Exhibit 99.1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
(Mark
One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 25, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File No. 1-9684
CHART HOUSE ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware 00-0000000
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
000 Xxxxx XxXxxxx, Xxxxx 000 00000
Xxxxxxx, Xxxxxxxx (Address of (Zip Code)
Principal Executive Offices)
Registrant's telephone number including area code: (000) 000-0000 Securities
registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
------------------- -----------------------
Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
Definitive Proxy or Information Statements Incorporated by reference in Part
III of this Form 10-K or any Amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 27, 2001 was $14,784,899.
The number of shares outstanding of common stock as of February 28, 2001
was 11,806,666.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the year
ended December 25, 2000 are incorporated by reference into Part I hereof.
Portions of the Registrant's Proxy Statement for the Annual Meeting to be
held May 16, 2001 are incorporated by reference into Part III hereof.
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PART I
This Annual Report on Form 10-K and the documents incorporated herein by
reference contain forward-looking statements that have been made pursuant to
provisions of the Private Securities Litigation Reform Act of 1995. Forward-
looking statements represent the Company's expectations or beliefs concerning
future events, including any statements regarding: future sales and gross
profit percentages, the continuation of historical trends, the sufficiency of
the Company's cash balances and cash generated from operating, financing
and/or investing activities for the Company's future liquidity and capital
resource needs. Without limiting the foregoing, the words "believes",
"intends", "projects", "plans", "expects", "anticipates", and similar
expressions are intended to identify forward-looking statements. The Company
cautions that these statements are further qualified by important economic and
competitive factors that could cause actual results to differ materially from
those in the forward-looking statements. These factors include, without
limitation, risks of the restaurant industry, an industry with many well-
established competitors with greater financial and other resources than the
Company, and the impact of changes in consumer trends, employee availability
and cost increases. In addition, the Company's ability to expand is dependent
upon various factors, such as the availability of attractive sites for new
restaurants, the ability to negotiate suitable lease terms, the ability to
generate or borrow funds to develop new restaurants, the ability to obtain
various government permits and licenses, and the recruitment and training of
skilled management and restaurant employees. Accordingly, such forward-looking
statements do not purport to be predictions of future events or circumstances
and may not be realized.
ITEM 1. BUSINESS.
As of December 25, 2000, Chart House Enterprises, Inc. and its subsidiaries
(the "Company") operated 46 restaurants, consisting of 40 Chart House
restaurants, one Peohe's restaurant, and five Xxxxxx and Xxxxx'x steakhouses.
The Company was incorporated in Delaware on July 25, 1985. In May 1996, the
Company sold its Islands restaurant operations and in October 1998, the
Company sold Solana Beach Baking Company, a wholesale bakery operated by the
Company. The Xxxxxx and Xxxxx'x steakhouse concept was acquired in April 1999.
CONCEPTS/OPERATIONS
Chart House operations commenced in 1961 with the opening of the first
Chart House in Aspen, Colorado by a predecessor of the Company. Chart House
restaurants are full-service, casual seafood dinner houses with a menu
featuring fresh fish and seafood, as well as steaks, chicken and prime rib.
Many of the Chart House restaurants feature an elaborate salad bar where the
customer prepares his or her own salad and selects from various appetizers.
The Company opened its Peohe's restaurant in January 1988 in Coronado,
California overlooking San Diego Bay and the San Diego city skyline. Although
similar to the Company's Chart House restaurants in many respects, Xxxxx's
opened under a different name in part to minimize confusion and competition
with other nearby Chart House restaurants and also to provide Chart House
management a suitable vehicle for experimentation and development of different
menu items, restaurant design and operating concepts. Peohe's has a more
extensive and higher priced menu, higher level of service and greater variety
of cooking techniques than the typical Chart House restaurant. In 2000, the
restaurant introduced a full service sushi bar.
In April 1999, the Company acquired the Xxxxxx and Xxxxx'x steakhouse in
New York, New York. Unlike typical steakhouses, Xxxxxx and Xxxxx'x offers
diners great steak, but serves up oversized portions at reasonable prices, all
in a unique setting that's sophisticated, yet energetic, and fun. Xxxxxx and
Xxxxx'x is a smoke-friendly establishment, and sells a revolving selection of
premium cigars at the restaurant. The acquisition of the concept creates
expansion opportunities for the Company.
The Company places great emphasis upon the location, exterior and interior
design of each restaurant. Each restaurant is unique and designed to fit
within and complement its surroundings. A significant remodeling program of
Chart House restaurants commenced in 1998. By the end of 2000, the Company had
spent
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approximately $21 million renovating 80% of the Chart House concept
restaurants over a period of 2 years, $10 million in 1999 and $11 million in
2000. The remodels serve two purposes. First, the Company is investing in the
structure of each building to maximize its longevity and ensure long-term
existence of the restaurant. Secondly, the image and concept are best
reflected in the updated decor chosen for each location. Representative
exteriors of Chart House restaurants range from the restored 18th century
former office of Xxxx Xxxxxxx on Boston's Long Wharf, to the modern three-
tiered glass restaurant in Philadelphia overlooking the Delaware River, which
was remodeled in 1999. With a few exceptions, the Chart House restaurants are
freestanding buildings.
In 2000, the annual revenue for each restaurant currently in operation for
all of 2000 ranged from $1.7 million to $10.2 million, with an average annual
sales per restaurant of $3.1 million. The average dinner check at Chart House
restaurants was approximately $39 per person. The average dinner check at
Xxxxxx and Xxxxx'x was approximately $52 per person.
The Company's business is seasonal in nature with revenues and net income
for the second and third quarters greater than in the first and fourth
quarters. The operating hours are typically 5:00 p.m. to 11:00 p.m. Some
selected restaurants are also open for lunch and/or brunch.
Alcoholic beverages are available at all locations. The sale of alcoholic
beverages accounted for approximately 23% of the revenues generated during
each of the past three years.
OPERATIONS
Each restaurant is managed by one general manager and between two and seven
assistant managers, depending on the operating characteristics and size of the
restaurant. On average, general managers possess approximately five years
experience with the Company. Each general manager is required to comply with
an extensive operations manual which contains procedures to ensure uniform
operations, consistently high quality products and service, and proper
accounting for restaurant operations. The general manager and his or her
assistants are responsible for training restaurant employees under a training
program managed by the Company's Director of Training. Assistant managers
generally are required to participate in a comprehensive management
development program that emphasizes the Company's operating strategies,
procedures, and standards. The aim of this program is to provide each manager
with the tools needed to thrive in progressive management assignments.
The success of each concept relies on the continued involvement of regional
Directors of Operations, Vice Presidents of Operations, and the President and
Chief Executive Officer of the Company. There are currently seven regional
Directors of Operations, each of whom is responsible for five to eight
restaurants in a designated region. The regional Directors of Operations
report to one of two Vice Presidents of Operations, who report directly to the
President and Chief Executive Officer of the Company.
The involvement of operations management ranges from attracting quality
management teams for the restaurants to routine visits to each location
enforcing strict adherence to Company strategies, policies and standards of
quality.
EXPANSION STRATEGY
The Company's long-term strategies include expanding both the Chart House
concept and the Xxxxxx and Xxxxx'x concept. This plan includes opening two
Xxxxxx and Xxxxx'x in 2001 (West Palm Beach, Fl., and Reston, Va.). The
Company's focus in 2001 will be to maximize its investment in the five new
Xxxxxx and Xxxxx'x locations that will exist outside of New York City, where
two Xxxxxx and Xxxxx'x restaurants are located. The Company's key priority
will be developing brand name recognition in the new marketplaces by executing
strong operations and delivering high levels of customer service, supplemented
by an aggressive marketing campaign (print, radio) highlighting the Xxxxxx and
Xxxxx'x brand name. Based on results achieved
3
at the Xxxxxx and Xxxxx'x locations, the Company will determine the future
growth of both Chart House and Xxxxxx and Xxxxx'x based on available resources
and its ability to deliver adequate shareholder returns.
When identifying and developing future restaurant sites, the Company places
particular emphasis on a potential site's physical location. Trade area
demographics, traffic volume, visibility, and accessibility are all key
performance indicators analyzed by management. Sales and profit projections
are then prepared to determine whether the economics of investment are sound.
The Company accords great importance to the selection of and coordination with
the architect to ensure that the proposed restaurant structure fits the
Company image. Senior management is involved extensively in each facet of the
site selection process.
The rate at which the Company can successfully achieve these expansion
objectives is dependent upon the success of locating acceptable sites,
negotiating acceptable lease or purchase terms, obtaining requisite
governmental permits and approvals, supervising location construction,
recruitment and training of qualified personnel, and access to capital.
PROCUREMENT OF FOOD AND SUPPLIES
The Company's ability to maintain consistent quality throughout its system
depends in large part upon its ability to acquire food products and related
items from reliable sources in accordance with Company specifications.
Suppliers are pre-approved by the Company and are required to adhere to strict
product specifications to ensure that high quality food and beverage products
are served in the restaurants. The Company negotiates directly with the major
suppliers to obtain competitive prices and uses purchase agreements to
stabilize the potentially volatile pricing associated with certain
commodities. Management believes that adequate alternative sources of quality
food and supplies are readily available.
EMPLOYEES AND LABOR RELATIONS
The Company employs approximately 3,300 persons, of whom approximately 50
are corporate personnel. Approximately 240 are restaurant management personnel
and the remainder represent hourly restaurant personnel. None of the Company's
employees are covered by a collective bargaining agreement. The Company has
never experienced a work stoppage and considers its labor relations to be
good.
COMPETITION
In general, the restaurant business is highly competitive and can be
affected by competition created by similar concept restaurants in a geographic
area, changes in the public's eating habits and preferences, local and
national economic conditions affecting consumer spending habits, population
trends and traffic patterns. Key success factors in the industry are the
quality and value of the food products offered, quality of service,
cleanliness, name identification, restaurant location, price and
attractiveness of facilities. The Company's strategy is to differentiate
itself from its competitors by providing unique, high-quality seafood and meat
entrees and delivering friendly and efficient service in a unique setting. Key
success factors to the setting are the location, attractive decor, as well as
the ambiance created by courteous and professional staff.
MARKETING
The Company has developed an integrated marketing communications program
which consists of public relations, advertising (print, direct mail,
electronic mail and local radio), promotions and support for our ViewPoints
Frequent Dining Program.
GOVERNMENT REGULATION
Each of the Company's restaurants is subject to various federal, state and
local laws, regulations and administrative practices affecting its business
and must comply with provisions regulating, among other things, health and
sanitation standards, equal employment, public accommodations for disabled
patrons, minimum
4
wages, worker safety and compensation and licensing for the sale of food and
alcoholic beverages. Difficulties or failures in obtaining or maintaining
required liquor licenses, or other required licenses, permits, or approvals,
could delay or prevent the opening of new restaurants or adversely affect the
operations of existing restaurants.
Federal and state environmental regulations have not had a material effect
on the Company's operations but more stringent and varied requirements of
local governmental bodies with respect to zoning, land use and environmental
factors could delay construction of new restaurants and add to their
construction cost.
The Company is also subject to the Fair Labor Standards Act, which governs
such matters as minimum wages, overtime and other working conditions. A
significant number of the Company's food service personnel are paid at rates
related to federal and state minimum wage requirements and, accordingly,
increases in the minimum wage or decreases in the allowable tip credit will
increase the Company's labor cost. There can be no assurance that future
legislation covering, among other matters, mandated health insurance and
living wage increases, will not be enacted and subsequently have a significant
effect on Company profitability.
The Company believes it is operating in substantial compliance with
applicable laws, regulations and administrative practices governing its
operations.
TRADEMARKS
The original "Chart House" logo and trademark were registered with the
United States Patent and Trademark Office (the "USPTO") in 1972 and 1977,
respectively. The new corporate "Chart House" logo and trademark were
registered with the USPTO in August 1997. The "Peohe's" logo and trademark
were registered with the USPTO in 1988. The "Xxxxxx and Xxxxx'x Steakhouse"
word mark was registered with the USPTO in 1997. The "Xxxxxx & Xxxxx'x
Steakhouse" logo was registered with the USPTO in April 2000. Trademarks in
connection with "ViewPoints", the Company's new frequent dining program were
registered with the USPTO in January 2001. Various marketing slogans and other
marks are currently pending with the USPTO.
The "Chart House" trademark and logo is licensed by the Company to the
operator of one Chart House restaurant located in Honolulu, Hawaii.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information about the Executive
Officers of the Company. The positions are with Chart House Enterprises, Inc.
Name Age Positions Held
---- --- --------------
Xxxxxx X. Xxxxxxx....... 42 President and Chief Executive Officer
Xxxxxxx X. Xxxxxxxx..... 33 Executive Vice President and Chief Financial Officer
Executive Officers of the Company are appointed annually by the Board of
Directors and serve at the Board's discretion.
Xxxxxx X. Xxxxxxx was promoted to Chief Executive Officer in November 1998.
He joined the Company as President and Chief Operating Officer and became a
member of the Board of Directors in February 1998. From March 1995 until
February 1998, Xx. Xxxxxxx was President of Xxxxxx'x of Chicago. He also
previously held the positions at Morton's of Vice President of Operations and
Regional Manager from March 1993 to March 1995. Prior to Xx. Xxxxxxx'
association with Morton's, he was Director of Food and Beverage with the Xxxx-
Xxxxxxx Hotel Corporation for six years. He has also held positions as
Director of Food and Beverage for the La Costa Resort & Spa, and Director of
Catering and Banquet for the Hyatt Hotels Corporation.
Xxxxxxx X. Xxxxxxxx was promoted to Executive Vice President and Chief
Financial Officer in June 1999. He joined the Company as Vice President-
Finance and Controller in March 1998. From June 1995 until March 1998, Xx.
Xxxxxxxx was the Chief Financial Officer for the mid-west area development
group for Boston Chicken,
5
Inc. Prior to June 1995, he held various financial positions with Boston
Chicken, Inc. and XxXxxxxx'x Corporation. Xx. Xxxxxxxx is a CPA. Xx. Xxxxxxxx
resigned his positions effective February 2, 2001.
ITEM 2. PROPERTIES.
All of the restaurant properties used by the Company are subject to a lease
agreement. The Company currently leases 42 Chart House restaurants, three of
which are held for disposal; one Peohe's restaurant; and seven Xxxxxx and
Xxxxx'x restaurants, two of which are expected to open in 2001. The average
remaining lease term (including renewal options) as of December 25, 2000 was 8
years for the Chart House restaurants (including Peohe's) and 10 years for
Xxxxxx and Xxxxx'x restaurants.
Restaurant sizes range from 4,600 to 32,000 square feet with an average of
8,949 square feet. Seating capacities range from 176 to 890 with an average of
287.
The amount of rent paid to lessors and the methods of computing rent vary
considerably from lease to lease. All of the Company's restaurant property
leases provide for a minimum annual rent, and most leases require payment of
additional rent based on sales volume at the particular location over
specified minimum levels. All of the Company's assets, are pledged as
collateral under the Revolving Credit and Term Loan Agreement, as amended.
The Company's principal executive offices occupy approximately 13,200
square feet of leased office spacein a building located in Chicago, Illinois.
This lease expires in June 2003.
ITEM 3. LEGAL PROCEEDINGS.
The Company periodically is a defendant in cases incidental to its business
activities. While any litigation or investigation has an element of
uncertainty, the Company believes that the outcome of any of these matters
will not have a materially adverse effect on its financial condition or
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information appearing under the caption "Common Stock Information" on
page 29 of the Company's Annual Report to Stockholders for the year ended
December 25, 2000 (the "Annual Report") is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data for the Company and its subsidiaries on page 13
of the Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results of
Operations appears on pages 8 through 12 of the Annual Report and is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed to market risk from changes in interest rates on
debt and changes in commodity prices. The Company's net exposure to interest
rate risk consists of its Revolving Credit that is benchmarked to the prime
rate, and the Term Loan Agreement and Subordinated Promissory Notes that are
benchmarked to the
6
LIBOR rate. The impact on the Company's results of operations of a one-point
interest rate change on the outstanding debt balance as of December 25, 2000
would be approximately $226,000 in incremental interest expense. The Company
does not use derivative instruments to manage borrowing costs or reduce
exposure to adverse fluctuations in the interest rate. The Company does not
use derivative instruments for trading purposes. The Company purchases certain
commodities such as beef, seafood, chicken, and cooking oil. These commodities
are generally purchased based upon purchase agreements or arrangements with
vendors. These purchase agreements or arrangements may contain features that
fix the commodity price or define the price from an agreed upon formula. The
Company does not use financial instruments to hedge commodity prices because
these purchase arrangements help control the ultimate cost paid and any
commodity price fluctuations are generally short term in nature. These
disclosures contain forward-looking statements. Actual results may differ
based upon general market conditions.
ITEM 8. FINANCIAL STATEMENTS.
The consolidated financial statements of the Company and its subsidiaries
appear on pages 14 through 16 of the Annual Report and are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Directors. The information appearing under the caption "Election of
Directors" on pages 4 and 5 of the Company's Proxy Statement for its Annual
Meeting of Stockholders to be held on May 16, 2001 (the "Proxy Statement") is
incorporated herein by reference.
Executive Officers. The information appearing under the caption "Executive
Officers of the Company" included on page 5 in Item 1 of this Annual Report on
Form 10-K is incorporated herein by reference.
Compliance with Section 16(a) of the Exchange Act. The information
appearing under the caption "Security Ownership of Management" on pages 13 and
14 of the Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information appearing under the caption "Executive Compensation"
commencing on page 7 of the Proxy Statement is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information appearing under the captions "Security Ownership of Certain
Beneficial Owners" on pages 2-4 and "Security Ownership of Management" on
pages 13 and 14 of the Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information appearing under the caption "Certain Relationships and
Related Transactions" commencing on page 10 of the Proxy Statement is
incorporated herein by reference.
7
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements:
Included in Part II of this report are the following financial
statements incorporated herein by reference to the following pages of the
Annual Report.
Page
-----
Consolidated Balance Sheets as of December 25, 2000 and December 27,
1999................................................................. 14
Consolidated Statements of Operations for the fiscal years 2000, 1999,
and 1998............................................................. 15
Consolidated Statements of Stockholders' Equity for the fiscal years
2000, 1999, and 1998................................................. 15
Consolidated Statements of Cash Flows for the fiscal years 2000, 1999,
and 1998............................................................. 16
Notes to Consolidated Financial Statements............................ 17-26
Report of Independent Public Accountants.............................. 27
(2) Financial Statement Schedules:
All schedules have been omitted since the information required to be
submitted has been included in the consolidated financial statements or
notes thereto or have been omitted as not applicable or not required.
(3) Exhibits:
2.1 Asset Purchase Agreement by and among Chart House Acquisition,
Inc., Xxxxxxx Xxx's Steak House, L.L.C., Xxxxxx Xxxxxx, Xxxxxxx
Xxxx, Xxxx Xxxxxx and, solely for purposes of Section 8.16, the
Company dated as of March 17, 1999.(11)
3.1 (1) Restated Certificate of Incorporation of the Company, as
amended.(1)
(2) Certificate of Amendment of Restated Certificate of
Incorporation of the Company.(2)
3.2 Amended and Restated Bylaws of the Company.(1)
4.1 Specimen Common Stock Certificate.(2)
4.2 Section 203 of the Delaware General Corporation Law.(2)
10.1 (1) Registration Rights Agreement dated November 27, 1985 among the
Company and its stockholders.(1)
(2) First Amendment to Registration Rights Agreement dated as of
April 28, 1986.(1)
(3) Second Amendment to Registration Rights Agreement dated as of
April 21, 1987.(1)
(4) Third Amendment to Registration Rights Agreement dated as of
September 6, 1989.(3)
10.2 Executive Benefit and Wealth Accumulation Plan of the Company,
effective January 27, 1986.(1)
10.3 1989 Non-Qualified Stock Option Plan of the Company.(2)
(a)Form of 1989 Non-Qualified Stock Option Plan Agreement.(2)
10.4 1992 Stock Option Plan.(4)
(a)Form of 1992 Stock Option Plan Agreement.(4)
10.5 Chart House Enterprises, Inc. Severance Pay Plan dated June 10,
1999.(14)
10.5.1 First Amendment to Chart House Enterprises, Inc. Severance Pay Plan
dated as of December 9, 1999.(14)
10.5.2 Second Amendment to Chart House Enterprises, Inc. Severance Pay
Plan dated as of August 2, 2000.(13)
10.6 Stock Purchase and Sale Agreement dated as of March 10, 1997 among
the Company, Chart House Investors, LLC and Alpha/ZFT
Partnership.(6)
8
10.7 Chart House Enterprises, Inc. Amended and Restated Standstill
Agreement dated October 1, 1997.(7)
10.7.1 Amended and Restated Standstill Agreement dated March 31,
1999.(14)
10.8 1996 Stock Option Plan.(8)
(a)Form of 1996 Stock Option Plan Agreement.(8)
10.9 1996 Nonemployee Director Stock Compensation Plan.(8)
10.9.1 2000 Nonemployee Director Equity Compensation Plan.(11)
10.10 Corporate Management Bonus Compensation Plan dated January 1,
1997.(8)
10.12 1998 Employee Stock Purchase Plan.(9)
10.13 Asset Purchase Agreement dated September 29, 1998 by and among
Crestone Group, L.L.C., Solana Beach Baking Company, and the
Company.(10)
10.14 Stock Purchase Agreement dated October 22, 1998 by and among
Inwood Investors Partnership, L.P., the Company, Metropolitan Life
Insurance Company, Xxxxxxx X. Xxxxxx, Xxxxx Xxxxxx, and Xxxxxx'x
Acquisition Corp.(10)
10.15 Revolving Credit and Term Loan Agreement, Dated as of April 26,
1999 among the Company, Chart House, Inc., BankBoston, N.A., as
Agent, and Bancboston Xxxxxxxxx Xxxxxxxx Inc., as Arranger.(14)
10.16 Amendment Agreement No. 1 to that certain Revolving Credit and
Term Loan Agreement dated as of October 29, 1999.(14)
10.17 Amendment Agreement No. 2 to that certain Revolving Credit and
Term Loan Agreement dated as of December 24, 1999.(14)
10.17.1 Amendment Agreement No. 9 to that certain Revolving Credit and
Term Loan Agreement dated as of December 24, 2000.
10.18 Sale-Leaseback Agreement dated June 23, 2000 between CH Restaurant
Property, LLC and Chart House Inc.(12)
10.19 Master Lease Agreement dated June 23, 2000 between CH Restaurant
Property, LLC and Chart House, Inc.(12)
10.20 Amended and Restated Subordinated Promissory Note and Guaranty
dated February 20, 2001 between Chart House, Inc. and EGI Fund
(00).
10.30 Amended and Restated Guaranty dated February 20, 2001 by several
subsidiaries of the Company in favor of EGI Fund (00) Investors,
LLC.
10.40 Second Amended and Restated Subordination Agreement dated as of
February 20, 2001 among Fleet National Bank, EGI-Fund (00)
Investors, LLC, and Chart House, Inc.
10.50 Amended and Restated Subordinated Promissory Note and Guaranty
dated February 20, 2001 between Chart House, Inc. and EGI Fund
(01).
10.60 Amended and Restated Guaranty dated February 20, 2001 by several
subsidiaries of the Company in favor of EGI Fund (01) Investors,
LLC.
10.70 Amended and Restated Subordination Agreement dated as of February
20, 2001 among Fleet National Bank, EGI-Fund (01) Investors, LLC,
and Chart House, Inc.
13. Annual Report to Stockholders for the year ended December 25,
2000.
21. Subsidiaries of the Company.
9
--------
(1) Filed as an exhibit to the Company's Registration Statement on Form S-1
dated August 27, 1987 or amendments thereto dated October 6, 1987 and
October 14, 1987 (Registration No. 33-16795).
(2) Filed as an exhibit to the Company's Registration Statement on Form S-1
dated July 20, 1989 or amendment thereto dated August 25, 1989
(Registration No. 33-30089).
(3) Filed as an exhibit to Form 10-K for the fiscal year ended December 31,
1989.
(4) Filed as an exhibit to Form 10-K for the fiscal year ended December 31,
1991.
(5) Filed as an exhibit to Form 10-Q for the quarterly period ended April 1,
1996.
(6) Filed as an exhibit to Form 10-Q for the quarterly period ended March 31,
1997.
(7) Filed as Exhibit 2.1 to Amendment No. 4 to a Schedule 13D of Chart House
Investors, LLC dated as of October 7, 1997.
(8) Filed as an exhibit to Form 10-K for the fiscal year ended December 30,
1996.
(9) Filed as an exhibit to Form S-8 dated December 14, 1998.
