respect of such payment is not covered in full by insurance maintained with responsible insurance carriers, (b) the occurrence of any Event of Default or (c) the Funded Debt to EBITDA Ratio being greater than (i) with respect to the third Fiscal Quarter of the 1995 Fiscal Year, 4.50 to 1.00, (ii) with respect to the fourth Fiscal Quarter of the 1995 Fiscal Year, 3.55 to 1.00 (iii) with respect to the first Fiscal Quarter of the 1996 Fiscal Year, 3.15 to 1.00, (iv) with respect to the second Fiscal Quarter of the 1996 Fiscal Year, 2.85 to 1.00, (v) with respect to the third Fiscal Quarter of the 1996 Fiscal Year, 2.40 to 1.00, (vi) with respect to the fourth Fiscal Quarter of the 1996 Fiscal Year 2.35 to 1.00 and (vii) with respect to each Fiscal Quarter thereafter, 1.90 to 1.00, at the direction of the Agent (at the request of the Required Lenders), the Borrower and the Parent shall, and shall cause each of their respective Subsidiaries to, take all steps necessary, at their own cost and expense, to (a) grant the Agent a first priority leasehold Lien on operating facilities (including renewals) and a first priority mortgage Lien on real property, fixtures, buildings and improvements thereon (including the Sunshine properties after the Merger) and (b) obtain title insurance coverage on such property in an amount, containing such terms and exceptions and issued by an insurance company, acceptable to the Agent in the Agent's reasonable discretion (together with such favorable legal opinions with respect thereto as the Agent may reasonably request). SECTION 7.1.10. Gasoline Purchases. Without limiting the effect of Section 7.2.1, each of the Borrower and Petroleum will purchase gasoline only to satisfy its own retail and wholesale requirements, will not engage in speculative trading or trade in gasoline futures for speculative purposes and will not purchase or sell futures contracts or enter into any commodities derivative transactions of any kind. SECTION 7.1.11. Rate Protection. The Borrower shall have in effect interest rate swap, hedge, cap, collar or similar arrangements with any Lender or Lenders satisfactory in form and substance (including as to the counterparty thereto) and pursuant to documentation satisfactory to the Agent in a notional amount equal to or greater than $20,000,000, and shall maintain such arrangements in full force and effect until the third anniversary of the Effective Date. SECTION 7.1.12. Further Assurances. The Borrower and the Parent agree that from time to time, at the expense of the Borrower and the Parent, the Borrower and the Parent will, and will cause each of their respective Subsidiaries to, promptly execute and deliver all further instruments and documents, and -83- 90 take all further action, that may be reasonably necessary or desirable, or that the Agent may reasonably request, in order to perfect and protect the assignments, security interests and Liens granted or purported to be granted under the Loan Documents or to enable the Agent to exercise and enforce its rights and remedies under this Agreement or any other Loan Document with respect to any Collateral. Without limiting the generality of the foregoing, the Borrower and the Parent will, and will cause each of their respective Subsidiaries to (a) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Agent may request, in order to perfect and preserve the assignments, security interests and Liens granted or purported to be granted under the Loan Documents; (b) furnish to the Agent, at the request of the Agent, an opinion of counsel acceptable to the Required Lenders to the effect that all financing or continuation statements have been filed, and all other action has been taken, to perfect and validate continuously from the date hereof the assignments, security interests and Liens granted under the Loan Documents; and (c) furnish to the Agent, from time to time at the Agent's request, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Agent may reasonably request, all in reasonable detail. With respect to the foregoing and the grant of the security interest under the Loan Documents, the Borrower and the Parent and each of their respective Subsidiaries hereby authorize the Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of the Borrower, the Parent or any such Subsidiary where permitted by law. A carbon, photographic or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. SECTION 7.2. Negative Covenants. The Borrower and the Parent jointly and severally agree with the Agent, each Issuer and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower and the Parent will perform the obligations set forth in this Section 7.2. SECTION 7.2.1. Business Activities. The Borrower and the Parent will not, and will not permit any of their respective -84- 91 Subsidiaries to, engage in any business activity, except those described in the second recital and such activities as may be incidental or related thereto and activities incidental or related to the consummation of the Merger. SECTION 7.2.2. Indebtedness. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness in respect of the Credit Extensions and other Obligations; (b) until the date of the initial Credit Extension on the Effective Date, Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the Disclosure Schedule; (c) Indebtedness existing as of the Effective Date which is identified in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure Schedule; (d) Indebtedness (other than Indebtedness described in the immediately preceding clause (c)) in an aggregate principal amount not to exceed $2,000,000 at any time outstanding in respect of (i) Indebtedness which is incurred by the Borrower or any other Subsidiary of the Parent to a vendor to finance its acquisition of any assets permitted to be acquired pursuant to Section 7.2.7 and (ii) Capitalized Lease Liabilities to the extent permitted by Section 7.2.7; (e) unsecured Indebtedness incurred in the ordinary course of business (including open accounts extended by suppliers on normal trade terms in connection with purchases of goods and services, but excluding all Indebtedness incurred through the borrowing of money and all Contingent Liabilities); (f) Indebtedness in respect of Rate Protection Agreements with a Lender and entered into solely with respect to the Credit Extensions or, as to currency matters, for protection in connection with the Borrower's ordinary course of business; (g) Indebtedness in an aggregate principal amount not to exceed $15,000,000 at any time outstanding in respect of the Petroleum Note; (h) Indebtedness of the Parent owing to the Borrower pursuant to the Parent Inter-Company Note; -85- 92 (i) other Indebtedness in an aggregate amount not exceeding $1,000,000 at any time; and (j) Obligations of the Parent under guarantees of any of its Subsidiaries' obligations to trade creditors in an aggregate amount outstanding not to exceed $10,000,000; provided that (i) each of such guaranties have an expressly stated limited amount and are for a term of no more than one year and (ii) the identity of the beneficiaries of such guaranties is provided in writing to the Agent; provided, however, that no Indebtedness pursuant to clauses (d) and (i) may be incurred if, after giving effect to the incurrence thereof, any Default shall have occurred and be continuing. SECTION 7.2.3. Liens. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except: (a) Liens securing payment of the Obligations granted pursuant to any Loan Document; (b) Liens (i) granted to secure payment of Indebtedness described in clause (c) of Section 7.2.2 to the extent such Liens are identified in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure Schedule or (ii) on properties of Sunshine identified in Item 7.2.3 ("Liens") of the Disclosure Schedule; (c) Liens granted to secure payment of the Indebtedness of the type permitted and described in clause (d) of Section 7.2.2 and covering only those assets acquired with the proceeds of such Indebtedness; (d) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (e) Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business for sums not overdue or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books; (f) Liens incurred in the ordinary course of business in connection with worker's compensation, unemployment -86- 93 insurance or other forms of governmental insurance or benefits (excluding any Liens in favor of a Pension Plan or PBGC), or to secure performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (g) judgment Liens in existence less than 15 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies; and (h) easements, rights-of-way, zoning and similar restrictions and other similar encumbrances or title defects which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of the Borrower or its Subsidiaries. SECTION 7.2.4. Financial Condition. The Borrower and the Parent will not permit: (a) the Interest Coverage Ratio, as of the last day of each Fiscal Quarter set forth below, to be less than the ratio set forth opposite such Fiscal Quarter:
Minimum Interest Fiscal Quarter Coverage Ratio ---------------- -------------- The third and fourth Fiscal Quarters of the 1995 Fiscal Year 3.0:1.00 Each Fiscal Quarter of the 1996 Fiscal Year 4.0:1.00 Each Fiscal Quarter of the 1997 Fiscal Year 5.0:1.00 Each Fiscal Quarter of the 1998 Fiscal Year 6.0:1.00 Each Fiscal Quarter of the 1999 Fiscal Year and thereafter 7.0:1.00
-87- 94 (b) the Fixed Charge Coverage Ratio, as of the last day of each Fiscal Quarter set forth below, to be less than the ratio set forth opposite such Fiscal Quarter:
Minimum Interest Fiscal Quarter Coverage Ratio ---------------- -------------- The third Fiscal Quarter of the 1995 Fiscal Year 1.00:1.00 The fourth Fiscal Quarter of the 1995 Fiscal Year 1.00:1.00 The first Fiscal Quarter of the 1996 Fiscal Year .85:1.00 The second Fiscal Quarter of the 1996 Fiscal Year .90:1.00 The third Fiscal Quarter of the 1996 Fiscal Year 1.00:1.00 The fourth Fiscal Quarter of the 1996 Fiscal Year 1.05:1.00 The first Fiscal Quarter of the 1997 Fiscal Year 1.05:1.00 The second Fiscal Quarter of the 1997 Fiscal Year 1.10:1.00 The third Fiscal Quarter of the 1997 Fiscal Year 1.10:1.00 The fourth Fiscal Quarter of the 1997 Fiscal Year 1.15:1.00 The first Fiscal Quarter of the 1998 Fiscal Year 1.15:1.00 The second Fiscal Quarter of the 1998 Fiscal Year 1.20:1.00 The third Fiscal Quarter of the 1998 Fiscal Year 1.20:1.00 The fourth Fiscal Quarter of the 1998 Fiscal Year 1.25:1.00
-88- 95
Minimum Interest Fiscal Quarter Coverage Ratio ---------------- -------------- The first Fiscal Quarter of the 1999 Fiscal Year 1.25:1.00 The second Fiscal Quarter of the 1999 Fiscal Year 1.30:1.00 The third Fiscal Quarter of the 1999 Fiscal Year 1.30:1.00 The fourth Fiscal Quarter of the 1999 Fiscal Year 1.35:1.00 The first Fiscal Quarter of the 2000 Fiscal Year 1.35:1.00 The second Fiscal Quarter of the 2000 Fiscal Year 1.40:1.00 The third Fiscal Quarter of the 2000 Fiscal Year 1.45:1.00 The fourth Fiscal Quarter of the 2000 Fiscal Year 1.45:1.00 The first Fiscal Quarter of the 2001 Fiscal Year and thereafter 1.45:1.00
(c) the Gross Profit Margin, as of the last day of each Fiscal Quarter set forth below, to be less than the percentage set forth opposite such Fiscal Quarter:
Calendar Month Gross Profit Margin ---------------- ------------------- The second Fiscal Quarter of the 1995 Fiscal Year 14.5% The third Fiscal Quarter of the 1995 Fiscal Year 18.5% The fourth Fiscal Quarter of the 1995 Fiscal Year 18.5% Each Fiscal Quarter of the 1996 Fiscal Year 19.0% Each Fiscal Quarter of the 1997 Fiscal Year 19.5%
-89- 96
Calendar Month Gross Profit Margin ---------------- ------------------- Each Fiscal Quarter of the 1998 Fiscal Year 20.0% Each Fiscal Quarter of the 1999 Fiscal Year 20.5% Each Fiscal Quarter of the 2000 Fiscal Year 21.0% Each Fiscal Quarter of the 2001 Fiscal Year 21.5%
(d) the Funded Debt to EBITDA Ratio, as of the last day of each Fiscal Quarter set forth below, to be greater than the ratio set forth opposite such Fiscal Quarter:
Maximum Funded Debt Fiscal Quarter to EBITDA Ratio ---------------- ------------------- The third Fiscal Quarter of the 1995 Fiscal Year 4.75:1.00 The fourth Fiscal Quarter of the 1995 Fiscal Year 3.75:1.00 The first Fiscal Quarter of the 1996 Fiscal Year 3.25:1.00 The second Fiscal Quarter of the 1996 Fiscal Year 3.00:1.00 The third Fiscal Quarter of the 1996 Fiscal Year 2.50:1.00 The fourth Fiscal Quarter of the 1996 Fiscal Year 2.50:1.00 Each Fiscal Quarter of the 1997 Fiscal Year and thereafter 2.00:1.00
(e) the Tangible Net Worth at any time to be less than the sum of -90- 97 (i) $55,000,000 plus (ii) 50% of Net Income for each Fiscal Quarter of each Fiscal Year commencing with the 1995 Fiscal Year without deduction for losses; (f) the SGA Margin, as of the last day of each Fiscal Quarter, commencing with the second Fiscal Quarter of the 1995 Fiscal Year, to be greater than 3.8%. SECTION 7.2.5. Investments. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, make, incur, assume or suffer to exist any Investment in any other Person, except: (a) the Parent's Investment existing on the Effective Date in the Borrower and Petroleum; (b) the Borrower's Investment existing on the Effective Date in Delight; (c) Petroleum's Investment existing on the Effective Date in Petroleum of California; (d) Cash Equivalent Investments; (e) without duplication, Investments permitted as Indebtedness pursuant to clauses (g) and (h) of Section 7.2.2; (f) without duplication, Investments permitted as Permitted Business Acquisitions pursuant to Section 7.2.7 (including any Subsidiary of the Borrower formed for the sole purpose of effectuating a Permitted Business Acquisition so long as the Borrower shall have complied with the provisions of Section 7.1.10 in respect of such Subsidiary); (g) promissory notes received as consideration in respect of Permitted Dispositions (subject to the limitations set forth in the definition thereof), to the extent pledged to the Agent for the benefit of the Agent and the Lenders; and (h) other Investments in an aggregate amount at any one time not to exceed $250,000; provided, however, that -91- 98 (i) any Investment which when made complies with the requirements of the definition of the term "Cash Equivalent Investment" may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; and (ii) no Investment otherwise permitted by clause (e) shall be permitted to be made if, immediately before or after giving effect thereto, any Default shall have occurred and be continuing. SECTION 7.2.6. Restricted Payments, etc. (a) On and at all times after the Effective Date, the Borrower (i) will not declare, pay or make any dividend or distribution (in cash, property or obligations) on any shares of any class of capital stock (now or hereafter outstanding) of the Borrower or on any warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of the Borrower (other than dividends or distributions payable in its common stock or warrants to purchase its common stock or split-ups or reclassifications of its stock into additional or other shares of its common stock) or apply, or permit any of its Subsidiaries to apply, any of its funds, property or assets to the purchase, redemption, sinking fund or other retirement of, or agree or permit any of its Subsidiaries to purchase or redeem, any shares of any class of capital stock (now or hereafter outstanding) of the Borrower, or warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of the Borrower; and (ii) will not, and will not permit any of its Subsidiaries to, make any deposit for any of the purposes described in the preceding clause (a)(i). (b) On and at all times after the Effective Date, the Parent (i) will not declare, pay or make any dividend or distribution (in cash, property or obligations) on any shares of any class of capital stock (now or hereafter outstanding) of the Parent or on any warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of the Parent (other than dividends or distributions payable in its common stock or warrants to purchase its common stock or split-ups or reclassifications of its stock into additional or other shares of its common stock) or apply, or permit any of its Subsidiaries to apply, any of its funds, property or assets to the purchase, redemption, sinking fund or other -92- 99 retirement of, or agree or permit any of its Subsidiaries to purchase or redeem, any shares of any class of capital stock (now or hereafter outstanding) of the Parent, or warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of the Parent; provided, however, that the Parent may, with respect to any shares of Series C Preferred Stock, declare and pay dividends thereon solely in the form of additional shares of Series C Preferred Stock, in accordance with the terms of such Series C Preferred Stock as in effect on the date of Amendment No. 3; and (ii) will not, and will not permit any of its Subsidiaries to, make any deposit for any of the purposes described in the preceding clause (b)(i). SECTION 7.2.7. Capital Expenditures, etc. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, make or, without duplication, commit to make Capital Expenditures in any Fiscal Year, except (a) Capital Expenditures (other than Capitalized Lease Liabilities) of the Borrower and other Subsidiaries of the Parent which do not aggregate in any Fiscal Year in excess of the amount set forth opposite such Fiscal Year under the Capital Expenditure Level applicable to such Fiscal Year, plus an amount equal to insurance proceeds (other than business interruption insurance proceeds) which are reinvested in accordance with Section 7.1.4 in capital assets of the Borrower or other applicable Subsidiary which suffered such loss:
Capital Capital Capital Capital Fiscal Expenditure Expenditure Expenditure Expenditure Year Level I Level II Level III Level IV ---- ------- -------- --------- -------- 1995 $19,900,000 $15,900,000 $11,900,000 $11,400,000 1996 18,800,000 15,000,000 11,300,000 9,800,000 1997 16,200,000 13,000,000 9,700,000 8,800,000 1998 13,400,000 10,700,000 8,900,000 8,900,000 1999 13,300,000 10,600,000 8,000,000 6,000,000 2000 14,800,000 11,800,000 8,900,000 6,100,000 2001 16,400,000 13,100,000 9,800,000 6,200,000
provided, however, that, during any Fiscal Year, commencing with the 1996 Fiscal Year, in which Capital Expenditure Level I is in effect, the Borrower and such other Subsidiaries may make or, without duplication, commit to -93- 100 make, additional Capital Expenditures (other than Capitalized Lease Liabilities) in an amount not to exceed 25% of Excess Cash Flow for the immediately preceding Fiscal Year; provided further, however, that the Borrower and such other Subsidiaries may not make any Business Acquisition unless such Business Acquisition is a Permitted Business Acquisition; and (b) Capitalized Lease Liabilities which do not aggregate in any Fiscal Year in excess of $500,000. SECTION 7.2.8. Rental Obligations. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, enter into at any time any arrangement which does not create a Capitalized Lease Liability and which involves the leasing by the Borrower or any other Subsidiary of the Parent from any lessor of any real or personal property (or any interest therein), except arrangements which, together with all other such arrangements which shall then be in effect, will not require the payment of an aggregate amount of rentals by the Borrower and such other Subsidiaries of the Parent in excess of (excluding escalations resulting from a rise in the consumer price or similar index) $15,000,000 for any Fiscal Year; provided, however, that any calculation made for purposes of this Section shall exclude any amounts required to be expended for maintenance and repairs, insurance, taxes, assessments, and other similar charges. SECTION 7.2.9. Take or Pay Contracts. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, enter into or be a party to any arrangement for the purchase of materials, supplies, other property or services if such arrangement by its express terms requires that payment be made by the Borrower, the Parent or any such Subsidiary regardless of whether such materials, supplies, other property or services are delivered or furnished to it. SECTION 7.2.10. Consolidation, Merger, etc. Other than the consummation of the Merger, the Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, liquidate or dissolve, consolidate or amalgamate with, or merge into or with, any other Person, or purchase or otherwise acquire all or any substantial part of the assets or stock of any Person (or of any division thereof) other than pursuant to a Permitted Business Acquisition. SECTION 7.2.11. Asset Dispositions, etc. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, sell, transfer, lease, contribute or otherwise convey or dispose of, or grant options, warrants or other rights with respect to, all or any part of its assets (including -94- 101 accounts receivable and capital stock of Subsidiaries) to any Person, except (a) if such sale, transfer, lease, contribution or conveyance is of Inventory in the ordinary course of its business; (b) if such disposition is a Permitted Disposition; or (c) if such assets are worn or obsolete and the net book value of such assets, together with the net book value of all other assets sold, transferred, leased, contributed or conveyed by the Borrower, the Parent or any of their respective Subsidiaries pursuant to this clause during the Fiscal Year in which such assets are to be sold, transferred, leased, contributed or conveyed, does not exceed $250,000 in the aggregate. SECTION 7.2.12. Modification of Certain Agreements. Neither the Borrower nor the Parent will consent to any amendment, supplement or other modification of any of the terms or provisions contained in, or applicable to, the Purchase Agreement, the Merger Certificate or the Stockholders Agreement, other than any such amendment, supplement or other modification which is immaterial and which could not adversely affect the Agent or any Lender. SECTION 7.2.13. Transactions with Affiliates. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with, any of its other Affiliates unless such arrangement or contract is on fair and reasonable terms and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of the Borrower or such Subsidiary with a Person which is not one of its Affiliates (it being acknowledged that transactions between the Parent or any of its Subsidiaries, on the one hand, and any Stockholder or any of its Affiliates, on the other hand, involving the provision of financial, investment banking, management, consulting or underwriting services by such Stockholder or any of its Affiliates shall not be prohibited by this Section to the extent that the fees payable (x) to DLJ or its Affiliates do not exceed the usual and customary fees of DLJ or its Affiliates charged to Persons that are not Affiliates of DLJ and its Affiliates or (y) to any other Stockholder or its Affiliates do not exceed the fees charged by recognized investment banking institutions which provide financial, investment banking, management, consulting or underwriting services in the ordinary course of their business, whether through direct equity ownership, warrants, contract rights or otherwise). -95- 102 SECTION 7.2.14. Negative Pledges, Restrictive Agreements, etc. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, enter into any agreement (excluding this Agreement and any other Loan Document) prohibiting: (a) the creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired (other than pursuant to an agreement governing Indebtedness permitted by clause (d) of Section 7.2.2 to the extent such agreement relates solely to the assets financed with the proceeds of such Indebtedness), or the ability of the Borrower or any other Obligor to amend or otherwise modify this Agreement or any other Loan Document; or (b) the ability of any Subsidiary of the Parent to make any payments, directly or indirectly, to the Borrower or the Parent by way of dividends, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to the Borrower. In addition, the Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, enter into any tax sharing agreement or similar arrangement unless the same shall have been reviewed by and consented to by the Agent (such consent not to be unreasonably withheld). SECTION 7.2.15. Management and Director Fees, Expenses, etc. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to: (a) pay management, advisory, consulting or other similar fees, other than (i) fees payable to the Lenders or any of their affiliates, (ii) fees payable on the date of the initial Credit Extension and disclosed to the Agent, and (iii) fees payable to consultants engaged on arm's-length basis; or (b) reimburse any Affiliates for any expenses unless the same shall be otherwise permitted hereunder and shall be reasonable and documented in reasonable detail. SECTION 7.2.16. Environmental Liens. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, allow any Lien imposed pursuant to any law, rule, regulation or order relating to any Hazardous Material (including the disposal thereof) to be imposed or to remain on any real property owned or operated by the Borrower, the Parent -96- 103 or any of their respective Subsidiaries, except as contested in good faith by appropriate proceedings for which adequate reserves have been established and are being maintained on its books. SECTION 7.2.17. Fiscal Year End. Neither the Borrower nor the Parent shall change its fiscal year to end on any date other than on the last Sunday of December. SECTION 7.2.18. Activities of the Parent. Without limiting the effect of any provision contained in this Article VII, the Parent will not engage in any business activity other than its continuing ownership of all the shares of capital stock of the Borrower and Petroleum and its compliance with the obligations applicable to it under the Loan Documents. Without limiting the generality of the immediately preceding sentence, the Parent will not (a) create, incur, assume or suffer to exist any Indebtedness (other than Indebtedness in respect of the guaranty contained in Article IX), (b) create, assume, or suffer to exist any Lien upon, or grant any options or other rights with respect to, any of its revenues, property or other assets, whether now owned or hereafter acquired (other than pursuant to the Loan Documents), (c) wind-up, liquidate or dissolve itself (or suffer to exist any of the foregoing), consolidate or amalgamate with or merge into or with any other Person, or convey, sell, transfer, lease or otherwise dispose of all or any part of its assets, in one transaction or a series of transactions, to any Person or Persons, (d) create, incur, assume or suffer to exist any Investment in any Person other than (i) as provided in clause (a) of Section 7.2.5 and (ii) in respect of any additional equity Investments in the Borrower or (e) permit to be taken any action that would result in a Change in Control. The Parent agrees not to commence or cause the commencement of any of the actions described in clause (b), (c) or (d) of Section 8.1.9 of this Agreement with respect to any of its Subsidiaries. SECTION 7.2.19. Activities of Certain Subsidiaries of the Parent. Without limiting the effect of any provision contained in this Article VII: (a) Petroleum of California will not engage in any business activity other than owning and operating gasoline stations in California and Arizona; and (b) Delight will not engage in any business activity other than the holding of the lease at the merchandise distribution warehouse located at 508 Time Saver Avenue, Harahan, Louisiana. -97- 104 ARTICLE VIII EVENTS OF DEFAULT SECTION 8.1. Listing of Events of Default. Each of the following events or occurrences described in this Section 8.1 shall constitute an "Event of Default". SECTION 8.1.1. Non-Payment of Obligations. The Borrower shall default (a) in the payment or prepayment when due of any principal of any Loan; (b) in the payment when due of any interest or fees and such default shall remain unremedied for a period in excess of three Business Days; and (c) in the payment when due of any other Obligation and such default shall continue unremedied for a period of 10 Business Days. SECTION 8.1.2. Breach of Warranty. Any representation or warranty of the Borrower or any other Obligor made or deemed to be made hereunder or in any other Loan Document executed by it or any other writing or certificate furnished by or on behalf of the Borrower or any other Obligor to the Agent or any Lender pursuant to this Agreement or any such other Loan Document (including any certificates delivered pursuant to Article V) is or shall be incorrect when made in any material respect. Any representation or warranty of Dillon Companies, Inc. under the Purchase Agreement or of Sunshine under the Merger Agreement shall have been incorrect when made which could reasonably be expected to have a material adverse effect on the financial condition, operations, assets, business, properties, revenues or prospects of the Borrower and its Subsidiaries taken as a whole or the Parent and its Subsidiaries taken as a whole. SECTION 8.1.3. Non-Performance of Certain Covenants and Obligations. The Borrower or the Parent shall default in the due performance and observance of any of their obligations under clause (e) of Section 7.1.1, Section 7.1.8, Section 7.1.9, Section 7.1.11 or Section 7.2 or any other Obligor shall default in the performance of any of its obligations in respect of such Sections as such Sections are incorporated by reference or otherwise in any Loan Document to which such Obligor is a party. SECTION 8.1.4. Non-Performance of Other Covenants and Obligations. Any Obligor shall default in the due performance and observance of (a) any agreement contained in Section 7.1.1 not covered in Section 8.1.3 and such default shall continue unremedied for a period of 10 days from the earlier of the date an Authorized Officer of an Obligor has actual knowledge thereof -98- 105 and the receipt by an Obligor of written notice thereof from the Agent, or (b) any other agreement contained herein or in any other Loan Document (other than items covered by Section 8.1.3) executed by it, and such default shall continue unremedied for a period of 30 days from the earlier of the date an Authorized Officer of an Obligor has actual knowledge thereof and the receipt by an Obligor of written notice thereof from the Agent. SECTION 8.1.5. Default on Other Indebtedness. A default shall occur in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any Indebtedness (other than Indebtedness described in Section 8.1.1) of the Borrower or any of its Subsidiaries or any other Obligor having a principal amount, individually or in the aggregate, in excess of $1,000,000, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity. SECTION 8.1.6. Judgments. Any judgment or order for the payment of money in excess of $2,000,000 shall be rendered against the Borrower or any of its Subsidiaries or any other Obligors and either (a) enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or (b) there shall be any period of 45 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal, bond or otherwise, shall not be in effect. SECTION 8.1.7. Pension Plans. Any of the following events shall occur with respect to any Pension Plan (a) the institution of any steps by the Borrower any member of its Controlled Group, any other Obligor, or any other Person to terminate a Pension Plan if, as a result of such termination, the Borrower or any such member could be required to make a contribution to such Pension Plan, or could reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $1,000,000; or (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien on