AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CLUCKER'S WOOD ROASTED CHICKEN, INC.;
PARADISE ACQUISITION CORP.;
CHART HOUSE ENTERPRISES, INC.;
AND
PARADISE BAKERY, INC.
DATED AS OF JULY 7, 1995
TABLE OF CONTENTS
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PAGE
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1. Recitals and Definitions.......................... 1
2. The Merger and Reorganization..................... 7
(a) Deposit of Funds............................. 7
(b) The Merger................................... 7
(c) Conversion of Shares......................... 8
(d) Closing...................................... 9
(e) Deliveries at Closing........................ 10
3. Representations and Warranties of Chart House and
Paradise.......................................... 10
(a) Organization, Standing and Power............. 10
(b) Capitalization............................... 10
(c) Authorization of Transaction................. 11
(d) Noncontravention............................. 11
(e) Subsidiaries................................. 11
(f) Paradise Financial Statements................ 12
(g) Events Subsequent to Most Recent Fiscal Year
End.......................................... 12
(h) Undisclosed Liabilities...................... 12
(i) Tax Matters.................................. 12
(j) Title to Assets.............................. 13
(k) Tangible Assets.............................. 13
(l) Real Property................................ 13
(m) Intellectual Property........................ 14
(n) Real Property Leases......................... 15
(o) Contracts.................................... 16
(p) Notes and Accounts Receivable................ 17
(q) Powers of Attorney........................... 18
(r) Insurance.................................... 18
(s) Litigation................................... 18
(t) Employees.................................... 19
(u) Employee Benefits............................ 19
(v) Guaranties................................... 19
(w) Environment, Health, and Safety.............. 19
(x) Legal Compliance............................. 19
(y) Brokers' Fees................................ 20
(z) Disclosure................................... 20
4. Representations and Warranties of Chart House..... 20
(a) Organization and Standing.................... 21
(b) Authorization of Transaction................. 21
(c) Noncontravention............................. 21
(d) Securities Ownership......................... 21
(e) Certain Business Relationships with Paradise 22
(f) Disclosure................................... 22
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5. Representations and Warranties of Clucker's and
PAC............................................... 22
(a) Organization, Standing and Power............. 22
(b) Authorization of Transaction................. 22
(c) Noncontravention............................. 23
(d) Clucker's Financial Statements............... 23
(e) Brokers' Fees................................ 23
(f) Disclosure................................... 23
6. Pre-Closing Covenants............................. 24
(a) General...................................... 24
(b) Notices and Consents......................... 24
(c) Operation of Business........................ 24
(d) Preservation of Business..................... 24
(e) Full Access.................................. 25
(f) Notice of Developments....................... 25
(g) Exclusivity.................................. 25
(h) Employees.................................... 25
(i) Pre-Closing Inventory Writedown.............. 26
7. Conditions to Obligation to Close................. 26
(a) Conditions to Obligation of Clucker's and
PAC.......................................... 26
(b) Conditions to Obligations of Chart House and
Paradise..................................... 28
8. Post-Closing Covenants............................ 29
(a) Post-Closing Covenants of Clucker's.......... 29
(b) Post-Closing Covenants of Chart House........ 29
9. Termination....................................... 30
(a) Termination of Agreement..................... 30
(b) Effect of Termination........................ 31
10. Indemnification................................... 31
11. Survival of Representations and Warranties........ 34
12. Miscellaneous..................................... 34
(a) Notices...................................... 34
(b) Further Assurances........................... 35
(c) Costs and Expenses........................... 35
(d) Time......................................... 36
(e) Entire Agreement............................. 36
(f) Amendment.................................... 36
(g) Assignment................................... 36
(h) Choice of Law................................ 36
(i) Headings..................................... 36
(j) Pronouns..................................... 36
(k) Number and Gender............................ 36
(l) Construction................................. 36
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(m) Effect of Waiver............................. 36
(n) Severability................................. 37
(o) Enforcement.................................. 37
(p) Binding Nature............................... 39
(q) No Third-Party Beneficiaries................. 39
(r) Counterparts................................. 39
EXHIBITS
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Exhibit "A" - Agreement of Merger
Exhibit "B" - Joint Instructions
Exhibit "C" - Secured Promissory Note
Exhibit "D" - Pledge and Security Agreement
Exhibit "E" - Unconditional Guaranty of Payment
Exhibit "F" - Noncompetition Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of the 7th day of July, 1995, by and among CLUCKER'S WOOD
ROASTED CHICKEN, INC., a Florida corporation ("Clucker's"); PARADISE ACQUISITION
CORP., a Florida corporation wholly owned by Clucker's ("PAC"); CHART HOUSE
ENTERPRISES, INC., a Delaware corporation ("Chart House"), and PARADISE BAKERY,
INC., a Delaware corporation wholly-owned by Chart House ("Paradise").
Clucker's, PAC, Chart House and Paradise, collectively, shall be referred to
herein as the "Parties," and individually as a "Party."
R E C I T A L S:
----------------------
A. Each of the Boards of Directors of Clucker's, PAC, Chart House and
Paradise have approved the acquisition of Paradise by Clucker's.
B. Each of the Boards of Directors of Clucker's, PAC, Chart House and
Paradise have approved the proposed merger, on the terms and conditions set
forth in this Agreement, of PAC into Paradise (the "Merger") in accordance with
an Agreement of Merger (the "Merger Agreement") in substantially the form of
Exhibit "A" attached hereto and made a part hereof, which states, among other
things, the manner and basis of converting the issued and outstanding shares of
the common stock, $.01 par value per share, of PAC ("PAC Common Stock") into
shares of the common stock, $.01 par value per share, of Paradise ("Paradise
Common Stock").
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Parties hereto agree as follows:
1. RECITALS AND DEFINITIONS.
(a) The foregoing recitals are true and correct, and are incorporated
herein and made a part hereof.
(b) For purposes of this Agreement, the terms set forth below shall
have the following meanings:
"Adverse Consequences" means all adverse charges, com plaints,
notices, actions, suits, proceedings, hearings, investigations, claims, demands,
judgments, orders, decrees, stipulations, injunctions, damages, dues, penalties,
fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes,
liens, losses, expenses, and fees, including all attorneys' fees and court
costs, in any court or quasi-judicial or administrative agency of
any federal, state, local or foreign jurisdiction or before an arbitrator.
"Affiliate" has the meaning thereof set forth in the regulations
promulgated under the Securities Exchange Act.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Chart House" has the meaning set forth in the preface above.
"Cancelled Shares" has the meaning set forth in (S)2(c) below.
"Cash Current Assets" means the sum of cash and accounts receivable
reflected on a balance sheet for Paradise prepared in accordance with GAAP.
"Cash Current Liabilities" means the sum of accounts payable and
other accrued liabilities, less the amount of the noncash item with respect to
voluntary disability plan withholding from the employees of Paradise, reflected
on a balance sheet for Paradise prepared in accordance with GAAP.
"Cash Payment" has the meaning set forth in (S)2(c) below.
"Cash Working Capital" means Cash Current Assets minus Cash Current
Liabilities.
"Closing" has the meaning set forth in (S)2(d) below.
"Closing Date" has the meaning set forth in (S)2(d) below.
"Clucker's" has the meaning set forth in the preface above.
"Clucker's Financial Statements" has the meaning set forth in (S)5(d)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Delaware Secretary of State" has the meaning set forth in (S)2(b)
below.
"Deposit" has the meaning set forth in (S)2(a) below.
"Disclosure Schedule" has the meaning set forth in (S)3 below.
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"Effective Date" has the meaning set forth in (S)2(b) below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
(S)3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
(S)3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Extremely Hazardous Substance" has the meaning set forth in Sec. 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Florida Secretary of State" has the meaning set forth in (S)2(b)
below.
"Founders" means Founders Venture, Inc., a Delaware corporation.
"Founders' Definitive Agreement" has the meaning set forth in (S)2(c)
below.
"Founders' Sanwa Loan" has the meaning set forth in (S)7(b)(6) below.
"Franchisee Notes" has the meaning set forth in (S)2(c) below.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Indemnification Event" means any of the following:
(1) any Liability incurred, other than in the Ordinary Course of
Business, by Paradise that is not set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) or
otherwise disclosed in this Agreement or in the Disclosure
Schedule, including but not limited to any claim by any employee
of Paradise or by any landlord of Paradise with respect to a
monetary default, in
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each case, arising from the operations of Paradise prior to the
Closing Date. Notwithstanding anything in this Agreement to the
contrary, an "Indemnification Event" shall not include (i) any
landlord claim with respect to a non-monetary default or any
other claim, except franchisee claims (which are specifically
provided for in (S)10(a)(8) of this Agreement), arising after the
Closing Date from the operations of Paradise prior to the Closing
Date that is not covered (without regard to any deductibles or
co-insurance requirements) under the insurance coverages
maintained by Chart House as disclosed in the Disclosure
Schedule, as to which none of the directors or officers of either
Paradise or Chart House had Knowledge prior to or on the Closing
Date or (ii) any Liability arising out of an event or occurrence
that is disclosed in this Agreement or the Disclosure Schedule,
except as otherwise specifically provided in (S)10(a)(7) of this
Agreement.
(2) any expense incurred, other than in the Ordinary Course of
Business, by Paradise that should have been recorded as an
expense in the Most Recent Financial Statements in accordance
with GAAP that was not so recorded, including expenses in
connection with any claim by any employee of Paradise or by any
landlord of Paradise with respect to a monetary default, in each
case arising from the operations of Paradise prior to the Closing
Date. Notwithstanding anything in this Agreement to the contrary,
an "Indemnification Event" shall not include (i) expenses in
connection with any landlord claim with respect to a non-monetary
default or any other claim, except franchisee claims (which are
specifically provided for in (S)10(a)(8) of this Agreement),
arising after the Closing Date from the operations of Paradise
prior to the Closing Date that is not covered (without regard to
any deductibles or co-insurance requirements) under the insurance
coverages maintained by Chart House as disclosed in the
Disclosure Schedule, as to which none of the directors or
officers of either Paradise or Chart House had Knowledge prior to
or on the Closing Date, unless a corresponding Liability or
reserve is reflected on the face of the Most Recent Balance Sheet
or (ii) any expense arising out of an event or occurrence that is
disclosed in this Agreement or the Disclosure Schedule, except as
otherwise specifically provided in (S)10(a)(7) of this Agreement.
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"Indemnitee" has the meaning set forth in (S)10(c) below.
"Indemnitor" has the meaning set forth in (S)10(c) below.
"Intellectual Property" means all (a) trademarks, service marks,
trade dress, logos, trade names, and corporate names and registrations and
applications for registration thereof, (b) copyrights and registrations and
applications for registration thereof, (c) trade secrets and confidential
business information (including ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial, marketing, and business data, pricing and
cost information, business and marketing plans, and customer and supplier lists
and information), (d) other proprietary rights, and (e) copies and tangible
embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge of any of the current directors or
officers of the designated corporate entity after reasonable investigation.
"Law(s)" means any statute, regulation, rule, judgment, ordinance,
order, decree, stipulation, injunction, charge, or other restrictions of any
federal, state, or local government, governmental agency, or court.
"Liability" means any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated, and whether due or
to become due), including any liability for Taxes.
"Material Adverse Effect" means an adverse effect of $25,000 or more
upon the business, operations, properties, assets or condition (financial or
otherwise) of Paradise. In determining whether any individual event would
result in a Material Adverse Effect, notwithstanding that such event does not of
itself have such effect, a Material Adverse Effect shall be deemed to have
occurred if the cumulative effect of such event and all other then existing
events would result in a Material Adverse Effect.
"Merger" means the merger of PAC into Paradise.
"Merger Agreement" means the Agreement of Merger between PAC and
Paradise pursuant to which PAC will be merged into Paradise.
"Most Recent Balance Sheet" means the balance sheet contained within
the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in
(S)3(f) below.
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"Most Recent Fiscal Month End" has the meaning set forth in (S)3(f)
below.
"Most Recent Fiscal Year End" has the meaning set forth in (S)3(f)
below.
"Multiemployer Plan" has the meaning set forth in ERISA (S)3(37).
"Note" has the meaning set forth in (S)2(c) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PAC" has the meaning set forth in the preface above.
"PAC Common Stock" means the common stock, $.01 par value per share,
of PAC.
"Paradise" has the meaning set forth in the preface above.
"Paradise Common Stock" means the common stock, $.01 par value per
share, of Paradise.
"Paradise Financial Statements" has the meaning set forth in (S)3(f)
below.
"Pledge Agreement" has the meaning set forth in (S)2(c) below.
"POP" means Piece of Paradise, Inc., a California corporation.
"Prospective Employees" has the meaning set forth in (S)6(h) below.
"Reportable Event" has the meaning set forth in ERISA Sec. 4043.
"Santa Xxx Reimbursement" has the meaning set forth in (S)2(c) below.
"SBBC" means Solana Beach Baking Company, a wholly-owned subsidiary
of Chart House.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Exchange Act" means the Securities Exchange Act of 1934.
"Security Interest" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than (a) construction, mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable,
(c) liens arising under worker's compensation, unemployment insurance, social
security, retirement, and similar legislation, (d) liens arising in connection
with sales of foreign receivables, (e) liens on goods in transit incurred
pursuant to documentary letters of credit, (f) purchase money liens and liens
securing rental payments under capital lease arrangements, and (g) other liens
arising in the Ordinary Course of Business and not incurred in connection with
the borrowing of money.
"Subsidiary" means any corporation with respect to which another
specified corporation has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, capital stock, franchise, profits, withholding, social security,
unemployment, disability, Real Property, personal property, stamp, excise,
occupation, sales, use, transfer, value added, alternative minimum, estimated,
or other tax, including any interest, penalty, or addition thereto, whether
disputed or not.
"Third-Party Claim" has the meaning set forth in (S)10(c).
2. THE MERGER AND REORGANIZATION.
(a) DEPOSIT OF FUNDS. Prior to the execution hereof, Clucker's has
delivered to Chart House's attorneys, Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx, as
escrow agent, the amount of $100,000 (together with accrued interest thereon,
the "Deposit") to be held in escrow in a separate interest-bearing account
pursuant to the terms of Joint Instructions dated May 25, 1995, a copy of which
is attached hereto as Exhibit "B." The Deposit shall be credited against the
cash payment required to be paid by Clucker's to Chart House pursuant to Section
2(c) hereof and which amount shall be returned by Chart House to Clucker's only
in accordance with the provisions contained in Section 9(b) hereof.
(b) THE MERGER. Upon the terms and subject to the conditions of this
Agreement and the Merger Agreement, PAC shall be merged into Paradise pursuant
to the Merger Agreement, and the separate existence of PAC shall cease and
Paradise shall be the surviving corporation in the Merger. The Merger shall be
consummated when a properly executed Certificate of Merger is filed in
accordance with the Delaware General Corporation Law with the Secretary of State
of the State of Delaware (the "Delaware
7
Secretary of State") and properly executed Articles of Merger are filed in
accordance with the Florida Business Corporation Act with the Secretary of State
of the State of Florida (the "Florida Secretary of State"). When used in this
Agreement, the term "Effective Date" shall mean the date on which the
Certificate of Merger is filed with the Delaware Secretary of State and the
Articles of Merger are filed with the Florida Secretary of State.
(c) CONVERSION OF SHARES. As specified in the Merger Agreement, on
the Effective Date, by virtue of the Merger and without any further action on
the part of any of the Parties, (a) each share of PAC Common Stock outstanding
on the Effective Date shall, by virtue of the Merger and without any action on
the part of Clucker's, continue without change as a share of the common stock of
the surviving corporation, and (b) all of the outstanding shares of Paradise
Common Stock owned by Chart House immediately prior to the Merger (the
"Cancelled Shares") shall be cancelled, shall cease to exist and shall be
converted into the right to receive (x) cash (the "Cash Payment") in the amount
of $5,080,000, which sum includes the amount of the Deposit on the Effective
Date and reflects a credit to Clucker's of $20,000 for inventory writedowns
taken or to be taken from the amount reflected on the Most Recent Balance Sheet
pursuant to the mutual agreement of Clucker's and Chart House; (y) a promissory
note (the "Note") from Paradise in substantially the form of Exhibit "C"
attached hereto and made a part hereof in an original principal amount equal to
the aggregate unpaid principal balance at the Effective Date of those certain
purchase-money notes from certain franchisees to Paradise (the "Franchisee
Notes"), which are expected to have an aggregate remaining principal balance of
approximately $1,500,000 at the Effective Date (if, prior to the Closing Date,
Paradise has repurchased the franchisee store located in West Covina,
California, from POP, then the original principal amount of the Note shall also
include an amount equal to $150,000 in lieu of the amounts owed by POP to
Paradise), which Note is to be secured by the Pledge and Security Agreement (the
"Pledge Agreement") in substantially the form attached hereto as Exhibit "D" and
guaranteed by Clucker's pursuant to an Unconditional Guaranty of Payment
substantially in the form of Exhibit "E" attached hereto and made a part hereof
(the "Guaranty"); and (z) reimbursement by Clucker's to Chart House of up to
$125,000 of the costs incurred in connection with the remodeling of Paradise's
Santa Xxx location (the "Santa Xxx Reimbursement"), subject to Clucker's receipt
of documentation reasonably satisfactory to it evidencing the payment by Chart
House or Paradise of such costs.
If, at the Closing Date, Paradise's Cash Working Capital as of the end of
the month ending on the Closing Date, if the Closing Date is the last day of a
month, or as of the end of the month immediately preceding the Closing Date, if
the Closing Date is a day other than the last day of a month, is more than
$50,000 or less than $30,000 then the Cash Payment shall be increased by the
8
excess, or decreased by the amount of the deficit, as the case may be.
The Note shall (a) bear interest at the rate of 9.5% simple interest per
annum, which Chart House represents to be equal to or less than the minimum
blended interest rate payable pursuant to the Franchisee Notes; (b) be payable
interest only for the first three years; (c) be payable thereafter in 8 equal
quarterly payments of principal and interest; (d) be prepayable in whole or in
part at any time without penalty; (e) be secured by the Franchisee Notes; and
(f) require, to the extent that Clucker's or Paradise receives any cash
principal payment on any of the Franchisee Notes, a mandatory prepayment of a
like amount of principal on the Note within 10 business days after such receipt;
provided, however, that, if Clucker's enters into a definitive agreement to
acquire Founders pursuant to the terms of that certain letter of intent between
Clucker's, Founders and Founders' shareholders dated May 26, 1995 (the
"Founders' Definitive Agreement"), and then acquires Founders, Paradise shall
make mandatory principal prepayments on the Note in the same amounts and on the
same payment dates as Founders would have had to make principal payments on the
Franchisee Note from Founders; and provided further, however, that, if Clucker's
or Paradise acquires, during the term of the Note, any other Paradise franchisee
that is an obligor on a Franchisee Note, Paradise shall make mandatory principal
prepayments on the Note in the same amounts and on the same payment dates as
such franchisee would have had to make principal payments on its Franchisee
Note.
Clucker's shall pay the Santa Xxx Reimbursement to Chart House on December
29, 1995, in cash, by cashier's check or by wire transfer of funds. The amount
of the Santa Xxx Reimbursement actually paid shall be subject to offset, in
whole or in part, by the aggregate amount, as of the scheduled date of payment,
for which Clucker's is entitled to indemnification from Chart House pursuant to
Section 10 of this Agreement.
(d) CLOSING. The Closing of the transactions contemplated herein
(the "Closing") shall be held at the offices of Broad and Xxxxxx, 000 X.
Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxx, Xxxxxxx, on July 31, 1995, or no later
than the fourth business day thereafter, beginning at 10:00 a.m. local time (the
"Closing Date"), subject to extension of such closing timeframe for two
successive periods of one month each upon the mutual consent of Clucker's and
Chart House, which consent shall not be unreasonably withheld, or at such later
time as Clucker's and Chart House shall agree. A pre-closing shall be held on
the business day immediately preceding the Closing Date at the same location and
beginning at 10:00 a.m. local time. Subject to the provisions of the Merger
Agreement, as part of the Closing, a fully executed Certificate of Merger shall
be filed with the Delaware Secretary of State and fully executed Articles of
Merger shall be filed with the Florida Secretary of State both on the Closing
Date with an effective time and date of 12:01 a.m. on the Closing Date.
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(e) DELIVERIES AT CLOSING. The Parties shall execute and deliver to
each other such documents, certificates, agreements and other writings and take
such other actions as may be required to effect, evidence or implement the
transactions contemplated herein. To effect the payment and delivery of the
Cash Payment and the Note, the Parties on the Closing Date shall deliver the
following:
(1) DELIVERIES BY CHART HOUSE. Chart House shall deliver to
Clucker's stock certificates of Paradise representing the Cancelled Shares with
each such certificate marked "cancelled."
