UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 1, 1997
Commission File Number 1-13226
DENAMERICA CORP.
----------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 58-1861457
- ---------------------------------------- -------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7373 N. SCOTTSDALE ROAD
SUITE D-120, SCOTTSDALE AZ 85253 85253
- ----------------------------------------- -------------------------
(address of principal executive offices) (zip code)
(602) 483-7055
--------------
(registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
The number of shares of the issuer's class of common stock as of the latest
practicable date, is as follows:
13,437,777 shares of Common Stock, $.10 par value, as of November 12, 1997.
- ---------------------------------------------------------------------------
<PAGE>
DENAMERICA CORP.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED OCTOBER 1, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - January 1, 1997 and
October 1, 1997 ........................................ 3
Condensed Consolidated Statements of Operations - 13-Week
Period ended October 1, 1997 and 13-Week Period ended
October 2, 1996 and 39-Week Period ended October 1,
1997 and 40-Week Period ended October 2, 1996 .......... 5
Condensed Consolidated Statements of Cash Flows - 13-Week
Period ended October 1, 1997 and 13-Week Period ended
October 2, 1996 and 39-Week Period ended October 1,
1997 and 40-Week Period ended October 2, 1996 .......... 6
Notes to Condensed Consolidated Financial Statements ........ 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .............................. 9
PART II. OTHER INFORMATION ........................................... 18
SIGNATURES .................................................. 20
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DENAMERICA CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
January 1, October 1,
Assets 1997 1997
------ ---------- ----------
Current assets:
Cash and cash equivalents ......... $ 2,609 $ 975
Receivables ....................... 4,102 4,132
Inventories ....................... 3,520 3,557
Deferred income taxes ............. 2,955 3,268
Other current assets .............. 1,196 1,629
-------- --------
Total current assets ......... 14,382 13,561
-------- --------
Property and equipment, net ............ 65,535 57,957
Intangibles, net ....................... 80,113 79,902
Deferred financing costs, net .......... 3,801 4,302
Deferred income taxes .................. 7,174 7,174
Other assets ........................... 8,184 8,672
-------- --------
$179,189 $171,568
======== ========
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
DENAMERICA CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets, Continued (Unaudited)
(In thousands)
January 1, October 1,
Liabilities and Shareholders' Equity 1997 1997
------------------------------------ ---------- ----------
Current liabilities:
Accounts payable ......................... $ 18,202 $ 17,046
Accrued compensation and related costs ... 8,487 6,292
Accrued taxes ............................ 4,636 3,989
Other current liabilities ................ 8,424 6,433
Current portion of long-term debt and
obligations under capital leases ........ 7,662 7,935
--------- ---------
Total current liabilities ............... 47,411 41,695
--------- ---------
Long-term debt, less current portion ....... 94,132 94,957
Deferred rent and other .................... 14,732 13,119
--------- ---------
Total liabilities ....................... 156,275 149,771
--------- ---------
Minority interest in joint ventures ........ 786 --
--------- ---------
Shareholders' equity:
Common stock ............................. 1,340 1,342
Additional paid-in capital ............... 35,706 35,781
Accumulated deficit ...................... (14,918) (15,326)
--------- ---------
Total shareholders' equity .............. 22,128 21,797
--------- ---------
$ 179,189 $ 171,568
========= =========
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
DENAMERICA CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Period ended Period ended
----------------------- ----------------------
October 2, October 1, October 2, October 1,
1996 1997 1996 1997
---------- ---------- ---------- ----------
(13 weeks) (13 weeks) (40 weeks) (39 weeks)
<S> <C> <C> <C> <C>
Restaurant sales .............................. $ 84,599 $ 75,494 $ 163,772 $ 227,787
--------- --------- --------- ---------
Restaurant operating expenses:
Cost of food and beverage ................... 23,001 20,644 44,972 62,097
Payroll and payroll related costs ........... 28,069 25,637 55,485 77,998
Depreciation and amortization ............... 2,379 2,232 5,215 6,822
Other restaurant operating expenses ......... 22,030 19,892 42,104 61,567
--------- --------- --------- ---------
Total restaurant operating expenses ........ 75,479 68,405 147,776 208,484
--------- --------- --------- ---------
Restaurant operating income ................... 9,120 7,089 15,996 19,303
Administrative expenses ....................... 3,223 3,006 6,404 10,579
--------- --------- --------- ---------
Operating income .............................. 5,897 4,083 9,592 8,724
Interest expense, net ......................... 2,930 3,220 6,581 9,587
--------- --------- --------- ---------
Income (loss) before minority interest in joint
venture, income taxes, and extraordinary item 2,967 863 3,011 (863)
Minority interest in joint venture ............ (7) (23) 4 (184)
--------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary item .......................... 2,974 886 3,007 (679)
Income tax (benefit) expense .................. 1,192 355 1,205 (271)
--------- --------- --------- ---------
Income (loss) before extraordinary item ...... 1,782 531 1,802 (408)
Extraordinary item - loss on
extinguishment of debt ...................... -- -- 497 --
--------- --------- --------- ---------
Net income (loss) income ...................... 1,782 531 1,305 (408)
Preferred stock dividend and accretion ........ -- -- 149 --
--------- --------- --------- ---------
Net income (loss) applicable to common
shareholders ................................. $ 1,782 $ 531 $ 1,156 ($ 408)
========= ========= ========= =========
Net income (loss) per common share
before extraordinary item ................... $ .13 $ .04 $ .15 ($ .03)
========= ========= ========= =========
Net income (loss) per common share ............ $ .13 $ .04 $ 0.10 ($ .03)
========= ========= ========= =========
Weighted average shares outstanding ........... 13,399 13,437 11,131 13,437
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
DENAMERICA CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Period ended Period ended
---------------------- ----------------------
October 2, October 1, October 2, October 1,
1996 1997 1996 1997
---------- ---------- ---------- ----------
(13 weeks) (13 weeks) (40 weeks) (39 weeks)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................ $ 1,782 $ 531 $ 1,305 ($ 408)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization ............. 2,379 2,232 5,215 6,822
Amortization of deferred financing costs .. 83 154 211 441
Minority interest in joint venture ........ (8) (356) 9 (518)
Deferred income taxes ..................... 549 313 547 (313)
Deferred rent - long term ................. 57 188 189 605
Other ..................................... 237 507 734 374
Changes in operating assets and liabilities:
Receivables ............................. 752 (786) (647) (30)
Inventories ............................. (54) 104 (602) (37)
Prepaid expenses and other assets ....... 188 397 (821) (433)
Accounts payable and accrued liabilities (1,432) (2,605) (2,444) (8,152)
-------- -------- -------- --------
Net cash provided by (used in)
operating activities .................. 4,533 679 3,696 (1,649)
-------- -------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment ........... (3,498) (2,261) (7,410) (5,267)
Purchase of intangibles ...................... (751) (198) (1,285) (1,696)
Payments for Acquisition of BEP and Merger,
net of cash acquired ........................ -- -- (231) --
Proceeds from the sale of assets ............. 2,422 1,774 2,422 8,508
-------- -------- -------- --------
Net cash (used in) provided by investing
activities .............................. (1,827) (685) (6,504) 1,545
-------- -------- -------- --------
Cash flows from financing activities:
Borrowings, net .............................. -- 13,439 13,361 15,669
Dividends on preferred stock ................. -- -- (124) --
Principal reductions on long-term obligations (2,485) (13,592) (10,160) (17,276)
Issuance of Common Stock and other, net ...... (221) -- (269) 77
-------- -------- -------- --------
Net cash provided by financing activities . (2,706) (153) 2,808 (1,530)
-------- -------- -------- --------
Net change in cash and cash equivalents ... -- (159) -- (1,634)
Cash and cash equivalents at beginning of period -- 1,134 -- 2,609
-------- -------- -------- --------
Cash and cash equivalents at end of period ..... $ -- $ 975 $ -- $ 975
======== ======== ======== ========
Supplemental schedule of cash flow information:
Cash paid during period for:
Interest ..................................... $ 3,103 $ 2,480 $ 6,136 $ 7,960
======== ======== ======== ========
Income taxes ................................. $ 29 -- $ 76 --
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
DENAMERICA CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
(Unaudited)
(1) Basis of Presentation
General
The accompanying unaudited condensed consolidated financial statements of
DenAmerica Corp. and Subsidiaries (the "Company") have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the Company's management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. These statements should be read in
conjunction with the consolidated financial statements and notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations included in the Company's Annual Report on Form 10-K for the fiscal
year ended January 1, 1997. Certain reclassifications have been made in the 1996
financial statements to conform to the 1997 presentation.
The three-month and nine-month periods ended October 1, 1997, as explained
below, are not comparable to the prior periods.
Mergers
On March 29, 1996, Denwest Restaurant Corp. ("DRC") merged with and into the
Company, with the Company being the surviving corporation (the "Merger"). Upon
consummation of the Merger, the Company changed its name from American Family
Restaurants, Inc. ("AFR") to DenAmerica Corp. The Merger has been accounted for
as a reverse purchase under generally accepted accounting principles as a result
of which DRC is considered to be the acquiring entity and AFR the acquired
entity for accounting purposes.
On July 3, 1996, the Company acquired all of the issued and outstanding common
stock of Black-eyed Pea U.S.A., Inc. ("BEP") from BEP Holdings, Inc. ("BEP
Holdings") pursuant to a Stock Purchase Agreement (the "BEP Acquisition"). In
accordance with the terms and conditions of the Stock Purchase Agreement, the
effective accounting date of the BEP Acquisition was June 24, 1996.
In accordance with the accounting rules for a purchase and a reverse
acquisition, the consolidated financial statements presented herein are as
follows:
(i) Consolidated Statements of Operations of the Company for the
periods ended October 1, 1997 (which include the results of
operations of the Company following the Merger and the BEP
Acquisition) and October 2, 1996 (which include the results of
operations of the AFR restaurants since the March 27, 1996
accounting date of the Merger and the results of operations of
BEP since the June 24, 1996 accounting date of the BEP
Acquisition); and
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(ii) Consolidated Statements of Cash Flows of the Company for the
periods ended October 1, 1997 (which include the results of
operations of the Company following the Merger and the BEP
acquisition) and October 2, 1996 (which include the results of
operations of the AFR restaurants since the March 27, 1996
accounting date of the Merger and the results of operations of
BEP since the June 24, 1996 accounting date of the BEP
Acquisition).
(2) Earnings Per Share
Earnings per share for the period ended October 2, 1996 has been
computed based upon the weighted average shares of (i) the Company's Common
Stock received in connection with the Merger by the former shareholders of DRC
after deducting preferred stock dividends and accretion on preferred stock of
DRC outstanding prior to the Merger and (ii) the Company's common stock
outstanding after the Merger. Earnings per share for the period ended October 1,
1997 has been computed based upon the weighted average of the common shares
outstanding.
(3) Other Matters
On July 31, 1997, the Company sold its leasehold interests in fourteen
Denny's and two non-Denny's restaurants to an unrelated party for $2.1 million.
Proceeds from this transaction were used to repay $1.0 million of senior debt
obligations and for working capital purposes. In conjunction with this
transaction, the Company recognized a gain of $250,000, which is included as a
reduction of other restaurant operating expenses.
On October 1, 1997 the Company purchased from a BEP franchisee certain
assets and leasehold interests in six Black-eyed Pea restaurants located in
Arizona. In connection with this transaction, the Company and the franchisee
settled certain threatened litigation. Under this settlement, the Company will
forego future royalty payments from thirteen franchised restaurants located in
Colorado operated by the franchisee. The effect of the loss of royalty income
will be partially offset by operating income from the restaurants acquired. In
conjunction with the closing of this transaction, CNL Group, Inc. and certain
affiliates ("CNL") acquired certain assets directly from the BEP franchisee and
entered into operating leases with the Company. The value of the leases exceeded
the purchase price, resulting in the Company receiving approximately $2.5
million in cash that has been recorded as a deferred gain to be amortized over
the life of the leases.
As described below, on October 1, 1997, the Company entered into a
series of transactions with CNL. The Company utilized the proceeds from these
transactions, which totaled approximately $25.0 million, to repay senior debt
obligations of the Company. The following is a summary of the transactions with
CNL:
A. The Company and CNL each had a 50% interest in three joint
ventures, which operated a total of 16 Denny's restaurants, of which nine
restaurant locations were leased from CNL. On October 1, 1997, the Company
purchased CNL's 50% interest in these joint ventures and the land and buildings
for the nine Denny's restaurants for $12.1 million. Consideration consisted of a
$7.7 million promissory note, which amortizes over 10 years with an interest
rate of 9%, and a $4.4 million subordinated convertible debenture. The
subordinated convertible debenture bears interest of 5%, payable quarterly, and
is convertible at the holder's option through October 2002 into the Company's
common stock at 90% of the share price immediately prior to the conversion. The
Company subsequently entered into 15-year sale/leaseback arrangements with CNL
for the nine Denny's restaurants described above and received $8.0 million. No
gain or loss was recognized on these transactions.
8
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B. The Company entered into equipment notes payable with CNL
totaling approximately $12.5 million. The notes payable are secured by certain
equipment located in 44 Denny's restaurants, bear interest at 10%, and amortize
over a seven-year period. No gain or loss was recognized in connection with this
transaction.
C. The Company sold eight buildings located on ground leases
to CNL for proceeds of $4.6 million and entered into operating leases for these
locations. No gain or loss was recognized on this transaction.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Basis of Presentation
Upon consummation of the Merger with AFR, 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 with an effective accounting date of March 29, 1996, the last day of
DRC's first quarter for fiscal 1996. In addition, on July 3, 1996 the Company
acquired all of the issued and outstanding common stock of BEP. The effective
accounting date of the BEP Acquisition was June 24, 1996.
The results of operations for the 1997 periods have been materially
impacted by the Merger and the BEP Acquisition. For the nine-month period ended
October 1, 1997, revenue and related expenses increased significantly over prior
years primarily as a result of these acquisitions. As a result, the 1997
operating results are not comparable to prior periods. In addition, the 1997
period contains thirty-nine weeks while the 1996 nine-month period contains
forty weeks.
General
As set forth below, the Company's restaurant operating income increased
by approximately $3.3 million and operating income decreased by approximately
$900,000 for the thirty-nine week period ended October 1, 1997 as compared with
the forty-week period ended October 2, 1996. For the thirteen-week period ended
October 1, 1997, restaurant operating income and operating income decreased by
approximately $2.0 million and $1.8 million, respectively, as compared with the
thirteen-week period ended October 2, 1996. The decrease in operating income for
the thirty-nine week period ended October 1, 1997 would have been approximately
$2.5 million without the gain on sale of restaurants of $900,000 and the gain on
other disposals of approximately $700,000 during this period. These changes
result primarily from the Merger and the BEP Acquisition, the additional week of
operating results in 1996, and the decline in same store sales in 1997, which
have negatively impacted the Company's operating results due to fixed cost
structure.
Denny's
For the thirteen-week period ended October 1, 1997, the Company
operated 176 Denny's restaurants in 31 states as compared with operating 182
Denny's restaurants in the comparable prior year period. In January 1996, the
Company and Denny's, Inc. adopted the "Breakaway Breakfast" value pricing
promotion, which offered five breakfast items for $1.99 or less. In September
1996, the Company withdrew from the Breakaway Breakfast and increased the price
of the Grand Slam breakfast to $2.99. The withdrawal from the Breakaway
Breakfast resulted in the decline of comparable Denny's restaurant sales of 5.8%
during the thirty-nine week period ending October 1, 1997 compared with the
prior year. The average guest check increased from $4.97 in the third quarter
1996 to $5.21 for the
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third quarter of 1997; however, guest counts for the same period declined. In
order to mitigate the possible material negative impact of the continued decline
in the Denny's sales levels, the Company has adopted a selective restaurant
disposition strategy described below.
Black-eyed Pea
For the thirteen-week period ended October 1, 1997, the Company
operated 92 Black-eyed Pea restaurants in 13 states and franchised 25 Black-eyed
pea restaurants in 5 states, as compared with operating 99 Black-eyed Pea
restaurants in the comparable prior year period. As previously described, the
Company purchased six franchised restaurant locations in Arizona during the
third quarter of 1997. The Company also opened three new Black-eyed Pea
restaurants during the third quarter of fiscal 1997. Subsequent to October 1,
1997, the Company opened an additional one restaurant in its core market of
Texas and has five locations in various stages of development. In addition, the
Company is under contract to purchase three restaurant locations in the Orlando,
Florida market from its Flordia franchisees.
The Company operates 64 Black-eyed Pea restaurants in Texas and
Oklahoma, which the Company considers to be its core market for Black-eyed Pea
restaurants. For the thirty-nine week period ended October 1, 1997, comparable
same-store sales decreased 4.6% for all of the Company's Black-eyed Pea
restaurants. Comparable same-store sales in the core market decreased only 2.5%,
however, during the thirty-nine week period ended October 1, 1997. The guest
check average at the Company's Black-eyed Pea restaurants is approximately
$7.90. For the third quarter of 1997, alcohol and carry-out sales accounted for
approximately 2.0% and 11.2%, respectively, of total sales at the Company's
Black-eyed Pea restaurants.
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COMPARISON OF RESULTS OF OPERATIONS
The following table presents, for the periods indicated, certain items
in the condensed consolidated statements of operations as a percentage of total
restaurant sales. As discussed above, as a result of the Merger and BEP
Acquisition, these results are not comparable.
<TABLE>
<CAPTION>
Period ended Period ended
---------------------- ----------------------
October 2, October 1, October 2, October 1,
1996 1997 1996 1997
---------- ---------- ---------- ----------
(13 weeks) (13 weeks) (40 weeks) (39 weeks)
<S> <C> <C> <C> <C>
Restaurant sales: .......................... 100.0% 100.0% 100.0% 100.0%
Restaurant operating expenses:
Cost of food and beverages .............. 27.2 27.4 27.5 27.3
Payroll and payroll related costs ....... 33.2 34.0 33.9 34.2
Depreciation and amortization ........... 2.8 3.0 3.2 3.0
Other restaurant operating cost ......... 26.0 26.2 25.7 27.0
----- ----- ----- -----
Total restaurant operating expenses . 89.2 90.6 90.3 91.5
----- ----- ----- -----
Restaurant operating income ................ 10.8 9.4 9.7 8.5
Administrative expenses .................... 3.8 4.0 3.9 4.6
----- ----- ----- -----
Operating income ........................... 7.0 5.4 5.8 3.9
Interest expense ........................... 3.5 4.2 4.0 4.2
----- ----- ----- -----
Income (loss) before income taxes and
extraordinary item ....................... 3.5 1.2 1.8 (.3)
Income tax expense (benefit) ............... 1.4 .5 0.7 (.1)
----- ----- ----- -----
Income (loss) before extraordinary item .... 2.1 .7 1.1 (.2)
Extraordinary item - loss on extinguishment
of debt ............................. -- -- 0.3% --
----- ----- ----- -----
Net income (loss) .......................... 2.1% .7% 0.8% (.2)%
===== ===== ===== =====
</TABLE>
<PAGE>
THIRTEEN-WEEK PERIOD ENDED OCTOBER 1, 1997 COMPARED WITH THIRTEEN-WEEK PERIOD
ENDED OCTOBER 2, 1996
Restaurant sales. Restaurant sales decreased $9.1 million, or 11%, to
$75.5 million for the thirteen-week period ended October 1, 1997 as compared
with restaurant sales of $84.6 million for the thirteen-week period ended
October 2, 1996. This decrease was primarily attributable to the sale or closure
of certain underperforming restaurants and same-store sales decline
Cost of Food and Beverage. Cost of food and beverage increased to 27.4%
of restaurant sales for the thirteen-week period ended October 1, 1997 as
compared with 27.2% of restaurant sales for the thirteen-week period ended
October 2, 1996, primarily as the result of several promotional programs
implemented in July 1997.
