Exhibit 10.17
ASSET PURCHASE AGREEMENT
BY AND AMONG
CHART HOUSE, INC.,
CHART HOUSE ENTERPRISES, INC.,
LCH ACQUISITION, INC.
AND
XXXXXX'X RESTAURANTS, INC.
DATED AS OF MAY 17, 2002
ARTICLE I PURCHASE AND SALE OF ASSETS....................................... 1
1.1 Sale........................................................... 1
1.1.1 Included Assets....................................... 2
1.1.2 Excluded Assets....................................... 4
1.2 Purchase....................................................... 5
1.3 The Purchase Price............................................. 5
1.3.1 Purchase Price........................................ 5
1.3.2 Payment at Closing.................................... 5
1.3.3 Net Adjustment........................................ 5
1.3.4 Allocation of Purchase Price.......................... 7
1.4 Liabilities.................................................... 7
1.4.1 Assumption of Liabilities............................. 7
1.4.2 Excluded Liabilities.................................. 8
1.5 Prorations..................................................... 8
1.6 Stock Sale..................................................... 8
ARTICLE II CLOSING ITEMS TO BE DELIVERED AND THIRD PARTY CONSENTS........... 9
2.1 Closing........................................................ 9
2.2 Items to be Delivered at Closing............................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES.................................. 11
3.1 Representations and Warranties of Seller and CHE............... 11
3.1.1 Organization and Qualification; Subsidiaries.......... 11
3.1.2 Certificate of Incorporation and By-Laws.............. 11
3.1.3 Authority Relative to This Agreement.................. 11
3.1.4 No Conflict; Required Filings and Consents; Landlord's
Consents....................................................... 12
3.1.5 SEC Filings; Financial Statements..................... 13
3.1.6 Absence Of Certain Changes Or Events.................. 13
3.1.7 No Undisclosed Liabilities............................ 14
3.1.8 Absence of Litigation................................. 14
3.1.9 Proxy Statement....................................... 14
3.1.10 Fairness Opinion of Financial Adviser................. 14
3.1.11 Brokers............................................... 14
3.1.12 Certain Restrictions Not Applicable................... 14
3.1.13 Vote Required......................................... 15
3.1.14 Title to Properties................................... 15
3.1.15 Ownership of Tangible Assets.......................... 15
3.1.16 Contracts............................................. 15
3.1.17 Real Property......................................... 16
3.1.18 Intellectual Property................................. 17
3.1.19 Permits............................................... 17
3.1.20 Tax Matters........................................... 18
3.1.21 Benefit Plans......................................... 18
3.1.22 Compliance with Applicable Laws....................... 19
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3.1.23 Compliance with Environmental Law..................... 19
3.1.24 Employee and Labor Matters............................ 19
3.1.25 Transactions with Affiliates.......................... 20
3.1.26 VIP Diners Cards...................................... 20
3.1.27 Insurance............................................. 20
3.1.28 COBRA Continuation.................................... 20
3.2 Representations and Warranties of Purchaser and Parent......... 21
3.2.1 Organization and Qualification........................ 21
3.2.2 Authority Relative to This Agreement.................. 21
3.2.3 No Conflict, Required Filings and Consents............ 21
3.2.4 Proxy Statement....................................... 22
3.2.5 Brokers............................................... 22
3.2.6 Financing............................................. 22
3.2.7 SEC Filings........................................... 22
3.2.8 No Business Activities................................ 22
3.3 Survival of Representations, Warranties and Agreements......... 22
ARTICLE IV AGREEMENTS PENDING CLOSING....................................... 23
4.1 Agreements of Seller and CHE Pending the Closing............... 23
4.1.1 Business in the Ordinary Course....................... 23
4.1.2 Existing Condition.................................... 25
4.1.3 Update Schedules...................................... 25
4.1.4 Proxy Statement....................................... 25
4.1.5 Stockholder Approval.................................. 26
4.1.6 Commercially Reasonable Efforts....................... 26
4.1.7 Access to Information and Personnel................... 26
4.1.8 Maintenance of Insurance; Damages..................... 27
4.1.9 Notice of Offers...................................... 27
4.2 Agreements of Purchaser and Parent Pending the
Closing........................................................ 27
4.2.1 Commercially Reasonable Efforts....................... 27
4.2.2 Proxy Statement....................................... 28
4.3 Confidentiality................................................ 28
ARTICLE V CONDITIONS PRECEDENT TO THE CLOSING............................... 28
5.1 Conditions Precedent to Purchaser's and Parent's Obligations... 28
5.1.1 Representations and Warranties True as of the Closing
Date................................................. 29
5.1.2 Compliance with this Agreement........................ 29
5.1.3 No Injunctions or Restraints.......................... 29
5.1.4 Consents and Approvals................................ 29
5.1.5 Material Adverse Change............................... 29
5.1.6 Non-Solicitation Agreements........................... 29
5.1.7 Gift Certificates and Other Perquisites............... 29
5.1.8 Certificates of Tax Authorities....................... 29
5.1.9 Closing Deliveries:................................... 30
5.1.10 Deposit Letters....................................... 30
5.2 Conditions Precedent to the Obligations of Seller and CHE...... 30
5.2.1 Representations and Warranties True as of the Closing
Date........................................................... 30
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5.2.2 Compliance with this Agreement........................ 30
5.2.3 No Injunctions or Restraints.......................... 30
5.2.4 Consents and Approvals................................ 31
5.2.5 Stockholder Approval.................................. 31
ARTICLE VI INDEMNIFICATION.................................................. 31
6.1 Indemnification by Seller and CHE.............................. 31
6.2 Indemnification by Purchaser and Parent........................ 31
6.3 Indemnification Procedures..................................... 32
6.4 Reduction of Losses............................................ 33
6.5 Subrogation.................................................... 33
6.6 Exclusive Remedy............................................... 33
6.7 Limitation and Expiration...................................... 34
6.8 No Consequential Damages....................................... 34
ARTICLE VII ADDITIONAL AGREEMENTS........................................... 34
7.1 Employee Matters............................................... 34
7.2 Maintenance of Books and Records............................... 37
7.3 Payments Received.............................................. 37
7.4 Use of Name.................................................... 37
7.5 Publicity...................................................... 38
7.6 No Solicitation of Other Offers................................ 38
7.7 Sales and Liquor Taxes......................................... 39
7.8 Further Assurances, Post-Closing Cooperation................... 40
ARTICLE VIII MISCELLANEOUS.................................................. 40
8.1 Termination.................................................... 40
8.2 Effect of Termination and Abandonment.......................... 41
8.3 Payment of Certain Fees upon Termination....................... 41
8.4 Bulk Sales Law................................................. 41
8.5 Sales, Transfer and Documentary Taxes, etc..................... 41
8.6 Expenses....................................................... 42
8.7 Contents of Agreement; Amendments.............................. 42
8.8 Assignment and Binding Effect.................................. 42
8.9 Waiver......................................................... 42
8.10 Notices........................................................ 42
8.11 Governing Law.................................................. 43
8.12 No Benefit to Others........................................... 43
8.13 Headings, Gender and "Person".................................. 43
8.14 Schedules and Exhibits......................................... 44
8.15 Severability................................................... 44
8.16 Counterparts; Facsimile Signatures............................. 44
8.17 CHE Guarantee.................................................. 44
8.18 Parent Guarantee............................................... 44
8.19 No Strict Construction......................................... 45
8.20 Jurisdiction and Service of Process............................ 45
8.21 Trial.......................................................... 45
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8.22 Knowledge...................................................... 46
8.23 Attorney's Fees................................................ 46
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), is made and entered into
as of this 17th day of May, 2002, by and among Chart House, Inc., a Delaware
corporation ("Seller"), Chart House Enterprises, Inc., a Delaware corporation
("CHE"), Xxxxxx'x Restaurants, Inc, a Delaware corporation ("Parent"), and LCH
Acquisition, Inc., a Delaware corporation and a direct or indirect wholly-owned
subsidiary of Parent ("Purchaser").
W I T N E S S E T H:
A. Seller has been and is engaged in the business of operating Chart House
restaurants and one Peohe's restaurant, located at the locations listed on
Exhibit A attached hereto (such business being referred to herein as the
"Business" and such locations being referred to herein as the "Premises");
B. CHE owns all of the outstanding capital stock of Seller and certain
assets used in connection with the Business;
C. Purchaser desires to acquire and assume from Seller and CHE, and Seller
and CHE desire to sell and assign to Purchaser, certain assets and liabilities
of the Business, all upon and subject to the terms and conditions hereinafter
set forth;
D. Parent owns all of the outstanding capital stock of Purchaser and will
receive substantial benefit as a result of the performance by Seller of its
obligations under this Agreement; and
E. Capitalized terms used but not defined in the body of the Agreement have
the respective meanings set forth in Annex 1.
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants, representations, warranties and agreements herein contained, and for
other good and valuable consideration, the receipt, adequacy and sufficiency of
which are hereby acknowledged, and intending to be legally bound hereby, the
Parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Sale. At the Closing, and except as otherwise specifically provided in
this Section 1.1, Seller or CHE, as applicable, shall grant, sell, convey,
assign, transfer and deliver to Purchaser, upon and subject to the terms and
conditions of this Agreement, all right, title and interest of Seller or CHE, as
applicable, in and to all of the assets, properties and rights set forth in
Section 1.1.1 (which assets, properties and rights are herein sometimes called
the "Assets"), in all cases free and clear of all Liens other than Permitted
Liens.
1.1.1. Included Assets. The Assets shall include, without limitation, the
following assets, properties and rights of Seller (and, as applicable, CHE) used
in the conduct of, or generated by or constituting, the Business but shall not
include the Excluded Assets:
(a) all of the real property leases held by CHE or Seller (including
all rights under lease) and used in the operation or conduct of the
Business which are identified on Exhibit A-1 hereto (the "Leases"),
together with all leasehold improvements owned by CHE or Seller that are
located in or on such leasehold interests, subject to the Leases relating
thereto, including, without limitation, all security deposits, utility
deposits and any other deposits (the "Leased Property").
(b) all tenements, hereditaments, easements, rights-of-way, rights,
licenses, patents, rights of ingress and egress, reversionary interests,
privileges and appurtenances belonging, pertaining or relating to the
Leased Property, any and all rights to the present or future use of
wastewater, wastewater capacity, drainage, water or other utility
facilities relating to the Leased Property, including, without limitation,
all reservations of or commitments or letters covering any such use in the
future, whether now owned or hereafter acquired, and the entire right,
title and interest of Seller, if any, in, to and under all streets, ways,
alleys, passages, strips, gores, pipes, pipelines, sewers, sewer rights,
ditches, waters, water courses, water rights and powers, air rights,
railroad sidings, minerals, mineral rights and mineral interests adjoining,
upon, above, in, under or pertaining to the Leased Property; all options
and rights to purchase or otherwise acquire real property that is adjacent
to or nearby the Leased Property, and all claims or demands whatsoever of
CHE or Seller, either in law or in equity, with respect to the Leased
Property, including, without limitation, any unpaid awards to be made
relating thereto, including any unpaid awards or damages payable by reason
of damage thereto or by reason of a widening of any adjoining streets or
roads or a changing of the grade with respect to same, but in each case
only to the extent Seller or CHE or any subsidiary of either owns and has
the right to convey the same to Purchaser.
(c) all appliances, kitchen equipment, office equipment and other
equipment, tools, spare parts, signage, decor items, furniture,
furnishings, leasehold improvements, dinnerware, glassware, flatware,
linens and other tangible personal property located at the Premises or
relating to the Business or the Assets or which were used in any closed or
abandoned Chart House Restaurant and which are owned by CHE or Seller and
not currently being used in another restaurant;
(d) all food and beverages, including alcoholic beverages, whether
opened or unopened, all other raw materials and ingredients, packing
materials and all other inventories (together, the "Inventory") and all
office and other supplies relating to the Business;
(e) all rights of Seller under any written or oral contract,
agreement, lease (other than the Leases), instrument, license agreement or
other agreement relating to the Business (including, without limitation,
the Material Contracts) (together with the Leases, hereinafter the
"Assigned Contracts"). A list of all Assigned Contracts, excluding the
Leases, are set forth on Schedule 1.1.1(e);
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(f) all transferable governmental licenses, registrations,
certificates of occupancy or other permits or approvals of any nature of
CHE or Seller or any of its subsidiaries relating to the Business
("Permits");
(g) all rights of Seller and CHE under any trademark, service xxxx,
trade dress, trade name, copyright or slogan relating to the Business,
whether registered or unregistered, and any similar or equivalent rights to
the foregoing anywhere in the world, and any applications therefor
including, without limitation, those items set forth on Schedule 1.1.1(g)
hereto;
(h) all technologies, methods, data bases, trade secrets, know-how,
manufacturing and other processes, inventions, formulae, recipes, process
sheets and mixing instructions and other intellectual property used in the
Business or under development for use in the Business;
(i) all computer hardware, software (including documentation and
related object and source codes), software licenses and peripherals of CHE
or Seller relating to or used in the Business and listed on Schedule
1.1.1(i) hereto;
(j) all of Seller's or CHE's books, records, papers and instruments of
whatever nature and wherever located that relate to the Business or any of
the Assets or which are required or necessary in order for Purchaser to
conduct the Business from and after the Closing Date in the manner in which
it is presently being conducted, including, without limitation, blueprints,
specifications, plats, maps, surveys, building and machinery diagrams,
correspondence from any lessor relating to any of the Leased Property, all
Lease files, accounting and financial records, maintenance and production
records, recipe books, operating and policy manuals, personnel and labor
relations records, environmental records and reports, sales and property
Tax records and returns, sales records, customer lists, records relating to
suppliers, marketing brochures, but excluding income Tax records and
returns and corporate minute book and stock records.
(k) all rights or choses in action, including, without limitation all
rights under express or implied warranties, representations and guaranties
relating to the Assets;
(l) all information, files, records, data, plans and recorded
knowledge related to the foregoing;
(m) all telephone numbers and telephone listings of Seller;
(n) all cash on hand in the Seller's restaurants on the Closing Date;
(o) all goodwill of the Business; and
(p) all assets, artwork, advertising material, equipment, furniture
and fixtures, boat and other models, software, brochures, testimonials,
pictures, etc., located in the corporate offices, warehouses, or otherwise
and relating to the Business or the Assets and excluding those assets
listed on Schedule 1.1.2(f).
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1.1.2 Excluded Assets. Notwithstanding the foregoing, the Assets shall not
include any of the following (the "Excluded Assets"):
(a) the certificate of incorporation, minute books, Tax Returns, books
of account or other records having to do with the organization of Seller or
CHE;
(b) the rights which accrue or will accrue to Seller or CHE under this
Agreement;
(c) any bank accounts or lock boxes of Seller or CHE;
(d) any cash or cash equivalents (including marketable securities and
short-term investments) and other securities held by Seller or CHE (other
than cash on hand in the Seller's restaurants on the Closing Date);
(e) all insurance policies of Seller or CHE;
(f) any assets located at, on or in CHE's corporate headquarters at
000 X. XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 which are specifically
referenced in Schedule 1.1.2(f);
(g) the rights of Seller and CHE under any Contract, other than the
Assigned Contracts (the "Excluded Contracts");
(h) the other assets, properties or rights, if any, set forth on
Schedule 1.1.2;
(i) any assets relating to any "employee benefit plans" as defined by
Section 3(3) of the ERISA, all specified fringe benefit plans as defined in
Section 6039D of the Code, and all other bonus, incentive compensation,
deferred compensation, profit sharing, stock option, stock appreciation
right, stock bonus, stock purchase, employee stock ownership, savings,
severance, supplemental unemployment, layoff, salary continuation,
retirement, pension, health, life insurance, dental, disability, accident,
group insurance, vacation, holiday, sick leave, fringe benefit or welfare
plan, and any other employee compensation or benefit plan, agreement,
policy, practice, commitment, contract, or understanding (whether qualified
or nonqualified, currently effective or terminated, written or unwritten),
and any trust, escrow or other agreement related thereto, which currently
is sponsored, established, maintained or contributed to or required to be
contributed by CHE or any of its Subsidiaries or for which CHE or any of
its Subsidiaries has any liability, contingent or otherwise (collectively,
the "Corporation Benefit Plans"); and
(j) all assets of CHE or any of its Subsidiaries relating to any
Xxxxxx and Xxxxx'x restaurants;
(k) all prepaid rentals, other prepaid expenses, bonds and financial
assurance requirements, and other current assets; and
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(l) all accounts receivable arising prior to Closing recorded or
otherwise (including rebates, volume incentives, marketing funds, etc.) of
CHE or Seller and all other rights of CHE or Seller to payment for goods
sold or leased or for services rendered, including without limitation those
which are not evidenced by instruments or chattel paper, whether or not
they have been written off or reserved against as a bad debt or doubtful
account in the Latest Balance Sheet relating to the Business; together with
all instruments and all documents of title representing any of the
foregoing, and all rights, title, security and guaranties in favor of
Seller with respect to any of the foregoing.