property of the Borrower or any of its Controlled Group under Section 302(f) of ERISA. -99- 106 SECTION 8.1.8. Change in Control; Stockholders Letter. Any Change in Control shall occur or there is a breach of the Stockholders Letter of Understanding. SECTION 8.1.9. Bankruptcy, Insolvency, etc. The Borrower or any of its Subsidiaries or any other Obligor shall (a) generally fail to pay debts as they become due, or admit in writing its inability to pay debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator, or other custodian for the Borrower or any of its Subsidiaries or any other Obligor or any property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the involuntary appointment of a trustee, receiver, sequestrator or other custodian for the Borrower or any of its Subsidiaries or any other Obligor or for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within thirty days; (d) permit or suffer to exist the involuntary commencement of, or voluntarily commence, any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency laws, or permit or suffer to exist the involuntary commencement of, or voluntarily commence, any dissolution, winding up or liquidation proceeding, in each case, by or against the Borrower or any of its Subsidiaries or any other Obligor, provided that if not commenced by the Borrower or such Subsidiary or any other Obligor such proceeding shall be consented to or acquiesced in by the Borrower or such Subsidiary or any other Obligor, or shall result in the entry of an order for relief or shall remain for thirty days undismissed; or (e) take any corporate action authorizing, or in furtherance of, any of the foregoing. SECTION 8.1.10. Impairment of Security, etc. Without the consent of the Lenders, any Loan Document, or any Lien granted thereunder, shall (except in accordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of the Borrower or any Obligor party thereto; the Borrower, any other Obligor or any other party shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability; or any Lien securing any Obligation shall, in -100- 107 whole or in part, cease to be a perfected first registered priority Lien. SECTION 8.1.11. Beverage Licenses. The Borrower and each other Subsidiary of the Parent which owns or operates convenience stores shall fail at any time to have in full force and effect Beverage Licenses necessary to permit, at 75% or more of the convenience stores owned or operated by the Borrower and such Subsidiaries which sold and distributed alcoholic beverages as of the Effective Date (exclusive of convenience stores sold by the Borrower or any such Subsidiary) and, if acquired or opened after the Effective Date, which sold and distributed alcoholic beverages on the date of such acquisition or opening, the sale and distribution of the alcoholic beverages so sold or distributed on such respective dates. SECTION 8.2. Action if Bankruptcy. If any Event of Default described in clauses (b) through (d) of Section 8.1.9 shall occur, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without notice or demand. SECTION 8.3. Action if Other Event of Default. If any Event of Default (other than any Event of Default described in clauses (b) through (d) of Section 8.1.9) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Agent, upon the direction of the Required Lenders, shall by notice to the Borrower declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, and/or, as the case may be, the Commitments shall terminate. ARTICLE IX GUARANTY SECTION 9.1. The Guaranty. The Parent hereby unconditionally and irrevocably guarantees the full and prompt payment when due, whether at stated maturity, by acceleration or otherwise (including all amounts which would have become due but for the operation of the automatic stay under Section 362(a) of the Federal Bankruptcy Code, 11 U.S.C. 362(a), and the operation of Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C. Section 502(b) and Section 506(b)), of the following (collectively, the "Guaranteed Obligations"), -101- 108 (a) all Obligations of the Borrower and each other Obligor to the Agent and each of the Lenders now or hereafter existing under this Agreement and each other Loan Document, whether for principal, interest, fees, expenses or otherwise; and (b) all other Obligations to the Agent and each of the Lenders now or hereafter existing under any of the Loan Documents, whether for principal, interest, fees, expenses or otherwise. The obligations of the Parent under this Article IX constitute a guaranty of payment when due and not of collection, and the Parent specifically agrees that it shall not be necessary or required that the Agent, any Lender or any holder of any Note exercise any right, assert any claim or demand or enforce any remedy whatsoever against the Borrower or any other Obligor (or any other Person) before or as a condition to the obligations of the Parent under this Article IX. SECTION 9.2. Guaranty Unconditional. The obligations of the Parent under this Article IX amend and restate the Parent's guaranty under the Existing Credit Agreement and shall be construed as a continuing, absolute, unconditional and irrevocable guaranty of payment and shall remain in full force and effect until all the Guaranteed Obligations have been indefeasibly paid in full in cash and all Commitments shall have permanently terminated. The Parent guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the agreement, instrument or document under which they arise, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the Agent or any of the Lenders with respect thereto. The liability of the Parent hereunder shall be absolute and unconditional irrespective of: (a) any lack of validity, legality or enforceability of this Agreement, the Notes, any Rate Protection Agreement with a Lender or any other Loan Document or any other agreement or instrument relating to any thereof; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations, or any compromise, renewal, extension, acceleration or release with respect thereto, or any other amendment or waiver of or any consent to departure from this Agreement, the Notes, any Rate Protection Agreement with a Lender or any other Loan Document; (c) any addition, exchange, release or non-perfection of any collateral, or any release or amendment or waiver of -102- 109 or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations; (d) the failure of the Agent or any Lender (i) to assert any claim or demand or to enforce any right or remedy against the Borrower, any other Obligor or any other Person (including any other guarantor) under the provisions of this Agreement, any Note, any Rate Protection Agreement with a Lender or any other Loan Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any of the Guaranteed Obligations; (e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of this Agreement, any Note, any Rate Protection Agreement with a Lender or any other Loan Document; (f) any defense, set-off or counter-claim which may at any time be available to or be asserted by the Borrower or any other Obligor against the Agent or any Lender; (g) any reduction, limitation, impairment or termination of the Guaranteed Obligations for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and the Parent hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Guaranteed Obligations or otherwise; or (h) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Borrower, any other Obligor or any surety or guarantor. SECTION 9.3. Reinstatement in Certain Circumstances. If at any time any payment in whole or in part of any of the Guaranteed Obligations is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower, any other Obligor or otherwise, the Parent's obligations under this Article IX with respect to such payment shall be reinstated as though such payment had been due but not made at such time. SECTION 9.4. Waiver by the Parent. The Parent irrevocably waives promptness, diligence, notice of acceptance hereof, -103- 110 presentment, demand, protest and any other notice with respect to any of the Guaranteed Obligations, as well as any requirement that at any time any action be taken by any Person against the Borrower or any other Person. SECTION 9.5. Postponement of Subrogation, etc. The Parent will not exercise any rights which it may acquire by way of rights of subrogation by any payment made hereunder or otherwise, until the prior payment, in full and in cash, of all Guaranteed Obligations. Any amount paid to the Parent on account of any such subrogation rights prior to the payment in full of all Guaranteed Obligations shall be held in trust for the benefit of the Lenders and each holder of a Note and shall immediately be paid to the Agent and credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of this Agreement; provided, however, that if (a) the Parent has made payment to the Lenders and each holder of a Note of all or any part of the Guaranteed Obligations, and (b) all Guaranteed Obligations have been paid in full and all Commitments have been permanently terminated, each Lender and each holder of a Note agrees that, at the Parent's request, the Agent, on behalf of the Lenders and the holders of the Notes, will execute and deliver to the Parent appropriate documents (without recourse and without representation or warranty) necessary to evidence the transfer by subrogation to the Parent of an interest in the Guaranteed Obligations resulting from such payment by the Parent. In furtherance of the foregoing, for so long as any Guaranteed Obligations or Commitments remain outstanding, the Parent shall refrain from taking any action or commencing any proceeding against the Borrower (or its successors or assigns, whether in connection with a bankruptcy proceeding or otherwise) to recover any amounts in the respect of payments to any Lender or any holder of a Note. SECTION 9.6. Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Borrower under this Agreement or any Note is stayed upon the occurrence of any event referred to in Section 8.1.9 with respect to the Borrower, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the Parent hereunder forthwith. -104- 111 ARTICLE X THE AGENT SECTION 10.1. Actions. Each Lender hereby appoints SG as Agent under and for purposes of this Agreement, the Notes and each other Loan Document. Each Lender authorizes the Agent to act on behalf of such Lender under this Agreement, the Notes and each other Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Agent (with respect to which the Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto. Without limiting the effect of the preceding sentences of this Section 10.1, each Lender authorizes the Agent to act as collateral agent and to hold and accept title to all liens and security interests granted to the Agent by the Borrower, the Parent or any other Obligor for the ratable benefit of the Agent and the Lenders, in order to exercise remedies on behalf of the Lenders in connection with the enforcement of such liens and security interests in accordance with the provisions of the Loan Documents. Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) the Agent, pro rata according to such Lender's Percentage, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Agent in any way relating to or arising out of this Agreement, the Notes and any other Loan Document, including reasonable attorneys' fees, and as to which the Agent is not reimbursed by the Borrower; provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from the negligence or wilful misconduct of the Agent. The Agent shall not be required to take any action hereunder, under the Notes or under any other Loan Document, or to prosecute or defend any suit in respect of this Agreement, the Notes or any other Loan Document, unless it is indemnified hereunder to its satisfaction. If any indemnity in favor of the Agent shall be or become, in the determination of the Agent, inadequate, the Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given; provided, however, that no Lender shall be required to indemnify the Agent, with respect to any obligation, loss, damage, claim, cost or expense for which the Agent would be entitled to indemnification hereunder, in an amount which would be greater than such Lender's Percentage of the aggregate amount of such obligation, loss, damage, claim, cost or expense. -105- 112 SECTION 10.2. Funding Reliance, etc. Unless the Agent shall have been notified by telephone, confirmed in writing, by any Lender by 5:00 p.m. (New York City time), on the day prior to a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Agent may assume that such Lender has made such amount available to the Agent and, in reliance upon such assumption, make available to the Borrower a corresponding amount. If and to the extent that such Lender shall not have made such amount available to the Agent, such Lender and the Borrower severally agree to repay the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Agent made such amount available to the Borrower to the date such amount is repaid to the Agent, in the case of the Borrower, at the interest rate applicable at the time to Loans comprising such Borrowing and, in the case of such Lender, for the period from the date such funds were advanced to the Borrower to (and including) three days thereafter, at the Federal Funds Rate and, following such third day, at the interest rate applicable at the time to Loans comprising such Borrowing. SECTION 10.3. Exculpation. Neither the Agent nor any of its directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own wilful misconduct or negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Loan Document, nor for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by the Borrower of its obligations hereunder or under any other Loan Document. Any such inquiry which may be made by the Agent shall not obligate it to make any further inquiry or to take any action. The Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Agent believes to be genuine and to have been presented by a proper Person. SECTION 10.4. Successor. The Agent may resign as such at any time upon at least 30 days' prior notice to the Borrower and all Lenders. If no successor Agent shall have been appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Agent's giving notice of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and having a combined -106- 113 capital and surplus of at least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall be entitled to receive from the retiring Agent such documents of transfer and assignment as such successor Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as the Agent, the provisions of (a) this Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement; and (b) Section 11.3 and Section 11.4 shall continue to inure to its benefit. SECTION 10.5. Credit Extensions by SG. SG shall have the same rights and powers with respect to (x) the Loans made by it or any of its Affiliates, and (y) the Notes held by it or any of its Affiliates as any other Lender and may exercise the same as if it were not the Agent. SG and each of its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if it were not the Agent hereunder. SECTION 10.6. Credit Decisions. Each Lender acknowledges that it has, independently of the Agent and each other Lender, and based on such Lender's review of the financial information of the Borrower, this Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments. Each Lender also acknowledges that it will, independently of the Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document. SECTION 10.7. Loan Documents, etc. Each Lender hereby authorizes the Agent to enter into the applicable Loan Documents and to take all action contemplated thereby. Each Lender agrees that no Lender shall have any right individually to seek to realize upon the security granted by any Loan Document, it being understood and agreed that such rights and remedies may be exercised solely by the Agent for the benefit of the Lenders and the Agent upon the terms of the Loan Documents. The Agent shall determine (after consultation with the Required Lenders (provided that, in the case there are only two Lenders at the time of such -107- 114 determination, such consultation will be with each such Lender)) the manner in which proceeds of Collateral will be applied to the Obligations (after the payment of fees and expenses as set forth in the Loan Documents). SECTION 10.8. Copies, etc. The Agent shall give prompt notice to each Lender of each notice or request given to the Agent by the Borrower or the Parent and required to be delivered to the Lenders pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by the Borrower or the Parent). The Agent will promptly distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Agent from the Borrower for distribution to the Lenders by the Agent in accordance with the terms of this Agreement. ARTICLE XI MISCELLANEOUS PROVISIONS SECTION 11.1. Waivers, Amendments, etc. The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Agent (acting only at the direction or with the authority of the Required Lenders); provided, however, that no such amendment, modification or waiver which would: (a) modify any requirement hereunder that any particular action be taken by all the Lenders or by the Required Lenders shall be effective unless consented to by each Lender; (b) modify this Section 11.1, change the definition of "Required Lenders", increase the Commitment Amount or the Percentage of any Lender, reduce any fees described in Article III, change the time for payment of fees to the Lenders described in Article III, or release all or any substantial part of the collateral security, except as otherwise specifically provided in any Loan Document, shall be made without the consent of each Lender affected thereby; (c) extend the due date for, or reduce the amount of, any scheduled repayment under Section 3.1.2(b) of principal of, or interest on, any Loan or Reimbursement Obligation (or reduce the principal amount of or rate of interest on any Loan or Reimbursement Obligation) or extend any Commitment Termination Date without the consent of the holder of that Note evidencing such Loan; (d) increase the Stated Amount of any Letter of Credit unless consented to by each Issuer; or -108- 115 (e) affect adversely the interests, rights or obligations of the Agent in its capacity as Agent or the Issuer in its capacity as Issuer, without the consent of the Agent or the Issuer, as the case may be. No failure or delay on the part of the Agent, any Lender or the holder of any Note in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right. No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Agent, any Lender or the holder of any Note under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions. No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder. The remedies provided in this Agreement are cumulative, and not exclusive of remedies provided by law. SECTION 11.2. Notices. All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing and addressed, delivered or transmitted to such party at its address or telecopy number set forth on Schedule IV hereto (or set forth in a Lender Assignment Agreement) or at such other address or telecopy number as may be designated by such party in a notice to the other parties given in accordance with this Section. Any notice, if mailed and properly addressed and sent return receipt requested with postage prepaid, shall be deemed given three Business Days after posting; any notice, if sent by prepaid overnight express shall be deemed delivered on the next Business Day; any notice, if transmitted by telecopy, shall be deemed given when sent, with confirmation of receipt; any notice, if transmitted by hand, shall be deemed received when delivered. SECTION 11.3. Payment of Costs and Expenses. The Borrower and the Parent jointly and severally agree to pay on demand all reasonable expenses of the Agent (including the reasonable fees and out-of-pocket expenses of counsel to the Agent, including any legal counsel and consultants, if any, who may be retained in connection with the transactions contemplated hereby by the Agent) in connection with (a) the negotiation, preparation, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, and the Lenders' and the Agent's consideration of their rights and remedies hereunder -109- 116 or in connection herewith from time to time whether or not the transactions contemplated hereby or thereby are consummated; (b) the filing, recording, refiling or rerecording of the Pledge Agreements, the Security Agreements (and any supplements thereto) and any other security instruments executed in connection with the transactions contemplated hereby and/or U.C.C. financing statements relating thereto and all amendments, supplements and modifications to any thereof and any and all other documents or instruments of further assurance required to be filed or recorded or refiled or rerecorded by the terms hereof or of the Pledge Agreements or the Security Agreements or such other documents; and (c) the preparation and review of the form of any document or instrument relevant to this Agreement or any other Loan Document. The Borrower and the Parent jointly and severally further agree to pay, and to save the Agent and the Lenders harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Agreement, the borrowings hereunder, or the issuance of the Notes or any other Loan Documents. The Borrower and the Parent jointly and severally also agree to reimburse the Agent and each Lender upon demand for all reasonable out- of-pocket expenses (including attorneys' fees and legal expenses, including allocated fees and expenses of internal counsel) incurred by the Agent or such Lender in connection with (x) the negotiation of any restructuring or "work-out", whether or not consummated, of any Obligations and (y) the enforcement of any Obligations (including the Obligations of the Parent under Article IX). The Borrower and the Parent jointly and severally also agree to reimburse the Agent on demand for all administration, audit and monitoring expenses incurred in connection with the Borrowing Base and determinations in respect thereof. The Borrower and the Parent jointly and severally further agree to reimburse the Agent on demand for all other administration, audit and monitoring expenses incurred after the occurrence of an Event of Default in connection with this Agreement and the other Loan Documents. SECTION 11.4. Indemnification. In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitments, the Borrower and the Parent jointly and severally hereby indemnify, exonerate and hold the Agent and each Lender and each of their respective officers, directors, employees and agents (collectively, the "Indemnified Parties") free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of -110- 117 whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys' fees and disbursements (including allocated fees and expenses of internal counsel) (collectively, the "Indemnified Liabilities"), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan or with any Letter of Credit; (b) the entering into and performance of this Agreement and any other Loan Document by any of the Indemnified Parties (including any action brought by or on behalf of the Borrower as the result of any determination by the Required Lenders pursuant to Article V not to fund any Borrowing); (c) any investigation, litigation or proceeding related to any acquisition or proposed acquisition by the Borrower, the Parent or any of their respective Subsidiaries of all or any portion of the stock or assets of any Person, whether or not the Agent or such Lender is party thereto; (d) any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment or the Release by the Borrower, the Parent or any of their respective Subsidiaries of any Hazardous Material; (e) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by the Borrower, the Parent or any of their respective Subsidiaries of any Hazardous Material (including, without limitation, any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law, the costs of defending and or counterclaiming or claiming over against third parties in respect of any action or matter, and any cost, liability or damage arising out of a settlement of any action entered into by the Agent), regardless of whether caused by, or within the control of, the Borrower, the Parent or any such Subsidiary; (f) Environmental Laws relating to the Borrower, the Parent or any of their respective Subsidiaries, including the assertion of any lien thereunder; (g) any order, consent, decree, settlement, judgement or verdict arising from the deposit, storage, disposal, burial, dumping, injection, spilling, leaking, or other placement or release in, on or from the Realty of any -111- 118 Hazardous Material (including without limitation any order under the Environmental Laws to clean-up or decommission), whether or not such deposit, storage, disposal, burial, dumping, injecting, spillage, leaking or other placement or release in, on or from the Realty of any Hazardous Material: (i) results by, through or under the Borrower, the Parent or any of their respective Subsidiaries; or (ii) occurred with the knowledge and consent of the Borrower, the Parent or any of their respective Subsidiaries; or (iii) occurred before or after the Effective Date, whether with or without the knowledge of the Borrower, the Parent or any of their respective Subsidiaries; or (h) the failure to maintain insurance coverage required by Section 7.1.4; except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party's gross negligence or wilful misconduct. If and to the extent that the foregoing undertaking may be unenforceable for any reason, the Borrower and the Parent each hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. SECTION 11.5. Survival. The obligations of the Borrower under Sections 4.3, 4.4, 4.5, 4.6, 11.3 and 11.4, and the obligations of the Lenders under Section 10.1, shall in each case survive any termination of this Agreement, the payment in full of all the Obligations and the termination of all the Commitments. The representations and warranties made by each Obligor in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document. SECTION 11.6. Severability. Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction. SECTION 11.7. Headings. The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or -112- 119 interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof. SECTION 11.8. Execution in Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement. SECTION 11.9. Governing Law; Entire Agreement. THIS AGREEMENT AND THE NOTES SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. This Agreement, the Notes and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto. SECTION 11.10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that: (a) neither the Borrower nor the Parent may assign or transfer its rights or obligations hereunder without the prior written consent of the Agent and all Lenders; and (b) the rights of sale, assignment and transfer of the Lenders are subject to Section 11.11. SECTION 11.11. Sale and Transfer of Loans and Notes; Participations in Loans and Notes. Each Lender may assign, or sell participations in, its Loans and Commitments to one or more other Persons in accordance with this Section 11.11. SECTION 11.11.1. Assignments. (a) Any Lender, upon notice to the Borrower and with the written consent of the Agent (which consent shall not be unreasonably withheld or delayed), may at any time assign and delegate all or any fraction of such Lender's Loans, Commitments and Letter of Credit participations to one or more commercial banks or other financial institutions (each Person described in either of the foregoing clauses as the Person to whom such assignment and delegation is to be made being hereinafter referred to as an "Assignee Lender"), all or any fraction of such Lender's total Loans, Commitments and Letter of Credit participations (which assignment and delegation shall be of a constant, and not a varying, percentage of all the assigning Lender's Loans and Commitments) in a minimum aggregate amount of $5,000,000 (or, if less, the total of such Lender's Commitment Amount); provided, however, that the Borrower, each other Obligor and the Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee Lender until -113- 120 (i) written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to the Borrower and the Agent by such Lender and such Assignee Lender; (ii) such Assignee Lender shall have executed and delivered to the Borrower and the Agent a Lender Assignment Agreement, accepted by the Agent; and (iii) the processing fees described below shall have been paid. From and after the date that the Agent accepts such Lender Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (y) the assignor Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it in connection with such Lender Assignment Agreement, shall be released from its obligations hereunder and under the other Loan Documents. Within five Business Days after its receipt of notice that the Agent has received an executed Lender Assignment Agreement, the Borrower shall execute and deliver to the Agent (for delivery to the relevant Assignee Lender) new Notes evidencing such Assignee Lender's assigned Loans and Commitments and, if the assignor Lender has retained Loans and Commitments hereunder, replacement Notes in the principal amount of the Loans and Commitments retained by the assignor Lender hereunder (such Notes to be in exchange for, but not in payment of, those Notes then held by such assignor Lender). Each such Note shall be dated the date of the predecessor Notes. The assignor Lender shall mark the predecessor Notes "exchanged" and deliver them to the Borrower. Accrued interest on that part of the predecessor Notes evidenced by the new Notes, and accrued fees, shall be paid as provided in the Lender Assignment Agreement. Accrued interest on that part of the predecessor Notes evidenced by the replacement Notes shall be paid to the assignor Lender. Accrued interest and accrued fees shall be paid at the same time or times provided in the predecessor Notes and in this Agreement. Such assignor Lender or such Assignee Lender must also pay a processing fee to the Agent upon delivery of any Lender Assignment Agreement in the amount of $3,000. Any attempted assignment and delegation not made in accordance with this Section 11.11.1 shall be null and void. (b) Notwithstanding clause (a), any Lender may assign and pledge all or any portion of its Loans and Notes and other rights to a Federal Reserve Bank as collateral security; provided, -114- 121 however, that no such assignment under this clause (b) shall release the assignor Lender from any of its obligations hereunder. SECTION 11.11.2. Participations. (a) Any Lender may at any time without the consent of the Borrower or the Agent (but with prior written notice to the Borrower and the Agent) sell to one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a "Participant") participating interests in any of the Loans, Commitments, or other interests of such Lender hereunder; provided, however, that (i) no participation contemplated in this Section 11.11.2 shall relieve such Lender from its Commitments or its other obligations hereunder or under any other Loan Document; (ii) such Lender shall remain solely responsible for the performance of its Commitments and such other obligations; (iii) the Borrower and each other Obligor and the Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and each of the other Loan Documents; (iv) no Participant, unless such Participant is an Affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender may agree with any Participant that such Lender will not, without such Participant's consent, take any actions of the type described