Payroll and Payroll Costs. Payroll and payroll related costs were 34.0%
of restaurant sales for the thirteen-week period ended October 1, 1997 as
compared with 33.2% of restaurant sales for the thirteen-week period ended
October 2, 1996. This increase was primarily attributable to the increased cost
of health insurance benefits for the Denny's restaurant employees, as well as
the impact of minimum wage rate increases.
Depreciation and Amortization. Depreciation and amortization of
restaurant equipment, leasehold improvements, intangible assets, pre-opening
costs, and other items was $2.2 million, or 3.0% of restaurant sales, for the
thirteen-week period ended October 1, 1997, which is comparable to $2.4 million,
or 2.8% of restaurant sales, for the thirteen-week period ended October 2, 1996.
Other Restaurant Operating Costs. Other restaurant operating costs were
26.2% of restaurant sales for the thirteen-week period ended October 1, 1997 as
compared with 26.0% of restaurant sales for the thirteen-week period ended
October 2, 1996. Included in the 1997 results is a gain of $250,000 relating to
the sale of a non-branded restaurant. Excluding this gain, other restaurant
operating costs, expressed as percentage of revenue, would have been 26.7%. This
increase was primarily attributable to the increased restaurant operating costs
associated with restaurants acquired as a result of the BEP acquisition (where
other restaurant operating costs as a percentage of revenue are higher than
Denny's operating costs) and a decrease in comparable same-store sales in the
Company's Denny's restaurants.
Restaurant Operating Income. Restaurant operating income decreased $2.0
million to $7.1 million for the thirteen-week period ended October 1, 1997, as
compared with $9.1 million for the thirteen-week period ended October 2, 1996.
This decrease was principally the result of the factors described above.
Administrative Expenses. Administrative expenses were $3.0 million, or
4.0% of restaurant sales, for the thirteen-week period ended October 1, 1997,
which is comparable with $3.2 million, or 3.8% of restaurant sales, for the
thirteen-week period ended October 2, 1996.
Interest Expense. Interest expense was $3.2 million, or 4.2% of
restaurant sales, for the thirteen-week period ended October 1, 1997 as compared
with $2.9 million, or 3.5% of restaurant sales, for the thirteen-week period
ended October 2, 1996. The increase is the result of amortization of warrants
issued in connection with the BEP Acquisition and the increase in outstanding
capital lease obligations.
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<PAGE>
Income Tax Expense. The Company recorded an income tax expense of
approximately $355,000, an effective rate of 40%, for the thirteen-week period
ended October 1, 1997 as compared with income tax expense of approximately $1.2
million, or an effective rate of 40%, for the thirteen week period ended October
2, 1996.
Net Income. The Company recorded net income of approximately $531,000
for the thirteen week period ended October 1, 1997 as compared with net income
of $1.8 million for the thirteen-week period ended October 2, 1996, as a result
of the factors described above.
THIRTY-NINE WEEK PERIOD ENDED OCTOBER 1, 1997 COMPARED WITH FORTY- WEEK PERIOD
ENDED OCTOBER 2, 1996
Restaurant sales. Restaurant sales increased $64.0 million, or 39.1%,
to approximately $227.8 million for the thirty-nine week period ended October 1,
1997 as compared with restaurant sales of $163.8 million for the forty-week
period ended October 2, 1996. This increase was primarily attributable to the
Merger and the BEP Acquisition.
Cost of Food and Beverage. Cost of food and beverage decreased to 27.3%
of restaurant sales for the thirty-nine week period ended October 1, 1997 as
compared with 27.5% of restaurant sales for the forty-week period ended October
2, 1996, primarily as the result of discontinuing several Denny's promotional
programs implemented in January 1996 and the conversion or sale of certain of
the Company's non-branded restaurants.
Payroll and Payroll Costs. Payroll and payroll related costs were 34.2%
of restaurant sales for the thirty-nine week period ended October 1, 1997 as
compared with 33.9% of restaurant sales for the forty week period ended October
2, 1996. This increase was primarily attributable to the costs of group
insurance benefits provided to employees of the Company's Denny's restaurants,
as well as the impact of minimum wage increases.
Depreciation and Amortization. Amortization and depreciation of
restaurant equipment, leasehold improvements, intangible assets, pre-opening
costs and other items decreased to 3.0% of restaurant sales for the thirty-nine
week period ended October 1, 1997 as compared with 3.2% of restaurant sales for
the forty-week period ended October 2, 1996. The increase of $1.6 million was
primarily attributable to the amortization of intangible assets associated with
the 1996 acquisitions and an increase of $600,000 in amortization of pre-opening
costs.
Other Restaurant Operating Costs. Other restaurant operating costs were
27.0% of restaurant sales for the thirty-nine week period ended October 1, 1997
as compared with 25.7% of restaurant sales for the forty-week period ended
October 2, 1996. Included in the 1997 results is a gain of $1.7 million relating
to the sale of restaurants and other assets. Excluding this gain, other
restaurant operating costs expressed as a percentage of revenue, would have been
27.8%. This increase was primarily attributable to increased restaurant
operating costs associated with restaurants acquired as a result of the BEP
Acquisition (where other restaurant operating costs as a percentage of revenues
are higher than Denny's operating costs), a decrease in comparable same store
sales in the Company's Denny's restaurants, and the impact of a thirty-nine week
operating period in 1997 versus a forty-week operating period in 1996.
13
<PAGE>
Restaurant Operating Income. Restaurant operating income increased $3.3
million to approximately $19.3 million for the thirty-nine week period ended
October 1, 1997, as compared with $16.0 million for the forty-week period ended
October 2, 1996. This increase was principally the result of the factors
described above.
Administrative Expenses. Administrative expenses increased to 4.6% of
restaurant sales for the thirty-nine week period ended October 1, 1997 as
compared with 3.9% of restaurant sales for the forty- week period ended October
2, 1996. This increase was primarily the result of declining same store-sales,
the impact of the thirty-nine week operating period in 1997 versus a forty-week
operating period in 1996, as well as the greater administrative support required
as a franchisor as opposed to operating solely as a franchisee.
Interest Expense. Interest expense was $9.6 million, or 4.2% of
restaurant sales, for the thirty-nine week period ended October 1, 1997 as
compared with $6.6 million, or 4.0% of restaurant sales, for the forty week
period ended October 2, 1996. The increase is the result of the increased level
of long-term debt associated with the 1996 acquisitions.
Income Tax Expense (Benefit). The Company recorded an income tax
benefit of approximately $271,000, an effective rate of 40%, for the thirty-nine
week period ended October 1, 1997 as compared with income tax expense of
approximately $1.2 million, an effective rate of 40%, for the forty week period
ended October 2, 1996.
Net Income (Loss). The Company recorded a net loss of approximately
$408,000 for the thirty-nine week period ended October 1, 1997 as compared with
net income of $1.2 million after the extraordinary item for the forty week
period ended October 2, 1996, as a result of the factors described above.
Liquidity and Capital Resources
The Company, and the restaurant industry generally, receives
substantially all of its revenues in cash with a relatively small amount of
receivables. Therefore, like many other companies in the restaurant industry,
the Company operates with a working capital deficit. The Company's working
capital deficit was $28.1 million at October 1, 1997 and $33.0 million at
January 1, 1997. The Company believes that it has funded the excessive working
capital deficit acquired in the Merger and that its current working capital
deficit is consistent with the working capital position of restaurant operators
of similar size. The Company anticipates that it will continue to operate with a
working capital deficit.
Over the past three quarters, the Company has converted ten non-Denny's
and non-Black-eyed Pea restaurants to the Denny's concept. In addition, during
1997 the Company has closed ten restaurants that were not achieving designated
cash flow requirements. The Company intends to continue to evaluate its existing
restaurant portfolio and to close or sell restaurants as appropriate. As
described above, the Denny's operating results have been negatively impacted by
same-store sales declines. The Company intends to pursue a strategy to lessen
its dependence on the Denny's brand and has identified certain geographic
markets where restaurants are available for disposition. Proceeds from such
dispositions will be used to retire debt and to reduce the working capital
deficit. As part of this strategy, in April 1997 the Company sold eleven
non-branded restaurants for cash and notes totaling $850,000, and in July 1997
the Company sold fourteen Denny's and two non-Denny's restaurants to an
unrelated party for $2.1 million. These transactions resulted in a gain of
$900,000, which has been included in the accompanying financial statements as a
reduction of other restaurant operating expenses.
14
<PAGE>
The Company intends to continue to expand the number of its Black-eyed
Pea restaurants in its core market through the development of new restaurants.
To date in 1997, the Company has opened four new Black-eyed Pea restaurants and
purchased six franchised restaurants located in Arizona, including the
associated development rights, and has entered into an agreement to purchase
three franchised restaurants located in Florida. The Company believes that the
Arizona market provides significant growth opportunities. These acquisitions are
a part of an overall settlement of threatened litigation by these franchisees.
Under the Arizona agreement, the Company will forego future royalty payments
from an additional thirteen franchise restaurants located in Colorado in
exchange for various releases and indemnifications. The loss of royalty income
will be partially offset by operating income from the restaurants acquired.
The Company historically has satisfied its capital requirements through
credit facilities and sale/leaseback financing. The Company requires capital
principally for the development of new restaurants and to fund the acquisition
and conversion of existing restaurants. Expenditures for property and equipment
and intangibles totaled approximately $2.5 million and $7.0 million for the
thirteen-week and thirty-nine week periods ended October 1, 1997, respectively.
The Company currently has commitments for approximately $40.0 million of
sale-leaseback financing through August 1998, which the Company believes will be
adequate to meet its financing needs during that period.
The Company believes that its future capital requirements will be
primarily for the development of new restaurants, for continued restaurant
acquisitions, and for conversion of restaurants to the Denny's or Black-eyed Pea
concepts. The Company estimates that its costs to develop and open new Denny's
and Black-eyed Pea restaurants, excluding real estate and building costs, will
be approximately $350,000 to $450,000 per restaurant, and that its costs
associated with the conversion of a non-branded restaurant to the Denny's
concept will be approximately $160,000 to $450,000 per restaurant.
The Company was not in compliance with certain of its debt covenants at
October 1, 1997, for which the Company has received waivers. In addition,
certain holders of the Series B Notes agreed to defer the interest due as of
September 30, 1997 until March 31, 1998.
Net cash provided by (used in) operating activities decreased from $3.7
million in the first forty-weeks of 1996 to ($1.6 million) in the first
thirty-nine weeks of 1997. This decrease is attributable to a reduction of
accounts payable, the payment of property taxes, and costs associated with the
closing and conversion of certain restaurants.
Net cash (used in) provided by investing activities increased from
($6.5 million) in the first forty-weeks of 1996 to $1.5 million in the first
thirty-nine weeks of 1997. This change primarily is attributable to the disposal
of approximately $5.2 million of various assets acquired in the BEP Acquisition.
Net cash provided by (used in) financing activities decreased from $2.8
million in the first forty-weeks of 1996 to ($1.5 million) in the first
thirty-nine weeks of 1997. Cash (used in) financing activities arose primarily
from the proceeds of borrowing activities, net of the principal reductions in
long-term debt.
15
<PAGE>
Seasonality
The Company's operating results fluctuate from quarter to quarter as a
result of the seasonal nature of the restaurant industry, the temporary closing
of existing restaurants for conversion, and other factors. The Company's
restaurant sales are generally greater in the second and third fiscal quarters
(April through September) than in the first and fourth fiscal quarters (October
through March). Occupancy and other operating costs, which remain relatively
constant, have a disproportionately negative effect on operating results during
quarters with lower restaurant sales. The Company's working capital requirements
also fluctuate seasonally, with its greatest needs occurring during its first
and fourth quarters.
Inflation
The Company does not believe that inflation has had a material effect
on operating results in past years. Although increases in labor, food or other
operating costs could adversely affect the Company's operations, the Company
generally has been able to modify its operating procedures or to increase prices
to offset increases in its operating costs.
New Accounting Standards
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
per Share", effective for both interim and annual periods ending after December
15, 1997. This statement specifies the computation, presentation and disclosure
of earnings per share for entities with publicly held common stock or potential
common stock. The Company will provide the required disclosures in its year-end
report. The effect on the Company's earning per share disclosure will not be
material for the periods presented.
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive
Income," which is effective for fiscal years beginning after December 31, 1997.
The statement changes the reporting of certain items currently reported in the
stockholders' equity section of the balance sheet and establishes standards for
reporting of comprehensive income and its components in a full set of general
purpose financial statements. The Company does not expect this standard to have
a material effect on the its financial statements.
In June 1997, the FASB also issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information," which is effective for
fiscal years beginning after December 31, 1997. This standard requires segments
of a business enterprise to be reported based on the way management organizes
and evaluates segments within the company. The standard also requires
disclosures regarding products and services, geographical areas and major
customers. The Company currently is evaluating the impact of this standard on
its disclosures.
The Company plans to adopt both SFAS No. 130 and No. 131 in 1998.
16
<PAGE>
Forward Looking Statements
This Report on Form 10-Q contains forward-looking statements, including
statements regarding the Company's business strategies, the Company's business,
and the industry in which the Company operates. These forward-looking statements
are based primarily on the Company's expectations and are subject to a number of
risks and uncertainties, some of which are beyond the Company's control. Actual
results could differ materially from the forward-looking statements as a result
of numerous factors, including those set forth in Item 1 - "Special
Considerations" in the Company's Annual Report on Form 10-K for the fiscal year
ended January 1, 1997.
17
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 24, 1997 the Company filed a lawsuit against Beck Holdings,
Inc. f/k/a/ BEP Holdings, Inc., and Unigate Holdings, N.V. (the "defendants") in
the United States District Court for the District of Arizona (Civil Action No.
CIV 97-1546 PHX RGS). The lawsuit alleged that the defendants breached a stock
purchase agreement and guaranty and violated Sections 10(b) and 20(a) and Rule
10b-5 of the Securities Exchange Act of 1934, as well as A.R.S. Sections 44-1991
et seq. (the Arizona securities fraud statute). The lawsuit also asserted common
law claims for breach of the implied covenant of good faith and fair dealing,
fraudulent misrepresentation and negligent misrepresentation. All of these
claims related to the Company's July 3, 1996 acquisition of the outstanding
capital stock of BEP and the defendants' failure to indemnify the Company in
connection with a settlement the Company reached in July 1997 with Arizona and
Colorado Black-eyed Pea restaurant franchisees. As part of the settlement with
these franshisees, the Company agreed to acquire six Arizona Black-eyed Pea
restaurants for a purchase price of $3.25 million. Other claims included in the
lawsuit involved alleged misrepresentations made by the defendants in connection
with the 1996 acquisition of BEP.
On September 30, 1997, the Company, BEP, and the defendants agreed to
settle this lawsuit. As part of the settlement, the Company has the option to
repurchase the promissory note issued to Beck Holdings, Inc. in connection with
the purchase of BEP (the "BEP Purchase Note") for approximately $13.0 million on
or before March 27, 1998. The BEP Purchase Note had an outstanding principal
amount of approximately $15.3 million as of September 30, 1997. In addition, the
common stock purchase warrant issued to Beck Holdings, Inc. was amended to
provide that (i) the warrant will not become exercisable until April 1, 1998,
and (ii) if any or all of the BEP Purchase Note is repaid on or before March 31,
1998, the warrant will be canceled pro rata based on the amount of the
outstanding principal that is repaid. As part of the settlement, the Company and
BEP on the one hand and the defendants on the other hand released one another
for any injury, damage, or loss arising directly or indirectly from the
Company's purchase of BEP, including claims that may be brought in the future by
past, present, or future Black-eyed Pea franchisees. The terms of the release do
not, however, relieve the defendants from their obligations to indemnify the
Company and BEP with respect to claims made by former Black-eyed Pea franchisees
whose status as a franchisee terminated prior to the Company's purchase of BEP.
On October 23, 1997, the court issued its final order dismissing the lawsuit
with prejudice.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
18
<PAGE>
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3.1A Articles of Amendment to the Articles of Incorporation of
DenAmerica Corp., as filed on July 2, 1997.
10.92.B Amendment and Limited Consent and Waiver dated as of September
30, 1997 among DenAmerica Corp., the Banks (as defined), and
Banque Paribas, as agent.
10.111 Loan and Security Agreement dated as of September 30, 1997 by
and among DenAmerica Corp., CNL Growth Corp., Midsouth Foods
I, Ltd., and Midsouth Foods II, Ltd.
10.112 5-Year 5% Convertible Redeemable Debenture dated September 30,
1997 in the principal amount of $4,400,000.
10.113 Subordinated Promissory Note dated September 30, 1997 in the
principal amount of $7,700,000.
10.114 Registration Rights Agreement dated as of September 30, 1997
between DenAmerica Corp., and CNL Growth Corp.
10.115 Agreement dated as of September 30, 1997 by and among
DenAmerica Corp., Beck Holdings, Inc. and Unigate Holdings,
NV.
11.1 Statement regarding computation of per share income
27.1 Summary Financial Information
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DENAMERICA CORP.
Dated: November 14, 1997 By: /s/ Todd S. Brown
------------------
Todd S. Brown
Vice President, Chief Financial Officer,
and Treasurer
(Duly authorized officer of the
registrant, principal financial
and accounting officer)
20
Secretary of State DOCKET NUMBER : 971830634
Corporations Division CONTROL NUMBER : 8918582
Suite 315, West Tower EFFECTIVE DATE : 07/02/1997
2 Martin Luther King Jr. Dr. REFERENCE : 0091
Atlanta, Georgia 30334-1530 PRINT DATE : 07/02/1997
FORM NUMBER : 111
CT CORPORATION SYSTEM
PATTIE HARDY
1201 PEACHTREE STREET, NE
ATLANTA, GA 30361
CERTIFICATE OF AMENDMENT
I, Lewis A. Massey, the Secretary of State and the Corporation Commissioner of
the State of Georgia, do hereby certify under the seal of my office that
DENAMERICA CORP.
A DOMESTIC PROFIT CORPORATION
has filed articles of amendment in the office of the Secretary of State and has
paid the required fees as provided by Title 14 of the Official Code of Georgia
Annotated. Attached hereto is a true and correct copy of said articles of
amendment.
WITNESS my hand and official seal in the City of Atlanta and the State of
Georgia on the date set forth above.
[SEAL]
STATE OF GEORGIA /s/ Lewis A. Massey
Lewis A. Massey
1776 Secretary of State
<PAGE>
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, 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.
<PAGE>
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:
(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
2
<PAGE>
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 June 26, 1997.
IN WITNESS WHEREOF, the Corporation has caused these Articles
of Amendment to be executed by a duly authorized officer on the 26th day of
June, 1997.
DENAMERICA CORP.
By: /s/ William J. Howard
---------------------------
Name: William J. Howard
-------------------------
Title: EVP & Secretary
------------------------
3
AMENDMENT AND LIMITED CONSENT AND WAIVER
----------------------------------------
This AMENDMENT AND LIMITED CONSENT AND WAIVER (this "Consent")
is entered into as of September 30, 1997 among DenAmerica Corp., a Georgia
corporation (the "Borrower"), the Banks (as hereinafter defined) and Banque
Paribas, as Agent.
RECITALS
--------
WHEREAS, the Borrower, certain financial institutions (the
"Banks") and the Agent are party to that certain Amended and Restated Credit
Agreement dated as of July 3, 1996, as modified by that certain Limited Consent,
dated as of April 16, 1997, as further modified by that certain Limited Consent,
dated as of June 30, 1997, as further modified by that certain Limited Consent,
dated as of July 31, 1997 and as further modified by that certain Limited
Waiver, dated as of August 21, 1997 (as further amended, supplemented or
modified hereby and as hereafter amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"); and
WHEREAS, the Borrower has requested that the Agent and the
Banks amend certain provisions of the Credit Agreement and certain other Loan
Documents and grant certain consents and waivers with respect to certain
provisions of the Credit Agreement, all as more fully described herein; and
WHEREAS, the Agent and the Banks have agreed to grant such
amendments, consents and waivers upon the terms and conditions set forth herein.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Definitions. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings assigned thereto in
the Credit Agreement.
