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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________________to ___________________
COMMISSION FILE NUMBER 1-9684
CHART HOUSE ENTERPRISES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0147725
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
115 SOUTH ACACIA AVENUE
SOLANA BEACH, CALIFORNIA 92075
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number including area code: (619) 755-8281
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
INDICATE BY CHECK MARK WHETHER REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT
WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K ((S) 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN,
AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN
DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART
III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 1996 was $34,989,714.
The number of shares outstanding of common stock as of March 15, 1996 was
8,238,293.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the year
ended December 31, 1995 are incorporated herein by reference into Parts I and
II.
Portions of the Registrant's Proxy Statement for the Annual Meeting to be
held May 7, 1996 are incorporated herein by reference into Part III.
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PART I
ITEM 1. BUSINESS.
As of December 31, 1995, Chart House Enterprises, Inc. (the "Company")
operated 81 restaurants, including 63 Chart Houses, one Peohe's and 17 Islands
through its subsidiaries, Chart House, Inc. ("CHI") and Islands Restaurants,
Inc. In addition, the Company has exclusive rights to develop and operate
Islands restaurants under a license agreement granted by the owners of the
Islands concept and manages 15 Islands restaurants owned by the licensor. The
Company sold its Paradise Bakery subsidiary in December 1995. In March 1996,
the Company signed definitive agreements to sell its Islands restaurant
operations. The Company was incorporated in Delaware on July 25, 1985. The
Company's principal executive offices are located at 115 South Acacia Avenue,
Solana Beach, California 92075, and its telephone number is (619) 755-8281.
The following discussion describes the Company's restaurant operations.
CHART HOUSE
Chart House operations commenced in 1961 with the opening of the first Chart
House in Aspen, Colorado by a predecessor of the Company. Today, the Company's
Chart House restaurant division operates 63 Chart House restaurants located in
21 states, Puerto Rico and the U.S. Virgin Islands. The Chart House restaurant
division also operates Peohe's restaurant and Solana Beach Baking Company,
both located in California. The Chart House division accounted for about 85%
of the Company's revenues for the year ended December 31, 1995.
Chart House restaurants are full-service, casual dinner houses with a menu
featuring fresh fish, seafood, steaks, chicken, prime rib, pasta dishes and as
much salad and bread as the customer desires. Many of the Chart House
restaurants feature an elaborate salad bar where the customer prepares his or
her own salad and some Chart Houses have a seafood bar which offers various
appetizers.
The Company places great emphasis upon the location and exterior and
interior design of each Chart House restaurant. Each Chart House is unique and
designed to fit within and complement its surroundings. The restaurant
buildings are environmentally sensitive and functional in design.
Representative exteriors of Chart House restaurants range from the restored
1887 Victorian boathouse on Coronado Island in San Diego Bay to the modern
three-tiered glass restaurant in Philadelphia overlooking the Delaware River.
With a few exceptions, Chart House restaurants are free-standing buildings
with dinner seating capacities ranging from 112 to 388 and an average seating
capacity of 180. The restaurant interiors are contemporary in design and decor
and are accentuated by contemporary artwork.
In 1995 the annual sales for Chart House restaurants currently in operation
ranged from $946,000 to$6.8 million with an average annual sales per Chart
House restaurant of $2.3 million. The average dinner check was approximately
$24 per person, excluding alcoholic beverages. Almost all Chart House
restaurants accept dinner reservations. The operating hours for Chart House
restaurants are typically 5:00 p.m. to 11:00 p.m. on weekdays and 5:00 p.m. to
1:00 a.m. on weekends.
Alcoholic beverages are available at all Chart House locations. The sale of
alcoholic beverages accounted for approximately 22% of the revenues generated
by Chart House restaurants during each of the past three years.
Each Chart House restaurant is managed by one general manager and between
one and seven assistant managers, depending on the operating characteristics
and size of the restaurant. On average, general managers possess approximately
nine years experience with Chart House. The assistant managers generally are
required to participate in a comprehensive training program in restaurant
management and operations over a four-month period prior to the assumption of
their duties. In addition, each general manager is required to comply with an
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extensive operations manual which contains procedures to ensure uniform
operations, consistently high quality products and service and proper
accounting for restaurant operations. The general manager and his or her
assistants are responsible for training restaurant employees.
There are 10 Chart House regional managers, each of whom is responsible for
five to eight Chart House restaurants in a given area. Each regional manager
reports to a vice president of operations. There are two vice presidents of
operations, one based in California and one in Connecticut, each of whom
reports directly to the President and Chief Operating Officer of the Company.
The duties of the vice presidents of operations include supervising and
assisting the managerial and staff employees of all Chart House restaurants.
Peohe's
The Company opened its Peohe's restaurant in January 1988 in Coronado,
California overlooking San Diego Bay and the San Diego city skyline. Although
similar to the Company's Chart House restaurants in many respects, Peohe's
opened under a different name in part to minimize confusion and competition
with nearby Chart House restaurants and also to provide Chart House management
a suitable vehicle for experimentation and development of different menu
items, restaurant design and operating concepts. Peohe's has a more extensive
and higher priced menu, higher level of service and greater variety of cooking
techniques than the typical Chart House restaurant. Peohe's is operated by the
Chart House restaurant division.
Solana Beach Baking Company
Chart House operates a wholesale bakery in a leased facility located in
Carlsbad, California under the trade name "Solana Beach Baking Company." The
wholesale bakery supplies bread and other baked goods to Chart House
restaurants and also supplies muffins, croissants and other bakery products to
several hotels, food service distributors and other third party accounts. In
late-1994, the wholesale bakery began supplying cookies, cinnamon rolls and
other baked goods to Starbucks retail coffee outlets throughout Southern
California.
Quahogs
In September 1995, the Company closed its Quahogs restaurant in Warwick,
Rhode Island because of weak sales. The restaurant property, which is owned by
the Company, is currently being held for disposal. Quahogs was a sports-bar
concept that had been open for just over one year.
Site Development
The cost of opening a Chart House restaurant varies significantly from
restaurant to restaurant, depending upon, among other things, the location of
the site and whether the land, building, furniture, fixtures and equipment are
purchased or leased. For example, the Alexandria, Virginia restaurant, a
building which was constructed in 1990 on leased land, required total capital
expenditures of approximately $4.8 million, while the Longboat Key, Florida
restaurant, which involved construction of leasehold improvements to an
existing structure in 1989, required total capital expenditures of
approximately $955,000. Capital expenditures for the new Chart House in
Newport, Kentucky, which is being constructed on leased land and is scheduled
to open in April 1996, are expected to total about $2.5 million.
While identifying and developing restaurant sites, particular emphasis is
placed on a potential site's physical location, with a preference for
locations near water and within major metropolitan areas. Sales and profit
projections are then prepared to determine whether the proposed restaurant
will provide a targeted return on investment. The Company accords great
importance to the selection of and coordination with the architect to ensure
that the proposed restaurant structure fits the Chart House restaurant image.
Where a new free-standing building is required to be built, up to 2 1/2 years
may elapse from site selection to restaurant opening. However, where the
Company is able to locate a suitable restaurant for conversion to a Chart
House, the development period is generally six to 12 months.
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Strategic Plan
Over the past few years, the Company had scaled back development of new
Chart House restaurants, in large part due to the redirection of expansion
efforts and capital to the development of Islands restaurants. In the fourth
quarter of 1995, the Company adopted a new strategic plan to improve
shareholder value by refocusing on its core business-- Chart House
restaurants. The key elements of the plan are as follows:
. Sell Paradise Bakery and Islands (see below), narrowing the Company's focus
to the remaining Chart House restaurant operations and Solana Beach Baking
Company.
. Add new tastes to the Chart House menu through a food development program
that responds to changing customer preferences and provides new lower-
priced entree choices in addition to the existing core menu items.
. Modernize and revitalize existing Chart House restaurants through concept,
decor and equipment enhancements and selected restaurant remodels.
. Implement an expanded marketing program emphasizing local-based direct
marketing and promotion efforts and use of the Aloha Club member data base.
. Expand the Chart House base at a moderate pace beginning with the
completion of the Newport, Kentucky (across the Ohio River from Cincinnati,
Ohio) restaurant in mid-1996 and developing at least one restaurant per
year thereafter.
. Dispose of selected Chart House restaurants that do not meet the Company's
performance criteria.
. Reorganize the management team, reduce overhead and implement succession
planning.
In connection with the adoption of the strategic plan, the Company in 1995
decided to dispose of certain underperforming restaurants and restaurants
properties, resulting in charges to income of approximately $4.4 million. See
Note 2 of the Notes to Consolidated Financial Statements as of December 31,
1995 for information with respect to the restructuring charges.
ISLANDS
In November 1991, the Company entered into an Area Development and License
Agreement with Seneca Partners, Inc. (formerly known as Islands Restaurants
("Seneca")), a company based in Costa Mesa, California, granting the Company
the exclusive right to develop and operate "Islands" restaurants in designated
metropolitan areas in accordance with a development schedule. In 1992 and
again in early 1993, the Area Development and License Agreement was amended to
modify the development schedule and the designated metropolitan areas.
In December 1993, the Area Development and License Agreement was amended and
restated to provide the Company's subsidiary, Islands Restaurants, Inc.
(formerly Big Wave, Inc. ("Islands")), as licensee, exclusive worldwide rights
to develop and operate Islands restaurants, including rights to sub-license or
franchise the concept. The Company paid $4,000,000 to Seneca for the expanded
territorial rights and will pay a continuing monthly license fee of 2% of the
gross sales of Islands restaurants operated under the license. The restated
license agreement, which has a term of 40 years and may be extended for an
additional 25 years, requires Islands to open a minimum of 100 restaurants at
a rate of five restaurants per year.
Concurrent with signing the restated license agreement, Islands and Seneca
also signed a long-term management agreement under which Islands, effective
January 1994, began managing 15 Islands restaurants previously managed by
Seneca as general partner of the limited partnership (Islands Restaurants,
L.P.) which owns the restaurants. Islands is entitled to receive a management
fee of 5% of the gross sales of the 15 restaurants, plus reimbursement for
certain accounting and administrative services provided to the limited
partnership.
3
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On March 18, 1996, the Company signed definitive agreements for the sale of
a 75% interest in its Islands restaurant operations to two affiliated
partnerships of Islands Restaurants, L.P. for a total price of $23 million in
notes. The notes bear interest at a rate of 9% and are secured by restaurant
assets. The Company will retain a 25% interest as a limited partner in both of
the partnerships.
As part of the transaction, the existing area development agreement and
management agreement will terminate, thereby relieving the Company of its
obligation to continue developing five Islands restaurants each year, and
reverting the license and development rights back to Islands Restaurants,
L.P., which will also reassume responsibility for managing its 15 Islands
restaurants in the Los Angeles and Dallas markets as well as the new
restaurants to be acquired from the Company.
The closing of the transaction is subject to several conditions, including
obtaining consents of landlords, liquor licensing authorities and other third
parties. The closing is scheduled at the end of April 1996, but there can be
no assurance that the closing will occur.
Islands restaurants are mid-priced, "gourmet" burger restaurants which also
offer chicken sandwiches, soft tacos, salads and unique exotic beverages. The
restaurants follow a tropical theme, which is enhanced by indoor palms, open
atriums, decorative birds, colorful tile and photo art. There are presently 17
Company-owned Islands restaurants, located in Southeast Florida, San Diego
County, California and the Phoenix, Arizona area, and 15 Islands, operated
under the management agreement, located in Los Angeles and Orange Counties,
California, and in the Dallas, Texas area. Average annual sales for Islands
restaurants were $1.8 million for 1995, with a check average of approximately
$7.50.
The Company opened seven Islands restaurants in 1995, four in California,
two in Florida and one in Arizona. One new Islands is scheduled to open in
April 1996 in Arizona.
PARADISE BAKERY DISPOSITION
Effective December 31, 1995, the Company completed the sale of all of the
outstanding common stock of its wholly owned subsidiary, Paradise Bakery,
Inc., to Java Centrale, Inc., a publicly-traded company headquartered in
Sacramento, California. The total sale price was $6,725,000, consisting of
$5,375,000 cash proceeds and a $1,350,000 note. The note bears interest at a
rate of 10% and matures in 1998.
PROCUREMENT OF FOOD AND SUPPLIES
The Company's ability to maintain consistent quality throughout its
restaurants depends in part upon the ability to acquire food products and
related items from reliable sources in accordance with Company specifications.
Chart House restaurants have purchased virtually all of the meat and frozen
seafood used in the restaurants on a national basis from one distributor for
the past 26 years. Management believes that adequate alternative sources of
supply are readily available.
EMPLOYEES AND LABOR RELATIONS
As of December 31, 1995, the Company employed approximately 6,600 persons,
of whom approximately 6,140 were hourly restaurant or clerical employees and
approximately 460 were salaried, managerial employees engaged in
administrative and supervisory capacities. A majority of the hourly employees
are employed on a part-time basis to provide services necessary during peak
periods of restaurant operations. None of the Company's employees is covered
by a collective bargaining agreement. The Company has never experienced a work
stoppage and believes its labor relations to be good.
4
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COMPETITION
In general, the restaurant business is highly competitive and can be
affected by competition created by similar restaurants in a geographic area,
changes in the public's eating habits and preferences and local and national
economic conditions affecting consumer spending habits, population trends and
traffic patterns. Key competitive factors in the industry are the quality and
value of the food products offered, quality of service, cleanliness, name
identification, restaurant locations, price and attractiveness of facilities.
The Company's strategy is to differentiate itself from its competitors by
providing consistently high quality products, and efficient and friendly
service in a unique setting.
MARKETING
The Company has developed an extensive, coordinated marketing communications
program. Prior to 1993, the Chart House division had not utilized any
significant advertising other than yellow pages and selected local print
advertising and limited test marketing programs in 1991 and 1992. The 1993
program developed for Chart House consisted of a national print media brand
awareness campaign, and the implementation of the Aloha Club, a frequent diner
program, in October 1993. Efforts in 1995 were devoted to supporting the Aloha
Club, which has a current enrollment of 300,000 members. The Islands division
uses media advertising and local promotions to a limited extent.
GOVERNMENT REGULATION
Each of the Company's restaurants is subject to various federal, state and
local laws, regulations and administrative practices affecting its business
and must comply with provisions regulating health and sanitation standards,
equal employment, public accommodations for disabled patrons, minimum wages,
worker safety and compensation and licensing for the sale of food and
alcoholic beverages. Difficulties or failures in obtaining or maintaining
required liquor licenses, or other required licenses or approvals, could delay
or prevent the opening of new restaurants or adversely affect the operations
of existing restaurants.
Federal and state environmental regulations have not had a material effect
on the Company's operations but more stringent and varied requirements of
local governmental bodies with respect to zoning, land use and environmental
factors could delay construction of new restaurants and add to their cost.
The Company is also subject to the Fair Labor Standards Act, which governs
such matters as minimum wages, overtime and other working conditions. A
significant number of the Company's food service personnel are paid at rates
related to federal and state minimum wage requirements and, accordingly,
increases in the minimum wage or decreases in the allowable tip credit will
increase the Company's labor cost. There can be no assurance that future
legislation covering, among other matters, mandated health insurance, will not
be enacted which could have a significant effect on the Company.
The Company believes it is operating in substantial compliance with
applicable laws and regulations governing its operations.
TRADEMARKS AND SERVICE MARKS
The "Chart House" logo and trademark were registered with the United States
Patent and Trademark Office (the "USPTO") in 1972 and 1977, respectively. The
"Peohe's" logo and trademark were registered with the USPTO in 1988.
Applications to register the "Aloha Club" trademark and logo are pending with
the USPTO.
The "Chart House" trademark and logo are licensed by the Company to the
operator of one Chart House restaurant located in Honolulu, Hawaii.
In November 1991, the Company acquired from Seneca a license to develop and
operate restaurants under the name "Islands." See "Islands."
5
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EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information about the executive
officers of the Company. Unless otherwise indicated, all positions are with
Chart House Enterprises, Inc.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
- ---- --- --------------------------
<S> <C> <C>
John M. Creed........................ 59 Chairman of the Board and Chief
Executive Officer
Harry F. Roberts..................... 53 President and Chief Operating Officer
William R. Kuntz, Jr. ............... 46 Executive Vice President, General
Counsel and Secretary
Harold E. Gaubert, Jr. .............. 46 Vice President, Treasurer and Chief
Financial Officer
Douglas E. Kollus.................... 46 Vice President of the Company and
President and Chief Operating Officer
of Islands
</TABLE>
Executive officers of the Company are appointed annually by the Board of
Directors and serve at the Board's discretion.
John M. Creed became Chief Executive Officer in February 1996 after having
served as President and Chief Executive Officer since November 1985. He has
been a director of the Company since November 1985 and was named Chairman of
the Board in August 1987. Mr. Creed has been with the Chart House restaurant
organization, or a parent company thereof, continuously for the past 28 years.
Harry F. Roberts joined the Company as President and Chief Operating Officer
in February 1996. He has been a director of the Company since 1993. He was
Vice President of Starbucks Coffee Company from July 1993 to January 1996.
From 1990 to July 1993, Mr. Roberts was President and Chief Executive Officer
of EvansGroup Portland, which is part of the EvansGroup multi-state marketing
communications network.
William R. Kuntz, Jr. became Executive Vice President, General Counsel and
Secretary in February 1996. He joined the Company as Vice President, General
Counsel and Secretary in June 1988. Mr. Kuntz was previously a partner in the
Los Angeles and San Diego offices of Morgan, Lewis & Bockius, a national law
firm.
Harold E. Gaubert, Jr. has been Vice President, Treasurer and Chief
Financial Officer of the Company since November 1985. He has been a member of
the American Institute of Certified Public Accountants since 1974. Mr. Gaubert
has been with the Chart House restaurant organization, or a parent company
thereof, continuously for the past 20 years.
Douglas E. Kollus has been a Vice President of the Company since February
1992 and became President and Chief Operating Officer of Islands in January
1994. He was Executive Vice President--Operations of Islands from February
1993 to January 1994. Mr. Kollus was President and Chief Operating Officer of
Mangos Restaurants, Inc. from May 1992 to February 1993 and was President and
Chief Operating Officer of Paradise Bakery, Inc., from December 1988 to May
1992. Mr. Kollus has been with the Chart House organization for the past 22
years.
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ITEM 2. PROPERTIES.
A majority of the restaurant properties used by the Company are leased from
others. The following table sets forth the number of restaurants owned, leased
and operated pursuant to ground leases and the average remaining lease term
(including renewal options) in years as of December 31, 1995. The table does
not include owned properties or leases under which the Company was not engaged
in restaurant operations at year end.
<TABLE>
<CAPTION>
AVERAGE
REMAINING
GROUND LEASE
OWNED LEASED(1) LEASES(2) TOTAL TERM(3)
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<S> <C> <C> <C> <C> <C>
Chart House and Peohe's............ 12 35 16 63 26
Islands............................ -- 3 14 17 28
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Total............................. 12 38 30 80
=== === === ===
</TABLE>
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(1) The Company leases restaurant properties (a) pursuant to standard lease or
sublease arrangements and (b) under "build-to-suit" arrangements pursuant
to which the landowner/landlord builds a restaurant to the Company's
specifications. Each restaurant property is owned by the
landowner/landlord and at the expiration or termination of the lease term,
the Company will have no interest in the restaurant or any other material
improvements constructed on the real property.
(2) Under ground lease arrangements, the Company, as tenant, leases
undeveloped real property and is responsible for constructing all or
substantially all improvements on the real property. In a typical ground
lease, the improvements constructed by the Company are owned by the
Company and the landowner/landlord has no interest in the improvements
constructed by the Company until the expiration or termination of the
lease, at which time the improvements become the property of the
landowner/landlord.
(3) Includes renewal options.
The amount of rent paid to lessors and the methods of computing rent vary
considerably from lease to lease. Most leases contain a provision for a rental
equal to the greater of a fixed minimum amount or a percentage of restaurant
sales at the leased premises.
Substantially all of the owned Chart House restaurants and certain of the
leased Chart House restaurants are subject to mortgages in favor of certain
lenders. See Note 6 of the Notes to Consolidated Financial Statements as of
December 31, 1995 for information with respect to security agreements and
obligations under mortgages.
The Company operates one Chart House restaurant under a management agreement
with the owner of the property. The restaurant, located in Weehawken, New
Jersey, covers approximately 22,000 square feet.
Solana Beach Baking Company leases approximately 13,000 square feet of space
in a building in Carlsbad, California for use as a wholesale bakery. The
initial term of the lease expires in 1998 and there is an option for an
additional five year term.
The Company's principal executive offices occupy approximately 20,400 square
feet of office space in a building located in Solana Beach, California, which
is owned and used by the Company.
ITEM 3. LEGAL PROCEEDINGS.
Management of the Company believes that there are no material legal
proceedings pending or threatened to which the Company is or may be a party or
to which any of its property is subject. The Company is involved in various
lawsuits incidental to its business. Management does not believe that the
outcome of such litigation will have a material adverse effect upon the
consolidated operations or financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information appearing under the caption "Common Stock Information" on
page 25 of the Company's Annual Report to Stockholders for the year ended
December 31, 1995 (the "Annual Report") is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data for the Company and its subsidiaries on page 14
of the Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results of
Operations appears on pages 11, 12 and 13 of the Annual Report and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS.
The consolidated financial statements of the Company and its subsidiaries,
listed under Item 14, appear on pages 15 through 24 of the Annual Report and
are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Directors. The information appearing under the caption "Election of
Directors" on pages 3, 4 and 5 of the Company's Proxy Statement for its Annual
Meeting of Stockholders to be held on May 7, 1996 (the "Proxy Statement") is
incorporated herein by reference.
Executive Officers. The information with respect to executive officers
appearing under the caption "Executive Officers of the Company" is included in
Item 1 of this Annual Report on Form 10-K on page 6 and is incorporated herein
by reference pursuant to general instruction G and instruction 3 to Item
401(b) of Regulation S-K.
Compliance with Section 16(a) of the Exchange Act. The information appearing
under the caption "Security Ownership of Management--Compliance with Section
16(a) of the Exchange Act" on page 13 of the Proxy Statement is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information appearing under the caption "Executive Compensation"
commencing on page 6 of the Proxy Statement is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information appearing under the captions "Principal Stockholders" on
page 2 and "Security Ownership of Management" on page 12 of the Proxy
Statement is incorporated herein by reference.
8
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements:
Included in Part II of this report are the following financial statements
incorporated herein by reference to the following pages of the Annual
Report.
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Consolidated Balance Sheets as of December 31, 1995 and 1994.......... 15
Consolidated Statements of Income for the years ended December 31,
1995, 1994 and 1993.................................................. 16
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993..................................... 16
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1994 and 1993.................................................. 17
Notes to Consolidated Financial Statements............................ 18-23
Report of Independent Public Accountants.............................. 24
</TABLE>
(2) Financial Statement Schedules:
All schedules have been omitted since the information required to be
submitted has been included in the consolidated financial statements or notes
thereto or have been omitted as not applicable or not required.
(3) Exhibits:
<TABLE>
<C> <S>
3.1(1) Restated Certificate of Incorporation of the Company, as
amended.(1)
(2) Certificate of Amendment of Restated Certificate of Incorporation
of the Company.(2)
3.2 Amended and Restated Bylaws of the Company.(1)
4.1 Specimen Common Stock Certificate.(2)
4.2 Section 203 of the Delaware General Corporation Law.(2)
10.1(1) Amended and Restated Revolving Credit and Term Loan Agreement
dated as of December 17, 1993 by and among CHI, as borrower, the
Company, Big Wave, Inc., and Paradise Bakery, Inc., as
guarantors, and The First National Bank of Boston ("FNBB") and
Sanwa Bank California ("Sanwa"), as lenders, together with
Restated Revolving Credit Notes dated December 17, 1993.(7)
(2) First Amendment dated September 30, 1994 to Amended and Restated
Revolving Credit and Term Loan Agreement.(8)
(3) Second Amendment dated April 24, 1995 to Amended and Restated
Revolving Credit and Term Loan Agreement.
(4) Third Amendment dated June 14, 1995 to Amended and Restated
Revolving Credit and Term Loan Agreement.
(5) Fourth Amendment dated August 25, 1995 to Amended and Restated
Revolving Credit and Term Loan Agreement.
