ASSET PURCHASE AGREEMENT

Exhibit 2.1

ASSET PURCHASE AGREEMENT

between

PETRO EXPRESS, INC.

and

THE PANTRY, INC.

Dated as of January 5, 2007

Table of Contents

 

 

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iii

EXHIBITS

 

 

iv

SCHEDULES

 

 

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ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (the “Agreement”), dated as of the 5th day of January, 2007 (the “Execution Date”), by and between PETRO EXPRESS, INC., a North Carolina corporation (the “Seller”), and THE PANTRY, INC., a Delaware corporation (the “Purchaser”).

WITNESSETH:

WHEREAS, the Seller operates sixty-six (66) convenience stores in North Carolina and South Carolina; and

WHEREAS, the Seller desires to transfer, sell, convey, assign and deliver (collectively, “Transfer”) or cause the Transfer to the Purchaser, and the Purchaser desires to purchase, acquire and accept from the Seller, Seller’s Affiliates and Seller’s Designates (defined herein) certain assets of Seller, Seller’s Affiliates and Seller’s Designates relating to Seller’s convenience store business and the wholesale/contract business of Carolina Petroleum Distributors of Charlotte, Inc. (“Carolina Petroleum”), upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, for and in consideration of the premises, mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

1.1 Defined Terms . The following terms, as used in this Agreement, shall have the following meanings:

“Action” shall mean any action, claim, proceeding, suit or investigation, or any appeal therefrom.

“Accrued Vacation Pay” shall mean all accrued vacation pay as of the First Closing Date of each of Seller’s employees as provided in Seller’s related Employee Benefit Plan.

“Affiliate” shall mean, with respect to any Person, any Person which, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “Affiliate,” with respect to Seller, shall be those Persons listed on Schedule 1.1A .

“Affiliate Real Property” shall mean the real property owned by Affiliates and more particularly described on Schedule 5.11(b) hereto.

“Agreement” shall mean this Asset Purchase Agreement and shall include all of the Schedules and Exhibits attached hereto.

“Announcement Date” shall mean the date on which Purchaser or Seller makes a public announcement of the transaction contemplated by this Agreement, which shall not be more than four (4) business days after the Execution Date.

“Approval” shall mean any approval, authorization, consent, franchise, or order of or by, or filing with, any Governmental Authority or other Person, excluding any License.

“Assumed Liabilities” shall have the meaning ascribed to such term in Section 2.3 hereof.

“Audit” shall mean a physical audit or count of all of the Inventory to be conducted jointly by Seller and Purchaser at each Store commencing at 7:00 a.m. on the day which is three (3) days before the First Closing.

“Business” shall mean the business of Seller’s sixty-six (66) convenience stores in North Carolina and South Carolina, identified on Schedule 1.1 , and the Carolina Petroleum Business but shall not include the Seller’s other business activities.

“Business Day” or “business day” shall mean any day that is not a Saturday, Sunday, or legal or banking holiday in North Carolina .

“Car Wash Equipment” shall mean all machinery, equipment, hoses, pipes, nozzles, fixtures, fittings and controls used in connection with any car wash operation.

“Carolina Petroleum Assets” shall mean the assets of the Carolina Petroleum Business more particularly described on Schedule 2.1(e) .

“Carolina Petroleum Business” shall mean the wholesale distribution of Petroleum Products in North Carolina, South Carolina, Georgia, Tennessee, Virginia and West Virginia.

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §9601 et seq., as amended, including any rules and regulations promulgated thereunder or in connection therewith.

“Change Fund” shall mean the cash on hand as normally maintained in the safe and registers of the Stores.

“Closing” or “Closings” shall mean the consummation of the transactions contemplated by this Agreement, effective as of 7:00 a.m. on the First Closing Date and/or Second Closing Date, as applicable.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and shall include all of the rules and regulations promulgated thereunder.

“Condition” shall mean, collectively, the business, properties, assets, operations, results of operations and condition (financial or otherwise).

 

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“Contracts” shall mean the contracts and agreements of the Seller and Carolina Petroleum relating to the Business and which will be assigned to and assumed by the Purchaser, as identified on Schedule 2.1(h) .

“Cost” shall mean Seller’s laid-in cost of Petroleum Inventory as of the day prior to the First Closing, Seller’s last invoiced cost for food and beverage service items (including coffee beans, cappuccino mix and bag-in-the-box soda syrup), Seller’s cost of QSR inventory, 79% of retail for beer, 72% of retail for cigarettes, and 69% of retail for all other Merchandise Inventory, all as determined from Seller’s books and records and the Audit, subject to confirmation by the parties upon completion of Purchaser’s review, which shall be completed no later than ten (10) calendar days after the First Closing.

“Damages” shall mean any fine, penalty, claim, loss, deficiency, liability, cost or expense (including, without limitation, reasonable attorneys’ and accountants’ fees, costs and expenses) or environmental assessment, monitoring or remediation expense, diminution in property value, or damage of any kind or nature whatsoever.

“Employee Benefit Plan” shall mean any employee benefit plan, arrangement, policy or commitment (meeting the definition of an “employee benefit plan” in Section 3(3) of ERISA) and any employment, consulting or deferred compensation agreement, executive compensation, bonus, incentive, pension, profit-sharing, savings, retirement, stock option, stock purchase or severance pay plan, any life, health, disability, accident or insurance plan or any holiday, vacation or other employee practice, policy or benefit.

“Environmental Insurance Policies” shall mean those insurance policies described in Schedule 5.13 providing coverage for claims and losses arising from or related to transport, storage, dispensing, release, remediation and assessment with respect to Petroleum Products or Hazardous Substances, or both.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated in connection therewith.

“Excluded Assets” shall have the meaning ascribed to such term in Section 2.2 hereof.

“Excluded Liabilities” shall have the meaning ascribed to such term in Section 2.4 hereof.

“Financial Statements” shall have the meaning ascribed to such term in Section 5.7 hereof.

“First Closing” and “First Closing Date” shall mean the later of (i) April 5, 2007, or (ii) the Thursday following the date that is five (5) Business Days after the date that Seller’s right to terminate this Agreement pursuant to each of Sections 7.7(d) and 7.8(c) has expired or has been waived by Seller, as Seller shall determine in its sole and absolute discretion, or as soon thereafter as the conditions to the First Closing described in Articles IX and X hereof shall have been fully satisfied or waived by the appropriate party or parties hereto, but not later than April 26, 2007, subject to extension pursuant to Section 11.5.

 

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“First Round Purchase Options” shall mean those options to purchase certain parcels of Affiliate Real Property described as “First Round Purchase Options” on Schedule 7.11 .

“GAAP” shall mean generally accepted accounting principles in the United States, consistently applied.