<PAGE>
Section 2. Amendments to the Loan Documents. Subject to the
terms and conditions set forth herein, the Credit Agreement and each other Loan
Document is hereby amended as follows:
(a) Definitions. Each reference in the Credit
Agreement (including Section 1.1 of the Credit Agreement) and in each other Loan
Document (other than this Consent) to the terms "Delayed Draw Term Loan,"
"Delayed Draw Term Loan Commitment," "Delayed Draw Term Loan Commitment
Termination Date," "Delayed Draw Term Loan Maturity Date," "Delayed Draw Term
Note," and "Total Delayed Draw Term Loan Commitment," is hereby deleted in its
entirety and shall be of no further force or effect and, to the extent any such
term is used to calculate certain amounts or percentages in the Credit Agreement
or any other Loan Document, such term for the purpose of such calculation shall
be deemed to equal zero.
(b) Delayed Draw Facility. Section 2.3 of the Credit
Agreement is hereby deleted in its entirety and shall be of no further force or
effect.
(c) Olajuwon Associates, L.L.C.
(i) Section 1.1 of the Credit Agreement is hereby
amended by adding thereto in proper alphabetical order the following
definitions:
"Olajuwon Associates, L.L.C." shall mean the joint venture
between the Borrower and Olajuwon Holdings, Inc. formed upon
terms substantially similar to the terms described in Annex A
to that certain Amendment and Limited Consent and Waiver,
dated as of September 30, 1997 among the Borrower, the Agent
and the Banks and such additional terms as the Agent, in its
sole discretion, shall approve.
"Olajuwon Deferred Purchase Price" shall mean the preferred
return of $5,200,000 to be paid to the Borrower by Olajuwon
Associates, L.L.C. in connection with the Borrower's interest
in the Olajuwon Associates, L.L.C."
(ii) Section 2.13(a) of the Credit Agreement is
hereby amended by (A) deleting the period as it appears at the end
2
<PAGE>
of subsection (iii) thereof and replacing it with a semicolon and (B)
adding the following new subsection (iv):
"(iv) Notwithstanding anything to the contrary contained in
this Section 2.13(a), the Borrower shall be required to apply
the Net Sale Proceeds received in connection with the Olajuwon
Associates, L.L.C. as follows: first, to prepay the Term
Loans, in inverse order of maturity, together with all accrued
and unpaid interest thereon to and including the date of such
prepayment, in an amount not to exceed $11,000,000, second, to
prepay the outstanding principal amount of the Subordinated
Promissory Note until such Subordinated Promissory Note shall
have repaid in full, together with all accrued and unpaid
interest thereon and all other amounts outstanding thereunder,
third, to prepay the Term Loans, in inverse order of maturity,
until such Term Loans shall have been repaid in full, together
with all accrued and unpaid interest thereon to and including
the date of prepayment and fourth, to prepay the Revolving
Loans until such Revolving Loans shall have been repaid in
full, together with all accrued and unpaid interest thereon,
provided that any such payment of the outstanding principal
amount of the Re volving Loans shall be accompanied by an
equivalent and permanent reduction of the Revolving Loan
Commitment."
(iii) Section 7.4(b) of the Credit Agreement is
hereby amended by adding the words "(other than the Olajuwon
Associates, L.L.C.)" immediately after the word "venture" as it appears
at the end of subsection (iii) thereof.
(iv) Section 7.5 of the Credit Agreement is hereby
amended by (A) deleting the word "and" as it appears at the end of
subsection (f) thereof, (B) deleting the period as it appears at the
end of subsection (g) thereof and replacing such period with a
semicolon and the word "and" and (C) adding to such Section 7.5 the
following new subsections (h) and (i):
"(h) Asset Dispositions effected in connection with
sale/leaseback transactions permitted pursuant to Section
7.14.
3
<PAGE>
(i) Asset Dispositions effected in connection with the
Olajuwon Associates, L.L.C."
(v) Section 7.8 of the Credit Agreement is hereby
amended by (A) deleting the word "and" as it appears at the end of
subsection (i) thereof, (B) deleting the period as it appears at the
end of subsection (j) thereof and replacing such period with a
semicolon and the word "and" and (C) adding to such Section 7.8 the
following new subsection (k):
"(k) the equity interest of the Borrower in the Olajuwon
Associates, L.L.C. and the Olajuwon Deferred Purchase Price."
Section 3. Limited Consent. Subject to the terms and
conditions set forth herein, the Agent and the Banks, as of the date hereof,
hereby consent to the effect on only the following specified provisions with
respect to each of the following:
(a) CNL Joint Venture. Notwithstanding the terms and
conditions of Sections 7.4(b)(i) and (iii) and 7.8 and of the Credit Agreement,
the Borrower is hereby permitted to purchase the general partnership interest of
each of the following (each such purchase being collectively referred to herein
as the "CNL JV Purchase"), (i) Denwest Foods, Ltd., a Florida limited
partnership, representing 50% of the entire partnership interest in Denwest
Joint Venture, a Florida general partnership, (ii) Densouth Foods II, Ltd., a
Florida limited partnership, representing 50% of the entire partnership interest
in Densouth Restaurants II Joint Venture, a Florida general partnership and
(iii) Denwest Foods II, Ltd., a Florida limited partnership, representing 50% of
the entire partnership interest in Denwest II Joint Venture, a Florida general
partnership. The purchase price for the CNL JV Purchase shall be an amount not
to exceed $4,400,000, which principal amount shall be evidenced solely by the
CNL Subordinated Debenture (as hereinafter defined). As a condition to this
Consent, the Borrower hereby represents and covenants to the Agent and the Banks
that no additional liabilities (other than the CNL Subordinated Debenture) shall
be assumed by the Borrower as a result of the CNL JV Purchase.
(b) CNL Indebtedness and Equity. Notwithstanding the
terms and conditions of Sections 7.2 and 7.21 of the Credit Agreement, the
Borrower is hereby permitted to incur Indebtedness (i) in connection with the
CNL
4
<PAGE>
JV Purchase in a principal amount not to exceed $4,400,000, which Indebtedness
shall be evidenced by a 5-year convertible redeemable debenture, payable to the
order of CNL Growth Corp. ("CNL"), bearing interest at the rate of 5% per annum
and convertible into shares of the Borrower's common stock (the "CNL
Subordinated Debenture") and (ii) in connection with the CNL Fee Property
Financing (as hereinafter defined), in a principal amount not to exceed
$7,700,000, which Indebtedness shall be evidenced by a promissory note (the "CNL
Subordinated Note") payable to the order of CNL; provided, however, that in
each case, such Indebtedness shall be subordinated in a manner and pursuant to
subordination terms and other terms and conditions satisfactory to the Agent as
determined in its sole discretion.
(c) CNL Personal Property Disposition.
Notwithstanding the terms and conditions of Section 7.5(c) of the Credit
Agreement, the Borrower is hereby permitted to make Asset Dispositions of the
personal property owned by the joint ventures referred to in Section 3(a) hereof
to CNL American Properties Fund, Inc., a Maryland corporation ("CNL Maryland"),
for a sale price of not less than $1,400,000 in the aggregate, paid in
immediately available funds, provided that the proceeds of such sale are applied
in accordance with Sections 2.13(a) and 2.14 of the Credit Agreement.
(d) CNL Equipment Financing. Notwithstanding the
terms and conditions of Sections 7.2(f), 7.5(c)(i), (iv) and (v) and 7.14(i) of
the Credit Agreement, the Borrower is hereby permitted to sell to CNL Maryland
certain equipment owned by the Borrower and located at the properties identified
on Schedule 3(d) hereto (the "Equipment"), for a sale price of not less than
$10,850,000 in the aggregate, paid in immediately available funds, and the
simultaneous lease of such equipment back to the Borrower at its then fair
market value (such sale and leaseback of the Equipment being collectively
referred to herein as, the "CNL Equipment Financing"), provided that the
proceeds of such sale are applied in accordance with the terms of Section 3(i)
hereof. Subject to the consummation of the CNL Equipment Financing and solely
for the purpose of the sale of the Equipment in connection therewith, the Agent
hereby releases its security interest in the Equipment located on the real
properties identified on Schedule 3(d) hereto.
(e) Improvement Financing. Notwithstanding the terms
and conditions of Sections 7.5(c)(i), (iv) and (v), 7.13 and 7.14(i) of the
Credit Agreement, the Borrower is hereby permitted to sell to one or more
affiliates of CNL,
5
<PAGE>
certain buildings and other improvements owned by the Borrower and located on
the real properties identified on Schedule 3(e) hereto (the "BEP Improvement
Locations"), for a sale price of not less than $4,750,000 in the aggregate, paid
in immediately available funds, and the simultaneous lease of such buildings and
other improvements back to the Borrower or BEP at their then fair market value
(such sale and leaseback of the buildings and other improvements collectively
being referred to herein as, the "CNL Improvement Financing"), provided that the
proceeds of such sale are applied in accordance with the terms of Section 3(i)
hereof.
(f) Fee Property Financing. Notwithstanding the terms
and conditions of Sections 7.4(b)(i), 7.5(c)(i), (iv) and (v) and 7.13 of the
Credit Agreement, the Borrower is hereby permitted to (i) purchase the fee
interest and/or leasehold interest in each of the parcels of real property
listed on Schedule 3(f) hereto (the "CNL Fee Properties") for a purchase price
not to exceed $7,700,000, and (ii) sell the CNL Fee Properties identified as
parcels 1, 2, 3, 5, 6, 7, 9, 10 and 12 on Schedule 3(f) hereto to one or more
affiliates of CNL for a sale price of not less than $8,000,000 in the aggregate,
paid in immediately available funds, and the simultaneous lease of such
properties back to the Borrower at their then fair market value (such purchase,
sale and leaseback of the CNL Fee Properties being collectively referred to
herein as, the "CNL Fee Property Financing"), provided that the proceeds of such
sale are applied in accordance with the terms of Section 3(i) hereof.
(g) Liens. Notwithstanding the terms and conditions
of Section 7.3 of the Credit Agreement, the Borrower is hereby permitted to
grant Liens (i) on its interest in the CNL Fee Properties identified as parcels
1 through 12 on Schedule 3(f) hereto, solely for the purpose of securing its
obligations under the CNL Subordinated Debenture and the CNL Subordinated Note,
(ii) on its interest in the Equipment, pursuant to one or more leases entered
into by the Borrower in connection with the CNL Equipment Financing, but only to
the extent required by such leases, (iii) on the personal property owned by the
Borrower or BEP that is located at the BEP Improvement Locations, pursuant to
one or more leases entered into by the Borrower in connection with the CNL
Improvement Financing, but only to the extent required by such leases and (iv)
on the personal property owned by the Borrower that is located at the CNL Fee
Properties, pursuant to one or more leases entered into by the Borrower in
connection with the CNL Fee Property Financing, but only to the extent required
by such leases.
6
<PAGE>
(h) Certain Restrictions. Notwithstanding the terms
and conditions of Sections 7.12(b), (c) and (e) of the Credit Agreement, the
Borrower is hereby permitted to enter into, in connection with the CNL JV
Purchase, the CNL Equipment Financing, the CNL Improvement Financing and the CNL
Fee Property Financing, one or more agreements that restrict the Borrower's
ability to sell or otherwise dispose of its assets, to create Liens on its
property and to make Restricted Payments.
(i) Use of Proceeds from CNL Transactions.
Notwithstanding the terms and conditions of Sections 2.13(a) and 2.14 of the
Credit Agreement, the Borrower is hereby required to apply the Net Sale Proceeds
received in connection with the CNL Equipment Financing, the CNL Improvement
Financing and the CNL Fee Property Financing as follows: first, to pay the Term
Loan installment due on September 30, 1997 under the Credit Agreement (the
"September Installment"), second, to prepay the scheduled installments of
principal on the Term Loans, in inverse order of maturity, in a principal amount
equal to $17,000,000 (less the September Installment) and third, to prepay the
outstanding principal amount of the Revolving Loans in a principal amount equal
to approximately $7,500,000.
(j) GHS Franchise Acquisitions.
(i) Notwithstanding the terms and conditions
of Sections 7.4(b)(i)(D) and 7.19 of the Credit Agreement, BEP is
hereby permitted to purchase (A) the fee interest of G.H.S. Restaurant
Management, Inc., an Arizona corporation ("GHS") in the real property
identified as parcel 1 on Schedule 3(j) hereto, together with the
buildings and improvements (including, without limitation, any
restaurants) located on such property (the "GHS Real Property"), (B)
the fee interest of GHS in the buildings and improvements located on
the properties identified as parcels 2 through 6 on Schedule 3(j)
hereto (the "GHS Buildings"), (C) the leasehold interest of GHS in the
real property identified as parcels 2 through 6 on Schedule 3(j) hereto
(the "GHS Leasehold Interests") and (D) the interest of GHS in certain
other personal property located on or used in connection with the GHS
Real Property, the GHS Buildings and the GHS Leasehold Interests
(including, without limitation, the equipment located on each property
(the "GHS Equipment"), for an aggregate purchase price not to exceed
$3,250,000 (each such
7
<PAGE>
purchase collectively, being referred to herein as the "GHS Franchise
Acquisitions").
(ii) Notwithstanding the terms and
conditions of Sections 6.5, 7.5(c)(i), (iv) and (v), 7.13 of the Credit
Agreement, BEP is hereby permitted to sell the GHS Real Property, the
GHS Buildings (other than the property identified as parcel 4 on
Schedule 3(j) hereto) and the GHS Equipment to one or more affiliates
of CNL for a sale price of not less than $5,600,000 in the aggregate,
paid in immediately available funds, and the simultaneous lease of such
GHS Real Property, GHS Buildings and GHS Equipment back to the Borrower
at their then fair market value (such sale and leaseback being
collectively referred to herein as, the "GHS Financing"), provided that
the proceeds of such sale are applied in accordance with the terms of
Section 3(j)(iii) hereof. As a condition to this Consent, the Borrower
hereby represents and covenants to the Agent and the Banks that in
connection with the GHS Franchise Acquisitions the Borrower will
acquire all rights and interests necessary or desirable to operate the
properties as currently operated and that no additional liabilities
shall be assumed by the Borrower as a result of such acquisitions.
(iii) Notwithstanding the terms and
conditions of Sections 2.13(a) and 2.14 of the Credit Agreement, the
Borrower shall be required to cause BEP to use the Net Sale Proceeds
received in connection with the GHS Financing as follows: first to pay
the purchase price in connection with the FRG Franchise Acquisitions
(as hereinafter defined), in an amount not to exceed $1,500,000, second
to pay the purchase price in connection with the GHS Franchise
Acquisitions, in an amount not to exceed $3,250,000 and third, to
prepay the Revolving Loans in a principal amount equal to the Net Sale
Proceeds received in connection with the GHS Financing less amounts
paid pursuant to clauses first and second hereof.
(k) Colorado Franchise Termination. Notwithstanding
the terms and conditions of Sections 6.5 and 7.5(c) of the Credit Agreement, the
Borrower is hereby permitted to make Asset Dispositions consisting solely of an
assignment of the right, title and interest in and to the BEP trade name, trade-
8
<PAGE>
marks, trade dress and service marks solely in the State of Colorado, in each
case pursuant to the terms of an agreement substantially in the form of Exhibit
C hereto, which assignment includes the termination of royalty payments to be
paid to BEP pursuant to each of the Franchisor Agreements listed on Schedule
3(k) hereto (collectively, the "BEP Franchisor Agreements").
(l) FRG Franchise Acquisition. Notwithstanding the
terms and conditions of Sections 6.5, 7.4(b)(i)(D) and 7.19 of the Credit
Agreement, BEP is hereby permitted to purchase (A) the fee interest of Florida
Restaurant Group, Inc. ("FRG") in the buildings and improvements located on the
properties identified on Schedule 3(l) hereto (the "FRG Properties"), (B) the
leasehold interest of FRG in the FRG Properties and (C) the interest of FRG in
certain personal property located on or used in connection with the FRG
Properties for an aggregate purchase price not to exceed $1,500,000 (such
purchases collectively being referred to herein as the "FRG Franchise
Acquisitions"). As a condition to this Consent, the Borrower hereby represents
and covenants to the Agent and the Banks that in connection with the FRG
Franchise Acquisitions, BEP will acquire all rights and interests necessary or
desirable to operate the properties as currently operated and that no additional
liabilities shall be assumed by the Borrower or BEP as a result of such
acquisitions.
(m) Unigate Transactions.
(i) Notwithstanding the terms and conditions
of Sections 7.5(c) and 7.10(i) of the Credit Agreement, the Borrower is
hereby permitted to make Asset Dispositions consisting solely of (A)
the termination of the Guarantee Agreement, dated as of May 31, 1996 by
Unigate Holdings, NV in favor of the Borrower and the Borrower's rights
thereunder and (B) the waiver by the Borrower of its indemnification
rights under the Stock Purchase Agreement to the extent provided in the
Settlement Agreement and Release, dated as of September 30, 1997 among
the Borrower, BEP, Beck Holdings, Inc. and Unigate Holdings, NV.
(n) Put Agreement. Notwithstanding the terms and
conditions of Sections 7.2 and 7.6 of the Credit Agreement, the Borrower is
hereby permitted to enter into a certain substitution and put agreement pursuant
to which the Borrower is required to purchase the properties identified on
Schedule 3(n) hereto (collectively, the "Put Properties") upon the occurrence of
certain events
9
<PAGE>
described in such substitution and put agreement, provided that the Borrower has
the ability under such agreement to provide a comparable property in
substitution for any Put Property and provided, further, that the purchase price
for the Put Properties shall not exceed $4,000,000 in the aggregate.
(o) Security Documents. Notwithstanding the terms and
conditions of Sections 2.22(b), 2.22(c), 6.1(l) and 6.21 of the Credit
Agreement, the Borrower shall not be required to deliver to the Agent on the
date hereof (i) any Mortgages, Uniform Commercial Code financing statements,
fixture filings or any other document pursuant to which the Borrower grants to
the Agent a security interest in or lien on its interest in (A) the Equipment,
(B) the GHS Real Property, (B) the GHS Buildings, (C) the GHS Leasehold
Interests, (D) certain personal property located on or used in connection with
the GHS Real Property, the GHS Buildings and the GHS Leasehold Interests and (E)
the FRG Properties (such property collectively, the "Acquired Property"), or
pursuant to which any such security interest is perfected, (ii) any third party
consents relating to the granting of a security interest to the Agent in the
Acquired Property, or (iii) any filing with respect to any of the Acquired
Property consisting of intellectual property, provided that in each such case,
the Borrower is hereby required to deliver any and all documentation referred to
in clauses (i), (ii) and (iii) above within 90 days of the date hereof.
Section 4. Limited Waiver of Defaults or Events of Default.
Subject to the terms and conditions set forth herein, the Agent and the Banks,
as of the date hereof, hereby waive any Default or Event of Default that has
occurred as of the date hereof or that shall occur, solely as a result of any of
the following:
(a) Financial Covenants. The failure of the Borrower
to maintain the financial covenants set forth in Sections 7.1(b), 7.1(d) and
7.1(e) of the Credit Agreement to and including December 30, 1997.
(b) Notice of Default or Litigation. The failure of
the Borrower to give notice (prior to the date hereof) to the Agent, pursuant to
Sections 6.1(g)(ii), 6.1(g)(iv) and 6.1(g)(vi) of the Credit Agreement, within
one Business Day after an Authorized Officer obtained knowledge of (i) the
occurrence of a material default or event of default under any of the BEP
Franchisor Agreements that could reasonably be expected to have a Material
Adverse Effect, arising solely as a result of BEP's failure to comply with
certain filing requirements under applicable franchising laws and (ii) the
existence of any pending or threatened
10
<PAGE>
litigation against BEP that could reasonably be expected to have a Material
Adverse Effect, arising solely in connection with the BEP Franchisor Agreements.
