EXHIBIT 10.19(2)
STANDSTILL AGREEMENT
Standstill Agreement dated as of March 10, 1997 (this "Agreement")
among Chart House Enterprises, Inc., a Delaware corporation (the "Company"),
Chart House Investors, LLC, a Delaware limited liability company ("CHI"), and
Alpha/ZFT Partnership, an Illinois general partnership ("Alpha").
W I T N E S S E T H:
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WHEREAS, pursuant to a Stock Purchase and Sale Agreement dated as of
March 10, 1997 (the "Stock Purchase and Sale Agreement") among the Company, CHI
and Alpha, CHI has agreed to purchase from the Company, and the Company has
agreed to sell to CHI, 3,400,000 newly issued shares of the Company's Common
Stock, par value $.01 per share ("Common Stock").
WHEREAS, the Company and CHI are entering into this Agreement to
establish certain arrangements with respect to the relationships between them.
WHEREAS, the Company believes that these arrangements will be in the
best interests of the Company and all of its stockholders.
NOW, THEREFORE, intending to be legally bound, the parties hereto
agree as follows:
Section 1. Certain Definitions. As used in this Agreement, the
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following terms shall have the following meanings:
1.1 "Company Voting Securities" shall mean, collectively, Common
Stock, any preferred stock of the Company that is entitled to vote generally for
the election of directors, any other class or series of Company securities that
is entitled to vote generally for the election of directors and any other
securities, warrants, options or rights of any nature (whether or not issued by
the Company) that are convertible into, exchangeable for, or exercisable for the
purchase of, or otherwise give the holder thereof any rights in respect of,
Common Stock, Company preferred stock that is entitled to vote generally for the
election of directors, or any other class or series of Company securities that
is entitled to vote generally for the election of directors.
1.2 "Effective Date" means the date hereof.
1.3 The "Combined Voting Power" at any measurement date shall mean
the total number of votes which could have been cast in an election of directors
of the Company had a meeting of the stockholders of the Company been duly held
based upon a record date as of the measurement date if all Company Voting
Securities then outstanding and entitled to vote at such meeting
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were present and voted to the fullest extent possible at such meeting.
1.4 The terms "beneficial ownership," "person" and "group" shall have
the respective meanings ascribed to such terms pursuant to Regulation 13D-G
adopted by the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect
on the date hereof. The term "affiliate" shall have the meaning ascribed to
such term pursuant to Rule 12b-2 under the Exchange Act, as in effect on the
date hereof.
1.5 "Xxxx Group" means CHI, Alpha and their affiliates, collectively;
provided, however, that publicly held entities that might fall within this
definition (a "Public Xxxx Affiliate") shall not be treated as affiliates of
Alpha hereunder unless CHI, Alpha or any of their other affiliates took any
action, directly or indirectly, to suggest, encourage or assist such entity in
taking the relevant action to be attributed to the Xxxx Group hereunder. For
purposes of the preceding sentence and the similar clause appearing in the
second sentence of Section 3.1, the failure of CHI, Alpha or any of their
affiliates, upon learning of a public affiliate's action, to request that such
affiliate refrain from taking such action because of the provisions of this
Agreement will be deemed to constitute "encouraging or assisting" in such
action.
1.6 "Independent Director" means directors of the Company who (i) are
not employees or officers of the Company, (ii) are not serving as designees of
CHI pursuant to Section 4 hereof, and (iii) have no financial interest in and
are not otherwise associated with CHI, Alpha or their affiliates, excluding
however any equity interest of not more than 2% of any publicly-held entity.
The term "associated" means having a business, financial or familial
relationship that might reasonably be expected to affect the individual's
judgment with respect to matters in which a member of the Xxxx 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.
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2.1 CHI and Alpha jointly and severally represent and warrant to the
Company as follows:
(a) CHI is a limited liability company duly organized, validly
existing and in good standing under the laws of Delaware. Alpha is a
validly existing partnership under the laws of Illinois. Each of CHI and
Alpha has the power and authority to enter into this Agreement and perform
its respective obligations hereunder.
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(b) This Agreement has been duly authorized, executed and delivered by
CHI and Alpha and constitutes the legal, valid and binding agreement of CHI
and Alpha, enforceable against them in accordance with the terms hereof.
(c) Neither the execution and delivery of this Agreement nor the
performance of its obligations hereunder will conflict with, or result in a
breach of, or constitute a default under, any law, rule, regulation,
judgment, order or decree of any court, arbitrator or governmental agency
or instrumentality, or of any agreement or instrument to which CHI or Alpha
is bound or by which it is affected or of any charter documents of CHI or
Alpha.
