<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[MARK ONE]
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 27, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO __________
COMMISSION FILE NUMBER 1-13226
DENAMERICA CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 58-1861457
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
7373 N. SCOTTSDALE ROAD 85253
SUITE D-120, SCOTTSDALE AZ 85253 (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (602) 483-7055
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /x/ No / /
The number of shares of the issuer's class of capital stock as of May 14, 1996;
the latest practicable date, is as follows: 13,129,944 shares of Common Stock,
$.10 par value.
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<PAGE> 2
DENAMERICA CORP.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 27, 1995 and March 27, 1996 3
Condensed Consolidated Statements of Operations -
Three months ended March 29, 1995 and March 27, 1996 5
Condensed Consolidated Statements of Cash Flows -
Three months ended March 29, 1995 and March 27, 1996 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information 14
</TABLE>
2
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DENAMERICA CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
December 27, March 27,
Assets 1995 1996
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ -- $ --
Receivables 989 1,317
Inventories 1,200 2,370
Deferred income taxes 249 949
Other current assets 215 933
-------- --------
Total current assets 2,653 5,569
-------- --------
Property and equipment, net of accumulated depreciation
and amortization of $5,505 at December 27, 1995 and
$6,170 at March 27, 1996 33,817 49,726
Cost in excess of fair value of the net assets acquired,
net of accumulated amortization of $415 at
December 27, 1995 and $487 at March 27, 1996 9,870 71,870
Franchise rights, net of accumulated amortization of $200 at
December 27, 1995 and $216 at March 27, 1996 925 1,020
Favorable leases, net of accumulated amortization of $197 at
December 27, 1995 and $215 at March 27, 1996 814 796
Deferred financing costs 653 2,333
Other intangible assets, net of accumulated amortization of
$691 at December 27, 1995 and $790 at March 27, 1996 316 1,277
Note receivable from shareholder 2,600 2,600
Other assets, including due from related parties of $35 2,137 1,636
-------- --------
$ 53,785 $136,827
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
DENAMERICA CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets, Continued (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
December 27, March 27,
Liabilities and Shareholders' Equity 1995 1996
------------------------------------ ---- ----
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 1,371 $ 4,121
Current obligations under capital leases 916 1,586
Accounts payable 3,775 11,252
Accrued compensation and related costs 2,113 6,215
Store closing reserve -- 6,000
Accrued taxes 935 1,990
Other current liabilities 2,949 4,502
--------- ---------
Total current liabilities 12,059 35,666
Long-term debt, less current portion 10,371 34,792
Subordinated notes (face value $24,250) -- 20,840
Obligations under capital leases, less
current obligations 19,881 21,992
Other 1,508 4,011
--------- ---------
Total liabilities 43,819 117,301
--------- ---------
Minority interest in joint ventures 1,901 1,903
5% Redeemable convertible preferred stock (note 1) 7,501 --
Shareholders' equity (notes 1, 3, and 4):
Common stock 7 1,308
Additional paid-in capital 3,156 33,525
Accumulated deficit (2,599) (17,210)
--------- ---------
Total shareholders' equity 564 17,623
--------- ---------
$ 53,785 $ 136,827
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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DENAMERICA CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Three months ended
------------------------------
March 29, March 27,
1995 1996
---- ----
<S> <C> <C>
Restaurant sales:
Denny's restaurants $ 15,843 $ 18,156
Non-Denny's restaurants -- 2,005
----------- -----------
Total restaurant sales 15,843 20,161
----------- -----------
Restaurant operating expenses:
Cost of food and beverage 4,265 5,632
Payroll and payroll related costs 5,365 7,260
Depreciation and amortization 573 916
Other restaurant operating costs 4,228 5,484
----------- -----------
Total restaurant operating expenses 14,431 19,292
----------- -----------
Restaurant operating income 1,412 869
Administrative expenses 799 1,047
----------- -----------
Operating income (loss) 613 (178)
Other income (expense):
Other income 2 --
Interest expense (484) (860)
----------- -----------
Income (loss) before minority interest in joint
ventures, income taxes and extraordinary item 131 (1,038)
Minority interest in joint ventures (22) 2
----------- -----------
Income (loss) before income taxes and
extraordinary item 109 (1,036)
Income tax expense (benefit) 40 (359)
----------- -----------
Income (loss) before extraordinary item 69 (677)
Extraordinary item - loss on extinguishment of
debt (note 6) -- (497)
----------- -----------
Net income (loss) 69 (1,174)
Preferred stock dividend and accretion (166) (149)
----------- -----------
Net income (loss) applicable to common shareholders $ (97) $ (1,323)
=========== ===========
Income (loss) before extraordinary item per common
and common equivalent share $ (.01) $ (.12)
Extraordinary item - loss on extinguishment of
debt per common and common equivalent share -- (.07)
----------- -----------
Net income (loss) per common and common
equivalent share $ (.01) $ (.19)
=========== ===========
Weighted average common and common
equivalent shares outstanding 6,937,500 6,937,500
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
DENAMERICA CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three months ended
-------------------------
March 29, March 27,
1995 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 69 $(1,174)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 573 916
Amortization of deferred financing costs (45) 45
Minority interest in joint ventures 22 2
Deferred income taxes 39 (368)
Deferred rent 26 81
Extraordinary item - loss on extinguishment of debt -- 497
Other -- 25
Changes in operating assets and liabilities:
Receivables 38 (217)
Inventories (29) (58)
Prepaid expenses and other assets (136) (542)
Accounts payable and accrued liabilities 839 449
------- -------
Net cash provided by (used in) operating activities 1,486 (344)
------- -------
Cash flows from investing activities:
Purchase of property and equipment (3,387) (1,425)
Purchase of intangibles (324) (413)
------- -------
Net cash used in investing activities (3,711) (1,838)
------- -------
Cash flows from financing activities:
Borrowings 1,616 3,650
Principal reductions on long-term obligations (260) (1,344)
Proceeds from expansion loan 860 --
Dividends on preferred stock -- (124)
Distributions to joint venturer (149) --
------- -------
Net cash provided by financing activities 2,067 2,182
------- -------
Net change in cash and cash equivalents (158) --
Cash and cash equivalents at beginning of period 158 --
------- -------
Cash and cash equivalents at end of period $ -- $ --
======= =======
Supplemental schedule of cash flow information -
cash paid during the period for:
Interest $ 254 $ 950
======= =======
Income taxes $ 100 $ 45
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE> 7
DENAMERICA CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
(1) Basis of Presentation
General
The accompanying unaudited condensed consolidated financial statements of
DenAmerica Corp. (the "Company") have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of the Company's management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. These statements
should be read in conjunction with the consolidated financial statements
and notes thereto and management's discussion and analysis of financial
condition and results of operations included in the Company's Transition
Report on Form 10-K for the year ended December 27, 1995, which will be
filed in June 1996.
Merger
On March 29, 1996, Denwest Restaurant Corp. ("DRC") merged with and into
the Company, with the Company being the surviving corporation (the
"Merger"). Upon consummation of the Merger, the Company changed its name
from American Family Restaurants, Inc. ("AFR") to DenAmerica Corp. In
connection with the Merger, the Company issued to the former shareholders
of DRC an aggregate of 6,937,500 shares of the Company's Common Stock, an
aggregate of $24,250 principal amount of the Company's 13% Series A and
Series B Subordinated Notes due 2003 (the "Series A and Series B Notes" or
"Notes") and warrants to purchase an aggregate of 666,000 shares of the
Company's Common Stock at an exercise price of $0.01 per share. Upon
completion of the Merger, the four former shareholders of DRC held
securities having an aggregate of approximately 53.0% of the outstanding
voting power of the Company.
Reverse Acquisition Method of Accounting for the Merger
As described above, the former shareholders of DRC owned an aggregate of
approximately 53.0% of the outstanding voting power of the Company
immediately following the Merger. Accordingly, the Merger has been
accounted for as a reverse purchase under generally accepted accounting
principles as a result of which DRC is considered to be the acquiring
entity and AFR the acquired entity for accounting purposes, even though
the Company is the surviving legal entity. In addition, as permitted under
generally accepted accounting principles, for accounting purposes the
Merger was deemed to have occurred on March 27, 1996, the last day of
DRC's first quarter for fiscal 1996. As a result, (i) the historical
financial statements of AFR for periods prior to the date of the Merger
are no longer the historical financial statements of the Company and
therefore are no longer presented; (ii) the historical financial
statements of the Company for periods prior to the date of the Merger are
those of DRC; (iii) all references to the financial statements of the
"Company" apply to the historical financial statements of DRC prior to and
subsequent to the Merger; and (iv) any references to "AFR" apply solely to
American Family Restaurants, Inc. and its financial statements prior to
the Merger.
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<PAGE> 8
In accordance with the accounting rules for a reverse acquisition, the
consolidated financial statements presented herein are as follows:
(i) Consolidated Balance Sheets of the Company at March 27, 1996
(which reflects the acquisition of AFR by DRC, since the
effective accounting date for the Merger is March 27, 1996) and
December 27, 1995 (which does not include the balance sheet of
AFR at such date);
(ii) Consolidated Statements of Operations of the Company for the
three months ended March 27, 1996 and March 29, 1995 (neither
of which includes the results of operations of AFR, since the
Merger accounting date is March 27, 1996); and
(iii) Consolidated Statements of Cash Flows of the Company for the
three months ended March 27, 1996 and March 29, 1995 (neither
of which includes the results of operations of AFR, since the
Merger accounting date is March 27, 1996). For purposes of the
Consolidated Statement of Cash Flows, the Merger was
substantially reported as a noncash transaction, as it was
completed primarily by using the Company's Common Stock and
Notes as consideration for the capital stock of DRC.
See Note 3 for certain summary pro forma financial information for DRC and
AFR.
(2) Earnings Per Share
Earnings per share have been computed based upon weighted average shares
of the Company's Common Stock received in connection with the Merger by
the former shareholders of DRC after deducting preferred stock dividends
and accretion on preferred stock of DRC outstanding prior to the Merger.
(3) Merger
As described in Note l herein, the Merger has been accounted for as a
reverse acquisition in which DRC acquired control of AFR for accounting
purposes.
The total purchase price of the Merger was $31.4 million, which represents
the number of shares of AFR Common Stock outstanding immediately prior to
the Merger valued at the market price of such shares as of the date of the
signing of the merger agreement plus merger-related expenses. This amount
was allocated to the assets of AFR acquired and liabilities of AFR
assumed, based upon their estimated fair value as of March 27, 1996. At
March 27, 1996, assets acquired and liabilities assumed were deemed to
have fair values substantially equal to their historic book values, except
for property and equipment, certain intangible assets, and certain
liabilities related to the costs associated with closing certain
restaurants. These amounts have been recorded based upon estimates
available at this time. The Company will finalize these estimates during
the remainder of fiscal 1996, although it currently does not believe that
such amounts will materially change.
Because the Merger was completed primarily with the issuance of newly
issued shares of Common Stock and Notes, the Company's Consolidated
Balance Sheet following the Merger reflects the reverse acquisition of
AFR. However, such noncash activity is excluded from the accompanying
Consolidated Statement of Cash Flows for the period prior to the Merger.