“Governmental Authority” shall mean any foreign, federal, state, local or other governmental, administrative or regulatory authority, body, agency, court, tribunal or similar entity.

“Hazardous Substance” shall have the meaning ascribed to such term in Section 5.16(a) hereof.

“Indemnified Party” shall mean any party entitled to indemnification pursuant to Article XII hereof and shall include such party’s Affiliates, successors and assigns and the Representatives of each of them, and with respect to Seller, Seller’s Designates and their successors, assigns and Representatives.

“Indemnifying Party” shall mean any party liable for indemnification pursuant to Article XII hereof and shall include such party’s successors and assigns.

“Inventory” or “Inventories” shall mean collectively the Merchandise Inventory and the Petroleum Inventory.

“IRS” shall mean the Internal Revenue Service.

“Knowledge” shall mean (i) the actual knowledge, after due inquiry and investigation, of Thomas J. Hall, Alan H. Erquitt and Michael J. Colitti, Jr., and (ii) the existence of facts, events, occurrences or matters with respect to which any of the persons referred to above should reasonably be expected to have knowledge in the ordinary conduct of his duties.

“Law” shall mean any Federal, state, local or foreign law, statute, rule, regulation, ordinance, standard, policy, requirement, administrative ruling, order or process (including, without limitation, any zoning or land use law or ordinance, building code or environmental law, any securities, blue sky, civil rights or occupational health and safety law or regulation, and any law or regulation relating to the distribution or sale of food products, beer, wine, cigarettes, gasoline or other motor fuel) and any court or arbitrator’s order or process.

“Lease” and “Leases” shall mean the Third Party Leases described on Schedule 5.12(a) .

“Liability” shall mean any debt, liability, commitment or obligation of any kind, character or nature whatsoever, whether known or unknown, secured or unsecured, accrued, fixed, absolute, contingent or otherwise, and whether due or to become due.

“License” shall mean any permit or license issued by a Governmental Authority and necessary or required for the operation of the Business.

“Lien” shall mean any lien, statutory lien (including, without limitation, any lien, restriction or right arising under N.C.G.S. §105-366(d)), pledge, mortgage, security interest,

 

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charge, encumbrance, easement, right of way, assessment (pending or confirmed), covenant, claim, restriction, right, option, conditional sale or other title retention agreement, warrant or equity of any kind or nature.

“M&A Qualified Beneficiary” shall mean an M&A qualified beneficiary as such term is defined in Treas. Reg. § 54.4980B-9, Q/A(4).

“Merchandise Inventory” shall mean all foodstuffs, beverages, tobacco products, magazines, books, household products, automotive products or accessories, and any other products of the Business of whatever nature (other than Petroleum Inventory) held for retail sale out of the Stores, but shall not include Store Supplies.

“OSHA” shall mean the Occupational Safety and Health Act of 1970, as amended.

“NCDENR” shall mean the North Carolina Department of Environment and Natural Resources.

“Permitted Liens” shall mean (i) Laws, ordinances and governmental regulations regulating the use or occupancy of the Real Property or the character, dimensions or locations of the improvements thereon; (ii) lease conditions, easements, rights of way, restrictions, and other exceptions discoverable by an inspection or survey or title examination or other imperfections of title that do not make title unmarketable; (iii) all items listed on Schedule B-II of the Title Commitments; and (iv) any notices of residual petroleum required under Law to be recorded on the Real Property; provided, however, that none of the same is or would be violated by the continued use of any portion of the Real Property for the purposes for which it has been customarily used by or in the Business and, provided further, that a Permitted Lien shall not include any such encumbrance or restriction which materially interferes with the continued or contemplated use of any Store or any material portion of the Real Property or Transferred Assets for the purposes for which they have been used by or in the Business.

“Person” shall mean any individual, partnership, corporation, limited liability company, association, business trust, joint venture, governmental entity, business entity or other entity of any kind or nature.

“Petroleum Equipment” shall mean all petroleum marketing equipment, including, but not limited to, pumps, gasoline dispensers, gas console, gasoline canopy, canopy structure, lights, registered and properly upgraded underground storage tanks and lines, environmental monitoring or upgrade equipment, and any related equipment or apparatus.

“Petroleum Inventory” shall mean all gasoline, diesel and kerosene products of the Business measured in gallons.

“Petroleum Products” shall mean gasoline and other petroleum products, by-products, and constituents.

“Purchase Price” shall have the meaning ascribed to such term in Section 2.5 hereof.

“Purchaser” shall mean The Pantry, Inc., a Delaware corporation.

 

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“Purchaser Group” shall have the meaning ascribed to such term in Section 7.6 hereof.

“Real Property” shall mean, collectively, the Seller Real Property, the Affiliate Real Property, the Seller Designate Real Property, and the Third Party Real Property.

“Remediation” or “Remediate” shall mean any investigation, clean-up, removal action, remedial action, restoration, repair, response action, corrective action, monitoring, sampling and analysis, installation, reclamation, abatement, closure, or post-closure in connection with the suspected, threatened or actual release of Petroleum Products or Hazardous Substances.

“Representative” shall mean any employee, officer, director, stockholder, partner, accountant, attorney, investment banker, broker, finder, investor, subcontractor, consultant or other authorized agent or representative of a Person.

“SCDHEC” shall mean the South Carolina Department of Health and Environmental Control.

“Second Closing” and “Second Closing Date” shall mean the date that is one hundred twenty-five (125) days after the Announcement Date, or as soon thereafter as the conditions to the Second Closing described in Articles IX and X hereof shall have been fully satisfied or waived by the appropriate party or parties hereto, but not later than June 28, 2007, subject to extension pursuant to Section 11.5.

“Second Round Purchase Options” shall mean those options to purchase certain parcels of Seller Designate Real Property described as “Second Round Purchase Options” on Schedule 7.11 .

“Seller” shall mean Petro Express, Inc., a North Carolina corporation.

“Seller’s Designates” shall mean those Persons owning the Seller Designate Real Property.

“Seller Real Property” shall mean the real property more particularly described on Schedule 5.11(a) hereto.

“Seller Designate Real Property” shall mean the real property more particularly described on Schedule 5.11(c) hereto.

“Store Equipment” shall mean all convenience store fixtures, machinery, and equipment, including, but not limited to, walk-in coolers, store fixtures, counters, shelving, refrigeration equipment, cash registers, safes, fountain dispensing equipment, QSR and food service equipment, coffee equipment, ice machines, tables and any other fixtures or equipment necessary for running a convenience store that may be at any of the Stores, regardless of whether such items are permanently attached to the Real Property, pole lights, pole signs or other personal property attached, appurtenant to or located in or around the buildings or improvements located at the Real Property.

 

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“Store Supplies” shall mean cups, lids, napkins, condiments, ice bags, paper towels, toilet paper, janitorial supplies, car wash supplies and similar non-Inventory items which are used in the operation or maintenance of the Stores.