(2) DELIVERIES BY CLUCKER'S AND PARADISE. Clucker's shall
deliver to Chart House the Cash Payment and the Guaranty, and Paradise shall
execute and deliver to Chart House the Note and the Pledge Agreement.
3. REPRESENTATIONS AND WARRANTIES OF CHART HOUSE AND PARADISE. Chart
House and Paradise jointly and severally represent and warrant to Clucker's and
PAC that the statements contained in this (S)3 are correct and complete as of
the date of this Agreement, will remain correct and complete from the date of
this Agreement until the Closing Date and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this (S)3), except as set
forth in the disclosure schedule accompanying this Agreement (the "Disclosure
Schedule"). This portion of the Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this (S)3 and will be delivered at the time of execution and delivery of this
Agreement. Disclosure of a particular contract, matter or item in one numbered
paragraph of the Disclosure Schedule shall be sufficient disclosure of the
particular contract, matter or item for purposes of all of the representations
contained in this Section and the particular contract, matter or item need not
be repeated in each separate subsection of the Disclosure Schedule.
(a) ORGANIZATION, STANDING AND POWER. Paradise is a corporation duly
organized, validly existing and in good standing under the Laws of Delaware and
is in good standing and qualified to do business under the laws of each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties requires such qualification, including but not limited to
Arizona; California; Colorado; Hawaii; Oklahoma; Oregon; Texas; and Washington.
Paradise has the corporate power and authority to carry on the business in which
it is engaged and to own and use the properties owned, leased and used by it.
True, complete and correct copies of Paradise's Certificate of Incorporation and
Bylaws, as amended, have been previously provided to Clucker's.
(b) CAPITALIZATION. The authorized capitalization of Paradise
consists of 10,000 shares of common stock, $.01 par value per share, of which
1,000 shares are outstanding at the date of
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this Agreement. All outstanding shares have been duly authorized, validly
issued, and are fully paid and non-assessable. All such shares were issued in
compliance with applicable federal and state securities law. Except as set
forth in (S)3(b) of the Disclosure Schedule, there are no outstanding or
presently authorized securities, warrants, preemptive rights, subscription
rights, options or related commitments or agreements of any nature to issue any
of Paradise's securities. The holder of the outstanding shares will have no
appraisal or dissenters' rights in connection with the transactions contemplated
by this Agreement.
(c) AUTHORIZATION OF TRANSACTION. Paradise has the requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. Without limiting the generality of the
foregoing, the Board of Directors of Paradise has duly authorized the execution,
delivery, and performance of this Agreement by Paradise. This Agreement
constitutes the valid and legally binding obligation of Paradise, enforceable in
accordance with its terms and conditions, subject to the effect of (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights and remedies of creditors generally and (ii) general
principles of equity.
(d) NONCONTRAVENTION. Other than notices and/or consents and
approvals required to be made under bank credit agree ments, note agreements,
leases and contracts, each of which Chart House and Paradise will use their
respective best efforts to obtain prior to the Closing, neither the execution
and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby will (i) violate any Law to which Paradise is subject or any
provision of the Certificate of Incorporation or Bylaws of Paradise or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest, or other arrangement to
which Paradise is a party or by which it is bound or to which any of its assets
is subject, or result in the imposition of any Security Interest upon any of its
assets, except in each such case where such violation, conflict, breach,
default, acceleration, termination, modification, cancellation or other
applicable event would not have a Material Adverse Effect. Paradise need not
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency to consummate the
transactions contemplated by this Agreement.
(e) SUBSIDIARIES. Paradise does not have any Subsidiaries and does
not control directly or indirectly or have any direct or indirect equity
participation in any corporation, partnership, trust, or other business
association that is not a
11
Subsidiary, except as set forth in (S)3(e) of the Disclosure Schedule.
(f) PARADISE FINANCIAL STATEMENTS. Attached hereto as (S)3(f) of the
Disclosure Schedule are the following financial statements of Paradise
(collectively the "Paradise Financial Statements"): (i) audited balance sheets
and statements of income, changes in stockholders' equity, and cash flows as of
and for the fiscal year ended December 31, 1994 (the "Most Recent Fiscal Year
End"); and (ii) unaudited balance sheets and statements of income (the "Most
Recent Financial Statements") as of and for the four months ended April 30, 1995
(the "Most Recent Fiscal Month End"). The Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, are correct and complete, and are consistent with the
books and records of Paradise (which books and records are correct and complete
in all material respects); provided, however, that the Most Recent Financial
Statements are subject to normal year-end adjustments (which will not be
material) and lack footnotes and other presentation items.
(g) EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Since the Most
Recent Fiscal Year End, there has not been any change in the assets,
Liabilities, business, financial condition, operations or results of operations
of Paradise taken as a whole, except as disclosed in (S)3(g) of the Disclosure
Schedule, that, either individually or together with other changes, has caused a
Material Adverse Effect.
(h) UNDISCLOSED LIABILITIES. To the Knowledge of any of the
directors and officers of either Paradise or Chart House, except as set forth in
(S)3(h) of the Disclosure Schedule, Paradise has no Liability (and there is no
Basis for any present or future Adverse Consequence against Paradise giving rise
to any Liability) that would constitute a Material Adverse Effect, except for
(i) Liabilities set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto), (ii) Liabilities that have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business (none of which
relates to any breach of contract, breach of warranty, tort, infringement, or
violation of Law or arose out of any Adverse Consequence) and (iii) Liabilities
disclosed in the footnotes to Paradise's audited financial state ments as of the
Most Recent Fiscal Year End and for the period then ended.
(i) TAX MATTERS.
(1) Paradise has filed all Tax reports and returns that it is
required to file. All such reports and returns were correct and complete in all
material respects. All Taxes owed by Paradise (whether or not shown on any
report or return) have been paid. Paradise currently is not the beneficiary of
any extension of time within which to file any report or return. Since
12
January 1, 1990, Paradise has not received notice of any claim by an authority
in a jurisdiction where Paradise does not file reports and returns that it is or
may be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of Paradise that arose in connection with any
failure (or alleged failure) to pay any Tax.
(2) Paradise has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
"employee," as defined in the applicable tax statute.
(3) There is no dispute or claim concerning any Tax Liability of
Paradise either (A) claimed or raised by any authority in writing or (B) as to
which any of the directors and officers of either Paradise or Chart House
responsible for Tax matters of Paradise has Knowledge based upon personal
contact with any agent of such authority. Paradise has delivered to Clucker's
correct and complete copies of all income Tax returns, examination reports, and
statements of deficiencies assessed against or agreed to by Paradise since
December 31, 1989.
(4) Paradise has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(5) The unpaid Taxes of Paradise, except for payroll taxes
accrued in the Ordinary Course of Business, do not exceed, by an amount that
would constitute a Material Adverse Effect, the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto), as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of Paradise in filing its Tax returns.
(j) TITLE TO ASSETS. Paradise has good and marketable, except where
there would not be a Material Adverse Effect, title to all of its assets, free
and clear of any Security Interest, except as otherwise described in (S)3(j) of
the Disclosure Schedule.
(k) TANGIBLE ASSETS. Paradise owns or leases all material tangible
assets necessary for the conduct of its businesses as presently conducted and as
presently proposed to be conducted.
(l) REAL PROPERTY. Paradise does not own any real property.
13
(m) INTELLECTUAL PROPERTY.
(1) Paradise owns all Intellectual Property necessary for the
operation of its business as presently conducted and as presently proposed to be
conducted.
(2) Since January 1, 1992, to the Knowledge of any of the
directors and officers of either Paradise or Chart House with responsibility for
Intellectual Property matters of Paradise, Paradise has not interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, except in each instance where
such activity did not constitute a Material Adverse Effect, and none of the
directors and officers and employees with responsibility for Intellectual
Property matters of Paradise has ever received any Adverse Consequence alleging
any such interference, infringement, misappropriation, or violation. Since
January 1, 1992, to the Knowledge of any of the directors and officers of either
Paradise or Chart House with responsibility for Intellectual Property matters of
Paradise, no third party, including SBBC, has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of Paradise.
(3) (S)3(m) of the Disclosure Schedule identifies each currently
effective registration that has been issued to Paradise with respect to any of
its Intellectual Property, identifies each pending application for registration
which Paradise has made with respect to any of its Intellectual Property, and
identifies, other than franchise agreements, each license, agree ment, or other
permission which Paradise has granted to any third party with respect to any of
its Intellectual Property (together with any exceptions). Paradise has
delivered to Clucker's correct and complete copies of all such registrations,
applications, licenses, agreements, and permissions (as amended to date) and has
made available to Clucker's correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of each such
item. With respect to each item of Intellectual Property that Paradise owns:
i) the item is not subject to any Adverse Consequence that
would constitute a Material Adverse Effect;
ii) no Adverse Consequence is pending or, to the Knowledge
of any of the directors and officers of either Paradise or Chart House with
responsibility for Intellectual Property matters of Paradise, is threatened
which challenges the legality, validity, enforceability, use, or ownership of
the item; and
iii) since January 1, 1992, to the Knowledge of any of the
directors and officers of either Paradise or Chart House with responsibility for
Intellectual Property matters of Paradise, Paradise has not agreed to indemnify
any person or entity
14
for or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
(4) Paradise does not use, pursuant to license, sublicense,
agreement, or permission, any Intellectual Property that any third party owns.
(n) REAL PROPERTY LEASES. (S)3(n) of the Disclosure Schedule lists
and describes briefly all real property leased or subleased to or by Paradise.
Paradise has delivered to Clucker's correct and complete copies of the leases
and subleases listed in (S)3(n) of the Disclosure Schedule (as amended to date).
With respect to each lease and sublease listed in (S)3(n) of the Disclosure
Schedule (other than those leases or subleases previously assigned by Paradise,
as to which no representation is made except as to any written notice actually
received by Paradise from a lessor or sublessor), except as otherwise disclosed
therein:
(1) the lease or sublease is legal, valid and binding and in
full force and effect;
(2) there is no guarantee of the lease or sublease by Chart
House;
(3) the lease or sublease will continue to be legal, valid and
binding, and the terms and provisions that are deemed material by Clucker's, in
the reasonable exercise of its sole discretion, of those leases and subleases
identified in the Disclosure Schedule will not be altered as a result of the
consummation of the transactions contemplated by this Agreement without the
prior written consent of Clucker's, which consent shall not be unreasonably
withheld;
(4) no party to the lease or sublease is in breach or default in
any material respect and, to the Knowledge of the directors and officers of
either Paradise or Chart House with responsibility for real property leasing
matters of Paradise, no event has occurred which, with notice or lapse of time,
would constitute a breach or default in any material respect or permit
termination, modification, or acceleration thereunder;
(5) no party to the lease or sublease has repudiated such lease
or sublease in any material respect;
(6) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(7) with respect to each sublease, the representations and
warranties set forth in subsections (1) through (6) above are true and correct
with respect to the underlying lease;
15
(8) Paradise has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or subleasehold;
(9) to the Knowledge of the directors and officers of either
Paradise or Chart House with responsibility for real property leasing matters of
Paradise, all facilities leased or subleased thereunder have received all
approvals of governmental authorities (including licenses and permits) required
in connection with the operation thereof, except where the lack of such approval
would not constitute a Material Adverse Effect, and have been operated and
maintained in accordance with applicable Laws in all material respects; and
(10) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said facilities
without interruption in any material respect.
(o) CONTRACTS. (S)3(o) of the Disclosure Schedule lists the
following contracts, agreements, and other written arrangements to which
Paradise is a party:
(1) any area development agreement or franchise agreement;
(2) any written arrangement (or group of related written
arrangements) for the lease of personal property from or to third parties
providing for lease payments in excess of $5,000 per annum;
(3) any written arrangement (or group of related written
arrangements) for the purchase or sale of meat, produce, commodities, supplies,
products, or other personal property or for the furnishing or receipt of
services, that either calls for performance over a period of more than three
months or involves more than the sum of $25,000; or
(4) any written arrangement concerning a partnership or joint
venture;
(5) any written arrangement (or group of related written
arrangements) under which it has created, incurred, assumed, or guaranteed (or
may create, incur, assume, or guarantee) indebtedness (including capitalized
lease obligations) involving more than $10,000 or under which it has imposed (or
may impose) a Security Interest on any of its assets, tangible or intangible;
(6) any written arrangement concerning confidentiality or
noncompetition;
(7) any written arrangement between Paradise, on the one hand,
and Chart House or any of Chart House's other Affiliates, on the other hand,
except for any credit agreement,
16
note agreement or any other contractual arrangements terminating as of the
Effective Date;
(8) any written arrangement with any of its directors, officers,
or employees in the nature of a collective bargaining agreement, employment
agreement, or severance agreement;
(9) any written arrangement under which the consequences of a
default or termination could have a Material Adverse Effect, other than leases,
subleases, area development agreements and franchise agreements; or
(10) any other written arrangement (or group of related
arrangements) either involving more than $25,000 or not entered into in the
Ordinary Course of Business.
Paradise will deliver to Clucker's a correct and complete copy of each written
arrangement listed in (S)3(o) of the Disclosure Schedule (as amended to date).
With respect to each written arrangement so listed, to the Knowledge of any of
the directors and officers of either Paradise or Chart House: (A) the written
arrangement is legal, valid and binding, and in full force and effect; (B) the
written arrangement, will continue to be legal, valid and binding, and the terms
and provisions that are deemed material by Clucker's in the reasonable exercise
of its sole discretion, of each such written arrangement will not be altered as
a result of the consummation of the transactions contemplated by this Agreement
without the prior written consent of Clucker's which consent shall not be
unreasonably withheld; (C) no party is in breach or default in any material
respect, and no event has occurred which, with notice or lapse of time, or both,
would constitute a breach or default in any material respect or permit
termination, modification, or acceleration, under the written arrangement; and
(D) no party has repudiated any material provision of the written arrangement.
Paradise is not a party to any oral contract, agreement, or other arrangement
which, if reduced to written form, would be required to be listed in (S)3(o) of
the Disclosure Schedule under the terms of this (S)3(o).
(p) NOTES AND ACCOUNTS RECEIVABLE. All notes and accounts receivable
of Paradise are reflected properly on their books and records in all material
respects, are valid receivables subject to no set-offs or counterclaims known to
Paradise or Chart House, are presently current and, except for the Franchise
Note receivables and where there would not be a Material Adverse Effect, are
collectible and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts reflected in the net
amount of accounts receivable set forth on the face of the Most Recent Balance
Sheet, as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Paradise.
17
(q) POWERS OF ATTORNEY. There are no outstanding powers of attorney
executed on behalf of Paradise currently in effect.
(r) INSURANCE. (S)3(r) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy currently in place
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which Paradise is a
party, a named insured, or otherwise the beneficiary of coverage:
(1) the name, address, and telephone number of the agent;
(2) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(3) the policy number and the period of coverage;
(4) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(5) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each insurance policy, to the Knowledge of any of the directors
and officers of either Paradise or Chart House with responsibility for insurance
matters of Paradise: (A) the policy is legal, valid and binding, and in full
force and effect; (B) neither Paradise nor any other party is in breach or
default in any material respect (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time or both, would constitute such a breach or default in any
material respect or permit termination, modifica tion, or acceleration, under
the policy; and (C) no party to the policy has repudiated any provision thereof.
Since January 1, 1990, Paradise has been continuously covered by insurance in
scope and amount customary and reasonable for the businesses in which it has
engaged during the aforementioned period. (S)3(r) of the Disclosure Schedule
describes any self-insurance arrangements affecting Paradise.
(s) LITIGATION. (S)3(s) of the Disclosure Schedule sets forth each
instance in which Paradise (i) is subject to any Adverse Consequence that would
constitute a Material Adverse Effect, or (ii) is a party or, to the Knowledge of
any of the directors and officers of either Paradise or Chart House, is
threatened to be made a party to any Adverse Consequence that would constitute a
Material Adverse Effect. To the Knowledge of any of the directors and officers
of either Paradise or Chart House, there is no Basis for any unasserted possible
claim against Paradise that would
18
constitute a Material Adverse Effect to be brought or threatened against
Paradise.
(t) EMPLOYEES. Paradise is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes. To the
Knowledge of any of the directors and officers of either Paradise or Chart House
with responsibility for employee matters of Paradise, there is no Basis to
believe Paradise has committed any unfair labor practice. None of the directors
and officers of either Paradise or Chart House with responsibility for
employment matters of Paradise has any Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of Paradise.
(u) EMPLOYEE BENEFITS. Paradise does not have any Employee Benefit
Plan.
(v) GUARANTIES. Except as disclosed in (S)3(v) of the Disclosure
Schedule, Paradise is not a guarantor or otherwise liable for any Liability or
obligation (including indebtedness) of any other person that would constitute a
Material Adverse Effect.
(w) ENVIRONMENT, HEALTH, AND SAFETY. To the Knowledge of any of the
directors and officers of either Paradise or Chart House with responsibility for
environmental matters of Paradise, there is no Basis for (1) a claim of a
violation by Paradise of any federal, state, or local environmental protection
laws and regulations where such violation would constitute a Material Adverse
Effect, and neither Paradise nor any of its franchisees has received any notice
of such violation; and (2) any material capital expenditures to be required for
compliance with any federal, state, or local laws or regulations now in force
relating to an Extremely Hazardous Substance.
(x) LEGAL COMPLIANCE.
(1) To the Knowledge of any of the directors and officers of
either Paradise or Chart House, Paradise has complied in all material respects
with all Laws, including but not limited to the Federal Trade Commission Act and
all applicable state franchise registration and business opportunity Laws, and
no Adverse Consequence has been filed or commenced against Paradise alleging any
failure to comply with any such Law.
(2) To the Knowledge of any of the directors and officers of
either Paradise or Chart House, Paradise has not:
i) made or agreed to make any contribution, payment, or
gift of funds or property to any governmental official, employee, or agent where
either the
19
contribution, payment, or gift or the purpose thereof was illegal under the Law;
ii) established or maintained any unrecorded fund or asset
for any purpose, or made any false entries on any books or records for any
reason; or
iii) made or agreed to make any contribution, or reimbursed
any political gift or contribution made by any other person, to any candidate
for federal, state, local, or foreign public office.
(3) To the Knowledge of any of the directors and officers of
either Paradise or Chart House, Paradise filed in a timely manner all reports,
documents, and other materials it was required to file (and the information
contained therein was correct and complete in all material respects) under all
applicable Laws, except where such failure to file would not constitute a
Material Adverse Effect.
(4) Paradise has possession of all records and documents that it
is required to retain under all applicable Laws, except where the failure to
possess such records and documents would not constitute a Material Adverse
Effect.
(y) BROKERS' FEES. Paradise has no Liability or obligation to pay
any fees or commissions to any broker or finder with respect to the transactions
contemplated by this Agreement.
(z) DISCLOSURE. The representations and warranties contained in this
(S)3 do not contain any untrue statements of a material fact or omit to state
any material fact necessary in order to make the statements and information
contained in this (S)3 not misleading.
4. REPRESENTATIONS AND WARRANTIES OF CHART HOUSE. Chart House represents
and warrants to Clucker's and PAC that the statements contained in this (S)4 are
correct and complete as of the date of this Agreement, will remain correct and
complete from the date of this Agreement until the Closing Date and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
(S)4), except as set forth in the Disclosure Schedule. This portion of the
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this (S)4 and will be delivered at the time
of execution and delivery of this Agreement. Disclosure of a particular
contract, matter or item in one numbered paragraph of the Disclosure Schedule
shall be sufficient disclosure of the particular contract, matter or item for
purposes of all of the representations contained in this Section and the
particular contract, matter or item need not be repeated in each separate
subsection of the Disclosure Schedule.
20
(a) ORGANIZATION AND STANDING. Chart House is a corporation duly
organized, validly existing and in good standing under the General Corporation
Law of Delaware and is in good standing and qualified to do business under the
corporate laws of California. Chart House has the corporate power and authority
to carry on the business in which it is engaged and to own and use the
properties owned, leased and used by it.
(b) AUTHORIZATION OF TRANSACTION. Chart House has the corporate
power and authority to execute and deliver this Agreement and each and every
other document, instrument or agreement to which it is a party hereunder and to
perform its obligations hereunder and thereunder. Without limiting the
generality of the foregoing, the Board of Directors of Chart House has duly
authorized the execution, delivery, and performance of this Agreement by Chart
House. This Agreement constitutes the valid and legally binding obligation of
Chart House, enforceable in accordance with its terms and conditions, subject to
the effect of (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights and remedies of creditors generally and (ii)
general principles of equity.