in clause (b) or (c) of Section 11.1; and (v) the Borrower shall not be required to pay any amount under clause (b) of this Section that is greater than the amount which it would have been required to pay had no participating interest been sold. (b) The Borrower acknowledges and agrees that each Participant, for purposes of Sections 4.3, 4.4, 4.5, 4.6, 11.3 and 11.4, shall be considered a Lender, subject to clause (v) above. SECTION 11.11.3. Certain Other Provisions. (a) The Borrower and the Parent authorize each Lender to disclose to any participant or assignee (each, a "Transferee") and any prospective Transferee, subject to the agreement of such Transferee or prospective Transferee to comply with Section 11.14 -115- 122 hereof, any and all financial and other information in such Lender's possession concerning the Borrower, the Parent or any of their respective Subsidiaries which has been delivered to such Lender by any such Person pursuant to or in connection with this Agreement or which has been delivered to such Lender by any such Person in connection with such Lender's credit evaluation of the Borrower, the Parent or any of their respective Subsidiaries prior to entering into this Agreement. (b) If, pursuant to this Section, any interest in this Agreement or any Loan or Note is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee (other than any Participant), and may cause any Participant, concurrently with the effectiveness of such transfer, (i) to represent to the transferor Lender (for the benefit of the transferor Lender, the Agent and the Borrower) that under applicable law and treaties, no taxes will be required to be withheld by the Agent, the Borrower or the transferor Lender with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the transferor Lender, the Agent and the Borrower either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such Transferee claims entitlement to whole or partial exemption from U.S. Federal withholding tax on all interest payments hereunder) and (iii) to agree (for the benefit of the transferor Lender, the Agent and the Borrower) to provide the transferor Lender, the Agent and the Borrower a new Form 4224 or Form 1001 upon the obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Transferee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption. SECTION 11.12. Other Transactions. Nothing contained herein shall preclude either the Agent or any other Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower, the Parent or any of their respective Affiliates in which the Borrower, the Parent or such Affiliate is not restricted hereby from engaging with any other Person. SECTION 11.13. Certain Collateral and Other Matters. (a) The Agent is authorized on behalf of all the Lenders, without the necessity of any notice to or further consent from the Lenders, from time to time to take any action with respect to any Collateral or the Loan Documents which may be necessary to perfect and maintain perfected the security interest in and Liens upon the Collateral granted pursuant to the Loan Documents. -116- 123 (b) The Lenders irrevocably authorize the Agent, at its option and in its discretion, to release any security interest or Lien granted to or held by the Agent upon any Collateral (i) upon termination of the Commitments and Letters of Credit and payment in full in cash of all principal of and interest on the Loans, all fees payable pursuant to Section 3.3 and 11.3, all Reimbursement Obligations (including interest thereon) and all other fees, costs and expenses that are payable under this Agreement or under any other Loan Document and have been invoiced (in which case the Lenders hereby authorize the Agent to execute, and the Agent agrees to execute, reasonable releases in connection with this Agreement (other than, in any event, as to items stated to survive the termination of this Agreement)); (ii) constituting property sold or to be sold or disposed of as part of or in connection with any disposition permitted hereunder; (iii) constituting property in which the Borrower or any Subsidiary of the Borrower owned no interest at the time the security interest and/or Lien was granted or at any time thereafter; (iv) constituting property leased to the Borrower or any Subsidiary of the Borrower under a lease which has expired or been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by the Borrower or such Subsidiary to be, renewed or extended; (v) consisting of an instrument evidencing Indebtedness or other debt instrument, if the Indebtedness evidenced thereby has been paid in full; or (vi) if approved, authorized or ratified in writing by the Required Lenders or, if required by Section 11.1, each Lender. Upon request by the Agent at any time, the Lenders will confirm in writing the Agent's authority to release particular types or items of collateral pursuant to this Section. SECTION 11.14. Confidential Information. The Agent and each Lender agree to hold all non-public information (which has been identified as such by the Borrower to the Agent and each Lender) obtained pursuant to this Agreement and the other Loan Documents in accordance with its customary procedures for handling confidential information, provided that disclosure of such confidential information may be made (a) to the Affiliates, examiners, directors, shareholders, accountants, auditors, counsel and other professional advisors of the Agent and each Lender, (b) in connection with any assignment or participation to an Assignee Lender or Participant, as the case may be, so long as such Assignee Lender or Participant has previously agreed to these confidentiality provisions, or (c) as required or requested by any governmental agency, authority or representative, or pursuant to any court order, legal process or applicable law, rule or regulation. SECTION 11.15. Forum Selection and Consent to Jurisdiction. TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR -117- 124 ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS, THE BORROWER OR THE PARENT MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH OF THE BORROWER AND THE PARENT HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. EACH OF THE BORROWER AND THE PARENT FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. EACH OF THE BORROWER AND THE PARENT HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER OR THE PARENT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, EACH OF THE BORROWER AND THE PARENT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. SECTION 11.16. Waiver of Jury Trial, etc. THE AGENT, THE LENDERS, THE BORROWER AND THE PARENT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS, THE BORROWER OR THE PARENT. THE BORROWER AND THE PARENT ACKNOWLEDGE AND AGREE THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT. IN NO EVENT SHALL ANY LENDER OR THE AGENT BE LIABLE FOR ANY CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 11.17. Re-Allocation of Loans, Letters of Credit Outstanding and Commitments. All Loans, Letters of Credit and Commitments outstanding of each Lender under the Existing Credit Agreement shall, from and after the Effective Date, be assigned and re-allocated among the Loans, Letters of Credit and Commitments provided for hereunder, so that after giving effect thereto, the Percentages of all Lenders are as set forth on Schedule II hereto. -118- 125 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. E-Z SERVE CONVENIENCE STORES, INC. as Borrower By: /s/ JOHN T. MILLER ----------------------------------- Title: Senior Vice President E-Z SERVE CORPORATION, as Guarantor By: /s/ JOHN T. MILLER ----------------------------------- Title: Senior Vice President SOCIETE GENERALE, as Agent By: /s/ CATHERINE A. SCAILLIER-LOISEAU ----------------------------------- Title: Vice President LENDERS SOCIETE GENERALE By: /s/ CATHERINE A. SCAILLIER-LOISEAU ----------------------------------- Title: Vice President BANK OF AMERICA TEXAS, N.A. By: /s/ KIM RUTH ----------------------------------- Title: Vice President PREMIER BANK, N.A. By: /s/ LYNN RICHARD ----------------------------------- Title: Vice President AMSOUTH BANK OF ALABAMA By: /s/ ANDREW W. BRASWELL ----------------------------------- Title: Assistant Vice President THE FIRST NATIONAL BANK OF BOSTON By: /s/ DANIEL G. HEAD, JR. ----------------------------------- Title: Vice President -119- EX-10.5.3 22 AMEND. AND WAIVER #2 TO CREDIT AND GUARANTY AGMT. 1 EXHIBIT 10.5.3 AMENDMENT AND WAIVER NO. 2 TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT THIS AMENDMENT AND WAIVER NO. 2 TO AMENDED AND RESTATED CREDIT AND GUARANTY AGREEMENT, dated as of March 27, 1997 (this "Amendment Agreement"), among E-Z SERVE CONVENIENCE STORES, INC., a Delaware corporation (the "Borrower"), E-Z SERVE CORPORATION, a Delaware corporation (the "Parent"), the Lenders (as defined below) and SOCIETE GENERALE ("SG"), as agent (in such capacity, the "Agent") for the Lenders, W I T N E S S E T H: WHEREAS, the Borrower, the Parent, the various financial institutions parties thereto (collectively, the "Lenders") and the Agent have heretofore entered into a certain Amended and Restated Credit and Guaranty Agreement (amending and restating the Credit and Guaranty Agreement, dated as of January 17, 1995), dated as of October 2, 1995 (the "Existing Credit Agreement" and, as heretofore amended, and together with this Amendment Agreement, the "Credit Agreement"); and WHEREAS, the Borrower and the Parent desire to amend, among other things, the Revolving Loan Commitment Termination Date, the amortization schedule and Stated Maturity Date of the Term Loans, the interest rate for LIBO Rate Loans, the financial covenants and the capital expenditure levels, all as more fully set forth herein; and WHEREAS, the Lenders are willing to consent to such limited waiver and amendments, but only upon the terms and conditions set forth below (including Article III); NOW, THEREFORE, the parties hereto hereby agree as follows: 2 ARTICLE I DEFINITIONS Unless otherwise defined or the context otherwise requires, terms used in this Amendment Agreement, including its preamble and recitals, have the meanings provided in the Credit Agreement. ARTICLE II AMENDMENTS AND LIMITED WAIVER TO CERTAIN PROVISIONS OF THE CREDIT AGREEMENT Effective on (and subject to the occurrence of) the Effective Date (as defined in Section 3.1), certain terms and provisions of the Existing Credit Agreement are hereby waived, modified and amended in accordance with this Article II. Except as so waived, modified and amended, the Existing Credit Agreement shall continue in full force and effect in accordance with its terms. SECTION 2.1 Limited Waiver with respect to Section 7.1.9 (Springing Liens) of the Existing Credit Agreement, etc. The Lenders hereby waive compliance (to the extent necessary and so long as the Borrower and the Parent continue to cooperate with the Agent to achieve compliance as soon as possible) by the Borrower and the Parent until May 5, 1997, solely with respect to (i) the applicable provisions of Section 7.1.9 of the Credit Agreement and (ii) the applicable provisions of the letter agreement, dated as of January 27, 1997, among the Agent, the Lenders signatories thereto, the Parent, the Borrower and Phemus Corporation, requiring the Borrower, within 30 days from the date of such letter agreement, to execute the mortgages, deeds of trust, UCC financing statements and any other related documents required to grant the Agent a first priority leasehold Lien on operating facilities and a first priority mortgage Lien on real property, fixtures, buildings and improvements thereon. SECTION 2.2 New definition of BofA Cash Management Agreement. The definition of BofA Cash Management Agreement is hereby inserted as a new definition in its correct alphabetical order. -2- 3 "BofA Cash Management Agreement" means, the Cash Management Services Agreement, dated March 6, 1997, between the Borrower and Bank of America. SECTION 2.3 Amendment to definition of Borrowing Base Amount. The definition of Borrowing Base Amount is hereby amended by adding the following new sentence to the end of such definition: "From the period beginning March 27, 1997 and ending on September 30, 1997 only, on any Borrowing Base Amount calculation date, the calculation of the Borrowing Base Amount shall be decreased by $2,000,000 during such period; provided, however, that for only the period from the 20th day of each month (commencing March 27, 1997) through the later of (i) the first Monday of each month and (ii) the 5th day of each subsequent month, only through September 30, 1997, the calculation of the Borrowing Base Amount shall be increased by $2,000,000 during such period." SECTION 2.4 Amendment to definition of Business Acquisition. The definition of Business Acquisition is hereby deleted in its entirety. SECTION 2.5 Amendment to definition of Capital Expenditure Level. The definition of Capital Expenditure Level is hereby deleted in its entirety. SECTION 2.6 Amendment to definition of Capital Expenditures. The definition of Capital Expenditures is hereby amended in its entirety by substituting the following therefor: "Capital Expenditures" means, for any period, without duplication, the sum of (a) the aggregate amount of all expenditures of the Parent and its Subsidiaries (including the Borrower and its Subsidiaries) for fixed or capital assets made during such period which, in accordance with GAAP, would be classified as capital expenditures; and (b) the aggregate amount of all Capitalized Lease Liabilities incurred during such period. -3- 4 SECTION 2.7 New definition of Commitment Termination Date. The definition of Commitment Termination Date is hereby inserted as a new definition in its correct alphabetical order. "Commitment Termination Date" means, as the case may be, the Revolving Loan Commitment Termination Date or the Term Loan Commitment Termination Date. SECTION 2.8 New definition of Cumulative Capital Expenditures. The definition of Cumulative Capital Expenditures is hereby inserted as a new definition in its correct alphabetical order. "Cumulative Capital Expenditures" means, the cumulative aggregate amount of Capital Expenditures commencing with the fiscal month beginning December 30, 1996. SECTION 2.9 New definition of Cumulative EBITDA. The definition of Cumulative EBITDA is hereby inserted as a new definition in its correct alphabetical order. "Cumulative EBITDA" means, the cumulative aggregate amount of EBITDA commencing with the fiscal month beginning December 30, 1996. SECTION 2.10 New definition of Cumulative Interest Expense. The definition of Cumulative Interest Expense is hereby inserted as a new definition in its correct alphabetical order. "Cumulative Interest Expense" means, the cumulative aggregate amount of Interest Expense commencing with the fiscal month beginning December 30, 1996. SECTION 2.11 Amendment to definition of Excess Insurance Proceeds. The definition of Excess Insurance Proceeds is hereby deleted in its entirety. SECTION 2.12 Amendment to definition of Fixed Charge Coverage Ratio. The definition of Fixed Charge Coverage Ratio is hereby amended in its entirety by substituting the following therefor: "Fixed Charge Coverage Ratio" means, as of the last day of any fiscal month, the ratio of: -4- 5 (a) Cumulative EBITDA for the Rolling Period ending on such day; to (b) the sum of (i) Cumulative Interest Expense paid in cash for such Rolling Period; plus (ii) all Cumulative Capital Expenditures made in such Rolling Period. SECTION 2.13 Amendment to definition of Gross Profit Margin. The definition of Gross Profit Margin is hereby deleted in its entirety. SECTION 2.14 New definition of Insurance Proceeds. The definition of Insurance Proceeds is hereby inserted as a new definition in its correct alphabetical order. "Insurance Proceeds" means the insurance proceeds received by the Agent pursuant to clause (d) of Section 7.1.4. SECTION 2.15 Amendment to definition of Interest Coverage Ratio. The definition of Interest Coverage Ratio is hereby amended in its entirety by substituting the following therefor: "Interest Coverage Ratio" means, as of the last day of any fiscal month, the ratio of: (a) Cumulative EBITDA for the Rolling Period ending on such day to (b) Cumulative Interest Expense paid in cash for such Rolling Period. SECTION 2.16 Amendment to definition of Interest Period. The definition of Interest Period of the Existing Credit -5- 6 Agreement is hereby amended by deleting the words "one, three or six months thereafter" appearing on the fifth line thereof and substituting such words with "one month thereafter". SECTION 2.17 Amendment to definition of Net Debt Proceeds. Clause (b) of the definition of Net Debt Proceeds of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "(b) in connection with the issuance, incurrence, placement or sale of permitted Indebtedness, (i) all reasonable and customary fees and expenses actually paid by the Parent or its Subsidiaries (except as provided in clause (ii)) and (ii) underwriters' discounts and commissions not payable to the Parent, any of its Subsidiaries or any of their Affiliates." SECTION 2.18 Amendment to definition of Net Disposition Proceeds. The definition of Net Disposition Proceeds of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "Net Disposition Proceeds" means the excess of (a) the gross cash proceeds (other than proceeds from any sale of Inventory of the Parent or any of its Subsidiaries in the ordinary course of their business) received by the Parent or any of its Subsidiaries from any Permitted Disposition, including any cash payments received by way of a deferred payment of principal pursuant to a permitted note or installment receivable or otherwise, but only when and as received; over (b) (i) all reasonable and customary fees and expenses with respect to legal, investment banking, brokerage, accounting and other professional fees actually incurred by the Parent and its Subsidiaries in connection with such Permitted Disposition which have not been paid to Affiliates of the Parent or any of its Subsidiaries, (ii) all taxes actually paid or estimated by the Parent (in good faith) to be payable in cash in connection with such Permitted Disposition; provided, -6- 7 however, that if, after the payment of all taxes with respect to such Permitted Disposition, the amount of estimated taxes, if any, pursuant to clause (ii) above exceeded the amount of taxes actually paid in cash in respect of such Permitted Disposition, the aggregate amount of such excess shall be immediately payable, pursuant to clause (c) of Section 3.1.2, as Net Disposition Proceeds, and (iii) if permitted hereunder or otherwise by the Required Lenders, the aggregate amount of any Indebtedness of the type referred to in clause (a) of the definition thereof which is secured by such asset and required to be repaid from such gross cash proceeds. SECTION 2.19 Amendment to definition of Net Equity Proceeds. Clause (b) of the definition of Net Equity Proceeds of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "(b) in connection with such issuance, placement or sale of such equity securities, all (i) reasonable and customary fees and expenses actually paid by the Parent or its Subsidiaries or the Parent or any corporation of which the Parent is a Subsidiary (except as provided in clause (ii)) and (ii) underwriters' discounts and commissions not payable to the Parent, any of its Subsidiaries or any of their Affiliates. SECTION 2.20 Amendment to definition of Net Income. The definition of Net Income is hereby deleted in its entirety by substituting the following therefor: "Net Income" means, for any period, all amounts (exclusive of all amounts in respect of any non-cash gains or losses and gains and losses associated with dispositions (except to the extent of gains of up to $458,000 in Fiscal Year 1997 in respect of any such dispositions)) which, in accordance with GAAP, would be included as net income on the consolidated statements of income of the Parent and its Subsidiaries for such period. SECTION 2.21 Amendment to definition of Obligations. The definition of Obligations is hereby deleted in its entirety by substituting the following therefor: -7- 8 "Obligations" means all obligations (monetary or otherwise) of the Borrower and each other Obligor arising under or in connection with this Agreement, the Notes, each other Loan Document and, until September 30, 1997, the obligations of the Borrower to Bank of America under the BofA Cash Management Agreement (to the extent and only to the extent of up to $2,000,000 in the aggregate). SECTION 2.22 Amendment to definition of Permitted Business Acquisition. The definition of Permitted Business Acquisition is hereby deleted in its entirety. SECTION 2.23 Amendment to definition of Permitted Disposition. The definition of Permitted Disposition is hereby amended in its entirety by substituting the following therefor: "Permitted Disposition" means any sale, lease, transfer or other disposition of assets of the Borrower or any other Subsidiary of the Parent to the extent that (a) the Borrower or such other Subsidiary shall receive only cash consideration therefor, provided that the Borrower or such other Subsidiary may receive promissory notes having terms that are customary for seller-financed transactions, to the extent the aggregate principal amount of all such promissory notes received by the Borrower and such other Subsidiaries in any Fiscal Year does not exceed $250,000; (b) the Borrower and such other Subsidiaries shall have received fair value therefor; and (c) at the time of each such disposition, no Default or Event of Default shall have occurred and be continuing. SECTION 2.24 Amendment to definition of Required Lenders. The definition of Required Lenders of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "Required Lenders" means, at the time any determination thereof is to be made, Lenders holding 66-2/3% or more of the aggregate of (a) the then aggregate unpaid principal -8- 9 amount of the Term Notes and (b) the Revolving Loan Commitments (or, if the Revolving Loan Commitments are no longer in effect, the aggregate unpaid principal amount, if any, of Revolving Notes and Letter of Credit Outstandings). SECTION 2.25 Amendment to definition of Revolving Loan Commitment Termination Date. Clause (a) of the definition of Revolving Loan Commitment Termination Date of the Existing Credit Agreement is hereby amended in its entirety by substituting the following new clause (a) therefor: "(a) October 1, 1998;". SECTION 2.26 Amendment to definition of Rolling Period. The definition of Rolling Period of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "Rolling Period" means, as of any date of calculation, the period commencing with December 30, 1996 and ending on the date of such calculation, provided, however, that commencing with the fiscal month ending January 25, 1998, the "Rolling Period" shall mean the immediately preceding twelve month period from the date of calculation. SECTION 2.27 Amendment to definition of Series H Preferred Stock. The definition of Series H Preferred Stock is hereby added in its correct alphabetized order. "Series H Preferred Stock" means the Convertible Preferred Stock, Series H, of the Parent, par value $.01 per share. SECTION 2.28 Amendment to definition of SGA Margin. The definition of SGA Margin is hereby amended in its entirety to read as follows: "SGA Margin" means, as of the last day of any Fiscal Quarter (commencing with the Fiscal Quarter ending March 30, 1997), the percentage obtained by dividing (a) selling, general and administrative expenses (as determined in accordance with GAAP) of the Parent and its Subsidiaries for the period ending on such day by (b) total sales (as -9- 10 determined in accordance with GAAP) by the Parent and its Subsidiaries for such period. SECTION 2.29 Amendment to definition of Stated Maturity Date. The definition of Stated Maturity Date is hereby amended in its entirety to read as follows: "Stated Maturity Date" means in the case of any Term Loan or Revolving Loan, October 1, 1998. SECTION 2.30 Amendment to definition of Tangible Net Worth. The definition of Tangible Net Worth is hereby deleted in its entirety. SECTION 2.31 Amendment to Clause (b) of Section 3.1.2 (Mandatory Prepayments) of the Existing Credit Agreement. Clause (b) of Section 3.1.2 of the Existing Credit Agreement is hereby amended by deleting clause (b) in its entirety and substituting the following therefor: "(b) the Borrower shall, on each date set forth below, make a scheduled repayment of the aggregate outstanding principal amount of all Term Loans in the amount set forth opposite each such date: -10- 11 Amount of Required "Repayment Date Principal Repayment -------------- ------------------- January 24, 1996 $2,000,000 July 24, 1996 $3,550,000 January 24, 1997 $3,550,000 July 24, 1997 $4,820,000 September 30, 1997 $6,080,000 December 31, 1997 $5,000,000 January 24, 1998 $5,780,000 February 28, 1998 $4,220,000 July 24, 1998 $6,280,000 October 1, 1998 $38,188,919 or the remaining principal amount of Term Loans outstanding on such date; ; provided, however, that at the option of the Borrower (after notice to the Agent in writing), the Borrower may defer the July 24, 1997 scheduled amortization payment until no later than September 30, 1997 (it is understood that any such deferred principal payment payable on September 30, 1997 shall be in addition to the $6,080,000 scheduled amortization payment required to be made on September 30, 1997) after payment to the Agent, for the pro rata account of the Lenders, the fee described in clause (a) of Section 3.3.4; provided, further, however, that (i) if the Borrower has reduced the aggregate amount of outstanding Term Loans to at least $60,000,000 by September 30, 1997, the scheduled principal amortization payment required on September 30, 1997 will be automatically and permanently waived, (ii) if the Borrower has reduced the aggregate amount of outstanding Term Loans to at least $55,000,000 by December 31, 1997, the scheduled principal amortization payment required on -11- 12 December 31, 1997 will be automatically and permanently waived, and (iii) if the Borrower has reduced the aggregate amount of outstanding Term Loans to at least $45,000,000 by February 28, 1998, the scheduled principal amortization payment required on February 28, 1998 will be automatically and permanently waived;" -12- 13 SECTION 2.32 Amendment to Clause (c) of Section 3.1.2 (Mandatory Prepayments) of the Existing Credit Agreement. Clause (c) of Section 3.1.2 of the Existing Credit Agreement is hereby amended by deleting clause (c) in its entirety and substituting the following therefor: "(c) the Parent or the Borrower, as the case may be, shall, (i) on the date of receipt by it or any of its Subsidiaries of any Gross Transaction Proceeds, Net Disposition Proceeds, Net Equity Proceeds, Net Debt Proceeds or Insurance Proceeds and (ii) on the date of delivery of the audited financial statements pursuant to clause (b) of Section 7.1.1 (and, in any event, on the date 90 days after the end of each Fiscal Year), in the case of Excess Cash Flow, apply (A) 100% of all such Gross Transaction Proceeds, Net Disposition Proceeds, Net Equity Proceeds, Insurance Proceeds and Net Debt Proceeds, as the case may be, and (B) 100% of all such Excess Cash Flow, to make a mandatory prepayment of the Term Loans to be applied to the installments thereof in the inverse order of the scheduled repayments of the Term Loans; provided, however, that 50% of the first $10,600,000 of Net Disposition Proceeds received by the Parent or the Borrower shall be applied pro rata to the July 24, 1997 and January 24, 1998 scheduled Term Loan principal amortization payments; and provided, further, however, that any Net Disposition Proceeds received by the Parent or the Borrower that are allocated solely to current assets (i.e., Eligible Inventory and Eligible Accounts) will be applied to make a mandatory prepayment of the Revolving Loans outstanding and 50% of any reduction to the Borrowing Base Amount (as a result of Net Disposition Proceeds arising from the sale of current assets (i.e., Eligible Inventory and Eligible Accounts)), will permanently reduce the Revolving Loan Commitment Amount by such amounts; and" SECTION 2.33 Amendment to Clause (e) of Section 3.1.2 of the Existing Credit Agreement. Clause (e) of Section 3.1.2 of the Existing Credit Agreement is hereby amended by deleting clause (e) in its entirety and substituting the following therefor: "(e) the Borrower shall prepay Revolving Loans so that the aggregate outstanding principal amount of all Revolving Loans outstanding does not exceed (i) for the period from -13- 14 March 27, 1997 until January 31, 1998, the greater of (a) $8,000,000 minus 50% of the aggregate amount of Net Disposition Proceeds applied to the Revolving Loans during such period and (b) $4,000,000; and (ii) from and after January 31, 1998, $4,000,000; during a five consecutive calendar day period during each calendar month (each such period, a "Clean-Down Period")." SECTION 2.34 Amendment to Section 3.2.1 of the Existing Credit Agreement (Rates). Clauses (a) and (b) of Section 3.2.1 of the Existing Credit Agreement are hereby amended in their entirety by substituting the following therefor: "(a) on that portion maintained from time to time as Base Rate Loans, equal to the sum of the SG Base Rate from time to time in effect plus 1.75% (retroactive to all Loans outstanding on and after January 1, 1997); provided, however, that if the Borrower has not reduced the aggregate principal amount of Term Loans to at least $55,000,000 by September 30, 1997, such rate of interest shall automatically and permanently increase to the sum of the SG Base Rate from time to time in effect plus 2.25%; and (b) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus 3.0% (retroactive to all Loans outstanding on and after January 1, 1997); provided, however, that if the Borrower has not reduced the aggregate principal amount of Term Loans to at least $55,000,000 by September 30, 1997, such rate of interest shall automatically and permanently increase to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus 3.5%." SECTION 2.35 Amendment to Section 3.2.2 of the Existing Credit Agreement (Post-Default Rates). Section 3.2.2 of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "SECTION 3.2.2. Post-Default Rates. From and after the occurrence of any Event of Default, the Borrower shall pay, but only to the extent permitted by law, interest (after as well as before judgment) on all amounts payable hereunder (including fees in respect of Letters of Credit) -14- 15 at a rate per annum equal to the rate per annum otherwise in effect plus a further margin of 4% per annum." SECTION 2.36 Amendment to Section 3.2.3 of the Existing Credit Agreement (Payment Dates). Clause (d) of Section 3.2.3 of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "(d) with respect to LIBO Rate Loans, on the last day of each applicable Interest Period; and" SECTION 2.37 Amendment to Article III of the Existing Credit Agreement (Deferral and Extension Fees). Article III of the Existing Credit Agreement is hereby amended to add a new Section 3.3.4 to read as follows: "SECTION 3.3.4. Deferral and Extension Fees, etc. The Borrower agrees to pay to the Agent for the pro rata account of the Lenders (based on each such Lender's Percentage of outstanding Term Loans) the following fees on the following dates: (a) a deferral fee payable on July 24, 1997 (but earned by the Lenders on March 27, 1997) in the amount of 2.50% multiplied by $4,820,000 (the amount of the scheduled Term Loan principal payment required pursuant to clause (b) of Section 3.1.2), only if the Borrower exercises its option to defer such scheduled Term Loan principal payment until September 