SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 25, 1998
DENAMERICA CORP.
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(Exact name of registrant as specified in its charter)
GEORGIA 1-13226 58-1861457
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(State or other (Commission File No.) (IRS Employer ID No.)
jurisdiction of incorporation)
7373 N. Scottsdale Road, Suite C-240, Scottsdale, Arizona 85253
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (602) 483-7055
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DENAMERICA CORP.
FORM 8-K
CURRENT REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 25, 1998, DenAmerica Corp. (the "Company") sold 63 Denny's
restaurants and eight non-branded restaurants in 10 states to Olajuwon Holdings,
Inc., a Texas corporation, for $28.7 million, consisting of cash of $25.2
million and notes totaling $3.5 million. The terms of the transaction were
determined by arms-length negotiations between representatives of the Company
and representatives of the buyer. The Company utilized the proceeds from this
transaction to (i) repay an outstanding promissory note at a $2.4 million
discount from its principal amount of approximately $15.3 million; (ii) cancel
outstanding warrants to acquire approximately 1.0 million shares of Common Stock
at an exercise price of $1.90 per share; (iii) permanently reduce its
outstanding borrowings under the term loan portion of its credit facility; and
(iv) repay certain equipment operating leases associated with the sold
restaurants.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Financial Statements of Businesses Acquired.
Not applicable.
(b) Pro Forma Financial Information.
As of the date of filing this Current Report on Form 8-K, it
is impracticable for the Company to provide the pro forma
financial information required by this Item 7(b). In
accordance with Item 7(b) of Form 8-K, such financial
statements shall be filed by amendment to this Form 8-K no
later than June 8, 1998.
(c) Exhibits.
Exhibit No. Description of Exhibit
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10.116 Asset Purchase Agreement dated January 27, 1998, among DenAmerica
Corp., Olajuwon Holdings, Inc., and Akinola Olajuwon
10.117 First Amendment to Asset Purchase Agreement dated March 16, 1998
between DenAmerica Corp., Olajuwon Holdings, Inc., and Akinola
Olajuwon
10.118 Promissory Note dated March 25, 1998, from Olajuwon Holdings, Inc.
to DenAmerica Corp. in the principal amount of $1,800,000
10.119 Negative Working Capital Note dated March 25, 1998, from Olajuwon
Holdings, Inc. to DenAmerica Corp. in the principal amount of
$1,700,000
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
April 8, 1998 DENAMERICA CORP.
By: /s/ Todd S. Brown
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Todd S. Brown
Vice President and Chief Financial Officer
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into this 27th day of January 1998 among OLAJUWON HOLDINGS, INC., a Texas
corporation ("Buyer"); AKINOLA OLAJUWON ("Shareholder"); and DENAMERICA CORP., a
Georgia corporation ("Seller").
A. Seller conducts the business of the ownership and operation of
restaurants, including, but not limited to, those 68 restaurants, some of which
are operated under the name "Denny's" that are more particularly described on
Schedule A hereto (the "Restaurants").
B. Shareholder is the sole shareholder and is a director and officer of
Buyer.
C. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, the Restaurants and certain of the assets associated with the
Restaurants, on an "as is" basis, and Buyer desires to assume certain of
Seller's liabilities associated with the Restaurants, all upon the terms and
conditions set forth in this Agreement.
D. Shareholder desires to cause Buyer to perform its obligations under
this Agreement and to make certain representations to Seller in connection with
the transactions contemplated by this Agreement.
E. To induce Seller to enter into this Agreement, and as a condition
precedent to Seller's obligations hereunder, Seller requires Shareholder to
guaranty payment in full by Buyer of the Promissory Note and Negative Working
Capital Note (as both terms are defined below).
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
Section 1. Sale and Purchase.
1.1 Assets and Properties to be Sold and Purchased.
At the Closing (as defined herein), Seller shall sell or cause to be sold to
Buyer and Buyer shall purchase from Seller, subject to all the terms and
conditions of this Agreement, on the Closing Date (as defined herein), the
following assets and properties of Seller with respect to the Restaurants (the
"Purchased Assets"), except the Excluded Assets (as hereinafter defined):
(a) Leased Properties and Improvements. All
of the right, title, and interest of Seller in and to the use of the real estate
and buildings associated with the Restaurants (the "Leased Properties") and all
other improvements, fixtures, and structure (collectively, the "Improvements")
located on, affixed to, and/or appurtenant to the Restaurants or the Leased
Properties, except to the extent the foregoing are the property of landlords and
are subject to the Leases (as defined herein).
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(b) Personal Property. All of the right,
title, and interest of Seller in and to any and all personal property utilized
in connection with the businesses conducted in the Restaurants, including, but
not limited to, the (i) mechanical systems, fixtures, and equipment comprising a
part of or attached to or located at the Restaurants; (ii) pylons and other
signs, china, silverware, glassware, and other utensils and dishes, tables,
chairs, lamps, fans, carpets, decorations, and other furnishings owned by Seller
and comprising a part of or attached to or located in the Restaurants,
including, but not limited to, any furnishings located in each Restaurant
office; and (iii) stoves, ovens, refrigerators, walk-in cold storage boxes and
other kitchen equipment, and other machinery, equipment, fixtures, keys,
inventory, and personal property of every kind and character owned by Seller and
held at the Restaurants, including, but not limited to, food, beverages, paper
goods, food preparation item, uniforms, guest checks, and other inventory and
supplies at the Restaurants by Seller, and which are presently located in or on
or used in connection with the Restaurants, the Leased Properties, or the
Improvements or the operations thereof or hereafter acquired in the ordinary
course of business (collectively, the "Personal Property").
(c) Contracts. All right, title, and
interest of Seller in, to and under all agreements and contracts relating to the
Restaurants, including, but not limited to, all maintenance, supply, and service
contracts, and any other contracts, arrangements, or agreements affecting the
Restaurants, the Leased Properties, the Improvements, or the Personal Property,
pursuant to which goods, services, supplies, or any other item whatsoever are
furnished and/or are to be furnished in connection with the operation of the
Restaurants, or the repair, maintenance, or operation thereof, and all right,
title, and interest of Seller in, to, and under all warranties, guaranties, and
bonds relating to the Restaurants, the Leased Properties, the Improvements, or
the Personal Property, together with all right, title, and interest of Seller
in, to and under all other representations, contract rights, transferable and
intangible property, miscellaneous rights, benefits, or privileges of any kind
or character with respect to the Restaurants (collectively, the "Contracts").
Within thirty (30) days after the date this Agreement is made and entered into,
Seller shall provide to Buyer copies of all of the above-described agreements
and contracts under which any property is being leased or purchased by payments
made in installments.
(d) Documents. All right, title, and
interest of Seller in and to all information and documentation in Seller's
possession regarding the Restaurants, including, but not limited to, surveys,
tax assessment records, engineering plans and specifications, as-built drawings,
development plans, plats, site plans, zoning materials, leases, guaranties,
contracts, combinations to all locks on or in the Restaurants, and all books,
records, and files relating to the ownership, management, and/or operation of
the Restaurants (collectively, the "Documents").
(e) Computer Hardware and Software. All
point of sale computer hardware and software owned, leased, or licensed by or to
Seller that is not otherwise prohibited from transfer by contract between Seller
and the owner thereof. On or before the date that is thirty (30) days after the
date this Agreement is made and entered into, Seller shall
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provide to Buyer a complete inventory, on a Restaurant by Restaurant basis, of
all computer hardware and software, whether owned, leased, or licensed, and
identifying any such hardware or software which may be prohibited from transfer.
All point of sale hardware and software shall remain as part of the Personal
Property.
(f) Goodwill. All of Seller's goodwill in
connection with the Restaurants.
(g) Telephone Number. All of Seller's
telephone and facsimile numbers presently used in connection with the operation
of the Restaurants.
(h) Ancillary Assets. All permits, licenses,
certificates of occupancy, governmental approvals, and marketing materials in
the possession of Seller that relate specifically to the Restaurants, the Leased
Properties, the Improvements, or the Personal Property, to the extent
transferable.
(i) Petty Cash. One Thousand Dollars
($1,000) in petty cash for each Restaurant at Closing.
1.2 Excluded Assets. The following assets of Seller
shall be excluded from the purchase and sale contemplated by this Agreement (the
"Excluded Assets"):
(a) Cash. All of Seller's cash on hand and
in banks and all right, title, and interest in and to all of Seller's bank
accounts.
(b) Non-Point of Sale Computer Hardware and
Software. All computer hardware and software used by Seller at the Restaurants
which is not point of sale computer hardware or software.
(c) Petty Cash and Certain Receivables.
Except as provided elsewhere herein, all petty cash held in the Restaurants at
3:00 p.m. local time for each such Restaurant on the date of Closing, notes
receivable, loans receivable, certificates of deposit, investment securities,
and allowances or credits due from vendors, suppliers, or service providers
accrued prior to the Closing, including, but not limited to, any credit card or
other accounts receivable from sales generated from the Restaurants prior to
3:00 p.m. local time for each Restaurant on the Closing Date, including, but not
limited to, the Denny's Credit Card Transfer Accounts. Seller shall provide One
Thousand Dollars ($1,000) in petty cash for each Restaurant site at the Closing.
(f) Books and Records. All of Seller's
books, records, and correspondence pertaining to the operation of the
Restaurants or to the operation of the assets or properties of Seller to be
transferred pursuant to this Agreement.
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(g) Real Property. Any real property owned
by Seller.
(h) Insurance Policies. All insurance
policies, including, but not limited to, real property insurance, liability
insurance, and workmen's compensation insurance, held by Seller.
(i) Other Assets. Any other assets of Seller
not specifically identified in Section 1.1 of this Agreement.
(j) Utility Deposit. All utility deposits
relating to the Restaurants.
(k) Escrow and Impound Accounts. Any escrow
and impound accounts for real estate and personal property taxes relating to the
Restaurants.
Section 2. Liabilities of Seller.
2.1 Liabilities to Remain with Seller. Seller shall
promptly pay or satisfy, as they become due, all obligations and liabilities of
Seller relating to the Restaurants existing on or prior to 3:00 p.m. on the
Closing Date, including, but not limited to, any obligation or liability of
Seller described in Section 2.3(b) and Section 20. Seller shall pay the balance
of any purchase or lease payments which come due after the Closing Date
concerning the point of sale hardware and software described in Section 1.1 (e).
2.2 Liabilities to be Assumed by Buyer. Upon the
conveyance, transfer, and assignment of the Purchased Assets to Buyer in
accordance with this Agreement, Buyer shall, except as provided in Section 2.3
below, assume and shall thereafter pay or satisfy, as they become due:
(a) except as otherwise provided herein, all
liabilities, obligations, or accruals relating to the operation of the
Restaurants accruing or relating to the period after 3:00 p.m. on the Closing
Date, including, but not limited to, all liabilities, obligations, or accruals
pursuant to the terms and provisions of all real estate leases on the Leased
Properties (the "Leases"), operating contracts, commitments, leases and other
agreements, and any sales, use, property, or transfer taxes arising as a result
of the transfer of the Purchased Assets by Seller to Buyer by virtue of the
consummation of the transactions contemplated hereby (the "Liabilities");
(b) all real estate and personal property
taxes arising from or relating to the Purchased Assets accruing on or after the
Closing Date; and
(c) the "Negative Working Capital" for the
Restaurants as of 3:00 p.m. on the Closing Date in an amount not to exceed One
Million Seven Hundred Thousand Dollars ($1,700,000). The Negative Working
Capital for each Restaurant shall be
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equal to the total of all accounts payable and any accrued liabilities for such
Restaurant, including, but not limited to, payroll and related benefits, sales
taxes, and other miscellaneous accruals related to such Restaurant. Seller shall
supply reasonable supporting documentation evidencing the total Negative Working
Capital for all of the Restaurants, which is estimated to be approximately One
Million Seven Hundred Thousand Dollars ($1,700,000). Buyer will assume such
Negative Working Capital by executing a promissory note (the "Negative Working
Capital Note") in the form set forth in Exhibit 1 to be delivered at the Closing
in the original principal amount of One Million Seven Hundred Thousand Dollars
($1,700,000), payable in full over the first eleven weeks immediately following
the Closing, in ten installments of $170,000 each beginning at the end of the
second week following the Closing Date and continuing on the last day of each of
the following ten weeks. The Negative Working Capital Note will contain cross
default provisions relating to the Promissory Note and will not permit Buyer to
set off amounts, if any, owed by Seller to Buyer pursuant to the terms of this
Agreement. Payment of the Negative Working Capital Note shall be secured by (i)
a Stock Pledge Agreement by and between Seller and Shareholder executed
contemporaneously with the execution and delivery of the Negative Working
Capital Note (the "Stock Pledge Agreement") in the form set forth in Exhibit 2;
(ii) a Guaranty executed by Shareholder (the "Guaranty) in the form set forth in
Exhibit 3; and (iii) a Second Mortgage ("Second Mortgage") on Buyer's property
located in Huntsville, Texas in the form set forth in Exhibit 4.