“Stores” shall mean the sixty-six (66) convenience stores operated by the Seller and identified on Schedule 1.1 , each being a “Store.”

“Tanks” shall have the meaning ascribed to such term in Section 5.16(g) hereof.

“Tax” shall mean any foreign, federal, state or local income, gross receipts, license, severance, occupation, premium, environmental (including taxes under Code Section 59A), customs, duties, profits, disability, registration, alternative or add-on minimum, estimated, withholding, payroll, employment, unemployment insurance, social security (or similar), excise, sales, use, value-added, occupancy, franchise, real property, personal property, gas, petroleum marketing, business and occupation, mercantile, windfall profits, capital stock, stamp, transfer, workmen’s compensation or other tax, fee or imposition of any kind whatsoever, including any interest, penalties, addition, assessments or deferred liability with respect thereto, whether disputed or not.

“Tax Return” shall mean any return, report, notice, declaration, claim for refund, estimate, election or information statement or return relating to any Tax, including any schedules or attachments thereto and any amendments thereof.

“Third Party Leases” shall mean leases for each parcel of Third Party Real Property as more particularly described on Schedule 5.12(a) .

“Third Party Lease Assignments” shall have the meaning ascribed to such term in Section 3.2 hereof.

“Third Party Real Property” shall mean the real property more particularly described on Schedule 5.11(d) hereto.

“Transaction Documents” shall mean, collectively, this Agreement, the Third Party Lease Assignments, the Seller Designate Real Property Subleases, the Non-Competition Agreement, the special warranty deeds, the bills of sale, assignments, and all other agreements, instruments, certificates and other documents executed and/or delivered in connection herewith or therewith.

 

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“Transfer” shall mean any sale, transfer, conveyance, assignment, delivery or other disposition.

“Transferred Assets” shall have the meaning ascribed to such term in Section 2.1 hereof.

“Trust Fund” shall have the meaning ascribed to such term in Section 2.1(j) hereof.

1.2 Additional Definitions . In addition to the foregoing defined terms, other capitalized terms appearing in this Agreement shall have the respective meanings ascribed to such terms where they first appear in the text of this Agreement.

ARTICLE II

PURCHASE AND SALE OF ASSETS AND

ASSUMPTION OF LIABILITIES; PURCHASE PRICE

2.1 Purchase and Sale of Assets . Subject to the terms and conditions of this Agreement, at the First Closing and Second Closing, in accordance with Section 2.6 herein, the Seller shall Transfer or cause to be transferred to the Purchaser, and the Purchaser shall purchase, acquire and accept from the Seller, Seller’s Affiliates and Seller’s Designates, as applicable, all of the Seller’s, Seller’s Affiliates’ and Seller’s Designates’, as applicable, right, title and interest in, to and under all of the real property, furniture, fixtures, equipment, inventory and other assets, used or located at the Stores and relating to the Business, less and except the Excluded Assets (after giving effect to the exclusion of the Excluded Assets, such assets, together with tenant’s rights and interest in the Leases, being hereinafter collectively referred to as the “Transferred Assets”), free and clear of any and all Liens except Permitted Liens, such Transferred Assets to include, without limitation:

(a) the Seller Real Property, the Affiliate Real Property and the Seller Designate Real Property, together with all buildings and improvements;

(b) the Store Equipment;

(c) the Petroleum Equipment;

(d) the Car Wash Equipment;

(e) the Carolina Petroleum Assets;

(f) the Inventory;

(g) the Change Fund and Store Supplies;

(h) all right and interest of the Seller in, to or under the Contracts identified on Schedule 2.1(h) ;

 

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(i) all computer hardware and computer software documentation (subject to applicable license agreements and restrictions on transfer) utilized in the Stores, including source code and systems documentation and telephone switches related to point-of-sale and petroleum dispensing equipment;

(j) all rights, interests and claims under the North Carolina Commercial Leaking Petroleum Underground Storage Tank Cleanup Fund and the South Carolina SUPERB Account and SUPERB Financial Responsibility Fund (collectively or individually, the “Trust Fund”), or any other fund, program, or insurance policy relating to payment or reimbursement of costs, expenses or damages related to releases from underground storage tanks located on real property purchased or leased by Purchaser pursuant to this Agreement;

(k) all claims, rights, choses-in-action of the Seller related to real property purchased or leased by Purchaser pursuant to this Agreement with respect to or against any third-party who is or may be liable in whole or in part for any damages arising out of petroleum product or hazardous substances contamination occurring prior to the First Closing, with respect to the Affiliate Real Property, Third Party Real Property and any Seller Designate Real Property conveyed at the First Closing, or the Second Closing, with respect to the remaining Seller Designate Real Property, for which Purchaser may be legally or contractually liable or which in any way may result in or cause or contribute to a claim for damages against Purchaser;

(l) the names “Petro Express” and “Carolina Petroleum Distributors”, all variations thereof, related trademark and trade name registrations, and the goodwill associated therewith and with the Business; provided that Purchaser acknowledges that any representations or warranties with respect to Transfer of the names “Petro Express” and “Carolina Petroleum Distributors” shall be contained in Section 5.26;

(m) all books and records described in Section 9.7(b); and

(n) all transferable Licenses.

2.2 Excluded Assets . Notwithstanding anything in Section 2.1 to the contrary, the Seller shall retain all of its right, title and interest in, to and under all, and shall not Transfer or cause the Transfer to the Purchaser any, of the following assets, rights or properties (the “Excluded Assets”):

(a) all cash and cash equivalents, including any cash in the cash acceptors at fuel dispensers, except the Change Fund;

(b) all accounts and notes receivable of the Business (including miscellaneous receivables) arising from products sold or services rendered by the Seller or Carolina Petroleum prior to the First Closing Date;

(c) all Federal, state, local and foreign income tax deposits paid by the Seller, Carolina Petroleum, Seller’s Affiliates or Seller’s Designates in connection with the income or operations of the Business with respect to any period ending on or prior to the First Closing Date;

 

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(d) all assets of Seller, Seller’s Affiliates or Carolina Petroleum located at its corporate offices;

(e) any assets not relating to the Business;

(f) all minute books and stock books of the Seller, Seller’s Affiliates, Seller’s Designates or Carolina Petroleum;

(g) any assets relating to any Employee Benefit Plan;

(h) all rights, interests and claims under the North Carolina Commercial Leaking Petroleum Underground Storage Tank Cleanup Fund and the South Carolina SUPERB Account and SUPERB Financial Responsibility Fund (collectively or individually, the “Trust Fund”), or any other fund, program, or insurance policy relating to payment or reimbursement of costs, expenses or damages related to releases from underground storage tanks located on real property owned by Seller, Seller’s Affiliates, Seller’s Designates or Carolina Petroleum that is not purchased or leased by Purchaser pursuant to this Agreement;

(i) all claims, rights, choses-in-action of the Seller, Seller’s Affiliates, Seller’s Designates or Carolina Petroleum related to real property not purchased or leased by Purchaser pursuant to this Agreement with respect to or against any third-party who is or may be liable in whole or in part for any damages arising out of petroleum product or hazardous substances contamination occurring prior to the First Closing, for which Purchaser may be legally or contractually liable or which in any way may result in or cause or contribute to a claim for damages against Purchaser;

(j) Licenses and computer hardware and software licenses which are not assignable or transferable; and

(k) Life insurance policies and any cash value therein, including those policies on the lives of Kenneth D. Shaver, Jr., Thomas J. Hall and Douglas P. Drew.

