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STANDBY PURCHASE AGREEMENT
This Standby Purchase Agreement (as the same may be amended or modified
from time to time, the "Agreement"), is made and entered as of March 26, 2001,
by and between Chart House Enterprises, Inc., a Delaware corporation (the
"Company"), and EGI-Fund (01) Investors, L.L.C., a Delaware limited liability
company (the "Standby Purchaser").
WITNESSETH:
WHEREAS, Standby Purchaser and EGI-Fund (00) Investors, L.L.C., an
affiliate of Standby Purchaser, have loaned, or in the future may loan, to Chart
House, Inc, a wholly-owned subsidiary of the Company ("Chart House"), up to
$13,000,000 in aggregate principal amount evidenced by certain Amended and
Restated Promissory Notes dated February 20, 2001, and guaranteed by the
Company. The aggregate principal amounts loaned to date or hereafter under any
of the promissory notes referenced above, together with all accrued but unpaid
interest and all other amounts owing thereon are hereinafter collectively
referred to as the "Loan Amounts," and such loans are hereinafter referred to
collectively as the "Loans."
WHEREAS, the Company is implementing a rights offering (the "Rights
Offering") with a gross aggregate offering amount of $8,500,000, pursuant to
which the Company will distribute to stockholders ("Stockholders") of record of
the Company as of a record date (the "Record Date") to be determined,
transferable rights (each, a "Right" and collectively, the "Rights") to
subscribe for shares of Series A senior convertible redeemable preferred stock
of the Company (the "Series A Preferred Shares"), at a subscription price equal
to the lower of (i) the average closing price of the Company's Common Stock over
the 20 trading days immediately preceding the date of mailing of the Rights
Offering to the Stockholders or (ii) $2.25 per share or $8,500,000 in the
aggregate (the "Subscription Price");
WHEREAS, the Rights will be exercisable in two steps: (i) first, the "basic
subscription right" will entitle Stockholders to subscribe for and purchase
their pro rata share (based on the number of shares of the Company's common
stock, par value $.01 per share ("Common Stock"), held as of the Record Date) of
Series A Preferred Shares offered in the Rights Offering; and (ii) second, the
"oversubscription right" will entitle Stockholders to subscribe for and purchase
any Series A Preferred Shares not subscribed for pursuant to the basic
subscription rights (Stockholders exercising oversubscription rights,
"Oversubscribers"), subject to pro rata cut-backs in the oversubscription
rights, based on the number of Series A Preferred Shares subscribed for by
Oversubscribers pursuant to their basic subscription rights, in the event more
Series A Preferred Shares are subscribed for than are available for subscription
pursuant to the oversubscription right;
WHEREAS, Samstock, L.L.C., Samstock/ZFT, L.L.C, Samstock/Alpha, L.L.C. and
Xxx Xxxx Revocable Trust (collectively, the "Affiliate Holders"), each of which
is an affiliate of Standby Purchaser and all of which collectively beneficially
own 4,154,902 shares of the Company's common stock in the aggregate, will
transfer all of their Rights to Standby Purchaser to facilitate Standby
Purchaser's commitments hereunder, and any references herein to Standby
Purchaser's Rights shall be deemed references to the Affiliate Holders' Rights
as so transferred to Standby Purchaser;
WHEREAS, in order to help assure the success of the Rights Offering,
Standby Purchaser is willing to, and hereby does, agree to serve as standby
purchaser for the Series A Preferred Shares available for purchase and not
otherwise subscribed for by Stockholders other than Standby Purchaser and the
Affiliate Holders ("Other Stockholders"), and the Company has
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agreed with Standby Purchaser to sell such securities to Standby Purchaser, all
as more particularly set forth herein.
WHEREAS, in connection with Standby Purchaser acting as standby purchaser
for the Rights Offering, the Company has agreed to grant Standby Purchaser
certain rights to designate Company directors, and certain registration rights
with respect to the Series A Preferred Shares and the Common Stock.
NOW, THEREFORE, in consideration of the mutual agreements set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Company and Standby Purchaser do hereby agree
as follows:
Section 1. Standby Purchase Commitment.
1.1 Standby Purchaser agrees that, by exercise of its basic subscription
right, oversubscription right or otherwise pursuant to this Agreement, it will
purchase the entire number of Series A Preferred Shares offered to, but not
subscribed for by, Stockholders in the Rights Offering, on the same terms so
offered to Stockholders. All of the Series A Preferred Shares acquired by
Standby Purchaser in the Rights Offering or pursuant to this Agreement
hereinafter shall be referred to as the "Standby Shares." Payment for the
Standby Shares shall be made as described in Section 3 hereof.
1.2 The purchase price of the Standby Shares sold pursuant to this
Agreement to Standby Purchaser shall be at the price and terms offered to the
Other Stockholders and Affiliate Holders pursuant to the Rights Offering;
provided that the aggregate gross purchase price for all Series A Preferred
Shares offered and sold to all Stockholders, including all Standby Shares
offered and sold to Standby Purchaser or the Affiliate Holders, shall not exceed
$8,500,000.
1.3 In consideration of Standby Purchaser's obligations under this
Agreement, the Company agrees to pay to Standby Purchaser at the Closing (as
hereinafter defined) a fee in the amount of $400,000 in cash.
1.4 Subject to satisfying the stockholder approval requirement under
Section 312 of the New York Stock Exchange ("NYSE") Listed Company Manual, if
applicable, or obtaining a waiver of such requirement from the NYSE, until the
Closing, if any stockholder or "group" of stockholders or other parties, whether
acting for themselves or as nominee for any other stockholder or party, would
"beneficially own" (the terms "group" and "beneficially own" being defined
pursuant to Regulation 13D-G promulgated under the Securities Exchange Act of
1934, as amended) 20% or more of the aggregate outstanding shares of Common
Stock and, upon the Closing, Series A Preferred Shares on an as converted basis,
Standby Purchaser and its affiliates shall have the right to purchase from the
Company, at a reasonable price and upon other reasonable terms of sale to then
be agreed upon in good faith, a sufficient number of shares of Common Stock or
other voting equity securities of the Company (in addition to the Standby
Shares) so that, after taking such number of shares of Common Stock or other
voting equity securities into account, upon the Closing, Standby Purchaser and
its affiliates shall
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beneficially own more than 50% of the Company's outstanding voting equity
securities on a fully-diluted basis.
