<PAGE>
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) May 14, 1996
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CHART HOUSE ENTERPRISES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-9684 33-0147725
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(State of other jurisdiction of (Commission (I.R.S. Employer
Incorporation or organization) File Number) Identification No.)
115 South Acacia Avenue, Solana Beach, California 92075-1803
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (619) 755-8281
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(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets.
On March 18, 1996, Chart House Enterprises, Inc. (the "Company") signed
definitive agreements for the sale of a 75% interest in its Islands restaurants
operations to two affiliated partnerships of Islands Restaurants, L.P., the
owner/licensor of the Islands concept, for a total sale price of $23 million in
notes.
On May 14, 1996, the sale of the business was completed.
Islands California/Arizona LP acquired the Company's 12 Islands restaurants
located in California and Arizona for a price of $20 million, represented by a
9% secured note in that amount issued by its general partner. As part of the
transaction, Islands Florida LP purchased the Company's six Islands restaurants
in Florida for a $3 million 9% secured note. The notes are payable over a 20-
year amortization period, with the remaining principal balances due at the end
of 15 years. The terms of the $3 million note allow for adjusted payments
(either increased or decreased) depending on available cash flows of the Florida
partnership.
In accordance with the agreements, the Company retained most current assets
and current liabilities as of the date of closing related to the Islands
restaurants operations, except as specifically provided in the agreements.
These accounts will be collected and paid in the normal course as they come due.
Islands California/Arizona LP and Islands Florida LP will reimburse the Company
for certain current items, such as cash reserves, inventories and prepaid
expenses, within 45 days from the closing date of the transaction.
The Company will retain a 25% interest as a limited partner in both of the
partnerships, and will be entitled to periodic distributions based on available
cash flows, as provided in the agreements.
As part of the transaction, the existing area development and license
agreement and management agreement between the Company's subsidiary, Islands
Restaurants, Inc. and Islands Restaurants, L.P. terminated, thereby relieving
the Company of its obligation to continue developing Islands restaurants, and
reverting the license and development rights back to Islands Restaurants, L.P.,
which also reassumed responsibility for managing its 15 Islands restaurants in
the Los Angeles and Dallas markets as well as the new restaurants acquired from
the Company.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
The following Pro Forma financial information is filed as a part of this
report:
Unaudited Pro Forma Condensed Balance Sheet as of April 1, 1996.
Unaudited Pro Forma Condensed Income Statement for the Thirteen Weeks Ended
April 1, 1996.
Unaudited Pro Forma Condensed Income Statement for the Year Ended December
31, 1995.
Notes to Unaudited Pro Forma Condensed Financial Statements.
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(b) Pro Forma Financial Information.
The unaudited pro forma condensed balance sheet as of April 1, 1996
gives effect to the disposition had it occurred on April 1, 1996. The unaudited
pro forma condensed income statements for the thirteen weeks ended April 1, 1996
and year ended December 31, 1995 give effect to the disposition had it occurred
at the beginning of these respective periods.
The pro forma balance sheet and income statements have been prepared
utilizing the Company's audited consolidated financial statements as of and for
the year ended December 31, 1995 and the unaudited interim consolidated
financial statements as of and for the thirteen weeks ended April 1, 1996. The
financial statements and results of the Islands restaurants operations for the
respective periods are unaudited.
The unaudited pro forma condensed financial statements have been
prepared by the Company based upon assumptions deemed proper by it. The
unaudited pro forma condensed financial statements presented herein are shown
for illustrative purposes only and are not necessarily indicative of the future
financial position or future results of operations of the Company, or of the
financial position or results of operations of the Company that would have
actually occurred had the disposition taken place on the dates indicated. In
addition, it should be noted that the Company's financial statements will
reflect the disposition only from May 14, 1996, the closing date of the
transaction.
The unaudited pro forma condensed financial statements should be read
in conjunction with the historical consolidated financial statements and related
notes of the Company.
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(c) Exhibits.
