<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK
ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 27, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
COMMISSION FILE NUMBER 1-9684
CHART HOUSE ENTERPRISES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0147725
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
640 North LaSalle, Suite 295, Chicago, 60610
Illinois (Zip Code)
(Address of Principal Executive
Offices)
Registrant's telephone number including area code: (312) 266-1100
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- ---------------------
<S> <C>
Common Stock, par value $.01 per share New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S) 229.405 of this Chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 7, 2000 was $42,018,750.
The number of shares outstanding of common stock as of March 7, 2000 was
11,775,991.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the year
ended December 27, 1999 are incorporated by reference into Part I hereof.
Portions of the Registrant's Proxy Statement for the Annual Meeting to be
held May 15, 2000 are incorporated by reference into Part III hereof.
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<PAGE>
PART I
This Annual Report on Form 10-K and the documents incorporated herein by
reference contain forward-looking statements that have been made pursuant to
provisions of the Private Securities Litigation Reform Act of 1995. Forward-
looking statements represent the Company's expectations or beliefs concerning
future events, including any statements regarding: future sales and gross
profit percentages, the continuation of historical trends, the sufficiency of
the Company's cash balances and cash generated from operating, financing
and/or investing activities for the Company's future liquidity and capital
resource needs. Without limiting the foregoing, the words "believes",
"intends", "projects", "plans", "expects", "anticipates", and similar
expressions are intended to identify forward-looking statements. The Company
cautions that these statements are further qualified by important economic and
competitive factors that could cause actual results to differ materially from
those in the forward-looking statements. These factors include, without
limitation, risks of the restaurant industry, an industry with many well-
established competitors with greater financial and other resources than the
Company, and the impact of changes in consumer trends, employee availability
and cost increases. In addition, the Company's ability to expand is dependent
upon various factors, such as the availability of attractive sites for new
restaurants, the ability to negotiate suitable lease terms, the ability to
generate or borrow funds to develop new restaurants, the ability to obtain
various government permits and licenses, and the recruitment and training of
skilled management and restaurant employees. Accordingly, such forward-looking
statements do not purport to be predictions of future events or circumstances
and may not be realized.
ITEM 1. BUSINESS.
As of December 27, 1999, Chart House Enterprises, Inc. and its subsidiaries
(the "Company") operated 51 restaurants, consisting of 49 Chart House
restaurants, one Peohe's restaurant, and one Angelo and Maxie's steakhouse.
The Company was incorporated in Delaware on July 25, 1985. In May, 1996, the
Company sold its Islands restaurant operations and in October, 1998, the
Company sold Solana Beach Baking Company, a wholesale bakery operated by the
Company. The Angelo and Maxie's steakhouse concept was acquired in April,
1999.
CONCEPTS/OPERATIONS
Chart House operations commenced in 1961 with the opening of the first
Chart House in Aspen, Colorado by a predecessor of the Company. Chart House
restaurants are full-service, casual seafood dinner houses with a menu
featuring fresh fish and seafood, as well as steaks, chicken and prime rib.
Many of the Chart House restaurants feature an elaborate salad bar where the
customer prepares his or her own salad and some Chart Houses have a seafood
bar which offers various appetizers.
The Company opened its Peohe's restaurant in January, 1988 in Coronado,
California overlooking San Diego Bay and the San Diego city skyline. Although
similar to the Company's Chart House restaurants in many respects, Peohe's
opened under a different name in part to minimize confusion and competition
with other nearby Chart House restaurants and also to provide Chart House
management a suitable vehicle for experimentation and development of different
menu items, restaurant design and operating concepts. Peohe's has a more
extensive and higher priced menu, higher level of service and greater variety
of cooking techniques than the typical Chart House restaurant.
In April, 1999 the Company acquired the Angelo and Maxie's steakhouse in
New York, New York. Unlike typical steakhouses, Angelo and Maxie's offers
diners great steak, but serves up oversized portions at reasonable prices, all
in a unique setting that's sophisticated, yet energetic, and fun. Angelo and
Maxie's is a smoke-friendly establishment, and sells a revolving selection of
premium cigars at the restaurant. The acquisition creates infinite expansion
opportunities for the Company.
The Company places great emphasis upon the location, exterior and interior
design of each restaurant. Each restaurant is unique and designed to fit
within and complement its surroundings. A significant remodeling program
commenced in 1998. By the end of 1999, the Company had spent approximately $10
million renovating
2
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about half of the Company's restaurants. These remodels serve two purposes.
First, the Company is investing in the structure of each building to maximize
its longevity and ensure long term existence of the restaurant. Secondly, the
image and concept are best reflected in the updated decor chosen for each
location. Representative exteriors of Chart House restaurants range from the
restored 1887 Victorian boathouse on Coronado Island in San Diego Bay, which
will undergo renovations in 2000, to the modern three-tiered glass restaurant
in Philadelphia overlooking the Delaware River, which was remodeled in 1999.
With a few exceptions, the restaurants are freestanding buildings.
In 1999, the annual revenue for each restaurant currently in operation for
the whole of 1999 ranged from $1.5 million to $6.1 million, with an average
annual sales per Chart House restaurant of $2.7 million. The average dinner
check was approximately $36 per person. Angelo and Maxie's contributed $6.4
million in revenues since it's acquisition in April, 1999. The average dinner
check was approximately $40 per person.
Historically, the Company's business is seasonal in nature with revenues
and net income for the first, second, and third quarters greater than in the
fourth quarter. The operating hours are typically 5:00 p.m. to 11:00 p.m. A
few selected restaurants are open for lunch and/or brunch.
Alcoholic beverages are available at all locations. The sale of alcoholic
beverages accounted for approximately 22% of the revenues generated during
each of the past three years.
OPERATIONS
Each restaurant is managed by one general manager and between two and seven
assistant managers, depending on the operating characteristics and size of the
restaurant. On average, general managers possess approximately six years
experience with the Company. Each general manager is required to comply with
an extensive operations manual which contains procedures to ensure uniform
operations, consistently high quality products and service, and proper
accounting for restaurant operations. The general manager and his or her
assistants are responsible for training restaurant employees under a training
program managed by the Company's Director of Training. Assistant managers
generally are required to participate in a comprehensive management
development program that emphasizes the Company's operating strategies,
procedures, and standards. The aim of this program is to provide each manager
with the tools needed to thrive in progressive management assignments.
The success of each concept relies on the continued involvement of regional
Directors of Operations, regional Vice Presidents of Operations, and the
President and Chief Executive Officer of the Company. There are currently six
regional Directors of Operations, each of whom is responsible for five to
eight restaurants in a given area. The regional Directors of Operations report
to one of two regional Vice Presidents of Operations, who report directly to
the President and Chief Executive Officer of the Company. Recently, the
Company has hired a Vice President of Operations for the Angelo and Maxie's
concept. As the number of Angelo and Maxie's restaurants grows, we anticipate
employing a similar management structure for the concept.
The involvement of operations management ranges from attracting quality
management teams for the restaurants to routine visits to each location
enforcing strict adherence to Company strategies, policies and standards of
quality.
EXPANSION STRATEGY
The Company's long term strategies include expanding both the Chart House
concept and the Angelo and Maxie's concept. This plan includes opening at
least five Angelo and Maxie's and at least two Chart Houses in 2000, with
comparable openings in the subsequent two to three years. The development will
be concentrated in markets with attractive demographics which will support the
Chart House concept and the Angelo and Maxie's concept.
3
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When identifying and developing restaurant sites, particular emphasis is
placed on a potential site's physical location. Trade area demographics,
traffic volume, visibility, and accessibility are all key performance
indicators analyzed by management. Sales and profit projections are then
prepared to determine whether the economics of investment are sound. The
Company accords great importance to the selection of and coordination with the
architect to ensure that the proposed restaurant structure fits the Company
image. Executive management is involved extensively in each facet of the site
selection process.
The rate at which the Company can successfully achieve these expansion
objectives is dependent upon the success of locating acceptable sites,
negotiating acceptable lease or purchase terms, obtaining requisite
governmental permits and approvals, supervising location construction, and
recruitment and training of personnel.
PROCUREMENT OF FOOD AND SUPPLIES
The Company's ability to maintain consistent quality throughout its system
depends in part upon its ability to acquire food products and related items
from reliable sources in accordance with Company specifications. Suppliers are
pre-approved by the Company and are required to adhere to strict product
specifications to ensure that high quality food and beverage products are
served in the restaurants. The Company negotiates directly with the major
suppliers to obtain competitive prices and uses purchase agreements to
stabilize the potentially volatile pricing associated with certain
commodities. Management believes that adequate alternative sources of quality
food and supplies are readily available.
EMPLOYEES AND LABOR RELATIONS
The Company employs approximately 3,400 persons, of whom approximately 60
are corporate personnel. Approximately 220 are restaurant management personnel
and the remainder represent hourly restaurant personnel. None of the Company's
employees are covered by a collective bargaining agreement. The Company has
never experienced a work stoppage and considers its labor relations to be
good.
COMPETITION
In general, the restaurant business is highly competitive and can be
affected by competition created by similar restaurants in a geographic area,
changes in the public's eating habits and preferences, and local and national
economic conditions affecting consumer spending habits, population trends and
traffic patterns. Key competitive factors in the industry are the quality and
value of the food products offered, quality of service, cleanliness, name
identification, restaurant locations, price and attractiveness of facilities.
The Company's strategy is to differentiate itself from its competitors by
continually upgrading its menu, updating the appearance of each restaurant
through remodeling activities, and efficient and friendly service in a unique
setting.
MARKETING
The Company has developed a coordinated marketing communications program.
Efforts are concentrated on various local activities, print media, promotional
campaigns and support for "ViewPoints", the Company's frequent diner rewards
program. The Company recently hired a Vice President of Marketing to expand
the marketing and promotion ventures.
GOVERNMENT REGULATION
Each of the Company's restaurants is subject to various federal, state and
local laws, regulations and administrative practices affecting its business
and must comply with provisions regulating, among other things, health and
sanitation standards, equal employment, public accommodations for disabled
patrons, minimum wages, worker safety and compensation and licensing for the
sale of food and alcoholic beverages. Difficulties or failures in obtaining or
maintaining required liquor licenses, or other required licenses, permits, or
approvals, could delay or prevent the opening of new restaurants or adversely
affect the operations of existing restaurants.
4
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Federal and state environmental regulations have not had a material effect
on the Company's operations but more stringent and varied requirements of
local governmental bodies with respect to zoning, land use and environmental
factors could delay construction of new restaurants and add to their
construction cost.
The Company is also subject to the Fair Labor Standards Act, which governs
such matters as minimum wages, overtime and other working conditions. A
significant number of the Company's food service personnel are paid at rates
related to federal and state minimum wage requirements and, accordingly,
increases in the minimum wage or decreases in the allowable tip credit will
increase the Company's labor cost. There can be no assurance that future
legislation covering, among other matters, mandated health insurance, will not
be enacted and subsequently have a significant effect on the Company.
The Company believes it is operating in substantial compliance with
applicable laws, regulations and administrative practices governing its
operations.
TRADEMARKS
The original "Chart House" logo and trademark were registered with the
United States Patent and Trademark Office (the "USPTO") in 1972 and 1977,
respectively. The new corporate "Chart House" logo and trademark were
registered with the USPTO in August 1997. The "Peohe's" logo and trademark
were registered with the USPTO in 1988. Applications to register new
trademarks in connection with "ViewPoints", the Company's new frequent dining
program, "Angelo and Maxie's Steakhouse", and various marketing slogans are
currently pending with the USPTO.
The "Chart House" trademark and logo is licensed by the Company to the
operator of one Chart House restaurant located in Honolulu, Hawaii.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information about the Executive
Officers of the Company. All positions are with Chart House Enterprises, Inc.
<TABLE>
<CAPTION>
NAME AGE POSITIONS HELD
---- --- ----------------------------------------------------
<S> <C> <C>
Thomas J. Walters....... 41 President and Chief Executive Officer
William M. Sullivan..... 33 Executive Vice President and Chief Financial Officer
</TABLE>
Executive Officers of the Company are appointed annually by the Board of
Directors and serve at the Board's discretion.
Thomas J. Walters was promoted to Chief Executive Officer in November 1998.
He joined the Company as President and Chief Operating Officer and became a
member of the Board of Directors in February 1998. From March 1995 until
February 1998, Mr. Walters was President of Morton's of Chicago. He also
previously held the positions at Morton's of Vice President of Operations and
Regional Manager from March 1993 to March 1995. Prior to Mr. Walters'
association with Morton's, he was Director of Food and Beverage with the Ritz-
Carlton Hotel Corporation for six years. He has also held positions as
Director of Food and Beverage for the La Costa Resort & Spa, and Director of
Catering and Banquet for the Hyatt Hotels Corporation.
William M. Sullivan was promoted to Executive Vice President and Chief
Financial Officer in June 1999. He joined the Company as Vice President--
Finance and Controller in March 1998. From June 1995 until March 1998, Mr.
Sullivan was the Chief Financial Officer for the mid-west area development
group for Boston Chicken, Inc. Prior to June 1995, he held various financial
positions with Boston Chicken, Inc. and McDonald's Corporation. Mr. Sullivan
is a CPA.
5
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ITEM 2. PROPERTIES.
A majority of the restaurant properties used by the Company are subject to
a lease agreement. The following table sets forth the number of restaurants
owned, leased and operated pursuant to ground leases and the average remaining
lease term (including renewal options) in years as of December 27, 1999.
<TABLE>
<CAPTION>
AVERAGE
REMAINING
OWNED LEASED TOTAL TERM
----- ------ ----- ---------
<S> <C> <C> <C> <C>
Chart House (including Peohe's)................. 7 43 50 26
Angelo and Maxie's.............................. -- 1 1 8
--- --- ---
Total........................................... 7 44 51
=== === ===
</TABLE>
Restaurant sizes range from 4,600 to 15,800 square feet with an average of
8,350 square feet. Seating capacities range from 112 to 434 with an average of
267.
The amount of rent paid to lessors and the methods of computing rent vary
considerably from lease to lease. All of the Company's restaurant property
leases provide for a minimum annual rent, and most leases require payment of
additional rent based on sales volume at the particular location over
specified minimum levels. All of the Company's assets, which includes
properties held in fee, are pledged as collateral under the Revolving Credit
and Term Loan Agreement, filed herewith.
The Company's principal executive offices occupy approximately 13,200
square feet of leased office space in a building located in Chicago, Illinois.
This lease expires in June, 2003.
ITEM 3. LEGAL PROCEEDINGS.
The Company periodically is a defendant in cases incidental to its business
activities. While any litigation or investigation has an element of
uncertainty, the Company believes that the outcome of any of these matters
will not have a materially adverse effect on its financial condition or
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information appearing under the caption "Common Stock Information" on
page 29 of the Company's Annual Report to Stockholders for the year ended
December 27, 1999 (the "Annual Report") is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data for the Company and its subsidiaries on page 13
of the Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results of
Operations appears on pages 8 through 12 of the Annual Report and is
incorporated herein by reference.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to market risk from changes in interest rates on
debt and changes in commodity prices. The Company's net exposure to interest
rate risk consists of its Revolving Credit and Term Loan Agreement that is
benchmarked to the prime rate and the LIBOR rate, respectively. The impact on
the Company's results of operations of a one-point interest rate change on the
outstanding debt balance as of December 27, 1999 would be approximately
$177,000 in incremental interest expense. The Company does not use derivative
instruments to manage borrowing costs or reduce exposure to adverse
fluctuations in the interest rate. The Company does not use derivative
instruments for trading purposes. The Company purchases certain commodities
such as beef, seafood, chicken, and cooking oil. These commodities are
generally purchased based upon purchase agreements established with vendors.
These purchase agreements may contain contractual features that fix the
commodity price or define the price from an agreed upon formula. The Company
does not use financial instruments to hedge commodity prices because these
purchase arrangements help control the ultimate cost paid and any commodity
price fluctuations are generally short term in nature. These disclosures
contain forward-looking statements. Actual results may differ based upon
general market conditions.
ITEM 8. FINANCIAL STATEMENTS.
The consolidated financial statements of the Company and its subsidiaries
appear on pages 14 through 16 of the Annual Report and are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Directors. The information appearing under the caption "Election of
Directors" on pages 2-6 of the Company's Proxy Statement for its Annual
Meeting of Stockholders to be held on May 15, 2000 (the "Proxy Statement") is
incorporated herein by reference.
Executive Officers. The information appearing under the caption "Executive
Officers of the Company" included on page 5 in Item 1 of this Annual Report on
Form 10-K is incorporated herein by reference.
Compliance with Section 16(a) of the Exchange Act. The information
appearing under the caption "Security Ownership of Management" on pages 12 and
13 of the Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information appearing under the caption "Executive Compensation"
commencing on page 6 of the Proxy Statement is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information appearing under the captions "Security Ownership of Certain
Beneficial Owners" on pages 10-12 and "Security Ownership of Management" on
pages 12 and 13 of the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information appearing under the caption "Certain Relationships and
Related Transactions" on page 10 of the Proxy Statement is incorporated herein
by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements:
Included in Part II of this report are the following financial statements
incorporated herein by reference to the following pages of the Annual Report.
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Consolidated Balance Sheets as of December 27, 1999 and December 28,
1998.................................................................... 14
Consolidated Statements of Operations for the fiscal years 1999, 1998 and
1997.................................................................... 15
Consolidated Statements of Stockholders' Equity for the fiscal years
1999, 1998 and 1997..................................................... 15
Consolidated Statements of Cash Flows for the fiscal years 1999, 1998 and
1997.................................................................... 16
Notes to Consolidated Financial Statements............................... 17-26
Report of Independent Public Accountants................................. 27
</TABLE>
(2) Financial Statement Schedules:
All schedules have been omitted since the information required to be
submitted has been included in the consolidated financial statements or notes
thereto or have been omitted as not applicable or not required.
(3) Exhibits:
<TABLE>
<C> <S> <C>
2.1 Asset Purchase Agreement by and among Chart House
Acquisition, Inc., Diamond Jim's Steak House, L.L.C.,
Howard Levine, Richard Wolf, Marc Packer and, solely for
purposes of Section 8.16, the Company dated as of March
17, 1999.(11)
3.1 (1) Restated Certificate of Incorporation of the Company,
as amended.(1)
(2) Certificate of Amendment of Restated Certificate of
Incorporation of the Company.(2)
3.2 Amended and Restated Bylaws of the Company.(1)
4.1 Specimen Common Stock Certificate.(2)
4.2 Section 203 of the Delaware General Corporation Law.(2)
10.1 (1) Registration Rights Agreement dated November 27, 1985
among the Company and its stockholders.(1)
(2) First Amendment to Registration Rights Agreement dated
as of April 28, 1986.(1)
(3) Second Amendment to Registration Rights Agreement
dated as of April 21, 1987.(1)
(4) Third Amendment to Registration Rights Agreement dated
as of September 6, 1989.(3)
10.2 Executive Benefit and Wealth Accumulation Plan of the
Company, effective January 27, 1986.(1)
10.3 1989 Non-Qualified Stock Option Plan of the Company.(2)
(a) Form of 1989 Non-Qualified Stock Option Plan
Agreement.(2)
10.4 1992 Stock Option Plan.(4)
(a) Form of 1992 Stock Option Plan Agreement.(4)
10.5 Chart House Enterprises, Inc. Severance Pay Plan dated
June 10, 1999.
10.5.1 First Amendment to Chart House Enterprises, Inc. Severance
Pay Plan dated as of December 9, 1999.
10.6 Stock Purchase and Sale Agreement dated as of March 10,
1997 among the Company, Chart House Investors, LLC and
Alpha/ZFT Partnership.(6)
10.7 Chart House Enterprises, Inc. Amended and Restated
Standstill Agreement dated October 1, 1997.(7)
10.7.1 Amended and Restated Standstill Agreement dated March 31,
1999.
10.8 1996 Stock Option Plan.(8)
(a) Form of 1996 Stock Option Plan Agreement.(8)
</TABLE>
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<TABLE>
<C> <S> <C>
10.9 1996 Nonemployee Director Stock Compensation Plan.(8)
10.10 Corporate Management Bonus Compensation Plan dated January
1, 1997.(8)
10.11 Chart House Guaranty Agreement dated as of December 10,
1997 between the Company and FINOVA Capital
Corporation.(9)
10.12 1998 Employee Stock Purchase Plan.(10)
10.13 Asset Purchase Agreement dated September 29, 1998 by and
among Crestone Group, L.L.C., Solana Beach Baking Company,
and the Company.(11)
10.14 Stock Purchase Agreement dated October 22, 1998 by and
among Inwood Investors Partnership, L.P., the Company,
Metropolitan Life Insurance Company, Michael C. Jolley,
Kirby Gorton, and Luther's Acquisition Corp.(11)
10.15 Revolving Credit and Term Loan Agreement, Dated as of
April 26, 1999 among the Company, Chart House, Inc.,
BankBoston, N.A., as Agent, and Bancboston Robertson
Stephens Inc., as Arranger.
10.16 Amendment Agreement No. 1 to that certain Revolving Credit
and Term Loan Agreement dated as of October 29, 1999.
10.17 Amendment Agreement No. 2 to that certain Revolving Credit
and Term Loan Agreement dated as of December 24, 1999.
13. Annual Report to Stockholders for the year ended December
27, 1999.
21. Subsidiaries of the Company.
27. Financial Data Schedule (required for electronic filing
only).
</TABLE>
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(1) Filed as an exhibit to the Company's Registration Statement on Form S-1
dated August 27, 1987 or amendments thereto dated October 6, 1987 and
October 14, 1987 (Registration No. 33-16795).
(2) Filed as an exhibit to the Company's Registration Statement on Form S-1
dated July 20, 1989 or amendment thereto dated August 25, 1989
(Registration No. 33-30089).
(3) Filed as an exhibit to Form 10-K for the fiscal year ended December 31,
1989.
(4) Filed as an exhibit to Form 10-K for the fiscal year ended December 31,
1991.
(5) Filed as an exhibit to Form 10-Q for the quarterly period ended April 1,
1996.
(6) Filed as an exhibit to Form 10-Q for the quarterly period ended March 31,
1997.
(7) Filed as Exhibit 2.1 to Amendment No. 4 to a Schedule 13D of Chart House
Investors, LLC dated as of October 7, 1997.
(8) Filed as an exhibit to Form 10-K for the fiscal year ended December 30,
1996.
(9) Filed as an exhibit to Form 10-K for the fiscal year ended December 29,
1997.
(10) Filed as an exhibit to Form S-8 dated December 14, 1998.
(11) Filed as an exhibit to Form 10-K for the fiscal year ended December 28,
1998.
(b) Reports on Form 8-K. A report on Form 8-K/A was filed by the Company on
July 6, 1999. Item 7 was reported describing financial statements and pro
forma financial information filed subsequent to the Angelo and Maxie's
business combination.
9
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Chart House Enterprises, Inc.
Date: March 24, 2000
/s/ Thomas J. Walters
By: _________________________________
Thomas J. Walters
President and Chief Executive
Officer; Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas J. Walters President and Chief March 24, 2000
____________________________________ Executive Officer; Director
Thomas J. Walters
/s/ William M. Sullivan Executive Vice President and March 24, 2000
____________________________________ Chief Financial Officer
William M. Sullivan
/s/ Barbara Allen Director March 24, 2000
____________________________________
Barbara Allen
/s/ Linda Walker Bynoe Director March 24, 2000
____________________________________
Linda Walker Bynoe
/s/ William M. Diefenderfer, III Director March 24, 2000
____________________________________
William M. Diefenderfer, III
/s/ F. Philip Handy Director March 24, 2000
____________________________________
F. Philip Handy
/s/ Stephen Ottmann Director March 24, 2000
____________________________________
Stephen Ottmann
/s/ Samuel Zell Chairman of the Board, March 24, 2000
____________________________________ Director
Samuel Zell
</TABLE>
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Ex. 10.5
CHART HOUSE ENTERPRISES, INC.
SEVERANCE PAY PLAN
AND SUMMARY PLAN DESCRIPTION
EFFECTIVE JUNE 10, 1999
<PAGE>
CHART HOUSE ENTERPRISES, INC.
SEVERANCE PAY PLAN
AND SUMMARY PLAN DESCRIPTION
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ESTABLISHMENT OF THE PLAN..................................................................... 1
PURPOSE OF THE PLAN........................................................................... 1
ELIGIBLE EMPLOYEES............................................................................ 1
CONDITIONS OF INELIGIBILITY................................................................... 1
BASE SEVERANCE PAY............................................................................ 2
SUPPLEMENTAL SEVERANCE PAY.................................................................... 3
PAYMENT OF SEVERANCE PAY...................................................................... 4
WAIVER AND RELEASE AGREEMENT.................................................................. 5
PLAN ADMINISTRATION........................................................................... 5
PROCEDCURE FOR MAKING AND APPEALING CLAIMS FOR PLAN BENEFITS.................................. 5
AMENDMENT/TERMINATION AND VESTING............................................................. 6
NO ASSIGNMENT................................................................................. 6
CONFIDENTIAL INFORMATION...................................................................... 7
NO SOLICITATION OF EMPLOYEES.................................................................. 7
NO DISPARGEMENT............................................................................... 7
RECOVERY OF PAYMENTS MADE BY MISTAKE.......................................................... 7
REPRESENTATIONS CONTRARY TO THE PLAN.......................................................... 7
NO EMPLOYMENT RIGHTS.......................................................................... 8
PLAN FUNDING.................................................................................. 8
APPLICABLE LAW................................................................................ 8
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SEVERABILITY................................................................................. 8
PLAN YEAR.................................................................................... 8
MANDATED PAYMENTS............................................................................ 8
ERISA INFORMATION............................................................................ 8
GENERAL INFORMATION.......................................................................... 9
MISCELLANEOUS PROVISIONS..................................................................... 10
EXHIBIT A (BENEFICIARY DESIGNATION FORM)
EXHIBIT B (WAIVER AND RELEASE AGREEMENT)
</TABLE>
ii
<PAGE>
SEVERANCE PAY PLAN
ESTABLISHMENT OF THE PLAN
Chart House Enterprises, Inc. ("Company") hereby adopts the Severance Pay Plan
("Plan"), effective June 10, 1999, for the benefit of eligible employees of the
Company.
The Plan is an unfunded welfare benefit plan for purposes of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and a severance
pay plan within the meaning of United States Department of Labor Regulations
Section 2510.3-2(b). The Plan supercedes any prior Company severance plan,
program or policy (formal or informal) covering any employee of the Company who
is eligible to participate in this Plan ("Eligible Employee"). This documents
serves as both the Plan document and the Summary Plan Description for the Plan
for all purposes under ERISA.
PURPOSE
The purpose of the Plan is to provide an Eligible Employee with severance pay
for a specified period of time in the event the Eligible Employee's employment
with the Company is terminated due to a reduction in workforce, lack of work,
rearrangement of work, change in Company management, or inability to
satisfactorily perform the responsibilities of his or her position, as
determined in the sole discretion of the Plan Committee (defined hereinafter).
ELIGIBLE EMPLOYEES
The Plan covers all regular full-time employees with one year or more of service
with the Company. A year of service is defined as twelve (12) months of
continuous employment with the Company. Periods of employment of less than
twelve months are not counted toward years of service under this Plan and no
partial or pro rata credit will be given unless otherwise granted by the Plan
Committee in its sole discretion. The amount of base severance compensation
payable to an Eligible Employee is set forth below under "Base Severance Pay."
CONDITIONS OF INELIGIBILITY
An employee is not eligible for severance pay under the Plan if any of the
following conditions exist:
. The employee's employment with the Company terminates through
retirement, resignation or job abandonment.
. Death of the employee or discharge for cause. For purposes of this
Plan, "cause" means, as determined by the Plan Committee, because of
an employee's violation of Company policies or gross negligence,
willful misconduct, fraud or conviction of a felony.
1
<PAGE>
. The employee is eligible to receive disability benefits from the
Company or any plan maintained by the Company.
. The employee leaves employment with the Company prior to the date
authorized by the Company.
. The employee is on an authorized leave of absence; provided that an
Eligible Employee who returns from an authorized leave of absence
seeks reemployment with the Company which can not otherwise be
provided by the Company.
. The employee is terminated for poor job performance, as determined by
the Plan Committee.
. With respect to a reduction of workforce or elimination of a position,
the employee is involuntarily terminated after the employee refuses to
accept another position within the Company or, in the case of a change
in control of the Company, with the surviving or successor entity,
offering comparable compensation and requiring similar skills,
knowledge, and/or qualifications.
. The employee's employment is terminated under the terms of a group
reorganization/restructuring benefit plan or program sponsored by the
Company.
. The employee is covered by a preexisting written letter of employment,
employment agreement, severance agreement, or other written document
specifying severance compensation is to be paid upon termination of
employment with the Company.
. The employee ceases to be an Eligible Employee as defined under the
terms of the Plan.
. The Plan is terminated.
BASE SEVERANCE PAY
Except as otherwise stated herein, Eligible Employees may receive base severance
pay based upon criteria including employment status and position as summarized
in the table below. For purposes of the Plan, one week of base severance pay is
equal to the average weekly wages or salary paid to the Eligible Employee by the
Company during the preceding four (4) week period (excluding all bonus and other
non-wage or salary compensation, including, but not limited to, tips income
attributed to restaurant employees). Base severance pay shall be payable in
accordance with the Company's ordinary payroll practices.
POSITION CATEGORY BASE SEVERANCE PAY
----------------- ------------------
President/Chief Executive Officer Determined by the Company's Board
of Directors
2
<PAGE>
Chief Financial Officer 4 weeks
Vice President 3 weeks
Director of Operations 2 weeks
or Director
Restaurant General Manager 1 week
Department Manager 1 week
and equivalent positions
Restaurant Operations Manager 1 week
(other than General Manager)
Full-time Exempt (salaried) 1 week
(1,000 hours per year minimum)
Full-time Nonexempt (hourly) 1 week
(25 hours per week minimum)
Part-time Hourly Employees None
All Eligible Employees receiving base severance pay should execute and return a
Designation of Beneficiary Form ("Beneficiary Form") (attached hereto as Exhibit
A) to the Plan Committee.
SUPPLEMENTAL SEVERANCE PAY
In addition to base severance pay, each Eligible Employee is eligible to receive
supplemental severance pay in the amounts set forth below in exchange for
providing the Company with a valid executed Waiver and Release Agreement
("Waiver and Release") (attached hereto as Exhibit B).
For purposes of the Plan, one week of supplemental severance pay is equal to the
average weekly wages or salary paid to the Eligible Employee by the Company
during the preceding four (4) week period (excluding all bonus and other non-
wage or salary compensation), including, but not limited to, tips income
attributed to restaurant employees. Supplemental severance amounts shall be
payable in accordance with the Company's ordinary payroll practices after the
expiration of base severance pay payments.
POSITION CATEGORY SUPPLEMENTAL SEVERANCE PAY
----------------- --------------------------
President/Chief Executive Officer Determined by the Company's Board
Of Directors.
Chief Financial Officer 4 weeks per year of service to a
maximum of 36 weeks or 40% of
salary (whichever is greater).
3
<PAGE>
Vice President 3 weeks per year of service to a
maximum of 26 weeks or 30% of
salary (whichever is greater).
Director of Operations 2 weeks per year of service to a
or Director maximum of 13 weeks or 20% of
salary (whichever is greater).
Restaurant General Manager 1 week per year of service to a
maximum of 10 weeks.
Department Manager 1 week per year of service to a
and equivalent positions maximum of 8 weeks.
Restaurant Operations Manager 1 week per year of service to a
(other than General Manager) maximum of 8 weeks.
Full-time Exempt (salaried) 1 week per year of service to a
(1,000 hours per year minimum) maximum of 6 weeks.
Full-time Nonexempt (hourly) 1 week per year of service to a
(30 hours per week minimum) maximum of 4 weeks.
Part-time Hourly Employees None.
The Plan Committee acting in its sole discretion may, in writing, enhance the
amount of supplemental severance pay that an Eligible Employee is eligible to
receive over the amount of the supplemental severance pay set forth above.
The consideration for the voluntary Waiver and Release shall be the supplemental
severance pay that the Eligible Employee would otherwise not be eligible to
receive.
PAYMENT OF SEVERANCE PAY
Base severance pay and any supplemental severance pay will be paid in accordance
with the Company's regular payroll practices following the Eligible Employee's
date of termination of employment. However, any supplemental severance pay that
becomes payable will be paid only after the seven (7) day revocation period for
a signed Waiver and Release has passed in accordance with the terms of the Plan.
All legally required taxes and any sums owing to the Company shall be deducted
from the Plan severance pay payments. In the event an Eligible Employee who is
receiving payment of severance pay under the Plan is reemployed by the Company,
the payment of severance pay under the Plan shall cease as of the date his or
her reemployment begins. If an Eligible Employee dies before receiving full
payment of his or her severance pay, the balance of the base severance pay and
any supplemental severance pay, shall be paid in accordance with the terms of
the executed Beneficiary Form or, in the case where no such Beneficiary Form has
been submitted, to his or her estate.
4
<PAGE>
WAIVER AND RELEASE AGREEMENT
In order to receive the supplemental severance pay available under the Plan, an
Eligible Employee must submit a signed Waiver and Release to the Plan Committee
(or the Plan Committee's designee) on or within forty-five (45) days of its
receipt by the Eligible Employee. The form of the required Waiver and Release
for Eligible Employees is attached hereto as Exhibit B. An Eligible Employee
may revoke his or her signed Waiver and Release within seven (7) days of the
date the employee signs the Waiver and Release.
Any such revocation must be made in writing and must be received by the Plan
Committee within the seven (7) day period. An Eligible Employee who timely
revokes the Waiver and Release shall not be eligible to receive any supplemental
severance pay under the Plan. An Eligible Employee who timely submits a signed
Waiver and Release and who does not exercise his or her right of revocation
shall be eligible to receive supplemental severance pay under the Plan.
In the event an Eligible Employee breaches the provisions of the Waiver and
Release, the payment of any supplemental severance pay shall cease, and the
Company shall exercise, and the Eligible Employee shall be bound by, the
remedies provided in the Waiver and Release.
Eligible Employees shall be advised to contact their personal attorney to review
the Waiver and Release, if they so desire.
PLAN ADMINISTRATION
The Vice President - Human Resources, Vice President - Corporate Counsel, and
Chief Financial Officer shall comprise the Company's Plan Committee ("Plan
Committee"), which shall serve as the "named fiduciary" within the meaning of
such terms as defined under ERISA. The Plan Committee shall have the
discretionary authority to determine coverage and eligibility for Plan benefits
and to construe the terms of the Plan, including the making of factual
determinations. The decisions of the Plan Committee shall be final and
conclusive with respect to all questions concerning the administration of the
Plan.
The Plan Committee may delegate to other persons the responsibility of
performing certain duties of the Plan Committee under the terms of the Plan and
may seek such expert advice as the Plan Committee deems reasonable or necessary
with respect to the Plan. The Plan Committee shall be entitled to rely upon the
information and advice furnished by such delegatees and experts, unless actually
knowing such information and advice to be inaccurate or unlawful.
In the event of a group termination, as determined in the sole discretion of the
Plan Committee, the Plan Committee shall furnish affected eligible employees
with such additional information as may be required by law.
PROCEDURES FOR MAKING AND APPEALING CLAIMS FOR PLAN BENEFITS
It is not necessary that an Eligible Employee apply for benefits under the Plan.
However, if an Eligible Employee wishes to file a claim for benefits, such claim
must be
5
<PAGE>
in writing and filed with the Plan Committee within six (6) months of his/her
termination date. Within ninety (90) days after receiving a claim, the Plan
Committee will either accept or deny the claim completely or partially, and
notify the claimant of the acceptance or denial of the claim.
If the claim is completely or partially denied, the Plan Committee will furnish
a written notice to the claimant containing the following information:
. The specific reasons for the denial;
. The specific references to the Plan provisions on which any denial is
based;
. A description of any additional material or information that must be
provided by the claimant to support the claim; and
. An explanation of the Plan's appeal procedures.
A claimant may appeal the denial of a claim and have the Plan Committee
reconsider the decision. The claimant or the claimant's authorized
representative has the right to:
. Request an appeal in writing to the Plan Committee not later than
sixty (60) days after receipt of the notice from the Plan Committee
denying the claim;
. Review the Plan documents; and
. Submit issues and comments regarding the claim in writing to the Plan
Committee.
The Plan Committee will make a decision with respect to the appeal within sixty
(60) days after receiving the written request for appeal. The claimant will be
advised of the Plan Committee's decision on the appeal in writing. The notice
will set forth the specific reasons for the decision and make specific reference
to Plan provisions which the decision on the appeal is based.
In no event shall a claimant or any other person be entitled to challenge a
decision of the Plan Committee in court or in any other administrative
proceeding unless and until the claim and appeal procedures described above have
been complied with and exhausted.
PLAN AMENDMENT/TERMINATION AND VESTING
Eligible Employees do not have any vested right to base severance pay or
supplemental severance pay under the Plan, and the Company reserves the right in
its sole discretion to amend or terminate the Plan at any time, retroactively or
otherwise, as determined by the Plan Committee.
NO ASSIGNMENT
Base severance pay and supplemental severance pay under the Plan shall not be
subject to anticipation, alienation, pledge, sale, transfer, assignment,
garnishment, attachment, execution, encumbrance, levy, lien or charge, and any
attempt to do so shall be void, except to the extent required by law.
6
<PAGE>
CONFIDENTIAL INFORMATION
Eligible Employees may have access to trade secrets and other confidential and
proprietary information ("Confidential Information") with regard to the business
of the Company. Recognizing that the disclosure or improper use of such
Confidential Information will cause serious and irreparable injury to the
Company, Eligible Employees with such access acknowledge that (a) they will not
at any time, directly or indirectly, disclose Confidential Information to any
third party or otherwise use such Confidential Information for their own benefit
or the benefit of others, and (b) payment of any supplemental severance pay
under the Plan shall cease if an Eligible Employee discloses or improperly uses
such Confidential Information.
NO SOLICITATION OF EMPLOYEES
An Eligible Employee shall not at any time during his or her employment with the
Company or thereafter during the severance pay period, directly or indirectly,
in his or her individual capacity or otherwise, induce, cause, persuade or
attempt to do any of the foregoing to cause any representative, agent or
employee of the Company to terminate such person's employment relationship with
the Company, or to violate the terms of any agreement between such
representative, agent or employee and the Company. Any Eligible Employee
engaging in the foregoing, as determined by the Plan Administrator, in its sole
discretion, shall forfeit his or her right to any supplemental severance
payments under the Plan.
NO DISPARAGEMENT
An Eligible Employee shall not at any time during his or her employment with the
Company or thereafter during the severance pay period, directly or indirectly,
defame or speak negatively about the Company, its affiliates, customers or
related entities, or its products and services, nor shall the employee
disparage, subvert, disclose or discuss any detail or aspect of the professional
careers or personal lives of any of the Company directors, officers or employees
for any reason whatsoever, except as may be required by law. Any Eligible
Employee engaging in the foregoing, as determined by the Plan Committee, in its
sole discretion, shall forfeit his or her right to any supplemental severance
payments under the Plan.
RECOVERY OF PAYMENTS MADE BY MISTAKE
An Eligible Employee shall be required to return to the Company any basic
severance or supplemental severance payments, or portion thereof, made by a
mistake of fact or law.
REPRESENTATIONS CONTRARY TO THE PLAN
No employee, officer, director or agent of the Company has the authority to
alter, vary or modify the terms of the Plan except by means of an authorized
written amendment to the Plan. No verbal or written representations contrary to
the terms of the Plan and its written amendments shall be binding upon the Plan,
the Plan Committee, the Company, or, in the case of a change in control, any
surviving or successor employer.
7
<PAGE>
NO EMPLOYMENT RIGHTS
The Plan shall not confer employment rights upon any person. No person shall be
entitled, by virtue of the Plan, to remain in the employ of the Company and
nothing in the Plan shall restrict the right of the Company to alter or
terminate the employment of any Eligible Employee or other person at any time.
PLAN FUNDING
No Eligible Employee shall acquire by reason of the Plan any right in or title
to any assets, funds or property of the Company or any other employer. Any
severance pay that becomes payable under the Plan is an unfunded obligation of
the Company and shall be paid from the general assets of the Company. No
employee, officer, director or agent of the Company or any other employer
guarantees in any manner the payment of Plan base severance pay or supplemental
severance pay.
APPLICABLE LAW
The Plan shall be governed and construed in accordance with the laws of the
state in which the Eligible Employee was employed by the Company, except where
preempted by federal law.
SEVERABILITY
If any provision of the Plan is found, held or deemed by the Plan Committee or a
court of competent jurisdiction to be void, unlawful or unenforceable under any
applicable statute or other controlling law, the remainder of the Plan shall
continue in full force and effect.
PLAN YEAR
The Plan Year of the Plan shall be the calendar year.
MANDATED PAYMENTS
The base severance pay and supplemental severance pay available under the Plan
are the maximum made available by the Company in the event of involuntary
termination of employment. To the extent that a federal, state or local law
mandates the Company to make a payment to an Eligible Employee because of
involuntary termination of employment or in accordance with a plant closing law,
any severance pay under the Plan shall be reduced by the amount of such mandated
payment.
ERISA INFORMATION
As a participant in the Plan, you are entitled to certain rights and protections
under the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
ERISA provides that all Plan participants will be entitled to:
. Examine, without charge, at the Plan Committee's office and at other
locations, such as work sites and union halls, all Plan documents,
including insurance contracts, collective bargaining agreements and
copies of all
8
<PAGE>
documents filed by the Plan with U.S. Department of Labor, such as
detailed annual reports and Plan descriptions; and
. Obtain copies of all Plan documents and other Plan information upon
written request to the Plan Committee. The Plan Committee may make a
reasonable charge for the copies.
. Receive a summary of the Plan's annual report.
In addition to creating rights for Plan participants, ERISA imposes duties upon
persons who are responsible for the operation of the employee benefit plan. The
people who operate your Plan, called "fiduciaries" of the Plan, have a duty to
do so prudently and in the interest of you and other Plan participants and
beneficiaries.
No one, including your employer or your union, may fire you or otherwise
discriminate against you in any way to prevent you from obtaining a welfare
benefit or exercising your rights under ERISA. Under ERISA, there are steps you
can take to enforce the above rights. For instance, if you request materials
from the Plan and do not receive them within thirty (30) days, you may file suit
in a federal court. In such a case, the court may require the Plan Committee to
provide the materials and pay you up to $110 a day until you receive the
materials. This does not apply if the materials were not sent because of
reasons beyond the control of the Plan Committee.
If you have a claim for benefits which is denied or ignored, in whole or in
part, you may file suit in a state or federal court. If it should happen that
Plan fiduciaries misuse the Plan's money, or if you are discriminated against
for asserting your rights, you may file suit in a federal court. The court will
decide who should pay court costs and legal fees. If you are successful, the
court may order the person you have sued to pay these costs and fees. If you
lose, the court may order you to pay these costs and fees; for example, if it
finds your claim is frivolous.
If you have any questions about the Plan, you should contact the Plan Committee.
If you have any questions about this statement or about your rights under ERISA,
you should contact the nearest office of the Pension and Welfare Benefits
Administration, U.S. Department of Labor, listed in your telephone directory or
the Division of Technical Assistance and Inquiries, Pension and Welfare Benefit
Administration, U.S. Department of Labor, 200 Constitution Avenue N.W.,
Washington, D.C. 20210.
GENERAL INFORMATION
Name of Plan: Chart House Enterprises, Inc. Severance Pay Plan
Plan Number: 505
Plan Sponsor: Chart House Enterprises, Inc.
640 North LaSalle Street
Suite 295
Chicago, Illinois 60610
(312) 266-1100
9
<PAGE>
Plan Sponsor's Employer
Identification Number: 33-0147725
Plan Administrator: Severance Pay Plan Committee
Chart House Enterprises, Inc.
640 North LaSalle Street
Suite 295
Chicago, Illinois 60610
(312) 266-1100
Plan Year: Calendar Year
MISCELLANEOUS PROVISIONS
All Company property (i.e., keys, credit cards, documents and records,
identification cards, office equipment, portable computers, car/mobile
telephones, parking cards, etc.) must be returned by an Eligible Employee as of
his or her date of termination of employment with the Company in order for the
Eligible Employee to begin receiving base severance pay or supplemental
severance pay under the Plan.
All pay and benefits (other than supplemental severance pay) payable to an
Eligible Employee as of his or her date of termination of employment with the
Company under any established plan, policy or procedure of the Company shall be
paid in accordance with the terms of such plan, policy or procedure. In
addition, any benefit continuation or conversion rights that an Eligible
Employee has as of his or her date of termination of employment with the Company
shall be made available to the Eligible Employee.
CHART HOUSE ENTERPRISES, INC.
By______________________________________
Thomas J. Walters
President and Chief Executive Officer
10
<PAGE>
CHART HOUSE ENTERPRISES, INC.
EXHIBIT A
---------
SEVERANCE PAY PLAN
DESIGNATION OF BENEFICIARY FORM
EMPLOYEE INFORMATION:
- --------------------
Name: (Last) __________________________ (First) __________________ (MI) ______
Social Security Number: ____ - __ - ___
I hereby designate the following beneficiary(ies) to receive benefits which may
be payable from the Plan because of my death, canceling any previous
designation(s) I may have made. Benefits are payable to the Secondary
Beneficiary only if the Primary Beneficiary dies before him or her.
PRIMARY BENEFICIARY:
- -------------------
<TABLE>
<CAPTION>
Primary Beneficiary Name Social Security Number Relationship
<S> <C> <C>
_______________________________________ _____ - ____ - _____ ___________
_______________________________________
Address (Street, City, State, Zip Code)
</TABLE>
________________________________________________________________________________
SECONDARY BENEFICIARY:
- ---------------------
<TABLE>
<CAPTION>
Primary Beneficiary Name Social Security Number Relationship
<S> <C> <C>
_______________________________________ _____ - ____ - _____ ___________
_______________________________________
Address (Street, City, State, Zip Code)
</TABLE>
________________________________________________________________________________
If the person(s) designated above is not living at the time of my death, or if I
do not designate a beneficiary, I understand that any Plan benefit will be paid
as provided in the Plan. If I am married at the time of my death and my spouse
at the time of my death has not signed the spousal consent below, my beneficiary
will be my spouse.
Employee's Signature: ___________________________ Date:_________________
SPOUSAL CONSENT AND NOTARIZATION:
- --------------------------------
COMPLETE THIS SECTION ONLY IF YOU ARE MARRIED AND YOUR SPOUSE IS NOT YOUR SOLE
DESIGNATED PRIMARY BENEFICIARY AS INDICATED ABOVE.
I am the husband/wife of the employee named above, I hereby consent to the
designation made by my spouse to have any benefits payable under the Plan
because of his or her death paid to the person(s) named as Primary Beneficiary
and/or Secondary Beneficiary in the current designation. I hereby acknowledge
that I understand that: (1) the effect of such designation is to cause all or
part of such Plan benefits to be paid to a beneficiary other than me; (2) the
designation is not valid unless I consent to it; and (3) my consent to this
designation is irrevocable unless my spouse revokes the designation.
Name of Employee's Spouse: _____________________________ Date:______________
Please Print
Spouse's Signature: ____________________________________ Date:______________
(Your signature must be notarized)
SIGNED AND SWORN TO BEFORE ME THIS _______ DAY OF ______________________, 1999.
_______________________________________
Notary Public
<PAGE>
CHART HOUSE ENTERPRISES, INC.