The following summarizes the noncash activity associated with the Merger.
<TABLE>
<S> <C>
Working capital deficit, including outstanding
checks in excess of cash balances of $(2,643) $ (20,208)
Property and equipment 14,450
Intangible assets 64,162
Long-term obligations (49,222)
</TABLE>
8
<PAGE> 9
The following represents the summary pro forma results of operations as
if the Merger had occurred at the beginning of 1995. The pro forma
results are not necessarily indicative of the results which will occur in
the future.
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 29, March 27,
1995 1996
------- -------
<S> <C> <C>
Restaurant sales 41,532 48,625
Income (loss) before extraordinary item (714) (3,986)
Net income (loss) (714) (4,483)
Earnings (loss) per share (.06) (.34)
</TABLE>
In May 1996, Jeffrey D. Miller, Chairman of the Board, forgave a $1.0
million loan to the Company at the request of former shareholders of DRC.
The existence of the loan would have constituted a breach of obligations
of the Company to the former shareholders of DRC. The debt forgiveness has
been reflected as part of the reverse purchase accounting as described in
notes 1 and 3.
(4) Shareholders' Equity
The Company has authorized 20,000,000 shares of Common Stock, par value of
$.10 per share. Upon consummation of the Merger, there were 13,084,944
shares issued and outstanding.
In connection with the Merger, the Company granted options to purchase
300,000 shares of Common Stock, of which options to purchase 60,000 shares
of Common Stock at an exercise price of $3.00 per share are immediately
vested and exercisable. The remaining options to purchase 240,000 shares
of Common Stock at an exercise price of $4.00 per share vest over a
four-year period, provided the employee who received the options
continues his employment with the Company.
In addition, in connection with the closing of the Company's new credit
facility, the Company issued to Banque Paribas six-year warrants to
acquire 438,028 shares of DenAmerica Common Stock at an exercise price of
$4.3065 per share.
On April 29, 1996, the Company granted stock options pursuant to its stock
option plan to acquire 240,000 shares of Common Stock at an exercise price
of $4.00 per share. Of the options granted, options to acquire 48,000
shares are immediately vested and exercisable. The remaining options vest
over a four-year period, provided the employees who received the options
continue their employment with the Company.
In addition, on April 29, 1996, the Company granted an option to purchase
24,800 shares of Common Stock at an exercise price of $4.00 per share. Of
these options, options to acquire 4,960 shares are immediately vested and
exercisable. The remaining options vest over a four-year period provided
the employee who received the options continues his employment with the
Company.
(5) Credit Facility
In connection with the Merger, the Company entered into a $65.0 million
credit facility with Banque Paribas (the "Paribas Facility"). The Paribas
Facility consists of (i) a Term Loan (the "Term Loan"), (ii) Revolving
Loans (the "Revolver"), and (iii) a Delayed Draw Term Loan (the "Delayed
Term Loan"). The Term Loan, the Revolver, and the Delayed Term Loan will
mature and become payable December 31, 2001. At the Company's option,
interest on all amounts borrowed under the Paribas Facility will accrue at
the rate of either prime plus 1.5% or a "Eurodollar Rate," calculated
based upon LIBOR plus 3.5%. Amounts borrowed under the Paribas Facility
are secured by substantially all of the tangible and intangible assets of
the Company. The Company will be required to make mandatory prepayments of
amounts borrowed under the Paribas Facility in the event of certain asset
sales, equity issuances, excess cash flows, and under certain other
9
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circumstances. The Company, at its option and without penalty, may cancel
any unused commitments or prepay outstanding indebtedness under the
Paribas Facility, in whole or in part, at any time during the term of the
Paribas Facility.
The Paribas Facility contains certain provisions that, among other things,
will limit the ability of the Company and its subsidiaries, without the
consent of Banque Paribas, to incur additional indebtedness, pay certain
dividends or make certain distributions on their respective capital stock,
repurchase shares of their respective capital stock, enter into additional
restaurant leases, make or sell assets, or exceed specified levels of
capital expenditures. The Paribas Facility also requires the Company to
maintain certain financial ratios and to meet certain financial tests. The
Paribas Facility also includes customary provisions for credit facilities
of this type, including representations, warranties, covenants, and events
of default.
The Company paid loan origination, investment banking, legal, prepayment
fees on existing debt, and other fees of approximately $4.0 million in
connection with the closing of the Paribas Facility. During the term of
the Paribas Facility, the Company will be required to pay an annual fee of
$75,000 to Banque Paribas as agent of the lenders that participate with it
in the facility and a fee of 0.5% of the unused portion of amounts
available for borrowing under the Paribas Facility. In addition, the
Company issued to Banque Paribas six-year warrants to acquire 438,028
shares of the Company's Common Stock at an exercise price of $4.3065 per
share.
Term Loan
In connection with the Merger, the Company borrowed $35.0 million under
the Term Loan, which was used to refinance certain indebtedness of AFR and
DRC existing prior to the Merger and to pay certain transaction expenses
incurred in connection with the Merger and the Paribas Facility. The
Company is required to repay the Term Loan in quarterly payments of
principal and interest.
Revolver
The Paribas Facility includes a $15.0 million Revolver which the Company
may utilize to finance working capital needs, to repay the Term Loan, to
make capital expenditures, and to support letters of credit. In connection
with the Merger, the Company borrowed $2.8 million under the Revolver.
Delayed Term Loan
Provided that certain conditions are met, the Company will be permitted to
make draws of all or a part of the $15.0 million available under the
Delayed Term Loan to finance acquisitions of additional restaurants
beginning on June 30, 1996 and ending on December 31, 1997, and will be
permitted to make draws under the Delayed Term Loan to repay the Series A
and Series B Notes beginning December 31, 1996 and ending on December 31,
1997. The Company will be required to repay the total amount outstanding
under the Delayed Term Loan in equal quarterly payments over a four-year
period commencing on January 1, 1998. The maximum amount that the Company
will be permitted to borrow under the Delayed Term Loan will be limited by
a specified ratio of the Company's adjusted senior debt (as defined) to
its earnings before interest, taxes, depreciation, and amortization for
the prior twelve-month period.
(6) Long-Term Debt/Extraordinary Item
In connection with the Merger, the Company repaid approximately $11,000 of
indebtedness, which resulted in an extraordinary loss on the
extinguishment of such debt of $497, net of an income tax benefit of $332.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read in conjunction with
the condensed consolidated financial statements and notes thereto included
elsewhere herein.
COMPARISON OF RESULTS OF OPERATIONS
The following table presents, for the periods indicated, certain items in
the condensed consolidated statements of operations as a percentage of total
restaurant sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------
MARCH 29, 1995 MARCH 27, 1996
-------------- --------------
<S> <C> <C>
Restaurant sales:
Denny's restaurants 100.0% 90.0%
Non-Denny's restaurants -- 10.0
----- -----
Total restaurant sales 100.0 100.0
----- -----
Restaurant operating expenses:
Cost of food and beverage 26.9 27.9
Payroll and payroll related costs 33.9 36.0
Amortization and depreciation 3.6 4.5
Other restaurant operating costs 26.7 27.2
----- -----
Total restaurant operating expenses 91.1 95.7
----- -----
Restaurant operating income 8.9 4.3
Administrative expenses 5.0 5.2
----- -----
Operating income 3.9 (.9)
Other income -- --
Interest expense (3.1) (4.2)
----- -----
Income (loss) before minority interest
in joint ventures, income taxes and
extraordinary item .8 (5.1)
Minority interest in joint ventures (.1) --
----- -----
Income (loss) before income taxes and
extraordinary item .7 (5.1)
Income tax expense (benefit) .3 (1.8)
----- -----
Income (loss) before extraordinary item .4 (6.9)
Extraordinary item - loss on extinguishment
of debt -- (2.5)
----- -----
Net income (loss) .4% (9.4)%
===== =====
</TABLE>
THREE MONTHS ENDED MARCH 27, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 29,
1995
Restaurant Sales. Restaurant sales increased $4.3 million, or 27.2%, to
$20.1 million for the three months ended March 27, 1996 as compared with
restaurant sales of $15.8 million for the three months ended March 29, 1995.
This increase was primarily attributable to acquisitions and new restaurants
opened during fiscal 1995.
Cost of Food and Beverage. Cost of food and beverage increased to 27.9% of
restaurant sales for the three months ended March 27, 1996 as compared with
26.9% of restaurant sales for the three months ended March 29, 1995, primarily
as the result of several promotional programs implemented in January 1996 and
the higher food costs associated with the Company's non-Denny's restaurants,
which were 30.6% of restaurant sales at the Company's non-Denny's restaurants
for the period.
Payroll and Payroll Related Costs. Payroll and payroll related costs were
36.0% of restaurant sales for the three months ended March 27, 1996 as compared
with 33.9% of restaurant sales for the three months ended March 29, 1995. This
increase was primarily attributable to staffing inefficiencies created by the
promotional programs implemented in the first quarter of 1996 and higher payroll
costs associated with the Company's non-Denny's restaurants, which were 43.0% of
restaurant sales at the Company's non-Denny's restaurants for the period.
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Depreciation and Amortization. Depreciation and amortization of
restaurant equipment, leasehold improvements, intangible assets, pre-opening
costs and other items increased to 4.5% of restaurant sales for the three
months ended March 27, 1996 as compared with 3.6% of restaurant sales for the
three months ended March 29, 1995. This increase was primarily attributable to
the amortization of pre-opening costs associated with the new restaurants
opened during fiscal 1995 and an increase in amortization attributable to
capital leases associated with new store development.
Other Restaurant Operating Costs. Other restaurant operating costs were
27.2% of restaurant sales for the three months ended March 27, 1996 as compared
with 26.7% of restaurant sales for the three months ended March 29, 1995. This
increase was primarily attributable to higher occupancy costs associated with
the Company's non-Denny's restaurants.
Restaurant Operating Income. Restaurant operating income decreased
$543,000 to $869,000 for the three months ended March 27, 1996 as compared with
$1.4 million for the three months ended March 29, 1995. This decrease was
principally the result of the factors described above.
Administrative Expenses. Administrative expenses increased to 5.2% of
restaurant sales for the three months ended March 27, 1996 as compared with 5.0%
of restaurant sales for the three months ended March 29, 1995. This increase was
primarily the result of increased adminstrative staffing levels in anticipation
of the Merger and other merger related costs.
Interest Expense. Interest expense was $860,000, or 4.2% of restaurant
sales, for the three months ended March 27, 1996 as compared with $484,000, or
3.1% of restaurant sales, for the three months ended March 29, 1995. The
increase is the result of increased debt levels, including interest expense on
capitalized lease obligations associated with new store development.
Income Tax Expense (Benefit). The Company recorded an income tax benefit of
approximately $(359,000), an effective rate of 35%, for the three months ended
March 27, 1996 as compared with income tax expense of approximately $40,000, an
effective rate of 37%, for the three months ended March 29, 1995.