1.2 Purchase. At the Closing hereunder, Purchaser shall purchase the Assets
from Seller or CHE, as the case may be, upon and subject to the terms and
conditions of this Agreement and in reliance on the representations, warranties,
covenants and agreements of Seller and CHE contained herein, in exchange for the
Purchase Price. In addition, Purchaser shall assume at the Closing and agree to
pay, discharge or perform, as appropriate, certain liabilities and obligations
of Seller only to the extent and as provided in Section 1.4 of this Agreement.
Except as specifically provided in Section 1.4 hereof, Purchaser shall not
assume and shall not be responsible for any liabilities or obligations of the
Business, the Assets, CHE, or Seller.
1.3 The Purchase Price.
1.3.1 Purchase Price. The Purchase Price shall be an amount equal to
$45,500,000, subject to adjustment as provided in Sections 1.3.3 and 1.5 (the
"Purchase Price").
1.3.2 Payment at Closing. On the Closing Date, Purchaser shall pay to
Seller the Purchase Price (as adjusted pursuant to Sections 1.3.3 and 1.5) by
wire transfer to such bank account as shall be designated in writing by Seller
to Purchaser.
1.3.3 Net Adjustment.
(a) At least two Business Days prior to the Closing Date, Seller shall
deliver to Purchaser a statement (the "Estimated Assumed Current Assets
Statement") of the estimated Assumed Current Assets of the Business as of
the Closing Date (the "Estimated Assumed Current Assets"). As used herein,
"Assumed Current Assets" shall be equal to the sum of Seller's net
Inventory (valued at cost on a FIFO basis) and cash on hand in the Seller's
restaurants on the Closing Date. The Purchase Price payable pursuant to
Section 1.3.1 hereof shall be increased or decreased dollar for dollar by
the amount of the difference between the Estimated Assumed Current Assets
and base amount set forth on Schedule 1.3.3(a). On the Closing Date, Seller
shall take a complete physical count of the Inventory of the Business and
Purchaser or its representatives shall be permitted to observe such
physical count being taken. Set forth on Schedules 1.4.1(a)(ii) and (iii)
(collectively the "Liabilities Schedules") are the estimated liabilities of
Seller for gift certificates and accrued vacations as of the Closing Date
(the "Estimated Assumed Closing Date Liabilities"). To the extent the
aggregate liabilities for gift certificates and accrued vacations as of the
Closing Date (the "Assumed Closing Date Liabilities") are different from
those set forth on the Liabilities Schedules, the Purchase Price payable
pursuant to Section 1.3.1 shall be increased or decreased dollar for dollar
by the amount of such difference. Within fifteen (15) days after the
Closing Date, Seller shall deliver to
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Purchaser a statement (the "Assumed Closing Statement") indicating the
actual Assumed Current Assets as of the Closing Date (the "Closing Assumed
Current Assets") and the actual Assumed Closing Date Liabilities. Purchaser
and its representatives shall have the right to review all work papers,
data, programs and procedures used to prepare the Assumed Closing Statement
and shall have the right to perform any other reasonable procedures
necessary to verify the accuracy thereof. Each Party shall bear its own
expenses incurred in connection with the above procedures.
(b) Unless Purchaser, within fifteen (15) days after delivery to
Purchaser of the Assumed Closing Statement, notifies Seller in writing that
it objects to the Assumed Closing Statement, and specifies the basis for
such objection, such Assumed Closing Statement shall become final, binding
and conclusive upon the Parties for purposes of this Agreement. If
Purchaser and Seller are unable to resolve any objections to the Assumed
Closing Statement within fifteen (15) days after any such notification has
been given by Purchaser, any Party hereto shall have the option to refer
the dispute to Deloitte & Touche (the "Independent Accounting Firm"). If
for any reason the Independent Accounting Firm is unavailable to resolve
such dispute between Purchaser and Seller and if Purchaser and Seller are
also unable to mutually agree upon the designation of a nationally
recognized public accounting firm within five (5) days after the dispute
has been referred to the Independent Accounting Firm pursuant to the
preceding sentence, any Party hereto may thereafter request that the
American Arbitration Association ("AAA") make such designation. The
accounting firm so designated will make a determination as to each of the
items in dispute, which determination shall be final, conclusive and
binding upon each of the Parties hereto. Purchaser and Seller shall
cooperate with each other and with each other's authorized representatives
in order to resolve any and all matters in dispute under this Section 1.3.3
as soon as practicable, and Purchaser and Seller shall share equally the
fees and expenses of the Independent Accounting Firm and, if applicable,
the accounting firm mutually agreed by the Parties or otherwise designated
by AAA.
(c) If (i) the amount of the Closing Assumed Current Assets are lower
than the amount of the Estimated Assumed Current Assets and/or (ii) the
Estimated Assumed Closing Date Liabilities are higher than the Assumed
Closing Date Liabilities then (iii) the Purchase Price shall be decreased
dollar for dollar by the amount of such difference. In such event, at
Purchaser's election: (i) Purchaser shall offset such amount by any amounts
Purchaser owes Seller in accordance with Section 1.4.1(a)(i), or (ii)
Seller shall remit the amount of such difference to Purchaser in cash, in
each case with interest at a rate per annum equal to the prime rate
announced from time to time by Citibank (the "Agreed Rate") from the
Closing Date to the date of payment, within five (5) days after delivery to
Purchaser of the Closing Assumed Current Asset Statement as provided above;
provided, however, that acceptance by Purchaser of such payment shall not
constitute a waiver of Purchaser's right to object to the Closing Assumed
Current Asset Statement during the fifteen (15) day period following its
delivery. If Purchaser does raise an objection and if resolution of such
objection results in a further payment due from Seller to Purchaser,
payment of such additional amount, with interest at the Agreed Rate, from
the Closing Date to the date of payment, shall be made to Purchaser within
five (5) days following final resolution of such objection.
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(d) If (i) the amount of the Closing Assumed Current Assets exceed the
amount of the Estimated Assumed Current Assets and/or (ii) the Estimated
Assumed Closing Date Liabilities are lower than the Assumed Closing Date
Liabilities then (iii) the Purchase Price shall be increased dollar for
dollar by the amount of such excess. In such event, at Seller's election:
(i) Seller shall offset such amount by any amounts Seller owes Purchaser or
(ii) Purchaser shall within five (5) days after the expiration of the
fifteen (15) day period referred to above, or if Purchaser contests the
Closing Assumed Current Asset Statement, within five (5) days after final
resolution of such objection, remit to Seller the amount of such
difference, together with interest thereon at the Agreed Rate, from the
Closing Date to the date of payment.
(e) The amounts due from Purchaser to Seller or from Seller to
Purchaser pursuant to paragraphs (c) and (d) hereof shall be netted to
provide for one sum due from one Party to the other.
(f) Except as otherwise set forth in this Section 1.3.3, any
undisputed or resolved amounts under this Section 1.3.3 shall be payable
within five (5) days of the date such amount is determined to be undisputed
or resolved, with interest at the Agreed Rate, even if other amounts
continue to be disputed and unresolved.
1.3.4 Allocation of Purchase Price. The Purchase Price and the
liabilities assumed by Purchaser in accordance with Section 1.4 hereof shall be
allocated among the Assets acquired hereunder in accordance with the
requirements of Section 1060 of the Internal Revenue Code, and in accordance
with Schedule 1.3.4 hereto. Purchaser shall prepare such Schedule of such
allocations and present it to Seller at least two (2) days prior to the Closing
Date. Seller and Purchaser hereby covenant and agree not to take a position on
any income tax return, before any governmental agency charged with the
collection of an income tax, or in any judicial proceeding that is in any way
inconsistent with the terms of this Section 1.3.4 or Schedule 1.3.4.
1.4 Liabilities.
1.4.1 Assumption of Liabilities. At the Closing, subject to the terms
of this Agreement, including Section 1.4.2 hereof, Purchaser shall assume and
agree to pay, discharge or perform, as appropriate, when due and payable and
otherwise in accordance with the relevant governing agreements, the following
(and only the following) liabilities and obligations of Seller (the "Assumed
Liabilities"):
(a) all trade payables set forth on Schedule 1.4.1(a)(i); (ii) all
liabilities arising out of previously issued gift certificates as set forth
on Schedule 1.4.1(a)(ii); and (iii) all accrued vacation as set forth on
Schedule 1.4.1(a)(iii);
(b) all liabilities and obligations of Seller in respect of the
Assigned Contracts arising after the Closing Date;
(c) all liabilities and obligations under the Permits;
(d) all liabilities and obligations under or arising from the
Permitted Liens; and
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(e) all liabilities and obligations incurred in, resulting from or
arising out of the use, operation, ownership or control of the Assets or
the operation of the Business after the Closing Date.
1.4.2 Excluded Liabilities. Other than the Assumed Liabilities,
Purchaser shall not assume, pay, discharge, perform or in any way be responsible
or liable for any liabilities or obligations of Seller or CHE, whether fixed or
unfixed, known or unknown, asserted or unasserted (the "Excluded Liabilities").
1.5 Prorations. On the Closing Date all obligations and liabilities listed
below relating to the Business and/or Assets will be prorated as of the Closing
Date, with Seller liable to Purchaser therefor to the extent such items relate
to any time period up to and including the day prior to the Closing Date and
Purchaser liable to Seller therefor to the extent such items relate to any time
period commencing on or after the Closing Date: personal property, real estate,
occupancy and water taxes, if any, on or with respect to the Business and/or
Assets; rents, taxes and similar items payable by Seller under any Assigned
Contract; the amount of any license or registration fees paid to a Governmental
Authority with respect to any Permits which are being assigned or transferred
hereunder; the amount of sewer rents and charges for water, telephone,
electricity and other utilities and fuel; and any other items which are normally
prorated in connection with similar transactions. Seller agrees to furnish
Purchaser with such documents and other records as Purchaser reasonably requests
in order for Purchaser to calculate all adjustments and prorations pursuant to
this Section 1.5. The amount of such prorations owed by Purchaser or Seller
pursuant to this Section 1.5 shall be paid to Purchaser by Seller or to Seller
by Purchaser, as the case may be, on the Closing Date and shall be treated as an
adjustment to the Purchase Price paid by Purchaser to Seller on the Closing
Date. If current payments with respect to items to be prorated pursuant to this
Section 1.5 are not ascertainable on the Closing Date, such payments shall be
prorated on the basis of the most recently ascertainable xxxx therefor and shall
be reprorated between Seller and Purchaser within 30 days after the Closing Date
and a cash settlement shall be made promptly thereafter on an item by item
basis.
1.6 Stock Sale. Notwithstanding anything in this Agreement to the contrary,
if CHE or Parent shall so elect, CHE and Seller shall transfer and assign all or
a portion of the Assets to a newly formed direct or indirect Subsidiary of CHE
("Newco") and at the Closing, shall sell, transfer and assign all of the
outstanding Stock of Newco to Purchaser (the "Stock Sale") in full satisfaction
of the obligations of CHE and Seller to sell, transfer and assign such Assets to
Purchaser under this Agreement. In such event, the Parties shall enter into such
amendments to this Agreement as shall be necessary or appropriate to effectuate
the Stock Sale. In connection with the Stock Sale, Seller shall, at the request
of Parent or Purchaser, timely execute and deliver to Parent or Purchaser an
election under Section 338(h)(10) of the Internal Revenue Code and under any
comparable provisions of state and local law with respect to the purchase of the
shares of Newco's stock, provided that Purchaser and Parent shall have
indemnified and held harmless Seller and CHE with respect to any additional
taxes payable to the extent the same results from such election. For this
purpose, the Purchase Price and the liabilities assumed by Purchaser in
accordance with Section 1.4 hereof shall be allocated among the Assets acquired
hereunder in accordance with the requirements of Section 338 of the Internal
Revenue Code and the regulations thereunder, and in accordance with Schedule
1.3.4 hereto.
8
ARTICLE II
CLOSING ITEMS TO BE DELIVERED AND THIRD PARTY CONSENTS
2.1 Closing. The closing (the "Closing") of the sale and purchase of the
Assets shall take place on the date of, and immediately following, the CHE
Stockholders' Meeting or upon the later satisfaction or waiver of the conditions
set forth in Article V of this Agreement, at the offices of Xxxxxx and Xxxxx,
LLP, 0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, or on such other
date and at such other place as the Parties may mutually agree. The date of the
Closing is sometimes herein referred to as the "Closing Date."
2.2 Items to be Delivered at Closing. At the Closing and subject to the
terms and conditions herein contained:
(a) Seller or CHE, as the case may be, shall deliver to Purchaser the
following:
(i) a duly executed xxxx of sale and assignment in the form of
Exhibit B hereto;
(ii) a duly executed assignment of United States trademarks in
the form of Exhibit C hereto;
(iii) a duly executed counterpart original of an assignment in
respect of each of the Leases including an assignment of rights under
any subordination, non-disturbance, attornment agreement in the form
of Exhibit D hereto (the "Lease Assignments");
(iv) a duly executed counterpart original of an undertaking
whereby Purchaser assumes and agrees to pay, discharge or perform, as
appropriate, the Assumed Liabilities in the form of Exhibit E hereto
(the "Assumption Agreement");
(v) a duly executed counterpart original of a Transition Services
Agreement in a form to be mutually agreed to by the Parties prior to
the Closing (the "Transition Services Agreement");
(vi) a duly executed opinion of Seyfarth Xxxx, dated the Closing
Date, counsel to Seller in the form of Exhibit F hereto;
(vii) a duly executed certificate of an officer of Seller dated
the Closing Date, certifying that the conditions specified in Sections
5.1.1 and 5.1.2 hereof have been fulfilled;
(viii) duly executed certificates of the Secretary of each of
Seller and CHE certifying (A) resolutions of the directors and
stockholders of Seller and CHE approving this Agreement and the
transactions contemplated hereby (together with an incumbency and
signature certificate regarding the officer
9
signing on behalf of Seller or CHE, as the case may be), and (B)
the certificate of incorporation and bylaws of Seller or CHE, as the
case may be;
(ix) all of the information, files, records, data, plans and
recorded knowledge belonging to Seller which are part of the Assets;
and
(x) to the extent the same are reasonably available as of the
Closing, any and all UCC-3 termination statements or amendments or
other documents needed to release or transfer any Liens on, or other
security interests in, the Assets, other than the Permitted Liens;
(xi) the consents required of those Landlords listed on Schedule
2.2(a)(xi) ("Landlord's Consents") to any assignment contemplated by
this Agreement;
(xii) an affidavit pursuant to FIRPTA in the form of Exhibit G
hereto;
(xiii) such agreements, in a form reasonably acceptable to the
Parties, including indemnities, to allow for the continuous
uninterrupted service of alcoholic beverages by Parent or Purchaser on
each of the Leased Properties; and
(xiv) those items set forth in Section 5.1.9.
and simultaneously with such delivery, Seller shall take all such steps as may
be required to put Purchaser in actual possession and operating control of the
Assets. Seller will effectuate delivery of the Assets by allowing Purchaser
access thereto at the Premises, any warehouse location or at the corporate
offices, as applicable. Purchaser shall remove the Assets located at the
corporate offices as soon as practicable, but no later than 30 days following
the Closing Date.