10.2(1) Amended and Restated Security and Inter-Creditor Agreement dated
as of December 17, 1993 by and among CHI, as debtor, and FNBB, as
security agent for itself, Sanwa and Metropolitan Life Insurance
Company ("Metropolitan"), as secured parties.(7)
10.2(2) Amended and Restated Pledge Agreement dated as of December 17,
1993 by and among CHI, as pledgor, and FNBB, as pledgee on behalf
of itself, Sanwa and Metropolitan.(7)
</TABLE>
9
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<TABLE>
<C> <S>
10.2(3) Amended and Restated Notice of Security Interest in Trademarks
dated December 17, 1993 by CHI in favor of FNBB, as security
agent for itself, Sanwa and Metropolitan.(7)
10.2(4) Amended and Restated Pledge Agreement dated as of December 17,
1993 by and among the Company, as pledgor, and FNBB, as
pledgee on behalf of itself, Sanwa and Metropolitan.(7)
10.2(5) Security and Inter-Creditor Agreement dated as of December 17,
1993 by and among Big Wave, Inc., as debtor, and FNBB, as
security agent for itself, Sanwa and Metropolitan, as secured
parties.(7)
10.3 Amended and Restated Note Purchase and Guarantee Agreement
dated as of December 30, 1993 by and among CHI, as note
issuer, the Company, Big Wave, Inc., and Paradise Bakery,
Inc., as guarantors, and Metropolitan, as note purchaser,
with respect to CHI's 10.40% Senior Secured Notes Due
2000.(7)
10.4 Note Purchase and Guarantee Agreement dated as of December 30,
1993 by and among CHI, as note issuer, the Company, Big Wave,
Inc., and Paradise Bakery, Inc., as guarantors, and
Metropolitan, as note purchaser, with respect to CHI's 6.69%
Senior Secured Notes Due 2001.(7)
10.5(1) Registration Rights Agreement dated November 27, 1985 among
the Company and its stockholders.(1)
(2) First Amendment to Registration Rights Agreement dated as of
April 28, 1986.(1)
(3) Second Amendment to Registration Rights Agreement dated as of
April 21, 1987.(1)
(4) Third Amendment to Registration Rights Agreement dated as of
September 6, 1989.(3)
10.6 [Intentionally Omitted]
10.7 [Intentionally Omitted]
10.8 Marks Licensing Agreement and Settlement Agreement, each dated
as of June 30,
1987 between CHI and Cabell Enterprises, Inc.(1)
10.9 Compensatory Plans, Contracts and Agreements:
(1) 1985 Incentive Stock Option Plan of the Company, as
amended.(1)
(2)(a) 1989 Non-Qualified Stock Option Plan of the Company.(2)
(b) Form of 1989 Non-Qualified Stock Option Plan Agreement.(2)
(3)(a) 1992 Stock Option Plan.(5)
(b) Form of 1992 Stock Option Plan Agreement.(5)
(4) Non-Qualified Stock Option Agreement dated as of June 1, 1988
between the Company
and William R. Kuntz, Jr.(2)
(5)(a) Chart House Enterprises, Inc. 401(k) Plan, effective January
1, 1987, as amended and
restated.(2)
(b) Amendment to Chart House Enterprises, Inc. 401(k) Plan dated
July 25, 1991.(6)
(c) Second Amendment to Chart House Enterprises, Inc. 401(k) Plan
dated July 1,
1992.(6)
(d) Trust Agreement between Shearson Lehman Trust Company and the
Company,
effective as of June 24, 1993.(7)
(6) Executive Benefit and Wealth Accumulation Plan of the Company,
effective January 27,
1986.(1)
(7) Chart House Enterprises, Inc. Incentive Compensation Plan,
effective January 1,
1993.(6)
10.10(1) Warrant Agreement dated as of September 6, 1989 between the
Company and FBMIP,
together with form of Warrant.(3)
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
(2) Registration Rights Agreement dated as of September 6, 1989 between the Company
and FBMIP.(3)
10.11(a) Stock Purchase Agreement dated as of December 30, 1988 by and among Luther's
Acquisition Corporation, CHI and Luther's Bar-B-Que, Inc.(2)
(b) Registration Rights Agreement dated as of December 30, 1988 between Luther's
Acquisition Corporation and certain shareholders, including CHI.(2)
(c) Shareholders' Agreement dated as of December 30, 1988 by and among Luther's
Acquisition Corporation and certain shareholders, including CHI.(2)
10.12 Amended and Restated Area Development and License Agreement dated as of
December 16, 1993 by and between Islands Restaurants and Big Wave, Inc.(7)
10.13 Management Agreement dated as of December 16, 1993 by and between Islands
Restaurants and Big Wave, Inc.(7)
10.14 Management Agreement dated as of February 14, 1994 by and between North Pier
Associates and CHI.(8)
10.15(1) Asset Purchase Agreement dated December 20, 1994 among Cork 'N Cleaver, Inc.,
Seward's Folly, Inc., and Walter Seward.(8)
(2) Asset Purchase Agreement dated December 20, 1994 among Cork 'N Cleaver of
Kalamazoo, Inc., Seward's Folly Michigan, Inc. and Walter Seward.(8)
(3) Management Agreement dated as of December 20, 1994 between Cork 'N Cleaver
of Kalamazoo, Inc., Seward's Folly Michigan, Inc. and Walter Seward.(8)
10.16(1) Agreement dated as of June 1, 1995 by and between the Edward Fineman Company, Inc.
and CHI.
(2) Agreement dated as of June 1, 1995 by and between the Edward Fineman Company, Inc.
and Islands Restaurants, Inc.
10.17 Stock Purchase Agreement dated as of December 14, 1995 by and among Java Centrale,
Inc., Chart House Enterprises, Inc. and Paradise Bakery, Inc.(9)
13. Annual Report to Stockholders for the year ended December 31, 1995.
21. Subsidiaries of the Company.
23. Consent of Arthur Andersen LLP, Independent Public Accountants.
27. Financial Data Schedule (required for electronic filing only).
</TABLE>
- --------
(1) Filed as an exhibit to the Company's Registration Statement on Form S-1
dated August 27, 1987 or amendments thereto dated October 6, 1987 and
October 14, 1987 (Registration No. 33-16795).
(2) Filed as an exhibit to the Company's Registration Statement on Form S-1
dated July 20, 1989 or amendment thereto dated August 25, 1989
(Registration No. 33-30089).
(3) Filed as an exhibit to Form 10-K for the fiscal year ended December 31,
1989.
(4) Filed as an exhibit to Form 10-K for the fiscal year ended December 31,
1990.
(5) Filed as an exhibit to Form 10-K for the fiscal year ended December 31,
1991.
(6) Filed as an exhibit to Form 10-K for the fiscal year ended December 31,
1992.
(7) Filed as an exhibit to Form 10-K for the fiscal year ended December 31,
1993.
(8) Filed as an exhibit to Form 10-K for the fiscal year ended December 31,
1994.
(9) Filed as an exhibit to Form 8-K dated January 12, 1996, for the event
reported as of December 31, 1995.
(b) Reports on Form 8-K. No reports on Form 8-K have been filed by the
Company during the fourth quarter of the fiscal year covered by this report.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 29, 1996
By JOHN M. CREED
-------------------------------------
John M. Creed
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
Chairman of the Board and
Chief Executive Officer
JOHN M. CREED (Principal Executive
- ---------------------------------------- Officer); Director March 29, 1996
John M. Creed
HARRY F. ROBERTS President and Chief Operating
- ---------------------------------------- Officer; Director March 29, 1996
Harry F. Roberts
Vice President, Treasurer and
HAROLD E. GAUBERT, JR. Chief Financial Officer
- ---------------------------------------- (Principal Financial Officer) March 29, 1996
Harold E. Gaubert, Jr.
Vice President and
Chief Accounting Officer
JAMES C. WENDLER (Principal Accounting
- ---------------------------------------- Officer) March 29, 1996
James C. Wendler
WILLIAM M. DIEFENDERFER
- ---------------------------------------- Director March 29, 1996
William M. Diefenderfer
WILLIAM E. MAYER
- ---------------------------------------- Director March 29, 1996
William E. Mayer
ALAN S. McDOWELL
- ---------------------------------------- Director March 29, 1996
Alan S. McDowell
ARTHUR J. NAGLE
- ---------------------------------------- Director March 29, 1996
Arthur J. Nagle
PATRICK W. ROSE
- ---------------------------------------- Director March 29, 1996
Patrick W. Rose
</TABLE>
12
<PAGE>
EXHIBIT 10.1(3)
-1-
AMENDMENT NO. 2
DATED AS OF APRIL 26, 1995 TO
AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT
DATED AS OF DECEMBER 17, 1993
AMENDMENT NO. 2 (this "Amendment") dated as of April 26, 1995 to the
Amended and Restated Revolving Credit and Term Loan Agreement dated as of
December 17, 1993 (as amended by Amendment No. 1 dated as of September 30, 1994
and in effect from time to time, the "Credit Agreement"), by and among (a) Chart
House, Inc., a Delaware corporation (the "Company"), (b) Chart House
Enterprises, Inc., a Delaware corporation (the "Parent"), Paradise Bakery, Inc.,
a Delaware corporation ("Paradise"), and Islands Restaurants, Inc., a Delaware
corporation ("Islands", and together with the Parent and Paradise, the
"Guarantors"), (c) The First National Bank of Boston, a national banking
association ("FNBB"), Sanwa Bank California, a California state chartered bank
("Sanwa") and (d) FNBB as agent for itself and Sanwa (the "Agent"). Capitalized
terms which are used herein without definition and which are defined in the
Credit Agreement shall have the same meaning herein as in the Credit Agreement,
as amended hereby.
WITNESSETH:
----------
WHEREAS, the Company and the Guarantors have requested that the Banks and
the Agent amend the Credit Agreement to add The Sumitomo Bank of California, a
California state chartered bank, as a lender and to increase the total lending
commitment of the Banks;
WHEREAS, the Company and the Guarantors have requested that FNBB resign as
agent for the Banks and that Sanwa be appointed as agent for the Banks;
WHEREAS, the Company and the Guarantors have requested that the Banks and
the Agent amend certain other terms and conditions of the Credit Agreement and
Loan
<PAGE>
-2-
Documents; and
WHEREAS, the Banks and the Agent, subject to the terms and conditions set
forth below, have agreed to amend the Credit Agreement and the other Loan
Documents in accordance with the above-listed requests;
NOW, THEREFORE, in consideration of the foregoing premises, on the terms
and subject to the conditions set forth herein, the parties hereto hereby agree
as follows:
(S)1. AMENDMENTS TO CREDIT AGREEMENT.
---------- -- ------ ---------
(S)1.1 THE AGENT. (a) The Credit Agreement is hereby amended to provide
---------
that any and all references to "FNBB as agent for the Banks" shall be deemed to
be references to "Sanwa as agent for the Banks". The Credit Agreement and each
of the Loan Documents are hereby amended mutatis mutandis as appropriate to
------- --------
reflect the fact that Sanwa and not FNBB is the agent for the Banks or, as
applicable, the security agent for the Banks and Metropolitan. (b) Other than
a counterpart original of the Credit Agreement and each of the amendments
thereto, FNBB will deliver to Sanwa on or before May 31, 1995 all originals of
Loan Documents currently held by FNBB in its capacity as agent under the Credit
Agreement or in its capacity as security agent under the Security Documents.
(S)1.2 PREAMBLE. The first paragraph of the preamble to the Credit
--------
Agreement is hereby amended by deleting it in its entirety and inserting in lieu
thereof the following:
"This AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT
is made as of December 17, 1993, by and among (a) Chart House, Inc. (the
"Company"), a Delaware corporation having its principal place of business
in Solana Beach, California, (b) Chart House Enterprises, Inc. (the
"Parent"), a Delaware corporation, Paradise Bakery, Inc. ("Paradise"), a
Delaware corporation, and Islands Restaurants, Inc., a Delaware corporation
(formerly known as Big Wave, Inc.) ("Islands"), (the Parent, Paradise and
Islands are referred to herein, collectively, as the "Guarantors"), (c) The
First National Bank of Boston, a national banking association having its
principal place of business at 100 Federal Street, Boston, Massachusetts
02110 ("FNBB"), Sanwa Bank California, a California state chartered bank
having its principal place of business in the United States at 444 Market
Street, San Francisco, California 94111
<PAGE>
-3-
("Sanwa"), The Sumitomo Bank of California, a California state chartered
bank, having its principal place of business at 611 West 6th Street, Suite
3900, Los Angeles, California 90017 ("Sumitomo") and such other banks who
may become parties hereto (collectively, the "Banks"), and (d) Sanwa as
agent for the Banks (the "Agent")."
(S)1.3 AMENDMENTS TO CERTAIN DEFINITIONS. Section 1 of the Credit
---------- -- ------- -----------
Agreement is hereby amended by amending certain definitions.
(a) The definition of Revolving Credit Commitment Amount is hereby
amended by deleting it in its entirety and inserting in lieu thereof the
following: "Revolving Credit Commitment Amount. At any date of
--------- ------ ---------- ------
determination, $40,000,000, as such amount is reduced pursuant to (S)2.2
and (S)6.4 hereof."
(b) The definition of Majority Banks is hereby amended by deleting
it in its entirety and inserting in lieu thereof the following: "Majority
--------
Banks. Any combination of Banks holding Notes evidencing in the aggregate
-----
66-2/3% of the Loans Outstanding at the time of determination, or, if no
Loans are Outstanding, any combination of Banks whose Commitment
Percentages aggregate 66-2/3%."
(c) The definition of Commitment Percentages is hereby amended by
deleting it in its entirety and inserting in lieu thereof the following:
"Commitment Percentage. For FNBB, 39.13043479%, for Sanwa, 50%, and for
---------- ----------
Sumitomo, 10.86956521%, in each case subject to adjustment upon assignments
permitted by (S)18 hereof.
(d) The definition of Base Rate is hereby amended by deleting it in
its entirety and inserting the following new definition in the appropriate
place in the alphabetical sequence of definitions: "Reference Rate. A
--------- ----
variable interest rate which is quoted, published or announced from time to
time by Sanwa as its reference rate."
(e) The definition of Eurodollar Rate is hereby amended by deleting
it in its entirety and inserting in lieu thereof the following: "Eurodollar
Rate. With respect to any Interest Period, in the case of any Euroloan Rate
Amount, the annual rate of interest determined by the Agent's Treasury
Desk, at or before 10:30 a.m. (San Diego time) (or as soon thereafter as
practicable) on the second Business Day prior to the first day of such
Interest Period, as being the approximate rate at which the Agent could
purchase offshore U.S. dollar
<PAGE>
-4-
deposits in an amount approximately equal to the amount of the relevant
Euroloan Rate Amount and for a period of time approximately equal to the
relevant Interest Period."
(S)1.4. REQUESTS FOR REVOLVING CREDIT LOANS. Section 2.4 of the Credit
-------- --- --------- ------ -----
Agreement is hereby amended by:
(a) deleting the address "100 Federal Street, 01-06-06, Boston,
Massachusetts 02110, Attention: J. Peter Mitchell, Director" appearing in
subsection (a) and inserting in lieu thereof the address "San Diego
Corporate Banking Center, 1280 Fourth Avenue San Diego, California 92101,
Attention: David L. Beall, Vice President & Manager".
(b) deleting the text "1:30 P.M., Boston time, (10:30 A.M. San
Diego time)" appearing in subsection (b) and inserting in lieu thereof the
following text: "10:30 A.M. San Diego time, (1:30 P.M. Boston time)".
(c) deleting the text "Boston, Massachusetts" appearing in the
third subsection of subsection (b) and inserting in lieu thereof the text
"San Diego, California".
(S)1.5 INTEREST ON REVOLVING CREDIT LOANS. The Credit Agreement and each
----------------------------------
of the Loan Documents are hereby amended to provide that any and all references
to "Base Rate" shall be deemed to be references to "Reference Rate".
(S)1.6 LETTERS OF CREDIT. Section 4.1 of the Credit Agreement is hereby
------- -- ------
amended by deleting the final sentence of subsection (b) and inserting in lieu
thereof the following sentence: "To the extent FNBB is the issuing bank of an
Existing Letter of Credit, FNBB shall be deemed a L/C Bank for the purposes
hereof. FNBB shall not issue any Letters of Credit after April 26, 1995."
(S)1.7. CERTAIN COMMON PROVISIONS. Section 6.2 of the Credit Agreement is
------- ------ ----------
hereby amended by:
(a) deleting the address "100 Federal Street, Boston, Massachusetts
02110" appearing in the first sentence and inserting in lieu thereof the
address "San Diego Corporate Banking Center, 1280 Fourth Avenue, San Diego,
California 92101".
(b) deleting the text "(Boston time)" each time it appears therein
and inserting in lieu thereof the text "(San Diego time)".
(S)1.8 AGENT'S FEE. Section 6.8 of the Credit Agreement is hereby amended
------- ---
by
<PAGE>
-5-
deleting it in its entirety and inserting in lieu thereof the following:
"(S)6.8. Agent's Fee. In addition to the Commitment Fees payable hereunder,
------- ---
the Company agrees to pay to Sanwa, for its own account, an agent's fee
("Agent's Fee") in the amount and at the times specified in the letter
agreement, dated April 26, 1995 between the Company and Sanwa."
(S)1.9 APPOINTMENT OF AGENT, POWERS AND IMMUNITIES. Section 14.1 of the
----------- -- ----- ------ --- ----------
Credit Agreement is hereby amended by inserting the words "or Sanwa" after the
word "FNBB" appearing in the second sentence thereof.
(S)1.10 NOTICES, ETC. Section 19 of the Credit Agreement is hereby
-------- ----
amended by re-lettering subsection (d) as subsection (f) and by deleting section
(c) in its entirety and inserting in lieu thereof the following:
"(c) if to the Agent, at Corporate Banking Center, 1280 Fourth
Avenue, San Diego, CA 92101 Attention: David L. Beall, Vice President &
Manager, or such other address for notice as the Agent shall last have
furnished in writing to the Person giving the notice; or
(d) if to FNBB, at 100 Federal Street, Mail Stop 01-09-05, Boston,
Massachusetts 02110 Attention: Debra L. Zurka, Vice President, or such
other address for notice as FNBB shall have last furnished in writing to
the Person giving the notice; or
(e) if to Sumitomo, at 611 West 6th Street, Suite 3900, Los
Angeles, California 90017, Attention: Matthew R. Van Steenhuyse, Vice
President, or such other address for notice as Sumitomo shall have last
furnished in writing to the Person giving the notice; or"
(S)1.11 CONCERNING EXHIBITS AND SCHEDULES.
---------- -------- ---------
(a) Schedule 1. Schedule 1 to the Credit Agreement is hereby amended by
----------
deleting Schedule 1 attached to the Credit Agreement and substituting therefor
----------
Schedule 1 attached to this Amendment, with the effect that from and after the
- ----------
date hereof, all references in the Credit Agreement to Schedule 1 shall be
----------
deemed to be references to Schedule 1 attached hereto.
----------
(b) Exhibit A. Exhibit A to the Credit Agreement is hereby amended by
--------- ---------
deleting Exhibit A attached to the Credit Agreement and substituting therefor
---------
Exhibit A attached to this Amendment, with the effect that from and after the
- ---------
date hereof, all references in the
<PAGE>
-6-
Credit Agreement to Exhibit A shall be deemed to be references to Exhibit A
--------- ---------
attached hereto.
(S)2. SCOPE OF AMENDMENT. Except as specifically amended by this
----- -- ---------
Amendment, the Credit Agreement shall remain unchanged and in full force and
effect.
(S)3. REPRESENTATIONS AND WARRANTIES. The Company and each of the
--------------- --- ----------
Guarantors represents and warrants (to the extent such representation or
warranty relates to such Guarantor or a Subsidiary of such Guarantor) as
follows:
(a) Representations and Warranties in Credit Agreement. The
--------------- --- ---------- -- ------ ---------
representations and warranties of the Company and the Guarantors contained in
the Credit Agreement (i) were true and correct in all material respects when
made, and (ii) except to the extent such representations and warranties by their
terms were made solely as of a prior date, continue to be true and correct in
all material respects on the date hereof.
(b) Authority, etc. The execution and delivery by the Company and the
--------- ---
Guarantors of this Amendment and, in the case of the Company, the Restated
Revolving Credit Note, dated as of the date hereof, from the Company to Sanwa in
the principal amount of $20,000,000 (the "Sanwa Note"), the Restated Revolving
Credit Note, dated as of the date hereof, from the Company to FNBB in the
principal amount of $15,652,173.91 (the "FNBB Note") and the Revolving Credit
Note, dated as of the date hereof, from the Company to Sumitomo in the principal
amount of $4,347,826.09 (the "Sumitomo Note", and collectively, the "New
Notes"), and the performance by the Company and the Guarantors of all of their
agreements and obligations under this Amendment are within the corporate
authority of each of the Company and the Guarantors, have been duly authorized
by all necessary corporate action on the part of each of the Company and the
Guarantors, and do not and will not (i) contravene any provision of the Company
or any of the Guarantors' charter, other incorporation papers, by-laws or any
stock provision, or any amendment thereof, (ii) conflict with, or result in a
breach of any material term, condition or provision of, or constitute a default
under or result in the creation of any mortgage, lien, pledge, charge, security
interest or other encumbrance upon any of the property of the Company or any
Guarantor under any agreement, deed of trust, indenture, mortgage or other
instrument to which the Company or such Guarantor is a party or by which any of
the Company or such Guarantor's properties are bound, (iii) violate or
contravene any provision of any law, regulation, order, ruling or interpretation
thereunder or any decree, order or judgment of any court or governmental or
regulatory authority, bureau, agency or official, (iv) require any waiver,
consent or approval by any creditor of the Company or any Guarantor which has
not been obtained or (v) require any approval, consent, order, authorization or
license by, or giving notice to, or taking any other action with respect to, any
governmental or regulatory authority or agency under any provision of any law,
except
<PAGE>
-7-
those actions which have been taken or will be taken prior to the date of
execution of this Amendment and the New Notes.
(c) Enforceability of Obligations. This Amendment, the Credit Agreement as
-------------- -- -----------
amended hereby, the New Notes and the Loan Documents constitute the legal, valid
and binding obligations of the Company and the Guarantors enforceable against
the Company and the Guarantors in accordance with their respective terms.
(d) No Default or Event of Default. No Default or Event of Default has
------------------------------
occurred or is continuing and the execution, delivery and effectiveness of this
Amendment and the New Notes will not cause any such Default or Event of Default
to occur.
(S)4. REVOLVING CREDIT NOTES. Each of the parties hereto acknowledges and
--------- ------ -----
agrees that the New Notes are "Revolving Credit Notes" as such term is used in
the Credit Agreement and the other Loan Documents.
(S)5. CONFIRMATION OF SECURITY DOCUMENTS. Each of the Company and the
------------ -- -------- ---------
Guarantors hereby ratifies and confirms each of its respective Security
Documents and the pledges and security interests created thereby. Each of the
Company and the Guarantors hereby further ratifies and confirms that the
Security Documents and the pledges and security interest created thereby secure
the Obligations of the Company and the Guarantors under the Credit Agreement, as
amended hereby, and the New Notes.
(S)6. CONFIRMATION OF GUARANTIES. Each of the Guarantors hereby ratifies
--------------------------
and confirms its respective Guaranty and acknowledges and agrees that the
Obligations under the Credit Agreement, as amended hereby, and the New Notes are
Guaranteed Obligations.
(S)7. RESIGNATION OF AGENT. Pursuant to (S)14.7 of the Credit Agreement,
--------------------
FNBB resigns as agent for the Banks and each of the Banks appoints Sanwa to act
as agent for the Banks. Each of the Banks and the Company waive the 60-day
notice requirement set forth in (S)14.7 of the Credit Agreement. Sanwa
represents and warrants to each of the Banks that it has a combined capital
surplus in excess of $250,000,000. FNBB and the Company acknowledge and agree
that the letter agreement, dated December 17, 1993 by and between FNBB and the
Company is terminated as of the date hereof.
(S)8. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment
---------- -- -------------
shall be conditioned upon receipt by the Agent of the following, in form and
substance satisfactory to the Agent and the Banks:
(a) this Amendment duly executed by each of the Company, the Guarantors,
the
<PAGE>
-8-
Banks and the Agent;
(b) each of the New Notes duly executed by the Company;
(c) confirmation that Sumitomo and Sanwa have made additional Loans to the
Company in an amount equal to the amount of Loans which the Company is required
to pay to FNBB in order to cause each Bank's Loans as of the date of this
Amendment to equal such Bank's Commitment Percentage of the Loans outstanding as
of the date hereof;
(d) copies, certified by the Secretary of each of the Company and the
Guarantors to be true and complete on the date of execution of this Amendment,
of the records of all actions taken by the Company and each such Guarantor as
may be required according to the terms of the Company or each such Guarantor's
charter, other incorporation documents and by-laws to authorize (i) the
execution and delivery of this Amendment by the Company and each such Guarantor,
(ii) the execution and delivery of each of the New Notes by the Company and
(iii) the performance by the Company and each of the Guarantors of all of each
such Person's agreements and obligations under this Amendment and the Credit
Agreement as amended hereby;
(e) a certificate of the Secretary of each of the Company and the
Guarantors (other than Islands) (i) setting forth the names, incumbency and
specimen signatures of those officers authorized to execute and deliver this
Amendment and, in the case of the Company, the New Notes and (ii) stating that
there have been no amendments to the charter documents and by-laws of each such
Person delivered to the Agent and the Banks on December 17, 1993;
(f) a certificate of the Secretary of Islands setting forth (i) the names,
incumbency and specimen signatures of those officers authorized to execute and
deliver this Amendment and (ii) stating that there have been no amendments to
the charter documents and by-laws of each such Person delivered to the Agent and
the Banks on September 30, 1994;
(g) a certificate from the Secretary of State of the State of Delaware as
to each of the Company and the Guarantors' legal existence and corporate good
standing;
(h) the written consent of Metropolitan, as holder of the 6.69% Notes and
the 10.40% Notes, to the execution and delivery by the Company and the
Guarantors of this Amendment, each of the New Notes, the Instrument of Adherence
and the other documents and instruments described herein;
(i) an opinion of counsel to the Company and the Guarantors in form and
<PAGE>
-9-
satisfactory to the Agent;
(j) Assignment of Notice of Security Interest in Trademarks duly executed
by FNBB;
(k) such Uniform Commercial Code financing statements executed by the
Company or the applicable Guarantor, as appropriate, as the Agent or Sanwa may
reasonably require;
(l) amendments to Mortgages, as required;
(m) payment by the Company of all fees and expenses incurred as of the date
hereof by the Agent and the Agent's special counsel, Bingham, Dana & Gould, in
connection with the preparation and execution of this Amendment, including,
without limitation, all recording fees and fees for endorsements to policies of
title insurance and all filing fees relating to any Uniform Commercial Code
financing statement filings; and
(o) the Instrument of Adherence duly executed by Sumitomo, the Company,
each of the Guarantors, the Banks and the Agent.
(S)9. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
--------- -- ------------
number of counterparts, but all such counterparts shall together constitute but
one instrument. In making proof of this Amendment, it shall not be necessary to
produce or account for more than one counterpart signed by each party hereto by
and against which enforcement hereof is sought.
(S)10. GOVERNING LAW. This Amendment shall be construed according to and
--------- ---
governed by the laws of the Commonwealth of Massachusetts.
<PAGE>
-10-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as an agreement under seal as of the date set forth at the
beginning of this Amendment.
The Company:
--- -------
CHART HOUSE, INC.
By:____________________________________
Harold E. Gaubert, Jr.,
Vice President
The Guarantors:
--- ----------
CHART HOUSE ENTERPRISES, INC.
By:____________________________________
Harold E. Gaubert, Jr.
Vice President
PARADISE BAKERY, INC.
By:____________________________________
Harold E. Gaubert, Jr.
Vice President
ISLANDS RESTAURANTS, INC.
By:____________________________________
Harold E. Gaubert, Jr.