EXHIBIT B
---------
SEVERANCE PAY PLAN
WAIVER AND RELEASE AGREEMENT
(1) In consideration for the supplemental severance pay to be provided to me
under the terms of the Chart House Enterprises, Inc. Severance Pay Plan
("Plan"), I, on behalf of myself and my heirs, executors, administrators,
attorneys and assigns, hereby waive, release and forever discharge Chart
House Enterprises, Inc. ("Company") and its parents, subsidiaries,
divisions and affiliates, whether direct or indirect, its and their joint
ventures and joint venturers (including its and their respective directors,
officers, associates, employees, shareholders, partners and agents, past,
present and future) and each of its and their respective successors and
assigns (collectively referred to as "Releasees"), from any and all known
or unknown actions, causes of action, claims or liabilities of any kind
that have or could be asserted against the Releasees arising out of or
related to my employment with and/or separation from employment with the
Company and/or any of the other Releasees and/or any other occurrence up to
and including the date of this Waiver and Release Agreement, including but
not limited to:
(a) claims, actions, causes of action or liabilities arising under Title
VII of the Civil Rights Act, as amended, the Age Discrimination in
Employment Act, as amended ("ADEA"), the Employee Retirement Income
Security Act, as amended, the Rehabilitation Act, as amended, the
Americans with Disabilities Act, as amended, the Family and Medical
Leave Act, as amended, and/or any other federal, state, municipal or
local employment discrimination statutes (including, but not limited
to, claims based upon age, sex, attainment of benefit plan rights,
race religion, national origin, marital status, sexual orientation,
ancestry, harassment, parental status, handicap, disability,
retaliation and veteran status); and/or
(b) claims, actions, causes of action or liabilities arising under any
other federal, state municipal or local statute, law, ordinance or
regulation; and/or
(c) any other claim whatsoever including, but not limited to, claims for
severance pay (other than claims for supplemental severance pay under
the Plan), claims based upon breach of contract, wrongful termination,
defamation, intentional infliction of emotional distress, tort,
personal injury, invasion of privacy, violation of public policy,
negligence and/or any other common law, statutory or other claim
whatsoever arising out of or relating to my employment with and/or
separation from employment with the Company and/or any of the other
Releasees,
but excluding the filing of an administrative charge, any claims I may make
under state workers' compensation or unemployment laws, and/or any claims
by law I cannot waive.
(2) I also agree never to sue any of the Releasees or become a party to in a
lawsuit on the basis of any claim or any type whatsoever arising out of or
related to my employment with and/or separation from employment with the
Company and/or any of the other Releasees, other than a lawsuit to
challenge this Waiver and Release Agreement under the ADEA.
<PAGE>
(3) I further acknowledge and agree that if I breach the provisions of
paragraph (2) above, then (a) the Company shall be entitled to apply for
and receive an injunction to restrain any violation of paragraph (2) above,
(b) the Company shall not be obligated to continue payment of the
supplemental severance pay, if any, to me, (c) I shall be obligated to pay
to the Company its costs and expenses in enforcing this Waiver and Release
Agreement and defending against such lawsuit (including court costs,
expenses and reasonable legal fees), and (d) as an alternative to (c), at
the Company's option, I shall be obligated upon demand to repay to the
Company all but $500.00 of any supplemental severance pay, if any, paid or
made available to me. I further agree that the foregoing covenants in this
paragraph (3) shall not affect the validity of this Waiver and Release
Agreement and shall not be deemed to be a penalty or forfeiture.
(4) I further waive my right to any monetary recovery should any federal, state
or local administrative agency pursue any claims on my behalf arising out
of or related to my employment with and/or separation from employment with
the Company and/or any of the other Releasees.
(5) I further waive, release and discharge the Releasees from any reinstatement
rights which I have or could have, and I acknowledge that I have not
suffered any on-the-job injury for which I have not already filed a claim.
(6) I further agree that if I breach the Confidential Information, No
Solicitation of Employees or No Disparagement provisions of the Plan, then
(a) the Company shall be entitled to apply for and receive an injunction to
restrain such breach, (b) the Company shall not be obligated to continue
payment of any supplemental severance pay, and (c) I shall be obligated to
pay to the Company its costs and expenses in enforcing the Confidential
Information provisions of the Plan (including court costs, expenses and
reasonable legal fees).
(7) I acknowledge I have been given forty-five (45) days to consider this
Waiver and Release Agreement thoroughly and I was encouraged by the Plan
Committee to consult with my personal attorney, if desired, before signing
below.
(8) I understand I may revoke this Waiver and Release Agreement within seven
(7) days after its signing and that any revocation must be made in writing
and submitted within this seven-day period to the Plan Committee. I
further understand that if I revoke this Waiver and Release Agreement, I
shall not receive any supplemental severance pay under the Plan.
(9) I also understand that the supplemental severance pay, if any, which I will
receive under the Plan in exchange for signing, and not later revoking,
this Waiver and Release Agreement are in addition to anything of value to
which I am already entitled.
(10) I FURTHER UNDERSTAND THAT THIS WAIVER AND RELEASE AGREEMENT INCLUDES A
RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
(11) I acknowledge and agree that if any provision of this Waiver and Release
Agreement is found, held or deemed by a court of competent jurisdiction to
be void, unlawful or unenforceable under any applicable statute or
controlling law, the remainder of this Waiver and Release Agreement shall
continue in full force and effect.
2
<PAGE>
(12) This Waiver and Release Agreement is deemed made and entered into in the
state in which I was employed by the Company and in all respects shall be
interpreted, enforced and governed under the laws of that state, except to
the extent superseded by federal law. Any dispute under this Waiver and
Release Agreement shall be adjudicated by a court of competent jurisdiction
in the state in which I was employed by the Company.
(13) I further acknowledge and agree that I have carefully read and fully
understand all of the provisions of this Waiver and Release Agreement and
that I voluntarily enter into this Waiver and Release Agreement by signing
below.
(14) If applicable, I also knowingly waive the provision of the California Civil
Code Section 1542, which reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOW BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Signed: ____________________________
Dated: _____________________________
PLEASE RETURN THE SIGNED AND DATED WAIVER AND RELEASE
AGREEMENT TO THE HUMAN RESOURCES MANAGER AT YOUR
LOCATION.
3
<PAGE>
Ex. 10.5.1
FIRST AMENDMENT TO THE
CHART HOUSE ENTERPRISES, INC. SEVERANCE PAY PLAN
------------------------------------------------
WHEREAS, Chart House Enterprises, Inc. (the "Company") has established and
maintains the Chart House Enterprises, Inc. Severance Pay Plan, effective June
10, 1999 (the "Plan"), for the benefit of its eligible employees;
WHEREAS, the terms of the Plan reserve to the Company the right to amend
the Plan at any time, retroactively or otherwise;
WHEREAS, the Company desires to amend the Plan to provide for all severance
pay benefits for the Company's officers in the event an officer's employment
with the Company is adversely affected following a change in control of the
Company, and authorize the Board of Directors to act with respect to members of
the Plan Committee in connection therewith.
WHEREAS, the Plan contains a typographical error with respect to the hours
requirements for Full-time Nonexempt (hourly) employees, which the Company
desires to clarify through this Amendment.
NOW, THEREFORE, the Plan is hereby amended, effective as of June 10, 1999,
in the following respects:
1. The following new Section, "CHANGE IN CONTROL BENEFITS," is hereby
added to the Plan to be and read as follows:
CHANGE IN CONTROL BENEFITS
--------------------------
Notwithstanding anything in the Plan to the contrary, the Chief Executive
Officer, the President, the Chief Financial Officer, all Executive Vice
Presidents and Vice Presidents of the Company (an "Officer") shall be
entitled to all base and supplemental severance pay benefits pursuant to
the Plan if there is a "change in control" of the Company and (a) the
Officer voluntarily terminates his or her employment for "good reason"as
determined by the Plan Committee or (b) the Officer is involuntarily
terminated without "cause."
Change in Control
A "change in control" of the Company shall occur in connection with any of
the following events, as determined in the discretion of the Plan
Committee:
<PAGE>
The acquisition (or series of acquisitions) by any entity, person
or group (including any other entity, person or group
controlling, controlled by or in common control with such entity,
person or group), other than a parent, subsidiary or affiliate of
the Company, of the capital stock of the Company entitled to
exercise more than fifty percent (50%) of the outstanding voting
power of all capital stock of the Company;
The merger or consolidation of the Company with one or more other
corporations as a result of which the current shareholders of the
Company hold less than fifty-one percent (51%) of the Voting
Stock of the surviving or resulting corporation;
A change in the majority composition of the Board of Directors
during any consecutive two-year period; and/or
The transfer or sale (or series of transfers or sales) of
substantially all of the assets of the Company to any entity
other than an entity of which the Company directly or indirectly
owns at least fifty-one percent (51%) of such entity's capital
stock or beneficial interest.
Good Reason
"Good reason" as determined by the Plan Committee, shall include, among
other things: (i) within a reasonable period of time following a change in
control, there is a diminution in the nature or the scope of the Officer's
authority or duties, (ii) within a reasonable period of time following a
change in control, there is a reduction in the Officer's regular base
salary in effect just prior to such change in control or (iii) as a result
of a change in control, the Company changes the principal location where
the Officer is required to perform services to a location that is 30 miles
outside of the Chicago downtown business district.
Cause
"Cause" shall mean, as determined by the Plan Committee, that an employee's
termination of employment was on account of (i) an act or omission of the
employee constituting dishonesty in the capacity of his or her employment
with the Company, (ii) an intentional wrongdoing or malfeasance involving
the Company or any of its employees, customers, suppliers, facilities or
equipment, or (iii) the employee's conviction of a felony.
-2-
<PAGE>
No Waiver and Release Agreement Required
If following a "change in control"of the Company, an Officer (a)
voluntarily terminates his or her employment for "good reason" as
determined by the Plan Committee or (b) is involuntarily terminated without
"cause,"the Officer shall be entitled to all base and supplemental
severance pay benefits pursuant to the Plan, payable in accordance with the
terms of the Plan, and shall not otherwise be required to execute a Waiver
and Release Agreement in order to receive such severance pay.
2. The following new paragraph is hereby added as a new second paragraph
to the Section entitled "PLAN ADMINISTRATION," to be and read as follows:
"Notwithstanding the foregoing, the Board of Directors of the Company shall
have the discretionary authority to determine coverage and eligibility for
Plan benefits, and to construe the terms of the Plan, with respect to the
coverage and eligibility of any member of the Plan Committee."
3. The Section, "SUPPLEMENTAL SEVERANCE PAY," is hereby clarified to
describe the Position Category for Full-time Nonexempt (hourly) employees as
follows:
"Full-time Nonexempt (hourly) 1 week per year of service to a maximum of
(25 hours per week minimum) 4 weeks."
* * *
IN WITNESS HEREOF, the Company has caused this instrument to be executed by
its duly authorized officer this 9th day of December, 1999.
CHART HOUSE ENTERPRISES, INC.
By:_________________________________
Laura A. Mondrowski
Vice President Corporate Counsel & Assistant
Secretary
-3-
<PAGE>
Ex. 10.7.1
CHART HOUSE ENTERPRISES, INC.
SECOND AMENDED AND RESTATED STANDSTILL AGREEMENT
DATED AS OF MARCH 31, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
Section 1. CERTAIN DEFINITIONS........................................ 2
Section 2. REPRESENTATIONS AND WARRANTIES............................. 3
Section 3. COVENANTS WITH RESPECT TO CONFIDENTIAL MATERIAL AND OTHER
MATTERS.................................................... 5
3.1 CONFIDENTIAL MATERIAL...................................... 5
3.2 GUARANTEE BY ALPHA......................................... 7
Section 4. VOTING OF COMPANY SECURITIES AND OTHER RELATED MATTERS..... 7
Section 5. REGISTRATION RIGHTS........................................ 9
5.1 DEFINITIONS................................................ 9
5.2 REQUEST FOR REGISTRATION................................... 9
5.2A SHELF REGISTRATION......................................... 10
5.3 PIGGYBACK REGISTRATION..................................... 11
5.4 OBLIGATIONS OF THE COMPANY................................. 11
5.5 FURNISH INFORMATION........................................ 12
5.6 EXPENSES OF DEMAND REGISTRATION AND SHELF REGISTRATION..... 12
5.7 EXPENSES OF PIGGYBACK REGISTRATION......................... 13
5.8 UNDERWRITING REQUIREMENTS.................................. 13
5.9 DELAY OF REGISTRATION...................................... 14
5.10 INDEMNIFICATION............................................ 14
5.11 REPORTS UNDER THE EXCHANGE ACT............................. 16
5.12 NO ASSIGNMENT OF REGISTRATION RIGHTS....................... 16
5.13 WAIVER PROCEDURES.......................................... 16
5.14 "MARKET STAND-OFF" AGREEMENT............................... 17
Section 6. TERM OF AGREEMENT; CERTAIN PROVISIONS REGARDING
TERMINATION................................................ 17
Section 7. LEGEND AND STOP TRANSFER ORDER............................. 17
Section 8. REMEDIES................................................... 17
Section 9. GENERAL PROVISIONS......................................... 18
9.1 CONSENT TO JURISDICTION; SERVICE OF PROCESS................ 18
9.2 ADDITIONAL ZELL GROUP PARTIES; JOINT AND SEVERAL
OBLIGATIONS................................................ 18
9.3 NOTICES.................................................... 18
9.4 SEVERABILITY............................................... 19
9.5 AMENDMENTS................................................. 20
9.6 DESCRIPTIVE HEADINGS....................................... 20
9.7 COUNTERPARTS; FACSIMILE SIGNATURES......................... 20
9.8 SUCCESSORS AND ASSIGNS..................................... 20
</TABLE>
<PAGE>
SECOND AMENDED AND RESTATED STANDSTILL AGREEMENT
Second Amended and Restated Standstill Agreement dated as of March 31, 1999,
(this "Agreement") among Chart House Enterprises, Inc., a Delaware corporation
(the "Company"), EGI-Chart House Investors, LLC, a Delaware limited liability
company (f/k/a Chart House Investors, LLC) ("CHI"), Samstock, L.L.C., a Delaware
limited liability company ("Samstock"), Samstock/ZFT, L.L.C., a Delaware limited
liability company ("ZFT"), F. Philip Handy, individually ("Handy"), F. Philip
Handy, as trustee of the Blaine Trust ("FPH Trustee"), and MelChart LLC, an
Illinois limited liability company ("MelChart"), (each of the foregoing parties,
other than the Company, individually a "Stockholder" and collectively the
"Stockholders") and, solely for purposes of Section 3.2 hereof, 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 purchased from the Company, and the Company sold to CHI, 3,400,000
newly issued shares of the Company's Common Stock, par value $.01 per share
("Common Stock"), representing approximately 29.2% of the Common Stock then
outstanding.
WHEREAS, Samstock, ZFT, FPH Trustee and MelChart have acquired from CHI or
its affiliates, directly or indirectly, the shares of Common Stock set forth on
EXHIBIT A hereto.
WHEREAS, Handy has entered into an Amended and Restated Option Agreement
with CHI, pursuant to which Handy has the option to acquire 163,581 shares of
Common Stock from CHI (the "Handy Option Shares").
WHEREAS, reference is made to that certain Amended and Restated Standstill
Agreement, dated as of October 1, 1997, among the parties hereto (the "First
Amended Standstill Agreement").
WHEREAS, the parties hereto are entering into this Agreement to establish
certain arrangements with respect to the relationships between them, and intend
for this Agreement to amend, restate and supersede the First Amended Standstill
Agreement in its entirety.
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:
<PAGE>
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 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 were present
and voted to the fullest extent possible at such meeting.
1.3 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.
1.4 "Zell Affiliate" means CHI, Samstock, ZFT, Handy, FPH Trustee and
any of their respective affiliates (exclusive of MelChart and its affiliates).
1.5 "Zell Group" means each Stockholder and any corporations,
partnerships, limited liability companies or other entities that are their
affiliates, collectively; provided, however, that publicly held entities that
might fall within this definition as a result of their affiliation with any Zell
Affiliate (a "Public Zell Affiliate") shall not be treated as affiliates of any
Zell Affiliate hereunder unless its 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 any Zell Affiliate or any of its affiliates, upon
learning of a Public Zell Affiliate's action, to request that such Public Zell
Affiliate refrain from taking such action because of the provisions of this
Agreement will be deemed to constitute "encouraging or assisting" in such
action.
2
<PAGE>
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
Samstock pursuant to Section 4 hereof, and (iii) have no financial interest in
and are not otherwise associated with CHI, Samstock, ZFT, any Public Zell
Affiliate 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, Samstock and ZFT jointly and severally represent and
warrant to the Company as follows:
(a) Each of CHI, Samstock and ZFT 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,
Samstock, ZFT and Alpha has the power and authority to enter into this Agreement
and perform its respective obligations hereunder.
(b) This Agreement has been duly authorized, executed and delivered
by CHI, Samstock, ZFT and Alpha and constitutes the legal, valid and binding
agreement of CHI, Samstock, ZFT 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, Samstock, ZFT
or Alpha is bound or by which it is affected or of any charter documents of CHI,
Samstock, ZFT or Alpha.
(d) As of the date hereof, no shares of Common Stock are currently
beneficially owned by any member of the Zell Group (other than Handy, FPH
Trustee and MelChart and their respective affiliates), except for those shares
of Common Stock originally acquired by CHI pursuant to the Stock Purchase and
Sale Agreement and set forth on EXHIBIT A hereto (exclusive of any options
granted by the Company).
3
<PAGE>
2.2 Handy and FPH Trustee jointly and severally represent and warrant
to the Company as follows:
(a) He has the legal capacity to enter into this Agreement and
perform his respective obligations hereunder both for himself individually and
on behalf of the Blaine Trust.
(b) This Agreement has been duly executed and delivered by him both
for himself and on behalf of the Blaine Trust and constitutes his legal, valid
and binding agreement enforceable against him in accordance with the terms
hereof both in his individual capacity and in his capacity as trustee of the
Blaine Trust.
(c) Neither the execution and delivery of this Agreement nor the
performance of his 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 he is bound or by
which he is affected, both in his individual capacity and in his capacity as
trustee of the Blaine Trust.
(d) As of the date hereof, no shares of Common Stock are currently
beneficially owned by him or his affiliates, except for those shares of Common
Stock set forth on EXHIBIT A hereto (exclusive of the Handy Option Shares and
any stock options granted by the Company).
2.3 MelChart represents and warrants to the Company as follows:
(a) MelChart is a limited liability company duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization. MelChart has the power and authority to enter into this Agreement
and perform its obligations hereunder.
(b) This Agreement has been duly authorized, executed and delivered
by MelChart and constitutes the legal, valid and binding agreement of MelChart
enforceable against MelChart 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 MelChart is bound or
by which MelChart is affected or of any charter documents of MelChart.
(d) As of the date hereof, no shares of Common Stock are currently
beneficially owned by MelChart or any of its affiliates, except for those shares
of Common Stock set forth on EXHIBIT A hereto.
4
<PAGE>
2.4 The Company represents and warrants to the Stockholders and Alpha
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, judgment,
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 CONFIDENTIAL MATERIAL AND OTHER
MATTERS. CHI, Samstock and ZFT hereby agree with respect to all members of the
Zell Group, other than Handy, FPH Trustee and MelChart and any of their
respective affiliates, and each of Handy, FPH Trustee and MelChart agree with
respect to themselves and their respective affiliates, as follows:
3.1 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.
5
<PAGE>
(ii) The term "Representatives" shall mean any and all employees,
agents, financial advisors, partners, 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, (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 3.1 and who agree to keep such information confidential,
(iii) any Zell Affiliate may make any disclosure of such information in
connection with any activity which such Zell Affiliate reasonably believes to be
in the best interests of the Company and not prohibited by this Agreement,
provided the recipient of such information is informed of the confidential
nature of the Confidential Material and of the terms of this Section 3.1 and
agrees in writing to keep such information confidential and otherwise to be
fully subject to the terms of this Section 3.1, and (iv) any member of the Zell
Group may make any disclosure of such information to any other member of the
Zell Group. 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) The Stockholders hereby acknowledge 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.
6
<PAGE>
(e) This Section 3.1 shall survive until the earlier of June 30, 2004
or two years following the date of termination of this Agreement.
3.2 GUARANTEE BY ALPHA. Alpha hereby irrevocably and unconditionally
guarantees the performance by CHI, Samstock and ZFT of all of their obligations
hereunder and under the other agreements and documents contemplated hereby.
Section 4. VOTING OF COMPANY SECURITIES AND OTHER RELATED MATTERS. CHI,
Samstock and ZFT hereby agree with respect to all members of the Zell Group,
other than Handy, FPH Trustee and MelChart and any of their respective
affiliates, and each of Handy, FPH Trustee and MelChart agree with respect to
themselves and their respective affiliates, as follows:
(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 Samstock 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 Samstock 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 Samstock 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 F. 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. Samstock 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 Samstock 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. Notwithstanding the foregoing, the
Company hereby waives the requirements contained in this Section 4(b) relating
to a majority of the directors consisting of Independent Directors, to the
extent that such
7
<PAGE>
requirements would not be satisfied as the result of Stephen Ottman ("Ottman")
being a director of the Company.
(c) For purposes of this Agreement, directors "designated by
Samstock" shall include directors designated by Samstock as anticipated by this
Section 4, and any other directors of the Company affiliated or associated with
any member of the Zell Group, but, notwithstanding the foregoing, shall not
include Ottman.
(d) At all times prior to June 30, 2002, Samstock 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), Samstock shall have the
right to designate two directors of the Company (it being understood that Ottman
shall not count as one of such two directors), 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), Samstock shall have the right to designate
one director of the Company (it being understood that Ottman shall not count as
such director), 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), Samstock 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),
Samstock shall not have the right to designate any directors of the Company,
Samstock's rights under this Section 4 shall terminate, Samstock shall cause its
designees to resign forthwith such that no designee of Samstock remains on the
Board of Directors of the Company and all of the covenants under Section 3 of
this Agreement shall lapse and no longer be of any force or effect. In addition,
all of the covenants under Section 3 of this Agreement shall lapse and no longer
be of any force or effect if for any reason any of the director designees
designated by Samstock pursuant to the rights granted by Section 4(b) shall not
be nominated for election as a director of the Company with the unanimous
recommendation of all of the directors of the Company (other than those
directors designated by Samstock pursuant to Section 4(b)) at the next election
of directors of the Company following Samstock's designation. At any time when
Samstock shall have the right to designate one or two directors, as the case may
be, pursuant to this Section 4, the Company shall
8
<PAGE>
not increase the number of directors to more than seven directors without the
prior written consent of Samstock.
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.
(d) The term "Rule 415 Offering" means an offering on a delayed or
continuous basis pursuant to Rule 415 (or any successor rule to similar effect)
promulgated under the Act.
(e) The term "Shelf Registration Statement" means a registration
statement intended to effect a shelf registration in connection with a Rule 415
Offering.
5.2 REQUEST FOR REGISTRATION.
(a) If the Company shall at any time receive a written request from
any Zell Affiliates who are 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 underwriting to the extent provided
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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.
5.2A SHELF REGISTRATION. If the Company shall at any time receive a
written request from any Zell Affiliates who are the Holders of at least 500,000
shares of Common Stock that the Company file a Shelf Registration Statement,
then the Company shall upon receipt of such notice prepare and file a Shelf
Registration Statement that shall include all Registrable Securities (and shall
include in the "plan of distribution" of such Shelf Registration Statement,
pledgees of any Holder), provided such Shelf Registration Statement shall not
include securities of the Company for sale for the Company's own account. The
Company shall use its reasonable best efforts to cause such Shelf Registration
Statement to be declared effective within 60 days of
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<PAGE>
such written request. The Company shall keep such Shelf Registration Statement
effective until such time as all Registrable Securities have been sold or
disposed of thereunder or sold, transferred or otherwise disposed of (other than
pursuant to a pledge of such Registrable Securities) to a person that is not a
Holder. The Shelf Registration Statement shall not be counted as a request for
registration pursuant to Section 5.2 hereof.
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 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 (other than with respect to
a Shelf Registration Statement), 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
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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 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 AND SHELF REGISTRATION. All
expenses incurred by or on behalf of the Company in connection with
registrations, filings or qualifications pursuant to Section 5.2 and Section
5.2A, 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,
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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
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 must be excluded, securities offered
by the Company shall be excluded.
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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. 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
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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 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
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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;
(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.
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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 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.
Section 7. LEGEND AND STOP TRANSFER ORDER. To assist in effectuating the
provisions of this Agreement, each Stockholder hereby consents (i) to the
placement 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.
The Stockholders 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
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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.
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 Northern District of Illinois, 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 Chicago,
Illinois, (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 (other than Handy, FPH
Trustee, MelChart and their affiliates) hereunder shall be joint and several.
All of the obligations of Handy, FPH Trustee, MelChart and their affiliates
hereunder shall be several and not joint. 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
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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:
Chart House Enterprises, Inc.
640 North LaSalle
Suite 295
Chicago, Illinois 60610
Attn: Chief Executive Officer
With a copy to:
Seyfarth, Shaw, Fairweather & Geraldson
55 East Monroe Street
Suite 4200
Chicago, Illinois 60603
Attn: Robert F. Weber
If to any Stockholder or any member of the Zell Group:
Samstock, L.L.C.
Two North Riverside Plaza
Suite 1900
Chicago, Illinois 60606
Attn: F. Philip Handy
With a copy to:
Rosenberg & Liebentritt
Two North Riverside Plaza
Suite 1515
Chicago, Illinois 60606
Attn: Joseph M. Paolucci
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
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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.
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.
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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: _____________________________________
Name:
Title:
CHI: EGI-CHART HOUSE INVESTORS, LLC, by ALPHABET PARTNERS,
its managing member, by a general partners
By: _____________________________________
Name:
Title:
Samstock: SAMSTOCK, L.L.C., by SZ INVESTMENTS, L.L.C.,
its sole member, by ZELL GENERAL PARTNERSHIP,
INC., its sole member
By: _____________________________________
Name:
Title:
ZFT: SAMSTOCK/ZFT, L.L.C., by ZFT PARTNERSHIP, its sole
member, by a general partner
By: _____________________________________
Name:
Title:
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Handy:
_______________________________________________
F. Philip Handy, individually
FPH Trustee:
_______________________________________________
F. Philip Handy, as Trustee of the Blaine Trust
MelChart: MELCHART, LLC
By: __________________________________________
Richard Melman, manager, by Michael E. Fox
under Power of Attorney
Alpha: ALPHA/ZFT PARTNERSHIP, by a general partner
of one of its general partners, solely for purposes of
Section 3.2 hereof
By: __________________________________________
Name:
Title:
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EXHIBIT A
OWNERSHIP OF COMMON STOCK
As of the date of the Second Amended and Restated Standstill Agreement,
3,331,677 of the 3,400,000 shares of Common Stock of Chart House Enterprises,
Inc. (the "Company") originally acquired by EGI-Chart House Investors, LLC
(f/k/a Chart House Investors, LLC) from the Company pursuant to that certain
Stock Purchase and Sale Agreement dated as of March 10, 1997, and subsequently
acquired, directly or indirectly, by sale, distribution, contribution or
otherwise by other Stockholders, are held by the Stockholders as follows:
STOCKHOLDER NUMBER OF SHARES HELD
Samstock, L.L.C. 1,891,522
Samstock/ZFT, L.L.C. 705,808
EGI-Chart House Investors, LLC 428,591
F. Philip Handy, as Trustee
of the Blaine Trust 103,539
MelChart LLC 202,217(1)
- -------------- ----------
Total 3,331,677
(1) In addition, Richard Melman as trustee of the Richard Melman Revocable
Trust U/T/A dated January 16, 1982, as amended, acquired 43,478 shares of
Common Stock from Samstock on or about June 30, 1998, which shares are not
subject to this agreement.
23
<PAGE>
REVOLVING CREDIT
----------------
AND
---
TERM LOAN AGREEMENT
-------------------
Dated as of April 26, 1999
among
CHART HOUSE ENTERPRISES, INC.
CHART HOUSE, INC.
BANKBOSTON, N.A., as Agent
and
BANCBOSTON ROBERTSON STEPHENS INC., as Arranger
<PAGE>
TABLE OF CONTENTS
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<TABLE>
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1. DEFINITIONS AND RULES OF INTERPRETATION............................................ 1
1.1. Definitions............................................................. 1
1.2. Rules of Interpretation................................................ 15
2. THE REVOLVING CREDIT FACILITY...................................................... 16
2.1. Commitment to Lend..................................................... 16
2.2. Commitment Fee......................................................... 17
2.3. Reduction of Total Revolving Credit Commitment......................... 17
2.4. The Revolving Credit Notes............................................. 17
2.5. Interest on Revolving Credit Loans..................................... 18
2.6. Requests for Revolving Credit Loans.................................... 18
2.6.1. General................................................. 18
2.6.2. Swing Line.............................................. 18
2.7. Conversion Options..................................................... 19
2.7.1. Conversion to Different Type of Revolving Credit Loan... 19
2.7.2. Continuation of Type of Revolving Credit Loan........... 19
2.7.3. Eurodollar Rate Loans................................... 20
2.8. Funds for Revolving Credit Loan....................................... 20
2.8.1. Funding Procedures...................................... 20
2.8.2. Advances by Agent....................................... 20
2.9. Settlements........................................................... 21
2.9.1. General................................................. 21
2.9.2. Failure to Make Funds Available......................... 21
2.9.3. No Effect on Other Banks................................ 22
3. REPAYMENT OF THE REVOLVING CREDIT LOANS............................................ 22
3.1. Maturity............................................................... 22
3.2. Mandatory Repayments of Revolving Credit Loans......................... 22
3.3. Optional Repayments of Revolving Credit Loans.......................... 22
4. THE TERM LOAN...................................................................... 23
4.1. Commitment to Lend..................................................... 23
4.2. The Term Notes......................................................... 23
4.3. Mandatory Payments of Principal of Term Loan........................... 23
4.3.1. Term Loan............................................... 23
4.3.2. Annual Excess Operating Cash Flow Recapture............. 24
4.3.3. Proceeds................................................ 24
4.4. Optional Prepayment of Term Loan....................................... 24
4.5. Interest on Term Loan.................................................. 25
4.5.1. Interest Rates.......................................... 25
4.5.2. Notification by Borrower................................ 25
4.5.3. Amounts, etc............................................ 25
5. LETTERS OF CREDIT.................................................................. 25
5.1. Letter of Credit Commitments........................................... 25
5.1.1. Commitment to Issue Letters of Credit................... 26
5.1.2. Letter of Credit Applications........................... 26
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5.1.3. Terms of Letters of Credit.............................. 26
5.1.4. Reimbursement Obligations of Banks...................... 26
5.1.5. Participations of Banks................................. 26
5.2. Reimbursement Obligation of the Borrower............................... 27
5.3. Letter of Credit Payments.............................................. 27
5.4. Obligations Absolute................................................... 28
5.5. Reliance by Issuer..................................................... 28
5.6. Letter of Credit Fee................................................... 28
6. CERTAIN GENERAL PROVISIONS......................................................... 29
6.1. Closing and Arrangement Fees........................................... 29
6.2. Agent's Fee............................................................ 29
6.3. Funds for Payments..................................................... 29
6.3.1. Payments to Agent....................................... 29
6.3.2. No Offset, etc.......................................... 29
6.4. Computations........................................................... 29
6.5. Inability to Determine Eurodollar Rate................................. 30
6.6. Illegality............................................................. 30
6.7. Additional Costs, etc.................................................. 30
6.8. Capital Adequacy....................................................... 31
6.9. Certificate............................................................ 32
6.10. Indemnity............................................................. 32
6.11. Interest After Default................................................ 32
6.11.1. Overdue Amounts......................................... 32
6.11.2. Amounts Not Overdue..................................... 33
6.12. Replacement Banks...................................................... 33
7. GUARANTY........................................................................... 33
7.1. Guaranty of Payment and Performance.................................... 33
7.2. Parent's Agreement to Pay Enforcement Costs, etc....................... 34
7.3. Waivers by the Parent; Banks' Freedom to Act........................... 34
7.4. Unenforceability of Obligations Against Borrower....................... 35
7.5. Subrogation; Subordination............................................. 35
7.5.1. Postponement of Rights Against Borrower................. 35
7.5.2. Subordination........................................... 35
7.5.3. Provisions Supplemental................................. 36
7.6. Security; Setoff....................................................... 36
7.7. Further Assurances..................................................... 36
7.8. Termination; Reinstatement............................................. 36
7.9. Successors and Assigns................................................. 36
8. COLLATERAL SECURITY AND GUARANTIES................................................. 37
8.1. Security of Borrower................................................... 37
8.2. Guaranties and Security of Subsidiaries................................ 37
8.3. Security of Parent.................................................... 37
9. REPRESENTATIONS AND WARRANTIES..................................................... 37
9.1. Corporate Authority.................................................... 37
9.1.1. Incorporation; Good Standing............................ 37
9.1.2. Authorization........................................... 38
</TABLE>
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<TABLE>
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9.1.3. Enforceability.......................................... 38
9.2. Governmental Approvals................................................. 38
9.3. Title to Properties; Leases............................................ 38
9.4. Financial Statements and Projections................................... 38
9.4.1. Fiscal Year............................................. 38
9.4.2. Financial Statements.................................... 39
9.4.3. Projections............................................. 39
9.5. No Material Changes, etc............................................... 39
9.6. Franchises, Patents, Copyrights, etc................................... 39
9.7. Litigation............................................................. 39
9.8. No Materially Adverse Contracts, etc................................... 40
9.9. Compliance with Other Instruments, Laws, etc........................... 40
9.10. Tax Status............................................................ 40
9.11. No Event of Default................................................... 40
9.12. Holding Company and Investment Company Acts........................... 40
9.13. Absence of Financing Statements, etc.................................. 40
9.14. Perfection of Security Interest....................................... 41
9.15. Certain Transactions.................................................. 41
9.16. Employee Benefit Plans................................................ 41
9.16.1. In General.............................................. 41
9.16.2. Terminability of Welfare Plans.......................... 41
9.16.3. Guaranteed Pension Plans................................ 41
9.16.4. Multiemployer Plans..................................... 42
9.17. Use of Proceeds....................................................... 42
9.17.1. General................................................. 42
9.17.2. Regulations U and X..................................... 42
9.17.3. Ineligible Securities................................... 42
9.18. Environmental Compliance.............................................. 43
9.19. Subsidiaries, etc..................................................... 44
9.20. Bank Accounts......................................................... 44
9.21. Insurance............................................................. 44
9.22. Year 2000 Problem..................................................... 44
9.23. No Amendments to Certain Documents.................................... 45
9.24. Disclosure............................................................ 45
10. AFFIRMATIVE COVENANTS OF THE BORROWER............................................. 45
10.1. Punctual Payment...................................................... 45
10.2. Maintenance of Office................................................ 45
10.3. Records and Accounts.................................................. 46
10.4. Financial Statements, Certificates and Information.................... 46
10.5. Notices............................................................... 47
10.5.1. Defaults................................................ 47
10.5.2. Environmental Events.................................... 47
10.5.3. Notification of Claim against Collateral................ 48
10.5.4. Notice of Litigation and Judgments...................... 48
10.6. Corporate Existence; Maintenance of Properties........................ 48
10.7. Insurance............................................................. 48
</TABLE>
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<TABLE>
<S> <C>
10.8. Taxes................................................................. 49
10.9. Inspection of Properties and Books, etc............................... 49
10.9.1. General................................................. 49
10.9.2. Appraisals.............................................. 49
10.9.3. Environmental Assessments............................... 49
10.9.4. Communications with Accountants......................... 50
10.10. Compliance with Laws, Contracts, Licenses, and Permits............... 50
10.11. Employee Benefit Plans............................................... 50
10.12. Use of Proceeds...................................................... 50
10.13. Additional Mortgaged Property........................................ 51
10.14. Interest Rate Protection............................................. 51
10.15. Bank Accounts........................................................ 51
10.16. Further Assurances................................................... 51
11. CERTAIN NEGATIVE COVENANTS OF THE BORROWER........................................ 51
11.1. Restrictions on Indebtedness.......................................... 52
11.2. Restrictions on Liens................................................. 53
11.3. Restrictions on Investments........................................... 54
11.4. Distributions......................................................... 55
11.5. Merger, Consolidation and Disposition of Assets....................... 55
11.5.1. Mergers and Acquisitions................................ 55
11.5.2. Disposition of Assets................................... 55
11.6. Sale and Leaseback.................................................... 55
11.7. Compliance with Environmental Laws.................................... 55
11.8. Employee Benefit Plans................................................ 56
11.9. Business Activities................................................... 56
11.10. Fiscal Year.......................................................... 56
11.11. Transactions with Affiliates......................................... 56
11.12. Negative Pledges..................................................... 57
11.13. Upstream Limitations................................................. 57
11.14. Inconsistent Agreements.............................................. 57
11.15. Creation of Subsidiaries............................................. 57
12. FINANCIAL COVENANTS OF THE BORROWER............................................... 58
12.1. Leverage.............................................................. 58
12.2. Consolidated Net Worth................................................ 58
12.3. Debt Service.......................................................... 58
12.4. Interest Coverage..................................................... 58
12.5. Capital Expenditures.................................................. 59
13. CLOSING CONDITIONS................................................................ 59
13.1. Loan Documents etc.................................................... 59
13.1.1. Loan Documents.......................................... 59
13.1.2. Acquisition Documents................................... 59
13.2. Certified Copies of Charter Documents................................. 59
13.3. Corporate Action...................................................... 59
13.4. Incumbency Certificate................................................ 59
13.5. Validity of Liens..................................................... 60
13.6. Perfection Certificates and UCC Search Results........................ 60
</TABLE>
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<TABLE>
<S> <C>
13.7. Survey and Taxes...................................................... 60
13.8. Title Insurance....................................................... 60
13.9. Certificates of Insurance............................................. 60
13.10. Hazardous Waste Assessments.......................................... 60
13.11. Opinion of Counsel................................................... 61
13.12. Satisfaction of Conditions of Purchase Agreement..................... 61
13.13. Completion of Acquisition, etc....................................... 61
13.14. Pro Forma Balance Sheet and Compliance Certificate................... 61
13.15. Consents and Approvals............................................... 61
13.16. Payment of Fees and other Arrangements............................... 61
13.17. Payoff Letter........................................................ 61
13.18. Disbursement Instructions............................................ 61
14. CONDITIONS TO ALL BORROWINGS...................................................... 61
14.1. Representations True; No Event of Default............................. 62
14.2. No Legal Impediment................................................... 62
14.3. Governmental Regulation............................................... 62
14.4. Proceedings and Documents............................................. 62
15. EVENTS OF DEFAULT; ACCELERATION; ETC.............................................. 62
15.1. Events of Default and Acceleration.................................... 62
15.2. Termination of Commitments............................................ 65
15.3. Remedies.............................................................. 66
15.4. Distribution of Collateral Proceeds................................... 66
16. SETOFF............................................................................ 67
17. THE AGENT......................................................................... 67
17.1. Authorization......................................................... 67
17.2. Employees and Agents.................................................. 68
17.3. No Liability.......................................................... 68
17.4. No Representations.................................................... 68
17.4.1. General................................................. 68
17.4.2. Closing Documentation, etc.............................. 69
17.5. Payments.............................................................. 69
17.5.1. Payments to Agent....................................... 69
17.5.2. Distribution by Agent................................... 69
17.5.3. Delinquent Banks........................................ 69
17.6. Holders of Notes...................................................... 70
17.7. Indemnity............................................................. 70
17.8. Agent as Bank......................................................... 70
17.9. Resignation........................................................... 70
17.10. Notification of Defaults and Events of Default....................... 71
17.11. Duties in the Case of Enforcement.................................... 71
18. EXPENSES AND INDEMNIFICATION...................................................... 71
18.1. Expenses.............................................................. 71
18.2. Indemnification....................................................... 72
18.3. Survival.............................................................. 72
19. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION..................................... 72
19.1. Sharing of Information with Section 20 Subsidiary..................... 72
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19.2. Confidentiality....................................................... 73
19.3. Prior Notification.................................................... 73
19.4. Other................................................................. 73
20. SURVIVAL OF COVENANTS, ETC........................................................ 74
21. ASSIGNMENT AND PARTICIPATION...................................................... 74
21.1. Conditions to Assignment and Accession................................ 74
21.1.1. Assignment by Banks..................................... 74
21.1.2. Accession............................................... 75
21.2. Certain Representations and Warranties; Limitations; Covenants........ 75
21.3. Register.............................................................. 76
21.4. New Notes............................................................. 76
21.5. Participations........................................................ 77
21.6. Disclosure............................................................ 77
21.7. Assignee or Participant Affiliated with the Borrower.................. 77
21.8. Miscellaneous Assignment Provisions................................... 78
21.9. Assignment by Borrower................................................ 78
22. NOTICES, ETC...................................................................... 78
23. GOVERNING LAW..................................................................... 79
24. HEADINGS.......................................................................... 79
25. COUNTERPARTS...................................................................... 79
26. ENTIRE AGREEMENT, ETC............................................................. 80
27. WAIVER OF JURY TRIAL.............................................................. 80
28. CONSENTS, AMENDMENTS, WAIVERS, ETC................................................ 80
29. SEVERABILITY...................................................................... 81
</TABLE>
<PAGE>
REVOLVING CREDIT
----------------
AND
---
TERM LOAN AGREEMENT
-------------------
This REVOLVING CREDIT AND TERM LOAN AGREEMENT is made as of April 26, 1999,
by and among CHART HOUSE ENTERPRISES, INC., a Delaware corporation, (the
"Parent"), CHART HOUSE, INC., (the "Borrower"), a Delaware corporation,
BANKBOSTON, N.A., a national banking association and the other lending
institutions listed on Schedule 1 hereto (the "Banks"), BANKBOSTON, N.A., as
----------
agent for itself and the Banks and BANCBOSTON ROBERTSON STEPHENS INC., as
arranger.
1. DEFINITIONS AND RULES OF INTERPRETATION.
---------------------------------------
1.1. Definitions. The following terms shall have the meanings set forth in
-----------
this (S)1 or elsewhere in the provisions of this Credit Agreement referred to
below:
A&M. Diamond Jim's Steak House, LLC, a New York limited liability company,
---
doing business as Angelo & Maxie's.
Acquisition. The acquisition by New A&M of substantially all of the assets
-----------
of A&M, pursuant to the Acquisition Documents.
Acquisition Documents. The Purchase Agreement and all agreements and
---------------------
documents required to be entered into or delivered in connection with the
Acquisition, each in the form delivered to the Agent on or prior to the Closing
Date.
Adjustment Date. The fifth Business Day following receipt by the Agent of
---------------
a Compliance Certificate to be delivered by the Borrower pursuant to (S)10.4(d)
hereto with respect to any fiscal quarter.
Affected Bank. See (S)6.12 hereof.
-------------
Affiliate. Any Person that would be considered to be an affiliate of the
---------
Parent or the Borrower under Rule 144(a) of the Rules and Regulations of the
Securities and Exchange Commission, as in effect on the date hereof, if the
Parent or the Borrower were issuing securities.
Agent. BankBoston, N.A. acting as agent for the Banks.
-----
Agent's Head Office. The Agent's head office located at 100 Federal
-------------------
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time.
Agent's Special Counsel. Bingham Dana LLP or such other counsel as may be
-----------------------
approved by the Agent.
Applicable Margin. For each period commencing on an Adjustment Date
-----------------
through the date immediately preceding the next Adjustment Date (each a "Rate
Adjustment Period"), the Applicable Margin shall be the applicable margin set
forth below with respect to the Leverage
<PAGE>
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Ratio for the Reference Period ending on the fiscal quarter ended immediately
preceding the applicable Rate Adjustment Period.
<TABLE>
<CAPTION>
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Level Level I Level II Level III Level IV Level V
------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Leverage Ratio *1.50 **1.50 - **2.00 - **2.50 - *3.00
*2.00 *2.50 *3.00
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Base Rate Loans 0.25% 0.50% 0.75% 1.00% 1.25%
---------------------------------------------------------------------------------------------------------
Eurodollar Rate Loans 2.00% 2.25% 2.50% 2.75% 3.00%
---------------------------------------------------------------------------------------------------------
</TABLE>
Notwithstanding the foregoing, (a) until the delivery by the Borrower to
the Agent of the Compliance Certificate pursuant to (S)10.4(d) for the period
ending December 31, 1999, the Applicable Margin shall be the Applicable Margin
set forth above in Level V, and (b) if the Borrower fails to deliver any
Compliance Certificate when required by (S)10.4(d) hereof then, for the period
commencing on the date such Compliance Certificate was required to be delivered
through the date immediately following the date on which such Compliance
Certificate is delivered, the Applicable Margin shall be the Applicable Margin
set forth above in Level V.
Assignment and Acceptance. See (S)21.1.
-------------------------
Balance Sheet Date. December 31, 1998.
------------------
Banks. BKB and the other lending institutions listed on Schedule 1 hereto
----- ----------
and any other Person who becomes an assignee of any rights and obligations of a
Bank pursuant to (S)21.
Base Rate. The higher of (i) the annual rate of interest announced from
---------
time to time by BKB at its head office in Boston, Massachusetts, as its "base
rate" and (ii) one-half of one percent (1/2%) above the Federal Funds Effective
Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall
mean for any day, the rate per annum equal to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three funds brokers of recognized
standing selected by the Agent.
Base Rate Loans. Revolving Credit Loans and all or any portion of the Term
---------------
Loan bearing interest calculated by reference to the Base Rate.
BKB. BankBoston, N.A. (f/k/a The First National Bank of Boston), a
---
national banking association, in its individual capacity.
* = Less than
** = Greater than
<PAGE>
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BKB Concentration Account. See (S)10.15.1.
-------------------------
Borrower. As defined in the preamble hereto.
--------
BRS. BancBoston Robertson Stephens Inc., in its capacity as arranger.
---
Business Day. Any day on which banking institutions in Boston,
------------
Massachusetts and Chicago, Illinois, are open for the transaction of banking
business and, in the case of Eurodollar Rate Loans, also a day which is a
Eurodollar Business Day.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
--------------
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will); provided that Capital Assets shall not
--------
include any item customarily charged directly to expense or depreciated over a
useful life of twelve (12) months or less in accordance with generally accepted
accounting principles.
Capital Expenditures. Amounts paid or Indebtedness incurred by a Person in
--------------------
connection with the purchase or lease by such Person of Capital Assets that
would be required to be capitalized and shown on the balance sheet of such
Person in accordance with generally accepted accounting principles, including
amounts paid in connection with acquisitions.
Capitalized Leases. Leases under which any Person is the lessee or
------------------
obligor, the discounted future rental payment obligations under which are
required to be capitalized on the balance sheet of the lessee or obligor in
accordance with generally accepted accounting principles.
CERCLA. See (S)9.18(a).
------
Closing Date. The first date on which the conditions set forth in (S)13
------------
have been satisfied and any Revolving Credit Loans and the Term Loan are to be
made or any Letter of Credit is to be issued hereunder.
Code. The Internal Revenue Code of 1986.
----
Collateral. All of the property, rights and interests of the Parent, the
----------
Borrower and their respective Subsidiaries that are or are intended to be
subject to the security interests and mortgages created by the Security
Documents.
Commitment. With respect to each Bank, the amount set forth on Schedule 1
---------- ----------
hereto as the amount of such Bank's Revolving Credit Commitment and Term
Commitment.
Commitment Fee. See (S)2.2.
--------------
Commitment Percentage. With respect to each Bank, the percentage set forth
---------------------
in Schedule 1 hereto in the column entitled "Commitment Percentage".
----------
<PAGE>
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Consolidated or consolidated. With reference to any term defined herein,
----------------------------
shall mean that term as applied to the accounts of any Person and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.
Consolidated Cash Flow. With respect to the Parent and its Subsidiaries
----------------------
for any fiscal period, an amount equal to Consolidated EBITDA for such period,
minus the sum of (a) cash taxes paid during such period and (b) Maintenance
- -----
Capital Expenditures made in such period.
Consolidated EBITDA. With respect to the Parent and its Subsidiaries for
-------------------
any fiscal period, an amount equal to Consolidated Net Income for such period,
plus, to the extent deducted in the calculation of Consolidated Net Income and
- ----
without duplication, (a) depreciation and amortization for such period, (b)
other noncash charges for such period, (c) income tax expense for such period,
(d) Consolidated Interest Charges paid or accrued during such period, and (e)
Minority Interest for such period.
Consolidated EBITDAR. With respect to the Parent and its Subsidiaries for
--------------------
any fiscal period, an amount equal to Consolidated EBITDA for such period plus
----
Consolidated Rental Expense for such period.
Consolidated Financial Obligations. For any period, the sum of all
----------------------------------
scheduled payments of principal on Consolidated Funded Indebtedness of the
Parent and its Subsidiaries made or required to be made in such period, plus
----
Consolidated Interest Charges of the Parent and its Subsidiaries for such
period.
