<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-9684
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CHART HOUSE ENTERPRISES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0147725
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(State of other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
115 South Acacia Avenue, Solana Beach, California 92075-1803
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(Address of principal executive offices, including zip code)
(619)755-8281
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(Registrant's telephone number, including area code)
Indicate by check mark whether the 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 periods 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 the number of shares outstanding of each of the issuer's
classes of common stock, as of April 28, 1997:
Common Stock ($.01 par value) - 9,908,257
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
March 31, December 30,
ASSETS 1997 1996
----------- ------------
<S> <C> <C>
(Unaudited)
Current Assets:
Cash $ 329 $ 204
Accounts Receivable 3,640 4,807
Refundable Income Taxes 1,852 1,852
Inventories 2,900 3,226
Prepaid Expenses and Other Current Assets 672 882
-------- --------
Total Current Assets 9,393 10,971
-------- --------
Property and Equipment, at Cost:
Land 7,655 7,655
Buildings 27,253 27,207
Equipment 39,572 39,530
Leasehold Interests & Improvements 72,243 72,011
Construction in Progress 503 787
-------- --------
147,226 147,190
Less: Accumulated Depreciation and Amortization 55,355 53,643
-------- --------
Net Property & Equipment 91,871 93,547
-------- --------
Leased Property under Capital Leases,
Less Accumulated Amortization of
$4,789 in 1997 and $4,561 in 1996 5,444 5,672
-------- --------
Assets of Business Transferred Under
Contractual Arrangements 23,263 23,416
-------- --------
Other Assets and Goodwill, Net 15,005 15,319
-------- --------
$144,976 $148,925
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
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<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
March 31, December 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
----------- ------------
<S> <C> <C>
(Unaudited)
Current Liabilities:
Current Portion of Long-Term Debt $ 4,000 $ 6,000
Current Portion of Obligations under
Capital Leases 787 772
Accounts Payable 3,831 3,303
Accrued Liabilities 11,290 13,466
-------- --------
Total Current Liabilities 19,908 23,541
-------- --------
Long-Term Debt 34,700 44,200
-------- --------
Long-Term Obligations under Capital Leases 6,094 6,299
-------- --------
Deferred Income Taxes 3,577 3,577
-------- --------
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; 9,904,263
shares outstanding in 1997 and
8,262,513 in 1996 99 83
Additional Paid-In Capital 50,844 42,145
Retained Earnings 29,754 29,080
-------- --------
Total Stockholders' Equity 80,697 71,308
-------- --------
$144,976 $148,925
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
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<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter First Quarter
Ended March 31, Ended April 1,
1997 1996
---------------- ---------------
<S> <C> <C>
Revenues $38,347 $43,246
------- -------
Costs and Expenses:
Cost of Sales 11,828 12,552
Restaurant Labor 10,333 12,432
Other Operating Costs 9,106 10,696
Selling, General and
Administrative Expenses 3,029 3,883
Depreciation and Amortization 2,384 2,705
Restructuring Charges - 710
Interest Expense 1,181 1,178
Interest Income (491) (36)
------- -------
Total Costs and Expenses 37,370 44,120
------- -------
Income (Loss) Before Income Taxes 977 (874)
Provision (Benefit) for Income Taxes 303 (244)
------- -------
Net Income (Loss) $ 674 $ (630)
======= =======
Net Income (Loss) Per Common Share $ .08 $ (.08)
======= =======
Weighted Average Shares Outstanding 8,647 8,264
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter First Quarter
Ended March 31, Ended April 1,
1997 1996
--------------- -----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ 674 $ (630)
Adjustments to Reconcile Net Income (Loss) to
Cash Flows from Operating Activities:
Depreciation and Amortization 2,384 2,705
Loss on Retirement and Disposition of Assets 90 29
Change in Net Current Liabilities 55 460
------- -------
Cash Provided by Operating Activities 3,203 2,564
------- -------
Cash Flows from Investing Activities:
Expenditures for Property and Equipment (419) (3,734)
Reductions of Other Assets 170 99
Proceeds from Disposition of Assets 19 11
Payments Received on Notes 127 -
------- -------
Cash Used in Investing Activities (103) (3,624)
------- -------
Cash Flows from Financing Activities:
Principal Payments on Obligations under Capital Leases (190) (111)
Net Borrowings (Payments) under Revolving Credit
Agreement (5,500) 1,126
Payment of Long-Term Debt (6,000) -
Net Proceeds from Sale/Issuance of Common Stock 8,715 38
------- -------
Cash Provided by (Used in) Financing Activities (2,975) 1,053
------- -------
Increase (Decrease) in Cash 125 (7)
Cash, Beginning of Period 204 245
------- -------
Cash, End of Period $ 329 $ 238
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
First Quarter First Quarter
Ended March 31, Ended April 1,
1997 1996
--------------- -----------------
<S> <C> <C>
The Change in Net Current Liabilities is Comprised of
the Following:
Decrease in Accounts Receivable $ 1,167 $ 392
Decrease in Inventories 326 250
Decrease in Prepaid Expenses and Other
Current Assets 210 232
Increase (Decrease) in Accounts Payable 528 (796)
Increase (Decrease) in Accrued Liabilities (2,176) 382
------- ------
Change in Net Current Liabilities $ 55 $ 460
======= ======
Supplemental Cash Flow Disclosures:
Cash Paid During the Period for:
Interest (Net of Amount Capitalized) $ 1,596 $1,694
Income Taxes (Net of Refunds) $ 21 $ (289)
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
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<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements of Chart House
Enterprises, Inc. and subsidiaries (the "Company") for the quarterly periods
ended March 31, 1997 and April 1, 1996 have been prepared in accordance with
generally accepted accounting principles, and with the instructions to Form 10-
Q. These financial statements have not been audited by independent public
accountants, but include all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial condition, results of operations and cash flows
for such periods. However, these results are not necessarily indicative of
results for any other interim period or for the full year.
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.
Certain information and footnote disclosures normally included in financial
statements in accordance with generally accepted accounting principles have been
omitted pursuant to requirements of the Securities and Exchange Commission.
Management believes that the disclosures included in the accompanying interim
financial statements and footnotes are adequate to make the information not
misleading, but should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on Form 10-
K for the year ended December 30, 1996.
(2) NET INCOME (LOSS) PER COMMON SHARE
Earnings per share calculations are based on the weighted average number of
common shares and common stock equivalents (stock options) outstanding during
the period. Anti-dilutive securities are excluded from calculations of any loss
per share.
In February 1997, the Financial Accounting Standards Board issued statement
of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). The
statement specifies the computation, presentation, and disclosure requirements
for earnings per share. The statement is effective for financial statements for
periods ending after December 15, 1997. Earlier application is not permitted.
However, management believes that pro forma earnings per share amounts computed
using SFAS 128 would not be significantly different from the amounts shown in
the accompanying consolidated statements of operations.
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<PAGE>
(3) LONG-LIVED ASSETS
On a regular basis, the Company evaluates and assesses its assets and
properties for impairment under the guidelines of Financial Accounting Standards
Board Statement No. 121 ("Accounting for Long-Lived Assets and for Long-Lived
Assets to be Disposed of"), and makes appropriate adjustments if and when an
asset is deemed to be impaired.
(4) LONG-TERM DEBT
The amount of current portion of long-term debt at December 30, 1996
represented two installments due under the 6.69% and 10.4% senior secured notes
($3,000,000 each), which were paid in March 1997 (See Note 5). The next
scheduled payment is a $4,000,000 installment under the 6.69% senior note due in
January 1998, which is shown as a current liability on the balance sheet at
March 31, 1997.
In March 1997, in connection with a sale of shares of common stock (See
Note 5), the Company and its lenders amended certain terms of the existing debt
agreements to, among other things, extend the maturity date of bank borrowings
under the revolving credit agreement from October 1, 1997 to April 1, 1998,
reduce the revolving credit commitment amount from $24 million to $20.4 million,
and enter into further discussions regarding modifications of other terms under
the debt agreements.
(5) STOCKHOLDERS' EQUITY
In March 1997, the Company agreed to sell 3,400,000 newly-issued shares of
common stock in a private placement to an investment company at $5.75 per share
for a total sale price of $19.5 million.
The initial sale of 1,641,750 shares for $9.4 million was completed in
March 1997. An additional 1,758,250 shares will be sold for $10.1 million,
subject to approval by the Company's shareholders at the annual meeting to be
held in May 1997. Transaction costs are estimated at approximately $1.1 million
($725,000 related to the initial sale transaction, with the remainder contingent
upon completion of the additional sale transaction).
The Company used the net proceeds from the initial sale transaction to
repay $6.0 million of scheduled principal installments due in 1997 under two
senior secured notes (See Note 4), with the remainder of the net proceeds from
the initial sale applied to reduce outstanding borrowings under the revolving
credit agreement. The Company intends to use the net proceeds from the sale of
the additional shares to further reduce existing indebtedness.
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
- ---------------------
The following is a comparative discussion of the results of operations for
the quarterly periods ended March 31, 1997 and April 1, 1996. The results of
operations for the first thirteen weeks of 1997 are not necessarily indicative
of the results to be expected for the fiscal year ending December 29, 1997. The
dollar amounts in the table below are in thousands.
<TABLE>
<CAPTION>
First Quarter First Quarter
Ended March 31, Ended April 1,
1997 1996
-------------------- ----------------------
Dollars Percent Dollars Percent
------- ------- ------- -------
<S> <C> <C> <C> <C>
(Unaudited)
Revenues 38,347 100.0 43,246 100.0
------ ----- ------ -----
Costs and Expenses:
Cost of Sales 11,828 30.8 12,552 29.0
Restaurant Labor 10,333 26.9 12,432 28.7
Other Operating Costs 9,106 23.8 10,696 24.8
Selling, General and
Administrative 3,029 7.9 3,883 9.0
Expenses
Deprecation and Amortization 2,384 6.2 2,705 6.3
Restructuring Charges - - 710 1.6
Interest Expense 1,181 3.1 1,178 2.7
Interest Income (491) (1.3) (36) (.1)
------ ----- ------ ------
Total Costs and 37,370 97.4 44,120 (102.0)
Expenses ------ ----- ------ ------
Income (Loss) Before Income 977 2.6 (874) (2.0)
Taxes
Provision (Benefit) for 303 .8 (244) (.5)
Income Taxes ------ ----- ------ ------
Net Income (Loss) 674 1.8 (630) (1.5)
====== ===== ====== ======
</TABLE>
Management believes that the most meaningful approach to analyzing results
of 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.
Revenues for the first quarter decreased by $4,899,000 from $43,246,000 in
1996 to $38,347,000 in 1997. The disposition of the Islands restaurant
operations in May 1996 accounted for a decrease in revenues of $7,495,000. One
Chart House restaurant which opened in 1996 and two restaurants which re-opened
after temporary shutdown contributed to an increase in revenues of $1,131,000.
Comparable sales (sales at restaurants open the entire quarter of both years)
were up by approximately $1.2 million, or 3.5%. There were several factors that
management believes contributed to the comparable sales increase, among them:
(i) the addition of New Year's Eve to the 1997 first quarter as a result of
period end timing; (ii) milder weather in the Northeast compared to last year;
(iii) Easter week falling in March instead of the first week in April
-9-
<PAGE>
as in 1996; and (iv) higher check averages because of menu adjustments made in
late-1996. Comparable customer counts were slightly down (about 1%) from the
prior year period.
Several cost and expense categories (as well as revenues) in the
consolidated income statement were lower in 1997 than 1996 because of the
disposition of the Islands restaurants. However, the disposition did not have a
material effect on 1997 first quarter net income compared to 1996 first quarter
net income.
Chart House restaurant operating margins overall were consistent between
years. Cost of sales as a percentage of revenues was higher primarily because
of the significant menu changes made beginning in the second quarter of 1996
which have continued to affect gross margins through the first quarter of 1997.
Restaurant labor was significantly lower than last year, as the Company has
focused efforts on further controlling restaurant hourly labor costs to counter
the effects of Federal and state minimum wage increases. Other operating costs
and depreciation and amortization, without the Islands restaurants, did not
change materially as a percentage of revenues between years.
Selling, general and administrative expenses in 1997 were $854,000 lower
than in 1996. The disposition of Islands accounted for $244,000 of the
difference. In addition, the Company reduced its marketing and promotional-
related expenses in 1997. The remainder of the decrease is due primarily to
decreases in administrative payroll costs because of organizational changes made
throughout last year. Special severance and compensation costs of $710,000,
incurred in the first quarter of 1996 as a result of the turnover of the
Company's former chief executive officer, are shown separately as restructuring
charges.
Interest expense was largely unchanged from 1996 to 1997, as overall debt
levels were relatively constant during the two quarterly periods. (Proceeds
from the sale of shares were not applied to reduce debt until the end of the
quarter). Prevailing interest rates under the revolving credit agreement were
also relatively constant.
Interest income was $455,000 higher in 1997 because of interest earned on a
note received in connection with the sale of the Islands restaurants in May
1996.
The provision for or benefit from income taxes reflects effective rates of
31% for the first quarter of 1997 and 28% for the first quarter of 1996.
As a result of the foregoing, net income increased by $1,304,000 from a net
loss of $630,000 for the first quarter of 1996 to net income of $674,000 for the
first quarter of 1997.
Liquidity and Capital Resources
- -------------------------------
The Company requires capital principally for the acquisition and
construction of new restaurants and the remodeling and refurbishing of existing
restaurants. The Company's primary sources of working capital are cash flows
from operations and borrowings under a revolving credit agreement with three
banks which provides a $20,400,000 line of credit (reduced from $24,000,000 in
March 1997, as discussed below) with interest at the agent bank's base rate (or
LIBOR plus 1.50%). Net cash flows from operating, financing and investing
activities are used primarily to reduce or increase those borrowings. During
the first quarter of 1997, the Company decreased its revolving credit borrowings
by $5,500,000. At March 31, 1997, the Company had outstanding borrowings of
$13,700,000 under the revolving credit agreement.
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<PAGE>
The Company's strategic plan initially allocates capital resources to
revitalizing the existing base of Chart House restaurants. The Company plans to
invest a significant amount of capital over the next approximately three years
under the Chart House restaurant facility revitalization program.
Revitalization activity will proceed on a prioritized basis in 1997. The
Company has planned upgrading activity in 1997 for approximately twenty
restaurants, which will devote capital resources, in a cost-effective way, to
the components that management believes will be noticed by Chart House
customers: paint, carpeting, lighting, sound systems, and cookline upgrades,
among other things. Current projections for capital expenditures for 1997 are
between $6 and $8 million.
Management believes that cash flows from operations will be sufficient to
fund planned capital expenditure activity in 1997. Borrowings under the
revolving credit agreement are expected to be available to meet any other
funding requirements not met by cash flows from operations.
In 1996, the Company and its lenders amended certain terms of the existing
debt agreements to establish October 1, 1997 as the due date for outstanding
revolving credit borrowings. In addition, the principal payments of $3.0
million payable in January 1997 and $3.0 million payable in July 1997 under the
two senior secured notes were deferred until October 1, 1997. In the first
quarter of 1997, the Company completed a process that had begun in late-1996 to
seek and obtain alternative financing in order to reduce the amounts owed to its
existing lenders and to provide capital needed to enable the Company to move
forward with its revitalization plan.
On March 10, 1997, the Company agreed to sell 3,400,000 newly-issued shares
of common stock in a private placement to an investment company at $5.75 per
share, for a total sale price of $19.5 million. The initial sale of 1,641,750
shares for $9.4 million was completed in March 1997. An additional 1,758,250
shares will be sold for $10.1 million, subject to approval by the Company's
shareholders at the annual meeting to be held in May 1997. The Company used the
net proceeds from the initial sale transaction to repay the $6.0 million of
scheduled principal installments due in 1997 under the two senior secured notes
and to reduce outstanding borrowings under the revolving credit agreement. The
Company intends to use the net proceeds from the additional sale transaction to
further reduce existing indebtedness.
In March 1997, the Company and its lenders further amended certain terms of
the existing debt agreements to extend the maturity date on the revolving credit
borrowings from October 1, 1997 to April 1, 1998, and to make certain other
immediate modifications to the debt agreements, including a reduction in the
revolving credit commitment amount from $24.0 million to $20.4 million. Giving
effect to the sale of the initial shares and the application thereof to the
revolving credit borrowings, management believes the Company will have
sufficient liquidity under its credit facility. The Company and its lenders are
in discussions to modify terms of the existing credit facility. Among other
modifications, the Company will seek to establish a longer term revolving credit
facility. The Company's lenders have notified the Company that any such
modifications would be contingent upon, among other conditions, completing the
sale of the additional shares (totaling $10.1 million). There can be no
assurance that such debt agreements will be modified on terms satisfactory to
the Company.
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<PAGE>
Seasonality and Other Information
- ---------------------------------
Historically, the Company's business is seasonal in nature with Revenues
and Net Income for the second and third quarters being greater than in the first
and fourth quarters.
This report contains forward-looking statements that were made within the
safe harbor provisions of the Securities Litigation Reform Act of 1995. Actual
results could differ materially from those projected in the forward-looking
statements.
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<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. 10.1(7) Sixth Amendment dated March 28, 1997 to Amended
and Restated Revolving Credit Agreement.
10.3(4) Amendment dated as of March 28, 1997 to Note
Purchase and Guarantee Agreements with respect
to 10.4% Senior Secured Notes Due 2000 and 6.69%
Senior Secured Notes Due 2001.
10.19(1) Stock Purchase and Sale Agreement dated as of
March 10, 1997 between Chart House Enterprises,
Inc., Chart House Investors, LLC and Alpha/ZFT
Partnership.
10.19(2) Standstill Agreement dated as of March 10, 1997
between Chart House Enterprises, Inc.,
Chart House Investors, LLC and Alpha/ZFT
Partnership.
27 Financial Data Schedule (required for electronic
filing only).
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter of which this report is filed.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHART HOUSE ENTERPRISES, INC. (Registrant)
Date: May 8, 1997 By: /s/ WILLIAM R. KUNTZ, JR.
--------------------------------------
William R. Kuntz, Jr.
Executive Vice President - Finance and
Administration, General Counsel and
Secretary
By: /s/ JAMES C. WENDLER
-------------------------------------
James C. Wendler
Vice President and Chief Accounting
Officer
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<PAGE>
EXHIBIT 10.1(7)
SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (the "Sixth Amendment") is made
and dated as of the 28th day of March, 1997 by and among CHART HOUSE, INC. (the
"Company"), CHART HOUSE ENTERPRISES, INC. (the "Parent"), BIG WAVE, INC.,
formerly known as Islands Restaurants, Inc. ("Big Wave") (the Parent and Big
Wave being sometimes referred to, collectively and severally, as the
"Guarantors"), SANWA BANK CALIFORNIA ("Sanwa"), THE FIRST NATIONAL BANK OF
BOSTON ("Bank of Boston") and THE SUMITOMO BANK OF CALIFORNIA ("Sumitomo")
(Sanwa, Bank of Boston and Sumitomo acting in their capacities as "Banks" under
the Credit Agreement described more particularly below being referred to,
collectively and severally, as the "Banks") and SANWA, acting in its capacity as
the successor Agent under the Credit Agreement and the successor Security Agent
under the Big Wave Security Agreement described more particularly below (in such
capacities, the "Agent" and the "Security Agent," as applicable).
RECITALS
A. Pursuant to that certain Amended and Restated Revolving Credit and
Term Loan Agreement dated as of December 17, 1993 by and among the Company, the
Guarantors, Paradise Bakery, Inc., the Banks party thereto and Bank of Boston as
the original "Agent" thereunder (as amended from time to time, including,
without limitation, pursuant to that certain Consent to Disposition and
Agreement for Substitution of Collateral, dated as of May 30, 1996 (the "Consent
Agreement") and that certain waiver and amendment letter dated August 14, 1996,
as so amended, the "Credit Agreement," and with capitalized terms not otherwise
defined herein used with the meanings given such terms in the Credit Agreement)
the Banks agreed to extend credit to the Company on the terms and subject to the
conditions set forth therein, including, without limitation, that the
obligations of the Company thereunder be guaranteed by Big Wave.