30, 1997; (b) an extension fee payable on September 30, 1997 (but earned by the Lenders on March 27, 1997) in the amount of .50% multiplied by the aggregate amount of Term Loans outstanding on such date, only if the Borrower has not reduced the aggregate amount of Term Loans outstanding on such date to at least $55,000,000; (c) an extension fee payable on December 31, 1997 (but earned by the Lenders on March 27, 1997) in the amount of .50% multiplied by the aggregate amount of Term Loans outstanding on such date, only if the Borrower has not reduced the aggregate amount of Term Loans outstanding on such date to at least $50,000,000; and -15- 16 (d) an extension fee payable on March 31, 1998 (but earned by the Lenders on March 27, 1997) in the amount of 1% multiplied by the aggregate amount of Term Loans and Revolving Loan Commitments outstanding on such date, only if the Borrower has not terminated all Commitments, not repaid all Loans and cancelled all Letters of Credit and all Obligations have not been paid in full in cash." SECTION 2.38 Amendment to Section 6.17 of the Existing Credit Agreement (Ownership of Stock). Section 6.17 of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "SECTION 6.17 Ownership of Stock. The Parent owns free and clear of all Liens (other than any Lien pursuant to the Parent Pledge Agreement), 100% of the outstanding shares of common stock (whether voting or non-voting) of the Borrower and Petroleum on a fully diluted basis. There are no outstanding options, warrants or convertible securities with respect to the shares of common stock of the Borrower." SECTION 2.39 Amendments to Section 7.1.1 of the Existing Credit Agreement (Financial Information, Reports, Notices, etc). (a) Clause (a) of Section 7.1.1 of the Existing Credit Agreement is hereby amended by (i) deleting the word "and" appearing immediately before clause (a)(ii) and substituting therefor a ","; (b) Clause (a) of Section 7.1.1. of the Existing Credit Agreement is hereby further amended by adding the following new clause (iii) immediately prior to the period of such clause (a)(ii): "and (iii) Compliance Certificate, executed by the chief financial Officer of the Parent, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Agent) compliance with the financial covenants set forth in Section 7.2.4" ; (c) clause (c) of Section 7.1.1 of the Existing Credit Agreement is hereby amended by deleting the words "and (ii) a Compliance Certificate, executed by the chief financial Authorized Officer of the Parent, showing (in reasonable detail and with appropriate calculations and computations in all -16- 17 respects satisfactory to the Agent) compliance with the financial covenants set forth in Section 7.2.4;" ; (d) clause (i) of Section 7.1.1 of the Existing Credit Agreement is hereby amended by deleting the word "and" at the end of such clause and (e) a new clause (k) and (l) are hereby added to Section 7.1.1 of the Existing Credit Agreement to read as follows: "(k) as soon as available and in any event within 2 Business Days after the end of each week, a comprehensive weekly report (with respect to the previous week) with respect to the Borrower's cash liquidity position and such other items as described on Annex I attached hereto; and (l) as soon as available and in any event no later than May 31, 1997, a detailed operating and merchandising operation plan prepared by the president and chief operating officer of the Borrower, in form satisfactory to the Agent." SECTION 2.40 Amendment to Section 7.1.3 of the Existing Credit Agreement (Maintenance of Properties). Section 7.1.3 of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "SECTION 7.1.3. Maintenance of Properties. The Borrower and the Parent will, and will cause each of their respective Subsidiaries to, maintain, preserve, protect and keep their respective properties in good repair, working order and condition (except to the extent sold, transferred or otherwise disposed of pursuant to a Permitted Disposition), and make necessary and proper repairs, renewals (including lease payments on leasehold properties) and replacements so that the business carried on in connection therewith may be properly conducted at all times, unless the Borrower or the Parent, as the case may be, determines in good faith that the continued maintenance of any of its properties is no longer economically desirable (provided that any such determination with respect to any property material to the operations of the Borrower or any other Subsidiary of the Parent shall be made only after consultation with the Agent)." -17- 18 SECTION 2.41 Amendment to Section 7.1.4 of the Existing Credit Agreement (Insurance). Clause (d) of Section 7.1.4 of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "(d) All proceeds of property insurance (including with respect to any casualty or other covered occurrence) in excess of $1,000,000 in the aggregate (so long as any such insurance proceeds are used by the Borrower for the repair, replacement or restoration of any properties covered by such insurance within 180 days of the receipt thereof), shall be delivered by the Borrower or such Subsidiary (and the Parent shall cause such Subsidiary to so deliver) to the Agent and shall constitute "Insurance Proceeds," to be applied as a mandatory prepayment of the Term Loans pursuant to clause (c) of Section 3.1.2. Notwithstanding any provision to the contrary in this Agreement or any other Loan Document, the Agent in its sole discretion may, subject to the consent of the Required Lenders, permit the Borrower the use of such Insurance Proceeds to repair, restore or replace the property or asset which suffered the loss for which such proceeds are being paid." SECTION 2.42 Amendment to Article VII of the Existing Credit Agreement. A new Section 7.1.13 is hereby added in its correct numerical order to Article VII of the Existing Credit Agreement to read as follows: "SECTION 7.1.13. Deposit and Pledge Agreements. The Parent and the Borrower shall deliver to the Agent prior to June 15, 1997, with respect to all bank accounts maintained with any and all depository institutions (including, in the case of any new accounts opened by the Borrower after such date), a deposit and pledge agreement or a concentration account agreement, as the case may be (relating to such account) duly authorized and executed by the Borrower and such depository institution (it is understood and agreed that the Borrower will use its best efforts to secure the signature of each such depository institution prior to June 15, 1997), along with an appropriate opinion of counsel (if required by the Agent) as to such due authorization and execution by the Borrower, in form and substance reasonably satisfactory to the Agent and its counsel. In addition, the Borrower shall not institute a new cash management system -18- 19 (including, without limitation, any replacement or material changes to the BofA Cash Management Agreement) without the prior written consent of the Agent." SECTION 2.43 Amendment to Section 7.2.2 of the Existing Credit Agreement. Section 7.2.2 of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "SECTION 7.2.2. Indebtedness. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness in respect of the Credit Extensions and other Obligations; (b) until the date of the initial Credit Extension on the Effective Date, Indebtedness identified in Item 7.2.2(b) ("Indebtedness to be Paid") of the Disclosure Schedule; (c) Indebtedness existing as of the Effective Date which is identified in Item 7.2.2(c) ("Ongoing Indebtedness") of the Disclosure Schedule; (d) Indebtedness (other than Indebtedness described in the immediately preceding clause (c)) in an aggregate principal amount not to exceed $2,000,000 at any time outstanding in respect of Capitalized Lease Liabilities to the extent permitted by Section 7.2.7; (e) unsecured Indebtedness incurred in the ordinary course of business (including open accounts extended by suppliers on normal trade terms in connection with purchases of goods and services, but excluding all Indebtedness incurred through the borrowing of money and all Contingent Liabilities); (f) Indebtedness in respect of Rate Protection Agreements with a Lender and entered into solely with respect to the Credit Extensions or, as to currency matters, -19- 20 for protection in connection with the Borrower's ordinary course of business; (g) Indebtedness in an aggregate principal amount not to exceed $15,000,000 at any time outstanding in respect of the Petroleum Note; (h) Indebtedness of the Parent owing to the Borrower pursuant to the Parent Inter-Company Note; and (i) Obligations of the Parent under guarantees of any of its Subsidiaries' obligations to trade creditors in an aggregate amount outstanding not to exceed $10,000,000; provided that (i) each of such guaranties have an expressly stated limited amount and are for a term of no more than one year and (ii) the identity of the beneficiaries of such guaranties is provided in writing to the Agent; provided, however, that no Indebtedness pursuant to clause (d) may be incurred if, after giving effect to the incurrence thereof, any Default shall have occurred and be continuing." SECTION 2.44 Amendment to Section 7.2.4 of the Existing Credit Agreement (Financial Condition). Section 7.2.4 of the Existing Credit Agreement is hereby amended (retroactive to December 29, 1996) in its entirety by substituting the following therefor: "(a) the Interest Coverage Ratio, as of the last day of each calendar month of each Fiscal Year set forth below, to be less than the ratio set forth opposite such fiscal month of each Fiscal Year: Minimum Interest Month/Fiscal Year Coverage Ratio ------------------- -------------- March, 1997 0.16:1.00 April, 1997 0.23:1.00 May, 1997 0.47:1.00 June, 1997 1.02:1.00 -20- 21 Minimum Interest Month/Fiscal Year Coverage Ratio ------------------- -------------- July, 1997 1.42:1.00 August, 1997 1.71:1.00 September, 1997 2.14:1.00 October, 1997 2.49:1.00 November, 1997 2.61:1.00 December, 1997 2.91:1.00 January, 1998 3.06:1.00 February, 1998 3.08:1.00 March through May, 1998 3.19:1.00 June, 1998 and thereafter; 3.35:1.00 (b) the Fixed Charge Coverage Ratio, as of the last day of each fiscal month of each Fiscal Year set forth below, to be less than the ratio set forth opposite such fiscal month: Fixed Charge Month/Fiscal Year Coverage Ratio ------------------- -------------- March, 1997 0.10:1.00 April, 1997 0.14:1.00 May, 1997 0.25:1.00 June, 1997 0.53:1.00 July, 1997 0.71:1.00 August, 1997 0.83:1.00 September, 1997 1.02:1.00 -21- 22 Fixed Charge Month/Fiscal Year Coverage Ratio ------------------- -------------- October, 1997 1.17:1.00 November, 1997 1.22:1.00 December, 1997 1.35:1.00 January, 1998 1.35:1.00 February, 1998 1.36:1.00 March through May, 1998 1.40:1.00 June, 1998 and thereafter; 2.05:1.00 (c) Cumulative EBITDA, as of the last day of each fiscal month of each Fiscal Year set forth below, to be less than the amount set forth opposite such fiscal month: Month/Fiscal Year Cumulative EBITDA ------------------- ----------------- March, 1997 $700,000 April, 1997 $1,100,000 May, 1997 $2,100,000 June, 1997 $4,700,000 July, 1997 $7,200,000 August, 1997 $9,600,000 September, 1997 $13,300,000 October, 1997 $16,800,000 November, 1997 $19,100,000 -22- 23 Month/Fiscal Year Cumulative EBITDA ------------------- ----------------- December, 1997 $23,000,000 January, 1998 $23,100,000 February, 1998 $23,200,000 March through May, 1998 $23,700,000 June, 1998 and thereafter; $25,400,000 (d) the SGA Margin, as of the last day of each Fiscal Quarter, to be greater than the percentage set forth below:
Fiscal Quarter SGA Margin -------------- ---------- The first Fiscal Quarter of the 1997 Fiscal Year 3.40:1.00 The second Fiscal Quarter of the 1997 Fiscal Year 3.20:1.00 The third Fiscal Quarter of the 1997 Fiscal Year 3.20:1:00 The fourth Fiscal Quarter of the 1997 Fiscal Year 3.00:1:00 The first Fiscal Quarter of the 1998 Fiscal Year 3.00:1:00 and thereafter."
SECTION 2.45 Amendment to Section 7.2.5 of the Existing Credit Agreement (Investments). Section 7.2.5 of the Existing Credit Agreement is hereby amended by deleting clause (f) in its entirety and substituting the following therefor: "(f) [Reserved];" SECTION 2.46 Amendment to Section 7.2.6 of the Existing Credit Agreement (Restricted Payments). Clause (b)(i) of Section 7.2.6 of the Existing Credit Agreement is hereby amended by deleting the proviso thereof and substituting the following therefor: -23- 24 "provided, however, that the Parent may, with respect to any shares of Series H Preferred Stock, declare and pay dividends thereon solely in the form of additional shares of Series H Preferred Stock, in accordance with the terms of such Series H Preferred Stock as in effect on the date of the Consent and Limited Waiver, dated as of January 27, 1997, among the Lenders signatories thereto, the Agent, the Parent and the Borrower." SECTION 2.47 Amendment to Section 7.2.7 of the Existing Credit Agreement (Capital Expenditures). Section 7.2.7 of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "SECTION 7.2.7. Capital Expenditures, etc. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, make or, without duplication, commit to make Capital Expenditures in any Fiscal Year, except (a) Cumulative Capital Expenditures (other than Capitalized Lease Liabilities) of the Borrower and other Subsidiaries of the Parent which do not aggregate in any fiscal month of any Fiscal Year the amount set forth opposite such fiscal month of such Fiscal Year listed below; Month/Fiscal Year Cumulative Capital ----------------- ------------------ Expenditures ------------ March, 1997 $ 1,500,000 April, 1997 $ 2,100,000 May, 1997 $ 2,800,000 June, 1997 $ 3,600,000 July, 1997 $ 4,500,000 August, 1997 $ 5,300,000 September, 1997 $ 6,200,000 October, 1997 $ 7,000,000 November, 1997 $ 7,700,000 -24- 25 Month/Fiscal Year Cumulative Capital ----------------- ------------------ Expenditures ------------ [S] [C] December, 1997 $8,500,000 January, 1998 and $8,600,000 thereafter ; provided, however, that the Borrower may not carry-forward any unused Capital Expenditures to the next Fiscal Year; and (b) Capitalized Lease Liabilities which do not aggregate in any Fiscal Year in excess of $500,000." SECTION 2.48 Amendment to Section 7.2.10 of the Existing Credit Agreement (Consolidation, Merger, etc.). Section 7.2.10 of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "SECTION 7.2.10. Consolidation, Merger, etc. Other than the consummation of the Merger, the Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, liquidate or dissolve, consolidate or amalgamate with, or merge into or with, any other Person, or purchase or otherwise acquire all or any substantial part of the assets or stock of any Person (or of any division thereof)." SECTION 2.49 Amendment to Section 7.2.11 of the Existing Credit Agreement (Asset Dispositions, etc.). Section 7.2.11 of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "SECTION 7.2.11. Asset Dispositions, etc. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, sell, transfer, lease, contribute or otherwise convey or dispose of, or grant options, warrants or other rights with respect to, all or any part of its assets (including accounts receivable and capital stock of Subsidiaries) to any Person, except (a) if such sale, transfer, lease, contribution or conveyance is of Inventory in the ordinary course of its business; or -25- 26 (b) if such assets are worn or obsolete and the net book value of such assets, together with the net book value of all other assets sold, transferred, leased, contributed or conveyed by the Borrower, the Parent or any of their respective Subsidiaries pursuant to this clause during the Fiscal Year in which such assets are to be sold, transferred, leased, contributed or conveyed, does not exceed $1,000,000 in the aggregate." SECTION 2.50 Amendment to Section 7.2.13 of the Existing Credit Agreement (Transactions with Affiliates). Section 7.2.13 of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "SECTION 7.2.13. Transactions with Affiliates. The Borrower and the Parent will not, and will not permit any of their respective Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with, any of its other Affiliates unless such arrangement or contract is on fair and reasonable terms and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of the Borrower or such Subsidiary with a Person which is not one of its Affiliates." SECTION 2.51 Amendment to Section 7.2.19 of the Existing Credit Agreement (Activities of Certain Subsidiaries of the Parent). Section 7.2.19 of the Existing Credit Agreement is hereby amended in its entirety by substituting the following therefor: "SECTION 7.2.19 Activities of Certain Subsidiaries of the Parent. Without limiting the effect of any provision contained in this Article VII, Petroleum of California will not engage in any business activity other than owning and operating gasoline stations in California and Arizona" SECTION 2.52 Amendment to Section 8.1.1 of the Existing Credit Agreement (Non-Payment of Obligations). Section 8.1.1 of the Existing Credit Agreement is hereby amended by deleting the words "10 Business Days" appearing in clause (c) of such Section and substituting therefor the words "5 Business Days". -26- 27 SECTION 2.53 Amendment to Section 8.1.3 of the Existing Credit Agreement (Non-Performance of Certain Covenants and Obligations). Section 8.1.3 of the Existing Credit Agreement is hereby amended by adding the words ", Section 7.1.13" immediately following the words "7.1.11". SECTION 2.54 Amendment to Section 10.8 of the Existing Credit Agreement (Copies, Etc.). Section 10.8 of the Existing Credit Agreement is hereby amended by adding the following new sentence to the end of such definition: "The Borrower will simultaneously deliver copies to each Lender of all communications being sent to the Agent." SECTION 2.55 Amendment to Section 11.15 of the Existing Credit Agreement (Forum Selection and Consent to Jurisdiction). The first sentence of Section 11.15 of the Existing Credit Agreement is hereby amended by substituting the following therefor: "TO THE FULLEST EXTENT PERMITTED UNDER APPLICABLE LAW, ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE LENDERS, THE BORROWER OR THE PARENT MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT, INCLUDING, WITHOUT LIMITATION, AGAINST ANY COLLATERAL OR OTHER PROPERTY, MAY BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY OTHER JURISDICTION." SECTION 2.56 Amendment to Schedule III of the Existing Credit Agreement (Capital Expenditure Levels II and III). Schedule III of the Existing Credit Agreement is hereby deleted in its entirety. ARTICLE III CONDITIONS PRECEDENT SECTION 3.1 Conditions to Effectiveness of Article II. The limited waiver and amendments set forth in Article II shall become effective upon the prior or concurrent satisfaction of -27- 28 each of the conditions precedent set forth in this Article III (the "Effective Date"). SECTION 3.2 Resolutions, etc. The Agent shall have received from the Parent, Petroleum and the Borrower and each other Obligor party to a Loan Document, a certificate, dated the date of the initial Credit Extension, of its Secretary or Assistant Secretary as to (a) resolutions of its Board of Directors then in full force and effect authorizing the execution, delivery and performance of this Amendment Agreement and each other Loan Document to be executed by it; and (b) the incumbency and signatures of the officers of the Parent, Petroleum and the Borrower and each such other Obligor authorized to act with respect to this Amendment Agreement and each other Loan Document as is to be executed by it, upon which certificate each Lender may conclusively rely until it shall have received a further certificate of the Secretary or Assistant Secretary of the Parent, Petroleum and the Borrower each other Obligor canceling or amending such prior certificate. SECTION 3.3 Amendment Fee. The Borrower shall have paid to the Agent, for the pro rata account of each Lender in accordance with their respective Commitment Amounts, a non-refundable amendment fee in the amount of .25% multiplied by the aggregate amount of all outstanding Term Loans and Revolving Loan Commitments on the Effective Date. SECTION 3.4 Stockholders' Acknowledgment and Confirmation. The Agent shall have received, with a copy for each Lender, a duly executed Stockholders' Acknowledgment and Confirmation, dated as of the Effective Date, substantially in the form of Exhibit B hereto, duly executed and delivered by each party thereto, with respect to the Stockholders' Letter of Understanding acknowledging the terms and conditions of this Amendment Agreement, and agreeing that the terms and provisions thereof remain in full force and effect. SECTION 3.5 Affirmation and Acknowledgement. The Agent shall have received an Affirmation and Acknowledgement, dated as of the Effective Date, substantially in the form of Exhibit A hereto, duly executed and delivered by each Obligor that is a party to the Security Agreements and the Pledge Agreements and -28- 29 each other Loan Document which was executed and delivered pursuant to the Existing Credit Agreement. SECTION 3.6 Agent's Closing Fees, Expenses, etc. The Agent shall have received for its own account, and for the account of each Lender, as the case may be, all fees, costs and expenses due and payable pursuant to Section 11.3 (including consulting and legal fees and expenses). SECTION 3.7 Opinion of Counsel. The Agent and the Lenders shall have received a legal opinion, dated the Effective Date, in form and substance satisfactory to the Agent from Bracewell & Patterson, L.L.P, as to such matters as the Agent may reasonably request. SECTION 3.8 Execution of Counterparts. The Agent shall have received counterparts of this Amendment Agreement duly executed by the Borrower, the Parent, the Agent and the Lenders, and duly acknowledged by Petroleum, each of which counterparts shall be deemed to be an original and all of which shall constitute together but one and the same agreement. SECTION 3.9 Representations and Warranties. The Agent shall have received a certificate executed by the chief financial Authorized Officer of each of the Parent and the Borrower certifying that the representations and warranties set forth in Article VI of the Credit Agreement and in the other Loan Documents are true and correct in all material respects as of the Effective Date, and that no Default or Event of Default has occurred and is continuing. SECTION 3.10 Satisfactory Legal Form. All documents executed or submitted pursuant hereto by or on behalf of the Borrower, the Parent or any other Obligor shall be satisfactory in form and substance to the Agent and its counsel; the Agent and its counsel shall have received all information, approvals, opinions, documents or instruments as the Agent or its counsel may reasonably request. -29- 30 ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS In order to induce the Lenders and the Agent to enter into this Amendment Agreement, the Borrower and the Parent jointly and severally represent and warrant unto the Agent, each Issuer and each Lender as set forth in this Article IV. SECTION 4.1 Compliance With Warranties. The representations and warranties set forth in Article VI of the Credit Agreement and in each other Loan Document delivered in connection herewith or therewith are true and correct in all material respects with the same effect as if made on and as of the Effective Date (unless stated to relate solely to an earlier date). SECTION 4.2 Due Authorization, Non-Contravention, etc. The execution, delivery and performance by each of the Borrower, Petroleum and the Parent of this Amendment Agreement and each Loan Document to be executed by it in connection with the terms and conditions hereof, have been duly authorized by all necessary corporate action, and do not (i) contravene the Borrower's or the Parent's Organic Documents, (ii) contravene or result in a default under any contractual restriction, law or governmental regulation or court decree or order binding on or affecting the Borrower or the Parent or (iii) result in, or require the creation or imposition of, any Lien (except as contemplated in or created by the Loan Documents). SECTION 4.3 Validity, etc. This Amendment Agreement has been duly executed and delivered and is, and each other Loan Document to be executed and delivered by the Borrower, Petroleum or the Parent, as the case may be, will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Borrower and the Parent, as the case may be, enforceable in accordance with their respective terms; subject in each case to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally, and subject to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law). Each of such Loan Documents which purports to create a security interest creates a valid first priority security interest in the Collateral subject thereto, subject only to Liens permitted by Section 7.2.3, securing the payment of the Obligations. SECTION 4.4 No Material Adverse Change. There has been no event or occurrence, nor has any fact or state of facts existed, -30- 31 which could reasonably be expected to have a material adverse change in the financial condition, operations, assets, business, properties, revenues or prospects of the Parent and its Subsidiaries or the Borrower and its Subsidiaries, taken as a whole. SECTION 4.5 Compliance With Credit Agreement. As of the execution and delivery of this Amendment Agreement and as of the Effective Date, each of the Borrower, the Parent and each other Obligor is in compliance with all the terms and conditions of the Credit Agreement and the other Loan Documents to be observed or performed by it, and no Default has occurred and is continuing. ARTICLE V MISCELLANEOUS PROVISIONS SECTION 5.1 Ratification of Existing Credit Agreement. The Existing Credit Agreement, as expressly amended by the terms hereof, is hereby ratified, approved and confirmed in each and every respect. Except as specifically amended herein, the Existing Credit Agreement shall continue in full force and effect in accordance with the provisions thereof and except as expressly set forth herein the provisions hereof shall not operate as a waiver of any right, power or privilege of the Agent and the Lenders nor shall the entering into of this Amendment Agreement preclude the Lenders from refusing to enter into any further or future amendments. This Amendment Agreement shall be deemed to be a "Loan Document" for all purposes of the Credit Agreement and all other Loan Documents. SECTION 5.2 Consent and Acknowledgment of Guarantors, etc. By their signatures below, each of the Parent and Petroleum, each in their capacity as a guarantor and (where applicable) as a grantor of collateral security under a Loan Document, hereby acknowledge, consent and agree to this Amendment Agreement and hereby ratify and confirm their respective obligations under each guaranty and Loan Document executed and delivered by it in all respects. SECTION 5.3 Existing Credit Agreement, References, etc. All references to the Existing Credit Agreement in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Existing Credit Agreement as modified hereby. As used in the Existing Credit Agreement, the terms "Agreement", "herein", "hereinafter", "hereunder", "hereto" and words of similar import shall mean, from and after the applicable -31- 32 Effective Date, the Existing Credit Agreement as modified by this Amendment Agreement. SECTION 5.4 Headings. The various headings of this Amendment Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment Agreement or any provisions hereof. SECTION 5.5 Governing Law; Entire Agreement. THIS AMENDMENT AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. This Amendment Agreement constitutes the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes any prior agreements, written or oral, with respect thereto. This Amendment Agreement and the provisions contained herein may be modified only by an instrument in writing executed by the Borrower, the Parent, the Agent and the Lenders. IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written. E-Z SERVE CONVENIENCE STORES, INC., as the Borrower By: /s/ John T. Miller _________________________________ Title: Sr. Vice President E-Z SERVE CORPORATION, as the Guarantor/Parent By: /s/ John T. Miller _________________________________ Title: Sr. Vice President SOCIETE GENERALE, as the Agent By:_________________________________ -32- 33 Title: -33- 34 LENDERS: SOCIETE GENERALE By:________________________________ Title: BANK OF AMERICA TEXAS, N.A. By:_________________________________ Title: BANK ONE, LOUISIANA, N.A. By:_________________________________ Title: AMSOUTH BANK OF ALABAMA By:_________________________________ Title: HELLER FINANCIAL, INC. By:__________________________________ Title: THE FIRST NATIONAL BANK OF BOSTON -34- 35 By:__________________________________ Title: -35- 36 ACKNOWLEDGED, CONFIRMED AND AGREED TO WITH RESPECT TO SECTION 5.2: E-Z SERVE PETROLEUM MARKETING, INC. By:_______________________________ Title: -36- EX-10.6.1 23 AGREEMENT BETWEEN DILLON COMPANIES, INC. 1 EXHIBIT 10.6.1 E-Z SERVE Final December 1, 1994 AGREEMENT BETWEEN DILLON COMPANIES, INC. AND E-Z SERVE CONVENIENCE STORES, INC. 2 E-Z SERVE Final December 1, 1994 TABLE OF CONTENTS
Page ---- 1. Purchase And Sale Of Stock 1 2. Representations And Warranties 3 3. Covenants And Agreements 18 4. Closing 22 5. Severance Provisions 33 6. Tax Matters 37 7. Environmental 40 8. Termination 44 9. Indemnification 46 10. General Provisions 52
3 E-Z SERVE Final December 1, 1994 EXHIBITS 1.2 Time Saver Non-Property Assets & Liabilities 2.1(a)(iii) Exceptions to State Qualifications 2.1(a)(iii)(A) List of each jurisdiction that Time Saver and Delight are licensed or qualified to do business as a foreign corporation 2.1(a)(v) Missing approvals, licenses and permits to conduct business 2.1(a)(vi) Violations from execution and delivery 2.1(a)(vii) Time Saver and Delight Articles of Incorporation and bylaws 2.1(b) Outstanding options, rights, etc. 2.1(c) Owned investments, corporations, etc. 2.1(d) Time Saver and Delight Officers and Directors 2.1(f) Time Saver Liabilities since 1/2/94 2.1(g) Time Saver and Delight Agreements with Officers, Directors, Employees Consultants and Agents
4 E-Z SERVE Final December 1, 1994 2.1(h) Time Saver and Delight employee benefits, programs, etc. 2.1(i) Time Saver and Delight employee compensation, bonus, pension, profit sharing/retirement plan and collective-bargaining agreements 2.1(j)(i) Time Saver and Delight property subject to tax liens 2.1(j)(ii) Time Saver and Delight federal, state, and local tax returns since 1990 2.1(k) Time Saver and Delight violations or defaults - laws or regulations 2.1(l) Time Saver and Delight claims or court actions 2.1(m) Time Saver and Delight mortgage defaults 2.1(n) Title Exceptions 2.1(n)(i) Assignments of leases of real or personal property 2.1(n)(ii) Time Saver and Delight legal descriptions and surveys for each parcel real property owned in fee 2.1(p)(i) Time Saver store list - owned, leased, and franchised 2.1(p)(ii) Time Saver equipment
5 E-Z SERVE Final December 1, 1994 2.1(q) Violations of laws, etc. 2.1(r)(i) Time Saver and Delight material contracts/agreements 2.1(r)(ii) Non-Compete Agreements 2.1(s) Time Saver and Delight accounts and notes receivable 2.1(t)(i) Time Saver letters of credit/powers of attorney 2.1(t)(ii) Time Saver powers of attorney (governmental agencies) 2.1(u) Hazardous Materials Releases 2.1(v)(i) Discharged Liens 2.1(v)(ii) Dividends, etc. 2.1(v)(iii) Cancelled debts, claims, etc. 2.1(v)(iv) Extraordinary transactions 2.1(v)(v) Material adverse change in financial condition 2.1(v)(vi) Damage, destruction, etc.