2.3 Assumption of Liabilities . Subject to the terms and conditions of this Agreement and other than as expressly provided in this Agreement, at the First Closing or Second Closing, as applicable, the Purchaser shall assume and agree to pay, perform and discharge when due only the following Liabilities (collectively, the “Assumed Liabilities”):

(a) all Liabilities incurred on or after the First Closing Date under the Third Party Leases;

(b) all Liabilities incurred on or after the First Closing Date under the Contracts;

(c) all Liabilities incurred on or after the First Closing Date related to the Business and the Transferred Assets transferred at the First Closing, and all Liabilities incurred on or after the Second Closing Date related to the Transferred Assets transferred at the Second Closing;

 

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(d) Liabilities for repayment of the unamortized oil company awards, allowances, loans and rebates set forth on Schedule 2.3(d) which become due and payable as a result of Purchaser’s debranding, not to exceed $1,000,000.

(e) all Liabilities of Purchaser specified in Article XI; and

(f) all Liabilities assumed by Purchaser pursuant to Section 7.7 herein.

2.4 Excluded Liabilities . Except for the Assumed Liabilities specified in Section 2.3 hereof or as otherwise specified in this Agreement, the Purchaser shall neither assume nor have any liability for any, and the Seller shall remain fully liable for, and shall pay, perform and discharge, all Liabilities of the Seller or the Business arising out of any act or omission occurring or state of facts existing prior to and, to the extent not related to the Business, at or after the First Closing (collectively, the “Excluded Liabilities”).

2.5 Purchase Price . Subject to the provisions of Sections 7.7 and 7.8, the aggregate purchase price (the “Purchase Price”) to be paid by the Purchaser to the Seller for the Transferred Assets shall be Two Hundred Seventy-Four Million Dollars ($274,000,000), plus Inventory at Cost. An additional amount of One Million Dollars ($1,000,000) shall be paid for the Non-Competition Agreement referenced on Exhibit C of this Agreement.

2.6 Two Phase Closing . The Closing shall take place in two phases, the First Closing and the Second Closing. Subject to the terms and conditions of this Agreement, at the First Closing, the Seller shall (i) Transfer or cause to be transferred to the Purchaser, and the Purchaser shall purchase, acquire and accept from the Seller and Seller’s Affiliates, as applicable, all of the Transferred Assets except certain Seller Designate Real Property and the equipment located on such Seller Designate Real Property, which Seller does not Transfer at the First Closing, (ii) assign the Seller’s leases or cause to be assigned the leases of Seller’s Affiliates, as applicable, to the Third Party Real Property pursuant to the Third Party Lease Assignments, and (iii) sublease to Purchaser the Seller Designate Real Property not conveyed, pursuant to a Sublease Agreement substantially in the form attached hereto as Exhibit E (the “Seller Designate Real Property Subleases”) with rent as set forth on Schedule 2.6 . Subject to the terms and conditions of this Agreement, at the Second Closing, the Seller shall Transfer or cause to be transferred to the Purchaser, and the Purchaser shall purchase, acquire and accept from the Seller and Seller’s Designates, as determined by the Seller, all of the Seller Designate Real Property not conveyed at the First Closing and the equipment located on such Seller Designate Real Property, and the Seller Designate Real Property Subleases shall terminate, and Seller shall record memoranda of termination of same.

2.7 Payment of Purchase Price . At the First Closing, the Purchaser shall pay to Seller, subject to the provisions of Sections 7.7 and 7.8, (i) an amount equal to the Purchase Price less the amounts specified on Schedule 2.7 for the parcels of Real Property and related equipment which are not conveyed to Purchaser (or at Purchaser’s direction to its designates) at the First Closing, and (ii) an amount equal to ninety-eight percent (98%) of Seller’s book cost of current Inventory (“Inventory Estimate”) by wire transfer of immediately available funds to an account designated in writing by Seller (the “First Closing Purchase Price”). Upon completion of the Audit, and the determination of the Cost of the Inventories, which shall be completed no later than thirty (30) calendar days after the First Closing, if Cost exceeds the Inventory Estimate, Purchaser shall pay the difference to Seller immediately, and if Cost is less than the Inventory Estimate, Purchaser shall deduct the difference from the Second Closing Purchase Price (defined herein). At the Second Closing, the Purchaser shall pay to Seller the balance of

 

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the Purchase Price by wire transfer of immediately available funds to an account designated in writing by Seller (the “Second Closing Purchase Price”); provided that in no event shall there be any adjustment to the Purchase Price from and after the First Closing except as may be caused by Seller’s inability to exercise a purchase option to deliver a parcel(s) of Seller Designate Real Property, it being the parties’ intent that adjustments, if any, under Sections 7.7 or 7.8 shall be determined prior to the First Closing Date; provided further, there may be an adjustment to the Purchase Price as provided in Section 11.5 and/or as required under Section 7.7(g).

2.8 Allocation of Purchase Price . The Purchase Price shall be allocated as set forth on Schedule 2.8 . The allocation of the Purchase Price is intended to comply with the requirements of Section 1060 of the Code. Purchaser and Seller shall file Form 8594, Asset Acquisition Statement Under Section 1060 of the Code, with their respective income tax returns for the taxable years that include the First Closing Date with respect to the Transferred Assets transferred at the First Closing, and the Second Closing Date with respect to the Transferred Assets transferred at the Second Closing, in a manner consistent with the allocation of the Purchase Price set forth herein. Purchaser and Seller agree to satisfy all of the reporting requirements of Section 1060 of the Code. In any proceeding related to the determination of any Tax, neither Purchaser nor Seller shall contend or represent that such allocation is not a correct allocation.

2.9 Prorations . All (a) real estate, property and ad valorem taxes, (b) payments due or arising under the Third Party Leases or Contracts and (c) other customarily-proratable items relating to the Transferred Assets payable on or after the First Closing Date and relating to a period of time both prior to and on or after the First Closing Date shall be prorated as of the First Closing Date between Purchaser and Seller. If the actual amount of any such item is not known as of the First Closing Date, the aforesaid proration shall be based on the previous year’s (or other applicable period’s) assessment of such item and the parties agree to adjust said proration and pay any underpayment or reimburse for any overpayment within thirty (30) days after the actual amount becomes known, which shall in no event be later than the date that is twelve (12) months after the First Closing Date.