B. The Company, the Agent and the Lenders have agreed to amend the
Credit Agreement in certain respects as set forth more particularly herein.
NOW, THEREFORE, in consideration of the above Recitals and for other good
and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Extension of Maturity Date. To reflect the agreement of the Banks to
--------------------------
extend the term of the Credit Agreement, effective as of the Effective Date (as
defined in Paragraph 6 below), the definition of the term "Maturity Date" set
forth in Section 1 of the Credit Agreement is hereby amended to read in its
entirety as follows:
<PAGE>
"Maturity Date. April 1, 1998, as such date may be extended by
-------------
written agreement of the Agent and one hundred percent (100%) of the
Banks."
2. Modification of Availability. To reflect the agreement of the parties
----------------------------
hereto to reduce the commitment of the Banks to advance Revolving Loans and to
issue Letters of Credit under the Credit Agreement, effective as of the
Effective Date:
(a) The definition of the term "Revolving Credit Commitment Amount" set
forth in Section 1 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Revolving Credit Commitment Amount. At any date of determination,
----------------------------------
$20,400,000, as such amount is reduced pursuant to (S)2.2 and
(S)6.4 hereof."
(b) Section 2.2 of the Credit Agreement is hereby amended to add a new
subparagraph (c) thereto to read in its entirety as follows:
"(c) The Revolving Credit Commitment Amount is subject to mandatory
reduction upon any principal payment made on account of the 6.69% Notes or
the 10.40% Notes from and after March 27, 1997 (other than the principal
payments made on account of the January 2, 1997 payment and the July 24,
1997 payment thereon) in a pro rata dollar amount."
(c) The definition of the term "Letter of Credit Commitment Amount" set
forth in Section 1 of the Credit Agreement is hereby amended to read in its
entirety as follows:
"Letter of Credit Commitment Amount. $3,000,000."
----------------------------------
3. Modification of Certain Financial and Other Covenants. To reflect the
-----------------------------------------------------
agreement of the parties hereto to modify certain of the financial and other
covenants contained in the Credit Agreement, effective as of the Effective Date
the Credit Agreement is hereby amended as follows:
(a) Section 11.6 is hereby amended to read in its entirety as follows:
"(S)11.6 Ratio of Consolidated Total Liabilities to Consolidated
-------------------------------------------------------
Tangible Net Worth. The Company will not permit the ratio of Consolidated
-------------------
Total Liabilities to Consolidated Tangible Net Worth to exceed 1.25:1 at
any time."
(b) Section 11.7 is hereby amended to read in its entirety as follows:
"(S)11.7 Minimum EBITDA. The Company will not permit
--------------
2
<PAGE>
EBITDA of the Company and its consolidated Subsidiaries to be less than:
For the Fiscal Quarter Ending: Required EBITDA
------------------------------ ---------------
December 31, 1996 $2,400,000
March 31, 1997 $2,400,000
June 30, 1997 $3,800,000
September 30, 1997 $4,400,000
December 31, 1997 $2,600,000
March 31, 1998 $2,700,000.
For purposes of this (S)11.7 the term `EBITDA' shall mean for each fiscal
quarter the sum of (a) net income (or net loss), including, without
limitation, interest income on the Florida Note and the CA/AZ Note (as
those terms are defined in that certain Consent to Disposition and
Agreement for Substitution of Collateral dated May 14, 1996), plus (b) all
amounts treated as expenses for interest, amortization, depreciation, taxes
(to the extent included in the determination of net income or net loss),
and other non-cash charges for such fiscal quarter."
(c) Section 11.8 is hereby amended to read in its entirety as follows:
"(S)11.8 Capital Expenditures. The Company will not: (a) make
---------------------
capital expenditures for any purpose other than maintenance and repair of
existing properties and assets and for improvements, or (b) permit the
aggregate capital expenditures of the Parent and its Subsidiaries,
determined on a consolidated basis, in accordance with generally accepted
accounting principles (but exclusive of expenditures in respect of
Capitalized Leases), to exceed $12,000,000 in the 1996 calendar year,
$7,000,000 in the 1997 calendar year or $2,000,000 for the first calendar
quarter of 1998."
4. Reaffirmation of Loan Documents. Each of the Company and each of the
-------------------------------
Guarantors hereby affirms and agrees that (a) the execution and delivery by such
Persons of, and the performance of their respective obligations under, this
Sixth Amendment shall not in any way amend, impair, invalidate or otherwise
affect any of such Person's obligations or the rights, remedies and powers of
the Agent and the Lenders under the Loan Documents, including, without
limitation, the Security Documents, as the same are amended hereby, and (b) all
Loan Documents remain in full force and effect.
3
<PAGE>
5. Representations and Warranties. Each of the Company, the Parent and
------------------------------
Big Wave hereby, severally and independently as to itself only, represents and
warrants that at the date hereof and at and as of the Effective Date:
(a) Except to the extent such were by their terms made solely as of a prior
date, the representations and warranties of such party contained in the Loan
Documents are accurate and complete in all material respects.
(b) The execution and delivery by such party of this Sixth Amendment and
the performance by such party of its obligations hereunder are within the
corporate power of such party, have been (or as of the Effective Date will be)
duly authorized by all necessary corporate action and do not and will not (1)
contravene any provision of such party's charter, other incorporation papers,
by-laws or any stock provisions, or any amendment thereof, (2) 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 any of such parties under any agreement, deed of trust, indenture, mortgage
or other instrument to such party is a party or by which any of its properties
are bound, (3) 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,
(4) require any waiver, consent or approval of any Person other than such as
have been obtained and copies of which have been provided to the Agent and the
Security Agent, or (5) 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 law,
except those actions which have been taken or will be taken prior to the
Effective Date.
(c) This Sixth Amendment constitutes the legal, valid and binding
obligations of such party enforceable against such party in accordance with
their respective terms.
(d) No Default or Event of Default has occurred or is continuing (other
than Events of Default which are waived hereunder) or will occur as a result of
(1) the execution and delivery of this Sixth Amendment, or (2) the consummation
of the transactions contemplated hereby.
6. Effective Date. This Sixth Amendment shall be effective upon the
--------------
date (the "Effective Date") upon which there shall have been delivered to the
Agent, in form and substance satisfactory to the Agent, the Security Agent and
the Banks, each of the following:
(a) A copy or counterpart copies of this Sixth Amendment, duly executed by
each of the parties hereto, including without limitation, Metropolitan Life
Insurance Company ("Metropolitan");
4
<PAGE>
(b) Evidence satisfactory to the Agent and the Banks that Metropolitan
has entered into an amendment of the Note Purchase Agreements (as defined in the
Consent Agreement) with the Company, which amendment shall be in form and
substance acceptable to the Agent and the Banks and which amendment shall
require the prepayment immediately following the Effective Date hereunder of (1)
the January 2, 1997 principal payment on account of the 6.69% Notes, and (2) the
prepayment of the July 24, 1997 principal payment on account of the 10.40% Notes
(each of which payments were previously deferred pursuant to the Fifth Amendment
to the Credit Agreement until October 1, 1997);
(c) Evidence satisfactory to the Agent and the Banks that Metropolitan
has not received and will not receive any compensation for the amendment
referred to above (other than the payments of principal required thereunder), by
way of amendment fee or otherwise, or if in fact Metropolitan has received or
will receive such compensation, an equivalent payment is made to the Agent and
the Banks;
(d) Evidence satisfactory to the Agent and the Banks that the aggregate
Maximum Drawing Amount of Letters of Credit outstanding under the Credit
Agreement on the Effective Date does not exceed the Letter of Credit Commitment
as reduced pursuant hereto on such date, such evidence to include the written
agreement of beneficiaries under such Letters of Credit to the amendment of
Letters of Credit held by them to reduce the amount available for drawing
thereunder; and
(e) From each of Big Wave, the Company and the Parent, certified copies
of such corporate resolutions and authorizations as the Agent may reasonably
request.
In the event the Effective Date shall not have occurred on or before March 31,
1997, then this Sixth Amendment shall, at the election of the Majority Banks, as
evidenced by written notice of such election delivered by the Agent to the
Company, terminate and be of no further force or effect.
7. Survival. The representations and warranties, covenants and
--------
agreements of the Company, the Parent and Big Wave set forth herein shall
survive the Effective Date.
8. Captions. Paragraph or other headings contained in this Sixth
--------
Amendment are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Sixth Amendment.
9. Governing Law. This Sixth Amendment shall be governed by and
-------------
construed in accordance with the laws of the State of California.
10. Expenses. The Company shall pay upon demand all costs and expenses,
--------
including, without limitation, legal fees of Morrison & Foerster, special
counsel
5
<PAGE>
to the Agent, in connection with the transactions contemplated hereby as
are required to be paid by the Company pursuant to Section 15 of the Credit
Agreement.
11. Counterparts. This Sixth Amendment may be executed in counterparts
------------
and such counterparts shall, when taken together, constitute one and the same
agreement.
EXECUTED as of the day and year first above written.
The Company:
------------
CHART HOUSE, INC.
By: /s/ WILLIAM R. KUNTZ, JR.
------------------------------------
Name: William R. Kuntz, Jr.
-----------------------------------
Title: Executive Vice President
----------------------------------
The Guarantors:
---------------
CHART HOUSE ENTERPRISES, INC.
By: /s/ WILLIAM R. KUNTZ, JR.
------------------------------------
Name: William R. Kuntz, Jr.
----------------------------------
Title: Executive Vice President
---------------------------------
BIG WAVE, INC.
By: /s/ WILLIAM R. KUNTZ, JR.
-------------------------------------
Name: William R. Kuntz, Jr.
----------------------------------
Title: President
---------------------------------
6
<PAGE>
The Agent and Security Agent:
-----------------------------
SANWA BANK CALIFORNIA
By: /s/ DAVID L. BEALL
--------------------------------------
Name: David L. Beall
------------------------------------
Title: Vice President
-----------------------------------
The Banks:
----------
SANWA BANK CALIFORNIA
By: /s/ DAVID L. BEALL
-------------------------------------
Name: David L. Beall
------------------------------------
Title: Vice President
----------------------------------
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ THOMAS F. FARLEY, JR.
--------------------------------------
Name: Thomas F. Farley, Jr.
------------------------------------
Title: Director
-----------------------------------
THE SUMITOMO BANK OF CALIFORNIA
By: /s/ MATTHEW R. VAN STEENHUYSE
--------------------------------------
Name: Matthew R. Van Steenhuyse
------------------------------------
Title: Vice President
----------------------------------
7
<PAGE>
ACKNOWLEGED AND AGREED TO
this 28 day of March, 1997
METROPOLITAN LIFE INSURANCE
COMPANY
By: /s/ JACQUELINE D. JENKINS
---------------------------------
Name: Jacqueline D. Jenkins
-------------------------------
Title: Vice President
------------------------------
8
<PAGE>
EXHIBIT 10.3(4)
[LETTERHEAD OF METLIFE]
March 28, 1997
Chart House, Inc.
115 South Acacia Avenue
Solana Beach, CA 92075
Attention: William R. Kuntz, Jr.
Executive Vice President and Chief Financial Officer
Gentlemen:
Reference is hereby made to (x) the Note Purchase and Guarantee Agreement, dated
as of December 30, 1993 (as amended, the "6.69% Note Agreement"), among Chart
House, Inc. (the "Company"), the Guarantors and Metropolitan Life Insurance
Company ("MetLife"), pursuant to which the Company issued its 6.69% Senior
Secured Notes due 2001 (as amended, the "6.69% Notes"), and (y) the Amended and
Restated Note Purchase and Guarantee Agreement, dated as of December 30, 1993
(as amended, the "10.40% Note Agreement" and, collectively with the 6.69% Note
Agreement, the "Note Agreements"), among the Company, the Guarantors and
MetLife, pursuant to which there is outstanding the Company's 10.40% Senior
Secured Notes due 2000 (as amended, the "10.40% Notes" and, collectively with
the 6.69% Notes, the "Notes"). Capitalized terms not otherwise defined herein
shall have the meanings ascribed thereto in the Note Agreements.
As holder of the Notes and party to the Note Agreements, MetLife hereby consents
and agrees that, effective as of the Effective Date (as hereinbelow defined):
a) the due date for (i) the $3,000,000 mandatory principal prepayment with
respect to the 6.69% Notes originally payable on January 2, 1997 pursuant to
(S)4.2 of the 6.69% Note Agreement and presently payable on the earlier of (x)
October 1, 1997 and (y) the date of execution of an agreement by the Company
effecting a refinance of all or a portion of the Company's indebtedness to the
Banks or any thereof under the Bank Agreement (the earlier of such dates, the
"Deferred Date"), and (ii) the $3,000,000 mandatory principal prepayment with
respect to the 10.40% Notes originally payable on July 24, 1997 pursuant to
(S)4.2 of the 10.40% Note Agreement and presently payable on the Deferred
<PAGE>
Date, shall in each case be modified (and (S)4.2 of the respective Note
Agreements shall be deemed amended mutatis mutandis to reflect such
------- --------
modification) to be March 31, 1997, and the Company's failure to make such
mandatory principal prepayments with respect to the Notes, together with accrued
interest thereon, on March 31, 1997 shall constitute an Event of Default under
(S)(S)5.1(a) and/or (b) of the respective Note Agreements (after the applicable
grace periods therein have expired);
b) the Notes shall be subject to mandatory prepayment (pro rata as between
the 6.69% Notes and the 10.40% Notes) upon any reduction of the Revolving Credit
Commitment Amount (as defined in the Bank Agreement) from and after March 31,
1997 in a pro rata dollar amount with such reduction (and (S)(S)4.2 of the
respective Note Agreements shall be deemed amended mutatis mutandis to reflect
------- --------
such mandatory prepayment requirement);
c) (S)7.6 of the Note Agreements shall be amended to read in its entirety
as follows:
"(S)7.6. Ratio of Consolidated Total Liabilities to Consolidated Tangible
----------------------------------------------------------------
Net Worth. The Company will not permit the ratio of Consolidated Total
---------
Liabilities to Consolidated Tangible Net Worth to exceed 1.25:1 at any time.";
d) (S)7.8 of the Note Agreements shall be amended to read in its entirety
as follows:
"(S)7.8. Capital Expenditures. The Company will not (a) make capital
--------------------
expenditures for any purpose other than maintenance and repair of existing
properties and assets and for improvements, or (b) permit the aggregate
capital expenditures of the Parent and its Subsidiaries, determined on a
consolidated basis in accordance with generally accepted accounting
principles (but exclusive of expenditures in respect of Capitalized
Leases), to exceed (i) $12,000,000 in the 1996 calendar year, (ii)
$7,000,000 in the 1997 calendar year, (iii) $2,000,000 for the first
calendar quarter of 1998 or (iv) $0 thereafter.";
e) (S)7.32 of the Note Agreements shall be amended to read in its
entirety as follows:
"(S)7.32. Minimum EBITDA. The Company will not permit EBITDA of the
--------------
Company and its consolidated Subsidiaries to be less than:
For the Fiscal Quarter Ending Required EBITDA
----------------------------- ---------------
December 31, 1996 $ 2,400,000
2
<PAGE>
March 31, 1997 $ 2,400,000
June 30, 1997 $ 3,800,000
September 30, 1997 $ 4,400,000
December 31, 1997 $ 2,600,000
March 31, 1998 $2,700,000.
For purposes of this (S)7.32 the term `EBITDA' shall mean
for each fiscal quarter the sum of (a) net income (or net loss),
including, without limitation, interest income on the Florida
Note and the CA/AZ Note (as those terms are defined in that
certain Consent to Disposition and Agreement for Substitution
of Collateral dated as of May 14, 1996), plus (b) all amounts
treated as expenses for interest, amortization, depreciation,
taxes (to the extent included in the determination of net
income (or net loss)) and other non-cash charges for such
fiscal quarter.";
f) (S)(S)7.7 and 7.31 of the Note Agreements need not be complied
with by the Company for the fiscal quarters ending December 31, 1997 and March
31, 1998, but such sections shall be complied with thereafter.
By their execution hereof, the Company and each of the Guarantors affirms and
agrees that (a) the execution and delivery by such Persons of, and the
performance of their respective obligations under, this consent and agreement
shall not in any way amend, impair, invalidate or otherwise affect any of such
Person's obligations or the rights, remedies and powers of MetLife under the
Loan Documents, including, without limitation, the Security Documents, as the
same are amended hereby, and (b) all Loan Documents remain in full force and
effect.
By their execution hereof, each of the Company, the Parent and Big Wave,
severally and independently as to itself only, represents and warrants that at
the date hereof and at and as of the Effective Date:
(a) Except to the extent such were by their terms made solely as of a
prior date, the representations and warranties of such party contained in the
Loan Documents are accurate and complete in all material respects.
(b) The execution and delivery by such party of this consent and agreement
and the performance by such party of its obligations hereunder are within the
corporate power of such party, have been (or as of the Effective Date will be)
duly authorized by all necessary corporate action and do not and will not
3
<PAGE>
(1) contravene any provision of such party's charter, other incorporation
papers, by-laws or any stock provisions, or any amendment thereof, (2) 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 any of such parties pursuant to, any agreement, deed of trust, indenture,
mortgage or other instrument to which such party is a party or by which any of
its properties are bound, (3) 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, (4) require any waiver, consent or approval of any Person other than
such as have been obtained and copies of which have been provided to MetLife, or
(5) require any approval, consent, order, authorization or license by, or giving
of notice to, or taking any other action with respect to, any governmental or
regulatory authority or agency under any provision of law, except those actions
which have been taken or will be taken prior to the Effective Date.
(c) This consent and agreement constitutes the legal, valid and binding
obligation of such party enforceable against such party in accordance with its
terms.
(d) No Default or Event of Default has occurred or is continuing or will
occur as a result of (1) the execution and delivery of this consent and
agreement, or (2) the consummation of the transactions contemplated hereby.
This consent and agreement shall become effective upon the date (the "Effective
Date") upon which there shall have been delivered to MetLife each of the
following:
(a) a copy or counterpart copies of this consent and agreement, duly
executed by the Company and the Guarantors;
(b) a duly executed copy of a Sixth Amendment to Credit Agreement from the
Banks, substantially in the form of Annex 1 hereto, which Sixth Amendment to
Credit Agreement shall be in full force and effect, together with evidence
satisfactory to MetLife of such fact;
(c) evidence satisfactory to MetLife that none of the Banks, the Security
Agent or the Agent (as defined in the Bank Agreement), in providing the Sixth
Amendment to Credit Agreement referred to above, has received or will receive
any compensation therefor, by way of amendment or waiver fee or otherwise, or if
in fact any of the Banks, the Security Agent or the Agent has received or will
receive such compensation, an equivalent payment is made to MetLife;
4
<PAGE>
(d) a counterpart of this consent and agreement, acknowledged and agreed
to by the Agent and the Banks; and
(e) from each of Big Wave, the Company and the Parent, certified copies of
such corporate resolutions and authorizations as are furnished to the Agent or
the Banks or as MetLife may reasonably request.
In the event the Effective Date shall not have occurred on or before March 31,
1997, then this consent and agreement shall, at the election of MetLife, as
evidenced by written notice of such election delivered by MetLife to the
Company, terminate and be of no further force or effect. By its execution
hereof, the Company agrees to promptly notify MetLife if the Sixth Amendment to
Credit Agreement referred to above is terminated pursuant to paragraph 6
thereof.
