SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
DenAmerica Corp.
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(Name of Registrant as Specified In Its Charter)
---------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
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<PAGE>
DENAMERICA CORP.
---------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 26, 1997
---------------------------------------------
The Annual Meeting of Shareholders of DenAmerica, a Georgia corporation
(the "Company"), will be held at 12:00 noon on Thursday, June 26, 1997, at the
Radisson Resort of Scottsdale, 7171 N. Scottsdale Road, Scottsdale, Arizona for
the following purposes:
1. To elect directors to serve until the next annual meeting of
shareholders and until their successors are elected and qualified.
2. To approve the Company's 1996 Stock Option Plan.
3. To approve an amendment to the Company's Restated Articles of
Incorporation to (a) increase the number of shares of the Company's common
stock, par value $.10 per share, that are authorized for issuance from the
current maximum of 20,000,000 shares to a maximum of 40,000,000 shares, and (b)
authorize 5,000,000 shares of serial preferred stock, par value $.01 per share,
which may be issued in one or more series from time to time as determined by the
Company's Board of Directors with such designations, preferences, privileges,
conversion and other rights, voting powers, restrictions, limitations,
qualifications, and other terms and conditions as the Board of Directors may
determine.
4. To ratify the appointment of Deloitte & Touche LLP as the
independent auditors of the Company for the fiscal year ending December 31,
1997.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on May 23, 1997
are entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
To assure your representation at the meeting, however, you are urged to mark,
sign, date, and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder of record
attending the meeting may vote in person even if he or she previously has
returned a proxy.
Sincerely,
William J. Howard
Secretary
Scottsdale, Arizona
May __, 1997
<PAGE>
DENAMERICA CORP.
7373 North Scottsdale Road
Suite D-120
Scottsdale, Arizona 85253
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PROXY STATEMENT
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VOTING AND OTHER MATTERS
General
The enclosed proxy is solicited on behalf of DenAmerica Corp., a
Georgia corporation (the "Company"), by the Company's board of directors (the
"Board of Directors") for use at the Annual Meeting of Shareholders to be held
Thursday, June 26, 1997 at 12:00 noon (the "Meeting"), or at any adjournment
thereof, for the purposes set forth in this Proxy Statement and in the
accompanying Notice of Annual Meeting of Shareholders. The Meeting will be held
at the Radisson Resort of Scottsdale, 7171 N. Scottsdale Road, Scottsdale,
Arizona.
These proxy solicitation materials were first mailed on or about May
__, 1997 to all shareholders entitled to vote at the Meeting.
Voting Securities and Voting Rights
Shareholders of record at the close of business on May 23, 1997 (the
"Record Date") are entitled to notice of and to vote at the Meeting. On the
Record Date, there were issued and outstanding 13,437,777 shares of the
Company's common stock, par value $.10 per share (the "Common Stock").
The presence, in person or by proxy, of the holders of a majority of
the total number of shares of Common Stock outstanding constitutes a quorum for
the transaction of business at the Meeting. Each shareholder voting at the
Meeting, either in person or by proxy, may cast one vote per share of Common
Stock held on all matters to be voted on at the Meeting. Assuming that a quorum
is present, (i) the affirmative vote of a plurality of the shares of Common
Stock of the Company present in person or represented by proxy at the Meeting
and entitled to vote is required for the election of directors; (ii) the
affirmative vote of a majority of the shares of Common Stock of the Company
present in person or represented by proxy at the Meeting and entitled to vote is
required (A) to approve the Company's 1996 Stock Option Plan (the "1996 Plan");
and (B) for the ratification of the appointment of Deloitte & Touche LLP as the
independent auditors of the Company for the fiscal year ending December 31,
1997; and (iii) the affirmative vote of a majority of the total number of the
issued and outstanding shares of the Company's Common Stock is required to
approve the amendments to the Company's Restated Articles of Incorporation (the
"Restated Articles") to (a) increase the number of shares of the Company's
Common Stock that are authorized for issuance from the current maximum of
20,000,000 shares to a maximum of 40,000,000 shares, and (b) to authorize
5,000,000 shares of serial preferred stock, par value $.01 per share, which may
be issued in one or more series from time to time as determined by the Company's
Board of Directors with such designations, preferences, privileges, conversion
and other rights, voting powers, restrictions, limitations, qualifications, and
other terms and conditions as the Board of Directors may determine.
Votes cast by proxy or in person at the Meeting will be tabulated by
the election inspectors appointed for the Meeting, who will determine whether a
quorum is present. The election inspectors will treat abstentions as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining the approval of any matter
submitted to the shareholders for a vote. If a broker
1
<PAGE>
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
Voting of Proxies
When a proxy is properly executed and returned, the shares it
represents will be voted at the Meeting as directed. If no specification is
indicated, the shares will be voted (i) "for" the election of the director
nominees set forth in this Proxy Statement, (ii) "for" approval of the 1996
Plan; (iii) "for" approval of the proposal to amend the Company's Restated
Articles; and (iv) "for" the ratification of the appointment of Deloitte &
Touche LLP as the independent auditors of the Company for the fiscal year ending
December 31, 1997.
Revocability of Proxies
Any person giving a proxy may revoke the proxy at any time before its
use by delivering to the Company written notice of revocation or a duly executed
proxy bearing a later date or by attending the Meeting and voting in person.
Solicitation
The cost of this solicitation will be borne by the Company. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for expenses incurred in forwarding
solicitation materials to such beneficial owners. Proxies also may be solicited
by certain of the Company's directors and officers, personally or by telephone
or telegram, without additional compensation.
Annual Report and Other Matters
The 1996 Annual Report to Shareholders, which was mailed to
shareholders with or preceding this Proxy Statement, contains financial and
other information about the activities of the Company, but is not incorporated
into this Proxy Statement and is not to be considered a part of these proxy
soliciting materials. The information contained in the "Compensation Committee
Report on Executive Compensation" and "Performance Graph" below shall not be
deemed "filed" with the Securities and Exchange Commission (the "SEC") or
subject to Regulations 14A or 14C or to the liabilities of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Company will provide upon written request, without charge to each
shareholder of record as of the Record Date, a copy of the Company's annual
report on Form 10-K for the fiscal year ended January 1, 1997 as filed with the
SEC. Any exhibits listed in the Form 10-K report also will be furnished upon
request at the actual expense incurred by the Company in furnishing such
exhibit. Any such requests should be directed to the Company's Secretary at the
Company's executive offices set forth in this Proxy Statement.
ELECTION OF DIRECTORS
Nominees
The Company's Restated Articles and Amended and Restated Bylaws provide
that the number of directors shall be fixed from time to time by resolution of
the Board of Directors. All directors are elected at each annual meeting of the
Company's shareholders and hold office until the Company's next annual meeting
of shareholders or until their successors are elected and qualified or until
their earlier resignation or removal.
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A board of seven directors is to be elected at the Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for each of the nominees named below. All but one of the nominees currently are
directors of the Company. In the event that any such nominee is unable or
declines to serve as a director at the time of the Meeting, the proxies will be
voted for any nominee designated by the current Board of Directors to fill the
vacancy. It is not expected that any nominee will be unable or will decline to
serve as a director.
The following table sets forth certain information regarding the
nominees for directors of the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Jack M. Lloyd............................. 47 Chairman of the Board, President, and Chief
Executive Officer
William J. Howard......................... 53 Executive Vice President, Secretary, and Director
William G. Cox............................ 48 Chief Operating Officer and Director
Todd S. Brown............................. 40 Vice President, Chief Financial Officer,
Treasurer, and Director
John M. Holliman, III..................... 43 Director
C. Alan MacDonald......................... 64 Director
Fred W. Martin............................ 66 Director
</TABLE>
Jack M. Lloyd has served as Chairman of the Board of the Company since
July 9, 1996 and as President, Chief Executive Officer, and a director of the
Company since March 29, 1996. Mr. Lloyd served as Chairman of the Board and
Chief Executive Officer of Denwest Restaurant Corp. ("DRC") from 1987 until the
March 1996 merger of DRC and the Company (the "Merger") and served as President
of DRC from 1987 until November 1994. Mr. Lloyd engaged in commercial and
residential real estate development and property management as President of
First Federated Investment Corporation during the early and mid-1980s. Mr. Lloyd
also currently serves as a director of Action Performance Companies, Inc., a
publicly held company, and Masterview Window Company, a privately held company.
William J. Howard has served as Executive Vice President of the Company
since July 9, 1996 and as Secretary and a director of the Company since March
29, 1996. Mr. Howard served as a Vice President of the Company from March 29,
1996 until July 3, 1996. Mr. Howard served as President of DRC from November
1994 until the Merger in March 1996 and as a director of DRC from 1990 until
March 1996. Mr. Howard served as Vice President of DRC from 1990 until November
1994 and as Chief Financial Officer of DRC from 1990 until August 1994. Prior to
joining DRC, Mr. Howard held numerous senior management positions with Citicorp
and Citibank, including Senior Vice President and Senior Credit Officer with
Citicorp Mortgage, Inc.
William G. Cox has served as Chief Operating Officer and a director of
the Company since March 29, 1996. Mr. Cox served as Vice President - Operations
for Denny's, Inc., the franchisor of Denny's restaurants, from June 1993 until
November 1995, with responsibility for approximately 590 company-owned and
franchised Denny's restaurants located throughout the United States. Mr. Cox
served as a Senior Vice President of Flagstar Companies, Inc. ("Flagstar"), of
which Denny's Inc. is a wholly-owned subsidiary, and as Chief Operating Officer
of Flagstar's "Quincy's" restaurant chain from May 1992 to June 1993. Mr. Cox
served as Vice President of Eastern Operations of Denny's, Inc. from March 1991
to May 1992 and as a Regional Manager and Division Leader for Denny's, Inc. from
1981 to March 1991. Mr. Cox joined Denny's, Inc. as a Manager-in-Training in
September 1977 and had advanced to the position of Regional Manager by 1981.
3
<PAGE>
Todd S. Brown has served as Vice President, Chief Financial Officer,
Treasurer, and a director of the Company since March 29, 1996. Mr. Brown served
as Vice President, Chief Financial Officer, and a Director of DRC from September
1994 until the Merger in March 1996. Mr. Brown was employed by Deloitte & Touche
LLP from 1980 to September 1994. Mr. Brown is a Certified Public Accountant in
the state of Arizona.
John M. ("Jock") Holliman, III has served as a director of the Company
since March 29, 1996. Mr. Holliman served as a director of DRC from January 1995
until the Merger in March 1996. Mr. Holliman is the sole general partner of AGP
Management, L.P., which is the managing general partner of Valley Ventures,
L.P., a limited partnership formed in 1993 to purchase the venture capital
portfolio of Valley National Bank of Arizona. From 1985 to 1993, Mr. Holliman
served as Senior Managing Director of Valley National Investors, Inc., a wholly
owned Small Business Investment Corporation subsidiary of Valley National Bank
of Arizona. Mr. Holliman also currently serves as a director of Voxel,
OrthoLogic Corp., and Express America Holdings Corp., each of which are publicly
held corporations, and several other privately held corporations. Mr. Holliman
also serves as a director of several non-profit organizations.
C. Alan MacDonald has served as a director of the Company since July
1993. Mr. MacDonald currently is a General Partner of the Marketing Partnership
Inc., a packaged goods marketing consulting firm. From 1992 through 1994, Mr.
MacDonald was Chairman of the Board and Chief Executive Officer of Lincoln
Snacks Company and continues to serve on that company's Board of Directors. From
1983 to 1995, Mr. MacDonald served as President and Chief Executive Officer of
the Nestle Foods Corporation. From 1955 through 1982, Mr. MacDonald was employed
by the Stouffers Corporation, serving as President of The Stouffer Frozen Food
Company from 1971 through 1982. Mr. MacDonald currently serves as a director of
several privately held corporations.
Fred W. Martin has served as a director of the Company since March 29,
1996. Mr. Martin served as a director of DRC from November 1994 until the Merger
in March 1996. Mr. Martin served as Western Regional Director of Franchise
Development with Denny's, Inc. from 1985 to 1994, during which time he approved
and developed 400 franchise and company locations for Denny's, Inc. throughout
the western United States. Mr. Martin served as Western Real Estate
Representative with Denny's, Inc. from 1979 until 1985.
Upon consummation of the Merger, the Company issued an aggregate of
6,937,500 shares of Common Stock to Jack M. Lloyd, William J. Howard, BancBoston
Ventures, Inc., and The Moffitt Family Trust in exchange for all of the
outstanding capital stock of DRC. See "Certain Transactions." As a result, the
former shareholders of DRC held approximately a 53.0% of the Company's
outstanding Common Stock immediately following the Merger. In addition, as of
the Record Date the former shareholders of DRC collectively owned a sufficient
number of shares of the Company's Common Stock to elect all of the members of
the Board of Directors at the Meeting. There is no agreement or understanding,
however, between or among the Company, the former shareholders of DRC, or any of
the persons who constitute the Company's Board of Directors as to their serving
on the Company's Board of Directors in the future.
Meetings and Committees of the Board of Directors
The Company's bylaws authorize the Board of Directors to appoint among
its members one or more committees composed of one or more directors. The Board
of Directors has appointed an Audit Committee, a Compensation Committee, a 1992
Stock Option Plan Committee, and a 1995 Directors' Stock Option Plan Committee.
The Audit Committee reviews the annual financial statements, the significant
accounting issues, and the scope of the audit with the Company's independent
auditors and is available to discuss with the auditors any other audit related
matters that may arise during the year. The Compensation Committee reviews and
acts on matters relating to compensation levels and benefit plans for key
executives of the Company. The 1992 Stock Option Plan Committee and the 1995
Directors' Stock Option Plan Committee administer the Company's 1992 Stock
Option Plan and 1995 Directors' Stock Option Plan, respectively. Messrs.
Holliman and Phillip B. Smith, who is not standing for re-election to the Board
of Directors, constituted the Audit Committee during fiscal 1996; Messrs.
4
<PAGE>
Holliman, MacDonald, and Martin currently constitute the Compensation and 1992
Stock Option Plan Committees; and Messrs. Lloyd and Howard currently constitute
the 1995 Directors' Stock Option Plan Committee.
The Board of Directors of the Company held a total of seven meetings
during the fiscal year ended January 1, 1997. The Company's Audit Committee held
one formal meeting during the fiscal year ended January 1, 1997 and the
Company's Compensation Committee held one formal meeting during the fiscal year
ended January 1, 1997. No director attended fewer than 75% of the aggregate of
(i) the total number of meetings of the Board of Directors during the period in
which such person served as a director, and (ii) the total number of meetings
held by all Committees of the Board on which such director was a member and
during the period in which such person served on such committee.
Director Compensation and Other Information
Employees of the Company do not receive compensation for serving as
members of the Company's Board of Directors. The Company pays each independent
director an annual fee in the amount of $10,000 and reimburses each independent
director for travel and related expenses incurred in connection with attendance
at board and committee meetings. The terms of the Company's 1995 Directors'
Stock Option Plan (the "1995 Plan") provide that each non-employee director will
receive an automatic grant of options to acquire 10,000 shares of the Company's
Common Stock on the date of his or her first appointment or election to the
Board of Directors. The 1995 Plan also provides for the automatic grant of
options to purchase 10,000 shares of the Company's Common Stock to non-employee
directors at the time of his or her re-election to the Board of Directors at an
annual meeting of shareholders. Accordingly, each of Messrs. Holliman,
MacDonald, and Martin will receive an automatic grant of options to purchase
10,000 shares of Common Stock at the time of their respective election or
re-election to the Board of Directors at the Meeting. See "Executive
Compensation - 1995 Directors' Stock Option Plan."