(c) Compliance with Laws. The failure of BEP to
comply with all applicable laws pursuant to Section 6.6 of the Credit Agreement,
solely as a result of BEP's failure prior to the date hereof to comply with
certain filing requirements under applicable franchising laws with respect to
the BEP Franchises.
(d) Asset Dispositions. The failure of the Borrower
to comply with the terms and conditions of Sections 2.13(a) and 7.5(c) of the
Credit Agreement as a result of the Borrower's sale of its leasehold interest
in, and its interest in the equipment located on the premises of, 1905 Preston
Road, Plano, Texas.
Section 5. Conditions to Effectiveness of this Consent. The
effectiveness of this Consent is subject to the satisfaction of the following
conditions precedent:
(a) Consent. This Consent shall have been duly
executed and delivered by each of the parties hereto.
(b) Proceeds. The Banks shall have received proceeds
from the respective sales referred to herein in an aggregate principal amount of
at least $24,500,000, to be applied in accordance with the terms and conditions
hereof.
(c) Subordinated Promissory Note. The holder of the
Subordinated Promissory Note shall have effected an amendment substantially in
the form of Exhibit A hereto.
(d) Series B Documentation. The Agent shall have
approved the form and substance of an agreement (which agreement has been
requested by the Agent) to be executed by the Borrower and the holders of the
Series B Subordinated Notes, relating to the deferral of the payment to such
holders (other than $15,000 in the aggregate to Fred W. Martin and the Moffitt
Family Trust) due on September 30, 1997 until March 31, 1998.
(e) Settlement. The Borrower shall have effected a
settlement agreement in the form of Exhibit B hereto with respect its lawsuit
against
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<PAGE>
Beck Holdings, Inc. (formerly known as BEP Holdings, Inc.) and Unigate Holdings,
NV.
(f) Legal Opinion. The Agent shall have received a
legal opinion, dated the date hereof, from O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, counsel to the Borrower and its Subsidiaries, as to
the matters referred to in this Consent and such other matters as requested by
the Agent, which legal opinion shall be in form and substance satisfactory to
the Agent.
(g) Officer's Certificate. The Agent shall have
received a certificate of an Authorized Officer of the Borrower certifying as to
the matters set forth in Sections 6(a) and 6(b) of this Consent.
(h) Transaction Documentation. The Agent shall have
approved the form and substance of each of the definitive agreements to be
executed by the Borrower in connection with each of the transactions
contemplated by Section 3 of this Consent.
(i) Additional Matters. The Agent shall have received
such other certificates, opinions, documents and instruments relating to the
transactions contemplated hereby as may have been requested by the Agent or any
Bank, in each case, in form and substance satisfactory to the Agent.
Section 6. Representations and Warranties. The Borrower
represents and warrants to the Agent and the Banks, as of the date hereof, that
both before and after giving effect to this Consent:
(a) no Default or Event of Default (other than any
Default or Event of Default waived pursuant to the terms hereof) has occurred
and is continuing; and
(b) all of the representations and warranties
contained in the Credit Agreement and in the other Loan Documents (other than
those that expressly speak only as of a different date) are true and correct.
Section 7. Miscellaneous.
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<PAGE>
(a) Effect; Ratification. The amendments, consents
and waivers set forth herein are effective solely for the purposes set forth
herein and shall be limited precisely as written, and shall not be deemed to (i)
be a consent to any amendment, consent or modification of any other term or
condition of the Credit Agreement or of any other instrument or agreement
referred to therein; or (ii) prejudice any right or remedy which the Agent or
the Banks may now have or may have in the future under or in connection with the
Credit Agreement or any other instrument or agreement referred to therein. Each
reference in the Credit Agreement to "this Amended Credit Agreement", "herein",
"hereof" and words of like import and each reference in the other Loan Documents
to the "Agreement" or the "Credit Agreement" shall mean the Credit Agreement as
amended hereby. This Consent shall be construed in connection with and as part
of the Credit Agreement and all terms, conditions, representations, warranties,
covenants and agreements set forth in the Credit Agreement and each other
instrument or agreement referred to therein, except as herein amended or waived,
are hereby ratified and confirmed and shall remain in full force and effect.
(b) Loan Documents. This Consent is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.
(c) Costs, Fees and Expenses. The Borrower agrees to
pay all costs, fees and expenses (including the reasonable fees and expenses of
counsel to the Agent) incurred in connection with the preparation, execution and
delivery of this Consent as required pursuant to the Credit Agreement.
(d) Headings Descriptive. The headings of the several
Sections and Subsections of this Consent are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision or term
of this Consent.
(e) Counterparts. This Consent may be executed in any
number of counterparts, each such counterpart constituting an original and all
of which when taken together shall constitute one and the same instrument.
(f) Severability. Any provision contained in this
Consent that is held to be inoperative, unenforceable or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or
invalid without affecting the
13
<PAGE>
remaining provisions of this Consent in that jurisdiction or the operation,
enforceability or validity of such provision in any other jurisdiction.
(g) GOVERNING LAW. THIS CONSENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF ILLINOIS.
(h) WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL
RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR IN CONNECTION WITH THIS CONSENT OR ANY OTHER LOAN DOCUMENT OR ANY MATTER
ARISING HEREUNDER OR THEREUNDER.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Consent to be executed by their respective duly authorized officers as of the
date first written above.
DEN AMERICA CORP.
By: /s/ T S Brown
-------------------------------
Name: Todd Brown
Its: CFO
BANQUE PARIBAS,
individually and as Agent
By: /s/ Peter Toal
-------------------------------
Name: PETER TOAL
Its: MANAGING DIRECTOR
By: /s/ Clark C. King
-------------------------------
Name: CLARK C. KING III
Its: DIRECTOR
FIRST SOURCE FINANCIAL LLP
By First Source Financial, Inc.
Its Agent/Manager
By: /s/ James W. Wilson
-------------------------------
Name: James W. Wilson
Its: Senior Vice President
<PAGE>
LASALLE NATIONAL BANK
By: /s/ Mark E. McCauley
-------------------------------
Name: Mark E. McCauley
Its: S.V.P.
PILGRIM AMERICAN PRIME RATE
TRUST
By: /s/ Daniel A. Norman
-------------------------------
Name: DANIEL A. NORMAN
Its: SENIOR VICE PRESIDENT
KZH-SOLEIL CORPORATION
By: /s/ Virginia R. Conway
-------------------------------
Name: Virginia R. Conway
Its: Authorized Agent
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made and entered
into as of the 30th day of September, 1997, by and between DENAMERICA CORP., a
Georgia corporation, whose address is 7373 North Scottsdale Road, Suite D-120,
Scottsdale, Arizona 85253 ("Corporation"), CNL GROWTH CORP., a Florida
corporation ("Agent") whose address is 400 East South Street, Suite 500,
Orlando, Florida 32801, as Agent for CNL Income & Growth Fund, Ltd., a Florida
limited partnership ("Growth Fund I"), CNL Income & Growth Fund II, Ltd., a
Florida limited partnership ("Growth Fund II"), Denglass Restaurants Real Estate
Joint Venture, a Florida general partnership ("Denglass"), Denwest Foods, Ltd.,
a Florida limited partnership ("Denwest I") and Denwest Foods II, Ltd., a
Florida limited partnership ("Denwest II"), (hereinafter together referred to as
"Lenders"), MIDSOUTH FOODS I, LTD., a Florida limited partnership ("Midsouth I")
and MIDSOUTH FOODS II, LTD., a Florida limited partnership ("Midsouth II").
Background Information:
-----------------------
CNL Growth Fund I, CNL Growth Fund II and Denglass have agreed to sell,
and Corporation has agreed to buy, certain real property pursuant to the terms
of that certain Contract for Purchase and Sale of even date herewith, with title
to such real property to be transferred to Corporation's designee, CNL-BB Corp.,
a Florida corporation, at the closing.
Corporation has agreed to make and deliver to Agent, pursuant to the
terms of this Agreement, a promissory note in the principal amount of Seven
Million Seven Hundred Thousand and No/100 Dollars ($7,700,000) in payment of the
purchase price for such real property.
Denwest I has agreed to sell, and Corporation has agreed to buy,
Denwest I's fifty percent (50%) general partnership interest in Denwest Joint
Venture, a Florida general partnership.
Denwest II has agreed to sell, and Corporation has agreed to buy,
Denwest II's fifty percent (50%) general partnership interest in Denwest II
Joint Venture, a Florida general partnership.
Corporation has agreed to make and deliver to Agent, pursuant to the
terms of this Agreement, a convertible debenture in the principal amount of Four
Million Four Hundred Thousand and No/100 Dollars ($4,400,000.00) in payment of
the purchase price for the general partnership interests of Denwest I and
Denwest II.
Midsouth I and Midsouth II are Affiliates of Denwest I and Denwest II
and currently hold shares of the common stock of Corporation and are executing
this Agreement for the sole purpose of joining in certain covenants contained in
paragraph 18 and paragraph 19 below.
<PAGE>
As a condition of the purchase and sale of the real property and
general partnership interests referenced above, Agent has required and
Corporation has agreed that Corporation shall grant a security interest to Agent
in and to certain restaurant property interests of Corporation more particularly
described below.
NOW THEREFORE, for and in consideration of the mutual promises,
covenants and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Definitions. For purposes of the Loan Documents (as defined below),
the following definitions shall apply unless the context otherwise requires
(such definitions to be equally applicable to both the singular and plural forms
of the terms defined):
(a) "Affiliate" or "affiliate" means
(i) any Person owning, directly or indirectly, more
than ten percent (10%) of the issued and outstanding stock of, or more
than a ten percent (10%) beneficial interest in, any of Agent, Midsouth
I or Midsouth II;
(ii) any Person in which Agent, Midsouth I or
Midsouth II owns, directly or indirectly, more than ten percent (10%)
of the issued and outstanding stock or more than a ten percent (10%)
beneficial interest;
(iii) any affiliate of the Persons named above in (a)
and (b) above, meaning any Person that owns more than ten percent (10%)
of the issued and outstanding stock of, or more than a ten percent
(10%) beneficial interest in, either of the Persons described in (a) or
(b) above, or is owned by such Persons according to the same
thresholds; and
(iv) any agent, officer, director, employee, or
partner (or any member of the family of any agent, officer, director,
employee or partner) of Agent, or any of the Persons or affiliates of
Persons as described in (a), (b) or (c) above.
(b) "Agent" means CNL Growth Corp., a Florida corporation, and
its successors and assigns.
(c) "Agreement" means this Agreement (together with exhibits
and schedules referred to herein) as from time to time assigned,
supplemented or amended or as the terms hereof may be waived.
2
<PAGE>
(d) "Business Day" means any day, other than a Saturday,
Sunday or legal holiday, on which banks in the State of Florida are
open for business.
(e) "Collateral" has the meaning set forth in the paragraph 4
hereof.
(f) "Common Stock" has the meaning set forth in paragraph 3(a)
hereof.
(g) "Conversion Date" has the meaning set forth in paragraph
3(c) hereof.
(h) "Conversion Shares" has the meaning set forth in paragraph
3(b) hereof.
(i) "Corporation" means DenAmerica Corp., a Georgia
corporation, and its successors and assigns.
(j) "Debenture" has the meaning set forth in paragraph 2(a)
below.
(k) "Event of Default" has the meaning set forth in paragraph
12 hereof.
(l) "GAAP" means generally accepted accounting principles,
consistently applied.
(m) "Indebtedness" has the meaning set forth in paragraph 6(a)
hereof.
(n) "Lenders" has the meaning set forth in the preamble above.
(o) "Loan Documents" has the meaning set forth in paragraph
2(b) hereof.
(p) "Material Adverse Effect" means a material adverse effect
on any of the following: (i) the operations, business, assets,
properties or condition of Corporation, (ii) the ability of Corporation
to perform any of its obligations under the Loan Documents, (iii) the
legality, validity or enforceability of the Loan Documents, or (iv) the
rights and remedies of Agent under the Loan Documents.
(q) "Maturity Date" has the meaning set forth in paragraph
3(a) hereof.
(r) "Note" has the meaning set forth in paragraph 2(c) below.
3
<PAGE>
(s) "Person" means an individual, corporation, limited
liability company, partnership, firm, association, joint venture,
trust, unincorporated organization, government, governmental body,
agency, political subdivision or other entity.
(t) "Potential Default" means a condition or event which, with
notice or lapse of time or both, would constitute an Event of Default.
(u) "Real Property" has the meaning set forth in paragraph 4
below.
(v) "Registration Rights Agreement" has the meaning set forth
in paragraph 2(b).
(w) "Securities Act" means the Securities Act of 1933, as
amended, and the rules, regulations and interpretations thereunder.
(x) "Security Interest" means the security interests granted
by Corporation to Agent pursuant to paragraph 4 hereof.
(y) "Threshold Amount" has the meaning set forth in paragraph
8(b) hereof.
2. Issuance of Debenture and Note.
(a) Corporation agrees to issue, and of even date herewith has
issued, to Agent and, subject to the terms and conditions hereof and in reliance
upon the representations and warranties of Corporation contained herein or made
pursuant hereto, Agent agrees to accept from Corporation as payment for the sale
of the general partnership interests as described in the Background Information
above, a Debenture in the principal amount of Four Million Four Hundred Thousand
and No/100 Dollars ($4,400,000.00) (the "Debenture").
(b) Agent and each of the holders of any Conversion Shares
shall have certain registration rights set forth in a registration rights
agreement by and between Corporation and Agent of even date herewith (the
"Registration Rights Agreement"). This Agreement, the Debenture, the Note, the
Registration Rights Agreement and all other documents related thereto are
sometimes hereinafter referred to collectively as the "Loan Documents."
(c) Corporation agrees to issue, and of even date herewith has
issued, to Agent and, subject to the terms and conditions hereof and in reliance
upon the representations and warranties of Corporation contained herein or made
pursuant hereto, Agent agrees to accept from Corporation as payment for the sale
of
4
<PAGE>
the real property interests as described in the Background Information above, a
promissory note in the principal amount of Seven Million Seven Hundred Thousand
and No/100 Dollars ($7,700,000.00) (the "Note").
3. Conversion of the Debenture.
(a) At any time and from time to time during the period
commencing on the date hereof and ending on the date that is five years after
the date first written above (the "Maturity Date"), Agent may convert the entire
outstanding principal amount of the Debenture, or any portion thereof, into
fully paid and nonassessable shares of Corporation's $.10 par value per share
common stock ("Common Stock"), at the conversion rate provided for in paragraph
3(b) below. If Agent has not converted the entire principal amount of the
Debenture into Common Stock before the Maturity Date and, provided that no Event
of Default has occurred and continues to exist, then the entire remaining
principal balance then outstanding under the Debenture shall be converted into
Common Stock as of the Maturity Date. If an Event of Default has occurred and
continues to exist as of the Maturity Date, then the Maturity Date shall be
extended for forty five (45) days to allow Corporation an opportunity to cure
such Event of Default to the extent provided below.
(b) The number of shares of Common Stock that Agent shall
receive upon a conversion of all or a portion of the outstanding principal
amount of the Debenture (the "Conversion Shares") shall be determined by
dividing the principal amount being converted by ninety percent (90%) of the
fair market value of a share of Common Stock as of the Conversion Date. For
purposes of this paragraph 3(b), the fair market value of a share of Common
Stock shall be determined as follows:
(i) If the Common Stock is listed on a National
Securities Exchange or admitted to unlisted trading privileges on such exchange
or approved for quotation on the Nasdaq Stock Market, the fair market value
shall be the average per-share closing price for the ten (10) Business Days
immediately preceding the Conversion Date, on such exchange or market, as the
case may be, or if no sale of Common Stock is made on any of such days, the
average of the closing bid and asked prices for any such day on such exchange or
market, as the case may be, shall be used for the purposes of the calculation
provided for in this paragraph 3(b)(i); or
(ii) If the Common Stock is not so listed, admitted
to unlisted trading privileges or approved for quotation, the fair market value
shall be the average of the mean of the last reported bid and asked prices
reported by National Quotation Bureau, Inc. for the ten (10) Business Days
immediately preceding the Conversion Date; or
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(iii) If the Common Stock is not so listed, admitted
to unlisted trading privileges or approved for quotation and bid and asked
prices are not so reported, the fair market value of a share of Common Stock as
of the Conversion Date as determined by an investment banking firm selected by
Agent.
(c) To convert all of the remaining outstanding principal
amount of the Debenture, or any portion thereof, into Common Stock, Agent shall
provide a written notice to Corporation. Such written notice shall state the
name or names (with address) in which the certificate or certificates for shares
of Common Stock that shall be issuable on such conversion shall be issued as
well as the amount of the remaining outstanding principal amount of the
Debenture. Each conversion of a portion of the remaining outstanding principal
balance of the Debenture shall be deemed to have been made as of the date of
such written notice (the "Conversion Date"); provided, however, that if Agent
has not converted the Debenture as of the Maturity Date and no Event of Default
has occurred and is continuing as of such date, then the Maturity Date shall be
the Conversion Date.
(d) As promptly as practicable, but no later than twenty (20)
days after the Conversion Date, Corporation shall pay to Agent, by check, all
accrued and unpaid interest on the converted Debenture or any portion thereof
converted through the date of such payment, as well as the fair market value of
any fractional share as provided in paragraph 3(e) below.
(e) No fractional shares of, or scrip representing fractional
shares of, Common Stock shall be issued upon the conversion of any portion of
the remaining outstanding principal balance of the Debenture. Instead,
Corporation shall pay Agent an amount equal to the fair market value of such
fractional share of Common Stock in lieu of each fraction of a share otherwise
called for upon any conversion of a Debenture. For purposes of this paragraph
3(e), the fair market value of a share of Common Stock shall be determined as
provided in paragraph 3(b) above.
(f) At such time as the entire remaining principal amount
outstanding under the Debenture shall be paid in full or converted to Common
Stock, Agent shall surrender the Debenture, duly endorsed, at the principal
office of Corporation, or at such other place as Corporation may designate by
written notice to Agent.
4. Creation of Security Interest. To secure the performance and payment
of the obligations of Corporation under the Loan Documents, Corporation hereby
grants to Agent a present security interest in all of Corporation's right, title
and interest in and to all trade fixtures, furniture, furnishings, machinery,
equipment and other personal property, including, without limitation, those
items of personal property described on Exhibit A attached hereto
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and by this reference made a part hereof, which are presently existing or
located at or upon the real property described on Exhibit B attached hereto and
by this reference made a part hereof (the "Real Property") including, without
limitation, any and all rights of Corporation as a lessee of any such items of
personal property. Corporation also grants to Agent a security interest in all
of Corporation's right, title and interest in and to any of such items of
personal property located at or upon the Real Property acquired by Corporation
after the date hereof including, without limitation, any and all rights as a
lessee of any of such items of personal property. All of such interests of
Corporation in which Corporation has granted to Agent a security interest under
this paragraph 4, as well as the items of personal property as to which such
interests relate, are hereinafter referred to as the "Collateral."
5. Leasehold Mortgages. To further secure the performance and payment
of the obligations of Corporation under the Loan Documents, Corporation grants
to Agent a present security interest in its leasehold interests in the parcels
of real property and leased restaurant sites described on Exhibit B attached
hereto. Corporation and Agent shall enter into a separate Leasehold Mortgage for
each such parcel of real property substantially in the form attached hereto as
Exhibit C and each such Leasehold Mortgage shall be recorded or filed in the
appropriate public records to provide record notice to all third persons.