1.5 As a material inducement for Standby Purchaser to enter into this
agreement, until the Closing, the Company's Board of Directors (the "Board")
shall not approve, and none of the Company or its subsidiaries shall consummate
or agree to consummate, a "business combination" with any "interested
stockholder" (as defined in Article Eighth of the Company's Certificate of
Incorporation and Section 203 of the Delaware General Corporation Law) other
than Standby Purchaser and its affiliates, who became an interested stockholder
after February 19, 2001, and before the Closing, without Standby Purchaser's
prior written consent which may be withheld or delayed in Standby Purchaser's
sole discretion; provided, however, the provisions of this paragraph shall
terminate if all of the following criteria are satisfied: (a) the "business
combination" consists of a sale of 100% of the Company's capital stock, or a
merger in which the acquiring entity or its subsidiaries or stockholders own
100% of the surviving entity's voting capital stock in exchange for all cash
consideration to the Company or its subsidiaries or stockholders, or a sale of
all or substantially all of the Company's assets, in each case, as applicable,
in any single or related series of transactions, and where Standby Purchaser and
its affiliates are not the buyers (a "Company Sale"); (b) the Board or an
independent committee thereof has received a written opinion of its independent
financial advisors for the transaction that the Company Sale is more favorable
to the Company from an economic perspective than the Rights Offering, and
written advice from its counsel that its fiduciary duties require consideration
or pursuit of the proposed Company Sale; (c) the Company has paid, or caused to
be paid by the interested stockholder or otherwise, to Standby Purchaser or its
affiliates, as applicable, the sum of (i) all amounts owed by Company or Chart
House or the Company's other subsidiaries under the Loans, including, without
limitation, all fees otherwise payable thereunder, (ii) the $400,000 standby
commitment fee otherwise payable to Standby Purchaser, (iii) Standby Purchaser's
fees and expenses incurred in connection with the Loans and the Rights Offering
up to $125,000 in the aggregate, and (iv) an additional fee of $675,000; and (d)
Standby Purchaser's obligations to buy the Standby Shares and any other
obligations hereunder have been terminated without cost or expense to Standby
Purchaser.
1.6 As a material inducement for Standby Purchaser to enter into this
agreement, until the Closing, the Board shall not approve, the Company shall
take all available and necessary actions so that the Board does not approve, and
none of the Company or its subsidiaries shall consummate or agree to consummate,
a refinancing or recapitalization not constituting a Company Sale, or a merger
in which the Company or its stockholders own less than 100% of the voting
capital stock of the surviving entity, in each case in any single or series of
related transactions and where Standby Purchaser and its affiliates are not the
source of funds ("Company Refinancing"); provided, however, the provisions of
this Section 1.6 shall terminate if all of the following criteria are satisfied:
(a) the Board or a committee thereof has received the written opinion of its
independent financial advisors for the transaction that the Company Refinancing
is more favorable to the Company from an economic perspective than the Rights
Offering, and written advice from its counsel that its fiduciary duties require
consideration or pursuit of the proposed Company Refinancing; (b) the Company
has paid, or caused to be paid by the interested stockholder or otherwise, to
Standby Purchaser and/or its designated affiliates, as applicable, the sum of
(i) all amounts owed by Chart House, the Company and/or its
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subsidiaries under the Loans, including, without limitation, all fees otherwise
payable thereunder, (ii) the $400,000 standby commitment fee otherwise payable
to Standby Purchaser, (iii) Standby Purchaser's fees and expenses incurred in
connection with the Loans and the Rights Offering, up to $125,000 in the
aggregate, and (iv) an additional cash fee of $810,000; and (c) Standby
Purchaser's obligations to buy the Standby Shares and any other obligations
hereunder and related documents have been terminated without cost or expense to
Standby Purchaser. If: (x) the Company Refinancing is a merger in which the
Company or its stockholders own less than 100% of the voting capital stock of
the surviving entity, (y) such Company Refinancing constitutes a "business
combination," and (z) all of the requirements of this paragraph are satisfied,
the provisions of Section 1.6 above shall terminate with respect to such Company
Refinancing.
1.7 Without Standby Purchaser's prior written consent, which may be
withheld or delayed in Standby Purchaser's sole discretion, the Company and its
subsidiaries including Chart House shall not agree to amend, or cause or permit
to be amended or supplemented in any way, any provisions of: (i) the Revolving
Credit and Term Loan Agreement dated as of April 26, 1999 (as amended from time
to time, the "senior credit agreement") by and among the Company, Chart House,
Bank Boston, N.A. (n/k/a Fleet National Bank), as agent, and the financial
institutions signatories thereto, (ii) the Second Amended and Restated
Subordination Agreement dated as of February 20, 2001, as amended from time to
time, executed by agent, the Company, Chart House, certain subsidiary
guarantors, and EGI-Fund (01) Investors, L.L.C. and (iii) any notes evidencing
the Company's and/or its subsidiaries' including Chart House's liabilities
thereunder or other instruments or documents pertaining thereto.
Section 2. Determination of Standby Shares.
2.1 As soon as practicable following the expiration of the exercise period
of the Rights (as the same may be extended) and promptly following its
determination of the number of Series A Preferred Shares validly subscribed for
through the exercise of the Rights in accordance with the terms of the Rights
Offering (including the exercise of any oversubscription rights by the
Stockholders), the Company shall notify Standby Purchaser in writing of the
number of Standby Shares, if any, to be purchased by it pursuant to Section 1.
Section 3. Closing.
3.1 The delivery of and payment for the Standby Shares shall take place at
the offices of Seyfarth Xxxx in Chicago, Illinois at 10:00 a.m., Chicago time,
on the date of the sale of the Series A Preferred Shares to the subscribing
Stockholders in the Rights Offering (such time and date being referred to as the
"Closing Time," the date of the Closing Time being referred to as the "Closing
Date" and the consummation of the transaction being referred to as the
"Closing").
3.2 At the Closing:
(a) the Company shall deliver to Standby Purchaser stock certificates
representing the Standby Shares to be purchased by Standby Purchaser
hereunder,
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registered in the name of Standby Purchaser or such of its nominees as it
may specify at least one business day prior to the Closing Date, for Standby
Purchaser's account;
(b) Standby Purchaser shall deliver the Subscription Price for each
Standby Share purchased by it in Federal funds in the form of a wire
transfer to an account designated by the Company at least one business day
prior to the Closing Date; and
(c) (i) Prior to, and in preference of, any other payment(s) for any
other purpose(s) or to any other party(ies), the gross proceeds of the
Rights Offering shall be paid, as follows: (A) to Standby Purchaser and/or
its designated affiliates, as applicable, in such sequence as Standby
Purchaser shall designate: (aa) an amount equal to the aggregate Loan
Amounts as of the Closing Date, less $5 million, (bb) accrued and unpaid
advisory fees owed to a Standby Purchaser affiliate as of the Closing Date,
(cc) Standby Purchaser's transaction fees and expenses related to the Loans
and the Rights Offering up to $125,000 in the aggregate, and (dd) the
$400,000 fee payable to Standby Purchaser under Section 1.3 hereof; and (B)
Contractor Liabilities (as defined in the $17.5 million Revolving Credit
and Term Loan Agreement, with Fleet National Bank, as agent for a group of
lenders, amended (the "Revolver")); and (C) pre-opening expenses then owing
in respect of the Xxxxxx & Xxxxx'x restaurants at Reston, Virginia and West
Palm, Florida.
