-----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, QO1rdLTM5kedHUc8QRByhg/hxTkYmLwUm8bmbQUcfatx/+D9UsL3Y80PUoyJ8gn4 Vpp4JU/Ipm/xS/zH6R1DOA== 0000950127-99-000349.txt : 19991130 0000950127-99-000349.hdr.sgml : 19991130 ACCESSION NUMBER: 0000950127-99-000349 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19991112 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED PETROLEUM CORP CENTRAL INDEX KEY: 0000082925 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTOMOTIVE REPAIR, SERVICES & PARKING [7500] IRS NUMBER: 133103494 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 002-38375 FILM NUMBER: 99765849 BUSINESS ADDRESS: STREET 1: 2620 MINERAL SPRING ROAD STREET 2: SUITE A CITY: KNOXVILLE STATE: TN ZIP: 37917 BUSINESS PHONE: 4236886204 MAIL ADDRESS: STREET 1: 2620 MINERAL SPRING ROAD STREET 2: SUITE A CITY: KNOXVILLE STATE: TN ZIP: 37917 8-K 1 FORM 8-K Securities and Exchange Commission Washington, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 12, 1999 United Petroleum Corporation (Exact name of registrant as specified in its charter) Delaware 0-25006 13-3103494 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 5800 N.W. 74th Avenue Miami, Florida 33166 (Address of principal (Zip Code) executive offices) (305) 592-3100 (Registrant's telephone number, including area code) 2620 Mineral Springs Road, Suite A Knoxville, Tennessee 37917 (Former name or former address, if changed since last report) ITEM 1. CHANGE IN CONTROL OF REGISTRANT. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. ITEM 3. BANKRUPTCY OR RECEIVERSHIP. As previously reported, on January 14, 1999, United Petroleum Corporation (the "Registrant" or the "Company") filed a petition for relief under chapter 11 of title 11 of the United States Code (11 U.S.C. ss.101 et. seq., the "Bankruptcy Code") with the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). On July 23, 1999, the Company filed with the Bankruptcy Court its second amended plan of reorganization (the "Plan", a copy of which, together with the Second Amended Disclosure Statement, are filed as Exhibits 99.1 and 99.2, respectively, and are incorporated herein by reference). On September 29, 1999, as contemplated by the Plan and subject to, among other things, its confirmation, the Company, United Petroleum Group, Inc. ("UPG"), a newly-formed, wholly-owned subsidiary of the Company (f/k/a United Petroleum Subsidiary, Inc.), and F.S. Convenience Stores, Inc. ("FSCI"), entered into an Agreement and Plan of Merger (the "Merger Agreement", a copy of which is filed as Exhibit 99.3 and is incorporated herein by reference) pursuant to which FSCI agreed to merge with and into UPG, with UPG as the surviving entity (the "Merger"). Pursuant to the Plan and the Merger Agreement, among other things: (i) all of the Company's securities in existence immediately prior to the Effective Date (as defined in the following paragraph), including, but not limited to, shares of the Company's issued and outstanding classes of common stock ("Old Common Stock"), preferred stock ("Old Preferred Stock"), stock options and warrants would be canceled, (ii) the shareholders of FSCI would receive 48% of the newly issued and outstanding shares of New Common Stock (as defined below) of the reorganized Company, 50% of the newly issued and outstanding shares of New Preferred Stock (as defined below) of the reorganized Company, and $3 million in cash, (iii) the Company would issue shares of New Common Stock to its existing holders of Old Common Stock, Old Preferred Stock and debentures ("Debentures"), and (iv) the Company would issue 50% of its newly issued and outstanding shares of New Preferred Stock to the holders of certain secured indebtedness of the Company. On October 7, 1999, the Bankruptcy Court entered an order (the "Confirmation Order", a copy of which is filed as Exhibit 99.4 and is incorporated herein by reference) confirming the Plan. The transactions contemplated by the Plan, as modified by the Confirmation Order and the Merger Agreement, were substantially consummated and the Plan became effective on November 12, 1999 (the "Effective Date"). On the Effective Date, pursuant to the Plan, the Confirmation Order, and the Merger Agreement, the following transactions and other events occurred: 1) FSCI merged with and into UPG. As a result, UPG acquired FSCI's walk-in convenience store business, and now operates 90 walk-in convenience stores in the State of Florida. Of these stores, 69 sell gasoline (of which 60 are leased from third parties to, and 9 are owned by, the Company's subsidiaries), and 21 (all of which are leased from third parties to F.S.Non-Gas Subsidiary, Inc., a wholly-owned subsidiary of UPG) do not sell gas. All of these convenience stores do business under the licensed trade name "Farm Stores." In addition, UPG, through its subsidiary, F.S. Non-Gas Subsidiary, Inc., owns a 10% interest in Farm Stores Grocery, Inc., a Delaware corporation, which operates 109 drive-thru specialty retail stores in Florida and which owns and licenses to the Company and UPG the trade name "Farm Stores" pursuant to that certain License Agreement dated as of November 12, 1999, a copy of which is filed as Exhibit 99.5 and is incorporated herein by reference. 2) All of the Company's issued and outstanding securities, including all pre-Merger Old Common Stock, Old Preferred Stock, Debentures, options, warrants and other rights to acquire securities, were canceled. 3) The Company amended and restated its Certificate of Incorporation (a copy of which is filed as Exhibit 3(i) and is incorporated herein by reference) to (i) authorize 10 million shares of common stock, par value, $.01 per share ("New Common Stock") and 300,000 shares of Class A 9% preferred stock ("New Preferred Stock"); (ii) prohibit the issuance of non-voting equity securities by the Company (as required by the Bankruptcy Code), (iii) opt out of Section 203 of the Delaware General Corporation Law, and (iv) restrict, for a period of two years, purchases and sales of its stock by beneficial owners of 5% or more of the total fair market value of the Company's stock. Pursuant to the Company's Certificate of Designation - Class A 9% Preferred Stock (a copy of which is filed as Exhibit 4 and is incorporated herein by reference), the New Preferred Stock issued by the Company in connection with the Plan and Merger is subordinate to all debts of the Company. Each share of New Preferred Stock carries a dividend rate of 9%. The dividends are cumulative and payable in cash or, at the Company's option, in additional shares of New Preferred Stock. Each share of New Preferred Stock has a liquidation preference over the Company's New Common Stock in the amount of $100 (plus cumulative unpaid dividends thereon), payable out of net proceeds (after payments to all creditors but before payments in respect of the Company's New Common Stock) from any liquidation or sale of the Company's assets. In addition, the Company amended and restated its Bylaws, a copy of which is filed as Exhibit 3(ii) and is incorporated herein by reference. 4) The Company issued a total of 5,000,000 shares of New Common Stock and 140,000 shares of New Preferred Stock. Holders of the following debt and equity securities of the Company received the following aggregate amounts of New Common Stock in exchange for their pre-Merger holdings: Percent of Shares Number of Shares of of New Common Stock Holdings Exchanged New Common Stock Issued Issued and Outstanding Debentures 1,750,000 shares 35.00% Old Preferred Stock 650,000 shares 13.00% Old Common Stock 200,000 shares 4.00% - ------------------ 1 Certain holders of the Company's securities have asserted a right to receive distributions as the holders of Debentures, even though such holders previously exchanged their Debentures for Old Preferred Stock. The Company has disputed such claims. Pending their resolution, the Company has reserved 365,273 shares of New Common Stock that would otherwise be available for distribution to the holders of Debentures. 5) The shareholders of FSCI, consisting of Mr. Joe Bared and Miriam Bared, his wife, were issued (i) 2,400,000 shares of New Common Stock, representing 48% of the issued and outstanding shares of New Common Stock, (ii) 70,000 shares of New Preferred Stock, representing 50% of the issued and outstanding shares of New Preferred Stock, and (iii) $3 million in cash. 6) Infinity Investors Limited, a Nevis, West Indies corporation ("Infinity") was issued (i) 1,360,862 shares of New Common Stock, representing 27.2% of the issued and outstanding shares of New Common Stock (which amount is included in the table set forth in Paragraph 4, above) in exchange for the Debentures and Old Preferred Stock held by it, and (ii) 70,000 shares of New Preferred Stock of the Company, representing 50% of the issued and outstanding shares of New Preferred Stock, in exchange for satisfaction of the obligations of the Company and its wholly-owned subsidiaries, Calibur Systems, Inc. and Jackson-United Petroleum Corporation, under secured notes dated August 5, 1998 in the original principal amounts of $4,200,000 and $2,800,000 and related agreements. Seacrest Capital Limited, and Fairway Capital Limited, both Nevis, West Indies corporations and wholly-owned subsidiaries of Infinity (collectively, the "Infinity Parties") were each issued 62,731 shares of New Common Stock, each representing 1.3% of the issued and outstanding shares of New Common Stock of the Company (which amounts are included in the table set forth in Paragraph 4, above), in exchange for the Debentures and Old Preferred Stock held by them. As a result of these exchanges, the Infinity Parties own an aggregate of 1,486,324 shares of New Common Stock, representing approximately 29.7% of the issued and outstanding shares of New Common Stock of the Company. Upon resolution of the disputed claims described in footnote 1 to the table set forth in Paragraph 4, above, the Company expects the Infinity Parties to be issued an additional 334,538 shares of New Common Stock, which would increase their aggregate ownership of New Common Stock to 1,820,862 shares, representing approximately 36% of the issued and outstanding shares of New Common Stock of the Company. 7) A trust (the "UPC Trust") is being created and funded with 200,000 shares of New Common Stock, representing 4.00% of the issued and outstanding shares of New Common Stock of the Company, which shares would otherwise have been issued to Infinity and are included in the table set forth in Paragraph 4, above. All Infinity Securities Claims (as defined in the Plan), except for those asserted in the lawsuit styled Pisacreta vs. Infinity Investors Limited, et al., Civil Action No. 3:97-CV-226 in the United States District Court for the Eastern District of Tennessee were channeled and transferred to the UPC Trust. Infinity has released the Company, its affiliates, and their respective officers, directors and employees from all claims, including but not limited to claims for contribution and indemnity, in respect of the Infinity Securities Claims. 8) The Company reconstituted its Board of Directors as follows: Mr. Joe P. Bared: Mr. Joe Bared, 57 years old, was born in Havana, Cuba and arrived in the United States in 1960. In 1967, he founded The Bared Company, Inc., which grew to become one of the top 50 mechanical engineering companies in the United States. In 1992, Mr. Bared led an investor group which purchased the assets of Farm Stores out of bankruptcy. He has served as Chief Executive Officer of that company since the purchase. Mr. Bared was a director of Republic Banking Corporation of Florida from 1970 until 1999, the year that bank was sold, where he served on various board committees, including the executive committee and audit committee. Mr. Bared has been a Trustee of the University of Miami since 1978, and is a member of the Board of Governors of the Sylvester Comprehensive Cancer Center of the University of Miami. Together with his wife, Miriam Bared, Mr. Joe Bared owns 48% of the issued and outstanding New Common Stock of the Company and 50% of its issued and outstanding New Preferred Stock. Mr. Joe Bared is the father of Mr. Carlos Bared. In addition to serving as Chairman of the Board of Directors of the Company, Mr. Bared serves as the Company's President and Chief Executive Officer. Mr. Carlos E. Bared: Mr. Carlos Bared, 31 years old, attended Loyola University and received a BBA degree in finance. He earned his MBA degree in 1995 from the University of Miami. Mr. Bared joined Farm Stores in 1997, as Chief Financial Officer. From 1992 to 1997, he was the President and Chief Financial Officer for the operations of The Bared Company, Inc. Mr. Bared was the president of the Construction Financial Management Association from 1994 to 1997 and was a director from 1993 to 1997. Mr. Bared is a director and treasurer of the not-for-profit Miami Childrens Museum and a founder of the not-for-profit Network Miami, Inc. Mr. Carlos Bared is the son of Mr. Joe Bared. In addition to serving on the Board of Directors of the Company, Mr. Bared serves as the Company's Senior Vice-President, Chief Financial Officer, and Secretary. Mr. Clark K. Hunt : Mr. Clark Hunt, 34 years old, is the President of Hunt Financial Group, LLC, a Dallas, Texas based financial services concern. Through Hunt Financial Group, Mr. Hunt is responsible for the management of investment funds with assets in excess of $300 million. Mr. Hunt is also involved in Hunt Capital Group, a venture capital investor, Hunt Midwest Enterprises, a real estate and mining conglomerate, and Hunt Sports Group, the management company responsible for overseeing the Hunt family's investments in the Kansas City Chiefs of the National Football League, the Chicago Bulls of the National Basketball Association, and two franchises in the newly launched Major Soccer League. Mr. Hunt is a manager of HW Finance, LLC, a Texas limited liability company that is a general partner of HW Partners L.P., a Texas limited partnership. HW Partners L.P. serves as an advisor to Infinity Investors Limited, which, together with its affiliates, is expected to own approximately 36% of the Company's issued and outstanding New Common Stock, and which owns 50% of the Company's issued and outstanding New Preferred Stock. Mr. Stuart J. Chasanoff : Mr. Stuart Chasanoff, 34 years old, is a 1990 cum laude graduate of Fordham University School of Law and a 1987 graduate of the University of Virginia. He joined HW Partners, L.P. in 1996 as Senior Vice President and in-house corporate counsel, involved with investment companies and corporate mergers and acquisitions. During the preceding seven years, Mr. Chasanoff was an asssociate corporate attorney with White & Case in New York City, and served as in-house counsel at PepsiCo, Inc. Mr. L. Grant ("Jack") Peeples: Mr. Jack Peeples, 68 years old, has been of counsel to the law firm of White & Case in Miami, Florida since 1994. Prior to that time, he was a partner at Peeples, Earl & Blank, specializing in legislative and administrative practice. After graduating from the University of Florida College of Law in 1957, and before returning to private practice in 1961, Mr. Peeples worked at the law firm of former Florida Governor Leroy Collins in Tallahassee, was Legislative Counsel to Governor Collins in 1958 and was appointed to the cabinet office of State Beverage Director in 1959. From 1969 until 1975, Mr. Peeples served as Senior Vice President, Director and General Counsel of the Deltona Corporation. From 1976 until 1980, he served as Chairman of the Board and Chief Financial Officer of the Roma Corporation. He was General Counsel to Alandco, a wholly owned subsidiary of Florida Power & Light Company, and served as counsel to various Murchison Family interests from 1975 until 1981. Mr. Peeples was the Campaign Chairman and Chairman of Transition Team for Florida Governor Lawton Chiles and Legislative and Senior Counsel to the Governor, Vice-Chairman of the Governor's Commission on Governance, Vice-Chairman of the Governor's Commission on the Homeless, Chairman of the Florida Aviation Commission, Co-Chairman of the Dade County Homeless Trust, and representative of the Governor and Cabinet on the Downtown Development Authority. 9) The Company entered into employment agreements with Mr. Jose Bared and Mr. Carlos Bared, each for a term of three years. Copies of these agreements are filed as Exhibits 99.6 and 99.7, respectively, and are incorporated herein by reference. The employment agreements include provisions for severance pay upon termination without cause (as defined in the agreements), and confidentiality and non-compete arrangements that are binding after certain terminations of the agreements. The employment agreements provide for base annual salary, annual bonuses in the discretion of the Board of Directors, reimbursement of business expenses and executive benefits. The employment agreements do not provide for compensation in the form of additional stock, or options to buy stock, of the Company. 10) The Company, the Infinity Parties, and Jose P. and Miriam Bared (the "Bareds") entered into a Stockholders Agreement dated as of November 3, 1999 (the "Stockholders Agreement"), a copy of which is filed as Exhibit 99.8 and is incorporated herein by reference. Pursuant to the Stockholders Agreement, among other things, the Bareds, on the one hand, and the Infinity Parties, on the other hand, agreed to vote their shares of New Common Stock so that the Board of Directors of the Company will continue to consist of two representatives selected by the Bareds (the "Bared Directors"), two representatives selected by the Infinity Parties (the "Infinity Directors"), and an independent director initially designated as Mr. L. Grant Peeples. Currently, the Bared Directors are Jose P. Bared and Carlos E. Bared, his son, and the Infinity Directors are Clark K. Hunt and Stuart J. Chasanoff. The Stockholders Agreement also provides that, by majority vote of the Company's stockholders at a duly called meeting of stockholders, the Board can be expanded and/or the independent director changed. The Stockholders Agreement also contains other provisions restricting disposition of the shares of New Common Stock held by the Bareds and the Infinity Parties, including for a two year period in which the shares cannot be transferred without the consent of the parties to the Stockholders Agreement, as well as certain provision granting certain registration and other rights relating to the New Common Stock. 11) UPG and Farm Stores Grocery, Inc. ("FSG") entered into a Management Agreement dated as of November 12, 1999 pursuant to which UPG will manage and provide all general and administrative services for FSG's business and operations, in exchange for management fees FSG pays to UPG based on the number of stores FSG operates. Prior to the Merger, and as a condition to its consummation, the Company, UPG, FSCI, and related entities (collectively, the "Borrowers") entered into a Loan Agreement dated November 9, 1999 (a copy of which is filed as Exhibit 99.9 and is incorporated herein by reference) pursuant to which the Borrowers received a loan in the aggregate principal amount of $23 million from Hamilton Bank, N.A., secured by their respective assets. FSCI borrowed $17 million of this amount and used the proceeds to purchase the interest of its former partner in the walk-in convenience store and gasoline station operations which they conducted in Florida, and to purchase from an affiliate of the same former partner its interest in the walk-in convenience stores without gasoline station operations and a 10% interest in the drive-thru specialty grocery business, both conducted in Florida with an affiliate of FSCI. The consideration for these transactions and the Merger was determined by arms' length negotiations between the Bareds and the former partner in the Farm Stores business, and between the Bareds and the Company. The negotiations between Mr. Bared and his former partner considered the relative values of Farm Stores and their respective interests therein, and the negotiations between the Bareds and the Company considered the value of the Farm Stores walk-in business, the 10% interest in FSG, the terms of the Management Agreement, and the real estate and other values of the Company's businesses. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) The financial statements required pursuant to this Item will be filed as soon as they are available, on an amendment to this report on Form 8-K, not later than 60 days after the date that this report on Form 8-K must be filed. (b) The pro forma financial information required pursuant to this Item will be filed as soon as it is available, on an amendment to this report on Form 8-K, not later than 60 days after the date that this report on Form 8-K must be filed. (c) Exhibits 3(i) Amended and Restated Certificate of Incorporation of United Petroleum Corporation 3(ii) Amended and Restated Bylaws of United Petroleum Corporation 4 Certificate of Designation - Class A 9% Preferred Stock 99.1 Second Amended Plan of Reorganization of United Petroleum Corporation dated July 23, 1999 99.2 Second Amended Disclosure Statement of United Petroleum Corporation dated July 23, 1999 99.3 Agreement and Plan of Merger dated September 29, 1999 99.4 Findings of Fact, Conclusions of Law and Order Confirming Amended Plan of Reorganization dated October 7, 1999 99.5 License Agreement dated as of November 12, 1999 among Farm Stores Grocery, Inc., United Petroleum Corporation and United Petroleum Group, Inc. 99.6 Employment Agreement dated as of November 3, 1999 between United Petroleum Corporation and Joe P. Bared 99.7 Employment Agreement dated as of November 3, 1999 between United Petroleum Corporation and Carlos Bared 99.8 Stockholders' Agreement dated as of November 3, 1999 by and among United Petroleum Corporation, Infinity Investors Limited, Fairway Capital Limited, Seacrest Capital Limited, and Joe Bared and Miriam Bared 99.9 Loan Agreement dated November 9, 1999 among United Petroleum Corporation, United Petroleum Group, Inc., F.S. Convenience Stores, Inc., et al., as Borrowers, and Hamilton Bank, N.A., as Lender SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. UNITED PETROLEUM CORPORATION (Registrant) By:/s/ Carlos E. Bared --------------------------------- Date: November 29, 1999 Carlos E. Bared Sr. Vice President and CFO EXHIBIT INDEX Exhibit Number Description 3(i) Amended and Restated Certificate of Incorporation of United Petroleum Corporation 3(ii) Amended and Restated Bylaws of United Petroleum Corporation 4 Certificate of Designation Class A 9% Preferred Stock 99.1 Second Amended Plan of Reorganization of United Petroleum Corporation dated July 23, 1999 99.2 Second Amended Disclosure Statement of United Petroleum Corporation dated July 23, 1999 99.3 Agreement and Plan of Merger dated September 29, 1999 99.4 Findings of Fact, Conclusions of Law and Order Confirming Amended Plan of Reorganization dated October 7, 1999 99.5 License Agreement dated as of November 12, 1999 among Farm Stores Grocery, Inc., United Petroleum Corporation, and United Petroleum Group, Inc. 99.6 Employment Agreement dated as of November 3, 1999 between United Petroleum Corporation and Joe P. Bared 99.7 Employment Agreement dated as of November 3, 1999 between United Petroleum Corporation and Carlos Bared 99.8 Stockholders Agreement dated as of November 3, 1999 by and among United Petroleum Corporation, Infinity Investors Limited, Fairway Capital Limited, Seacrest Capital Limited, and Joe Bared and Miriam Bared 99.9 Loan Agreement dated November 9, 1999 among United Petroleum Corporation, United Petroleum Group, Inc., F.S. Convenience Stores, Inc., et al., as Borrowers, and Hamilton Bank, N.A., as Lender EX-3.(I) 2 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF UNITED PETROLEUM CORPORATION United Petroleum Corporation, a Delaware Corporation (the "Corporation"), hereby certifies as follows: The name of the Corporation is United Petroleum Corporation. The name under which this Corporation was originally incorporated was Don Reid Productions, Inc., and the date of filing of its original Certificate of Incorporation with the Secretary of State of the State of Delaware was May 19, 1970. The original Certificate of Incorporation was amended pursuant to Certificates of Amendment filed with the Secretary of State of Delaware on August 14, 1970, February 19, 1971, April 2, 1971, March 7, 1986, December 14, 1992, April 23, 1993, and March 18, 1997, by a Certificate of Merger filed with the Secretary of State of the State of Delaware on November 12, 1982, and by Certificates of Preferred Stock Designation filed with the Secretary of State of the State of Delaware on April 29, 1997 and September 29, 1997. On January 14, 1999, the Corporation filed a petition for relief under chapter 11 of title 11 of the United States Code and this Amended and Restated Certificate of Incorporation was duly adopted in accordance with Sections 242, 245, and 303 of the Delaware General Corporation Law in accordance with a chapter 11 plan of reorganization of the Corporation approved by order dated October 7, 1999 of the United States Bankruptcy Court for the District of Delaware in In re: United Petroleum Corporation, Chapter 11 Case No. 99-88(PJW). The Certificate of Incorporation of this Corporation is hereby amended and restated to read in its entirety as follows: FIRST: The name of the Corporation is United Petroleum Corporation. SECOND: The registered office of the Corporation in the State of Delaware is located at 1013 Centre Road, Wilmington, New Castle County, Delaware 19805, and the name of its registered agent at such address is The Prentice-Hall Corporation System, Inc. THIRD: The purpose of this Corporation is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law ("DGCL"). FOURTH: The aggregate number of shares of all classes of capital stock that this Corporation shall have authority to issue is (i) ten million (10,000,000) shares of common stock, $0.01 par value per share (the "Common Stock"), and (ii) three hundred thousand (300,000) shares of Preferred Stock, $0.01 par value per share (the "Preferred Stock"). (A) All shares of Common Stock to be issued must be voting securities and, as to all Common Stock, voting power must be appropriately distributed by the Board of Directors of the Corporation on a proportional one-vote-per-share basis. (B) Shares of Preferred Stock may be issued from time to time in one ore more classes or one or more series within any class and the Board of Directors of the Corporation is hereby authorized, subject to the limitations provided by law, to establish and designate such classes or series of the Preferred Stock, to fix the number of shares constituting each class or series and to fix by resolution or resolutions the voting power, full or limited, and such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, and to increase or decrease the number of shares constituting each class or series. (C) The Corporation shall not have the power or authority to issue any shares of capital stock without voting power. FIFTH: In order to preserve certain federal income tax attributes of the Corporation, on or before November 9, 2001, without the written approval of the Corporation's Board of Directors, no stockholder who beneficially owns, directly or indirectly, five percent (5%) or more of the total fair market value of the Corporation's stock or who, upon the purchase, sale, or other transfer of any shares of the Corporation's stock, would beneficially own, directly or indirectly, or would cause any other person or entity to beneficially own, directly or indirectly, five percent (5%) or more of the total fair market value of the Corporation's stock may sell or purchase any shares of the Corporation's stock (or any option, warrant, or similar right to acquire shares of the Corporation's stock or any securities issued by the Corporation that are convertible into or exchangeable for shares of the Corporation's stock). For purposes of this Article FIFTH, "stock" means shares of the Corporation's Common Stock and any other interests in the Corporation that would be treated as "stock" of the Corporation under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder. The provisions of this Article FIFTH shall be subject to waiver or modification only upon the vote of a majority of the issued and outstanding Common Stock. The Corporation may place transfer restriction legends on the certificates representing the foregoing stock. SIXTH: Provisions for the management of the business and for the conduct of the affairs of this Corporation and provisions creating, defining, limiting and regulating the powers of this Corporation, the directors and the stockholders are as follows: (A) The initial members of the Board of Directors of the Corporation, appointed pursuant to the Second Amended Plan of Reorganization of United Petroleum Corporation, dated July 23, 1999 (the "Plan") and as confirmed by order dated September 29, 1999 of the United States Bankruptcy Court for the District of Delaware, shall be: Jose P. Bared, Carlos E. Bared, Clark Hunt, Stuart J. Chasanoff and L. Grant Peeples. (B) The Board of Directors shall have the power to make, adopt, alter, amend and repeal the bylaws of this Corporation without the assent or vote of the stockholders, including, without limitation, the power to fix, from time to time, the number of directors that shall constitute the whole Board of Directors of this Corporation subject to the right of the stockholders to alter, amend and repeal the bylaws made by the Board of Directors. (C) Election of directors of this Corporation need not be by written ballot unless the bylaws so provide. (D) The directors, in their discretion, may submit any contract or act for approval or ratification at any annual meeting of the stockholders or at any meeting of the stockholders called for the purpose of considering any such act or contract, and any contract or act that shall be approved or be ratified by the vote of the holders of a majority of the stock of this Corporation that is represented in person or by proxy at such meeting and entitled to vote thereat (provided that a lawful quorum of stockholders be there represented in person or by proxy) shall be as valid and as binding upon this Corporation and upon all the stockholders as though it had been approved or ratified by every stockholder of this Corporation, whether or not the contract or act would otherwise be open to legal attack because of directors' interest, or for any other reason. (E) In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the board of directors of this Corporation is hereby expressly empowered to exercise all such powers and to do all such acts and things as may be exercised or done by this Corporation; subject, nevertheless, to the provisions of the statutes of the State of Delaware and of this Certificate of Incorporation as each may be amended, altered or changed from time to time and to any bylaws from time to time made by the directors or stockholders; provided, however, that no bylaw so made shall invalidate any prior act of the board of directors that would have been valid if such bylaw had not been made. (F) Whenever this Corporation shall be authorized to issue more than one class of stock, the holders of the stock of any class that is not otherwise entitled to voting power shall not be entitled to vote upon the increase or decrease in the number of authorized shares of such class. (G) Pursuant to Section 203(3)(b)(1) of the DGCL, the Corporation elects not to be governed by Section 203 of the DGCL. (H) Any transaction between an officer and director of the Corporation and their affiliates on the one hand, and the Corporation on the other hand, shall be approved by a majority of the directors who have no direct or indirect interest in the transaction in order for such transaction to be valid. For purposes of this subparagraph (H), a transaction shall also include (i) actions to amend, modify or terminate a contract or agreement by and between the Corporation and an officer, director or one of their affiliates or (ii) the failure of the Corporation to enforce any of its rights under a contract or agreement by and between the Corporation and an officer, director or one of their affiliates. SEVENTH: To the fullest extent permitted by the DGCL, including, without limitation, as provided in Section 102(b)(7) of the DGCL, as the same exists or may hereafter be amended, a director of this Corporation shall not be personally liable to this Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL is amended after approval by the stockholders of this provision to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of this Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Any repeal or modification of this Article SEVENTH by the stockholders of this Corporation shall not adversely affect any right or protection of a director of this Corporation existing at the time of such repeal or modification or with respect to events occurring prior to such time. EIGHTH: (A) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding") by reason of the fact that he or she is or was a 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 such director or officer or additionally in the case of another Corporation, as an employee or agent or in any other capacity while serving as such director, officer, employee or agent shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the DGCL, 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, other expenses and losses, amounts paid or to be paid in settlement, and excise taxes or penalties arising under the Employee Retirement Income Security Act of 1974) reasonably incurred or suffered by such person in connection therewith 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 paragraph (b) 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 of the Corporation. The right to indemnification conferred in this Article EIGHTH shall be a contract right and shall include the right to be paid by the Corporation the expenses (including attorneys' fees) incurred in defending any such proceeding in advance of its final disposition; provided, however, that 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 a proceeding, shall be made only upon delivery to the Corporation of an undertaking, which undertaking shall itself be sufficient without the need for further evaluation of any credit aspects of the undertaking or with respect to such advancement, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined by a final, non-appealable order of a court of competent jurisdiction that such director or officer is not entitled to be indemnified under this Article EIGHTH or otherwise. (B) If a claim under paragraph (A) of this Article EIGHTH is not paid in full by the Corporation within sixty (60) days after a written claim, together with reasonable evidence as to the amount of such expenses, has been received by the Corporation, except in the case of a claim for advancement of expenses (including attorneys' fees), in which case the applicable period shall be twenty (20) days, 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 also be entitled to be paid the expense, including attorneys' fees, of prosecuting such claim. It shall be a defense to any such action, other than an action brought to enforce a claim for expenses (including attorneys' fees) 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 DGCL for the Corporation to indemnify the claimant for 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 or a committee thereof, 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 DGCL, nor an actual determination by the Corporation (including its board of directors or a committee thereof, 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. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article EIGHTH or otherwise shall be on the Corporation. (C) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article EIGHTH shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise. (D) 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 such 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 DGCL. (E) In the case of a claim for indemnification or advancement of expenses against the Corporation under this Article EIGHTH arising out of acts, events or circumstances for which the claimant, who was at the relevant time serving as a director, officer, employee or agent of any other entity at the request of the Corporation, may be entitled to indemnification or advancement of expenses pursuant to such other entity's certificate of incorporation or bylaws or a contractual agreement between the claimant and such entity, the claimant seeking indemnification hereunder shall first seek indemnification and advancement of expenses pursuant to any such certificate of incorporation, bylaw or agreement. To the extent that amounts to be indemnified or advanced to a claimant hereunder are paid or advanced by such other entity, the claimant's right to indemnification and advancement of expenses hereunder shall be reduced. NINTH: 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 the DGCL 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 the DGCL, 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. TENTH: This Corporation reserves the right to restate this Amended and Restated Certificate of Incorporation and to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on the stockholders, directors and officers are subject to this reserved power. IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been signed by an authorized officer of this corporation on this __th day of November, 1999. UNITED PETROLEUM CORPORATION By:_______________________________ Name: Title: EX-3.(II) 3 AMENDED AND RESTATED BY-LAWS AMENDED AND RESTATED UNITED PETROLEUM CORPORATION BYLAWS ADOPTED AS OF NOVEMBER 12, 1999 UNITED PETROLEUM CORPORATION BYLAWS BYLAWS OF UNITED PETROLEUM CORPORATION ARTICLE I. OFFICES Section 1. Registered Office. The address of the registered office of the corporation in the State of Delaware shall be 1013 Centre Road, Wilmington, County of New Castle, State of Delaware 19805, and the registered agent at such address in charge thereof shall be The Prentice-Hall Corporation System, Inc., all of which shall be subject to change from time to time as permitted by law. Section 2. Other Offices. The corporation may also have an office or offices or place or places of business within or without the State of Delaware as the board of directors may from time to time designate. ARTICLE II. MEETINGS OF STOCKHOLDERS Section 1. Annual Meeting. The annual meeting of stockholders for the election of directors and for the purpose of transacting such other proper business shall be held within or without the State of Delaware on such date and at such time and place as may be designated by resolution of the board of directors from time to time. Section 2. Special Meetings. Special meetings of the stockholders for any purpose or purposes may be called at any time (i) by the board of directors, (ii) by a committee of the board of directors whose power and authority, either as expressly provided in the resolution of the board of directors, or as may be provided in these bylaws, includes the power to call such meetings or (iii) upon the request to the board of directors in writing of stockholders of record holding a majority of votes which could be cast by the holders of all outstanding shares having the right to vote at such meeting. Section 3. Time and Place of Special Meetings. Special meetings of the stockholders shall be held at such times and at such places, within or without the State of Delaware, as may from time to time be designated by the board of directors, with regard to special meetings called by it or called upon the request of stockholders, or as may be otherwise designated by the committee calling such meeting. Section 4. Notice. Written notice of all stockholders' meetings, stating the place, date and hour thereof, and the purpose or purposes thereof, shall be given to each stockholder of record entitled to notice of or to vote at such meeting. If mailed, such notice shall be deemed to have been given when deposited in the United States mails, postage prepaid, addressed to the stockholder at his address as it appears on the records of the corporation. Section 5. Quorum. Except as may otherwise be provided by law, the certificate of incorporation or these bylaws, the presence, in person or by proxy, at each meeting of stockholders, of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote at the meeting shall constitute a quorum, but, in the absence of a quorum and until a quorum is secured, either the chairman of the meeting or a majority of the votes cast at the meeting by holders who are present, in person or by proxy, may adjourn the meeting, from time to time, without further notice if the time and place of the adjourned meeting are announced at the meeting at which the adjournment is taken. Section 6. Adjournment. Any meeting of stockholders may be adjourned at the meeting from time to time, either by the chairman of the meeting, for an announced proper purpose, or by the stockholders, for any reason, to reconvene at a later time and at the same or some other place, and, unless otherwise provided by law, notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the stockholders may transact any business which might have been transacted at the original meeting. If a quorum is present at any meeting, any adjournment of such meeting by the chairman of the meeting may be overruled by the vote of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares of stock entitled to vote thereon which are present in person or by proxy at the meeting. Section 7. Organization of Meetings. Meetings of stockholders shall be presided over by the chairman of the meeting who shall be the Chairman of the board, if any, or in his absence, the President, if any, or Chief Executive Officer, or in his absence, by a Vice President, or in the absence of the foregoing persons or persons with functionally equivalent executive titles, by the person so designated by the board of directors or in the absence of any such designation, by a chairman chosen by the stockholders at the meeting. The Secretary, if any, shall act as secretary of the meeting, but in his absence, the chairman of the meeting shall appoint a secretary of the meeting. Section 8. Voting and Record Date. Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote shall, at every meeting of the stockholders, be entitled to one vote, in person or by proxy, for each share of voting stock held by him, but no proxy shall be voted on after three years from its date, unless it provides for a longer period. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by tendering to the corporation at or before the meeting either an instrument in writing revoking the proxy or another duly executed proxy bearing a later date. Voting at meetings need not be by written ballot and need not be conducted by inspectors of election unless otherwise required by law (e.g., 8 Del. C. Section 231) as prescribed in accordance with Section 9 of this Article II. At all meetings of stockholders for the election of directors, a plurality of the votes cast shall be sufficient to elect directors. Unless otherwise provided by law, the certificate of incorporation or these bylaws, all other elections and matters shall be determined by the vote of the holders of record of outstanding shares of stock comprising a majority of the votes which could be cast and which are present at the meeting, in person or by proxy, and entitled to vote at such meeting. The fixing of a record date for the determination of stockholders entitled to vote shall be as provided by law. Section 9. Conduct of Meeting. Subject to and to the extent permitted by Delaware law, the board of directors of the Corporation may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with law or such rules and regulations as adopted by the board of directors, the chairman of any meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the board of directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting and announcement of the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; (v) limitations on the time allotted to questions or comments by participants; and (vi) appointment of inspectors of election and other voting procedures, including, without limitation, those procedures set out in 8 Del. C. Section 231. Unless and to the extent determined by the board of directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. Section 10. Action Without Meeting. Any action permitted or required to be taken at any meeting of shareholders may be taken by written consent without a meeting subject to and to the extent permitted by applicable Delaware law. ARTICLE III. DIRECTORS Section 1. Number. The entire board of directors shall initially consist of five (5) directors and, thereafter, from time to time, such number as shall be established by resolution of the board of directors; provided, however, that the number of directors shall be increased to seven (7) directors in the event that the Corporation shall fail to pay dividends on its Class A Preferred Stock for eight (8) consecutive full quarter-annual periods as specified in the Certificate of Designation filed by the Corporation with the Office of the Secretary of State of the State of Delaware on August __, 1999 (the "Certificate of Designation"). The two (2) additional directors added upon the failure of the conditions set forth in the Certificate of Designation are herein referred to as the "Default Directors." Section 2. Term, Qualification, Vacancies and Newly Created Directorships. The directors shall hold office until the next annual election and until their successors are elected and qualify or until their earlier resignation or removal. Directors need not be stockholders. Directors shall be elected by a plurality of votes cast at a meeting of the stockholders, except that if there be a vacancy in the board by reason of death, resignation or otherwise, or if there be any newly created directorships resulting from an increase in the authorized number of directors, such vacancy or directorship shall be filled by a majority of the directors then in office, although less than a quorum; provided, however, that the Default Directors, if any, shall be elected solely by a plurality of votes cast at a meeting of the holders of the Class A 9% Non-Voting Preferred Stock of the Corporation and any vacancy arising with respect to a Default Director shall be filled by a plurality vote of the Class A 9% Non-Voting Preferred Stock of the Corporation. Any director chosen by reason of such vacancy or such newly created directorship shall hold office until the next annual meeting and until his successor is elected and qualified or until his earlier resignation or removal. 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 so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective and each director so chosen shall hold office as provided in these bylaws in the filling of other vacancies. Section 3. Removal. Any director or directors may be removed, either with or without cause, at any time by the affirmative vote of the holders of shares of stock having a majority of the votes which could be cast by the holders of all outstanding shares entitled to vote thereon at a meeting called for that purpose at which a quorum is present; provided, however, that any Default Director shall may only be removed, either with or without cause, at any time by the affirmative vote of the holders of shares of the Class A 9% Non-Voting Preferred Stock of the Corporation. Section 4. Powers. The board of directors shall manage the property and the business and affairs of this corporation and shall have all such powers and authority, as may be exercised by the board of directors of a corporation organized under the General Corporation Law of the State of Delaware. Section 5. Meetings of Directors. Regular meetings of the board of directors may be held within or without the State of Delaware at such time and place as may be fixed from time to time by resolution of the board. No notice of regular meetings shall be required. Special meetings of the board of directors may be called by the President, any Vice President, the Secretary or any director. Notice of the date, time and place of the meeting shall be given by or at the direction of the person or persons calling the meeting, and unless otherwise stated in the notice thereof, any and all business may be transacted at any meeting without specification of such business in the notice. Unless the board of directors prescribes different periods of time for notice, notice shall be provided to each director at least 24 hours in advance of the special meeting if notice is by personal service, telephone, facsimile copier or in person and at least seven days in advance if notice is by means of mail, telegram, cablegram or radiogram. Special meetings of the directors may be held within or without the State of Delaware as is indicated in the notice or waiver of notice thereof. Section 6. Quorum. A majority of the total authorized number of directors constituting the entire board of directors shall constitute a quorum for the transaction of business, but a smaller number may adjourn from time to time, without further notice, until a quorum is secured. Section 7. Vote Necessary to Act and Participation by Conference Telephone. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, except as may otherwise be provided by law, the certificate of incorporation or these bylaws. Participation in a meeting by conference telephone or similar means by which all participating members of the board can hear each other shall constitute presence in person at such meeting. Section 8. Executive and Other Committees. (A) The board of directors may, by resolution passed by a majority of the total authorized number of, or whole board or directors, designate an executive committee and/or one or more other committees, each committee to consist of two or more members of the board of directors. Any such committee, to the extent provided in the resolution or in these bylaws, shall have and may exercise the powers and authority of the board of directors in the management of the business and affairs of the corporation, except in reference to powers or authority expressly forbidden such a committee by applicable statutory law, and may authorize the seal of the corporation to be fixed to all papers which may require it. (B) In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. (C) The executive committee shall have and shall exercise, between the meetings of the board of directors, the full power and authority of the board in the management of the business and affairs of the corporation, including, without limitation, the power and authority to declare a dividend, to call meetings of shareholders and to authorize the issuance of stock, except in reference to power and authority expressly forbidden by applicable statutory law, and may authorize the seal of the corporation to be affixed to all papers which require it; provided, however, that the executive committee shall not have the power or authority to fill vacancies in its own membership which vacancies shall be filled by the board of directors. (D) The executive committee and such other committees shall meet at stated times or on notice to all of their own number. They shall fix their own rules of procedure. A majority shall constitute a quorum, but the affirmative vote of a majority of the whole committee shall be necessary to act in every case. (E) Such other committees shall have and may exercise the powers and authority of the board of directors to the extent provided in such resolution or resolutions. Section 9. Compensation. The board of directors shall fix the compensation of directors. Section 10. Rules of Procedure. Subject to applicable law, the certificate of incorporation and these bylaws, the board of directors shall fix its own rules of procedure and conduct from time to time. Section 11. Action Without Meeting. Any action permitted or required to be taken at any meeting of the board of directors may be taken by unanimous written consent without a meeting subject to and to the extent permitted by applicable Delaware law. ARTICLE IV. OFFICERS Section 1. Officers. The board of directors shall elect a President, Secretary and Treasurer (by those or any other functionally equivalent executive titles) and may elect other officers and agents, including one or more Vice Presidents. In addition, the board of directors may elect a Chairman from among its members. All officers of this corporation shall be chosen by the board of directors by the vote of a majority of the directors present at a meeting at which a quorum is present or by written consent pursuant to applicable statutory law. No officer need be a stockholder. Section 2. Number Of Offices. Any number of offices may be held by the same person. Section 3. Terms. The officers of the corporation shall hold office until their successors are chosen and qualify or until their earlier resignation or removal. Any officer chosen or appointed by the board of directors may resign at any time by written notice to the corporation and may be removed immediately, either with or without cause, at any time, by affirmative vote of a majority of the total authorized number, or whole board of directors. If the office of any officer or agent becomes vacant for any reason, the vacancy may be filled by the board of directors in the same manner as any officer or agent of this corporation is chosen. Section 4. Duties of the Executive Officers. The officers of this corporation shall have such powers and shall perform such duties, executive or otherwise, as from time to time may be prescribed or assigned to them by the board of directors, and to the extent not so provided, as generally pertain to their respective offices, subject to the control of the board of directors. The board of directors shall assign to one officer the duty to record the proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose. ARTICLE V. INDEMNIFICATION Section 1. Right of Indemnification. (A) This corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of this corporation), by reason of the fact that he is or was a director or officer of this corporation, or is or was serving at the request of this corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such act, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of this corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of this corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (B) This corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of this corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of this corporation, or is or was serving at the request of this corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of this corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to this corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper. (C) Expenses (including attorneys' fees) incurred by an officer or director in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon the receipt of an undertaking, which undertaking shall itself be sufficient without the need for further evaluation of any credit aspects of the undertaking or with respect to such advancement, by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in Section 145 of the Delaware General Corporation Law. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. (D) The right of indemnification provided by this Article V shall apply as to action by any person in his official capacity and as to action in another capacity while holding such office and shall continue as to a person who has ceased to be such director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (E) Notwithstanding the foregoing provisions of this Article V, the right of indemnification provided hereunder shall not apply with respect to an action, suit or proceeding (or part thereof) initiated by a director, officer or other indemnified person unless the initiation of such action, suit or proceeding (or part thereof) was authorized by the board of directors of this corporation; provided, however, that this Paragraph (E) shall not limit the right of an indemnified person to recover the expenses of suit with respect to a suit by such indemnified person against this corporation to recover the unpaid amount of a claim for indemnification under Paragraph (A) or Paragraph (B) of this Article V, or the unpaid portion of a claim for advancement of expenses under Paragraph (C) of this Article V, or the defense of a suit by this corporation to recover an advancement of expenses pursuant to the terms of an undertaking, to the extent that the indemnified person is successful in prosecuting or defending such suit. (F) The right of indemnification provided by this Article V shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (G) The right of indemnification provided by this Article V shall be deemed to be a contract between this corporation and each director and officer of this corporation who serves in such capacity, both as to action in his official capacity and as to action in another capacity while holding such office, at any time while this Article V and the relevant provisions of the General Corporation Law of the State of Delaware and other applicable law, if any, are in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts. (H) Notwithstanding any provision of this Article V to the contrary, this corporation may, but shall not be obligated to, purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of this corporation, or is or was serving at the request of this corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not this corporation would have the power to indemnify him against such liability. (I) For purposes of this Article V, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries, and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Article V. ARTICLE VI. MISCELLANEOUS Section 1. Certificates of Stock. Certificates of stock shall be signed, manually or by facsimile signature, by the President or a Vice President and either the Treasurer, Assistant Treasurer, Secretary or Assistant Secretary (or the executive titles functionally equivalent thereto). If a certificate of stock be allegedly lost, stolen or destroyed, another may be issued in its stead upon proof of loss, theft or destruction and the giving of a satisfactory bond of indemnity in an amount sufficient to indemnify the corporation against any claim or loss. A new certificate may be issued without requiring bond when, in the judgment of the board of directors, it is proper to do so. Section 2. Transfer of Stock. All transfers of stock of the corporation shall be made upon its books by the holder of the shares in person or by his lawfully constituted representative, upon surrender of certificates of stock, duly endorsed or with acceptable power attached thereto, for cancellation. Section 3. Stockholders of Record. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such shares on the part of any other person whether or not it shall have express or other notice thereof, save as expressly provided by the laws of Delaware. Section 4. Corporate Seal. The corporate seal shall have inscribed thereon the name of the corporation, the year of its incorporation and the words "Corporate Seal Delaware". Section 5. Fiscal Year. The fiscal year of the corporation shall be determined by resolution of the board of directors. Section 6. Books and Records. The books, records and accounts of the corporation, except as may otherwise be required by the laws of the State of Delaware, may be kept within or without the State of Delaware, at such place or places as may from time to time be designated by the Bylaws or by resolution of the directors. Section 7. Notices. Any written waiver of notice, signed by the person entitled to notice, whether before or after the event with respect to which such waiver pertains, shall be deemed equivalent to proper notice. Attendance of a person at a meeting shall constitute waiver of notice of such meeting, except where attendance is for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE VII. AMENDMENT OF BYLAWS These bylaws may be amended, altered, repealed or added to by the board of directors but this power shall not divest or limit the power of the stockholders to adopt, amend or repeal these bylaws. TABLE OF CONTENTS Page ARTICLE I.OFFICES............................................................1 Section 1.Registered Office............................................1 Section 2.Other Offices................................................1 ARTICLE II.MEETINGS OF STOCKHOLDERS..........................................1 Section 1.Annual Meeting...............................................1 Section 2.Special Meetings.............................................1 Section 3.Time and Place of Special Meetings...........................2 Section 4.Notice.......................................................2 Section 5.Quorum.......................................................2 Section 6.Adjournment..................................................2 Section 7.Organization of Meetings.....................................3 Section 8.Voting and Record Date.......................................3 Section 9.Conduct of Meeting...........................................4 Section 10.Action Without Meeting......................................5 ARTICLE III.DIRECTORS........................................................5 Section 1.Number.......................................................5 Section 2.Term, Qualification, Vacancies and Newly Created Directorships....................................................5 Section 3.Removal......................................................6 Section 4.Powers.......................................................7 Section 5.Meetings of Directors........................................7 Section 6.Quorum.......................................................7 Section 7.Vote Necessary to Act and Participation by Conference Telephone........................................................7 Section 8.Executive and Other Committees...............................8 Section 9.Compensation.................................................9 Section 10.Rules of Procedure..........................................9 Section 11.Action Without Meeting......................................9 ARTICLE IV.OFFICERS..........................................................9 Section 1.Officers.....................................................9 Section 2.Number Of Offices...........................................10 Section 3.Terms.......................................................10 Section 4.Duties of the Executive Officers............................10 ARTICLE V.INDEMNIFICATION...................................................10 Section 1.Right of Indemnification....................................10 ARTICLE VI.MISCELLANEOUS....................................................14 Section 1.Certificates of Stock.......................................14 Section 2.Transfer of Stock...........................................15 Section 3.Stockholders of Record......................................15 Section 4.Corporate Seal..............................................15 Section 5.Fiscal Year.................................................15 Section 6.Books and Records...........................................15 Section 7.Notices.....................................................15 ARTICLE VII.AMENDMENT OF BYLAWS.............................................16 EX-4 4 CERTIFICATE OF DESIGNATION UNITED PETROLEUM CORPORATION CERTIFICATE OF DESIGNATION CLASS A 9% PREFERRED STOCK ($0.01 par value) The undersigned, , in his capacity as the duly elected Secretary of United Petroleum Corporation, a Delaware corporation (hereinafter "Corporation"), pursuant to the provisions of Sections 103 and 151 of the General Corporation Law of the State of Delaware does hereby make this Certificate of Designation under the corporate seal of the Corporation and does hereby state and certify that pursuant to the authority expressly vested in the Board of Directors of the Corporation by the Certificate of Incorporation, the Board of Directors duly adopted the following resolutions: RESOLVED, that, pursuant to Article FOURTH of the Corporation's Certificate of Incorporation (that authorizes three hundred thousand (300,000) shares of Preferred Stock, $0.01 par value), the Board of Directors hereby fixes the voting powers, designation, preferences, and relative participating, optional and other special rights, qualifications, limitations, and restrictions of Preferred Stock. RESOLVED, that each share of the Class A 9% Preferred Stock shall rank equally in all respects and shall be subject to the following provisions: 1. Number and Designation. Three hundred thousand (300,000) shares of the Preferred Stock of the Corporation shall be designated as Class A 9% Preferred Stock (the "Class A Preferred Stock"). 2. Rank. The Class A Preferred Stock shall, with respect to rights on liquidation, winding up and dissolution, rank prior to all classes or series of equity securities heretofore and hereafter issued by the Corporation, including the Common Stock (as defined below). 3. Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution, winding up of the affairs of the Corporation, or a sale of all or substantially all of the assets of the Corporation, the record holders of Class A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders an aggregate amount equal to one hundred dollars ($100.00) (the "Preference Amount") for each share of Class A Preferred Stock then held by such record holders of Class A Preferred Stock, before any payment shall be made or any assets distributed to the holders of any shares of any class of equity securities heretofore or hereafter issued by the Corporation, including the Common Stock. The Preference Amount shall be paid at such time and upon such terms as payments are received by the Corporation upon any liquidation, dissolution, winding up of the affairs of, or sale of all or substantially all of the assets of the Corporation. 4. Dividends. The holders of the shares of Class A Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors of the Corporation, out of funds legally available therefor, cumulative dividends ("Dividends") on the shares of Class A Preferred Stock equal to nine percent (9%) per annum of the Preference Amount. Dividends on shares of the Class A Preferred Stock shall be payable in equal quarterly installments on January 15, April 15, July 15, and October 15 of each year, commencing on October 15, 1999. In the Corporation's discretion, Dividends on the Class A Preferred Stock shall be paid either in cash or additional shares of Class A Preferred Stock, valued at the time of payment. Dividends on the Class A Preferred Stock shall be paid in preference to and in priority over dividends on the Corporation's Common Stock. Such Dividends shall be paid to the holders of record of the Class A Preferred Stock at the close of business on the date specified by the Board of Directors of the Corporation at the time such Dividend is declared. Dividends on the Class A Preferred Stock shall be fully cumulative and shall accrue (whether or not earned or declared and, to the extent permitted by law, whether or not there are unrestricted funds of the Corporation legally available for the payment of Dividends) from the initial date of issuance of the Class A Preferred Stock. Dividends with respect to the Class A Preferred Stock, whether or not in arrears, may be declared and paid at any time, without reference to any regular payment date, to holders of record of shares of Class A Preferred Stock as of the close of business on a date, not more than sixty (60) days nor less than ten (10) days preceding the payment date thereof, specified by the Board of Directors of the Corporation at the time the payment of such Dividends is declared. The amount of Dividends accrued for any shares of Class A Preferred Stock for any period that is less than a full year shall be calculated on the basis of nine percent (9%) per annum of the Preference Amount for the actual number of days elapsed from the later of the date of issuance of such Class A Preferred Stock and the last date on which accrued and unpaid Dividends were declared and paid with respect to such Class A Preferred Stock, to and including the date as of which such calculation is made, (based on a three hundred sixty-five (365) day year), as the case may be, and the actual number of days elapsed. 5. Voting Rights. In the event that Dividends shall remain unpaid and in arrears for a total of eight (8) consecutive full quarterly periods, the number of directors constituting the Board of Directors of the Corporation shall be increased from five (5) to seven (7) and holders of the Class A Preferred Stock, as a class, shall have the right to elect two (2) directors to the Corporation's Board of Directors. 6. Redemption. (a) At the option of the Corporation, shares of the Class A Preferred Stock shall be redeemable, in whole or in part, by the Corporation, at any time and from time to time, at a redemption price, payable in cash, equal to the Preference Amount plus, in each case, an amount equal to accrued and unpaid Dividends thereon (whether or not earned or declared), if any, to the date fixed for redemption. (b) Whenever shares of Class A Preferred Stock are to be redeemed pursuant to Section 6(a), a notice of such redemption shall be mailed, by registered or certified mail (return receipt requested), postage prepaid, or delivered by hand to each holder of Class A Preferred Stock at such holder's address as the same appears on the stock transfer books of the Corporation. Such notice shall be mailed or delivered not less than ten (10) days and not more than sixty (60) days prior to the date fixed for redemption. Each such notice shall state: (i) the date fixed for redemption (the "Redemption Date"); (ii) the number of shares of Class A Preferred Stock to be redeemed; (iii) the redemption price (including the amount of accrued and unpaid Dividends to the Redemption Date); (iv) the place or places where such shares of the Class A Preferred Stock are to be surrendered for payment of the redemption price ( including the amount of accrued and unpaid Dividends to the Redemption Date); and (v) that Dividends on the shares to be redeemed will cease to accrue on the Redemption Date. If fewer than all share of the Class A Preferred Stock held by a holder are to be redeemed, the notice mailed to such holder shall specify the number of shares to be redeemed from such holder. Except as required by applicable law, no defect in the notice of redemption or in the mailing thereof shall affect the validity of the redemption proceedings. (c) Notice having been mailed as described in Section 6(b), and if, on or before the Redemption Date specified in such notice, an amount in cash sufficient to redeem in full on the Redemption Date and at the applicable redemption price, together with accrued and unpaid Dividends to such Redemption Date, all shares of the Class A Preferred Stock called for redemption shall have been irrevocably set apart so as to be available for such purpose and only for such purpose, or shall have been paid to the holders thereof, then effective as of the close of business on such Redemption Date, Dividends on the shares Class A Preferred Stock so called for redemption shall cease to accrue, said shares shall no longer be deemed to be outstanding, said shares shall have the status of authorized but unissued shares of Class A Preferred Stock, and all rights of the holders thereof as stockholders of the Corporation (except the right to receive from the Corporation the redemption price and any accrued and unpaid Dividends to the Redemption Date) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Directors of the Corporation shall so require and the notice shall so state), such shares shall be redeemed by the Corporation at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are redeemed, a new certificate of like terms and having the same date of original issuance shall be issued representing the unredeemed shares without cost to the holder thereof. (d) Nothing contained in this Certificate of Designation shall limit any legal right of the Corporation or any of its subsidiaries or affiliates to purchase or otherwise acquire any shares of Class A Preferred Stock at any price, whether higher or lower than the redemption price, so long as the holder thereof shall agree thereto. 7. General Provisions. The section headings in the paragraphs, subparagraphs, clauses and subclauses of this Certificate of Designation are for convenience of reference only and shall not define, limit or affect any of the provisions hereof. IN WITNESS WHEREOF, United Petroleum Corporation has caused this Certificate of Designation to be signed and attested by the undersigned this __ day of _________, 1999. UNITED PETROLEUM CORPORATION By:______________________________________ Name: Title: Secretary EX-99.1 5 PLAN OF REORGANIZATION IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: ) ) Chapter 11 ) UNITED PETROLEUM CORPORATION, ) ) ) Case No. 99-88 (PJW) ) Debtor. ) ) - ----------------------------------------------------- SECOND AMENDED PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE FOR UNITED PETROLEUM CORPORATION Dated: July 23, 1999 Pursuant to section 1121(c) of the Bankruptcy Code, United Petroleum Corporation proposes this chapter 11 plan: ARTICLE I. DEFINITIONS AND INTERPRETATION 1.1. Definitions. The capitalized terms used herein shall have the respective meanings set forth below: (a) "Administrative Expense Claim" means a Claim incurred by the Debtor (or its Estate) on or after the Petition Date and before the Effective Date for a cost or expense of administration in the Chapter 11 Case entitled to priority under sections 503(b) and 507(a)(1) of the Bankruptcy Code. (b) "ADR" means the Alternative Dispute Resolution Procedure for Treatment of Securities Claims pursuant to the Plan as attached to the Plan as Appendix II. (c) "Affiliate" means, with respect to any Person, all Persons that would fall within the definition assigned to such term in section 101(2) of the Bankruptcy Code, if such Person was a debtor in a case under the Bankruptcy Code. (d) "Allowed," when used (i) with respect to any Claim, except for a Claim that is an Administrative Expense Claim or a Securities Claim, means such Claim (A) to the extent it is not a Contested Claim as of the Effective Date; (B) to the extent it may be set forth pursuant to any stipulation or agreement that has been approved by Final Order of the Bankruptcy Court; (C) to the extent it is a Contested Claim as of the Effective Date, proof of which was filed timely with the Bankruptcy Court, and (I) as to which no objection was filed by the Objection Deadline (as specified in Section 10.1 of the Plan), unless such Claim is to be determined in a forum other than the Bankruptcy Court, in which case such Claim shall not become Allowed until determined by Final Order of such other forum and allowed by Final Order of the Bankruptcy Court; or (II) as to which an objection was filed by the Objection Deadline, to the extent allowed by a Final Order; or (D) which otherwise becomes an Allowed Claim as provided in the Plan; (ii) with respect to any Securities Claim, means a Securities Claim to the extent (A) it has become "Allowed" pursuant to the ADR or (B) it may be set forth pursuant to any stipulation or agreement that has been approved by Final Order of the Bankruptcy Court; or (iii) with respect to an Administrative Expense Claim, means an Administrative Expense Claim, that has become "Allowed" pursuant to the procedures set forth in Article V of the Plan; or (iv) with respect to any Equity Interest, means an Equity Interest, proof of which was timely and properly filed or, if no proof of interest was filed, which has been or hereafter is listed by the Debtor on its Schedules as fixed in amount and not disputed or contingent, and, in either case, as to which no objection to the allowance thereof has been interposed on or before the Effective Date, or as to which any objection has been determined by a Final Order to the extent such objection is determined in favor of the holder of such Equity Interest. (e) "Ballot" means the form or forms that will be distributed along with the Disclosure Statement to holders of Allowed Claims and Equity Interests in classes that are Impaired under the Plan and entitled to vote, which the holders of Impaired Claims and Equity Interests may use to vote to accept or reject the Plan. (f) "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended, and codified at title 11 of the United States Code and as applicable to the Chapter 11 Case. (g) "Bankruptcy Court" means the Bankruptcy Court unit of the United States District Court for the District of Delaware, or such other court having jurisdiction over the Chapter 11 Case. (h) "Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedure, as prescribed by the United States Supreme Court pursuant to section 2075 of title 28 of the United States Code and as applicable to the Chapter 11 Case. (i) "Bar Date" means March 30, 1999, the date set by the Bankruptcy Court as the last day for the filing of proofs of claim against the Debtor. (j) "Business Day" means any day on which commercial banks are open for business in both New York, New York and Knoxville, Tennessee. (k) "Calibur" means Calibur Systems, Inc., a Tennessee corporation, which is a wholly-owned subsidiary of UPC. (l) "Cash" means legal tender of the United States of America or cash equivalents. (m) "Calibur A Note" means that certain promissory note, dated August 5, 1998, made payable by Calibur, UPC and Jackson to Infinity in the original principal amount of $4,200,000, the payment of which is (i) guaranteed by UPC's President, Michael Thomas, and (ii) secured by a lien in and to assets of UPC, Calibur and Jackson that is pari passu with the liens that secure payment of the Calibur B Note. (n) "Calibur B Note" means that certain promissory note dated August 5, 1998, made payable by Calibur, UPC and Jackson to Infinity in the original principal amount of $2,800,000, the payment of which is secured by a lien in and to assets of UPC, Calibur and Jackson that is pari passu with the liens that secure payment of the Calibur A Note. (o) "Causes of Action" means all claims, rights, actions, causes of action, liabilities, obligations, suits, debts, remedies, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages or judgments, whether known or unknown and whether asserted or unasserted. (p) "Chapter 11 Case" means the Debtor's case under chapter 11 of the Bankruptcy Code pending before the Bankruptcy Court and styled In re United Petroleum Corporation, Case No. 99-88(PJW). (q) "Claim" means (i) any right to payment from the Debtor, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; (ii) any right to an equitable remedy for breach of performance if such breach gives rise to a right of payment from the Debtor, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured or (iii) any right under section 502(h) of the Bankruptcy Code. (r) "Collateral" means any Estate Asset subject to a Lien. (s) "Common Equity Interest" means any share or other instrument (including, without limitation, the Old UPC Common Stock) evidencing a common stock ownership interest in the Debtor, whether or not transferable or denominated "stock", or similar security, and any warrant or right, other than a right to convert, to purchase, sell, or subscribe to a common stock ownership interest in the Debtor. (t) "Confirmation Date" means the date on which the Clerk of the Bankruptcy Court enters the Confirmation Order on the docket with respect to the Chapter 11 Case. (u) "Confirmation Hearing" means the hearing held by the Bankruptcy Court, as it may be continued from time to time, on confirmation of the Plan. (v) "Confirmation Order" means the order of the Bankruptcy Court confirming the Plan. (w) "Contested," when used (i) with respect to a Claim, other than a Securities Claim, means a Claim (A) that is listed in the Schedules as disputed, contingent, or unliquidated, in whole or in part; (B) that is listed in the Schedules as undisputed, liquidated, and not contingent and as to which a proof of claim has been filed with the Bankruptcy Court, to the extent the proof of claim amount exceeds the scheduled amount; (C) that is not listed in the Schedules, but as to which a proof of claim has been filed with the Bankruptcy Court; or (D) as to which an objection has been filed before the Effective Date, provided, that a Claim that is Allowed by Final Order or pursuant to the Plan on or before the Effective Date shall not be a Contested Claim; and (ii) with respect to a Securities Claim, means such Claim to the extent it has not become an Allowed Claim pursuant to the ADR; provided, that a Claim that is Allowed by Final Order or pursuant to the Plan on or before the Effective Date shall not be a Contested Claim. (x) "Debentures" means, collectively, the following debentures, together with all amendments thereto, and all documents, instruments, and agreements executed and delivered in connection therewith: (i) The Debtor's six percent (6%) convertible debentures that matured on August 1, 1998; (ii) The Debtor's seven percent (7%) convertible debentures that mature on September 1, 1999; and (iii) The Debtors eighteen percent (18%) convertible debentures that matured on February 28, 1998. (y) "Debenture Claim" means a Claim arising under or relating in any way to the Debentures, including any Claim for accrued and unpaid interest. (z) "Debtor" or "UPC" means United Petroleum Corporation, a Delaware corporation, the debtor and debtor in possession in this Chapter 11 Case. (aa) "Deficiency Amount" means, with respect to a Secured Claim, the amount by which the Claim exceeds the sum of (i) any set-off rights of the holder of such Claim against the Debtor under Bankruptcy Code sections 506 and 553, plus (ii) the net proceeds realized by the holder of such Claim from the disposition of the Collateral securing such Claim or, if such Collateral is not liquidated to Cash, the value of the interest of the holder of the Claim in the Debtor's interest in such Collateral, as determined by the Bankruptcy Court under Bankruptcy Code section 506; provided, that if the holder of a Claim that is secured by a Lien on Collateral makes the election provided in Bankruptcy Code section 1111(b), there shall be no Deficiency Amount in respect of such Claim. (bb) "Disallowed," when used with respect to a Claim, means a Claim that has been disallowed by a Final Order of the Bankruptcy Court. (cc) "Disbursing Agent" means any Person designated by the Proponent to make distributions required under the Plan which may include, without limitation, UPC, any financial institution of recognized standing, or such other disbursing agent as may be approved by the Proponent. (dd) "Disbursing Agreement" means, with respect to any Disbursing Agent (other than UPC), the agreement referenced in Article XI of the Plan which shall govern the rights and obligations of the Disbursing Agent. The Disbursing Agreement will be in substantially the form thereof filed as a Plan Document, unless UPC serves as the Disbursing Agent, in which case, the Plan shall be the Disbursing Agreement. (ee) "Disclosure Statement" means the disclosure statement respecting the Plan, as approved by the Bankruptcy Court as containing adequate information in accordance with Section 1125 of the Bankruptcy Code, all exhibits and annexes thereto and any amendments or modifications thereof. (ff) "Distribution Date" means, (i) for any Claim that is an Allowed Claim on the Effective Date, as soon as practicable after the occurrence of the Effective Date; (ii) for any Claim that is neither a Disallowed Claim nor an Allowed Claim on the Effective Date, the first Business Day after such Claim becomes an Allowed Claim, or as soon as practicable thereafter; provided, that with respect to Securities Claims, the Distribution Date shall be determined by the UPC Trustee, consistent with the ADR and UPC Trust. (gg) "Distribution Record Date" means the record date fixed for voting on the Plan. (hh) "Effective Date" means (i) the first Business Day after the Confirmation Date upon which the transactions consummated by the Merger Agreement are consummated, or (ii) a Business Day selected by the Debtor after the first Business Day which is ten (10) days after the Confirmation Date on which (y) the Confirmation Order is not stayed and (z) all conditions to the entry of the Confirmation Order and the occurrence of the Effective Date have been satisfied or waived as provided in Article XIII of the Plan. (ii) "Equity Interest" means (a) the legal, equitable, contractual and other rights of any Person with respect to Old UPC Common Stock, Old UPC Preferred Stock, or any other equity security of the company and (b) the legal, equitable, contractual or other rights of any Person to acquire or receive any of the foregoing. (jj) "Estate" means the estate of the Debtor created by section 541 of the Bankruptcy Code upon the commencement of the Chapter 11 Case. (kk) "Estate Asset" means any property, right, or interest in property that is included in the Estate of the Debtor. (ll) "Estimated Claims Order" means any order of the Bankruptcy Court estimating any Claim or the aggregate amount of all Claims in any class created under the Plan to aid in the confirmation of the Plan, or the calculation of distributions under the Plan. (mm) "Fairway" means Fairway Capital Limited, a Nevis, West Indies corporation. (nn) "Farm Stores" means all of the ninety-two (92) walk-in convenience stores owned or leased by various entities in which the FSCI Shareholder has a partnership interest, and all inventory, fixtures, equipment, merchandise, accounts and general intangibles associated therewith, except as otherwise provided in the Merger Agreement. (oo) "Farm Stores Assets" shall mean all of the assets held by FSCI, as more fully described in the Merger Agreement, immediately preceding consummation of the Merger, including, but not limited to, partnership and other interests in the Farm Stores, the Farm Stores Real Estate, and the Farm Stores License. (pp) "Farm Stores License" means the royalty-free license to use the "Farm Stores" name and all related trademarks in connection with the operation of the Farm Stores Assets. The Farm Stores License shall be in substantially the form attached as an Exhibit to the Merger Agreement. (qq) "Farm Stores Real Estate" means the real property owned by various entities in which the FSCI Shareholder has a partnership interest and used in connection with nine (9) of the Farm Stores. (rr) "FSCI" means F.S. Convenience Stores, Inc., a Florida corporation. (ss) "FSCI Shareholder" means the holder or holders of 100% of the equity interest of FSCI. (tt) "FSG" means Farm Stores Grocery, Inc., a Florida corporation. (uu) "FSG Equity Interest" means a ten percent (10%) ownership interest in FSG. (vv) "Fee Application" means an application of a Professional Person under section 330 or 503 of the Bankruptcy Code for allowance of compensation and reimbursement of expenses in the Chapter 11 Case. (ww) "Fee Claim" means a Claim under section 330 or 503 of the Bankruptcy Code for allowance of compensation and reimbursement of expenses in the Chapter 11 Case. (xx) "Final Order" means (i) an order or judgment of the Bankruptcy Court or any other court or adjudicative body as to which the time to appeal, petition for certiorari, or move for reargument or rehearing has expired and as to which no appeal, petition for certiorari, or other proceedings for reargument or rehearing shall then be pending or, (ii) in the event that an appeal, writ of certiorari, reargument, or rehearing thereof has been sought, such order of the Bankruptcy Court or any other court or adjudicative body shall have been affirmed by the highest court to which such order was appealed, or certiorari has been denied, or from which reargument or rehearing was sought, and the time to take any further appeal, petition for certiorari or move for reargument or rehearing shall have expired; provided, that no order shall fail to be a Final Order solely because of the possibility that a motion pursuant to Rule 60 of the Federal Rules of Civil Procedure or Rule 7024 of the Bankruptcy Rules may be filed with respect to such order. (yy) "General Unsecured Claim" means any Claim that is not an Administrative Expense Claim, a Priority Tax Claim, a Priority Non-Tax Claim, the Infinity Secured Claim, a Secured Claim, a Debenture Claim or a UPC Securities Claim. (zz) "Infinity" means Infinity Investors Limited, a Nevis, West Indies corporation. (aaa) "Infinity Party" means Infinity, Fairway, and Seacrest, and each of their respective Affiliates, officers, directors, managers, stockholders, investors, agents, attorneys and representatives, including, without limitation, Clark K. Hunt. (bbb) "Infinity Secured Claim" means the Secured Claims of Infinity under the Calibur A Note and the Calibur B Note (and all related security agreements, instruments and documents). (ccc) "Infinity Securities Claim" means any Cause of Action against the Infinity Parties arising from or in connection with the sale, offer, exchange, conversion, or issuance of, or any transaction involving, the Common Equity Interests, including without limitation, the Causes of Action asserted in the Pisacreta/Tucci Action, but excluding derivative Causes of Action that are property of the Estate. (ddd) "Infinity Settlement Agreement" means the agreement dated as of the Effective Date among the Debtor, the Infinity Parties and The UPC Trust, providing for the settlement of all Causes of Action that have been, are, or may be asserted by or on behalf of any of the parties thereto against any of the parties thereto as set forth in Section 14.1 of the Plan. The Infinity Settlement Agreement shall be substantially in the form thereof filed as a Plan Document. (eee) "Jackson" means Jackson-United Petroleum Corporation, a Kentucky corporation, which is a wholly-owned subsidiary of UPC. (fff) "Lien" shall have the meaning assigned to it in section 101(37) of the Bankruptcy Code. (ggg) "Management Agreement" means the agreements to be entered into as of the Effective Date between the management of UPC and UPC Merger Sub and FSG regarding the management of FSG from and after the Effective Date. The Management Agreement shall be in substantially the form thereof filed as a Plan Document. (hhh) "Merger" means the combination of FSCI with and into UPC Merger Sub, with UPC Merger Sub being the surviving corporation, upon the terms and conditions set forth in the Merger Agreement. (iii) "Merger Agreement" means the agreement and plan of merger to be entered into by and among UPC, UPC Merger Sub and FSCI. The Merger Agreement shall be in substantially the form attached hereto as Appendix I. (jjj) "Merger Consideration" consideration means the consideration to be received by the FSCI Shareholders under the Merger Agreement, to wit, (i) $3 million Cash Payment delivered to the FSCI Shareholder; (ii) 2,400,000 shares of New UPC Common Stock delivered to the FSCI Shareholder, and, (iii) 70,000 shares New UPC Preferred Stock delivered to the FSCI Shareholder. (kkk) "Merger Financing" means the financing, as contemplated in the Merger Agreement, in the original principal amount of up to $23.0 million, secured by a Lien on the Farm Stores Assets, the proceeds of which shall be used, inter alia, to pay the Merger Consideration and to execute and perform the $17 million obligation under the Toni Option. Upon consummation of the Merger, the Merger Financing shall be an obligation of UPC Merger Sub. (lll) "New UPC Bylaws" means the Bylaws of United Petroleum Corporation, as amended and restated pursuant to the Plan. The New UPC Bylaws shall be in substantially the form thereof filed as a Plan Document. (mmm) "New UPC Charter" means the Certificate of Incorporation for United Petroleum Corporation, as amended and restated pursuant to the Plan. The New UPC Charter shall be in substantially the form thereof filed as a Plan Document. (nnn) "New UPC Common Stock" means the 10,000,000 shares of UPC common stock which shall be authorized for issuance under the New UPC Charter; 5,000,000 of which shares shall be issued and outstanding on the Effective Date pursuant the transactions to occur thereon under the Plan and the Merger Agreement. (ooo) "New UPC Preferred Stock" means the 300,000 shares of UPC Class A Preferred Stock which shall be authorized for issuance under the New UPC Charter; 70,000 of which shares shall be issued to Infinity on the Effective Date in full satisfaction of the obligations under the Calibur A Note and the Calibur B Note, and 70,000 of which shares shall be issued to the FSCI Shareholder in conjunction with the transactions contemplated in the Merger Agreement. (ppp) "Old UPC Common Stock" means the issued and outstanding shares of common stock of UPC immediately before the occurrence of the Effective Date; to wit 30,565,352 shares. (qqq) "Old UPC Preferred Stock" means the issued and outstanding shares of preferred stock of UPC immediately before the occurrence of the Effective Date; to wit 9,912 shares of Class A Preferred Stock of UPC and 1,833 shares of Class B Preferred Stock of UPC. (rrr) "Penalty Claims" means Claims and Causes of Action for noncompensatory, statutory, exemplary, or punitive damages, or penalties. (sss) "Person" means an individual, corporation, partnership, joint venture, trust, estate, unincorporated association, unincorporated organization, governmental entity, or political subdivision thereof, or any other entity. (ttt) "Petition Date" means January 14, 1999. (uuu) "Pisacreta/Tucci Action" means that certain lawsuit entitled Pisacreta v. Infinity Investors Limited et al., Civil Action No. 3:97-CV-226 in the United States District Court for the Eastern District of Tennessee, as amended to include the allegations originally asserted in the Tucci Action. (vvv) "Plan" means this chapter 11 plan, as it may be modified from time to time in compliance with the Bankruptcy Code and the Bankruptcy Rules. (www) "Plan Documents" means the documents that aid in effectuating the Plan as specifically identified as such herein, including but not limited to, the Merger Agreement, the Management Agreement and the Farm Stores License. (xxx) "Preferred Equity Interest" means any (1) shares or other instruments (including, without limitation, the Old UPC Preferred Stock) evidencing a preferred stock ownership interest in the Debtor, whether or not transferable or denominated "stock,"; (2) Cause of Action arising under or in any way relating to a share or shares of Old UPC Preferred Stock; or (3) unpaid dividends with respect to a share or shares of Old UPC Preferred Stock. (yyy) "Post-Confirmation Interest" means simple interest at the rate of 6.00% per annum or such other rate as the Bankruptcy Court may determine at the Confirmation Hearing is appropriate; such interest to accrue from the date of the entry of an order allowing a Claim until such Claim is paid. (zzz) "Priority Non-Tax Claim" means any Claim accorded priority in right of payment under section 507(a)(3), (4), (5), (6), or (7) of the Bankruptcy Code. (aaaa) "Priority Tax Claim" means a Claim of a governmental unit of the kind specified in section 507(a)(8) of the Bankruptcy Code. (bbbb) "Professional Person" means a Person retained or to be compensated pursuant to section 327, 328, 330, 503(b), or 1103 of the Bankruptcy Code. (cccc) "Proponent" means the Debtor. (dddd) "Pro Rata Share" means the proportion that the amount of an Allowed Claim or Equity Interest in a particular class of Claims or Equity Interests bears to the aggregate amount of all Claims or Equity Interests in such class, including Contested Claims and Equity Interests, but not including Disallowed Claims and Equity Interests, (i) as calculated by the Disbursing Agent, or the UPC Trustee, as applicable, on or before any Distribution Date; or (ii) as determined by the Bankruptcy Court in an Estimated Claims Order, if such an order is sought and obtained. (eeee) "Schedules" means the schedules of assets and liabilities and the statements of financial affairs filed by the Debtor as required by section 521 of the Bankruptcy Code and Bankruptcy Rule 1007, as such schedules and statements have been or may be supplemented or amended. (ffff) "Seacrest" means Seacrest Capital Limited, a Nevis, West Indies corporation. (gggg) "Secured Claim" means (i) a Claim secured by a Lien on any Estate Asset, which Lien is valid, perfected, and enforceable under applicable law and is not subject to avoidance under the Bankruptcy Code or other applicable non-bankruptcy law, and which is duly established in the Chapter 11 Case, but only to the extent of the value of the Collateral that secures payment of the Claim; (ii) a Claim that is subject to a valid right of setoff under section 553 of the Bankruptcy Code; and (iii) a Claim allowed under the Plan as a Secured Claim. (hhhh) "Securities Claim" means either a UPC Securities Claim or an Infinity Securities Claim. (iiii) "Securities Claims Resolution Facility" means the facility to be established or designated by the UPC Trustee for the purpose of liquidating Securities Claims as specified in the ADR. (jjjj) "Toni" means Toni Gas & Food Stores, Inc. (kkkk) "Toni Option" means that certain agreement between, among others, Toni and FSCI, under which, FSCI has the option of purchasing from Toni, for $17 million, all partnership and other interests which relate to the Farm Stores, and which are not already owned by FSCI or the FSCI Shareholder. (llll) "Thomas Guarantee" means the guarantee of the Calibur A Note by UPC's president, Michael Thomas. (mmmm) "UPC Merger Sub" means United Petroleum Subsidiary, Inc., a Delaware corporation and the wholly-owned subsidiary of UPC created for the purpose of consummating the Merger. (nnnn) "UPC Securities Claim" means any Cause of Action against the Debtor arising from or in connection with the sale, offer, exchange, conversion or issuance of, or any transaction involving, the Common Equity Interests, including without limitation, any Causes of Action asserted against the Debtor in the Pisacreta/Tucci Action. (oooo) "UPC Trust" means the trust to be established pursuant to Section 7.1 of the Plan and the UPC Trust Agreement. (pppp) "UPC Trust Agreement" means the trust agreement between the Debtor, Infinity and the UPC Trustee, dated as of the Effective Date. The UPC Trust Agreement shall be in substantially the form thereof filed as a Plan Document. (qqqq) "UPC Trustee" means the Person that is duly appointed and qualified to serve as the trustee of the UPC Trust pursuant to the terms and conditions of the Plan and the UPC Trust Agreement and as approved by the Bankruptcy Court. 1.2. Interpretation. Unless otherwise specified, all section, article, and exhibit references in the Plan are to the respective section in, article of, or exhibit to, the Plan, as the same may be amended, waived, or modified from time to time. The headings in the Plan are for convenience of reference only and shall not limit or otherwise affect the provisions of the Plan. Words denoting the singular number shall include the plural number and vice versa, and words denoting one gender shall include the other gender. The Disclosure Statement may be referred to for purposes of interpretation to the extent any term or provision of the Plan is determined by the Bankruptcy Court to be ambiguous. 1.3. Application of Definitions and Rules of Construction Contained in the Bankruptcy Code. Words and terms defined in section 101 of the Bankruptcy Code shall have the same meaning when used in the Plan, unless a different definition is given in the Plan. The rules of construction contained in section 102 of the Bankruptcy Code shall apply to the construction of the Plan. 1.4. Other Terms. The words "herein," "hereof," "hereto," "hereunder," and others of similar import refer to the Plan as a whole and not to any particular section, subsection, or clause contained in the Plan. A term used herein that is not defined herein shall have the meaning ascribed to that term, if any, in the Bankruptcy Code. 1.5. Appendices and Plan Documents. All Appendices to the Plan and the Plan Documents are incorporated into the Plan by this reference and are a part of the Plan as if set forth in full herein. ARTICLE II. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS 2.1. Claims and Equity Interests Classified. For purposes of organization, voting, and all confirmation matters, except as otherwise provided herein, all Claims (except for Administrative Expense Claims, and Priority Tax Claims) and all Equity Interests shall be classified as set forth in this Article II of the Plan. 2.2. Administrative Expense Claims and Priority Tax Claims. As provided in section 1123(a)(1) of the Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims shall not be classified for purposes of voting or receiving distributions under the Plan. Rather, all such Claims shall be treated separately as unclassified Claims on the terms set forth in Article V of the Plan. 2.3. Claims and Equity Interests. The Plan classifies the Claims against and Equity Interests in the Debtor as follows: (a) Class 1: Priority Non-Tax Claims (b) Class 2: Infinity Secured Claim (c) Class 3: Secured Claims (other than the Infinity Secured Claim) (d) Class 4: General Unsecured Claims (e) Class 5: Debenture Claims (f) Class 6: Preferred Equity Interests (g) Class 7: Common Equity Interests (h) Class 8: UPC Securities Claims 2.4. Separate Classification of Secured Claims. Although placed in one category for purposes of convenience, each Claim that is determined to be a Secured Claim shall be treated as though in a separate class (to be designated as Class 3A, Class 3B, Class 3C, etc.) for purposes of voting and receiving distributions under the Plan. ARTICLE III. IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS 3.1. Unimpaired Classes of Claims and Equity Interests. Class 1 -- Priority Non-Tax Claims, Class 3 -- Secured Claims (if any), and Class 4 -- General Unsecured Claims, are not impaired under the Plan. 3.2. Impaired Classes of Claims and Equity Interests. With the exception of the unimpaired classes specified in Section 3.1 of the Plan, all classes of Claims and Equity Interests are impaired under the Plan. 3.3. Impairment Controversies. If a controversy arises as to whether any Claim or Equity Interest, or any class of Claims or class of Equity Interests, is impaired under the Plan, the Bankruptcy Court shall, after notice and a hearing, determine such controversy. ARTICLE IV. PROVISIONS FOR TREATMENT OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN 4.1. Treatment of Claims and Equity Interests. The classes of Claims against and Equity Interests in the Debtor shall be treated under the Plan as follows: (a) Class 1 -- Priority Non-Tax Claims. Each holder of an Allowed Priority Non-Tax Claim shall be unimpaired under the Plan and, pursuant to section 1124 of the Bankruptcy Code, all of the legal, equitable and contractual rights of each holder of an Allowed Priority Non-Tax Claim in respect of such Claim shall be fully reinstated and retained as though the Chapter 11 Case had not been filed. (b) Class 2 -- Infinity Secured Claim. The Infinity Secured Claim shall be Allowed pursuant to the Plan and on the Effective Date the holder of the Infinity Secured Claim shall receive 70,000 shares of New UPC Preferred Stock in full satisfaction and release of the Infinity Secured Claim. (c) Class 3 -- Secured Claims (Other than the Infinity Secured Claim). Each holder of an Allowed Secured Claim shall be unimpaired under the Plan and, pursuant to section 1124 of the Bankruptcy Code, all of the legal, equitable, and contractual rights of each holder of a Secured Claim in respect of such Claim shall be fully reinstated and retained as though the Chapter 11 Case had not been filed. Notwithstanding the foregoing, the Debtor and any holder of an Allowed Secured Claim may agree to any alternate treatment of such Secured Claim which treatment may include preservation of such holder's Lien; provided, that such treatment shall not provide a return to such holder having a present value as of the Effective Date in excess of the amount of such holder's Allowed Secured Claim. (d) Class 4 -- General Unsecured Claims. Each holder of an Allowed General Unsecured Claim shall be unimpaired under the Plan and, pursuant to section 1124 of the Bankruptcy Code, all of the legal, equitable and contractual rights of each holder of an Allowed General Unsecured Claim in respect of such Claim shall be fully reinstated and retained as though the Chapter 11 Case had not been filed. (e) Class 5 -- Debenture Claims. The Debenture Claims shall be Allowed pursuant to the Plan and on the Effective Date each holder of an Allowed Debenture Claim shall receive a Pro Rata Share of 1,750,000 shares (35%) of New UPC Common Stock in full satisfaction and release of the Debenture Claims. (f) Class 6 -- Preferred Equity Interests. The Preferred Equity Interests shall be Allowed pursuant to the Plan and on the Effective Date each holder of an Allowed Preferred Equity Interest shall receive a Pro Rata Share of 650,000 shares (13%) of New UPC Common Stock in full satisfaction and release of the Preferred Equity Interests. (g) Class 7 -- Common Equity Interests. All Common Equity Interests will be canceled, annulled and extinguished as of the Effective Date. In full satisfaction and release of the Common Equity Interests, each holder of an Allowed Common Equity Interests evidenced by Old UPC Common Stock as of the Distribution Record Date shall receive (i) a Pro Rata Share of 200,000 shares (4%) of New UPC Common Stock, and (ii) the right to receive a Pro Rata Share of one-half (1/2) of any of the assets initially contributed to the UPC Trust pursuant to Sections 7.2 and 7.3 of the Plan, which remain after all distributions have been made by the UPC Trust under the Plan in respect of Allowed Securities Claims. (h) Class 8 -- UPC Securities Claims. In full satisfaction and release of the UPC Securities Claims, the UPC Securities Claims shall have the right to be liquidated and allowed pursuant to the ADR, together with the Infinity Securities Claims, except that, under no circumstance will any Person other than the UPC Trust be liable to the holder of a UPC Securities Claim on account of such UPC Securities Claim. On the Distribution Date, each holder of an Allowed UPC Securities Claim shall receive a distribution from the UPC Trust as provided for by Article VII of the Plan, the UPC Trust Agreement and the ADR. ARTICLE V. PROVISIONS FOR TREATMENT OF UNCLASSIFIED CLAIMS UNDER THE PLAN 5.1. Treatment of Administrative Expense Claims. All Administrative Expense Claims shall be treated as follows: (a) Time for Filing Administrative Expense Claims. The holder of an Administrative Expense Claim, other than (i) a Fee Claim, (ii) a liability incurred and paid in the ordinary course of business by the Debtor, or (iii) an Administrative Expense Claim that has been allowed on or before the Effective Date, must file with the Bankruptcy Court and serve on the Debtor and its counsel, notice of such Administrative Expense Claim within twenty (20) days after service of notice of entry of the Confirmation Order. Such notice must include at a minimum (1) the name of the holder of the Claim, (2) the amount of the Claim, and (3) the basis of the Claim. Failure to file this notice timely and properly shall result in the Administrative Expense Claim being forever barred and discharged. (b) Time for Filing Fee Claims. Each Professional Person or other entity that holds or asserts an Administrative Expense Claim that is a Fee Claim incurred before the Effective Date shall be required to file with the Bankruptcy Court, and serve on all parties required to receive notice, a Fee Application within forty-five (45) days after the Effective Date. The failure to file timely the Fee Application shall result in the Fee Claim being forever barred and discharged. (c) Allowance of Administrative Expense Claims. An Administrative Expense Claim with respect to which notice has been properly filed pursuant to Section 5.1(a) of the Plan shall become an Allowed Administrative Expense Claim if no objection is filed within sixty (60) days after the deadline for filing and serving a notice of such Administrative Expense Claim specified in Section 5.1(a) hereof, or such later date as may be approved by the Bankruptcy Court on motion of the Debtor, without notice or a hearing. If an objection is filed within such sixty-day period (or any extension thereof), the Administrative Expense Claim shall become an Allowed Administrative Expense Claim only to the extent allowed by Final Order. An Administrative Expense Claim that is a Fee Claim, and with respect to which a Fee Application has been properly filed pursuant to Section 5.1(b) of the Plan, shall become an Allowed Administrative Expense Claim only to the extent allowed by Final Order. (d) Payment of Allowed Administrative Expense Claims. Each holder of an Allowed Administrative Expense Claim shall receive (i) the amount of such holder's Allowed Claim in one Cash payment on the Distribution Date, or (ii) such other treatment as may be agreed upon in writing by the Debtor and such holder; provided, that an Administrative Expense Claim representing a liability incurred in the ordinary course of business of the Debtor may be paid at the Debtor's election in the ordinary course of business by the Debtor. All Allowed Administrative Expense Claims shall be paid by, and shall be the sole responsibility of, UPC. 5.2. Treatment of Priority Tax Claims. Each holder of an Allowed Priority Tax Claim shall receive from UPC in full satisfaction of such holder's Allowed Priority Tax Claim, (i) the amount of such holder's Allowed Claim, with Post-Confirmation Interest thereon, in equal annual Cash payments on each anniversary of the Distribution Date, until the sixth anniversary of the date of assessment of such Claim (provided that the Debtor may prepay the balance of any such Allowed Priority Tax Claim at any time without penalty); (ii) a lesser amount in one Cash payment as may be agreed upon in writing by such holder; or (iii) such other treatment as may be agreed upon in writing by such holder. The Confirmation Order shall constitute and provide for an injunction by the Bankruptcy Court as of the Effective Date against any holder of a Priority Tax Claim from commencing or continuing any action or proceeding against any responsible person or officer or director of the Debtor that otherwise would be liable to such holder for payment of a Priority Tax Claim so long as UPC is not in default of its obligations with respect to such Claim under this Section 5.2 of the Plan. ARTICLE VI. ACCEPTANCE OR REJECTION OF THE PLAN; EFFECT OF REJECTION BY ONE OR MORE CLASSES OF CLAIMS OR EQUITY INTERESTS 6.1. Classes Entitled to Vote. Each impaired class of Claims shall be entitled to vote separately to accept or reject the Plan. All unimpaired classes of Claims shall be deemed to have accepted the Plan. 6.2. Class Acceptance Requirement. A class of Claims shall have accepted the Plan if it is accepted by at least two-thirds (2/3) in amount and more than one-half (1/2) in number of the Allowed Claims in such class that have voted on the Plan. A class of Equity Interests shall have accepted the Plan if it is accepted by holders of at least two-thirds (2/3) of the Allowed Equity Interests in such class that have voted on the Plan. 6.3. Confirmation Without Acceptance by All Impaired Classes. If any impaired class of Claims or Equity Interests shall fail to accept the Plan in accordance with section 1129(a) of the Bankruptcy Code, the Plan shall constitute a request that the Bankruptcy Court confirm the Plan over such rejection in accordance with section 1129(b) of the Bankruptcy Code. ARTICLE VII. TRANSFERS OF PROPERTY TO AND ASSUMPTION OF CERTAIN LIABILITIES BY THE UPC TRUST 7.1. Creation of UPC Trust and Appointment of Trustee. (a) On the Effective Date, the UPC Trust will be created pursuant to the UPC Trust Agreement for the benefit of all holders of Securities Claims. The UPC Trust or the fund established for transfer to the UPC Trust may be a "designated settlement fund" or "qualified settlement fund" pursuant to section 468B of the Internal Revenue Code and related regulations. (b) The UPC Trust shall be administered by an independent trustee who shall be an individual designated by the Debtor, subject to approval of the Bankruptcy Court. The terms of the compensation to be payable to the UPC Trustee shall also be subject to approval of the Bankruptcy Court. (c) No person shall be eligible to be appointed as the UPC Trustee who, within the five (5) years preceding such appointment, had any business or professional affiliation with the Debtor or any holder of a Claim, or any attorney representing any of the foregoing. The appointment of the UPC Trustee and the terms of his/her compensation shall be subject to the approval of the Bankruptcy Court. 7.2. Transfers of Certain Property of the Debtor to the UPC Trust. (a) As of the Effective Date, the Debtor shall transfer and assign (or deliver, as applicable) to the UPC Trust in accordance with the UPC Trust Agreement, all Causes of Action of the Debtor for contribution and indemnity with respect to Securities Claims against any Person, excluding the Infinity Parties. (b) On or as soon as practicable after the Effective Date, the Debtor shall transfer to the UPC Trust all of its documents and records relating to the transactions and events that purportedly give rise to Securities Claims, except those documents necessary for the Debtor's continuing operations. As of the date of such transfer, the UPC Trust shall assume any and all obligations related to the storage of such documents and records. The Proponent shall retain a right of access to all documents and records transferred to the UPC Trust. 