OPTION AGREEMENT
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(New Direction - Horizon Lodges - Sooner - Sooner Sub)
THIS OPTION AGREEMENT (the "Agreement") is entered into effective
September 9, 1997, by and among SOONER HOLDINGS, INC. ("Sooner"), an Oklahoma
corporation; N D ACQUISITION CORP. ("Sooner Sub"), an Oklahoma corporation; NEW
DIRECTION CENTERS OF AMERICA, A LIMITED LIABILITY COMPANY ("New Direction"), an
Oklahoma limited liability company; and HORIZON LODGES OF AMERICA, INC.
("Horizon Lodges"), an Oklahoma corporation.
IN CONSIDERATION of the representations, promises, undertakings, and
covenants set forth herein, the parties agree as follows:
This Agreement is not assignable and transferable by ND Acquisitions.
1. Representation by New Direction. New Direction represents as
follows:
1.1 New Direction is the permittee of a permit (the "Permit")
granted by the Oklahoma Department of Corrections ("ODOC") to operate a
pre-release program (the "Program") for up to 300 criminal offenders subject to
the authority of the ODOC and referred by ODOC to New Direction (the "Clients").
The Permit restricts the Program to activities conducted at and from a certain
facility (the "Facility") located on approximately 2.8 acres of land with
frontage of approximately 280 feet on North Lincoln Boulevard in Oklahoma City,
Oklahoma. The Facility is presently able to accommodate only 155 Clients, is not
accredited by the American Correctional Association (the "ACA"), and must be
rehabilitated at a cost of approximately $478,000 (i) to expand to accommodate
300 Clients and (ii) to obtain ACA accreditation.
1.2 New Direction leases the Facility from Horizon Lodges at a
monthly rental of $8,500.
1.3 New Direction's sole manager is Xxx Xxxxxxxxx of Norman,
Oklahoma.
1.4 Attached as Schedule 1.4 is a true and complete list (i)
of New Direction's and Horizon Lodges' liabilities as of the date set forth
therein and (ii) of the ownership interests of all of New Direction's members
except certain employees who hold minor interests. Liabilities are variable due
to operations, subsequently a true and correct accounting will be
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issued on the day of closing. Ordinary expenditures creating liability will be
incurred only nominal offsetting.
1.5 Among the liabilities listed in Schedule 1.4 is an
obligation owed to Xxx Xxxxxx, a previous owner of the Permit, which obligation
is a one-month's portion of a 20-year obligation which is, itself, a continuing
participation in the revenues obtained through the exercise of the rights
granted by the Permit (the "Royalty Obligation").
2. Representations of Horizon Lodges. Horizon Lodges represents
as follows:
2.1 Horizon Lodges is the owner in fee simple of the Facility.
2.2 Attached as Schedule 2.2 is a true and complete list of
all mortgages, liens and other encumbrances attached to or operating as charges
on the Facility as of the date set forth therein.
2.3 Horizon Lodges leases the Facility to New Direction for a
monthly rental of $8,500.
3. Representations of Sooner. Sooner represents as follows:
3.1 Sooner has issued and there are outstanding approximately
7,400,000 shares of its Common Stock. Its Common Stock trades on the NASD OTC
Bulletin Board under the symbol "SOON".
3.2 Sooner Sub is a wholly owned subsidiary of Sooner.
4. Option. New Direction and Horizon Lodges (collectively, the
"Sellers") grant to Sooner Sub an option (the "Option") to acquire the Permit,
the Facility, and all other assets of the Sellers, real and personal, tangible
and intangible, related in any way to the enjoyment of the Permit and the
Facility.
5. Expiration of Option. The Option expires at 5:00 P.M.,
Oklahoma City time, on January 31, 1998, unless earlier exercised. Exercised
shall be interpreted as closing of the purchase. The transaction must be closed
on or before January 31, 1998.
6. Purchase Price for the Option. As consideration for the grant
of the Option, Sooner Sub agrees to lend $325,000, less $25,000 in prepaid
interest, to the Sellers (the "Rehabilitation Loan") subject to the following
provisions:
6.1 The Rehabilitation Loan shall:
6.1.1 have a three year term commencing on January
31, 1998;
6.1.2 bear interest at 10% per annum;
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6.1.3 be amortized starting on January 31, 1998 using
a ten year amortization schedule; requiring quarterly payments;
6.2 The principal amount of the Rehabilitation Loan shall be
advanced only for costs directly related to the rehabilitation of the Facility
to qualify it for ACA accreditation and for expansion to accommodate 300
Clients. The Sellers shall incur costs, in the respect, only after obtaining the
prior written approval of Sooner Sub to incur such costs, which approval shall
not be unreasonably withheld.