2.3 Liabilities Not Assumed by Buyer. Buyer shall not
be deemed by anything contained herein to have assumed:
(a) Any obligation or liability of Seller
arising from any tort claims made by a third party arising from actions or
failures to act by the Seller prior to the Closing;
(b) Any obligation or liability of Seller
relating to employees or independent contractors accruing on or prior to the
Closing Date, including, but not limited to, accrued salaries, other
compensation or benefits, severance payments, accrued vacations, pensions,
retirement plans, distributions or bonuses accruing on or prior to 3:00 p.m. on
the Closing Date, except for any Negative Working Capital up to One Million
Seven Hundred Thousand Dollars ($1,700,000) which shall be assumed and paid by
Buyer in accordance with Section 2.2(c); it being understood that, at or prior
to the Closing, any employment agreements between Seller and any employees
relating to the operation of the Restaurants will be terminated on or before the
Closing Date and none of the same will prevent any of such employees becoming
employees of Buyer after the Closing; it being further understood that Seller
shall fulfill any obligations relating to employees for accrued vacations prior
to Buyer's final payment under the Negative Working Capital Note; or
(c) Any obligation or liability of Seller to
any secured party of Seller.
Section 3. Purchase Price
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3.1 Amount and Payment of Purchase Price; Security.
As full and complete payment for the Purchased Assets, Buyer shall pay Seller
the aggregate sum of Twenty-Eight Million Seven Hundred Thousand Dollars
($28,700,000) (the "Purchase Price"), payable as follows:
(a) An amount equal to Twenty Five Million
Two Hundred Thousand Dollars ($25,200,000) payable at the Closing by wire
transfer of immediately available funds pursuant to Seller's instructions or any
other mutually agreeable method.
(c) Delivery at Closing of a Promissory Note
("Promissory Note") in the principal amount of One Million Eight Hundred
Thousand Dollars ($1,800,000) in the form of Exhibit 5. Payment of the
Promissory Note shall be secured by the Stock Pledge Agreement, Second Mortgage
and Guaranty; and
(d) Delivery at Closing of the Negative
Working Capital Note.
3.2 Allocation of Purchase Price. The total Purchase
Price (including, but not limited to, liabilities assumed) shall be allocated as
agreed by Buyer and Seller in accordance with the requirements of Section 1060
of the Internal Revenue Code of 1986, as amended, and any applicable Treasury
Regulations promulgated thereunder. If Buyer and Seller cannot agree, they shall
each prepare their own allocations of the Purchase Price. Buyer, Seller and
Shareholder, each at its own expense, shall file appropriate forms with the
Internal Revenue Service setting forth the information required to be furnished
to the Internal Revenue Service by Section 1060 and the applicable Treasury
Regulations thereunder.
Section 4. Intentionally Deleted.
Section 5. Seller's Representations and Warranties. To induce
Buyer and Shareholder to enter into this Agreement and for the benefit of Buyer
and Shareholder, Seller represents and warrants as follows:
5.1 Corporate Status and Authority. Seller is a
corporation duly organized, validly existing, and in good standing under the
laws of the state of Georgia, has the requisite corporate power and authority to
own, operate, and lease its assets and properties and to carry on its business
as now being conducted with respect to the operation of the Restaurants, and is
duly qualified to conduct the business of operating the Restaurants in all
jurisdictions where the Restaurants are located. The execution and delivery of
this Agreement, the consummation of the transactions contemplated hereby, and
the fulfillment of the terms hereof have been validly authorized by all
necessary corporate action of Seller and this Agreement constitutes the valid,
legal, and binding obligation of Seller enforceable against Seller in accordance
with its terms.
5.2 Ownership of Assets and Properties. Except as set
forth in
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Schedule 5.2, Seller has good and valid title to all of the Purchased Assets.
Except as set forth in Schedule 5.2, all of the Purchased Assets are owned free
and clear of all liens, mortgages, pledges, security interests, restrictions,
prior assignments, encumbrances, and claims.
5.3 Financial Statements. To Seller's knowledge, the
Financial Statements related to the Restaurants attached as Schedule 5.3 to this
Agreement are true, complete and correct and have been prepared in accordance
with generally accepted accounting principles. The Financial Statements fairly
present in all material respects a true, accurate, and complete statement of the
financial condition, assets, liabilities and results of operations pertaining to
the operations of the Restaurants as of the dates and for the periods set forth
therein.
5.4 Compliance with Laws and Other Regulations.
Except as set forth in Schedule 5.4, Seller has not received any notice from any
federal, state, or local authority or any insurance or inspection body that any,
and to its knowledge none, of the assets, properties, facilities, equipment or
business procedures or practices relating to the operation of the Restaurants
fails to comply in any material respect with any applicable law, ordinance,
regulation, building or zoning law, or requirement of any public authority or
body. Seller, to its knowledge, has in connection with the Restaurants, complied
with all laws (including, but not limited to, rules and regulations thereunder)
of federal, state, and local governments (and all agencies thereof) concerning
the environment, public health and safety, and employee health and safety, and
no charge, complaint, action, suit, proceeding, hearing, investigation, claim,
demand, or notice has been filed or commenced against Seller or its Restaurants
alleging any failure to comply with any such law or regulation.
5.5 Leases. The Leases are valid, binding, and
enforceable in accordance with their terms, and neither Seller nor, to Seller's
knowledge, any other party is in material default or in arrears nor has Seller
or, to Seller's knowledge, any other party committed any act or failed to
perform any obligation that, with the passage of time or the giving of notice or
both, would constitute a material default under any of the Leases.
5.6 Insurance. Seller currently has in force such
policies of insurance as are appropriate to the operation of the Restaurants,
including, but not limited to, the property and assets pertaining to the
Restaurants, in such amounts and against such risks as are customarily carried
and insured against by owners of comparable businesses, properties, and assets.
All such policies of insurance are in full force and effect, and Seller is not
in default, whether as to the payment of premiums or otherwise, under the terms
of any such policy. Seller has not received any notice from or on behalf of any
issuer of any such policy of its intention to cancel or refuse to renew any
policy issued by it or to increase the cost of premiums thereunder. Seller shall
maintain all such insurance through the Closing Date.
5.7 No Conflicts. Except as disclosed in Schedule 5.7
hereto, neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the fulfillment of the
terms hereof, will violate any provision of the
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articles of incorporation or bylaws of Seller or result in the breach of any
material term or provision of, or constitute a default under, or conflict with,
or cause the acceleration of any material obligation under, any loan agreement,
note, debenture, indenture, mortgage, deed of trust, lease, contract, agreement,
or other material obligation of any description to which Seller is a party or by
which it is bound, or any judgment, decree, order, or award of any court,
governmental body or arbitrator, or any applicable law, rule or regulation.
5.8 Litigation. Except as set forth in Schedule 5.8
hereto, there is no legal action, suit, arbitration, or other legal,
administrative, or governmental investigation, inquiry, or proceeding (whether
federal, state, local or foreign) pending or, to the Seller's knowledge,
threatened against Seller with respect to the Restaurants or the assets being
transferred pursuant to this Agreement.
5.9 Employees and Labor Matters. Seller is not
subject to any collective bargaining agreement with respect to the employees of
the Restaurants. To its knowledge, Seller is in substantial compliance with
respect to the operation of the Restaurants with all, and Seller has received no
notice of any material violation of any, federal or state laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours and, to its knowledge, is not engaged in any unfair labor
practice. To Seller's knowledge, no union or other labor organization has
attempted to organize any of the employees of the Restaurants.
5.10 Tax Matters.
(a) To its knowledge, Seller has filed all
sales taxes returns, payroll tax returns, and tax returns ("tax returns") that
it was required to file to all jurisdictions, both state and federal, which were
required to have been filed for any period or partial period accruing any such
tax liability prior to the Closing. All such tax returns were correct and
complete in all material respects. To its knowledge, all taxes owed by Seller
(whether or not shown on any tax return) have been paid. Seller currently is not
the beneficiary of any extension of time within which to file any tax return. To
its knowledge, no material claim has ever been made by an authority in a
jurisdiction where any of Seller does not file tax returns that it is or may be
subject to taxation by the jurisdiction. To its knowledge, there are no security
interests on any of the assets of any of Seller the arose in connection with any
failure (or alleged failure) to pay any tax.
(b) To its knowledge, Seller has withheld
and paid all taxes required to have been withheld and paid in connection with
material amounts paid or owing to any employee, creditor, independent
contractor, or other third party.
(c) To its knowledge, Seller has not waived
any statute of limitations in respect of taxes or agreed to any extension of
time with respect to a tax assessment or deficiency.
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Section 6. Buyer's Representations and Warranties. To induce
Seller to enter into this Agreement, Buyer and Shareholder, jointly and
severally, represent and warrant as follows:
6.1 Corporate Status and Authority. Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the state of Texas, has the requisite corporate power and authority to
own, operate, and lease the Restaurants and the Purchased Assets, and will by
the Closing be duly qualified to conduct the business of operating the
Restaurants in all jurisdictions in which the Restaurants are located. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been validly authorized by all appropriate
corporate action of Buyer, and this Agreement constitutes the valid and binding
obligation of Buyer enforceable in accordance with its terms.
6.2 Knowledge Regarding the Business. Buyer and
Shareholder are sophisticated investors and have experience in the management
and operation of business similar to those of the Restaurant and are therefore
familiar with the operation of the Restaurants and with the assets to be
purchased and the liabilities to be assumed under this Agreement. As a result,
Buyer and Shareholder possess sufficient knowledge of and information pertaining
to the Restaurants to enable each of them to make an informed decision regarding
the purchase of the Purchased Assets and assumption of the Liabilities pursuant
to this Agreement.
6.3 Condition of Assets. Buyer and Shareholder have
conducted or shall conduct their own physical inspection of the Restaurants and
the Purchased Assets. Buyer and Shareholder understand that, except to the
extent explicitly set forth herein, Seller makes no representation or warranties
regarding the Restaurants or the Purchased Assets, and Buyer and Shareholder
hereby acknowledge that the Restaurants and the Purchased Assets are being sold
on an "AS IS, WHERE IS" basis.
6.4 Financial Capacity. At the Closing, Buyer will
have the financial capacity to consummate the transaction contemplated herein.
6.5 Agreement Not in Breach of Other Instruments.
Except as set forth in Schedule 6.5, neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, nor the
fulfillment of the terms hereof, will violate any provision of the articles of
incorporation or by-laws of Buyer or result in the breach of any material term
or provision of, or constitute a default under, or conflict with, or cause the
acceleration of any material obligation under, any loan agreement, note,
debenture, indenture, mortgage, deed of trust, lease, contract, agreement, or
other material obligation of any description to which Buyer or Shareholder is a
party or by which either is bound, or any judgment, decree, order, or award of
any court, governmental body or arbitrator, or any applicable law, rule or
regulation.
6.6 Litigation. Except as set forth in Schedule 6.6
hereto, there is no legal action, suit, arbitration, or other legal
administrative or governmental investigation, inquiry
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or proceeding (whether federal, state, local, or foreign) pending or, to Buyer's
knowledge, threatened against Buyer or Shareholder.
Section 7. Further Representation and Warranties of
Shareholder.
To induce Seller to enter into this Agreement, and
for the benefit of Seller, Shareholder further represents and warrants that (i)
Shareholder has full power and authority to execute, deliver and perform his
obligations under this Agreement including, but not limited to, his obligations
under the Other Buyer/Shareholder Agreements (as defined below), and (ii) this
Agreement is a legal, valid, and binding obligation of Shareholder, enforceable
against him in accordance with its terms.
Section 8. Continuation and Survival of Representation and
Warranties.