7.3. Transfers of Certain Property of the Infinity Parties to the UPC Claims Trust. The Infinity Parties shall transfer and assign (or deliver, as applicable) or cause to be transferred and assigned (or deliver, as applicable) to the UPC Trust in accordance with the UPC Trust Agreement, effective as of the Effective Date, the following: (a) 200,000 shares of New UPC Common Stock; (b) all Causes of Action of the Infinity Parties for contribution and indemnity with respect to Securities Claims against any Person, excluding the Debtor, its affiliates and their respective officers, directors, attorneys and representatives. 7.4. Distribution of Assets by the UPC Trust. The UPC Trustee shall make distributions from the assets in the UPC Trust to the holders of Allowed Securities Claims, in the full amount of such Allowed Securities Claims. Upon the termination of the channeling injunction in favor of the Infinity Parties pursuant to Section 16.2(d) of the Plan, holders of Securities Claims that have been timely asserted shall be permitted to assert such claims directly against the Infinity Parties. After the satisfaction of all Allowed Securities Claims, any assets remaining in the UPC Trust shall be allocated and distributed in accordance with the Infinity Settlement Agreement 50% to the Infinity Parties and 50% to the holders of Allowed Common Equity Interests. 7.5. Assumption of Certain Liabilities by the UPC Trust. (a) In consideration for the property transferred and the payments made to the UPC Trust pursuant to Sections 7.2 and 7.3 of the Plan, the UPC Trust shall assume all Securities Claims against the Debtor and the Infinity Parties. (b) As of the Effective Date, the UPC Trust shall (i) establish the Securities Claims Resolution Facility and assume responsibility for the liquidation of all Securities Claims as specified in the ADR, (ii) assume the defense of all Causes of Action against the Debtor and the Infinity Parties that constitute or may give rise to Securities Claims, (iii) assume the defense of all Causes of Action against any Person that may give rise to an indemnification liability against the Infinity Parties; and (iv) prosecute the Causes of Action of the Debtor and the Infinity Parties that have been transferred and assigned to the UPC Trust as the UPC Trustee shall determine is appropriate under the circumstances. Except as otherwise provided in the UPC Trust Agreement and the Infinity Settlement Agreement, the UPC Trust shall have all defenses, cross claims, Causes of Action, and rights to liens, offsets and recoupments that the Debtor and the Infinity Parties would have had against any Person under applicable non-bankruptcy law with respect to the Securities Claims. 7.6. Certain Property Held in Trust by the Debtor and the Infinity Parties. If for any reason after the Effective Date the Debtor and the Infinity Parties shall retain or receive any property that is owned by the Debtor or the Infinity Parties and which is to be transferred to the UPC Trust, then the Debtor and the Infinity Parties shall segregate and hold such property (and any proceeds thereof) in trust for the benefit of the UPC Trust, and shall take such actions with respect to such property at the expense and for the account of the UPC Trust as the UPC Trustee shall direct in writing. 7.7. Obligations of the UPC Trust with Regard to Claims Over. The rights and entitlement of the UPC Trust in respect of its prosecution of Causes of Action, rights, and claims are subject to the obligations and conditions set forth in subparagraphs (a) and (b) below. (a) When the UPC Trust asserts a Cause of Action, that was transferred or assigned to the UPC Trust by the Debtor or the Infinity Parties, the UPC Trust shall as soon as practicable deliver to the Person designated by each of the Debtor and Infinity to receive notice (the "Notice Party"), a copy of the complaint asserting such Cause of Action. Notwithstanding the injunctions provided pursuant to Section 16.12 of the Plan and the discharge provided pursuant to Section 16.11 and 16.13 of the Plan, if a party to such action asserts therein a counterclaim or cross claim (a "Claim Over") against the Debtor, Infinity or any other Person specified in the Infinity Settlement Agreement (a "Named Party"), the UPC Trust shall as soon as practicable deliver to the Notice Party a copy of the pleading asserting such Claim Over. (b) If the UPC Trust obtains a settlement with respect to or judgment against a party who has made a Claim Over in respect of such settlement or judgment, the UPC Trust shall: (i) in the event of any settlement, obtain, as part of such settlement, a release of each Named Party or a withdrawal with prejudice of any Claim Over against each Named Party; and (ii) in the event of any judgment rendered other than by reason of settlement: (A) in the event that the Claim Over is adjudicated, reduce, in satisfaction of such Claim Over, any such judgment obtained against the party asserting the Claim Over by the amount, if any, necessary to eliminate and satisfy such Claim Over without any further obligation of the relevant Named Party or Parties with respect to such Claim Over; provided, that (without limiting its obligations for indemnification) in no event shall reduction in respect of such Claim Over exceed the amount of the judgment obtained by the UPC Trust against the party asserting such Claim Over, or (B) indemnify and hold the Named Parties harmless in respect of such Claim Over if such Claim Over has not been adjudicated. (c) If a Claim Over has been asserted by any party against any Named Party, the UPC Trust shall fully indemnify and hold harmless the relevant Named Party from and against any and all liabilities, losses, penalties, damages, and all other reasonable costs and expenses or disbursements (including legal fees) incurred in connection with, or related to, the defense of the Claim Over. 7.8. Powers and Duties of the UPC Trustee. (a) Subject to the terms and provisions of the UPC Trust Agreement, as approved by the Bankruptcy Court, the UPC Trustee shall have the duty and authority to take all actions, including, but not limited to, the retention of professionals, deemed by the UPC Trustee to be necessary or appropriate (i) to implement the Plan, including without limitation, executing, entering into and implementing (A) the UPC Trust Agreement, (B) the Infinity Settlement Agreement, and (B) any other document, instrument or agreement necessary, or appropriate to implement the Plan, (ii) to assert, enforce, or settle the rights and claims of the UPC Trust under the Plan, the UPC Trust Agreement, any order of the Bankruptcy Court, any agreement, instrument, or document, and applicable law, (iii) to protect, maintain, liquidate to Cash, and maximize the value of the assets transferred to the UPC Trust, (iv) to liquidate and resolve the Securities Claims pursuant to the ADR, (v) to make distributions to the holders of Allowed Securities Claims pursuant to the Plan, and (vi) to prepare and make available to the Debtor, Infinity and holders of Claims and Equity Interests periodic reports regarding the results of the UPC Trust's operations. (b) Except as otherwise provided in this Section 7.8, the UPC Trustee, together with his/her officers, directors, employees, agents, and representatives, are hereby exculpated by all Persons, holders of Claims and Equity Interests, and parties in interest, from any and all Causes of Action, and other assertions of liability (including breach of fiduciary duty) arising out of the discharge of the powers and duties conferred upon the UPC Trustee by the UPC Trust Agreement, the Plan, any Final Order of the Bankruptcy Court entered pursuant to or in the furtherance of the Plan, or applicable law, except solely for actions or omissions arising out of the UPC Trustee's willful misconduct. No holder of a Claim or an Equity Interest, or representative thereof, shall have or pursue any claim or cause of action against the UPC Trustee or his/her officers, directors, employees, agents, and representatives for making payments in accordance with the Plan, or for liquidating assets to make payments under the Plan. ARTICLE VIII. MEANS FOR IMPLEMENTATION OF THE PLAN 8.1. Continued Corporate Existence. UPC shall continue to exist after the Effective Date as a separate corporate entity, with all corporate powers, in accordance with the laws of the State of Delaware and pursuant to the New UPC Charter and the New UPC Bylaws, which shall become effective upon the occurrence of the Effective Date. 8.2. The Merger . Pursuant to the terms and conditions set forth in the Merger Agreement, (a) FSCI will receive and disburse $17 Million from the Merger Financing to exercise and perform under the Toni Option, (b) UPC Merger Sub and FSCI shall merge on the Effective Date, with UPC Merger Sub being the surviving corporation, (c) the FSCI Shareholder shall receive the Merger Consideration such that the UPC Merger Sub will own 100% of the Farm Stores Assets and 10% of the equity in FSG. 8.3. Vesting of Assets. (a) Upon the occurrence of the Effective Date, title to the Estate Assets shall vest in UPC, free and clear of all Liens, Claims, Causes of Action, and interests, except as expressly provided in the Plan. On and after the occurrence of the Effective Date, UPC may operate its business and may use, acquire and dispose of its assets free of any restrictions of the Bankruptcy Code. (b) Upon the occurrence of the Effective Date, and pursuant to the Merger Agreement, title to the Farm Stores Assets shall vest in UPC Merger Sub, subject to a lien securing payment of the Merger Financing. On and after the occurrence of the Effective Date, UPC Merger Sub may operate its business and may use, acquire and dispose of its assets free of any restrictions of the Bankruptcy Code. 8.4. Management. Upon the occurrence of the Effective Date, the management, control, and operation of UPC shall become the general responsibility of the board of directors of UPC, as reconstituted pursuant to the Plan and Merger Agreement. Additionally, pursuant to the terms of the Management Agreement, UPC shall provide the management for FSG. Entry of the Confirmation Order shall ratify and approve all actions taken by the board of directors of UPC from the Petition Date through and until the Confirmation Date. 8.5. Reconstitution of UPC Board of Directors. The initial board of directors of UPC shall be composed of the individuals identified in the Disclosure Statement or as otherwise identified at or prior to the Confirmation Hearing, to hold such positions. 8.6. Officers. The officers of UPC immediately following the Effective Date, shall be those parties identified in the Disclosure Statement or otherwise identified prior to the conclusion of the Confirmation Hearing. 8.7. The New UPC Charter and Bylaws. Upon the occurrence of the Effective Date, UPC's charter and bylaws shall be amended and restated as specified herein. In addition to containing provisions that are currently contained in UPC's charter and bylaws, the New UPC Charter and the New UPC Bylaws shall provide for, among other things, a prohibition against the issuance of nonvoting equity securities as required by section 1123(a)(6) of the Bankruptcy Code. 8.8. Issuance of New UPC Common Stock. (a) All existing shares of Old UPC Common Stock and Old UPC Preferred Stock shall be deemed canceled, annulled, and extinguished as of the Effective Date. (b) On the Effective Date, UPC shall issue and distribute 5,000,000 shares of New UPC Common Stock as follows: (i) 2,400,000 shares will be issued to the FSCI Shareholder; (ii) 1,750,000 shall be issued to the holders of Allowed Debenture Claims; (iii) 650,000 shall be issued to the holders of Allowed Preferred Equity Interests; and (iv) 200,000 shall be issued to the holders of Allowed Common Equity Interests. (c) Each share of New UPC Common Stock shall have a par value of $0.01. The New UPC Common Stock shall have one vote per share on all matters. 8.9. Issuance of New UPC Preferred Stock. (a) On the Effective Date, UPC shall issue and distribute 140,000 shares of New UPC Preferred Stock as follows: (i) 70,000 shares shall be issued to the FSCI Shareholder; and (ii) 70,000 shares shall be issued to the holder of the Infinity Secured Claim. (b) The New UPC Preferred Stock shall be issued pursuant to a certificate of designation in substantially the form to be filed with the Bankruptcy Court as a Plan Document, pursuant to which each share of New UPC Preferred Stock shall (i) entitle the holder to receive cumulative quarterly dividends at the annual rate of approximately nine percent (9%), dividends payable in cash out of funds legally available for the payment thereof, or, at the election of the Board of Directors, New UPC Common Stock having an equivalent market value; (ii) have a preference of $100.00, plus accrued and unpaid dividends upon any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of the Debtor; and (iii) provide that at any time or times dividends shall be in arrears and unpaid on an amount equal to eight (8) consecutive full quarterly dividend periods, then the number of directors constituting the board of directors, without further action, shall be increased by two (2) and the holders of shares of New UPC Preferred Stock shall have the exclusive right, voting separately as a class, to elect the directors to fill such newly-created directorships. 8.10. Cancellation of Instruments and Agreements. Upon the occurrence of the Effective Date, except as otherwise provided herein, all promissory notes, share certificates, instruments, indentures, or agreements evidencing, giving rise to, or governing any Claim or Equity Interest shall be deemed canceled and annulled without further act or action under any applicable agreement, law, regulation, order, or rule, and the obligations of the Debtor under such promissory notes, share certificates, instruments, indentures, or agreements shall be discharged. 8.11. Effectuating Documents. On or before ten (10) business days prior to the deadline for parties to vote to accept or reject the Plan, the Proponent shall file with the Bankruptcy Court substantially final forms of the agreements and other documents that have been identified herein as Plan Documents, which documents and agreements shall implement and be controlled by the Plan. Entry of the Confirmation Order shall authorize the officers of UPC to execute, enter into, and deliver all documents, instruments and agreements, including, but not limited to, the Plan Documents, and to take all actions necessary or appropriate to implement the Plan. To the extent the terms of any of the Plan Documents conflict with the terms of the Plan, the Plan shall control. 8.12. Treatment of Affiliate Claims. Except for valid intercompany payables and receivables between and among the Debtor, Jackson and Calibur, which shall be unaffected by the Chapter 11 Case, all rights, claims, Causes of Action, obligations, and liabilities between and among the Debtor and its Affiliates shall be waived, released, and discharged upon the occurrence of the Effective Date. 8.13. Retention of Causes of Action. Except as otherwise provided in the Plan, all Causes of Action assertable by the Debtor including, without limitation, those Causes of Action assertable pursuant to sections 542, 543, 544, 545, 547, 548, 549, 550, or 553 of the Bankruptcy Code, shall be retained by the Debtor and shall be vested in the Debtor upon the occurrence of the Effective Date. Any net recovery realized by the Debtor on account of such Causes of Action shall be property of the Debtor. 8.14. Indemnification. The entry of the Confirmation Order shall constitute a permanent injunction against the prosecution of all claims and Causes of Action of any Person against the officers, directors, employees and attorneys of the Debtor as of the Confirmation Date to the extent such claims or Causes of Action (a) are based in whole or in part on events occurring on or before the Confirmation Date, and (b) have been indemnified by the Debtor under its charter, its bylaws, applicable state law or any other agreement between the Debtor and such other parties, or any combination of the foregoing. 8.15. Employee Benefits. Except as may be otherwise provided in a motion filed with the Bankruptcy Court prior to entry of the Confirmation Order, all employment and severance practices, policies, and agreements, and all compensation and benefit agreements, plans, policies, and programs of the Debtor applicable to its directors, officers, or employees, including, without limitation, all savings plans, health care plans, severance benefit plans, incentive plans, employment agreements, workers' compensation programs, and life, disability, and other insurance plans, to the extent in full force and effect on the date of the commencement of the Confirmation Hearing, and excluding all Retiree Benefit Plans, are treated as executory contracts under the Plan, and the Plan constitutes and incorporates a motion to assume all such practices, policies, agreements, plans, and programs pursuant to section 365(a) of the Bankruptcy Code. The Confirmation Order shall represent and reflect an order of the Bankruptcy Court approving such assumptions as of the Effective Date; provided, that the confirmation and consummation of the Plan shall not constitute a change of control or triggering event under any employment agreement. 8.16. Appointment of the Disbursing Agent. Unless prior to the conclusion of the Confirmation Hearing the Debtor specifically identifies a Person to serve as the Disbursing Agent under the Plan, the Debtor shall serve as the Disbursing Agent. 8.17. Transactions on the Effective Date. On the Effective Date, unless otherwise provided by the Confirmation Order of the Bankruptcy Court, the following shall occur, shall be deemed to have occurred simultaneously, and shall constitute substantial consummation of the Plan: (a) the New UPC Charter and Bylaws shall become effective; (b) The Merger Agreement shall become effective and the transactions contemplated by the Merger Agreement shall be consummated; (c) all payments and other distributions to be made on, or as soon as practicable after, the Effective Date by the Debtor or the UPC Trust pursuant to Articles IV and V of the Plan shall be made or duly provided for; (d) the UPC Trustee shall be duly appointed and qualified to serve; (e) the Debtor, the UPC Trustee and Infinity shall enter into the Infinity Settlement Agreement and the transactions contemplated thereby shall be consummated; (f) the Debtor shall issue the shares of New UPC Common Stock and New UPC Preferred Stock to be issued under the Plan; and (g) the UPC Trustee, the Debtor, and Infinity shall enter into and execute the UPC Trust Agreement, the UPC Trust shall be established, and the property to be transferred to the UPC Trust pursuant to Sections 7.2 and 7.3 of the Plan shall automatically vest in the UPC Trust without further action on the part of the Debtor, Infinity or the UPC Trustee, with the execution, delivery and filing or recording as necessary of appropriate documents of conveyance and physical delivery of such property occurring as soon thereafter as practicable. 8.18. Sources of Cash for Plan Distributions. All Cash necessary for the Debtor to make payments and distributions to pursuant to the Plan shall be obtained from existing Cash balances, from funds made available pursuant to Merger Financing, and the operations of the Debtor and its subsidiaries, including UPC Merger Sub. All Cash necessary for the UPC Trust to make payments to the holders of Allowed Securities Claims shall be obtained from the assets contributed to the UPC Trust pursuant to the Plan, or the proceeds thereof. ARTICLE IX. PROVISIONS GOVERNING DISTRIBUTIONS 9.1. Date of Distributions. Any distributions and deliveries to be made under the Plan on account of an Allowed Claim shall be made on the Distribution Date with respect to such Allowed Claim, as otherwise provided for herein, or as may be ordered by the Bankruptcy Court. 9.2. Disbursing Agent/UPC Trustee. The Disbursing Agent shall make or direct all distributions required under this Plan, except for distributions to the holders of Allowed Securities Claims, which shall be made by the UPC Trustee. 9.3. Means of Cash Payment. Cash payments made pursuant to the Plan shall be in US funds, by check drawn on a domestic bank, or by wire transfer from a domestic bank, except that payments made to foreign trade creditors holding Allowed Claims or to foreign governmental units holding Allowed Priority Tax Claims shall be in such funds and by such means as are customary or as may be necessary in a particular foreign jurisdiction. 9.4. Delivery of Distributions. Subject to Bankruptcy Rule 9010, distributions and deliveries to holders of Allowed Claims shall be made at the address of each such holder (a) as set forth on the proofs of Claim filed by such holders, (b) as set forth in the Verification Form (as defined in the ADR), with respect to holders of Allowed Securities Claims, or (c) at the last known address of such holders if the Disbursing Agent, or the UPC Trustee (as applicable) have been notified of a change of address, except as otherwise provided in this Article IX of the Plan. If any holder's distribution is returned as undeliverable, no further distributions to such holder shall be made unless and until the Disbursing Agent (or the UPC Trustee, as applicable) receives notification of such holder's then current address, at which time any missed distributions shall be made to such holder without interest. Amounts in respect of undeliverable distributions shall be returned to the Disbursing Agent (or the UPC Trustee, as applicable) until such distributions are claimed. All claims for undeliverable distributions shall be made on or before the second anniversary of the Distribution Date. After such date all unclaimed property shall (a) in the case of distributions to holders of Administrative Expense Claims, Priority Tax Claims, Class 1 -- Priority Non-Tax Claims, the Class 2 -- Infinity Secured Claim, Class 3 -- Secured Claims, and Class 4 -- General Unsecured Claims, Class 5 -- Debenture Claims, Class 6 -- Preferred Equity Interests and Class 7 -- Common Equity Interests revert to UPC, and (b) in the case of Securities Claims, revert to the UPC Trust; and, in any case, the Claim or Equity Interest of any holder with respect to such property shall be discharged and forever barred. 9.5. Surrender of Notes, Instruments, and Securities. As a condition to receiving distributions provided for by the Plan, each holder of a promissory note, share certificate, or other instrument evidencing a Claim or Equity Interest shall surrender such promissory note, share certificate, or instrument to the Disbursing Agent (or, in the case of the holders of Securities Claims, to the UPC Trustee) within sixty (60) days of the Effective Date. All promissory notes, share certificates, and other instruments surrendered pursuant to the preceding sentence shall be marked "Compromised and Settled only as provided in Debtor's Plan of Reorganization." Unless waived by the Disbursing Agent (or the UPC Trustee in the case of the holders of Securities Claims), any person seeking the benefits of being a holder of an Allowed Claim or Equity Interest evidenced by a promissory note, share certificate, or other instrument, who fails to surrender such promissory note, share certificates, or other instrument must (a) establish the unavailability of such promissory note, share certificate, or other instrument to the reasonable satisfaction of the Disbursing Agent (or the UPC Trustee, in the case of the holders of Securities Claims), and (b) provide an indemnity bond in form and amount acceptable to the Disbursing Agent (or the UPC Trustee, in the case of the holders of Securities Claims) holding harmless the Debtor and the Disbursing Agent (or the UPC Trustee, in the case of the holders of Securities Claims) from any damages, liabilities, or costs incurred a result of treating such Person as a holder of an Allowed Claim or Equity Interest, as applicable. Thereafter, such Person shall be treated as the holder of an Allowed Claim or Equity Interest for all purpose under the Plan. Notwithstanding the foregoing, any holder of a promissory note, share certificate, or other instrument evidencing a Claim or Equity Interest that fails within one year of the Effective Date to surrender to the Debtor (or the UPC Trustee, as applicable) such note or other instrument, or alternatively, to satisfy the requirements of the second sentence of this Section 9.5 shall be deemed to have forfeited all rights, Claims against, and Equity Interests in, the Debtor and shall not be entitled to receive any distribution under the Plan. 9.6. Expenses Incurred On or After the Effective Date and Claims of the Disbursing Agent and the UPC Trustee. Except as otherwise ordered by the Bankruptcy Court, the amount of any expenses incurred by the Disbursing Agent or the UPC Trustee on or after the Effective Date (including, but not limited to, taxes) and any compensation and expenses (including any post-confirmation fees, costs, expenses, or taxes) to be paid to or by the Disbursing Agent or the UPC Trustee shall be borne by the Debtor and the UPC Trust, respectively. Professional fees and expenses incurred by the Disbursing Agent and the UPC Trustee after the Effective Date in connection with the effectuation of the Plan shall be paid by each in the ordinary course of business. 9.7. Time Bar to Cash Payments. Checks issued by the Disbursing Agent or the UPC Trustee in respect of Allowed Claims shall be null and void if not negotiated within ninety (90) days after the date of issuance thereof. Requests for reissuance of any check shall be made directly to the Disbursing Agent or the UPC Trustee, as applicable, by the holder of the Allowed Claim with respect to which such check originally was issued. Any claim in respect of such a voided check shall be made on or before the later of (a) the second anniversary of the Distribution Date or (b) ninety (90) days after the date of issuance of such check. After such date, all Claims in respect of void checks shall be discharged and forever barred. 9.8. Initial and Interim Distributions. Initial distributions and interim distributions, if any, under the Plan to the holders of Allowed Securities Claims shall be made on the Distribution Dates and be based on the UPC Trustee' calculation or estimate of the amount of Allowed Securities Claims, unless upon the timely request of a party in interest, the Bankruptcy Court determines that a different estimate is appropriate. Final distributions shall be based on the actual amount of Allowed Securities Claims. 9.9. Effect of Distributions on Account of Securities Claims. The making of a final distribution under the Plan on account of an Allowed Securities Claim shall effect, without the need to take any further action, the assignment of all right, title, claim, and interest in and to such Allowed Securities Claim to the UPC Trust. ARTICLE X. PROCEDURES FOR RESOLVING AND TREATING CONTESTED CLAIMS AND EQUITY INTERESTS 10.1. Objection Deadline. As soon as practicable, but in no event later than sixty (60) days after the Effective Date (subject to being extended by the Bankruptcy Court upon motion of the Debtor without notice or a hearing), objections to Claims (except Securities Claims) shall be filed with the Bankruptcy Court and served upon the holders of each of the Claims to which objections are made; provided, that no objection may be filed with respect to any Claim that is Allowed on or before the Effective Date pursuant to Section 1.1(d)(i)(A), (B) or (D) of the Plan. 10.2. Prosecution of Objections. After the date of entry of the Confirmation Order, only the Disbursing Agent shall have authority to file, litigate, settle, or withdraw objections to Claims (except for Securities Claims). All disputes regarding the existence amount and treatment of Securities Claims shall be resolved pursuant to ADR, except as otherwise provided in the Plan. 10.3. No Distributions Pending Allowance. Notwithstanding any other provision of the Plan, no payment or distribution shall be made with respect to any Claim or Equity Interest to the extent it is Contested unless and until such Contested Claim becomes an Allowed Claim or Equity Interest. 10.4. Distributions After Allowance. Payments and distributions to each holder of a Contested Claim or Equity Interest, to the extent that such Claim or Equity Interest ultimately becomes Allowed, shall be made in accordance with the provision of the Plan governing the class of Claims or Equity Interests to which the respective holder belongs. 10.5. Estimation of Claims. The Disbursing Agent (or the UPC Trustee, as applicable) may, at any time, request that the Bankruptcy Court estimate any Contested Claim or Equity Interest pursuant to section 502(c) of the Bankruptcy Code regardless of whether the Disbursing Agent (or the UPC Trustee, as applicable) has previously objected to such Claim or Equity Interest or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court will retain jurisdiction to estimate any Claim or Equity Interest at any time during litigation concerning any objection to any Claim, including during the pendency of any appeal relating to any such objection. In the event that the Bankruptcy Court estimates any Contested Claim or Equity Interest, that estimated amount will constitute either the allowed amount of such Claim or Equity Interest or a maximum limitation on such Claim or Equity Interest, as determined by the Bankruptcy Court. If the estimated amount constitutes a maximum limitation on such Claim or Equity Interest, the Disbursing Agent (or the UPC Trustee, as applicable) may elect to pursue any supplemental proceedings to object to any ultimate payment on such Claim or Equity Interest. All of the objection, estimation, settlement, and resolution procedures set forth in the Plan are cumulative and not necessarily exclusive of one another. Claims or Equity Interests may be estimated and subsequently compromised, settled, withdrawn or resolved by any mechanism approved by the Bankruptcy Court. ARTICLE XI. POWERS AND DUTIES OF THE DISBURSING AGENT 11.1. Exculpation. Except as otherwise provided in this Section 11.1, the Disbursing Agent, together with its officers, directors, employees, agents, and representatives, are hereby exculpated by all Persons, holders of Claims and Equity Interests, and parties in interest, from any and all Causes of Action, and other assertions of liability (including breach of fiduciary duty) arising out of the discharge of the powers and duties conferred upon the Disbursing Agent by the Disbursement Agreement, the Plan, any Final Order of the Bankruptcy Court entered pursuant to or in the furtherance of the Plan, or applicable law, except solely for actions or omissions arising out of the Disbursing Agent's willful misconduct. No holder of a Claim or an Equity Interest, or representative thereof, shall have or pursue any claim or cause of action (i) against the Disbursing Agent or its officers, directors, employees, agents, and representatives for making payments in accordance with the Plan, or for liquidating assets to make payments under the Plan, or (ii) against any holder of a Claim or an Equity Interest for receiving or retaining payments or transfers of assets as provided for by the Plan. Nothing contained in this Section 11.1 shall preclude or impair any holder of an Allowed Claim or Equity Interest from bringing an action in the Bankruptcy Court against the Debtor to compel the making of distributions contemplated by the Plan on account of such Claim or Equity Interest. 11.2. Powers and Duties of the Disbursing Agent. Pursuant to the terms and provisions of the Disbursement Agreement and the Plan, the Disbursing Agent shall be empowered and directed to (a) take all steps and execute all instruments and documents necessary to make distributions to holders of Allowed Claims (except Securities Claims); (b) make distributions contemplated by the Plan; (c) comply with the Plan and the obligations thereunder; (d) employ, retain, or replace professionals to represent it with respect to its responsibilities; (e) object to Claims (except Securities Claims) as specified in Article X hereof, and prosecute such objections; (f) compromise and settle any issue or dispute regarding the amount, validity, priority, treatment, or Allowance of any Claim (except Securities Claims) without further notice or hearing, and without the need for an order of the Bankruptcy Court approving such compromise or settlement; (g) make annual and other periodic reports regarding the status of distributions under the Plan to the holders of Allowed Claims that are outstanding against the Debtor at this time; such reports to be made available upon request to the holders of any Contested Claim; and (h) exercise such other powers as may be vested in the Disbursing Agent pursuant to the Disbursement Agreement, order of the Bankruptcy Court, or the Plan. ARTICLE XII. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES 12.1. Assumed If Not Rejected. The Plan constitutes and incorporates a motion to reject all prepetition executory contracts, and all prepetition unexpired leases to which the Debtor is a party, except for an executory contract or lease that (a) has been assumed or rejected by Final Order of the Bankruptcy Court; or (b) is the subject of a motion to assume or reject that is pending before the Bankruptcy Court on the Effective Date. The Confirmation Order shall represent and reflect an order of the Bankruptcy Court approving such rejections and assumptions of executory contracts and leases as of the Effective Date. 12.2. Cure Payments. Any monetary amounts by which the contracts and leases to be assumed under the Plan are in default shall be satisfied (a) by delivery of one Cash payment on the Distribution Date in the amount of such default, or (b) as otherwise agreed by the parties or ordered by the Bankruptcy Court. 12.3. Bar to Rejection Damages. If the rejection of an executory contract or unexpired lease by the Debtor results in damages to the other party or parties to such contract or lease, a Claim for such damages, if not heretofore evidenced by a filed proof of Claim, shall be forever barred and shall not be enforceable against the Debtor, or its properties or agents, successors, or assigns, unless a proof of Claim is filed with the Bankruptcy Court and served upon counsel for the Debtor on or before thirty (30) days after service of notice of entry of the Confirmation Order. ARTICLE XIII. CONDITIONS PRECEDENT TO CONFIRMATION OF THE PLAN AND THE OCCURRENCE OF THE EFFECTIVE DATE 13.1. Conditions Precedent to Confirmation. (a) It is a condition to confirmation of the Plan that the Clerk of the Bankruptcy Court shall have entered an order or orders on the docket in the Chapter 11 Case, which may be the Confirmation Order, approving the Plan Documents, authorizing the Debtor to execute, enter into, and deliver the Plan Documents and to execute, implement, and give effect to, the transactions contemplated thereby. (b) It is a condition to confirmation of the Plan that the Clerk of the Bankruptcy Court shall have entered an order or orders on the docket in the Chapter 11 Case, which may be the Confirmation Order, approving the Merger Agreement and authorizing the Debtor, UPC Merger Sub and FSCI to consummate the Merger. (c) It is a condition to confirmation of the Plan that the Clerk of the Bankruptcy Court shall have entered an order or orders on the docket in the Chapter 11 Case, which may be the Confirmation Order, approving the compromises and settlements described in Section 14.1 of the Plan. (d) It is a condition to confirmation of the Plan that the Clerk of the Bankruptcy Court shall have entered an order or orders on the docket in the Chapter 11 Case, which may be the Confirmation Order, issuing the injunctions described in Section 16.12 of the Plan. 13.2. Conditions Precedent to the Occurrence of the Effective Date. (a) It is a condition to the occurrence of the Effective Date that the Confirmation Order shall have been entered by the Clerk of the Bankruptcy Court on the docket in the Chapter 11 Case, be in full force and effect and be in form and substance satisfactory to Infinity and FSCI. (b) It is a condition to the occurrence of the Effective Date that (i) the Merger Financing shall have been obtained and (ii) FSCI shall have acquired and hold 100% ownership interest in and to the Farm Stores Assets. (c) It is a condition to the occurrence of the Effective Date that all necessary and material consents, authorizations and approvals shall have been given or waived for the transfers and transactions described in the Merger Agreement. (d) It is a condition to the occurrence of the Effective Date that all necessary and material consents, authorizations and approvals shall have been given or waived for the transfers of property and the payments described in Sections 7.2 and 7.3 of the Plan, as applicable. 13.3. Waiver of Conditions. The Proponent (with the consent of Infinity and FSCI) may waive any of the conditions set forth in Sections 13.1 and 13.2 of the Plan in a writing executed by each of them. ARTICLE XIV. COMPROMISE AND SETTLEMENT OF CERTAIN CAUSES OF ACTION 14.1. Compromise and Settlement Between and Among the Debtor, the UPC Trust and the Infinity Parties. The Plan constitutes a motion pursuant to Bankruptcy Rule 9019 for the entry of an order authorizing and approving the following compromise and settlement between and among the Debtor, the UPC Trust and the Infinity Parties: (a) For and in consideration of the undertakings and other agreements of the Infinity Parties under and in connection with the Plan and the Infinity Settlement Agreement, as of the Effective Date, the Debtor shall: (i) issue 70,000 shares of New UPC Preferred Stock to Infinity, or its designee, and (ii) release the Infinity Parties from any and all Causes of Action arising in whole or in part from conduct or events that occurred prior to the Effective Date (including, without limitation, derivative claims which the Debtor otherwise has legal power to assert, compromise or settle in connection with the Chapter 11 Case), except as otherwise provided in the Plan and the Infinity Settlement Agreement. (b) For and in consideration of the undertakings and agreements of UPC under and in connection with the Plan and the Infinity Settlement Agreement, as of the Effective Date, the Infinity Parties shall (i) waive and release all of their rights, interests and claims (including, without limitation, as to UPC, Calibur, Jackson and under the Thomas Guarantee) in and under the Calibur A Note and the Calibur B Note, (ii) contribute 200,000 shares of New UPC Common Stock to the UPC Trust as provided in Section 7.3 of the Plan, and (iii) release the Debtor, and its Affiliates, and their respective past and present directors, officers, employees, agents, sales representatives, and attorneys from any and all Causes of Action and Claims Over arising in whole or in part from conduct or events that occurred prior to the Effective Date, except as otherwise provided in the Plan and the Infinity Settlement Agreement. (c) As of the Effective Date, the Infinity Parties and the Debtor shall release the UPC Trust and the UPC Trustee from any and all Causes of Action arising in whole or in part from conduct or events that occurred prior to the Effective Date, except as otherwise provided in the Plan and the Infinity Settlement Agreement. ARTICLE XV. RETENTION OF JURISDICTION 15.1. Scope of Jurisdiction. Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court shall retain such jurisdiction over the Chapter 11 Case after the Effective Date as legally permissible, including, but not limited to, jurisdiction to: (a) Allow, disallow, determine, liquidate, classify, estimate or establish the priority or secured or unsecured status of any Claim, including the resolution of any request for payment of any Administrative Expense Claim and the resolution of any and all objections to the allowance or priority of Claims; (b) Grant or deny any applications for allowance and payment of any Fee Claim for periods ending on or before the Effective Date; (c) Resolve any matters related to the assumption, assumption and assignment or rejection of any executory contract or unexpired lease to which the Debtor is a party or with respect to which the Debtor may be liable and to hear, determine and, if necessary, liquidate, any Claims arising therefrom, including those matters related to the amendment after the Effective Date pursuant to Article XVI of the Plan to add any executory contracts or unexpired leases to Appendix II hereto; (d) Ensure that distributions to holders of Allowed Claims are accomplished pursuant to the provisions of the Plan, including ruling on any motion filed pursuant to Article XII; (e) Decide or resolve any motions, adversary proceedings, contested or litigated matters and any other matters and grant or deny any applications involving the Debtor that may be pending on or commenced after the Effective Date; (f) Enter such orders as may be necessary or appropriate to implement or consummate the provisions of the Plan, the Merger Agreement and all contracts, instruments, releases, indentures and other agreements or documents created in connection with the Plan or the Disclosure Statement, including without limitation the UPC Trust Agreement and the Infinity Settlement Agreement, including to correct any defect, cure any omission or reconcile any inconsistency, except as provided in Section 15.1(g) or elsewhere herein; (g) Resolve any cases, controversies, suits, or disputes that may arise in connection with the consummation, interpretation or enforcement of the Plan or the UPC Trust Agreement or any entity's obligations incurred in connection with the Plan or the UPC Trust Agreement, or any other agreements governing, instruments evidencing or documents relating to any of the foregoing, including the interpretation or enforcement of any rights, remedies or obligations under any of the foregoing; (h) Issue injunctions, enter and implement other orders or take such other actions as may be necessary or appropriate to restrain interference by any entity with Consummation or enforcement of the Plan, except as otherwise provided herein; (i) Enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason modified, stayed, reversed, revoked or vacated; (j) Determine any other matters that may arise in connection with or relate to the Plan, the Disclosure Statement, the Confirmation Order or any contract, instrument, release, indenture or other agreement or document created in connection with the Plan or the Disclosure Statement, including without limitation the UPC Trust Agreement, except as provided in Section 15.1(g) or elsewhere herein; and (k) Enter a Final Decree as contemplated by Bankruptcy Rule 3022. ARTICLE XVI. MISCELLANEOUS PROVISIONS 16.1. Notice of Entry of Confirmation Order and Relevant Dates. Promptly upon entry of the Confirmation Order, the Debtor shall publish as directed by the Bankruptcy Court and serve on all known parties in interest, holders of Claims, and holders of Equity Interests, notice of the entry of the Confirmation Order and all relevant deadlines and dates under the Plan, including, but not limited to, the deadline for filing notice of Administrative Expense Claims (Section 5.1 hereof), and the deadline for filing rejection damage claims (Section 12.3 hereof). 16.2. Payment of Statutory Fees. All fees payable pursuant to section 1930 of title 28 of the United States Code, as determined if necessary by the Bankruptcy Court at the hearing pursuant to section 1128 of the Bankruptcy Code, shall be paid on or before the Effective Date. 16.3. No Interest or Attorneys' Fees. Except as expressly stated in the Plan, or as allowed by the Bankruptcy Court, no interest, penalty or late charge arising after the Petition Date, and no award or reimbursement of attorneys fees or related expenses or disbursements, shall be allowed on, or in connection with, any Claim. 16.4. Modification of the Plan. Modification of the Plan may be proposed in writing by the Proponent at any time before confirmation, provided that the Plan, as modified, meets the requirements of section 1122 and 1123 of the Bankruptcy Code, and the Debtor shall have complied with section 1125 of the Bankruptcy Code. The Proponent may modify the Plan (with the consent of Infinity and FSCI) at any time after confirmation and before substantial consummation, provided that the Plan, as modified, meets the requirements of sections 1122 and 1123 of the Bankruptcy Code and the Bankruptcy Court, after notice and a hearing, confirms the Plan as modified, under section 1129 of the Bankruptcy Code, and the circumstances warrant such modifications. A holder of a Claim that has accepted or rejected the Plan shall be deemed to have accepted or rejected, as the case may be, such plan as modified, unless, within the time fixed by the Bankruptcy Court, such holder changes its previous acceptance or rejection. 16.5. Revocation of Plan. The Proponent reserves the right to revoke and withdraw the Plan after the Confirmation Date and prior to the occurrence of the Effective Date (with the consent of Infinity and FSCI). If the Proponent revokes or withdraws the Plan, or if the Effective Date does not occur, then, the Plan and all settlements set forth in Article XIV of the Plan shall be deemed null and void and nothing contained herein shall be deemed to constitute a waiver or release of any Claims by or against the Proponent or any other person or to prejudice in any manner the rights of the Proponent or any person in any other further proceedings involving the Debtor. 16.6. Exemption From Transfer Taxes. Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer, or exchange of notes or equity securities under the Plan, the creation of any mortgage, deed of trust, or other security interest, the making or assignment of any lease or sublease, or the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with, the Plan, including, without limitation, the Merger Agreements or any agreements of consolidation, deeds, bills of sale, or assignments executed in connection with any of the transactions contemplated under the Plan shall not be subject to any stamp, real estate, transfer, mortgage recording, or other similar tax. 16.7. Setoff Rights. In the event that the Debtor has a claim of any nature whatsoever against the holder of a Claim, the Debtor may, but is not required to, setoff against the Claim (and any payments or other distributions to be made in respect of such Claim hereunder) the Debtor's claim against the holder, unless any such claim is or will be released under the Plan, subject to the provisions of section 553 of the Bankruptcy Code. Neither the failure to set off nor the allowance of any Claim under the Plan shall constitute a waiver or release by the Debtor of any claim that the Debtor has against the holder of a Claim. 16.8. Subordination Rights. All Claims against and Equity Interests in the Debtor, based upon any claimed subordination rights against the Debtor or rights to avoid payments or transfers of property by the Debtor pursuant to any provision of the Bankruptcy Code or other applicable law, shall be deemed satisfied as to the Debtor by the distributions under the Plan to holders of Allowed Claims and Allowed Equity Interests having such subordination rights and any rights to avoid payments or transfers of property. As proposed in the Plan, the distributions to the various classes of Claims hereunder shall not be subject to levy, garnishment, attachment, or like legal process by any holder of a Claim or Equity Interest by reason of any claimed subordination rights or otherwise of the holder of a Claim or Equity Interest against the holder of another Claim or Equity Interest, except as otherwise provided herein. Distributions under the Plan shall be subject to and modified by any order pursuant to which a party in interest obtains a Final Order directing distributions other than as provided in the Plan, which distributions take into account the subordination rights of holders of Claims and Equity Interests between and among themselves. 16.9. Compliance with Tax Requirements. In connection with the Plan, the Debtor, and the Disbursing Agent, and the UPC Trustee shall comply with all withholding and reporting requirements imposed by federal, state, local, and foreign taxing authorities and all distributions hereunder shall be subject to such withholding and reporting requirements. Pursuant to section 1146(c) of the Bankruptcy Code, the issuance, transfer, or exchange of promissory notes, equity securities, or other instruments under the Plan, the creation of any mortgage, deed of trust, or other security interest, the making or assignment of any lease or sublease or the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with the Plan, including, without limitation, any merger agreements or agreements of consolidation, deeds, bills of sale, or assignments executed in connection with any of the transactions contemplated under the Plan shall not be subject to any stamp, real estate transfer, mortgage recording, or other similar tax. 16.10. Recognition of Guaranty Rights. The classification of and manner of satisfying all Claims under the Plan take into consideration (a) the existence of guaranties by the Debtor of obligations of other Persons, and (b) the fact that the Debtor may be a joint obligor with other Persons with respect to an obligation. All Claims against the Debtor based upon any such guaranties or joint obligations shall be discharged in the manner provided in the Plan; provided, that no creditor shall be entitled to receive more than one recovery with respect to any of its Allowed Claims. 16.11. Compliance With All Applicable Laws. If notified by any governmental authority that it is in violation of any applicable law, rule, regulation, or order of such governmental authority relating to its businesses, the Debtor, shall take whatever action as may be required to comply with such law, rule, regulation, or order; provided, that nothing contained herein shall require such compliance if the legality or applicability of any such requirement is being contested in good faith, and, if appropriate, an adequate reserve for such requirement has been set aside. 16.12. Discharge of Claims. Except as otherwise provided herein or in the Confirmation Order, the rights afforded in the Plan and the payments and distributions to be made hereunder shall discharge all existing debts and Claims of any kind, nature, or description whatsoever against the Debtor or the Estate Assets to the extent permitted by section 1141 of the Bankruptcy Code; upon the Effective Date, all existing Claims shall be, and shall be deemed to be discharged; and all holders of Claims shall be precluded from asserting against the Debtor, or any of the Estate Assets, any other or further Claim based upon any act or omission, transaction, or other activity of any kind or nature that occurred prior to the Effective Date, whether or not such holder filed a proof of Claim. 16.13. Injunctions. (a) On the Effective Date, all Persons who have been, are, or may be holders of Claims against or Equity Interests in the Debtor shall be enjoined from taking any of the following actions against or affecting the Debtor, its Estate, or its assets and property with respect to such Claims or Equity Interests (other than actions brought to enforce any rights or obligations under the Plan and appeals, if any, from the Confirmation Order): (i) commencing, conducting or continuing in any manner, directly or indirectly, any suit, action or other proceeding of any kind against the Debtor, its Estate, or its assets or property, or any direct or indirect successor in interest to the Debtor, or any assets or property of such transferee or successor (including, without limitation, all suits, actions, and proceedings that are pending as of the Effective Date, which must be withdrawn or dismissed with prejudice); (ii) enforcing, levying, attaching, collecting or otherwise recovering by any manner or means whether directly or indirectly any judgment, award, decree or order against the Debtor, its Estate, or its assets or property, or any direct or indirect successor in interest to the Debtor, or any assets or property of such transferee or successor; (iii) creating, perfecting or otherwise enforcing in any manner, directly or indirectly, any Lien against the Debtor, its Estate, or its respective assets or property, or any direct or indirect successor in interest to any of the Debtor, or any assets or property of such transferee or successor other than as contemplated by the Plan; (iv) asserting any setoff, right of subrogation or recoupment of any kind, directly or indirectly against any obligation due the Debtor, its Estate, or its respective assets or property, or any direct or indirect successor in interest to any of the Debtor, or any assets or property of such transferee or successor; and (v) proceeding in any manner in any place whatsoever that does not conform to or comply with the provisions of the Plan or the settlement set forth in Article XIV of the Plan to the extent such settlements have been approved by the Bankruptcy Court in connection with confirmation of the Plan. (b) Except as provided herein, as of the Effective Date, all Persons are permanently enjoined from commencing or continuing in any manner, any action or proceeding (including, without limitation, the Causes of Action asserted in the Pisacreta/Tucci Action), whether directly, derivatively, on account of or respecting any Claim, debt, right, Cause of Action or liability released or to be released pursuant to the Plan. (c) From and after the Effective Date, any Infinity Securities Claim shall channel and transfer to the UPC Trust, and all Persons who have been, are, or may be holders of any such Infinity Securities Claim shall be enjoined from taking any of the following actions against or affecting Infinity or its assets and property with respect to such Infinity Securities Claim (other than actions brought to enforce any rights or obligations under the Plan, the UPC Trust Agreement and the Infinity Settlement Agreement): (i) commencing, conducting or continuing in any manner, directly or indirectly, any suit, action or other proceeding of any kind against any Infinity party or its assets or property, or its direct or indirect successors in interest, or any assets or property of such transferee or successor (including, without limitation, all suits, actions, and proceedings that are pending as of the Effective Date, which must be withdrawn or dismissed with prejudice); (ii) enforcing, levying, attaching, collecting or otherwise recovering by any manner or means whether directly or indirectly any judgment, award, decree or order against any Infinity Party or its assets or property, or its direct or indirect successors in interest, or any assets or property of such transferee or successor; (iii) creating, perfecting or otherwise enforcing in any manner, directly or indirectly, any Lien against any Infinity Party or its assets or property, or its direct or indirect successors in interest, or any assets or property of such transferee or successor; (iv) asserting any set-off, right of subrogation or recoupment of any kind, directly or indirectly against any obligation due any Infinity Party, or its assets or property, or its direct or indirect successors in interest, or any assets or property of such transferee or successor; and (v) proceeding in any manner in any place whatsoever that does not conform to or comply with the provisions of the Plan, or the settlements set forth in Article XIV of the Plan, the UPC Trust Agreement or the Infinity Settlement Agreement. (d) The injunction provided by Section 16.12(c) shall terminate and be of no further force or effect if at any time or from time to time the UPC Trustee file with the Bankruptcy Court and serve upon the Infinity Parties a notice that the UPC Trust assets have been fully expended and that additional Allowed Securities Claims exists or that all Securities Claims have not yet been resolved and the Infinity Parties, within thirty (30) days after the filing of such notice, fail to make an additional contribution to the UPC Trust in an aggregate amount equivalent to (A) not less than $100,000 (provided that such amount must be at least enough to satisfy all outstanding Allowed Securities Claims in full and provide at least $25,000 to fund the expenses of the UPC Trust in liquidating any remaining Securities Claims) or (B) such lesser amount as may be agreed to by the UPC Trustee. 16.14. Discharge of the Debtor. Any consideration distributed under the Plan shall be in exchange for and in complete satisfaction, discharge, and release of all Claims of any nature whatsoever against the Debtor and any of its assets or properties; and, except as otherwise provided herein, upon the Effective Date, the Debtor shall be deemed discharged and released to the extent permitted by section 1141 of the Bankruptcy Code from any and all Claims, including but not limited to demands and liabilities that arose before the Effective Date, and all debts of the kind specified in section 502(g), 502(h), or 502(i) of the Bankruptcy Code, whether or not (a) a proof of Claim based upon such debt is filed or deemed filed under section 501 of the Bankruptcy Code; (b) a Claim based upon such debt is allowed under section 502 of the Bankruptcy Code; or (c) the holder of a Claim based upon such debt has accepted the Plan. Except as provided herein, the Confirmation Order shall be a judicial determination of discharge of all liabilities of the Debtor. As provided in section 524 of the Bankruptcy Code, such discharge shall void any judgment against the Debtor at any time obtained to the extent it relates to a Claim discharged, and operates as an injunction against the prosecution of any action against the Debtor, or its property, to the extent it relates to a Claim discharged. 16.15. Exculpation. Neither the Proponent, Infinity, FSCI, any of their respective Affiliates, nor any of their respective members, officers, directors, managers, employees, agents, or professionals shall have or incur any liability to any holder of a Claim or Equity Interest for any act, event, or omission in connection with, or arising out of, the preparation and dissemination of the Disclosure Statement, the solicitation of votes with respect to the Plan, the Chapter 11 Case, the confirmation of the Plan, the consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan, except for willful misconduct. 16.16. Binding Effect. The Plan shall be binding upon and inure to the benefit of the Debtor, Infinity, the holders of all Claims and Equity Interests, and their respective successors and assigns. 16.17. Notices. Whenever service is required in the Plan, such service shall be made upon the following parties so as to be received by 5:00 p.m. eastern time on or before the date required: The Debtor: Attn: President United Petroleum Corporation 2620 Mineral Springs Road, Suite A Knoxville, Tennessee 37917 Facsimile: (423) 688-3463 with a copy to: Laura Davis Jones, Esquire Young Conaway Stargatt & Taylor, LLP Rodney Square North, 11th Floor P.O. Box 391 Wilmington, Delaware 19899-0391 Facsimile: (305) 571-1254 David A. Wood, Esquire Wood, Exall & Bonnet, L.L.P. 12222 Merit Drive, Suite 880 Dallas, Texas 75251 Facsimile: (972) 991-9261 Infinity: Infinity Investors Limited 38 Hertford Street London, England WIY-7T6 Facsimile: with a copy to: Stuart J. Chasanoff, Esquire HW Finance LLC 1601 Elm Street, Suite 4000 Dallas, Texas 75201 Facsimile: (214)720-1667 Thomas E Lauria, Esquire White & Case First Union Financial Center 200 South Biscayne Boulevard Miami, FL 33131 Facsimile: (305) 358-5744 16.18. Governing Law. Unless a rule of law or procedure is supplied by federal law (including the Bankruptcy Code and Bankruptcy Rules) or the Delaware General Corporation Law, the laws of the State of Delaware shall govern the construction and implementation of the Plan and any agreements, documents, and instruments executed in connection with the Plan or the Chapter 11 Case, including the Plan Documents, except as may otherwise be provided in such agreements, documents, instruments, and Plan Documents. 16.19. Severability. SHOULD THE BANKRUPTCY COURT DETERMINE THAT ANY PROVISION OF THE PLAN IS UNENFORCEABLE EITHER ON ITS FACE OR AS APPLIED TO ANY CLAIM OR EQUITY INTEREST OR TRANSACTION, THE PROPONENT (WITH THE CONSENT OF INFINITY) MAY MODIFY THE PLAN IN ACCORDANCE WITH SECTION 16.5 OF THE PLAN SO THAT SUCH PROVISION SHALL NOT BE APPLICABLE TO THE HOLDER OF ANY CLAIM OR EQUITY INTEREST. SUCH A DETERMINATION OF UNENFORCEABILITY SHALL NOT (A) LIMIT OR AFFECT THE ENFORCEABILITY AND OPERATIVE EFFECT OF ANY OTHER PROVISION OF THE PLAN OR (B) REQUIRE THE RESOLICITATION OF ANY ACCEPTANCE OR REJECTION OF THE PLAN. Dated: July ___, 1999 Respectfully submitted, UNITED PETROLEUM CORPORATION By: Its: APPENDICES Appendix I -- The Merger Agreement. Appendix II -- Alternative Dispute Resolution Procedures For Treatment of Securities Claims Pursuant to The Plan of Reorganization Under Chapter 11 of the United States Bankruptcy Code For United Petroleum Corporation. TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS AND INTERPRETATION.................................................1 1.1. Definitions..............................................................1 1.2. Interpretation..........................................................12 1.3. Application of Definitions and Rules of Construction Contained in the Bankruptcy Code...........................12 1.4. Other Terms.............................................................12 1.5. Appendices and Plan Documents...........................................12 ARTICLE II CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS.................................12 2.1. Claims and Equity Interests Classified..................................12 2.2. Administrative Expense Claims and Priority Tax Claims...................13 2.3. Claims and Equity Interests.............................................13 2.4. Separate Classification of Secured Claims...............................13 ARTICLE III IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS........................................13 3.1. Unimpaired Classes of Claims and Equity Interests.......................13 3.2. Impaired Classes of Claims and Equity Interests.........................14 3.3. Impairment Controversies................................................14 ARTICLE IV. PROVISIONS FOR TREATMENT OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN...........................................14 4.1. Treatment of Claims and Equity Interests................................14 ARTICLE V. PROVISIONS FOR TREATMENT OF UNCLASSIFIED CLAIMS UNDER THE PLAN.........................................15 5.1. Treatment of Administrative Expense Claims..............................15 5.2. Treatment of Priority Tax Claims........................................16 ARTICLE VI. ACCEPTANCE OR REJECTION OF THE PLAN; EFFECT OF REJECTION BY ONE OR MORE CLASSES OF CLAIMS OR EQUITY INTERESTS.........................................17 6.1. Classes Entitled to Vote................................................17 6.2. Class Acceptance Requirement............................................17 6.3. Confirmation Without Acceptance by All Impaired Classes.................17 ARTICLE VII. TRANSFERS OF PROPERTY TO AND ASSUMPTION OF CERTAIN LIABILITIES BY THE UPC TRUST............................18 7.1. Creation of UPC Trust and Appointment of Trustee........................18 7.2. Transfers of Certain Property of the Debtor to the UPC Trust............18 7.3. Transfers of Certain Property of the Infinity Parties to the UPC Claims Trust................................18 7.4. Distribution of Assets by the UPC Trust.................................19 7.5. Assumption of Certain Liabilities by the UPC Trust......................19 7.6. Certain Property Held in Trust by the Debtor and the Infinity Parties...19 7.7. Obligations of the UPC Trust with Regard to Claims Over.................20 7.8. Powers and Duties of the UPC Trustee....................................21 ARTICLE VIII. MEANS FOR IMPLEMENTATION OF THE PLAN..........................................22 8.1. Continued Corporate Existence...........................................22 8.2. The Merger..............................................................22 8.3. Vesting of Assets.......................................................22 8.4. Management..............................................................22 8.5. Reconstitution of UPC Board of Directors................................23 8.6. Officers ...............................................................23 8.7. The New UPC Charter and Bylaws..........................................23 8.8. Issuance of New UPC Common Stock........................................23 8.9. Issuance of New UPC Preferred Stock.....................................24 8.10. Cancellation of Instruments and Agreements..............................24 8.11. Effectuating Documents..................................................24 8.12. Treatment of Affiliate Claims...........................................25 8.13. Retention of Causes of Action...........................................25 8.14. Indemnification.........................................................25 8.15. Employee Benefits.......................................................25 8.16. Appointment of the Disbursing Agent.....................................26 8.17. Transactions on the Effective Date......................................26 8.18. Sources of Cash for Plan Distributions..................................26 ARTICLE IX. PROVISIONS GOVERNING DISTRIBUTIONS............................................27 9.1. Date of Distributions...................................................27 9.2. Disbursing Agent/UPC Trustee............................................27 9.3. Means of Cash Payment...................................................27 9.4. Delivery of Distributions...............................................27 9.5. Surrender of Notes, Instruments, and Securities.........................28 9.6. Expenses Incurred On or After the Effective Date and Claims of the Disbursing Agent and the UPC Trustee..................28 9.7. Time Bar to Cash Payments...............................................29 9.8. Initial and Interim Distributions.......................................29 9.9. Effect of Distributions on Account of Securities Claims.................29 ARTICLE X. PROCEDURES FOR RESOLVING AND TREATING CONTESTED CLAIMS AND EQUITY INTERESTS.........................................29 10.1. Objection Deadline......................................................29 10.2. Prosecution of Objections...............................................29 10.3. No Distributions Pending Allowance......................................30 10.4. Distributions After Allowance...........................................30 10.5. Estimation of Claims....................................................30 ARTICLE XI. POWERS AND DUTIES OF THE DISBURSING AGENT.....................................30 11.1. Exculpation.............................................................30 11.2. Powers and Duties of the Disbursing Agent...............................31 ARTICLE XII. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.........................31 12.1. Assumed If Not Rejected.................................................31 12.2. Cure Payments...........................................................32 12.3. Bar to Rejection Damages................................................32 ARTICLE XIII. CONDITIONS PRECEDENT TO CONFIRMATION OF THE PLAN AND THE OCCURRENCE OF THE EFFECTIVE DATE..........................32 13.1. Conditions Precedent to Confirmation....................................32 13.2. Conditions Precedent to the Occurrence of the Effective Date............33 13.3. Waiver of Conditions....................................................33 ARTICLE XIV. COMPROMISE AND SETTLEMENT OF CERTAIN CAUSES OF ACTION...................................................33 14.1. Compromise and Settlement Between and Among the Debtor, the UPC Trust and the Infinity Parties......................33 ARTICLE XV. RETENTION OF JURISDICTION.....................................................34 15.1. Scope of Jurisdiction...................................................34 ARTICLE XVI. MISCELLANEOUS PROVISIONS......................................................36 16.1. Notice of Entry of Confirmation Order and Relevant Dates................36 16.2. Payment of Statutory Fees...............................................36 16.3. No Interest or Attorneys'Fees...........................................36 16.4. Modification of the Plan................................................36 16.5. Revocation of Plan......................................................36 16.6. Exemption From Transfer Taxes...........................................37 16.7. Setoff Rights...........................................................37 16.8. Subordination Rights....................................................37 16.9. Compliance with Tax Requirements........................................37 16.10. Recognition of Guaranty Rights.........................................38 16.11. Compliance With All Applicable Laws....................................38 16.12. Discharge of Claims....................................................38 16.13. Injunctions............................................................38 16.14. Discharge of the Debtor................................................39 16.15. Exculpation............................................................41 16.16. Binding Effect.........................................................41 16.17. Notices42 16.18. Governing Law..........................................................43 16.19. Severability...........................................................44 EX-99.2 6 SECOND AMENDED DISCLOSURE STATEMENT IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: ) Chapter 11 ) UNITED PETROLEUM CORPORATION, ) Case No. 99-88 (PJW) ) Debtor. ) SECOND AMENDED DISCLOSURE STATEMENT WITH RESPECT TO SECOND AMENDED PLAN OF REORGANIZATION OF UNITED PETROLEUM CORPORATION Young Conaway Stargatt & Taylor, LLP Laura Davis Jones (No. 2436) Joel A. Waite (No. 2925) Brendan L. Shannon (No. 3136) Rodney Square North 11th Floor P.O. Box 391 Wilmington, Delaware 19899-0391 Attorneys for United Petroleum Corporation, et. al., Debtors in Possession Dated: Wilmington, Delaware July 23, 1999 DISCLAIMERS ALL CREDITORS AND INTEREST HOLDERS ARE ADVISED AND ENCOURAGED TO READ THIS DISCLOSURE STATEMENT AND THE PLAN IN THEIR ENTIRETY. PLAN SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT, INCLUDING THE FOLLOWING EXECUTIVE SUMMARY, ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN, THE EXHIBITS ANNEXED TO THE PLAN, AND THIS DISCLOSURE STATEMENT AS A WHOLE. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE ONLY AS OF THE DATE HEREOF, AND THERE CAN BE NO ASSURANCE THAT THE STATEMENTS CONTAINED HEREIN WILL BE CORRECT AT ANY TIME AFTER THE DATE HEREOF. ALL CREDITORS AND INTEREST HOLDERS ARE ADVISED THAT THIS DISCLOSURE STATEMENT AND RELATED PLAN ARE PREMISED ON A PROPOSED MERGER TRANSACTION WITH FSCI, WITH RESPECT TO WHICH THE DEBTOR AND FSCI HAVE NOT COMPLETED THEIR DUE DILIGENCE. CONSUMMATION OF THE PLAN AND THE MERGER AGREEMENT HAS THUS BEEN MADE EXPRESSLY CONTINGENT UPON THE SATISFACTION OF THE PARTIES THERETO CONTINUING DUE DILIGENCE INVESTIGATIONS. THE DEBTOR HAS BEEN ASKED TO SUPPORT THE PROPOSED MERGER TRANSACTION BY ITS SECURED LENDER, INFINITY. INFINITY BROUGHT THE PROPOSED TRANSACTION TO THE DEBTOR FOR CONSIDERATION. INFINITY HAS BEEN ACTIVELY INVOLVED IN THE NEGOTIATIONS WITH FSCI. A SUBSTANTIAL AMOUNT OF THE INFORMATION CONTAINED HEREIN HAS BEEN PROVIDED EITHER BY INFINITY OR FSCI AND THEIR ADVISORS AND HAS NOT YET BEEN FULLY REVIEWED OR EVALUATED BY THE DEBTOR OR ITS ADVISORS. THE DEBTOR INTENDS TO CONDUCT FURTHER DUE DILIGENCE WITH RESPECT TO THE PROPOSED MERGER AGREEMENT PRIOR TO THE COURT'S APPROVAL OF THE PLAN. IF SUFFICIENT DUE DILIGENCE CANNOT BE COMPLETED BY THE DEBTOR PRIOR TO THE HEARING TO CONSIDER APPROVAL OF THE PLAN, THE DEBTOR MAY NOT BE ABLE TO PROCEED TO OBTAIN COURT APPROVAL OF THE PLAN. THE DEBTOR MAKES NO REPRESENTATIONS WHATSOEVER REGARDING THE ACCURACY AND COMPLETENESS OF THE INFORMATION HEREIN REGARDING FSCI, ITS ASSETS, OR ITS HISTORICAL OR PROJECTED FINANCIAL INFORMATION AND DISCLAIMS ANY LIABILITY WITH RESPECT THERETO. THE DEBTOR HAS DETERMINED THAT PROCEEDING AT THIS TIME WITH SOLICITING VOTES ON THE PLAN UNDER THESE CIRCUMSTANCES IS APPROPRIATE IN LIGHT OF THE FACT THAT THE PROPOSED MERGER REPRESENTS THE ONLY KNOWN POSSIBILITY OF PROVIDING A SUBSTANTIAL RECOVERY TO THE DEBTOR'S CREDITORS AND INTEREST HOLDERS AND IN LIGHT OF THE CRITICAL TIMING ISSUES ASSOCIATED WITH THE PROPOSED MERGER DISCUSSED THROUGHOUT THIS DISCLOSURE STATEMENT. THE DEBTOR DOES NOT PRESENTLY HAVE THE MEANS TO CONFIRM A PLAN WITHOUT THE SUPPORT OF INFINITY. ABSENT THE PROPOSED MERGER, THE DEBTOR WOULD LIKELY BE FORCED TO LIQUIDATE ITS ASSETS, WHICH WOULD PRODUCE LITTLE OR NO RECOVERY FOR ANY CREDITOR OTHER THAN INFINITY. THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH SECTION 1125 OF THE BANKRUPTCY CODE AND RULE 3016(c) OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE AND NOT IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES LAWS. THIS DISCLOSURE STATEMENT HAS NEITHER BEEN APPROVED NOR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. THIS DISCLOSURE STATEMENT WAS PREPARED TO PROVIDE HOLDERS OF CLAIMS AGAINST AND INTERESTS IN THE DEBTOR WITH "ADEQUATE INFORMATION" (AS DEFINED IN SECTION 1125 OF THE BANKRUPTCY CODE) SO THAT THEY CAN MAKE AN INFORMED JUDGMENT ABOUT THE PLAN. PERSONS OR ENTITIES TRADING IN, OR OTHERWISE PURCHASING, SELLING, OR TRANSFERRING, SECURITIES OF THE DEBTOR SHOULD NOT RELY UPON THIS DISCLOSURE STATEMENT FOR SUCH PURPOSES AND SHOULD EVALUATE THIS DISCLOSURE STATEMENT AND THE PLAN IN LIGHT OF THE PURPOSE FOR WHICH THEY WERE PREPARED. THIS DISCLOSURE STATEMENT SHALL NOT CONSTITUTE OR BE CONSTRUED AS AN ADMISSION OF ANY FACT OR LIABILITY, STIPULATION, OR WAIVER, BUT RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. NOR SHALL THE STATEMENTS SET FORTH HEREIN BE USED AS EVIDENCE OR BIND ANY PARTY IN CONNECTION WITH THE PISACRETA/TUCCI ACTION. THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS INCLUDED HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES OF THE PLAN AND MAY NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN TO MAKE A JUDGMENT WITH RESPECT TO, AND DETERMINE HOW TO VOTE ON, THE PLAN. THE DISCLOSURE STATEMENT SHALL NOT BE ADMISSIBLE IN ANY NON-BANKRUPTCY PROCEEDING INVOLVING THE DEBTOR OR ANY OTHER PARTY, NOR SHALL IT BE CONSTRUED TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES, OR OTHER LEGAL EFFECTS OF THE LIQUIDATION OR PLAN AS TO HOLDERS OF CLAIMS AGAINST, OR INTERESTS IN, THE DEBTOR. DISCLAIMER CONCERNING BUSINESS PLANS, PROJECTIONS AND OTHER FORWARD-LOOKING STATEMENTS This Disclosure Statement includes "forward-looking statements" as that term is used under the Securities Exchange Act of 1934, as amended ("Exchange Act"). All statements other than statements of historical facts included in this Disclosure Statement, including without limitation, statements under "Certain Risk Factors to be Considered" and statements regarding the Debtor's, Farm Stores'(R) or any other company's financial position, business strategy and plans and objectives for future operations, including those found in the section entitled "Business Plan and Projections," are forward-looking statements. The forward-looking statements herein regarding Farm Stores(R) and the projected financial performance of the combined reorganized Debtor have been prepared by F.S. Management and its advisors. Although F.S. Management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Certain of the factors that could affect such forward looking statements are described in Section XII, "Certain Risk Factors to be Considered". EXECUTIVE SUMMARY On January 14, 1999 (the "Petition Date") United Petroleum Corporation, a Delaware corporation ("UPC" or the "Debtor") filed a petition for relief under chapter 11 of title 11 of the United States Code (11 U.S.C. ss.ss. 101 et. seq.) (the "Bankruptcy Code"). On July 23, 1999 the Debtor filed its second amended plan of reorganization (the "Plan"), which sets forth how claims against and interests in the Debtor will be treated. This Disclosure Statement describes certain aspects of the Plan, the Debtor's operations, significant events occurring in the Debtor's Chapter 11 Case and other related matters. This Executive Summary is intended solely as a summary of the distribution provisions of the Plan and certain matters related to the Debtor's businesses. FOR A COMPLETE UNDERSTANDING OF THE PLAN, YOU SHOULD READ THE DISCLOSURE STATEMENT, THE PLAN AND THE EXHIBITS AND SCHEDULES THERETO IN THEIR ENTIRETY. - --------------------- All capitalized terms used herein but not defined herein shall have the meanings attributed to such terms in the Plan. Capitalized terms used in this Executive Summary and not otherwise defined herein have the meanings ascribed to them in the Disclosure Statement and the Plan. The Plan is intended, among other things, to materially reduce the Debtor's overall indebtedness and the related drain on the Debtor's cash flow from servicing its debt obligations. As described in greater detail in the Disclosure Statement, the Debtor is proposing the Plan to achieve changes in its financial structure that it believes are necessary to alleviate the problems caused by the Debtor's excessive debt levels and fixed charges (including its obligations to make payments in respect of interest and dividends), to enable the Debtor to continue to implement its revised business strategy and to assure the Debtor's long-term viability. An important feature of the Plan is the Debtor's contemplated merger with a chain of 92 walk in convenience stores, and Debtor's acquisition of 10% of the equity in a chain of drive-thru stores, all located in Florida and presently owned and operated by a group of related entities doing business as "Farm Stores"(R). Time is of the essence in order to effect the merger. The walk-in and drive-thru Farm Stores(R) are currently beneficially owned by two different entities, which are controlled by a Mr. Joe Bared and the Isaias family (see "General information -- Farm Stores"). The Isaias family and Mr. Bared, however, have entered into an agreement whereby Mr. Bared has the option, but only until August 25, 1999, to purchase all of the interest held by the Isaias family. Thus, if the Debtor is unsuccessful in consummating the Plan and acquiring the Merger Financing by August 25, 1999, this option will expire and neither Bared, nor the Debtor would have the right to acquire the Isaias's interest in the business. To insure that it could satisfy the requirements under the Bankruptcy Code regarding the length of notice that must be provided prior to a hearing on the Disclosure Statement and confirmation of the Plan, the Debtor is proceeding with soliciting votes on the Plan, prior to entering into the Merger Agreement (which shall be in substantially the form attached to the Plan as Annex I) or completion of its due diligence. Nevertheless, among other things, the Merger Agreement contemplates the parties' need to complete due diligence and conditions closing of the Merger on the parties' satisfaction with their due diligence investigations. The Plan has been carefully designed and structured to preserve the going-concern value of the Debtor's business enterprise and the businesses of Farm Stores(R) to be acquired by Debtor, materially enhance the Debtor's operational viability on a prospective basis, channel and resolve all disputes relating to certain existing and potential litigation, and create a mechanism for the settlement of Securities Claims. Given the inability of the Debtor, standing alone, to fund the achievement of such an outcome, the Plan includes the acquisition of new businesses (as described above) and incorporates a settlement with Infinity, pursuant to which Infinity's Claims against and Interests in the Debtor will be restructured and all Securities Claims will be channeled to a trust funded by Infinity and the Debtor. Under the Plan, Claims against and Interests in the Debtor are divided into Classes. Certain unclassified Claims, including Administrative Claims and Priority Tax Claims, will receive payment in full in cash on or before the Effective Date. All other Allowed Claims and Interests are divided into 8 classes and will receive the distributions and recoveries described in the table below. This summary is qualified in its entirety by reference to the balance of this Disclosure Statement and the provisions of the Plan, a copy of which is attached hereto as Exhibit "A". SUMMARY OF ANTICIPATED DISTRIBUTIONS UNDER THE PLAN This summary of distributions under the Plan includes estimated recoveries for certain classes of creditors of the Debtor. These estimates are based, in whole or in part, on various assumptions and projections, including among others: that the Merger with Farm Stores will be consummated; that the businesses combined in the Merger will perform as well as is anticipated; that the actual value of the stock issued in the reorganization will not be significantly different from the value determined for it on the basis of available financial and business information and assumptions used in estimating its value; and that post-Merger UPC will have sufficient income to repay the obligations of the Farm Stores' business acquired in the Merger, bank debt incurred in connection with the Merger, and the obligations of UPC that arise later. The assumptions and projections on which the estimates below are based are subject to numerous risks and uncertainties, and actual values and recovery may differ from these estimates. For a description of certain of these risks, see " Section XII Certain Risk Factors to be Considered." Class Description Treatment Under the Plan Class 1 - Priority Non-Tax Claims Unimpaired Estimated Allowed Amount: Pursuant to section 1124 of the Bankruptcy Approximately $10,000 Code, all of the legal, equitable and contractual rights of a holder of an Allowed Priority Non-Tax Claim shall be fully reinstated and retained as though the Chapter 11 Case had never been filed. Estimated Recovery: 100% Class 2 - Infinity Secured Impaired Estimated Allowed On the Effective Date the holder of the Amount: $7,300,000 Infinity Secured Claim shall receive 70,000 shares of New UPC Preferred Stock, in full satisfaction and release of the Infinity Secured Claim. Class 3 - Secured Claims Unimpaired Estimated Allowed Amount: Pursuant to section 1124 of the Bankruptcy Approximately $908,045 Code, all of the legal, equitable and contractual rights of a holder of a Secured Claim (other than an Infinity Secured Claim) shall be fully reinstated and retained as though the Chapter 11 Case had never been filed. Estimated Recovery: 100% Class 4 General Unsecured Claims Unimpaired Estimated Allowed Amount: Pursuant to section 1124 of the Bankruptcy Approximately $250,000 Code, all of the legal, equitable and contractual rights of a holder of an Allowed General Unsecured Claim shall be fully reinstated and retained as though the Chapter 11 Case had never been filed. Estimated Recovery: 100% Class 5 - Debenture Claims Impaired Estimated Allowed Amount: On account of and in full satisfaction of Approximately $7,500,000 its Allowed Debenture Claim, the holder of such a claim shall receive its Pro Rata Share of 1,750,000 shares (35%) of New UPC Common Stock. Estimated Recovery: 87.9% (based upon the valuation of the New UPC Common Stock provided by F.S. Management, see "Valuation of New UPC Common Stock") Class 6 Preferred Equity Interests Impaired Estimated Allowed Amount: On account of and in full satisfaction of Approximately $13,800,000 its Allowed Preferred Equity Interest, the holder of such an interest shall receive its Pro Rata Share of 650,000 shares (13%) of New UPC Common Stock. Estimated Recovery: 17.3% (based upon the valuation of the New UPC Common Stock provided by F.S. Management, see "Valuation of New UPC Common Stock") Class 7 Common Equity Interests Impaired Estimated Allowed Amount: On account of and in full satisfaction of Approximately 30,565,352 Shares its Allowed Common Equity Interest, the holder of such an interest shall receive its Pro Rata Share of (i) 200,000 shares (4%) of New UPC Common Stock, and (ii) 1/2 of any assets remaining in the UPC Trust after all distributions have been made under the Plan in respect of all Securities Claims. Estimated Value of Recovery: $754,000 (based upon the valuation of the New UPC Common Stock provided by F.S. Management, see "Valuation of New UPC Common Stock"), plus 1/2 of remaining assets initially contributed to UPC Trust Class 8 UPC Securities Claims All UPC Securities Claims will be liqui- Estimated Allowed Amount: dated pursuant to the ADR (annexed as Zero Appendix I to the Plan) together with the Infinity Securities. Each holder of an allowed UPC Securities Claim shall receive, on account of and in full satisfaction and release of such Securities Claim, a Distribution from the UPC Trust, as provided for by the UPC Trust Agreement and the ADR. COMPROMISE AND SETTLEMENT WITH INFINITY PARTIES The Plan is the result of protracted negotiations between the Debtor and the Infinity Parties, which commenced approximately one year ago when the Debtor encountered a working capital short fall and sought additional financing from various sources, including Infinity. After reviewing the Debtor's financial conditions and operations, Infinity concluded that it would only be willing to provide the requested financing in conjunction with an overall restructuring of the Debtor's capital and a final resolution of various contingent matters. Without the loans made by Infinity in the approximate amount of $7.0 million in contemplation of the Debtor's reorganization and the substantial concessions being made by the Infinity Parties under the Plan, the Debtor would have been unlikely to maintain its operations or to reorganize and would most likely be forced to liquidate its assets - presumably for the sole benefit of the Infinity Parties. See "Confirmation of the Plan - Requirements for Confirmation of the Plan; Application of Section 1129(a)(7) of the Bankruptcy Code." In addition to being the Debtor's largest unsecured creditor and holder of preferred stock, the Infinity Parties hold mature claims secured by substantially all of the Debtor's assets in the approximate amount of $7.3 million. Instead of exercising its right to foreclose on the Debtor's assets, which would most likely result in there being no recovery to unsecured creditors and Interest holders, the Infinity Parties have agreed, among other things, to convert their entire secured claim of $7.3 million into equity, to allow for the payment in full of allowed General Unsecured Claims, to allow for the distribution of 4.0% of the equity of the reorganized Debtor to existing common stockholders, to share pro rata approximately 35% of the equity of the reorganized Debtor with existing holders of Debentures, to share pro rata approximately 13% of the equity of the reorganized Debtor with existing holders of Preferred Stock, to release any and all claims or causes of action that the Infinity Parties may hold against the Debtor, and to contribute 200,000 shares (4.0% of the equity in the reorganized Debtor) to the UPC Trust for liquidation and payment of Securities Claims. See "The Plan - Compromise and Settlement Between and Among the Debtor, the Infinity Parties and the UPC Trust" and "Comparison of Rights in Securities to be Issued Under the Plan to Rights Held in Prepetition Securities." Among other things and as more fully disclosed in the Disclosure Statement and the Plan, in consideration of the concessions made by the Infinity Parties and to ensure the feasibility of the Debtor's reorganization, the Plan provides for (i) the mutual release and compromise of any and all claims or causes of action against one another by the Debtor, the Infinity Parties, and their respective officers, directors, employees and agents and (ii) the establishment of the UPC Trust and channeling injunction for the liquidation and payment of all Securities Claims. Infinity has been actively involved in the Debtor's efforts to reorganize for several months. The Debtor initially intended to accomplish its reorganization through a prepackaged bankruptcy. In that regard, the Infinity Parties' involvement included, among other things initially drafting the Debtor's Plan, Disclosure Statement, the ADR procedures and certain other documents, in consultation with the Debtor's management and its professional advisors at that time. In August, 1998, in connection with the refinancing of the Debtor's secured debt, Infinity's counsel, White & Case LLP, was paid $300,000 by the Debtor for legal fees incurred in connection with restructuring the loans and for drafting the Plan, Disclosure Statement and other documents. As the major stakeholder in this case, Infinity, through its counsel has continued to be actively involved since the Petition Date in the Debtor's efforts to successfully complete this chapter 11 case including, without limitation, conducting due diligence with respect to the proposed merger transaction, being actively involved in the negotiations and drafting of the Merger Agreement and is actively involved in efforts to obtain the financing necessary to close under the Merger Agreement. SECURITIES CLAIMS AND THE UPC TRUST All UPC Securities Claims and Infinity Securities Claims (as defined in the Plan, Securities Claims include all non-derivative claims arising in connection with the purchase, sale, exchange or issuance of a UPC security, including without limitation, claims asserted in the Pisacreta/Tucci Action (but only to the extent such Claims are not derivative claims) described under "General Information-Legal Proceedings") will be settled and liquidated pursuant to an alternative dispute resolution procedure (the "ADR," a true and correct copy of which is attached to the Plan as Appendix II) and satisfied from the UPC Trust, which is being funded by Infinity and the Debtor for the purpose of paying Securities Claims. Under the Plan, the UPC Trust shall assume full responsibility for the liquidation and satisfaction of all Securities Claims. In particular, the trustee of the UPC Trust (the "UPC Trustee"), whose appointment and terms of compensation are subject to Bankruptcy Court approval, shall establish a Securities Claims Resolution Facility that incorporates and adopts the ADR, for the efficient and expeditious settlement and liquidation of all Securities Claims. The UPC Trust will be funded initially with, among other things, 200,000 shares of New UPC Common Stock, to be transferred by Infinity, and all of the Debtor's causes of action for contribution or indemnity against any party in connection with the Securities Claims other than the Infinity Parties, such causes of action to be prosecuted by the UPC Trustee. See "The Plan -- Means for Implementation of the Plan; Establishment and Funding of the UPC Trust." Based on the Debtor's current assessment of the aggregate amount of all Securities Claims and the value of the assets to be initially contributed to the UPC Trust, the Debtor believes that the UPC Trust will be sufficiently funded to pay all Allowed Securities Claims in full. In that regard, the Debtor believes that the claims asserted in the Pisacreta/Tucci Action seek relief that is derivative in nature, that belong to the Debtor's chapter 11 estate and that are among the claims being resolved pursuant to the Settlement between the Debtor and the Infinity Parties contained in Article XIV of the Plan. Such contention is disputed by the plaintiff in the Pisacreta/Tucci Action. Any excess assets from those initially contributed, pursuant to Sections 7.2 and 7.3 of the Plan, held by the UPC Trust after satisfaction of all Securities Claims and related expenses shall be allocated and distributed 50% to Infinity or its affiliates and 50% to holders of currently issued and outstanding shares of Common Stock. In order to give effect to the UPC Trust and make possible the contribution of 200,000 shares of New UPC Stock by Infinity, upon confirmation of the Plan and for so long as assets remain in the UPC Trust, any person who has been, is, or may be a holder of a Securities Claim shall be enjoined from taking any action against or affecting the Debtor or the Infinity Parties or their respective assets and property with respect to such Securities Claim. In the event that the assets of the UPC Trust are exhausted and there exists additional unpaid Allowed Securities Claims or additional Securities Claims that have not been resolved, then the channeling injunction will terminate as to the Infinity Parties unless the Infinity Parties contribute additional funds to the UPC Trust to enable the UPC Trustee to continue to perform their duties and pay all Allowed Securities Claims in full. Merger with Farm Stores The centerpiece of the Plan is the Debtor's proposed merger ("Merger") with a Florida based chain of walk-in convenience stores and Drive-thru specialty retail stores operating under the tradename Farm Stores(R). The Debtor has entered into a letter of intent and intends to execute that certain agreement and plan of merger substantially in the form attached to the Plan as Annex I (the "Merger Agreement") with F.S. Convenience Stores, Inc. ("FSCI"). Prior to consummation of the Merger Agreement, the assets of FSCI shall include (a) a chain of 65 Farm Stores(R) walk-in convenience stores that sell gasoline and 23 walk-in convenience stores that do not sell gasoline, (b) 10% of the stock of Farm Stores Grocery, Inc., a Delaware corporation ("FSG") that will own or lease a chain of 108 specialty grocery drive-through stores, and (c) a royalty free license to use the Farm Stores(R) name and related trademarks. Pursuant to the Merger Agreement, FSCI will merge with and into a newly formed subsidiary of the Debtor ("UPC Merger Sub"). Upon consummation of the Merger, (a) the former shareholder of FSCI (the "Farm Stores' Shareholder") will receive 48% of the New UPC Common Stock, 50% of the New UPC Preferred Stock and $3 Million; (ii) UPC Merger Sub and FSCI will borrow (either directly or by assumption of debt incurred by FSCI in connection with the transaction) up to $23 million ("Merger Financing"), secured by the Farm Stores(R) walk-in convenience stores; (iii) FSCI will use some of the proceeds of the Merger Financing to perform under an agreement to purchase for $17 million (x) all of the interests not already held by FSCI in the Farm Stores(R) walk-in convenience stores that sell gasoline (such that FSCI will own or lease 100% of Farm Stores(R) walk-in convenience stores that sell gasoline); (y) 100% of 23 Farm Stores(R) walk-in convenience stores that do not presently sell gasoline; and (z) a 10% of the equity of Farm Stores Grocery, Inc. ("FSG"), a corporation recently formed to own and operate 108 Farm Stores Express(R) drive-through specialty grocery stores; (iv) UPC Merger Sub will license the Farm Stores(R) name for use in connection with its walk in convenience stores from FSG, and (v) UPC Merger Sub and FSG will enter into a Management Agreement, providing for UPC Merger Sub to provide general, administrative, and management services to FSG and for FSG to pay management fees to UPC Merger Sub therefor. Additionally, during the first year, after the Merger, UPC Merger Sub may acquire up to an additional 15% of the equity of FSG at the fixed amount of $1 million per 2%. - --------------------- Alternatively, management services may be provided through a separate entity or other means. None of these alternatives will materially effect the economics of the management agreement. I. INTRODUCTION United Petroleum Corporation (referred to herein alternatively as the "Debtor" or "UPC"), the debtor and debtor in possession in the above-referenced chapter 11 case (the "Chapter 11 Case"), submits this Second Amended Disclosure Statement Pursuant to Section 1125 of the United States Bankruptcy Code with Respect to the Second Amended Plan of Reorganization Under Chapter 11 of the United States Bankruptcy Code for United Petroleum Corporation (the "Disclosure Statement"). This Disclosure Statement is to be used in connection with the solicitation of acceptances of the Second Amended Plan of Reorganization Under Chapter 11 of the United States Bankruptcy Code for United Petroleum Corporation, dated July 23, 1999 (the "Plan"), filed by the Debtor with the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). A copy of the Plan is attached hereto as Exhibit "A." UNLESS OTHERWISE DEFINED HEREIN, TERMS USED HEREIN HAVE THE MEANING ASCRIBED THERETO IN THE PLAN (SEE ARTICLE 1 OF THE PLAN ENTITLED "DEFINITIONS AND INTERPRETATIONS"). II. NOTICE TO HOLDERS OF CLAIMS AND EQUITY INTERESTS The purpose of this Disclosure Statement is to enable you, as a creditor whose Claim is impaired under the Plan or as a stockholder whose Equity Interest is impaired under the Plan, to make an informed decision in exercising your right to accept or reject the Plan. See "Confirmation of the Plan -- Solicitation of Votes; Parties Entitled to Vote" and "Definition of Impairment." THIS DISCLOSURE STATEMENT CONTAINS IMPORTANT INFORMATION THAT MAY BEAR UPON YOUR DECISION TO ACCEPT OR REJECT THE PLAN PROPOSED BY THE DEBTOR. PLEASE READ THIS DOCUMENT WITH CARE. THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. On July 23, 1999, after notice and a hearing, the Bankruptcy Court entered an order pursuant to section 1125 of the United States Bankruptcy Code, 11 U.S.C. ss. 101, et seq. (the "Bankruptcy Code"), approving this Disclosure Statement (the "Disclosure Statement Order") as containing information of a kind, in sufficient detail, and adequate to enable a hypothetical, reasonable investor typical of the solicited classes of Claims against and Equity Interests of the Debtor to make an informed judgment with respect to the acceptance or rejection of the Plan (a true and correct copy of the Disclosure Statement Order is attached hereto as Exhibit "B," and should be referred to for details regarding the procedures for the solicitation of votes on the Plan). APPROVAL OF THIS DISCLOSURE STATEMENT BY THE BANKRUPTCY COURT DOES NOT CONSTITUTE A DETERMINATION BY THE BANKRUPTCY COURT OF THE FAIRNESS OR MERITS OF THE PLAN OR OF THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT. Each holder of a Claim or Equity Interest entitled to vote to accept or reject the Plan should read this Disclosure Statement and the Plan in their entirety before voting. No solicitation of votes to accept or reject the Plan may be made except pursuant to this Disclosure Statement and section 1125 of the Bankruptcy code. Except for the Debtor and its professionals, no person has been authorized to use or promulgate any information concerning the Debtor, its businesses, or the Plan other than the information contained in this Disclosure Statement. You should not rely on any information relating to the Debtor, its businesses, and the Plan other than that contained in this Disclosure Statement and the Plan and the exhibits hereto and thereto. After carefully reviewing this Disclosure Statement, including the attached exhibits, please indicate your acceptance or rejection of the Plan by voting in favor of or against the Plan on the enclosed ballot and return the same to the address set forth on the ballot, in the enclosed return envelope so that it will be actually received by the Debtor's tabulation agent, Logan & Company, Inc., 615 Washington Street, Second Floor, Hoboken, New Jersey 07030 no later than 4:00 p.m., Prevailing Eastern Time, on August, 20, 1999. You may be bound by the Plan if it is accepted by the requisite holders of Claims or Equity Interests, even if you do not vote to accept the Plan. See "Confirmation of the Plan -- Solicitation of Votes; Vote Required for Class Acceptance," "-- Requirements for Confirmation of the Plan," and "-- Confirmation Without Acceptance of All Impaired Classes." TO BE SURE YOUR BALLOT IS COUNTED, YOUR BALLOT MUST BE ACTUALLY RECEIVED NO LATER THAN 4:00 P.M., PREVAILING EASTERN TIME, ON August 20, 1999. For a general description of the voting instructions and the name, address and phone number of the person you may contact if you have questions regarding the voting procedures, see "Confirmation of the Plan -- Solicitation of Votes." Pursuant to section 1128 of the Bankruptcy Code, the Bankruptcy Court has scheduled a hearing to consider confirmation of the Plan (the "Confirmation Hearing") on August 24, 1999, at 3:00 p.m., Prevailing Eastern Time, in the United States Bankruptcy Court, District of Delaware. The Bankruptcy Court has directed that objections, if any, to confirmation of the Plan be filed and served on or before 4:00 p.m. on August 20, 1999, in the manner described under the caption, "Confirmation of the Plan -- Confirmation Hearing." III. EXPLANATION OF CHAPTER 11 A. Overview of Chapter 11 Chapter 11 is the principal reorganization chapter of the Bankruptcy Code. Pursuant to chapter 11, the debtor in possession attempts to reorganize its business for the benefit of the debtor, its creditors, its stockholders, and other parties in interest. The present chapter 11 Case commenced with the filing by the Debtor of a voluntary petition for protection under chapter 11 of the Bankruptcy Code on January 14, 1999. The Chapter 11 Case has been assigned Case No. 99-88(PJW) by the clerk of the Bankruptcy Court. The commencement of a chapter 11 Case creates an estate comprising all the legal and equitable interests of the debtor in property as of the date the petition is filed. Sections 1101, 1107, and 1108 of the Bankruptcy Code provide that a debtor may continue to operate its business and remain in possession of its property as a "debtor in possession" unless the bankruptcy court orders the appointment of a trustee. In the present Chapter 11 Case, the Debtor has remained in possession of its property and continues to operate its businesses, as a debtor in possession. See "The Chapter 11 Case -- Commencement of the Chapter 11 Case." The filing of a chapter 11 petition also triggers the automatic stay provisions of the Bankruptcy Code. Section 362 of the Bankruptcy Code provides, among other things, for an automatic stay of all attempts to collect prepetition claims from the debtor or otherwise interfere with its property or business. Except as otherwise ordered by the bankruptcy court, the automatic stay remains in full force and effect until the effective date of a confirmed plan of reorganization. The formulation of a plan of reorganization is the principal purpose of a chapter 11 Case. The plan sets forth the means for satisfying the holders of claims against and interests in the debtor. Unless a trustee is appointed, only the debtor may file a plan during the first 120 days of a chapter 11 Case (the "Exclusive Period"). However, section 1121(d) of the Bankruptcy Code permits the court to extend or reduce the Exclusive Period upon a showing of "cause." After the Exclusive Period has expired, a creditor or any other party in interest may file a plan, unless the debtor has filed a plan within the Exclusive Period, in which case, the debtor is given 60 additional days (the "Solicitation Period") during which it may solicit acceptances of its plan. The Solicitation Period may also be extended or reduced by the court upon a showing of "cause." B. Plan of Reorganization Although referred to as a plan of reorganization, a plan may provide anything from a complex restructuring of a debtor's business and its related obligations to a simple liquidation of the debtor's assets. In either event, upon confirmation of the plan, it becomes binding on the debtor and all of its creditors and equity holders, and the obligations owed by the debtor to such parties are compromised and exchanged for the obligations specified in the plan. In the present Chapter 11 Case, the Plan, as proposed by the Debtor, provides for the continuance of the Debtor as a separate corporate entity in essentially its current form, with all of the existing Equity Interests in the Debtor being canceled, and new common stock being issued to the holders of certain Allowed Claims and Interests. See "The Plan -- Classification and Treatment of Claims and Interests." The Plan contemplates that the recoveries of creditors will be based on the Debtor's going concern value (which will provide recoveries substantially in excess of liquidation recoveries), and that the Debtor's business will be continued as a viable business enterprise. See "Valuation of the New UPC Common Stock." After a plan of reorganization has been filed, the holders of claims against and interests in a debtor are permitted to vote to accept or reject the plan. Before soliciting acceptances of the proposed plan, section 1125 of the Bankruptcy Code requires the debtor to prepare a disclosure statement containing adequate information of a kind, and in sufficient detail, to enable a hypothetical reasonable investor to make an informed judgment about the plan. This Disclosure Statement is presented to holders of Claims against and Equity Interests in the Debtor to satisfy the requirements of section 1125 of the Bankruptcy Code in connection with the Debtor's solicitation of votes on the Plan. If all classes of claims and equity interests accept a plan of reorganization, the bankruptcy court may confirm the plan if the court independently determines that the requirements of section 1129 of the Bankruptcy Code have been satisfied. See "Confirmation of the Plan -- Requirements for Confirmation of the Plan." Section 1129 sets forth the requirements for confirmation of a plan and, among other things, requires that a plan meet the "best interests" of creditors test and be "feasible." The "best interests" test generally requires that the value of the consideration to be distributed to the holders of claims or equity interests under a plan may not be less than those parties would receive if the debtor were liquidated pursuant to a hypothetical liquidation occurring under chapter 7 of the Bankruptcy Code. Under the "feasibility" requirement, the court generally must find that there is a reasonable probability that the debtor will be able to meet its obligations under its plan without the need for further financial reorganization. The Debtor believes that the Plan satisfies all the applicable requirements of section 1129(a) of the Bankruptcy Code, including, in particular, the best interests of creditors test and the feasibility requirement. Chapter 11 does not require that each holder of a claim or interest in a particular class vote in favor of a plan of reorganization in order for the bankruptcy court to determine that the class has accepted the plan. See "Confirmation of the Plan -- Solicitation of Votes; Vote Required For Class Acceptance." Rather, a class of claims will be determined to have accepted the plan if the court determines that the plan has been accepted by a majority in number and two-thirds in amount of those claims actually voting in such class. Similarly, a class of equity interests (equity securities) will have accepted the plan if the court determines that the plan has been accepted by holders of two-thirds of the number of shares actually voting in such class. In the present case, only the holders of Claims or Equity Interests who actually vote will be counted as either accepting or rejecting the Plan. In addition, classes of claims or equity interests that are not "impaired" under a plan of reorganization are conclusively presumed to have accepted the plan and thus are not entitled to vote. See "Confirmation of the Plan -- Solicitation of Votes; Definition of Impairment" and "Classes Impaired Under the Plan." Accordingly, acceptances of a plan will generally be solicited only from those persons who hold claims or equity interests in an impaired class. A class is "impaired" if the legal, equitable, or contractual rights associated with the claims or equity interests of that class are modified in any way under the plan. Modification for purposes of determining impairment, however, does not include curing defaults and reinstating maturity or payment in full in cash on the effective date of the plan. Except for Classes 1, 3 and 4, all classes of Claims and Equity Interests are impaired under the Plan, and thus entitled to vote on the Plan. The bankruptcy court may also confirm a plan of reorganization even though fewer than all the classes of impaired claims and equity interests accept it. For a plan of reorganization to be confirmed despite its rejection by a class of impaired claims or equity interests, the proponent of the plan must show, among other things, that the plan does not "discriminate unfairly" and that the plan is "fair and equitable" with respect to each impaired class of claims or equity interests that has not accepted the plan. See "Confirmation of the Plan -- Cramdown." Under section 1129(b) of the Bankruptcy Code, a plan is "fair and equitable" as to a rejecting class of claims or equity interests if, among other things, the plan provides: (a) with respect to secured claims, that each such holder will receive or retain on account of its claim property that has a value, as of the effective date of the plan, equal to the allowed amount of such claim; and (b) with respect to unsecured claims and equity interests, that the holder of any claim or equity interest that is junior to the claims or equity interests of such class will not receive or retain on account of such junior claim or equity interest any property at all unless the senior class is paid in full. A plan does not "discriminate unfairly" against a rejecting class of claims or equity interests if (a) the relative value of the recovery of such class under the plan does not differ materially from that of any class (or classes) of similarly situated claims or equity interests, and (b) no senior class of claims or equity interests is to receive more than 100% of the amount of the claims or equity interests in such class. The Plan has been structured so that it will satisfy the foregoing requirements as to any rejecting class of Claims or Equity Interests, and can therefore be confirmed, if necessary, over the objection of any classes of Claims or Equity Interests. IV. SUMMARY OF THE PLAN The following summary is intended only to highlight information contained elsewhere in this Disclosure Statement. This summary is qualified in its entirety by the more detailed information, the financial statements, including the notes thereto, the projections of certain financial data and the assumptions thereto, the pro forma information appearing elsewhere in this Disclosure Statement, the Appendices hereto, and the other documents referenced herein. The centerpiece of the Plan, as discussed throughout this Disclosure Statement, is the Merger of the business conducted under the Farm Stores(R) tradename with and into the Debtor's business. The following table sets forth the current holdings of each of the impaired Classes and the consideration they will receive under the Plan (including the New UPC Preferred Stock), as well as the current principal and interest of the outstanding debt and liquidation preference and dividend arrearage of the preferred stock of the Debtor (unless otherwise stated, the indicated percentage ownership is computed after the consummation of the Merger):
- ------------------------------------------------------------- ---------------------------------- ------------------ Other Principal and New UPC Common Stock Ownership Consideration Interest Outstanding Post-Restructuring (2) In the Before Restructuring (1) Restructuring - ------------------------------------------------------------- ---------------------------------- ------------------ Restructuring Participant Principal Interest Shares Percentage - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ Debt Holders - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ Infinity Secured Claim $7,000,000 $300,000 --------- --------- 70,000 New UPC Preferred Share(3) - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ 6% Debentures $1,324,696 --------- 359,483 7.19 - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ 7% Debentures $3,549,120 --------- 963,126 19.26 - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ 18% Debentures $1,575,000 --------- 227,408(4) 4.55(4) - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ Equity holders - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ Series A Preferred Stock -------- -------- 552,212 11.04 - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ Series B Preferred Stock -------- -------- 97,788 1.96 - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ Common Stock holders -------- -------- 200,000(5) 4.00(5) - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ UPC Trust -------- -------- 200,000(4) 4.00(4) - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ FSCI Shareholder -------- -------- 2,400,000 48.00 70,000 New UPC Preferred Shares (3)(6) - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ Total 100% 5,000,000 100.00% - ------------------------------ ----------------- ------------ --------------- ------------------ ------------------ (1) Assumes no conversion of Debentures or shares of Preferred Stock after the Petition Date. (2) After giving effect to the Merger (3) Each share of New UPC Preferred Stock carries a liquidation preference in the amount of $100. (4) The distribution on account of the 18% Debentures excludes 200,000 shares of New UPC Common Stock to be transferred to the New UPC Trust by Infinity or its affiliates. (5) The Common Stock holders and Infinity (or its affiliates) shall each be eligible to receive 50% of the shares remaining in the UPC Trust after all claims against the UPC Trust are satisfied in full and all expenses of the UPC Trust are paid. See "The Plan -- Classification and Treatment of Claims and Interests, and -- Creation of UPC Trust and Appointment of Trustee." (6) The FSCI Shareholder receives all of its New UPC Common Stock and New UPC Preferred Stock as consideration in the Merger.