The representations, warranties, covenants and agreements of the Company, the
Parent and Big Wave set forth herein shall survive the Effective Date.
This consent and agreement shall be governed by and construed in accordance with
the laws of the State of New York.
5
<PAGE>
This consent and agreement may be executed in counterparts and such counterparts
shall, when taken together, constitute one and the same agreement.
Very truly yours,
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ JACQUELINE JENKINS
---------------------------------
ACKNOWLEDGED AND AGREED TO
this 28th day of March, 1997.
CHART HOUSE, INC.
By: /s/ JAMES C. WENDLER
-------------------------------
Name: James C. Wendler
-----------------------------
Title: Assistant Secretary
-----------------------------
CHART HOUSE ENTERPRISES, INC.
By: /s/ JAMES C. WENDLER
-------------------------------
Name: James C. Wendler
------------------------------
Title: Vice President
-----------------------------
BIG WAVE, INC.
By: /s/ JAMES C. WENDLER
--------------------------------
Name: James C. Wendler
-------------------------------
Title: Treasurer and Asst. Secretary
------------------------------
SANWA BANK CALIFORNIA
as Agent and Security Agent
By: /s/ DAVID BEALL
--------------------------------
Name: David Beall
------------------------------
Title: Vice President
------------------------------
6
<PAGE>
SANWA BANK CALIFORNIA
By: /s/ DAVID BEALL
--------------------------------
Name: David Beall
------------------------------
Title: Vice President
------------------------------
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ THOMAS F. FARLEY, JR.
--------------------------------
Name: Thomas F. Farley, Jr.
-------------------------------
Title: Director
------------------------------
THE SUMITOMO BANK OF CALIFORNIA
By: /s/ MATTHEW VAN STEENHUYSE
---------------------------------
Name: Matthew Van Steenhuyse
-------------------------------
Title: Vice President
------------------------------
7
<PAGE>
EXHIBIT 10.19(1)
STOCK PURCHASE AND SALE AGREEMENT
DATED AS OF MARCH 10, 1997
BETWEEN
CHART HOUSE ENTERPRISES, INC.,
CHART HOUSE INVESTORS, LLC
AND
ALPHA/ZFT PARTNERSHIP
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. PURCHASE AND SALE OF INITIAL SHARES AND
ADDITIONAL SHARES................................................. 1
1.1 Purchase and Sale of Initial Shares............................... 1
1.2 Purchase and Sale of Additional Shares............................ 2
1.3 Closings.......................................................... 2
1.4 Definitions....................................................... 2
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................... 2
2.1 Organization and Qualification; Subsidiaries...................... 2
2.2 Capitalization of the Company and Its Subsidiaries................ 3
2.3 Authority Relative to This Agreement.............................. 4
2.4 Non-Contravention; Required Filings and Consents.................. 4
2.5 SEC Reports....................................................... 5
2.6 Absence of Certain Changes........................................ 6
2.7 Brokers........................................................... 6
2.8 Absence of Litigation............................................. 6
2.9 Taxes............................................................. 7
2.10 Employee Benefits................................................. 7
2.11 Environmental Matters............................................. 9
2.12 Intellectual Property............................................. 10
2.13 Material Contracts................................................ 10
2.14 Compliance........................................................ 10
2.15 Related Party Transactions........................................ 11
2.16 Real Property..................................................... 11
2.17 Labor Matters..................................................... 12
2.18 Takeover Status................................................... 13
2.19 Voting Requirements............................................... 13
2.20 Compliance with Securities Laws................................... 13
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND ALPHA............. 13
3.1 Organization...................................................... 13
3.2 Authority Relative to this Agreement.............................. 13
3.3 Non-Contravention; Required Filings and Consents.................. 14
3.4 Brokers........................................................... 14
3.5 Absence of Litigation............................................. 14
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.6 Investment Intent................................................. 14
ARTICLE 4. COVENANTS......................................................... 15
4.1 Conduct of the Business........................................... 15
4.2 No Solicitation................................................... 16
4.3 Notification of Certain Matters................................... 17
4.4 Access to Information............................................. 17
4.5 Reasonable Best Efforts........................................... 18
4.6 Public Announcements.............................................. 18
4.7 Stockholders' Meeting............................................. 18
4.8 Board of Directors................................................ 19
4.9 New York Stock Exchange Listing................................... 19
4.10 Limitations on Transfer of Initial Shares and Additional Shares... 19
4.11 Expense Reimbursement and Break-Up Fee............................ 20
4.12 Use of Proceeds................................................... 20
4.13 Guarantee of Alpha................................................ 20
ARTICLE 5. CONDITIONS PRECEDENT.............................................. 21
5.1 Conditions to Each Party's Obligations with Respect to Sale
and Purchase of the Initial Shares............................... 21
5.2 Conditions to the Obligation of Purchaser with Respect to
Purchase of the Initial Shares................................... 21
5.3 Conditions to the Obligation of the Company with Respect
to Sale of the Initial Shares.................................... 22
5.4 Conditions to Each Party's Obligations with Respect to Sale
and Purchase of the Additional Shares............................ 22
5.5 Conditions to the Obligation of Purchaser with Respect to
Purchase of the Additional Shares................................ 23
5.6 Conditions to the Obligation of the Company with Respect
to Sale of the Additional Shares................................. 23
ARTICLE 6. INDEMNIFICATION; REMEDIES.......................................... 23
6.1 Survival of Representations and Warranties........................ 23
6.2 Indemnification and Payment of Damages by the Company............. 23
6.3 Indemnification and Payment of Damages by Purchaser............... 24
6.4 Time Limitations.................................................. 24
6.5 Limitations On Amount............................................. 24
6.6 Other Limitations................................................. 25
6.7 Procedure for Indemnification..................................... 25
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 7. DEFINITIONS......................................................... 25
7.1 Definitions......................................................... 25
ARTICLE 8. MISCELLANEOUS....................................................... 28
8.1 Termination......................................................... 28
8.2 Procedure upon Termination.......................................... 28
8.3 Abandonment of Additional Closing................................... 28
8.4 Amendment........................................................... 29
8.5 Extension; Waiver................................................... 29
8.6 Execution in Counterparts; Facsimile Signatures..................... 29
8.7 Notices............................................................. 29
8.8 Waivers............................................................. 31
8.9 Publicity........................................................... 31
8.10 Severability........................................................ 31
8.11 Applicable Law...................................................... 31
8.12 Headings............................................................ 31
8.13 Entire Agreement.................................................... 31
8.14 Assignment, Etc..................................................... 31
8.15 No Third-Party Rights............................................... 31
</TABLE>
EXHIBITS
Exhibit A Standstill Agreement between Purchaser and the Company
iii
<PAGE>
STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT (the "Agreement"), dated as of March
10, 1997, between CHART HOUSE ENTERPRISES, INC., a Delaware corporation (the
"Company"), CHART HOUSE INVESTORS, LLC, a Delaware limited liability company
("Purchaser"), and, solely for purposes of Section 4.13 of this Agreement,
ALPHA/ZFT PARTNERSHIP, an Illinois general partnership ("Alpha").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and Purchaser desire to effect the sale and purchase
of newly issued shares of Common Stock of the Company, par value $0.01 per share
(the "Common Stock"), as described herein, which sale and purchase will be
accomplished in two installments and will result in Purchaser owning 29.2% of
the capital stock of the Company outstanding after completion of both
installments of such sale and purchase;
WHEREAS, as the first installment of such sale and purchase, the Company
will issue to Purchaser, and Purchaser will purchase from the Company, 1,641,750
newly issued shares of Common Stock (the "Initial Shares"), on the terms and
subject to the conditions set forth herein;
WHEREAS, as the second installment of such sale and purchase, the Company
will issue to Purchaser, and Purchaser will purchase from the Company, 1,758,250
newly issued shares of Common Stock (the "Additional Shares"), which taken
together with the Initial Shares shall collectively equal 29.2% of the
outstanding Common Stock after issuance of the Initial Shares and the Additional
Shares, on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises, representations and
warranties and the mutual covenants and agreements set forth herein and other
good and valuable consideration the receipt of which is hereby acknowledged,
each of the parties hereto agrees as follows:
ARTICLE 1. PURCHASE AND SALE OF INITIAL SHARES
AND ADDITIONAL SHARES; CLOSINGS; DEFINITIONS
1.1 Purchase and Sale of Initial Shares. Subject to the applicable terms
-----------------------------------
and conditions set forth herein, the Company hereby agrees to issue and sell to
Purchaser, and Purchaser hereby agrees to purchase from the Company, the Initial
Shares, free and clear of all liens, claims, encumbrances and pre-emptive
rights, other than any created by Purchaser. In consideration for the Initial
Shares, Purchaser hereby agrees to pay to the Company, in cash, a purchase price
of $5.75 per share for the Initial Shares, for an aggregate purchase price of
$9,440,063 (the "Initial Purchase Price").
<PAGE>
1.2 Purchase and Sale of Additional Shares. Subject to the applicable
--------------------------------------
terms and conditions set forth herein, the Company hereby agrees to issue and
sell to Purchaser, and Purchaser hereby agrees to purchase from the Company, the
Additional Shares, free and clear of all liens, claims, encumbrances and pre-
emptive rights, other than any created by Purchaser. In consideration for the
Additional Shares, Purchaser hereby agrees to pay to the Company, in cash, a
purchase price of $5.75 per share for the Additional Shares, for an aggregate
purchase price of $10,109,937 (the "Additional Purchase Price").
1.3 Closings. (a) The closing of the issuance of the Initial Shares (the
--------
Initial Closing") shall take place at the offices of Seyfarth, Shaw, Fairweather
& Geraldson, located at 55 East Monroe Street, Chicago, Illinois, on the date of
execution of this Agreement (the "Initial Closing Date") or such other place or
date as the parties may mutually agree. At the Initial Closing, Purchaser shall
pay the Initial Purchase Price for the Initial Shares to the Company by wire
transfer of immediately available funds to the account or accounts of the
Company previously specified by the Company to Purchaser, and the Company shall
deliver to Purchaser certificates representing the Initial Shares registered in
the name of Purchaser and bearing the legend described in Section 4.10 hereof.
(b) The closing of the issuance of the Additional Shares (the
"Additional Closing") shall take place at the location specified in paragraph
(a) above, on the day (the "Additional Closing Date") which is the third
business day following satisfaction, or waiver by the affected party, of each
condition to the obligations of Purchaser and the Company to consummate such
issuance as specified in this Agreement, or such other place or date as the
parties may mutually agree. At the Additional Closing, Purchaser shall pay the
Additional Purchase Price for the Additional Shares to the Company by wire
transfer of immediately available funds to the account or accounts of the
Company previously specified by the Company to Purchaser, and the Company shall
deliver to Purchaser certificates representing the Additional Shares, registered
in the name of Purchaser and bearing the legend described in Section 4.10
hereof.
1.4 Definitions. Certain terms not otherwise defined in this Agreement
-----------
shall have the meanings ascribed thereto in Article 7 hereof.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company hereby represents and warrants to Purchaser as follows:
2.1 Organization and Qualification; Subsidiaries.
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2.1.1 Each of the Company and each of its subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
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2.1.2 Each of the Company and each of its subsidiaries is duly qualified
or licensed and in good standing to do business in each jurisdiction (including
any foreign country) in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed and in good
standing would not reasonably be expected to have a Material Adverse Effect.
2.1.3 The Company has heretofore furnished to Purchaser complete and
correct copies of the Certificate of Incorporation and By-Laws, or other
equivalent organizational documents, as amended, for the Company and each of its
subsidiaries. Such organizational documents are in full force and effect and no
other organizational documents are applicable to or binding upon the Company or
any of its subsidiaries. None of the Company or any of its subsidiaries are in
violation of any of the provisions of its respective organizational documents.
2.1.4 Except as set forth on Schedule 2.1.4 and except for the ownership
of the capital stock of its subsidiaries by the Company, none of the Company or
any of its subsidiaries owns any direct or indirect economic or voting interest
in any person, except for investments of less than 1% of any corporation listed
on a national securities exchange.
2.2 Capitalization of the Company and Its Subsidiaries. The authorized
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capital stock of the Company consists of (i) 30,000,000 shares of Common Stock,
par value $.01 per share, of which, as of the date of this Agreement, 8,262,513
shares of Common Stock are issued and outstanding and (ii) 10,000,000 shares of
Preferred Stock, par value $1.00 per share, of which, as of the date of this
Agreement, no shares are issued and outstanding. All outstanding shares of
Common Stock have been duly authorized and validly issued, and are fully paid
and nonassessable. As of the date of this Agreement, Employee Options to
purchase an aggregate of 610,500 shares of Common Stock are outstanding and
warrants to purchase 435,000 shares of Common Stock are outstanding and held by
Metropolitan Life Insurance Company, First Boston LBO, Inc. or their successors
and assigns (the "Warrants"). Except as set forth above and except as set forth
on Schedule 2.2, there are outstanding (i) no shares of capital stock or other
voting securities of the Company, (ii) no securities of the Company convertible
into or exchangeable for shares of capital stock or voting securities of the
Company, (iii) no written or oral options, subscriptions, warrants, convertible
securities, calls, preemptive or rescission rights or other rights to acquire
from the Company, and no obligation of the Company to issue, deliver or sell,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company, and (iv) no
equity equivalents (including, without limitation, stock appreciation rights),
interests in the ownership or earnings of the Company or other similar rights
(collectively, "Company Securities"). There are no outstanding obligations of
the Company or any of its subsidiaries to repurchase, redeem or otherwise
acquire any Company Securities. Except as set forth on Schedule 2.2, each of
the outstanding shares of capital stock of each of the Company's subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and is directly or
indirectly owned by the Company, free and clear of all
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Liens. There are no existing options, calls or commitments of any character
relating to the issued or unissued capital stock or other securities of any
subsidiary of the Company. No bonds, debentures, notes or other indebtedness of
the Company or any of its subsidiaries having the right to vote (or convertible
into, or exchangeable for securities having the right to vote) on any matters on
which the stockholders of the Company may vote are issued or outstanding. The
number of shares of Common Stock constituting the Initial Shares shall be equal
to 19.9% of the outstanding shares of Common Stock at the time of the Initial
Closing, without giving effect to the issuance of the Initial Shares. The
Initial Shares and the Additional Shares shall constitute 29.2% of the
outstanding shares of Common Stock at the time of the Additional Closing, after
giving effect to the issuance of the Initial Shares and the Additional Shares,
but before giving effect to any other issuances after the date hereof pursuant
to exercise of Employee Options or the Warrants or pursuant to the 1996
Nonemployee Directors Stock Compensation Plan.
2.3 Authority Relative to This Agreement. The Company has all necessary
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corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company (the "Board") and no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement or to consummate the transactions so contemplated, other than, with
respect to issuance to Purchaser of the Additional Shares in accordance with the
terms of this Agreement, the stockholder approval specified in Section 5.4.1.
The Board has approved the transactions contemplated hereby so as to render
inapplicable to such transactions, including, without limitation, the issuance
to Purchaser of the Initial Shares and the Additional Shares, the restrictions
contained in Section A of Article Eighth of the Certificate of Incorporation of
the Company and the restrictions contained in Section 203 of the Delaware
General Corporation Law. This Agreement has been duly and validly executed and
delivered by the Company and constitutes a legal, valid and binding agreement of
the Company enforceable against the Company in accordance with its terms and the
other agreements and instruments to be executed, delivered and performed by the
Company in connection with the transactions contemplated hereby will constitute
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their terms. Upon the issuance thereof, the Initial
Shares and the Additional Shares shall have been duly authorized and validly
issued, and will be fully paid, nonassessable and free of all Liens, other than
any created by Purchaser, and free of all preemptive and rescission rights.
2.4 Non-Contravention; Required Filings and Consents.
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2.4.1 The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby do not
and will not (i) contravene or conflict with, result in the breach of any of the
terms or conditions of, or constitute a default under, the organizational
documents of the Company or any of its
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subsidiaries; (ii) assuming that all consents, authorizations and approvals
contemplated by Section 2.4.2 have been obtained and all filings described
therein have been made, contravene or conflict with or constitute a violation of
any provision of any law, statute, regulation, rule, ordinance, judgment,
injunction, writ, award, order or decree binding upon or applicable to the
Company, any of its subsidiaries or any of their respective properties; (iii)
assuming that the stockholder approval specified in Section 5.4.1 has been
obtained, conflict with, or result in the breach or termination of any provision
of or constitute a default (with or without the giving of notice or the lapse of
time or both) under, or give rise to any right of modification, termination,
cancellation, or loss of any benefit to which the Company or any of its
subsidiaries is entitled under any provision of, any agreement, contract,
license or other instrument binding upon the Company, any of its subsidiaries or
any of their respective properties, or allow the acceleration of the performance
or maturity of any obligation of the Company or any of its subsidiaries under
any indenture, mortgage, deed of trust, lease, license, contract, instrument or
other agreement to which the Company or any of its subsidiaries is a party or by
which the Company, any of its subsidiaries or any of their respective assets or
properties is subject or bound; or (v) result in the creation or imposition of
any Lien on any asset or property of the Company or any of its subsidiaries.
2.4.2 Except as set forth on Schedule 2.4, the execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby require no action by or in respect of, or
filing with, or notice to, any governmental body, agency, official or authority
(either domestic or foreign) other than compliance with any applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act").
2.5 SEC Reports.
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2.5.1 The Company has filed all required forms, reports and documents with
the SEC since December 31, 1993 (collectively, the "SEC Reports"), each of which
has complied with applicable requirements of the Securities Act and the Exchange
Act. As of their respective dates, none of the SEC Reports, including, without
limitation, any financial statements or schedules included therein, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited
consolidated interim financial statements of the Company included in the SEC
Reports fairly present, in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and their consolidated results
of operations and cash flows for the periods then ended (subject to normal year-
end adjustments in the case of any unaudited interim financial statements). The
Company has previously provided complete and correct copies of each of the SEC
Reports filed on or prior to the date of this Agreement to Purchaser.
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2.5.2 Except as reflected or reserved against in the consolidated balance
sheet of the Company and its subsidiaries as of December 30, 1996 previously
provided to Purchaser by the Company (the "December 30 Financials"), the Company
and its subsidiaries have no liabilities of any nature (whether arising out of
contract, tort, statute or otherwise and whether direct or indirect, accrued,
matured or unmatured, asserted or unassorted, absolute, contingent or otherwise)
which would be required to be reflected on a balance sheet prepared in
accordance with generally accepted accounting principles (all of such
liabilities being collectively referred to as "Liabilities"), except for
Liabilities incurred in the ordinary course of business since December 30, 1996
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
2.6 Absence of Certain Changes. Since September 30, 1996, except as
--------------------------
specifically disclosed in the SEC Reports filed on or prior to the date of this
Agreement or as disclosed in the December 30 Financials, neither the Company nor
any of its subsidiaries has entered into any transaction, or conducted its
business or operations, other than in the ordinary course of business consistent
with past practice. Since September 30, 1996, except as specifically disclosed
in the SEC Reports filed on or prior to the date of this Agreement or as
disclosed in the December 30 Financials, there has not been any material adverse
change in the business, assets, liabilities, results of operations, properties,
financial or operating condition or prospects of the Company and its
subsidiaries, taken as a whole, nor has there been any material adverse change
in the ability of the Company to perform its obligations under this Agreement or
consummate the transactions contemplated hereby.