Each of the representations and warranties contained
in this Agreement shall be true and correct on the date hereof and as of the
Closing Date with the same force and effect as if made on and as of that date,
except to the extent, if any, that such representations and warranties shall be
affected by transactions contemplated by this Agreement. All such
representations and warranties shall survive the consummation of the
transactions contemplated by this Agreement for a period of one year.
Section 9. Seller's Covenants.
9.1 Operation of Restaurants Prior to the Closing
Date. Between the date hereof and the Closing Date, Seller shall operate the
Restaurants in the regular, ordinary, and usual course and manner of Seller's
general business practices, shall maintain its "par stock level" of supplies,
inventory, and consumables at the "approved" levels customarily maintained by
Seller in its ordinary course of business, and shall maintain and keep in repair
and regular working order all equipment, fixtures, and furniture used in
connection with the Restaurants.
9.2 Access to Books, Records, and Restaurants. Seller
shall permit Buyer's authorized representatives access during normal business
hours to all of Seller's books, contracts, documents, and records related to the
operation of the Restaurants; provided, however, that Buyer's representative
provides notice to Seller of its intent to inspect such books, records, or
premises at least 48 hours in advance or such shorter period as is reasonably
acceptable to Seller. Seller shall use reasonable efforts to cooperate with
Buyer to allow Buyer's authorized representative reasonable access to employees
of the Restaurants and any applicable Restaurant records.
9.3 Hart-Scott Rodino. Seller shall make or cause to
be made any reports or filings that may be required to be made by or on behalf
of Seller or any of its affiliates pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") and other applicable federal and state
laws, rules, and regulations. Seller will provide any and
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all such information as is required to facilitate compliance with the HSR Act
and other applicable laws, rules, and regulations and if any investigation
results therefrom. Seller shall pay all costs and expenses of any HSR reports or
filings required by law to be made by Seller. Seller shall use its best efforts
to secure waiver of any applicable waiting periods, if necessary. Buyer shall
fully cooperate with respect thereto.
Section 10. Buyer's Covenants.
10.1 Hart-Scott Rodino. Buyer shall make or cause to
be made any reports or filings that may be required to be made by or on behalf
of Buyer or any of its affiliates pursuant to the HSR Act and other applicable
federal and state laws, rules, and regulations. Buyer will provide any and all
such information as is required to facilitate compliance with the HSR Act and
other applicable laws, rules, and regulations and if any investigation results
therefrom, Buyer shall fully cooperate with respect thereto. Buyer shall pay all
costs and expenses of any HSR reports or filings required by law to be made by
Buyer. Buyer shall use its best efforts to secure waiver of any applicable
waiting periods, if necessary. Seller shall fully cooperate with respect
thereto.
10.2 Notification of Denny's Contacts. Buyer shall
promptly provide to Seller copies of any and all correspondence, agreements, and
documents received from or provided to Denny's Inc., DFO, Inc. or their
affiliates by Buyer or Shareholder relating to the transactions contemplated by
this Agreement.
Section 11. Buyer's and Shareholder's Conditions Precedent to
the Closing. The obligations of Buyer and Shareholder hereunder and their
obligations to consummate the Closing provided for herein shall be subject to
the following conditions precedent, any one or more of which may be waived in
writing by Buyer:
11.1 Compliance With Agreements and Covenants. Seller
shall have performed and complied with each of its agreements, covenants, and
obligations to be performed by it on or prior to the Closing Date except those
calling for performance after the Closing Date.
11.2 Accuracy of Representations and Warranties. The
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects at the Closing Date, with the same
force and effect as if made on and as of that date.
11.3 Governmental Consents. All consents, approvals,
orders, and authorizations of any governmental authorities required in
connection with the completion of any of the transactions contemplated by this
Agreement by the Seller shall have been obtained on or before the Closing Date.
11.4 Secured Party Releases. Seller shall have
obtained and delivered to Buyer by the Closing releases from the secured parties
of Seller with respect to all UCC financing statements filed in connection with
the Purchased Assets by such secured parties.
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11.5 Termination of HSR Act Waiting Periods . Any and
all applicable waiting periods under the HSR Act with respect to the
transactions contemplated by this Agreement shall have expired or shall have
been terminated.
11.6 Financing. Buyer shall have obtained all third
party financing Buyer deems necessary in order to consummate the transaction
described in this Agreement. Buyer shall deliver the approval of its proposed
lender of a proposed loan to Buyer no later than February 15, 1998.
11.7 Opinion of Counsel of Buyer. Seller shall have
received an opinion of Dishongh & Thompson, a Professional Corporation, limited
to Texas law, in form and substance reasonably satisfactory to Seller and its
counsel, to the effect that:
(a) Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the state of Texas and
has the corporate power and authority under the law of such state to own, lease,
and operate its properties, to carry on its business as now being conducted, and
to consummate the transactions contemplated by this Agreement.
(b) All necessary corporate proceedings of
the Board of Directors and shareholders of the Buyer to authorize the execution
and delivery of the this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly and validly taken.
(c) The Buyer and the Shareholder, as
applicable, have the power and authority to execute and deliver this Agreement
and the other agreements, instruments and documents ("Other Buyer/Shareholder
Agreements") to be executed and delivered by the Buyer and/or Shareholder
pursuant to this Agreement, and this Agreement and the Other Buyer/Shareholder
Agreements have been duly authorized, executed, and delivered by the Buyer and
the Shareholder, as applicable, and constitute legal, valid, and binding
obligations of the Buyer and the Shareholder enforceable in accordance with
their terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium, or other similar laws now or hereafter
in effect relating to creditors' rights, (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the defenses of the court before which any proceeding relief may
be brought to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought, (iii) principles of equity which may
limit equitable remedies, and (iv) the rights of the United States under the
Federal Tax Lien Act of 1966.
(d) To the knowledge of counsel, the
consummation of the transactions contemplated by this Agreement will not violate
or result in a breach of or constitute a default by the Buyer or the Shareholder
under any provision of any material indenture, mortgage, lien, lease, contract,
instrument, order, judgment, decree, award, ordinance, regulation, or any other
restriction of any kind or character known to counsel, to which the Buyer or the
Shareholder is a party prior to the Closing or by which they are bound prior to
the
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Closing.
11.8 Operation of Restaurants. Buyer has reasonably
determined that Seller has operated its Restaurants as provided in Section 9.1.
11.9 Consents and Approvals. Within five (5) business
days after execution of this Agreement, Buyer shall have obtained all necessary
consents and approvals from Denny's Inc. and/or DFO, Inc. with respect to
becoming an approved franchisee for the Restaurants as of the Closing Date.
Seller understands that the Denny's franchisor has a right of first refusal to
acquire the Restaurants and that, in the event such right is exercised, this
Agreement shall be null and void. Seller understands that in the event the
Denny's franchisor elects to become a party to this transaction, Seller and
Buyer shall use their best efforts to adjust the Purchase Price on mutually
agreeable terms to reflect any change in the Restaurants being acquired by Buyer
or other applicable terms of the transaction. Buyer shall have obtained all
consents required from its creditors and other third parties in connection with
completion of any of the transactions contemplated by this Agreement on or
before the Closing Date, unless the failure to obtain a consent does not have a
materially adverse effect on the Buyer or its business.
11.10 Real Property Leases. The Parties shall have
obtained landlord consents to the sublease of the Leased Properties to Buyer in
accordance with a Master Sublease Agreement ("Master Sublease Agreement") in the
form of Exhibit 6. The Parties shall cooperate in connection with obtaining all
required landlord consents. Buyer shall pay all costs of and expenses associated
with the sublease of the Leased Properties.
11.11 Equipment Leases. The Parties shall have
obtained the consents of any owners of equipment leased to Seller to the
assignment of such equipment leases to Buyer and the release of Seller from any
liabilities or obligations thereunder except the liabilities Seller has agreed
to pay as provided in this Agreement. Buyer shall pay all costs and expenses
associated with the assignment of any such equipment leases, except as otherwise
provided herein. The Parties shall cooperate in obtaining any such consents.
Buyer shall have approved the terms of such equipment leases.
11.12 Approval of Form of Documents. The form and
content of all Schedules to be attached hereto, and all documents to be attached
hereto as Exhibits, shall have been approved and agreed to by Buyer and
Shareholder, which approval shall not be unreasonably withheld or delayed.
11.13 Delivery of Documents. All documents required
to be delivered at the Closing by Seller under Section 13.1 shall have been
delivered or tendered at the Closing.
Section 12. Seller's Conditions Precedent to the Closing.
The obligations of Seller hereunder and its obligations to consummate the
Closing provided for
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herein shall be subject to the following conditions precedent, any one or more
of which may be waived in writing by Seller:
12.1 Compliance with Agreements and Covenants. Buyer
and Shareholder shall have performed and complied with each of their respective
agreements, covenants, and obligations to be performed by them hereunder on or
prior to the Closing Date except those calling for performance after the Closing
Date.
12.2 Accuracy of Representations and Warranties. The
representations and warranties of Buyer and Shareholder contained in this
Agreement shall be true and correct in all material respects at the Closing
Date, with the same force and effect as if made on and as of that date.
12.3 Real Property Leases. Buyer shall have obtained
landlord consents to the sublease of the Leased Properties to Buyer in
accordance with a Master Sublease Agreement ("Master Sublease Agreement") in the
form of Exhibit 6. Seller shall cooperate with Buyer in connection with
obtaining all required landlord consents. Buyer shall pay all costs of and
expenses associated with the sublease of the Leased Properties.
12.4 Equipment Leases. Buyer shall have obtained the
consents of any owners of equipment leased to Seller to the assignment of such
equipment leases to Buyer and the release of Seller from any liabilities or
obligations thereunder except as otherwise provided herein. Buyer shall pay all
costs and expenses associated with the assignment of any such equipment leases.
Seller shall cooperate with Buyer in obtaining any such consents.
12.5 Transfer of Obligations, Liabilities and
Ancillary Assets. Buyer shall have made such arrangements as may be necessary to
transfer any obligations, liabilities or ancillary assets to the Restaurants,
including, but not limited to, (a) telephone bills, utility charges, and those
obligations and liabilities set forth in Section 2, and (b) permits, licenses,
certificates of occupancy, government approvals and marketing materials, into
the name of Buyer, effective as of the Closing Date.
12.6 Consents and Approvals. Buyer shall have
obtained all necessary consents and approvals from Denny's Inc. and/or DFO, Inc.
with respect to the assignment or sublease of any of the Leased Properties and
the franchise transfers with respect to the Restaurants, and Seller shall have
been released from liability under all franchise agreements. Buyer understands
that the Denny's franchisor has a right of first refusal to acquire the
Restaurants and that, in the event such right is exercised, this Agreement shall
be null and void. Buyer understands that in the event the Denny's franchisor
elects to become a party to this transaction, Seller and Buyer shall use their
best efforts to adjust the Purchase Price on mutually agreeable terms to reflect
any change in the Restaurants being acquired by Buyer or other applicable terms
of the transaction. Buyer shall have obtained all necessary consents and
approvals from its creditors and other third parties. Buyer's Board of Directors
shall have authorized the Buyer to consummate the transactions contemplated by
this Agreement.
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12.7 Governmental Consents. All consents, approvals,
orders, and authorizations of any governmental authorities required in
connection with the completion of any of the transactions contemplated by this
Agreement by the Buyer shall have been obtained on or before the Closing Date.
12.8 Termination of HSR Act Waiting Periods. Any and
all applicable waiting periods under the HSR Act with respect to the
transactions contemplated by this Agreement shall have expired or shall have
been terminated.
12.9 Release of Secured Creditors. Seller shall have
obtained release of any liabilities to its secured creditors with respect to the
Leased Properties or any equipment leases.
12.10 Opinion of Counsel of Seller. Buyer shall have
received an opinion of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, a
Professional Association, limited to Arizona or Georgia law, as applicable, in
form and substance reasonably satisfactory to Buyer and its counsel, to the
effect that:
(a) Seller is a corporation duly organized,
validly existing, and in good standing under the laws of the state of Georgia
and has the corporate power and authority under the laws of such state to own,
lease, and operate its properties, to carry on its business as now being
conducted, and to consummate the transactions contemplated by this Agreement.
(b) All necessary corporate proceedings of
the Board of Directors and shareholders of the Seller to authorize the execution
and delivery of the this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly and validly taken.