(b) Purchaser shall deliver to Seller the following:
(i) the Purchase Price in accordance with Section 1.3.2 hereof;
(ii) a duly executed counterpart original of each of the Lease
Assignments;
(iii) a duly executed counterpart original of the Assumption
Agreement;
(iv) a duly executed counterpart original of the Transition
Services Agreement;
(v) a duly executed opinion of Xxxxxx and Xxxxx, LLP, counsel to
Purchaser and Parent, dated the Closing Date, in the form of Exhibit H
hereto;
(vi) a duly executed certificate of an officer of Purchaser dated
the Closing Date, certifying that the conditions specified in Sections
5.2.1 and 5.2.2 of this Agreement have been fulfilled; and
10
(vii) duly executed certificates of the Secretary of each of
Purchaser and Parent certifying (A) resolutions of the directors of
Purchaser and Parent approving this Agreement and the transactions
contemplated hereby (together with an incumbency and signature
certificate regarding the officer signing on behalf of Purchaser or
Parent, as the case may be), and (B) the certificate of incorporation
and bylaws of Purchaser or Parent, as the case may be; and
(viii) such agreements, in a form reasonably acceptable to the
Parties, including indemnities, to allow for the continuous
uninterrupted service of alcoholic beverages by Parent or Purchaser on
each of the Leased Properties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Seller and CHE. Except as set forth
in the Seller's Disclosure Schedule to be delivered by CHE and Seller to Parent
and Purchaser on the date hereof, which sets forth certain disclosures
concerning CHE and the Seller and its business (the "Seller's Disclosure
Schedule"), each section of which only qualifies the correspondingly numbered
representation or warranty in this Article III, Seller and CHE hereby jointly
and severally represent and warrant to Purchaser and Parent as follows:
3.1.1 Organization and Qualification; Subsidiaries. CHE, Seller and
each of their respective subsidiaries are corporations duly organized,
validly existing and in good standing under the respective laws of the
jurisdictions of their incorporation, except where the failure to be so
organized, existing and in good standing would not reasonably be expected
to have, and does not have, individually or in the aggregate, a Material
Adverse Effect. CHE, Seller and each of their respective subsidiaries have
the requisite corporate power and authority necessary to own, lease and
operate the properties they purport to own, lease or operate and to carry
on their business as it is now being conducted, except where the failure to
have such power and authority would not reasonably be expected to have, or
does not have, individually or in the aggregate, a Material Adverse Effect,
and each of CHE, Seller and each of their respective subsidiaries is duly
qualified and in good standing to do business in each jurisdiction in which
such qualification is necessary because of the nature of the business
conducted by it, except where the failure to be so qualified would not have
a Material Adverse Effect.
3.1.2 Certificate of Incorporation and By-Laws. CHE has heretofore
made available to Purchaser a true, complete and correct copy of its
Restated Certificate of Incorporation, as amended, (the "Restated
Certificate of Incorporation") and Amended and Restated By-Laws (the
"Amended and Restated By-Laws"), each as amended to date, and has furnished
or made available to Parent the Certificate of Incorporation and By-Laws
(or equivalent organizational documents) of each of its Subsidiaries (the
"Subsidiary Documents"). Such Restated Certificate of Incorporation,
Amended and Restated By-Laws and Subsidiary Documents are in full force and
effect.
3.1.3 Authority Relative to This Agreement. Each of CHE and Seller has
all necessary corporate power and authority to execute and deliver this
Agreement and to perform
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its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by CHE and Seller and
the consummation by CHE and Seller of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on
the part of CHE and Seller, and no other corporate proceedings on the part
of CHE or Seller are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby, other than the approval of this
Agreement by the holders of a majority of the outstanding shares of CHE's
common stock, par value $.01 per share (the "Common Stock") and CHE's
preferred stock, par value $1.00 per share (the "Preferred Stock") entitled
to vote in accordance with the Delaware General Corporation Law (the
"DGCL") and CHE's Restated Certificate of Incorporation and Amended and
Restated By-Laws (the "Required Company Vote"). The Board of Directors of
CHE (the "Board") has approved this Agreement and the transactions
contemplated hereby and declared the advisability thereof. This Agreement
has been duly and validly executed and delivered by CHE and Seller and,
assuming the due authorization, execution and delivery by Parent and
Purchaser, constitutes a legal, valid and binding obligation of CHE and
Seller enforceable against each of them in accordance with its terms.
3.1.4 No Conflict; Required Filings and Consents; Landlord's Consents.
(a) The execution and delivery of this Agreement by CHE and Seller
does not, and the performance of this Agreement by CHE and Seller will not,
(i) conflict with or violate the Restated Certificate of Incorporation or
Amended and Restated By-Laws of CHE or any Subsidiary Document or (ii)
conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to CHE or any of its subsidiaries or by which its or any
of their respective properties is bound or affected, except in the case of
(ii) only, for any such conflicts, violations, breaches, defaults or other
occurrences that would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(b) The execution and delivery of this Agreement by CHE and Seller
does not, and the performance of this Agreement by CHE and Seller will not,
require any consent, approval, authorization or permit of, or filing with
or notification to, any national, federal, state, provincial or local
governmental, regulatory or administrative authority, agency, commission,
court, tribunal, arbitral body or self-regulated entity, domestic or
foreign (collectively, the "Governmental Authorities"), or any other Person
except for (i) (A) applicable requirements, if any, of the Securities Act
of 1933, as amended (the "Securities Act"), the Securities Exchange Act of
1934, as amended (the "Exchange Act"), state securities laws ("Blue Sky
Laws"), (B) filings with or approvals of franchise regulatory authorities,
licensing boards or agencies under applicable alcohol and beverage laws and
regulations, (C) regulatory filings related to the operation of the
Business, (D) filings under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), to the extent applicable, (E)
filings in connection with any applicable transfer or other taxes in
applicable jurisdictions and, (F) consents and waivers set forth on Section
3.1.4 of Seller's Disclosure Schedule (collectively the "Required
Consents") or (ii) the Landlord Consents. An otherwise Required Consent
shall not be required where the failure to obtain the Required Consent
would not (A) prevent or materially delay consummation of the transactions
contemplated hereby, (B) otherwise
12
prevent or materially delay CHE or Seller from performing their obligations
under this Agreement, or (C) otherwise reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
3.1.5 SEC Filings; Financial Statements.
(a) CHE has filed all forms, reports and documents required to be
filed with the SEC since December 31, 2000, including, without limitation,
(i) its Annual Reports on Form 10-K and all quarterly reports on Form 10-Q,
(ii) all proxy statements relating to CHE's meetings of stockholders
(whether annual or special), (iii) all other reports or registration
statements filed by CHE with the SEC since December 31, 2000, and (iv) all
amendments and supplements to all such reports and registration statements
filed by CHE with the SEC since December 31, 2000 (collectively, the "CHE
SEC Reports"). CHE SEC Reports (i) were prepared in all material respects
in accordance with the requirements of the Securities Act or the Exchange
Act, as the case may be, and (ii) did not at the time they were filed (or
if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of CHE's
Subsidiaries is required to file any forms, reports or other documents with
the SEC or any national securities exchange or quotation service.
(b) Each of the consolidated financial statements (including, in each
case, any related notes and schedules thereto) contained in CHE SEC Reports
was prepared in accordance with U.S. generally accepted accounting
principles) ("GAAP") applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto and as permitted
by Form 10-Q in the case of interim unaudited financial statements), and
each fairly presents in all material respects the consolidated financial
position of CHE and its Subsidiaries as at the respective dates thereof and
the consolidated results of their operations and cash flows for the periods
indicated.
(c) Section 3.1.5(c) of the Seller's Disclosure Schedule contains the
unaudited consolidated balance sheet of CHE as of April 1, 2002 (the
"Latest Balance Sheet") and the related unaudited statement of operations,
and cash flows for the period then ended. The Latest Balance Sheet and the
related financial statements have been prepared from the books and records
of CHE in accordance with GAAP and fairly in all material respects present
the financial condition and results of operations of CHE and its
Subsidiaries as of the date and for the period indicated.
3.1.6 Absence Of Certain Changes Or Events. Except as set forth in CHE
SEC Reports, since December 31, 2001, CHE and its Subsidiaries have conducted
the Business in the ordinary course and there has not occurred: (i) any Material
Adverse Effect, (ii) any amendments or changes in the Restated Certificate of
Incorporation or Amended and Restated By-laws of CHE, and (iii) any sale of a
material amount of property of CHE or any of its Subsidiaries, except sales in
the ordinary course of business or that would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
13
3.1.7 No Undisclosed Liabilities. Neither CHE nor any of its
Subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
except liabilities (a) reflected in CHE's audited balance sheet as of December
31, 2001 or disclosed in the notes to CHE's consolidated financial statements
for the period then ended, (b) incurred in the ordinary course of business and
not required under GAAP to be reflected on CHE's audited balance sheet as of
December 31, 2001, (c) incurred since December 31, 2001 in the ordinary course
of business consistent with past practice, (d) incurred in connection with this
Agreement, (e) disclosed in CHE SEC Reports or (f) which would not reasonably be
expected to have, and will not have, individually or in the aggregate, a
Material Adverse Effect.
3.1.8 Absence of Litigation. Except as set forth on Section 3.1.8 of
Seller's Disclosure Schedule, there are no claims, actions, suits, proceedings
or investigations ("Proceedings") pending or, to the knowledge of CHE,
threatened against the Business or the Assets before any Governmental Authority
or body, domestic or foreign, nor are there, to CHE's knowledge, any
investigations or reviews by any Governmental Authority pending or threatened
against, relating to or affecting, the Business or the Assets that, if adversely
determined, would reasonably be expected to have, or does have, individually or
in the aggregate, a Material Adverse Effect. Neither CHE nor any of its
Subsidiaries is subject to any outstanding order, writ, injunction or decree of
any court or Governmental Authority which, individually or in the aggregate, has
resulted or could reasonably be expected to result in a Material Adverse Effect.
3.1.9 Proxy Statement. The proxy statement or similar materials
distributed to CHE's stockholders in connection with the transactions
contemplated hereby (the "Proxy Statement"), including any amendments or
supplements thereto, shall not, at the time filed with the SEC, at the time
mailed to CHE's stockholders or at the time of CHE Stockholders' Meeting (as
hereinafter defined), contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Proxy Statement will comply in all material respects
with the provisions of the Exchange Act. Notwithstanding the foregoing, CHE
makes no representation or warranty with respect to any information provided by
or required to be provided by Parent or Purchaser and/or by their auditors,
legal counsel, financial advisors or other consultants or advisors specifically
for use in the Proxy Statement.
3.1.10 Fairness Opinion of Financial Adviser. The Board has received
the fairness opinion of its financial advisor, U.S. Bancorp Xxxxx Xxxxxxx Inc.
("Xxxxx Xxxxxxx"), to the effect that, as of the date of this Agreement, the
Purchase Price is fair to CHE and Seller from a financial point of view, and CHE
will make available a copy of that opinion to Parent.
3.1.11 Brokers. No broker, finder or investment banker (other than
Xxxxx Xxxxxxx) is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of CHE. Attached as Section 3.1.11 of Seller's
Disclosure Schedule hereto is a complete and correct copy of the agreement
between CHE and Xxxxx Xxxxxxx pursuant to which such firm would be entitled to
any payment relating to the transactions contemplated hereunder.
3.1.12 Certain Restrictions Not Applicable. The Board has taken all
actions so that the restrictions contained in Article Eighth of the Restated
Certificate of Incorporation of
14
CHE and the restrictions contained in Section 203 of the DGCL applicable to a
"business combination" (as defined in such Section 203) will not apply to the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated by this Agreement.
3.1.13 Vote Required. The Required Company Vote is the only vote of
the holders of any class or series of CHE's capital stock necessary (under the
charter documents of CHE, the DGCL, other Applicable Law or otherwise) to
approve this Agreement and the transactions contemplated hereby.
3.1.14 Title to Properties. Seller and CHE, as applicable, have good
title to all of the Assets, free and clear of all material Liens except for (a)
taxes, assessments, governmental charges or levies which are not yet due and
payable, (b) the non-material claims of landlords, carriers, contractors,
materialmen, repairmen, mechanics and similar Persons, (c) any Liens or
imperfections of title which are matters of record, (d) any encroachments or
other facts or conditions that would be revealed by an accurate survey of any of
the Premises, (e) any applicable building and zoning ordinances, and (f) those
items set forth on Section 3.1.14 of Seller's Disclosure Schedule hereto and (g)
the Liens in favor of the Senior Lenders to secure the Senior Debt (any of the
items described in clauses (a) through (g) hereof being referred to herein as
"Permitted Liens").
3.1.15 Ownership of Tangible Assets. No Person other than Seller owns
any equipment or other material tangible assets or properties situated on any of
the Leased Property or used in the operation of the Business, except for items
disclosed on Section 3.1.15 of Seller's Disclosure Schedule and items leased
pursuant to the Assigned Contracts.
3.1.16 Contracts.
(a) Except as set forth on Section 3.1.16(a) of Seller's Disclosure
Schedule, CHE or Seller is not a party to or bound by any Contract that is
used or held for use in, or that arises out of, the operation or conduct of
the Business or the Assets which is not terminable without payment or
penalty upon no more than sixty (60) days notice and that is (each of the
Contracts listed below being a "Material Contract"):
(i) a written employment agreement that has an annual salary in
excess of $75,000, unless terminable at will by CHE or Seller without
payment or penalty;
(ii) a Contract with any labor organization, union or
association;
(iii) a Contract subjecting CHE or Seller to a covenant not to
compete;
(iv) a Contract with any stockholder, director, officer or
Affiliate of CHE or Seller not previously disclosed in a CHE SEC
Report;
(v) a lease or similar Contract with any third party under which
CHE or Seller is a lessor or sublessor of, or makes available for use
to any Person, any property or any portion of any of the Premises;
15
(vi) a Contract (excluding a purchase order), involving payment
by CHE or Seller of more than $25,000, other than sales orders entered
into in the ordinary course of business after the date of this
Agreement and not in violation of this Agreement;
(vii) a Contract (including a sales order) involving the
obligation of CHE or Seller to deliver products or services for
payment of more than $25,000;
(viii) a franchise, management, royalty license or joint venture
agreement;
(ix) an agreement, arrangement or understanding (written or oral)
with any other Person which CHE or the Seller (i) provides capital,
surplus, balance sheet or any other form of economic or financial
support to such other Person; or (ii) guaranties the obligations of,
or performance of any acts, by such other Person; or
(x) a Contract other than as set forth above to which CHE or
Seller is a party or by which it or any of the Assets are bound or
subject that is material to the continued operation of the Business as
presently conducted.
(b) Except as set forth in Section 3.1.16(b) of Seller's Disclosure
Schedule, all Material Contracts are to CHE and Seller's knowledge in full
force and effect, except to the extent the enforceability thereof may be
affected by applicable bankruptcy, reorganization, insolvency, moratorium
or other similar laws or general principles of equity. Except as set forth
on Section 3.1.16(b) of Seller's Disclosure Schedule, CHE or Seller is not
on notice that it is (with or without the lapse of time) in breach or
default in any material respect under any Material Contract and, to the
knowledge of CHE or Seller, no other party to any material Contract is
(with or without the lapse of time or the giving of notice, or both) in
breach or default in any material respect thereunder. CHE or Seller has
not, except as disclosed in the applicable Schedule, received any written
notice of the intention of any party to terminate any Material Contract.
Copies of all Material Contracts together with all modifications and
amendments thereto, have been made available to Parent.
3.1.17 Real Property.
(a) Leased Real Property. Except as set forth on Section 3.1.17 of
Seller's Disclosure Schedule, the only real property leased by Seller is
the Leased Property. Seller has previously delivered to Parent a true and
correct copy of each Lease. Each Lease is in full force and effect and has
not been assigned, modified, supplemented or amended excepted as listed on
Exhibit A-1 and neither Seller nor the lessor under any of the Leases has
given the other party written notice of any default under a Lease which
remains outstanding.
(b) Owned Real Property. No real property is owned by Seller or CHE
which relates to the Business or the Assets.
16
3.1.18 Intellectual Property.
(a) Section 3.1.18(a) of Seller's Disclosure Schedule sets forth a
list of all registered trademarks, tradenames, and internet domain names
owned or used by CHE or Seller in connection with the Assets or the
Business.
(b) CHE or Seller owns or is licensed or otherwise possesses legally
enforceable rights to use, any and all (i) trademarks and service marks
(registered or unregistered), trade dress, trade names and other names and
slogans embodying business goodwill or indications of origin, all
applications or registrations in any jurisdiction pertaining to the
foregoing and all goodwill associated therewith, (ii) patentable
inventions, technology, computer programs and software (including, to the
extent owned, password unprotected interpretive code or source code, object
code, development documentation, programming tools, drawings,
specifications and data) and all applications and patents in any
jurisdiction pertaining to the foregoing, including re-issues,
continuations, divisions, continuations-in-part, renewals or extensions,
(iii) trade secrets, including confidential and other non-public
information, (iv) copyrights in writings, designs, software programs, mask
works or other works, applications or registrations in any jurisdiction for
the foregoing and all rights related thereto, (v) databases and all
database rights, and (vi) Internet Web sites, domain names and applications
and registrations pertaining thereto that, in the case of each of clauses
(i) through (vi), are used in the business of CHE or Seller as currently
conducted (as described in clauses (i) through (vi) above, collectively,
"Intellectual Property"), except for any such failures to own, be licensed
or possess rights that would not be reasonably likely to have a Material
Adverse Effect.