(ii) After the payments described in Section 3.2(c)(i) have been made,
(A) the balance of the Rights Offering gross proceeds, if any, together
with (B) the excess of the balance of the Loan Amounts, if any, as of the
Closing Date, over $5 million (the "Excess Loan Amount"), and (C) amounts,
if any, available under the Revolver, shall be applied to the following
uses (provided, however, that the determination as to which of the three
sources of funds described above in this subparagraph (ii), and the
relative proportions of each to be used for any particular payment,
together with the sequence of payment, shall be determined jointly by the
Company and Standby Purchaser):
Financial Advisory fees and expenses incurred by the Company in
connection with the Loans and the Rights Offering;
Attorney's fees and expenses incurred by the Company and/or the
Special Committee in connection with the Loan and the Rights Offering;
Accounting fees and expenses incurred by the Company in connection
with the Loan and the Rights Offering;
Printing and engraving fees and expenses incurred by the Company in
connection with the Rights Offering;
Filing fees incurred by the Company payable to the SEC, NYSE and under
applicable state securities and blue-sky laws;
Fees and expenses of the subscription agent for the Rights Offering;
Other items agreed upon by the Company and Standby Purchaser; and
Such amount of the Excess Loan Amount as the Company and
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Standby Purchaser may agree upon in each of their sole and absolute discretion.
The balance of proceeds, if any, shall be held by the Company as
working capital.
Section 4. Representations, Warranties and Covenants.
4.1 The Company represents and warrants to, and covenants with, Standby
Purchaser, as of the date hereof and again as of the Closing Date, as follows:
(a) As soon as practicable, but no later than March 27, 2001, the
Company shall file with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-2 to register under the
Securities Act of 1933 (the Securities Act") such number of Rights, Series
A Preferred Shares and shares of Common Stock into which the Series A
Preferred Shares may, from time to time, be convertible in relation to the
Rights Offering such that the gross proceeds thereof, assuming full
subscription, shall be $8,500,000. The Company will file such amendments to
the registration statement as may be necessary to permit the registration
statement, as so amended, to become effective. Such registration statement
as amended at the time it becomes effective (the "Effective Date"),
including all exhibits and all documents incorporated therein by reference,
is herein called the "Registration Statement." The prospectus first filed
with the Commission pursuant to Rule 424(b) under the Securities Act of
1933 (the "Securities Act") is herein called the "Prospectus." The
Registration Statement and the Prospectus will be substantially in form and
substance of the draft thereof dated the date of this Agreement. The
Company shall use commercially reasonable efforts to have the Series A
Preferred Shares, and the Common Stock issuable on conversion thereof,
listed for trading on the NYSE or such other national stock exchange as
Issuer and Standby Purchaser shall agree upon.
(b) On the Effective Date and at the time when the Prospectus is first
filed with the Commission pursuant to Rule 424(b), the Registration
Statement and the Prospectus will comply in all material respects with the
provisions of the Securities Act and the rules and regulations promulgated
thereunder, and on the Effective Date neither the Registration Statement
nor the Prospectus will contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; except that the foregoing does not apply to
statements or omissions in the Registration Statement or the Prospectus
made in reliance upon information furnished by Standby Purchaser to the
Company expressly for use therein.
(c) The documents to be incorporated by reference in the Prospectus
(the "Incorporated Documents") at the time filed with the Commission, shall
comply as to form in all material respects with the requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations of the Commission promulgated thereunder, and, when read
together with the other information in the Prospectus, will not contain an
untrue statement of a material fact or omit to state a material fact
required to
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be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of the Company to be included in the
Incorporated Documents shall comply as to form in all material respects
with applicable accounting requirements and the rules and regulations of
the SEC with respect thereto, shall be prepared in accordance with
generally accepted accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in notes
thereto) and shall fairly present in all material respects the consolidated
financial position of the Company and its subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the Incorporated
Documents or the Prospectus, neither the Company nor any of its
subsidiaries has any obligation or liability of any nature whatsoever
(direct or indirect, matured or unmatured, absolute, accrued, contingent or
otherwise) either (i) required by generally accepted accounting principles
to be set forth on a consolidated balance sheet of the Company and its
subsidiaries or in the notes thereto or (ii) which, individually or in the
aggregate, could reasonably be expected to have a material adverse effect
(or any development which could reasonably be expected to have a material
adverse effect) on the business, operations, assets, financial or other
condition, results of operations or prospects of the Company and its
subsidiaries, taken as a whole, whether or not required by generally
accepted accounting principles to be provided for or reserved against on a
balance sheet prepared in accordance with generally accepted accounting
principles, other than liabilities and obligations reflected or reserved
against in the consolidated financial statements of the Company and its
consolidated subsidiaries included in the Company's quarterly report on
Form 10-Q for the quarter ended September 25, 2000, or incurred since the
date of the balance sheet included in such financial statements in the
ordinary course of business which are not individually or collectively
material to the Company and its subsidiaries taken as a whole.
(d) The Company has all necessary corporate power and authority to
execute and deliver this Agreement, and perform its obligations hereunder.
The execution, delivery and performance by the Company of this Agreement
and the transactions contemplated hereby, including, without limitation,
the issuance to Standby Purchaser of the Standby Shares and the shares of
Common Stock issuable upon conversion of the Standby Shares, so as to
render inapplicable thereto the restrictions contained in Article Eighth of
the Certificate of Incorporation of the Company, and the restrictions
contained in Section 203 of the Delaware General Corporation Law, have been
duly and validly authorized and approved by at least a majority of all
Disinterested Directors (as defined in that certain Second Amended and
Restated Standstill Agreement, dated as of March 31, 1999, by and among the
Company, certain Xxxx Affiliates (as defined therein) and certain other
parties (the "Second Amended and Restated Standstill Agreement")),
including without limitation the three members of a special committee
("Special Committee") of disinterested Independent Directors (as defined in
the Second Amended and Restated Standstill Agreement), and no other
corporate proceedings on the part of the Company are necessary to authorize
such execution, delivery and performance by the Company.
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(e) This Agreement has been duly authorized, executed and delivered by
the Company and is the valid and binding obligation of the Company and is
enforceable against the Company by Standby Purchaser in accordance with its
terms.
(f) The Rights, the Series A Preferred Shares offered by the Company
to the Stockholders upon exercise of Rights, the Standby Shares and the
shares of Common Stock issuable upon conversion of all Series A Preferred
Shares issued in the Rights Offering or sold by the Company under this
Agreement have been duly authorized by the Company and will be included in
the Registration Statement. Upon acceptance of the filing of the
Certificate of Designations, in substantially the form attached hereto as
Exhibit A, with the Secretary of State of the State of Delaware (the
"Delaware Filing"), the Standby Shares and any shares of Common Stock into
which the Standby Shares may be convertible shall have been reserved for
issuance by the Company, and the Standby Shares, when issued and delivered
by the Company against payment therefor as provided in the Prospectus or
this Agreement, will be validly issued, fully paid and nonassessable, and
Standby Purchaser shall acquire good and valid title to the Standby Shares
(and any shares of Common Stock into which they may be convertible), free
and clear of all Liens. For purposes of this paragraph (f), "Lien" means
any preemptive or similar rights of any third party, purchase options,
calls, proxies, voting trusts, voting agreements, judgments, pledges,
charges, assessments, levies, escrows, rights of first refusal or first
offer, transfer restrictions, mortgages, indentures, claims, liens,
equities, mortgages, deeds of trust, deeds to secure debt, security
interests and other encumbrances of every kind and nature whatsoever,
whether arising by agreement, operation of law or otherwise, other than any
created by Standby Purchaser or pursuant to this Agreement or arising under
appropriate sate or federal securities laws. No vote of the holders of any
class or series of capital stock or other securities of the Company or any
subsidiary of the Company is required to approve or effect this Agreement
or any transaction contemplated hereby, including, without limitation,
under applicable law, applicable stock exchange rules or regulations, the
certificate or articles of incorporation (including, without limitation,
Article Eighth of the Company's Certificate of Incorporation) or by-laws of
the Company or any subsidiary of the Company, or any agreement of any kind
applicable to the Company, any subsidiary of the Company, or their assets;
provided that, with respect to Section 312 of the NYSE Listed Company
Manual, the foregoing is based upon advice regarding the stockholder
approval requirement given by the NYSE or its counsel.