(c) NONCONTRAVENTION. Other than notices and/or consents or
approvals required to be made under bank credit agreements, note agreements,
leases and contracts, each of which Chart House and Paradise will use their
respective best efforts to obtain prior to the Closing, neither the execution
and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby will (i) violate any Law to which Chart House is subject or
any provision of the Certificate of Incorporation or Bylaws of Chart House or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument or indebtedness, Security Interest, or other
arrangement to which Chart House is a party or by which it is bound or to which
any of its assets is subject, or result in the imposition of any Security
Interest upon any of its assets. Chart House need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency to consummate the transactions contemplated by
this Agreement.
(d) SECURITIES OWNERSHIP. Chart House owns, of record and
beneficially, all of the issued and outstanding shares of Paradise Common Stock,
free and clear of any Security Interest, except as disclosed in (S)4(d) of the
Disclosure Schedule, and has not sold, pledged, assigned or otherwise
transferred, nor is there any agreement to sell, pledge, assign or otherwise
transfer such securities, except as disclosed in (S)4(d) of the Disclosure
Schedule or pursuant to this Agreement, nor are there any irrevocable
21
proxies given with respect to such securities or any agreements to do so.
(e) CERTAIN BUSINESS RELATIONSHIPS WITH PARADISE. Except as
disclosed in (S)4(e) of the Disclosure Schedule and except for any credit
agreements, note agreements or any other contractual arrangements terminating as
of the Effective Date, there are no written arrangements between Paradise, on
the one hand, and Chart House or any of Chart House's other Affiliates, on the
other hand, and neither Chart House nor any of its Affiliates other than
Paradise owns any property or right, tangible or intangible, which in any case
will be used in the business of Paradise after the Closing Date, except as
contemplated by this Agreement.
(f) DISCLOSURE. The representations and warranties contained in this
(S)4 do not contain any untrue statements of a material fact or omit to state
any material fact necessary in order to make the statements and information
contained in this (S)4 not misleading.
5. REPRESENTATIONS AND WARRANTIES OF CLUCKER'S AND PAC. Clucker's and
PAC jointly and severally represent and warrant to Chart House that the
statements contained in this (S)5 are correct and complete as of the date of
this Agreement, will remain correct and complete from the date of this Agreement
until the Closing Date and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the
date of this Agreement throughout this (S)5), except as set forth in the
Disclosure Schedule. This portion of the Disclosure Schedule will be arranged
in paragraphs corresponding to the lettered and numbered paragraphs contained in
this (S)5 and will be delivered at the time of execution and delivery of this
Agreement.
(a) ORGANIZATION, STANDING AND POWER. Each of Clucker's and PAC is a
corporation duly organized, validly existing, and in good standing under the
Laws of Florida and Clucker's is qualified to do business under the Laws of
Georgia. Clucker's has the corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned, leased
and used by it.
(b) AUTHORIZATION OF TRANSACTION. Each of Clucker's and PAC has the
corporate power and authority to execute and deliver, as applicable, this
Agreement, the Note, the Pledge Agreement, the Guaranty, and each and every
other document, instrument or agreement which it is a party to hereunder, and to
perform its respective obligations hereunder and thereunder. Without limiting
the generality of the foregoing, the Board of Directors of each of Clucker's and
PAC has duly authorized the execution, delivery and performance of this
Agreement by Clucker's and PAC, respectively. This Agreement constitutes and,
when executed and delivered, the Note, the Pledge Agreement and each and every
document, instrument or agreement to which it is a party to hereunder will
constitute,
22
the valid and legally binding obligation of each of Clucker's and PAC,
enforceable in accordance with its terms and conditions, subject to the effect
of (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights and remedies of creditors generally and (ii) general
principles of equity.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, the Note, the Pledge Agreement and the Guaranty, nor the consummation
of the transactions contemplated hereby will (i) violate any Law to which either
of Clucker's or PAC is subject or any provision of their respective Articles of
Incorporation or bylaws or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, Security
Interest, or other arrangement to which either Clucker's or PAC is a party or by
which it is bound or to which any of its assets is subject, or result in the
imposition of any Security Interest upon any of its respective assets, except in
each such case where such violation, conflict, breach, default, acceleration,
termination, modification, cancellation or other applicable event would not
constitute a Material Adverse Effect. Clucker's or PAC does not need to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency to consummate the transactions
contemplated by this Agreement.
(d) CLUCKER'S FINANCIAL STATEMENTS. The following financial
statements of Clucker's (collectively, the "Clucker's Financial Statements")
will be sent by overnight delivery to Chart House on the date that Clucker's
Form 10-KSB is sent for filing with the SEC: (i) audited consolidated balance
sheets and statements of operations, stockholders' equity and cash flows as of
and for the fiscal year ended March 26, 1995. The Clucker's Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, are correct and complete, and are
consistent with the books and records of Clucker's (which books and records are
correct and complete in all material respects.
(e) BROKERS' FEES. Neither Clucker's nor PAC has any Liability or
obligation to pay any fees or commissions to any broker or finder with respect
to the transactions contemplated by this Agreement, except for the reimbursement
of certain out-of-pocket expenses incurred by to Xxxxxx ("Ty") Peabody.
(f) DISCLOSURE. The representations and warranties contained in this
(S)5 do not contain any untrue statements of a material fact or omit to state
any material fact necessary in order
23
to make the statements and information contained in this (S)5 not misleading.
6. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing:
(a) GENERAL. Each of the Parties will use its best efforts to take
all action and to do all things necessary, proper, or advisable to consummate
and make effective the transactions contemplated by this Agreement (including
satisfying the closing conditions set forth in (S)7 below).
(b) NOTICES AND CONSENTS. Chart House and Paradise will give any
required notices to third parties, and will use their respective best efforts to
obtain any required third party consents in connection with the matters
pertaining to Paradise disclosed or required to be disclosed in the Disclosure
Schedule. Each of Clucker's, Chart House and Paradise will take any additional
action that may be reasonably necessary, proper, or advisable in connection with
any other notices to; filings with; and authorizations, consents, and approvals
of; government agencies or third parties that it may be required to give, make,
or obtain. Without limiting the generality of the foregoing, Chart House and
Paradise will obtain consents of all landlords of Paradise for the change of
control of Paradise from Chart House to Clucker's, if required by the applicable
leases, and releases of all Security Interests in Paradise's stock or assets;
and Chart House agrees to pay any and all charges or costs imposed by any of
such landlords or holders of such Security Interests in connection with
obtaining such consents or releases.
(c) OPERATION OF BUSINESS. Paradise will not engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of
Business, without the prior written consent of Clucker's. Without limiting the
generality of the foregoing, Paradise will not, without the prior written
consent of Clucker's, materially alter the method of operation of its business;
increase its accounts payable and other accrued liabilities outside the Ordinary
Course of Business; issue any shares of Paradise Common Stock or other
securities; grant any option, warrants, convertible securities or other rights
to acquire Paradise Common Stock; incur any financing debt outside the Ordinary
Course of Business; enter into any new area development or franchise agreements
or modify any such agreement in existence on the date of this Agreement; enter
into any other material agreements; or make any acquisitions or divestitures or
any agreements to do so.
(d) PRESERVATION OF BUSINESS. Paradise will use its best efforts to
keep its business and properties substantially intact (reasonable wear and tear
excepted), including their present operations, physical facilities, working
conditions, and
24
relationships with real property lessors, licensors, suppliers, customers and
key employees.
(e) FULL ACCESS. Chart House and Paradise will permit
representatives of Clucker's to have full access at all reasonable times during
regular business hours, and in a manner so as not to interfere with normal
business operations of Paradise, to all premises, properties, books, records,
contracts, Tax records, and documents of Paradise.
(f) NOTICE OF DEVELOPMENTS. Each of Clucker's and/or PAC and Chart
House and/or Paradise will give prompt written notice to Chart House or
Clucker's, as applicable, of any material developments affecting the assets,
Liabilities, business, financial condition, operations or results of operations
of Clucker's and Paradise, respectively. Each of Clucker's and Chart House will
give prompt written notice to the other of any material development affecting
the ability of Clucker's or Chart House to consummate the transactions
contemplated by this Agreement or the ability to perform their respective
obligations under this Agreement and the exhibits hereto. No disclosure by any
of Clucker's, Chart House or Paradise pursuant to this (S)6(f), however, shall
be deemed to amend or supplement the Disclosure Schedule or to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.
(g) EXCLUSIVITY. Except in connection with the trans actions
contemplated by this Agreement, neither Chart House nor Paradise will (1)
solicit, initiate, or encourage the submission of any proposal or offer from any
person relating to any (i) liquidation, dissolution, or recapitalization of
Paradise, (ii) merger or consolidation of Paradise, (iii) acquisition or
purchase of securities or assets of Paradise, or (iv) similar transaction or
business combination involving Paradise or (2) participate in any discussions or
negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
person to do or seek any of the foregoing. Chart House and/or Paradise will
notify Clucker's immediately if any person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
(h) EMPLOYEES. Clucker's shall have the opportunity to interview,
and recruit for employment as employees of Paradise after the Effective Date,
the following Paradise supervisory or executive employees: Xxxxx X. Xxxxx, Vice
President of Operations; Xxx Xxxx, Regional Manager; and Xxxxxx Xxxxxx,
Franchise Coordinator (collectively, the "Prospective Employees"). Clucker's
will not be obligated to hire any of the Prospective Employees, and Chart House
will be responsible for any severance compensation to be paid to any of the
Prospective Employees not hired by Clucker's relating to their employment by
Chart House or Paradise. Clucker's shall offer continued employment to all
salaried and hourly employees who are employed by Paradise at Paradise's
restaurants as of the Effective Date at the bakeries owned and operated by
25
Paradise; provided, however, that Clucker's shall not be responsible for
liability to such employees pursuant to worker compensation claims arising
solely prior to the Effective Date or any pending claim as of the Effective Date
under the Equal Employment Opportunity Act of 1972 and related regulations.
Clucker's will offer to all eligible Paradise employees who are participants in
Chart House's or Paradise's group insurance plan and who remain employees of
Paradise after the Effective Date the opportunity to enroll as participants in a
comparable insurance plan established or maintained for Paradise employees
effective as of the Effective Date and Chart House shall not be required to
offer any continuing insurance under COBRA or otherwise with respect to any such
employee. Chart House agrees not to directly or indirectly recruit, solicit or
otherwise influence any employee of Paradise to discontinue such employment
relationship with Paradise.
(i) PRE-CLOSING INVENTORY WRITEDOWN. Prior to the Closing Date,
Paradise shall write down the amount of inventory reflected on the Most Recent
Balance Sheet by an amount mutually and reasonably acceptable to Chart House and
Xxxxxx ("Ty") Peabody on behalf of Clucker's.
7. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF CLUCKER'S AND PAC. The obligation of
Clucker's and PAC to consummate the transactions to be respectively performed by
them in connection with the Closing is subject to satisfaction of the following
conditions:
(1) the representations and warranties set forth in each of (S)3
and (S)4 above shall be true and correct in all material respects at and as of
the Closing Date;
(2) Each of Chart House and Paradise shall have performed and
complied with all of their respective covenants hereunder in all material
respects through the Closing Date;
(3) Chart House and Paradise shall have procured all of the
required third party consents specified in (S)6(b) above;
(4) No Adverse Consequence shall be pending or threatened,
wherein an unfavorable determination would (a) prevent consummation of any of
the transactions contemplated by this Agreement, (b) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (c) affect adversely the right of Clucker's to acquire or own
shares of Paradise Common Stock;
(5) Paradise shall have delivered to Clucker's a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in (S)7(a)(1)-(4) is
satisfied in all respects;
26
(6) With respect to any lease, sublease or other agreement to
which Paradise is a party and that contains a change-in-control provision that
will be triggered by the consummation of the transactions contemplated by this
Agreement, the receipt of the consent or approval by the other party thereto of
the change in control on terms and conditions that are reasonably satisfactory
to Clucker's;
(7) Paradise's intercompany payable to Chart House must be
cancelled prior to the Effective Date;
(8) Paradise's deferred income must be eliminated as of the
Closing Date and its deferred tax asset and accrued income taxes shall be
transferred to Chart House as of the Closing Date;
(9) Any contractual obligation of Paradise to SBBC must
terminate on the Effective Date without any additional consideration being paid
by Paradise, except amounts owed for goods received prior to the Effective Date
but not paid for by then;
(10) Prior to the Effective Date, Paradise must be released from
liability on any and all indebtedness or obligations of Chart House or any of
Chart House's other Affiliates, including but not limited to Chart House's
$30,000,000 revolving line of credit and the $34,000,000 of senior secured notes
of Chart House, Inc., and any of the assets of Paradise that secure any such
indebtedness or obligations must be released from any such liens;
(11) Execution and delivery by Chart House of a noncompetition
agreement with Clucker's and Paradise substantially in the form of Exhibit "F"
attached hereto and made a part hereof (the "Noncompetition Agreement") with
respect to the retail bakery business, other than the retail sale of bakery
goods incidental to Chart House's restaurant business or the acquisition by
Chart House of another restaurant business that engages in the retail sale of
bakery goods incidental to its primary restaurant business, for a period of five
years after the Effective Date. The Noncompetition Agreement shall prohibit
Chart House, SBBC and any Chart House Affiliate from selling any proprietary
bakery goods of Paradise, except to Paradise and franchisees of Paradise; and
(12) All actions to be taken by Chart House or Paradise in
connection with consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to Clucker's.
Clucker's may waive any condition specified in this (S)7(a) if it executes a
writing so stating at or prior to the Closing.
27
(b) CONDITIONS TO OBLIGATIONS OF CHART HOUSE AND PARADISE. The
obligation of Chart House and Paradise to consummate the transactions to be
respectively performed by them in connection with the Closing is subject to
satisfaction of the following conditions:
(1) The representations and warranties set forth in (S)5 above
shall be true and correct in all material respects at and as of the Closing
Date;
(2) Each of Clucker's and PAC shall have performed and complied
with all of their respective covenants hereunder in all material respects
through the Closing Date;
(3) No Adverse Consequence shall be pending or threatened,
wherein an unfavorable determination would (a) prevent consummation of any of
the transactions contemplated by this Agreement or (b) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation;
(4) Paradise shall have executed and delivered to Chart House
the Note and the Pledge Agreement, and Clucker's shall have executed and
delivered to Chart House the Guaranty, each substantially in the forms of
Exhibits "D," "E" and "F," attached hereto, respectively;
(5) Clucker's shall have delivered to Chart House a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified above in (S)7(b)(1)-(4) is
satisfied in all respects;
(6) If Clucker's enters into the Definitive Founders' Agreement,
a mutually acceptable and reasonably satisfactory understanding between
Clucker's and Chart House concerning Chart House's guarantee of a certain loan
from Sanwa Bank to Founders (the "Founders' Sanwa Loan") should Clucker's then
acquire Founders;
(7) Prior to the Effective Date, Paradise must be released from
liability on any and all indebtedness or obligations of Chart House or any of
Chart House's other Affiliates, including but not limited to Chart House's
$30,000,000 revolving line of credit and the $34,000,000 of senior secured notes
of Chart House, Inc., and any of the assets of Paradise that secure any such
indebtedness or obligations must be released from any such liens; and
(8) All actions to be taken by Clucker's in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other documents required to effect the transactions
contemplated hereby
28
will be reasonably satisfactory in form and substance to Chart House.
Chart House may waive any condition specified in this (S)7(b) if it executes a
writing so stating at or prior to the Closing.
8. POST-CLOSING COVENANTS.
(a) POST-CLOSING COVENANTS OF CLUCKER'S. Clucker's agrees that,
subsequent to the Closing:
(1) SECURITIES EXCHANGE ACT REPORTS BY CLUCKER'S. Until payment
in full of the Note, Clucker's will provide to representatives of Chart House
(via regular mail) copies of the following information:
i) Annual reports to shareholders;
ii) Notices, proxies, proxy statements and other proxy
materials for any annual or special meeting of stockholders;
iii) Annual reports on Form 10-KSB, as filed with the SEC
for the fiscal year ended March 26, 1995, and thereafter;
iv) Quarterly reports on Form 10-QSB, as filed with the SEC
for each quarterly period ended from and after June 25, 1995; and
v) Current reports on Form 8-K, as filed with the SEC
after the date of this Agreement.
(2) PAYMENT OF SANTA XXX REIMBURSEMENTS. On December 29, 1995,
Clucker's shall cause Paradise to pay the Santa Xxx Reimbursement, as adjusted,
to Chart House in cash, by cashier's check or by wire transfer of funds.
(b) POST-CLOSING COVENANTS OF CHART HOUSE. Chart House agrees that,
subsequent to the Closing:
(1) CODE SECTION 338(H)(10) ELECTION. If requested by
Clucker's, Chart House shall join with Clucker's in making the election pursuant
to Section 338(h)(10) of the Code, and corresponding state law, as applicable.
In such event, Chart House shall reasonably cooperate with Clucker's to assure
that the transaction meets the definition of a "qualified stock purchase"
pursuant to Section 338(d)(3) of the Code or otherwise results in a stepped-up
basis in Paradise's assets for income tax purposes.
(2) RELATIONSHIP WITH SOLANA BEACH BAKING COMPANY. If Paradise
so requests, for a period not exceeding six months after the Closing, Chart
House shall cause SBBC to continue
29
to offer for sale to Paradise and franchisees of Paradise bakery products
regularly manufactured by SBBC at the prices for such bakery products in effect
as of the Closing Date, with such future price increases as reasonably may be
required to account for increases in SBBC's manufacturing, labor and overhead
costs for such bakery products. Neither Paradise nor any of the franchisees of
Paradise shall be obligated to purchase any bakery products from SBBC.
(3) COORDINATION OF ACCOUNTING/MANAGEMENT INFORMATION SYSTEMS.
Chart House and Clucker's agree to cooperate with each other in order to allow
for the preparation of appropriate financial information following the Closing.
Chart House agrees to make available for a period not to exceed 90 days
following Closing, one Chart House employee at Chart House's expense to
coordinate invoice processing and royalty receipts so that appropriate financial
statements relating to Paradise can be prepared at Paradise's expense by some
person unrelated to Chart House.
(4) TEMPORARY STORAGE OF PARADISE NON-FOOD COMMISSARY ITEMS.
Chart House shall permit Paradise to continue to use storage space leased by
Chart House at 0000 Xxxxxx Xxxx Xxxxx, Xxxxxx X and C, Carlsbad, California, for
Paradise's non-food commissary items for a period of time up to seven calendar
days after the Effective Date without charge.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. This Agreement may be terminated as
provided below:
(1) Clucker's and Chart House may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(2) Clucker's may terminate this Agreement by giving written
notice to Chart House at any time prior to the Closing if Chart House or
Paradise is in breach of any material representation, warranty, or covenant
contained in this Agreement in any material respect and fails to cure such
breach within five calendar days of notice thereof from Clucker's; and Chart
House may terminate this Agreement by giving written notice to Clucker's at any
time prior to the Closing if Clucker's or PAC is in breach of any material
representation, warranty, or covenant contained in this Agreement in any
material respect and fails to cure such breach within five calendar days of
notice thereof from Clucker's;
(3) Clucker's may terminate this Agreement by giving written
notice to Chart House at any time prior to the Closing if the Closing shall not
have occurred on or before the 90th day following the date of this Agreement by
reason of the failure of any condition precedent under (S)6(a) hereof (unless
the
30
failure results primarily from Clucker's itself or PAC breaching any
representation, warranty, or covenant contained in this Agreement);
(4) Chart House may terminate this Agreement by giving written
notice to Clucker's at any time prior to the Closing if the Closing shall not
have occurred on or before the 90th day following the date of this Agreement by
reason of the failure of any condition precedent under (S)6(b) hereof (unless
the failure results primarily from Chart House itself or Paradise breaching any
representation, warranty, or covenant contained in this Agreement); or
(b) EFFECT OF TERMINATION. If this Agreement is terminated pursuant
to (S)9(a) above, all obligations hereunder of the parties hereto shall
terminate without any Liability of any party to any other party (except for any
Liability of Chart House for breach), except that, if Chart House terminates
this Agreement pursuant to the provisions of either (S)9(a)(2) or (4), then
Chart House shall be paid the Deposit as liquidated damages.
10. INDEMNIFICATION.
(a) Chart House hereby indemnifies and holds harmless Clucker's,
Paradise and the directors, officers, employees, and agents of both in respect
of any and all Adverse Consequences incurred by any of them in connection with
each and all of the following:
(1) Any misrepresentation or breach of any rep resentation or
warranty made by Chart House or Paradise in this Agreement or in any Schedule,
Exhibit, or other document attached hereto or delivered to Clucker's by Chart
House, Paradise or any officer of either in connection with the transactions
contemplated hereby.