(c) The Seller has the corporate power and
authority to execute and deliver this Agreement, and this Agreement has been
duly authorized, executed, and delivered by the Seller, and constitutes a legal,
valid, and binding obligation of the Seller enforceable in accordance with its
terms, except that (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium, or other similar laws now or hereafter
in effect relating to creditors' rights, (ii) the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefore may be brought, (iii) principles of equity which may limit equitable
remedies, and (iv) the rights of the United States under the Federal Tax Lien
Act of 1966.
(d) To the knowledge of counsel, the
consummation of the transactions contemplated by this Agreement will not violate
or result in a breach of or constitute a default by the Seller under any
provision of any material indenture, mortgage, lien, lease, contract,
instrument, order, judgment, decree, award, ordinance, regulation, or any other
restriction of any kind or character known to counsel, to which the Seller is a
party prior to the
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Closing or by which it is bound prior to the Closing.
O'Connor, Cavanagh, Anderson, Killingsworth & Beshears may
rely on counsel admitted in the state of Georgia with respect to matters of
Georgia law.
12.11 Approval of Form of Documents. The form and
content of all Schedules to be attached hereto, and all documents to be attached
hereto as Exhibits, shall have been approved and agreed to by Seller, which
approval shall not be unreasonably withheld or delayed.
12.12 Delivery of Documents. All documents required
to be delivered by Buyer and Shareholder at the Closing under Section 13.2 shall
have been delivered or shall be tendered at the Closing.
Section 13. The Closing.
The closing under this Agreement (the "closing")
shall take place at the offices of O'Connor, Cavanagh, Anderson, Killingsworth &
Beshears, P.A., One East Camelback Road, Suite 1100, Phoenix, Arizona
85012-1656, on March 15, 1998 (subject to the right of either Buyer or Seller,
if it has satisfied all of its conditions precedent to the Closing, to extend
the Closing for up to 30 days in the event that the other party has not
satisfied all of its conditions precedent to the Closing), or at such other
date, time and place as may be agreed upon by Seller and Buyer (the "Closing
Date"), and provided that the Closing shall be automatically extended for the
period of any HSR waiting period and the time necessary for Denny's Inc. or DFO,
Inc. to approve the transactions in this Agreement.
13.1 Deliveries by Seller. At the Closing, Seller
shall deliver:
(a) Such deeds, bills of sale, instruments
of assignment, and other instruments and documents as may be necessary to convey
to Buyer title to all the applicable assets and properties to be transferred
hereunder, including, but not limited to, a Bill of Sale, Assignment and
Assumption Agreement (the "Bill of Sale") in the form attached as Exhibit 7
hereto.
(b) The certificate of Seller that all
representations and warranties of Seller contained in this Agreement are true
and correct in all material respects at the Closing Date.
(c) The certificate of the Secretary of
Seller certifying to the resolutions constituting all necessary corporate action
by the Board of Directors of Seller to authorize or ratify the consummation of
the transactions provided for herein.
(d) Copies of all consents or approvals
described in Section 11.3 and 11.4.
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(e) A certificate of Seller that to its
knowledge at Closing;
(i) Subsequent to the date of this
Agreement and to the date of Closing, no party (including the Seller) has
accelerated, terminated, modified, or canceled any material contract, lease,
sublease, license or sublicense (or series of related contracts, leases,
subleases, licenses, and sublicenses) with respect to the Restaurants other than
in the ordinary course of business;
(ii) Subsequent to the date of this
Agreement and to the date of Closing, Seller has not experienced any material
damage, destruction, or loss (whether or not covered by insurance) with respect
to the Restaurants;
(iii) Subsequent to the date of this
Agreement and to the date of Closing Seller has not adopted any (A) bonus, (B)
profit-sharing, (C) incentive compensation, (D) pension, (E) retirement, (F)
medical, hospitalization, life, or other insurance, (G) severance, or (H) other
plan, contract, or commitment for any of its Restaurant employees, or modified
or terminated any such existing plan, contract, or commitment; and
(iv) Subsequent to the date of this
Agreement and to the date of Closing, there has not been any other material
occurrence, event, incident, action, failure to act, or transaction outside the
ordinary course of business involving the Restaurants.
(f) The Bill of Sale.
(g) A Certificate of Good Standing (or
Qualification) from the Secretary of state of the state of Georgia and of each
other state in which the Restaurants are located where the Seller is required to
be qualified, each such certificate dated within five days prior to the Closing.
(h) The Master Sublease Agreement,
transition services Agreement ("Transition services Agreement") in the form of
Exhibit 8 hereto, Restaurant Conversion Agreement ("Restaurant Conversion
Agreement") in the form of Exhibit 9 hereto, and such other instruments and
documents as may be reasonably requested by the Buyer or Shareholder to
consummate the transactions contemplated by this Agreement.
All certificates and other documents delivered by Seller shall
be in form reasonably satisfactory to Buyer and counsel for Buyer.
13.2 Deliveries by Buyer and Shareholder. At the
Closing, Buyer and Shareholder shall deliver:
(a) An amount equal to Twenty Five Million
Two Hundred Thousand Dollars ($25,200,000) or such other portion of the Purchase
Price agreed by Buyer and Seller in accordance with Section 3.1 by wire transfer
of immediately available funds or by
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other means mutually agreeable between Buyer and Seller.
(b) The Negative Working Capital Note,
Promissory Note, Stock Pledge Agreement, Transition Services Agreement,
Restaurant Conversion Agreement, and such other instruments and documents as may
be reasonably requested by the Seller to consummate the transactions
contemplated by this Agreement.
(c) Such documents as may be necessary to
perfect Seller's security interests granted pursuant to the Stock Pledge
Agreement.
(d) The certificate of Shareholder, in his
personal capacity and as a duly authorized officer of Buyer, that all
representations and warranties of Buyer contained in this Agreement are true and
correct in all material respects as of the Closing Date.
(e) The certificate of Shareholder that all
representation and warranties of Shareholder contained in this Agreement are
true and correct in all material respects as of the Closing Date.
(f) The Certificate of Buyer's Secretary
certifying to the resolutions constituting all necessary action by the Board of
Directors and by the shareholders of Buyer to authorize the consummation of the
transactions provided for herein.
(g) The Bill of Sale.
(h) A Certificate of Good Standing (or
Qualification) from the Secretary of state of the state of Texas and of each
other state in which the Restaurants are located where the Buyer is required to
be qualified, each such certificate dated within five days prior to the Closing.
(i) Copies of all consents or approvals
described in Sections 12.3, 12.4, 12.5, 12.6 and 12.7.
All certificates and other documents delivered by Buyer and
Shareholder shall be in form reasonably satisfactory to Seller and counsel for
Seller.
13.3 Prorations. All ad valorem taxes shall be
prorated at Closing.
Section 14. Confidentiality. Buyer will receive from Seller
certain information respecting the financial condition, assets, customers,
recipes, and products of Buyer (collectively, the "Information"). Buyer and
Shareholder acknowledge and agree that the Information furnished to Buyer is
proprietary and confidential and that the unrestricted disclosure or use of any
Information could result in substantial damage to Seller, which damage could be
irreparable and extremely difficult to quantify. Accordingly, in consideration
of the furnishing of such Information by Seller, Buyer and Shareholder agree as
follows:
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(a) All Information heretofore or hereafter
furnished to Buyer or any one or more of Buyer's, shareholders, officers,
directors, employees, lenders, agents, or representatives in connection with or
during the course of discussions or negotiations regarding the transactions
contemplated by this Agreement constitutes and shall constitute and shall be
treated by Buyer as proprietary and confidential information of Seller. Buyer
shall limit access to the Information only to those employees, lenders, and
representatives of Buyer whose duties require them to have access to the
Information.
(b) Unless the Closing occurs as and when
contemplated by this Agreement, neither Buyer nor any of its shareholders,
officers, directors, employees, agents or representatives will use any of the
Information directly or indirectly for competitive purposes or for any purpose
without the prior written consent of Seller.
(c) Buyer and Shareholder shall accept full
responsibility for any use or disclosure of any Information by Buyer or any of
its shareholders, officers, directors, employees, lenders, agents, or
representatives in contravention of the provisions of this Section.
(d) Neither Buyer nor any of its
shareholders, officers, directors, employees, agents, or representatives will
transfer originals, copies or any other reproductions of the Information to any
third party, for any reason whatsoever, without prior written consent of Seller,
which consent may be conditioned on the requirement that Seller obtain from the
third party a written agreement providing for the third party to be subject to
the same restrictions and requirements respecting use, non-disclosure and
confidentiality as contained in this Section. Seller acknowledges and consents
that certain information regarding the Restaurants may be released to Buyer's
lenders, attorneys, accountants and other identified professionals to consummate
this transaction, and to Denny's Inc. and DFO, Inc.
(e) To the extent that the Closing does not
occur, all Information shall remain the property of Seller. All documents that
shall have been furnished to Buyer or any one or more of its shareholders,
officers, directors, employees, agents or representatives and all copies or
other reproductions of any and all such documents, shall be returned to Seller
at Buyer's cost and expense and Buyer and its officers, directors, employees,
agents, and representatives shall maintain confidential all Information, facts,
matters, and materials contained therein.
(f) Buyer and Shareholder acknowledge and
agree that the use or disclosure of any of the Information in contravention of
the provisions of this Section would result in substantial damage to Seller,
which damage would be irreparable and extremely difficult to quantify; and
Seller would not have an adequate remedy at law. Accordingly, Buyer and
Shareholder agree that in the event of any actual or threatened violation of
this Section, Seller shall have right and privilege to obtain, in addition to
any other remedies that may be available, equitable relief, including, but not
limited to, temporary and permanent injunctive relief, to cease or prevent any
actual or threatened violation of any provision of this Section.
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(g) Notwithstanding any other provisions of
this Agreement to the contrary, the provisions of this Section shall survive the
Closing or the termination of this Agreement.
Section 15. Further Assurances.
Seller, Buyer, and Shareholder shall execute and
deliver all such other instruments and take all such other action as any party
may reasonably request from time to time, before or after the Closing, in order
to effectuate the transactions provided for herein. The parties shall cooperate
with each other and with their respective counsel and accountants in connection
with any steps to be taken as a part of their respective obligations under this
Agreement, including, but not limited to, the preparation of financial
statements. Buyer and Seller shall use their respective best efforts to obtain
any approvals or consents of third parties that may be required in order to
consummate the transactions contemplated by this Agreement. To the extent that
the terms of any contract, commitment, lease, or other agreement to which Seller
is a party and that is to be assigned or transferred to Buyer pursuant to this
Agreement (each, an "Other Agreement") requires the consent of any other party
to such assignment or transfer, Seller and Buyer shall use their respective best
efforts to obtain such consent, except that, notwithstanding the failure of
Seller to obtain any one or more consents to any Other Agreement as of the
Closing Date (a) Buyer shall be responsible for all payments, obligations, md
other liabilities arising under each Other Agreement after the Closing Date, and
(b) Seller's failure to obtain any of such consents shall not constitute a
breach by Seller of any representation, warranty, or covenant made by Seller in
this Agreement.
Section 16. Indemnification by Buyer and Shareholder.
(a) Buyer and Shareholder.Buyer and Shareholder,
jointly and severally, shall indemnify and hold Seller, and its employees,
agents, and representatives harmless for, from, and against all liabilities,
suits, actions, proceedings, claims, demands, losses, damages, fees, costs,
taxes, penalties, and expenses (including reasonable attorneys' and accountants'
fees) caused by, arising out of, or otherwise related to the ownership of the
Purchased Assets and operation of the Restaurants subsequent to the Closing
Date.
(b) Seller. Seller shall indemnify and hold Buyer,
and its employees, agents, and representatives harmless for, from, and against
all liabilities, suits, actions, proceedings, claims, demands, losses, damages,
fees, costs, taxes, penalties, and expenses (including reasonable attorneys' and
accountants' fees) caused by, arising out of, or otherwise related to the
ownership of the Purchased Assets and operation of the Restaurants prior to and
on the Closing Date, other than in connection with liabilities and obligations
assumed by the Buyer pursuant to this Agreement or the Other Buyer/Shareholder
Agreements.
Section 17. Brokers and Finders.
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Each of the parties hereto represents and warrants to
the other that it has not employed or retained any broker or finder in
connection with the transactions contemplated by this Agreement nor has it had
any dealings with any person which may entitle that person to a fee or
commission from any other party hereto. Each of the parties shall indemnify and
hold the other harmless for, from and against any claim, demand or damages
whatsoever by virtue of any arrangement or commitment made by it with or to any
person that may entitle such person to any fee or commission from the other
parties to this Agreement.
