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EXHIBIT 5.1
AMENDMENT TO STANDBY PURCHASE AGREEMENT
THIS AMENDMENT, dated as of May 11, 2001 (this "Amendment"), is entered
into by and between Chart House Enterprises, Inc., a Delaware corporation (the
"Company") and EGI-Fund (01) Investors, L.L.C., a Delaware limited liability
company (the "Standby Purchaser").
WHEREAS, the Company and the Standby Purchaser have entered into a Standby
Purchase Agreement, dated as of March 26, 2001 (the "Standby Purchase
Agreement"); and
WHEREAS, the Company and the Standby Purchaser have agreed to amend the
Standby Purchase Agreement on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, the parties hereto hereby agree as follows:
1. Amendment of Standby Purchase Agreement. Effective as of the date
hereof, the Standby Purchase Agreement is hereby amended as follows:
(a) The second Whereas clause is amended to read in its entirety as
follows:
WHEREAS, the Company is implementing a rights offering (the "Rights
Offering") with a gross aggregate offering amount of $8,500,000, pursuant to
which the Company will distribute to stockholders ("Stockholders") of record of
the Company as of a record date (the "Record Date") to be determined,
transferable rights (each, a "Right" and collectively, the "Rights") to
subscribe for shares of Series A senior convertible redeemable preferred stock
of the Company (the "Series A Preferred Shares"), at a subscription price equal
to the lower of (i) the average closing price of the Company's Common Stock over
the 20 trading days immediately preceding the date of the effectiveness under
the Securities Act of 1933, as amended, of the Registration Statement relating
to the Rights Offering or (ii) $2.25 per share or $8,500,000 in the aggregate
(the "Subscription Price");
(b) Exhibit A is amended to read in its entirety as set forth in
Exhibit A hereto.
2. Effect Upon the Standby Purchase Agreement. This Amendment constitutes
an amendment to the Standby Purchase Agreement in accordance with Section 10.5
thereof. Except as specifically amended herein, the Standby Purchase Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
3. Counterparts; Facsimile Signatures. This Amendment may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. A facsimile copy of a
signature hereto shall be fully effective as if an original.
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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and
year first above written.
CHART HOUSE ENTERPRISES, INC.
By:
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Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer
EGI-FUND (01) INVESTORS, L.L.C.
By:
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Name: Xxxxxx X. Xxxxxxxxxxx
Title: Vice President
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EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES A PREFERRED STOCK
(PAR VALUE $1.00 PER SHARE)
OF
CHART HOUSE ENTERPRISES, INC.
Pursuant to Section 151(g) of the
General Corporation Law of the State of Delaware
Chart House Enterprises, Inc., a corporation (the "Corporation") organized
and existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
Article Fourth of the Certificate of Incorporation of the Corporation, the Board
of Directors at its meeting on , 2001 adopted the following
resolution creating a series of [ ] shares of Senior Convertible
Redeemable Preferred Stock, par value $1.00 per share, designated as "Series A
Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of Article Fourth of its
Certificate of Incorporation, a series of Preferred Stock, par value $1.00 per
share of the Corporation is hereby created, and that the designation and amount
thereof and the voting powers, preferences and relative, participating, optional
and other special rights of the shares of such series, and the qualifications,
limitations or restrictions thereof are as follows:
1. Designation and Number. The designation of the series of preferred stock
fixed by this resolution shall be "Series A Senior Convertible Redeemable
Preferred Stock" (hereinafter referred to as "Series A Preferred Stock" or this
"Series") and the number of shares constituting such series shall be
[ ].
2. Rank. The Series A Preferred Stock shall rank: (i) prior to all of the
Corporation's Common Stock, par value $.01 per share ("Common Stock") and (ii)
prior to any class or series of capital stock of the Corporation hereafter
created either specifically ranking by its terms junior to this Series or not
specifically ranking by its terms senior to or on parity with this Series
(collectively with the Common Stock, "Junior Securities"), in each case, as to
payment of dividends and as to distributions of assets upon liquidation,
dissolution or winding-up of the Corporation, whether voluntary or involuntary.
3. Dividends.
(a) General Dividend Obligation. (i) The holders of shares of this
Series shall be entitled to receive dividends per share at the rate (the
"Dividend Rate") of 10% per annum on
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the Liquidation Preference (as hereinafter defined) which shall be payable in
cash semi-annually in arrears, on the business day of and
of each year, commencing in 2001 (each, a "Dividend Payment
Date"), provided that to the extent the Corporation is restricted from paying
such dividends in cash by applicable law or agreements with its lenders, such
dividends shall be paid on such dates by the issuance of additional shares of
Series A Preferred Stock (including fractional shares) priced at the Conversion
Price (as hereinafter defined) then in effect.