(2) The breach of any covenant, agreement, or obligation of
Chart House or Paradise contained in this Agreement or any Schedule or Exhibit
hereto or any other instrument specifically contemplated by this Agreement.
(3) Any misrepresentation contained in any statement in writing
or certificate furnished by an officer of either Chart House or Paradise
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement.
(4) Any misrepresentation in or omission from any list,
Schedule, Exhibit, certificate or other instrument required to be furnished or
specifically contemplated to have been furnished pursuant to this Agreement to
Clucker's or its authorized representatives.
31
(5) Any several liability of Paradise for taxes of other members
of Chart House's consolidated return group.
(6) Any Indemnification Event.
(7) Notwithstanding any of the foregoing subsections of this
(S)10(a), (i) any claims by POP or any of its Affiliates, (ii) any claims by any
employees of Paradise with respect to voluntary disability plan coverage related
to employee withholding in connection therewith prior to the Closing Date or
(iii) any administrative claim against Paradise with respect to the franchise
location in Littleton, Colorado, for Skiberg Paradise, Inc.
(8) Any claims by franchisees arising out of the operations of
Paradise prior to the Effective Date that are not set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) or otherwise
disclosed in this Agreement or in the Disclosure Schedule.
(b) Clucker's and PAC, jointly and severally, hereby indemnify and
hold harmless Chart House, Paradise and the directors, officers, employees, and
agents of both in respect of any and all Adverse Consequences incurred by any of
them in connection with each and all of the following:
(1) Any misrepresentation or breach of any rep resentation or
warranty made by Clucker's or PAC in this Agreement or in any Schedule, Exhibit,
or other document attached hereto or delivered to Chart House by Clucker's, PAC
or any officer of either in connection with the transactions contemplated
hereby.
(2) The breach of any covenant, agreement, or obligation of
Clucker's or PAC contained in this Agreement or any Schedule or Exhibit hereto
or any other instrument specifically contemplated by this Agreement.
(3) Any misrepresentation contained in any statement in writing
or certificate furnished by an officer of either Clucker's or PAC pursuant to
this Agreement or in connection with the transactions contemplated by this
Agreement.
(4) Any misrepresentation in or omission from any list,
Schedule, Exhibit, certificate or other instrument required to be furnished or
specifically contemplated to have been furnished pursuant to this Agreement to
Chart House, Paradise or any of their authorized representatives.
(5) Any litigation involving Chart House or Paradise because of
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
32
(6) If Clucker's acquires Founders, any obligations of Chart
House as the guarantor of the Founders' Sanwa Loan.
(7) Expenses reasonably incurred by Chart House relating to the
company-paid portion of Paradise employees' insurance claims arising after the
Closing Date and the cost to Chart House of providing insurance to Paradise
employees who elect continuing coverage pursuant to the Consolidate Omnibus
Budget Reconciliation Act of 1985.
(8) The operations of Paradise after the Effective Date.
(c) Whenever any claims shall arise for indemnification hereunder,
the party seeking indemnification ("Indemnitee") shall promptly notify the other
party ("Indemnitor") of the claim and, when known, the facts constituting the
basis for such claim. If any claim for indemnification hereunder results from or
is in connection with any claim or Adverse Consequence by a person who is not a
party to this Agreement ("Third-Party Claim"), such notice shall also specify,
if known, the amount or an estimate of the amount of the liability arising
therefrom. The Indemnitee shall give the other party prompt notice of any such
claim and the Indemnitor shall undertake the defense thereof by representatives
of its own choosing, reasonably satisfactory to the Indemnitee, at the expense
of the Indemnitor. The Indemnitee shall have the right to participate in any
such defense of a Third-Party Claim with advisory counsel of its own choosing,
at its own expense. If Indemnitor, within 30 calendar days after written notice
of any such Third-Party Claim, fails to defend, the Indemnitee or any subsidiary
or affiliate of the Indemnitee shall have the right to undertake the defense,
compromise or settlement of such Third-Party Claim on behalf of, and for the
account of, Indemnitor, at the expense and risk of Indemnitor, provided that any
settlement must receive the prior written consent of the Indemnifying Party,
which consent shall not be unreasonably withheld. Indemnitor shall not, without
the Indemnitee's written consent, settle or compromise any such Third-Party
Claim or consent to entry of any judgment that does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to
Indemnitee of an unconditional release from all liability in respect of such
Third-Party Claim. Notwithstanding any provision herein to the contrary, failure
of Indemnitee to give any notice required by this section shall not constitute a
waiver of Indemnitee's right to indemnification or a defense to any claim by
Indemnitee hereunder, except to the extent that the Indemnitor has been
prejudiced thereby.
(d) All indemnification hereunder shall be effected upon demand by
payment of cash, delivery of a cashier's check or wire transfer in the amount of
the indemnification liability or, in the case of Clucker's, by offset against
the Santa Xxx Reimbursement to the extent that it is then available.
33
(e) The indemnities contained herein shall survive the Closing and
any investigation made in connection with the transactions contemplated by this
Agreement for a period of one year following the Effective Date, except that the
indemnification obligation of Chart House for any claims by any landlord of
Paradise with respect to a monetary default shall survive for a period of only
180 calendar days following the Effective Date; provided, however, that this
Section 10(e) limitation on indemnification shall not limit any claims for
indemnification by Chart House against Clucker's in connection with the Guaranty
for so long as the Note remains unpaid and shall not limit any claims for
indemnification by Clucker's or Paradise against Chart House with respect to the
items described in (S)10(a)(7) of this Agreement.
(f) Chart House, as the indemnifying party, shall not have the
obligation to indemnify Clucker's or Paradise under this Section 10 for any
amount, other than any amount relating to (S)10(a)(7) and (S)10(a)(8) of this
Agreement, until the aggregate indemnification amount to which Clucker's is
entitled exceeds $50,000. Once that threshold has been exceeded, Chart House
shall then indemnify Clucker's or Paradise for all amounts in excess of the
first $25,000 for which they would otherwise be entitled to indemnification
pursuant to this Agreement. Indemnification with respect to the claims
described in (S)10(a)(8) of this Agreement shall not be subject to the $50,000
threshold but shall be limited to $100,000 in the aggregate, and such claims
shall not count with respect to reaching the $50,000 threshold for other claims
subject to that threshold.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the respective parties contained in this
Agreement shall survive the Closing for a period of one year.
12. MISCELLANEOUS.
(a) NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered in person or sent by overnight delivery, confirmed telecopy
(with confirmation by prepaid first-class mail delivery), or prepaid first-class
registered or certified mail, return receipt requested, to the following
addresses, or such other addresses as are given to the other parties to this
Agreement in the manner set forth herein:
If to Clucker's or PAC, to:
Clucker's Wood Roasted Chicken, Inc.
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxx 00000
Attn.: Xxxxxx X. Xxxxxxx
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
34
with courtesy copies to:
Clucker's Wood Roasted Chicken, Inc.
000 X. Xxxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn.: Xxxxxxx X. Xxxxxxxxxx
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
Xxxxxxx X. Xxxxxxxxx, P.A.
Broad and Xxxxxx
Miami Center, Suite 3000
000 X. Xxxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
If to Chart House or Paradise, to:
Chart House Enterprises, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxxxx X. Xxxxx, Xx., Esq.
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
with a courtesy copy to:
Xxx X. Xxxxxxxx, Esq.
Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
Any such notices shall be effective when delivered in person or sent by telecopy
(with confirmation by prepaid first-class mail delivery) one business day after
being sent by overnight delivery or three business days after being sent by
registered or certified mail. Any of the foregoing addresses may be changed by
giving notice of such change in the foregoing manner, except that notices for
changes of address shall be effective only upon receipt.
(b) FURTHER ASSURANCES. At any time, and from time to time, each
party will execute such additional instruments and take such action as may be
reasonably requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the intent and purposes
of this Agreement.
(c) COSTS AND EXPENSES. Each party hereto agrees to pay its own
costs and expenses, including legal, accounting, consultant
35
and adviser fees, incurred in negotiating this Agreement and consummating the
transactions described herein.
(d) TIME. Time is of the essence.
(e) ENTIRE AGREEMENT. Each of the exhibits and schedules attached
hereto is incorporated herein by reference and expressly made a part of this
Agreement. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof. It supersedes all prior
negotiations, letters and understandings relating to the subject matter hereof.
(f) AMENDMENT. This Agreement may not be amended, supplemented or
modified in whole or in part except by an instrument in writing signed by the
party or parties against whom enforcement of any such amendment, supplement or
modification is sought.
(g) ASSIGNMENT. This Agreement may not be assigned by any party
hereto without the prior written consent of the other parties.
(h) CHOICE OF LAW. In the event of a dispute concerning this
Agreement or its interpretation, the laws of state of the principal executive
office of the defendant in the action shall govern.
(i) HEADINGS. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(j) PRONOUNS. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
context may require.
(k) NUMBER AND GENDER. Words used in this Agreement, regardless of
the number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context indicates is appropriate.
(l) CONSTRUCTION. The parties hereto and their respective legal
counsel participated in the preparation of this Agreement; therefore, this
Agreement shall be construed neither against nor in favor of any of the parties
hereto, but rather in accordance with the fair meaning thereof.
(m) EFFECT OF WAIVER. The failure of any party at any time or times
to require performance of any provision of this Agreement will in no manner
affect the right to enforce the same. The waiver by any party of any breach of
any provision of this Agreement will not be construed to be a waiver by any such
party of
36
any succeeding breach of that provision or a waiver by such party of any breach
of any other provision.
(n) SEVERABILITY. The invalidity, illegality or unenforceability of
any provision or provisions of this Agreement will not affect any other
provision of this Agreement, which will remain in full force and effect, nor
will the invalidity, illegality or unenforceability of a portion of any
provision of this Agreement affect the balance of such provision. In the event
that any one or more of the provisions contained in this Agreement or any
portion thereof shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein.
(o) ENFORCEMENT. Any claim, controversy or dispute with respect to
this Agreement shall be promptly submitted to arbitration ("Arbitration") for
determination . The Arbitration shall be binding upon the parties thereto,
without a right by any party to a trial de novo in a court of competent
jurisdiction, and shall be conducted under the auspices of the American
Arbitration Association (herein referred to as "Association") in the county and
state where the principal executive offices of the party initially defending
such Arbitration is located, and in accordance with its Commercial Arbitration
Rules, however:
(i) The party seeking Arbitration shall give written notice
of a Demand to Arbitrate (herein referred to as "Demand") to the other party and
to the Association; the Demand shall include (i) the issues to be determined,
(ii) a copy of this arbitration provision and (iii) the designation of one
arbitrator;
(ii) Within ten days after receipt of the Demand, the other
party shall give (i) written notice (herein referred to as "Response") to the
party that demanded arbitration and to the Association of any additional issues
to be arbitrated, (ii) its answer to the issues raised by the party that sent
the Demand and (iii) its designation of a second arbitrator;
(iii) If a Response designating a second arbitrator is not
given within the aforesaid ten day time, the Association shall designate the
second arbitrator forthwith.
(iv) The two arbitrators as designated pursuant to the
foregoing provisions shall then designate a third arbitrator within ten days
after the designation of the second arbitrator. If the two arbitrators cannot
agree on the designation of the third arbitrator within the ten day time period
allotted, the Association shall designate the third arbitrator forthwith.
(v) The arbitration panel as thus designated shall proceed
with the Arbitration by giving written notice to all parties of its proceedings
and hearings in accordance with the
37
Association's applicable procedures. The Arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the Association except as
modified by this Agreement. The arbitrators shall follow and apply the
substantive laws of the state of the party that did not originally demand the
Arbitration and, at all hearings where evidence is taken, they shall follow and
apply the rules of evidence as then in effect in such state. The cost of the
Arbitration shall be borne and paid equally between the parties thereto, but
that cost, along with all other costs and expenses, including attorneys' fees,
shall be subject to award, in whole or in part, by the arbitrators in their
discretion to the prevailing party on the various issues arbitrated.
(vi) Upon written demand on any party to the Arbitration for
the production of documents reasonably related to the issues being arbitrated,
the party upon which such demand is made shall forthwith produce, or make
available for inspection and copying, such documents without the necessity of
any action by the arbitrators.
(vii) The arbitrators shall have the power to grant any and
all relief and remedies, whether at law or in equity, that the courts may grant.
The decision of the arbitrators shall be final and may be enforced by any court
as if it were a judgment of that court. The parties to this Agreement expressly
consent to the jurisdiction of the Association.
Should it become necessary for any party to institute legal
action to enforce the terms and conditions of an arbitration award or to seek
equitable relief, the successful party will be awarded reasonable attorneys'
fees at all trial and appellate levels, expenses and costs.
The parties hereto acknowledge and agree that any party's remedy
at law for a breach or threatened breach of any of the provisions of this
Agreement would be inadequate and such breach or threatened breach shall be per
se deemed as causing irreparable harm to such party. Therefore, in the event of
such breach or threatened breach, the parties hereto agree that, in addition to
any available remedy at law, including but not limited to monetary damages, an
aggrieved party, without posting any bond, shall be entitled to seek equitable
relief in the form of specific enforcement, temporary restraining order,
temporary or permanent injunction, or any other equitable remedy that may then
be available to the aggrieved party. In particular, and not by way of limitation
of any of the foregoing provisions of this paragraph, the parties hereto agree
that, in the event of a breach of the provisions of (S)6(g) of this Agreement by
Chart House or Paradise, Clucker's will be irreparably damaged in an amount that
cannot be ascertained. Therefore, in the event of such breach, Chart House and
Paradise shall be jointly and severally subject to injunctive relief in favor of
Clucker's, in addition to any other remedies available to Clucker's, including
monetary damages.
38
(p) BINDING NATURE. This Agreement will be binding upon and will
inure to the benefit of any permitted successor or succes sors of the parties
hereto.
(q) NO THIRD-PARTY BENEFICIARIES. No person shall be deemed to
possess any third-party beneficiary right pursuant to this Agreement. It is the
intent of the parties hereto that no direct benefit to any third party is
intended or implied by the execution of this Agreement.
(r) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
39
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf by its officers thereunto duly authorized as of
the date first written above.
CLUCKER'S WOOD ROASTED CHICKEN,
INC., a Florida corporation
By:/s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------------
Xxxxxxx X. Xxxxxxxxxx, President
PARADISE ACQUISITION CORP., a
Florida corporation
By:/s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------------
Xxxxxxx X. Xxxxxxxxxx, President
CHART HOUSE ENTERPRISES, INC., a
Delaware corporation
By:/s/ Xxxx Xxxxx
--------------------------------
Xxxx Xxxxx, Chairman
PARADISE BAKERY, INC., a Delaware
corporation
By:/s/ Xxxx Xxxxx
--------------------------------
Xxxx Xxxxx, Chairman
40
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
by and Among
CLUCKER'S WOOD ROASTED CHICKEN, INC.;
PARADISE ACQUISITION CORP.;
CHART HOUSE ENTERPRISES, INC.;
and
PARADISE BAKERY, INC.
Dated as of July 7, 1995
DISCLOSURE SCHEDULE
-------------------
The Disclosure Schedule accompanying the Agreement and Plan of
Reorganization, which sets forth exceptions to the representations and
warranties of Chart House and Paradise contained in (S)(S) 3 and 4 of the
Agreement, has been omitted from this filing pursuant to Section 601(b)(2) of
Regulation S-K. The Company (Chart House) hereby agrees to furnish
supplementally a copy of the Disclosure Statement to the Commission upon
request.
AGREEMENT AND PLAN OF MERGER
OF
PARADISE BAKERY, INC.
AND
PARADISE ACQUISITION CORP.
-----------------------------
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement and Plan") is entered
into this _____ day of _______________, 1995, by and between PARADISE BAKERY,
INC., a Delaware corporation (the "Surviving Corporation"), and PARADISE
ACQUISITION CORP., a Florida corporation (the "Disappearing Corporation"), as
approved by the Board of Directors and shareholders of said corporations:
R E C I T A L S:
- - - - - - - -
A. Surviving Corporation is a corporation duly organized and existing
under the laws of the State of Delaware.
B. Disappearing Corporation is a corporation duly organized and existing
under the laws of the State of Florida.
C. Directors of the Disappearing Corporation and the Surviving
Corporation believe that the merger of the Disappearing Corporation into the
Surviving Corporation would be advantageous and beneficial to the respective
shareholders, employees and customers of those corporations.
D. Disappearing Corporation and Surviving Corporation have agreed that
Disappearing Corporation shall merge into the Surviving Corporation upon the
terms and conditions and in the manner set forth in this Agreement and Plan and
in accordance with the applicable laws of the State of Delaware.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
provisions, grants, guarantees and representations contained in this Agreement
and Plan and in order to consummate the transaction described above,
Disappearing Corporation and Surviving Corporation, the constituent corporations
to this Agreement and Plan, agree as follows:
1. MERGER. Disappearing Corporation shall be merged with and into
Surviving Corporation.
2. FILING AND EFFECTIVE TIME. Surviving Corporation shall file with the
Delaware Secretary of State and record in the office of the recorder of deeds of
the County of Kent, Delaware, a Certificate of Merger pursuant to Section 252 of
the Delaware General Corporation Law (the "Delaware Law") and shall file with
the Florida Department of State Articles of Merger pursuant to Section 607.1105
of the Florida Business Corporation Act. The effective date of the merger (the
"Effective Date") shall be the date of filing the Certificate of Merger with the
Delaware Secretary of State and the Articles of Merger with the Florida
Department of State.
3. SURVIVING CORPORATION. The Surviving Corporation shall continue its
existence under its current name pursuant to the provisions of the Delaware Law,
and shall succeed without other transfer to all the rights and properties of the
Disappearing Corporation and shall be subject to all the debts and liabilities
of the Disappearing Corporation in the same manner as if Surviving Corporation
had incurred them in accordance with the laws of the State of Delaware.
4. DISAPPEARING CORPORATION. The separate existence of the Disappearing
Corporation shall cease upon the Effective Date of the merger in accordance with
the provisions of the laws of the State of Florida.
5. TERMS OF THE MERGER. Each share of the Disappearing Corporation's
common stock outstanding on the Effective Date shall, by virtue of the Merger,
become a share of the common stock of the Surviving Corporation. All of the
outstanding shares of the Surviving Corporation's common stock owned by Chart
House Enterprises, Inc., a Delaware corporation ("Chart House") immediately
prior to the Merger (the "Cancelled Shares") shall be cancelled, shall cease to
exist and shall be converted into the right to receive the consideration
specified in Section (c) of that certain agreement dated as of July __, 1995,
among Clucker's Wood Roasted Chicken, Inc., a Florida corporation; the
Disappearing Corporation; Chart House; and the Surviving Corporation.
6. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of the
Surviving Corporation as now in force and effect shall remain in force and
effect until changed, altered, or amended as therein provided and in the manner
prescribed by the provisions of the Delaware Law.
7. BYLAWS. The Bylaws of the Surviving Corporation as now in force and
effect shall remain in force and effect until changed, altered, or amended as
therein provided and in the manner prescribed by the provisions of the Delaware
Law.
8. DIRECTORS AND OFFICERS. The directors and officers of the
Disappearing Corporation upon the Effective Date shall become the directors and
the officers of the Surviving Corporation, all of whom shall hold their
directorships and offices until the election and qualification of their
respective successors or until their
-2-
tenure is otherwise terminated in accordance with the Bylaws of the Surviving
Corporation.
9. APPROVAL. The agreement contemplated by this Agreement and Plan has
previously been submitted to and approved by the Board of Directors and
Shareholders of the Disappearing Corporation and the Board of Directors and
Shareholders of the Surviving Corporation. Subsequent to the execution of this
Agreement and Plan by the appropriate officers of the Disappearing Corporation
and Surviving Corporation, the proper officers of each corporation shall, and
are hereby authorized and directed to, cause to be executed and filed such
documents prescribed by the laws of the States of Delaware and Florida and to
perform all such further acts as the same may be necessary or proper to render
effective the merger contemplated by this Agreement and Plan.
10. AMENDMENT. This Agreement and Plan may be amended with the approval
of the Boards of Directors of the Surviving Corporation and the Disappearing
Corporation at any time prior to the filing and recording of the Certificate of
Merger in Delaware and the filing of the Articles of Merger in Florida, provided
that any amendment made subsequent to the adoption of this Agreement and Plan by
the shareholders of the Disappearing Corporation or the Surviving Corporation
shall not (a) alter of change the consideration to be received by the holders of
the common stock of the Surviving Corporation, (b) alter or change any term of
the Certificate of Incorporation of the Surviving Corporation or (c) alter or
change any of the terms and conditions of this Agreement and Plan if such
alteration or change would adversely affect the holders of common stock of the
Surviving Corporation or Disappearing Corporation.