6.3 Said loan shall be secured by a second mortgage on the
property. Said loan shall be executed by the LLC, non-recourse to LLC Members
and no liability other than the property to the manager of the LLC.
7. Exercise Price of the Option. The exercise price of the Option
is as follows:
7.1 Assumption of the Rehabilitation loan.
7.2 Assumption of the Royalty Obligation.
7.3 $1,725,000.
7.4 1,000,000 shares of Common Stock of Sooner.
8. Closing. Should Sooner Sub exercise the Option, the closing of
this transaction (the "Closing") shall occur as follows:
8.1 The Closing shall occur in the office of Xxxxxx, Xxxx &
Xxxxxxx, 800 Bank of Xxxxxxxx Xxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000, and in the
Oklahoma County Courthouse at a time or times designated by Sooner Sub. Closing
shall be concluded on or before January 31, 1998. The closing shall be concluded
in the offices of a designated title company.
8.2 The parties shall first examine and approve the form of
the following documents:
8.2.1 Horizon Lodges' deed of the Facility to Sooner
Sub (the "Deed").
8.2.2 New Direction's assignment to Sooner Sub of the
Permit, approved by the Oklahoma Department of Corrections (the "Permit
Assignment").
8.2.3 The Sellers' assignments to Sooner Sub of all
other assets of the Sellers (the "Other Assignments").
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8.2.4 Sooner Sub's cashier's checks (the "Cashier's
Checks") aggregating $1,725,000, for the extinguishment of all debt of the
Sellers and payments to members in accordance with Schedule 1.4(ii).
8.2.5 Sooner Sub's written evidence of its assumption
of the Royalty Obligation.
8.2.6 Evidence that Sooner's debt, denominated as
"L.T. Notes Payable" and in the amount of $462,693 as of June 30, 1997, either
(i) has been paid partially or in full, (ii) has been assumed by Sooner's real
estate subsidiary corporation, Charlie O Business Park, Inc., or (iii) has been
converted to Common Stock of Sooner at a conversion rate equal to the lower of
$0.20 a share or the market bid price of Sooner's Common Stock on the day before
the Closing.
8.3 A representative of each of the parties shall be stationed
in the Oklahoma County Courthouse in each of (i) the office of the Recorder of
Deeds and (ii) the office of the County Clerk, which representatives shall be in
cellular telephone contact with representatives of the parties in the offices of
Xxxxxx, Xxxx & Xxxxxxx.
8.4 At such time as the representatives of the parties can
ascertain that no mortgages, liens, or security interests have been filed as
charges on the Permit, the Facility, or the Sellers not acceptable to Sooner Sub
or to Sooner, the parties shall exchange the documents and instruments described
in paragraph 8.2 herein and the Deed and the Security Interest shall be filed
for recording in the offices of the Oklahoma County Recorder of Deeds and County
Clerk.
8.5 The parties agree that X.X. Xxxxxxxxxx XX shall receive
back his $227,000 certificate of deposit pledged to support the loan from First
Enterprise Bank as soon as that bank is paid from the proceeds of the sale. The
parties will execute any documentation to effect this agreement.
9. Pre-Closing. Sellers agree to make available to Sooner, during
business hours, its books and records and access to the Facility and its
employees in order that Sooner can satisfy itself concerning the assets,
liabilities and business of New Directions.
10. Post-Closing. Subsequent to the Closing:
10.1 The parties shall each cooperate with the others to do
all acts and execute any required documents to carry out the intention of this
Agreement and to achieve the enjoyment by the parties of the fruits of their
bargains, which includes a requirement that the
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Sellers obtain an audit of their financial statements as required by Regulation
S-B of the Securities and Exchange Commission.
10.2 Sooner shall indemnify Xxx Xxxxxxxxx and Xxxxx Xxxxxx,
Jr. for their legal fees up to $10,000 related to defending any claims asserted
regarding a note executed between Alexander and Tabot (as borrowers) and P.J.K.
Inc. as lender. Such claims are for reimbursement of reasonable legal fees.
N D ACQUISITION CORP SOONER HOLDINGS, INC.
By: /s/ X. X. Xxxxxxxxxx, XX By: X. X. Xxxxxxxxxx, XX
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X.X. Xxxxxxxxxx, XX President X.X. Xxxxxxxxxx, XX President
HORIZON LODGES OF AMERICA, INC. NEW DIRECTION CENTERS OF AMERICA, A
LIMITED LIABILITY COMPANY
By: /s/ Xxx Xxxxx By: /s/ Xxx Xxxxxxxxx
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Xxx Xxxxx, President Xxx Xxxxxxxxx, Manager
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