Consolidated Funded Indebtedness. With respect to the Parent and its
--------------------------------
Subsidiaries for any period, the sum of (a) the aggregate amount of Indebtedness
of the Parent and its Subsidiaries, on a consolidated basis, relating to the
borrowing of money (including, without limitation, all Indebtedness evidenced by
notes or bonds) or the obtaining of credit or in respect of capitalized leases,
plus (b) the aggregate maximum drawing amount of all letters of credit
- ----
outstanding, plus (c) without duplication, all Indebtedness of the types
----
referred to in (a) and (b) guaranteed by the Parent or any of its Subsidiaries.
Consolidated Interest Charges. With respect to the Parent and its
-----------------------------
Subsidiaries for any period, the aggregate amount of interest required to be
paid or payable in cash during such period on all Indebtedness of the Parent and
its Subsidiaries outstanding during all or any part of such period, whether such
interest was or is required to be reflected as an item of expense or
capitalized, including payments consisting of interest in respect of any
Capitalized Lease, or any synthetic lease referred to in clause (d) of the
definition of the term "Indebtedness," and including commitment fees, letter of
credit fees, agency fees, facility fees, balance deficiency fees and similar
fees or expenses in connection with the borrowing of money
Consolidated Net Income. With respect to the Parent and its Subsidiaries
-----------------------
for any fiscal period, the consolidated net income (or net deficit) of the
Parent and its Subsidiaries, after deduction of all expenses, taxes, and other
proper charges, determined in accordance with generally accepted accounting
principles, after eliminating therefrom all extraordinary nonrecurring items of
income incurred after December 31, 1998.
<PAGE>
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Consolidated Rental Expense. With respect to the Parent and its
---------------------------
Subsidiaries for any fiscal period, the consolidated rental expense of the
Parent and its Subsidiaries, determined in accordance with generally accepted
accounting principles.
Consolidated Total Assets. The sum of (i) all assets ("consolidated
-------------------------
balance sheet assets") of the Parent and its Subsidiaries determined on a
consolidated basis in accordance with generally accepted accounting principles,
plus (ii) without duplication, all assets leased by the Parent or any Subsidiary
- ----
as lessee under any synthetic lease referred to in clause (d) of the definition
of the term "Indebtedness" to the extent that such assets would have been
consolidated balance sheet assets had the synthetic lease been treated for
accounting purposes as a Capitalized Lease.
Consolidated Total Liabilities. All liabilities of the Parent and its
------------------------------
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles and classified as such on the consolidated
balance sheet of the Parent and its Subsidiaries and all other Indebtedness of
the Parent and its Subsidiaries, whether or not so classified.
Conversion Request. A notice given by the Borrower to the Agent of the
------------------
Borrower's election to convert or continue a Loan in accordance with (S)2.7.
Credit Agreement. This Revolving Credit and Term Loan Agreement, including
----------------
the Schedules and Exhibits hereto.
Debt Service Coverage Ratio. As at any date of determination, the ratio of
---------------------------
(a) Consolidated Cash Flow of the Parent and its Subsidiaries for the Reference
Period ending on such date to (b) Consolidated Financial Obligations of the
Parent and its Subsidiaries for such Reference Period.
Default. See (S)15.1.
-------
Delinquent Bank. See (S)17.5.3.
---------------
Distribution. The declaration or payment of any dividend on or in respect
------------
of any shares of any class of capital stock of any Person, other than dividends
payable solely in shares of common stock of such Person; the purchase,
redemption, or other retirement of any shares of any class of capital stock of
such Person, directly or indirectly through a subsidiary of such Person or
otherwise; the return of capital by such Person to its shareholders as such; or
any other distribution on or in respect of any shares of any class of capital
stock of such Person.
Dollars or $. Dollars in lawful currency of the United States of America.
------- -
Domestic Lending Office. Initially, the office of each Bank designated as
-----------------------
such in Schedule 1 hereto; thereafter, such other office of such Bank, if any,
-------- -
located within the United States that will be making or maintaining Base Rate
Loans.
Drawdown Date. The date on which any Revolving Credit Loan or the Term
-------------
Loan is made or is to be made, and the date on which any Revolving Credit Loan
is converted or
<PAGE>
-6-
continued in accordance with (S)2.7 or all or any portion of the Term Loan is
converted or continued in accordance with (S)4.5(b).
Eligible Assignee. Any of (i) a commercial bank or finance company
-----------------
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (ii)
a savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (iii) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having total assets in excess of $1,000,000,000, provided that such
--------
bank is acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (iv) the
central bank of any country which is a member of the OECD; and (v) if, but only
if, any Event of Default has occurred and is continuing, any other bank,
insurance company, commercial finance company or other financial institution or
other Person approved by the Agent, such approval not to be unreasonably
withheld.
Employee Benefit Plan. Any employee benefit plan within the meaning of
---------------------
(S)3(3) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan.
Environmental Laws. See (S)9.18(a).
------------------
EPA. See (S)9.18(b).
---
ERISA. The Employee Retirement Income Security Act of 1974.
-----
ERISA Affiliate. Any Person which is treated as a single employer with the
---------------
Borrower under (S)414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
----------------------
Pension Plan within the meaning of (S)4043 of ERISA and the regulations
promulgated thereunder.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Rate
-------------------------
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.
Eurodollar Business Day. Any day on which commercial banks are open for
-----------------------
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.
<PAGE>
-7-
Eurodollar Lending Office. Initially, the office of each Bank designated
-------------------------
as such in Schedule 1 hereto; thereafter, such other office of such Bank, if
----------
any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar Rate
---------------
Loan, the rate of interest equal to (i) the arithmetic average of the rates per
annum for each Reference Bank (rounded upwards to the nearest 1/16 of one
percent) of the rate at which such Reference Bank's Eurodollar Lending Office is
offered Dollar deposits two (2) Eurodollar Business Days prior to the beginning
of such Interest Period in the interbank eurodollar market where the eurodollar
and foreign currency and exchange operations of such Eurodollar Lending Office
are customarily conducted, for delivery on the first day of such Interest Period
for the number of days comprised therein and in an amount comparable to the
amount of the Eurodollar Rate Loan of such Reference Bank to which such Interest
Period applies, divided by (ii) a number equal to 1.00 minus the Eurocurrency
Reserve Rate, if applicable.
Eurodollar Rate Loans. Revolving Credit Loans and all or any portion of
---------------------
the Term Loan bearing interest calculated by reference to the Eurodollar Rate.
Event of Default. See (S)15.1.
----------------
Excess Operating Cash Flow. With respect to the Parent and its Subsidiaries
--------------------------
for any fiscal year, an amount equal to Consolidated Net Income for such period,
plus, to the extent deducted in the calculation of Consolidated Net Income and
- ----
without duplication, the sum of (a) depreciation and amortization for such
period, (b) other noncash charges for such period, and (c) income tax expense
for such period, minus the sum of (a) cash taxes paid during such period, (b)
-----
Capital Expenditures made in such period other than that portion of any Capital
Expenditures financed pursuant to third party debt permitted under (S)11.1(g),
(c) mandatory payments of principal made during such period in accordance with
(S)4.3, and (d) voluntary payments of principal on the Term Loans made during
such period in accordance with (S)4.4.
Fee Letter. The fee letter dated as of April 12, 1999 among the Parent,
----------
the Agent and BRS.
generally accepted accounting principles. (i) When used in (S)12, whether
----------------------------------------
directly or indirectly through reference to a capitalized term used therein,
means (A) principles that are consistent with the principles promulgated or
adopted by the Financial Accounting Standards Board and its predecessors, in
effect for the fiscal year ended on the Balance Sheet Date, and (B) to the
extent consistent with such principles, the accounting practice of the Parent
reflected in its financial statements for the year ended on the Balance Sheet
Date, and (ii) when used in general, other than as provided above, means
principles that are (A) consistent with the principles promulgated or adopted by
the Financial Accounting Standards Board and its predecessors, as in effect from
time to time, and (B) consistently applied with past financial statements of the
Parent adopting the same principles, provided that in each case referred to in
this definition of "generally accepted accounting principles" a certified public
accountant would, insofar as the use of such accounting principles is pertinent,
be in a position to deliver an unqualified opinion (other than a qualification
regarding changes in generally accepted accounting principles) as to financial
statements in which such principles have been properly applied.
<PAGE>
-8-
Growth Capital Expenditures. Capital Expenditures relating to
---------------------------
acquisitions, new unit development, existing unit remodeling, and the conversion
of Real Estate to a new concept (including the A&M concept) of the Parent, the
Borrower and their respective Subsidiaries.
Guaranteed Pension Plan. Any employee pension benefit plan within the
-----------------------
meaning of (S)3(2) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Guarantors. The Parent and all Subsidiary Guarantors.
----------
Guaranty. The Guaranty, dated or to be dated on or prior to the Closing
--------
Date, made by each Subsidiary Guarantor in favor of the Banks and the Agent
pursuant to which each Subsidiary Guarantor guaranties to the Banks and the
Agent the payment and performance of the Obligations and in form and substance
satisfactory to the Banks and the Agent.
Hazardous Substances. See (S)9.18(b).
--------------------
Indebtedness. All obligations, contingent and otherwise, that in
------------
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should be
made by footnotes thereto, including in any event and whether or not so
classified: (a) all debt and similar monetary obligations, whether direct or
indirect; (b) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; (c) all obligations in respect of interest rate protection
arrangements and other interest rate, currency or commodity hedging
arrangements; (d) all obligations under any lease (a "synthetic lease") treated
as an operating lease under generally accepted accounting principles and as a
loan or financing for U.S. income tax purposes; and (e) all guarantees,
endorsements and other contingent obligations whether direct or indirect in
respect of indebtedness of others, including any obligation to supply funds to
or in any manner to invest in, directly or indirectly, the debtor, to purchase
indebtedness, or to assure the owner of indebtedness against loss, through an
agreement to purchase goods, supplies, or services for the purpose of enabling
the debtor to make payment of the indebtedness held by such owner or otherwise,
and the obligations to reimburse the issuer in respect of any letters of credit,
provided, however that the conversion of one class of stock solely to another
- -------- -------
class of stock shall not be deemed to create Indebtedness.
Ineligible Securities. Securities which may not be underwritten or dealt
---------------------
in by member banks of the Federal Reserve System under Section 16 of the Banking
Act of 1933 (12 U.S.C. (S)24, Seventh), as amended.
Instrument of Accession. See (S)21.1.2.
-----------------------
Interest Coverage Ratio. As at any date of determination, the ratio of (a)
-----------------------
Consolidated EBITDAR of the Parent and its Subsidiaries for the Reference Period
ending on such date to (b) the sum of (i) Consolidated Interest Charges of the
Parent and its Subsidiaries for such Reference Period plus (ii) Consolidated
----
Rental Expense.
<PAGE>
-9-
Interest Payment Date. (i) As to any Base Rate Loan, the last day of the
---------------------
calendar quarter with respect to interest accrued during such calendar quarter,
including, without limitation, the calendar quarter which includes the Drawdown
Date of such Base Rate Loan; and (ii) as to any Eurodollar Rate Loan in respect
of which the Interest Period is (A) three (3) months or less, the last day of
such Interest Period and (B) more than three (3) months, the date that is three
(3) months from the first day of such Interest Period and, in addition, the last
day of such Interest Period.
Interest Period. With respect to each Revolving Credit Loan or all or any
---------------
relevant portion of the Term Loan, (i) initially, the period commencing on the
Drawdown Date of such Loan and ending on the last day of one of the periods set
forth below, as selected by the Borrower in a Loan Request or as otherwise
required by the terms of this Credit Agreement (A) for any Base Rate Loan, the
last day of the calendar quarter; and (B) for any Eurodollar Rate Loan, 1, 2, 3,
or 6 months; and (ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Revolving Credit Loan or all
or such portion of the Term Loan and ending on the last day of one of the
periods set forth above, as selected by the Borrower in a Conversion Request;
provided that all of the foregoing provisions relating to Interest Periods are
- --------
subject to the following:
(a) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;
(b) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the
next succeeding Business Day;
(c) if the Borrower shall fail to give notice as provided in (S)2.7,
the Borrower shall be deemed to have requested a conversion of the affected
Eurodollar Rate Loan to a Base Rate Loan and the continuance of all Base
Rate Loans as Base Rate Loans on the last day of the then current Interest
Period with respect thereto;
(d) any Interest Period relating to any Eurodollar Rate Loan that
begins on the last Eurodollar Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Eurodollar
Business Day of a calendar month; and
(e) any Interest Period that would otherwise extend beyond the
Revolving Credit Loan Maturity Date (if comprising a Revolving Credit Loan)
or the Term Loan Maturity Date (if comprising the Term Loan or a portion
thereof) shall end on the Revolving Credit Loan Maturity Date or the Term
Loan Maturity Date (as the case may be).
<PAGE>
-10-
International Standby Practices. With respect to any standby Letter of
-------------------------------
Credit, International Standby Practices (ISP98), International Chamber of
Commerce Publication No. 590, or any successor code of standby letter of credit
practices among banks adopted by the Agent in the ordinary course of its
business as a standby letter of credit issuer and in effect at the time of
issuance of such Letter of Credit.
Investments. All expenditures made and all liabilities incurred
-----------
(contingently or otherwise) for the acquisition of stock or Indebtedness of, or
for loans, advances, capital contributions or transfers of property to, or in
respect of any guaranties (or other commitments as described under
Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (i) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (ii) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(iii) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (iv) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (ii) may be
deducted when paid; and (v) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
Letter of Credit. See (S)5.1.1.
----------------
Letter of Credit Application. See (S)5.6.
----------------------------
Letter of Credit Fee. See (S)5.1.1.
--------------------
Letter of Credit Participation. See (S)5.1.4.
------------------------------
Leverage Ratio. As at any date of determination, the ratio of (a)
--------------
Consolidated Funded Indebtedness of the Parent and its Subsidiaries outstanding
on such date, over (b) Consolidated EBITDA of the Parent and its Subsidiaries
for such Reference Period.
Loan Documents. This Credit Agreement, the Notes, the Letter of Credit
--------------
Applications, the Letters of Credit and the Security Documents.
Loan Request. See (S)2.6.
------------
Loans. The Revolving Credit Loans and the Term Loan.
-----
Local Account. See (S)10.15.1.
-------------
Maintenance Capital Expenditures. All Capital Expenditures other than
--------------------------------
Growth Capital Expenditures and excluding amounts expended in connection with
any acquisition to the extent permitted by (S)11.5.1.
<PAGE>
-11-
Maximum Drawing Amount. The maximum aggregate amount that the
----------------------
beneficiaries may at any time draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.
Minority Interest. For any period, minority interest expense in respect of
------------------
non-wholly owned Subsidiaries deducted in calculating Consolidated Net Income
for such period in accordance with generally accepted accounting principles.
Mortgaged Property. Any Real Estate which is subject to any Mortgage.
------------------
Mortgages. The several mortgages and deeds of trust, dated or to be dated
---------
on or prior to the Closing Date, from the Borrower and its Subsidiaries to the
Agent with respect to the fee and leasehold interests of the Borrower and its
Subsidiaries in the Real Estate and in form and substance satisfactory to the
Banks and the Agent.
Multiemployer Plan. Any multiemployer plan within the meaning of (S)3(37)
------------------
of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate.
New A&M. Chart House Acquisition, Inc., a Delaware corporation and a
-------
wholly owned Subsidiary of the Parent.
Non-Affected Banks. As at any date of determination, those Banks which are
------------------
not Affected Banks.
Notes. The Term Notes and the Revolving Credit Notes.
-----
Obligations. All indebtedness, obligations and liabilities of any of the
-----------
Parent, the Borrower and their respective Subsidiaries to any of the Banks and
the Agent, individually or collectively, existing on the date of this Credit
Agreement or arising thereafter, direct or indirect, joint or several, absolute
or contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise, arising or
incurred under this Credit Agreement or any of the other Loan Documents or in
respect of any of the Loans made or Reimbursement Obligations incurred or any of
the Notes, Letter of Credit Application, Letter of Credit, interest rate
protection arrangements or other instruments at any time evidencing any thereof.
Operating Account. See (S)2.6.2.
-----------------
outstanding. With respect to the Loans, the aggregate unpaid principal
-----------
thereof as of any date of determination.
Parent. As defined in the preamble hereto.
------
Parent Guaranty. The guaranty of the Parent as set forth in (S)7 hereof.
---------------
PBGC. The Pension Benefit Guaranty Corporation created by (S)4002 of ERISA
----
and any successor entity or entities having similar responsibilities.
<PAGE>
-12-
Perfection Certificates. The Perfection Certificates as defined in the
-----------------------
Security Agreements.
Permitted Liens. Liens, security interests and other encumbrances
---------------
permitted by (S)11.2.
Person. Any individual, corporation, partnership, trust, unincorporated
------
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.
Purchase Agreement. The Asset Purchase Agreement, dated as of March 17,
------------------
1999, among New A&M, the Parent, A&M and the managing members of A&M.
Rate Adjustment Period See the definition of Applicable Margin.
----------------------
RCRA. See (S)9.18(a).
----
Real Estate. All real property at any time owned or leased (as lessee or
-----------
sublessee) by the Borrower or any of its Subsidiaries.
Record. The grid attached to a Note, or the continuation of such grid, or
------
any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.
Reference Banks. BKB.
---------------
Reference Period. Any period of (a) four (4) consecutive fiscal quarters of
----------------
the Parent ending on the relevant date or (b) until four (4) full fiscal
quarters of the Parent have elapsed after June 30, 1999, such shorter period of
one (1), two (2) or three (3) full fiscal quarters elapsed since June 30, 1999,
with the relevant amount applicable to such shorter period annualized for the
period of four (4) consecutive fiscal quarters for which the applicable covenant
or test calculation is being performed by multiplying such relevant amount by a
fraction whose numerator is four (4) and whose denominator is such actual number
of elapsed full fiscal quarters.
Register. See (S)21.3.
--------
Reimbursement Obligation. The Borrower's obligation to reimburse the Agent
------------------------
and the Banks on account of any drawing under any Letter of Credit as provided
in (S)5.2.
Required Banks. As of any date, the Banks holding at least sixty-six and
--------------
two-thirds percent (66 2/3%) of the outstanding principal amount of the Notes on
such date; and if no such principal is outstanding, the Banks whose aggregate
Commitments constitute at least sixty-six and two-thirds percent (66 2/3%) of
the Total Revolving Credit Commitment.
Revolving Credit Commitment. With respect to each Bank, the amount set
---------------------------
forth on Schedule 1 as the amount of its commitment to make Revolving Credit
----------
Loans and to participate in the issuance, extension and renewal of Letters of
Credit for the account of the Borrower, as
<PAGE>
-13-
the same may be modified pursuant to (S)21.1.2 hereof, and as the same may be
reduced from time to time; or if such commitment is terminated pursuant to the
provisions hereof, zero.
Revolving Credit Loan Maturity Date. March 31, 2004.
-----------------------------------
Revolving Credit Loans. Revolving credit loans made or to be made by the
----------------------
Banks to the Borrower pursuant to (S)2.
Revolving Credit Note Record. A Record with respect to a Revolving Credit
----------------------------
Note.
Revolving Credit Notes. See (S)2.4.
----------------------
SARA. See (S)9.18(a).
----
Section 20 Subsidiary. A Subsidiary of the bank holding company
---------------------
controlling any Bank, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.
Security Agreements. The several Security Agreements, dated or to be
-------------------
dated on or prior to the Closing Date, between the Parent, the Borrower and
their respective Subsidiaries and the Agent and in form and substance
satisfactory to the Banks and the Agent.
Security Documents. The Guaranty, the Parent Guaranty, the Security
------------------
Agreements, the Mortgages, the Trademark Assignments, the Stock Pledge
Agreements and all other instruments and documents, including without limitation
Uniform Commercial Code financing statements, required to be executed or
delivered pursuant to any Security Document.
Settlement. The making or receiving of payments, in immediately available
----------
funds, by the Banks, to the extent necessary to cause each Bank's actual share
of the outstanding amount of Revolving Credit Loans (after giving effect to any
Loan Request) to be equal to such Bank's Commitment Percentage of the
outstanding amount of such Revolving Credit Loans (after giving effect to any
Loan Request), in any case where, prior to such event or action, the actual
share is not so equal.
Settlement Amount. See (S)2.9.1.
-----------------
Settlement Date. (a) The Drawdown Date relating to any Loan Request, (b)
---------------
Friday of each week, or if a Friday is not a Business Day, the Business Day
immediately following such Friday, (c) at the option of the Agent, on any
Business Day following a day on which the account officers of the Agent active
upon the Borrower's account become aware of the existence of an Event of
Default, (d) any Business Day on which the amount of Revolving Credit Loans
outstanding from BKB plus BKB's Commitment Percentage of the sum of the Maximum
----
Drawing Amount and any Unpaid Reimbursement Obligations is equal to or greater
than BKB's Commitment Percentage of the Total Revolving Credit Commitment, (e)
the Business Day immediately following any Business Day on which the amount of
Revolving Credit Loans outstanding increases or decreases by more than
$5,000,000 as compared to the previous Settlement Date, (f) any day on which any
conversion of a Base Rate Loan to a Eurodollar Rate
<PAGE>
-14-
Loan occurs, or (g) any Business Day on which (i) the amount of outstanding
Revolving Credit Loans decreases and (ii) the amount of the Agent's Revolving
Credit Loans outstanding equals zero Dollars ($0).
Settling Bank. See (S)2.9.1.
-------------
Stock Pledge Agreements. The several Stock Pledge Agreements, dated or to
-----------------------
be dated on or prior to the Closing Date, between the Parent, the Borrower and
their respective Subsidiaries and the Agent and in form and substance
satisfactory to the Banks and the Agent.
Subsidiary. Any corporation, association, trust, or other business entity
----------
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding Voting Stock.
Subsidiary Guarantors. Collectively, all Subsidiaries of the Parent (other
---------------------
than the Borrower) and all Subsidiaries of the Borrower.
Survey. In relation to each Mortgaged Property, an instrument survey of
------
such Mortgaged Property which shall show the location of all buildings,
structures, easements and utility lines on such Mortgaged Property, shall be
sufficient to remove the survey exception from the Title Policy, shall show that
all buildings and structures are within the lot lines of such Mortgaged
Property, shall not show any encroachments by others, shall show the zoning
district or districts in which such Mortgaged Property is located in a flood
hazard district as established by the Federal Emergency Management Agency or any
successor agency or is located in any flood plain, flood hazard or wetland
protection district established under federal, state or local law.
Surveyor Certificate. In relation to each Mortgaged Property for which a
--------------------
Survey has been conducted, a certificate executed by the surveyor who prepared
such Survey dated as of a recent date and containing such information relating
to such Mortgaged Property as the Agent or the Title Insurance Company may
require, such certificate to be satisfactory to the Agent in form and substance.
Term Commitment. With respect to each Bank, the amount set forth on
---------------
Schedule 1 attached hereto as the amount of such Bank's commitment to make a
- ----------
portion of the Term Loan to the Borrower on the Closing Date.
Term Loan. The term loan made or to be made by the Banks to the Borrower
---------
on the Closing Date in the aggregate principal amount of $15,000,000.00 pursuant
to (S)4.1.
Term Loan Maturity Date. March 31, 2004.
-----------------------
Term Notes. See (S)4.2.
----------
Term Note Record. A Record with respect to a Term Note.
----------------
Title Insurance Company. First American Title Company.
-----------------------
<PAGE>
-15-
Title Policy. In relation to each Mortgaged Property, an ALTA standard
------------
form title insurance policy issued by the Title Insurance Company (with such
reinsurance or co-insurance as the Agent may require, any such reinsurance to be
with direct access endorsements) in such amount as may be determined by the
Agent insuring the priority of the Mortgage of such Mortgaged Property and that
the Borrower or one of its Subsidiaries holds marketable title to such Mortgaged
Property, subject only to the encumbrances permitted by such Mortgage and which
shall not contain exceptions for mechanics liens, persons in occupancy or
matters which would be shown by a survey (except as may be permitted by such
Mortgage), shall not insure over any matter except to the extent that any such
affirmative insurance is acceptable to the Agent in its sole discretion, and
shall contain such endorsements and affirmative insurance as the Agent in its
discretion may require, including but not limited to (i) comprehensive
endorsement, (ii) variable rate of interest endorsement, (iii) usury
endorsement, (iv) revolving credit endorsement, (v) tie-in endorsement, and (vi)
doing business endorsement.
Total Revolving Credit Commitment. The sum of the Revolving Credit
---------------------------------
Commitments of the Banks, as in effect from time to time.
Trademark Assignments. The several Trademark Assignments, dated or to be
---------------------
dated on or prior to the Closing Date, made by the Parent and New A&M in favor
of the Agent and in form and substance satisfactory to the Banks and the Agent.
Type. As to any Revolving Credit Loan or all or any portion of the Term
----
Loan, its nature as a Base Rate Loan, or a Eurodollar Rate Loan.
Uniform Customs. With respect to any Letter of Credit, the Uniform Customs
---------------
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor version thereto adopted by the
Agent in the ordinary course of its business as a letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.
Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which
-------------------------------
the Borrower does not reimburse the Agent and the Banks on the date specified
in, and in accordance with, (S)5.2.
Voting Stock. Stock or similar interests, of any class or classes (however
------------
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.
1.2. Rules of Interpretation.
-----------------------
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit Agreement.
(b) The singular includes the plural and the plural includes the
singular.
<PAGE>
-16-
(c) A reference to any law includes any amendment or modification to
such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have the
meanings assigned to them therein, with the term "instrument" being that
defined under Article 9 of the Uniform Commercial Code.
(h) Reference to a particular "(S)" refers to that section of this
Credit Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.
(j) Unless otherwise expressly indicated, in the computation of
periods of time from a specified date to a later specified date, the word
"from" means "from and including," the words "to" and "until" each mean "to
but excluding," and the word "through" means "to and including."
(k) This Credit Agreement and the other Loan Documents may use
several different limitations, tests or measurements to regulate the same
or similar matters. All such limitations, tests and measurements are,
however, cumulative and are to be performed in accordance with the terms
thereof.
(l) This Credit Agreement and the other Loan Documents are the result
of negotiation among, and have been reviewed by counsel to, among others,
the Agent and the Borrower and are the product of discussions and
negotiations among all parties. Accordingly, this Credit Agreement and the
other Loan Documents are not intended to be construed against the Agent or
any of the Banks merely on account of the Agent's or any Bank's involvement
in the preparation of such documents.
2. THE REVOLVING CREDIT FACILITY.
-----------------------------
2.1. Commitment to Lend. Subject to the terms and conditions set forth in
------------------
this Credit Agreement, each of the Banks severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time from
the Closing Date up to but not including
<PAGE>
-17-
the Revolving Credit Loan Maturity Date upon notice by the Borrower to the Agent
given in accordance with (S)2.6, such sums as are requested by the Borrower up
to a maximum aggregate amount outstanding (after giving effect to all amounts
requested) at any one time equal to such Bank's Revolving Credit Commitment
minus such Bank's Commitment Percentage of the sum of the Maximum Drawing Amount
- -----
and all Unpaid Reimbursement Obligations, provided that the sum of the
--------
outstanding amount of the Revolving Credit Loans (after giving effect to all
amounts requested) plus the Maximum Drawing Amount and all Unpaid Reimbursement
----
Obligations shall not at any time exceed the Total Revolving Credit Commitment.
The Revolving Credit Loans shall be made pro rata in accordance with each Bank's
--- ----
Commitment Percentage. Each request for a Revolving Credit Loan hereunder shall
constitute a representation and warranty by the Borrower that the conditions set
forth in (S)13 and (S)14, in the case of the initial Revolving Credit Loans to
be made on the Closing Date, and (S)14, in the case of all other Revolving
Credit Loans, have been satisfied on the date of such request.
2.2. Commitment Fee. The Borrower agrees to pay to the Agent for the
--------------
accounts of the Banks in accordance with their respective Commitment Percentages
a commitment fee calculated at the rate of one-half of one percent (0.5%) per
annum on the average daily amount during each calendar quarter or portion
thereof from the Closing Date to the Revolving Credit Loan Maturity Date by
which the Total Revolving Credit Commitment minus the sum of the Maximum Drawing
-----
Amount and all Unpaid Reimbursement Obligations exceeds the outstanding amount
of Revolving Credit Loans during such calendar quarter. The commitment fee shall
be payable quarterly in arrears on the last Business Day of any fiscal quarter
for the then ending calendar quarter commencing on the first such date following
the date hereof, with a final payment on the Revolving Credit Maturity Date or
any earlier date on which the Revolving Credit Commitments shall terminate.
2.3. Reduction of Total Revolving Credit Commitment. The Borrower shall
----------------------------------------------
have the right at any time and from time to time upon five (5) Business Days
prior written notice to the Agent to reduce by $5,000,000 or an integral
multiple thereof or terminate entirely the Total Revolving Credit Commitment,
whereupon the Revolving Credit Commitments of the Banks shall be reduced pro
---
rata in accordance with their respective Commitment Percentages of the amount
- ----
specified in such notice or, as the case may be, terminated. Promptly after
receiving any notice of the Borrower delivered pursuant to this (S)2.3, the
Agent will notify the Banks of the substance thereof. Upon the effective date of
any such reduction or termination, the Borrower shall pay to the Agent for the
respective accounts of the Banks the full amount of any commitment fee then
accrued on the amount of the reduction. No reduction or termination of the
Revolving Credit Commitments may be reinstated.
2.4. The Revolving Credit Notes. The Revolving Credit Loans shall be
--------------------------
evidenced by separate promissory notes of the Borrower in substantially the form
of Exhibit A hereto (each a "Revolving Credit Note"), dated as of the Closing
------- -
Date and completed with appropriate insertions. One Revolving Credit Note shall
be payable to the order of each Bank in a principal amount equal to such Bank's
Revolving Credit Commitment or, if less, the outstanding amount of all Revolving
Credit Loans made by such Bank, plus interest accrued thereon, as set forth
below. The Borrower irrevocably authorizes each Bank to make or cause to be
made, at or about the time of the Drawdown Date of any Revolving Credit Loan or
at the time of receipt of
<PAGE>
-18-
any payment of principal on such Bank's Revolving Credit Note, an appropriate
notation on such Bank's Revolving Credit Note Record reflecting the making of
such Revolving Credit Loan or (as the case may be) the receipt of such payment.
The outstanding amount of the Revolving Credit Loans set forth on such Bank's
Revolving Credit Note Record shall be prima facie evidence of the principal
----- -----
amount thereof owing and unpaid to such Bank, but the failure to record, or any
error in so recording, any such amount on such Bank's Revolving Credit Note
Record shall not limit or otherwise affect the obligations of the Borrower
hereunder or under any Revolving Credit Note to make payments of principal of or
interest on any Revolving Credit Note when due.
2.5. Interest on Revolving Credit Loans. Except as otherwise provided in
----------------------------------
(S)6.11,
(a) Each Revolving Credit Loan which is a Base Rate Loan shall bear
interest for the period commencing with the Drawdown Date thereof and
ending on the last day of the Interest Period with respect thereto at the
rate of per annum equal to the Base Rate plus the Applicable Margin then
applicable to Base Rate Loans.
(b) Each Revolving Credit Loan which is a Eurodollar Rate Loan shall
bear interest for the period commencing with the Drawdown Date thereof and
ending on the last day of the Interest Period with respect thereto at the
rate per annum equal to the Eurodollar Rate then applicable to the
Eurodollar Rate Loans.
(c) The Borrower promises to pay interest on each Revolving Credit
Loan in arrears on each Interest Payment Date with respect thereto.
2.6 Requests for Revolving Credit Loans.
-----------------------------------
2.6.1. General. The Borrower shall give to the Agent written notice
-------
in the form of Exhibit B hereto (or telephonic notice confirmed in a
------- -
writing in the form of Exhibit B hereto) of each Revolving Credit Loan
------- -
requested hereunder (a "Loan Request") no later than 12:00 noon (Boston
time) (i) the proposed Drawdown Date of any Base Rate Loan and (ii) on the
third Eurodollar Business Day prior to the proposed Drawdown Date of any
Eurodollar Rate Loan. Each such notice shall specify (A) the principal
amount of the Revolving Credit Loan requested, (B) the proposed Drawdown
Date of such Revolving Credit Loan, (C) the Interest Period for such
Revolving Credit Loan and (D) the Type of such Revolving Credit Loan.
Promptly upon receipt of any such notice, the Agent shall notify each of
the Banks thereof. Each Loan Request shall be irrevocable and binding on
the Borrower and shall obligate the Borrower to accept the Revolving Credit
Loan requested from the Banks on the proposed Drawdown Date. Each Loan
Request shall be in a minimum aggregate amount of $100,000 or an integral
multiple thereof for Base Rate Loans or a minimum aggregate amount of
$1,000,000 or a whole multiple of $100,000 in excess thereof for Eurodollar
Rate Loans.
2.6.2. Swing Line. Notwithstanding the notice and minimum amount
----------
requirements set forth in (S)2.6.1 but otherwise in accordance with the
terms and conditions of this Credit Agreement, the Agent may, in its sole
discretion and without conferring with the Banks, make Revolving Credit
Loans to the Borrower (i) by entry of
<PAGE>
-19-
credits to the Borrower's operating account (Account No. 55067524) or such
other account approved by the Agent (the "Operating Account") with the
Agent to cover checks or other charges which the Borrower has drawn or made
against such account or (ii) in an amount as otherwise requested by the
Borrower. The Borrower hereby requests and authorizes the Agent to make
from time to time such Revolving Credit Loans by means of appropriate
entries of such credits sufficient to cover checks and other charges then
presented for payment from the Operating Account or as otherwise so
requested. The Borrower acknowledges and agrees that the making of such
Revolving Credit Loans shall, in each case, be subject in all respects to
the provisions of this Credit Agreement as if they were Revolving Credit
Loans covered by a Loan Request including, without limitation, the
limitations set forth in (S)2.1 and the requirements that the applicable
provisions of (S)13 (in the case of Revolving Credit Loans made on the
Closing Date) and (S)14 be satisfied. All actions taken by the Agent
pursuant to the provisions of this (S)2.6.2 shall be conclusive and binding
on the Borrower and the Banks absent the Agent's gross negligence or
willful misconduct. Revolving Credit Loans made pursuant to this (S)2.6.2
shall be Base Rate Loans until converted in accordance with the provisions
of the Credit Agreement and, prior to a Settlement, such interest shall be
for the account of the Agent.
2.7. Conversion Options.
------------------
2.7.1. Conversion to Different Type of Revolving Credit Loan. The
-----------------------------------------------------
Borrower may elect from time to time to convert any outstanding Revolving
Credit Loan to a Revolving Credit Loan of another Type, provided that (i)
--------
with respect to any such conversion of a Revolving Credit Loan to a Base
Rate Loan, the Borrower shall give the Agent not later than 1:00 p.m.
(Boston time) prior written notice of such election; (ii) with respect to
any such conversion of a Base Rate Loan to a Eurodollar Rate Loan, the
Borrower shall give the Agent at least three (3) Eurodollar Business Days
prior written notice of such election; (iii) with respect to any such
conversion of a Eurodollar Rate Loan into a Revolving Credit Loan of
another Type, such conversion shall only be made on the last day of the
Interest Period with respect thereto and (iv) no Loan may be converted into
a Eurodollar Rate Loan when any Default or Event of Default has occurred
and is continuing. On the date on which such conversion is being made each
Bank shall take such action as is necessary to transfer its Commitment
Percentage of such Revolving Credit Loans to its Domestic Lending Office or
its Eurodollar Lending Office, as the case may be. All or any part of
outstanding Revolving Credit Loans of any Type may be converted into a
Revolving Credit Loan of another Type as provided herein, provided that any
--------
partial conversion shall be in an aggregate principal amount of $100,000 or
a whole multiple thereof if a conversion to a Base Rate Loan and in an
aggregate principal amount of $1,000,000 or a whole multiple of $100,000 in
excess thereof if a conversion to a Eurodollar Rate Loan. Each Conversion
Request relating to the conversion of a Revolving Credit Loan to a
Eurodollar Rate Loan shall be irrevocable by the Borrower.
2.7.2. Continuation of Type of Revolving Credit Loan. Any Revolving
---------------------------------------------
Credit Loan of any Type may be continued as a Revolving Credit Loan of the
same Type upon the expiration of an Interest Period with respect thereto by
compliance by the Borrower
<PAGE>
-20-
with the notice provisions contained in (S)2.7.1; provided that no
--------
Eurodollar Rate Loan may be continued as such when any Default or Event of
Default has occurred and is continuing, but shall be automatically
converted to a Base Rate Loan on the last day of the first Interest Period
relating thereto ending during the continuance of any Default or Event of
Default of which officers of the Agent active upon the Borrower's account
have actual knowledge. In the event that the Borrower fails to provide any
such notice with respect to the continuation of any Eurodollar Rate Loan as
such, then such Eurodollar Rate Loan shall be automatically converted to a
Base Rate Loan on the last day of the first Interest Period relating
thereto. The Agent shall notify the Banks promptly when any such automatic
conversion contemplated by this (S)2.7 is scheduled to occur.
2.7.3 Eurodollar Rate Loans. Any conversion to or from Eurodollar
---------------------
Rate Loans shall be in such amounts and be made pursuant to such elections
so that, after giving effect thereto, the aggregate principal amount of all
Eurodollar Rate Loans having the same Interest Period shall not be less
than $1,000,000 or a whole multiple of $100,000 in excess thereof. Not more
than six (6) Eurodollar Rate Loans having different interest periods may be
outstanding at any time.
2.8. Funds for Revolving Credit Loan.
-------------------------------
2.8.1. Funding Procedures. Not later than 2:00 p.m. (Boston time) on
------------------
the proposed Drawdown Date of any Revolving Credit Loans, each of the Banks
will make available to the Agent, at the Agent's Head Office, in
immediately available funds, the amount of such Bank's Commitment
Percentage of the amount of the requested Revolving Credit Loans. Upon
receipt from each Bank of such amount, and upon receipt of the documents
required by (S)(S)13 and 14 and the satisfaction of the other conditions
set forth therein, to the extent applicable, the Agent will make available
to the Borrower the aggregate amount of such Revolving Credit Loans made
available to the Agent by the Banks. The failure or refusal of any Bank to
make available to the Agent at the aforesaid time and place on any Drawdown
Date the amount of its Commitment Percentage of the requested Revolving
Credit Loans shall not relieve any other Bank from its several obligation
hereunder to make available to the Agent the amount of such other Bank's
Commitment Percentage of any requested Revolving Credit Loans.
2.8.2. Advances by Agent. The Agent may, unless notified to the
-----------------
contrary by any Bank prior to a Drawdown Date, assume that such Bank has
made available to the Agent on such Drawdown Date the amount of such Bank's
Commitment Percentage of the Revolving Credit Loans to be made on such
Drawdown Date, and the Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes available to the Agent such amount
on a date after such Drawdown Date, such Bank shall pay to the Agent on
demand an amount equal to the product of (i) the average computed for the
period referred to in clause (iii) below, of the weighted average interest
rate paid by the Agent for federal funds acquired by the Agent during each
day included in such period, times (ii) the amount of such Bank's
-----
Commitment Percentage of such Revolving Credit Loans, times (iii) a
-----
fraction, the numerator of which is the number of days that elapse from and
including such Drawdown Date to the date on which the amount of such Bank's
<PAGE>
-21-
Commitment Percentage of such Revolving Credit Loans shall become
immediately available to the Agent, and the denominator of which is 365. A
statement of the Agent submitted to such Bank with respect to any amounts
owing under this paragraph shall be prima facie evidence of the amount due
----- -----
and owing to the Agent by such Bank. If the amount of such Bank's
Commitment Percentage of such Revolving Credit Loans is not made available
to the Agent by such Bank within three (3) Business Days following such
Drawdown Date, the Agent shall be entitled to recover such amount from the
Borrower on demand, with interest thereon at the rate per annum applicable
to the Revolving Credit Loans made on such Drawdown Date.
2.9. Settlements.
-----------
2.9.1. General. On each Settlement Date, the Agent shall, not later
-------
than 11:00 a.m. (Boston time), give telephonic or facsimile notice (i) to
the Banks and the Borrower of the respective outstanding amount of
Revolving Credit Loans made by the Agent on behalf of the Banks from the
immediately preceding Settlement Date through the close of business on the
prior day and the amount of any Eurodollar Rate Loans to be made (following
the giving of notice pursuant to (S)2.6.1(ii)) on such date pursuant to a
Loan Request and (ii) to the Banks of the amount (a "Settlement Amount")
that each Bank (a "Settling Bank") shall pay to effect a Settlement of any
Revolving Credit Loan. A statement of the Agent submitted to the Banks and
the Borrower or to the Banks with respect to any amounts owing under this
(S)2.9 shall be prima facie evidence of the amount due and owing. Each
----- -----
Settling Bank shall, not later than 3:00 p.m. (Boston time) on such
Settlement Date, effect a wire transfer of immediately available funds to
the Agent in the amount of the Settlement Amount for such Settling Bank.
All funds advanced by any Bank as a Settling Bank pursuant to this (S)2.9
shall for all purposes be treated as a Revolving Credit Loan made by such
Settling Bank to the Borrower and all funds received by any Bank pursuant
to this (S)2.9 shall for all purposes be treated as repayment of amounts
owed with respect to Revolving Credit Loans made by such Bank. In the
event that any bankruptcy, reorganization, liquidation, receivership or
similar cases or proceedings in which the Borrower is a debtor prevent a
Settling Bank from making any Revolving Credit Loan to effect a Settlement
as contemplated hereby, such Settling Bank will make such dispositions and
arrangements with the other Banks with respect to such Revolving Credit
Loans, either by way of purchase of participations, distribution, pro tanto
--- -----
assignment of claims, subrogation or otherwise as shall result in each
Bank's share of the outstanding Revolving Credit Loans being equal, as
nearly as may be, to such Bank's Commitment Percentage of the outstanding
amount of the Revolving Credit Loans.
2.9.2. Failure to Make Funds Available. The Agent may, unless
-------------------------------
notified to the contrary by any Settling Bank prior to a Settlement Date,
assume that such Settling Bank has made or will make available to the Agent
on such Settlement Date the amount of such Settling Bank's Settlement
Amount, and the Agent may (but it shall not be required to), in reliance
upon such assumption, make available to the Borrower a corresponding
amount. If any Settling Bank makes available to the Agent such amount on a
date after such Settlement Date, such Settling Bank shall pay to the Agent
on demand an amount equal to the product of (i) the average computed for
the period referred to in clause (iii)
<PAGE>
-22-
below, of the weighted average interest rate paid by the Agent for federal
funds acquired by the Agent during each day included in such period, times
(ii) the amount of such Settlement Amount, times (iii) a fraction, the
numerator of which is the number of days that elapse from and including
such Settlement Date to the date on which the amount of such Settlement
Amount shall become immediately available to the Agent, and the denominator
of which is 360. A statement of the Agent submitted to such Settling Bank
with respect to any amounts owing under this (S)2.9.2 shall be prima facie
evidence of the amount due and owing to the Agent by such Settling Bank. If
such Settling Bank's Settlement Amount is not made available to the Agent
by such Settling Bank within three (3) Business Days following such
Settlement Date, the Agent shall be entitled to recover such amount from
the Borrower on demand, with interest thereon at the rate per annum
applicable to the Revolving Credit Loans as of such Settlement Date.
2.9.3. No Effect on Other Banks. The failure or refusal of any
------------------------
Settling Bank to make available to the Agent at the aforesaid time and
place on any Settlement Date the amount of such Settling Bank's Settlement
Amount shall not (i) relieve any other Settling Bank from its several
obligations hereunder to make available to the Agent the amount of such
other Settling Bank's Settlement Amount or (ii) impose upon any Bank, other
than the Settling Bank so failing or refusing, any liability with respect
to such failure or refusal or otherwise increase the Commitment of such
other Bank.
3. REPAYMENT OF THE REVOLVING CREDIT LOANS.
---------------------------------------
3.1. Maturity. The Borrower promises to pay on the Revolving Credit Loan
--------
Maturity Date, and there shall become absolutely due and payable on the
Revolving Credit Loan Maturity Date, all of the Revolving Credit Loans
outstanding on such date, together with any and all accrued and unpaid interest
thereon.
3.2. Mandatory Repayments of Revolving Credit Loans. If at any time the
----------------------------------------------
sum of the outstanding amount of the Revolving Credit Loans, the Maximum Drawing
Amount and all Unpaid Reimbursement Obligations exceeds the Total Revolving
Credit Commitment then the Borrower shall immediately pay the amount of such
excess to the Agent for the respective accounts of the Banks for application:
first, to any Unpaid Reimbursement Obligations; second, to the Revolving Credit
Loans; and third, to provide to the Agent cash collateral for Reimbursement
Obligations as contemplated by (S)5.2(b) and (c). Each payment of any Unpaid
Reimbursement Obligations or prepayment of Revolving Credit Loans shall be
allocated among the Banks, in proportion, as nearly as practicable, to each
Reimbursement Obligation or (as the case may be) the respective unpaid principal
amount of each Bank's Revolving Credit Note, with adjustments to the extent
practicable to equalize any prior payments or repayments not exactly in
proportion.
3.3. Optional Repayments of Revolving Credit Loans. The Borrower shall
---------------------------------------------
have the right, at its election, to repay the outstanding amount of the
Revolving Credit Loans, as a whole or in part, at any time without penalty or
premium, provided that any full or partial prepayment of the outstanding amount
--------
of any Eurodollar Rate Loans pursuant to this (S)3.3 may be made only on the
last day of the Interest Period relating thereto (unless accompanied by amounts
required by (S)6.10). The Borrower shall give the Agent, not later than 1:00
p.m., Boston
<PAGE>
-23-
time on the date of such proposed prepayment pursuant to this (S)3.3 of Base
Rate Loans, and three (3) Eurodollar Business Days notice of any proposed
prepayment pursuant to this (S)3.3 of Eurodollar Rate Loans, in each case
specifying the proposed date of prepayment of Revolving Credit Loans and the
principal amount to be prepaid. Each such partial prepayment of the Revolving
Credit Loans shall be in an integral multiple of $100,000, shall be accompanied
by the payment of accrued interest on the principal prepaid to the date of
prepayment and shall be applied, in the absence of instruction by the Borrower,
first to the principal of Base Rate Loans and then to the principal of
Eurodollar Rate Loans. Each partial prepayment shall be allocated among the
Banks, in proportion, as nearly as practicable, to the respective unpaid
principal amount of each Bank's Revolving Credit Note, with adjustments to the
extent practicable to equalize any prior repayments not exactly in proportion.
4. THE TERM LOAN.
-------------
4.1. Commitment to Lend. Subject to the terms and conditions set forth in
------------------
this Credit Agreement, each Bank agrees to lend to the Borrower on the Closing
Date the amount of its Term Commitment of the principal amount of
$15,000,000.00.
4.2. The Term Notes. The Term Loan shall be evidenced by separate
--------------
promissory notes of the Borrower in substantially the form of Exhibit C hereto
---------
(each a "Term Note"), dated the Closing Date and completed with appropriate
insertions. One Term Note shall be payable to the order of each Bank in a
principal amount equal to such Bank's Term Commitment of the Term Loan and
representing the obligation of the Borrower to pay to such Bank such principal
amount or, if less, the outstanding amount of such Bank's Term Commitment of the
Term Loan, plus interest accrued thereon, as set forth below. The Borrower
irrevocably authorizes each Bank to make or cause to be made a notation on such
Bank's Term Note Record reflecting the original principal amount of such Bank's
Term Commitment of the Term Loan and, at or about the time of such Bank's
receipt of any principal payment on such Bank's Term Note, an appropriate
notation on such Bank's Term Note Record reflecting such payment. The aggregate
unpaid amount set forth on such Bank's Term Note Record shall be prima facie
----- -----
evidence of the principal amount thereof owing and unpaid to such Bank, but the
failure to record, or any error in so recording, any such amount on such Bank's
Term Note Record shall not affect the obligations of the Borrower hereunder or
under any Term Note to make payments of principal of and interest on any Term
Note when due.
4.3. Mandatory Payments of Principal of Term Loan.
--------------------------------------------
4.3.1. Term Loan. The Borrower promises to pay to the Agent for the
---------
account of the Banks the principal amount of the Term Loan in sixteen (16)
consecutive quarterly payments, payable on the last day of each calendar
quarter ending within any period set forth below in the amount set forth
opposite such period, commencing on June 30, 2000, with a final payment on
the Term Loan Maturity Date in an amount equal to the unpaid balance of the
Term Loan.