11. GOVERNING LAW. This Agreement and Plan shall be construed in
accordance with and governed by the laws of the State of Delaware, without
resort to choice of law principles.
12. FURTHER ASSURANCES. Each of the parties hereto shall take or cause to
be taken all actions, and do or cause to be done all things, necessary, proper
or advisable to effectuate the merger.
13. COUNTERPARTS. This Agreement and Plan may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
-3-
IN WITNESS WHEREOF, the duly authorized officers of the constituent
corporations have executed this Agreement and Plan as of the date first above
written.
"DISAPPEARING CORPORATION"
PARADISE ACQUISITION CORP.,
a Florida corporation
By:___________________________
Xxxxxxx X. Xxxxxxxxxx,
President
"SURVIVING CORPORATION"
PARADISE BAKERY, INC.,
a Delaware corporation
By:___________________________
Xxxx Xxxxx, Chairman
STATE OF FLORIDA )
) SS:
COUNTY OF BROWARD )
On this _____ day of ______________, 1995, before me, the undersigned, a
Notary Public of said State, duly commissioned and sworn, personally appeared
Xxxxxxx X. Xxxxxxxxxx, the President of PARADISE ACQUISITION CORP., a Florida
corporation, to me known, and who executed the within instrument on behalf of
the corporation, and who, being sworn by me, did acknowledge that he executed
the same on behalf of the corporation as the corporation's voluntary act and
deed and that the facts stated therein are true.
My Commission Expires: _______________________________
NOTARY PUBLIC, XXXXX XX XXXXXXX
-0-
XXXXX XX XXXXXXXXXX )
) SS:
COUNTY OF )
On this _____ day of ______________, 1995, before me, the undersigned, a
Notary Public of said State, duly commissioned and sworn, personally appeared
Xxxx Xxxxx, the Chairman of PARADISE BAKERY, INC., a Delaware corporation, to me
known, and who executed the within instrument on behalf of the corporation, and
who, being sworn by me, did acknowledge that he executed the same on behalf of
the corporation as the corporation's voluntary act and deed and that the facts
stated therein are true.
My Commission Expires: __________________________________
NOTARY PUBLIC, STATE OF CALIFORNIA
CERTIFICATE OF SURVIVING CORPORATION
------------------------------------
I, XXXXXXX X. XXXXX, XX., the Secretary of PARADISE BAKERY, INC., a
Delaware corporation, hereby certify that the foregoing Agreement and Plan of
Merger was adopted by the vote of at least a majority of the outstanding stock
of the corporation entitled to vote thereon.
Date: _______________, 1995 __________________________________
XXXXXXX X. XXXXX, XX.
CERTIFICATE OF DISAPPEARING CORPORATION
---------------------------------------
I, XXXXXXX X. XXXXXXX, the Secretary of PARADISE ACQUISITION CORP., a
Florida corporation, hereby certify that the foregoing Agreement and Plan of
Merger was adopted by the vote of at least a majority of the outstanding stock
of the corporation entitled to vote thereon.
Date: _______________, 1995 __________________________________
XXXXXXX X. XXXXXXX
-5-
EXHIBIT B
JOINT INSTRUCTIONS
May 25, 1995
Allen, Matkins, Xxxx,
Xxxxxx & Xxxxxxx
Attention: Managing Partner
000 Xxxx Xxxxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Dear Sir:
Chart House Enterprises, Inc., a Delaware corporation ("CHE") and
Clucker's Wood Roasted Chicken, Inc. ("Clucker's"), acting pursuant to the terms
and conditions of that certain letter of intent attached hereto as Exhibit "A",
hereby appoint Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx ("Holder") as Holder and
Clucker's hereby delivers by wire transfer to Holder funds in the amount of
$100,000 to be held by Holder in accordance with the following instructions:
1. Holder agrees that the funds will be held in its client trust
account and to dispose of same in accordance with all the terms and conditions
of these Joint Instructions. If from time to time and at any time on or after
the date of these Joint Instructions CHE or Clucker's shall give notice
(hereinafter called a "Disbursement Notice") to Holder and the other party to
these Joint Instructions to make a disbursement of funds pursuant to the
provisions of Section 3 of the letter of intent, Holder will act on such written
instructions and disburse the funds in accordance with those instructions unless
within two (2) days after the receipt of such Disbursement Notice by Holder,
Holder receives an objection notice from Clucker's or CHE that such requesting
party is not entitled to be paid such amount, in which case Holder will not pay
such amount to either party except as provided in Section 2 or Section 6 of
these Joint Instructions.
2. In the event either Clucker's or CHE provides Holder with an
objection notice in accordance with Paragraph 1 above, Holder shall be entitled
to file an action in interpleader in the Superior Court in the County of San
Diego with respect to the entire amount then held by Holder pursuant to these
Joint Instructions, or otherwise seek authorization from the Superior Court of
the County of San Diego for instruction concerning disposition of such funds.
3. Clucker's and its affiliates, partners, agents and related
parties recognize, acknowledge and agree that Holder is acting as counsel to CHE
and Paradise Bakery, Inc. in connection with the transactions contemplated by
the letter of intent. Notwithstanding Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx'x
acting as Holder hereunder, Clucker's, on its own behalf and on behalf of its
affiliates, partners, agents and related parties, acknowledges and agrees that
Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx shall be entitled to continue their
representation of CHE and Paradise Bakery, Inc. in connection with such
transactions during the period of and subsequent to
the termination of these Joint Instructions, and each of the undersigned consent
to such continuing representation by Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx.
4. Holder's duties may be altered, amended, modified or revoked only
by a writing signed by all of the parties hereto.
5. Holder shall be obligated only for the performance of such duties
as are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by
Holder to be genuine and to have been signed or presented by the proper party or
parties. Holder shall not be personally liable for any act Holder may commit or
omit hereunder while acting in good faith and in the exercise of Holder's own
good judgment; and any act committed or omitted by Holder pursuant to the advice
of Holder's own counsel shall be conclusive evidence of such good faith.
6. Holder is hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case Holder obeys or complies with any such order, judgment or decree
of any court, Holder shall not be liable to any of the parties hereto or any
other person, firm or corporation by reason of such compliance, notwithstanding
any such order, judgment or decree being subsequently reversed, modified,
annulled, set aside, vacated or found to have been entered without jurisdiction.
7. If Holder reasonably requires other or further instruments in
connection with these Joint Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
8. Any notice required or permitted hereunder shall be given in
writing and deemed effectively given upon personal delivery, including delivery
by express courier, or four (4) days after deposit in the United States mail,
registered or certified, postage and fees prepaid, addressed to each of the
other parties entitled to such notice at the following addresses or at such
other address as a party may designate by ten (10) days' advance written notice
to each of the other parties as follows:
If to CHE:
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Xx.
Vice President and General Counsel
If to Clucker's:
000 Xxxx Xxxxxxx Xxxxx Xxxx
Xxxxx 000
Xxxx Xxxxxxxxxx, XX 00000
-2-
If to Holder:
Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Managing Partner
9. Holder shall be reimbursed for all expenses, including counsel
fees, reasonably incurred by it in connection with the performance of its duties
and obligations under these Joint Instructions. All such fees and expenses shall
be borne equally by CHE and Clucker's.
10. This Agreement shall be governed by and interpreted and
determined in accordance with the laws of the State of California.
Very truly yours,
Chart House Enterprises, Inc.,
a Delaware corporation
By /s/ Xxxx Xxxxx
--------------
Its Chairman, President and CEO
---------------------------
Chief Executive Officer
Clucker's Wood Roasted Chicken, Inc.
By /s/ Xxxxxxx X. Xxxxxxxxxx
-------------------------
Its President
-------------------------
"Holder"
Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx
By: /s/ Xxxxxx X. Xxxxxx
---------------------
Managing Partner
---------------------
-3-
If to Holder:
Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Managing Partner
9. Holder shall be reimbursed for all expenses, including counsel
fees, reasonably incurred by it in connection with the performance of its duties
and obligations under these Joint Instructions. All such fees and expenses shall
be borne equally by CHE and Clucker's.
10. This Agreement shall be governed by and interpreted and
determined in accordance with the laws of the State of California.
Very truly yours,
Chart House Enterprises, Inc.,
a Delaware corporation
By /s/ Xxxx Xxxxx
--------------
Its Chairman, President and CEO
---------------------------
Chief Executive Officer
Clucker's Wood Roasted Chicken, Inc.
By /s/ Xxxxxxx X. Xxxxxxxxxx
-------------------------
Its President
-------------------------
"Holder"
Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx
By: /s/ Xxxxxx X. Xxxxxx
---------------------
Managing Partner
---------------------
-3-
EXHIBIT C
SECURED PROMISSORY NOTE
[$1,500,000] ______________, 1995
FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby
promises to pay to the order of Chart House Enterprises, Inc., a Delaware
corporation or order ("Lender"), at its office at 000 Xxxxx Xxxxxx Xxxxxx,
Xxxxxx Xxxxx, Xxxxxxxxxx 00000 in lawful money of the United States of America,
the principal amount set forth above, together with interest on the unpaid
balance of said principal amount from time to time remaining outstanding from
the date of this Note, until maturity, in like money, at said office, at a rate
per annum equal to nine and one-half percent (9 1/2%). Interest on this Note
shall be calculated at a rate per annum based upon the actual number of days
elapsed in an actual calendar year (365 days or 366 days in a leap year).
1. Principal and Interest Payments. The Note shall be payable
-------------------------------
interest only on the first day of each month commencing [September 1, 1995],
during the first three (3) years and thereafter principal under this Note shall
be payable in 8 equal quarterly payments in amounts sufficient to fully amortize
the entire principal balance over a period of 8 quarters. Each quarterly
installment shall consist of amortized principal and accrued interest and shall
be due and payable on the first day of each [February, May, August, and
November], thereafter until paid in full (each and every quarterly payment date
is referred to herein as a "Payment Date"). The first installment of principal
shall be due and payable on [August 1, 1998]. All unpaid principal and all
earned interest then accrued and unpaid shall be due and payable in full on
[August 1, 2000]. Payments under this Note shall be applied first to interest
and then principal, and any interest remaining unpaid following a Payment Date
shall be added to principal and shall accrue interest thereafter.
2. Prepayment Option. Borrower shall have the right, from time
-----------------
to time, without premium or penalty, to prepay the indebtedness evidenced by
this Note, in full or in part together with interest on the prepaid principal
amount accrued to the date of the prepayment.
3. Prepayment Obligation. Borrower shall have the obligation
---------------------
to prepay the indebtedness evidenced by this Note, to the extent Borrower or
Borrower's parent company, Clucker's Wood Roasted Chicken, Inc., a Florida
corporation (the "Parent Company"), receives any cash principal payment on any
of the Franchise Notes ( as defined below). Such prepayment shall be made within
ten (10) business days of the date of Borrower's receipt of such cash principal
payment on the Franchisee Note(s) in an amount equal to such cash principal
payment(s).
4. Cancellation of Founder's Venture and/or Other Franchisee
---------------------------------------------------------
Note(s). In the event the Parent Company, Borrower or any of the Parent
-------
Company's other subsidiaries acquires Founders Venture, Inc. ("Founders") or any
other franchisee of Borrower (individually a "Subsequent Event" and collectively
"Subsequent Events"), then notwithstanding such Subsequent Event(s), Borrower
shall have the obligation to provide written notification to Lender of such
Subsequent Event and to prepay a portion of the indebtedness evidenced by this
Note, at the times and in the amounts equal to the scheduled payment dates
originally provided for under
the terms of such Franchisee Notes as of the date hereof as if such Subsequent
Event(s) had not occurred. Such prepayment shall be made within [ten (10)]
business days of the original due date of such payment under the terms of the
Franchisee Notes as of the date hereof.
5. Attorneys' Fees. If this Note is collected by suit or
---------------
through the bankruptcy court, or any judicial proceeding, or if this Note is not
paid at maturity, however such maturity may occur, and it is placed in the hands
of an attorney for collection (whether or not legal proceedings are instituted),
then Borrower agrees to pay, in addition to all other amounts owing hereunder,
the reasonable collection costs and reasonable attorneys' fees of the holder
hereof.
6. Security. This Note is secured by the promissory notes
--------
("Franchisee Notes") identified and described in Exhibit "A" hereto in favor of
the Borrower from certain franchisees, together with the Pledge and Security
Agreement of even date herewith, by and between Paradise and Lender assigning
rights in all pledge agreements, security agreements, collateral assignments,
assignments of rights, securities, instruments and assets of every type and
nature as described in Exhibit "B" hereto, executed by any of the borrowers
under the Franchisee Notes in favor of the Borrower, or executed by any other
person as security for this Note, including any executed prior to,
simultaneously with, or after the date of this Note (the "Security Documents").
7. Events of Default; Acceleration. If any of the following
-------------------------------
events ("Events of Default") shall occur:
(i) If Borrower shall default in the payment of any
installment of principal, other than principal prepayments required by
Section 3 or Section 4 of this Note, or of interest on this Note for ten
(10) calendar days after the same shall become due and payable; or, with
respect to principal prepayments required by Section 3 or Section 4 of this
Note, after the same shall become due and payable;
(ii) Except for any technical defaults under agreements or
other borrowing arrangements with Roasters Corp. or any other obligation
for money borrowed in the aggregate amount of $100,000 or less, the Parent
Company, Borrower or any subsidiary defaults in any payment of principal of
or interest on any other obligation for money borrowed (or of any
obligation under conditional sale or other title retention agreements or of
any obligation secured by purchase money mortgage or of any obligation
under notes payable or drafts accepted representing extensions of credit)
beyond any period of grace provided with respect thereto, or the Borrower
or any subsidiary defaults in the performance or observance of any other
material agreement, term or condition contained in any agreement under
which any such obligation is created, or if any other event of default
thereunder or under any such agreement shall occur and be continuing and
the effect of such event or default is to cause, or to permit the holder or
holders of such obligation or a trustee on behalf of such holder or
holders, to cause, such obligation to become due prior to any stated
maturity;
-2-
(iii) The Parent Company or Borrower shall commence a
voluntary case concerning itself under Title 11 of the United States Code
entitled "Bankruptcy" as now or hereafter in effect, or any successor
thereto (the "Bankruptcy Code"); or an involuntary case is commenced
against the Parent Company or Borrower, and the petition is not
controverted within ten (10) business days, or is not dismissed within
sixty (60) calendar days, after commencement of the case; or a custodian
(as defined in the Bankruptcy Code) is appointed for, or takes charge of,
all or substantially all of the property of the Parent Company or Borrower,
or the Parent Company or Borrower commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Parent Company or
Borrower, or there is commenced against the Parent Company or Borrower any
such proceeding which remains undismissed for a period of sixty (60)
calendar days, or the Parent Company or Borrower is adjudicated insolvent
or bankrupt; or any order of relief or other order approving any such case
or proceeding is entered; or the Parent Company or Borrower suffers any
appointment of any custodian or the like for it or any substantial part of
its property to continue undischarged or unstayed for a period of sixty
(60) calendar days; or the Parent Company or Borrower makes a general
assignment for the benefit of creditors; or any corporate action is taken
by the Parent Company or Borrower for the purpose of effecting any of the
foregoing; or
(iv) Borrower or the Parent Company defaults in the
performance or observance of the post-closing covenant concerning Santa Xxx
reimbursement or the Parent Company's indemnification obligations under the
Agreement and Plan of Reorganization dated as of July 7, 1995, by and among
Borrower, the Parent Company, Lender and Paradise Acquisition Corporation;
then and in any such event, the holder of this Note may at any time (unless all
defaults shall have been remedied), at its option, by written notice to
Borrower, declare this Note to be due and payable, whereupon the same shall
forthwith mature and become due and payable without presentment, demand, protest
or notice, all of which are hereby waived.
8. Partial Acceleration. In the event Borrower shall default
--------------------
in any prepayment obligation required by Section 3 or Section 4 of this Note,
then and in such event, the holder of this Note may at any time (unless all
defaults have been remedied), at its option, by written notice to Borrower,
declare a portion of this Note equal to the full unpaid principal amount of that
Franchisee Note as to which a principal prepayment obligation has arisen
pursuant to Section 3 or 4 of this Note, as applicable, to be due and payable,
whereupon the same shall forthwith mature and become due and payable without
presentment, demand, protest or notice, all of which are hereby waived;
provided, however, that such partial acceleration shall not affect the
-------- -------
unaccelerated portion of the Note or permit the Lender to seek recourse against
any of the collateral other than that in connection with the Franchisee Note in
question.
9. Late Payment Charges. In the event that any interest
--------------------
payment is not received ten (10) days following the Payment Date, a one-time
late payment fee shall be due and owing to the Lender in the amount of five
percent (5%) of any such payment, or a part thereof, as
-3-
it becomes past due. Lender shall have no obligation under this Note to accept
any late payments not accompanied by all outstanding late payment fees.
Notwithstanding anything contained herein, this paragraph is not intended to,
and shall not, create any grace period or indulgence by Lender with respect to
the punctual payment by Borrower of all sums owed Lender, nor shall this
paragraph in any way hinder, prevent or delay Lender from exercising any remedy
which it may have hereunder, or at law or in equity, with respect to Borrower's
failure timely to make any payment when due. Borrower acknowledges that the late
payment fee is not imposed as a charge for the use of money, but rather is
imposed to permit Lender to recoup its administrative charges and other costs in
dealing with loans not paid on time, and the late payment fee shall in no way be
deemed an interest charge. The late payment fee shall be payable on demand and,
in any case, no later than the date on which the overdue amount in respect of
which the late payment fee was calculated is paid.
10. Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered or mailed by first class registered or certified mail,
postage prepaid, addressed, (i) if to the holder of this Note to whom this Note
is originally issued, to Chart House Enterprises, Inc., 000 Xxxxx Xxxxxx Xxxxxx,
Xxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention: Xxxxxxx X. Xxxxx, Xx., Vice
President, Secretary and General Counsel, or at such other address as may have
been furnished to Borrower by such holder in writing, or (ii) if to any other
holder of this Note, at such address as may have been furnished to Borrower in
writing by such holder, or, until such other holder furnishes to Borrower an
address, then to, and at the address of, the last holder of this Note who has
furnished in writing an address to Borrower, or (iii) if to Borrower, to
Clucker's Wood Roasted Chicken, Inc., 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000,
Xxxxx, Xxxxxxx 00000, Attention: Xxxxxx X. Xxxxxxx, with a copy to Clucker's
Wood Roasted Chicken, Inc., 000 X. Xxxxxxx Xxxxx Xxxx, Xxxxx 000, Xxxx
Xxxxxxxxxx, Xxxxxxx 00000, Attention: Xxxxxxx X. Xxxxxxxxxx, or such other
address as may have been furnished in writing by Borrower to the last holder of
this Note who has furnished in writing an address to Borrower.
11. Amendments and Waivers. Neither this Note nor any term
----------------------
hereof may be changed, waived, discharged or terminated orally or in writing,
except that any term of this Note may be amended and the observance of any such
term may be waived (either generally or in a particular instance and either
retroactively or prospectively) with (but only with) the written consent of the
holder of this Note. Borrower and all sureties, endorsers and guarantors of
this Note waive demand, presentment for payment, notice of nonpayment, protest,
notice of protest, and agree to any substitution, exchange or release of any
such security, the release of any party primarily or secondarily liable hereon
and further agree that it will not be necessary for any holder hereof, in
order to enforce payment of this Note, to first institute suit or exhaust its
remedies against any security for this Note, and consent to any one or more
extensions or postponements of time of payment of this Note on any terms or any
other indulgences with respect hereto. No waiver of any default or event of
default or failure or delay to exercise any right or remedy by the holder of
this Note shall operate as a waiver of any other default or Event of Default or
the same default or Event of Default in the future or as a waiver of any right
or remedy with respect to the same or any other occurrence.
-4-
12. Benefit. All of the covenants, stipulations, promises and
-------
agreements contained in this Note by Borrower shall be binding upon Borrower and
its permitted successors and assigns and shall inure to the benefit of and be
enforceable by the holder of this Note and its successors and assigns. Borrower
shall not assign any of its obligations under this Note without Lender's prior
written consent which Lender shall be entitled to withhold in its sole and
absolute discretion.
13. Governing Law. This Note shall be governed by and construed
-------------
in accordance with the internal laws of the State of California.