(g) The execution, delivery and performance of this Agreement will not
(i) conflict with, result in the creation or imposition of any lien, charge
or encumbrance upon any of the assets of the Company or any of its
subsidiaries pursuant to the terms of, or constitute a default under, any
material agreement, indenture or instrument to which the Company or any of
its subsidiaries is a party, or (ii) upon acceptance of the Delaware
Filing, result in a violation of the Certificate of Incorporation or By-
laws of the Company or any of its subsidiaries or any order, rule or
regulation of any court or governmental agency having jurisdiction over the
Company or any of its subsidiaries or any of their respective properties.
Except for the Delaware Filing and as required by the Securities Act, the
Exchange Act and applicable state securities law, no consent, authorization
or order of,
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or filing or registration with, any court or governmental agency is
required for the execution, delivery and performance of this Agreement.
(h) The Board and the Special Committee have taken all steps
reasonably necessary to ensure that the Rights Offering and the
transactions contemplated hereby satisfy all applicable Delaware corporate
law (including, without limitation, for example, "fair price" and "fair
procedure" requirements, to the extent applicable).
(i) The legally authorized number of directors comprising the entire
Board is eight.
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4.2 Standby Purchaser represents and warrants to, and covenants with, the
Company as follows:
(a) Standby Purchaser shall receive from the Company and review a copy
of the registration statement and the Incorporated Documents, in the form
in which they are filed with the Commission, and the information relating
to Standby Purchaser contained therein furnished by Standby Purchaser to
the Company expressly for use therein shall not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) Standby Purchaser understands and acknowledges that neither the
Standby Shares, nor the shares of Common Stock into which the Standby
Shares are convertible, have been registered under Section 5 of the
Securities Act and may not be sold or otherwise transferred unless so
registered or pursuant to a valid exemption therefrom. Standby Purchaser
further agrees that it will not sell, transfer, hypothecate or dispose of
(i) any Series A Preferred Shares, or (ii) any shares of Common Stock into
which the Series A Preferred Shares are convertible, except in compliance
with the Securities Act and applicable state securities laws.
(c) Standby Purchaser is an "accredited advisor" as that term is
defined in Regulation D promulgated under the Securities Act. Standby
Purchaser is acquiring the Standby Shares and the Shares of Common Stock
into with the Standby Shares are convertible solely for the account of the
Standby Purchaser, for investment purposes only and not with a view to the
distribution thereof. Standby Purchaser is (a) a sophisticated investor
with such knowledge and experience in business and financial matters as
will enable the Standby Purchaser to evaluate the merits and risk of
investment in the Company, (b) is able to bear the economic risk and lack
of an liquidity of an investment in the Company, and (c) is able to bear
the risk of loss of its entire investment in the Company.
(d) Standby Purchaser has all necessary corporate power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance by Standby Purchaser of
this Agreement have been duly and validly authorized by the Managing Member
of Standby Purchaser, and no other proceedings on the part of Standby
Purchaser are necessary to authorize the execution, delivery and
performance by Standby Purchaser of this Agreement. The Managing Member has
approved this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, the purchase by Standby
Purchaser of the Standby Shares.
(e) This Agreement has been duly authorized, executed and delivered by
Standby Purchaser and is the valid and binding obligation of Standby
Purchaser and is enforceable against Standby Purchaser by the Company in
accordance with its terms.
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(f) On the Closing Date, Standby Purchaser will have sufficient cash
funds on hand to purchase the Standby Shares on the terms and conditions
contained in this Agreement.
Section 5. Conditions to Closing.
5.1 The obligation of Standby Purchaser to purchase the Standby Shares as
set forth in this Agreement is subject to the following conditions:
(a) The Registration Statement shall have been declared effective by
the Commission. No order suspending the effectiveness of the Registration
Statement shall be in effect, no proceedings for such purpose shall be
pending before or threatened by the Commission and any requests for
additional information by the Commission (to be included in the
Registration Statement, in the Prospectus or otherwise) shall have been
complied with to the reasonable satisfaction of Standby Purchaser;
(b) The shares of Common Stock into which the Series A Preferred
Shares are convertible shall have been approved for listing on the NYSE or
such other national stock exchange as Standby Purchaser and the Company may
agree upon;
(c) The representations and warranties of the Company contained herein
shall be true and correct in all material respects as of the Closing Date,
the Company shall have performed all covenants and agreements herein
required to be performed on its part at or prior to the Closing Date and
Standby Purchaser shall have received a certificate to such effect dated
the Closing Date and executed by either the President or a Vice President
of the Company;
(d) Purchaser shall have received an opinion of the Company's counsel,
Seyfarth Xxxx, in pertinent part substantially in the form attached hereto
as Exhibit B, with such assumptions, limitations and other provisions as
are customary and reasonably acceptable to Standby Purchaser;
(e) In the event that Standby Purchaser is entitled to designate
director(s) to the Board pursuant to Section 8.3 hereof, and shall have so
designated individual(s) to serve as such additional director(s), such
individual(s) shall have been elected to the Board to serve commencing
prior to or upon the Closing;
(f) Concurrently with the Closing, all of the gross proceeds of the
Rights Offering shall be employed as required by Section 3.2(c) above;
(g) All applicable requirements, pertaining to the transactions
contemplated hereby, under the Securities Act, the Exchange Act, the Xxxx-
Xxxxx-Xxxxxx Act, the NYSE Listed Company Manual (or other applicable stock
exchange rules), and other applicable law, regulations or rules, shall have
been satisfied;
(h) no vote of the Company's stockholders being required to conduct
and
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consummate the Rights Offering as described herein, whether under SEC or
NYSE rules or other applicable requirements, provided that, with respect to
Section 312 of the NYSE Listed Company Manual, the foregoing is based upon
advice given by the Company from the NYSE or its counsel;
(i) The Registration Statement shall have been filed with the SEC no
later than March 27, 2001, or such later date to which Standby Purchaser
may consent in its reasonable discretion, and the Rights Offering shall
have been consummated as soon as practicable but no later than July 31,
2001, unless Standby Purchaser shall have consented to a later date in its
sole discretion;
(j) The Company and/or its subsidiaries shall not have consummated a
Company Sale or Company Refinancing, and the Company's and/or its
subsidiaries' Board or a committee thereof shall not have approved a
Company Sale or Company Refinancing.