---------------------------------------------------------------
Amount of
Quarter Ending: Each Payment
---------------------------------------------------------------
June 30, 2000 - September 30, 2001 $ 750,000.00
---------------------------------------------------------------
<PAGE>
-24-
---------------------------------------------------------------
December 31, 2001 - September 30, 2003 $1,000,000.00
---------------------------------------------------------------
December 31, 2003 - March 31, 2004 $1,250,000.00
---------------------------------------------------------------
4.3.2. Annual Excess Operating Cash Flow Recapture. For each fiscal
-------------------------------------------
year of the Parent ending on or after December 31, 1999, the Borrower shall
make a prepayment of principal on the Term Loan in an amount equal to (a)
seventy-five percent (75%) of Excess Operating Cash Flow for such fiscal
year if the Leverage Ratio is greater than 3.25:1.00 at the end of such
fiscal year and the next succeeding fiscal quarter and (b) fifty percent
(50%) of such Excess Operating Cash Flow for such fiscal year if the
Leverage Ratio is less than or equal to 3.25:1.00 at the end of such fiscal
year and the next succeeding fiscal quarter, such mandatory prepayment to
be due one hundred five (105) days after the end of each applicable fiscal
year and to be applied against the remaining scheduled installments of
principal due on the Term Loan pro rata, with any remaining amounts to be
--------
applied against the outstanding amount of the Revolving Credit Loans;
provided, however, that if the Leverage Ratio is less than or equal to
-------- -------
2.50:1.00 for any fiscal year and the next succeeding fiscal quarter, then
no prepayment of principal will be required.
4.3.3. Proceeds. In the event the Borrower or any of its Subsidiaries
--------
receives any (a) net cash proceeds in an aggregate amount exceeding
$1,000,000 in any fiscal year from the sale or other disposition of assets
permitted by (S)11.5.2 (other than the asset sales set forth on Schedule
--------
11.5.2 and sales of inventory in the ordinary course of business); (b)
------
proceeds of insurance claims which have not been reinvested by the Borrower
or such Subsidiary in replacement assets or to repair the asset so damaged,
as the case may be, within two hundred seventy (270) days of receipt by
such Person of such proceeds; (c) proceeds of tax refunds received by the
Borrower or such Subsidiary; or (d) net cash proceeds from any equity
issuances by the Borrower or its Subsidiaries after the Closing Date, the
Borrower shall, within three (3) days of receipt by such Person of such
proceeds, repay the outstanding Term Loan in an amount equal to 100% of
such net cash proceeds (other than proceeds of insurance claims that are to
be reinvested in accordance with clause (b)) provided, however, that in the
-------- -------
case of net cash proceeds from equity issuances if the Leverage Ratio is
less than 2.50:1.00 at the time such net cash proceeds are received, no
such payment shall be required. Any such mandatory payments shall be
applied against the remaining scheduled installments of principal due on
the Term Loan pro rata.
--- ----
4.4. Optional Prepayment of Term Loan. The Borrower shall have the right
--------------------------------
at any time to prepay the Term Notes on or before the Term Loan Maturity Date,
as a whole, or in part, upon not less than five (5) Business Days prior written
notice to the Agent, without premium or penalty, provided that (i) each partial
--------
prepayment shall be in the principal amount of $100,000 or an integral multiple
thereof, (ii) no portion of the Term Loan bearing interest at the Eurodollar
Rate may be prepaid pursuant to this (S)4.4 except on the last day of the
Interest Period relating thereto (unless accompanied by amounts required by
(S)6.10), and (iii) each partial prepayment shall be allocated among the Banks,
in proportion, as nearly as practicable, to the respective outstanding amount of
each Bank's Term Note, with adjustments to the extent practicable to equalize
any prior prepayments not exactly in proportion. Any prepayment of
<PAGE>
-25-
principal of the Term Loan shall include all interest accrued to the date of
prepayment and shall be applied against the scheduled installments of principal
due on the Term Loan pro rata. No amount repaid with respect to the Term Loan
may be reborrowed.
4.5. Interest on Term Loan.
---------------------
4.5.1. Interest Rates. Except as otherwise provided in (S)6.11, the
--------------
Term Loan shall bear interest during each Interest Period relating to all
or any portion of the Term Loan at the following rates:
(a) To the extent that all or any portion of the Term Loan
bears interest during such Interest Period at the Base Rate, the Term
Loan or such portion shall bear interest during such Interest Period
at the rate per annum equal to the Base Rate plus the Applicable
Margin then applicable to Term Loans.
(b) To the extent that all or any portion of the Term Loan
bears interest during such Interest Period at the Eurodollar Rate, the
Term Loan or such portion shall bear interest during such Interest
Period at the rate per annum equal to the Eurodollar Rate plus the
Applicable Margin then applicable to Term Loans.
The Borrower promises to pay interest on the Term Loan or any portion
thereof outstanding during each Interest Period in arrears on each Interest
Payment Date applicable to such Interest Period.
4.5.2. Notification by Borrower. The Borrower shall notify the
------------------------
Agent, such notice to be irrevocable, not later than 1:00 p.m. (Boston
time) on the Drawdown Date of the Term Loan if all or any portion of the
Term Loan is to bear interest at the Base Rate and at least three (3)
Eurodollar Business Days prior to the Drawdown Date of the Term Loan if all
or any portion of the Term Loan is to bear interest at the Eurodollar Rate.
After the Term Loan has been made, the provisions of (S)2.7 shall apply
mutatis mutandis with respect to all or any portion of the Term Loan so
----------------
that the Borrower may have the same interest rate options with respect to
all or any portion of the Term Loan as it would be entitled to with respect
to the Revolving Credit Loans.
4.5.3. Amounts, etc. Any portion of the Term Loan bearing interest
-------------
at the Eurodollar Rate relating to any Interest Period shall be in the
minimum amount of $1,000,000. No Interest Period relating to the Term Loan
or any portion thereof bearing interest at the Eurodollar Rate shall extend
beyond the date on which a regularly scheduled installment payment of the
principal of the Term Loan is to be made unless a portion of the Term Loan
at least equal to such installment payment has an Interest Period ending on
such date or is then bearing interest at the Base Rate.
5. LETTERS OF CREDIT.
-----------------
5.1. Letter of Credit Commitments.
----------------------------
<PAGE>
-26-
5.1.1. Commitment to Issue Letters of Credit. Subject to the terms
-------------------------------------
and conditions hereof and the execution and delivery by the Borrower of a
letter of credit application on the Agent's customary form (a "Letter of
Credit Application"), the Agent on behalf of the Banks and in reliance upon
the agreement of the Banks set forth in (S)5.1.4 and upon the
representations and warranties of the Borrower contained herein, agrees, in
its individual capacity, to issue, extend and renew for the account of the
Borrower one or more standby or documentary letters of credit
(individually, a "Letter of Credit"), in such form as may be requested from
time to time by the Borrower and agreed to by the Agent; provided, however,
-------- -------
that, after giving effect to such request, (a) the sum of the aggregate
Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not
exceed $4,000,000 at any one time and (b) the sum of (i) the Maximum
Drawing Amount on all Letters of Credit, (ii) all Unpaid Reimbursement
Obligations, and (iii) the amount of all Revolving Credit Loans outstanding
shall not exceed the Total Revolving Credit Commitment.
5.1.2. Letter of Credit Applications. Each Letter of Credit
-----------------------------
Application shall be completed to the satisfaction of the Agent. In the
event that any provision of any Letter of Credit Application shall be
inconsistent with any provision of this Credit Agreement, then the
provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.
5.1.3. Terms of Letters of Credit. Each Letter of Credit issued,
--------------------------
extended or renewed hereunder shall, among other things, (i) provide for
the payment of sight drafts for honor thereunder when presented in
accordance with the terms thereof and when accompanied by the documents
described therein, and (ii) have an expiry date no later than the date
which is fourteen (14) days (or, if the Letter of Credit is confirmed by a
confirmer or otherwise provides for one or more nominated persons, forty-
five (45) days) prior to the Revolving Credit Loan Maturity Date. Each
Letter of Credit so issued, extended or renewed shall be subject to the
Uniform Customs or, in the case of a standby Letter of Credit, either the
Uniform Customs or the International Standby Practices.
5.1.4. Reimbursement Obligations of Banks. Each Bank severally agrees
----------------------------------
that it shall be absolutely liable, without regard to the occurrence of any
Default or Event of Default or any other condition precedent whatsoever, to
the extent of such Bank's Commitment Percentage, to reimburse the Agent on
demand for the amount of each draft paid by the Agent under each Letter of
Credit to the extent that such amount is not reimbursed by the Borrower
pursuant to (S)5.2 (such agreement for a Bank being called herein the
"Letter of Credit Participation" of such Bank).
5.1.5. Participations of Banks. Each such payment made by a Bank
-----------------------
shall be treated as the purchase by such Bank of a participating interest
in the Borrower's Reimbursement Obligation under (S)5.2 in an amount equal
to such payment. Each Bank shall share in accordance with its participating
interest in any interest which accrues pursuant to (S)5.2.
<PAGE>
-27-
5.2. Reimbursement Obligation of the Borrower. In order to induce the
----------------------------------------
Agent to issue, extend and renew each Letter of Credit and the Banks to
participate therein, the Borrower hereby agrees to reimburse or pay to the
Agent, for the account of the Agent or (as the case may be) the Banks, with
respect to each Letter of Credit issued, extended or renewed by the Agent
hereunder,
(a) except as otherwise expressly provided in (S)5.2(b) and (c), on
each date that any draft presented under such Letter of Credit is honored
by the Agent, or the Agent otherwise makes a payment with respect thereto,
(i) the amount paid by the Agent under or with respect to such Letter of
Credit, and (ii) the amount of any taxes, fees, charges or other costs and
expenses whatsoever incurred by the Agent or any Bank in connection with
any payment made by the Agent or any Bank under, or with respect to, such
Letter of Credit,
(b) upon the reduction (but not termination) of the Total Revolving
Credit Commitment to an amount less than the Maximum Drawing Amount, an
amount equal to such difference, which amount shall be held by the Agent
for the benefit of the Banks and the Agent as cash collateral for all
Reimbursement Obligations, and
(c) upon the termination of the Total Revolving Credit Commitment, or
the acceleration of the Reimbursement Obligations with respect to all
Letters of Credit in accordance with (S)15, an amount equal to the then
Maximum Drawing Amount on all Letters of Credit, which amount shall be held
by the Agent for the benefit of the Banks and the Agent as cash collateral
for all Reimbursement Obligations.
Each such payment shall be made to the Agent at the Agent's Head Office in
immediately available funds. Interest on any and all amounts remaining unpaid
by the Borrower under this (S)5.2 at any time from the date such amounts become
due and payable (whether as stated in this (S)5.2, by acceleration or otherwise)
until payment in full (whether before or after judgment) shall be payable to the
Agent on demand at the rate specified in (S)6.11 for overdue principal on the
Revolving Credit Loans.
5.3. Letter of Credit Payments. If any draft shall be presented or other
-------------------------
demand for payment shall be made under any Letter of Credit, the Agent shall
notify the Borrower of the date and amount of the draft presented or demand for
payment and of the date and time when it expects to pay such draft or honor such
demand for payment. If the Borrower fails to reimburse the Agent as provided in
(S)5.2 on or before the date that such draft is paid or other payment is made by
the Agent, the Agent may at any time thereafter notify the Banks of the amount
of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston
time) on the Business Day next following the receipt of such notice, each Bank
shall make available to the Agent, at the Agent's Head Office, in immediately
available funds, such Bank's Commitment Percentage of such Unpaid Reimbursement
Obligation, together with an amount equal to the product of (i) the average,
computed for the period referred to in clause (iii) below, of the weighted
average interest rate paid by the Agent for federal funds acquired by the Agent
during each day included in such period, times (ii) the amount equal to such
-----
Bank's Commitment Percentage of such Unpaid Reimbursement Obligation, times
-----
(iii) a fraction, the numerator of which is the number of days that elapse from
and including the date the Agent
<PAGE>
-28-
paid the draft presented for honor or otherwise made payment to the date on
which such Bank's Commitment Percentage of such Unpaid Reimbursement obligation
shall become immediately available to the Agent, and the denominator of which is
360. The responsibility of the Agent to the Borrower and the Banks shall be
only to determine that the documents (including each draft) delivered under each
Letter of Credit in connection with such presentment shall be in conformity in
all material respects with such Letter of Credit.
5.4. Obligations Absolute. The Borrower's obligations under this (S)5
--------------------
shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Agent, any Bank or any
beneficiary of a Letter of Credit. The Borrower further agrees with the Agent
and the Banks that the Agent and the Banks shall not be responsible for, and the
Borrower's Reimbursement Obligations under (S)5.2 shall not be affected by,
among other things, the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged, or any dispute between or among
the Borrower, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrower against the beneficiary of any
Letter of Credit or any such transferee. The Agent and the Banks shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit. The Borrower agrees that any action taken or omitted by
the Agent or any Bank under or in connection with each Letter of Credit and the
related drafts and documents, absent any gross negligence or willful misconduct
on the part of the Agent or such Bank, shall be binding upon the Borrower and
shall not result in any liability on the part of the Agent or any Bank to the
Borrower.
5.5. Reliance by Issuer. To the extent not inconsistent with (S)5.4, the
------------------
Agent shall be entitled to rely, and shall be fully protected in relying upon,
any Letter of Credit, draft, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person or Persons and upon
advice and statements of legal counsel, independent accountants and other
experts selected by the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Credit Agreement unless it shall first
have received such advice or concurrence of the Required Banks as it reasonably
deems appropriate or it shall first be indemnified to its reasonable
satisfaction by the Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Credit Agreement in accordance with a request of the Required
Banks, and such request and any action taken or failure to act pursuant thereto
shall be binding upon the Banks and all future holders of the Revolving Credit
Notes or of a Letter of Credit Participation.
5.6. Letter of Credit Fee. The Borrower shall, on the last Business Day
--------------------
of any fiscal quarter pay a fee (in each case, a "Letter of Credit Fee") to the
Agent in respect of each Letter of Credit at a rate per annum equal to the
Applicable Margin for Eurodollar Rate Loans on the face
<PAGE>
-29-
amount of such Letter of Credit, for the accounts of the Banks in accordance
with their respective Commitment Percentages. The Borrower shall also pay to the
Agent for the Agent's own account, a fronting fee (the "Fronting Fee") equal to
one-eighth of one percent (0.125%) per annum of the face amount of such Letter
of Credit. In respect of each Letter of Credit, the Borrower shall also pay to
the Agent for the Agent's own account, at such other time or times as such
charges are customarily made by the Agent, the Agent's customary issuance,
amendment, negotiation or document examination and other administrative fees as
in effect from time to time.
6. CERTAIN GENERAL PROVISIONS.
--------------------------
6.1. Closing and Arrangement Fees. The Borrower agrees to pay to the Agent
----------------------------
and BRS fees in the amount and at the times set forth in the Fee Letter.
6.2. Agent's Fee. The Borrower shall pay to the Agent an Agent's fee as
-----------
provided in the Fee Letter.
6.3. Funds for Payments.
------------------
6.3.1. Payments to Agent. All payments of principal, interest,
-----------------
Reimbursement Obligations, commitment fees, Letter of Credit Fees and any
other amounts due hereunder or under any of the other Loan Documents shall
be made on the due date thereof to the Agent in Dollars, for the respective
accounts of the Banks and the Agent, at the Agent's Head Office or at such
other place that the Agent may from time to time designate, in each case
not later than 2:00 p.m. (Boston time or other local time at the place of
payment) and in immediately available funds.
6.3.2. No Offset, etc. All payments by the Borrower hereunder and
---------------
under any of the other Loan Documents shall be made without recoupment,
setoff or counterclaim and free and clear of and without deduction for any
taxes, levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof
or taxing or other authority therein unless the Borrower is compelled by
law to make such deduction or withholding. If any such obligation is
imposed upon the Borrower with respect to any amount payable by it
hereunder or under any of the other Loan Documents, the Borrower will pay
to the Agent, for the account of the Banks or (as the case may be) the
Agent, on the date on which such amount is due and payable hereunder or
under such other Loan Document, such additional amount in Dollars as shall
be necessary to enable the Banks or the Agent to receive the same net
amount which the Banks or the Agent would have received on such due date
had no such obligation been imposed upon the Borrower. The Borrower will
deliver promptly to the Agent certificates or other valid vouchers for all
taxes or other charges deducted from or paid with respect to payments made
by the Borrower hereunder or under such other Loan Document.
6.4. Computations. All computations of interest on the Loans and of
------------
commitment fees, Letter of Credit Fees or other fees shall, unless otherwise
expressly provided herein, be based on
<PAGE>
-30-
a 360-day year and paid for the actual number of days elapsed. Except as
otherwise provided in the definition of the term "Interest Period" with respect
to Eurodollar Rate Loans, whenever a payment hereunder or under any of the
other Loan Documents becomes due on a day that is not a Business Day, the due
date for such payment shall be extended to the next succeeding Business Day, and
interest shall accrue during such extension. The outstanding amount of the Loans
as reflected on the Revolving Credit Note Records and the Term Note Records from
time to time shall be considered correct and binding on the Borrower unless
within five (5) Business Days after receipt of any notice by the Agent or any of
the Banks of such outstanding amount, the Agent or such Bank shall notify the
Borrower to the contrary.
6.5. Inability to Determine Eurodollar Rate. In the event, prior to the
--------------------------------------
commencement of any Interest Period relating to any Eurodollar Rate Loan, the
Agent shall determine or be notified by the Required Banks that adequate and
reasonable methods do not exist for ascertaining the Eurodollar Rate that would
otherwise determine the rate of interest to be applicable to any Eurodollar Rate
Loan during any Interest Period, the Agent shall forthwith give notice of such
determination (which shall be conclusive and binding on the Borrower and the
Banks) to the Borrower and the Banks. In such event (i) any Loan Request or
Conversion Request with respect to Eurodollar Rate Loans shall be automatically
withdrawn and shall be deemed a request for Base Rate Loans, (ii) each
Eurodollar Rate Loan will automatically, on the last day of the then current
Interest Period relating thereto, become a Base Rate Loan, and (iii) the
obligations of the Banks to make Eurodollar Rate Loans shall be suspended until
the Agent or the Required Banks determines that the circumstances giving rise to
such suspension no longer exist, whereupon the Agent shall so notify the
Borrower and the Banks.
6.6. Illegality. Notwithstanding any other provisions herein, if any
----------
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Borrower and the other Banks and thereupon (i) the
commitment of such Bank to make Eurodollar Rate Loans or convert Loans of
another Type to Eurodollar Rate Loans shall forthwith be suspended and (ii) such
Bank's Revolving Credit Loans then outstanding as Eurodollar Rate Loans, if any,
shall be converted automatically to Base Rate Loans on the last day of each
Interest Period applicable to such Eurodollar Rate Loans or within such earlier
period as may be required by law. The Borrower hereby agrees promptly to pay the
Agent for the account of such Bank, upon demand by such Bank, any additional
amounts necessary to compensate such Bank for any costs incurred by such Bank in
making any conversion in accordance with this (S)6.6, including any interest or
fees payable by such Bank to lenders of funds obtained by it in order to make or
maintain its Eurodollar Rate Loans hereunder.
6.7. Additional Costs, etc. If any present or future applicable law, which
---------------------
expression, as used herein, includes statutes, rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at any
time or from time to time hereafter made upon or otherwise issued to any Bank or
the Agent by any central bank or other fiscal, monetary or other authority
(whether or not having the force of law), shall:
<PAGE>
-31-
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Credit Agreement, the other Loan Documents, any Letters of Credit, such
Bank's Commitment or the Loans (other than taxes based upon or measured by
the income or profits of such Bank or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or
the interest on any Loans or any other amounts payable to any Bank or the
Agent under this Credit Agreement or any of the other Loan Documents, or
(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Credit Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held
by, or deposits in or for the account of, or loans by, or letters of credit
issued by, or commitments of an office of any Bank, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Credit Agreement, the other Loan
Documents, any Letters of Credit, the Loans, such Bank's Commitment, or any
class of loans, letters of credit or commitments of which any of the Loans
or such Bank's Commitment forms a part, and the result of any of the
foregoing is
(i) to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining any of the Loans or such
Bank's Commitment or any Letter of Credit, or
(ii) to reduce the amount of principal, interest, Reimbursement
Obligation or other amount payable to such Bank or the Agent hereunder
on account of such Bank's Commitment, any Letter of Credit or any of
the Loans, or
(iii) to require such Bank or the Agent to make any payment or
to forego any interest or Reimbursement Obligation or other sum
payable hereunder, the amount of which payment or foregone interest or
Reimbursement Obligation or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by such Bank
or the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, upon demand made by such Bank or
(as the case may be) the Agent at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or the Agent such additional
amounts as will be sufficient to compensate such Bank or the Agent for such
additional cost, reduction, payment or foregone interest or Reimbursement
Obligation or other sum.
6.8. Capital Adequacy. If after the date hereof any Bank or the Agent
----------------
determines that (i) the adoption of or change in any law, governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law) regarding capital requirements for banks or
<PAGE>
-32-
bank holding companies or any change in the interpretation or application
thereof by a court or governmental authority with appropriate jurisdiction, or
(ii) compliance by such Bank or the Agent or any corporation controlling such
Bank or the Agent with any law, governmental rule, regulation, policy, guideline
or directive (whether or not having the force of law) of any such entity
regarding capital adequacy, has the effect of reducing the return on such Bank's
or the Agent's commitment with respect to any Loans to a level below that which
such Bank or the Agent could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's or the Agent's then existing
policies with respect to capital adequacy and assuming full utilization of such
entity's capital) by any amount deemed by such Bank or (as the case may be) the
Agent to be material, then such Bank or the Agent may notify the Borrower of
such fact. To the extent that the amount of such reduction in the return on
capital is not reflected in the Base Rate, the Borrower and such Bank shall
thereafter attempt to negotiate in good faith, within thirty (30) days of the
day on which the Borrower receives such notice, an adjustment payable hereunder
that will adequately compensate such Bank in light of these circumstances. If
the Borrower and such Bank are unable to agree to such adjustment within thirty
(30) days of the date on which the Borrower receives such notice, then
commencing on the date of such notice (but not earlier than the effective date
of any such increased capital requirement), the fees payable hereunder shall
increase by an amount that will, in such Bank's reasonable determination,
provide adequate compensation. Each Bank shall allocate such cost increases
among its customers in good faith and on an equitable basis.
6.9. Certificate. A certificate setting forth any additional amounts
-----------
payable pursuant to (S)(S)6.7 or 6.8 and a brief explanation of such amounts
which are due, submitted by any Bank or the Agent to the Borrower, shall be
conclusive, absent manifest error, that such amounts are due and owing.
6.10. Indemnity. The Borrower agrees to indemnify each Bank and to hold
---------
each Bank harmless from and against any loss, cost or expense (including loss of
anticipated profits) that such Bank may sustain or incur as a consequence of (i)
default by the Borrower in payment of the principal amount of or any interest on
any Eurodollar Rate Loans as and when due and payable, including any such loss
or expense arising from interest or fees payable by such Bank to lenders of
funds obtained by it in order to maintain its Eurodollar Rate Loans, (ii)
default by the Borrower in making a borrowing or conversion after the Borrower
has given (or is deemed to have given) a Loan Request, notice (in the case of
all or any portion of the Term Loans pursuant to (S)4.5.2) or a Conversion
Request relating thereto in accordance with (S)2.6 or (S)2.7 or (S)4.5 or (iii)
the making of any payment of a Eurodollar Rate Loan or the making of any
conversion of any such Loan to a Base Rate Loan on a day that is not the last
day of the applicable Interest Period with respect thereto, including interest
or fees payable by such Bank to lenders of funds obtained by it in order to
maintain any such Loans.
6.11. Interest After Default.
----------------------
6.11.1. Overdue Amounts. Overdue principal and (to the extent
---------------
permitted by applicable law) interest on the Loans and all other overdue
amounts payable hereunder or under any of the other Loan Documents shall
bear interest compounded monthly and payable on demand at a rate per annum
equal to three percent (3.0%) per annum above
<PAGE>
-33-
the Base Rate plus the Applicable Margin then applicable to Base Rate Loans
----
until such amount shall be paid in full (after as well as before judgment).
6.11.2. Amounts Not Overdue. During the continuance of a Default
-------------------
or an Event of Default the principal of the Loans not overdue shall, until
such Default or Event of Default has been cured or remedied or such Default
or Event of Default has been waived by the Required Banks pursuant to
(S)27, bear interest at a rate per annum equal to the greater of three
percent (3.0%) per annum above the Base Rate plus the Applicable Margin
----
then applicable to Base Rate Loans.
6.12. Replacement Banks.
Within thirty (30) days after (a) any Bank has demanded compensation from
the Borrower pursuant to (S)(S)6.7 or 6.8 hereof, or (b) there shall have
occurred a change in law with respect to any Bank as a consequence of which it
shall have become unlawful for such Bank to make a Eurodollar Rate Loan on any
Drawdown Date, as described in (S)6.6 hereof (any such Bank described in the
foregoing clauses (a) or (b) is hereinafter referred to as an "Affected Bank"),
-------- ----
the Borrower may request so long as no Default or Event of Default has occurred
that the Non-Affected Banks acquire all, but not less than all, of the Affected
Bank's outstanding Loans and assume all, but not less than all, of the Affected
Bank's Commitment. If the Borrower so requests, the Non-Affected Banks may
elect to acquire all or any portion of the Affected Bank's outstanding Loans and
to assume all or any portion of the Affected Bank's Commitment. If the Non-
Affected Banks do not elect to acquire and assume all of the Affected Bank's
outstanding Loans and Commitment, the Borrower may designate a replacement bank
or banks, which must be satisfactory to the Agent and which would otherwise be
an Eligible Assignee, to acquire and assume that portion of the outstanding
Loans and Commitment of the Affected Bank not being acquired and assumed by the
Non-Affected Banks. The provisions of (S)21 hereof shall apply to all
reallocations pursuant to this (S)6.12, and the Affected Bank and any Non-
Affected Banks and/or replacement banks which are to acquire the Loans and
Commitments of the Affected Bank shall execute and deliver to the Agent, in
accordance with the provisions of (S)21 hereof, such Assignments and Acceptances
and other instruments, including, without limitation, Notes, as are required
pursuant to (S)21 hereof to give effect to such reallocations. On the effective
date of the applicable Assignments and Acceptances, the Borrower shall pay to
the Affected Bank all interest accrued on its Loans up to but excluding such
date, along with any fees payable to such Affected Bank hereunder up to but
excluding such date.
7. GUARANTY.
--------
7.1. Guaranty of Payment and Performance. The Parent hereby guarantees to
-----------------------------------
the Agent and the Banks, the full and punctual payment when due (whether at
stated maturity, by required pre-payment, by acceleration or otherwise), as well
as the performance, of all of the Obligations including all such which would
become due but for the operation of the automatic stay pursuant to (S)362(a) of
the Federal Bankruptcy Code and the operation of (S)(S)502(b) and 506(b) of the
Federal Bankruptcy Code. This Guaranty is an absolute, unconditional and
continuing guaranty of the full and punctual payment and performance of all of
the Obligations and not of their collectability only and is in no way
conditioned upon any requirement that the
<PAGE>
-34-
Agent or any Bank first attempt to collect any of the Obligations from the
Borrower or resort to any collateral security or other means of obtaining
payment. Should the Borrower default in the payment or performance of any of the
Obligations, the obligations of the Parent hereunder with respect to such
Obligations in default shall, upon demand by the Agent, become immediately due
and payable to the Agent, for the benefit of the Banks and the Agent, without
demand or notice of any nature, all of which are expressly waived by the Parent.
Payments by the Parent hereunder may be required by the Agent on any number of
occasions. All payments by the Parent hereunder shall be made to the Agent, in
the manner and at the place of payment specified therefor in (S)6.2.1 hereof,
for the account of the Banks and the Agent.
7.2. Parent's Agreement to Pay Enforcement Costs, etc. The Parent further
------------------------------------------------
agrees, as the principal obligor and not as a guarantor only, to pay to the
Agent, on demand, all reasonable costs and expenses (including court costs and
legal expenses, including the allocated cost of staff counsel) incurred or
expended by any Agent or any Bank in connection with the Obligations, this
Guaranty and the enforcement thereof, together with interest on amounts
recoverable under this (S)7 from the time when such amounts become due until
payment, whether before or after judgment, at the rate of interest for overdue
principal set forth in (S)6.11 hereof, provided that if such interest exceeds
--------
the maximum amount permitted to be paid under applicable law, then such interest
shall be reduced to such maximum permitted amount.
7.3. Waivers by the Parent; Banks' Freedom to Act. The Parent agrees that
--------------------------------------------
the Obligations will be paid and performed strictly in accordance with their
respective terms, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Agent or any Bank with respect thereto. The Parent waives promptness, diligence,
presentment, demand, protest, notice of acceptance, notice of any Obligations
incurred and all other notices of any kind, all defenses which may be available
by virtue of any valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshalling of assets of the
Borrower or any other entity or other Person primarily or secondarily liable
with respect to any of the Obligations, and all suretyship defenses generally.
Without limiting the generality of the foregoing, the Parent agrees to the
provisions of any instrument evidencing, securing or otherwise executed in
connection with any Obligation and agrees that the obligations of the Parent
hereunder shall not be released or discharged, in whole or in part, or otherwise
affected by (i) the failure of the Agent or any Bank to assert any claim or
demand or to enforce any right or remedy against the Borrower or any other
entity or other person primarily or secondarily liable with respect to any of
the Obligations; (ii) any extensions, compromise, refinancing, consolidation or
renewals of any Obligation; (iii) any change in the time, place or manner of
payment of any of the Obligations or any rescissions, waivers, compromise,
refinancing, consolidation or other amendments or modifications of any of the
terms or provisions of this Credit Agreement, the other Loan Documents or any
other agreement evidencing, securing or otherwise executed in connection with
any of the Obligations made in accordance with the terms hereof; (iv) the
addition, substitution or release of any entity or other person primarily or
secondarily liable for any Obligation; (v) the adequacy of any rights which the
Agent or any Bank may have against any collateral security or other means of
obtaining repayment of any of the Obligations; (vi) the impairment of any
collateral securing any of the Obligations, including without limitation the
failure to perfect or preserve any rights which the Agent or any Bank might have
in such
<PAGE>
-35-
collateral security or the substitution, exchange, surrender, release, loss or
destruction of any such collateral security; or (vii) any other act or omission
which might in any manner or to any extent vary the risk of the Parent or
otherwise operate as a release or discharge of the Parent (other than the
indefeasible payment in full, in cash, of all of the Obligations and the
irrevocable termination of the Commitments), all of which may be done without
notice to the Parent. To the fullest extent permitted by law, the Parent hereby
expressly waives any and all rights or defenses arising by reason of (A) any
"one action" or "anti-deficiency" law which would otherwise prevent the Agent or
any Bank from bringing any action, including any claim for a deficiency, or
exercising any other right or remedy (including any right of set-off), against
the Parent before or after the Agent's or such Bank's commencement or completion
of any foreclosure action, whether judicially, by exercise of power of sale or
otherwise, or (B) any other law which in any other way would otherwise require
any election of remedies by the Agent or any Bank.
7.4. Unenforceability of Obligations Against Borrower. If for any reason
------------------------------------------------
the Borrower has no legal existence or is under no legal obligation to discharge
any of the Obligations, or if any of the Obligations have become irrecoverable
from the Borrower by reason of the Borrower's insolvency, bankruptcy or
reorganization or by other operation of law or for any other reason (other than
the indefeasible payment in full, in cash, of all of the Obligations and the
irrevocable termination of the Commitments), to the extent permitted by law,
this Guaranty shall nevertheless be binding on the Parent to the same extent as
if the Parent at all times had been the principal obligor on all such
Obligations. In the event that acceleration of the time for payment of any of
the Obligations is stayed upon the insolvency, bankruptcy or reorganization of
the Borrower, or for any other reason, all such amounts otherwise subject to
acceleration under the terms of this Credit Agreement, the other Loan Documents
or any other agreement evidencing, securing or otherwise executed in connection
with any Obligation shall be immediately due and payable by the Parent.
7.5. Subrogation; Subordination.
--------------------------
7.5.1. Postponement of Rights Against Borrower. Until the final
---------------------------------------
payment and performance in full in cash of all of the Obligations, the
Parent shall not exercise any rights against the Borrower arising as a
result of payment by the Parent hereunder, by way of subrogation,
reimbursement, restitution, contribution or otherwise, and will not prove
any claim in competition with the Agent or any Bank in respect of any
payment hereunder in any bankruptcy, insolvency or reorganization case or
proceedings of any nature; the Parent will not claim any setoff, recoupment
or counterclaim against the Borrower in respect of any liability of the
Parent to the Borrower; and the Parent waives any benefit of and any right
to participate in any collateral security which may be held by the Agent or
any Bank.
7.5.2. Subordination. The payment of any amounts due with respect to
-------------
any indebtedness of the Borrower for money borrowed or credit received now
or hereafter owed to the Parent is hereby subordinated to the prior payment
in full in cash of all of the Obligations. The Parent agrees that, after
the occurrence of any default in the payment or performance of any of the
Obligations, the Parent will not demand, sue for or otherwise attempt to
collect any such indebtedness of the Borrower to such Parent
<PAGE>
-36-
until all of the Obligations shall have been paid in full. If,
notwithstanding the foregoing sentence, the Parent shall collect, enforce
or receive any amounts in respect of such indebtedness while any
Obligations are still outstanding, such amounts shall be collected,
enforced and received by the Parent as trustee for the Banks and the Agent
and be paid over to the Agent, for the benefit of the Banks and the Agent,
on account of the Obligations without affecting in any manner the liability
of the Parent under the other provisions of this Guaranty.
7.5.3. Provisions Supplemental. The provisions of this (S)7.5 shall
-----------------------
be supplemental to and not in derogation of any rights and remedies of the
Banks and the Agent under any separate subordination agreement which the
Agent may at any time and from time to time enter into with the Parent for
the benefit of the Banks and the Agent.
7.6. Security; Setoff. The Parent grants to the Agent and the Banks, as
----------------
security for the full and punctual payment and performance of all of the
Parent's obligations hereunder, a continuing lien on and security interest in
all securities or other property belonging to the Parent now or hereafter held
by the Agent or such Bank and in all deposits (general or special, time or
demand, provisional or final) and other sums credited by or due from the Agent
or such Bank to the Parent or subject to withdrawal by the Parent. Regardless of
the adequacy of any collateral security or other means of obtaining payment of
any of the Obligations, each of the Agent and the Banks is hereby authorized at
any time and from time to time, without notice to the Parent (any such notice
being expressly waived by the Parent) and to the fullest extent permitted by
law, to set off and apply such deposits and other sums against the obligations
of the Parent under this Guaranty, whether or not the Agent or such Bank shall
have made any demand under this Guaranty and although such obligations may be
contingent or unmatured.
7.7. Further Assurances. The Parent agrees that it will from time to
------------------
time, at the request of the Agent, do all such things and execute all such
documents as the Agent may reasonably consider necessary or desirable to give
full effect to this Guaranty and to perfect and preserve the rights and powers
of the Banks and the Agent hereunder. The Parent acknowledges and confirms that
it has established its own adequate means of obtaining from the Borrower on a
continuing basis all information desired by it concerning the financial
condition of the Borrower and that it will look to the Borrower and not to the
Agent or any Bank in order for it to keep adequately informed of changes in any
of the Borrower's financial condition.
7.8. Termination; Reinstatement. This Guaranty shall terminate upon the
--------------------------
final and indefeasible payment in full, in cash, of the Obligations.
Notwithstanding any termination of this Guaranty upon the final and indefeasible
payment in full, in cash, of the Obligations, this Guaranty shall continue to be
effective or be reinstated, if at any time any payment made or value received
with respect to any Obligation is rescinded or must otherwise be returned by the
Agent or any Bank upon the insolvency, bankruptcy or reorganization of the
Borrower, or otherwise, all as though such payment had not been made or value
received.
7.9. Successors and Assigns. This Guaranty shall be binding upon the
----------------------
Parent, its successors and assigns, and shall inure to the benefit of the Agent
and the Banks and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing
<PAGE>
-37-
sentence, each Bank may, in accordance with the provisions of (S)22 and subject
to the limitations set forth therein, assign or otherwise transfer this Credit
Agreement, the other Loan Documents or any other agreement or note held by it
evidencing, securing or otherwise executed in connection with the Obligations,
or sell participations in any interest therein, to any other entity or other
person, and such other entity or other person shall thereupon become vested, to
the extent set forth in the agreement evidencing such assignment, transfer or
participation, with all the rights in respect thereof granted to such Bank
herein. The Parent may not assign any of its obligations hereunder.
8. COLLATERAL SECURITY AND GUARANTIES.
----------------------------------
8.1. Security of Borrower. The Obligations shall be secured by (a) a
--------------------
perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable law) in all of the assets of the Borrower,
whether now owned or hereafter acquired, pursuant to the terms of the Security
Documents to which the Borrower is a party, and (b) a pledge by the Borrower of
100% of the capital stock of each of its Subsidiaries pursuant to the terms of
the Stock Pledge Agreement to which the Borrower is a party.
8.2. Guaranties and Security of Subsidiaries. The Obligations shall also
---------------------------------------
be guaranteed by each Subsidiary Guarantor, pursuant to the terms of the
Guaranty. The obligations of each Subsidiary Guarantor under the Guaranty shall
be in turn secured by (a) a perfected first priority security interest (subject
only to Permitted Liens entitled to priority under applicable law) in all of the
assets of each Subsidiary Guarantor, whether now owned or hereafter acquired,
pursuant to the terms of the Security Documents to which such Subsidiary
Guarantor is a party, and (b) a pledge by each Subsidiary Guarantor of one
hundred percent (100%) of the capital stock of each of its Subsidiaries pursuant
to the Stock Pledge Agreement to which such Subsidiary Guarantor is a party.
8.3. Security of Parent. The Obligations shall be secured by (a) a
------------------
perfected first priority security interest (subject only to Permitted Liens
entitled to priority under applicable law) in all of the assets of the Parent,
whether now owned or hereafter acquired, pursuant to the terms of the Security
Documents to which the Parent is a party, and (b) a perfected first priority
interest in 100% of the capital stock of each of its Subsidiaries pursuant to
the terms of the Stock Pledge Agreement to which the Parent is a party.
9. REPRESENTATIONS AND WARRANTIES.
------------------------------
Each of the Borrower and the Parent represents and warrants to the Banks
and the Agent as follows:
9.1. Corporate Authority.
-------------------
9.1.1. Incorporation; Good Standing. Each of the Parent, the
----------------------------
Borrower and their respective Subsidiaries (i) is a corporation duly
organized, validly existing and in good standing under the laws of its
state of incorporation, (ii) has all requisite corporate power to own its
property and conduct its business as now conducted and as presently
contemplated, and (iii) is in good standing as a foreign corporation and is
duly
<PAGE>
-38-
authorized to do business in each jurisdiction where such qualification is
necessary except where a failure to be so qualified would not have a
materially adverse effect on the business, assets or financial condition of
the Parent, the Borrower and their Subsidiaries taken as a whole.
9.1.2. Authorization. The execution, delivery and performance of
-------------
this Credit Agreement and the other Loan Documents to which the Parent, the
Borrower or any of their Subsidiaries is or is to become a party and the
transactions contemplated hereby and thereby (i) are within the corporate
authority of such Person, (ii) have been duly authorized by all necessary
corporate proceedings, (iii) do not conflict with or result in any breach
or contravention of any provision of law, statute, rule or regulation to
which any of their Subsidiaries is subject or any judgment, order, writ,
injunction, license or permit applicable to the Parent, the Borrower or any
of their Subsidiaries and (iv) do not conflict with any provision of the
corporate charter or bylaws of, or any agreement or other instrument
binding upon, the Parent, the Borrower or any of their Subsidiaries.
9.1.3. Enforceability. The execution and delivery of this Credit
--------------
Agreement and the other Loan Documents to which the Parent, the Borrower or
any of their respective Subsidiaries is or is to become a party will result
in valid and legally binding obligations of such Person enforceable against
it in accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally
the enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor
may be brought.
9.2. Governmental Approvals. The execution, delivery and performance by
----------------------
the Parent, the Borrower and any of their respective Subsidiaries of this Credit
Agreement and the other Loan Documents to which the Parent, the Borrower or any
of their Subsidiaries is or is to become a party and the transactions
contemplated hereby and thereby do not require the approval or consent of, or
filing with, any governmental agency or authority other than those already
obtained.
9.3. Title to Properties; Leases. Except as indicated on Schedule 11.2
--------------------------- -------------
hereto, the Parent, the Borrower and their respective Subsidiaries own all of
the assets reflected in the consolidated balance sheet of the Parent, the
Borrower and their respective Subsidiaries as at the Balance Sheet Date or
acquired since that date (except property and assets sold or otherwise disposed
of in the ordinary course of business since that date), subject to no rights of
others, including any mortgages, leases, conditional sales agreements, title
retention agreements, liens or other encumbrances except Permitted Liens.
9.4. Financial Statements and Projections.
------------------------------------
9.4.1. Fiscal Year. The Parent, the Borrower and each of their
-----------
respective Subsidiaries has a 52/53 week fiscal year, with quarter ends as
set forth on Schedule 9.4.1.
--------------
<PAGE>
-39-
9.4.2. Financial Statements. There has been furnished to each of the
--------------------
Banks a consolidated balance sheet of the Parent and its Subsidiaries as at
the Balance Sheet Date, and a consolidated statement of income of the
Parent and its Subsidiaries for the fiscal year then ended, certified by
Arthur Andersen LLP. Such balance sheet and statement of income have been
prepared in accordance with generally accepted accounting principles and
fairly present the financial condition of the Parent, on a consolidated
basis, as at the Balance Sheet Date and the results of operations for the
fiscal year then ended. There are no contingent liabilities of the Parent
or any of its Subsidiaries as of such date involving material amounts,
known to the officers of the Borrower, which were not disclosed in such
balance sheet and the notes related thereto.
9.4.3. Projections. The projections of the annual operating budgets
-----------
of the Parent and its Subsidiaries on a consolidated basis, balance sheets
and cash flow statements for the 1999 to 2003 fiscal years, copies of which
have been delivered to each Bank, disclose all key assumptions made in
formulating such projections. To the knowledge of the Parent or any of its
Subsidiaries, no facts exist that (individually or in the aggregate) would
result in any material change in any of such projections. The projections
are based upon reasonable estimates and assumptions, have been prepared on
the basis of the assumptions stated therein and reflect the reasonable
estimates of the Parent and its Subsidiaries of the results of operations
and other information projected therein.
9.5. No Material Changes, etc. Since the Balance Sheet Date there has
------------------------
occurred no materially adverse change in the financial condition or business of
the Parent, the Borrower and their respective Subsidiaries as shown on or
reflected in the consolidated balance sheet of the Parent and its Subsidiaries
as at the Balance Sheet Date, or the consolidated statement of income for the
fiscal year then ended, other than changes in the ordinary course of business
that have not had any materially adverse effect either individually or in the
aggregate on the business or financial condition of the Parent, the Borrower and
their Subsidiaries taken as a whole. Since the Balance Sheet Date, neither the
Parent nor the Borrower has made any Distributions.
9.6. Franchises, Patents, Copyrights, etc. Each of the Parent, the
------------------------------------
Borrower and their respective Subsidiaries possesses all franchises, patents,
copyrights, trademarks, trade names, licenses and permits, and rights in respect
of the foregoing, adequate for the conduct of its business substantially as now
conducted without known conflict with any rights of others.
9.7. Litigation. Except as set forth in Schedule 9.7 hereto, there are no
---------- -------- ---
actions, suits, proceedings or investigations of any kind pending or threatened
against the Parent, the Borrower or any of their Subsidiaries before any court,
tribunal or administrative agency or board that, if adversely determined, might,
either individually or in the aggregate, materially adversely affect the
properties, assets, financial condition or business of the Parent, the Borrower
and their respective Subsidiaries or materially impair the right of the Parent,
the Borrower and their respective Subsidiaries, considered as a whole, to carry
on business substantially as now conducted by them, or result in any substantial
liability not adequately covered by insurance, or for which adequate reserves
are not maintained on the consolidated balance sheet of the Parent, the Borrower
and their respective Subsidiaries, or which question the validity of this Credit
Agreement or any of the other Loan Documents, or any action taken or to be taken
pursuant hereto or thereto.
<PAGE>
-40-
9.8. No Materially Adverse Contracts, etc. None of the Parent, the
------------------------------------
Borrower nor any of their Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation that
has or is expected in the future to have a materially adverse effect on the
business, assets or financial condition of the Parent, the Borrower or any of
their Subsidiaries. None of the Parent, the Borrower nor any of their
Subsidiaries is a party to any contract or agreement that has or is expected, in
the judgment of the Borrower's officers, to have any materially adverse effect
on the business of the Parent, the Borrower and their Subsidiaries taken as a
whole.
9.9. Compliance with Other Instruments, Laws, etc. None of the Parent,
--------------------------------------------
the Borrower nor any of their Subsidiaries is in violation of any provision of
its charter documents, bylaws, or any agreement or instrument to which it may be
subject or by which it or any of its properties may be bound or any decree,
order, judgment, statute, license, rule or regulation, in any of the foregoing
cases in a manner that could result in the imposition of substantial penalties
or materially and adversely affect the financial condition, properties or
business of the Parent, the Borrower and their Subsidiaries taken as a whole.
9.10. Tax Status. Each of the Parent, the Borrower and their respective
----------
Subsidiaries (i) have made or filed all federal and state income and all other
tax returns, reports and declarations required by any jurisdiction to which any
of them is subject, (ii) have paid all taxes and other governmental assessments
and charges shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and by appropriate
proceedings and (iii) have set aside on their books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply except where the failure to
file such tax returns, reports and declarations as described in clause (i) of
this Section 9.10, or the failure to make the payments described in clause (ii)
of this Section 9.10, would not have a material adverse effect on the financial
condition of the Parent, the Borrower and their Subsidiaries taken as a whole.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Borrower know of no basis
for any such claim.
9.11. No Event of Default. No Default or Event of Default has occurred
-------------------
and is continuing.
9.12. Holding Company and Investment Company Acts. None of the Parent,
-------------------------------------------
the Borrower or any of their Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935; nor is it an "investment company", or an "affiliated company" or a
"principal underwriter" of an "investment company", as such terms are defined in
the Investment Company Act of 1940.
9.13. Absence of Financing Statements, etc. Except with respect to
------------------------------------
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
in, any assets or property of the Parent, the Borrower or any of their
Subsidiaries or any rights relating thereto.
<PAGE>
-41-
9.14. Perfection of Security Interest. All filings, assignments, pledges
-------------------------------
and deposits of documents or instruments have been made and all other actions
have been taken that are necessary or advisable, under applicable law, to
establish and perfect the Agent's security interest in the Collateral. The
Collateral and the Agent's rights with respect to the Collateral are not subject
to any setoff, claims, withholdings or other defenses. The Parent, the Borrower
or a Subsidiary Guarantor party to one of the Security Agreements is the owner
of the Collateral free from any lien, security interest, encumbrance and any
other claim or demand, except for Permitted Liens.
9.15. Certain Transactions. Except as set forth on Schedule 9.15 hereto
-------------------- -------------
and for arm's length transactions pursuant to which the Parent, the Borrower or
any of their Subsidiaries makes payments in the ordinary course of business upon
terms no less favorable than such person could obtain from third parties, none
of the officers, directors, or employees of the Parent, the Borrower or any of
their Subsidiaries is presently a party to any transaction with the Parent, the
Borrower or any of their Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Parent or the
Borrower, any corporation, partnership, trust or other entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
9.16. Employee Benefit Plans.
----------------------
9.16.1. In General. Each Employee Benefit Plan and each
----------
Guaranteed Pension Plan has been maintained and operated in compliance in
all material respects with the provisions of ERISA and, to the extent
applicable, the Code, including but not limited to the provisions
thereunder respecting prohibited transactions and the bonding of
fiduciaries and other persons handling plan funds as required by (S)412 of
ERISA. The Borrower has heretofore delivered to the Agent the most recently
completed annual report, Form 5500, with all required attachments, and
actuarial statement required to be submitted under (S)103(d) of ERISA, with
respect to each Guaranteed Pension Plan.