PARADISE BAKERY, INC.,
a Delaware corporation
By:______________________
Name:____________________
Title:___________________
-5-
Exhibit "A"
-----------
DESCRIPTION OF FRANCHISEE NOTES
-------------------------------
ORIGINAL PRINCIPAL
------------------
OBLIGOR DESCRIPTION OF NOTE AMOUNT OF NOTE
------- ------------------- --------------
Founders Venture, Inc. Promissory Note dated May 8, 550,000
1992, in favor of Paradise
Bakery, Inc. ("PBI")
Xxx X. and Xxxxxxxx Xxxxxxx Promissory Note dated June 570,000
18, 1992, in favor of PBI
JMB Holding Corporation Promissory Note dated 450,000
October 16, 1992, in favor of PBI
Torrey Point, Inc. Promissory Note dated March 203,283
1, 1993, in favor of PBI
EXHIBIT "A"
----------
EXHIBIT "B"
-----------
DESCRIPTION OF SECURITY DOCUMENTS - TO BE SUPPLIED.
EXHIBIT "B"
-----------
EXHIBIT D
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This PLEDGE AND SECURITY AGREEMENT, dated as of ______________,
1995, (the"Agreement") made by PARADISE BAKERY, INC., a Delaware corporation,
having its principal office at ___________________________________________
(the "Pledgor"), in favor of CHART HOUSE ENTERPRISES, INC., a Delaware
corporation ("CHE"), with offices located at 000 Xxxxx Xxxxxx Xxxxxx, Xxxxxx
Xxxxx, Xxxxxxxxxx 00000.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Pledgor is the holder of certain promissory notes
from certain franchisees of Pledgor issued in favor of the Pledgor (the "Pledged
Notes") set forth on Schedule I;
WHEREAS, pursuant to an Agreement and Plan of Reorganization (the
"Merger Agreement") among Pledgor, Clucker's Wood Roasted Chicken, Inc., a
Florida corporation ("Clucker's"), Paradise Acquisition Corporation, a Florida
corporation ("PAC"), and CHE, and the other documents executed and delivered in
connection therewith, PAC has been merged with and into Pledgor and in
connection therewith Pledgor's has executed and delivered a promissory note of
even date herewith (the "Note") in favor of CHE and;
WHEREAS, CHE required, as a condition to its entering into the
Merger Agreement and accepting the Note from Pledgor, that the Pledgor pledge to
CHE and grant to CHE a security interest in, the "Pledged Collateral" (as
hereinafter defined);
NOW THEREFORE, in consideration of the premises and in order to
induce CHE to accept the Note from the Pledgor, Pledgor hereby agrees as
follows:
1. Pledge. The Pledgor hereby pledges to CHE, and grants to CHE
------
a security interest in, the following (the "Pledged Collateral"):
(a) The Pledged Notes and the instruments representing
the Pledged Notes, and all cash proceeds of any of the Pledged Notes, including,
without limitation, all interest and principal payments;
(b) All additional promissory notes of any of the issuers
of those Pledged Notes from time to time held by the Pledgor in any manner (any
such additional promissory notes shall constitute part of the Pledged Notes
under and as defined in this Agreement) and, all cash proceeds of any of such
additional Pledged Notes, including, without limitation, all interest and
principal payments; and
(c) All collateral security for the Pledged Notes as
described in Schedule II, including, but not limited to, accounts, inventory,
-----------
products, chattel paper,
documents, instruments, equipment, deposit accounts and general intangibles and
all accessories, improvements, substitutions and replacements thereto and
thereof and all products, proceeds and distributions thereunder.
2. Security for Obligations. This Agreement secures the payment
------------------------
of all of the Pledgor's obligations to CHE whether for principal, interest, or
collection fees or expenses and all obligations of the Pledgor now or hereafter
existing under this Agreement or the Note (the obligations of the Pledgor now or
hereafter existing under this Agreement being referred to herein as the
"Liabilities").
3. Delivery of Pledged Collateral. All certificates or
------------------------------
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of CHE pursuant hereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance reasonably
satisfactory to CHE.
4. Representations and Warranties. The Pledgor represents and
------------------------------
warrants as follows:
(a) The Pledgor is the legal and beneficial owner of the
Pledged Collateral, free and clear of any lien, security interest, option or
other charge, encumbrance or restriction on the Pledged Collateral except for
the security interest created by this Agreement.
(b) Upon the delivery to CHE of the Pledged Notes, the
pledge of the Pledged Notes pursuant to this Agreement creates a valid security
interest in the Pledged Notes, securing the payment of the Liabilities, provided
the Pledged Notes are held in the possession of CHE.
(c) No authorization, approval, or other action by, and
no notice to or filing with, any governmental authority or regulatory body is
required either (i) for the pledge by the Pledgor of the Pledged Collateral
pursuant to this Agreement or for the execution, delivery or performance of this
Agreement by the Pledgor; or (ii) for the exercise by CHE of the rights provided
for in this Agreement or the remedies in respect of the Pledged Collateral
pursuant to this Agreement.
(d) The Pledgor has full power and authority to enter
into this Agreement and has the right to pledge and grant a security interest in
the Pledged Notes as provided by this Agreement.
5. Further Assistance. The Pledgor agrees that at any time and
------------------
from time to time, at the expense of the Pledgor, the Pledgor will promptly
execute and deliver, or cause to be executed and delivered, all assignments,
instruments and documents and take all further action, that is reasonably
necessary, at CHE's request, in order to perfect any security interest granted
or purported to be granted hereby or to enable CHE to exercise and enforce its
rights and remedies hereunder with respect to any Pledged Collateral and to
carry out the provisions and purposes hereof.
-2-
6. Rights to Receive Payments.
--------------------------
(a) So long as no Event of Default (as hereinafter
defined in Section 12 of this Agreement) shall have occurred and be continuing,
the Pledgor shall be entitled to receive all cash payments of interest and
principal paid from time to time with respect to the Pledged Notes.
(b) Upon the occurrence of and during the continuance of
an Event of Default, any and all interest or principal paid or payable in the
form of instruments and other property (other than cash interest and principal
payments permitted under Section 6(a) hereof) received, receivable or otherwise
distributable in respect of, or in exchange for, any Pledged Collateral shall be
in each case forthwith delivered to CHE to hold as Pledged Collateral and shall,
if received by the Pledgor, be received in trust for the benefit of CHE, be
segregated from the other property or funds of the Pledgor, and be forthwith
delivered to CHE as Pledged Collateral in the same form as so received (with any
necessary endorsement).
(c) Upon the occurrence and during the continuance of an
Event of Default, all cash payments of interest and principal with respect to
the Pledged Notes shall be paid to CHE and Pledgor's right to receive such cash
payments pursuant to Section 6(a) hereof shall immediately cease.
7. Transfers and Other Liens; Additional Notes.
-------------------------------------------
(a) The Pledgor agrees that it will not (i) sell or
otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral without the prior written consent of CHE which consent shall not be
unreasonably withheld, provided, however, that the contemplated merger of
Founders Venture, Inc. ("Founders") into Pledgor and the resulting
extinguishment of the Pledged Note from Founders shall not be deemed to be a
violation or default pursuant to this Agreement and provided, further, that the
acquisition by Pledgor of any other maker of a Pledged Note and the resulting
extinguishment of such note shall not be deemed to be a violation or default
pursuant to this Agreement; or (ii) create or permit to exist any lien, security
interest, or other charge or encumbrance upon or with respect to any of the
Pledged Collateral, except for the security interest granted under this
Agreement.
(b) The Pledgor agrees that it will pledge and deliver to
CHE, immediately upon its acquisition (directly or indirectly) thereof, any
replacement collateral security for the Pledged Collateral after the date
hereof.
8. CHE Appointed Attorney-in-Fact. Pledgor hereby appoints CHE
------------------------------
as Pledgor's attorney-in-fact, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, from time to time in CHE's
reasonable discretion to take any action and to execute any instrument which CHE
may deem necessary or advisable to further perfect the security interest granted
hereby.
9. CHE May Perform. If the Pledgor fails to perform any
---------------
agreement contained herein, CHE may itself, but shall in no way be required or
otherwise obligated to perform,
-3-
or cause performance of, such agreement, and the reasonable expenses of CHE
incurred in connection therewith shall be payable by the Pledgor under Section
13 hereof.
10. Reasonable Care. CHE shall be deemed to have exercised
---------------
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which CHE accords its own property, it being understood that CHE shall
not have any responsibility for (i) ascertaining or taking action with respect
to maturities or other matters relative to any Pledged Collateral, whether or
not CHE has or is deemed to have knowledge of such matters; or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Pledged Collateral.
11. Subsequent Changes Affecting Collateral. The Pledgor
---------------------------------------
represents to CHE that the Pledgor has made its own arrangements for keeping
informed of changes or potential changes affecting the Pledged Collateral
(including, but not limited to, payments of interest and/or principal), and the
Pledgor agrees that CHE shall have no responsibility or liability for informing
the Pledgor of any such changes or potential changes or for taking any action or
omitting to take any action with respect thereto.
12. Events of Default; Remedies Upon Default.
----------------------------------------
(a) The following shall constitute Events of Default
("Events of Default") under this Agreement:
(i) there occurs or is continuing an Event of
Default under and as defined in the Note;
(ii) the Pledgor fails to perform or observe in any
material respect any term, covenant or agreement contained in this Pledge
Agreement or in the Merger Agreement on its part to be performed or
observed and such failure shall continue for ten (10) business days after
delivery by CHE of notification of such failure, or any representation or
warranty made by the Pledgor in this Agreement shall be untrue or
misleading in any material respect as of the date with respect to which
such representation or warranty was made;
(iii) a notice of lien, levy, or assessment is filed
or recorded with respect to all or a substantial part of the Pledged
Collateral, except for a lien, levy or assessment which relates to current
taxes not yet due and payable, and the applicable claim is not discharged
or satisfied within ten (10) business days of the Pledgor's actual or
constructive knowledge of such filing or recordation; or
(iv) all or a substantial part of the Pledged
Collateral is attached, seized, subjected to a writ or distress warrant, or
is levied upon, or comes within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors and such Pledged
Collateral is not returned to the Pledgor or such writ, distress warrant or
levy is not dismissed, stayed or lifted within ten (10) business days.
(b) If any Event of Default shall have occurred and be
continuing, CHE
-4-
shall, in addition to all other rights given by law or by this Agreement, the
Note or otherwise, have all of the rights and remedies with respect to the
Pledged Collateral of a secured party under the Uniform Commercial Code ("Code")
in effect in the State of California at that time and CHE may, without notice
and at its option, transfer or register, and the Pledgor shall register or cause
to be registered upon request therefore by CHE, any securities constituting a
part of the Pledged Collateral CHE's name or the name of its nominee(s), with or
without any indication that such Pledged Collateral is subject to the security
interest hereunder. In addition, with respect to any Pledged Collateral which
shall then be in or shall thereafter come into the possession or custody of CHE,
CHE may sell or cause the same to be sold at any public or private sale, in one
or more sales or lots, at such price or prices as CHE may deem best, for cash or
on credit or for future delivery, without assumption of any credit risk. The
purchaser of any or all Pledged Collateral so sold shall thereafter hold the
same absolutely, free from any claim, encumbrance or right of any kind
whatsoever. Unless any of the Pledged Collateral threatens to decline speedily
in value or is or becomes of a type sold on a recognized market, CHE will give
Pledgor reasonable notice of the time and place of any public sale thereof, or
of the time after which any private sale or other intended disposition is to be
made. Any sale of the Pledged Collateral conducted in conformity with reasonable
commercial practices of banks, insurance companies, commercial finance
companies, or other financial institutions disposing of property similar to the
Pledged Collateral shall be deemed to be commercially reasonable. Any
requirements of reasonable notice shall be met if such notice is mailed to the
Pledgor as provided in Section 16 below, at least ten (10) business days before
the time of the sale or disposition. Any other requirement of notice, demand or
advertisement for sale is, to the extent permitted by law, waived. CHE may, in
its own name or in the name of a designee or nominee, buy any of the Pledged
Collateral at any public sale and if permitted by applicable law, at any private
sale. All expenses (including court costs and reasonable attorneys' fees and
expenses) of, or incident to, the enforcement of any of the provisions hereof
shall be recoverable from the proceeds of the sale or other disposition of the
Pledged Collateral.
In addition, upon the occurrence or during the continuance of an
Event of Default, all rights of the Pledgor to exercise the voting and other
rights which it would otherwise be entitled to exercise shall cease, and all
such rights shall thereupon become vested in CHE as provided in Section 6.
13. Expenses. The Pledgor will upon demand pay to CHE the
--------
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which CHE may incur in
connection with (i) the exercise or enforcement of any of the rights of CHE
hereunder; or (ii) the failure by the Pledgor to perform or observe any of the
provisions hereof.
14. Security Interest Absolute. All rights of CHE and security
--------------------------
interests hereunder, and all obligations of the Pledgor hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Note or
any other agreement or instrument relating thereto;
-5-
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Liabilities, or any other
amendment or waiver of or any consent to any departure from the Note;
(c) any exchange, surrender, release or non-perfection of
any other collateral, or any release or amendment or waiver of or consent
to departure from any guaranty, for all or any of the Liabilities; or
(d) any other circumstance occurring after the
consummation of the Merger pursuant to the Merger Agreement which might
otherwise constitute a defense available to, or a discharge of, the Pledgor
in respect of the Liabilities or of this Agreement.
15. Amendments, Waivers and Consents. No amendment or waiver of
--------------------------------
any provision of this Agreement nor consent to any departure by the Pledgor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by CHE, and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
16. Notices. Any notice or other communication required or
-------
desired to be served, given or delivered hereunder shall be in writing and sent
by registered or certified mail, with proper postage prepaid and addressed to
the party to be notified as follows:
(a) If to the Pledgor, at
Paradise Bakery, Inc.
c/o Clucker's Wood Roasted Chicken, Inc.
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
with copies to:
Xxxxxxx X. Xxxxxxxxx, P.A.
Broad and Xxxxxx
Miami Center, Suite 3000
000 X. Xxxxxxxx Xxxxxxxxx
Xxxxx, XX 00000
Paradise Bakery, Inc.
000 X. Xxxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxxx
-6-
(b) If to CHE, at
Chart House Enterprises, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx Xxxxx, XX 00000
Attention: Legal Department
with a copy to:
Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xxx X. Xxxxxxxx, Esq.
or to such other address as any of the parties may hereafter designate for
itself by written notice to the other parties in the manner herein prescribed.
17. Continuing Security Interest. This Agreement shall create a
----------------------------
continuing security interest in the Pledged Collateral and shall (i) remain in
full force and effect until payment in full of the Liabilities and termination
of all obligations under the Note and all other documents executed and delivered
in connection therewith; (ii) be binding upon the Pledgor, its successors and
assigns; and (iii) inure to the benefit of CHE and its successors, transferees
and assigns.
18. Waivers. The Pledgor waives presentment and demand for
-------
payment of any of the Liabilities, protest and notice of dishonor or default
with respect to any of the Liabilities.
19. Governing Law; Terms. This Agreement shall be governed by
--------------------
and construed in accordance with the internal laws (as opposed to conflict of
laws provisions) and decisions of the State of California. Unless otherwise
defined herein, terms defined in Article 9 of the Code are used herein as
therein defined. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be interpreted in such manner as to
be ineffective or invalid under applicable law, such provision shall be
ineffective or invalid only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.
20. Definitions. Capitalized terms used herein and not
-----------
otherwise defined herein shall have the meaning given such terms in the Merger
Agreement. The singular shall include the plural and vice versa and any gender
shall include any other gender as the text shall indicate.
21. Section Headings. The section headings herein are for
----------------
convenience of reference only, and shall not affect in any way the
interpretation of any of the provisions hereof.
-7-
IN WITNESS WHEREOF, the Pledgor and CHE have each caused this
Agreement to be duly executed and delivered as of the date first above written.
"Pledgor"
PARADISE BAKERY, INC.,
a Delaware corporation
By: _______________________________
Its:___________________________
"CHE"
CHART HOUSE ENTERPRISES, INC.,
a Delaware corporation
By: ________________________________
Its:____________________________
-8-
SCHEDULE I
----------
PLEDGED NOTES
-------------
ORIGINAL PRINCIPAL
------------------
OBLIGOR DESCRIPTION OF NOTE AMOUNT OF NOTE
------- ------------------- --------------
Founders Venture, Inc. Promissory Note dated May 8, 550,000
1992, in favor of Paradise
Bakery, Inc. ("PBI")
Xxx X. and Promissory Note dated June 18, 570,000
Xxxxxxxx Xxxxxxx 1992, in favor of PBI
JMB Holding Corporation Promissory Note dated 450,000
October 16, 1992, in favor of
PBI
Torrey Point, Inc. Promissory Note dated March 1, 203,283
1993, in favor of PBI
SCHEDULE II
-----------
COLLATERAL SECURITY OF PLEDGED NOTES
------------------------------------
[INFORMATION TO BE SUPPLIED]
EXHIBIT E
UNCONDITIONAL GUARANTY OF PAYMENT
---------------------------------
THIS UNCONDITIONAL GUARANTY OF PAYMENT (this "Guaranty"), made as
of _____________, 1995, by Clucker's Wood Roasted Chicken, Inc., a Florida
corporation ("Guarantor"), whose address is 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000,
Xxxxx, Xxxxxxx 00000 in favor of Chart House Enterprises, Inc., a Delaware
corporation, whose address is 000 Xxxxx Xxxxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxxxxxx
00000 ("CHE").
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to an Agreement and Plan of Reorganization (the
"Merger Agreement") among Guarantor; Paradise Acquisition Corporation, a Florida
corporation ("PAC"); Paradise Bakery, Inc., a Delaware corporation ("Paradise");
and CHE, PAC has been merged with and into Paradise and in connection therewith
Paradise has executed and delivered a promissory note of even date herewith (the
"Note") in favor of CHE;
WHEREAS, the Note is secured by a Pledge and Security Agreement
with respect to various promissory notes in favor of Paradise from certain of
its franchisees (the "Franchisee Notes") (the Note, the Pledge and Security
Agreement, the Franchisee Notes, the Merger Agreement and such other documents
and instruments, as the same may from time to time be amended, consolidated,
renewed or replaced, being collectively referred to herein as the "Loan
Documents");
WHEREAS, as a condition to entering into the Merger Agreement and
accepting the Note from Paradise, CHE has required that Guarantor guarantee to
CHE payment by Paradise under the Loan Documents; and
WHEREAS, Guarantor is the sole shareholder of Paradise, the
acceptance of the Note from Paradise in favor of CHE is of substantial benefit
to Guarantor and, therefore, Guarantor desires to guarantee to CHE payment by
Paradise under the Note and the Loan Documents.
NOW, THEREFORE, to induce CHE to accept the Note from Paradise
and in consideration of the foregoing premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Guarantor hereby covenants and agrees for the benefit of CHE, as follows:
1. Guarantees.
----------
(a) Guaranty of Payment. Guarantor does hereby unconditionally
-------------------
guarantee to CHE the full and prompt payment of the Note when due, whether by
acceleration or otherwise, with such interest as may accrue thereon as may be
due in connection therewith, either before or after maturity thereof.
(b) Guaranty of Performance. Guarantor does hereby
-----------------------
unconditionally guarantee to CHE the full and prompt payment of any and all
obligations whatsoever of Paradise
to CHE under the terms of the Note and any other Loan Documents, whether such
obligations now exist or arise hereafter.
(c) Guarantor Obligations. Guarantor does hereby agree that if
---------------------
the Note is not paid by Paradise in accordance with its terms for any reason
whatsoever, or if any and all sums which are now or may hereafter become due
from Paradise to CHE under the Loan Documents are not paid by Paradise in
accordance with their terms for any reason whatsoever, Guarantor will
immediately make such payments upon notice to Guarantor from CHE. Guarantor
further agrees to pay CHE all expenses (including, without limitation,
reasonable attorneys' fees) paid or incurred by CHE in endeavoring to collect
all or any portion of the indebtedness evidenced by the Note, to enforce any
other obligations guaranteed hereby, or to enforce this Guaranty.
(d) Loan Documents. The provisions of this Guaranty shall
--------------
extend and be applicable to all renewals, replacements, amendments, extensions,
consolidations and modifications of the Loan Documents, and any and all
references herein to the Loan Documents or any of them shall be deemed to
include any such renewals, replacements, amendments, extensions, consolidations
or modifications thereof.