5
<PAGE>
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation
The following table sets forth information concerning the compensation
of each person who served as the Company's Chief Executive Officer and the four
other most highly compensated executive officers whose cash salary and bonuses
exceeded $100,000 during the fiscal year ended January 1, 1997 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
------------
Annual Compensation Awards
---------------------------------- ------
Other Annual Securities
Fiscal Salary Compensation Underlying All Other
Name and Principal Position Year $(1) Bonus($) ($) Options (#) Compensation($)(2)
--------------------------- ------ -------- -------- ------------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Jack M. Lloyd, Chairman of the 1996 $375,200 -- -- -- --
Board, President, and Chief 1995 312,000 -- -- -- --
Executive Officer(3) 1994 312,000 -- -- -- --
Jeffrey D. Miller, Chairman of 1996 $129,227 -- $ 0 -- $115,385
Board, President, and Chief the 1995 240,863 -- 23,750 -- --
Executive Officer(4) 1994 193,808 -- 25,847 -- --
William J. Howard, Executive Vi 1996 $187,600 -- -- -- --
President and Secretary(5) 1995 156,000 -- -- -- --
1994 156,000 -- -- -- --
William G. Cox, Chief Operating 1996 $221,795(6) -- -- 300,000(7) $15,921
Officer
Todd S. Brown, Vice President, 1996 $115,700 $75,000 -- 124,800(9) --
Chief Financial Officer, and 1995 91,000 -- -- -- --
Treasurer(5) 1994 27,300(8) 9,000 -- -- --
Michael Larsen, Vice President(5) 1996 $135,470 -- -- 100,000(9) --
1995 150,020 -- -- -- --
1994 150,020 -- -- -- --
</TABLE>
- ------------------
(1) Each of the Named Executive Officers received certain perquisites, the
value of which did not exceed 10% of their salary during fiscal 1996.
(2) Amounts paid in fiscal 1996 represent (a) severance payments to Mr. Miller
in the amount of $115,385 and (b) reimbursement of relocation expenses to
Mr. Cox in the amount of $15,921.
(3) Mr. Lloyd became the Company's President and Chief Executive Officer upon
consummation of the Merger on March 29, 1996, and became the Company's
Chairman of the Board on July 9, 1996. Amounts shown for periods prior to
March 29, 1996 represent payments to Mr. Lloyd for services as an executive
officer of DRC prior to the Merger.
(4) Mr. Miller served as the President and Chief Executive Officer of the
Company or its predecessors from April 1986 until March 1996. Mr. Miller
also served as Chairman of the Board of the Company or its predecessors
from April 1986 until July 1996.
(5) Each of Messrs. Howard, Brown, and Larsen became executive officers of the
Company upon consummation of the Merger on March 29, 1996. Amounts shown
for periods prior to March 29, 1996 represent payments to each such person
for services as an executive officer of DRC prior to the Merger.
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<PAGE>
(6) Represents amounts accrued or paid beginning on March 29, 1996, the date of
Mr. Cox's employment with the Company.
(7) The exercise price of options to acquire 60,000 shares of Common Stock is
$3.00 per share, which was less than the fair value of the Company's Common
Stock on the date of grant. The exercise price of the remaining options to
acquire 240,000 shares of Common Stock is $4.00 per share, which was the
fair value of the Company's Common Stock on the date of grant.
(8) Represents amounts accrued or paid beginning in September 1994, the date of
Mr. Brown's employment with DRC.
(9) The exercise prices of such options were equal to the fair value of the
Company's Common Stock on the date of grant.
Options Grants
The following table sets forth certain information with respect to
stock options granted to the Named Executive Officers during the fiscal year
ended January 1, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------- Potential Realizable Value
Percentage at Assumed Annual
Number of of Total Rates of Stock Price
Securities Options Exercise Appreciation for
Underlying Granted to Exercise Price Option Term(2)
Options Employees in Price at Date Expiration ---------------------------
Name Granted (#) Fiscal Year ($/Sh)(1) of Grant($) Date 0% 5% 10%
---- ----------- ----------- --------- ----------------------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jack M. Lloyd........ -- -- -- -- -- -- -- --
Jeffrey D. Miller(3). -- -- -- -- -- -- -- --
William J. Howard.... -- -- -- -- -- -- -- --
William G. Cox ...... 60,000 7.1% $3.00 $4.00 3/28/06 $60,000 $210,935 $442,498
240,000 28.4% $4.00 $4.00 3/28/06 $0 $603,738 $1,529,993
Todd S. Brown........ 124,800 14.8% $4.00 $4.00 4/28/06 $0 $313,944 $795,596
Michael Larsen ...... 100,000 11.8% $4.00 $4.00 4/28/06 $0 $251,558 $637,496
</TABLE>
- ---------------------
(1) Twenty percent of the options vested and became exercisable on the date
of grant, and the remainder of the options vest and become exercisable in
four equal annual installments beginning on the first anniversary of the
date of grant.
(2) Potential gains are net of the exercise price, but before taxes
associated with the exercise. Amounts represent hypothetical gains that
could be achieved for the respective options if exercised at the end of
the option term. The assumed 5% and 10% rates of stock price appreciation
are provided in accordance with the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
the future price of the Company's Common Stock. Actual gains, if any, on
stock option exercises will depend upon the future market prices of the
Company's Common Stock.
(3) Mr. Miller served as the President and Chief Executive Officer of the
Company or its predecessors from April 1986 until March 1996. Mr. Miller
also served as Chairman of the Board of the Company or its predecessors
from April 1986 until July 1996.
7
<PAGE>
Option Holdings
The following table sets forth information concerning the number and
value of all options held at January 1, 1997, by the Named Executive Officers.
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options
Options at Fiscal Year-End at Fiscal Year-End ($)(1)
-------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jack M. Lloyd..................................... -- -- N/A N/A
Jeffrey D. Miller(2).............................. -- -- N/A N/A
William J. Howard................................. -- -- N/A N/A
William G. Cox.................................... 60,000 240,000 $7,500 $0
Todd S. Brown .................................... 24,960 99,840 $0 $0
Michael Larsen.................................... 20,000 80,000 $0 $0
</TABLE>
- --------------------
(1) Calculated based upon the closing price of the Company's Common Stock on
December 31, 1996 of $3.125 per share, less the exercise prices of the
options held. Except as indicated, the exercise prices of all options held
by the Named Executive Officers were greater than $3.125 per share on that
date.
(2) Mr. Miller served as the President and Chief Executive Officer of the
Company or its predecessors from April 1986 until March 1996. Mr. Miller
also served as Chairman of the Board of the Company or its predecessors from
April 1986 until July 1996.
Employment Agreements
General
The Company currently is a party to an employment agreement with each
of Jack M. Lloyd, William J. Howard, Todd S. Brown, and William G. Cox. In
addition to the provisions of the individual employment agreements as described
below, the employment agreements generally require the Company to provide each
person with certain medical and life insurance benefits, to reimburse them for
all travel, entertainment, and other ordinary and necessary expenses incurred in
connection with the Company's business and their duties under their respective
employment agreements, and to provide such other fringe benefits that the
Company makes generally available to all of its employees on a
non-discriminatory basis. The employment agreements with Messrs. Lloyd, Howard,
and Cox require the Company to provide each such officer with an automobile for
use in connection with the Company's business. The agreements with Messrs.
Lloyd, Howard, Brown, and Cox contain provisions that prohibit the respective
officer from (i) competing with the business of the Company, (ii) taking certain
actions intended to solicit other persons to terminate their business
relationship with the Company or to terminate his or her employment relationship
with the Company, and (iii) making unauthorized use or disclosure of the
Company's trade names, fictitious names, or confidential information.
Jack M. Lloyd; William J. Howard; Todd S. Brown
DRC entered into employment agreements, effective September 30, 1994,
with each of Jack M. Lloyd, William J. Howard, and Todd S. Brown. Upon
consummation of the Merger, the Company assumed DRC's obligations under these
agreements. The employment agreement with Mr. Lloyd, as amended, provides for a
base salary of $520,000 per year; the agreement with Mr. Howard, as amended,
provides for a base salary of $260,000 per year; and the agreement with Mr.
Brown, as amended, provides for a base salary of $124,800 per year. In
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<PAGE>
addition, each agreement provides that the Company may pay each of Messrs.
Lloyd, Howard, and Brown additional incentive compensation for each fiscal year,
based upon standards to be determined from time to time by the Company's Board
of Directors in its sole discretion. In order to be eligible to receive
incentive compensation for any fiscal year, however, the officer must be
employed by the Company on the last day of such fiscal year. Each employment
agreement expires on December 25, 1997. The Company may terminate each officer's
employment only for cause, as defined in the respective agreements. Each
agreement also will terminate automatically upon the death of the respective
officer, and each officer may terminate his employment agreement upon 60 days'
written notice to the Company.
William G. Cox
In December 1995, the Company entered into an employment agreement with
William G. Cox, which became effective upon consummation of the Merger on March
29, 1996. Pursuant to his agreement with the Company, Mr. Cox serves as the
Chief Operating Officer of the Company at a base salary of $220,000 per year.
The agreement also provides that Mr. Cox will be eligible to receive an annual
bonus of up to 50% of his annual base salary pursuant to a bonus pool plan to be
established by and administered in the sole discretion of the Company. Pursuant
to the agreement, the Company reimbursed Mr. Cox for certain relocation expenses
and granted to Mr. Cox options to purchase 300,000 shares of the Company's
Common Stock. Mr. Cox's agreement provides for his employment until March 29,
1999, subject to extension for additional one-year periods under mutually
agreeable terms and conditions. The Company may terminate the agreement only for
cause, as defined in the agreement.
Stock Option Plans
1996 Stock Option Plan
On December 10, 1996, the Company's Board of Directors adopted the
Company's 1996 Stock Option Plan, subject to shareholder approval at the
Meeting. See "Proposal to Approve the Company's 1996 Stock Option Plan."
Amended and Restated 1992 Stock Option Plan
A total of 1,000,000 shares of the Company's Common Stock have been
reserved for issuance under the Company's Amended and Restated 1992 Stock Option
Plan (the "1992 Plan"). The 1992 Plan limits the persons eligible to receive
options to directors, consultants, and key employees, including officers, of the
Company or a subsidiary of the Company and "key persons" who are not employees
but have provided valuable services, have incurred financial risk on behalf of
the Company, or have extended credit to the Company or its subsidiaries. The
1992 Plan provides that options granted to employees may be incentive stock
options or non-qualified options pursuant to the Internal Revenue Code of 1986,
as amended. Key persons who are not employees are eligible to receive only
non-qualified options. The 1992 Plan is intended to comply with Rule 16b-3 as
promulgated under the Exchange Act with respect to persons subject to Section 16
of the Exchange Act. As of May 23, 1997, there were outstanding options to
acquire a total of 823,000 shares of Common Stock under the 1992 Plan. The
number of shares and option prices are subject to adjustment pursuant to certain
anti-dilution provisions contained in the 1992 Plan. The 1992 Plan terminates on
April 1, 2002.
The 1992 Stock Option Plan Committee (the "1992 Plan Committee")
determines the periods during which options granted under the 1992 Plan may be
exercised, but no option granted under the 1992 Plan may expire more than 10
years from the date of grant. The Board of Directors or the 1992 Plan Committee,
in its sole discretion, determines the exercise price of options granted under
the 1992 Plan. Incentive stock options may not have an exercise price less than
the fair market value of the Common Stock on the grant date, except that, in the
case of an incentive stock option granted to any participant who owns more than
10% of the Company's outstanding voting
9
<PAGE>
shares, the exercise price must be at least 110% of the fair market value of the
Common Stock on the date of grant and the term of the option may be no longer
than five years. Options that are not incentive stock options may not have an
exercise price less than the greater of the minimum price required by applicable
state law, by the Company's Restated Articles or the par value of the Common
Stock.
At the discretion of the 1992 Plan Committee or the Board of Directors,
options may be exercised by delivery of any combination of cash, shares of
Common Stock, or by delivering to the Company a promissory note upon such terms
and conditions as the 1992 Plan Committee or Board of Directors may determine.
The 1992 Plan also permits the 1992 Plan Committee or the Board of Directors, in
its sole discretion, to include a provision in any option agreement that will
allow the optionholder, on any date on which the option is exercisable and on
which the fair market value (as defined in the 1992 Plan) of Common Stock
exceeds the exercise price of the option, to surrender the option in lieu of
exercise and in exchange receive cash or shares of Common Stock in an amount
equal to the excess of the fair market value of Common Stock over the exercise
price of the option.
1995 Directors Stock Option Plan
A total of 300,000 shares of Common Stock have been reserved for
issuance under the Company's 1995 Directors Stock Option Plan. The purpose of
the 1995 Plan is to promote the interests of the Company and its shareholders by
strengthening the Company's ability to attract and retain the services of
experienced and knowledgeable non-employee directors and by encouraging such
directors to acquire an increased proprietary interest in the Company.
Options to purchase 10,000 shares of Common Stock are automatically
granted to each non-employee director of the Company on the date of his or her
initial election to the Board of Directors or re-election at an annual meeting
of the Company's shareholders. Directors who are first elected or appointed to
the Board of Directors on a date other than an annual meeting date are
automatically granted options to purchase the number of shares of Common Stock
equal to the product of 10,000 multiplied by a fraction, the numerator of which
is the number of days during the period beginning on such grant date and ending
on the date of the next annual meeting, and the denominator of which is 365. If
no meeting is scheduled at a time a director is first elected or appointed to
the Board of Directors, the date of the next annual meeting is deemed to be the
120th day of the fiscal year next following the interim grant date. The exercise
price of each option is the fair market value of the Company's Common Stock on
the business day preceding the date of grant, and the term of each option may
not exceed ten years. One-half of the options granted vest and become
exercisable after the first year of continuous service as a director following
the automatic grant date, and 100% vest after two years of continuous service on
the Board of Directors. The 1995 Plan expires on January 16, 2005.
The 1995 Plan replaced the Company's 1992 Directors' Stock Option Plan,
pursuant to which options to purchase 22,500 shares of Common Stock at an
exercise price of $6.00 per share were granted to Mr. MacDonald and the
Company's other non-employee directors prior to March 1995. At the time the 1995
Plan was approved by the Company's shareholders in March 1995, Mr. MacDonald and
the Company's other non-employee directors at that time received options to
purchase 10,000 shares of Common Stock at an exercise price of $3.00 per share.
Upon consummation of the Merger in March 1996, each of Messrs. Holliman,
MacDonald, Martin, and Phillip B. Smith, who is not standing for re-election as
a director, were automatically granted options to purchase 10,000 shares of
Common Stock at an exercise price of $3.94 per share under the 1995 Plan.
Pursuant to the 1995 Plan, each of Messrs. Holliman, MacDonald and Martin will
automatically receive options to purchase 10,000 shares on the date of the
Meeting.
10
<PAGE>
Compensation Committee Interlocks and Insider Participation
C. Alan MacDonald, Fred W. Martin, and John M. Holliman, III served as
members of the Compensation Committee of the Board of Directors during fiscal
1996. None of such individuals had any contractual or other relationships with
the Company during fiscal 1996 except as directors.