(ii) In the case of the original issuance of shares of this
Series, dividends shall accrue and shall be cumulative from the date of issue.
Dividends payable on shares of this Series shall be computed on the basis of a
360-day year consisting of twelve 30-day months.
(iii) Dividends shall be payable to holders of record of this
Series as they appear on the books of the Corporation on each record date, not
less than 15 days nor more than 60 days preceding the date for payment thereof,
as may be fixed by the Board of Directors of the Corporation.
(b) Participation. In addition to the dividends described in paragraph
(a) above, in the event that the Corporation at any time or from time to time
shall declare, order, pay or make a dividend or other distribution on its Common
Stock (other than a dividend payable in shares of Common Stock or in rights,
options, warrants or convertible securities containing the right to subscribe
for or purchase shares of Common Stock), then the holders of shares of this
Series shall be entitled to receive from the Corporation with respect to each
share of this Series held, a dividend or other distribution which is equivalent
to the dividend or distribution that would be received by a holder of the number
of whole shares of Common Stock into which a share of this Series is convertible
pursuant to paragraph 5 hereof on the record date for such dividend or
distribution.
(c) Limitation on Dividends. For so long as any shares of this Series
are outstanding (i) no dividend (other than a dividend payable in shares of, or
warrants, rights or options exercisable for or convertible into shares of,
Common Stock or other Junior Security and cash in lieu of fractional shares in
connection with any such dividend) shall be declared or paid or set aside for
payment on or with respect to Junior Securities, unless, in each case, the full
amount of accrued and unpaid dividends (whether or not declared) on all
outstanding shares of this Series for all dividend periods ending on or before
the date of payment of such dividend shall have been paid or set apart for
payment or contemporaneously are declared and paid, and (ii) and no payment on
account of the redemption, purchase or other acquisition or retirement for value
by the Corporation (except in connection with a reclassification or exchange of
Junior Securities through the issuance of other Junior Securities (and cash in
lieu of fractional shares in connection therewith) or in connection with any
Benefit Arrangements (as hereinafter defined)) shall be made for any Junior
Securities, unless approved by holders of a majority of the shares of this
Series then outstanding. Subject to the foregoing limitations, dividends may be
paid on the Common Stock or other Junior Security out of any funds legally
available for such purpose when and as declared by the Board of Directors,
provided that dividends are also paid or set apart for payment on the shares of
this Series in accordance with subparagraph 3(b).
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4. Voting Rights.
(a) General Voting Rights. In addition to any voting rights provided
by law and the special voting rights provided herein, the holders of shares of
this Series shall be entitled to vote upon all matters upon which holders of the
Common Stock have the right to vote, together with the holders of Common Stock
and not as a separate class, on the basis of one vote for each share of Common
Stock issuable upon conversion of the shares of Series A Preferred Stock held of
record by such holders.
(b) Special Voting Rights.
(i) If and whenever at any time or times current dividends
payable on shares of this Series shall have been in arrears and unpaid in any
manner permitted under this Certificate of Designations, Preferences and Rights
of Series A Preferred (the "Certificate") in an aggregate amount equal to or
exceeding the amount of current dividends due and payable thereon for three (3)
semi-annual dividend periods (consecutive or otherwise), then the number of
directors constituting the Board of Directors shall be increased by two (2) and
the holders of shares of this Series shall have the right, voting separately as
a class, to elect two (2) directors of the Corporation to fill such
newly-created directorships.
(A) Such special voting right may be exercised initially
either at a special meeting of the holders of this Series called as hereinafter
provided, or at any annual meeting of stockholders held for the purpose of
electing directors, and thereafter at each such annual meeting. The right of the
holders of this Series to vote for the election of such members of the Board of
Directors of the Corporation as aforesaid shall continue until such time as all
current dividends accumulated on this Series shall have been paid in full in any
manner permitted under this Certificate, at which time the special voting rights
of the holders of this Series to vote separately as a class shall terminate and,
if such voting right of the holders of this Series shall have terminated,
subject to the requirements of the General Corporation Law of Delaware, the term
of the directors elected pursuant to subparagraph 4(b)(i) shall terminate.
