Asset Exchange Agreement

ASSET EXCHANGE AGREEMENT


By And Among


NATIONAL CONVENIENCE STORES INCORPORATED,


NCS REALTY COMPANY,


THE CIRCLE K CORPORATION


And


CIRCLE K PROPERTIES, INC.


DATED AS OF APRIL 20, 1994 2


TABLE OF CONTENTS


PAGE
---- TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
INDEX OF EXHIBITS AND SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
ARTICLE 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1. Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2. EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.1. Exchange of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.2. Purchase of Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.3. Assumption of Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.4. Opt-Out Stores. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.5. Instruments of Conveyance and Transfer. . . . . . . . . . . . . . . . . . . 8
Section 2.6. Escrow Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 3. TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.1. Title Commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.2. Title Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.3. Review of Title Commitments by Transferee. . . . . . . . . . . . . . . . . . 10
Section 3.4. Transferor's Right to Cure. . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.5. Inability to Deliver Any of the Stores. . . . . . . . . . . . . . . . . . . 11
Section 3.6. Surveys. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 4. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.1. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.2. Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.3. Actions by the Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.4. Conditions to Obligation to Close. . . . . . . . . . . . . . . . . . . . . . 13
Section 4.5. Prorations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 5. ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.1. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.2. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.3. Assumption of Liability; Indemnification . . . . . . . . . . . . . . . . . . 16
Section 5.4. Certain Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 6. REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 6.1. Representations, Warranties and Covenants. . . . . . . . . . . . . . . . . . 18
Section 6.2. Operation, Repair and Condition. . . . . . . . . . . . . . . . . . . . . . 20


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Section 6.3. Purchases of Inventories Prior to Closing Date. . . . . . . . . . . 21
Section 6.4. Covenant of Cooperation . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 7. INDEPENDENT INVESTIGATION; DISCLAIMER; AND SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS AND INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.1. Independent Investigation; Scope of Representations and Warranties . 21
Section 7.2. Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.3. Survival of Covenants, Agreements, Representations and
Warranties and Indemnity. . . . . . . . . . . . . . . . . . . . . 22
(a) Indemnification by Transferor . . . . . . . . . . . . . . . . . . . 23
(b) Indemnification by Transferee . . . . . . . . . . . . . . . . . . . 23
(c) Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 8. ACCESS TO INFORMATION; DUE DILIGENCE . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 8.1. Inspections; Access to Information. . . . . . . . . . . . . . . . . 24
ARTICLE 9. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.1. Effective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.2. Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 10. EMPLOYMENT MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 10.1. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 10.2. No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . 27
ARTICLE 11. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11.1. Defaults by Either Party. . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 12.1. Closing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 12.2. Brokerage Commissions. . . . . . . . . . . . . . . . . . . . . . . . 28
Section 12.3. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 12.4. Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 12.5. Entire Agreement; Modifications. . . . . . . . . . . . . . . . . . . 28
Section 12.6. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 12.7. Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.8. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.9. Additional Acts. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.10. Applicable law and Jurisdiction. . . . . . . . . . . . . . . . . . . 30
Section 12.11. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 12.12. Bulk Transfer Matters. . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.13. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31


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Section 12.14. Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.15. Public Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.16. Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.17. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.18. Exhibits and Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.19. Exchange of Written Materials. . . . . . . . . . . . . . . . . . . . . . . 31
Section 12.20. Met Life Sale Leaseback Stores . . . . . . . . . . . . . . . . . . . . . . 32
Section 12.21. Use of Tradenames and Servicemarks . . . . . . . . . . . . . . . . . . . . 32


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INDEX OF EXHIBITS AND SCHEDULES


EXHIBITS


Exhibit A Procedures for Determining Purchase Price of Inventories


Exhibit B-1 Form of NCS Assignment and Assumption of Lease (With Lessor
Consent)


Exhibit B-2 Form of NCS Assignment and Assumption of Lease (No Lessor
Consent)


Exhibit B-3 Form of NCS Assignment and Assumption of Sublease (NCS as
Sublessor)


Exhibit B-4 Form of NCS Assignment and Assumption of Lease
(Metropolitan Life Insurance Company)


Exhibit B-5 Form of NCS Assignment and Assumption of Lease (NCS as
Lessor)