9.16.2. Terminability of Welfare Plans. No Employee Benefit
------------------------------
Plan, which is an employee welfare benefit plan within the meaning of
(S)3(1) or (S)3(2)(B) of ERISA, provides benefit coverage subsequent to
termination of employment, except as required by Title I, Part 6 of ERISA
or the applicable state insurance laws. The Parent, the Borrower or their
respective Subsidiaries may terminate each such Plan at any time (or at any
time subsequent to the expiration of any applicable bargaining agreement)
in the discretion of such person without liability to any Person other than
for claims arising prior to termination.
9.16.3. Guaranteed Pension Plans. Each contribution required to
------------------------
be made to a Guaranteed Pension Plan, whether required to be made to avoid
the incurrence of an accumulated funding deficiency, the notice or lien
provisions of (S)302(f) of ERISA, or otherwise, has been timely made. No
waiver of an accumulated funding deficiency or extension of amortization
periods has been received with respect to any Guaranteed
<PAGE>
-42-
Pension Plan, and none of the Parent, the Borrower, any of their
Subsidiaries nor any ERISA Affiliate is obligated to or has posted security
in connection with an amendment to a Guaranteed Pension Plan pursuant to
(S)307 of ERISA or (S)401(a)(29) of the Code. No liability to the PBGC
(other than required insurance premiums, all of which have been paid) has
been incurred by the Parent, the Borrower, any of their Subsidiaries or any
ERISA Affiliate with respect to any Guaranteed Pension Plan and there has
not been any ERISA Reportable Event (other than an ERISA Reportable Event
as to which the requirement of 30 days notice has been waived), or any
other event or condition which presents a material risk of termination of
any Guaranteed Pension Plan by the PBGC. Based on the latest valuation of
each Guaranteed Pension Plan (which in each case occurred within twelve
months of the date of this representation), and on the actuarial methods
and assumptions employed for that valuation, the aggregate benefit
liabilities of all such Guaranteed Pension Plans within the meaning of
(S)4001 of ERISA did not exceed the aggregate value of the assets of all
such Guaranteed Pension Plans, disregarding for this purpose the benefit
liabilities and assets of any Guaranteed Pension Plan with assets in excess
of benefit liabilities, by more than $500,000.
9.16.4. Multiemployer Plans. None of the Parent, the Borrower,
-------------------
any of their Subsidiaries nor any ERISA Affiliate has incurred any material
liability (including secondary liability) to any Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan
under (S)4201 of ERISA or as a result of a sale of assets described in
(S)4204 of ERISA. Neither the Borrower nor any ERISA Affiliate has been
notified that any Multiemployer Plan is in reorganization or insolvent
under and within the meaning of (S)4241 or (S)4245 of ERISA or is at risk
of entering reorganization or becoming insolvent, or that any Multiemployer
Plan intends to terminate or has been terminated under (S)4041A of ERISA.
9.17. Use of Proceeds.
---------------
9.17.1. General. The proceeds of the Loans shall be used for
-------
the Acquisition, for Capital Expenditures, for new unit development and
conversions, for existing unit remodeling, for permitted stock repurchases,
for the issuance of letters of credit and working capital and general
corporate purposes. The Borrower will obtain Letters of Credit solely for
working capital and general corporate purposes.
9.17.2. Regulations U and X. No portion of any Loan is to be
-------------------
used, and no portion of any Letter of Credit is to be obtained, for the
purpose of purchasing or carrying any "margin security" or "margin stock"
as such terms are used in Regulations U and X of the Board of Governors of
the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
9.17.3. Ineligible Securities. No portion of the proceeds of
---------------------
any Loans is to be used, and no portion of any Letter of Credit is to be
obtained, for the purpose of knowingly purchasing, or providing credit
support for the purchase of, during the underwriting or placement period or
within thirty (30) days thereafter, any Ineligible Securities underwritten
or privately placed by a Section 20 Subsidiary.
<PAGE>
-43-
9.18. Environmental Compliance. The Borrower has taken all necessary
------------------------
steps to investigate the past and present condition and usage of the Real Estate
and the operations conducted thereon and, based upon such diligent
investigation, has determined that:
(a) none of the Parent, the Borrower, their Subsidiaries or any
operator of the Real Estate or any operations thereon is in violation, or
alleged violation, of any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery Act
("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the
Federal Clean Air Act, the Toxic Substances Control Act, or any state or
local statute, regulation, ordinance, order or decree relating to health,
safety or the environment (hereinafter "Environmental Laws"), which
violation would have a material adverse effect on the environment or the
business, assets or financial condition of the Parent, the Borrower and
their Subsidiaries taken as a whole;
(b) none of the Parent, the Borrower nor any of their respective
Subsidiaries has received notice from any third party including, without
limitation, any federal, state or local governmental authority, (i) that
any one of them has been identified by the United States Environmental
Protection Agency ("EPA") as a potentially responsible party under CERCLA
with respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B; (ii) that any hazardous waste, as defined by 42 U.S.C.
(S)6903(5), any hazardous substances as defined by 42 U.S.C. (S)9601(14),
any pollutant or contaminant as defined by 42 U.S.C. (S)9601(33) and any
toxic substances, oil or hazardous materials or other chemicals or
substances regulated by any Environmental Laws ("Hazardous Substances")
which any one of them has generated, transported or disposed of has been
found at any site at which a federal, state or local agency or other third
party has conducted or has ordered that the Parent, the Borrower or any of
their Subsidiaries conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (iii) that it is or
shall be a named party to any claim, action, cause of action, complaint, or
legal or administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the release of Hazardous
Substances;
(c) except as set forth on Schedule 9.18 attached hereto: (i) no
-------------
portion of the Real Estate has been used for the handling, processing,
storage or disposal of Hazardous Substances except in accordance with
applicable Environmental Laws; and no underground tank or other underground
storage receptacle for Hazardous Substances is located on any portion of
the Real Estate; (ii) in the course of any activities conducted by the
Parent, the Borrower, their Subsidiaries or operators of its properties, no
Hazardous Substances have been generated or are being used on the Real
Estate except in accordance with applicable Environmental Laws; (iii) there
have been no releases (i.e. any past or present releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, disposing or dumping) or threatened releases of
<PAGE>
-44-
Hazardous Substances on, upon, into or from the properties of the Parent,
the Borrower or their respective Subsidiaries, which releases would have a
material adverse effect on the value of any of the Real Estate or adjacent
properties or the environment; (iv) to the best of the Parent's, the
Borrower's knowledge, there have been no releases on, upon, from or into
any real property in the vicinity of any of the Real Estate which, through
soil or groundwater contamination, may have come to be located on, and
which would have a material adverse effect on the value of, the Real
Estate; and (v) in addition, any Hazardous Substances that have been
generated on any of the Real Estate have been transported offsite only by
carriers having an identification number issued by the EPA, treated or
disposed of only by treatment or disposal facilities maintaining valid
permits as required under applicable Environmental Laws, which transporters
and facilities have been and are, to the best of the Parent's, the
Borrower's or any of their Subsidiaries knowledge, operating in compliance
with such permits and applicable Environmental Laws; and
(d) None of the Parent, the Borrower and their respective
Subsidiaries, any Mortgaged Property or any of the other Real Estate is
required by any applicable environmental law to perform Hazardous
Substances site assessments, or to remove or remediate Hazardous
Substances, or to give notice to any governmental agency or to record or
deliver to other Persons any environmental disclosure document or statement
by virtue of the transactions set forth herein and contemplated hereby, or
as a condition to the recording of any Mortgage or to the effectiveness of
any other transactions contemplated hereby.
9.19. Subsidiaries, etc. As of the Closing Date, the only Subsidiaries
-----------------
of the Parent and the Borrower are as set forth on Schedule 9.19 hereto. The
-------------
Parent is the record and beneficial owner of one hundred percent (100%) of the
outstanding capital stock of the Borrower. Except as set forth on Schedule 9.19
-------------
hereto, neither the Borrower nor any Subsidiary Guarantor is engaged in any
joint venture or partnership with any other Person.
9.20. Bank Accounts. Schedule 9.20 hereto identifies each financial or
------------- -------------
similar institution with which the Parent, the Borrower or any of their
Subsidiaries holds or maintains a depository, disbursement or investment account
(other than any accounts held or maintained with the Agent), the address of such
institutions, the account holder, account number sort code (if applicable), a
description (including type and currency) and the purpose for which such account
is used. Accounts for deposit of sales, excise and similar taxes which the
Parent, the Borrower and their respective Subsidiaries are required by law to
collect and pay to a taxing authority shall be so identified.
9.21. Insurance. The Parent, the Borrower and each of their
---------
Subsidiaries maintains with financially sound and reputable insurers insurance
with respect to its properties and businesses against such casualties and
contingencies as are in accordance with sound business practices, with the
details of such coverage being more fully described on Schedule 9.21 hereto.
-------------
9.22. Year 2000 Problem. The Parent, the Borrower and their respective
-----------------
Subsidiaries have (i) reviewed the areas within their businesses and operations
which could be adversely affected by failure to become "Year 2000 Compliant"
(i.e. that computer applications, imbedded
<PAGE>
-45-
microchips and other systems used by the Parent, the Borrower or any of their
Subsidiaries or any of its material vendors, will be able properly to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999), (ii) developed a detailed plan and
timetable to become Year 2000 Compliant in a timely manner, and (iii) committed
adequate resources to support the Year 2000 plan of the Parent, the Borrower and
their respective Subsidiaries. Based upon such review, the Borrower reasonably
believes that the Parent, the Borrower and their respective Subsidiaries will
become "Year 2000 Compliant" in a timely manner except to the extent that
failure to do so will not have any materially adverse effect on the business or
financial condition of the Parent, the Borrower and their Subsidiaries taken as
a whole.
9.23. No Amendments to Certain Documents. None of the Parent, the
----------------------------------
Borrower or any of their Subsidiaries has amended any of the Acquisition
Documents in any material respect and each of the representations and warranties
made by such Person in any of the Acquisition Documents was true and correct in
all material respects when made and continues to be true and correct in all
material respects on the Closing Date.
9.24. Disclosure. Neither this Credit Agreement nor any of the other
----------
Loan Documents contains any untrue statement of a material fact or omits to
state a material fact (known to the Parent, the Borrower or any of their
Subsidiaries in the case of any document or information not furnished by it or
any of their Subsidiaries) necessary in order to make the statements herein or
therein not misleading. There is no fact known to the Parent, the Borrower or
any of their Subsidiaries which materially adversely affects, or which is
reasonably likely in the future to materially adversely affect, the business,
assets, financial condition or prospects of the Parent, the Borrower and their
Subsidiaries taken as a whole, exclusive of effects resulting from changes in
general economic conditions, legal standards or regulatory conditions.
10. AFFIRMATIVE COVENANTS OF THE BORROWER.
-------------------------------------
Each of the Parent and the Borrower covenants and agrees that, so long as
any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Bank has any obligation to make any Loans or the Agent has
any obligation to issue, extend or renew any Letters of Credit:
10.1. Punctual Payment. The Borrower will duly and punctually pay or
----------------
cause to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the commitment fees, the Agent's fee and
all other amounts provided for in this Credit Agreement and the other Loan
Documents to which the Borrower or any of the Subsidiary Guarantors is a party,
all in accordance with the terms of this Credit Agreement and such other Loan
Documents.
10.2. Maintenance of Office. Each of the Parent and the Borrower will
---------------------
maintain its chief executive office in Chicago, Illinois or at such other place
in the United States of America as the Borrower shall designate upon written
notice to the Agent, where notices, presentations and demands to or upon the
Parent or the Borrower in respect of the Loan Documents to which the Parent or
the Borrower is a party may be given or made.
<PAGE>
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10.3. Records and Accounts. Each of the Parent and the Borrower will
--------------------
(i) keep, and cause each of their Subsidiaries to keep, true and accurate
records and books of account in which full, true and correct entries will be
made in accordance with generally accepted accounting principles, (ii) maintain
adequate accounts and reserves for all taxes (including income taxes),
depreciation, depletion, obsolescence and amortization of its properties and the
properties of their Subsidiaries, contingencies, and other reserves, and (iii)
at all times engage Arthur Andersen LLP or other independent certified public
accountants satisfactory to the Agent as the independent certified public
accountants of the Parent, the Borrower and their respective Subsidiaries and
will not permit more than thirty (30) days to elapse between the cessation of
such firm's (or any successor firm's) engagement as the independent certified
public accountants of the Parent, the Borrower and their respective Subsidiaries
and the appointment in such capacity of a successor firm as shall be
satisfactory to the Agent.
10.4. Financial Statements, Certificates and Information. The Borrower
--------------------------------------------------
will deliver to each of the Banks:
(a) as soon as practicable, but in any event not later than
ninety (90) days after the end of each fiscal year of the Parent, the
consolidated balance sheet of the Parent and its Subsidiaries and the
consolidating balance sheet of the Parent and its Subsidiaries, each as at
the end of such year, and the related consolidated statement of income and
consolidated statement of cash flow and consolidating statement of income
and consolidating statement of cash flow for such year, each setting forth
in comparative form the figures for the previous fiscal year and all such
consolidated and consolidating statements to be in reasonable detail,
prepared in accordance with generally accepted accounting principles, and
certified without qualification by Arthur Andersen LLP or by other
independent certified public accountants satisfactory to the Agent,
together with a written statement from such accountants to the effect that
they have read a copy of this Credit Agreement, and that, in making the
examination necessary to said certification, they have obtained no
knowledge of any Default or Event of Default, or, if such accountants shall
have obtained knowledge of any then existing Default or Event of Default
they shall disclose in such statement any such Default or Event of Default;
provided that such accountants shall not be liable to the Banks for failure
--------
to obtain knowledge of any Default or Event of Default;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each of the fiscal quarters of the
Parent, copies of the unaudited consolidated balance sheet of the Parent
and its Subsidiaries and the unaudited consolidating balance sheet of the
Parent and its Subsidiaries, each as at the end of such quarter, and the
related consolidated statement of income and consolidated statement of cash
flow and consolidating statement of income and consolidating statement of
cash flow for the portion of the Parent's fiscal year then elapsed, all in
reasonable detail and prepared in accordance with generally accepted
accounting principles, together with a certification by the principal
financial or accounting officer of the Borrower that the information
contained in such financial statements fairly presents the financial
position of the Parent and its Subsidiaries on the date thereof (subject to
year-end adjustments);
<PAGE>
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(c) as soon as practicable, but in any event within thirty
(30) days after the end of each month in each fiscal year of the Parent,
unaudited monthly consolidated financial statements of the Parent and its
Subsidiaries for such month and unaudited monthly consolidating financial
statements of the Parent and its Subsidiaries for such month, each prepared
in accordance with generally accepted accounting principles, together with
a certification by the principal financial or accounting officer of the
Borrower that the information contained in such financial statements fairly
presents the financial condition of the Parent and its Subsidiaries on the
date thereof (subject to year-end adjustments);
(d) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, a statement
certified by the principal financial or accounting officer of the Borrower
in substantially the form of Exhibit D hereto and setting forth in
---------
reasonable detail computations evidencing compliance with the covenants
contained in (S)12 and (if applicable) reconciliations to reflect changes
in generally accepted accounting principles since the Balance Sheet Date;
(e) contemporaneously with the filing or mailing thereof,
copies of all material of a financial nature filed with the Securities and
Exchange Commission or sent to the stockholders of the Parent or the
Borrower;
(f) from time to time upon request of the Agent,
projections of the Parent and its Subsidiaries updating those projections
delivered to the Banks and referred to in (S)9.4.2 or, if applicable,
updating any such later projections delivered in response to a request
pursuant to this (S)10.4(i); and
(g) from time to time such other financial data and
information (including accountants, management letters) as the Agent or any
Bank may reasonably request.
10.5. Notices.
-------
10.5.1. Defaults. The Parent and the Borrower will promptly
--------
notify the Agent and each of the Banks in writing of the occurrence of any
Default or Event of Default. If any Person shall give any notice or take
any other action in respect of a claimed default (whether or not
constituting an Event of Default) under this Credit Agreement or any other
note, evidence of indebtedness, indenture or other obligation to which or
with respect to which the Parent, the Borrower or any of their Subsidiaries
is a party or obligor, whether as principal, guarantor, surety or
otherwise, the Parent and the Borrower shall forthwith give written notice
thereof to the Agent and each of the Banks, describing the notice or action
and the nature of the claimed default.
10.5.2. Environmental Events. The Borrower will promptly give
--------------------
notice to the Agent and each of the Banks (i) of any violation of any
Environmental Law that the Borrower or any of the Subsidiary Guarantors
reports in writing or is reportable by such Person in writing (or for which
any written report supplemental to any oral report is made) to any federal,
state or local environmental agency and (ii) upon becoming aware thereof,
of any inquiry, proceeding, investigation, or other action, including a
notice
<PAGE>
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from any agency of potential environmental liability, of any federal, state
or local environmental agency or board, that has the potential to
materially affect the assets, liabilities, financial conditions or
operations of the Borrower or any of the Subsidiary Guarantors, or the
Agent's rights under the Mortgages with respect to the Mortgaged Property.
10.5.3. Notification of Claim against Collateral. The Parent
----------------------------------------
and the Borrower will, immediately upon becoming aware thereof, notify the
Agent and each of the Banks in writing of any setoff, claims (including,
with respect to the Real Estate, environmental claims), withholdings or
other defenses to which any of the Collateral, or the Agent's rights with
respect to the Collateral, are subject.
10.5.4. Notice of Litigation and Judgments. The Parent and the
----------------------------------
Borrower will, and will cause each of their Subsidiaries to, give notice to
the Agent and each of the Banks in writing within fifteen (15) days of
becoming aware of any litigation or proceedings threatened in writing or
any pending litigation and proceedings affecting the Parent, the Borrower
or any of their Subsidiaries or to which the Parent, the Borrower or any of
their Subsidiaries is or becomes a party involving an uninsured claim
against the Parent, the Borrower or any of their Subsidiaries that could
reasonably be expected to have a materially adverse effect on the Parent,
the Borrower or any of their Subsidiaries and stating the nature and status
of such litigation or proceedings. Each of the Parent and the Borrower
will, and will cause each of their Subsidiaries to, give notice to the
Agent and each of the Banks, in writing, in form and detail satisfactory to
the Agent, within ten (10) days of any judgment not covered by insurance,
final or otherwise, against the Parent, the Borrower or any of their
Subsidiaries in an amount in excess of $1,000,000.
10.6. Corporate Existence; Maintenance of Properties. Each of the
----------------------------------------------
Parent and the Borrower will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises and those of their Subsidiaries and will not, and will not cause or
permit any of their Subsidiaries to, convert to a limited liability company. It
(i) will cause all of its properties and those of its Subsidiaries used or
useful in the conduct of its business or the business of their Subsidiaries to
be maintained and kept in good condition, repair and working order and supplied
with all necessary equipment, (ii) will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Parent and the Borrower may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times, and (iii) will, and will cause each of their Subsidiaries to,
continue to engage primarily in the businesses now conducted by them and in
related businesses; provided that nothing in this (S)10.6 shall prevent the
--------
Parent and the Borrower from discontinuing the operation and maintenance of any
of its properties or any of those of their Subsidiaries if such discontinuance
is, in the judgment of the Parent and the Borrower, desirable in the conduct of
its or their business and that do not in the aggregate materially adversely
affect the business of the Parent, the Borrower and their respective
Subsidiaries on a consolidated basis.
10.7. Insurance. The Parent and the Borrower will, and will cause each
---------
of their Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect
<PAGE>
-49-
to its properties and business against such casualties and contingencies as
shall be in accordance with the general practices of businesses engaged in
similar activities in similar geographic areas and in amounts, containing such
terms, in such forms and for such periods as may be reasonable and prudent and
in accordance with the terms of the Security Agreements, the Mortgages and
Schedule 9.21.
- -------------
10.8 Taxes. The Parent and the Borrower will, and will cause each of
-----
their Subsidiaries to, duly pay and discharge, or cause to be paid and
discharged, before the same shall become overdue, all taxes, assessments and
other governmental charges imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of its property; provided that any such tax,
--------
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if the Parent, the Borrower or such Subsidiary shall have set aside on its
books adequate reserves with respect thereto; and provided further that the
-------- -------
Parent, the Borrower and each Subsidiary will pay all such taxes, assessments,
charges, levies or claims forthwith upon the commencement of proceedings to
foreclose any lien that may have attached as security therefor.
10.9 Inspection of Properties and Books, etc.
---------------------------------------
10.9.1. General. The Parent and the Borrower shall permit the
-------
Banks, through the Agent or any of the Banks' other designated
representatives, to visit and inspect any of the properties of the Parent,
the Borrower or any of their Subsidiaries, to examine the books of account
of the Parent, the Borrower and their respective Subsidiaries (and to make
copies thereof and extracts therefrom), and to discuss the affairs,
finances and accounts of the Parent, the Borrower and their respective
Subsidiaries with, and to be advised as to the same by, its and their
officers, all at such reasonable times and intervals as the Agent or any
Bank may reasonably request.
10.9.2. Appraisals. No more frequently than once each calendar
----------
year, or more frequently as determined by the Agent if an Event of Default
shall have occurred and be continuing, upon the request of the Agent, the
Parent will obtain and deliver to the Agent appraisal reports in form and
substance and from appraisers satisfactory to the Agent, stating (i) the
then current fair market, orderly liquidation and forced liquidation values
of all or any portion of the equipment or real estate owned by the Parent
or any of its Subsidiaries and (ii) the then current business value of each
of the Parent and its Subsidiaries. All such appraisals shall be conducted
and made at the expense of the Borrower.
10.9.3. Environmental Assessments. No more frequently than once
-------------------------
each calendar year, or more frequently as determined by the Agent if an
Event of Default shall have occurred and be continuing, the Agent may, for
the purpose of assessing and ensuring the value of any Mortgaged Property,
obtain an environmental assessment or audit of such Mortgaged Property
prepared by a hydrogeologist, an independent engineer or other qualified
consultant or expert approved by the Agent to evaluate or confirm (i)
whether any Hazardous Materials are present in the soil or water at such
<PAGE>
-50-
Mortgaged Property and (ii) whether the use and operation of such Mortgaged
Property complies with all Environmental Laws. Environmental assessments
may include without limitation detailed visual inspections of such
Mortgaged Property including any and all storage areas, storage tanks,
drains, dry wells and leaching areas, and the taking of soil samples,
surface water samples and ground water samples, as well as such other
investigations or analyses as the Agent deems appropriate. All such
environmental assessments shall be conducted and made at the expense of the
Borrower.
10.9.4. Communications with Accountants. The Parent and the
-------------------------------
Borrower authorize the Agent and, if accompanied by the Agent, the Banks to
communicate directly with the Parent's independent certified public
accountants and authorizes such accountants to disclose to the Agent and
the Banks any and all financial statements and other supporting financial
documents and schedules including copies of any management letter with
respect to the business, financial condition and other affairs of the
Parent, the Borrower or any of their Subsidiaries. At the request of the
Agent, the Parent shall deliver a letter addressed to such accountants
instructing them to comply with the provisions of this (S)10.9.5.
10.10. Compliance with Laws, Contracts, Licenses, and Permits. The
------------------------------------------------------
Parent and the Borrower will, and will cause each of their Subsidiaries to,
comply with (i) the applicable laws and regulations wherever its business is
conducted, including all Environmental Laws, (ii) the provisions of its charter
documents and by-laws, (iii) all agreements and instruments by which it or any
of its properties may be bound and (iv) all applicable decrees, orders, and
judgments except to the extent any such failure to comply does not have a
material adverse effect on the business, assets or financial condition of the
Parent, the Borrower and their respective Subsidiaries. If any authorization,
consent, approval, permit or license from any officer, agency or instrumentality
of any government shall become necessary or required in order that the Parent
and the Borrower or any of their Subsidiaries may fulfill any of its obligations
hereunder or any of the other Loan Documents to which the Parent, the Borrower
or such Subsidiary is a party, the Parent or the Borrower will, or (as the case
may be) will cause such Subsidiary to, immediately take or cause to be taken all
reasonable steps within the power of such person to obtain such authorization,
consent, approval, permit or license and furnish the Agent and the Banks with
evidence thereof.
10.11. Employee Benefit Plans. The Parent and the Borrower will (i) upon
----------------------
request of the Agent, furnish to the Agent a copy of the most recent actuarial
statement required to be submitted under (S)103(d) of ERISA and Annual Report,
Form 5500, with all required attachments, in respect of each Guaranteed Pension
Plan and (ii) promptly upon receipt or dispatch, furnish to the Agent any
notice, report or demand sent or received in respect of a Guaranteed Pension
Plan under (S)(S)302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or
in respect of a Multiemployer Plan, under (S)(S)4041A, 4202, 4219, 4242, or 4245
of ERISA.
10.12. Use of Proceeds. The Borrower will use the proceeds of the Loans
---------------
used for the Acquisition, for Capital Expenditures, for new unit development and
conversions, for existing unit remodeling, for permitted stock repurchases, for
the issuance of letters of credit and working capital and general corporate
purposes. The Borrower will obtain Letters of Credit solely for working capital
and general corporate purposes.
<PAGE>
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10.13. Additional Mortgaged Property. If, after the Closing Date, the
-----------------------------
Borrower or any Subsidiary Guarantor acquires any real estate, the Borrower
shall, or shall cause such Subsidiary to, forthwith deliver to the Agent a fully
executed mortgage or deed of trust over such real estate, in form and substance
satisfactory to the Agent, together with title insurance policies, surveys,
evidences of insurances with the Agent named as loss payee and additional
insured, legal opinions and other documents and certificates with respect to
such real estate as was required for Real Estate of the Borrower or such
Subsidiary Guarantor as of the Closing Date. The Borrower further agrees that,
following the taking of such actions with respect to such real estate, the Agent
shall have for the benefit of the Banks and the Agent a valid and enforceable
first priority mortgage or deed of trust over such real estate, free and clear
of all defects and encumbrances except for Permitted Liens. Upon the request of
the Agent, the Borrower shall, or shall cause any Subsidiary Guarantor to,
forthwith deliver to the Agent a fully executed leasehold mortgage over any Real
Estate leased by the Borrower or any Subsidiary Guarantor.
10.14. Interest Rate Protection. The Borrower will, within five (5) days
------------------------
after the Eurodollar Rate for one month Interest Periods exceeds 7.0% for seven
consecutive Business Days, purchase interest rate protection arrangements at
times and in amounts satisfactory to the Agent having the effect of capping the
Eurodollar Rate.
10.15. Bank Accounts. The Parent and the Borrower will, and will cause
-------------
each of their respective Subsidiaries to, (i) establish a depository account
(the "BKB Concentration Account") under the control of the Agent for the benefit
of the Banks and the Agent, in the name of the Borrower, (ii) cause all cash
proceeds of accounts to be deposited only into local depository accounts ("Local
Accounts") or the BKB Concentration Account, (iii) direct all depository
institutions with Local Accounts to cause all funds held in each such Local
Account to be transferred no less frequently than every other Business Day to
and only to the BKB Concentration Account, and (iv) at all times ensure that
immediately upon the Parent's, the Borrower's or any of their respective
Subsidiaries' receipt of any funds constituting accounts or cash proceeds of any
Collateral, all such amounts shall have been deposited in a Local Account or the
BKB Concentration Account. Notwithstanding the foregoing, each Local Account may
maintain a balance not to exceed $50,000 at any time and the combined balances
of all Local Accounts shall not exceed $500,000 in the aggregate at any time.
10.16. Further Assurances. The Parent and the Borrower will, and will
------------------
cause each of their Subsidiaries to, cooperate with the Banks and the Agent and
execute such further instruments and documents as the Banks or the Agent shall
reasonably request to carry out to their satisfaction the transactions
contemplated by this Credit Agreement and the other Loan Documents.
11. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
------------------------------------------
Each of the Parent and the Borrower covenants and agrees that, so long as
any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Bank has any obligation to make any Loans or the Agent has
any obligations to issue, extend or renew any Letters of Credit:
<PAGE>
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11.1. Restrictions on Indebtedness. Neither the Parent nor the Borrower
----------------------------
will, nor will they permit any of their Subsidiaries to, create, incur, assume,
guarantee or be or remain liable, contingently or otherwise, with respect to any
Indebtedness other than:
(a) Indebtedness to the Banks and the Agent arising under any of
the Loan Documents;
(b) current liabilities of the Parent, the Borrower or any of their
Subsidiaries incurred in the ordinary course of business not incurred
through (i) the borrowing of money, or (ii) the obtaining of credit except
for credit on an open account basis customarily extended and in fact
extended in connection with normal purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, worker's compensation, materials
and supplies to the extent that payment therefor shall not at the time be
required to be made in accordance with the provisions of (S)11.8;
(d) Indebtedness in respect of judgments or awards that have been
in force for less than the applicable period for taking an appeal so long
as execution is not levied thereunder or in respect of which the Borrower
or any Subsidiary shall at the time in good faith be prosecuting an appeal
or proceedings for review and in respect of which a stay of execution shall
have been obtained pending such appeal or review;
(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary
course of business;
(f) Indebtedness of the Parent, the Borrower or any of their
Subsidiaries in respect of intercompany loans, advances, obligations or
similar transfers among the Parent, the Borrower or such Subsidiaries,
provided that such Person has executed and delivered to the Agent, for the
--------
benefit of the Banks and the Agent, a guaranty in substantially the form of
Exhibit E attached hereto (if such Person is not a Borrower), a security
---------
agreement in substantially the form of Exhibit F attached hereto, and any
---------
other agreements, documents or instruments necessary to grant to the Agent
a first priority perfected security interest in such Person's assets, as
applicable;
(g) Indebtedness of the Borrower or any Subsidiary in respect of
Capitalized Leases and purchase money Indebtedness incurred in connection
with the acquisition after the date hereof of any real or personal property
by the Borrower or any Subsidiary; provided that (i) the amount of such
--------
Indebtedness does not exceed the lesser of the fair market value or the
purchase price of the property so acquired, and (ii) any lien securing such
Indebtedness covers only the property so acquired, and provided, further
--------- -------
that the sum of (A) the present value of the aggregate amount of all future
principal payments owing under (i) Capitalized Leases existing on the date
hereof and (ii) additional Capitalized Leases entered into pursuant to this
subsection (g) after the date hereof, and (B) the aggregate principal
amount of such purchase money Indebtedness, shall not at any time exceed
$7,000,000;
<PAGE>
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(h) Indebtedness in respect of interest rate protection
arrangements required to be maintained by (S)10.14;
(j) Indebtedness existing on the date hereof and listed and
described on Schedule 11.1 hereto;
-------- ----
(k) Unsecured Indebtedness of the Parent, the Borrower or any of
their Subsidiaries in an amount not to exceed $1,000,000 in the aggregate;
and
(l) Indebtedness of the Parent or the Borrower in respect of
guarantees of Indebtedness of any Subsidiary of the Parent or the Borrower
to the extent that such Subsidiary is permitted to incur such Indebtedness
under (S)11.1.
11.2. Restrictions on Liens. Neither Parent nor the Borrower will permit
---------------------
nor will they permit any of their Subsidiaries to, (i) create or incur or suffer
to be created or incurred or to exist any lien, encumbrance, mortgage, pledge,
charge, restriction or other security interest of any kind upon any of its
property or assets of any character whether now owned or hereafter acquired, or
upon the income or profits therefrom; (ii) transfer any of such property or
assets or the income or profits therefrom for the purpose of subjecting the same
to the payment of Indebtedness or performance of any other obligation in
priority to payment of its general creditors; (iii) acquire, or agree or have an
option to acquire, any property or assets upon conditional sale or other title
retention or purchase money security agreement, device or arrangement; (iv)
suffer to exist for a period of more than thirty (30) days after the same shall
have been incurred any Indebtedness or claim or demand against it that if unpaid
might by law or upon bankruptcy or insolvency, or otherwise, be given any
priority whatsoever over its general creditors; or (v) sell, assign, pledge or
otherwise transfer any accounts, contract rights, general intangibles, chattel
paper or instruments, provided that the Parent, the Borrower or any of their
--------
Subsidiaries may create or incur or suffer to be created or incurred or to
exist:
(a) liens to secure taxes, assessments and other government
charges in respect of obligations not overdue or liens on properties other
than Mortgaged Properties to secure claims for labor, material or supplies
in respect of obligations not overdue or which are being contested in good
faith and by appropriate proceedings in accordance with Section 10.8;
(b) deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security obligations;
(c) liens on properties in respect of judgments or awards, the
Indebtedness with respect to which is permitted by (S)11.1(d);
(d) liens of carriers, warehousemen, mechanics and materialmen,
and other like liens on properties other than Mortgaged Properties, in
existence less than 120 days from the date of creation thereof in respect
of obligations not overdue or which are being contested in good faith and
by appropriate proceedings in accordance with Section 10.8;
<PAGE>
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(e) encumbrances on Real Estate other than the Mortgaged Property
consisting of easements, rights of way, zoning restrictions, restrictions
on the use of real property and defects and irregularities in the title
thereto, landlord's or lessor's liens under leases to which the Borrower or
a Subsidiary Guarantor is a party, and other minor liens or encumbrances
none of which in the opinion of the Borrower interferes materially with the
use of the property affected in the ordinary conduct of the business of the
Borrower or such Subsidiary Guarantor, which defects do not individually or
in the aggregate have a materially adverse effect on the business of the
Borrower or such Subsidiary Guarantor, individually or of the Parent, the
Borrower and their respective Subsidiaries on a consolidated basis;
(f) liens existing on the date hereof and listed on Schedule 11.2
-------- ----
hereto;
(g) purchase money security interests in or purchase money
mortgages on real or personal property other than Mortgaged Properties
acquired after the date hereof to secure purchase money Indebtedness of the
type and amount permitted by (S)11.1(g), incurred in connection with the
acquisition of such property, which security interests or mortgages cover
only the real or personal property so acquired;
(h) liens and encumbrances on each Mortgaged Property as and to
the extent permitted by the Mortgage applicable thereto; and
(i) liens in favor of the Agent for the benefit of the Banks and
the Agent under the Loan Documents.
11.3. Restrictions on Investments. Neither the Parent nor the Borrower
---------------------------
will, nor will they permit any of their Subsidiaries to, make or permit to exist
or to remain outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of purchase
by the Borrower;
(b) demand deposits, certificates of deposit, bankers acceptances
and time deposits of United States banks having total assets in excess of
$1,000,000,000;
(c) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any state thereof that at the time of purchase have been rated
and the ratings for which are not less than "P 1" if rated by Moody's
Investors Service, Inc., and not less than "A 1" if rated by Standard and
Poor's Rating Group;
(d) Investments existing on the date hereof and listed on
Schedule 11.3 hereto;
-------------
(e) Investments with respect to Indebtedness permitted by
(S)11.1(f) so long as such entities remain Subsidiaries of the Parent or
the Borrower;
<PAGE>
-55-
(f) Investments consisting of the Parent Guaranty and the
Guaranty;
(g) Investments by the Parent or the Borrower in the Borrower or
a Guarantor;
(h) Investments consisting of promissory notes received as
proceeds of asset dispositions permitted by (S)11.5.2; and
11.4. Distributions.
-------------
The Parent and the Borrower will not, nor will they permit any of their
Subsidiaries to, make any Distributions other than:
(a) Distributions by any Subsidiary of the Borrower to the Borrower; or
(b) Distributions by any Subsidiary of the Parent to the Parent;
provided in each case that no Default or Event of Default then exists or
--------
would result after the making of such payment.
11.5. Merger, Consolidation and Disposition of Assets.
-----------------------------------------------
11.5.1. Mergers and Acquisitions. Neither the Parent nor the
------------------------
Borrower will, nor will they permit any of their Subsidiaries to, become a
party to any merger or consolidation, or agree to or effect any asset
acquisition or stock acquisition (other than the acquisition of assets in
the ordinary course of business consistent with past practices) except (a)
the Acquisition and (b) the merger or consolidation of one or more of the
Subsidiaries of the Borrower with and into the Borrower, or the merger or
consolidation of two or more Subsidiaries of the Borrower.
11.5.2. Disposition of Assets. Neither the Parent nor the
---------------------
Borrower will, nor will they permit any of their Subsidiaries to, become a
party to or agree to or effect any disposition of assets, other than (i)
those asset sales set forth on Schedule 11.5.2 hereto, and (ii) the sale of
---------------
equipment and other restaurant or office furnishings no longer used or
useful in the business in an amount not to exceed $500,000 in the
aggregate, and (iii) the sale of inventory, the licensing of intellectual
property and the disposition of obsolete assets, in each case in the
ordinary course of business consistent with past practices.
11.6. Sale and Leaseback. Neither the Parent nor the Borrower will, nor
------------------
will they permit any of their Subsidiaries to, enter into any arrangement,
directly or indirectly, whereby such person shall sell or transfer any property
owned by it in order then or thereafter to lease such property or lease other
property that such Person intends to use for substantially the same purpose as
the property being sold or transferred.
11.7. Compliance with Environmental Laws. Neither the Parent nor the
----------------------------------
Borrower will, nor will they permit any of their Subsidiaries to, (i) use any of
the Real Estate or any portion thereof for the handling, processing, storage or
disposal of Hazardous Substances, (ii) except as set forth in Schedule 9.18,
-------------
cause or permit to be located on any of the Real Estate any
<PAGE>
-56-
underground tank or other underground storage receptacle for Hazardous
Substances, (iii) generate any Hazardous Substances on any of the Real Estate,
(iv) conduct any activity at any Real Estate or use any Real Estate in any
manner so as to cause a release (i.e. releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping) or threatened release of Hazardous Substances on, upon or
into the Real Estate or (v) otherwise conduct any activity at any Real Estate or
use any Real Estate in any manner that would violate in any material respect any
Environmental Law or bring such Real Estate in violation in any material respect
of any Environmental Law.
11.8. Employee Benefit Plans. Neither the Parent nor the Borrower nor any
----------------------
ERISA Affiliate will
(a) engage in any "prohibited transaction" within the meaning of
(S)406 of ERISA or (S)4975 of the Code which could result in a material
liability for the Borrower or any of its Subsidiaries; or
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in (S)302 of ERISA, whether or
not such deficiency is or may be waived; or
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of the
Borrower or any of its Subsidiaries pursuant to (S)302(f) or (S)4068 of
ERISA; or
(d) amend any Guaranteed Pension Plan in circumstances requiring
the posting of security pursuant to (S)307 of ERISA or (S)401(a)(29) of the
Code; or
(e) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of (S)4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of
such Plans, disregarding for this purpose the benefit liabilities and
assets of any such Plan with assets in excess of benefit liabilities, by
more than the amount set forth in (S)8.16.3.
11.9. Business Activities. Neither the Parent nor the Borrower will, nor
-------------------
will they permit any of their Subsidiaries to, engage directly or indirectly
(whether through Subsidiaries or otherwise) in any type of business other than
the businesses conducted by them on the Closing Date and in related businesses.
11.10. Fiscal Year. Neither the Parent nor the Borrower will, nor will
-----------
they permit any of their Subsidiaries to, change the date of the end of its
fiscal year from that set forth in (S)8.4.1.
11.11. Transactions with Affiliates. Except as set forth on Schedule 9.15
---------------------------- -------------
hereto, neither the Parent nor the Borrower will, nor will it permit any of its
Subsidiaries to, engage in any transaction with any Affiliate (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring
<PAGE>
-57-
payments to or from any such Affiliate or, to the knowledge of the Borrower, any
corporation, partnership, trust or other entity in which any such Affiliate has
a substantial interest or is an officer, director, trustee or partner, on terms
more favorable to such Person than would have been obtainable on an arm's-length
basis in the ordinary course of business.
11.12. Negative Pledges. Neither the Parent nor the Borrower will, nor
----------------
will they permit any of their Subsidiaries to, enter into any agreement
(excluding this Credit Agreement and the other Loan Documents) prohibiting the
creation or assumption of any lien upon its properties, revenues or assets or
those of any of their respective Subsidiaries, whether now owned or hereafter
acquired other than agreements with Persons prohibiting any such lien only with
respect to assets in which such Person has a prior security interest which is
permitted by (S)11.2.
11.13. Upstream Limitations. Neither the Parent nor the Borrower will
--------------------
permit any of their respective Subsidiaries to, enter into any agreement,
contract or arrangement (other than the Credit Agreement and the Loan Documents)
restricting the ability of any Subsidiary to pay or make dividends or
distributions in cash or kind, to make loans, advances or other payments of
whatsoever nature or to make transfers or distributions of all or any part of
its assets to the Borrower or to any Subsidiary of such Subsidiary.
11.14. Inconsistent Agreements. Neither the Parent nor the Borrower will,
-----------------------
nor will it permit any of their respective Subsidiaries to, enter into any
agreement containing any provision which would be violated or breached by the
performance by the Parent, the Borrower or such Subsidiary of its obligations
hereunder or under any of the Loan Documents.
11.15. Creation of Subsidiaries. Neither the Parent nor any Borrower
------------------------
shall, nor shall they permit any of their respective Subsidiaries to, create any
Subsidiary (other than Subsidiaries existing on the Closing Date and disclosed
in (S)9.19 hereto) unless (a) one hundred percent (100%) of the capital stock or
other equity interests of such Subsidiary are owned by the Parent, the Borrower
or such Subsidiary, (b) prior to the formation of such Subsidiary, the Parent or
the Borrower shall notify the Agent and the Banks thereof, and (c)
contemporaneously with the formation of such Subsidiary, the Parent, the
Borrower or such Subsidiary shall (i) take all steps as may be necessary or
advisable in the opinion of the Agent to pledge to the Agent, for the benefit of
the Banks and the Agent, on a perfected, first-priority basis all of the capital
stock or other equity interest of such Subsidiary pursuant to a pledge agreement
in form and substance satisfactory to the Agent, which such pledge agreement
shall be a Security Document hereunder, (iii) cause such Subsidiary to guaranty
all of the Obligations hereunder pursuant to a guaranty in form and substance
satisfactory to the Agent, which such guaranty shall be a Security Document
hereunder, and (iv) cause such Subsidiary to take all steps as may be necessary
or advisable in the opinion of the Agent to grant to the Agent, for the benefit
of the Banks and the Agent, a first priority, perfected security interest in
substantially all of its assets as collateral security for such guaranty,
pursuant to security documents, mortgages, pledges and other documents in form
and substance satisfactory to the Agent, each of which documents shall be
Security Documents hereunder.
<PAGE>
-58-
12. FINANCIAL COVENANTS OF THE BORROWER.
-----------------------------------
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank
has any obligation to make any Loans or the Agent has any obligation to issue,
extend or renew any Letters of Credit:
12.1. Leverage. The Borrower will not, as of the end of any Reference
--------
Period ending on a date at any time during any period described in the table set
forth below, permit the Leverage Ratio for such Reference Period to Exceed the
ratio set forth opposite such period in such table:
Period Ratio
------ -----
Closing Date through September 27, 1999 3.50:1.00
September 28, 1999 through December 27, 1999 3.25:1.00
December 28, 1999 through June 26, 2000 3.00:1.00
Thereafter 2.50:1.00
12.2. Consolidated Net Worth. The Borrower will not permit Consolidated
----------------------
Net Worth at any time to be less than the sum of (a) $55,000,000 plus (b) on a
----
cumulative basis, fifty percent (50%) of positive Consolidated Net Income of the
Parent and its Subsidiaries for each fiscal year thereafter, plus (c) one
----
hundred percent (100%) of the proceeds of any sale by the Parent, the Borrower
or their respective Subsidiaries of equity securities issued by the Parent, the
Borrower or such Subsidiary.
12.3. Debt Service. The Borrower will not, as of the end of any Reference
------------
Period ending on any date at any time during any period described in the table
set forth below, permit the Debt Service Coverage Ratio for such Reference
Period to be less than the ratio set forth opposite such period in such table.
Period Ratio
------ -----
Closing Date through December 27, 1999 2.00:1.00
Thereafter 2.50:1.00
12.4. Interest Coverage. The Borrower will not, as of the end of any
-----------------
Reference Period ending on any date at any time during any period described in
the table set forth below to be less than the ratio set forth opposite such
period in such table:
Period Ratio
------ -----
Closing Date through June 26, 2000 1.75
June 27, 2000 through June 25, 2001 2.00
Thereafter 2.25
<PAGE>
-59-
12.5. Capital Expenditures. The Borrower will not make, or permit any
--------------------
Subsidiary of the Borrower to make, Capital Expenditures in any fiscal year that
exceed $25,000,000 in the aggregate in fiscal year 1999, $20,000,000 in the
aggregate in fiscal year 2000 and $10,000,000 in the aggregate in any fiscal
year thereafter; provided, however, that, if during any fiscal year the amount
-------- -------
of Capital Expenditures permitted for such fiscal year is not so utilized, fifty
percent (50%) of such unutilized amount (one hundred percent (100%) for fiscal
year 1999) may be utilized in the next succeeding fiscal year but not in any
subsequent fiscal year. Notwithstanding the foregoing, any Capital Expenditures
made in connection with the Acquisition shall not be Capital Expenditures for
purposes of this (S)12.5.
13. CLOSING CONDITIONS.
------------------
The obligations of the Banks to make the initial Revolving Credit Loans and
the Term Loan and of the Agent to issue any initial Letters of Credit shall be
subject to the satisfaction of the following conditions precedent on or prior to
the Closing Date:
13.1. Loan Documents etc.
------------------
13.1.1. Loan Documents. Each of the Loan Documents shall have
--------------
been duly executed and delivered by the respective parties thereto, shall
be in full force and effect and shall be in form and substance satisfactory
to each of the Banks. Each Bank shall have received a fully executed copy
of each such document.
13.1.2. Acquisition Documents. Each of the Acquisition Documents
---------------------
shall have been duly executed and delivered by the respective parties
thereto, shall be in full force and effect and shall be in form and
substance satisfactory to each of the Banks. Each Bank shall have received
a fully executed copy of each such document.
13.2. Certified Copies of Charter Documents. Each of the Banks shall have
-------------------------------------
received from the Parent, the Borrower and each of their respective Subsidiaries
a copy, certified by a duly authorized officer of such Person to be true and
complete on the Closing Date, of each of (i) its charter or other incorporation
documents as in effect on such date of certification, and (ii) its by-laws as in
effect on such date.
13.3. Corporate Action. All corporate action necessary for the valid
----------------
execution, delivery and performance by the Parent, the Borrower and each of
their respective Subsidiaries of this Credit Agreement and the other Loan
Documents to which it is or is to become a party shall have been duly and
effectively taken, and evidence thereof satisfactory to the Banks shall have
been provided to each of the Banks.
13.4. Incumbency Certificate. Each of the Banks shall have received from
----------------------
the Parent, the Borrower and each of their respective Subsidiaries an incumbency
certificate, dated as of the Closing Date, signed by a duly authorized officer
of such Person, and giving the name and bearing a specimen signature of each
individual who shall be authorized: (i) to sign, in the name and on behalf of
each of such Person, each of the Loan Documents to which such Person is or is
<PAGE>
-60-
to become a party; (ii) in the case of the Borrower, to make Loan Requests and
Conversion Requests and to apply for Letters of Credit; and (iii) to give
notices and to take other action on its behalf under the Loan Documents.
13.5. Validity of Liens. The Security Documents shall be effective to
-----------------
create in favor of the Agent a legal, valid and enforceable first (except for
Permitted Liens entitled to priority under applicable law) security interest in
and lien upon the Collateral. All filings, recordings, deliveries of instruments
and other actions necessary or desirable in the opinion of the Agent to protect
and preserve such security interests shall have been duly effected. The Agent
shall have received evidence thereof in form and substance satisfactory to the
Agent.
13.6. Perfection Certificates and UCC Search Results. The Agent shall have
----------------------------------------------
received from each of the Parent, the Borrower and their respective Subsidiaries
a completed and fully executed Perfection Certificate and the results of UCC
searches with respect to the Collateral, indicating no liens other than
Permitted Liens and otherwise in form and substance satisfactory to the Agent.
13.7. Survey and Taxes. The Agent shall have received (i) an updated
----------------
Survey of each Mortgaged Property together with a Surveyor Certificate relating
thereto and (ii) evidence of payment of real estate taxes and municipal charges
on all Real Estate not delinquent on or before the Closing Date.