(10) Filed as an exhibit to Form 10-K for the fiscal year ended December 28,
1998.
(11) Filed as Exhibit A in the Notice of Annual Meeting of Stockholders to be
held May 15, 2000.
(12) Filed as an exhibit to Form 10-Q for the quarterly period ended June 26,
2000.
(13) Filed as an exhibit to Form 10-Q for the quarterly period ended September
25, 2000.
(14) Filed as an exhibit to Form 10-K for the fiscal year ended December 27,
1999.
(b) Reports on Form 8-K. A report on Form 8-K was filed by the Company on
December 18, 2000. Item 5 was reported describing the Company's borrowings
pursuant to a note in favor of a related party.
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Chart House Enterprises, Inc.
/s/ Xxxxxx X. Xxxxxxx
By: _________________________________
Xxxxxx X. Xxxxxxx
President and Chief Executive
Officer, Director
Date: March 12, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated.
Name Title Date
---- ----- ----
/s/ Xxxxxx X. Xxxxxxx President and Chief March 12, 2001
____________________________________ Executive Officer, Director
Xxxxxx X. Xxxxxxx
/s/ Xxxxxxx Xxxxx Director March 12, 2001
____________________________________
Xxxxxxx Xxxxx
/s/ Xxxxx Xxxxxx Xxxxx Director March 12, 2001
____________________________________
Xxxxx Xxxxxx Xxxxx
/s/ Xxxxxxx X. Xxxxxxxxxxxx, III Director March 12, 2001
____________________________________
Xxxxxxx X. Xxxxxxxxxxxx, III
/s/ Xxxxxxx X. Xxxxx Director March 12, 2001
____________________________________
Xxxxxxx X. Xxxxx
/s/ Xxxxxx XxXxxxxxx Director March 12, 2001
____________________________________
Xxxxxx XxXxxxxxx
/s/ Xxxxxxx Xxxxxxx Director March 12, 2001
____________________________________
Xxxxxxx Xxxxxxx
/s/ Xxxxxx Xxxx Chairman of the Board, March 12, 2001
____________________________________ Director
Xxxxxx Xxxx
11
Exhibit 10.17.1
AMENDMENT AGREEMENT NO. 9
to that certain
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This AMENDMENT AGREEMENT NO. 9 (this "Amendment") dated as of December 24,
---------
2000, is among (a) CHART HOUSE ENTERPRISES, INC. (the "Parent"), (b) CHART
------
HOUSE, INC. (the "Borrower"), (c) FLEET NATIONAL BANK (formerly known as
--------
BankBoston, N.A.) and the other lending institutions listed on Schedule 1 to the
-------- -
Credit Agreement (collectively, the "Banks"), and (d) FLEET NATIONAL BANK
-----
(formerly known as BankBoston, N.A.) as agent (the " Agent") for itself and the
-----
other Banks.
WHEREAS, the Parent, the Borrower, the Banks and the Agent are parties to
that certain Revolving Credit Agreement and Term Loan Agreement, dated as of
April 26, 1999 (as amended and in effect from time to time, the "Credit
------
Agreement"), pursuant to which the Banks, upon certain terms and conditions,
---------
have agreed to make loans to, and to issue letters of credit for the benefit of,
the Borrower; and
WHEREAS, the Borrower has requested that the Agent and the Banks agree, and
the Agent and the Banks have agreed, on the terms and subject to the conditions
set forth herein, to amend certain of the terms and provisions of the Credit
Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
(S)1. Defined Terms. Capitalized terms which are used herein without
-------------
definition and which are defined in the Credit Agreement shall have the same
meanings herein as in the Credit Agreement.
(S)2. Amendments to Section 1 of the Credit Agreement.
-----------------------------------------------
Section 1.1 of the Credit Agreement is hereby amended by
(a) deleting the definition of "Additional Samstock Subordinated
--------------------------------
Debt" in its entirety and replacing it with the following:
"Additional Samstock Subordinated Debt. Unsecured subordinated
-------------------------------------
Indebtedness of the Borrower in an amount not more than $11,000,000 in
the aggregate and the guaranty of such indebtedness by the Parent
incurred pursuant to the Amended and Restated Subordinated Promissory
Note and Guaranty dated as of February 20, 2001 (the "Additional
Subordinated Note") made by the Borrower and the Parent in favor of
EGI-Fund (01) Investors, L.L.C. and unsecured subordinated
Indebtedness of the Subsidiaries of the Borrower evidenced by an
amended and restated guaranty dated as of February 20, 2001 (the
"Additional Subsidiary Guaranty"), made by
each subsidiary of the Borrower in favor of EGI-Fund (01) Investors,
L.L.C., provided that, (a) each of the Additional Subordinated Note
--------
and the Additional Subsidiary Guaranty will be expressly subordinated
and made junior to the payment and performance in full of all of the
Obligations pursuant to the provisions of the Amended and Restated
Subordination Agreement, dated as of February 20, 2001 (the
"Additional Subordination Agreement"), among the Parent, the Borrower,
each of the Subsidiaries of the Borrower, the Agent and EGI-Fund (01)
Investors, L.L.C., (b) the proceeds of the Additional Samstock
Subordinated Debt shall be used for the purpose of making payments in
respect of the Contractor Liabilities, the 2001 Pre-Opening Costs and
for working capital purposes, and (c) the terms of the Additional
Subordinated Note, the Additional Subordinated Guaranty and any
subordination agreement relating thereto shall not be amended or
otherwise modified without the written consent of the Agent and the
Banks."
(b) deleting the definition of "Adjusted Leverage Ratio" in its
-----------------------
entirety and replacing it with the following:
"Adjusted Leverage Ratio. As at any date of determination, the
-----------------------
ratio of (a) the sum of (i) Consolidated Rental Expense of the Parent
and its Subsidiaries for the Reference Period ending on such date
multiplied by eight (8) plus (ii) Consolidated Senior Funded
----
Indebtedness of the Parent and its Subsidiaries outstanding on such
date, over (b) Consolidated EBITDAR of the Parent and its Subsidiaries
for such Reference Period."
(c) deleting the definition of "Consolidated EBITDA" in its entirety
-------------------
and replacing it with the following:
"Consolidated EBITDA. With respect to the Parent and its
-------------------
Subsidiaries for any fiscal period, an amount equal to Consolidated
Net Income for such period, plus, to the extent deducted in the
----
calculation of Consolidated Net Income and without duplication, (a)
depreciation and amortization for such period, (b) other noncash
charges for such period, (c) income tax expense for such period, (d)
Consolidated Interest Charges paid or accrued during such period, (e)
the non-recurring charges for such period relating to the sale of each
of the properties set forth on Schedule 1A attached hereto in an
-----------
amount not to exceed $5,000,000 in the aggregate, (f) Minority
Interest for such period, (g) restaurant pre-opening costs for such
period, (h) severance expenses in an amount not to exceed $400,000 in
respect of fiscal year 2000, and (i) expenses associated with the
Rights Offering in an amount not to exceed $750,000 in the aggregate,
minus, without duplication, all Pro Forma Rents for such period."
-----
2
(d) deleting the definition of "Consolidated Financial Obligations"
----------------------------------
in its entirety and replacing it with the following:
"Consolidated Financial Obligations. For any period, the sum of
----------------------------------
all scheduled payments of principal on Consolidated Senior Funded
Indebtedness of the Parent and its Subsidiaries made or required to be
made in such period, plus Consolidated Interest Charges of the Parent
and its Subsidiaries for such Period."
(e) deleting the definition of "Initial Samstock Subordinated Debt"
----------------------------------
in its entirety and replacing it with the following:
"Initial Samstock Subordinated Debt. Unsecured subordinated
----------------------------------
Indebtedness of the Borrower and the guaranty of such indebtedness by
the Parent incurred pursuant to the Amended and Restated Subordinated
Promissory Note and Guaranty dated as of February 20, 2001 (the
"Initial Subordinated Note") made by the Borrower and the Parent in
favor of Xxxxxxxx, L.L.C. and subsequently assigned to EGI-Fund (00)
Investors, L.L.C. and unsecured subordinated Indebtedness of the
Subsidiaries of the Borrower evidenced by the amended and restated
guaranty dated as of February 20, 2001 (the "Initial Subsidiary
Guaranty"), made by each subsidiary of the Borrower in favor of
Xxxxxxxx, L.L.C. and subsequently assigned to EGI-Fund (00) Investors,
L.L.C., such Indebtedness being expressly subordinated and made junior
to the payment and performance in full of all of the Obligations
pursuant to the provisions of the Second Amended and Restated
Subordination Agreement, dated as of February 20, 2001 (the "Initial
Subordination Agreement"), among the Parent, the Borrower, each of the
Subsidiaries of the Borrower, the Agent and EGI-Fund (00) Investors,
L.L.C., provided that, the terms of the Initial Subordinated Note, the
-------- ----
Initial Subordinated Guaranty and the Initial Subordination Agreement
shall not be amended or otherwise modified without the written consent
of the Agent and the Banks.
(f) deleting the definition of "Leverage Ratio" in its entirety and
--------------
replacing it with the following:
"Leverage Ratio. As at any date of determination, the ratio of
---------------
(a) Consolidated Senior Funded Indebtedness of the Parent and its
Subsidiaries outstanding on such date, over (b) Consolidated EBITDA of
the Parent and its Subsidiaries for such Reference Period."
(g) inserting the following new definitions in the appropriate
alphabetical order:
3
"2001 Pre-Opening Costs. The pre-opening costs associated with
----------------------
the new units located in West Palm Beach, Florida and Reston,
Virginia, in an amount not to exceed $600,000 in the aggregate."
"Consolidated Senior Funded Indebtedness. With respect to the
---------------------------------------
Parent and its Subsidiaries for any fiscal period, Consolidated Funded
Indebtedness minus the aggregate amount of Samstock Subordinated
-----
Debt."
"Contractor Liabilities. Collectively, (i) the principal amount
----------------------
of $5,543,523.60 (together with all interest and fees thereon) owed to
Shawmut and described in the Shawmut Payment Agreement, (ii)
$1,900,000 in the aggregate on account of Capital Expenditures or New
Restaurant Capital Expenditures contracted to be made at the
Borrower's Jacksonville, West 52nd Street, Atlanta, Washington,
Phoenix, West Palm Beach and Reston locations, (iii) $670,000 owed to
Xxxxx Construction, and (iv) $50,000 of development expenses,
including preliminary design and site investigation expenses, related
to the Chicago, Illinois and the Lincolnshire, Illinois locations."
"Rights Offering. That certain offering of nontransferable
---------------
rights to stockholders of the Parent to purchase an aggregate of up to
$8,000,000 newly issued shares of Series A senior convertible
redeemable preferred stock of the Parent, par value $1.00 per share
(the "Preferred Stock")."
"Shawmut. Shawmut Woodworking & Supply Co., Inc. (d/b/a Shawmut
-------
Design and Construction)."
"Shawmut Payment Agreement. The Agreement dated as of February
-------------------------
2, 2001 between the Parent and Shawmut pursuant to which the Parent
agreed to a payment schedule for all outstanding amounts owed to
Shawmut."
"Subordinated Debt Documents. Collectively, the Initial
---------------------------
Subordinated Note, the Initial Subsidiary Guaranty, the Initial
Subordination Agreement, the Additional Subordinated Note, the
Additional Subsidiary Guaranty and the Additional Subordination
Agreement."
(S)3. Amendment to Section 2 of the Credit Agreement. Section 2.1 of the
----------------------------------------------
Credit Agreement is hereby amended by deleting the last two sentences thereof in
their entirety.
(S)4. Amendments to Section 4 of the Credit Agreement.
-----------------------------------------------
(a) Section 4.3.2 of the Credit Agreement is hereby amended by deleting it
in its entirety and replacing it with the following:
4
"4.3.2. Annual Excess Operating Cash Flow Recapture.
-------------------------------------------
For each fiscal year of the Parent ending on or after December
31, 2001, the Borrower shall make a prepayment of principal on the
Term Loan in an amount equal to seventy-five percent (75%) of Excess
Operating Cash Flow for such fiscal year, such mandatory prepayment to
be due one hundred five (105) days after the end of each applicable
fiscal year and to be applied against the remaining scheduled
installments of principal due on the Term Loan pro rata, with any
--------
remaining amounts to be applied against the outstanding amount of the
Revolving Credit Loans."
(b) Section 4.3.3 of the Credit Agreement is hereby amended by inserting
the following new sentence at the end thereof:
"Notwithstanding the foregoing, and whether or not a Default or Event
of Default then exists or would result therefrom, the gross cash
proceeds from the Rights Offering (together with the $5,000,000 of
Samstock Subordinated Debt to remain outstanding following the
consummation of the Rights Offering) shall be used to repay the
Contractor Liabilities, the 2001 Pre-Opening Costs, the Samstock
Subordinated Debt, accrued interest and fees in respect of the
Samstock Subordinated Debt and expenses relating to the Rights
Offering."
(S)5. Amendment to Section 10 of the Credit Agreement. Section 10.4(i) of
-----------------------------------------------
the Credit Agreement is hereby amended by (a) inserting after the words "each
fiscal month of the Parent," the words "(a)", and (b) inserting after the words
"satisfactory to the Banks" the words ", and (b) the monthly management report
of the Parent and its Subsidiaries for the next fiscal month, such monthly
management report to be substantially in the form of the monthly management
report previously delivered to the Banks and otherwise in form satisfactory to
the Banks."
(S)6. Amendments to Section 11 of the Credit Agreement.
------------------------------------------------
(a) Section 11.5.2 of the Credit Agreement is hereby amended by inserting
the following new sentence at the end thereof:
"Notwithstanding the foregoing and the provisions of (S)4.3.3, the Borrower
shall be permitted to assign the ground lease for its Inner Harbor,
Baltimore, Maryland location for an aggregate gross amount of not less than
$900,000, such proceeds to be applied against the outstanding amount of the
Revolving Credit Loans."
(b) Section 11.11 of the Credit Agreement is hereby amended by deleting the
words "Other than the Samstock Subordinated Debt and, except" and replacing them
with the words "Other than the Samstock Subordinated Debt and the Rights
Offering (including the standby purchase arrangement contemplated thereunder),
and except".
5
(c) Section 11 of the Credit Agreement is hereby amended by inserting the
following new Section 11.16 at the end thereof:
"11.16. Subordinated Debt. The Borrower will not, and will not
-----------------
permit any of its Subsidiaries to, prepay, redeem or repurchase any of the
Samstock Subordinated Debt, provided that:
(a) The Borrower may pay regularly scheduled accrued and unpaid interest
pursuant to the terms of the Samstock Subordinated Debt, so long as (i) no
Default or Event of Default then exists and none would exist after giving
effect to any such payment of interest, (ii) the outstanding principal
amount of the Samstock Subordinated Debt is (x) less than or equal to
$5,000,000 and the Leverage Ratio is less than 2.50:1.00 as at the end of
the most recently ended fiscal quarter of the Borrower ,or (y) greater than
$5,000,000 and the Leverage Ratio is less than 2.00:1.00, and (iii) the
Borrower has provided to the Agent a pro forma compliance certificate
---------
evidencing compliance (after giving effect to the payment of such interest)
with the financial covenants set forth in (S)12 hereof and with clause (ii)
of this paragraph (a); and
(b) Whether or not a Default or Event of Default then exists or would result
therefrom, the Samstock Subordinated Debt (including accrued interest and
fees thereon) may be prepaid with the proceeds of the Rights Offering, so
long as (i) the Rights Offering yields gross cash proceeds to the Borrower
of not less than $8,000,000, and (ii) such payment is made prior to July
31, 2001.
(S)7. Amendments to Section 12 of the Credit Agreement. Section 12 of the
------------------------------------------------
Credit Agreement is hereby amended by deleting it in its entirety and replacing
it with the following:
"12. FINANCIAL COVENANTS OF THE BORROWER.
-----------------------------------
The Borrower covenants and agrees that, so long as any Loan, Unpaid
Reimbursement Obligation, Letter of Credit or Note is outstanding or any
Bank has any obligation to make any Loans or the Agent has any obligation
to issue, extend or renew any Letters of Credit:
12.1. Leverage.
--------
The Borrower will not, as of the end of any Reference Period ending on
a date at any time during any period described in the table set forth
below, permit the Leverage Ratio for such Reference Period to exceed the
ratio set forth opposite such period in such table:
Period Ratio
------ -----
6
December 25, 2000 through March 26, 2001 4.20:1.00
March 27, 2001 through June 25, 2001 3.70:1.00
June 26, 2001 through September 24, 2001 3.30:1.00
September 25, 2001 through December 31, 2001 3.30:1.00
January 1, 2002 through April 1, 2002 3.25:1.00
April 2, 2002 through July 1, 2002 3.00:1.00
July 2, 2002 through September 30, 2002 2.75:1.00
October 1, 2002 through December 30, 2002 2.50:1.00
Thereafter 2.00:1.00
12.2. Intentionally omitted.
---------------------
12.3. Debt Service. The Borrower will not, as of the end of any
------------
Reference Period ending on any date at any time during any period described
in the table set forth below, permit the Debt Service Coverage Ratio for
such Reference Period to be less than the ratio set forth opposite such
period in such table.
Period Ratio
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December 25, 2000 through September 24, 2001 1.075:1.00
September 25, 2001 through December 31, 2001 1.10:1.00
January 1, 2002 through July 1, 2002 1.20:1.00
July 2, 2002 through June 30, 2003 1.25:1.00
Thereafter 1.30:1.00
12.4. Interest Coverage. The Borrower will not, as of the end of any
-----------------
Reference Period ending on any date at any time during any period described
in the table set forth below, permit the Interest Coverage Ratio for such
Reference Period to be less than the ratio set forth opposite such period
in such table:
Period Ratio
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December 25, 2000 through March 26, 2001 1.25:1.00
March 27, 2001 through September 24, 2001 1.30:1.00
September 25, 2001 through July 1, 2002 1.35:1.00
July 2, 2002 through December 30, 2002 1.50:1.00
December 31, 2002 through June 30, 2003 1.60:1.00
Thereafter 1.80:1.00
7
12.5. Capital Expenditures.
--------------------
(a) The Borrower will not make, or permit any Subsidiary of the
Borrower to make, Capital Expenditures in any fiscal year that exceed
$35,000,000 in the aggregate in fiscal year 2000, $11,750,000 (of which
$8,863,523.60 constitutes Contractor Liabilities) in the aggregate in
fiscal year 2001, $3,500,000 in the aggregate in fiscal year 2002,
$4,000,000 in the aggregate in fiscal year 2003 and $5,000,000 in the
aggregate in fiscal year 2004; provided, however, that, if during any
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fiscal year the amount of Capital Expenditures permitted for such fiscal
year is not so utilized, fifty percent (50%) of such unutilized amount may
be utilized in the next succeeding fiscal year but not in any subsequent
fiscal year. Notwithstanding the foregoing, any Capital Expenditures made
in connection with the Acquisition shall not be Capital Expenditures for
purposes of this (S)12.5(a).
(b) The Borrower will not enter into, or permit any Subsidiary of the
Borrower to enter into, any agreement to fund any New Restaurant Capital
Expenditures. Notwithstanding the foregoing, the Borrower shall be
permitted to make payments in respect of the Contractor Liabilities and the
2001 Pre-Opening Costs provided, that such payments shall be made solely
--------
with the proceeds from the Samstock Subordinated Debt, and that the
Borrower provides the Agent with invoices and such other supporting
documentation as the Agent may reasonably request in connection with such
payments.
12.6. Adjusted Leverage Ratio. The Borrower will not, as of the end
-----------------------
of any Reference Period ending on a date at any time during any period
described in the table set forth below, permit the Adjusted Leverage Ratio
for such Reference Period to exceed the ratio set forth opposite such
period in such table:
Period Ratio
------ -----
December 25, 2000 through March 26, 2001 6.50:1.00
March 27, 2001 through June 25, 2001 6.20:1.00
June 26, 2001 through December 31, 2001 6.00:1.00
January 1, 2001 through July 1, 2002 5.50:1.00
July 2, 2002 through March 31, 2003 5.25:1.00
April 1, 2003 through June 30, 2003 5.00:1.00
July 1, 2003 through September 29, 2003 4.75:1.00
Thereafter 4.50:1.00
12.7. Minimum EBITDA.
--------------
8
(a) The Borrower will not, as of the end of any quarter ending during
any period described in the table set forth below, permit Consolidated
EBITDA for such fiscal quarter to be less than the amount set forth
opposite such period in such table:
Period Amount
------ ------
December 25, 2000 through March 26, 2001 $2,000,000
March 27, 2001 through June 25, 2001 $2,500,000
June 26, 2001 through September 24, 2001 $2,200,000
September 25, 2001 through December 31, 2001 $1,800,000
January 1, 2002 through April 1, 2002 $2,000,000
April 2, 2002 through July 1, 2002 $3,100,000
July 2, 2002 through September 30, 2002 $2,500,000
October 1, 2002 through December 30, 2002 $1,800,000
(b) The Borrower will not, as of the end of any Reference Period
ending on a date at any time during any period described in the table set
forth below, permit Consolidated EBITDA for such Reference Period to exceed
the ratio set forth opposite such period in such table:
December 31, 2002 through March 31, 2003 $10,450,000
April 1, 2003 through June 30, 2003 $10,700,000
July 1, 2003 through September 29, 2003 $10,800,000
September 30, 2003 through December 29, 2003 $10,900,000
(S)8. Amendment to Section 15 of the Credit Agreement. Section 15.1(r) of
-----------------------------------------------
the Credit Agreement is hereby amended by inserting the words "(other than by
virtue of operation of the Third Amended and Restated Standstill Agreement,
dated as of February __, 2001, among the Parent, EGI-Chart House Investors, LLC,
Samstock, L.L.C. and the other parties named therein or the exercise of voting
rights of the holders of the Preferred Stock)" at the end thereof.
(S)9. Amendment to Schedules to Credit Agreement. Schedule 1 to the
------------------------------------------ -------- -
Credit Agreement is hereby deleted in its entirety and replaced with the new
Schedule 1 attached hereto.
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(S)10. Affirmation and Acknowledgement of the Banks. The Agent and the
--------------------------------------------
Banks hereby affirm and acknowledge to the Parent, the Borrower and the
Subsidiary Guarantors that, on the Effective Date, the Events of Default in
respect of the financial covenants set forth in (S)12 of the Credit Agreement
for the fiscal quarter ended December 25, 2000 have been cured or waived.
(S)11. Affirmation and Acknowledgment of the Parent and the Borrower.
-------------------------------------------------------------
Each of the Parent and the Borrower hereby affirm and acknowledge to the Banks
as follows:
(a) The Borrower hereby ratifies and confirms all of its Obligations to the
Banks, including, without limitation, the Loans, and the Borrower hereby affirms
its absolute and
9
unconditional promise to pay to the Banks all indebtedness, obligations and
liabilities in respect of the Loans, the Letters of Credit, and all other
amounts due under the Credit Agreement as amended hereby. The Borrower hereby
confirms that the Obligations are and remain secured pursuant to the Security
Documents and pursuant to all other instruments and documents executed and
delivered by the Borrower as security for the Obligations.
(b) The Parent hereby acknowledges the provisions of this Amendment and
hereby reaffirms its absolute and unconditional guaranty of the Borrower's
payment and performance of the Obligations as more fully described in the Parent
Guaranty. The Parent hereby confirms that its obligations under the Parent
Guaranty are and remain secured pursuant to the Security Documents to which it
is a party.
(S)12. Representations and Warranties. The Parent and the Borrower hereby
------------------------------
represent and warrant to the Banks as follows:
(a) The execution and delivery by the Parent, the Borrower and each
Subsidiary Guarantor of this Amendment, and the performance by the Parent, the
Borrower and each Subsidiary Guarantor of its obligations and agreements under
this Amendment and the Credit Agreement as amended hereby, are within the
corporate authority of the Parent, the Borrower, and each Subsidiary Guarantor,
have been duly authorized by all necessary corporate proceedings on behalf of
the Parent, the Borrower and each Subsidiary Guarantor and do not and will not
contravene any provision of law, statute, rule or regulation to which the
Parent, the Borrower or any Subsidiary Guarantor is subject or any of the
Parent's, the Borrower's, or any Subsidiary Guarantor's charter, other
incorporation papers, by-laws or any stock provision or any amendment thereof or
of any agreement or other instrument binding upon the Parent, the Borrower or
any Subsidiary Guarantor, the contravention of which would materially adversely
affect the business, assets or financial condition of the Borrower and its
Subsidiaries, considered as a whole, or of the Borrower, considered
individually.