(e) Liability of Guarantor. This is a guaranty of payment and
----------------------
not of collection. The liability of Guarantor under this Guaranty shall be
direct and immediate and not conditional or contingent upon the pursuit of any
remedies against Paradise or any other person (including, without limitation,
other guarantors, if any), nor against any other property (whether real or
personal), rights, estates and interests now or at any time hereafter securing
the payment of the Indebtedness and/or the other payment obligations of Paradise
under the Loan Documents whether held by CHE or by any person or entity on CHE's
behalf or for CHE's account (the "Collateral"). Guarantor waives any right to
require that an action be brought against Paradise or any other person or to
require that resort be had to any Collateral. In the event, on account of the
Bankruptcy Reform Act of 1978, as amended, or any other debtor relief law
(whether statutory, common law, case law or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, which may be or become applicable,
Paradise shall be relieved of or fail to incur any payment obligation as
provided in the Loan Documents, Guarantor shall nevertheless be fully liable
therefor. In the event of a default under the Loan Documents which is not cured
within any applicable grace or cure period, CHE shall have the right to enforce
its rights, powers and remedies (including, without limitation, foreclosure of
all or any portion of the Collateral) thereunder or hereunder, in any order, and
all rights, powers and remedies available to CHE in such event shall be
nonexclusive and cumulative of all other rights, powers and remedies provided
thereunder or hereunder or by law or in equity. If the indebtedness and
obligations guaranteed hereby are partially paid or discharged by reason of the
exercise of any of the remedies available to CHE, this Guaranty shall
nevertheless remain in full force and effect, and Guarantor shall remain liable
for all remaining indebtedness and obligations guaranteed hereby, even though
any rights which Guarantor may have against Paradise may be destroyed or
diminished by the exercise of any such remedy; and if the indebtedness and
obligations guaranteed hereby are otherwise partially paid or discharged for any
reason, including voluntary payment or prepayment, this Guaranty shall
nevertheless remain in full force and effect, and Guarantor shall remain liable
for all remaining indebtedness and payment obligations guaranteed hereby.
-2-
2. Reinstatement of Obligations. If at any time all or any part
----------------------------
of any payment made by Guarantor or received by CHE from Guarantor under or with
respect to this Guaranty is or must be rescinded or returned for any reason
whatsoever (including, but not limited to, the insolvency, bankruptcy or
reorganization of Guarantor or Paradise), then the obligations of Guarantor
hereunder shall, to the extent of the payment rescinded or returned, be deemed
to have continued in existence, notwithstanding such previous payment made by
Guarantor, or receipt of payment by CHE, and the obligations of Guarantor
hereunder shall continue to be effective or be reinstated, as the case may be,
as to such payment, all as though such previous payment by Guarantor had never
been made.
3. Waivers by Guarantor. To the extent permitted by law,
--------------------
Guarantor hereby waives and agrees not to assert or take advantage of (as a
defense or otherwise):
(a) Any right to require CHE to proceed against Paradise or any
other person or to proceed against or exhaust any security held by CHE at any
time or to pursue any other remedy in CHE's power or under any other agreement
before proceeding against Guarantor hereunder;
(b) Any defense that may arise by reason of lack of authority of
any person or persons or the failure of CHE to file or enforce a claim against
any other person or persons;
(c) Demand, presentment for payment, notice of nonpayment,
protest, notice of protest and notice of any action or non-action on the part of
Paradise, CHE, any endorser or creditor of Paradise or of Guarantor or on the
part of any other person whomsoever under this or any other instrument in
connection with any payment obligation or evidence of indebtedness of Paradise
held by CHE, or the lack of any thereof;
(d) Any defense based upon an election of remedies by CHE;
(e) Any right or claim or right to cause a marshalling of the
assets of Guarantor;
(f) Any duty on the part of CHE to disclose to Guarantor any
facts CHE may now or hereafter know about Paradise, regardless of whether CHE
has reason to believe that any such facts materially increase the risk beyond
that which Guarantor intends to assume or has reason to believe that such facts
are unknown to Guarantor or has a reasonable opportunity to communicate such
facts to Guarantor, it being understood and agreed that Guarantor is fully
responsible for being and keeping informed of the financial condition of
Paradise and of any and all circumstances bearing on the risk that liability may
be incurred by Guarantor hereunder;
(g) Any lack of notice of disposition or of manner of
disposition of any Collateral;
(h) Failure to properly record any document or any other lack of
due diligence by CHE in collection, protection or realization upon any
Collateral or in obtaining reimbursement or performance from any person or
entity now or hereafter liable for the Loan Documents or any payment obligation
secured thereby;
-3-
(i) Any sale or assignment by Paradise of the Collateral, or any
portion thereof or interest therein, whether or not consented to by CHE;
(j) Any lack of commercial reasonableness in dealing with any of
the Collateral except with respect to CHE's possession of the Franchisee Notes
which shall be maintained in a commercially reasonably manner;
(k) An assertion or claim that the automatic stay provided by 11
U.S.C. (S)362 (arising upon the voluntary or involuntary bankruptcy proceeding
of Paradise) or any other stay provided under any other debtor relief law
(whether statutory, common law, case law or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, which may be or become applicable, shall
operate or be interpreted to stay, interdict, condition, reduce or inhibit the
ability of CHE to enforce any of its rights, whether now or hereafter required,
which CHE may have against Guarantor or the Collateral;
(l) Any modifications of the Loan Documents or any obligation of
Paradise relating to the Note by operation of law or by action of any court,
whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or any other
debtor relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, or otherwise;
(m) The release of Paradise or of any other person or entity
from performance or observance of any of the agreements, covenants, terms or
conditions contained in any of the Loan Documents by operation of law;
(n) Any action, occurrence, event or matter consented to by
Guarantor under Section 4(d) hereof, under any other provision hereof, or
otherwise.
4. General Provisions.
------------------
(a) Survival. This Guaranty shall be deemed to be continuing in
--------
nature and shall remain in full force and effect and shall survive the exercise
of any remedy by CHE under the Collateral or any of the other Loan Documents.
(b) Subordination; No Recourse Against CHE. Guarantor hereby
--------------------------------------
subordinates any and all indebtedness of Paradise now or hereafter owed to
Guarantor to all indebtedness of Paradise to CHE, and agrees with CHE that
Guarantor shall not claim any offset or other reduction of Guarantor's
obligations hereunder because of any such indebtedness and shall not take any
action to obtain any of the Collateral. Further, Guarantor shall not have any
right of recourse against CHE by reason of any action CHE may take or omit to
take under the provisions of this Guaranty or under the provisions of any of the
Loan Documents.
(c) Rights Cumulative. CHE's rights under this Guaranty shall
-----------------
be in addition to all rights of CHE under the Note and the other Loan Documents.
(d) Consents. Guarantor hereby consents and agrees that CHE may
--------
at any time, and from time to time, without notice to or further consent from
Guarantor, either with or
-4-
without consideration: release and surrender the Collateral or any portion
thereof; substitute for any Collateral held by or on behalf of CHE other
collateral of like kind, or of any kind; agree to modify the terms of any one or
more of the Loan Documents; extend or renew the Note for any period; grant
releases, compromises and indulgences with respect to any one or more of the
Loan Documents and to any persons or entities now or hereafter liable thereunder
or hereunder; release any other guarantor or endorser of or other person or
entity liable upon the Note or any other of the Loan Documents, other than the
Franchisee Notes; or take or fail to take any action of any type whatsoever. No
such action which CHE shall take or fail to take in connection with the Loan
Documents or any Collateral, nor any course of dealing with Paradise or any
other person, shall limit, impair or release Guarantor's obligations hereunder,
affect this Guaranty in any way or afford Guarantor any recourse against CHE.
Nothing contained in this section shall be construed to require CHE to take or
refrain from taking any action referred to herein.
(f) Entire Agreement; Amendment; Severability. This Guaranty
-----------------------------------------
contains the entire agreement between the parties respecting the matters herein
set forth and supersedes all prior agreements, whether written or oral, between
the parties respecting such matters; and Guarantor and CHE acknowledge that
there are no contemporaneous oral agreements with respect to the subject matter
hereof. This Guaranty may not be changed, modified or amended, except by a
writing executed by the parties hereto; and no obligation of Guarantor can be
released or waived by CHE or any agent of CHE, except by a writing duly executed
by CHE. A determination that any provision of this Guaranty is unenforceable or
invalid shall not affect the enforceability or validity of any other provision,
and any determination that the application of any provision of this Guaranty to
any person or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such provision as it may apply to any other
persons or circumstances.
(g) Governing Law; Binding Effect; Assignment; Waiver of
----------------------------------------------------
Acceptance. This Guaranty shall be governed by and construed in accordance with
----------
the laws of the State of California, except to the extent that the applicability
of any of such laws may now or hereafter be preempted by Federal law, in which
case such Federal law shall so govern and be controlling. The provisions of this
Guaranty shall be binding upon Guarantor and the successors and assigns of
Guarantor and shall inure to the benefit of CHE and the successors and assigns
of CHE. This Guaranty shall in no event be impaired by any change which may
arise by reason of the dissolution of Paradise or Guarantor. This Guaranty is
assignable by CHE upon prior written notice to Guarantor, and any full or
partial assignment hereof by CHE shall operate to vest in the assignee all
rights and powers herein conferred upon and granted to CHE and so assigned by
CHE. Notwithstanding the foregoing, Guarantor shall not assign any of its rights
or obligations under this Guaranty. Guarantor hereby waives any acceptance of
this Guaranty by CHE, and this Guaranty shall immediately be binding upon
Guarantor.
(h) Notice. All notices, demands, requests or other
------
communications to be sent by one party to the other hereunder or required by law
shall be in writing and shall be deemed to have been validly given or served by
delivery of the same in person to the intended addressee, or by depositing the
same with Federal Express or another reputable private courier service for next
business day delivery to the intended addressee at its address set forth on the
first page of this Guaranty or at such other address as may be designated by
such party as herein provided, or by
-5-
depositing the same in the United States mail, postage prepaid, registered or
certified mail, return receipt requested, addressed to the intended addressee at
its address set forth on the first page of this Guaranty or at such other
address as may be designated by such party as herein provided. All notices,
demands and requests shall be effective upon such personal delivery, or one (1)
business day after being deposited with the private courier service, or five (5)
business days after being deposited in the United States mail as required above.
Rejection or other refusal to accept or the inability to deliver because of
changed address of which no notice was given as herein required shall be deemed
to be receipt of the notice, demand or request sent. By giving to the other
party hereto at least fifteen (15) days' prior written notice thereof in
accordance with the provisions hereof, the parties hereto shall have the right
from time to time to change their respective addresses and each shall have the
right to specify as its address any other address within the United States of
America.
(i) No Waiver; Time of Essence; Business Day. The failure of
----------------------------------------
any party hereto to enforce any right or remedy hereunder, or to promptly
enforce any such right or remedy, shall not constitute a waiver thereof nor give
rise to any estoppel against such party nor excuse any of the parties hereto
from their respective obligations hereunder. Any waiver of such right or remedy
must be in writing and signed by the party to be bound. This Guaranty is subject
to enforcement at law or in equity, including actions for damages or specific
performance. Time is of the essence hereof. The term "business day" as used
herein shall mean a weekday, Monday through Friday, except a legal holiday or a
day on which banking institutions in New York, New York are authorized by law to
be closed.
(j) Captions for Convenience; Pronouns. The captions and
----------------------------------
headings of the sections and paragraphs of this Guaranty are for convenience of
reference only and shall not be construed in interpreting the provisions hereof.
All personal pronouns used herein, whether used in the masculine, feminine or
neuter gender, shall include all other genders; and the singular shall include
the plural and vice versa.
(k) Attorneys' Fees. In the event it is necessary for CHE to
---------------
retain the services of an attorney or any other consultants in order to enforce
this Guaranty, or any portion thereof, Guarantor agrees to pay to CHE any and
all reasonable costs and expenses, including, without limitation, attorneys'
fees, incurred by CHE as a result thereof and such reasonable costs, fees and
expenses shall be payable to CHE upon demand.
(l) Successive Actions. A separate right of action hereunder
------------------
shall arise each time CHE acquires knowledge of any failure of payment
guaranteed by Guarantor under this Guaranty. Separate and successive actions may
be brought hereunder to enforce any of the provisions hereof at any time and
from time to time. No action hereunder shall preclude any subsequent action, and
Guarantor hereby waives and covenants not to assert any defense in the nature of
splitting of causes of action or merger of judgments.
(m) WAIVER OF JURY TRIAL. GUARANTOR, TO THE FULL EXTENT
--------------------
PERMITTED BY LAW, HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON
THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE
RIGHT TO A TRIAL BY
-6-
JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY
RELATING TO THIS GUARANTY OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR
GUARANTOR, OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR ATTORNEYS,
OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR GUARANTOR, IN EACH OR THE
FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
(n) Waiver by Guarantor. Guarantor covenants and agrees that,
-------------------
upon the commencement of a voluntary or involuntary bankruptcy proceeding by or
against Paradise, Guarantor shall not seek or cause Paradise or any other person
or entity to seek a supplemental stay or other relief, whether injunctive or
otherwise, pursuant to 11 U.S.C. (S)105 or any other provision of the Bankruptcy
Reform Act of 1978, as amended, or any other debtor relief law, (whether
statutory, common law, case law or otherwise) of any jurisdiction whatsoever,
now or hereafter in effect, which may be or become applicable, to stay,
interdict, condition, reduce or inhibit the ability of CHE to enforce any rights
of CHE against Guarantor or the Collateral by virtue of this Guaranty or
otherwise.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of
the day and year first above written.
CLUCKER'S WOOD ROASTED CHICKEN, INC.,
a Florida corporation
By:__________________________________
Xxxxxxx X. Xxxxxxxxxx, President
-7-
EXHIBIT F
NONCOMPETITION AGREEMENT
------------------------
THIS NONCOMPETITION AGREEMENT (the "Agreement") is made and entered into as
of the _____ day of __________, 1995 (the "Effective Date"), between CLUCKER'S
WOOD ROASTED CHICKEN, INC., a Florida corporation (the "Company"), whose address
is 00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxx Xxxxx,Xxxxxxx 00000; and CHART
HOUSE ENTERPRISES, INC., a Delaware corporation (the "Seller"), whose address is
000 Xxxxx Xxxxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxxxxxx 00000.
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Company is acquiring from the Seller Paradise Bakery, Inc., a
Delaware corporation ("Paradise Bakery"), which operates and franchises retail
bakeries and bakery cafes; and
WHEREAS, the Seller, by virtue of the Seller's ownership of Paradise
Bakery, is familiar with the trade secrets and other confidential information
pertaining to Paradise Bakery's business, including Paradise Bakery's client
base;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and the Seller do hereby agree as follows:
1. COVENANT NOT TO COMPETE. The Seller acknowledges and recognizes that
Paradise Bakery's business is highly competitive and that the goodwill and
continued patronage of Paradise Bakery's customers constitute a substantial
asset of Paradise Bakery, having been acquired through considerable time, money
and effort. Accordingly, in consideration of the acquisition by the Company of
Paradise Bakery (the "Paradise Bakery Acquisition"), the Seller agrees to the
following:
(a) That during the Restricted Period (as defined herein) and within
the Restricted Area (as defined herein), the Seller or any of the Seller's
Affiliates (as defined herein) will not, individually or in conjunction with
others, directly or indirectly, engage in any Business Activities (as
hereinafter defined), whether as an employer, partner, independent contractor,
investor (other than as a holder of less than 5% of the outstanding capital
stock of a publicly traded corporation), consultant, advisor, agent or
otherwise. For these purposes, the term "Affiliate" shall mean any of the
Seller's subsidiaries, whether now in existence or subsequently acquired or
formed during the Restricted Period, and any executive officer of Seller or any
such subsidiary.
(b) That during the Restricted Period and within the Restricted Area,
the Seller or any of the Seller's Affiliates will not, indirectly or directly,
solicit, induce or influence any of the vendors or suppliers of Paradise Bakery
at the time of the Paradise Bakery Acquisition to discontinue or reduce the
extent of such relationship with Paradise Bakery.
(c) That during the Restricted Period and within the Restricted Area,
the Seller or any of the Seller's Affiliates will not (1) directly or indirectly
recruit, solicit or otherwise influence any employee or agent of Paradise Bakery
to discontinue such employment or agency relationship with Paradise Bakery, or
(2) for a period of 90 calendar days after the Effective Date, employ or seek to
employ, or cause or permit any business that competes directly or indirectly
with the Business Activities of Paradise Bakery (the "Competitive Business") to
employ or seek to employ for any Competitive Business any person who is then (or
was at any time within six (6) months prior to the date Seller or the
Competitive Business employs or seeks to employ such person) employed at the
Effective Date by Paradise Bakery as a manager or supervisor of any of Paradise
Bakery's company-owned stores.
(d) That during the Restricted Period, the Seller or any of the
Seller's Affiliates will not interfere with, disrupt or attempt to disrupt any
past or present relationship, contractual or otherwise, between Paradise Bakery
and any of its vendors, suppliers, employees or agents.
2. NON-DISCLOSURE OF INFORMATION. The Seller acknowledges that Paradise
Bakery's trade secrets, private or secret processes, methods and ideas, as they
exist from time to time; customer lists and information concerning Paradise
Bakery's products, services, training methods, development, technical
information, marketing activities and procedures; and credit and financial data
concerning Paradise Bakery's vendors and suppliers (the "Proprietary
Information") are valuable, special and unique assets of Paradise Bakery. In
light of the highly competitive nature of Paradise Bakery's business, the Seller
agrees that all Proprietary Information heretofore obtained by the Seller or any
of the Seller's Affiliates as a result of their respective association with
Paradise Bakery shall be considered confidential.
In recognition of this fact, the Seller agrees that the Seller or any of
its Affiliates will not use or disclose any such Proprietary Information for the
Seller's own purposes or for the benefit of any person or other entity or
organization (except Paradise Bakery, or with the prior written consent of
Paradise Bakery, the franchisees of Paradise Bakery) under any circumstances
unless such Proprietary Information has been publicly disclosed generally or,
unless upon written advice of legal counsel
-2-
reasonably satisfactory to the Company, the Seller or any of the Seller's
Affiliates is legally required to disclose such Proprietary Information.
Documents (as hereinafter defined) of Paradise Bakery that have come into the
possession of the Seller or any of its Affiliates during the Seller's ownership
of Paradise Bakery are and remain the property of Paradise Bakery, and such
Documents shall be returned to Paradise Bakery; provided, however, that, to the
extent that Solana Beach Baking Company, a wholly-owned subsidiary of the Seller
("SBBC"), needs to use any of such Documents in order to supply proprietary
bakery goods of Paradise to Paradise and the franchisees of Paradise, then SBBC
may retain such Documents for such purposes so long as it is supplying
proprietary bakery goods of Paradise to Paradise and the franchisees of
Paradise.
3. DOCUMENTS. "Documents" shall mean all original written, recorded, or
graphic matters whatsoever, and any and all copies thereof, including, but not
limited to: papers; books; records; tangible things; correspondence; telex
messages; memoranda; work-papers; reports; statements; summaries; analyses;
evaluations; client records and information; agreements; agendas;
advertisements; manuals; brochures; publications; directories; industry lists;
schedules; price lists; client lists; statistical records; training manuals;
computer printouts, software and hardware; books of account, records and
invoices reflecting business operations; and all things similar to any of the
foregoing however denominated. In all cases where originals are not available,
the term "Documents" shall also mean identical copies of original documents or
non-identical copies thereof.
4. RESTRICTIVE PERIOD. The "Restrictive Period" shall be deemed to be the
period of five years following the Effective Date.
5. RESTRICTED AREA. The "Restricted Area" shall be deemed to mean the
United States of America.
6. BUSINESS ACTIVITIES. "Business Activities" shall be deemed to include
(a) the retail bakery business other than (i) the retail sale of bakery goods
incidental to the restaurant businesses of the Seller or any of its Affiliates;
(ii) the retail sale of bakery goods incidental to SBBC's wholesale bakery
business to customers who purchase those goods directly from the wholesale
bakery facility that produces those goods at the physical location of such
facility, which does not have any retail selling space and has not engaged in
any generic advertising in order to obtain such incidental retail sales; and
(iii) the acquisition by the Seller or any of its Affiliates of another
restaurant business that engages
-3-
in the retail sale of bakery goods incidental to its primary restaurant business
and (b) the sale, whether retail or wholesale, to any person other than Paradise
Bakery or the franchisees of Paradise Bakery, by the Seller, SBBC or any of the
Seller's other Affiliates of any bakery products of Paradise Bakery (the
"Protected Products") utilizing the identical ingredients and methods of
preparation as are set forth in the Paradise Bakery Baked Goods Food Prep Guide
as in effect on the Effective Date (the "Food Prep Guide").