Section 18. Non-Assignable Contracts.
Within thirty (30) days after the date this Agreement
is made and entered into, Seller shall identify to Buyer all material contracts,
and whether such contracts are assignable. At Buyer's sole option, subject to
Section 1.1(c), if any of Purchased Assets include any Non-Assignable Contracts,
as hereinafter defined, the Closing will not constitute an assignment or an
attempted assignment of such Non-Assignable Contracts. Instead, Seller will
assign Non-Assignable Contracts to the Buyer if and when such assignment is
permitted. To the extent permitted by applicable law and the terms of such
contracts, Non-Assignable Contracts will be held by Seller, in trust for Buyer
and the covenants and obligations thereunder will be performed by Buyer in the
name of Seller and all benefits and obligations existing thereunder will be for
the account of Buyer. Seller will take or cause to be taken such action in its
name to provide Buyer with the benefits thereof and to effect the collection of
money due and payable under each Non-Assignable Contract as if such
Non-Assignable Contract had been assigned as of the Closing Date and Seller will
promptly pay over to Buyer all money received by it with respect to all
Non-Assignable Contracts. As and from the Closing Date, Seller authorizes Buyer,
to the extent permitted by applicable law and the terms of the Non-Assignable
Contracts, at Buyer's expense, to perform all of Seller's obligations under each
Non-Assignable Contract. As and from the Closing Date, Seller shall provide such
reasonable assistance as may be required and requested, to amend or seek to
amend, any Non-Assignable Contract (except to the extent such action would
materially increase Seller's liabilities under such Non-Assignable Contract). If
Seller or Buyer is unable to obtain assignment of any Non-Assignable Contract or
if Buyer is unable to obtain the full benefit thereof, Buyer may endeavor to
enter into a new contract, lease, equipment lease, or license and/or to obtain
the benefit of new contractual rights, warranty rights and transferable
licenses, or permits, as the case may be satisfactory to Buyer in substitution
for each Non-Assignable Contract.
For the purposes of this Agreement, "Non-Assignable
Contract" means any contract or agreement:
(i) the assignment of which at the Closing would
constitute a breach thereof;
(ii) the assignment of which at the Closing would
constitute a breach thereof without the consent of a third party and such
consent has not been contained;
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(iii) in respect to which the rights thereunder and
the remedies for the enforcement thereof to Seller would not pass to Buyer at
the Closing; or
(iv) the assignment of which would at the Closing
contravene applicable law or a provision of any of the foregoing.
Section 19. Post Closing Covenants of Buyer and Shareholder.
19.1 New Leases. Buyer and Shareholder shall use
their best efforts to enter into a new lease (a "New Lease") for each of the
Leased Properties and for any equipment covered by any equipment lease
agreements (the "Equipment Lease Agreements") with respect to which the Seller
has waived the provisions of Section 12.4, such that Seller's lease with respect
to each of the Leased Properties and the equipment leases with respect to the
Equipment Lease Agreements shall be cancelled or terminated and Seller shall be
released from all of its duties and obligations under each such Lease and
Equipment Lease Agreement immediately upon the effectiveness of the New Lease
for such Leased Property or the equipment covered by such Equipment Lease
Agreement. For so long as any amount of principal, interest, or any other
obligation remains outstanding under the Promissory Note, each New Lease shall
contain provisions, satisfactory to Seller, permitting any of Seller's secured
creditors to place a leasehold mortgage upon all of Buyer's leasehold interests
under such New Lease, provided the leasehold mortgage is subordinate to any
leasehold mortgage held by Buyer's lender.
19.2 Employees. Simultaneously with or immediately
following the Closing, Seller shall terminate all employees employed at the
Restaurants by Seller, excluding any employees whose employment responsibilities
extend to restaurants owned or operated by Seller other than the Restaurants.
Except for the District Managers and the Supervising Regional Vice President
identified by Seller, Buyer shall offer employment to all employees employed at
the Restaurants by Seller as of the Closing (the "Continuing Employees") at an
identical rate of pay or salary, and with the same seniority, existing
immediately prior to the Closing Date. Nothing in this Agreement, however, shall
limit in any way the right of Buyer to change the rate of pay or salary of any
Continuing Employee, or prevent Buyer from terminating the employment of any
Continuing Employee after the Closing Date.
19.3 Transfer of Obligations and Liabilities. Within
ten days after the Closing Date, Buyer shall have made such arrangements as may
be necessary to transfer any obligations or liabilities relating to the
Restaurants, including, but not limited to, telephone bills and utility charges.
19.4 Maintenance of Purchased Assets and Leased
Properties. At all times subsequent to the date of the Closing during which any
amount of principal or accrued but unpaid interest under the Promissory Note
remains outstanding or during which Seller remains liable under any Leased
Properties or Equipment Lease Agreements, Buyer shall keep the Purchased Assets
in the same operating condition as of the date hereof, normal wear and tear
excepted, and Buyer shall perform, at Buyer's sole cost and expense, all
customary repairs and
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maintenance necessary to maintain the Purchased Assets in such condition.
19.5 Maintenance of Insurance. At all times
subsequent to the date of the Closing during which any amount of principal or
accrued but unpaid interest under the Promissory Note remains outstanding or
during which Seller remains liable under any Leased Properties or Equipment
Lease Agreements, Buyer shall maintain in force such policies of insurance as
are appropriate to the operation of the Restaurants, including, but not limited
to, the property and assets pertaining to the Restaurants, are in such amounts
and against such risks as are customarily carried and insured against by owners
of comparable businesses, properties and assets.
19.6 Employees and Labor Matters. At all times
subsequent to the date of the Closing during which any amount of principal or
accrued but unpaid interest under the Promissory Note remains outstanding or
during which Seller remains liable under any Leased Properties or Equipment
Lease Agreements, Buyer shall comply with all federal, state, and local laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours and unfair labor practices.
19.7 Maintenance of Corporate Status and Authority.
At all times subsequent to the date of the Closing during which any amount of
principal or accrued but unpaid interest under the Promissory Note remains
outstanding or during which Seller remains liable under any Leased Properties or
Equipment Lease Agreements, Buyer shall continue as a corporation duly
organized, validly existing and in good standing under the laws of the state of
Texas with the requisite corporate power and authority to own, operate, and
lease its assets and properties and to carry on its business with respect to the
operation of the Restaurants.
19.8 Compliance with Laws and Other Regulations. At
all times subsequent to the date of the Closing during which any amount of
principal or accrued but unpaid interest under the Promissory Note remains
outstanding or during which Seller remains liable under any Leased Properties or
Equipment Lease Agreements, neither Buyer nor any of its employees involved in
the operation of the Restaurants shall fail to comply in any material respect
with any applicable law, ordinance, regulation, building, or zoning law, or
requirement of any public authority or body relating to the operation of the
Restaurants.
19.9 Covenants in Security Agreement. At all times
during which any amount of principal or accrued but unpaid interest under the
Promissory Note remains outstanding or Seller remains liable under any Leased
Properties or Equipment Lease Agreements, Buyer shall, and Shareholder shall
cause Buyer to, comply with all of Buyer's covenants set forth in the Other
Buyer/Shareholder Agreements.
19.10 Maintenance of Shareholder's Control of Buyer;
Transfer of Assets. At all times subsequent to the Date of Closing during which
any amount of principal or accrued but unpaid interest under the Promissory Note
remains outstanding or during which Seller remains liable under any Leased
Properties or Equipment Lease Agreements, (i) Buyer shall not
23
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(and shall not permit any subsidiary to) make or declare any distributions or
dividends to any shareholder (other than year-end distributions to its
shareholders and/or their spouses in an amount not to exceed their respective
income tax liability arising as a result of Buyer's status as a S corporation,
if applicable) or issue any shares of its capital stock or grant any option,
warrant, or other right to purchase or to convert any obligation into shares of
Buyer's capital stock in an amount that, in the aggregate, would reduce
Shareholder's ownership of the combined voting power of Buyer's equity
securities to an amount less than 51% of Buyer's voting stock on a fully diluted
basis; (ii) Shareholder shall not, directly or indirectly, sell, offer to sell,
pledge, transfer, assign, or otherwise, dispose of or grant any option or other
right to acquire Shareholder's shares of Buyer's capital stock in an amount
that, in the aggregate, would reduce Shareholder's ownership of the combined
voting power of Buyer's equity securities to less than 51% of Buyer's voting
stock on a fully diluted basis; and (iii) without the prior written consent of
Seller, Buyer shall not (and shall not permit any subsidiary to), and
Shareholder shall not cause or permit Buyer or any of its subsidiaries to,
directly or indirectly, sell, pledge, transfer, assign, or otherwise dispose of
any of the Restaurants or the Purchased Assets, other than assets disposed of in
the ordinary course of business associated with the operation of the
Restaurants. Notwithstanding anything to the contrary contained herein, Buyer
may pay any installments which come due under any loan to Buyer from any
shareholder or other corporation owned or controlled by any shareholder. Buyer
shall provide information to Seller on the amount of any current loans to any
such persons as of the Closing Date. Seller hereby expressly consents to the
pledge of or security interest in any assets of Buyer in favor of its lender in
connection with Buyer's financing of the transactions contemplated by this
Agreement.
19.11 By-pass System. At all times subsequent to the
date of Closing during which any amount of principal or accrued but unpaid
interest under the Promissory Note remains outstanding or during which Seller
remains liable under any Leased Properties or Equipment Lease Agreements, Buyer
shall use Denny's Inc. "By-pass" system for all credit card transactions.
Section 20. Post Closing Covenants of Seller.
Seller shall be responsible for all obligations and
liabilities of Seller with respect to any employees employed at the Restaurants
arising prior to the Closing Date, including, but not limited to, all such
obligations of Seller for salaries, vacation and holiday pay, severance
payments, bonuses, retirement benefits, welfare benefits, and other forms of
compensation, benefits, or other payments or liabilities of Seller arising under
Title X of the Consolidated Omnibus Budget Reconciliation Act of 1986.
Section 21. Termination.
21.1 Right to Terminate. Notwithstanding anything to
the contrary contained herein, this Agreement and the transactions contemplated
hereby may be terminated at any time on or after March 15, 1998 (subject to the
right of either Buyer or Seller, if it has satisfied all conditions precedent
required of it by the Closing, to extend the Closing for up to
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thirty (30) days if the other party has not satisfied all conditions required of
it by the Closing) (a) by Buyer if the conditions precedent set forth in Section
11 are not satisfied or waived in writing by Buyer; or (b) by Seller if the
conditions precedent set forth in Section 12 are not satisfied or waived in
writing by Seller.
21.2 Remedies. No party shall be limited to the
termination right granted in Section 21.1 hereof by reason of the nonfulfillment
of any condition precedent to such party's closing obligations or a breach of
another party's representations and warranties, but may, in the alternative,
elect to do one of the following:
(a) Proceed to Close. Proceed to Closing
despite the nonfulfillment of any condition precedent to its obligation to
proceed to Closing, it being understood that the consummation of the
transactions contemplated herein shall not be deemed a waiver of a breach of any
representation, warranty, or covenant or of any party's rights and remedies with
respect thereto.
(b) Decline to Close. Decline to proceed to
Closing, terminate this Agreement as provided in Section 21.1 hereof, and
thereafter seek damages as limited by, and only to the extent permitted in,
Section 21.3 hereof.
21.3 Right to Damages. If this Agreement is
terminated pursuant to this Section 21, no party hereto shall have any liability
or obligation to the other; provided, however, that each party shall remain
liable for (a) any willful breach of any of the party's representations,
warranties, and covenants contained in this Agreement, and (b) any willful
failure by the party to perform any of its or their obligations or agreements
contained in this Agreement, in which case the party shall be liable for all of
the other parties' out-of-pocket costs and expenses which were incurred in
connection with the negotiations and preparation of this Agreement and all of
the other documents related to this transaction and those costs and expenses
which are incurred by the other party in pursuing such rights and remedies
(including reasonable attorneys' fees), in an amount not to exceed Two Hundred
Thousand Dollars ($200,000).
21.4 Return of Documents on Termination. In the event
of a termination, (i) Buyer and Shareholder agree to return to Seller any and
all documents and copies and extracts therefrom that Buyer or Shareholder
obtained pursuant to this Agreement, and (ii) Seller agrees to return to Buyer
and Shareholder any and all documents and copies and extracts therefrom that
Seller obtained pursuant to this Agreement.