Exhibit No. 10.18(1) Asset Purchase Agreement dated as of March 18,
1996 by and between Islands Restaurants, Inc.
and Islands Florida LP (with attached Form of
Promissory Note)*
(2) Partnership Interest Purchase Agreement dated
as of March 18, 1996 by and between Islands
Restaurants, Inc. and Islands CA/AZ Holdings LP
(with attached Form of Promissory Note)*
(3) Termination of License Agreement.
(4) Termination of Management Agreement.
* Filed as an exhibit to Form 10-Q for the quarterly period ended
April 1, 1996.
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SIGNATURES
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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 thereunto duly authorized.
CHART HOUSE ENTERPRISES, INC. (Registrant)
Date: May 28, 1996 By: /s/ HAROLD E. GAUBERT, JR.
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Harold E. Gaubert, Jr.
Vice President, Treasurer and Chief
Financial Officer
By: /s/ JAMES C. WENDLER
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James C. Wendler
Vice President and Chief Accounting
Officer
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CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES (THE "COMPANY")
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET AS OF APRIL 1, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments
---------- --------------------- Pro Forma
Company Islands (a) Other Balances
---------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Current Assets 8,829 (2,038) 1,603 (b) 8,394
Net Property and Equipment 119,267 (22,685) 96,582
Leased Property under Capital Leases 4,328 (683) 3,645
Assets of Business Transferred Under
Contractual Arrangements 27,217 (c) 27,217
Other Assets and Goodwill 21,031 (3,907) 17,124
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Total Assets 153,455 (29,313) 28,820 152,962
========== =========== ======= =========
Current Liabilities 23,156 (1,214) 1,193 (b) 23,385
250 (d)
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Long-Term Debt 44,400 44,400
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Long-Term Obligations under
Capital Leases 5,321 (722) 4,599
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Deferred Income Taxes 4,518 4,518
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Amounts Due to Parent Company (29,224) 29,224 (e)
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Stockholders' Equity:
Common Stock 82 82
Additional Paid-In Capital 42,105 42,105
Retained Earnings 33,873 1,847 (1,847)(e) 33,873
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Total Stockholders' Equity 76,060 1,847 (1,847) 76,060
---------- ----------- ------- ---------
Total Liabilities and Stockholders' Equity 153,455 (29,313) 28,820 152,962
========== =========== ======= =========
</TABLE>
(a) To eliminate the assets and liabilities related to the Islands restaurants
operations included in the consolidated balance sheet of the Company as of
April 1, 1996.
(b) To reflect current assets and current liabilities retained by the Company
or included in post-closing settlement.
(c) To reflect presentation of the consideration received from disposition ($23
million in notes receivable) plus the Company's 25% limited partnership
interests.
(d) To reflect estimated transaction costs.
(e) To offset elimination of intercompany payable and equity amounts.
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CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES (THE "COMPANY")
UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT
FOR THE THIRTEEN WEEKS ENDED APRIL 1, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments
---------- ---------------------- Pro Forma
Company Islands (a) Other Results
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<S> <C> <C> <C> <C>
Revenues 43,246 (7,495) 35,751
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Operating Expenses:
Cost of Food and Supplies 12,552 (1,788) 10,764
Payroll and Related Taxes 12,432 (2,286) 10,146
Other Operating Expenses 10,696 (2,264) 8,432
Depreciation and Amortization 2,705 (542) 2,163
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38,385 (6,880) 31,505
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Income From Restaurant Operations 4,861 (615) 4,246
Selling, General and Administrative
Expenses 4,593 (244) (53)(b) 4,296
Interest Expense, Net 1,142 1,142
Interest Income (517)(c) (517)
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Income (Loss) Before Income Taxes (874) (371) 570 (675)
Provision (Benefit) For Income Taxes (244) (101) 160 (d) (185)
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Net Income (Loss) (630) (270) 410 (490)
========== =========== ======= =========
Net Income (Loss) Per Common Share (0.08) (0.06)
========== =========
Weighted Average Shares Outstanding 8,264 8,264
========== =========
</TABLE>
(a) To eliminate the profit and loss of the Islands restaurants operations for
the period.
(b) To reflect administrative costs incurred on behalf of the Islands
restaurants operations that would have been eliminated as a result of the
disposition.