(d) As of the Effective Date, no shares of Common Stock are currently
beneficially owned by any member of the Xxxx Group, except for those shares
of Common Stock acquired pursuant to the Stock Purchase and Sale Agreement.
2.2 The Company represents and warrants to CHI as follows:
(a) The Company is a validly existing corporation under the laws of
the jurisdiction of its organization and has the corporate power and
authority to enter into this Agreement and perform its obligations
hereunder.
(b) This Agreement has been duly authorized, executed and delivered by
the Company and constitutes the legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with the terms
hereof.
(c) Neither the execution and delivery of this Agreement nor the
performance of its obligations hereunder will conflict with, or result in a
breach of, or constitute a default under, any law, rule, regulation,
judgement, order or decree of any court, arbitrator or governmental agency
or instrumentality, or of any agreement or instrument to which the Company
is bound or by which it is affected or of any charter documents of the
Company.
Section 3. Covenants with Respect to the Company Voting Securities
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and Other Matters.
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3.1 Acquisition of Company Voting Securities. Except as the same may
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be approved by a majority of the Disinterested Directors in a specific
resolution to that effect adopted prior to the taking of such action, prior to
June 30, 2002, no member of the Xxxx Group shall, directly or indirectly,
acquire, offer to acquire, agree to acquire, become the beneficial owner of or
obtain any rights in respect of any Company Voting Securities, by purchase or
otherwise, or take any action in furtherance thereof, if the effect of such
acquisition, agreement or other action would be (either immediately or upon
consummation of any such
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acquisition agreement or other action, or expiration of any period of time
provided in any such acquisition, agreement or other action) to increase the
aggregate beneficial ownership of Company Voting Securities by the Xxxx Group to
such number of Company Voting Securities that represents or possesses greater
than 29.2% of the Combined Voting Power of Company Voting Securities, without
the approval of the majority of the Company's Disinterested Directors.
Notwithstanding the foregoing maximum percentage limitations, (A) no member of
the Xxxx Group shall be obligated to dispose of any Company Voting Securities
beneficially owned in violation of such maximum percentage limitations if, and
solely to the extent that, its beneficial ownership is or will be increased
solely as a result of (1) a repurchase of any Company Voting Securities by the
Company or any of its subsidiaries if such repurchase was approved by a majority
of the Disinterested Directors or (2) the purchase by any Public Xxxx Affiliate
unless CHI, Alpha or any of their other affiliates took any action, directly or
indirectly, to suggest, encourage or assist in such purchase and (B) the
foregoing shall not prohibit any purchase of Company Voting Securities directly
from the Company (including pursuant to the exercise of rights, oversubscription
rights or standby purchase obligations in connection with rights offerings by
the Company). For purposes of calculating the maximum percentage limitations,
all Company Voting Securities that are the subject of an agreement, arrangement
or understanding pursuant to which the Xxxx Group or any member thereof has the
right to obtain beneficial ownership of such securities in the future
(including, without limitation, the shares of Common Stock being sold after the
date hereof under the Stock Purchase and Sale Agreement as long as the Stock
Purchase and Sale Agreement constitutes a binding commitment to purchase and
sell those shares) shall also be deemed to be outstanding and beneficially owned
by the Xxxx Group or the applicable member thereof. If the Stock Purchase and
Sale Agreement shall be terminated as a result of a default by CHI thereunder,
then the number "29.2%" set forth in this paragraph shall be adjusted
automatically to "17%".
3.2 Distribution of the Company Voting Securities.
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(a) Except as the same may be approved by a majority of the
Disinterested Directors in a specific resolution to that effect adopted prior to
the taking of such action, no member of the Xxxx Group shall, directly or
indirectly, sell, transfer any beneficial interest in, pledge, hypothecate or
otherwise dispose of any Company Voting Security other than to another member of
the Xxxx Group prior to June 30, 2002, in a transaction that would result in a
transfer to any person or group that, to the knowledge of the Xxxx Group, upon
consummation of such sale, transfer or disposition, would, directly or
indirectly, have beneficial ownership of or the right to acquire beneficial
ownership of such number of Company Voting Securities as represent greater than
5.0% of the Combined Voting Power, except in response to certain tender or
exchange offers as permitted by Section 3.2(b).
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(b) Notwithstanding Section 3.2(a), on and after the eleventh business
day after commencement of a tender or exchange offer made by a person who is not
a member of the Xxxx Group for outstanding Company Voting Securities (a
"Qualifying Offer"), any member of the Xxxx Group may tender or exchange any
Company Voting Securities beneficially owned by it pursuant to such Qualifying
Offer if the Qualifying Offer shall have been approved by a majority of the
Disinterested Directors.