Vice President
The Banks:
--- -----
THE FIRST NATIONAL BANK
OF BOSTON
By:____________________________________
<PAGE>
-11-
Debra L. Zurka, Vice President
SANWA BANK CALIFORNIA
By____________________________________
David L. Beall, Vice President
The Agent:
--- -----
THE FIRST NATIONAL BANK OF
BOSTON, as Agent
By:____________________________________
Debra L. Zurka, Vice President
<PAGE>
-1-
INSTRUMENT OF ADHERENCE
---------- -- ---------
April 26, 1995
The First National Bank
of Boston, as Agent
100 Federal Street
Boston, MA 02110
Ladies and Gentlemen:
Reference is hereby made to that certain Amended and Restated Revolving
Credit and Term Loan Agreement dated as of December 17, 1993 among Chart House,
Inc., a Delaware corporation (the "Company"), Chart House Enterprises, Inc., a
Delaware corporation (the "Parent"), Paradise Bakery, Inc., a Delaware
corporation ("Paradise"), Islands Restaurants, Inc., a Delaware corporation
("Islands"), Sanwa Bank California, a California state chartered bank ("Sanwa"),
The First National Bank of Boston, a national baking association ("FNBB, and
together with Sanwa, the "Banks") and FNBB as agent for the Banks (the "Agent")
(as amended by Amendment No. 1 dated as of September 30, 1994 and in effect from
time to time, the "Credit Agreement"). Capitalized terms which are used herein
without definition and which are defined in the Credit Agreement shall have the
same meanings herein as in the Credit Agreement.
The undersigned, The Sumitomo Bank of California, a California state
chartered bank, hereby agrees to (i) provide additional Loans to the Borrower in
accordance with the terms of the Credit Agreement up to a maximum amount of
$5,000,000 (its "Commitment") and (ii) become a Bank under and as defined in the
Credit Agreement and to perform in accordance with their terms all of the
obligations that by the terms of the Credit Agreement as required to be
performed by it as a Bank.
This Instrument of Adherence shall be effective on the date (the "Effective
Date") it has been executed by and delivered to each of the undersigned, the
Borrower and the Agent, and upon the satisfaction of the conditions set forth in
Section 18 of the Credit Agreement and Section 8 of Amendment No. 2 to the
Credit Agreement dated as of April 26, 1995.
<PAGE>
-2-
The undersigned confirms, represents and warrants to, and agrees with the
Agent and the Banks that:
(i) the Agent and the Banks have made no representation or warranty and
shall have no responsibility with respect to any statements,
warranties or representations made in or in connection with the
Credit Agreement or the other Loan Documents or the execution,
legality, validity, enforceability, genuineness, sufficiency,
collectibility or value of the Credit Agreement, the other Loan
Documents, any Collateral, or any other instrument or document
furnished pursuant hereto;
(ii) the Agent and the Banks have made no representation or warranty and
shall have no responsibility with respect to the financial condition
of the Company, the Parent, Paradise or Islands or any of their
Subsidiaries or any other Person primarily or secondarily liable in
respect of any of the Obligations, or the performance or observance
by the Company, the Parent, Paradise or Islands or any of their
Subsidiaries or any other Person primarily or secondarily liable in
respect of any of the Obligations of any of their obligations under
the Credit Agreement or any of the other Loan Documents or any other
instrument or document furnished pursuant thereto;
(iii) it has received a copy of the Credit Agreement, and the other Loan
Documents, together with copies of the financial statements referred
to in (S)(S)8.7 and 11.9 of the Credit Agreement and such other
documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Instrument of
Adherence;
(iv) it will, independently and without reliance on the other Banks or
the Agent and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit Agreement;
(v) it appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement
and the other Loan Documents as are delegated to the Agent by the
terms of the Credit Agreement and the other Loan Documents, together
with such powers as are reasonably incidental thereto; and
(vi) it is legally authorized to enter into this Instrument of Adherence.
Notwithstanding the foregoing, the Company, the Parent, Paradise, Islands
and the
<PAGE>
-3-
Agent represent and warrant to the undersigned that as of the Effective Date of
this Instrument of Adherence, to the actual knowledge of the Company, the
Parent, Paradise, Islands and the Agent, there exists no Default or Event of
Default which has not been cured or waived, on the part of the Company, the
Parent, Paradise, Island, any Bank or the Agent.
Notices and other communications made or required to be given to the
undersigned pursuant to the Credit Agreement, shall be addressed as follows: The
Sumitomo Bank of California, 611 West 6th Street, Suite 3900, Los Angeles,
California 90017, Attention: Matthew R. Van Steenhuyse, Vice President.
This Instrument of Adherence is intended to be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts. This Instrument
of Adherence may be executed in several counterparts, each of which when so
executed and delivered shall be an original, but all of which together shall
constitute but one instrument. In proving this agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
IN WITNESS WHEREOF, the undersigned have duly executed this Instrument of
Adherence as a sealed instrument as of the date first set forth above.
Very truly yours,
THE SUMITOMO BANK
OF CALIFORNIA
By:_________________________________
Title:
Accepted and Agreed:
- --------------------
The Company:
- --- -------
CHART HOUSE, INC.
By:________________________________
<PAGE>
-4-
Harold E. Gaubert, Jr.,
Vice President
<PAGE>
-5-
The Guarantors:
- --- ----------
CHART HOUSE ENTERPRISES, INC.
By:________________________________
Harold E. Gaubert, Jr.
Vice President
PARADISE BAKERY, INC.
By:________________________________
Harold E. Gaubert, Jr.
Vice President
ISLANDS RESTAURANTS, INC.
By:________________________________
Harold E. Gaubert, Jr.
Vice President
The Banks:
- --- -----
THE FIRST NATIONAL BANK OF BOSTON
By:________________________________
Debra L. Zurka, Vice President
SANWA BANK CALIFORNIA
By________________________________
David Beall, Vice President
The Agent:
- --- -----
THE FIRST NATIONAL BANK OF BOSTON,
as Agent
<PAGE>
-6-
By:________________________________
Debra L. Zurka, Vice President
<PAGE>
OMNIBUS AMENDMENT NO. 1
-----------------------
OMNIBUS AMENDMENT (this "Amendment") dated as of April 26, 1995, by and among by
and among CHART HOUSE, INC. a Delaware corporation (the "Company"), ISLANDS
RESTAURANTS, INC., a Delaware corporation (formerly known as Big Wave, Inc.)
("Islands"), CHART HOUSE ENTERPRISES, INC., a Delaware corporation (the
"Parent"), and THE FIRST NATIONAL BANK OF BOSTON ("FNBB"), as security agent
(the "Security Agent") for (i) itself, SANWA BANK CALIFORNIA ("Sanwa") (together
-
with FNBB and Sanwa, the "Banks") and (ii) METROPOLITAN LIFE INSURANCE COMPANY,
--
a New York corporation ("Metropolitan") (the Banks and Metropolitan are
individually referred to herein as a "Secured Party" and collectively referred
to herein as the "Secured Parties"), and the SECURED PARTIES.
WHEREAS, (a) the Company, (b) the Parent, Paradise Bakery, Inc., a Delaware
corporation ("Paradise"), and Islands (Islands together with the Parent and
Paradise, the "Guarantors"), (c) the Banks and (d) FNBB as agent for itself and
Sanwa are parties to the Amended and Restated Revolving Credit Agreement dated
as of December 17, 1993 (as amended and in effect from time to time, the "Credit
Agreement");
WHEREAS, the Company, the Secured Parties and the Security Agent are parties to
that certain Security and Intercreditor Agreement dated as of December 17, 1993
(as amended and in effect from time to time, the "Company Security Agreement");
WHEREAS, Islands, the Secured Parties and the Security Agent are parties to that
certain Amended and Restated Security and Intercreditor Agreement dated as of
December 17, 1993 (as amended and in effect from time to time, the "Big Wave
Security Agreement");
WHEREAS, the Company, the Secured Parties and the Security Agent are parties to
that certain Amended and Restated Pledge Agreement dated as of December 17, 1993
(as amended and in effect from time to time, the "Company Pledge Agreement");
WHEREAS, the Parent, the Secured Parties and the Security Agent are parties to
that certain Amended and Restated Pledge Agreement (as amended and in effect
from time to time, the "Parent Pledge Agreement");
<PAGE>
WHEREAS, the Security Agent and the Company are parties to the mortgages (the
"Mortgages") listed on Exhibit A attached hereto and made a part hereof;
------- -
WHEREAS, the Company is party to that certain Amended and Restated Notice of
Security Interest in Trademarks dated as of December 17, 1993 (as amended and in
effect from time to time, the "Trademark Notice") which was recorded with the
United States Patent and Trademark Office on or about January 18, 1994 at Reel
1085, Frame 234 (the Company Security Agreement; the Big Wave Security
Agreement, the Company Pledge Agreement, the Parent Pledge Agreement, the
Mortgages, the Deeds of Trust, and the Trademark Notice are referred to
collectively herein as the "Security Documents"),
WHEREAS, the Company, the Gurantors and Metropolitan are parties to (i) the
Amended and Restated Note Purchase and Gaurantee Agreement dated as of December
30, 1993 with respect to the Company's 10.40 % Senior Secured Notes due 2000
(the "10.40% Note Agreement"), and (ii) the Note Purchase and Guarantee
Agreement dated as of December 30, 1993 with respect to the Company's 6.69%
Senior Secured Notes due 2001 (the "6.69% Note Agreement");
WHEREAS, the Company and the Guarantors have requested that the Banks and FNBB
as agent amend the Credit Agreement to add The Sumitomo Bank of California, a
California state chartered bank, as a lender and to increase the total lending
commitment of the Banks;
WHEREAS, the Company and the Guarantors have requested that FNBB resign as
agent for the Banks under the Credit Agreement and as security agent for the
Secured Parties under the Security Documents and that Sanwa be appointed as
agent for the Banks under the Credit Agreement and as security agent for the
Secured Parties under the Security Documents;
WHEREAS, Sanwa is willing to accept such appointment;
WHEREAS, the Company and Metropolitan desire to amend each of the 10.40% Note
Agreement and the 6.69% Note Agreement and the Company, the Guarantors, Big Wave
and Metropolitan desire to amend the Security Documents;
NOW, THEREFORE, in consideration of the premises contained herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AMENDMENT TO THE SECURITY DOCUMENTS. Each of the Security Documents is
hereby amended mutatis mutandis as appropriate to reflect the fact that FNBB has
------- --------
resigned as security agent and Sanwa has been appointed as security agent for
the Secured Parties.
2. AMENDMENT TO THE METROPILITAN AGREEMENTS. The Definition of "Security
Agent" in each of the 10.40% Note Agreement and the 6.69% Note Agreement is
hereby deleted in its entirety and the following substituted therefor:
"'Security Agent' shall mean Sanwa Bank California, in its capacity as Security
Agent under the Security Documents."
<PAGE>
3. ADDRESS FOR NOTICES. From and after the date hereof all notices and
other communications made or required to be given to the Security Agent under
the Security Documents shall be addressed as follows: Sanwa Bank of California,
1280 4th Avenue, San Diego, California 92101, Attention: David L. Beall, Vice
President or such other address for notice as Sanwa as security agent shall have
last furnished in writing to the to the party giving notice.
4. CONDITIONS TO EFFECTIVENESS. This Amendment shall not become effective
unless and until the Agent receives counterparts of this Amendment and each of
the conditions set forth in (S)8 of Amendment No. 2 to the Credit Agreement
dated as of the date hereof by and among FNBB, Sanwa, the Parent, the Guarantors
and the Company have been met.
5. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any number
of counterparts, but all such counterparts shall together constitute but one
instrument. In making proof of this Amendment, it shall not be necessary to
produce or account for more than one counterpart signed by each party hereto by
and against which enforcement hereof is sought.
6. GOVERNING LAW. This Amendment shall be construed according to and
governed by the laws of the Commonwealth of Massachusetts.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these presents to be duly
executed as an instrument under seal by their authorized representatives as of
the date first written above.
CHART HOUSE ENTERPRISES, INC.
By:_______________________________
Title:
CHART HOUSE, INC.
By:_______________________________
Title:
THE FIRST NATIONAL BANK OF
BOSTON, as Security Agent
By:_______________________________
Title:
THE FIRST NATIONAL BANK OF
BOSTON, as a Secured Party
By:_______________________________
Title:
SANWA BANK CALIFORNIA,
as a Secured Party
By:_______________________________
Title:
METROPOLITAN LIFE INSURANCE
COMPANY, as a Secured Party
By:_________________________________
Title:
<PAGE>
ISLANDS RESTAURANTS, INC.
By:_________________________________
Title:
<PAGE>
-1-
Schedule 1
----------
Existing Mortgages [1]
-------- ---------
<TABLE>
<CAPTION>
Date of
Location of Real Property Original Mortgage Date of Amendment(s)
- ------------------------- ----------------- ---------------------
<S> <C> <C>
Scottsdale, AZ (Fee) 09/30/90 12/30/93
Idyllwild, CA (Fee) 11/27/85 09/30/90, 12/30/93
Los Gatos, CA (Fee) 11/27/85 09/30/90, 12/30/93
Montara, CA (Leasehold) 04/14/86 09/30/90, 12/30/93
Sausalito, CA (Fee) 11/27/85 09/30/90, 12/30/93
Solana Beach, CA (Fee) 11/27/85 12/30/93
Genesee, CO (Fee) 02/25/86 09/30/90, 12/30/93
Chester, CT (Fee) 02/25/86 09/30/90, 11/12/92,
12/30/93
New Haven, CT (Fee) 02/25/86 09/30/90, 11/12/92,
12/30/93
St. Augustine, FL (Fee) 02/25/86 09/30/90, 12/30/93
Lahaina, HI (Fee-Parking Lot) 02/25/86 09/30/90, 12/30/93
Cohasset, MA (Fee) 09/30/90 12/30/93
</TABLE>
<PAGE>
-2-
<TABLE>
<CAPTION>
Date of
Location of Real Property Original Mortgage Date of Amendment(s)
- ------------------------- ----------------- ---------------------
<S> <C> <C>
Portland, OR (Fee) 02/25/86 09/30/90, 12/30/93
Warwick, RI (Fee) 09/30/90 12/30/93
</TABLE>
- -------------------------
[1] The following is a list of leasehold mortgages/deeds of trust that the Banks
believe were previously executed and delivered by the Company to the
Security Agent. However, their recordation has not been confirmed and the
Company believes such leasehold mortgages/deeds of trust were in fact not
recorded due to the absence of necessary consents by the respective
landlords under the subject leases. Therefore, these mortgages/deeds of
trust may not constitute a valid mortgage lien of first priority with
respect to the current secured obligations.
La Jolla, CA (Leasehold) Jacksonville, FL (Leasehold)
Vail, CO (Leasehold) Melbourne, FL (Leasehold)
Fort Myers, FL (Leasehold) New Orleans, LA (Leasehold)
Philadelphia, PA (Leasehold)
<PAGE>
-3-
Exihibit A
----------
Existing Mortgages [1]
------------------
<TABLE>
<CAPTION>
Date of
Location of Real Property Original Mortgage Date of Amendment(s)
- ------------------------- ----------------- ---------------------
<S> <C> <C>
Scottsdale, AZ (Fee) 09/30/90 12/30/93
Idyllwild, CA (Fee) 11/27/85 09/30/90, 12/30/93
Los Gatos, CA (Fee) 11/27/85 09/30/90, 12/30/93
Montara, CA (Leasehold) 04/14/86 09/30/90, 12/30/93
Sausalito, CA (Fee) 11/27/85 09/30/90, 12/30/93
Solana Beach, CA (Fee) 11/27/85 12/30/93
Genesee, CO (Fee) 02/25/86 09/30/90, 12/30/93
Chester, CT (Fee) 02/25/86 09/30/90, 11/12/92,
12/30/93
New Haven, CT (Fee) 02/25/86 09/30/90, 11/12/92,
12/30/93
St. Augustine, FL (Fee) 02/25/86 09/30/90, 12/30/93
Lahaina, HI (Fee-Parking Lot) 02/25/86 09/30/90, 12/30/93
Cohasset, MA (Fee) 09/30/90 12/30/93
</TABLE>
<PAGE>
-4-
<TABLE>
<CAPTION>
Date of
Location of Real Property Original Mortgage Date of Amendment(s)
- ------------------------- ----------------- ---------------------
<S> <C> <C>
Portland, OR (Fee) 02/25/86 09/30/90, 12/30/93
Warwick, RI (Fee) 09/30/90 12/30/93
</TABLE>
- -------------------------
[1] The following is a list of leasehold mortgages/deeds of trust that the Banks
believe were previously executed and delivered by the Company to the
Security Agent. However, their recordation has not been confirmed and the
Company believes such leasehold mortgages/deeds of trust were in fact not
recorded due to the absence of necessary consents by the respective
landlords under the subject leases. Therefore, these mortgages/deeds of
trust may not constitute a valid mortgage lien of first priority with
respect to the current secured obligations.
La Jolla, CA (Leasehold) Jacksonville, FL (Leasehold)
Vail, CO (Leasehold) Melbourne, FL (Leasehold)
Fort Myers, FL (Leasehold) New Orleans, LA (Leasehold)
Philadelphia, PA (Leasehold)
<PAGE>
-1-
RESTATED REVOLVING CREDIT NOTE
$15,652,173.91 April ___, 1995
FOR VALUE RECEIVED, the undersigned Chart House, Inc., a Delaware
corporation (the "Company"), hereby absolutely and unconditionally promises to
pay to the order of The First National Bank of Boston (the "Bank") at the head
office of Sanwa Bank California at 1280 Fourth Avenue, San Diego, California
92101:
(a) on the Conversion Date (as defined in the Credit Agreement referred
to below), the principal amount of FIFTEEN MILLION SIX HUNDRED FIFTY-TWO
THOUSAND ONE HUNDRED SEVENTY-THREE DOLLARS AND NINETY-ONE CENTS
($15,652,173.91), or, if less, the aggregate unpaid principal amount of
Revolving Credit Loans advanced by the Bank to the Company pursuant to the
Amended and Restated Revolving Credit and Term Loan Agreement dated as of
December 17, 1993 (as amended and in effect from time to time, the "Credit
Agreement"), among the Company, the Bank, the other "Banks" named therein
and The First National Bank of Boston, as agent for the Banks; and
(b) interest on the Existing Note (as hereinafter defined) and on the
principal balance hereof from time to time outstanding from the date hereof
through and including the date on which such principal amount is paid in
full, at the times and at the rates provided in the Credit Agreement.
This Note evidences borrowings under and has been issued by the Company in
accordance with the terms of the Credit Agreement in order to amend, restate or
be substitute for, but not in payment or satisfaction of, the Restated Revolving
Credit Note of the Company dated September 30, 1994 payable to the order of the
Bank in the original principal amount of $15,000,000 (the "Existing Note"). The
Bank and any holder hereof is entitled to the benefits of the Credit Agreement
and may enforce the agreements of the Company contained therein, and any holder
may exercise the respective remedies provided for thereby or otherwise available
in respect thereof, all in accordance with the respective terms thereof. All
capitalized terms used in this Note and not otherwise defined herein shall have
the same meanings herein as in the Credit Agreement.
<PAGE>
-2-
The Bank may, and is hereby irrevocably authorized by the Company to,
endorse on the schedule attached to this Note or a continuation of such schedule
attached hereto and made a part hereof, an appropriate notation evidencing
advances and repayments of principal of this Note, provided that failure by the
--------
Bank to make any such notations shall not affect any of the Company's
obligations in respect of this Note.
The Company has the right in certain circumstances and the obligation under
certain other circumstances to prepay the whole or part of the principal of this
Note on the terms and conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall occur, the entire unpaid
principal amount of this Note and all of the unpaid interest accrued thereon may
become or be declared due and payable in the manner and with the effect provided
in the Credit Agreement.
The Company and every endorser and guarantor of this Note or the obligation
represented hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note, assent to any extension or postponement of
the time of payment or any other indulgence, to any substitution, exchange or
release of collateral and to the addition or release of any other party or
person primarily or secondarily liable.
This Note shall be deemed to take effect as a sealed instrument under the
laws of the Commonwealth of Massachusetts and for all purposes shall be
construed in accordance with such laws.
IN WITNESS WHEREOF, Chart House, Inc. has caused this Note to be signed in
its corporate name and its corporate seal to be impressed thereon by its duly
authorized officer as of the day and year first above written.
[Corporate Seal] CHART HOUSE, INC.
Attest:
By:_______________________________
Title:____________________________
<PAGE>
-3-
Amount of
Amount of Principal Paid Balance of Notation
Date Loan or Prepaid Principal Unpaid Made By
- ------- --------- -------------- ---------------- --------
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
<PAGE>
-4-
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
<PAGE>
-1-
RESTATED REVOLVING CREDIT NOTE
$20,000,000 April ___ 1995
FOR VALUE RECEIVED, the undersigned Chart House, Inc., a Delaware
corporation (the "Company"), hereby absolutely and unconditionally promises to
pay to the order of Sanwa Bank California (the "Bank") at the head office of the
Sanwa Bank California at 1280 Fourth Avenue, San Diego, California 92101.
(a) on the Conversion Date (as defined in the Credit Agreement referred
to below), the principal amount of TWENTY MILLION DOLLARS ($20,000,000),
or, if less, the aggregate unpaid principal amount of Revolving Credit
Loans advanced by the Bank to the Company pursuant to the Amended and
Restated Revolving Credit and Term Loan Agreement dated as of December 17,
1993 (as amended and in effect from time to time, the "Credit Agreement"),
among the Company, the Bank, the other "Banks" named therein and The First
National Bank of Boston, as agent for the Banks; and
(b) interest on the Existing Note (as hereinafter defined) and on the
principal balance hereof from time to time outstanding from the date hereof
through and including the date on which such principal amount is paid in
full, at the times and at the rates provided in the Credit Agreement.
This Note evidences borrowings under and has been issued by the Company in
accordance with the terms of the Credit Agreement in order to amend, restate or
be substitute for, but not in payment or satisfaction of, the Restated Revolving
Credit Note of the Company dated September 30, 1994, payable to the order of the
Bank in the original principal amount of $20,000,000 (the "Existing Note"). The
Bank and any holder hereof is entitled to the benefits of the Credit Agreement
and may enforce the agreements of the Company contained therein, and any holder
may exercise the respective remedies provided for thereby or otherwise available
in respect thereof, all in accordance with the respective terms thereof. All
capitalized terms used in this Note and not otherwise defined herein shall have
the same meanings herein as in the Credit Agreement.
<PAGE>
-2-
The Bank may, and is hereby irrevocably authorized by the Company to,
endorse on the schedule attached to this Note or a continuation of such schedule
attached hereto and made a part hereof, an appropriate notation evidencing
advances and repayments of principal of this Note, provided that failure by the
--------
Bank to make any such notations shall not affect any of the Company's
obligations in respect of this Note.
The Company has the right in certain circumstances and the obligation under
certain other circumstances to prepay the whole or part of the principal of this
Note on the terms and conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall occur, the entire unpaid
principal amount of this Note and all of the unpaid interest accrued thereon may
become or be declared due and payable in the manner and with the effect provided
in the Credit Agreement.
The Company and every endorser and guarantor of this Note or the obligation
represented hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note, assent to any extension or postponement of
the time of payment or any other indulgence, to any substitution, exchange or
release of collateral and to the addition or release of any other party or
person primarily or secondarily liable.
This Note shall be deemed to take effect as a sealed instrument under the
laws of the Commonwealth of Massachusetts and for all purposes shall be
construed in accordance with such laws.
IN WITNESS WHEREOF, Chart House, Inc. has caused this Note to be signed in
its corporate name and its corporate seal to be impressed thereon by its duly
authorized officer as of the day and year first above written.
[Corporate Seal] CHART HOUSE, INC.
Attest:
By:_______________________________
Title:____________________________
<PAGE>
-3-
Amount of
Amount of Principal Paid Balance of Notation
Date Loan or Prepaid Principal Unpaid Made By
- ------- --------- -------------- ---------------- --------
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
<PAGE>
-4-
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
<PAGE>
-1-
REVOLVING CREDIT NOTE
$4,347,826.09 April ___, 1995
FOR VALUE RECEIVED, the undersigned Chart House, Inc., a Delaware
corporation (the "Company"), hereby absolutely and unconditionally promises to
pay to the order of The Sumitomo Bank of California, a California state
chartered bank (the "Bank") at the head office of Sanwa Bank California at 1280
Fourth Avenue, San Diego, California 92101:
(a) on the Conversion Date (as defined in the Credit Agreement referred
to below), the principal amount of FOUR MILLION THREE HUNDRED FORTY-SEVEN
THOUSAND EIGHT HUNDRED TWENTY-SIX DOLLARS AND NINE CENTS ($4,347,826.09),
or, if less, the aggregate unpaid principal amount of Revolving Credit
Loans advanced by the Bank to the Company pursuant to the Amended and
Restated Revolving Credit and Term Loan Agreement dated as of December 17,
1993 (as amended and in effect from time to time, the "Credit Agreement"),
among the Company, the Bank, the other "Banks" named therein and The First
National Bank of Boston, as agent for the Banks; and
(b) interest on the Existing Note (as hereinafter defined) and on the
principal balance hereof from time to time outstanding from the date hereof
through and including the date on which such principal amount is paid in
full, at the times and at the rates provided in the Credit Agreement.
The Bank and any holder hereof is entitled to the benefits of the Credit
Agreement and may enforce the agreements of the Company contained therein, and
any holder may exercise the respective remedies provided for thereby or
otherwise available in respect thereof, all in accordance with the respective
terms thereof. All capitalized terms used in this Note and not otherwise
defined herein shall have the same meanings herein as in the Credit Agreement.
The Bank may, and is hereby irrevocably authorized by the Company to,
endorse on the schedule attached to this Note or a continuation of such schedule
attached hereto and
<PAGE>
-2-
made a part hereof, an appropriate notation evidencing advances and repayments
of principal of this Note, provided that failure by the Bank to make any such
--------
notations shall not affect any of the Company's obligations in respect of this
Note.
The Company has the right in certain circumstances and the obligation under
certain other circumstances to prepay the whole or part of the principal of this
Note on the terms and conditions specified in the Credit Agreement.
If any one or more of the Events of Default shall occur, the entire unpaid
principal amount of this Note and all of the unpaid interest accrued thereon may
become or be declared due and payable in the manner and with the effect provided
in the Credit Agreement.
The Company and every endorser and guarantor of this Note or the obligation
represented hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note, assent to any extension or postponement of
the time of payment or any other indulgence, to any substitution, exchange or
release of collateral and to the addition or release of any other party or
person primarily or secondarily liable.
This Note shall be deemed to take effect as a sealed instrument under the
laws of the Commonwealth of Massachusetts and for all purposes shall be
construed in accordance with such laws.
IN WITNESS WHEREOF, Chart House, Inc. has caused this Note to be signed in
its corporate name and its corporate seal to be impressed thereon by its duly
authorized officer as of the day and year first above written.