2.7 Brokers. No broker, finder, investment banker or other person (other
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than Alex. Brown & Sons, Incorporated) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
2.8 Absence of Litigation. Except as specifically disclosed in the SEC
---------------------
Reports filed on or prior to the date of this Agreement or as set forth on
Schedule 2.8 to this Agreement, there is no action, suit, claim, arbitration,
investigation or proceeding pending against, or to the knowledge of the Company,
threatened against or affecting, the Company or any of its subsidiaries or any
of their respective businesses or properties before any court or arbitrator or
any administrative, regulatory or governmental body, or any agency or official
which (i) individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect on the Company; (ii) in any manner challenges or seeks
to prevent, enjoin, alter or delay any of the transactions contemplated hereby;
or (iii) alleges criminal action or inaction by the Company, any of its
subsidiaries or any of their directors, officers or employees. Except as
specifically disclosed in the SEC Reports filed on or prior to the date of this
Agreement, or as set forth on Schedule 2.8 to this Agreement, neither the
Company nor any of its subsidiaries nor any of their respective businesses or
properties are subject to any order, writ, judgment, injunction, decree,
determination or award having, or which would reasonably be expected to have, a
Material Adverse Effect on the Company or
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which would interfere with the consummation of the transactions contemplated by
this Agreement.
2.9 Taxes. Each of the Company and its subsidiaries has filed all
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federal, state, county, local and foreign tax returns and reports, or requests
for extensions to file such returns and reports, which the Company and its
subsidiaries were required to have filed on or before the date hereof. All tax
returns and reports filed by the Company or its subsidiaries are complete and
accurate, except where the failure so to be complete and accurate would not
reasonably be expected to have a Material Adverse Effect. The Company and each
of its subsidiaries have paid (or the Company has paid on behalf of its
subsidiaries) or has made adequate provision for the payment of all taxes shown
as due on such returns and reflected in the most recent financial statements
contained in the SEC Reports for all taxable periods and portions thereof
accrued through the date of such financial statements. No deficiencies for any
taxes or any penalties, interest or assessments have been proposed, asserted or
assessed against the Company or its subsidiaries that are not adequately
reserved for, pursuant to such returns or reports or pursuant to any assessment
received with respect thereto. Except as set forth on Schedule 2.9, there is no
pending audit or examination of any tax return of the Company or any of its
subsidiaries by any Governmental Authority, nor has the Company or any of its
subsidiaries received written notice of any such audit or examination and there
are no unexpired waivers or agreements for the extension of time for the
assessment of taxes on the Company or any of its subsidiaries or extension of
any statute of limitations with respect to any taxes, and there are no pending
nor has the Company or any of its subsidiaries received any written notice of
any threatened actions, proceedings or investigations by any Governmental
Authority with respect to taxes.
2.10 Employee Benefits.
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2.10.1 The Company has delivered to the Purchaser copies (or if the same
do not exist in written form, descriptions) of each formal, informal, oral or
written bonus, deferred compensation, incentive compensation, stock purchase,
stock option, restricted stock purchase or other issuance, severance or
termination pay, hospitalization or other medical, life or other insurance (or
similar self-insurance), supplemental unemployment benefits, profit-sharing,
employee stock ownership, pension, or retirement plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement whether for the benefit of present or former officers, employees,
agents, directors or independent contractors of the Company or any of its
subsidiaries or any ERISA Affiliate, sponsored, maintained or contributed to or
required to be contributed to by the Company or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that together with the
Company would be deemed a "single employer" within the meaning of Section
4001(b) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or Section 414 of the Code (collectively, the "Plans"). Each of the
Plans that is an "employee benefit plan," as that term is defined in section
3(3) of ERISA is collectively referred to herein as "ERISA Plans."
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2.10.2 No material liability under Title IV of ERISA has been incurred by
the Company or any ERISA Affiliate that has not been satisfied in full, and no
condition exists that presents a material risk to the Company or any ERISA
Affiliate of incurring a material liability under such Title, other than
liability for premiums due the Pension Benefit Guaranty Corporation ("PBGC")
(which premiums have been paid when due). To the extent this representation
applies to sections 4064, 4069 or 4204 of Title IV of ERISA, it is made not only
with respect to each ERISA Plan but also with respect to any employee benefit
plan, program, agreement or arrangement subject to Title IV of ERISA to which
the Company or any ERISA Affiliate made, or was required to make, contributions
during the five-year period ending on the Initial Closing Date. Neither the
Company nor any ERISA Affiliate is required to contribute to a "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA) or has withdrawn from any
multiemployer plan where such withdrawal has resulted or would result in any
"withdrawal liability" (within the meaning of Title IV of ERISA) that has not
been fully paid.
2.10.3 The PBGC has not instituted proceedings to terminate any ERISA Plan
and no condition exists that presents a material risk that such proceedings will
be instituted.
2.10.4 Neither the Company nor any ERISA Affiliate, nor any ERISA Plan,
nor any trust created thereunder, nor any trustee or administrator thereof has
engaged in a transaction in connection with which the Company or any ERISA
Affiliate, any ERISA Plan, any such trust, or any trustee or administrator
thereof, or any party dealing with any ERISA Plan or any such trust could
reasonably be subject to either a material civil penalty assessed pursuant to
section 409 or 502(i) of ERISA or a material tax imposed pursuant to section
4975 or 4976 of the Code.
2.10.5 No ERISA Plan or any trust established thereunder has incurred any
"accumulated funding deficiency" (as defined in section 302 of ERISA and section
412 of the Code), whether or not waived, as of the last day of the most recent
fiscal year of each ERISA Plan, which could reasonably be expected to result in
a material liability to the Company; and all contributions required to be made
with respect thereto (whether pursuant to the terms of any ERISA Plan or
otherwise) have been timely made.
2.10.6 Each Plan has been operated and administered in accordance with its
terms and applicable law in all material respects, including, but not limited
to, ERISA and the Code. No Plan is subject to any material dispute or
proceeding other than relating to a routine claim for benefits.
2.10.7 Except as set forth on Schedule 2.10.7, there are no material
pending or (to the knowledge of the Company) threatened claims by or on behalf
of any Plan, by any employee or beneficiary covered under any such Plan, or
otherwise involving any such Plan (other than routine claims for benefits).
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2.10.8 No fact exists that could reasonably be expected to result in the
disqualification of any Plan that is intended to be qualified under Section
401(a) of the Code.
2.11 Environmental Matters. Except as set forth on Schedule 2.11 and other
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than any such exceptions to any of the following representations as would not
reasonably be expected to result in a Material Adverse Effect, to the knowledge
of the Company:
2.11.1 There does not exist at, on, under or about any of the Real
Property (as defined below), nor has there been any release of, any flammables,
contaminants, gasoline, petroleum products, crude oil, explosives, radioactive
materials, hazardous materials, hazardous wastes, hazardous or toxic substances,
polychlorinated biphenyls or related or similar materials, asbestos or any
material containing asbestos, any underground storage tanks, any air, soil or
water pollution or any other substance or material as may be defined as a
hazardous or toxic substance under any federal, state or local governmental law,
rule, regulation or ordinance, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Section 1801, et. seq.), the Resource Conservation and
Recovery Act, as amended (42 U.S.C. Sections 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. Sections 1251 et seq.), the Clean Air Act (42
U.S.C. Sections 7401 et seq.) (collectively, "Hazardous Materials"), other than
materials which have been stored and used in material compliance with applicable
laws, rules, regulations and ordinances. None of the Real Property has been
used to generate, manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce, process or in any manner deal with Hazardous Materials, other
than materials which have been stored and used in material compliance with
applicable laws, rules, regulations and ordinances. To the Company's knowledge,
there are no Hazardous Materials located off the Real Property which originated
therefrom. Neither the Company nor any of its subsidiaries has received any
written citation, directive, notice, order, summons or warning from any
Governmental Authority that Hazardous Materials have been stored or used in
noncompliance with applicable laws, rules, regulations or ordinances.
2.11.2 Neither the Company nor its subsidiaries have received any written
citation, inquiry, order, notice, warning or other communication from (i) any
Governmental Authority, or (ii) the current or prior owner or operator of any of
the Real Property, of any actual or potential violation or failure to comply
with any Environmental Law, or of any actual or threatened obligation to
undertake or bear the cost of any liability under any Environmental Law with
respect to any of the Real Property or any other properties or assets (whether
real, personal, or mixed) in which the Company or its subsidiaries has or had an
interest.
2.11.3 To the Company's knowledge, there are no existing or threatened
claims, encumbrances or other restrictions of any nature, arising under or
pursuant to any Environmental Law with respect to any of the Real Property or
any other properties and
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assets (whether real, personal, or mixed) in which the Company or its
subsidiaries has or had an interest.
2.12 Intellectual Property. Except as set forth on Schedule 2.12 and other
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than any such exceptions to any of the following representations as would not
reasonably be expected to result in a Material Adverse Effect: (1) the Company
and each of its subsidiaries owns, or is licensed to use (in each case, free and
clear of any Liens), all Intellectual Property used in or necessary for the
conduct of its business as currently conducted; (2) to the knowledge of the
Company, the use of any Intellectual Property by the Company and its
subsidiaries does not infringe on or otherwise violate the rights of any person;
and (3) to the knowledge of the Company, no person is challenging, infringing on
or otherwise violating any right of the Company or any of its subsidiaries with
respect to any Intellectual Property owned by and/or licensed to the Company or
any of its subsidiaries.
2.13 Material Contracts. Except as set forth on Schedule 2.13, the Company
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has provided or made available to Purchaser (i) true and complete copies of all
written contracts, agreements (including, but not limited to, agreements
relating to the purchase of food, ingredients and other supplies), commitments,
arrangements, leases (including with respect to personal property) and other
instruments to which it or any of its subsidiaries is a party or by which it or
any such subsidiary is bound (A) which require payments to be made in excess of
$500,000 per year for goods and/or services (including, without limitation,
services performed by employees and independent contractors), (B) do not by
their terms expire and are not subject to termination (without penalty to the
Company or its subsidiaries as the case may be) within six months from the date
of the execution and delivery thereof and require payments to be made in excess
of $500,000, or (C) to which any director, officer or holder of more than 5% of
the outstanding shares of Common Stock or any of their respective affiliates
(other than the Company and its subsidiaries) are a party (the agreements set
forth in (A) through (C) being collectively referred to herein as "Material
Contracts"). Except as set forth on Schedule 2.13, each Material Contract is in
full force and effect, enforceable in accordance with its terms, and neither the
Company nor any of its subsidiaries is, or has received any notice or has any
knowledge that any other party is, in default in any material respect under or
in material breach of any such Material Contract; and there has not occurred any
event that with the lapse of time or the giving of notice or both would
constitute such a material default or breach. To the Company's knowledge, no
party to any Material Contract has threatened to terminate such contract.
2.14 Compliance. Except as set forth on Schedule 2.14 and other than any
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such exceptions to any of the following representations as would not reasonably
be expected to result in a Material Adverse Effect: (a) neither the Company nor
any of its subsidiaries is in violation of, nor has the Company or any of its
subsidiaries violated, any applicable provisions of any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise, or other
instrument or obligations to which the Company or any of its subsidiaries is a
party or by which the Company, any of its subsidiaries or any of their
respective properties are bound or affected; (b) the Company and each of its
subsidiaries has
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in effect all federal, state, local and foreign governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices, permits
and rights ("Permits") necessary for it to own, lease or operate its properties
and assets and to carry on its business as now conducted, and there has occurred
no default under any such Permit; (c) except as disclosed in the SEC Reports
filed on or prior to the date of this Agreement, the Company and its
subsidiaries are in compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of any Governmental Authority, including, without
limitation, those that govern the operation of restaurants; and (d) except as
disclosed in the SEC Reports filed on or prior to the date of this Agreement, as
of the date of this Agreement, no investigation by any Governmental Authority
with respect to the Company or any of its subsidiaries is pending or threatened.
2.15 Related Party Transactions. Except as set forth on Schedule 2.15 and
--------------------------
except as disclosed in the SEC Reports, no director, officer, more than 5%
shareholder or affiliate of the Company or any of its subsidiaries (i) has
borrowed any monies from or has outstanding any indebtedness or other similar
obligations to the Company or any of its subsidiaries; (ii) owns more than a 5%
equity interest in, or is a director, officer, employee, partner, affiliate or
associate of, or consultant or lender to, or borrower from, or has the right to
participate in the management, operations or profits of, any person which is a
competitor, supplier, customer, distributor, lessor, tenant, creditor or debtor
of the Company or any of its subsidiaries; or (iii) is otherwise a party to any
contract, arrangement or understanding with the Company or any of its
subsidiaries, in all cases other than travel and other expenses and
reimbursements, company car charges and other similar transactions which are
customary in amount and in the ordinary course of business.
2.16 Real Property.
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2.16.1 The Company and each of its subsidiaries has good and marketable
title to each parcel of real property owned by it free and clear of all Liens,
except (1) to the extent reflected or reserved against in the most recent
balance sheet of the Company included in the SEC Reports filed on or prior to
the date of this Agreement; (2) taxes and general and special assessments not in
default and payable without penalty and interest or being contested in good
faith; (3) mechanics', carriers', workmen's, repairmen's or other like Liens
arising or incurred in the ordinary course of business with respect to
liabilities that are not yet due or delinquent, or which are being contested in
good faith by appropriate proceedings; (4) leases to third parties; (5) as set
forth on Schedule 2.16; and (6) other liens, mortgages, pledges, encumbrances
and security interests which do not materially interfere with the Company's, or
any of its subsidiaries', use and enjoyment of such real property or materially
detract from or diminish the value thereof.
2.16.2 The Company has previously delivered to Purchaser correct and
complete copies of all leases, subleases and other agreements (the "Real
Property Leases") under which the Company or any of its subsidiaries uses or
occupies or has the right to use or occupy, now or in the future, any real
property (including all modifications, amendments and
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supplements thereto). Each Real Property Lease is valid, binding and in full
force and effect and, to the knowledge of the Company, no termination event or
condition or uncured default on the part of the Company or any such subsidiary
or the landlord, exists under any Real Property Lease. Each of the Company and
its subsidiaries has a good and valid leasehold interest in each parcel of real
property leased by it free and clear of all Liens, except (i) to the extent
reflected or reserved against in the most recent balance sheet of the Company
included in the SEC Reports filed on or prior to the date of this Agreement,
(ii) taxes and general and special assessments not in default and payable
without penalty and interest or being contested in good faith; (iii) mechanics',
carriers', workmen's, repairmen's or other like Liens arising or incurred in the
ordinary course of business with respect to liabilities that are not yet due or
delinquent, or which are being contested in good faith by appropriate
proceedings, (iv) leases to third parties, (v) as set forth on Schedule 2.16,
and (vi) other liens, mortgages, pledges, encumbrances and security interests
which do not materially interfere with the Company's or any of its subsidiaries'
use and enjoyment of such real property or materially detract from or diminish
the value thereof. All of the real property owned by the Company or its
subsidiaries together with all real property subject to the Real Property Leases
is collectively referred to as the "Real Property".
2.16.3 Except as set forth on Schedule 2.16 and other than any such
exceptions to any of the following representations as would not reasonably be
expected to result in a Material Adverse Effect: (a) none of the Real Property
or the businesses conducted by the Company and its subsidiaries thereon are in
material violation of any use or occupancy restriction, limitation, condition or
covenant of record or any zoning or building law, code or ordinance or public
utility easement; (b) there are no material challenges or appeals pending
regarding the amount of the taxes on, or the assessed valuation of, the Real
Property and no special arrangements or agreements exist with any governmental
authority with respect thereto; (c) there are no condemnation proceedings
pending or, to the best of the Company's knowledge, threatened with respect to
any portion of the Real Property; and (d) there is no tax assessment (in
addition to the normal, annual general real estate tax assessment) pending or,
to the best of the Company's knowledge, threatened with respect to any portion
of the Real Property.
2.17 Labor Matters. Except as set forth on Schedule 2.17 and other than
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any such exceptions to any of the following representations as would not result
in a Material Adverse Effect: (a) the Company and each of its subsidiaries is
(i) in compliance with all federal and state laws respecting (A) employment and
employment practices (including immigration laws relevant to employment), and
(B) terms and conditions of employment and wages and hours, and (ii) not engaged
in any unfair labor practice; (b) there is no unfair labor practice charge or
complaint against the Company or any of its subsidiaries pending before the
National Mediation Board, the National Labor Relations Board, or any comparable
state or local agency, (c) there is no (x) labor strike, dispute, slow down or
stoppage actually pending or, to the knowledge of the Company, threatened
against or involving the Company or any of its subsidiaries, or (y) labor
grievance or pending arbitration involving the Company or any of its
subsidiaries; (d) neither the Company nor any of its subsidiaries has
experienced any work
12
<PAGE>
stoppage or other material labor difficulty during the three-year period prior
to the date of this Agreement; (e) there are no collective bargaining
agreements, union contracts or similar types of agreements by which the Company
or any of its subsidiaries is bound or covered; (f) there are no union
representation petitions pending before the National Labor Relations Board, and
no union within the past three years has sought or demanded recognition by the
Company or any of its subsidiaries; and (g) there is no union organizing
activity, to the knowledge of the Company, currently in progress involving the
Company or any of its subsidiaries.
2.18 Takeover Status. No "fair price", "moratorium", "control share
---------------
acquisition" or other similar anti-takeover statute or regulation enacted under
state or federal laws in the United States (each a "Takeover Statute"),
including, without limitation, Section 203 of the Delaware General Corporation
Law, applicable to the Company or any of its subsidiaries is applicable to the
transactions contemplated hereby.
2.19 Voting Requirements. The stockholder approval specified in Section
-------------------
5.4.1 is the only vote of the holders of any class or series of the Company's
securities necessary to approve this Agreement and the transactions contemplated
hereby.
2.20 Compliance with Securities Laws. The Company has not taken, and will
-------------------------------
not take, any action which would subject the sale of the Initial Shares or the
Additional Shares pursuant to this Agreement to the provisions of Section 5 of
the Securities Act, or violate the registration or qualification provisions of
any securities or blue sky laws of any applicable jurisdiction, and, based in
part on the representations of Purchaser in Section 3.6 hereof, the sale of the
Initial Shares and the Additional Shares pursuant to this Agreement complies
with all applicable requirements of federal and state securities and blue sky
laws.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF
PURCHASER AND ALPHA
Purchaser and Alpha hereby jointly and severally represent and warrant to
the Company as follows:
3.1 Organization. Purchaser is a limited liability company duly
------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Purchaser has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Alpha is a validly existing general partnership under the laws of the State of
Illinois. Alpha has all requisite power and authority to own, lease and operate
the properties and to carry on its business as now being conducted.
3.2 Authority Relative to this Agreement. Each of Purchaser and Alpha has
------------------------------------
all necessary power and authority to execute and deliver this Agreement, to
perform its respective obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the
13
<PAGE>
transactions contemplated hereby have been duly and validly authorized by the
members of Purchaser and the partners of Alpha, and no other proceedings on the
part of Purchaser or Alpha are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Purchaser and Alpha and constitutes a
legal, valid and binding agreement of Purchaser and Alpha, enforceable against
each of Purchaser and Alpha in accordance with its terms.
3.3 Non-Contravention; Required Filings and Consents.
------------------------------------------------
3.3.1 The execution, delivery and performance by Purchaser and Alpha of
this Agreement and the consummation of the transactions contemplated hereby do
not and will not (i) contravene or conflict with the organizational documents of
Purchaser or Alpha; or (ii) assuming that all consents, authorizations and
approvals contemplated by Section 3.3.2 have been obtained and all filings
described therein have been made, contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to Purchaser or Alpha or any of its
respective properties.
3.3.2 The execution, delivery and performance by Purchaser and Alpha of
this Agreement and the consummation of the transactions contemplated hereby
require no action by or in respect of, or filing with, or notice to, any
governmental body, agency, official or authority (either domestic or foreign)
other than compliance with any applicable requirements of the HSR Act.
3.4 Brokers. No broker, finder, investment banker or other person is
-------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Purchaser or Alpha.