Net Income (Loss). The Company recorded a net loss of approximately $(1.2
million) for the three months ended March 27, 1996 as compared with net income
of $69,000 for the three months ended March 29, 1995, as a result of the factors
described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company, and the restaurant industry generally, operate principally on
a cash basis with a relatively small amount of receivables. Therefore, like many
other companies in the restaurant industry, the Company operates with a working
capital deficit. The Company's working capital deficit was $9.4 million at
December 27, 1995 and $30.1 million at March 27, 1996. The Company anticipates
that it will continue to have a working capital deficit.
The Company requires capital principally for the development of new
restaurants and the acquisition and conversion of existing restaurants. The
Company has historically satisfied its capital and operating requirements
through a combination of public and private placements of equity securities and
debt instruments, cash from operations, and leasing transactions.
Expenditures for property and equipment and intangibles totaled
approximately $3.7 million and $1.8 million for the three months ended March 29,
1995 and March 27, 1996, respectively.
The Company believes that its future capital requirements will be primarily
for the development of new restaurants and the continued acquisition and
conversion of restaurants to a Denny's or other restaurant concept. Pursuant to
an agreement with Denny's, Inc., the franchisor of the Company's Denny's
restaurants, the Company has the right to develop and open 33 Denny's
restaurants in specified locations during the period ending December 31, 1997.
During the first quarter of fiscal 1996, the Company developed and opened two
new Denny's
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<PAGE> 13
restaurants. Pursuant to various other agreements with Denny's, Inc. and certain
other parties, the Company is required to (i) convert 20 restaurants currently
operating under the "Kettle" trade name to the Denny's concept by March 1997;
(ii) convert at least a total of 21 of the non-Denny's restaurants to a Denny's
before January 1, 1998; and (iii) close or convert 24 non-Denny's restaurants to
a Denny's or other restaurant concept that is not in competition with the
business of Denny's, Inc., its affiliates, subsidiaries or franchisees.
During the first quarter of fiscal 1996, the Company converted five non-Denny's
restaurants to Denny's restaurants. The Company estimates that its costs to
develop and open new Denny's restaurants, excluding real estate and building
costs, will be approximately $350,000 to $390,000 per restaurant, and that its
costs associated with the conversion of a non-Denny's restaurant to a Denny's
will be approximately $160,000 to $450,000 per restaurant.
An affiliate of CNL Group, Inc. ("CNL") has agreed, subject to various
conditions, including that there be no material adverse change in the financial
condition of the Company, to make available to the Company up to $20.0 million
in each of 1996 and 1997 in order to finance the conversion of non-Denny's
restaurants to the Denny's concept. Each financing will take the form of a
"sale-leaseback," in which CNL would purchase a particular restaurant property
and lease it back to the Company for up to 30 years. During that period, the
initial annual rent will be 10.625% of the purchase price, subject to a 10%
increase every five years (e.g., from 10.625% to 11.6875% at the end of the
first five-year period). The leases also will provide for additional rent based
on increases in gross sales at the respective restaurants. The Company will
have a right of first refusal on the sale of each property by CNL, and will
have the right to purchase each property during the eighth year of the lease.
Credit Facility
In connection with the Merger, the Company entered into a $65.0 million
credit facility with Banque Paribas. The Paribas Facility consists of (i) a Term
Loan; (ii) a Revolver; and (iii) a Delayed Term Loan. The Company is required to
make principal payments of $3.8 million over the next twelve months under the
$35.0 million Term Loan. As of May 9, 1996, the Company had approximately $8.0
million available for borrowings under the Revolver.
In connection with the Merger and the Paribas Facility, the Company
entered into an agreement (the "Amendment Agreement") with Denny's, Inc. and
DFO, Inc. (collectively "Denny's, Inc."), the franchisor of the Denny's
restaurants operated by the Company. The Amendment Agreement amended
substantially all of the franchise agreements for the Company's Denny's
restaurants to provide that, upon notice from Banque Paribas of the occurrence
of an event of default under the Paribas Facility, Denny's, Inc. will have the
right to immediately terminate each of the franchise agreements amended by the
Amendment Agreement.
SEASONALITY
The Company's operating results fluctuate from quarter to quarter as a
result of the seasonal nature of the restaurant industry, the temporary closing
of existing restaurants for conversion, and other factors. The Company's
restaurant sales are generally greater in the second and third fiscal quarters
(April through September) than in the first and fourth fiscal quarters (October
through March). Occupancy and other operating costs, which remain relatively
constant, have a disproportionately negative effect on operating results during
quarters with lower restaurant sales. The Company's working capital requirements
also fluctuate seasonally, with its greatest needs occurring during its first
and fourth quarters.
INFLATION
The Company does not believe that inflation has had a material effect on
operating results in past years. Although increases in labor, food or other
operating costs could adversely affect the Company's operations, the Company
generally has been able to modify its operating procedures or to increase prices
to offset increases in its operating costs.
13
<PAGE> 14
NEW ACCOUNTING STANDARDS
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," in fiscal 1995.
The Company has determined that it will not change to the fair value method
under Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," but will continue to use Accounting Principles Board
Opinion No. 25 for measurement and recognition of employee stock based
transactions.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in routine litigation from time to time in the
regular course of its business. There are no material legal proceedings pending
or known to be contemplated to which the Company is a party or to which any of
its property is subject.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Special Meeting of the Company's shareholders was held on February 28,
1996. The following item was voted upon by the shareholders:
(a) Proposal to approve the Amended and Restated Agreement and Plan of Merger
dated as of August 9, 1995, between American Family Restaurants, Inc. and
Denwest Restaurant Corp.
<TABLE>
<CAPTION>
Votes in Favor Opposed Abstained Broker Non-Vote
- -------------- ------- --------- ---------------
<S> <C> <C> <C>
3,826,334 26,613 34,000 0
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
3.2 Amended and Restated Bylaws, as amended
11.1 Statement Re: Computation of per share income (loss).
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file a report on Form 8-K during the quarter
ended March 27, 1996.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DENAMERICA CORP.
Dated: May 15, 1996 By: /s/ TODD S. BROWN
-----------------------------------------
TODD S. BROWN
Chief Financial Officer and
Treasurer
(Duly authorized officer of the
registrant, principal financial
and accounting officer)
15
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
DENAMERICA CORP.
A GEORGIA CORPORATION,
AS OF
MARCH 29, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I Offices............................................1
Section 1 Registered Office..................................1
Section 2 Other Offices......................................1
ARTICLE II Meetings of Shareholders...........................1
Section 1 Place of Meeting...................................1
Section 2 Time of Meeting....................................1
Section 3 Special Meetings...................................1
Section 4 Notice of Meetings.................................1
Section 5 Waiver of Notice...................................1
Section 6 Voting List........................................2
Section 7 Voting Group.......................................2
Section 8 Quorum.............................................2
Section 9 Vote Required for Action...........................2
Section 10 Voting.............................................2
Section 11 Action of Shareholders Without a Meeting...........2
Section 12 Record Date........................................3
Section 13 Proxies............................................3
Section 14 Presiding Officer..................................3
Section 15 Adjournments.......................................3
Section 16 Shareholder Proposals at Annual Meetings...........3
Section 17 Notice of Shareholder Nominees.....................4
ARTICLE III Board of Directors.................................5
Section 1 General Powers.....................................5
Section 2 Number and Election................................5
Section 3 Term of Office; Removal............................5
Section 4 Vacancy............................................5
Section 5 Compensation.......................................5
Section 6 Regular Meetings...................................5
Section 7 Special Meetings...................................6
Section 8 Notice of Meetings.................................6
Section 9 Waiver of Notice...................................6
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
Section 10 Place of Meetings........................................6
Section 11 Participation by Conference Telephone....................6
Section 12 Quorum...................................................6
Section 13 Voting...................................................6
Section 14 Action Without a Meeting.................................6
Section 15 Adjournments.............................................6
Section 16 General Powers of Directors..............................6
Section 16 Specific Powers of Directors.............................7
ARTICLE IV Committees...............................................7
Section 1 Appointing Committees....................................7
Section 2 Powers of Committees.....................................7
Section 3 Committee Meetings, Quorum and Voting....................7
Section 4 Removal from Committees..................................7
Section 5 Appointment of Executive Committee.......................8
Section 6 Procedures of Executive Committee........................8
Section 7 Compensation Committee...................................8
Section 8 Audit Committee..........................................8
Section 9 Other Committees.........................................8
Section 10 Alternative Members......................................8
ARTICLE V Officers.................................................8
Section 1 Number...................................................8
Section 2 Election and Term........................................9
Section 3 Salaries.................................................9
Section 4 Chairman of the Board....................................9
Section 5 Chief Executive Officer..................................9
Section 6 President; Vice Presidents...............................9
Section 7 Secretary................................................9
Section 8 Treasurer...............................................10
Section 9 Duties of Officers May Be Delegated.....................10
Section 10 Execution of Documents..................................10
ARTICLE VI Contracts, Checks, Drafts, Bank Accounts,
and Documents...........................................10
Section 1 Execution of Contracts and Documents....................10
Section 2 Checks and Drafts.......................................11
</TABLE>
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<TABLE>
<S> <C>
Section 3 Deposits..............................................11
Section 4 Proxies...............................................11
ARTICLE VII Distributions.........................................11
Section 1 Authorization or Declaration..........................11
Section 2 Record Date With Record to Distributions
and Share Dividends...................................11
ARTICLE VIII Capital Stock.........................................11
Section 1 Authorization and Issuance of ........................11
Section 2 Capital Stock.........................................11
Section 3 Record of Shareholders................................12
Section 4 Lost, Stolen or Destroyed Certificates................12
Section 5 Transfer of Shares....................................12
Section 6 Duty of Corporation to Register Transfer..............12
Section 7 Registered Shareholders...............................12
ARTICLE IX Indemnification.......................................13
Section 1 Definitions...........................................13
Section 2 Indemnification.......................................13
Section 3 Advances for Expenses.................................14
Section 4 Court-Ordered Indemnification and
Advances for Expenses................................14
Section 5 Determination and Authorization
of Indemnification...................................14
Section 6 Shareholder Approved Indemnification..................15
Section 7 Indemnification of Employees and Agents...............16
Section 8 Insurance.............................................16
Section 9 Not Exclusive of Other Rights.........................16
Section 10 Severability..........................................16
ARTICLE X Emergency Powers......................................16
Section 1 Power to Adopt........................................16
Section 2 Lines of Succession of Officers or Agents.............16
Section 3 Change of Office......................................16
Section 4 Effect of Bylaws......................................17
Section 5 Notices...............................................17
</TABLE>
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<TABLE>
<S> <C>
Section 6 Quorum.................................................17
Section 7 Liability..............................................17
ARTICLE XI General Provisions.....................................17
Section 1 Fiscal Year............................................17
Section 2 Corporate Seal.........................................17
Section 3 Annual Financial Statements............................17
Section 4 Inspection of Books and Records........................17
Section 5 Conflict with Articles of Incorporation................17
Section 6 Adoption of Amendments to Incentive
Stock Option Plans....................................17
Section 7 Reference to Code Sections.............................17
ARTICLE XII Amendments...........................................18
ARTICLE XIII Fair Price Requirements..............................18
ARTICLE XIV Business Combinations with Interested
Shareholders.........................................18
</TABLE>
v
<PAGE> 6
AMENDED AND RESTATED BYLAWS OF
DENAMERICA CORP.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be in the
State of Georgia, County of Fulton. The Board of Directors from time to time may
change the address of the registered office, which may be, but need not be, the
principal office of the Corporation.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Georgia as the Board of
Directors may from time to time determine and the business of the Corporation
may require or make desirable.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meeting. All meetings of the Shareholders may be
held either within or without the State of Georgia, but in the absence of notice
to the contrary Shareholders' meetings shall be held at the principal office of
the Corporation.