3.3 Proxy Solicitations, etc. Prior to June 30, 2002, no member of
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the Xxxx Group shall solicit proxies, assist any other person in any way,
directly or indirectly, in the solicitation of proxies, become a "participant"
in a "solicitation" or assist any "participant" in a "solicitation" (as such
terms are defined in Rule 14a-1 of Regulation 14A under the Exchange Act) in
opposition to the recommendation of a majority of the Disinterested Directors,
submit any proposal for the vote of stockholders of the Company, recommend or
request or induce or attempt to induce any other person to take any such
actions, or seek to advise, encourage or influence any other person with respect
to the voting of Company Voting Securities, in each case without the prior
approval of the majority of the Disinterested Directors.
3.4 No Voting Trusts, Pooling Agreements, or Formation of "Groups".
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Except as the same may be approved by a majority of the Disinterested Directors
in a specific resolution to that effect adopted prior to the taking of such
action, prior to June 30, 2002, neither CHI nor Alpha nor any other member of
the Xxxx Group shall form, join or in any other way participate in a
partnership, pooling agreement, syndicate, voting trust or other "group" other
than the Xxxx Group with respect to Company Voting Securities, or enter into any
agreement or arrangement or otherwise act in concert with any other person, for
the purpose of acquiring, holding, voting or disposing of Company Voting
Securities.
3.5 No Solicitation of Bidders. Except as the same may be approved
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by a majority of the Disinterested Directors in a specific resolution to that
effect adopted prior to the taking of such action, prior to June 30, 2002 no
member of the Xxxx Group shall directly or indirectly assist, encourage or
induce any person to bid for or acquire outstanding Company Voting Securities
which would result in such other person, directly or indirectly, beneficially
owning in excess of 5.0% of the Combined Voting Power of Company Voting
Securities, provided, however, that the mere sale of Company Voting Securities
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by any member of the Xxxx Group shall not constitute assisting, encouraging or
inducing within the meaning of this Section 3.5.
3.6 Material Transactions. Prior to June 30, 2002, no member of the
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Xxxx Group shall engage in any material transaction with the Company without the
prior approval of a majority of the Disinterested Directors.
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3.7 Non-Circumvention. Except as the same may be approved by a
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majority of the Disinterested Directors in a specific resolution to that effect
adopted prior to the taking of such action, prior to June 30, 2002 no member of
the Xxxx Group shall take any action, alone or in concert with any other person,
to seek control of the Company or otherwise seek to circumvent the limitations
of the provisions of Section 3 of this Agreement. Without limiting the
generality of the foregoing, without such approval no member of the Xxxx Group
shall (i) present to the Company or to any third party any proposal that can
reasonably be expected to result in a change of control of the Company or in any
increase beyond the percentage specified in Section 3.1 in the Combined Voting
Power of Company Voting Securities beneficially owned in the aggregate by the
Xxxx Group, (ii) publicly suggest or announce its willingness or desire to
engage in a transaction or group of transactions that would result in a change
of control of the Company or in any increase beyond the percentage specified in
Section 3.1 in the Combined Voting Power of Company Voting Securities
beneficially owned in the aggregate by the Xxxx Group, or (iii) initiate,
request, induce or attempt to induce or give encouragement to any other person
to initiate any proposal that can reasonably be expected to result in a change
of control of the Company or in any increase beyond the percentage specified in
Section 3.1 in the Combined Voting Power of Company Voting Securities
beneficially owned in the aggregate by the Xxxx Group.
3.8 Confidential Material.
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(a) Definitions. For purposes of this Section:
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(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 Xxxx Group or any of the Representatives (as defined below),
and all notes, reports, analyses, compilations, studies and other materials
prepared by the Xxxx 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 Xxxx 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 Xxxx Group or any of
the Representatives or becomes available to any member of the Xxxx Group or
any of the Representatives on a non-confidential basis from any source that
is not known by such member of the Xxxx Group or such Representative to be
bound by an obligation of confidentiality to the Company.
(ii) The term "Representatives" shall mean any and all
employees, agents, financial advisors, partners,
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affiliates or other representatives of any member of the Xxxx Group.
(b) Each member of the Xxxx 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,
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that (i) the Xxxx Group may make any disclosure of such information to which the
Company gives its prior consent, and (ii) any of such information may be
disclosed to the Representatives who need to know such information, and who are
informed of the confidential nature of the Confidential Material and of the
terms of this Section 3.8 and who agree to keep such information confidential.
In any event, the Xxxx 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 Xxxx 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 Xxxx 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 Xxxx Group, the
Xxxx Group is legally compelled to disclose, and to cooperate with any action by
the Company to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Material.