Section 22. General Provisions.
22.1 Definition of Knowledge. As used in this
Agreement, (i) the term "knowledge" with respect to any natural person shall
mean such person's actual knowledge, without inquiry, and (ii) the term
"knowledge" with respect to any corporation shall mean the actual knowledge,
without inquiry, of such corporation's executive officers.
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22.2 Notices. All notices, requests, demands, and
other communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given, made and received when
delivered against receipt or upon actual receipt of registered or certified
mail, postage prepaid, return receipt requested, addressed as set forth below:
(a) If to Buyer or Shareholder:
Olajuwon Holdings, Inc.
10375 Richmond Avenue, Suite 1105
Houston, Texas 77042
Attention: Mr. Akinola Olajuwon
Phone: 713-266-2120
FAX: 713-266-2005
with a copy to:
Dishongh & Thompson, A Professional Corporation
800 Gessner
Suite 1200
Houston, Texas 77024
Attention: Bartt G. Thompson, Esq.
Phone: 713-932-9998
FAX: 713-932-6124
(b) If to Seller:
DenAmerica Corp.
7373 N. Scottsdale Road, Suite D-120
Scottsdale, Arizona 85253
Attention: Robert J. Gentz
Phone: (602) 483-7055
FAX: (602) 483-9592
with a copy to:
O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
One East Camelback, Suite 1100
Phoenix, Arizona 85012
Attention: Robert S. Kant, Esq.
Phone: (602) 263-2606
FAX: (602) 263-2900
Any party may alter the address to which
communications or copies are to
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be sent by giving notice of such change of address in conformity with the
provisions of this paragraph for the giving of notice.
22.3 Public Announcements. Any public announcement or
similar publicity with respect to this Agreement or the transactions
contemplated hereby will be issued, if at all, at such time and in such manner
as Seller and Buyer mutually agree upon. Notwithstanding the foregoing, prior to
the Closing, unless consented to by Seller in advance, each of the parties to
this Agreement shall, and shall cause their officers, directors, shareholders,
managers, employees, partners, and affiliates to, keep this Agreement strictly
confidential and shall not make any disclosure of this Agreement to any person
except to the extent required to comply with the terms of this Agreement;
provided, however, that Seller may make any public disclosure that it believes
in its good faith to be required by applicable law or the regulations of the
Securities and Exchange Commission or the American Stock Exchange.
22.4 Binding Nature of Agreement, Assignment. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors, and assigns,
except that no party may assign or transfer its or his rights or obligations
under this Agreement without the prior written consent of the other parties
hereto. Nothing in this Agreement is intended to confer any rights or benefits
to any third party.
22.5 Entire Agreement. This Agreement together with
the exhibits and schedules hereto contains the entire agreement and among the
parties hereto with respect to the subject matter hereof, and supersedes all
prior and contemporaneous agreements, understandings, inducements and
conditions, express or implied, oral or written, of any nature whatsoever with
respect to the subject matter hereof. The express terms hereof control and
supersede any course of performance and/or usage of the trade inconsistent with
any of the terms hereof. This Agreement may not be modified or amended other
than by an agreement in writing.
22.6 Controlling Law; Venue. This Agreement and all
questions relating to its validity, interpretation, performance and enforcement,
shall be governed by and construed, interpreted and enforced in accordance with
the laws of the state of Arizona, notwithstanding any Arizona or other
conflict-of-law provisions to the contrary. In the event there is any dispute
arising under any provisions of this Agreement, whether in a court of law or
otherwise, the parties agree that the venue for such dispute shall be in
Maricopa County, Arizona.
22.7 Schedules and Exhibits. All Schedules and
Exhibits referred to herein or attached hereto are hereby incorporated by
reference into, and made a part of, this Agreement. The form of any such
Schedule or Exhibit may be delivered by the parties after the execution of this
Agreement and shall be as mutually agreed by the parties.
22.8 Indulgences, Not Waivers. Neither the failure
nor any delay on the part of a party to exercise any right, remedy, power, or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power, or privilege preclude
any other or further exercise of the same or of any other right, remedy,
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<PAGE>
power, or privilege, nor shall any waiver of any right, remedy, power, or
privilege with respect to any occurrence be construed as a waiver of such right,
remedy, power, or privilege with respect to any other occurrence. No waiver
shall be effective unless it is in writing and is signed by the party asserted
to have granted such waiver.
22.9 Attorneys' Fees. The party prevailing in any
legal proceeding hereunder shall be entitled to recover from the other party or
parties all costs, expenses and attorneys' fees incurred in connection with the
enforcement of its rights and remedies. For the purpose of this Section 22.9 the
"prevailing party" shall mean, in the case of the claimant, one who is
successful in obtaining substantially all of the relief sought, and in the case
of a defendant or respondent, one who is successful in denying substantially all
of the relief sought by a claimants.
22.10 Costs and Expenses. Except as set forth
elsewhere in this Agreement, Seller, Buyer and Shareholder shall each be
responsible for and shall pay its or his costs and expenses (including, but not
limited to, the fees and disbursements of counsel and accountants) incurred in
connection with (i) the negotiation and preparation of this Agreement and such
other agreements and documents as maybe necessary to consummate the transactions
contemplated hereby, including, but not limited to, all costs and expenses
incurred in obtaining any consents or approvals from landlords, lenders,
creditors and their respective counsel in connection with the transactions
contemplated hereby, and (ii) the Closing under this Agreement and all matters
incident thereto. Notwithstanding the foregoing, Buyer shall pay any charges
levied by the Denny's franchisor. Each party shall be responsible for and shall
pay any taxes or few properly levied on it with respect to the transfer of the
Purchased Assets.
22.11 Execution in Counterparts. This Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original as against any party whose signature appears thereon and all of
which shall together constitute one and the same instrument. This Agreement
shall become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories. Any photographic or xerographic copy of this Agreement, with
all signatures reproduced on one or more sets of signature pages, shall be
considered for all purposes as of it were an executed counterpart of this
Agreement.
22.12 Provisions Separable. The provisions of this
Agreement are independent and separable from each other, and no provision shall
be affected or rendered invalid or unenforceable by virtue of the fact that for
any reason any other or others of them may be invalid or unenforceable in whole
or in part.
22.13 Number of Days. In computing the number of days
for purposes of this Agreement, all days shall be counted, including Saturdays,
Sundays, and bank holidays; provided, however, that if the final day of any time
period falls on a Saturday, Sunday, or bank holiday, then the final day shall be
deemed to be the next day which is not a Saturday, Sunday, or bank holiday.
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22.14 Construction. The parties hereto acknowledge
that each party was represented by legal counsel (or had the opportunity to be
represented by legal counsel) in connection with this Agreement and that each of
them and its counsel have reviewed and revised this Agreement, or have had an
opportunity to do so, and that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments or any exhibits or
schedules hereto or thereto.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
BUYER:
OLAJUWON HOLDINGS, INC.,
a Texas corporation
By: /s/ Akinola S. Olajuwon
----------------------------------
Akinola S. Olajuwon, President
SHAREHOLDER:
/s/ Akinola S. Olajuwon
------------------------------------
AKINOLA OLAJUWON
SELLER:
DENAMERICA CORP., a Georgia corporation
By: /s/ Jack Lloyd
---------------------------------
Jack Lloyd, Chief Executive Officer
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT is entered into as of
the 16th day of March, 1998, by and between DENAMERICA CORP., a Georgia
corporation ("Seller"), OLAJUWON HOLDINGS, INC., a Texas corporation ("Buyer"),
and AKINOLA OLAJUWON.
RECITALS
A. The parties hereto entered into an Asset Purchase Agreement dated as
of January 27, 1998 (the "Asset Purchase Agreement").
B. The parties wish to make certain amendments to the Asset Purchase
Agreement in accordance with this First Amendment.
AGREEMENT
1. Additional Restaurants. Restaurants designated by Seller as
unit numbers 6345, 6431 and 6432 (the "Additional Restaurants") shall be added
to the restaurants to be sold by Seller to Buyer pursuant to the Asset Purchase
Agreement and, in this regard, Schedule A to the Asset Purchase Agreement shall
be replaced by Schedule A hereto which includes the Additional Restaurants.
2. Waiver of Lease Extension. Seller shall not be required to
obtain an extension of the terms of the respective leases for the Additional
Restaurants.
3. Closing Date. Section 13 of the Asset Purchase Agreement is
hereby deleted in its entirety and replaced with the following:
The closing (the "Closing") under this Agreement
shall take place at the offices of the Buyer's lender in New
York, New York (or such other place as mutually agreed upon by
the parties hereto) on March 25, 1998, (the "Closing Date").
4. Real Estate Leases. Notwithstanding any provision of the
Asset Purchase Agreement to the contrary, the parties hereto acknowledge and
agree that the execution and delivery of the Asset Purchase Agreement and the
consummation of the transactions contemplated by the Asset Purchase Agreement do
not result in the assignment of all of the Leases and that Seller's right to use
and possession of the Premises subject to the Leases, save and except with
respect to eleven Restaurants, will be subleased to the Buyer in accordance with
the terms of the Master Sublease Agreement.
<PAGE>
5. Transition Services Agreement. The parties hereby agree
that the Buyer and Seller will not enter into the Transition Services Agreement
and that all references to the Transition Services Agreement in the Asset
Purchase Agreement are hereby deleted.
6. Stock Pledge Agreement. The parties hereby agree that they
shall not enter into the Stock Pledge Agreement and that all references to the
Stock Pledge Agreement in the Asset Purchase Agreement are hereby deleted.
7. Definitions. Unless defined herein, all capitalized terms
shall have the meanings set forth in the Asset Purchase Agreement.
8. Effect of Amendment. Except as expressly amended pursuant
to this First Amendment, the Asset Purchase Agreement shall remain in full force
and effect.
9. Waiver. The restriction on the sale, pledge, transfer, or
assignment of Restaurants set forth in Section 19.10 of the Asset Purchase
Agreement is hereby waived.
IN WITNESS WHEREOF, the parties have executed and delivered this First
Amendment as of the date first above written.
BUYER:
OLAJUWON HOLDINGS, INC.,
a Texas corporation
By: /s/ Akinola S. Olajuwon
----------------------------------
Akinola S. Olajuwon, President
SHAREHOLDER:
/s/ Akinola S. Olajuwon
------------------------------------
AKINOLA OLAJUWON
SELLER:
DENAMERICA CORP., a Georgia corporation
By: /s/ Robert J. Gentz
----------------------------------
Its: Executive Vice President
---------------------------------
2
PROMISSORY NOTE
U.S. $1,800,000 March 25, 1998
FOR VALUE RECEIVED, OLAJUWON HOLDINGS, INC., a Texas corporation
("OHI"), hereby promises to pay to the order of DENAMERICA CORP., a Georgia
corporation ("DAC"), at the office of DAC located at 7373 N. Scottsdale Road,
Suite D-120, Scottsdale, Arizona 85253, the principal amount of ONE MILLION
EIGHT HUNDRED THOUSAND DOLLARS ($1,800,000.00), together with interest on the
principal balance outstanding hereunder, at a per annum rate equal to the Stated
Interest Rate specified below or, to the extent applicable, the Default Interest
Rate specified below, in accordance with the following terms and conditions:
1. Contracted For Rate of Interest. The contracted for rate of interest
of the indebtedness evidenced hereby, without limitation, shall consist of the
following:
(a) The Stated Interest Rate (as hereinafter defined), as from
time to time in effect, calculated daily on the basis of actual days elapsed
over a 360-day year, applied to the principal balance from time to time
outstanding hereunder;
(b) The Default Interest Rate (as hereinafter defined), as
from time to time in effect, calculated daily on the basis of actual days
elapsed over a 360-day year, applied to the principal balance from time to time
outstanding hereunder; and
(c) All Additional Sums (as hereinafter defined), if any.
OHI agrees to pay an effective contracted for rate of interest which is the sum
of the Stated Interest Rate referred to in Subsection 1(a) above, plus any
additional rate of interest resulting from the application of the Default
Interest Rate referred to in Sub-section 1(b) above, and the Additional Sums, if
any, referred to in Subsection 1(c) above.
2. Stated Interest Rate. Except as provided in Section 3 below, the
principal balance outstanding hereunder from time to time shall bear interest at
the Stated Interest Rate. The Stated Interest Rate shall be equal to 10% per
annum until the first anniversary of the date of this Note and, if this Note is
extended pursuant to Section 4(b), 11% per annum thereafter.