(c) Except as set forth on Section 3.1.18(c) of Seller's Disclosure
Schedule, to CHE's or Seller's knowledge, (i) there are no conflicts with
or infringements of any material Intellectual Property by any third party
and (ii) the conduct of the businesses as currently conducted does not
conflict with or infringe upon any proprietary intellectual property right
of a third party, except for any such conflicts or infringements that is
not reasonably likely to have a Material Adverse Effect.
(d) Section 3.1.18(d) of Seller's Disclosure Schedule sets forth a
complete list of all written and, to its knowledge, oral licenses,
sublicenses and other agreements in which CHE or Seller has granted rights
to any Person to use the Intellectual Property. CHE or Seller will not, as
a result of the execution and delivery of this Agreement or the performance
of its obligations under this Agreement, be in breach of any license,
sublicense or other agreement relating to the Intellectual Property.
(e) CHE or Seller owns or has the right to use all computer software
currently used in the business, except for any failures to own or have the
right to use that would not be reasonably likely to have a Material Adverse
Effect.
3.1.19 Permits. Except as set forth on Section 3.1.19 of Seller's
Disclosure Schedule, to the knowledge of CHE or Seller, (a) CHE or Seller holds
and is in compliance with all material Permits required under Applicable Law for
the conduct of the Business except for
17
any failure to so hold or comply which would not, individually or in the
aggregate, have a Material Adverse Effect, (b) neither CHE nor Seller is in
material violation of any Permits, except in the case of violations which,
individually or in the aggregate, would not have a Material Adverse Effect, and
(c) during the past three years, CHE or Seller has not received notice of any
Proceedings relating to the revocation or modification of any such Permits the
revocation or modification of which would have a Material Adverse Effect. This
Schedule does not relate to Permits required by any Environmental Law, which are
the subject of Section 3.1.23.
3.1.20 Tax Matters. CHE and Seller have filed (after taking into
account any extensions to file) all United States federal income Tax Returns
required to be filed by them prior to the Closing Date and have filed (after
taking into account any extensions to file) all other federal, state, county,
local and foreign Tax Returns required to be filed by them prior to the Closing
Date, except to the extent that a failure to file such other federal state,
county, local and foreign Tax Returns would not have a Material Adverse Effect.
All such Tax Returns have accurately reflected the liability for Taxes of CHE
and Seller for the periods covered thereby, except to the extent that any
inaccuracies would not, individually or in the aggregate, have a Material
Adverse Effect. CHE and Seller have paid and discharged or caused to be paid and
discharged all Taxes reflected on such Tax Returns which have become due and
payable by them (except Taxes being contested in good faith and reserved
against) and have made adequate provision in reserves established in their
financial statements and accounts for all Taxes which have accrued or may accrue
but are not yet due and payable. All Taxes that CHE and Seller are or were
required to withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper Governmental Authority or other
Person, except for any failures to so withhold, collect or pay which,
individually or in the aggregate, would not have a Material Adverse Effect. As
of the date of this Agreement, to the knowledge of CHE or Seller, there are no
pending or threatened in writing audits, examinations, investigations or other
Proceedings with respect to Taxes relating to CHE or Seller. CHE and Seller have
not waived any statute of limitations affecting any Tax liability or agreed to
any extension of time during which a Tax assessment or deficiency assessment may
be made, which waiver or extension is still in effect. CHE or Seller is a not,
nor has been within the past five years, a party to any Tax allocation or
sharing agreement.
3.1.21 Benefit Plans.
(a) CHE has previously made available to Purchaser true and correct
copies of all Corporation Benefit Plans.
(b) (i) CHE and its Subsidiaries have substantially complied, and
currently comply, in all material respects with the applicable continuation
requirements for any Corporation Benefit Plan that is a "group health plan"
as that term is defined by Section 607(1) of ERISA, including Section 4980B
of the Code (as well as its predecessor provision, Section 162(k) of the
Code) and Sections 601 through 608, inclusive of ERISA; (ii) neither CHE
nor any of its Subsidiaries (including any entity that, either currently or
within the six (6) year period preceding the date of this Agreement, would
be treated as a "single employer" with CHE under Section 414(b), (c), (m),
or (o) of the Code) currently maintains or contributes to or at any time
within the six
18
(6) year period preceding the date of this Agreement was required to
maintain or contribute to or had any liability with respect to any
"multiemployer plan" as that term is defined in Section 4001 of ERISA
or an "employee benefit plan" (as defined in Section 3(3) of ERISA)
that is subject to Title IV of ERISA or Section 412 of the Code; (iii)
no Proceedings (other than routine benefit claims) are pending or, to
the knowledge of CHE, threatened against or relating to any
Corporation Benefit Plan, or any fiduciary thereof except as
individually or in the aggregate, would not result in any loss to CHE
or Parent or the imposition of any lien or encumbrance on the Assets;
and (iv) no written or oral representations have been made to any
employee or former employee of CHE or its Subsidiaries by CHE or any
Person concerning the employee benefits of Parent or Purchaser.
3.1.22 Compliance with Applicable Laws. CHE or Seller is in compliance
in all material respects with all Applicable Laws except for instances of
noncompliance that, individually or in the aggregate, would not have a Material
Adverse Effect. Except as set forth on Section 3.1.22 of Seller's Disclosure
Schedule, CHE or Seller has not received any written communication during the
past two years from a Governmental Authority that alleges that CHE or Seller is
not in compliance in any respect with any Applicable Laws except for instances
of noncompliance that, individually or in the aggregate, would not have a
Material Adverse Effect. This Section 3.1.22 does not relate to matters with
respect to Permits, which are the subject of Section 3.1.19, Taxes, which are
the subject of Section 3.1.20, or to environmental matters, which are the
subject of Section 3.1.23.
3.1.23 Compliance with Environmental Law. Except as set forth on
Section 3.1.23 of Seller's Disclosure Schedule (a) during the last three (3)
years CHE and Seller have not received any written notice from a Governmental
Authority or third party that alleges that CHE and Seller or any of the Leased
Properties are: not in compliance with any Environmental Law; are liable or
potentially liable for investigation or remediation of, or natural resource
damages associated with, a release or threatened release of a Hazardous
Substance; or are liable or potentially liable for damages to people or property
resulting from the presence or release of Hazardous Substances, (b) each of CHE
and Seller hold, have timely filed for any necessary renewals of, and are in
compliance with, all Permits required under Environmental Laws to conduct the
Business, and are in compliance with all Environmental Laws, except for any
failures to so hold or comply that would not, individually or in the aggregate,
have a Material Adverse Effect, (c) neither CHE nor Seller is subject to or
bound by any court decree or order or judgment relating to liabilities under or
compliance with any Environmental Law, (d) neither CHE nor Seller has generated,
treated, stored, released or disposed of, or otherwise placed, deposited in or
located on the Leased Property, any Hazardous Substances, except in material
compliance with all Environmental Laws and in a manner that would not create
liabilities under Environmental Laws, and (e) to the knowledge of CHE or Seller,
there are no above ground or underground tanks on the Leased Property.
3.1.24 Employee and Labor Matters. (a) Neither CHE or Seller nor any
Affiliate is a party to any collective bargaining agreement or similar
agreement; (b) there are no unfair labor practice Proceedings, complaints under
OSHA, or any other state or federal regulation governing employment practices
and work environment for employees pending against CHE or Seller or any
Affiliate, or to the best of their knowledge, threatened in writing
19
against any of them, before the National Labor Relations Board, OSHA, or other
Governmental Authority, and no grievance or arbitration proceeding arising out
of or under any collective bargaining agreement or otherwise is pending against
any of them, (c) no strike, labor dispute, slowdown or stoppage is pending
against CHE or Seller or any Affiliate and (d) there is no union representation
question existing with respect to the employees of CHE or Seller or any
Affiliate, except with respect to any matter specified above, which, in the case
of clause (b), (c) or (d) (individually or in the aggregate) is not reasonably
likely to have a Material Adverse Effect. To the knowledge of CHE or Seller,
except as disclosed in Section 3.1.24 of Seller's Disclosure Schedule, no
executive, regional manager or restaurant manager employed by CHE or Seller as
of the date hereof has given CHE or Seller written notice of any intent to
terminate his or her employment with CHE or Seller.
3.1.25 Transactions with Affiliates. Except for normal employment
arrangements consistent with past practices or except as disclosed on Section
3.1.25 of Seller's Disclosure Schedule or in the CHE SEC Reports, since January
1, 2000, neither CHE nor Seller has purchased, acquired or leased any property
or services from, or sold, transferred or leased any property or services to, or
loaned or advanced any money to, or borrowed any money from any officer,
director or stockholder of CHE or Seller or any of their respective Affiliates
in each case relating to the Assets or the Business.
3.1.26 VIP Diners Cards. Section 3.1.26 of Seller's Disclosure
Schedule sets forth a list of each Person entitled to eat without charge in any
of CHE or Seller's restaurants that are part of the Business.
3.1.27 Insurance. Section 3.1.27 of Seller's Disclosure Schedule
contains a complete list of all insurance policies currently in effect which are
presently owned or held by CHE or Seller, insuring the Assets or the Business of
CHE or Seller and all general liability policies maintained by CHE or Seller. As
of the date of this Agreement, all premiums due have been paid and no notice of
cancellation or termination or intent to cancel has been received by CHE or
Seller with respect to any such policy. To the knowledge of CHE or Seller, CHE
or Seller is not in default under any such insurance policies.
3.1.28 COBRA Continuation. Section 3.1.28 of Seller's Disclosure
Schedule contains a list of each former employee of CHE and Seller, and each
dependent who qualifies as a "qualified beneficiary" as defined in Code Section
4980B(g)(1), who is either actively receiving COBRA coverage (within the meaning
of Code Section 4980B) or is still eligible to elect to receive COBRA coverage
(as set forth in Code Section 4980B(f)(5)) as of the date of this Agreement.
Such Schedule will be updated as of the Closing Date.
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3.2 Representations and Warranties of Purchaser and Parent. Except as set
forth in the Disclosure Schedule to be delivered by Parent and Purchaser to
Seller and CHE on the date hereof, which sets forth certain disclosures
concerning Parent and Purchaser and its business (the "Purchaser's Disclosure
Schedule"), each section of which only qualifies the correspondingly numbered
representation or warranty in this Article III, Purchaser and Parent jointly and
severally represent and warrant to Seller and CHE as follows:
3.2.1 Organization and Qualification. Each of Parent and Purchaser is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, except where the failure to be so
organized, existing and in good standing would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. Each of
Parent and Purchaser has the requisite corporate power and authority and is in
possession of all approvals necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to have such power, authority and
approvals would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
3.2.2 Authority Relative to This Agreement. Each of Parent and
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by each of Parent and Purchaser, and the consummation by each of Parent and
Purchaser of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action on the part of Parent and
Purchaser, and no other corporate proceedings on the part of Parent or Purchaser
are necessary to authorize this Agreement, the Financing Documents or to
consummate the transactions contemplated hereby or thereby. This Agreement has
been duly and validly executed and delivered by each of Parent and Purchaser
and, assuming the due authorization, execution and delivery by CHE and Seller,
constitutes a legal, valid and binding obligation of Parent and Purchaser
enforceable against each of them in accordance with its terms.
3.2.3 No Conflict, Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement by Parent and
Purchaser will not, (i) conflict with or violate the Certificate of
Incorporation (or equivalent organizational documents) or By-Laws of Parent
or Purchaser, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Parent or any of its Subsidiaries
or by which its or their respective properties are bound or affected, or
(iii) result in any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or
modification in a manner materially adverse to Parent or its Subsidiaries
of any right or benefit under, or impair Parent's or any of its
Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment,
acceleration, repayment or repurchase, increased payments or cancellation
under, or result in the creation of a Lien on any of the properties or
assets of Parent or any of its Subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which Parent or any of its
Subsidiaries or its or any of their respective
21
properties are bound or affected, except in the case of (ii) or (iii) only,
for any such conflicts, violations, breaches, defaults or other occurrences
that would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent or its Subsidiaries.
(b) The execution and delivery of this Agreement by each of Parent and
Purchaser does not, and the performance of this Agreement by each of Parent
and Purchaser will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority,
except for (i) applicable requirements, if any, of the Securities Act, the
Exchange Act, the Blue Sky Laws, and filings under the HSR Act, to the
extent applicable, and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not (a) prevent or materially delay consummation of
the transactions contemplated hereby, (b) otherwise prevent or materially
delay Parent or Purchaser from performing their respective obligations
under this Agreement or (c) would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
3.2.4 Proxy Statement. None of the information provided by Parent or
Purchaser and/or by their auditors, legal counsel, financial advisors or other
consultants or advisors specifically for use in the Proxy Statement shall, at
the time filed with the SEC, at the time mailed to CHE's stockholders or at the
time of CHE Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. If at any time prior to CHE
Stockholders' Meeting, or the Closing, any event relating to Parent or any of
its Affiliates, officers or directors should be discovered by Parent that should
be set forth in a supplement to the Proxy Statement, Parent shall promptly
inform CHE.
3.2.5 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Purchaser.
3.2.6 Financing. Parent will have at the Closing, sufficient liquid
assets on hand to pay the Purchase Price and otherwise consummate the
transactions contemplated by this Agreement.
3.2.7 SEC Filings. All forms, reports and documents required to be
filed by Parent with the SEC since December 31, 2000 have been filed with the
SEC and are true and correct in all material respects.
3.2.8 No Business Activities. Purchaser is not a party to any material
agreements and has not conducted any activities other than in connection with
the organization of Purchaser, the negotiation and execution of this Agreement
and the consummation of the transactions contemplated hereby.
3.3 Survival of Representations, Warranties and Agreements. The
representations, warranties, covenants and other agreements made by the Parties
in this Agreement or in any
22
certificate, schedule, statement, document or instrument required to be
furnished hereunder or in connection herewith shall survive for the period set
forth in Section 6.7.
ARTICLE IV
AGREEMENTS PENDING CLOSING
4.1 Agreements of Seller and CHE Pending the Closing. Seller and CHE
jointly and severally covenant and agree that, pending the Closing and except as
otherwise agreed to in writing by Purchaser (such agreement not to be
unreasonably withheld or delayed):
4.1.1 Business in the Ordinary Course.
(a) The Business shall be conducted solely in the ordinary course
consistent with past practice or as required by this Agreement.