(B) At any time when such voting rights shall have vested in
holders of this Series, a proper officer of the Corporation shall, upon the
written request of the record holders of at least 10% of the aggregate voting
power represented by the then outstanding shares of this Series, addressed to
the Secretary of the Corporation, call a special meeting of such holders for the
purpose of electing directors pursuant to paragraph 4(b)(i). Such meeting shall
be held at the earliest practicable date upon the notice required for annual
meetings of stockholders at the place for holding annual meetings of
stockholders of the Corporation or, if none, at a place designated by the Board
of Directors. If such meeting is not called by the proper officers of the
Corporation within thirty (30) days after the personal service of such written
request upon the Secretary of the Corporation, or within thirty-five (35) days
after mailing the same within the United States of America, by registered mail,
addressed to the Secretary of the Corporation at its principal office (such
mailing to be evidenced by the registry receipt issued by the postal
authorities), then the record holders of at least 10% of the aggregate voting
power represented by the then outstanding shares of this Series may designate in
writing one of their number to call such meeting at the expense of the
Corporation, and such meeting may be called by such person so designated upon
the notice required for annual meetings of stockholders and shall be held at
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the same place as is elsewhere provided for in this subparagraph 4(b)(i)(B) or
such other place as is selected by such designated stockholder.
Any holder of this Series who would be entitled to vote at such meeting
shall have access to the stock books of the Corporation for the purpose of
causing a meeting of stockholders to be called pursuant to the provisions of
this paragraph 4(b)(i). Notwithstanding the provisions of this subparagraph
4(b)(i)(B), no such special meeting shall be called during a period within
ninety (90) days immediately preceding the date fixed for the next annual
meeting of stockholders.
(C) At the meeting held for the purpose of electing
directors at which the holders of this Series shall have the right to elect two
(2) directors as provided herein, the presence in person or by proxy of the
holders of a majority of the aggregate voting power represented by the then
outstanding shares of this Series shall be required and shall be sufficient to
constitute a quorum of such class for the election of directors by such holders.
At any such meeting or adjournment thereof the absence of a quorum having such
special voting rights shall not prevent the election of directors other than
those to be elected by the holders of shares having such special voting rights,
and the absence of a quorum of the holders of capital stock entitled to elect
directors other than those to be elected by the holders of shares having such
special voting rights shall not prevent the election of directors to be elected
by the holders of shares having these special voting rights. Except as otherwise
required by law, in the absence of a quorum of the holders of this Series
entitled to vote for the election of directors pursuant to this Section 4(b)(i),
a majority of such holders present in person or by proxy shall have the power to
adjourn the meeting for the special election of directors, from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
(D) Any vacancy in the Board of Directors in respect of a
director elected by holders of shares of this Series pursuant to the voting
right created under this Section 4(b)(i) shall be filled by vote of the
remaining director so elected, or if there be no such remaining director, by the
holders of shares of this Series at a special meeting called in accordance with
the procedures set forth in subparagraph 4(b)(i)(A), or, if no such special
meeting is called, at the next annual meeting of stockholders.
(ii) So long as any shares of this Series remain outstanding, the
Corporation shall not, either directly or indirectly, without the affirmative
vote at a meeting or the written consent with or without a meeting of the
holders of at least two-thirds in number of shares of this Series then
outstanding, amend, alter or repeal any of the provisions of the Certificate of
Incorporation or the bylaws of the Corporation so as to affect adversely the
preferences, special rights or privileges or voting powers of shares of this
Series; provided, that the issuance of any class or series of capital stock of
the Corporation hereinafter created specifically ranking by its terms senior to
or on parity with this Series as to payments of dividends or as to distributions
of assets upon liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, shall be deemed, for purposes of this
subparagraph (i), to affect adversely the preferences, special rights and
privileges of shares of this Series.
(iii) So long as any shares of this Series remain outstanding,
the Corporation shall not, either directly or indirectly, without the
affirmative vote at a meeting or
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written consent with or without a meeting of the holders of at least a majority
of the shares of this Series then outstanding take any action which has the
effect of increasing the number of shares of this Series which the Corporation
is authorized to issue.
(iv) In exercising the voting rights set forth in this paragraph
4(b), each share of this Series entitled to such voting right shall have equal
voting power, notwithstanding any greater or lesser general voting powers of one
or more series or classes of stock.
(v) No consent of holders of shares of this Series shall be
required for (i) the creation of any indebtedness of any kind of the
Corporation, (ii) the authorization or issuance of any Junior Securities or
(iii) subject to subparagraphs 4(b)(ii) and 4(b)(iii), the issuance of any
shares of preferred stock.