Exhibit C Form of NCS Assignment and Assumption of Contracts


Exhibit D-1 Form of Circle K Assignment and Assumption of Lease


Exhibit D-2 Form of Circle K Assignment and Assumption of Lease (Circle
K as Sublessor)


Exhibit D-3 Form of Circle K Assignment and Assumption of Lease (Circle
K as Lessor)


Exhibit E Form of Circle K Assignment and Assumption of Contracts


Exhibit F-1 Form of NCS Corporation Grant Deed


Exhibit F-2 Form of Circle K Special Warranty Deed


Exhibit G-1 Form of NCS Assignment and Bill of Sale


Exhibit G-2 Form of Circle K Assignment and Bill of Sale


Exhibit H-1 Form of NCS Officer's Certificate


Exhibit H-2 Form of Circle K Officer's Certificate


Exhibit I-1 Form of Underground Storage Tank System Information List


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Exhibit I-2 Form of Current/Required Remediation Sites Schedule


Exhibit I-3(i) Form of NCS Remediation of Petroleum Contamination Transfer
Letter


Exhibit I-3(ii) Form of Circle K Remediation of Petroleum Contamination
Transfer Letter


Exhibit I-4 Form of Environmental Remediation Reimbursement
Applications List


SCHEDULES


Schedule 1.1(d) Contracts


Schedule 1.1(j)(9) Description of Additional Excluded Assets


Schedule 1.1(m) Description of Excluded Improvements


Schedule 1.1(o) Descriptions of Fee Stores


Schedule 1.1(r) Description of Leases


Schedule 1.1(s) Liabilities Assumed by Transferee


Schedule 1.1(ab) Description of Sale Leaseback Agreement(s)


Schedule 1.1(ac) List of Convenience Stores


Schedule 2.4 Store Valuations and Cash Flow


Schedule 6.1(c) Requisite Consents to be Obtained by Transferor


Schedule 6.1(e) Transferor Litigation


Schedule 6.1(l) Employment Related Agreements to be Assumed by Transferee


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EXHIBIT A


PROCEDURES FOR DETERMINING PURCHASE PRICE OF INVENTORIES


The Transferor shall, at the time of the audit, physically gauge the level of motor fuels contained in each fuel storage tank at each Store to be conveyed to the Transferee and determine the number of inches of motor fuel contained therein. The Transferee may have representatives present. Thereafter, the number of inches shall be converted to gallons of motor fuel less water by use of the appropriate manufacturer's tank chart. To determine the purchase price of the Motor Fuel Inventory to be paid by the Transferee to the Transferor, the result shall be multiplied by the price the Transferor paid for the motor fuel at its last documented delivery for each Store, plus applicable freight charges and taxes. Immediately after the conclusion of such measurements and calculations, the results thereof shall be memorialized in writing and signed by representatives of the Transferor and the Transferee, and shall be binding on the Transferor and the Transferee.


The purchase price of the Merchandise Inventory to be paid by the Transferee to the Transferor for the Stores shall equal the actual retail price of such Merchandise Inventory established in accordance with the Transferor's inventory pricing practices multiplied by the average cost of such Merchandise Inventory as calculated by the retail method of inventory valuation utilized by Transferor for the operating area where each Store is located, expressed as a percentage on the operating statement for such Store for the three (3) calendar months immediately preceding the Closing Date. The Transferor shall, on the Closing Date or within 48 hours before, conduct an audit of the inventory at each Store along with a representative from the Transferee who shall have a right to participate in the taking of the inventory. The Transferee will take control of the inventory at each location effective as of the initiation of the physical audit taken at each location. Damaged, spoiled and outdated merchandise will not be included in the count. Branded items, such as hard plastic coffee cups/fountain mugs and ice chests will not be included in the count. Hot cups, cold cups, Icee cups, popcorn bags and nacho bowls will be limited to a maximum inventory of 200 containers per size. None of the smallest size of the Transferor's hot cups and none of the smallest size of the Transferor's cold cups will be counted. The Transferee will only be obligated to buy filled ice bags. Those products used to fill hot/cold containers (i.e., coffee beans/packets, fountain drink bag in the box, etc.) will be assigned a zero value. Immediately after the calculation of the amount of the Merchandise Inventory, the results


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thereof shall be memorialized in writing and signed by representatives of the Transferor and the Transferee and shall be binding on the Transferor and the Transferee.