(d) CHI hereby acknowledges on behalf of itself and all members of the
Xxxx Group (and agrees to advise the Representatives and members of the Xxxx
Group who are informed in accordance with the terms or this Section 3.8 as to
the matters which are the subject of this Section 3.8), that the United States
securities laws prohibit, in certain circumstances, any person who has received
from an issuer material, non-public information, including certain information
that may be part of the Confidential Material, while such information is non-
public, from purchasing or selling securities of such issuer or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
(e) This Section 3.8 shall survive until the earlier of June 30, 2004
or two years following the date of termination of this Agreement.
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3.9 Guarantee by Alpha. Alpha hereby irrevocably and
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unconditionally guarantees the performance by CHI of all of its obligations
hereunder and under the other agreements and documents contemplated hereby.
Section 4. Voting of Company Securities and Other Related Matters.
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(a) Each member of the Xxxx Group that is a holder of record of
Company Voting Securities shall be present, and each member of the Xxxx 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 Xxxx Group may be counted for the purpose of determining the
presence of a quorum at such meetings.
(b) At all times prior to June 30, 2002, except to the extent
otherwise provided herein, the Company shall take all necessary or appropriate
action to assist in the nomination and election as directors of (i) that number
of individuals specified in Section 4(d) below designated by CHI to be elected
as directors of the Company, provided such designees are reasonably acceptable
to the Independent Directors at the time of their designation, and (ii) so long
as CHI is entitled to designate one or two directors, Independent Directors
constituting a majority of the total number of directors of the Company. All
persons to be so designated as Independent Directors shall be individuals
selected by a majority of the Independent Directors then in office, except that
one of the Independent Directors shall be an individual mutually acceptable to
CHI on the one hand and a majority of the Independent Directors on the other
hand. The Company hereby agrees and acknowledges that Xxx Xxxx and Xxxxxx Xxxxx
are reasonably acceptable to the Independent Directors as directors of the
Company. The Company further agrees that one position on the Board of Directors
of the Company is intended to be filled by the chief executive officer to be
selected by the Board of Directors of the Company. CHI shall cause its
designees on the Board of Directors of the Company to take all necessary or
appropriate action to assist in the nomination and election as directors of all
such nominees as may be selected to serve as Independent Directors in the manner
described above. The Xxxx Group and the directors designated by the Xxxx Group
shall not vote (as stockholders or directors) in favor of, and shall not take
any other action in furtherance of or seeking to cause, a reduction of the
number of directors of the Company below seven directors, the removal of any
directors, or a majority of the directors not consisting of Independent
Directors.
(c) For purposes of this Agreement, directors "designated by CHI"
shall include directors designated by CHI as anticipated by this Section 4, and
any other directors of the Company affiliated or associated with any member of
the Xxxx Group.
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(d) At all times prior to June 30, 2002, CHI shall be entitled to
designate the following number of directors pursuant to Section 4(b) hereof:
(i) so long as the members of the Xxxx Group that have executed this
Agreement as parties (the "Xxxx Contracting Parties") beneficially own at
least 15% of the Combined Voting Power of all Company Voting Securities
(calculated in accordance with Section 3.1 hereof and including, for these
purposes, the shares of Common Stock to be acquired from the Company
pursuant to the Stock Purchase and Sale Agreement as long as such agreement
is in effect), CHI shall have the right to designate two directors of the
Company, provided such designees are reasonably acceptable to the
Independent Directors at the time of their designation; and
(ii) so long as the Xxxx Contracting Parties beneficially own less
than 15%, but at least 7.5% of the Combined Voting Power of all Company
Voting Securities (as so calculated), CHI shall have the right to designate
one director of the Company, provided such designee is reasonably
acceptable to the Independent Directors at the time of his or her
designation;
provided, however, that at any time when the Xxxx Contracting Parties shall no
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longer beneficially own at least 15% of the Combined Voting Power of all Company
Voting Securities (as so calculated), CHI shall cause one of its two designees
to resign forthwith such that only one designee remains on the Board of
Directors of the Company; and provided, further, that at any time when the Xxxx
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Contracting Parties shall no longer beneficially own at least 7.5% of the
Combined Voting Power of all Company Voting Securities (as so calculated), CHI
shall not have the right to designate any directors of the Company, CHI's rights
under this Section 4 shall terminate, and CHI shall cause its designees to
resign forthwith such that no designee of CHI remains on the Board of Directors
of the Company. At any time when CHI shall have the right to designate one or
two directors, as the case may be, pursuant to this Section 4, the Company shall
not increase the number of directors to more than seven directors without the
prior written consent of CHI.
