FORECLOSURE AND SETTLEMENT AGREEMENT
This Foreclosure and Settlement Agreement (this "Agreement") is executed
and delivered on August ____, 1999, but effective as of January 3, 2000, by
and between Phoenix Restaurant Group, Inc., a Georgia corporation, f/k/a
DenAmerica Corp. ("PRG"), and the Moffitt Family Trust, a trust formed under
the laws of the State of Texas (the "Trust").
Factual Background
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A. DenWest Restaurant Corp., a Delaware corporation ("DRC"), provided
the Trust with a $2,600,000 loan to enable the Trust to perform its
obligations under the Purchase Agreement, dated as of November 14, 1994, by
and between DRC and the Trust (the "Purchase Agreement"), which loan is
evidenced by the non-recourse Promissory Note, dated as of November 14, 1994,
in the stated principal amount of $2,600,000, executed by the Trust in favor
of DRC (the "Promissory Note"). Pursuant to the terms of the Purchase
Agreement, the Trust became the holder of 520,000 shares of DRC common stock,
par value $.001 per share (the "DRC Shares"). The obligations of the Trust
under the Promissory Note are secured by the Stock Pledge Agreement, dated as
of November 14, 1994, by and between the Trust and DRC (the "Stock Pledge
Agreement"). Pursuant to the Promissory Note, DRC's sole recourse is to
foreclose the Pledged Collateral (as defined in the Stock Pledge Agreement)
if the Trust defaults under the Purchase Agreement, the Promissory Note or
the Stock Pledge Agreement. The Pledged Collateral includes the Trust Shares
(as defined below).
B. Pursuant to the terms and conditions of the Amended and Restated
Agreement and Plan of Merger, dated as of August 9, 1995, between American
Family Restaurants, Inc. ("AFR") and DRC, DRC merged with and into AFR, which
became the surviving corporation and AFR changed its name to "DenAmerica
Corp." Due to the merger, (i) PRG succeeded to the rights and obligations of
DRC under the Purchase Agreement, the Promissory Note and the Stock Pledge
Agreement, and (ii) the DRC Shares were converted into 403,456 shares of PRG
common stock, $.10 par value per share (the "Trust Shares").
C. The Trust is (i) the holder of the Series B Note, issued as of
March 29, 1996, in the stated principal amount of $1,455,521, executed by PRG
in favor of the Trust (the "Trust Series B Note"), (ii) the owner of the
Trust Shares, and (iii) the holder of the Series B Common Stock Purchase
Warrant, issued as of March 29, 1996, executed by PRG in favor of the Trust
(the "Trust Series B Warrant," and collectively, with the Trust Series B
Note, the "Trust Series B Note and Warrant").
D. PRG and the Trust agree that the Trust Series B Note and the
Promissory Note are in default. PRG and the Trust desire to enter into this
Agreement whereby PRG will foreclose the Promissory Note, take possession
and ownership of the Pledged Collateral (including the Trust Shares), and
cancel any further obligations of the Trust under the Promissory Note in
return for the cancellation by the Trust of PRG's obligations under the
Trust Series B Note and Warrant
Agreement
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Therefore, in consideration of the mutual promises contained in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, PRG and the Trust agree as
follows:
1. Recitals. The recitals set forth above in the Factual Background
are true, accurate and correct, and are incorporated in this Agreement by
this reference and made a material part of this Agreement.
2. Mutual Cancellation of Obligations. As full and complete
satisfaction and settlement of the obligations of the Trust under the
Promissory Note, effective as of January 3, 2000, PRG and the Trust agree
that (i) PRG shall foreclose its interest under the Promissory Note and the
Stock Pledge Agreement by taking possession and ownership of the Pledged
Collateral (including the Trust Shares), and (ii) PRG's obligations under the
Trust Series B Note and Warrant shall be cancelled. As full and complete
satisfaction and settlement of the obligations of PRG under the Trust Series
B Note and Warrant, PRG and the Trust agree that the Trust's obligations
under the Promissory Note and the Stock Pledge Agreement shall be cancelled,
effective as of January 3, 2000.