Within fifteen (15) Days after the Closing Date, the Parties shall calculate the total purchase price payable by NCS to Circle K for the Circle K Inventories and the total purchase price payable by Circle K to NCS for the NCS Inventories. The net amount payable by NCS to Circle K or by Circle K to NCS, as the case may be, shall be paid by wire transfer of immediately available federal funds not later than fifteen (15) Days after the Closing Date.


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ASSET EXCHANGE AGREEMENT


THIS ASSET EXCHANGE AGREEMENT ("Agreement"), dated as of April 20, 1994, is by and among NATIONAL CONVENIENCE STORES INCORPORATED, a Delaware corporation, and NCS REALTY COMPANY, a Texas corporation (hereinafter, collectively, "NCS") whose principal address is 100 Waugh Drive, Houston, Texas 77007, and THE CIRCLE K CORPORATION, a Texas corporation, and CIRCLE K PROPERTIES, INC., a Delaware corporation (hereinafter, collectively, "Circle K"), whose principal address is Phoenix Corporate Center, Suite 1800, 3003 North Central Avenue, Phoenix, Arizona 85012.


INTRODUCTION


NCS Realty Company has agreed to exchange with Circle K eight (8) operating Fee Stores and adjacent properties (if any) located in the State of California for certain operating Fee Stores and adjacent properties (if any) owned by Circle K located in the State of Texas. National Convenience Stores Incorporated has agreed to exchange with Circle K forty-four (44) operating Leased Stores and adjacent properties (if any) and one (1) operating Fee Store and adjacent property (if any) located in the State of California for certain operating Leased Stores and operating Fee Stores and properties adjacent to Circle K Store Nos. 2169 and 8505 located in the State of Texas. In addition, National Convenience Stores Incorporated has agreed to exchange with Circle K the Assets located in its operating Fee Stores and Leased Stores located in the State of California for the Assets located in certain of Circle K's operating Fee Stores and Leased Stores in the State of Texas. Consequently, Circle K and NCS are acting as both transferor and transferee of convenience stores and their related assets under the terms of this Agreement. As provided herein, the Parties have agreed to exchange certain assets used in the operation of convenience stores and to also purchase each other's merchandise and motor fuel inventories in such stores and to assume those ongoing obligations as specifically identified in this Agreement relating to and pertaining to the operation of the convenience stores.


The respective rights, responsibilities and obligations, as well as warranties, representations and covenants of NCS and Circle K are reciprocal under this Agreement depending upon the role of Circle K and NCS as transferor or transferee with respect to designated assets herein. A reference to such terms as Party, Other Party, Transferor or Transferee (as these terms are defined below) is a reference to the role to be played by Circle K or NCS with respect to certain assets and the governing terms of this Agreement. With respect to assets that Circle K is transferring to NCS, Circle K may be referred to as the Transferor and NCS as the Transferee. With respect to assets that NCS is transferring to Circle K, NCS may be referred to as the Transferor and Circle K as the Transferee. It is intended that the terms "Transferee," "Transferor," "Party," "Parties" and "Other Party" be used interchangeably, depending upon the role of Circle K and NCS with respect to the assets being exchanged.


10


Consistent with the foregoing, the schedules to this Agreement are comprised of two sub-schedules for each designated schedule, the first of which relates to a particular aspect of the assets or business of NCS, and the second of which relates to the same aspect of the assets or business of Circle K. For example, Schedule 1.1(o)(i) is the schedule relating to NCS's fee interest in certain real property, and Schedule 1.1(o)(ii) is the schedule relating to Circle K's fee interest in certain real property.


NCS and Circle K intend that this Agreement shall constitute an exchange within the meaning of Section 1031 of the Internal Revenue Code. The provisions of this Agreement shall be interpreted to effectuate this intention.


ARTICLE 1. DEFINITIONS


SECTION 1.1. CERTAIN DEFINITIONS.


As used in this Agreement:


(a) "ASSETS" shall mean a Party's interest in the
Land, Improvements, Equipment, Leases, transferable licenses and
permits and Contracts, all as hereinafter defined, but shall not
include the Excluded Assets, as hereinafter defined.


(b) "CLOSING" shall mean the consummation of the
transactions contemplated by Article 2 of this Agreement.


(c) "CLOSING DATE" shall mean the date designated in
Section 4.1 on which the Closing will be held.