Indemnification and Limitation of Personal Liability of Directors
The Company's Amended and Restated Bylaws require the Company to
indemnify its directors and officers against liabilities that they may incur
while serving in such capacities, to the full extent permitted and in the manner
required by the Georgia Business Corporation Code (the "GBCC"). Pursuant to
these provisions, the Company will indemnify its directors and officers against
any losses incurred in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director or
officer of the Company or served with another corporation, partnership, joint
venture, trust or other enterprise at the request of the Company. In addition,
the Company will provide advances for expenses incurred in defending any such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such advances if it is ultimately determined
that he or she is not entitled to indemnification by the Company. The Company
has entered into indemnification agreements with certain of its directors and
executive officers pursuant to the foregoing provisions of its Amended and
Restated Bylaws.
As permitted by the GBCC, the Company's Restated Articles contain
provisions that eliminate the personal liability of directors for monetary
damages to the Company or its shareholders for breach of their fiduciary duties
as directors. In accordance with the GBCC, these provisions do not limit the
liability of a director for (i) any appropriation of a business opportunity of
the Company in violation of the director's duty, (ii) acts or omissions that
involve intentional misconduct or a knowing violation of law, (iii) any dividend
payment, stock repurchase, stock redemption or distribution in liquidation that
is prohibited under Georgia law, or (iv) any merger from which the director
derived an improper personal benefit. These provisions do not limit or eliminate
the rights of the Company or any shareholder to seek an injunction or any other
non-monetary relief in the event of a breach of a director's fiduciary duty. In
addition, these provisions apply only to claims against a director arising out
of his or her role as a director and do not relieve a director from liability
for violations of statutory law, such as certain liabilities imposed on a
director under the federal securities laws.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Introduction
The Compensation Committee of the Board of Directors (the "Committee")
consists exclusively of independent, non-employee directors. John M. Holliman,
III is the Chairman of the Committee, and C. Alan MacDonald and Fred W. Martin
are the other current Committee members. The Committee is responsible for
reviewing and recommending for approval by the Board of Directors the Company's
compensation practices, executive salary levels, and variable compensation
programs, both cash-based and equity-based. The Committee generally reviews base
salary levels for executive officers of the Company at or about the start of
each fiscal year and approves actual bonuses at the end of each fiscal year
based upon Company and individual performance.
Philosophy
The Company's executive compensation program seeks to provide a level
of compensation that is competitive with similar companies in the restaurant
industry. The Committee reviewed comparative data of other restaurant companies
in order to assess the competitiveness of the Company's executive compensation
program as compared with similar restaurant companies. Actual total compensation
levels may differ from competitive levels
11
<PAGE>
in surveyed companies as a result of annual and long-term Company performance,
as well as individual performance. The Committee uses its discretion to set
executive compensation when, in its judgment, external, internal, or an
individual's circumstances warrant.
Compensation Program
The primary components of the Company's executive compensation program
consist of base salary, annual discretionary bonuses, and stock option grants.
Base Salary
The Committee reviews salaries recommended by the Chief Executive
Officer for executive officers other than the Chief Executive Officer. In
formulating these recommendations, the Chief Executive Officer considers the
overall performance of the Company and conducts an informal evaluation of
individual officer performance. Final decisions on any adjustments to the base
salary for executives, other than the Chief Executive Officer, are made by the
Committee in conjunction with the Chief Executive Officer. The Committee's
evaluation of the recommendations by the Chief Executive Officer considers the
same factors outlined above and is subjective with no particular weight assigned
to any one factor. Base salaries for fiscal 1996 were determined by the
Committee in April 1996 following the March 1996 merger of the Company and DRC
and the restructuring of the Company's executive personnel following that
transaction.
Annual Discretionary Bonuses
The annual discretionary bonuses are designed to provide incentive
compensation to key officers and employees who contribute substantially to the
success of the Company. Discretionary bonuses are intended to maintain a strong
link between overall Company performance and enhanced value by rewarding results
that exceed industry averages. Discretionary bonuses may be awarded to selected
officers and employees from a pool based on a subjective percentage of the
Company's net income for the fiscal year. In determining the amount of
discretionary bonuses that may be awarded, if any, the Committee evaluates the
overall performance of the Company to date, taking into consideration
achievement of sales, net income, and other performance criteria, as well as
individual responsibility, performance, efficiency of effort, strength of
leadership, and compensation level. The Committee's evaluation of these factors
is subjective, with no particular weight being assigned to any one factor. The
Committee determined that the Company's performance did not warrant the payment
of any discretionary bonuses for fiscal 1996.
Stock Option Grants
The Company grants stock options periodically to executive officers and
other key employees to provide additional incentive to work to maximize
long-term total return to shareholders. Although the Board is the Plan
Administrator of the 1992 Plan, it has delegated its authority to the 1992 Plan
Committee. The members of the Compensation Committee serve as members of the
1992 Plan Committee, which is the Committee that grants options to officers of
the Company. In general, stock options are granted to senior level and key
employees at the onset of employment. If in the opinion of the Board of
Directors or the 1992 Plan Committee the outstanding service of an existing
employee merits an increase in the number of options held, however, the Board of
Directors or the 1992 Plan Committee may grant additional stock options to that
employee. During fiscal 1996, the Company granted options to purchase an
aggregate of 844,800 shares of Common Stock to its employees, including options
to purchase 300,000, 124,800, and 100,000 shares of Common Stock granted to
William G. Cox, Todd S. Brown, and Michael Larsen, respectively.
12
<PAGE>
Benefits
The Company provides various employee benefit programs to its executive
officers, including medical and life insurance benefits and short- and long-term
disability insurance. These programs are generally available to all employees of
the Company.
Chief Executive Officer Compensation
The Committee considers the factors outlined above in evaluating the
base salary and other compensation of Jack M. Lloyd, the Company's Chief
Executive Officer. The Committee's evaluation of Mr. Lloyd's base salary is
subjective, with no particular weight assigned to any one factor. In April 1996,
the Committee established Mr. Lloyd's base salary at $520,000 per year. The
Committee believes that this base salary is competitive with that paid to chief
executive officers of comparable companies. As with the Company's other
executive officers, the Committee determined that the Company's performance did
not warrant payment of for a discretionary bonus to Mr. Lloyd for 1996.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation in excess of $1 million paid to
each of any publicly held corporation's chief executive officer and four other
most highly compensated executive officers. Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements are
met. The Company currently intends to structure the performance-based portion of
the compensation of its executive officers in a manner that complies with
Section 162(m).
This report has been furnished by the members of the Compensation
Committee to the Board of Directors of the Company.
John M. Holliman, III, Chairman
C. Alan MacDonald
Fred W. Martin
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
officers, and persons that own more than 10 percent of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the SEC. SEC regulations require officers, directors, and greater
than 10 percent shareholders to furnish the Company with copies of all Section
16(a) forms they file. Based solely upon the Company's review of the copies of
such forms received by it during the fiscal year ended January 1, 1997 and
written representations that no other reports were required, the Company
believes that each person who, at any time during such fiscal year, was a
director, officer, or beneficial owner of more than 10 percent of the Company's
Common Stock complied with all Section 16(a) filing requirements during such
fiscal year except that (i) Jack M. Lloyd filed a late report on Form 4 covering
two transactions; (ii) Todd S. Brown filed two late reports on Form 4 covering
two transactions; (iii) John M. Holliman, III filed a late report on Form 4
covering two transactions, and (iv) Haig V. Antranikian, a former officer and
director of the Company, filed two late reports on Form 4 covering a total of 10
transactions.
13
<PAGE>
COMPANY PERFORMANCE GRAPH
The following line graph compares cumulative total returns, assuming
reinvestment of dividends, for the period from October 18, 1994 to January 1,
1997 for (i) the Company's Common Stock; (ii) the Standard and Poor's SmallCap
600 Index; and (iii) the Dow Jones Restaurants Index (the "Restaurant Index").
The graph assumes an investment of $100 on in the Company's Common Stock on
October 18, 1994 (the date on which the Company's Common Stock first became
registered under Section 12 of the Exchange Act as a result of the Company's
initial public offering) and an investment of $100 in the Small Cap Index and
the Restaurant Index on September 30, 1994. The calculation of cumulative return
for the Company's Common Stock does not include reinvestment of dividends
because the Company did not pay dividends during the measurement period. The
performance shown is not necessarily indicative of future performance.
Cumulative Total Return
--------------------------------------
10/18/94 12/28/94 12/27/95 1/01/97
DenAmerica Corp. DEN 100 73 113 63
S&P SMALLCAP 600 1600 100 98 127 154
DOW JONES RESTAURANTS IRES 100 107 152 155
14
<PAGE>
CERTAIN TRANSACTIONS
Each of Jeffrey D. Miller and Haig V. Antranikian, former officers and
directors of the Company, owns a 20% interest in a building located in Marion,
Ohio that the Company leased for administrative offices. The Company paid rent
of $2,850 per month under the lease, which was the amount payable per month
under a promissory note issued to finance the initial acquisition of the
building. The Company also was responsible for all taxes, utilities,
maintenance, and other expenses associated with the building. Effective with the
closing of the Merger, the Company's obligations under this lease were
terminated through the payment to the lessor of an amount equal to 50% of the
balance of payments remaining under the lease.
Jeffrey D. Miller, a former officer and director of the Company, and
his wife have personally guaranteed repayment of certain of the Company's
obligations, including certain obligations of the Company to its joint venture
partners and its affiliates, obligations under the Denny's Franchise Agreements,
and certain property and equipment lease obligations of the Company.
During the term of his employment with the Company, the Company from
time to time made loans to Mr. Miller. The largest outstanding principal balance
of such loans during fiscal 1996 was $110,000. As of January 1, 1997, there was
no outstanding principal remaining on those loans.
During 1995, DRC entered into leases for two restaurant properties
owned by Lloyd/Howard L.L.C. ("Lloyd/Howard"), a limited liability company
controlled by Jack M. Lloyd (Chairman of the Board and Chief Executive Officer
of DRC at that time) and William J. Howard (President and a director of DRC at
that time). Lloyd/Howard acquired these two properties and certain other
properties from Kettle Restaurants, Inc. in consideration of the assumption by
Lloyd/Howard of environmental liabilities associated with the two properties
leased by DRC. During 1996, Lloyd/Howard sold one of the properties to an
affiliate of CNL Group, Inc. ("CNL") and the Company entered into a lease with
CNL for that location. The Company paid Lloyd/Howard rent of approximately
$120,000 with respect to these two restaurant properties during fiscal 1996.
Upon consummation of the Merger, the Company issued an aggregate of (i)
3,103,504 shares of Common Stock, $11,196,000 principal amount of Series B 13%
Subordinated Notes due 2003 (the "Series B Notes"), and Series B Warrants to
purchase an aggregate of 293,223 shares of Common Stock to Jack M. Lloyd,
Chairman of the Board and Chief Executive Officer of DRC; (ii) 1,551,752 shares
of Common Stock, $5,598,000 principal amount of Series B Notes, and Series B
Warrants to purchase 146,611 shares of Common Stock to William J. Howard,
President and a director of DRC; and (iii) 1,878,788 shares of Common Stock,
$6,000,000 principal amount of Series A 13% Subordinated Notes due 2003 (the
"Series A Notes"), and Series A Warrants to purchase 188,047 shares of Common
Stock to BancBoston Ventures, Inc. ("BancBoston"), in exchange for such persons'
respective shares of DRC capital stock. Upon consummation of the Merger, Mr.
Lloyd became President, Chief Executive Officer and a director of the Company
and Mr. Howard became a Vice President and director of the Company. Mr. Lloyd
became Chairman of the Board of the Company on July 9, 1996, and Mr. Howard
became Executive Vice President of the Company on July 9, 1996.
In connection with the Merger, the Company entered into a registration
rights agreement with Mr. Lloyd, Mr. Howard, BancBoston, and the other former
shareholder of DRC with respect to the shares of Common Stock issued to them in
the Merger and the shares issuable upon exercise of the warrants. In connection
with the acquisition of Black-eyed Pea U.S.A., Inc. ("BEP") in July 1996 (the
"BEP Acquisition"), the Company repaid all of the $6.0 million principal amount
outstanding on its Series A Notes held by BancBoston plus accrued and unpaid
interest thereon for $5.2 million in cash and 250,000 shares of the Company's
Common Stock. Upon payment of the Series A Notes, the related Series A Warrants
were automatically cancelled. The Company granted registration rights to
BancBoston for the 250,000 shares issued to it. Pursuant to various contractual
obligations, in November 1996 the Company registered for resale an aggregate of
4,660,540 shares of Common Stock held by or issuable to certain holders of the
Company's Common Stock and various warrants and unit purchase options, including
15
<PAGE>
2,124,352 shares held by BancBoston and 999,190 shares held by Jeffrey D.
Miller, a former officer and director of the Company.
In May 1996, Jeffrey D. Miller, the Company's Chairman of the Board at
that time, 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.
In connection with the financing of the BEP Acquisition, LH Leasing
Company, Inc. ("LH Leasing"), a corporation owned by Jack M. Lloyd and William
J. Howard, purchased from the Company for cash in the amount of $14.25 million
the equipment located at 62 Black-eyed Pea restaurants leased by BEP, a wholly
owned subsidiary of the Company, or Texas BEP, L.P. ("Texas BEP"), a limited
partnership in which BEP is the general partner and in which a wholly owned
subsidiary of BEP is the limited partner. Concurrently with the sale of the
equipment to LH Leasing, LH Leasing leased the equipment to the Company and the
Company subleased the equipment to BEP or Texas BEP. The equipment lease has a
term of five years and grants the Company an option to purchase the equipment at
its fair market value upon the expiration of the lease. The terms of the
subleases between the Company and each of BEP and Texas BEP are consistent with
the terms set forth in the equipment lease between the Company and LH Leasing.
Messrs. Lloyd and Howard formed LH Leasing as an accommodation to the Company to
enable it to satisfy the requirements of the Company's senior lenders. Messrs.
Lloyd and Howard received no material compensation for the transactions
involving the Company and LH Leasing.
In order to finance its sale and lease transaction with the Company, LH
Leasing borrowed cash in the amount of $14.25 million from FFCA Acquisition
Corporation ("FFCA"). Messrs. Lloyd and Howard jointly and severally guaranteed
the repayment of the loan. In addition, Messrs. Lloyd and Howard pledged their
stock in LH Leasing to FFCA as additional collateral for the loan.
Effective as of July 3, 1996, the Company sold the assets related to 23
restaurants operated under the "Ike's" and "Jerry's" trade names to Mid-American
Restaurants, Inc. ("Mid-American"), a corporation wholly owned by Haig V.
Antranikian, a Vice President and director of the Company at that time. As
payment for the restaurants, Mid-American issued to the Company a promissory
note in the principal amount of $4.6 million (the "Mid-American Note"). The
Mid-American Note (i) bears interest at the rate of 10% per annum through June
30, 2001, 11% per annum through June 30, 2002, and 12% per annum through June
30, 2003, and (ii) requires Mid- American to make 60 equal installments of
$65,000 per month beginning on July 31, 1996, 12 equal installments of $75,000
per month beginning on July 31, 2001, and 11 equal installments of $85,000 per
month beginning on July 31, 2002. All unpaid principal and interest on the
Mid-American Note will be due and payable on June 30, 2003. The Mid-American
Note is secured by (a) all of the assets transferred to Mid-American, (b) the
personal guaranty of Mr. Antranikian and his wife, and (c) the pledge of all of
the outstanding stock of Mid-American owned by Mr. Antranikian. The Mid-American
Note also requires Mid-American to prepay all or a portion of the outstanding
principal under such note in the event of (1) an equity issuance or other
contribution to Mid-American's capital in excess of $500,000, in which case
Mid-American must make prepayments equal to 50% of Mid- American's net proceeds
from each such issuance or contribution up to $5.0 million and 100% of such net
proceeds in excess of $5.0 million, or (2) a sale by Mid-American of any of its
assets, to the extent that such sale results in net proceeds to Mid-American in
excess of $25,000.