(b) Without limiting the generality of the foregoing paragraph (a),
CHE or Seller will not insofar as it relates to the Business or the Assets:
(i) make any capital expenditures or incur any expenses,
including maintenance, repairs, replacements except in the ordinary
course of business;
(ii) voluntarily incur any material liability or obligation,
sell, transfer, mortgage, pledge or otherwise dispose of, or encumber,
or agree to sell, transfer, mortgage, pledge or otherwise dispose of
or encumber, any assets or properties (real, personal or mixed)
material to CHE or Seller in any case other than in the ordinary
course of business consistent with past practice; provided, however,
that, Seller or CHE may sell, assign or otherwise transfer any of the
Excluded Assets and Excluded Liabilities or any of the assets listed
on Schedule 4.1.1;
(iii) increase in any manner the wages, salaries, bonus,
compensation or other benefits of any of its officers or employees or
enter into, establish, amend or terminate any employment, consulting,
retention, change in control, collective bargaining, bonus or other
incentive compensation, profit sharing, health or other welfare, stock
option or other equity, pension, retirement, vacation, severance,
termination, deferred compensation or other compensation or benefit
plan, policy, agreement, trust, fund or arrangement with, for or in
respect of, any stockholder, officer, director, other employee, agent,
consultant or affiliate other than as required pursuant to the terms
of agreements in effect on the date of this Agreement, provided,
however, salary increases may be given to hourly employees in the
ordinary course of business and consistent with past practices if
prior written approval of Parent has been obtained in accordance with
the procedures set forth on Schedule 4.1.1(b)(iii);
(iv) commit or omit to do any act which act or omission would
cause a breach of any covenant contained in this Agreement or would
cause any representation or warranty contained in this Agreement to
become untrue, as if
23
each such representation and warranty were continuously made from and after the
date hereof;
(v) fail to maintain its books, accounts and records in the usual
manner on a basis consistent with that heretofore employed;
(vi) materially increase or decrease the average restaurant,
corporate or warehouse facility inventory or house bank accounts in
any restaurant;
(vii) enter into, terminate or amend any Lease, contract or
agreement pursuant to which CHE or Seller is obligated to pay or incur
obligations of more than $2,500, except that CHE or Seller may: (a)
terminate any Lease, contract or agreement set forth in Schedule
4.1.1(b)(vii)(A), or (b) enter into, terminate or amend any contract
or agreement (i) for the purchase of Inventory or for any catered
event, in each case, in the ordinary course of business consistent
with past practice, or (ii) other than pursuant to clause (i) hereof,
in accordance with the requirements set forth on Schedule
4.1.1(b)(vii)(B);
(viii) to its knowledge, allow any employee or other Person to
remove, any Asset, including without limitation, any Asset consisting
of artwork, brochures, signage, testimonials, advertising, display,
proprietary asset, retail item or other property from the corporate
office, warehouses, restaurants of CHE or Seller or any other CHE or
Seller facilities other than in connection with the performance of
employment responsibilities in the ordinary course, consistent with
past practices;
(ix) discharge any obligations (including accounts payable) other
than on a timely basis in the ordinary course of business consistent
with past practice, or delay the making of any material capital
expenditures from CHE or Seller's current capital expenditure
schedule, which have been disclosed to, and approved by, Parent or
delay or defer the payment of any accounts payable beyond the date
such payable is due without penalty;
(x) (a) issue any coupons or complimentary rights for dining or
(b) sell any coupons or gift certificates for retail, other than, in
the case of (b), such amounts as are in the ordinary course of
business consistent with past practice and provided, further, in the
case of (a) in accordance with the procedures set forth on Schedule
4.1.1(b)(x);
(xi) sell, give away or otherwise dispose of any Inventory, other
than in the ordinary course of business consistent with past practice;
or
(xii) authorize any of, or agree to commit to do any of, the
foregoing actions.
(xiii) cease to provide coverage under any group health plan (as
defined in Section 5000b of the Code, Section 607 of ERISA, or both)
which provides welfare benefits to any current or former employee of
Seller or any of Seller's
24
Subsidiaries, in connection with the sale (as such phrase is described
in Section 54.4980B-9, Q&A-8 of the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as those
regulations may be amended from time to time (including corresponding
provisions of succeeding regulations), whether or not such regulations
apply to this Agreement) of the Assets, and the Business as described
in this Agreement.
(c) CHE or Seller shall use commercially reasonable efforts to comply
in all material respects with all Laws applicable to it or any of its
properties, assets or business and maintain in full force and effect all
the Permits necessary for, or otherwise material to, such business, in each
case, where the failure to do so is reasonably likely to have a Material
Adverse Effect.
(d) CHE or Seller shall administer each Corporation Benefit Plan, or
cause the same to be so administered, in all material respects in
accordance with the applicable provisions of the Code, ERISA and all other
Applicable Laws. CHE or Seller will promptly notify Parent in writing of
any receipt by CHE or Seller (and furnish Parent with copies) of any notice
of Proceeding threatened or initiated by any Person involving any
Corporation Benefit Plan to the extent such Proceeding would result in the
imposition of any Lien on the Assets.
4.1.2 Existing Condition. Neither CHE nor Seller shall cause or permit
to occur any of the events or occurrences described in Section 3.1.6 hereof;
provided, however, that, Seller or CHE may sell, assign or otherwise transfer
any of the Excluded Assets and Excluded Liabilities or any of the assets listed
on Schedule 4.1.1.
4.1.3 Update Schedules. Seller shall promptly disclose to Purchaser
any information contained in its representations and warranties herein or the
Schedules hereto which, because of an event occurring after the date hereof, is
incomplete or is no longer correct as of all times after the date hereof until
the Closing Date; provided, however, that none of such disclosures shall be
deemed to modify, amend or supplement the representations and warranties of
Seller herein or the Schedules hereto for the purposes of Article V hereof,
unless Purchaser shall have expressly consented to such modification in writing.
4.1.4 Proxy Statement. As promptly as is reasonably practicable, CHE
will prepare and file a preliminary Proxy Statement with the SEC. CHE will use
its best efforts to file such preliminary Proxy Statement by May 24, 2002. CHE
will use its reasonable best efforts to respond to the comments of the SEC, if
any, in connection therewith and to furnish all information regarding CHE
required in the definitive Proxy Statement (including, without limitation,
financial statements and supporting schedules and certificates and reports of
independent public accountants). Such Proxy Statement shall also seek approval
of CHE's and Seller's change of name immediately at the Closing Date. As
promptly as is reasonably practicable, after receiving approval from the SEC to
mail (or being informed that the SEC will not review the Proxy Statement), CHE
will cause the definitive Proxy Statement to be mailed to the stockholders of
CHE. CHE shall use its best efforts to cause such mailing within two (2)
Business Days after receiving such approval or information. If necessary, after
the definitive Proxy Statement shall have been so mailed, CHE shall promptly
circulate amended,
25
supplemental or supplemented proxy material and, if required in connection
therewith, re-solicit proxies. CHE's obligations under this Section 4.1.4 are
subject to its right to withdraw or modify its approval or recommendation of the
sale in accordance with Section 6.2.
4.1.5 Stockholder Approval. CHE, acting through its Board, shall, in
accordance with Applicable Law, duly call, give notice of, convene and hold a
meeting of the holders of Shares (the "CHE Stockholders' Meeting") for the
purpose of voting upon this Agreement and the transactions contemplated hereby.
CHE will hold such meeting in accordance with the minimum time required under
Delaware law and CHE's Amended and Restated By-Laws. CHE agrees that this
Agreement shall be submitted at such meeting. CHE shall use its reasonable best
efforts to solicit from its stockholders proxies, and shall take all other
action necessary and advisable, to obtain the approval of stockholders required
by Applicable Law and the Restated Certificate of Incorporation or Amended and
Restated By-Laws of CHE for this Agreement and the transactions contemplated
hereby. CHE agrees that it will include in the Proxy Statement the
recommendation of its Board that holders of its Common Stock and Preferred Stock
approve and adopt this Agreement and approve the transactions contemplated
hereby. CHE's obligations under this Section 4.1.5 are subject to its right to
withdraw or modify its approval or recommendation of the sale in accordance with
Section 6.2.
4.1.6 Commercially Reasonable Efforts. CHE and Seller shall promptly
make all filings and seek to obtain all authorizations (including, without
limitation, all filings required under the HSR Act) required under all
Applicable Laws with respect to this Agreement and the transactions contemplated
hereby and will reasonably consult and cooperate with each other with respect
thereto. CHE and Seller will use their best efforts to make such filings by May
24, 2002. CHE and Seller shall not take any action (including effecting or
agreeing to effect or announcing an intention or proposal to effect, any
acquisition, business combination or other transaction) which would impair the
ability of the Parties to consummate the transactions contemplated hereby; and
(iii) use their commercially reasonable efforts to promptly (x) take, or cause
to be taken, all other actions and (y) do, or cause to be done, all other things
reasonably necessary, proper or appropriate to satisfy the conditions set forth
in Article V (unless waived) and to consummate and make effective the
transactions contemplated by this Agreement on the terms and conditions set
forth herein (including seeking to remove promptly any injunction or other legal
barrier that may prevent such consummation). CHE's and Seller's obligations
under this Section 4.1.6 are subject to CHE's right to withdraw or modify its
approval or recommendation of the sale in accordance with Section 6.2. Seller
shall promptly notify Purchaser of any communication to that party from any
Governmental Authority in connection with any required filing with, or approval
or review by, such Governmental Authority in connection with this Agreement and
the transactions contemplated hereby and permit Purchaser to review in advance
any proposed communication to any Governmental Authority in such connection to
the extent permitted by Applicable Law.
4.1.7 Access to Information and Personnel. CHE shall (and shall cause
each of its subsidiaries to) afford to officers, employees, counsel, accountants
and other authorized representatives of Parent ("Parent Representatives")
reasonable access, during normal business hours throughout the period prior to
the Closing Date, to its properties, books and records, such access not to
unreasonably interfere with CHE's business or operations, and, during such
period, shall (and shall cause each of its subsidiaries to) furnish promptly to
such Parent Representatives
26
all information concerning its business, properties and personnel as may
reasonably be requested; provided, however, that access to any of Seller's
restaurants and discussions with any landlord under any Lease or any of Seller's
lenders shall be scheduled in advance with, and subject to the prior approval,
not to be unreasonably withheld, of the Chief Executive Officer or President of
CHE, and CHE shall have an opportunity to participate in such discussions.
Parent shall have the right to meet with, interview, discuss and plan with
Seller's Senior Vice President of Operations, regional managers, corporate chef
and such others in the operational, marketing, purchasing, accounting or
financial groups as Parent may reasonably desire, provided, however, that any
such meetings, interviews or discussions shall be scheduled in advance with, and
subject to the prior approval not to be unreasonably withheld, of the Chief
Executive Officer or President of CHE, and any out-of-pocket travel or other
travel related expenses related to such meetings, interviews or discussions
shall be paid by Parent. Parent acknowledges CHE's interest that the Parent
Representatives' investigations be as discreet as possible and not unduly
disrupt the operations of CHE, and Parent will work diligently to complete the
Parent Representatives' investigations in a timely manner so long as CHE
cooperates in making the records and personnel available to Parent in a timely
fashion. Nothing contained in this Agreement shall give Parent or Purchaser,
directly or indirectly, the right to control or direct CHE's operations prior to
the Closing.
4.1.8 Maintenance of Insurance; Damages.
Seller agrees to maintain Seller's current fire and casualty insurance on
any of the Leased Premises until Closing. If before Closing, all or any part of
any of the Leased Premises is damaged by fire or other casualty in an amount in
excess of $2,500, then Seller shall notify Purchaser of such fact and, at the
Closing, Seller shall assign, transfer and set over to Purchaser any insurance
claims and proceeds that may have been or may thereafter be made for such
damage. At Purchaser's request, Seller shall make any insurance claim relating
to the damaged Leased Premises, and the Parties shall mutually agree upon a
course of action to commence repairing or rebuilding the damaged Leased
Premises.
4.1.9 Notice of Offers.
Seller agrees to promptly notify Purchaser of any third-party inquiry
concerning the purchase of any of the material part of the Assets (including any
restaurant) being sold pursuant to this Agreement.
4.2 Agreements of Purchaser and Parent Pending the Closing. Purchaser and
Parent jointly and severally covenant and agree that, pending the Closing and
except as otherwise agreed to in writing by Seller (such agreement not to be
unreasonably withheld or delayed):
4.2.1 Commercially Reasonable Efforts. Parent and Purchaser shall, and
shall use their commercially reasonable efforts to cause their respective
subsidiaries, to: (i) promptly, but no later than five (5) days after execution
of this Agreement, make all filings and seek to obtain all authorizations
(including, without limitation, all filings required under the HSR Act) required
under all Applicable Laws with respect to this Agreement and the transactions
contemplated hereby and will reasonably consult and cooperate with each other
with respect thereto; (ii) not take any action (including effecting or agreeing
to effect or announcing an
27
intention or proposal to effect, any acquisition, business combination or other
transaction) which would impair the ability of the Parties to consummate the
transactions contemplated hereby; and (iii) promptly (x) take, or cause to be
taken, all other actions and (y) do, or cause to be done, all other things
reasonably necessary, proper or appropriate to satisfy the conditions set forth
in Article V (unless waived) and to consummate and make effective the
transactions contemplated by this Agreement on the terms and conditions set
forth herein (including seeking to remove promptly any injunction or other legal
barrier that may prevent such consummation). Purchaser shall promptly notify
Seller of any communication to Purchaser from any Governmental Authority in
connection with any required filing with, or approval or review by, such
Governmental Authority in connection with this Agreement and the transactions
contemplated hereby and permit Seller to review in advance any proposed
communication to any Governmental Authority in such connection to the extent
permitted by Applicable Law.
4.2.2 Proxy Statement. Parent and Purchaser will cooperate with CHE in
the preparation of the Proxy Statement. Without limiting the generality of the
foregoing, each of Parent and Purchaser will furnish to CHE the information
relating to it required by the Exchange Act to be set forth in the Proxy
Statement.
4.3 Confidentiality. Each Party acknowledges that such Party has had, and
may from time to time have, access to confidential records, data, customers
lists, trade secrets and other confidential information owned or used by each
other Party or any Subsidiary thereof (each, an "Interested Party") in the
course of its business (the "Confidential Information"). Accordingly, each Party
agrees (a) to hold all Confidential Information in strict confidence, (b) not to
disclose Confidential Information of any Interested Party to any Person (except
to such Interested Party or any Affiliate, employee, agent or representative
thereof), and (c) not to use, directly or indirectly, any of such Confidential
Information of any Interested Party for any competitive or commercial purpose;
provided, however, that each Party may disclose Confidential Information to its
Affiliates', officers, directors, employees, agents and attorneys if such
Persons agree to comply with this Section 4.3; and provided, further, that,
notwithstanding anything to the contrary contained herein, no Party shall be
subject to any of the limitations set forth above with respect to any
Confidential Information which (i) is now, or hereafter becomes, through no act
or failure to act on the part of such Party that constitutes a breach of this
Section 4.3, generally known or available to the public, (ii) is hereafter
furnished to such Party by a third party, who, to the knowledge of such
receiving Party, is not under any obligation of confidentiality to the related
Interested Party, (iii) is disclosed with the written approval of the related
Interested Party, (iv) is required to be disclosed by law (including securities
law), court order or similar compulsion, (v) is required or is reasonably
necessary to be provided pursuant to or in connection with any Proceeding
involving the Parties hereto, or (vi) is independently developed by employees or
agents of such Party and/or its, his or her Affiliates which or who have had no
access to the relevant portions of the Confidential Information.
ARTICLE V
CONDITIONS PRECEDENT TO THE CLOSING
5.1 Conditions Precedent to Purchaser's and Parent's Obligations. The
obligations on the part of the Purchaser and Parent to consummate the
transactions to be consummated by each
28
of them at the Closing pursuant to this Agreement are subject to the
satisfaction at or prior to the Closing of each of the conditions set forth in
this Section 5.1, any of which may be waived by Purchaser and Parent in their
sole discretion.
5.1.1 Representations and Warranties True as of the Closing Date. The
representations and warranties of Seller and CHE contained in this Agreement or
in any list, certificate or document delivered by Seller or CHE to Purchaser
pursuant to the provisions hereof shall be true in all material respects on the
Closing Date with the same effect as though such representations and warranties
were made as of such date; provided, however, that any representation or
warranty which is qualified by materiality shall, with regard to the portion so
qualified, be true and correct in all respects.
5.1.2 Compliance with this Agreement. Seller and CHE shall have
performed and complied with, in all material respects, all agreements and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing, including, without limitation, delivery to Purchaser
of all of the items to be delivered by Seller pursuant to Section 2.2(a) of this
Agreement.
5.1.3 No Injunctions or Restraints. On the Closing Date, no
injunction, restraining order or other order or legal restraint or prohibition
issued by any Governmental Authority shall be in effect which would prevent the
consummation of the transactions contemplated by this Agreement or materially
interfere with the Purchaser's ability to own the Assets and operate the
Business.
5.1.4 Consents and Approvals.
(a) Purchaser and Parent shall have received all Required Consents and
any waiting period (and any extension thereof) under the HSR Act applicable
to the transactions contemplated hereby shall have expired or been
terminated.
(b) Parent shall have received the Landlord's Consents.
5.1.5 Material Adverse Change. There shall have been no change in
respect of the Business or the Assets resulting in a Material Adverse Effect (or
changes which in the aggregate result in a Material Adverse Effect) since the
date hereof.
5.1.6 Non-Solicitation Agreements. Each Person listed on Schedule
5.1.6 shall have entered into non-solicitation agreements in the form of
Exhibits I-1 and I-2 hereto (the "Non-Solicitation Agreement").