[Corporate Seal] CHART HOUSE, INC.
Attest:
By:_______________________________
Title:____________________________
<PAGE>
-3-
Amount of
Amount of Principal Paid Balance of Notation
Date Loan or Prepaid Principal Unpaid Made By
- ------- --------- -------------- ---------------- --------
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
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<PAGE>
-4-
_________________________ _________________________________________________
_________________________ _________________________________________________
_________________________ _________________________________________________
<PAGE>
EXHIBIT 10.1(4)
AMENDMENT NO. 3
DATED AS OF JUNE 14, 1995 TO
AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT
DATED AS OF DECEMBER 17, 1993
AMENDMENT NO. 3 (this "Amendment") dated as of June 14, 1995 to the Amended
and Restated Revolving Credit and Term Loan Agreement dated as of December 17,
1993 (as amended by Amendment No. 1 dated as of September 30, 1994, Amendment
No. 2 dated as of April 26, 1995 and in effect from time to time, the "Credit
Agreement"), by and among (a) Chart House, Inc., a Delaware corporation (the
"Company"), (b) Chart House Enterprises, Inc., a Delaware corporation (the
"Parent"), Paradise Bakery, Inc., a Delaware corporation ("Paradise"), and
Islands Restaurants, Inc., a Delaware corporation ("Islands", and together with
the Parent and Paradise, the "Guarantors"), (c) The First National Bank of
Boston, a national banking association ("FNBB"), Sanwa Bank California, a
California state chartered bank ("Sanwa"), The Sumitomo Bank of California, a
California state chartered bank ("Sumitomo", and collectively with Sanwa and
FNBB, the "Banks") and (d) Sanwa as agent for itself, FNBB and Sumitomo (in such
capacity, the "Agent"). Capitalized terms which are used herein without
definition and which are defined in the Credit Agreement shall have the same
meaning herein as in the Credit Agreement, as amended hereby.
WITNESSETH:
----------
WHEREAS, the Company and the Guarantors have requested that the Banks and
the Agent amend the Credit Agreement to extend the Conversion Date to January 1,
1997 and the term loan maturity date to December 31, 2001;
WHEREAS, the Company and the Guarantors have requested that the Banks and
the Agent amend certain other terms and conditions of the Credit Agreement and
Loan Documents; and
WHEREAS, the Banks and the Agent, subject to the terms and conditions set
forth below, have agreed to amend the Credit Agreement and the other Loan
Documents in accordance with the above-listed requests;
<PAGE>
-2-
NOW, THEREFORE, in consideration of the foregoing premises, on the terms
and subject to the conditions set forth herein, the parties hereto hereby agree
as follows:
(S)1. AMENDMENTS TO CREDIT AGREEMENT. (a) Section 1 of the Credit
---------- -- ------ ---------
Agreement is hereby amended by deleting the text "January 1, 1996" appearing in
the definition of "Conversion Date" and inserting in lieu thereof the text
"January 1, 1997". (b) Section 3.2 of the Credit Agreement is hereby amended by
deleting the text "the final payment due on December 31, 1999 rather than
January 1, 2000" and inserting in lieu thereof the text "the final payment due
on December 31, 2001 rather than January 1, 2002"
(S)2. SCOPE OF AMENDMENT. Except as specifically amended by this
----- -- ---------
Amendment, the Credit Agreement shall remain unchanged and in full force and
effect.
(S)3. REPRESENTATIONS AND WARRANTIES. The Company and each of the
--------------- --- ----------
Guarantors represents and warrants (to the extent such representation or
warranty relates to such Guarantor or a Subsidiary of such Guarantor) as
follows:
(a) Representations and Warranties in Credit Agreement. The
--------------- --- ---------- -- ------ ---------
representations and warranties of the Company and the Guarantors contained in
the Credit Agreement (i) were true and correct in all material respects when
made, and (ii) except to the extent such representations and warranties by their
terms were made solely as of a prior date, continue to be true and correct in
all material respects on the date hereof.
(b) Authority, etc. The execution and delivery by the Company and the
--------- ---
Guarantors of this Amendment and the performance by the Company and the
Guarantors of all of their agreements and obligations under this Amendment are
within the corporate authority of each of the Company and the Guarantors, have
been duly authorized by all necessary corporate action on the part of each of
the Company and the Guarantors, and do not and will not (i) contravene any
provision of the Company or any of the Guarantors' charter, other incorporation
papers, by-laws or any stock provision, or any amendment thereof, (ii) conflict
with, or result in a breach of any material term, condition or provision of, or
constitute a default under or result in the creation of any mortgage, lien,
pledge, charge, security interest or other encumbrance upon any of the property
of the Company or any Guarantor under any agreement, deed of trust, indenture,
mortgage or other instrument to which the Company or such Guarantor is a party
or by which any of the Company or such Guarantor's properties are bound, (iii)
violate or contravene any provision of any law, regulation, order, ruling or
interpretation thereunder or any decree, order or judgment of any court or
governmental or regulatory authority, bureau, agency or official, (iv) require
any waiver, consent or approval by any creditor of the Company or any Guarantor
which has not been obtained or (v) require any approval, consent, order,
authorization or license by, or giving notice to, or taking any other action
with respect to, any governmental or regulatory authority or agency under any
provision of any law, except those actions which have been taken or will be
taken prior to the date of execution of this Amendment.
<PAGE>
-3-
(c) Enforceability of Obligations. This Amendment, the Credit Agreement as
-------------- -- -----------
amended hereby and the Loan Documents constitute the legal, valid and binding
obligations of the Company and the Guarantors enforceable against the Company
and the Guarantors in accordance with their respective terms.
(d) No Default or Event of Default. No Default or Event of Default has
------------------------------
occurred or is continuing and the execution, delivery and effectiveness of this
Amendment will not cause any such Default or Event of Default to occur.
(S)4. CONFIRMATION OF SECURITY DOCUMENTS. Each of the Company and the
------------ -- -------- ---------
Guarantors hereby ratifies and confirms each of its respective Security
Documents and the pledges and security interests created thereby. Each of the
Company and the Guarantors hereby further ratifies and confirms that the
Security Documents and the pledges and security interest created thereby secure
the Obligations of the Company and the Guarantors under the Credit Agreement, as
amended hereby.
(S)5. CONFIRMATION OF GUARANTIES. Each of the Guarantors hereby ratifies
--------------------------
and confirms its respective Guaranty and acknowledges and agrees that the
Obligations under the Credit Agreement, as amended hereby are Guaranteed
Obligations.
(S)6. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment
---------- -- -------------
shall be conditioned upon receipt by the Agent of (i) this Amendment duly
executed by each of the Company, the Guarantors, the Banks and the Agent and
(ii) the written consent of Metropolitan, as holder of the 6.69% Notes and the
10.40% Notes, to the execution and delivery by the Company and the Guarantors of
this Amendment.
(S)7. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
--------- -- ------------
number of counterparts, but all such counterparts shall together constitute but
one instrument. In making proof of this Amendment, it shall not be necessary to
produce or account for more than one counterpart signed by each party hereto by
and against which enforcement hereof is sought.
(S)8. GOVERNING LAW. This Amendment shall be construed according to and
--------- ---
governed by the laws of the Commonwealth of Massachusetts (without reference to
conflicts or choice of law provisions).
<PAGE>
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as an agreement under seal as of the date set forth at the
beginning of this Amendment.
The Company:
--- -------
CHART HOUSE, INC.
By:__________________________________
Harold E. Gaubert, Jr.,
Vice President
The Guarantors:
--- ----------
CHART HOUSE ENTERPRISES, INC.
By:__________________________________
Harold E. Gaubert, Jr.
Vice President
PARADISE BAKERY, INC.
By:__________________________________
Harold E. Gaubert, Jr.
Vice President
ISLANDS RESTAURANTS, INC.
By:__________________________________
Harold E. Gaubert, Jr.
Vice President
The Banks:
--- -----
THE FIRST NATIONAL BANK
OF BOSTON
By:__________________________________
Debra L. Zurka, Vice President
<PAGE>
-5-
SANWA BANK CALIFORNIA
By__________________________________
David L. Beall, Vice President
THE SUMITOMO BANK
OF CALIFORNIA
By__________________________________
Matthew R. Van Steenhuyse,
Vice President
The Agent:
--- -----
SANWA BANK CALIFORNIA
By__________________________________
David L. Beall, Vice President
<PAGE>
EXHIBIT 10.1(5)
AMENDMENT NO. 4
DATED AS OF AUGUST 25, 1995 TO
AMENDED AND RESTATED REVOLVING CREDIT
AND TERM LOAN AGREEMENT
DATED AS OF DECEMBER 17, 1993
AMENDMENT NO. 4 (this "Amendment") dated as of August 25, 1995 to the
Amended and Restated Revolving Credit and Term Loan Agreement dated as of
December 17, 1993 (as amended by Amendment No. 1 dated as of September 30, 1994,
Amendment No. 2 dated as of April 26, 1995, Amendment No. 3 dated as of June 14,
1995 and as may be further amended and in effect from time to time, the "Credit
Agreement"), by and among (a) Chart House, Inc., a Delaware corporation (the
"Company"), (b) Chart House Enterprises, Inc., a Delaware corporation (the
"Parent"), Paradise Bakery, Inc., a Delaware corporation ("Paradise"), and
Islands Restaurants, Inc., a Delaware corporation ("Islands", and together with
the Parent and Paradise, the "Existing Guarantors", and Islands and the Parent,
together the "Remaining Guarantors"), (c) The First National Bank of Boston, a
national banking association ("FNBB"), Sanwa Bank California, a California state
chartered bank ("Sanwa"), The Sumitomo Bank of California, a California state
chartered bank ("Sumitomo", and collectively with Sanwa and FNBB, the "Banks")
and (d) Sanwa as agent for itself, FNBB and Sumitomo (in such capacity, the
"Agent"). Capitalized terms which are used herein without definition and which
are defined in the Credit Agreement shall have the same meaning herein as in the
Credit Agreement, as amended hereby. As used herein the term "Omnibus
Amendment" shall mean Omnibus Amendment No. 2 dated as of the date hereof by and
among the Company, the Existing Guarantors, the Banks, Metropolitan Life
Insurance Company ("Metropolitan") and Sanwa as pledgee for the Banks and
Metropolitan.
WITNESSETH:
- ----------
WHEREAS, the Parent has informed the Banks and the Agent that the Parent
intends to sell all of its rights and interest in Paradise to Clucker's Wood
Roasted Chicken, Inc. substantially in accordance with the terms set forth on
Exhibit A attached hereto and made a part hereof (the "Sale");
- ---------
WHEREAS, the Company and the Existing Guarantors have requested that the
Banks and the Agent consent to the Sale and amend the Credit Agreement and the
other Loan Documents to reflect the Sale;
<PAGE>
-2-
WHEREAS, the Company and the Existing Guarantors have requested that the
Banks and the Agent amend certain other terms and conditions of the Credit
Agreement and Loan Documents; and
WHEREAS, the Banks and the Agent, subject to the terms and conditions set
forth below, have agreed to consent to the Sale and to amend the Credit
Agreement and the other Loan Documents in accordance with the above-listed
requests;
NOW, THEREFORE, in consideration of the foregoing premises, on the terms
and subject to the conditions set forth herein, the parties hereto hereby agree
as follows:
(S)1. AMENDMENTS TO CREDIT AGREEMENT. (a) The preamble of the Credit
---------- -- ------ --------- -
Agreement is hereby amended by deleting the text "Paradise Bakery, Inc.
("Paradise"), a Delaware corporation" appearing in the first paragraph thereof;
(b) The preamble is further amended by deleting the word "Paradise" each time
-
such word appears therein; (c) Section 1 of the Credit Agreement is hereby
-
amended by deleting the definition of "Paradise" in its entirety; (d) Section
-------- -
8.2 of the Credit Agreement is hereby amended by deleting the word "Paradise"
each time such word appears therein; (e) Section 11.5(i) of the Credit
-
Agreement is amended by deleting the text "(except Paradise)" each time such
text appears therein; (f) Section 11.24 of the Credit Agreement is amended by
-
deleting the text "(except Paradise)" each time such text appears therein.
(S)2. CONSENT TO SALE. The Banks and the Agent hereby consent to the
----------------
Sale. This consent operates solely with respect to the Sale and shall not be
construed as a consent to any other matters.
(S)3. SCOPE OF AMENDMENT. Except as specifically amended by this
----- -- ---------
Amendment and the Omnibus Amendment, the Credit Agreement and each of the Loan
Documents shall remain unchanged and in full force and effect.
(S)4. REPRESENTATIONS AND WARRANTIES. The Company and each of the
--------------- --- ----------
Remaining Guarantors represents and warrants (to the extent such representation
or warranty relates to such Guarantor or a Subsidiary of such Guarantor) as
follows:
(a) Representations and Warranties in Credit Agreement. The
- --------------- --- ---------- -- ------ ---------
representations and warranties of the Company and the Remaining Guarantors
contained in the Credit Agreement (i) were true and correct in all material
respects when made, and (ii) except to the extent such representations and
warranties by their terms were made solely as of a prior date, continue to be
true and correct in all material respects on the date hereof except for changes
resulting from the Sale.
<PAGE>
-3-
(b) Authority, etc. The execution and delivery by the Company and the
- --------- ---
Remaining Guarantors of this Amendment and the performance by the Company and
the Remaining Guarantors of all of their agreements and obligations under this
Amendment are within the corporate authority of each of the Company and the
Remaining Guarantors, have been duly authorized by all necessary corporate
action on the part of each of the Company and the Remaining Guarantors, and do
not and will not (i) contravene any provision of the Company or any of the
Remaining Guarantor's charter, other incorporation papers, by-laws or any stock
provision, or any amendment thereof, (ii) conflict with, or result in a breach
of any material term, condition or provision of, or constitute a default under
or result in the creation of any mortgage, lien, pledge, charge, security
interest or other encumbrance upon any of the property of the Company or any
Remaining Guarantor under any agreement, deed of trust, indenture, mortgage or
other instrument to which the Company or such Remaining Guarantor is a party or
by which any of the Company or such Remaining Guarantor's properties are bound,
(iii) violate or contravene any provision of any law, regulation, order, ruling
or interpretation thereunder or any decree, order or judgment of any court or
governmental or regulatory authority, bureau, agency or official, (iv) require
any waiver, consent or approval by any creditor of the Company or any Remaining
Guarantor which has not been obtained or (v) require any approval, consent,
order, authorization or license by, or giving notice to, or taking any other
action with respect to, any governmental or regulatory authority or agency under
any provision of any law, except those actions which have been taken or will be
taken prior to the date of execution of this Amendment.
(c) Enforceability of Obligations. This Amendment, the Credit Agreement,
- -------------- -- -----------
as amended hereby, and the other Loan Documents, as amended by the Omnibus
Amendment, constitute the legal, valid and binding obligations of the Company
and the Remaining Guarantors enforceable against the Company and the Remaining
Guarantors in accordance with their respective terms.
(d) No Default or Event of Default. No Default or Event of Default has
- ------------------------------
occurred or is continuing and the execution, delivery and effectiveness of this
Amendment will not cause any such Default or Event of Default to occur.
(S)5. CONFIRMATION OF SECURITY DOCUMENTS. Each of the Company and the
------------ -- -------- ---------
Remaining Guarantors hereby ratifies and confirms each of its respective
Security Documents, as amended by the Omnibus Amendment, and the pledges and
security interests created thereby. Each of the Company and the Remaining
Guarantors hereby further ratifies and confirms that the Security Documents, as
amended by the Omnibus Amendment, and the pledges and security interest created
thereby secure the Obligations of the Company and the Remaining Guarantors under
the Credit Agreement, as amended hereby.
(S)6. CONFIRMATION OF GUARANTIES. Each of the Remaining Guarantors hereby
--------------------------
ratifies and confirms its respective Guaranty and acknowledges and agrees that
the Obligations under the Credit Agreement, as amended hereby are Guaranteed
Obligations.
<PAGE>
-4-
(S)7. CONDITIONS TO EFFECTIVENESS. The effectiveness of this Amendment
---------- -- -------------
shall be conditioned upon receipt by the Agent of the following, in form and
substance satisfactory to the Agent and the Banks:
(a) this Amendment duly executed by each of the Company, the Existing
-
Guarantors, the Banks and the Agent;
(b) copies, certified by the Secretary of each of the Company and the
-
Remaining Guarantors to be true and complete on the date of execution of this
Amendment, of the records of all actions taken by the Company and each such
Remaining Guarantor as may be required according to the terms of the Company or
each such Remaining Guarantor's charter, other incorporation documents and by-
laws to authorize (i) the execution and delivery of this Amendment by the
Company and each such Remaining Guarantor, and (ii) the performance by the
Company and each of the Guarantors of all of each such Person's agreements and
obligations under this Amendment, the Credit Agreement, as amended hereby and
the other Loan Documents, as amended by the Omnibus Amendment;
(c) a certificate of the Secretary of each of the Company and the Parent
-
(i) setting forth the names, incumbency and specimen signatures of those
officers authorized to execute and deliver this Amendment; (ii) stating that
there have been no amendments to the charter documents and by-laws of each such
Person delivered to the Agent and the Banks on December 17, 1993; and (iii)
certifying the collateral list for the Company Security Agreement and the stock
list for the Parent Pledge Agreement;
(d) a certificate of the Secretary of Islands setting forth (i) the names,
-
incumbency and specimen signatures of those officers authorized to execute and
deliver this Amendment; (ii) stating that there have been no amendments to the
charter documents and by-laws of Islands delivered to the Agent and the Banks on
September 30, 1994; and (iii) certifying the collateral list for the Islands
Security Agreement;
(e) the written consent of Metropolitan, as holder of the 6.69% Notes and
-
the 10.40% Notes, to the execution and delivery by the Company and the Existing
Guarantors of this Amendment and the other documents and instruments described
herein;
(f) an opinion of counsel to the Company and the Remaining Guarantors in
-
form and substance satisfactory to the Agent;
(g) Omnibus Amendment No. 2 duly executed by each of the Company, the
-
Existing Guarantors, the Banks, the Agent and Metropolitan;
(h) receipt of satisfactory evidence that the Sale has been duly
-
consummated; and
<PAGE>
-5-
(i) payment by the Company of all fees and expenses incurred as of the date
hereof by the Agent and the Agent's special counsel, Bingham, Dana & Gould, in
connection with the preparation and execution of this Amendment.
(S)8. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
--------- -- ------------
number of counterparts, but all such counterparts shall together constitute but
one instrument. In making proof of this Amendment, it shall not be necessary to
produce or account for more than one counterpart signed by each party hereto by
and against which enforcement hereof is sought.
(S)9. GOVERNING LAW. This Amendment shall be construed according to and
--------- ---
governed by the laws of the Commonwealth of Massachusetts (without reference to
conflicts or choice of law provisions).
<PAGE>
-6-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as an agreement under seal as of the date set forth at the
beginning of this Amendment.
The Company:
--- -------
CHART HOUSE, INC.
By:_____________________________________
Harold E. Gaubert, Jr.,
Vice President
The Existing Guarantors:
--- -------- ----------
CHART HOUSE ENTERPRISES, INC.
By:_____________________________________
Harold E. Gaubert, Jr.
Vice President
PARADISE BAKERY, INC.
By:_____________________________________
Harold E. Gaubert, Jr.
Vice President
ISLANDS RESTAURANTS, INC.
By:_____________________________________
Harold E. Gaubert, Jr.
Vice President
The Banks:
--- -----
THE FIRST NATIONAL BANK
OF BOSTON
By:_____________________________________
Debra L. Zurka, Vice President
<PAGE>
-7-
SANWA BANK CALIFORNIA
By_____________________________________
David L. Beall, Vice President
THE SUMITOMO BANK
OF CALIFORNIA
By_____________________________________
Matthew R. Van Steenhuyse,
Vice President
The Agent:
--- -----
SANWA BANK CALIFORNIA
By_____________________________________
David L. Beall, Vice President
<PAGE>
EXHIBIT 10.16
AGREEMENT
THE EDWARD FINEMAN
COMPANY, INC.
_____________________
CHART HOUSE, INC.
June 1, 1995
1
<PAGE>
THIS AGREEMENT is entered into as of the first day of June, 1995 by and between
THE EDWARD FINEMAN COMPANY, INC., a California corporation (EFC) and CHART
HOUSE, INC., a Delaware corporation (CHART).
RECITALS
WHEREAS, EFC is in the business of providing food and food related products to
various types of business establishments; and
WHEREAS, CHART has, over the years, purchased from EFC a variety of meat,
seafood and other food related products for all or substantially all of its
restaurants; and
WHEREAS, CHART desires to have EFC continue to provide purchasing,
manufacturing, warehousing and delivery services of such products pursuant to
the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
AGREEMENT
1. TERM. This agreement shall be in effect commencing June 1, 1995 with an
----
initial term of five (5) years, expiring on May 31, 2000 (the "Initial Term").
This Agreement shall terminate at the end of the Initial Term if written notice
to terminate is given by either party to the other party as provided in
paragraph 26 at least thirty (30) days prior to the last day of the Initial
Term. Otherwise, this Agreement shall continue from year to year from and
after the last day of the Initial Term until terminated by either party by
written notice given to the other party as provided in paragraph 26 at least
thirty (30) days prior to the last day of the contract year in which such notice
is given. This Agreement may also be terminated earlier in the manner and
under the circumstances provided in paragraph 17.
2. REPRESENTATIONS OF EFC. EFC represents and warrants that:
----------------------
(a) EFC has the legal right and authority to enter into this Agreement and
perform the services expected of EFC under the Agreement;
(b) Based upon due inquiry, EFC has no knowledge of any facts or circumstances
leading it to believe (i) that EFC lacks the legal right and authority to
perform the services it has undertaken to perform pursuant to the Agreement;
(ii) that the Agreement violates EFC's existing contractual obligations to any
person or entity; (iii) that performance of the Agreement violates existing
federal, state or local law, rules or regulations applicable to the conduct of
EFC's business; or (iv) that EFC does not have all licenses and other
authorizations presently required by law or regulation to permit EFC to perform
its services under the Agreement with regard to CHART's restaurants which EFC is
presently serving;
(c) EFC will comply with all reasonable requests of CHART relating to the
conduct of EFC's business with respect to the Agreement, or the performance of
EFC under the Agreement, in order (i) not to interfere in any way with the
business of CHART and (ii) to maximize the benefits expected by CHART from the
Agreement; and
(d) EFC will use its best efforts to conform products to applicable
specifications and instructions.
3. REPRESENTATIONS OF CHART. CHART represents and warrants that:
------------------------
(a) CHART has the legal right and authority to enter into this Agreement;
2
<PAGE>
(b) Based upon due inquiry, CHART has no knowledge of any facts or
circumstances leading it to believe (i) that CHART lacks the legal right and
authority to perform its obligations pursuant to the Agreement; (ii) that the
Agreement violates CHART's existing contractual obligations to any person or
entity; (iii) that performance of the Agreement violates existing federal, state
or local law, rules or regulations applicable to the conduct of CHART's
business; or (iv) that CHART does not have all licenses and other authorizations
presently required by law or regulation to permit EFC to perform its obligations
under the Agreement with regard to CHART's restaurants which EFC is presently
serving;
(c) CHART will purchase, from EFC, substantially all of its requirements of
"core" products as set forth in Table I of the Manual. CHART is entitled to
purchase certain "non-core" products, as needed, from other suppliers. A non-
exclusive list of non-core products is identified in Table I of the Operations
Manual.
4. FORCE MAJEURE. Neither party shall be liable for delays in the performance
--------------
of any act required under this Agreement to be performed by such party, if such
delay is due to strikes, lockouts, failure of power or other utilities,
injunction or other court or administrative order, governmental law or
regulations which prevent or substantially interfere with the required
performance, condemnations, riots, insurrections, martial law, civil commotion,
war, fire, flood, earthquake, or other casualty, acts of God, or other causes
not within the control of such party. The performance of any covenant,
agreement, work, service or other act shall be excused for the period of delay
and the period for the performance of the same shall be extended by such period.
5. OPERATIONS MANUAL. Attached to this Agreement is an Operations Manual (the
-----------------
"Manual") that defines the financial arrangements, specifications and
operational guidelines of the program conducted by EFC for CHART. All of the
provisions of the Manual are incorporated herein by this reference and shall
have full force and effect as if set forth herein in their entirety.
6. PRODUCT OWNERSHIP & INVENTORIES. At the direction of CHART, EFC shall
-------------------------------
purchase, own and control inventory levels of CHART's desired products to be
either manufactured or warehoused by EFC. CHART also agrees to deplete,
within a reasonable time, any and all inventories which have been discontinued
on a national or regional level that were purchased by EFC exclusively for
CHART. It is agreed and understood that both parties shall endeavor to maintain
inventory levels at less than 30 days supply based on anticipated usage by the
restaurants. Selected inventories that exceed 30 days supply are subject to
interest and storage charges as described in the Manual.
7. PRODUCTION AND SPECIFICATIONS. EFC shall be responsible for the performance
-----------------------------
of all production activities, including cutting and packaging as required and
specified by CHART and the attached Manual for CHART's business. EFC is
entitled to assign approved outside agents to facilitate such production
functions as necessary to perform the Agreement. CHART agrees not to
unreasonably withhold approval of such agents. All products covered by this
Agreement and the Manual shall conform to CHART's written specifications,
including but not limited to grade, type, size, weight and aging. CHART may,
from time to time, by written notice to EFC, make commercially reasonable
modifications or additions to any specification as it deems necessary. EFC
shall monitor and respond to all issues and problems of the performance of EFC
and its agents and upon receipt of written notice of non-compliance with the
Agreement, EFC shall, within ten (10) days, place itself into compliance under
the Agreement.
8. WAREHOUSING. EFC agrees to provide administrative (order-processing),
-----------
receiving, shipping, and loading services of products for the sale to CHART
restaurants under guidelines specified under the Manual. EFC may assign
outside agents to facilitate such warehousing functions as necessary to perform
the distribution services. EFC shall monitor and respond to all issues and
problems of the performance of EFC and its agents and upon receipt of written
notice of non-compliance with the Agreement, EFC shall, within ten (10) days,
place itself into compliance under the Agreement.