3. Deliveries. Contemporaneous with the execution of this Agreement,
the Trust shall deliver the stock power, in the form attached hereto as
Exhibit A, necessary to transfer ownership of the Pledged Collateral
(including the Trust Shares). On January 3, 2000, (a) PRG shall (i) take
possession and ownership of the Pledged Collateral (including the Trust
Shares), (ii) mark the Promissory Note "cancelled", and (iii) surrender the
Promissory Note to the Trust; and (b) the Trust shall (i) deliver the Pledged
Collateral (including the Trust Shares) to PRG, (ii) mark the Trust Series B
Note and Warrant "cancelled", and (iii) surrender the Trust Series B Note and
Warrant to PRG.
4. Valuation of Trust Shares. The market value of the Trust Shares
shall be equivalent to the product of (i) 403,456 multiplied by (ii) the
price listed for an individual share of PRG common stock at the close of
trading on January 3, 2000 on the American Stock Exchange (the "Trust Shares'
Market Value"). In the event that the sum of (i) the Trust Shares' Market
Value, and (ii) the value of the Trust Series B Note and Warrant shall be
less than the value of the Promissory Note, then the Trust shall not be
required to compensate PRG for the amount of such deficiency. Alternatively,
if the sum of (i) the Trust Shares' Market Value and (ii) the value of the
Trust Series B Note and Warrant shall be greater than the value of the
Promissory Note, then PRG shall not be required to compensate the Trust for
the amount of such excess.
5. Mutual Release. In consideration of the execution of this Agreement
by PRG, effective as of January 3, 2000, the Trust hereby releases and
discharges PRG, its affiliates, and the directors, officers, and agents of
PRG and its affiliates for, from and against any and all demands, claims and
causes of action of any type or nature, at law and/or in equity, that the
Trust has, as a result of any action or inaction by PRG, that arises from, or
is in any way related to, the Trust Series B Note and Warrant or any other
document executed in connection with the Trust Series B Note and Warrant. In
consideration of the execution of this Agreement, effective as of
2
January 3, 2000, PRG hereby releases and discharges the Trust, its affiliates
and the trustee of the Trust for, from and against any and all demands,
claims and causes of action of any type or nature, at law and/or in equity,
that PRG has, as a result of any action or inaction by the Trust, that arises
from, or is in any way related to the Promissory Note and the Stock Pledge
Agreement.
6. Further Assurances. PRG and the Trust shall each do all acts and
things, and make, execute and deliver such written documents and instruments,
as shall from time to time be reasonably required to carry out the intent of
this Agreement.
7. Governing Law and Personal Jurisdiction. This Agreement shall be
deemed to have been entered into in Phoenix, Arizona. This Agreement and
performance hereunder shall be governed by, and construed in accordance with,
the laws of the State of Arizona (without giving effect to its conflict of
laws principles). PRG and the Trust agree that any claims arising out of this
Agreement shall be brought in a state or federal court sitting in the State
of Arizona, and that such courts shall have exclusive jurisdiction for such
purpose-.
8. Miscellaneous. Time is of the essence of this Agreement and each
and every provision of this Agreement. The parties hereby waive any notices
or consents that may be required under the Uniform Commercial Code as in
effect in the State of Arizona. This Agreement may be executed in several
counterparts. This Agreement 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 Agreement.
IN WITNESS WHEREOF, PRG and the Trust have executed and delivered this
Agreement on the date first above written, but effective as of January 3,
2000.
PHOENIX RESTAURANT GROUP, INC., a
Georgia corporation, f/k/a DenAmerica Corp.
By: /s/ Todd S. Brown
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Name: Todd S. Brown
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Its: Senior Vice President
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THE MOFFITT FAMILY TRUST
By: /s/ Carl Luna, Trustee
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Name: Carl Luna, Esq.
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Title: Trustee
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EXHIBIT A
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ASSIGNMENT SEPARATE FROM CERTIFICATE
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FOR VALUE RECEIVED, the undersigned does hereby sell, assign and
transfer to Phoenix Restaurant Group, Inc., a Georgia corporation (the
"Corporation"), four hundred and three thousand four hundred and fifty-six
(403,456) shares of common stock of the Corporation, represented by
certificate number AFR 4710 in the name of the undersigned on the books of
the Corporation.
The undersigned does hereby irrevocably constitute and appoint any
officer of the Corporation as its attorney to transfer said stock on the
books of the Corporation with full power of substitution in the premises.
This power is coupled with an interest.
Executed and delivered on August ___, 1999, but effective as of January
3, 2000.
THE MOFFITT FAMILY TRUST
By: /s/ Carl Luna, Trustee
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Name: Carl Luna, Esq.
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Title: Trustee
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