5.2 The obligation of the Company to issue and sell the Standby Shares as
set forth in this Agreement is subject to the following condition:
(a) The representations and warranties of Standby Purchaser contained
herein shall be true and correct in all material respects as of the Closing
Date and Standby Purchaser shall have performed all covenants and
agreements herein required to be performed on its part at or prior to the
Closing Date.
Section 6. Indemnification.
6.1 The Company agrees to indemnify and hold Standby Purchaser, the
Affiliate Holders, any of its or their affiliates, and any of its or their
respective officers, directors, employees, agents, representatives, successors,
members, stockholders, partners, lenders and capital sources (each, a "Standby
Purchaser Indemnitee") harmless from and against any and all losses, claims,
damages and liabilities, joint or several (including any investigation, legal
and other expenses reasonably incurred in connection with, and any amount paid
in settlement of, any action, suit or proceeding or any claim asserted)
(collectively, "Losses"), to which any Standby Purchaser Indemnitee may become
subject under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such Losses
arise out of or are based upon (i) any inaccuracy in, breach of or failure to
comply with, any representation, warranty, or covenant made by the Company in
this Agreement, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus, the Registration
Statement or the Prospectus (as amended or supplemented, if the Company shall
have filed with the Commission any amendment thereof or supplement thereto), or
any amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as any such untrue
statement or omission or alleged untrue statement or omission was made in such,
preliminary prospectus, the Registration Statement or the Prospectus, or such
amendment or supplement in reliance upon, and in conformity with, information
furnished to the Company by Standby Purchaser expressly for use therein.
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6.2 Standby Purchaser agrees to indemnify and hold harmless the Company,
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, each director of the Company and each officer of the
Company who signs the Registration Statement (each, a "Company Indemnitee"),
from and against any and all Losses to which any Company Indemnitee may become
subject under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such Losses
are based upon (i) any inaccuracy in, breach of or failure to comply with, any
representation, warranty, or covenant made by Standby Purchaser in this
Agreement or (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus, the Registration Statement or the
Prospectus (as amended or supplemented, if the Company shall have filed with the
Commission any amendment thereof or supplement thereto), or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only insofar as any such untrue statement or
omission or alleged untrue statement or omission was made in such preliminary
prospectus, the Registration Statement or the Prospectus, or such amendment or
supplement, in reliance upon, and in conformity with, information furnished to
the Company by Standby Purchaser expressly for use therein; provided, however,
that the obligation of Standby Purchaser to indemnify the Company Indemnitees
hereunder shall be limited to the total price for the Series A Preferred Shares
purchased by Standby Purchaser pursuant to this Agreement.
6.3 Any party which proposes to assert the right to be indemnified under
this Section 6 will promptly after receipt of notice of a claim or of
commencement of any action, suit or proceeding against such party in respect of
which a claim is to be made against any indemnifying party under this Section 6,
notify each such indemnifying party of the nature of the claim or the
commencement of such action, suit or proceeding, enclosing a copy of all
correspondence received and papers served, but the omission so to notify such
indemnifying party of any such claim, action, suit or proceeding shall not
relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 6. In case any such claim shall be asserted or
any such action, suit or proceeding shall be brought against any indemnified
party and it shall notify the indemnifying party of the assertion or
commencement thereof, the indemnifying party shall be entitled to participate
in, and to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its selection so to assume the defense thereof the
indemnifying party shall not be liable to such indemnified party for any
subsequent legal or other expenses. The indemnified party shall have the right
to employ its counsel in any such action where the indemnifying party has
assumed the defense as aforesaid, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the employment of
counsel by such indemnified party has been authorized by the indemnifying party,
(ii) the indemnified party shall have reasonably concluded that there may be a
conflict of interest between the indemnifying party and the indemnified party in
the conduct of the defense of such action (in which case the indemnifying party
shall not have the right to direct the defense of such action on behalf of the
indemnified party) or (iii) the indemnifying party shall not in fact have
employed counsel satisfactory to the indemnified party to assume the defense of
such action, in any of which events such fees and expenses shall be borne by the
indemnifying party. An indemnifying
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party shall not be liable for any settlement of any action or claim effected
without its consent so long as it is performing its obligations under this
Section 6.
Section 7. Survival.
The indemnification agreement contained in Section 6 hereof and the
representations, warranties, covenants and agreements of the Company and Standby
Purchaser set forth in this Agreement shall remain operative and in full force
and effect regardless of (a) any termination of this Agreement, (b) any
investigation made by or on behalf of Standby Purchaser, or (c) acceptance of
Standby Shares under this Agreement.
Section 8. Board of Directors.
8.1 Prior to the closing of the Rights Offering, neither the Board nor the
Company shall take any actions, or permit any actions to be taken, with the
intent or effect of increasing the size of the Board beyond eight.
8.2 Until the closing of the Rights Offering, Standby Purchaser shall have
the right to designate four of the Company's eight directors; provided, however,
that, any directors designated by Standby Purchaser's affiliate Samstock, L.L.C.
("Samstock") pursuant to the Second Amended and Restated Standstill Agreement
shall be counted as directors designated by Standby Purchaser pursuant to this
Section 8.2. The Company and the Board shall take all steps necessary to cause
the nomination and election of Standby Purchaser's designees under this Section
8.2 with the term of office to begin effective no later than five (5) business
days after designation by Standby Purchaser. Upon the closing of the Rights
Offering, if Standby Purchaser is entitled to designate fewer directors pursuant
to Section 8.3 below than it had previously designated pursuant to this Section
8.2, then, provided they are still serving as directors, Standby Purchaser shall
cause the excess number of directors, if any, designated under this Section 8.2
to resign effective as of the closing of the Rights Offering.
8.3 From and after the closing of the Rights Offering, Standby Purchaser
shall have the right to designate that number of directors that, together with
the number of directors to which Samstock is entitled to designate pursuant to
the Second Amended and Restated Standstill Agreement, equal the smallest number
of director designees representing at least the percentage of the entire Board
of Directors equal to the percentage of the Company's outstanding Common Stock,
on a fully diluted basis, beneficially owned by Standby Purchaser and its
affiliates; provided, however, that: (i) any directors designated by Samstock
pursuant to the Second Amended and Restated Standstill Agreement shall be
counted as directors designated by Standby Purchaser pursuant to this Section
8.3; and (ii) in any case, the Board shall have a sufficient number of
independent directors to satisfy the rules and regulations of the SEC, NYSE (or
other applicable stock exchange), and IRS and other applicable requirements with
respect to the constitution of the Board and the audit and compensation
committees thereof. The Company and the existing Board shall take all steps
necessary to cause the nomination and election of Standby Purchaser's designees
under this Section 8.3 with the term of office to begin, for the initial
designees, effective as of the closing of the Rights Offering, and for
subsequent designees, within five (5) business days after designation by Standby
Purchaser. Any time, from
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time to time, when the percentage of the Company's outstanding Common Stock, on
a fully diluted basis, beneficially owned by Standby Purchaser and its
affiliates decreases or increases from such percentage as determined as of the
closing of the Rights Offering, the number of directors as to which Standby
Purchaser is entitled to designate pursuant to this Section 8.3 shall be
recalculated, and Standby Purchaser shall either cause the resignation of such
of its director designees, or be entitled to designate such number of additional
director designees, as appropriate, to satisfy and not exceed or fall short of
the rights provided above in this Section 8.3.