6 E-Z SERVE Final December 1, 1994 2.1(v)(vii) Time Saver and Delight Intellectual Property 2.1(w) Employee Benefit Plans-Failures to Report/Contribute 2.2(b) E-Z suits, etc. 4.3(b) Shareholder Opinion of Counsel 4.3(b)(vi) Litigation and governmental investigations 4.4(a) Wiring Instructions 4.4(b) E-Z Opinion of Counsel 5.1(i) Time Saver Severance Policy 5.1(ii) E-Z Severance Policy 5.2 Employment Agreements 5.6 Employees with Wage Continuation - To be Attached at Closing 7.2(a)(i) Time Saver locations, owned or leased 7.2(a)(ii) UST Sites
7 E-Z SERVE Final December 1, 1994 7.2(a)(iii) Release, Qualified and Non-Qualified UST Sites 7.2(c) Time Saver Expenditures 7.2(d) Non-Release Sites 7.2(e) UST Sites containing non-operating underground storage tanks
8 E-Z SERVE Final December 1, 1994 LIST OF DEFINED TERMS "Claims " - as defined on Page 49 "Closing Financial Statements" - as defined on Page 3 "Code" - as defined on Page 8 "Confidentiality Agreement" - as defined on Page 20 "Damages" - as defined on Page 46 "Delight" - as defined on Page 3 "Eligible Employee" - as defined on Page 33 "Employee Benefit Plans" - as defined on Page 7 "Environmental Claim" - as defined on Page 13 "Environmental Law" - as defined on Page 14 "ERISA" - as defined on Page 7 "E-Z" - as defined on Page 1
9 E-Z SERVE Final December 1, 1994 "E-Z Indemnitees" - as defined on Page 46 "E-Z Severance Payment" - as defined on Page 33 "Financing" - as defined on Page 24 "Financial Statements" - as defined on Page 6 "401(k) Plan" - as defined on Page 34 "Fund" - as defined on Page 40 "GAAP" - as defined on Page 3 "Hazardous Materials" - as defined on Page 14 "H-S-R" - as defined on Page 19 "Material Adverse Effect" - as defined on Page 4 "Non-Property Capital" - as defined on Page 2 "Non-Qualified UST Sites - as defined on Page 41 "Non-Release Sites" - as defined on Page 42
10 E-Z SERVE Final December 1, 1994 "Profit Sharing Plan" - as defined on Page 34 "Purchase Price" - as defined on Page 2 "Qualifying Remediation" - as defined on Page 41 "Qualified UST Sites - as defined on Page 41 "Releases" - as defined on Page 14 "Release UST Sites" - as defined on Page 41 "Remediation" - as defined on Page 40 "Severance Period" - as defined on Page 33 "Shareholder" - as defined on Page 1 "Shareholder Indemnitees" - as defined on Page 48 "Shareholder Severance" - as defined on Page 33 "Stock" - as defined on Page 1 "Study" - as defined on Page 40
11 E-Z SERVE Final December 1, 1994 "Time Saver" - as defined on Page 1 "UST Sites" - as defined on Page 41 "Warehouse" - as defined on Page 40 "8023-A Statement" - as defined on Page 38
12 E-Z SERVE Final December 1, 1994 THIS AGREEMENT, made as of the 2nd day of December, 1994, by and between DILLON COMPANIES, INC. ("Shareholder"), a Kansas corporation with its principal place of business at 700 East 30th Street, Hutchinson, Kansas, and E-Z Serve Convenience Stores, Inc. ("E-Z"), a Delaware corporation with its principal place of business at 2550 North Loop West, Suite 600, Houston, Texas. WHEREAS, Shareholder is the sole shareholder of Time Saver Stores, Inc., a Kansas corporation ("Time Saver"); WHEREAS, E-Z, subject to the terms and conditions of this Agreement, desires to acquire all of the issued and outstanding capital stock (the "Stock") of Time Saver; and WHEREAS, the Shareholder, subject to the terms and conditions of this Agreement, desires to sell the Stock to E-Z; NOW, THEREFORE, in consideration of the mutual covenants, representations and warranties contained herein, the parties agree as follows: 1. PURCHASE AND SALE OF STOCK 1.1 Subject to the terms and conditions of this Agreement, E-Z shall purchase from Shareholder, and Shareholder shall sell, transfer and deliver to E-Z all right, title, and interest in and to all of the issued and outstanding shares of Stock, free and clear of all liens, pledges, claims, interests, and encumbrances of any kind, on the Closing Date, as 13 E-Z SERVE Final December 1, 1994 hereinafter defined in Article 4. The Shareholder will pay or provide for payment of all applicable stock transfer taxes. 1.2 The total purchase price (the "Purchase Price") to be paid for the Stock shall be Twenty Nine Million Nine Hundred Sixty Thousand Dollars ($29,960,000). Subject to the terms and conditions of this Agreement, E-Z shall, on the Closing Date, deliver the Purchase Price by wire transfer of funds to the Shareholder in accordance with Section 4.4. The Purchase Price shall be subject to adjustment (i) upward by an amount equal to the amount by which Time Saver's Non-Property Capital, as defined below, exceeds $0, or (ii) downward by an amount equal to the amount by which the Non-Property Capital is less than $0. For purposes of this Agreement, the "Non-Property Capital" shall be equal to Time Saver's non-property assets evidenced by the accounts listed on Exhibit 1.2 attached hereto minus Time Saver's non-property liabilities evidenced by the accounts listed on Exhibit 1.2 attached hereto, with all such accounts determined in the same manner as the Closing Financial Statements, as defined below. If the Purchase Price is required to be adjusted pursuant to this section, Shareholder or E-Z, as the case may be, shall, within 15 business days after (i) the date on which copies of the Closing Financial Statements shall have been delivered to Shareholder and E-Z, or (ii) the final determination pursuant to Section 10.8 of the adjustment to the Purchase Price, pay to the other party, by wire transfer of funds, an amount equal to the total Purchase Price adjustment; provided, however, that to the extent the parties agree on an amount that is due pursuant to this Section 1.2, such amount shall be paid inaccordance with clause (i) above and any disputed amount shall be paid in accordance 2 14 E-Z SERVE Final December 1, 1994 with clause (ii) above. The Time Saver financial statements, including a balance sheet and statement of income, for the partial year ended as of the Closing Date (the "Closing Financial Statements"), shall be prepared by Shareholder within thirty (30) days after the Closing Date, in accordance with generally accepted accounting principles ("GAAP") applied on a basis consistent with the basis on which the Financial Statements (as defined at Section 2.1(e)) were prepared (including usual and customary adjustments of the kind ordinarily made at year-end) and shall be consolidated to include the financial affairs of Time Saver's wholly-owned subsidiary, Delight Distributing and Sales Co., Inc. ("Delight"). 2. REPRESENTATIONS AND WARRANTIES 2.1 The Shareholder represents and warrants to E-Z that each of the following will be true and correct as of the date hereof and as of the Closing Date: (a) (i) Time Saver is a corporation duly organized, validly existing and in good standing under the laws of the State of Kansas. Delight is a corporation duly organized, validly existing and in good standing under the laws of the State of Louisiana. (ii) Each of Time Saver and Delight has the corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted in each jurisdiction wherein such properties are located and such business is currently conducted; 3 15 E-Z SERVE Final December 1, 1994 (iii) Except as described on Exhibit 2.1(a)(iii), each of Time Saver and Delight is duly qualified as a foreign and domestic corporation, respectively, and is in good standing in every jurisdiction in which the nature of its business or of its properties makes such qualification necessary. Exhibit 2.1(a)(iii)(A) contains a list of each jurisdiction in which Time Saver and Delight are duly licensed or qualified to do business as a foreign corporation; (iv) The Shareholder has the corporate power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform all the terms and conditions hereof to be performed by it. This Agreement constitutes the valid and binding obligation of the Shareholder enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting enforcement of creditors' rights generally and by general principles of equity (whether applied in a proceeding at law or in equity); (v) Except as otherwise disclosed on Exhibit 2.1(a)(v), Time Saver and Delight have received and maintain all approvals, licenses, and permits of federal, state and local authorities necessary for them to conduct their respective business as currently conducted, except to the extent that the failure to receive same will not have a material adverse effect on the business, assets, operations, properties, prospects or condition of Time Saver and Delight, taken as a whole ("Material Adverse Effect"); (vi) Except as listed on Exhibit 2.1(a)(vi), the execution and delivery of this Agreement and the related documents required herein and the consummation of the transaction contemplated hereby will not violate any provision of, or result in the 4 16 E-Z SERVE Final December 1, 1994 acceleration of any obligation under, the Articles of Incorporation, any bylaw, mortgage, loan, lien, lease, agreement, indenture, order, arbitration, award, judgment or decree to which Time Saver or Delight is a party or by which Time Saver or Delight is bound and will not violate any other restriction of any kind or character to which Time Saver or Delight is subject, except to the extent that same will not result in a Material Adverse Effect; and (vii) the certified copies of Time Saver's and Delight's Articles of Incorporation and bylaws attached as Exhibit 2.1(a)(vii) are true, complete and correct, have not been further amended or repealed, and are in full force and effect. (b) The total authorized capital stock of Time Saver consists of One Hundred (100) common shares, $100 par value per share. Of the authorized shares of Time Saver, One Hundred (100) shares are issued and outstanding and are owned beneficially and of record by Shareholder. The total authorized capital stock of Delight consists of One Thousand (1,000) common shares, no par value per share. Of the authorized shares of Delight, Nine Hundred Ten (910) shares are issued and outstanding and are owned beneficially and of record by Time Saver. All such issued and outstanding shares of Time Saver and Delight are legally and validly issued, fully paid and non-assessable. Except as listed on Exhibit 2.1(b), there are no outstanding options, subscription rights, warrants, preemptive rights or commitments of any kind, which restrict, or grant rights with respect to, the Stock, the issued and outstanding capital stock of Delight, or the authorized but unissued capital stock of Time Saver or Delight or which create any right to purchase or which impose or 5 17 E-Z SERVE Final December 1, 1994 grant any lien, encumbrance, or claim with respect to any of such shares. Shareholder has full legal right to sell, assign and transfer the Stock to E-Z and will, upon delivery of the Stock to E-Z pursuant to the terms hereof, transfer to E-Z good and valid title to the Stock free and clear of all liens, security interests, claims, charges, encumbrances, rights, options to purchase, voting trusts or other voting agreements and calls and commitments of every kind affecting the Stock. (c) Except as otherwise listed on Exhibit 2.1(c), Time Saver does not own, directly or indirectly, any investment, whether debt or equity, in any corporation, partnership, business, trust or other entity and is not a party to any partnership or joint venture or similar arrangement. (d) The minute books of Time Saver and Delight contain substantially complete and accurate records of all material meetings, proceedings and actions of their respective shareholders and board of directors. Such minute books will be delivered to E-Z on or before the Closing Date. Attached hereto as Exhibit 2.1(d) is a complete list of the officers and directors of Time Saver and Delight as of the date hereof. (e) The Shareholder (i) has furnished to E-Z the unaudited consolidated financial statements, including balance sheets and the related statements of income, of Time Saver for the two consecutive fiscal years ended January 3, 1993, and January 2, 1994, and the interim unaudited consolidated financial statements of Time Saver for the nine month period ended October 2, 1994 (collectively, the "Financial Statements"), and (ii) has made available such other financial reports and examinations as are reasonably necessary to show the financial condition and results of operation of Time Saver. 6 18 E-Z SERVE Final December 1, 1994 (f) Except as otherwise listed on Exhibit 2.1(f), since January 2, 1994, neither Time Saver nor Delight has incurred any liabilities or obligations of any kind (whether absolute, accrued, contingent or otherwise and whether due or to become due) not incurred in the ordinary course of business, consistent with past practices. The Financial Statements fairly present the consolidated financial position and results of operation of Time Saver as of and for the periods indicated, in conformity with GAAP applied on a consistent basis, except as otherwise disclosed therein. Except to the extent reflected in or reserved against in the Financial Statements, Time Saver did not, as of the date of such Financial Statements, have any liabilities or obligations of any nature, either accrued, absolute, contingent or otherwise, including, without limitation, tax liabilities due or accruable, and no basis exists for the assertion of any such liability or obligation against Time Saver which was not fully reflected or reserved against in such Financial Statements or disclosed in Exhibit 2.1(f), other than those which would not result in a Material Adverse Effect. (g) Exhibit 2.1(g) lists all agreements with any officers, directors, employees, consultants and agents of Time Saver or Delight not terminable at the will of Time Saver or Delight. (h) Except as disclosed on Exhibit 2.1(h), neither Time Saver nor Delight has any employee benefit plans, policies, programs and arrangements and all related contracts, agreements and other descriptions thereof with respect to the employee benefits provided to the employees of Time Saver or Delight prior to the Closing Date (collectively, the "Employee Benefit Plans") that are subject to Title IV of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the minimum funding obligations of 7 19 E-Z SERVE Final December 1, 1994 Section 412 of the Internal Revenue Code of 1986, as amended (the "Code"); and neither Time Saver, Delight, nor any entity required to be aggregated therewith pursuant to Section 414(b) or (c) of the Code has any liability under Title IV of ERISA or under Section 412(f) or 412(n) of the Code. (i) Time Saver and Delight employees do not participate in any deferred compensation, bonus, pension, profit sharing or retirement plan, or collective bargaining contracts, except as described on Exhibit 2.1(i). Copies of all such agreements and plans have been furnished to E-Z. (j) Time Saver and Delight have paid or made provision for payment of all taxes due or levied against them by the federal, state, municipal or other taxing authorities, including but not limited to corporation taxes, franchise taxes, federal, state and local income taxes, stamp, excise and excess profits taxes, federal unemployment and insurance taxes, capital stock taxes, and all taxes levied by any taxing authority. Except as described in Exhibit 2.1(j)(i), none of Time Saver's or Delight's property, or the Stock to be acquired hereby, is subject to any lien for the payment of any taxes of Time Saver or Delight currently due and payable. All tax reports and returns required by any applicable law or governmental regulation have been duly filed by Time Saver or Delight, as applicable. Attached as Exhibit 2.1(j)(ii) is a true and complete list of all federal, state and local tax returns, including state capital stock tax returns, of Time Saver and Delight which have been filed since January 1, 1990, identifying the returns which, as of the Closing Date, have been or 8 20 E-Z SERVE Final December 1, 1994 are being audited or for which notice of audit has been received. Such returns or copies thereof have been provided to E-Z. There are no tax deficiencies now being asserted against Time Saver or Delight. (k) Except as otherwise disclosed on Exhibit 2.1(k), neither Time Saver nor Delight is in violation of or default under any law or regulation, including all laws and regulations governing labor relations and employment, nor is Time Saver or Delight under any order of any court or federal, state, municipal or other governmental body other than those which would not result in a Material Adverse Effect. Each of Time Saver and Delight has all governmental permits, licenses, and other authorizations, including all licenses for the sale of alcoholic beverages, necessary to the conduct of its business in the manner and in the areas in which such business is at present conducted. No action or proceeding contemplating any revocation or suspension of such permits, licenses or authorizations is pending or, to the best knowledge of the Shareholder, threatened except those which would not result in a Material Adverse Effect. (l) Neither Time Saver nor Delight is a party to any action in any court or before any governmental board, agency or body, and there are not any claims in law or at equity against Time Saver or Delight and, to the best knowledge of the Shareholder, none are threatened, except as listed on Exhibit 2.1(l) or those which would not result in a Material Adverse Effect. 9 21 E-Z SERVE Final December 1, 1994 (m) Except as listed on Exhibit 2.1(m), neither Time Saver nor Delight is in default under, and no condition exists that, with notice or lapse of time or both, would constitute a default under (i) any mortgage, loan agreement, indenture, evidence of indebtedness or other instrument evidencing borrowed money to which it or any of its properties are bound, (ii) any judgment, order, or injunction of any court, arbitrator, or governmental agency, or (iii) any other agreement, except for such defaults and conditions that, individually or in the aggregate, will not result in a Material Adverse Effect. (n) Time Saver has possession, as owner in possession or as lessee (or franchises through a franchise arrangement), of not less than 116 operating convenience store locations. On the Closing Date, each of Time Saver and Delight will have good and marketable title to all of the properties and assets, real and personal, tangible and intangible, which it purports to own, subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance, or charge other than those of record or which would not unreasonably interfere with the use of the property in the manner as being conducted by Time Saver or Delight as of the date hereof, except as otherwise shown on Exhibits 2.1(n). Each real or personal property lease of Time Saver or Delight is in writing, is in full force and effect, and, to the best of Shareholder's knowledge, constitutes the legal, valid and binding obligation of the respective parties thereto, enforceable in accordance with its terms, except as such enforceability may be limited or affected by applicable bankruptcy, reorganization, insolvency, moratorium, or other laws relating to or affecting generally the enforcement of creditors' rights and by equitable principles. Except as listed 10 22 E-Z SERVE Final December 1, 1994 on Exhibit 2.1(n)(i), no lease of real or personal property has been assigned by Time Saver or Delight. The Shareholder is not aware of any default in any mortgage or deed of trust on premises leased by Time Saver or Delight. Each real property owned in fee by Time Saver or Delight on the Closing Date will be free and clear from any mortgage, pledge, lien, conditional sale contract, encumbrance, easement, covenant, restriction, right of occupancy, or charge, other than those reflected in Exhibit 2.1(n) and those of record or which would not unreasonably interfere with the use of the property in the manner as being conducted by Time Saver or Delight as of the date hereof. Exhibit 2.1(n)(ii) sets forth complete and accurate copies of all legal descriptions and surveys (to the extent available) for each parcel of real property owned in fee by Time Saver or Delight as of the Closing Date. (o) Each of the buildings and the equipment of Time Saver and Delight is maintained as of the date hereof, and will be as of the Closing Date, in substantial conformity with each lease, if applicable, and in substantial compliance with all applicable laws, ordinances, regulations, building, zoning and other similar codes and laws except to the extent that such failure to comply would not result in a Material Adverse Effect. (p) Exhibit 2.1(p)(i) lists all of the store locations owned or leased by Time Saver and identifies whether each location is owned or leased, and whether it is franchised. Lists of all the equipment owned by Time Saver and Delight have been or will be provided to E-Z at least ten (10) days prior to the Closing Date. Such lists contain a 11 23 E-Z SERVE Final December 1, 1994 general representation of the equipment so owned but are not warranted to be complete or accurate. Lists of all the equipment leased by Time Saver and Delight are attached hereto as Exhibit 2.1(p)(ii). (q) Each of Time Saver and Delight is conducting its business in substantial conformity with all applicable federal, state and municipal laws, ordinances and regulations and with all rules and regulations of all governmental agencies and authorities having jurisdiction over such business except where such noncompliance would not result in a Material Adverse Effect, or except as disclosed on Exhibit 2.1(q). (r) Attached as Exhibit 2.1(r)(i) is a complete and accurate list as of the Closing Date of all material contracts and agreements (other than the store and equipment leases referred to in Section 2.1(p)) to which Time Saver or Delight is a party or by which it or any of its property is bound. A contract or agreement shall be deemed material if the annual amounts owed by or owing to Time Saver or Delight exceed $25,000.00. To the best of Shareholder's knowledge, each such contract or agreement is in full force and effect and constitutes the legal, valid and binding obligation of the respective parties thereto enforceable in accordance with its terms, except as such enforceability may be limited or affected by applicable bankruptcy, reorganization, insolvency, moratorium, or other laws relating to or affecting generally the enforcement of creditors' rights and by equitable principles. Neither Time Saver nor Delight has been notified that it is in breach in any material respect under any such instrument. To the best of Shareholder's knowledge, no party other than Time Saver or Delight is in breach of any of the material provisions thereof, and there has not occurred any event which with the passage of time or the giving of notice would constitute such a breach. 12 24 E-Z SERVE Final December 1, 1994 Except as contained in contracts, leases, or agreements delivered to E-Z under this Agreement or as disclosed in Exhibit 2.1(r)(ii), neither Time Saver nor Delight is a party to any contract or agreement limiting its freedom to engage in any line of business or to compete with any person or entity. (s) Exhibit 2.1(s) lists, as of October 2, 1994, the accounts receivable (in the form of an aged account balance) and notes receivable of Time Saver and Delight. (t) Except as otherwise disclosed on Exhibit 2.1(t)(i), Time Saver and Delight do not have any outstanding letters of credit or powers of attorney, except routine powers of attorney relating to representation before governmental agencies which are disclosed on Exhibit 2.1(t)(ii). (u) (1) For this Section 2.1(u), the following definitions shall apply: Environmental Claim shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, orders, notices of noncompliance or violations, investigations or proceedings relating in any way to any Environmental Law (for purposes of this definition, "Claims") or any permit issued under any such Environmental Law, including without limitation (i) any and all Claims by governmental or regulatory authorities or private parties for enforcement, cleanup, removal, remedial or other actions for damages pursuant to any applicable Environmental Law and (ii) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous 13 25 E-Z SERVE Final December 1, 1994 Materials or arising from alleged injury or threat of injury to health, safety or the environment. Environmental Law shall mean any federal, state or local statute, law, rule, regulation, ordinance, code, policy or rule of common law now in effect and in each case as amended and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree, guidance policy or judgment, relating to Hazardous Materials, the environment or health relating to or arising from environmental conditions. Hazardous Materials shall mean any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar import under any applicable Environmental Law. (2) Except as disclosed on Exhibit 2.1(u), except as contemplated by Article 7 hereof and except where it would not have a Material Adverse Effect, (A) Hazardous Materials have not been disposed, discharged, injected, spilled, leaked, leached, dumped, emitted, escaped, emptied, allowed to seep, placed and the like, into or upon any land or water or air, or otherwise allowed to enter into the environment (collectively, "Releases") by Time Saver and Delight, their authorized agents or their independent contractors (including suppliers) on the real property owned or leased by Time Saver and Delight or any property adjoining such real property except such Releases which do not violate any Environmental Laws, (B) each of Time Saver and Delight is in compliance with all applicable Environmental Laws and the requirements of any permits issued under such 14 26 E-Z SERVE Final December 1, 1994 Environmental Laws with respect to such real property, (C) there are no pending or, to the best knowledge of the Shareholder, threatened Environmental Claims against Time Saver and Delight or such real property, or (D) there are no facts or circumstances, conditions, pre-existing conditions or occurrences on such real property known to the Shareholder, Time Saver or Delight that could reasonably be anticipated (x) to form the basis of an Environmental Claim against either of Time Saver and Delight or such real property, or (y) to cause such real property to be subject to any restrictions on the ownership, occupancy, use or transferability of such real property under any Environmental Law. . (v) From the date of the latest Financial Statements furnished to E-Z to the Closing Date: (i) Except as otherwise disclosed on Exhibit 2.1(v)(i), neither Time Saver nor Delight has discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent) other than current liabilities shown on such Financial Statements and current liabilities incurred since the date thereof in the ordinary course of business; (ii) Except as otherwise disclosed on Exhibit 2.1(v)(ii), Time Saver has not declared or made or agreed to declare or make any payment of dividends or distributions of any assets of any kind whatsoever to Shareholder, or purchased or redeemed, or agreed to purchase or redeem, any of Time Saver's capital stock; (iii) Except as otherwise disclosed on Exhibit 2.1(v)(iii), neither Time Saver nor Delight has cancelled or agreed to cancel any debts or claims, except in the ordinary 15 27 E-Z SERVE Final December 1, 1994 course of business, or suffered any extraordinary losses or waived any extraordinary rights or values; (iv) Except as otherwise disclosed on Exhibit 2.1(v)(iv), neither Time Saver nor Delight has entered into any transaction, terminated or materially amended any contract or agreement or incurred any liability, other than in the ordinary course of business; (v) Except as otherwise disclosed on Exhibit 2.1(v)(v), there has not been any material and adverse change in the financial condition, assets, liabilities, income, business or prospects, taken as a whole, of Time Saver or Delight; and (vi) Except as listed on Exhibit 2.1(v)(vi), there has not been any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the property or business of Time Saver or Delight. (vii) To the best knowledge of the Shareholder and except as otherwise disclosed on Exhibit 2.1(v)(vii), all trade names, trademarks, copyrights, patents and applications, if any, whether currently issued or pending, currently used by each of Time Saver and Delight are its property free and clear of all encumbrances, and each of Time Saver and Delight has the right to bring actions for the infringement thereof. Exhibit 2.1(v)(vii) lists all such intellectual property and, where applicable, identifies the registration of each. 16 28 E-Z SERVE Final December 1, 1994 (viii) Copies of the leases, which have been or will be furnished, prior to the Closing Date, to E-Z are complete and, except as have been provided to or requested by E-Z, there are no amendments or modifications thereto, or separate agreements, which change the terms and conditions thereof. Time Saver is not in default in any material respect under any such lease, and there has not occurred any event which with the passage of time or the giving of notice or both would constitute such a default. (w) Except as disclosed on Exhibit 2.1(w), Time Saver and Delight have made the contributions required and due to be paid under the Employee Benefit Plans, satisfied all reporting requirements to federal, state and local governments and governmental agencies and to all Employee Benefit Plan participants and beneficiaries, and satisfied the applicable requirements under Part 6 of Title I of ERISA and Section 4980B of the Code, except to the extent that any failure would not result in a Material Adverse Effect. (x) To Shareholder's knowledge, there is no transaction in connection with the Employee Benefit Plans which would be subject to either a civil penalty assessed pursuant to Section 502 of ERISA, a tax imposed by Section 4975 of the Code or liability for breach of fiduciary responsibility under ERISA. 