(b) This Amendment and the Credit Agreement as amended hereby constitute
legal, valid and binding obligations of the Parent, the Borrower and each
Subsidiary Guarantor, enforceable in accordance with their respective terms,
except as limited by bankruptcy, insolvency, reorganization, moratorium or other
laws relating to or affecting generally the enforcement of creditors' rights in
general, and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) No approval or consent of, or filing with, any governmental agency or
authority is required to make valid and legally binding the execution, delivery
or performance by the Parent, the Borrower or any Subsidiary Guarantor of this
Amendment or the Credit Agreement as amended hereby.
(d) The representations and warranties contained in (S)9 of the Credit
Agreement are true and correct at and as of the date made and as of the date
hereof, except to the extent of changes resulting from transactions contemplated
or permitted by this Amendment and the other Loan Documents, changes which have
been disclosed to the Agent and the Banks prior to the date hereof and changes
occurring in the ordinary course of business that singly or in the
10
aggregate are not materially adverse, and to the extent that such
representations and warranties relate expressly to an earlier date.
(e) Each of the Parent, the Borrower and each Subsidiary Guarantor
has performed and complied in all material respects with all terms and
conditions herein required to be performed or complied with by it prior to or at
the time hereof, and as of the date hereof, after giving effect to the
provisions hereof, there exists no Event of Default or Default.
(f) Except for the Contractor Liabilities, none of the Parent, the
Borrower or any Subsidiary Guarantor has any liability for, or on account of,
New Restaurant Capital Expenditures as of the Effective Date.
(S)13. Effectiveness. This Amendment shall become effective as of
-------------
December 24, 2000 upon the date (the "Effective Date") on which the Agent
--------------
receives each of the following:
(a) a fully executed counterpart hereof signed by each of the Parent,
the Borrower, the Subsidiary Guarantors and the Banks;
(b) a guaranty granted by Xxxxxxxx, L.L.C. in favor of the Agent, for
the benefit of the Banks, of the obligations incurred pursuant to the Additional
Subordinated Note;
(c) an amendment fee in the amount of $77,500 for the pro rata
accounts of the Banks;
(d) evidence that the Subordinated Debt Documents have been duly
executed and delivered by the respective parties thereto and shall be in full
force and effect; and
(e) board resolutions authorizing the Parent and the Borrower to
enter into and carry out the terms of the Subordinated Debt Documents, all in
form and substance satisfactory to the Agent and the Banks.
(S)14. Miscellaneous Provisions.
------------------------
(a) Except as otherwise expressly provided by this Amendment, all of
the terms, conditions and provisions of the Credit Agreement shall remain the
same. It is declared and agreed by each of the parties hereto that the Credit
Agreement, as amended hereby, shall continue in full force and effect, and that
this Amendment and the Credit Agreement shall be read and construed as one
instrument.
(b) This Amendment is intended to take effect as an agreement under
seal and shall be construed according to and governed by the laws of The
Commonwealth of Massachusetts.
(c) This Amendment may be executed in any number of counterparts, but
all such counterparts shall together constitute but one instrument. In making
proof of this Amendment it shall not be necessary to produce or account for more
than one counterpart signed by each party hereto by and against which
enforcement hereof is sought.
11
(d) The Borrower hereby agrees to pay to the Agent, on demand by the
Agent, all reasonable out-of-pocket costs and expenses incurred or sustained by
the Agent in connection with the preparation of this Amendment (including
reasonable legal fees).
12
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first written above.
CHART HOUSE ENTERPRISES, INC.
By:______________________________
Title: President & Chief Executive Officer
CHART HOUSE, INC.
By:______________________________
Title: President & Chief Executive Officer
FLEET NATIONAL BANK (f/k/a BankBoston, N.A.),
individually and as Agent
By:______________________________
Title:
BNP PARIBAS
By:______________________________
Title:
By:______________________________
Title:
ING (U.S.) CAPITAL LLC
By:______________________________
Name:
Title:
RATIFICATION OF GUARANTY
Each of the undersigned guarantors (each, a "Subsidiary Guarantor")
hereby acknowledges and consents to the foregoing Amendment as of December __,
2000, and agrees that the Subsidiary Guaranty (as defined in the Credit
Agreement, and each other guaranty executed by a Subsidiary Guarantor after the
Closing Date pursuant to the terms of the Credit Agreement) from each Subsidiary
Guarantor in favor of the Agent and each of the Banks remains in full force and
effect, and each of the Subsidiary Guarantors confirms and ratifies all of its
obligations thereunder.
CHART HOUSE ENTERPRISES OF IDAHO, INC., as
Subsidiary Guarantor
By:______________________________
Title: Assistant Secretary
CHART HOUSE ENTERPRISES OF PUERTO RICO, INC., as
Subsidiary Guarantor
By:______________________________
Title: President & Chief Executive Officer
CHART HOUSE OF ANNAPOLIS, INC., as Subsidiary
Guarantor
By:______________________________
Title: President & Chief Executive Officer
CHART HOUSE OF MARYLAND, INC., as Subsidiary
Guarantor
By:______________________________
Title: President & Chief Executive Officer
CHART HOUSE ACQUISITION, INC., as Subsidiary
Guarantor
By:______________________________
Title: President & Chief Executive Officer
BIG WAVE, INC., as Subsidiary Guarantor
By:______________________________
Title: President & Chief Executive Officer
CORK 'N XXXXXXX, INC., as Subsidiary Guarantor
By:______________________________
Title: President & Chief Executive Officer
ANALOS COMPANY, as Subsidiary Guarantor
By:______________________________
Title: President & Chief Executive Officer
WEST 52/nd/ STREET, INC., as Subsidiary Guarantor
By:______________________________
Title: President & Chief Executive Officer
CHART HOUSE ACQUISITION OF NEVADA, INC., as
Subsidiary Guarantor
By:______________________________
Title: President & Chief Executive Officer
CHART HOUSE ACQUISITION OF MARYLAND, INC., as
Subsidiary Guarantor
By:______________________________
Title: President & Chief Executive Officer
Schedule 1
----------
(as of December 24, 2000)
--- -- -------- --- -----
--------------------------------------------------------------------------------------------------------------
Revolving
Credit Commitment Term Commitment
Banks Commitment Percentage Commitment Percentage
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Fleet National Bank (f/k/a
BankBoston, N.A.) $ 8,750,000 50% $ 6,750,000 50%
Domestic and Eurodollar
Lending Office
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx
Vice President
--------------------------------------------------------------------------------------------------------------
Paribas
Domestic and Eurodollar $ 4,375,000 25% $ 3,375,000 25%
Lending Office
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
--------------------------------------------------------------------------------------------------------------
ING (US) LLC
Domestic and Eurodollar $ 4,375,000 25% $ 3,375,000 25%
Lending Office:
000 Xxxxx Xxxxxx Xxxxx,
Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxx Xxxxxxxxxxx
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Totals: $17,500,000 100% $13,500,000 100%
--------------------------------------------------------------------------------------------------------------
EXHIBIT 10.20
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED EXCEPT
(i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT WHICH HAS BECOME
EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT
TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT CONSISTENT WITH ALL
APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR
STATE SECURITIES LAWS
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL OF ALL INDEBTEDNESS OF THE ISSUER (THE "SENIOR DEBT") INCURRED
PURSUANT TO THAT CERTAIN REVOLVING CREDIT AND TERM LOAN AGREEMENT DATED AS OF
APRIL 26, 1999 (AS AMENDED FROM TIME TO TIME, THE "SENIOR CREDIT AGREEMENT") BY
AND AMONG CHART HOUSE ENTERPRISES, INC., A DELAWARE CORPORATION ("PARENT"), THE
COMPANY (AS DEFINED BELOW), BANK BOSTON, N.A. (n/k/a FLEET NATIONAL BANK), AS
AGENT ("AGENT") AND THE FINANCIAL INSTITUTIONS SIGNATORIES THERETO, PURSUANT TO
THAT CERTAIN SECOND AMENDED AND RESTATED SUBORDINATION AGREEMENT OF EVEN DATE
HEREWITH (AS AMENDED FROM TIME TO TIME, THE "SUBORDINATION AGREEMENT") EXECUTED
BY AGENT, PARENT, THE COMPANY, THE SUBSIDIARY GUARANTORS PARTY THERETO, AND EGI
FUND (00) INVESTORS, L.L.C.
Amended and Restated
Subordinated Promissory Note and Guaranty
-----------------------------------------
Chicago, Illinois
February 20, 2001 $2,000,000.00
FOR VALUE RECEIVED, CHART HOUSE, INC., a Delaware corporation (the
"Company"), promises to pay to the order of EGI Fund (00) Investors, L.L.C., a
Delaware limited liability company, or its assigns ("Holder", which term shall
include the holder, from time to time, of this Note) the sum of Two Million and
No/100ths Dollars ($2,000,000.00), in legal tender of the United States,
together with interest (computed on the basis of a 360-day year of twelve 30-day
months for actual days elapsed) on the principal amount outstanding from time to
time as provided in Section 1 hereof.
1. Payments of Principal and Interest.
----------------------------------
(a) (i) Interest shall accrue on the unpaid principal of this Note and
shall be computed at a rate per annum from time to time equal to the Then
Applicable Eurodollar Rate (as defined below) plus sixteen percent (16%),
----
with such rate to change when and as such Then Applicable Eurodollar Rate
changes. Subject to the foregoing, interest hereunder shall be applicable,
and otherwise computed, for Interest Periods and in a manner identical to
the Interest Periods and manner applicable to the Loans under the Senior
Credit Agreement (including Revolving Credit Loans and Term Loans). As
used in this Note, "Then Applicable Eurodollar Rate" shall mean, at any
time, and from time to time, the Eurodollar Rate then applicable to the
Loans under the Senior Credit Agreement (including Revolving Credit Loans
and Term Loans), or any portion thereof, for the Eurodollar Rate Loan with
the Interest Period with the then shortest remaining duration. If at the
time the Then Applicable Eurodollar Rate is to be calculated there is
no outstanding Eurodollar Rate Loan applicable to the Loans under the
Senior Credit Agreement (including Revolving Credit Loans and Term Loans),
the Then Applicable Eurodollar Rate shall equal the Eurodollar Rate which
would be applicable to a Loan for a one month Interest Period under the
terms of the Senior Credit Agreement. Except as provided below, to the
extent permitted by applicable law, accrued but unpaid interest owing on
this Note shall be added to the principal balance of this Note as of each
Interest Payment Date applicable to the Eurodollar Rate Loan used in
calculating the Then Applicable Eurodollar Rate, and shall accrue interest
as if it were additional principal hereunder.
(ii) Notwithstanding the foregoing, at such time that either (A) the
Senior Debt has been paid in full in cash or the Senior Credit Agreement
shall otherwise be terminated or no longer in full force and effect (the
"Senior Payment Date"), or (B) each of the following shall be true: (I) no
Default or Event of Default shall exist under the Senior Credit Agreement
(and none would exist after giving effect to the payment of such interest),
(II) if the outstanding principal amount of the Samstock Subordinated Debt
(as defined in the Senior Credit Agreement) is (x) less than or equal to
$5,000,000 and the Leverage Ratio (under the Senior Credit Agreement) is
less than 2.50:1.00 as at the end of the most recently ended fiscal quarter
of the Company, or (y) greater than $5,000,000 and the Leverage Ratio is
less than 2.00:1.00 as at the end of the most recently ended fiscal quarter
of the Company, and (III) the Company has delivered to Agent a pro forma
compliance certificate evidencing compliance (after giving effect to the
payment of such interest) with the financial covenants set forth in Section
12 of the Senior Credit Agreement and with clause (II) above, then in
either such case of (A) or (B) above, the Company may make, and Holder may
receive, payment of accrued interest on the unpaid principal of this Note
on each Interest Payment Date applicable to the Eurodollar Rate Loan used
in calculating the Then Applicable Eurodollar Rate.
(iii) The calculation of the Then Applicable Eurodollar Rate and the
interest rate hereunder, and the determination of advances and payments
made hereunder shall be made and determined by Xxxxxx and shall be binding
upon the Company absent manifest error. If not sooner paid, the total
unpaid principal balance, all accrued but unpaid interest, and all other
amounts owing hereunder, shall be due and payable on the Maturity Date (as
hereinafter defined). All payments of principal and interest shall be made
to the holder of this Note not later than 1:00 p.m. (Chicago time) on the
date and at the place of payment designated by the holder hereof as
aforesaid, and any payment received on such date but after such hour shall
be deemed to have been paid to and received by the holder hereof on the
next succeeding business day. If the date on which any payment is required
to be made pursuant to this Note is not a business day, then such payment
shall be due and payable on the next succeeding date which is not a
Saturday, Sunday or legal holiday, and such extension of time shall be
included in computing interest. All payments of principal and interest
made hereunder shall be applied first to accrued interest and then to
principal.
(b) As used in this Note, the term "Maturity Date" shall mean the
date which is the first to occur of (i) March 31, 2005, and (ii) the date on
which the right to accelerate payment of this Note accrues to the holder hereof
as provided in this Note.
(c) All payments hereunder shall be made without reduction, and
shall not be subject to any claim or offset of any kind or nature whatsoever.
Without limiting the foregoing, all payments made by the Company or Parent under
this Note shall be made free and clear of,
-2-
and without deduction or withholding for or on account of, any future income,
stamp or other taxes, levies, imposts, deductions, charges, or withholdings,
excluding taxes imposed on net income of Holder (all such non-excluded taxes,
levies, imposts, deductions, charges or withholdings being hereinafter called
"Taxes"). If any Taxes are required to be withheld from any amounts so payable
to Holder hereunder, the amounts so payable to Holder shall be increased to the
extent necessary to yield to Holder (after payment of all Taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts specified in
this Note.
(d) The terms and provisions of Sections 6.5 - 6.7 of the Senior
Credit Agreement shall be applicable to the indebtedness owing under this Note,
to the extent applicable, and with the necessary conforming modifications.
(e) After all principal, accrued interest, and all other amounts at
any time owed on this Note have been paid in full in cash, this Note shall be
surrendered to the Company for cancellation.
2. Prepayment by the Company.
-------------------------
(a) Optional Prepayment. This Note may be prepaid in whole or in
-------------------
part without penalty or premium, together with all accrued interest on the
amount prepaid, and all other obligations then due and owing hereunder. Any
prepayment amount shall be first applied to collection costs and other amounts
(excluding principal and interest) due hereunder, then to accrued interest
hereunder, and then to principal.
(b) Mandatory Prepayment.
--------------------
(i) On the Rights Offering Closing Date (as hereinafter
defined), the Company shall apply the proceeds of the Rights Offering (as
hereinafter defined) to pay to Holder in full in cash the entire
outstanding principal (including capitalized interest) of, accrued but
unpaid interest on, and all other amounts owing under this Note. The
"Rights Offering Closing Date" shall mean the date on which Series A senior
convertible redeemable preferred stock of Parent, par value $1.00 per share
(the "Preferred Stock") is issued and sold by Parent to stockholders of
Parent as have elected to purchase the Preferred Stock pursuant to that
certain offering (the "Rights Offering") of nontransferable rights to the
stockholders of Parent to purchase an aggregate of up to $8,000,000 newly
issued Preferred Stock (the "Rights Offering Closing").
(ii) From and after the Senior Payment Date, the Company shall
make to Holder payment of all principal outstanding hereunder (including
without limitation capitalized interest and fees) in equal quarterly
installments on the last day of each March, June, September and December
thereafter, and on the Maturity Date, commencing on the first of such dates
to occur after the Senior Payment Date.
3. Events of Default. Each of the following shall constitute an "Event
-----------------
of Default," whatever the reason for such event and whether it shall be
voluntary or involuntary, or within or without the control of the Company, or be
effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any governmental or nongovernmental body:
-3-
(a) The Company or Parent defaults in payment of the outstanding
principal, any accrued and unpaid interest on this Note or any other payments
due hereunder when the same become due and payable in accordance with the terms
of this Note; or
(b) The Company or Parent fails to observe, perform or comply with any
covenant, condition or agreement to be observed, performed or complied with
under this Note, and if such failure can be cured, such failure continues
unwaived and uncured for thirty (30) days following the date the Company and
Parent receives written notice from Holder of such nonperformance (it being
acknowledged that such 30-day cure and notice period shall not apply to Section
6(e)(ii)); or
(c) Any representation or warranty made by the Company or Parent
herein shall prove to have been untrue or incorrect in any material respect on
or as of the date made; or
(d) The Company or any Guarantor shall (i) commence a voluntary case
under the Federal bankruptcy laws (as now or hereafter in effect), (ii) file a
petition seeking to take advantage of any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or composition or
adjustment of debts, (iii) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in an involuntary case under
such bankruptcy laws or other laws, (iv) apply for, or consent to, or fail to
contest in a timely and appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of a
substantial part of its assets domestic or foreign, (v) admit in writing its
inability to pay its debts as they become due, (vi) make a general assignment
for the benefit of creditors, or (vii) take any corporate action for the purpose
of effecting any of the foregoing; or
(e) A case or other proceeding shall be commenced against the Company
or any Guarantor in any court of competent jurisdiction seeking (i) relief under
the Federal bankruptcy laws (as now or hereafter in effect) or under any other
laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization,
winding up or adjustment of debts, or (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like, of the Company or any Guarantor, or
of all or any substantial part of the assets, domestic or foreign, of the
Company or any Guarantor and such case or proceeding shall continue undismissed
or unstayed for a period of sixty (60) calendar days, or an order granting the
relief requested in such case or proceeding against the Company or any Guarantor
(including, but not limited to, an order for relief under such Federal
bankruptcy laws) shall be entered; or
(f) The holders of the Senior Debt shall accelerate the Senior Debt or
there shall occur an Event of Default under the Senior Credit Agreement; or
(g) The Amended and Restated Guaranty of even date herewith (the
"Guaranty") executed by the Company's Subsidiaries, or the guaranty set forth in
Section 4 hereof, in each case executed or given by the Guarantors, shall cease,
for any reason, to be in full force and effect, or any Guarantor shall so assert
or shall disavow liability thereunder; or
(h) There shall occur an Event of Default or default under any
promissory note, guaranty, subordination agreement, reimbursement agreement,
standby purchase agreement, or other document or agreement, in any such case
relating to financing provided to the Company or the Rights Offering (as defined
in the Senior Credit Agreement), executed by
-4-
the Company, Parent and/or any of their respective subsidiaries made payable to,
in favor of, for the benefit of or together with Holder or any affiliate of
Holder.
Upon the occurrence of an Event of Default hereunder, Holder may, upon
written notice to the Company, (i) declare all obligations owing hereunder
immediately due and payable, provided however that upon an Event of Default
described in Sections 3(d) or (e) above, all such obligations shall
automatically become immediately due and payable without notice or demand of any
kind, and (ii) pursue its other rights and remedies under this Note, the
Guaranty and applicable law.
All powers and remedies given by this Section 3 to Holder shall, to
the extent permitted by law, be deemed cumulative and not exclusive of any
thereof or of any other powers and remedies available to Holder by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Note, and no delay or omission of
Holder to exercise any right or power accruing upon any default occurring and
continuing as aforesaid shall impair any such right or an acquiescence therein
and every power and remedy given by this Section 3 or by law to Holder may be
exercised from time to time, and as often as shall be deemed expedient, by
Xxxxxx.
In addition to those remedies set forth in this Section 3, if any
amount owing under this Note is not paid when due, whether at maturity or by
acceleration, interest shall accrue on such amount from the date due until the
date paid at the interest rate provided for in Section 1 of this Note.
Additionally, the Company promises to pay all costs of collection and
enforcement of this Note and the Guaranty, including, without limitation,
reasonable attorneys' fees and costs, whether or not suit is filed hereon. Such
costs and expenses shall include without limitation all costs, reasonable
attorneys' fees and expenses incurred by Holder in connection with any
insolvency, bankruptcy, reorganization, arrangement or other similar proceedings
involving the Company or any Guarantor.
4. Guaranty.
--------
(a) Guaranty of Payment and Performance. The Parent hereby guarantees
-----------------------------------
to Holder the full and punctual payment when due (whether at stated maturity, by
required pre-payment, by acceleration or otherwise), as well as the performance,
of all of the indebtedness and other amounts owing under this Note
(collectively, the "Obligations"), including all such Obligations which would
become due but for the operation of the automatic stay pursuant to (S)362(a) of
the Federal Bankruptcy Code and the operation of (S)(S)502(b) and 506(b) of the
Federal Bankruptcy Code. This guaranty is an absolute, unconditional and
continuing guaranty of the full and punctual payment and performance of all of
the Obligations and not of their collectability only and is in no way
conditioned upon any requirement that Holder first attempt to collect any of the
Obligations from the Company or resort to any collateral security or other means
of obtaining payment. Should the Company default in the payment or performance
of any of the Obligations, the obligations of the Parent hereunder with respect
to such Obligations in default shall, upon demand by Holder, become immediately
due and payable to Holder, without demand or notice of any nature, all of which
are expressly waived by the Parent. Payments by the Parent hereunder may be
required by Xxxxxx on any number of occasions. All payments by the Parent
hereunder shall be made to the Holder, in the manner and at the place of payment
specified therefor for payments hereunder to be made by the Company.
-5-
(b) Parent's Agreement to Pay Enforcement Costs, etc. The Parent
------------------------------------------------
further agrees, as the principal obligor and not as a guarantor only, to pay to
Holder, on demand, all reasonable costs and expenses (including court costs and
reasonable legal expenses, including the allocated cost of staff counsel)
incurred or expended by Holder in connection with the Obligations, this guaranty
and the enforcement thereof, together with interest on amounts recoverable
hereunder from the time when such amounts become due until payment, whether
before or after judgment, at the rate of interest set forth in (S)1 hereof,
provided that if such interest exceeds the maximum amount permitted to be paid
---------
under applicable law, then such interest shall be reduced to such maximum
permitted amount.
(c) Waivers by the Parent; Xxxxxx's Freedom to Act. The Parent agrees
----------------------------------------------
that the Obligations will be paid and performed strictly in accordance with
their respective terms, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of Holder with respect thereto. The Parent waives promptness, diligence,
presentment, demand, protest, notice of acceptance, notice of any Obligations
incurred and all other notices of any kind, all defenses which may be available
by virtue of any valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshalling of assets of the
Company or any other entity or other Person primarily or secondarily liable with
respect to any of the Obligations, and all suretyship defenses generally.
Without limiting the generality of the foregoing, the Parent agrees to the
provisions of any instrument evidencing, securing or otherwise executed in
connection with any Obligation and agrees that the obligations of the Parent
hereunder shall not be released or discharged, in whole or in part, or otherwise
affected by (i) the failure of Holder to assert any claim or demand or to
enforce any right or remedy against the Company or any other entity or other
Person primarily or secondarily liable with respect to any of the Obligations;
(ii) any extensions, compromise, refinancing, consolidation or renewals of any
Obligation; (iii) any change in the time, place or manner of payment of any of
the Obligations or any rescissions, waivers, compromise, refinancing,
consolidation or other amendments or modifications of any of the terms or
provisions of this Note or any other agreement evidencing, securing or otherwise
executed in connection with any of the Obligations made in accordance with the
terms hereof; (iv) the addition, substitution or release of any entity or other
person primarily or secondarily liable for any Obligation; or (v) any other act
or omission which might in any manner or to any extent vary the risk of the
Parent or otherwise operate as a release or discharge of the Parent (other than
the indefeasible payment in full, in cash, of all of the Obligations), all of
which may be done without notice to the Parent.
(d) Unenforceability of Obligations Against the Company. If for any
---------------------------------------------------
reason the Company has no legal existence or is under no legal obligation to
discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from the Company by reason of the Company's insolvency, bankruptcy
or reorganization or by other operation of law or for any other reason (other
than the indefeasible payment in full, in cash, of all of the Obligations), to
the extent permitted by law, this guaranty shall nevertheless be binding on the
Parent to the same extent as if the Parent at all times had been the principal
obligor on all such Obligations. In the event that acceleration of the time for
payment of any of the Obligations is stayed upon the insolvency, bankruptcy or
reorganization of the Company, or for any other reason, all such amounts
otherwise subject to acceleration under the terms of this Note or any other
agreement evidencing, securing or otherwise executed in connection with any
Obligation shall be immediately due and payable by the Parent.
-6-
(e) Subrogation; Subordination.
--------------------------
(i) Postponement of Rights Against the Company. Until the final
------------------------------------------
payment and performance in full in cash of all of the Obligations, the Parent
shall not exercise any rights against the Company arising as a result of payment
by the Parent hereunder, by way of subrogation, reimbursement, restitution,
contribution or otherwise, and will not prove any claim in competition with
Holder in respect of any payment hereunder in any bankruptcy, insolvency or
reorganization case or proceedings of any nature; the Parent will not claim any
setoff, recoupment or counterclaim against the Company in respect of any
liability of the Parent to the Company.