5. Conversion Rights.
(a) Optional Conversion. (i) Each whole share of this Series may be
converted, at the option of the holder, at any time and from time to time, into
fully-paid and non-assessable shares of Common Stock; provided, a holder's right
to so convert shares of Series A Preferred Stock shall terminate as to shares
thereof that are redeemed by the Corporation on the redemption date therefor as
provided in and subject to the terms and conditions of paragraph 7 hereof. The
number of shares of Common Stock to which the holder of each share of this
Series shall be entitled upon conversion shall be the product obtained by
multiplying the number of whole shares of this Series to be converted by the
Conversion Rate. The "Conversion Price" shall be $2.25 [or if the offering price
is lower, such lower amount] initially, subject to adjustment as provided in
paragraph 5(e). The "Conversion Rate" shall be determined by dividing the sum of
$2.25 [or if the offering price is lower, such lower amount] plus all accrued
and unpaid dividends by the Conversion Price.
(ii) A holder of shares of this Series desiring to convert all or
a portion of the whole shares of this Series owned by such holder shall give
written notice thereof to the Corporation. Such notice shall be accompanied by
certificates, duly endorsed for conversion, evidencing the number of whole
shares of this Series such holder desires to convert, together with cash, if
any, required by subparagraph 5(c) hereof. The Corporation will, as soon as
practicable thereafter, deliver to such holder or to such holder's nominee or
nominees, a certificate or certificates for the appropriate number of shares of
Common Stock, together with cash, as provided in subparagraph 5(d), with respect
to any fractional shares otherwise issuable upon conversion and, in the event of
a partial conversion, a certificate representing the balance, if any, of the
whole shares of this Series represented by the surrendered certificate or
certificates but not converted to Common Stock.
(iii) If a holder has delivered notice to the Corporation of its
desire to convert all or a portion of its shares of this Series, and
certificates, duly endorsed for conversion in respect of such shares and cash,
if any, required by subparagraph 5(c) hereof, then all shares of this Series so
tendered to the Corporation shall be deemed to be no longer outstanding and,
notwithstanding the failure of the Corporation to issue the Common Stock, such
holder shall be deemed, for all purposes to be a holder of the number of shares
of Common Stock into which the
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shares of this Series such holder is entitled to receive pursuant to the terms
of this paragraph 5, in each case as of the close of business on the date on
which such conversion notice is delivered.
(b) Mandatory Conversion. The Series A Preferred Stock is subject to
mandatory conversion as provided in this subparagraph 5(b).
(i) (A) Conversion by the Corporation. If at any time after
, 2004, the closing price of the Common Stock, as reported by the
New York Stock Exchange Composite Tape (or the composite reporting system of any
other national securities exchange or quotation system on which the Common Stock
of the Corporation is then traded or quoted) exceeds 250% of the Liquidation
Preference, plus accrued and unpaid dividends, for thirty consecutive trading
days, provided that a daily average of at least 100,000 shares of the Common
Stock were traded during such period, and that at least 50,000 shares of the
Common Stock were traded on each of such trading days, then the Corporation
shall have the right, for a period of ninety (90) days thereafter, to cause the
automatic conversion of all outstanding shares of this Series at the Conversion
Rate then in effect. The Liquidation Preference for each share of this Series
shall be $2.25 [or if the offering price is lower, such lower amount].
(B) Conversion by the Majority Holders. Holders of a
majority of the outstanding shares of this Series at any time shall have the
right to cause the conversion of all outstanding shares of this Series at the
Conversion Rate then in effect by delivering written notice thereof, sent by
first class mail, postage prepaid, to the Corporation.
(ii) The Corporation shall give all holders of record of shares
of this Series prior written notice of the exercise by it or the majority
holders, as the case may be, of the right set forth in this subparagraph 5(b)
not less than thirty (30) days prior to the date upon which such conversion
shall occur. Such notice shall specify the place designated for exchanging
shares of this Series for shares of Common Stock, and shall be sent by first
class mail, postage prepaid, to each holder of record of shares of this Series
at such holder's address as shown in the records of the Corporation.
(iii) From and after the date of conversion, all rights of the
holders of any shares of this Series, as such, shall cease and terminate,
regardless of whether the holders of such shares of this Series have tendered
their certificates therefor in accordance with this subparagraph 5(b).
(c) Payment of Dividends. In the event that shares of this Series are
surrendered for conversion on any date during the period from the close of
business on a record date fixed for determining the holders entitled to receive
dividends to the opening of business on the corresponding payment date
designated for the payment of such dividends, the holder must also deliver to
the Corporation an amount equal to the dividend payable with respect to such
shares of this Series on such dividend payment date and shall continue to be
entitled to receive such dividend on such dividend payment date. In the event
that the date on which the shares are converted is the payment date designated
for the payment of such dividends, such holder will be entitled to receive the
dividend payable with respect to such shares of this Series and shall not be
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required to include any payment in the amount of the dividend payable with
respect to such converted shares of Series A Preferred Stock.