Notwithstanding any term or covenant of the Leasehold Mortgages to the contrary,
the following provisions shall apply thereto:
(a) in the event of any conflict or ambiguity between any
provision of the Leasehold Mortgage and the provisions of this Agreement and any
of the other Loan Documents, the provisions hereof and of the Loan Documents
other than the Leasehold Mortgages shall control;
(b) in the event of any conflict or ambiguity between any
provision of the Leasehold Mortgages and the rights of and obligations of the
Tenant to the landlord under any lease encumbered thereby (herein an "Encumbered
Lease"), the provisions of the Encumbered Lease shall control; and
(c) without limiting the generality of the foregoing, absent
an Event of Default hereunder the landlord's insurance requirements under the
Encumbered Leases shall supercede any greater amount required under the Loan
Documents, and the Agent shall consent to the application of insurance and
condemnation proceeds for reconstruction of the leased premises consistent with
the requirements of each Encumbered Lease.
So long as and under the condition that no Event of Default exists hereunder, or
any event which with the giving of notice or passage of time could constitute an
Event of Default, then upon and in the
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event of the bona fide sale of the Corporation's interest in any of the
restaurant sites subject hereto to an un-affiliated third party in an arm's
length transaction, the Leasehold Mortgage and all other security interests of
the Agent hereunder encumbering such restaurant site and personal property
located thereat shall be released. No release price shall be due, so long as the
Corporation pays any costs incurred by Agent in connection with any such
release.
6. Corporation's Obligations. The obligations of Corporation to Agent,
the performance and payment of which are secured by this Security Agreement are
as follows:
(a) Obligation to Pay Indebtedness. Corporation shall pay to
Agent the sum or sums evidenced by, and in accordance with the terms of the
Note, the Debenture and all of the other Loan Documents (the "Indebtedness").
(b) Compliance with Agreements. Corporation shall execute all
documents, perform all acts, do all things and pay all sums on Corporation's
part to be executed, performed, done and paid pursuant to the terms and
provisions of each and every one of the covenants and agreements on its part
made in the Loan Documents.
7. Right to Discharge Corporation's Obligations. Agent may, at its
option, discharge taxes, liens, public charges or security interests or other
encumbrances at any time levied or placed on the Collateral which are or may
become superior to the security interest herein granted if the same are not
promptly discharged by Corporation, may remedy or cure any default of
Corporation under the terms hereof (after written notice and opportunity to cure
as provided below) or under the terms of any lease, rental agreement or other
document which in any way pertains to or affects Corporation's title to or
interest in any of the Collateral if such default is not promptly remedied or
cured by Corporation, may pay for insurance on the Collateral if the insurance
premiums due on any insurance maintained by Corporation on the Collateral is not
promptly paid by Corporation, and may pay for the maintenance and preservation
of the Collateral if an Event of Default exists and is continuing, and
Corporation agrees to reimburse Agent, upon five (5) days prior written notice,
for any payment made or any expense incurred by Agent pursuant to the foregoing
authorization, which payments and expenses, together with interest thereon at
the lesser of fourteen percent (14%) per annum or the highest rate allowed by
law, and reasonable attorney fees incurred by Agent in connection therewith,
shall be secured by the security intended to be afforded by this Agreement.
8. Representations and Warranties of Corporation. Corporation hereby
makes the following representations and warranties as of the date hereof for the
benefit of Agent and hereby acknowledges that Agent is relying on the truth and
accuracy
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of such representations and warranties in entering into this Agreement:
(a) Corporate Existence Power and Authority.
(i) Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia,
and is duly qualified and authorized to do business and in good standing in each
other jurisdiction where the failure to be so qualified could reasonably be
expected to have a Material Adverse Effect.
(ii) No proceeding looking toward the dissolution or
merger of Corporation or the amendment of its Articles of Incorporation has been
commenced. Corporation is not in violation in any respect of its Articles of
Incorporation or Bylaws.
(iii) Corporation has all requisite corporate power,
authority and legal right to own or to hold under lease its properties and to
conduct its business as presently conducted.
(iv) Corporation has all requisite power, authority
and legal right to execute, deliver, enter into, consummate and perform each of
the Loan Documents including, without limitation, the issuance by Corporation of
the Note and the Debenture as contemplated herein. The execution, delivery and
performance of the Loan Documents (including, without limitation, the issuance
by Corporation of the Note and the Debenture as contemplated herein) have been
duly authorized by all required corporate and other actions. Corporation has
duly executed and delivered the Loan Documents, and the Loan Documents
constitute the legal, valid and binding obligations of Corporation, enforceable
in accordance with their terms, subject to the effect of any applicable
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
creditors' rights generally and subject to the effect of general principals of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
(b) Stock Ownership. The authorized Common Stock of
Corporation consists of 40,000,000 shares of such common stock, par value $.10
per share, of which 13,437,777 shares are presently issued and outstanding. All
of Corporation's issued and outstanding shares are duly authorized, validly
issued and fully paid and non-assessable. Except for the 13,437,777 shares of
Common Stock presently issued and outstanding, and except as set forth on
Schedule 8(b) attached hereto, Corporation has not issued any capital stock,
options, rights or convertible securities for an amount in excess of thirty
percent (30%) of Corporation's current market capitalization (the "Threshold
Amount"). Except in connection with the Debenture and except as set forth on
Schedule 8(b) attached hereto, Corporation is not a party to any agreements
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or commitments providing for the issuance, transfer, disposition or acquisition
of any of its capital stock in amounts in excess of the Threshold Amount.
(c) No Conflicts or Defaults.
(i) No Event of Default or Potential Default has
occurred and is continuing.
(ii) Corporation is not in violation or default in
any material respect under any material indenture, agreement or instrument to
which it is a party or by which it or its properties may be bound.
(iii) None of the execution, delivery or performance
by Corporation of the Loan Documents or any of the transactions contemplated
hereby or thereby (including, without limitation, the issuance of the Note and
the Debenture as contemplated herein) (i) violates or conflicts with or will
violate or conflict with, in any material respect, with or without the giving of
notice or the passage of time or both, any provision of (A) the Articles of
Incorporation or Bylaws of Corporation or (B) any law, rule, regulation, order,
judgment, writ, injunction, decree, agreement, indenture or other instrument
applicable to Corporation or any of its properties (or to which Corporation is a
party or by which its properties may be bound), (ii) results or will result in
the creation of any security interest or lien upon any of Corporation's
properties, assets or revenues, other than the Security Interest created
hereunder, (iii) requires or will require the consent, waiver, approval, order
or authorization of, or declaration, registration, qualification or filing with,
any Person (whether or not a governmental authority and including, without
limitation, any shareholder approval) except as disclosed on Schedule 8(c)(iii)
attached hereto, all of which will have been obtained or made prior to the date
of this Agreement, or (iv) except as set forth on Schedule 8(b) attached hereto,
causes or will cause anti-dilution clauses of any outstanding securities to
become operative.
(d) Litigation. Except as disclosed on Schedule 8(d) attached
hereto, there is no action, suit, proceeding, investigation or claim pending or,
to the knowledge of Corporation, threatened in law, equity or otherwise before
any court, administrative agency or arbitrator which either (i) questions the
validity of any of the Loan Documents or any action taken or to be taken
pursuant hereto or thereto, or (ii) could reasonably be expected to have a
Material Adverse Effect, or (iii) if adversely determined, could reasonably be
expected to have a Material Adverse Effect.
(e) Taxes. Corporation has filed all federal, state, local and
other tax returns and reports required to be filed by it except to the extent
that the failure to so file could not be
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reasonably expected to have a Material Adverse Effect. Corporation has paid or
caused to be paid all taxes (including interest and penalties) that are due and
payable, except those which are being contested by it in good faith by
appropriate proceedings and in respect of which adequate reserves are being
maintained on its books in accordance with GAAP, and except to the extent that
the failure to pay any such taxes could not reasonably be expected to have a
Material Adverse Effect. Corporation has no material liabilities for taxes other
than those incurred in the ordinary course of business and in respect of which
adequate reserves are being maintained by it in accordance with GAAP. No claims
against Corporation have been made or, to Corporation's knowledge, threatened by
the U.S. government or any other taxing agency, except such as have been paid.
(f) Legal Compliance.
(i) Corporation has, to its knowledge, complied in
all material respects with all applicable laws, rules, regulations, orders,
licenses, judgments, writs, injunctions, decrees or demands, except to the
extent that failure to so comply could not reasonably be expected to have a
Material Adverse Effect.
(ii) To Corporation's knowledge, there are no orders,
judgments, writs, injunctions, decrees or demands of any court or administrative
body, domestic or foreign, or of any other governmental agency or
instrumentality, domestic or foreign, outstanding against Corporation that could
reasonably be expected to have a Material Adverse Effect.
(g) Title to Collateral. Except as described on Schedule 8(g)
attached hereto, Corporation is the owner or lessor of the Collateral, free and
clear of all security interests or other encumbrances and claims of any kind or
nature in favor of any third person, other than the Security Interest.
(h) Use of Collateral. The Collateral is used, bought or
leased for use solely in business operations.
(i) Chief Executive Office. Corporation's chief
executive office and principal place of business is located at the
address set forth on the first page hereof.
(j) Properties. Certain real property used by Corporation in
the conduct of its business at the Restaurants is held under lease, and there is
no pending or, to the knowledge of Corporation, threatened claim or action by
any lessor of any such property to terminate any such lease that could
reasonably be expected to have a Material Adverse Effect.
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9. Affirmative Covenants. Corporation covenants and agrees that so long
as any portion of the principal of the Debenture remains outstanding it will do
all of the following:
(a) promptly pay and discharge all lawful taxes, assessments,
and governmental charges or levies imposed upon Corporation or upon its income
and profits, or upon any of its property (including the Collateral), before the
same shall become in default, as well as all lawful claims for labor, materials
and supplies which, if unpaid, might become a lien or charge upon such
properties or any part thereof; provided, however, that Corporation shall not be
required to pay and discharge any such tax, assessment, charge, levy or claim so
long as (a) the validity thereof shall be contested in good faith by appropriate
proceedings and Corporation shall set aside on its books adequate reserves with
respect to any such tax, assessment, charge, levy or claim so contested, and
(ii) the failure to pay could not reasonably be expected to have a Material
Adverse Effect;
(b) do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence, rights and franchises
and comply with all laws applicable to Corporation as its counsel may advise
except to the extent that the failure to keep any of such franchises in full
force and effect or to comply with such laws could not reasonably be expected to
have a Material Adverse Effect.
(c) at all times maintain, preserve, protect and keep its
property used or useful in the conduct of its business in good repair, working
order and condition, subject to ordinary wear and tear, and from time to time
make all needful and proper repairs, renewals, replacements, betterments and
improvements thereto, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times;
(d) at all times keep true and correct books, records and
accounts;
(e) maintain its corporate existence, rights and other
franchises in full force and effect; provided that Corporation may permit the
termination or abandonment of rights or other franchises if, in the reasonable
opinion of Corporation it is no longer in Corporation's best interests to
maintain such existence, rights or other franchises and such termination or
abandonment will not be prejudicial in any material respect to Agent;
(f) comply in all material respects with all applicable laws,
orders, rules, rulings, certificates, licenses, regulations, demands, judgments,
writs, injunctions and decrees; provided that such compliance shall not be
necessary so long as the failure to so comply could not reasonably be expected
to have a Material Adverse Effect;
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(g) defend the Collateral against the claims and demands of
all other persons and keep the Collateral free and clear from all security
interests, liens and other encumbrances and claims of any kind or nature in
favor of any third persons except for those listed on Schedule 8(g) attached
hereto and except for the Security Interest;
(h) keep in accordance with generally accepted accounting
principles, consistently applied, accurate and complete records concerning the
Collateral; mark such records and, upon reasonable prior written request of
Agent made from time to time, permit Agent or its agents to inspect the
Collateral and Corporation's records concerning the Collateral and to audit and
make abstracts of such records or any of Corporation's books, ledgers, reports,
correspondence and other records during normal business hours;
(i) notify Agent in writing at least thirty (30) days in
advance of any of the following: any change in Corporation's name; any change in
Corporation's address set forth on the first page hereof; any change in the
location, or of any additional locations, at which the Collateral is kept; any
change in the address at which records concerning the Collateral are kept; and
any change in the location of Corporation's chief executive office or principal
place of business;
(j) execute and deliver to Agent such financing statements and
other documents reasonably requested by Agent and take such other action as
Agent may reasonably deem advisable (i) to perfect, protect or continue the
perfection of the Security Interest including, without limitation, obtaining
appropriate landlord's and mortgagee's waivers, and (ii) to otherwise effect the
purposes of this Agreement;
(k) use the Collateral in the conduct of Corporation's
operation of restaurants at the Real Property, unless Agent consents in writing
to another use or to another location;
(l) keep the Collateral at all times insured against loss,
damage, theft and such other risks in such amounts, with such companies, under
such policies (the originals or certified copies of which, together with
renewals thereof and receipts evidencing the payment of the premium therefor,
shall be deposited with and held by Agent) in such form and for such periods as
shall be reasonably required by Agent, and each such policy shall provide for
not less than thirty (30) days prior written notice of expiration or
cancellation to Agent and shall further provide that the loss thereunder and the
proceeds payable thereunder shall be payable to Agent, pursuant to a
non-contributing loss payable clause, as Agent's interest may appear, and Agent
shall apply any proceeds of such insurance which may be received by Agent toward
the restoration, repair or replacement of the Collateral unless an
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Event of Default has occurred and is continuing in which event Agent, at its
option, may apply such proceeds toward the payment of Corporation's obligations
under the Note and the Debenture, whether due or not due, in such order as Agent
may determine;
(m) keep the Collateral located at the site of the Restaurants
where the Collateral is presently located, except for its temporary removal for
maintenance or repair in connection with its ordinary use or unless Corporation
notifies Agent in writing and Agent consents in writing in advance of its
removal to another location, except that Corporation shall be entitled to
dispose of such of the Collateral as may become unfit for continued use provided
Corporation replaces such unfit Collateral with fit Collateral of similar kind
and for like use and provided the purchase price of such replacement Collateral
be paid in full at the time of such replacement and provided that the security
interest and lien granted to Agent in this Security Agreement shall continue to
be effective upon and with respect to such replacement Collateral;
(n) retain the Collateral in its control, keep the Collateral
in good condition and repair and not use the Collateral in violation of any
provisions of this Agreement, of any applicable statute, rule, regulation or
ordinance, any order binding Corporation or of any policy of insurance insuring
the Collateral; and
(o) prevent the Collateral or any part thereof from being an
accession to other goods or property not covered by this Agreement.
10. Negative Covenants. Corporation further covenants and agrees that
it shall not take any of the following actions without the prior written consent
of Agent, which consent shall not be unreasonably withheld by Agent:
(a) amend or alter any provision of Corporation's Articles of
Incorporation in any way that could reasonably be expected to have a Material
Adverse Effect;
(b) change or alter the nature of Corporation's business or
any major business activity or the purpose of Corporation in any way that could
reasonably be expected to have a Material Adverse Effect, or divest any major
business activity or activities of Corporation unless all successor owners of
any such business activity shall guarantee the Indebtedness under instruments
reasonably acceptable to Agent;
(c) sell, lease, exchange or distribute all or any substantial
portion of the property and assets of Corporation unless any such successor
owner thereof shall guarantee the Indebtedness under instruments reasonably
acceptable to Agent;
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(d) undertake the dissolution of Corporation, any acquisition
of another entity for consideration paid by Corporation in excess of the
Threshold Amount, or any merger, consolidation, division, amalgamation of
Corporation or any spin-off, split-off or split-up by Corporation, unless any
and all successor entities of and to the Corporation shall guarantee the
Indebtedness under instruments reasonably acceptable to Agent;
(e) undertake any action in connection with Corporation's
appointment of a receiver, custodian, trustee or liquidator; admission of
inability to pay debts; assignment for the benefit of creditors; commencement of
any bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debt; or any action for the purposes of effecting the foregoing;
(f) except as provided under the release provisions of
paragraph 5 hereinabove, pledge, sell, transfer, assign, lease or otherwise
dispose of any of the Collateral or any interest therein or offer to do so
without the prior written consent of Agent, which consent shall not be
unreasonably withheld, or permit anything to be done that may impair the value
of any of the Collateral or the security intended to be afforded by this
Agreement;
(g) misuse, waste or allow the Collateral to deteriorate,
except for ordinary wear and tear resulting from its intended primary use; or
(h) use the Collateral in violation of any statute or
ordinance.
11. Replacement of the Debenture. Upon receipt by Corporation of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of the Debenture and, in the case of any such loss, theft or
destruction, upon delivery of an indemnity agreement or sufficient indemnity
bond reasonably satisfactory to Corporation (if requested by Corporation), or in
the case of any such mutilation, upon surrender and cancellation of the
Debenture, Corporation shall execute and deliver a new Debenture of like tenor
in lieu of such lost, stolen, destroyed or mutilated Debenture as if the lost,
stolen, destroyed or mutilated Debenture were then surrendered for exchange.
12. Default. If any of the following events (each herein called an
"Event of Default") shall occur and be continuing:
(a) If Corporation shall default in the payment of any part of
the principal of or accrued interest on the Note or the Debenture when the same
shall become due and payable, whether at maturity or by acceleration or
otherwise, and such default in the payment of principal or interest shall have
continued for ten (10) days after Corporation's receipt of written notice
thereof from Agent; or
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(b) If Corporation shall default in the performance of any
agreement or covenant in any of the Loan Documents and such default shall not
have been remedied within thirty (30) days after Corporation's receipt of
written notice thereof from Agent (provided that if such default cannot
reasonably be cured within such thirty (30) day period, then Borrower shall have
up to an additional thirty (30) days to cure such default as long as Borrower is
proceeding at all times with due diligence to cure such default); or
(c) If any representation or warranty by Corporation herein or
in any certificate delivered pursuant hereto shall prove to have been incorrect
in any material respect when made; or
(d) If a final judgment which, either alone or together with
other outstanding final judgments against Corporation, exceeds the Threshold
Amount shall be rendered against Corporation and such judgment shall have
continued undischarged or unstayed for thirty (30) days after entry thereof; or
(e) If Corporation shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts; or if a
receiver or trustee shall be appointed for Corporation or for substantially all
of its assets and, if appointed without its consent, such appointment is not
discharged or stayed within ninety (90) days; or if proceedings under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors are
instituted by or against Corporation, and, if contested by it, are not dismissed
or stayed within one hundred and twenty (120) days; or if any writ of attachment
or execution or any similar process is issued or levied against Corporation or
any significant part of its property and is not released, stayed, bonded or
vacated within ninety (90) days after its issue or levy; or if Corporation takes
corporate action in furtherance of any of the foregoing; or
then and in each such event Agent may at any time (unless all Events of Default
shall theretofore have been remedied) at its option, by written notice to
Corporation, declare the entire unpaid principal amount of the Note and/or the
Debenture to be due and payable, whereupon the same shall forthwith mature and
become due and payable, together with interest accrued thereon, without
presentment, demand, protest or further notice, all of which are hereby waived
and any obligation of Agent to convert the remaining outstanding principal
balance of the Debenture upon the Maturity Date shall terminate.
13. Remedies.
(a) In case any one or more Events of Default shall occur and
be continuing, Agent may proceed to protect and enforce its rights by an action
at law, suit in equity or other appropriate
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proceeding, whether for the specific performance of any agreement contained
herein or in any of the other Loan Documents, or for an injunction against a
violation of any of the terms hereof or thereof, or in aid of the exercise of
any power granted hereby or thereby or by law or for any other remedy
(including, without limitation, damages).
(b) Agent shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code as enacted in the State of
Florida and under any other applicable law from time to time in effect. Agent
shall also have any additional rights and remedies granted herein and in any
other agreement now or hereafter in effect between Corporation and Agent or
otherwise granted by law or equity. If requested by Agent, Corporation will
assemble the Collateral and make it available to Agent at a place to be
designated by Agent. All rights and remedies of Agent under this Agreement, the
Uniform Commercial Code, or otherwise shall be cumulative and exercisable
concurrently or consecutively or in the alternative, at Agent's option. Without
limiting the generality of the foregoing, Corporation expressly agrees that,
after an Event of Default and provided that Corporation has not cured such Event
of Default, Agent may (i) lawfully enter any premises where any Collateral may
be without judicial process and take possession of the Collateral, and (ii)
sell, lease or otherwise dispose of any or all of the Collateral.