13.8. Title Insurance. The Agent shall have received a Title Policy
---------------
covering each Mortgaged Property (or commitments to issue such policies, with
all conditions to issuance of the Title Policy deleted by an authorized agent of
the Title Insurance Company) together with proof of payment of all fees and
premiums for such policies, from the Title Insurance Company and in amounts
satisfactory to the Agent, insuring the interest of the Agent and each of the
Banks as mortgagee under the Mortgages.
13.9. Certificates of Insurance. The Agent shall have received (i) a
-------------------------
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms, and otherwise describing the insurance obtained in accordance with
the provisions of the Security Agreements and (ii) certified copies of all
policies evidencing such insurance (or certificates therefore signed by the
insurer or an agent authorized to bind the insurer).
13.10. Hazardous Waste Assessments. The Agent shall have received
---------------------------
hazardous waste site assessments from environmental engineers and in form and
substance satisfactory to the Agent, covering all Real Estate and all other real
property in respect of which the Parent, the Borrower or any of their respective
Subsidiaries may have material liability, whether contingent or otherwise, for
dumping or disposal of Hazardous Substances.
13.11. Opinion of Counsel. Each of the Banks and the Agent shall have
------------------
received a favorable legal opinion addressed to the Banks and the Agent,
dated as of the Closing Date, in form and substance satisfactory to the
Banks and the Agent, from Seyfarth, Shaw, Fairweather & Geraldson, counsel
to the Parent, the Borrower and their respective Subsidiaries.
<PAGE>
-61-
13.12 Satisfaction of Conditions of Purchase Agreement. The Agent shall
------------------------------------------------
have received evidence that all of the closing conditions in the Purchase
Agreement have been satisfied without recourse to any provision permitting the
waiver by any party thereto of any condition, obligation, covenant or other
requirement.
13.13 Completion of Acquisition, etc. The Acquisition shall have been
------------------------------
completed pursuant to the Purchase Agreement and otherwise on terms and
conditions that are satisfactory to the Agent in all respects. The purchase
price of the assets acquired pursuant to the Acquisition and all expenditures
and transaction costs associated therewith shall not exceed $12,500,000 in the
aggregate.
13.14 Pro Forma Balance Sheet and Compliance Certificate. The Agent
--------------------------------------------------
shall have received (a) a satisfactory pro forma balance sheet of the Parent and
---------
its Subsidiaries dated as of the Closing Date evidencing the effects of the
Acquisition, and (b) a pro forma Compliance Certificate evidencing compliance
---------
with the financial covenants set forth in (S)12 on the Closing Date.
13.15 Consents and Approvals. The Agent shall have received evidence
----------------------
that all consents and approvals necessary to complete the transactions
contemplated hereby have been obtained.
13.16 Payment of Fees and other Arrangements. The Borrower shall have
--------------------------------------
paid to the Banks or the Agent, as appropriate, the closing fee and the Agent's
Fee and complied with all other arrangements as set forth in the Fee Letter
among the Agent, BRS and the Borrower.
13.17 Payoff Letter. The Agent shall have received payoff letters from
-------------
all existing lenders, indicating the amount of the loan obligations of the
Parent, the Borrower or any of their respective Subsidiaries to such lender to
be discharged on the Closing Date and an acknowledgment by such lender that upon
receipt of such funds it will forthwith execute and deliver to the Agent for
filing all termination statements and take such other actions as may be
necessary to discharge all mortgages, deeds of trust and security interests
granted by the Parent, the Borrower or any of their respective Subsidiaries in
favor of such lender.
13.18 Disbursement Instructions. The Agent shall have received
-------------------------
disbursement instructions from the Borrower, indicating that a portion of the
proceeds of the Term Loan, in an amount equal to the aggregate loan obligations
of the Parent, the Borrower or any of their respective Subsidiaries to any
existing lenders, are to be disbursed to repay such obligations in full.
14. CONDITIONS TO ALL BORROWINGS.
----------------------------
The obligations of the Banks to make any Loan, including the Revolving
Credit Loan and the Term Loan, and of the Agent to issue, extend or renew any
Letter of Credit, in each case whether on or after the Closing Date, shall also
be subject to the satisfaction of the following conditions precedent:
<PAGE>
-62-
14.1 Representations True; No Event of Default. Each of the representations
-----------------------------------------
and warranties of any of the Parent, the Borrower and their respective
Subsidiaries contained in this Credit Agreement, the other Loan Documents or in
any document or instrument delivered pursuant to or in connection with this
Credit Agreement shall be true as of the date as of which they were made and
shall also be true at and as of the time of the making of such Loan or the
issuance, extension or renewal of such Letter of Credit, with the same effect as
if made at and as of that time (except to the extent of changes resulting from
transactions contemplated or permitted by this Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and to the extent that
such representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing.
14.2 No Legal Impediment. No change shall have occurred in any law or
-------------------
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Bank would make it illegal for such Bank to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or in
the reasonable opinion of the Agent would make it illegal for the Agent to
issue, extend or renew such Letter of Credit.
14.3 Governmental Regulation. Each Bank shall have received such statements
-----------------------
in substance and form reasonably satisfactory to such Bank as such Bank shall
require for the purpose of compliance with any applicable regulations of the
Comptroller of the Currency or the Board of Governors of the Federal Reserve
System.
14.1 Proceedings and Documents. All proceedings in connection with the
-------------------------
transactions contemplated by this Credit Agreement, the other Loan Documents and
all other documents incident thereto shall be satisfactory in substance and in
form to the Banks and to the Agent and the Agent's Special Counsel, and the
Banks, the Agent and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Agent may reasonably request.
15. EVENTS OF DEFAULT; ACCELERATION; ETC.
------------------------------------
15.1 Events of Default and Acceleration. If any of the following events
----------------------------------
("Events of Default" or, if the giving of notice or the lapse of time or both is
required, then, prior to such notice or lapse of time, "Defaults") shall occur:
(a) the Borrower shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of maturity
or at any other date fixed for payment;
(b) the Borrower or any of the Subsidiary Guarantors shall fail to
pay any interest on the Loans, the commitment fee, any Letter of Credit
Fee, the Agent's fee, or other sums due hereunder or under any of the other
Loan Documents within two (2) days after the same shall become due and
payable, whether at the stated date of maturity or any accelerated date of
maturity or at any other date fixed for payment;
<PAGE>
-63-
(c) the Parent, the Borrower or any of their respective Subsidiaries
shall fail to comply with any of its covenants contained in (S)(S)10.2,
10.4, 10.5, 10.6, 10.8, 10.10, 10.12, 10.14, 10.15, 11 or 12 or any of the
covenants contained in any of the Mortgages;
(d) the Parent, the Borrower or any of their respective Subsidiaries
shall fail to perform any term, covenant or agreement contained herein or
in any of the other Loan Documents (other than those specified elsewhere in
this (S)15.1) for fifteen (15) days after written notice of such failure
has been given to the Borrower by the Agent;
(e) any representation or warranty of the Parent, the Borrower or any
of their respective Subsidiaries in this Credit Agreement or any of the
other Loan Documents or in any other document or instrument delivered
pursuant to or in connection with this Credit Agreement shall prove to have
been false in any material respect upon the date when made or deemed to
have been made or repeated;
(f) the Parent, the Borrower or any of their respective Subsidiaries
shall fail to pay at maturity, or within any applicable period of grace,
any obligation for borrowed money or credit received or in respect of any
Capitalized Leases in an aggregate amount in excess of $500,000, or fail to
observe or perform any material term, covenant or agreement contained in
any agreement by which it is bound, evidencing or securing borrowed money
or credit received or in respect of any Capitalized Leases in an aggregate
amount in excess of $500,000 for such period of time as would permit
(assuming the giving of appropriate notice if required) the holder or
holders thereof or of any obligations issued thereunder to accelerate the
maturity thereof, or any such holder or holders shall rescind or shall have
a right to rescind the purchase of any such obligations;
(g) the Parent, the Borrower or any of their respective Subsidiaries
shall make an assignment for the benefit of creditors, or admit in writing
its inability to pay or generally fail to pay its debts as they mature or
become due, or shall petition or apply for the appointment of a trustee or
other custodian, liquidator or receiver of such Person or of any
substantial part of the assets of such Person or shall commence any case or
other proceeding relating to such Person under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation or similar law of any jurisdiction, now or hereafter in
effect, or shall take any action to authorize or in furtherance of any of
the foregoing, or if any such petition or application shall be filed or any
such case or other proceeding shall be commenced against such Person and
such Person shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition or application shall not have been
dismissed within forty-five (45) days following the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Parent, the Borrower
or any of their respective Subsidiaries bankrupt or insolvent, or approving
a petition in any such case or other proceeding, or a decree or order for
relief is entered in respect of such Person in an involuntary case under
federal bankruptcy laws as now or hereafter constituted;
<PAGE>
-64-
(i) there shall remain in force, unvacated, undischarged, unsatisfied
and unstayed, for more than thirty (30) days, whether or not consecutive,
any final judgment against the Parent, the Borrower or any of their
respective Subsidiaries that, with other outstanding final judgments,
undischarged, against such Person exceeds in the aggregate $1,000,000;
(j) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or the Agent's security interests, mortgages or liens
in a substantial portion of the Collateral shall cease to be perfected, or
shall cease to have the priority contemplated by the Security Documents, in
each case otherwise than in accordance with the terms thereof or with the
express prior written agreement, consent or approval of the Banks, or any
action at law, suit or in equity or other legal proceeding to cancel,
revoke or rescind any of the Loan Documents shall be commenced by or on
behalf of the Parent, the Borrower or any of their respective Subsidiaries
party thereto or any of their respective stockholders, or any court or any
other governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a judgment, order,
decree or ruling to the effect that, any one or more of the Loan Documents
is illegal, invalid or unenforceable in accordance with the terms thereof;
(k) the Borrower or any ERISA Affiliate incurs any liability to the
PBGC or a Guaranteed Pension Plan pursuant to Title IV of ERISA in an
aggregate amount exceeding $1,000,000 or the Borrower or any ERISA
Affiliate is assessed withdrawal liability pursuant to Title IV of ERISA by
a Multiemployer Plan requiring aggregate annual payments exceeding
$1,000,000, or any of the following occurs with respect to a Guaranteed
Pension Plan: (i) an ERISA Reportable Event, or a failure to make a
required installment or other payment (within the meaning of (S)302(f)(1)
of ERISA), provided that the Agent determines in its reasonable discretion
--------
that such event (A) could be expected to result in liability of the
Borrower or any of its Subsidiaries to the PBGC or such Guaranteed Pension
Plan in an aggregate amount exceeding $1,000,000 and (B) could constitute
grounds for the termination of such Guaranteed Pension Plan by the PBGC,
for the appointment by the appropriate United States District Court of a
trustee to administer such Guaranteed Pension Plan or for the imposition of
a lien in favor of such Guaranteed Pension Plan; or (ii) the appointment by
a United States District Court of a trustee to administer such Guaranteed
Pension Plan; or (iii) the institution by the PBGC of proceedings to
terminate such Guaranteed Pension Plan;
(l) the Parent, the Borrower or any of their respective Subsidiaries
shall be enjoined, restrained or in any way prevented by the order of any
court or any administrative or regulatory agency from conducting any
material part of its business and such order shall continue in effect for
more than thirty (30) days;
(m) there shall occur any material damage to, or loss, theft or
destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy,
or other casualty, which in any such case causes, for more than fifteen
(15) consecutive days, the cessation or substantial curtailment of revenue
producing activities at any facility of the Borrower or any of their
respective Subsidiaries if such event or circumstance is not covered by
business
<PAGE>
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interruption insurance and would have a material adverse effect on the
business or financial condition of the Borrower or such Subsidiary;
(n) there shall occur the loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
the Parent, the Borrower or any of their respective Subsidiaries if such
loss, suspension, revocation or failure to renew would have a material
adverse effect on the business or financial condition of the Parent, the
Borrower or such Subsidiary;
(o) the Parent, the Borrower or any of their respective Subsidiaries
shall be indicted for a state or federal crime, or any civil or criminal
action shall otherwise have been brought against the Parent, the Borrower
or any of their respective Subsidiaries, a punishment for which in any such
case could include the forfeiture of any assets of such Person having a
fair market value in excess of $1,000,000;
(p) the Parent shall at any time, legally or beneficially own less
than one hundred percent (100%) shares of the common stock of the Borrower,
as adjusted pursuant to any stock split, stock dividend or recapitalization
or reclassification of the capital of the Borrower;
(r) any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended) (other than EGI-
Chart House Investors, LLC and its Affiliates) shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said Act) of twenty-five percent
(25%) or more of the outstanding shares of common stock of the Parent; or,
during any period of twelve consecutive calendar months, individuals who
were directors of the Parent on the first day of such period shall cease to
constitute a majority of the board of directors of the Parent;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Required Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Notes and the other Loan Documents and all Reimbursement Obligations to be,
and they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; provided that in the event of any Event
--------
of Default specified in (S)(S)15.1(g), 15.1(h) or 15.1(j), all such amounts
shall become immediately due and payable automatically and without any
requirement of notice from the Agent or any Bank.
15.2 Termination of Commitments. If any one or more of the Events of
--------------------------
Default specified in (S)15.1(g), (S)15.1(h) or (S)15.1(j) shall occur, any
unused portion of the credit hereunder shall forthwith terminate and each of the
Banks shall be relieved of all further obligations to make Loans to the Borrower
and the Agent shall be relieved of all further obligations to issue, extend or
renew Letters of Credit. If any other Event of Default shall have occurred and
be continuing, the Agent may and, upon the request of the Required Banks, shall,
by notice to the Borrower, terminate the unused portion of the credit hereunder,
and upon such notice being given such unused portion of the credit hereunder
shall terminate immediately and each of the
<PAGE>
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Banks shall be relieved of all further obligations to make Loans and the Agent
shall be relieved of all further obligations to issue, extend or renew Letters
of Credit. No termination of the credit hereunder shall relieve the Borrower or
any of their respective Subsidiaries of any of the Obligations.
15.3 Remedies. In case any one or more of the Events of Default shall have
--------
occurred and be continuing, and whether or not the Banks shall have accelerated
the maturity of the Loans pursuant to (S)15.1, each Bank, if owed any amount
with respect to the Loans or the Reimbursement Obligations, may, with the
consent of the Required Banks but not otherwise, proceed to protect and enforce
its rights by suit in equity, action at law or other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained in
this Credit Agreement and the other Loan Documents or any instrument pursuant to
which the Obligations to such Bank are evidenced, including as permitted by
applicable law the obtaining of the ex parte appointment of a receiver, and, if
-- -----
such amount shall have become due, by declaration or otherwise, proceed to
enforce the payment thereof or any other legal or equitable right of such Bank.
No remedy herein conferred upon any Bank or the Agent or the holder of any Note
or purchaser of any Letter of Credit Participation is intended to be exclusive
of any other remedy and each and every remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or any other provision of law.
15.4 Distribution of Collateral Proceeds. In the event that, following the
-----------------------------------
occurrence or during the continuance of any Default or Event of Default, the
Agent or any Bank, as the case may be, receives any monies in connection with
the enforcement of any of the Security Documents, or otherwise with respect to
the realization upon any of the Collateral, such monies shall be distributed for
application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies by
the Agent, for the exercise, protection or enforcement by the Agent of all
or any of the rights, remedies, powers and privileges of the Agent under
this Credit Agreement or any of the other Loan Documents or in respect of
the Collateral or in support of any provision of adequate indemnity to the
Agent against any taxes or liens which by law shall have, or may have,
priority over the rights of the Agent to such monies;
(b) Second, to all other Obligations in such order or preference as
the Required Banks may determine; provided, however, that (i) distributions
-------- -------
shall be made (A) pari passu among Obligations with respect to the Agent's
---- -----
fee payable pursuant to (S)6.2 and all other Obligations and (B) with
respect to each type of Obligation owing to the Banks, such as interest,
principal, fees and expenses, among the Banks pro rata, and (ii) the Agent
--- ----
may in its discretion make proper allowance to take into account any
Obligations not then due and payable;
(c) Third, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Banks and the Agent of all of the
Obligations, to the
<PAGE>
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payment of any obligations required to be paid pursuant to (S)9-504(1)(c)
of the Uniform Commercial Code of the Commonwealth of Massachusetts; and
(d) Fourth, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
16. SETOFF.
------
Regardless of the adequacy of any collateral, during the continuance of any
Event of Default, any deposits or other sums credited by or due from any of the
Banks to the Borrower and any securities or other property of the Borrower in
the possession of such Bank may be applied to or set off by such Bank against
the payment of Obligations and any and all other liabilities, direct, or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, of the Borrower to such Bank. Each of the Banks agrees with
each other Bank that (i) if an amount to be set off is to be applied to
Indebtedness of the Borrower to such Bank, other than Indebtedness evidenced by
the Notes held by such Bank or constituting Reimbursement Obligations owed to
such Bank, such amount shall be applied ratably to such other Indebtedness and
to the Indebtedness evidenced by all such Notes held by such Bank or
constituting Reimbursement Obligations owed to such Bank, and (ii) if such Bank
shall receive from the Borrower, whether by voluntary payment, exercise of the
right of setoff, counterclaim, cross action, enforcement of the claim evidenced
by the Notes held by, or constituting Reimbursement Obligations owed to, such
Bank by proceedings against the Borrower at law or in equity or by proof thereof
in bankruptcy, reorganization, liquidation, receivership or similar proceedings,
or otherwise, and shall retain and apply to the payment of the Note or Notes
held by, or Reimbursement Obligations owed to, such Bank any amount in excess of
its ratable portion of the payments received by all of the Banks with respect to
the Notes held by, and Reimbursement Obligations owed to, all of the Banks, such
Bank will make such disposition and arrangements with the other Banks with
respect to such excess, either by way of distribution, pro tanto assignment of
--- -----
claims, subrogation or otherwise as shall result in each Bank receiving in
respect of the Notes held by it or Reimbursement obligations owed it, its
proportionate payment as contemplated by this Credit Agreement; provided that if
--------
all or any part of such excess payment is thereafter recovered from such Bank,
such disposition and arrangements shall be rescinded and the amount restored to
the extent of such recovery, but without interest.
17. THE AGENT.
---------
17.1 Authorization.
-------------
(a) The Agent is authorized to take such action on behalf of each of
the Banks and to exercise all such powers as are hereunder and under any of
the other Loan Documents and any related documents delegated to the Agent,
together with such powers as are reasonably incident thereto, provided that
--------
no duties or responsibilities not expressly assumed herein or therein shall
be implied to have been assumed by the Agent.
<PAGE>
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(b) The relationship between the Agent and each of the Banks is that
of an independent contractor. The use of the term "Agent" is for
convenience only and is used to describe, as a form of convention, the
independent contractual relationship between the Agent and each of the
Banks. Nothing contained in this Credit Agreement nor the other Loan
Documents shall be construed to create an agency, trust or other fiduciary
relationship between the Agent and any of the Banks.
(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder
and under the other Loan Documents, the Agent is nevertheless a
"representative" of the Banks, as that term is defined in Article 1 of the
Uniform Commercial Code, for purposes of actions for the benefit of the
Banks and the Agent with respect to all collateral security and guaranties
contemplated by the Loan Documents. Such actions include the designation
of the Agent as "secured party", "mortgagee" or the like on all financing
statements and other documents and instruments, whether recorded or
otherwise, relating to the attachment, perfection, priority or enforcement
of any security interests, mortgages or deeds of trust in collateral
security intended to secure the payment or performance of any of the
Obligations, all for the benefit of the Banks and the Agent.
17.2 Employees and Agents. The Agent may exercise its powers and execute
--------------------
its duties by or through employees or agents and shall be entitled to take, and
to rely on, advice of counsel concerning all matters pertaining to its rights
and duties under this Credit Agreement and the other Loan Documents. The Agent
may utilize the services of such Persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.
17.3 No Liability. Neither the Agent nor any of its shareholders,
------------
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.
17.4 No Representations.
------------------
17.4.1 General. The Agent shall not be responsible for the execution
-------
or validity or enforceability of this Credit Agreement, the Notes, the
Letters of Credit, any of the other Loan Documents or any instrument at any
time constituting, or intended to constitute, collateral security for the
Notes, or for the value of any such collateral security or for the
validity, enforceability or collectability of any such amounts owing with
respect to the Notes, or for any recitals or statements, warranties or
representations made herein or in any of the other Loan Documents or in any
certificate or instrument hereafter furnished to it by or on behalf of the
Borrower or any of their respective Subsidiaries, or be bound to ascertain
or inquire as to the performance or observance of any of the terms,
conditions, covenants or agreements herein or in any instrument at any time
constituting, or intended to constitute, collateral security for the Notes
or to inspect
<PAGE>
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any of the properties, books or records of the Borrower or any of their
respective Subsidiaries. The Agent shall not be bound to ascertain whether
any notice, consent, waiver or request delivered to it by the Borrower or
any holder of any of the Notes shall have been duly authorized or is true,
accurate and complete. The Agent has not made nor does it now make any
representations or warranties, express or implied, nor does it assume any
liability to the Banks, with respect to the credit worthiness or financial
conditions of the Parent, the Borrower or any of their respective
Subsidiaries. Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank, and based upon such information
and documents as it has deemed appropriate, made its own credit analysis
and decision to enter into this Credit Agreement.
17.4.2 Closing Documentation, etc. For purposes of determining
--------------------------
compliance with the conditions set forth in (S)12, each Bank that has
executed this Credit Agreement shall be deemed to have consented to,
approved or accepted, or to be satisfied with, each document and matter
either sent, or made available, by the Agent or BRS to such Bank for
consent, approval, acceptance or satisfaction, or required thereunder to be
to be consent to or approved by or acceptable or satisfactory to such Bank,
unless an officer of the Agent or BRS active upon the Borrower's account
shall have received notice from such Bank prior to the Closing Date
specifying such Bank's objection thereto and such objection shall not have
been withdrawn by notice to the Agent or BRS to such effect on or prior to
the Closing Date.
17.5. Payments.
--------
17.5.1. Payments to Agent. A payment by the Borrower to the Agent
-----------------
hereunder or any of the other Loan Documents for the account of any Bank
shall constitute a payment to such Bank. The Agent agrees promptly to
distribute to each Bank such Bank's pro rata share of payments received by
--- ----
the Agent for the account of the Banks except as otherwise expressly
provided herein or in any of the other Loan Documents.
17.5.2. Distribution by Agent. If in the opinion of the Agent the
---------------------
distribution of any amount received by it in such capacity hereunder, under
the Notes or under any of the other Loan Documents might involve it in
liability, it may refrain from making distribution until its right to make
distribution shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Agent is to be repaid, each Person
to whom any such distribution shall have been made shall either repay to
the Agent its proportionate share of the amount so adjudged to be repaid or
shall pay over the same in such manner and to such Persons as shall be
determined by such court.
17.5.3 Delinquent Banks. Notwithstanding anything to the contrary
----------------
contained in this Credit
Agreement or any of the other Loan Documents, any Bank that fails (i) to
make available to the Agent its pro rata share of any Loan or to purchase
--- ----
any Letter of Credit Participation or (ii) to comply with the provisions of
(S)15 with respect to making dispositions and arrangements with the other
Banks, where such Bank's share of any payment received, whether by setoff
or otherwise, is in excess of its pro rata share of
--- ----
<PAGE>
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such payments due and payable to all of the Banks, in each case as, when
and to the full extent required by the provisions of this Credit Agreement,
shall be deemed delinquent (a "Delinquent Bank") and shall be deemed a
Delinquent Bank until such time as such delinquency is satisfied. A
Delinquent Bank shall be deemed to have assigned any and all payments due
to it from the Borrower, whether on account of outstanding Loans, Unpaid
Reimbursement Obligations, interest, fees or otherwise, to the remaining
nondelinquent Banks for application to, and reduction of, their respective
pro rata shares of all outstanding Loans and Unpaid Reimbursement
--- ----
Obligations. The Delinquent Bank hereby authorizes the Agent to distribute
such payments to the nondelinquent Banks in proportion to their respective
pro rata shares of all outstanding Loans and Unpaid Reimbursement
--- ----
Obligations. A Delinquent Bank shall be deemed to have satisfied in full a
delinquency when and if, as a result of application of the assigned
payments to all outstanding Loans and Unpaid Reimbursement Obligations of
the nondelinquent Banks, the Banks' respective pro rata shares of all
--- ----
outstanding Loans and Unpaid Reimbursement Obligations have returned to
those in effect immediately prior to such delinquency and without giving
effect to the nonpayment causing such delinquency.
17.6 Holders of Notes. The Agent may deem and treat the payee of any Note
----------------
or the purchaser of any Letter of Credit Participation as the absolute owner or
purchaser thereof for all purposes hereof until it shall have been furnished in
writing with a different name by such payee or by a subsequent holder, assignee
or transferee.
17.7 Indemnity. The Banks ratably agree hereby to indemnify and hold
---------
harmless the Agent and its affiliates from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent or such affiliate has not
been reimbursed by the Borrower as required by (S)18), and liabilities of every
nature and character arising out of or related to this Credit Agreement, the
Notes, or any of the other Loan Documents or the transactions contemplated or
evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly caused
by the Agent's willful misconduct or gross negligence.
17.8 Agent as Bank. In its individual capacity, BKB shall have the same
-------------
obligations and the same rights, powers and privileges in respect to its
Commitment and the Loans made by it, and as the holder of any of the Notes and
as the purchaser of any Letter of Credit Participations, as it would have were
it not also the Agent.
17.9 Resignation. The Agent may resign at any time by giving sixty (60)
-----------
days prior written notice thereof to the Banks and the Borrower. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent. Unless a Default or Event of Default shall have occurred and be
continuing, such successor Agent shall be reasonably acceptable to the Borrower.
If no successor Agent shall have been so appointed by the Required Banks and
shall have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Banks, appoint a successor Agent, which shall be a financial institution
having a rating of not less than A or its equivalent by Standard & Poor's
Corporation. Upon the acceptance of any appointment as Agent
<PAGE>
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hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation, the provisions of
this Credit Agreement and the other Loan Documents shall continue in effect for
its benefit in respect of any actions taken or omitted to be taken by it while
it was acting as Agent.
17.10. Notification of Defaults and Events of Default. Each Bank hereby
----------------------------------------------
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this (S)17.10 it shall promptly notify the other
Banks of the existence of such Default or Event of Default.
17.11. Duties in the Case of Enforcement. In case one of more Events of
---------------------------------
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (i) so requested by
the Required Banks and (ii) the Banks have provided to the Agent such additional
indemnities and assurances against expenses and liabilities as the Agent may
reasonably request, proceed to enforce the provisions of the Security Documents
authorizing the sale or other disposition of all or any part of the Collateral
and exercise all or any such other legal and equitable and other rights or
remedies as it may have in respect of such Collateral. The Required Banks may
direct the Agent in writing as to the method and the extent of any such sale or
other disposition, the Banks hereby agreeing to indemnify and hold the Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, provided that the Agent need not
--------
comply with any such direction to the extent that the Agent reasonably believes
the Agent's compliance with such direction to be unlawful or commercially
unreasonable in any applicable jurisdiction.
18. EXPENSES AND INDEMNIFICATION.
----------------------------
18.1. Expenses. The Borrower agrees to pay (i) the reasonable costs of
--------
producing and reproducing this Credit Agreement, the other Loan Documents and
the other agreements and instruments mentioned herein, (ii) any taxes (including
any interest and penalties in respect thereto) payable by the Agent or any of
the Banks (other than taxes based upon the Agent's or any Bank's net income) on
or with respect to the transactions contemplated by this Credit Agreement (the
Borrower hereby agreeing to indemnify the Agent and each Bank with respect
thereto), (iii) the reasonable fees, expenses and disbursements of the Agent's
Special Counsel or any local counsel to the Agent incurred in connection with
the preparation, syndication, administration or interpretation of the Loan
Documents and other instruments mentioned herein, each closing hereunder, any
amendments, modifications, approvals, consents or waivers hereto or hereunder,
or the cancellation of any Loan Document upon payment in full in cash of all of
the Obligations or pursuant to any terms of such Loan Document for providing for
such cancellation, (iv) the reasonable fees, expenses and disbursements of the
Agent or any of its affiliates incurred by the Agent or such affiliate in
connection with the preparation, syndication, administration or interpretation
of the Loan Documents and other instruments mentioned herein, including all
title insurance premiums and surveyor, engineering and appraisal charges, (v)
all reasonable out-of-pocket expenses (including without limitation reasonable
attorneys' fees and costs, which attorneys may be employees of any Bank or the
Agent, and reasonable consulting, accounting, appraisal, investment banking and
similar professional fees and
<PAGE>
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charges) incurred by any Bank or the Agent in connection with (A) the
enforcement of or preservation of rights under any of the Loan Documents against
the Parent, the Borrower or any of their respective Subsidiaries or the
administration thereof after the occurrence of a Default or Event of Default and
(B) any litigation, proceeding or dispute whether arising hereunder or
otherwise, in any way related to any Bank's or the Agent's relationship with the
Parent, the Borrower or any of their respective Subsidiaries and (vi) all
reasonable fees, expenses and disbursements of any Bank or the Agent incurred in
connection with UCC searches, UCC filings or mortgage recordings.
18.2. Indemnification. The Borrower agrees to indemnify and hold harmless
---------------
the Agent, its affiliates and the Banks from and against any and all claims,
actions and suits whether groundless or otherwise, and from and against any and
all liabilities, losses, damages and expenses of every nature and character
arising out of this Credit Agreement or any of the other Loan Documents or the
transactions contemplated hereby including, without limitation, (i) any actual
or proposed use by the Parent, the Borrower or any of their respective
Subsidiaries of the proceeds of any of the Loans or Letters of Credit, (ii) any
actual or alleged infringement of any patent, copyright, trademark, service mark
or similar right of the Parent, the Borrower or any of their respective
Subsidiaries comprised in the Collateral, (iii) the Parent, the Borrower or any
of their respective Subsidiaries entering into or performing this Credit
Agreement or any of the other Loan Documents or (iv) with respect to the Parent,
the Borrower and their respective Subsidiaries and their respective properties
and assets, the violation of any Environmental Law, the presence, disposal,
escape, seepage, leakage, spillage, discharge, emission, release or threatened
release of any Hazardous Substances or any action, suit, proceeding or
investigation brought or threatened with respect to any Hazardous Substances
(including, but not limited to, claims with respect to wrongful death, personal
injury or damage to property), in each case including, without limitation, the
reasonable fees and disbursements of counsel and allocated costs of internal
counsel incurred in connection with any such investigation, litigation or other
proceeding. In litigation, or the preparation therefor, the Banks and the Agent
and its affiliates shall be entitled to select their own counsel and, in
addition to the foregoing indemnity, the Borrower agrees to pay promptly the
reasonable fees and expenses of such counsel. If, and to the extent that the
obligations of the Borrower under this (S)18.2 are unenforceable for any reason,
the Borrower hereby agrees to make the maximum contribution to the payment in
satisfaction of such obligations which is permissible under applicable law.
18.3. Survival. The covenants contained in this (S)18 shall survive
--------
payment or satisfaction in full of all other Obligations.
19. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.
---------------------------------------------
19.1. Sharing of Information with Section 20 Subsidiary. The Borrower
-------------------------------------------------
acknowledges that from time to time financial advisory, investment banking and
other services may be offered or provided to the Parent, the Borrower or one or
more of their respective Subsidiaries, in connection with this Credit Agreement
or otherwise, by a Section 20 Subsidiary. The Parent and the Borrower, for
itself and each of their respective Subsidiaries, hereby authorizes (except as
otherwise prohibited by applicable law) (a) such Section 20 Subsidiary to share
with the Agent and each Bank any information delivered to such Section 20
Subsidiary by the Parent, the Borrower or any of their respective Subsidiaries,
and (b) the Agent and each Bank to share
<PAGE>
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with such Section 20 Subsidiary any information delivered to the Agent or such
Bank by the Parent, the Borrower or any of their respective Subsidiaries
pursuant to this Credit Agreement, or in connection with the decision of such
Bank to enter into this Credit Agreement; it being understood, in each case,
that any such Section 20 Subsidiary receiving such information shall be bound by
the confidentiality provisions of this Credit Agreement. Such authorization
shall survive the payment and satisfaction in full of all of Obligations.
19.2. Confidentiality. Each of the Banks and the Agent agrees, on behalf
---------------
of itself and each of its affiliates, directors, officers, employees and
representatives, to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Parent, the Borrower or any of
their respective Subsidiaries pursuant to this Credit Agreement that is
identified by such Person as being confidential at the time the same is
delivered to the Banks or the Agent, provided that nothing herein shall limit
--------
the disclosure of any such information (a) after such information shall have
become public other than through a violation of this (S)19, (b) to the extent
required by statute, rule, regulation or judicial process, (c) to counsel for
any of the Banks or the Agent, (d) to bank examiners or any other regulatory
authority having jurisdiction over any Bank or the Agent, or to auditors or
accountants, (e) to the Agent, any Bank or any Section 20 Subsidiary, (f) in
connection with any litigation to which any one or more of the Banks, the Agent
or any Section 20 Subsidiary is a party, or in connection with the enforcement
of rights or remedies hereunder or under any other Loan Document, (g) to a
Subsidiary or affiliate of such Bank as provided in (S)19.1 or (h) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant agrees to be bound by the provisions of (S)21.6.
Moreover, each of the Agent, the Banks and any Section 20 Subsidiary is hereby
expressly permitted by the Borrower to refer to any of the Parent, the Borrower
and their respective Subsidiaries in connection with any advertising, promotion
or marketing undertaken by the Agent, such Bank or such Section 20 Subsidiary
and, for such purpose, the Agent, such Bank or such Section 20 Subsidiary may
utilize any trade name, trademark, logo or other distinctive symbol associated
with the Parent, the Borrower or any of their respective Subsidiaries or any of
their businesses.
19.3. Prior Notification. Unless specifically prohibited by applicable
------------------
law or court order, each of the Banks and the Agent shall, prior to disclosure
thereof, notify the Borrower of any request for disclosure of any such non-
public information by any governmental agency or representative thereof (other
than any such request in connection with an examination of the financial
condition of such Bank by such governmental agency) or pursuant to legal
process.
19.4. Other. In no event shall any Bank or the Agent be obligated or
-----
required to return any materials furnished to it or any Section 20 Subsidiary by
the Parent, the Borrower or any of their respective Subsidiaries. The
obligations of each Bank under this (S)19 shall supersede and replace the
obligations of such Bank under any confidentiality letter in respect of this
financing signed and delivered by such Bank to the Borrower prior to the date
hereof and shall be binding upon any assignee of, or purchaser of any
participation in, any interest in any of the Loans or Reimbursement Obligations
from any Bank.
<PAGE>
-74-
20. SURVIVAL OF COVENANTS, ETC.
--------------------------
All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Parent, the Borrower or any of their
respective Subsidiaries pursuant hereto shall be deemed to have been relied upon
by the Banks and the Agent, notwithstanding any investigation heretofore or
hereafter made by any of them, and shall survive the making by the Banks of any
of the Loans and the issuance, extension or renewal of any Letters of Credit, as
herein contemplated, and shall continue in full force and effect so long as any
Letter of Credit or any amount due under this Credit Agreement or the Notes or
any of the other Loan Documents remains outstanding or any Bank has any
obligation to make any Loans or the Agent has any obligation to issue, extend or
renew any Letter of Credit, and for such further time as may be otherwise
expressly specified in this Credit Agreement. All statements contained in any
certificate or other paper delivered to any Bank or the Agent at any time by or
on behalf of the Parent, the Borrower or any of their respective Subsidiaries
pursuant hereto or in connection with the transactions contemplated hereby shall
constitute representations and warranties by the Borrower or such Subsidiary
hereunder.
21. ASSIGNMENT AND PARTICIPATION.
----------------------------
21.1. Conditions to Assignment and Accession.
--------------------------------------
21.1.1. Assignment by Banks. Except as provided herein, each Bank
-------------------
may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including
all or a portion of (a) its Commitment Percentage and Revolving Credit
Commitment and the same portion of the Loans at the time owing to it, the
Revolving Credit Notes held by it and its participating interest in the
risk relating to any Letters of Credit and (b) its Term Loan Commitment and
the same portion of the Term Loan owing to it and the Term Note held by
it); provided that (i) each of the Agent and, unless a Default or Event of
--------
Default shall have occurred and be continuing, the Borrower shall have
given its prior written consent to such assignment, which consent, in the
case of the Borrower, will not be unreasonably withheld, (ii) each such
assignment shall be of a constant, and not a varying, percentage of all the
assigning Bank's rights and obligations under this Credit Agreement, (iii)
each assignment shall be in a minimum amount of $5,000,000 and (iv) the
parties to such assignment shall execute and deliver to the Agent, for
recording in the Register (as hereinafter defined), an Assignment and
Acceptance, substantially in the form of Exhibit G hereto (an "Assignment
------- -
and Acceptance"), together with any Notes subject to such assignment. Upon
such execution, delivery, acceptance and recording, from and after the
effective date specified in each Assignment and Acceptance, which effective
date shall be at least five (5) Business Days after the execution thereof,
(i) the assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and obligations
of a Bank hereunder, and (ii) the assigning Bank shall, to the extent
provided in such assignment and upon payment to the Agent of the
registration fee referred to in (S)21.3, be released from its obligations
under this Credit Agreement.
<PAGE>
-75-
21.1.2 Accession. Except as otherwise provided herein, Eligible
---------
Assignees (each such Eligible Assignee, an "Acceding Bank") may, at the
request of the Borrower and with the consent of the Agent, become party to
this Credit Agreement by entering into an Instrument of Accession in
substantially the form of Exhibit H hereto (an "Instrument of Accession")
---------
with the Borrower and the Agent and assuming thereunder a Revolving Credit
Commitment, in an amount to be agreed upon by the Borrower, such Acceding
Bank and the Agents, to make Revolving Credit Loans and participate in the
risk relating to the Letters of Credit pursuant to the terms hereof, and
the Total Revolving Credit Commitment shall thereupon be increased by the
amount of such Acceding Bank's Revolving Credit Commitment; provided,
however, that (a) the Agent shall have given its prior written consent to
such accession, and (b) in no event shall the Total Revolving Credit
Commitment be increased under any one or more of such Instruments of
Accession so as to exceed, in the aggregate, $25,000,000. On the effective
date specified in any Instrument of Accession, Schedule 1 hereto shall be
----------
deemed to be amended to reflect (a) the name, address, Revolving Credit
Commitment and Commitment Percentage of such Acceding Bank, (b) the Total
Revolving Credit Commitment as increased by such Acceding Bank's Revolving
Credit Commitment, and (c) the changes to the other Banks' respective
Commitment Percentages and any changes to the other Banks' respective
Revolving Credit Commitments (in the event such Bank is also the Acceding
Bank) resulting from such assumption and such increased Total Revolving
Credit Commitment.
21.2. Certain Representations and Warranties; Limitations; Covenants. By
--------------------------------------------------------------
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:
(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Bank makes no representation or
warranty, express or implied, and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
the attachment, perfection or priority of any security interest or
mortgage,
(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Parent, the Borrower and their respective Subsidiaries or any other Person
primarily or secondarily liable in respect of any of the Obligations, or
the performance or observance by the Parent, the Borrower and their
respective Subsidiaries or any other Person primarily or secondarily liable
in respect of any of the Obligations of any of their obligations under this
Credit Agreement or any of the other Loan Documents or any other instrument
or document furnished pursuant hereto or thereto;
(c) such assignee confirms that it has received a copy of this
Credit Agreement, together with copies of the most recent financial
statements referred to in (S)9.4 and (S)10.4 and such other documents and
information as it has deemed appropriate
<PAGE>
-76-
to make its own credit analysis and decision to enter into such Assignment
and Acceptance;
(d) such assignee will, independently and without reliance upon the
assigning Bank, the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Credit
Agreement;
(e) such assignee represents and warrants that it is an Eligible
Assignee;
(f) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof or thereof, together with such powers as are reasonably
incidental thereto;
(g) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Credit
Agreement are required to be performed by it as a Bank;
(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and
(i) such assignee acknowledges that it has made arrangements with
the assigning Bank satisfactory to such assignee with respect to its pro
---
rata share of Letter of Credit Fees in respect of outstanding Letters of
----
Credit.
21.3. Register. The Agent shall maintain a copy of each Assignment and
--------
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Revolving Credit Loans and the Term
Loan owing to and Letter of Credit Participations purchased by, the Banks from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder for all purposes of
this Credit Agreement. The Register shall be available for inspection by the
Borrower and the Banks at any reasonable time and from time to time upon
reasonable prior notice. Upon each such recordation, the assigning Bank agrees
to pay to the Agent a registration fee in the sum of $3,500.
21.4. New Notes. Upon its receipt of an Assignment and Acceptance executed
---------
by the parties to such assignment, together with each Note subject to such
assignment, the Agent shall (i) record the information contained therein in the
Register, and (ii) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Note, a new Note to the order of such
Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Note to the order
of the assigning Bank in an amount equal to the
<PAGE>
-77-
amount retained by it hereunder. Such new Notes shall provide that they are
replacements for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered Notes, shall
be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of the assigned Notes. Within five (5)
days of issuance of any new Notes pursuant to this (S)21.4, the Borrower shall
deliver an opinion of counsel, addressed to the Banks and the Agent, relating to
the due authorization, execution and delivery of such new Notes and the
legality, validity and binding effect thereof, in form and substance
satisfactory to the Banks. The surrendered Notes shall be cancelled and returned
to the Borrower.
21.5. Participations. Each Bank may sell participations to one or more
--------------
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; provided
--------
that (i) each such participation shall be in an amount of not less than
$5,000,000, (ii) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrower and (iii) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Loans, extend the term or increase the
amount of the Commitment of such Bank as it relates to such participant, reduce
the amount of any commitment fees or Letter of Credit Fees to which such
participant is entitled or extend any regularly scheduled payment date for
principal or interest.
21.6. Disclosure. The Borrower agrees that in addition to disclosures
----------
made in accordance with standard and customary banking practices any Bank may
disclose information obtained by such Bank pursuant to this Credit Agreement to
assignees or participants and potential assignees or participants hereunder;
provided that such assignees or participants or potential assignees or
- --------
participants shall agree (i) to treat in confidence such information unless such
information otherwise becomes public knowledge, (ii) not to disclose such
information to a third party, except as required by law or legal process and
(iii) not to make use of such information for purposes of transactions unrelated
to such contemplated assignment or participation. For purposes of this (S)21.6
an assignee or participant or potential assignee or participant may include a
counterparty with whom such Bank has entered into or potentially might enter
into a derivative contract referenced to credit or other risks or events arising
under this Credit Agreement or any other Loan Document.
21.7. Assignee or Participant Affiliated with the Borrower. If any
----------------------------------------------------
assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall
have no right to vote as a Bank hereunder or under any of the other Loan
Documents for purposes of granting consents or waivers or for purposes of
agreeing to amendments or other modifications to any of the Loan Documents or
for purposes of making requests to the Agent pursuant to (S)15.1 or (S)15.2, and
the determination of the Required Banks shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to such assignee
Bank's interest in any of the Loans or Reimbursement Obligations. If any Bank
sells a participating interest in any of the Loans or Reimbursement Obligations
to a participant, and such participant is the Borrower or an Affiliate of the
Borrower, then such transferor Bank shall promptly notify the Agent of the sale
of such participation. A transferor Bank shall have no right to vote as a Bank
hereunder or
<PAGE>
-78-
under any of the other Loan Documents for purposes of granting consents or
waivers or for purposes of agreeing to amendments or modifications to any of the
Loan Documents or for purposes of making requests to the Agent pursuant to
(S)15.1 or (S)15.2 to the extent that such participation is beneficially owned
by the Borrower or any Affiliate of the Borrower, and the determination of the
Required Banks shall for all purposes of this Credit Agreement and the other
Loan Documents be made without regard to the interest of such transferor Bank in
the Loans or Reimbursement Obligations to the extent of such participation.
21.8. Miscellaneous Assignment Provisions. Any assigning Bank shall
-----------------------------------
retain its rights to be indemnified pursuant to (S)18 with respect to any claims
or actions arising prior to the date of such assignment. If any assignee Bank is
not incorporated under the laws of the United States of America or any state
thereof, it shall, prior to the date on which any interest or fees are payable
hereunder or under any of the other Loan Documents for its account, deliver to
the Borrower and the Agent certification as to its exemption from deduction or
withholding of any United States federal income taxes. If any Reference Bank
transfers all of its interest, rights and obligations under this Credit
Agreement, the Agent shall, in consultation with the Borrower and with the
consent of the Borrower and the Required Banks, appoint another Bank to act as a
Reference Bank hereunder. Anything contained in this (S)21 to the contrary
notwithstanding, (a) any Bank may at any time pledge all or any portion of its
interest and rights under this Credit Agreement (including all or any portion of
its Notes) to any of the twelve Federal Reserve Banks organized under (S)4 of
the Federal Reserve Act, 12 U.S.C. (S)341 and (b) any Bank that is a fund that
invests in bank loans may at any time pledge all or any portion of its interests
and rights with respect to its Term Note to any trustee for, or any other
representative of, holders of obligations owed or securities issued by such fund
as security for such obligations or securities, provided that any foreclosure or
--------
similar action by such trustee or other representative shall be subject to the
other provisions of this (S)21. No such pledge or the enforcement thereof shall
release the pledgor Bank from its obligations hereunder or under any of the
other Loan Documents.
21.9. Assignment by Borrower. The Borrower shall not assign or transfer
----------------------
any of its rights or obligations under any of the Loan Documents without the
prior written consent of each of the Banks.
22. NOTICES, ETC.
------------
Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes or any Letter of Credit Applications shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or sent
by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier
or postal service, addressed as follows:
(a) if to the Parent or the Borrower, at 640 North LaSalle Street,
Suite 295, Chicago, IL 60610 Attention Thomas J. Walters, or at such other
address for notice as the Borrower shall last have furnished in writing to
the Person giving the notice;
<PAGE>
-79-
(b) if to the Agent, at 100 Federal Street, Boston, Massachusetts
02110, USA, Attention: Thomas P. Tansi, Vice President, or such other
address for notice as the Agent shall last have furnished in writing to the
Person giving the notice; and
(c) if to any Bank, at such Bank's address set forth on Schedule 1
-------- -
hereto, or such other address for notice as such Bank shall have last
furnished in writing to the Person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.
23. GOVERNING LAW.
-------------
THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWER
AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT
BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN (S)22. THE
BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.
24. HEADINGS.
--------
The captions in this Credit Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.
25. COUNTERPARTS.
------------
This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Credit Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.
<PAGE>
-80-
26. ENTIRE AGREEMENT, ETC.
---------------------
The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Credit Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
(S)28.
27. WAIVER OF JURY TRIAL.
--------------------
The Borrower hereby waives its right to a jury trial with respect to any
action or claim arising out of any dispute in connection with this Credit
Agreement, the Notes or any of the other Loan Documents, any rights or
obligations hereunder or thereunder or the performance of such rights and
obligations. Except as prohibited by law, the Borrower hereby waives any right
it may have to claim or recover in any litigation referred to in the preceding
sentence any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages. The Borrower (i)
certifies that no representative, agent or attorney of any Bank or the Agent has
represented, expressly or otherwise, that such Bank or the Agent would not, in
the event of litigation, seek to enforce the foregoing waivers and (ii)
acknowledges that the Agent and the Banks have been induced to enter into this
Credit Agreement, the other Loan Documents to which it is a party by, among
other things, the waivers and certifications contained herein.
28. CONSENTS, AMENDMENTS, WAIVERS, ETC.
----------------------------------
Any consent or approval required or permitted by this Credit Agreement to
be given by the Banks may be given, and any term of this Credit Agreement, the
other Loan Documents or any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Parent, the Borrower or
any of their respective Subsidiaries of any terms of this Credit Agreement, the
other Loan Documents or such other instrument or the continuance of any Default
or Event of Default may be waived (either generally or in a particular instance
and either retroactively or prospectively) with, but only with, the written
consent of the Borrower and the written consent of the Required Banks.