(d) Fractional Shares. The Corporation shall not issue fractional
shares of Common Stock upon conversion of this Series but, in lieu thereof,
shall pay to a holder cash in an amount equal to such fraction multiplied by the
closing price of the Common Stock, as reported by the New York Stock Exchange
Composite Tape (or the composite reporting system of any other principal
national securities exchange or quotation system on which the Common Stock is
then listed or quoted) on the trading day prior to the date on which the shares
are converted.
(e) Conversion Price Adjustments. (i) If, prior to the date on which
all shares of this Series are converted or redeemed, the Corporation shall (1)
pay a dividend in shares of Common Stock or make a distribution in shares of
Common Stock, (2) subdivide its outstanding Common Stock, (3) combine its
outstanding Common Stock into a smaller number of shares of Common Stock or (4)
issue by reclassification of its Common Stock other securities of the
Corporation, the Conversion Price in effect at the opening of business on the
record date for the determination of stockholders entitled to participate in
such transaction shall thereupon be adjusted, or, if necessary, the right to
convert shall be amended, such that the number of shares of Common Stock
receivable upon conversion of the shares of this Series immediately prior
thereto shall be adjusted so that the holder shall be entitled to receive, upon
the conversion of such shares of this Series, the kind and number of shares of
Common Stock or other securities of the Corporation which it would have owned or
would have been entitled to receive after the happening of any of the events
described above had its shares of this Series been converted immediately prior
to the happening of such event or any record date with respect thereto. Any
adjustment made pursuant to this subparagraph 5(e)(i) shall become effective
immediately after the effective date of such event and such adjustment shall be
retroactive to the record date, if any, for such event. No adjustment with
respect to any cash dividends (made out of current or accumulated earnings) on
shares of Common Stock shall be made.
(ii) Except in respect of transactions described in subparagraph
5(e)(i) above, if, prior to the date on which all shares of this Series are
converted or redeemed, the Corporation shall sell or issue Common Stock or
rights, options, warrants or convertible securities (or rights, options or
warrants to purchase convertible securities) containing the right to subscribe
for or purchase shares of Common Stock (collectively, "Rights"), and the sale or
issuance price per share of Common Stock (or in the case of Rights, the sum of
the consideration paid or payable for any such Right entitling the holder
thereof to acquire one share of Common Stock and such additional consideration
paid or payable upon exercise or conversion of any such Right to acquire one
share of Common Stock) is less than the lower of the then current Conversion
Price or the closing price of the Common Stock (as reported by the New York
Stock Exchange Composite Transactions or any other national securities exchange
or quotation system on which the Common Stock is then listed or quoted) for the
trading day immediately preceding the dates of such sale or issuance (the
"Current Common Stock Price"), the Conversion Price shall thereupon be adjusted
such that the number of shares of Common Stock receivable upon conversion of the
Series A Preferred Stock shall be the number determined by multiplying (1) the
number of shares of Common Stock receivable upon conversion of the shares of
this Series immediately prior to such issuance or sale by (2) a fraction (not to
be less than one) with a
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numerator equal to the product of the number of shares of Common Stock
outstanding after giving effect to such sale or issuance (and assuming, in the
case of Rights that such Rights had been fully exercised or converted, as the
case may be) and the Current Common Stock Price and a denominator equal to the
sum of (x) the product of the number of shares of Common Stock outstanding
immediately before the issuance or sale or the record date, as the case may be,
multiplied by the Current Common Stock Price and (y) the aggregate consideration
received or deemed to be received by the Corporation for the shares of Common
Stock to be issued or sold or to be purchased or subscribed for upon exercise of
such Rights. For the purposes of such adjustments, the Common Stock which the
holders of any such Rights shall be entitled to subscribe for or purchase shall
be deemed to be issued and outstanding as of the date of such issuance or sale
or the record date, as the case may be.