5.1.7 Gift Certificates and Other Perquisites. CHE or Seller shall
have returned to it all gift certificates and all VIP Diners Cards, held by any
officer or director or any of their affiliates and any other card or similar
device permitting any officer or director to dine at a discount at any of CHE's
or Seller's restaurants constituting the Business.
5.1.8 Certificates of Tax Authorities. Certificates dated as of a date
not earlier than the fifth business day prior to the Closing Date as to the good
standing and dated at the latest practicable date as to the payment of all
applicable sales taxes by Seller, executed by the
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appropriate official of the state of its incorporation and each jurisdiction in
which Seller is licensed or qualified to do business as a foreign corporation;
provided, however, that Seller's failure to deliver any such sales tax
certificates from jurisdictions where the effect of such failure would not
reasonably be expected to have a Material Adverse Effect shall not be a
condition to Closing;
5.1.9 Closing Deliveries: CHE or Seller, as the case may be, shall
have delivered to Parent:
(a) a payoff letter or other documentation from each of the Senior
Lenders and the Sub Lender in form and substance reasonably satisfactory to
Parent evidencing the liabilities related to or arising under the Senior
Debt or Sub Debt, as applicable, outstanding on the Closing Date and
confirming that, following payment in full of such liabilities, such
parties shall return to the Surviving Corporation any and all possessory
collateral ("Possessory Collateral") held by or on behalf of either of them
and provide to Parent recordable form Lien releases, UCC termination
statements, canceled notes, releases and re-assignments of trademark and
patent assignments and other documents (collectively, the "Release
Documents") reasonably requested by Parent simultaneously with or promptly
following the Closing.
5.1.10 Deposit Letters. Purchaser shall have presented written
assurances from any Person refunding all or any portion of a deposit to Seller,
that no additional deposit will be required from Purchaser after Closing.
5.2 Conditions Precedent to the Obligations of Seller and CHE. The
obligations on the part of the Seller and CHE to consummate the transactions to
be consummated by each of them at the Closing pursuant to this Agreement are
subject to the satisfaction at or prior to the Closing of each of the conditions
set forth in this Section 5.2, any of which may be waived by the Seller and CHE
in their sole discretion.
5.2.1 Representations and Warranties True as of the Closing Date. The
representations and warranties of Purchaser and Parent contained in this
Agreement or in any list, certificate or document delivered by Purchaser or
Parent to Seller or CHE pursuant to the provisions hereof shall be true in all
material respects on the Closing Date with the same effect as though such
representations and warranties were made as of such date; provided, however,
that any representation or warranty which is qualified by materiality shall,
with regard to the portion so qualified, be true and correct in all respects.
5.2.2 Compliance with this Agreement. Purchaser and Parent shall have
performed and complied with, in all material respects, all agreements and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing including, without limitation, delivery to Seller of
all of the items to be delivered by Purchaser pursuant to Section 2.2(b) of this
Agreement.
5.2.3 No Injunctions or Restraints. On the Closing Date, no
injunction, restraining order or other order or legal restraint or prohibition
issued by any Governmental
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Authority shall be in effect which would prevent the consummation of the
transactions contemplated by this Agreement.
5.2.4 Consents and Approvals.
(a) Seller and CHE shall have received all Required Consents and
Landlord's Consents provided that the failure to receive any such Required
Consent or Landlord's Consent shall not constitute a failure to satisfy a
condition precedent to Seller's and CHE's obligations to consummate the
transactions to be consummated by each of them at the Closing, provided
that Purchaser and Parent shall have indemnified and held harmless Seller
and CHE with respect to the failure to receive such Required Consents and
Landlord's Consents on terms reasonably satisfactory to Seller and CHE.
(b) Any waiting period (and any extension thereof) under the HSR Act
applicable to the transactions contemplated hereby shall have expired or
been terminated.
5.2.5 Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved by the Required Company Vote.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by Seller and CHE. Except as otherwise limited by this
Article VI, Seller and CHE, jointly and severally, shall indemnify and hold
harmless Parent, Purchaser and their respective officers, directors, successors
and permitted assigns from any and all liabilities, losses, damages, claims,
costs and expenses, interest, awards, judgments and penalties (including,
without limitation, reasonable legal costs and expenses) suffered or incurred by
any of them (hereinafter "Purchaser Losses"), arising out of or resulting from:
(a) the breach of any representation, warranty, covenant or agreement
by Seller or CHE contained herein or in any exhibit, schedule or
certificate delivered under this Agreement; or
(b) the failure of Seller to pay or otherwise discharge the Excluded
Liabilities.
6.2 Indemnification by Purchaser and Parent. Except as otherwise limited by
this Article VI, Purchaser and Parent, jointly and severally, shall indemnify
and hold harmless Seller, CHE and their respective officers, directors,
successors and permitted assigns from any and all liabilities, losses, damages,
claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, reasonable legal costs and expenses) suffered or
incurred by any of them (hereinafter "Seller Losses") arising out of or
resulting from:
(a) the breach of any representation, warranty, covenant or agreement
by Purchaser or Parent contained herein or in any exhibit, schedule or
certificate delivered under this Agreement; or
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(b) the failure of Purchaser to pay, perform or otherwise discharge
the Assumed Liabilities.
6.3 Indemnification Procedures.
(a) For the purposes of this Section 6.3, the term "Indemnitee" shall
refer to the Person indemnified, or entitled, or claiming to be entitled,
to be indemnified, pursuant to the provisions of Section 6.1 or 6.2, as the
case may be; the term "Indemnitor" shall refer to the Person having the
obligation to indemnify pursuant to such provisions; and "Losses" shall
refer to the "Seller Losses" or the "Purchaser Losses," as the case may be.
(b) An Indemnitee shall give written notice (a "Notice of Claim") to
the Indemnitor within 30 days (or, to the extent possible, within such
shorter period as may be necessary to give the Indemnitor a reasonable
opportunity to respond to such claim) after the Indemnitee has knowledge of
any claim (including a Third Party Claim in which case such Notice of Claim
shall set forth the name of the party making such Third Party Claim, to the
extent known) which an Indemnitee has determined has given or could give
rise to a right of indemnification under this Agreement. No failure to give
such Notice of Claim shall affect the indemnification obligations of the
Indemnitor hereunder, except to the extent such failure shall have
prejudiced such Indemnitor's ability to successfully defend the matter
giving rise to the claim. The Notice of Claim shall state the nature of the
claim and the amount of the Loss, if known, and the Indemnitor shall have a
period of 30 days to reply to such Notice of Claim.
(c) The obligations and liabilities of an Indemnitor under this
Article VI with respect to Losses arising from claims of any third party
that are subject to the indemnification provisions provided for in this
Article VI ("Third Party Claims") shall be governed by the following
additional terms and conditions: The Indemnitee at the time it gives a
Notice of Claim to the Indemnitor of the Third Party Claim shall advise the
Indemnitor that the Indemnitor shall be permitted, at the Indemnitor's
option, to assume and control the defense of such Third Party Claim at the
Indemnitor's expense and through counsel of the Indemnitor's choice
reasonably acceptable to Indemnitee if the Indemnitor gives notice within
the 30 day period specified above of the Indemnitor's intention to do so.
In the event the Indemnitor exercises the Indemnitor's right to undertake
the defense against any such Third Party Claim as provided above, the
Indemnitee shall cooperate with the Indemnitor in such defense and make
available to the Indemnitor all witnesses, pertinent records, materials and
information in the Indemnitee's possession or under the Indemnitee's
control relating thereto as is reasonably required by the Indemnitor, and
the Indemnitee may participate by the Indemnitee's own counsel and at the
Indemnitee's own expense in defense of such Third Party Claim. Except for
the settlement of a Third Party Claim which involves the payment of money
only which is to be paid in full by the Indemnitor, no Third Party Claim
for which the Indemnitor has elected to defend may be settled by the
Indemnitor without the prior written consent of the Indemnitee, which
consent shall not be unreasonably withheld or delayed. If the Indemnitee
does not receive written notice within said period that the Indemnitor has
elected to assume the defense of such Third Party Claim, the Indemnitee may
elect to assume such defense, assisted by counsel of the Indemnitee's own
choosing. Whether or
32
not Indemnitee elects to assume the defense of such Third Party Claim, the
Indemnitor shall not be relieved of the Indemnitor's obligations hereunder.
The Indemnitee will give the Indemnitor at least 10 days notice of any
proposed settlement or compromise of any Third Party Claim it has elected
to defend, during which time the Indemnitor may assume the defense of, and
responsibility for, such Third Party Claim and if it does so the proposed
settlement or compromise may not be made. In the event the Indemnitee is,
directly or indirectly, conducting the defense against any such Third Party
Claim, the Indemnitor shall cooperate with the Indemnitee in such defense
and make available to the Indemnitee all such witnesses, records, materials
and information in the Indemnitor's possession or under the Indemnitor's
control relating thereto as is reasonably required by the Indemnitee and
the Indemnitor may participate by the Indemnitor's own counsel and at the
Indemnitor's own expense in the defense of such Third Party Claim.
(d) Any claim by an Indemnitee with respect to Losses which do not
result from a Third Party Claim will be asserted in the same manner as
specified in Section 6.3(c) above. If the Indemnitor does not respond to
such claim within the 30 day period specified in Section 6.3(c), the
Indemnitor will be deemed to have rejected such claim, in which event the
Indemnitee will be free to pursue such remedies as may be available to the
Indemnitee under this Agreement.
6.4 Reduction of Losses. To the extent any Losses of an Indemnitee are
reduced by receipt of payment (a) under insurance policies which are not subject
to retroactive adjustment or other reimbursement to the insurer in respect of
such payment or (b) from third parties not affiliated with the Indemnitee, such
payments (net of the expenses of the recovery thereof) shall be credited against
such Losses and, if indemnification payments shall have been received prior to
the collection of such proceeds, the Indemnitee shall remit to the Indemnitor
the amount of such proceeds (net of the cost of collection thereof) to the
extent of indemnification payments received in respect of such Losses. All
Losses shall be calculated net of any tax benefits or tax detriments actually
received or suffered relating to such Losses.
6.5 Subrogation. The Indemnitor shall be subrogated to the Indemnitee's
rights of recovery to the extent of any Losses satisfied by the Indemnitor. The
Indemnitee shall permit the Indemnitor to use the name of the Indemnitee and the
names of the Indemnitee's affiliates in any transaction or proceeding to enforce
such rights and shall use reasonable efforts to execute and deliver such
instruments and papers as are necessary to assign such rights and assist in the
exercise thereof, including access to books and records with respect to such
Losses.
6.6 Exclusive Remedy. From and after the Closing, none of the Parties
hereto shall be liable or responsible in any manner whatsoever to any other
Party, whether for indemnification or otherwise, except for indemnity as
expressly provided in this Article VI, which provides the exclusive remedy and
cause of action of the Parties hereto with respect to any matter arising out of
or in connection with this Agreement or any Schedule or Exhibit hereto or any
opinion or certificate delivered in connection herewith. Each of the Parties
hereby waives, releases and agrees not to make any claim or bring any
contribution, cost recovery or other action against the other Parties or any of
their respective successors or assigns or any controlling Person or other
affiliate of the other Parties, under common law or any Federal, state or local
law
33
or regulation now existing or hereafter enacted which seeks to allocate
liabilities between Purchaser and Seller in a different manner than as expressly
set forth in this Agreement.
6.7 Limitation and Expiration.
(a) The Indemnitor shall be liable for all Losses arising out of any
breaches of the covenants, agreements, representations and warranties set
forth in this Agreement, unless any such covenant, agreement,
representation or warranty shall have been specifically waived in writing
by the Indemnitee.
(b) The aggregate amount of the Losses for which Seller or CHE, on the
one hand, or Parent or Purchaser on the other, may be responsible under
this Article VI shall not exceed an amount equal to the Purchase Price,
except for Losses arising out of fraud, which may be unlimited.
(c) The indemnification obligations under this Article VI or under any
certificate or writing furnished in connection herewith, shall terminate at
the date that is the later of clause (i), (ii) or (iii) of this Section
6.7, as applicable:
(i) except for the representations and warranties set forth in
Sections 3.1.4, 3.1.5, 3.1.14, 3.1.15, 3.1.17, 3.1.18, 3.1.19, 3.1.20,
3.1.23, 3.1.24, 3.1.27 and 3.1.28, all representations and warranties
set forth in this Agreement shall not survive the Closing.
(ii) (A) with respect to claims relating to or arising out of any
Taxes, the date that is six (6) months after the expiration of the
longest applicable federal or state statute of limitations (including
any extension thereof) or if there is no applicable statute of
limitations, ten (10) years after the Closing Date; or
(B) with respect to all claims other than those referred to
in clauses (i) or (ii)(A) of this Section 6.7(c), twelve (12)
months after the Closing Date; or
(iii) the final resolution of claims or demands pending as of the
relevant dates described in subparagraph (ii) of this Section 6.7.
6.8 No Consequential Damages. The obligations of any Indemnitor in respect
of a claim for indemnification under this Article VI shall not include any
special, exemplary or consequential damages, including business interruption or
lost profits, or any punitive damages made by any Indemnitee.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Employee Matters.
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(a) Purchaser shall, on or prior to the Closing Date, offer employment
in connection with the conduct of the Business effective after the Closing
Date to all employees of Seller (excluding, except as otherwise required by
applicable law, employees who are on a leave of absence for any reason)
other than those listed in Schedule 7.1. Purchaser may, but shall not be
required to, offer employment to those persons listed on Schedule 7.1. All
such employees who accept Purchaser's offer of employment will become
employees of Purchaser (the "Transferred Employees"). Purchaser shall not
be required to offer employment to any employee of Seller or CHE that is
not actively at work on the Closing Date as the result of a long-term
disability or as a result of any disciplinary action by Seller, and
Purchaser shall not assume any liability with respect to any current or
former employee of Seller except as specifically set forth in this
Agreement with respect to the Transferred Employees, or as otherwise
required by applicable law;
(b) With respect to each Transferred Employee:
(i) Purchaser will provide the Transferred Employees with base
salary or wage compensation substantially similar to that provided
such employees by Seller on the Closing Date. Purchaser shall not,
however, be obligated to retain or provide any bonus or other
incentive program as was provided by Seller on the Closing Date. With
respect to non-wage terms and conditions of employment, such as
pension or savings plans, health, life and disability insurance,
Purchaser may either (A) establish or provide arrangements that are
similar to those provided such employees by Seller on the Closing
Date, or (B) cover such employees (to the extent underwriting
conditions permit) under the arrangements Purchaser provides its
current, similar-treated employees.
(ii) To the extent provided under Purchaser's Medical Plan,
Purchaser shall waive pre-existing condition requirements, evidence of
insurability provisions or any similar provisions under any employee
benefit plan or compensation arrangements maintained or sponsored by
or contributed to by Purchaser for the Transferred Employees as of the
Closing Date to the extent such individuals were covered under
Seller's or CHE's applicable medical plan ("Seller's Medical Plan")
and to the extent such requirements or provisions did not apply under
Seller's Medical Plan.
(iii) Purchaser shall offer coverage to the Transferred Employees
under Purchaser's plan or plans that provide medical benefits
("Purchaser's Medical Plan") as of the Closing Date consistent with
plans offered to other employees of Purchaser similarly situated.
Seller shall be responsible for medical expenses covered under the
terms of Seller's Medical Plan incurred by a Transferred Employee
and/or his covered dependents prior to and through the Closing Date.
If a Transferred Employee or a covered dependent of a Transferred
Employee enrolled in Seller's Medical Plan is hospitalized on the
Closing Date, Seller's Medical Plan shall continue to provide coverage
for such Person until he or she is discharged from the hospital, to
the extent coverage is provided under the terms of Seller's Medical
Plan.