Section 2. Time of Meeting. The Annual Meeting of the Shareholders
shall be held annually within six (6) months after the end of each fiscal year
of the Corporation. Failure to hold the Annual Meeting as aforesaid shall not
work a forfeiture or dissolution of the Corporation nor shall such failure
affect otherwise valid corporate acts.
Section 3. Special Meetings. Special Meetings of the Shareholders may
be called for any purpose or purposes at any time and at any place by (a) the
Corporation's Chief Executive Officer, (b) a majority of the members of the
Board of Directors, (c) a majority of the members of the Executive Committee.
Any meeting called by one or more of these methods may be canceled or postponed
by a majority of the members of the Board of Directors. If the Corporation has
100 or more Shareholders of record, then a special meeting shall be called upon
written request of the holders of at least seventy-five percent (75%) or such
greater or lesser percentage as may be provided in the Articles of
Incorporation, of all the votes entitled to be cast on any issue to be
considered at the proposed Special Meeting; provided, however, such written
request shall be signed and dated by such holders and delivered to the Secretary
of the Corporation and, further provided, such written request shall set forth
the purpose or purposes for which such meeting is to be held.
Section 4. Notice of Meetings. The Corporation shall give notice
stating the date, time and place of each Shareholders' Meeting, whether special
or annual, not less than ten (10) nor more than sixty (60) days before the date
of the meeting, and shall be in writing unless oral notice is reasonable under
the circumstances, and may be communicated in person, by telephone, telegraph,
facsimile, or other form of wire or wireless communication, or by mail or
private carrier, to each Shareholder of record entitled to vote at such meeting,
at such address as last appears on the books of the Corporation. In the case of
an annual meeting, the notice need not state the purpose or purposes of the
meeting unless the Articles of Incorporation or the Georgia Business Corporation
Code (the "Code") requires the purpose or purposes to be stated in the notice of
the meeting. In the case of a Special Meeting, the notice of the meeting must
include a description of purpose or purposes for which the meeting is called.
Notice of any adjourned meeting need not be given otherwise than by announcement
at the meeting, at which the adjournment is taken; provided however, if a new
record date for the adjourned meeting is or must be fixed pursuant to Section 12
of this Article II, notice of the adjourned meeting shall be given to persons
who are Shareholders as of the new record date.
Section 5. Waiver of Notice. Any Shareholder may waive notice of any
meeting, whether special or annual, either before, at or after the meeting, and
a Shareholder's attendance at a meeting, either in person or
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<PAGE> 7
by proxy, shall of itself constitute a waiver of notice and waiver of any and
all objections to the date, time, place, manner of calling, or consideration of
a particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, except when the Shareholder attends the meeting
solely for the purpose of stating such objection. Unless required by the Code,
neither the business transacted nor the purpose of the meeting need be specified
in the waiver of notice.
Section 6. Voting List. After fixing a record date for a meeting of the
Shareholders in accordance with Section 12 of this Article II, the Corporation
will cause to be prepared a complete alphabetical list of Shareholders entitled
to notice of a Shareholders' meeting, with the address of and the number of
shares held by each. This list shall be produced and kept open at the time and
place of the meeting and shall be subject to inspection by any Shareholder
during the whole time of the meeting. The foregoing list shall not have to be
prepared where the record of Shareholders is presented and shows in alphabetical
order or by alphabetical index, and by classes or series, if any, the names of
the Shareholders entitled to vote, with the address of and the number of shares
held by each.
Section 7. Voting Group. A Voting Group means all shares of one or more
classes or series that under the Articles of Incorporation or the Code are
entitled to vote and be counted together collectively on a matter at a meeting
of the Shareholders. All shares entitled by the Articles of Incorporation or the
Code to vote generally on the matter are for that purpose a single Voting Group.
Section 8. Quorum. Shares entitled to vote as a separate Voting Group
may take action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. Unless the Articles of Incorporation provide
otherwise, the presence, in person or by proxy, of a majority of the votes
entitled to be cast on the matter by the Voting Group constitutes a quorum of
that Voting Group for action on that matter. Once a share is represented for any
purpose at a meeting other than solely to object to holding the meeting or
transacting business at the meeting, it is deemed present for quorum purposes
for the remainder of the meeting and for any adjournment of that meeting unless
a new record date is or must be set for that adjourned meeting.
Section 9. Vote Required for Action. If a quorum exists, action on a
matter (other than the election of Directors) by a Voting Group is approved if
the votes cast within the Voting Group favoring the action exceed the votes cast
opposing the action, unless the Articles of Incorporation, these Bylaws or the
Code requires a greater number of affirmative votes. If the Articles of
Incorporation or the Code provide for voting by two or more Voting Groups on a
matter, action on that matter is taken only when voted upon by each of those
Voting Groups counted separately. Action may be taken by one Voting Group on a
matter even though no action is taken by another Voting Group entitled to vote
on the matter. With regard to the election of Directors, unless otherwise
provided in the Articles of Incorporation, if a quorum exists, action on the
election of Directors is taken by a plurality of the votes cast by the shares
entitled to vote in the election.
Section 10. Voting. Except as otherwise provided for in the Articles of
Incorporation, each outstanding share having voting rights shall be entitled to
one vote on each matter submitted to a vote at a Shareholders' meeting.
Outstanding shares of preferred stock, if any, shall have the voting rights set
forth within the Corporation's Articles of Incorporation or as set by resolution
of the Board of Directors, as the case may be. Voting on all matters shall be by
voice vote or by show of hands unless any qualified voter, prior to the voting
on any matter, demands vote by ballot, in which case each ballot shall state the
name of the shareholder voting and the number of shares voted by him, and if the
ballot be cast by proxy, it shall also state the name of the proxy.
Section 11. Action of Shareholders Without a Meeting. Any action
required to be taken at a meeting of the Shareholders, or any action which may
be taken at a meeting of the Shareholders, may be taken without a meeting if
written consent and approval, setting forth the action authorized, shall be
signed by all Shareholders entitled to vote on such action or, if so provided in
the Articles of Incorporation, any persons who would be entitled to vote at a
meeting those shares having voting power to cast not less than the minimum
number (or numbers, in the case of voting by groups) of votes that would be
necessary to
-2-
<PAGE> 8
authorize or take such actions at a meeting at which all shares entitled to vote
were present and voted, provided that action by less than unanimous written
consent may not be taken with respect to any election of Directors as to which
Shareholders would be entitled to cumulative voting. The action must be
evidenced by one or more written consents describing the action taken, signed by
shareholders entitled to take action without a meeting and delivered to the
Corporation for inclusion in the minutes or for filing with the corporate
records. No written consent shall be valid unless the consenting shareholder has
been furnished the same material that would have been required to be sent to the
shareholders in a notice of a meeting at which the proposed action would have
been submitted to the shareholders for action, including notice of any
applicable dissenters' rights, or the written consent contains an express waiver
of the right to receive the material otherwise required to be furnished. If
corporate action is taken without a meeting by less than unanimous written
consent, then written notice shall be given to all persons who are voting
shareholders on the date the consent is first executed and who have not
consented in writing, not later than ten (10) days after such action is taken.
Section 12. Record Date. For the purpose of determining Shareholders
entitled to notice of or to vote at any meeting of Shareholders or any
adjournment thereof, or in order to make a determination of Shareholders for any
other proper purpose, the Board of Directors of the Corporation may fix in
advance a date as the record date not more than seventy (70) days before the
meeting or action requiring a determination of Shareholders. When a
determination of Shareholders entitled to notice of or to vote at any meeting of
Shareholders has been made as provided in this Section 12, such determination
shall apply to any adjournment and reconvened meeting thereof, unless the Board
of Directors sets a new record date under this section for the reconvened
meeting. If the adjournment is for a date more than 120 days after the date
fixed for the original meeting, a new record date must be fixed.
Section 13. Proxies. A Shareholder entitled to vote pursuant to Section
10 of this Article II may vote in person or by proxy executed in writing by the
Shareholder or by his attorney-in-fact. A proxy shall not be valid after eleven
(11) months from the date of its execution, unless such instrument provides for
a longer period. If the validity of any proxy is questioned, it must be
submitted to the Secretary of the Shareholders' meeting for examination or to a
proxy officer or committee appointed by the person presiding at the meeting. The
Secretary of the meeting or, if appointed, the proxy officer or committee, shall
determine the validity of any proxy submitted and reference by the Secretary in
the minutes of the meeting to the regularity of a proxy shall be received as
prima facie evidence of the facts stated for the purpose of establishing the
presence of a quorum at such meeting and for all other purposes.
Section 14. Presiding Officer. The Corporation's Chief Executive
Officer shall serve as Chairman of every Shareholders' meeting unless some other
person is elected to serve as Chairman by a majority vote of the shares
represented at the meeting. The Chairman shall appoint such persons as he deems
required to assist with the meeting.
Section 15. Adjournments. Any meeting of the Shareholders, whether or
not a quorum is present, may be adjourned by the holders of a majority of the
voting shares represented at the meeting to be reconvened at a specific time and
place. If notice of the adjourned meeting was properly given, it shall not be
necessary to give any notice of the reconvened meeting or of the business to be
transacted, if the date, time and place of the reconvened meeting are announced
at the meeting which was adjourned and before adjournment. At any such
reconvened meeting at which a quorum is present or represented, any business may
be transacted which could have been transacted at the meeting which was
adjourned.
Section 16. Shareholder Proposals at Annual Meetings.
(a) Business may be properly brought before an Annual Meeting of
Shareholders by a Shareholder only upon the Shareholder's timely notice thereof
in writing to the Secretary of the Corporation. To be timely, a Shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not less than thirty (30) days prior to the meeting
as originally scheduled; provided, however, that in the event that less than
thirty (30) days notice or prior public disclosure of the date of the meeting is
given or made to Shareholders, notice by the Shareholder to be timely must be so
-3-
<PAGE> 9
received not later than the close of business on the tenth day following the day
on which such notice of the date of the meeting was mailed or such public
disclosure was made.