2.10 Employees .

(a) If the First Closing occurs, Purchaser shall be free to hire such persons, whether or not employees of the Seller or the Business, on such terms and conditions of employment as Purchaser shall determine in the exercise of its sole discretion, and, except as expressly set forth herein, nothing in this Agreement shall establish any enforceable rights, legal or equitable, in any Person other than the parties hereto, including, without limitation, any employee of Seller or the Business or any beneficiary of such employee. Any claim, including any claim for benefits, asserted by or on behalf of any Person with respect to such Person’s employment by the Purchaser shall be governed solely by applicable employment policies and employee benefit plans, if any, which the Purchaser maintains or may adopt after the First Closing, subject to and as construed in accordance with applicable Federal and state law. Schedule 2.10 provides a true and complete list (including names, titles, job descriptions, compensation, date of hire, and full vs. part-time status) of all employees of the Business as of the date indicated.

(b) Within forty-five (45) calendar days of the Announcement Date, Purchaser shall identify the employees listed on Schedule 2.10 to whom Purchaser will offer employment as of the First Closing (“Hired Employees”), and shall provide Seller with a list of those Hired Employees (“Notice of Hired Employees”). Except as described below, the Seller

 

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shall be fully liable for the employment (or termination or severance thereof) of any employees not hired by Purchaser. In addition, the Seller shall be liable for, and shall pay, all wages, salaries, payroll taxes and employee benefits, including without limitation, Accrued Vacation Pay, due, owing or accrued for all employees of the Business through the First Closing Date. Except as expressly provided in this Agreement, all claims incurred or liabilities asserted under Seller’s Employee Benefit Plans shall be the responsibility of Seller, and Purchaser shall not have any liability with respect to such claims or liabilities. Notwithstanding the foregoing, the parties acknowledge that: (i) the transactions contemplated by this Agreement are anticipated to result in the termination of Seller’s group health plans; (ii) Seller will provide Purchaser all information related to Seller’s group health plans and participants therein necessary for Purchaser to provide notices to M&A Qualified Beneficiaries regarding continuation coverage required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”); and (iii) as allowed by Treas. Reg. § 54.4980B-9, Q/A(7), Purchaser shall make available COBRA continuation coverage under applicable group health plans to all M&A Qualified Beneficiaries to the extent required by COBRA and shall timely provide M&A Qualified Beneficiaries applicable notices of such coverage.

2.11 WARN Act . Seller will be solely responsible for all obligations (including notice) under the U.S. Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101 et seq. or the regulations promulgated thereunder (the “WARN Act”), that arise with respect to any employees of Seller or the Business who are not hired by Purchaser. Seller will provide any necessary WARN Act notices to its employees at least sixty (60) days prior to the First Closing Date.

2.12 Dispute Resolution . In the event of any disagreement with respect to the Audit and Inventory Estimate (Section 2.7) or any post-closing prorations (Section 2.9), the parties hereby agree that such dispute shall be submitted to the accounting firm Grant Thornton LLP, or its successors, to act as sole arbitrator and to decide all points of disagreement with respect to the Audit, Inventory Estimate or any post-closing prorations. If such firm is unwilling or unable to serve in such capacity, then the Seller and Purchaser shall use commercially reasonable efforts to designate and retain another mutually acceptable nationally-recognized accounting firm not retained for general audit purposes by either of them as the sole arbitrator under this Section 2.12. The costs and expenses of the arbitrator, whether the firm designated above, or otherwise designated, shall be shared equally by Seller and Purchaser.

2.13 Hart-Scott-Rodino Filing . Within fifteen (15) days of the Execution Date, Seller and Purchaser shall prepare and file the Premerger Notification Form and any other filings as may be required by the Hart-Scott-Rodino Antitrust Improvements Act, as amended, and Seller and Purchaser shall split equally the cost thereof.

ARTICLE III

THE CLOSINGS

3.1 Time and Place of Closings . The Closings shall take place at 10:00 a.m. on the First Closing Date and Second Closing Date, as provided in this Agreement, at the offices of Johnston, Allison & Hord, P.A., 1065 East Morehead Street, Charlotte, North Carolina.

3.2 Instruments of Transfer . At the Closings, the Seller shall deliver or cause its Affiliates and Seller’s Designates to deliver to the Purchaser such special warranty deeds, bills

 

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of sale, substantially in the form of Exhibit G to this Agreement, assignments and other good and sufficient instruments of Transfer, in form and substance reasonably satisfactory to the Purchaser and its counsel and Seller and its counsel, as shall be effective to vest in the Purchaser all of the Seller’s, its Affiliates’ and/or Seller’s Designates’ right, title and interest in, to and under the Transferred Assets. Seller agrees that Purchaser, at its option, may direct Seller, its Affiliates or Seller’s Designates to convey title to the Seller Real Property, the Affiliate Real Property and the Seller Designate Real Property, respectively, to a grantee other than Purchaser. In addition, the Seller and the Purchaser shall execute and deliver assignment and assumption agreements (the “Third Party Lease Assignments”) of the rights granted and obligations imposed in the Third Party Leases with respect to the Third Party Real Property. The Third Party Lease Assignments shall be substantially in the form of Exhibit A . At the First Closing, Seller shall use its best efforts to deliver or cause the delivery of executed Seller Designate Real Property Subleases substantially in the form attached as Exhibit E ; provided further, in the event Seller is unable to deliver any Seller Designate Real Property Sublease, Seller and Purchaser shall negotiate in good faith to enter into an operating agreement for such Store unless such operating agreement would violate the primary lease or jeopardize Seller’s right to exercise the purchase option.

3.3 Further Assurances . In addition to the actions, documents and instruments specifically required to be taken or delivered by this Agreement, at the First Closing or Second Closing, as applicable, or from time to time thereafter, and without further consideration, the parties hereto shall take such other actions, and execute and deliver such other commercially reasonable documents and instruments, as the other party or parties hereto or their respective counsel may reasonably request in order to effectuate and perfect the transactions contemplated by this Agreement.

3.4 Transfer Taxes . Except for all transfer taxes and fees, if any, which shall be borne and paid solely by the Seller, Seller’s Affiliates or Seller’s Designates, and the cost of recording the deeds and any other instruments to be recorded, which shall be paid solely by the Purchaser, each party hereto shall pay any and all taxes incurred by such party in connection with the transactions contemplated by this Agreement.