Section 9. Registration Rights.
9.1 Definitions. For purposes of this Section 9:
(a) The term "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Act").
(b) The term "Registrable Securities" means the Series A Preferred
Shares and Common Stock held, from time to time, by any Holder.
(c) The term "Holder" means (i) Standby Purchaser, and (ii) provided
they first sign and deliver to the Company joinder agreements to this
Section 9: (A) Standby Purchaser's affiliates, (B) Standby Purchaser's and
its affiliates' direct or indirect assignees or distributees of Registrable
Securities acquired directly or indirectly from Standby Purchaser or its
affiliates; and (C) any financial institution that is a pledgee of any such
Holder, but only with respect to those shares of Registrable Securities
acquired by foreclosure on the pledge or similar action.
(d) The term "Rule 415 Offering" means an offering on a delayed or
continuous basis pursuant to Rule 415 (or any successor rule to similar
effect) promulgated under the Act.
(e) The term "Shelf Registration Statement" means a registration
statement intended to effect a shelf registration in connection with a Rule
415 Offering, which registration statement (i) includes in the "plan of
distribution" pledgees of any Holder, (ii) does not include securities of
the Company for sale for the Company's own account, and (iii) is kept
effective by the Company until such time as all Registrable Securities have
been sold or disposed of thereunder or sold, transferred or otherwise
disposed of (other than pursuant to a pledge of such Registrable
Securities) to a person that is not a Holder.
9.2 Request for Registration.
(a) If the Company shall at any time receive a written request from
Standby Purchaser or any affiliate thereof that the Company file a
registration statement under the Act covering the registration of at least
500,000 shares of Common Stock, then the Company shall, within 10 days
after the receipt thereof, give written notice of such request to all
Holders, and shall, subject to the limitations of Section 9.2 (b), effect
as soon as practicable after the receipt of
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such request the registration under the Act of all Registrable Securities
which the Holders request to be registered within 15 days after the mailing
of such notice by the Company in accordance with Section 9.3.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise
the Company as a part of their request made pursuant to this Section 9.2
and the Company shall include such information in the written notice
referred to in Section 9.2(a). In such event, the right of any Holder to
include Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of
such Holder's Registrable Securities in the underwriting to the extent
provided herein. All Holders proposing to distribute Registrable Securities
through such underwriting shall (together with the Company as provided in
Section 9.4(e)) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the
Initiating Holders and reasonably acceptable to the Company. The Company at
its sole discretion may offer a right to participate in any registration
statement filed pursuant to this Section 9.2 to other holders of Common
Stock, and may itself participate in any registration statement filed
pursuant to this Section 9.2. However, notwithstanding any other provision
of this Section 9.2, if the offering is an underwritten offering and the
lead managing underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares of
Registrable Securities to be underwritten, then (subject to any contrary
provisions in registration rights agreements executed by the Company prior
to the date hereof) the total number of shares of Registrable Securities to
be underwritten shall be reduced, with such reduction coming first from
selling stockholders who are not Holders, and then from the Company. If
further reduction is required, the Company shall so advise all Holders of
Registrable Securities that would have otherwise been underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be
included in the underwriting shall be allocated among all Holders thereof,
including the Initiating Holders, in proportion (as nearly as practicable)
to the amount of Registrable Securities sought to be registered by each
Holder.
(c) The Company is obligated to effect an unlimited number of
registrations pursuant to this Section 9.2, and, if the initiating Holders
so request, any one or more of such registrations may be filed as a Rule
415 Offering under a Shelf Registration Statement.
(d) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 9.2 a
certificate signed by the Chief Executive, Chief Operating, or Chief
Financial Officer of the Company stating that, in the good faith judgment
of a majority of the disinterested directors of the Board, it would be
materially detrimental to the Company for such registration statement to be
filed, the Company shall have the right to defer such filing for a period
of not more than 120 days after receipt of the request of the Initiating
Holders; provided, however, that the Company may not utilize this right
more than twice in any 12-month period.
9.2A Shelf Registration. After the closing of the Rights Offering, the
Company shall file a Shelf Registration Statement that shall include all
Registrable Securities, and the
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Company shall use its reasonable best efforts to cause such Shelf Registration
Statement to be declared effective within 60 days after the closing of the
Rights Offering.
9.3 Piggyback Registration. If (but without any obligation to do so) the
Company proposes to register any of its Common Stock under the Act in connection
with the public offering of such Common Stock by the Company solely for cash
(other than a registration relating solely to the sale of securities to
participants in a dividend reinvestment plan, stock plan or employee benefit
plan; a registration relating solely to the issuance of securities to the
security holders of an acquired company in connection with an acquisition; or a
registration on any form which does not permit inclusion of selling
stockholders), or the Company proposes to register any of its securities on
behalf of a holder exercising demand registration rights similar to those set
forth in Section 9.2, the Company shall, at such time, promptly give each Holder
written notice of such registration. Upon the written request of each Holder
given within 15 days after mailing of such notice by the Company in accordance
with Section 9.3, the Company shall, subject to the provisions of Section 9.8,
cause to be registered under the Act all of the Registrable Securities that each
such Holder has requested to be registered.
9.4 Obligations of the Company. Whenever required under this Section 9 to
effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its reasonable efforts to
cause such registration statement to become effective, and (other than with
respect to a Shelf Registration Statement), upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to 120 days.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of
the Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue
Sky laws of such states or other jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required
to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the underwriters
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of such offering. Each Holder participating in such underwriting shall also
enter into and perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing, and then use its best efforts to promptly correct such
statement or omission. Notwithstanding the foregoing and anything to the
contrary set forth in this Section 9.4, each Holder acknowledges that there
may occasionally be times when the Company must suspend the use of the
prospectus forming a part of the registration statement until such time as
an amendment to the registration statement has been filed by the Company
and declared effective by the SEC, or until such time as the Company has
filed an appropriate report with the SEC pursuant to the Exchange Act. Each
Holder hereby covenants that it will (a) keep any such notice strictly
confidential, and (b) not sell any shares of Common Stock pursuant to such
prospectus during the period commencing at the time at which the Company
gives the Holder notice of the suspension of the use of such prospectus and
ending at the time the Company gives the Holder notice that it may
thereafter effect sales pursuant to such prospectus. The Company shall only
be able to suspend the use of such prospectus for periods aggregating no
more than 60 days in respect of any registration and, in any event, the
120- day period of effectiveness referred to in Section 9.4(a) shall be
extended one day for each day that sales are suspended under this Section
9.4(f).