(e) Except as expressly set forth above, each member of the Xxxx Group
shall vote all Company Voting Securities owned of record by such member of the
Xxxx Group and shall cause all Company Voting Securities owned beneficially by
such member of the Xxxx Group to be voted with respect to the election or
removal of directors of Company, or any other matter that may be presented to
the stockholders of the Company that would relate to a possible change of
control of the Company, at the sole option of such member of the Xxxx Group,
either (i) in accordance with the recommendations of a majority of the
Disinterested Directors, or (ii) in the same proportions (including abstentions)
as the holders of record of Company Voting Securities other than those
beneficially owned by the Xxxx Group that are entitled to vote on
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the election of directors (or such other matter) vote their Company Voting
Securities, provided, however, that notwithstanding the foregoing (A) CHI may
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at all times vote its Company Voting Securities for the election or retention of
the one or two directors, as the case may be, designated by CHI in accordance
with Section 4(b) in elections in which they would cease to be directors if not
elected and (B) any member of the Xxxx Group may vote its Company Voting
Securities with respect to any matter presented to the stockholders of the
Company that would relate to a possible change of control of the Company either
(i) in favor of such matter if such matter was recommended by a majority of the
full Board of Directors or (ii) against such matter.
Section 5. Registration Rights. The Company covenants and agrees as
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follows:
5.1 Definitions. For purposes of this Section 5:
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(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 Xxxx Group.
(c) The term "Holder" means any Xxxx Contracting Party who owns of
record Registrable Securities.
5.2 Request for Registration.
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(a) If the Company shall at any time receive a written request from
the Holders of at least 500,000 shares of Common Stock that the Company file a
registration statement under the Act covering the registration of at least
500,000 shares of Common Stock, then the Company shall, within 10 days after the
receipt thereof, give written notice of such request to all Holders, and shall,
subject to the limitations of Section 5.2(b), effect as soon as practicable
after the receipt of such request the registration under the Act of all
Registrable Securities which the Holders request to be registered within 15 days
after the mailing of such notice by the Company in accordance with Section 9.3.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 5.2 and the Company
shall include such information in the written notice referred to in Section
5.2(a). In such event, the right of any Holder to include Registrable Securities
in such registration shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the
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underwriting to the extent provided herein. All Holders proposing to distribute
Registrable Securities through such underwriting shall (together with the
Company as provided in Section 5.4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Initiating Holders and reasonably acceptable to the Company.
The Company at its sole discretion may offer a right to participate in any
registration statement filed pursuant to this Section 5.2 to other holders of
Common Stock, and may itself participate in any registration statement filed
pursuant to this Section 5.2. However, notwithstanding any other provision of
this Section 5.2, if the offering is an underwritten offering and the lead
managing underwriter advises the Initiating Holders in writing that marketing
factors require a limitation of the number of shares of Common Stock to be
underwritten, then (subject to any contrary provisions in registration rights
agreements executed by the Company prior to the date hereof) the total number of
shares of Common Stock to be underwritten shall be reduced, with such reduction
coming first from selling stockholders who are not Holders, and then from the
Company. If further reduction is required, the Company shall so advise all
Holders of Registrable Securities that would have otherwise been underwritten
pursuant hereto, and the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Holders thereof,
including the Initiating Holders, in proportion (as nearly as practicable) to
the amount of Registrable Securities sought to be registered by each Holder.
(c) The Company is obligated to effect only two such registrations
pursuant to this Section 5.2; provided, however, that if, as a result of a
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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
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utilize this right more than twice in any 12-month period.
5.3 Piggyback Registration. If (but without any obligation to
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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
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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
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Section 5 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable efforts to
cause such registration statement to become effective, and, upon the
request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up to
120 days.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such states or other jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required
to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the underwriters of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
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obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing, and then use its best efforts to promptly correct such
statement or omission. Notwithstanding the foregoing and anything to the
contrary set forth in this Section 5.4, each Holder acknowledges that there
may occasionally be times when the Company must suspend the use of the
prospectus forming a part of the registration statement until such time as
an amendment to the registration statement has been filed by the Company
and declared effective by the SEC, or until such time as the Company has
filed an appropriate report with the SEC pursuant to the Exchange Act.
Each Holder hereby covenants that it will (a) keep any such notice strictly
confidential, and (b) not sell any shares of Common Stock pursuant to such
prospectus during the period commencing at the time at which the Company
gives the Holder notice of the suspension of the use of such prospectus and
ending at the time the Company gives the Holder notice that it may
thereafter effect sales pursuant to such prospectus. The Company shall
only be able to suspend the use of such prospectus for periods aggregating
no more than 60 days in respect of any registration and, in any event, the
120-day period of effectiveness referred to in Section 5.4(a) shall be
extended one day for each day that sales are suspended under this Section
5.4(f).
5.5 Furnish Information. It shall be a condition precedent to
-------------------
the obligations of the Company to take any action pursuant to this Section 5
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such
Holder's Registrable Securities and as may be required from time to time
to keep such registration current.