9. TRANSPORTATION. EFC shall provide delivery service to each CHART restaurant
--------------
as agreed to by both parties and as specified in the Manual. EFC may assign
outside agents to facilitate such delivery services as necessary. EFC shall
monitor and respond to all issues and problems of the performance of EFC and its
agents and upon receipt of written notice of non-compliance with the Agreement,
EFC shall, within ten (10) days, place itself into compliance under the
Agreement.
3
<PAGE>
10. COST-PLUS PROGRAM. EFC shall charge CHART for the above described services
-----------------
on a Cost-Plus formula. The Cost-Plus formula is defined in the Manual and all
rates pertaining to the Cost-Plus section in the Manual shall remain in effect
unless changes are mutually agreed upon by both parties.
11. REVIEWS AND AUDITS. EFC shall provide proper documentation related to
------------------
matters covered in this Agreement and the Manual as required by CHART. Such
Documents shall include, but not limited to complete and accurate records to
substantiate the landed cost of goods ("LCG") for each product supplied to
CHART, along with all other charges, including storage fees, interest charges
and upcharges. EFC shall be required to maintain such records on file for two
(2) years. CHART may audit such records at any time upon reasonable notice.
Both parties agree to reimburse the other party for any adjustments revealed by
any audits or series of audits. EFC agrees to abide by all reasonable
recommendations of CHART relating to modifications of EFC's record-keeping
system to the extent that EFC's existing system fails properly to reflect costs
being charged to CHART.
12. BILLING OF GOODS. EFC shall generate an invoice for each order placed by
----------------
CHART restaurants, itemizing the number of cases per item, item description, net
weight, sale price, and extended sales dollars. CHART shall pay all invoices in
full as signed for by the CHART designated receiver of goods. All billings
shall be due and payable to EFC within 7 days from date of receipt of goods by
the restaurant ordering the goods.
13. INDEMNITY. EFC will indemnify, defend and hold harmless CHART, its parent
---------
and affiliates, officers and directors, agents, employees, subcontractors,
independent contractors and customers from any and all claims, demands, losses,
liabilities, suits at law or in equity, costs and expenses, including reasonable
attorney's fees, arising out of, or relating to:
(a) EFC's activities;
(b) EFC's products and/or completed operations;
(c) EFC fixtures, equipment, or supplies used in connection with services
provided to CHART; or
(d) any injury, illness and/or death caused, in whole or in part, by contact
with, use and/or consumption of, EFC's products.
Notwithstanding the foregoing, EFC shall have no obligation to indemnify,
defend or hold CHART harmless from CHART's own gross negligence or intentional
acts. Upon tendering of any suit to EFC, EFC shall defend the same at its sole
cost and expense. CHART agrees to advise EFC in the event it receives
notification that a claim has been or may be filed with respect to a matter
covered by this indemnity and EFC shall be given the opportunity to assume the
defense of that claim. If EFC fails to assume such defense, CHART may defend
the action in the manner it deems appropriate, and EFC shall pay to CHART all
costs, including reasonable attorney's fees, incurred by CHART in effecting such
defense, in addition to any sum which CHART may pay by reason of any settlement
or judgment against CHART. Notwithstanding anything to the contrary, the burden
of proof shall be on EFC to defend the lawsuit and establish CHART's negligence
and/or misconduct contributed to such injury, loss, illness or death. In the
event it is either established by a court of competent jurisdiction or admitted
by EFC that the product, in the condition it existed when delivered to CHART,
caused the subject injury, illness and/or death, EFC shall only be liable to the
extent it is determined or admitted that the product, in the condition it
existed when delivered to CHART, caused such injury, illness and/or death.
14. INSURANCE. EFC shall maintain in full force and effect, at EFC's expense,
---------
and shall provide to CHART, certificates of insurance evidencing insurance
coverage in accordance with CHART's requirements as follows:
(a) The certificates of insurance shall name CHART as an "Additional Insured".
(b) EFC insurers must be approved by CHART and have a financial rating of at
least A-VII in the most current edition of A.M. Best's insurance reports. EFC's
policies of insurance shall include:
4
<PAGE>
(i) Commercial general liability insurance, including contractual liability,
product/completed operations, broad form property damage, and manufacturer's
liability with broad form endorsement, with minimum primary limits of $1,000,000
per occurrence and $2,000,000 aggregate covering claims for bodily injury
and/or death to persons and/or injury to property and property damages arising
out of the services or products covered under this Agreement, and shall contain
a waiver of subrogation by EFC's insurance carriers against CHART and CHART's
insurance carriers with respect to all obligations assumed by EFC pursuant to
this Agreement,
(ii) Workers' compensation insurance and employer's liability insurance with
minimum limits of $100,000 per employee and $1,000,000 per accident,
(iii) Automobile liability insurance with minimum limits of $1,000,000
combined single limits, such insurance to include coverage for owned, non-owned,
and hired vehicles.
(c) In addition to commercial general liability and automobile insurance
policies, EFC must maintain an umbrella policy with a limit of no less than
$10,000,000 per occurrence and aggregate. Each insurance policy required by
this Agreement shall contain provisions to the effect that the policy limits may
not be reduced, terms changed, or policy canceled with less than thirty (30)
days prior written notice provided to CHART. The insurance required by this
Agreement shall be primary and non-contributing with respect to any other
insurance available to CHART. EFC will provide a copy of any contract of
insurance required under this Agreement, upon request from CHART.
15. CONFIDENTIALITY. In the course of the relationship between CHART and
---------------
EFC, under this Agreement, both parties may be given, or have access to, non-
public confidential information concerning the other party's marketing or
operational policies, practices and future plans. Both Parties agree to protect
and maintain the confidentiality of each other's information and shall not
disclose or transmit such information to any third person for so long as the
information is not publicly disclosed.
16. ASSIGNMENT. The Agreement shall be binding upon and shall inure to the
----------
benefit of, the parties of this Agreement, provided, however, it shall not be
assigned by either CHART or EFC without the prior written consent of the other
party, provided, consent shall not be unreasonably withheld.
17. DEFAULT AND TERMINATION.
-----------------------
(a) Event of Default by EFC:
(i) If EFC fails or refuses to comply with any of its obligations under this
Agreement, or,
(ii) If EFC seeks protection under the bankruptcy laws (other than as a
creditor) or any assignment is made for the benefit of creditors or a trustee is
appointed for all or any portion of such party's assets;
(b) Event of Default by CHART:
(i) If CHART fails or refuses to comply with any of its obligations under
this Agreement, or
(ii) If CHART seeks protection under the bankruptcy laws (other than as a
creditor) or any assignment is made for the benefit of creditors or a trustee is
appointed for all or any portion of such party's assets.
In the Event of Default, the non-defaulting party may terminate this Agreement
upon ten (10) days prior written notice to the defaulting party and this
Agreement shall terminate in the event that the defaulting party has failed to
cure within the ten (10) day period after receipt of such notice. The failure
of the non-defaulting party to terminate the Agreement upon the occurrence of
one or more of these events of default shall not constitute a waiver or
otherwise affect the right to terminate the Agreement as a result of a
continuing or subsequent failure or refusal to comply with any of such
obligations. Furthermore, failure by the non-defaulting party to exercise any
of its rights or remedies hereunder or insist on strict compliance by the
5
<PAGE>
defaulting party with any of the terms of this Agreement shall not constitute a
waiver of any of the terms or conditions of this Agreement with respect to any
other or subsequent breach nor shall it constitute a waiver of its right at any
time thereafter to require strict compliance with the terms of this Agreement.
18. INSPECTIONS.
-----------
(a) EFC's product must comply with the inspection and test procedures
established and carried out by the United States Department of Agriculture
("USDA") and all applicable federal, state and local laws. In addition, at no
time will EFC's procedures and standards be less stringent than those set forth
in the document entitled Hazard Analysis Critical Control Points, Second
Edition, dated January 1995 and prepared by Midwest Portion Meats, Inc.,
otherwise known as a "HACCP program". Should the USDA, State or Local agencies
mandate pathogen testing procedures (i.e. - E. Coli, Salmonella, Listeria,
etc.), any expenses directly related to products sold to CHART to implement such
procedures and/or requirements shall be paid by EFC up to $20,000 per year.
For any expenses directly related to products sold to CHART, exceeding $20,000
per year, CHART agrees to pay a surcharge against the landed cost of goods (LCG)
of up to an additional $20,000 per year. Should any expenses exceed the sum
total of $40,000 per year, both parties agree to negotiate a resolution. The
surcharge shall be calculated by determining the annual expense exceeding
$20,000, up to $40,000, divided by the estimated annual volume sold (in pounds)
to determine a cents-per-pound rate to be added to LCG.
(b) Upon request, EFC will provide CHART with copies of all inspection reports
and provide additional documentation to indicate compliance with this
paragraph.
(c) All products ordered hereunder, as well as the facility in which such are
manufactured, will be subject to inspection and testing by CHART to the extent
practicable at all times and places, including the period of manufacture and in
any event prior to acceptance. EFC agrees to permit CHART access to EFC's
facilities at all reasonable times and upon reasonable notice for such
inspection. EFC's product will be subject to final inspection and acceptance by
CHART after delivery. It is expressly agreed that inspections and/or payments
prior to delivery will not constitute final acceptance. If the product does not
meet the specifications or otherwise conform with the requirements of any order
by CHART or this Agreement, CHART shall have the right to reject such product.
19. RECALL. In the event it is deemed necessary by EFC to recall any quantity
------
of the product, from any restaurant of CHART or from any consumer, either as a
result of failure of the product to satisfy the specifications, comply with any
warranties, or for any other reason bearing on quality and/or safety of the
product, EFC agrees to comply diligently with all product recall procedures
established by the U.S. Consumer Product Safety Commission. Furthermore, EFC
agrees to bear all costs and expenses incurred by it and/or CHART in complying
with such recall procedures.
20. COMPLIANCE. EFC agrees that all food products including food articles,
----------
food ingredients and food packaging comprising the product or any part thereof
delivered, sold or transferred to CHART hereunder (a) shall be in full
compliance with either the Federal Food, Drug and Cosmetic Act ("FDCA"), as
amended, or the rules and regulations promulgated from time to time by the USDA,
or any other applicable rule or regulation, as the case may be; (b) shall be
manufactured, stored and delivered in accordance with appropriate "Good
Manufacturing Practices" under the FDCA or comparable regulations of the USDA,
as applicable; (c) shall not be adulterated or misbranded within the meaning of
the FDCA or USDA, as applicable; (d) shall not be a food product which may not,
under the FDCA (or comparable regulations of the USDA), be introduced into
interstate commerce except as provided, therein; (e) shall comply with all
regulations, statutes, state or federal, U.S. or Canadian with respect to
nutritional labeling requirements, and (f) shall not be food product adulterated
or misbranded under any applicable provision of any state law or municipal
ordinance.
21. HARMFUL INGREDIENTS/DEFECTIVE DESIGN. Whenever EFC becomes aware that any
------------------------------------
ingredient or component of the product covered by this Agreement is or may
become harmful to persons or property, or that the design or construction of the
product is defective in any manner which is or may become harmful to persons or
property, EFC shall immediately give notice thereof, including all relevant
information with respect thereto, to CHART.
6
<PAGE>
22. INDEPENDENT CONTRACTOR RELATIONSHIP. EFC acknowledges that it is an
-----------------------------------
independent contractor and is not an agent, partner, joint venturer nor employee
of CHART. EFC shall have no authority to bind or otherwise obligate CHART in
any manner nor shall EFC represent to anyone that it has a right to do so.
CHART is not an agent, partner, joint venture, or employee of EFC, and CHART
shall have no authority to bind or otherwise obligate EFC to any third party, or
make any contrary representation to anyone. CHART further makes no
representations regarding the duration of this Agreement beyond the Term
contemplated herein, and EFC and CHART acknowledge that such Term may be
abbreviated for Events of Default.
23. NO THIRD-PARTY BENEFICIARY. No persons other than the signatories to this
--------------------------
Agreement and their successors have enforceable rights under this Agreement.
24. APPLICABLE LAW. This Agreement and all of its provisions shall be
--------------
construed in accordance with, and governed by, the internal laws of the State of
California without regard to the conflicts of laws provisions or principles of
California law. Any legal action brought by EFC against CHART based on,
arising out of or to enforce the Agreement shall be brought in a state court in
San Diego County or in the United States District Court for the Southern
District of California, and any legal action brought by CHART against EFC based
on, arising out of or to enforce the Agreement shall be brought in a state court
in Los Angeles County or in the United States District Court for the Central
District of California (collectively, the "Designated Jurisdiction"); provided,
however, that nothing herein shall bar either EFC or CHART (a) from asserting
any cross-claim or third party claim against the other in any proceeding in
another jurisdiction in which EFC or CHART are sued or joined by a third party,
or (b) from suing CHART or EFC, as the case maybe, in another jurisdiction
having personal jurisdiction over CHART or EFC if CHART or EFC also have a claim
or cause of action arising out of the same transaction against a third party who
is not amenable to the personal jurisdiction of the court in the Designated
Jurisdiction. EFC and CHART both agree to waive trial by jury with respect to
any claims, causes of actions, set-offs or defenses asserted by either against
the other; provided, however, that nothing herein shall bar either EFC or CHART
from seeking trial by jury with regards to any claims, causes of action, set-
offs or defenses by or against any other person joined in the lawsuit with EFC
or CHART, as the case may be.
25. TIME OF ESSENCE. Time is of the essence in each provision of the
---------------
Agreement in which a date or period of time is established for the performance
of any act.
26. NOTICE. All notices, requests, demands, and other communications given in
------
connection with this Agreement, shall be in writing and deemed to have been duly
given if delivered personally or mailed, by registered or certified mail
(return receipt requested), or by faxsimile if mailed 1st class on the same day
or sent via overnight mail delivery service with receipt and with postage
prepaid to the business address of either party as set forth below or to such
other persons or addresses as may be provided in writing given by either party
to this Agreement to the other party in the manner specified herein.
To EFC at: The Edward Fineman Company, Inc.
13215 Cambridge Street.
P. O. Box 3343
Santa Fe Springs, CA 90670
Attention: President
Fax: (310) 926-5113
To CHART at: Chart House, Inc.
115 South Acacia Avenue
P. O. Box 7007
Solana Beach, CA 92075-1803
Attention: President
Fax: (619) 481-0693
27. ENTIRE AGREEMENT. All documents and exhibits attached hereto or referred
----------------
to herein, including the Manual and all exhibits attached thereto, constitute a
part of this Agreement. This Agreement contains all representations, warranties
and
7
<PAGE>
agreements made by the parties hereto relating to the subject matter hereof.
It is the intention of the parties to incorporate in this Agreement, their full
and complete understanding, and no amendment, modification or addition hereto
shall have effect or be binding unless it is in writing and signed by the
parties hereto.
28. TITLES AND REFERENCES. The titles to the paragraphs of this Agreement are
---------------------
for convenience only and are not a part of this Agreement and shall have no
effect upon the construction or interpretation of any part of this Agreement.
29. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
30. FURTHER ASSURANCES. The parties hereto, and each of them, agree to take
------------------
such further actions, and execute such additional documents, instruments and
other writings, as may reasonably be requested by the other party hereto in
order more fully to give effect to the intentions of the parties with respect to
the subject matter of this Agreement.
31. SEVERABILITY. The provisions of the Agreement are severable and the
------------
Agreement shall be interpreted and enforced as if all completely invalid or
unenforceable provisions were not contained in the Agreement, and partially
valid and enforceable provisions shall be enforced to the extent that they are
valid and enforceable.
32. SURVIVAL. Paragraphs 2 & 3 (Representations), 4 (Force Majeure), 11
--------
(Audits), 13 (Indemnity), 15 (Confidentiality), 19 (Recall), 24 (Applicable Law)
and 26 (Notice) shall survive termination or expiration of this Agreement and
be binding upon such party, its successors and assigns. Either party shall
notify the other party upon occurrence of a change of control of the company,
the sale of all or substantially all of the assets of the company, or a
corporate merger or consolidation.
IN WITNESS WHEREOF, the parties hereto, or their duly authorized agents, have
caused this Agreement to be executed as of the date first above written.
THE EDWARD FINEMAN COMPANY, INC. CHART HOUSE, INC.
by______________________________ by__________________________________
Edward Fineman John Creed
President President
8
<PAGE>
EXHIBIT 10.16(2)
AGREEMENT
THE EDWARD FINEMAN
COMPANY, INC.
____________________
ISLANDS RESTAURANTS, INC.
June 1, 1995
1
<PAGE>
THIS AGREEMENT is entered into as of the first day of June, 1995 by and between
THE EDWARD FINEMAN COMPANY, INC., a California corporation (EFC) and ISLANDS
RESTAURANTS, INC., a Delaware corporation (ISLANDS).
RECITALS
WHEREAS, EFC is in the business of providing food and food related
products to various types of business establishments; and
WHEREAS, ISLANDS has, over the years, purchased from EFC a variety of
meat, seafood and other food related products for all or substantially all of
its restaurants; and
WHEREAS, ISLANDS desires to have EFC continue to provide purchasing,
manufacturing, warehousing and delivery services of such products pursuant to
the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
AGREEMENT
1. TERM. This agreement shall be in effect commencing June 1, 1995 with an
----
initial term of three (3) years, expiring on May 31, 1998 (the "Initial Term").
This Agreement shall terminate at the end of the Initial Term if written notice
to terminate is given by either party to the other party as provided in
paragraph 26 at least thirty (30) days prior to the last day of the Initial
Term. Otherwise, this Agreement shall continue from year to year from and after
the last day of the Initial Term until terminated by either party by written
notice given to the other party as provided in paragraph 26 at least thirty (30)
days prior to the last day of the contract year in which such notice is given.
This Agreement may also be terminated earlier in the manner and under the
circumstances provided in paragraph 17.
2. REPRESENTATIONS OF EFC. EFC represents and warrants that:
----------------------
(a) EFC has the legal right and authority to enter into this Agreement
and perform the services expected of EFC under the Agreement;
(b) Based upon due inquiry, EFC has no knowledge of any facts or
circumstances leading it to believe (i) that EFC lacks the legal right and
authority to perform the services it has undertaken to perform pursuant to the
Agreement; (ii) that the Agreement violates EFC's existing contractual
obligations to any person or entity; (iii) that performance of the Agreement
violates existing federal, state or local law, rules or regulations applicable
to the conduct of EFC's business; or (iv) that EFC does not have all licenses
and other authorizations presently required by law or regulation to permit EFC
to perform its services under the Agreement with regard to ISLANDS's restaurants
which EFC is presently serving;
(c) EFC will comply with all reasonable requests of ISLANDS relating to the
conduct of EFC's business with respect to the Agreement, or the performance of
EFC under the Agreement, in order (i) not to interfere in any way with the
business of ISLANDS and (ii) to maximize the benefits expected by ISLANDS from
the Agreement; and
(d) EFC will use its best efforts to conform products to applicable
specifications and instructions.
3. REPRESENTATIONS OF ISLANDS. ISLANDS represents and warrants that:
--------------------------
(a) ISLANDS has the legal right and authority to enter into this Agreement;
2
<PAGE>
(b) Based upon due inquiry, ISLANDS has no knowledge of any facts or
circumstances leading it to believe (i) that ISLANDS lacks the legal right and
authority to perform its obligations pursuant to the Agreement; (ii) that the
Agreement violates ISLANDS's existing contractual obligations to any person or
entity; (iii) that performance of the Agreement violates existing federal, state
or local law, rules or regulations applicable to the conduct of ISLANDS's
business; or (iv) that ISLANDS does not have all licenses and other
authorizations presently required by law or regulation to permit EFC to perform
its obligations under the Agreement with regard to ISLANDS's restaurants which
EFC is presently serving;
(c) Those ISLANDS restaurants listed in Table II of the Operations Manual
will purchase, from EFC, substantially all of its requirements of "core"
products as set forth in Table I of the Manual. ISLANDS is entitled to purchase
certain "non-core" products, as needed, from other suppliers. A non-exclusive
list of non-core products is identified in Table I of the Operations Manual.
4. FORCE MAJEURE. Neither party shall be liable for delays in the performance
--------------
of any act required under this Agreement to be performed by such party, if such
delay is due to strikes, lockouts, failure of power or other utilities,
injunction or other court or administrative order, governmental law or
regulations which prevent or substantially interfere with the required
performance, condemnations, riots, insurrections, martial law, civil commotion,
war, fire, flood, earthquake, or other casualty, acts of God, or other causes
not within the control of such party. The performance of any covenant,
agreement, work, service or other act shall be excused for the period of delay
and the period for the performance of the same shall be extended by such period.
5. OPERATIONS MANUAL. Attached to this Agreement is an Operations Manual (the
-----------------
"Manual") that defines the financial arrangements, specifications and
operational guidelines of the program conducted by EFC for ISLANDS. All of the
provisions of the Manual are incorporated herein by this reference and shall
have full force and effect as if set forth herein in their entirety.
6. PRODUCT OWNERSHIP & INVENTORIES. At the direction of ISLANDS, EFC shall
-------------------------------
purchase, own and control inventory levels of ISLANDS's desired products to be
either manufactured or warehoused by EFC. ISLANDS also agrees to deplete,
within a reasonable time, any and all inventories which have been discontinued
on a national or regional level that were purchased by EFC exclusively for
ISLANDS. It is agreed and understood that both parties shall endeavor to
maintain inventory levels at less than 30 days supply based on anticipated usage
by the restaurants. Selected inventories that exceed 30 days supply are subject
to interest and storage charges as described in the Manual.
7. PRODUCTION AND SPECIFICATIONS. EFC shall be responsible for the
-----------------------------
performance of all production activities, including cutting and packaging as
required and specified by ISLANDS and the attached Manual for ISLANDS's
business. EFC is entitled to assign approved outside agents to facilitate such
production functions as necessary to perform the Agreement. ISLANDS agrees not
to unreasonably withhold approval of such agents. All products covered by this
Agreement and the Manual shall conform to ISLANDS's written specifications,
including but not limited to grade, type, size, weight and aging. ISLANDS may,
from time to time, by written notice to EFC, make commercially reasonable
modifications or additions to any specification as it deems necessary. EFC shall
monitor and respond to all issues and problems of the performance of EFC and its
agents and upon receipt of written notice of non-compliance with the Agreement,
EFC shall, within ten (10) days, place itself into compliance under the
Agreement.
8. WAREHOUSING. EFC agrees to provide administrative (order-processing),
-----------
receiving, shipping, and loading services of products for the sale to ISLANDS
restaurants, listed in Table II of the Manual, under guidelines specified under
the Manual. EFC may assign outside agents to facilitate such warehousing
functions as necessary to perform the distribution services. EFC shall monitor
and respond to all issues and problems of the performance of EFC and its agents
and upon receipt of written notice of non-compliance with the Agreement, EFC
shall, within ten (10) days, place itself into compliance under the Agreement.
9. TRANSPORTATION. EFC shall provide delivery service to each ISLANDS
--------------
restaurant, listed in Table II of the Manual, and as specified in the Manual.
EFC may assign outside agents to facilitate such delivery services as necessary.
EFC shall monitor and respond to all issues and problems of the performance of
EFC and its agents and upon receipt of written notice of non-compliance with
the Agreement, EFC shall, within ten (10) days, place itself into compliance
under the Agreement.
3
<PAGE>
10. COST-PLUS PROGRAM. EFC shall charge ISLANDS for the above described
-----------------
services on a Cost-Plus formula. The Cost-Plus formula is defined in the Manual
and all rates pertaining to the Cost-Plus section in the Manual shall remain in
effect unless changes are mutually agreed upon by both parties.
11. REVIEWS AND AUDITS. EFC shall provide proper documentation related to
------------------
matters covered in this Agreement and the Manual as required by ISLANDS. Such
Documents shall include, but not limited to complete and accurate records to
substantiate the landed cost of goods ("LCG") for each product supplied to
ISLANDS, along with all other charges, including storage fees, interest charges
and upcharges. EFC shall be required to maintain such records on file for two
(2) years. ISLANDS may audit such records at any time upon reasonable notice.
Both parties agree to reimburse the other party for any adjustments revealed by
any audits or series of audits. EFC agrees to abide by all reasonable
recommendations of ISLANDS relating to modifications of EFC's record-keeping
system to the extent that EFC's existing system fails properly to reflect costs
being charged to ISLANDS.
12. BILLING OF GOODS. EFC shall generate an invoice for each order placed by
----------------
ISLANDS restaurants, itemizing the number of cases per item, item description,
net weight, sale price, and extended sales dollars. ISLANDS shall pay all
invoices in full as signed for by the ISLANDS designated receiver of goods. All
billings shall be due and payable to EFC within 7 days from date of receipt of
goods by the restaurant ordering the goods.
13. INDEMNITY. EFC will indemnify, defend and hold harmless ISLANDS, its
---------
parent and affiliates, officers and directors, agents, employees,
subcontractors, independent contractors and customers from any and all claims,
demands, losses, liabilities, suits at law or in equity, costs and expenses,
including reasonable attorney's fees, arising out of, or relating to:
(a) EFC's activities;
(b) EFC's products and/or completed operations;
(c) EFC fixtures, equipment, or supplies used in connection with services
provided to ISLANDS; or
(d) any injury, illness and/or death caused, in whole or in part, by
contact with, use and/or consumption of, EFC's products.
Notwithstanding the foregoing, EFC shall have no obligation to indemnify,
defend or hold ISLANDS harmless from ISLANDS's own gross negligence or
intentional acts. Upon tendering of any suit to EFC, EFC shall defend the same
at its sole cost and expense. ISLANDS agrees to advise EFC in the event it
receives notification that a claim has been or may be filed with respect to a
matter covered by this indemnity and EFC shall be given the opportunity to
assume the defense of that claim. If EFC fails to assume such defense, ISLANDS
may defend the action in the manner it deems appropriate, and EFC shall pay to
ISLANDS all costs, including reasonable attorney's fees, incurred by ISLANDS in
effecting such defense, in addition to any sum which ISLANDS may pay by reason
of any settlement or judgment against ISLANDS. Notwithstanding anything to the
contrary, the burden of proof shall be on EFC to defend the lawsuit and
establish ISLANDS's negligence and/or misconduct contributed to such injury,
loss, illness or death. In the event it is either established by a court of
competent jurisdiction or admitted by EFC that the product, in the condition it
existed when delivered to ISLANDS, caused the subject injury, illness and/or
death, EFC shall only be liable to the extent it is determined or admitted that
the product, in the condition it existed when delivered to ISLANDS, caused such
injury, illness and/or death.