(c) In case of a default in the payment of any principal or
interest on the Note or the Debenture, Corporation will pay to Agent thereof, in
addition to any principal and interest otherwise required, such further amount
as shall be sufficient to cover any and all costs and expenses of enforcement
and collection, including, without limitation, reasonable attorney fees,
expenses and disbursements. No course of dealing and no delay on the part of
Agent in exercising any rights or remedies shall operate as a waiver thereof or
otherwise prejudice such Agent's rights. No right or remedy conferred hereby or
by any of the other Loan Documents shall be exclusive of any other right or
remedy referred to herein or therein or available at law, in equity, by statute
or otherwise.
(d) Agent shall, in addition to other remedies provided by
law, have the right and remedy to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any breach or threatened breach of the provisions
of this Agreement will cause irreparable injury to Agent and that money damages
will not provide an adequate remedy. Nothing contained herein shall be construed
as prohibiting Agent from pursuing any other remedies available to it for such
breach or threatened breach, including the recovery of damages from Corporation.
14. Restrictions on Transfer. Agent agrees that it will not sell or
otherwise dispose of the Debenture unless (i) the Debenture
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has been registered under the Securities Act, or (ii) the Debenture is sold in
accordance with the applicable requirements and limitations of Rule 144 under
the Securities Act (or any successor rule, regulation or statute to Rule 144),
or (iii) Corporation has been furnished with an opinion or opinions reasonably
satisfactory to Corporation's counsel to the effect that registration under the
Securities Act is not required for the transfer as proposed (which opinion may
be conditioned upon the transferee's assuming the obligations of Agent under
this paragraph 14) or (iv) Corporation has been furnished with a letter from the
Division of Corporate Finance of the Securities Exchange Commission to the
effect that such Division would not recommend any action to the Securities
Exchange Commission if such proposed transfer were effected without a
registration statement effective under the Securities Act. Corporation agrees
that within ten (10) Business Days after receipt of any opinion referred to in
(iii) above, it will notify Agent whether such opinion is satisfactory to
Corporation. Agent will promptly give notice to Corporation of any transfer by
it of the Debenture.
15. Payments. Corporation shall make payments of principal and interest
on the Note and the Debenture by check or checks payable to the order of Agent
or other registered holder of the Debenture, directly or to the separate Lenders
in amounts designated by Agent, duly mailed or delivered to Agent at its address
as set forth on the first page hereof, or at such other address as Agent (or
Agent's successor or assign) may designate in writing, or, at the option of
Corporation, by wire transfer to the account(s) of such Person(s) at any bank or
trust company in the United States of America. All such payments shall be made
in lawful money of the United States of America.
16. Reservation of Shares. Corporation will at all times reserve for
issuance and delivery upon conversion of the Debenture all Conversion Shares.
All such Conversion Shares shall be duly authorized and, when issued upon such
conversion, shall be validly issued, fully paid and nonassessable and free of
all preemptive rights.
17. Redemption. Corporation may at any time prepay in whole or in part,
without any prepayment premium, penalty or fee whatsoever, the remaining
outstanding principal amount plus accrued interest to the date of prepayment of
the Debenture. Corporation shall give Agent at least thirty (30) days prior
written notice (the "Redemption Notice") specifying the date of redemption (the
"Redemption Date"). The portion of the remaining outstanding principal balance
of the Debenture that is the subject of the Redemption Notice shall become due
and payable on the Redemption Date specified in such notice and from and after
Agent's receipt of payment, interest on such Debenture shall cease to accrue.
After its receipt of a Redemption Notice hereunder, Agent may exercise its
conversion rights under paragraph 3 above as to any portion of
18
<PAGE>
the remaining outstanding principal amount of the Debenture including the
portion thereof to be redeemed by Corporation pursuant to the Redemption Notice.
18. Lock-Out Provisions. During the ninety (90) consecutive days after
Agent, Midsouth I or Midsouth II or any of their respective Affiliates sells any
Common Stock, Agent may not exercise its right to convert all or any portion of
the remaining outstanding principal amount of the Debenture pursuant to
paragraph 3 above. Furthermore, each of Agent, Midsouth I, Midsouth II and their
respective Affiliates agree not to sell any Common Stock during the ninety (90)
consecutive days immediately prior to the Maturity Date if any of the principal
amount of the Debenture (after reductions for all Conversion Notices given to
Corporation) remains outstanding. The provisions of this paragraph 18 above
shall be terminated and of no force or effect as of the date of any notice given
pursuant to paragraph 3(c) above to convert the entire remaining outstanding
principal balance of the Debenture.
19. Private Placement Rights.
(a) If any of Agent, Midsouth I, Midsouth II or any of their
respective Affiliates intends to sell any Common Stock, such Person (the
"Selling Shareholder") shall notify Corporation in writing of the intended sale
and the number of shares of Common Stock to be sold and, if applicable, any
agreed-upon price at which Selling Shareholder has offered to sell such shares.
For a period of five (5) Business Days after its receipt of such written notice,
Corporation shall have the right to redeem or privately place such Common Stock
at a sales price that is no less than the value of the fair market value of such
Common Stock on the notice date or specified price. If Corporation does not
privately place or release such Common Stock within such five (5) day period,
then the Selling Shareholder shall be free for a period of thirty (30) days
thereafter to sell such Common Stock .
(b) Any of Agent, Midsouth I, Midsouth II or any of their
respective Affiliates may not pledge any of their Common Stock unless the
pledgee of such Common Stock agrees in writing that if such pledgee ever intends
to sell such stock to recover amounts owed to such pledgee, then such pledgee
shall give written notice of such fact to Corporation and Corporation shall have
the right, for five (5) Business Days after its receipt of such notice, to
privately place such Common Stock at such Common Stock's fair market value on
the date of such private placement. Midsouth I and Midsouth II shall use good
faith efforts to obtain such an undertaking from any current pledgee of Common
Stock held by them, if any.
(c) For purposes of this paragraph 19, the fair market value
of Common Stock shall be the number of shares of Common Stock to be privately
placed multiplied by the fair market value of a
19
<PAGE>
share of Common Stock as determined under paragraph 3(b) above except that in
the case of paragraph 3(b)(i) such fair market value shall be the per-share
closing price on the day immediately prior to the private placement, and in the
case of paragraph 3(b)(ii) such fair market value shall be the mean of the last
reported bid and asked prices reported by the National Quotation Bureau, Inc. on
the day of the private placement.
20. Payment of Existing Debt. As described in the Background
Information hereinabove, Corporation has agreed to sell the real property
described in such Background Information to CNL-BB Corp, a Florida corporation.
Further, Corporation has agreed to sell the personal property previously owned
by the general partnerships described in the Background Information above to CNL
American Properties Fund, Inc., a Maryland corporation. Corporation hereby
covenants and agrees that it will use all of the proceeds of such sales (after
the payment of reasonable expenses of Corporation incurred in connection
therewith and in connection with certain related transactions as well as any and
all outstanding legal fees and costs of Corporation's legal counsel), to pay
down the outstanding balance of the loan to Corporation from the group of
lenders represented by Banque Paribas, a French corporation, as agent.
21. Notices. Unless otherwise expressly specified or permitted by the
terms hereof, all notices, requests, demands, consents and other communications
hereunder or with respect to any of the Loan Documents shall be in writing and
shall be delivered or shall be sent, postage prepaid, by registered or certified
U.S. mail, return receipt requested, or by reputable registered overnight
courier service, to the following addresses:
(a) If to Agent or its nominee, at its address as set forth on
the first page hereof, or at such other address as may have been furnished to
Corporation by such Agent in writing; or
(b) If to any other holder of the Debenture, at such address
as the payee or registered holder thereof shall have designated to Corporation
by a written notice stating that such holder has acquired the Debenture and
designating such address; or
(c) If to Corporation, at the address set forth on the first
page hereof or at such other address as may have been furnished in writing by
Corporation to Agent, with a copy to Jeffrey H. Verbin, Esquire, O'Conner
Cavanagh, Anderson, Killinsworth & Beshears, P.A., One East Camelback Road,
Suite 1100, Phoenix, Arizona 85012-1656.
Whenever any notice is required to be given hereunder, such
notice shall be deemed received (if not sooner actually received) three (3) days
after being placed in the U.S. mail or the
20
<PAGE>
day after being delivered to a reputable registered overnight courier service.
22. Miscellaneous.
(a) Notice. Corporation agrees that any notice by Agent of the
sale, lease or other disposition of the Collateral or any other intended action
hereunder, whether required by the Uniform Commercial Code or otherwise, shall
constitute reasonable notice to Corporation if the notice is provided in the
manner set forth in paragraph 21 hereof at least ten (10) days before the date
of any public sale, lease or other disposition of the Collateral, or the time
after which any private sale, lease or other disposition of the Collateral is to
take place.
(b) Perfection of Security Interests. Corporation agrees to
cooperate with Agent as to the execution and filing of any financing statement
or statements relating to the Collateral (with or without Corporation's
signature thereon), and to take any other action deemed necessary or appropriate
by Agent to perfect and to continue perfection of the Security Interest.
(c) Right to Proceeds. After an Event of Default and provided
that Corporation has not cured such Event of Default, Agent may demand, collect,
and sue for all proceeds of the Collateral (either in Corporation's or Agent's
name at the latter's option) with the right to enforce, compromise, settle, or
satisfy any claim and, in connection therewith, Corporation hereby irrevocably
appoints Agent as Corporation's attorney-in-fact to endorse, by writing or
stamp, Corporation's name on all checks, commercial paper, and other instruments
pertaining to the proceeds. Such appointment is binding and coupled with an
interest. After an Event of Default and provided that Corporation has not cured
such Event of Default, Corporation also authorizes Agent to collect and apply
against the Indebtedness any refund of insurance premiums or any insurance
proceeds payable on account of the loss of or damage to any of the Collateral
and hereby irrevocably appoints Agent as Corporation's attorney-in-fact to
endorse, by writing or stamp, any check or draft representing such proceeds or
refund. Such appointment is binding and coupled with an interest. After an Event
of Default and provided that Corporation has not cured such Event of Default,
Agent may notify any party obligated to pay proceeds of the Collateral of the
existence of the Security Interest and may also direct them to pay all such
proceeds to Agent.
(d) Confidentiality. Agent shall not disclose, divulge or
communicate any financial information of Corporation received by Agent from
Corporation under the terms of this Agreement to any other person or persons
(other than Agent's officers, directors, employees, agents, legal counsel and
affiliates), except as may be required by law.
21
<PAGE>
(e) Entire Agreement. The Loan Documents contain the entire
agreement among Agent and Corporation with respect to the indebtedness
represented by the Note and the Debenture, and supersede any prior oral or
written agreements, commitments, terms or understandings, regarding the subject
matter hereof.
(f) Survival. All agreements, representations and warranties
contained in the Loan Documents shall survive, and shall continue in effect
following, the execution and delivery of the Loan Documents, any investigation
at any time made by Agent or on its behalf or by any other Person, and the
issuance, sale and delivery of the Debenture and any disposition thereof;
provided, however, that such agreements (including, without limitation, the
security agreement contained herein), representations and warranties will
terminate upon Corporation's full payment of all amounts due to Agent under the
Loan Documents. All statements contained in any certificate or other document
delivered by or on behalf of Corporation pursuant hereto shall constitute
representations and warranties by Corporation hereunder.
(g) Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument, and all signatures need not appear on
any one counterpart.
(h) Headings. The headings and captions in this Agreement are
for convenience of reference only and shall not define, limit or otherwise
affect any of the terms or provisions hereof.
(i) Binding Effect and Assignment. The terms of this Agreement
shall be binding upon, and inure to the benefit of, the parties and their
respective successors and assigns whether so expressed or not. Corporation may
not assign any of its obligations, duties or rights under this Agreement, or
under any of the other Loan Documents. In addition to any assignment by
operation of law, except as otherwise set forth in this Agreement and the other
Loan Documents, Agent may assign, in whole or in part, any or all of its rights
under this Agreement or under the Debenture issued hereunder to any Person and
any such assignment shall not diminish the rights such Agent would otherwise
have under this Agreement or with respect to any remaining Debenture held by it.
(j) Severability. Any provision hereof or of the Note or the
Debenture issued hereunder which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or thereof, and any such prohibition or unenforceability in
any jurisdiction shall not
22
<PAGE>
invalidate or render unenforceable such provision in any other jurisdiction.
(k) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Florida (other than any
conflict of laws rule which might result in the application of the laws of any
other jurisdiction).
(l) Jurisdiction and Venue.
(i) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any Florida court or federal court of the United States of
America sitting in Orlando, Florida, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to any of the Loan
Documents, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any such
Florida court or, to the extent permitted by law, in such federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
(ii) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection that it may now or hereafter have to the laying of venue or
any suit, action or proceeding arising out of or relating to any of the Loan
Documents in any Florida State or federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(iii) Each of the parties hereto hereby irrevocably
waives all right to trial by jury in any action, proceeding or counterclaim
(whether based on contract, tort or otherwise) arising out of or relating to any
of the Loan Documents or the actions of the Agent in the negotiation,
administration, performance or enforcement thereof.
23
<PAGE>
IN WITNESS WHEREOF, the parties have caused these presents to be
executed as of the day and year first above written.
DENAMERICA CORP., a Georgia
corporation
By: /s/ Robert J. Gentz
----------------------------
Name: Robert J. Gentz
--------------------------
Title: SR VICE PRESIDENT
-------------------------
(CORPORATE SEAL)
"Corporation"
CNL GROWTH CORP., a Florida
corporation
By:____________________________
Name:__________________________
Title:_________________________
(CORPORATE SEAL)
"Agent"
MIDSOUTH FOODS I, LTD., a
Florida limited partnership
By: CNL Growth Partners, Inc.,
a Florida corporation,
General Partner
By:________________________
Name:______________________
Title:_____________________
(CORPORATE SEAL)
"Midsouth I"
24
<PAGE>
MIDSOUTH FOODS II, LTD., a
Florida limited partnership
By: CNL Growth Partners, Inc.,
a Florida corporation,
General Partner
By:________________________
Name:______________________
Title:_____________________
(CORPORATE SEAL)
"Midsouth II"
25
THIS DEBENTURE IS SUBJECT TO THE PROVISIONS OF THE CNL/PARIBAS INTERCREDITOR
AGREEMENT OF EVEN DATE HEREWITH BETWEEN BANQUE PARIBAS, AS AGENT, AND THE HOLDER
OF THIS DEBENTURE.
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND IS
NOT TRANSFERABLE EXCEPT UPON THE CONDITIONS SPECIFIED IN SECTION 14 OF THE LOAN
AND SECURITY AGREEMENT REFERRED TO HEREIN.
DENAMERICA CORP.
Scottsdale, Arizona
September 30, 1997
5-YEAR 5% CONVERTIBLE REDEEMABLE DEBENTURE
DENAMERICA CORP., a Georgia corporation (the "Corporation"), whose
address is 7373 North Scottsdale Road, Suite D-120, Scottsdale, Arizona 85253,
for value received, promises to pay to the order of CNL GROWTH CORP., a Florida
corporation, as agent for Denwest Foods, Ltd, a Florida limited partnership, and
Denwest Foods II, Ltd., a Florida limited partnership, or registered assigns,
the principal sum of FOUR MILLION FOUR HUNDRED THOUSAND AND NO/100 DOLLARS
($4,400,000.00), and to pay interest on such principal sum at the rate of five
percent (5%) per annum quarterly on the 30th day of December, March, June and
September of each year, computed from the date first written above.
This Debenture is being delivered pursuant to that certain Loan and
Security Agreement entered into as of the 30th day of September, 1997 (the "Loan
and Security Agreement"), by and between DenAmerica Corp., a Georgia
corporation; CNL Growth Corp., a Florida corporation, as agent for CNL Income &
Growth Fund, Ltd., a Florida limited partnership, CNL Income & Growth Fund II,
Ltd., a Florida limited partnership, Denglass Restaurants Real Estate Joint
Venture, a Florida general partnership, Denwest Foods, Ltd., a Florida limited
partnership, and Denwest Foods II, Ltd., a Florida limited partnership; MidSouth
Foods, I, Ltd., a Florida limited partnership; and MidSouth Foods II, Ltd., a
Florida limited partnership.
If any payment of interest due hereunder becomes due and payable on a
day which is not a Business Day (as defined in the Loan and Security Agreement),
the due date thereof shall be the next preceding day which is a Business Day,
and the interest payable on such next preceding Business Day shall be the
interest which would otherwise have been payable on the due date which was not a
Business Day.
<PAGE>
Payments of principal and interest shall be made in lawful money of the
United States of America at 400 East South Street, Suite 500, Orlando, Florida
32801, or at such other place as the holder hereof shall have designated for
such purpose to the Corporation in writing, and may be paid by check mailed, or
shall be made by wire transfer, all as provided in the Loan and Security
Agreement, to the address or account designated by the holder hereof for such
purpose.
The Corporation and the holder of this Debenture are subject to the
provisions of, and are entitled to the benefits of, the Loan and Security
Agreement. In addition, this Debenture is transferable only upon the terms and
conditions specified in the Loan and Security Agreement.
In case an Event of Default (as defined in the Loan and Security
Agreement) shall occur and be continuing, the principal of this Debenture may be
declared due and payable in the manner and with the effect provided in the Loan
and Security Agreement.
No reference herein to the Loan and Security Agreement and no provision
hereof or thereof shall alter or impair the obligation of the Corporation, which
is absolute and unconditional, to pay the principal hereof and interest hereon
at the respective times and places specified herein and in the Loan and Security
Agreement.
This Debenture shall be construed and enforced in accordance with and
governed by the laws of the State of Florida (other than any conflict of laws
rules which might result in the application of the laws of any other
jurisdiction).
IN WITNESS WHEREOF, a duly authorized officer of the Corporation has
executed this Debenture as of the date first written above.
DENAMERICA CORP., a Georgia
corporation
By: /s/ Robert J. Gentz
----------------------------
Name: Robert J. Gentz
--------------------------
Title: Sr. Vice President
-------------------------
2
<PAGE>
STATE OF ARIZONA
COUNTY OF Maricopa
The foregoing instrument was acknowledged before me this 30th day of
September, 1997, by Robert J. Gentz, as the Sr. vice President of DENAMERICA
CORP., a Georgia corporation, on behalf of the corporation, who is personally
known to me or has produced Florida DL # G532-770-49-415-0 as identification.
/s/ Nancy G. Houston
-----------------------------------
(NOTARY SEAL) Notary Public, State of Arizona
Name: Nancy G. Houston
OFFICIAL SEAL Notary Commission No. _____________
NANCY G. HOUSTON My Commission Expires: 7-20-2000
NOTARY PUBLIC - STATE OF ARIZONA
MARICOPA COUNTY
My Comm. Expires 7/20/00
3
PROMISSORY NOTE
(SUBORDINATED)
$7,700,000.00 Scottsdale, Arizona
September 30, 1997
FOR VALUE RECEIVED, the undersigned, DENAMERICA CORP., a Georgia
corporation ("Borrower"), whose address is 7373 North Scottsdale Road, Suite
D-120, Scottsdale, Arizona 85253 promises to pay to the order of CNL GROWTH
CORP., a Florida corporation, as agent for CNL Income & Growth Fund, Ltd., a
Florida limited partnership, CNL Income & Growth Fund II, Ltd., a Florida
limited partnership, and Denglass Restaurants Real Estate Joint Venture, a
Florida general partnership, (hereinafter referred to in such capacity as
"Agent") whose address is 400 E. South Street, Suite 500, Orlando, Florida
32801, the principal sum of Seven Million Seven Hundred Thousand and No/100
Dollars ($7,700,000.00), together with interest at the rate of nine percent (9%)
per annum on the principal balance from time to time remaining unpaid from the
date first written above in lawful money of the United States of America which
shall be legal tender in payment of all debts at the time of payment; said
principal and interest to be paid over a term, at the times, and in the
following manner:
Borrower shall make forty (40) equal consecutive quarterly payments of
principal and interest in the amount of Two Hundred Ninety-Three
Thousand Nine-Hundred Sixty-Five and 82/100 Dollars ($293,965.82) which
shall be due and payable on the 30th day of December, March, June and
September commencing on December 30, 1997 and continuing through and
including September 30, 2007.