(d) "CONTRACTS" shall mean a Party's interest in
those contracts designated on Schedule 1.1(d) (i) or (ii) which shall
be assigned to and assumed by the Other Party on the Closing Date.


(e) "DAYS" shall mean calendar days unless the phrase
"Business Days" is used, and if the last Day of any period of time
set forth herein falls on a Saturday, Sunday or national legal
holiday, such period shall be automatically extended to include the
next following Business Day. "BUSINESS DAYS" shall mean those
calendar days that are not Saturdays, Sundays or national legal
holidays.


(f) "EFFECTIVE TIME" shall mean as to (i) the
Inventory in each Store, the time on the Closing Date at which the
inventory procedure described in Exhibit A is initiated with respect
to such Store, and (ii) the Employees and the Assets (other than the
Inventory), 10:00 a.m., Houston, Texas time on the Closing Date.


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(g) "EFFECTIVE DATE" shall mean the date of
this Agreement.


(h) "EMPLOYEES" shall mean employees of a Party who
work at a Store to be exchanged pursuant to this Agreement or who
directly service or supervise any such Stores.


(i) "EQUIPMENT" shall mean except for Excluded Assets
a Party's interest in all gasoline storage tanks and related piping,
gasoline station and gasoline dispensing equipment, walk-in boxes,
movable trade fixtures, equipment, furniture, furnishings and
installations of every kind located on the Land or the Leased Land
and conveyed to the Other Party on the Closing Date.


(j) "EXCLUDED ASSETS" shall mean the following:


(1) Cash and accounts receivable, except
for a change fund for each Store to be separately purchased
from the Transferor by the Transferee and as agreed to by
the Parties at the time of the Closing;


(2) Any service mark, trademark, trade
name, signs, uniforms or other items bearing any trademark
owned or licensed by a Party or bearing the Party's name or
logo;


(3) A Party's name plate on credit card
imprinters;


(4) Money order machines;


(5) Access to the mainframe computer and
computer systems owned or operated by a Party;


(6) Logo racks belonging to vendors and
other assets owned by suppliers and other third parties and
not assigned pursuant to a contract designated on Schedule
1.1(d);


(7) Nontransferable licenses, permits,
contracts and other agreements;


(8) Manuals and operational and training
materials; and


(9) Additional assets described or
identified on Schedule 1.1(j)(9).


(k) "FEE STORES" shall mean the Stores with respect
to which a Party has fee simple ownership of the Land.


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(l) "HAZARDOUS MATERIALS" shall mean (i) any "solid
waste," "hazardous waste" or "regulated substance" as defined by the
Resource Conservation and Recovery Act ("RCRA") of 1976 (42 U.S.C.
Section 6901 et seq.) as amended from time to time, and regulations
promulgated thereunder; (ii) "regulated asbestos-containing
materials" as defined in the National Emission Standard for Asbestos
("NESA") (40 C.F.R. Section 61.140 et seq.) as amended from time to
time; (iii) any substance, the presence of which is prohibited by any
governmental authority; (iv) any other substance which by any
governmental regulatory authority requires special handling or
notification of any federal, state or local governmental entity in
its collection, sale, transportation, storage, treatment or disposal;
and (v) any underground storage tanks, whether active, inactive,
empty, filled or partially filled with any such materials, provided,
however, that the term "Hazardous Materials" shall not include
Petroleum Products.


(m) "IMPROVEMENTS" shall mean a Party's interest in
all buildings constructed upon the Land or the Leased Land together
with all permanently attached machinery and fixtures, heating,
plumbing, electrical, lighting, ventilating and air-conditioning
equipment located on the Land or the Leased Land on the Closing Date,
except as described on Schedule 1.1(m).


(n) "INVENTORY" shall mean the Merchandise Inventory,
and the Motor Fuel Inventory of each Party as each is hereinafter
defined.


(o) "LAND" shall mean a Party's fee interest in the
real property described on Schedule 1.1(o), together with the Party's
interest in the rights, easements and appurtenances pertaining
thereto, including without limitation any right-of-way or easement
over any adjoining property and any right, title and interest of the
Party in and to adjacent streets, alleys or rights-of-way.


(p) "LEASED LAND" shall mean the real property
demised to a Party pursuant to a Lease.


(q) "LEASED STORES" shall mean the Stores with
respect to which a Party has a leasehold estate in the Leased Land.


(r) "LEASES" shall mean a Party's interest in the
leases and/or ...