For purposes of this Section 16, any adjournment(s) or postponement(s)
of the original meeting whereby the meeting will reconvene within ninety (90)
days from the original date shall be deemed for purposes of notice to be a
continuation of the original meeting and no business may be brought before any
such reconvened meeting unless pursuant to a notice of such business which was
timely for the meeting on the date originally scheduled. Such Shareholder's
notice to the Secretary shall set forth (i) as to each matter the Shareholder
proposed to bring before the Annual Meeting, a brief description of the business
desired to be brought before the meeting, (ii) the name and address, as they
appear on the Corporation's books, of the Shareholder proposing such business,
(iii) the class and number of shares of the Corporation which are beneficially
owned by the Shareholder, and (iv) a complete and accurate description of any
material interest of the Shareholder in such proposed business.
Notwithstanding the foregoing, nothing in this Section 16 shall be
interpreted or construed to require the inclusion of information about any such
proposal in any proxy statement distributed by the Corporation at the direction
of or on behalf of the Corporation.
(b) The Chairman of an Annual Meeting of Shareholders shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 16, and if the Chairman should so determine, the Chairman shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
Section 17. Notice of Shareholder Nominees.
(a) Nominations of persons for election to the Board of Directors shall
be made only at an Annual or Special Meeting of the Shareholders called for that
purpose and only (i) by or at the direction of the Board of Directors or (ii) by
any Shareholder entitled to vote for the election of Directors at the meeting
who complies with the notice procedures set forth in Section 16 of this Article
II for Annual Meetings. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation. To be timely, a Shareholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than thirty (30) days prior to the meeting;
provided, however, that in the event that less than thirty (30) days notice of
the date of the meeting is given or made to Shareholders, notice by the
Shareholder to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made.
For purposes of this Section 17, any adjournment(s) or postponement(s)
of the original meeting whereby the meeting will reconvene within ninety (90)
days from the original date shall be deemed for purposes of notice to be a
continuation of the original meeting and no nominations by a Shareholder of a
person or persons to be elected a director or directors of the Corporation may
be made at any such reconvened meeting unless pursuant to a notice which was
timely for the meeting on the date originally scheduled. Such Shareholder's
notice to the Secretary shall set forth (i) as to each person whom the
Shareholder proposes to nominate for election or re-election as a director, all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to the Securities Exchange Act of 1934, as amended; and (ii)
as to the Shareholder giving notice (A) the name and address, as they appear on
the Corporation's books, of such Shareholder, and (B) the class and number of
shares of the Corporation which are beneficially owned by such Shareholder.
Notwithstanding the foregoing, nothing in this Section 17 shall be
interpreted or construed to require the inclusion of information about any such
nominee in any proxy statement distributed by the Corporation at the direction
of or on behalf of the Corporation.
(b) The Chairman of the Annual or Special Meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this
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Section 17, and if the Chairman should so determine, the Chairman shall so
declare to the meeting and the defective nomination shall be disregarded.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the Corporation shall
be managed under the direction of, the Board of Directors. In addition to the
powers and authority expressly conferred upon it by these Bylaws, the Board of
Directors shall exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law, by any legal agreement among
Shareholders, by the Articles of Incorporation, or by these Bylaws directed or
required to be exercised or done by the Shareholders.
Section 2. Number of Directors and Term of Office. The number of
Directors of the Corporation shall not be less than three (3) nor more than
fifteen (15), the precise number to be fixed by resolution of the Board of
Directors from time to time. Except as provided in Section 4 of this Article
III, a Director shall be elected by the affirmative vote of a plurality of the
shares represented at the meeting of shareholders at which the Director stands
for election and entitled to elect such Director. The number of Directors may be
increased or decreased from time to time as provided by these Bylaws and in the
Articles of Incorporation; provided, however, that the total number of Directors
at any time shall not be less than three (3); and provided further, that no
decrease in the number of Directors shall have the effect of shortening the term
of an incumbent director. Each Director shall serve until his successor is
elected and qualified or until his earlier resignation, retirement,
disqualification, removal from office, or death.
Section 3. Removal. The entire Board of Directors or any individual
Director may be removed from the office but only for cause and only by the
affirmative vote of at least seventy-five percent (75%) of all classes of stock
of the Corporation entitled to vote in the election of such Director or
Directors, considered for purposes of this Section as one class. Notwithstanding
the foregoing, in the event that preferred stock of the Corporation is issued
and authorizes the election of one or more Directors by the holders of such
preferred stock, any individual Director elected by the preferred shareholders
may be removed only by the holders of the outstanding shares of the preferred
stock in accordance with the terms of the preferred stock as provided therein.
Removal action may be taken at any shareholders meeting with respect to which
notice of such purpose has been given, and a removed Directors' successor may be
elected at the same meeting to serve the unexpired term.
Section 4. Vacancies. A vacancy occurring on the Board of Directors,
other than by reason of removal of a Director by the shareholders but including
vacancies arising from resignation, death or through an increase in the number
of Directors, may be filled, until the next election of Directors by the
shareholders, by the affirmative vote of at least two thirds (2/3) of the total
number of Directors then remaining in office, though they constitute less than a
quorum of the Board of Directors.
Section 5. Compensation. Directors may receive such compensation for
their services as directors and as members of committees of the Board of
Directors as may from time to time be fixed by a majority vote of the Directors
or the Shareholders. A Director may also serve the Corporation in a capacity
other than that of director and receive compensation, as determined by the Board
of Directors for services rendered in any other capacity. Directors shall also
be entitled to reimbursement for any reasonable expenses incurred in attending
any meeting of the Board of Directors or any committee thereof.
Section 6. Regular Meetings. The first meeting of each newly elected
Board of Directors shall follow immediately after the Annual Meeting of the
Shareholders and be held at the same place as the Annual Meeting of the
Shareholders, or may be held at such time and place as shall be fixed by the
consent in writing of all the Directors. In addition, the Board of Directors
may, by resolution providing for the date, time and place, schedule other
meetings to occur at regular intervals throughout the year.
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Section 7. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the Corporation's Chief Executive Officer,
or in his absence by the Secretary of the Corporation, or by any two (2)
Directors in office at that time.
Section 8. Notice of Meetings. Unless the Articles of Incorporation
provide otherwise, regular meetings of the Board of Directors may be held
without notice of the date, time, place or purpose of the meeting. Unless the
Articles of Incorporation provide otherwise, every Special Meeting shall be
preceded by at least forty-eight (48) hours notice of the date, time and place
of the meeting. Such notice shall be in writing unless oral notice is reasonable
under the circumstances, and may be communicated in person, by telephone,
telegraph, facsimile, telecopy, or other forms of wire or wireless
communication, or by mail or private carrier. Such notice need not specify the
purpose of the Special Meeting of the Board unless required by the Articles of
Incorporation.
Section 9. Waiver of Notice. A Director may waive notice of any meeting
either before or after the meeting stated in the notice. Except as specified
herein, the waiver must be in writing, signed by the Director entitled to
notice, and delivered to the Corporation for inclusion in the minutes or filing
with the corporate records. A Director's attendance at or participation in a
meeting waives any required notice to the Director of the meeting unless the
Director at the beginning of the meeting (or promptly upon arrival) objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
Section 10. Place of Meetings. The Directors may hold their meetings at
the principal office of the Corporation or at such other place or places, either
in the State of Georgia or elsewhere, as they may from time to time determine.
Section 11. Participation by Conference Telephone. Unless the Articles
of Incorporation provide otherwise, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee thereof, by means of telephone
conference or similar communications equipment, provided that all Directors
participating in the meeting can simultaneously hear each other during the
meeting. A Director participating in a meeting by this means is deemed to be
present in person at the meeting.
Section 12. Quorum. Unless a greater number is required by the Articles
of Incorporation or the Code, a majority of the Directors in office immediately
before the meeting begins shall constitute a quorum of the Board of Directors.
Section 13. Voting. If a quorum is present when a vote is taken, the
affirmative vote of a majority of the Directors present is the act of the Board
of Directors unless the Articles of Incorporation, the Code or these Bylaws
require the vote of a greater number of Directors.
Section 14. Action Without a Meeting. Unless the Articles of
Incorporation provide otherwise, action required or permitted to be taken at a
meeting of the Board of Directors, or of any committee thereof, may be taken
without a meeting if the action is taken by all members of the Board of
Directors, or of such committee, as the case may be. The action must be
evidenced by one or more written consents describing the action taken, signed by
each Director, or each committee member, as the case may be, and delivered to
the Corporation for inclusion in the minutes or filing with the corporate
records.
Section 15. Adjournments. Whether or not a quorum is present to
organize a meeting, any meeting of Directors (including an adjourned meeting)
may be adjourned by a majority of the Directors present, to reconvene at a
specific time and place. At any reconvened meeting any business may be
transacted that could have been transacted at the meeting that was adjourned. If
notice of the adjourned meeting was properly given, it shall not be necessary to
give any notice of the reconvened meeting or of the business to be transacted,
if the date, time and place of the reconvened meeting are announced at the
meeting that was adjourned.
Section 16. General Powers of Directors. The Board of Directors shall
have, in addition to such powers as are herein expressly conferred on it and all
such powers as may be conferred on it by law, all such
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powers as may be exercised by the Corporation, subject to the provisions of the
Articles of Incorporation and the Code.
Section 17. Specific Powers of Directors. The Board of Directors shall
also have power:
(a) to purchase or otherwise acquire property, rights, or
privileges for the Corporation, which the Corporation has power to make, at such
prices and on such terms as the Board of Directors may deem proper;
(b) to pay for such property, rights or privileges in whole or
in part with money, stocks, bonds, debentures or other securities of the
Corporation, or by the delivery of other property of the Corporation;
(c) to create, make and issue mortgages, bonds, deeds of
trust, trust agreements and negotiable or transferable instruments and
securities, secured by mortgages or otherwise, and to do every act and thing
necessary to effectuate the same;
(d) to elect the corporate officers and fix their salaries, to
appoint employees and trustees, and to dismiss them at its discretion, to fix
their duties and emoluments, and to change them from time to time, and to
require security as it may deem proper;
(e) to confer on any officer of the Corporation the power
of selecting, discharging or suspending such employees; and
(f) to determine by whom and in what manner the Corporation's
bills, notes, receipts, acceptances, endorsements, checks, releases, contracts,
or other documents shall be signed.
ARTICLE IV
COMMITTEES
Section 1. Appointing Committees. Unless the Articles of Incorporation
provide otherwise, the Board of Directors may create one (1) or more committees
and appoint members of the Board of Directors to serve on them. Each committee
may have one or more members, who serve at the pleasure of the Board of
Directors.
Section 2. Powers of Committees. To the extent specified by the Board
of Directors or in the Articles of Incorporation, each committee may exercise
the authority granted to the Board of Directors, except that a committee may
not:
(a) approve or propose to Shareholders action that the Code
requires to be approved by Shareholders;
(b) fill vacancies on the Board of Directors or on any of its
committees;
(c) amend the Articles of Incorporation pursuant to O.C.G.A.
Section 14-2-1002;
(d) adopt, amend, or repeal Bylaws; or
(e) approve a plan of merger not requiring Shareholder
approval.