Both principal and interest hereunder shall be payable at the offices
of Agent at 400 E. South Street, Suite 500, Orlando, Florida 32801 or at such
other place, either within or without the State of Florida, as Agent may from
time to time designate.
Borrower may prepay this Note in whole or in part at any time without
any prepayment premium, penalty or fee whatsoever. Prepayments will be applied
to the principal balance of the loan in inverse order of maturity.
If any payment is not made within ten (10) days after the due date
hereunder, whether at its stated maturity, by acceleration or otherwise,
Borrower shall pay to Agent on demand a late charge equal to two percent (2%) of
the amount of such delinquent payment plus interest on the principal amount of
such delinquent payment from the day when due until the day when paid at the
lesser of fourteen percent (14%) per annum or the highest rate allowed by law.
All payments made hereunder shall at Agent's option be applied first to
late charges and other charges due hereunder and under the Loan and Security
Agreement of even date herewith, then to interest and then to principal.
<PAGE>
In no event shall the amount of interest due or payment in the nature
of interest payable hereunder exceed the maximum rate of interest allowed by
applicable law, as amended from time to time, and in the event any such payment
is paid by Borrower or received by Agent, then such excess sum shall be credited
as a payment of principal, unless Borrower shall notify Agent, in writing, that
Borrower elects to have such excess sum returned to it forthwith.
This Note is secured by a Loan and Security Agreement, UCC-1 Financing
Statements, Leasehold Mortgages and other loan documents executed by Borrower,
all of even date herewith, encumbering certain assets of Borrower, more
particularly described therein (the "Loan Documents"). The Loan Documents set
forth terms and provisions which may constitute grounds for acceleration of the
indebtedness represented by this Note, and additional remedies in the event of
default hereunder.
If default be made in the payment of any of the sums or interest
mentioned herein or in the Loan Documents, which default is not cured within ten
(10) days after Borrower's receipt of written notice of same from Agent, or if
default be made in the performance of or compliance with any of the covenants
and conditions contained herein or in the Loan Documents, which default is not
cured within thirty (30) days after Borrower's receipt of written notice of same
from Agent (provided that if such default cannot reasonably be cured within such
thirty (30) day period, then Borrower shall have up to an additional thirty (30)
days to cure such default as long as Borrower is proceeding at all times with
due diligence to cure such default), then in any or all of such events, at the
option of Agent, the entire amount of principal of this Note, together with all
interest then accrued, shall become and be immediately due and payable, without
further notice or demand of any kind. In addition, upon the occurrence of any
such default, Agent shall have all other rights and remedies existing in Agent's
favor at law or in equity. The rights and remedies of Agent as provided herein,
and at law and in equity, shall be cumulative and concurrent, and may be pursued
singularly, successively or together, at the sole discretion of Agent. Failure
on the part of Agent to exercise any right granted herein or in the Loan
Documents shall not constitute a waiver of such right or preclude the subsequent
exercise thereof.
No payment shall be made on account of principal, interest, late or
other charges hereunder upon the final maturity of all of the Senior
Indebtedness (as hereinafter defined) by lapse of time, acceleration, demand or
otherwise, resulting from an Event of Default under Sections 8.1(a) or 8.1(e) of
the Credit Agreement (as hereinafter defined), unless and until all amounts
thereof and interest thereon shall first be paid in full. The "Senior
Indebtedness" shall mean all "Obligations" payable by Borrower as such term is
defined in that certain Credit Agreement dated as of February 29, 1996 (as
amended, modified, supplemented or restated from time to time, the "Credit
Agreement") among Borrower, the banks party thereto from time to time
(collectively, the "Banks") and Banque Paribas, as agent for the Banks (together
with its successors in such capacity under the Credit Agreement, the "Senior
Agent"). Borrower and Agent intend for the Banks and Senior Agent to be
third-party
2
<PAGE>
beneficiaries of the subordination provisions contained in this paragraph. The
subordination provisions contained in this paragraph shall not be amended
without the prior written consent of Senior Agent.
In the event this Note is placed in the hands of any attorney for
collection, or in case Agent shall become a party either as plaintiff or as
defendant in any suit or legal proceeding in relation to the property described
or the lien created in the Loan Documents, or for the recovery or protection of
the indebtedness represented by this Note, or the property given as security
therefor, Borrower will repay, on demand, all costs and expenses arising
therefrom including, without limitation, reasonable attorney fees, together with
all attorney fees, costs and expenses incurred by Agent in connection with any
such proceeding including, but not limited to, any bankruptcy proceeding
involving any person liable hereunder or any person who might now have or
hereafter acquire a record interest or other interest in the mortgaged property,
whether or not there exists any default hereunder, including by way of example,
but without limitation, all attorney fees, costs, and expenses incurred in
connection with motions for relief from the automatic stay and adequate
protection, proofs of claim and objections thereto, motions to dismiss or
convert bankruptcy cases, approval of disclosure statements and objections
thereto, confirmation of plans of reorganization and objections thereto,
litigation involving preference and other avoidance powers, motions to value
collateral, objections to the sale or use of collateral, and any and all other
matters pertaining to any bankruptcy case affecting this Note, the Loan
Documents or the enforcement thereof, together with interest on such costs and
expenses until paid at the lesser of fourteen percent (14%) per annum or the
highest rate allowed by law.
The maker, endorsers and guarantors hereof, if any, and all others who
may be or become liable for all or any part of the obligation represented by
this Note, severally waive presentment and demand for payment, dishonor, notice
of dishonor, protest, notice of protest and non-payment, and consent to any
number of renewals or extensions of time of payment hereof, except as otherwise
may be provided in this Note or in the Loan and Security Agreement between the
parties of even date herewith. Any such renewals or extensions of time may be
made without notice to any of said parties and without affecting their
liability. In addition, each maker, endorser, or guarantor and all others who
may be or become liable for all or any part of the obligation represented by
this Note agree that Agent may without notice, and without regard to the
consideration, if any, paid therefor, release or substitute any part of the
property given as security for the repayment of the indebtedness represented
hereby without releasing any other property given as security for such
indebtedness or may release any person liable for the repayment of the
indebtedness represented hereby without releasing any other person obligated on
or for the repayment of the indebtedness represented by this Note.
If and whenever this Note shall be assigned and transferred, or
negotiated, the holder hereof shall be deemed "Agent" for all purposes under
this Note.
3
<PAGE>
In any suit, action or proceeding concerning the rights and obligations
created hereunder, the prevailing party shall recover its costs (including
attorney fees at all levels of proceedings) from the non-prevailing party.
The loan evidenced hereby has been made, and the obligations of
Borrower hereunder are to be performed, in the State of Florida and this Note
shall be governed by and construed under the laws of such state. Borrower hereby
agrees that the jurisdiction and venue of any action at law or in equity in
connection with this Note may lie in a court of competent jurisdiction in and
for Orange County, Florida and Borrower hereby irrevocably and unconditionally
submits to the nonexclusive jurisdiction of any Florida court or federal court
of the United States of America sitting in Orlando, Florida, and any related
appellate court, and hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such an
action in any such court.
Wherever possible each provision of this Note shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited by or be invalid under such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Note.
DENAMERICA CORP., a Georgia
corporation
By: /s/ Robert J. Gentz
----------------------------
Name: Robert J. Gentz
--------------------------
Title: Sr. Vice President
-------------------------
STATE OF ARIZONA
COUNTY OF Maricopa
The foregoing instrument was acknowledged before me this 30th day of
September, 1997 by Robert Gentz, as the _______________________ of DENAMERICA
CORP., a Georgia corporation, on behalf of the corporation. He/she is personally
known to me or produced the following identification: Florida Driver License #
G532-770-49-415-0
/s/ Nancy G. Houston
--------------------------------
Name: Nancy G. Houston
(NOTARY SEAL) Notary Public-State of Arizona
Commission No.:_________________
OFFICIAL SEAL My Commission Expires: 7/20/2000
NANCY G. HOUSTON
NOTARY PUBLIC - STATE OF ARIZONA
MARICOPA COUNTY
My Comm. Expires 7/20/00
4
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of the 30th day of September, 1997 by and between DENAMERICA
CORP., a Georgia corporation (the "Corporation"), whose address is 7373 North
Scottsdale Road, Suite D-120, Scottsdale, Arizona 85253 and CNL GROWTH CORP., a
Florida corporation, as agent for Denwest Foods, Ltd, a Florida limited
partnership, and Denwest Foods II, Ltd., a Florida limited partnership, whose
address is 400 East South Street, Suite 500, Orlando, Florida 32801 (hereinafter
referred to in such capacity as the "Holder").
Simultaneously with the execution and delivery of this Agreement, the
Corporation is issuing a Convertible Debenture (the "Debenture") to the Holder
in the principal amount of $4,400,000.00 pursuant to the terms of that certain
Loan and Security Agreement of even date herewith (the "Loan and Security
Agreement"). The Convertible Debenture is convertible into shares of the
Corporation's $.10 per share par value common stock (the "Common Stock") as
provided in the Loan and Security Agreement. The Corporation desires to grant to
the Holder the registration rights set forth herein with respect to such shares
of common stock.
NOW, THEREFORE, the parties hereby mutually agree as follows:
1. Piggy-Back Registration Rights.
(a) If the Corporation proposes at any time to file a
registration statement on a general form for registration under the Securities
Act of 1933, as amended (the "Securities Act"), and relating to securities
issued or to be issued by it, then it shall give written notice of such proposal
to the Holder. If, within thirty (30) days after the giving of such notice, the
Holder shall request in writing that all or any of the Common Stock owned by or
issuable to the Holder upon conversion of the Debenture be included in such
proposed registration, the Corporation will also register such Common Stock as
shall have been requested in writing; provided, however, that:
(i) the Corporation shall not be required to include
any of such securities if, by reason of such inclusion, the Corporation shall be
required to prepare and file a registration statement on a form promulgated by
the Securities and Exchange Commission different from that which the Corporation
otherwise would use;
(ii) the Holder shall cooperate with the Corporation
in the preparation of such registration statement to the extent required to
furnish information concerning the Holder; and
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(iii) the Corporation shall have the right at any
such time after it shall have given written notice pursuant to this Section 1
(irrespective of whether a written request for inclusion of any Common Stock
shall have been made) to elect not to file any such proposed registration
statement, or to withdraw the same after the filing but prior to the effective
date thereof. In such event, the Holder shall retain any remaining demand
registration rights set forth in Section 2 hereof, as well as the piggy-back
registration rights set forth in this Section 1.
(b) (i) Notwithstanding the provisions of Section 1(a) hereof,
if in the written opinion of the Corporation's managing underwriter, if any, for
the offering contemplated by such registration statement, the inclusion of all
or a portion of the Common Stock requested to be registered, when added to the
securities being registered by the Corporation or any selling security holder,
will exceed the maximum amount of the Corporation's securities which can be
marketed (i) at a price reasonably related to their then current market value,
or (ii) without otherwise materially adversely affecting the entire offering,
then the Corporation may exclude from such offering all or a pro rata portion of
the Common Stock requested to be registered as required by the managing
underwriter.
(ii) If securities are proposed to be offered for
sale pursuant to such registration statement by other security holders of the
Corporation and the total number of securities to be offered by the Holder and
such other selling security holders is required to be reduced pursuant to a
request from the managing underwriter (which request shall be made only for the
reasons and in the manner set forth above) the aggregate number of shares of
Common Stock to be offered by the Holder pursuant to such registration statement
shall equal the number which bears the same ratio to the maximum number of
securities that the underwriter believes may be included for all the selling
security holders (including the Holder) as the original number of shares of
Common Stock proposed to be sold by the Holder bears to the total original
number of securities proposed to be offered by the Holder and the other selling
security holders.
(iii) If the Corporation exercises the rights granted
under this Section 1(b), then the Holder shall retain any remaining demand
registration rights and piggy-back registration rights for its Common Stock (to
the extent not registered) as set forth in Sections 1 and 2 hereof.
2. Demand Registration Rights.
(a) In addition to the registration rights set forth in
Section 1, the Corporation will, upon the written request of the Holder (a
"Request"), within a reasonable period after receipt of such Request, prepare
and file and take such reasonable steps as
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may be required to have declared effective, a registration statement under the
Securities Act, covering all, and not less than all, of the Common Stock issued
or issuable upon conversion of the Debenture by the Holder, and in connection
therewith shall advise the persons entitled thereto of their rights under
Section 1 hereof; provided, however, that:
(i) the Corporation may include any securities issued
or to be issued by the Corporation in such registration statement and may engage
such underwriters or managing agents as it deems necessary or desirable for the
purpose of purchasing or arranging for the sale of the securities then being
offered by the Corporation under such registration statement;
(ii) the Holder shall cooperate with the Corporation
in the preparation of such registration statement to the extent required to
furnish information concerning the Holder;
(iii) the Corporation shall be obligated to effect
only one such registration pursuant to this Section 2; and
(iv) if the Corporation shall furnish to the Holder a
certificate signed by an officer of the Corporation stating that a Blackout
Period (as defined below) is in effect, then the Corporation shall have the
right to defer the filing of a registration statement pursuant to this Section 2
during the term of such Blackout Period; provided, however, that a Blackout
Period or Periods shall not be in effect for more than four months during any
12-month period. The term "Blackout Period" means any period (A) beginning on
the date on which the Corporation notifies the Holder that (i) the Board of
Directors of the Corporation, in its good faith judgment, has determined that
the Holder's sales of Common Stock pursuant to a registration statement (or the
use of a registration statement or related prospectus) would interfere with any
pending material acquisition, material corporate reorganization, or any other
material corporate transaction involving the Corporation or any subsidiaries of
the Corporation (a "Transaction Blackout"); or (ii) based upon the advice of
outside counsel to the Corporation, the Holder's sale of shares of Common Stock
pursuant to a registration statement (or the use of a registration statement or
related prospectus) would require disclosure of material information and the
Corporation's Board of Directors, in its reasonable judgment and in good faith,
resolves that the Corporation has a bona fide business purpose for preserving
such information confidential (an "Information Blackout"); and (B) ending on the
date (1) in the case of a Transaction Blackout, the earliest of (x) one month
after the completion of such acquisition, corporate reorganization, or other
similar transaction, (y) promptly after abandonment of such acquisition,
corporate reorganization, or other similar transaction and (z) 90 days after the
date of the Corporation's written notice of such Transaction Blackout; and (2)
in the case of an Information
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<PAGE>
Blackout, the earlier of (x) the date upon which such material information is
disclosed to the public or ceases to be material and (y) 90 days after the
Corporation makes such good faith determination.
3. Additional Terms.
(a) In connection with the filing of a registration statement
pursuant to Sections 1 or 2 hereof, the Corporation shall:
(i) notify the Holder as to the filing thereof and of
all amendments thereto filed prior to the effective date of said registration
statement;
(ii) notify the Holder promptly after it shall have
received notice of the time when the registration statement becomes effective or
any supplement to any prospectus forming a part of the registration statement
has been filed;
(iii) prepare and file without expense to the Holder
any necessary amendment or supplement to such registration statement or
prospectus as may be necessary to comply with Section 10(a)(3) of the Securities
Act or advisable in connection with the proposed distribution of the securities
by the Holder (but only during such period as the Corporation is required to
keep the registration statement effective);
(iv) use its reasonable best efforts to qualify the
Common Stock being so registered for sale under the securities or blue sky laws
of such reasonable number of states as the Holder may designate in writing and
to register or obtain the approval of any federal or state authority which may
be required in connection with the proposed distribution, except, in each case,
in jurisdictions in which the Corporation must either qualify to do business or
file a general consent to service of process as a condition to the qualification
of such Common Stock;
(v) notify the Holder of any stop order suspending
the effectiveness of the registration statement and use its reasonable best
efforts to remove such stop order;
(vi) undertake to keep such registration statement
and prospectus effective for a period of one hundred and twenty (120) days after
its effective date; and
(vii) furnish to the Holder as soon as available,
copies of any such registration statement and each preliminary or final
prospectus and any supplement or amendment required to be prepared pursuant to
the foregoing provisions of Sections 1 and 2 hereof all in such quantities as
the Holder may from time to time reasonably request. Upon written request, the
Corporation shall
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also furnish to the Holder, without cost, one set of the exhibits to such
registration statement.
(b) The Holder of the Common Stock registered under Sections 1
and 2 hereof agrees to pay all applicable underwriting discounts and
commissions, brokerage commissions, transfer taxes, and its own counsel fees
with respect to the Common Stock owned by it and being registered. The
Corporation will pay all other costs and expenses in connection with a
registration statement to be filed pursuant to Section 1 and Section 2 hereof
including, without limitation, the fees and expenses of counsel for the
Corporation, the fees and expenses of its accountants and all other costs and
expenses incident to the preparation, printing and filing under the Securities
Act of any such registration statement, each prospectus and all amendments and
supplements thereto, the costs incurred in connection with the qualification of
such Common Stock for sale in a reasonable number of states as the Holder has
designated, including fees and disbursements of counsel for the Corporation,
registration fees and the costs of supplying a reasonable number of copies of
the registration statement, each preliminary prospectus, final prospectus and
any supplements or amendments thereto to the Holder.
(c) The Holder of the Common Stock registered under Section 1
and 2 hereof agrees to notify the Corporation, at any time when a prospectus
relating to the Holder's Common Stock covered by a registration statement is
required to be delivered under the Securities Act, of the happening of any event
with respect to Holder as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
circumstances then existing.
(d) In the event of an underwritten public offering, the
Holder participating in such underwriting shall enter into and perform its
obligations under the underwriting agreement for such offering, and, if
requested to do so by the underwriters managing such offering, the Holder shall
enter into a customary holdback agreement.
(e) Neither the giving of any notice by the Holder nor the
making of any request for prospectuses shall impose upon the Holder making such
request any obligation to sell any Common Stock.
(f) The Holder, upon receipt of notice from the Corporation,
upon the occurrence of an event which requires a post-effective amendment to the
registration statement or a supplement to the prospectus included therein, shall
promptly discontinue the sale of the Common Stock until it has received copies
of a supplemented or amended prospectus from the Corporation, which the
Corporation shall provide as soon as practicable after such notice.
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<PAGE>
(g) Notwithstanding the provisions of Sections 1 and 2 hereof,
if all of the Common Stock held by the Holder or issuable upon conversion of the
Debenture may be sold by the Holder in a transaction pursuant to Rule 144
promulgated under the Securities Act, the Holder shall not be entitled to
require the Corporation to register such securities pursuant to any registration
statement filed under the Securities Act.
4. Indemnification. In the event Common Stock is included in a
registration statement under this Agreement:
(a) The Corporation will indemnify and hold harmless the
Holder, the officers and directors of the Holder, any underwriter (as defined in
the Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), against any losses, claims,
damages, or liabilities (joint or several) to which such person or persons may
become subject under the Securities Act, the 1934 Act, or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in any registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, or (ii) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and the Corporation
will reimburse the Holder, officer or director, underwriter, or controlling
person for any legal or other expenses reasonably incurred by such person or
persons in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this Section 4 shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Corporation, nor shall the Corporation be liable in
any such loss, claim, damage, liability, or action to the extent that it arises
out of or is based upon (i) a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by the Holder, underwriter, or controlling person, or
(ii) the failure of the Holder, underwriter, or controlling person to deliver a
copy of the registration statement or the prospectus, or any amendments or
supplements thereto, after the Corporation has furnished such person with a
sufficient number of copies of the same.