14. INSURANCE. EFC shall maintain in full force and effect, at EFC's expense,
---------
and shall provide to ISLANDS, certificates of insurance evidencing insurance
coverage in accordance with ISLANDS's requirements as follows:
(a) The certificates of insurance shall name ISLANDS as an "Additional
Insured".
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<PAGE>
(b) EFC insurers must be approved by ISLANDS and have a financial rating of
at least A-VII in the most current edition of A.M. Best's insurance reports.
EFC's policies of insurance shall include:
(i) Commercial general liability insurance, including contractual
liability, product/completed operations, broad form property damage, and
manufacturer's liability with broad form endorsement, with minimum primary
limits of $1,000,000 per occurrence and $2,000,000 aggregate covering claims
for bodily injury and/or death to persons and/or injury to property and property
damages arising out of the services or products covered under this Agreement,
and shall contain a waiver of subrogation by EFC's insurance carriers against
ISLANDS and ISLANDS's insurance carriers with respect to all obligations assumed
by EFC pursuant to this Agreement,
(ii) Workers' compensation insurance and employer's liability insurance
with minimum limits of $100,000 per employee and $1,000,000 per accident,
(iii) Automobile liability insurance with minimum limits of $1,000,000
combined single limits, such insurance to include coverage for owned, non-owned,
and hired vehicles.
(c) In addition to commercial general liability and automobile insurance
policies, EFC must maintain an umbrella policy with a limit of no less than
$10,000,000 per occurrence and aggregate. Each insurance policy required by this
Agreement shall contain provisions to the effect that the policy limits may not
be reduced, terms changed, or policy canceled with less than thirty (30) days
prior written notice provided to ISLANDS. The insurance required by this
Agreement shall be primary and non-contributing with respect to any other
insurance available to ISLANDS. EFC will provide a copy of any contract of
insurance required under this Agreement, upon request from ISLANDS.
15. CONFIDENTIALITY. In the course of the relationship between ISLANDS and
---------------
EFC, under this Agreement, both parties may be given, or have access to, non-
public confidential information concerning the other party's marketing or
operational policies, practices and future plans. Both Parties agree to protect
and maintain the confidentiality of each other's information and shall not
disclose or transmit such information to any third person for so long as the
information is not publicly disclosed.
16. ASSIGNMENT. The Agreement shall be binding upon and shall inure to the
----------
benefit of, the parties of this Agreement, provided, however, it shall not be
assigned by either ISLANDS or EFC without the prior written consent of the other
party, provided, consent shall not be unreasonably withheld.
17. DEFAULT AND TERMINATION.
-----------------------
(a) Event of Default by EFC:
(i) If EFC fails or refuses to comply with any of its obligations under
this Agreement, or,
(ii) If EFC seeks protection under the bankruptcy laws (other than as a
creditor) or any assignment is made for the benefit of creditors or a trustee is
appointed for all or any portion of such party's assets;
(b) Event of Default by ISLANDS:
(i) If ISLANDS fails or refuses to comply with any of its obligations
under this Agreement, or
(ii) If ISLANDS seeks protection under the bankruptcy laws (other than
as a creditor) or any assignment is made for the benefit of creditors or a
trustee is appointed for all or any portion of such party's assets.
In the Event of Default, the non-defaulting party may terminate this
Agreement upon ten (10) days prior written notice to the defaulting party and
this Agreement shall terminate in the event that the defaulting party has failed
to cure within the ten (10) day period after receipt of such notice. The failure
of the non-defaulting party to terminate the Agreement upon the
5
<PAGE>
occurrence of one or more of these events of default shall not constitute a
waiver or otherwise affect the right to terminate the Agreement as a result of a
continuing or subsequent failure or refusal to comply with any of such
obligations. Furthermore, failure by the non-defaulting party to exercise any of
its rights or remedies hereunder or insist on strict compliance by the
defaulting party with any of the terms of this Agreement shall not constitute a
waiver of any of the terms or conditions of this Agreement with respect to any
other or subsequent breach nor shall it constitute a waiver of its right at any
time thereafter to require strict compliance with the terms of this Agreement.
18. INSPECTIONS.
-----------
(a) EFC's product must comply with the inspection and test procedures
established and carried out by the United States Department of Agriculture
("USDA") and all applicable federal, state and local laws. In addition, at no
time will EFC's procedures and standards be less stringent than those set forth
in the document entitled Hazard Analysis Critical Control Points, Second
Edition, dated January 1995 and prepared by Midwest Portion Meats, Inc.,
otherwise known as a "HACCP program". Should the USDA, State or Local agencies
mandate pathogen testing procedures (i.e. - E. Coli, Salmonella, Listeria,
etc.), any expenses directly related to products sold to ISLANDS to implement
such procedures and/or requirements shall be paid by EFC up to $20,000 per
year. For any expenses directly related to products sold to ISLANDS, exceeding
$20,000 per year, ISLANDS agrees to pay a surcharge against the landed cost of
goods (LCG) of up to an additional $20,000 per year. Should any expenses exceed
the sum total of $40,000 per year, both parties agree to negotiate a resolution.
The surcharge shall be calculated by determining the annual expense exceeding
$20,000, up to $40,000, divided by the estimated annual volume sold (in pounds)
to determine a cents-per-pound rate to be added to LCG.
(b) Upon request, EFC will provide ISLANDS with copies of all inspection
reports and provide additional documentation to indicate compliance with this
paragraph.
(c) All products ordered hereunder, as well as the facility in which such
are manufactured, will be subject to inspection and testing by ISLANDS to the
extent practicable at all times and places, including the period of manufacture
and in any event prior to acceptance. EFC agrees to permit ISLANDS access to
EFC's facilities at all reasonable times and upon reasonable notice for such
inspection. EFC's product will be subject to final inspection and acceptance by
ISLANDS after delivery. It is expressly agreed that inspections and/or payments
prior to delivery will not constitute final acceptance. If the product does not
meet the specifications or otherwise conform with the requirements of any order
by ISLANDS or this Agreement, ISLANDS shall have the right to reject such
product.
19. RECALL. In the event it is deemed necessary by EFC to recall any quantity
------
of the product, from any restaurant of ISLANDS or from any consumer, either as a
result of failure of the product to satisfy the specifications, comply with any
warranties, or for any other reason bearing on quality and/or safety of the
product, EFC agrees to comply diligently with all product recall procedures
established by the U.S. Consumer Product Safety Commission. Furthermore, EFC
agrees to bear all costs and expenses incurred by it and/or ISLANDS in complying
with such recall procedures.
20. COMPLIANCE. EFC agrees that all food products including food articles,
----------
food ingredients and food packaging comprising the product or any part thereof
delivered, sold or transferred to ISLANDS hereunder (a) shall be in full
compliance with either the Federal Food, Drug and Cosmetic Act ("FDCA"), as
amended, or the rules and regulations promulgated from time to time by the USDA,
or any other applicable rule or regulation, as the case may be; (b) shall be
manufactured, stored and delivered in accordance with appropriate "Good
Manufacturing Practices" under the FDCA or comparable regulations of the USDA,
as applicable; (c) shall not be adulterated or misbranded within the meaning of
the FDCA or USDA, as applicable; (d) shall not be a food product which may not,
under the FDCA (or comparable regulations of the USDA), be introduced into
interstate commerce except as provided, therein; (e) shall comply with all
regulations, statutes, state or federal, U.S. or Canadian with respect to
nutritional labeling requirements, and (f) shall not be food product adulterated
or misbranded under any applicable provision of any state law or municipal
ordinance.
21. HARMFUL INGREDIENTS/DEFECTIVE DESIGN. Whenever EFC becomes aware that any
------------------------------------
ingredient or component of the product covered by this Agreement is or may
become harmful to persons or property, or that the design or construction of
6
<PAGE>
the product is defective in any manner which is or may become harmful to persons
or property, EFC shall immediately give notice thereof, including all relevant
information with respect thereto, to ISLANDS.
22. INDEPENDENT CONTRACTOR RELATIONSHIP. EFC acknowledges that it is an
-----------------------------------
independent contractor and is not an agent, partner, joint venturer nor employee
of ISLANDS. EFC shall have no authority to bind or otherwise obligate ISLANDS
in any manner nor shall EFC represent to anyone that it has a right to do so.
ISLANDS is not an agent, partner, joint venture, or employee of EFC, and ISLANDS
shall have no authority to bind or otherwise obligate EFC to any third party, or
make any contrary representation to anyone. ISLANDS further makes no
representations regarding the duration of this Agreement beyond the Term
contemplated herein, and EFC and ISLANDS acknowledge that such Term may be
abbreviated for Events of Default.
23. NO THIRD-PARTY BENEFICIARY. No persons other than the signatories to this
--------------------------
Agreement and their successors have enforceable rights under this Agreement.
24. APPLICABLE LAW. This Agreement and all of its provisions shall be
--------------
construed in accordance with, and governed by, the internal laws of the State of
California without regard to the conflicts of laws provisions or principles of
California law. Any legal action brought by EFC against ISLANDS based on,
arising out of or to enforce the Agreement shall be brought in a state court in
San Diego County or in the United States District Court for the Southern
District of California, and any legal action brought by ISLANDS against EFC
based on, arising out of or to enforce the Agreement shall be brought in a state
court in Los Angeles County or in the United States District Court for the
Central District of California (collectively, the "Designated Jurisdiction");
provided, however, that nothing herein shall bar either EFC or ISLANDS (a) from
asserting any cross-claim or third party claim against the other in any
proceeding in another jurisdiction in which EFC or ISLANDS are sued or joined by
a third party, or (b) from suing ISLANDS or EFC, as the case maybe, in another
jurisdiction having personal jurisdiction over ISLANDS or EFC if ISLANDS or EFC
also have a claim or cause of action arising out of the same transaction against
a third party who is not amenable to the personal jurisdiction of the court in
the Designated Jurisdiction. EFC and ISLANDS both agree to waive trial by jury
with respect to any claims, causes of actions, set-offs or defenses asserted by
either against the other; provided, however, that nothing herein shall bar
either EFC or ISLANDS from seeking trial by jury with regards to any claims,
causes of action, set-offs or defenses by or against any other person joined in
the lawsuit with EFC or ISLANDS, as the case may be.
25. TIME OF ESSENCE. Time is of the essence in each provision of the
---------------
Agreement in which a date or period of time is established for the performance
of any act.
26. NOTICE. All notices, requests, demands, and other communications given in
------
connection with this Agreement, shall be in writing and deemed to have been duly
given if delivered personally or mailed, by registered or certified mail
(return receipt requested), or by faxsimile if mailed 1st class on the same day
or sent via overnight mail delivery service with receipt and with postage
prepaid to the business address of either party as set forth below or to such
other persons or addresses as may be provided in writing given by either party
to this Agreement to the other party in the manner specified herein.
To EFC at: The Edward Fineman Company, Inc.
13215 Cambridge Street.
P. O. Box 3343
Santa Fe Springs, CA 90670
Attention: President
Fax: (310) 926-5113
To ISLANDS at: Islands Restaurants
115 South Acacia Avenue
P. O. Box 7007
Solana Beach, CA 92075-1803
Attention: President
Fax: (619) 481-0693
7
<PAGE>
27. ENTIRE AGREEMENT. All documents and exhibits attached hereto or referred
----------------
to herein, including the Manual and all exhibits attached thereto, constitute a
part of this Agreement. This Agreement contains all representations, warranties
and agreements made by the parties hereto relating to the subject matter hereof.
It is the intention of the parties to incorporate in this Agreement, their full
and complete understanding, and no amendment, modification or addition hereto
shall have effect or be binding unless it is in writing and signed by the
parties hereto.
28. TITLES AND REFERENCES. The titles to the paragraphs of this Agreement are
---------------------
for convenience only and are not a part of this Agreement and shall have no
effect upon the construction or interpretation of any part of this Agreement.
29. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
30. FURTHER ASSURANCES. The parties hereto, and each of them, agree to take
------------------
such further actions, and execute such additional documents, instruments and
other writings, as may reasonably be requested by the other party hereto in
order more fully to give effect to the intentions of the parties with respect to
the subject matter of this Agreement.
31. SEVERABILITY. The provisions of the Agreement are severable and the
------------
Agreement shall be interpreted and enforced as if all completely invalid or
unenforceable provisions were not contained in the Agreement, and partially
valid and enforceable provisions shall be enforced to the extent that they are
valid and enforceable.
32. SURVIVAL. Paragraphs 2 & 3 (Representations), 4 (Force Majeure), 11
--------
(Audits), 13 (Indemnity), 15 (Confidentiality), 19 (Recall), 24 (Applicable Law)
and 26 (Notice) shall survive termination or expiration of this Agreement and
be binding upon such party, its successors and assigns. Either party shall
notify the other party upon occurrence of a change of control of the company,
the sale of all or substantially all of the assets of the company, or a
corporate merger or consolidation.
IN WITNESS WHEREOF, the parties hereto, or their duly authorized agents, have
caused this Agreement to be executed as of the date first above written.
THE EDWARD FINEMAN COMPANY, INC. ISLANDS RESTAURANTS, INC.
by______________________________ by_____________________________________
Edward Fineman John M. Creed
President Chairman and Chief Executive Officer
8
<PAGE>
CHART HOUSE
ENTERPRISES, INC.
ANNUAL REPORT 1995
[ART]
<PAGE>
TO OUR SHAREHOLDERS:
Since we last reported to you, there have been a number of substantive changes
at Chart House. We consummated the sale of Paradise Bakery; signed an agreement
to sell a 75% interest in our Islands restaurants; recorded a write-down of $4.8
million relating to several underperforming assets; and brought in Harry Roberts
from Starbucks Coffee Company as President and Chief Operating Officer of Chart
House.
All this activity was the result of a close inspection of our business. The key
questions that surfaced were: where could we obtain the greatest return on
invested capital, and where should our efforts be directed as we plot a course
into the millenium? During this period of introspection, it became obvious that
a shift in thinking was required if we were to continue as a viable enterprise.
The competition had become too intense, the marketplace too demanding and the
options for investors too numerous.
We realized that we had lost focus and that many of our premier locations had
been compromised by time and hard use. Thus, the decision to sell off all but
our flagship division and concentrate on restoring it to its rightful place as
the preeminent dinner house in the country.
Our strategy has five major elements:
Revitalize the Assets: We intend to allocate the bulk of our excess cash to
restore and rejuvenate Chart House restaurants, not only to make them look
and feel current, but to ensure operational integrity as we raise the bar
on quality and expand the menu. The amount of capital necessary for this
four-year revitalization program is substantial. However, each dollar spent
will be subjected to our return on investment criteria. In addition, we
have scheduled principal reductions of our long-term debt beginning this
year so we will be enhancing the balance sheet as well as the facilities.
No new borrowings are anticipated to fund the revitalization program.
Focus on Food: Our new menu, which has been tested in several Chart Houses,
will make its debut in Cincinnati in mid-April. This menu utilizes time
tested Chart House entrees as a core, around which will evolve a continuing
flow of new appetizers, entrees, and desserts, offering the customer more
than one reason to frequent the Chart House. The response to this new food
direction has been positive. It elevates Chart House into its own niche as
a dining option. We no longer intend to be just a steak house or just a
seafood restaurant, but will hone our food skills so that we become "the"
choice when dining out.
2 Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report
<PAGE>
FOUR NEW "PASTA GRILL"
ENTREES, INCLUDING EAST
& WEST PRAWNS AND GARLIC
STEAK (PICTURED) WERE
DEVELOPED AND INTRODUCED
IN 1995. THEY WERE THE
LEADING EDGE OF A CHART
HOUSE FOOD REVOLUTION--A
CUSTOMER FOCUSED
REVITALIZATION PROGRAM
THAT BROUGHT EXCITING NEW
TASTES, A WIDER RANGE OF
PRICES AND CONTEMPORARY
APPEAL TO THE CHART HOUSE
MENU.
[PHOTO OF - PASTA]
3
<PAGE>
Market Chart House Restaurants: The company has never been inclined to
consistently spend capital on marketing simply because we didn't have to.
But the game has changed and the company can no longer ignore the need to
keep the Chart House "top of mind."
To this end, we have allocated 2% of sales per year to begin the process.
The Aloha Club, our frequent diner program, is central to the effort. That
coupled with in-unit promotions and local/regional advertising campaigns
will comprise our outreach as we strive to become a market-driven
organization.
Reduce Overhead: In light of the disposition of Islands and Paradise Bakery
it becomes imperative that we reduce SG&A expenses. The process has begun
and will be complete by the end of 1997. Our target is to reduce SG&A below
8% of revenues.
Strengthen Management: The hiring of Harry Roberts as the President and
Chief Operating Officer of the company addresses two issues: First, we have
placed a proven marketer at the operating helm and introduced a different
point of view from outside the company. Second, Mr. Roberts' appointment,
plus the promotion of Bill Kuntz to Executive Vice President, directly
addresses the issue of CEO succession.
The intended result of these actions is to increase the company's return on
invested capital. This will be accomplished by increasing our sales through
marketing, product development and modernizing our facilities, and building at
least one new restaurant per year, while continuing to evaluate our existing
restaurant base and prune as appropriate. In addition, we have applied the
strategic discipline of formula investing so that each dollar of invested
capital provides a fair return. We are currently generating a 6% ROIC and our
goal is to significantly increase this over the next five years.
I believe we have taken bold steps to reorganize, rejuvenate and revolutionize
the Chart House. The desired outcome will not be achieved in a fortnight and
1996 will be a transition year. Our near-term results may suffer as we implement
our strategy. However, shareholders should expect, nay, demand superior returns
in the ensuing years.
Sincerely,
/s/ John M. Creed
Chairman and CEO
4 Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report
<PAGE>
[PHOTO OF - DESSERTS]
THE MENU
REVITALIZATION
INCLUDED A SERIES OF
NEW DESSERTS. BY
LATE 1995 THE CHART
HOUSE SIGNATURE MUD
PIE WAS SHARING
"SMALL INDULGENCE"
SPOTLIGHT WITH SUCH
ITEMS AS CREME
BRULEE AND TIRAMISU.
THE DESSERT PROGRAM
NOT ONLY ADDED
ENJOYMENT AND
SOPHISTICATION TO
THE DINING
EXPERIENCE, BUT
PROMISED HIGHER
CHECK AVERAGES AS
WELL.
5
<PAGE>
FOOD BECAME THE
CHART HOUSE PASSION
IN 1995, BUT THE
FACILITIES UPGRADE
PROGRAM WAS A
CRITICAL ELEMENT OF
THE REVITILIZATION
PACKAGE. THE
NEWLY-SPARKLING
CARDIFF CHART HOUSE
WAS ONLY THE LATEST
IN AN ONGOING SERIES
OF REMODELS DESIGNED
TO MAKE DINING AT
CHART HOUSE A
WARMER, MORE
SATISFYING, AND
TRULY CONTEMPORARY
DINING EXPERIENCE.
[PHOTO OF - 2-PAGE PHOTO OF CARDIFF INTERIOR (LEFT)]
6
<PAGE>
[PHOTO OF - CARDIFF INTERIOR]
7
<PAGE>
Blank
8
<PAGE>
FINANCIALS
About Our Company........................................10
Management's Discussion and Analysis.....................11
Selected Financial Data..................................14
Consolidated Balance Sheets..............................15
Consolidated Statements of Income........................16
Consolidated Statements of Stockholders' Equity..........16
Consolidated Statements of Cash Flows....................17
Notes to Consolidated Financial Statements...............18
Report of Independent Public Accountants.................24
Chart House Enterprises, Inc & Subsidiaries / 1995 Annual Report 9
<PAGE>
ABOUT OUR COMPANY
Chart House Enterprises, Inc. is a publicly held, New York Stock Exchange
listed company comprised of two operating divisions, Chart House and Islands.
The Chart House division operates 63 Chart House restaurants in 21 states,
Puerto Rico and the U.S. Virgin Islands. Chart House also operates Peohe's
restaurant and Solana Beach Baking Company, both located in California. The
Chart House division is the largest of our operations, representing 85% of 1995
revenues.
Chart House restaurants are full-service, casual dinner houses with a menu
featuring fresh fish, steaks, prime rib, seafood, pasta dishes and chicken, and
as much salad and bread as the customer desires. Many of the Chart House
restaurants feature an elaborate salad bar and some Chart Houses have seafood
bars which offer various appetizers. The menu is offered in architecturally or
historically unique buildings located in a variety of settings, including
lakeshores, mountains and seacoasts.
One Chart House, which opened in 1994 in Weehawken, New Jersey, is being
operated under a management agreement with the owner of the property.
A new Chart House in Newport, Kentucky is scheduled to open in April 1996.
No new restaurants were opened in 1995, and three were closed--the Chart Houses
in Idyllwild, California and St. Croix, U.S.Virgin Islands, and the Quahogs
restaurant in Warwick,Rhode Island.
Peohe's is an upscale seafood restaurant located in Coronado, California.
Chart House also operates Solana Beach Baking Company, a wholesale bakery
facility in Carlsbad, California, which supplies bread and other bakery goods to
Chart House restaurants. It also supplies muffins, croissants, cookies and other
bakery goods to food service distributors and other restaurant and retail
accounts.
The Islands division is operated by the Company's subsidiary, Islands
Restaurants, Inc., which has exclusive rights to develop and operate Islands
restaurants under a 40-year license agreement granted by the owners of the
Islands concept. As licensee, Islands pays royalties of 2% of restaurant sales.
There are currently 17 company-owned Islands restaurants. The Company also
manages 15 Islands restaurants owned by the licensor.
Islands are mid-priced, "gourmet" burger restaurants with a tropical theme,
which also offer chicken sandwiches, soft tacos, salads and unique exotic
beverages.
Islands opened seven restaurants in 1995, four in California, two in
Florida and one in Arizona. One Islands is currently scheduled to open in 1996.
The company entered into an agreement in March 1996 to sell the Islands
restaurant operations to the licensor of the concept. The transaction is
expected to close near the end of April 1996.
[The following table was presented as a bar graph in the printed document]
REVENUES
(Millions)
1991 ................... 161.9
1992 ................... 158.5
1993 ................... 157.1
1994 ................... 174.9
1995 ................... 179.2
[The following table was presented as a bar graph in the printed document]
NET INCOME
(Millions)
1991 ................... 4.4
1992 ................... 0.3
1993 ................... 4.0
1994 ................... 4.3
1995 ................... 2.7
[The following table was presented as a bar graph in the printed document]
STOCKHOLDERS' EQUITY (END OF YEAR)
(Millions)
1991 ................... 65.0
1992 ................... 65.5
1993 ................... 69.6
1994 ................... 74.0
1995 ................... 76.7
10 Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table presents the results of operations for each of the
three years in the period ended December 31, 1995. The dollar amounts are in
thousands.
<TABLE>
<CAPTION>
1995 1994 1993
-------------------- ------------------- --------------------
Amount % Amount % Amount %
--------- --- --------- --- --------- ---
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 179,155 100.0 $ 174,940 100.0 $ 157,137 100.0
--------- ----- --------- ----- --------- -----
Operating Expenses:
Cost of Food and Supplies 51,891 29.0 52,121 29.8 47,011 29.9
Payroll and Related Taxes 48,583 27.1 47,239 27.0 42,175 26.8
Other Operating Costs 42,467 23.7 38,511 22.0 34,511 22.0
Depreciation and Amortization 10,697 6.0 9,872 5.7 9,395 6.0
Restructuring Charges 4,853 2.7 -- -- -- --
--------- ----- --------- ----- --------- -----
Total Operating Expenses 158,491 88.5 147,743 84.5 133,092 84.7
--------- ----- --------- ----- --------- -----
Income from Restaurant Operations 20,664 11.5 27,197 15.5 24,045 15.3
Selling, General and Administrative Expenses 15,286 8.5 16,072 9.2 11,644 7.4
Interest Expense, Net 4,811 2.7 4,527 2.6 5,174 3.3
Other Income-Gain on Sale of Subsidiary (1,855) (1.1) -- -- -- --
--------- --- --------- --- --------- ---
Income Before Income Taxes and
Extraordinary Item 2,422 1.4 6,598 3.7 7,227 4.6
Provision (Benefit) for Income Taxes (241) (.1) 2,312 1.3 3,080 2.0
--------- ----- --------- ----- --------- -----
Income Before Extraordinary Item 2,663 1.5 4,286 2.4 4,147 2.6
Extraordinary Item, Net -- -- -- -- (172) (.1)
--------- ----- --------- ----- --------- -----
Net Income $ 2,663 1.5 $ 4,286 2.4 $ 3,975 2.5
========= ===== ========= ===== ========= =====
</TABLE>
- --------------------------------------------------------------------------------
Management believes that the most meaningful approach to analyzing
operations is through margin analysis which requires critically reviewing the
relationships that certain costs and expenses bear to Revenues. Accordingly, the
discussion below follows this approach.
- --------------------------------------------------------------------------------
1995 COMPARED TO 1994
Revenues increased by $4,215,000 from $174,940,000 to $179,155,000.
Newly-opened Islands restaurants accounted for an increase in Revenues of
$9,115,000. The Company's wholesale bakery increased its sales by $2,030,000
over 1994, due primarily from the addition of the Starbucks Coffee Company
retail account. The sale of the Cork 'N Cleaver restaurants at the end of 1994
accounted for a decrease in Revenues of $3,123,000. Comparable restaurant sales
(sales at restaurants open the entire period of both years) fell by
approximately $3,500,000, or 2.2% from the previous year. The decrease is
primarily the result of decreases in customer counts at Chart House and Islands
restaurants, offset somewhat by higher check averages at the restaurants. Menu
price increases for 1995 averaged approximately 1% at Chart House restaurants
and 2% at Islands.
Restaurant operating margins (Income from Restaurant Operations as a
percentage of Revenues), excluding Restructuring Charges, were 15.5% in 1994,
and decreased to 14.2% in 1995. Generally, weaker restaurant sales in 1995
placed pressure on restaurant operating margins. Cost of Food and Supplies
decreased as a percentage of Revenues mainly because of lower costs of beef and
chicken products and improved control of food costs at Islands restaurants.