1. Summary of the Terms of the Plan. As set forth in this Disclosure Statement and in the accompanying materials, the Plan provides for the following (in each case after giving effect to the Merger): (a) Conversion of Common Stock. The currently issued and outstanding shares of Common Stock shall be exchanged for 200,000 shares of New UPC Common Stock, representing 4% of the shares of New UPC Common Stock to be issued and outstanding upon effectiveness of the Plan. See "Risk Factors to be Considered -- Risks Particular to the Holders of Common Stock." Directors and executive officers of UPC own 5,433,762 shares of Common Stock, or approximately 17.8% (including options to purchase 2,466,668 shares of Common Stock). (b) Conversion of A-Note. The A-Note, which represents $4,200,000 principal amount of indebtedness, shall be converted into 42,000 shares of New UPC Preferred Stock. The A-Note is secured by a first lien on substantially all assets of the Debtor, Calibur and Jackson, is guaranteed by Michael F. Thomas, UPC's President, has a liquidation preference over all equity securities and unsecured debt obligations, and is pari passu with the B-Note. The New UPC Preferred Stock will be subordinate to all debts of the Debtor, as reorganized. Each share of New UPC Preferred Stock carries a dividend rate of approximately 9%. Such dividends will be cumulative and payable in cash, or at UPC's option, in additional shares of New UPC Preferred Stock. In addition, each share of New UPC Preferred Stock will have a liquidation preference over the New UPC Common in the amount of $100 (plus cumulative unpaid dividends thereon), payable out of net proceeds (after payments to all creditors) from any sale of the Debtor's assets. Infinity is the holder of the A-Note. See "Risk Factors -- Risks Particular to Holders of the A-Note." (c) Conversion of B-Note. The B-Note, which represents $2,800,000 principal amount of indebtedness, shall be converted into 28,000 shares of New UPC Preferred Stock. The B-Note is currently secured by all of the same assets as the A-Note, is pari passu with the A-Note, and has a liquidation preference over all equity securities and unsecured debt obligations. Infinity is the holder of the B-Note. The New UPC Preferred Stock issued in exchange for the B-Note will have the same terms as the New UPC Preferred Stock issued in exchange for the A-Note. See "Risk Factors to be Considered -- Risks Particular to Holders of the B-Note." (d) Conversion of Debentures. The principal amount of Debentures, together with accrued and unpaid interest, of approximately $6,448,816 and $1,049,694, respectively, at the Petition Date, shall be converted into an aggregate of 1,750,000 shares of New UPC Common Stock, representing approximately 35% of the shares of New UPC Common Stock to be issued and outstanding upon effectiveness of the Plan. Infinity, Seacrest and Fairway own approximately $1,175,000 aggregate principal amount (88.7%) of the 6% Debentures, approximately $3,046,000 aggregate principal amount (85.8%) of the 7% Debentures, and 100% of the 18% Debentures as of the Petition Date. The Debentures are unsecured obligations of UPC, junior in right of payment and on liquidation to the secured indebtedness of UPC and its subsidiaries, and senior to the Preferred Stock and the Common Stock. See "Risk Factors -- Risks Particular to Holders of Debentures." The expected amount of principal and accrued interest due for each class of Debenture at August 31, 1999, is presented below along with the number of shares of New UPC Common Stock to be received per $1,000 of principal and accrued interest and as a percentage of New UPC Common Stock:
Class of Debentures 6% 7% 18% All Principal Amount $1,324,696 $3,549,120 $1,575,000 $6,448,816 As of 1/14/99 Accrued Interest 97,070 532,507 420,117 1,049,694 ---------- ---------- ----------- ---------- Total $1,421,766 $4,081,627 $1,995,117 $7,498,510 Number of shares of New UPC Common Stock 359,483 963,126 427,408 1,750,000 Percent of fully diluted New UPC Common Stock 7.19% 19.26% 4.55% 35.00%
(e) Conversion of Preferred Stock. Each share of Preferred Stock shall be converted into approximately 55.34 shares of New UPC Common Stock. In the aggregate, the Preferred Stock shall convert into 649,400 shares, representing 13%, of the New UPC Common Stock to be issued and outstanding upon effectiveness of the Plan. Infinity, Seacrest and Fairway own in the aggregate 7,918 shares (approximately 79.9%) of the Class A Preferred Stock, and no shares of the Class B Preferred Stock, as of the Petition Date. The Preferred Stock is junior in right of payment and on liquidation to the indebtedness of UPC and its subsidiaries, and senior to the Common Stock. As of the Petition Date, there was $9,912,000 in liquidation preference of the Class A Preferred Stock and $1,833,000 in liquidation preference of the Class B Preferred Stock. See "Risk Factors to be Considered -- Risks Particular to Holders of Preferred Stock." (f) Change in Composition of Board of Directors. The Plan effectuates a change in the composition of the Board of Directors such that the five members of the Board of Directors shall initially be comprised of two designees of the current holders of Farm Stores, consisting of Joe Bared and Carlos Bared, and two designees of the holders of the Debentures, consisting of Messrs. Clark K. Hunt, and Stuart J. Chasanoff and one independent member to be selected by the foregoing members of the Board. (g) Changes in the Certificate of Incorporation. UPC's charter shall be amended to the extent necessary to implement the Plan, to prohibit the issuance of nonvoting equity securities by UPC as required by section 1123(a)(6) of the Bankruptcy Code, to opt out of Section 203 of the Delaware Generation Corporation Law ("Business Combinations with Interested Stockholders"), and to restrict certain transfers of New UPC Common Stock. (h) Channeling of Securities Claims/Contribution of Shares to the UPC Trust. All Securities Claims against UPC and the Infinity Parties (e.g., claims arising in connection with the purchase, sale, exchange or issuance of a UPC security, including without limitation, claims asserted in the Pisacreta/Tucci Action described under "General Information -- Legal Proceedings -- Pisacreta/Tucci", but only to the extent such claims are not derivative claims) shall be enjoined and channeled to a trust (the "UPC Trust") to be established pursuant to the Plan and funded with, among other things, 200,000 shares of New UPC Common Stock to be transferred by Infinity to the UPC Trust. The channeling injunction and the UPC Trust shall terminate and holders of Securities Claims that have been timely asserted shall be permitted to assert such claims directly against the Infinity Parties if the UPC Trustee notifies the Infinity Parties that the UPC Trust assets have been expended and that additional Allowed Securities Claims exist or that all Securities Claims have not yet been resolved and the Infinity Parties fail to provide sufficient additional funds to the UPC Trust within thirty (30) days of such notice. Any excess assets held by the UPC Trust after satisfaction of all Securities Claims and related expenses shall be allocated and distributed 50% to Infinity or its affiliates and 50% to holders of currently issued and outstanding shares of Common Stock. A putative class action lawsuit has been filed by two Purchasers of the Debtor's common Stock, purportedly on behalf of all stockholders who purchased shares of Common Stock during certain periods in 1996 and 1997, against certain of the Infinity Parties and certain other holders of the Debentures. The plaintiff alleges that the defendants, in acquiring and disposing of Debentures, violated certain provisions of the securities laws of the United States. The plaintiff also alleges that the defendants breached a contract between the defendants and the Debtor. Certain of the Infinity Parties have sued the Debtor and asserted claims against the Debtor in such actions, including, without limitation, claims for contribution and indemnity. The Debtor believes that the claims asserted in the Pisacreta/Tucci Action seek relief that is derivative in nature and that such claims belong to the Debtor and may only be prosecuted or settled by the Debtor. See "General Information -- Legal Proceedings -- Pisacreta/Tucci." In that regard, the Debtor has agreed to settle all of its claims (including any derivative claims) against the Infinity Parties on the terms set forth in the Plan. See "the Plan -- Compromise and Settlement Between and Among the Debtor, the Infinity Parties and the UPC Trust.) (i) Termination of Outstanding Options and Warrants. Each outstanding option, warrant or other right to acquire Common Stock of the Debtor that is not exercised on or prior to the Effective Date of the confirmation of the Plan will terminate and expire. The applicable record date for purposes of determining which holders of Debtor's outstanding Notes, Debentures, Preferred Stock and Common Stock are entitled to vote on the Plan is July 22, 1999 (the "Record Date"). It is important that the holders of Outstanding Notes, Debentures, Preferred Stock and Common Stock read and carefully consider the matters described in this Disclosure Statement, including, without limitation, all of the factors set forth under the heading "Risk Factors to be Considered," and that such holders respond promptly by returning their ballots to the Ballot Agent so that ballots are actually received prior to the Voting Deadline. Subject to limitations contained in the Plan, the Debtor also reserves the right, in accordance with the Bankruptcy Code and subject to the consent of the Infinity Parties and FSCI, to amend or modify the Plan at any time prior to the entry by the Bankruptcy Court of the Confirmation Order. Under the Bankruptcy Rules, such amendments or modifications may be approved by the Bankruptcy Court at confirmation without resolicitation of the votes of the members of any Class whose treatment is not adversely affected by the amendment or modification. Any amendment or modification which adversely affects a Class of Claims or Interests will require the resolicitation of votes from the holders of Claims or Interests of any such affected Class, unless the amendment or modification results in a Class of Claims or Interests not retaining or receiving any property, in which case such Class will be deemed not to have accepted the Plan, as amended or modified. The Plan provides that, in the event that sufficient acceptances are not received from each Impaired Class, the Debtor reserves the right to seek confirmation of the Plan over the objection of such Class and to modify the Plan to provide treatment to the Class or Classes not accepting the Plan necessary to meet the requirements of sections 1129(a) and (b) of the Bankruptcy Code with respect to the rejecting Classes and any other Classes affected by the modification. 2. Changes in Equity Ownership Effected by the Plan. Implementation of the Plan will substantially change the current equity ownership of UPC. The following table illustrates the equity ownership of UPC before the Petition Date and the proposed equity ownership of UPC upon the occurrence of the Effective Date by each class of debt or equity security that will receive shares of New UPC Common Stock under the Plan.
- ------------------------------------------------------------------------ -------------------------------------- Common Stock Ownership New UPC Common Stock Before Restructuring (1) Ownership Post-Restructuring (2) - ------------------------------------------------------------------------ -------------------------------------- Restructuring Participant Shares Percentage Shares Percentage - -------------------------------------- --------------- ----------------- ---------------- --------------------- 6% Debenture holders -------- -------- 359,480 7.19 - -------------------------------------- --------------- ----------------- ---------------- --------------------- 7% Debenture holders -------- -------- 963,116 19.26 - -------------------------------------- --------------- ----------------- ---------------- --------------------- 18% Debenture holders -------- -------- 227,404(3) 4.55 - -------------------------------------- --------------- ----------------- ---------------- --------------------- Series A Preferred Stock -------- -------- 552,212 10.98 - -------------------------------------- --------------- ----------------- ---------------- --------------------- Series B Preferred Stock -------- -------- 97,788 2.02 - -------------------------------------- --------------- ----------------- ---------------- --------------------- Common Stock holders (4) 30,565,352 100% 200,000 4.00 - -------------------------------------- --------------- ----------------- ---------------- --------------------- UPC Trust -------- -------- 200,000 4.00 - -------------------------------------- --------------- ----------------- ---------------- --------------------- FSCI Shareholder 2,400,000 48.00 - -------------------------------------- --------------- ----------------- ---------------- --------------------- Total Shares 30,535,352 100% 5,000,000 100.00% - -------------------------------------- --------------- ----------------- ---------------- --------------------- (1) Assumes no conversion of Debentures or shares of Preferred Stock, and excludes the New UPC Preferred Stock. (2) After giving effect to the Merger. (3) Excludes 200,000 shares of New UPC Common Stock to be transferred to the New UPC Trust by Infinity or its affiliates. (4) The Common Stock holders and Infinity (or its affiliates) shall each be eligible to receive 50% of the shares initially contributed to the UPC Trust that remain after all claims against the UPC Trust are satisfied in full and all expenses of the UPC Trust are paid. See "The Plan -- Classification and Treatment of Claims and Interests, and -- Creation of UPC Trust and Appointment of Trustee." 3. Other Significant Provisions in the Plan. o The centerpiece of the Plan is Debtor's acquisition, by merger, of the Farm Stores'(R) chain of 65 walk-in convenience stores that sell gas and its acquisition by purchase of (i) Farm Stores'(R) chain of 23 walk-in convenience stores that sell do not presently sell gas (the chain of 88 walk-in stores that do and do not presently sell gas is called the "Walk-In Stores", and (ii) a 10% interest in the Farm Stores' business consisting of approximately 108 Farm Stores Express(R) drive-through specialty grocery stores (the "Drive-Thru Stores"). The Walk-In Stores and Drive-Thru Stores are located in South and Central Florida and, together with UPC's existing properties, will be the primary business of the Debtor post-Merger. o The Plan provides for a discharge and broad release of UPC from all claims and causes of action that are held by holders of Claims against and Equity Interests in UPC. o The Plan provides for the exclusion of the Debtor, Farm Stores(R), and the Infinity Parties from all liability, except for willful misconduct or gross negligence, for any act or omission in connection with or arising out of the solicitation of votes on, or their administration of, the Plan or the property to be distributed thereunder. o The Plan provides for the rejection of all executory contracts and unexpired leases of UPC, except for those expressly assumed by UPC with Bankruptcy Court approval. o The Plan provides under certain circumstances for the amendment or modification of the Plan and the right to withdraw the Plan any time prior to the entry of the Confirmation Order. V. GENERAL INFORMATION A. The Debtor UPC is a holding company that has two operating subsidiaries: Calibur and Jackson. Calibur's primary business activities consist of the operation of retail car wash and automotive related service facilities, and Jackson's primary business activities consist of the acquisition and development of oil and gas properties. As of the date of this Disclosure Statement, Calibur operates eight car wash facilities in Tennessee and Georgia and leases two facilities to an independent operator in Georgia. Of these facilities, three have on-site convenience stores that offer a variety of automotive products and snack foods, beverages and sundries to customers. Four of the facilities sell gasoline, diesel fuel and/or other petroleum products and five provide express lubrication services. In addition, Calibur has two free standing express lubrication locations. Jackson owns a seventy-five percent (75%) working interest in sixteen oil and gas wells located in Pennsylvania, which is the subject of a contract to sell. Jackson also has a mineral lease covering approximately 26,000 acres of real property located in central Kentucky, which Jackson presently intends to market for sale. - --------------- In June, 1999, a third express lube center located in Knoxville, Tennessee was sold by Caliber to Pinnacle Sales Company for the sum of $310,000.00. The Debtor's offices are presently located at 2620 Mineral Springs Road, Suite A, Knoxville, Tennessee 37917. The Debtor's telephone number is (423) 688-6204. B. Cash Collateral In connection with the issuance of the A-Note and the B-Note, the Company granted Infinity a security interest in substantially all of the Company's assets, including, without limitation, all of the Company's cash. As a result, section 363 of the Bankruptcy Code requires the Debtor to either obtain Bankruptcy Court approval to use the cash collateral of Infinity or obtain approval of an agreement with Infinity regarding the use of such cash. Without access to and the ability to use Infinity's cash collateral, the Debtor could not, among other things, meet its payroll, pay utility expenses, meet its overhead, as well as make other payments necessary for its continued operation. In that regard, on February 25, 1999, the Bankruptcy Court entered its order (the "Cash Collateral Order") authorizing and approving the Debtor's agreement with Infinity, under which, among other things, Infinity consented to the Debtor's use of Infinity's cash collateral during the pendancy of the Chapter 11 Case and Infinity was granted a superpriority administrative expense equal to the amount of Infinity's cash collateral expended by the Debtor. C. Farm Stores Farm Stores, Inc., the predecessor to the F.S. Partnerships, began its convenience store operations (the "F.S. Business") in the late 1950's with the opening of its first store in Miami-Dade County and the subsequent acquisition of a portfolio of stores. Over time, Farm Stores, Inc. developed into a leading Florida-based chain of stores. In 1990, Farm Stores, Inc.'s then owners experienced financial difficulties due to a failed leveraged buyout attempt and a difficult industry-wide operating environment. Later that year, Farm Stores, Inc. filed a petition for relief under chapter 11 of the Bankruptcy Code. Over the next two years, the company restructured its business through the shutdown of approximately 40 underperforming stores and the re-negotiation of many leases. In September 1992, the current owners, led by Joe Bared ("Bared") and the Isaias family ("Isaias") purchased assets of Farm Stores, Inc. and brought it out of bankruptcy. The F.S. Business was organized into three related and affiliated partnerships, REWJB Investments, REWJB Gas Investments and REWJB Dairy Plant Associates (collectively, the "F.S. Partnerships"). Each of the F.S. Partnerships has two partners, one of which is owned by Bared (the "Bared Corporations") and the other of which is owned by Isaias (the "Isaias Corporations"). Since acquiring the F.S. Business, the F.S. Partnerships have solidified their position as independent convenience store operators and established the Farm Stores(R) trademark as one of the leading brand names in Florida. The F.S. Partnerships have built a strong operational team and, as recognized by the Greater Miami Chamber of Commerce, reconfigured the F.S. Business into a profitable and growing enterprise. In 1999 Bared and Isaias entered into an agreement (the "Toni Option") under which the Bared Corporations have the option to purchase 100% of the equity currently held by the Isaias Corporations in the F.S. Partnerships. Thus, upon consummation of the Toni Option, Bared would have effective control over 100% of the F.S. Business. Currently, the F.S. Business consists of 92 Walk-In Stores (including 4 Walk-In Stores that are affected by casualties, that the Reorganized Debtor may elect to rebuild or return to FSG) and 108 Drive-Thru Stores. All of the Walk-In and Drive-Thru Stores are located in South and Central Florida. The State of Florida offers a number of favorable demographic fundamentals that benefit a strong retail operation. Florida's population, the 11th largest in the nation, has grown at a compounded annual rate of 1.6% from 1992 to 1996, which is 60% over the comparable U.S. growth rate. Further, the F.S. Business benefits from operating efficiencies as stores are largely clustered in key Florida counties, including Dade Broward, Hillsborough, Highlands, Polk, Palm Beach and Sarasota, all of which are highly developed markets with significant barriers to entry under local zoning, concurrency and other laws. Thus, the F.S. Business also benefits from the relative scarcity of attractive real estate making it difficult for competitors to gain a foothold. In October, 1998, the F.S. Business sold the good will of its dairy business in an arms' length transaction to Velda Farms, Inc. ("Velda"), and entered into a 10 year supply agreement providing for Velda to supply the F.S. Business' requirements of milk, ice cream, and certain other products (the "Velda Agreement"). The F.S. Business believes that the prices provided for in the Velda Agreement are as favorable as could be obtained from a comparable vendor. The proceeds of this sale, and the assets of the dairy plant operation, are excluded from the Merger; however, the reorganized Debtor and FSG will remain obligated to perform under the Velda Agreement. D. F.S. Convenience Stores, Inc. At or before the effective time of the Merger, and upon the consummation of the Toni Agreement, the reorganized Debtor (i) will be the successor to the F.S. Partnerships interest in any and all assets associated with the Walk-In Stores (ii) will hold a 10% equity interest in FSG, a recently formed corporation which will be the successor to the F.S. Partnerships interest in any and all assets associated with the Drive-Thru Stores, and (iii) will hold a royalty-free license to use the "Farm Store" name and all related trademarks (clauses (i) - (iii) hereinafter collectively referred to as the "FSCI Assets"). E. Walk In Stores Farm Stores operates 92 Walk-In Stores, including four that are not currently operating (the "Casualty Stores") due to natural disaster, and which are currently at different stages of reconstruction. The reorganized Debtor will have the right to rebuild these Casualty Stores with its own funds, or to return the Casualty Stores to FSG. The Walk-In Stores include two formats: (i) 23 Walk-In Stores without gasoline operations ("Non-gas Stores"), and (ii) 69 Walk-In Stores with gasoline operations ("Gas Stores"), only 13 of which are branded. For the year ended August 30, 1998, the Walk-In Stores had revenues of $116,739,000 and store-level operating income of $4,902,000. An average of approximately 63,000 merchandise customers visit the Walk-In Stores per day. The Walk-In Stores are typically located in free-standing buildings with distinctive and recognizable interior and exterior designs. The average store size is approximately 2,300 square feet, with a range of 620 square feet to 3,100 square feet. The Walk-In Stores generally have ample parking facilities for quick shopping and are located in neighborhood areas, at major intersections or on main thoroughfares, in shopping centers, or on other sites where they are highly visible and accessible. Of the 92 Stores, 55 are open 24 hours while the remaining 37 Stores offer extended hours. Each Store carries an average of 2,500 to 3,500 SKU's. All Walk-In Stores offer cigarettes, beer, soft drinks and dairy products. With an operating history dating back to the 1970's, the Walk-In Stores have established a customer base because they are well situated, carry a wide variety of merchandise and have a good reputation for products and service. Sources of non-food and non-gas income include money orders (all Walk-In Stores), food stamps (all Walk-In Stores), public pay phones (73 Walk-In Stores), phone cards (81 Walk-In Stores), lottery tickets (90 Walk-In Stores), and lotto (91 Walk-In Stores). These services bring in additional income to the Walk-In Stores and serve to increase customer traffic, impulse buying and store patronage. The Walk-In Stores have a strong presence as a money order vendor in Florida. Money orders generate a significant source of income since many of the Walk-In Stores are located in high demand neighborhoods. The Walk-In Stores have established a customer base for money orders for both overseas remittance and traditional domestic uses. If the Debtor were to operate the money order business as a principal, it could generate higher profits from the Walk-In Stores on more favorable clearing terms. Farm Stores currently offers deli services in only 14 Walk-In Stores and branded fast food in only three Walk-In Stores, as Blimpie franchisees. Several well-known fast food operators have approached management of the F.S. Partnerships to open branded outlets at the Walk-In Stores. Management of the F.S. Partnerships anticipates that the reorganized Debtor could significantly enhance revenues and profits by expanding fast food, particularly branded fast food offerings, and selling other higher margin items in the Walk-In Stores. Currently, only the Gas Stores accept credit cards. The 13 branded Gas Stores accept privately labeled gasoline cards, and none of the Walk-In Stores accept debit cards. Expanding the Walk-In Stores' payment options could enhance the Walk-In Stores' competitive position. The Gas Stores have a particularly high merchandise sales component, at 53%, reflecting the strength of the Gas Stores' inside traffic. Management of the F.S. Partnerships have not emphasized gasoline operations at the Walk-In Stores. Only 13 of the Walk-In Stores offer branded gasoline products, and 23 of the Walk-In Stores do not currently offer gasoline. Only 14 Gas Stores offer pay-at-the pump services. Many of the Gas Stores have the capacity to add more pumps and increase these Gas Stores' gasoline revenues. Management of the F.S. Partnerships believes that upgrading the Gas Stores' gasoline equipment (pay-at-the-pump) and branding can increase the Gas Stores' profits, particularly by increasing the volume of premium gasoline sold. In 1998, average per store gasoline sales at an unbranded fuel store was approximately $700,000, whereas a branded fuel store had average sales of $2 million. Average annual fuel gallons were approximately 620,000 per unbranded store and 1.8 million per branded store. Many of the national gasoline companies have sought to brand the Walk-In Stores. Branded outlets may also increase customer traffic and generate higher merchandise revenues. F. Drive-Thru Stores The F.S. Partnerships operate 108 Drive-Thru Stores located throughout South and Central Florida. The Drive-Thru Stores utilize a patented full-service double drive-through concept that has become well known to consumers in its markets. While the Drive-Thru Stores differ in many respects from typical convenience stores, there are some operational similarities. For the year ended August 30, 1998, the Drive-Thru Stores had revenues of $67.1 million and store-level operating income of $4.0 million. Immediately prior to the consummation of the Merger, the operating assets and liabilities of the Drive-Thru Stores (other than the underlying real estate) will be contributed to FSG. Among the assets being contributed to FSG is the ownership of the Farm Stores(R) name and related trademarks, and the patent for the double-drive through building design. FSG will license the Farm Stores(R) name and related trademarks to the reorganized Debtor under a royalty-free license. The equity ownership schedule and the financial information throughout this Disclosure Statement assume that the above transaction has been completed. With 108 stores at present, the F.S. Partnerships are the first and only large-scale operator of drive-through grocery stores. The use of drive-through formats to deliver products and services to consumers has experienced dramatic growth. First popularized by fast food restaurants, the format has been adopted by banks, dry cleaners, drug stores, ice cream parlors, fresh coffee shops and video rental stores. The growth of drive-through is a natural competitive response to consumer preferences for convenience, reduced transaction times and safety. Drive-Thru Stores are currently located in 9 counties in southern and central Florida. The stores are located in free-standing buildings, are situated at highly visible and accessible sites, on highly traveled thoroughfares, generally with driveways large enough to permit cueing of at least 10 vehicles. Of the 108 stores, 48 are open 24 hours while the remaining 60 stores offer extended hours. Drive-Thru Stores are distinguished by their innovative building design, the distinct "wing" canopies and the friendly dairy cow logo. Over the last several years, the F.S. Partnerships have fine-tuned and standardized the Drive-Thru Store prototype that it will use for all future store expansion. The prototype design is 756 square feet in size; utilizes a prefabricated building and custom store fixture package; and incorporates the distinctive winged canopies and Farm Stores(R) imaging found in all Drive-Thru Stores. The Drive-Thru Stores seek to offer consumers a convenient, safe and friendly way to access grocery merchandise staples at value prices. The Drive-Thru Stores are intended to compete only indirectly with traditional convenience stores. Rather, Drive-Thru Stores are intended to capture "fill-in" purchases of grocery staples which consumers require in between trips to the supermarket. Drive-Thru Stores' target customers are the same individuals within a household, typically middle- to upper-income parents, who do the household's grocery shopping at supermarkets. Management of the F.S. Partnerships believe that it is necessary to compete on convenience, location and service, rather than price alone. Drive-Thru Stores' merchandising strategy differentiates them from convenience stores through a variety of means, including drive-through service; an emphasis on dairy products; its premium Farm Stores(R) branded products; and its reasonable consumer price points. Convenience stores, in contrast, have target customers that are overwhelmingly less-affluent males, and their merchandising and imaging is generally much different than that of Drive-Thru Stores. Drive-Thru Stores carry approximately 1500 SKU's, compared with 2,500 to 3,000 SKU's at a typical convenience store and over 40,000 at a modern supermarket. The Express Store prototype utilizes 756 square feet of space, while convenience stores are typically 2,000 to 3,000 square feet. Drive-Thru Stores derive 32% of their revenues from dairy items, compared to 4% for a typical convenience store. Drive-Thru Store locations are typically one-third acre in size, and located on primary roads having two curb cuts and preferably no fixed median. Drive-Thru Stores are manufactured to specifications and transported by truck to the site for final improvements. A standard Drive-Thru Store requires $200,000 to $225,000 to develop, including prefabricated building, equipment, site improvements and beginning inventories. Land, if owned, costs an additional $200,000 to $250,000. FSG will also seek to remodel its older Drive-Thru Stores, which generally experience a material increase in sales after remodeling. G. Directors and Officers 1. Existing Officers and Directors. The following table sets forth the name, age and position of each current director and executive officer of the Debtor and amount of Common Equity Interests of UPC held by each:
- ----------------------------------------- --------- ---------------------- ------------------------- Name and Address Age Position Common Equity Interests - ----------------------------------------- --------- ---------------------- ------------------------- Michael F. Thomas 46 CEO, President and 4,162,548 2620 Mineral Springs Road Director 13.6% Suite A Knoxville, TN 37917 Dwight S. Thomas 46 Secretary, Treasurer 396,384 2620 Mineral Springs Road and Director 1.3% Suite A Knoxville, TN 37917 Walter L. Helton 65 Director 118,000 c/o Tennessee Tech University less than 1% P.O. Box 5062 Cookeville, TN 38505 Steven Bauer Director 150,000 less than 1% Eugenio (Rolando) Martinez 76 Director 179,000 Apt. 106 1821 Jefferson less than 1% Miami Beach, FL 33139 Antonio Julio Gonzalez Gimenez Director 150,000 Av. Diaz Moreno Edif. El Juncal less than 1% Piso 3, Officina 33 Valencia, Edo - Carobabo Venezuela L. Douglas Keene, Jr. 45 Executive Vice 281,830 2620 Mineral Springs Road President and CFO less than 1% Suite A Knoxville, TN 37917 * Michael F. Thomas and Dwight S. Thomas are cousins. There are no other family relationships between any directors or executive officers of the Debtor. Consists of 2,329,214 shares held directly and currently exercisable options to purchase 1,833,334 shares. Consists of 60,050 shares held directly and currently exercisable options to purchase 333,334 shares. Includes currently exercisable options to purchase 50,000 shares. Includes currently exercisable options to purchase 150,000 shares. Consists of 31,831 shares held directly and currently exercisable options to purchase 250,000 shares.
2. Existing Officer & Director Compensation. Directors: Inside directors do not receive any additional compensation for their services as a director. Outside directors receive $1,000 for each in person meeting attended, plus reimbursement of travel expenses and $500 for each telephonic board meeting. Officers: Michael Thomas has a written employment contract with UPC dated September 18, 1996. The contract has a five year term and, among other things, provides for an annual salary of $400,000, incentive compensation, stock options, a fee for guaranteeing certain company obligations, commissions with respect to certain transactions, automobile allowance, club dues, medical insurance and life and disability insurance coverage. Additionally, the contract provides a severance benefit to Mr. Thomas equal to 2.99 years of his base salary in the event he is terminated without cause or as a result of a change in control. In the third quarter of 1997, as a result of the termination of two leases UPC had with Michael Thomas, Mr. Thomas' salary was reduced to $300,000 per year. Additionally, as a result of the Debtor's financial difficulties and at the request of Infinity, in the fall of 1998, Mr. Thomas' salary was further reduced by agreement of the parties. Presently, Mr. Thomas receives a salary from UPC in the amount of $125,000 per year, plus a monthly automobile allowance of $500.00, a monthly gasoline allowance of $250.00 and a monthly insurance allowance of $900.00. As management of the post-Merger Debtor will likely be the responsibility of the current management of FSCI, it is unclear what Mr. Thomas's role will be after the Effective Date of the Plan. It is anticipated, however, that a consensual resolution will be reached, the terms of which will be disclosed before the Confirmation Date. L. Douglas Keene, Jr. has a written employment contract with UPC dated September 18, 1996. The contract has a five year term, and among other things, provides for an annual salary of $120,000, incentive compensation, stock options, commissions with respect to certain transactions, automobile allowance, club dues, medical insurance and life and disability insurance. Additionally, the contract provides a severance benefit to Mr. Keene equal to 2.99 years of his base salary in the event he is terminated without cause or as a result of a change in control. As a result of the Debtor's financial difficulties and at the request of Infinity, in the fall of 1998, Mr. Keene's compensation was reduced by agreement of the parties. Presently, Mr. Keene receives a salary of $100,000 per year, plus a monthly automobile allowance of $500.00. As management of the post-Merger Debtor will likely be the responsibility of the current management of FSCI, it is unclear what Mr. Keene's role will be after the Effective Date of the Plan. It is anticipated that Mr. Keene and the Reorganized Debtor will enter into an agreement providing for Mr. Keene's continued employment by the Reorganized Debtor at his current salary through January 31, 2000 with his association with Reorganized Debtor after such date to be determined at a later time. It is expected that such arrangement will be in lieu of his current agreement with the Debtor. 3. Proposed Directors. The following is a list of the director names proposed to be elected pursuant to the Plan to serve as directors upon the Effective Date of the Plan which list may be modified at or prior to the Confirmation Hearing: Name and Address Age Joe Bared 57 Carlos E. Bared 31 Clark K. Hunt 33 1601 Elm Street, Suite 4000 Dallas, TX 75201 Stuart J. Chasanoff 33 1601 Elm Street, Suite 4000 Dallas, TX 75201 Following the Effective Date, the compensation of directors will be the same as presently exists. The proposed directors may be changed at or prior to the Confirmation Hearing. It is anticipated that a fifth director will be appointed by mutual agreement of the foregoing four members of the Board after the Effective Date. Proposed Director Biographies Joe Bared: Jose P. "Joe" Bared, Chairman, Chief Executive Officer, and President. Mr. Bared, 57 years old, was born in Havana, Cuba in 1941 and arrived in the United States in 1960. He graduated from the University of Miami in 1964 with a degree in mechanical engineering. In 1967, he founded The Bared Company, Inc., which grew to become one of the top 50 mechanical construction companies in the United States with annual revenues of $58 million. In three separate transactions from 1991 to 1993, the principal operating divisions of The Bared Company were sold to company managers. In 1992, Mr. Bared led an investor group which purchased the assets of Farm Stores out of bankruptcy. He has served as CEO of the Company since the purchase. Together with his management team, Mr. Bared has led a significant turnaround in the profitability of the Company. From 1970 to 1999, Mr. Bared was a director of Republic Banking Corporation of Florida, where he served on various board committees, including the loan committee, executive committee and audit committee. The bank grew during that time from $17 million to $1.5 billion in assets and, prior to its sale to Union Planters Bank this year, was the largest independent bank in the State of Florida. In February 1999, Republic completed its initial public stock offering and trades on the NADSAQ under the symbol "RBCF." Mr. Bared has been a Trustee of the University of Miami since 1978. He is also a member of the Board of Overseers of the Sylvester Cancer Center of the University of Miami. He is actively involved with several professional associations including the American Bankers Association and the National Association of Convenience Stores. Civic memberships include service as an advisor to the Florida Department of Professional Regulation (appointed by the Governor of Florida in 1979 and serving for nine years), director of the Leukemia Foundation of South Florida, and cabinet member of the United Way. Carlos Bared: Chief Financial Officer, Vice-President-Finance. Mr. Bared, 31 years old, attended Loyola University in New Orleans and graduated with a BBA degree in finance. He earned his MBA degree in 1995 from the University of Miami. Mr. Bared joined the Company in August 1997. From 1992 to 1997, he was the President and Chief Financial Officer of the remaining operations of the Bared Company, Inc., an electrical and mechanical engineering contracting firm. He was the President of the Construction Financial Management Association (CFMA) from 1994 to 1997 and was a director of CFMA from 1993 to 1997. Mr. Bared is a director of the non-for-profit Miami Children's Museum, and a founder and vice president of the non-for-profit Network Miami, Inc. He has been an advisory board member of the Miami-Dade County Commission's Business Impact Committee since 1995. Clark Knoebel Hunt: President of Hunt Financial Group, L.L.C., a Dallas, Texas based financial services concern. Through Hunt Financial, Mr. Hunt is responsible for the management of investment funds with assets in excess of $300,000,000. Mr. Hunt is also involved in venture capital investor, Hunt Capital Group, real estate and mining conglomerate, Hunt Midwest Enterprises, and Hunt Sports Group. Hunt Sports Group is the management company responsible for overseeing the Hunt family's investments in the Kansas City Chiefs of the National Football League, the Chicago Bulls of the National Basketball Association and two franchises in the newly launched Major League Soccer. Clark K. Hunt has a connection to Infinity in that Infinity is a Nevis, West Indies Corporation advised by HW Partners, L.P., a Texas limited partnership, the general partner of which is HW Finance, L.L.C., a Texas limited liability company whose managers include Clark K. Hunt. Stuart J. Chasanoff: In 1996, Mr. Chasanoff (a 1990 cum laude graduate of the Fordham University School of Law, and a 1987 graduate of the University of Virginia), joined H.W. Partners, L.P., as Senior Vice President and in-house corporate counsel, involved with investment companies and corporate mergers and acquisitions. For the preceding seven years, Mr. Chasanoff was an associate corporate attorney with White & Case's New York office, dealing with mergers/acquisitions, corporate reorganizations and financial services. Additionally, he served as in-house counsel at PepsiCo., Inc. for two years, affecting mergers and acquisitions. 4. Post Effective Date Officers and Compensation. Debtor presently anticipates that after the Effective Date, Mr. Joe Bared and Mr. Carlos Bared will serve as CEO and CFO, respectively. The terms of Mr. Joe Bared's and Mr. Carlos Bared's (son of Joe Bared) employment after the Effective Date has not yet been finalized, but is expected to be on terms similar to those they presently have with Farm Stores. Presently, Mr. Joe Bared, receives an annual salary of $372,000, plus an automobile lease and insurance, health and life insurance and other benefits generally made available to Farm Store Employees. Mr. Carlos Bared presently receives an annual salary of $150,000, plus an automobile and insurance allowance, health and life insurance and other benefits generally made available to Farm Store Employees H. Insider Relationships and Transactions Transactions involving Michael F. Thomas. During 1997, the Company sold a number of retail facilities to Mr. Thomas, the Company's President and Chief Executive Officer. One location (Farragut) was sold for $1,140,000 (it had an appraised value of $1,100,500). This location was declared in default by its lender shortly before the sale and the Company determined that it was not able to refinance the location. Mr. Thomas had guaranteed this obligation on behalf of the Company. The second location (Cookeville) was sold for $879,000 (it had an appraised value of $961,500). This location had been operating at a cash flow loss to the Company prior to its sale and the Company was unable to refinance the mortgage on this location such that the location would contribute to the cash flow of the Company. The Board therefore determined that it was in the best interests of the Company to sell the location. Mr. Thomas had guaranteed this obligation on behalf of the Company. A third location (Murfreesboro) was transferred to Mr. Thomas in exchange for Mr. Thomas's assumption and repayment of the debt on the location, for which he was a guarantor. The Company had received a notice of foreclosure on this location and the Board determined that it was in the best interests of the Company to sell this location. A fourth location (Knoxville) was sold to Mr. Thomas for $300,000 in order to raise working capital for the Company. This location consisted only of a lease of the land and buildings occupied by the store and was under environmental remediation with an estimated cost of $50,000, which Mr. Thomas assumed. There was no debt on this location. The Company also transferred a piece of unimproved real estate located in Knoxville to Mr. Thomas in exchange for Mr. Thomas' assumption of the debt on the location, for which he was a guarantor. The property had been acquired from Exxon for approximately $125,000 in 1995. The outstanding debt on the property was approximately $138,000 and Mr. Thomas paid approximately $150,000 for the property including the assumption of the debt. During the third quarter of 1997, the Company sold a location (Oak Ridge) to a non-affiliated local petroleum distributor in order to repay a loan in the amount of $300,000 to Mr. Thomas and to raise additional capital. The sale enabled the Company to pay off the existing first mortgage from NationsBank, pay off the note to Mr. Thomas and raise approximately $144,548 in working capital. The location continues to be operated by the Company as the transaction was in the form of a sale/lease back. The Company entered into a ten year lease with the non-affiliated distributor with monthly payments of $8,804. At the option of the Company, the lease could have been canceled after the first six months and the Company had the option to repurchase the store during the first year at a purchase price of $950,000, and during the second year at a purchase price of $1,000,000. By mutual consent between landlord and company the lease was terminated in May of 1999. During the third quarter of 1997, the leases of two locations that were being leased from Mr. Thomas for a monthly rental of $27,000, were canceled by mutual agreement between the Company and Mr. Thomas as a result of the Company's failure to pay 1996 and 1997 property taxes, which had caused loans owed by Mr. Thomas related to the properties to be in default. The two locations produced a combined annual cash flow of approximately $100,000, and Mr. Thomas agreed to a reduction of his annual compensation by $100,000 in exchange for the cancellation of the leases. The lease payments on these properties, included on the income statements among general and administrative expenses, amounted to approximately $177,000 in 1997 and $356,000 in 1996, and the Company had not paid $91,796 in property taxes for 1996 and 1997 that Mr. Thomas assumed. In other lease transactions with Mr. Thomas, the Company rented, under month-to-month operating leases, certain vehicles. Expenses related to these transactions were approximately $25,000 and $45,000 in 1997 and 1996, respectively. During the third quarter of 1997, the Company transferred an Exxon distributorship contract to TCS Systems, Inc., ("TCS"), a corporation controlled by Mr. Thomas and engaged in the manufacturing and distribution of items related to the Company's automotive subsidiary. Upon the expiration of the letter of credit posted by the Company in favor of Exxon in connection with the contract, Exxon required that the letter of credit be renewed and increased from $100,000 to $200,000. Because the Company was unable to obtain such letter of credit, the contract was transferred to TCS, which continues to make available to the Company gasoline for $0.01 per gallon above the wholesale price available to TCS, plus freight charges. Prior to the confirmation, it is anticipated that a consensual resolution will be reached regarding the nature of this contract. On July 1, 1997, the Company entered into a ten year agreement with TCS, to purchase exclusively, in areas served by TCS, its gasoline inventories at a price of $.01 per gallon above the wholesale price available to TCS plus freight charges. Aggregate purchases of gasoline under this agreement during 1997 were approximately $989,000 and $525,000, respectively (no sales were made under the agreement in 1996). In 1998, 1997 and 1996, transactions between the Company and TCS included equipment sales and certain ongoing construction activities conducted for the Company by TCS. Equipment sales and construction activities totaled approximately $258,500, $323,271 and $182,603, in 1998, 1997 and 1996, respectively. Prior to confirmation, it is anticipated that a consensual resolution will be reached regarding the nature of this contract. The above-referenced transfers of Company properties and assets to Mr. Thomas were analyzed and approved by UPC's Board of Directors, Chief Financial Officer and accounting department. In order to ensure that the transactions were fair and equitable to the Company, an assumption agreement was entered into between the Company and Mr. Thomas on July 3, 1997. The agreement provided, among other things, that Mr. Thomas would assume or pay the following: (i) a note payable to Pennzoil in the approximate amount of $219,829, (ii) the Pennzoil Unearned Discount in the amount of $200,000, (ii) a note payable to Coffman Oil Company, Inc. in the approximate amount of $25,406 (iv) a note payable to Sun Trust Bank in the approximate amount of $389,387, (v) a note payable to First American Bank in the approximate amount of $140,000, (vii) real estate taxes in the approximate amount of $85,529 and (viii) pay cash to the Company in the sum of $300,000. As a result of the divestitures and the assumption of numerous debts of the Company, the Company experienced a loss on the sales of approximately $22,966.27. These transactions decreased the liabilities of the Company by approximately $1,137,935. As of August 19, 1998, these assumptions had been completed. In August 1998, Mr. Thomas guaranteed the payment of indebtedness of the Company to Infinity under the A-Note referred to in Management's Discussion and Analysis of Financial Condition and Results of Operations. In fiscal 1997 and 1996, the Company paid Mr. Thomas fees for acting as guarantor on Company indebtedness of $81,280 and $98,682 (one percent of the amount guaranteed). Additionally, in 1998. the Company paid rent in the approximate amount of $20,000 to Mr. Thomas prior to relocating its corporate offices to their current location. Transactions involving Dwight S. Thomas. During 1997, the Company sold a location (Cookeville) to Dwight S. Thomas, the Company's Secretary and a member of the Company's Board of Directors. The purpose of the sale was to raise working capital. The location was sold for $516,000 (it had an M.A.I. appraised value of $536,000) and resulted in net proceeds to the Company of approximately $152,385. The location was in need of capital improvements, including approximately $80,000 worth of environmental updates of underground petroleum storage tanks necessary to meet 1998 standards. In exchange for the sale, Dwight Thomas agreed to the cancellation of his employment contract with the Company dated December 2, 1996. Transactions involving Farm Stores. Following the Merger, the reorganized Debtor will be involved in several affiliated transactions involving Farm Stores and its affiliates. Principally among these will be the Management Agreement and the License Agreement between the reorganized Debtor and FSG. The Management Agreement will contemplate that the exchange for the Management Fees (as such term is defined in the Management Agreement) the general and administrative personnel and related expenses of FSG will be transferred to the reorganized Debtor, and that the reorganized Debtor will manage the operations of FSG. The Management Agreement involves significant potential conflicts of interest, and includes indemnity and exculpation provisions. The reorganized Debtor shall have the right to terminate the Management Agreement upon short notice, and the Directors appointed to the UPC Board by Farm Stores shall abstain in considerations of such a termination. Upon such a termination, it is expected that the management personnel that the Debtor hired from Farm Stores will become the management of FSG. - ----------------- Alternatively, management services may be provided through a separate entity or other means. None of these alternatives will materially effect the economics of the management arrangement. The License Agreement allows the reorganized Debtor to continue to use the Farm Stores name and related trademarks for the Walk-In Stores without payment of royalties. Under the Purchase Agreement, the reorganized Debtor may purchase up to 15% of the equity of FSG within one year after the Effective Date, at $1 Million per 2% of such equity. FSG will lease the real estate underlying nine (9) of its Drive Thru Stores from an affiliate of Bared, such leases to be on market terms. It is expected that the management and administrative personnel for the reorganized Debtor will occupy the facility presently occupied by the F.S. Partnerships' administrative personnel. These premises will be owned by an affiliate of the FSCI Shareholder. The reorganized Debtor would assume responsibility for the costs of operating this facility, including but not limited to maintenance, security, taxes, equipment rentals and insurance, but would not otherwise pay rent. However, the FSCI Shareholder expects to market this property, and upon its sale, the reorganized Debtor would have to relocate to other premises. I. The Restructuring 1. Background and Reason for Commencing the Chapter 11 Case. In 1996, the Debtor undertook a business strategy of growing through acquisitions. In order to fund anticipated acquisitions, the Debtor, in a series of private placement offerings, issued convertible debentures in the approximate principal amount of $27,500,000. The anticipated acquisitions, however, did not take place as a result of the Debtor's inability to identify suitable acquisition candidates on acceptable terms, and the Debtor then used a portion of the proceeds of the offerings to fund a drilling program. Shortly after the completion of the foregoing private placement, the price of the Debtor's stock began to decline precipitously. Based upon its investigation, the Debtor concluded that the decline was brought about by certain holders of the Debentures short selling the Debtor's stock. The only parties actually identified by the Debtor as having short sold the Debtor's stock, and who acknowledged their short-selling activities to the Debtor were Mantel International Investments, Ltd. and Lake Management, LDC. Certain parties have asserted that the Infinity Parties short sold the Debtor's stock. The Infinity Parties have repeatedly denied that they short sold the Debtor's stock and Debtor presently has no information to support a contrary conclusion. Subsequently, the Debtor suffered significant cash losses when amounts advanced to underwriters and consultants (in order to fund the repurchase of shares of the Debtor's common stock and to prevent the disorderly liquidation of a large block of stock held by such groups) were not utilized as expected or repaid to the Debtor. See General Information Legal Proceedings; TAJ/National." Notwithstanding management's efforts, the Debtor's revenues were insufficient to satisfy the Debtor's obligations. In April 1997, the Debtor restructured the debentures, exchanging a substantial portion of such debentures for shares of Preferred Stock, and borrowed additional funds for working capital needs. Despite these efforts, the Debtor was still unable to generate sufficient revenues to satisfy its obligations. The Debtor's results of operations, combined with the potential conversion of the Debentures and Preferred Stock depressed the price of the Debtor's Common Stock and adversely affected the Debtor's ability to raise additional needed capital. In the second quarter of 1998, two holders of Calibur's mortgage notes in the outstanding principal amount of approximately $2,500,000 declared the notes in default and demanded payment in full. These notes, as well as Calibur's remaining mortgage notes, were refinanced in June and August of 1998 through a line of credit provided by Infinity which matured on January 1, 1999. The Debtor's management and Board of Directors have determined that the continuing viability of the Debtor requires the conversion of a substantial portion of its indebtedness and preferred stock to common equity by means that can only be implemented in chapter 11. 2. Rationale of the Restructuring and the Merger. The Debtor first filed for chapter 11 relief in order to achieve changes in its financial structure, reducing the Debtor's excessive debt levels and fixed charges (including its obligations to make payments in respect of interest and dividends), to enable the Debtor to continue to implement its revised business strategy and to help assure the Debtor's long-term viability. The Debtor had hoped that it could continue as a viable concern if it were able to (a) substantially reduce its debt service and dividend obligations, (b) eliminate miscellaneous existing and potential litigation, and (c) create an appropriate capital structure. In that regard, on February 16, 1999 the Debtor filed its initial plan and disclosure statement which contemplated a stand alone plan of reorganization. However, prior to holding a hearing to consider approval of the initial disclosure statement, it became apparent that without a dramatic increase in revenues, the Debtor would be unsuccessful in meeting its debt service and operating obligations, even with the reduced debt levels and capital structure proposed in the original plan. During the pendency of the Chapter 11 Case, Infinity was approached regarding the possibility of combining a substantial portion of the F.S. Business with that of the Debtor's. Infinity recognized the potential synergy that could be created by a merger of the F.S. Business with that of the Debtor's and began preliminary due diligence in an effort to determine whether such a business combination would in deed benefit the Debtor. As evidenced by the reorganized Debtor's financial statements (prepared by F.S. Management, and attached hereto as Exhibit E) the merger is designed to achieve significant savings and advantages, such that the value of the combined entity is significantly greater than the value of UPET and FSCI standing separately. The Merger Agreement provides for the merger of FSCI with and into UPC Merger Sub, a newly created wholly owned subsidiary of the Debtor. Pursuant to the Merger Agreement: (a) the Debtor and FSCI, with the assistance of Infinity, undertake to obtain up to $23 million of secured financing (the "Merger Financing") to be secured by, the Walk-In Stores, (b) FSCI undertakes that it will own, immediately prior to the consummation of the Merger, (i) all of the interests relating to the Gas Stores currently held by the Bared Corporations, (ii) a royalty free license for the use of the Farm Stores(R) name and related trademarks, and (iii) subject to its receipt of $17 Million in net proceeds from the Merger Financing, FSCI will exercise the Toni Option, such that FSCI shall purchase from Isaias Corporations for $17 Million (x) all remaining interests in the Walk-In Stores; and (y) ten percent (10%) of the issued and outstanding capital stock of FSG, and (c) FSCI's shareholder will receive, upon consummation of the Merger, (i) 48% of the New UPC Common Stock, (ii) $7 Million principal amount (50% of the authorized and outstanding class) of New UPC Preferred Stock, and (iii) $3 Million in cash. After the Merger, the reorganized Debtor shall own 100% of the equity interests relating to the Walk-In Stores and a 10% interest in FSG. In connection with the Merger, the following material agreements will come into effect or remain in effect, as noted: (a) The general and administrative personnel of the FS Partnerships will become employed by the reorganized Debtor , which will enter into the Management Agreement (to be filed as a Plan Document). (b) The reorganized Debtor and FSG will enter into a royalty free license allowing the reorganized Debtor to use the Farm Stores brands and trademarks. (c) FSG and Reorganized Debtor will remain obligated to perform under the Velda Agreement. (d) FSG will lease the real estate underlying certain of the Drive-Thru Stores from an affiliate of Bared. Time is of the essence in order to effect the Merger. As discussed above, the F.S. Business is currently owned by both Bared and Isaias (see "General Information -- Farm Stores"). However, pursuant to the Toni Option, which must be consummated by August 25, 1999, Bared has the ability to acquire Isaias's interest in the F.S. Business. Thus, if the Debtor is unsuccessful in consummating the Plan and acquiring the Merger Financing by August 25, 1999, the Toni Option will expire and neither Bared, the Debtor nor UPC Merger Sub would have the right to acquire the Isaias's interest in the F.S. Business. To insure that it could satisfy the requirements under the Bankruptcy Code regarding the length of notice that must be provided prior to a hearing on the Disclosure Statement and confirmation of the Plan, the Debtor is soliciting votes on the Plan prior to finalizing and executing the Merger Agreement and prior to the completion of its due diligence. Nevertheless, among other things, the Merger Agreement contemplates the Debtor's (and FSCI's) need to complete due diligence and conditions closing of the Merger on the parties' satisfaction with their due diligence investigations and the satisfaction or waiver of the conditions precedent to closing set forth in the Merger Agreement. 3. Merger Financing. Closing under the Merger Agreement and consummation of the Plan are conditioned upon the Debtors and FSCI's ability to obtain $20 million to $23 million of financing on acceptable terms. To date, the merger financing has not been obtained. The Debtor, Infinity Parties and FSCI and their respective financial advisors are working to and are hopeful that they will be able to obtain the necessary financing on acceptable terms and that the closing under the Merger Agreement can occur by the August 25, 1999 deadline. If, however, sufficient merger financing on acceptable terms cannot be obtained or, if obtained, cannot be closed by August 25, 1999, the Merger Agreement may not close and the Plan may never be consummated. J. Legal Proceedings 1. NASDAQ Allegations. In 1997, NASDAQ alleged that the Debtor (a) had entered into various consulting agreements with the sole purpose of expanding investor interest in the Debtor's shares, which arrangements are said to have led to a deterioration of stockholder value, (b) facilitated and pursued manipulative transactions in the Debtor's stock, and (c) violated various other NASDAQ rules. Despite the Debtor's vigorous response and objection to NASDAQ's allegations, NASDAQ delisted the Common Stock from the NASDAQ SmallCap Market in December 1997. In the one year prior to the stock being delisted, the stock had a high closing price of $.65625 and a low closing price of $.0625 2. TAJ/National. In March of 1996, the Debtor was approached by Ronald Berkowitz, a securities promoter in Miami, Florida affiliated with Strategic Holdings Corporation ("Strategic"). Among other things, Berkowitz represented that Strategic could raise substantial capital for the Debtor in private placement transactions that would not adversely affect the market price of the Debtor's common stock. Shortly thereafter, Berkowitz introduced the Debtor to Wilbur Jurdine ("Jurdine"), the president and principal shareholder of TAJ Global Equities, Inc. ("TAJ"). Among other things, Jurdine represented that TAJ had the ability to make a market in the Debtor's common stock. Subsequently, the Debtor issued the Debentures in the aggregate face amount of approximately $27.5 million in a series of substantially similar private placement transactions arranged by Strategic. Shortly after the foregoing private placement in early 1997, the price of the Common Stock began to fall sharply. Believing that the lower prices were not justified, and in an effort to stabilize the market in the shares, the Debtor's Board of Directors authorized a share buy-back program, which was never successfully implemented. In connection with this program, the Debtor deposited some of the proceeds of the Debenture sale with TAJ for use if and when purchases were desired. At that time, the Debtor had engaged TAJ to act as the Debtor's underwriter for a planned offering of Common Stock. TAJ, without the Debtor's knowledge or consent, purchased over 3 million shares of the Debtor's stock from its own customers when the price of the shares began to fall. Those purchases were initially made through the TAJ trading account apparently maintained by TAJ for its own trading activities. The shares were subsequently transferred to the account of Strategic for which TAJ had a power of attorney. Strategic, which had assisted the Debtor in connection with the sale of the Debentures and which had a consulting agreement with the Debtor, contends that it did not authorize such transaction and that it did not know they had taken place. In order to settle its account with National Financial Services Corp. ("National"), in late August and early September of 1996, TAJ began trying to liquidate its holdings of the Debtor's common stock by selling such stock to TAJ's customers. This additional selling activity created downward pressure on the price of the Debtor's stock however, and TAJ found itself unable to pay or otherwise clear its account with National as the then current price for the Debtor's stock was less than the amount at which TAJ acquired the 3 million shares. When TAJ and Strategic were unable to pay for the shares they had acquired, TAJ and National, TAJ's clearing broker, demanded payment from the Debtor, threatening to summarily liquidate the shares and thereby transform the orderly market in the Debtor's Common Stock into a disorderly market, an action which would have damaged the interests of the Debtor's stockholders. In an effort to prevent such consequences, the Debtor paid for the shares. In March 1997, the Debtor commenced a civil action styled United Petroleum Corporation v. TAJ Global Equities, Inc., et al (the "TAJ Action") against TAJ, Mr. Wilbur Jurdine (a principal of TAJ) ("Jurdine") and National, in the United States District Court for the Eastern District of Tennessee (the "Tennessee Federal Court"). In it, the Debtor seeks compensatory and punitive damages arising from a conspiracy to engage in a course of misconduct intended to defraud the Debtor, for conversion of the Debtor's property, and under theories of unjust enrichment, breach of fiduciary duty and other causes of action. By Order dated April 22, 1999 (the "April 22 Order") the Tennessee Federal Court dismissed the TAJ Action with respect to TAJ and Jurdine for failure to effect service of process on such entities. Also in the April 22 Order, the Tennessee Federal Court directed the Debtor to show cause why the TAJ Action should not be dismissed as well. The Debtor moved for reconsideration of the April 22 Order by Motion dated April 30, 1999. By Order dated May 24, 1999, the Tennessee Federal Court vacated the April 22 Order and reinstated in full the TAJ Action. The Debtor believes that its claims and causes of action in this litigation have merit; however, this matter is in its earliest stages, and the timing, amount and likelihood of any recovery for the Debtor are impossible to predict at this time. Additionally, even if the Debtor prevails in the TAJ Action and obtains an award of money damages against one or more of the Defendants therein, it is unclear whether the Debtor would be able to successfully enforce and collect upon such a judgment against these parties. The Debtor expects that any proceeds realized in the TAJ Action will be used either to fund ongoing operations or to reduce the Debtor's principal and interest obligations under its secured borrowing facility. In any event, if the Plan is not consummated, however, it is unlikely that the Debtor will have the wherewithal to prosecute the action. 3. Strategic. On October 6, 1998, the Debtor was sued by Strategic Holdings Corporation of Miami, Florida. The suit, styled Strategic Holdings Corporation v. United Petroleum Corporation, was filed in the Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County, Florida. The action seeks damages of approximately $550,000 arising from the Debtor's alleged breach of an agreement. The Debtor believes the claims are without merit. As of the Petition Date, the time for the Debtor to answer or otherwise respond had not occurred. If Strategic's claim are determined to have merit, Strategic would have a General Unsecured Claim. 4. Ishmael. In June of 1997, the Debtor was sued by Kevin Ishmael, a former employee, alleging that the Debtor had dismissed him improperly. Ishmael obtained a final judgment against the Debtor for back pay and damages totaling $54,422.03. The Debtor has also been ordered to reinstate the employee. This matter has been resolved by the payment of the back pay and damages. 5. Unifirst. In May of 1997, the Debtor was sued by Unifirst, Inc. ("Unifirst"), a supplier of work uniforms for breach of contract. During the pendancy of the suit, counsel for the Debtor became terminally ill and died. During that period, counsel for Unifirst obtained a default judgment against the Debtor in the amount of $72,844.22. The Debtor then obtained new counsel and petitioned the court to set aside the default judgment. The Debtor believes it has valid defenses to Unifirst's Claims. However, if Unifirst obtains a judgment, its claim would be a General Unsecured Claim. 6. In re United Petroleum. On May 18, 1998, an involuntary bankruptcy petition, styled In re United Petroleum Corporation d/b/a Jackson-United Petroleum Corporation and Calibur Systems, Inc. was filed in the United States Bankruptcy Court in the Eastern District of Tennessee by three preferred stockholders of the Debtor, Dan Dotan, Ben Golan and Shemulik Zeitoni. This petition was never served on the Debtor, and the petitioners' counsel of record subsequently withdrew and was not replaced. On July 28, 1998, the Debtor filed a motion to dismiss the petition for lack of standing. On September 10, 1998, the plaintiff requested that the court dismiss the petition and on that date the court entered an order dismissing the case. 7. Pisacreta/Tucci. In March 1997, a putative class action lawsuit (the "Pisacreta Action") was filed by John Pisacreta, a purchaser of the Debtor's Common Stock, in the Tennessee Federal Court, purportedly on behalf of all purchasers who purchased shares of Common Stock during the period of May 1, 1996 through January 16, 1997. This suit was filed against Ronald Berkovitz, Infinity Investors Limited, Dan Dotan, Fairway Capital Limited, Lake Management LDC, Laurel Angela MacDonald, Seacrest Capital Limited and Mohamed Ghaus Khalifa as discussed more fully below. In or around October 1997, Mohamed Ghaus Khalifa and Dan Dotan were dismissed from the Pisacreta Action. In the lawsuit, the plaintiff alleges that the defendants, in acquiring and disposing of certain of the Debentures, participated in a fraudulent and manipulative scheme in violation of certain provisions of the securities laws of the United States. The plaintiff also alleges that the defendants committed fraud and deceit under common law and breached a contract between the defendants and the Debtor. The defendants filed a motion to dismiss the complaint for failure to state a claim upon which relief can be granted. The Tennessee Federal Court granted the motion in part, dismissing one of the two federal securities law claims, as well as the claim for common law fraud. Following a July 16, 1999 hearing before the United States Magistrate Judge for the United States District Court for the Eastern District of Tennessee at Knoxville, an order was entered denying John Pisacreta's request for class certification. In November 1997, Lisa Tucci, a purchaser of the Debtor's Common Stock and the daughter of John Pisacreta, filed a putative class action lawsuit (the "Tucci Action") in the Tennessee Federal Court against Clark K. Hunt ("Hunt"), purportedly on behalf of all persons and entities who purchased Common Stock from May 1, 1996 through January 16, 1997. The lawsuit was based on factual allegations identical to those set forth in the Pisacreta Action, described above. The plaintiff claims that Hunt is the controlling person of certain of the purchasers of the Debentures and is secondarily liable under the securities laws of the United States for the violations alleged in the Pisacreta Action. In January 1998, the defendant filed a motion to dismiss for failure to state a claim or alternatively to dismiss the complaint for improper venue. In April 1998, the Tennessee Federal Court dismissed the Tucci Action for improper venue. In May 1998, the plaintiff filed a notice of her intent to appeal the court's ruling to the United States Court of Appeals. After the appeal was filed in the Tucci Action, the plaintiff in the Pisacreta Action filed a motion to amend his complaint to add Hunt as a defendant under the theory of controlling person liability. The motion was ultimately granted and Hunt was added as a defendant in the Pisacreta Action. The Debtor believes that the appeal in the Tucci Action has been abandoned and that the order dismissing that matter has become final. In December 1998, Hunt answered the complaint in the Pisacreta/Tucci Action and impleaded the Debtor as a third-party defendant, alleging that the Debtor is liable for any claims of the plaintiffs under theories of indemnity and contribution. Thereafter, the Tennessee Federal Court entered an agreed order permitting Infinity, Fairway, and Seacrest to assert similar causes of action against the Debtor. Pursuant to order of the Tennessee Federal Court dated June 3, 1999 the plaintiff's motion to sever the third party claims asserted against the Debtor from the claims asserted against the defendants in the Pisacreta/Tucci Action was granted. These parties' claims for indemnification and contribution rest, in the first instance, upon provisions in the Subscription Agreements wherein the Debtor covenanted to indemnify and hold harmless the Infinity Parties in the event the Debtor breached any of the provisions of the Subscription Agreements. While the Debtor vigorously disputes that it has committed any such breach, the Infinity Parties have alleged that the Debtor made certain misrepresentations regarding use of proceeds to induce the Infinity Parties to execute the Subscription Agreements. Additionally, the Infinity Parties allege that to the extent Pisacreta ultimately succeeds on his claim that the Subscription Agreements were non-compliant with Regulation S, the Debtor is liable to indemnify the Infinity Parties for damages arising therefrom. Infinity's claims in this regard stem from the contention that compliance with exemptions to registration is the obligation of the issuer/seller of the securities, not of the Infinity Parties. The Debtor denies that it has any obligation for indemnity or contribution to the Infinity Parties in connection with the Piscreta/Tucci Action. However, if the Infinity Parties succeed in their claims for indemnity and contribution against the Debtor, the Debtor would ultimately be liable for all or part of any award rendered in favor of the Plaintiffs in the Pisacreta Action. Pisacreta currently has articulated three separate claims pending in the Tennessee Federal Court: (i) alleged violations of the Securities and Exchange Act of 1934 (the "1934 Act") and Rule 10b-5 promulgated thereunder; (ii) breach of contract; and (iii) controlling person liability against Clark K. Hunt under Section 20(a) of the 1934 Act for the purported violations of Section 10(b) by Infinity. Investors Limited ("Infinity"), Fairway Capital Limited ("Fairway") and Seacrest Capital Limited ("Seacrest"). With respect to claims arising under Section 10 (b) 5 of the 1934 Act, Pisacreta's claim for market manipulations are based upon allegations that Infinity, Seacrest and Fairway converted their debentures and thereafter sold their holdings of the Debtor's Stock in such a way as to cause an artificial inflation in the price of the Debtor's Stock. The Infinity Parties have asserted that Pisacreta lacks standing to assert claims under Section 10(b) against Infinity, Fairway and Seacrest and that he did not rely on statements of any of the Defendants in the Pisacreta Action in purchasing securities of the Debtor. Assuming that they prevail in the foregoing defense, the Infinity Parties believe that the lack of liability for Infinity, Seacrest and Fairway will similarly dispose of the "controlling person" claim against Clark K. Hunt. Pisacreta's breach of contract claim is based on alleged breaches of the Subscription Agreements entered into by and between the Debtor and each of the defendants in the Pisacreta Action (except for Clark K. Hunt). Pisacreta's claims in this regard are largely predicated upon allegations that Fairway and Seacrest are not true offshore entities, such that these parties' representations in the Subscription Agreements regarding compliance with Regulation "S" were false. In addition, Pisacreta asserts (and the Tennessee Federal Court has ruled) that Pisacreta and all holders of the Debtor's Common Stock are third-party beneficiaries of the Subscription Agreements. The Infinity Parties assert that, even if Pisacreta is a third-party beneficiary under the Subscription Agreements (a point the Infinity Parties dispute and expect to appeal), Pisacreta lacks standing to sue the Infinity Parties thereunder because the Debtor -- from whom Pisacreta's rights derive -- has previously released Infinity, Seacrest and Fairway. Finally, the Infinity Parties vigorously dispute the proposition that Infinity, Fairway and Seacrest are not offshore entities. Finally, the Debtor believes that the relief sought in the causes of action presently asserted by the plaintiff in the Pisacreta/Tucci Action is derivative in nature and that such claims properly belong to the Debtor. The Debtor believes that the securities law claim asserted in the Pisacreta/Tucci action is not premised on unique harm or injury to any particular stockholder, but rather, is based on the argument that the defendants' conduct improperly diluted the interests of all stockholders. The breach of contract claim is based on the Infinity Parties alleged breach of a contract with the Debtors, not the plaintiffs. As a result, the Debtor believes that the claims asserted in the Pisacreta/Tucci Action belong to the Debtor's chapter 11 estate and that the plaintiffs are stayed from prosecuting the claims. The Pisacreta/Tucci Plaintiff disputes Debtor's characterization of its claims as derivative in nature and believes that the claims asserted in the Pisacreta/Tucci Action are direct claims and not derivative. There can be no certainty that a Court will agree with the Debtor's characterization. Perhaps more importantly, based on the Debtor's assessment of the value of the claims asserted in the Pisacreta/Tucci Action, the Debtor believes that such claims are appropriately resolved pursuant to the settlement contained in Article XIV of the Plan between the Debtor and the Infinity Parties. On February 4, 1999, the Debtor commenced an action in the Bankruptcy Court to stay the Tennessee Litigation, and for a determination of whether the claims asserted in such action are derivative in nature. After briefing and a hearing on February 22, 1999, the Bankruptcy Court ruled that it would "not enjoin [the plaintiff]...from pursuing the Tennessee Litigation," but that it would "issue a very modified injunctive order," restricting the prosecution of the Tennessee Litigation to (i) continued prosecution of plaintiff's motion to sever the debtor from the Tennessee Litigation, (ii) continued prosecution of plaintiff's motion to compel production of documents and (iii) continuing plaintiff's efforts to take the deposition of Mr. Clark Hunt. At the February 25, 1999 hearing the Judge also stated that the issue of whether Pisacreta's claims were derivative or direct was "sufficiently subject to serious debate" that he could not conclude that the Debtor was likely to prevail on that issue. Additionally, the Bankruptcy Court specifically ruled that its order would expire on the later of May 25, 1999 or confirmation of the Debtor's Plan. On May 24, 1999, the Debtor moved the Bankruptcy Court for an extension of the preliminary injunctions. On June 14, 1999, the Bankruptcy Court denied the Debtor's motion, freeing the plaintiff to pursue the Tennessee Litigation. Nevertheless if the Plan is confirmed, the claims asserted in the Tennessee Litigation would be channeled into, and so long as the UPC Trust remains funded, could be pursued only against the UPC Trust. 8. Dotan/Mantel Dan Dotan ("Dotan") and Mantel International Investments, Ltd. ("Mantel") have advised the Debtor that they assert claims against the Infinity Parties related to or arising from the Debentures or the restructuring thereof, which, as discussed under "X. The Plan - B. Classification and Treatment of Claims - 2. Classified Claims - (e) Class 5 - Debenture Claims" with respect to claims asserted against the Debtor, are not Securities claims and are not subject to the channelling injunction into the UPC Trust. Dotan and Mantel have advised the Debtors that they may also assert claims against the Infinity Parties which would constitute Securities Claims, which claims may impact upon the Court's consideration of the proposed Infinity Settlement. No action has been commenced with respect to such asserted claims. Such claims are disputed by the Debtor and Infinity Parties. VI. FINANCIAL INFORMATION The Debtor's historical and projected income statements, growth and margin analysis and balance sheets for the years ended December 31, 1997, through December 31, 2002 are attached hereto as Exhibit C and incorporated herein by reference. The combined historical and projected income statements, growth and margin analysis, balance sheets and cash flows for the portion of the F.S. Business which relates to the Walk-In Stores, for fiscal years ended August 29, 1997 through August 29, 2002 along with F.S. Management's discussions of the results of operations are attached hereto as Exhibit D and incorporated herein by reference. VII. BUSINESS PLAN AND PROJECTIONS The financial projections for the post-Merger reorganized Debtor, attached hereto as Exhibit E, were prepared by management of the F.S. Business ("F.S. Management"), and reflect F.S. Management's best estimates regarding the expected results of operations, cash flows and financial position of UPC Merger Sub for the years ended August 29, 1999, through August 29, 2002. To the extent that the Financial Projections related to the expected performance of the UPC stores, F.S. Management has relied on information and assumptions provided by the Debtor's management. F.S. Management believes that the basis for the Financial Projections is reasonable, taking into account the purpose for which they were prepared. HOWEVER, THE FINANCIAL PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARD COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE SECURITIES AND EXCHANGE COMMISSION OR THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR FORECASTS. DELOITTE & TOUCHE LLP, THE F.S. PARTNERSHIP'S INDEPENDENT ACCOUNTANTS, HAS NEITHER EXAMINED REVIEWED NOR COMPILED THE FINANCIAL PROJECTIONS AND, CONSEQUENTLY, DOES NOT EXPRESS AN OPINION OR ANY OTHER FORM OF ASSURANCE WITH RESPECT TO THEM. F.S. Management believes that the Financial Projections are presented on a basis consistent in all material aspects with generally accepted accounting principles as applied to its historical financial statements. The Financial Projections are based on numerous assumptions with respect to future events and circumstances, including industry performance, general business and economic conditions and other matters, many of which are beyond management's control. In addition, unanticipated events and circumstances may affect the actual financial results of the reorganized Debtor, which may cause such financial results to differ materially from those set forth in the Financial Projections. The assumptions set forth herein are those that F.S. Management believes are significant to the Financial Projections. F.S. Management believes that such assumptions are reasonable. However, to the extent that the Financial Projections related to the expected operation of the UPC Stores, Debtor's management has provided the information and assumptions relating thereto. Debtor's management believes that its assumptions relating to the UPC stores are reasonable. Nevertheless, accurate forecasting is very difficult due to, among other factors, the effects of unforeseen circumstances on the post-Merger business plans, such as lower levels of consumer demand than anticipated, unfavorable weather conditions and volatility in wholesale fuel prices. Therefore, the assumptions made in forecasting results could prove to be inaccurate, including in particular the following assumptions: in forecasting results post-merger, management assumed that general and administrative expenses would decline, and that F.S. management would successfully negotiate an agreement to sell branded gas products at the Gas Stores, and sales of gas at those stores would increase. A detailed discussion of these and other risks is located in this Disclosure Statement under the heading "Risk Factors to be Considered. The approach utilized by F.S. Management in developing the Financial Projections for 2000, 2001 and 2002 involved a "top down" methodology whereby revenues and expenses were estimated on a macro basis by applying overall relationships and expectations about future operating variables. While F.S. Management believes that such an approach is reasonable, the results might differ had F.S. Management utilized a "bottom-up" methodology whereby revenues and expenses were estimated on a micro basis using, for example, detailed departmental budgeting procedures. Because the Projections are based on assumptions that may not materialize as anticipated, and because of this choice of approach in forecasting financial results, it is likely that there will be differences between the projected and actual results. Such differences may be material. THE REORGANIZED DEBTOR WILL NOT HAVE PRIOR CONSOLIDATED OPERATING HISTORY AND DOES NOT EXPECT TO PUBLISH ITS BUDGET OR DISCLOSE PUBLICLY PROJECTIONS OR FORECASTS OF ITS EXPECTED RESULTS OF OPERATIONS, CASH FLOWS OR FINANCIAL POSITION. ACCORDINGLY, THE REORGANIZED DEBTOR DOES NOT INTEND TO, AND DISCLAIMS ANY OBLIGATION TO (A) UPDATE OR OTHERWISE REVISE FOR THE HOLDERS OF CLAIMS OR INTERESTS PRIOR TO THE CONFIRMATION DATE, THE FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS (EVEN IN THE EVENT THAT THE ASSUMPTIONS UNDERLYING THE FINANCIAL PROJECTIONS ARE SHOWN TO BE INACCURATE), EXCEPT AS REQUIRED BY APPLICABLE LAW AFTER THE EXPIRATION OF THE PLAN SOLICITATION, (B) INCLUDE ANY UPDATED INFORMATION IN SECURITIES AND EXCHANGE COMMISSION FILINGS, OR (C) OTHERWISE MAKE SUCH INFORMATION PUBLICLY AVAILABLE. THE FINANCIAL PROJECTIONS HAVE BEEN PREPARED SOLELY BY F.S. MANAGEMENT AND HAVE NOT BEEN AUDITED OR COMPILED BY OUTSIDE AUDITORS, FINANCIAL ADVISORS OR OTHER ADVISORS. THE DEBTOR AND ITS FINANCIAL ADVISORS ARE STILL COMPLETING THEIR DUE DILIGENCE WITH RESPECT TO THE FINANCIAL PROJECTIONS AND ACCORDINGLY, NEITHER THE DEBTOR NOR ITS OUTSIDE AUDITORS, FINANCIAL ADVISORS NOR ANY OTHER ADVISOR HAS EXPRESSED ANY OPINION, MADE ANY REPRESENTATION OR WARRANTY OR OTHERWISE GIVEN ANY OTHER ASSURANCES WITH RESPECT TO THE ACCURACY OR ADEQUACY OF THE FINANCIAL PROJECTIONS OR OF THE UNDERLYING ASSUMPTIONS. HOLDERS OF CLAIMS AGAINST AND INTERESTS IN THE DEBTOR ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE FINANCIAL PROJECTIONS IN DETERMINING WHETHER OR HOW TO VOTE ON THE PLAN OR WHETHER TO ACCEPT THE PLAN. THE FINANCIAL PROJECTIONS SHOULD BE READ IN CONJUNCTION WITH THE ASSUMPTIONS, QUALIFICATIONS, LIMITATIONS AND EXPLANATIONS RELATING THERETO AND TO THE CONSOLIDATED FINANCIAL STATEMENTS OF THE REORGANIZED DEBTOR. A. Assumptions - Nature and Limitations of Projections The accompanying projected financial statements present, to the best of F.S. Management's knowledge and belief, the reorganized Debtor 's expected financial position as of August 29, 1999 through December 31, 2002, and the results of its operations and its cash flows for the years then ended, assuming consummation of the Plan on August 15, 1999. The projected statements reflect F.S. Management's judgment as of June 15, 1999, the date of these projections, of the expected conditions and management's expected course of action. To the extent that these projections related to the expected performance of the UPC stores, F.S. Management has relied upon the Debtor's management to provide the necessary information and assumptions. Because events and circumstances frequently do not occur as expected, differences between the projected and actual results which may be material, should be anticipated. B. Assumptions - Nature of Operations The accompanying projected financial statements include the accounts of the F.S. Partnership which relate to the Walk-In Stores, as well as UPC and its wholly owned subsidiaries, Calibur and Jackson, and give effect to the Plan as discussed elsewhere in this Disclosure Statement. The general assumptions used to prepare the projections include the following: 1. Sales. Sales are projected for 1999 using 36 weeks actual data and the balance of the year based on historical averages under normal operating conditions. The projection assumes a 4.0%, 3.5% and 3.5% increase in Merchandise Sales in 2000, 2001 and 2002, based on the following planned events: (1) reopening of three casualty stores damaged in recent months by fire and tornado, (2) re-merchandising and remodeling of Farm Stores' convenience stores, similar to a recent successful effort in the Drive-Thru Stores, (3) leasing available space in existing stores to fast food and other food service operators, (4) obtaining a national brand for sales of gasoline at the Gas Stores, and, (5) acquisition of new stores. Fuel Sales are projected to increase 13%, 22% and 3% in 2000, 2001 and 2002 respectively, based on branding of the Gas Stores. This projected increase contributes substantially to the projected financial results, and in particular, to the projected growth in the Walk-In Stores' earnings. Assumed increase in gas earnings accounts for 26% and 71% of the projected increase in the Walk-In Stores' earnings for the fiscal years 2000 and 2001, respectively. F.S. Management has also selected eleven UPC stores for inclusion in the projection, based on an assessment of historical operating performance and an estimate of future profitability. The remainder of the UPC stores is not included in this projection. These stores, together with certain underperforming Walk-In Stores (whose results are also excluded from the projections) will be sold over the projection period. F.S. Management routinely reviews acquisitions of companies with complementary operations and has held discussions with a number of acquisition candidates. The projection does not give effect to these potential acquisitions, despite management's intention to pursue such opportunities when acquisitions are available on favorable terms. 2. Cost of Sales. Cost of sales are projected using historical percentages, where the UPC properties are adjusted for cost savings measures and overhead reductions as a result of the implementation of a Farm Stores model. Cost of sales should decrease over the period covered by the projection, due to a number of management's initiatives described above in Sales. Branding the Gas Stores is projected to increase margins in this business by increasing the proportion of premium grade gasoline that the Gas Stores sell. This gain in gross margin from non-gas operations is projected from the re-merchandising of the Walk-In Stores units, renegotiating deals with key vendors, revamping some of the stores to emphasize fast food, and by altering pricing structures where applicable. 3. Expenses. Expenses are projected based on historical amounts and percentages, giving effect to planned reductions in staffing and overhead. The general and administrative burden of the F.S. Business included operating a dairy plant for period prior to October, 1998. Included in the staffing and overhead reductions are $693,721 in UPC overhead eliminations resulting from the consolidation of the F.S. Partnerships and UPC operations and the relocation of the UPC headquarters to Miami. Additionally, management expects to discontinue operations in certain underperforming stores and all of the Jackson operations (oil and gas exploration and development) in 2000, 2001 or 2002. These stores and Jackson's assets will be sold, and the proceeds from the sale will be invested in FSG or used for general corporate purposes, including working capital and debt repayment. The expected synergies of the Merger depend in large part upon the substantial savings in general and administrative expenses the Projections assume will occur. 4. Other Income. Projected other income includes interest expense, gains or losses estimated on the sale of fixed assets, management fee income, goodwill amortization and miscellaneous income estimated using historical averages. 5. Reorganization Expenses. Reorganization expenses are projected based on estimates obtained from various professionals expected to assist in the Chapter 11 process. 6. Depreciation. Depreciation is estimated based on the most recent historical amounts included in the F.S. Partnerships historical financial statements with additional depreciation coming from the UPC stores which will remain in operation. Such amounts are computed using primarily straight line depreciation methodology and estimated useful lives of 7 to 31.5 years for used buildings and improvements, 3 to 7 years for equipment, 3 to 4 years for vehicles and 3 to 10 years for leasehold improvements. All capitalized costs of gas and oil properties are amortized on the unit-of-production method using estimates of proved reserves. 7. Capital Expenditures. F.S. Management believes that $1,821,000, $1,121,000 and $1,121,000 will be required in 2000, 2001 and 2002, respectively, to improve and maintain existing locations. This translates to approximately $11,000 per store per year. The 2000 capital expenditures projection includes $700,000 in equipment upgrades to prepare for the branding of the fuel stores. 8. Receivables. Receivables are projected based on historical sales of 3.2 days. 9. Inventory. Inventories are projected based on historical turns of 20 times. 10. Debt Service and Interest. Debt service and interest expense are projected based on the terms of the expected financing under the Merger Financing. 11. Effects of Plan Consummation. Reorganization transactions are projected as follows: Post-Petition Reorganization costs are projected to be at least $500,000, based on estimates provided to management from professionals providing the necessary services and management's estimate of travel, printing and other incidental costs. The majority of these expenses are projected to be paid upon consummation of the Plan. As a preliminary step in preparing the Projected Consolidated Financial Statements for the years ending August 29, 2000, 2001 and 2002, F.S. Management has prepared the Unaudited Proforma UPC Balance Sheet as of the Effective Date, an Unaudited Proforma Farm Stores Balance Sheet as of the Effective Date, and an Unaudited Consolidated Balance Sheet for the surviving company, UPC Merger Sub. The Unaudited Proforma Consolidated Balance Sheet, which follows, reflects F.S. Management's projections with respect to the financial position of the Debtor and Farm Stores, assuming: (a) the Debtor meets its projections for the balance of fiscal 1999, (b) Farm Stores meets its projections for fiscal 1999 and (c) the effects of certain transactions that will occur upon consummation of the Plan, assumed to be August 24, 1999. Step 1: UPC Reorganization The accounting treatment for the Plan will be in accordance with the accounting principles required by the provisions of the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code." Pursuant to SOP 90-7, the Company will adopt "fresh start" reporting as of the Effective Date of the Plan. F.S. Management has estimated that the Debtor's reorganization value is equal to the carrying values of the assets at the Effective Date. Liabilities expected to exist as of the Effective Date are stated at the present values of amounts to be paid. Accordingly, the resulting shareholders equity of $24,512,000 is represented by 140,000 shares of New UPC Preferred Stock with an assigned value equal to its liquidation value of $14,000,000 ($100 per share) and 5,000,000 shares of New UPC Common Stock, with an assigned value of $10,512,000 ($2.10 per share). As a result of adopting fresh start reporting upon emerging from Chapter 11 status, the Debtor will have no beginning retained earnings or deficit. In future reporting periods, UPC's financial statements will be presented on a different basis than for prior reporting periods and, therefore will not be comparable with those financial statements prepared before the Plan is confirmed. Step 2: Merger with FSCI Immediately prior to the Merger and with $17 Million of the net proceeds of the Merger Financing, FSCI and its affiliates will perform the Toni Agreement. After the reorganization of the Debtor's balance sheet according to the terms of Chapter 11, the reorganized Debtor will merge with FSCI. Upon consummation of the merger and the Toni Agreement: (1) UPC will succeed to all of the assets and liabilities of FSCI and will own or lease 100% of the Walk-In Stores and a 10% equity interest in FSG, the operator of the Drive-Thru Stores; (2) the shareholders of FSCI will receive (x) approximately 48% of the New UPC Common Stock, (y) 50% ($7 million aggregate liquidation preference) of the New UPC Preferred Stock; and (z) cash in the amount of $3 million; (3) the existing unsecured creditors and equity holders of UPC (including but not limited to UPC's unsecured creditors, equity holders and the Trustee of the litigation settlement trust contemplated by the Chapter 11 plan in the proceedings) will receive approximately 52% of the common stock of UPC; and (4) Infinity will receive, on account of its secured claims against UPC, 50% ($7 million aggregate liquidation preference) of the New UPC Preferred Stock. F.S. Management has prepared the Unaudited Proforma Consolidated Balance Sheet as of the Effective Date. Merger-related adjustments to the balance sheets reflective of the above transaction are as follows: (1) write-up of Farm Stores' contributed assets in the amount of $1,900,000 to reflect fair market value; (2) contribution of $3,300,000 in FSG common stock; (3) contribution of deferred tax assets, resulting from UPC net operating loss carryforwards, in the amount of $10,000,000; (4) the issuance of $20,000,000 in debt to (x) pay the $17,000,000 purchase price of Isaias, a non-managing partner of the F.S. Partnerships, and (y) fund the $3 million cash payment due to Bared upon consummation of the Merger; (5) issuance of 140,000 shares of New UPC Preferred Stock and 5,000,000 shares of New UPC Common Stock (having a par value of $0.001 per share); (6) the creation of $14,268,000 in post-transaction goodwill associated with the Merger; and, (7) the conversion of $2,002,281 of retained earnings into paid in capital, thereby reducing the retained earnings balance to zero. The Unaudited Proforma Consolidated Balance Sheet is not necessarily indicative of the results which would have actually been obtained had all the transactions referred to above occurred on such dates. The Unaudited Proforma Consolidated Balance Sheet should be read in conjunction with the Debtor's consolidated financial statements and the notes thereto. Additional assumptions on which the Unaudited Proforma Consolidated Balance Sheet is based are set forth as follows: (a) Represents F.S. Management's assessment of the write-up to fair market value of the Farm Stores contributed assets. (b) Represents goodwill created through the merger (c) Represents the present value of the UPC net operating loss carryforward contributed to UPC Merger Sub. (d) Represents the value of 10% of the stock of FSG. (e) Represents new debt secured upon the assets of UPC Merger Sub to effect the Merger Financing. (f) Represents the New UPC Preferred Stock issued according to the terms of the Plan and the Merger Agreement. (g) Represents the New UPC Common Stock issued according to the terms of the Plan and the Merger Agreement. 12. Taxes. In connection with the reorganization transactions discussed in 11 above, Debtor's management estimates that there will be a gain on the reorganization of approximately $975,000 on the conversion of the Debentures and accumulated interest. The projections assume that any such gain will be offset by net operating loss carryforwards. As discussed elsewhere in this Disclosure Statement, UPC Merger Sub's net operating loss carryforwards subsequent to the reorganization may be subject to disallowance. For purposes of these projections, no part of the potential net operating loss carryforwards that may be retained by UPC have been utilized in the years ending December 31, 2000, 2001 and 2002. Income taxes for the years ending August 29, 2000, 2001 and 2002 have been projected using tax rates effective as of the date of the projections. Deferred taxes are provided for the estimated accumulated temporary differences due to basis differences for assets and liabilities for financial reporting and income tax purposes. The projected differences are primarily due to different financial reporting and tax methods for depreciation and amortization. 13. Effects of Chapter 11 Case. It has been assumed that no adverse effects will result from the commencement of the Chapter 11 Case. It is possible that sales (and, accordingly, earnings) would decline during pendancy of the Chapter 11 Case and that UPC Merger Sub would be unable to recover such lost sales (and earnings) during any future period. VIII. VALUATION OF THE NEW UPC COMMON STOCK The valuation information contained herein is not a prediction or guarantee of the future trading price of the New UPC Common Stock to be issued under the Plan. The trading price of securities issued under a plan of reorganization is subject to many unforseeable circumstances and therefore cannot be accurately predicted. In addition, the actual amount of Allowed Claims and Interests could materially exceed the amounts estimated by the Debtor for purposes of valuing the anticipated percentage recoveries by the holders of such Claims and Interests. As noted below, the valuation of New UPC Common Stock is based on the average projected EBITDA for 2000-2001, and there can be no assurance that the trading market for the New UPC Common Stock will give effect to this analysis. Accordingly, no representation can be or is being made with respect to whether such percentage recoveries will actually be realized by the holders of Allowed claims and Interests. In connection with certain matters relating to the Plan, F.S. Management determined that it was necessary to estimate the value of the New UPC Common Stock as of the Effective Date. Accordingly, F.S. Management has performed certain analyses and estimated the value for the New UPC Common Stock to be issued under the Plan. Specifically, the valuation was developed for purposes of (a) evaluating the relative recoveries of holders of claims and Equity Interests, and (b) evaluating whether the Plan meets the "best interests of creditors" test under section 1129(a)(7) of the Bankruptcy Code. In preparing its analysis, F.S. Management and its financial advisors considered, among other factors: (1) "comparable company analysis" which consisted of reviewing net income, EBITDA and other statistics of selected publicly traded companies deemed similar to the reorganized Debtor; (ii) "comparable transaction analysis," which consisted of reviewing valuation multiples of consolidated net income, consolidated EBITDA and store-level EBITDA achieved typically in transactions involving sales of control ownership positions by multi-store operators in the convenience store industry; (iii) the likely present value of the net operating loss carry forwards held by the Debtor; and (iv) the estimated value of the 10% stake the Debtor will hold in Farm Stores Grocery, Inc., a chain of approximately 108 drive-through specialty grocery stores. In its comparable company analyses, management considered the stock market valuations of such growth-oriented convenience store operators as Casey's General Stores and The Pantry. For the comparable transactions analyses, F.S. Management's valuation assumptions were based on their judgment and experience gained from analysis of a number of comparable control transactions in the industry, rather than relying on a small set of specific transactions. In control transactions in the Debtor's industry, valuations are often based on "store-level" earning power rather than consolidated net income or cash flow. Because of the difficulty of obtaining store-level profitability data in transactions involving publicly traded suitors and targets, F.S. Management felt it was better to rely on its knowledge of valuations seen in those (typically private) transactions where F.S. Management could accurately observe store-level profitability data. Each analysis valued both the enterprise value and the value of the New UPC Common Stock. The enterprise value is equal to the market value of the Common Stock plus the value of the New UPC Preferred Stock (plus accrued dividends) plus the market value of interest-bearing liabilities (including accrued interest) less cash and marketable securities. In summary, F.S. Management's estimate of the value of the New UPC Common Stock was arrived at in the following manner: (in thousands, except per share data) Fiscal 2000 estimated EBITDA $ 5,257 Fiscal 2001 estimated EBITDA $ 8,539 ------------ Average $ 6,898 EBITDA multiple assumed $ 6.0 ------------ Enterprise value of Debtor's convenience store operations $ 41,385 Estimated value of Debtor's 10% share of Farm Stores Grocery, Inc. $ 3,300 Estimated present value of tax Shelter from Debtor's $ 8,878 Total enterprise value $ 53,566 Subtract: post transaction debt $ 20,738 preferred stock face value $ 14,000 ============ Equity value $ 18,828 ============ Common shares outstanding $ 5,000 Estimated value per common share $ 3.77 Notes: An average of the next two fiscal years is used because fiscal 1999 is anticipated to be a transition year where the benefits of combining the two businesses and of branding the Gas Stores will not be fully realized. Fiscal 2000's projected earning power should capture both the benefits of the merger and the full impact of a fuel branding program expected to commence in the first calendar quarter of 2000. An average of the two EBITDA figures is more appropriate for comparisons with public companies than simply using 2001 projected data, as the most distant earnings estimates published by securities analysts for comparable public companies are for the year ending December 31, 2000. The assumed EBITDA-based valuation multiple used in this analysis, 6.0 times, represents a modest discount to the average multiple of 2000 EBITDA data for comparable public companies. The present value of the tax shelter associated with the Debtor's approximately $30 million NOL carryforwards assumes utilization of the NOL of $1,603,000; $5,899,000; $9,977,000; $9,977,000 and $2,500,000 in years 1 through 5, respectively.