5.6 Expenses of Demand Registration. All expenses incurred by
-------------------------------
or on behalf of the Company in connection with registrations, filings or
qualifications pursuant to Section 5.2, including, without limitation, all
registration, filing and qualification fees, printers' and accounting fees, and
fees and disbursements of counsel for the Company, shall be borne by the
Company; provided, however, that the Company shall not be required to pay for
-------- -------
any expenses of any registration begun pursuant to Section 5.2 if the
registration request is
14
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating Holders
shall reimburse the Company promptly for all such reasonable expenses), unless
the Holders of a majority of the Registrable Securities agree to forfeit their
right to one demand registration pursuant to Section 5.2. In no event shall the
Company be obligated to bear any underwriting discounts or commissions relating
to registrable Securities or the fees and expenses of counsel to the selling
Holders.
5.7 Expenses of Piggyback Registration. The Company shall bear
----------------------------------
and pay all expenses incurred by or on behalf of the Company in connection with
any registration, filing or qualification of Registrable Securities with respect
to the registrations pursuant to Section 5.3 for each Holder, including, without
limitation, all registration, filing, and qualification fees, printing and
accounting fees and fees and disbursements of counsel for the Company relating
or allocable thereto, but excluding any underwriting discounts or commissions
relating to Registrable Securities and the fees and disbursements of counsel to
the selling Holders.
5.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 5.3 to include any of the Holders'
Registrable Securities in such underwriting or the registration statement
relating thereto unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by the Company. If the total
amount of securities, including Registrable Securities, requested by Holders and
other stockholders to be included in such offering exceeds the amount of
securities offered other than by the Company that the underwriters reasonably
believe can be offered without jeopardizing the success of the offering, then
the Company shall be required to include in the offering only that number of
such securities, including Registrable Securities, which the underwriters
believe will not jeopardize the success of the offering. To achieve any
necessary reduction in the securities to be sold, the securities to be excluded
from the offering shall first be selected (in each case, pro rata among such
class of holders according to the total amount of securities proposed to be
included in the registration statement or in such other proportions as shall
mutually be agreed to by such class of holders) in the following order (subject
to any contrary provisions in registration rights agreements executed by the
Company prior to the date hereof): (i) first, securities being included on
behalf of holders other than members of the Xxxx 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
15
must be excluded, securities offered by the Company shall be excluded.
5.9 Delay of Registration. No Holder shall have any right to
---------------------
obtain or seek an injunction restraining or otherwise delaying any registration
as the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 5.
5.10 Indemnification. In the event any Registrable Securities
---------------
are included in a registration statement under this Section 5:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder and the affiliates of such Holder, and their
respective directors, officers, general and limited partners, agents and
representatives (and the directors, officers, affiliates and controlling
persons thereof), and each other person, if any, who controls such Holder
within the meaning of the Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions
or violations (collectively a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus (but only if such statement
is not corrected in the final prospectus) contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading (but only if such omission is
not corrected in the final prospectus), or (iii) any violation or alleged
violation by the Company in connection with the registration of Registrable
Securities under the Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Act, the Exchange Act or any state
securities law; and the Company will pay to each such Holder, affiliate or
controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
-------- -------
indemnity agreement contained in this Section 5.10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or
action to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any
such Holder or controlling person.
16
Each indemnified party shall furnish such information regarding itself or
the claim in question as an indemnifying party may reasonably request in
writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the Act, the Exchange Act
or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with
such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this Section 5.10(b) in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
--------
however, that the indemnity agreement contained in this Section 5.10(b)
-------
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of such Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this section 5.10(b)
--------
exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
5.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
5.10, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties. The
failure to deliver written notice to the indemnifying party within a
reasonable time after the commencement of any such action, if materially
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
Section 5.10 to the extent of such prejudice, but the omission so to
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any
17
indemnified party otherwise than under this Section 5.10. The indemnified
party shall have the right, but not the obligation, to participate in the
defense of any action referred to above through counsel of its own choosing
and shall have the right, but not the obligation, to assert any and all
separate defenses, cross claims or counterclaims which it may have, and the
fees and expenses of such counsel shall be at the expense of such
indemnified party unless (i) the employment of such counsel has been
specifically authorized in advance by the indemnifying party, (ii) there is
a conflict of interest that prevents counsel for the indemnifying party
from adequately representing the interests of the indemnified party or
there are defenses available to the indemnified party that are different
from, or additional to, the defenses that are available to the indemnifying
party, (iii) the indemnifying party does not employ counsel that is
reasonably satisfactory to the indemnified party, or (iv) the indemnifying
party fails to assume the defense or does not reasonably contest such
action in good faith, in which case, if the indemnified party notifies the
indemnifying party that it elects to employ separate counsel, the
indemnifying party shall not have the right to assume the defense of such
action on behalf of the indemnified party and the reasonable fees and
expenses of such separate counsel shall be borne by the indemnifying party;
provided, however, that, the indemnifying party shall not, in connection
-------- -------
with any proceeding or related proceedings in the same jurisdiction, be
liable for the reasonable fees and expenses of more than one separate firm
(in addition to one firm acting as local counsel) for all indemnified
parties.