In connection with the sale to Mid-American, the Company and
Mid-American entered into a master sublease agreement (the "Master Sublease")
with respect to the 23 restaurant properties pursuant to which Mid- American
subleases each of the restaurant properties on essentially the same terms as the
terms of the leases between the Company and the respective owners of those
properties. Mid-American's obligations under the Master Sublease are secured by
Mr. Antranikian's personal guaranty.
Also in connection with the sale to Mid-American, (i) Mr. Antranikian
repaid all outstanding principal and interest, totalling approximately $120,000,
under a loan made by the Company to Mr. Antranikian in April 1996; (ii) Mr.
Antranikian resigned as an officer and director of the Company; (iii) all of the
Company's obligations under
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<PAGE>
Mr. Antranikian's employment agreement with the Company were cancelled; and (iv)
unvested employee stock options to purchase 28,667 shares of the Company's
Common Stock held by Mr. Antranikian were cancelled.
During fiscal 1996, the Company made various advances to Jack M. Lloyd.
Such advances totalled $400,000 as of January 1, 1997.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS,
DIRECTORS AND OFFICERS
The following table sets forth certain information regarding the shares
of the Company's Common Stock beneficially owned as of May __, 1997 by (i) each
of the Company's directors and executive officers; (ii) all directors and
executive officers of the Company as a group; and (iii) each person known by the
Company to be the beneficial owner of 5% or more of the Company's Common Stock.
<TABLE>
<CAPTION>
Number Percentage
Name and Address of Beneficial Holder(1) of Shares(2) Ownership(2)
- ---------------------------------------- ------------ ------------
<S> <C> <C>
Directors and Executive Officers
- --------------------------------
Jack M. Lloyd 3,180,504(3) 23.7%
William J. Howard 1,553,752(4) 11.6%
William G. Cox 120,000(5) *
Todd S. Brown 51,720(6) *
Michael Larsen 40,000(7) *
John M. Holliman, III 17,436(8) *
C. Alan MacDonald 37,500(9) *
Fred W. Martin 6,000(10) *
All directors and executive officers as a group (eight persons) 5,006,912 36.6%
Non-Management 5% Shareholders
- ------------------------------
BancBoston Ventures, Inc.(11) 2,124,352 15.8%
Jeffrey D. Miller(12) 699,190 5.2%
</TABLE>
- --------------
* Less than 1.0% of the outstanding shares of Common Stock.
(1) Except as otherwise indicated, each person named in the table has sole
voting and investment power with respect to all Common Stock beneficially
owned by him, subject to applicable community property law. Except as
otherwise indicated, each of such persons may be reached through the
Company at 7373 N.
Scottsdale Road, Suite D-120, Scottsdale, Arizona 85253.
(2) The numbers and percentages shown include the shares of Common Stock
actually owned as of May __, 1997 and the shares of Common Stock which
the person or group had the right to acquire within 60 days of such date.
In calculating the percentage of ownership, all shares of Common Stock
which the identified person or group had the right to acquire within 60
days of May __, 1997 upon the exercise of options and warrants are deemed
to be outstanding for the purpose of computing the percentage of the
shares of Common Stock owned by such person or group, but are not deemed
to be outstanding for the purpose of computing the percentage of the
shares of Common Stock owned by any other person.
(3) The number of shares of Common Stock beneficially owned by Mr. Lloyd does
not include 293,223 shares issuable upon exercise of warrants that are
not exercisable within 60 days of May __, 1997.
(4) The number of shares of Common Stock beneficially owned by Mr. Howard
does not include 146,611 shares issuable upon exercise of warrants that
are not exercisable within 60 days of May __, 1997.
(5) Represents 120,000 shares issuable upon the exercise of vested options.
(6) Represents 1,800 shares of Common Stock and 49,920 shares issuable upon
the exercise of vested options.
17
<PAGE>
(7) Represents 40,000 shares issuable upon the exercise of vested options.
(8) Represents 9,436 shares of Common Stock and 5,000 shares issuable upon
exercise of vested options held by Mr. Holliman and 3,000 shares of
Common Stock beneficially owned by Mr. Holliman as trustee under a trust
for the benefit of his mother.
(9) Represents 37,500 shares issuable upon the exercise of vested options.
(10) Represents 1,000 shares of Common Stock held by Mr. Martin and his spouse
and 5,000 shares issuable upon the exercise of vested options.
(11) The address of BancBoston Ventures, Inc. is c/o BancBoston Capital, Inc.,
100 Federal Street, Boston, Massachusetts 02110.
(12) Mr. Miller is a former officer and director of the Company. Mr. Miller's
address is 13845 East Laurel Lane, Scottsdale, Arizona 85259.
PROPOSAL TO APPROVE THE
COMPANY'S 1996 STOCK OPTION PLAN
The Board of Directors has approved the Company's 1996 Stock Option
Plan, subject to approval by the Company's shareholders at the Meeting. The full
text of the 1996 Plan is included as "Appendix A" to this Proxy Statement. The
Board of Directors believes that it is in the best interests of the Company to
adopt the 1996 Plan. Accordingly, the Board of Directors recommends a vote "FOR"
the of the 1996 Plan.
Description of the 1996 Stock Option Plan
General
The 1996 Plan is intended to promote the interests of the Company by
providing key employees, consultants, and other independent contractors who
provide valuable services to the Company with the opportunity to acquire, or
otherwise increase, their proprietary interest in the Company as an incentive to
remain in service to the Company. The 1996 Plan provides for the grant of
options to acquire Common Stock of the Company ("Options"), the direct grant of
Common Stock ("Stock Awards"), the grant of stock appreciation rights ("SARs"),
and the grant of other cash awards ("Cash Awards") (Stock Awards, SARs, and Cash
Awards are collectively referred to herein as "Awards"). The 1996 Plan states
that it is not intended to be the exclusive means by which the Company may issue
options or warrants to acquire its Common Stock, stock awards, or any other type
of award. To the extent permitted by applicable law, the Company may issue any
other options, warrants, or awards other than pursuant to the 1996 Plan without
approval.
Shares Subject to the Plan
A maximum of 500,000 shares of the Company's Common Stock may be issued
under the 1996 Plan. If any Option or SAR terminates or expires without having
been exercised in full, stock not issued under such Option or SAR will again be
available for the purposes of the 1996 Plan. If any change is made in the stock
subject to the 1996 Plan or subject to any Option or SAR granted under the 1996
Plan (through merger, consolidation, reorganization, recapitalization, stock
dividend, split-up, combination of shares, exchange of shares, change in
corporate structure, or otherwise), the 1996 Plan provides that appropriate
adjustments will be made as to the maximum number of shares subject to the 1996
Plan and the number of shares and exercise price per share of stock subject to
outstanding Options or Awards. As of May 23, 1997, no Options or Awards have
been granted under the 1996 Plan.
Eligibility and Administration
Options and Awards may be granted pursuant to the 1996 Plan only to
persons ("Eligible Persons") who at the time of grant are either (i) key
personnel (including officers and directors) of the Company, or (ii) consultants
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and independent contractors who provide valuable services to the Company.
Options granted pursuant to the 1996 Plan may be incentive stock options or
non-qualified stock options. Options that are incentive stock options may be
granted only to key personnel of the Company who are also employees of the
Company. To the extent that granted Options are incentive stock options, the
terms and conditions of those Options must be consistent with the qualification
requirements set forth in the Internal Revenue Code of 1986, as amended (the
"Code").
The Eligible Persons under the 1996 Plan are divided into two groups,
and there is a separate administrator (each a "Plan Administrator") for each
group. One group consists of the executive officers and directors of the Company
and persons who own 10 percent or more of the Company's issued and outstanding
stock. The power to administer the 1996 Plan with respect to those persons is
vested exclusively with the Board of Directors or a committee (the "Senior
Committee") comprised of two or more non-employee directors who are appointed by
the Board of Directors. The power to administer the 1996 Plan with respect to
the remaining Eligible Persons is vested with the Board of Directors of the
Company or with a committee of one or more directors appointed by the Board of
Directors. Each Plan Administrator determines (i) which of the Eligible Persons
in its group will be granted Options and Awards; (ii) the amount and timing of
the grant of such Options and Awards; and (iii) such other terms and conditions
as may be imposed by the Plan Administrator consistent with the 1996 Plan. No
person who is an employee of the Company may receive Options or Awards in an
amount that exceeds 50 percent of the shares of Common Stock that may be issued
under the 1996 Plan.
Terms and Conditions of Options; Exercise of Options
Each Plan Administrator will determine the expiration date, maximum
number of shares purchasable, and the other provisions of the Options at the
time of grant. Options may be granted for terms of up to 10 years. Options will
vest and become exercisable in whole or in one or more installments at such time
as may be determined by the Plan Administrator upon the grant of the Options.
However, a Plan Administrator has the discretion to provide for the automatic
acceleration of the vesting of any Options or Awards granted under the 1996 Plan
in the event of a "Change in Control," as defined in the 1996 Plan.
Each Plan Administrator also will determine the exercise prices of
Options at the time of grant. However, the exercise price of any Option intended
to be an incentive stock option may not be less than 100 percent of the fair
market value of the Common Stock at the time of the grant (110 percent if the
Option is granted to a person who at the time the Option is granted owns stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company). On May 23, 1997, the closing price of the
Company's Common Stock on the American Stock Exchange was $______ per share. To
exercise an Option, the optionholder will be required to deliver to the Company
full payment of the exercise price for the shares as to which the Option is
being exercised. Generally, Options can be exercised by delivery of cash, check,
or shares of Common Stock of the Company.
Transferability; Termination of Employment or Services
Except as otherwise allowed by the Plan Administrator, Options and
Awards granted under the 1996 Plan are nontransferable other than by will or by
the laws of descent and distribution upon the death of the holder and, during
the lifetime of the holder, are exercisable only by such holder. In the event of
the termination of an employee holder's services with the Company, other than
for death or disability, the holder may exercise any vested incentive stock
options or vested SARs granted in conjunction with incentive stock options until
the earlier of (i) three months after the date of termination of service, or
(ii) the expiration date of such Options or SARs. However, such Options or SARs
held by the terminated employee will immediately become void and terminate if
the holder is discharged for "cause," as defined in the 1996 Plan, or if the
holder commits acts detrimental to the Company's interests after his or her
service is terminated. If termination is by reason of disability, however, the
holder may exercise his or her vested Options or vested SARs until the earlier
of (i) 12 months after the termination of service, or (ii) the expiration of the
term of the Option or SAR. If the holder dies while in service to the Company,
the
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holder's estate or successor by bequest or inheritance may exercise any vested
Options or SARs that the holder was entitled to exercise on the date of his or
her death at any time until the earlier of (i) the period ending three months
after the holder's death, or (ii) the expiration of the term of the Option or
SAR. Vested Options that are not incentive stock options and vested SARs granted
in conjunction with non-qualified stock options will remain exercisable for the
period of time determined by the Plan Administrator at the time of grant and set
forth in the documents evidencing such vested Options or SARs. In the absence of
such provisions, such Options and SARs will remain exercisable for one year
after termination as a result of "cause" disability and for three months after
termination as a result of death or for any reason other than termination by the
Company for "cause" or if the holder commits acts detrimental to the Company's
interests, in which case the Options and SARs will immediately become void and
terminate.
Awards
SARs will entitle the recipient to receive a payment equal to the
appreciation in market value of a stated number of shares of Common Stock from
the price on the date the SAR was granted or became effective to the market
value of the Common Stock on the date the SARs are exercised or surrendered.
Stock Awards will entitle the recipient to receive shares of the Company's
Common Stock directly. Cash Awards will entitle the recipient to receive direct
payments of cash depending on the market value or the appreciation of the Common
Stock or other securities of the Company. The Plan Administrators may determine
such other terms, conditions, or limitations, if any, on any Awards granted
pursuant to the 1996 Plan.
Duration and Modification
The 1996 Plan will remain in effect until December 10, 2006. The Board
of Directors of the Company may at any time suspend, amend, or terminate the
1996 Plan, except that without approval of the Company, the Board of Directors
may not (i) increase the maximum number of shares of Common Stock subject to the
1996 Plan (except in the case of certain organic changes to the Company), (ii)
reduce the exercise price at which Options may be granted or the exercise price
for which any outstanding Options may be exercised, (iii) extend the term of the
1996 Plan, (iv) change the class of persons eligible to receive Options or
Awards under the 1996 Plan, or (v) materially increase the benefits accruing to
participants under the 1996 Plan. In addition, the Board may not, without the
consent of the optionholder, take any action that disqualifies any Option
previously granted under the Plan for treatment as an incentive stock option or
which adversely affects or impairs the rights of the optionholder of any
outstanding Option. Notwithstanding the foregoing, the Board of Directors may
amend the 1996 Plan from time to time as it deems necessary in order to meet the
requirements of any amendments to Rule 16b-3 under the Exchange Act without the
consent of the Company.
Federal Income Tax Consequences
Certain Options granted under the 1996 Plan will be intended to qualify
as incentive stock options under Section 422 of the Code. Accordingly, there
will be no taxable income to an employee when an incentive stock option is
granted to him or her or when that option is exercised. The amount by which the
fair market value of the shares at the time of exercise exceeds the exercise
price generally will be treated as an item of preference in computing the
alternate minimum taxable income of the optionholder. If an optionholder
exercises an incentive stock option and does not dispose of the shares within
either two years after the date of the grant of the Option or one year of the
date the shares were transferred to the optionholder, any gain realized upon
disposition will be taxable to the optionholder as a capital gain. If the
optionholder does not satisfy the applicable holding periods, however, the
difference between the exercise price and the fair market value of the shares on
the date of exercise of the Option will be taxed as ordinary income, and the
balance of the gain, if any, will be taxed as capital gain. If the shares are
disposed of before the expiration of the one-year and two-year periods and the
amount realized is less than the fair market value of the shares at the date of
exercise, the employee's ordinary income is limited to the amount realized less
the exercise price paid. The Company will be entitled to a tax deduction only to
the extent
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the optionholder has ordinary income upon the sale or other disposition of the
shares received when the Option was exercised.
Options issued under the 1996 Plan also may be non-qualified options.
The income tax consequences of non-qualified options and Stock Awards will be
governed by Section 83 of the Code. Under Section 83, the excess of the fair
market value of the shares of the Company's Common Stock acquired pursuant to
the grant of a Stock Award or the exercise of any Option over the amount paid
for such stock (hereinafter referred to as "Excess Value") must be included in
the gross income of the holder in the first taxable year in which the Common
Stock acquired by the holder is not subject to a substantial risk of forfeiture.
In calculating Excess Value, fair market value will be determined on the date
that the substantial risk of forfeiture expires, unless a Section 83(b) election
is made to include the Excess Value in income immediately after the acquisition,
in which case fair market value will be determined on the date of the
acquisition. Generally, the Company will be entitled to a federal income tax
deduction in the same taxable year that holders, including "highly compensated
officers" for purposes of Section 162(m) of the Internal Revenue Code, recognize
income. The Company will be required to withhold income taxes with respect to
income reportable pursuant to Section 83 by a holder. The basis of the shares
acquired by an optionholder will be equal to the exercise price of those shares
plus any income recognized pursuant to Section 83. Subsequent sales of the
acquired shares will produce capital gain or loss. Such capital gain or loss
will be long term if the stock has been held for one year from the date the
substantial risk of forfeiture lapsed or, if a Section 83(b) election is made,
one year from the date the shares were acquired.