3. Default Interest Rate. The Default Interest Rate shall be 12% per
annum. The principal balance outstanding hereunder from time to time shall bear
interest at the Default Interest Rate from the date of the occurrence of an
Event of Default (as hereinafter defined) hereunder until the earlier of: (a)
the date on which the principal balance outstanding hereunder, together with all
accrued interest and other amounts payable hereunder, are paid in full; or (b)
the date on which such Event of Default is timely cured in a manner satisfactory
to DAC, (i) if OHI is specifically granted a right to cure such Event of Default
in any of the agreements, instruments
<PAGE>
or documents (collectively, the "Purchase Documents") entered into in connection
with the Asset Purchase Agreement (as defined below) or (ii) if no such right to
cure is specifically granted, then DAC, in its sole and absolute discretion,
permits such Event of Default to be cured.
4. Payments. This Note shall be payable as follows:
(a) Interest. Any and all interest that has accrued under this
Note shall be paid on the dates that are six months and twelve months after the
date hereof and, if the Note term is extended pursuant to Section 4(b), on the
dates that are eighteen and twenty-four months after the date hereof; provided,
however, that any and all accrued interest shall be paid in full on or before
the date that the principal balance of this Note is paid.
(b) Principal. The entire principal balance of this Note shall
be paid on the date that is twelve months after the date hereof; provided,
however, that if an Event of Default (as defined below) has not occurred on or
before such date, OHI shall be entitled to defer the payment of principal for up
to an additional twelve months by providing DAC with written notice thereof at
least thirty days prior to the one-year anniversary of the date hereof.
5. Application and Place of Payments. Payments received by DAC with
respect to the indebtedness evidenced hereby shall be applied in such order and
manner as DAC in its sole and absolute discretion may elect. Unless otherwise
elected by DAC, all such payments shall first be applied to accrued and unpaid
interest at the Stated Interest Rate and, to the extent applicable, the Default
Interest Rate, next to the principal balance then outstanding hereunder, and the
remainder to any Additional Sums or other costs or added charges provided for
herein or in any of the Purchase Documents. Payments hereunder shall be made at
the address for DAC first set forth above, or at such other address as DAC may
specify to OHI in writing.
6. Prepayments. Payments of principal hereof may be made at any time,
or from time to time, in whole or in part, without penalty, provided that all
previously matured interest and other charges accrued to the date of prepayment
are also paid in full. Notwithstanding any partial prepayment of principal
hereof, there will be no change in the due date or amount of scheduled payments
due hereunder unless DAC, in its sole and absolute discretion, agrees in writing
to such change. At the option of DAC, partial prepayments shall be applied in
the inverse order of maturity.
7. Events of Default; Acceleration. The occurrence of any one or more
of the following events shall constitute an "Event of Default" hereunder, and
upon such Event of Default, the entire principal balance outstanding hereunder,
together with all accrued interest and other amounts payable hereunder, at the
election of DAC, shall become immediately due and payable, without any notice to
OHI:
(a) Nonpayment of principal, interest or other amounts when
the same shall become due and payable hereunder and such principal, interest or
other amount shall remain unpaid for five or more days;
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<PAGE>
(b) The failure of OHI to comply with any provision of this
Note and OHI's failure to cure such noncompliance within ten (10) days after
receipt of written notice thereof from DAC;
(c) The failure of OHI or Akinola Olajuwon ("Olajuwon") to
comply subsequent to the date hereof with any provision of the Negative Working
Capital Note, Second Mortgage or Guaranty and OHI's failure to cure such
noncompliance within ten (10) days after receipt of written notice thereof from
DAC or such other time to cure as is expressly permitted in such document,
instrument or agreement;
(d) The dissolution, winding-up or termination of the
existence of OHI;
(e) The making by OHI or any other person or entity who is or
may become liable hereunder of an assignment for the benefit of its creditors;
(f) The appointment of (or application for appointment of) a
receiver of OHI or any other person or entity who is or may become liable
hereunder, or the involuntary filing against or voluntary filing by OHI, or any
other person or entity who is or may become liable hereunder, of a petition or
application for relief under federal bankruptcy law or any similar state or
federal law, or the issuance of any writ of garnishment, execution or attachment
for service with respect to OHI or any person or entity who is or may become
liable hereunder, or any property of OHI or property of any person or entity who
is or may become liable hereunder; or
(g) OHI transfers any right or obligation under this Note
without DAC's prior written consent.
8. Guaranty/Collateral. OHI's obligations under this Note are
guaranteed by Olajuwon under the Guaranty and additionally secured by the
property described in the Second Mortgage.
9. Additional Sums. All fees, charges, goods, things in action or any
other sums or things of value, other than the interest resulting from the Stated
Interest Rate and the Default Interest Rate, as applicable, paid or payable by
OHI (collectively, the "Additional Sums"), whether pursuant to this Note, the
Purchase Documents or any other document or instrument in any way pertaining to
this transaction, or otherwise with respect to this transaction, that, under the
laws of the State of Arizona, may be deemed to be interest with respect to this
transaction, for the purpose of any laws of the State of Arizona that may limit
the maximum amount of interest to be charged with respect to this transaction,
shall be payable by OHI as, and shall be deemed to be, additional interest, and
for such purposes only, the agreed upon and "contracted for rate of interest" of
this transaction shall be deemed to be increased by the rate of interest
resulting from the Additional Sums. OHI understands and believes that this
transaction complies with the usury laws of the State of Arizona; however, if
any interest or other charges in connection with this transaction are ever
determined to exceed the maximum amount permitted by law, then OHI agrees that:
(a) the amount of interest or charges payable pursuant to this transaction shall
be reduced to the maximum amount permitted by law; and (b) any excess amount
previously
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collected from OHI in connection with this transaction that exceeded the maximum
amount permitted by law, will be credited against the principal balance then
outstanding hereunder. If the outstanding principal balance hereunder has been
paid in full, the excess amount paid will be refunded to OHI.
10. Waivers. Except as set forth in this Note or the Purchase
Documents, to the extent permitted by applicable law, OHI, and each person who
is or may become liable hereunder, severally waive and agree not to assert: (a)
demand, diligence, grace, presentment for payment, protest, notice of
nonpayment, nonperformance, extension, dishonor, maturity, protest and default;
and (b) recourse to guaranty or suretyship defenses (including, without
limitation, the right to require the DAC to bring an action on this Note). DAC
may extend the time for payment of or renew this Note, release collateral as
security for the indebtedness evidenced hereby or release any party from
liability hereunder, and any such extension, renewal, release or other
indulgence shall not alter or diminish the liability of OHI or any other person
or entity who is or may become liable on this Note except to the extent
expressly set forth in a writing evidencing or constituting such extension,
renewal, release or other indulgence.
11. Costs of Collection. OHI agrees to pay all costs of collection,
including, without limitation, attorneys' fees, whether or not suit is filed,
and all costs of suit and preparation for suit (whether at trial or appellate
level), in the event any payment of principal, interest or other amount is not
paid when due, or in case it becomes necessary to protect the collateral which
is security for the indebtedness evidenced hereby, or to exercise any other
right or remedy hereunder or in the Purchase Documents, or in the event DAC is
made party to any litigation because of the existence of the indebtedness
evidenced hereby, or if at any time DAC should incur any attorneys' fees in any
proceeding under any federal bankruptcy law (or any similar state or federal
law) in connection with the indebtedness evidenced hereby. In the event of any
court proceeding, attorneys' fees shall be set by the court and not by the jury
and shall be included in any judgment obtained by DAC.
12. No Waiver by DAC. No delay or failure of DAC in exercising any
right hereunder shall affect such right, nor shall any single or partial
exercise of any right preclude further exercise thereof.
13. Governing Law. This Note shall be construed in accordance with and
governed by the laws of the State of Arizona, without regard to the choice of
law rules of the State of Arizona.
14. Jurisdiction and Venue. OHI hereby expressly agrees that in the
event any actions or other legal proceedings are initiated by or against OHI or
DAC involving any alleged breach or failure by any party to pay, perform or
observe any sums, obligations or covenants to be paid, performed or observed by
it under this Note or the Purchase Documents, or involving any other claims or
allegations arising out of the transactions evidenced or contemplated by this
Note or the Purchase Documents, regardless of whether such actions or
proceedings shall be for damages, specific performance or declaratory relief or
otherwise, such actions, in the sole and absolute discretion of DAC, may be
required to be brought in Maricopa County, Arizona; and
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<PAGE>
OHI hereby submits to the jurisdiction of the State of Arizona for such purposes
and agrees that the venue of such actions or proceedings shall properly lie in
Maricopa County, Arizona; and OHI hereby waives any and all defenses in such
jurisdiction and venue.
15. Time of Essence. Time is of the essence of this Note and each and
every provision hereof.
16. Conflicts; Inconsistency. In the event of any conflict or
inconsistency between the provisions of this Note and the provisions of any one
or more of the Purchase Documents, the provisions of this Note shall govern and
control to the extent necessary to resolve such conflict or inconsistency.
17. Amendments. No amendment, modification, change, waiver, release or
discharge hereof and hereunder shall be effective unless evidenced by an
instrument in writing and signed by the party against whom enforcement is
sought.
18. Severability. If any provision hereof is invalid or unenforceable,
the other provisions hereof shall remain in full force and effect and shall be
liberally construed in favor of DAC in order to effectuate the other provisions
hereof.
19. Binding Nature. The provisions of this Note shall be binding upon
OHI and the successors and assigns of OHI, and shall inure to the benefit of DAC
and any subsequent holder of all or any portion of this Note, and their
respective successors and assigns. DAC may from time to time transfer all or any
part of its interest in this Note without notice to OHI.
20. Notice. Any notice or other communication with respect to this Note
shall: (a) be in writing; (b) be effective on the day of hand-delivery thereof
to the party to whom directed, one day following the day of deposit thereof with
delivery charges prepaid, with a national overnight delivery service, or two
days following the day of deposit thereof with postage prepaid, with the United
States Postal Service, by regular first class, certified or registered mail; (c)
if directed to DAC, be addressed to DAC at the office of DAC set forth above, or
to such other address as DAC shall have specified to OHI by like notice; and (d)
if directed to OHI, be addressed to OHI at the address for OHI set forth below
OHI's name, or to such other address as OHI shall have specified by like notice.
21. Section Headings. The section headings set forth in this Note are
for convenience only and shall not have substantive meaning hereunder or be
deemed part of this Note.
22. Construction. This Note shall be construed as a whole, in
accordance with its fair meaning, and without regard to or taking into account
any presumption or other rule of law requiring construction against the party
preparing this Note.
23. Subordination. All indebtedness evidenced by this Note is
subordinated to other indebtedness pursuant to, and to the extent provided in,
and is otherwise subject to the
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<PAGE>
terms of, the Intercreditor and Subordination Agreement, dated March 25, 1998
(the "Subordination Agreement"), as the same may be amended, modified or
otherwise supplemented from time to time, by and among Olajuwon Holdings, Inc.
and Akinola Olajuwon, as debtors and Global Alliance Finance Company, L.L.C., as
Senior Lender, and the holders from time to time of the obligations arising
under the Subordinated Notes referred to in the Subordination Agreement,
including, without limitation, this Note.
24. Definitions. Unless otherwise deferred herein, all capitalized
terms shall have the meanings assigned to such terms in the Asset Purchase
Agreement, dated as of January 27, 1998 (the "Asset Purchase Agreement"), by and
between DAC, OHI and Akinola Olajuwon.
25. Post-Closing Agreement. This Note shall be subject to the terms
contained in the Post-Closing Agreement between DAC and OHI dated as of the date
hereof.
IN WITNESS WHEREOF, OHI has executed this Note as of the date first set
forth above.
OLAJUWON HOLDINGS, INC.