ARTICLE IV

TERMINATION

4.1 Termination . This Agreement may be terminated:

(a) at any time prior to the First Closing Date or Second Closing Date, as applicable, by the mutual written consent of the Seller and the Purchaser;

(b) at any time prior to the First Closing Date or Second Closing Date, as applicable, by the Seller, upon written notice to Purchaser, if there shall have been a material breach by Purchaser of any of the terms or provisions of this Agreement or any of the Transaction Documents, and such breach shall not have been cured within fifteen (15) business days after Purchaser shall have received notice of Seller’s intent to terminate this Agreement pursuant to this subsection (b);

(c) at any time prior to the First Closing Date or Second Closing Date, as applicable, by the Purchaser, upon written notice to Seller, if there shall have been a

 

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material breach by Seller of any of the terms or provisions of this Agreement or any of the Transaction Documents, and such breach shall not have been cured within fifteen (15) business days after Seller shall have received notice of Purchaser’s intent to terminate this Agreement pursuant to this subsection (c); provided further, it is specifically acknowledged and agreed that Section 11.5 contains Purchaser’s sole remedy for Seller’s delay or failure to deliver title to individual parcels of Real Property, and such shall not constitute a material breach of this Agreement nor otherwise give Purchaser any right to terminate this Agreement;

(d) at any time prior to the First Closing Date or Second Closing Date, as applicable, by the Seller or the Purchaser if any court of competent jurisdiction or other Governmental Authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transaction contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and non-appealable; or

(e) at any time prior to the First Closing Date, by the Seller or the Purchaser after April 26, 2007, if the First Closing shall not have occurred by such date, unless the First Closing is delayed as a result of default, negligence or dilatory actions on the part of the party seeking to terminate this Agreement; provided that the First Closing shall be extended by the number of days necessary to allow for any cure period activated above pursuant to notice properly given prior to April 26, 2007; provided further that the First Closing shall be extended by the number of days necessary to allow Seller to comply with the terms of Section 7.7 herein if all Purchaser notifications required therein were properly given prior to April 26, 2007; provided further, it is specifically acknowledged and agreed that Section 11.5 contains Purchaser’s sole remedy for Seller’s delay or failure to deliver title to individual parcels of Real Property, and such shall not constitute a material breach of this Agreement nor otherwise give Purchaser any right to terminate this Agreement.

4.2 Effect of Termination . In the event of the termination of this Agreement pursuant to Section 4.1(a), (d) or (e) hereof, such termination shall be the sole remedy, this Agreement shall forthwith become void (except for Sections 7.10 and 8.3 (Confidentiality) and 13.1 (Fees and Expenses)) and there shall be no liability on the part of any of the parties hereto, any of their respective Affiliates or any of the Representatives of any of them. If such termination shall result from any other reason, including the breach by a party hereto of its obligations under this Agreement, or if either of the Closings do not occur because of the breach by a party hereto of its obligations under this Agreement, such party shall be fully liable for Damages sustained or incurred by the other party or parties as a result of such breach, including, without limitation, fees, expenses and costs incurred by such other party in connection with the origin, preparation, negotiation, execution and delivery of this Agreement, the other Transaction Documents, and the transactions contemplated hereby or thereby, including without limitation, any fees, expenses, or commissions of its attorneys, accountants or other representatives, and such other party or parties shall be entitled to pursue any remedies available at law or in equity, and in the case of a Purchaser breach resulting in the failure to consummate the Second Closing, Seller may, at its option, elect either of the following: (i) seek specific performance of Purchaser’s obligations and recover Seller’s costs and any Damages incurred while seeking specific performance, including Damages for the period from Purchaser’s breach to closing pursuant to specific performance, or (ii) terminate the Seller Designate Real Property Subleases, terminate the Noncompetition Agreements, recover the Trademarks assigned to Purchaser, seek another buyer notwithstanding Section 7.5, and pursue any other remedies and Damages which may be

 

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available at law or equity; provided, however, such non-breaching party shall only be allowed to recover Damages after it has proven such Damages in a court of competent jurisdiction as evidenced by a final, non-appealable judgment; provided further, no party shall be liable to the other party for any incidental or consequential damages; provided further, no party shall be able to recover any Damages in excess of $1,500,000.00; provided further, the preceding limitation on incidental or consequential damages and the $1,500,000 cap on Damages shall not apply if Purchaser fails to consummate the Second Closing due to a Purchaser breach.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller hereby represents and warrants to the Purchaser as follows:

5.1 Organization and Good Standing . Each of the Seller and Carolina Petroleum is a corporation duly organized, validly existing and in good standing under the laws of the State of North Carolina, is qualified to do business and is in good standing in each jurisdiction in which such qualification is required, as indicated on Schedule 5.1 , and has all requisite power and authority, corporate and otherwise, to own, operate and lease its properties and assets and to conduct Seller’s Business or the Carolina Petroleum Business, as applicable.

5.2 Power and Authority . The Seller has all requisite power and authority to enter into and deliver this Agreement, perform its obligations hereunder and consummate the transactions contemplated hereby. The execution and delivery of this Agreement, the performance by it of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby have been duly and validly authorized by all corporate, stockholder, and other actions on its part required by applicable Law, its Articles of Incorporation or its By-Laws. This Agreement constitutes the legal, valid and binding obligation of the Seller, enforceable against Seller in accordance with their terms, except as the same may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors’ rights generally and (b) general equitable principles.

5.3 No Violation . Except as set forth on Schedule 5.3, neither the execution and delivery by the Seller of this Agreement, the performance by it of its obligations hereunder, nor the consummation of the transactions contemplated hereby, will (a) contravene any provision of Seller’s Articles of Incorporation; (b) violate any material agreement or instrument to which the Seller or Carolina Petroleum is a party or by which it or any of its assets or properties may be bound; or (c) violate any material Law or any judgment, decree or order of any court or other Governmental Authority or any arbitration award to which it is subject or by which any of its assets or properties may be bound.

5.4 No Actions . There is no Action pending or, to the knowledge of Seller, threatened, against it, any Affiliate or any of their respective assets, properties or rights (including, without limitation, any relating to any of the Transferred Assets or the Real Property) before any court or other Governmental Authority which (a) questions or challenges the validity of this Agreement or the other Transaction Documents or any action taken or proposed to be taken by the Seller or any Affiliate pursuant hereto or in connection with the transactions contemplated hereby or (b) could, if adversely determined, have a material adverse effect on any of the Transferred Assets, the Real Property, the Condition of the Business or the transactions contemplated hereby and thereby. Schedule 5.4 hereto sets forth a true and

 

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complete list and description of all Actions pending or, to the knowledge of Seller, threatened, against the Seller or any Affiliate, with respect to the Business, before any court or other Governmental Authority.