2.2 E-Z represents and warrants to Shareholder, as of the date hereof and on the Closing Date: 17 29 E-Z SERVE Final December 1, 1994 (a) The execution of this Agreement by E-Z and the consummation of the transactions contemplated hereby are duly and validly authorized by all necessary corporate action. (b) Except as set forth in Exhibit 2.2(b), there is no suit, action, legal, administrative or other proceeding or investigation, contract, indenture, mortgage, or loan agreement relating to E-Z which adversely affects E- Z's right or ability to consummate the transactions contemplated by this Agreement. (c) E-Z is purchasing the Stock for its own account for investment only and not with a view to any further resale or distribution thereof. (d) This Agreement constitutes the valid and binding agreement of E-Z, enforceable in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, reorganization, insolvency, moratorium, or other laws relating to or affecting generally the enforcement of creditors' rights and by equitable principles. 3. COVENANTS AND AGREEMENTS 3.1 Shareholder agrees, from and after the date hereof and to the Closing Date: 18 30 E-Z SERVE Final December 1, 1994 (a) To make all governmental filings required, including those required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "H-S-R"), and promptly to comply with all requests for additional information that may be made in connection therewith. (b) To continue to operate the business of Time Saver and Delight in the ordinary course of business in substantially the same manner as prior to the date hereof. (c) To notify E-Z of any change in circumstance of which its senior management becomes aware between the date hereof and the Closing Date which would result in a Material Adverse Effect. (d) Except as otherwise provided in this Agreement, not to dispose of the assets of Time Saver or Delight except in the ordinary course of business or consistent with past practices. 3.2 The Shareholder will afford to E-Z and its authorized representatives reasonable access to Time Saver's and Delight's financial, title, tax, corporate and legal materials and operating data and information available as of the date hereof and which becomes available to the Shareholder at any time prior to the Closing Date, and will furnish to E-Z such other information as it may reasonably request, unless any such access and disclosure would violate the terms of any agreement to which the Shareholder, Time Saver or Delight is bound or any applicable law or regulation. The Shareholder will use its reasonable business efforts to secure all requisite consents for the examination by E-Z and its representatives of all information covered by confidentiality agreements. The 19 31 E-Z SERVE Final December 1, 1994 Shareholder will cause Time Saver and Delight to allow E-Z access to and consultation with the lawyers, accountants, and other professionals employed by or used by Time Saver and Delight for all purposes under this Agreement. Any such consultation and access to information and data shall occur under circumstances appropriate to maintain intact the attorney-client privilege as to privileged communications and attorney work product. Additionally, the Shareholder will afford to E-Z and its authorized representatives reasonable access to the books and records of the Shareholder insofar as they relate to property, accounting and tax matters of Time Saver and Delight. Until the Closing Date, the confidentiality of any data or information so acquired shall be maintained by E-Z and its representatives pursuant to the terms of that certain Letter Agreement between E-Z and Shareholder dated September 29, 1994 (the "Confidentiality Agreement"). Further, the Shareholder will afford to E-Z and its authorized representatives reasonable access from the date hereof until the Closing Date, during normal business hours, to Time Saver's and Delight's assets and properties; provided that such access shall be at the sole cost, expense and risk of E-Z. The Shareholder acknowledges that E-Z has had access and will continue to have access to the senior management of Time Saver and Delight and that each of such members of senior management is entitled to reveal to E-Z and its representatives information concerning Time Saver and Delight that may be deemed confidential and proprietary. 3.3 The Shareholder and E-Z shall use their reasonable business efforts to (i) obtain all approvals and consents required by or necessary for the transactions contemplated by this Agreement, and (ii) ensure that all of the conditions to the obligations of E-Z and the Shareholder contained in Article 4 are satisfied timely. 20 32 E-Z SERVE Final December 1, 1994 3.4 After the Closing Date, the Shareholder shall not, directly or indirectly, use or provide to, or shall not permit any affiliate, directly or indirectly, to use or provide to any other person any non-public information concerning the business or operations (financial or other) of Time Saver and Delight, except as on the advice of counsel is required in governmental filings or judicial, administrative or arbitration proceedings. 3.5 The Shareholder shall give E-Z prompt notice if at any time on or prior to the Closing Date there is a change in any state of facts, or there is the occurrence, nonoccurrence or existence of any event subsequent to the date of this Agreement, which change or event is known to any executive officer of the Shareholder and which would make any representation and warranty (including the information set forth in the Exhibits) made by the Shareholder to E-Z not true or correct in any material respect, it being the intention of the parties to this Agreement that the Shareholder shall engage in a continuous disclosure process from the date of this Agreement through the Closing Date. 3.6 Shareholder will provide to E-Z reasonable information systems support for fiscal year 1994 as necessary in preparation of W-2 statements for Time Saver and Delight employees. In addition, Shareholder will furnish to E-Z, for a period of ninety (90) days from the Closing Date, reasonable processing support for financial systems and warehouse systems in order to ease the transition of processing data from Shareholder's systems to E-Z's systems. 3.7 E-Z agrees, from and after the date hereof and to the Closing Date: 21 33 E-Z SERVE Final December 1, 1994 (a) To make all governmental filings required, including those required under the H-S-R, and promptly to comply with all requests for additional information that may be made in connection therewith. (b) To treat all information received from Shareholder, Time Saver or Delight, prior to or after the date of this Agreement, as strictly confidential and to use same only in furtherance of the transactions contemplated by this Agreement. (c) To use its reasonable best efforts to obtain the Financing, as hereinafter defined. 4. CLOSING This transaction shall be closed at the offices of counsel for E-Z in Houston, Texas, at 10:00 a.m., or as soon thereafter as practicable, on December 16, 1994, or such other place, date or time as the parties hereto shall mutually agree (the "Closing Date"). 4.1 The obligation of E-Z to proceed with the closing contemplated hereby is subject to the satisfaction on or prior to the Closing Date of all of the following conditions, any one or more of which may be waived in writing, in whole or in part, by E-Z: (a) The Shareholder shall have complied in all material respects with each of its covenants and agreements contained herein and each of its representations and warranties contained in this Agreement shall be deemed to have been made again at and as of the Closing Date and shall then be true and correct in all material respects. 22 34 E-Z SERVE Final December 1, 1994 (b) E-Z shall have received a certificate, dated as of the Closing Date, of an executive officer of the Shareholder certifying as to the matters specified in Section 4.1(a) hereof. (c) All necessary filings with and consents of any governmental authority or agency required for the consummation of the transactions contemplated in this Agreement shall have been made and obtained, all waiting periods with respect to filings made with governmental authorities in contemplation of the consummation of the transactions described herein shall have expired or been terminated, and no action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit E-Z's acquisition of the Stock and no governmental agency or body shall have taken any other action as a result of which the management of E-Z reasonably deems it inadvisable to proceed with the transactions hereunder. (d) The Shareholder shall have delivered such resignations effective as of the Closing Date of any officer or director of Time Saver and Delight as may be requested by E-Z. (e) The Shareholder shall have, as of the Closing Date, caused Time Saver and Delight to cancel the authority of each person who is listed on Exhibit 2.1(g) hereto to draw checks on or withdraw funds from any of the bank accounts maintained by Time Saver and Delight, except for any person designated by E-Z in writing prior to the Closing Date, and shall provide to E-Z evidence of said cancellation. 23 35 E-Z SERVE Final December 1, 1994 (f) All actions, proceedings, instruments and documents required to carry out this Agreement or incidental hereto and all other related legal matters shall have been approved by counsel to E-Z and such counsel shall have been furnished with all such documents and instruments as it shall have reasonably requested in connection with the transactions contemplated herein. (g) No suit, action or other proceeding shall be pending in which there is sought any remedy to restrain, enjoin or otherwise prevent the consummation of this Agreement or the transactions in connection herewith. (h) E-Z shall have received evidence of notice of the termination of Time Saver's contract for money orders with Travelers Express as of a date designated in writing by E-Z. (i) Shareholder shall have approved the assignment of the lease between Dillon Real Estate Co., Inc., as lessor, and Time Saver, as lessee, for the Warehouse, as hereinafter defined, if requested by E-Z, subject to Time Saver remaining primarily liable under said lease. (j) E-Z Serve shall have received financing for the purchase of the Stock on terms reasonably acceptable to E-Z (the "Financing"). (k) The Shareholder shall have contributed all long term debt payable by Time Saver and Delight to the Shareholder or any affiliate thereof and all other accounts payable by Time Saver and Delight to the Shareholder or any affiliate thereof to the capital 24 36 E-Z SERVE Final December 1, 1994 of Time Saver or Delight, as applicable, as additional paid in capital, and all other intercompany accounts between the Shareholder or any affiliate thereof on the one hand and Time Saver and Delight on the other hand, and all deferred income taxes of Time Saver and Delight, shall be eliminated by contribution to capital, dividend or payment. (l) The Shareholder shall have caused to be contributed to Time Saver the real property owned by the Shareholder or its subsidiaries in fee that is associated with Time Saver or Delight locations and shall have delivered executed special warranty deeds for such real property, subject to all matters affecting title existing on the date of acquisition of such real property by Dillon Real Estate Co., Inc. and any subsequent encumbrances by Dillon Real Estate Co., Inc., in form and substance reasonably satisfactory to E-Z. (m) Shareholder shall have furnished to E-Z copies of surveys and title insurance policies in Shareholder's possession, for E-Z's review in addition to any title reports which E-Z may elect to obtain at E-Z's sole cost and expense. E-Z shall only be entitled to object to matters affecting title which would unreasonably interfere with the use of the fee properties in the manner in which the properties are being used as of the date hereof, and by giving written notice thereof to Shareholder (the "Objection"). Should Shareholder fail to cure such Objection to E-Z's reasonable satisfaction, which Shareholder shall in no event be obligated to do, E-Z may terminate this Agreement pursuant to Article 8 hereof. (n) Shareholder shall have made the deliveries as set forth in Section 4.3 below. 25 37 E-Z SERVE Final December 1, 1994 4.2 The obligation of the Shareholder to proceed with the Closing contemplated hereby is subject to the satisfaction on or prior to the Closing Date of all of the following conditions, any one or more of which may be waived in writing, in whole or in part, by the Shareholder: (a) E-Z shall have complied in all material respects with its covenants and agreements contained herein and each of its representations and warranties contained in this Agreement shall be deemed to have been made again at and as of the Closing Date and shall then be true in all material respects. (b) The Shareholder shall have received a certificate, dated the Closing Date, of an executive officer of E-Z certifying as to the matters specified in Section 4.2(a) hereof. (c) All necessary filings with and consents of any governmental authority or agency or lessor required for the consummation of the transactions contemplated in this Agreement shall have been made and obtained, all waiting periods with respect to filings made with governmental authorities in contemplation of the consummation of the transactions described herein shall have expired or been terminated, and no action or proceeding before a court or any other governmental agency or body shall have been instituted or threatened to restrain or prohibit E-Z's acquisition of the Stock and no governmental agency or body shall have taken any other action as a result of which the management of the Shareholder reasonably deems it inadvisable to proceed with the transactions hereunder. 26 38 E-Z SERVE Final December 1, 1994 (d) All actions, proceedings, instruments and documents required to carry out this Agreement or incidental hereto and all other related legal matters shall have been approved by counsel to the Shareholder and such counsel shall have been furnished with all such documents and instruments as it shall have reasonably requested in connection with the transactions contemplated herein. (e) No suit, action or other proceeding shall be pending in which there is sought any remedy to restrain, enjoin or otherwise prevent the consummation of this Agreement or the transactions in connection herewith. (f) E-Z shall have made the deliveries as set forth in Section 4.4 below. 4.3 On the Closing Date, Shareholder shall deliver to E-Z: (a) Certificates representing all of the Stock, duly endorsed in blank, in form suitable for transfer, containing no contractual restrictions whatsoever, free and clear of all liens, claims and encumbrances. (b) An opinion of counsel, in the form attached as Exhibit 4.3(b), dated the Closing Date, to the effect that: (i) Each of Time Saver and Delight is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has the corporate power and authority to own and lease its properties and carry on its business as now conducted; 27 39 E-Z SERVE Final December 1, 1994 (ii) Each of Time Saver and Delight is duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each jurisdiction in which it conducts significant business and in which failure so to qualify would have a material adverse effect on Time Saver, Delight, their respective business or properties; (iii) this Agreement constitutes the valid and binding obligation of the Shareholder and is enforceable in accordance with its terms except as enforcement thereof may be limited or affected by applicable bankruptcy, insolvency or other laws relating to or affecting generally the enforcement of creditors' rights and by equitable principles; (iv) the total authorized capital stock of Time Saver consists of 100 common shares, $100 par value per share, of which 100 common shares are outstanding and the total authorized capital stock of Delight consists of 1,000 common shares, no par value per share, 910 of which are outstanding. (v) the execution and delivery of this Agreement and the other agreements referenced herein by Shareholder and the performance by the Shareholder of its obligations thereunder will not violate any provision of any existing law or regulation applicable to Shareholder, Time Saver or Delight, or of any order, judgment, award or decree, known to us after due inquiry, of any court, arbitrator or governmental authority applicable to the Shareholder, Time Saver or Delight, the Articles of Incorporation or bylaws or, or any securities issued by, the Shareholder, Time Saver or Delight or any mortgage, indenture, lease, contract or other agreement, instrument or undertaking, known to us after due inquiry, to which Shareholder, Time Saver or Delight is a party or by which 28 40 E-Z SERVE Final December 1, 1994 the Shareholder, Time Saver or Delight or any of their respective assets is bound, and will not result in, or require, the creation or imposition of any lien on any of Time Saver's or Delight's property, assets or revenues pursuant to the provisions of any such mortgage, indenture, lease, contract or other agreement, instrument or undertaking. (vi) except as otherwise stated herein, there is no litigation or investigation pending or to the best knowledge of such counsel after due inquiry, threatened, in any court, legislative or administrative body which if adversely decided would in the aggregate result in any material adverse change in the condition, financial or otherwise, assets, liabilities, business or prospects, taken as a whole, of Time Saver or Delight, or which would cast any question upon Shareholder's title to the Stock, or which questions the validity of any action taken or to be taken by the Shareholder in connection with the transactions contemplated hereby, and such counsel does not know or reasonably has any ground to know, of any basis for any such litigation, proceeding or investigation; Attached hereto as Exhibit 4.3(b)(vi) is an accurate list of all material litigation and governmental investigations pending or, to the best knowledge of such counsel after due inquiry, threatened, involving any court, legislative or administrative body, in which Time Saver or Delight is a party. (vii) Shareholder has full corporate power and authority to sell and deliver the Stock, and no provision of the Articles of Incorporation or bylaws of Time Saver or Delight or any other contract or agreement creates any lien or encumbrance upon or prevents the Shareholder from delivering to E-Z, in the manner contemplated by this Agreement, good, valid and merchantable title to the Stock. 29 41 E-Z SERVE Final December 1, 1994 In rendering such opinions, counsel is authorized to rely, provided counsel has no reason to question any of the recitals therein, on certificates of public officials or on certificates or statements of officers of Time Saver, Delight and Shareholder, with respect to factual matters upon which such opinion is based, or opinion of other counsel (which other counsel shall be identified by name) which such counsel shall reasonably consider appropriate and upon which such counsel's opinion is based. (c) A certificate of good standing for Time Saver from the Secretaries of State of Kansas and Louisiana and a certificate of good standing for Delight from the Secretary of the State of Louisiana dated no more than ninety (90) days prior to the Closing Date. (d) Certified copies of all resolutions authorizing the transactions contemplated hereunder. (e) All minute books, corporate and other records of Time Saver and those of Delight and predecessor corporations or other business entities of each. 4.4 On the Closing Date, E-Z shall deliver to Shareholder: (a) The Purchase Price, by wire transfer, to Shareholder in accordance with the wiring instructions attached as Exhibit 4.4(a) hereto. (b) An opinion of counsel, in the form attached as Exhibit 4.4(b), dated the Closing Date, to the effect that: 30 42 E-Z SERVE Final December 1, 1994 (i) E-Z is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has the corporate power and authority to own and lease its properties and carry on its business as now conducted; (ii) E-Z is duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each jurisdiction in which it conducts significant business and in which failure so to qualify would have a material adverse effect on E-Z, its business, or properties; (iii) this Agreement constitutes the valid and binding obligation of E-Z and is enforceable in accordance with its terms except as enforcement thereof may be limited or affected by applicable bankruptcy, insolvency or other laws relating to or affecting generally the enforcement of creditors' rights and by equitable principles; (iv) the execution and delivery of this Agreement and the other agreements referenced herein by E-Z and the performance by E-Z of its obligations thereunder will not violate any provision of any existing law or regulation applicable to E-Z or of any order, judgment, award or decree, known to us after due inquiry of any court, arbitrator or governmental authority applicable to E-Z, the Articles of Incorporation or bylaws or any securities issued by or any mortgage, indenture, lease, contract or other agreement, instrument or undertaking, known to us after due inquiry, to which E-Z is a party or by which E-Z or any of its assets is bound, and will not result in, or require the creation or imposition of any lien on any of E-Z's property, assets or revenues pursuant to 31 43 E-Z SERVE Final December 1, 1994 the provisions of any such mortgage, indenture, lease, contract or other agreement, instrument or undertaking. (v) except as otherwise stated herein, there is no litigation or investigation pending or to the best knowledge of such counsel after due inquiry, threatened, in any court, legislative or administrative body which if adversely decided would question the validity of any action taken or to be taken by E-Z in connection with the transactions contemplated hereby, and such counsel does not know or reasonably has any ground to know, of any basis for any such litigation, proceeding or investigation; (vi) E-Z has full corporate power and authority to consummate the transactions contemplated under this Agreement. In rendering such opinions, counsel is authorized to rely, provided counsel has no reason to question any of the recitals therein, on certificates of public officials or on certificates of E-Z, with respect to factual matters upon which such opinion is based, or opinion of other counsel (which other counsel shall be identified by name) which such counsel shall reasonably consider appropriate and upon which such counsel's opinion is based. (c) A certificate of good standing for E-Z from the Secretary of State of Delaware and the State of Louisiana dated no more than ninety (90) days prior to the Closing Date. 32 44 E-Z SERVE Final December 1, 1994 (d) Certified copies of all resolutions authorizing the transactions contemplated hereunder. 5. SEVERANCE/ BENEFITS PROVISIONS 5.1 Prior to the Closing, Shareholder shall terminate or cause to be terminated any severance policies applicable to the employees of Time Saver and Delight. After the Closing Date up through March 15, 1995 (the "Severance Period"), any person who was employed by Time Saver or Delight at the Closing and whose employment is terminated by E-Z or any affiliate thereof following the Closing Date (an "Eligible Employee") shall receive severance benefits from E-Z based upon Time Saver's severance policies in effect prior to the Closing Date, in accordance with Exhibit 5.1(i) ("E-Z Severance Payment"); provided, that the Eligible Employee shall receive credit for the time employed with Time Saver or Delight prior to the Closing Date and from the Closing Date to the date of separation as if such employment was with a member of the Shareholder consolidated group. During the Severance Period Shareholder shall reimburse E-Z the amount, if any, by which (i) the E-Z Severance Payment actually paid (without any deduction for any tax withheld) to the Eligible Employee exceeds (ii) the severance payment the Eligible Employee would have received under the severance policies of E-Z in accordance with Exhibit 5.1(ii) hereto (without deduction for any taxes which would have been withheld), including credit for the time employed with Time Saver or Delight prior to the Closing Date and from the Closing Date to the Date of separation as if such employment was with a member of the E-Z consolidated group (such excess hereinafter referred to as the "Shareholder Severance"). For purposes of calculating the Shareholder Severance to be reimbursed to E-Z, if any, E-Z shall notify Shareholder, within ten (10) days 33 45 E-Z SERVE Final December 1, 1994 of the end of any month during the Severance Period in which an Eligible Employee has been terminated, of the names of any Eligible Employee whose employment was terminated during such month, the E-Z Severance Payment, if any, paid to such Eligible Employee, and the amount which would have been paid under E-Z's severance policies in effect at the time of separation. Any Shareholder Severance owed shall be paid by Shareholder to E-Z within fifteen (15) days of Shareholder's receipt of E-Z's notice. 5.2 Except for such employees covered by employment agreements listed on Exhibit 5.2, (a) neither Time Saver nor Delight shall have any obligation to continue the employment of any employee of Time Saver or Delight on or after the Closing Date, and (b) after the Closing Date any continued employment of the employees of Time Saver and Delight shall be on such terms and conditions and, except as otherwise provided in this Agreement to the contrary, include such benefits as E-Z shall deem appropriate in its sole and unlimited discretion. 5.3 Time Saver and Delight shall adopt appropriate resolutions terminating, effective as of the Closing Date, their participation in the Dillon Companies, Inc. Profit Sharing and Savings Plan ("Profit Sharing Plan") and the Dillon Companies, Inc. Employees Ownership and Savings Plan ("401(k) Plan"), collectively, "the Plans" herein. The Plans will be amended accordingly and will be amended so that each employee of Time Saver or Delight participating in the Plans effective as of Time Saver and Delight's terminating their participation in the Plans will be 100% vested in his or her account under the Plans. As soon after the Closing Date as is practical, each employee of Time Saver or Delight participating in the Profit Sharing Plan shall receive a distribution of his or her account in accordance with the terms of the Profit Sharing Plan and applicable law. For those Time 34 46 E-Z SERVE Final December 1, 1994 Saver and Delight employees participating in the 401(k) Plan, each may elect a distribution of his or her account any time after the Closing Date through December 31, 1995, after which time they may elect a distribution only upon separation of employment from E-Z, in accordance with the terms of the 401(k) Plan and applicable law. 5.4 Effective on the Closing Date and except as provided in Section 5.6 below, E-Z, Time Saver or Delight, shall provide all employees of Time Saver and Delight who are employees of Time Saver or Delight immediately following the Closing Date with welfare and retirement benefits substantially equivalent to those E-Z provides similarly situated employees hired by E-Z after the Closing Date; provided, however, that E-Z reserves the right to modify or terminate such benefits from time to time after the Closing Date. Each employee of Time Saver or Delight that participates in the employee benefit plans of E-Z or any affiliate thereof shall be credited under such employee benefit plans with the same amount of service for vesting purposes credited to such employees as of the Closing Date under the Employee Benefit Plans in which they have theretofore participated. 