9.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 9 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities and as may be required from time to time to keep such registration
current.
9.6 Expenses of Demand Registration and Shelf Registration. All expenses
incurred by or on behalf of the Company in connection with registrations,
filings or qualifications pursuant to Section 9.2 and Section 9.2A, including,
without limitation, all registration, filing and qualification fees, printers'
and accounting fees, and fees and disbursements of counsel for the Company,
shall be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration begun pursuant to Section
9.2 if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered (in which
case all participating Holders shall reimburse the Company promptly for all such
reasonable expenses). In no event shall the Company be obligated to bear any
underwriting discounts or commissions relating to Registrable Securities or the
fees and expenses of counsel to the selling Holders.
9.7 Expenses of Piggyback Registration. The Company shall bear and pay all
expenses incurred by or on behalf of the Company in connection with any
registration, filing or qualification of Registrable Securities with respect to
the registrations pursuant to Section 9.3 for
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each Holder, including, without limitation, all registration, filing, and
qualification fees, printing and accounting fees and fees and disbursements of
counsel for the Company relating or allocable thereto, but excluding any
underwriting discounts or commissions relating to Registrable Securities and the
fees and disbursements of counsel to the selling Holders.
9.8 Underwriting Requirements. In connection with any offering involving an
underwriting of shares being issued by the Company, the Company shall not be
required under Section 9.3 to include any of the Holders' Registrable Securities
in such underwriting or the registration statement relating thereto unless they
accept the terms of the underwriting as agreed upon between the Company and the
underwriters selected by the Company. If the total amount of securities,
including Registrable Securities, requested by Holders and other stockholders to
be included in such offering exceeds the amount of securities offered other than
by the Company that the underwriters reasonably believe can be offered without
jeopardizing the success of the offering, then the Company shall be required to
include in the offering only that number of such securities, including
Registrable Securities, which the underwriters believe will not jeopardize the
success of the offering. To achieve any necessary reduction in the securities to
be sold, the securities to be excluded from the offering shall first be selected
(in each case, pro rata among such class of holders according to the total
amount of securities proposed to be included in the registration statement or in
such other proportions as shall mutually be agreed to by such class of holders)
in the following order (subject to any contrary provisions in registration
rights agreements executed by the Company prior to the date hereof): (i) first,
securities being included on behalf of holders other than members of the Xxxx
Group shall be excluded, except for securities of holders referred to in clause
(iii) below; (ii) next, if additional securities must be excluded, Registrable
Securities included pursuant to Section 9.3 shall be excluded; (iii) thereafter,
if additional securities must be excluded, securities included on behalf of a
holder exercising demand registration rights similar to those set forth in
Section 9.2 shall be excluded; and (iv) finally, if additional securities must
be excluded, securities offered by the Company shall be excluded.
9.9 Delay of Registration. No Holder shall have any right to obtain or seek
an injunction restraining or otherwise delaying any registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 9.
9.10 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Section 9:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder and the affiliates of such Holder, and their
respective directors, officers, general and limited partners, agents and
representatives (and the directors, officers, affiliates and controlling
persons thereof), and each other person, if any, who controls such Holder
within the meaning of the Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions
or violations (collectively a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus (but only if such statement
is
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not corrected in the final prospectus) contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make
the statements therein not misleading (but only if such omission is not
corrected in the final prospectus), or (iii) any violation or alleged
violation by the Company in connection with the registration of Registrable
Securities under the Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Act, the Exchange Act or any state
securities law; and the Company will pay to each such Holder, affiliate or
controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 9.10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or
action to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any
such Holder or controlling person. Each indemnified party shall furnish
such information regarding itself or the claim in question as an
indemnifying party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claim and litigation
resulting therefrom.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers
who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any
losses, claims, damages or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the Act, the Exchange Act
or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with
such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this Section 9.10(b) in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 9.10(b)
shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the
consent of such Holder, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this Section 9.10(b)
exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
9.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section
9.10, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties. The
failure to deliver written notice to
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the indemnifying party within a reasonable time after the commencement of
any such action, if materially prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 9.10 to the extent of such prejudice,
but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 9.10. The indemnified party shall
have the right, but not the obligation, to participate in the defense of
any action referred to above through counsel of its own choosing and shall
have the right, but not the obligation, to assert any and all separate
defenses, cross claims or counterclaims which it may have, and the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless (i) the employment of such counsel has been specifically authorized
in advance by the indemnifying party, (ii) there is a conflict of interest
that prevents counsel for the indemnifying party from adequately
representing the interests of the indemnified party or there are defenses
available to the indemnified party that are different from, or additional
to, the defenses that are available to the indemnifying party, (iii) the
indemnifying party does not employ counsel that is reasonably satisfactory
to the indemnified party, or (iv) the indemnifying party fails to assume
the defense or does not reasonably contest such action in good faith, in
which case, if the indemnified party notifies the indemnifying party that
it elects to employ separate counsel, the indemnifying party shall not have
the right to assume the defense of such action on behalf of the indemnified
party and the reasonable fees and expenses of such separate counsel shall
be borne by the indemnifying party; provided, however, that, the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm (in addition to one firm acting as
local counsel) for all indemnified parties.
(d) The obligations of the Company and the holders under this Section
9.10 shall survive the completion of any offering of Registrable Securities
in a registration statement under this Section 9.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
(if any) entered into in connection with any underwritten public offering
of the Registrable Securities are in conflict with the foregoing
provisions, the provisions in such underwriting agreement shall control.
9.11 Reports Under the Exchange Act. With a view to making available to the
Holders the benefits of Rule 144 and any other rule or regulation of the SEC
that may at any time permit a Holder to sell securities of the Company to the
public without registration or pursuant to a registration on Form S-3, the
Company agrees to:
(a) use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144;
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required under the Act and the Exchange Act;
and
(c) furnish to any Holder forthwith upon request (i) a written
statement by the Company as to its compliance with the reporting
requirements of Rule 144, or as to whether it
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qualifies as a registrant whose securities may be resold pursuant to Form
S-3, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and
(iii) such other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC which permits the selling of
any such securities without registration or pursuant to such form.
9.12 No Assignment of Registration Rights. The rights to cause the Company
to register Registrable Securities pursuant to this Section 9 may only be
assigned by a Holder to another Holder.
9.13 Waiver Procedures. The observance by the Company of any provision of
this Section 9 may be waived (either generally or in a particular instance and
either retroactively or prospectively) with the written consent of the Holders
of a majority of the Registrable Securities, and any waiver effected in
accordance with this paragraph shall be binding upon each Holder of Registrable
Securities.
9.14 "Market Stand-off" Agreement. Any Holder of Registrable Securities, if
requested by an underwriter of any registered public offering of Company
securities being sold in a firm commitment underwriting, agrees not to sell or
otherwise transfer or dispose of any Common Stock (or other Company Voting
Securities) held by such Holder other than shares of Registrable Securities
included in the registration during the seven days prior to, and during a period
of up to 120 days following, the effective date of the registration statement.