(iii) Except in respect of transactions described in subparagraph
5(e)(i) above, if, prior to the date on which all shares of this Series are
converted or redeemed, the Corporation shall declare, order, pay or make a
dividend or other distribution (including without limitation any distribution of
cash, other or additional stock or other securities or property or options, by
way of dividend or spin-off, reclassification, recapitalization or similar
corporate rearrangement or otherwise, but excluding dividends on the Common
Stock described in paragraph 3(b) or in the last sentence of subparagraph
5(e)(i)), then, in each case, the Conversion Price shall thereupon be adjusted
such that the number of shares of Common Stock thereafter receivable upon the
conversion of shares of this Series shall be determined by multiplying (1) the
number of shares of Common Stock theretofore receivable upon conversion of the
shares of this Series by (2) a fraction of which the numerator shall be the then
Conversion Price on the record date for the determination of stockholders
entitled to receive such dividend or other distribution, and of which the
denominator shall be such Conversion Price on such date minus the amount of such
dividend or distribution applicable to one share of Common Stock. The Board of
Directors of the Corporation shall determine the amount of such dividend or
distribution allocable to one share of Common Stock and such determination, if
reasonable and based upon the Board of Directors' good faith business judgment,
shall be binding upon the holder. Such adjustment shall be made whenever any
such distribution is made and shall become effective on the date of distribution
retroactive to the record date for the determination of stockholders entitled to
receive such distribution.
(iv) Upon the expiration of any Rights, if such shall not have
been exercised, the Conversion Price, to the extent that shares of this Series
have not been converted or redeemed, shall, upon such expiration, be readjusted
and shall thereafter be such as they would have been had they been originally
adjusted (or had the original adjustment not been required, as the case may be)
on the basis of (1) the fact that the only shares of Common Stock so issued were
the shares of Common Stock, if any, actually issued or sold upon the exercise of
such Rights and (2) such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Corporation (including for purposes
hereof, any underwriting discounts or selling commissions paid by the
Corporation) for the issuance, sale or grant of all such Rights, whether or not
exercised; provided, that no such readjustment shall have the effect of
increasing the Conversion Price by a proportion (relative to the Conversion
Price in effect immediately prior to such readjustment) in excess of the inverse
of the aggregate proportional adjustment thereof made in respect of the issue,
sale, or grant of such Rights.
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If the consideration provided for in any Right or the additional
consideration, if any, payable upon the conversion or exchange of any right
shall be reduced, or the rate at which any Right is exercisable or convertible
into or exchangeable for shares of Common Stock shall be increased, at any time
under or by reason of provisions with respect thereto designed to protect
against dilution, then, effective concurrently with each such change, the
Conversion Price then in effect shall first be adjusted to eliminate the effects
(if any) of the issuance (or deemed issuance) of such Right on the Conversion
Price and then readjusted as if such Right had been issued on the date of such
change with the terms in effect after such change, but only if as a result of
such readjustment the Conversion Price then in effect hereunder is thereby
reduced.
(v) For the purposes of this paragraph 5: (x) the consideration
for the issue or sale of any additional shares of Common Stock shall,
irrespective of the accounting treatment of such consideration, be deemed to be
the consideration actually received by the Corporation and (1) insofar as it
consists of cash, be computed at the net amount of cash received by the
Corporation, plus any expense paid or incurred by the Corporation and any
commissions or compensation paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services in connection with
such issue or sale, (2) insofar as it consists of property (including
securities) other than cash, be computed at the fair value thereof at the time
of such issue or sale, as determined in good faith by the Board of Directors of
the Corporation, and (3) in case additional shares of Common Stock are issued or
sold together with other stock or securities or other assets of the Corporation
for a consideration which covers both, be the portion of such consideration so
received, computed as provided in clauses (1) and (2) above, allocable to such
additional shares of Common Stock, all as determined in good faith by the Board
of Directors of the Corporation; (y) additional shares of Common Stock deemed to
have been issued pursuant to subparagraphs 5(e)(iv) relating to Rights, shall be
deemed to have been issued for a consideration per share determined by dividing
(1) the total amount, if any, received by the Corporation as consideration for
the issue, sale or grant of the Rights in question, less the value of the Rights
not actually received by the Corporation as consideration therefor, plus the
minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provisions contained therein
for a subsequent adjustment of such consideration to protect against dilution)
payable to the Corporation upon the exercise, conversion or exchange of such
Rights or, in the case of Rights which are rights, options or warrants for
convertible securities, the exercise of such Rights for convertible securities
and the conversion or exchange of such convertible securities, in each case
computing such consideration as provided in the foregoing clause (x) of this
subparagraph 5(e)(v), by (2) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for subsequent adjustment of such number to protect against
dilution) issuable upon the exercise, conversion or exchange of such Rights;
and, (z) additional shares of Common Stock deemed to have been issued pursuant
to subparagraph 5(e)(i) and (iii), relating to stock dividends, stock splits,
etc., shall be deemed to have been issued for no consideration. For the purposes
of this paragraph 5, the term "Common Stock" shall mean (i) the class of stock
designated as Common Stock in the Certificate of Incorporation of the
Corporation as may be amended as of the date hereof, or (ii) any other class of
stock resulting from successive changes or reclassification of such Common Stock
consisting solely of changes in par value or from par value to no par value, or
from no par value to par value.