5.5 Effective as of 12:01 a.m. on the Closing Date, Time Saver and Delight shall terminate participation in Shareholder's health care and welfare benefit plans and Shareholder shall have no responsibility toward employees of Time Saver and Delight who are employees of Time Saver or Delight on or after the Closing Date and their dependents for any hospitalization, medical, survivor benefits, life insurance, disability or other claims. On or after the Closing Date, E-Z, Time Saver and Delight shall have no obligations or 35 47 E-Z SERVE Final December 1, 1994 liabilities in connection with Shareholder's health care and welfare benefit plans. Commencing on the Closing Date, all employees of Time Saver and Delight who are employees of Time Saver or Delight on or after the Closing Date shall participate in E-Z's health care and welfare benefit plans, and E-Z shall waive any pre-existing condition restrictions under its health care plan and shall be responsible for any hospitalization, medical, survivor benefits, life insurance or disability claims thereunder made by such employees and their dependents regardless of when incurred. Notwithstanding the foregoing, for any employee of Time Saver or Delight or his or her dependent who either (i) for the twelve-month period immediately preceding the Closing Date filed claims for medical, hospital or health care expenses on any of Shareholder's, Time Saver's, or Delight's health care related plans in an aggregate amount of $10,000 or more over such period, or (ii) for the sixty days immediately preceding the Closing Date filed claims for medical, hospital or health care expenses on any of Shareholder's, Time Saver's, or Delight's health care related plans in an aggregate amount of $5,000 or more over such period, Shareholder shall reimburse E-Z for all claims for medical, hospital and other health care expenses of such employees and their dependents paid by E-Z for the twelve-month period immediately following the Closing Date less any premiums paid by such employee. E-Z shall notify Shareholder, within ten (10) days of the end of each month, of the amount paid by E-Z pursuant to this Section 5.5, if any, and Shareholder shall pay to E-Z such 36 48 E-Z SERVE Final December 1, 1994 amount, if any, owing E-Z under this Section 5.5 within fifteen (15) days of receipt of E-Z's notice. As soon after the Closing Date as is practicable, Shareholder shall provide E-Z a list of employees described in (i) and (ii), above, based upon medical claims incurred and reported through the Closing Date. 5.6 Notwithstanding anything contained in Section 5.5 to the contrary, as of the Closing Date, Shareholder will list on Exhibit 5.6 hereto those employees of Time Saver or Delight who are entitled to wage or salary related continuation benefits under any of Shareholder's, Time Saver's or Delight's disability plan(s), and Shareholder covenants and agrees to continue to provide such employees with the wage or salary related continuation benefits under and in accordance with Shareholder's disability plan(s) on or after the Closing Date. On or after the Closing Date, E- Z, Time Saver and Delight shall have no responsibility, obligation or liability in connection with providing such employees listed on Exhibit 5.6 any wage or salary related continuation benefits under E-Z's, Time Saver's or Delight's disability plans. 6. TAX MATTERS 6.1 The parties hereto elect to treat the transactions covered by this Agreement in accordance with Section 338(h)(10) of the Code, and shall file such forms as 37 49 E-Z SERVE Final December 1, 1994 are necessary to evidence such election. Any legal, accounting or appraisal costs related to such election which E-Z, at its sole discretion, chooses to incur shall be paid for by E-Z. 6.2 Within one hundred twenty days after the Closing Date, E-Z shall provide to Shareholder all exhibits required by Form 8023-A ("8023-A Statement") with E-Z's allocation of the Purchase Price among the assets of Time Saver and Delight (which allocation shall be adopted by the Shareholder). Thereafter E-Z shall provide to Shareholder any revised copies of the 8023-A Statement. Any depreciation or amortization tax assessments resulting from adjustments to asset basis allocations shall be the sole liability of E-Z. 6.3 Shareholder agrees to indemnify E-Z and Time Saver, and Delight for all liabilities pursuant to Treasury Regulation Section 1.338(h)(10)-1(e) and 1.1502-6, and to indemnify Time Saver and Delight for any other Taxes that may be imposed on Time Saver or Delight for any period prior to the Closing Date, to the extent such Taxes have not been reserved for on Time Saver's balance sheet. 6.4 Shareholder shall, pursuant to Section 47.287.441 Louisiana Revised Statutes of 1950, file the appropriate Louisiana income tax return and shall be responsible 38 50 E-Z SERVE Final December 1, 1994 for any tax liability resulting from the imposition of the Louisiana income tax for the period ending on the Closing Date, and shall also be liable for any other state tax liabilities for Time Saver and Delight attributable to any taxable period ending on or before the Closing Date. 6.5 Shareholder shall be liable for any state income tax liability which may be triggered by the execution of this agreement and the Code Section 338(h)(10) election. 6.6 Immediately prior to the Closing Date, Time Saver and Delight shall be released from any tax sharing or allocation agreements to which they may be parties, and following the Closing Date, Time Saver and Delight shall have no obligations under any such agreements. 6.7 The indemnification rights of Time Saver, Delight, and E-Z related to Section 338(h)(10) of the Code shall not be subject to the limitation of Section 9.3 hereof. 7. ENVIRONMENTAL 39 51 E-Z SERVE Final December 1, 1994 7.1 Within fifteen (15) days from the Closing Date, E-Z shall contract for and commence a Phase II environmental study (the "Study") of the warehouse located at Humphreys Street and Time Saver Avenue, Jefferson Parish, Louisiana (the "Warehouse"), with an environmental firm and methodology acceptable to Shareholder. Shareholder shall reimburse E-Z for 50% of the costs incurred by E-Z or any affiliate thereof in conducting the Study, provided that any such costs allocable to Shareholder over $15,000 are first approved in writing by Shareholder. In the event that the Study discloses environmental contamination for which Time Saver is responsible for remediation to the extent required by any Environmental Law (hereinafter, "Remediation"), Shareholder shall reimburse Time Saver for the costs incurred by Time Saver in completing such Remediation, only to the extent that such costs are not reimbursable under a local, state or federal statute or fund including, but not limited to, the Louisiana Underground Storage Tank Trust Fund (hereinafter, a "Fund"), and only to the extent of the contamination disclosed in the Study. In addition, as a condition to Shareholder's obligations, E-Z must obtain Shareholder's written approval, which approval shall not be unreasonably withheld, of the contractors performing the Remediation, the methodology used and the cost to be incurred. Remediation conforming to the requirements of the preceding sentence is hereinafter referred to as "Qualifying Remediation." 40 52 E-Z SERVE Final December 1, 1994 7.2(a) The parties acknowledge that of the locations owned or leased by Time Saver as of the Closing Date listed on Exhibit 7.2(a)(i), 104 locations contain underground storage tanks (the "UST Sites") as identified on Exhibit 7.2(a)(ii). Of the UST Sites, Time Saver has reported to the proper local authorities a Release which has occurred prior to the Closing Date at those UST Sites (the "Release UST Sites") identified in Exhibit 7.2(a)(iii), with those UST Sites which have qualified for clean-up pursuant to the Louisiana Underground Storage Tank Trust Fund, as identified on Exhibit 7.2(a)(iii), (the "Qualified UST Sites") noted with an asterisk. The remaining Release UST Sites are hereinafter referred to as "Non-Qualified UST Sites", as defined on Exhibit 7.2(a)(iii). (b) In the event that it is reasonably practicable to do so, Shareholder agrees prior to the Closing Date to remediate the contamination at the Non-Qualified UST Sites. If such Remediation is not reasonably practicable, Shareholder shall reimburse Time Saver for the costs incurred by Time Saver in effecting the Remediation in accordance with Corrective Action Plans dated April 8, 1993 and August 22, 1994, provided that such remediation meets the standards for a Qualifying Remediation. (c) Shareholder shall reimburse Time Saver for the costs incurred by Time Saver from and after the Closing Date for Remediation of the Qualified UST Sites, provided 41 53 E-Z SERVE Final December 1, 1994 that such remediation meets the standards for Qualifying Remediation, and further provided that the amount of such reimbursement per Qualified UST Site in no event shall exceed an amount equal to $15,000 less an amount equal to the sums expended by Time Saver on remediation of such Qualified UST Sites prior to the Closing Date, as set forth on Exhibit 7.2(c). (d) With respect to the remaining UST Sites which are not as of the date hereof Release UST Sites (the "Non-Release Sites") and identified on Exhibit 7.2(d) hereof, E-Z will cause Time Saver to conduct at its cost within six (6) months of the Closing Date, such studies as E-Z deems necessary to determine whether a Release has occurred. E-Z shall notify Shareholder of any such Release within such six (6) month period. To the extent of any such identified Release, E-Z shall obtain a determination from the proper local authorities whether such Non-Release Site qualifies for clean-up under the applicable state fund. In the event that a Non-Release Site does not so qualify, Shareholder shall reimburse Time Saver for the costs incurred by Time Saver from and after the Closing Date to the extent that such costs exceed $15,000 at any Non-Release Site, provided that such remediation meets the standards for a Qualifying Remediation, but in no event shall such reimbursement exceed $35,000 per Non-Release Site. 42 54 E-Z SERVE Final December 1, 1994 (e) The parties acknowledge that the UST Sites identified in Exhibit 7.2(e) contain non-operating underground storage tanks as of the date hereof. In the event that it is reasonably practicable to do so, Shareholder shall remove the tanks and complete Remediation of such sites. If not so practicable, Shareholder agrees to reimburse Time Saver for the costs incurred by Time Saver in removing such tanks and in completing the Remediation of such sites to the extent of a Release provided that the underground storage tanks are not operated after the Closing Date, and further provided that such remediation meets the standards for a Qualifying Remediation. (f) For a period of five (5) years from the Closing Date, Shareholder shall indemnify and hold harmless E-Z, in accordance with the provisions of Article 9, for any third party claims made for Damages related to any Environmental Claim arising from the property or assets of Time Saver or Delight prior to the Closing Date. Claims made in writing to Shareholder by E-Z during the first thirty (30) months from the Closing Date shall be presumed to relate to pre-Closing Date releases and those made during the second thirty (30) months from the Closing Date shall be presumed to relate to post-Closing Date releases. In either case a party may rebut the presumption with evidence to the contrary. 43 55 E-Z SERVE Final December 1, 1994 (g) Any payments to be made to either party pursuant to this Article 7 shall be made within 15 business days after written request therefor. 8. TERMINATION 8.1 This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the Closing Date: (a) by the mutual written consent of E-Z and the Shareholder; (b) by E-Z or the Shareholder in writing without liability on the part of the terminating party (provided the terminating party is not in material default or breach of this Agreement and has not failed or refused to close without proper justification hereunder), if the Closing Date shall not have occurred on or before December 31, 1994; (c) by either E-Z, on the one hand, or the Shareholder, on the other hand, in writing, without prejudice to other rights and remedies which the terminating party may have (provided the terminating party is not in material default or breach of this Agreement and has not failed or refused to close without justification hereunder), if the other party 44 56 E-Z SERVE Final December 1, 1994 shall (i) fail to perform its or their covenants or agreements contained herein required to be performed prior to the Closing Date, or (ii) breach or have breached any of its or their representations or warranties contained herein; or (d) by E-Z or Shareholder, respectively, for failure of a condition precedent to closing set forth in Section 4.1 or 4.2, respectively For purposes of this Agreement, it is expressly agreed that, subject to Section 3.6(d) hereof, the failure to obtain the Financing shall not constitute a default or failure to perform of E-Z. 8.2 Termination of this Agreement pursuant to this Article 8 shall terminate (i) all obligations of the parties hereunder, except for the obligations under Sections 10.6, 10.10, and 10.12 hereof and (ii) the obligations set forth in the next succeeding sentence of this Section 8.2, and (iii) the obligations under the Confidentiality Agreement. Upon any termination of this Agreement each party hereto will redeliver all documents, work papers and other material of any other party relating to the transactions contemplated hereby, and all copies of such materials, whether so obtained before or after the execution hereof, to the party furnishing the same. 45 57 E-Z SERVE Final December 1, 1994 9. INDEMNIFICATION 9.1 From and after the Closing Date, Shareholder agrees to indemnify and hold harmless E-Z, Time Saver, Delight, their successors and assigns, or any parent or subsidiary company of E-Z, Time Saver or Delight, and any employee, representative, director, officer or agent thereof (collectively, the "E-Z Indemnitees"), from and against any and all losses, liabilities, damages, including exemplary damages and penalties, deficiencies, fines, obligations, costs, judgments, expenses, taxes, and reasonable fees and expenses of counsel and agents who are not regular employees of such companies, including reasonable expenses of investigating, defending and prosecuting litigation (collectively, "Damages") which may be sustained, suffered or incurred by any of the E-Z Indemnitees, arising from, by reason of, caused by, or in any way related to (i) the breach or inaccuracy of any covenant, warranty, agreement or representation made by the Shareholder under this Agreement or any agreement referenced herein, (ii) the final determination of liability, deficiency or penalty against Time Saver or Delight incurred prior to the Closing Date but not reserved for on its Closing Financial Statements in accordance with GAAP applied on a basis consistent with that applied when preparing the Financial Statements, (iii) the Shareholder's failure in any respect to comply with or 46 58 E-Z SERVE Final December 1, 1994 perform any covenant or agreement contained in this Agreement or any agreement referenced herein, (iv) the business activities of Time Saver or Delight or Shareholder's ownership of Time Saver or Delight for the period on or prior to the Closing Date, excluding, however, all obligations or Damages which are reflected in the Closing Financial Statements, and (v) any Remediation or Environmental Claim related to the UST Sites identified on Exhibit 7.2(e). 9.2 Notwithstanding any other provision of this section, the obligations of the Shareholder under this Agreement with respect to any representation, warranty, covenant or agreement contained in this Agreement (i) shall be limited to any such representation, warranty, covenant or agreement as is actually made by Shareholder, and (ii) shall not apply to any such losses, liabilities, damages, costs, judgments, expenses, taxes and fees that arise out of the negligence or misconduct of any of the parties otherwise entitled to indemnification (provided, however, that this clause shall not limit Time Saver's or Delight's indemnification rights relating to Time Saver's or Delight's negligent actions occurring prior to the Closing Date). 9.3 No monies shall be due to E-Z under this Article 9 unless the total of any amounts due exceeds $250,000 and the amount due under this Agreement shall be the 47 59 E-Z SERVE Final December 1, 1994 amount in excess of $250,000. The determination of whether the total amount due exceeds $250,000 shall be made on a pre-tax basis; provided that the foregoing deductible of $250,000 shall not apply to any claims made pursuant to Section 6.7, Article 7 and Section 9.1(v) . 9.4 Excluding liability assumed by Shareholder pursuant to Article 8 hereof, E-Z agrees to indemnify, defend and hold harmless Shareholder, any parent or subsidiary company of Shareholder, any employee or agent thereof, any current or former shareholder and any former director, officer, or employee of Time Saver or Delight who served or was employed prior to the Closing Date (collectively, the "Shareholder Indemnitees") against any and all Damages which may be sustained, suffered or incurred by any of the Shareholder Indemnitees, arising from, by reason of, caused by or in any way related to (i) the breach or inaccuracy of any covenant, warranty, agreement or representation made by E-Z under this Agreement or any agreement referenced herein, (ii) E-Z's failure in any respect to comply with or perform any covenant or agreement contained in this Agreement or any agreement referenced herein, or (iii) the business activities of Time Saver or Delight or E-Z's ownership of Time Saver or Delight for the period from and after the Closing Date. 48 60 E-Z SERVE Final December 1, 1994 9.5 Each indemnified party hereunder agrees that promptly upon its discovery of facts giving rise to a claim for indemnity under the provisions of this Agreement, including receipt by it of notice of any demand, assertion, claim, action or proceeding, judicial or otherwise, by any third party (such claims for indemnification and third party actions being collectively referred to herein as the "Claims"), with respect to any matter as to which it claims to be entitled to indemnity under the provisions of this Agreement, it will give prompt notice thereof in writing to the indemnifying party, together with a statement of such information respecting any of the foregoing as it shall have. Such notice shall include a formal demand for indemnification under this Agreement. 9.6 The indemnifying party shall be entitled at its cost and expense to contest and defend by all appropriate legal proceedings any Claim with respect to which it is called upon to indemnify the indemnified party under the provisions of this Agreement; provided, that notice of the intention so to contest shall be delivered by the indemnifying party to the indemnified party within 20 days from the date of receipt by the indemnifying party of notice by the indemnified party of the assertion of the Claim. Any such contest may be conducted in the name and on behalf of the indemnifying party or the indemnified party as may be appropriate. Such contest shall be conducted by reputable counsel employed by the indemnifying party, but the indemnified party shall have the right but not 49 61 E-Z SERVE Final December 1, 1994 the obligation to participate in such proceedings and to be represented by counsel of its own choosing at its sole cost and expense. The indemnifying party shall have full authority to determine all action to be taken with respect thereto; provided, however, that the indemnifying party will not have the authority to subject the indemnified party to any obligation whatsoever, other than the performance of purely ministerial tasks or obligations not involving material expense. If the indemnifying party does not elect to contest any such Claim, the indemnifying party shall be bound by the result obtained with respect thereto by the indemnified party. At any time after the commencement of the defense of any Claim, the indemnifying party may request the indemnified party to agree in writing to the abandonment of such contest or to the payment or compromise by the indemnified party of the asserted Claim, whereupon such action shall be taken unless the indemnified party determines that the contest should be continued, and so notifies the indemnifying party in writing within 15 days of such request from the indemnifying party. If the indemnified party determines that the contest should be continued, the indemnifying party shall be liable hereunder only to the extent of the amount that the other party to the contested Claim had agreed unconditionally to accept in payment or compromise as of the time the indemnifying party made its request therefor to the indemnified party. 50 62 E-Z SERVE Final December 1, 1994 9.7 If requested by the indemnifying party, the indemnified party agrees to cooperate with the indemnifying party and its counsel in contesting any third party Claim that the indemnifying party elects to contest or, if appropriate, in making any counterclaim against the person asserting the Claim, or any cross-complaint against any person, and the indemnifying party will reimburse the indemnified party for any expenses incurred by it in so cooperating. If the indemnifying party has not chosen to contest a Claim, the indemnifying party shall cooperate with the indemnified party and its counsel in contesting any Claim at no cost or expense to the indemnified party. 9.8 The indemnified party agrees to afford the indemnifying party and its counsel the opportunity to be present at, and to participate in, conferences with all persons, including governmental authorities, asserting any Claim against the indemnified party or conferences with representatives of or counsel for such persons. 9.9 The indemnifying party shall pay to the indemnified party in immediately available funds any amounts to which the indemnified party may become entitled by reason of the provisions of this Agreement, such payment to be made within five days after any such amounts are finally determined either by mutual agreement of the parties hereto or pursuant to the final unappealable judgment of a court of competent 51 63 E-Z SERVE Final December 1, 1994 jurisdiction. Each indemnified party agrees to use its best efforts to pursue any claims related to the event giving rise to the Damages or rights it may have against any third party which would materially reduce the amount of Damages otherwise incurred by such indemnified party. 10. GENERAL PROVISIONS 10.1 Unless otherwise expressly provided otherwise to the contrary in this Agreement, all representations and warranties of the Shareholder and E-Z made in or pursuant to this Agreement, or any exhibit, schedule or annex hereto, or in any document or instrument delivered hereunder, or in connection with the transactions contemplated hereby, shall survive the Closing Date for a period of one (1) year and shall be fully enforceable for such period, except to the extent that the party making the claim of such breach has knowledge acquired before the Closing Date of any fact in variance with or of any breach of, any representation or warranty. 10.2 Shareholder represents to E-Z and E-Z represents to the Shareholder, that no broker or finder has been involved in this transaction. Any commission or fee 52 64 E-Z SERVE Final December 1, 1994 which is or will be due to any broker or lender retained or alleged to have been retained by any party to this Agreement, will be paid by such party. 10.3 This Agreement, the exhibits attached hereto, and any letter agreements or other documents executed by the parties on or before the Closing Date together constitute the entire agreement between the parties and supersede and cancel any other agreement, representation or communication, whether oral or written, between the parties relating to the transactions contemplated herein or the subject matter hereof. All information required or permitted by this Agreement to be disclosed on an Exhibit shall be deemed to have been so disclosed if such information appears on any other Exhibit pertaining to similar information. 10.4 The tables and section headings in this Agreement are for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. 10.5 All notices, requests, demands and other communications to be given hereunder shall be in writing and shall be deemed to have been duly given if delivered in person or by courier service requiring acknowledgment of receipt of delivery or mailed by certified mail, postage prepaid and return receipt requested, or by telecopier: (i) if to E-Z, 53 65 E-Z SERVE Final December 1, 1994 at 2550 North Loop West, Suite 600, Houston, Texas 77092, Attention John Miller, Senior Vice President, with a copy to John L. Keffer, Bracewell & Patterson, L.L.P., 711 Louisiana, Suite 2900, Houston, Texas 77002; (ii) if to Shareholder, at 700 East 30th Street, Hutchinson, Kansas 67502, Attention: Frank Remar, Senior Vice President, with a copy to Bruce M. Gack, Esq., The Kroger Co., 1014 Vine Street, Cincinnati, Ohio 45202-1100; or to such other person or address as may be specified from time to time by the person entitled to receive such notice. Notice given by personal delivery, courier service or mail shall be effective upon actual receipt. Notice given by telecopier shall be confirmed by appropriate answer back and shall be effective upon actual receipt if received during the recipient's normal business hours, or at the beginning of the recipient's next business day after receipt if not received during the recipient's normal business hours. All Notices by telecopier shall be confirmed promptly after transmission in writing by certified mail or personal delivery. 10.6 All details of this transaction shall be kept confidential and may be disclosed only to those persons or entities to whom such disclosures shall be reasonably required. In the event the transactions contemplated hereby are not consummated, each party shall return to the other all documents furnished by the other, and all copies thereof shall be likewise returned. 54 66 E-Z SERVE Final December 1, 1994 10.7 This Agreement may be amended only by a written instrument executed by the Shareholder and E-Z. The failure of a party to exercise any right or remedy shall not be deemed or constitute a waiver of such right or remedy in the future. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided. 10.8 In the event that either party objects to a matter disclosed in a financial statement or review prepared pursuant to Section 1.2 or Section 9.1 hereof, it shall advise the other party of such objection in writing (the "Notice") within thirty (30) days of its receipt of such financial statement or review, and the parties shall endeavor to resolve the dispute within thirty (30) days of the Notice. If the parties are unsuccessful in resolving the dispute, they shall retain the independent public accounting firm of Ernst & Young, whose determination of the disputed items, which the parties shall endeavor to have completed within one hundred twenty (120) days, shall be binding on the parties. Shareholder and E-Z shall bear equally the cost of the services provided by such independent public accounting firm. 55 67 E-Z SERVE Final December 1, 1994 10.9 The parties acknowledge that this contract reflects significant negotiations between the parties and agree that no provision of this Agreement shall be construed against the party which drafted this Agreement. 10.10 This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Kansas (excluding any conflicts-of-law rule or principle that might refer same to the laws of another jurisdiction). 10.11 This Agreement and the rights and obligations hereunder shall bind and inure to the benefit of the parties and their respective personal representatives, heirs, successors and permitted assigns; but neither this Agreement nor any of the rights, benefits or obligations hereunder shall be assigned, by operation of law or otherwise, by any party hereto without the prior written consent of the other party; provided, that E-Z may assign this Agreement and E-Z's rights hereunder and under other documents entered into in connection herewith to financial institutions or their affiliates providing any financing for this transaction or any refinancing thereof; and provided further, that upon foreclosure or sale in lieu of foreclosure or deed in lieu of foreclosure or deed of any of the assets of E-Z to its affiliates of E-Z's rights hereunder or under other documents entered into in connection herewith or a substantial portion thereof by or to any such financial institutions 56 68 E-Z SERVE Final December 1, 1994 or their affiliates, the representations, warranties, obligations, covenants, agreements and indemnities of the Shareholder herein and in such other documents will inure to the benefit of such financial institutions (or their affiliates) or any such purchaser or grantee. Except for the foregoing, nothing in this Agreement, express or implied, is intended to confer upon any person or entity other than the parties hereto and their respective successors and permitted assigns, any rights, benefits or obligations hereunder. 10.12 Except as otherwise provided in this Agreement, E-Z and the Shareholder shall each pay their own costs and expenses incurred by them or on their behalf in connection with this Agreement and the transactions contemplated hereby. 10.13 If any provision of the Agreement is rendered or declared illegal or unenforceable by reason of any existing or subsequently enacted legislation or by decree of a court of last resort, E-Z and the Shareholder shall promptly meet and negotiate substitute provisions for those rendered or declared illegal or unenforceable, but all of the remaining provisions of this Agreement shall remain in full force and effect. 