(ii) Subordination. The payment of any amounts due with respect
-------------
to any indebtedness of the Company for money borrowed or credit received now or
hereafter owed to the Parent is hereby subordinated to the prior payment in full
in cash of all of the Obligations. The Parent agrees that, after the occurrence
of any default in the payment or performance of any of the Obligations, the
Parent will not demand, sue for or otherwise attempt to collect any such
indebtedness of the Company to such Parent until all of the Obligations shall
have been paid in full. If, notwithstanding the foregoing sentence, the Parent
shall collect, enforce or receive any amounts in respect of such indebtedness
while any Obligations are still outstanding, such amounts shall be collected,
enforced and received by the Parent as trustee for the Holder and be paid over
to Holder, on account of the Obligations without affecting in any manner the
liability of the Parent under the other provisions of this guaranty.
(iii) Provisions Supplemental. The provisions of this (S)4(e)
-----------------------
shall be supplemental to and not in derogation of any rights and remedies of
Holder under any separate subordination agreement which Holder may at any time
and from time to time enter into with the Parent.
(f) Setoff. Upon the occurrence and during the continuation of an
------
Event of Default, Holder is hereby authorized at any time and from time to time,
without notice to the Parent (any such notice being expressly waived by the
Parent) and to the fullest extent permitted by law, to set off and apply any and
all sums credited by or due from Holder to the Parent against the obligations of
the Parent under this guaranty, whether or not Holder shall have made any demand
under this guaranty and although such obligations may be contingent or
unmatured.
(g) Further Assurances. The Parent agrees that it will from time to
------------------
time, at the request of Xxxxxx, do all such things and execute all such
documents as Holder may reasonably consider necessary or desirable to give full
effect to this guaranty and to perfect and preserve the rights and powers of
Holder hereunder. The Parent acknowledges and confirms that it has established
its own adequate means of obtaining from the Company on a continuing basis all
information desired by it concerning the financial condition of the Company and
that it will look to the Company and not to Holder in order for it to keep
adequately informed of changes in any of the Company's financial condition.
(h) Termination; Reinstatement. This guaranty shall terminate upon
--------------------------
the final and indefeasible payment in full, in cash, of the Obligations.
Notwithstanding any termination of this guaranty upon the final and indefeasible
payment in full, in cash, of the Obligations, this guaranty shall continue to be
effective or be reinstated, if at any time any payment made or value received
with respect to any Obligation is rescinded or must otherwise be returned by
-7-
Holder upon the insolvency, bankruptcy or reorganization of the Company, or
otherwise, all as though such payment had not been made or value received.
(i) Successors and Assigns. This guaranty shall be binding upon the
----------------------
Parent, its successors and assigns, and shall inure to the benefit of Xxxxxx and
its respective successors, transferees and assigns. The Parent may not assign
any of its obligations hereunder.
5. Priority. The indebtedness evidenced by this Note is subordinate to
--------
the prior payment in full of the Senior Debt pursuant to the terms of the
Subordination Agreement.
6. Representations, Warranties and Covenants. Each of Parent and the
-----------------------------------------
Company represents and warrants to Holder as follows:
(a) Authorization. It has the corporate power and authority to
-------------
execute, deliver and perform this Note and to incur the Obligations, and it has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Note.
(b) No Consents Required. Except for any filings under applicable
--------------------
federal or state securities laws, no consent, approval or authorization of, or
declaration or filing with, any federal, state or local governmental authority
and no consent of any other person, company, partnership or other organization
or entity is required in connection with its execution, delivery and performance
of this Note.
(c) No Conflict. Its execution, delivery and performance of this
-----------
Note and payment of the Obligations does not and will not conflict with, or
constitute a violation or breach of, constitute a default under (i) any material
contract, mortgage, lien, lease, agreement or other instrument to which it is a
party or which is binding upon it, (ii) any requirement of law or regulation
applicable to it or (iii) its certificate of incorporation or bylaws.
(d) Enforceability. This Note has been duly executed and delivered
--------------
by it and constitutes its legal, valid and binding obligations, enforceable
against it in accordance with its terms.
(e) Covenants.
---------
(i) From the time that (and for so long as) the Senior Debt
shall be paid in full in cash, or the Senior Credit Agreement shall
otherwise be terminated or no longer in full force and effect, each and
every covenant contained in Sections 10-12 of the Senior Credit Agreement
(as in effect as of the date of such payment or termination) shall be
deemed incorporated in and a part of this Note as if they were set forth
herein, with all necessary conforming modifications, and the Company and
Parent shall comply with each and every such covenant.
(ii) The Company and Parent shall cause the Rights Offering
Closing to occur on or before June 30, 2001.
7. Miscellaneous.
-------------
(a) This section headings contained in this Note are inserted for
convenience only and shall not affect, in any way, the meaning or
interpretations of this Note.
-8-
(b) This Note shall be governed by and construed in accordance with
the internal laws (and not the laws of conflicts) of the State of Illinois.
(c) To the maximum extent permitted by applicable law, the Company,
Parent and all endorsers and all persons liable or to become liable hereunder
hereby waive presentment, demand, protest, diligence of collection, notice of
protest, dishonor and nonpayment and all notices of every kind, and, the defense
of the statute of limitations.
(d) BY ACCEPTANCE OF THIS NOTE, XXXXXX REPRESENTS THAT IT IS AN
ACCREDITED INVESTOR, WITHIN THE MEANING OF RULE 501 OF REGULATION D UNDER THE
ACT, AND THAT IT IS PURCHASING THIS NOTE FOR ITS OWN ACCOUNT FOR INVESTMENT, AND
NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY PUBLIC DISTRIBUTION OF
SUCH NOTE.
(e) It is the intention of the parties to conform strictly to the
usury laws, whether state or federal, that are applicable to this Note. All
agreements between the Company and Holder, whether now existing or hereafter
arising and whether oral or written, are hereby expressly limited so that in no
contingency or event whatsoever, shall the amount paid or agreed to be paid to
Holder, or collected by Xxxxxx, for the use, forbearance or detention of the
money loaned or to be loaned hereunder or otherwise, or for the payment or
performance of any covenant or obligation contained herein or in any other
document evidencing, securing or pertaining to the indebtedness evidenced
hereby, exceed the maximum amount permissible under applicable federal or state
usury laws. If under any circumstances whatsoever fulfillment of any provision
hereof, at the time performance of such provision shall be due, shall involve
exceeding the limit of validity prescribed by law, then the obligation to be
fulfilled shall be reduced to the limit of such validity; and if under any
circumstances Holder shall ever receive an amount deemed interest by applicable
law, which would exceed the highest lawful rate, such amount that would be
excessive interest under applicable usury laws shall be applied to the reduction
of the principal amount owing hereunder and not to the payment of interest, or
if such excessive interest exceeds the unpaid balance of principal, the excess
shall be deemed to have been a payment made by mistake and shall be refunded to
the Company or to any other person making such payment on the Company's behalf.
All sums paid or agreed to be paid to the holder hereof for the use, forbearance
or detention of the indebtedness of the Company evidenced hereby outstanding
from time to time shall, to the extent permitted by applicable law, and to the
extent necessary to preclude exceeding the limit of validity prescribed by law,
be amortized, prorated, allocated and spread from the date of disbursement of
the proceeds of this Note until payment in full of the loan evidenced hereby so
that the actual rate of interest on account of such indebtedness is uniform
throughout the term hereof.
(f) Time is of the essence with respect to the performance of the
obligations of the Company and Parent under this Note.
(g) Any notice required or permitted to be given hereunder shall be
in writing, and shall be given in the manner set forth in the Senior Credit
Agreement and to the addresses set forth below.
-9-
(h) No modification, waiver, amendment, discharge or change of this
Note shall be valid unless the same is in writing and signed by the party
against which the enforcement of such modification, waiver, amendment, discharge
or change is sought.
(i) In the event any one or more of the provisions contained in this
Note should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein or therein shall not in any way be affected or impaired thereby.
(j) This Note represents the agreement of the Company, Parent and
Holder with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by Holder relative to the subject
matter hereof not expressly set forth or referred to herein.
(k) This Note shall inure to the benefit of and shall be binding on
the parties hereto and their respective successors and assigns, provided that
neither the Company nor Parent may transfer its obligations under, or interest
in, this Note, or any portion hereof, without the prior written consent of
Holder.
(l) This Note is unsecured.
(m) The Company agrees to pay all costs and out-of-pocket expenses
(including, but not limited to, reasonable attorneys' fees) incurred by Holder
in connection with the negotiation, documentation and consummation of this Note,
but not in excess of $7,500 in the aggregate.
(n) Capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Senior Credit Agreement; provided that it is
hereby agreed that all references to the Senior Credit Agreement, including
defined terms, procedures, and particular terms and provisions, shall be
references to the Senior Credit Agreement, as amended from time to time;
provided further that if the Senior Debt shall be paid in full in cash, or the
Senior Credit Agreement shall otherwise be terminated or no longer in full force
and effect, such references to the Senior Credit Agreement shall be references
to the Senior Credit Agreement as in effect as of the date hereof.
(o) Each of the Company and Parent agrees that any suit for the
enforcement of this Note may be brought in the courts of the State of Illinois
or any federal court sitting therein and consents to the nonexclusive
jurisdiction of such court and to service of process in any such suit being made
upon the Company or Parent by mail at the address specified by reference in
Section 7(g). Each of the Company and Parent hereby waives any objection that
it may now or hereafter have to the venue of any such suit or any such court or
that such suit was brought in an inconvenient court.
(p) EACH OF THE COMPANY AND PARENT HEREBY WAIVES ITS RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS NOTE, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law,
each of the Company and Parent hereby waives any right which it may have to
claim or recover in any litigation referred to in the preceding sentence any
special, exemplary, punitive or consequential damages or any damages other than,
or in addition to, actual damages. Each of the Company and Parent (i) certifies
that neither Holder nor any
-10-
representative, agent or attorney of Xxxxxx has represented, expressly or
otherwise, that Xxxxxx would not, in the event of litigation, seek to enforce
the foregoing waivers, and (ii) acknowledges that, in making the loan evidenced
by this Note, Xxxxxx is relying upon, among other things, the waivers and
certifications contained in this Section 7(p).
(q) This Note may be executed (i) in counterparts, each of which
counterparts shall be an original, and all of which together shall constitute
one instrument, and (ii) by facsimile signature, and such facsimile signature
shall be deemed to be an original instrument.
(r) The Company shall pay, indemnify and hold Holder and its
officers, directors, members, employees, agents and affiliates (the "Indemnified
Parties") harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including reasonable attorneys'
fees and disbursements) which may be incurred by the Indemnified Parties or any
of them, including in connection with any claims (whether or not they result in
an investigative, administrative or judicial proceeding) that may at any time be
asserted against any Indemnified Party, as a result of the execution, delivery,
enforcement and performance of, or the transactions contemplated by, this Note,
provided, that the Company shall have no obligation hereunder to any Indemnified
Party with respect to indemnified liabilities arising from the gross negligence
or willful misconduct of such Indemnified Party.
(s) This Note amends and restates in its entirety, but shall not
constitute payment of amounts outstanding under, that certain Subordinated
Promissory Note and Guaranty dated November 21, 2000 (the "Original Note"), in
the principal amount of $2,000,000.00, executed by the Company and Parent made
payable to Holder. Advances and loans made under the Original Note shall be
treated as if made under this Note.
-11-
IN WITNESS WHEREOF, the Company and Parent have caused this Note to be
executed as of this 20/th/ day of February, 2001.
CHART HOUSE, INC., a Delaware corporation
By: __________________________________________________
Name:__________________________________________________
Its: __________________________________________________
CHART HOUSE ENTERPRISES, INC., a Delaware corporation
(solely for purpose of Sections 4 and 6 above)
By: __________________________________________________
Name:__________________________________________________
Its: __________________________________________________
Address for notices to the Company and Parent:
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Fax No.: 000-000-0000
Attn: General Counsel
Address for notices to Holder:
EGI Fund (00) Investors, L.L.C.
c/o Equity Group Investments, L.L.C.
Two North Riverside Plaza
Xxxxx 000
Xxxxxxx, XX 00000
Fax No.: 000-000-0000
Attn: General Counsel
-12-
EXHIBIT 10.30
THIS AMENDED AND RESTED GUARANTY IS SUBORDINATED TO THE GUARANTY DATED AS OF
APRIL 26, 1999 EXECUTED BY EACH OF THE UNDERSIGNED IN FAVOR OF BANK BOSTON, N.A.
(n/k/a FLEET NATIONAL BANK), AS AGENT ("AGENT"), AND CERTAIN OTHER FINANCIAL
INSTITUTIONS PARTY TO THAT CERTAIN REVOLVING CREDIT AND TERM LOAN AGREEMENT
DATED AS OF APRIL 26, 1999 BY AND AMONG CHART HOUSE ENTERPRISES, INC., CHART
HOUSE, INC., AGENT, AND SUCH FINANCIAL INSTITUTIONS, PURSUANT TO THAT CERTAIN
SECOND AMENDED AND RESTATED SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH
EXECUTED BY AGENT, CHART HOUSE INC., CHART HOUSE ENTERPRISES INC., THE
UNDERSIGNED, AND EGI FUND (00) INVESTORS, L.L.C.
AMENDED AND RESTATED
GUARANTY
--------
AMENDED AND RESTATED GUARANTY (this "Guaranty"), dated as of February 20,
2001, by CHART HOUSE ENTERPRISES OF IDAHO, INC., an Idaho corporation, CHART
HOUSE ENTERPRISES OF PUERTO RICO, INC., a Louisiana corporation, CHART HOUSE OF
ANNAPOLIS, INC., a Delaware corporation, CHART HOUSE OF MARYLAND, INC., a
Delaware corporation, CHART HOUSE ACQUISITION, INC., a Delaware corporation, BIG
WAVE, INC., a Delaware corporation, CORK 'N XXXXXXX, INC., a Delaware
corporation, and ANALOS COMPANY, a Delaware corporation, WEST 00XX XXXXXX, INC.,
a Delaware corporation, CHART HOUSE ACQUISITION OF NEVADA, INC., a Delaware
corporation, and CHART HOUSE ACQUISITION OF MARYLAND, INC., a Delaware
corporation (collectively the "Guarantors"), in favor of EGI FUND (00)
INVESTORS, L.L.C., a Delaware limited liability company ("Lender").
WHEREAS, Chart House Enterprises, Inc. ("Parent") and Chart House, Inc.
(the "Company") and the Guarantors are members of a group of related
corporations, the success of any one of which is dependent in part on the
success of the other members of such group;
WHEREAS, each of the Guarantors expects to receive substantial direct and
indirect benefits from the extensions of credit to the Company by Lender
pursuant to that certain Amended and Restated Subordinated Promissory Note and
Guaranty of even date herewith (as amended from time to time, the "Note")
executed by Parent and the Company in favor of Lender, and pursuant to which
Xxxxxx made a loan (the "Loan") to the Company in the amount of $2,000,000
(which benefits are hereby acknowledged);
WHEREAS, it is a condition precedent to Xxxxxx's making the Loan to the
Company that each of the Guarantors execute and deliver to Lender this guaranty;
and
WHEREAS, each of the Guarantors wishes to guaranty the Company's
obligations to Lender under or in respect of the Loan and the Note as provided
herein;
NOW, THEREFORE, each of the Guarantors hereby agrees with Xxxxxx as
follows:
1. Definitions. The term "Obligations" and all other capitalized terms
-----------
used herein without definition shall have the respective meanings provided
therefor in the Note.
2. Guaranty of Payment and Performance. Each of the Guarantors hereby
-----------------------------------
guarantees to Lender the full and punctual payment when due (whether at stated
maturity, by required pre-payment, by acceleration or otherwise), as well as the
performance, of all of the Obligations including all such Obligations which
would become due but for the operation of the automatic stay pursuant to
(S)362(a) of
the Federal Bankruptcy Code and the operation of (S)(S)502(b) and 506(b) of the
Federal Bankruptcy Code. This Guaranty is an absolute, unconditional and
continuing guaranty of the full and punctual payment and performance of all of
the Obligations and not of their collectibility only and is in no way
conditioned upon any requirement that Lender first attempt to collect any of the
Obligations from the Company or resort to any collateral security or other means
of obtaining payment. Should the Company default in the payment or performance
of any of the Obligations, the joint and several obligations of each of the
Guarantors hereunder with respect to such Obligations in default shall, upon
demand by Xxxxxx, become immediately due and payable, without demand or notice
of any nature, all of which are expressly waived by the Guarantors. Payments by
each of the Guarantors hereunder may be required by Xxxxxx on any number of
occasions. All payments by such Guarantors hereunder shall be made to Lender, in
the manner and at the place of payment specified therefor in the Note.
3. Guarantors' Agreement to Pay Enforcement Costs, etc. Each of the
---------------------------------------------------
Guarantors further jointly and severally agrees, as the principal obligor and
not as a guarantor only, to pay to Lender, on demand, all costs and expenses
(including court costs and reasonable legal expenses) incurred or expended by
Lender in connection with the Obligations, this Guaranty and the enforcement
thereof, together with interest on amounts recoverable under this (S)3 from the
time when such amounts become due until payment, whether before or after
judgment, at the rate of interest set forth in the Note, provided that if such
---------
interest exceeds the maximum amount permitted to be paid under applicable law,
then such interest shall be reduced to such maximum permitted amount.
4. Waivers by Guarantors; Xxxxxx's Freedom to Act. Each of the Guarantors
----------------------------------------------
agrees that the Obligations will be paid and performed strictly in accordance
with their respective terms, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of Lender with respect thereto. Each of the Guarantors waives promptness,
diligences, presentment, demand, protest, notice of acceptance, notice of any
Obligations incurred and all other notices of any kind, all defenses which may
be available by virtue of any valuation, stay, moratorium law or other similar
law now or hereafter in effect, any right to require the marshalling of assets
of the Company or any other entity or other person primarily or secondarily
liable with respect to any of the Obligations, and all suretyship defenses
generally. Without limiting the generality of the foregoing, each of the
Guarantors agrees to the provisions of any instrument evidencing, securing or
otherwise executed in connection with any Obligation and agrees that the
obligations of each of the Guarantors hereunder shall not be released or
discharged, in whole or in part, or otherwise affected by (i) the failure of
Lender to assert any claim or demand or to enforce any right or remedy against
the Company or any other entity or other person primarily or secondarily liable
with respect to any of the Obligations; (ii) any extensions, compromise,
refinancing, consolidation or renewals of any Obligation; (iii) any change in
the time, place or manner of payment of any of the Obligations or any
rescissions, waivers, compromise, refinancing, consolidation or other amendments
or modifications of any of the terms or provisions of the Note or any other
agreement evidencing, securing or otherwise executed in connection with any of
the Obligations made in accordance with the terms thereof; (iv) the addition,
substitution or release of any entity or other person primarily or secondarily
liable for any Obligation; or (v) any other act or omission which might in any
manner or to any extent vary the risk of such Guarantor or otherwise operate as
a release or discharge of such Guarantor, all of which may be done without
notice to the Guarantor.
5. Unenforceability of Obligations Against Company. If for any reason the
-----------------------------------------------
Company has no legal existence or is under no legal obligation to discharge any
of the Obligations, or if any of the Obligations have become irrecoverable from
the Company by reason of the Company's insolvency, bankruptcy or reorganization
or by other operation of law or for any other reason, this Guaranty shall
nevertheless be binding on each of the Guarantors to the same extent as if such
Guarantor at all times had been the principal obligor on all such Obligations.
In the event that acceleration of the time for payment of any of the Obligations
is stayed upon the insolvency, bankruptcy or reorganization of the Company, or
2
for any other reason, all such amounts otherwise subject to acceleration under
the terms of the Note or any other agreement evidencing, securing or otherwise
executed in connection with any Obligation shall be immediately due and payable
by such Guarantor.
6. Subrogation; Subordination.
--------------------------
6.1. Waiver of Rights Against Company. Until the final payment and
--------------------------------
performance in full of all of the Obligations, none of the Guarantors shall
exercise and each of the Guarantors hereby waives any rights against the
Company arising as a result of payment by such Guarantor hereunder, by way
of subrogation, reimbursement, restitution, contribution or otherwise, and
will not prove any claim in competition with Xxxxxx in respect of any
payment hereunder in any bankruptcy, insolvency or reorganization case or
proceedings of any nature; none of the Guarantors will claim any setoff,
recoupment or counterclaim against the Company in respect of any liability
of such Guarantor to the Company.
6.2. Subordination. The payment of any amounts due with respect to any
-------------
indebtedness of the Company for money borrowed or credit received now or
hereafter owed to each of the Guarantors is hereby subordinated to the
prior payment in full of all of the Obligations. Each of the Guarantors
agrees that, after the occurrence of any default in the payment or
performance of any of the Obligations, such Guarantor will not demand, sue
for or otherwise attempt to collect any such indebtedness of the Company to
such Guarantor until all of the Obligations shall have been paid in full.
If, notwithstanding the foregoing sentence, such Guarantor shall collect,
enforce or receive any amounts in respect of such indebtedness while any
Obligations are still outstanding, such amounts shall be collected,
enforced and received by such Guarantor as trustee for Lender and be paid
over to Lender on account of the Obligations without affecting in any
manner the liability of such Guarantor under the other provisions of this
Guaranty.
6.3. Provisions Supplemental. The provisions of this (S)6 shall be
-----------------------
supplemental to and not in derogation of any rights and remedies of Lender
under any separate subordination agreement which Lender may at any time and
from time to time enter into with any of the Guarantors.
7. Setoff. Upon the occurrence and during the continuance of an Event of
------
Default, Lender is hereby authorized at any time and from time to time, without
notice to the Guarantors (any such notice being expressly waived by each of the
Guarantors) and to the fullest extent permitted by law, to set off and apply any
and all sums credited by or due from Lender to any Guarantor against the
obligations of such Guarantor under this Guaranty, whether or not Lender shall
have made any demand under this Guaranty and although such obligations may be
contingent or unmatured.
8. Further Assurances. Each of the Guarantors agrees that it will from
------------------
time to time, at the request of Lender, do all such things and execute all such
documents as Lender may consider necessary or desirable to give full effect to
this Guaranty and to perfect and preserve the rights and powers of Lender
hereunder. Each of the Guarantors acknowledges and confirms that such Guarantor
itself has established its own adequate means of obtaining from the Company on a
continuing basis all information desired by such Guarantor concerning the
financial condition of the Company and that such Guarantor will look to the
Company and not to Lender in order for such Guarantor to keep adequately
informed of changes in the Company's financial condition.
9. Termination; Reinstatement. This Guaranty shall remain in full force
--------------------------
and effect until Lender is given written notice of any of the Guarantors'
intention to discontinue this Guaranty, notwithstanding any intermediate or
temporary payment or settlement of the whole or any part of the Obligations. No
such
3
notice shall be effective unless received and acknowledged by an officer of
Lender at the address of Xxxxxx for notices set forth in the Note. No such
notice shall affect any rights of Lender hereunder, including without limitation
the rights set forth in (S)(S)4 and 6, with respect to any Obligations incurred
or accrued prior to the receipt of such notice or any Obligations incurred or
accrued pursuant to any contract or commitment in existence prior to such
receipt. This Guaranty shall continue to be effective or be reinstated,
notwithstanding any such notice, if at any time any payment made or value
received with respect to any Obligation is rescinded or must otherwise be
returned by Lender upon the insolvency, bankruptcy or reorganization of the
Company, or otherwise, all as though such payment had not been made or value
received.
10. Successors and Assigns. This Guaranty shall be binding upon each of
----------------------
the Guarantors, its successors and assigns, and shall inure to the benefit of
Lender and its successors, transferees and assigns. Without limiting the
generality of the foregoing sentence, Lender may assign or otherwise transfer
the Note or any other agreement or note held by it evidencing, securing or
otherwise executed in connection with the Obligations, or sell participations in
any interest therein, to any other entity or other person, and such other entity
or other person shall thereupon become vested, to the extent set forth in the
agreement evidencing such assignment, transfer or participation, with all the
rights in respect thereof granted to Lender herein. No Guarantor may assign any
of its obligations hereunder.
11. Amendments and Waivers. No amendment or waiver of any provision of
----------------------
this Guaranty nor consent to any departure by any of the Guarantors therefrom
shall be effective unless the same shall be in writing and signed by Xxxxxx. No
failure on the part of Lender to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.