(d) The obligations of the Company and the holders under this Section
5.10 shall survive the completion of any offering of Registrable Securities
in a registration statement under this Section 5.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
(if any) entered into in connection with any underwritten public offering
of the Registrable Securities are in conflict with the foregoing
provisions, the provisions in such underwriting agreement shall control.
5.11 Reports Under the Exchange Act. With a view to making
------------------------------
available to the holders the benefits of Rule 144 and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144;
18
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required under the Act and the Exchange Act;
and
(c) furnish to any Holder forthwith upon request (i) a written
statement by the Company as to its compliance with the reporting
requirements of Rule 144, or as to whether it qualifies as a registrant
whose securities may be resold pursuant to Form S-3, (ii) a copy of the
most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Holder of any
rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
5.12 No Assignment of Registration Rights. The rights to cause
------------------------------------
the Company to register Registrable Securities pursuant to this Section 5 may
only be assigned by a Holder to a transferee or assignee of any Registrable
Securities if (i) such transferee or assignee is a Xxxx Contracting Party and
(ii) immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Act.
5.13 Waiver Procedures. The observance by the Company of any
-----------------
provision of this Section 5 may be waived (either generally or in a particular
instance and either retroactively or prospectively) with the written consent of
the Holders of a majority of the Registrable Securities, and any waiver effected
in accordance with this paragraph shall be binding upon each Holder of
Registrable Securities.
5.14 "Market Stand-off" Agreement. Any Holder of Registrable
----------------------------
Securities, if requested by an underwriter of any registered public offering of
Company securities being sold in a firm commitment underwriting, agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other Company
Voting Securities) held by such Holder other than shares of Registrable
Securities included in the registration during the seven days prior to, and
during a period of up to 120 days following, the effective date of the
registration statement. Such agreement shall be in writing in a form reasonably
satisfactory to the Company and such underwriter. The Company may impose stop-
transfer instructions with respect to the securities subject to the foregoing
restriction until the end of the required stand-off period.
Section 6. Term of Agreement; Certain Provisions Regarding
-----------------------------------------------
Termination. Unless this Agreement specifically provides for earlier or later
-----------
termination with respect to any particular right or obligation, this Agreement
shall terminate if the Xxxx Group shall, at any time (in compliance with this
Agreement), sell or otherwise dispose of or otherwise cease to
19
own Company Voting Securities such that the Xxxx Group beneficially owns in the
aggregate Company Voting Securities representing less than 2% of the Combined
Voting Power of all Company Voting Securities (calculated in accordance with
Section 3.1 and including the shares of Common Stock to be acquired from the
Company pursuant to the Stock Purchase and Sale Agreement as long as such
agreement is in effect).
Section 7. Legend and Stop Transfer Order. To assist in effectuating
------------------------------
the provisions of this Agreement, CHI hereby consents (i) to the placement, in
connection with the transactions contemplated by the Stock Purchase and Sale
Agreement or otherwise within 10 business days after any Company Voting
Securities become subject to the provisions of this Agreement, of the legend
specified in Section 4.10(b) of the Stock Purchase and Sale Agreement on all
certificates representing ownership of Company Voting Securities owned of record
or beneficially by any member of the Xxxx 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 Xxxx 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 Xxxx Group in compliance with the
provisions of this Agreement.
Section 8. Remedies.
--------
(a) CHI and the Company acknowledge and agree that (i) the provisions
of this Agreement are reasonable and necessary to protect the proper and
legitimate interests of the parties hereto, and (ii) the parties would be
irreparably damaged in the event any of the provisions of this Agreement
were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that, except as otherwise
provided in Section 5.9 hereof, each party shall be entitled to preliminary
and permanent injunctive relief to prevent breaches of the provisions of
this Agreement by the other party (or its affiliates) without the necessity
of proving actual damages or of posting any bond, and to enforce
specifically the terms and provisions hereof and thereof in any court of
the United States or any state thereof having jurisdiction, which rights
shall be cumulative and in addition to any other remedy to which the
parties may be entitled hereunder or at law or equity.