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(vi) No adjustment in the Conversion Price shall be required
unless explicitly provided for in this paragraph 5 and unless such adjustment
(plus any adjustments not previously made by reason of this subparagraph
5(e)(vi)), would require an increase or decrease of at least five percent (5%)
in such price; provided, that any adjustments which by reason of this
subparagraph 5(e)(vi) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
subparagraph 5(e)(vi) shall be made to the nearest cent.
(vii) No adjustment shall be made (1) upon conversion of the
Series A Preferred Stock, (2) upon exercise of options and/or warrants of the
Corporation outstanding on the date hereof, (3) in respect of options, stock or
other stock-based benefits hereafter granted to employees, officers or directors
of or consultants to the Corporation, pursuant to stock option plans or other
plans, programs or agreements in effect on the date hereof or hereafter adopted
("Benefit Arrangements"), (4) in respect of dividends or distributions declared,
ordered, paid or made on the Common Stock in which shares of this Series may
participate pursuant to subparagraph 3(b), and (5) in respect of any dividend of
rights pursuant to a "poison pill" rights plan.
(viii) Whenever the Conversion Price is adjusted pursuant to any
of the foregoing provisions of this paragraph 5, the Corporation shall forthwith
prepare a written statement signed by the president or any vice president and
the treasurer or any assistant treasurer or the secretary or any assistant
secretary of the Corporation, setting forth the adjusted Conversion Rate
determine as provided in the paragraph 5, and in reasonable detail the facts
requiring such adjustment. Such statement shall be filed among the permanent
records of the Corporation and a copy thereof shall be furnished to any holder
requesting the same, and shall at all reasonable times during business hours be
open to inspection by the holders. Within 10 days of the event requiring an
adjustment, the Corporation shall also cause a notice, stating that such an
adjustment has been made and setting forth the adjusted Conversion Rate, to be
mailed, first-class, postage prepaid, to all then holders of record at their
addresses as the same appear on the stock records of the Corporation.
(f) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued Common Stock the
full number or shares of Common Stock deliverable upon the conversions of all
the then outstanding shares of this Series (including all shares issuable in
payment of dividends) and shall take all such action and obtain all such permits
or orders as may be necessary to enable the Corporation to validly and legally
issue fully paid and non-assessable shares of Common Stock upon the conversion
of Series A Preferred Stock. The Corporation shall use its best efforts to
obtain, prior to or concurrently with the first issuance of this Series, the
authorization for the listing of such shares and the shares of Common Stock
issuable upon conversion of this Series on The New York Stock Exchange and shall
use its best efforts to maintain for as long as any share of this Series shall
be outstanding such authorization or authorization for the listing of such
shares on a national securities exchange or quotation system. The Corporation
shall pay any and all transfer, stamp and other like taxes that may be payable
in respect of the issuance or delivery to a holder of shares of Common Stock or
conversion of the Series A Preferred Stock by such holder.
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6. Liquidation; Company Sale.
(a) Priority. If (i) the Corporation liquidates, dissolves or is wound
up, or (ii) the Corporation consolidates or merges into or with any other
corporation or corporations or any other entity or entities, or (iii) the
Corporation sells or transfers all or substantially all its assets, or (iv) a
majority of the then outstanding capital stock of the Corporation is sold in a
transaction, and in the case of clause (ii) hereof, such transaction results in
the stockholders of the Corporation immediately prior to the transaction
possessing less than fifty percent (50%) of the voting securities of the
surviving entity, or in the case of clause (iii) hereof, of the entity owning
such assets (a transaction described in clause (i) hereof being referred to as a
"Liquidation" and a transaction described in clauses (ii), (iii) or (iv) hereof
being referred to as a "Company Sale"), then, subject to the conversion right of
this Series provided in paragraph 5(a), the holders of the shares of this Series
shall be entitled to receive, before any distribution or payment is made upon
the Common Stock or any other Junior Securities, an amount per share equal to
the greater of :
(x) $2.25 [or if the offering price is lower, such lower amount], plus
all accrued but unpaid dividends to such date (collectively, the "Liquidation
Payments"), plus, if after the Liquidation Payments are made to the holders of
the shares of this Series, there are any remaining assets and funds of the
Corporation, such assets and funds shall be distributed to holders of this
Series and the Common Stock and any Junior Securities, ratably, on the basis
that all shares of this Series are deemed to have been converted into Common
Stock in accordance with the terms hereof; provided, however, that such
distributions to holders of shares of this Series (the "Participating
Liquidation Payments") shall not exceed $4,000,000 in the aggregate, reduced by
the product of (A) the number of shares of this Series converted into Common
Stock prior to the date of such distribution, multiplied by (B) a fraction, the
numerator of which is $4,000,000, and the denominator of which is the total
number of shares of this Series issued upon subscription therefor in the rights
offering of such shares to the stockholders of the Corporation to be made on or
about , 2001, and excluding any shares of this Series issued
thereafter, including any such shares issued as dividends pursuant to
subparagraph 3(a)(i) hereof; or
(y) the amount determined by dividing (A) the total consideration paid
or payable in respect of the Liquidation or Company Sale, whether such
consideration is in the form of cash, notes, earn-out payments, securities or
other property of any kind whatsoever, by (B) total number of shares of Common
Stock and any Junior Securities on the basis that all shares of this Series are
deemed to have been converted into Common Stock in accordance with the terms
hereof. From and after the date of a Liquidation or Company Sale, all rights of
the holders of any shares of this Series, as such, shall cease and terminate,
such shares shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and no consideration shall be delivered or
deliverable in exchange therefor other than the payments provided for herein.