12. Notices. All notices and other communications called for hereunder
-------
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or mailed
first class, postage prepaid, or, in the case of telegraphic or telexed notice,
when transmitted, answer back received, addressed as follows: if to a Guarantor,
at the address set forth beneath its signature hereto, and if to Lender, at the
address for notices to Lender set forth in the Note, or at such address as
either party may designate in writing to the other.
13. Governing Law; Consent to Jurisdiction. THIS GUARANTY SHALL BE GOVERNED
--------------------------------------
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS OF
CONFLICTS) OF THE STATE OF ILLINOIS. Each of the Guarantors agrees that any suit
for the enforcement of this Guaranty may be brought in the courts of the State
of Illinois or any federal court sitting therein and consents to the
nonexclusive jurisdiction of such court and to service of process in any such
suit being made upon the Guarantor by mail at the address specified by reference
in (S)12. Each of the Guarantors hereby waives any objection that it may now or
hereafter have to the venue of any such suit or any such court or that such suit
was brought in an inconvenient court.
14. Waiver of Jury Trial. EACH OF THE GUARANTORS HEREBY WAIVES ITS RIGHT
--------------------
TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law,
each of the Guarantors hereby waives any right which it may have to claim or
recover in any litigation referred to in the preceding sentence any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages. Each of the Guarantors (a) certifies that neither
Xxxxxx nor any representative, agent or attorney of Xxxxxx has represented,
expressly or otherwise, that Lender would not, in the event of litigation, seek
4
to enforce the foregoing waivers and (b) acknowledges that, in making the loan
evidenced by the Note, Xxxxxx is relying upon, among other things, the waivers
and certifications contained in this (S)14.
15. Miscellaneous. This Guaranty constitutes the entire agreement of each
-------------
of the Guarantors with respect to the matters set forth herein. The rights and
remedies herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Guaranty shall be in addition
to any other guaranty of or collateral security for any of the Obligations. The
invalidity or unenforceability of any one or more sections of this Guaranty
shall not affect the validity or enforceability of its remaining provisions.
Captions are for the ease of reference only and shall not affect the meaning of
the relevant provisions. The meanings of all defined terms used in this Guaranty
shall be equally applicable to the singular and plural forms of the terms
defined. This Guaranty may be executed (a) in counterparts, each of which
counterparts shall be an original, and all of which together shall constitute
one instrument, and (b) by facsimile signature, and such facsimile signature
shall be deemed to be an original instrument. This Guaranty amends and restates
in its entirety that certain Guaranty dated as of November 21, 2000 executed by
the undersigned in favor of Xxxxxx.
5
IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to be
executed and delivered as of the date first above written.
CHART HOUSE ENTERPRISES OF IDAHO, INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
CHART HOUSE ENTERPRISES OF PUERTO RICO,
INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
CHART HOUSE OF MARYLAND, INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
CHART HOUSE OF ANNAPOLIS, INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
6
CHART HOUSE ACQUISITION, INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
BIG WAVE, INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
CORK'N XXXXXXX, INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
ANALOS COMPANY
By: ________________________________
Name: ________________________________
Title: ________________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
WEST 00/XX/ XXXXXX, INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
7
CHART HOUSE ACQUISITION OF NEVADA, INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
CHART HOUSE ACQUISITION OF MARYLAND,
INC.
By: ________________________________
Name: ________________________________
Title: ________________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
8
Exhibit 10.40
SECOND AMENDED AND RESTATED SUBORDINATION AGREEMENT
---------------------------------------------------
SECOND AMENDED AND RESTATED SUBORDINATION AGREEMENT (this "Agreement"),
dated as of February 20, 2001, among FLEET NATIONAL BANK (formerly known as
BankBoston, N.A.), a national banking association having its office at 000
Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, in its capacity as agent (the
"Agent") for the Banks (as hereinafter defined), EGI-FUND (00) INVESTORS,
L.L.C., a Delaware limited liability company having a principal of business at
Two North Riverside Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000 (the
"Subordinating Creditor"), CHART HOUSE, INC., a Delaware corporation having its
office at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000 (the
"Borrower"), CHART HOUSE ENTERPRISES, INC. (the "Parent") and each of the
Subsidiaries of the Borrower set forth on the signature pages hereto as
Guarantors.
WHEREAS, pursuant to a Revolving Credit and Term Loan Agreement, dated as
of April 26, 1999 (as amended and in effect from time to time, including any
replacement agreement therefor, the "Credit Agreement"), among the lending
institutions party thereto (the "Banks"), the Agent, the Borrower and the
Parent, the Banks have agreed, upon the terms and subject to the conditions
contained therein, to make loans and otherwise to extend credit to the Borrower;
and
WHEREAS, the Subordinating Creditor has extended credit to the Borrower
pursuant to a Subordinated Promissory Note and Guaranty dated as of November 21,
2000 (as assigned to the Subordinating Creditor pursuant to the Assignment of
Loan and Loan Documents dated as of December 18, 2000 between the Subordinating
Creditor and Samstock, L.L.C.) (as amended with the consent of the Agent as
provided herein and in effect from time to time, the "Original Subordinated
Note"), executed by the Borrower and the Parent in favor of the Subordinating
Creditor; and
WHEREAS, the Agent, the Borrower, the Parent, the Guarantors and the
Subordinating Creditor entered into an Amended and Restated Subordination
Agreement, dated as of December 18, 2000 (the "Original Subordination
Agreement") pursuant to which all indebtedness of the Borrower to the
Subordinating Creditor was subordinated to indebtedness of the Borrower to the
Agent and the Banks on the terms and conditions contained therein;
WHEREAS, the Original Subordinated Note shall be amended and restated in
its entirety by the Amended and Restated Subordinated Promissory Note and
Guaranty dated as of February __, 2001 (the "Subordinated Note") executed by the
Borrower and the Parent in favor of the Subordinating Creditor, as set forth
therein and shall remain in full force and effect only as set forth therein;
WHEREAS, the parties hereto wish to amend and restate the Original
Subordination Agreement to amend certain provisions thereto;
WHEREAS, it is a condition precedent to the Banks' willingness to continue
to make loans and otherwise to extend credit to the Borrower pursuant to the
Credit
Agreement that the Borrower and the Subordinating Creditor enter into this
Agreement with the Agent; and
WHEREAS, in order to induce the Banks to continue to make loans and
otherwise extend credit to the Borrower pursuant to the Credit Agreement, the
Borrower and the Subordinating Creditor have agreed to enter into this Agreement
with the Agent;
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements
herein contained and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Definitions. Terms not otherwise defined herein have the same
-----------
respective meanings given to them in the Credit Agreement. In addition, the
following terms shall have the following meanings:
Senior Debt. All principal, interest, fees, costs, enforcement expenses
-----------
(including legal fees and disbursements), collateral protection expenses and
other reimbursement or indemnity obligations created or evidenced by the Credit
Agreement or any of the other Loan Documents, or any prior, concurrent, or
subsequent notes, instruments or agreements of indebtedness, liabilities or
obligations of any type or form whatsoever relating thereto in favor of the
Agent or any of the Banks. Senior Debt shall expressly include any and all
interest accruing or out of pocket costs or expenses incurred after the date of
any filing by or against the Borrower of any petition under the federal
Bankruptcy Code or any other bankruptcy, insolvency or reorganization act
regardless of whether the Agent's or any Bank's claim therefor is allowed or
allowable in the case or proceeding relating thereto.
Subordinated Debt. All principal, interest (including interest accrued
-----------------
pursuant to the Subordinated Note), fees, costs, enforcement expenses (including
legal fees and disbursements), collateral protection expenses and other
reimbursement and indemnity obligations created or evidenced by the Subordinated
Note, the Subordinated Guaranty or any prior, concurrent or subsequent notes,
instruments or agreements of indebtedness, liabilities or obligations of any
type or form whatsoever relating thereto in favor of the Subordinating Creditor.
Subordinated Documents. Collectively, the Subordinated Note, the
----------------------
Subordinated Guaranty, any promissory notes executed in connection therewith and
any and all guaranties and security interests, mortgages and other liens
directly or indirectly guarantying or securing any of the Subordinated Debt, and
any and all other documents or instruments evidencing or further guarantying or
securing directly or indirectly any of the Subordinated Debt, whether now
existing or hereafter created.
Subordinated Guaranty. The Amended and Restated Guaranty, dated as of
---------------------
February __, 2001, made by each Subsidiary of the Borrower in favor of the
Subordinating Creditor.
2
2. General. Except as expressly permitted by Section 11.16 of the Credit
-------
Agreement, the Subordinated Debt and any and all Subordinated Documents shall be
and hereby are subordinated and the payment thereof is deferred until the full
and final payment in cash of the Senior Debt, whether now or hereafter incurred
or owed by the Borrower. The Subordinating Creditor acknowledges and agrees
that, except as expressly permitted by Section 11.16 of the Credit Agreement,
the Subordinated Debt may not be prepaid without the consent of the Agent and
the Banks, such consent to be granted or withheld in the sole and absolute
discretion of the Agent and the Banks.
3. Enforcement. The Subordinating Creditor will not take or omit to take
-----------
any action or assert any claim with respect to the Subordinated Debt or
otherwise which is inconsistent with the provisions of this Agreement. Without
limiting the foregoing, the Subordinating Creditor will not assert, collect or
enforce the Subordinated Debt or any part thereof or take any action to
foreclose or realize upon the Subordinated Debt or any part thereof or enforce
any of the Subordinated Documents except to the extent (but only to such extent)
that the commencement of a legal action may be required to toll the running of
any applicable statute of limitation, to defend any challenge to the validity of
the Subordinated Debt, or to file a proof of claim or to make a vote in a
proceeding described in (S)6.1. Until the Senior Debt has been finally paid in
full in cash, the Subordinating Creditor shall not have any right of
subrogation, reimbursement, restitution, contribution or indemnity whatsoever
from any assets of the Borrower or any guarantor of or provider of collateral
security for the Senior Debt. The Subordinating Creditor further waives any and
all rights with respect to marshalling.
4. Payments Held in Trust. Until the Senior Debt is paid in full in cash,
----------------------
the Subordinating Creditor will hold in trust and immediately pay over to the
Agent for the account of the Banks and the Agent, in the same form of payment
received, with appropriate endorsements, for application to the Senior Debt any
cash amount that the Borrower pays to the Subordinating Creditor with respect to
the Subordinated Debt, or as collateral for the Senior Debt any other assets of
the Borrower that the Subordinating Creditor may receive with respect to the
Subordinated Debt.
5. Defense to Enforcement. If the Subordinating Creditor, in contravention
----------------------
of the terms of this Agreement, shall commence, prosecute or participate in any
suit, action or proceeding against the Borrower, then the Borrower may interpose
as a defense or plea the making of this Agreement, and the Agent or any Bank may
intervene and interpose such defense or plea in its name or in the name of the
Borrower. If the Subordinating Creditor, in contravention of the terms of this
Agreement, shall attempt to collect any of the Subordinated Debt or enforce any
of the Subordinated Documents, then the Agent, any Bank or the Borrower may, by
virtue of this Agreement, restrain the enforcement thereof in the name of the
Agent or such Bank or in the name of the Borrower. If the Subordinating
Creditor, in contravention of the terms of this Agreement, obtains any cash or
other assets of the Borrower as a result of any administrative, legal or
equitable actions, or otherwise, the Subordinating Creditor agrees forthwith to
pay, deliver and assign to the Agent, for the account of the
3
Banks and the Agent, with appropriate endorsements, any such cash for
application to the Senior Debt and any such other assets as collateral for the
Senior Debt.
6. Bankruptcy, etc.
---------------
6.1. Payments relating to Subordinated Debt. At any meeting of
--------------------------------------
creditors of the Borrower or in the event of any case or proceeding,
voluntary or involuntary, for the distribution, division or application of
all or part of the assets of the Borrower or the proceeds thereof, whether
such case or proceeding be for the liquidation, dissolution or winding up
of the Borrower or its business, a receivership, insolvency or bankruptcy
case or proceeding, an assignment for the benefit of creditors or a
proceeding by or against the Borrower for relief under the federal
Bankruptcy Code or any other bankruptcy, reorganization or insolvency law
or any other law relating to the relief of debtors, readjustment of
indebtedness, reorganization, arrangement, composition or extension or
marshalling of assets or otherwise, the Agent is hereby irrevocably
authorized at any such meeting or in any such proceeding to receive or
collect for the benefit of the Banks and the Agent any cash or other assets
of the Borrower distributed, divided or applied by way of dividend or
payment, or any securities issued on account of any Subordinated Debt, and
apply such cash to or to hold such other assets or securities as collateral
for the Senior Debt, and to apply to the Senior Debt any cash proceeds of
any realization upon such other assets or securities that the Agent in its
discretion elects to effect, until all of the Senior Debt shall have been
paid in full in cash, rendering to the Subordinating Creditor any surplus
to which the Subordinating Creditor is then entitled.
6.2. Securities by Plan of Reorganization or Readjustment.
----------------------------------------------------
Notwithstanding the foregoing provisions of (S)6.1, the Subordinating
Creditor shall be entitled to receive and retain any securities of the
Borrower or any other corporation or other entity provided for by a plan of
reorganization or readjustment (a) the payment of which securities is
subordinate, at least to the extent provided in this Agreement with respect
to Subordinated Debt, to the payment of all Senior Debt under any such plan
of reorganization or readjustment and (b) all other terms of which are
acceptable to the Banks and the Agent.
6.3. Subordinated Debt Voting Rights. At any such meeting of
-------------------------------
creditors or in the event of any such case or proceeding, the Subordinating
Creditor shall retain the right to vote and otherwise act with respect to
the Subordinated Debt (including, without limitation, the right to vote to
accept or reject any plan of partial or complete liquidation,
reorganization, arrangement, composition or extension), provided that the
--------
Subordinating Creditor shall not vote with respect to any such plan or take
any other action in any way so as to contest (a) the validity of any Senior
Debt or any collateral therefor or guaranties thereof, (b) the relative
rights and duties of any holders of any Senior Debt established in any
instruments or agreements creating or evidencing any of the Senior Debt
with
4
respect to any of such collateral or guaranties or (c) the Subordinating
Creditor's obligations and agreements set forth in this Agreement.
7. Lien Subordination. The Senior Debt, the Credit Agreement and the other
------------------
Loan Documents and any and all other documents and instruments evidencing or
creating the Senior Debt and all guaranties, mortgages, security agreements,
pledges and other collateral guarantying or securing the Senior Debt or any part
thereof shall be senior to the Subordinated Debt and all of the Subordinated
Documents irrespective of the time of the execution, delivery or issuance of any
thereof or the filing or recording for perfection of any thereof or the filing
of any financing statement or continuation statement relating to any thereof.
7.1. Further Assurances. The Subordinating Creditor hereby agrees,
------------------
upon request of the Agent at any time and from time to time, to execute
such other documents or instruments as may be requested by the Agent
further to evidence of public record or otherwise the senior priority of
the Senior Debt as contemplated hereby.
7.2. Books and Records. The Subordinating Creditor further agrees to
-----------------
maintain on its books and records such notations as the Agent may
reasonably request to reflect the subordination contemplated hereby and to
perfect or preserve the rights of the Agent hereunder. A copy of this
Agreement may be filed as a financing statement in any Uniform Commercial
Code recording office.
8. Banks' Freedom of Dealing. The Subordinating Creditor agrees, with
-------------------------
respect to the Senior Debt and any and all collateral therefor or guaranties
thereof, that the Borrower and the Banks may agree to increase the amount of the
Senior Debt or otherwise modify the terms of any of the Senior Debt, and the
Banks may grant extensions of the time of payment or performance to and make
compromises, including releases of collateral or guaranties, and settlements
with the Borrower and all other persons, in each case without the consent of the
Subordinating Creditor or the Borrower and without affecting the agreements of
the Subordinating Creditor or the Borrower contained in this Agreement;
provided, however, that nothing contained in this (S)8 shall constitute a waiver
-------- ------
of the right of the Borrower itself to agree or consent to a settlement or
compromise of a claim which the Agent or any Bank may have against the Borrower.
9. Modification or Sale of the Subordinated Debt. The Subordinating
---------------------------------------------
Creditor will not, at any time while this Agreement is in effect, modify any of
the terms of any of the Subordinated Debt or any of the Subordinated Documents;
nor will the Subordinating Creditor sell, transfer, pledge, assign, hypothecate
or otherwise dispose of any or all of the Subordinated Debt to any person other
than a person who agrees in a writing, satisfactory in form and substance to the
Agent, to become a party hereto and to succeed to the rights and to bound by all
of the obligations of the Subordinating Creditor hereunder. In the case of any
such disposition by the Subordinating Creditor, the Subordinating Creditor will
notify the Agent at least 10 days prior to the date of any of such intended
disposition.
5
10. Xxxxxxxx's Obligations Absolute. Nothing contained in this Agreement
-------------------------------
shall impair, as between the Borrower and the Subordinating Creditor, the
obligation of the Borrower to pay to the Subordinating Creditor all amounts
payable in respect of the Subordinated Debt as and when the same shall become
due and payable in accordance with the terms thereof, or prevent the
Subordinating Creditor (except as expressly otherwise provided in (S)3 or (S)6)
from exercising all rights, powers and remedies otherwise permitted by
Subordinated Documents and by applicable law upon a default in the payment of
the Subordinated Debt or under any Subordinated Document, all, however, subject
to the rights of the Agent and the Banks as set forth in this Agreement. The
failure of the Borrower to make any payment with respect to the Subordinated
Debt in accordance with its terms by reason of the operation of this Agreement
shall not be construed as preventing the occurrence of a default under the
Subordinated Document s.
11. Termination of Subordination. This Agreement shall continue in full
----------------------------
force and effect, and the obligations and agreements of the Subordinating
Creditor and the Borrower hereunder shall continue to be fully operative, until
all of the Senior Debt shall have been paid and satisfied in full in cash and
such full payment and satisfaction shall be final and not avoidable. To the
extent that the Borrower or any guarantor of or provider of collateral for the
Senior Debt makes any payment on the Senior Debt that is subsequently
invalidated, declared to be fraudulent or preferential or set aside or is
required to be repaid to a trustee, receiver or any other party under any
bankruptcy, insolvency or reorganization act, state or federal law, common law
or equitable cause (such payment being hereinafter referred to as a "Voided
Payment"), then to the extent of such Voided Payment, that portion of the Senior
Debt that had been previously satisfied by such Voided Payment shall be revived
and continue in full force and effect as if such Voided Payment had never been
made. In the event that a Voided Payment is recovered from the Agent or any
Bank, an Event of Default shall be deemed to have existed and to be continuing
under the Credit Agreement from the date of the Agent's or such Bank's initial
receipt of such Voided Payment until the full amount of such Voided Payment is
restored to the Agent or such Bank. During any continuance of any such Event of
Default, this Agreement shall be in full force and effect with respect to the
Subordinated Debt. To the extent that the Subordinating Creditor has received
any payments with respect to the Subordinated Debt subsequent to the date of the
Agent's or any Bank's initial receipt of such Voided Payment and such payments
have not been invalidated, declared to be fraudulent or preferential or set
aside or are required to be repaid to a trustee, receiver, or any other party
under any bankruptcy act, state or federal law, common law or equitable cause,
the Subordinating Creditor shall be obligated and hereby agrees that any such
payment so made or received shall be deemed to have been received in trust for
the benefit of the Agent or such Bank, and the Subordinating Creditor hereby
agrees to pay to the Agent for the benefit of the Agent or (as the case may be)
such Bank, upon demand, the full amount so received by the Subordinating
Creditor during such period of time to the extent necessary fully to restore to
the Agent or such Bank the amount of such Voided Payment. Upon the payment and
satisfaction in full in cash of all of the Senior Debt, which payment shall be
final and not avoidable, this Agreement will automatically terminate without any
additional action by any party hereto.
6
12. Notices. All notices and other communications which are required and
-------
may be given pursuant to the terms of this Agreement shall be in writing and
shall be sufficient and effective in all respects if given in writing or
telecopied, delivered or mailed by registered or certified mail, postage
prepaid, as follows:
If to the Agent:
Fleet National Bank
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
with a copy to:
Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X.X. Xxxxx
If to the Subordinating Creditor:
EGI-Fund (00) Investors, L.L.C.
c/o Equity Group Investments, L.L.C.
Two North Riverside Plaza
Suite 000
Xxxxxxx, XX 00000
Attention: Xxx Xxxxxxxxxxx
Xxxx Xxxxx
with a copy to:
Xxxx, Xxxxxx & Xxxxxxxxx
Two North LaSalle Street
Chicago, IL 60602
Attention: Xxxx Xxxxxxx
7
If to the Parent, the
Borrower or any Guarantor:
Chart House, Inc.
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
or such other address or addresses as any party hereto shall have
designated by written notice to the other parties hereto. Notices shall be
deemed given and effective upon the earlier to occur of (i) the third day
following deposit thereof in the U.S. mail or (ii) receipt by the party to whom
such notice is directed.
13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN
-------------
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL BE A
SEALED INSTRUMENT UNDER SUCH LAWS.
14. Waiver of Jury Trial. EACH OF THE SUBORDINATING CREDITOR AND THE
--------------------
BORROWER EACH HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION
OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY
RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF THE SUBORDINATING CREDITOR AND
THE BORROWER HEREBY WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER IN
ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. EACH OF THE SUBORDINATING CREDITOR AND THE BORROWER (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR ANY BANK HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY BANK WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B)
ACKNOWLEDGES THAT THE AGENT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
15. Miscellaneous. This Agreement may be executed in several counterparts
-------------
and by each party on a separate counterpart, each of which when so executed and
delivered shall be an original, and all of which together shall constitute one
instrument. In proving this Agreement, it shall not be necessary to produce or
account for more than one such counterpart signed by the party against which
enforcement is sought. The Agent, acting upon the instructions of the Required
Banks, may, in their sole and absolute discretion, waive any provisions of this
Agreement benefiting the Agent and the Banks; provided, however, that such
-------- -------
waiver shall be effective only if in writing and signed by the Agent and shall
be limited to the specific provision or provisions expressly so waived. This
Agreement shall be binding upon the successors and assigns of the
8
Subordinating Creditor and the Borrower and shall inure to the benefit of the
Agent and the Banks, the Agent's and the Banks' respective successors and
assigns, any lender or lenders refunding or refinancing any of the Senior Debt
and their respective successors and assigns, but shall not otherwise create any
rights or benefits for any third party. In the event that any lender or lenders
refund or refinance any of the Senior Debt, the terms "Credit Agreement", "Loan
Documents", "Event of Default" and the like shall refer mutatis mutandis to the
------- --------
agreements and instruments in favor of such lender or lenders and to the related
definitions contained therein. In the event of any inconsistency or conflict
between the Subordinated Documents and this Agreement, such inconsistency or
conflict will be governed by the terms of this Agreement and not the
Subordinated Documents. This Agreement constitutes the entire agreement between
the parties pertaining to the subject matter contained in it and supersedes all
prior and contemporaneous agreements, representations and understandings of the
parties with respect to the same, specifically including the Original
Subordination Agreement.
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BANK: FLEET NATIONAL BANK, As Agent
By:_________________________
Name:
Title:
SUBORDINATING CREDITOR: EGI-FUND (00) INVESTORS, L.L.C.
By:_________________________
Name:
Title:
PARENT: CHART HOUSE ENTERPRISES, INC.
By:_________________________
Name:
Title:
BORROWER: CHART HOUSE, INC.
By:_________________________
Name:
Title:
GUARANTORS: CHART HOUSE ENTERPRISES OF
IDAHO, INC.
By:_________________________
Name:
Title:
CHART HOUSE ENTERPRISES OF
PUERTO RICO, INC.
By:______________________________
Title:
CHART HOUSE OF ANNAPOLIS, INC.
By:______________________________
Title:
CHART HOUSE OF MARYLAND, INC.
By:______________________________
Title:
CHART HOUSE ACQUISITION, INC.
By:______________________________
Title:
BIG WAVE, INC.
By:______________________________
Title:
CORK 'N XXXXXXX, INC.
By:______________________________
Title:
ANALOS COMPANY
By:______________________________
Title:
WEST 00/xx/ XXXXXX, INC.
By:______________________________
Title:
CHART HOUSE ACQUISITION OF NEVADA, INC.
By:______________________________
Title:
CHART HOUSE ACQUISITION OF MARYLAND, INC.
By:______________________________
Title:
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF______________________________)
) ss.
COUNTY OF_____________________________)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ____ day of February 2001, personally appeared ____________
to me known personally, and who, being by me duly sworn, deposes and says that
he is the ___________ of EGI-FUND (00) INVESTORS, L.L.C., and that said
instrument was signed and sealed on behalf of said limited liability company by
authority of its members, and said _________________ acknowledged said
instrument to be the free act and deed of said limited liability company.