(c) To reflect interest income earned on the notes receivable.
(d) To adjust the provision for income taxes based on the tax effects of
adjustments (b) and (c).
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CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES (THE "COMPANY")
UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments
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Company Islands (a) Other Results
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<S> <C> <C> <C> <C>
Revenues 179,155 (23,225) 155,930
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Operating Expenses:
Cost of Food and Supplies 51,891 (5,543) 46,348
Payroll and Related Taxes 48,583 (6,668) 41,915
Other Operating Expenses 42,467 (6,987) 35,480
Depreciation and Amortization 10,697 (1,874) 8,823
Restructuring Charges 4,853 4,853
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158,491 (21,072) 137,419
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Income From Restaurant Operations 20,664 (2,153) 18,511
Selling, General and Administrative
Expenses 15,286 (2,086) (364)(b) 12,836
Interest Expense, Net 4,811 4,811
Interest Income (2,053)(c) (2,053)
Other Income - Gain on Sale of Subsidiary (1,855) (1,855)
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Income Before Income Taxes 2,422 (67) 2,417 4,772
Provision (Benefit) For Income Taxes (241) (18) 749 (d) 490
---------- ----------- ------- ---------
Net Income 2,663 (49) 1,668 4,282
========== =========== ======= =========
Net Income Per Common Share 0.32 0.52
========== =========
Weighted Average Shares Outstanding 8,277 8,277
========== =========
</TABLE>
(a) To eliminate the profit and loss of the Islands restaurants operations for
the period.
(b) To reflect administrative costs incurred on behalf of the Islands
restaurants operations that would have been eliminated as a result of the
disposition.
(c) To reflect interest income earned on the notes receivable.
(d) To adjust the provision for income taxes based on the tax effects of
adjustments (b) and (c).
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EXHIBIT 10.18(3)
TERMINATION OF LICENSE AGREEMENT
--------------------------------
THIS TERMINATION OF LICENSE AGREEMENT (the "Agreement") is entered
into as of May 14, 1996 by and between ISLANDS RESTAURANTS, L.P., a Delaware
limited partnership (the successor to the License Agreement, as defined below,
by assignment from Seneca Partners, Inc., a California corporation, formerly
known as Islands Restaurants) ("Licensor"), and ISLANDS RESTAURANTS, INC., a
Delaware corporation (formerly known as Big Wave, Inc.) ("Licensee").
R E C I T A L S :
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A. Pursuant to that certain Amended and Restated Area Development and
License Agreement entered into on December 16, 1993, which is currently by and
between Licensor and Licensee (the "License Agreement"), Licensor granted to
Licensee, among other things, an exclusive license (subject to certain reserved
rights retained by Licensor) to use certain Marks (as defined in the License
Agreement) and to establish and operate restaurants under the trade name
"Islands" or utilizing the Islands concept anywhere in the world.
B. Licensor and Licensee now desire to terminate the License
Agreement in connection with certain transactions by and between Licensee and
certain affiliates of Licensor as more fully set forth in that certain
Partnership Interest Purchase Agreement dated as of March 18, 1996, by and
between Licensee and Islands CA/AZ Holdings LP, a Delaware limited partnership,
and that certain Asset Purchase Agreement dated as of March 18, 1996, by and
between Licensee and Islands Florida LP, a Delaware limited partnership.
NOW, THEREFORE, in consideration of the preceding recitals and the
promises, agreements and covenants set forth below, Licensor and Licensee agree
as follows:
A G R E E M E N T :
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1. Termination of License Agreement. Licensor and Licensee hereby
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mutually agree that the License Agreement and all of the provisions thereof
shall terminate as of the date hereof. Further, Licensee acknowledges its
duties and obligations upon the termination of the License Agreement as set
forth in Section 12.5 therein; provided, however, that Licensor hereby agrees
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not to exercise its demand rights as set forth in Section 12.5(c) of the License
Agreement.