Notwithstanding the foregoing, a decrease in the rate of interest on the Notes
forgiveness of any principal of the Notes, an extension of the maturity of or
extension of scheduled payments on the Notes, an increase in the Revolving
Credit Commitment (other than increases which are contemplated and permitted by
(S)21.1.2 hereof), an increase in the maximum principal amount of the Term Loans
of the Banks, or a decrease in the amount of the commitment fee or Letter of
Credit Fees hereunder may not be effected without the written consent of each
Bank affected thereby; this (S)28 and the definition of Required Banks may not
be amended, and substantially all of the Collateral may not be released, and no
Guarantor may be released without the written consent of all of the Banks; and
the amount of the Agent's Fee or any Letter of Credit Fees payable for the
Agent's account and (S)17 may not be amended without the written consent of the
Agent. No waiver shall extend to or affect any obligation not expressly waived
or impair any right consequent thereon. No course of dealing or delay or
omission on the part of the Agent or any Bank in exercising any right shall
operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or
demand upon the Borrower shall entitle the Borrower to other or further notice
or demand in similar or other circumstances.
<PAGE>
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29. SEVERABILITY.
------------
The provisions of this Credit Agreement are severable and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Credit Agreement in any jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.
CHART HOUSE ENTERPRISES, INC.
By: _________________________________________
Name:
Title:
CHART HOUSE, INC.
By: _________________________________________
Name:
Title:
BANKBOSTON, N.A., individually and as Agent
By: _________________________________________
Name:
Title:
BANCBOSTON ROBERTSON STEPHENS INC.,
as Arranger
By: _________________________________________
Name:
Title:
<PAGE>
AMENDMENT AGREEMENT NO. 1
to that certain
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This AMENDMENT AGREEMENT NO. 1 (this "Amendment") dated as of October 29,
---------
1999, is among (a) CHART HOUSE ENTERPRISES, INC. (the "Parent"), (b) CHART
------
HOUSE, INC. (the"Borrower"), (c) BANKBOSTON, N.A. and the other lending
--------
institutions listed on Schedule 1 to the Credit Agreement (collectively, the
----------
"Banks"), and (d) BANKBOSTON, N.A. as agent (the "Agent") for itself and the
----- -----
other Banks.
WHEREAS, the Parent, the Borrower, the Banks and the Agent are parties to
that certain Revolving Credit Agreement and Term Loan Agreement, dated as of
April 26, 1999 (as amended and in effect from time to time, the "Credit
------
Agreement"), pursuant to which the Banks, upon certain terms and conditions,
- ---------
have agreed to make loans to, and to issue letters of credit for the benefit of,
the Borrower; and
WHEREAS, the Borrower has requested that the Agent and the Banks agree, and
the Agent and the Banks have agreed, on the terms and subject to the conditions
set forth herein, to amend certain of the terms and provisions of the Credit
Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
(S)1. Defined Terms. Capitalized terms which are used herein without
-------------
definition and which are defined in the Credit Agreement shall have the same
meanings herein as in the Credit Agreement.
(S)2. Amendments to Definitions. Certain of the definitions contained in
-------------------------
(S)1 of the Credit Agreement are hereby amended as follows:
(a) The definition of "Required Banks" is hereby deleted in its entirety
and replaced with the following:
"Required Banks. As of any date, (a) if there are less than three
--------------
(3) Banks on such date, all Banks, and (b) if there are three (3) or
more Banks on such date, the Banks holding at least sixty-six and
two-thirds percent (66 2/3%) of the outstanding principal amount of
the Term Loans and the Total Revolving Credit Commitment."
(b) The following definition shall be inserted after the definition of
"Distribution":
"Documentation Agent. Paribas, acting in its capacity as
-------------------
documentation agent for itself and the other Banks."
<PAGE>
-2-
(S)3. Amendment to Events of Default. Section 15.1 of the Credit
------------------------------
Agreement is hereby amended by inserting following subclause (r), the following
new subclause (s):
"(s) EGI-Chart House Investors, LLC , Samstock, L.L.C. and their
affiliates and the other members of their group for purposes of Rule
13d-1 of the Rules and Regulations of the Securities and Exchange
Commission shall at any time, legally or beneficially own, less than
twenty-five percent (25%) of the shares of the common stock of the
Parent, as adjusted pursuant to any stock split, stock dividend or
recapitalization or reclassification of the capital of the Parent;"
(S)4. Amendment to Agency Provisions. Section 17.1 of the Credit
------------------------------
Agreement is hereby amended by inserting at the end of subclause (b), the
sentence "The Documentation Agent shall have no duties or responsibilities under
this Credit Agreement."
(S)5. Affirmation and Acknowledgment of the Parent, the Borrower and their
--------------------------------------------------------------------
Subsidiaries. The Parent, the Borrower, and each of the Subsidiary Guarantors
- ------------
hereby affirm and acknowledge to the Banks as follows:
(a) The Borrower hereby ratifies and confirms all of its Obligations to
the Banks, including, without limitation, the Loans, and the Borrower hereby
affirms its absolute and unconditional promise to pay to the Banks all
indebtedness, obligations and liabilities in respect of the Loans, the Letters
of Credit, and all other amounts due under the Credit Agreement as amended
hereby. The Borrower hereby confirms that the Obligations are and remain secured
pursuant to the Security Documents and pursuant to all other instruments and
documents executed and delivered by the Borrower as security for the
Obligations.
(b) The Parent and each of the Subsidiary Guarantors hereby acknowledges
the provisions of this Amendment and hereby reaffirms its absolute and
unconditional guaranty of the Borrower's payment and performance of the
Obligations as more fully described in the Parent Guaranty and the Guaranty. The
Parent and each of the Subsidiary Guarantors hereby confirms that its
obligations under the Parent Guaranty and the Guaranty are and remain secured
pursuant to the Security Documents to which it is a party.
(S)6. Representations and Warranties. The Parent and the Borrower hereby
------------------------------
represent and warrant to the Banks as follows:
(a) The execution and delivery by the Parent, the Borrower and each
Subsidiary Guarantor of this Amendment, and the performance by the Parent, the
Borrower and each Subsidiary Guarantor of its obligations and agreements under
this Amendment and the Credit Agreement as amended hereby, are within the
corporate authority of the Parent, the Borrower, and each Subsidiary Guarantor,
have been duly authorized by all necessary corporate proceedings on behalf of
the Parent, the Borrower and each Subsidiary Guarantor and do not and will not
contravene any provision of law, statute, rule or regulation to which the
Parent, the Borrower or any Subsidiary Guarantor is subject or any of the
Parent's, the Borrower's, or any Subsidiary Guarantor's charter, other
incorporation papers, by-laws or any stock provision or any amendment thereof or
of any agreement or other instrument binding upon the Parent,
<PAGE>
-3-
the Borrower or any Subsidiary Guarantor, the contravention of which would
materially adversely affect the business, assets or financial condition of the
Borrower and its Subsidiaries, considered as a whole, or of the Borrower,
considered individually.
(b) This Amendment and the Credit Agreement as amended hereby constitute
legal, valid and binding obligations of the Parent, the Borrower and each
Subsidiary Guarantor, enforceable in accordance with their respective terms,
except as limited by bankruptcy, insolvency, reorganization, moratorium or other
laws relating to or affecting generally the enforcement of creditors' rights in
general, and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) No approval or consent of, or filing with, any governmental agency or
authority is required to make valid and legally binding the execution, delivery
or performance by the Parent, the Borrower or any Subsidiary Guarantor of this
Amendment or the Credit Agreement as amended hereby.
(d) The representations and warranties contained in (S)9 of the Credit
Agreement are true and correct at and as of the date made and as of the date
hereof, except to the extent of changes resulting from transactions contemplated
or permitted by this Amendment and the other Loan Documents, changes which have
been disclosed to the Agent and the Banks prior to the date hereof and changes
occurring in the ordinary course of business that singly or in the aggregate are
not materially adverse, and to the extent that such representations and
warranties relate expressly to an earlier date.
(e) Each of the Parent, the Borrower and each Subsidiary Guarantor has
performed and complied in all material respects with all terms and conditions
herein required to be performed or complied with by it prior to or at the time
hereof, and as of the date hereof, after giving effect to the provisions hereof,
there exists no Event of Default or Default.
(S)7. Effectiveness. This Amendment shall become effective upon (i) the
-------------
receipt by the Agent of a fully executed counterpart hereof signed by each of
the Parent, the Borrower, the Subsidiary Guarantors and the Required Banks, and
(ii) the receipt by the Agent of the fully executed Assignment, Acceptance and
Accession Agreement signed by Paribas and the Borrower.
(S)8. Miscellaneous Provisions.
------------------------
(a) Except as otherwise expressly provided by this Amendment, all of the
terms, conditions and provisions of the Credit Agreement shall remain the same.
It is declared and agreed by each of the parties hereto that the Credit
Agreement, as amended hereby, shall continue in full force and effect, and that
this Amendment and the Credit Agreement shall be read and construed as one
instrument.
(b) This Amendment is intended to take effect as an agreement under seal
and shall be construed according to and governed by the laws of The Commonwealth
of Massachusetts.
<PAGE>
-4-
(c) This Amendment may be executed in any number of counterparts, but all
such counterparts shall together constitute but one instrument. In making proof
of this Amendment it shall not be necessary to produce or account for more than
one counterpart signed by each party hereto by and against which enforcement
hereof is sought.
(d) The Borrower hereby agrees to pay to the Agent, on demand by the
Agent, all reasonable out-of-pocket costs and expenses incurred or sustained by
the Agent in connection with the preparation of this Amendment (including
reasonable legal fees).
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
CHART HOUSE ENTERPRISES, INC.
By:______________________________
Title:
CHART HOUSE, INC.
By:______________________________
Title:
BANKBOSTON, N.A., individually and as Agent
By:______________________________
Title:
CHART HOUSE ENTERPRISES OF IDAHO, INC., as
Subsidiary Guarantor
By:______________________________
Title:
CHART HOUSE ENTERPRISES OF PUERTO RICO, INC., as
Subsidiary Guarantor
By:______________________________
Title:
<PAGE>
CHART HOUSE OF ANNAPOLIS, INC., as Subsidiary
Guarantor
By:______________________________
Title:
CHART HOUSE OF MARYLAND, INC., as Subsidiary
Guarantor
By:______________________________
Title:
CHART HOUSE ACQUISITION, INC., as Subsidiary
Guarantor
By:______________________________
Title:
BIG WAVE, INC., as Subsidiary Guarantor
By:______________________________
Title:
CORK `N CLEAVER, INC., as Subsidiary Guarantor
By:______________________________
Title:
ANALOS COMPANY, as Subsidiary Guarantor
By:______________________________
Title:
<PAGE>
AMENDMENT AGREEMENT NO. 2
to that certain
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This AMENDMENT AGREEMENT NO. 2 (this "Amendment") dated as of December 24,
---------
1999, is among (a) CHART HOUSE ENTERPRISES, INC. (the "Parent"), (b) CHART
------
HOUSE, INC. (the "Borrower"), (c) BANKBOSTON, N.A. and the other lending
--------
institutions listed on Schedule 1 to the Credit Agreement (collectively, the
-------- -
"Banks"), and (d) BANKBOSTON, N.A. as agent (the " Agent") for itself and the
----- -----
other Banks.
WHEREAS, the Parent, the Borrower, the Banks and the Agent are parties to
that certain Revolving Credit Agreement and Term Loan Agreement, dated as of
April 26, 1999 (as amended and in effect from time to time, the "Credit
------
Agreement"), pursuant to which the Banks, upon certain terms and conditions,
- ---------
have agreed to make loans to, and to issue letters of credit for the benefit of,
the Borrower; and
WHEREAS, the Borrower has requested that the Agent and the Banks agree, and
the Agent and the Banks have agreed, on the terms and subject to the conditions
set forth herein, to amend certain of the terms and provisions of the Credit
Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
(S)1. Defined Terms. Capitalized terms which are used herein without
------- -----
definition and which are defined in the Credit Agreement shall have the same
meanings herein as in the Credit Agreement.
(S)2. Amendment to Definitions. The definition of Consolidated EBITDA is
------------------------
amended by deleting the words "and (e)" in the last line thereof replacing them
with the words "(e) solely for the Reference Period ending on December 27, 1999,
the non-recurring non-cash charges for such period relating to the sale of each
of the properties set forth on Schedule 1A attached hereto in an amount not to
-----------
exceed $5,000,000 in the aggregate, and (f)".
(S)3. Amendment to Revolving Credit Facility. Section 2.1 of the Credit
--------------------------------------
Agreement is hereby amended by inserting after the first sentence thereto, the
following new sentence.
"Notwithstanding the foregoing, the sum of the outstanding amount of the
Revolving Credit Loans (after giving effect to all amounts requested) plus
----
the Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall
not at any time on or prior to March 31, 2000, exceed $15,000,000."
<PAGE>
-2-
(S)4. Amendments to Financial Covenants.
---------------------------------
(a) Section 12.2 of the Credit Agreement is hereby amended by inserting
after the last sentence thereof, the sentence "Notwithstanding the foregoing,
for the fiscal year ended December 27, 1999, the Borrower will not permit
Consolidated Net Worth to be less than $50,000,000."
(b) Section 12.4 of the Credit Agreement is hereby amended by inserting
in the second line thereof following the words "in the table set forth below",
the words", permit the Interest Coverage Ratio for such Reference Period".
(S)5. Amendments to Schedules. The Schedules to the Credit Agreement are
-----------------------
hereby amended by inserting immediately following Schedule 1 to the Credit
----------
Agreement, the schedule attached hereto as Schedule 1A to the Credit Agreement.
-----------
(S)6. Limited Waiver and Consent. The Borrower has advised the Agent that
--------------------------
it intends to sell each of the properties set forth on Schedule 1A attached
-----------
hereto (the "Property Sales"). Under the provisions of the Credit Agreement,
the Property Sales constitute transactions not permitted by (S)11.5.2 of the
Credit Agreement.
The Borrower has requested that the Banks provide written consent to the
Property Sales, and, to the extent necessary, waive the provisions of (S)11.5.2
of the Credit Agreement to permit the Property Sales.
In response to such request, the Banks hereby consent to the Property Sales
and waive the provisions of (S)11.5.2 of the Credit Agreement to permit the
Property Sales, provided that the net proceeds received by the Borrower or any
--------
Subsidiary from the Property Sales shall be applied against the outstanding
amount of the Revolving Credit Loans. The Banks further agree to provide any
necessary mortgage releases for the properties sold in connection with the
Property Sales. The consent and waiver given herein is limited strictly to its
terms and shall apply only to the specific provisions described herein. The
consent and waiver contained herein shall not extend to or affect any other
obligations of the Parent, the Borrower or their Subsidiaries contained in the
Credit Agreement or any other Loan Documents and shall not impair or prejudice
any rights consequent thereon.
(S)7. Affirmation and Acknowledgment of the Parent and the Borrower. Each
-------------------------------------------------------------
of the Parent and the Borrower hereby affirm and acknowledge to the Banks as
follows:
(a) The Borrower hereby ratifies and confirms all of its Obligations to
the Banks, including, without limitation, the Loans, and the Borrower hereby
affirms its absolute and unconditional promise to pay to the Banks all
indebtedness, obligations and liabilities in respect of the Loans, the Letters
of Credit, and all other amounts due under the Credit Agreement as amended
hereby. The Borrower hereby confirms that the Obligations are and remain secured
pursuant to the Security Documents and pursuant to all other instruments and
documents executed and delivered by the Borrower as security for the
Obligations.
<PAGE>
-3-
(b) The Parent hereby acknowledges the provisions of this Amendment and
hereby reaffirms its absolute and unconditional guaranty of the Borrower's
payment and performance of the Obligations as more fully described in the Parent
Guaranty. The Parent hereby confirms that its obligations under the Parent
Guaranty are and remain secured pursuant to the Security Documents to which it
is a party.
(S)6. Representations and Warranties. The Parent and the Borrower hereby
--------------- --- ----------
represent and warrant to the Banks as follows:
(a) The execution and delivery by the Parent, the Borrower and each
Subsidiary Guarantor of this Amendment, and the performance by the Parent, the
Borrower and each Subsidiary Guarantor of its obligations and agreements under
this Amendment and the Credit Agreement as amended hereby, are within the
corporate authority of the Parent, the Borrower, and each Subsidiary Guarantor,
have been duly authorized by all necessary corporate proceedings on behalf of
the Parent, the Borrower and each Subsidiary Guarantor and do not and will not
contravene any provision of law, statute, rule or regulation to which the
Parent, the Borrower or any Subsidiary Guarantor is subject or any of the
Parent's, the Borrower's, or any Subsidiary Guarantor's charter, other
incorporation papers, by-laws or any stock provision or any amendment thereof or
of any agreement or other instrument binding upon the Parent, the Borrower or
any Subsidiary Guarantor, the contravention of which would materially adversely
affect the business, assets or financial condition of the Borrower and its
Subsidiaries, considered as a whole, or of the Borrower, considered
individually.
(b) This Amendment and the Credit Agreement as amended hereby constitute
legal, valid and binding obligations of the Parent, the Borrower and each
Subsidiary Guarantor, enforceable in accordance with their respective terms,
except as limited by bankruptcy, insolvency, reorganization, moratorium or other
laws relating to or affecting generally the enforcement of creditors' rights in
general, and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) No approval or consent of, or filing with, any governmental agency or
authority is required to make valid and legally binding the execution, delivery
or performance by the Parent, the Borrower or any Subsidiary Guarantor of this
Amendment or the Credit Agreement as amended hereby.
(d) The representations and warranties contained in (S)9 of the Credit
Agreement are true and correct at and as of the date made and as of the date
hereof, except to the extent of changes resulting from transactions contemplated
or permitted by this Amendment and the other Loan Documents, changes which have
been disclosed to the Agent and the Banks prior to the date hereof and changes
occurring in the ordinary course of business that singly or in the aggregate are
not materially adverse, and to the extent that such representations and
warranties relate expressly to an earlier date.
(e) Each of the Parent, the Borrower and each Subsidiary Guarantor has
performed and complied in all material respects with all terms and conditions
herein required to be performed or complied with by it prior to or at the time
hereof, and as of the date hereof, after giving effect to the provisions hereof,
there exists no Event of Default or Default.
<PAGE>
-4-
(S)7. Effectiveness. This Amendment shall become effective as of December
-------------
24, 1999, upon the receipt by the Agent of a fully executed counterpart hereof
signed by each of the Parent, the Borrower, the Subsidiary Guarantors and the
Required Banks.
(S)8. Miscellaneous Provisions.
------------- ----------
(a) Except as otherwise expressly provided by this Amendment, all of the
terms, conditions and provisions of the Credit Agreement shall remain the same.
It is declared and agreed by each of the parties hereto that the Credit
Agreement, as amended hereby, shall continue in full force and effect, and that
this Amendment and the Credit Agreement shall be read and construed as one
instrument.
(b) This Amendment is intended to take effect as an agreement under seal
and shall be construed according to and governed by the laws of The Commonwealth
of Massachusetts.
(c) This Amendment may be executed in any number of counterparts, but all
such counterparts shall together constitute but one instrument. In making proof
of this Amendment it shall not be necessary to produce or account for more than
one counterpart signed by each party hereto by and against which enforcement
hereof is sought.
(d) The Borrower hereby agrees to pay to the Agent, on demand by the
Agent, all reasonable out-of-pocket costs and expenses incurred or sustained by
the Agent in connection with the preparation of this Amendment (including
reasonable legal fees).
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
CHART HOUSE ENTERPRISES, INC.
By:______________________________
Title:
CHART HOUSE, INC.
By:______________________________
Title:
BANKBOSTON, N.A., individually and as Agent
By:______________________________
Title:
PARIBAS
By:______________________________
Title:
By:______________________________
Title:
<PAGE>
RATIFICATION OF GUARANTY
Each of the undersigned guarantors (each, a "Subsidiary Guarantor")
hereby acknowledges and consents to the foregoing Amendment as of December 24,
1999, and agrees that the Subsidiary Guaranty (as defined in the Credit
Agreement, and each other guaranty executed by a Subsidiary Guarantor after the
Closing Date pursuant to the terms of the Credit Agreement) from each Subsidiary
Guarantor in favor of the Agent and each of the Banks remains in full force and
effect, and each of the Subsidiary Guarantors confirms and ratifies all of its
obligations thereunder.
CHART HOUSE ENTERPRISES OF IDAHO, INC., as
Subsidiary Guarantor
By:______________________________
Title:
CHART HOUSE ENTERPRISES OF PUERTO RICO, INC., as
Subsidiary Guarantor
By:______________________________
Title:
CHART HOUSE OF ANNAPOLIS, INC., as Subsidiary
Guarantor
By:______________________________
Title:
CHART HOUSE OF MARYLAND, INC., as Subsidiary
Guarantor
By:______________________________
Title:
<PAGE>
CHART HOUSE ACQUISITION, INC., as Subsidiary
Guarantor
By:______________________________
Title:
BIG WAVE, INC., as Subsidiary Guarantor
By:______________________________
Title:
CORK'N CLEAVER, INC., as Subsidiary Guarantor
By:______________________________
Title:
ANALOS COMPANY, as Subsidiary Guarantor
By:______________________________
Title:
<PAGE>
Schedule 1A
-----------
Consolidated EBITDA
-------------------
Non-recurring non-cash charges relating to the sale of the following properties:
Vail, Colorado
Chester, Connecticut
Greenwich, Connecticut
New Haven, Connecticut
Atlanta, Georgia
Kona, Hawaii
Haiku, Hawaii
Lahania, Hawaii
Wailea, Hawaii
Newport, Rhode Island
Hilton Head, South Carolina
<PAGE>
Exhibit 13
A LETTER TO OUR SHAREHOLDERS
As I described in last year's letter to shareholders, we committed ourselves to
a comprehensive plan to revitalize Chart House Enterprises. The plan included
operating more effectively and delivering the highest level of guest experience
by remodeling all of our unique Chart House locations, introducing a new and
exciting seafood-oriented menu throughout the system and improving our field
level execution. In addition, we committed to taking a critical look at each of
our units to ensure that they were contributing to the overall health of the
Company.
During 1999, we realized positive tangible results from our efforts to
revitalize and reposition Chart House. I believe Chart House has made
significant progress in the revitalization process, and by doing so, we have
built a solid foundation for growth.
For the first time in many years, the Company's flagship Chart House concept
enjoyed strong same store sales growth. I am even more encouraged that the level
of same store sales growth [for continuing units] increased in each quarter of
1999 over the comparable prior period. In the final quarter, same store sales
growth from continuing units was nearly five percent. The combination of our new
seafood-oriented menu and reinvestment in many of our locations created repeat
guest experiences and attracted new patrons to Chart House. We closely monitored
consumer feedback through an independent market research firm and found that our
guests gave the "new" Chart House experience very high marks.
Although I am not satisfied with our level of profitability in 1999, the
Company's restaurant profit contribution from the Chart House concept improved
over the prior year. We operated more efficiently and improved management of
all controllable costs in 1999. As new menu implementation costs and lost
profits from remodel disruptions abate in fiscal 2000, I expect even higher
levels of restaurant contribution.
I am very satisfied with the remodel results and returns on investments we are
achieving. Through 1999, we remodeled 19 Chart House restaurants. The degree of
remodel varied from extensive infrastructure and decor investment to relatively
minor interior cosmetic refurbishment and signage improvements. Our guests
responded very well to the new decor packages with restaurants such as
Scottsdale, Malibu, Annapolis and Rancho Mirage experiencing extraordinary and
sustained sales and guest count increases. The nature of some of the remodel
investment was in the category of required deferred maintenance; therefore, the
return from these types of expenditures was expected to be marginal. Other units
such as our two cornerstone locations in Weehawken, New Jersey and Boston are
being rebuilt and restored to a level well exceeding their former condition. In
Weehawken, the Chart House restaurant is being entirely rebuilt and will open in
May 2000. A short ferry or car ride across the Hudson River from Manhattan, the
Weehawken location will be our largest restaurant offering nearly 30,000 square
feet of dining area and private banquet rooms with stunning views of the
Manhattan skyline. Further up the East Coast, our Boston Chart House operates
within a National Historic Landmark building, which is currently undergoing
significant renovation. Although many structural and cosmetic upgrades are being
made to the restaurant, careful consideration is being given to maintaining the
integrity and historical significance of the building.
We completed our new menu implementation as of June 1999. This menu was
developed in conjunction with our friends and partners at Lettuce Entertain You
Enterprises. Rich Melman has been a good partner and a significant advisor and
resource to the Company. The Lettuce Entertain You team was instrumental in
conceiving and testing the new menu. Our chefs and menu development personnel
continue to work with
1
<PAGE>
Lettuce Entertain You to further refine and improve our menu offering. We will
continue to emphasize a menu based on exciting, creative seafood items while
maintaining a core selection of Chart House's well-known steak entrees.
Throughout 1999, Chart House maintained a consistent brand presence in all of
our markets. We further renewed our commitment to markets that have been
cornerstones of the Chart House brand. Strongholds like Alexandria, Annapolis,
Dobbs Ferry, Miami, Philadelphia, Malibu, Redondo Beach and Scottsdale benefited
from increased marketing activity including advertising and public relations.
Our efforts and activities are ongoing and reflect a clear understanding of the
competitive environment in which we operate.
To further build consumer awareness about the many positive changes occurring at
Chart House, we reinstated local marketing efforts. These initiatives included
the implementation of re-opening events that showcased the "new" Chart House and
were attended by local dignitaries, media representatives and other prominent
community members. Our ViewPoints frequent dining rewards program was introduced
in early 1999 and continues to motivate our guests to visit us more often.
Viewpoints also offers Chart House the opportunity to develop closer
relationships with our most loyal customers.
In mid-1999, we took a hard look at every unit in the Chart House system and its
individual contribution to the Company. Our approach was "zero-based" in that we
looked at each location's recent financial performance, near-term prospects,
required capital investment and management resources. There were no "sacred
cows" and no pre-conceptions about which units contributed to enterprise
profitability and shareholder value and which did not. Out of this rigorous
exercise, senior management recommended and the Company's Board of Directors
approved the closure of 11 units. This decision, while never easy, recognized
the necessity of reducing the Chart House portfolio to a core group of
restaurants with attractive and sustainable economics. As we begin fiscal year
2000, we have restaurants that are operating at attractive unit volumes and
profit margins contributing to Company-wide profitability.
In April, we made the strategic move to acquire New York's popular Angelo and
Maxie's Steakhouse. This unique concept provides an excellent complementary
growth vehicle to our Chart House brand. Angelo and Maxie's has a sophisticated,
yet high-energy, atmosphere that appeals to a much broader demographic group
than traditional steakhouse concepts. With an interesting, high quality menu,
over-sized portions, an average check of less than $40 and a vibrant atmosphere,
Angelo and Maxie's attracts younger professional male and female guests who
comprise a very active portion of the dining public. The Angelo and Maxie's
concept has been readied for expansion into several new markets in year 2000.
Even at conservative volume estimates, the unit economics are very attractive,
making aggressive unit growth for the foreseeable future a significant
opportunity. Experienced senior level management in sufficient numbers is
already in place to address the growth planned for this exciting, differentiated
concept during the upcoming year.
1999 was a year of great progress for Chart House Enterprises. Our operating and
growth strategies are having a positive impact on sales volume, profitability
and brand equity. Great strides have been made in restoring the Chart House
brand and in positioning it for continued success and expansion. The Angelo and
Maxie's concept is similarly prepared to expand into new markets and to create a
unique niche among steakhouse concepts. For the first time in many years, Chart
House Enterprises is poised for success. I appreciate your continued support as
we move "FULL SPEED AHEAD!"
2
<PAGE>
Chart House Restaurants
Since first opening its doors in 1961, Chart House has been recognized for great
American fare, stunning locations and a unique approach to relaxed, casual
dining. Nearly 40 years later, there are Chart House restaurants in 17 states.
Every Chart House location draws on its region's best features--from setting to
architecture-infusing it with its own "come as your are" personality. This
unique approach is inherent in how we do business and what makes Chart House one
of a kind.
We began 1999 with a clearly defined strategy towards providing a complete fresh
seafood dining experience for our guests. The system-wide revitalization
program, initiated in 1998, resulted in the implementation of a new seafood-
focused menu in all Chart House restaurants. To further position Chart House as
a fresh seafood restaurant, we ran two heavily publicized and highly successful
seafood promotions, featuring Copper River Salmon and South Pacific Seafood.
Similar future seafood product promotions will continue to stimulate incremental
customer visits.
Another critical part of the revitalization program included remodeling each of
our locations. As of the end of 1999, over half of the Chart House restaurants
have been remodeled - reflecting a more contemporary decor. The remaining
locations are scheduled for remodel in 2000.
Our ViewPoints Frequent Dining Program, introduced in early 1999, includes a
growing number of more than 150,000 members, and allows us to stay in touch with
our most loyal Chart House customers.
With the significant progress made in 1999 to redefine and focus Chart House,
the concept is poised to move full speed ahead into the new millenium.
3
<PAGE>
Angelo and Maxie's Steakhouse
Founded in 1996 and named after an eatery in the tune "Lullaby of Broadway" from
the hit musical 42/nd/ Street, Chart House Enterprise's 1999 acquisition-Angelo
and Maxie's Steakhouse- captures the essence of a by-gone era. Its inviting
1930's atmosphere, thick, juicy steaks and private dining room for cigar smokers
make for a unique dining experience.
Unlike its namesake, Angelo and Maxie's opulent Art Deco-style decor is a salute
to American abundance. You'll find warm "Frank Lloyd Wright-esque" woodwork,
glowing bronzes, contemporary Tiffany style light fixtures and whimsical wall
murals depicting cigar puffing, steak-eating cows.
Angelo and Maxie's popularity among shrewd, discriminating New Yorkers is
illustrated by a packed house night after night. The menu offers an array of
oversized steaks, salads, fish and fowl - and a veritable smorgasbord of
appetizers and add-ons.
By taking the stuffiness out of the traditional steakhouse and adding a touch of
whimsy, Angelo and Maxie's has evolved into a steakhouse that's not just for the
suits and ties. It attracts younger professional male and female guests who
comprise a very active portion of the dining public. The entrepreneurial spirit
that inspired this unique dining concept is being preserved even as unit
operations are systematized for future growth.
Many potential sites have been identified for growth in 2000 and beyond. As of
the end of 1999, we have secured leases for three new locations--Atlanta,
Washington D.C. and a second Angelo and Maxie's in Manhattan. Real estate owners
continue to be impressed with the exciting and energetic personality of this
differentiated steakhouse concept.
With an attractive price point, proven popularity among a diverse demographic
profile and its twist on the traditional steakhouse concept, Angelo and Maxie's
provides a strong complementary growth vehicle to our seafood-focused Chart
House brand. The Angelo and Maxie's and Chart House concepts each cater to
distinct target audiences - allowing both to operate in the same markets.
Angelo and Maxie's is positioned to move full speed ahead and play an even
greater role in the overall success of Chart House Enterprises.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The following table presents the results of operations for each of the fiscal
years in the three years ended December 27, 1999. The dollar amounts are in
thousands.
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------
Amount % Amount % Amount %
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $140,937 100.0 $145,188 100.0 $151,202 100.0
Costs and Expenses:
Cost of Sales 45,059 32.0 47,388 32.6 46,932 31.0
Restaurant Labor 42,015 29.8 42,078 29.0 42,056 27.8
Other Operating Costs 31,930 22.6 34,955 24.1 36,289 24.0
Selling, General and Administrative 11,472 8.1 14,353 9.9 12,879 8.5
Expenses
Depreciation and Amortization 7,830 5.6 6,601 4.5 8,964 5.9
Write Down of Assets and 4,890 3.5 - - 43,374 28.7
Restructuring and Unusual Charges
Gains on Sales of Assets (742) (0.5) (1,534) (1.0) - -
Interest Expense 2,023 1.4 790 0.5 3,292 2.2
Interest Income - - (14) - (1,827) (1.2)
--------------------------------------------------------------------
Total Costs and Expenses 144,477 102.5 144,617 99.6 191,959 127.0
--------------------------------------------------------------------
(Loss) Income Before Income (3,540) (2.5) 571 0.4 (40,757) (27.0)
Taxes
Benefit for Income Taxes - - - - (9,639) (6.4)
--------------------------------------------------------------------
Net (Loss) Income $ (3,540) (2.5) $ 571 0.4 $(31,118) (20.6)
====================================================================
</TABLE>
5
<PAGE>
________________________________________________________________________________
Management believes that the most meaningful approach to analyzing operations is
through margin analysis, which requires critically reviewing the relationships
that certain costs and expenses bear to revenues. Accordingly, the discussion
below follows this approach.
________________________________________________________________________________
Fiscal years 1999, 1998 and 1997
Total revenues decreased 2.9% in 1999 and 4.0% in 1998 due primarily to the
closure of restaurants. The table below reflects the percentage change in
revenues resulting from strategic decisions implemented over the past three
years.
1999 1998 1997
Closure/opening of Chart House restaurants (6.1%) (3.2%) 0.6%
Angelo and Maxie's (acquired in 1999) 4.2% - -
Solana Beach Baking Company (sold in 1998) (3.6%) (0.7%) 0.5%
Islands Restaurants (disposed in 1996) - - (6.9%)
Comparable restaurant revenues 2.6% (0.1%) -
---- ---- ----
Total (2.9%) (4.0%) (5.8%)
At December 27, 1999 Chart House operated 50 Chart House restaurants (which
includes the Peohe's restaurant). Of those restaurants, eleven restaurants have
been designated for closure. Management estimates that all eleven restaurants
will be closed in 2000. Comparable restaurant revenue growth for the continuing
39 restaurants for the past three years have been:
1999 1998 1997
Continuing comparable restaurants 3.5% 0.6% 2.5%
Comparable restaurant revenues have increased primarily due to the
adjustments made in the menu. A new menu was created in 1998 in an alliance with
Lettuce Entertain You Enterprises, Inc. Chart House implemented this menu into
all designated restaurants during a year-long conversion which began in the
third quarter 1998. Revenues were negatively affected, temporarily, at many
restaurants during the implementation period.
The cost of sales percentage has decreased by 0.6% versus 1998. This
decrease is primarily due to the 1998 implementation of the new menu which
required intensive training and practice, increasing food waste. The percentage
is still higher than 1997 results as the current menu incorporates reduced
pricing and uses larger, pre-portioned meat and better quality seafood; both of
which negatively affect the cost of sales percentage. Angelo and Maxie's cost of
sales percentage is higher than the average Chart House percentage due to a
predominance of beef on the menu and large portion sizes. In 1999, the
incremental cost of sales attributed to the Angelo and Maxie's restaurant did
not have significant impact on overall results. However, the Company anticipates
an increase in the ratio of Angelo and Maxie's to the entire system beginning in
2000. As a result, the Company anticipates total cost of sales to increase.
Restaurant labor was higher as a percentage of revenues in 1999 due to
enhanced management staffing and the addition of several catering sales
managers. These effects were incremental to the 1998 labor increases. In 1998,
federal, as well as state, minimum wage requirements negatively affected
comparable results for the hourly restaurant labor costs. The minimum wage in
California (where the Company operates 17 restaurants) was increased in March
1998 from $5.15 to $5.75 per hour.
Other operating costs decreased in 1999 primarily as a result of
significant restaurant remodeling in both 1998 and 1999. The capital investment
relieved the Company in 1999 of major repair and maintenance expenditures. The
remaining margin decrease is a reflection of efficiencies realized in supplies
and outside services. Other operating costs in 1998 remained consistent as a
percentage of revenues with 1997.
6
<PAGE>
Selling, general, and administrative expenses decreased, as a percentage of
sales, in 1999 to their lowest level in six years. Of the 1.8% percentage of
sales decrease in 1999, 0.6% relates to relocation costs incurred in 1998, with
no comparable cost in 1999. The remaining savings include decreased outside
consulting expense and decreased salary expense. In 1998, these expenses
included the one time costs of relocating the corporate office from Solana
Beach, California to Chicago, Illinois. Additionally, in 1998 new staff were
hired and trained to better support field operations and incremental costs were
incurred as part of a consulting arrangement with Lettuce Entertain You
Enterprises, Inc. Related party transactions with EGI Risk Services, Inc., EGI
Corporate Investments, Inc., Lettuce Entertain You Enterprises, Inc., and
Rosenberg & Liebentritt, P.C. amounted to approximately $1.6 million in 1999.
Depreciation and amortization increased since 1998 as a result of
significant capital investment in approximately 50% of the Chart House
restaurants during the latter half of 1998 and all of 1999. In addition, there
was significant incremental amortization relating to the intangible assets
acquired in the 1999 business combination. In 1998, depreciation and
amortization decreased from 1997 primarily because of asset dispositions
resulting from the restaurant closures.
Six restaurant properties were sold in 1999 generating gains of $742,000.
The 1998 results include gains on sales of non-core assets totaling $1,534,000,
stemming primarily from the sale of Solana Beach Baking Company and Company-held
investments. There were no comparable gains in 1997.
The Company incurred special charges of $4,890,000 in 1999 for asset write-
downs and other charges related to the closure of eleven Chart House
restaurants. There were no similar charges in 1998. In 1997, the Company
recorded special charges of $43,374,000 for asset write-downs and other charges
related to management organizational changes. A description of the 1999 and 1997
special charges is detailed below.
Interest expense increased significantly in 1999 as a result of the $15
million term loan obtained in conjunction with the 1999 business combination. In
1998, interest expense decreased primarily due to a reduction in the Company's
outstanding debt balances as a result of the 1997 sale of shares of common stock
and the sale of certain assets.
Interest income in 1997 was earned principally from the note received in
connection with the sale of the Islands restaurant operations in May 1996. The
note was paid at the end of 1997.
There was no tax provision recorded in 1999 or in 1998. The loss reported
in 1997 from the special charges generated a tax benefit, which has been applied
against taxable income. The effective rate for the benefit for income taxes was
approximately 24% for 1997.
Operating profits before taxes, gains on sales, restructuring charges, and
write-downs of assets were $608,000, or 0.4% of sales in 1999. Comparable
results in 1998 reflect a loss of ($963,000), or (0.7%) of sales; and
$2,617,000, or 1.7% of sales in 1997.
BUSINESS COMBINATION
In April 1999, the Company purchased a restaurant business located in New
York, New York d/b/a Angelo and Maxie's Steakhouse ("Angelo and Maxie's"). The
acquisition was accounted for under the purchase method of accounting. The
purchase price was $12,633,000. Of this amount approximately $10,383,000 was
paid at closing, including costs of acquisition, with the remaining $2,250,000
due in equal installments over the subsequent 36 months. The identifiable net
assets acquired included tangible net assets of $1,015,000, the value of the
trade name of $6,975,000, and the value of a non-compete agreement of $450,000.
Goodwill of $4,193,000 representing the excess of purchase price over the fair
value of identifiable net assets acquired was recorded as a result of the
acquisition. The intangible assets are being amortized on a straight-line basis
over lives of 3 to 20 years. The results of operations of Angelo and Maxie's are
included in the Company's consolidated results of operations from the date of
its acquisition, April 22, 1999.
RESTRUCTURING ACTIONS AND SPECIAL CHARGES
In 1999, the Company committed to an expansion plan of both the Chart House
concept and the Angelo and Maxie's concept. The economics of continuing to
operate all restaurants did not support this objective. After thorough
evaluation of every Chart House restaurant in the system, eleven restaurants
were identified for disposal. All eleven restaurants remained open through
December 27, 1999. Seven of these restaurants will close in the first quarter.
The closing dates of the remaining four restaurants are dependent upon securing
favorable sales agreements. Management intends to pursue selling the locations
vigorously, but cannot assure the occurrence
7
<PAGE>
or timing of the sales. In the fourth quarter 1999, the Company recorded
$4,286,000 in asset impairment write-down, including impairment of goodwill, and
$604,000 in exit costs and severance payments due 283 employees.
There were no restructuring charges in 1998. Throughout most of its
history, the Company has enjoyed relative stability in executive management and
Chart House restaurant operations. Prior to 1998, the Company experienced
disruption from organizational changes including significant turnover of senior
management and failed attempts to expand other restaurant concepts. Operating
profitability declined over the 1996 and 1997 fiscal years.
In 1997, the Company made the decision to sell for cash all non-core assets
(assets and operations outside of the core restaurant operations) in an effort
to pay down remaining debt balances and focus management attention on the
revitalization of the Chart House concept. Management and the Board also re-
examined prior management's willingness to maintain marginally performing
restaurants. As a result of this change in direction, a decision was made to
dispose of certain restaurants and write down others to amounts which
approximate fair value. In addition, the Company sold its corporate office
building and relocated the corporate operations from Solana Beach, California to
Chicago, Illinois. A resulting termination plan affected approximately 55
corporate managerial and clerical employees. As a direct result of certain of
these restructuring activities, the Company was able to generate significant
proceeds from asset disposals to pay off long-term debt.
The 1997 special charges of $43.4 million were primarily the result of
write-downs of assets to be used in ongoing operations or to be disposed. The
charges included (i) approximately $21.2 million in write-downs to estimated net
realizable value of assets to be sold or otherwise disposed, including the
Company's remaining investment in Islands ($5.7 million); five Chart House
restaurants ($6.3 million); fixtures, decor and other identified restaurant
assets to be disposed of in connection with the remodel and revitalization of
the Chart House restaurants ($7.8 million); and other non-core assets and
minority interests in unrelated companies ($1.4 million), and (ii) approximately
$16.8 million in write-downs to estimated fair value of several underperforming
Chart House restaurants to be used in ongoing operations and other non-cash
charges, including a write down of goodwill associated with impaired assets
($4.2 million). The remainder of the special charges consisted of approximately
$5.4 million of charges, which included, among other things, costs associated
with hiring a new chief executive officer, severance and other costs related to
executive management and organizational changes, and termination benefits to be
paid to employees in connection with the planned relocation of the Company's
headquarters.
OPERATING OUTLOOK
This outlook section contains a number of forward-looking statements, all
of which are based on current expectations. Actual results may differ
materially.
The main operational objectives in 2000 focus on expansion of both the
Chart House concept and the Angelo and Maxie's concept. For the first time in
many years, the Chart House restaurants are reflecting the operational stability
required to sustain future growth. The Angelo and Maxie's concept is ripe for
expansion in many markets and will be the primary focus of the expansion plan.
The Company is committed to leases at three restaurant locations in 2000, but
cannot assure the timing of their openings. The opening of new restaurants in
either concept requires significant pre-opening expense, including, but not
limited to, training, procurement, and legal fees. The Company has not opened a
new restaurant since 1996; a year in which generally accepted accounting
principles permitted deferral of pre-opening expenses with amortization over
future periods. In 2000, all expenses to open new restaurants will be recognized
as incurred in 2000. While the Company is taking every measure to control the
amount of pre-opening expense, it is not feasible to provide an estimate of
these costs.
The Company anticipates maintaining its current level of comparable
restaurant revenue growth with consistent margins. It is feasible that new
restaurant openings will initially have a detrimental impact on total Company
margins. Personnel, both in the front and the back of the house, need to be
trained for performance at levels meeting Company standards. This training will
transpire both in currently open restaurants as well as in unopened restaurant
locations. Both situations may drive margins downward. The total impact is a
function of the number of restaurants opening and the timing of those restaurant
openings.
As of the end of the 1999 fiscal year, the Company completed the remodeling
of 19 Chart House restaurants. The remodel program is intended to update the
look of each Chart House restaurant and create a more comfortable and enjoyable
dining experience. Over the next year, management expects to remodel the
remaining Chart House restaurants. Management anticipates remodeling
expenditures during 2000 to approximate $8 million.
8
<PAGE>
Federal and state legislated minimum wage increases generally have some
impact on the restaurant operating results. Future federal legislated minimum
wage increases could adversely affect the Company's labor costs. With the
exception of California, the Company does not currently have a significant
number of hourly personnel in any one state such that a state legislated minimum
wage increase may affect overall operating results.
Restructuring and other activities that occurred in 1999 will affect
results of operations in 2000. Revenues will be reduced to the extent of the
closed restaurants. Additionally, restaurant revenues and operating expenses
will be affected to the extent there is shutdown time in connection with the
remodeling of restaurants. The Company expects one Chart House restaurant to be
closed for the majority of 2000, and another Chart House restaurant to be closed
for all of 2000 for remodeling. Depreciation and amortization will increase in
2000 as remodeling activities continue. Interest expense will also increase as
the Company increases debt levels to fund revitalization activities. A portion
of the interest payments may require capitalization, if debt proceeds will be
used to construct new restaurants. The proportion of capitalized interest to
total interest cost depends upon the amount and timing of new restaurant
construction.
There are two restaurant properties held for disposal that are under
capital lease. It is anticipated that approximately $700,000 in gains would be
recognized on the disposal of these properties if the Company is released from
the lease obligation. The Company remains committed on these leases and no
assurances can be given concerning any income statement impact the disposal of
these leases may have.
Management continues to target companies for acquisition as part of its
expansion strategies for 2000. The objectives of any acquisition will include
enhancement of Company operating results. As of December 27, 1999, there were no
plans of acquisition. No assurance can be given that any acquisition
transactions will occur, nor can management assure that results will be
positively affected as a result of an acquisition.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash from operating activities $ 3,528 $ 3,507 $ 16,594
Cash used for acquisition (10,383) - -
Cash (used in) provided by investing activities
(other than for acquisition) (6,825) (6,234) 15,622
Cash provided by (used in) financing activities 13,838 2,788 (32,215)
-------- ------- --------
Net increase in cash $ 158 $ 61 $ 1
======== ======= ========
</TABLE>
The Company requires capital principally for the acquisition and
construction of new restaurants and for 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 and term loan
agreement which provides up to a $25 million line of credit and a term loan of
$15 million, each of which mature on March 31, 2004. The proceeds of the term
loan were used primarily for the acquisition of Angelo and Maxie's as well as to
pay down the outstanding balance on the previous line of credit. Principal
payments on the term loan begin in the third quarter 2000. This agreement
contains several financial covenants that restrict cash flow under certain
situations.
At the end of 1999, the Company had approximately $4,200,000 in outstanding
borrowings under its line of credit, compared with $3,450,000 at the end of
1998. The incremental borrowings were used partially to fund the $600,000 net
increase in investing activities and to fund operating activities. In 1999,
greater interest expense was the primary incremental operating cost. At the end
of 1999, the unused portion of the available line of credit was more than $20
million. The Company expects total borrowings to increase during 2000 to fund
expansion of the current restaurant system and to capitalize on appropriate
acquisition opportunities. New lease commitments for new Angelo and Maxie's at
three locations will require the infusion of approximately $6 million in capital
constructing the new restaurants.
In 1999, the Company sold six restaurant properties generating proceeds of
$7.4 million. In December 1999, the Company announced its intentions to dispose
of eleven restaurants. The fair market value of each restaurant property differs
significantly and the amount of proceeds derived from prior sales is not
indicative of estimated future proceeds.
9
<PAGE>
Cash flows from operations, plus availability under the $25 million
revolving credit agreement will, in the opinion of management, be sufficient to
fund working capital and regular capital expenditure commitments. The Company
currently projects 2000 capital expenditures to be upwards of $15 million;
however, this amount may vary depending on several factors. These factors
include, but are not limited to, the timing of construction activities and
compliance with financial covenants under the revolving credit and term loan
agreement. In order to fully implement the remodeling and expansion program,
both short-term and long-term, the Company may require alternative sources of
long-term financing. However, no assurance can be given that such financing will
be available or available on terms satisfactory to the Company.
EFFECT OF INFLATION
Management does not believe inflation has had a significant effect on
Company operations during the past several years. The Company generally has been
able to substantially offset increases in its operating costs resulting from
inflation by increasing menu prices or making other adjustments, there can be no
assurance that it will be able to do so in the future. Although management does
not anticipate inflation having a material effect on income from restaurant
operations in 2000, future increases in labor, food or other operating costs
could adversely affect Company operating results.