Generally, all Cash Awards granted to employees will be treated as
compensation income to the employees when the cash payment is made pursuant to
the award. Such cash payment will also result in a federal income tax deduction
for the Company.
Ratification by Shareholders of the 1996 Plan
Approval of the 1996 Plan will require the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock of the Company
present in person or by proxy at the Meeting and voting on the proposal. Upon
approval of the 1996 Plan by the Company's shareholders, any Options or Awards
granted pursuant to the 1996 Plan prior to approval will remain valid and
unchanged. In the event that the 1996 Plan is not approved by the Company's
shareholders at the Meeting, any Options and Awards granted pursuant to the 1996
Plan will automatically terminate and be forfeited to the same extent and with
the same effect as though the 1996 Plan had never been adopted, and the Company
will not make any further grants of Options or Awards under the 1996 Plan.
PROPOSAL TO AMEND THE COMPANY'S
RESTATED ARTICLES OF INCORPORATION
The Board of Directors has approved a proposal to amend the Company's
Restated Articles to (i) increase the number of shares of the Company's Common
Stock that are authorized for issuance from the current maximum of 20,000,000
shares to a maximum of 40,000,000 shares, and (ii) authorize 5,000,000 shares of
Serial Preferred Stock, par value $.01 per share (the "Serial Preferred Stock"),
which may be issued in one or more series from time to time as determined by the
Board of Directors with such designations, preferences, privileges, conversion
and other rights, voting powers, restrictions, limitations, qualifications, and
other terms and conditions as the Board of Directors may determine. The Board of
Directors recommends a vote "for" the proposal to amend the Restated Articles.
The full text of the proposed amendment to the Restated Articles is included as
"Appendix B" to this Proxy Statement. If approved by the Company's shareholders,
the proposed amendment will become effective upon filing of Articles of
Amendment with the Georgia Secretary of State, which will occur as soon as
practicable following the Meeting.
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Background
Prior to the Company's initial public offering in October 1994, the
Company's Restated Articles authorized 20,000,000 shares of Common Stock and
2,240,000 shares of Preferred Stock. Pursuant to the terms of the Restated
Articles, upon completion of the Company's initial public offering (i) all
outstanding shares of Series A Preferred Stock were automatically converted into
shares of Common Stock; (ii) certain outstanding unit purchase options
automatically became exercisable for shares of Common Stock instead of Series A
Preferred Stock; and (iii) the Company was no longer authorized to issue any
shares of Series A Preferred Stock or any other shares of preferred stock.
Reasons for and Effect of the Proposed Amendment
The Board of Directors believes that the approval of the proposed
amendment to the Restated Articles is necessary to promote the welfare of the
Company and its shareholders generally. The Board of Directors believes that
increasing the number of shares of Common Stock authorized for issuance and
authorizing the Board of Directors to issue shares of Serial Preferred Stock
will provide additional flexibility and enable the Company to raise capital,
refinance indebtedness, make acquisitions, and accomplish other corporate
objectives in response to market conditions or growth opportunities as and when
they become available.
Increase in the Number of Shares of Common Stock Authorized for Issuance
It is proposed to increase the number of shares of Common Stock
authorized for issuance from 20,000,000 shares to a maximum of 40,000,000
shares. The proposed increase in the number of shares authorized for issuance
recognizes the growth of the Company's operations and the increase in the number
of outstanding shares of the Company's Common Stock as a result of (i) the
Company's initial public offering and automatic conversion of Series A Preferred
Stock into Common Stock in October 1994; (ii) the issuance of 6,937,500 shares
of Common Stock to the former shareholders of DRC in connection with the Merger
in March 1996; (iii) the issuance of 250,000 shares of Common Stock to
BancBoston as repayment of indebtedness in July 1996; and (iv) the issuance of
shares of Common Stock upon exercise of employee stock options. As a result of
these issuances, there currently are 13,437,777 shares of Common Stock
outstanding. Approximately 4,176,000 additional shares of Common Stock currently
are issuable upon exercise of outstanding employee stock options, warrants, and
unit purchase options. As a result, an aggregate of approximately 17,614,000 of
the 20,000,000 shares of Common Stock authorized for issuance under the Restated
Articles currently are outstanding or issuable.
The proposed increase in the number of shares of Common Stock
authorized for issuance will provide the Company with the flexibility necessary
to enable it to (a) raise additional capital through one or more public
offerings or private placements of shares of Common Stock or options, warrants,
convertible debt, convertible preferred stock, or other securities exercisable
or convertible into shares of Common Stock; (b) acquire additional assets or
businesses by using shares of Common Stock for a portion or all of the
consideration paid to the sellers; (c) repay existing indebtedness by issuing
shares of Common Stock in lieu of cash; (d) attract and retain directors,
officers, and key employees and motivate such persons to exert their best
efforts on behalf of the Company by issuing options to acquire shares of Common
Stock; or (e) make stock dividends to existing shareholders. The Board of
Directors believes that the number of shares of Common Stock currently
authorized for issuance is not adequate to provide a sufficient number of shares
for transactions such as those described above as and when they may arise in the
future. Accordingly, the Board of Directors believes that the proposed increase
in the number of authorized shares of Common Stock could be an important factor
in the Company's ability to raise capital and to acquire significant amounts of
new assets and is appropriate and in the best interests of the Company and its
shareholders generally. Upon approval of the proposed amendment to the Restated
Articles and filing of Articles of Amendment with the Georgia Secretary of
State, the authorized shares of Common Stock will be available for issuance by
action of the Board of Directors for any of the reasons described above or for
any other corporate
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purpose. With the exception of certain extraordinary issuances, no further
shareholder approval will be required before the Company can complete any of the
transactions described above.
Authorization of Serial Preferred Stock
As described above, the Company's Restated Articles currently do not
authorize the issuance of any shares of preferred stock. The Board of Directors
believes that, in certain instances, it would be advantageous to the Company and
its shareholders to have the flexibility to issue shares of preferred stock
instead of Common Stock or debt securities. The Company may not be able to, and
does not desire to, raise the entire amount of funds needed to operate and
expand the Company from additional borrowings. In particular, the Company's
current credit facility places significant limitations on the Company's ability
to incur additional indebtedness. In addition, the Company recognizes that it
may not be able to issue additional shares of Common Stock at certain times as a
result of market conditions or lack of market demand. The Company believes that
the ability to issue one or more series of preferred stock would provide a new
source of capital and enhance its ability to make acquisitions.
The proposed amendment to the Restated Articles would authorize the
Board of Directors to approve the issuance of one or more series of preferred
stock and to establish the terms for such Preferred Stock as the Board of
Directors may deem appropriate. No further shareholder approval would be
required for the authorization and issuance of such preferred stock unless
otherwise required by applicable laws or by the rules of the American Stock
Exchange. As described below, those terms may include preferential dividend
rights, voting rights, and liquidation rights. The Board of Directors believes
that this flexibility is necessary in order to enable it to tailor the specific
terms of any series of Preferred Stock that may be issued to meet market
conditions and financing or acquisition opportunities as they arise without the
expense, delay, and uncertainty that may be encountered in calling a meeting of
the Company's shareholders to approve the terms of any specific series of
Preferred Stock. The Board of Directors also believes that, as a practical
matter in today's financial markets, it seldom is practicable to delay potential
issuances of Preferred Stock for the period that would be necessary to obtain
shareholder approval of any particular series of Preferred Stock.
The Board of Directors will have broad discretion with respect to
designating and establishing the terms of each series of Serial Preferred Stock
prior to its issuance. Under the proposed amendment, the Board of Directors will
have authority to set or change the dividend rate, if any, time of payment, and
whether dividends are cumulative on any shares of Serial Preferred Stock. As a
result, the holders of Serial Preferred Stock may receive payment of dividends
from the Company at times when no dividends are paid on the Company's Common
Stock or the amount of any dividends paid on the Company's Common Stock is less
than the amount paid to such Serial Preferred Stock. The Board of Directors also
will have authority to determine whether any shares of Serial Preferred Stock
will have voting rights in addition to the voting rights provided by law and, if
so, the extent of such rights, including the right to elect one or more members
of the Company's Board of Directors at all times or upon non-payment of
dividends for a specified period of time. Under the proposed amendment, the
Board of Directors also will have authority to determine (i) whether shares of a
series will be redeemable and, if so, the redemption price, sinking fund
provisions, and other terms and conditions for redemption; (ii) whether shares
of a series will be convertible into or exchangeable for shares of Common Stock
or any other preferred stock and, if so, the terms and conditions of such
conversion or exchange; and (iii) the liquidation rights of such shares in the
event of a liquidation, dissolution, or winding up of the Company, which may be
prior in right of payment to the rights of holders of Common Stock.
The Company currently does not have any plans to issue shares of Serial
Preferred Stock. The Board of Directors believes, however, that the ability to
issue Serial Preferred Stock may be helpful in structuring financings or
acquisitions in the future for the reasons described above.
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Potential Effects of the Proposed Amendment
In deciding whether to issue additional shares of Common Stock or
shares of Serial Preferred Stock, the Board of Directors will carefully consider
the terms of such capital stock and the effect of the issuance on the operating
results of the Company and its existing shareholders. With the exception of
stock dividends, issuances of Common Stock or one or more series of Serial
Preferred Stock may result in dilution to the investments of existing
shareholders. In addition, issuances of Common Stock or Serial Preferred Stock
could be used to discourage or make more difficult a business combination or an
attempt to obtain control of the Company that is not approved by the Company's
Board of Directors, even when those attempts may be in the best interests of
some or all of the Company's shareholders. In addition, certain provisions in
the Company's Amended and Restated Bylaws make applicable to the Company certain
provisions of Georgia law relating to business combinations with interested
shareholders. These provisions may create a potential restraint on takeovers or
other changes in control of the Company. The Board of Directors did not propose
this amendment for the purpose of discouraging mergers, tender offers, proxy
contests or other changes in control of the Company and the Company is not aware
of any specific effort to accumulate its Common Stock or to obtain control of
the Company by means of a merger, tender offer, solicitation, or otherwise.
No rights of appraisal or similar rights of dissenters exist with
respect to this matter.
Ratification by Shareholders of the Proposed Amendment to the Restated Articles
Approval of the proposed amendment to the Restated Articles will
require the affirmative vote of the holders of a majority of the total number of
the issued and outstanding shares of the Company's Common Stock. Upon approval
by the Company's shareholders, the proposed amendment will become effective upon
filing of Articles of Amendment with the Georgia Secretary of State, which will
occur as soon as practicable following the Meeting. In the event that the
proposed amendment is not approved by the Company's shareholders at the Meeting,
the current Restated Articles will remain in effect.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Change of Accountants
Upon consummation of the Merger, 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, pursuant to which DRC is considered to be the acquiring entity and
the Company the acquired entity for accounting purposes, even though the Company
is the surviving legal entity. As a result of the reverse purchase accounting
treatment, the Company determined that it was in its best interests that
Deloitte & Touche LLP ("Deloitte & Touche"), DRC's independent public
accountants prior to the Merger, serve as the Company's independent public
accountants following the Merger. Accordingly, the Company ceased its
client-auditor relationship with KPMG Peat Marwick LLP ("Peat Marwick")
effective April 29, 1996, and the Company retained Deloitte & Touche as its
independent public accountants on April 29, 1996. The change in independent
public accountants was approved by the Board of Directors of the Company,
including all of the members of the Audit Committee of the Board of Directors.
Peat Marwick's report on the financial statements of the Company for
the years ended September 28, 1994 and September 27, 1995 did not contain an
adverse opinion or a disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope, or accounting principles. In connection with the
two audits for the years ended September 28, 1994 and September 27, 1995, and
subsequently to April 29, 1996, there were no disagreements on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement, if not resolved to the satisfaction of
Peat Marwick, would have caused it to make
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reference to the subject matter of the disagreement in connection with its
report. Prior to retaining Deloitte & Touche, no discussions took place between
the Company and Deloitte & Touche regarding the application of accounting
principles or the type of opinion that might be rendered on the Company's
financial statements since the historical financial statements of DRC, as
audited by Deloitte & Touche, will be the continuing historical financial
statements of the Company. The Company has authorized Peat Marwick to respond
fully to inquiries from Deloitte & Touche.
Ratification of Appointment of Independent Auditors
The Board of Directors has appointed Deloitte & Touche, independent
public accountants, to audit the consolidated financial statements of the
Company for the fiscal year ending December 31, 1997 and recommends that vote in
favor of the ratification of such appointment. In the event of a negative vote
on such ratification, the Board of Directors will reconsider its selection. The
Board of Directors anticipates that representatives of Deloitte & Touche will be
present at the Meeting, will have the opportunity to make a statement if they
desire, and will be available to respond to appropriate questions.
DEADLINE FOR RECEIPT OF PROPOSALS
Shareholder proposals that are intended to be presented by such
shareholders at the annual meeting of shareholders of the Company to be held
during calendar 1998 must be received by the Company no later than January __,
1998 in order to be included in the proxy statement and form of proxy relating
to such meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Meeting.
If any other matters properly come before the Meeting, it is the intention of
the persons named in the enclosed proxy card to vote the shares they represent
as the Board of Directors may recommend.
Dated: May __, 1997
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APPENDIX A
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DENAMERICA CORP.
1996 STOCK OPTION PLAN
ARTICLE I
General
1.1 Purpose of Plan; Term.
(a) Adoption. On December 10, 1996, the Board of Directors
(the "Board") of DenAmerica Corp., a Georgia corporation (the "Company"),
adopted this stock option plan to be known as the DenAmerica Corp. 1996 Stock
Option Plan (the "Plan").
(b) Defined Terms. All initially capitalized terms used hereby
shall have the meaning set forth in Article V hereto.
(c) General Purpose. The purpose of the Grant Program is to
further the interests of the Company and its shareholders by encouraging key
persons associated with the Company (or Parent or Subsidiary Corporations) to
acquire shares of the Company's Stock, thereby acquiring a proprietary interest
in its business and an increased personal interest in its continued success and
progress. Such purpose shall be accomplished by providing for the granting of
options to acquire the Company's Stock ("Options"), the direct granting of the
Company's Stock ("Stock Awards"), the granting of stock appreciation rights
("SARs"), or the granting of other cash awards ("Cash Awards") (Stock Awards,
SARs and Cash Awards shall be collectively referred to herein as "Awards").
(d) Character of Options. Options granted under this Plan to
employees of the Company (or Parent or Subsidiary Corporations) that are
intended to qualify as "incentive stock options" as defined in Code section 422
("Incentive Stock Options") will be specified in the applicable stock option
agreement. All other Options granted under this Plan will be nonqualified
options.
(e) Rule 16b-3 Plan. The Company is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and therefore the Plan is intended to comply with all applicable
conditions of Rule 16b-3 (and all subsequent revisions thereof) promulgated
under the 1934 Act. To the extent any provision of the Plan or action by a Plan
Administrator fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by such Plan Administrator. In
addition, the Board may amend the Plan from time to time as it deems necessary
in order to meet the requirements of any amendments to Rule 16b-3 without the
consent of the shareholders of the Company.
(f) Duration of Plan. The term of the Plan is 10 years
commencing on the date of adoption of the original Plan by the Board as
specified in Section 1.1(a) hereof. No Option or Award shall be granted under
the Plan unless granted within 10 years of the adoption of the Plan by the
Board, but Options or Awards outstanding on that date shall not be terminated or
otherwise affected by virtue of the Plan's expiration.