______________________________
Notary Public
My commission expires:
EXHIBIT 10.50
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD, ASSIGNED OR TRANSFERRED EXCEPT (i)
PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT WHICH HAS BECOME EFFECTIVE
AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC
EXEMPTION FROM REGISTRATION UNDER THE ACT CONSISTENT WITH ALL APPLICABLE
PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR STATE
SECURITIES LAWS
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL OF ALL INDEBTEDNESS OF THE ISSUER (THE "SENIOR DEBT") INCURRED
PURSUANT TO THAT CERTAIN REVOLVING CREDIT AND TERM LOAN AGREEMENT DATED AS OF
APRIL 26, 1999 (AS AMENDED FROM TIME TO TIME, THE "SENIOR CREDIT AGREEMENT") BY
AND AMONG CHART HOUSE ENTERPRISES, INC., A DELAWARE CORPORATION ("PARENT"), THE
COMPANY (AS DEFINED BELOW), BANK BOSTON, N.A. (n/k/a FLEET NATIONAL BANK), AS
AGENT ("AGENT") AND THE FINANCIAL INSTITUTIONS SIGNATORIES THERETO, PURSUANT TO
THAT CERTAIN AMENDED AND RESTATED SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH
(AS AMENDED FROM TIME TO TIME, THE "SUBORDINATION AGREEMENT") EXECUTED BY AGENT,
PARENT, THE COMPANY, THE SUBSIDIARY GUARANTORS PARTY THERETO, AND EGI FUND (01)
INVESTORS, L.L.C.
Amended and Restated
Subordinated Promissory Note and Guaranty
-----------------------------------------
Chicago, Illinois
February 20, 2001 $11,000,000.00
FOR VALUE RECEIVED, CHART HOUSE, INC., a Delaware corporation (the
"Company"), promises to pay to the order of EGI-Fund (01) Investors, L.L.C., a
Delaware limited liability company, or its assigns ("Holder", which term shall
include the holder, from time to time, of this Note) the sum of Eleven Million
and No/100ths Dollars ($11,000,000.00), or so much thereof as shall from time to
time be advanced, in legal tender of the United States, together with interest
(computed on the basis of a 360-day year of twelve 30-day months for actual days
elapsed) on the principal amount outstanding from time to time as provided in
Section 1 hereof.
1. Payments of Principal and Interest.
----------------------------------
(a) (i) Interest shall accrue on the unpaid principal of this Note
and shall be computed at a rate per annum from time to time equal to the
Then Applicable Eurodollar Rate (as defined below) plus sixteen percent
----
(16%), with such rate to change when and as such Then Applicable Eurodollar
Rate changes. Subject to the foregoing, interest hereunder shall be
applicable, and otherwise computed, for Interest Periods and in a manner
identical to the Interest Periods and manner applicable to the Loans under
the Senior Credit Agreement (including Revolving Credit Loans and Term
Loans). As used in this Note, "Then Applicable Eurodollar Rate" shall mean,
at any time, and from time to time, the Eurodollar Rate then applicable to
the Loans under the Senior Credit Agreement (including Revolving Credit
Loans and Term Loans), or any portion thereof, for the Eurodollar Rate Loan
with the Interest Period with the then shortest remaining duration. If at
the time the Then Applicable Eurodollar Rate is to be calculated there is
no outstanding Eurodollar Rate Loan applicable to the Loans under the
Senior Credit
Agreement (including Revolving Credit Loans and Term Loans), the Then
Applicable Eurodollar Rate shall equal the Eurodollar Rate which would be
applicable to a Loan for a one month Interest Period under the terms of the
Senior Credit Agreement. Except as provided below, to the extent permitted
by applicable law, accrued but unpaid interest owing on this Note shall be
added to the principal balance of this Note as of each Interest Payment
Date applicable to the Eurodollar Rate Loan used in calculating the Then
Applicable Eurodollar Rate, and shall accrue interest as if it were
additional principal hereunder.
(ii) Notwithstanding the foregoing, at such time that either (A) the
Senior Debt has been paid in full in cash or the Senior Credit Agreement
shall otherwise be terminated or no longer in full force and effect (the
"Senior Payment Date"), or (B) each of the following shall be true: (I) no
Default or Event of Default shall exist under the Senior Credit Agreement
(and none would exist after giving effect to the payment of such interest),
(II) if the outstanding principal amount of the Samstock Subordinated Debt
(as defined in the Senior Credit Agreement) is (x) less than or equal to
$5,000,000 and the Leverage Ratio (under the Senior Credit Agreement) is
less than 2.50:1.00 as at the end of the most recently ended fiscal quarter
of the Company, or (y) greater than $5,000,000 and the Leverage Ratio is
less than 2.00:1.00 as at the end of the most recently ended fiscal quarter
of the Company, and (III) the Company has delivered to Agent a pro forma
compliance certificate evidencing compliance (after giving effect to the
payment of such interest) with the financial covenants set forth in Section
12 of the Senior Credit Agreement and with clause (II) above, then in
either such case of (A) or (B) above, the Company may make, and Holder may
receive, payment of accrued interest on the unpaid principal of this Note
on each Interest Payment Date applicable to the Eurodollar Rate Loan used
in calculating the Then Applicable Eurodollar Rate.
(iii) The calculation of the Then Applicable Eurodollar Rate and the
interest rate hereunder, and the determination of advances and payments
made hereunder and/or with respect to the Letter of Credit (as hereinafter
defined), shall be made and determined by Xxxxxx and shall be binding upon
the Company absent manifest error. If not sooner paid, the total unpaid
principal balance, all accrued but unpaid interest, and all other amounts
owing hereunder, including the Commitment Fee, shall be due and payable on
the Maturity Date (as hereinafter defined). All payments of principal and
interest shall be made to the holder of this Note not later than 1:00 p.m.
(Chicago time) on the date and at the place of payment designated by the
holder hereof as aforesaid, and any payment received on such date but after
such hour shall be deemed to have been paid to and received by the holder
hereof on the next succeeding business day. If the date on which any
payment is required to be made pursuant to this Note is not a business day,
then such payment shall be due and payable on the next succeeding date
which is not a Saturday, Sunday or legal holiday, and such extension of
time shall be included in computing interest. All payments of principal
and interest made hereunder shall be applied first to accrued interest and
then to principal.
(b) As used in this Note, the term "Maturity Date" shall mean the
date which is the first to occur of (i) March 31, 2005, and (ii) the date on
which the right to accelerate payment of this Note accrues to the holder hereof
as provided in this Note, provided that, it is contemplated that,
notwithstanding the occurrence of the Rights Offering Closing (as hereinafter
defined), but after giving effect to Section 4(b)(i) below, a portion of the
outstanding principal amount of this Note in an amount not to exceed $5,000,000
(the "Long-Term Debt Portion")
-2-
shall remain outstanding hereunder. In such event, the terms of this Note shall
continue to apply to the Long-Term Debt Portion.
(c) All payments hereunder shall be made without reduction, and shall
not be subject to any claim or offset of any kind or nature whatsoever. Without
limiting the foregoing, all payments made by the Company or Parent under this
Note shall be made free and clear of, and without deduction or withholding for
or on account of, any future income, stamp or other taxes, levies, imposts,
deductions, charges, or withholdings, excluding taxes imposed on net income of
Holder (all such non-excluded taxes, levies, imposts, deductions, charges or
withholdings being hereinafter called "Taxes"). If any Taxes are required to be
withheld from any amounts so payable to Holder hereunder, the amounts so payable
to Holder shall be increased to the extent necessary to yield to Holder (after
payment of all Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Note.
(d) The terms and provisions of Sections 6.5 - 6.7 of the Senior
Credit Agreement shall be applicable to the indebtedness owing under this Note,
to the extent applicable, and with the necessary conforming modifications.
(e) After all principal, accrued interest, and all other amounts at
any time owed on this Note have been paid in full in cash, and all obligations
of Holder to make advances to the Company hereunder have been terminated, this
Note shall be surrendered to the Company for cancellation.
2. Letter of Credit; Guaranty. The Company hereby acknowledges that it
--------------------------
has requested Holder (or its affiliates) to apply to American National Bank and
Trust Company of Chicago or Bank One Corporation (either such entity, the
"Bank"), on the Company's behalf, for the issuance of a letter of credit (the
"Letter of Credit") in the stated amount of $5,859,378.60 for the benefit of
Xxxxxxx Xxxxxxxxxxx & Supply Co., Inc. (the "Beneficiary"). The Company also
acknowledges that the Letter of Credit would not be issued but for the approval
thereof by Xxxxxx and/or Xxxxxx's obligation to reimburse its affiliates for any
obligation such affiliates may have with respect to the Letter of Credit, and
that the Bank has agreed to issue the Letter of Credit on the basis of Holder's
or one of Holder's affiliates' agreement to reimburse the Bank for amounts paid
to the Beneficiary upon any draw or draws on the Letter of Credit. Further, the
Company acknowledges that Holder may elect to directly fund under this Note
obligations which otherwise might be paid to the Beneficiary pursuant to a draw
or draws on the Letter of Credit. Any and all amounts advanced hereunder to
fund amounts that would otherwise be paid to the Beneficiary pursuant to a draw
or draws on the Letter of Credit or to reimburse Holder for amounts owed by
Holder to its affiliates or by Xxxxxx's affiliates to the Bank in respect of a
draw or draws on the Letter of Credit shall, without duplication, be referred to
herein as an "LC Advance". The Company hereby irrevocably authorizes Xxxxxx and
Xxxxxx's affiliates to (a) cause the Letter of Credit to be issued, (b) make
payments in satisfaction of reimbursement obligations in connection with draws
on the Letter of Credit, and (c) fund advances hereunder, from time to time, and
in one or more payments, in lieu of draws on the Letter of Credit, as aforesaid.
The stated amount of the Letter of Credit shall constitute an advance hereunder
solely for purposes of Section 3(c) hereof, provided that LC Advances shall not
constitute an advance hereunder for purposes of said Section 3(c). The stated
amount of the Letter of Credit shall not constitute outstanding principal
amounts hereunder. LC Advances shall constitute outstanding principal amounts
hereunder, including without limitation for the purposes of Section 5(a)
hereunder. Without limitation to the foregoing, (i) from and after the issuance
of the Letter of Credit until, and to the extent, of LC Advances, the issued but
undrawn amount of the Letter
-3-
of Credit shall be subject to the Commitment Fee, and (ii) LC Advances shall
accrue interest as provided in Section 1(a) of this Note.
3. Requirements for Borrowings. The Company shall give Holder at least
---------------------------
one (1) business day's prior written notice of the Company's request for an
advance of loan proceeds under this Note, which notice shall be received by
Holder prior to 10:00 am. (Chicago time) and which notice shall state the
effective date of the borrowing, which effective date shall be a business day on
or before the Maturity Date. Holder's obligation and agreement to make such
advances shall terminate on the earlier of (i) June 30, 2001 and (ii) the
Maturity Date (such earlier date, the "Commitment Termination Date"), and shall
be made in Xxxxxx's sole and absolute discretion, and may, without limitation,
be conditioned upon each of the following being true in Holder's sole opinion:
(a) there shall exist no default or Event of Default under this Note
either immediately prior to or after giving effect to such advance or issuance;
(b) each of the representations and warranties made by the Company
hereunder shall be true and correct in all material respects on and as of the
date of such advance or issuance;
(c) the aggregate amount of advances made (including, without
duplication, the stated amount of the Letter of Credit and all LC Advances, and
any previously made advances which have been repaid by the Company, including
advances made under the Original Note (as defined below)), together with all
other amounts owing to Holder hereunder (excluding accrued interest not yet due
and payable and accrued interest which has been capitalized in accordance with
the terms of this Note), shall not exceed eleven million and no/100ths dollars
($11,000,000.00), either immediately prior to or giving effect to such advance;
and
(d) since the date hereof, there shall have occurred no material
adverse change in Parent's, the Company's or any of their respective
Subsidiaries' condition (financial or otherwise), assets, business or prospects,
including without limitation by reason of any force majeure event, such as war,
strike, lockout, act of god, casualty and inability to obtain materials.
Notwithstanding the foregoing, provided that each of the conditions set forth
above in Section 3(a)-(d) are true or have been met in Xxxxxx's sole judgment,
Holder shall make advances requested by the Company for the uses and in the
aggregate maximum amounts set forth in Exhibit A attached hereto. Amounts
borrowed by the Company hereunder and repaid may not be reborrowed. Each notice
from the Company requesting an advance of loan proceeds hereunder shall
constitute a certification by the Company that each of the foregoing conditions
are true or have been met.
4. Prepayment by the Company.
-------------------------
(a) Optional Prepayment. This Note may be prepaid in whole or in part
-------------------
without penalty or premium, together with all accrued interest on the amount
prepaid, and all other obligations then due and owing hereunder. Any prepayment
amount shall be first applied to collection costs and other amounts (excluding
principal and interest) due hereunder, then to accrued interest hereunder, and
then to principal.
(b) Mandatory Prepayment.
--------------------
-4-
(i) On the "Rights Offering Closing Date", the Company shall
apply the net proceeds of the "Rights Offering" (after application of such
proceeds to (A) expenses incurred in connection with the Rights Offering,
and (B) payment in full of all amounts owing under that certain Amended and
Restated Subordinated Promissory Note and Guaranty of even date herewith in
the amount of $2,000,000 executed by the Company and payable to EGI Fund
(00) Investors, L.L.C.) to pay Holder in full in cash the outstanding
principal (including capitalized interest and fees) of, accrued but unpaid
interest and fees on, and all other amounts owing under this Note (in such
order as Holder shall determine). The "Rights Offering Closing Date" shall
mean the date on which Series A senior convertible redeemable preferred
stock of Parent, par value $1.00 per share (the "Preferred Stock") is
issued and sold by Parent to stockholders of Parent as have elected to
purchase the Preferred Stock pursuant to that certain offering (the "Rights
Offering") of nontransferable rights to the stockholders of Parent to
purchase an aggregate of up to $8,000,000 newly issued Preferred Stock (the
"Rights Offering Closing").
(ii) From and after the Senior Payment Date, the Company shall
make to Holder payment of all principal outstanding hereunder (including
without limitation capitalized interest and fees) in equal quarterly
installments on the last day of each March, June, September and December
thereafter, and on the Maturity Date, commencing on the first of such dates
to occur after the Senior Payment Date.
5. Fees.
----
(a) Commitment Fee. The Company agrees to pay to Holder a commitment
--------------
fee (the "Commitment Fee") for the period from the date hereof to (i) the
Commitment Termination Date and (ii) solely with respect to the Letter of
Credit, the earlier of the date the Letter of Credit is returned to Holder or
its affiliates and the expiry date of the Letter of Credit (such date, the "LC
Termination Date"), computed at the rate of twelve percent (12%) per annum on
the average daily amount of the Available Commitment (as defined below) during
the period for which payment of the Commitment Fee accrues. The Commitment Fee
shall accrue quarterly in arrears on the last day of each March, June, September
and December and on the Commitment Termination Date and the LC Termination Date,
commencing on the first of such dates to occur after the date hereof, and, to
the extent permitted by applicable law, shall be added to the principal balance
of this Note as of each such quarterly accrual date or the Commitment
Termination Date or the LC Termination Date, if applicable, and shall accrue
interest thereon as if it were additional principal hereunder, and if not sooner
paid, shall be due and payable on the Maturity Date. "Available Commitment"
shall mean, subject to Section 2 above, (A) prior to the Commitment Termination
Date, an amount equal to $11,000,000.00 minus the aggregate principal amount of
-----
all advances then outstanding, and (B) if the LC Termination Date has not yet
occurred, after the Commitment Termination Date and until the LC Termination
Date, the issued but undrawn amount of the Letter of Credit.
(b) Other Letter of Credit Fees. The Company shall reimburse Holder
---------------------------
on demand by Holder for all (i) letter of credit fees charged by the Bank to
Holder or its affiliates on the undrawn amount of the Letter of Credit, and (ii)
other costs, fees and expenses, including without limitation attorneys' fees and
expenses, incurred by Holder or its affiliates as the result of or in connection
with the Bank's issuance and administration of the Letter of Credit. Such
costs, fees and expenses shall include, without limitation, (A) fees and charges
charged by the Bank for issuance, amendments, transfers and draws of or on the
Letter of Credit, (B) without duplication to fees referenced in clause (i)
above, up front and/or annual letter of credit and/or
-5-
usage or commitment fees charged by the Bank with respect to the Letter of
Credit, and (C) fees and charges charged by the Bank with respect to Holder's
(or its affiliate's) existing financing arrangement with the Bank with respect
to the Letter of Credit.
6. Events of Default. Each of the following shall constitute an "Event
-----------------
of Default," whatever the reason for such event and whether it shall be
voluntary or involuntary, or within or without the control of the Company, or be
effected by operation of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any governmental or nongovernmental body:
(a) The Company or Parent defaults in payment of the outstanding
principal, any accrued and unpaid interest on this Note or any other payments
due hereunder when the same become due and payable in accordance with the terms
of this Note; or
(b) The Company or Parent fails to observe, perform or comply with
any covenant, condition or agreement to be observed, performed or complied with
under this Note, and if such failure can be cured, such failure continues
unwaived and uncured for thirty (30) days following the date the Company and
Parent receives written notice from Holder of such nonperformance (it being
acknowledged that such 30-day cure and notice period shall not apply to Section
9(e)(ii)); or
(c) Any representation or warranty made by the Company or Parent
herein shall prove to have been untrue or incorrect in any material respect on
or as of the date made; or
(d) The Company or any Guarantor shall (i) commence a voluntary case
under the Federal bankruptcy laws (as now or hereafter in effect), (ii) file a
petition seeking to take advantage of any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or composition or
adjustment of debts, (iii) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in an involuntary case under
such bankruptcy laws or other laws, (iv) apply for, or consent to, or fail to
contest in a timely and appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of a
substantial part of its assets domestic or foreign, (v) admit in writing its
inability to pay its debts as they become due, (vi) make a general assignment
for the benefit of creditors, or (vii) take any corporate action for the purpose
of effecting any of the foregoing; or
(e) A case or other proceeding shall be commenced against the Company
or any Guarantor in any court of competent jurisdiction seeking (i) relief under
the Federal bankruptcy laws (as now or hereafter in effect) or under any other
laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization,
winding up or adjustment of debts, or (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like, of the Company or any Guarantor, or
of all or any substantial part of the assets, domestic or foreign, of the
Company or any Guarantor and such case or proceeding shall continue undismissed
or unstayed for a period of sixty (60) calendar days, or an order granting the
relief requested in such case or proceeding against the Company or any Guarantor
(including, but not limited to, an order for relief under such Federal
bankruptcy laws) shall be entered; or
(f) The holders of the Senior Debt shall accelerate the Senior Debt
or there shall occur an Event of Default under the Senior Credit Agreement; or
-6-
(g) The Amended and Restated Guaranty of even date herewith (the
"Guaranty") executed by the Company's subsidiaries, or the guaranty set forth in
Section 7 hereof, in each case executed or given by the Guarantors, shall cease,
for any reason, to be in full force and effect, or any Guarantor shall so assert
or shall disavow liability thereunder; or
(h) There shall occur an Event of Default or default under any
promissory note, guaranty, subordination agreement, reimbursement agreement,
standby purchase agreement, or other document or agreement, in any such case
relating to financing provided to the Company or the Rights Offering, executed
by the Company, Parent and/or any of their respective subsidiaries made payable
to, in favor of, for the benefit of or together with Holder or any affiliate of
Holder.
Upon the occurrence of an Event of Default hereunder, Holder may, upon
written notice to the Company, (i) declare all obligations owing hereunder
immediately due and payable and terminate all obligations to make advances
hereunder, provided however that upon an Event of Default described in Sections
6(d) or (e) above, all such obligations shall automatically become immediately
due and payable and terminated, as the case may be, without notice or demand of
any kind, (ii) require that the Company deliver to Holder, and the Company shall
deliver to Holder, cash collateral in an amount equal to the maximum amount
which could be payable under the Letter of Credit, as determined by Xxxxxx, and
(iii) pursue its other rights and remedies under this Note, the Guaranty and
applicable law.
All powers and remedies given by this Section 6 to Holder shall, to
the extent permitted by law, be deemed cumulative and not exclusive of any
thereof or of any other powers and remedies available to Holder by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Note, and no delay or omission of
Holder to exercise any right or power accruing upon any default occurring and
continuing as aforesaid shall impair any such right or an acquiescence therein
and every power and remedy given by this Section 6 or by law to Holder may be
exercised from time to time, and as often as shall be deemed expedient, by
Xxxxxx.
In addition to those remedies set forth in this Section 6, if any
amount owing under this Note is not paid when due, whether at maturity or by
acceleration, interest shall accrue on such amount from the date due until the
date paid at the interest rate provided for in Section 1 of this Note.
Additionally, the Company promises to pay all costs of collection and
enforcement of this Note and the Guaranty, including without limitation
reasonable attorneys' fees and costs, whether or not suit is filed hereon. Such
costs and expenses shall include without limitation all costs, reasonable
attorneys' fees and expenses incurred by Holder in connection with any
insolvency, bankruptcy, reorganization, arrangement or other similar proceedings
involving the Company or any Guarantor.
7. Guaranty.
--------
(a) Guaranty of Payment and Performance. The Parent hereby guarantees
-----------------------------------
to Holder the full and punctual payment when due (whether at stated maturity, by
required pre-payment, by acceleration or otherwise), as well as the performance,
of all of the indebtedness and other amounts owing under this Note, including
all LC Advances (collectively, the "Obligations"), including all such
Obligations which would become due but for the operation of the automatic stay
pursuant to (S)362(a) of the Federal Bankruptcy Code and the operation of
(S)(S)502(b) and 506(b) of the Federal Bankruptcy Code. This guaranty is an
absolute, unconditional and continuing guaranty of the full and punctual payment
and performance of all
-7-
of the Obligations and not of their collectability only and is in no way
conditioned upon any requirement that Holder first attempt to collect any of the
Obligations from the Company or resort to any collateral security or other means
of obtaining payment. Should the Company default in the payment or performance
of any of the Obligations, the obligations of the Parent hereunder with respect
to such Obligations in default shall, upon demand by Holder, become immediately
due and payable to Holder, without demand or notice of any nature, all of which
are expressly waived by the Parent. Payments by the Parent hereunder may be
required by Xxxxxx on any number of occasions. All payments by the Parent
hereunder shall be made to the Holder, in the manner and at the place of payment
specified therefor for payments hereunder to be made by the Company.
(b) Parent's Agreement to Pay Enforcement Costs, etc. The Parent
------------------------------------------------
further agrees, as the principal obligor and not as a guarantor only, to pay to
Holder, on demand, all reasonable costs and expenses (including court costs and
reasonable legal expenses, including the allocated cost of staff counsel)
incurred or expended by Holder in connection with the Obligations, this guaranty
and the enforcement thereof, together with interest on amounts recoverable
hereunder from the time when such amounts become due until payment, whether
before or after judgment, at the rate of interest set forth in (S)1 hereof,
provided that if such interest exceeds the maximum amount permitted to be paid
--------
under applicable law, then such interest shall be reduced to such maximum
permitted amount.
(c) Waivers by the Parent; Xxxxxx's Freedom to Act. The Parent agrees
---------------------------------------------
that the Obligations will be paid and performed strictly in accordance with
their respective terms, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of Holder with respect thereto. The Parent waives promptness, diligence,
presentment, demand, protest, notice of acceptance, notice of any Obligations
incurred and all other notices of any kind, all defenses which may be available
by virtue of any valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshalling of assets of the
Company or any other entity or other Person primarily or secondarily liable with
respect to any of the Obligations, and all suretyship defenses generally.
Without limiting the generality of the foregoing, the Parent agrees to the
provisions of any instrument evidencing, securing or otherwise executed in
connection with any Obligation and agrees that the obligations of the Parent
hereunder shall not be released or discharged, in whole or in part, or otherwise
affected by (i) the failure of Holder to assert any claim or demand or to
enforce any right or remedy against the Company or any other entity or other
Person primarily or secondarily liable with respect to any of the Obligations;
(ii) any extensions, compromise, refinancing, consolidation or renewals of any
Obligation; (iii) any change in the time, place or manner of payment of any of
the Obligations or any rescissions, waivers, compromise, refinancing,
consolidation or other amendments or modifications of any of the terms or
provisions of this Note or any other agreement evidencing, securing or otherwise
executed in connection with any of the Obligations made in accordance with the
terms hereof; (iv) the addition, substitution or release of any entity or other
person primarily or secondarily liable for any Obligation; or (v) any other act
or omission which might in any manner or to any extent vary the risk of the
Parent or otherwise operate as a release or discharge of the Parent (other than
the indefeasible payment in full, in cash, of all of the Obligations), all of
which may be done without notice to the Parent.