Section 3. Committee Meetings, Quorum and Voting. Except as set forth
with respect to the Executive Committee in Section 6 below, Sections 8, 9, 10,
11, 12, 13, 14 and 15 of Article III of these Bylaws which govern meetings,
adjournments of meetings, actions without meeting, notice and waiver of notice,
and quorum and voting requirements of the Board of Directors, apply to
committees and their members.
Section 4. Removal from Committees. The Board of Directors shall have
power at any given time to remove any member of any committee, with or without
cause, and to fill vacancies in and to dissolve any such committee.
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Section 5. Appointment of Executive Committee. The Board of Directors
may by resolution adopted by a majority of the full Board of Directors appoint
an Executive Committee consisting of not less than three (3) Directors who shall
serve until such time as their successors are elected to the Executive Committee
or such time as such person ceases being a member of the Board of Directors or
the Executive Committee. The Executive Committee shall to the extent provided in
such resolution have all of the powers and authority of the Board of Directors,
except as otherwise provided by these Bylaws or by law. Such Executive Committee
shall not have the power to amend or repeal any resolution of the Board of
Directors which by its terms is not subject to amendment or repeal by the
Executive Committee.
Section 6. Procedures of Executive Committee. The Executive Committee
shall meet from time to time on call of the Corporation's Chief Executive
Officer or of any two (2) or more members of the Executive Committee. Meetings
of the Executive Committee may be held at such place or places as the Executive
Committee shall determine or as may be specified or fixed in the respective
notices or waivers of such meetings. The Executive Committee may fix its own
rules of procedure, including provisions for notice of its meetings. It shall
keep minutes of its proceedings which shall be reviewed by the Board of
Directors and inserted with the Corporation's records, and all such proceedings
shall be subject to revision or alteration by the Board of Directors except to
the extent that action shall have been taken pursuant to or in reliance upon
such proceedings prior to any such revision or alteration.
Section 7. Compensation Committee. The Board of Directors may, from
time to time by a majority vote of the Directors, elect one or more Directors as
a Compensation Committee to serve until its authority is revoked or its
membership is changed by a majority vote of the Directors. The Compensation
Committee shall have such power and authority with regards to compensation
issues as are granted to the Committee by the Board of Directors from time to
time.
Section 8. Audit Committee. The Board of Directors may, from time to
time by a majority vote of the Directors, elect two or more members of the Board
of Directors to serve as an Audit Committee. The members of the Audit Committee
shall serve until the authority of the Audit Committee is revoked or its
membership is changed by a majority vote of the Board of Directors. The Board of
Directors may designate persons other than members of the Board of Directors to
serve as non-voting members of the Audit Committee. The Audit Committee shall
have such power and authority with regards to accounting and financial reporting
issues as are granted to the Committee by the Board of Directors from time to
time.
Section 9. Other Committees. The Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate one or more
additional committees of the Board of Directors, each committee to consist of
one (1) or more Directors of the Corporation, which shall have such name or
names and shall have and may exercise such powers of the Board of Directors in
the management of the business and affairs of the Corporation, except as
otherwise provided by these Bylaws or by law, as may be determined from time to
time by resolution of the Board of Directors. The Board of Directors may also
appoint other committees which do not exercise any of the authority of the Board
of Directors, but which are fact finding, planning or advisory in nature. Such
additional committees may have members who are not directors.
Section 10. Alternative Members. The Board of Directors, by resolution
adopted in accordance with Section 1 of Article IV of these Bylaws, may
designate one or more Directors as alternate members of any such committee, who
may act in the place of any absent member or members at any meeting of such
committee.
ARTICLE V
OFFICERS
Section 1. Number. The officers of the Corporation shall be designated
and elected by the Board of Directors with such responsibilities and duties as
may be designated by the Board of Directors consistent with this Article V. The
Board of Directors shall elect at least one officer who shall be responsible for
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preparing minutes of the Directors' and Shareholders' meetings and for
authenticating records of the Corporation. Any two or more offices may be held
by the same person. No officer need be a Shareholder.
Section 2. Election and Term. All officers shall be appointed by the
Board of Directors or by a duly appointed officer pursuant to this Article V and
shall serve at the pleasure of the Board of Directors and the appointing
officers as the case may be. All officers, however appointed, may be removed
with or without cause by the Board of Directors and any officer appointed by
another officer may also be removed by the appointing officer with or without
cause.
Section 3. Salaries. The salaries and compensation of all officers
appointed by the Board of Directors shall be fixed by the Board of Directors,
unless the Directors delegate such power to any officer or officers.
Section 4. Chairman of the Board. Unless the Board of Directors
determines otherwise, the Chairman of the Board, if one shall so be elected,
shall preside at all meetings of the Board. The Chairman shall have such other
powers and duties as may be specifically designated by the Board of Directors
and, if so designated, may serve as Chief Executive Officer.
Section 5. Chief Executive Officer.
(a) The Chief Executive Officer shall be elected by the Board of
Directors. In the absence or disability of the President of the Corporation, or
at the direction of the Board of Directors, the Chief Executive Officer shall
also serve as the President of the Corporation. The Chief Executive Officer
shall preside at all meetings of the Shareholders; and, in the absence of the
Chairman, he shall preside at all meetings of the Board of Directors if the
Board so requests. He shall have general and active management of the business
of the Corporation, and shall exercise general supervision and administration
over all of its affairs with power to make all contracts in the conduct of the
regular and ordinary business of the Corporation, and shall see that all orders
and resolutions of the Board of Directors are carried into effect.
(b) The Chief Executive Officer or if one is not so designated, the
President, shall execute deeds, bonds, notes, mortgages and other contracts on
behalf of the Corporation.
(c) The Chief Executive Officer or if one is not so designated, the
President, shall be ex-officio a member of all standing committees and shall
have the general powers and duties of supervision and management of the
Corporation.
(d) The Chief Executive Officer or if one is not so designated, the
President, may appoint and discharge agents and employees of the Corporation and
fix their compensation subject to the general supervisory power of the Board of
Directors, and do and perform such other duties as from time to time may be
assigned to him by the Board of Directors and as may be authorized by law. The
Chief Executive Officer or if one is not so designated, the President, may from
time to time appoint one or more Assistant Secretaries of the Corporation.
Section 6. President; Vice Presidents. The President, if one shall so
be elected, shall, in the absence or disability of the Chief Executive Officer,
perform all of the duties and exercise all of the powers of the Chief Executive
Officer and shall perform such other duties as the Board of Directors shall
request or delegate.
The Board may elect, and the Chief Executive Officer may appoint, one
or more Vice Presidents who shall have such duties as are assigned by the
electing or appointing party. The Vice President, if one shall so be elected or
appointed, shall act in the absence or disability of the Chief Executive Officer
and the President. If there is more than one (1) Vice President, then the one
designated by the Board of Directors shall act in the absence or disability of
the Chief Executive Officer and the President.
Section 7. Secretary. The Secretary, if one shall so be elected, shall
keep accurate records of the acts and proceedings of all meetings of
Shareholders, Directors and committees of Directors. The Secretary shall give,
or cause to be given, notice of all meetings of the Shareholders and any
meetings of the Board of Directors, and other notices required by law or these
Bylaws, and shall perform such other duties as may be
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prescribed by the Board of Directors or President, under whose supervision the
Secretary shall be. The Secretary shall keep in safe custody the seal of the
Corporation, and the Secretary or any other officer may affix the same to any
instrument requiring it and, when so affixed, it may be attested by the
Secretary's signature or by the signature of an Assistant Secretary.
Notwithstanding the foregoing, unless otherwise required by law or the Code, the
seal of the Corporation need not be affixed to any documents or instruments, nor
must the Secretary or Assistant Secretary attest any such document or
instrument. In the absence or disability of the Secretary or at the direction of
the President, any Assistant Secretary or other officer designated by the Board
of Directors may perform the duties and exercise the powers of the Secretary.
Section 8. Treasurer.
(a) The Treasurer, if one shall so be elected, shall have custody of
and be responsible for all funds and securities, receipts and disbursements of
the Corporation, and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation, and shall deposit or cause
to be deposited, all monies and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors.
(b) The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors or by the President, taking proper vouchers
for such disbursements, and shall render to the President and Directors,
whenever they may require it, an account of all transactions as Treasurer and of
the financial condition of the Corporation, and at the regular meeting of the
Board of Directors next preceding the Annual Shareholders' Meeting, a like
report for the preceding year.
(c) The Treasurer shall keep an account of stock registered and
transferred in such manner and subject to such regulations as the Board of
Directors may prescribe.
(d) The Treasurer shall give the Corporation a bond, if required by the
Board of Directors, in such sum and in form and with security satisfactory to
the Board of Directors for the faithful performance of the duties of the office
and the restoration to the Corporation in case of the Treasurer's death,
resignation or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in the possession of the Treasurer, belonging to
the Corporation. The Treasurer shall perform such other duties as the Board of
Directors may from time to time prescribe or require.
Section 9. Duties of Officers May Be Delegated. In case of the absence
of any officer of the Corporation, or for any other reason that the Board of
Directors may deem sufficient, the Board may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer or to any
Director or employee of the Corporation, provided a majority of the entire Board
of Directors concurs.
Section 10. Execution of Documents. The Chief Executive Officer,
President, Chief Financial Officer and Secretary of the Corporation, or any
other officer designated by the Board of Directors, shall execute deeds, bonds,
notes, mortgages and other contracts on behalf of the Corporation.
ARTICLE VI
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS AND DOCUMENTS
Section 1. Execution of Contracts and Documents. The Board of
Directors, except as otherwise provided in these Bylaws, may authorize any
officer or officers or agent or agents of the Corporation to enter into any
contract or execute and deliver any instrument in the name and on the behalf of
the Corporation, and such authority may be general or confined to specific
instances. Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, formal contracts, promissory notes and other
evidences of indebtedness, deeds of trust, mortgages and corporate instruments
or documents requiring the corporate seal, and certificates for shares of stock
owned by the Corporation shall be executed, signed or endorsed by the President
(or any Vice President) and by the Secretary (or any Assistant Secretary) or the
Treasurer (or any Assistant Treasurer). The Board of Directors may, however,
authorize any one of these officers to sign any of such instruments, for and on
behalf of the Corporation, without necessity of countersignature; may designate
officers or employees of the Corporation, other than those named above, who may,
in the name of the Corporation, sign such instruments; and may authorize the use
of facsimile signatures for any of such persons. No officer, agent or employee
shall have any power or authority to bind
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the Corporation by any contract or engagement or to pledge its credit or to
render it liable for damages, whether monetary or otherwise, for any purpose or
for any amount except as specifically authorized in these Bylaws or by the Board
of Directors or an officer or committee with the power to grant such authority.
Section 2. Checks and Drafts. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by the President or such other person or
persons and in such manner as shall, from time to time, be determined by the
Board of Directors.
Section 3. Deposits. All funds of the Corporation shall be deposited to
the credit of the Corporation under such conditions and in such banks, trust
companies or other depositories as the Board of Directors may designate or as
may be designated by an officer or officers or agent or agents of the
Corporation to whom such power may, from time to time, be determined by the
Board of Directors.