(b) The Holder will indemnify and hold harmless the
Corporation, each of its officers and directors, and each person, if any, who
controls the Corporation within the meaning of the Securities Act, and any
underwriter, against any losses, claims, damages, or liabilities (joint or
several) to which the Corporation
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<PAGE>
or any such officer, director, controlling person, or underwriter or controlling
person may become subject, under the Securities Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by the Holder
expressly for use in connection with such registration; and the Holder will
reimburse any legal or other expenses reasonably incurred by the Corporation or
any such officer, director, controlling person, underwriter or controlling
person, in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this Section 4 shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Holder.
(c) Promptly after receipt by an indemnified party under this
Section 4 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 4, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnified party, except that such fees and expenses shall be paid by
the indemnifying party if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 4, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 4.
(d) The indemnification provided by this Section 4 shall be a
continuing right to indemnification and shall survive the registration and sale
of any of the Common Stock hereunder and the expiration or termination of this
Agreement.
5. Governing Law. This Agreement shall be deemed to have been made and
delivered in the State of Florida and shall be
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<PAGE>
governed as to validity, interpretation, construction, effect and in all other
respects by the internal laws of the State of Florida.
6. Amendment.
This Agreement may only be amended by a written instrument
executed by each of the parties hereto.
7. Entire Agreement.
This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof, and supersedes all prior
agreements and understandings of the parties, oral and written, with respect to
the subject matter hereof.
8. Execution of Counterparts.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same documents.
9. Notices.
All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed duly given when delivered by
hand or three (3) days after mailing by registered or certified mail, postage
prepaid, return receipt requested, to the parties' respective addresses set
forth on the first page of this Agreement or such other address as a party may
specify by written notice to the other party hereunder.
10. Headings.
The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the items or provisions of this Agreement.
11. Binding Effect; Benefits.
This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective heirs, legal representatives,
successors and permitted assigns and to the holders of any Conversion Shares (as
such term is defined in the Loan and Security Agreement). Nothing herein
contained, express or implied, is intended to confer any rights or remedies
under or by reason of this Agreement to any other person or entity.
12. Severability.
Any provision of this Agreement which is held by a court of
competent jurisdiction to be prohibited or unenforceable in any
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<PAGE>
jurisdiction(s) shall be, as to such jurisdiction(s), ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties hereto as of the date first above written.
DENAMERICA CORP., a Georgia
corporation
By: /s/ Robert J. Gentz
-------------------------------
Name: Robert J. Gentz
-----------------------------
Title: Sr. Vice President
----------------------------
CNL GROWTH CORP., a Florida
corporation
By:_______________________________
Name:_____________________________
Title:____________________________
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EXHIBIT 10.115
AGREEMENT
This Agreement is entered into as of September 30, 1997 by and among
DenAmerica Corp., a Georgia corporation ("DenAm"), Beck Holdings, Inc., a
Delaware corporation formerly known as BEP Holdings, Inc. ("Beck"), and Unigate
Holdings, NV, a corporation organized under the laws of The Netherlands ("UNV").
Whereas, DenAm and Beck are parties to a Stock Purchase Agreement dated
as of May 31, 1996 (the "Stock Purchase Agreement"), pursuant to which DenAm
purchased the stock of Black-eyed Pea USA, Inc. ("BEP") from Beck.
Whereas, UNV guaranteed certain obligations of Beck under the Stock
Purchase Agreement pursuant to a Guarantee Agreement dated as of May 31, 1996.
Whereas, Beck holds a Senior Subordinated Promissory Note payable by
DenAm with a current principal amount of $15,289,980 (the "Note").
Whereas, in July 1997 DenAm commenced litigation against Beck and UNV
in the United States District Court in and for the district of Arizona as to
certain matters (the "Litigation").
Whereas, DenAm is (1) proposing to enter into certain transactions with
various entities affiliated with CNL Group (the "CNL Transactions") and (2)
considering certain transactions with various entities affiliated with members
of the Olajuwon family (the "Olajuwon Transactions").
Whereas, the CNL Transactions and the Olajuwon Transaction require the
consent of Beck under the terms of the Note.
Now, therefore, for good and valuable consideration the receipt and
sufficiency of which is agreed and acknowledged, parties hereto agree as
follows:
1. DenAm, Black-eyed Pea U.S.A., Inc., Beck and UNV shall immediately
execute and deliver the Settlement Agreement and Release attached
hereto as Exhibit 1.
2. DenAm and UNV agree that the Guarantee is forever and irrevocably
canceled, and that UNV shall have no liability under the Guarantee in
respect of any past, present or future claim or matter.
3. DenAm and Beck agree that the Note is hereby amended by adding the
following as new Section 2(f):
"(f) Special Repurchase Option. Notwithstanding
anything in this Note to the contrary:
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(i) The Company shall have the option (exercisable at
any time on or prior to March 27, 1998) to repurchase this
Note from the Holder at a price equal to $13 million minus the
aggregate amount of all principal payments made on this Note
on or after September 30, 1997 minus the Special Deduction
plus all accrued but unpaid interest on this Note through the
date of repayment (the "Repurchase Option"). The "Special
Deduction" shall equal the product of (i) $138,000 times (ii)
the number of days elapsed from (and including) September 30,
1997 through the closing of the Repurchase Option divided by
182 (but not to exceed 1.0).
(ii) The Company may elect to exercise the Repurchase
Option by delivering written notice to such effect to the
holder on or prior to March 27, 1998. Such notice shall be
transmitted by telecopy to the attention of Jack Davis of Beck
Holdings at (214) 363-9892 (with receipt confirmed by
telephone at (214) 363-9513), with a copy to the attention of
Carter W. Emerson of Kirkland & Ellis at (312) 861-2200 (with
receipt confirmed by telephone at (312) 861-2052). In the even
the Repurchase Option is so exercised, the closing of the
repurchase of the Note shall occur on the third business day
following delivery of the Exercise Notice to the Holder. At
the closing, the Company shall pay the repurchase price to the
Holder by wire transfer of immediately available fund to a
bank account designated by the Holder, and the Holder shall
deliver the Note to the Company for cancellation. In the event
that the closing of the repurchase does not occur on or prior
to the third business day following delivery of the Exercise
Notice for any reason (other than a failure by the Holder to
specify wire transfer instructions or make the Note available
for cancellation at the closing), the purported exercise of
the Repurchase Option shall be deemed null and void; provided
that the Company may deliver subsequent Exercise Notices at
any time on or prior to March 27, 1998."
(iii) The Repurchase Option shall not be exercisable
by the Company after March 27, 1998.
(iv) The Repurchase Option shall not affect or reduce
the interest payable on the note, which will continue to
accrue and be payable on the full principal amount of the Note
(as opposed to the price payable upon exercise of the
repurchase Option). Without limiting the generality of the
foregoing, interest shall be due and payable on the full
principal amount of the Note upon the terms set forth in the
Note on September 30, 1997, December 31, 1997, March 31, 1998
and all interest due dates thereafter (until such time as the
Note is repaid in full upon exercise of the Repurchase Option
or otherwise).
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4. Beck hereby consents to the cancellation of the Delayed Draw Facility
(as defined in the Note) and waives those requirements of the Note
which require DenAm to utilize the Delayed Draw Facility to repay the
Note.
5. DenAm and Beck agree that the Common Stock Purchase Warrant dated July
3, 1996 issued by DenAm to Beck is hereby amended as follows:
a. The first sentence of the first paragraph of he warrant is
amended and restated to read as follows:
"This is to certify that, for value received, BECK HOLDINGS,
INC., or assigns (the "Warrantholder"), is entitled, subject
to the terms and conditions hereinafter set forth, at any time
after April 1, 1998 and on or before 5:00 P.M., Pacific
Standard Time, on March 31, 2002, but not thereafter, to
purchase the Applicable Number (as defined below) of shares of
common stock, par value $0.10 per share (the "Common Stock"),
of DENAMERICA CORP. (the "Company") for the Warrant Price (as
defined below), and to receive a certificate or certificates
for the shares of Common Stock so purchased."
b. The first sentence of Section 2(a) of the Warrant is amended
and restated to read as follows:
"Subject to the terms of this Warrant, the Warrantholder shall
have the right, at any time during the period (the "Exercise
Period") commencing on April 1, 1998 and ending at 5:00 P.M.,
Pacific Standard Time, on March 31, 2002 (the "Termination
Date), or, if such date is a day on which banking institutions
are authorized by law to close, then on the next succeeding
day which shall not be such a day, to purchase from the
Company up to the number of fully paid and nonasessable shares
of Common Stock which the Warrantholder may at the time be
entitled to purchase pursuant to this Warrant Certificate."
c. A new Section 10 is added to the Warrant as follows:
10. Automatic Cancellation Under Certain
Circumstances. Notwithstanding anything in this Warrant to the
contrary, if all or any portion of the principal amount of the
Note is repaid during the period beginning on September 30,
1997 and ending on March 31, 1998 (the "Specified Period"),
then the Specified Percentage of this Warrant shall
automatically be canceled without any consideration or benefit
to the Warrantholder (and the canceled portion shall be null
and void and of no further force or effect). Any such
cancellation shall be effective on March 31, 1998. The
"Specified Percentage" shall equal the percentage represented
by (i) the aggregate amount of principal payments made on the
Note during the Specified
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Period divided by (ii) $15,289,980 (or, if the Note is
repurchased pursuant to the Repurchase Option, $13 million).
6. Beck consents to, and waives the application of the covenants contained
in the Stock Purchase Agreement and the Note (and any other document
executed in connection with the Stock Purchase Note or the Note) to,
the CNL Transactions, as the same are described in the documents
attached as Exhibit 2 hereto. Any material deviation from the terms
described in Exhibit 2 hereto which would have an adverse effect on
Beck, as holder of the Note, shall require Beck's further written
consent.
7. Beck and DenAm agree that Section 4(h)(viii) of the Note is deleted in
its entirety and replaced with the following:
"(viii) Indebtedness of the Company to CNL
Growth Corp., a Florida corporation, as agent for CNL
Income & Growth Fund, Ltd., CNL Income & Growth Fund
ll, Ltd., and Denglass Real Estate Venture, or to CNL
Growth Corp., a Florida corporation, as agent for
Denwest Foods, Ltd. and Denwest Foods II, Ltd. (or
their affiliates) in an aggregate principal amount of
up to $12.1 million (plus any Indebtedness which may
be deemed to exist by reason of the sale/leaseback
transactions with such Persons entered into on
September 30, 1997); and
(ix) additional unsecured Indebtedness of
the Company not otherwise permitted by any of clauses
(i) through (viii) above, provided that the aggregate
principal amount of such additional indebtedness
shall not at any time exceed $5,000,000."
8. Beck hereby consents, and waives the application of the covenants
contained in the Note, to the acquisition of restaurants located in the
State of Arizona from Colorado Restaurant Management, Inc. and/or
G.H.S. Restaurants Management, Inc. (the "Franchisees"), the
sale/leaseback financing transactions involving the assets acquired in
such restaurant acquisitions, the application of the proceeds from such
sale/leaseback financing transactions to the settlement of claims made
by Black-eyed Pea franchisees and the forgiveness of any franchise fees
or royalties owed by the Franchisees to affiliates of DenAm. The
consent and waiver contained in this Section 8 does not, however,
constitute Beck's consent to the settlement of claims made by the
Franchisees against Black-eyed Pea U.S.A., Inc. and/or DenAm or any
admission of wrongdoing by Beck or UNV.
9. Subject to Section 10 below, Beck consents to, and waives the
application of the covenants contained in the Stock Purchase Agreement
and the Note (and any other document executed in connection with the
Stock Purchase Note or the Note) to, the Olajuwon Transaction, as the
same is described in that certain document entitled "Summary of The
Mechanics of The Joint Venture" attached as Exhibit 3 hereto. Any
material deviation from the terms described
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in Exhibit 3 which would have an adverse effect on Beck, as holder of
the Note, shall require Beck's further written consent.
10. Beck's consent to the Olajuwon Transaction is conditioned on (a) the
immediate application of any proceeds (net of reasonable and documented
third party transaction costs) from the Olajuwon Transaction in excess
of $11 million in the aggregate to the repayment of the Note and (b)
the application of the first $11 million of such net proceeds to bank
debt. In the event that the proceeds of the Olajuwon Transaction are
not applied in accordance with the preceding sentence, Beck's consent
to the Olajuwon Transaction shall be null and void.
11. DenAm represents and warrants that it has obtained the consent of its
bank syndicate to the application of proceeds as described in Section
10 above.
12. Beck and DenAm agree that the Note shall be automatically amended as
follows, if and when the Olajuwon Transaction is consummated with
Beck's consent, as described in this Agreement:
a. The following shall be added as Section 4(i)(vi) of the Note:
"(vi) Investments in the limited liability
company or joint venture to be formed with members of
the Olajuwon family (or entities affiliated with
them), on the terms set forth in that certain
document entitled "Summary of The Mechanics of The
Joint Venture" attached as Exhibit 3 hereto (the
"Olajuwon Transaction")."
b. Section 4(j)(ii) shall be amended and restated to read as
follows:
"(ii) Asset Sales consisting of sales of
property having a fair market value, in the aggregate
for all such Asset Sales from and after September 30,
1997, of not greater than $5,000,000; provided, that
(1) prior to and after giving effect to such Asset
Sale, or Event of Default is continuing and (2) the
consideration received by the Company or such
Subsidiary on the closing date of such Asset Sale
shall be equal to the fair market value of the assets
sold and at least 80% of the consideration shall
consist of immediately available funds (provided that
the Company and its subsidiaries shall be entitled to
sell non- or under-performing restaurants in
transactions which fail to meet the 80% test
contained in this clause so long as the fair market
value of the aggregate proceeds of such transactions
does not exceed $10,000,000), and further provided,
that any Asset Sales made as part of the Olajuwon
Transaction shall be excluded from the $5,000,000
basket referred to above;"
c. The following shall be added as Section 4(j)(vi) of the Note:
5
<PAGE>
"(vi) Asset Sales made as part of the
Olajuwon Transaction."
13. From and after the date of this Agreement, neither DenAm nor Black-eyed
Pea U.S.A., Inc. nor any of their directors, officers or employees will
issue any press releases, or make any comments to the media or others,
which are disparaging to Beck, UNV or any of their affiliates or which
in any way suggest that the Litigation was settled on a basis other
than that described in this Agreement and the Settlement Agreement and
Release (including without limitation Section 1.4 thereof).
14. From and after the date of this Agreement, neither Beck nor UNV nor any
of their directors, officers or employees will issue any press
releases, or make any comments to the media or others, which are
disparaging to DenAm, Black-eyed Pea U.S.A., Inc. or any of their
affiliates or which in any way suggest that the Litigation was settled
on a basis other than that described in this Agreement and the
Settlement and Release.
15. Beck agrees to add the following legend (in the applicable form) to the
face of each of the Note and the Warrant and to send copies of such
instruments to DenAm promptly thereafter:
"THE TERMS OF THIS [NOTE][WARRANT] HAVE BEEN AMENDED BY, AND IS SUBJECT
TO, THE AGREEMENT DATED AS OF SEPTEMBER 30, 1997 BY AND AMONG
DENAMERICA CORP., BECK HOLDINGS, INC. AND UNIGATE HOLDINGS, NV. A COPY
OF SUCH AGREEMENT SHALL BE FURNISHED BY DENAMERICA TO THE HOLDER HEREOF
UPON WRITTEN REQUEST AND WITHOUT CHARGE."
Upon Beck's request, DenAm will issue amended and restated versions of
the Note and Warrant reflecting the amendments set forth in this
Agreement.
16. The consents contained in this Agreement shall be effective only with
respect to the matters specifically described herein, and this
Agreement shall not constitute a consent or waiver as to any other
action or transaction or any non-compliance by DenAm with any of the
terms of the Note. Except as expressly provided herein, the Note shall
remain unchanged and in full force and effect. This Agreement may be
executed in any number of counterparts, all of which taken together
shall constitute one and the same instrument and any of the parties
hereto may execute this Agreement by signing any such counterpart.
17. DenAm represents and warrants that (i) it has obtained all consents and
approvals which are required in connection with its execution, delivery
and performance of this Agreement and the Settlement Agreement and
Release and (ii) neither Denwest Foods, Ltd. nor Denwest Foods, II,
Ltd. are affiliates of DenAm or any of its officers or directors.
18. Beck and UNV represent and warrant that they have obtained all consents
and approvals which are required in connection with their execution,
delivery and performance of this
6
<PAGE>
Agreement and the Settlement Agreement and Release. Beck represents and
warrants that it is the sole record and beneficial owner of the Note
and the Warrant.
19. This Agreement shall be governed by, and construed in accordance with,
the law of the State of Delaware.
20. This Agreement, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an
original Agreement and shall be considered to have the same binding
legal effects as if it were the original signed version thereof
delivered in person. No party hereto shall raise the use of a facsimile
machine to deliver a signature or the fact that any signature was
transmitted or communicated through the use of facsimile machine as a
defense to the formation of a contract and each such party forever
waives any such defense.
*********************
7
<PAGE>
In witness whereof, the parties have executed this Agreement as of the
date first written above.
DENAMERICA CORP.
BY: /s/ T S Brown
--------------------------
ITS: Vice President
-------------------------
BECK HOLDINGS, INC.
BY: /s/ Jack H Davis
--------------------------
ITS: President
-------------------------
UNIGATE HOLDINGS NV
BY: /s/ G. J. Kemper
--------------------------
ITS: Director
-------------------------
8
EXHIBIT 11.1
DENAMERICA CORP. AND SUBSIDIARIES
Statement re: computation of per share income (loss)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Period ended
------------
October 2, October 1,
Description 1996 1997
----------- ---------- ----------
(40 weeks) (39 weeks)
<S> <C> <C>
Income (loss) before extraordinary item ........... $ 1,802 (408)
Extraordinary item - loss on extinguishment
of debt ....................................... (497) --
------------ ------------
Net income (loss) ................................. 1,305 (408)
Less: Preferred stock dividend and accretion ..... (149) --
------------ ------------
Net income (loss) applicable to common shareholders $ 1,156 ($ 408)
============ ============
Income (loss) before extraordinary item per
common and common equivalent share ............. $ .15 ($ 03)
Extraordinary item - loss on extinguishment
of debt per common and common equivalent
share .......................................... (.05) --
------------ ------------
Net income (loss) per common and common
equivalent share .................................. $ .10 ($ .03)
============ ============
Weighted average common and common equivalent
shares outstanding ............................. 11,131,000 13,437,000
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Exhibit contains summary financial information extracted from the
Registrant's unaudited consolidated financial statements for the period ended
October 1, 1997 and is qualified in its entirety by reference to such financial
statements. This Exhibit shall not be deemed filed for purposes of Section 11 of
the Securities Act of 1933 and Section 18 of the Securities Exchange Act of
1934, or otherwise subject to the liability of such Sections, nor shall it be
deemed a part of any other filing which incorporates this report by reference,
unless such other filing expressly incorporates this Exhibit by reference.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> OCT-01-1997
<EXCHANGE-RATE> 1
<CASH> 975
<SECURITIES> 0
<RECEIVABLES> 4,132
<ALLOWANCES> 0
<INVENTORY> 3,557
<CURRENT-ASSETS> 13,561
<PP&E> 64,729
<DEPRECIATION> 6,822
<TOTAL-ASSETS> 171,568
<CURRENT-LIABILITIES> 41,695
<BONDS> 94,957
0
0
<COMMON> 1,342
<OTHER-SE> 20,455
<TOTAL-LIABILITY-AND-EQUITY> 171,568
<SALES> 227,787
<TOTAL-REVENUES> 227,787
<CGS> 62,097
<TOTAL-COSTS> 62,097
<OTHER-EXPENSES> 146,387
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,587
<INCOME-PRETAX> (679)
<INCOME-TAX> (271)
<INCOME-CONTINUING> (408)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (408)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