(d) Unenforceability of Obligations Against the Company. If for any
---------------------------------------------------
reason the Company has no legal existence or is under no legal obligation to
discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from the Company by reason of the Company's insolvency, bankruptcy
or reorganization or by other operation of law
-8-
or for any other reason (other than the indefeasible payment in full, in cash,
of all of the Obligations), to the extent permitted by law, this guaranty shall
nevertheless be binding on the Parent to the same extent as if the Parent at all
times had been the principal obligor on all such Obligations. In the event that
acceleration of the time for payment of any of the Obligations is stayed upon
the insolvency, bankruptcy or reorganization of the Company, or for any other
reason, all such amounts otherwise subject to acceleration under the terms of
this Note or any other agreement evidencing, securing or otherwise executed in
connection with any Obligation shall be immediately due and payable by the
Parent.
(e) Subrogation; Subordination.
--------------------------
(i) Postponement of Rights Against the Company. Until the
------------------------------------------
final payment and performance in full in cash of all of the Obligations,
the Parent shall not exercise any rights against the Company arising as a
result of payment by the Parent hereunder, by way of subrogation,
reimbursement, restitution, contribution or otherwise, and will not prove
any claim in competition with Holder in respect of any payment hereunder in
any bankruptcy, insolvency or reorganization case or proceedings of any
nature; the Parent will not claim any setoff, recoupment or counterclaim
against the Company in respect of any liability of the Parent to the
Company.
(ii) Subordination. The payment of any amounts due with
-------------
respect to any indebtedness of the Company for money borrowed or credit
received now or hereafter owed to the Parent is hereby subordinated to the
prior payment in full in cash of all of the Obligations. The Parent agrees
that, after the occurrence of any default in the payment or performance of
any of the Obligations, the Parent will not demand, sue for or otherwise
attempt to collect any such indebtedness of the Company to such Parent
until all of the Obligations shall have been paid in full. If,
notwithstanding the foregoing sentence, the Parent shall collect, enforce
or receive any amounts in respect of such indebtedness while any
Obligations are still outstanding, such amounts shall be collected,
enforced and received by the Parent as trustee for the Holder and be paid
over to Holder, on account of the Obligations without affecting in any
manner the liability of the Parent under the other provisions of this
guaranty.
(iii) Provisions Supplemental. The provisions of this Section
-----------------------
7(e) shall be supplemental to and not in derogation of any rights and
remedies of Holder under any separate subordination agreement which Holder
may at any time and from time to time enter into with the Parent.
(f) Setoff. Upon the occurrence and during the continuation of an
------
Event of Default, Holder is hereby authorized at any time and from time to time,
without notice to the Parent (any such notice being expressly waived by the
Parent) and to the fullest extent permitted by law, to set off and apply any and
all sums credited by or due from Holder to the Parent against the obligations of
the Parent under this guaranty, whether or not Holder shall have made any demand
under this guaranty and although such obligations may be contingent or
unmatured.
(g) Further Assurances. The Parent agrees that it will from time to
------------------
time, at the request of Xxxxxx, do all such things and execute all such
documents as Holder may reasonably consider necessary or desirable to give full
effect to this guaranty and to perfect and preserve the rights and powers of
Holder hereunder. The Parent acknowledges and confirms that it has established
its own adequate means of obtaining from the Company on a continuing
-9-
basis all information desired by it concerning the financial condition of the
Company and that it will look to the Company and not to Holder in order for it
to keep adequately informed of changes in any of the Company's financial
condition.
(h) Termination; Reinstatement. This guaranty shall terminate upon
--------------------------
the final and indefeasible payment in full, in cash, of the Obligations.
Notwithstanding any termination of this guaranty upon the final and indefeasible
payment in full, in cash, of the Obligations, this guaranty shall continue to be
effective or be reinstated, if at any time any payment made or value received
with respect to any Obligation is rescinded or must otherwise be returned by
Holder upon the insolvency, bankruptcy or reorganization of the Company, or
otherwise, all as though such payment had not been made or value received.
(i) Successors and Assigns. This guaranty shall be binding upon the
----------------------
Parent, its successors and assigns, and shall inure to the benefit of Xxxxxx and
its respective successors, transferees and assigns. The Parent may not assign
any of its obligations hereunder.
8. Priority. The indebtedness evidenced by this Note is subordinate to
--------
the prior payment in full of the Senior Debt pursuant to the terms of the
Subordination Agreement.
9. Representations, Warranties and Covenants. Each of Parent and the
-----------------------------------------
Company represents and warrants to Holder as follows:
(a) Authorization. It has the corporate power and authority to
-------------
execute, deliver and perform this Note and to incur the Obligations, and it has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Note.
(b) No Consents Required. Except for any filings under applicable
--------------------
federal or state securities laws, no consent, approval or authorization of, or
declaration or filing with, any federal, state or local governmental authority
and no consent of any other person, company, partnership or other organization
or entity is required in connection with its execution, delivery and performance
of this Note.
(c) No Conflict. Its execution, delivery and performance of this
-----------
Note and payment of the Obligations does not and will not conflict with, or
constitute a violation or breach of, constitute a default under (i) any material
contract, mortgage, lien, lease, agreement or other instrument to which it is a
party or which is binding upon it, (ii) any requirement of law or regulation
applicable to it or (iii) its certificate of incorporation or bylaws.
(d) Enforceability. This Note has been duly executed and delivered
--------------
by it and constitutes its legal, valid and binding obligations, enforceable
against it in accordance with its terms.
(e) Covenants.
---------
(i) From the time that (and for so long as) the Senior Debt
shall be paid in full in cash, or the Senior Credit Agreement shall
otherwise be terminated or no longer in full force and effect, each and
every covenant contained in Sections 10-12 of the Senior Credit Agreement
(as in effect as of the date of such payment or termination) shall be
deemed incorporated in and a part of this Note as if they were set forth
herein,
-10-
with all necessary conforming modifications, and the Company and Parent
shall comply with each and every such covenant.
(ii) The Company and Parent shall cause the Rights Offering
Closing to occur on or before June 30, 2001.
10. Miscellaneous.
-------------
(a) This section headings contained in this Note are inserted for
convenience only and shall not affect, in any way, the meaning or
interpretations of this Note.
(b) This Note shall be governed by and construed in accordance with
the internal laws (and not the laws of conflicts) of the State of Illinois.
(c) To the maximum extent permitted by applicable law, the Company,
Parent and all endorsers and all persons liable or to become liable hereunder
hereby waive presentment, demand, protest, diligence of collection, notice of
protest, dishonor and nonpayment and all notices of every kind, and, the defense
of the statute of limitations.
(d) BY ACCEPTANCE OF THIS NOTE, XXXXXX REPRESENTS THAT IT IS AN
ACCREDITED INVESTOR, WITHIN THE MEANING OF RULE 501 OF REGULATION D UNDER THE
ACT, AND THAT IT IS PURCHASING THIS NOTE FOR ITS OWN ACCOUNT FOR INVESTMENT, AND
NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY PUBLIC DISTRIBUTION OF
SUCH NOTE.
(e) It is the intention of the parties to conform strictly to the
usury laws, whether state or federal, that are applicable to this Note. All
agreements between the Company and Holder, whether now existing or hereafter
arising and whether oral or written, are hereby expressly limited so that in no
contingency or event whatsoever, shall the amount paid or agreed to be paid to
Holder, or collected by Xxxxxx, for the use, forbearance or detention of the
money loaned or to be loaned hereunder or otherwise, or for the payment or
performance of any covenant or obligation contained herein or in any other
document evidencing, securing or pertaining to the indebtedness evidenced
hereby, exceed the maximum amount permissible under applicable federal or state
usury laws. If under any circumstances whatsoever fulfillment of any provision
hereof, at the time performance of such provision shall be due, shall involve
exceeding the limit of validity prescribed by law, then the obligation to be
fulfilled shall be reduced to the limit of such validity; and if under any
circumstances Holder shall ever receive an amount deemed interest by applicable
law, which would exceed the highest lawful rate, such amount that would be
excessive interest under applicable usury laws shall be applied to the reduction
of the principal amount owing hereunder and not to the payment of interest, or
if such excessive interest exceeds the unpaid balance of principal, the excess
shall be deemed to have been a payment made by mistake and shall be refunded to
the Company or to any other person making such payment on the Company's behalf.
All sums paid or agreed to be paid to the holder hereof for the use, forbearance
or detention of the indebtedness of the Company evidenced hereby outstanding
from time to time shall, to the extent permitted by applicable law, and to the
extent necessary to preclude exceeding the limit of validity prescribed by law,
be amortized, prorated, allocated and spread from the date of disbursement of
the proceeds of this Note until payment in full of the loan evidenced hereby so
that the actual rate of interest on account of such indebtedness is uniform
throughout the term hereof.
-11-
(f) Time is of the essence with respect to the performance of the
obligations of the Company and Parent under this Note.
(g) Any notice required or permitted to be given hereunder shall be
in writing, and shall be given in the manner set forth in the Senior Credit
Agreement and to the addresses set forth below.
(h) No modification, waiver, amendment, discharge or change of this
Note shall be valid unless the same is in writing and signed by the party
against which the enforcement of such modification, waiver, amendment, discharge
or change is sought.
(i) In the event any one or more of the provisions contained in this
Note should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein or therein shall not in any way be affected or impaired thereby.
(j) This Note represents the agreement of the Company, Parent and
Holder with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by Holder relative to the subject
matter hereof not expressly set forth or referred to herein.
(k) This Note shall inure to the benefit of and shall be binding on
the parties hereto and their respective successors and assigns, provided that
neither the Company nor Parent may transfer its obligations under, or interest
in, this Note, or any portion hereof, without the prior written consent of
Holder.
(l) This Note is unsecured.
(m) The Company agrees to pay all costs and out-of-pocket expenses
(including but not limited to reasonable attorneys' fees) incurred by Holder in
connection with the negotiation, documentation and consummation of this Note.
(n) Capitalized terms used but not defined herein shall have the
meanings ascribed thereto in the Senior Credit Agreement; provided that it is
hereby agreed that all references to the Senior Credit Agreement, including
defined terms, procedures, and particular terms and provisions, shall be
references to the Senior Credit Agreement, as amended from time to time;
provided further that if the Senior Debt shall be paid in full in cash, or the
Senior Credit Agreement shall otherwise be terminated or no longer in full force
and effect, such references to the Senior Credit Agreement shall be references
to the Senior Credit Agreement as in effect as of the date hereof.
(o) Each of the Company and Parent agrees that any suit for the
enforcement of this Note may be brought in the courts of the State of Illinois
or any federal court sitting therein and consents to the nonexclusive
jurisdiction of such court and to service of process in any such suit being made
upon the Company or Parent by mail at the address specified by reference in
Section 10(g). Each of the Company and Parent hereby waives any objection that
it may now or hereafter have to the venue of any such suit or any such court or
that such suit was brought in an inconvenient court.
(p) EACH OF THE COMPANY AND PARENT HEREBY WAIVES ITS RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF
-12-
ANY DISPUTE IN CONNECTION WITH THIS NOTE, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THE PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by
law, each of the Company and Parent hereby waives any right which it may have to
claim or recover in any litigation referred to in the preceding sentence any
special, exemplary, punitive or consequential damages or any damages other than,
or in addition to, actual damages. Each of the Company and Parent (i) certifies
that neither Holder nor any representative, agent or attorney of Holder has
represented, expressly or otherwise, that Holder would not, in the event of
litigation, seek to enforce the foregoing waivers, and (ii) acknowledges that,
in accepting this Note from the Company and in making a loan or advance
evidenced by this Note, Xxxxxx is relying upon, among other things, the waivers
and certifications contained in this Section 10(p).
(q) This Note may be executed (i) in counterparts, each of which
counterparts shall be an original, and all of which together shall constitute
one instrument, and (ii) by facsimile signature, and such facsimile signature
shall be deemed to be an original instrument.
(r) The Company shall pay, indemnify and hold Holder and its
officers, directors, members, employees, agents and affiliates (the "Indemnified
Parties") harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including reasonable attorneys'
fees and disbursements) which may be incurred by the Indemnified Parties or any
of them, including in connection with any claims (whether or not they result in
an investigative, administrative or judicial proceeding) that may at any time be
asserted against any Indemnified Party, as a result of the execution, delivery,
enforcement and performance of, or the transactions contemplated by, this Note,
including the issuance of the Letter of Credit, provided, that the Company shall
have no obligation hereunder to any Indemnified Party with respect to
indemnified liabilities arising from the gross negligence or willful misconduct
of such Indemnified Party.
(s) This Note amends and restates in its entirety, but shall not
constitute payment of amounts outstanding under, that certain Subordinated
Promissory Note and Guaranty dated January 30, 2001 (the "Original Note"), in
the principal amount of $2,000,000.00, executed by the Company and Parent made
payable to Holder. Advances and loans made under the Original Note shall be
treated as if made under this Note.
-13-
IN WITNESS WHEREOF, the Company and Parent have caused this Note to be
executed as of this 20/th/ day of February, 2001.
CHART HOUSE, INC., a Delaware corporation
By: ___________________________________
Name: ___________________________________
Its: ___________________________________
CHART HOUSE ENTERPRISES, INC., a Delaware
corporation (solely for purpose of Sections
7 and 9 above)
By: ___________________________________
Name: ___________________________________
Its: ___________________________________
Address for notices to the Company and Parent:
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Fax No.: 000-000-0000
Attn: General Counsel
Address for notices to Holder:
EGI-Fund (01) Investors, L.L.C.
c/o Equity Group Investments, L.L.C.
Two North Riverside Plaza
Xxxxx 000
Xxxxxxx, XX 00000
Fax No.: 000-000-0000
Attn: General Counsel
HOLDER:
EGI FUND (01) INVESTORS, L.L.C.. a
Delaware limited liability company
By: ___________________________________
Name: ___________________________________
Its: ___________________________________
-14-
Exhibit A
---------
Maximum
Permitted Use Aggregate Advances
------------- ------------------
Without duplication, issuance of the Letter of Credit and related $5,859,378.60
LC Advances
Pre-opening expenses for Reston $ 300,000.00
Pre-opening expenses for West Palm $ 300,000.00
Payments to Xxxxx Construction $ 670,000.00
Payments to third parties relating to outfitting and furnishing $1,900,000.00
newly constructed restaurants
Payment of development expenses, including preliminary design and $ 50,000.00
site investigation expenses, related to the Chicago, Illinois and
Lincolnshire, Illinois locations
EXHIBIT 10.60
THIS AMENDED AND RESTATED GUARANTY IS SUBORDINATED TO THE GUARANTY DATED AS OF
APRIL 26, 1999 EXECUTED BY EACH OF THE UNDERSIGNED IN FAVOR OF BANK BOSTON, N.A.
(n/k/a FLEET NATIONAL BANK), AS AGENT ("AGENT"), AND CERTAIN OTHER FINANCIAL
INSTITUTIONS PARTY TO THAT CERTAIN REVOLVING CREDIT AND TERM LOAN AGREEMENT
DATED AS OF APRIL 26, 1999 BY AND AMONG CHART HOUSE ENTERPRISES, INC., CHART
HOUSE, INC., AGENT, AND SUCH FINANCIAL INSTITUTIONS, PURSUANT TO THAT CERTAIN
AMENDED AND RESTATED SUBORDINATION AGREEMENT OF EVEN DATE HEREWITH EXECUTED BY
AGENT, CHART HOUSE INC., CHART HOUSE ENTERPRISES INC., THE UNDERSIGNED, AND
EGI-FUND (01) INVESTORS, L.L.C.
AMENDED AND RESTATED GUARANTY
-----------------------------
AMENDED AND RESTATED GUARANTY (this "Guaranty"), dated as of February 20,
2001, by CHART HOUSE ENTERPRISES OF IDAHO, INC., an Idaho corporation, CHART
HOUSE ENTERPRISES OF PUERTO RICO, INC., a Louisiana corporation, CHART HOUSE OF
ANNAPOLIS, INC., a Delaware corporation, CHART HOUSE OF MARYLAND, INC., a
Delaware corporation, CHART HOUSE ACQUISITION, INC., a Delaware corporation, BIG
WAVE, INC., a Delaware corporation, CORK `N XXXXXXX, INC., a Delaware
corporation, and ANALOS COMPANY, a Delaware corporation, WEST 00/XX/ XXXXXX,
INC., a Delaware corporation, CHART HOUSE ACQUISITION OF NEVADA, INC., a
Delaware corporation, and CHART HOUSE ACQUISITION OF MARYLAND, INC., a Delaware
corporation (collectively the "Guarantors"), in favor of EGI-FUND (01)
INVESTORS, L.L.C., a Delaware limited liability company ("Lender").
WHEREAS, Chart House Enterprises, Inc. ("Parent") and Chart House, Inc.
(the "Company") and the Guarantors are members of a group of related
corporations, the success of any one of which is dependent in part on the
success of the other members of such group;
WHEREAS, each of the Guarantors expects to receive substantial direct and
indirect benefits from the extensions of credit to the Company by Lender
pursuant to that certain Amended and Restated Subordinated Promissory Note and
Guaranty of even date herewith (as amended from time to time, the "Note")
executed by Parent and the Company in favor of Lender, and pursuant to which
Lender may make available to the Company a loan (the "Loan") to the Company in
the maximum aggregate principal amount of $11,000,000 (which benefits are hereby
acknowledged);
WHEREAS, it is a condition precedent to Xxxxxx's accepting the Note from
the Company that each of the Guarantors execute and deliver to Lender this
guaranty; and
WHEREAS, each of the Guarantors wishes to guaranty the Company's
obligations to Lender under or in respect of the Loan and the Note as provided
herein;
NOW, THEREFORE, each of the Guarantors hereby agrees with Xxxxxx as
follows:
1. Definitions. The term "Obligations" and all other capitalized terms
------------
used herein without definition shall have the respective meanings provided
therefor in the Note.
2. Guaranty of Payment and Performance. Each of the Guarantors hereby
-----------------------------------
guarantees to Lender the full and punctual payment when due (whether at stated
maturity, by required pre-payment, by acceleration or otherwise), as well as the
performance, of all of the Obligations including all such Obligations which
would become due but for the operation of the automatic stay pursuant to
(S)362(a) of
the Federal Bankruptcy Code and the operation of (S)(S)502(b) and 506(b) of the
Federal Bankruptcy Code. This Guaranty is an absolute, unconditional and
continuing guaranty of the full and punctual payment and performance of all of
the Obligations and not of their collectibility only and is in no way
conditioned upon any requirement that Lender first attempt to collect any of the
Obligations from the Company or resort to any collateral security or other means
of obtaining payment. Should the Company default in the payment or performance
of any of the Obligations, the joint and several obligations of each of the
Guarantors hereunder with respect to such Obligations in default shall, upon
demand by Xxxxxx, become immediately due and payable, without demand or notice
of any nature, all of which are expressly waived by the Guarantors. Payments by
each of the Guarantors hereunder may be required by Xxxxxx on any number of
occasions. All payments by such Guarantors hereunder shall be made to Lender, in
the manner and at the place of payment specified therefor in the Note.
3. Guarantors' Agreement to Pay Enforcement Costs, etc. Each of the
---------------------------------------------------
Guarantors further jointly and severally agrees, as the principal obligor and
not as a guarantor only, to pay to Lender, on demand, all costs and expenses
(including court costs and reasonable legal expenses) incurred or expended by
Lender in connection with the Obligations, this Guaranty and the enforcement
thereof, together with interest on amounts recoverable under this (S)3 from the
time when such amounts become due until payment, whether before or after
judgment, at the rate of interest set forth in the Note, provided that if such
--------
interest exceeds the maximum amount permitted to be paid under applicable law,
then such interest shall be reduced to such maximum permitted amount.
4. Waivers by Guarantors; Xxxxxx's Freedom to Act. Each of the Guarantors
----------------------------------------------
agrees that the Obligations will be paid and performed strictly in accordance
with their respective terms, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of Lender with respect thereto. Each of the Guarantors waives promptness,
diligences, presentment, demand, protest, notice of acceptance, notice of any
Obligations incurred and all other notices of any kind, all defenses which may
be available by virtue of any valuation, stay, moratorium law or other similar
law now or hereafter in effect, any right to require the marshalling of assets
of the Company or any other entity or other person primarily or secondarily
liable with respect to any of the Obligations, and all suretyship defenses
generally. Without limiting the generality of the foregoing, each of the
Guarantors agrees to the provisions of any instrument evidencing, securing or
otherwise executed in connection with any Obligation and agrees that the
obligations of each of the Guarantors hereunder shall not be released or
discharged, in whole or in part, or otherwise affected by (i) the failure of
Lender to assert any claim or demand or to enforce any right or remedy against
the Company or any other entity or other person primarily or secondarily liable
with respect to any of the Obligations; (ii) any extensions, compromise,
refinancing, consolidation or renewals of any Obligation; (iii) any change in
the time, place or manner of payment of any of the Obligations or any
rescissions, waivers, compromise, refinancing, consolidation or other amendments
or modifications of any of the terms or provisions of the Note or any other
agreement evidencing, securing or otherwise executed in connection with any of
the Obligations made in accordance with the terms thereof; (iv) the addition,
substitution or release of any entity or other person primarily or secondarily
liable for any Obligation; or (v) any other act or omission which might in any
manner or to any extent vary the risk of such Guarantor or otherwise operate as
a release or discharge of such Guarantor, all of which may be done without
notice to the Guarantor.
5. Unenforceability of Obligations Against Company. If for any reason the
-----------------------------------------------
Company has no legal existence or is under no legal obligation to discharge any
of the Obligations, or if any of the Obligations have become irrecoverable from
the Company by reason of the Company's insolvency, bankruptcy or reorganization
or by other operation of law or for any other reason, this Guaranty shall
nevertheless be binding on each of the Guarantors to the same extent as if such
Guarantor at all times had been the principal obligor on all such Obligations.
In the event that acceleration of the time for payment of any of the Obligations
is stayed upon the insolvency, bankruptcy or reorganization of the Company, or
2
for any other reason, all such amounts otherwise subject to acceleration under
the terms of the Note or any other agreement evidencing, securing or otherwise
executed in connection with any Obligation shall be immediately due and payable
by such Guarantor.
6. Subrogation; Subordination.
--------------------------
6.1. Waiver of Rights Against Company. Until the final payment and
--------------------------------
performance in full of all of the Obligations, none of the Guarantors shall
exercise and each of the Guarantors hereby waives any rights against the
Company arising as a result of payment by such Guarantor hereunder, by way
of subrogation, reimbursement, restitution, contribution or otherwise, and
will not prove any claim in competition with Xxxxxx in respect of any
payment hereunder in any bankruptcy, insolvency or reorganization case or
proceedings of any nature; none of the Guarantors will claim any setoff,
recoupment or counterclaim against the Company in respect of any liability
of such Guarantor to the Company.
6.2. Subordination. The payment of any amounts due with respect to any
-------------
indebtedness of the Company for money borrowed or credit received now or
hereafter owed to each of the Guarantors is hereby subordinated to the prior
payment in full of all of the Obligations. Each of the Guarantors agrees
that, after the occurrence of any default in the payment or performance of
any of the Obligations, such Guarantor will not demand, sue for or otherwise
attempt to collect any such indebtedness of the Company to such Guarantor
until all of the Obligations shall have been paid in full. If,
notwithstanding the foregoing sentence, such Guarantor shall collect,
enforce or receive any amounts in respect of such indebtedness while any
Obligations are still outstanding, such amounts shall be collected, enforced
and received by such Guarantor as trustee for Lender and be paid over to
Lender on account of the Obligations without affecting in any manner the
liability of such Guarantor under the other provisions of this Guaranty.
6.3. Provisions Supplemental. The provisions of this (S)6 shall be
------------------------
supplemental to and not in derogation of any rights and remedies of Lender
under any separate subordination agreement which Lender may at any time and
from time to time enter into with any of the Guarantors.
7. Setoff. Upon the occurrence and during the continuance of an Event of
------
Default, Lender is hereby authorized at any time and from time to time, without
notice to the Guarantors (any such notice being expressly waived by each of the
Guarantors) and to the fullest extent permitted by law, to set off and apply any
and all sums credited by or due from Lender to any Guarantor against the
obligations of such Guarantor under this Guaranty, whether or not Lender shall
have made any demand under this Guaranty and although such obligations may be
contingent or unmatured.