Section 4. Proxies. Unless otherwise provided by the Board of
Directors, the President may from time to time appoint an attorney or attorneys
or agent or agents of the Corporation in the name and on behalf of the
Corporation to cast the vote which the Corporation may be entitled to cast as a
Shareholder or otherwise in any other Corporation any of the stock or other
securities of which is held by the Corporation, at meetings of the holders of
the stock or other securities of such other Corporation, and may instruct the
person or persons so appointed as to the manner of casting such vote or giving
such consent, and may execute or cause to be executed in the name and on behalf
of the Corporation such written proxies or other instruments as the President
may deem necessary or proper in the premises.
ARTICLE VII
DISTRIBUTIONS
Section 1. Authorization or Declaration. Unless the Articles of
Incorporation provide otherwise, the Board of Directors from time to time in its
discretion may authorize or declare distributions or share dividends in
accordance with the Code.
Section 2. Record Date With Record to Distributions and Share
Dividends. For the purpose of determining shareholders entitled to a
distribution (other than one involving a purchase, redemption, or other
reacquisition of the Corporation's shares) or a share dividend, the Board of
Directors may fix a date as the record date. If no record date is fixed by the
Board of Directors, the record date shall be determined in accordance with the
provisions of the Code.
ARTICLE VIII
CAPITAL STOCK
Section 1. Authorization and Issuance of Shares. In accordance with the
Code, the Board of Directors may authorize shares of any class or series
provided for in the Articles of Incorporation to be issued for any consideration
valid under the provisions of the Code. To the extent provided in the Articles
of Incorporation, the Board of Directors shall determine the preferences,
limitations, and relative rights of the shares.
Section 2. Capital Stock. All shares issued by the Corporation shall be
evidenced by a certificate or certificates. Each certificate of stock of the
Corporation shall be numbered, shall be entered in the books of the Corporation,
and shall be signed, either manually or in facsimile, by any one of the
President, a Vice President, the Secretary, or the Treasurer or such other
officer or officers as designated to sign such certificates, from time to time,
by the Board of Directors. In any case in which any officer or officers who
shall have signed, or whose facsimile signature or signatures shall have been
used on, any such certificate or certificates shall cease to be such officer or
officers of the Corporation, whether because of death, resignation or otherwise,
before such certificate or certificates shall have been delivered by the
Corporation, such certificate or certificates may nevertheless be delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature shall have been used thereon had not ceased to be such
officer or officers. If a share certificate is signed in facsimile, then it
shall be countersigned by a
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transfer agent or registered by a registrar other than the Corporation itself or
an employee of the Corporation. The corporate seal need not be affixed to the
share certificate. Each certificate representing shares shall set forth upon the
face thereof:
(a) The name of the Corporation;
(b) That the Corporation is organized under the laws of the
State of Georgia;
(c) The name of the person to whom issued; and
(d) The number and class of shares and the designation of the
series, if any, such certificate represents.
Section 3. Record of Shareholders. The Corporation shall keep a record
of the Shareholders of the Corporation which readily shows, in alphabetical
order or by alphabetical index, and by classes of stock, the names of the
Shareholders, including those Shareholders entitled to vote, with the address of
and the number of shares held by each.
Section 4. Lost, Stolen or Destroyed Certificates. The Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Corporation alleged to
have been lost or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost or destroyed certificate or
certificates, or his or her legal representative, to advertise the same in such
manner as it shall require or give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Shares. Transfers of shares shall be made upon
the transfer books of the Corporation, kept at the office of the transfer agent
designated to transfer the shares, only upon direction of the person named in
the certificate, or by an attorney lawfully constituted in writing; and before a
new certificate is issued, the old certificate shall be surrendered for
cancellation or in the case of a certificate alleged to have been lost, stolen
or destroyed, the provisions of Section 4 of this Article VIII shall have been
complied with.
Section 6. Duty of Corporation to Register Transfer. Notwithstanding
any of the provisions of Section 5 of this Article VIII, the Corporation is
under a duty to register the transfer of its shares only if:
(a) the share certificate is endorsed by the appropriate person or
persons; and
(b) reasonable assurance is given that these endorsements are genuine
and effective; and
(c) the Corporation has no duty to inquire into adverse claims or has
discharged any such duty; and
(d) any applicable law relating to the collection of taxes has been
complied with; and
(e) the transfer is in fact rightful or is to a bona fide purchaser.
Section 7. Registered Shareholders. Prior to due presentation for
transfer of registration of its shares, the Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the person
exclusively entitled to vote the shares, to receive any dividend or distribution
with respect to the shares, and for all other purposes; and, accordingly, the
Corporation shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
law.
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ARTICLE IX
INDEMNIFICATION
Section 1. Definitions. As used in this Article IX, the term:
(a) "Corporation" includes any domestic or foreign predecessor entity
of the Corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(b) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic Corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise. A director is
considered to be serving an employee benefit plan at the Corporation's request
if his duties to the Corporation also impose duties on, or otherwise involve
services by, him to the plan or to participants in or beneficiaries of the plan.
Director includes, unless the context requires otherwise, the estate or personal
representative of a director.
(c) "Expenses" include attorneys' fees.
(d) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses incurred with respect to a proceeding.
(e) "Officer" means an individual who is or was an officer of the
Corporation or an individual who, while an officer of the Corporation, is and
was serving at the Corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic Corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise.
An officer is considered to be serving an employee benefit plan at the
Corporation's request if his duties to the Corporation also impose duties on, or
otherwise involve services by, him to the plan or to participants in or
beneficiaries of the plan. Officer includes, unless the context requires
otherwise, the estate or personal representative of an officer.
(f) "Party" includes an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
and whether formal or informal.
Section 2. Indemnification.
(a) Except as provided in subsections (d) and (e) of this Section 2
below, the Corporation shall indemnify to the fullest extent permitted by the
Code, and to the extent that applicable law from time to time in effect shall
permit indemnification that is broader than provided in these Bylaws, then to
the maximum extent authorized by law, any individual who is made a party to a
proceeding because he is or was a director or officer against liability incurred
by him in the proceeding if the individual acted in a manner he believed in good
faith to be in or not opposed to the best interests of the Corporation and, in
the case of any criminal proceeding, he had no reasonable cause to be believe
his conduct was unlawful.
(b) An individual's conduct with respect to an employee benefit plan
for a purpose he believed in good faith to be in the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of subsection (a) of this Section 2 above.
(c) The termination of a proceeding by judgment, order, settlement, or
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, be determinative that an individual did not meet the standard of conduct
set forth in subsection (a) of this Section 2 above.
(d) The Corporation shall not indemnify an individual under this
Article IX:
(1) In connection with a proceeding by or in the right of
the Corporation in which such individual was adjudged
liable to the Corporation; or
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(2) In connection with any other proceeding in which such
individual was adjudged liable on the basis that
personal benefit was improperly received by him
unless, and then only to the extent that, a court of
competent jurisdiction determines pursuant to Section
14-2-854 of the Code that in view of the
circumstances of the case, such individual is fairly
and reasonably entitled to indemnification.
(e) Indemnification permitted under this Article IX in connection with
a proceeding by or in the right of the Corporation is limited to reasonable
expenses incurred in connection with the proceeding.
Section 3. Advances for Expenses.
(a) The Corporation shall pay for or reimburse the reasonable expenses
incurred by a director or officer who is a party to a proceeding in advance of
final disposition of the proceeding if:
(1) Such individual furnishes the Corporation a written
affirmation of his good faith belief that he has met the standard of
conduct set forth in subsection (a) of Section 2 above; and
(2) Such individual furnishes the Corporation a written
undertaking, executed personally or on his behalf, to repay any
advances if it is ultimately determined that he is not entitled to
indemnification under this Article IX.
(b) The undertaking required by paragraph (2) of subsection (a) of this
Section 3 must be an unlimited general obligation of the director or officer but
need not be secured and may be accepted without reference to financial ability
to make repayment.
Section 4. Court-Ordered Indemnification and Advances for Expenses.
Unless the Articles of Incorporation provide otherwise, a director or officer of
the Corporation who is a party to a proceeding may apply for indemnification or
advances for expenses to the court conducting the proceeding or to another court
of competent jurisdiction. On receipt of an application, the court after giving
any notice the court considers necessary may order indemnification or advances
for expenses if it determines:
(a) The individual is entitled to mandatory indemnification under Code
Section 14-2-852, in which case the court shall also order the Corporation to
pay such individual's reasonable expenses incurred to obtain court ordered
indemnification;
(b) The individual is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether or not he met the standard of
conduct set forth in subsection (a) of Section 2 above or was adjudged liable as
described in subsection (d) of Section 2 above, but if he was adjudged so liable
his indemnification is limited to reasonable expenses incurred unless the
Articles of Incorporation or a contract or resolution approved or ratified by
the Shareholders pursuant to Section 6 of this Article IX below provides
otherwise; or
(c) In the case of advances for expenses, the individual is entitled
pursuant to the Articles of Incorporation or any applicable resolution or
agreement, to payment or reimbursement of his reasonable expenses incurred as a
party to a proceeding in advance of final disposition of the proceeding.
Section 5. Determination and Authorization of Indemnification.
(a) The Corporation shall not indemnify a director or officer under
Section 2 of this Article IX above unless a determination has been made in the
specific case that indemnification of such individual is permissible in the
circumstances because he has met the standard of conduct set forth in subsection
(a) of Section 2 of this Article IX above; provided, however, that regardless of
the result or absence of any such determination, and unless limited by the
Articles of Incorporation, to the extent that such individual has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party, or in defense of any claim, issue or matter therein,
because he is or was a director or officer, the Corporation shall indemnify such
individual against reasonable expenses incurred by him in connection therewith.
(b) The determination specified in subsection (a) of this Section 5
shall be made:
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<PAGE> 20
(1) By the Board of Directors by majority vote of a quorum
consisting of Directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under paragraph (1) of this
subsection (b) of this Section 5, by majority vote of a committee duly
designated by the Board of Directors (in which designation Directors
who are parties may participate), consisting solely of two or more
Directors not at the time parties to the proceeding;
(3) By special legal counsel:
(A) Selected by the Board of Directors or its
committee in the manner prescribed in paragraphs (1) and (2)
of this subsection (b) of this Section 5; or
(B) If a quorum of the Board of Directors cannot be
obtained under paragraph (1) of this subsection (b) of this
Section 5 and a committee cannot be designated under paragraph
(2) of this subsection (b) of this Section 5, selected by a
majority vote of the full Board of Directors (in which
selection Directors who are parties may participate); or
(4) By the Shareholders, but shares owned by or voted under
the control of directors or officers who are at the time parties to the
proceeding may not be voted on the determination.
(c) Evaluation as to reasonableness of expenses shall be made in the
same manner as the determination that indemnification is permissible, except
that if the determination is made by special legal counsel, evaluation as to
reasonableness of expenses shall be made by those entitled under paragraph (3)
of subsection (b) of this Section 5 to select counsel.
(d) If the determination to be made pursuant to Section 5(a) above has
not been made within thirty (30) days following an individual's written request
for indemnification, then the individual shall be deemed to have met the
standard of conduct set forth in subsection (a) of Section 5 of this Article IX.