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(iv) Recognizing Seller's inability to offer effective continued
health coverage on a regional basis where Seller no longer maintains
operations, Purchaser shall be primarily responsible for providing
insurance coverage as required by Sections 4980B of the Code and
Section 601 et seq of ERISA ("COBRA") on and after Closing with
respect to any employee or former employee of Seller (other than any
employee set forth on Schedule 7.1 or whose employment was associated
with any of the assets relating to any Xxxxxx and Xxxxx'x restaurant)
whose employment with Seller is terminated prior to or in connection
with the sale but who does not become a Transferred Employee and any
dependent of such employee, who on, prior to or in connection with the
Closing, becomes a "qualified beneficiary" (within the meaning of
Section 4980B(g)(1) of the Code) as the result of any "qualifying
event"(within the meaning of Section 4980B(f)(3) of the Code) that
occurs on, prior to or in connection with the Closing. Seller shall be
secondarily liable for such COBRA coverage, and shall remain solely
liable for (a) complying with all legal requirements relating to
coverage, including providing any legally required notices, under the
Seller's Medical Plan with respect to any employee listed on Schedule
7.1 or whose employment was associated with any of the assets relating
to any Xxxxxx and Xxxxx'x restaurant; and (b) complying with all
notices requirements (including, but not limited to, COBRA notice
requirements) relating to coverage under the Seller's Medical Plan,
with respect to each employee of Seller who terminates employment
prior to Closing but not in connection with the Closing. Purchaser
shall be solely responsible for complying with all legal requirements
relating to group health plan coverage with respect to any (a)
Transferred Employee or (b) dependent of such Transferred Employee, in
each case who, after the Closing Date, becomes a "qualified
beneficiary" (within the meaning of Section 4980B(g)(1) of the Code)
as the result of any "qualifying event"(within the meaning of Section
4980B(f)(3) of the Code) that occurs after the Closing Date or who,
after the Closing Date, ceases to be covered under Purchaser's group
health plan.
(v) Purchaser shall recognize for purposes of eligibility for
participation and vesting under its employee benefit plans and
compensation arrangements the service of any Transferred Employee with
Seller and/or its Affiliates.
(c) As of the Closing Date, Purchaser will assume any and all
obligations of the Seller to Transferred Employees for any vacation entitlement
and vacation pay entitlement which were accrued as of the Closing Date and set
forth on Schedule 1.4.1(a)(iii), as adjusted.
(d) Neither Purchaser nor Seller intend this Section 7.1 to create any
rights or interest, except as between Purchaser and Seller, and no present or
future employees of any Party (or any dependents of such employees) will be
treated as third party beneficiaries in or under this Agreement.
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(e) Before and after the Closing Date, Seller and Purchaser will
cooperate to make available to each other on a prompt basis all reasonable
information and documents as may be necessary to coordinate the employment
by Purchaser of Transferred Employees, their benefit programs and
employment practices and to further the orderly administration of those
programs, practices in the provisions of this Agreement relating to
Transferred Employees.
(f) Seller shall retain sponsorship and liability of all Corporation
Benefit Plans following the Closing, and for payment of all benefits owing
under the Corporation Benefit Plans both before and after the Closing.
(g) Seller and Purchaser agree to use their reasonable efforts to
execute all necessary documents, file all required forms with any
governmental agencies and to undertake all actions that may be necessary or
desirable to implement expeditiously any actions contemplated in this
Section 7.1.
7.2 Maintenance of Books and Records. Each of Seller and Purchaser shall
preserve until the seventh anniversary of the Closing Date all records possessed
or to be possessed by such Party relating to any of the assets, liabilities or
business of the Business prior to the Closing Date. After the Closing Date,
where there is a legitimate purpose, such Party shall provide the other Parties
with access, upon prior reasonable written request specifying the need therefor,
during regular business hours, to (a) the officers, directors, accountants, and
employees of such Party and (b) the books of account and records of such Party,
and the other Parties and their representatives shall have the right to make
copies of such books and records; provided, however, that the foregoing right of
access shall not be exercisable in such a manner as to interfere unreasonably
with the normal operations and business of such Party; and further provided,
that, as to so much of such information as constitutes trade secrets or
confidential business information of such Party, the requesting Party and its
officers, directors and representatives will use due care to not disclose such
information except (i) as required by law, (ii) with the prior written consent
of such Party, which consent shall not be unreasonably withheld, or (iii) where
such information becomes available to the public generally, or becomes generally
known to competitors of such Party, through sources other than the requesting
Party, its affiliates or its officers, directors or representatives. Such
records may nevertheless be destroyed by a Party if such Party sends to the
other Party written notice of its intent to destroy records, specifying with
particularity the contents of the records to be destroyed. Such records may then
be destroyed after the 30th day after such notice is given unless the other
Party objects to the destruction, in which case, the Party seeking to destroy
the records shall deliver such records to the objecting Party.
7.3 Payments Received. Seller and Purchaser each agree that after the
Closing Date they will hold and will promptly transfer and deliver to the other,
from time to time as and when received by them, any cash, checks with
appropriate endorsements (using their best efforts not to convert such checks
into cash), or other property that they may receive on or after the Closing Date
which properly belongs to the other Party and will account to the other for all
such receipts.
7.4 Use of Name. In connection with the submission of the Proxy Statement,
CHE shall obtain approval to change its and Seller's name. Immediately following
the Closing Date,
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Seller and CHE shall take all such actions as are necessary to change the name
of Chart House, Inc., Chart House Enterprises, Inc. and the corporate name of
any affiliate of CHE to another corporate name which does not include the word
"Chart House" or other words which are confusingly similar to the corporate
names, trade names and/or trademarks of Purchaser and/or its affiliates.
7.5 Publicity. Parent and CHE will agree upon the timing and content of the
initial press release to be issued describing the transactions contemplated by
this Agreement, and will not make any public announcement thereof prior to
reaching such agreement unless required to do so by Applicable Law or regulation
or stock exchange requirement. To the extent reasonably requested by any other
Party, each Party will thereafter consult with and provide reasonable
cooperation to the others in connection with the issuance of further press
releases or other public documents describing the transactions contemplated by
this Agreement.
7.6 No Solicitation of Other Offers.
(a) CHE shall not, nor shall it permit any of its subsidiaries to, nor
shall it authorize or permit any officer, director or representative or
agent of CHE or any of its subsidiaries (including, without limitation, any
investment banker, financial advisor, attorney or accountant retained by
CHE or any of its subsidiaries) to, directly or indirectly, (i) solicit,
initiate or knowingly encourage (including by way of furnishing non-public
information), or take any other action to facilitate the initiation of any
inquiries or proposals regarding an Acquisition Proposal (as hereinafter
defined), (ii) engage in negotiations or discussions concerning, or provide
any nonpublic information to any Person relating to, any Acquisition
Proposal, or (iii) agree to approve or recommend any Acquisition Proposal;
provided, however, that nothing contained in this Section 7.6 shall
prohibit CHE or the Board from taking and disclosing to stockholders a
position contemplated by Rule 14e-2 promulgated under the Exchange Act; and
provided, further, that, prior to CHE Stockholders' Meeting, (y) the Board
on behalf of CHE may upon the bona fide unsolicited request of a Third
Party (as hereinafter defined) furnish information or data (including,
without limitation, confidential or non-public information or data)
relating to CHE or its subsidiaries for the purposes of an Acquisition
Proposal and participate in negotiations with a Person making an
unsolicited bona fide Acquisition Proposal if the Board believes that to do
so could reasonably lead to a Superior Proposal (as hereinafter defined)
and (z) the Board may withdraw or modify its recommendation relating to
this Agreement or the transactions contemplated hereby if the Board
determines in good faith after consultation with its financial advisor that
the transactions contemplated hereby are no longer in the best interests of
CHE's stockholders and that such withdrawal or modification is, therefore,
advisable in order to satisfy its fiduciary duties to CHE's stockholders
under Applicable Law.
(b) As used in this Agreement, "Acquisition Proposal" means any
proposal for any of the following (in each case, an "Acquisition
Transaction"): (i) a transaction pursuant to which any Person (or group of
Persons) other than Parent or its affiliates (a "Third Party") acquires 20%
or more of the outstanding shares of capital stock of CHE or Seller
pursuant to a tender offer or exchange offer or otherwise, (ii) a merger or
other business combination involving CHE or Seller and any Third Party,
(iii) any other
38
transaction pursuant to which any Third Party acquires control of assets
(including for this purpose the outstanding equity securities of Seller or
other subsidiaries of CHE, and the entity surviving any merger or business
combination including any of them) of CHE or Seller having a fair market
value equal to 20% or more of the fair market value of all the assets of
CHE or Seller immediately prior to such transaction, (iv) any public
announcement by a Third Party of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in any of the foregoing, (v) a
self tender offer, or (vi) any transaction subject to Rule 13(e)-3 under
the Exchange Act. As used in this Agreement, "Superior Proposal" means an
Acquisition Proposal for more than 50% of the outstanding shares of capital
stock, or for all or substantially all of the assets, of CHE that (i) is
not subject to any financing contingencies or is, in the good faith
judgment of the Board after consultation with its financial advisor,
reasonably capable of being financed and (ii) the Board determines in good
faith, based upon such matters as it deems relevant, including an opinion
of its financial advisor, would, if consummated, result in a transaction
more favorable to CHE's stockholders from a financial point of view than
the transactions contemplated hereby.
(c) Prior to providing any information to or entering into discussions
with any Person in connection with an Acquisition Proposal by a Person as
set forth in Section 7.6(a), CHE shall receive from such Person an executed
confidentiality agreement in reasonably customary form and shall notify
Parent orally and in writing of the existence of any Acquisition Proposal
or any inquiries indicating that any Person is considering making or wishes
to make an Acquisition Proposal, as promptly as practicable (but in no case
later than three Business Days) after its receipt thereof. CHE shall, to
the extent reasonably practicable, inform Parent of the status of any
discussions or negotiations with any such Third Party, and any material
changes to the terms and conditions of such Acquisition Proposal. At least
five (5) days prior to either (x) accepting any Superior Proposal or (y)
any change by the Board in its recommendation of the transactions
contemplated hereby (if following the receipt of any Acquisition Proposal),
CHE shall advise Parent orally and in writing of such Acquisition Proposal
and the material terms and conditions of such Acquisition Proposal and the
identity of the Person making any such Acquisition Proposal. During such
five (5) day period, the Board shall negotiate in good faith to determine
whether Parent can or is willing to make a proposal that is superior to the
Superior Proposal.
(d) Subject to the foregoing provisions of this Section 7.6, CHE shall
immediately cease and cause to be terminated any existing discussions or
negotiations with any Person (other than Parent and Purchaser) conducted
heretofore with respect to any of the foregoing. CHE shall ensure that the
officers and directors of CHE and its subsidiaries and any investment
banker, financial advisor, attorney, accountant or other advisor or
representative retained by CHE are aware of the restrictions described in
this Section 7.6.
7.7 Sales and Liquor Taxes.
39
Seller agrees that it will pay any sales and liquor tax and any taxes
required to be paid pursuant to the Illinois Unemployment Insurance Act, in each
case relating to the operations of Seller and attributable to time periods prior
to the Closing Date.
7.8 Further Assurances, Post-Closing Cooperation.
(a) At any time or from time-to-time after the Closing, at Purchaser's
request and without further consideration, CHE and Seller shall execute and
deliver to Purchaser such other instruments of sale, transfer, conveyance,
assignment and confirmation, provide such materials and information and
take such other actions as Purchaser may reasonably deem necessary or
desirable in order more effectively to transfer, convey and assign to
Purchaser, and to confirm Purchaser's title to, all of the Assets, and, to
the full extent permitted by law, to put Purchaser in actual possession and
operating control of the Business and the Assets and to assist Purchaser in
exercising all rights with respect thereto, and otherwise to cause CHE and
Seller to fulfill their obligations under this Agreement. Seller shall be
reimbursed by Purchaser for any actual out-of-pocket expense incurred in
connection with the foregoing.
(b) If, in order properly to prepare its Tax Returns, other documents
or reports required to be filed with any Governmental Authority, financial
statements or to fulfill its obligations hereunder, it is necessary that a
Party be furnished with additional information, documents or records
relating to the Business and such information, documents or records are in
the possession or control of the other Party, such other Party shall use
commercially reasonable efforts to furnish or make available such
information, documents or records (or copies thereof) at the recipient's
request, cost and expense. Any information obtained by Seller or Purchaser
in accordance with this paragraph shall be held confidential by Seller or
Purchaser in accordance with Section 4.3.
ARTICLE VIII
MISCELLANEOUS
8.1 Termination.
Anything herein or elsewhere to the contrary notwithstanding, this
Agreement may be terminated by written notice of termination at any time before
the Closing Date only as follows:
(a) by mutual written consent of Parent and CHE; or
(b) subject to Section 5.1.2 and 5.2.2, by Parent or CHE if the
Closing shall not have occurred by July 31, 2002, provided, however, that
the right to terminate this Agreement under this Section 8.1(b) shall not
be available to any Party whose failure to perform any obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date; or
(c) by Parent or CHE, if any court of competent jurisdiction or
Governmental Authority shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the payment of the Purchase
40
Price and such order, decree, ruling or other action shall have become
final and nonappealable; or
(d) by Parent or CHE, if the Board shall have authorized CHE to enter
into a written agreement concerning a transaction that the Board has
determined is a Superior Proposal; or
(e) by Parent or CHE, if the Required Company Vote shall not have been
obtained at the CHE Stockholders' Meeting; or
(f) by CHE, in the event of a breach in any material respect by Parent
or Purchaser of any representation, warranty, covenant or agreement
contained in this Agreement which (i) cannot or has not been cured within
15 days after the giving of written notice of such breach to Parent and
Purchaser and has not been waived by CHE pursuant to the provisions hereof
and (ii) would cause the conditions set forth in Article V not to be
satisfied;
(g) by Parent, if the Board shall have withdrawn or modified its
approval or recommendation of this Agreement or the transactions
contemplated hereby; or
(h) by Parent, in the event of a breach in any material respect by
Seller or CHE of any representation, warranty, covenant or agreement
contained in this Agreement which (i) cannot or has not been cured prior to
15 days after the giving of written notice of such breach to Seller and has
not been waived by Parent pursuant to the provisions hereof and (ii) would
cause the conditions set forth in Article V not to be satisfied.
8.2 Effect of Termination and Abandonment. In the event of termination of
this Agreement and abandonment of the transactions contemplated hereby pursuant
to this Article VIII, no Party (or any of its directors or officers) shall have
any liability or further obligation to any other Party, except as provided in
Section 8.3 and 8.6, except that nothing herein will relieve any Party from
liability for any breach of this Agreement.
8.3 Payment of Certain Fees upon Termination. If (i) CHE or Parent
terminates this Agreement pursuant to Section 8.1(d) or (ii) Parent terminates
this Agreement pursuant to Section 8.1(g) and by the date which is twelve (12)
months after the date of termination of this Agreement, an Acquisition
Transaction with a third party is announced or a letter of intent is entered
into and the Acquisition Transaction is subsequently consummated, then, in
either case, CHE shall pay to Parent, by wire transfer of immediately available
funds, within two days after the consummation of the transaction constituting a
Superior Proposal or Acquisition Transaction, as the case may be, a fee of
$1,500,000 plus expenses not to exceed $500,000.
8.4 Bulk Sales Law. Purchaser waives compliance by Seller with the
provision of any applicable bulk sales laws. Seller shall promptly pay and
discharge when due or contest or litigate all claims of creditors that are
asserted against Purchaser by reason of non-compliance with such laws, except
with respect to any such claims that relate to the Assumed Liabilities.
8.5 Sales, Transfer and Documentary Taxes, etc. All excise, sales, value
added, use, registration, stamp, transfer and similar Taxes, levies, charges and
fees incurred in connection
41
with this Agreement and the transactions contemplated hereby shall be paid by
Purchaser, whether imposed by law on Seller or Purchaser, and Purchaser shall
indemnify, reimburse and hold harmless Seller in respect of the liability for
payment of or failure to pay any such Taxes, levies, charges or fees. Purchaser
and Seller shall cooperate in providing each other appropriate resale exemption
certificates and other appropriate Tax documentation.
8.6 Expenses. Each Party shall bear its own expenses, including the fees
and expenses of any attorneys, accountants, investment bankers, brokers, finders
or other intermediaries or other Persons engaged by it, incurred in connection
with this Agreement and the transactions contemplated hereby, except (i) the
expenses incurred in connection with the printing, filing and mailing to
stockholders of the Proxy Statement and the solicitation of stockholder
approvals shall be the sole responsibility of CHE, and (ii) all filing fees
incurred, or to be incurred, in connection with filings under the HSR Act and
any other applicable antitrust laws and regulations shall be shared equally by
CHE and Parent.
8.7 Contents of Agreement; Amendments. This Agreement and the
Confidentiality Agreement dated August 13, 2001 between Parent and CHE (the
"Confidentiality Agreement') sets forth the entire understanding of the Parties
hereto with respect to the transactions contemplated hereby. Any and all
previous agreements and understandings between or among the Parties regarding
the subject matter hereof, whether written or oral (other than the
Confidentiality Agreement), are superseded by this Agreement. This Agreement
shall not be amended or modified except by written instrument duly executed by
each of the Parties hereto.