Such agreement shall be in writing in a form reasonably satisfactory to the
Company and such underwriter. The Company may impose stop- transfer instructions
with respect to the securities subject to the foregoing restriction until the
end of the required stand-off period.
Section 10. Miscellaneous
10.1 As used in this Agreement, the terms "beneficial ownership," "person"
and "group" shall have the respective meanings ascribed to such terms pursuant
to Regulation 13D-G adopted by the Securities and Exchange Commission (the
"SEC") under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date hereof. The term "affiliate" shall have the
meaning ascribed to such term pursuant to Rule 12b-2 under the Exchange Act, as
in effect on the date hereof.
10.1 This Agreement is made solely for the benefit of Standby Purchaser,
the Affiliate Holders, its or their respective affiliates, the Standby Purchase
Indemnities, the Company, the Company Indemnities and their respective
successors or representatives, and no other person, partnership, association or
corporation shall acquire or have any right under or by virtue of this
Agreement.
10.2 Neither the Company nor Standby Purchaser may assign any of its rights
under this Agreement without the prior written consent of the other party
hereto.
10.3 This Agreement constitutes the entire agreement between Standby
Purchaser and the Company with respect to the subject matter hereof (excluding
the Loans and
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the Loan Amounts), and supersedes all prior agreements and understandings with
respect to the subject matter hereof (excluding the Loans and the Loan Amounts),
including, without limitation, the Summary Terms of EGI Financing Proposal
Including A Rights Offering and Senior Subordinated Debt dated February 19,
2001. In case any one or more of the provisions contained in this Agreement, or
the application thereof in any circumstance, is held invalid, illegal or
unenforceable in any respect under the laws of any jurisdiction, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way affected or
impaired thereby or under the laws of any other jurisdiction.
10.4 This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be an original, and all such
counterparts together constitute but one and the same instrument.
10.5 This Agreement may not be amended, modified or changed, in whole or in
part, except by an instrument in writing signed by the Company and Standby
Purchaser.
Section 11. Notices.
Except as otherwise provided in this Agreement, and unless otherwise
notified by the respective addressee, all notices and communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
personally to the recipient, one day after being sent by overnight courier
(charged prepaid), five days after being mailed to the recipient (postage
prepaid) or upon confirmation if transmitted via fax. Notices should be directed
as follows:
If to the Company:
Chart House Enterprises, Inc.
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Fax: 000-000-0000
Attn: Xxxxxx X. Xxxxxxx, President and Chief Executive Officer
If to Standby Purchaser:
EGI-Fund (01) Investors, L.L.C.
Two X. Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Fax: (000) 000-0000
Section 12. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois, without regard to the conflict of laws rules
thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
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CHART HOUSE ENTERPRISES, INC.
By
----------------------------------------------
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
EGI-FUND (01) INVESTORS, L.L.C.
By
----------------------------------------------
Xxxxxx X. Xxxxxxxxxxx, Vice President
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EXHIBIT A
CERTIFICATE OF DESIGNATIONS
26
EXHIBIT B
FORM OF OPINION
STANDBY PURCHASE AGREEMENT REVIEWED
(1) the Standby Purchase Agreement;
(2) the Certificate of Incorporation of the Company, together with all
amendments thereto;
(3) the Certificate of Designations relating to the Series A convertible
redeemable preferred Stock, in the form filed with the Secretary of State of the
State of Delaware on the date hereof (the "Certificate of Designations");
(4) the Certificate of Incorporation of the Company, and all amendments
thereto;
(5) the By-laws of the Company, as amended on the date prior to the date
hereof; and
(6) certain resolutions of the Special Committee and of the Disinterested
Directors adopted at a meeting held on February 19, 2001.
GENERAL CORPORATE AND CONTRACT OPINIONS
(1) The Company is a corporation organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power and authority to carry on its business as it is now being conducted.
(2) The Company has all necessary corporate power and authority to execute
and deliver the Documents, to perform its obligations thereunder and to
consummate the transactions contemplated thereby. The execution, delivery and
performance of each of the Documents by the Company, and the consummation by the
Company of the transactions contemplated thereby, have been duly and validly
authorized unanimously by at least a majority of the Disinterested Directors of
the Board (within the meaning of Article Eighth of the Certificate of
Corporation of the Company and the Second Amended and Restated Standstill
Agreement), including, without limitation, the members of the Special Committee,
and no other corporate proceedings on the part of the Company are necessary to
authorize the execution, delivery and performance of the Standby Purchase
Agreement or consummation of the transactions contemplated thereby. The Standby
Purchase Agreement has been duly and validly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company.
(3) The execution, delivery and performance of the Standby Purchase
Agreement by the Company: (a) will not, upon the due filing of the Certificate
of Designations with the Secretary of State of the State of Delaware (the
"Delaware Filing"), conflict with or violate (i) the Certificate of
Incorporation, as amended, or By-laws of the Company or any Subsidiary, (ii) the
Delaware General Corporation Law or any federal, statute, rule or regulation or,
to our knowledge, any order, judgment or decree applicable to the company or any
Subsidiary or by which its or any of
27
its respective properties are bound or affected; and (b) do not require any
consent, approval, authorization or permit of, action by, filing with or
notification to, any governmental entity, except for the Delaware Filing and as
required by the Securities Act, the Exchange Act, applicable state exchange
rules and regulations and applicable state securities laws.
(4) No vote of the holders of any class or series of capital stock or other
securities of the Company is necessary to consummate the transactions
contemplated by the Standby Purchase Agreement, excluding any vote that may be
required by Section 312 of the NYSE Listed Company Manual.
SPECIAL DELAWARE OPINIONS
(1) The Certificate of Designations was effective upon its filing with the
Secretary of State, and no further action by or on behalf of the Company shall
be required for the Certificate of Designations to be effective.
(2) Subject to due execution and filing of the Certificate of Designations
with the Secretary of State, upon the issuance and sale of the Standby Shares by
the Company to Standby Purchaser or the Affiliate Holders and the payment by
them of the purchase price therefor, all in accordance with the terms of the
Standby Purchase Agreement or the Rights Offering, and when certificates
representing such Standby Share are duly and properly endorsed and delivered,
the Standby Shares will be validly issued, fully paid, and nonassessable.
(3) Subject to due execution and filing of the Certificate of Designations
with the Secretary of State, the shares of Common Stock into which the Standby
Shares are convertible (the "Conversion Shares") have been reserved for issuance
by the Company.
(4) Subject to due execution and filing of the Certificate of Designations
with the Secretary of State, when and if the Conversion Shares are issued upon
conversion of the Standby Shares in accordance with the terms of the Certificate
of Designations, and when certificates representing such Conversion Shares are
duly and properly endorsed and delivered, the Conversion Shares will be validly
issued, fully paid, and nonassessable.
(5) Neither Article Eighth of the Company's Certificate of Incorporation,
as amended, nor Section 203 of the Delaware General Corporation Law prohibits
the transactions contemplated by the Standby Purchase Agreement.
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