7. SBBC STARBUCKS ACCOUNT. SBBC presently sells certain baked goods to
Starbucks Coffee Company ("Starbucks") for resale by Starbucks to its retail
customers, including baked goods such as cookies, muffins, brownies and cinnamon
rolls that are similar to the Paradise Bakery baked goods listed in the Food
Prep Guide, but that differ in ingredients or recipes in one or more respects.
Nothing in this Agreement shall restrict SBBC from continuing to sell those
baked goods or others baked goods to Starbucks, provided that the baked goods
differ from the Protected Products in ingredients or recipes in one or more
respects.
8. COVENANTS AS ESSENTIAL ELEMENTS OF THIS AGREEMENT. It is understood by
and between the parties hereto that the foregoing covenants by Seller contained
in Paragraphs 1 and 2 of this Agreement shall be construed to be agreements
independent of any other element of the Seller's sale of Paradise Bakery to the
Company. The existence of any other claim or cause of action, whether predicated
on any other provision in this Agreement, or otherwise, as a result of the
Seller's sale of Paradise Bakery to the Company shall not constitute a defense
to the enforcement of the covenants in this Agreement against the Seller or any
of its Affiliates.
9. REMEDIES.
(a) The Seller acknowledges and agrees that the Company's remedy at
law for a breach or threatened breach of any of the provisions of Paragraphs 1
or 2 herein would be inadequate and the breach shall be per se deemed as causing
irreparable harm to the Company. In recognition of this fact, in the event of a
breach by the Seller of any of the provisions of Paragraphs 1 or 2, the Seller
agrees that, in addition to any remedy at law available to the Company,
including, but not limited to monetary damages, the Company, without posting any
bond, shall be entitled to obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction or
any other equitable remedy that may then be available to the Company.
-4-
(b) The Seller acknowledges that the granting of a temporary
injunction, temporary restraining order or permanent injunction merely
prohibiting the use of Proprietary Information would not be an adequate remedy
upon breach or threatened breach of Paragraph 2 and consequently agrees, upon
proof of any such breach, to the granting of injunctive relief prohibiting
violation of the terms of this Agreement. Nothing herein contained shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach.
10. MISCELLANEOUS.
(a) NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered in person or sent by overnight delivery, confirmed telecopy
(with confirmation by prepaid first-class mail delivery) or prepaid first-class
registered or certified mail, return receipt requested, to the following
addresses, or such other addresses as are given to the other parties to this
Agreement in the manner set forth herein:
If to the Company, to:
Clucker's Wood Roasted Chicken, Inc.
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxxxx, Xxxxxxx 00000
Attn.: Xxxxxx X. Xxxxxxx
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
with courtesy copies to:
Clucker's Wood Roasted Chicken, Inc.
000 X. Xxxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn.: Xxxxxxx X. Xxxxxxxxxx
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
Xxxxxxx X. Xxxxxxxxx, P.A.
Broad and Xxxxxx
Miami Center, Suite 3000
000 X. Xxxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
-5-
If to the Seller, to:
Chart House Enterprises, Inc.
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxxxx X. Xxxxx, Xx., Esq.
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
with a courtesy copy to:
Xxx X. Xxxxxxxx, Esq.
Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Telephone Number: (000) 000-0000
Telecopier Number: (000) 000-0000
(b) FURTHER ASSURANCES. At any time, and from time to time, each
party will execute such additional instruments and take such action as may be
reasonably requested by the other party to carry out the intent and purposes of
this Agreement.
(c) COSTS AND EXPENSES. Each party hereto agrees to pay its own costs
and expenses incurred in negotiating this Agreement and consummating the
transactions described herein.
(d) TIME. Time is of the essence.
(e) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof. It
supersedes all prior negotiations, letters and understandings relating to the
subject matter hereof.
(f) AMENDMENT. This Agreement may not be amended, supplemented or
modified in whole or in part except by an instrument in writing signed by the
party or parties against whom enforcement of any such amendment, supplement or
modification is sought.
(g) CHOICE OF LAW. This Agreement will be interpreted, construed and
enforced in accordance with the laws of the State of Florida with respect to all
jurisdictions other than the State of California, where it shall be interpreted,
construed and enforced in accordance with the laws of the State of California.
(h) HEADINGS. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
-6-
(i) PRONOUNS. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural as the context
may require.
(j) CONSTRUCTION. The parties hereto and their respective legal
counsel participated in the preparation of this Agreement; therefore, this
Agreement shall be construed neither against nor in favor of any of the parties
hereto, but rather in accordance with the fair meaning thereof.
(k) EFFECT OF WAIVER. The failure of any party at any time or times
to require performance of any provision of this Agreement will in no manner
affect the right to enforce the same. The waiver by any party of any breach of
any provision of this Agreement will not be construed to be a waiver by any such
party of any succeeding breach of that provision or a waiver by such party of
any breach of any other provision.
(l) SEVERABILITY. The invalidity, illegality or unenforceability of
any provision or provisions of this Agreement will not affect any other
provision of this Agreement, which will remain in full force and effect, nor
will the invalidity, illegality or unenforceability of a portion of any
provision of this Agreement affect the balance of such provision. In the event
that any one or more of the provisions contained in this Agreement or any
portion thereof shall for any reason be held to be invalid, illegal or
unenforceable in any respect, this Agreement shall be reformed, construed and
enforced as if such invalid, illegal or unenforceable provision had never been
contained herein. If any court determines that any provision of Section 1 or 2
hereof is unenforceable because of the duration or scope of such provision, such
court shall have the power to reduce the scope or duration of such provision, as
the case may be, and, in its reduced form, such provision shall then be
enforceable.
(m) ENFORCEMENT. Should it become necessary for any party to
institute legal action to enforce the terms and conditions of this Agreement,
the successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs.
(n) BINDING NATURE. This Agreement will be binding upon and will
inure to the benefit of any successor or successors of the parties hereto.
(o) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same instrument.
-7-
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf by its officers thereunto duly authorized as of
the date first written above.
CLUCKER'S WOOD ROASTED CHICKEN,
INC., a Florida corporation
By:____________________________
Xxxxxxx X. Xxxxxxxxxx,
President
CHART HOUSE ENTERPRISES, INC., a
Delaware corporation
By:____________________________
Xxxx Xxxxx, Chairman
-8-
FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
-------------------------------------------------------
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION (the
"Amendment") is made and entered into this 6th day of September, 1995 by and
among CLUCKER'S WOOD ROASTED CHICKEN, INC., a Florida corporation ("Clucker's");
PARADISE ACQUISITION CORP., a Florida corporation wholly owned by Clucker's
("PAC"); CHART HOUSE ENTERPRISES, INC., a Delaware corporation ("Chart House"),
and PARADISE BAKERY, INC., a Delaware corporation wholly-owned by Chart House
("Paradise").
WHEREAS, Clucker's, PAC, Chart House and Paradise (collectively, the
"Parties") are the parties to that certain Agreement and Plan of Reorganization
(the "Agreement") dated as of July 7, 1995, with respect to the acquisition by
Clucker's of Paradise; and
WHEREAS, by a Consent to Extension of Closing Date dated August 3, 1995,
the Parties extended the "Closing Date," as defined in the Agreement, to
September 8, 1995; and
WHEREAS, Clucker's and PAC have requested further extension of the Closing
Date on the terms and conditions of this Amendment; and
WHEREAS, Chart House and Paradise are willing to grant further extension of
the Closing Date on the terms and conditions of this Amendment;
NOW, THEREFORE, the Parties agree as follows:
1. The second sentence of (S)2(a) of the Agreement is hereby replaced in
its entirety by the following:
"On September 8, 1995, Clucker's shall deliver to Chart House's attorney,
Allen, Matkins, Xxxx, Xxxxxx & Xxxxxxx, as escrow agent, the additional
amount of $50,000 (together with accrued interest thereon, the "Additional
Deposit," and together with the Deposit, the "Total Deposit"). On the same
date, $100,000 of the Total Deposit shall be paid to Chart House. The
Total Deposit shall be credited at Closing against the cash payment
required to be paid by Clucker's to Chart House pursuant to (S)2(c) hereof.
In the event that the Closing does not occur, Chart House shall retain the
Total Deposit as liquidated damages."
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2. The first sentence of (S)2(d) of the Agreement is hereby replaced in
its entirety by the following:
"(d) CLOSING. The Closing of the transactions contemplated
herein (the "Closing") shall be held at the offices of Broad and Xxxxxx,
000 X. Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxx, Xxxxxxx, on September 29,
1995, or no later than the fourth business day thereafter, to be effective
as of the close of business on September 30, 1995, beginning at 10:00 a.m.
local time (the "Closing Date"), subject to the following three successive
options to extend the Closing Date by one month each, at the sole
discretion of Clucker's. If Clucker's gives Chart House written notice of
its exercise of the first option to extend on or before September 22, 1995,
and pays Chart House an extension fee of $50,000 in immediately available
funds on or before September 29, 1995, then the Closing Date shall be
extended to October 31, 1995, or no later than the fourth business day
thereafter, to be effective as of the close of business on October 31,
1995. If Clucker's gives Chart House written notice of its exercise of the
second option to extend on or before October 24, 1995, and pays Chart House
an extension fee of $50,000 in immediately available funds on or before
October 30, 1995, then the Closing Date shall be extended to November 30,
1995, or no later than the fourth business day thereafter, to be effective
as of the close of business on November 30, 1995. If Clucker's gives Chart
House written notice of its exercise of the third option to extend on or
before November 22, 1995, and pays Chart House an extension fee of $50,000
in immediately available funds on or before November 29, 1995, then the
Closing Date shall be extended to December 29, 1995, to be effective as of
the close of business on December 31, 1995. Each exercise by Clucker's of
an option to extend shall increase the Cash Payment by $50,000. Each
extension fee paid by Clucker's shall be credited against the Cash Payment
at the Closing. In the event that the Closing does not occur, Chart House
shall retain the paid extension fees as additional liquidated damages."
3. (S)(S)9(a)(3) and 9(a)(4) of the Agreement are hereby amended by
substituting the date of December 29, 1995, for the phrase "the 90th day
following the date of this Agreement" and by changing the respective references
to (S)6(a) and (S)6(b) of the Agreement therein to respective references to
(S)7(a) and (S)7(b) of the Agreement.
4. (S)9(b) of the Agreement is hereby amended by deleting the language ",
except that, if Chart House terminates this Agreement pursuant to the provisions
of either (S)9(a)(2) or (4),
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then Chart House shall be paid the Deposit as liquidated damages."
5. Except as amended hereby, the terms and conditions of the Agreement
shall remain the same and in full force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be duly executed on its behalf by its officers thereunto duly authorized as of
the date first above written.
CLUCKER'S WOOD ROASTED CHICKEN,
INC., a Florida corporation
By:_________________________________
Xxxxxxx X. Xxxxxxxxxx,
President
PARADISE ACQUISITION CORP., a
Florida corporation
By:_________________________________
Xxxxxxx X. Xxxxxxxxxx,
President
CHART HOUSE ENTERPRISES, INC., a
Delaware corporation
By:_________________________________
Xxxx Xxxxx, Chairman
PARADISE BAKERY, INC., a
Delaware corporation
By:_________________________________
Xxxx Xxxxx, Chairman
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SECOND AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
--------------------------------------------------------
THIS SECOND AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION (the "Second
Amendment") is made and entered into this 2nd day of November, 1995, by and
among FOODQUEST, INC., formerly known as CLUCKER'S WOOD ROASTED CHICKEN, INC., a
Florida corporation ("FOODQUEST"); PARADISE ACQUISITION CORP., a Florida
corporation wholly owned by FOODQUEST ("PAC"); CHART HOUSE ENTERPRISES, INC., a
Delaware corporation ("Chart House"), and PARADISE BAKERY, INC., a Delaware
corporation wholly-owned by Chart House ("Paradise").
WHEREAS, FOODQUEST, PAC, Chart House and Paradise (collectively, the
"Parties") are the parties to that certain Agreement and Plan of Reorganization
dated as of July 7, 1995, as previously amended by that certain First Amendment
to Agreement and Plan of Reorganization dated September 6, 1995 (the "First
Amendment"), with respect to the acquisition by FOODQUEST of Paradise
(collectively, the "Agreement"); and
WHEREAS, by a letter notice dated September 22, 1995, FOODQUEST extended
the "Closing Date," as defined in the Agreement, to no later than November 6,
1995; AND
WHEREAS, FOODQUEST and PAC have requested further extension of the Closing
Date on the terms and conditions of this Second Amendment; and
WHEREAS, Chart House and Paradise are willing to grant further extension of
the Closing Date on the terms and conditions of this Second Amendment;
NOW THEREFORE, the Parties agree as follows:
1. S2(c) of the Agreement, as amended by the First Amendment, is hereby
replaced in its entirety by the following:
"(c) CONVERSION OF SHARES. As specified in the Merger Agreement, on
the Effective Date, by virtue of the Merger and without any further action on
the part of any of the Parties, (a) each share of PAC Common Stock outstanding
on the Effective Date shall, by virtue of the Merger and without any action on
the part of FOODQUEST, continue without change as a share of the common stock of
the surviving corporation, and (b) all of the outstanding shares of Paradise
Common Stock owned by Chart House immediately prior to the Merger (the "Canceled
Shares") shall be canceled, shall cease to exist and shall be converted into the
right to receive (x) cash (the "Cash Payment") in the amount of $5,130,000, plus
the amount of any extension fee payable pursuant to (S)2(d) below, which sum
includes the amount of the Total Deposit on the Effective Date and reflects a
credit to FOODQUEST of $20,000 for inventory writedowns taken or to be taken
from the amount reflected on the Most Recent Balance Sheet pursuant to the
mutual agreement of FOODQUEST and Chart House; (y) a promissory note (the
"Note") from Paradise in substantially the form of Exhibit "C" attached hereto
and made a part hereof in an original principal amount equal to the sum of (i)
the aggregate unpaid principal balance at the Effective Date of those certain
purchase-money notes from certain franchisees (Xxx and Xxxxxxxx Xxxxxxx, JMB
Holding Corporation, and Torrey Point, Inc.) to Paradise (the "Franchisee
Notes"), which are expected to have an aggregate remaining principal balance of
approximately $900,000 at the Effective Date, and (ii) $150,000 representing the
amount in lieu of a franchisee note canceled by Paradise in connection with the
purchase of the West Covina, California store from POP; which Note is to be
secured by the Pledge and Security Agreement (the "Pledge Agreement") in
substantially the form attached hereto as Exhibit "D" and guaranteed by
FOODQUEST pursuant to an Unconditional Guaranty of Payment substantially in the
form of Exhibit "E" attached hereto and made a part hereof (the "Guaranty"); and
(z) reimbursement by FOODQUEST to Chart House of up to $125,000 of the costs
incurred in connection with the remodeling of Paradise's Santa Xxx location (the
"Santa Xxx Reimbursement"), subject to FOODQUEST'S receipt of documentation
reasonably satisfactory to it evidencing the payment by Chart House or Paradise
of such costs.
If Paradise's Cash Working Capital, as of October 31, 1995 (if the Closing
Date occurs on or before November 7, 1995) or as of the Closing Date (if the
Closing Date occurs after November 7, 1995), is more than $50,000 or less than
$30,000 then the Cash Payment shall be increased by the excess, or decreased by
the amount of the deficit, as the case may be.
The Note shall (a) bear interest at the rate of 10% simple interest per
annum, which Chart House represents to be equal to or less than the minimum
blended interest rate payable pursuant to the Franchisee Notes; (b) be payable
interest only for the first three years; (c) be payable thereafter in 8 equal
quarterly payments of principal and interest; (d) be prepayable in whole or in
part at any time without penalty; (e) be secured by the Franchisee Notes; and
(f) require, to the extent that FOODQUEST or Paradise receives any cash
principal payment on any of the Franchisee Notes, a mandatory prepayment of a
like amount of principal on the Note within 10 business days after such receipt;
provided, however, that, if FOODQUEST or Paradise acquires, during the term of
the Note, any Paradise franchisee that is an obligor on a Franchisee Note,
Paradise shall make mandatory principal prepayments on the Note in the same
amounts and on the same payment dates as such franchisee would have had to make
principal payments on its Franchisee Note.
Paradise has assigned all of its rights under a franchisee note receivable
from Founders in the unpaid principal amount of $385,000 (the "Founders Note"),
to Chart House, to be effective as of the Effective Date. If FOODQUEST enters
into a definitive agreement to acquire Founders pursuant to the terms of that
certain letter of intent between FOODQUEST, Founders and
2
Founders' shareholders dated May 26, 1995 (the "Founders' Definitive
Agreement"), and then acquires Founders, Paradise shall assume the obligations
of Founders to Chart House under the Founders Note, and the Founders Note will
be secured by the Pledge Agreement and the Guaranty.
FOODQUEST shall pay the Santa Xxx Reimbursement to Chart House on January
15, 1996, in cash, by cashier's check or by wire transfer of funds. The amount
of the Santa Xxx Reimbursement actually paid shall be subject to offset, in
whole or in part, by the aggregate amount, as of the scheduled date of payment,
for which FOODQUEST is entitled to indemnification from Chart House pursuant to
Section 10 of this Agreement."
2. (S)2(d) of the Agreement, as amended by the First Amendment, is hereby
replaced in its entirety by the following:
"(d) CLOSING. The Closing of the transactions contemplated herein (the
"Closing") shall occur on or before November 7, 1995 (the "Closing Date"),
subject to the option to extend the Closing Date by up to five business days
(counting Saturday but not Sunday as a business day for this purpose) through
Monday, November 13, 1995, at the sole discretion of FOODQUEST, upon the payment
at the Closing of an extension fee of $5,000 per business day. If the Closing
occurs on or before November 7, 1995, then the Closing shall be effective as of
the close of business on October 31, 1995. If the Closing occurs on or before
November 13, 1995, but after November 7, 1995, then the Closing shall be
effective as of the close of business on the day on which the Closing occurs.
Each additional business day after November 7, 1995, through the business day on
which the Closing occurs, shall increase the Cash Payment by $5,000. Any
extension fee paid by FOODQUEST prior to or at Closing shall be credited against
the Cash Payment at the Closing. If the Closing does not occur before November
14, 1995, then (S)6(g) of the Agreement entitled "Exclusivity" shall be deleted
from the Agreement, upon which deletion Chart House shall be free to deal with
third parties interested in acquiring Paradise and enter into an agreement with
any such third party for such acquisition; provided, however, that, if (w)
FOODQUEST has paid Chart House an extension fee of $25,000 on or before November
13, 1995; (x) FOODQUEST is able to cause the Closing to occur on December 29,
1995, to be effective as of the close of business on December 31, 1995, on the
terms and conditions of the Agreement as amended by the Second Amendment, plus
an increase in the cash payment of an additional $100,000; (y) Chart House has
not executed a binding definitive agreement for an alternative sale of Paradise
on or before that date; and (z) FOODQUEST gives Chart House written notice on or
before December 15, 1995, of FOODQUEST'S ability to close on that date, then
Chart House shall sell Paradise to FOODQUEST on such date on the terms and
conditions of the Agreement at the increased purchase price. In the event that
the Closing does not occur by December 29, 1995, to be effective as of the close
of business on December 31, 1995, Chart House shall retain all paid extension
fees as additional liquidated damages."
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3. (S)2 of the Agreement is hereby amended by adding the following clause
(f) at the end thereof:
"(f) POST-CLOSING ADJUSTMENT. Within 10 days following the Closing Date,
Chart House will prepare and submit to FOODQUEST a calculation of Paradise's
Cash Working Capital as of October 31, 1995 (or as of the Closing Date if the
Closing occurs after November 7, 1995) and a statement setting forth the amounts
of any Paradise accounts payable or other obligations paid by Chart House for
the account of Paradise and any Paradise accounts receivable or other amounts
collected by Chart House for the account of Paradise, in each case with respect
to the period following the effective date of the Closing, as determined
pursuant to (S)2(d). The net amount shall be paid promptly by the appropriate
Party and in any event not later than December 29, 1995."
4. Except as amended hereby, the terms and conditions of the Agreement
shall remain the same and in full force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
be duly executed on its behalf by its officers thereunto duly authorized as of
the date first above written.
FOODQUEST, INC.,
a Florida corporation
By:______________________________________
Xxxxxxx X. Xxxxxxxxxx, President
PARADISE ACQUISITION CORP.,
a Florida corporation
By:______________________________________
Xxxxxxx X. Xxxxxxxxxx, President
CHART HOUSE ENTERPRISES, INC.,
a Delaware corporation
By:______________________________________
Xxxxxx X. Xxxxxxx, Xx., Vice President
PARADISE BAKERY, INC.,
a Delaware corporation
By:______________________________________
Xxxxxx X. Xxxxxxx, Xx., Vice President
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