(b) In addition to any other remedy the Company may have under this
Agreement or in law or equity, if any member of the Xxxx Group shall
acquire or transfer any Company Voting Securities in violation of this
Agreement, such Company Voting Securities which are in excess of the number
20
permitted to be owned or controlled by the Xxxx Group or which have been
transferred by a member of the Xxxx Group in violation of the provisions of
this Agreement may not be voted by the owner thereof or any proxy therefor.
Section 9. General Provisions.
------------------
9.1 Consent to Jurisdiction; Service of Process. This agreement
-------------------------------------------
shall be governed by and interpreted and enforced in accordance with the laws of
the State of Delaware without giving effect to any conflicts of law provisions.
Each of the parties hereto irrevocably and unconditionally (a) agrees that any
suit, action or other legal proceeding (collectively, "suit") arising out of
this agreement shall be brought and adjudicated in the United States District
Court for the District of Delaware or the Southern District of California, or,
if such courts will not accept jurisdiction, in any court of competent civil
jurisdiction sitting in either the State of Delaware or the City of San Diego,
California, (b) submits to the jurisdiction of any such court for the purposes
of any such suit and (c) waives and agrees not to assert by way of motion, as a
defense or otherwise in any such suit, any claim that it is not subject to the
jurisdiction of the above courts, that such suit is brought in an inconvenient
forum or that the venue of such suit is improper. Each of the parties also
irrevocably and unconditionally consents to the service of any process,
pleadings, notices or other papers in a manner permitted by the notice
provisions of Section 9.3.
9.2 Additional Xxxx Group Parties; Joint and Several Obligations.
------------------------------------------------------------
All of the obligations of the Xxxx Group and its members hereunder shall be
joint and several. Each member of the Xxxx 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 Xxxx 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
Xxxx Group shall transfer securities to another member of the Xxxx Group unless
the transferee shall agree to be bound by this Agreement in the manner specified
above in this Section 9.2.
9.3 Notices. All notices, consents, requests, instructions,
-------
approvals and other communications provided for herein and all legal process in
regard hereto shall be in writing and shall be decreed to be validly given, made
or served when delivered personally or deposited in the U.S. mail, postage
prepaid, for delivery by express, registered or certified mail, or delivered to
a recognized overnight courier service, addressed as follows:
If to the Company:
21
Chart House Enterprises, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
With a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
If to CHI or any member of the Xxxx Group:
Chart House Investors, LLC
Two Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxx
With a copy to:
Xxxxxxxxx & Xxxxxxxxxxx
Two Xxxxx Xxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
And to:
Seyfarth, Shaw, Xxxxxxxxxxx & Xxxxxxxxx
00 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
or to such other address as may be specified in a notice given pursuant to this
Section 9.3.
9.4 Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect and shall in no
way be affected, impaired or invalidated. The parties hereto agree that they
will use their best efforts at all times to support and defend this Agreement.
9.5 Amendments. This Agreement may be amended only by an
----------
agreement in writing signed by each of the parties hereto; provided, however,
-------- -------
that any amendment executed by the Company must prior thereto be approved by a
majority of the Disinterested Directors then in office.
22
9.6 Descriptive Headings. Descriptive headings are for
--------------------
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
9.7 Counterparts; Facsimile Signatures. This Agreement shall
----------------------------------
become binding when one or more counterparts hereof, individually or taken
together, bears the signatures of each of the parties hereto. This Agreement
may be executed in any number of counterparts, each of which shall be an
original as against the party whose signature appears thereon, or on whose
behalf such counterpart is executed, but all of which taken together shall be
one and the same agreement. A facsimile copy of a signature of a party to this
Agreement or any such counterpart shall be fully effective as if an original
signature.
9.8 Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of and be enforceable by the successors and
assigns of the parties hereto.
23
IN WITNESS WHEREOF, the parties hereto intending to be legally bound
have duly executed this Agreement, all as of the day and year first above
written.
Company: CHART HOUSE ENTERPRISES, INC.
By: /s/ XXXXXXX X. XXXXX, XX.
-------------------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
--------------------------------------
Title: Executive Vice President
--------------------------------------
CHI: CHART HOUSE INVESTORS, LLC, by
ALPHA/ZFT PARTNERSHIP, its
managing member, by a general
partner of one of its general
partners
By: /s/ XXXXX X. XXXXXXXXX
-------------------------------------------
Name: Xxxxx X. Xxxxxxxxx
--------------------------------------
Title: Trustee
-------------------------------------
Alpha: ALPHA/ZFT PARTNERSHIP
by a general partner of one of its general
partners, solely for purposes of Section 3.9
of this Agreement
By: /s/ XXXXX X. XXXXXXXXX
-----------------------------------------
Name: Xxxxx X. Xxxxxxxxx
------------------------------------
Title: Trustee
-----------------------------------