2. Payment of License Fees. In accordance with Section 12.5(a) of
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the License Agreement, Licensee shall deliver, within three (3) business days of
the date of this Agreement, all License Fees and other amounts due and owing
Licensor under the License Agreement through the date of this Agreement which
shall be accompanied by a report of Gross Sales for each Restaurant for the
period of April 30, 1996 up to the date of this Agreement, certified by the
chief financial or accounting officer of Licensee.
<PAGE>
IN WITNESS THEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"LICENSOR" ISLANDS RESTAURANTS, L.P., a Delaware limited
partnership
By: Seneca Partners, Inc., a Delaware corporation
Its: Sole General Partner
By: /s/ JOHN P. WAGNER
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Name: John P. Wagner
Title: Vice President, Secretary and
Treasurer
"MANAGER" ISLANDS RESTAURANTS, INC., a Delaware corporation
By: /s/ WILLIAM R. KUNTZ, JR.
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Name: William R. Kuntz, Jr.
Title: Vice President
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<PAGE>
EXHIBIT 10.18(4)
TERMINATION OF MANAGEMENT AGREEMENT
-----------------------------------
THIS TERMINATION OF MANAGEMENT AGREEMENT (the "Agreement") is entered
into as of May 14, 1996 by and between ISLANDS RESTAURANTS, L.P., a Delaware
limited partnership (the successor to the Management Agreement, as defined
below, by assignment from Seneca Partners, Inc., a California corporation,
formerly known as Islands Restaurants) ("Partnership"), and ISLANDS RESTAURANTS,
INC., a Delaware corporation (formerly known as Big Wave, Inc.)("Manager").
R E C I T A L S :
----------------
A. Pursuant to that certain Management Agreement entered into on
December 16, 1993 (but made effective as of January 3, 1994), which is currently
by and between Partnership and Manager (the "Management Agreement"), Partnership
retained Manager to, among other things, provide all services necessary to
operate the restaurants set forth on Schedule "A" attached to the Management
------------
Agreement (the "Restaurants").
B. Partnership and Manager now desire to terminate the Management
Agreement in connection with certain transactions by and between Manager and
certain affiliates of Partnership as more fully set forth in that certain
Partnership Interest Purchase Agreement dated as of March 18, 1996, by and
between Islands CA/AZ Holdings LP, a Delaware limited partnership, and Manager,
and that certain Asset Purchase Agreement dated as of March 18, 1996, by and
between Islands Florida LP, a Delaware limited partnership, and Manager.
NOW, THEREFORE, in consideration of the preceding recitals and the
promises, agreements and covenants set forth below, Partnership and Manager
agree as follows:
A G R E E M E N T :
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1. Termination of Management Agreement. Partnership and Manager
-----------------------------------
hereby mutually agree that the Management Agreement and all of the provisions
thereof shall terminate as of the date hereof; provided, however, that the
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provisions contained in Section 6 of the Management Agreement regarding
indemnification shall survive the termination of the Management Agreement in
accordance with the terms of such Section 6; and provided, further, that the
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provisions contained in Section 9(j) of the Management Agreement regarding
confidential information shall also survive the termination of the Management
Agreement. Further, Manager and Partnership acknowledge their respective duties
and obligations upon the termination of the Management Agreement as set forth in
Section 2(g) therein.
2. Books and Records. In accordance with Section 2(g)(ii)(C),
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concurrently with the execution of this Agreement, Manager shall return to
Partnership all keys, contracts, leases, receipts, unpaid bills and documents,
work papers, financial and accounting records, policy and procedure manuals and
other material (including all copies thereof) obtained in connection with
Manager's provision of services under the Management Agreement which relate to
Partnership or the operation of the Restaurants.
<PAGE>
IN WITNESS THEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"PARTNERSHIP" ISLANDS RESTAURANTS, L.P., a Delaware limited
partnership
By: Seneca Partners, Inc., a Delaware corporation
Its: Sole General Partner
By: /s/ JOHN P. WAGNER
-------------------------------------
Name: John P. Wagner
Title: Vice President, Secretary and
Treasurer
"MANAGER" ISLANDS RESTAURANTS, INC., a Delaware corporation
By: /s/ WILLIAM R. KUNTZ, JR.
-------------------------------
Name: William R. Kuntz, Jr.
Title: Vice President
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