Estimates of reorganization value do not purport to be appraisals nor do they necessarily reflect the values that may be realized if assets are sold in arm's length transactions between buyers and sellers. The estimates of value herein represent hypothetical reorganization values that were developed solely for the purposes cited above. Such estimates reflect computations of the estimated equity values of the Debtor though application of various valuation techniques and do not purport to reflect or constitute appraisals of the actual market value that may be realized through the sale of the New UPC Common Stock to be issued pursuant to the Plan, which may be significantly different from the amounts set forth herein. The valuation of the New UPC Common Stock is subject to uncertainties and contingencies, all of which are difficult to predict. The actual market price of the New UPC Common Stock at the time of issuance will depend upon prevailing interest rates, market conditions, the conditions and prospects, financial and otherwise, of the reorganized Debtor, including the anticipated initial securities holdings of prepetition creditors, some of which may prefer to liquidate their investment rather than hold it on a long-term basis, and other factors that generally influence the prices of securities. The actual market price of the New UPC Common Stock may be affected by the reorganized Debtor's performance during the pendency of the Chapter 11 Case or by other factors not possible to predict. Many of the analytic assumptions upon which the valuations are based are beyond the control of the reorganized Debtor and F.S. Management, and accordingly, there will be variations between such assumptions and the actual results. These variations may be material. The New UPC Common Stock is likely to trade at values that differ from the amounts assumed herein, and which differ from the common shareholders' equity per share shown in the financial/exhibits attached hereto. In the event that the estimated value of the reorganized Debtor is different from the actual trading market value after the Effective Date, actual recoveries realized by one or more of the classes of the claims or Equity Interests may be significantly higher or lower than estimated in this Disclosure Statement. F.S. Management believes that the Projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgment as to the future operating and financial performance of the Debtor. Accordingly, the valuation herein assumes that the operating results projected by F.S. Management will be achieved in all material respects. However, no assurance can be given that the projected results will be achieved. In particular, the projected results include assumed substantial increases in gas revenues and decreases in general and administrative expenses, which combine to create substantially more earnings than the F.S. Business and the Debtor have realized in the past. Thus to the extent that the valuation is dependent upon the reorganized Debtor's achievement of the projections, the valuation must be considered speculative. The summary set forth above does not purport to be a complete description of the analysis performed by the F.S. Management. The preparation of an estimate involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods in the particular circumstances and, therefore, such an estimate is not readily susceptible to summary description. In performing its analysis, numerous assumptions were made with respect to industry performance, business and economic conditions, and other matters. The analyses contained herein are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses. As a result of the analyses, reviews, discussions, consideration and assumptions summarized herein, F.S. Management believes that the value of the New UPC Common Stock is equal to $3.77 per common share. This estimate is necessarily based on economic, market, financial and other conditions as they exist on, and on the information made available as of, the date of this Disclosure Statement. Although subsequent events may affect the conclusions, F.S. Management has no obligation to update, revise or reaffirm its estimate of its reorganized value. By way of comparison, based upon the pro forma balance sheet attached hereto as Exhibit E, the common stock will have a book value of approximately $2.00 share. IX. THE CHAPTER 11 CASE A. Commencement of the Chapter 11 Case On January 14, 1999 (the "Petition Date"), the Debtor commenced this Chapter 11 Case by filing a voluntary petition for protection under the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware, the Honorable Peter J. Walsh presiding. B. Continuation of Business After the Petition Date Since the Petition Date, the Debtor has continued to operate its business and manage its property as a debtor in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. During the period immediately following the Petition Date, the Debtor sought and obtained authority from the Bankruptcy Court with respect to a number of matters deemed by the Debtor to be essential to its smooth efficient transition into chapter 11 administration and to stabilize its operations. In addition to seeking entry of the Cash Collateral Order, shortly after the commencement of the Chapter 11 Case, the Debtor has sought certain additional orders, including the following: (a) orders authorizing the retention of professionals (including accountants and attorneys) in connection with the Chapter 11 Case, (b) an order authorizing the Debtor to maintain its prepetition bank account and to continue use of existing business forms and existing books and records (c) an order authorizing the payment of certain payroll taxes, and (d) an order extending the Debtor's time to file its schedules of assets and statement of financial affairs. On February 4, 1999, the Debtor commenced an action in the Bankruptcy Court to stay the Tennessee Litigation, and for a determination of whether the claims asserted in such action are derivative in nature. After briefing and a hearing on February 25, 1999, the Bankruptcy Court preliminarily enjoined the plaintiff in the Tennessee Litigation from continuing to prosecute its action in the Tennessee Federal Court in any way except (i) continued prosecution of plaintiff's motion to sever the Debtor from the Tennessee Litigation, (ii) continued efforts to take certain document discovery and (iii) continuing Plaintiff's efforts to take the deposition of Mr. Clark K. Hunt. Additionally, the Bankruptcy Court specifically ruled that its order would expire on the earlier of May 25, 1999 or confirmation of the Debtor's Plan. On May 24, 1999, the Debtor moved the Bankruptcy Court for an extension of the preliminary injunctions. On June 14, 1999, the Bankruptcy Court denied the Debtor's motion, freeing the plaintiff to pursue the Tennessee Litigation. Nevertheless if the Plan is confirmed, the claims asserted in the Tennessee Litigation would be channeled into, and so long as the UPC Trust remains funded, could be pursued only against the UPC Trust. C. Representation of the Debtor Shortly before the Petition Date, the Debtor retained and has since been represented by the law firm of Young Conaway Stargatt & Taylor, LLP located at Rodney Square North, 11th Floor, P.O. Box 391, Wilmington, Delaware 19899-0391, as bankruptcy counsel. Additionally, the Debtor has retained and is represented by the law firm of Wood, Exall & Bonnet, L.L.P. who serves as special corporate and securities counsel. The Debtor has also retained the accounting firm, J.H. Cohn as its financial advisor. X. THE PLAN A. General THE FOLLOWING IS A SUMMARY OF CERTAIN MATTERS CONTEMPLATED TO OCCUR EITHER PURSUANT TO OR IN CONNECTION WITH THE CONSUMMATION OF THE PLAN. THIS SUMMARY HIGHLIGHTS CERTAIN OF THE SUBSTANTIVE PROVISIONS OF THE PLAN, AND IS NOT, NOR IS IT INTENDED TO BE, A COMPLETE DESCRIPTION OR A SUBSTITUTE FOR A FULL AND COMPLETE REVIEW OF THE PLAN. STATEMENTS REGARDING PROJECTED AMOUNTS OF CLAIMS OR DISTRIBUTIONS (OR VALUE OF SUCH DISTRIBUTIONS) ARE ESTIMATES BASED UPON CURRENT INFORMATION AND ARE NOT REPRESENTATIVE AS TO THE ACCURACY OF THESE AMOUNTS. FOR AN EXPLANATION OF THE BASIS FOR, LIMITATIONS OF, AND UNCERTAINTIES RELATING TO THE VALUE OF THE STOCK TO BE ISSUED UNDER THE PLAN, SEE THE SECTION VIII OF THIS DISCLOSURE STATEMENT ENTITLED "VALUATION OF THE NEW UPC STOCK." THE DEBTOR URGES ALL HOLDERS OF CLAIMS AND INTERESTS AND OTHER PARTIES IN INTEREST TO READ AND STUDY CAREFULLY THE PLAN, A COPY OF WHICH IS ATTACHED HERETO AS EXHIBIT A. Section 1123 of the Bankruptcy Code provides that a plan of reorganization must classify claims against and equity interests in a debtor. Although the Bankruptcy Code gives a debtor significant flexibility in classifying claims and interests, section 1122 of the Bankruptcy Code requires that a plan of reorganization may only place a claim or an interest into a class containing claims or interests that are substantially similar to such claim or interest. The Plan designates six Classes of Claims and two Classes of Interests. These Classes take into account the differing nature and priority of Claims against and Interests in the Debtor. In addition, Administrative Expense Claims and Priority Tax Claims are not classified for purposes of voting or receiving distributions under the Plan, as is permitted by section 1123(a)(1) of the Bankruptcy Code. Rather, all such Claims are treated separately as Unclassified Claims. The Plan provides different treatment for each class of Claims and Equity Interests. Only holders of Allowed Claims or Equity Interests are entitled to receive distributions under the Plan. Allowed Claims are Claims that are not in dispute, are not contingent, are liquidated in amount, and are not subject to objection or estimation. In accordance with the Plan, unless otherwise provided in the Plan or the Confirmation Order, the treatment of any Claim or Equity Interest under the Plan will be in full satisfaction, settlement, release, and discharge of and in exchange for such Claim or Equity Interest. Article 2 of the Plan classifies the Claims against and Equity Interests in the Debtor. Article 4 of the Plan provides for the treatment of Claims and Equity Interests. Article 5 of the Plan provides for the treatment of unclassified Claims. The following discussion summarizes the classification scheme and treatment method proposed by and for the Debtor and is qualified in its entirety by the terms of the Plan, which is attached hereto as Exhibit "A", and which should be read carefully by you in considering whether to vote to accept or reject the Plan. B. Classification and Treatment of Claims and Interests If the Plan is confirmed by the Bankruptcy Court, each holder of an Allowed Claim or Allowed Interest in a particular Class will receive the same treatment as the other holders in the same Class of Claims or Interests, whether or not such holder voted to accept the Plan. Moreover, upon confirmation, the Plan will be binding on all creditors and stockholders of UPC regardless of whether such creditors or stockholders voted to accept the Plan. Such treatment will be in full satisfaction, release and discharge of and in exchange for such holder's respective Claims against or Interests in UPC, except as otherwise provided in the Plan. 1. Unclassified Claims. The Bankruptcy Code does not require classification of certain priority claims against a debtor. In this case, these unclassified Claims include Administrative Expense Claims and Priority Tax Claims. (a) Administrative Expense Claims. An Administrative Expense Claim is any cost or expense of administration of the Chapter 11 Case incurred by UPC (or its Estate) on or after the Petition Date and before the Effective Date, and which is entitled to and allowed priority under Section 503(b) of the Bankruptcy Code. These Claims include, without limitation, any reasonable, actual and necessary costs and expenses of preserving the Estate and operating the business of UPC during the Chapter 11 Case. In the present case, Administrative Expense Claims are primarily composed of professional fees and costs, which the Debtor has estimated will be at least $500,000. Each holder of an Allowed Administrative Expense Claim shall receive (i) the amount of such holder's Allowed Administrative Expense Claim in one cash payment on the Distribution Date, or (ii) such other treatment as may be agreed upon in writing by UPC and such holder; provided, that an Administrative Expense Claim representing a liability incurred in the ordinary course of business of UPC may be paid at UPC's election in the ordinary course of business by UPC. Certain Claims which may have accrued before the Petition Date or may accrue after the Petition Date, but arise out of executory contracts with UPC made before the Petition Date, and which would ordinarily be treated as General Unsecured Claims, may constitute Administrative Expense Claims as a result of the Debtor's assumption, pursuant to section 365 of the Bankruptcy Code, of the agreement giving rise to the Claim. Because the Plan provides that Claims in Class 4, consisting of General Unsecured Claims, are unimpaired, the distinction is de minimis. Accordingly, holders of such Claims may elect not to apply for treatment of such Claims as Administrative Expense Claims. Regardless of the class into which any such postpetition Claim is placed, any such postpetition Claim that is considered to be for "services or for costs and expenses in or in connection with the Chapter 11 Case, or in connection with the Plan and incident to the case," must be approved by or be subject to the approval of the Bankruptcy Court as reasonable. (b) Priority Tax Claims. A Priority Tax Claim is that portion of any Claim against UPC for unpaid taxes which is entitled to priority in right of payment under section 507(a)(8) of the Bankruptcy Code. UPC believes that it was substantially current on its tax obligations at the time of commencement of the Chapter 11 Case. Accordingly, UPC anticipates that Priority Tax Claims will be less than $40,000. Pursuant to the Plan, each holder of an Allowed Priority Tax Claim shall receive from the Debtor in full satisfaction of such holder's Allowed Priority Tax Claim, (i) the amount of such holder's Allowed Claim, with Post-Confirmation Interest thereon, in equal annual cash payments on each anniversary of the Distribution Date, until the sixth anniversary of the date of assessment of such Claim (provided that the Debtor may prepay the balance of any such claim at any time without penalty); (ii) a lesser amount in one cash payment as may be agreed upon in writing by the Debtor and such holder; or (iii) such other treatment as may be agreed upon in writing by the Debtor and such holder. 2. Classified Claims. The following describes the Plan's classification of the Claims and Interest that are required to be classified under the Bankruptcy Code and the treatment that the holders of Allowed Claims or Allowed Interests will receive for such Claims or Interests: (a) Class 1 -- Priority Non-Tax Claims. A Priority Non-Tax Claim is any Claim against UPC for an amount entitled to priority under section 507(a) of the Bankruptcy Code, other than an Administrative Claim or a Priority Tax Claim. Such Claims are primarily for employee wages, vacation pay, severance pay, contributions to benefit plans and other similar obligations. The Debtor estimates that the aggregate allowed amount of Priority Non-Tax Claims will be no more than $10,000 on the Effective Date. All holders of Allowed Priority Non-Tax Claims will have all of their legal, contractual and equitable rights reinstated pursuant to the Plan and therefore are unimpaired under the Plan. (b) Class 2 -- Infinity Secured Claim. The Infinity Secured Claim shall be Allowed pursuant to the Plan and on the Effective Date the holder of the Infinity Secured Claim shall receive 70,000 shares of New UPC Preferred Stock in full satisfaction and release of the Infinity Secured Claim. (c) Class 3 -- Secured Claims (Other than the Infinity Secured Claim). This Class includes all Claims that are secured by Liens on any asset of UPC, excluding the Infinity Secured Claim. The Debtor currently believes that the only such Claim is the Secured Claim of the Small Business Administration (the "SBA") with respect to the Marietta, Georgia location. The SBA's Secured Claim is comprised of first and second mortgage loans in the combined principal amount of approximately $908,045 to Calibur, which are secured by real property owned by the Debtor. As of December 31, 1998, the combined balance of the two notes was $930,000, which balance should decrease because monthly payments are being made on the SBA notes by Calibur's tenant on the Marietta, Georgia Property. Each holder of an Allowed Secured Claim shall be unimpaired under the Plan and, pursuant to section 1124 of the Bankruptcy Code, all of the legal, equitable, and contractual rights of each holder of a Secured Claim in respect of such Claim shall be fully reinstated and retained as though the Chapter 11 Case had not been filed. Notwithstanding the foregoing, the Debtor and any holder of an Allowed Secured Claim may agree to any alternate treatment of such Secured Claim, which treatment may include preservation of such holder's Lien; provided, that such treatment shall not provide a return to such holder having a present value as of the Effective Date in excess of the amount of such holder's Allowed Secured Claim. (d) Class 4 -- General Unsecured Claims. This Class includes all Claims against UPC that are not secured by a Lien on any asset of UPC, excluding the Debenture Claims and Securities Claims. General Unsecured Claims are composed primarily of trade debt incurred by UPC for goods and services provided before the commencement of the Chapter 11 Case, and other miscellaneous obligations arising from the prepetition operations of UPC's business. The Debtor currently estimates that the allowed amount of such Claims will not exceed $250,000. However, the Debtor has scheduled as disputed approximately $900,000 of unsecured claims and proofs of unsecured claims, which the Debtor likewise disputes, have been filed totaling approximately $2,000,000. Although the Debtor believes that all of the disputed scheduled and filed claims will ultimately be disallowed by the Bankruptcy Court, there can be no assurance that some or all of the disputed scheduled and filed claims will not be allowed by the Bankruptcy Court. The allowance of a substantial portion of such disputed claims would have a deleterious effect on the ability of the Debtor to consummate the Plan, as under the Plan, each holder of an Allowed General Unsecured Claim shall be unimpaired and, pursuant to section 1124 of the Bankruptcy Code, all of the legal, equitable and contractual rights of each holder of an Allowed General Unsecured Claim in respect of such Claim shall be fully reinstated and retained as though the Chapter 11 Case had not been filed. (e) Class 5 -- Debenture Claims. The Debenture Claims shall be Allowed pursuant to the Plan and on the Effective Date each holder of an Allowed Debenture Claim shall receive a Pro Rata Share of 1,750,000 shares of New UPC Common Stock. Infinity or its affiliates will transfer 200,000 shares of the New UPC Common Stock that it receives on account of its Debentures to the UPC Trust; provided, that Infinity or its affiliates shall be entitled to receive one-half (1/2) of any such assets that remain in the UPC Trust, if any, after all distributions have been made by the UPC Trust under the Plan in respect of Allowed Securities Claims. As of January 14, 1999, the outstanding principal amount of (i) the 6% Debentures was $1,324,696 and accrued interest was $97,020, (ii) the outstanding principal amount of the 7% Debentures was $3,549,120 and accrued interest was $532,507, and (iii) the outstanding principal amount of the 18% Debentures was $1,575,000 and accrued interest was $420,117. As of December 31, 1998, the aggregate outstanding principal amount of the Debentures was $6,448,816 and accrued interest was $1,049,694. In addition to the principal and interest owing under the Debentures, Class 5 Debenture Claims also include any other claims arising under or in any way relating to the Debentures, and would include any Causes of Action. The only Debenture Claims filed other than for principal and interest were filed by Dan Dotan and Mantel International Investments, Ltd. ("Mantel"). Dan Dotan filed three claims in unliquidated amounts (the "Dotan Claims") which assert claims for diversion, recision and failure to convert, arising out of his prior ownership of Debentures. Debtor's records reflect that Dan Dotan holds a Debenture Claim in the amount of $200.00. Additionally, Mantel filed an unliquidated claim for fraud, breach of contract and other causes of action arising out of his ownership of Debentures (the "Mantel Claims"). Debtor's records reflect that Mantel holds no Debenture Claim. Debtor believes the Dotan Claims and Mantel Claim are without merit and the Debtor intends to vigorously contest such Claims. To the extent such claims are allowed by the Court, the total amount of claims in Class 5 will increase and the percentage recovery to holders of Class 5 Claims will be diminished proportionately. Additionally, Dan Dotan filed a claim arising out of his Preferred Stock holding which claim, to the extent allowed, will be treated in Class 6. (f) Class 6 -- Preferred Equity Interests. The Preferred Equity Interests shall be Allowed pursuant to the Plan and on the Effective Date each holder of an Allowed Preferred Equity Interest shall receive a Pro Rata Share of 650,000 shares of New UPC Common Stock. As of December 31, 1998, the Class A Preferred Stock had an aggregate liquidation preference of $9,912,000 and a dividend rate of 18%, and the Class B Preferred Stock had an aggregate liquidation preference of $1,833,000 and a dividend rate of 8%. Preferred Equity Interests will be canceled, annulled and extinguished on the Effective Date. (g) Class 7 -- Common Equity Interests. This Class includes all shares of Common Stock outstanding on the Petition Date (which UPC currently estimates to be 30,565,352 shares). All Common Equity Interests (except for Securities Claims) will be canceled, annulled and extinguished as of the Effective Date. Each holder of an Allowed Common Equity Interest as of the Distribution Record Date shall receive (i) a Pro Rata Share of 200,000 shares of New UPC Common Stock, and (ii) the right to receive a Pro Rata Share of one-half ( 1/2) of any assets initially contributed to the UPC Trust pursuant to Sections 7.2 and 7.3 of the Plan, which remain after all distributions have been made by the UPC Trust under the Plan in respect of Allowed Securities Claims. (h) Class 8 - UPC Securities Claims. This class includes all UPC Securities Claims, if any. All UPC Securities Claims shall be liquidated and allowed pursuant to the ADR, together with the Infinity Securities Claims. On the distribution Date, each holder of an Allowed UPC Securities Claim shall receive a distribution from the UPC Trust as provided by the UPC Trust Agreement and the ADR. C. Means for Implementation of the Plan 1. Continued Corporate Existence. UPC and its subsidiaries, Calibur and Jackson, shall continue to exist after the Effective Date as separate corporate entities, with all corporate powers, in accordance with the laws of the State of Delaware and pursuant to their respective charters and new by-laws (in the Debtor's case, its New Charter and By-Laws which shall become effective upon the occurrence of the Effective Date). The vast majority of the Company's employees are employed by, and the vast majority of the Company's trade creditors are creditors of, Calibur, which operates the Company's car wash, gas station, lube center and convenience store businesses. As a result, because the Company does not contemplate commencing a chapter 11 case for Calibur, the Chapter 11 Case should have no direct impact on the vast majority of the Company's employees or trade creditors. All employees or trade creditors of Calibur and Jackson may continue to transact business with the Company in the ordinary course and the companies intend to pay such claims in the ordinary course during the pendancy of the Chapter 11 Case of UPC. The Plan provides that valid Claims of trade creditors are unimpaired; such claims are to be to be paid in full and the holders of any such Claim shall not be required to file a proof of claim or take any other formal action to obtain such payment unless such holder disagrees with the amount scheduled for such Claim by the Company. The Debtor intends that, except as may be provided in the Plan, separate motion filed with the Bankruptcy Court, the Merger Agreement or the Management Agreement, salaries, wages, expense reimbursements, accrued paid vacations, health-related benefits, severance benefits and similar benefits of employees of UPC will be unaffected by the Plan. However, after the Effective Date, the employees of the Debtor will become subject to the benefit plans and programs of F.S. Partnerships rather than those of the Debtor. The Plan provides for all UPC employee claims and benefits to be paid or honored no later than the date on or after the Effective Date when such payment or other obligation becomes due and performable. 2. Actions Prior to the Effective Date. On or prior to the Effective Date (except as otherwise indicated), the following actions shall have been effected: (a) title to the Estate Assets shall vest in UPC, free and clear of all liens, claims, and interests, except as expressly provided in the Plan; (b) pursuant to the Merger Agreement, title to the FSCI Assets shall vest in UPC Merger Sub, and pursuant to the Merger Agreement and the consummation of the Toni Option, UPC Merger Sub will own 100% of the assets consisting of the Walk-In Stores and 10% of the stock of FSG. (c) the management, control, and operation of UPC shall become the general responsibility of the board of directors of UPC, as reconstituted pursuant to the Plan and Merger Agreement, (d) UPC's charter and bylaws shall be amended and restated to provide for, among other things, the implementation of the Plan, UPC's opting out of Section 203 of the Delaware General Corporation Law, a prohibition against the issuance of nonvoting equity securities as required by section 1123(a)(6) of the Bankruptcy Code, and restrictions on certain transfers of New UPC Common Stock (See Description of Securities and Instruments to be issued in Connection with the Plan; Common Stock to be Issued Pursuant to the Plan); (e) the Debentures, the A-Note, the B-Note and all related loan, security and other documents, and all existing shares of Common Stock and the Series A and Series B Preferred Stock shall be canceled, annulled, and extinguished; (f) UPC shall issue and distribute 2,600,000 shares of New UPC Common Stock (representing a 52% common equity interest in UPC) as follows: (i) 1,750,000 shares shall be issued to the holders of Allowed Debenture Claims (of which Infinity or its affiliates shall transfer 200,000 shares to the UPC Trust); (ii) 650,000 shares shall be issued to the holders of Allowed Preferred Equity Interests; and (iii) 200,000 shall be issued to the holders of Allowed Common Equity Interests; (g) UPC shall issue and distribute to Infinity 70,000 shares of New UPC Preferred Stock in exchange for the cancellation of the Infinity Secured Claim as specified in the Infinity Settlement Agreement; (h) UPC shall issue and distribute 2,400,000 shares of New UPC Common Stock (representing a 48% common equity interest in UPC), 70,000 shares of New UPC Preferred Stock and $3 Million to the FSCI Shareholder pursuant to the Merger Agreement; (i) except as otherwise provided in the Plan, all promissory notes, share certificates, instruments, indentures, or agreements evidencing, giving rise to, or governing any Claim or Equity Interest shall be deemed canceled and annulled without further act or action under any applicable agreement, law, regulation, order, or rule, and the obligations of UPC under such promissory notes, share certificates, instruments, indentures, or agreements shall be discharged; (j) the UPC Trustee, the Debtor, and the Infinity Parties shall enter into and execute the UPC Trust Agreement, the UPC Trust shall be established, and the property to be transferred to the UPC Trust shall automatically vest in the UPC Trust without further action on the part of the Debtor, Infinity or the UPC Trustee, with the execution, delivery and filing or recording as necessary of appropriate documents of conveyance and physical delivery of such property occurring as soon thereafter as practicable; and (k) all Securities Claims against UPC and the Infinity Parties shall be (i) channeled to the UPC Trust for liquidation pursuant to the ADR resolution procedures established pursuant to the Plan (as attached to the Plan as Appendix II thereto) and satisfied from the assets of the UPC Trust, and (ii) enjoined from being asserted against or collected from UPC or the Infinity Parties. 3. Sources and Uses of Funds. The Debtor estimates that, on the Effective Date, it will be required to make cash payments totaling up to approximately $20.9 million (i.e., the cash required to pay $3 Million to the FSCI shareholder upon consummation of the Merger, the $17 Million payment under the Toni Option, Administrative Expense Claims, Priority Tax Claims, Priority Non-Tax Claims and General Unsecured Claims). The Company believes that the $23 million Merger Financing it hopes to obtain will be more than adequate to cover its cash obligations under the Plan, as well as to provide UPC with sufficient working capital to meet its ongoing obligations and any additional cash needs after the Effective Date. However, this belief is based on assumptions and projections as to the reorganized Debtor's future performance, including, among other things, projections concerning profit margins that assume certain cost savings resulting from the Merger, and there can be no assurance that the actual performance of the reorganized Debtor, and therefore its ability to cover its cash obligations under the Plan, will be as favorable as projected. See "Business Plan and Assumptions." All Cash necessary for the UPC Trust to make payments to the holders of Allowed Securities Claims shall be obtained from the assets contributed by Infinity to the UPC Trust pursuant to the Plan, or the proceeds thereof. 4. Use of Cash Collateral. In connection with the issuance of the A-Note and the B-Note, the Company granted Infinity a security interest in substantially all of the Company's assets, including, without limitation, all of the Company's cash. As a result, section 363 of the Bankruptcy Code requires the Debtor to either obtain Bankruptcy Court approval to use such cash or obtain approval of an agreement with Infinity regarding the use of such cash. In that regard, the Debtor has entered into and obtained Bankruptcy Court approval of an agreement with Infinity authorizing the use of cash collateral during the pendancy of the Chapter 11 Case. 5. Filing and Execution of Plan Documents. On or before five (5) business days prior to the deadline for parties to vote to accept or reject the Plan, UPC shall file with the Bankruptcy Court substantially final forms of the agreements and other documents that have been identified as Plan Documents, which documents and agreements shall implement and be controlled by the Plan. Entry of the Confirmation Order shall (a) ratify all actions taken by the Debtor during the Chapter 11 Case, and (b) authorize the officers of UPC to execute, enter into, and deliver all documents, instruments and agreements, including, but not limited to, the Plan Documents, and to take all actions necessary or appropriate to implement the Plan. To the extent the terms of any of the Plan Documents conflict with the terms of the Plan, the Plan shall control. 6. Intercompany Causes of Action. Except for valid intercompany payables and receivables between and among UPC, Jackson and Calibur, which shall be unaffected by the Chapter 11 Case, all rights, claims, Causes of Action, obligations, and liabilities between and among UPC and its Affiliates shall be waived, released, and discharged upon the occurrence of the Effective Date. 7. Vesting of Causes of Action. Because of the exigencies relating to the Merger and in order to minimize administrative expenses so as to maximize distributions to creditors, the Proponent has filed the Plan and this Disclosure Statement on an expedited basis. As a result, the Proponent has yet to undertake and complete a thorough analysis of possible Causes of Action and the potential defendants in respect thereof. Except as otherwise provided in the Plan, all Causes of Action assertable by UPC including, without limitation, all Causes of Action assertable pursuant to sections 542, 543, 544, 545, 547, 548, 549, 550, or 553 of the Bankruptcy Code shall be retained by UPC and shall be vested in UPC upon the occurrence of the Effective Date. Any net recovery realized by UPC on account of such Causes of Action shall be property of UPC. Further, without limiting the scope of the above paragraph or the universe of potential defendants, all creditors who received transfers or payments which may be avoidable under Bankruptcy or non-Bankruptcy law, directors and former officers of the Debtor, and advisors to the Debtor (except to the extent expressly released pursuant to the Plan), may be targets in such litigation. The entry of the Confirmation Order shall not constitute res judicata or otherwise bar or inhibit the prosecution of Causes of Action by the Debtor. 8. Injunction for Indemnities. The entry of the Confirmation Order shall constitute a permanent injunction against the prosecution of all claims and causes of action of any Person against the officers, directors, employees and attorneys of UPC, who served in such capacities as of the Effective Date, to the extent such claims or causes of action (a) are based in whole or in part on events occurring on or before the Effective Date, and (b) have been indemnified by UPC Debtor under its charter, its bylaws, applicable state law or as specified by agreement, or any combination of the foregoing. The obligations of UPC to indemnify, reimburse, or limit the liability of such directors, officers, employees, or attorneys against any claims or causes of action as provided in UPC's charter, UPC's bylaws, applicable state law, or specified by agreement, or any combination of the foregoing, shall survive confirmation of the Plan, remain unaffected thereby, and not be discharged to the extent such claims or causes of action are (a) asserted against individuals who served in such capacities on the Effective Date, and (b) based in whole or in part on events occurring on or before the Effective Date. Dan Dotan and Mantel have advised the Debtor that they have claims against present or former directors and officers of UPC, on which claims said directors and officers are asserted to be jointly liable with UPC. Dan Dotan and Mantel therefore assert that indemnification by UPC and the proposed injunction in favor of such persons violates 11 U.S.C. section 502(e) and 520(b), which assertion UPC disputes. 9. Severance Policies. Other than as may be provided for in the Merger Agreement, the Management Agreement or separate motion filed with the Bankruptcy Court prior to entry of the Confirmation Order, all employment and severance practices, policies, and agreements, and all compensation and benefit agreements, plans, policies, and programs of UPC applicable to its directors, officers, or employees, including, without limitation, all savings plans, health care plans, severance benefit plans, incentive plans, employment agreements, workers' compensation programs, and life, disability, and other insurance plans, to the extent in full force and effect on the date of the commencement of the Confirmation Hearing are treated as executory contracts under the Plan, and the Plan constitutes and incorporates a motion to assume all such practices, policies, agreements, plans, and programs pursuant to section 365(a) of the Bankruptcy Code, as modified by the Plan. D. Creation of UPC Trust and Appointment of Trustee On the Effective Date, the UPC Trust will be created pursuant to the UPC Trust Agreement for the benefit of all holders of Securities Claims. The UPC Trust shall be administered by an independent trustee who shall be designated by UPC, subject to approval of the Bankruptcy Court. In consideration for the property transferred and the payments made to the UPC Trust pursuant to the Plan, the UPC Trust shall assume all Securities Claims against UPC and the Infinity Parties and indemnify them for any claims for reimbursement or contribution. So long as the property transferred to the UPC Trust has not been exhausted, or if exhausted, replenished by Infinity, the Confirmation Order shall enjoin the holders of Securities Claims (including, without limitation, the Claims asserted in the Pisacreta/Tucci Action to the extent they are not derivative claims belonging to the Debtor) from asserting against, or collecting such claims from, the Infinity Parties and their assets. See "General Information - Legal Proceedings" and "The Plan-Injunctive Projection for the Debtor and the Infinity Parties." As of the Effective Date, UPC shall transfer and assign (or deliver, as applicable) to the UPC Trust in accordance with the UPC Trust Agreement, (1) all Causes of Action of UPC for contribution and indemnity with respect to Securities Claims against any Person, excluding the Infinity Parties, and (2) all of its documents and records relating to the transactions and events that purportedly give rise to Securities Claims, except those documents necessary for the Company's continuing operations. As of the Effective Date, Infinity shall transfer and assign (or deliver, as applicable) or cause to be transferred and assigned (or delivered, as applicable) to the UPC Trust in accordance with the UPC Trust Agreement, effective as of the Effective Date, (1) 200,000 shares of New UPC Common Stock, and (2) all Causes of Action of the Infinity Parties for contribution and indemnity with respect to Securities Claims against any Person, excluding UPC, its affiliates and their respective officers, directors, attorneys and representatives. As of the Effective Date, the UPC Trust shall (1) establish the Securities Claims Resolution Facility and assume responsibility for the liquidation of all Securities Claims as specified in the ADR, (2) assume the defense of all Causes of Action against UPC and the Infinity Parties that constitute or may give rise to Securities Claims, (3) assume the defense of all Causes of Action against any Person that may give rise to an indemnification liability against the Infinity Parties; and (4) prosecute such Causes of Action, rights, and claims of UPC and the Infinity Parties that have been transferred and assigned to the UPC Trust as the UPC Trustee shall determine is appropriate under the circumstances. Any assets initially contributed to the UPC Trust pursuant to Sections 7.2 and 7.3 of the Plan, that remain after satisfaction of all Allowed Securities Claims and related expenses shall be allocated and distributed in accordance with the Infinity Settlement Agreement 50% to Infinity or its affiliates and 50% to the holders of Allowed Common Equity Interests. E. Compromise and Settlement Between and Among the Debtor, the Infinity Parties, and the UPC Trust Pursuant to 1123(b)(3)(a) of the Bankruptcy Code, the Plan provides for the settlement of all disputes and controversies between the Debtor, the Infinity Parties, and the UPC Trust. In accordance with Bankruptcy Rule 9019, at the Confirmation Hearing, the Debtor will request that the Bankruptcy Court approve the settlements embodied in Article XIV of the Plan. The evaluation of the settlements by the Bankruptcy Court will entail the consideration of certain factors to determine whether such settlements are in the best interests of the Debtor's estate and its creditors, and should thus be approved. Among the determinative factors to be considered are: o the probability of success in litigation; o the complexity of the litigation and the expenses, inconveniences and delays necessarily attendant to prosecution of the litigation; o the difficulties, if any, to be encountered in the collection of any judgment that might be obtained; and o the interests of the debtor's estate, including those of the creditors and other parties in interest with appropriate deference to the reasonable views expressed by them in relation to the proposed settlement. In evaluating proposed settlements, the Bankruptcy Court is not to substitute its judgment for that of the Debtor. Thus, there is a strong initial presumption that the compromises and settlements negotiated by the Debtor are fair and reasonable. Based upon the factors set forth above, the Debtor believes that the proposed settlements fall well within the range of reasonableness and therefore should be approved by the Bankruptcy Court. The Plan constitutes a motion pursuant to Bankruptcy Rule 9019 for the entry of an order authorizing and approving the following compromise and settlement between and among the Debtor, the UPC Trust and the Infinity Parties: 1. For and in consideration of the undertakings and other agreements of the Infinity Parties under and in connection with the Plan and the Infinity Settlement Agreement, as of the Effective Date, the Debtor shall: (a) issue 70,000 shares of New UPC Preferred Stock to Infinity, or its designee; and (b) release the Infinity Parties from any and all Causes of Action arising in whole or in part from conduct or events that occurred prior to the Effective Date (including, without limitation, derivative claims which the Debtor otherwise has legal power to assert, compromise or settle in connection with the Chapter 11 Case), except as otherwise provided in the Plan and the Infinity Settlement Agreement. 2. For and in consideration of the undertakings and agreements of UPC under and in connection with the Plan and the Infinity Settlement Agreement, as of the Effective Date, the Infinity Parties shall (a) waive and release all of their rights, interests and claims in and under the A-Note and the B-Note, (b) contribute 200,000 shares of New UPC Common Stock to the UPC Trust as provided in Section 7.3 of the Plan, and (c) release the Debtor, and its Affiliates, and their respective past and present directors, officers, employees, agents, sales representatives, and attorneys from any and all Causes of Action arising in whole or in part from conduct or events that occurred prior to the Effective Date, except as otherwise provided in the Plan and the Infinity Settlement Agreement. 3. As of the Effective Date, the Infinity Parties and the Debtor shall release the UPC Trust and the UPC Trustee from any and all Causes of Action arising in whole or in part from conduct or events that occurred prior to the Effective Date, except as otherwise provided in the Plan and the Infinity Settlement Agreement. F. Injunctive Protection for the Debtor and the Infinity Parties Upon approval of the UPC Trust and the Effective Date of the Plan, and subject to the provisions of Section 16.12(b) of the Plan, all Securities Claims otherwise assertable against the Debtor, or the Infinity Parties, shall be channeled and asserted against the assets of the UPC Trust and all persons who have been, are, or may become holders of such claims shall be enjoined from taking any of the following actions against the Debtor or the Infinity Parties (other than actions to enforce rights under the Plan, the Plan Documents, and appeals, if any, from the Confirmation Order): 1. commencing, conducting or continuing in any manner, directly or indirectly, any suit, action or other proceeding of any kind against such party or its assets or property, or its direct or indirect successors in interest, or any assets or property of such transferee or successor (including, without limitation, all suits, actions, and proceedings that are pending as of the Effective Date, which must be withdrawn or dismissed with prejudice); 2. enforcing, levying, attaching, collecting or otherwise recovering by any manner or means whether directly or indirectly any judgment, award, decree or order against such party or its assets or property, or its direct or indirect successors in interest, or any assets or property of such transferee or successor; 3. creating, perfecting or otherwise enforcing in any manner, directly or indirectly, any Lien against such party or its assets or property, or its direct or indirect successors in interest, or any assets or property of such transferee or successor; 4. asserting any set-off, right of subrogation or recoupment of any kind, directly or indirectly against any obligation due such party, or its assets or property, or its direct or indirect successors in interest, or any assets or property of such transferee or successor; and 5. proceeding in any manner in any place whatsoever that does not conform to or comply with the provisions of the Plan, or the settlements set forth in Article XIV of the Plan, the UPC Trust Agreement or the Infinity Settlement Agreement. If, within thirty (30) days after the UTC Trustee files, at any time or from time to time, with the Bankruptcy Court and serve upon the Infinity Parties, a certificate stating that the assets of the UTC Trust have been totally liquidated and distributed and that either (i) additional Allowed Securities Claims exist or (ii) all timely asserted Securities Claims have not yet been liquidated, the Infinity Parties do not make an additional contribution to the UTC Trust in an aggregate amount equivalent to (A) not less than $100,000 (provided that such amount must be at least enough to satisfy all then Allowed Securities Claims in full and provide at least $25,000 to fund the expenses of the UPC Trust in liquidating any remaining Securities Claims) or (B) such lesser amount as may be agreed to by the UTC Trustee, then the UPC Trust and the injunction shall terminate so that all parties that timely asserted Securities Claims that as of that date have not been liquidated and paid in full may pursue such claims directly against the Infinity Parties. G. Description of Securities and Instruments to be Issued in Connection With the Plan 1. Preferred Stock to be Issued Pursuant to the Plan. Under the Plan, UPC will issue 140,000 shares of New UPC Preferred Stock, par value $.01 per share. The New UPC Preferred Stock will be the only preferred stock of UPC issued and outstanding. Each share of New UPC Preferred Stock will have a preference of $100.00 plus accrued and unpaid dividends (the "Preference Amount") upon any voluntary or involuntary liquidation, dissolution, or winding up of the affairs of UPC. In the event of such voluntary or involuntary liquidation, dissolution or winding up of the affairs of UPC, holders of the New UPC Preferred Stock will be entitled to receive ratably (in proportion to the number of shares of New UPC Preferred Stock held) those amounts or assets available (up to the Preference Amount) after payment or provision for payment of amounts due to holders of all indebtedness or liabilities of UPC, but before any distribution is made to the holders of the New UPC Common Stock. Holders of New UPC Preferred Stock will be entitled to receive cumulative quarterly dividends at the annual rate of approximately 9 percent (9%) of the $100 initial Preference Amount payable in cash out of funds legally available for the payment thereof, or at the option of UPC in New UPC Preferred Stock valued as of the date of payment of such dividends. Each share of New UPC Preferred Stock is redeemable at any time by UPC at the Preference Amount. If there are funds available to redeem a portion of the New UPC Preferred Stock, the redemption shall be carried out on a pro rata basis among all of the holders of the New UPC Preferred Stock. There is no current intention of the Board of Directors to redeem any shares of the New UPC Preferred Stock. If at any time or times dividends on the New UPC Preferred Stock shall be in arrears and unpaid for a total of eight (8) consecutive full quarterly dividend periods, then the number of directors constituting the board of directors, without further action, shall be increased by two (2) and the holders of shares of New UPC Preferred Stock shall have the exclusive right, voting separately as a class, to elect the directors to fill such newly-created directorships. 2. Common Stock to be Issued Pursuant to the Plan. Under the Plan, there will be 5,000,000 shares of New UPC Common Stock issued and outstanding on the Effective Date, 200,000 of which will be held by the current holders of Common Stock. The relative rights, preferences and limitations of the New UPC Common Stock will be essentially identical to those of the existing Common Stock with the exception of (a) the number of outstanding shares, and (b) changes resulting from the amendments to UPC's charter (i) to opt out of Section 203 of the Delaware General Corporation Law (described below), (ii) to prohibit the issuance of nonvoting equity securities as required by section 1123(a)(6) of the Bankruptcy Code, (iii) to restrict certain transfers of New UPC Common Stock and (iv) to implement the Plan. Shares of New UPC Common Stock may be issued at such time or times and for such consideration (but not less than par value) as the Board of Directors of UPC deems advisable, subject to limitations set forth in the laws of the State of Delaware, or UPC's charter or bylaws. Holders of New UPC Common Stock are not entitled to preemptive or other subscription rights, and are not subject to assessment or further call. Each share of New UPC Common Stock is entitled to one vote on all matters on which holders of common stock are entitled to vote. Holders of New UPC Common Stock are not entitled to convert the shares to any other securities of UPC. Holders of the New UPC Common Stock are entitled to receive such dividends as may be declared, from time to time, by the Board of Directors of UPC out of funds legally available therefor. UPC has the right to, and may from time to time, enter into borrowing arrangements or issue other debt instruments, the provisions of which may contain restrictions on payment of dividends and other distributions on the New UPC Common Stock. The Board of Directors is also authorized to issue shares of preferred stock which could contain provisions restricting the payment of dividends and other distributions on the New UPC Common Stock unless the payment of dividends or other payments with respect to such preferred stock have been paid. UPC's current and proposed indebtedness and preferred stock contain provisions limiting UPC's ability to declare or pay dividends on the Common Stock or the New UPC Common Stock. In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up of UPC, holders of Common Stock are entitled to receive ratably in proportion to the number of shares held, those amounts or assets available after payment or provision for payment of amounts due to holders of any outstanding preferred stock (including without limitation, the New UPC Preferred Stock) which has been issued with a liquidation preference provision, and of all indebtedness or other liabilities to any other Person. Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interested stockholder, unless (a) prior to the date of the business combination, the transaction is approved by the board of directors of the corporation; (b) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owns at least 85% of the outstanding voting stock; or (c) on or after such date, the business combination is approved by the board of directors and by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder. A "business combination" includes mergers, asset sales, and other transactions resulting in a financial benefit to the stockholder. An "interested stockholder" is a person who, together with affiliates and associates, owns (or within three years, did own) 15% or more of the corporation's voting stock. As described above, the Debtor intends to opt out of Delaware General Corporations Law Section 203. In order to avoid certain federal income tax consequences caused by certain subsequent ownership changes, the New UPC Charter will contain a "5% Ownership Limitation," effective until the last day of the taxable year of UPC that includes the second anniversary of the Effective Date. (See Certain Federal Income Tax Consequences of the Plan). It is expected that this limitation will provide that no person who beneficially owns, directly or indirectly, five percent or more of the total fair market value of the New UPC Common Stock, or who, upon the purchase, sale, or other transfer of any shares of New UPC Common Stock, would beneficially own, directly or indirectly, or would cause any other person beneficially to own, directly or indirectly, five percent or more of the total fair market value of the common stock of UPC (a "5% Holder"), may sell or purchase any shares of common stock (or any option, warrant or other right to purchase or acquire shares of common stock or any securities convertible into or exchangeable for shares of common stock), except as authorized by the Board of Directors or its designee, subject to the waiver or modification of this restriction by the holders of a majority of the outstanding common stock. The purpose of the 5% Ownership Limitation is to reduce the risk that any change in the ownership of New UPC Common Stock may jeopardize the preservation of federal income tax attributes of UPC for purposes of Section 382 and 383 of the Internal Revenue Code. In conjunction with the 5% Ownership Limitation in the New UPC Charter, in order to further reduce the risk that a change in ownership of the New UPC Common Stock will occur that may jeopardize UPC's federal income tax attributes, each certificate representing shares of New UPC Common Stock shall bear a legend in substantially the following form: "The shares of New UPC Common Stock represented by this certificate are issued pursuant to the Plan of Reorganization for United Petroleum Corporation, as confirmed by the United States Bankruptcy Court for the District of Delaware. The Corporation's Certificate of Incorporation contains restrictions prohibiting the sale, transfer, disposition, purchase or acquisition of any shares of Common Stock without the prior written authorization of the Corporation's Board of Directors (or its designee) by or to any person (a) who beneficially owns, directly or through attribution (as determined under Section 382 of the Internal Revenue Code of 1986 as amended from time to time (the "Code")), 5% or more of the total fair market value of the then issued and outstanding shares of Common Stock of the corporation, or (b) who, upon the sale, transfer, disposition, purchase or acquisition of any shares of Common Stock of the Corporation would beneficially own, directly or through attribution (as determined under Section 382 of the Code), or would cause another person beneficially to own, directly or through attribution (as determined under Section 382 of the Code), 5% or more of the total fair market value of the then issued and outstanding shares of common stock, if that sale, transfer, disposition, purchase or acquisition would jeopardize UPC's preservation of its federal income tax attributes pursuant to Sections 382 or 383 of the Code; provided however, that for so long as the percentage point changes in ownership of the common stock (as described in Section 382(g)(1) of the Code) since the Effective Date do not total more than thirty (30) percentage points, the above restrictions shall be applied by substituting "10%" for "5%". UPC will furnish a copy of its Certificate of Incorporation to the holder of record of this certificate without charge upon written request addressed to UPC at its principal place of business." H. Exemption from Securities Registration for New Securities 1. Initial Issuance of New UPC Common Stock and New UPC Preferred Stock. Section 1145 of the Bankruptcy Code provides that the securities registration requirements of federal, state and local laws do not apply to the offer or sale of stock, warrants or other securities issued by a debtor (or its successor) if (i) the offer or sale occurs under a plan of reorganization and (ii) the securities are transferred in exchange (or principally in exchange) for a claim or interest in a debtor. Accordingly, under section 1145 of the Bankruptcy Code, the Debtor believes the issuance of New UPC Preferred Stock to the holder of the Class 2 Claim and the issuance of New UPC Common Stock holders of Class 5, 6, 7 and 8 Claims and Interests pursuant to the Plan is exempt from registration under the securities laws. With respect to the distribution of New UPC Common Stock and New UPC Preferred Stock to the FSCI shareholder as merger consideration, Debtor believes such issuance will fall under a private-placement exemption of the securities laws. To the extent it is determined that registration is required, the appropriate documentation will be filed. 2. Transfer of Plan Securities. Any person other than the Debtor who is not an "underwriter" under section 1145 of the Bankruptcy Code or a "dealer" under the Securities Act of 1933, as amended (the "1933 Act"), and who transfers New UPC Preferred Stock or New UPC Common Stock received under the Plan need not comply with the registration requirements of the 1933 Act or under the state "blue sky" laws. The term "underwriter," as used in section 1145 of the Bankruptcy Code, includes four categories of persons, which are referred to in this Disclosure Statement as "Controlling Persons," "Accumulators,", "Distributors" and "Syndicators." Dealers and the four types of underwriters are discussed below. EACH PARTY RECEIVING NEW COMMON STOCK PURSUANT TO THE PLAN IS URGED TO CONSULT ITS OWN LEGAL ADVISORS TO DETERMINE WHETHER SUCH PARTY MAY BE DEEMED A DEALER OR UNDERWRITER UNDER THESE DEFINITIONS. (a) Controlling Persons "Controlling Persons" are persons who, after the Effective Date, have the ability, whether direct or indirect and whether formal or informal, to control the management and policies of the reorganized Company. Whether a person has such power depends on a number of factors, including the person's equity in the reorganized Company relative to other equity holders, and whether the person, acting alone or in concert with others, has a contractual or other relationship giving that person power over management policies and decisions. Controlling Persons are permitted to sell or otherwise dispose of New Common Stock only by complying with the registration requirements of the 1933 Act and state "blue sky" laws, or an exemption therefrom. Directors, executive officers and beneficial owners of 10% or more of the outstanding stock of any issuer may be presumed to be controlling persons of that issuer and thus an underwriter for purposes of section 1145 of the Bankruptcy Code. The Debtor believes the Infinity Parties will be considered to be underwriters for purposes of section 1145 of the Bankruptcy Code. (b) Accumulator and Distributors "Accumulators" are persons who purchase a claim against or interest in the Debtor with a view to distribution of any New UPC Preferred Stock or New UPC Common Stock to be received under the Plan in exchange for such claims or interest. "Distributors" are persons who offer to sell New UPC Preferred Stock or New UPC Common Stock for the holders of those securities. (c) Syndicators "Syndicators" are persons who offer to buy New UPC Preferred Stock or New UPC Common Stock from the holders with a view to distribution, under an agreement made in connection with the Plan, with consummation of the Plan or with the offer or sale of securities under the Plan. The Debtors are not aware of any arrangements for the resale of New UPC Preferred Stock or New UPC Common Stock which would make any person a Syndicator. (d) Dealers "Dealers" are persons who engage either for all or part of their time, directly or indirectly, as agent, broker, or principal, in the business of offering, buying, selling, or otherwise dealing or trading in securities. Section 4(3) of the 1933 Act exempts transactions in New UPC Preferred Stock or New UPC Common Stock by dealers taking place more than 40 days after the Effective Date. Within the 40-day period after the Effective Date, transactions by dealers who are stockbrokers are exempt from the 1933 Act pursuant to section 1145(a)(4) of the Bankruptcy Code, as long as the stockbrokers deliver a copy of this Disclosure Statement (and supplements hereto, if any, as ordered by the Court) at or before the time of delivery of New UPC Preferred Stock or New UPC Common Stock to their customers. This requirement specifically applies to trading and other after-market transactions in such securities. I. Market for New Securities The Reorganized Debtor intends to apply to have the New UPC Common Stock listed for trading on a national securities exchange. No guarantee can be given that the Reorganized Debtor will be successful in getting the stock listed or that a market for the stock will develop. J. Executory Contracts and Unexpired Leases The Plan constitutes and incorporates a motion to reject all prepetition executory contracts, and all prepetition unexpired leases to which the Debtor is a party, except for an executory contract or lease that (1) has been assumed or rejected pursuant to Final Order of the Bankruptcy Court; (2) is specifically designated in the Plan as an executory contract or lease to be assumed; or (3) is the subject of a motion to assume or reject that is pending before the Bankruptcy Court on the Effective Date. The Confirmation Order shall represent and reflect an order of the Bankruptcy Court approving such rejections and assumptions of executory contracts and leases as of the Effective Date. UPC currently intends to assume most of the Debtor's executory contracts and unexpired leases in accordance with their terms. K. Other Provisions of the Plan 1. Discharge. Except as otherwise expressly provided in the Plan or in the Confirmation Order, the confirmation of the Plan will (a) bind all holders of Claims and Interests, whether or not they accept the Plan, and (b) discharge and release UPC, pursuant to section 1141(d)(1) of the Bankruptcy Code, effective on the Effective Date, from any Claim, Interest or any "debt" (as that term is defined in section 101(2) of the Bankruptcy Code) that arose or was incurred before the Confirmation Date, and completely extinguish all liabilities in respect thereof, including, without limitation, any liability of a kind specified in section 502(g) of the Bankruptcy Code, regardless of whether: (i) a proof of the Claim or Interest was filed, or the Interest or Claim was scheduled by UPC, (ii) the Claim or Interest is an Allowed Claim or Allowed Interest, as the case may be, or (iii) the holder of such Claim or Interest voted to accept or reject, or abstained from voting on, the Plan. In addition, except as otherwise provided in the Plan, confirmation of the Plan pursuant to the Confirmation Order will act as a discharge and release, effective as of the Effective Date, as to each holder of a Claim or Interest receiving or entitled to receive any distribution under the Plan in respect of any direct or indirect right, Claim or Interest such holder had or may have had against or in UPC. Except as otherwise provided in the Plan, on and after the Effective Date, every holder of a Claim or Interest shall be precluded and enjoined from asserting against UPC, their respective assets or properties, any further Claim or Interest based on any document or instrument or act, omission, transaction or other activity of any kind or nature that occurred prior to the Confirmation Date. 2. Retention and Waiver of Causes of Action. Under the Plan, UPC will retain all of its rights, causes of action and defenses under the Bankruptcy Code or similar applicable non-bankruptcy law and retain and reserve all rights and causes of action against or with respect to any Claim left unimpaired by the Plan, excluding such claims, rights and causes of action as are released by UPC pursuant to the Plan. 3. Objections to Claims and Interests/Distributions. The Plan provides that as soon as practicable, but in no event later than sixty (60) days after the Effective Date (subject to being extended by the Bankruptcy Court upon Motion of the Debtor without notice or a hearing), objections to Claims (except Securities Claims) shall be filed with the Bankruptcy Court and served upon the holders of each of the Claims to which objections are made; provided, that no objection may be filed with respect to any Claim that is or becomes Allowed on or before the Effective Date. After the date of entry of the Confirmation Order, only the Disbursing Agent shall have authority to file, litigate, settle, or withdraw objections to Claims (except for Securities Claims, as to which all disputes regarding existence, amount and treatment shall be resolved pursuant to ADR). The Disbursing Agent (or the UPC Trustee, as applicable) may, at any time, request that the Bankruptcy Court estimate any Contested Claim or Equity Interest pursuant to section 502(c) of the Bankruptcy Code regardless of whether the Disbursing Agent (or the UPC Trustee, as applicable) has previously objected to such Claim or Equity Interest or whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy Court will retain jurisdiction to estimate any Claim or Equity Interest at any time during litigation concerning any objection to any Claim, including during the pendancy of any appeal relating to any such objection. All of the objection, estimation, settlement, and resolution procedures set forth in the Plan are cumulative and not necessarily exclusive of one another. Claims or Equity Interests may be estimated and subsequently compromised, settled, withdrawn or resolved by any mechanism approved by the Bankruptcy Court. 4. Term of Injunctions or Stays. Unless otherwise provided in the Plan, all injunctions or stays provided for in the Chapter 11 Case pursuant to section 105 or 362 of the Bankruptcy Code or otherwise in effect on the Confirmation Date will remain in full force and effect until the Effective Date. On the Effective Date, all Persons who have been, are, or may be holders of Claims against or Equity Interests in UPC shall be enjoined from taking any of the following actions against or affecting UPC, its Estate, or its assets and property with respect to such Claims or Equity Interests (other than actions brought to enforce any rights or obligations under the Plan and appeals, if any, from the Confirmation Order): (a) commencing, conducting or continuing in any manner, directly or indirectly, any suit, action or other proceeding of any kind against UPC, its Estate, or its assets or property, or any direct or indirect successor in interest to UPC, or any assets or property of such transferee or successor (including, without limitation, all suits, actions, and proceedings that are pending as of the Effective Date, which must be withdrawn or dismissed with prejudice); (b) enforcing, levying, attaching, collecting or otherwise recovering by any manner or means whether directly or indirectly any judgment, award, decree or order against UPC, its Estate, or its assets or property, or any direct or indirect successor in interest to UPC, or any assets or property of such transferee or successor; (c) creating, perfecting or otherwise enforcing in any manner, directly or indirectly, any Lien against UPC, its Estate, or its respective assets or property, or any direct or indirect successor in interest to any of UPC, or any assets or property of such transferee or successor other than as contemplated by the Plan; (d) asserting any setoff, right of subrogation or recoupment of any kind, directly or indirectly against any obligation due UPC, its Estate, or its respective assets or property, or any direct or indirect successor in interest to any of UPC, or any assets or property of such transferee or successor; and (e) proceeding in any manner in any place whatsoever that does not conform to or comply with the provisions of the Plan or the settlement set forth in Article XIV of the Plan to the extent such settlements have been approved by the Bankruptcy Court in connection with confirmation of the Plan. With respect to the Securities Claims, the Plan provides that from and after the Effective Date, any Securities Claim otherwise assertable against the Infinity Parties or UPC (including, without limitation, the Causes of Action asserted in the Pisacreta Action and the Tucci Action, see "Legal Proceedings -- Pisacreta/Tucci Action") shall channel and transfer to the UPC Trust, and all Persons who have been, are, or may be holders of any such Securities Claim shall be enjoined, so long as the UPC Trust is funded, from taking any action against or affecting the Infinity Parties or UPC or their respective assets and property with respect to such Securities Claim (other than actions brought to enforce any rights or obligations under the Plan, the UPC Trust Agreement and the Infinity Settlement Agreement). See "The Plan - Injunctive Protection for the Debtor and the Infinity Parties." 5. Release. Any consideration distributed under the Plan shall be in exchange for and in complete satisfaction, discharge, and release of all Claims of any nature whatsoever against UPC and any of its assets or properties; and, except as otherwise provided in the Plan, upon the Effective Date, UPC shall be deemed discharged and released to the extent permitted by section 1141 of the Bankruptcy Code from any and all Claims, including but not limited to demands and liabilities that arose before the Effective Date, and all debts of the kind specified in sections 502(g), 502(h), or 502(i) of the Bankruptcy Code, whether or not (a) a proof of Claim based upon such debt is filed or deemed filed under section 501 of the Bankruptcy Code; (b) a Claim based upon such debt is allowed under section 502 of the Bankruptcy Code; or (c) the holder of a Claim based upon such debt has accepted the Plan. The Confirmation Order shall be a judicial determination of discharge of all liabilities of UPC. As provided in section 524 of the Bankruptcy Code, such discharge shall void any judgment against UPC at any time obtained to the extent it relates to a Claim discharged, and operates as an injunction against the prosecution of any action against UPC, or its property, to the extent it relates to a Claim discharged. 6. Exculpation. None of UPC, Infinity, the F.S. Partnerships, F.S. Management, any of their respective partners, Affiliates, nor any of their respective partners, members, managers, officers, directors, employees, agents, or professionals shall have or incur any liability to any holder of a Claim or Equity Interest for any act, event, or omission in connection with, or arising out of, the dissemination of this Disclosure Statement, or documents prepared in connection herewith, the solicitation of votes with respect to the Plan, the Chapter 11 Case, the confirmation of the Plan, the consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan, except for willful misconduct. 7. Retention of Jurisdiction. Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court shall retain such jurisdiction over the Chapter 11 Case after the Effective Date as legally permissible, including, but not limited to, jurisdiction to: (a) allow, disallow, determine, liquidate, classify, estimate or establish the priority or secured or unsecured status of any Claim, including the resolution of any request for payment of any Administrative Claim and the resolution of any and all objections to the allowance or priority of Claims; (b) grant or deny any applications for allowance and payment of any Fee Claim for periods ending on or before the Effective Date; (c) resolve any matters related to the assumption, assumption and assignment or rejection of any executory contract or unexpired lease to which UPC is a party or with respect to which UPC may be liable and to hear, determine and, if necessary, liquidate, any Claims arising therefrom, including those matters related to the amendment after the Effective Date pursuant to Article XVI of the Plan to add any executory contracts or unexpired leases to Appendix II of the Plan; (d) ensure that distributions to holders of Allowed Claims are accomplished pursuant to the provisions of the Plan, including ruling on any motion filed pursuant to Article XII; (e) decide or resolve any motions, adversary proceedings, contested or litigated matters and any other matters and grant or deny any applications involving UPC that may be pending on or commenced after the Effective Date; (f) enter such orders as may be necessary or appropriate to implement or consummate the provisions of the Plan and all contracts, instruments, releases, indentures and other agreements or documents created in connection with the Plan or this Disclosure Statement, including without limitation the UPC Trust Agreement and the Infinity Settlement Agreement, including to correct any defect, cure any omission or reconcile any inconsistency, except as provided in the Plan; (g) resolve any cases, controversies, suits, or disputes that may arise in connection with the consummation, interpretation or enforcement of the Plan or the UPC Trust Agreement or any entity's obligations incurred in connection with the Plan or the UPC Trust Agreement, or any other agreements governing, instruments evidencing or documents relating to any of the foregoing; (h) issue injunctions, enter and implement other orders or take such other actions as may be necessary or appropriate to restrain interference by any entity with consummation or enforcement of the Plan, except as otherwise provided herein; (i) enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason modified, stayed, reversed, revoked or vacated; (j) determine any other matters that may arise in connection with or relate to the Plan, this Disclosure Statement, the Confirmation Order or any contract, instrument, release, indenture or other agreement or document created in connection with the Plan or this Disclosure Statement, including without limitation the UPC Trust Agreement, except as provided in the Plan; and (k) enter a Final Decree as contemplated by Bankruptcy Rule 3022. 8. Failure of Court to Exercise Jurisdiction. If the Bankruptcy Court abstains from exercising, or declines to exercise, jurisdiction or is otherwise without jurisdiction over any matter arising in, arising under or related to the Chapter 11 Case, including matters discussed in "Retention of Jurisdiction" above, the Plan shall have no effect upon and shall not control, prohibit or limit the exercise of jurisdiction by any other court having competent jurisdiction with respect to such matter. 9. Payment Dates. Whenever any payment to be made under the Plan is due on a day other than a Business Day, such payment will instead be made, without interest, on the next Business Day. 10. Successors and Assigns. The rights, benefits and obligations of any person or entity named or referred to in the Plan will be binding upon, and will inure to the benefit of, the heir, executor, administrator, successor or assign of such person. 11. Payment of Statutory Fees. All fees payable pursuant to Section 1930 of Title 28 of the United States Code, as determined by the Bankruptcy Court, will be paid on or before the Effective Date. Any such fees incurred after the Effective Date until the Chapter 11 Case is closed, will be paid when due. XI. COMPARISON OF RIGHTS IN SECURITIES TO BE ISSUED UNDER THE PLAN TO RIGHTS HELD IN PREPETITION SECURITIES A. Comparison of the Rights of Holders of A-Note and the New UPC Preferred Stock Under the Plan, Infinity, in its capacity as the holder of the A-Note and the B-Note, will receive 70,000 shares of New UPC Preferred Stock in exchange for its A-Note and B-Note. There are material differences between the rights of the holder of the A-Note and the B-Note and those of the holder of New UPC Preferred Stock, certain of which are summarized as follows: 1. Seniority. In the event of the liquidation, dissolution, distribution of assets or winding-up of the Company, the holder of the A-Note and the B-Note would be entitled to receive the principal balance of the A-Note and the B-Note together with accrued and unpaid interest prior to distribution to the holders of junior liens in the Company's assets, unsecured debt of the Company, the Preferred Stock or the Common Stock. As a holder of the New UPC Preferred Stock, any distribution of the Preference Amount would be made only after the payment of all secured and unsecured liabilities of the Company, including the payment of any current or future promissory notes incurred in connection with borrowing of funds by the Company. 2. Voting. The holder of the A-Note and the B-Note has no voting rights except as to such rights as might be granted by statute. The holder of the New UPC Preferred Stock will have no right to vote on any matters, unless if at any time or times dividends on the New UPC Preferred Stock are in arrears and unpaid for a total of eight (8) consecutive full quarterly dividend periods. 3. Dividends/Interest Payments. The holder of the A-Note and the B-Note is entitled to the payment of interest at the rate of 12% per annum and to repayment of principal on its maturity date. The holder of the New UPC Preferred Stock will be entitled to receive cumulative quarterly cash dividends when, as and if declared by the Board of Directors. 4. Conversion. The holder of the A-Note and the B-Note is not entitled to convert the note into any other securities of the Company. The New UPC Preferred Stock shares will likewise not be convertible into any other securities of the Company. 5. Security. The A-Note and the B-Note is secured by a first lien on substantially all of the assets of Calibur, Jackson and UPC, and is guaranteed by Michael Thomas. The New UPC Preferred Stock will be unsecured and will not be entitled to the benefits of the liens or the guaranties supporting the repayment of the A-Note and the B-Note . B. Comparison of the Rights of Holders of Debentures and New UPC Common Stock Under the Plan, the holders of the Debentures will receive shares of New UPC Common Stock in substitution for their Debentures. There are material differences between the rights of the holders of Debentures and those of holders of New UPC Common Stock, certain of which are summarized as follows: 1. Seniority. In the event of the liquidation, dissolution, distribution of assets or winding-up of the Company, holders of the Debentures would be entitled to receive payment of the principal balance of their Debentures together with accrued and unpaid interest prior to any distribution to either the holders of UPC's preferred stock or common stock. As a holder of New UPC Common Stock, any such distribution would be made only after the payment of all liabilities of the Company and the distribution of the Preference Amount to the holders of any preferred stock (including, without limitation, the New UPC Preferred Stock). 2. Voting. Holders of Debentures have no voting rights except as to such rights as might be granted by statute. Holders of the New UPC Common Stock have the right to vote on all matters on which holders of common stock are entitled to vote. 3. Dividends/Interest Payments. Holders of the Debentures are entitled to the payment of interest on a quarterly basis, at either the rate of 6%, 7% or 18%. Holders of New UPC Common Stock are entitled to receive dividends if, as and when declared by the Board of Directors. Historically, the Company has not paid dividends on Common Stock and such dividends are not anticipated in the foreseeable future. UPC's indebtedness and preferred securities will impose limitations on UPC's ability to declare or pay dividends on the New UPC Common Stock after the Effective Date. 4. Conversion. The holders of the Debentures are entitled to convert their Debentures at any time to Common Stock of UPC at the market price (or a discount thereto) of the Common Stock. Holders of New UPC Common Stock are not entitled to convert their shares to any other securities of UPC. The New UPC Common Stock which the holders of the Debentures will receive as a part of the reorganization proposed in the Plan will equal 35% of the issued and outstanding shares of New UPC Common Stock as of the date of the reorganization proposed in the Plan. If all of the Debenture holders were to convert their Debentures to Common Stock of UPC at the present time, the resulting percentage of ownership in Common Stock could be substantially in excess of 35% of the shares of outstanding Common Stock (although UPC does not have a sufficient number of authorized shares of Common Stock to effect such conversion). The Company believes that such conversion would not yield to the holders of the Debentures the other potential benefits anticipated to be gained from the Plan. C. Comparison of the Rights of Holders of Preferred Stock and New UPC Common Stock Under the Plan, the holders of the Preferred Stock will receive shares of New UPC Common Stock in substitution for their Preferred Stock. There are material differences between the rights of the holders of Preferred Stock and those of holders of New UPC Common Stock, certain of which are summarized as follows: 1. Seniority. In the event of the liquidation, dissolution, distribution of assets or winding-up of the Company, holders of the Preferred Stock would be entitled to receive the amount of the liquidation preference payable on each series of Preferred Stock together with accrued and unpaid dividends prior to any distribution to the holders of the Common Stock. The liquidation preference of the Series A Preferred Stock is approximately $9,912,000 and the liquidation preference of the Series B Preferred Stock is approximately $1,813,000. As a holder of New UPC Common Stock, any such distribution would be made only after the payment of all liabilities of the Company and the distribution of the liquidation preference amount to the holders of any outstanding preferred stock (including, without limitation, the New UPC Preferred Stock) and would be shared pro rata with the other holders of New UPC Common Stock. 2. Voting. Holders of Preferred Stock have no voting rights except as to such rights as might be granted by statute. Holders of New UPC Common Stock have the right to vote on all matters on which holders of common stock are entitled to vote. 3. Dividends/Interest Payments. Holders of the Preferred Stock are entitled to the payment of cumulative dividends in cash or shares of Common Stock at the rate of 18% per annum for the holders of Series A Preferred Stock and 8% per annum for the holders of Series B Preferred Stock. Holders of New UPC Common Stock are entitled to receive dividends if, as and when declared by the Board of Directors. Historically, UPC has not paid dividends on Common Stock and such dividends are not anticipated with respect to the New UPC Common Stock for the foreseeable future. UPC's indebtedness and preferred securities (including, without limitation, the New UPC Preferred Stock) will impose limitations on UPC's ability to declare or pay dividends on the New UPC Common Stock after the Effective Date. 4. Conversion. The holders of the Preferred Stock are entitled to convert their shares of Preferred Stock into Common Stock of UPC. The Preferred Stock shares are convertible into shares of Common Stock based on the preference amount at the rate of 1/13th for Series A and 1/15th for Series B per month beginning on July 1, 1997. The price at which the conversions may be effected is the greater of the market price for the Common Stock or a floor price (currently $.50 for Series A and $1.00 for Series B). Shares of the New UPC Common Stock are not convertible into any other securities of UPC. The New UPC Common Stock which the holders of the Preferred Stock will receive as a part of the Plan will equal 13% of the issued and outstanding shares of New UPC Common Stock as of the Effective Date. If all of the Preferred Stock holders were to convert their Preferred Stock into Common Stock at the present time, the resulting percentage of ownership in Common Stock could be in excess of 13% of the shares of outstanding Common Stock (although UPC does not have a sufficient number of authorized shares of Common Stock to effect such conversion). The Company believes that such conversion would not yield to the holders of the Preferred Stock the other potential benefits anticipated to be gained from the Plan. XII. CERTAIN RISK FACTORS TO BE CONSIDERED A. Risks Relating to the Debtor's Financial Condition The Debtor has experienced substantial net losses in recent years, with a net loss of approximately $(4,270,000), $(12,138,000) and $(11,572,000) for the years ended December 31, 1998, December 31, 1997 and December 31, 1996. As of December 31, 1998, the Debtor had current liabilities of $17.4 million and approximately $492,000 of current assets. The Debtor failed to achieve an operating profit from its business operations during 1996, 1997 and 1998. Sales of the Debtor declined from $13.234 million for the year ended December 31, 1996 to $9.721 million for the year ended December 31, 1997 and to $6.179 million for the year ended December 31, 1998. Even if the Plan is approved and the Plan and Merger Agreement are consummated, there can be no assurance that the Reorganized Debtor will not continue to experience losses. The Reorganized Debtor's ability to become profitable and generate cash flow will likely depend upon the success of the Walk-In Stores, the Debtor's ability to raise additional debt or equity capital and to successfully implement its business strategy. There can be no assurance that the Reorganized Debtor will be able to accomplish the foregoing. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." B. Liquidity Risks The Debtor is presently in default under the A-Note, the B-Note, its outstanding Debentures and the Preferred Stock. The Debtor ceased paying interest on the Debentures and ceased paying dividends on the outstanding Preferred Stock effective December 31, 1997. Prior to this date, the Debtor had been paying interest on the Debentures and dividends on Preferred Stock via the issuance of shares of Common Stock. As of December 31, 1998, accrued interest on the Debentures totaled $1,026,030 and accrued dividends on the Preferred Stock totaled $2,113,362. In addition, the Debtor is in default under the A-Note and B-Note, which matured by their terms on January 1, 1999. The Reorganized Debtor will remain leveraged even after the consummation of the Merger and the acquisition of Farm Stores, due to the Merger Financing of up to $23 Million. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations." The Plan is intended to convert much of the debt and preferred stock of the Reorganized Debtor into shares of New UPC Common Stock or New UPC Preferred Stock. However, the Debtor's historical capital requirements have been significant and the Reorganized Debtor's future capital requirements could vary significantly and may be affected by general economic conditions, industry trends, the performance of the acquired Walk-In Stores, weather conditions and otherwise, many of which factors are not within the Reorganized Debtor's control. Historically, the Debtor has had difficulty financing its operations due, in part, to its significant losses, and there can be no assurance that the Reorganized Debtor will be able to obtain financing in the future. Even if the Plan is approved and consummated, there can be no assurance that the Reorganized Debtor will not continue to experience losses. The Reorganized Debtor's ability to become profitable and generate cash flow will likely depend upon the performance of the Walk-In Stores, its ability to raise additional debt or equity capital and to successfully implement its business strategy. There can be no assurance that the Reorganized Debtor will be able to accomplish the foregoing. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." C. Ability of the Reorganized Debtor to Continue as a Going Concern; Explanatory Paragraph in Auditors' Report The Debtor's independent auditors have included an explanatory paragraph in their report for the fiscal year ended December 31, 1997, stating that the consolidated financial statements included in this Disclosure Statement have been prepared assuming that the Reorganized Debtor will continue as a going concern and that the Reorganized Debtor's financial condition raises substantial doubts about its ability to continue as a going concern. The form and content of future auditors' reports (including any explanatory paragraphs the auditors deem necessary) will be based upon, among other factors, the application of their professional judgment to the facts and circumstances related to the Reorganized Debtor and its business at the time any such report is rendered. Accordingly, there can be no assurance that future auditors' reports on the Reorganized Debtor's financial statements will not include explanatory paragraphs relating to uncertainties regarding the Reorganized Debtor's ability to continue as a going concern, even if the Plan is consummated. The existence of an explanatory paragraph may materially adversely affect the Reorganized Debtor's ability to raise additional funds, and its relationships with suppliers and prospective suppliers, restrict ordinary credit terms or require guarantees of payment, and therefore could have a material adverse effect on the Reorganized Debtor's business, financial condition and results of operations. D. Risks Regarding the Financial Projections The Financial Projections included elsewhere in this Disclosure Statement were developed by F.S. Management in connection with the planning and development of the Plan, and illustrate the estimated effects of the Plan and certain related transactions on the results of operations, cash flow and financial position of the Reorganized Debtor for the periods indicated. The Financial Projections are qualified by the introductory paragraphs thereto and the accompanying assumptions, and must be read in conjunction with such introductory paragraphs and assumptions, which constitute an integral part of the Financial Projections. The Financial Projections are based upon a variety of assumptions as set forth therein, and the Reorganized Debtor's future operating results are subject to and likely to be affected by a number of factors, including significant business, economic, regulatory and competitive uncertainties, many of which are beyond the control of the Reorganized Debtor; and, accordingly, actual results may vary materially from those shown in the Financial Projections. F.S. Management believes that the industries in which the Reorganized Debtor will be operating are volatile due to numerous factors, including the risks described in "-- Risks Relating to the Company's Business and Farm Stores Business Acquired in the Merger" all of which make accurate forecasting very difficult. Although it is not possible to predict all risks associated with the Financial Projections and the assumptions underlying those projections, there are some risks which F.S. Management is presently able to identify. The Financial Projections assume that all aspects of the Plan, including the Merger and the Merger Financing, will be successfully implemented on the terms set forth in this Disclosure Statement, and that the publicity associated with the bankruptcy proceeding contemplated by the Plan will not adversely affect the Reorganized Debtor's operating results. There can be no assurance that these two assumptions are accurate, and the failure of the Plan to be successfully implemented, or adverse publicity, could materially adversely affect the Reorganized Debtor's business, results of operations and financial condition. The Financial Projections also assume that most of the Reorganized Debtor's earnings growth will derive from (a) a branding contract for the Gas Stores, generating substantially increased revenues and profits from gas sales, and (b) substantial savings in general and administrative expenses. As explained in the paragraphs that follow, these two assumptions are subject to various risks that could cause such assumptions to be inaccurate, and therefore the projected earnings growth could fail to occur. The Gas Stores historically have relied on sales of non-gas products to produce most of their earnings. Proposed Management of the Reorganized Debtor plans to negotiate an agreement for the sale of branded gas products in the Gas Stores, and the Reorganized Debtor will focus its efforts on increasing sales of gas products at the Gas Stores. The Financial Projections assume that all aspects of this plan to sell branded gas products will be successful, including that the Reorganized Debtor will negotiate an acceptable agreement for the supply of branded gas products and will enjoy a significant increase in sales of branded gas products. However, there can be no assurance that this plan will succeed, and the likelihood that the Reorganized Debtor will be able to consummate a branding arrangement and successfully reorient the Gas Stores to emphasize sales of branded gas products must be considered in light of the difficulties and delays inherent in any such enterprise. For example, it may not be possible to locate a supplier of branded gasoline products to supply those products on terms acceptable to the Reorganized Debtor. Or, assuming an acceptable agreement is made with a branded supplier, sales of the branded gas products may not increase as anticipated, due to factors such as fluctuation in gas prices that decrease consumer demand, inability to compete effectively with other suppliers of branded gas products, changes in laws regulating sales of gasoline products, political events in gas producing nations that reduce the supply of gas products, and other risks relating to this line of business. See "Risks Relating to the Company's Business and Farm Stores' business Acquired in the Merger - Competition; -- Government Regulation; -- Possible Environmental Liabilities and Regulation; -- Volatility of Natural Gas and Oil Prices." If any one or more aspects of this plan to sell branded gas products were to fail, actual results of the Reorganized Debtor could fall far short of the Financial Projections. Another significant and untested assumption in the Financial Projections is the projected decline in general and administrative expenses. The projected decline is based upon anticipated cost savings and business synergies resulting from the Merger. Realization of cost savings and synergies could be affected by factors such as unfavorable general economic conditions, unexpected increases in operating costs (including costs that might be incurred in connection with the proposal to sell branded gas products), responses of competitors requiring additional expenditures to compete effectively, and unfavorable regulatory developments. In such case, general and administrative expenses probably would not decrease as projected, thereby negatively impacting the Reorganized Debtor's projected growth and profitability. The projected decline in general and administrative expenses also must be considered in light of the difficulty in combining the business and operations of the Debtor with the F.S. Business. It may not be possible to combine the business and operations of the Debtor and F.S. Business as efficiently as projected. Inefficiencies and difficulties could result from having different potentially incompatible operating practices and systems. Further, personnel problems could result form consolidating personnel with different backgrounds and corporate cultures into one company. As a result, the Reorganized Debtor may not achieve anticipated cost savings and operating efficiencies and may have difficulties in managing, integrating and operating its business post-Merger. In summary, it is likely that there will be differences between the forecasted results for the Reorganized Debtor, as set forth in the Financial Projections, and actual results, and that such differences may be material. The Financial Projections assume substantial increases in the reorganized Debtor's earnings above historical results. Because the Financial Projections are subject to significant uncertainties and are based upon assumptions that may not be realized, holders of Impaired Claims and Interests and holders of the Reorganized Debtor's Securities are cautioned not to place undue certainty on these Financial Projections. See "Financial Projections of Certain Financial Data." E. Risks Relating to Certain Debt and Equity Holders 1. Risks Particular to Holders of Outstanding Notes. Under the Plan, the holder of the A-Note and the B-Note will receive 70,000 shares of New UPC Preferred Stock in substitution for the A-Note and the B-Note. In agreeing to the Plan, the holder of the A-Note will be consenting to the exchange of its interests in a secured senior security, which has a stated interest rate and a liquidation preference over unsecured debt and equity securities, for New UPC Preferred Stock, which will be subordinate to all creditor claims, including trade creditors. There can be no assurance that the value of the shares of New UPC Preferred Stock that are to be issued pursuant to the Plan will equal or exceed the value of the A-Note and the B-Note. See "Comparison of the Rights of Holders of A-Note and the B-Note and the New UPC Preferred Stock." 2. Risks Particular to Holders of Debentures. If the Plan is confirmed and consummated, holders of the Debentures will receive shares of New UPC Common Stock in substitution for their Debentures. In agreeing to the Plan, holders of the Debentures will be consenting to the exchange of their interests in a senior debt security, which has a stated interest rate, a repayment date and a liquidation preference over equity securities, for shares of New UPC Common Stock, which will be subordinate to all creditor claims, including trade creditors, and the $14,000,000 aggregate liquidation preference rights of the New UPC Preferred Stock. As of the Effective Date, the principal and interest on the Debentures will total approximately $7,500,000. 3. Risks Particular to Holders of Preferred Stock. If the Plan is confirmed and consummated, holders of Preferred Stock will receive shares of New UPC Common Stock in substitution for their Preferred Stock. In agreeing to the Plan, holders of Preferred Stock will be consenting to the exchange of their shares of a senior equity security, which has a stated dividend rate and a liquidation preference over common equity, for shares of New UPC Common Stock, which will be subordinate to all creditor claims, including trade creditors, and the $14,000,000 aggregate liquidation preference rights of the New UPC Preferred Stock. 4. Risks Particular to the Holders of Common Stock. If the reorganization proposed in the Plan is confirmed and consummated, existing holders of Common Stock will have their percentage ownership of the common equity of the Reorganized Debtor reduced from 100% of the issued and outstanding common equity to 200,000 shares of New UPC Common Stock, representing approximately 4% of the shares of New UPC Common Stock to be issued and outstanding (assuming conversion of the New UPC Preferred Stock) upon effectiveness of the Plan (assuming conversion of the New UPC Preferred Stock). In addition to the 5,000,000 shares of Common Stock which will be outstanding after the consummation of the Plan (assuming conversion of the New UPC Preferred Stock), the Reorganized Debtor will have an additional 5,000,000 shares of Common Stock that are authorized for future issuance. The New UPC Common Stock will be subordinate to all creditor claims, including the Merger Financing and trade creditors, and the $14,000,000 aggregate liquidation preference rights of the New UPC Preferred Stock. 5. No Prior Active Market; Possible Volatility of Stock Price. There is no current active market for the Common Stock and there can be no assurance that an active trading market for the New UPC Common Stock will develop or, if developed, that such market will be sustained following the Effective Date or that the market price of the New UPC Common Stock will not decline. While the Debtor intends to apply to have New UPC Common Stock listed for trading on a national securities exchange, there can be no assurance that such request will be granted or that an active trading market for the New UPC Common Stock will develop. The trading price of the Common Stock has been subject to wide fluctuations, and the trading price of the New UPC Common Stock could be subject to wide fluctuations in the future in response to variations in the Debtor's results of operations, as well as developments that affect the industry, the overall economy and the financial markets. 6. Control by Principal Stockholder. After the Effective Date, the Infinity Parties and the shareholders of FSCI, collectively, will own approximately 84.5% of the outstanding shares of New UPC Common Stock (approximately 36.5% to Infinity and 48% to FSCI). This ownership will give the Infinity Parties and the FSCI shareholder control over any stockholder vote, including a vote for election of all of the members of the Debtor's Board of Directors, a vote for the adoption of amendments to the Debtor's charter and bylaws and a vote for the approval of a merger, consolidation, asset sale or other corporate transaction requiring approval of the stockholders of the Debtor. F. Risks Relating to Confirmation of the Plan Section 1129 of the Bankruptcy Code, which sets forth the requirements for confirmation of a plan of reorganization, requires, among other things, a finding by the bankruptcy court (1) that the plan is "feasible" (i.e., that confirmation of the plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor), (2) that all Claims and Interests have been classified in compliance with the provisions of section 1122 of the Bankruptcy Code, and (3) that, under the plan, holders of Claims and Interests within Impaired Classes either accept the plan or receive or retain cash or property of a value, as of the date the plan becomes effective, that is not less than the value such holders would receive or retain if the debtor was liquidated under Chapter 7 of the Bankruptcy Code. See "The Plan--Confirmation of the Plan." Although the Debtor believes that the Plan complies with all relevant requirements for confirmation, there can be no assurance that the Bankruptcy Court will agree without first requiring material modifications which may or may not be acceptable to the Debtor, FSCI, the Infinity Parties and other parties in interest or which would not require a resolicitation of votes on the Plan. The confirmation and effectiveness of the Plan are also subject to certain conditions being satisfied on its "Effective Date", which is projected to occur on August 25, 1999. See "The Plan--Conditions to Confirmation." No assurances can be given that these conditions will be satisfied or waived or that any necessary consent will be obtained. In the event any Impaired Class of Claims or Interests rejects the Plan, the Bankruptcy Court, pursuant to section 1129(b) of the Bankruptcy Code (the "cramdown" provisions), may nevertheless confirm the Plan at the Reorganized Debtor's request if at least one Impaired Class of Claims has accepted the Plan (with such acceptance being determined without including the acceptance of any "insider" in such Class) and, as to each Impaired Class which has not accepted the Plan, the Bankruptcy Court determines that the Plan "does not discriminate unfairly" and is "fair and equitable" with respect to such Impaired Class and if all of the other applicable requirement of section 1129(a) of the Bankruptcy Code are met. The Debtor reserves the right to request confirmation pursuant to section 1129(b) of the Bankruptcy Code in the event that any Impaired Class of Claims or Interests rejects the Plan. See "The Plan - -- Confirmation of the Plan." If the Plan is not confirmed as a result of the rejection by any Impaired Class of Claims or Interests and the Plan is not confirmed pursuant to section 1129(b) of the Bankruptcy Code, then the Debtor may be required to continue its bankruptcy case without the agreement of its major creditors as to the terms of a reorganization plan, possibly resulting in the complications discussed above. G. Risks Relating to Approval of the UPC Trust Bankruptcy Court approval of the UPC Trust and the channeling of all Securities Claims against UPC and the Infinity Parties to the UPC Trust is a condition precedent to Infinity's willingness to support the Plan. Although the Debtor believes that a channeling injunction such as that proposed by the Plan is appropriate and within the equitable power of the bankruptcy courts, it is not certain that the Bankruptcy Court will reach the same conclusion. Further, although it is possible if the Bankruptcy Court denies approval of the channeling injunction, that Infinity will waive such condition, it cannot be certain that the Infinity Parties would be willing to do so. In making its decision whether the UPC Trust and channeling injunction should be approved, it is likely that the Bankruptcy Court will review the following factors: (1) whether the non-debtor has contributed substantial assets to the reorganization; (2) whether the injunction is essential to reorganization and, without it, there is little likelihood of success; (3) whether the plan provides a mechanism for the payment of the claims of the class or classes affected by the injunction; and (4) whether there is an identity of interest between the debtor and the third party (e.g. an indemnity relationship), such that a suit against the non-debtor either operates as a suit against the debtor or will deplete assets of the estate. H. Risks Relating to the Company's Businesses and Farm Stores(R) Business Acquired in The Merger 1. Industry and Geographic Concentration. The acquired Farm Stores' business, which will be the primary business of the Debtor post-Merger, consists of walk-in convenience stores and drive-thru specialty convenience stores. As a result, a downturn in the convenience store industry could have a material adverse effect on the Debtor's business. Further, both the acquired F.S. Business and the business of Calibur are concentrated geographically (the F.S. Business in Florida; Calibur in Tennessee and Georgia); and it is anticipated that the business of Jackson will be sold subsequent to consummation of the Plan. Operating results in individual geographic markets will be adversely affected by local and or regional economic downturns. Such economic downturns could have an adverse impact on the Debtor's financial condition and results of operations. 2. Competition The convenience store and retail gasoline industries are highly competitive. The number and type of competitors vary by location. The Debtor will compete with other convenience stores, gasoline service stations, supermarket chains, neighborhood grocery stores, fast food operations and other similar retail outlets, some of which are well-recognized national or regional retail chains with significantly greater resources than Debtor. Key competitive factors will include, among others, location, ease of access, store management, product selection, pricing, hours of operation, store safety, cleanliness, product promotions and marketing. Even assuming the reorganization proposed in the Plan is completed, there can be no assurance that Debtor will be able to compete effectively. 3. Government Regulation. The Debtor is and will continue to be subject to numerous federal, state and local laws, regulations and ordinances. In addition, various federal, state and local legislative and regulatory proposals are made from time to time to, among other things, increase the minimum wage payable to employees and increase taxes on the retail sale of certain products; in particular, sales of milk, gasoline, tobacco products and alcoholic beverages are subject to extensive regulation. Changes to such laws, regulations or ordinances may adversely affect the Debtor's performance by increasing the costs or affecting sales of certain products at the Debtor's existing stores and the acquired Farm Stores' stores. The F.S. Business to be acquired in the Merger sells tobacco and alcoholic beverages where such sales are legally permitted. Sales of tobacco products and alcoholic beverages are regulated by state and local laws. Changes in such laws significantly restricting such sales, or the revocation of any license or permit required to make such sales, could have a material adverse impact on sales and profits. Similarly, the sale of gasoline, including the price charged for gasoline, is subject to extensive regulation. If the Walk-In Stores were required to pay higher prices to purchase gasoline that could not be supported by price increases at the pump, or if due to changes in regulations those stores were to become unable to sell gasoline, it would have a material adverse effect on the Walk-In Stores' sales and profits. In recent years, sellers of alcoholic beverages have been held responsible for damages caused by persons who purchased alcoholic beverages from them and who were at the time of the purchase, or subsequently became, intoxicated. There is potential exposure to the Debtor as a seller of alcoholic beverages. The F.S. Business sells a significant amount of milk products. Under the Federal Milk Marketing Order program, the federal government and some state agencies established minimum regional prices paid to producers for raw milk. In 1996, the U.S. Congress passed legislation to phase out the Federal Milk Marketing Order program. This program is currently scheduled to be phased out by October 1999. The U.S. Department of Agriculture has also recently proposed changes to this program, including changes in pricing classifications for certain dairy products. It is not known whether the Department of Agriculture will adopt its proposed changes in their current or another form, and what effect any final changes or the termination of this federal program will have on the market for dairy products. In addition, various states have adopted or are considering adopting compacts among milk producers, which would establish minimum prices paid by milk processors, to raw milk producers. It is not known whether new compacts will be adopted or the extent to which these compacts would affect the prices paid for milk 4. Possible Environmental Liabilities and Regulations. The Debtor is and will continue to be subject to various federal, state, and local environmental, health and safety laws and regulations; in particular, federal and state regulations regarding underground storage tanks and related equipment that apply to acquired walk-in convenience stores selling gasoline. Certain of the more significant federal laws are described below. The implementation of these laws by the United States Environmental Protection Agency ("EPA") and the states will continue to affect the Debtor's operations by imposing operating and maintenance costs and capital expenditures required for compliance. The Resource Conservation and Recovery Act of 1976, as amended, affects the Debtor through its substantial reporting, record keeping and waste management requirements. In addition, standards for underground fuel storage tanks and associated equipment may increase operating expenses. The Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"), as amended, creates the potential for substantial liability for the costs of study and clean-up of waste disposal sites and includes various reporting requirements. CERCLA could result in joint and several liability even for parties not primarily responsible for hazardous waste disposal sites. The Clean Air Act, as amended, and similar regulations at the state and local levels, impose significant responsibilities on the Debtor through certain requirements pertaining to vapor recovery, sales of reformulated gasoline and related record keeping. The gasoline sales operations conducted by the Walk In Stores and Calibur entail certain inherent environmental risks. Each operation utilizes underground storage tanks for its petroleum products. The leakage of underground storage tanks would result in environmental remediation obligations for the Debtor under federal and state environmental laws, could give rise to third party claims, and could result in civil or criminal enforcement actions. The State of Florida has a program for the remediation of environmental contamination from underground storage tanks, and Farm Stores participates in such programs. In accordance with the requirements of such program, Farm Stores carries insurance against certain environmental risks. However, there can be no assurance that the operating results and financial condition of the reorganized Debtor will not be materially adversely affected by environmental liabilities, including increase in premiums and uninsured losses. Jackson's business is regulated by certain local, state and federal laws and regulations relating to the exploration for, and the development, production, marketing, pricing, transportation and storage of, oil and natural gas. Its business is also subject to extensive and changing environmental and safety laws and regulations governing plugging and abandonment, the discharge of materials into the environment or otherwise relating to environmental protection. As with any owner of property, Jackson is also subject to cleanup costs and liability for hazardous materials, asbestos or any other toxic or hazardous substance that may exist on or under any of its properties. The implementation of new, or the modification of existing, laws or regulations could have a material adverse effect on Jackson. Although the reorganized Debtor intends to sell Jackson's assets after the Effective Date, there can be no assurance that its business will not be adversely affected by these matters prior to the sale, or pursuant to any indemnification obligations that may survive a sale of Jackson's assets. 5. Volatility of Natural Gas and Oil Prices. Revenues generated from the sale of gasoline at the Walk-In Stores and Calibur stores, from the sale of Jackson's oil and gas properties, are highly dependent upon the price of, and supply of and demand for petroleum products and, as to Jackson, natural gas as well. Historically, the markets for petroleum products and natural gas have been volatile and are likely to continue to be volatile in the future. Prices for petroleum and natural gas are subject to wide fluctuations in response to relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty and a variety of additional factors that are beyond the control of the Debtor. These factors include the level of consumer product demand, weather conditions, domestic and foreign governmental regulations, the price and availability of alternative fuels, political conditions in the Middle East, the foreign supply of petroleum products and natural gas, the price of foreign imports and overall economic conditions. It is impossible to predict future petroleum products and natural gas price movements with any certainty. 6. Drilling Risks. The Debtor currently anticipates that it will sell its non-producing oil and gas properties after the Effective Date. Nevertheless, to the extent the Debtor undertakes drilling activities, they involve numerous risks, including the risk that no commercially productive natural gas or oil reservoirs will be discovered. The cost of drilling, completing and operating wells is often uncertain, and drilling operations may be curtailed, delayed or canceled as a result of a variety of factors, including unexpected drilling conditions or pressure irregularities in formations, equipment failures, accidents, adverse weather conditions and shortages or delays in the delivery of equipment. The Debtor's drilling activities have in the aggregate been historically unproductive and may be unsuccessful in the future and, if unsuccessful, such failure will have an adverse effect on Debtor's future results of operations and financial condition. 7. Uncertainty of Reserve Information and Future Net Revenue Estimates. There are numerous uncertainties inherent in estimating oil and natural gas reserves and their estimated values, including many factors beyond the control of the producer. Reservoir engineering is a subjective process of estimating underground accumulations of oil and natural gas that cannot be measured in an exact manner. Estimates of economically recoverable oil and gas reserves and of future net cash flows necessarily depend upon a number of variable factors and assumptions, such as historical production from the area compared with production from other producing areas, the assumed effects of regulations by governmental agencies and assumptions concerning future oil and gas prices, future operating costs, severance and excise taxes, development costs and workover and remedial costs, all of which may in fact vary considerably from actual results. For these reasons, estimates of the economically recoverable quantities of oil and natural gas attributable to any particular group of properties, classifications of such reserves based on risk of recovery, and estimates of the future net cash flows expected therefrom prepared by different engineers or by the same engineers at different times may vary substantially and such reserve estimates may be subject to downward or upward adjustment based upon such factors. Actual production, revenues and expenditures with respect to Debtor's reserves will likely vary from estimates, and such variances may be material. There can be no assurance that the Reorganized Debtor will be able to sell Jackson's assets for any price related to the book or carrying values of these assets on the Debtor's books. 8. Operating Risks of Oil and Gas Operations. The oil and gas business involves certain operating hazards such as well blowouts, cratering, explosions, uncontrollable flows of oil, natural gas or well fluids, fires, formations with abnormal pressures, pollution, releases of toxic gas and other environmental hazards and risks, any of which could result in substantial losses to the Debtor. The availability of a ready market for the Debtor's oil and natural gas production also depends on the proximity of reserves to, and the capacity of, oil and gas gathering systems, pipelines and trucking or terminal facilities. In addition, the Debtor may be liable for environmental damage caused by previous owners of property purchased and leased by the Debtor. As a result, liabilities to third parties or governmental entities may be incurred, the payment of which could reduce or eliminate the funds available for development, acquisitions or exploration, or result in the loss of the Debtor's properties. The Debtor does not carry business interruption insurance. The occurrence of an event not covered by insurance could have a material adverse effect on the financial condition and results of operations of the Debtor. 9. Dependence on Personnel. The business of the Reorganized Debtor will depend upon the ability and expertise of certain key employees, including Mr. Joe Bared and Mr. Carlos Bared. If one or more key employees of the Reorganized Debtor terminate their employment, the Reorganized Debtor's operations could be adversely affected. There can be no assurance that one or more key employees will not resign from employment with the Reorganized Debtor. 10. Need For Additional Financing. In the event that cash from operations and other available funds prove to be insufficient to fund the Reorganized Debtor's presently anticipated operations, the Reorganized Debtor will be required to seek additional financing. Even if the Reorganized Debtor has no future capital expenditures, the Reorganized Debtor's operations could require more cash than is generated from the Reorganized Debtor's operations and other available funds, in which case the Reorganized Debtor would require additional financing. There can be no assurance that, if additional or replacement financing is required, it will be available on acceptable terms, or at all. Nor can any assurances be given that the Infinity Parties would be willing to refinance or to fund any additional operational requirements of the Reorganized Debtor in the future. Additional financing may involve substantial dilution to the interests of the Reorganized Debtor's then-current stockholders, including the holders of the New UPC Common Stock. 11. Legal Proceedings. The Debtor is involved in certain legal proceedings as described in "Legal Proceedings." While the Debtor intends to defend such lawsuits, any adverse decisions or settlements and the costs of defending such suits, could have a material adverse effect on the Debtor. In addition, the Debtor has filed a lawsuit seeking the recovery of substantial damages. See "Legal Proceedings -- TAJ/National." This lawsuit is in the early stages and there can be no assurances of the timing or amounts of any recovery. In the event the Debtor is ultimately successful in such lawsuit, the holders of the Common Stock of the Debtor would receive less of the benefits from the recovery, if any, if the Plan is confirmed and consummated. However, if the Plan is not approved, the Debtor would not have sufficient funds to pursue the litigation. 12. Year 2000 Compliance. Many currently installed computer systems and software products are coded to accept only two digit entries in the date code field. These date code fields will need to accept four digit entries to distinguish 21st century dates from 20th century dates. As a result, in less than twelve months, computer systems and/or software used by many companies will need to be upgraded to comply with such "Year 2000" requirements. Systems that do not properly recognize such information could generate erroneous data or cause a system to fail. Significant uncertainty exists in the software industry concerning the potential effects associated with such compliance. Management does not anticipate that the Debtor will incur significant operating expenses or be required to invest heavily in computer systems improvements to be Year 2000 compliant. The occurrence of any of the foregoing could have a material adverse effect on the Debtor's business, operating results or financial condition. Although the Debtor believes the software and hardware it uses internally comply with Year 2000 requirements and is not aware of any material operational issues or costs associated with preparing its internally used software and hardware for the Year 2000, there can be no assurances that the Debtor will not experience serious, unanticipated negative consequences and/or material costs caused by undetected errors or defects in the technology used in its internal systems. The occurrence of any of the foregoing could have a material adverse effect on the Debtor's business, operating results or financial condition. 13. Benefits of Combining the F.S. Business and the Debtor's Business May not be Realized. There can be no assurance that the anticipated benefits of merging the Walk-In Stores with the Debtor's business, and the Debtor's investment in the Drive-Thru Stores, will be achieved. Further, any difficulties encountered in the transition and integration of the Walk-In Stores' business with the Debtor's business could have an adverse effect on the profitability of either or both of the Debtor's existing business and the Walk-In Stores. To the extent that the Financial Projections assume earnings growth in the Reorganized Debtor from reductions in general and administrative expenses, the reasonableness of this assumption must be evaluated in light of the above factors. 14. Conflicts of Interest; Exculpation and Indemnification. The proposed Management Agreement among the reorganized Debtor involves substantial conflicts of interest. The Management Agreement contemplates that the existing management of the F.S. Business will become employed by the reorganized Debtor , and manage UPC as well as FSG, a company in which UPC will have only a 10% equity interest. The remaining equity in FSG is owned by Bared affiliates. FSG will pay a management fee for UPC's management services under this Agreement. However, the management of UPC will experience conflicts of interest in allocating their time, and the resources of the UPC and FSG, and with respect to agreements that may involve one or the other, or both of such concerns. There can be no assurance that such conflicts will be resolved in favor of UPC. Moreover, the Management Agreement will contain provisions providing exculpation and indemnification for the benefit of (a) the management personnel of UPC, with respect to claims by or in the right of UPC or FSG, and (b) UPC, with respect to claims by FSG. These provisions will protect these beneficiaries against claims for mismanagement, conflict of interest, and the like, unless it is finally established that such claims arose out of bad faith, or willful misconduct. It is the intended effect of these provisions that UPC and FSG shall have more restricted rights than would exist absent these provisions. There can be no assurance that these provisions will not materially adversely affect UPC and FSG. Alternatively, management services may be provided through a separate entity or other means. None of these alternatives will materially effect the economics of the management arrangement. 15. Weather Related Risk. The largest single source of revenues for Calibur is from the operation of car washes, which represented approximately 46.9% and 44.1% of the Debtor's revenues for the year ended December 31, 1997 and the nine months ended September 30, 1998, respectively. These revenues are significantly adversely affected by adverse weather conditions, since car washes are generally utilized less frequently during wet and/or severe freezing weather. During 1997 and the first and second quarters of 1998, the El Nino weather condition produced unusually wet weather, which resulted in decreased usage of the Debtor's facilities and had a negative effect on revenues. Long term weather conditions are difficult, if not impossible, to predict accurately and may have a material adverse effect on the Debtor's results of operations and financial condition. XIII. CERTAIN MATERIAL INCOME TAX CONSEQUENCES OF THE PLAN THE PLAN AND ITS RELATED TAX CONSEQUENCES ARE COMPLEX. MOREOVER, MANY OF THE INTERNAL REVENUE CODE PROVISIONS DEALING WITH THE FEDERAL INCOME TAX ISSUES ARISING FROM THE PLAN HAVE BEEN THE SUBJECT OF RECENT LEGISLATION AND, AS A RESULT, MAY BE SUBJECT TO AS YET UNKNOWN ADMINISTRATIVE OR JUDICIAL INTERPRETATIONS. THE DEBTOR HAS NOT REQUESTED A RULING FROM THE IRS WITH RESPECT TO THESE MATTERS. ACCORDINGLY, NO ASSURANCE CAN BE GIVEN AS TO THE INTERPRETATION THAT THE IRS WILL ADOPT. THERE ALSO MAY BE STATE, LOCAL OR OTHER TAX CONSIDERATIONS APPLICABLE TO EACH CREDITOR. CREDITORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE CONSEQUENCES OF THE PLAN TO THEM UNDER FEDERAL AND APPLICABLE STATE, LOCAL AND OTHER TAX LAWS. A. U.S. Federal Income Tax Consequences to Holders of Allowed Claims and Equity Interests The U.S. federal income tax consequences to holders of an Allowed Claim, Common Equity Interest or Preferred Equity Interest arising from the distributions to be made under the Plan may vary depending upon, among other things: the type of consideration received by the holder in exchange for its Claim or Interest; for Claims, the nature of the indebtedness owing to the holder; whether the holder has previously claimed a bad debt or worthless security deduction in respect of such holder's Claim or Interest; and whether such Claim or Interest constitutes a "security" for purposes of the reorganization provisions of the Tax Code. As noted above, the U.S. federal income tax consequences of the Plan to holders of Allowed Claims will depend, in part, on whether the indebtedness underlying their Claims constitutes securities for purposes of the reorganization provisions of the Tax Code. Neither the Tax Code nor the regulations thereunder define the term "securities." The determination of whether a Claim constitute a "security" depends upon the nature of the indebtedness or obligation. Important factors to be considered include, among other things, the length of time to maturity, the degree of continuing interest in the issuer, and the purpose of the borrowing. Generally, corporate debt instruments with maturities when issued of less than five years are not considered securities, and corporate debt instruments with maturities when issued of ten years or more are considered securities. Claims for accrued interest are generally not considered securities. Subject to the discussion below regarding characterization of the Debentures, based on these factors, all Allowed Claims should not be considered securities. Characterization of the Debentures is uncertain. The Debtor believes that the Debentures should not constitute "securities" because all of the Debentures matured within approximately two years of their issue date. However, other characteristics of the Debentures, such as the ability of holders to have converted the Debentures into shares of Old UPC Common Stock, may cause the Debentures to be characterized as securities. Unless otherwise specifically noted, the remainder of this discussion assumes that the Debentures will not be characterized as securities. However, due to the uncertainty regarding this characterization, holders of Debentures are urged to consult their own tax advisors. HOLDERS OF ALLOWED CLAIMS SHOULD EVALUATE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN TO THEM BASED UPON THEIR OWN PARTICULAR CIRCUMSTANCES AND SHOULD NOT RELY SOLELY ON THE GENERAL DISCUSSION HEREIN. 1. Tax Consequences by Class. Subject to the discussion below in "Certain Other U.S. Federal Income Tax Considerations for Holders of Allowed Claims": (a) Holders of Allowed Claims That Are Not Securities. Pursuant to the Plan, holders of Allowed Claims that are not securities will receive either (i) payment in full in cash (General Unsecured Claims); (ii) New UPC Preferred Stock (the Infinity Secured Claim); or (iii) New UPC Common Stock (Debenture Claims and Securities Claims). Generally, a holder of an Allowed Claim that is not a security will realize gain or loss on the exchange in the amount equal to the difference between (i) the "amount realized" in respect of such Claim (other than in respect of accrued interest) and (ii) the holder's tax basis in its Claim (other than any Claim in respect of accrued interest). The "amount realized" will be equal to the fair market value of the property received. The holder's tax basis in its Allowed Claim will generally equal the amount paid, if any, by the holder for the Claim increased by the amount of any accrued original issue discount and decreased by the amount of any loss deduction previously taken with respect to such Claim. A holder's tax basis in the property received will be equal to the fair market value of such property at the time of the exchange and the holder's holding period with respect to such property received will begin on the day after the Effective Date. The gain or loss should generally be capital in nature if the Allowed Claim is a capital asset within the meaning of Section 1221 of the Tax Code, otherwise, such gain or loss will be ordinary income. Any capital gain or loss would be long-term if the Allowed Claim was held by the holder for more than one year as of the Effective Date, otherwise such capital gain or loss will be short-term. (b) Holders of Allowed Claims That Are Securities. In general, if the Debentures constitute securities, the exchange of such Debentures for New UPC Common Stock should qualify as a "recapitalization" for U.S. federal income tax purposes. In such case, holders of the Debentures will generally not recognize gain or loss on the receipt of New UPC Common Stock in satisfaction of their Debentures, and the initial tax basis of the New UPC Common Stock received (other than such stock received in exchange for accrued interest) will be equal to the adjusted basis of the Debentures surrendered in exchange for such stock. Further, if the Debentures constitute securities, the New UPC Common Stock received (other than such stock received in exchange for accrued interest) will have a holding period that includes the period during which the holders held their Debentures. (c) Holders of Allowed Equity Interests. All Equity Interests (the Preferred Stock and the Common Stock) should constitute securities under the federal tax laws. The exchange of an Equity Interest for shares of New UPC Common Stock should qualify as a "recapitalization" for U.S. federal income tax purposes. In such case, holders of Equity Interests will generally not recognize gain or loss on the receipt of New UPC Common Stock in satisfaction of their Equity Interests. The initial tax basis of the stock received (other than stock received in exchange for accrued dividends) generally will be equal to the adjusted basis of the Equity Interest surrendered in exchange for such stock. The stock received (other than stock received in exchange for accrued dividends) will have a holding period that includes the period during which the holders of such Equity Interests held their Equity Interests. B. Certain Other U.S. Federal Income Tax Considerations for Holders of Allowed Claims (a) Accrued Interest and Accrued Dividends. Notwithstanding the discussion above in "Tax Consequences by Class", holders of Allowed Claims or Equity Interests in respect of which interest or dividends accrue may have different tax consequences. Holders of Allowed Claims or Equity Interests will be treated as having received ordinary income to the extent that the shares of the New UPC Common Stock or the New UPC Preferred Stock the holder receives is allocable to accrued but unpaid interest (including original issue discount) or dividends, if any, on the Allowed Claims or Equity Interests, provided that the holder has not previously included such amount in gross income. Holders who have previously included such accrued interest or dividends in gross income will recognize a loss equal to the extent the amount of such previous inclusion in gross income exceeds the fair market value of the New UPC Common Stock or the New UPC Preferred Stock received by the holder that is allocable to such accrued interest or dividends. With respect to holders of Allowed Claims or Equity Interests who do not receive full payment of their claims (including accrued interest or dividends), the manner in which the property received by the holders should be allocated to accrued interest or dividends as opposed to their underlying claim is not clear. The initial tax basis of stock received that is allocable to accrued interest or dividends is equal to the fair market value of such stock on the Effective Date. The holding period of the stock received that is allocable to accrued interest or dividends commences on the day after the Effective Date. (b) Market Discount. "Market discount" arises when a debt instrument is purchased or acquired for less than its stated redemption price at maturity, unless the discount amount is no more than a specified de minimis amount. A holder of an Allowed Claim with "market discount," as described above, must treat any gain recognized with respect to the principal amount of such Claim as ordinary income to the extent of the market discount accrued during the holder's period of ownership, unless the holder has elected to include the market discount in income as it accrued. Any additional gain will be characterized as discussed above. C. U.S. Federal Income Tax Consequences to the Debtor 1. Discharge of Indebtedness Income. The Debtor will generally realize cancellation of debt ("COD") income to the extent a creditor receives an amount of consideration in respect of its claim that is less than the amount of such claim. Pursuant to the Plan, the Debtor will issue New UPC Common Stock and New UPC Preferred Stock in satisfaction of certain indebtedness. As a result, the Debtor will be treated as having satisfied the indebtedness with an amount of money equal to the fair market value of the newly issued stock that is issued in satisfaction of such indebtedness. The extent by which the amount of the debt discharged exceeds any consideration therefor, if any, will be COD income under the Tax Code. Because the discharge of indebtedness of the Debtor will occur in a proceeding under the Bankruptcy Code, the Reorganized Debtor will be able to exclude any COD income from gross income. As a consequence of this exclusion (the "Bankruptcy Exclusion"), the Debtor must reduce certain tax attributes. Under the Plan, all of the Allowed Claims are to be satisfied in full, other than the Debenture Claims. The Debenture Claims will be satisfied by the issuance of new UPC Common Stock. As a result of the satisfaction of the Debenture Claims, the Debtor will realize COD income under the Plan. However, as a result of the Bankruptcy Exclusion, the Debtor will not recognize gross income as a result of this COD income. Instead, the Debtor must reduce certain tax attributes to the extent of the income excluded under the Bankruptcy Exclusion. Pursuant to the Tax Code, tax attribute reduction occurs after the tax liability for the taxable year of debt discharge is determined. Unless the Debtor elects to first reduce its tax basis in depreciable property, the amount of any COD income will first be applied against and reduce the Debtor's net operating losses and net operating loss carryovers ("NOLs"), on a dollar-for-dollar basis, and then be applied to reduce other specified tax attributes in the order of priority specified in the Tax Code. Accordingly, as a result of the exclusion of COD income pursuant to the Bankruptcy Exclusion, the Debtor will be required to reduce its available NOLs by approximately $5 to $10 million. 2. Accrued Interest. To the extent that there exists accrued but unpaid interest on the indebtedness owing to holders of Allowed Claims and to the extent that such accrued but unpaid interest has not previously been deducted by the Debtor, portions of payments made in consideration for the indebtedness underlying such Allowed Claims that are allocable to accrued but unpaid interest should be deductible by the Reorganized Debtor. Any such interest that is not paid will not be deductible by the Reorganized Debtor and will not give rise to COD income. To the extent that the Debtor has previously taken a deduction for accrued but unpaid interest, any amounts so deducted that are paid will not give rise to any tax consequences to the Reorganized Debtor. If such amounts are not paid, they will give rise to COD income that would be excluded from gross income pursuant to the Bankruptcy Exclusion. As a result, the Debtor would be required to further reduce its NOLs to the extent of such interest previously deducted and not paid. The Debtor has not determined the precise amount by which the NOLs would be further reduced as a result of interest previously deducted and not paid; however, this amount would not exceed [$1,500,000.] 3. The Merger. The Merger should qualify as a reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Tax Code, and no tax gain or loss will be recognized by the Reorganized Debtor or UPC Merger Sub as a result of the Merger. After consummation of the Merger, the Reorganized Debtor will elect to file a consolidated tax return with UPC Merger Sub. In general, this election will cause the Reorganized Debtor and UPC Merger Sub to be treated as a single entity for tax purposes. One principal advantage of filing a consolidated tax return is that, in general, losses of one member of the consolidated group may be used to offset income of other members. Thus, subject to certain exceptions and limitations (the significant exceptions and limitations are discussed in Section 4 below), the Reorganized Debtor's losses (including NOLs) generally may be used to offset the income of UPC Merger Sub (or vice versa) to reduce the tax liability of the group. 4. Utilization of Debtor's Net Operating Loss Carryovers. (a) Section 382. Section 382 of the Tax Code provides rules limiting the utilization of a corporation's NOLs following a more than 50% change in ownership of a corporation's equity (an "ownership change"). An ownership change will occur with respect to the Reorganized Debtor in connection with the Plan. Therefore, the Reorganized Debtor's NOLs will be limited by Section 382 of the Tax Code, unless the Bankruptcy Exception (described below) applies to the transactions contemplated by the Plan. Unless the Bankruptcy Exception applies, the amount of post-ownership change annual taxable income of the Reorganized Debtor's consolidated group that can be offset by the Reorganized Debtor's pre-ownership change NOLs generally cannot exceed an amount equal to the product of (i) the fair market value of the Reorganized Debtor's stock prior to the Merger (subject to various adjustments) multiplied by (ii) the federal long-term tax-exempt rate in effect on the date of the ownership change (the "Annual Limitation"). The value of the Reorganized Debtor's stock for purposes of this computation would reflect the increase, if any, in value resulting from any surrender or cancellation of creditors' claims in the bankruptcy reorganization. The federal long-term tax-exempt rate in effect as of June, 1999 is 4.85%. Accordingly, the Debtor estimates that, unless the Bankruptcy Exception is applicable, the Annual Limitation would be approximately $400,000. Unless the Bankruptcy Exception is applicable, the Annual Limitation may also apply to limit the Reorganized Debtor's ability to utilize certain losses and deductions (other than its NOLs) that are generated and reportable after the Effective Date, but that are "built-in" as of the Effective Date. Section 382(l)(5) of the Tax Code (the "Bankruptcy Exception") provides that the Annual Limitation will not apply to limit the utilization of the Reorganized Debtor's NOLs if the stock of the Reorganized Debtor owned by those persons who were shareholders of the Reorganized Debtor immediately before the ownership change, together with certain stock of the Reorganized Debtor received by certain holders of Allowed Claims pursuant to the Plan, comprise 50% or more of the value and voting power of all of the stock (other than "Straight Preferred Stock", described below) of the Reorganized Debtor outstanding immediately after the ownership change. Stock received by such holders will be included in the 50% calculation if, and to the extent that, the holders constitute "historic creditors." A "historic creditor" is a holder of an Allowed Claim that (i) was held by such holder since July 14, 1997 (the date that is 18 months before the date on which the Reorganized Debtor filed its petition with the Bankruptcy Court) or (ii) arose in the ordinary course of business and is held by the person who at all times held the beneficial interest in such Allowed Claim. In determining whether the Bankruptcy Exception applies, certain creditors who would own a de minimis amount of Reorganized Debtor stock pursuant to the Plan are presumed to have held their Claims since the origination of such Claims. In general, this de minimis rule applies to creditors who would own directly or indirectly less than 5% of the total fair market value of the Reorganized Debtor's stock pursuant to the Plan. The Reorganized Debtor could elect to not have the Bankruptcy Exception apply, in which event the Annual Limitation would apply. The Reorganized Debtor has determined not to make such an election. In making the 50% calculation, "straight preferred stock" issued by the Reorganized Debtor is not counted as stock. Straight preferred stock includes stock that (i) is not entitled to vote, (ii) is limited and preferred as to dividends and does not participate in corporate growth to any significant extent, (iii) has redemption and liquidation rights that do not exceed the issue price of such stock (except for a reasonable redemption or liquidation premium), and (iv) is not convertible into another class of stock. Prior to the Confirmation Date, the Debtor shall seek a determination that the shares of New UPC Preferred Stock will have a fair market value equal to their face amount as of the Effective Date and that the Reorganized Debtor will have sufficient assets and cash flow (not taking into account future growth of the Reorganized Debtor's assets) to meet all required payments on the New UPC Preferred Stock. Based upon the characteristics of the New UPC Preferred Stock, if the Reorganized Debtor obtains such a determination, the Reorganized Debtor believes that the New UPC Preferred Stock will qualify as straight preferred stock. However, the IRS could challenge the characterization of the New UPC Preferred Stock as straight preferred stock. If such challenge is successful, the Bankruptcy Exclusion would not apply and the Annual Limitation would apply to the Reorganized Debtor's NOLs. If the Bankruptcy Exception applies, a subsequent ownership change with respect to the Reorganized Debtor occurring within two (2) years after the Effective Date will result in the reduction of the Annual Limitation that would otherwise be applicable to the subsequent ownership change to zero. Thus, a subsequent ownership change within two years after the Effective Date would eliminate the Reorganized Debtor's NOLs. In order to avoid a subsequent ownership change, the Amended UPC Charter will contain a "5% Ownership Limitation," effective until the last day of the taxable year of Reorganized Debtor that includes the second anniversary of the Effective Date. It is expected that this limitation will provide that no person who beneficially owns, directly or indirectly, five percent or more of the total fair market value of the Reorganized Debtor's stock, or who, upon the purchase, sale, or other transfer of any shares of the Reorganized Debtor's stock, would beneficially own, directly or indirectly, or would cause any other person beneficially to own, directly or indirectly, five percent or more of the total fair market value of the Reorganized Debtor's stock (a "5% Holder"), may sell or purchase any shares of stock (or any option, warrant or other right to purchase or acquire shares of the Reorganized Debtor's stock or any securities convertible into or exchangeable for shares of stock), except as authorized by the Board of Directors or its designee, subject to the waiver or modification of this restriction by the holders of a majority of the outstanding stock. For purposes of the 5% Ownership Limitation, "stock" means stock for U.S. federal income tax purposes, but does not include stock that qualifies as Straight Preferred Stock. The purpose of the 5% Ownership Limitation is to reduce the risk that a change in the ownership of the Reorganized Debtor may result in the loss or reduction of federal income tax attributes of the Reorganized Debtor for purposes of Sections 382 and 383 of the Tax Code. However, the implementation of the 5% Ownership Limitation also could have the effect of impeding an attempt to acquire a significant or controlling interest in the Reorganized Debtor interest and, as a practical matter, may make it impossible for a 5% Holder to pledge such securities on margin. Any 5% Holder who proposes to transfer shares of stock that would be subject to the 5% Ownership Limitation must, prior to the date of the proposed transfer, request in writing (a "Request") that the Directors or the designee of the Directors (as defined in the Restated Certificate) review and authorize the proposed transfer. A Request must, among other things, be delivered to the President of the Reorganized Debtor and must include (i) the name, address and telephone number of the 5% Holder, (ii) a description of the stock proposed to be transferred by or to the 5% Holder, (iii) the date of the proposed transfer, (iv) the name of the transferor and transferee of such shares of stock, and (v) a request that the Board of Directors or its designee authorize, if appropriate, the transfer by or to the 5% Holder. If the 5% Holder seeks to buy or sell shares, then within fifteen (15) business days of receipt by the President of a Request, either the Directors or the designee shall determine whether to authorize the proposed transfer described in the Request. In any case, the Directors or the designee shall conclusively determine whether to authorize the proposed transfer and shall immediately inform such 5% Holder of such determination; provided however, that the Directors or the designee shall authorize a transfer by or to a 5% Holder if that transfer will not jeopardize the Reorganized Debtor's preservation of its federal income tax attributes pursuant to Sections 382 and 383 of the Tax Code. For purposes of applying the 5% Ownership Limitation (including the determination of whether a holder is a 5% Holder), 10% shall be substituted for 5% for so long as the percentage point changes in the ownership of the Reorganized Debtor's stock (as determined in accordance with Section 382(g)(1) of the Tax Code) since the Effective Date (taking into account the proposed transfer) do not total more than 30 percentage points. Any transfer of shares of stock that are subject to the 5% Ownership Limitations in violation of the requirements of the Amended UPC Charter shall be null and void. The purported transferor shall remain the owner of the transferred shares and the Reorganized Debtor, as agent for the purported transferor, shall be authorized to sell such shares to an eligible transferee that is not subject to the 5% Ownership Limitation. The proceeds of any such sale shall be applied to reimburse the Reorganized Debtor for its expenses, then to reimburse the intended transferee for any payments made by the intended transferee to the transferor, and the remainder, if any, to the original transferor. New UPC Common Stock certificates will bear a legend reflecting the existence of the transfer restrictions. Although the Annual Limitation will not restrict the deductibility of the Reorganized Debtor's NOLs if the Bankruptcy Exception applies, the Reorganized Debtor's NOLs will nevertheless be reduced by any interest paid or accrued by the Reorganized Debtor during the three (3) taxable years preceding the taxable year in which the ownership change occurs and during the portion of the taxable year of the ownership change preceding the ownership change with respect to all Allowed Claims converted into stock. The Debtor has estimated that, if the Bankruptcy Exception applies to the Debtor, the aggregate NOLs that would be available to the Reorganized Debtor after the Bankruptcy Exception reduction (and after the reduction as a result of the exclusion of COD income) would be in the range of $15 to $20 million. (b) Section 384. In certain circumstances, Section 384 of the Tax Code generally prevents a corporation from applying its preacquisition NOLs against an acquired corporation's "Recognized Built-In Gains." "Recognized Built-In Gains" are gains that are recognized after an acquisition (such as the Merger) with respect to an asset held by the acquired corporation prior to the acquisition, but only to the extent the fair market value of the asset exceeded the asset's tax basis as of the acquisition date. Therefore, where Section 384 of the Tax Code applies, it will limit the ability of an acquiring corporation from applying its preacquisition NOLs against the preacquisition appreciation of the acquired corporation's assets; however, Section 384 of the Tax Code will not limit the ability of the acquiring corporation from applying its preacquisition NOLs against the post-acquisition appreciation of the acquired corporation's assets. Furthermore, Section 384 of the Tax Code does not apply to any gains recognized more than five (5) years after the acquisition date. Section 384 of the Tax Code may apply to limit the use of the NOLs of the Reorganized Debtor with respect to certain gains recognized by the Reorganized Debtor's consolidated group after the Reorganized Debtor's acquisition of FSCI in the Merger. In order for Section 384 of the Tax Code to apply, the Farm Stores Assets must have an aggregate fair market value on the Effective Date (the "Aggregate Fair Market Value") that exceeds FSCI's aggregate basis in such assets by the lesser of (i) 15% of the Aggregate Fair Market Value, or (ii) $10,000,000. The Debtor has not determined the amount, if any, of such excess; accordingly, it is uncertain whether Section 384 of the Tax Code would apply. If Section 384 of the Tax Code does apply, the Reorganized Debtor's consolidated group would generally be unable to utilize the Reorganized Debtor's NOLs against gains recognized by the Reorganized Debtor's consolidated group with respect to the sale of any of the Farm Store Assets, to the extent such asset's fair market value on the Effective Date exceeded its tax basis. Notwithstanding the foregoing, Section 384 of the Tax Code would not apply to any gains recognized by the Reorganized Debtor's consolidated group from sales consummated more than five years after the Effective Date. Because the Reorganized Debtor intends to continue to operate the business of FSCI after the Merger, the Reorganized Debtor does not believe that it will dispose of any significant assets of FSCI in the foreseeable future. Accordingly, the Reorganized Debtor does not believe that Section 384 of the Tax Code, if it applied, would be materially applicable to the Reorganized Debtor. However, if Section 384 of the Tax Code applies, and if the Reorganized Debtor disposed of any of the Farm Stores Assets within five (5) years after the Effective Date, Section 384 of the Tax Code may prevent the Reorganized Debtor's consolidated group from using its NOLs against some or all of the gain generated from such disposition. (c) Section 269. Pursuant to section 269(a)(1) of the Tax Code, the IRS may disallow a corporate tax benefit if the principal purpose for an acquisition of 50% or more (in vote or value) of the stock of a corporation (an "Applicable Stock Acquisition") is the evasion or avoidance of federal income tax by securing a corporate tax benefit that would not otherwise be available. Furthermore, pursuant to section 269(a)(2) of the Tax Code, the IRS may disallow a corporate tax benefit if the principal purpose for certain asset acquisitions ("Applicable Asset Acquisitions") is the evasion or avoidance of federal income tax by securing a corporate tax benefit that would not otherwise be available. On the Effective Date, more than 50% in value of the total outstanding stock of the Reorganized Debtor will be issued to holders of Allowed Claims, and the Merger will constitute an Applicable Asset Acquisition. Thus, in addition to the limitations on, and reductions in, the NOLs set forth in Section 382 of the Tax Code, the IRS may assert that Section 269(a)(1) of the Tax Code authorizes it to disallow deductions with respect to some or all of the Reorganized Debtor's NOLs if either the Plan or the Merger is determined to have been structured principally for tax avoidance purposes. This determination is primarily a question of fact. If the IRS asserts Section 269 of the Tax Code with respect to an Applicable Stock Acquisition or an Applicable Asset Acquisition, the taxpayer has the burden of proof because the IRS's determination of a tax avoidance principal purpose is presumptively correct. If the taxpayer is unable to carry the burden of proving a principal purpose other than tax avoidance, the determination of a tax avoidance will stand. The regulations under Section 269 of the Tax Code provide that, in cases where the Bankruptcy Exception applies, there is a presumption that Section 269(a)(1) of the Tax Code will disallow any deduction of the Debtor's NOLs if the Debtor does not carry on more than an insignificant amount of an active trade or business during and subsequent to the Chapter 11 Case. The regulations under the Tax Code provide that this presumption controls unless rebutted by strong evidence to the contrary. The Reorganized Debtor intends to retain and continue to operate substantially all of its business as well as the businesses of FSCI. Accordingly, the Reorganized Debtor does not believe that this presumption will apply to it. However, if the Reorganized Debtor in the future were to substantially reduce the amount of its business and the businesses of FSCI, the IRS, using hindsight, could attempt to apply the presumption to disallow the Reorganized Debtor's utilization of NOLs. Even though the presumption in the regulations should not apply, the IRS could assert that the principal purpose of the Plan and the Merger is to enhance the ability of the Reorganized Debtor to utilize its NOLs through the Reorganized Debtor's and UPC Merger Sub's acquisition of the historically profitable businesses of FSCI. This assertion can be negated by the Reorganized Debtor's showing that a business purpose (other than tax avoidance) was the principal motivation for both the Plan and the Merger. Although the Reorganized Debtor will be required to carry the burden of proof with respect to this issue, the IRS itself has recognized that courts are generally reluctant to invoke Section 269 of the Tax Code where a reasonable business purpose existed for the timing and form of the acquisition, even if the availability of NOLs was a major consideration in the transaction. As noted above, the determination of whether tax avoidance is the principal motivation with respect to a transaction is primarily a question of fact. The Debtor believes that, if the Plan is challenged by the IRS, the Reorganized Debtor could show that reasonable business purposes existed for the implementation of the Plan and that tax avoidance was not the principal motivation for the Plan. Accordingly, the Debtor believes that Section 269 of the Tax Code should not apply to the Plan. The Debtor believes that the creditors' acquisition of control of the Reorganized Debtor pursuant to the Plan will be made for reasonable business purposes. The creditors have been offered stock because the Reorganized Debtor cannot offer them sufficient cash and/or new debt instruments to preserve their investment in the Reorganized Debtor. In light of business exigencies requiring the Reorganized Debtor to satisfy most of its indebtedness with stock, tax avoidance should not be considered the principal motivation for the Plan. Although the appropriate application of Section 269 of the Tax Code to the Merger is less certain, the Reorganized Debtor believes that, if the Merger is challenged by the IRS, the Reorganized Debtor could show that reasonable business purposes exist for the consummation of the Merger and that tax avoidance is not the principal motivation for the Merger. Accordingly, the Debtor believes that Section 269 should not apply to the Merger. The Debtor believes that the Merger will be consummated principally for reasonable business purposes. The Merger is anticipated to reap significant synergistic benefits, create critical mass, accomplish geographical diversity, provide management with significant experience in the Company's core business, and enhance the efficiency of all of the reorganized Company's businesses. Even though the Debtor believes that Section 269 of the Tax Code should not apply to either the Plan or the Merger, the IRS could assert that Section 269 of the Tax Code applies to either or both of the Plan and the Merger. If such assertion is successful, Section 269 of the Tax Code would severely limit or even extinguish the Reorganized Debtor's ability to utilize its pre-ownership change NOLs. Although the Debtor believes that Section 269 of the Tax Code should not apply, due to the highly factual nature of the issue, there can be no assurance that the IRS would not prevail on this issue if it asserts the application of Section 269 of the Tax Code to the Plan or the Merger. THE ABOVE SUMMARY HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES ONLY. ALL HOLDERS OF ALLOWED CLAIMS AND EQUITY INTERESTS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES OF THE PLAN. XIV. CONFIRMATION OF THE PLAN A. Solicitation of Votes; Voting Procedures 1. Ballots and Voting Deadlines. A ballot to be used for voting to accept or reject the Plan, together with a envelope, is enclosed with all copies of this Disclosure Statement mailed to all holders of Claims and Equity Interests entitled to vote. BEFORE COMPLETING YOUR BALLOT, PLEASE READ CAREFULLY THE INSTRUCTION SHEET THAT ACCOMPANIES THE BALLOT. HOLDERS OF COMMON STOCK SHOULD CAREFULLY READ THE INSTRUCTIONS ACCOMPANYING THIS DISCLOSURE STATEMENT REGARDING HOW TO PROPERLY COMPLETE THE BALLOT OR MASTER BALLOW, AS APPROPRIATE, WITH RESPECT TO CLASS 7. The Bankruptcy Court has directed that, in order to be counted for voting purposes, ballots for the acceptance or rejection of the Plan must be actually received no later than 4:00 p.m., Prevailing Eastern Time, on August 20, 1999, at the following address: United Petroleum Balloting c/o Logan & Company, Inc. 615 Washington Street Second Floor Hoboken, New Jersey 07030 YOUR BALLOT MAY NOT BE COUNTED IF IT IS RECEIVED AT THE ABOVE ADDRESS AFTER 4:00 P.M., PREVAILING EASTERN TIME, ON AUGUST 20, 1999. 2. Parties Entitled to Vote. Any holder of a Claim against or Equity Interest in the Debtor at the date on which the order is entered approving the Disclosure Statement whose Claim or Equity Interest has not previously been disallowed by the Bankruptcy Court is entitled to vote to accept or reject the Plan, if such Claim or Equity Interest is impaired under the Plan and either (a) such holder's Claim or Equity Interest has been scheduled by the Debtor (and such Claim or Equity Interest is not scheduled as disputed, contingent or unliquidated) or (b) such holder has filed a proof of claim or proof of interest on or before March 30, 1999, the last date set by the Bankruptcy Court for such filings. Any Claim or Equity Interest as to which an objection is filed on or prior to the voting deadline is not entitled to vote, unless the Bankruptcy Court, upon application of the holder to whose Claim or Equity Interest an objection has been made, temporarily allows such Claim or Equity Interest in an amount that it deems proper for the purpose of accepting or rejecting the Plan. Any such application must be heard and determined by the Bankruptcy Court on or before commencement of the Confirmation Hearing. A vote may be disregarded if the Bankruptcy Court determines, after notice and a hearing, that such vote was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy Code. IF YOU HAVE ANY QUESTIONS REGARDING THE PROCEDURES FOR VOTING ON THE PLAN, PLEASE CONTACT THE DEBTOR'S TABULATION AGENT AT THE FOLLOWING ADDRESS: Logan & Company, Inc. 615 Washington Street Second Floor Hoboken, New Jersey 07030 (201) 798-1031 3. Definition of Impairment. As set forth in section 1124 of the Bankruptcy Code (as applicable to the Debtor's Chapter 11 case), a class of claims or equity interests is impaired under a plan of reorganization unless, with respect to each claim or equity interest of such class, the plan: (a) leaves unaltered the legal, equitable, and contractual rights of the holder of such claim or equity interest; or(a) leaves unaltered the legal, equitable, and contractual rights of the holder of such claim or equity interest; or (b) notwithstanding any contractual provision or applicable law that entitles the holder of a claim or equity interest to demand or receive accelerated payment of such claim or equity interest after the occurrence of a default: (i) cures any such default that occurred before or after the commencement of the case under the Bankruptcy Code, other than a default of a kind specified in section 365(b)(2) of the Bankruptcy Code;o (i) cures any such default that occurred before or after the commencement of the case under the Bankruptcy Code, other than a default of a kind specified in section 365(b)(2) of the Bankruptcy Code; (ii) reinstates the maturity of such claim or interest as it existed before such default; (iii) compensates the holder of such claim or interest for any damages incurred as a result of any reasonable reliance on such contractual provision or such applicable law; ando (iii) compensates the holder of such claim or interest for any damages incurred as a result of any reasonable reliance on such contractual provision or such applicable law; and (iv) does not otherwise alter the legal, equitable or contractual rights to which such claim or interest entitles the holder of such claim or interest.o (iv) does not otherwise alter the legal, equitable or contractual rights to which such claim or interest entitles the holder of such claim or interest. 4. Classes Impaired Under the Plan. The following classes of claims and equity interests are impaired under the Plan and holders of claims and equity interests in such classes are entitled to vote to accept or reject the Plan: Class 2: Infinity Secured Claims Class 5: Debenture Claims Class 6: Preferred Equity Interests Class 7: Common Equity Interests Class 8: UPC Securities Claims All other classes of claims or interests are unimpaired under the Plan, are deemed to have accepted the Plan, and are not entitled to vote with respect to the acceptance or rejection of the Plan. 5. Vote Required for Class Acceptance. The Bankruptcy Code defines acceptance of a plan by a class of claims as acceptance by holders of at least two-thirds in dollar amount, and more than one-half in number, of the claims of that class which actually cast ballots for acceptance or rejection of the Plan. Thus, class acceptance takes place only if at least two-thirds in amount and a majority in number of the holders of claims voting cast their ballots in favor of acceptance. The Bankruptcy Code defines acceptance of a plan by a class of equity interests as acceptance by holders of at least two-thirds in amount of the equity interests of that class that actually cast ballots for acceptance or rejection of the plan. Thus, class acceptance takes place only if at least two-thirds in amount of the holders of equity interests voting cast their ballots in favor of acceptance. B. Confirmation Hearing Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a hearing on confirmation of a plan. By order of the Bankruptcy Court, the Confirmation Hearing has been scheduled for August 24, 1999, at 3:00 p.m., Prevailing Eastern Time in the United States Bankruptcy Court, District of Delaware. The Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court without further notice except for an announcement made at the confirmation hearing or any adjournment thereof. Section 1128(b) of the Bankruptcy Code provides that any party in interest may object to confirmation of a plan. Any objection to confirmation of the Plan must be made in writing and filed with the Bankruptcy Court and served upon the following parties, together with proof of service, on or before 4:00 p.m. on August 20, 1999: Young Conaway Stargatt & Taylor, LLP Attn: Joel A. Waite Rodney Square North 1100 North Market Street P.O. Box 391 Wilmington, DE 19899 Office of the United States Trustee 601 Walnut Street Curtis Center, Suite 950 West Philadelphia, PA 19106 Objections to confirmation of the Plan are governed by Bankruptcy Rule 9014. UNLESS AN OBJECTION TO CONFIRMATION IS TIMELY SERVED AND FILED, IT WILL NOT BE CONSIDERED BY THE BANKRUPTCY COURT. C. Requirements for Confirmation of the Plan In order for the Plan to be confirmed, regardless of whether all Impaired Classes of Claims and Interests vote to accept the Plan, the Bankruptcy Code requires that the Bankruptcy Court determine that the Plan complies with the requirements of section 1129 of the Bankruptcy Code. In order for the Plan to be confirmed, section 1129 of the Bankruptcy Code requires, among other things, that: (i) the Plan receive sufficient acceptances from each Impaired Class of Claims and Interests, except to the extent that confirmation, despite the failure of one or more of such Impaired Classes to accept the Plan, is available under section 1129(b) of the Bankruptcy Code (see below "Confirmation Without Acceptance of All Impaired Classes"); (ii) the Plan is feasible (that is, there is a reasonable probability that the Debtor will be able to perform its obligations under the Plan and continue to operate its business without the need for further financial reorganization) (see below "Feasibility of the Plan"); and (iii) the Plan meets the requirements of section 1129(a)(7) of the Bankruptcy Code, which specify that, with respect to each Impaired Class, each holder of a Claim or Interest in such Class either (a) accepts the Plan or (b) receives at least as much pursuant to the Plan as such holder would receive in a liquidation of the Debtor under chapter 7 of the Bankruptcy Code (see below "Application of section 1129(a)(7) of the Bankruptcy Code"). In addition, the Debtor must demonstrate in accordance with section 1129 of the Bankruptcy Code that (i) the Plan has been proposed in good faith, (ii) the Plan and the Debtor have complied with the Bankruptcy Code, (iii) payment for services or costs and expenses in or in connection with the Chapter 11 Case, or in connection with the Plan, have been approved by or are subject to the approval of the Bankruptcy Court, (iv) the individuals to serve as the officers and directors of the Debtor have been disclosed and their appointment or continuance in such office is consistent with the interests of creditors and Interest holders, (v) the identity of any insider that will be employed or retained by the Debtor is disclosed, as well as any compensation to be paid to such insider, (vi) adequate provision for the payment of all priority claims has been made, (vii) all statutory fees have been or will be paid, and (viii) the Plan provides for the continued maintenance of retiree benefits at a certain level. Although the Debtor believes that the requirements of section 1129 of the Bankruptcy Code for confirmation of the Plan will be met, there can be no assurance that the Bankruptcy Court will reach the same conclusion. 1. Acceptance of the Plan. As a condition to confirmation, the Bankruptcy Code requires that each Impaired Class of Claims or Interests accept a plan of reorganization, except as described below under "Confirmation of the Plan -- Confirmation Without Acceptance of All Impaired Classes." Classes of Claims or Interests that are not impaired under a plan are deemed to have accepted the plan and are not entitled to vote. Classes 2, 5, 6, 7 and 8 are Impaired under the Plan, and, therefore, must accept the Plan in order for it to be confirmed without application of section 1129(b) of the Bankruptcy Code. In that regard, based on discussions and negotiations between the Debtor and Infinity, the Debtor currently anticipates that the holders of the requisite majorities of Claims and Interests, as applicable, contained in Classes 2, 5 and 6 will vote to accept the Plan. Section 1129(b) is discussed below in "Confirmation of the Plan -- Confirmation Without Acceptance of All Impaired Classes." 2. Feasibility of the Plan. The Bankruptcy Code requires that, in order to confirm the Plan, the Bankruptcy Court must find that confirmation of the Plan will not likely be followed by the liquidation or the need for further financial reorganization of UPC, except as specifically contemplated by the Plan (the "Feasibility Test"). For the Plan to meet the Feasibility Test, the Bankruptcy Court must find that it is reasonably likely that reorganized UPC will possess the resources and working capital necessary to fund its operations and that is reasonably likely that reorganized UPC will be able to meet its obligations under the Plan. As part of its due diligence the Debtor will analyze and carefully consider its ability to meet its obligations under the Plan. As part of its analysis, the Debtor will consider the Financial Projections developed by F.S. Management with respect to the Debtor's financial performance after consummation of the Plan and the Merger. These projections and the significant assumptions on which they are based are included in this Disclosure Statement. See "Business Plan & Projections" and "The Plan -- Sources and Uses of Funds." Holders of Claims and Interests are cautioned not to place undue reliance on the Financial Projections prepared by F.S. Management or Debtor's analysis thereof and are advised to consult with their own advisors. In connection with confirmation of the Plan, the Bankruptcy Court will have to determine that the Plan is feasible. There can be no assurance that the Bankruptcy Court will agree with the Debtor's determinations. In particular, there can be no assurance that the Bankruptcy Court will accept the projections or the assumptions underlying F.S. Management's or the Debtor's determination. 3. Application of Section 1129(a)(7) of the Bankruptcy Code. Even if the Plan is accepted by each Impaired Class of Claims and Interests, in order to confirm the Plan, the Bankruptcy Court must determine that either (i) each member of an Impaired Class of Claims or Interests has accepted the Plan, or (ii) the Plan will provide each such non-accepting member of an Impaired Class of Claims or Interests a recovery that has a value as of the Effective Date at least equal to the value of the distribution that each such member would receive if UPC were liquidated under chapter 7 of the Bankruptcy Code on the Effective Date (the "Best Interests Test"). If all members of an Impaired Class of Claims or Interests accept the Plan, the Best Interests Test does not apply to that Class. To determine what holders in each Impaired Class of Claims and Interests would receive if UPC were liquidated, the Bankruptcy Court must determine the dollar amount that would be generated from the liquidation of UPC's assets and properties in the context of a chapter 7 liquidation case, as well as consider the cash held by UPC as of the Effective Date. Secured Claims and the costs and expenses of the liquidation case must then be paid in full from the liquidation proceeds before the balance of those proceeds would be made available to pay any other Claims and Interests. Under chapter 7, absent subordination in accordance with section 510 of the Bankruptcy Code, the rule of absolute priority of distribution applies. Under that rule no junior creditor receives any distribution until the Allowed Claims of all senior creditors are paid in full, and no holder of an Interest receives any distribution until the Allowed Claims of all creditors and all Senior Allowed Interests are paid in full. After consideration of the effect that a chapter 7 liquidation case would have on the ultimate proceeds available for distribution to the holders of Impaired Claims and Interests, including (i) the increased costs and expenses of liquidation under chapter 7 arising from fees payable to a trustee in bankruptcy and professional advisors to such a trustee, (ii) the erosion in the value of UPC's assets in the context of an expeditious liquidation as is required by chapter 7 and the "forced sale" atmosphere that would prevail, (iii) the adverse effects on the salability of business segments that could result from the probable departure of key employees, (iv) the costs attributable to the time value of money resulting from what is likely to be a more protracted proceeding than if the Plan is confirmed (because of the time required to liquidate the assets of UPC, resolve claims and related litigation and prepare for distributions), (v) the application of the rule of absolute priority (as described in the immediately preceding paragraph) to distributions in the chapter 7 liquidation, and (vi) the likelihood that the commencement of a chapter 7 case for UPC will necessitate the filing of chapter 7 cases for UPC's operating subsidiaries, Calibur and Jackson, the Debtor believes that the confirmation of the Plan will provide each holder of a Claim or Interest in an Impaired Class with a recovery at least equal to the recovery that such holder would receive pursuant to a liquidation of assets of UPC under chapter 7 of the Bankruptcy Code. The Debtor did not assign a specific discount to the assets as a result of any of the enumerated factors. The Debtor's belief that confirmation of the Plan will provide each holder of a Claim or Interest in an Impaired Class with a recovery at least equal to the recovery that such holder would receive pursuant to a liquidation under chapter 7 of the Bankruptcy Code is based on a comparison of the liquidation values set forth below with the Debtor's estimate of the value of the distributions to the holders of Claims and Interests pursuant to the Plan. There can be no assurance that the liquidation value determined by the Debtor will be accepted by the Bankruptcy Court. The Debtor's estimate of the value of such distributions, together with the Debtor's estimate of the percentage of each Claim to be satisfied under the Plan, is set forth in the table set forth below. The Liquidation Analysis set forth below reflects the Debtor's estimates of the proceeds that would be realized if UPC, Calibur and Jackson were to be liquidated under chapter 7 of the Bankruptcy Code by a court appointed trustee. The Liquidation Analysis assumed that the liquidation period would last two months and was based on the Debtor's income statement and balance sheet as of September 30, 1998. The analysis assumed the assets of UPC and its subsidiaries were sold for cash in an orderly liquidation process and the net proceeds after payments of the Debtor's debts would be distributed to the SECURITY HOLDERS. The Liquidation Analysis suggested that there would be no remaining value (after repayment of debt obligations) for the holders of Common Stock or Preferred Stock upon liquidation of the Debtor's assets. Given that UPC would be under substantial financial pressure due to its debt obligations, the Debtor's management assumed that any sale would likely be at a discount to the Debtor's "going concern" market value. This discounted value reflects the estimated value that could be realized if the owner of a business were forced to sell or otherwise dispose of its assets under distressed conditions, for cash or cash equivalents, within a short period of time. Based upon the likelihood of a distressed sale, management anticipated that under such circumstances buyers would substantially discount the "going concern" value and that the net value for holders of unsecured debt and noteholders would be substantially less than that which might be achieved under the Plan. The following table details the computation of liquidation proceeds: Hypothetical net liquidation proceeds(a)..............................$8,430,000 Less: chapter 7 administration costs(b).................................$225,000 Less: payment of disposition-related taxes....................................$0 Less: Amount owed under the secured A-Note and B-Note.................$7,300,000 Less: Amount owed other secured creditors..............................$930,000 Less: Trade debt of Calibur and Jackson.................................$150,000 Liquidation value available for distribution to pay Trade Debt of UPC..$(25,000) Liquidation value available for distribution to holders of Debentures.........$0 Liquidation value available for distribution to Equity Interest holders of the Debtor (including preferred and common)................................$0 - -------------- (a) Hypothetical net liquidation proceeds, as estimated by the Debtor. The hypothetical net liquidation proceeds include interest on cash balances during the liquidation period at an assumed pretax rate of 5% per annum and reflect the estimated value of the assets available to creditors and equity interest holders of the Debtor after the payment of specific claims at each of UPC's subsidiaries, including: (i) any disposition-related taxes, and (ii) severance payments, but without subtracting the liabilities at each subsidiary which must be paid in full before any obligations owed by UPC can be paid. (b) Includes estimated asset disposition fee expenses of 3% of estimated net liquidation proceeds. The table below sets forth a comparison of the estimated distributions to holders of Impaired Claims and Interests under the Plan with the estimated recoveries of such holders in a liquidation of the Debtor.
Estimated Estimated Estimated Liquidation Recovery Plan Recovery --------- ---------------------------- ---------------------- Claim Amount Amount Percent Amount Percent ------ ------ ----------- ------ ----------- Liquidation proceeds available $ 8,105,000 for distribution Class 2 -- Infinity Secured $7,300,000 $ 7,300,000 100.0 7,000,000 100.0 Claim Class 3 - Secured Claims 930,000 805,000 86.5 930,000 100.0 (Other than the Infinity Security Claim) Unclassified - Administrative 140,000 0 0.0 140,000 100.0 Claims Unclassified - Priority Tax 30,000 0 0.0 30,000 100.0 Claims Class I -- Priority Non-Tax 10,000 0 0.0 10,000 100.0 Claims Class 4 -- General Unsecured 200,000 0 0.0 200,000 100.0 Claims Class 5 - Debenture Claims 7,505,000 0 0.0 6,597,500 87.9 Class 6 - Preferred Equity 14,163,000 0 0.0 2,450,500 17.3 Interests Class 7 - Common Equity 0 0 0.0 -- -- Interests Class 8 - UPC 0 0 0.0 [] [] Securities Claims - -------------- For purposes of the Liquidation Analysis, Claims and Interests have been grouped together in accordance with the rules of absolute priority under the Bankruptcy Code, which UPC believes would be applied in a liquidation. Percentage shown in the table as "Estimated Liquidation Recovery -- Percentage" is the quotient of the present value of the available liquidation proceeds divided by the estimated amount of Claims or Interests in such Class. Amount shown in the table as Estimated Plan Recovery -- Percentage is the quotient of the assumed value of the securities to be distributed to all holders of Claims or Interests in such Class under the Plan divided by the estimated amount of such Claims or Interests. It should be noted that depending on general market conditions and other factors prevailing at the relevant times, the equity securities may trade at a price other than that which was assumed for purposes of this analysis. Accordingly, no representation can be, or is being, made with respect to whether the percentage recoveries shown in the table above will actually be realized by the holder of Claims or Interests in any particular Class under the Plan. Assumes all payments are received at the Calibur and Jackson levels, where the obligations owed to Infinity under the A-Note and the B-Note and the obligations owed to the SBA are secured by the assets of such subsidiaries. The SBA claim represents first and second mortgage loans in the aggregate amount of $930,000 to Calibur, which are secured by UPC real property titled in the name of the UPC. As of September 30, 1998, the combined balance of the two notes was $922,284, and the balance should decrease because the Debtor is making monthly payments on the SBA notes. Additionally, the Debtor is currently leasing the location to a non-affiliated third party which has the right to acquire the location from the Debtor by assuming the SBA notes. Liquidation proceeds assumes that either this third party or another party would assume the SBA notes. In a liquidation scenario, claims related to certain unliquidated, contingent liabilities have conservatively been excluded from the class of General Unsecured Claims. In a Plan, these liabilities are assumed to be satisfied in the ordinary course of business. Under the Plan, the holders of Debentures will receive 1,750,000 shares of New UPC Common Stock. For purposes of this Liquidation Analysis, the New UPC Common Stock has been assumed to have a value of $3.77 per share, based upon the valuation of the New UPC Common Stock provided by F.S. Management, see "Valuation of New UPC Common Stock." Under the Plan the holders of Preferred Equity Interests will receive 650,000 shares of New UPC Common Stock. For purposes of this Liquidation Analysis, the New UPC Common Stock has been assumed to have a value of $3.77 per share, based upon the valuation of the New UPC Common Stock provided by F.S. Management, see "Valuation of New UPC Common Stock." Under the Plan, the holders of Common Equity Interests which are attributable solely to the ownership of shares of Common Stock prior to the filing of the Chapter 11 Case will receive 200,000 shares of New UPC Common Stock.. Additionally, holders of Common Equity Interests will receive one-half of the remaining assets of the UPC Trust. Securities Claimants will be entitled to pursue claims against the UPC Trust, to which Infinity will transfer 200,000 shares of New UPC Common Stock.