SEASONALITY AND OTHER INFORMATION
Historically, the Company's business is seasonal in nature with revenues
and net income for the first, second and third quarters greater than in the
fourth quarter. The Company has not encountered any problems, technical or
otherwise, involving Year 2000. There were no significant expenses incurred to
ensure systems were compliant, or in the remedy of Year 2000 issues.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this report may be forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
include financial projections, estimates and statements regarding plans,
objectives and expectations of the Company and its management. Examples of
certain forward-looking statements are the Company's intentions and abilities to
dispose of assets, remodel assets, or acquire assets, the intentions and
abilities to increase or decrease outstanding borrowings, the intentions and
abilities to control or mitigate changes in any operating costs, and the
intentions and abilities to maintain current levels of comparable restaurant
revenues or operating results. Although the Company believes that the
expectations reflected in all such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
achieved. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Some of the known and unknown risks, uncertainties and other
factors referred to above include, but are not limited to, the following:
changes in customer demand due to economic factors, competitive factors, pricing
pressures, availability of employees, changes in demographic trends, the ability
to open new restaurants successfully and to successfully integrate any acquired
businesses, litigation involving employment, liability and other issues, weather
and other acts of God.
10
<PAGE>
Selected Financial Data
(In thousands, except per share data)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------------------- ------------------ ---------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues $140,937 $145,188 $151,202 $160,551 $179,155
Depreciation & Amortization 7,830 6,601 8,964 9,743 10,697
Restructuring and Other Charges 4,890 - 43,374 7,833 4,853
(1)
Interest Expense 2,023 790 3,292 4,903 4,996
Interest Income - (14) (1,827) (1,240) (185)
Other Income-Gain on Sale Of
Subsidiary(2) - - - - (1,855)
(Loss) Income Before Income Taxes (3,540) 571 (40,757) (8,216) 2,422
Net (Loss) Income (3,540) 571 (31,118) (5,423) 2,663
Net (Loss) Income Per Common
Share - Basic and Diluted (3) (.30) .05 (2.91) (.66) .32
Weighted Average Shares
Outstanding (3) 11,767 11,745 10,688 8,254 8,277
Balance Sheet Data (End of
Period):
Total Assets: 99,489 88,446 88,245 148,925 153,446
Current Portion of Long-Term
Indebtedness 2,435 724 816 6,772 3,401
Long-Term Indebtedness 22,413 8,470 5,746 50,499 51,694
Stockholder's Equity 56,289 59,754 59,005 71,308 76,652
</TABLE>
- ---------------------
(1) Restructuring and Other Charges in 1999, 1997, 1996 and 1995 include asset
write-downs, severance and other charges.
(2) Other Income in 1995 represents the gain recorded on the sale of the
Company's wholly owned subsidiary, Paradise Bakery, Inc.
(3) Effective December 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). The adoption
of the standard had no material impact for any of the years presented above.
For all years presented, basic and diluted earnings per share are the same.
11
<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 27, December 28,
ASSETS 1999 1998
--------------- --------------
<S> <C> <C>
Current Assets:
Cash and Equivalents $ 424 $ 266
Accounts Receivable 2,969 3,275
Inventories 2,282 2,288
Prepaid Expenses and Other Current Assets 530 560
Current Portion of Deferred Tax Asset 288 685
-------- --------
Total Current Assets 6,493 7,074
-------- --------
Property and Equipment, at Cost:
Land 3,904 6,258
Buildings 15,384 18,844
Equipment 33,115 31,400
Leasehold Interests & Improvements 53,854 50,532
Construction in Progress 3,380 2,063
-------- --------
109,637 109,097
Less: Accumulated Depreciation and Amortization 42,621 44,659
-------- --------
Net Property & Equipment 67,016 64,438
Leased Property under Capital Leases, Less Accumulated
Amortization of $2,329 in 1999 and $6,376 in 1998 2,514 4,128
Other Assets, Less Accumulated Amortization of $3,680 in
1999 and $3,641 in 1998:
Goodwill 10,043 7,539
Trade Name 6,742 -
Non-current Portion of Deferred Tax Asset 5,092 4,679
Other Assets 1,589 588
-------- --------
Total Other Assets, net 23,466 12,806
-------- --------
$ 99,489 $ 88,446
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
12
<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 27, December 28,
LIABILITIES AND STOCKHOLDERS' EQUITY 1999 1998
--------------- ---------------
<S> <C> <C>
Current Liabilities:
Current Portion of Long-Term Obligations $ 2,435 $ 724
Accounts Payable 4,577 4,772
Accrued Liabilities 13,775 14,726
------- -------
Total Current Liabilities 20,787 20,222
Non-Current Liabilities (Excluding Current Portion):
Deferred Payments on Acquisition 1,000 -
Long-Term Debt 17,700 3,450
Long-Term Obligations under Capital Leases 3,713 5,020
------- -------
Total Non-Current Liabilities (Excluding Current Portion) 22,413 8,470
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, $1.00 par value, authorized 10,000,000
shares; 0 outstanding - -
Common Stock, $.01 par value, authorized 30,000,000
shares; 11,775,191 and 11,762,561 shares outstanding
in 1999 and 1998, respectively
118 118
Additional Paid-In Capital 61,178 61,103
Accumulated Deficit (5,007) (1,467)
------- -------
Total Stockholders' Equity 56,289 59,754
------- -------
$99,489 $88,446
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
13
<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
12/27/99 12/28/98 12/29/97
<S> <C> <C> <C>
Revenues $140,937 $145,188 $151,202
-------------------------------------------------
Costs and Expenses:
Cost of Sales 45,059 47,388 46,932
Restaurant Labor 42,015 42,078 42,056
Other Operating Costs 31,930 34,955 36,289
Selling, General and Administrative
Expenses 11,472 14,353 12,879
Depreciation and Amortization 7,830 6,601 8,964
Write Down of Assets and
Restructuring and Unusual Charges 4,890 - 43,374
Gains on Sales of Assets (742) (1,534) -
Interest Expense 2,023 790 3,292
Interest Income - (14) (1,827)
--------------------------------------------------------
Total Costs and Expenses 144,477 144,617 191,959
--------------------------------------------------------
(Loss) Income Before Income Taxes (3,540) 571 (40,757)
Benefit for Income Taxes - - (9,639)
--------------------------------------------------------
Net (Loss) Income $ (3,540) $ 571 $(31,118)
========================================================
Net (Loss) Income Per Common Share - $ (0.30) $ 0.05 $ (2.91)
Basic and Diluted
========================================================
Weighted Average Shares Outstanding 11,767 11,745 10,688
========================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
14
<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
ADDITIONAL RETAINED TOTAL
COMMON STOCK PAID-IN EARNINGS STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 30, 1996 8,262 $ 83 $42,145 $ 29,080 $ 71,308
Issuance of New Shares 3,400 34 18,407 - 18,441
Exercise of Stock Options 57 - 324 - 324
Nonemployee Director Compensation 8 - 50 - 50
Net Loss - - - (31,118) (31,118)
-----------------------------------------------------------------------------
Balance, December 29, 1997 11,727 $117 $60,926 $ (2,038) $ 59,005
Exercise of Stock Options 26 1 155 - 156
Nonemployee Director Compensation 10 - 22 - 22
Net Income - - - 571 571
-----------------------------------------------------------------------------
Balance, December 28, 1998 11,763 $118 $61,103 $ (1,467) $ 59,754
Nonemployee Director Compensation 12 - 75 - 75
Net Loss - - - (3,540) (3,540)
-----------------------------------------------------------------------------
Balance, December 27, 1999 11,775 $118 $61,178 $ (5,007) $ 56,289
=============================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
15
<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------------------
DEC. 27, DEC.28, DEC. 29,
1999 1998 1997
================================================================================================================================
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net (Loss) Income $ (3,540) $ 571 $(31,118)
Adjustments to Reconcile Net (Loss) Income
to Cash Flows Provided by Operating Activities:
Depreciation and Amortization 7,922 6,601 8,964
Deferred Income Taxes - - (9,252)
Common Stock Issued in lieu of Compensation 75 22 50
Loss (Gain) on Retirement and Write-Down of Assets 3,544 (1,534) 38,113
Change in Net Current Liabilities (4,473) (2,153) 9,837
----------------------------------------------------
Cash Provided by Operating Activities 3,528 3,507 16,594
----------------------------------------------------
Cash Flows from Investing Activities:
Expenditures for Property and Equipment (14,190) (10,225) (5,926)
Reductions (Increases) in Other Assets 2 (67) 510
Net Proceeds from Disposition of Assets 7,363 4,058 3,968
Payments Received on Notes Receivable - - 17,070
Business Acquisition, net of cash (10,383) - -
----------------------------------------------------
Cash (Used in) Provided by Investing Activities (17,208) (6,234) 15,622
----------------------------------------------------
Cash Flows from Financing Activities:
Principal Payments on Long-Term Obligations under (724) (818) (780)
Capital Leases
Net Borrowings (Payments) under Revolving Credit 750 3,450 (19,200)
Agreement
Net Proceeds (Payments) of Long-Term Debt 15,000 - (31,000)
Debt Issuance Costs (688) - -
Payments under Deferred Acquisition Agreement (500) - -
Proceeds from Issuance of Common Stock - 156 18,765
----------------------------------------------------
Cash Provided by (Used in) Financing Activities 13,838 2,788 (32,215)
----------------------------------------------------
Increase in Cash 158 61 1
Cash, Beginning of Year 266 205 204
----------------------------------------------------
Cash, End of Year $ 424 $ 266 $ 205
====================================================
</TABLE>
16
<PAGE>
The Change in Net Current Liabilities is Comprised of
the Following:
<TABLE>
<S> <C> <C> <C>
Decrease in Accounts Receivable $ 306 $ 156 $ 1,558
Decrease in Refundable Income Taxes - 537 1,315
Decrease in Inventories 152 336 602
Decrease in Prepaid Expenses and Other Current Assets 30 123 453
(Decrease) Increase in Accounts Payable (195) (183) 1,652
(Decrease) Increase in Accrued Liabilities (4,766) (3,122) 4,257
-------------------------------------------------
Change in Net Current Liabilities: $(4,473) $(2,153) $ 9,837
=================================================
Supplemental Cash Flow Disclosure:
Cash Paid During the Year For:
Interest (Net of Amount Capitalized) $ 1,695 $ 735 $ 4,044
Income Taxes (Net of Refunds) $ (395) $ (205) $(2,269)
Non-Cash Investing and Financing Activities:
Capitalized Lease Obligations Released $ (197) - -
Capitalized Lease Obligations Incurred for Property - - $ 271
Additions and Acquisitions
Deferred Payment Obligation Incurred for Business $ 1,750 - -
Acquisition
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
17
<PAGE>
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 27, 1999
(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
- --------------------
The Company is engaged in the restaurant business. At December 27, 1999,
the Company operated 49 Chart House restaurants, one Peohe's restaurant, and one
Angelo and Maxie's restaurant. The restaurants are located primarily on the East
and West Coasts.
The Company previously operated Solana Beach Baking Company, a wholesale
bakery, through October 1998. The Company sold this operation in October 1998.
Revenues were $5.2 million and $5.8 million in 1998 and 1997, respectively.
Basis of Presentation
- ---------------------
The Company reports fiscal years under a 52/53 week format. This reporting
method is used by many companies in the restaurant and retail industries and is
meant to improve year-to-year comparisons of operating results. Under this
method, certain years will contain 53 weeks. The determinable years are based
upon the selection of acceptable alternatives including: the last specified day
in the quarter, or a specified day closest to the calendar quarter end as the
fiscal quarter end. In 1996, the Company chose the Monday closest to the
calendar quarter end as its official fiscal quarter. In 1999, the Company
changed this alternative to the last Monday of the calendar quarter as its
official fiscal quarter end. It should be noted that the 1998 and 1997 fiscal
quarters and years would have been the same regardless of the alternative
chosen. The first three quarter ending dates in 1999 were the same under either
alternative. Fiscal year 1999 would have ended on January 3, 2000 under the
previously chosen alternative. Financial information for fiscal year 1999
without the change would have resulted in approximately $3 million in
incremental revenues and no significant incremental net income.
Principles of Consolidation
- ---------------------------
The accompanying consolidated financial statements include the accounts of
Chart House Enterprises, Inc. and its subsidiaries, all of which are wholly
owned (hereinafter referred to as the "Company"). All significant intercompany
balances and transactions have been eliminated in consolidation.
Use of Estimates
- ----------------
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.
Reclassification
- ----------------
Certain prior year balances have been reclassified to conform to the 1999
presentation.
18
<PAGE>
Cash and Equivalents
- --------------------
Cash and equivalents include investments which are readily convertible to
cash with an original maturity date of three months or less and are stated at
cost, which approximates fair value.
Inventories
- -----------
Inventories are valued at the lower of cost (first-in, first-out) or
market, and consist of the following (in thousands):
Dec. 27, Dec. 28,
1999 1998
------- ------
Food and Non-Alcoholic Beverages $ 888 $ 917
Alcoholic Beverages 1,379 1,197
Merchandise 15 174
------ ------
$2,282 $2,288
====== ======
Property and Equipment and Leased Property
- ------------------------------------------
Depreciation and amortization are recorded for financial reporting purposes
using the straight-line method over the estimated useful lives of the assets.
Leasehold interests and improvements and leased property are amortized over the
shorter of the lease term or the asset life. The average estimated depreciable
lives for financial reporting purposes are 30 years for buildings, 22 years for
leasehold interests and improvements and leased property, and 3 to 7 years for
equipment.
Maintenance, repairs and minor purchases are expensed as incurred. Major
purchases of equipment and facilities, and major replacements and improvements
are capitalized. When assets are sold or otherwise disposed of, the cost and
related accumulated depreciation and amortization are removed from the accounts
and the resulting gains or losses are reflected in the accompanying consolidated
statements of operations as incurred.
Intangible and Other Assets
- ---------------------------
Goodwill represents the excess of purchase price over the fair market value
of net identifiable assets acquired. Goodwill was $10,043,000 and $7,539,000 at
December 27, 1999 and December 28, 1998, respectively, net of accumulated
amortization of $3,347,000 and $3,641,000, respectively. Goodwill recorded prior
to 1999 is being amortized using the straight-line method over 40 years.
Goodwill acquired in 1999 is being amortized using the straight-line method over
20 years. Approximately $379,000 in carrying value of goodwill was written off
in 1999 upon the sale of one restaurant.
The value of trade names is determined using conservative industry
estimates for returns on assets. The estimated returns are capitalized using
conservative rates common in the industry. The value of a trade name of
$6,742,000, net of accumulated amortization of $233,000, is being amortized
using the straight-line method over 20 years.
Other assets include costs of liquor licenses of $358,000 and $397,000 at
December 27, 1999 and December 28, 1998, respectively. In accordance with the
guidelines of Financial Accounting Standards Board Statement No. 121,
"Accounting for Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS No. 121"), the historical cost of liquor licenses acquired has been
written down to a net realizable value. The carrying values of liquor licenses
are not being amortized. A substantial number of licenses are transferable and
were issued in California, which has a very restricted market for new licenses.
For this reason, management believes the licenses, which have indefinite legal
lives, will retain their value.
19
<PAGE>
Long-Lived Assets
- -----------------
The Company evaluates its assets and properties for impairment, in
accordance with SFAS No. 121, when events or circumstances indicate that
carrying amounts may not be recoverable. In performing this analysis, the
Company generally groups assets by individual location or restaurant property.
Future estimated cash flows to be generated as a result of operating the
particular restaurant, generally over specified lease terms or useful lives, are
compared against the carrying value of the related assets.
Revenue Recognition
- -------------------
The Company records revenues from normal recurring sales upon the
performance of services.
Fees and Royalties
- ------------------
The Company previously operated a Chart House restaurant in Weehawken, New
Jersey under a management agreement with the owner of the property that provided
the Company with a fee of 7% of restaurant sales. In May 1998, the restaurant
was completely destroyed by fire. The Company is named as an insured party in a
policy held by the owner of the property. The insurance policy covers lost
profits, and therefore, this business interruption has not had an impact on 1999
or 1998 operating results. Proceeds received in 1999 and 1998 for business
interruption insurance were approximately $592,000 and $388,000, respectively.
Management fees related to this operation were $592,000, $586,000, and $557,000
in 1999, 1998, and 1997, respectively.
The Company generally recognizes royalty income upon receipt. In 1999, the
Company recorded approximately $387,000 in royalties from a previously held
subsidiary. Of this amount, approximately $120,000 was received in 1999 and the
remaining was deferred in previous years, as result of the pending sale of this
subsidiary.
Advertising
- -----------
The Company records advertising expense as incurred. Advertising expense
was $1,091,000, $1,040,000, and $669,000, in fiscal years 1999, 1998, and 1997,
respectively.
Income Taxes
- ------------
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply in the years in which those temporary differences are expected
to be recovered or settled. A valuation allowance has been provided to reduce
deferred tax assets to the amounts expected to be realized.
Stock Based Compensation
- ------------------------
The Company has elected to account for stock based compensation under the
intrinsic value method of accounting. This method measures compensation cost as
the excess, if any, of the quoted market price of the Company's common stock at
the grant date over the amount the employee must pay for the stock. The
Company's policy is to grant stock options at fair value on the grant date. The
Company has disclosed required pro forma disclosures of compensation expense
determined under the fair value method of accounting for stock based
compensation as prescribed by Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation" ("SFAS No. 123").
20
<PAGE>
Net Income (Loss) Per Common Share
- ----------------------------------
Basic earnings per share is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
reporting period. Diluted earnings per share reflects the potential dilution
that could occur if all common stock equivalents were outstanding. Common stock
equivalents are anti-dilutive, by definition, in periods reporting losses and,
therefore, excluded from the weighted average number of shares calculation. The
number of stock options outstanding, excluded from calculations of income (loss)
per share because their impact is anti-dilutive, was 962,586, 921,103, and
612,816 in 1999, 1998, and 1997, respectively. The incremental effect of
dilutive securities on weighted average shares outstanding used to compute
diluted earnings per share was not material at December 27, 1999 or December 28,
1998. Diluted earnings per share equals basic earnings per share for all periods
presented.
Segment Reporting
- -----------------
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131 ("SFAS No. 131"), "Disclosure About Segments of an Enterprise and
Related Information." This Statement requires that public companies report
annual and interim financial and descriptive information about its reportable
operating segments. Reportable operating segments are defined in the Statement
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in evaluating performance. SFAS No. 131
allows aggregation of similar operating segments into a single reportable
operating segment if the components are considered similar under certain
criteria. The Company believes its restaurants meet the criteria supporting
aggregation of all restaurants into one operating segment.
Computer Software
- -----------------
The Company adopted AICPA, Statement of Position 98-1, "Accounting for the
Cost of Computer Software Developed or Obtained for Internal Use," effective
December 29, 1998. This statement provides criteria to determine whether costs
of computer software developed or obtained for internal use are expensed or
capitalized. The adoption of this statement had no material impact on the
Company's financial statements for the fiscal year ended December 27, 1999.
(2) PROPERTY & EQUIPMENT
Depreciation expense was $3,842,000, $3,319,000, and $4,518,000 in 1999,
1998 and 1997, respectively. Included in Net Property & Equipment in the
accompanying consolidated balance sheet at December 27, 1999 is property held
for future development of $3,841,000 and assets held for disposal of
approximately $4,769,000. The Company intends to dispose of the assets held for
disposal in 2000.
(3) RESTRUCTURING AND SPECIAL CHARGES
1999 charges
- ------------
In 1999, the Company recorded a restructuring charge and write-down of
assets totaling $4,890,000 in preparation for a 2000 expansion plan which
required disposing of eleven restaurants whose operating results and economics
were not conducive to the long-term success of the Company. The charges
included:
Write-down of assets to be disposed $4,286,000
Severance and other exit costs $ 604,000
21
<PAGE>
The write-down of assets to be disposed represents the estimated loss
resulting from the write-down of the assets to fair value less costs to sell. It
includes $3,460,000 in carrying value of tangible fixed assets and $826,000 in
carrying value of goodwill. It is reasonably possible that these estimates will
change in the near term due to uncertainties surrounding fair value and costs to
sell. The Company intends to sell the restaurant properties, if owned, and
equipment located at the properties. The assets to be disposed of include
buildings, equipment, leasehold improvements and goodwill. The Company expects
to dispose of these assets in 2000.
The severance payments are due to 283 employees; primarily restaurant
personnel along with eight corporate employees.
The restaurants identified for disposal contributed $266,000, $852,000, and
$1,201,000 of the income reported by the Company (excluding overhead
allocations) in 1999, 1998 and 1997, respectively.
There were no restructuring charges in 1998.
1997 charges
- ------------
During 1997, the Company incurred significant restructuring charges in
connection with the Company's strategy to, among other things, revitalize its
core Chart House restaurants, dispose of non-core assets and selected under-
performing Chart House restaurants, and reorganize senior management.
In 1997, the charges of $43.4 million, as presented in the accompanying
consolidated statement of operations, included:
Write-down of assets to be disposed of $21.2 million
Write-down of assets to be used in continuing operations $16.8 million
Severance and other relocation costs $ 5.4 million
All of the restaurants and properties written down in 1997 have been
disposed.
In 1999, amounts paid and charged against the liability for severance and
other special costs totaled $519,000 representing primarily severance payments.
At December 27, 1999 and December 28, 1998, the balance of the liability
established in previous years' restructuring charges (included in accrued
liabilities) was $0 and $519,000, respectively. There were no amounts paid and
charged against the liability established for the 1999 restructuring charges as
of December 27, 1999.
(4) ACQUISITIONS AND DISPOSITIONS
Business Combinations
- ---------------------
In April, 1999 the Company purchased a restaurant business located in New
York, New York d/b/a Angelo and Maxie's Steakhouse ("Angelo and Maxie's"). The
acquisition was accounted for under the purchase method of accounting. The
purchase price was $12,633,000. Of this amount approximately $10,383,000 was
paid at closing, including costs of acquisition, with the remaining $2,250,000
due in equal installments over the subsequent 36 months. The identifiable net
assets acquired included tangible net assets of $1,015,000, the value of the
trade name of $6,975,000, and the value of a non-compete agreement of $450,000.
Goodwill of $4,193,000 representing the excess of purchase price over the fair
value of identifiable net assets acquired was
22
<PAGE>
recorded as a result of the acquisition. The intangible assets are being
amortized on a straight-line basis over lives of 3 to 20 years. The results of
operations of Angelo and Maxie's are included in the Company's consolidated
results of operations from the date of its acquisition, April 22, 1999.
The following unaudited pro forma results of operations present combined
year to date historical financial information as if the acquisition occurred at
the beginning of each fiscal year. This unaudited pro forma information may not
be indicative of the results that actually would have occurred if the
acquisition had taken place at the beginning of the periods presented, or of the
future results of operations of the Company. All information, except per share
amounts, are presented in thousands.
1999 1998
$ per share $ per share
------------------- ---------------
Revenues $143,749 $154,967
(Loss) Income before Extraordinary Items and
Cumulative Effects of Accounting
Changes $ (3,914) $ (.33) $65 $.01
Net (Loss) Income $ (3,914) $ (.33) $18 $.00
Dispositions
- ------------
In November 1998, the Company sold an investment in capital stock of a non-
public company to an unrelated third party. The total sale price was $1,349,000
and was received in cash. The Company recognized a net gain on the sale of
$1,080,000, which is included in the accompanying consolidated statement of
operations.
In October 1998, the Company sold all of the assets of the Solana Beach
Baking Company to an unrelated third party. The total sale price was $865,000
and was received in cash. The Company recognized a net gain on the sale of
$388,000, which is included in the accompanying consolidated statement of
operations.
In December 1997, the Company and Islands CA/AZ Holdings, Inc. completed a
restructuring of the Company's note receivable from the partnership and purchase
of the Company's 25% limited partner interest, generating net cash proceeds to
the Company of approximately $17.1 million. In connection with the transaction,
the Company agreed to guarantee through January 2004 an amount of $4.0 million
of note obligations to the Islands partnership's new lender. The accompanying
consolidated statement of operations for the year ended December 29, 1997
includes approximately $5.7 million of charges related to this transaction.
23
<PAGE>
(5) ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
December 27, December 28,
1999 1998
------------ -------------
Bank Drafts Outstanding $ 3,317 $ 2,193
Unredeemed Gift Certificates 2,834 3,525
Payroll and Related Expenses 1,917 2,148
Insurance 1,294 2,075
Other 4,413 4,785
------- -------
$13,775 $14,726
======= =======
(6) INCOME TAXES
The benefit for income taxes consists of the following components (in
thousands):
Fiscal Years Ended
--------------------------------
1999 1998 1997
------- ------- -------
Current $ (483) $(2,762) $ (537)
Deferred 483 2,762 (9,102)
------- ------- -------
Benefit for Income Taxes $ - $ - $(9,639)
======= ======= =======
24
<PAGE>
The income tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
December 27, December 28,
1999 1998
-------- --------
<S> <C> <C>
Deferred Tax Liabilities:
Excess of Tax Depreciation Over
Book Depreciation $ 5,369 $ 6,653
State Income Taxes 21 34
-------- --------
Deferred Tax Liabilities 5,390 6,687
Deferred Tax Assets:
Excess of Book Expense over Tax Expense
Related to Restructuring Charges (1,559) (1,572)
Excess of Book Expense over Tax Expense
Related to Fixed Asset Write-Downs (7,303) (7,922)
Excess of Book Expense over Tax Expense
Related to Capitalized Leases (455) (426)
Deferred Tax Credits, including Targeted Jobs
and FICA Credit Carry Forwards (3,732) (2,225)
Net Operating Loss Carry Forwards (3,307) (2,753)
Compensation and Other Benefits Not
Deducted Until Paid (67) (383)
Other Deferred Costs (445) (715)
-------- --------
Deferred Tax Assets (16,868) (15,996)
-------- --------
Net Deferred Tax Assets (11,478) ( 9,309)
Deferred Tax Asset Valuation Allowance 6,098 3,945
-------- --------
Deferred Tax Assets $ (5,380) $ (5,364)
======== ========
</TABLE>
25
<PAGE>
The benefit for income taxes reconciles to the amounts computed by applying
the Federal statutory rate to income before tax as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Years Ended
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Statutory Federal Income Tax
(Benefit) Provision $(1,204) $ 194 $(13,858)
Amortization of Goodwill 95 95 1,536
State Income Taxes, Net of
Federal Benefit (77) 113 (716)
Deferred Tax Asset Valuation
Allowance 2,153 566 3,379
Meals and Entertainment 28 27 20
FICA Tax Credit, net (995) (995) -
------- ----- --------
Benefit for Income Taxes $ - $ - $ (9,639)
======= ===== ========
</TABLE>
(7) LONG-TERM DEBT
Long-term debt of the Company is as follows (in thousands):
<TABLE>
<CAPTION>
December 27, December 28,
1999 1998
-------- --------
<S> <C> <C>
Term loan payable to bank under Revolving Credit and Term
Loan Agreement, interest payable at LIBOR (5.47% at December
27, 1999) plus 3% $ 15,000 $ -
Outstanding line of credit under Revolving Credit and Term
Loan Agreement, interest payable at prime (8.5% at December 27,
1999) plus 1.25% 4,200 -
Notes payable to banks under Revolving Credit Agreement,
interest payable quarterly at the bank's base rate (7.75% at
December 28, 1998) - 3,450
------------------------
Total outstanding debt 19,200 3,450
Less: amount classified as current (1,500) -
------------------------
Total long-term debt $ 17,700 $ 3,450
========================
</TABLE>
In April 1999, the Company paid off the outstanding balance of an existing
revolving credit agreement and entered into a Revolving Credit and Term Loan
Agreement with the same bank, along with other lending institutions. This
agreement provides for a revolving line of credit of up to $25 million and a
term loan of $15 million, each of which mature on March 31, 2004. The interest
rates on the revolving and term facilities are prime interest rate, plus a
maximum of 1.25% and LIBOR, plus a maximum of 3.00%, respectively. The Company
is required to pay a facility fee of .50% per annum on the unused portion of the
commitment. At December 27, 1999, the unused portion of the commitment was
approximately $20.8 million. The Revolving Credit and Term Loan Agreement
requires compliance with several financial and non-financial covenants,
including a financial covenant requiring the Company to maintain a leverage
ratio of 3:1. All of the Company's assets and the capital stock of each of its
subsidiaries are pledged as security to the banks in accordance with the terms
of the agreement. The carrying value of long-term debt as of December 27, 1999
approximates fair value.
26
<PAGE>
Principal payments due for each of the following five years is as follows
(in thousands):
Fiscal Years Ended
- ------------------
2000 $ 1,500
2001 4,000
2002 3,000
2003 4,000
2004 6,700
-------
$19,200
=======
Interest cost incurred and charged to expense was $2,023,000, $790,000, and
$3,292,000 in 1999, 1998, and 1997, respectively.
(8) LEASES
The Company is committed under long-term lease agreements primarily
involving land and restaurant buildings which expire on various dates through
2031. Also, a substantial number of leases contain renewal options ranging from
five to fifty years. Certain of the leases require the payment of an additional
amount by which a percentage of annual sales exceeds annual minimum rentals.
The total amount of such contingent rentals for the fiscal years 1999, 1998 and
1997 amounted to $2,029,000, $2,147,000 and $2,251,000, respectively.
Capital Leases
- --------------
At December 27, 1999, minimum lease payments under long-term capital leases
were as follows (in thousands):
Fiscal Years Ended
------------------
2000 $ 576
2001 576
2002 584
2003 520
2004 520
Thereafter 4,884
------
Total Minimum Lease Payments 7,660
Less: Amount Representing Interest 3,762
------
Total Obligations under Capital Leases 3,898
Less: Current Portion 185
------
Long-Term Obligations under Capital Leases,
with an Average Interest Rate of 9.5% $3,713
======
Amortization of leased property under capital leases is included in
depreciation and amortization on the accompanying consolidated statements of
results of operations.
27
<PAGE>
Operating Leases
- ----------------
The Company is committed under long-term operating leases to make minimum
rental payments as follows (in thousands):
Fiscal Year Ended
-----------------
2000 $ 4,372
2001 4,622
2002 4,306
2003 4,419
2004 4,060
Thereafter 24,771
-------
$46,550
=======
Minimum rental expense for all operating leases, excluding contingent rent,
for the fiscal years 1999, 1998 and 1997 was $3,442,000, $3,468,000 and
$4,140,000, respectively.
(9) EMPLOYEE BENEFIT PLANS
The Company's 401(k) Plan allows qualified employees to contribute through
payroll deductions from 1% to 10% of gross pay. The Company makes basic matching
contributions to the plan equal to 25% of the first 5% of the employee's
contribution, not to exceed $1,250 per employee per year. In addition, the
Company will make a supplemental 25% matching contribution on the first 5% of
the employees contribution, not to exceed $1,250 per employee, per year, on a
quarterly basis if targeted financial results are achieved. Company matching
contributions and administrative costs associated with the plan were $133,000,
$454,000 and $325,000 for the fiscal years 1999, 1998 and 1997, respectively.
The Company's Executive Benefit and Wealth Accumulation Plan allows
qualified key executives to defer compensation of at least $5,000 per year and
to obtain supplemental survivor and disability benefits.
(10) STOCK OPTION PLANS
In July 1989, the Board of Directors adopted and the stockholders of the
Company approved the 1989 Non-Qualified Stock Option Plan (the "1989 Plan")
which authorized the grant of non-qualified stock options to purchase up to
250,000 shares of the Company's common stock. Under the 1989 Plan, options to
purchase 250,000 shares were granted in 1989 to certain senior management and
other employees at a fair market value exercise price of $13.50 per share. The
options vested at a rate of 25% per year over four years and expire ten years
from the date of grant. In December 1991, the Board of Directors approved an
exchange program giving option holders under the 1989 Plan an opportunity to
surrender their existing options in exchange for the reissuance of a new option
with an exercise price of $8.50 that covers one-half the number of shares
covered by the existing option. The exchange also required the four-year vesting
schedule to start over. Options covering a total of 7,250 shares were reissued
in connection with this exchange program. In September 1995, the Board of
Directors approved an additional exchange program giving all option holders,
excluding executive officers, the opportunity to surrender their existing $13.50
options and $8.50 options for the reissuance of new options with an exercise
price of $6.25 that covers one-half the number of shares covered by the existing
$13.50 options and four-fifths the number of shares covered by the existing
$8.50 options. The exchange required a new two-year vesting period. In 1998, the
Board of Directors approved an adjustment disallowing future grants under the
1989 Plan.
28
<PAGE>
In February 1992, the Board of Directors adopted, and stockholders
approved, the 1992 Stock Option Plan (the "1992 Plan"), which authorized the
grant of non-qualified options to purchase up to 310,000 shares of the Company's
common stock. The options under the 1992 Plan were awarded at exercise prices
equal to the fair market value of the common stock at the date of grant. Through
1998, management and other employees were granted stock options to purchase an
aggregate of 377,000 shares of common stock (which included option grants for
shares totaling 70,500 related to previously granted and forfeited options). The
options vest at a rate of 20% per year over five years and expire ten years from
the date of grant. In 1998, the Board of Directors approved an adjustment
disallowing future grants under the 1992 Plan.
In May 1996, the Board of Directors adopted, and stockholders approved, the
1996 Stock Option Plan (the "1996 Plan"), which authorizes the grant of non-
qualified stock options to employees to purchase up to 1,000,000 shares of the
Company's common stock. Options were granted in 1997, 1998, and 1999 to
employees at exercise prices ranging from $4.19 to $8.63 per share, the fair
market value at the date of grant. The options granted generally vest at a rate
of 20% per year over five years and expire ten years from the date of grant.
There are 274,865 options available for future grant under the 1996 Plan as of
December 27, 1999.
In 1998, options to purchase a total of 10,000 shares of common stock were
granted to directors following the Company's annual meeting of shareholders
under the 1996 Nonemployee Director Stock Compensation Plan (see Note 11). There
were 12,500 options granted in 1997.
In addition to options granted under the plans described above, an option
to purchase 20,000 shares of common stock was granted to an officer of the
Company in April 1988 at a price of $2.31 per share. The option vested over a
five-year period and would have expired ten years from the date of grant. In
August 1997, this officer exercised the remaining 10,000 shares outstanding and
exercisable. An option to purchase 100,000 shares was granted in May 1997 to a
director of the Company at an exercise price of $6.75 per share, the fair market
value at date of grant. This option grant, which is not covered under the
Company's option plans, was subsequently approved at the annual stockholders'
meeting in May 1998, and expires ten years from date of grant. An option to
purchase 160,000 shares of common stock was granted to an officer of the Company
in March 1998 at a price of $7.00, the fair market value on the date of grant.
This option grant, which is not covered under the Company's option plans, was
subsequently approved at the annual stockholders' meeting in May 1998, and
expires ten years from date of grant.
There have been no charges to operations with respect to options granted in
the 1999, 1998 and 1997 fiscal years.
29
<PAGE>
The following table summarizes stock option transactions for the fiscal
years 1997, 1998 and 1999:
<TABLE>
<CAPTION>
Weighted Average
ISO Plan/ Option
Other 1989 Plan 1992 Plan 1996 Plan Total Shares Price Per Share
--------- --------- --------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
December 30, 1996 10,000 103,050 196,000 323,500 632,550 $7.84
Granted 512,500 - - 451,500 964,000 $7.52
Exercised (10,000) (1,250) (32,000) (13,800) (57,050) $5.68
Forfeited (400,000) (64,800) (89,400) (355,100) (909,300) $7.90
-------- ------- ------- -------- ---------
Outstanding
December 29, 1997 112,500 37,000 74,600 406,100 630,200 $7.46
Granted 170,000 - - 491,000 661,000 $6.80
Exercised - (3,500) (19,900) (1,630) (25,030) $6.21
Forfeited - (18,050) (29,200) (294,990) (342,240) $7.81
-------- ------- ------- -------- ---------
Outstanding,
December 28, 1998 282,500 15,450 25,500 600,480 923,930 $6.83
Granted - - - 287,500 287,500 $4.71
Exercised - - - - -
Forfeited - (11,200) (16,500) (178,275) (205,975) $7.62
Outstanding at
December 27, 1999 282,500 4,250 9,000 709,705 1,005,455 $6.12
======== ======= ======= ======== =========
Exercisable at
December 27, 1999 157,500 4,250 9,000 123,425 294,175 $6.79
======== ======= ======= ======== =========
</TABLE>
The following table summarizes information concerning outstanding and
exercisable stock options as of December 27, 1999:
<TABLE>
<CAPTION>
Range of Shares Covered by Options Weighted Average Price Weighted Average
Exercise Prices Outstanding Exercisable Outstanding Exercisable Remaining Years
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$4.19-$6.25 450,965 52,535 $ 4.93 $ 5.41 9.20
$6.50-$8.63 548,490 235,640 $ 7.02 $ 6.95 7.90
$12.88-$12.88 6,000 6,000 $12.88 $12.88 4.13
----------------------------------------------------------------------
Total 1,005,455 294,175 $ 6.12 $ 6.79 8.46
======================================================================
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, ("Accounting
for Stock Issued to Employees"), and related interpretations in accounting for
its employee stock option plans and, accordingly, does not recognize
compensation expense. Had the Company elected to recognize compensation expense
based
30
<PAGE>
on the fair value at the grant date for options granted under the plans
consistent with the methodology prescribed under SFAS No. 123, the Company's net
income (loss) and per share amounts would reflect the following pro forma
amounts (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net (Loss) Income
As Reported $(3,540) $ 571 $(31,118)
Pro Forma $(3,924) $ 209 $(31,406)
Net (Loss) Income
Per Common Share:
As Reported $ (.30) $ .05 $ (2.91)
Pro Forma $ (.33) $ .02 $ (2.94)
Weighted average fair value
of options granted $ 2.59 $ 2.93 $ 3.36
Expected stock price volatility 49% 47% 46%
Risk-free interest rates 6.3% 4.8% 5.8%
Expected lives 6.0 years 4.0 years 4.9 years
Dividend yield 0.0% 0.0% 0.0%
</TABLE>
In accordance with SFAS 123, pro forma amounts reflect only options granted
since fiscal year 1996 and not the options granted prior to 1996 from the 1989
Plan and 1992 Plan. Therefore, the full impact of calculating compensation cost
for stock options is not reflected in the pro forma results set forth above
because compensation cost is reflected over the options' vesting period and
compensation cost for options granted prior to fiscal year 1996 is not
considered. In addition, these amounts may not be representative of the impact
on net income and earnings per share in future years due to future grants and
vesting requirements.
(11) STOCKHOLDERS' EQUITY
The Company's preferred stock may be issued in one or more series and the
Board of Directors may fix the designation, powers, preferences, rights,
qualifications, limitations and restrictions of each class or series so
authorized.
In May 1996, the Board of Directors adopted and stockholders of the Company
approved the 1996 Nonemployee Director Stock Compensation Plan. The plan
provides the right for each nonemployee director, at his or her election, to
receive Company common stock and stock options in lieu of cash compensation and
the automatic grant to each participating director of an option to purchase
2,500 shares of common stock as of the date of each annual meeting of
shareholders. There are a total of 50,000 shares reserved for issuance under the
plan. A total of 12,630, 10,122 and 7,846 shares of common stock were issued to
directors under this plan in 1999, 1998, and 1997, respectively.
(12) RELATED PARTY TRANSACTIONS
Related party transactions with EGI Risk Services, Inc., EGI Corporate
Investments, Inc., Lettuce Entertain You Enterprises, Inc. and Rosenberg and
Liebentritt, P.C. totaled $1,638,000, $2,103,000, and $772,000 in 1999, 1998,
and 1997, respectively. The transactions reflect arm's length transactions
involving insurance brokerage, consulting and legal services. The relationships
stem from one or more members of the Company's Board of Directors maintaining
influential management positions at or within these organizations.
31
<PAGE>
(13) COMMITMENTS AND CONTINGENCIES
Litigation and Other Contingencies
- ----------------------------------
The Company periodically is a defendant in cases incidental to its business
activities. While any litigation or investigation has an element of uncertainty,
the Company believes that the outcome of any of these matters will not have a
materially adverse effect on its financial condition or operations.
The Company maintains letters of credit primarily to cover insurance
reserves. At December 27, 1999, outstanding letters of credit amounted to
$2,464,000.
The Company has guaranteed certain bank debt obligations of third parties
with maximum potential liability totaling $5,035,000 as of December 27, 1999.
The Company is contingently liable, in certain circumstances, for certain
lease obligations of the Islands restaurants sold in 1996.
32
<PAGE>
(14) SUMMARY OF UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following is a summary of the unaudited quarterly results of operations
for 1999 and 1998 (in thousands, except per share data):
<TABLE>
<CAPTION>
1999 Quarter Ended
- ------------------------------------------------------------------------------------------------------
March 29 June 28 September 27 December 27
<S> <C> <C> <C> <C>
Revenues $34,631 $37,329 $36,040 $32,937
------- ------- ------- -------
Costs and Expenses:
Cost of Sales 11,099 11,810 11,416 10,734
Restaurant Labor 10,406 11,056 10,518 10,035
Other Operating Costs 7,904 8,155 7,825 8,046
Selling, General and
Administrative Expenses 2,986 3,142 2,905 2,439
Depreciation and Amortization 1,837 2,034 1,996 1,963
Gains on Sales of Assets - (742) - -
Write-down of Assets and Restructuring - - - 4,890
and Unusual Charges
Interest Expense 275 328 803 617
Interest Income - - - -
--------------------------------------------------------
Total Costs and Expenses 34,507 35,783 35,463 38,724
------- ------- ------- -------
Income (Loss) Before Income Taxes 124 1,546 577 (5,787)
Provision (Benefit) for Income Taxes - - - -
Net Income (Loss) $ 124 $ 1,546 $ 577 $(5,787)
========================================================
Net Income (Loss) Per Share $ .01 $ .13 $ .05 $ (.49)
========================================================
Weighted Average Shares Outstanding 11,763 11,763 11,767 11,775
========================================================
</TABLE>
33
<PAGE>
(14) SUMMARY OF UNAUDITED QUARTERLY FINANCIAL INFORMATION - (CONTINUED)
<TABLE>
<CAPTION>
1998 Quarter Ended
- ------------------------------------------------------------------------------------------------------
March 30 June 29 September 28 December 28
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $37,152 $38,522 $37,018 $32,496
------- ------- ------- -------
Costs and Expenses:
Cost of Sales 11,957 12,172 12,336 10,923
Restaurant Labor 10,022 10,782 11,051 10,223
Other Operating Costs 8,428 9,358 8,708 8,461
Selling, General and Administrative
Expenses 3,586 3,851 3,655 3,261
Depreciation and Amortization 1,823 1,821 1,717 1,240
Gains on Sales of Assets - - - (1,534)
Interest Expense 211 179 193 207
Interest Income - (1) (13) -
------- ------- ------- -------
Total Costs and Expenses 36,027 38,162 37,647 32,781
------- ------- ------- -------
Income (Loss) Before Income Taxes 1,125 360 (629) (285)
Provision (Benefit) for Income Taxes 349 112 (153) (308)
------- ------- ------- -------
Net Income (Loss) $ 776 $ 248 $ (476) $ 23
======= ======= ======= =======
Net Income (Loss) Per Share $ .07 $ .02 $ (.04) $ -
======= ======= ======= =======
Weighted Average Shares Outstanding 11,734 11,730 11,752 11,763
======= ======= ======= =======
</TABLE>
34
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Chart House Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of Chart House
Enterprises, Inc. (a Delaware corporation) and subsidiaries as of December 27,
1999 and December 28, 1998, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three fiscal
years in the period ended December 27, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Chart House Enterprises, Inc.
and subsidiaries as of December 27, 1999 and December 28, 1998, and the results
of their operations and their cash flows for each of the three fiscal years in
the period ended December 27, 1999 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 24, 2000
35
<PAGE>
BOARD OF DIRECTORS
BARBARA R. ALLEN
Chief Operating Officer,
Paladin Resources, L.L.C.
LINDA WALKER BYNOE
President and Chief Executive Officer,
Telemat Ltd.
WILLIAM M. DIEFENDERFER III
Partner,
Diefenderfer, Hoover, Boyle & Wood
F. PHILIP HANDY
Private Investor
STEPHEN OTTMANN
President and Chief Executive Officer,
Lettuce Entertain You Enterprises, Inc.
THOMAS J. WALTERS
President and Chief Executive Officer,
Chart House Enterprises, Inc.
SAMUEL ZELL
Chairman,
Equity Group Investments, L.L.C.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
Chicago, Illinois
TRANSFER AGENT & REGISTRAR
BankBoston, N.A.
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
(781) 575-3120
www.equiserve.com
ANNUAL MEETING
The Company's annual meeting of
stockholders will be held Monday,
May 15, 2000 at 10:00 a.m. at:
One North Franklin Street
Third Floor
Chicago, Illinois 60606
36
<PAGE>
COMPANY OFFICERS
THOMAS J. WALTERS
President and Chief Executive Officer
WILLIAM M. SULLIVAN
Executive Vice President and Chief Financial Officer
NYDIA I. CASAS
Vice President--Purchasing
THOMAS S. DOWNS
Vice President--Marketing
PETER A. LUCAS
Vice President--Chart House Operations, East
LAURA A. MONDROWSKI
Vice President and Corporate Counsel
SUSAN MORLOCK
Vice President--Human Resources
MARK RUNNING
Vice President--Chart House Operations, West
TIMOTHY WHITLOCK
Vice President--Angelo and Maxie's Operations
CORPORATE OFFICES
640 LaSalle Street, Suite 295
Chicago, IL 60610
(312) 266-1100
37
<PAGE>
THE COMPANY
Chart House Enterprises, Inc., based in Chicago, Illinois, operates 39 Chart
House restaurants, one Peohe's restaurant, and one Angelo and Maxie's steakhouse
which are full-service dinner houses located in 17 states.
COMMON STOCK INFORMATION
The Company's Common Stock is listed on the New York Stock Exchange under the
trading symbol CHT. On March 7, 2000, there were approximately 600 holders of
record of the Company's Common Stock. The Company has not paid any cash
dividends on its Common Stock and does not anticipate paying cash dividends in
the foreseeable future. The following table sets forth the quarterly high and
low sales prices for a share of the Company's Common Stock for the two most
recent fiscal years.
1999 HIGH LOW
- ---------------------------------------------------
First Quarter 6 1/4 4
Second Quarter 6 11/16 4
Third Quarter 7 7/16 5 5/16
Fourth Quarter 6 4 1/8
1998 HIGH LOW
- ---------------------------------------------------------------
First Quarter 7 3/8 6
Second Quarter 9 3/16 6 11/16
Third Quarter 8 11/16 4 9/16
Fourth Quarter 6 1/8 4
SEC FORM 10-K REPORT
A copy of the Company's annual report to the Securities and Exchange Commission
on Form 10-K is available without charge to stockholders and may be obtained by
writing to:
Chief Financial Officer
Chart House Enterprises, Inc.
640 LaSalle Street, Suite 295
Chicago, Illinois 60610
STOCKHOLDER MAILING LIST
The Company maintains a direct mailing list to ensure that stockholders whose
shares are held in the name of a brokerage firm, bank or other person may
receive corporate reports on a timely basis. If you would like your name added
to this list, please send us your request in writing.
38
<PAGE>
CHART HOUSE ENTERPRISES, INC. Exhibit 21
SUBSIDIARIES AS OF DECEMBER 27, 1999
<TABLE>
<CAPTION>
Name State of Incorporation Trade Name
- ----- ---------------------- ----------
<S> <C> <C>
Chart House, Inc. Delaware Chart House, Peohe's
Big Wave, Inc. Delaware
(formerly known as
Islands Restaurants, Inc.)
Chart House Acquisition, Inc. Delaware Angelo and Maxie's
West 52/nd/ Street, Inc. Delaware Angelo and Maxie's
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-27-1999
<PERIOD-START> DEC-29-1998
<PERIOD-END> DEC-27-1999
<CASH> 424
<SECURITIES> 0
<RECEIVABLES> 2,969
<ALLOWANCES> 0
<INVENTORY> 2,282
<CURRENT-ASSETS> 6,493
<PP&E> 109,637
<DEPRECIATION> 42,621
<TOTAL-ASSETS> 99,489
<CURRENT-LIABILITIES> 20,787
<BONDS> 0
0
0
<COMMON> 118
<OTHER-SE> 56,171
<TOTAL-LIABILITY-AND-EQUITY> 99,489
<SALES> 140,937
<TOTAL-REVENUES> 140,937
<CGS> 45,059
<TOTAL-COSTS> 87,074
<OTHER-EXPENSES> 11,472
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,023
<INCOME-PRETAX> (3,540)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,540)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,540)
<EPS-BASIC> (0.30)
<EPS-DILUTED> (0.30)
</TABLE>