If the determination to be made pursuant to Section 5(c) above has not been made
within thirty (30) days following an individual's written request for
indemnification for, or advancement of, expenses, then the expenses claimed
shall be deemed reasonable.
Section 6. Shareholder Approved Indemnification.
(a) If authorized by the Articles of Incorporation or a contract or
resolution approved or ratified by the Shareholders of the Corporation by a
majority of the votes entitled to be cast, the Corporation may indemnify or
obligate itself to indemnify a director or officer made a party to a proceeding,
including a proceeding brought by or in the right of the Corporation, without
regard to the limitations in other Sections of this Article IX.
(b) The Corporation shall not indemnify an individual under this
Section 6 for any liability incurred in a proceeding in which such individual is
adjudged liable to the Corporation or is subjected to injunctive relief in favor
of the Corporation:
(1) For any appropriation, in violation of his duties, of any
business opportunity of the Corporation;
(2) For acts or omissions which involve intentional misconduct
or a knowing violation of law;
(3) For the types of liability set forth in Code Section
14-2-832 of the Code; or
(4) For any transaction from which he received an improper
personal benefit.
(c) Where approved or authorized in the manner described in subsection
(a) of this Section 6, the Corporation may advance or reimburse expenses
incurred in advance of final disposition of the proceeding only if:
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<PAGE> 21
(1) The Director furnishes the Corporation a written
affirmation of his good faith belief that his conduct does not
constitute behavior of the kind described in subsection (b) of this
Section 6; and
(2) The Director furnishes the Corporation a written
undertaking, executed personally or on his behalf to repay any advance
if it is ultimately determined that he is not entitled to
indemnification under this Section 6 of this Article IX.
Section 7. Indemnification of Employees and Agents. Unless the Articles
of Incorporation provide otherwise, the Corporation may indemnify and advance
expenses to an employee or agent of the Corporation who is not a director or
officer to the same extent, consistent with public policy, that may be provided
by the Articles of Incorporation, these Bylaws, general or specific action of
the Board of Directors, or contract.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of an individual who is or was a director, officer,
employee, or agent of the Corporation or who, while a director, officer,
employee, or agent of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise against liability asserted against or
incurred by him in that capacity or arising from his status as a director,
officer, employee, or agent, whether or not the Corporation would have power to
indemnify him against the same liability under Sections 2 and 5 of this Article
IX above.
Section 9. Not Exclusive of Other Rights. The indemnification and
advancement of expenses provided by this Article IX shall not be deemed
exclusive of any other rights, in respect of indemnification or otherwise, to
which those seeking indemnification or advancement of expenses may be entitled
under any resolution or agreement, either specifically or in general terms
approved by the affirmative vote of the holders of a majority of the shares
entitled to vote thereon, with respect to any proceeding to which a director or
officer is made a party, including a proceeding brought by or in the right of
the Corporation. This Section 9 shall apply both as to action by a director,
officer, employee or agent in his official capacity and as to action in another
capacity while holding such office or position, 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.
Section 10. Severability. In the event that any of the provisions of
Article IX is held by a court of competent jurisdiction to be invalid, void or
otherwise unenforceable, the remaining provisions of this Article IX shall
remain enforceable to the fullest extent permitted by law.
ARTICLE X
EMERGENCY POWERS
Section 1. Power to Adopt. Unless the Articles of Incorporation provide
otherwise, the Board of Directors may adopt bylaws to be effective only in an
emergency, which bylaws shall be subject to amendment or repeal by the
Shareholders. An emergency exists for purposes of this Section if a quorum of
the Directors cannot readily be assembled because of some catastrophic event.
The emergency bylaws may make any provision that may be practical and necessary
for the circumstances of the emergency.
Section 2. Lines of Succession of Officers or Agents. The Board of
Directors, either before or during any such emergency, may provide, and from
time to time modify, lines of succession in the event that during such an
emergency any or all officers or agents of the Corporation shall for any reason
be rendered incapable of discharging their duties.
Section 3. Change of Office. The Board of Directors, either before or
during any such emergency, may, effective in the emergency, change the head
office or designate several alternative head offices or regional offices, or
authorize the officers so to do.
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<PAGE> 22
Section 4. Effect of Bylaws. To the extent not inconsistent with any
emergency bylaws so adopted, these Bylaws shall remain in effect during any such
emergency and, upon its termination, the emergency bylaws shall cease to be
operative.
Section 5. Notices. Unless otherwise provided in emergency bylaws,
notice of any meeting of the Board of Directors during any such emergency may be
given only to such of the Directors as it may be feasible to reach at the time,
and by such means as may be feasible at the time, including publication, radio
or television.
Section 6. Quorum. To the extent required to constitute a quorum at any
meeting of the Board of Directors during any such emergency, the officers of the
Corporation who are present shall, unless otherwise provided in the emergency
bylaws, be deemed, in order of rank and within the same rank and order of
seniority, Directors for such meeting.
Section 7. Liability. Corporate action taken in good faith in
accordance with the emergency bylaws binds the Corporation and may not be used
to impose liability on a corporate director, officer, employee or agent.
ARTICLE XI
GENERAL PROVISIONS
Section 1. Fiscal Year. The Board of Directors is authorized to
designate and change the fiscal year of the Corporation from time to time as it
deems appropriate.
Section 2. Corporate Seal. The seal of the Corporation shall be in such
form as the Board of Directors shall approve from time to time. The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. In the event it is inconvenient to use such a seal at
any time, the signature of the Corporation followed by the word "Seal" enclosed
in parentheses shall be deemed the seal of the Corporation.
Section 3. Annual Financial Statements. In accordance with the Code,
the Corporation shall prepare and furnish to shareholders such financial
statements as may be required by the Code.
Section 4. Inspection of Books and Records. The Board of Directors
shall have power to determine which accounts, books and records of the
corporation shall be opened to the inspection of shareholders, except those as
may by law specifically be made open to inspection, and shall have power to fix
reasonable rules and regulations not in conflict with the applicable law for the
inspection of accounts, books and records which by law or by determination of
the Board of Directors shall be open to inspection. Without the prior approval
of the Board of Directors in their discretion, the right of inspection set forth
in Section 14-2-1602(c) of the Code shall not be available to any shareholder
owning two percent (2%) or less of the shares outstanding.
Section 5. Conflict with Articles of Incorporation. In the event that
any provision of these Bylaws conflicts with any provision of the Articles of
Incorporation, the Articles of Incorporation shall govern.
Section 6. Adoption of Amendments to Incentive Stock Option Plans. In
addition to the rights of the Board of Directors to approve the adoption of
amendments to any incentive stock option plans of the Corporation which qualify
under Section 422A of the Internal Revenue Code of 1986, as amended, the
Shareholders of the Corporation may approve any such amendment by written
consent of the Shareholders which is signed by Shareholders having voting power
to cast not less than the minimum number of votes that would be necessary to
authorize such action, as provided in and subject to the provisions of Section
14-2-704, as amended, of the Code.
Section 7. Reference to Code Sections. Any reference to any Section or
Article of the Georgia Business Corporation Code contained herein shall be
interpreted to include any Section or Article which amends or supersedes such
Section or Article.
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<PAGE> 23
ARTICLE XII
AMENDMENTS
Except as otherwise provided in these Bylaws, the Board of Directors
shall have power to alter, amend or repeal these Bylaws or adopt new Bylaws by
majority vote of all of the Directors, but any Bylaws adopted by the Board of
Directors may be altered, amended or repealed, and new Bylaws adopted, by the
Shareholders by majority vote of the holders of record entitled to vote thereon.
The Shareholders may prescribe by expressing in the action they take in adopting
any Bylaw or Bylaws that the Bylaw or Bylaws so adopted shall not be altered,
amended or repealed by the Board of Directors. Notwithstanding anything herein
to the contrary, the provisions of Articles IX, XII, XIII, or XIV, or of
Sections 3 or 11 of Article II, or Sections 2, 3 or 4 of Article III, of these
Bylaws shall not be altered, amended or repealed, and no provision inconsistent
therewith shall be adopted, without the affirmative vote of a majority of the
entire Board of Directors or of the holders of at least 75% of the shares of the
Corporation entitled to vote generally in the election of directors, voting as a
single Voting Group.
ARTICLE XIII
FAIR PRICE REQUIREMENTS
All requirements of Sections 14-2-1110 through 14-2-1113 of the Code,
as may be in effect from time to time, shall apply to the Corporation.
ARTICLE XIV
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
All of the requirements of Part 3 of Article 11 of the Code (currently
codified in Sections 14-2-1131 through 14-2-1133 thereof), as may be in effect
from time to time (the "Business Combination Statute"), shall apply to all
"business combinations" (as defined in Section 14-2-1131 of the Code) involving
the Corporation. The requirements of the Business Combination Statute shall be
in addition to the requirements of Article XIII above. Nothing contained in the
Business Combination Statute shall be deemed to limit the provisions contained
in Article XIII above, and nothing contained in Article XIII above shall be
deemed to limit the provisions contained in the Business Combination Statute.
-18-
<PAGE> 1
EXHIBIT 11.1
DENAMERICA CORP. AND SUBSIDIARIES
Statement re: computation of per share income (loss)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
Description March 29, 1995 March 27, 1996
- ----------- -------------- --------------
<S> <C> <C>
Income (loss) before extraordinary item $ 69 $ (677)
Extraordinary item - loss on extinguishment of debt -- (497)
----------- -----------
Net income (loss) 69 (1,174)
Less: Preferred stock dividend and accretion (166) (149)
----------- -----------
Net income (loss) applicable to common shareholders $ (97) $ (1,323)
=========== ===========
Income (loss) before extraordinary item per common
and common equivalent share $ (.01) $ (.12)
Extraordinary item - loss on extinguishment
of debt per common and common equivalent share -- (.07)
----------- -----------
Net income (loss) per common and common equivalent share $ (.01) $ (.19)
=========== ===========
Weighted average common and common equivalent
shares outstanding 6,937,500 6,937,500
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-1997
<PERIOD-START> DEC-28-1995
<PERIOD-END> MAR-27-1996
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,317
<ALLOWANCES> 0
<INVENTORY> 2,370
<CURRENT-ASSETS> 5,569
<PP&E> 55,896
<DEPRECIATION> 6,170
<TOTAL-ASSETS> 136,827
<CURRENT-LIABILITIES> 35,666
<BONDS> 77,624
0
0
<COMMON> 1,308
<OTHER-SE> 16,315
<TOTAL-LIABILITY-AND-EQUITY> 136,827
<SALES> 20,161
<TOTAL-REVENUES> 20,161
<CGS> 5,632
<TOTAL-COSTS> 5,632
<OTHER-EXPENSES> 14,707
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 860
<INCOME-PRETAX> (1,185)
<INCOME-TAX> (359)
<INCOME-CONTINUING> (826)
<DISCONTINUED> 0
<EXTRAORDINARY> (497)
<CHANGES> 0
<NET-INCOME> (1,323)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