4. Confirmation Without Acceptance of All Impaired Classes. Section 1129(b) of the Bankruptcy Code provides that a plan can be confirmed even if it is not accepted by all Impaired Classes of Claims and Interests as long as at least one Impaired Class of Claims has accepted it, without counting the votes of insiders. The Bankruptcy Court may confirm the Plan notwithstanding the rejection of an Impaired Class of Claims or Interests if the Plan "does not discriminate unfairly" and is "fair and equitable" as to each Impaired Class that has rejected the Plan. A plan does not discriminate unfairly within the meaning of the Bankruptcy Code if a rejecting Impaired Class is treated substantially similar to other classes of equal rank and priority. A plan is "fair and equitable" with respect to a class of non-accepting secured claimants, among other things, if the plan provides (a) that each secured creditor in the class retains under the plan its liens on the property securing its claims and receives deferred cash payments totaling at least the allowed amount of its secured claim, of a value, as of the effective date of the plan, of at least the value of such secured creditor's interest in the estate's interest in such property, (b) for the sale, subject to section 363(k) of the Bankruptcy Code, of any property that is subject to the liens securing such claims, free and clear of such liens, with such liens attaching to the proceeds of such sale, and for the treatment of the liens on such proceeds as described in (a) above or (c) below, or (c) for the realization by the secured creditor of the indubitable equivalent of its secured claim. A plan is "fair and equitable" with respect to a non-accepting Impaired class of unsecured claims, among other things, if (a) each Impaired unsecured creditor in such Class receives or retains under the plan property of a value, as of the effective date of such plan, equal to the allowed amount of its claim, or (b) no holder of any Claim or Interest which is junior to the claims of such non-accepting Impaired Class of unsecured claims receives or retains any property under the plan on account of its Claim or Interest. A plan is "fair and equitable" with respect to a non-accepting Impaired Class of Interests if, among other things, (a) the plan provides that each holder of an Interest in such class receives or retains property of a value as of the effective date of the plan equal to the greater of (i) the allowed amount of any fixed liquidation preference or fixed redemption price to which such holder is entitled, or (ii) the value of such interest, or (b) no holder of any interest which is junior to the interests of such non-accepting Impaired Class of Interests receives or retains any property under the plan on account of its interest. The Debtor believes that the treatment afforded to each class of Impaired Claims and Interests under the Plan (i) does not discriminate unfairly, and (ii) is fair and equitable. No assurance can be given, however, that if any of Class 2, Class 5, Class 6, Class 7 or Class 8 rejects the Plan, the Bankruptcy Court will agree with the Debtor's conclusions and find that the Plan is non-discriminatory and fair and equitable with respect to such rejecting Class. D. Alternatives to Confirmation of the Plan. If the Plan is not confirmed, the Debtor (or any other party in interest if the Debtor's exclusive right to propose a plan is terminated) could attempt to formulate and propose a different plan or plans of reorganization. Such plans could involve a reorganization and continuation of UPC's business, a sale of UPC's businesses as going concerns, an orderly liquidation of UPC's assets, or any combination thereof. If no plan of reorganization is confirmed by the Bankruptcy Court, the Chapter 11 Case may be converted to a liquidation case under chapter 7 of the Bankruptcy Code, and/or the Bankruptcy Court may grant holders of Secured Claims relief from the automatic stay to foreclose on their collateral and, accordingly, valuable assets of UPC may be lost. In a chapter 7 case, a trustee will be appointed or elected with the primary duty of liquidating the assets of UPC. Typically, in a liquidation, assets are sold for less than their going concern value and, accordingly the return to creditors would be reduced. Proceeds from liquidation would be distributed to the creditors of UPC in accordance with the priorities set forth in the Bankruptcy Code. Because of the difficulties in estimating what the assets of UPC would bring in a liquidation and the uncertainties concerning the aggregate claims to be paid and their priority in liquidation, it is not possible to predict with certainty what return, if any, each Class of Claims or Interests might receive in a liquidation. Nevertheless, the Debtor believes that the most likely result would be the sale of the assets of UPC at a price which is significantly less than needed to pay the debts of UPC in full. The Debtor believes that holders of Impaired Claims and Interests would realize a greater recovery under the Plan than would be realized under a chapter 7 liquidation. See "Application of Section 1129(a)(7) of the Bankruptcy Code." Based upon discussions with Infinity, Debtor believes that if the current Plan is not confirmed and consummated that Infinity will not support an alternate plan of reorganization, but rather will seek to have the Debtor liquidated either through a Chapter 11 liqudation or foreclosure action. If the Debtor is liquidated, Debtor believes it is unlikely that any creditors, other than Infinity, will receive any distribution. Because the Debtor does not believe it could borrow sufficient funds to pay Infinity's secured claim or otherwise satisfy the requirements of Section 1129(b) of the Bankruptcy Code with respect to Infinity's secured claim, and in light of the Infinity Parties' significant unsecured claims, the Debtor does not believe it could confirm a Chapter 11 plan without Infinity's support of such plan. Accordingly, at the present time, the Debtor believes the Plan and proposed merger are the only viable alternative to liquidation of the Debtor. XV. CONCLUSION AND RECOMMENDATION The Debtor urges holders of impaired Claims and Interests to vote to accept the Plan and to evidence such acceptance by returning their ballots so that they will be received on or before 4:00 p.m., Prevailing Eastern Time on August 20, 1999. Dated: July 22, 1999 Respectfully submitted, UNITED PETROLEUM CORPORATION By: ----------------------------------- Its: ---------------------------------- TABLE OF CONTENTS Page I. INTRODUCTION..........................................................1 II. NOTICE TO HOLDERS OF CLAIMS AND EQUITY INTERESTS......................1 III. EXPLANATION OF CHAPTER 11.............................................3 A. Overview of Chapter 11.......................................3 B. Plan of Reorganization.......................................3 IV. SUMMARY OF THE PLAN...................................................6 1. Summary of the Terms of the Plan....................8 2. Changes in Equity Ownership Effected by the Plan...11 3. Other Significant Provisions in the Plan...........12 V. GENERAL INFORMATION..................................................13 A. The Debtor..................................................13 B. Cash Collateral.............................................14 C. Farm Stores.................................................14 D. F.S. Convenience Stores, Inc................................15 E. Walk InStores...............................................15 F. Drive-Thru Stores...........................................17 G. Directors and Officers......................................18 1. Existing Officers and Directors....................18 2. Existing Officer & Director Compensation...........20 3. Proposed Directors.................................21 4. Post Effective Date Officers and Compensation......23 H. Insider Relationships and Transactions......................23 I. The Restructuring...........................................27 1. Background and Reason for Commencing the Chapter 11 Case............................................27 2. Rationale of the Restructuring and the Merger......28 3. Merger Financing...................................30 J. Legal Proceedings...........................................30 1. NASDAQ Allegations.................................30 2. TAJ/National.......................................30 3. Strategic..........................................32 4. Ishmael............................................32 5. Unifirst...........................................32 6. In re United Petroleum.............................33 7. Pisacreta/Tucci....................................33 8. Dotan/Montel.......................................36 VI. FINANCIAL INFORMATION................................................36 VII. BUSINESS PLAN AND PROJECTIONS........................................37 A. Assumptions -Nature and Limitations of Projections..........39 B. Assumptions -Nature of Operations...........................39 1. Sales..............................................39 2. Cost of Sales......................................40 3. Expenses...........................................40 4. Other Income.......................................41 5. Reorganization Expenses............................41 6. Depreciation.......................................41 7. Capital Expenditures...............................41 8. Receivables........................................41 9. Inventory..........................................41 10. Debt Service and Interest..........................41 11. Effects of Plan Consummation.......................41 12. Taxes..............................................44 13. Effects of Chapter 11 Case.........................44 VIII. VALUATION OF THE NEW UPC COMMON STOCK................................44 IX. THE CHAPTER 11 CASE..................................................47 A. Commencement of the Chapter 11 Case.........................48 B. Continuation of Business After the Petition Date............48 C. Representation of the Debtor................................49 X. THE PLAN.............................................................49 A. General.....................................................49 B. Classification and Treatment of Claims and Interests........50 1. Unclassified Claims................................50 2. Classified Claims..................................52 C. Means for Implementation of the Plan........................55 1. Continued Corporate Existence......................55 2. Actions Prior to the Effective Date................55 3. Sources and Uses of Funds..........................57 4. Use of Cash Collateral.............................57 5. Filing and Execution of Plan Documents.............58 6. Intercompany Causes of Action......................58 7. Vesting of Causes of Action........................58 8. Injunction for Indemnities.........................59 9. Severance Policies.................................59 D. Creation of UPC Trust and Appointment of Trustee............59 E. Compromise and Settlement Between and Among the Debtor, the Infinity Parties, and the UPC Trust.........60 F. Injunctive Protection for the Debtor and the Infinity Parties.....................................................62 G. Description of Securities and Instruments to be Issued in Connection With the Plan....................63 1. Preferred Stock to be Issued Pursuant to the Plan..63 2. Common Stock to be Issued Pursuant to the Plan.....64 H. Exemption from Securities Registration for New Securities...66 1. Initial Issuance of New UPC Common Stock and New UPC Preferred Stock................................66 2. Transfer of Plan Securities........................66 I. Market for New Securities...................................68 J. Executory Contracts and Unexpired Lease.....................68 K. Other Provisions of the Plan................................68 1. Discharge..........................................68 2. Retention and Waiver of Causes of Action...........69 3. Objections to Claims and Interests/Distributions...69 4. Term of Injunctions or Stays.......................70 5. Release............................................71 6. Exculpation........................................71 7. Retention of Jurisdiction..........................72 8. Failure of Court to Exercise Jurisdiction..........73 9. Payment Dates......................................73 10. Successors and Assigns.............................73 11. Payment of Statutory Fees..........................73 XI. COMPARISON OF RIGHTS IN SECURITIES TO BE ISSUED UNDER THE PLAN TO RIGHTS HELD IN PREPETITION SECURITIES..............73 A........Comparison of the Rights of Holders of A-Note and the New UPC Preferred Stock...............................73 1. Seniority..........................................73 2. Voting.............................................74 3. Dividends/Interest Payments........................74 4. Conversion.........................................74 5. Security...........................................74 B. Comparison of the Rights of Holders of Debentures and New UPC Common Stock.........................74 1. Seniority..........................................75 2. Voting.............................................75 3. Dividends/Interest Payments........................75 4. Conversion.........................................75 C. Comparison of the Rights of Holders of Preferred Stock and New UPC Common Stock.................76 1. Seniority..........................................76 2. Voting.............................................76 3. Dividends/Interest Payments........................76 4. Conversion.........................................76 XII. CERTAIN RISK FACTORS TO BE CONSIDERED................................77 A. Risks Relating to the Debtor's Financial Condition..........77 B. Liquidity Risks.............................................77 C. Ability of the Company to Continue as a Going Concern; Explanatory Paragraph in Auditors'Report....................78 D. Risks Regarding the Financial Projections...................79 E. Risks Relating to Certain Debt and Equity Holders...........81 1. Risks Particular to Holders of Outstanding Notes...81 2. Risks Particular to Holders of Debentures..........81 3. Risks Particular to Holders of Preferred Stock.....81 4. Risks Particular to the Holders of Common Stock....82 5. No Prior Active Market; Possible Volatility of Stock Price........................................82 6. Control by Principal Stockholder...................82 F. Risks Relating to Confirmation of the Plan..................82 G. Risks Relating to Approval of the UPC Trust.................83 H. Risks Relating to the Company's Businesses and Farm Stores(R)BusinessAcquired in The Merger.....................84 1. Industry and Geographic Concentration..............84 2. Competition........................................84 3. Government Regulation..............................84 4. Possible Environmental Liabilities and Regulations.85 5. Volatility of Natural Gas and Oil Prices...........87 6. Drilling Risks.....................................87 7. Uncertainty of Reserve Information and Future Net Revenue7Estimates..................................87 8. Operating Risks of Oil and Gas Operations..........88 9. Dependence on Personnel............................88 10. Need For Additional Financing......................88 11. Legal Proceedings..................................89 12. Year 2000 Compliance...............................89 13. Benefits of Combining the F.S. Business and the Debtor's Business May not be Realized..............90 14. Conflicts of Interest; Exculpation and Indemnification....................................90 15. Weather Related Risk...............................90 XIII. CERTAIN MATERIAL INCOME TAX CONSEQUENCES OF THE PLAN.................91 A. U.S. Federal Income Tax Consequences to Holders of Allowed Claims and Equity Interests.................................91 1. Tax Consequences by Class..........................92 B. Certain Other U.S. Federal Income Tax Considerations for Holders of Allowed Claims...................................93 C. U.S. Federal Income Tax Consequences to the Debtor..........94 1. Discharge of Indebtedness Income...................94 2. Accrued Interest...................................95 3. The Merger.........................................95 4. Utilization of Debtor's Net Operating Loss Carryovers.........................................96 XIV. CONFIRMATION OF THE PLAN............................................102 A. Solicitation of Votes; Voting Procedures...................102 1. Ballots and Voting Deadlines......................102 2. Parties Entitled to Vote..........................103 3. Definition of Impairment..........................104 4. Classes Impaired Under the Plan...................104 5. Vote Required for Class Acceptance................105 B. Confirmation Hearing.......................................105 C. Requirements for Confirmation of the Plan..................106 1. Acceptance of the Plan............................107 2. Feasibility of the Plan...........................107 3. Application of Section 1129(a)(7) of the Bankruptcy Code...................................108 4. Confirmation Without Acceptance of All Impaired Classes...........................................113 D. Alternatives to Confirmation of the Plan...................114 XV. CONCLUSION AND RECOMMENDATION.......................................115 EX-99.3 7 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of September 29, 1999 (this "Agreement"), by and among F.S. Convenience Stores, Inc., a Florida corporation ("FSCI"), United Petroleum Corporation, a Delaware corporation (the "Company") and Chapter 11 debtor-in-possession, in case No. 99-88 (PJW) (the "Chapter 11 Case"), pending in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"), and United Petroleum Subsidiary, Inc., a Delaware corporation ("UPC Merger Sub"). WHEREAS, on July 23, 1999, the Company filed with the Bankruptcy Court its second amended chapter 11 reorganization plan (the "Chapter 11 Plan"); WHEREAS, pursuant to this Agreement and the Chapter 11 Plan, UPC Merger Sub shall acquire FSCI; WHEREAS, to complete such acquisition, the Company, UPC Merger Sub, and FSCI propose the merger of FSCI with and into UPC Merger Sub (the "Merger") in a forward triangular merger, such that the holders (collectively, the "FSCI Shareholder") of FSCI's capital stock (the "FSCI Common Stock") will receive certain common and preferred stock of the reorganized Company, and $3 Million in cash, pursuant to and subject to the terms and conditions of this Agreement and the Chapter 11 Plan; WHEREAS, on the Effective Date of the Chapter 11 Plan, each share of the Company's common stock then issued and outstanding shall be canceled, annulled and extinguished; and WHEREAS, on the Effective Date, the Company shall be authorized to issue 10,000,000 shares of New UPC Common Stock and 300,000 shares of New UPC Preferred Stock, NOW, THEREFORE, in consideration of the premises and of the mutual covenants, representations, warranties and agreements herein contained, and other good and valuable considerations, the receipt and adequacy of which are hereby conclusively acknowledged, the parties hereto, intending to be legally bound, agree as follows: ARTICLE I THE MERGER AND RELATED MATTERS Section 1.1 The Merger. (a) Subject to the terms and conditions of this Agreement, at the time of the Closing, a certificate of merger (the "Certificate of Merger") shall be duly prepared, executed and acknowledged by FSCI and UPC Merger Sub in accordance with the Delaware General Corporation Law, 8 Del. C. Section 101 et seq. (the "DGCL"). The Certificate of Merger and any certificate required to effect the Merger under the applicable provisions of Florida law shall be filed on the Closing Date with the Secretary of State of the State of Delaware and the Secretary of State of the State of Florida, respectively. The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with the provisions and requirements of the DGCL. The date and time when the Merger shall become effective is hereinafter referred to as the "Effective Date" or "Effective Time." (b) At the Effective Time, FSCI shall be merged with and into UPC Merger Sub, the separate corporate existence of FSCI shall cease, and UPC Merger Sub shall continue as the surviving corporation under the laws of the State of Delaware (the "Surviving Corporation"). (c) From and after the Effective Time, the Merger shall have the effects set forth in section 259 of the DGCL. Section 1.2 Consideration. At the Effective Time, the FSCI Shareholder shall, by virtue of the Merger and without any action on the part of the FSCI Shareholder, in exchange for the surrender to the Company of all outstanding shares of FSCI Common Stock, receive (i) 2,400,000 fully paid and nonassessable shares of New UPC Common Stock (as defined in Section 2.2(c) hereof), (ii) 70,000 shares of New UPC Preferred Stock (as defined in Section 2.2(c) hereof), and (iii) cash in the amount of three million dollars ($3,000,000.00)(collectively, the "Merger Consideration"). Section 1.3 Certificate of Incorporation of the Surviving Corporation. The certificate of incorporation of UPC Merger Sub, in substantially the form attached as Exhibit A, shall be the certificate of incorporation of the Surviving Corporation (the "Certificate of Incorporation"). Section 1.4 Bylaws of the Surviving Corporation. The bylaws of UPC Merger Sub, in substantially the form attached as Exhibit B, shall be the bylaws of the Surviving Corporation ("Bylaws"). Section 1.5 Directors and Officers of the Surviving Corporation. At the Effective Time, the directors set forth in Schedule 1.5 shall be the directors of the Company and the Surviving Corporation, each of such directors to hold office, subject to the applicable provisions of the Certificate of Incorporation and Bylaws of the Company or the Surviving Corporation, as applicable, until the next annual stockholders' meeting of the Company or the Surviving Corporation, as applicable, and until their respective successors shall be duly elected or appointed and qualified. At the Effective Time, the officers described in Schedule 1.5 , subject to the applicable provisions of the Certificate of Incorporation and Bylaws of the Company or the Surviving Corporation, as appropriate, shall be the officers of the Company and the Surviving Corporation, as applicable until their respective successors shall be duly elected or appointed and qualified. Section 1.6 Closing. The Closing of the Merger shall take place at the offices of White & Case LLP, 200 South Biscayne Boulevard, Suite 4900, Miami, Florida, or, at the option of the lender providing the Merger Financing at the offices of the lender or counsel to such lender, as soon as practicable after the last of the conditions set forth in Article V hereof is fulfilled or waived but in no event later than 5:00 p.m., prevailing Eastern Time, on October 15, 1999, or at such other time and place and on such other date as FSCI, UPC Merger Sub and the Company shall mutually agree (the "Closing Date"). ARTICLE II REPRESENTATIONS AND WARRANTIES Section 2.1 Representations and Warranties of the Company and UPC Merger Sub. Except as may be otherwise disclosed in the Company Disclosure Schedule, attached or to be attached and initialed by all parties hereto, the Company and UPC Merger Sub hereby represent and warrant to FSCI as follows: (a) Due Organization, Good Standing and Corporate Power. Except as disclosed in Schedule 2.1(a) hereto, each of the Company and its subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation and each such corporation has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of the Company and its subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except in such jurisdictions where the failure to be so qualified or licensed and in good standing would not have a material adverse effect on the business, properties, assets, liabilities, operations, results of operations, condition (financial or otherwise) (collectively, the "Condition") of the Company and its subsidiaries taken as a whole. The certificate of incorporation and bylaws of the Company, as amended and to be in effect as of the Effective Time, shall be substantially in the form attached hereto as Exhibit C. (b) Authorization and Validity of Agreement. Subject to the entry of the Confirmation Order and the occurrence of the Effective Date of the Chapter 11 Plan, the Company and UPC Merger Sub have full corporate power and authority to execute and deliver this Agreement and to consummate the transactions and enter into the agreements contemplated hereby. The execution, delivery and performance of this Agreement by the Company and UPC Merger Sub, and the consummation by them of the transactions contemplated hereby, have been duly authorized and approved by their respective Boards of Directors and, subject to the entry of the Confirmation Order and the occurrence of the Effective Date of the Chapter 11 Plan, (i) no other corporate action on the part of the Company or UPC Merger Sub is necessary to authorize the execution, delivery and performance of this Agreement by the Company and UPC Merger Sub and the consummation of the transactions contemplated hereby, and (ii) this Agreement will constitute a valid and binding obligation of the Company and UPC Merger Sub enforceable against the Company and UPC Merger Sub in accordance with its terms. Subject to the entry of the Confirmation Order and the occurrence of the Effective Date of the Chapter 11 Plan, this Agreement has been duly executed and delivered by the Company and UPC Merger Sub. (c) Capitalization. (i) Upon the Effective Date of the Chapter 11 Plan, the authorized capital stock of the Company will consist of 10,000,000 shares of common stock ("New UPC Common Stock"), 5,000,000 of which shall be issued and outstanding, and 300,000 shares of preferred stock, par value $100 per share ("New UPC Preferred Stock"), 140,000 shares of which shall be issued and outstanding. The authorized capital stock of UPC Merger Sub will consist of three thousand (3,000) shares of common stock, all of which shall be issued to and owned by the Company. New UPC Common Stock and New UPC Preferred Stock, when issued in accordance with the Chapter 11 Plan and this Agreement, (A) will be duly authorized, validly issued, fully paid and nonassessable, (B) will not be subject to, nor issued in violation of, any preemptive rights, and (C) will be free and clear of all liens, proxies, voting trusts, encumbrances, options or claims whatsoever. The holders of the New UPC Preferred Stock will have all of the powers, preferences and rights as set forth in the preference certificate. (ii) Schedule 2.1(c)(ii) lists all of the Company's subsidiaries. All of the outstanding shares of capital stock of each of the Company's subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable, are not subject to, nor were they issued in violation of, any preemptive rights, and are owned, of record and beneficially, by the Company, free and clear of all liens, encumbrances, options or claims whatsoever. Except as contemplated by this Agreement, no shares of capital stock of the Company or any of the Company's subsidiaries are reserved for issuance and there are no outstanding or authorized options, warrants, rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities, or other commitments, contingent or otherwise, relating to the capital stock of the Company or any subsidiary of the Company, pursuant to which the Company or such subsidiary is or may become obligated to issue any shares of capital stock of the Company or such subsidiary or any securities convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of the Company or such subsidiary. There are no restrictions of any kind that prevent the payment of dividends by any of the Company's subsidiaries. Except for the subsidiaries listed on Schedule 2.1(c)(ii), the Company does not own, directly or indirectly, any capital stock or other equity interest in any Person or have any direct or indirect equity or ownership interest in any Person and neither the Company nor any of its subsidiaries is subject to any obligation or requirement to provide funds for or to make any investment (in the form of a loan, capital contribution or otherwise) to or in any Person. (d) Consents and Approvals; No Violations. Assuming that filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), are made and the waiting period thereunder has been terminated or has expired, the filing of the Certificate of Merger and other appropriate merger documents, if any, as required by the DGCL or under the applicable provisions of Florida law, are made, the Bankruptcy Court enters an order, that may be the Confirmation Order, approving the Merger and this Agreement, and subject to the receipt of those consents and approvals identified in Schedule 2.1(d), the execution and delivery of this Agreement by the Company and UPC Merger Sub and the consummation by the Company and UPC Merger Sub of the transactions contemplated hereby will not: (i) violate any provision of the certificate of incorporation of the Company or UPC Merger Sub or the bylaws of the Company or UPC Merger Sub, each as in effect as of the Effective Time; (ii) violate any statute, ordinance, rule, regulation, order or decree of any court or of any governmental or regulatory body, agency or authority applicable to the Company or UPC Merger Sub or by which any of their respective properties or assets may be bound; (iii) require any filing with, or permit, consent or approval of, or the giving of any notice to, any governmental or regulatory body, agency or authority; or (iv) result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, payment or acceleration) under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company or any of its subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, permit, agreement, lease, franchise agreement or other instrument or obligation to which the Company or any of its subsidiaries is a party, or by which it or any of their respective properties or assets may be bound, excluding from the foregoing clauses (iii) and (iv) filings, notices, permits, consents and approvals the absence of which, and violations, breaches, defaults, conflicts and liens that, in the aggregate, would not have a material adverse effect on the Condition of the Company and its subsidiaries taken as a whole; or (v) trigger any consent or approval requirements with respect to those leases, licenses, permits, or approvals held by the Company. (e) Company Reports and Financial Statements. Except as set forth in Schedule 2.1(e), since December 31, 1996, the Company has filed all forms, reports and documents, together with all exhibits and amendments thereto with the Securities and Exchange Commission (the "Commission") required to be filed by it pursuant to the federal securities laws and the Commission rules and regulations thereunder, and all such forms, reports and documents filed by the Company with the Commission (collectively, the "Commission Filings") have complied in all material respects with all applicable requirements of the federal securities laws and the Commission rules and regulations promulgated thereunder. The Company has heretofore delivered to FSCI true and complete copies of all Commission Filings since December 31, 1996. As of their respective filing dates, the Commission Filings did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the consolidated balance sheets as of the end of the fiscal years ended December 31, 1997 and 1998 and the consolidated statements of operations, consolidated statements of stockholders' equity and consolidated statements of changes in financial position for the fiscal years ended December 31, 1997 and 1998 included in the Commission Filings, were prepared in accordance with generally accepted accounting principles (as in effect from time to time) applied on a consistent basis (except as may be indicated therein or in the notes or schedules thereto) and fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the results of their operations and changes in financial position for the periods then ended. (f) Minute Books. The minute books of the Company and its material subsidiaries, as previously made available to FSCI and its representatives, contain accurate records of all meetings of and corporate actions or written consents by the stockholders and Boards of Directors of the Company and its material subsidiaries since January 1, 1996. (g) Title to Properties; Encumbrances; Facilities. (i) The Company and each of its subsidiaries has good, valid and marketable title to (A) all its material tangible properties and assets (real and personal), including, without limitation, all the properties and assets reflected in the consolidated balance sheet as of December 31, 1998 included in the Disclosure Statement (the "Balance Sheet") except as indicated in the notes thereto and except for properties and assets reflected in the Balance Sheet that have been sold or otherwise disposed of in the ordinary course of business, and (B) all the tangible properties and assets purchased by the Company and any of its subsidiaries since December 31, 1998 except for such properties and assets that have been sold or otherwise disposed of in the ordinary course of business; in each case subject to no encumbrance, lien, charge or other restriction of any kind or character, except for (I) liens pertaining to indebtedness reflected in the Balance Sheet and described on Schedule 2.1(g), (II) liens consisting of zoning or planning restrictions, easements, permits and other restrictions or limitations on the use of real property or irregularities in title thereto that do not materially detract from the value of, or impair the use of, such property by the Company or any of its subsidiaries in the operation of its respective business, (III) liens for current taxes, assessments or governmental charges or levies on property not yet due and delinquent, and (IV) statutory landlord's liens, liens granted to landlords under leases for the Company Facilities, and fee mortgages made by such landlords. (ii) Schedule 2.1(g) sets forth a list of all Company Facilities now being occupied by the Company or any of its subsidiaries or used in connection with their respective operations. The Company Facilities are all premises leased or owned by the Company or any of its subsidiaries. Neither the Company nor any of its subsidiaries has received notice of any building or health code violations with respect to any of the Company Facilities. Each of the Company and its subsidiaries has complied with all federal, state and local laws, ordinances, rules and regulations applicable to each Company Facility, except where the failure to so comply would not have a material adverse effect on the Condition of the Company and its subsidiaries. There is no pending, proposed, or, to the Company's knowledge, threatened condemnation, eminent domain, or similar proceeding affecting any of the Company Facilities. (h) Compliance with Laws. The Company and its subsidiaries are in compliance with all applicable laws, regulations, orders, judgments and decrees except where the failure to so comply would not have a material adverse effect on the Condition of the Company and its subsidiaries taken as a whole. (i) Litigation. Except for the Chapter 11 Case and except as specifically disclosed in Schedule 2.1(i), there is no action, suit, proceeding at law or in equity, or any arbitration or any administrative or other proceeding by or before (or, to the best knowledge, information and belief of the Company, any investigation by) any governmental or other instrumentality or agency, pending, or, to the best knowledge, information and belief of the Company, threatened, against or affecting the Company or any of its subsidiaries, or any of their properties or rights. There are no such suits, actions, claims, proceedings or investigations pending or, to the best knowledge, information and belief of the Company, threatened, seeking to prevent or challenging the transactions contemplated by this Agreement. Except as disclosed in the Disclosure Statement, neither the Company nor any of its subsidiaries is subject to any judgment, order or decree entered in any lawsuit or proceeding that could have a material adverse effect on the Condition of the Company and its subsidiaries taken as a whole or on the ability of the Company or any subsidiary to conduct its business as presently conducted. Schedule 2.1(i) sets forth all litigation involving the Company or its subsidiaries that is pending or, to the Company's knowledge, threatened. (j) Employee Benefit Plans. (i) List of Plans. Set forth in Schedule 2.1(j) attached hereto is an accurate and complete list of all employee benefit plans ("Employee Benefit Plans") within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), whether or not any such Employee Benefit Plans are otherwise exempt from the provisions of ERISA, established, maintained or contributed to by the Company or any of its subsidiaries (including, for this purpose and for the purpose of all of the representations in this Section 2.1(j)), all employers (whether or not incorporated) that by reason of common control are treated together with the Company as a single employer within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the "Code")). (ii) Status of Plans. Neither the Company nor any of its subsidiaries maintains any Employee Benefit Plans subject to ERISA. (iii) Contributions. Full payment has been made of all amounts that the Company or any of its subsidiaries is required, under applicable law or under any Employee Benefit Plan or any agreement relating to any Employee Benefit Plan to which the Company or any of its subsidiaries is a party, to have paid as contributions thereto as of the last day of the most recent fiscal year of such Employee Benefit Plan ended prior to the date hereof. The Company has made adequate provision for reserves to meet contributions that have not been made because they are not yet due under the terms of any Employee Benefit Plan or related agreements. Benefits under all Employee Benefit Plans are as represented and have not been increased subsequent to the date as of which documents have been provided to FSCI. (iv) [Intentionally Omitted] (v) Tax Qualification. Each Employee Benefit Plan intended to be qualified under Section 401(a) of the Code has been determined to be so qualified by the Internal Revenue Service and nothing has occurred since the date of the last such determination that resulted or is likely to result in the revocation of such determination. (vi) Transactions. No Reportable Event (as defined in Section 4043 of ERISA) has occurred with respect to any Employee Benefit Plan for which the 30-day notice requirement has not been waived by the Pension Benefit Guaranty Corporation ("PBGC") and neither the Company nor any of its subsidiaries has engaged in any transaction with respect to the Employee Benefit Plans that would subject it to a tax, penalty or liability for prohibited transactions under ERISA or the Code nor has any of their respective directors, officers, or employees, to the extent they or any of them are fiduciaries with respect to such Employee Benefit Plans, breached any of their responsibilities or obligations imposed upon fiduciaries under Title I of ERISA or would result in any claim being made under or by or on behalf of any such Employee Benefit Plans by any party with standing to make such claim. (vii) Other Plans. The Company currently does not maintain any employee or non-employee benefit plans or any other foreign pension, welfare or retirement benefit plans other than those listed in Schedule 2.1(k). (viii) Documents. The Company has made available to FSCI and its counsel true and complete copies of (A) all Employee Benefit Plans as in effect, together with all amendments thereto that will become effective at a later date, as well as the latest Internal Revenue Service determination letter obtained with respect to any such Employee Benefit Plan qualified under Section 401 or 501 of the Code and (B) Form 5500 for the most recent completed fiscal year for each Employee Benefit Plan required to file such form. (k) Employment Relations and Agreements. (i) Each of the Company and its subsidiaries is in substantial compliance with all federal, state or other applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and has not and is not engaged in any unfair labor practice; (ii) to the Company's knowledge, no unfair labor practice complaint against the Company or any of its subsidiaries is pending before the National Labor Relations Board; (iii) there is no labor strike, dispute, slowdown or stoppage actually pending or, to the Company's knowledge, threatened against or involving the Company or any of its subsidiaries; (iv) no representation question exists respecting the employees of the Company or any of its subsidiaries; (v) to the Company's knowledge, no grievance that might have a material adverse effect on the Condition of the Company and its subsidiaries as a whole or the conduct of their respective businesses exists, no arbitration proceeding arising out of or under any collective bargaining agreement is pending and no claim therefor has been asserted; (vi) no collective bargaining agreement is currently in effect or being negotiated by the Company or any of its subsidiaries; and (vii) neither the Company nor any of its subsidiaries has experienced any material labor difficulty during the last three years. There has not been, and to the best knowledge of the Company, there will not be, any change in relations with employees of the Company or any of its subsidiaries as a result of the transactions contemplated by this Agreement that could have a material adverse effect on the Condition of the Company and its subsidiaries or the Surviving Corporation taken as a whole. Except as disclosed in Schedule 2.1(k) attached hereto (which schedule lists the maximum payment that could be owed), there exist no employment, consulting, severance or indemnification agreements between the Company and any director, officer or employee of the Company or any agreement that would give any Person the right to receive any payment from the Company as a result of the Merger. (l) Taxes. Except as provided in Schedule 2.1(l), the Company has filed or caused to be filed, within the times and in the manner prescribed by law (including permitted extensions of time to file), all federal, state, local and foreign tax returns and tax reports that are required to be filed by, or with respect to, the Company or any of its subsidiaries. All federal, state, local and foreign income, profits, franchise, sales, use, occupancy, excise and other taxes and assessments (including interest and penalties) payable by, or due from, the Company or any of its subsidiaries (i) have either been fully paid or will be fully paid under the Chapter 11 Plan to the extent allowed as a Claim under the Chapter 11 Plan, and (ii) adequately disclosed and fully provided for in the books and financial statements of the Company and its subsidiaries. Except as provided in Schedule 2.1(l), the federal income tax liability of the Company and its subsidiaries has been finally determined for all fiscal years to and including the fiscal year ended December 31, 1996. No examination of any tax return of the Company or any of its subsidiaries is currently in progress. There are no outstanding agreements or waivers extending the statutory period of limitation applicable to any tax return of the Company or any of its subsidiaries. (m) Intellectual Properties. In the operation of its business the Company and its subsidiaries have used, and currently use, domestic and foreign patents, patent applications, patent licenses, software licenses, know-how licenses, trade names, trademarks, copyrights, unpatented inventions, service marks, trademark registrations and applications, service mark registrations and applications, copyright registrations and applications, trade secrets and other confidential proprietary information (collectively the "Company Intellectual Property"). Schedule 2.1(m) attached hereto contains an accurate and complete list of all Company Intellectual Property that is of material importance to the operation of the business of the Company or any of its subsidiaries. Unless otherwise indicated in Schedule 2.1(m) the Company (or the subsidiary indicated) owns the entire right, title and interest in and to the Company Intellectual Property listed on Schedule 2.1(m) used in the operation of its business (including, without limitation, the exclusive right to use and license the same) and each item constituting part of the Company Intellectual Property that is owned by the Company or a subsidiary and listed on Schedule 2.1(m) has been, to the extent indicated in Schedule 2.1(m), duly registered with, filed in or issued by, as the case may be, the United States Patent and Trademark Office or such other governmental entities, domestic or foreign, as are indicated in Schedule 2.1(m) and such registrations, filings and issuances remain in full force and effect. To the best knowledge of the Company, except as stated in such Schedule 2.1(m), there are no pending or threatened proceedings or litigation or other adverse claims affecting or with respect to the Company Intellectual Property. Schedule 2.1(m) lists all notices or claims currently pending or received by the Company or any of its subsidiaries during the past two years that claim infringement, contributory infringement, inducement to infringe, misappropriation or breach by the Company or any of its subsidiaries of any domestic or foreign patents, patent applications, patent licenses and know-how licenses, trade names, trademark registrations and applications, service marks, copyrights, copyright registrations or applications, trade secrets or other confidential proprietary information. To the best knowledge of the Company, except as indicated on Schedule 2.1(m), no Person is materially infringing the Company Intellectual Property. (n) Broker's or Finder's Fee. No agent, broker, Person or firm acting on behalf of the Company is, or will be, entitled to any fee, commission or broker's or finder's fees from any of the parties hereto, or from any Person controlling, controlled by, or under common control with any of the parties hereto, in connection with this Agreement or any of the transactions contemplated hereby. (o) Accounts Receivable. The accounts receivable of the Company and its subsidiaries as reflected in the Balance Sheet, to the extent uncollected on the date of this Agreement, and the accounts receivable reflected on the books of the Company are, on the basis of existing facts, valid and existing, represent monies due for goods sold and delivered or services rendered, and (subject to the aforesaid reserve) are subject to no refunds or other adjustments (except for returns or discounts for prompt payment given in the ordinary course of business) and to no defenses, rights of setoff, assignments, restrictions, encumbrances or conditions enforceable by third parties on or affecting any thereof. (p) Inventories. The inventories reflected in the Balance Sheet were, and those reflected on the books of the Company and its subsidiaries since such date have been, determined and valued in accordance with generally accepted accounting principles applied on a consistent basis as reflected in the consolidated balance sheet, and existed on the respective dates. Except for normal spoilage or obsolescence, the inventories of the Company and its subsidiaries consist of items that are good and merchantable and are of a quality and quantity presently usable or salable in the ordinary course of business. (q) Environmental Matters. (i) The Company and each subsidiary is, and at all times has been, in substantial compliance with, and has not been and is not in violation of or liable under, any Environmental Law with respect to any of their real properties, leaseholds or other real property interests owned or leased by the Company or any of its subsidiaries, and any buildings, plants, structures, or equipment (including motor vehicles), that are owned or leased both as of the date hereof and as of the Closing Date ("Company Facilities"). Except for matters covered by applicable state remediation programs, the Company and its subsidiaries have not received any actual or threatened order, notice, or other communication from (A) any governmental body or private citizen acting in the public interest, or (B) the current or prior owner or operator of any Company Facilities, of any actual or potential violation or failure to comply with any Environmental Law, or of any actual or threatened obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the Company Facilities or any other properties or assets (whether real, personal, or mixed) in which the Company or any of its subsidiaries has an interest, or with respect to any Company Facility at or to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used, or processed by the Company, any of its subsidiaries or any other Person for whose conduct they are or may be held responsible, or from which Hazardous Materials have been transported, treated, stored, handled, transferred, disposed, recycled, or received. (ii) There are no pending or, to the knowledge of the Company, threatened claims, liens, or other restrictions of any nature, resulting from any Environmental, Health, and Safety Liabilities or arising under or pursuant to any Environmental Law, with respect to or affecting any of the Company Facilities or any other properties and assets (whether real, personal, or mixed) in which the Company and of its subsidiaries has an interest. (iii) Except for matters covered by any applicable state remediation programs or applicable insurance policies, the Company and its subsidiaries have not received any citation, directive, inquiry, notice, order, summons, warning, or other communication that relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential violation or failure to comply with any Environmental Law, or of any alleged, actual, or potential obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the Company Facilities. (iv) Except for matters covered by any applicable state remediation programs or by applicable insurance policies, the Company and its subsidiaries have no Environmental, Health, and Safety Liabilities with respect to the Company Facilities or with respect to any other properties and assets (whether real, personal, or mixed) in which the Company or any of its subsidiaries (or any predecessor), has an interest, or at any property geologically or hydrologically adjoining the Company Facilities or any such other property or assets. (v) Except for matters covered by any applicable state remediation programs or by applicable insurance policies, there has been no Release or, to the knowledge of the Company, threat of Release, of any Hazardous Materials at or from the Company Facilities or, to the knowledge of the Company, at any other locations where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used, or processed from or by the Company Facilities, or from or by any other properties and assets (whether real, personal, or mixed) in which the Company or any of its subsidiaries has an interest, or to the knowledge of the Company any geologically or hydrologically adjoining property, whether by the Company, any of its subsidiaries or any other Person. (vi) The Company has made available to FSCI true and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed or initiated by the Company or any of its subsidiaries pertaining to Hazardous Materials or Hazardous Activities in, on, or under the Company Facilities, or concerning compliance by the Company, any of its subsidiaries, or any other Person for whose conduct they are or may be held responsible, with Environmental Laws. (r) Chapter 11 Proceedings. The Company has complied in all material respects with the Bankruptcy Code, and with all other laws, rules, regulations, decrees or orders applicable to or arising out of the Chapter 11 Case, except to the extent that any such non-compliance would not have a material adverse affect on Condition of the Company. To the best of the Company's knowledge, all lists of creditors and stockholders, schedules, statements of affairs, and financial reports filed by the Company with the Bankruptcy Court were complete and accurate in all material respects as of the date filed or made. Such notice of the Chapter 11 Case as is required by the Bankruptcy Code has been or will be given to all known holders of Claims (as such term is defined in the Bankruptcy Code), and the Company shall serve notice of the transactions contemplated by this Agreement on parties entitled to such notice under the Bankruptcy Code, as modified by orders in respect of notice that may be issued at any time and from time to time by the Bankruptcy Court. (s) Absence of Certain Changes. Except as disclosed in Schedule 2.1(s) hereto, since December 31, 1998: (i) there has not been any material adverse change in the Condition of the Company and its subsidiaries, taken as a whole; (ii) the businesses of the Company and its subsidiaries have been conducted only in the ordinary course; (iii) the Company and its subsidiaries have not incurred any material liabilities (direct, contingent or otherwise) or engaged in any material transaction or entered into any material agreement outside the ordinary course of business; (iv) the Company and its subsidiaries have not increased the compensation of any officer or granted any general salary or benefits increase to their employees other than in the ordinary course of business; and (v) the Company and its subsidiaries have not taken any action referred to in Section 3.4 hereof except as permitted or required thereby. (t) Material Contracts. Schedule 2.1(t) identifies all material contracts, agreements and other written or oral arrangements to which the Company or any of its subsidiaries is party and all arrangements that are filed with the Commission as part of the Commission Filings. True, correct and complete copies (with all amendments thereto) thereof have been made available to FSCI. "Material" contracts, agreements and arrangements are those that obligate the parties, in the aggregate, to in excess of $50,000 of obligations. With respect to each written arrangement so listed: (i) the written arrangement is legal, valid, binding, enforceable, and in full force and effect, and has not been materially amended or altered; (ii) the Company and its subsidiaries are not in breach or default, and no event has occurred that, with notice or lapse of time, or both, would constitute a breach or default by the Company or its subsidiaries or permit a party other than the Company or its subsidiaries to terminate, modify, or accelerate performance under any such written arrangement; and (iii) to the Company's knowledge, no party other than the Company or its subsidiaries is in breach or default, and no event has occurred that, with notice or lapse of time, or both, would constitute a breach or default or permit termination, modification, or acceleration, under any such written arrangement. (u) Liabilities. The Company and its subsidiaries have no material outstanding claims, liabilities or indebtedness, contingent or otherwise, required to be reflected in a financial statement prepared in accordance with GAAP, except as set forth in the financial statements delivered to FSCI, or referred to in the footnotes thereto, other than liabilities incurred subsequent to December 31, 1998 in the ordinary course of business not involving borrowings by the Company and its subsidiaries. Except for that indebtedness and those obligations identified in the Disclosure Statement, the Company and its subsidiaries are not in default in respect of the material terms and conditions of any material indebtedness or other agreements. The Company currently estimates that the allowed amount of such Claims will not exceed $250,000. However, the Company has scheduled as disputed approximately $900,000 of unsecured claims and proofs of unsecured claims, which the Company likewise disputes, have been filed totaling approximately $2,000,000. Although the Company believes that all of the disputed scheduled and filed claims will ultimately be disallowed by the Bankruptcy Court, there can be no assurance that some or all of the disputed scheduled and filed claims will not be allowed by the Bankruptcy Court. Section 2.2 Representations and Warranties of FSCI. Except as may be otherwise disclosed in the FSCI Disclosure Schedule, attached or to be attached and initialed by the parties, FSCI represents and warrants to the Company and UPC Merger Sub, as of the Effective Time, as follows: (a) Due Organization; Good Standing and Corporate Power. (i) FSCI and, as of the Effective Time, a subsidiary of FSCI ("FSCI Sub") formed solely to serve as a partner in the REWJB Gas Investments, a Florida general partnership (the "Gas Partnership"), Farm Stores Grocery, Inc., a Delaware corporation in which FSCI will own as of the Effective Time ten percent (10%) of the issued and outstanding stock ("FSG"), a subsidiary of FSG ("FSG Sub") formed solely to serve as a partner in REWJB Investments, a Florida general partnership (the "Drive-Thru Partnership" and, together with the Gas Partnership, the "Partnerships"), are each corporations duly incorporated, validly existing, and in good standing under the laws of their respective jurisdictions of incorporation and have all requisite corporate power and authority to own, lease and operate their respective properties and to carry on their respective businesses as now being conducted. FSCI, FSCI Sub, FSG, and FSG Sub are duly qualified or licensed to do business and are in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except in such jurisdictions where the failure to be so qualified or licensed and in good standing would not have a material adverse effect on the Condition of FSCI, FSCI Sub, FSG, FSG Sub, as appropriate. (ii) Each of the Partnerships has been duly formed and is validly existing under the laws of the jurisdiction of its organization and has all requisite power and authority to own, lease and operate its properties and carry on its business as now being conducted. Each of the Partnerships is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by each of the Partnerships or the nature of the business conducted by the Partnerships makes such qualification necessary, except in such jurisdictions where the failure to be so qualified or licensed and in good standing would not have a material adverse effect on the Condition of the Partnerships. (b) Authorization and Validity of Agreement. FSCI has full corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions and enter into the agreements contemplated hereby. The execution, delivery and performance of this Agreement by FSCI, and the consummation of the transactions contemplated hereby, has been duly authorized by the Board of Directors of FSCI. No other corporate action on the part of FSCI is necessary to authorize the execution, delivery and performance of this Agreement by FSCI and the consummation of the transactions contemplated hereby (other than the approval of this Agreement by the FSCI Shareholder). This Agreement has been duly executed and delivered by FSCI and is a valid and binding obligation of FSCI, enforceable against FSCI in accordance with its terms. (c) Capitalization. (i) The FSCI Common Stock is all of the authorized capital stock of FSCI and consists of 10,000 shares of common stock. As of the date hereof, (A) 10,000 shares of FSCI Common Stock are issued and outstanding, (B) no shares of FSCI Common Stock are reserved for issuance pursuant to outstanding options or stock incentive plans, (C) all issued and outstanding FSCI Common Stock is owned by the FSCI Shareholder, and (D) no shares of FSCI Common Stock are held in FSCI's treasury. All issued and outstanding shares of FSCI Common Stock have been validly issued and are fully paid and nonassessable, and are not subject to, nor were they issued in violation of, any preemptive rights. Except as set forth in this Section 2.2(c), at the Effective Time, and as contemplated by this Agreement, there will not be any outstanding or authorized options, warrants, rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities, or other commitments, contingent or otherwise, relating to FSCI Common Stock or any other shares of capital stock of FSCI, pursuant to which FSCI is or may become obligated to issue shares of FSCI Common Stock, any other shares of its capital stock or any securities convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of the capital stock of FSCI. (ii) The authorized capital stock of FSG consists of 10,000,000 shares of common stock ("FSG Common Stock"),of which, as of the Effective Time, 1,000,000 will be issued (including 100,000 shares issued to FSCI) and outstanding or reserved for issuance under options or warrants. Except as set forth in the preceding sentence, (A) no shares of FSG Common Stock are reserved for issuance pursuant to outstanding options or stock incentive plans, (B) all issued and outstanding FSG Common Stock is owned beneficially by FSCI and FSCI Shareholder, and (C) no shares of FSG Common Stock are held in FSG's treasury. All issued and outstanding shares of FSG Common Stock have been validly issued and are fully paid and nonassessable, and are not subject to, nor were they issued in violation of, any preemptive rights. Except as set forth in this Section 2.2(c), at the Effective Time, and as contemplated by this Agreement, there will not be any outstanding or authorized options, warrants, rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities, or other commitments, contingent or otherwise, relating to FSG Common Stock or any other shares of capital stock of FSG, pursuant to which FSG is or may become obligated to issue shares of FSG Common Stock, any other shares of its capital stock or any securities convertible into, exchangeable for, or evidencing the right to subscribe for, any shares of the capital stock of FSG. (iii) The interests in the Gas Partnership owned by FSCI are fully paid and nonassessable, were issued by the Gas Partnership in accordance with the Gas Partnership's partnership agreement dated September 9, 1992 ("Gas Partnership Agreement"), and are owned, of record and beneficially, by FSCI free and clear of all liens and encumbrances. The partnership interests owned by FSCI in the Gas Partnership constitute a forty percent (40%) interest in the Gas Partnership. Except for those interests in the Gas Partnership owned by Toni Gas & Food Stores, Inc., a Florida corporation, that are subject to being and that will be purchased by FSCI immediately prior to the Effective Time, there are no other outstanding interests in the Gas Partnership nor are there any options, warrants, rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities, or other commitments, contingent or otherwise, relating to interests in the Gas Partnership pursuant to which the Gas Partnership is or may become obligated or any Person is entitled to acquire any interest in the Gas Partnership or any securities convertible into, exchangeable for, or evidencing the right to subscribe for, any interest in the Gas Partnership. As of the Effective Time, there will be no restrictions of any kind in the Gas Partnership Agreement that prevent the payment of distributions by the Gas Partnership. (iv) At the Effective time, the interests in the Drive-Thru Partnership owned by FSG and FSG Sub will be fully paid and nonassessable, will be issued by the Drive-Thru Partnership in accordance with the Drive-Thru Partnership's partnership agreement dated September 9, 1992 ("Drive-Thru Partnership Agreement"), and will be owned, of record and beneficially, by FSG and FSG Sub free and clear of all liens and encumbrances. The partnership interests owned by FSG in the Drive-Thru Partnership constitute a forty percent (99%) interest in the Drive-Thru Partnership. Except for those interests in the Drive-Thru Partnership owned by FSG Sub immediately prior to the Effective Time, there are no other outstanding interests in the Drive-Thru Partnership nor are there any options, warrants, rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities, or other commitments, contingent or otherwise, relating to interests in the Drive-Thru Partnership pursuant to which the Drive-Thru Partnership is or may become obligated or any Person is entitled to acquire any interest in the Drive-Thru Partnership or any securities convertible into, exchangeable for, or evidencing the right to subscribe for, any interest in the Drive-Thru Partnership. As of the Effective Time, there will be no restrictions of any kind in the Drive-Thru Partnership Agreement that prevent the payment of distributions by the Drive-Thru Partnership. (v) Except for its interests in the Gas Partnership and stock of FSG and FSCI Sub that FSCI will acquire pursuant to or in furtherance of the Toni Agreement immediately prior to the Effective Time, at the Effective Time FSCI will not own, directly or indirectly, any capital stock or other equity interest in any Person or have any direct or indirect equity or ownership interest in any Person. Except as contemplated by this Agreement, each of FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships are not subject to any obligation or requirement to provide funds for or to make any investments (in the form of a loan, capital contribution or otherwise) to or in any Person. (d) Consents and Approvals; No Violations. Assuming that filings required under the HSR Act are made and the waiting period thereunder has been terminated or has expired, the filing of the Certificate of Merger and other appropriate merger documents, if any, as required by the DGCL or under the applicable provisions of Florida law, are made, and the Bankruptcy Court enters an order, that may be the Confirmation Order, approving the Merger and this Agreement, and subject to the receipt of those consents and approvals identified in Schedule 2.2(d), the execution and delivery of this Agreement by FSCI and the consummation by FSCI of the transactions contemplated hereby will not: (i) violate any provision of the Certificate of Incorporation or Bylaws of FSCI, FSCI Sub, FSG, or FSG Sub, respectively, or the Gas Partnership Agreement or Drive-Thru Partnership Agreement, each as in effect as of the Effective Time; (ii) violate any statute, ordinance, rule, regulation, order or decree of any court or of any governmental or regulatory body, agency or authority applicable to FSCI, FSCI Sub, FSG, FSG Sub, the Partnerships, or by which their respective properties or assets may be bound; (iii) require any filing with, or permit, consent or approval of, or the giving of any notice to any governmental or regulatory body, agency or authority; (iv) result in a violation or breach of, conflict with, constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties or assets of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, permit, agreement, lease or other instrument or obligation to which FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships are a party, or by which they or their respective properties or assets may be bound, excluding from the foregoing clauses (iii) and (iv) filings, notices, permits, consents and approvals the absence of which, and violations, breaches, defaults, conflicts and liens that, in the aggregate, would not have a material adverse effect on the Condition of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships taken as a whole; or (v) trigger any consent or approval requirements with respect to those leases, licenses, permits, or approvals held by the Partnerships (excluding those leases, licenses, permits, or approvals with respect to the Walk-In Convenience Stores Partnerships to another entity in accordance with this Agreement). (e) FSCI Reports and Financial Statements. FSCI has delivered to the Company combined balance sheets for the Partnerships and each of their combined affiliates as of the end of the fiscal years ended September 1, 1996, August 31, 1997 and August 30, 1998 and the combined statements of operations, combined statement of equity and consolidated statements of changes in financial position for the Partnerships and each of their combined affiliates for the fiscal years ended September 1, 1996, August 31, 1997 and August 30, 1998. Such financial statements were prepared in accordance with generally accepted accounting principles (as in effect at the time such financial statements were prepared) applied on a consistent basis (except as may be indicated therein or in the notes or schedules thereto) and fairly present in all material respects the combined financial position of the Partnerships and their combined affiliates as of the dates thereof and the results of their operations and changes in financial position for the periods then ended. (f) Absence of Certain Changes. Except as disclosed in Schedule 2.2(f) hereto, since December 31, 1998: (i) there has not been any material adverse change in the Condition of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships, taken as a whole; (ii) the businesses of FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships have been conducted only in the ordinary course; (iii) FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships have not incurred any material liabilities (direct, contingent or otherwise) or engaged in any material transaction or entered into any material agreement outside the ordinary course of business; (iv) FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships have not increased the compensation of any officer or granted any general salary or benefits increase to their employees other than in the ordinary course of business; and (v) FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships have not taken any action referred to in Section 3.4 hereof except as permitted or required thereby. (g) Minute Books. The minute books of FSCI, FSG, and the managing general partner of the Partnership, as previously made available to the Company and its representatives, contain accurate records of all meetings of the stockholders or partners, as appropriate, all corporate actions or written consents by the stockholders and Boards of Directors of FSCI and FSG, and all actions on behalf of the Partnership by the managing general partner of the Partnership since January 1, 1996. (h) Title to Properties; Encumbrances. (i) FSCI, FSCI Sub, FSG, FSG Sub and the Partnerships have, or will acquire contemporaneously with the Merger, good, valid and marketable title to all of their respective material tangible properties and assets (real and personal), including, without limitation, all the properties and assets reflected in Schedule 2.2(h), subject to no encumbrance, lien, charge or other restriction of any kind or character, except for (A) liens pertaining to indebtedness reflected in the balance sheets of the Partnerships and described on Schedule 2.2(h), (B) liens consisting of zoning or planning restrictions, easements, permits and other restrictions or limitations on the use of real property or irregularities in title thereto that do not materially detract from the value of, or impair the use of, such property by FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships in the operation of their respective businesses, (C) liens for current taxes, assessments or governmental charges or levies on property not yet due and delinquent, and (D) statutory landlord's liens, liens granted to landlords under leases for the FSCI Facilities, and fee mortgages made by such landlords. (ii) Schedule 2.2(h) sets forth a list of all FSCI Facilities now being occupied, or to be occupied on the Closing Date, by FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships or used in connection with their respective operations. The FSCI Facilities are all, or will be on the Closing Date, premises leased or owned by FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships. Schedule 2.2(h) describes those leases of FSCI Facilities that require the landlord's consent to assignment of such leases. No notices of any building or health code violations with respect to any of the FSCI Facilities have been received and are pending or uncured which would be material to any FSCI Facility. Each of FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships have complied with all federal, state and local laws, ordinances, rules and regulations applicable to each FSCI Facility, except where the failure to so comply would not have a material adverse effect on the Condition of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships. Except as disclosed in Schedule 2.2(h), there is no pending, proposed, or, to FSCI's, knowledge, threatened condemnation, eminent domain, or similar proceeding affecting any of the FSCI Facilities. (i) Compliance with Laws. FSCI, FSCI Sub, FSG, FSG Sub and the Partnerships are in compliance with all applicable laws, regulations, orders, judgments and decrees except where the failure to so comply with the same would not have a material adverse effect on the Condition of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships taken as a whole. (j) Litigation. Except as set forth in Schedule 2.2(j) hereto, there is no action, suit, proceeding at law or in equity, or any arbitration or any administrative or other proceeding by or before (or to the best knowledge, information and belief of the Company any investigation by) any governmental or other instrumentality or agency, pending, or, to the best knowledge, information and belief of FSCI, threatened, against or affecting FSCI, FSG, the Partnership, or any of their respective properties or rights that could have a material adverse effect on the Condition of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships. There are no such suits, actions, claims, proceedings or investigations pending or, to the best knowledge, information and belief of FSCI, threatened, seeking to prevent or challenging the transactions contemplated by this Agreement. FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships are not subject to any judgment, order or decree entered in any lawsuit or proceeding that could have a material adverse effect on the Condition of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships, taken as a whole or on the ability of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships to conduct their respective businesses as presently conducted. Schedule 2.2(j) sets forth all litigation involving FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships that is pending or, to FSCI's knowledge, threatened against FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships. (k) Employee Benefit Plans. (i) List of Plans. Set forth in Schedule 2.2(k) is an accurate and complete list of all Employee Benefit Plans within the meaning of Section 3(3) of ERISA, whether or not any such Employee Benefit Plans are otherwise exempt from the provisions of ERISA, established, maintained or contributed to by FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships (including, for this purpose and for the purpose of all of the representations in this Section 2.2(k)), all employers (whether or not incorporated) that by reason of common control are treated together with the Company as a single employer within the meaning of Section 414 of the Code). (ii) Status of Plans. Except as set forth in Schedule 22(k) FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships do not maintain any Employee Benefit Plans subject to ERISA. (iii) Contributions. Full payment has been made of all amounts that FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships are required, under applicable law or under any Employee Benefit Plan or any agreement relating to any Employee Benefit Plan to which FSCI, or FSG or the Partnership is or was a party, to have paid as contributions thereto as of the last day of the most recent fiscal year of such Employee Benefit Plan ended prior to the date hereof. FSCI has made adequate provision for reserves to meet contributions that have not been made because they are not yet due under the terms of any Employee Benefit Plan or related agreements. Benefits under all Employee Benefit Plans are as represented and have not been increased subsequent to the date as of which documents have been provided to the Company. (iv) [Intentionally Omitted] (v) Tax Qualification. Each Employee Benefit Plan of FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships intended to be qualified under Section 401(a) of the Code has been determined to be so qualified by the Internal Revenue Service and nothing has occurred since the date of the last such determination that resulted or is likely to result in the revocation of such determination. (vi) Transactions. No Reportable Event (as defined in Section 4043 of ERISA) for which the 30-day notice requirement has not been waived by the PBGC has occurred with respect to any Employee Benefit Plan maintained by FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships and FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships have not engaged in any transaction with respect to the Employee Benefit Plans maintained by them that would subject any of them to a tax, penalty or liability for prohibited transactions under ERISA or the Code nor have any of their respective directors, officers, partners, or employees to the extent they or any of them are fiduciaries with respect to such Employee Benefit Plans, breached any of their responsibilities or obligations imposed upon fiduciaries under Title I of ERISA or would result in any claim being made under or by or on behalf of any such Employee Benefit Plans by any party with standing to make such claim. (vii) Other Plans. The Company currently does not maintain any employee or non-employee benefit plans or any other foreign pension, welfare or retirement benefit plans other than those listed in Schedule 2.1(k). (viii) Documents. FSCI has made available to the Company and its counsel true and complete copies of (A) all Employee Benefit Plans maintained by FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships as in effect, together with all amendments thereto that will become effective at a later date, as well as the latest Internal Revenue Service determination letter obtained with respect to any such Employee Benefit Plan qualified under Section 401 or 501 of the Code and (B) Form 5500 for the most recent completed fiscal year for each such Employee Benefit Plan required to file such form. (l) Employment Relations and Agreements. (i) FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships are in substantial compliance with all federal, state or other applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and have not and are not engaged in any unfair labor practice; (ii) to the knowledge of FSCI, no unfair labor practice complaint against FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships is pending before the National Labor Relations Board; (iii) there is no labor strike, dispute, slowdown or stoppage actually pending or, to the knowledge of FSCI, threatened against or involving FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships; (iv) no representation question exists respecting the employees of FSCI , FSG, or the Partnership; (v) to the knowledge of FSCI, no grievance that might have a material adverse effect on the Condition of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships or the conduct of their respective businesses exists, no arbitration proceeding arising out of or under any collective bargaining agreement is pending and no claim therefor has been asserted; (vi) no collective bargaining agreement is currently in effect or being negotiated by FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships; and (vii) none of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships has experienced any material labor difficulty during the last three years. There has not been, and, to the best knowledge of FSCI, there will not be, any change in relations with employees of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships as a result of the transactions contemplated by this Agreement that could have a material adverse effect on the Condition of FSCI, FSG, the Partnership, or the Surviving Corporation, taken as a whole. Except as disclosed in Schedule 2.2(l) attached hereto (which schedule lists the maximum payment that could be owed), there exist no employment, consulting, severance or indemnification agreements (x) between FSCI and any director, officer or employee of FSCI or any agreement that would give any Person the right to receive any payment from FSCI as a result of the Merger, (y) between FSG and any director, officer or employee of FSG or any agreement that would give any Person the right to receive any payment from FSG as a result of the Merger, and (z) between the Partnership and any partner or employee of the Partnership or any agreement that would give any Person the right to receive any payment from the Partnership as a result of the Merger. (m) [Intentionally Omitted] (n) Taxes. FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships have filed or caused to be filed, within the times and in the manner prescribed by law (including permitted extensions of time to file), all federal, state, local and foreign tax returns and tax reports that are required to be filed by, or with respect to, FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships. All federal, state, local and foreign income, profits, franchise, sales, use, occupancy, excise and other taxes and assessments (including interest and penalties) payable by, or due from, FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships have been fully paid or adequately disclosed and fully provided for in the books and financial statements of FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships. No examination of any tax return of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships is currently in progress. There are no outstanding agreements or waivers extending the statutory period of limitation applicable to any tax return of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships. (o) Liabilities. FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships have no material outstanding claims, liabilities or indebtedness, contingent or otherwise, required to be reflected in a financial statement prepared in accordance with GAAP, except as set forth in the financial statements delivered to the Company, or referred to in the footnotes thereto, other than liabilities incurred subsequent to December 31, 1998 in the ordinary course of business not involving borrowings by FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships. FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships are not in default in respect of the material terms and conditions of any material indebtedness or other agreement. (p) Intellectual Properties. In the operation of its business, FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships have used, and currently use, domestic and foreign patents, patent applications, patent licenses, software licenses, know-how licenses, trade names, trademarks, copyrights, unpatented inventions, service marks, trademark registrations and applications, service mark registrations and applications, copyright registrations and applications, trade secrets and other confidential proprietary information, other than commercially available computer software programs (collectively the "Farm Store Intellectual Property"). Schedule 2.2(p) attached hereto contains an accurate and complete list of all Farm Store Intellectual Property that is of material importance to the operation of the business of FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships. Unless otherwise indicated in Schedule 2.2(p), FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships owns the entire right, title and interest in and to the Farm Store Intellectual Property listed on Schedule 2.2(p) used in the operation of the businesses of FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships (including, without limitation, the exclusive right to use and license the same) and each item constituting part of the Farm Store Intellectual Property that is owned by FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships and listed on Schedule 2.2(p) has been, to the extent indicated in Schedule 2.2(p), duly registered with, filed in or issued by, as the case may be, the United States Patent and Trademark Office or such other government entities, domestic or foreign, as are indicated in Schedule 2.2(p) and such registrations, filings and issuances remain in full force and effect. To the best knowledge of FSCI, except as stated in such Schedule 2.2(p), there are no pending or threatened proceedings or litigation or other adverse claims affecting or with respect to the Farm Store Intellectual Property. Schedule 2.2(p) lists all material notices or claims currently pending or received by FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships during the past two years that claim infringement, contributory infringement, inducement to infringe, misappropriation or breach by FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships of any domestic or foreign patents, patent applications, patent licenses and know-how licenses, trade names, trademark registrations and applications, service marks, copyrights, copyright registrations or applications, trade secrets or other confidential proprietary information. To the best knowledge of FSCI, except as indicated on Schedule 2.2(p), no Person is materially infringing the Farm Store Intellectual Property. (q) Broker's or Finder's Fee. No agent, broker, Person or firm acting on behalf of FSCI, FSG, the Partnership, or FSCI Shareholder is, or will be, entitled to any fee, commission or broker's or finder's fees from any of the parties hereto, or from any Person controlling, controlled by, or under common control with any of the parties hereto, in connection with this Agreement or any of the transactions contemplated hereby. (r) Environmental Matters. Except as disclosed on Schedule 2.2(r) attached hereto: (i) FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships are, and at all times have been, in substantial compliance with, and have not been and are not in violation of or liable under, any Environmental Law with respect to any of their respective real property, leaseholds or other real property interests owned or leased by the FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships, and any buildings, plants, structures, or equipment (including motor vehicles), that are owned or leased both as of the date hereof and as of the Closing Date (collectively, "FSCI Facilities"). Except for matters covered by the applicable state remediation programs, FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships have not received any actual or threatened order, notice, or other communication from (A) any governmental body or private citizen acting in the public interest, or (B) the current or prior owner or operator of any FSCI Facilities, of any actual or potential violation or failure to comply with any Environmental Law, or of any actual or threatened obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the FSCI Facilities or any other properties or assets (whether real, personal, or mixed) in which FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships has an interest, or with respect to any FSCI Facility at or to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used, or processed by FSCI, FSG, the Partnership, or any other Person for whose conduct they are or may be held responsible, or from which Hazardous Materials have been transported, treated, stored, handled, transferred, disposed, recycled, or received. (ii) There are no pending or, to the knowledge of FSCI, threatened claims, liens, or other restrictions of any nature, resulting from any Environmental, Health, and Safety Liabilities or arising under or pursuant to any Environmental Law, with respect to or affecting any of the FSCI Facilities or any other properties and assets (whether real, personal, or mixed) in which FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships or its subsidiaries has an interest. (iii) Except for matters covered by the applicable state remediation programs and/or by applicable insurance policies, FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships have not received any citation, directive, inquiry, notice, order, summons, warning, or other communication that relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential violation or failure to comply with any Environmental Law, or of any alleged, actual, or potential obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the FSCI Facilities. (iv) Except for matters covered by the applicable state remediation programs and/or by applicable insurance policies, FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships have no Environmental, Health, and Safety Liabilities with respect to the FSCI Facilities or with respect to any other properties and assets (whether real, personal, or mixed) in which FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships (or any predecessor), has an interest, or at any property geologically or hydrologically adjoining the FSCI Facilities or any such other property or assets. (v) Except for matters covered by the applicable state remediation programs and/or by applicable insurance policies, there has been no Release or, to the knowledge of FSCI, threat of Release, of any Hazardous Materials at or from the FSCI Facilities or, to the knowledge of FSCI, at any other locations where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used, or processed from or by the FSCI Facilities, or from or by any other properties and assets (whether real, personal, or mixed) in which FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships has an interest, or, to the knowledge of the FSCI and FSCI Shareholder, any geologically or hydrologically adjoining property, whether by FSCI, FSG, the Partnership, or any other Person. (vi) FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships have made available to the Company true and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed or initiated by FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships pertaining to Hazardous Materials or Hazardous Activities in, on, or under the FSCI Facilities, or concerning compliance by FSCI, FSG, the Partnership, or any other Person for whose conduct they are or may be held responsible, with Environmental Laws. (s) Toni Agreement. Except as provided in Schedule 2.2(s), that certain letter agreement, by and between Jose P. Barad, as President of F.S. Dairy Plan, Inc., FSCI, and F.S. Stores, Inc., and Roberto Isaias, as President of Robi Dairy Plant, Inc., REW Dairy Investments, Inc., and Toni Gas & Food Stores, Inc., dated April 23, 1999 (the "Toni Agreement") a copy of which has been provided to the Company: (i) has been duly executed and delivered by the parties thereto; (ii) has been approved by all requisite corporate action of the parties thereto; (iii) constitutes a valid and binding obligation of each of the parties thereto, enforceable against each such party in accordance with its terms; and (iv) constitutes the entire agreement among the parties with respect to the transactions contemplated by the Toni Agreement and there have been no oral or written modifications to the Toni Agreement. (t) Material Contracts. Schedule 2.2(t) identifies all material contracts, agreements and other written or oral arrangements to which FSCI, FSG or the Partnership is a party and true, correct and complete copies (with all amendments thereto) thereof have been made available to the Company. "Material" contracts, agreements and arrangements are those that obligate the parties, in the aggregate, to in excess of $50,000 of obligations. With respect to each written arrangement so listed: (i) the written arrangement is legal, valid, binding, enforceable, and in full force and effect, and has not been materially amended or altered; and (ii) FSCI, any subsidiary of FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships are not in breach or default, and no event has occurred that, with notice or lapse of time, or both, would constitute a breach or default by the FSCI, any subsidiary of FSCI, FSG or the Partnership or permit a party other than the Company or its subsidiaries to terminate, modify, or accelerate performance under any such written arrangement; and (iii) to FSCI's knowledge, no party other than FSCI, any subsidiary of FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships is in breach or default, and no event has occurred that, with notice or lapse of time, or both, would constitute a breach or default or permit termination, modification, or acceleration, under any such written arrangement. ARTICLE III TRANSACTIONS PRIOR TO CLOSING DATE; COVENANTS Section 3.1 Access to Information Concerning Properties and Records. (a) During the period commencing on the date hereof and ending on the Closing Date, the Company shall, and shall cause each of its subsidiaries to, upon reasonable notice, afford FSCI, and its counsel, accountants and other authorized representatives, full access during normal business hours to the properties, books and records of the Company and its subsidiaries in order that they may have the opportunity to make such investigations as they shall desire of the affairs of the Company and its subsidiaries; such investigation shall not, however, affect the representations and warranties made by the Company in this Agreement. The Company agrees to cause its officers and employees to furnish such additional financial and operating data and other information and respond to such inquiries as FSCI shall from time to time request. (b) During the period commencing on the date hereof and ending on the Closing Date, FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships shall, upon reasonable notice, afford the Company, and its counsel, accountants and other authorized representatives, full access during normal business hours to the properties, books and records of FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships in order that it may have the opportunity to make such investigations as it shall desire of the affairs of FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships; such investigation shall not, however, affect the representations and warranties made by FSCI in this Agreement. FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships agree to cause their respective officers and employees to furnish such additional financial and operating data and other information and respond to such inquiries as the Company shall from time to time request. Section 3.2 Confidentiality. Information obtained by FSCI and the Company pursuant to Section 3.1 hereof shall be subject to the provisions of the Confidentiality Agreements between the Company and FSCI, each executed during June, 1999. Section 3.3 Conduct of the Business of the Company Pending the Closing Date. The Company agrees that, except as permitted, required or specifically contemplated by, or otherwise described in, this Agreement, as may be required by the Bankruptcy Court in connection with the Chapter 11 Case or Chapter 11 Plan, or otherwise consented to or approved in writing by FSCI, during the period commencing on the date hereof and ending on the Closing Date: (a) The Company and each of its subsidiaries will conduct their respective operations only according to their ordinary and usual course of business and will use their best efforts to preserve intact their respective business organization, keep available the services of their officers and employees and maintain satisfactory relationships with licensors, suppliers, distributors, clients and others having business relationships with them; (b) Neither the Company nor any of its subsidiaries shall (i) make any change in or amendment to its Certificate of Incorporation or By-Laws (or comparable governing documents); (ii) issue or sell any shares of its capital stock or any of its other securities, or issue any securities convertible into, or options, warrants or rights to purchase or subscribe to, or enter into any arrangement or contract with respect to the issuance or sale of, any shares of its capital stock or any of its other securities, or make any other changes in its capital structure; (iii) declare, pay or make any dividend or other distribution or payment with respect to, or split, redeem or reclassify, any shares of its capital stock; (iv) enter into any contract or commitment except contracts in the ordinary course of business, including without limitation, any acquisition of a material amount of assets or securities, any disposition of a material amount of assets or securities or release or relinquish any material contract rights; (v) amend any employee or non-employee benefit plan or program, employment agreement, license agreement or retirement agreement, or pay any bonus or contingent compensation, except in each case in the ordinary course of business consistent with past practice prior to the date of this Agreement; (vi) agree, in writing or otherwise, to take any of the foregoing actions; (c) Without limiting the generality of subsection (a), above, the Company shall continue to pay its accounts payable in the ordinary course and in accordance with its regular and usual practices pertaining to timing of payment of such payables; and (d) The Company shall not, and shall not permit any of its subsidiaries to, (i) take any action, engage in any transaction or enter into any agreement that would cause any of the representations or warranties set forth in Section 2.1 hereof to be materially untrue as of the Closing Date, or (ii) purchase or acquire, or offer to purchase or acquire, any shares of capital stock of the Company. Section 3.4 Conduct of the Business of FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships Pending the Closing Date. FSCI agrees that, except as permitted, required or specifically contemplated by, or otherwise described in, this Agreement, or pursuant to alternative means to perform under the Toni Agreement, or otherwise consented to or approved in writing by the Company, during the period commencing on the date hereof and ending on the Closing Date: (a) FSCI will conduct its operations, will not close any stores (except as set forth on schedule 3.4(a)), and will cause FSCI Sub, FSG, FSG Sub, and the Partnerships to conduct their operation, only according to their ordinary and usual course of business and will use its commercially reasonable best efforts to preserve intact their respective business organization, keep available the services of their officers and employees and maintain satisfactory relationships with licensors, suppliers, distributors, clients and others having business relationships with FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships; (b) FSCI shall not and shall ensure that FSCI Sub, FSG, FSG Sub and the Partnerships do not (i) make any change in or amendment to its Certificate of Incorporation or By-Laws or partnership agreement (or comparable governing documents); (ii) issue or sell any shares of its capital stock or any of its other securities, or issue any securities convertible into, or options, warrants or rights to purchase or subscribe to, or enter into any arrangement or contract with respect to the issuance or sale of, any shares of its capital stock or any of its other securities, or make any other changes in its capital structure; (iii) declare, pay or make any dividend or other distribution or payment with respect to, or split, redeem or reclassify, any shares of its capital stock, except that, immediately prior to the Effective Time, the Partnerships may distribute its cash balances (other than funds in the cash registers of the "Walk-In Convenience Stores" (as defined below) as of the close of business on the business day immediately preceding the Effective Time) to the FSCI Shareholder; (iv) enter into any contract or commitment except contracts in the ordinary course of business, including without limitation, any acquisition of a material amount of assets or securities, any disposition of a material amount of assets or securities or release or relinquish any material contract rights; (v) amend any employee or non-employee benefit plan or program, employment agreement, license agreement or retirement agreement, or pay any bonus or contingent compensation, except in each case in the ordinary course of business consistent with past practice prior to the date of this Agreement; or (vi) agree, in writing or otherwise, to take any of the foregoing actions; (c) Without limiting the generality of subsection (a), above, FSCI, FSCI Sub, FSG, FSG Sub, and the Partnerships shall continue to pay their respective accounts payable in the ordinary course and in accordance with its regular and usual practices pertaining to timing of payment of such payables; and (d) FSCI shall not, and shall cause FSCI Sub, FSG, FSG Sub, and the Partnerships not to, take any action, engage in any transaction or enter into any agreement that would cause any of the representations or warranties set forth in Section 2.2 hereof to be materially untrue as of the Closing Date. Section 3.5 Best Efforts. Each of the Company and FSCI shall, and the Company shall cause each of its subsidiaries to and FSCI shall cause each of FSCI Sub, FSG, FSG Sub, and the Partnerships to, cooperate and use their respective commercially reasonable best efforts to take, or cause to be taken, all appropriate action, and to make, or cause to be made, all filings necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, their respective best efforts to obtain, prior to the Closing Date, all licenses, permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with the Company and its subsidiaries as are necessary for consummation of the transactions contemplated by this Agreement and to fulfill the conditions to the Merger. Section 3.6 HSR Act. The Company and FSCI shall, as soon as practicable, file Notification and Report Forms under the HSR Act with the Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "Antitrust Division") and shall use their respective best efforts to respond as promptly as practicable to all inquiries received from the FTC or the Antitrust Division for additional information or documentation. Section 3.7 Merger Financing. FSCI shall use its best efforts together with HW Partners, L.P. to obtain, prior to the Effective Time, the Merger Financing. The Company and FSCI shall irrevocably commit the proceeds of the Merger Financing, as follows: (a) $17,000,000.00 for payment under the Toni Agreement by FSCI, (b) $3,000,000.00 for payment to the FSCI Shareholder as part of the Merger Consideration, (c) that amount required to make the payments due upon confirmation of the Chapter 11 Plan, and (d) the balance thereof for working capital or other corporate uses of the Surviving Corporation. Section 3.8 Plan Covenants. Unless and until this Agreement is terminated by FSCI or the Company or the Bankruptcy Court fails to confirm the Chapter 11 Plan (after giving effect to whatever amendments thereto FSCI may agree), the Company will not actively solicit any Person (other than FSCI) for the purpose of pursuing a sale or merger transaction with the Company or its subsidiaries or the assets of any of them. Further, the Company agrees to provide FSCI with prompt written notice of any offer or expression of interest (written or otherwise) it receives from any third party for any such transaction, and to include in such notice the identity of the Person expressing such interest and a description of the transaction proposed by such Person. Unless and until this Agreement is terminated by FSCI or the Company, the Company agrees: (a) to actively and with best efforts support and not directly or indirectly oppose the confirmation of the Chapter 11 Plan; (b) not to amend or modify the Chapter 11 Plan without the written consent of FSCI; (c) not to file, sponsor, or promote any plan or reorganization or liquidation other than the Chapter 11 Plan; and (d) not to seek dismissal of the Chapter 11 Case or conversion of the Chapter 11 Case to a case under Chapter 7 of the Bankruptcy Code. Section 3.9 Casualty Stores. There are two (2) convenience stores that have been affected by casualty (each a "Casualty Store" and, collectively, "Casualty Stores"). The Gas Partnership shall have the right to either (a) rebuild the Casualty Stores as it sees fit, or (b) transfer the Casualty Stores to the Drive-Thru Partnership. The Surviving Corporation shall make this election by written notice to FSG within three (3) months after the Effective Time. ARTICLE IV CONDITIONS PRECEDENT TO MERGER Section 4.1 Conditions Precedent to Obligations of UPC, UPC Merger Sub and FSCI. The respective obligations of FSCI, on the one hand, and the Company and UPC Merger Sub, on the other hand, to effect the Merger are subject to the satisfaction or waiver (subject to applicable law) at or prior to the Effective Time of each of the following conditions: (a) Effectiveness of the Chapter 11 Plan. All conditions precedent to the effectiveness of the Chapter 11 Plan shall have been satisfied or waived. (b) The Confirmation Order. The Confirmation Order shall have been entered in a form and content acceptable to FSCI and the Company, shall not have been modified, amended, dissolved, revoked or rescinded, shall be in full force and effect on the Closing Date, and, without the necessity of any further action or proceedings by the Company, any of its subsidiaries or the Bankruptcy Court, shall have, to the extent specified in the Plan, (i) on or prior to the Closing Date, effected a full and complete discharge and release of, and thereby extinguished, all debts of the Company and each of its subsidiaries (to the fullest extent possible under Section 1141(d)(1) of the Bankruptcy Code) (ii) extinguished all Existing Shares and Existing Equity Rights, and (iii) at and as of the Closing Date, authorized the issuance of New UPC Common Stock and New UPC Preferred Stock in accordance with the Plan. (c) Government Consents. All government consents necessary for the consummation of the Merger shall have been received (except for government consents, the absence of which will, alone and in the aggregate, not have a material adverse effect on the Condition of the Surviving Corporation either on or after the Closing) and any waiting period (and any extension thereof) with respect to the HSR Act shall have expired or been terminated. (d) Material Adverse Effect. Since the date hereof, there shall not have been any material adverse change with respect to the Company and its subsidiaries, FSCI, FSCI Sub, FSG, FSG Sub, or the Partnerships or their respective assets. (e) Due Diligence. FSCI and the Company shall be reasonably satisfied with the results of their due diligence investigations; (f) Injunction. No preliminary or permanent injunction or other order shall have been issued by any court or by any governmental or regulatory agency, body or authority that prohibits the consummation of the Merger and the transactions contemplated by this Agreement and that is in effect at the Effective Time; (g) Statutes. No statute, rule, regulation, executive order, decree or order of any kind shall have been enacted, entered, promulgated or enforced by any court or governmental authority that prohibits the consummation of the Merger or has the effect of making the issuance or the purchase of the Merger Stock illegal. (h) Merger Financing. The Merger Financing shall have been obtained, all conditions to the full funding of the Merger Financing shall have been satisfied or waived, and the proceeds of the Merger Financing shall have been irrevocably committed as provided in Section 3.7 of this Agreement. (i) Employment Agreements. The Company shall have entered into Employment Agreements with Jose Bared and Carlos Bared. Section 4.2 Conditions Precedent to Obligations of FSCI. The obligations of FSCI and FSCI Shareholder to effect the Merger are also subject to the satisfaction or waiver, at or prior to the Effective Time, of each of the following conditions: (a) Accuracy of Representations and Warranties. All representations and warranties of the Company and UPC Merger Sub contained herein shall be true and correct in all material respects as of the date hereof and at and as of the Closing, with the same force and effect as though made on and as of the Closing Date, except for representations and warranties made expressly as of a prior date, that shall continue to be true and correct in all material respects as of such prior date. (b) Performance by Company. The Company and UPC Merger Sub shall have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants and conditions, contained in this Agreement to be performed or complied with by it prior to the Closing Date; (c) License Agreement. Both the Company and FSCI shall have executed and delivered a License Agreement, substantially in the form attached hereto as Exhibit E, with respect to the Company's management of FSG from and after the Effective Time; and (d) Management Agreement. Both the Company and FSCI shall have executed and delivered a Management Agreement, substantially in the form attached hereto as Exhibit D, with respect to the Company's management of FSG from and after the Effective Time; and (e) Resignations of Officers and Directors. On the Closing Date, all existing officers and directors of the Company and its subsidiaries shall have tendered their respective resignations. (f) Other Transactions. The transactions contemplated by the Toni Agreement shall have been performed in their entirety and all consideration due there under shall have been paid. (g) Employment Agreements; UPET Related Party Transactions. Those contracts or other arrangements identified in Schedule 4.2(f) shall have been terminated (or other arrangements reasonably satisfactory to FSCI shall have been concluded with respect thereto) and those releases identified in Schedule 4.2(f) shall have been executed and delivered by the appropriate parties identified in Schedule 4.2(f). (h) Required Approvals. The Company shall have secured or properly applied for all necessary consents, approvals, permits, or licenses necessary to allow the Surviving Corporation to continue, both on and after the Closing Date, the sale of all merchandise sold by the Company's stores on the date of this Agreement, including, without limitation, gasoline and petroleum products (both as branded and unbranded products), any products offered for sale under or pursuant to any franchise agreement or license, tobacco products, alcoholic beverages, money orders, and state lottery tickets. (i) Distributor Agreement. The Company or FSCI and TCS Systems, Inc. shall have negotiated an agreement for the assignment to the Company of the Exxon Distributorship Agreement currently held by TCS Systems, Inc. (j) Good Standing. All companies identified in Schedule 2.1(a) shall be in good standing in the jurisdiction in which such company was formed. Section 4.3 Conditions Precedent to Obligation of the Company and UPC Merger Sub. The obligations of the Company and UPC Merger Sub to effect the Merger is also subject to the satisfaction or waiver, at or prior to the Effective Time, of each of the following conditions: (a) Accuracy of Representations and Warranties. All representations and warranties of FSCI contained herein shall be true and correct in all material respects as of the date hereof and at and as of the Closing, with the same force and effect as though made on and as of the Closing Date, except for representations and warranties made expressly as of a prior date, that shall continue to be true and correct in all material respects as of such prior date. (b) Performance by FSCI. FSCI shall have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants and conditions, contained in this Agreement to be performed or complied with by it prior to the Closing Date; (c) License Agreement . The Company shall have received an executed original copy of a license agreement, substantially in the form of Exhibit E hereto, with respect to use of the "Farm Store" name; (d) Required Approvals. FSCI shall have used its best effort to secure all necessary consents, approvals, permits, or licenses necessary to allow the Surviving Corporation and the Partnerships, as appropriate, to continue, both on and after the Closing Date, the sale of all merchandise sold by the Walk-In Convenience Stores and the Drive-Thrus on the date of this Agreement, including, without limitation, gasoline and petroleum products (both as branded and unbranded products), any products offered for sale under or pursuant to any franchise agreement or license, tobacco products, alcoholic beverages, money orders, and