3.5 Absence of Litigation. As of the date hereof, there is no action,
---------------------
suit, claim, investigation or proceeding pending against, or to the knowledge of
Purchaser or Alpha, threatened against or affecting Purchaser or Alpha or any of
its properties before any court or arbitrator or any administrative, regulatory
or governmental body, or any agency or official which in any manner challenges
or seeks to prevent, enjoin, alter or delay any of the transactions contemplated
hereby. As of the date hereof, neither Purchaser nor Alpha or any of its
properties is subject to any order, writ, judgment, injunction, decree,
determination or award which would prevent or delay the consummation of the
transactions contemplated hereby.
3.6 Investment Intent. Purchaser is purchasing the Initial Shares and the
-----------------
Additional Shares for its own account for investment, and not with a view to, or
for resale in connection with, any public distribution of the Initial Shares or
the Additional Shares.
14
<PAGE>
ARTICLE 4. COVENANTS
4.1 Conduct of the Business. During the period from the date of this
-----------------------
Agreement and continuing through the Additional Closing, the Company agrees as
to the Company and its subsidiaries that (except to the extent that Purchaser
shall otherwise consent in writing):
4.1.1 The Company and each of its subsidiaries shall carry on its business
in the usual, regular and ordinary course in substantially the same manner as
previously conducted and shall use all reasonable efforts to preserve intact its
present business organization, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with it.
4.1.2 The Company shall not, nor shall it permit any of its subsidiaries
to: (i) declare, set aside or pay any dividends on or make any other
distributions in respect of any of its capital stock (whether in cash, stock, or
property or any combination thereof); (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock; or (iii) redeem, repurchase or otherwise acquire any of its
securities or any securities of its subsidiaries, except as required by the
terms of its securities outstanding on the date hereof, as contemplated by this
Agreement or as contemplated by employee benefit and dividend reinvestment plans
as in effect on the date hereof.
4.1.3 The Company shall not, and shall cause its subsidiaries not to,
amend or propose to amend its Certificate of Incorporation or By-Laws or, except
as contemplated by Section 4.8 hereof or the Standstill Agreement, elect or
appoint any person a director of any of them who is not serving as such on the
date hereof.
4.1.4 The Company shall not, nor shall it permit any of its subsidiaries
to acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, except for such
transactions which involve aggregate consideration of less than $500,000.
4.1.5 Other than dispositions in the ordinary course of business
consistent with past practice which are not material, individually or in the
aggregate, to the Company and its subsidiaries taken as a whole and dispositions
of Real Property that have been approved by the Board of Directors of the
Company prior to the date hereof, and except for any other such transactions
which involve aggregate consideration of less than $500,000, the Company shall
not, nor shall it permit any of its subsidiaries to, sell, lease, encumber or
otherwise dispose of, or agree to sell, lease (whether such lease is an
operating or capital lease), encumber or otherwise dispose of, any of its
assets.
15
<PAGE>
4.1.6 The Company shall not authorize, recommend, propose or announce an
intention to adopt a plan of complete or partial liquidation or dissolution of
the Company or any of its subsidiaries.
4.1.7 The Company shall not, and shall not permit any of its subsidiaries
to, enter into any agreement providing for the acceleration of payment or
performance or other consequences as a result of any of the transactions
contemplated by this Agreement.
4.1.8 The Company shall not, and shall not permit any of its subsidiaries
to, enter into any new lines of business or otherwise make material changes to
the operation of its business.
4.2 No Solicitation.
---------------
4.2.1 The Company will immediately cease any existing discussions or
negotiations with any third parties conducted prior to the date hereof with
respect to any sale, transfer, liquidation or other disposition, directly or
indirectly, of all or any material part of the assets or the capital stock of
the Company, including, without limitation, any such transaction involving one
or more subsidiaries of the Company, or any business combination, tender offer,
exchange offer, merger, recapitalization or other transaction which would result
in the issuance or transfer of a more than 5% equity or voting interest in the
Company, or any instrument or right convertible into or exchangeable for any
such interest (a "Competing Transaction"). Until the earlier of the Additional
Closing or the termination of this Agreement, the Company shall not, directly or
indirectly, through any officer, director, employee, representative or agent or
any of its subsidiaries, (i) solicit, initiate or encourage any inquiries,
proposals or offers that constitute, or could reasonably be expected to lead to,
a proposal or offer for a Competing Transaction, (ii) solicit, initiate,
continue or engage in negotiations or discussions concerning, or provide any
non-public information or data to any person relating to, any Competing
Transaction, or (iii) agree to, provide or recommend any Competing Transaction;
provided, that nothing contained in this Section 4.2 shall prevent the Company
- --------
from (A) furnishing non-public information or data to, or entering into
discussions or negotiations with, any person in connection with an unsolicited
bona fide written proposal for a Competing Transaction by such person or
recommending an unsolicited bona fide written proposal for a Competing
Transaction to the stockholders of the Company, if and only to the extent that a
majority of the Company's independent directors determine in good faith, based
upon the written advice of independent financial advisors, that such Competing
Transaction would, if consummated, result in a transaction more favorable to the
Company's stockholders from a financial point of view than the transactions
contemplated by this Agreement and a majority of the Company's independent
directors determine in good faith, based upon the written advice of independent
legal counsel, that such action is required for the discharge of their fiduciary
duties to stockholders under applicable law, or (B) complying with Rule 14e-2
promulgated under the Exchange Act with regard to a Competing Transaction. If a
majority of the independent directors determine in good faith that any proposal
for a Competing Transaction constitutes a Superior Proposal (as defined below),
the
16
<PAGE>
Board shall promptly give written notice, specifying the structure and material
terms of such Superior Proposal (a "Notice of Superior Proposal") to Purchaser,
provided that the Company shall be permitted to refrain from making such
disclosure to the extent that the independent directors of the Company have
determined in good faith, based upon written advice of independent legal
counsel, that such action is required for the discharge of their fiduciary
duties to stockholders under applicable law. The Board may (subject to the
following sentences of this subsection and compliance with Section 4.11), to the
extent a majority of the independent directors of the Company determine in good
faith based upon written advice of independent legal counsel that it is
necessary in order to comply with their fiduciary duties under applicable law,
(i) approve or recommend any such Superior Proposal, (ii) approve or authorize
the Company's entering into an agreement with respect to such Superior Proposal,
or (iii) terminate this Agreement, in each case at any time after the third
business day following delivery to Purchaser of the Notice of Superior Proposal
(each of the actions referred to in clauses (i) through (iii) of this sentence
being hereinafter referred to as a "Superior Proposal Event"). The Company may
take any of the foregoing actions pursuant to the preceding sentence only if the
proposal for a Competing Transaction that was a Superior Proposal at the time of
delivery of a Notice of Superior Proposal continues to be a Superior Proposal in
light of any improved transaction proposed by Purchaser prior to the expiration
of the three business day period specified in the preceding sentence. For
purposes of this Agreement, a "Superior Proposal" means any bona fide proposal
for a Competing Transaction that a majority of the independent directors of the
Company determine in their good faith reasonable judgment, based on the written
advice of independent financial advisors, to be made by a person with the
financial ability to consummate such proposal and to provide greater aggregate
value to the Company and/or the Company's stockholders than the transactions
contemplated by this Agreement or otherwise proposed by Purchaser as
contemplated above.
4.2.2 The Company shall notify Purchaser immediately (but in no event
later than 24 hours) after receipt by the Company of any proposal for a
Competing Transaction. Such notice shall be made orally and in writing and
shall indicate in reasonable detail the identity of the offeror and the terms
and conditions of such proposal, provided that the Company shall be permitted to
refrain from making such disclosure to the extent that the independent directors
of the Company have determined in good faith, based upon written advice of
independent legal counsel, that such action is required for the discharge of
their fiduciary duties to stockholders under applicable law.
4.3 Notification of Certain Matters. The Company shall promptly provide
-------------------------------
Purchaser (or its counsel) with copies of all filings made by the Company with
the SEC or any other Governmental Authority in connection with this Agreement
and the transactions contemplated hereby.
4.4 Access to Information. Subject to applicable law, between the date
---------------------
hereof and the Additional Closing Date, the Company will give each of Purchaser
and its counsel, financial advisors, auditors, and other authorized
representatives reasonable access to all
17
<PAGE>
employees, plants, offices, warehouses and other facilities and to all books
and records of the Company and its subsidiaries, will permit each of Purchaser
and its counsel, financial advisors, auditors and other authorized
representatives to make such inspections as Purchaser may reasonably request and
will cause the Company's and its subsidiaries' officers to furnish Purchaser or
its representatives with such financial and operating data and other information
with respect to the business and properties of the Company and its subsidiaries
as Purchaser may from time to time reasonably request. All such information
obtained pursuant to this Section shall be subject to the Confidentiality
Agreement.
4.5 Reasonable Best Efforts. Subject to the terms and conditions herein
-----------------------
provided, and subject to the fiduciary duties of the Company's Board of
Directors to stockholders under applicable law, each of the parties hereto
agrees to use its reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things reasonably necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, Purchaser and the Company shall cooperate with one
another (i) in the preparation and filing of any required filings under the HSR
Act; (ii) in determining whether action by or in respect of, or filing with, any
Governmental Authority is required, proper or advisable or any actions,
consents, waivers or approvals are required to be obtained from parties to any
contracts, in connection with the transactions contemplated by this Agreement;
and (iii) in seeking timely to obtain any such actions, consents and waivers and
to make any such filings.
4.6 Public Announcements. The Company and Purchaser will consult with
--------------------
each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement
(including any announcements to employees of the Company or its subsidiaries),
and shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by applicable law or by
applicable rules of any securities exchange or inter-dealer quotation system.
4.7 Stockholders' Meeting. The Company, acting through the Board, shall,
---------------------
in accordance with applicable law, as soon as practicable:
4.7.1 duly call, give notice of, convene and hold an annual or special
meeting of its stockholders (the "Stockholders' Meeting") for the purpose of
considering and taking action upon the issuance of the Additional Shares in
accordance with the terms of this Agreement;
4.7.2 include in the proxy statement to be distributed to the Company's
stockholders in connection with the issuance of the Additional Shares, including
any amendments or supplements thereto (the "Proxy Statement"), the
recommendation of the Board that stockholders of the Company vote in favor of
the approval of the issuance of the Additional Shares in accordance with the
terms of this Agreement;
18
<PAGE>
4.7.3 use its best efforts (A) to obtain and furnish the information
required to be included by it in the Proxy Statement and respond promptly to any
comments made by the SEC with respect to the Proxy Statement and any preliminary
version thereof and cause the Proxy Statement to be mailed to its stockholders
at the earliest practicable time and (B) to obtain the necessary approvals by
its stockholders of the issuance of the Additional Shares in accordance with the
terms of this Agreement; and
4.7.4 cause the Proxy Statement (i) not to contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, and (ii) to comply as
to form in all material respects with the applicable provisions of the Exchange
Act and the rules and regulations thereunder.
4.7.5 The Company shall not be obligated to take the actions set forth in
Sections 4.7.1, 4.7.2 and 4.7.3, if and only to the extent, that a majority of
the Company's independent directors determine in good faith, based upon the
written advice of independent legal counsel, that the discharge of their
fiduciary duties to stockholders under applicable law requires that such actions
not be taken.
4.8 Board of Directors. The Company hereby agrees to take all action
------------------
within its power to cause two of the members of the Board to be replaced on the
Initial Closing Date by persons designated by Purchaser.
4.9 New York Stock Exchange Listing. As promptly as practicable following
-------------------------------
the execution of this Agreement, the Company will apply to the New York Stock
Exchange to list the Initial Shares and the Additional Shares, and the Company
will use its reasonable efforts to cause the Initial Shares and the Additional
Shares to be listed on the New York Stock Exchange at the Initial Closing Date
or the Additional Closing Date, as applicable, subject to official notice of
issuance.
4.10 Limitations on Transfer of Initial Shares and Additional Shares.
---------------------------------------------------------------
(a) Purchaser agrees not to sell, transfer, assign, offer, pledge or otherwise
dispose of all or any portion of the Initial Shares or the Additional Shares
unless (i) Purchaser is in compliance with the provisions of the Standstill
Agreement and (ii) either (A) a registration statement relating thereto has been
duly filed and becomes effective under the Securities Act and all applicable
state securities laws or (B) such sale, transfer, assignment, offer, pledge or
other disposition is exempt from the registration and prospectus delivery
requirements of the Securities Act and such laws (as evidenced by an opinion of
counsel for Purchaser reasonably satisfactory in form and substance to the
Company or, in the case of a transfer by Purchaser to any of its affiliates,
other evidence reasonably satisfactory to the Company).
(b) Purchaser also agrees to the placing on the certificates
representing the Initial Shares or the Additional Shares of a legend, in
substantially the following form, referring to the restrictions set forth in the
immediately foregoing paragraph:
19
<PAGE>
"The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"),
or applicable state securities laws and may not be sold, transferred,
assigned, offered, pledged or otherwise disposed of unless (i) there
is an effective registration statement under such Act and such laws
covering such securities or (ii) such sale, transfer, assignment,
offer, pledge or other disposition is exempt from the registration
and prospectus delivery requirements of such Act and such laws. The
securities evidenced by this certificate are subject to the
restrictions on transfer contained in the Standstill Agreement dated
as of March 10, 1997 to which the Company is a party, as amended,
supplemented or otherwise modified from time to time, and may not be
transferred except in compliance therewith."
4.11 Expense Reimbursement and Break-Up Fee. If Purchaser shall have
--------------------------------------
elected not to proceed with the Additional Closing pursuant to Section 8.3(b)
hereof, or if Purchaser or the Company shall have elected not to proceed with
the Additional Closing pursuant to Section 8.3(c) hereof and no Competing
Transaction shall have been proposed which has a value per share of Common Stock
in excess of $5.75, the Company shall reimburse Purchaser for out-of-pocket
expenses incurred by Purchaser in connection with the transactions contemplated
hereby, including without limitation, all expenses incurred in connection with
this Agreement, the negotiations leading to its execution, the due diligence
investigations of the Company, the preparation and negotiation of any related
agreements, and all fees and expenses incurred by Purchaser and its affiliates
to investment bankers, accountants, attorneys and other representatives,
provided that the Company shall not be obligated to reimburse Purchaser for more
than $250,000 of such expenses in the aggregate. If (i) Purchaser shall have
elected not to proceed with the Additional Closing pursuant to Section 8.3(a)
hereof, (ii) Purchaser or the Company shall have elected not to proceed with the
Additional Closing pursuant to Section 8.3(c) hereof and a bona fide definitive
proposal with respect to a Competing Transaction shall have been presented to
the Company and publicly announced prior to the vote of the Company's
stockholders in accordance with Section 5.4.1, which has a value per share of
Common Stock in excess of $5.75, or (iii) the Company shall have elected not to
proceed with the Additional Closing pursuant to Section 8.3(d) hereof, then in
the case of any of (i), (ii) or (iii) of this Section 4.11, the Company will pay
$1,000,000 to Purchaser. In the event the immediately preceding sentence of
this Section 4.11 is applicable, then the first sentence of this Section 4.11
will not be applicable.
4.12 Use of Proceeds. The Company will use the net proceeds derived by it
---------------
from the issuance of the Initial Shares and the Additional Shares to repay
indebtedness, whether at scheduled maturity or, at the option of the Company, at
an earlier time, and until so used will be held by the Company in appropriate
fixed income investments.
4.13 Guarantee of Alpha. Alpha hereby irrevocably and unconditionally
------------------
guarantees the performance by Purchaser of all of its obligations hereunder and
under the other
20
<PAGE>
agreements and documents contemplated hereby, including without limitation the
obligation of Purchaser to purchase the Additional Shares subject to the terms
and conditions hereof.
ARTICLE 5. CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligations with Respect to Sale and
---------------------------------------------------------------
Purchase of the Initial Shares. The respective obligations of each party hereto
- ------------------------------
to consummate the sale and purchase of the Initial Shares are subject to the
satisfaction at or prior to the Initial Closing of the following conditions:
5.1.1 There shall not be in effect any order, decree or ruling or other
action restraining, enjoining or otherwise prohibiting the issuance of the
Initial Shares or any of the other transactions contemplated by this Agreement
which order, decree, ruling or action shall have been issued or taken by any
court of competent jurisdiction or other Governmental Authority.
5.1.2 All regulatory approvals necessary for the consummation of the
issuance of the Initial Shares shall have been obtained and there shall have
been no material modification to the terms of the transactions contemplated by
this Agreement.
5.1.3 The parties shall have entered into a Standstill Agreement with
respect to the Initial Shares and the Additional Shares in the form of Exhibit A
hereto (the "Standstill Agreement").
5.2 Conditions to the Obligation of Purchaser with Respect to Purchase of
---------------------------------------------------------------------
the Initial Shares. The obligation of Purchaser to consummate the purchase of
- ------------------
the Initial Shares is subject to the satisfaction at or prior to the Initial
Closing of the following further conditions:
5.2.1 The Company shall have performed in all material respects its
covenants, agreements and obligations under this Agreement up to the Initial
Closing.
5.2.2 Except as otherwise contemplated by this Agreement, the
representations and warranties of the Company contained in this Agreement which
are qualified as to materiality shall be true and correct, and which are not so
qualified shall be true and correct in all material respects, in each case, as
of the date when made and at and as of the Initial Closing as though newly made
at and as of that time.
5.2.3 The Company shall have executed and delivered, or caused to be
executed and delivered, to Alpha, such certificates, opinions and other
documents related to the consummation of the transactions contemplated hereby as
may be reasonably requested by Alpha, including without limitation, an opinion
of Simpson Thacher & Bartlett, in the form of Exhibit 5.2.3.
21
<PAGE>
5.3 Conditions to the Obligation of the Company with Respect to Sale of
-------------------------------------------------------------------
the Initial Shares. The obligation of the Company to consummate the sale of the
- ------------------
Initial Shares is subject to the satisfaction at or prior to the Initial Closing
of the following further conditions:
5.3.1 Purchaser shall have performed in all material respects its
covenants, agreements and obligations under this Agreement up to the Initial
Closing.
5.3.2 Except as otherwise contemplated by this Agreement, the
representations and warranties of Purchaser contained in this Agreement which
are qualified as to materiality shall be true and correct, and which are not so
qualified shall be true and correct in all material respects, in each case, as
of the date when made and at and as of the Initial Closing as though newly made
at and as of that time.
5.3.3 Purchaser shall have executed and delivered, or caused to be
executed and delivered, to the Company, such certificates, opinions and other
documents related to the consummation of the transactions contemplated hereby as
may be reasonably requested by the Company.
5.4 Conditions to Each Party's Obligations with Respect to Sale and
---------------------------------------------------------------
Purchase of the Additional Shares. The respective obligations of each party
- ---------------------------------
hereto to consummate the sale and purchase of the Additional Shares are subject
to the satisfaction at or prior to the Closing of the following conditions:
5.4.1 The issuance of the Additional Shares in accordance with the terms
of this Agreement shall have been approved by a majority of the votes cast by
holders of the Company's Common Stock on the proposal, provided that the holders
of a majority of the outstanding Common Stock of the Company cast votes on the
proposal.
5.4.2 There shall not be in effect any order, decree or ruling or other
action restraining, enjoining or otherwise prohibiting the issuance of the
Additional Shares or any of the other transactions contemplated by this
Agreement which order, decree, ruling or action shall have been issued or taken
by any court of competent jurisdiction or other Governmental Authority.
5.4.3 All regulatory approvals necessary for the consummation of the
issuance of the Additional Shares shall have been obtained.
5.4.4 Any waiting period applicable to the issuance of the Additional
Shares under the HSR Act shall have terminated or expired.
5.4.5 Neither Purchaser nor the Company shall have terminated this
Agreement pursuant to Section 8.1 hereof or elected not to proceed with the
Additional Closing pursuant to Section 8.3 hereof.