(b) Notice. Written notice of a Liquidation or a Company Sale, stating
a payment date, the estimated amount of the payments to be made in connection
therewith and a description of the calculation thereof, and the place where such
payments shall be payable, shall be given by first class mail, postage prepaid,
not less than 30 days prior to the payment dated
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stated therein, to each holder of record of this Series at such holder's address
as the same appears on the stock records of the Corporation.
7. Redemption.
(a) Optional Redemption by the Company. (i) All, but not less than
all, of the shares of this Series may be redeemed, at the option of the Company,
on or before July 1, 2007, if at any time after , 2002, the Corporation
shall have consummated an underwritten public offering of equity securities
which results in gross proceeds to the Corporation of at least an amount
sufficient to pay off all outstanding indebtedness of the Corporation under the
Amended and Restated Subordinated Promissory Notes of the Corporation dated
February ___, 2001 and to pay the amounts necessary to redeem all of the
outstanding shares of this Series in accordance with this paragraph 7(a) (the
"Underwritten Offering"), and either the price of the securities sold in the
Underwritten Offering, or the average of the high and low sales prices of the
Common Stock on the day of the Underwritten Offering, is not less than the
Conversion Price than in effect.
(ii) If the Corporation desires to redeem all of the shares of
this Series pursuant to subparagraph 7(a)(i) hereof, it shall give written
notice thereof to all holders of such shares, accompanied by instructions
concerning delivery of the certificates representing such shares. Such notice
shall be given with ninety (90) days after the closing of the Underwritten
Offering.
(iii) The redemption price for the Preferred Shares pursuant to
subparagraph 7(a)(i) shall be equal to the Liquidation Preference, plus accrued
and unpaid dividends, multiplied by the following respective amounts:
Redemption Dates on or before July,
2003 2004 2005 2006 2007
---- ---- ---- ---- ----
1.50x 1.85x 2.25x 2.75x 3.40x
(b) Effect of Redemption. (i) If notice shall have been given as
provided in subparagraph 7(a)(ii) and the Corporation shall have set apart or
provided monies at the time and place specified for the payment of the
redemption price pursuant to such notice, including any accrued and unpaid
dividends, then from and after the redemption date, whether or not certificates
for such shares have been surrendered for cancellation, dividends on the shares
of this Series so called for redemption shall cease to accrue, such shares shall
no longer be deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the redemption price without interest thereon) shall cease; provided
that the Corporation shall not be required to redeem any shares of this Series
which have been converted to Common Stock prior to the close of business on the
redemption date. Upon surrender to the Corporation or its designated agent (in
accordance with the notice) of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Directors of the
Corporation shall so require and the notice shall so state), such shares shall
be redeemed by the Corporation at the redemption price. In case fewer than all
the shares
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represented by any such certificate are to be redeemed, a new certificate shall
be issued representing the unredeemed shares, without cost to the holder
thereof.
(ii) Any shares of this Series which have been redeemed or
converted shall, after such redemption or conversion, have the status of
authorized but unissued shares of Preferred Stock, without designation as to
series, until such shares are once more designated as part of a particular
series by the Board of Directors.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed as of this __ day of ___________________, 2001.
CHART HOUSE ENTERPRISES, INC.
By:
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Name:
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Title:
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