state lottery tickets; provided, however, that FSCI shall on or before the Effective Date, secure all landlord consents necessary with respect to that certain Convenience Store number 2651 located in Osceola County, Florida (the "Required Consent Store") or deliver to the Company $450,000. In the event of a failure to secure, on or before the Effective Time, any necessary consents, approvals, permits, or licenses with respect to the transfer of any Convenience Store other than the Required Consent Store (each a "Non-Compliant Store"), then, as of the Effective Time, the Surviving Corporation shall assume all beneficial interests in and to such Non-Compliant Store, including all benefits and burdens related to ownership of such Non-Compliant Store, but legal title to such Non-Compliant Store shall be retained by the Drive-Thru Partnership and not be conveyed to the Surviving Corporation until such time, not to exceed sixty (60) days from and after the Effective Date, as the Drive-Thru Partnership, at the Drive-Thru Partnership's expense, shall have obtained such necessary consents, approvals, permits, or licenses with respect to such Non-Compliant Store. During such time, the Drive-Thru Partnership shall operate any Non-Compliant Store solely for the benefit of and without any management fee to the Surviving Corporation. If, upon the expiration of the sixty-day period after the Effective Date, the Drive-Thru Partnership has not obtained the required consents with respect to a Non-Compliant Store, then FSE shall initiate litigation and bear all costs related to obtaining such consents. (e) Ownership of Assets. Subject to the provisions of Section 4.3(d) and as described on schedule 3.4(a), on the Effective Date and immediately prior to the Effective Time: (i) FSCI shall own (A) ten percent (10%) of the issued and outstanding common stock of FSG, (B) an agreement, subject to approval by the Board of Directors of the Company, to purchase up to an additional fifteen percent (15%) of the issued and outstanding common stock of FSG, under a Purchase Agreement in substantially the form attached as Exhibit F, (C) eleven (11) retail convenience stores that do not sell gasoline and petroleum products ("Convenience Stores"), and (D) all issued and outstanding stock of FSCI Sub; (ii) FSCI and FSCI Sub will own all outstanding interests in the Gas Partnership; (iii) The Gas Partnership shall own or lease, (A) sixty-seven (67) retail convenience stores that also sell gasoline and petroleum products ("Gas Stores"), (B) nine (9) parcels of real estate on which Walk-In Convenience Stores are situated, (C) two (2) Casualty Stores, and (D) inventory (at customary levels used in the operation of the Walk-In Convenience Stores), store fixtures and equipment, merchandise, accounts and general intangibles used in the operation of the Walk-In Convenience Stores at that time; (iv) FSG and FSG Sub shall own all outstanding interests in the Drive-Thru Partnership; and (v) The Drive-Thru Partnership shall own or lease (A) all one hundred eight (108) "drive-thru" retail convenience stores operated by the Drive-Thru Partnership on the date of this Agreement ("Drive-Thrus"), (B) eleven (11) retail convenience stores that do not sell gasoline or petroleum products (together with the Convenience Stores and the Gas Stores, the "Walk-In Convenience Stores"), and (C) all right, title, and interest in and to the trade names, trademarks, service marks, trade dress, logos, emblems relating to the name "Farm Stores." (f) Closing Under Toni Agreement. The closing on the purchase of interests in the Partnerships under the Toni Agreement shall have occurred immediately prior to the Effective Time. ARTICLE V TERMINATION AND ABANDONMENT Section 5.1 Termination. This Agreement may be terminated and the transactions contemplated hereby may be abandoned, at any time prior to the Effective Time: (a) by mutual written consent of the Company and UPC Merger Sub, on the one hand, and of FSCI and FSCI Shareholder, on the other hand; or (b) by FSCI and FSCI Shareholder, on the one hand, or the Company and UPC Merger Sub, on the other hand, if the Effective Time shall not have occurred by October 15, 1999 or there has been a material breach of any representation, warranty, obligation, covenant, agreement or condition set forth in this Agreement on the part of the other party; or (c) by FSCI if the Chapter 11 Case is dismissed or converted to a case under Chapter 7 of the Bankruptcy Code. Section 5.2 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 5.1 hereof by FSCI and FSCI Shareholder, on the one hand, or the Company and UPC Merger Sub, on the other hand, written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination is made, and this Agreement shall become void and have no effect, and there shall be no liability hereunder on the part of FSCI, FSCI Shareholder, the Company, or UPC Merger Sub, except that Sections 3.2 and 6.1 hereof shall survive any termination of this Agreement. Nothing in this Section 5.2 shall relieve any party to this Agreement of liability for breach of this Agreement. ARTICLE VI MISCELLANEOUS Section 6.1 Fees and Expenses. All costs and expenses incurred in connection with this Agreement and the consummation of the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, except for HSR fees payable by the Company as an acquiring person and the commitment fee payable to Hamilton Bancorp, Inc. Section 6.2 Representations and Warranties. The respective representations and warranties of the Company and UPC Merger Sub, on the one hand, and FSCI, on the other hand, contained herein or in any certificates or other documents delivered prior to or at the Closing shall not be deemed waived or otherwise affected by any investigation made by any party. However, this Agreement sets forth exclusively all of the parties' representations, warranties, covenants and agreements regarding the subject matter hereof, and no representations or statements of any party that is not included in this Agreement has been relied upon or shall have any legal effect. Except for the representations and warranties of the parties in this Agreement, each party has determined to enter into and consummate this Agreement based on its own independent investigation. Each and every such representation and warranty in this Agreement shall terminate as of, and not survive the Closing hereunder. This Section 6.2 shall have no effect upon any other obligation of the parties hereto, whether to be performed before or after the Effective Time. Section 6.3 Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken by or on behalf of the respective Boards of Directors of the Company, UPC Merger Sub or FSCI, may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein by any other applicable party or in any document, certificate or writing delivered pursuant hereto by any other applicable party, or (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed by such party. Section 6.4 Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if delivered in person or mailed, certified or registered mail with postage prepaid, or Federal Express or other recognized overnight courier delivery service or sent by telex, telegram or telecopier, as follows: (a) if to the Company, to: United Petroleum Corporation 2620 Mineral Springs Road Suite A Knoxville, TN 37917 Attention: President Fax No.: (423)688-3463 with a copy (that will not constitute notice) to: Young Conaway Stargatt & Taylor, LLP Rodney Square North, 11th Floor 1100 North Market Street P.O. Box 391 Wilmington, DE 19899-0391 Attention: Joel A. Waite, Esquire Fax No.: (302)571-1253 (b) if to the UPC Merger Sub, to: c/o United Petroleum Corporation 2620 Mineral Springs Road Suite A Knoxville, TN 37917 Attention: President Fax No.: (423)688-3463 with a copy (that will not constitute notice) to: Young Conaway Stargatt & Taylor, LLP Rodney Square North, 11th Floor 1100 North Market Street P.O. Box 391 Wilmington, DE 19899-0391 Attention: Joel A. Waite, Esquire Fax No.: (302)571-1253 (c) if to FSCI, to: F.S. Convenience Stores, Inc. 5800 N.W. 74th Ave. Miami, FL 33166 Attention: President Fax No.: (305) 592-2582 with a copy (that will not constitute notice) to: Berger Davis & Singerman, P.A. Suite 2950 200 South Biscayne Boulevard Miami, Florida 33131 Attention: Daniel Lampert, Esquire Fax No.: (305) 714-4340 or to such other Person or address as any party shall specify by notice in writing to each of the other parties. All such notices, requests, demands, waivers and communications shall be deemed to have been received on the date of delivery, or in the case of overnight courier service, the next business day, and unless if mailed, in which case on the third business day after the mailing thereof except for a notice of a change of address, that shall be effective only upon receipt thereof. Section 6.5 Entire Agreement. This Agreement and the schedules and other documents referred to herein or delivered pursuant hereto, collectively contain the entire understanding of the parties hereto with respect to the subject matter contained herein and supersede all prior representations, warranties, agreements and understandings, oral and written, with respect thereto. The information disclosed in any one schedule to this Agreement shall be deemed to be disclosed for purposes of each and every other schedule attached to, or representation made in, this Agreement, provided that proper cross-reference is made to the appropriate schedule setting forth such disclosure information. Section 6.6 Binding Effect; Benefit; Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties. Nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto or their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. This Agreement is executed and delivered by each party solely in a corporate capacity. Section 6.7 Amendment and Modification. Subject to applicable law, including but not limited to the requirements of the Bankruptcy Code and the orders of the Bankruptcy Court, this Agreement may be amended, modified and supplemented in writing by the parties hereto in any and all respects before the Effective Time, by action taken by the respective Boards of Directors of FSCI, UPC Merger Sub and the Company (or by the respective officers authorized by such Boards of Directors). Section 6.8 Further Actions. Each of the parties hereto agrees that, subject to its legal obligations, it will use its best efforts to fulfill all conditions precedent specified herein, to the extent that such conditions are within its control, and to do all things reasonably necessary to consummate the transactions contemplated hereby. Section 6.9 Headings. The descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. Section 6.10 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument. Section 6.11 Applicable Law. This Agreement and the legal relations between the parties hereto shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of laws rules thereof. Section 6.12 Severability. If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions contained in this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. Section 6.13 Definitions. Capitalized terms used throughout this Agreement shall have the meanings ascribed to them in this Agreement. (a) Unless otherwise defined in the text of this Agreement, capitalized terms used in this Agreement shall have the following meanings: "Closing" means the consummation of the transactions contemplated by this Agreement on the Closing Date. "Company Disclosure Schedule" means the disclosure schedule prepared by the Company that is attached to this Agreement and incorporated by reference herein. "Confirmation Order" means a final order entered by the Bankruptcy Court confirming the Chapter 11 Plan. "Disclosure Statement" means the disclosure statement dated July 23, 1999 filed with the Bankruptcy Court on behalf of the Company and in support of the Chapter 11 Plan. "Environmental Law" means any federal, state, local or foreign law (including common law), statute, code, ordinance, rule, regulation or other requirement relating in any way to the environment, natural resources, or public or employee health and safety and includes, without limitation, the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. ss. 136 et seq.., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. ss. 6901 et seq.., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the Clean Water Act, 33 U.S.C. ss. 1251 et seq., the Occupational Safety and Health Act, 29 U.S.C. ss. 651 et seq.., and the Oil Pollution Act of 1990, 33 U.S.C. ss. 2701 et seq., as such laws have been amended or supplemented, and the regulations promulgated pursuant thereto, and all analogous state and local statutes. "Environmental, Health, and Safety Liabilities" means any liability arising out of violation of an Environmental Law. "Existing Equity Rights" means options, warrants, or rights of any nature to receive any form of capital stock of the Company other than New UPC Common Stock or New UPC Preferred Stock. "Existing Shares" means all shares of capital stock of the Company other than New UPC Common Stock or New UPC Preferred Stock. "FSCI Disclosure Schedule" means the disclosure schedule prepared by FSCI that is attached to this Agreement and incorporated by reference herein. "Hazardous Activity" means any activity in which Hazardous Materials are used. "Hazardous Material" means any substance, material or waste which is regulated by any Governmental Authority of the United States, the Applicable Foreign Jurisdiction or other national government, including, without limitation, any material, substance or waste which is defined as a "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "contaminant," "toxic waste" or "toxic substance" under any provision of Environmental Law, which includes, but is not limited to, petroleum, petroleum products, asbestos, urea formaldehyde and polychlorinated biphenyls. "Merger Financing" means a credit facility that will provide proceeds of not less than $20,000,000 and not more than $23,000,000 that will be (i) secured by the Walk-In Convenience Stores, (ii) not require any personal guarantees of any shareholder of the Company, (iii) upon such other terms and conditions as shall be acceptable by FSCI and the Company, and (iv) after the Effective Time, will be an obligation of the Surviving Corporation. "Person" means any natural person, corporation, general partnership, limited partnership, limited liability company, business trust, or other juridical entity. "Release" means any release, spill, emission, leaking, pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal, leaching or migration on or into the indoor or outdoor environment or into or out of any property. (b) Where any provision contained in this Agreement is expressly qualified by reference to "best knowledge," "knowledge," "known to" or similar qualification, the same shall mean the knowledge of any officer, director, or partner of a party. (Signature Page Follows) IN WITNESS WHEREOF, each of FSCI and the Company have caused this Agreement to be executed by their respective officers thereunto duly authorized, all as of the date first above-written. Attest: F.S. CONVENIENCE STORES, INC., a Florida corporation By: Secretary Name: Title: Attest: UNITED PETROLEUM CORPORATION, a Delaware corporation By: Secretary Name: Title: Attest: UNITED PETROLEUM SUBSIDIARY, INC., a Delaware corporation By: Witness Name: Title: EX-99.4 8 CONFIRMATION ORDER IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE In re: ) Chapter 11 ) UNITED PETROLEUM CORPORATION, ) Case No. 99-88 (PJW) ) Debtor. ) FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER AND ORDER CONFIRMING AMENDED PLAN OF REORGANIZATION United Petroleum Corporation ("UPC" or "Debtor"), as Debtor-In-Possession, having on July 23, 1999 filed the Second Amended Plan of Reorganization Under Chapter 11 of The Bankruptcy Code for United Petroleum Corporation (the "Plan"); and the Debtors having on July 23, 1999 filed the Second Amended Disclosure Statement With Respect to Second Amended Plan of Reorganization of United Petroleum Corporation (the "Disclosure Statement"); and the Court, by Order dated July 23, 1999 (the "Disclosure Approval Order") having approved the Disclosure Statement after notice and a hearing held on July 22, 1999 and July 23, 1999; and upon the affidavits of service filed herein reflecting compliance with the notice and solicitation requirements of the Disclosure Approval Order; and upon the Declaration of Kathleen Logan Certifying the Ballots Accepting and Rejecting the Plan filed with the Court on August 23, 1999; and objections to confirmation of the Plan having been filed by (i) John Rankin, (ii) Dan Dotan and Mantel Investments, (iii) The Internal Revenue Service, (iv) John Pisacreta and James Lynn (the "Securities Claim Objectors") and (v) the Securities and Exchange Commission (collectively, the "Objections'); and upon the submission of Plan Documents filed on August 13, 1999 (the "Plan Documents"); and upon the submission of the revised form of Merger Agreement on September 29, 1999 (the "Merger Agreement"), and after a hearing having been held on September 29, 1999 (the "Hearing"); and upon the evidence adduced and proffered and the arguments of counsel made at the Hearing; and the Court having reviewed all documents in connection with confirmation and having heard all parties desiring to be heard; and the Debtor, Infinity and the Securities Claim Objectors having reached an agreement as set forth herein regarding the terms on which the objections of the Securities Claim Objectors shall be resolved; and upon the record compiled in the case; and after due deliberation and consideration of all of the foregoing; and sufficient cause appearing therefor; the Court hereby makes the following: FINDINGS OF FACT AND CONCLUSIONS OF LAW: A. Capitalized terms used herein, but not defined herein, shall have the respective meanings attributed to such terms in the Plan and the Disclosure Statement. B. This Court has jurisdiction over the Debtor's chapter 11 case pursuant to 28 U.S.C. Section 1334(a) and 157(l). Venue of these proceedings and the chapter 11 case in this district is proper pursuant to 28 U.S.C. Section 1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. Section 157(b)(2). C. The Plan complies with all of the applicable provisions of the Bankruptcy Code. D. The classification of claims and interests under the Plan is proper under Section 1122 of the Bankruptcy Code. E. The Plan provides equal treatment for each Claim or Interest of a particular class. F. The Debtor, as proponent of the Plan has complied with the applicable provisions of the Bankruptcy Code. G. The Plan has been proposed in good faith and not by any means forbidden by law. H. Any payments made or promised by the Debtor, or a person issuing securities or acquiring property under the Plan, for services or for costs and expenses in, or in connection with, the case, or in connection with the Plan and incident to the case, have been approved by, or is subject to approval of the Court as reasonable. I. In the Disclosure Statement, the identity, qualifications, and affiliation of the persons who are to serve as officers and directors of the reorganized debtor after confirmation of the Plan was fully disclosed and the appointment of such persons is consistent with the interests of the Debtor's creditors and equity security holders and with public policy. J. In the Disclosure Statement, the identity of any insider that will be employed or retained by the Debtor and his compensation has been fully disclosed. K. The provisions of Section 1129(a)(6) of the Bankruptcy Code are inapplicable to this case. L. The procedures by which the ballots for acceptance or rejection of the Plan were distributed and tabulated were fair, properly conducted, and complied with the Bankruptcy Code, the Bankruptcy Rules and the Disclosure Approval Order. M. As evidenced by the Disclosure Statement and at the Hearing, each holder of a Claim or Interest in each impaired class has either accepted the Plan or will receive or retain under the Plan property of a value, as of the Effective Date of the Plan, that is not less than the amount that such holder would receive or retain if the Debtor liquidated under Chapter 7 of the Bankruptcy Code on such date. N. With respect to each class of Claims or Interests, such class has accepted the Plan or such class is not impaired under the Plan and is, therefore, deemed to have accepted the Plan under Section 1126(f) of the Bankruptcy Code, except for Class 8. O. With respect to Class 8, the requirements of 11 U.S.C. Section 1129(b)(2)(c) have been satisfied. P. At least one impaired class of claims has accepted the Plan, determined without including any acceptances of the Plan by any insider. Q. Except to the extent that the holder of a particular claim has agreed to a different treatment of such Claim, the treatment of Claims under the Plan of the type specified in Sections 507(a)(1) and 507(a)(3) - 507(a)(8) of the Bankruptcy Code, if any, complies with the provisions of Section 1129(a)(9) of the Bankruptcy Code. R. No other chapter 11 plan has been moved for confirmation. S. The primary purpose of the Plan is not the avoidance of taxes or the requirements of Section 5 of the Securities Act of 1933. T. Confirmation of the Plan is not likely to be followed by the need for further financial reorganization of the Debtor. U. All fees payable under section 1930 of title 28 of the United States Code, have either been paid or will be paid under the Plan. V. The Plan and the Infinity Settlement Agreement are hereby modified as follows: (a) Infinity Securities Claims asserted in the Pisacreta/Tucci Action shall (including, without limitation, the Claims of the named plaintiffs therein, the members of the putative class sought to be certified therein whether or not the class is certified, and any opt-outs from such class) shall be excluded from the injunctive provisions of Section 16.13(c) of the Plan; (b) any assets in the UPC Trust after the satisfaction of all Allowed Securities Claims shall be distributed 100% to the Infinity Parties; and (c) the Infinity Parties shall retain all of their Causes of Action for contribution and indemnity against any Person with respect to the Infinity Securities Claims, except the Debtor, its affiliates and their respective officers, directors and employees. W. The settlements and compromises incorporated into the Plan (including, the settlement and compromise set forth in Section 14.1 of the Plan and the Infinity Settlement Agreement, as modified pursuant to paragraph V, above) meet the requirements for approval under section 1123(6)(3) of the Code and Bankruptcy Rule 9019 because, among other things, the settlements: i. reflect a reasonable balance of the risks and expenses of both future litigation and the continuation of this Chapter 11 Case, on the one hand, and early resolution of the disputes, on the other hand; ii. fall within the range of reasonableness for the resolution of complex litigation or litigable issues and claims; iii. are fair and equitable and in the best interest of the Debtor, the Debtor's estate and all holders of Claims and Equity Interests; and iv. Are essential to the Debtor's reorganization and the confirmation of the Plan. X. The Proponent, Infinity and FSCI have consented to the approval of the compromises and settlements described in Section 14.1 of the Plan, as modified hereby, and the exclusion of Infinity Securities Claims asserted in the Pisacreta/Tucci Action from the injunctive provisions set forth in Section 16.13(c) of the Plan. Y. The Plan, as modified hereby, does not materially adversely affect the treatment of any class of Claims or Equity Interests under the Plan. Consequently, all votes accepting the Plan shall constitute votes accepting the Plan, as modified hereby. Z. By operation of section 1145 of the Bankruptcy Code, the distribution of new UPC Common Stock to be issued under the Plan shall be exempt from registration under section 5 of the Securities Act of 1933, as amended, and any state or local law requiring registration for offer or sale of a security or registration or licensing of an issuer of, or broker or dealer in, a security. All such securities so issued shall be freely transferable by the initial recipients thereof (i) except for any such securities received by an underwriter within the meaning of section 1145(b) of the Bankruptcy Code and (ii) subject to any restriction contained in the terms of such securities themselves, in the Plan or any documents relating to the Plan. NOW, it is hereby, ORDERED, ADJUDGED, and DECREED, that: 1. All Objections, to the extent not settled or withdrawn, are hereby expressly overruled. 2. The Plan, as modified hereby (the "Modified Plan") and as supplemented by the Merger Agreement, is confirmed pursuant to section 1129 of the Bankruptcy Code; provided, however, that if there is any conflict between the terms of the Modified Plan and the terms of the Merger Agreement, the terms of the Modified Plan shall control and if there is any conflict between the terms of either the Modified Plan or Merger Agreement and the terms of this Confirmation Order, this Confirmation Order shall control. 3. The Merger Agreement and Plan Documents substantially in the forms previously filed with the Court, are approved and the Debtor is authorized and directed to execute, enter into and deliver such documents and to execute, implement and consummate the transactions contemplated thereby. 4. The Debtor is hereby authorized, empowered, and ordered to issue, execute, deliver, file and record any documents or court papers or pleadings, and to take any and all actions, that are necessary or desirable to implement, effectuate, and consummate the transactions contemplated by the Plan, whether or not specifically referred to therein and without further application or order of this Court, in each case with like effect as if exercised and taken by unanimous action of the directors and stockholders of the Debtor as may be necessary to cause the same to become effective under the Delaware General Corporation Law. 5. The Debtor shall remain a Debtor-in-Possession under the Bankruptcy Code until the Effective Date. The Debtor may consummate the transactions contemplated by the Plan and make distributions to creditors after the Effective Date in accordance with the Plan, and free of any restrictions imposed by the Bankruptcy Code. 6. Any and all pre-petition unexpired leases and executory contracts not previously rejected by the Debtor, unless specifically assumed pursuant to the Bankruptcy Code prior to the date hereof or the subject of a motion to assume or assume and assign pending on the date hereof, shall be deemed rejected by the Debtor effective as of the Effective Date of the Plan. 7. All proofs of claim with respect to claims arising from the rejection of executory contracts and unexpired leases shall, unless another order of the Bankruptcy Court provides for an earlier date, be filed with the Bankruptcy Court within thirty (30) days after the mailing of notice of the entry of this order. Any proof of claim that is not timely filed shall be released, discharged and forever barred from assertion against the Debtor, its estate or property or the Post-Confirmation Debtor. 8. The exculpation and injunction provisions set forth in the Modified Plan, including without limitation, those set forth in Sections 5.2, 8.14, 11.1, 16.12, 16.13, 16.14 and 16.15 of the Modified Plan, are approved; provided, however, that the injunction provided by section 5.2 of the Plan shall not result in the release by the United States Internal Revenue Service (the "IRS") of any claim against any responsible officer or director of the Debtor that otherwise would be liable to the IRS on any priority tax claim owed by the Debtor to the IRS and further provided that notwithstanding section 16.13(iv) of the Modified Plan, the IRS shall be permitted to offset against any claim of the Debtor or Reorganized Debtor against the IRS any claim of the IRS against the Debtor that was timely filed in the Debtor's Chapter 11 case, to the extent ultimately allowed. 9. Subject to paragraph 8 herein, on the Effective Date, all Persons who have been, are, or may be holders of Claims against or Equity Interests in the Debtor shall be enjoined from taking any of the following actions against or affecting the Debtor, its Estate, or its assets and property with respect to such Claims or Equity Interests (other than actions brought to enforce any rights or obligations under the Plan and appeals, if any, from this Confirmation Order): (i) commencing, conducting or continuing in any manner, directly or indirectly, any suit, action or other proceeding of any kind against the Debtor, its Estate, or its assets or property, or any direct or indirect successor in interest to the Debtor, or any assets or property of such transferee or successor (including, without limitation, all suits, actions, and proceedings that are pending as of the Effective Date, which must be withdrawn or dismissed with prejudice); (ii) enforcing, levying, attaching, collecting or otherwise recovering by any manner or means whether directly or indirectly any judgment, award, decree or order against the Debtor, its Estate, or its assets or property, or any direct or indirect successor in interest to the Debtor, or any assets or property of such transferee or successor; (iii) creating, perfecting or otherwise enforcing in any manner, directly or indirectly, any Lien against the Debtor, its Estate, or its respective assets or property, or any direct or indirect successor in interest to any of the Debtor, or any assets or property of such transferee or successor other than as contemplated by the Plan; (iv) asserting any setoff, right of subrogation or recoupment of any kind, directly or indirectly against any obligation due the Debtor, its Estate, or its respective assets or property, or any direct or indirect successor in interest to any of the Debtor, or any assets or property of such transferee or successor; and (v) proceeding in any manner in any place whatsoever that does not conform to or comply with the provisions of the Plan or the settlement set forth in Article XIV of the Plan to the extent such settlements have been approved by the Bankruptcy Court in connection with confirmation of the Plan. 10. From and after the Effective Date, except (a) for Infinity Securities Claims asserted in the Pisacreta/Tucci Action, including, without limitation, the Claims of the named plaintiffs therein, the members of the putative class sought to be certified therein, whether or not such class is certified, and any opt-outs from such putative class (which claims shall not be affected or impaired in any way by this Order), and (b) as provided by paragraph 11 below, all Infinity Securities Claims shall channel and transfer to the UPC Trust, and all Persons who have been, are, or may be holders of any such Infinity Securities Claim shall be enjoined from taking any of the following actions against or affecting the Infinity Parties or their assets and property with respect to such Infinity Securities Claim (other than actions brought to enforce any rights or obligations under the Plan, the UPC Trust Agreement and the Infinity Settlement Agreement): (vi) commencing, conducting or continuing in any manner, directly or indirectly, any suit, action or other proceeding of any kind against any Infinity Party or its assets or property, or its direct or indirect successors in interest, or any assets or property of such transferee or successor (including, without limitation, all suits, actions, and proceedings that are pending as of the Effective Date, which must be withdrawn or dismissed with prejudice); (vii) enforcing, levying, attaching, collecting or otherwise recovering by any manner or means whether directly or indirectly any judgment, award, decree or order against any Infinity Party or its assets or property, or its direct or indirect successors in interest, or any assets or property of such transferee or successor; (viii) creating, perfecting or otherwise enforcing in any manner, directly or indirectly, any Lien against any Infinity Party or its assets or property, or its direct or indirect successors in interest, or any assets or property of such transferee or successor; (ix) asserting any set-off, right of subrogation or recoupment of any kind, directly or indirectly against any obligation due any Infinity Party, or its assets or property, or its direct or indirect successors in interest, or any assets or property of such transferee or successor; and (x) proceeding in any manner in any place whatsoever that does not conform to or comply with the provisions of the Plan, or the settlements set forth in Article XIV of the Plan, the UPC Trust Agreement or the Infinity Settlement Agreement. 11. The injunction provided by paragraph 10 of this Confirmation Order shall terminate and be of no further force or effect if at any time or from time to time the UPC Trustee files with the Bankruptcy Court and serves upon the Infinity Parties a notice that the UPC Trust assets have been fully expended and that additional Allowed Securities Claims exist or that all Securities Claims have not yet been resolved and the Infinity Parties, within thirty (30) days after the filing of such notice, fail to make an additional contribution to the UPC Trust in an aggregate amount equivalent to (A) not less than $100,000 (provided that such amount must be at least enough to satisfy all outstanding Allowed Securities Claims in full and provide at least $25,000 to fund the expenses of the UPC Trust in liquidating any remaining Securities Claims) or (B) such lesser amount as may be agreed to by the UPC Trustee. 12. Nothing contained herein or in the Modified Plan shall impair the rights or claims asserted in the Pisacreta/Tucci Action by or on behalf of the named plaintiffs therein, the members of the class sought to be certified therein (whether or not such class is certified) or any opt-outs from such class. 13. Unless required to be filed by an earlier date by another order of this Court, all requests for payment of Administrative Claims, including all applications for final allowance of compensation and reimbursement of expenses of Professionals, must be filed and served on the Debtor, no later than forty-five (45) days after the Effective Date. Any person that is required to file and serve such a request for payment of an Administrative Claim and fails to timely file and serve such request, shall be forever barred, estopped and enjoined from asserting such Claim or participating in distributions under the Plan on account thereof. 14. The Debtor shall file objections to Claims with this Court no later than 60 days after the Effective Date, provided, however, that this deadline may be extended by the Court upon motion of the Post-Confirmation Debtor, without notice or a hearing. After the date hereof, no party, other than the Debtor or Post-Confirmation Debtor, may file objections to the allowance of claims. 15. This Order shall constitute all approvals and consents required, if any, by the laws, rules or regulations of any State or any other governmental authority with respect to the implementation or consummation of the Plan and any other acts that may be necessary or appropriate for the implementation or consummation of the Plan. 16. Pursuant to Section 1146(c) of the Bankruptcy Code, neither the making nor delivery of an instrument of transfer, nor the revesting, transfer and sale of any real property or personal property of the Debtor in accordance with the Plan, shall subject the Debtor to any state or local law imposing a stamp tax, transfer tax or similar tax or fee. 17. The provisions of the Plan and this Order shall be, and hereby are now, and forever afterwards, binding on the Debtor, all holders of Claims and Interests (whether or not impaired under the Plan and whether or not, if impaired, they accepted the Plan), any other party in interest, any other party making an appearance in this Chapter 11 Case, and any other person or entity affected thereby, as well as their respective heirs, successors, assigns, trustees, subsidiaries, affiliates, officers, directors, agents, employees, representatives, attorneys, beneficiaries, guardians, and similar officers, or any person claiming through or in the right of any such person or entity. 18. The Court hereby retains jurisdiction of this case (i) as provided for in the Plan, (ii) as provided for in this Order, and (iii) for the purposes set forth in Sections 1127 and 1142 of the Bankruptcy Code. 19. The compromises and settlements set forth in Section 14.1 of the Plan and in the Infinity Settlement Agreement, in substantially the form attached hereto as Exhibit A, are approved. 20. The UPC Trust Agreement and the ADR are hereby approved and the Debtor and the UPC Trustee once appointed may take such actions as are necessary to implement the terms thereof. 21. The failure to reference or discuss any particular provision of the Plan in this Order shall have no effect on the validity, binding effect and enforceability or such provision and such provision shall have the same validity, binding effect and enforceability as every other provision of the Plan. 22. Pursuant to Bankruptcy Rule 2002(f)(7) and 3020(c), the Debtor is hereby directed to serve a notice of the entry of this Order on all holders of record of Claims and Interests as of the date hereof, all parties who have entered their appearance in this case and requested notice pursuant to Bankruptcy Rule 2002 and the Office of the United States Trustee no later than ten (10) days after the Effective Date of the Plan. Dated: Wilmington, Delaware October 7, 1999 s/Peter J. Walsh ------------------------------------ Peter J. Walsh Chief Judge, United States Bankruptcy Court EX-99.5 9 LICENSE AGREEMENT LICENSE AGREEMENT THIS AGREEMENT is made and entered into as of November 12, 1999, by and among Farm Stores Grocery, Inc., a Delaware corporation ("Licensor"), having its principal office at 5800 N.W. 74th Avenue, Miami, Florida 33166, and United Petroleum Corporation, and United Petroleum Group, Inc., both Delaware corporations (collectively, "UPET" or "Licensee"), and having their principal office at 2620 Mineral Springs Road, Suite A, Knoxville, TN 37917. Preliminary Statements Licensor and its affiliates have been engaged in the convenience store business in the United States, operating both conventional walk-in convenience stores ("Walk-In Stores") and specialty retail grocery stores incorporating a double drive-through operating concept ("Drive-Thru Stores"). Licensor historically has identified the Walk-In Stores and Drive-Thru Stores and certain products sold in the Walk-In Stores and Drive-Thru Stores and identified on Exhibit A hereto (the "Branded Products") in the State of Florida by means of certain trade names, trademarks, service marks, trade dress, logos, emblems, and indicia of origin, including, but not limited to, the mark "FARM STORES" and such other trademarks and service marks, all as listed on Exhibit B attached hereto and incorporated herein (collectively, the "Marks"). Licensee is acquiring the Walk-In Stores from an affiliate of Licensor (the "Acquired Stores"), and in connection with this acquisition, Licensor is willing to grant a nonexclusive license in the Marks to Licensee for use in identifying the Walk-In Stores and the Branded Products that are sold in the Walk-In Stores, as well as any other walk-in convenience stores that the Licensee opens in accordance with the terms of this Agreement in the State of Florida and other parts of the United States of America (collectively, the "Additional UPET Stores;), and for the sale of Branded Products within the Licensed Stores, all subject to the terms and conditions in this Agreement. NOW, THEREFORE, in consideration of the agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby conclusively acknowledged, the parties hereto, intending to be legally bound, agree as follows: I. GRANT AND TERM OF LICENSE 1.1 Grant; Definitions. The foregoing Preliminary Statement is hereby incorporated into and made a part of this Agreement. As used herein, (a) "Licensed Stores" means, collectively, the Additional UPET Stores and the Acquired Stores; (b) "affiliate" means, when used in reference to a specified Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with the specified Person; (c) "control" means the power to direct or cause the direction of the management and policies of a Person; (d) "Person" means any firm, association, partnership (whether general or limited), trust, corporation, limited liability company or other legal entities, including public or administrative bodies, or natural persons, (e) "Termination Event" means the termination of Jose P. Bared's ("Bared") employment by UPET for any reason or no reason, and (f) "Involuntary Termination Event" means the termination of Bared's employment with UPET by Bared without Good Reason (as defined in his employment agreement with UPET), or UPET's termination of, or failure to renew at the expiration of its term, Bared's employment by UPET without "cause" (as defined in Bared's employment agreement with UPET). During the Term, as defined in section 1.2, below, Licensee shall have the non-exclusive right, subject and pursuant to all of the terms and conditions of this Agreement, to use the Marks (a) to identify the name of the Licensed Stores on signs located at the premises of the Licensed Stores, (b) on promotional materials relating to the Licensed Stores, and (c) for display and sale in the Licensed Stores of the Branded Products. Except as set forth in the preceding sentence, Licensee shall not have the right, without obtaining the prior written consent of Licensor, which Licensor may withhold in its sole discretion, to use any of the Marks for any purpose whatsoever. 1.2 Term. The term of this Agreement shall commence on the date of this Agreement ("Effective Date"), and except as otherwise provided herein, shall expire one (1) year after the Effective Date (this initial one-year period is sometimes referred to in this Agreement as the "Initial Term"). The term of this Agreement shall automatically, and without any action being required of either party, renew for successive one-year terms (each, a "Renewal Term"; and as used herein, "Term" means the Initial Term and all Renewal Terms); provided, however, that the Term shall be subject to termination as provided in this Agreement. Upon renewal of the Term, all of the terms and conditions set forth herein shall remain in force and effect. 1.3 Fees. This license is royalty free, except as may be agreed by the parties after any Involuntary Termination Event. II. MARKS 2.1 Representations. Licensor represents with respect to the Marks that: (a) Licensor has registered the Mark "FARM STORES" with the United States Patent and Trademark Office and is the owner of United States Registration Nos. _______ for said Mark for use in connection with ________; and (b) Licensor will take all steps reasonably necessary at Licensor's sole cost and expense to preserve and protect the ownership and validity of the Marks. 2.2 Licensee Acknowledgments and Agreements. Licensee expressly understands, acknowledges and agrees that: (a) Licensor is the owner of all right, title and interest in and to the Marks and all the goodwill associated with and symbolized by the Marks, and Licensor has the right to use the Marks and to authorize others to use the Marks. (b) Neither Licensee's use of the Marks nor Licensee's acquisition of the Acquired Stores nor use of the Marks in connection with other Licensed Stores gives Licensee any ownership interest or other interest in or to the Marks, except the license granted by this Agreement; (c) Any and all goodwill arising from Licensee's use of the Marks shall inure solely and exclusively to Licensor's benefit, and upon expiration or termination of the Term and the license granted herein, no monetary amount shall be assigned or paid to Licensee for any goodwill associated with Licensee's use of the Marks or otherwise; (d) The right and license to use the Marks granted hereunder to Licensee is non-exclusive; and Licensor and its affiliates shall have and retain the rights, among others, on any terms and conditions as they deem advisable and without providing any rights therein to Licensee: (i) to use the Marks themselves; (ii) to grant other licenses for the Marks, in addition to those licenses which may already be granted; provided, however, that notwithstanding any inconsistent provisions hereof, during the Term and after the occurrence of a Termination Event or (except as otherwise provided in this Agreement) an Involuntary Termination Event, the Licensor shall not grant any license to use the Marks in connection with the operation of a walk-in convenience store (as distinct from a drive-through store, or for uses for any purpose other than operation of a walk-in convenience store, for all of which Licensor may license the Marks without restriction hereunder); and (iii) to develop and establish other stores using the same or similar Marks, or any other marks, and to grant licenses or other rights with respect thereto. 2.3 Integrity of Marks. Licensee acknowledges that the Marks have become established in the trade and among the consuming public as representing not only high quality goods, but also indicating that the stores selling such goods are of good repute and integrity, and further acknowledges that it is in the mutual interest of the parties hereto to protect and foster the value and trade and consumer acceptance of the Marks; accordingly: (a) Licensee shall use the Marks only in the manner authorized and permitted by Licensor pursuant to this Agreement; (b) Licensee shall use the Marks only for the operation and promotion of the Licensed Stores and the sale of the Branded Products therein; (c) Unless otherwise authorized or required by Licensor, Licensee shall not use the name "Farm Stores" or any of the other Marks with any prefix or suffix; (d) Licensee's right to use the Marks is limited to the right to reproduce such Marks without change, modification or alteration in their design and appearance from that furnished by Licensor, and to such uses as are authorized under this Agreement, and any unauthorized use of the Marks shall constitute a material breach of this Agreement; (e) Licensee shall not use the Marks as part of its corporate or other legal names; nor shall it use the Marks to incur any obligation or indebtedness on behalf of Licensor or Licensor's affiliates; (f) Licensee shall identify itself as the owner (or lessee) of the Licensed Stores in conjunction with any of the Marks, including, without limitation, on promotional materials; (g) Licensee shall not directly or indirectly contest the validity of Licensor's ownership of the Marks; (h) Licensee shall clearly designate the Licensed Stores with the Marks in such manner as shall be approved by Licensor, or with a similar designation or designations as shall be approved by Licensor; and the decoration, layout, color scheme, furnishing and general physical presence of the Licensed Stores shall be at the expense of Licensee, but shall be subject to the approval of Licensor which approval shall not be unreasonably withheld; (i) Licensee shall operate the Licensed Stores in compliance with this Agreement and in accordance with Licensor's standards for quality, appearance, cleanliness and service, as prescribed by Licensor from time to time in any and all manuals and training materials or as otherwise reasonably designated by Licensor to Licensee and in accordance with all applicable laws and regulations; (j) Licensor shall have the right to require that one or more of its representatives be permitted to inspect all stores that are utilizing Marks from time to time at any time; (k) Licensee shall not, without the approval of Licensor, occupy or use any Licensed Store displaying any Marks for any business other than a walk in convenience store business substantially similar to that historically operated at the Licensed Stores; (l) Licensee shall purchase all Branded Products and all other products for sale in the Licensed Stores utilizing the Marks solely from suppliers who demonstrate, to the continuing satisfaction of Licensor, the ability to meet Licensor's standards of quality (including, as to dairy products, freshness) for Branded Products and such other items. Licensee shall perform such testing and other quality assurance procedures as Licensor may reasonably require to assure compliance with the foregoing, and shall permit Licensor to do so as well. 2.4 Execution of Documents. Licensee shall cooperate with the Licensor in Licensor's maintenance of the Marks, and at the request of Licensor, shall execute any documents and provide Licensor with any specimens or materials required for the registration renewal and/or such similar maintenance of the Marks. 2.5 Protection of Rights in Marks. Licensee shall promptly notify Licensor of any unauthorized use of the Marks, any challenge to the validity of the Marks, any passing-off or attempts to pass-off the goodwill associated with the Marks, or any challenge to Licensor's ownership of, or Licensee's right to use, the Marks, in each case of which Licensee becomes aware. Licensee acknowledges and agrees that (i) Licensor has the sole right to direct and control any dispute, administrative proceeding or litigation involving the Marks, including any settlement thereof, and (ii) Licensor has the right, but not the obligation, to take action against uses by others that may constitute infringement of the Marks, each at Licensor's expense. Licensor shall be entitled to any and all damages collected in any such action. If Licensor elects not to take action against any infringement of the Marks by third parties outside the State of Florida, Licensee shall have the right (at its expense) to commence any action to enjoin or recover damages by reason of any such infringement of the Marks, provided that it receives an opinion of experienced intellectual property counsel that such action is advisable in order to protect the Marks in such jurisdiction. If Licensee prosecutes such an action in accordance therewith, it shall be entitled to retain any damages awarded. (a) Provided that Licensee has used the Marks only in accordance with this Agreement, and that Licensee provides Licensor with prompt notice of any claim, suit, demand or penalty, Licensor will defend, indemnify and hold harmless Licensee, at Licensor's expense, against any and all judgments settlements, penalties, losses, liabilities, claims, suits, damages, costs and expenses (including attorney's fees) involving the ownership, validity or right to use the Marks arising out of Licensee's permitted use thereof within the State of Florida, and Licensor shall have the right to control the defense of and settle any such matter. Outside of the State of Florida, Licensor shall have the option to defend such infringement actions as set forth above, or make any other arrangements it deems to be appropriate (including without limitation, requiring Licensee to cease or restrict use of the Marks in a certain territory) in connection therewith. In the event that Licensee has not used the Marks in accordance with this Agreement, Licensor may, at Licensor's option, defend Licensee, at Licensor's expense, against such third party claims, suits or demands, but Licensor shall not be obligated to do so. (b) In the event of any litigation relating to the ownership, validity or right to use the Marks, Licensee agrees to execute any and all documents and to do such acts as may, in Licensor's reasonable opinion, be necessary to carry out such defense or prosecution, including, but not limited to, becoming a nominal party to any legal action. Licensor shall not be required to consult with Licensee or Licensee's counsel in connection with any such litigation, unless Licensor names Licensee a nominal party to such action. III. PROMOTION 3.1 Promotional Materials. Recognizing the value of promotion and the importance of the goodwill and public image of the Marks, Licensor may from time to time provide to Licensee, as Licensor deems appropriate, promotional plans and materials which Licensor has developed. 3.2 License Promotions. (a) All promotion by Licensee in any medium which contain or refer to the Marks shall be conducted in a dignified manner and shall conform to the standards and requirements of Licensor as set forth in any manuals and other materials provided by Licensor to Licensee. Licensee shall submit to Licensor its promotional and public relations plans and materials which contain or refer to the Marks for a twelve month period, on an annual basis. Licensee shall obtain Licensor's prior approval of all promotional and public relations plans and materials which contain or refer to the Marks that Licensee desires to use. Licensor shall provide the approval or disapproval of such plans and materials within 30 days of receipt of all related documents, and if disapproved, shall state with specificity the reasons therefor. Licensee shall use no such plans or materials until they have been approved by Licensor, and shall promptly discontinue use of any promotional plans or materials upon reasonable notice from Licensor. (b) In all promotion, Licensee shall use the Marks only in accordance with the terms and conditions of this Agreement. Licensee shall display the Marks in the manner prescribed by Licensor on all signs and other promotional materials. IV. SUBLICENSING 4.1 Licensor Consent Required. Licensee shall not grant any sublicense to use any of the Marks, or otherwise grant any other right in the Marks, without the prior written consent of Licensor, which Licensor may withhold in its sole and absolute discretion. 4.2 Conditions. If Licensee shall sublicense any Marks, then (a) Licensee shall ensure that the sublicense provides that the sublicensee is bound by all of Licensee's representations, warranties and covenants in this Agreement; (b) The terms and conditions of the Sublicense Agreement shall be subject to the approval of Licensor; (c) Licensee shall enforce all of the terms and conditions of the sublicense agreement in a timely and proper manner, including, but not limited to, enforcing the proper usage and presentation of the Marks, compliance with Licensor's standards of quality and service, and adherence to the manuals and other materials designed to promote quality and good service provided Licensee by Licensor. V. CONFIDENTIALITY AND NON-DISCLOSURE OBLIGATIONS 5.1 Definitions. (a) "Confidential Information" shall mean all information concerning Licensor, the Marks (but excluding the Marks, themselves), Licensor's business and manuals, and all other information provided by or on behalf of Licensor to Licensee, except for the information excluded in subsection 5.1(c). (b) Confidential Information shall include, without limitation, (i) the terms and provisions of this Agreement; (ii) Licensor's methods and systems of operation and otherwise, including but not limited to operating manuals, to the extent Licensee may become familiar with or have possession, custody or control of such; (iii) technical memoranda and data; (iv) research; (v) manuals; (vi) reports and memoranda; (vii) new product and service development; (viii) other intellectual property and all draft or proposed applications for registrations thereof; (ix) comparative analyses of competitive products; (x) services and operating procedures; (xi) prices charged and paid by Licensor; (xii) emails and other electronic data transmitted by or on behalf of Licensor; and (xiii) information, data or documents that Licensor designates as trade secrets or as confidential, whether or not any of the foregoing qualify as "trade secrets" under applicable law. (c) Confidential Information shall not include (i) information that is or becomes generally known to the public other than through disclosure (whether deliberate or inadvertent) by Licensee, and (ii) information disclosed in judicial or administrative proceedings to the extent that Licensee is legally compelled to disclose such information, provided that Licensee shall have given Licensor prior written notice of such required disclosure and shall have used its best efforts, and afforded Licensor the opportunity, to obtain an appropriate protective order or other assurance satisfactory to Licensor of confidential treatment for the information required to be disclosed. 5.2 Non-Disclosure. (a) During the Term of this Agreement and for 10 years thereafter, Licensee shall treat all Confidential Information confidentially, and shall not communicate, divulge, disclose, reveal, or use to or for the benefit of any person or entity, other than Licensor, any Confidential Information; provided that Licensee may disclose Confidential Information to Licensee's employees, directors, officers, representatives and advisors who need to know such information as an incident to performing Licensee's obligations hereunder. (b) Licensee shall at all times treat all manuals and other written materials provided by Licensor, and the information contained therein, as Confidential Information, and shall use all reasonable efforts to maintain such information secret and confidential. Licensee shall not, at any time, without Licensor's prior written approval, copy, duplicate, record, or otherwise make any such manuals or other Confidential Information available to any person not authorized by this Agreement. All Confidential Information shall at all times remain the sole property of Licensor, and shall at all times be kept in a secure place. (c) Upon any termination of this Agreement, Licensee shall immediately return to Licensor, or, at Licensor's written request, destroy, all Confidential Information in its possession, copies of all materials relating to the Mark and operations of the Licensed Stores provided by or on behalf of Licensor, including, without limitation, all manuals and employee training information. Confidential Information in computer code or other electronic form shall be deleted from all computers, lap tops and similar devices, disks and other electronic media to which Licensee has access; provided that, at Licensor's written request, Licensee shall print and return to Licensor hard copies of any such information prior to its destruction. 5.3 Scope of Responsibility. Licensee shall be responsible for any breach of this Article V by any of its employees, directors, officers, representatives or advisors and other parties to whom Licensee discloses Confidential Information as permitted hereby or otherwise, and agrees, at Licensee's sole expense, to take all reasonable measures (including but not limited to court proceedings) to restrain its employees, directors, officers, representatives, advisors and such parties from prohibited or unauthorized disclosure or use of any Confidential Information. VI. TRANSFERS OF INTEREST; TERMINATION EVENTS 6.1 Licensor Transfers Permitted. Licensor shall have the right to transfer or assign this Agreement and all or any part of its rights or obligations herein to any person or entity, and agrees to advise Licensee immediately of the effective date of such transfer or assignment and of the name and address of such transferee or assignee. 6.2 Licensee Transfers Restricted. Licensee understands and acknowledges that the rights and duties set forth in this agreement are personal to Licensee, and that Licensor has granted the rights hereunder in reliance on Licensee's business skill and reputation. Accordingly, neither Licensee, nor any immediate or remote successor to any part of Licensee, nor any individual, partnership, corporation or other legal entity which directly or indirectly owns any interest in Licensee, shall sell, assign, transfer, convey, give away, pledge, mortgage or otherwise encumber, without the prior written consent of Licensor (which consent may be withheld in Licensor's sole discretion), any direct or indirect interest in this Agreement, or the rights and obligations hereunder. Any purported assignment or transfer not having the prior written approval of Licensor shall be a material breach of this Agreement by Licensee and shall otherwise be null and void. 6.3 Effect of Involuntary Termination Event. If an Involuntary Termination Event shall have occurred, then (a) the license rights provided to Licensee hereunder shall become applicable only as to use of the Marks for Licensed Stores within the Metropolitan Statistical Areas ("MSAs") in which the Marks are then being actively used by Licensee as previously permitted hereunder (the "Active MSAs"); (b) the Licensee shall be permitted to use the Marks in connection with Additional UPET Stores without payment of a fee only if the Additional UPET Stores are located within Active MSAs. (c) the Licensor shall not license other parties to use the Marks for the operation of walk-in convenience stores (other than the Licensee) for a period of 2 years after the Involuntary Termination Event; (d) the Licensor shall not, after the expiration of the 2 year period set forth in (c), above, grant a license to any operator of walk-in convenience stores to use the Marks in any area other than the Active MSAs (the "Non-UPET MSAs"), unless Licensor first gives Licensee a notice to offer such a license to Licensee. Such notice shall specify the terms (including the license fee) to govern such proposed license and the Non-UPET MSAs in which such license will be valid. If Licensee does not accept such terms within 15 days after Licensor's notice as aforesaid, then the Licensor shall be free to grant such license to any third party, provided that the license is limited to the Non-UPET MSAs identified in Licensor's notice and governed by terms not less favorable to Licensor than those set forth in Licensor's notice. VII. DEFAULT AND TERMINATION 7.1 Default and Automatic Termination. Licensee shall be deemed to be in default under this Agreement, and the Term of this Agreement and all rights granted hereunder shall terminate automatically, without notice to Licensee and without affording Licensee any opportunity to cure the default, effective immediately upon the occurrence of any of the following events: (a) Licensee shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidation, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; or (b) An involuntary case or other proceeding shall be commenced against Licensee seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidation, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against Licensee under the federal bankruptcy laws as now or hereafter in effect. 7.2 Default and Optional Termination. After the occurrence of a Termination Event and upon the occurrence of any of the events described in subsection (a)-(c) below, Licensor, at its option, may terminate the Term of this Agreement and all rights granted hereunder effective immediately upon Licensor's notice of termination to Licensee (and without affording Licensee any opportunity to cure the default); and (a) If Licensee makes or attempts to make a transfer or assignment in violation of Section 6.2 hereof or grants or attempts to grant a sublicense without Licensor's prior written consent; (b) If Licensee fails to comply with the covenants and agreements set forth in Section IV; (c) If Licensee makes any unauthorized use of the Marks; 7.3 Defaults Capable of Cure. After the occurrence of a Termination Event and upon the occurrence of any material breach of any provision of this Agreement, not otherwise set forth in sections 7.1 or 7.2, Licensor, at its option, may terminate this Agreement and all rights granted hereunder, effective 30 days from the date the Licensor delivers to Licensee a written notice of termination describing such material breach. Notwithstanding the preceding sentence, this Agreement shall not terminate so long as Licensee cures such material breach within 30 days from the date the notice of termination was delivered; provided, however, if the breach or default is not capable of being cured, then the termination of this Agreement shall be effective upon the delivery of the notice of default. VIII. OBLIGATIONS UPON TERMINATION OR EXPIRATION 8.1 Obligations. Upon termination or expiration of the Term of this Agreement, all rights granted herein to Licensee shall forthwith terminate, and (a) Licensee shall not thereafter, directly or indirectly, represent to the public that it is, or hold itself out as, a present or former licensee of Licensor; (b) Licensee shall immediately deliver to Licensor or destroy all Confidential Information in its possession, in accordance with section 5.2(c) hereof; (c) Licensee shall, at Licensor's option and request, transfer and assign to Licensor all of Licensee's rights and prospective obligations in all sublicense agreements executed by Licensee hereunder and shall execute all documents reasonably required by Licensor in connection with such transfer; (d) Licensee shall immediately and permanently cease to use the Marks, and all other distinctive forms, slogans, signs, symbols, and devices associated with the Licensed Stores and the Branded Products. Without limiting the generality of the foregoing, the Licensee shall remove the Marks from all of the Licensed Stores' signage (within 45 days from such termination) and promptly (within 5 days from such termination) cease any sale of the Branded Products. Licensee shall take such action as may be necessary to cancel any business name registration of Licensee which contains the mark "FARM STORES" or any other Mark of Licensor or its affiliates, and Licensee shall furnish Licensor with evidence satisfactory to Licensor of compliance with this obligation within fourteen (14) days after termination or expiration of this Agreement; (e) Licensee shall immediately deliver to Licensor all manuals provided to it by Licensor, all of which are acknowledged to be the property of Licensor; (f) Licensee shall comply with the covenants and agreements set forth in Section V of this Agreement. 8.2 Survival. The following provisions of this Agreement shall survive its termination or expiration for any reason whatsoever: Article V "Confidential Information"; Article VIII "Obligations upon Termination or Expiration"; Section 9.1 "Taxes"; Section 10.3 "Indemnity"; Article XI "Notices"; and Article XIII "Governing Law." Termination or expiration of this Agreement shall in no way affect the survival of any right, duty, or obligation of the parties which is intended, expressly or impliedly, under the provisions of this Agreement, to survive its termination or expiration. IX. TAXES AND PERMITS 9.1 Taxes. Licensee shall pay all taxes or other levies payable as a result of this Agreement, or any of the documents contemplated by this Agreement, and Licensor shall have no liability for any sales, use, service, occupation, excise, gross receipts, value-added, income, property or other taxes, whether levied upon the Licensed Stores, Licensee's property, or Licensor, in connection with the rights granted hereunder. Provided, however, that Licensee shall not be liable for Licensor's income taxes on any royalties payable hereunder, or for Licensor's own use of the Marks. Licensee agrees to indemnify Licensor for any assessments or taxes that might be made against Licensor under the terms of this Agreement. 9.2 Compliance with Laws. Licensee shall comply with all applicable laws and regulations, and shall timely obtain, and shall maintain in full force and effect at all times during the term of this Agreement, at its sole cost and expense, any and all approvals, permits, certificates, and licenses necessary for the full and proper performance of this Agreement. 9.3 Notification Requirement. Licensee shall notify Licensor in writing within five (5) business days of learning of the commencement of any action, suit, or proceeding, and of the issuance of any order, writ, injunction, award, or decree of any court, agency or other governmental authority, which arises out of or in connection with the Licensee's use of the Marks, and may adversely affect the Marks or the use thereof, or the operations or financial condition of Licensee. X. INDEPENDENT CONTRACTOR; INDEMNIFICATION 10.1 Parties Independent. This Agreement does not create a fiduciary relationship between the parties hereto. Licensee is an independent contractor, and nothing in this Agreement is intended to constitute either party an agent, legal representative, subsidiary, joint venturer, partner, employee, or servant of the other for any purpose whatsoever. Licensee shall hold itself out to the public as an independent contractor holding the rights to license the Marks from their owner. 10.2 No Agency Relationship. Nothing in this Agreement authorizes Licensee to make any contract, agreement, warranty, or representation on Licensor's behalf, or to incur any debt or any other obligation in Licensor's name, and Licensor shall in no event assume liability for, or be deemed liable hereunder as a result of, any such action or by reason of any act or omission of Licensee, or any claim or judgment arising therefrom. 10.3 Indemnity. If Licensor shall be subject to any claim, demand or penalty or become a party to any suit or other judicial or administrative proceeding by reason of any claimed act or omission of Licensee, its officers, directors, representatives, employees or agents, or by reason of any act occurring at or in respect of a Licensed Store, provided Licensor provides Licensee with prompt written notice after Licensor becomes aware of a claim, Licensee shall defend, indemnify and hold Licensor harmless from and against all judgments, settlements, penalties, losses, liabilities, claims, suits, damages, costs and expenses (including attorneys' fees and costs) incurred by or imposed on Licensor in connection therewith. Notwithstanding the foregoing, this indemnity shall not apply to infringement actions against Licensor brought solely in connection with the Licensee's use of the Marks as permitted hereby in the State of Florida. XI. NOTICES All notices required hereunder shall be in writing and shall be given (a) by personal service, (b) by certified or registered mail, with postage prepaid, return receipt requested, (c) by international commercial courier, express delivery, with delivery acknowledgment required, or (d) by cable, telex, or telecopy (each of which must be evidenced by a machine generated receipt), if immediately confirmed in writing by one of the aforedescribed means. All notices shall be addressed to the recipient at the address set forth in the first paragraph of this Agreement, or such other address as such party may from time to time designate in a notice given in the aforesaid manner. Notices shall be deemed effective when received or when delivery thereof is refused. XII. MISCELLANEOUS 12.1 Entire Agreement. This Agreement, and the exhibits and schedules hereto, constitute the entire, full, and complete agreement between Licensor and Licensee with respect to the subject matter hereof and supersede any and all prior agreements with respect thereto. This Agreement incorporates by reference the recitals, and all exhibits and schedules hereto. 12.2 Gender and Number. All references in this Agreement to the singular shall include the plural where applicable, and all references to the masculine, feminine or neuter shall be deemed interchangeably to refer to all genders and vice-versa. 12.3 Severability. Every part of this Agreement shall be considered severable. If any part of this Agreement for any reason shall be declared invalid, such invalidity shall not affect the validity of any remaining portion, which shall remain in full force and effect. In the event that any material provision of this Agreement shall be stricken or declared invalid the parties shall use their best efforts to negotiate a mutually satisfactory amendment to this Agreement. If any covenant herein which restricts a competitive act is deemed unenforceable by virtue of its scope in terms of geographical area, type of business activity prohibited and/or length of time, but could be enforceable by reducing any part or all thereof, Licensor and Licensee agree that the same shall be deemed amended to conform with applicable law and shall be enforced to the fullest extent permissible under applicable laws and public policies. 12.4 Conflict with Law. If any applicable law or rule of any jurisdiction requires a greater prior notice of the termination hereof than is required hereunder, or the taking of some other action not required hereunder, the prior notice and/or other action required by such law or rule shall be substituted for the comparable provisions hereof. 12.5 No Third Party Beneficiaries. This Agreement is entered into solely for the benefit of the parties hereto, and no third party is an intended beneficiary hereof. No third party is entitled to rely upon this Agreement or have any rights hereunder. 12.6 Headings. The headings of the sections and subsections of this Agreement are for convenience only and do not limit or affect the construction of the contents of such sections or subsections. 12.7 Counterparts. This Agreement may be executed in multiple copies, each of which shall be deemed an original. Time is of the essence in this Agreement. 12.8 Amendment. No interpretation, change, termination or waiver of any of the provisions hereof shall be binding upon either party unless in writing and duly executed by both parties. No modification, waiver, termination, rescission, discharge or cancellation of this Agreement shall affect the right of any party hereto to enforce any claim hereunder, whether or not liquidated, which occurred prior to the date of such modification, waiver, termination, rescission, discharge or cancellation. XIII. GOVERNING LAW; ENFORCEMENT OF REMEDIES 13.1 Choice of Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida, applicable to contracts made and wholly enforceable in such State. 13.2 Specific Performance. Notwithstanding anything to the contrary contained in this Agreement, if, due to a breach or threatened breach or default or threatened default (including without limitation, under the confidentiality provisions hereof), a party is suffering or is threatened with suffering irreparable harm for which monetary damages are inadequate, such party shall be entitled to such injunctive relief, specific performance, restraining orders, or other equitable relief, in addition to all other legal and equitable remedies available to such party. For purposes hereof, the parties hereby irrevocably submit in any such suit, action or proceeding to the jurisdiction of the United States District Court for the Southern District of Florida and waive any and all objections that such jurisdiction, situs and/or venue is inconvenient or otherwise improper. Each party further agrees that process may be served upon such party in any manner authorized under the laws of Florida, and waives any objections that such party may otherwise have to such process. 13.3 Attorneys' Fees. If either Licensor or Licensee institutes legal action against the other to secure or protect its rights under or to enforce the terms of this Agreement, in addition to any judgment entered in its favor whether as plaintiff or defendant, any and all costs incurred by the prevailing party, including, without limitation reasonable attorneys' fees, shall be paid by the non-prevailing party. All references to attorneys' fees (or similar phrases) herein shall include attorneys' and paralegals' fees and expenses in all administrative, regulatory, investigation, bankruptcy or appellate proceedings. 13.4 Rights Cumulative. The rights of the Licensor and Licensee hereunder are cumulative and no exercise or enforcement by either the Licensor or the Licensee of any right or remedy hereunder shall preclude the exercise or enforcement by the Licensor or the Licensee of any other right or remedy hereunder which the Licensor or the Licenses is entitled to enforce by law. 13.5 Waivers. No delay, waiver, omission, or forbearance on the part of the Licensor or the Licensee to exercise any right, option, duty or power arising out of any breach or default by the Licensor or the Licensee under any of the terms or provisions of this Agreement shall constitute a waiver by the Licensor or the Licensee of any ability to enforce any such right, option, duty or power as against the Licensor or the Licensee, or as to any subsequent breach or default by the Licensor or the Licensee. XIV. REPRESENTATIONS 14.1 Mutual Representations. Licensor and Licensee represent and warrant to the other as follows: (a) The execution, delivery and performance of this Agreement (a) has been duly authorized by all necessary or appropriate acts or proceedings; (b) does not violate or conflict with any provision of its organizational documents or corporate authority; and (c) does not violate or result in a breach or default (with the giving of notice, the passage of time, or otherwise) under any contract, understanding, judgment, order, writ, law or regulation that is applicable to the representing party or its assets; (b) This Agreement is the valid, legal and binding obligation and agreement of the representing party, and is enforceable against it in accordance with its terms; and (c) The representing party is duly organized and validly existing, in good standing in the jurisdiction of its organization. 14.2 Licensee Acknowledgments. Licensee acknowledges that: (a) Licensor does not represent or warrant that the use of the Marks pursuant to this Agreement will achieve any specific results; and that Licensor is not responsible or liable to Licensee for any failure of Licensee to exploit the license in accordance with Licensee's own expectations; (b) Except as provided for herein, no future licenses or offers of licenses have been promised to Licensee and any other license agreement shall only be in a writing executed by Licensor and Licensee; and (c) Except as provided for herein, nothing in this Agreement shall prohibit or restrain Licensor or its affiliates from selling any goods under the Marks, providing any services under the Marks, licensing any other party to use the Marks, or accepting and retaining all compensation therefor. [SIGNATURES FOLLOW ON NEXT PAGE] IN WITNESS WHEREOF, the parties hereto have executed, sealed and delivered this Agreement the date first written above. LICENSEE: By: ___________________________ Its:___________________________ LICENSOR: By: ___________________________ Its:___________________________ EXHIBIT A TO LICENCE AGREEMENT Branded Products Homogenized Milk (quart, pint (plastic), half gallon, gallon) Skim Milk (half gallon, gallon) Light Taste (half gallon, gallon) Buttermilk (half gallon) Chocolate Milk (half gallon) Half & Half (pint) Orange Juice (gallon) Orange Drink (half gallon, gallon) Fruit Punch (half gallon, gallon) Lemon Drink (half gallon) Grape Drink (half gallon) Ice Tea (half gallon) Sour Cream Cottage Cheese Jumbo Eggs Egg Nog (half gallon) Ice Cream - Half Gallon Vanilla Chocolate Cherry Vanilla Chocolate Almond Chocolate Chip Cookie Dough Cookies 'N Cream Dark Horse Heavenly Hash Neopolitan Pistachio Rocky Road Butter Pecan Light Vanilla Light Chocolate Light Chocolate Chip Light Butter Pecan EXHIBIT B TO LICENCE AGREEMENT Licensed Marks Farm Stores Farm Store Foods EX-99.6 10 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT AGREEMENT made effective as of the 3rd day of November, 1999, by and between United Petroleum Corporation, a Delaware corporation with its principal offices at 2620 Mineral Springs Road, Suite A, Knoxville, Tennessee 37917 (the "Company") and Joe P. Bared, an individual residing at 9025 Arvida Drive, Coral Gables, Florida 33156 (the "Executive"). PRELIMINARY STATEMENT The Company has agreed to employ the Executive and the Executive has agreed to accept such employment, all on the terms set forth herein. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable considerations, the receipt and adequacy of which are hereby conclusively acknowledged, the parties, intending to be legally bound, agree as follows: 1. Term. The Company hereby employs the Executive as the Chairman and Chief Executive Officer of the Company (as used herein, reference to the Company includes its subsidiaries), and the Executive agrees to serve the Company as such, upon the terms and conditions hereof. The term of employment hereunder (the "Term") shall commence on the date hereof and continue until November 2, 2002, unless the Term is otherwise terminated in accordance with the provisions hereof. 2. Duties. (a) Executive shall serve as the Company's Chairman and Chief Executive Officer, the principal executive officer of the Company, and shall be responsible for the Company's overall management, operations and growth. The Executive shall also discharge such duties and authority as are generally incident to such position, or in such other senior management position as the Company shall determine, provided that such other position shall be comparable in authority and responsibility to the position specified above. The Executive will report only to the Company's Board of Directors. The Executive will serve as a member of the Board of Directors of the Company during the entire Term of this Agreement, and shall hold such senior offices and/or such directorships in the Company and/or any subsidiaries or affiliates of the Company to which, from time to time, he may be elected or appointed. The Company shall not require the Executive, directly or indirectly, to violate any applicable laws, regulations or ethical standards. (b) The Executive agrees that he will devote substantially all of his time and attention to the affairs of the Company and use his best efforts to promote the business and interests of the Company and that he will not engage, directly or indirectly, in any other business or occupation during the term of employment, except as provided for in the Management Agreement and as set forth in this Section 2. The Executive shall be permitted to continue to conduct the activities identified on Exhibit A hereto. It is understood, however, that the foregoing will not prohibit the Executive from engaging in personal investment, charitable and civic activities for himself and his family which do not interfere with the performance of his duties hereunder. 3. Compensation. The Company will pay the Executive for all services to be rendered by the Executive hereunder (including, without limitation, all services to be rendered by him as an officer and/or director of the Company and its subsidiaries and affiliates): (a) A salary ("Base Annual Pay") of $ 378,000, in installments in accordance with customary payroll practices for senior executives of the Company. (b) Bonus compensation for each fiscal year of the Company, based on Executive's performance and the overall performance of the Company, either on an "ad hoc" basis or pursuant to a bonus plan or arrangement as may be established at the Company's discretion for senior executives of the Company. Notwithstanding any conflicting or inconsistent provisions of this Agreement, bonus compensation shall be payable in such amounts, if any, and at such times, if any, as determined by the Company's Board of Directors or the Compensation Committee thereof, in its sole and absolute discretion (and the Board of Directors shall implement an incentive compensation plan in which the Executive participates and promptly communicates the criteria therefor to the Executive). Nothing contained herein shall prohibit the Board of Directors of the Company, in its sole discretion, from increasing the compensation payable to the Executive pursuant to this Agreement. The Base Annual Pay shall be reviewed for potential increase on an annual basis, and in any event, the Executive will receive an annual raise of at least the greater of 6% or the previous year's increase in the Consumer Price Index. 4. Expenses. The Executive shall be entitled to reimbursement by the Company, in accordance with the Company's policies then applicable to senior executives at the Executive's level, against appropriate vouchers or other receipts for authorized travel, entertainment and other business expenses reasonably incurred by him in the performance of his duties hereunder. Without limiting the generality of the foregoing, the Company will furnish the Executive with corporate credit cards and a fuel card and pay or reimburse the Executive for the use of a pager and for two cellular telephones. The Company will also pay or reimburse the Executive for the expenses of leasing, insuring, maintaining and operating a car identical or similar to a BMW 740. 5. Executive Benefits. The Executive shall be entitled to participate in, and receive benefits under, any pension, profit sharing, insurance, hospitalization, medical, disability, stock purchase, stock option stock ownership, vacation or other employee benefit plan, program or policy of the Company which may be in effect at any time during the course of his employment by the Company and which shall be generally available to senior executives of the Company occupying positions of comparable status or responsibility, subject to the terms of such plans, programs or policies. The Executive shall also be entitled to three (3) weeks' paid vacation per year. Without limiting the generality of the foregoing, the Executive shall be entitled to receive Group Health and Dental Insurance coverages for himself and his family at no charge to Executive. 6. Withholding. All payments required to be made by the Company hereunder to the Executive shall be subject to the withholding of such amounts relating to taxes and other governmental assessments as the Company may reasonably determine it should withhold pursuant to any applicable law, rule or regulation. 7. Death; Permanent Disability. Upon the death of the Executive during the term of this Agreement, this Agreement shall terminate. If during the term of this Agreement the Executive fails because of illness or other incapacity to perform the services required to be performed by him hereunder for any consecutive period of more than 90 days, or for shorter periods aggregating more than 120 days in any consecutive twelve-month period (any such illness or incapacity being hereinafter referred to as "permanent disability"), then the Company, in its discretion, may at any time thereafter terminate this Agreement upon not less than 10 days' written notice thereof to the Executive, and this Agreement shall terminate and come to an end upon the date set forth in said notice as if said date were the termination date of this Agreement; provided, however, that no such termination shall be effective if prior to the date when such notice is given, the Executive's illness or incapacity shall have terminated and he shall be physically and mentally able to perform the services required hereunder and shall have taken up and be performing such duties. If the Executive's employment shall be terminated by reason of his death or permanent disability, the Executive or his estate, as the case may be, shall be entitled to receive (i) any earned and unpaid salary accrued through the date of termination, (ii) a pro rata portion of any annual bonus which the Executive would otherwise have been entitled to receive pursuant to any bonus plan or arrangement for senior executives of the Company (such pro rata portion to be payable at the time such annual bonus would otherwise have been payable to the Executive) and (iii) subject to the terms thereof, any benefits which may be due to the Executive on the date of termination under the provisions of any employee benefit plan, program or policy. 8. Termination. (a) For Cause. The Company may at any time during the term of this Agreement, by written notice, terminate the employment of the Executive for cause, the cause to be specified in the notice. For purposes of this Agreement, "cause" shall mean (i) any gross negligence or willful misconduct of the Executive in connection with the performance of any of his duties hereunder, including without limitation misappropriation of funds or property of the Company, or any willful and intentional act having the effect of injuring the reputation, business or business relationships of the Company; (ii) breach of any covenants contained in this Agreement that remains uncured after notice and a reasonable opportunity to cure the breach; (iii) conviction of any felony, provided, however, that (1) if the Executive is defending against the charge in good faith and by appropriate proceedings, then the Company shall suspend the Executive from office without compensation of any type, pending the resolution of the matter; and (2) unless the Executive is exonerated from the charges, he shall be terminated for cause effective upon the date he was indicted or held for trial. Termination for cause shall be effective upon the giving of such notice and the Executive shall be entitled to receive (i) any earned and unpaid salary accrued through the date of termination and (ii) subject to the terms thereof, any benefits which may be due to the Executive on such date under the provisions of any employee benefit plan, program or policy. A determination that cause exists for termination of employment can only be made by the Board of Directors at a meeting called for that purpose, and the Executive shall receive notice of, and an opportunity to be heard by the Board on the issues, at such meeting. (b) Without Cause. The Company may terminate the Term at any time, upon at least 30 days' notice to Executive, without Cause, and the Company may also decline to renew the term of this Agreement at its scheduled expiration, provided that in any such event that the Company shall pay the Executive continuation of Base Annual Pay (as then in effect) for 12 months following such termination as severance, in addition to (i) any additional earned and unpaid compensation accrued hereunder through the date of termination, (ii) subject to the terms thereof, any benefits which may be due to the Executive on such date under the provisions of any employee benefit plan, program or policy; (iii) continuation of health and dental coverages for 12 months following such termination, (iv) a pro rata portion of any annual bonus with respect to the fiscal year in which such termination occurs, and (v) acceleration of the vesting of all stock options or similar rights then held by the Executive. In the event of a Change in Control, as defined below, the Executive may, within 60 days of the effective date of such Change in Control, terminate the term of this Agreement, with the effects as provided herein for a termination by the Company without Cause. As used herein, a "Change in Control" means the occurrence of a change in the beneficial ownership to voting securities of the Company representing 50% or more of the combined voting power of the Company's securities (other than by reason of the sales of any such securities that are beneficially owned by Executive or any member of his immediate family), or if a person not a shareholder of the Company on the date hereof acquires the power to elect a majority of the Company's Board of Directors. (c) Termination by Executive. The Executive may terminate the Term at any time, upon at least 60 days' notice to the Company, and such termination shall have the same effect with respect to severance pay as a termination for Cause as set forth above. The Executive may also terminate the Term for "Good Reason", which shall mean (i) the Company's requiring the Executive to relocate beyond a 60 mile radius from Miami-Dade County, Florida (ii) the Company's material breach of this Agreement, or (iii) the Company changing the Executive's responsibilities so that he is no longer the Company's principal executive officer, or must report to anyone other than the Board of Directors of the Company. A termination by Executive for Good Reason shall have the same effects hereunder as a termination by the Company without Cause, as set forth above. 9. Intentionally Omitted. 10. Non-Competition (a) The Executive acknowledges and recognizes that the highly competitive nature of the Company's business and that the goodwill and patronage of the Company's customers constitute a substantial asset of the Company, having been acquired through considerable time, effort and money. Accordingly, the Executive agrees that during his employment with the Company and for a period until the last to occur of 2 years after Executive leaves the Company's employ for any reason or 5 years from the date of this Agreement, he shall not, without the written consent of the Company, directly or indirectly, either individually or as an employee, agent, partner, shareholder, consultant, option holder, lender of money, guarantor or in any other capacity, participate in, engage in or have a financial interest or management position or other interest in any business, firm, company or other entity that operates walk-in convenience stores, nor will he solicit any other person to engage in any of the foregoing activities, in each case within the Metropolitan Statistical Areas ("MSAs") in which the Company has (or has pending plans to open or acquire within 6 months of the date of termination) active operations generating at least $1,000,000 a year in annual revenues as of the termination of employment hereunder. Participation in the management of FSG or any business operation other than in connection with the management of a business operation which operates walk-in convenience stores shall not be deemed to be a breach of this Section 10(a). The foregoing provisions of this Section 10(a) shall not prohibit the ownership by the Executive (as the result of open market purchase) of 5% or less of any class of capital stock of a Company which is regularly traded on a national securities exchange or over-the-counter on the NASDAQ System. (b) If any of the covenants contained in this Section 10 or any part thereof, is held by a court of competent jurisdiction to be unenforceable because of the duration of such provision, the activity limited by or the subject of such provision and/or the area covered thereby, then the court making such determination shall construe such restriction so as to thereafter be limited or reduced to be enforceable to the greatest extent permissible by applicable law. 11. Confidential Information, Etc. The Executive agrees that he shall not, during or after the termination of this Agreement, divulge, furnish or make accessible to any person, firm, company or other business entity, any information, trade secrets, technical data or know-how relating to the business, business practices, methods, products, processes, equipment, clients' prices, lists of customers of the Company, terms of marketing arrangements or other confidential or secret aspect of the business of the Company and/or any subsidiary or affiliate, except as may be required in good faith in the course of his employment with the Company or by law, without the prior written consent of the Company, unless such information shall become public knowledge or becomes available from independent sources, in each case other than by reason of Executive's breach of the provisions hereof. 12. Acceptance by Parties. Each of the Executive and the Company accepts all of the terms and provisions of this Agreement and agrees to perform all of the covenants on his or its part to be performed hereunder. 13. Equitable Remedies. The Executive acknowledges that he has been employed for his unique talents and that his leaving the employ of the Company would seriously hamper the business of the Company and that the Company will suffer irreparable damage if any provisions of Sections 10 and 11 hereof are not performed strictly in accordance with their terms or are otherwise breached. The Executive hereby expressly agrees that the Company shall be entitled as a matter of right to injunctive or other equitable relief, in addition to all other remedies permitted by law, to prevent a breach or violation by the Executive and to secure enforcement of the provisions of Sections 10 and 11 hereof. Resort to such equitable relief, however, shall not constitute a waiver or any other rights or remedies which the Company may have. 14. Entire Agreement. This Agreement memorializes, encompasses and supersedes the parties understandings and agreement relative to the Executive's acceptance of employment hereunder, and constitutes the entire agreement between the parties hereto and there are no other terms other than those contained herein. No variation or modification hereof shall be deemed valid unless in writing and signed by the parties hereto and no discharge of the terms hereof shall be deemed valid unless by full performance of the parties hereto or by a writing signed by the parties hereto. No waiver by the Company or any breach by the Executive of any provision or condition of this Agreement by him to be performed shall be deemed a waiver of a breach of a similar or dissimilar provision or condition at the same time or any prior or subsequent time. 15. Severability. In case any provision in this Agreement shall be declared invalid, illegal or unenforceable by any court of competent jurisdiction, the validity and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 16. Notices. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be deemed to have been given at the time when mailed in the United States enclosed in a registered or certified post-paid envelope, return receipt requested, and addressed to the addresses of the respective parties stated below or to such changed addresses as such parties may fix by notice: To the Company: United Petroleum Corporation 2620 Mineral Springs Road Suite A Knoxville, Tennessee 37917 To the Executive: provided, however, that any notice of change of address shall be effective only upon receipt. 17. Successors and Assigns. This Agreement is personal in its nature and neither of the parties hereto shall, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder (except for an assignment or transfer by the Company to a successor as contemplated by the following proviso); provided, however, that the provisions hereof (including but not limited to the non-compete and confidentiality provisions hereof) shall inure to the benefit of, and be binding upon, any successor of the Company, whether by merger, consolidation, transfer of all or substantially all of the assets of the Company, or otherwise, and upon the Executive, his heirs, executors, administrators and legal representatives. 18. Governing Law. This Agreement and its validity, construction and performance shall be governed in all respects by the internal laws of the State of Florida, without giving effect to any principles of conflict of laws. 19. Headings. The headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of this Agreement. IN WITNESS WHEREOF, the parties hereto have hereunder set their hands and seals to the Employment Agreement the day and year first above written. UNITED PETROLEUM CORPORATION By: ________________________ Name: ________________________ Title: ________________________ _______________________________ Joe P. Bared EX-99.7 11 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT AGREEMENT made effective as of the 3rd day of November, 1999, by and between United Petroleum Corporation, a Delaware corporation with its principal offices at 2620 Mineral Springs Road, Suite A, Knoxville, Tennessee 37917 (the "Company") and Carlos Bared, an individual residing at 10001 S.W. 58th Avenue, Miami, Florida 33156 (the "Executive"). PRELIMINARY STATEMENT The Company has agreed to employ the Executive and the Executive has agreed to accept such employment, all on the terms set forth herein. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable considerations, the receipt and adequacy of which are hereby conclusively acknowledged, the parties, intending to be legally bound, agree as follows: 1. Term. The Company hereby employs the Executive as the Senior Vice President, Chief Financial Officer of the Company (as used herein, reference to the Company includes its subsidiaries), and the Executive agrees to serve the Company as such, upon the terms and conditions hereof. The term of employment hereunder (the "Term") shall commence on the date hereof and continue until November 2, 2002, unless the Term is otherwise terminated in accordance with the provisions hereof. 2. Duties. (a) Executive shall serve as the Company's Chief Financial Officer, and shall be responsible for the Company's financial, treasury and accounting matters. The Executive shall also discharge such duties and authority as are generally incident to such position, or in such other senior management position as the Company shall determine, provided that such other position shall be comparable in authority and responsibility to the position specified above. The Executive will report to the Company's Chief Executive Officer and to the Company's Board of Directors. The Executive shall serve as a member of the Company's Board of Directors during the entire Term of this Agreement, and shall hold such senior offices and/or such directorships in the Company and/or any subsidiaries or affiliates of the Company to which, from time to time, he may be elected or appointed. The Company shall not require the Executive, directly or indirectly, to violate any applicable laws, regulations or ethical standards. (b) The Executive agrees that he will devote substantially all of business his time and attention to the affairs of the Company and use his best efforts to promote the business and interests of the Company and that he will not engage, directly or indirectly, in any other business or occupation during the term of employment, except as provided for in the Management Agreement and as set forth in this Section 2. The Executive shall be permitted to continue to conduct the activities identified on Exhibit A hereto. It is understood, however, that the foregoing will not prohibit the Executive from engaging in personal investment, charitable and civic activities for himself and his family which do not interfere with the performance of his duties hereunder. 3. Compensation. The Company will pay the Executive for all services to be rendered by the Executive hereunder (including, without limitation, all services to be rendered by him as an officer and/or director of the Company and its subsidiaries and affiliates): (a) A salary ("Base Annual Pay") of $ 150,000 in installments in accordance with customary payroll practices for senior executives of the Company. (b) Bonus compensation for each fiscal year of the Company, based on Executive's performance and the overall performance of the Company, either on an "ad hoc" basis or pursuant to a bonus plan or arrangement as may be established at the Company's discretion for senior executives of the Company. Notwithstanding any conflicting or inconsistent provisions of this Agreement, bonus compensation shall be payable in such amounts, if any, and at such times, if any, as determined by the Company's Board of Directors or the Compensation Committee thereof, in its sole and absolute discretion (and the Board of Directors shall implement an incentive compensation plan in which the Executive participates and promptly communicates the criteria therefor to the Executive). Nothing contained herein shall prohibit the Board of Directors of the Company, in its sole discretion, from increasing the compensation payable to the Executive pursuant to this Agreement. The Base Annual Pay shall be reviewed for potential increase on an annual basis, and in any event, the Executive will receive an annual raise of at least the greater of 6% or the previous year's increase in the Consumer Price Index. 4. Expenses. The Executive shall be entitled to reimbursement by the Company, in accordance with the Company's policies then applicable to senior executives at the Executive's level, against appropriate vouchers or other receipts for authorized travel, entertainment and other business expenses reasonably incurred by him in the performance of his duties hereunder. Without limiting the generality of the foregoing, the Company will furnish the Executive with corporate credit cards and a fuel card and pay or reimburse the Executive for the use of a pager and for two cellular telephones. The Company will also pay or reimburse the Executive up to $750 per month for the expenses of leasing, maintaining and operating a car and the Company will be responsible for providing and paying the insurance for such car. 5. Executive Benefits. The Executive shall be entitled to participate in, and receive benefits under, any pension, profit sharing, insurance, hospitalization, medical, disability, stock purchase, stock option stock ownership, vacation or other employee benefit plan, program or policy of the Company which may be in effect at any time during the course of his employment by the Company and which shall be generally available to senior executives of the Company occupying positions of comparable status or responsibility, subject to the terms of such plans, programs or policies. The Executive shall also be entitled to three (3) weeks' paid vacation per year. Without limiting the generality of the foregoing, the Executive shall be entitled to receive Group Health and Dental Insurance coverages for himself and his family at no charge to Executive. 6. Withholding. All payments required to be made by the Company hereunder to the Executive shall be subject to the withholding of such amounts relating to taxes and other governmental assessments as the Company may reasonably determine it should withhold pursuant to any applicable law, rule or regulation. 7. Death; Permanent Disability. Upon the death of the Executive during the term of this Agreement, this Agreement shall terminate. If during the term of this Agreement the Executive fails because of illness or other incapacity to perform the services required to be performed by him hereunder for any consecutive period of more than 90 days, or for shorter periods aggregating more than 120 days in any consecutive twelve-month period (any such illness or incapacity being hereinafter referred to as "permanent disability"), then the Company, in its discretion, may at any time thereafter terminate this Agreement upon not less than 10 days' written notice thereof to the Executive, and this Agreement shall terminate and come to an end upon the date set forth in said notice as if said date were the termination date of this Agreement; provided, however, that no such termination shall be effective if prior to the date when such notice is given, the Executive's illness or incapacity shall have terminated and he shall be physically and mentally able to perform the services required hereunder and shall have taken up and be performing such duties. If the Executive's employment shall be terminated by reason of his death or permanent disability, the Executive or his estate, as the case may be, shall be entitled to receive (i) any earned and unpaid salary accrued through the date of termination, (ii) a pro rata portion of any annual bonus which the Executive would otherwise have been entitled to receive pursuant to any bonus plan or arrangement for senior executives of the Company (such pro rata portion to be payable at the time such annual bonus would otherwise have been payable to the Executive) and (iii) subject to the terms thereof, any benefits which may be due to the Executive on the date of termination under the provisions of any employee benefit plan, program or policy. 8. Termination. (a) For Cause. The Company may at any time during the term of this Agreement, by written notice, terminate the employment of the Executive for cause, the cause to be specified in the notice. For purposes of this Agreement, "cause" shall mean (i) any gross negligence or willful misconduct of the Executive in connection with the performance of any of his duties hereunder, including without limitation misappropriation of funds or property of the Company, or any willful and intentional act having the effect of injuring the reputation, business or business relationships of the Company; (ii)breach of any covenants contained in this Agreement that remains uncured after notice and a reasonable opportunity to cure the breach; (iii) conviction of any felony, provided, however, that (1) if the Executive is defending against the charge in good faith and by appropriate proceedings, then the Company shall suspend the Executive from office without compensation of any type, pending the resolution of the matter; and (2) unless the Executive is exonerated from the charges, he shall be terminated for cause effective upon the date he was indicted or held for trial. Termination for cause shall be effective upon the giving of such notice and the Executive shall be entitled to receive (i) any earned and unpaid salary accrued through the date of termination and (ii) subject to the terms thereof, any benefits which may be due to the Executive on such date under the provisions of any employee benefit plan, program or policy. A determination that cause exists for termination of employment can only be made by the Board of Directors at a meeting called for that purpose, and the Executive shall receive notice of, and an opportunity to be heard by the Board on the issues, at such meeting. (b) Without Cause. The Company may terminate the Term at any time, upon at least 30 days' notice to Executive, without Cause, and the Company may also decline to renew the term of this Agreement at its scheduled expiration, provided that in any such event that the Company shall pay the Executive continuation of Base Annual Pay (as then in effect) for 24 months following such termination as severance, in addition to (i) any additional earned and unpaid compensation accrued hereunder through the date of termination, (ii) subject to the terms thereof, any benefits which may be due to the Executive on such date under the provisions of any employee benefit plan, program or policy; (iii) continuation of health and dental coverages for 24 months following such termination, (iv) a pro rata portion of any annual bonus with respect to the fiscal year in which such termination occurs, and (v) acceleration of the vesting of all stock options or similar rights then held by the Executive. In the event of a Change in Control, as defined below, the Executive may, within 60 days of the effective date of such Change in Control, terminate the term of this Agreement, with the effects as provided herein for a termination by the Company without Cause. As used herein, a "Change in Control" means the occurrence of a change in the beneficial ownership to voting securities of the Company representing 50% or more of the combined voting power of the Company's securities (other than by reason of the sales of any such securities that are beneficially owned by Executive or any member of his immediate family), or if a person not a shareholder of the Company on the date hereof acquires the power to elect a majority of the Company's Board of Directors. (c) Termination by Executive. The Executive may terminate the Term at any time, upon at least 60 days' notice to the Company, and such termination shall have the same effect with respect to severance pay as a termination for Cause as set forth above. The Executive may also terminate the Term for "Good Reason", which shall mean (i) the Company's requiring the Executive to relocate beyond a 60 mile radius from Miami-Dade County, Florida (ii) the Company's material breach of this Agreement, or (iii) the Company changing Executive's responsibilities to be other than Chief Financial Officer or requiring him to report other than as set forth in this Agreement. A termination by Executive for Good Reason shall have the same effects hereunder as a termination by the Company without Cause, as set forth above. 9. Intentionally Omitted. 