1.2 Stock and Maximum Number of Shares Subject to Plan.
(a) Description of Stock and Maximum Shares Allocated. The
shares of stock subject to the provisions of the Plan and issuable upon the
grant of Stock Awards or upon the exercise of SARs or Options granted under the
Plan are shares of the Company's common stock, $.10 par value per share (the
"Stock"), which may be either unissued or treasury shares. The Company may not
issue more than 500,000 shares of Stock pursuant
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to the Plan, unless the Plan is amended as provided in Section 1.3 or the
maximum number of shares subject to the Plan is adjusted as provided in Section
3.1.
(b) Calculation of Available Shares. The number of shares of
Stock available under the Plan shall be reduced (i) by any shares of Stock
issued (including any shares of Stock withheld for tax withholding requirements)
upon exercise of an Option and (ii) by any shares of Stock issued (including any
shares of Stock withheld for tax withholding requirements) upon the grant of a
Stock Award or the exercise of a SAR.
(c) Restoration of Unpurchased Shares. If an Option or SAR
expires or terminates for any reason prior to its exercise in full and before
the term of the Plan expires, the shares of Stock subject to, but not issued
under, such Option or SAR shall, without further action or by or on behalf of
the Company, again be available under the Plan.
1.3 Approval; Amendments.
(a) Approval by Shareholders. The Plan shall be submitted to
the shareholders of the Company for their approval at a regular or special
meeting to be held within 12 months after the adoption of the Plan by the Board.
Shareholder approval shall be evidenced by the affirmative vote of the holders
of a majority of the shares of the Company's Common Stock present in person or
by proxy and voting at the meeting. The date such shareholder approval has been
obtained shall be referred to herein as the "Effective Date."
(b) Commencement of the Grant Program. The Grant Program is
effective immediately, but if the Plan is not approved by the shareholders
within 12 months after its adoption by the Board, the Plan and all Options and
Awards made under the Grant Program will automatically terminate and be
forfeited to the same extent and with the same effect as though the Plan had
never been adopted.
(c) Amendments to Plan. The Board may, without action on the
part of the Company's shareholders, make such amendments to, changes in and
additions to the Plan as it may, from time to time, deem necessary or
appropriate and in the best interests of the Company; provided, the Board may
not, without the consent of the applicable Optionholder, take any action which
disqualifies any Option previously granted under the Plan for treatment as an
Incentive Stock Option or which adversely affects or impairs the rights of the
Optionholder of any Option outstanding under the Plan, and further provided
that, except as provided in Article III hereof, the Board may not, without the
approval of the Company's shareholders, (i) increase the aggregate number of
shares of Stock subject to the Plan, (ii) reduce the exercise price at which
Options may be granted or the exercise price at which any outstanding Option may
be exercised, (iii) extend the term of the Plan, (iv) change the class of
persons eligible to receive Options or Awards under the Plan, or (v) materially
increase the benefits accruing to participants under the Plan. Notwithstanding
the foregoing, Options or Awards may be granted under this Plan to purchase
shares of Stock in excess of the number of shares then available for issuance
under the Plan if (A) an amendment to increase the maximum number of shares
issuable under the Plan is adopted by the Board prior to the initial grant of
any such Option or Award and within one year thereafter such amendment is
approved by the Company's shareholders and (B) each such Option or Award granted
does not become exercisable or vested, in whole or in part, at any time prior to
the obtaining of such shareholder approval.
ARTICLE II
Grant Program
2.1 Participants; Administration.
(a) Eligibility and Participation. Options and Awards may be
granted only to persons ("Eligible Persons") who at the time of grant are (i)
key personnel (including officers and directors) of the Company or Parent or
Subsidiary Corporations, or (ii) consultants or independent contractors who
provide valuable services
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to the Company or Parent or Subsidiary Corporations; provided that (1) Incentive
Stock Options may only be granted to key personnel of the Company (and its
Parent or Subsidiary Corporation) who are also employees of the Company (or its
Parent or Subsidiary Corporation) and (2) the maximum number of shares of stock
with respect to which Options or Awards may be granted to any employee during
the term of the Plan shall not exceed 50 percent of the shares of stock covered
by the Plan. A Plan Administrator shall have full authority to determine which
Eligible Persons in its administered group are to receive Option grants under
the Plan, the number of shares to be covered by each such grant, whether or not
the granted Option is to be an Incentive Stock Option, the time or times at
which each such Option is to become exercisable, and the maximum term for which
the Option is to be outstanding. A Plan Administrator shall also have full
authority to determine which Eligible Persons in such group are to receive
Awards under the Grant Program and the conditions relating to such Award.
(b) General Administration. The Eligible Persons under the
Grant Program shall be divided into two groups and there shall be a separate
administrator for each group. One group will be comprised of Eligible Persons
that are Affiliates. For purposes of this Plan, the term "Affiliates" shall mean
all "officers" (as that term is defined in Rule 16a-1(f) promulgated under the
1934 Act) and directors of the Company and all persons who own ten percent or
more of the Company's issued and outstanding equity securities. Initially, the
power to administer the Grant Program with respect to Eligible Persons that are
Affiliates shall be vested with the Board. At any time, however, the Board may
vest the power to administer the Grant Program with respect to Persons that are
Affiliates exclusively with a committee (the "Senior Committee") comprised of
two or more Non-Employee Directors who are appointed by the Board. The Senior
Committee, in its sole discretion, may require approval of the Board for
specific grants of Options or Awards under the Grant Program. The administration
of all Eligible Persons that are not Affiliates ("Non-Affiliates") shall be
vested exclusively with the Board. The Board, however, may at any time appoint a
committee (the "Employee Committee") of one or more persons who are members of
the Board and delegate to such Employee Committee the power to administer the
Grant Program with respect to the Non-Affiliates. In addition, the Board may
establish an additional committee or committees of persons who are members of
the Board and delegate to such other committee or committees the power to
administer all or a portion of the Grant program with respect to all or a
portion of the Eligible Persons. Members of the Senior Committee, Employee
Committee or any other committee allowed hereunder shall serve for such period
of time as the Board may determine and shall be subject to removal by the Board
at any time. The Board may at any time terminate all or a portion of the
functions of the Senior Committee, the Employee Committee, or any other
committee allowed hereunder and reassume all or a portion of powers and
authority previously delegated to such committee. The Board in its discretion
may also require the members of the Senior Committee, the Employee Committee or
any other committee allowed hereunder to be "outside directors" as that term is
defined in any applicable regulations promulgated under Code section 162(m).
(c) Plan Administrators. The Board, the Employee Committee,
Senior Committee, and/or any other committee allowed hereunder, whichever is
applicable, shall be each referred to herein as a "Plan Administrator." Each
Plan Administrator shall have the authority and discretion, with respect to its
administered group, to select which Eligible Persons shall participate in the
Grant Program, to grant Options or Awards under the Grant Program, to establish
such rules and regulations as they may deem appropriate with respect to the
proper administration of the Grant Program and to make such determinations
under, and issue such interpretations of, the Grant Program and any outstanding
Option or Award as they may deem necessary or advisable. Unless otherwise
required by law or specified by the Board with respect to any committee,
decisions among the members of a Plan Administrator shall be by majority vote.
Decisions of a Plan Administrator shall be final and binding on all parties who
have an interest in the Grant Program or any outstanding Option or Award.
(d) Guidelines for Participation. In designating and selecting
Eligible Persons for participation in the Grant Program, a Plan Administrator
shall consult with and give consideration to the recommendations and criticisms
submitted by appropriate managerial and executive officers of the Company. A
Plan Administrator also shall take into account the duties and responsibilities
of the Eligible Persons, their past,
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present and potential contributions to the success of the Company and such other
factors as a Plan Administrator shall deem relevant in connection with
accomplishing the purpose of the Plan.
2.2 Terms and Conditions of Options.
(a) Allotment of Shares. A Plan Administrator shall determine
the number of shares of Stock to be optioned from time to time and the number of
shares to be optioned to any Eligible Person (the "Optioned Shares"). The grant
of an Option to a person shall neither entitle such person to, nor disqualify
such person from, participation in any other grant of Options or Stock Awards
under this Plan or any other stock option plan of the Company.
(b) Exercise Price. Upon the grant of any Option, a Plan
Administrator shall specify the option price per share. If the Option is
intended to qualify as an Incentive Stock Option under the Code, the option
price per share may not be less than 100 percent of the fair market value per
share of the stock on the date the Option is granted (110 percent if the Option
is granted to a shareholder who at the time the Option is granted owns or is
deemed to own stock possessing more than 10 percent of the total combined voting
power of all classes of stock of the Company or of any Parent or Subsidiary
Corporation). The determination of the fair market value of the Stock shall be
made in accordance with the valuation provisions of Section 3.5 hereof.
(c) Individual Stock Option Agreements. Options granted under
the Plan shall be evidenced by option agreements in such form and content as a
Plan Administrator from time to time approves, which agreements shall
substantially comply with and be subject to the terms of the Plan, including the
terms and conditions of this Section 2.2. As determined by a Plan Administrator,
each option agreement shall state (i) the total number of shares to which it
pertains, (ii) the exercise price for the shares covered by the Option, (iii)
the time at which the Options vest and become exercisable and (iv) the Option's
scheduled expiration date. The option agreements may contain such other
provisions or conditions as a Plan Administrator deems necessary or appropriate
to effectuate the sense and purpose of the Plan, including covenants by the
Optionholder not to compete and remedies for the Company in the event of the
breach of any such covenant.
(d) Option Period. No Option granted under the Plan that is
intended to be an Incentive Stock Option shall be exercisable for a period in
excess of 10 years from the date of its grant (five years if the Option is
granted to a shareholder who at the time the Option is granted owns or is deemed
to own stock possessing more than 10 percent of the total combined voting power
of all classes of stock of the Company or of any Parent or any Subsidiary
Corporation), subject to earlier termination in the event of termination of
employment, retirement or death of the Optionholder. An Option may be exercised
in full or in part at any time or from time to time during the term of the
Option or provide for its exercise in stated installments at stated times during
the Option's term.
(e) Vesting; Limitations. The time at which Options may be
exercised with respect to an Optionholder shall be in the discretion of that
Optionholder's Plan Administrator. Notwithstanding the foregoing, to the extent
an Option is intended to qualify as an Incentive Stock Option, the aggregate
fair market value (determined as of the respective date or dates of grant) of
the Stock for which one or more Options granted to any person under this Plan
(or any other option plan of the Company or its Parent or Subsidiary
Corporations) may for the first time become exercisable as Incentive Stock
Options during any one calendar year shall not exceed the sum of $100,000
(referred to herein as the "$100,000 Limitation"). To the extent that any person
holds two or more Options which become exercisable for the first time in the
same calendar year, the foregoing limitation on the exercisability as an
Incentive Stock Option shall be applied on the basis of the order in which such
Options are granted.
(f) No Fractional Shares. Options shall be exercisable only
for whole shares; no fractional shares will be issuable upon exercise of any
Option granted under the Plan.
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(g) Method of Exercise. To exercise an Option with respect to
any vested Optioned Shares, an Optionholder (or in the case of an exercise after
an Optionholder's death, such Optionholder's executor, administrator, heir or
legatee, as the case may be) must take the following action:
(i) execute and deliver to the Company a written
notice of exercise signed in writing by the person exercising the Option
specifying the number of shares of Stock with respect to which the Option is
being exercised;
(ii) pay the aggregate Option Price in one of the
alternate forms as set forth in Section 2.2(h) below; and
(iii) furnish appropriate documentation that the
person or persons exercising the Option (if other than the Optionholder) has the
right to exercise such Option.
As soon as practicable after the Exercise Date, the Company will mail or deliver
to or on behalf of the Optionholder (or any other person or persons exercising
an Option under the Plan) a certificate or certificates representing the Stock
acquired upon exercise of the Option.
(h) Payment of Option Price. The aggregate Option Price shall
be payable in one of the alternative forms specified below:
(i) Full payment in cash or check made payable to the
Company's order; or
(ii) Full payment in shares of Stock held for the
requisite period necessary to avoid a charge to the Company's reported earnings
and valued at fair market value on the Exercise Date (as determined in
accordance with Section 3.5 hereof); or
(iii) If a cashless exercise program has been
implemented by the Board, full payment through a sale and remittance procedure
pursuant to which the Optionholder (A) shall provide irrevocable written
instructions to a designated brokerage firm to effect the immediate sale of the
Optioned Shares to be purchased and remit to the Company, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the Optioned Shares to be purchased and (B)
shall concurrently provide written directives to the Company to deliver the
certificates for the Optioned Shares to be purchased directly to such brokerage
firm in order to complete the sale transaction.
(i) Rights of a Shareholder. An Optionholder shall not have
any of the rights of a shareholder with respect to Optioned Shares until such
individual shall have exercised the Option and paid the Option Price for the
Optioned Shares. No adjustment will be made for dividends or other rights for
which the record date is prior to the date of such exercise and full payment for
the Optioned Shares.
(j) Repurchase Right. The Plan Administrator may, in its sole
discretion, set forth other terms and conditions upon which the Company (or its
assigns) shall have the right to repurchase shares of Stock acquired by an
Optionholder pursuant to an Option. Any repurchase right of the Company shall be
exercisable by the Company (or its assignees) upon such terms and conditions as
the Plan Administrator may specify in the Stock Repurchase Agreement evidencing
such right. The Plan Administrator may also in its discretion establish as a
term and condition of one or more Options granted under the Plan that the
Company shall have a right of first refusal with respect to any proposed sale or
other disposition by the Optionholder of any shares of Stock issued upon the
exercise of such Options. Any such right of first refusal shall be exercisable
by the Company (or its assigns) in accordance with the terms and conditions set
forth in the Stock Repurchase Agreement.
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(k) Termination of Incentive Stock Options.
(i) Termination of Service. If any Optionholder
ceases to be in Service to the Company for a reason other than permanent
disability or death and any vested Option held by such Optionholder is an
Incentive Stock Option, then such Optionholder may, within three months after
the date of termination of such Service, but in no event after the Incentive
Stock Option's stated expiration date, exercise some or all of the Incentive
Stock Options that the Optionholder was entitled to exercise on the date the
Optionholder's Service terminated; provided, that if the Optionholder is
discharged for Cause or commits acts detrimental to the Company's interests
after the Service of the Optionholder has been terminated, then the Incentive
Stock Options will thereafter be void for all purposes. "Cause" shall mean a
termination of Service based upon a finding by the applicable Plan Administrator
that the Optionholder: (i) has committed a felony involving dishonesty, fraud,
theft or embezzlement; (ii) after written notice from the Company has repeatedly
failed or refused, in a material respect, to follow reasonable policies or
directives established by the Company; (iii) after written notice from the
Company, has willfully and persistently failed to attend to material duties or
obligations; (iv) has performed an act or failed to act, which, if he were
prosecuted and convicted, would constitute a theft of money or property of the
Company; or (v) has misrepresented or concealed a material fact for purposes of
securing employment with the Company. If any Optionholder ceases to be in
Service to the Company by reason of permanent disability within the meaning of
section 22(e)(3) of the Code (as determined by the applicable Plan
Administrator), the Optionholder will have 12 months after the date of
termination of Service, but in no event after the stated expiration date of the
Optionholder's Incentive Stock Options, to exercise Incentive Stock Options that
the Optionholder was entitled to exercise on the date the Optionholder's Service
terminated as a result of the disability.