22
<PAGE>
5.5 Conditions to the Obligation of Purchaser with Respect to Purchase of
---------------------------------------------------------------------
the Additional Shares. The obligation of Purchaser to consummate the purchase
- ---------------------
of the Additional Shares is subject to the satisfaction at or prior to the
Additional Closing of the following further condition:
5.5.1 The Company shall have performed in all material respects its
covenants, agreements and obligations under this Agreement up to the Additional
Closing.
5.6 Conditions to the Obligation of the Company with Respect to Sale of
-------------------------------------------------------------------
the Additional Shares. The obligation of the Company to consummate the sale of
- ---------------------
the Additional Shares is subject to the satisfaction at or prior to the
Additional Closing of the following further condition:
5.6.1 Purchaser shall have performed in all material respects its
covenants, agreements and obligations under this agreement up to the Additional
Closing.
ARTICLE 6. INDEMNIFICATION; REMEDIES
6.1 Survival of Representations and Warranties. All representations and
------------------------------------------
warranties specifically set forth in this Agreement will survive the Initial
Closing and the Additional Closing and will survive for the periods specified in
Section 6.4.
6.2 Indemnification and Payment of Damages by the Company. The Company
-----------------------------------------------------
will indemnify and hold harmless Purchaser and its stockholders, controlling
persons, and affiliates (collectively, the "Indemnified Persons") for, and will
pay to the Indemnified Persons the amount of, any loss, liability, claim, damage
or expense (including reasonable attorneys' fees and expenses) or diminution of
value (collectively, "Damages") actually incurred by the Indemnified Persons,
arising, directly or indirectly, from or in connection with: (a) any breach of
any representation or warranty specifically made by the Company in this
Agreement; (b) any breach by the Company of any covenant or obligation of the
Company specifically contained in this Agreement; (c) any claim by any Person
for brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by any such Person with the
Company (or any Person acting on behalf of the Company) in connection with any
of the transactions contemplated hereby. A diminution of the value of
Purchaser's holdings of the Company's Common Stock will be included in the
definition of Damages actually incurred in the preceding sentence if and to the
extent that, but only if and to the extent that, it can be established that such
diminution of value was caused by one or more events or conditions which also
constitute one or more of the matters referred to in clauses (a), (b) and (c) of
this Section 6.2. The remedies provided in this Section 6.2 will be the sole
remedies available to Purchaser and the other Indemnified Persons with respect
to the matters referred to in clauses (a), (b) and (c) of this Section 6.2,
provided that the foregoing shall not limit any right to specific performance or
injunctive relief that a party may otherwise have.
23
<PAGE>
6.3 Indemnification and Payment of Damages by Purchaser. Purchaser will
---------------------------------------------------
indemnify and hold harmless the Company, and will pay to the Company the amount
of any Damages actually incurred by the Company, arising, directly or
indirectly, from or in connection with (a) any breach of any representation or
warranty specifically made by Purchaser in this Agreement, (b) any breach by
Purchaser of any covenant or obligation of Purchaser specifically contained in
this Agreement, or (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Purchaser (or any Person acting on
its behalf) in connection with any of the transactions contemplated hereby. The
remedies provided in this Section 6.3 will be the sole remedies available to the
Company with respect to the matters referred to in clauses (a), (b) and (c) of
this Section 6.3, provided that the foregoing shall not limit any right to
specific performance or injunctive relief that a party may otherwise have.
6.4 Time Limitations. The Company will have no liability (for
----------------
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Initial
Closing Date or the Additional Closing Date, other than those in Sections 2.9 or
2.11, unless on or before the first anniversary of the Additional Closing Date
(or the first anniversary of the Initial Closing Date if the Additional Closing
shall not have occurred by such anniversary date), Purchaser notifies the
Company of a claim specifying the factual basis of that claim in reasonable
detail to the extent then known by Purchaser; a claim with respect to Sections
2.9 or 2.11 may be brought at any time on or before the fourth anniversary of
the Additional Closing Date (or the fourth anniversary of the Initial Closing
Date if the Additional Closing shall not have occurred by such anniversary
date). If the Initial Closing and/or the Additional Closing shall occur,
Purchaser will have no liability (for indemnification or otherwise) with respect
to any representation or warranty, or covenant or obligation to be performed and
complied with prior to the Initial Closing Date or the Additional Closing Date,
unless on or before the first anniversary of the Additional Closing Date (or the
first anniversary of the Initial Closing Date if the Additional Closing shall
not have occurred by such anniversary date) the Company notifies Purchaser of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by the Company.
6.5 Limitations On Amount. (a) The Company will have no liability to
---------------------
Purchaser pursuant to clause (a) of Section 6.2, and, with respect to Section
4.1 hereof, pursuant to clause (b) of Section 6.2, until the total of all
Damages with respect to such matters exceeds $1,500,000, and then only for the
amount by which such Damages exceed $1,500,000. The liability of the Company to
Purchaser pursuant to clause (a) of Section 6.2 and, with respect to Section 4.1
hereof, pursuant to clause (b) of Section 6.2, shall not exceed $5,000,000 in
the aggregate.
(b) Purchaser will have no liability to the Company pursuant to clause (a)
of Section 6.3 until the total of all Damages with respect to such matters
exceeds $1,500,000, and then only for the amount by which such Damages exceed
$1,500,000. The liability of
24
<PAGE>
Purchaser to the Company pursuant to clause (a) of Section 6.3 shall not exceed
$5,000,000 in the aggregate.
6.6 Other Limitations. The Company will have no liability to Purchaser or
-----------------
the Indemnified Persons for any breach of representation or warranty to the
extent that the Company can establish that Purchaser or Alpha had actual
knowledge of the facts which form the basis of such claim prior to the Initial
Closing Date. Purchaser will have no liability to the Company for any breach of
representation or warranty to the extent that Purchaser can establish that the
Company had actual knowledge of the facts which form the basis of such claim
prior to the Initial Closing Date.
6.7 Procedure for Indemnification. Promptly upon an indemnified party
-----------------------------
under Section 6.2 or 6.3 becoming aware of a claim it may have against an
indemnifying party under such Section, such indemnified party will if a claim is
to be made against an indemnifying party under such Section, give notice to the
indemnifying party, but the failure so to notify the indemnifying party will not
relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that it shall have been materially prejudiced by the indemnifying party's
failure to give such notice. The parties shall cooperate in resolving questions
as to Damages payable under Section 6.2 or 6.3 and determining the amount of any
Damages payable. If the parties shall not be able, for a period of 30 days, to
concur and agree upon the amount of Damages payable under said Section, as
applicable, either party may, upon the expiration of such number of days, submit
such difference to a court of competent jurisdiction in the United States of
America for final determination. The final determination of such court with
respect to any difference so submitted, after all appeals have been taken or the
time to appeal shall have expired (the "Final Determination"), shall be
conclusive and binding upon the parties. Promptly after the exact amount and
nature of any Damages under Section 6.2 or 6.3 payable has been determined or
agreed upon by the parties or fixed by a Final Determination, the indemnifying
party shall pay such Damages to the indemnified party. Such Damages shall be
deemed to be due and payable by the indemnifying party as of a date no later
than the date when notice of the claim therefor was first given to the
indemnifying party on behalf of the indemnified party.
ARTICLE 7. DEFINITIONS
7.1 Definitions. The following terms shall have the meanings set forth
-----------
below unless otherwise defined herein.
"affiliate" of a person means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person.
"Code" means the Internal Revenue Code of 1986, as amended.
25
<PAGE>
"Confidentiality Agreement" means the letter agreement dated December 24,
1996 between Alex. Brown & Sons Incorporated and Equity Group Investments, Inc.
"Employee Options" means options to purchase shares of Common Stock issued
pursuant to the Company's 1989 Non-Qualified Stock Option Plan, 1992 Stock
Option Plan, 1996 Stock Option Plan and the Stock Option Agreement dated June 1,
1988 between the Company and William Kuntz.
"Environmental Law" means any legal requirement that requires or relates
to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction,
that could have significant impact on the environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or Hazardous Materials into the environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used
so that they do not present unreasonable risks to human health or the
environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of Hazardous Materials, pollutants, oil, or other
potentially harmful substances;
(g) cleaning up pollutants that have been released, preventing the
threat of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the environment, or permitting self-
appointed representatives of the public interest to recover for injuries
done to public assets.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"generally accepted accounting principles" shall mean the generally
accepted accounting principles set forth in the opinions and pronouncements of
the Accounting
26
<PAGE>
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession in the United States, in each case applied
on a consistent basis.
"Governmental Authority" means any national, supranational, federal, state
or local legislative body, court, arbitral tribunal, administrative agency or
commission or other governmental or other regulatory authority or agency.
"Intellectual Property" means trademarks, service marks, certification
marks, assumed names, trade names and other indications of origin, the goodwill
associated with the foregoing and registrations in any jurisdiction of, and
applications in any jurisdictions to register, the foregoing, including any
extension, modification or renewal of any such registration or application;
inventions, processes, discoveries and ideas, whether patentable or not in any
jurisdiction; patents, applications for patents (including, without limitation,
division, continuations, continuations in part and renewal applications), and
any renewals, extensions or reissues thereof, in any jurisdiction; writings and
other works, whether copyrightable or not in any jurisdiction; registrations or
applications for registration of copyrights in any jurisdiction, and any
renewals or extensions thereof; any similar intellectual property or proprietary
rights; and any claims or causes of action arising out of or related to any
infringement or misappropriation of any of the foregoing.
"knowledge" of the Company means the actual knowledge of William Kuntz, Roy
Bream, Timothy Halverson, Stephen McGillin, Randall McNamara or James Wendler.
"Liens" means security interests, mortgages, liens, claims, pledges,
charges, voting agreements or other encumbrances of any nature whatsoever.
"Material Adverse Effect" with respect to any person means a material
adverse effect on the business, assets, liabilities, results of operations,
properties, financial or operating condition or prospects of such person and its
subsidiaries taken as a whole or the ability of such person (and to the extent
applicable, its subsidiaries) to perform its (or their) obligations under this
Agreement or consummate the transactions contemplated hereby.
"person" means an individual, corporation, partnership, limited liability
company, association, trust, unincorporated organization, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act).
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"subsidiary" or "subsidiaries" of any person means any corporation,
partnership, limited liability company, joint venture or other legal entity of
which such person (either
27
<PAGE>
alone or through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests the holder of
which is generally entitled to vote for the election of the board of directors
or other governing body of such corporation, partnership, limited liability
company, joint venture or other legal entity.
"taxes" shall mean all taxes, however denominated, including, without
limitation, any interest, penalties, assessments or deficiencies or other
additions to tax that may become payable in respect thereof, imposed by any
federal, territorial, state, local or foreign government or any agency or
political subdivision of any such government, which taxes shall include, without
limiting the generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and state income taxes),
real property gains taxes, payroll and employee withholding taxes, unemployment
insurance taxes, social security taxes, sales and use taxes, ad valorem taxes,
excise taxes, franchise taxes, gross receipts taxes, business license taxes,
occupation taxes, real and personal property taxes, stamp taxes, environmental
taxes, transfer taxes, workers' compensation, Pension Benefit Guaranty
Corporation premiums and other governmental charges, and other obligations of
the same or of a similar nature to any of the foregoing, which is required to be
paid, withheld or collected.
ARTICLE 8. MISCELLANEOUS
8.1 Termination. This Agreement may be terminated at any time:
-----------
(a) by mutual consent of the Company and Purchaser;
(b) by either Purchaser or the Company, if the Initial Closing shall
not have occurred on or before March 31, 1997, unless the absence of such
occurrence shall be due to the failure of the party seeking to terminate
the Agreement to perform in all material respects each of its obligations
under this Agreement required to be performed by it at or prior to the
Initial Closing; or
(c) as provided in Section 8.3, by the specific party identified
therein as may have right to elect not to proceed with the Additional
Closing; provided that such termination shall not affect the rights and
obligations of the parties under Section 4.11 hereof.
8.2 Procedure upon Termination. In the event of the termination and
--------------------------
abandonment of this Agreement by a party hereto, written notice thereof shall
promptly be given to the other parties hereto and this Agreement shall terminate
and the transactions contemplated hereby shall be abandoned without further
action by any of the parties hereto.
8.3 Abandonment of Additional Closing. The specified party or parties may
---------------------------------
elect not to proceed with the Additional Closing as follows:
28
<PAGE>
(a) Purchaser, upon notice to the Company, if (i) a bona fide
definitive proposal with respect to a Competing Transaction which has a
value per share of Common Stock in excess of $5.75 shall have been
presented to the Company and publicly announced prior to the vote of the
Company's stockholders in accordance with Section 5.4.1, and the Additional
Closing shall not have occurred on or before September 30, 1997, or (ii)
there shall have been a Superior Proposal Event;
(b) Purchaser, upon notice to the Company, if the Additional Closing
shall not have occurred on or before September 30, 1997, unless the absence
of such occurrence shall be due to the failure of Purchaser to perform in
all material respects each of its obligations under this Agreement required
to be performed by it at or prior to the Additional Closing.
(c) Purchaser or the Company, upon notice to the other, if the
Company's stockholders fail to adopt the proposal specified in Section
5.4.1 at the forthcoming meeting of the Company's stockholders; or
(d) the Company, upon notice to Purchaser, in the event of its receipt
of a Superior Proposal.
8.4 Amendment. This Agreement may be amended by the parties hereto, but
---------
may only be amended by an instrument or instruments in writing signed and
delivered on behalf of each of the parties hereto.
8.5 Extension; Waiver. At any time prior to the Additional Closing
-----------------
Date, any party hereto which is entitled to the benefits hereof may (a) extend
the time for the performance of any of the obligations or other acts of any of
the other parties hereto, (b) waive any inaccuracy in the representations and
warranties of any of the other parties hereto contained herein, and (c) waive
compliance with any of the agreements of any of the other parties hereto or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument in writing
signed and delivered on behalf of such party.
8.6 Execution in Counterparts; Facsimile Signatures. 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 document.
A facsimile copy of a signature of a party to this Agreement or any such
counterpart shall be fully effective as if an original signature.
8.7 Notices. All notices and other communications given or made
-------
pursuant hereto shall be in writing and shall be deemed to have been given or
made when delivered personally or three business days after having been sent by
registered or certified mail, postage prepaid, return receipt requested, or one
business day after having been sent by
29
<PAGE>
Federal Express or other comparable nationally recognized overnight courier
service (receipt requested), as follows:
If to the Company:
Chart House Enterprises, Inc.
115 South Acacia Avenue
Solana Beach, California 92057
Attention: Chief Executive Officer
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Robert L. Friedman
If to Purchaser or Alpha to:
Chart House Investors, LLC
Two North Riverside Plaza, Suite 1900
Chicago, Illinois 60606
Attention: Phillip Handy
With a copy to:
Rosenberg & Liebentritt
Two North Riverside Plaza
Suite 600
Chicago, Illinois 60606
Attention: Alisa Singer
and to
Seyfarth, Shaw, Fairweather
& Geraldson
55 East Monroe Street - Suite 4200
Chicago, Illinois 60603-5803
Attention: Robert F. Weber
30
<PAGE>
or to such other persons or at such other addresses as either party shall have
designated by like notice in writing to the other party.
8.8 Waivers. No action taken pursuant to this Agreement shall be deemed
-------
to constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
8.9 Publicity. None of the parties will issue any press release or
---------
otherwise make any public statements with respect to the transactions
contemplated by this Agreement, without the prior consent of the other party
hereto except as may be required by law.
8.10 Severability. If any provision of this Agreement shall be declared
------------
by any court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
8.11 Applicable Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Delaware.
8.12 Headings. The headings contained in this Agreement are inserted
--------
for convenience only and do not constitute a part of this Agreement.
8.13 Entire Agreement. This Agreement, together with the agreements
----------------
attached as exhibits hereto, constitutes the entire agreement among the parties
hereto and supersedes all other prior agreements and understandings, both
written and oral, among the parties hereto with respect to the subject matter
hereof.
8.14 Assignment, Etc. This Agreement shall inure to the benefit of and
----------------
be binding upon the parties hereto and their respective successors and assigns.
Neither this Agreement nor any of the parties' rights, interests or obligations
hereunder shall be assignable by any party hereto without the prior written
consent of the other parties hereto. No assignment shall relieve the assigning
party of any of its obligations hereunder. Any attempted assignment of this
Agreement in breach of this provision shall be void and of no effect.
8.15 No Third-Party Rights. Nothing in this Agreement, expressed or
---------------------
implied, shall or is intended to confer upon any person other than the parties
hereto or their respective successors or assigns any rights or remedies of any
nature or kind whatsoever under or by reason of this Agreement.
31
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by or on behalf
of each of the parties hereto as of the date first above written.
CHART HOUSE ENTERPRISES, INC.
By: /s/ WILLIAM R. KUNTZ, JR.
---------------------------------
Name: William R. Kuntz, Jr.
Title: Executive Vice President
CHART HOUSE INVESTORS, LLC,
by ALPHA/ZFT PARTNERSHIP,
its managing member, by a
general partner of one of
its general partners
By:
---------------------------------
Name:
Title:
ALPHA/ZFT PARTNERSHIP,
by a general partner of one
of its general partners,
solely for purposes of
Section 4.13 of this
Agreement
By:
---------------------------------
Name:
Title:
32
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by or on behalf
of each of the parties hereto as of the date first above written.
CHART HOUSE ENTERPRISES, INC.
By:
---------------------------------
Name:
Title:
CHART HOUSE INVESTORS, LLC,
by ALPHA/ZFT PARTNERSHIP,
its managing member, by a
general partner of one of
its general partners
By: /s/ SHELI Z. ROSENBERG
---------------------------------
Name: Sheli Z. Rosenberg
Title: Trustee
ALPHA/ZFT PARTNERSHIP,
by a general partner of one
of its general partners,
solely for purposes of
Section 4.13 of this
Agreement
By: /s/ SHELI Z. ROSENBERG
---------------------------------
Name: Sheli Z. Rosenberg
Title: Trustee
32
<PAGE>
EXHIBIT 10.19(2)
STANDSTILL AGREEMENT
Standstill Agreement dated as of March 10, 1997 (this "Agreement")
among Chart House Enterprises, Inc., a Delaware corporation (the "Company"),
Chart House Investors, LLC, a Delaware limited liability company ("CHI"), and
Alpha/ZFT Partnership, an Illinois general partnership ("Alpha").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to a Stock Purchase and Sale Agreement dated as of
March 10, 1997 (the "Stock Purchase and Sale Agreement") among the Company, CHI
and Alpha, CHI has agreed to purchase from the Company, and the Company has
agreed to sell to CHI, 3,400,000 newly issued shares of the Company's Common
Stock, par value $.01 per share ("Common Stock").
WHEREAS, the Company and CHI are entering into this Agreement to
establish certain arrangements with respect to the relationships between them.
WHEREAS, the Company believes that these arrangements will be in the
best interests of the Company and all of its stockholders.
NOW, THEREFORE, intending to be legally bound, the parties hereto
agree as follows:
Section 1. Certain Definitions. As used in this Agreement, the
-------------------
following terms shall have the following meanings:
1.1 "Company Voting Securities" shall mean, collectively, Common
Stock, any preferred stock of the Company that is entitled to vote generally for
the election of directors, any other class or series of Company securities that
is entitled to vote generally for the election of directors and any other
securities, warrants, options or rights of any nature (whether or not issued by
the Company) that are convertible into, exchangeable for, or exercisable for the
purchase of, or otherwise give the holder thereof any rights in respect of,
Common Stock, Company preferred stock that is entitled to vote generally for the
election of directors, or any other class or series of Company securities that
is entitled to vote generally for the election of directors.
1.2 "Effective Date" means the date hereof.