5.5 Approvals; Licenses . Except as set forth in this Agreement and Schedule 5.5 , to the Knowledge of Seller, neither any declaration, filing or registration with, notice to, nor Approval of, any Governmental Authority or other Person is required to be made, obtained or given by or with respect to any Affiliate or the Seller or the Business in connection with the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby, except such filings as may be required by the Hart-Scott-Rodino Antitrust Improvements Act, as amended. It is acknowledged and agreed that the Seller and the Purchaser shall each pay one-half (1/2) of the fee payable upon filing the Premerger Notification Form and any other filings as may be required by the Hart-Scott-Rodino Antitrust Improvements Act, as amended. Each of the Seller and Carolina Petroleum has all Licenses required for the lawful operation of the Business and the use and ownership or leasing of its properties and assets as it is currently operated, except as noted on Schedule 5.5 . All such Licenses are (i) listed on Schedule 5.5 , and (ii) valid, in full force and effect and in good standing, except as noted on Schedule 5.5 . There is no proceeding pending or, to the Knowledge of Seller, threatened that disputes the validity of any such License or that may result in the revocation, cancellation or suspension, or any adverse modification of, any such License. The Seller will make available to the Purchaser true and complete copies of all such Licenses.

5.6 Compliance with Laws and Orders . Except as described in detail on Schedule 5.6 , except where the failure to be in compliance could not reasonably have an adverse effect on the Condition of the Business, to the Knowledge of Seller, (a) each of the Seller and Carolina Petroleum have complied in all material respects with all Laws applicable to it, to its ownership and/or use of the Real Property, and to the operation of the Business, (b) neither the Seller nor Carolina Petroleum has been charged with or, threatened with any charge concerning or under any investigation with respect to any material violation of any provision of any Law applicable to or affecting Seller, the Business or the Real Property, and (c) neither the Seller nor Carolina Petroleum is in violation of or in default under, and no event has occurred which, with the lapse of time or the giving of notice or both, could result in the violation of or default under, the terms of any judgment, decree, order, injunction or writ of any court or other Governmental Authority applicable to, Seller, any of its assets, properties or Stores, or the Business.

5.7 Financial Statements . Seller has delivered to Purchaser unaudited financial statements (for Seller and for Carolina Petroleum) for the twelve (12) months ended March 31, 2005 and 2006 and unaudited interim financial statements for the five (5) months ended August 31, 2006, copies of which are attached as Schedule 5.7 . Said financial statements are true and correct in all material respects and fairly present the financial condition of Seller or Carolina Petroleum, as applicable, for the periods indicated and the results of the operations of Seller or Carolina Petroleum, as applicable, for said periods, in conformity with generally accepted accounting principles applied on a basis consistent with prior periods except as otherwise noted within said financial statements.

5.8 Absence of Certain Changes or Events . Except as described in detail on Schedule 5.8 hereto, since March 31, 2006 the Seller has conducted Seller’s Business and Carolina Petroleum has conducted the Carolina Petroleum Business in the ordinary course and consistent with past practice and:

(a) to the Seller’s Knowledge, there has not occurred (i) any material adverse change in the Condition of the Business or (ii) any event, circumstance or combination thereof, whether arising prior to or after March 31, 2006, which might reasonably be expected to result in any material adverse change in the Condition of the Business before, on or after the First Closing Date; and

 

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(b) the Seller (or Carolina Petroleum) has not (i) to Seller’s Knowledge, suffered any damage, destruction or loss, whether covered by insurance or not, materially and adversely affecting the Condition of the Business, (ii) entered into any material commitment or transaction (including, without limitation, any borrowing or capital expenditure) affecting or relating to the Business not in the ordinary course of business in accordance with past practice, (iii) Transferred any of the assets of the Business except in the ordinary course of business in accordance with past practice, (iv) granted or agreed to grant any increase in the compensation of any employee of the Business (including any such increase pursuant to any bonus, pension, profit-sharing or other plan or commitment) or any increase in the compensation payable or to become payable to any employee of the Business, except for those granted in the ordinary course of business in accordance with past practice or as described on Schedule 5.8(b) , or (v) entered into or agreed (whether in writing or otherwise) to enter into any agreement or other arrangement to take any action referred to in this Section 5.8, including, without limitation, any agreement or arrangement granting any preferential right to purchase any of the assets of the Business (including, without limitation, the Transferred Assets) or requiring the consent of any party to the Transfer of any such assets.

5.9 Title to Transferred Assets .

(a) Except as set forth on Schedule 5.9 , (i) the Seller, its Affiliates or Seller’s Designates, as applicable, has legal title to all of the Transferred Assets and the Seller Real Property, free and clear of any pledge, mortgage or security interest of any kind whatsoever, except for those mortgages or other encumbrances listed on Schedule 5.9 , which shall be removed at or prior to the First Closing; (ii) each Affiliate identified on Schedule 5.11(b) has legal title to the Affiliate Real Property identified as owned by such Affiliate, free and clear of any pledge, mortgage or security interest of any kind whatsoever, except for those mortgages or other encumbrances listed on Schedule 5.9 , which shall be removed at or prior to the First Closing; (iii) to Seller’s Knowledge, each Seller’s Designate identified on Schedule 5.11(c) has legal title to the Seller Designate Real Property identified as owned by such Seller’s Designate, free and clear of any pledge, mortgage or security interest of any kind whatsoever, except for those mortgages or other encumbrances listed on Schedule 5.9 , which shall be removed at or prior to the Second Closing; and (iv) with respect to each parcel of Third Party Real Property identified on Schedule 5.11(d) , Seller has no knowledge of any adverse claim against the title to the Third Party Real Property owned by such Third Party, except as scheduled on Schedule 5.11(g) .

(b) Except as set forth on Schedule 5.18(b) , all material properties and assets (real, personal, mixed, tangible or intangible) used in the operation of the Business are included in the Transferred Assets.

(c) Upon the delivery of the instruments of Transfer described in Section 3.2 hereof to the Purchaser at the First Closing with respect to the Transferred Assets transferred at the First Closing, or the Second Closing with respect to the Transferred Assets transferred at the Second Closing, the Transferred Assets shall have been Transferred to the Purchaser, free and clear of any Liens of any kind whatsoever, except for Permitted Liens.

 

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5.10 Inventory . Subject to Section 5.8 and related Schedules, as of the First Closing, the Inventories shall be in good and merchantable condition and constitute a customary and normal supply and product mix, consistent with Seller’s past practice, of saleable Merchandise Inventory and Petroleum Inventory currently sold at normal prices in the ordinary course of business of the Business. The Seller and Purchaser agree that the parties shall conduct an Audit of all Inventories, and the cost of the Audit shall be borne equally by Seller and Purchaser and paid at or before the Second Closing.

5.11 Real Property .

(a) Schedule 5.11(a) hereto contains a true and complete list and description of all of the Seller Real Property.