10. Non-Competition (a) The Executive acknowledges and recognizes that the highly competitive nature of the Company's business and that the goodwill and patronage of the Company's customers constitute a substantial asset of the Company, having been acquired through considerable time, effort and money. Accordingly, the Executive agrees that during his employment with the Company and for a period until 2 years after Executive leaves the Company's employ for any reason, he shall not, without the written consent of the Company, directly or indirectly, either individually or as an employee, agent, partner, shareholder, consultant, option holder, lender of money, guarantor or in any other capacity, participate in, engage in or have a financial interest or management position or other interest in any business, firm, company or other entity that operates walk-in convenience stores, nor will he solicit any other person to engage in any of the foregoing activities, in each case within the Metropolitan Statistical Areas ("MSAs") in which the Company has (or has pending plans to open or acquire within 6 months of the date of termination) active operations generating at least $1,000,000 a year in annual revenues as of the termination of employment hereunder. Participation in the management of FSG or any business operation other than in connection with the management of a business operation which operates walk-in convenience stores shall not be deemed to be a breach of this Section 10(a). The foregoing provisions of this Section 10(a) shall not prohibit the ownership by the Executive (as the result of open market purchase) of 5% or less of any class of capital stock of a Company which is regularly traded on a national securities exchange or over-the-counter on the NASDAQ System. (b) If any of the covenants contained in this Section 10 or any part thereof, is held by a court of competent jurisdiction to be unenforceable because of the duration of such provision, the activity limited by or the subject of such provision and/or the area covered thereby, then the court making such determination shall construe such restriction so as to thereafter be limited or reduced to be enforceable to the greatest extent permissible by applicable law. 11. Confidential Information, Etc. The Executive agrees that he shall not, during or after the termination of this Agreement, divulge, furnish or make accessible to any person, firm, company or other business entity, any information, trade secrets, technical data or know-how relating to the business, business practices, methods, products, processes, equipment, clients' prices, lists of customers of the Company, terms of marketing arrangements or other confidential or secret aspect of the business of the Company and/or any subsidiary or affiliate, except as may be required in good faith in the course of his employment with the Company or by law, without the prior written consent of the Company, unless such information shall become public knowledge or becomes available from independent sources, in each case other than by reason of Executive's breach of the provisions hereof. 12. Acceptance by Parties. Each of the Executive and the Company accepts all of the terms and provisions of this Agreement and agrees to perform all of the covenants on his or its part to be performed hereunder. 13. Equitable Remedies. The Executive acknowledges that he has been employed for his unique talents and that his leaving the employ of the Company would seriously hamper the business of the Company and that the Company will suffer irreparable damage if any provisions of Sections 10 and 11 hereof are not performed strictly in accordance with their terms or are otherwise breached. The Executive hereby expressly agrees that the Company shall be entitled as a matter of right to injunctive or other equitable relief, in addition to all other remedies permitted by law, to prevent a breach or violation by the Executive and to secure enforcement of the provisions of Sections 10 and 11 hereof. Resort to such equitable relief, however, shall not constitute a waiver or any other rights or remedies which the Company may have. 14. Entire Agreement. This Agreement memorializes, encompasses and supersedes the parties understandings and agreement relative to the Executive's acceptance of employment hereunder, and constitutes the entire agreement between the parties hereto and there are no other terms other than those contained herein. No variation or modification hereof shall be deemed valid unless in writing and signed by the parties hereto and no discharge of the terms hereof shall be deemed valid unless by full performance of the parties hereto or by a writing signed by the parties hereto. No waiver by the Company or any breach by the Executive of any provision or condition of this Agreement by him to be performed shall be deemed a waiver of a breach of a similar or dissimilar provision or condition at the same time or any prior or subsequent time. 15. Severability. In case any provision in this Agreement shall be declared invalid, illegal or unenforceable by any court of competent jurisdiction, the validity and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 16. Notices. All notices, requests, demands and other communications provided for by this Agreement shall be in writing and shall be deemed to have been given at the time when mailed in the United States enclosed in a registered or certified post-paid envelope, return receipt requested, and addressed to the addresses of the respective parties stated below or to such changed addresses as such parties may fix by notice: If to the Company: United Petroleum Corporation 2620 Mineral Springs Road Suite A Knoxville, Tennessee 37917 If to the Executive provided, however, that any notice of change of address shall be effective only upon receipt. 17. Successors and Assigns. This Agreement is personal in its nature and neither of the parties hereto shall, without the consent of the other, assign or transfer this Agreement or any rights or obligations hereunder (except for an assignment or transfer by the Company to a successor as contemplated by the following proviso); provided, however, that the provisions hereof (including but not limited to the non-compete and confidentiality provisions hereof) shall inure to the benefit of, and be binding upon, any successor of the Company, whether by merger, consolidation, transfer of all or substantially all of the assets of the Company, or otherwise, and upon the Executive, his heirs, executors, administrators and legal representatives. 18. Governing Law. This Agreement and its validity, construction and performance shall be governed in all respects by the internal laws of the State of Florida, without giving effect to any principles of conflict of laws. 19. Headings. The headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of this Agreement. IN WITNESS WHEREOF, the parties hereto have hereunder set their hands and seals to the Employment Agreement the day and year first above written. UNITED PETROLEUM CORPORATION By: ________________________ Name: ________________________ Title: ________________________ _______________________________ Carlos Bared EX-99.8 12 STOCKHOLDERS AGREEMENT STOCKHOLDERS AGREEMENT This STOCKHOLDERS AGREEMENT is made as of November 3, 1999, by and among United Petroleum Corporation, a Delaware corporation (the "Corporation"), Infinity Investors Limited, a Nevis, West Indies corporation, Fairway Capital Limited, a Nevis, West Indies corporation, Seacrest Capital Limited, a Nevis, West Indies corporation (collectively, the "Investor") and Joe Bared and Miriam Bared (collectively, "Bared"). The Investor and Bared are sometimes collectively referred to as the "Stockholders" and individually as a "Stockholder.") Capitalized terms used herein are defined in Section 12 hereof. The Corporation and the Stockholders desire to enter into this Agreement for the purposes, among others, of (i) assuring continuity in the management and ownership of the Corporation, (ii) limiting the manner and terms by which the Stockholders' stock may be transferred, and (iii) providing the Stockholders with certain registration rights. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows: 1. Restrictions on Transfer of Shareholder Shares. No Stockholder shall sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of (collectively, a "Transfer") any interest in any Stockholder Shares for a period of two (2) years from the date hereof (the "Termination Date"). 2. Stockholder Preemptive Rights. Prior to the Termination Date, and for so long as any Stockholder owns any Stockholder Shares, each time the Corporation proposes to sell shares of its capital stock or options, warrants or other rights to buy capital stock for cash (except any capital stock issued pursuant to a stock option or warrant plan of the Corporation which does not exceed ten percent (10%) of the issued and outstanding capital stock of the Corporation at the time the warrant or option plan is adopted by the Corporation), the Corporation shall also make an offering of such shares to the Stockholders in accordance with the following provisions: (a) The Corporation shall deliver a notice to each Stockholder stating the number of shares to be offered and the price and the terms on which it proposes to offer such shares. Such notice shall be sent to the addresses set forth in the records of the Corporation. (b) Within 15 days after delivery of the notice, each Stockholder may elect to purchase, at the price and on the terms specified in the notice, up to its Pro Rata Portion of such shares by delivering written notice of such election to the Corporation within such 15 calendar days. (c) Any shares referred to in the notice that are not elected to be purchased as provided in subsection (b) above may, during the 180-day period thereafter, be offered by the Corporation to any other person or persons at a price not less than, and on terms no more favorable to the offeree than, those specified in the notice. 3. Board of Directors. (a) From and after the date hereof and until the Termination Date, each Stockholder shall vote all of his Stockholder Shares and any other voting securities of the Corporation over which such Stockholder has voting control and shall take all other necessary or desirable actions within his control (whether in his capacity as a stockholder, director, member of a Board of Directors committee or officer of the Corporation or otherwise, and including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Corporation shall take all necessary and desirable actions within its control (including, without limitation, calling special board and stockholder meetings), so that: (i) the number of directors on the Board shall be five (5) directors; (ii) the following persons shall be elected to the Board: (A) Two (2) representatives designated by the Investor (the "Investor Directors"); (B) Two (2) representatives designated by Bared (the "Bared Directors"); and (C) L. Grant Peeples (the "Independent Director"). (iii) the removal from the Board (with or without cause) of any representative designated hereunder by the Investor or Bared shall be at only the Investor's, or Bared's written request, respectively; (iv) in the event that any representative designated hereunder by the Investor or Bared for any reason ceases to serve as a member of the Board during his term of office, the resulting vacancy on the Board shall be filed by a representative designated by the Investor or Bared, respectively, as provided hereunder; provided that any representative removed for cause shall not be designated again as a member of the Board; and (v) Expansion of the Board and election of its additional members will initially be subject to the mutual agreement of the Investor Directors and Bared Directors and whenever they do not agree on such a matter, may be submitted to the vote of all stockholders of the Corporation at a duly called meeting. (vi) Each member of the Board shall abstain acting in the event of a direct or indirect financial interest (excluding matters that relate to Farm Stores Grocery, Inc., so long as UPET has a financial interest in it). (b) The Board shall not appoint any committee with the authority to act on behalf of the Board without the consent of the Investor Directors and the Bared Investors. (c) If any party fails to designate a representative to fill a directorship pursuant to the terms of this Section 3, the election of a person to such directorship shall be accomplished in accordance with the Corporation's bylaws and applicable law. 4. Piggyback Registrations. (a) Right to Piggyback. Subject to Section 1 hereof, whenever the Corporation proposes to register any of its Common Stock under the Securities Act (other than the initial public offering, pursuant to a transaction described under Rule 145 of the Securities Act, a transaction registering securities convertible into Common Stock or pursuant to Form S-8 or its successor forms) and the registration form to be used may be used for the registration of the Stockholder Shares of the Stockholders (a "Piggyback Registration"), the Corporation shall give prompt written notice to the Stockholders of its intention to effect such a registration and will include in such registration the Stockholder Shares of the Stockholders with respect to which the Corporation has received written requests for inclusion therein within 15 days after the receipt of the Corporation's notice. (b) Right to Shelf Registration. Subject to Section 11 hereof, in addition to the Piggyback Registration provided pursuant to paragraph 4(a), the Stockholders shall be entitled to request an unlimited number of Form S-3 resale registrations (a "Short Form Registration") in which the Corporation will pay all Registration Expenses; provided that the Corporation and the securities meet the eligibility requirements for such form and provided further that the Short Form Registration shall only be effective for 180 days and shall be subject to no sale periods upon notice to the Stockholders participating therein if in the reasonable judgment of the Corporation such Short Form Registration conflicts with the Corporation's business plans or another existing or proposed registration statement. The Corporation shall use its best efforts to make Short-Form Registrations available for the resale of Stockholder Shares. (c) Expenses. The Registration Expenses of the Stockholders shall be paid by the Corporation in all Piggyback Registrations and Short-Form Registrations. (d) Priority on Primary Registrations. If a Piggyback Registration is an underwritten primary registration on behalf of the Corporation, and the managing underwriters advise the Corporation in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Corporation shall include in such registration (i) first, the securities the Corporation proposes to sell, (ii) second, the Stockholder Shares of the Investor and Bared requested to be included in such registration (on a pro rata basis), together with any securities underlying any warrants issued to the lenders or underwriters of the Corporation on a pro rata basis, (iii) third, other securities requested by other persons to be included in such registration. (e) Priority on Secondary Registrations. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Corporation's securities, and the managing underwriters advise the Corporation in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Corporation shall include in such registration (i) first, the securities requested to be included therein by the Investor and Bared on a pro rata basis, together with any securities underlying any warrants issued to the lenders or underwriters of the Corporation on a pro rata basis, (ii) second, other securities requested by other persons to be included in such registration. 5. Registration Procedures. Whenever the Stockholders have requested that any securities be registered pursuant to this Agreement, the Corporation shall use its best efforts to effect the registration and the sale of such securities in accordance with the intended method of disposition thereof, and pursuant thereto the Corporation shall as expeditiously as possible: (a) prepare and file with the Securities and Exchange Commission a registration statement with respect to such securities and use its best efforts to cause such registration statement to become effective (provided that before filing a registration statement or prospectus or any amendments or supplements thereto, the Corporation shall furnish to the counsel selected by the Stockholders covered by such registration statement copies of all such documents proposed to be filed, which documents will be subject to the review and comment of such counsel); (b) prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than 180 days and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; (c) furnish to each seller of securities such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the securities owned by such seller; (d) use its best efforts to register or qualify such securities under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the securities owned by such seller (provided that the Corporation shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to general service of process in any such jurisdiction); (e) notify each seller of Stockholder Shares, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Corporation shall prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Stockholder Shares, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; (f) cause all such securities to be listed on each securities exchange on which similar securities issued by the Corporation are then listed and, if not so listed, to be listed on the NASD automated quotation system and, if listed on the NASD automated quotation system, use its best efforts to secure designation of all such securities covered by such registration statement as a Nasdaq national market security within the meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing that, to secure Nasdaq authorization for such securities and, without limiting the generality of the foregoing, to arrange for at least two market makers to register as such with respect to such securities with the NASD; (g) provide a transfer agent and registrar for all such securities not later than the effective date of such registration statement; (h) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the Selling Stockholder or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such securities (including, without limitation, effecting a stock split or a combination of shares); (i) make available for inspection by any seller of securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Corporation, and cause the Corporation's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; (j) otherwise use its best efforts to comply with all applicable rules and regulations of the Securities and Exchange Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Corporation's first full calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (k) permit the Selling Stockholder which, in its sole and exclusive judgment, might be deemed to be an underwriter or a controlling person of the Corporation, to participate in the preparation of such registration or comparable statement and to require the insertion therein of material, furnished to the Corporation in writing, which in the reasonable judgment of the Selling Stockholder and its counsel should be included; (l) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any Common Stock included in such registration statement for sale in any jurisdiction, the Corporation shall use its best efforts promptly to obtain the withdrawal of such order; and (m) in the event of an underwritten offering obtain a cold comfort letter from the Corporation's independent public accountants and an opinion from the Corporation's counsel in customary form and covering such matters of the type customarily covered by cold comfort letters or opinions, respectively as any underwriter may reasonably request. 6. Registration Expenses. (a) All expenses incident to the Corporation's performance of or compliance with this Agreement, including without limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for the Corporation and all independent certified public accountants, underwriters (excluding discounts and commissions and selling expenses (including brokers' fees and commissions)) and other persons retained by the Corporation (all such expenses being herein called "Registration Expenses"), shall be borne by the Corporation as provided in this Agreement, except that the Corporation shall, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Corporation are then listed or on the NASD automated quotation system. (b) In connection with each Piggyback Registration or Short Form Registration, the Corporation shall reimburse the Stockholders for the reasonable fees and disbursements to the extent the Corporation's counsel has not performed the work. (c) To the extent Registration Expenses are not required to be paid by the Corporation, each holder of securities included in any registration hereunder shall pay those Registration Expenses allocable to the registration of such holder's securities so included, and any Registration Expenses not so allocable shall be borne by all sellers of securities included in such registration in proportion to the aggregate selling price of the securities to be so registered. 7. Indemnification. (a) The Corporation agrees to indemnify, to the extent permitted by law, the Selling Stockholder, its officers and directors and each person who controls the Selling Stockholder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Corporation by the Selling Stockholder expressly for use therein or by the Selling Stockholder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Corporation has furnished the Selling Stockholder with a sufficient number of copies of the same. In connection with an underwritten offering, the Corporation shall indemnify such underwriters, their officers and directors and each person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the Selling Stockholder. (b) In connection with any registration statement in which the Selling Stockholder is participating, the Selling Stockholder shall furnish to the Corporation in writing such powers of attorney, custody agreements and letters of direction and other information and affidavits as the Corporation reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, shall only have to indemnify the Corporation, its directors and officers and each person who controls the Corporation (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by the Selling Stockholder to the Corporation for specific use in such registration statement, prospectus or amendment or supplement thereto and which remained in the final prospectus delivered to the purchaser of such securities; provided that the obligation to indemnify shall be limited to the net amount of proceeds received by the Selling Stockholder from the sale of Stockholder Shares pursuant to such registration statement. (c) Any person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. (d) The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling person of such indemnified party and shall survive the transfer of securities. The Corporation also agrees to make such provisions, as are reasonably requested by any indemnified party, for contribution to such party in the event the Corporation's indemnification is unavailable for any reason. (e) If the indemnification provided for in this Section 7 is unavailable or insufficient to hold harmless an indemnified party, then each indemnifying party, to the extent that it would have been or was obligated to provide indemnification under this Section 7, shall contribute to the amount paid or payable by such indemnified party as a result of the claims. losses, changes or liabilities referred to in this Section 7 in such proportion as is appropriate to reflect the relative benefits received by the Stockholders on the one hand and the Corporation on the other. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law then each indemnifying party shall contribute to such amount paid or payable by such indemnified party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Stockholders on the one hand and the Corporation on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Stockholders on the one hand or the Corporation on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 8. Participation in Underwritten Registrations. No person may participate in any registration hereunder which is underwritten unless such person (i) agrees to sell such person's securities on the basis provided in any underwriting arrangements approved by the person or persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements; provided that no holder of securities included in any underwritten registration shall be required to make any representations or warranties to the Corporation or the underwriters other than representations and warranties regarding such holder and such holder's intended method of distribution. 9. Legend. Each certificate evidencing Stockholder Shares and each certificate issued in exchange for or upon the Transfer of any Stockholder Shares shall be stamped or otherwise imprinted with legends in substantially the following form (in addition to any other applicable legends). "The shares of New UPC Common Stock represented by this certificate are issued pursuant to the Plan of Reorganization for United Petroleum Corporation, as confirmed by the United States Bankruptcy Court for the District of Delaware. The Corporation's Certificate of Incorporation contains restrictions prohibiting the sale, transfer, disposition, purchase or acquisition of any shares of Common Stock without the prior written authorization of the Corporation's Board of Directors (or its designee) by or to any person (a) who beneficially owns, directly or through attribution (as determined under Section 382 of the Internal Revenue Code of 1986 as amended from time to time (the "Code")), 5% or more of the total fair market value of the then issued and outstanding shares of Common Stock of the corporation, or (b) who, upon the sale, transfer, disposition, purchase or acquisition of any shares of Common Stock of the Corporation would beneficially own, directly or through attribution (as determined under Section 382 of the Code), or would cause another person beneficially to own, directly or through attribution (as determined under Section 382 of the Code), 5% or more of the total fair market value of the then issued and outstanding shares of common stock, if that sale, transfer, disposition, purchase or acquisition would jeopardize UPC's preservation of its federal income tax attributes pursuant to Sections 382 or 383 of the Code; provided however, that for so long as the percentage point changes in ownership of the common stock (as described in Section 382(g)(1) of the Code) since the Effective Date do not total more than thirty (30) percentage points, the above restrictions shall be applied by substituting "10%" for "5%". UPC will furnish a copy of its Certificate of Incorporation to the holder of record of this certificate without charge upon written request addressed to UPC at its principal place of business." "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A STOCKHOLDERS AGREEMENT DATED NOVEMBER 3, 1999. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE CORPORATION'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." The Corporation shall imprint such legend on certificates evidencing outstanding Stockholder Shares. The legend set forth above shall be removed from the certificates evidencing any Stockholder Shares after the Termination Date. 10. Conflicting Agreements. Each Stockholder represents that it has not granted and is not a party to any proxy, voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement, and no holder of Stockholder Shares shall grant any proxy or become party to any voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement. No Stockholder shall act, for any reason, as a member of a group or in concert or enter into any agreement or arrangement with any other person in connection with the acquisition, disposition or voting of Stockholder Shares in any manner which is inconsistent with the provisions of this Agreement. 11. Actions Consistent with Agreement. The Corporation shall not circumvent this Agreement by taking any action through a subsidiary or affiliate that would be prohibited under this Agreement. The certificate of incorporation and bylaws of the Corporation may be amended in any manner permitted thereunder, except that neither the certificate nor the bylaws shall be amended in any manner that would conflict with, or be inconsistent with, the provisions of this Agreement. 12. Definitions. "Bared Directors" shall have the meaning set forth in Section 3(a)(ii) hereof. "Corporation" shall have the meaning set forth in the preamble and shall include all of the Corporation's subsidiaries. "Independent Director" shall have the meaning set forth in Section 3(a)(ii) hereof. "Investor Directors" shall have the meaning set forth in Section 3(a)(ii) hereof. "Piggyback Registration" shall have the meaning set forth in Section 4(a) hereof. "Registration Expenses" shall mean all expenses related to registration pursuant to Sections 4(a) and 4(b) of this Agreement. "Securities Act" means the Securities Act of 1933, as amended from time to time. "Stockholder" shall have the meaning as set forth in the preamble and shall include their permitted successors and assigns. "Stockholder Shares" means (i) any common stock of the Corporation purchased or otherwise acquired by any Stockholder (ii) any equity securities issued or issuable directly or indirectly with respect to the Common Stock referred to in clause (i) above by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, and (iii) any other shares of any class or series of capital stock of the Corporation held by a Stockholder. As to any particular shares constituting Stockholder Shares, such shares shall cease to be Stockholder Shares when they have been sold to the public through a Public Sale even if thereafter they are reacquired by a Stockholder. "Transfer" shall have the meaning set forth in Section 1 hereof. 13. Transfers in Violation of Agreement. Any Transfer or attempted Transfer of any Stockholder Shares in violation of any provision of this Agreement shall be void, and the Corporation shall not record such Transfer on its books or treat any purported transferee of such Stockholder Shares as the owner of such shares for any purpose. 14. Amendment and Waiver. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against the Corporation, the Investor or Bared unless such modification, amendment, termination or waiver is approved unanimously in writing by the Corporation, the Investor and Bared. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. 15. Severability. Whenever possible, each provision of this Agreement shall 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 invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 16. Entire Agreement. Except as set forth herein, this document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. 17. Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Corporation and its successors and assigns and the Stockholders and any permitted subsequent holders of Stockholder Shares and the respective successors and permitted assigns of each of them, so long as they hold Stockholder Shares. 18. Counterparts. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. 19. Remedies. The Corporation, the Investor and Bared shall be entitled to enforce their rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that the Corporation, any Investor and Bared may in its sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement. 20. Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, or mailed first class mail (postage prepaid) or sent by reputable overnight courier service (charges prepaid) to the Corporation at the address set forth below and to any other recipient at the address indicated on the schedules hereto and to any subsequent holder of Stockholder Shares subject to this Agreement at such address as indicated by the Corporation's records, or at such address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder when delivered personally, three days after deposit in the U.S. mail and one day after deposit with a reputable overnight courier service. The Corporation's address is: United Petroleum Corporation 2620 Mineral Springs Road, Suite A Knoxville, Tennessee 37917 21. Governing Law. This Agreement will be construed and interpreted in accordance with and governed by the laws of the State of Delaware. 22. Termination. This Agreement shall expire on the tenth anniversary of the date of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Stockholders Agreement on the day and year first above written. UNITED PETROLEUM CORPORATION By: Its: INFINITY INVESTORS LIMITED By: Its: FAIRWAY CAPITAL LIMITED By: Its: SEACREST CAPITAL LIMITED By: Its: Joe Bared Miriam Bared EX-99.9 13 LOAN AGREEMENT LOAN AGREEMENT LOAN AGREEMENT dated November 3, 1999 among UNITED PETROLEUM CORPORATION, a corporation organized under the laws of the State of Delaware ("UPET"), UNITED PETROLEUM GROUP, INC., a corporation organized under the laws of the State of Delaware and formerly known as United Petroleum Subsidiary, Inc. ("UPET Group"), F.S. CONVENIENCE STORES, INC., a corporation organized under the laws of the State of Florida ("F.S. Stores"), F.S. GAS SUBSIDIARY, INC., a corporation organized under the laws of the State of Florida ("F.S. Gas"), F.S. NON-GAS SUBSIDIARY, INC., a corporation organized under the laws of the State of Florida ("F.S. Non-Gas"), REWJB GAS INVESTMENTS, a Florida general partnership ("REWJB Gas"), JACKSON-UNITED PETROLEUM CORPORATION, a corporation organized under the laws of the Commonwealth of Kentucky ("Jackson"), CALIBUR SYSTEMS, INC., a corporation organized under the laws of the State of Tennessee ("Calibur"), (UPET, UPET Group, F.S. Stores, F.S. Gas, F.S. Non-Gas, REWJB Gas, Jackson and Calibur, collectively, "Borrowers") and HAMILTON BANK, N.A., a national banking association ("Bank"). WHEREAS, Borrowers have requested the Bank to make available to Borrowers a US$4,233,000 Revolving Credit Facility, a US$8,300,000 Mortgage Loan Facility and a US$10,467,000 Term Loan Facility, all upon and subject to the terms and conditions of this Agreement; ACCORDINGLY, the parties agree as follows: ARTICLE I: DEFINITIONS In this Agreement: 1.1 "Banking Day" means any day other than a Saturday, Sunday or legal holiday on which banks are authorized or required to be closed in Miami, Florida and New York, New York, and, with respect to LIBOR Loans, a day on which banks also are open and dealing in Dollars in the London, England interbank market. 1.2 "Borrowing Base" means the Dollar amount determined in accordance with Section 2.1(c). 1.3 "Closing Date" means November 3, 1999 or such other date for closing the Loans as agreed to by the Bank and UPET. 1.4 "Collateral" means the assets of Borrowers described in Article VIII assigned to the Bank, mortgaged to the Bank or in which a security interest is granted to the Bank to secure the Loans and other Liabilities of Borrowers to the Bank. 1.5 "Collateral Agreements" means the Lease Assignments, the Mortgages, the Security Agreements, the Pledge Agreement and the collateral assignments of the Purchase Agreement and the Management Agreement. 1.6 "Commitments" means the obligations of the Bank to make the Revolving Credit Loans, the Mortgage Loan and the Term Loan to Borrowers. 1.7 "Documents" means this Agreement, the Notes and the Collateral Agreements. 1.8 "Dollars" and "US$" means lawful money of the United States of America. Any reference in this Agreement to payment in "Dollars" or "US$" means payment in immediately available Dollar funds. 1.9 "Drawing Date" means any date on which a Revolving Credit Loan is made by the Bank to a Borrower hereunder. 1.10 "Eurocurrency Reserve Requirements" means, for any day, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of any reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for Eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such system. 1.11 "Event of Default" means any of the events mentioned in Article X of this Agreement. 1.12 "GAAP" means generally accepted accounting principles applied on a basis consistent with those used in Borrowers' financial statements. 1.13 "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 1.14 "Indebtedness" means any item which would properly be included as a liability on the liability side of a balance sheet prepared in accordance with GAAP as of any date as of which "Indebtedness" is to be determined. 1.15 "Lease Assignments" means the instruments of assignment of the Leases to the Bank. 1.16 "Leases" means the lease agreements by which Borrowers hold the leasehold interests described in Schedule 1.16 attached hereto, and any lease agreement by which any Borrower hereafter holds a leasehold interest meeting the requirements of Section 6.10. 1.17 "Liabilities" means all obligations of borrowers under this Agreement and the Notes and all other obligations of Borrowers to the Bank, its successors and assigns, of every kind, nature and description, direct or indirect, secured or unsecured, joint and several, absolute and contingent, due or to become due, now existing or hereafter arising, regardless of how they arose or by what instrument or whether evidenced by any agreement or instrument. "Liabilities" includes obligations to perform acts and to refrain from taking action as well as obligations to pay money. 1.18 "LIBOR" means in respect of each LIBOR Interest Period, the rate per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%) quoted on Reuters International System's "LIBO" page at approximately 11:00a.m. London time on the day two (2) Banking Days before the beginning of the LIBOR Interest Period for the offering by leading banks in the London interbank market of Dollar deposits for the term of such LIBOR Interest Period and in amounts comparable to the principal amount of the LIBOR Loan scheduled to be outstanding for the LIBOR Interest Period. 1.19 "LIBOR Determination Date" means the last Banking Day of each LIBOR Interest Period. 1.20 "LIBOR Interest Period" means each successive period of time used to determine the rate of interest applicable to the principal of a LIBOR Loan. The first LIBOR Interest Period of a LIBOR Loan shall commence on the date specified by UPET for the commencement of the LIBOR Loan and end on its first LIBOR Determination Date, and each subsequent LIBOR Interest Period shall commence on the LIBOR Determination Date for the preceding LIBOR Interest Period and end on the next succeeding LIBOR Determination Date. Except as otherwise provided herein, LIBOR Interest Periods shall be six (6) months for the LIBOR Mortgage Loan and one (1) month for a LIBOR Revolving Credit Loan. If any LIBOR Determination Date falls on a day which is not a Banking Day, it shall be adjusted and determined in accordance with the practices of the offshore Dollar interbank markets as from time to time in effect, provided, however, that the last LIBOR Interest Period shall end no later than the date specified by UPET for conversion of such LIBOR Loan into a Prime Rate Loan, the fifth (5th) anniversary of the Closing Date or the date all amounts outstanding hereunder become due whether by acceleration or otherwise, as the case may be. 1.21 "LIBOR Revolving Credit Loan", "LIBOR Mortgage Loan" and "LIBOR Loans" means a Revolving Credit Loan or the Mortgage Loan or both, respectively, at any time during which interest thereon is calculated with reference to LIBOR. 1.22 "Loans" means the Revolving Credit Loans, the Mortgage Loan and the Term Loan. 1.23 "Management Agreement" means the Management Agreement to be entered into between UPET Group and Farm Stores Grocery, Inc. 1.24 "Maturity Date" means the fifth anniversary (5th) of the Closing Date, but in no event later than October 30, 2004. 1.25 "Merger Plan" means the Agreement and Plan of Merger dated September 29, 1999 among F.S. Stores, UPET and UPET Group and joined for certain limited purposes by Farm Stores Grocery, Inc., as the same may be amended from time to time. 1.26 "Mortgage Loan" means the term loan described in Section 2.2. 1.27 "Mortgages" means the first mortgages or deeds of trust in favor of or for the benefit of the Bank on the Owned Real Properties. 1.28 "Notes" means the joint and several promissory notes of Borrowers evidencing the Loans in substantially the form of Exhibit A attached hereto. 1.29 "Owned Real Properties" means the real properties owned by Borrowers. Owned Real Properties owned by Borrowers on the Closing Date are described in Schedule 1.29 attached hereto. 1.30 "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. 1.31 "Pledge Agreements" means the Pledge Agreements pledging the shares of Farm Stores Grocery, Inc. owned by one or more Borrowers and described in Section 8.3 to the Bank in substantially the form of Exhibit B attached hereto. 1.32 "Prime Rate" means the Dollar prime commercial rate as publicly announced from time to time by Citibank, N.A. as its "prime rate". 1.33 "Prime Rate Loans" means the Term Loan and a Revolving Credit Loan or the Mortgage Loan (or any portion thereof) or both, respectively, at any time during which interest thereon is calculated with reference to Prime Rate. 1.34 "Purchase Agreement" means the Purchase Agreement to be entered into between UPET Group and Farm Stores Grocery, Inc. granting UPET Group an option to purchase shares of Farm Stores Grocery, Inc. 1.35 "Requirement of Law" means, as to any Person, the Certificate of Incorporation and By-Laws or other organization or governing documents of such Person and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. 1.36 "Revolving Credit Loans" means the revolving loans described in Section 2.1. 1.37 "Security Agreements" means the security agreements executed by each of the Borrowers granting the Bank a first security interest in all of the Borrower's personal property, each in substantially the form of Exhibit C hereto. 1.38 "Term Loan" means the term loan described in Section 2.3. 1.39 "Year 2000 Compliant" means that the relevant party's computers, computer systems and codes (i) will not fail to accurately and properly read, process, perform mathematical calculations, store, sort, distinguish, recognize, accept or interpret any data containing date information prior to, during and after the year 2000, (ii) will not fail to accurately and properly read and process the fact that the year 2000 is a leap year, (iii) will accurately and properly read and process so-called "magic dates" such as the date "9/9/99" or any other date field data used by the party to signify information other than the date and (iv) will be compatible with any other party's computer system as to Year 2000 Compliant matters with respect to circumstances described in (i) - (iii) above. ARTICLE II: THE LOANS 2.1 Revolving Credit Loans. (a) Drawdowns. The Bank agrees, on the terms and conditions set forth herein and upon at least two (2) Banking Days' prior notice from UPET, to make Revolving Credit Loans jointly and severally available to Borrowers in the aggregate principal amount not at any time exceeding the lesser of the Borrowing Base, as determined in subsection (c) below, or US$4,233,000. The notice from UPET shall specify whether the Revolving Credit Loan is to be a Prime Rate Loan or a LIBOR Loan, the Drawing Date of the Loan and the account at the Bank of a Borrower to which the Loan is to be credited and shall include or be accompanied by a certificate setting forth the current calculation of the Borrowing Base. (b) Repayment. Borrowers shall have the right to repay in whole or in part without penalty or premium Prime Rate Revolving Credit Loans at any time and LIBOR Revolving Credit Loans on LIBOR Determination Dates for the LIBOR Revolving Credit Loans being repaid. Any such repayments of a LIBOR Revolving Credit Loan also shall be upon at least two (2) Banking Days prior notice to the Bank. Borrowers shall have the right prior to the Maturity Date, or one (1) month prior to the Maturity Date in the case of a LIBOR Revolving Credit Loan, to reborrow as provided in this Section 2.1, provided, that, all outstanding Revolving Credit Loans shall be due and payable jointly and severally by the Borrowers on the Maturity Date. If at any time the aggregate principal amount of outstanding Revolving Credit Loans shall be greater than the Borrowing Base, Borrowers immediately shall repay Revolving Credit Loans in an amount sufficient to reduce the aggregate principal amount of outstanding Revolving Credit Loans to less than the Borrowing Base. Repayments shall be accompanied by payment of accrued interest on the amount repaid to the date of repayment and, in the case of any repayment of a LIBOR Revolving Credit Loan on a date other than its LIBOR Determination Date, any amount required by Section 4.4 hereof. (c) Borrowing Base. Until the first anniversary of the Closing Date, the Borrowing Base for Revolving Credit Loans shall be at any time an amount equal to the sum of eighty percent (80%) of Borrowers' eligible accounts receivable plus eighty percent (80%) of Borrowers' eligible inventory. Thereafter the Borrowing Base for Revolving Credit Loans shall be at any time an amount equal to the sum of eighty percent (80%) of Borrowers' eligible accounts receivable plus seventy percent (70%) of Borrowers' eligible inventory. Eligible accounts receivable are non-related accounts of any borrower (i.e., accounts due from parties not a Borrower or affiliated with any Borrower), for which there are no contra accounts, that are outstanding for up to 60 days from due date and otherwise complying with the representations and warranties and other terms and conditions of the Security Agreements. Any account with more than 50% of its balance past due more than 60 days will be deemed ineligible in its entirety. Eligible inventory is inventory of any Borrower complying with the representations and warranties and other terms and conditions of the Security Agreements and excludes the amount of any reserve, for obsolescence or otherwise, placed against such inventory on the financial statements of Borrowers. The Bank retains the right from time to time to establish standards of eligibility and reserves against availability in its sole but reasonable discretion. 2.2 Mortgage Loan. The Bank agrees, on the terms and conditions set forth herein, to make the Mortgage Loan to Borrowers in the principal amount of US$8,300,000 on the Closing Date. The Mortgage Loan shall be repayable jointly and severally by Borrowers in monthly level principal and interest payments based upon a fifteen (15) year amortization schedule (readjusted upon any change in interest rate to reflect such change in interest rate) and a balloon payment on the Maturity Date of all amounts then outstanding under the Mortgage Loan. Notwithstanding the foregoing, in no event shall the principal amount of the Mortgage Loan exceed eighty percent (80%) of the appraised value of the Owned Real Properties as set forth in the appraisals described in Article IX. 2.3 Term Loan. The Bank agrees, on the terms and conditions set forth herein, to make the Term Loan to Borrowers in the principal amount of US$10,467,000 on the Closing Date. The Term Loan shall be repayable jointly and severally by Borrowers beginning thirteen (13) months after the Closing Date in equal monthly principal payments based upon a six (6) year amortization schedule and a balloon payment on the Maturity Date of all amounts then outstanding under the Term Loan. Notwithstanding the foregoing or any other conflicting or inconsistent provision herein, if the original principal amount of the Mortgage Loan is less than US$8,300,000, the original principal amount of the Term Loan, at the option of UPET, may be increased by up to US$750,000 of the amount of such reduction in the Mortgage Loan, provided, however, that the aggregate principal amounts of the Mortgage Loan and the Term Loan shall not exceed US$18,767,000. 2.4 Interest. Borrowers jointly and severally shall pay interest on the unpaid principal amount of the Loans from the date made available by the Bank to a Borrower until maturity as follows: (a) Revolving Credit Loans shall bear interest at the option of UPET at rates per annum equal to (i) the sum of Prime Rate plus one percent (1.0%) or (ii) the sum of three and seven-eighths percent (3.875%) plus LIBOR. Any change in the Prime Rate shall take effect immediately with respect to interest on Prime Rate Revolving Credit Loans. Any Prime Rate Revolving Credit Loan may be converted into a LIBOR Revolving Credit Loan upon two (2) Banking Days prior notice by UPET to the Bank. Any LIBOR Revolving Credit Loan may be converted on any LIBOR Determination Date for such LIBOR Revolving Credit Loan into a Prime Rate Revolving Credit Loan upon two (2) Banking Days prior notice by UPET to the Bank. (b) The Mortgage Loan shall bear interest at the option of UPET at rates per annum equal to (i) the sum of Prime Rate plus one and one-eighths percent (1.125%) or (ii) the sum of four percent (4.0%) plus LIBOR. At least two (2) Banking Days prior to each six (6) month anniversary of the Closing Date, UPET shall advise the Bank whether the interest rate on the Mortgage Loan for the following six (6) month period shall be computed with reference to the Prime Rate in effect on the first day of such following six (6) month period or LIBOR for such following six (6) month period. If the Prime Rate option is selected, the interest rate for the entire six (6) month period shall be based upon the Prime Rate in effect on the first day of the six (6) month period. (c) The Term Loan shall bear interest at a rate per annum equal to the sum of Prime Rate plus three percent (3.0%). Any change in the Prime Rate shall take effect immediately. (d) All interest shall be computed on the basis of the actual number of days elapsed in a 360 day year and shall be payable monthly in arrears and on payment in full of the Loans. Borrowers agree that any amount of principal of any of the Loans, and to the extent permitted by law interest, that is not paid on its due date (whether at stated maturity, by acceleration or otherwise) shall bear interest from such due date until paid in full at a rate per annum equal to the rate provided in (a) - (c) above, as the case may be, plus five percent (5.0%), provided that such interest rate shall not at any time exceed the maximum rate allowed by law. Default interest shall be payable on demand. 2.5 Prepayment of the Mortgage Loan and the Term Loan. (a) Mandatory Prepayments. (i) The net cash proceeds from the sale of any non-real estate assets (other than (1) sales of inventory in the ordinary course of business, (2) sales of assets to the extent the proceeds are applied to the repair or replacement of Collateral and (3) immaterial sales not exceeding US$50,000 in any fiscal year of Borrowers) of any of the Borrowers shall be used to repay the Term Loan. Any remaining excess proceeds from the sale of any non-real estate assets after payment in full of the Term Loan, shall be applied first to the Mortgage Loan and then to the Revolving Credit Facility. Prepayments under this subsection shall be due within ten (10) days of receipt of any cash proceeds. (ii) The net cash proceeds from the sale of any real estate assets of any of the Borrowers shall be used to repay the Mortgage Loan. Any remaining excess proceeds for the sale of any real estate, after application to the Mortgage Loan, shall be applied first to the Term Loan and then the Revolving Credit Facility. Prepayments under this subsection shall be due within ten (10) days of receipt of any cash proceeds. (iii) Fifty percent (50%) of the cash proceeds received by any Borrower from the issuance of debt securities by any Borrower, net of all costs and expenses associated with the issuance of such debt securities, shall be used to reduce Borrowers' obligations first under the Term Loan, second under the Mortgage Loan and third under the Revolving Credit Facility. Prepayments under this subsection shall be due within five (5) days of receipt of any cash proceeds. (iv) Twenty-five percent (25%) of the cash proceeds received by any Borrower from the issuance of equity securities by any Borrower net of all costs and expenses associated with the issuance of such equity securities, shall be used to reduce Borrowers' obligations first under the Term Loan, second under the Mortgage Loan and third under the Revolving Credit Facility. Prepayments under this subsection shall be due within five (5) days of receipt of any cash proceeds. (v) The Term Loan shall be prepaid by an amount equal to twenty-five percent (25%) of UPET's consolidated net income plus depreciation and amortization (during the period under review) minus principal payments made and net cash capital expenditures (during the period under review), all computed in accordance with GAAP. The calculations and prepayments shall be effected for the six months prior to each fiscal year and for each intervening six month period and for any "short" fiscal year due to a change in UPET's fiscal year, provided that the first period to which this subsection is applicable shall be the six month period ending June 30, 2000 or the end of the "short" fiscal year if a change in UPET's fiscal year occurs prior to June 30, 2000. Prepayments under this subsection shall be due within ninety (90) days of the end of a fiscal year for a period under review ending on a fiscal year end and within forty-five (45) days of the end of any intervening period under review. (vi) Any partial prepayments shall be applied to installments of principal due in the inverse order of their maturity. Any mandatory prepayment of a LIBOR Loan on a date other than its LIBOR Determination Date may, at the Bank's sole option, (A) be held as cash collateral until such LIBOR Loan's next LIBOR Determination Date and applied as a prepayment on such LIBOR Determination Date or (B) be applied immediately by the Bank as a prepayment, but without Borrowers incurring any liability for any indemnity payment of any amount otherwise required by Section 4.4 hereof. (b) Voluntary Prepayments. Borrowers shall have the right, on any Banking Day, to prepay the Mortgage Loan or the Term Loan or both in whole or in part, provided that any prepayment of a LIBOR Loan on a day other than a LIBOR Determination Date with respect thereto shall be subject to payment of any amount required by Section 4.4 hereof. Any partial prepayments shall be in the amount of US$100,000 or an integral multiple thereof and shall be applied to installments of principal due in the inverse order of their maturity. (c) Exit Fee. Any prepayment shall be accompanied by prepayment of accrued interest on the amount prepaid. Subsequent to 18 months from the Closing Date, an Exit Fee shall be payable for prepayments of the Mortgage Loan or the Term Loan or both, other than pursuant to Subsection 2.5(a) (v), in amounts equal to (i) the amount prepaid divided by (A) the total principal amounts of the Mortgage Loan and the Term Loan outstanding 18 months after the Closing Date less (B) the principal amortization amounts scheduled to be paid from 18 months after the Closing Date to the Maturity Date multiplied by (ii) US$350,000, provided, however, that if prepayments of the Mortgage Loan or the Term Loan or both have occurred within 18 months from the Closing Date, the US$350,000 amount set forth above shall be reduced by the percentage that such prepayments within 18 months of the Closing Date bear to the total original principal amounts of the Mortgage Loan and the Term Loan. 2.6 Payments. All payments hereunder shall be made without setoff or counterclaim and shall be made through demand deposit accounts maintained by each Borrower at the Bank's Main Office, 3750 N.W. 87th Avenue, Miami, Florida 33178, U.S.A., (or at such other branch or office of the Bank as the Bank may from time to time specify by notice to UPET). 2.7 Withholding and Taxes. (a) All amounts payable under this Agreement or under any of the other Documents shall be made without set-off or counterclaim and clear of and without deduction for any and all present and future taxes, levies, imposts, deductions, charges, withholdings, contributions, services, surcharges, exchange commissions, penalties and all liabilities with respect thereto imposed by any governmental or taxing authority (other than income or franchise taxes based on or measured by the overall net income or capital of the Bank imposed by the United States of America or the State of Florida), including any stamp or other taxes, registration fees or other duties, levies, imposts, notarial fees or other charges of any nature whatsoever by whomsoever imposed with respect to the preparation, execution, delivery, registration, performance and enforcement of this Agreement and any of the other Documents (collectively, "Taxes"). Borrowers agree to cause all Taxes to be paid on behalf of the Bank directly to the appropriate Governmental Authority. If for any reason Borrowers are prohibited from paying any Taxes on behalf of the Bank, then all payments made on or in respect of this Agreement including payments made pursuant to this Section, shall be increased so that, after provisions for such Taxes, including Taxes on such increase, the amounts received by the Bank will equal the amounts the Bank would have received if no Taxes were due on such payments. If any of the amounts referred to in this Section are paid by or on behalf of the Bank, the Bank shall promptly so notify Borrowers and Borrowers shall, upon demand, promptly indemnify the Bank for such payments, together with any interest, penalties and expenses in connection therewith, plus interest thereon at the rate specified in Section 2.4(c) hereof. (b) If, at any time and for any reason there is a change in the basis of taxation of payments in respect of this Agreement or a Loan (except for changes in taxes based upon or measured by income or capital of the Bank or the Bank's franchise taxes) and the result thereof is to increase the cost to the Bank of maintaining the Loans of to reduce any amount receivable under this Agreement, then Borrowers shall promptly pay the Bank, upon its demand, any additional amount necessary to compensate the Bank for such increased cost or reduced amount receivable. (c) Borrower shall provide the Bank with original tax receipts, notarized copies of tax receipts, or such other documentation as will prove payment of tax in a court of law applying the U.S. Federal Rules of Evidence, for all Taxes paid by Borrowers pursuant to this Section. Borrower shall deliver such receipts or other documentation to the Bank within 30 days after the due date for the related Tax. (d) The Bank shall upon request provide reasonable assistance to Borrowers for the purpose of establishing any reduction in or exemption from deduction or withholding or any liability for any Taxes or avoiding or mitigating such increased costs or reduced amounts receivable, such assistance in the case of Taxes to be limited to the timely provision of properly completed and executed documentation sufficient to establish to the relevant taxing authorities the entitlement to such reduction or exemption. (e) The obligations of Borrowers under this Section shall survive the payment in full or principal and interest on the Loans and the cancellation of the Notes and any of the other Documents. ARTICLE III: EXPENSES AND FEES 3.1 Structuring Fees. Borrower shall pay to the Bank on the Closing Date Structuring Fees equal to (a) 1.5% flat, or US$63,495, on the Revolving Credit Loan Commitment, (b) 1.5% flat, or US$124,500, on the Mortgage Loan Commitment and (c) 7.7577625% flat, or US$812,005, on the Term Loan Commitment. The nonrefundable US$500,000 fee paid upon delivery of the September 27, 1999 commitment letter for this Loan Agreement and the US$50,000 paid upon acceptance of such commitment letter shall be applied to the total amount of the Structuring Fees. The Bank shall deduct such balance of the Structuring Fees from the proceeds of the Revolving Credit Loans. 3.2 Expenses. Borrowers shall pay to the Bank all documentation costs, filing and search fees, title insurance premiums and other expenses, including reasonable legal fees of counsel to the Bank, incurred in connection with the preparation of the Documents. The Bank shall deduct such amounts from the proceeds of the Revolving Credit Loans. 3.3 Future Expenses. Borrowers shall pay on demand, whether any Event of Default hereunder shall have occurred and regardless of whether any proceeding to enforce the same shall have been commenced, the Bank's standard loan fees as set from time to time by notice to the Bank's customers generally, all costs and expenses of the Bank, including, without limitation, all fees and disbursements of counsel to the Bank, incurred in connection with the enforcement of the Documents, including any appeals, any waivers or consents in connection herewith or the preparation of any amendment to or modification of the Documents. ARTICLE IV: YIELD PROTECTION AND ILLEGALITY 4.1 Inability to Determine Interest Rate. In the event that prior to the first day of any LIBOR Interest Period: (a) the Bank shall have determined (which determination shall be conclusive and binding upon Borrowers) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining LIBOR for such LIBOR Interest Period, or (b) the Bank determines that the LIBOR rate for such LIBOR Interest Period will not adequately and fairly reflect the cost to the Bank (as conclusively certified by the Bank) of maintaining the relevant LIBOR Loan during such LIBOR Interest Period, the Bank shall give notice thereof to UPET as soon as practicable. If such notice is given, the Loans shall remain or shall be converted to on the first day of such LIBOR Interest Period, as the case may be, Prime Rate Loans. 4.2 Illegality. Notwithstanding any other provision herein, if any change after the date hereof in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for the Bank to make or maintain the LIBOR Loans as contemplated by this Agreement, the LIBOR Loans shall be converted automatically to Prime Rate Loans on the last day of the then current LIBOR Interest Period or within such earlier period as required by law. If any such conversion of the LIBOR Loans occurs on a day which is not a LIBOR Determination Date with respect thereto, Borrowers shall pay to the Bank such amounts, if any, as may be required pursuant to Section 4.4 unless such illegality was due to the fault of the Bank. 4.3 Requirements of Law. (a) In the event that any change after the date hereof in any Requirement of Law or in the interpretation or application thereof or compliance by the Bank with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall impose, modify or hold applicable any reserve, special deposit, compulsory loans or similar requirement against assets held by, deposits or other liabilities in or for the account of LIBOR Loans, or any other acquisition of funds by, any office of the Bank which is not otherwise included in the determination of the LIBOR hereunder; or (ii) shall impose on the Bank any other condition; and the result of any of the foregoing is to increase the cost to the Bank, by an amount which the Bank deems in its reasonable judgment to be material, of maintaining the LIBOR Loans or to reduce any amount receivable hereunder in respect thereof then, in any case, Borrowers shall promptly pay the Bank, upon its demand, any additional amounts necessary to compensate the Bank for such increased cost or reduced amount receivable. If the Bank becomes entitled to claim any additional amounts pursuant to this subsection, it shall promptly notify UPET of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection setting forth the calculation thereof in reasonable detail (as determined by the Bank in its reasonable discretion) submitted by the Bank to UPET shall be conclusive in the absence of manifest error. This covenant shall survive the termination of the Loans and the payment of the Notes and all other amounts payable hereunder. (b) In the event that the Bank shall have determined that any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by the Bank or any corporation controlling the Bank with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof does or shall have the effect of reducing the rate of return on the Bank's capital as a consequence of its LIBOR obligations hereunder to a level below that which the Bank or such corporation could have achieved but for such change or compliance (taking into consideration the Bank's or such corporation's policies with respect to capital adequacy) by an amount deemed by the Bank, in its reasonable judgment, to be material, then from time to time, after submission by the bank to UPET of a written request therefor, Borrowers shall pay to the Bank such additional amount or amounts as will compensate the Bank for such reduction. A certificate as to any additional amount payable pursuant to this subsection setting forth the calculation thereof in reasonable detail (as determined by the Bank in its reasonable discretion) to UPET shall be conclusive in the absence of manifest error. (c) Upon request by the Bank, from time to time, Borrowers shall pay the cost of all Eurocurrency Reserve Requirements applicable to the LIBOR Loans. If the Bank is or becomes entitled to receive payments in respect of Eurocurrency Reserve Requirements pursuant to this subsection, it shall promptly notify UPET thereof. A certificate as to the amount of such Eurocurrency Reserve Requirements setting forth the calculation thereof in reasonable detail (as determined by the Bank in its reasonable discretion) submitted by the Bank to UPET shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (d) If requested by UPET, payments required under this Section 4.3 may be made in equal monthly installments over the twelve months following notice by the Bank to UPET pursuant to this Section 4.3. (e) If payments are required under this Section 4.3, Borrowers may convert the LIBOR Loans so affected into Prime Rate Loans subject to Section 4.4. 4.4 Indemnity. Borrowers agree to indemnify the Bank and to hold the Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence of (a) default by any Borrower in payment when due of the principal amount of or interest on a LIBOR Loan, (b) default by Borrowers in making any prepayment on a LIBOR Loan after Borrowers or UPET have given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a payment, conversion to a Prime Rate Loan or prepayment of a LIBOR Loan on a day which is not a LIBOR Determination Date with respect thereto, including, without limitation, in each case, any such loss or expense arising from the reemployment of funds obtained by the Bank or from fees payable to terminate the deposits from which such funds were obtained. Payments required under this Section 4.4 shall be made within ten (10) days after notice thereof by the Bank. A certificate as to any additional amount payable pursuant to this Section 4.4 setting forth the calculation thereof in reasonable detail (as determined by the Bank in its reasonable discretion) to UPET shall be conclusive in the absence of manifest error. This covenant shall survive the payment of the Loans or the Notes, and all other amounts payable hereunder. ARTICLE V: REPRESENTATIONS AND WARRANTIES Borrowers represent and warrant to the Bank that: 5.1 Binding Obligations. Each Borrower is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has the corporate power to own its property and to carry on its business as now being conducted, is duly qualified to engage in business and is in good standing as a foreign corporation in each jurisdiction in which the character of the properties owned by it or the transaction of its business makes such qualification necessary (except where the failure to obtain such qualification does not have any material adverse effect on the Borrowers) and has full power, authority and legal right to incur the Indebtedness and other obligations provided for in the Documents to which it is a party, to execute and deliver the Documents to which it is a party and to perform and observe the terms and provisions hereof and thereof. This Agreement constitutes, and the Notes when executed and delivered for value will constitute, legal, valid and binding obligations of Borrowers, enforceable against Borrowers in accordance with their respective terms, except as the foregoing may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting enforceability of creditors' rights generally at the time in effect (regardless of whether enforcement is sought in equity or law). 5.2 Corporate Authorizations. The execution, delivery and performance of the Documents and the borrowing hereunder have been duly authorized by all necessary action on the part of Borrowers including, without limitation, the authorization of all partners or Boards of Directors of Borrowers, and all necessary approvals of Governmental Authorities in connection therewith have been received. 5.3 Absence of Restrictions. The execution, delivery and performance by Borrowers of the Documents and the borrowings hereunder will not (i) violate any provision of law or the charters or by-laws of Borrowers, (ii) violate, be in conflict with, result in a breach of or constitute a default under any order of any court, arbitrational tribunal or Governmental Authority or under any material mortgage, indenture, contract, undertaking or other agreement to which any Borrower is a party or by which any Borrower or any of its properties, assets or revenues is bound, (iii) violate any governmental or agency rule or regulation (including, without limitation, Regulations U and X of the Board of Governors of the Federal Reserve System of the United States of America) or (iv) result in the creation or imposition of any security interest, lien, charge or other encumbrance of any nature whatsoever upon any of its properties, assets or revenues, other than as contemplated herein. 5.4 Financial Position and Statements. The financial statements listed in Schedule 5.4, together with supporting schedules and notes, of Borrowers delivered to the Bank have been prepared in accordance with GAAP and correctly set forth in all material respects Borrower's financial position as at or for the periods shown therein and show all known material liabilities, direct or contingent, as of such dates. Except for the payment of the expenses of the transactions contemplated hereby and by the Merger Plan, there have been no material adverse changes in Borrowers' financial position since the date of the latest of such financial statements. 5.5 Litigation. Except as provided in Schedule 5.5, there are no material actions, suits, proceedings or claims pending against or materially affecting any Borrower which, if adversely determined, would have a material adverse effect on the financial condition or business of such Borrower. 5.6 Bankruptcy Plan. (a) Bankruptcy Approvals. Each of the Borrowers, to the extent applicable, has obtained all necessary and requisite authority, consents and approvals of the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") in the Chapter 11 bankruptcy proceedings styled United Petroleum Corporation, Case No. 99-88(PJW) (the "Bankruptcy Proceedings") to enter into and consummate the transactions contemplated in this Loan Agreement and in the Merger Plan, including, without limitation, incurring of the indebtedness and granting of the liens provided for herein. (b) Effectiveness of Plan. The Second Amended Plan of Reorganization for UPET (the "Plan") and the Order Confirming the Amended Plan by the Bankruptcy Court (the "Confirmation Order") in the Bankruptcy Proceedings (1) are in full force and effect, have not been withdrawn, modified or amended as of the date hereof, and are enforceable in accordance with their respective terms, (2) are not the subject of any motion for reconsideration or rehearing, whether under Rules 59 or 60 of the Federal Rules of Civil Procedure or otherwise, and (3) are not the subject of any appeal, extension of time for appeal, stay pending appeal or similar pleading. (c) Effective Date. All of the conditions precedent to the occurrence of the Effective Date, as defined in the Plan, including as set forth in Section 13.1 and 13.2 thereof or otherwise, have been satisfied as of the date hereof. The Effective Date, as defined in the Plan, and all of the transactions or events described in Section 8.17 of the Plan, including substantial consummation of the Plan, have occurred as of the date hereof or will occur simultaneously with the consummation of the transactions contemplated under this Loan Agreement. (d) Compliance With Plan. Each of the Borrowers, to the extent applicable, has fully complied with all of the provisions of the Plan, and the Order and the United States Bankruptcy Code in connection with the transactions contemplated herein, including the incurrence of the indebtedness herein or the granting of the liens provided for herein. To the extent applicable, no Borrower is in default of the Plan, the Order or the provisions of the United States Bankruptcy Code or will be in default thereof as a result of the transactions contemplated herein, including the incurrence of the indebtedness herein or the granting of the liens provided for herein. (e) Reasonably Equivalent Value. Each of the Borrowers has received reasonably equivalent value in exchange for the indebtedness incurred under this Loan Agreement and in exchange for the liens granted pursuant hereto. Each of the Borrowers is solvent as of the date hereof and will not be made insolvent as a result of the transactions contemplated hereunder, the term solvent meaning that each Borrower's property, at a fair valuation, is greater than the sum of its debts, including the indebtedness being incurred hereunder. Each of the Borrowers does not and will not, as a result of the transactions hereunder, have or be left with an unreasonably small capital with which to conduct its business. Each of the Borrowers do not intend to incur and will not incur, including as a result of the transactions contemplated hereunder, debts that would be beyond such Borrower's ability to pay as they matured. (f) Notice. Each of the Borrowers, to the extent applicable, has provided, or caused to be provided, proper notice of the Bankruptcy Proceedings and the related claims bar date therein to all known and suspected creditors, whether secured or unsecured, liquidated or unliquidated, contingent or fixed, priority or non-priority or disputed or undisputed, and that each Borrower, to the extent applicable, has fully complied with the provisions of that certain Order of the Bankruptcy Court Fixing Bar date for Filing Proofs of Claim and Approving Form and Manner of Notice of Bar Date, dated February 17, 1999 (the "Bar Date Order"). No Borrower is aware of, or has reason or basis to be aware of, any claimant or creditor or UPET that has not received proper notice of the Bar Date Order, or the claims bar date contained therein. 5.7 Title to Properties; No Liens. Except as provided in Schedule 5.7(a), Borrowers have good and marketable title to all of their respective properties and assets and, except as provided in Schedule 5.7(b) or as permitted or required by the provisions hereof, none of the properties, assets and revenues of Borrowers are subject to any mortgage, lien, security interest, pledge or other charge or encumbrance or any similar arrangement of any kind. 5.8 Payment of Taxes. Except as provided in Schedule 5.8, Borrowers have filed, or caused to be filed, all tax returns which are required to be filed by any of them, and have paid or caused to be paid all taxes as shown on such returns or on any assessment received by any of them, to the extent that such taxes have become due. 5.9 Agreements. Except as provided in Schedule 5.9, none of Borrowers is in default, in any manner which would materially and adversely affect any of its business, properties, assets, operations or condition (financial or otherwise), in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which it or any of its properties, assets or revenues is bound. 5.10 Correct Information. The information, exhibits and reports furnished by Borrowers in connection with the negotiation and preparation of this Agreement are correct and taken as a whole do not contain any omissions or misstatements of fact which would make the statements contained therein misleading or incomplete in any material respect. 5.11 Year 2000 Compliant. Each Borrower is in all material respects Year 2000 Compliant with respect to its computers, computer systems and codes. 5.12 Year 2000 Indemnity. Borrowers hereby indemnify the Bank and hold the Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence of all or any part of the Year 2000 Compliant representations and warranties made herein or otherwise in writing by Borrowers in connection herewith being incorrect, false or misleading. This covenant shall survive the payment of the Loans and cancellation of the Notes, and all other amounts payable hereunder. ARTICLE VI: AFFIRMATIVE COVENANTS From the date hereof and until payment in full of all amount due hereunder and the performance of all other obligations of Borrowers to the Bank, Borrowers agree with the Bank that, unless the Bank shall otherwise consent in writing, Borrowers shall: 6.1 Corporate Existence, Properties, Insurance. Except as provided in the Merger Plan, do or cause to be done all things necessary to preserve and keep in full force and effect each Borrower's corporate existence, rights and franchises and comply with all laws applicable to it; at all times maintain, preserve and protect all trade names and preserve all the remainder of each Borrower's property used or useful in the conduct of its business and keep the same in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, replacements, betterments and improvements thereto so that the business carried on in connection therewith may be properly and advantageously conducted at all times; and maintain insurance to such extent and against such risks as is customary and with companies similarly situated and as specifically set forth in Schedule 6.1. 6.2 Payment of Indebtedness, Taxes. (a) Pay or cause to be paid all of each Borrower's Indebtedness and obligations promptly and in accordance with normal terms and trade practices and (b) pay and discharge or cause to be paid and discharged promptly all taxes, assessments and governmental charges or levies imposed upon any Borrower or upon its income and profits, or upon any of its property, real, personal or mixed or upon any part thereof, before the same shall become in default, as well as all lawful claims for labor materials and supplies or otherwise which, if unpaid, might become a lien or charge upon its properties or any part thereof; provided, however, that Borrowers shall not be required to pay and discharge or cause to be paid and discharged any such Indebtedness, tax, assessment, charge, levy or claim so long as the amount, applicability or validity thereof shall be contested in good faith by appropriate proceedings and the relevant Borrower shall have set aside on its books adequate reserves with respect to any such Indebtedness, tax, assessment, charge, levy or claim, so contested. 6.3 Financial Statements, Reports. Furnish to the Bank: (a) at each time UPET files its Form 10-K, but in no event later than within one hundred twenty (120) days after the end of each of its fiscal years, an audited consolidated and consolidating balance sheet and statement of income and surplus of each of Borrowers and Farm Stores Grocery, Inc., together with supporting schedules, all certified by an independent certified public accountant of recognized standing selected by Borrowers or Farm Stores Grocery, Inc., as the case may be, and with regard to Borrowers only approved in writing by the Bank (the form of such certification to include statements that the audit of the financial statements has been conducted in accordance with generally accepted accounting standards and that the financial statements present the financial condition of Borrowers and Farm Stores Grocery, Inc., as the case may be, in accordance with generally accepted accounting principles consistently applied, all as existing at the end of the appropriate period); (b) within sixty (60) days after the end of each intervening fiscal quarterly period, similar financial statements to those referred to in subsection (a) above, unaudited but similarly certified to by the chief financial officer of Borrowers or Farm Stores Grocery, Inc., as the case may be; (c) with each of the financial statements submitted under subsections (a) or (b) above, a certificate executed by the chief financial officer of UPET to the effect that to his knowledge no Event of Default or event which, upon notice or lapse of time or both, would constitute an Event of Default has occurred and is continuing; (d) within fifteen (15) days after the end of each fiscal quarterly period, accounts receivable and inventory reports of Borrowers setting forth in detail acceptable to the Bank the determination of the Borrowing Base at the end of such fiscal quarterly period; and (e) promptly, from time to time, such other information regarding the operations, business, affairs and financial condition of Borrowers, including the Borrowing Base, as the Bank may reasonably request. 6.4 Branding Agreements. (a) Within 180 days from the Closing Date enter into agreements with major oil companies acceptable to the Bank to have not less than 40% of its stores' gasoline sales branded one (1) year from the Closing Date and (b) within one (1) year from the Closing Date enter into agreements with major oil companies acceptable to the Bank to have an additional 40% of its stores' gasoline sales branded within eighteen (18) months from the Closing Date. 6.5 Management Agreement. Cause UPET Group to enter into the Management Agreement for the management by UPET Group of Farm Stores Grocery, Inc. and providing for a management fee payable to UPET Group of not less than US$2,500,000 annually so long as the Loans remain unpaid and cause UPET Group to fulfill all of its obligations under the Management Agreement. 6.6 Maintenance of Collateral. Ensure that all Collateral shall be and remain free and clear of any liens, claims or encumbrances in favor of any Person other than to the Bank, as provided in Schedule 5.7(b) or as permitted by the provisions hereof. 6.7 Tangible Net Worth. Maintain a consolidated ratio, tested quarterly, of debt to "Tangible Net Worth" not exceeding 3.5 x 1, adjusted to 3.0 x 1 at the conclusion of UPET's fiscal year 2000 and to 2.0 x 1 at the conclusion of UPET's fiscal year 2001. As used herein, "Tangible Net Worth" means net worth as defined in GAAP less goodwill and related party receivables. 6.8 EBITDA. Maintain a consolidated ratio, tested quarterly and computed in accordance with GAAP, of (a) earning before interest, taxes, depreciation and amortization to (b) current maturities of long term debt plus interest expense not less than 1.4 x 1 during UPET's fiscal year 2000 and 1.2 x 1 thereafter, to be tested at the time of UPET's filing of its Forms 10-Q and 10-K. 6.9 Additional Owned Real Properties. (a) Not later than thirty (30) days prior to closing, (i) notify the Bank of any proposed acquisition of a direct or indirect ownership interest in any additional Owned Real Properties, and (ii) provide the Bank with a title commitment, hard copies of all title exceptions, current survey, current environmental audit and any other information reasonably requested by the Bank to evaluate such property; and (b) if requested by the Bank, grant a first-priority mortgage, deed of trust or security deed (as appropriate) in favor of the bank encumbering such additional Owned Real Properties, or spread the lien of the Mortgages (for any additional real property located in a jurisdiction in which a Mortgage has been recorded or filed and remains in effect) to such property, in each case pursuant to a form of mortgage, deed of trust, security deed or spreader agreement approved by the Bank. The mortgage instrument shall be in recordable form and shall be recorded in the appropriate public or land records simultaneously with the recording of the instrument of conveyance of such Owned Real Properties. 6.10 Additional Leases. (a) Grant a first-priority collateral assignment in favor of the Bank encumbering any additional Lease hereafter entered into by any Borrower or spread the lien of the Lease Assignments (for any additional Leases leasing property located in a jurisdiction in which a Lease Assignment has been recorded or filed and remains in effect) to such Lease, in each case pursuant to a form of Lease Assignment or spreader agreement approved by the Bank. The Lease Assignment or spreader shall be in recordable form and shall be recorded in the appropriate public or land records simultaneously with the recording of a short form or memorandum of such additional Lease; and (b) either cause any such additional Lease to include the following provisions or obtain the landlord's specific consent to the Bank containing the following provisions: (i) that the tenant's interest in the Lease is freely assignable and that the landlord's consent is not required for the collateral assignment or other pledge of the tenant's interest in the lease to tenant's lender (the "Leasehold Mortgagee"); (ii) that the landlord agrees that any and all liens of the landlord against the Collateral for the payment of rent, whether statutory or otherwise, are automatically subject and subordinate to the security interest in the Collateral granted by the tenant in favor of the Leasehold Mortgagee; (iii) that a short form or memorandum of the Lease in recordable form shall be executed by the parties and promptly recorded in the appropriate public or land records; (iv) that the Lease shall not be subordinate to any mortgage placed on the landlord's interest in the lease premises unless the landlord's lender enters into a non-disturbance agreement with the tenant in form satisfactory to the tenant; (v) that the landlord agrees (A) not to amend or modify the Lease or accept a surrender of the Lease without the Leasehold Mortgagee's written consent, which shall not be unreasonably withheld; (B) to notify the Leasehold Mortgagee in writing if the tenant fails to pay the required rent when due or otherwise commits a default under the Lease that would entitle the landlord to terminate the Lease; (C) to accept a cure of the tenant's default of offered by the Leasehold Mortgage within 30 days after the landlord's written notice to the Leasehold Mortgagee; and (D) to accept the Leasehold Mortgagee or its designee as the landlord's new tenant under the Lease if the Leasehold Mortgagee exercises its rights against the tenant under its collateral assignment of the Lease, provided that the tenant's defaults under the Lease are cured and the new tenant assumes the Lease; and (vi) that the landlord consents and agrees that the Leasehold Mortgagee shall have the right to enter the lease premises where the Collateral is located for the purpose of removing, selling or otherwise dealing with the Collateral; provided that the Leasehold Mortgagee shall be responsible for any cost of repair of physical injury (but not diminution of value) caused by any such removal. Even if the Leasehold Mortgagee or its designee does not elect to cure the tenant's default and assume the Lease as landlord's new tenant as described above, then the Leasehold Mortgagee shall nevertheless have up to 30 days after the landlord's notice of default in which to remove the Collateral from the lease premises, provided that the Leasehold Mortgagee pays to the landlord on demand all rent accruing under the Lease from the date such notice is received until the Collateral is removed. 6.11 Inspection. Permit authorized representatives of the Bank to visit and inspect the offices and properties of Borrowers from time to time upon reasonable notice during normal business hours, to examine the books and records of Borrowers and make copies or extracts therefrom and to discuss the affairs and accounts of Borrowers with their officers. 6.12 Observance of Legal Requirements. Observe and comply in all material respects with all statutes, rules, regulations, guidelines or other requirements having the force of law which now or at any time hereafter may be applicable to any of Borrowers, provided that a Borrower may defer observation and compliance with requirements as to which it contests the validity or application thereof in good faith and by appropriate proceedings if such deferral does not materially hinder Borrowers operations. 6.13 Obtain Approvals. Promptly obtain each consent, license, authorization or approval and make each filing or registration which hereafter shall be either necessary or desirable to enable each Borrower to comply with its obligations hereunder, and promptly furnish evidence thereof to the Bank. 6.14 Furnish Notice. Furnish to the Bank, as soon as possible and in any event within fifteen (15) days after becoming aware of the occurrence of any Event of Default, or any event which with the lapse of time or notice or both would constitute an Event of Default, a statement of a senior executive officer of UPET setting out the details of such Event of Default or event and the action which Borrowers propose to take in order to cure the effect thereof. ARTICLE VII: NEGATIVE COVENANTS From the date hereof and until payment in full of all amounts due hereunder and the performance of all other obligations of Borrowers to the Bank, Borrowers agree with the Bank that, unless the Bank shall otherwise consent in writing, Borrowers shall not: 7.1 Indebtedness. Incur any Indebtedness other than (a) accrued expenses, trade debt, wage obligations and similar Indebtedness in the ordinary course of business, (b) the issuance of debt securities the principal of which is repayable only after payment in full of the Loans, (c) Indebtedness to fund capital expenditures of up to US$1,821,000 to be incurred in 2000, US$1,121,000 to be incurred in 2001 and US$1,121,000 to be incurred in 2002 and each year thereafter which Indebtedness for equipment purchases may be secured by a purchase money security interest and (d) immaterial Indebtedness not exceeding US$50,000 in any fiscal year of Borrowers. Any such Indebtedness for capital expenditures must be at prevailing market rates and on terms acceptable to the Bank in its reasonable discretion. 7.2 Dividends. Pay any dividend on any class of stock of any Borrower, except for dividends paid exclusively in shares of stock of one or more Borrowers or dividends paid exclusively to one or more Borrowers. 7.3 Nature of Business. Permit any material changes to be made in the character of the business of Borrowers from that conducted by them on the date hereof except as provided in the Merger Plan. 7.4 Mergers, Consolidations and Sale of Assets. (a) Enter into any merger, amalgamation or consolidation, (b) except in the ordinary course of its business, sell, lease or otherwise transfer or dispose of a substantial part of its assets except as provided in the Merger Plan or otherwise exclusively among Borrowers other than transfers to or from Calibur or Jackson or (c) sell or dispose of any material assets for deferred payment of all or part of the sales price unless (1) the Bank approves the creditworthiness of the purchaser and any other obligor or (2) a Borrower shall hold a first security interest in such sold assets to secure the deferred portion of the sales price. ARTICLE VIII: COLLATERAL The loans and all other Liabilities of Borrowers to the Bank shall be secured by the following Collateral: 8.1 Mortgages. The Bank shall be granted a first mortgage on the interests of the Borrowers in the Owned Real Estate. 8.2 Leases. Borrowers shall collaterally assign to the Bank the Borrowers' rights under the Leases. 8.3 Pledge. F.S. Non-Gas shall pledge to the Bank its ten percent (10%) common stock interest in Farm Stores Grocery, Inc. together with any additional purchase or acquisitions of Farm Stores Grocery, Inc. stock by any of Borrowers. 8.4 Life Insurance. F.S. Stores shall assign to the Bank the Key Man Life Insurance policy in the amount of US$5,000,000 on the life of Mr. Jose Bared issued by an insurance company acceptable to the Bank. 8.5 Management Agreement. The rights of UPET Group under the Management Agreement shall be collaterally assigned to the Bank. 8.6 Purchase Agreement. The rights of UPET Group under the Purchase Agreement shall be collaterally assigned to the Bank. 8.7 Other Corporate Assets. The Bank shall be granted a first security interest in all other corporate assets of the Borrowers. 8.8 Trademark. Borrowers shall cause Farm Stores Grocery, Inc. to agree for the benefit of the Bank not to encumber the Farm Stores trademark (except on terms that provide that default under any such encumbrance shall not affect Borrowers' rights under the License Agreement relating to the trademark and the usage thereof by Borrowers) and to allow use of the mark by Borrowers at no cost to Borrowers at least so long as the Loans are outstanding. ARTICLE IX: CONDITIONS 9.1 Conditions Precedent. The obligation of the Bank to extend any credit hereunder is subject to Borrowers taking the following action and the Bank having received the following documents in form and substance satisfactory to it and its counsel. (a) This Agreement, the Notes and the Collateral Agreements duly executed by Borrowers party to each such Document; (b) The shares of Farm Stores Grocery, Inc. pledged under the Pledge Agreement, duly endorsed in blank, or by separate stock power executed in blank, to the order of the Bank; (c) Evidence of the application for the Key Man Life Insurance policy in the amount of US$5,000,000 on the life of Mr. Jose Bared; (d) Evidence of the agreement for the benefit of the Bank of Farm Stores Grocery, Inc. not to encumber the Farm Stores trademark and to allow use of the mark by Borrowers at no cost to Borrowers at least so long as the Loans are outstanding; (e) The assignment to the Bank of the rights of UPET Group under the Management Agreement including specifically a collateral assignment of the management fee payable to UPET Group thereunder; (f) The assignment to the Bank of the rights of UPET Group under the Purchase Agreement including specifically a collateral assignment of the option to UPET Group thereunder; (g) Evidence of the filing of UCC-1 Financing Statements for the security interests granted to the Bank; (h) Appraisals of the Owned Real Estate by an appraiser acceptable to and in form and substance acceptable to the Bank; (i) Mortgagee Title Insurance for the Mortgages [and other real estate documents including independent environmental assessment for compliance with Federal and State regulations] in form acceptable to and containing only such exceptions as are acceptable to the Bank and its counsel, including specifically Messrs. Paul, Hastings, Janofsky & Walker, special real estate counsels to the Bank; (j) The following documents related to the Chapter 11 bankruptcy proceedings styled United Petroleum Corporation, Case No. 99-88(PJW), all in form acceptable to the Bank and its counsel, including specifically Messrs. Genovese Lichtman Joblove & Battista, special bankruptcy counsel to the Bank: (i) Certified copy of the Motion for Entry of Order Establishing Bar Date for Filing Proofs of Claims and Approving Form and Manner of Notice Thereof. (ii) Certified copy of the Order Fixing Bar Date For Filing Proofs of Claim and Approving Form and Manner of Notice of Bar Date. (iii) Certified copy of the Second Amended Disclosure Statement. (iv) Certified copy of the Order Approving Second Amended Disclosure Statement. (v) Certified copy of the Second Amended Plan of Reorganization. (vi) Certified copy of the Findings of Fact, Conclusions of Law and Order Confirming Amended Plan; (k) Evidence of environmental, casualty, liability and business interruption insurance acceptable to the Bank; (l) Certificate of Mr. Jose Bared of the shares of UPET to be owned by him at the completion of the Closing and as to any agreements with respect to such shares; (m) Copies of resolutions of the Boards of Directors of Borrowers, certified as of a current date by the Secretary or an Assistant Secretary of each Borrower, authorizing the execution and delivery of the Documents to which it is a party and the borrowings hereunder; (n) Incumbency Certificates of the officers of each Borrower, including specimen signatures of such officers empowered to execute the Documents to which it is a party and any documents other relating hereto, certified as of a current date by the Secretary or an Assistant Secretary of each Borrower; and (o) Copies of the Certificate or Articles of Incorporation or other charter documents and all amendments thereto of each Borrower, currently certified by the relevant Governmental Authority (such certified charter documents shall include evidence of good standing from the appropriate Governmental Authority). 9.2 Conditions Subsequent. Borrowers covenant to provide, and the obligation of the Bank to continue extending any credit hereunder is subject to Borrowers taking the following action and the Bank having received the following documents in form and substance satisfactory to it and its counsel: (a) Within sixty (60) days of the Closing Date, evidence of the assignment to the Bank of the Key Man Life Insurance policy in the amount of US$5,000,000 on the life of Mr. Jose Bared; and (b) Within sixty (60) days of the Closing Date, evidence of the release or subordination of the mortgages and security interests of Pennzoil Products Company in assets of Calibur and evidence of the correction of the legal description of the Dekalb County, Georgia Owned Real Property. ARTICLE X: EVENTS OF DEFAULT 10.1 Events of Default. If any of the following events shall have occurred and shall be continuing: (a) Failure of Payment. Borrowers fail to pay any principal, interest or other amounts due under this Agreement or with respect to the Documents on the due date and in the manner provided hereunder or therein and, in the case of interest, such default shall continue for more than five (5) days; or (b) Misstatements. Any material representation, warranty or other statement made herein or otherwise in writing by or on behalf of a Borrower in connection herewith proves to be or have been incorrect or misleading in any material respect as of the date at which it is made or deemed to be made; or (c) Other Obligations. A Borrower defaults in any payment of principal of or interest on any other obligation for the payment of borrowed money or under a financing lease, in excess of US$100,000 in the aggregate, when such obligation becomes due and payable, or is required to be prepaid prior to the stated maturity thereof, and, in the case of interest, such default shall continue for more than five (5) days; or a Borrower defaults in the performance of any other agreement, term or condition contained in any agreement or instrument pursuant to which such Borrower has borrowed money or under a financing lease, or by which any obligation for the payment of borrowed money is created, if the effect of such default is to cause such obligation in excess of US$100,000 in the aggregate to become due and payable prior to its stated maturity; or (d) Performance of Covenants. Borrowers default in the due performance or observance of any covenant, condition or provision on the part of Borrowers to be performed or observed pursuant to the documents and such default, if capable of cure, is not cured (i) within fifteen (15) days after Borrowers becomes aware of such default or (ii) in the event the default is incapable of cure within such fifteen (15) days, within sixty (60) days if Borrowers provide the Bank with reasonable assurance that such default is capable of cure within such 60 day period, promptly commence to cure the default and thereafter continue diligently to cure the default; or (e) Judgments. A Borrower shall permit any judgment for more than US$100,000 against it to remain undischarged for a period of more than thirty (30) days unless during such period such judgment shall be effectively stayed, on appeal or otherwise; or (f) Business Operations; Bankruptcy. A Borrower suspends the operations (other than in the ordinary course of business and not for reasons of insolvency and similar acts) of any of its businesses (other than in connection with the sales or closures of stores in the ordinary course of business), becomes insolvent, is unable to pay its debts as they mature or admits such inability in writing, calls a meeting of its creditors, files for or suffers to be filed against it any petition under any provision of any bankruptcy, insolvency, reorganization, rearrangement, readjustment of debt or similar law or statute or any application for the process of controlled administration, or a Borrower applies for or permits to be appointed any receiver, trustee or custodian for it or any substantial portion of its property or any order for relief is entered with respect to a Borrower under any bankruptcy code or any similar law of any jurisdiction and the same shall remain undischarged for a period of sixty (60) days; or (g) Condemnation. All or a substantial part of a Borrower's property is condemned, seized or otherwise appropriated, or custody of such property is assumed by any Governmental Authority or court or other Person purporting to act under the authority of government of any jurisdiction, or a Borrower is prevented from exercising normal control over all or a substantial part of its property and such default is not remedied within 30 days after it occurs; or (h) Change of Control. Mr. Jose Bared disposes of shares of UPET which the Bank, after consultation with UPET, determines to be adverse to the best interest of Borrowers or Mr. Jose Bared ceases to be the Chief Executive Officer of UPET and UPET Group, and the Bank after consultation with UPET determines such action to be adverse to the best interest of Borrowers; or (i) Enforceability. This Agreement, or any provision hereof, at any time after its execution and delivery and for any reason whatsoever ceases to be in full force and effect, valid and enforceable both in the jurisdictions in which the Borrowers operate and in the State of Florida, or Borrowers at any time fail to agree that this Agreement and all provisions hereof are in full force and effect, valid, and enforceable both in the jurisdictions in which the Borrowers operate and in the State of Florida; then the Bank by notice to UPET may declare the entire unpaid principal amount of the Loans to be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived. 10.2 Exercise of Rights. Upon the occurrence of an Event of Default and at any time thereafter, the Bank shall have the right in its sole discretion to determine which rights, security, liens, guarantees, security interests or remedies it shall retain, pursue, release, subordinate, modify or take any other action with respect to, without in any way modifying or affecting any of the other of them or any of its rights hereunder. Notwithstanding any other rights which the Bank may have under applicable law and hereunder, Borrowers agree that, should at any time an Event of Default occur or be continuing, the Bank shall have the right to apply (including, without limitation, by way of setoff) any of Borrowers' property held by, or thereafter coming into possession of, the Bank (including, without limitation, deposit account balances) to a reduction of Indebtedness of Borrowers to the Bank. ARTICLE XI: MISCELLANEOUS 11.1 Notices. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the parties hereto under the Documents shall be deemed to have been duly given or made when delivered in writing (including telecommunications) to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, at the address or facsimile number set forth opposite the name of such party on the signature lines set forth below, or at such other address or facsimile number as the parties hereto may hereafter specify to the other in writing. Written notices shall be deemed delivered upon receipt if delivered by hand or five Business Days after mailing. Notices provided by any of the other means referred to above shall be deemed delivered upon receipt. 11.2 Waiver of Rights. No failure to exercise and no delay in exercising, on the part of the Bank, any right, power or privilege under the Documents shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 11.3 Cumulative Remedies, Conflicts. Each of the Documents and the obligations of Borrowers hereunder and thereunder are in addition to and not in substitution for any other obligations or security interests now or hereafter held by the Bank and shall not operate as a merger of any contract or debt or suspend the fulfillment of or affect the rights, remedies or powers of the Bank in respect of any obligation or other security interest held by it for the fulfillment thereof. The rights and remedies provided in the Documents are cumulative and not exclusive of any other rights or remedies provided by law. If any conflict exists between the terms of this Agreement and the terms of any of the other Documents to which UPET, UPET Group, F.S. Stores, F.S. Gas, F.S. Non-Gas or REWJB Gas are parties, the terms of this Agreement shall control. 11.4 Successors; Governing Law. This Agreement shall be binding upon and inure to the benefit of Borrowers and the Bank, and their respective successors and assigns, except that none of Borrowers may assign or transfer its rights hereunder without the prior written consent of the Bank. This Agreement shall be governed by and construed in accordance with the laws of the State of Florida. 11.5 Consent to Jurisdiction; Process Agent. (a) Borrowers hereby irrevocably submit to the nonexclusive jurisdiction of any Florida State or Federal court sitting in Miami-Dade County, Florida in any action or proceeding arising out of or relating to this Agreement and the other Documents, and Borrowers hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Florida State or Federal court. Each Borrower hereby irrevocably appoints CT Corporation, 1200 South Pine Island Road, Plantation, Florida 33324, its successors or any other person acting on behalf of such person ("Process Agent"), as its agent and attorney-in-fact to receive on its behalf of its property, service of copies of the summons and complaint and any other process which may be served in any such action or proceeding. Such service may be made by mailing or delivering a copy of such process to a Borrower in care of the Process Agent at the Process Agent's address set forth above or such other address as the Process Agent shall designate in writing to the Bank, and each Borrower hereby irrevocably authorizes and directs the Process Agent to accept such service on its behalf. (b) Borrowers hereby irrevocably waive any objection which any of them may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any Florida State or Federal court sitting in Miami-Dade County, Florida, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. (c) Nothing in this Section 11.5 shall affect the right of the Bank to serve legal process in any other manner permitted by law or affect the right of the Bank to bring any action or proceeding against Borrowers or their property in the courts of other jurisdictions. 11.6 Currency Conversion. This is a credit transaction in which the specification of Dollars is of the essence, and Dollars shall be the currency of account in all events. The payment obligations of the Borrowers under this Agreement and the other Documents shall not be discharged by an amount paid in another currency or in another place, whether pursuant to a judgment or otherwise, to the extent that the amount so paid on conversion to Dollars in accordance with normal banking procedures does not yield the amount of Dollars due hereunder. Notwithstanding the foregoing, if for the purpose of obtaining or enforcing judgment in any court it is necessary to convert a sum due hereunder in Dollars into another currency (the "Second Currency"), the rate of exchange which shall be applied shall be that at which in accordance with normal banking procedures the Bank could purchase Dollars with the Second currency on the Business Day preceding that on which final judgment is given. If payment of any sum due hereunder is made to or received by the Bank, whether by judicial judgment (and notwithstanding the rate of exchange actually applied in giving such judgment), or otherwise, in a Second Currency, the obligations hereunder of Borrowers shall be discharged only in the net amount of Dollars that on the Business Day following receipt by the Bank of any sum adjudicated to be due in a Second Currency, the recipient in accordance with its normal bank procedures is able to lawfully purchase with such amount of Second Currency. To the extent that the Bank is not able to purchase sufficient Dollars with such amount of Second Currency to discharge the Dollar obligations to the Bank, the obligations of Borrowers to the Bank shall not be discharged with respect to such difference, and Borrowers agrees that any such undischarged amount will be due as a separate debt and shall not be affected by payment of or judgment being obtained for any other sums due under or in respect of this Agreement. To the extent that the Bank is able to purchase an amount in Dollars in excess of the amount necessary to discharge such Dollar obligations, the Bank shall promptly remit such excess to Borrowers. 11.7 Amendments. The terms of this Agreement may not be amended, modified or waived except by written agreement between Borrowers and the Bank. 11.8 Usury. Anything herein to the contrary notwithstanding, the obligations of Borrowers to pay interest shall be subject to the limitation that payment of interest shall not be required to the extent that receipt of such payment by the Bank would be contrary to the provisions of any law applicable to the Bank limiting the maximum rate of interest which may be charged or collected by the Bank. 11.9 Survival of Agreements. All covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the making by the Bank of the credit herein contemplated and shall continue in full force and effect so long as such credit is outstanding and unpaid. 11.10 Severability. Any provision hereof which is prohibited or unenforceable shall be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. 11.11 Descriptive Headings. The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. 11.12 Waiver of Trial by Jury. BORROWERS AND BANK EACH HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY LITIGATION BASED HEREON OR ARISING OUT OF OR IN CONNECTION WITH ANY AGREEMENT, DOCUMENT OR INSTRUMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. 11.13 Confidentiality. The Bank agrees (on behalf of itself and each of its Affiliates, directors, officers, employees, and representatives) to keep confidential, in accordance with its customary procedures of handling confidential information of the same nature and in accordance with safe and sound banking practices, any non-public information supplied to it by Borrowers or any of their Subsidiaries pursuant to this Agreement; provided, however, that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for the Bank so long as such counsel confirms it shall keep the non-public information confidential in accordance with these provisions, (iii) to bank examiners, auditors or accountants or to any other regulatory agency or body with proper authority (including non-governmental regulatory agencies or bodies), (iv) in connection with any litigation to which the Bank is a party where disclosure of such information is, in the opinion of counsel for the Bank, necessary or advisable in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving the Bank and arising out of, based upon, relating to or involving this Agreement or any Note, or any transactions contemplated hereby or arising hereunder, (v) to any assignee or participant of the Bank's rights hereunder, so long as such assignee or participant first acknowledges that it is bound by the provisions of this Section 10.13, or (vi) to any credit agency that rates the financial condition of the Bank or the claims paying ability of the Bank or the financial condition of any Borrower. To the extent disclosure is required under clauses (i), (iii) and (iv) above, the Bank agrees to use its best efforts to give the Borrower prompt prior notice thereof if allowed by law. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the date first written above. Address for Bank: HAMILTON BANK, N.A. 3750 N.W. 87th Avenue Miami, Florida 33178 By: Attn: Alina Cannon ------------------------------------- Name: Alina Cannon Telephone: (305) 717-5500 Title: Vice President Facsimile: (305) 717-6873 By: ------------------------------------- Name: J. Reid Bingham Title: General Counsel Address for all Borrowers: UNITED PETROLEUM CORPORATION 5800 N.W. 74th Avenue Miami, Florida 33166 By: Attn: Mr. Jose Bared ------------------------------------- Name: Carlos Bared Telephone: (305) Title: Vice President Facsimile: (305) UNITED PETROLEUM GROUP, INC. By: ------------------------------------- Name: Carlos Bared Title: President F.S. CONVENIENCE STORES, INC. By: ------------------------------------- Name: Carlos Bared Title: Vice President F.S. GAS SUBSIDIARY, INC. By: ------------------------------------- Name: Carlos Bared Title: Vice President F.S. NON-GAS SUBSIDIARY, INC. By: ------------------------------------- Name: Carlos Bared Title: Vice President REWJB GAS INVESTMENTS By: ------------------------------------- Name: Carlos Bared Title: Vice President JACKSON-UNITED PETROLEUM CORPORATION By: ------------------------------------- Name: Carlos Bared Title: Vice President CALIBUR SYSTEMS, INC. By: ------------------------------------- Name: Carlos Bared Title: Vice President -----END PRIVACY-ENHANCED MESSAGE-----