1.3 The "Combined Voting Power" at any measurement date shall mean
the total number of votes which could have been cast in an election of directors
of the Company had a meeting of the stockholders of the Company been duly held
based upon a record date as of the measurement date if all Company Voting
Securities then outstanding and entitled to vote at such meeting
<PAGE>
2
were present and voted to the fullest extent possible at such meeting.
1.4 The terms "beneficial ownership," "person" and "group" shall have
the respective meanings ascribed to such terms pursuant to Regulation 13D-G
adopted by the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect
on the date hereof. The term "affiliate" shall have the meaning ascribed to
such term pursuant to Rule 12b-2 under the Exchange Act, as in effect on the
date hereof.
1.5 "Zell Group" means CHI, Alpha and their affiliates, collectively;
provided, however, that publicly held entities that might fall within this
definition (a "Public Zell Affiliate") shall not be treated as affiliates of
Alpha hereunder unless CHI, Alpha or any of their other affiliates took any
action, directly or indirectly, to suggest, encourage or assist such entity in
taking the relevant action to be attributed to the Zell Group hereunder. For
purposes of the preceding sentence and the similar clause appearing in the
second sentence of Section 3.1, the failure of CHI, Alpha or any of their
affiliates, upon learning of a public affiliate's action, to request that such
affiliate refrain from taking such action because of the provisions of this
Agreement will be deemed to constitute "encouraging or assisting" in such
action.
1.6 "Independent Director" means directors of the Company who (i) are
not employees or officers of the Company, (ii) are not serving as designees of
CHI pursuant to Section 4 hereof, and (iii) have no financial interest in and
are not otherwise associated with CHI, Alpha or their affiliates, excluding
however any equity interest of not more than 2% of any publicly-held entity.
The term "associated" means having a business, financial or familial
relationship that might reasonably be expected to affect the individual's
judgment with respect to matters in which a member of the Zell Group might be
interested.
1.7 "Disinterested Director" means Independent Directors who are
"disinterested directors" as that term is used in Section 144 of the Delaware
General Corporate Law.
Section 2. Representations and Warranties.
------------------------------
2.1 CHI and Alpha jointly and severally represent and warrant to the
Company as follows:
(a) CHI is a limited liability company duly organized, validly
existing and in good standing under the laws of Delaware. Alpha is a
validly existing partnership under the laws of Illinois. Each of CHI and
Alpha has the power and authority to enter into this Agreement and perform
its respective obligations hereunder.
<PAGE>
3
(b) This Agreement has been duly authorized, executed and delivered by
CHI and Alpha and constitutes the legal, valid and binding agreement of CHI
and Alpha, enforceable against them in accordance with the terms hereof.
(c) Neither the execution and delivery of this Agreement nor the
performance of its obligations hereunder will conflict with, or result in a
breach of, or constitute a default under, any law, rule, regulation,
judgment, order or decree of any court, arbitrator or governmental agency
or instrumentality, or of any agreement or instrument to which CHI or Alpha
is bound or by which it is affected or of any charter documents of CHI or
Alpha.
(d) As of the Effective Date, no shares of Common Stock are currently
beneficially owned by any member of the Zell Group, except for those shares
of Common Stock acquired pursuant to the Stock Purchase and Sale Agreement.
2.2 The Company represents and warrants to CHI as follows:
(a) The Company is a validly existing corporation under the laws of
the jurisdiction of its organization and has the corporate power and
authority to enter into this Agreement and perform its obligations
hereunder.
(b) This Agreement has been duly authorized, executed and delivered by
the Company and constitutes the legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with the terms
hereof.
(c) Neither the execution and delivery of this Agreement nor the
performance of its obligations hereunder will conflict with, or result in a
breach of, or constitute a default under, any law, rule, regulation,
judgement, order or decree of any court, arbitrator or governmental agency
or instrumentality, or of any agreement or instrument to which the Company
is bound or by which it is affected or of any charter documents of the
Company.
Section 3. Covenants with Respect to the Company Voting Securities
-------------------------------------------------------
and Other Matters.
- -----------------
3.1 Acquisition of Company Voting Securities. Except as the same may
----------------------------------------
be approved by a majority of the Disinterested Directors in a specific
resolution to that effect adopted prior to the taking of such action, prior to
June 30, 2002, no member of the Zell Group shall, directly or indirectly,
acquire, offer to acquire, agree to acquire, become the beneficial owner of or
obtain any rights in respect of any Company Voting Securities, by purchase or
otherwise, or take any action in furtherance thereof, if the effect of such
acquisition, agreement or other action would be (either immediately or upon
consummation of any such
<PAGE>
4
acquisition agreement or other action, or expiration of any period of time
provided in any such acquisition, agreement or other action) to increase the
aggregate beneficial ownership of Company Voting Securities by the Zell Group to
such number of Company Voting Securities that represents or possesses greater
than 29.2% of the Combined Voting Power of Company Voting Securities, without
the approval of the majority of the Company's Disinterested Directors.
Notwithstanding the foregoing maximum percentage limitations, (A) no member of
the Zell Group shall be obligated to dispose of any Company Voting Securities
beneficially owned in violation of such maximum percentage limitations if, and
solely to the extent that, its beneficial ownership is or will be increased
solely as a result of (1) a repurchase of any Company Voting Securities by the
Company or any of its subsidiaries if such repurchase was approved by a majority
of the Disinterested Directors or (2) the purchase by any Public Zell Affiliate
unless CHI, Alpha or any of their other affiliates took any action, directly or
indirectly, to suggest, encourage or assist in such purchase and (B) the
foregoing shall not prohibit any purchase of Company Voting Securities directly
from the Company (including pursuant to the exercise of rights, oversubscription
rights or standby purchase obligations in connection with rights offerings by
the Company). For purposes of calculating the maximum percentage limitations,
all Company Voting Securities that are the subject of an agreement, arrangement
or understanding pursuant to which the Zell Group or any member thereof has the
right to obtain beneficial ownership of such securities in the future
(including, without limitation, the shares of Common Stock being sold after the
date hereof under the Stock Purchase and Sale Agreement as long as the Stock
Purchase and Sale Agreement constitutes a binding commitment to purchase and
sell those shares) shall also be deemed to be outstanding and beneficially owned
by the Zell Group or the applicable member thereof. If the Stock Purchase and
Sale Agreement shall be terminated as a result of a default by CHI thereunder,
then the number "29.2%" set forth in this paragraph shall be adjusted
automatically to "17%".
3.2 Distribution of the Company Voting Securities.
---------------------------------------------
(a) Except as the same may be approved by a majority of the
Disinterested Directors in a specific resolution to that effect adopted prior to
the taking of such action, no member of the Zell Group shall, directly or
indirectly, sell, transfer any beneficial interest in, pledge, hypothecate or
otherwise dispose of any Company Voting Security other than to another member of
the Zell Group prior to June 30, 2002, in a transaction that would result in a
transfer to any person or group that, to the knowledge of the Zell Group, upon
consummation of such sale, transfer or disposition, would, directly or
indirectly, have beneficial ownership of or the right to acquire beneficial
ownership of such number of Company Voting Securities as represent greater than
5.0% of the Combined Voting Power, except in response to certain tender or
exchange offers as permitted by Section 3.2(b).
<PAGE>
5
(b) Notwithstanding Section 3.2(a), on and after the eleventh business
day after commencement of a tender or exchange offer made by a person who is not
a member of the Zell Group for outstanding Company Voting Securities (a
"Qualifying Offer"), any member of the Zell Group may tender or exchange any
Company Voting Securities beneficially owned by it pursuant to such Qualifying
Offer if the Qualifying Offer shall have been approved by a majority of the
Disinterested Directors.
3.3 Proxy Solicitations, etc. Prior to June 30, 2002, no member of
------------------------
the Zell Group shall solicit proxies, assist any other person in any way,
directly or indirectly, in the solicitation of proxies, become a "participant"
in a "solicitation" or assist any "participant" in a "solicitation" (as such
terms are defined in Rule 14a-1 of Regulation 14A under the Exchange Act) in
opposition to the recommendation of a majority of the Disinterested Directors,
submit any proposal for the vote of stockholders of the Company, recommend or
request or induce or attempt to induce any other person to take any such
actions, or seek to advise, encourage or influence any other person with respect
to the voting of Company Voting Securities, in each case without the prior
approval of the majority of the Disinterested Directors.
3.4 No Voting Trusts, Pooling Agreements, or Formation of "Groups".
--------------------------------------------------------------
Except as the same may be approved by a majority of the Disinterested Directors
in a specific resolution to that effect adopted prior to the taking of such
action, prior to June 30, 2002, neither CHI nor Alpha nor any other member of
the Zell Group shall form, join or in any other way participate in a
partnership, pooling agreement, syndicate, voting trust or other "group" other
than the Zell Group with respect to Company Voting Securities, or enter into any
agreement or arrangement or otherwise act in concert with any other person, for
the purpose of acquiring, holding, voting or disposing of Company Voting
Securities.
3.5 No Solicitation of Bidders. Except as the same may be approved
--------------------------
by a majority of the Disinterested Directors in a specific resolution to that
effect adopted prior to the taking of such action, prior to June 30, 2002 no
member of the Zell Group shall directly or indirectly assist, encourage or
induce any person to bid for or acquire outstanding Company Voting Securities
which would result in such other person, directly or indirectly, beneficially
owning in excess of 5.0% of the Combined Voting Power of Company Voting
Securities, provided, however, that the mere sale of Company Voting Securities
-------- -------
by any member of the Zell Group shall not constitute assisting, encouraging or
inducing within the meaning of this Section 3.5.
3.6 Material Transactions. Prior to June 30, 2002, no member of the
---------------------
Zell Group shall engage in any material transaction with the Company without the
prior approval of a majority of the Disinterested Directors.
<PAGE>
6
3.7 Non-Circumvention. Except as the same may be approved by a
-----------------
majority of the Disinterested Directors in a specific resolution to that effect
adopted prior to the taking of such action, prior to June 30, 2002 no member of
the Zell Group shall take any action, alone or in concert with any other person,
to seek control of the Company or otherwise seek to circumvent the limitations
of the provisions of Section 3 of this Agreement. Without limiting the
generality of the foregoing, without such approval no member of the Zell Group
shall (i) present to the Company or to any third party any proposal that can
reasonably be expected to result in a change of control of the Company or in any
increase beyond the percentage specified in Section 3.1 in the Combined Voting
Power of Company Voting Securities beneficially owned in the aggregate by the
Zell Group, (ii) publicly suggest or announce its willingness or desire to
engage in a transaction or group of transactions that would result in a change
of control of the Company or in any increase beyond the percentage specified in
Section 3.1 in the Combined Voting Power of Company Voting Securities
beneficially owned in the aggregate by the Zell Group, or (iii) initiate,
request, induce or attempt to induce or give encouragement to any other person
to initiate any proposal that can reasonably be expected to result in a change
of control of the Company or in any increase beyond the percentage specified in
Section 3.1 in the Combined Voting Power of Company Voting Securities
beneficially owned in the aggregate by the Zell Group.
3.8 Confidential Material.
---------------------
(a) Definitions. For purposes of this Section:
-----------
(i) The term "Confidential Material" means all information,
whether oral, written or otherwise (including any information furnished
prior to the execution of this Agreement), furnished by the Company to any
member of the Zell Group or any of the Representatives (as defined below),
and all notes, reports, analyses, compilations, studies and other materials
prepared by the Zell Group or any of the Representatives (in whatever form
maintained, whether documentary, computer storage or otherwise) containing
or based upon, in whole or in part, any such information, and the fact that
such information has been delivered to the Zell Group or any of its
Representatives. The term "Confidential Material" does not include
information which is or becomes generally available to the public other
than as a result of a disclosure by any member of the Zell Group or any of
the Representatives or becomes available to any member of the Zell Group or
any of the Representatives on a non-confidential basis from any source that
is not known by such member of the Zell Group or such Representative to be
bound by an obligation of confidentiality to the Company.
(ii) The term "Representatives" shall mean any and all
employees, agents, financial advisors, partners,
<PAGE>
7
affiliates or other representatives of any member of the Zell Group.
(b) Each member of the Zell Group and each of the Representatives will
preserve the confidentiality of the Confidential Material and will not disclose
any of the Confidential Material in any manner whatsoever; provided, however,
-------- -------
that (i) the Zell Group may make any disclosure of such information to which the
Company gives its prior consent, and (ii) any of such information may be
disclosed to the Representatives who need to know such information, and who are
informed of the confidential nature of the Confidential Material and of the
terms of this Section 3.8 and who agree to keep such information confidential.
In any event, the Zell Group will be responsible for any actions by the
Representatives which are not in accordance with the provisions hereof.
(c) If any member of the Zell Group or any of the Representatives are
requested or required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand, any informal or
formal investigation by any government or governmental agency or authority or
otherwise) to disclose any Confidential Material or such person's opinion,
judgment, view or recommendation concerning the Company as developed from the
Confidential Material, the Zell Group agrees (i) to promptly notify the Company
of the existence, terms and circumstances surrounding such a request, (ii) to
the extent possible, to consult with the Company on the advisability of taking
legally available steps to resist or narrow such request and (iii) if disclosure
of such information is required, to furnish only that portion of the
Confidential Material which, in the opinion of counsel to the Zell Group, the
Zell Group is legally compelled to disclose, and to cooperate with any action by
the Company to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Material.
(d) CHI hereby acknowledges on behalf of itself and all members of the
Zell Group (and agrees to advise the Representatives and members of the Zell
Group who are informed in accordance with the terms or this Section 3.8 as to
the matters which are the subject of this Section 3.8), that the United States
securities laws prohibit, in certain circumstances, any person who has received
from an issuer material, non-public information, including certain information
that may be part of the Confidential Material, while such information is non-
public, from purchasing or selling securities of such issuer or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
(e) This Section 3.8 shall survive until the earlier of June 30, 2004
or two years following the date of termination of this Agreement.
<PAGE>
8
3.9 Guarantee by Alpha. Alpha hereby irrevocably and
------------------
unconditionally guarantees the performance by CHI of all of its obligations
hereunder and under the other agreements and documents contemplated hereby.
Section 4. Voting of Company Securities and Other Related Matters.
------------------------------------------------------
(a) Each member of the Zell Group that is a holder of record of
Company Voting Securities shall be present, and each member of the Zell Group
that is a beneficial owner of Company Voting Securities shall cause the holder
of record to be present, in person or by proxy, at all meetings of stockholders
of the Company so that all Company Voting Securities owned of record or
beneficially by the Zell Group may be counted for the purpose of determining the
presence of a quorum at such meetings.
(b) At all times prior to June 30, 2002, except to the extent
otherwise provided herein, the Company shall take all necessary or appropriate
action to assist in the nomination and election as directors of (i) that number
of individuals specified in Section 4(d) below designated by CHI to be elected
as directors of the Company, provided such designees are reasonably acceptable
to the Independent Directors at the time of their designation, and (ii) so long
as CHI is entitled to designate one or two directors, Independent Directors
constituting a majority of the total number of directors of the Company. All
persons to be so designated as Independent Directors shall be individuals
selected by a majority of the Independent Directors then in office, except that
one of the Independent Directors shall be an individual mutually acceptable to
CHI on the one hand and a majority of the Independent Directors on the other
hand. The Company hereby agrees and acknowledges that Sam Zell and Philip Handy
are reasonably acceptable to the Independent Directors as directors of the
Company. The Company further agrees that one position on the Board of Directors
of the Company is intended to be filled by the chief executive officer to be
selected by the Board of Directors of the Company. CHI shall cause its
designees on the Board of Directors of the Company to take all necessary or
appropriate action to assist in the nomination and election as directors of all
such nominees as may be selected to serve as Independent Directors in the manner
described above. The Zell Group and the directors designated by the Zell Group
shall not vote (as stockholders or directors) in favor of, and shall not take
any other action in furtherance of or seeking to cause, a reduction of the
number of directors of the Company below seven directors, the removal of any
directors, or a majority of the directors not consisting of Independent
Directors.
(c) For purposes of this Agreement, directors "designated by CHI"
shall include directors designated by CHI as anticipated by this Section 4, and
any other directors of the Company affiliated or associated with any member of
the Zell Group.
<PAGE>
9
(d) At all times prior to June 30, 2002, CHI shall be entitled to
designate the following number of directors pursuant to Section 4(b) hereof:
(i) so long as the members of the Zell Group that have executed this
Agreement as parties (the "Zell Contracting Parties") beneficially own at
least 15% of the Combined Voting Power of all Company Voting Securities
(calculated in accordance with Section 3.1 hereof and including, for these
purposes, the shares of Common Stock to be acquired from the Company
pursuant to the Stock Purchase and Sale Agreement as long as such agreement
is in effect), CHI shall have the right to designate two directors of the
Company, provided such designees are reasonably acceptable to the
Independent Directors at the time of their designation; and
(ii) so long as the Zell Contracting Parties beneficially own less
than 15%, but at least 7.5% of the Combined Voting Power of all Company
Voting Securities (as so calculated), CHI shall have the right to designate
one director of the Company, provided such designee is reasonably
acceptable to the Independent Directors at the time of his or her
designation;
provided, however, that at any time when the Zell Contracting Parties shall no
- -------- -------
longer beneficially own at least 15% of the Combined Voting Power of all Company
Voting Securities (as so calculated), CHI shall cause one of its two designees
to resign forthwith such that only one designee remains on the Board of
Directors of the Company; and provided, further, that at any time when the Zell
-------- -------
Contracting Parties shall no longer beneficially own at least 7.5% of the
Combined Voting Power of all Company Voting Securities (as so calculated), CHI
shall not have the right to designate any directors of the Company, CHI's rights
under this Section 4 shall terminate, and CHI shall cause its designees to
resign forthwith such that no designee of CHI remains on the Board of Directors
of the Company. At any time when CHI shall have the right to designate one or
two directors, as the case may be, pursuant to this Section 4, the Company shall
not increase the number of directors to more than seven directors without the
prior written consent of CHI.
(e) Except as expressly set forth above, each member of the Zell Group
shall vote all Company Voting Securities owned of record by such member of the
Zell Group and shall cause all Company Voting Securities owned beneficially by
such member of the Zell Group to be voted with respect to the election or
removal of directors of Company, or any other matter that may be presented to
the stockholders of the Company that would relate to a possible change of
control of the Company, at the sole option of such member of the Zell Group,
either (i) in accordance with the recommendations of a majority of the
Disinterested Directors, or (ii) in the same proportions (including abstentions)
as the holders of record of Company Voting Securities other than those
beneficially owned by the Zell Group that are entitled to vote on
<PAGE>
10
the election of directors (or such other matter) vote their Company Voting
Securities, provided, however, that notwithstanding the foregoing (A) CHI may
-------- -------
at all times vote its Company Voting Securities for the election or retention of
the one or two directors, as the case may be, designated by CHI in accordance
with Section 4(b) in elections in which they would cease to be directors if not
elected and (B) any member of the Zell Group may vote its Company Voting
Securities with respect to any matter presented to the stockholders of the
Company that would relate to a possible change of control of the Company either
(i) in favor of such matter if such matter was recommended by a majority of the
full Board of Directors or (ii) against such matter.
Section 5. Registration Rights. The Company covenants and agrees as
-------------------
follows:
5.1 Definitions. For purposes of this Section 5:
-----------
(a) The term "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Act").
(b) The term "Registrable Securities" means the shares of Common
Stock held, from time to time, by the Zell Group.
(c) The term "Holder" means any Zell Contracting Party who owns of
record Registrable Securities.