Payroll and Related Taxes as a percentage of Revenues remained, for the most
part, even with the 1994 level, as management continued its efforts to control
hourly employee labor costs at the restaurants despite the softness in 1995
sales. However, Other Operating Costs, which include expenses for rent,
maintenance, utilities, tableware, property taxes, insurance and other services
and costs, increased as a percentage of Revenues in 1995. The higher percentage
is primarily the result of increased direct promotional costs of redeeming Aloha
Club awards at the Chart House restaurants, an increase in insurance expenses,
and new Islands restaurants, which have had higher occupancy and other operating
costs as a percentage of Revenues. Depreciation and Amortization increased
slightly as a percentage of Revenues because of the addition of several new
Islands restaurants, which generally have shorter asset lives and higher
relative asset costs than the older base of Chart House restaurants.
Restructuring Charges of $4,853,000 included asset write-downs and other
costs associated with the decision to dispose of three Chart House restaurants
and two former restaurant properties, as well as employee severance costs. The
restructuring charges were an outgrowth of a strategic plan adopted by the
Company to refocus on its core business--Chart House restaurants--through
revitalization of facilities, enhancement of menu offerings and increased
marketing efforts. The strategic plan includes building new Chart House
restaurants at a moderate pace and selectively disposing of restaurants that do
not meet performance criteria. As part of the plan, the Company sold the
Paradise Bakery division (see below) and has signed an agreement to sell the
Islands restaurant operations. The Paradise Bakery division in 1995 had Revenues
of $4,700,000 and Income Before Income Taxes of $700,000. The Islands restaurant
division, which contributed Revenues of $23,225,000 in 1995 and $15,100,000 in
1994, had not provided a significant amount of earnings for the
Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report 11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Company for the past two years. The decision to sell Islands is largely the
result of the Company's dissatisfaction with overall returns on its investment
in Islands that did not meet expectations.
Selling, General and Administrative Expenses as a percentage of Revenues
decreased from 9.2% in 1994 to 8.5% in 1995. Marketing expenditures for the
Chart House Aloha Club were lower in 1995 than in 1994, as there were
significant start up costs in 1994 for the Aloha Club, and costs for redeeming
award certificates were shifted to restaurant operations in 1995. In addition,
the Company reduced personnel and overhead costs at the Islands organization in
1995. Partially offsetting these decreases was an increase in consulting fees
for purposes of strategic planning and related matters, food development,
concept design and compensation planning. There were unusual credit items in
both years, which reduced Selling, General and Administrative Expenses, as
follows: In 1994, the Company recorded the final settlement of an insurance
claim in the amount of $300,000; and, in 1995, the Company recognized income of
$185,000 from non-refundable deposits (net of legal costs incurred) received
from a party who was unsuccessful in acquiring Paradise Bakery, Inc.
Interest Expense increased by $284,000 in 1995 due primarily to higher
prevailing interest rates under the revolving credit agreement in 1995.
Other Income in 1995 of $1,855,000 represents the gain on the sale of the
Company's wholly-owned subsidiary, Paradise Bakery, Inc.
The Provision for Income Taxes for 1994 reflected an effective rate of 35%.
The effective rate recorded through the first nine months of 1995 was 31%. The
rate decrease resulted primarily from an estimated increase in the amount of
federal tax credit for employment-related FICA taxes paid on tip earnings
reported by the Company's employees. In the fourth quarter of 1995, additional
tax credits in the amount of $1.0 million related to those FICA taxes were
recognized, thereby creating a benefit for income taxes for the year of 1995.
The additional credits were determined based on a year-end analysis and revision
of previous estimates. The Company anticipates its effective tax rate for 1996
will be around 30%.
As a result of the foregoing, Net Income decreased by $1,623,000 from
$4,286,000 in 1994 to $2,663,000 in 1995.
1994 Compared to 1993
Revenues increased by $17,803,000 from $157,137,000 in 1993 to $174,940,000
in 1994. Comparable restaurant sales (sales at restaurants open the entire
period of both years) increased by $7,177,000, or 5%, due to a combination of
increased customer counts, higher check averages and a 1% selective menu price
increase at the Chart House restaurants. Newly-opened Islands restaurants
accounted for an increase in Revenues of $8,170,000. Also, the Company earned
$1,720,000 in management fees in 1994 under two management agreements covering
15 licensor-owned Islands restaurants and one Chart House restaurant.
Restaurant operating margins (Income from Restaurant Operations as a
percentage of Revenues), which were 15.3% in 1993, increased slightly to 15.5%
in 1994. Overall, 1994 margins benefited from the addition of management fee
revenue, which accounted for an increase in margins of .7%. The effect on Cost
of Food and Supplies as a percentage of Revenues of increases in the cost of
food products, especially seafood, in 1994 was largely offset by the selective
menu price increases. Payroll and Related Taxes as a percentage of Revenues
increased over 1993 from an increase in FICA taxes on employee tip income due to
higher tip reporting by restaurant employees. Amortization of pre-opening costs,
which is included in Other Operating Costs, was higher in 1994 due to the number
of new Islands restaurants opened in late-1993 and 1994. Other major items
included in Other Operating Costs, such as rent, maintenance, utilities,
tableware, property taxes, insurance and other services, in total were unchanged
as a percentage of Revenues. The decrease in Depreciation and Amortization as a
percentage of Revenues is the result of lower depreciation at Chart House
restaurants in 1994, as a significant amount of restaurant equipment items,
acquired at the time of the Company's 1985 leveraged buyout of Chart House,
became fully depreciated in mid-1993.
Selling, General and Administrative Expenses as a percentage of Revenues
increased from 7.4% in 1993 to 9.2% in 1994. The Company's marketing
expenditures increased by $800,000 over last year. Costs in 1993 were limited to
a nationwide Chart House print advertising program that ran from July through
December 1993. In 1994, the Company increased marketing expenditures to develop,
promote and support the Chart House Aloha Club, a frequent-diner program that
has enrolled approximately 275,000 members. Also, Selling, General and
Administrative Expenses increased by approximately $900,000 from the addition of
operating and administrative personnel to supervise Islands restaurants under
the management agreement and to develop company-owned Islands. In addition, the
1993 year benefited from income recognition on insurance proceeds related to two
property damage claims totalling $1,450,000. The 1994 year benefited by only
$300,000 from the final settlement of one of the claims.
Interest Expense decreased by $647,000 in 1994. Interest costs decreased by
approximately $1,200,000 because the company refinanced its $19,000,000 senior
note which lowered the interest rate from 13% to 6.69%. Increases in interest
resulted from an increase in borrowings to fund the expansion of Islands
restaurants and higher prevailing interest rates under the revolving credit
agreement in 1994.
The Provision for Income Taxes reflects an effective rate of 35% for 1994,
compared to 43% for 1993. The decrease in the rate is primarily the result of
the favorable impact from targeted jobs tax credits on qualified employees and
from a new federal tax credit for employment-related FICA taxes paid on tip
earnings reported by the Company's employees.
The Extraordinary Item, net of taxes, in 1993 represents a premium paid on
the early retirement of the $19,000,000 senior note.
As a result of the foregoing, Net Income increased by $311,000 from
$3,975,000 in 1993 to $4,286,000 in 1994.
Liquidity and Capital Resources
The Company requires capital principally for the acquisition and
construction of new restaurants and remodeling and refurbishing of existing
restaurants. The Company's primary sources of working capital are cash flows
from operations and borrowings under a $40,000,000 revolving credit agreement
with interest at the agent bank's base rate. Any excess cash flows from
operating and investing activities are used primarily to reduce revolving credit
debt. In 1995, the Company decreased its revolving credit debt by $6,726,000,
primarily due to the cash proceeds of $5,375,000 received from the sale of
Paradise Bakery, Inc. in December 1995. Capital expenditures, which totalled
12 Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
approximately $17.4 million for 1995, were essentially covered by cash flows
from operations. At December 31, 1995, the Company had outstanding borrowings of
$15,274,000 under the revolving credit agreement.
Capital expenditure activities in 1995 were focused substantially on
Islands restaurants. The Company opened seven Islands restaurants (three in the
fourth quarter of 1995), two in Florida, four in California and one in Arizona.
Also included were expenditures for remodels of certain Chart House restaurants
and one Chart House (in Newport, Kentucky) and one Islands (in Arizona) under
construction at the end of the year. The two restaurants under construction are
both scheduled to open in April 1996.
The Company intends to sell its Islands restaurant operations. Capital
expenditures in 1996 for new Islands restaurants will be curtailed and limited
to amounts necessary to remain in compliance with the license and development
agreement, and eliminated entirely upon consummation of the proposed sale. Under
the terms of the agreement, the Company is required to open three additional
restaurants by the end of 1996. The new strategic plan allocates more capital
resources to revitalizing the existing base of Chart House restaurants as well
as selective development of new Chart House restaurants. The Company plans to
invest a significant amount of capital over the next three to four years under
the revitalization program, initially targeting several restaurants for remodel
in 1996 at an average cost of $600,000. Projected total capital expenditures for
1996 are $11.0 million, which includes expenditures for two new Islands
restaurants which will not be required if the Islands restaurant operations are
sold. Management believes that cash flows from operations will be adequate to
fund capital expenditure activities in 1996. Borrowings under the revolving
credit agreement are expected to meet any other funding requirements not met by
cash flows from operations.
The first principal installment of $3,000,000 under the Company's 10.4%
Senior Secured Note will become due in July 1996, and the first principal
installment of $3,000,000 under the 6.69% Senior Secured Note will become due in
January 1997.
EFFECT OF INFLATION; OTHER COST INCREASES
The Company generally has been able to increase menu prices or make other
adjustments to substantially offset increases in its operating costs resulting
from inflation. In 1995, the Company implemented selective menu price increases
of approximately 1% in the Chart House restaurants to counter increases in costs
of certain seafood products and approximately 2% in Islands restaurants. It is
anticipated that menu prices for 1996 will be not be raised significantly.
Although management does not anticipate that inflation will have a material
effect on income from restaurant operations in 1996, future increases in labor,
food or other operating costs could still adversely affect the Company's
operating results.
The Company's strategic plan calls for the introduction of new menu items
and increased marketing activities at the restaurants, which most likely will
result initially in higher labor and marketing costs.
Various Federal and state legislative and administrative proposals have
been introduced or are contemplated that would increase the minimum hourly wage
required to be paid to employees. Although management cannot predict the outcome
of these proposals, if ultimately enacted, one or more of these measures could
significantly increase the Company's labor costs.
NEW ACCOUNTING PRONOUNCEMENTS
In March, 1995, the Financial Accounting Standards Board issued Statement
No. 121 ("Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of") on accounting for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to assets to be
held and used. The statement also establishes accounting standards for long-
lived assets and certain identifiable intangibles to be disposed of. In
addition, in 1995 Statement No. 123 ("Accounting for Stock-Based Compensation")
was issued. Both statements are effective for companies with fiscal years
beginning after December 15, 1995. Management has not yet determined what
impact, if any, the adoption of these standards will have on the Company's
financial statements or related disclosures thereto.
SEASONALITY
Historically, the Company's business is seasonal in nature with Revenues
and Net Income for the second and third quarters greater than in the first and
fourth quarters.
In 1996, the Company switched from a calendar-based fiscal year to a
52/53-week fiscal year. This reporting method is favored by many companies in
the restaurant and retail industries and will improve future year-to-year
comparisons of operating results. In 1996, the fiscal year will consist of four
equal 13-week quarterly periods ending April 1, July 1, September 30 and
December 30. The Company does not anticipate that this change will have material
effect on reported results for the year. However, the fourth fiscal quarter of
1996 may be slightly impacted, as the day of December 31, which historically is
the highest sales day for the Chart House restaurants, will fall into the first
fiscal quarter of 1997.
RECENT RESULTS AND TRENDS
The Company reported weak operating results in the fourth quarter of 1995
as sales softened overall at the Company's restaurants. Continuing the trend,
comparable restaurant sales at Chart House restaurants for the first two months
of the new year were down by approximately 4.4%. The severe weather in the
northeastern part of the country has had a significant negative impact on these
results.
The Company does not expect the sale of Paradise Bakery, Inc. and the
planned sale of the Islands restaurant operations to have a combined material
dilutive effect on 1996 net income.
Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report 13
<PAGE>
SELECTED FINANCIAL DATA
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Income Statement Data: 1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues $ 179,155 $ 174,940 $ 157,137 $ 158,500 $ 161,897
Restructuring Charges (1) 4,853 -- -- 4,129 --
Income From Restaurant Operations 20,664 27,197 24,045 16,967 24,898
Interest Expense, Net 4,811 4,527 5,174 5,302 6,255
Other Income-Gain on Sale of Subsidiary (2) (1,855) -- -- -- --
Income Before Income Taxes
and Extraordinary Item 2,422 6,598 7,227 741 7,382
Income Before Extraordinary Item 2,663 4,286 4,147 293 4,421
Extraordinary Item (3) -- -- (172) -- --
Net Income 2,663 4,286 3,975 293 4,421
Income Per Common Share Before
Extraordinary Item .32 .52 .50 .04 .54
Extraordinary Item -- -- (.02) -- --
Net Income Per Common Share $ .32 $ .52 $ .48 $ .04 $ .54
Weighted Average Shares Outstanding 8,277 8,292 8,285 8,219 8,204
Balance Sheet Data (End of Period):
Total Assets $ 151,875 $ 156,709 $ 147,008 $ 137,593 $ 138,870
Long-Term Indebtedness 51,694 61,982 56,209 48,012 53,706
Stockholders' Equity 76,652 73,958 69,582 65,522 65,020
</TABLE>
- --------------------------------------------------------------------------------
(1) Restructuring Charges in 1995 include amounts to write down assets to their
estimated net realizable value and estimated costs related to ceasing
operations and selling the restaurants, as well as employee severance
costs. Restructuring charges in 1992 were primarily the result of
terminating development of a new restaurant concept.
(2) Other Income in 1995 represents the gain recorded on the sale of the
Company's wholly-owned subsidiary, Paradise Bakery, Inc.
(3) Extraordinary Item in 1993 represents a prepayment penalty on early
retirement of debt in the amount of $300,000, net of the related income tax
benefit of $128,000.
14 Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report
<PAGE>
CONSOLIDATED BALANCE SHEETS
As of December 31, 1995 and 1994
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Assets 1995 1994
------- -------
<S> <C> <C>
Current Assets:
Cash $ 245 $ 245
Accounts Receivable 2,402 3,722
Inventories 3,900 3,992
Prepaid Expenses and Other Current Assets 1,592 1,310
-------- --------
Total Current Assets 8,139 9,269
-------- --------
Property and Equipment, at Cost:
Land 7,655 9,400
Buildings 27,871 29,742
Equipment 46,376 43,224
Leasehold Interests and Improvements 85,225 79,332
Construction in Progress 3,813 3,752
-------- --------
170,940 165,450
Less: Accumulated Depreciation and Amortization 52,924 48,276
-------- --------
Net Property and Equipment 118,016 117,174
-------- --------
Leased Property under Capital Leases,
Less Accumulated Amortization
of $4,051 in 1995 and $4,702 in 1994 4,456 5,285
-------- --------
Other Assets and Goodwill, Net 21,264 24,981
-------- --------
$151,875 $156,709
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Current Portion of Long-Term Debt $ 3,000 $ --
Current Portion of Obligations under Capital Leases 401 646
Accounts Payable 4,240 3,226
Accrued Liabilities 11,370 10,509
-------- --------
Total Current Liabilities 19,011 14,381
-------- --------
Long-Term Debt 46,274 56,000
-------- --------
Long-Term Obligations under Capital Leases 5,420 5,982
-------- --------
Deferred Income Taxes 4,518 6,388
-------- --------
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, $1.00 par value, Authorized
10,000,000 shares; none outstanding -- --
Common Stock, $.01 par value, Authorized
30,000,000 shares; 8,216,123 shares outstanding
in 1995 and 8,196,213 in 1994 82 82
Additional Paid-In Capital 42,067 42,036
Retained Earnings 34,503 31,840
-------- --------
Total Stockholders' Equity 76,652 73,958
-------- --------
$151,875 $156,709
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report 15
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1995, 1994 and 1993
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Revenues $ 179,155 $ 174,940 $ 157,137
--------- --------- ---------
Operating Expenses:
Cost of Food and Supplies 51,891 52,121 47,011
Payroll and Related Taxes 48,583 47,239 42,175
Other Operating Costs 42,467 38,511 34,511
Depreciation and Amortization 10,697 9,872 9,395
Restructuring Charges 4,853 -- --
--------- --------- ---------
Total Operating Expenses 158,491 147,743 133,092
--------- --------- ---------
Income from Restaurant Operations 20,664 27,197 24,045
Selling, General and Administrative Expenses 15,286 16,072 11,644
Interest Expense, Net 4,811 4,527 5,174
Other Income--Gain on Sale of Subsidiary (1,855) -- --
--------- --------- ---------
Income Before Income Taxes and Extraordinary Item 2,422 6,598 7,227
Provision (Benefit) for Income Taxes (241) 2,312 3,080
--------- --------- ---------
Income Before Extraordinary Item 2,663 4,286 4,147
Extraordinary Item, Loss from Early Retirement of Debt,
Net of Income Tax Benefit of $128 -- -- (172)
--------- --------- ---------
Net Income $ 2,663 $ 4,286 $ 3,975
========= ========= =========
Income Per Common Share Before Extraordinary Item $ .32 $ .52 $ .50
Extraordinary Item -- -- (.02)
--------- --------- ---------
Net Income Per Common Share $ .32 $ .52 $ .48
========= ========= =========
Weighted Average Shares Outstanding 8,277 8,292 8,285
========= ========= =========
</TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1995, 1994 and 1993
(In Thousands)
<TABLE>
<CAPTION>
Common Stock Additional Total
------------------------ Paid-In Retained Stockholders'
Shares Amount Capital Earnings Equity
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 8,086 $ ,081 $41,862 $23,579 $65,522
Exercise of Stock Options 54 -- 85 -- 85
Net Income -- -- -- 3,975 3,975
------- ------- ------- ------- -------
Balance, December 31, 1993 8,140 ,081 41,947 27,554 69,582
Exercise of Stock Options 56 1 89 -- 90
Net Income -- -- -- 4,286 4,286
------- ------- ------- ------- -------
Balance, December 31, 1994 8,196 82 42,036 31,840 73,958
Exercise of Stock Options 20 -- 31 -- 31
Net Income -- -- -- 2,663 2,663
------- ------- ------- ------- -------
Balance, December 31, 1995 8,216 $ 82 $42,067 $34,503 $76,652
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
16 Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1995, 1994 and 1993
(In Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 2,663 $ 4,286 $ 3,975
Adjustments to Reconcile Net Income to Cash Flows
Provided by Operating Activities:
Depreciation and Amortization 10,697 9,872 9,395
Deferred Income Taxes (1,957) 117 174
Loss on Retirement of Assets 469 379 286
Write-Down of Assets to Net Realizable Value 4,443 -- --
Gain on Sale of Subsidiary (1,855) -- --
Loss from Early Retirement of Debt -- -- 172
Change in Net Current Liabilities 2,745 (1,194) 684
-------- -------- --------
Cash Provided by Operating Activities 17,205 13,460 14,686
-------- -------- --------
Cash Flows from Investing Activities:
Expenditures for Property and Equipment (17,351) (18,994) (13,407)
Purchase of Territorial Rights -- -- (4,000)
Reductions (Additions) to Other Assets and Goodwill 344 (1,498) (638)
Proceeds from Sale of Subsidiary 5,375 -- --
Proceeds from Sale/Leaseback of Asset 905 -- --
Net Proceeds from Disposition of Assets 441 870 125
Payments Received on Notes 416 281 406
-------- -------- --------
Cash Used in Investing Activities (9,870) (19,341) (17,514)
-------- -------- --------
Cash Flows from Financing Activities:
Principal Payments of Long-Term Obligations under Capital Leases (640) (782) (760)
Net Borrowings (Payments) under Revolving Credit Agreement (6,726) 6,600 3,800
Proceeds from Long-Term Debt Borrowings -- -- 19,000
Payments of Long-Term Debt -- -- (19,000)
Prepayment Premium on Long-Term Debt -- -- (300)
Proceeds from Issuance of Common Stock on Exercise of Options 31 90 85
-------- -------- --------
Cash Provided by (Used in) Financing Activities (7,335) 5,908 2,825
-------- -------- --------
Increase (Decrease) in Cash -- 27 (3)
Cash, Beginning of Year 245 218 221
-------- -------- --------
Cash, End of Year $ 245 $ 245 $ 218
======== ======== ========
The Change in Net Current Liabilities is Comprised of the Following:
Decrease (Increase) in Accounts Receivable $ 980 $ (619) $ (919)
Decrease (Increase) in Inventories (103) (515) 1,329
Decrease (Increase) in Prepaid Expenses and Other Current Assets (292) 365 (769)
Increase (Decrease) in Accounts Payable 972 (995) 1,285
Increase (Decrease) in Accrued Liabilities 1,188 570 (242)
-------- -------- --------
Change in Net Current Liabilities $ 2,745 $ (1,194) $ 684
======== ======== ========
Supplemental Cash Flow Disclosures:
Cash Paid During the Year For:
Interest (Net of Amount Capitalized) $ 4,923 $ 3,946 $ 5,347
Income Taxes $ 1,505 $ 2,303 $ 2,711
Non-Cash Investing and Financing Activities:
Notes Receivable from Sale of Subsidiary and Property $ 1,350 $ -- $ 403
Capitalized Lease Obligations Incurred for Property
Additions and Acquisitions $ -- $ -- $ 1,276
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report 17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) NATURE OF OPERATIONS AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Chart House Enterprises, Inc. and its subsidiaries, all of which are
wholly-owned (hereinafter referred to as the "Company"). All significant
intercompany balances and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In 1996, the Company will switch from a calendar-based fiscal year to a
52/53-week fiscal year. This reporting method, which is favored by many
companies in the restaurant and other retail industries, is intended to provide
the Company more meaningful comparisons of operating results as well as bring
about operational and administrative efficiencies. In 1996, the fiscal year will
consist of four equal 13-week quarterly periods ending April 1, July 1,
September 30 and December 30.
NATURE OF OPERATIONS
The Company is engaged primarily in the restaurant business. At December
31, 1995, the Company operated 81 restaurants, including 63 Chart Houses, 17
Islands and one Peohe's. The Company also operates a wholesale bakery. In
addition, the Company has exclusive rights to develop and operate Islands
restaurants under a license agreement granted by the owner of the Islands
concept and manages 15 Islands restaurants owned by the licensor.
The Company operates restaurants in 22 states, Puerto Rico and the U.S.
Virgin Islands, with a concentration of operations on the east and west coasts.
INVENTORIES
Inventories are priced at the lower of cost (first-in, first-out) or
market, and consist of the following at December 31, 1995 and 1994 (in
thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Food and Non-Alcoholic Beverages $1,388 $1,463
Alcoholic Beverages 1,223 1,135
Operating Supplies 1,289 1,394
------ ------
$3,900 $3,992
====== ======
</TABLE>
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets include, among other things,
deferred restaurant pre-opening costs which are amortized over a period of
twelve months from the opening dates of the respective restaurants. Pre-opening
costs consist of hiring and training-related expenses and other direct costs
associated with opening a new restaurant. Deferred pre-opening costs amounted to
$681,000 and $487,000 at December 31, 1995 and 1994, respectively. Amortization
of deferred pre-opening costs for the years ended December 31, 1995, 1994 and
1993 was $921,000, $1,060,000 and $486,000, respectively.
PROPERTY AND EQUIPMENT AND LEASED PROPERTY
Depreciation and amortization are recorded for financial reporting purposes
using the straight-line method over the estimated useful lives of the assets.
Leasehold interests and improvements and leased property are amortized over the
shorter of the lease term or the asset life. The average estimated depreciable
lives for financial reporting purposes are 30 years for buildings, 22 years for
leasehold interests and improvements and leased property, and nine years for
equipment.
Maintenance, repairs and minor purchases are expensed as incurred. Major
purchases of equipment and facilities, and major replacements and improvements
are capitalized. When assets are sold or otherwise disposed of, the cost and
related accumulated depreciation and amortization are removed from the accounts
and the resulting gains or losses are reflected in the accompanying consolidated
statements of income.
OTHER ASSETS AND GOODWILL
Other assets and goodwill include costs of liquor licenses of $1,067,000
and $1,019,000 at December 31, 1995 and 1994, respectively, which are not being
amortized because they have undefined lives. Islands territorial rights were
$3,800,000 at December 31, 1995 and $3,900,000 at December 31, 1994, which are
being amortized over the 40 year term of the related license agreement (see Note
2). Goodwill was $12,895,000 and $14,916,000 at December 31, 1995 and 1994,
respectively, net of accumulated amortization of $4,310,000 and $4,331,000,
respectively. The goodwill is being amortized using the straight-line method
over 40 years. The Company evaluates goodwill for impairment on an ongoing
basis.
Other assets and goodwill at December 31, 1995 and 1994 also include
reimbursable amounts of $896,000 and $1,469,000, respectively, related to
pre-opening construction, fixturization, inventories and operating costs for the
Chart House restaurant in Weehawken, New Jersey. The restaurant opened in August
1994 and is being operated under a management agreement with the owner of the
property. The reimbursable amounts are to be paid back to the Company from
current and future operating cash flows of the restaurant, as defined in the
agreement.
FEES AND ROYALTIES
The Company recognized initial franchise fees as income on the date a
franchised Paradise Bakery commenced operations, at which time the Company had
substantially performed its obligations relating to such fees. Initial franchise
fees included in revenues for the years ended December 31, 1995, 1994 and 1993
were $84,000, $66,000 and $122,000, respectively. Royalties from franchise
agreements were taken into income on an accrual basis as the fees were earned.
Amounts of royalties included in revenues for the same periods were $1,091,000,
$1,060,000 and $1,044,000, respectively. In December 1995, the Company sold its
Paradise Bakery subsidiary (see Note 3).
In January 1994, the Company began earning fees for operating certain
Islands restaurants under a management agreement (see Note 2). In addition, in
August 1994, the Company began operating the Weehawken Chart House restaurant
under a management agreement with the owner of the property that provides the
Company with a management fee of 7% of sales of the restaurant. Total management
fees for all restaurants, which are included in revenues in the accompanying
consolidated statements of income, were $2,021,000 in 1995 and $1,720,000 in
1994.
18 Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
INTEREST COSTS
Interest costs incurred during the construction period for new restaurants
are capitalized. Property additions for the Company include capitalized interest
of $256,000, $169,000 and $87,000 for the years ended December 31, 1995, 1994
and 1993, respectively.