(ii) Death of Optionholder. If an Optionholder dies
while in the Company's Service, any vested Options that are Incentive Stock
Options that the Optionholder was entitled to exercise on the date of death will
be exercisable within three months after such date or until the stated
expiration date of the Optionholder's Incentive Stock Options, whichever occurs
first, by the person or persons ("successors") to whom the Optionholder's rights
pass under a will or by the laws of descent and distribution. As soon as
practicable after receipt by the Company of the notice of exercise and of
payment in full of the Option Price as specified in Sections 2.2(g) and (h)
hereof, a certificate or certificates representing the Optioned Shares shall be
registered in the name or names specified by the successors in the written
notice of exercise and shall be delivered to the successors.
(l) Termination of Nonqualified Options. Any Options that are
not Incentive Stock Options and that are exercisable at the time an Optionholder
ceases to be in Service to the Company shall remain exercisable for such period
of time thereafter as determined by the Plan Administrator at the time of grant
and set forth in the documents evidencing such Options. In the absence of any
provision in the documents evidencing such Options, the Options shall remain
exercisable (i) for a period of three months after termination as a result of
the Optionholder's death; (ii) for a period of 12 months if the Optionholder
ceases to be in service to the Company by reason of permanent disability within
the meaning of section 22(e)(3) of the Code (as determined by the applicable
Plan Administrator); and (iii) for a period of three months after termination
for any other reason; provided, that no Option shall be exercisable after the
Option's stated expiration date, and provided further, that if the Optionholder
is discharged for Cause (as defined in Section 2.2(k)(i)) or commits acts
detrimental to the Company's interests after the Service of the Optionholder has
been terminated, then the Option will thereafter be void for all purposes.
(m) Other Plan Provisions Still Applicable. If an Option is
exercised upon the termination of Service or death of an Optionholder under this
Section 2.2, the other provisions of the Plan will continue to apply to such
exercise, including the requirement that the Optionholder or its successor may
be required to enter into a Stock Repurchase Agreement.
(n) Definition of "Service". For purposes of this Plan, unless
it is evidenced otherwise in the option agreement with the Optionholder, the
Optionholder is deemed to be in "Service" to the Company so long
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as such individual renders continuous services on a periodic basis to the
Company (or to any Parent or Subsidiary Corporation) in the capacity of an
employee, director, or an independent consultant or advisor. In the discretion
of the applicable Plan Administrator, an Optionholder will be considered to be
rendering continuous services to the Company even if the type of services
change, e.g., from employee to independent consultant. The Optionholder will be
considered to be an employee for so long as such individual remains in the
employ of the Company or one or more of its Parent or Subsidiary Corporations.
2.3 Terms and Conditions of Stock Awards.
(a) Eligibility. All Eligible Persons shall be eligible to
receive Stock Awards. The Plan Administrator of each administered group shall
determine the number of shares of Stock to be awarded from time to time to any
Eligible Person in such group. Except as otherwise provided in this Plan, the
grant of a Stock Award to a person (a "Grantee") shall neither entitle such
person to, nor disqualify such person from participation in, any other grant of
options or awards by the Company, whether under this Plan or under any other
stock option or award plan of the Company.
(b) Award for Services Rendered. Stock Awards shall be granted
in recognition of an Eligible Person's services to the Company. The grantee of
any such Stock Award shall not be required to pay any consideration to the
Company upon receipt of such Stock Award, except as may be required to satisfy
any applicable Arizona corporate law, employment tax and/or income tax
withholding requirements.
(c) Conditions to Award. All Stock Awards shall be subject to
such terms, conditions, restrictions, or limitations as the applicable Plan
Administrator deems appropriate, including, by way of illustration but not by
way of limitation, restrictions on transferability, requirements of continued
employment, individual performance or the financial performance of the Company,
or payment by the recipient of any applicable employment or withholding taxes.
Such Plan Administrator may modify or accelerate the termination of the
restrictions applicable to any Stock Award under the circumstances as it deems
appropriate.
(d) Award Agreements. A Plan Administrator may require as a
condition to a Stock Award that the recipient of such Stock Award enter into an
award agreement in such form and content as that Plan Administrator from time to
time approves.
2.4 Terms and Conditions of SARs.
(a) Eligibility. All Eligible Persons shall be eligible to
receive SARs. The Plan Administrator of each administered group shall determine
the SARs to be awarded from time to time to any Eligible Person in such group.
The grant of a SAR to a person shall neither entitle such person to, nor
disqualify such person from participation in, any other grant of options or
awards by the Company, whether under this Plan or under any other stock option
or award plan of the Company.
(b) Award of SARs. Concurrently with or subsequent to the
grant of any Option to purchase one or more shares of Stock, the Plan
Administrator may award to the Optionholder with respect to each share of Stock
underlying the Option, a related SAR permitting the Optionholder to be paid any
appreciation on that Stock in lieu of exercising the Option. In addition, a Plan
Administrator may award to any Eligible Person a SAR permitting the Eligible
Person to be paid the appreciation on a designated number of shares of the
Stock, whether or not such shares are actually issued.
(c) Conditions to SAR. All SARs shall be subject to such
terms, conditions, restrictions or limitations as the applicable Plan
Administrator deems appropriate, including, by way of illustration but not by
way of limitation, restrictions on transferability, requirements of continued
employment, individual performance, financial performance of the Company, or
payment by the recipient of any applicable employment or withholding
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taxes. Such Plan Administrator may modify or accelerate the termination of the
restrictions applicable to any SAR under the circumstances as it deems
appropriate.
(d) SAR Agreements. A Plan Administrator may require as a
condition to the grant of a SAR that the recipient of such SAR enter into a SAR
agreement in such form and content as that Plan Administrator from time to time
approves.
(e) Exercise. An Eligible Person who has been granted a SAR
may exercise such SAR subject to the conditions specified by the Plan
Administrator in the SAR agreement.
(f) Amount of Payment. The amount of payment to which the
grantee of a SAR shall be entitled upon the exercise of each SAR shall be equal
to the amount, if any, by which the fair market value of the specified shares of
Stock on the exercise date exceeds the fair market value of the specified shares
of Stock on the date the Option related to the SAR was granted or became
effective, or, if the SAR is not related to any Option, on the date the SAR was
granted or became effective.
(g) Form of Payment. The SAR may be paid in either cash or
Stock, as determined in the discretion of the applicable Plan Administrator and
set forth in the SAR agreement. If the payment is in Stock, the number of shares
to be paid to the participant shall be determined by dividing the amount of the
payment determined pursuant to Section 2.4(f) by the fair market value of a
share of Stock on the exercise date of such SAR. As soon as practical after
exercise, the Company shall deliver to the SAR grantee a certificate or
certificates for such shares of Stock.
(h) Termination of Employment; Death. Section 2.2(k),
applicable to Incentive Stock Options, and Section 2.2(l), applicable to all
other Options, shall apply equally to SARs issued in tandem with such Options.
Section 2.2(l) shall apply equally to SARs that are not issued in tandem with
any Options.
2.5 Other Cash Awards.
(a) In General. The Plan Administrator of each administered
group shall have the discretion to make other awards of cash to Eligible Persons
in such group ("Cash Awards"). Such Cash Awards may relate to existing Options
or to the appreciation in the value of the Stock or other Company securities.
(b) Conditions to Award. All Cash Awards shall be subject to
such terms, conditions, restrictions or limitations as the applicable Plan
Administrator deems appropriate, and such Plan Administrator may require as a
condition to such Cash Award that the recipient of such Cash Award enter into an
award agreement in such form and content as the Plan Administrator from time to
time approves.
ARTICLE III
Miscellaneous
3.1 Capital Adjustments. The aggregate number of shares of Stock
subject to the Plan, the number of shares of Stock covered by outstanding
Options and Awards, and the price per share stated in all outstanding Options
and Awards shall be proportionately adjusted for any increase or decrease in the
number of outstanding shares of Stock of the Company resulting from a
subdivision or consolidation of shares or any other capital adjustment or the
payment of a stock dividend or any other increase or decrease in the number of
such shares effected without the Company's receipt of consideration therefor in
money, services or property.
3.2 Mergers, Etc. If the Company is the surviving corporation in any
merger or consolidation (not including a Corporate Transaction), any Option or
Award granted under the Plan shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to the Option or Award
would have been
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entitled prior to the merger or consolidation. Except as provided in Section 3.3
hereof, a dissolution or liquidation of the Company shall cause every Option or
Award outstanding hereunder to terminate.
3.3 Corporate Transaction. In the event of shareholder approval of a
Corporate Transaction, the Plan Administrator shall have the discretion and
authority, exercisable at any time, to provide for the automatic acceleration of
one or more of the outstanding Options or Awards granted by it under the Plan.
Upon the consummation of the Corporate Transaction, all Options shall, to the
extent not previously exercised, terminate and cease to be outstanding.
3.4 Change in Control.
(a) Grant Program. In the event of a Change in Control, a Plan
Administrator shall have the discretion and authority, exercisable at any time,
whether before or after the Change in Control, to provide for the automatic
acceleration of one or more outstanding Options or Awards granted by it under
the Plan upon the occurrence of such Change in Control. A Plan Administrator may
also impose limitations upon the automatic acceleration of such Options or
Awards to the extent it deems appropriate. Any Options or Awards accelerated
upon a Change in Control will remain fully exercisable until the expiration or
sooner termination of the Option term.
(b) Incentive Stock Option Limits. The exercisability of any
Options which are intended to qualify as Incentive Stock Options and which are
accelerated by the Plan Administrator in connection with a pending Corporation
Transaction or Change in Control shall, except as otherwise provided in the
discretion of the Plan Administrator and the Optionholder, remain subject to the
$100,000 Limitation and vest as quickly as possible without violating the
$100,000 Limitation.
3.5 Calculation of Fair Market Value of Stock. The fair market value of
a share of Stock on any relevant date shall be determined in accordance with the
following provisions:
(a) If the Stock is not at the time listed or admitted to
trading on any stock exchange but is traded in the over-the-counter market, the
fair market value shall be the mean between the highest bid and lowest asked
prices (or, if such information is available, the closing selling price) per
share of Stock on the date in question in the over-the-counter market, as such
prices are reported by the National Association of Securities Dealers through
its Nasdaq system or any successor system. If there are no reported bid and
asked prices (or closing selling price) for the Stock on the date in question,
then the mean between the highest bid price and lowest asked price (or the
closing selling price) on the last preceding date for which such quotations
exist shall be determinative of fair market value.
(b) If the Stock is at the time listed or admitted to trading
on any stock exchange, then the fair market value shall be the closing selling
price per share of Stock on the date in question on the stock exchange
determined by the Board to be the primary market for the Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If
there is no reported sale of Stock on such exchange on the date in question,
then the fair market value shall be the closing selling price on the exchange on
the last preceding date for which such quotation exists.
(c) If the Stock at the time is neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter market, then
the fair market value shall be determined by the Board after taking into account
such factors as the Board shall deem appropriate, including one or more
independent professional appraisals.
3.6 Use of Proceeds. The proceeds received by the Company from the sale
of Stock pursuant to the exercise of Options or Awards hereunder, if any, shall
be used for general corporate purposes.
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3.7 Cancellation of Options. Each Plan Administrator shall have the
authority to effect, at any time and from time to time, with the consent of the
affected Optionholders, the cancellation of any or all outstanding Options
granted under the Plan by that Plan Administrator and to grant in substitution
therefore new Options under the Plan covering the same or different numbers of
shares of Stock as long as such new Options have an exercise price per share of
Stock no less than the minimum exercise price as set forth in Section 2.2(b)
hereof on the new grant date.
3.8 Regulatory Approvals. The implementation of the Plan, the granting
of any Option or Award hereunder, and the issuance of Stock upon the exercise of
any such Option or Award shall be subject to the procurement by the Company of
all approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the Options or Awards granted under it, and the Stock issued
pursuant to it.
3.9 Indemnification. In addition to such other rights of
indemnification as they may have, the members of a Plan Administrator shall be
indemnified and held harmless by the Company, to the extent permitted under
applicable law, for, from and against all costs and expenses reasonably incurred
by them in connection with any action, legal proceeding to which any member
thereof may be a party by reason of any action taken, failure to act under or in
connection with the Plan or any rights granted thereunder and against all
amounts paid by them in settlement thereof or paid by them in satisfaction of a
judgment of any such action, suit or proceeding, except a judgment based upon a
finding of bad faith.
3.10 Plan Not Exclusive. This Plan is not intended to be the exclusive
means by which the Company may issue options or warrants to acquire its Stock,
stock awards or any other type of award. To the extent permitted by applicable
law, any such other option, warrants or awards may be issued by the Company
other than pursuant to this Plan without shareholder approval.
3.11 Company Rights. The grants of Options shall in no way affect the
right of the Company to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
3.12 Assignment. The right to acquire Stock or other assets under the
Plan may not be assigned, encumbered or otherwise transferred by any
Optionholder except as specifically provided herein. Except as specifically
allowed by the Plan Administrator at the time of grant and set forth in the
documents evidencing an Option or Award, no Option or Award granted under the
Plan or any of the rights and privileges conferred thereby shall be assignable
or transferable by an Optionholder or grantee other than by will or the laws of
descent and distribution, and such Option or Award shall be exercisable during
the Optionholder's or grantee's lifetime only by the Optionholder or grantee.
The provisions of the Plan shall inure to the benefit of, and be binding upon,
the Company and its successors or assigns, and the Optionholders, the legal
representatives of their respective estates, their respective heirs or legatees
and their permitted assignees.
3.13 Securities Restrictions.
(a) Legend on Certificates. All certificates representing
shares of Stock issued under the Plan shall be endorsed with a legend reading as
follows:
The shares of Common Stock evidenced by this certificate have
been issued to the registered owner in reliance upon written
representations that these shares have been purchased solely
for investment. These shares may not be sold, transferred or
assigned unless in the opinion of the Company and its legal
counsel such sale, transfer or assignment will not be in
violation of the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
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(b) Private Offering for Investment Only. The Options and
Awards are and shall be made available only to a limited number of present and
future key personnel and their permitted transferees who have knowledge of the
Company's financial condition, management and its affairs. The Plan is not
intended to provide additional capital for the Company, but to encourage
ownership of Stock among the Company's key personnel or their permitted
transferees. By the act of accepting an Option or Award, each grantee or
permitted transferees agrees (i) that, any shares of Stock acquired will be
solely for investment and not with any intention to resell or redistribute those
shares and (ii) such intention will be confirmed by an appropriate certificate
at the time the Stock is acquired if requested by the Company. The neglect or
failure to execute such a certificate, however, shall not limit or negate the
foregoing agreement.
(c) Registration Statement. If a Registration Statement
covering the shares of Stock issuable under the Plan is filed under the
Securities Act of 1933, as amended, and is declared effective by the Securities
Exchange Commission, the provisions of Sections 3.13(a) and (b) shall terminate
during the period of time that such Registration Statement, as periodically
amended, remains effective.
3.14 Tax Withholding.
(a) General. The Company's obligation to deliver Stock under
the Plan shall be subject to the satisfaction of all applicable federal, state
and local income tax withholding requirements.