5.2 Request for Registration.
------------------------
(a) If the Company shall at any time receive a written request from
the Holders of at least 500,000 shares of Common Stock that the Company file a
registration statement under the Act covering the registration of at least
500,000 shares of Common Stock, then the Company shall, within 10 days after the
receipt thereof, give written notice of such request to all Holders, and shall,
subject to the limitations of Section 5.2(b), effect as soon as practicable
after the receipt of such request the registration under the Act of all
Registrable Securities which the Holders request to be registered within 15 days
after the mailing of such notice by the Company in accordance with Section 9.3.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 5.2 and the Company
shall include such information in the written notice referred to in Section
5.2(a). In such event, the right of any Holder to include Registrable Securities
in such registration shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the
<PAGE>
11
underwriting to the extent provided herein. All Holders proposing to distribute
Registrable Securities through such underwriting shall (together with the
Company as provided in Section 5.4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Initiating Holders and reasonably acceptable to the Company.
The Company at its sole discretion may offer a right to participate in any
registration statement filed pursuant to this Section 5.2 to other holders of
Common Stock, and may itself participate in any registration statement filed
pursuant to this Section 5.2. However, notwithstanding any other provision of
this Section 5.2, if the offering is an underwritten offering and the lead
managing underwriter advises the Initiating Holders in writing that marketing
factors require a limitation of the number of shares of Common Stock to be
underwritten, then (subject to any contrary provisions in registration rights
agreements executed by the Company prior to the date hereof) the total number of
shares of Common Stock to be underwritten shall be reduced, with such reduction
coming first from selling stockholders who are not Holders, and then from the
Company. If further reduction is required, the Company shall so advise all
Holders of Registrable Securities that would have otherwise been underwritten
pursuant hereto, and the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Holders thereof,
including the Initiating Holders, in proportion (as nearly as practicable) to
the amount of Registrable Securities sought to be registered by each Holder.
(c) The Company is obligated to effect only two such registrations
pursuant to this Section 5.2; provided, however, that if, as a result of a
-------- -------
reduction in the size of an offering pursuant to Section 5.2(b), Holders are
prevented from registering, in the aggregate, one-half of all of their
Registrable Securities, then the Company shall be obligated to effect a third
such registration pursuant to this Section 5.2.
(d) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 5.2 a
certificate signed by the Chief Executive, Chief Operating, or Chief Financial
Officer of the Company stating that, in the good faith judgment of a majority of
the Disinterested Directors, it would be materially detrimental to the Company
for such registration statement to be filed, the Company shall have the right to
defer such filing for a period of not more than 120 days after receipt of the
request of the Initiating Holders; provided, however, that the Company may not
-------- -------
utilize this right more than twice in any 12-month period.
5.3 Piggyback Registration. If (but without any obligation to
----------------------
do so) the Company proposes to register any of its Common Stock under the Act in
connection with the public offering of such Common Stock by the Company solely
for cash (other than a registration relating solely to the sale of securities to
participants in a dividend reinvestment plan, stock plan or
<PAGE>
12
employee benefit plan; a registration relating solely to the issuance of
securities to the security holders of an acquired company in connection with an
acquisition; or a registration on any form which does not permit inclusion of
selling stockholders), or the Company proposes to register any of its securities
on behalf of a holder exercising demand registration rights similar to those set
forth in Section 5.2, the Company shall, at such time, promptly give each Holder
written notice of such registration. Upon the written request of each Holder
given within 15 days after mailing of such notice by the Company in accordance
with Section 9.3, the Company shall, subject to the provisions of Section 5.8,
cause to be registered under the Act all of the Registrable Securities that each
such Holder has requested to be registered.
5.4 Obligations of the Company. Whenever required under this
--------------------------
Section 5 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable efforts to
cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up to
120 days.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such states or other jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required
to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the underwriters of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
<PAGE>
13
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing, and then use its best efforts to promptly correct such
statement or omission. Notwithstanding the foregoing and anything to the
contrary set forth in this Section 5.4, each Holder acknowledges that there
may occasionally be times when the Company must suspend the use of the
prospectus forming a part of the registration statement until such time as
an amendment to the registration statement has been filed by the Company
and declared effective by the SEC, or until such time as the Company has
filed an appropriate report with the SEC pursuant to the Exchange Act.
Each Holder hereby covenants that it will (a) keep any such notice strictly
confidential, and (b) not sell any shares of Common Stock pursuant to such
prospectus during the period commencing at the time at which the Company
gives the Holder notice of the suspension of the use of such prospectus and
ending at the time the Company gives the Holder notice that it may
thereafter effect sales pursuant to such prospectus. The Company shall
only be able to suspend the use of such prospectus for periods aggregating
no more than 60 days in respect of any registration and, in any event, the
120-day period of effectiveness referred to in Section 5.4(a) shall be
extended one day for each day that sales are suspended under this Section
5.4(f).
5.5 Furnish Information. It shall be a condition precedent to
-------------------
the obligations of the Company to take any action pursuant to this Section 5
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such
Holder's Registrable Securities and as may be required from time to time
to keep such registration current.
5.6 Expenses of Demand Registration. All expenses incurred by
-------------------------------
or on behalf of the Company in connection with registrations, filings or
qualifications pursuant to Section 5.2, including, without limitation, all
registration, filing and qualification fees, printers' and accounting fees, and
fees and disbursements of counsel for the Company, shall be borne by the
Company; provided, however, that the Company shall not be required to pay for
-------- -------
any expenses of any registration begun pursuant to Section 5.2 if the
registration request is
<PAGE>
14
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating Holders
shall reimburse the Company promptly for all such reasonable expenses), unless
the Holders of a majority of the Registrable Securities agree to forfeit their
right to one demand registration pursuant to Section 5.2. In no event shall the
Company be obligated to bear any underwriting discounts or commissions relating
to registrable Securities or the fees and expenses of counsel to the selling
Holders.
5.7 Expenses of Piggyback Registration. The Company shall bear
----------------------------------
and pay all expenses incurred by or on behalf of the Company in connection with
any registration, filing or qualification of Registrable Securities with respect
to the registrations pursuant to Section 5.3 for each Holder, including, without
limitation, all registration, filing, and qualification fees, printing and
accounting fees and fees and disbursements of counsel for the Company relating
or allocable thereto, but excluding any underwriting discounts or commissions
relating to Registrable Securities and the fees and disbursements of counsel to
the selling Holders.
5.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 5.3 to include any of the Holders'
Registrable Securities in such underwriting or the registration statement
relating thereto unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by the Company. If the total
amount of securities, including Registrable Securities, requested by Holders and
other stockholders to be included in such offering exceeds the amount of
securities offered other than by the Company that the underwriters reasonably
believe can be offered without jeopardizing the success of the offering, then
the Company shall be required to include in the offering only that number of
such securities, including Registrable Securities, which the underwriters
believe will not jeopardize the success of the offering. To achieve any
necessary reduction in the securities to be sold, the securities to be excluded
from the offering shall first be selected (in each case, pro rata among such
class of holders according to the total amount of securities proposed to be
included in the registration statement or in such other proportions as shall
mutually be agreed to by such class of holders) in the following order (subject
to any contrary provisions in registration rights agreements executed by the
Company prior to the date hereof): (i) first, securities being included on
behalf of holders other than members of the Zell Group shall be excluded, except
for securities of holders referred to in clause (iii) below; (ii) next, if
additional securities must be excluded, Registrable Securities included pursuant
to Section 5.3 shall be excluded; (iii) thereafter, if additional securities
must be excluded, securities included on behalf of a holder exercising demand
registration rights similar to those set forth in Section 5.2 shall be excluded;
and (iv) finally, if additional securities
<PAGE>
15
must be excluded, securities offered by the Company shall be excluded.
5.9 Delay of Registration. No Holder shall have any right to
---------------------
obtain or seek an injunction restraining or otherwise delaying any registration
as the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 5.
5.10 Indemnification. In the event any Registrable Securities
---------------
are included in a registration statement under this Section 5:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder and the affiliates of such Holder, and their
respective directors, officers, general and limited partners, agents and
representatives (and the directors, officers, affiliates and controlling
persons thereof), and each other person, if any, who controls such Holder
within the meaning of the Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions
or violations (collectively a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus (but only if such statement
is not corrected in the final prospectus) contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading (but only if such omission is
not corrected in the final prospectus), or (iii) any violation or alleged
violation by the Company in connection with the registration of Registrable
Securities under the Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Act, the Exchange Act or any state
securities law; and the Company will pay to each such Holder, affiliate or
controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
-------- -------
indemnity agreement contained in this Section 5.10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or
action to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any
such Holder or controlling person.
<PAGE>
16
Each indemnified party shall furnish such information regarding itself or
the claim in question as an indemnifying party may reasonably request in
writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the Act, the Exchange Act
or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with
such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this Section 5.10(b) in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
--------
however, that the indemnity agreement contained in this Section 5.10(b)
-------
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of such Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this section 5.10(b)
--------
exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
5.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
5.10, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties. The
failure to deliver written notice to the indemnifying party within a
reasonable time after the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 5.10 to the extent of such prejudice, but the omission so to
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any
<PAGE>
17
indemnified party otherwise than under this Section 5.10. The indemnified
party shall have the right, but not the obligation, to participate in the
defense of any action referred to above through counsel of its own choosing
and shall have the right, but not the obligation, to assert any and all
separate defenses, cross claims or counterclaims which it may have, and the
fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of such counsel has been
specifically authorized in advance by the indemnifying party, (ii) there is
a conflict of interest that prevents counsel for the indemnifying party
from adequately representing the interests of the indemnified party or
there are defenses available to the indemnified party that are different
from, or additional to, the defenses that are available to the indemnifying
party, (iii) the indemnifying party does not employ counsel that is
reasonably satisfactory to the indemnified party, or (iv) the indemnifying
party fails to assume the defense or does not reasonably contest such
action in good faith, in which case, if the indemnified party notifies the
indemnifying party that it elects to employ separate counsel, the
indemnifying party shall not have the right to assume the defense of such
action on behalf of the indemnified party and the reasonable fees and
expenses of such separate counsel shall be borne by the indemnifying party;
provided, however, that, the indemnifying party shall not, in connection
-------- -------
with any proceeding or related proceedings in the same jurisdiction, be
liable for the reasonable fees and expenses of more than one separate firm
(in addition to one firm acting as local counsel) for all indemnified
parties.
(d) The obligations of the Company and the holders under this Section
5.10 shall survive the completion of any offering of Registrable Securities
in a registration statement under this Section 5.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
(if any) entered into in connection with any underwritten public offering
of the Registrable Securities are in conflict with the foregoing
provisions, the provisions in such underwriting agreement shall control.
5.11 Reports Under the Exchange Act. With a view to making
------------------------------
available to the holders the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144;
<PAGE>
18
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required under the Act and the Exchange Act;
and
(c) furnish to any Holder forthwith upon request (i) a written
statement by the Company as to its compliance with the reporting
requirements of Rule 144, or as to whether it qualifies as a registrant
whose securities may be resold pursuant to Form S-3, (ii) a copy of the
most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Holder of any
rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
5.12 No Assignment of Registration Rights. The rights to cause
------------------------------------
the Company to register Registrable Securities pursuant to this Section 5 may
only be assigned by a Holder to a transferee or assignee of any Registrable
Securities if (i) such transferee or assignee is a Zell Contracting Party and
(ii) immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Act.
5.13 Waiver Procedures. The observance by the Company of any
-----------------
provision of this Section 5 may be waived (either generally or in a particular
instance and either retroactively or prospectively) with the written consent of
the Holders of a majority of the Registrable Securities, and any waiver effected
in accordance with this paragraph shall be binding upon each Holder of
Registrable Securities.
5.14 "Market Stand-off" Agreement. Any Holder of Registrable
----------------------------
Securities, if requested by an underwriter of any registered public offering of
Company securities being sold in a firm commitment underwriting, agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other Company
Voting Securities) held by such Holder other than shares of Registrable
Securities included in the registration during the seven days prior to, and
during a period of up to 120 days following, the effective date of the
registration statement. Such agreement shall be in writing in a form reasonably
satisfactory to the Company and such underwriter. The Company may impose stop-
transfer instructions with respect to the securities subject to the foregoing
restriction until the end of the required stand-off period.
Section 6. Term of Agreement; Certain Provisions Regarding
-----------------------------------------------
Termination. Unless this Agreement specifically provides for earlier or later
- -----------
termination with respect to any particular right or obligation, this Agreement
shall terminate if the Zell Group shall, at any time (in compliance with this
Agreement), sell or otherwise dispose of or otherwise cease to
<PAGE>
19
own Company Voting Securities such that the Zell Group beneficially owns in the
aggregate Company Voting Securities representing less than 2% of the Combined
Voting Power of all Company Voting Securities (calculated in accordance with
Section 3.1 and including the shares of Common Stock to be acquired from the
Company pursuant to the Stock Purchase and Sale Agreement as long as such
agreement is in effect).
Section 7. Legend and Stop Transfer Order. To assist in effectuating
------------------------------
the provisions of this Agreement, CHI hereby consents (i) to the placement, in
connection with the transactions contemplated by the Stock Purchase and Sale
Agreement or otherwise within 10 business days after any Company Voting
Securities become subject to the provisions of this Agreement, of the legend
specified in Section 4.10(b) of the Stock Purchase and Sale Agreement on all
certificates representing ownership of Company Voting Securities owned of record
or beneficially by any member of the Zell Group, until such shares are sold,
transferred or disposed in a manner permitted hereby to a person who is not then
a member of the Zell Group, and (ii) to the entry of stop transfer orders with
the transfer agent or agents of Company Voting Securities against the transfer
of Company Voting Securities except in compliance with the requirements of this
Agreement. The Company agrees to remove promptly all legends and stop transfer
orders with respect to the transfer of Company Voting Securities being made to a
person who is not then a member of the Zell Group in compliance with the
provisions of this Agreement.
Section 8. Remedies.
--------
(a) CHI and the Company acknowledge and agree that (i) the provisions
of this Agreement are reasonable and necessary to protect the proper and
legitimate interests of the parties hereto, and (ii) the parties would be
irreparably damaged in the event any of the provisions of this Agreement
were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that, except as otherwise
provided in Section 5.9 hereof, each party shall be entitled to preliminary
and permanent injunctive relief to prevent breaches of the provisions of
this Agreement by the other party (or its affiliates) without the necessity
of proving actual damages or of posting any bond, and to enforce
specifically the terms and provisions hereof and thereof in any court of
the United States or any state thereof having jurisdiction, which rights
shall be cumulative and in addition to any other remedy to which the
parties may be entitled hereunder or at law or equity.
(b) In addition to any other remedy the Company may have under this
Agreement or in law or equity, if any member of the Zell Group shall
acquire or transfer any Company Voting Securities in violation of this
Agreement, such Company Voting Securities which are in excess of the number
<PAGE>
20
permitted to be owned or controlled by the Zell Group or which have been
transferred by a member of the Zell Group in violation of the provisions of
this Agreement may not be voted by the owner thereof or any proxy therefor.
Section 9. General Provisions.
------------------
9.1 Consent to Jurisdiction; Service of Process. This agreement
-------------------------------------------
shall be governed by and interpreted and enforced in accordance with the laws of
the State of Delaware without giving effect to any conflicts of law provisions.
Each of the parties hereto irrevocably and unconditionally (a) agrees that any
suit, action or other legal proceeding (collectively, "suit") arising out of
this agreement shall be brought and adjudicated in the United States District
Court for the District of Delaware or the Southern District of California, or,
if such courts will not accept jurisdiction, in any court of competent civil
jurisdiction sitting in either the State of Delaware or the City of San Diego,
California, (b) submits to the jurisdiction of any such court for the purposes
of any such suit and (c) waives and agrees not to assert by way of motion, as a
defense or otherwise in any such suit, any claim that it is not subject to the
jurisdiction of the above courts, that such suit is brought in an inconvenient
forum or that the venue of such suit is improper. Each of the parties also
irrevocably and unconditionally consents to the service of any process,
pleadings, notices or other papers in a manner permitted by the notice
provisions of Section 9.3.
9.2 Additional Zell Group Parties; Joint and Several Obligations.
------------------------------------------------------------
All of the obligations of the Zell Group and its members hereunder shall be
joint and several. Each member of the Zell Group that shall become or have the
right to become the beneficial owner, within the meaning and scope of Section
3.1 hereof, of Company Voting Securities shall, promptly upon becoming such
owner or holder, execute and deliver to the Company a joinder agreement,
agreeing to be legally bound by this Agreement to the same extent as if it had
signed this Agreement as an original signatory as a member of the Zell Group;
provided that failure to execute such an agreement shall not excuse such
- --------
member's non-compliance with any provision of this Agreement. No member of the
Zell Group shall transfer securities to another member of the Zell Group unless
the transferee shall agree to be bound by this Agreement in the manner specified
above in this Section 9.2.
9.3 Notices. All notices, consents, requests, instructions,
-------
approvals and other communications provided for herein and all legal process in
regard hereto shall be in writing and shall be decreed to be validly given, made
or served when delivered personally or deposited in the U.S. mail, postage
prepaid, for delivery by express, registered or certified mail, or delivered to
a recognized overnight courier service, addressed as follows:
If to the Company:
<PAGE>
21
Chart House Enterprises, Inc.
115 South Acacia Avenue
Solana Beach, California 92075
Attn: Chief Executive Officer
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Robert L. Friedman
If to CHI or any member of the Zell Group:
Chart House Investors, LLC
Two North Riverside Plaza
Suite 1900
Chicago, Illinois 60606
Attn: Philip Handy
With a copy to:
Rosenberg & Liebentritt
Two North Riverside Plaza
Suite 1515
Chicago, Illinois 60606
Attn: Alisa M. Singer
And to:
Seyfarth, Shaw, Fairweather & Geraldson
55 East Monroe Street
Suite 4200
Chicago, Illinois 60603
Attn: Robert F. Weber
or to such other address as may be specified in a notice given pursuant to this
Section 9.3.
9.4 Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect and shall in no
way be affected, impaired or invalidated. The parties hereto agree that they
will use their best efforts at all times to support and defend this Agreement.
9.5 Amendments. This Agreement may be amended only by an
----------
agreement in writing signed by each of the parties hereto; provided, however,
-------- -------
that any amendment executed by the Company must prior thereto be approved by a
majority of the Disinterested Directors then in office.
<PAGE>
22
9.6 Descriptive Headings. Descriptive headings are for
--------------------
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
9.7 Counterparts; Facsimile Signatures. This Agreement shall
----------------------------------
become binding when one or more counterparts hereof, individually or taken
together, bears the signatures of each of the parties hereto. This Agreement
may be executed in any number of counterparts, each of which shall be an
original as against the party whose signature appears thereon, or on whose
behalf such counterpart is executed, but all of which taken together shall be
one and the same agreement. A facsimile copy of a signature of a party to this
Agreement or any such counterpart shall be fully effective as if an original
signature.
9.8 Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of and be enforceable by the successors and
assigns of the parties hereto.
<PAGE>
23
IN WITNESS WHEREOF, the parties hereto intending to be legally bound
have duly executed this Agreement, all as of the day and year first above
written.
Company: CHART HOUSE ENTERPRISES, INC.
By: /s/ WILLIAM R. KUNTZ, JR.
-------------------------------------------
Name: William R. Kuntz, Jr.
--------------------------------------
Title: Executive Vice President
--------------------------------------
CHI: CHART HOUSE INVESTORS, LLC, by
ALPHA/ZFT PARTNERSHIP, its
managing member, by a general
partner of one of its general
partners
By: /s/ SHELI Z. ROSENBERG
-------------------------------------------
Name: Sheli Z. Rosenberg
--------------------------------------
Title: Trustee
-------------------------------------
Alpha: ALPHA/ZFT PARTNERSHIP
by a general partner of one of its general
partners, solely for purposes of Section 3.9
of this Agreement
By: /s/ SHELI Z. ROSENBERG
-----------------------------------------
Name: Sheli Z. Rosenberg
------------------------------------
Title: Trustee
-----------------------------------
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0
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