(b) Schedule 5.11(b) hereto contains a true and complete list and description of all of the Affiliate Real Property.

(c) Schedule 5.11(c) hereto contains a true and complete list and description of all of the Seller Designate Real Property.

(d) Schedule 5.11(d) hereto contains a true and complete list and description of all of the Third Party Real Property.

(e) The Real Property includes all land, easements, rights of way, access to public streets or roads, buildings, structures and other improvements (except as otherwise provided in this Agreement) used by the Seller in the conduct of the related Stores and the Business as it is currently being conducted.

(f) Except as set forth on Schedule 5.11(f) , neither the Seller, any Affiliate nor, to the Seller’s Knowledge, any Seller’s Designate or Third Party owns, holds or is obligated under or a party to any option, right of first refusal or other contractual right to acquire or sell any of the Real Property or any interest therein which will survive the First Closing with respect to the Affiliate Real Property and the Third Party Real Property, or the Second Closing with respect to the Seller Designate Real Property.

(g) Except as set forth on Schedule 5.11(g) , with respect to the Real Property, to the Seller’s Knowledge, there are not (i) any pending or threatened condemnation proceedings, (ii) any pending or threatened Actions or (iii) any other matter materially and adversely affecting the value thereof other than those matters that are Permitted Liens or are subject to the provisions of Section 7.7, 7.8 and/or 11.3.

(h) Each of the Seller, the Affiliates and, to Seller’s Knowledge, the Third Parties and Seller’s Designates, has paid, and will continue to pay through the First Closing, all taxes, assessments, charges, fees, levies and impositions which are due and payable and owing by each or any of them with respect to the Real Property. Except as set forth on Schedule 5.11(h) , to the Seller’s Knowledge, there is no actual or pending imposition of any assessments or public betterments, and, no improvements have been constructed or planned which would be paid for by means of assessments upon the Real Property.

 

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5.12 Third Party Leases .

(a) Schedule 5.12(a) hereto contains a true and complete list and description, including annual rent, of each of the Third Party Leases. Except as specifically identified on Schedule 5.12(a) , the Seller’s interest in each of the Third Party Leases is free and clear of any pledge, mortgage or security interest of any kind whatsoever. The Seller has delivered to the Purchaser true and complete copies of all of the Third Party Leases and of all related options, if any, to purchase the Third Party Real Property.

(b) Each Third Party Lease and each such option to purchase is valid and binding and is in full force and effect, subject only to exceptions based on bankruptcy, insolvency or similar Laws of general application, and there are no existing material defaults by the Seller or an Affiliate under, or, to the Knowledge of the Seller, by any other party to, any Lease or any option to purchase the Third Party Real Property, or any condition, event or act known to the Seller that, with notice or lapse of time or both, would constitute a material default. Without limiting the foregoing, the Seller has not received any notice from any Person asserting that the Seller or an Affiliate is in default under any Third Party Lease or under any option to purchase, nor does the Seller have any Knowledge of a default by it or an Affiliate under any Third Party Lease or under any option to purchase. The Seller or an Affiliate currently enjoys peaceful and undisturbed possession of the Third Party Real Property under each of the Third Party Leases.

(c) Except as described in detail on Schedule 5.12(c) hereto, all of the Seller’s or an Affiliate’s rights under the Third Party Leases, as the case may be, may be assigned or subleased to the Purchaser without the Approval of any Person.

5.13 Insurance . The Seller currently has in effect policies of fire, liability, and worker’s compensation insurance which provide coverage for the Stores and the Business as summarized on Schedule 5.13 (collectively, the “Insurance Policies”). The Insurance Policies are, and will remain, in full force and effect through the First Closing Date. Except as described on Schedule 5.13 , there is no notice of or basis for any modification, suspension, termination or cancellation of any Insurance Policy or of any claim thereunder.

5.14 Contracts . Each of the Contracts specified on Schedule 2.1(h) is valid and in full force and effect and has been entered into in the ordinary course of business, Seller is current in its obligations thereunder, and, to the Knowledge of the Seller, none of them is in default in any material respect. The Seller has delivered to the Purchaser true and complete copies of each of the Contracts. Except as set forth on Schedule 5.14 hereto, each Contract that is being assigned by the Seller to the Purchaser hereunder may be so assigned without notice to, or the Approval of, any Person.

5.15 Employment Law Matters .

(a) With respect to the Business, to Seller’s Knowledge (i) the Seller is in compliance with all applicable Laws respecting employment, employment practices, terms and conditions of employment, wages and hours and the employment of aliens or similar immigration matters except where such non-compliance would not have a material adverse effect on the Business or the transactions contemplated by this Agreement or the other Transaction Documents; and (ii) the Seller is not engaged in any unfair labor practice.

 

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(b) There is no strike, labor dispute, slowdown or work stoppage pending or, to the Knowledge of the Seller, threatened, against or affecting the Business.

(c) Except as set forth on Schedule 5.15 hereto, none of the current employees of the Business is represented by a labor union, and, to the Seller’s Knowledge, no petition has been filed or proceedings instituted by any employee or group of employees of the Business with any labor relations board seeking recognition of a bargaining representative at any time. There are no controversies or disputes (including any union grievances or arbitration proceedings) pending or, to the Knowledge of the Seller, threatened, between the Seller and any of the employees of the Business (or any union or other representative of such employees), except for such controversies and disputes which do not and will not, individually or in the aggregate, have a material adverse effect on the Condition of the Business.

5.16 Environmental Matters .

(a) For purposes of this Section 5.16, “Hazardous Substance” means any of the following: (i) a “hazardous substance” as defined in 42 U.S.C. Section 9601(14), as amended from time to time, and all rules, regulations and orders promulgated thereunder as in effect from time to time, (ii) a “hazardous waste,” as defined in 42 U.S.C. Section 6903(5), as amended from time to time, and all rules, regulations and orders promulgated thereunder as in effect from time to time, (iii) if not included in (i) or (ii) above, “hazardous waste constituents” as defined in 40 C.F.R. Section 260.10, including, without limitation, those listed in Appendix VII and VIII of Subpart D of 40 C.F.R. Section 261, as amended from time to time, and all rules, regulations and orders promulgated thereunder as in effect from time to time, and (iv) “source,” “special nuclear” or “by-product material,” as defined in 42 U.S.C. Sections 3011, et seq., as amended from time to time, and all rules, regulations and orders promulgated thereunder as in effect from time to time, but the definition “Hazardous Substance” specifically excludes Petroleum Products, other than waste oil.

(b) Except as set forth in Schedule 5.16(b) , the Seller, the Affiliates and the Real Property are in compliance in all material respects with all applicable Laws relating to Hazardous Substances in respect of the Business. Without limiting but subject to the foregoing, except as set forth in Schedule 5.16(b) hereto (i) the operations of th