(b) Shares to Pay for Withholding. The Board may, in its
discretion and in accordance with the provisions of this Section 3.14(b) and
such supplemental rules as it may from time to time adopt, provide any or all
Optionholders or Grantees with the right to use shares of Stock in satisfaction
of all or part of the federal, state and local income tax liabilities incurred
by such Optionholders or Grantees in connection with the receipt of Stock
("Taxes"). Such right may be provided to any such Optionholder or Grantee in
either or both of the following formats:
(i) Stock Withholding. An Optionholder or Grantee may
be provided with the election, which may be subject to approval by the Plan
Administrator, to have the Company withhold, from the Stock otherwise issuable,
a portion of those shares of Stock with an aggregate fair market value equal to
the percentage (not to exceed 100 percent) of the applicable Taxes designated by
the Optionholder or Grantee.
(ii) Stock Delivery. The Board may, in its
discretion, provide the Optionholder or Grantee with the election to deliver to
the Company, at the time the Option is exercised or Stock is awarded, one or
more shares of Stock previously acquired by such individual (other than pursuant
to the transaction triggering the Taxes) with an aggregate fair market value
equal to the percentage of the taxes (not to exceed 100 percent) incurred in
connection with such Option exercise or Stock Award designated by the
Optionholder or Grantee.
3.15 Governing Law. The Plan shall be governed by and all questions
hereunder shall be determined in accordance with the laws of the State of
Arizona.
ARTICLE IV
Definitions
The following capitalized terms used in this Plan shall have the
meaning described below:
"Affiliates" shall mean all "officers" (as that term is defined in Rule
16a-1(f) promulgated under the 1934 Act) and directors of the Company and all
persons who own ten percent or more of the Company's issued and outstanding
Stock.
"Award" shall mean a Stock Award, SAR or Cash Award under the Grant
Program.
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"Board" shall mean the Board of Directors of the Company.
"Cash Award" shall mean an award to be paid in cash and granted under
Section 2.5 hereunder.
"Change in Control" shall mean and include the following transactions
or situations:
(i) A sale, transfer, or other disposition by the Company
through a single transaction or a series of transactions of securities of the
Company representing 30 percent or more of the combined voting power of the
Company's then outstanding securities to any "Unrelated Person" or "Unrelated
Persons" acting in concert with one another. For purposes of this definition,
the term "Person" shall mean and include any individual, partnership, joint
venture, association, trust corporation, or other entity (including a "group" as
referred to in Section 13(d)(3) of the 1934 Act). For purposes of this
definition, the term "Unrelated Person" shall mean and include any Person other
than the Company, a wholly-owned subsidiary of the Company, or an employee
benefit plan of the Company.
(ii) A sale, transfer, or other disposition through a single
transaction or a series of transactions of all or substantially all of the
assets of the Company to an Unrelated Person or Unrelated Persons acting in
concert with one another.
(iii) A change in the ownership of the Company through a
single transaction or a series of transactions such that any Unrelated Person or
Unrelated Persons acting in concert with one another become the "Beneficial
Owner," directly or indirectly, of securities of the Company representing at
least 30 percent of the combined voting power of the Company's then outstanding
securities. For purposes of this definition, the term "Beneficial Owner" shall
have the same meaning as given to that term in Rule 13d-3 promulgated under the
1934 Act, provided that any pledgee of voting securities is not deemed to be the
Beneficial Owner thereof prior to its acquisition of voting rights with respect
to such securities.
(iv) Any consolidation or merger of the Company with or into
an Unrelated Person, unless immediately after the consolidation or merger the
holders of the common stock of the Company immediately prior to the
consolidation or merger are the Beneficial Owners of securities of the surviving
corporation representing at least 50 percent of the combined voting power of the
surviving corporation's then outstanding securities.
(v) During any period of two years, individuals who, at the
beginning of such period, constituted the Board of Directors of the Company
cease, for any reason, to constitute at least a majority thereof, unless the
election or nomination for election of each new director was approved by the
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
(vi) A change in control of the Company of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the 1934 Act, or any successor regulation of
similar import, regardless of whether the Company is subject to such reporting
requirement.
Notwithstanding any provision hereof to the contrary, the filing of a
proceeding for the reorganization of the Company under Chapter 11 of the General
Bankruptcy Code or any successor or other statute of similar import shall not be
deemed to be a Change of Control for purposes of this Plan.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean DenAmerica Corp., a Georgia corporation.
"Corporate Transaction" shall mean (a) a merger or consolidation in
which the Company is not the surviving entity, except for a transaction the
principal purposes of which is to change the state in which the
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Company is incorporated; (b) the sale, transfer of or other disposition of all
or substantially all of the assets of the Company and complete liquidation or
dissolution of the Company, or (c) any reverse merger in which the Company is
the surviving entity but in which the securities possessing more than 50 percent
of the total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such securities
immediately prior to such merger.
"Effective Date" shall mean the date that the Plan has been approved by
the shareholders as required by Section 1.3(a) hereof.
"Eligible Persons" shall mean, with respect to the Grant Program, those
persons who, at the time that the Option or Award is granted, are (i) key
personnel (including officers and directors) of the Company or Parent or
Subsidiary Corporations, or (ii) consultants or independent contractors who
provide valuable services to the Company or Parent or Subsidiary Corporations.
"Employee Committee" shall mean that committee appointed by the Board
to administer the Plan with respect to the Non-Affiliates and comprised of one
or more persons who are members of the Board.
"Exercise Date" shall be the date on which written notice of the
exercise of an Option and payment of the Option Price is delivered to the
Company in accordance with the requirements of the Plan.
"Grantee" shall mean an Eligible Person who has received an Award.
"Grant Program" shall mean the program described in Article II of this
Agreement pursuant to which certain Eligible Persons are granted Options or
Awards in the discretion of the Plan Administrator.
"Incentive Stock Option" shall mean an Option that is intended to
qualify as an "incentive stock option" under Code section 422.
"Non-Affiliates" shall mean all persons who are not Affiliates.
"Non-Employee Directors" shall mean those Directors who satisfy the
definition of "Non-Employee Director" under Rule 16b-3(b)(3)(i) promulgated
under the 1934 Act.
"$100,000 Limitation" shall mean the limitation pursuant to which the
aggregate fair market value (determined as of the respective date or dates of
grant) of the Stock for which one or more Options granted to any person under
this Plan (or any other option plan of the Company or any Parent or Subsidiary
Corporation) may for the first time be exercisable as Incentive Stock Options
during any one calendar year shall not exceed the sum of $100,000.
"Optionholder" shall mean an Eligible Person to whom Options have been
granted.
"Optioned Shares" shall be those shares of Stock to be optioned from
time to time to any Eligible Person.
"Option Price" shall mean the exercise price per share as specified by
the Plan Administrator or by the terms of the Plan.
"Options" shall mean options to acquire Stock granted under the Plan.
"Parent Corporation" shall mean any corporation in the unbroken chain
of corporations ending with the employer corporation, where, at each link of the
chain, the corporation and the link above owns at least 50 percent of the
combined total voting power of all classes of the stock in the corporation in
the link below.
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"Plan" shall mean this stock option plan for DenAmerica Corp.
"Plan Administrator" shall mean (a) either the Board, the Senior
Committee, or any other committee, whichever is applicable, with respect to the
administration of the Grant Program as it relates to Affiliates and (b) either
the Board, the Employee Committee, or any other committee, whichever is
applicable, with respect to the administration of the Grant Program as it
relates to Non-Affiliates.
"SAR" shall mean stock appreciation rights granted pursuant to Section
2.4 hereof.
"Senior Committee" shall mean that committee appointed by the Board to
administer the Grant Program with respect to the Affiliates and comprised of two
or more Non-Employee Directors.
"Service" shall have the meaning set forth in Section 2.2(n) hereof.
"Stock" shall mean shares of the Company's common stock, $.01 par value
per share, which may be unissued or treasury shares, as the Board may from time
to time determine.
"Stock Awards" shall mean Stock directly granted under the Grant
Program.
"Subsidiary Corporation" shall mean any corporation in the unbroken
chain of corporations starting with the employer corporation, where, at each
link of the chain, the corporation and the link above owns at least 50 percent
of the combined voting power of all classes of stock in the corporation below.
EXECUTED as of the 10th day of December, 1996.
DENAMERICA CORP.
By:
-------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
ATTESTED BY:
- ------------------------------------
Secretary
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<PAGE>
EXHIBIT "B"
-----------
ARTICLES OF AMENDMENT
OF
DENAMERICA CORP.
1.
The name of the corporation is:
DENAMERICA CORP.
2.
Article II of the Articles of Incorporation shall be amended
in its entirety to be and read as follows:
"ARTICLE II
Section 2.1 Common Stock. The aggregate number of shares of
common stock (the "Common Stock") that the Corporation shall have the authority
to issue is 40,000,000, with $.10 par value per share. Except as required by law
or as set forth in articles of amendment filed with the Georgia Secretary of
State with respect to any series of preferred stock issued by the Corporation,
each share of Common Stock shall have one vote on each matter submitted to a
vote of the shareholders of the Corporation. Subject to the provisions of
applicable law and the rights of the holders of the outstanding shares of
Preferred Stock, if any, the holders of shares of Common Stock shall be entitled
to receive, when and as declared by the Board of Directors of the Corporation,
out of the assets of the Corporation legally available therefor, dividends or
other distributions, whether payable in cash, property or securities of the
Corporation. The holders of shares of Common Stock shall be entitled to receive,
in proportion to the number of shares of Common Stock held, the net assets of
the Corporation upon dissolution after any preferential amounts required to be
paid or distributed to holders of outstanding shares of Preferred Stock, if any,
are so paid or distributed.
Section 2.2 Preferred Stock. The aggregate number of shares of
preferred stock (the "Preferred Stock") that the Corporation shall have
authority to issue is 5,000,000, with a par value of $.01 per share. The
Preferred Stock may be issued from time to time by the Board of Directors as
shares of one or more series. The description of shares of each series of
Preferred Stock, including any designations, preferences, privileges, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption shall be as set forth in
resolutions adopted by the Board of Directors, and articles of amendment shall
be filed with the Georgia Secretary of State as required by law to be filed with
respect to the issuance of such Preferred Stock, prior to the issuance of any
shares of such series.
The Board of Directors is expressly authorized, at any time,
by adopting resolutions providing for the issuance of, or providing for a change
in the number of, shares of any particular series of Preferred Stock and, if and
to the extent from time to time required by law, by filing articles of amendment
which are effective without shareholder action, to increase or decrease the
number of shares included in each series of Preferred Stock, but not below the
number of shares then issued, and to set in any one or more respects the
designations, preferences, conversion, or other rights, voting powers,
restrictions, limitations as to dividends, qualifications, or terms and
conditions of redemption relating to the shares of each such series. The
authority of the Board of Directors with respect to each series of Preferred
Stock shall include, but not be limited to, setting or changing the following:
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<PAGE>
(i) the dividend rate, if any, on shares of such
series, the times of payment and the date from
which dividends shall be accumulated, if dividends
are to be cumulative;
(ii) whether the shares of such series shall be
redeemable and, if so, the redemption price and the
terms and conditions of such redemption;
(iii) the obligation, if any, of the Corporation to
redeem shares of such series pursuant to a sinking
fund;
(iv) whether shares of such series shall be convertible
into, or exchangeable for, shares of stock of any
other class or classes and, if so, the terms and
conditions of such conversion or exchange,
including the price or prices or the rate or rates
of conversion or exchange and the terms of
adjustment, if any;
(v) whether the shares of such series shall have voting
rights, in addition to the voting rights provided
by law, and, if so, the extent of such voting
rights;
(vi) the rights of the shares of such series in the
event of voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation; and
(vii) any other relative rights, powers, preferences,
qualifications, limitations or restrictions thereof
relating to such series.
Section 2.3 Shares Acquired by the Corporation. Shares of
Common Stock that have been acquired by the Corporation shall become treasury
shares and may be resold or otherwise disposed of by the Corporation for such
consideration, not less than the par value thereof, as shall be determined by
the Board of Directors, unless or until the Board of Directors shall by
resolution provide that any or all treasury shares so required shall constitute
authorized but unissued shares. Unless otherwise provided in the resolutions
adopted by the Board of Directors and set forth in the articles of amendment
filed with the Georgia Secretary of State with respect to any series of
Preferred Stock, shares of Preferred Stock that have been acquired by the
Corporation shall become treasury shares and may be resold or otherwise disposed
of by the Corporation for such consideration, not less than the par value
thereof, as shall be determined by the Board of Directors, unless or until the
Board of Directors shall by resolution provide that any or all treasury shares
so required shall constitute authorized but unissued shares."
3.
The amendment was adopted by the Board of Directors of the
Corporation on March 6, 1997 and approved by the Shareholders of the Corporation
on ___________________, 1997.
IN WITNESS WHEREOF, the Corporation has caused these Articles
of Amendment to be executed by a duly authorized officer on the _____ day of
____________________, 1997.
DENAMERICA CORP.
By:
-------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
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<PAGE>
DENAMERICA CORP.
1997 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of DENAMERICA CORP., a Georgia corporation (the
"Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement of the Company, each dated May __, 1997, and
hereby appoints Jack M. Lloyd and William J. Howard, and each of them, proxies
and attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the 1997 Annual
Meeting of Shareholders of the Company, to be held on Thursday, June 26, 1997,
at 12:00 noon, local time, at the Radisson Resort of Scottsdale, 7171 N.
Scottsdale Road, Scottsdale, Arizona, and at any adjournment or adjournments
thereof, and to vote all shares of the Company's Common Stock which the
undersigned would be entitled to vote if then and there personally present, on
the matters set forth on the reverse side.
This Proxy will be voted as directed or, if no contrary direction is
indicated, will be voted FOR the election of directors; FOR approval of the
Company's 1996 Stock Option Plan; FOR approval of the proposal to amend the
Company's Restated Articles of Incorporation; FOR the ratification of the
appointment of Deloitte & Touche LLP as the independent auditors of the Company;
and as said proxies deem advisable on such other matters as may come before the
meeting.
A majority of such proxies or substitutes as shall be present and shall act
at said meeting or any adjournment or adjournments thereof (or if only one shall
be present and act, then that one) shall have and may exercise all of the powers
of said proxies hereunder.
(Continued, and to be signed and dated, on the reverse side.)
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as indicated). for all nominees listed below.
</TABLE>
To withhold authority to vote for any individual nominee, strike a line through
that nominee's name in the list below:
Jack M. Lloyd, William J. Howard, William G. Cox, Todd S. Brown,
John M. Holliman, III, C. Alan MacDonald, and Fred W. Martin
2. Proposal to approve the Company's 1996 Stock Option Plan:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Proposal to amend the Company's Restated Articles of Incorporation to (a)
increase the number of shares of the Company's common stock, par value $.10
per share, that are authorized for issuance from the current maximum of
20,000,000 shares to a maximum of 40,000,000 shares, and (b) authorize
5,000,000 shares of serial preferred stock, par value $.01 per share, which
may be issued in one or more series from time to time as determined by the
Company's Board of Directors with such designations, preferences,
privileges, conversion and other rights, voting powers, restrictions,
limitations, qualifications, and other terms and conditions as the Board of
Directors may determine.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Proposal to ratify the appointment of Deloitte & Touche LLP as the
independent auditors of the Company.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
And upon such matters which may properly come before the meeting or any
adjournment or adjournments thereof.
Dated:__________________, 1997 ----------------------------------------
Signature
----------------------------------------
Signature
(This Proxy should be dated, signed by
the shareholder(s) exactly as his or her
name appears hereon, and returned
promptly in the enclosed envelope.
Persons signing in a fiduciary capacity
should so indicate. If shares are held
by joint tenants or as community
property, both shareholders should
sign.)
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope.
Votes must be indicated (x) in Black or Blue ink. [X]