/s/ Akinola Olajuwon
-------------------------
By: Akinola Olajuwon
Its: President
Address of OHI:
10375 Richmond Avenue
-------------------------
Suite 1105
-------------------------
Houston, Texas 77042
-------------------------
6
NEGATIVE WORKING CAPITAL NOTE
U.S. $1,700,000 March 25, 1998
FOR VALUE RECEIVED, OLAJUWON HOLDINGS, INC., a Texas corporation
("OHI"), hereby promises to pay to the order of DENAMERICA CORP., a Georgia
corporation ("DAC"), at the office of DAC located at 7373 N. Scottsdale Road,
Suite D-120, Scottsdale, Arizona 85253, the principal amount of ONE MILLION
SEVEN HUNDRED THOUSAND DOLLARS ($1,700,000.00), together with interest on the
principal balance outstanding hereunder, to the extent applicable, at a per
annum rate equal to the Default Interest Rate specified below, in accordance
with the following terms and conditions:
1. Contracted For Rate of Interest. The contracted for rate of interest
of the indebtedness evidenced hereby, without limitation, shall consist of the
following:
(a) No interest if an Event of Default (as defined below) has
not occurred;
(b) The Default Interest Rate (as hereinafter defined), as
from time to time in effect, calculated daily on the basis of actual days
elapsed over a 360-day year, applied to the principal balance from time to time
outstanding hereunder; and
(c) All Additional Sums (as hereinafter defined), if any.
OHI agrees to pay an effective contracted for rate of interest which is the sum
of the Default Interest Rate referred to in Sub-section 1(b) above, and the
Additional Sums, if any, referred to in Subsection 1(c) above.
2. Default Interest Rate. The Default Interest Rate shall be 12% per
annum. The principal balance outstanding hereunder from time to time shall bear
interest at the Default Interest Rate from the date of the occurrence of an
Event of Default hereunder until the earlier of: (a) the date on which the
principal balance outstanding hereunder, together with all accrued interest and
other amounts payable hereunder, are paid in full; or (b) the date on which such
Event of Default is timely cured in a manner satisfactory to DAC, (i) if OHI is
specifically granted a right to cure such Event of Default in any of the
agreements, instruments or documents executed in connection with the Asset
Purchase Agreement (as defined below) (the "Purchase Documents") or (ii) if no
such right to cure is specifically granted, then DAC, in its sole and absolute
discretion, permits such Event of Default to be cured.
3. Payments. The entire principal balance of this Note shall be payable
in full over the first eleven weeks immediately following the Closing, in ten
installments of $170,000 each beginning at the end of the second week following
the Closing Date and continuing on the last day of each of the following ten
weeks in accordance with the Schedule of Payments attached as Exhibit A hereto.
<PAGE>
4. Application and Place of Payments. Payments received by DAC with
respect to the indebtedness evidenced hereby shall be applied in such order and
manner as DAC in its sole and absolute discretion may elect. Unless otherwise
elected by DAC, all such payments shall first be applied to accrued and unpaid
interest at the Default Interest Rate, next to the principal balance then
outstanding hereunder, and the remainder to any Additional Sums or other costs
or added charges provided for herein or in any of the Purchase Documents.
Payments hereunder shall be made at the address for DAC first set forth above,
or at such other address as DAC may specify to OHI in writing.
5. Prepayments. Payments of principal hereof may be made at any time,
or from time to time, in whole or in part, without penalty, provided that all
previously matured interest and other charges accrued to the date of prepayment
are also paid in full. Notwithstanding any partial prepayment of principal
hereof, there will be no change in the due date or amount of scheduled payments
due hereunder unless DAC, in its sole and absolute discretion, agrees in writing
to such change. At the option of DAC, partial prepayments shall be applied in
the inverse order of maturity.
6. Events of Default; Acceleration. The occurrence of any one or more
of the following events shall constitute an "Event of Default" hereunder, and
upon such Event of Default, the entire principal balance outstanding hereunder,
together with all accrued interest and other amounts payable hereunder, at the
election of DAC, shall become immediately due and payable, without any notice to
OHI:
(a) Nonpayment of principal, interest or other amounts when
the same shall become due and payable hereunder and such principal, interest or
other amount shall remain unpaid for five or more days;
(b) The failure of OHI to comply with any provision of this
Note and OHI's failure to cure such noncompliance within ten (10) days after
receipt of written notice thereof from DAC;
(c) The failure of OHI or Akinola Olajuwon ("Olajuwon") to
comply subsequent to the date hereof with any provision of the Promissory Note,
Second Mortgage or Guaranty and OHI's failure to cure such noncompliance within
ten (10) days after receipt of written notice thereof from DAC or such other
time to cure as is expressly permitted in such document, instrument or
agreement;
(d) The dissolution, winding-up or termination of the
existence of OHI;
(e) The making by OHI or any other person or entity who is or
may become liable hereunder of an assignment for the benefit of its creditors;
(f) The appointment of (or application for appointment of) a
receiver of OHI or any other person or entity who is or may become liable
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<PAGE>
hereunder, or the involuntary filing against or voluntary filing by OHI, or any
other person or entity who is or may become liable hereunder, of a petition or
application for relief under federal bankruptcy law or any similar state or
federal law, or the issuance of any writ of garnishment, execution or attachment
for service with respect to OHI or any person or entity who is or may become
liable hereunder, or any property of OHI or property of any person or entity who
is or may become liable hereunder; or
(g) OHI transfers any right or obligation under this Note
without DAC's prior written consent.
7. Guaranty/Collateral. OHI's obligations under this Note are
guaranteed by Olajuwon under the Guaranty and additionally secured by the
property described in the Second Mortgage.
8. Additional Sums. All fees, charges, goods, things in action or any
other sums or things of value, other than the interest resulting from the
Default Interest Rate, as applicable, paid or payable by OHI (collectively, the
"Additional Sums"), whether pursuant to this Note, the Purchase Documents or any
other document or instrument in any way pertaining to this transaction, or
otherwise with respect to this transaction, that, under the laws of the State of
Arizona, may be deemed to be interest with respect to this transaction, for the
purpose of any laws of the State of Arizona that may limit the maximum amount of
interest to be charged with respect to this transaction, shall be payable by OHI
as, and shall be deemed to be, additional interest, and for such purposes only,
the agreed upon and "contracted for rate of interest" of this transaction shall
be deemed to be increased by the rate of interest resulting from the Additional
Sums. OHI understands and believes that this transaction complies with the usury
laws of the State of Arizona; however, if any interest or other charges in
connection with this transaction are ever determined to exceed the maximum
amount permitted by law, then OHI agrees that: (a) the amount of interest or
charges payable pursuant to this transaction shall be reduced to the maximum
amount permitted by law; and (b) any excess amount previously collected from OHI
in connection with this transaction that exceeded the maximum amount permitted
by law, will be credited against the principal balance then outstanding
hereunder. If the outstanding principal balance hereunder has been paid in full,
the excess amount paid will be refunded to OHI.
9. Waivers. Except as set forth in this Note or the Purchase Documents,
to the extent permitted by applicable law, OHI, and each person who is or may
become liable hereunder, severally waive and agree not to assert: (a) demand,
diligence, grace, presentment for payment, protest, notice of nonpayment,
nonperformance, extension, dishonor, maturity, protest and default; and (b)
recourse to guaranty or suretyship defenses (including, without limitation, the
right to require the DAC to bring an action on this Note). DAC may extend the
time for payment of or renew this Note, release collateral as security for the
indebtedness evidenced hereby or release any party from liability hereunder, and
any such extension, renewal, release or other indulgence shall not alter or
diminish the liability of OHI or any other person or entity who is or may become
liable on this Note except to the extent expressly set forth in a writing
evidencing or constituting such extension, renewal, release or other indulgence.
10. Costs of Collection. OHI agrees to pay all costs of collection,
including, without limitation, attorneys' fees, whether or not suit is filed,
and all costs of suit and
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<PAGE>
preparation for suit (whether at trial or appellate level), in the event any
payment of principal, interest or other amount is not paid when due, or in case
it becomes necessary to protect the collateral which is security for the
indebtedness evidenced hereby, or to exercise any other right or remedy
hereunder or in the Purchase Documents, or in the event DAC is made party to any
litigation because of the existence of the indebtedness evidenced hereby, or if
at any time DAC should incur any attorneys' fees in any proceeding under any
federal bankruptcy law (or any similar state or federal law) in connection with
the indebtedness evidenced hereby. In the event of any court proceeding,
attorneys' fees shall be set by the court and not by the jury and shall be
included in any judgment obtained by DAC.
11. No Waiver by DAC. No delay or failure of DAC in exercising any
right hereunder shall affect such right, nor shall any single or partial
exercise of any right preclude further exercise thereof.
12. Governing Law. This Note shall be construed in accordance with and
governed by the laws of the State of Arizona, without regard to the choice of
law rules of the State of Arizona.
13. Jurisdiction and Venue. OHI hereby expressly agrees that in the
event any actions or other legal proceedings are initiated by or against OHI or
DAC involving any alleged breach or failure by any party to pay, perform or
observe any sums, obligations or covenants to be paid, performed or observed by
it under this Note or the Purchase Documents, or involving any other claims or
allegations arising out of the transactions evidenced or contemplated by this
Note or the Purchase Documents, regardless of whether such actions or
proceedings shall be for damages, specific performance or declaratory relief or
otherwise, such actions, in the sole and absolute discretion of DAC, may be
required to be brought in Maricopa County, Arizona; and OHI hereby submits to
the jurisdiction of the State of Arizona for such purposes and agrees that the
venue of such actions or proceedings shall properly lie in Maricopa County,
Arizona; and OHI hereby waives any and all defenses in such jurisdiction and
venue.
14. Time of Essence. Time is of the essence of this Note and each and
every provision hereof.
15. Conflicts; Inconsistency. In the event of any conflict or
inconsistency between the provisions of this Note and the provisions of any one
or more of the Purchase Documents, the provisions of this Note shall govern and
control to the extent necessary to resolve such conflict or inconsistency.
16. Amendments. No amendment, modification, change, waiver, release or
discharge hereof and hereunder shall be effective unless evidenced by an
instrument in writing and signed by the party against whom enforcement is
sought.
17. Severability. If any provision hereof is invalid or unenforceable,
the other provisions hereof shall remain in full force and effect and shall be
liberally construed in favor of DAC in order to effectuate the other provisions
hereof.
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<PAGE>
18. Binding Nature. The provisions of this Note shall be binding upon
OHI and the successors and assigns of OHI, and shall inure to the benefit of DAC
and any subsequent holder of all or any portion of this Note, and their
respective successors and assigns. DAC may from time to time transfer all or any
part of its interest in this Note without notice to OHI.
19. Notice. Any notice or other communication with respect to this Note
shall: (a) be in writing; (b) be effective on the day of hand-delivery thereof
to the party to whom directed, one day following the day of deposit thereof with
delivery charges prepaid, with a national overnight delivery service, or two
days following the day of deposit thereof with postage prepaid, with the United
States Postal Service, by regular first class, certified or registered mail; (c)
if directed to DAC, be addressed to DAC at the office of DAC set forth above, or
to such other address as DAC shall have specified to OHI by like notice; and (d)
if directed to OHI, be addressed to OHI at the address for OHI set forth below
OHI's name, or to such other address as OHI shall have specified by like notice.
20. Section Headings. The section headings set forth in this Note are
for convenience only and shall not have substantive meaning hereunder or be
deemed part of this Note.
21. Construction. This Note shall be construed as a whole, in
accordance with its fair meaning, and without regard to or taking into account
any presumption or other rule of law requiring construction against the party
preparing this Note.
22. Subordination. All indebtedness evidenced by this Note is
subordinated to other indebtedness pursuant to, and to the extent provided in,
and is otherwise subject to the terms of, the Intercreditor and Subordination
Agreement, dated March 25, 1998 (the "Subordination Agreement"), as the same may
be amended, modified or otherwise supplemented from time to time, by and among
Olajuwon Holdings, Inc. and Akinola Olajuwon, as debtors and Global Alliance
Finance Company, L.L.C., as Senior Lender, and the holders from time to time of
the obligations arising under the Subordinated Notes referred to in the
Subordination Agreement, including, without limitation, this Note.
23. Definitions. Unless otherwise deferred herein, all capitalized
terms shall have the meanings assigned to such terms in the Asset Purchase
Agreement, dated as of January 27, 1998 (the "Asset Purchase Agreement"), by and
between DAC, OHI and Akinola Olajuwon.
24. Post-Closing Agreement. This Note shall be subject to the terms
contained in the Post-Closing Agreement between DAC and OHI dated as of the date
hereof.
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<PAGE>
IN WITNESS WHEREOF, OHI has executed this Note as of the date first set
forth above.
/s/ Akinola Olajuwon
-------------------------
By: Akinola Olajuwon
Its: President
Address of OHI:
10375 Richmond Avenue
-------------------------
Suite 1105
-------------------------
Houston, Texas 77042
-------------------------
6