Interest expense in the accompanying consolidated statements of income is
presented net of interest income of $185,000, $191,000 and $177,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
NET INCOME PER COMMON SHARE
Net income per common share is calculated by dividing net income by the
weighted average number of common shares and common stock equivalents (stock
options) outstanding during the period. Fully-diluted earnings per share equals
primary earnings per share for all periods presented.
(2) RESTRUCTURING
In 1995, the Company adopted a new strategic plan to improve shareholder
returns by refocusing on its core business - Chart House restaurants. The
Company's Board of Directors approved management's recommendation to sell the
Islands and Paradise Bakery restaurant operations and to modernize, revitalize
and expand the Chart House restaurant concept. As part of the strategic plan,
the Company also decided to dispose of selected underperforming Chart House
restaurants and implement a plan for reorganizing the management team and
reducing administrative and operational overhead costs.
As of December 31, 1995, the Company had completed the sale of Paradise
Bakery, Inc. (see Note 3) and had begun preliminary negotiations to sell its
Islands restaurant division (see Note 14).
The restructuring actions resulted in charges to income in the fourth
quarter of 1995 of $4,853,000 before income taxes. Approximately $4,443,000 of
these charges relate to the Company's decision to dispose of three Chart House
restaurants and two former Chart House restaurant properties. The charges
include amounts to write down assets to their estimated net realizable value and
estimated costs related to ceasing operations and selling the restaurants.
Included in property and equipment in the accompanying consolidated balance
sheet at December 31, 1995 is approximately $2.1 million of assets held for
disposal. The remainder of the restructuring charges consist of severance and
related expenses for certain management employees.
The amount of write-down and resulting carrying value of the respective
assets at December 31, 1995 include management's best estimates of the amounts
to be realized on the disposition of the assets. The amounts the Company will
ultimately realize may differ from the amounts assumed in arriving at the
aforementioned write-down.
(3) ACQUISITIONS AND DISPOSITIONS
In December 1995, the Company sold to an unrelated third party all of the
outstanding common stock of its wholly-owned subsidiary, Paradise Bakery, Inc.
The total sale price was $6,725,000, consisting of $5,375,000 cash proceeds and
a $1,350,000 note (see Note 4). The Company recognized a gain on sale of
$1,855,000 before income taxes, which is included in the accompanying 1995
consolidated statement of income. Although management believes that the note
receivable is fully collectible, 20% of the gross gain on sale, or $450,000,
which represents the proportionate share of the total sale price of non-cash
proceeds (i.e., note) received, was deferred. This deferred gain has been
presented as a reduction to the note receivable balance in the accompanying
consolidated balance sheet as of December 31, 1995. The deferred gain will be
recognized by the Company under the installment method as principal payments on
the note are received. Paradise Bakery, Inc. had total assets prior to the sale
of approximately $4.7 million and its revenues for 1995 were approximately $4.7
million and income before income taxes was approximately $700,000.
In closing the sale of Paradise Bakery, the Company recognized income of
$185,000 from non-refundable deposits (net of legal costs incurred) received
from another third party who had unsuccessfully attempted to acquire Paradise
Bakery, Inc. This income is included in selling, general and administrative
expenses in the accompanying 1995 statement of income.
In December 1994, the Company sold the assets of its Cork 'N Cleaver
subsidiary to a former management employee for a total cash sale price of
$1,133,000. The transaction was consummated in two stages in December 1994 and
April 1995. There was no material gain or loss recognized on the transaction.
The Company has guaranteed certain debt obligations of the buyer that relate to
this transaction (see Note 12).
In December 1993, the Company and Islands Restaurants, L.P. amended and
restated their original license agreement to provide the Company, as licensee,
exclusive worldwide rights to develop and operate restaurants under the name
"Islands," including rights to sub-license or franchise the concept. The Company
paid $4,000,000 for the expanded territorial rights and will pay a continuing
license royalty fee of 2% of Islands restaurant sales. The restated license
agreement, which has a term of 40 years and may be extended for an additional 25
years, requires the Company to open a minimum of 100 restaurants at a rate of
five restaurants per year. The Company could potentially forfeit its rights
under the agreement should it not meet the requirements of the development
schedule. As of December 31, 1995, the Company was in compliance with the
development schedule.
Concurrent with signing the restated license agreement, effective January
1994, the Company and Islands Restaurants, L.P. also signed a long-term
management agreement under which the Company agreed to manage Islands
restaurants previously managed by the licensor. The Company receives a
management fee of 5% of these restaurants' sales plus reimbursement for certain
accounting and administrative services provided to the partnership.
There were no other significant acquisitions or dispositions during the
three-years in the period ended December 31, 1995. See Note 14.
(4) NOTES RECEIVABLE
At December 31, 1995 and 1994, the Company held $1,350,000 and $2,081,000,
respectively, in notes receivable. The amount at December 31, 1995, which
represents the note received from the buyer in connection with the sale of
Paradise Bakery, Inc., is included in other assets and goodwill in the
accompanying consolidated balance sheet net of a deferred gain of $450,000 (see
Note 3). The note bears interest at 10% and has scheduled quarterly principal
payments beginning in February 1997, with a maturity in November 1998. Notes
receivable at the end of the prior year were primarily from Paradise Bakery
franchisees,
Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report 19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
which were transferred to the buyer in connection with the sale of
Paradise Bakery, Inc. The portion of the notes that was due within a period of
one year, $250,000 at December 31, 1994 was included in accounts receivable in
the accompanying consolidated balance sheet. The remaining long-term portion of
notes receivable, $1,831,000 at December 31, 1994, was included in other assets
and goodwill.
(5) INCOME TAXES
The provision (benefit) for income taxes consists of the following
components (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1995 1994 1993
------- ------- ------
<S> <C> <C> <C>
Current $ 1,716 $ 2,195 $ 2,906
Deferred (1,957) 117 174
------- ------- -------
Provision (Benefit)
for Income Taxes $ (241) $ 2,312 $ 3,080
======= ======= =======
</TABLE>
The components of deferred income taxes as of December 31, 1995 and 1994
are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Excess of Tax Depreciation over
Book Depreciation $7,168 $7,769
Compensation and Other Benefits
Not Deducted Until Paid (311) (605)
State Income Taxes 76 78
Excess Book Expense
over Tax Expense Related to
Restructuring Charges (1,869) --
Excess of Book Expense
over Tax Expense Related to
Capitalized Leases (361) (345)
Other Deferred Costs (185) (509)
------ ------
Deferred Income Taxes $4,518 $6,388
====== ======
</TABLE>
The provision (benefit) for income taxes reconciles to the amounts computed
by applying the Federal statutory rate to income before tax as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Statutory Federal Income
Tax Provision $ 824 $ 2,243 $ 2,355
Amortization of Goodwill 117 134 134
State Income Taxes,
Net of Federal Benefit 286 539 438
Other, Net, Including
Targeted Jobs and
FICA Tax Credits (1,468) (604) 153
------- ------- -------
Provision (Benefit)
for Income Taxes $ (241) $ 2,312 $ 3,080
======= ======= =======
</TABLE>
(6) LONG-TERM DEBT
Long-term debt of the Company as of December 31, 1995 and 1994 is as
follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Notes payable to banks under Revolving
Credit Agreement, interest payable
quarterly at the lead bank's base rate
(8.5% at December 31, 1995), principal
due in installments from 1997
through 2001 $15,274 $22,000
10.4% Senior Secured Notes, interest
payable quarterly, principal due in
installments from 1996 through 2000(a) 15,000 15,000
6.69% Senior Secured Notes, interest
payable semi-annually, principal due
in installments from 1997 through 2001(a) 19,000 19,000
------- -------
49,274 56,000
Less:Current Portion 3,000 --
------- -------
$46,274 $56,000
======== =======
</TABLE>
(a) Amount is payable to an insurance company that is a principal stockholder
of the Company.
The Company and its lenders have entered into a security and inter-creditor
agreement with respect to the notes payable under the Revolving Credit Agreement
and the Senior Secured Notes, whereby all of the Company's assets have been
pledged as security to the lenders on a pro-rata basis in accordance with the
terms of the agreement.
The Revolving Credit Agreement provided for a commitment of $40,000,000 at
December 31, 1995. (The commitment was increased from $30,000,000 in April
1995). The unused portion of this credit line was $24,726,000. The Company is
required to pay a commitment fee of 3/8% on the unused amount of the commitment.
The Company must also maintain certain specified financial ratios. On January 1,
1997, the outstanding revolving credit loans convert to a term loan, payable in
twenty equal quarterly installments (beginning in April 1997) with interest at
the banks' base rate.
In December 1993, the Company retired its $19,000,000, 13% Senior Secured
Note and replaced it with a new $19,000,000, 6.69% Senior Secured Note due 2001
to the same lender. In accordance with the terms of the 13% note agreement, the
Company paid a premium of $300,000 to retire the note before its maturity. This
prepayment premium has been reflected as an extraordinary item, net of taxes, in
the accompanying consolidated statement of income for the year ended December
31, 1993.
The aggregate principal payments of long-term debt required to be made for
each of the years 1997 through 2000 are as follows (in thousands):
1997 $ 9,055
1998 $ 10,055
1999 $ 11,055
2000 $ 10,055
20 Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(7) LEASES
The Company is committed under long-term lease agreements primarily
involving land and restaurant buildings, improvements and equipment which expire
on various dates through 2031. Also, a substantial number of leases contain
renewal options ranging from five to fifty years. Certain of the leases require
the payment of an additional amount by which a percentage of annual sales
exceeds annual minimum rentals. The total amount of such contingent rentals for
the years ended December 31, 1995, 1994 and 1993 amounted to $2,392,000,
$2,542,000, and $2,361,000, respectively.
CAPITAL LEASES
At December 31, 1995, minimum lease payments under long-term capital leases
were as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------
<S> <C>
1996 $ 942
1997 912
1998 864
1999 700
2000 619
Thereafter 7,819
------
Total Minimum Lease Payments 11,856
Less: Amount Representing Interest 6,035
------
Total Obligations under Capital Leases 5,821
Less: Current Portion 401
------
Long-Term Obligations under Capital Leases,
with an Average Interest Rate of 9% $5,420
======
</TABLE>
Amortization of leased property under capital leases and interest expense
on the outstanding obligations under such leases were as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Amortization $ 688 $ 862 $ 837
Interest Expense $ 588 $ 685 $ 691
</TABLE>
OPERATING LEASES
The Company is committed under long-term operating leases (primarily for
restaurant land) to make minimum rental payments as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------
<S> <C>
1996 $4,437
1997 4,107
1998 3,858
1999 3,745
2000 3,774
Thereafter 27,741
-------
$47,662
=======
</TABLE>
The Company is also party to long-term leases on properties where
restaurant operations have not commenced as of December 31, 1995 with an
aggregate commitment of $2,650,000. In addition, in December 1995, the Company
entered into a commitment with a leasing company to lease approximately $3.0
million of computer and related equipment for future point-of-sale system
installations at its restaurants.
The Company, as sublessor, subleased certain Paradise Bakery locations in
connection with the 1992 and 1993 franchise sales. Rentals received under these
subleases amounted to $293,000, $286,000 and $289,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
Minimum rental expense for all operating leases, excluding contingent rent,
for the years ended December 31, 1995, 1994 and 1993 was $5,560,000, $5,059,000
and $4,405,000, respectively.
(8) EMPLOYEE BENEFIT PLANS
The Company's 401(k) Plan allows qualified employees to contribute through
payroll deductions from 1% to 5% of gross pay. The Company makes basic matching
contributions to the plan equal to 25% of the employee's contribution, not to
exceed $1,250 per employee per year, plus a supplemental 25% matching
contribution on a quarterly basis if targeted financial results are achieved.
Company matching contributions and administrative costs associated with the plan
were $282,000, $269,000 and $404,000 for the years ended December 31, 1995, 1994
and 1993, respectively.
The Company's Executive Benefit and Wealth Accumulation Plan allows
qualified key executives to defer compensation of at least $5,000 per year and
to obtain supplemental survivor and disability benefits.
(9) STOCK OPTION PLANS
In November 1985, the Board of Directors of the Company adopted an
incentive stock option plan (the "ISO Plan") for its key employees and reserved
455,000 shares of common stock for issuance at fair value as determined by the
Board of Directors. Options to purchase 455,000 shares of common stock were
granted between 1986 and 1988. The options are exercisable no later than ten
years from the date of grant. As of December 31, 1995, all participants in the
ISO Plan are 100% vested.
In July 1989, the Board of Directors adopted and the stockholders of the
Company approved the 1989 Non-Qualified Stock Option Plan (the "1989 Plan")
which authorizes the grant of non-qualified stock options to purchase up to
250,000 shares of the Company's common stock. Under the 1989 Plan, options to
purchase 250,000 shares were granted in 1989 to certain senior management and
other employees at a fair market value exercise price of $13.50 per share. The
options vest at a rate of 25% per year over four years and expire ten years from
the date of grant. In December 1991, the Board of Directors approved an exchange
program giving option holders under the 1989 Plan an opportunity to surrender
their existing options in exchange for the reissuance of a new option with an
exercise price of $8.50 that covers one-half the number of shares covered by the
existing option. The exchange also required the four-year vesting schedule to
start over. Options covering a total of 7,250 shares were reissued in connection
with this program. In September 1995, the Board of Directors approved an
additional exchange program giving all option holders, excluding executive
officers, the opportunity to surrender their existing $13.50 options and $8.50
options for the reissuance of new options with an exercise price of $6.25 that
cover one-half the number of shares covered by the existing $13.50 options and
four-fifths the number of shares covered by the existing $8.50 options. The
exchange required a new two-year vesting period to start.
Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report 21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In February 1992, the Board of Directors adopted, and stockholders later
approved, the 1992 Stock Option Plan (the "1992 Plan"), which authorizes the
grant of options to purchase up to 310,000 shares of the Company's common stock.
The options under the 1992 Plan may be awarded as non-qualified stock options or
as incentive stock options at an exercise price no less than the fair market
value of the common stock at the date of grant. Through December 31, 1995,
management and other employees have been granted non-qualified stock options to
purchase an aggregate of 377,000 shares of common stock (which include option
grants for shares totalling 70,500 related to previously granted and forfeited
options). The options vest at a rate of 20% per year over five years and expire
ten years from the date of grant.
In addition to options granted under the ISO Plan, 1989 Plan and 1992 Plan,
an option to purchase 20,000 shares of common stock was granted to an officer in
April 1988 at a price of $2.31 per share. The option vested over a five-year
period and will expire ten years from the date of grant. In 1994, this officer
exercised the option with respect to 5,000 shares. At December 31, 1995, the
option was exercisable with respect to 15,000 shares.
There are 3,500 options available for future grant under the 1992 Plan.
There have been no charges to income with respect to any options granted. The
following table summarizes stock option transactions for the year ended December
31, 1995:
<TABLE>
<CAPTION>
Shares
-----------------------------------------
ISO Plan 1989 Plan 1992 Plan
---------- ----------- -------------
<S> <C> <C> <C>
Outstanding,
December 31, 1994 61,300 207,750 246,400
Granted - - 80,000
Exercised (19,910) - -
Forfeited - (35,500) (38,900)
Surrendered - (72,750) -
Reissued - 37,800 -
------ ------- -------
Outstanding,
December 31, 1995 41,390 137,300 287,500
====== ======= =======
Exercisable at
December 31, 1995 41,390 99,500 65,000
====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Price Range
-----------------------------------------
ISO Plan 1989 Plan 1992 Plan
---------- ----------- -------------
<S> <C> <C> <C>
Outstanding,
December 31, 1994 $1.54-2.17 $8.50-13.50 $5.875-13.625
Granted - - $6.25
Exercised $1.54 - -
Forfeited - $8.50-13.50 $5.875-13.625
Surrendered - $8.50-13.50 -
Reissued - $6.25 -
Outstanding,
December 31, 1995 $1.54-2.17 $6.25-13.50 $5.875-12.875
Exercisable at
December 31, 1995 $1.54-2.17 $13.50 $5.875-12.875
</TABLE>
(10) STOCKHOLDERS' EQUITY
The Company's preferred stock may be issued in one or more series and the
Board of Directors may fix the designation, powers, preferences, rights,
qualifications, limitations and restrictions of each class or series so
authorized.
In connection with the Company's initial public offering in 1989, warrants
to purchase a total of 435,000 shares of the Company's common stock were issued
to two stockholders. The warrants, which have a price per share of $18.00,
became exercisable in September 1993 and expire four years from that date.
(11) SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION
Accrued liabilities consist of the following at December 31, 1995 and 1994
(in thousands):
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Rent $ 863 $ 892
Sales Tax 889 943
Payroll and Payroll Taxes 2,730 3,029
Insurance 1,273 600
Interest 1,252 1,154
Unredeemed Gift Certificates 2,658 2,479
Other 1,705 1,412
------ ------
$11,370 $10,509
====== ======
</TABLE>
In 1994 and 1993, the Company recorded a net gain of approximately $300,000
and $900,000, respectively, which is included in selling, general and
administrative expenses in the accompanying consolidated statements of income,
related to property damage and business interruption insurance coverage
resulting from a fire at a Chart House restaurant.
(12) COMMITMENTS AND CONTINGENCIES
COMMITMENTS
At December 31, 1995, the Company had no material purchase commitments
relating to buildings and equipment.
LITIGATION AND OTHER CONTINGENCIES
The Company periodically is a defendant in cases incidental to its business
activities. While any litigation or investigation has an element of uncertainty,
the Company believes that the outcome of any of these matters will not have a
materially adverse effect on its financial condition or operations.
The Company maintains letters of credit to cover insurance reserves and
other contingencies. At December 31, 1995, outstanding letters of credit
amounted to $5,185,000.
In addition, the Company has guaranteed certain bank debt obligations of
third parties with a outstanding balance totalling $1.7 million as of December
31, 1995.
22 Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
(13) SUMMARY OF UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following is a summary of the unaudited quarterly results of operations for
1995 and 1994 (in thousands, except per share data):
<TABLE>
<CAPTION>
1995
------
Quarter Ended
---------------------------------------------------------------
March 31 June 30 September 30 December 31
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 42,772 $ 46,563 $ 47,332 $ 42,488
Restaurant Operating Expenses 36,447 39,112 40,014 38,065
Restructuring Charges -- -- -- 4,853
-------- -------- -------- --------
Income (Loss) from Restaurant Operations 6,325 7,451 7,318 (430)
Selling, General and Administrative Expenses 3,820 4,008 3,597 3,861
Interest Expense, Net 1,217 1,207 1,194 1,193
Other Income -- -- -- (1,855)
-------- -------- -------- --------
Income (Loss) Before Income Taxes 1,288 2,236 2,527 (3,629)
Provision (Benefit) for Income Taxes 400 695 784 (2,120)
-------- -------- -------- --------
Net Income (Loss) $ 888 $ 1,541 $ 1,743 $ (1,509)
======== ======== ======== ========
Net Income (Loss) Per Common Share $ .11 $ .19 $ .21 $ (.18)
======== ======== ======== ========
Weighted Average Shares Outstanding 8,283 8,279 8,276 8,273
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1994
------
Quarter Ended
---------------------------------------------------------------
March 31 June 30 September 30 December 31
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 40,290 $ 45,089 $ 46,277 $ 43,284
Restaurant Operating Expenses 34,401 37,720 38,572 37,050
-------- -------- -------- --------
Income from Restaurant Operations 5,889 7,369 7,705 6,234
Selling, General and Administrative Expenses 3,638 4,143 4,079 4,212
Interest Expense, Net 1,073 1,097 1,109 1,248
-------- -------- -------- --------
Income Before Income Taxes 1,178 2,129 2,517 774
Provision for Income Taxes 450 742 847 273
-------- -------- -------- --------
Net Income $ 728 $ 1,387 $ 1,670 $ 501
======== ======== ======== ========
Net Income Per Common Share $ .09 $ .17 $ .20 $ .06
======== ======== ======== ========
Weighted Average Shares Outstanding 8,319 8,294 8,290 8,295
======== ======== ======== ========
</TABLE>
The tax benefit for the fourth quarter of 1995 reflects additional tax
credits related to FICA taxes on tips of $1.0 million. These credits were
determined based on a year-end analysis and revision of previous estimates.
Historically, the Company's business is seasonal in nature with revenues
and net income in the second and third quarters being greater than in the first
and fourth quarters.
- --------------------------------------------------------------------------------
(14) SUBSEQUENT EVENT
On March 18, 1996, the Company signed definitive agreements for the sale of
a 75% interest in its Islands restaurant operations to two affiliates of Islands
Restaurants, L.P., the owner/licensor of the Islands concept, for a total
purchase price of $23.0 million in notes. The notes bear interest at a rate of
9% and are payable in equal monthly amounts of principal and interest over a
20-year amortization period, with the remaining principal balances due at the
end of 15 years. The Company will retain a 25% interest as a limited partner in
both of the new entities.
The consummation of the transaction is subject to obtaining consents and
satisfying certain closing conditions. The anticipated date of closing is in the
second quarter of 1996.The Company does not expect to recognize any material
gain or loss as a result of the transaction.
Revenues for the Islands restaurant division for 1995 were $23,225,000 and
income before income taxes was approximately $67,000.
Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report 23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Chart House Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of Chart House
Enterprises, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Chart House
Enterprises, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
San Diego, California
January 25, 1996 (except with respect
to the matter discussed in Note 14, as
to which the date is March 18, 1996)
24 Chart House Enterprises, Inc. & Subsidiaries / 1995 Annual Report
<PAGE>
BOARD OF DIRECTORS
John M. Creed
Chairman of the Board
and Chief Executive Officer,
Chart House Enterprises, Inc.
William M. Diefenderfer III
Partner,
Wunder, Diefenderfer, Cannon & Thelen,
law firm
William E. Mayer
Dean,
College of Business and Management,
University of Maryland
Alan S. McDowell
private investor
Arthur J. Nagle
Managing Director,
Vestar Capital Partners, Inc.
investment banking
Harry F. Roberts
President and Chief Operating Officer,
Chart House Enterprises, Inc.
Patrick W. Rose
Chairman, President and
Chief Executive Officer,
Van Camp Seafoods, Inc.
CORPORATE OFFICES
115 South Acacia Avenue
Solana Beach, California 92075-1803
(619) 755-8281
INDEPENDENT PUBLIC
ACCOUNTANTS
Arthur Andersen LLP
San Diego, California
TRANSFER AGENT
AND REGISTRAR
The First National Bank of Boston
c/o Boston EquiServe
P.O. Box 644
Boston, Massachusetts 02102-0644
ANNUAL MEETING
The Company's annual meeting of
stockholders will be held Tuesday,
May 7, 1996 at 11:00 a.m. at:
Chart House Restaurant
2588 South Highway 101
Cardiff, California 92007
EXECUTIVE OFFICERS
John M. Creed
Chairman of the Board
and Chief Executive Officer
Harry F. Roberts
President and Chief Operating Officer
William R. Kuntz, Jr.
Executive Vice President,
General Counsel and Secretary
Harold E. Gaubert, Jr.
Vice President,
Treasurer and
Chief Financial Officer
Douglas E. Kollus
Vice President;
President and
Chief Operating Officer,
Islands Restaurants, Inc.
OFFICERS
John L. Anderson
Vice President--Training,
Chart House, Inc.
Roy S. Bream
Vice President--
Real Estate and Development
Timothy A. Halverson
Vice President--Taxation
Stephen J. McGillin
Vice President--Operations,
Chart House, Inc.
Randall P. McNamara
Vice President--Operations,
Chart House, Inc.
Michael J.Plant
Vice President--Marketing
Richard D. Tipton
Vice President and
Assistant General Counsel
John W. Townsend
Vice President--Information Systems
James C. Wendler
Vice President and
Chief Accounting Officer
COMMON STOCK
INFORMATION
The Company's Common Stock is listed on the New York Stock Exchange under the
trading symbol CHT. On March 15, 1996, there were 655 holders of record of the
Company's Common Stock. The Company has not paid any cash dividends on its
Common Stock and does not anticipate paying cash dividends in the foreseeable
future. The following table sets forth the quarterly high and low sales prices
for a share of the Company's Common Stock for the two most recent fiscal years.
1994 High Low
- --------------- ------ ------
First Quarter 14 5/8 10 1/2
Second Quarter 15 3/4 6
Third Quarter 7 3/4 5 3/4
Fourth Quarter 10 5/8 6
1995 High Low
- --------------- ------ ------
First Quarter 9 3/8 6 3/4
Second Quarter 9 6 3/4
Third Quarter 7 5/8 5 7/8
Fourth Quarter 8 5 5/8
SEC FORM 10-K REPORT
A copy of the Company's annual report to the Securities and Exchange Commission
on Form 10-K is available without charge to stockholders and may be obtained by
writing to:
William R. Kuntz, Jr.
Secretary
Chart House Enterprises,Inc.
115 South Acacia Avenue
Solana Beach, California 92075-1803
STOCKHOLDER MAILING LIST
The Company maintains a direct mailing list to ensure that stockholders whose
shares are held in the name of a brokerage firm, bank or other person may
receive corporate reports on a timely basis. If you would like your name added
to this list, please send us your request in writing.
Printed on recycled paper.
<PAGE>
EXHIBIT 21
CHART HOUSE ENTERPRISES, INC.
SIGNIFICANT SUBSIDIARIES AS OF JANUARY 1, 1996
<TABLE>
<CAPTION>
Name State of Incorporation Trade Names
- ---- ---------------------- -----------
<S> <C> <C>
Chart House, Inc. Delaware Chart House,
Peohe's, Quahogs
Islands Restaurants, Inc. Delaware Islands Fine Burgers &
Drinks
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report, incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statements File Numbers 33-32501 and 33-34947.
ARTHUR ANDERSEN LLP
San Diego, California
March 29, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 245
<SECURITIES> 0
<RECEIVABLES> 2,402
<ALLOWANCES> 0
<INVENTORY> 3,900
<CURRENT-ASSETS> 8,139
<PP&E> 170,940
<DEPRECIATION> 52,924
<TOTAL-ASSETS> 151,875
<CURRENT-LIABILITIES> 19,011
<BONDS> 51,694
<COMMON> 82
0
0
<OTHER-SE> 76,570
<TOTAL-LIABILITY-AND-EQUITY> 151,875
<SALES> 179,155
<TOTAL-REVENUES> 179,155
<CGS> 51,891
<TOTAL-COSTS> 51,891
<OTHER-EXPENSES> 106,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,811
<INCOME-PRETAX> 2,422
<INCOME-TAX> (241)
<INCOME-CONTINUING> 2,663
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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</TABLE>