8.8 Assignment and Binding Effect. This Agreement may not be assigned prior
to the Closing by any Party without the prior written consent of the other
Parties, provided that Purchaser may assign this Agreement to an affiliate of
Purchaser without obtaining such consent, provided further that no such
assignment shall relieve Purchaser or Parent of its obligations hereunder.
Subject to the foregoing, all of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
successors and assigns of CHE, Parent, Seller and Purchaser, provided that the
Parties hereto shall continue to be obligated in accordance with the terms of
this Agreement.
8.9 Waiver. Any term or provision of this Agreement may be waived at any
time by the Party entitled to the benefit thereof by a written instrument duly
executed by such Party.
8.10 Notices. All notices required or permitted to be given hereunder shall
be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given three (3) Business Days after being deposited in the
United States mail, postage prepaid, registered or certified mail. Notices
delivered by hand, by facsimile, or by nationally recognized private carrier
shall be deemed given on the first Business Day following receipt; provided,
however, that a notice delivered by facsimile shall only be effective if such
notice is also delivered by hand, or deposited in the United States mail,
postage prepaid, registered or certified mail, on or before two (2) Business
Days after its delivery by facsimile. All notices shall be addressed as follows:
42
a) As to the Company: Chart House Enterprises, Inc.
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxx
with a copy (which shall not Seyfarth Xxxx
constitute notice) to: 00 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attn: Xxxxxx X. Xxxxx
b) As to Parent and Merger Sub: Xxxxxx'x Restaurants, Inc.
0000 Xxxx Xxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx,
Chairman,
President and Chief
Executive Officer
with a copy (which shall not Xxxxxx and Xxxxx, LLP
constitute notice) to: 0000 Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
or to such other address and to the attention of such other Person as the Party
to whom such notice is to be given may have theretofore designated in a notice
to the other Party hereto.
8.11 Governing Law. This Agreement shall be governed by and interpreted and
enforced in accordance with the internal laws of the State of Delaware.
8.12 No Benefit to Others. The representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the Parties
hereto and, in the case of Article VI hereof, the other Indemnitees, and their
heirs, executors, administrators, legal representatives, successors and assigns,
and they shall not be construed as conferring any rights on any other Persons.
8.13 Headings, Gender and "Person". All section headings contained in this
Agreement are for convenience of reference only, do not form a part of this
Agreement and shall
43
not affect in any way the meaning or interpretation of this Agreement. Words
used herein, 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 requires. Any
reference to a "Person" herein shall include an individual, firm, corporation,
partnership, trust, Governmental Authority or body, association, unincorporated
organization or any other entity.
8.14 Schedules and Exhibits. All schedules and exhibits referred to herein
are intended to be and hereby are specifically made a part of this Agreement.
8.15 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability, and any such invalidity or unenforceability
shall not invalidate or render unenforceable the remaining provisions hereof,
and any such invalidity or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
8.16 Counterparts; Facsimile Signatures. This Agreement may be executed in
any number of counterparts and any Party hereto may execute any such
counterpart, each of which when executed and delivered shall be deemed to be an
original and all of which counterparts taken together shall constitute but one
and the same instrument. This Agreement shall become binding when one or more
counterparts taken together shall have been executed and delivered by the
Parties. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts. The
Parties agree that facsimile transmission of original signatures shall
constitute and be accepted as original signatures.
8.17 CHE Guarantee. CHE hereby unconditionally guarantees to Purchaser and
Parent the full and timely performance of all of the obligations and agreements
of Seller in accordance with the terms hereof. The foregoing guarantee shall
include the guarantee of the payment of all Purchaser Losses which might become
recoverable as a result of the nonperformance of any of the obligations or
agreements so guaranteed or as a result of the nonperformance of this guarantee.
Each of Purchaser and Parent may, at its option, proceed against CHE for the
performance of any such obligation or agreement, or for damages for default in
the performance thereof, without first proceeding against Seller or against any
of its properties. CHE further agrees that its guarantee shall be an irrevocable
guarantee and shall continue in effect notwithstanding any extension or
modification of any guaranteed obligation, any assumption of any such guaranteed
obligation by any other party, or any other act or thing which might otherwise
operate as a legal or equitable discharge of a guarantor and CHE hereby waives
all special suretyship defenses and notice requirements.
8.18 Parent Guarantee. Parent hereby unconditionally guarantees to Seller
and CHE the full and timely performance of all of the obligations and agreements
of Purchaser in accordance with the terms hereof. The foregoing guarantee shall
include the guarantee of the payment of all Seller Losses which might become
recoverable as a result of the nonperformance of any of the obligations or
agreements so guaranteed or as a result of the nonperformance of this guarantee.
Each of Seller and CHE may, at its option, proceed against Parent for the
performance of any such obligation or agreement, or for damages for default in
the performance thereof, without first proceeding against Purchaser or against
any of its properties. Parent further
44
agrees that its guarantee shall be an irrevocable guarantee and shall continue
in effect notwithstanding any extension or modification of any guaranteed
obligation, any assumption of any such guaranteed obligation by any other party,
or any other act or thing which might otherwise operate as a legal or equitable
discharge of a guarantor and Parent hereby waives all special suretyship
defenses and notice requirements.
8.19 No Strict Construction. The language used in this Agreement shall be
deemed to be the language chosen by the Parties to express their mutual intent
and agreement, and no rule of strict construction shall be applied against any
Party.
8.20 Jurisdiction and Service of Process. SELLER, CHE, PARENT AND PURCHASER
HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
WILMINGTON, DELAWARE, AND IRREVOCABLY AGREE THAT, SUBJECT TO THE OTHER
PROVISIONS OF THIS AGREEMENT, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT WHICH MAY BE LITIGATED SHALL BE LITIGATED IN SUCH
COURTS. EACH OF SELLER, CHE, PARENT AND PURCHASER ACCEPTS FOR SUCH PARTY AND IN
CONNECTION WITH SUCH PARTY'S PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT.
8.21 Trial. EACH OF SELLER, CHE, PARENT AND PURCHASER HEREBY WAIVES SUCH
PARTY'S RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THE PARTIES HERETO
RELATING TO THE SUBJECT MATTER HEREOF. EACH OF SELLER, CHE, PARENT AND PURCHASER
ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR
THIS WAIVER, BE REQUIRED OF ANY PARTY TO THIS AGREEMENT. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH OF SELLER, CHE,
PARENT AND PURCHASER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO
ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER
IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE
WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OF SELLER, CHE, PARENT AND
PURCHASER FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS
WAIVER WITH SUCH PARTY'S LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND
VOLUNTARILY WAIVES SUCH PARTY'S JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
45
8.22 Knowledge. As used in this Agreement, "knowledge" of Seller or CHE, to
Seller's or CHE's knowledge, or words of similar import shall mean the actual
knowledge as of the applicable date, after reasonable inquiry, of those persons
listed in Schedule 8.22(a). As used in this Agreement, "knowledge" of Purchaser
or Parent, to Purchaser's or Parent's knowledge, or words of similar import
shall mean the actual knowledge as of the applicable date, after reasonable
inquiry, of those persons listed in Schedule 8.22(b).
8.24 Attorney's Fees. The prevailing Party in any action, suit, proceeding,
arbitration, or mediation, brought to enforce any matter under this Agreement,
shall be entitled to recover, in addition to any other available remedies, its
reasonable attorney's fees and costs actually incurred in connection with the
action, suit, proceeding, arbitration or mediation.
[SIGNATURE PAGE FOLLOWS]
46
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of
the day and year first above written.
CHART HOUSE, INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
CHART HOUSE ENTERPRISES, INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
XXXXXX'X RESTAURANTS, INC.
By:______________________________________
Xxxxxx X. Xxxxxxxx
President
LCH ACQUISITION, INC.
By:______________________________________
Xxxxxx X. Xxxxxxxx
President
47
ANNEX I
DEFINITIONS
Capitalized terms used but not defined in the Asset Purchase Agreement
have the respective meanings assigned to such terms below.
"AAA" is defined in Section 1.3.3(b).
"Acquisition Proposal" is defined in Section 7.6(b).
"Acquisition Transaction" is defined in Section 7.6(b).
"Affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person.
"Agreed Rate" is defined in Section 1.3.3(c).
"Agreement" is defined in the first paragraph of this Agreement.
"Amended and Restated By-Laws" is defined in Section 3.1.2.
"Applicable Law" means any law, order, rule or regulation applicable to
the Company, any Company Subsidiary or the assets of the Company or any Company
Subsidiary.
"Assets" is defined in Section 1.1.
"Assigned Contracts" is defined in Section 1.1.1(e).
"Assumed Closing Date Liabilities" is defined in Section Section
1.3.3(a).
"Assumed Closing Statement" is defined in Section 1.3.3(a).
"Assumed Current Assets" is defined in Section 1.3.3(a)
"Assumed Liabilities" is defined in Section 1.4.1.
"Assumption Agreement" is defined in Section 2.2(a)(iv).
"Blue Sky Laws" is defined in Section 3.1.4(b).
"Board" is defined in Section 3.1.3.
"Business" is defined in Recital A.
48
"CERCLA" means the federal Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sections 9601 et. seq., as amended.
"CHE" is defined in the first paragraph of this Agreement.
"CHE SEC Reports" is defined in Section 3.1.5(a).
"CHE Stockholders' Meeting" is defined in Section 4.1.5.
"Closing" is defined in Section 2.1.
"Closing Date" is defined in Section 2.1.
"Closing Assumed Current Assets" is defined in Section 1.3.3(a).
"COBRA" means Consolidated Omnibus Budget Reconciliation Act,
as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" is defined in Section 3.1.3.
"Confidential Information" is defined in Section 4.3.
"Confidentiality Agreement" is defined in Section 8.7.
"Contract" means any loan or credit agreement, note, bond, mortgage,
indenture, lease, sublease, purchase order or other agreement, commitment, or
license.
"Corporation Benefit Plans" is defined in Section 1.1.2(i).
"DGCL" is defined in Section 3.1.3.
"Environmental Law" means any applicable federal, state, and local
statute, regulation, ordinance, and administrative or judicial order relating to
protection of public health and welfare and the environment, including, without
limitation, those regulating hazardous substances, such as CERCLA, the Resource
Conservation and Recovery Act, the Federal Clean Air and Clean Water Acts, and
their state analogs, and those relating to the protection of environmentally
sensitive areas.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Estimated Assumed Closing Date Liabilities" is defined in
Section 1.3.3(a).
"Estimated Assumed Current Assets" is defined in Section 1.3.3(a).
"Estimated Assumed Current Assets Statement" is defined in
Section 1.3.3(a).
49
"Exchange Act" is defined in Section 3.1.4(b).
"Excluded Assets" is defined in Section 1.1.2.
"Excluded Contracts" is defined in Section 1.1.2(g).
"Excluded Liabilities" is defined in Section 1.4.2.
"FIRPTA" means Foreign Investment in Real Property Tax Act.
"GAAP" is defined in Section 3.1.5(b).
"Governmental Authorities" is defined in Section 3.1.4(b).
"Hazardous Substance" means "hazardous substance," "pollutant," or
"contaminant," and "petroleum" and "natural gas liquids" as those terms are
defined or used in Section 101 of CERCLA, and any other substances regulated
because of their effect or potential effect on public health and the
environment, including, without limitation, PCBs, lead paint, asbestos, urea
formaldehyde, bioaerosols, radioactive materials, mold, and putrescible and
infectious materials.
"HSR Act" is defined in Section 3.1.4(b).
"Indemnitee" is defined in Section 6.3(a).
"Indemnitor" is defined in Section 6.3(a).
"Independent Accounting Firm" is defined in Section 1.3.3(b).
"Intellectual Property" is defined in Section 3.1.18(b).
"Interested Party" is defined in Section 4.3.
"Inventory" is defined in Section 1.1.1(d).
"IRS" means the Internal Revenue Service.
"knowledge" is defined in Section 8.22.
"Landlord's Consents" is defined in Section 2.2(a)(xi).
"Latest Balance Sheet" is defined in Section 3.1.5(c).
"Lease Assignments" is defined in Section 2.2(a)(iii).
"Leased Property" is defined in Section 1.1.1(a).
"Leases" is defined in Section 1.1.1(a).
50
"Liabilities Schedule" is defined in Section 1.3.3(a).
"Liens" means mortgages, liens, security interests, pledges, easements,
rights of first refusal, options, restrictions or encumbrances of any kind.
"Losses" is defined in Section 6.3(a).
"Material Adverse Effect" means in respect of any Person, any change
in, or effect on such Person, or, in the case of the Seller, the Business or the
Assets, in each case taken as a whole, which is or is reasonably likely to be,
materially adverse to the business, operations, assets, liabilities, financial
condition of the Business or the Assets, taken as a whole.
"Material Contract" is defined in Section 3.1.16(a).
"Newco" is defined in Section 1.6.
"Non-Solicitation Agreement" is defined in Section 5.1.6.
"Notice of Claim" is defined in Section 6.3(b).
"OSHA" means Occupational Safety and Health Administration.
"Parent" is defined in the first paragraph of this Agreement.
"Parent Representatives" is defined in Section 4.1.7.
"Party" or "Parties" means one or more as the context requires of CHE,
Seller, Parent and Purchaser.
"Permits" is defined in Section 1.1.1(f).
"Permitted Liens" is defined in Section 3.1.14.
"Person" is defined in Section 8.13.
"Xxxxx Xxxxxxx" is defined in Section 3.1.10.
"Possessory Collateral" is defined in Section 5.1.9(a). "Preferred
Stock" is defined in Section 3.1.3.
"Premises" is defined in Recital A.
"Proceedings" is defined in Section 3.1.8.
"Proxy Statement" is defined in Section 3.1.9.
51
"Purchaser" is defined in the first paragraph of this Agreement.
"Purchaser Losses" is defined in Section 6.1.
"Purchaser's Disclosure Schedule" is defined in Section 3.2.
"Purchaser's Medical Plan" is defined in Section 7.1(b).
"Purchase Price" is defined in Section 1.3.1.
"Release Documents" is defined in Section 5.1.9(a).
"Required Company Vote" is defined in Section 3.1.3.
"Required Consents" is defined in Section 3.1.4(b).
"Restated Certificate of Incorporation" is defined in Section 3.1.2.
"Returns" means, collectively, with respect to any Person, returns,
declarations of estimated tax, tax reports, information returns and statements
relating to any material Taxes with respect to any income, assets or operations.
"SEC" means the Securities and Exchange Commission.
"Securities Act" is defined in Section 3.1.4(b).
"Seller" is defined in the first paragraph of this Agreement. In
addition, "Seller" shall mean any Subsidiary of Chart House, Inc. or CHE, owning
any interest in the Assets or the Business.
"Seller Losses" is defined in Section 6.2.
"Seller's Disclosure Schedule" is defined in Section 3.1.
"Seller's Medical Plan" is defined in Section 7.1(b)(ii).
"Senior Debt" means the Company's Revolving Credit and Term Loan
Agreement.
"Senior Lender" means the holder of the Senior Debt.
"Stock Sale" is defined in Section 1.6.
"Sub Debt" means the Company's outstanding unsecured notes.
"Sub Lender" means the holder of the Sub Debt Amount.
52
"Subsidiary" means, with respect to any Person, any other Person of
which more than fifty percent (50%) of the capital stock or other interests
entitled to vote in the election of directors or comparable Persons performing
similar functions are at the time owned or controlled, directly or indirectly,
through one or more Subsidiaries, by such Person.
"Subsidiary Documents" is defined in Section 3.1.2.
"Superior Proposal" is defined in Section 7.6(b).
"Taxes" in the plural and "Tax" in the singular means all federal,
state, local and foreign taxes, including income, employment (including Social
Security, withholding and state disability), excise, property, franchise, gross
income, real or personal property, ad valorem, sales, use, customs, duties, and
other taxes, fees, assessments or charges of any kind, together with all
interest, additions to tax and penalties relating thereto.
"Tax Return" means any return, report, declaration, form, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party" is defined in Section 7.6(b).
"Third Party Claims" is defined in Section 6.3(c).
"Transferred Employees" is defined in Section 7.1(a).
"Transition Services Agreement" is defined in Section 2.2(a)(v).
53