10.14 All references to "E-Z Serve Corporation" in the headings of the Exhibits hereto shall be deemed to be references to "E-Z Serve Convenience Stores, Inc." 57 69 E-Z SERVE Final December 1, 1994 10.15 This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have signed this Agreement as of the 2nd day of December, 1994. DILLON COMPANIES, INC. By: /s/ Frank J. Remar ----------------------------- Attest: Frank J. Remar Senior Vice President /s/ Robert L. Meyers - ------------------------------- Vice President E-Z SERVE CONVENIENCE STORES, INC. By: /s/ John T. Miller ----------------------------- John T. Miller Senior Vice President Attest: /s/ H. E. Lambert - ----------------------------------------- Assistant Secretary 58 70 E-Z SERVE Final December 1, 1994 E-Z SERVE CORPORATION joins in the execution hereof for the purposes of unconditionally guarantying the performance and undertakings of E-Z under this Agreement. E-Z SERVE CORPORATION By: /s/ John T. Miller ------------------------ John T. Miller Senior Vice President Attest: /s/ H. E. Lambert - ------------------------- Assistant Secretary STATE OF KANSAS SS. COUNTY OF BE IT REMEMBERED, That on this 2nd day of December, 1994, before me, a Notary Public in and for said County and State, personally appeared Frank J. Remar, and Robert L. Meyers, Senior Vice President and Assistant Secretary, respectively, of DILLON COMPANIES, INC., the corporation, whose name is subscribed to and which executed the foregoing instrument, and for themselves and as such officers respectively, and for and on behalf of the corporation, acknowledged the signing and execution of said instrument as their free and voluntary act and deed as such officers respectively, and the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my official seal, on the day and year last aforesaid. /s/ Faith W. White ---------------------- Notary Public My Commission Expires: 12/29/94 59 71 E-Z SERVE Final December 1, 1994 STATE OF TEXAS SS. COUNTY OF HARRIS BE IT REMEMBERED, That on this 2nd day of December, 1994, before me, a Notary Public in and for said County and State, personally appeared John T. Miller, and H.E. Lambert, Senior Vice President and Assistant Secretary, respectively, of E-Z Serve Convenience Stores, Inc., the corporation, whose name is subscribed to and which executed the foregoing instrument, and for themselves and as such officers respectively, and for and on behalf of the corporation, acknowledged the signing and execution of said instrument as their free and voluntary act and deed as such officers respectively, and the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my Notarial seal, on the day and year last aforesaid. ANDRE MASSEY /s/ Andre Massey Notary Public, State of Texas ----------------------- My Commission Expires 05-20-97 Notary Public My Commission Expires: May 20, 1997 STATE OF TEXAS SS. COUNTY OF HARRIS BE IT REMEMBERED, That on this 2nd day of December, 1994, before me, a Notary Public in and for said County and State, personally appeared John T. Miller, and H.E. Lambert, Senior Vice President and Assistant Secretary, respectively, of E-Z Serve Corporation, the corporation, whose name is subscribed to and which executed the foregoing instrument, and for themselves and as such officers respectively, and for and on 60 72 E-Z SERVE Final December 1, 1994 behalf of the corporation, acknowledged the signing and execution of said instrument as their free and voluntary act and deed as such officers respectively, and the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my Notarial seal, on the day and year last aforesaid. [SEAL] /s/ Andre Massey Notary Public My Commission Expires: May 20, 1997 61 EX-10.6.2 24 AMEND. AGMT. BETWEEN DILLON COMPANIES, INC. 1 EXHIBIT 10.6.2 AMENDMENT TO AGREEMENT THIS AMENDMENT TO AGREEMENT, made as of the 28th day of December, 1994, by and between Dillon Companies, Inc. ("Shareholder") and E-Z Serve Convenience Stores, Inc. ("E-Z"). W I T N E S S E T H : WHEREAS, Dillon and E-Z are parties to an Agreement dated as of December 2, 1994, pursuant to which E-Z is to acquire the common stock of Time Saver Stores, Inc., on the terms and conditions set forth in the Agreement; and WHEREAS, the parties desire to modify and amend the Agreement as set forth below; NOW, THEREFORE, in consideration of the mutual agreements contained herein, the parties agree as follows: 1. Capitalized terms used herein shall have the meanings ascribed to them in the Agreement. 2. Upon execution hereof, E-Z shall deliver to Dillon, in immediately available funds, the sum of Two Hundred Thousand Dollars ($200,000) as a non-refundable extension fee, which amount shall be credited against the Purchase Price, without interest, at the closing, but in no event (other than a failure of the transaction to close due solely to a default by Dillon under the Agreement, in which event the extension fee shall be refundable) shall such amount be refundable by Dillon, it being agreed by the parties that such amount shall be earned by Dillon on the date hereof. 2 3. Article 4 of the Agreement is hereby modified so that the term "December 16, 1994" in the second line thereof is changed to read "January 17, 1995." 4. Section 5.1 of the Agreement is hereby modified so that the term "March 15, 1995" in the third line thereof is changed to read "April 15, 1995." 5. Section 8.1(b) of the Agreement is hereby modified so that the term "December 31, 1994" in the last line thereof is changed to read "January 17, 1995." 6. Except as otherwise modified herein, the Agreement shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have signed this Agreement as of the day and year first above written. DILLON COMPANIES, INC. By: /s/ FRANK J. REMAR ------------------------------- Attest: Frank J. Remar Senior Vice President /s/ HAROLD D. RYAN - ----------------------------------- Vice President E-Z SERVE CONVENIENCE STORES, INC. By: /s/ JOHN T. MILLER ------------------------------- John T. Miller Senior Vice President Attest: /s/ H.E. LAMBERT - ----------------------------------- Assistant Secretary E-Z SERVE CORPORATION joins in the execution hereof for the purposes of consenting hereto and unconditionally guarantying the performance and undertakings of E-Z under this Amendment 3 to Agreement. E-Z SERVE CONVENIENCE STORES, INC. By: /s/ JOHN T. MILLER ------------------------------- John T. Miller Senior Vice President Attest: /s/ H.E. LAMBERT - ----------------------------------- Assistant Secretary STATE OF KANSAS ) SS. COUNTY OF RENO BE IT REMEMBERED, That on this 28th day of December 1994, before me, a Notary Public in and for said County and State, personally appeared Frank J. Remar, and Harold D. Ryan, Senior Vice President and Vice President, respectively, of DILLON COMPANIES, INC., the corporation, whose name is subscribed to and which executed the foregoing instrument, and for themselves and as such officers respectively, and for and on behalf of the corporation, acknowledged the signing and execution of said instrument as their free and voluntary act and deed as such officers respectively, and the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my official seal, on the day and year last aforesaid. /s/ NANCY A. ROBERTS -------------------------------------- Notary Public My Commission Expires: NOTARY PUBLIC - State of Kansas NANCY A. ROBERTS My Appt. Exp. 8/21/98 STATE OF TEXAS SS. COUNTY OF HARRIS BE IT REMEMBERED, That on this 28th day of December 1994, before me, a Notary Public in and for said County and State, personally appeared John T. Miller, and 4 Harold E. Lambert, Senior Vice President and Assistant Secretary, respectively, of E-Z Serve Convenience Stores, Inc., the corporation, whose name is subscribed to and which executed the foregoing instrument, and for themselves and as such officers respectively, and for and on behalf of the corporation, acknowledged the signing and execution of said instrument as their free and voluntary act and deed as such officers respectively, and the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my Notarial seal, on the day and year last aforesaid. /s/ ANDRE MASSEY -------------------------------------- Notary Public My Commission Expires: ANDRE MASSEY Notary Public, State of Texas My Commission Expires 05-20-97 STATE OF TEXAS ) SS. COUNTY OF HARRIS BE IT REMEMBERED, That on this 28th day of December, 1994, before me, a Notary Public in and for said County and State, personally appeared John T. Miller, and Harold E. Lambert, Senior Vice President and Assistant Secretary, respectively, of E-Z Serve Corporation, the corporation, whose name is subscribed to and which executed the foregoing instrument, and for themselves and as such officers respectively, and for and on behalf of the corporation, acknowledged the signing and execution of said instrument as their free and voluntary act and deed as such officers respectively, and the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my Notarial seal, on the day and year last aforesaid. /s/ ANDRE MASSEY -------------------------------------- Notary Public My Commission Expires: ANDRE MASSEY Notary Public, State of Texas My Commission Expires 05-20-97 EX-10.6.3 25 2ND AMEND. TO AGMT. BETWEEN DILLON COMPANIES, INC. 1 EXHIBIT 10.6.3 SECOND AMENDMENT TO AGREEMENT THIS SECOND AMENDMENT TO AGREEMENT, made as of the 17th day of January, 1995, by and between Dillon Companies, Inc. ("Shareholder") and E-Z Serve Convenience Stores, Inc. ("E-Z"). W I T N E S S E T H : WHEREAS, Dillon and E-Z are parties to an Agreement dated as of December 2, 1994, as amended by Amendment to Agreement dated as of December 28, 1994, pursuant to which E-Z is to acquire the common stock of Time Saver Stores, Inc., on the terms and conditions set forth in the Agreement; and WHEREAS, the parties desire to modify and amend the Agreement as set forth below; NOW, THEREFORE, in consideration of the mutual agreements contained herein, the parties agree as follows: 1. Capitalized terms used herein shall have the meanings ascribed to them in the Agreement. 2. E-Z has conducted a lien and judgment search on Time Saver and Delight which has disclosed the liens and judgments attached hereto as Schedule 1 (the "Judgments"). Shareholder believes that all of the Judgments have been satisfied. Shareholder shall use its best efforts to deliver to E-Z, on or before the date of delivery of the Closing Financial Statements, documentation evidencing the 2 satisfaction of the Judgments and the release of record of judgment liens associated therewith. In the event that Shareholder is unable to furnish such documentation, it shall indemnify E-Z with respect to such Judgments as to which documentation is not furnished, to the same extent as set forth in Article 9 of the Agreement. 3. Except as otherwise modified herein, the Agreement shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have signed this Agreement as of the day and year first above written. DILLON COMPANIES, INC. By: /s/ FRANK J. REMAR Attest: ------------------------------------- Frank J. Remar Senior Vice President /s/ ROBERT L. MEYERS - -------------------------------- Vice President E-Z SERVE CONVENIENCE STORES, INC. By: /s/ JOHN T. MILLER ------------------------------------- John T. Miller Senior Vice President 3 E-Z SERVE CORPORATION joins in the execution hereof for the purposes of consenting hereto and unconditionally guarantying the performance and undertakings of E-Z under this Second Amendment to Agreement. E-Z SERVE CORPORATION By: /s/ JOHN T. MILLER ------------------------------------- John T. Miller Senior Vice President STATE OF NEW YORK ) SS. COUNTY OF NEW YORK BE IT REMEMBERED, That on this 17th day of January, 1995, before me, a Notary Public in and for said County and State, personally appeared Frank J. Remar, and Robert L. Meyers, Senior Vice President and Vice President, respectively, of DILLON COMPANIES, INC., the corporation, whose name is subscribed to and which executed the foregoing instrument, and for themselves and as such officers respectively, and for and on behalf of the corporation, acknowledged the signing and execution of said instrument as their free and voluntary act and deed as such officers respectively, and the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my official seal, on the day and year last aforesaid. /s/ BERNADETTE M. COLGAN -------------------------------- Notary Public My Commission Expires: BERNADETTE M. COLGAN Notary Public, State of New York No. 03-5028006 Qualified in Bronx County Commission Expires: May 23, 1996 STATE OF NEW YORK ) SS. COUNTY OF NEW YORK BE IT REMEMBERED, That on this 17th day of January, 1995, before me, a Notary Public in and for said County and State, personally appeared John T. Miller, Senior Vice President of E-Z Serve Convenience Stores, Inc., the corporation, whose name is subscribed to and which executed the foregoing instrument, and for themselves and as such officers respectively, and for and on behalf of the corporation, acknowledged the signing and execution of said instrument as their free and voluntary act and deed as such officers respectively, and the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned. 4 IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my Notarial seal, on the day and year last aforesaid. /s/ BERNADETTE M. COLGAN -------------------------------- Notary Public My Commission Expires: BERNADETTE M. COLGAN Notary Public, State of New York No. 03-5028006 Qualified in Bronx County Commission Expires: May 23, 1996 STATE OF NEW YORK SS. COUNTY OF NEW YORK BE IT REMEMBERED, That on this 17th day of January, 1995, before me, a Notary Public in and for said County and State, personally appeared John T. Miller, Senior Vice President of E-Z Serve Corporation, the corporation, whose name is subscribed to and which executed the foregoing instrument, and for themselves and as such officers respectively, and for and on behalf of the corporation, acknowledged the signing and execution of said instrument as their free and voluntary act and deed as such officers respectively, and the free and voluntary act and deed of said corporation, for the uses and purposes therein mentioned. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed my Notarial seal, on the day and year last aforesaid. /s/ BERNADETTE M. COLGAN -------------------------------- Notary Public My Commission Expires: BERNADETTE M. COLGAN Notary Public, State of New York No. 03-5028006 Qualified in Bronx County Commission Expires: May 23, 1996 EX-10.10 26 EMPLOYMENT AGREEMENT - CALLAHAN GUION 1 EXHIBIT 10.10 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is by and between E-Z Serve Corporation, a Delaware corporation (the "Company"), and Kathleen Callahan-Guion, an individual residing in Alexandria, Virginia (the "Employee"). The parties hereto, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which is hereby mutually acknowledged, hereby agree as follows: 1. Employment. The Company hereby employs Employee and Employee hereby accepts employment with the Company subject to the terms and conditions set forth in this Agreement. Employee will use her reasonable best efforts to begin working at the Company by March 17, 1997, but no later than March 24, 1997 (the "Start Date"). 2. Term. This Agreement shall be effective immediately upon full execution hereof, but the term of Employee's employment ("Employment Term") shall commence as of the Start Date and continue through the date two (2) years thereafter, unless terminated earlier as provided in this Agreement. 3. Compensation. a. Salary. As compensation for all services of whatever type rendered by Employee in the performance of her duties or obligations under this Agreement, the Company shall in the aggregate pay Employee a base salary of $225,000 per year during the Employment Term. b. Bonus. Based on the actual performance of the Company as compared to its budgeted performance, and any other criteria that the Board may determine, during each year of the Employment Term, as determined by the Board of Directors of the Company, Employee's target bonus per year shall be $175,000 ("Bonus"). c. Additional Compensation. Employee shall receive $5,100 per year for a car allowance and the Company shall pay monthly dues plus a reasonable initiation fee at a club of Employee's choice 2 d. Relocation Expenses. Company shall pay or reimburse to Employee her expenses to relocate to the greater Houston, Texas metropolitan area as follows: 1. Travel costs for a reasonable number of trips for Employee and her spouse for purposes of locating a residence in the Houston, Texas, area; 2. Employee's temporary living expenses in the Houston, Texas, area while locating and accomplishing the move to a permanent residence; 3. Movement of household goods by a commercial carrier to include the following: packing materials, packing labor, loading labor, transportation, unloading labor, unpacking labor, debris pickup and insurance/replacement coverage. 4. Reasonable closing costs on sale of current residence to include real estate commission paid at settlement (up to 7%), document preparation, notary public, reasonable attorney fees and title insurance. 5. Reasonable closing costs on the purchase of new residence in Houston to include appraisal fees, credit report, lender's inspection fee, mortgage insurance application fee, settlement or closing fee, title search, title examination fee, attorney's fee, title insurance, recording fees, city/county tax stamps, deed and mortgage, and state tax stamps, deed and mortgage, and loan origination fee (up to 1% of first mortgage principal). 6. Loan discount points (up to 2%). 7. Relocation of two personal vehicles to include the relocation of one vehicle to Houston shortly after the Start Date and the second vehicle at the time of the final move. 8. An incidental relocation payment equal to two months salary less normal payroll and withholding deductions, payable within 30 days of the Start Date. -2- 3 9. Such other reasonable and necessary expenses of relocation as may be incurred by Employee and approved by Company. Except for those items set forth in subparagraph 8 hereof, all payments made to or on behalf of Employee pursuant to this paragraph shall be subject to a "tax adder" with respect to federal income taxes only which shall be paid by Company to Employee to offset additional tax liability created by such payments. e. Stock Options. When sufficient shares are authorized under the Company's 1991 Stock Option Plan ("1991 Plan"), Employee shall be issued options to purchase 500,000 shares of the Company's common stock under the 1991 Plan at an exercise price of the market price of the shares of common stock as of the effective date hereof. When sufficient shares are authorized under the Company's 1994 Stock Option Plan ("1994 Plan"), Employee shall be issued options to purchase 1,500,000 shares of the Company's common stock under the 1994 Plan at an exercise price of $0.70 per share. Following the first anniversary of the Start Date, Employee's performance shall be evaluated and the Board of Directors may designate Employee as a "Senior Executive" under the 1991 Plan and the 1994 Plan. Further, in the event there should occur prior to the issuance of such options to Employee an event that accelerates the vesting of the options under the 1991 Plan or that permits a participant of the 1994 Plan to sell his or her stock, the Employee shall receive the same economic benefits she would have been entitled to had she been issued the options under the 1991 Plan and the 1994 Plan on the date hereof. f. Withholding. All salary, bonus, commissions and any termination payments made pursuant to this Agreement shall be subject to any and all payroll and withholding deductions required by the law of any jurisdiction, state or federal, having taxing authority with respect to such salary, bonus and/or commissions. 4. Other Benefits. In addition to the compensation specified in Section 3 above, Employee also shall be entitled to receive the following benefits as made available on the same terms and conditions to other employees of the Company, all in accordance with such policies as may be established by the Company: a. Annual vacation of four weeks and specified holidays, both with full pay; and b. Group hospitalization, major medical, and any long-term disability and life insurance coverages. -3- 4 In addition, the Company will reimburse Employee for her medical and dental COBRA payments during the period, not to exceed 60 days from the Start Date that Employee is not eligible to participate in the Company's benefit plans. 5. Duties. Employee shall be employed as the President and Chief Operating Officer of the Company and shall perform such services and functions for the Company and its subsidiaries as may from time to time be specified by the Chief Executive Officer of the Company or such subsidiaries' respective Boards of Directors. 6. Trade Secrets and Confidential Information. The Company and Employee acknowledge and agree that during the term of her employment with the Company, Employee will have access to certain confidential information relating to the business of the Company, including, but not limited to, corporate books and records, trade secrets, know-how, computer programs, marketing plans, financial information, personnel information, lists of vendors, consultants, customers and suppliers with which the Company does business or has engaged in negotiations, as well as to certain information pertaining to confidential or secret designs, processes, formulae, plans, processes, techniques, procedures, methods, trademarks, patents, copyrights, devices or materials, if any, of the Company (or an affiliate thereof) (collectively, the "Confidential Information"), all of which are of extreme importance to the future financial success of the Company because of the highly specialized nature of the Company' business. To ensure the continued secrecy of the Confidential Information, Employee agrees that she will not, during the term of her employment under this Agreement, or at any time thereafter, divulge, furnish or make accessible to anyone (other than in the ordinary course of business of the Company or any affiliate thereof), any knowledge or information with respect to any of the Confidential Information relating to the business of the Company. Upon the termination of Employee's employment with the Company, Employee shall not take from the premises of the Company and shall return to the premises, if previously taken, any such Confidential Information and any records, files or other documents, or copies thereof, relating to the business or affairs of the Company. The obligations of this paragraph shall not apply to any (i) use or disclosure of any information in the enforcement of Employee's rights hereunder; (ii) information that is now or later becomes publicly available through no fault of Employee; (iii) information obtained by Employee from a third party, other than in connection with Employee's employment by the Company, without any obligation of secrecy or confidentiality; (iv) information independently developed by Employee without reference to any Confidential Information; (v) any disclosure required by applicable law, provided that Employee shall use reasonable efforts to give advance notice to and cooperate with Company in connection with any such disclosure; and (vi) any disclosure with the consent of Company. -4- 5 7. Termination. a. Employee's employment by the Company shall terminate immediately upon the death or permanent disability of Employee. Employee shall be deemed permanently disabled if deemed so in accordance with the terms of the 1994 Plan. b. Employee may voluntarily terminate her employment with the Company by giving 60 days written notice to the Company prior to Employee's desired termination date. c. The Company may terminate Employee's employment with the Company by giving 60 days written notice to the Employee prior to the proposed termination date. d. The Company may also terminate Employee's employment for Cause (as defined in the 1994 Plan) by giving 24 hour written notice to the Employee prior to the proposed effectiveness of the termination ("Cause Termination"). e. Any termination caused other than by Employee's death shall not, however, relieve Employee of her obligations pursuant to Section 6 hereof. 8. Continuing Rights Upon Termination of Employment. Immediately upon the effectiveness of the termination of Employee's employment with the Company, all rights of the Employee to receive any payment hereunder shall immediately cease, except as follows: a. In the event Employee voluntarily terminates her employment with the Company for any reason, Employee shall receive any payments due and payable or which have accrued under this Agreement at the time of termination; provided, however, that no Bonus payment under paragraph 3.b above shall accrue or be payable for the year of termination or any subsequent year thereafter. b. In the event of Employee's termination of employment by the Company for any reason other than a Cause Termination, Employee shall be entitled to a lump sum severance payment on the date of termination in the amount of $225,000. c. In the event of a Cause Termination, Employee shall not receive any payments under this Agreement other than pursuant to clause (a) of this Section 8. 9. Acknowledgments of Employee. Employee hereby acknowledges that her execution of this Agreement is given in consideration of the Company's employment of Employee -5- 6 under the terms and conditions contained in this Agreement and Employee acknowledges that this is adequate consideration. 10. Miscellaneous. a. Notice. Any notice, request, reply, instruction, or other communication provided or permitted in this Agreement must be given in writing and may be served (i) by depositing same in the United States mail in certified or registered form, postage prepaid, addressed to the party or parties to be notified with return receipt requested, (ii) by telecopy with a confirming copy forwarded as in clause (i) or (iii) by delivering the notice in person to such party or parties. Notice deposited in the United States mail in the manner herein prescribed shall be effective on dispatch. Notice by telecopy shall be effective upon confirmation of a completed transmittal. Written notice given by delivery or by certified or registered mail shall be effective upon actual receipt by the party to be notified. For purposes of notice, the address of Employee, her spouse, any purported donee or transferee or any administrator, executor or legal representative of Employee or her estate, as the case may be, shall be as follows: Kathleen Callahan-Guion 419 North Fairfax Street Alexandria, Virginia 22314 The address of the Company for purposes of notice hereunder shall be: E-Z Serve Corporation 2550 North Loop West, Suite 600 Houston, Texas 77092 Telecopy: (713) 684-4367 Employee and the Company shall have the right to change their respective addresses by giving notice as provided herein. b. CONTROLLING LAW. THE EXECUTION, VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. c. Entire Agreement/Amendment. This Agreement contains the entire agreement of the parties hereto and supersedes any prior written or oral agreements among -6- 7 the parties with respect to the subject matter hereof. The Agreement may be amended only by an agreement in writing signed by the parties hereto. d. Separability. If any provision of the Agreement is rendered or declared illegal or unenforceable by reason of any existing or subsequently enacted legislation or by decree of a court of last resort, the Company and Employee shall promptly meet and negotiate substitute provisions for those rendered or declared illegal or unenforceable, but all of the remaining provisions of this Agreement shall remain in full force and effect. e. Effect of Agreement; Assignment. This Agreement shall be binding on Employee and her heirs, executors, administrators, legal representatives and successors and the Company and its successors and assigns. This Agreement may not be assigned by Employee. This Agreement may be assigned by the Company to any entity acquiring its business or substantially all of its assets (whether through an acquisition or by the dissolution of the Company or by the transfer of the business of the Company to an affiliate of the Company), and Employee specifically consents to such future assignment. f. Execution. This Agreement may be executed in multiple counterparts each of which shall be deemed an original and all of which shall constitute one instrument. g. Waiver of Breach. The waiver by the Company or Employee of a breach of any provision of the Agreement by the other shall not operate or be construed as a waiver of any subsequent breach. EXECUTED AND EFFECTIVE this 4th day of March,1997. E-Z SERVE CORPORATION By: /s/ Neil H. McLaurin ----------------------------- Neil H. McLaurin Chairman and Chief Executive Officer -7- 8 EMPLOYEE: /s/ Kathleen Callahan-Guion --------------------------- Kathleen Callahan-Guion -8- EX-21 27 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT E-Z Serve Convenience Stores, Inc. - a Delaware corporation E-Z Serve Petroleum Marketing Company - a Delaware corporation ("EZPET") E-Z Serve Petroleum Marketing Company of California - a California corporation and wholly-owned subsidiary of EZPET EX-23 28 CONSENT OF KPMG PEAT MARWICK LLP 1 Exhibit 23 INDEPENDENT AUDITORS' CONSENT The Board of Directors and Stockholders E-Z Serve Corporation We consent to the incorporation by reference in the Registration Statements (No. 33-79410 on Form S-8 and No. 33-77772 on Form S-8) of our report dated March 27, 1997, relating to the consolidated balance sheets of E-Z Serve Corporation and subsidiaries as of December 29, 1996 and December 31, 1995 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 29, 1996, which report appears in the December 29, 1996, annual report on Form 10-K of E-Z Serve Corporation. Our report refers to a change to the provisions of the Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of". KPMG Peat Marwick LLP Houston, Texas April 11, 1997 EX-27 29 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FROM THE COMPANY'S REPORT ON FORM 10-K FOR THE PERIOD ENDED DECEMBER 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-29-1996 DEC-29-1996 6,333 0 8,764 0 40,070 64,887 165,440 28,142 240,405 73,606 72,395 0 1 691 54,592 240,405 849,197 861,642 702,862 820,296 48,134 0 8,630 (15,418) (343) (15,075) 0 0 0 (15,075) (.23) (.23)
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