8. Further Assurances. Each of the Guarantors agrees that it will from
------------------
time to time, at the request of Lender, do all such things and execute all such
documents as Lender may consider necessary or desirable to give full effect to
this Guaranty and to perfect and preserve the rights and powers of Lender
hereunder. Each of the Guarantors acknowledges and confirms that such Guarantor
itself has established its own adequate means of obtaining from the Company on a
continuing basis all information desired by such Guarantor concerning the
financial condition of the Company and that such Guarantor will look to the
Company and not to Lender in order for such Guarantor to keep adequately
informed of changes in the Company's financial condition.
9. Termination; Reinstatement. This Guaranty shall remain in full force
--------------------------
and effect until Lender is given written notice of any of the Guarantors'
intention to discontinue this Guaranty, notwithstanding any intermediate or
temporary payment or settlement of the whole or any part of the Obligations. No
such
3
notice shall be effective unless received and acknowledged by an officer of
Lender at the address of Xxxxxx for notices set forth in the Note. No such
notice shall affect any rights of Lender hereunder, including without limitation
the rights set forth in (S)(S)4 and 6, with respect to any Obligations incurred
or accrued prior to the receipt of such notice or any Obligations incurred or
accrued pursuant to any contract or commitment in existence prior to such
receipt. This Guaranty shall continue to be effective or be reinstated,
notwithstanding any such notice, if at any time any payment made or value
received with respect to any Obligation is rescinded or must otherwise be
returned by Lender upon the insolvency, bankruptcy or reorganization of the
Company, or otherwise, all as though such payment had not been made or value
received.
10. Successors and Assigns. This Guaranty shall be binding upon each of
----------------------
the Guarantors, its successors and assigns, and shall inure to the benefit of
Lender and its successors, transferees and assigns. Without limiting the
generality of the foregoing sentence, Lender may assign or otherwise transfer
the Note or any other agreement or note held by it evidencing, securing or
otherwise executed in connection with the Obligations, or sell participations in
any interest therein, to any other entity or other person, and such other entity
or other person shall thereupon become vested, to the extent set forth in the
agreement evidencing such assignment, transfer or participation, with all the
rights in respect thereof granted to Lender herein. No Guarantor may assign any
of its obligations hereunder.
11. Amendments and Waivers. No amendment or waiver of any provision of
----------------------
this Guaranty nor consent to any departure by any of the Guarantors therefrom
shall be effective unless the same shall be in writing and signed by Xxxxxx. No
failure on the part of Lender to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.
12. Notices. All notices and other communications called for hereunder
-------
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or mailed
first class, postage prepaid, or, in the case of telegraphic or telexed notice,
when transmitted, answer back received, addressed as follows: if to a Guarantor,
at the address set forth beneath its signature hereto, and if to Lender, at the
address for notices to Lender set forth in the Note, or at such address as
either party may designate in writing to the other.
13. Governing Law; Consent to Jurisdiction. THIS GUARANTY SHALL BE
--------------------------------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS
OF CONFLICTS) OF THE STATE OF ILLINOIS. Each of the Guarantors agrees that any
suit for the enforcement of this Guaranty may be brought in the courts of the
State of Illinois or any federal court sitting therein and consents to the
nonexclusive jurisdiction of such court and to service of process in any such
suit being made upon the Guarantor by mail at the address specified by reference
in (S)12. Each of the Guarantors hereby waives any objection that it may now or
hereafter have to the venue of any such suit or any such court or that such suit
was brought in an inconvenient court.
14. Waiver of Jury Trial. EACH OF THE GUARANTORS HEREBY WAIVES ITS RIGHT
--------------------
TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law,
each of the Guarantors hereby waives any right which it may have to claim or
recover in any litigation referred to in the preceding sentence any special,
exemplary, punitive or consequential damages or any damages other than, or in
addition to, actual damages. Each of the Guarantors (a) certifies that neither
Xxxxxx nor any representative, agent or attorney of Xxxxxx has represented,
expressly or otherwise, that Lender would not, in the event of litigation, seek
to enforce the foregoing waivers and (b) acknowledges that, in accepting the
Note from the Company and
4
in making a loan evidenced by the Note, Xxxxxx is relying upon, among other
things, the waivers and certifications contained in this (S)14.
15. Miscellaneous. This Guaranty constitutes the entire agreement of each
-------------
of the Guarantors with respect to the matters set forth herein. The rights and
remedies herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Guaranty shall be in addition
to any other guaranty of or collateral security for any of the Obligations. The
invalidity or unenforceability of any one or more sections of this Guaranty
shall not affect the validity or enforceability of its remaining provisions.
Captions are for the ease of reference only and shall not affect the meaning of
the relevant provisions. The meanings of all defined terms used in this Guaranty
shall be equally applicable to the singular and plural forms of the terms
defined. This Guaranty may be executed (a) in counterparts, each of which
counterparts shall be an original, and all of which together shall constitute
one instrument, and (b) by facsimile signature, and such facsimile signature
shall be deemed to be an original instrument. This Guaranty amends and restates
in its entirety that certain Guaranty dated as of January 30, 2001 executed by
the undersigned in favor of Xxxxxx.
5
IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to be
executed and delivered as of the date first above written.
CHART HOUSE ENTERPRISES OF IDAHO, INC.
By: _______________________________
Name: _______________________________
Title: _______________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
CHART HOUSE ENTERPRISES OF PUERTO RICO, INC.
By: _______________________________
Name: _______________________________
Title: _______________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
CHART HOUSE OF MARYLAND, INC.
By: _______________________________
Name: _______________________________
Title: _______________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
6
CHART HOUSE OF ANNAPOLIS, INC.
By: _______________________________
Name: _______________________________
Title: _______________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000 Xxxxxxx, Xxxxxxxx
00000
CHART HOUSE ACQUISITION, INC.
By: _______________________________
Name: _______________________________
Title: _______________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000 Xxxxxxx, Xxxxxxxx
00000
BIG WAVE, INC.
By: _______________________________
Name: _______________________________
Title: _______________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000 Xxxxxxx, Xxxxxxxx
00000
CORK'N XXXXXXX, INC.
By: _______________________________
Name: _______________________________
Title: _______________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000 Xxxxxxx, Xxxxxxxx
00000
ANALOS COMPANY
By: _______________________________
Name: _______________________________
Title: _______________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000 Xxxxxxx, Xxxxxxxx
00000
7
WEST 00/XX/ XXXXXX, INC.
By: _______________________________
Name: _______________________________
Title: _______________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000 Xxxxxxx, Xxxxxxxx
00000
CHART HOUSE ACQUISITION OF NEVADA, INC.
By: _______________________________
Name: _______________________________
Title: _______________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000 Xxxxxxx, Xxxxxxxx
00000
CHART HOUSE ACQUISITION OF MARYLAND, INC.
By: _______________________________
Name: _______________________________
Title: _______________________________
Address:
000 X. XxXxxxx Xxxxxx, Xxxxx 000 Xxxxxxx, Xxxxxxxx
00000
8
EXHIBIT 10.70
AMENDED AND RESTATED SUBORDINATION AGREEMENT
--------------------------------------------
AMENDED AND RESTATED SUBORDINATION AGREEMENT (this "Agreement"), dated as
of February 20, 2001, among FLEET NATIONAL BANK (formerly known as BankBoston,
N.A.), a national banking association having its office at 000 Xxxxxxx Xxxxxx,
Xxxxxx, Xxxxxxxxxxxxx 00000, in its capacity as agent (the "Agent") for the
Banks (as hereinafter defined), EGI-FUND (01) INVESTORS, L.L.C., a Delaware
limited liability company having a principal of business at Two North Riverside
Plaza, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000 (the "Subordinating Creditor"), CHART
HOUSE, INC., a Delaware corporation having its office at 000 Xxxxx XxXxxxx
Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000 (the "Borrower"), CHART HOUSE
ENTERPRISES, INC. (the "Parent") and each of the Subsidiaries of the Borrower
set forth on the signature pages hereto as Guarantors.
WHEREAS, pursuant to a Revolving Credit and Term Loan Agreement, dated as
of April 26, 1999 (as amended and in effect from time to time, including any
replacement agreement therefor, the "Credit Agreement"), among the lending
institutions party thereto (the "Banks"), the Agent, the Borrower and the
Parent, the Banks have agreed, upon the terms and subject to the conditions
contained therein, to make loans and otherwise to extend credit to the Borrower;
and
WHEREAS, the Subordinating Creditor has extended credit to the Borrower
pursuant to a Subordinated Promissory Note and Guaranty dated as of January 30,
2000 (as amended with the consent of the Agent as provided herein and in effect
from time to time, the "Original Subordinated Note"), executed by the Borrower
and the Parent in favor of the Subordinating Creditor; and
WHEREAS, the Agent, the Borrower, the Parent, the Guarantors and the
Subordinating Creditor entered into a Subordination Agreement, dated as of
January 30, 2001 (the "Original Subordination Agreement") pursuant to which all
indebtedness of the Borrower to the Subordinating Creditor was subordinated to
indebtedness of the Borrower to the Agent and the Banks on the terms and
conditions contained therein;
WHEREAS, the Original Subordinated Note shall be amended and restated in
its entirety by the Amended and Restated Subordinated Promissory Note and
Guaranty dated as of February __, 2001 (the "Subordinated Note") executed by the
Borrower and the Parent in favor of the Subordinating Creditor, as set forth
therein and shall remain in full force and effect only as set forth therein;
WHEREAS, the parties hereto wish to amend and restate the Original
Subordination Agreement to amend certain provisions thereto;
WHEREAS, it is a condition precedent to the Banks' willingness to continue
to make loans and otherwise to extend credit to the Borrower pursuant to the
Credit Agreement that the Borrower and the Subordinating Creditor enter into
this Agreement with the Agent; and
WHEREAS, in order to induce the Banks to continue to make loans and
otherwise extend credit to the Borrower pursuant to the Credit Agreement, the
Borrower and the Subordinating Creditor have agreed to enter into this Agreement
with the Agent;
NOW, THEREFORE, in consideration of the foregoing, the mutual agreements
herein contained and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Definitions.
-----------
Terms not otherwise defined herein have the same respective meanings given
to them in the Credit Agreement. In addition, the following terms shall have
the following meanings:
Senior Debt. All principal, interest, fees, costs, enforcement expenses
-----------
(including legal fees and disbursements), collateral protection expenses and
other reimbursement or indemnity obligations created or evidenced by the Credit
Agreement or any of the other Loan Documents, or any prior, concurrent, or
subsequent notes, instruments or agreements of indebtedness, liabilities or
obligations of any type or form whatsoever relating thereto in favor of the
Agent or any of the Banks. Senior Debt shall expressly include any and all
interest accruing or out of pocket costs or expenses incurred after the date of
any filing by or against the Borrower of any petition under the federal
Bankruptcy Code or any other bankruptcy, insolvency or reorganization act
regardless of whether the Agent's or any Bank's claim therefor is allowed or
allowable in the case or proceeding relating thereto.
Subordinated Debt. All principal, interest (including interest accrued
-----------------
pursuant to the Subordinated Note), fees, costs, enforcement expenses (including
legal fees and disbursements), collateral protection expenses and other
reimbursement and indemnity obligations created or evidenced by the Subordinated
Note, the Subordinated Guaranty or any prior, concurrent or subsequent notes,
instruments or agreements of indebtedness, liabilities or obligations of any
type or form whatsoever relating thereto in favor of the Subordinating Creditor.
Subordinated Documents. Collectively, the Subordinated Note, the
----------------------
Subordinated Guaranty, any promissory notes executed in connection therewith and
any and all guaranties and security interests, mortgages and other liens
directly or indirectly guarantying or securing any of the Subordinated Debt, and
any and all other documents or instruments evidencing or further guarantying or
securing directly or indirectly any of the Subordinated Debt, whether now
existing or hereafter created.
Subordinated Guaranty. The Amended and Restated Guaranty, dated as of
---------------------
February __, 2001, made by each Subsidiary of the Borrower in favor of the
Subordinating Creditor.
2. General. Except as expressly permitted by Section 11.16 of the Credit
-------
Agreement, the Subordinated Debt and any and all Subordinated Documents shall be
2
and hereby are subordinated and the payment thereof is deferred until the full
and final payment in cash of the Senior Debt, whether now or hereafter incurred
or owed by the Borrower. The Subordinating Creditor acknowledges and agrees
that, except as expressly permitted by Section 11.16 of the Credit Agreement,
the Subordinated Debt may not be prepaid without the consent of the Agent and
the Banks, such consent to be granted or withheld in the sole and absolute
discretion of the Agent and the Banks.
3. Enforcement. The Subordinating Creditor will not take or omit to take
-----------
any action or assert any claim with respect to the Subordinated Debt or
otherwise which is inconsistent with the provisions of this Agreement. Without
limiting the foregoing, the Subordinating Creditor will not assert, collect or
enforce the Subordinated Debt or any part thereof or take any action to
foreclose or realize upon the Subordinated Debt or any part thereof or enforce
any of the Subordinated Documents except to the extent (but only to such extent)
that the commencement of a legal action may be required to toll the running of
any applicable statute of limitation, to defend any challenge to the validity of
the Subordinated Debt, or to file a proof of claim or to make a vote in a
proceeding described in (S)6.1. Until the Senior Debt has been finally paid in
full in cash, the Subordinating Creditor shall not have any right of
subrogation, reimbursement, restitution, contribution or indemnity whatsoever
from any assets of the Borrower or any guarantor of or provider of collateral
security for the Senior Debt. The Subordinating Creditor further waives any and
all rights with respect to marshalling.
4. Payments Held in Trust. Until the Senior Debt is paid in full in cash,
----------------------
the Subordinating Creditor will hold in trust and immediately pay over to the
Agent for the account of the Banks and the Agent, in the same form of payment
received, with appropriate endorsements, for application to the Senior Debt any
cash amount that the Borrower pays to the Subordinating Creditor with respect to
the Subordinated Debt, or as collateral for the Senior Debt any other assets of
the Borrower that the Subordinating Creditor may receive with respect to the
Subordinated Debt.
5. Defense to Enforcement. If the Subordinating Creditor, in contravention
----------------------
of the terms of this Agreement, shall commence, prosecute or participate in any
suit, action or proceeding against the Borrower, then the Borrower may interpose
as a defense or plea the making of this Agreement, and the Agent or any Bank may
intervene and interpose such defense or plea in its name or in the name of the
Borrower. If the Subordinating Creditor, in contravention of the terms of this
Agreement, shall attempt to collect any of the Subordinated Debt or enforce any
of the Subordinated Documents, then the Agent, any Bank or the Borrower may, by
virtue of this Agreement, restrain the enforcement thereof in the name of the
Agent or such Bank or in the name of the Borrower. If the Subordinating
Creditor, in contravention of the terms of this Agreement, obtains any cash or
other assets of the Borrower as a result of any administrative, legal or
equitable actions, or otherwise, the Subordinating Creditor agrees forthwith to
pay, deliver and assign to the Agent, for the account of the Banks and the
Agent, with appropriate endorsements, any such cash for application to the
Senior Debt and any such other assets as collateral for the Senior Debt.
6. Bankruptcy, etc.
---------------
3
6.1. Payments relating to Subordinated Debt. At any meeting of
--------------------------------------
creditors of the Borrower or in the event of any case or proceeding,
voluntary or involuntary, for the distribution, division or application of
all or part of the assets of the Borrower or the proceeds thereof, whether
such case or proceeding be for the liquidation, dissolution or winding up
of the Borrower or its business, a receivership, insolvency or bankruptcy
case or proceeding, an assignment for the benefit of creditors or a
proceeding by or against the Borrower for relief under the federal
Bankruptcy Code or any other bankruptcy, reorganization or insolvency law
or any other law relating to the relief of debtors, readjustment of
indebtedness, reorganization, arrangement, composition or extension or
marshalling of assets or otherwise, the Agent is hereby irrevocably
authorized at any such meeting or in any such proceeding to receive or
collect for the benefit of the Banks and the Agent any cash or other assets
of the Borrower distributed, divided or applied by way of dividend or
payment, or any securities issued on account of any Subordinated Debt, and
apply such cash to or to hold such other assets or securities as collateral
for the Senior Debt, and to apply to the Senior Debt any cash proceeds of
any realization upon such other assets or securities that the Agent in its
discretion elects to effect, until all of the Senior Debt shall have been
paid in full in cash, rendering to the Subordinating Creditor any surplus
to which the Subordinating Creditor is then entitled.
6.2. Securities by Plan of Reorganization or Readjustment.
----------------------------------------------------
Notwithstanding the foregoing provisions of (S)6.1, the Subordinating
Creditor shall be entitled to receive and retain any securities of the
Borrower or any other corporation or other entity provided for by a plan of
reorganization or readjustment (a) the payment of which securities is
subordinate, at least to the extent provided in this Agreement with respect
to Subordinated Debt, to the payment of all Senior Debt under any such plan
of reorganization or readjustment and (b) all other terms of which are
acceptable to the Banks and the Agent.
6.3. Subordinated Debt Voting Rights. At any such meeting of
-------------------------------
creditors or in the event of any such case or proceeding, the Subordinating
Creditor shall retain the right to vote and otherwise act with respect to
the Subordinated Debt (including, without limitation, the right to vote to
accept or reject any plan of partial or complete liquidation,
reorganization, arrangement, composition or extension), provided that the
Subordinating Creditor shall not vote witH respect to any such plan or take
any other action in any way so as to contest (a) the validity of any Senior
Debt or any collateral therefor or guaranties thereof, (b) the relative
rights and duties of any holders of any Senior Debt established in any
instruments or agreements creating or evidencing any of the Senior Debt
with respect to any of such collateral or guaranties or (c) the
Subordinating Creditor's obligations and agreements set forth in this
Agreement.
7. Lien Subordination. The Senior Debt, the Credit Agreement and the other
------------------
Loan Documents and any and all other documents and instruments evidencing or
4
creating the Senior Debt and all guaranties, mortgages, security agreements,
pledges and other collateral guarantying or securing the Senior Debt or any part
thereof shall be senior to the Subordinated Debt and all of the Subordinated
Documents irrespective of the time of the execution, delivery or issuance of any
thereof or the filing or recording for perfection of any thereof or the filing
of any financing statement or continuation statement relating to any thereof.
7.1. Further Assurances. The Subordinating Creditor hereby agrees,
------------------
upon request of the Agent at any time and from time to time, to execute
such other documents or instruments as may be requested by the Agent
further to evidence of public record or otherwise the senior priority of
the Senior Debt as contemplated hereby.
7.2. Books and Records. The Subordinating Creditor further agrees to
-----------------
maintain on its books and records such notations as the Agent may
reasonably request to reflect the subordination contemplated hereby and to
perfect or preserve the rights of the Agent hereunder. A copy of this
Agreement may be filed as a financing statement in any Uniform Commercial
Code recording office.
8. Banks' Freedom of Dealing. The Subordinating Creditor agrees, with
-------------------------
respect to the Senior Debt and any and all collateral therefor or guaranties
thereof, that the Borrower and the Banks may agree to increase the amount of the
Senior Debt or otherwise modify the terms of any of the Senior Debt, and the
Banks may grant extensions of the time of payment or performance to and make
compromises, including releases of collateral or guaranties, and settlements
with the Borrower and all other persons, in each case without the consent of the
Subordinating Creditor or the Borrower and without affecting the agreements of
the Subordinating Creditor or the Borrower contained in this Agreement;
provided, however, that nothing contained in this (S)8 shall constitute a waiver
-------- -------
of the right of the Borrower itself to agree or consent to a settlement or
compromise of a claim which the Agent or any Bank may have against the Borrower.
9. Modification or Sale of the Subordinated Debt. The Subordinating
---------------------------------------------
Creditor will not, at any time while this Agreement is in effect, modify any of
the terms of any of the Subordinated Debt or any of the Subordinated Documents;
nor will the Subordinating Creditor sell, transfer, pledge, assign, hypothecate
or otherwise dispose of any or all of the Subordinated Debt to any person other
than a person who agrees in a writing, satisfactory in form and substance to the
Agent, to become a party hereto and to succeed to the rights and to bound by all
of the obligations of the Subordinating Creditor hereunder. In the case of any
such disposition by the Subordinating Creditor, the Subordinating Creditor will
notify the Agent at least 10 days prior to the date of any of such intended
disposition.
10. Xxxxxxxx's Obligations Absolute. Nothing contained in this Agreement
-------------------------------
shall impair, as between the Borrower and the Subordinating Creditor, the
obligation of the Borrower to pay to the Subordinating Creditor all amounts
payable in respect of the Subordinated Debt as and when the same shall become
due and payable in accordance with the terms thereof, or prevent the
Subordinating Creditor (except as expressly
5
otherwise provided in (S)3 or (S)6) from exercising all rights, powers and
remedies otherwise permitted by Subordinated Documents and by applicable law
upon a default in the payment of the Subordinated Debt or under any Subordinated
Document, all, however, subject to the rights of the Agent and the Banks as set
forth in this Agreement. The failure of the Borrower to make any payment with
respect to the Subordinated Debt in accordance with its terms by reason of the
operation of this Agreement shall not be construed as preventing the occurrence
of a default under the Subordinated Documents.
11. Termination of Subordination. This Agreement shall continue in full
----------------------------
force and effect, and the obligations and agreements of the Subordinating
Creditor and the Borrower hereunder shall continue to be fully operative, until
all of the Senior Debt shall have been paid and satisfied in full in cash and
such full payment and satisfaction shall be final and not avoidable. To the
extent that the Borrower or any guarantor of or provider of collateral for the
Senior Debt makes any payment on the Senior Debt that is subsequently
invalidated, declared to be fraudulent or preferential or set aside or is
required to be repaid to a trustee, receiver or any other party under any
bankruptcy, insolvency or reorganization act, state or federal law, common law
or equitable cause (such payment being hereinafter referred to as a "Voided
Payment"), then to the extent of such Voided Payment, that portion of the Senior
Debt that had been previously satisfied by such Voided Payment shall be revived
and continue in full force and effect as if such Voided Payment had never been
made. In the event that a Voided Payment is recovered from the Agent or any
Bank, an Event of Default shall be deemed to have existed and to be continuing
under the Credit Agreement from the date of the Agent's or such Bank's initial
receipt of such Voided Payment until the full amount of such Voided Payment is
restored to the Agent or such Bank. During any continuance of any such Event of
Default, this Agreement shall be in full force and effect with respect to the
Subordinated Debt. To the extent that the Subordinating Creditor has received
any payments with respect to the Subordinated Debt subsequent to the date of the
Agent's or any Bank's initial receipt of such Voided Payment and such payments
have not been invalidated, declared to be fraudulent or preferential or set
aside or are required to be repaid to a trustee, receiver, or any other party
under any bankruptcy act, state or federal law, common law or equitable cause,
the Subordinating Creditor shall be obligated and hereby agrees that any such
payment so made or received shall be deemed to have been received in trust for
the benefit of the Agent or such Bank, and the Subordinating Creditor hereby
agrees to pay to the Agent for the benefit of the Agent or (as the case may be)
such Bank, upon demand, the full amount so received by the Subordinating
Creditor during such period of time to the extent necessary fully to restore to
the Agent or such Bank the amount of such Voided Payment. Upon the payment and
satisfaction in full in cash of all of the Senior Debt, which payment shall be
final and not avoidable, this Agreement will automatically terminate without any
additional action by any party hereto.
12. Notices. All notices and other communications which are required and
-------
may be given pursuant to the terms of this Agreement shall be in writing and
shall be sufficient and effective in all respects if given in writing or
telecopied, delivered or mailed by registered or certified mail, postage
prepaid, as follows:
6
If to the Agent:
Fleet National Bank
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
with a copy to:
Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X.X. Xxxxx
If to the Subordinating Creditor:
EGI-Fund (01) Investors, L.L.C.
c/o Equity Group Investments, L.L.C.
Two North Riverside Plaza
Suite 000
Xxxxxxx, XX 00000
Attention: Xxx Xxxxxxxxxxx
Xxxx Xxxxx
with a copy to:
Xxxx, Xxxxxx & Xxxxxxxxx
Two North LaSalle Street
Chicago, IL 60602
Attention: Xxxx Xxxxxxx
If to the Parent, the
Borrower or any Guarantor:
Chart House, Inc.
000 Xxxxx XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
or such other address or addresses as any party hereto shall have
designated by written notice to the other parties hereto. Notices shall be
deemed given and effective
7
upon the earlier to occur of (i) the third day following deposit thereof in the
U.S. mail or (ii) receipt by the party to whom such notice is directed.
13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN
-------------
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL BE A
SEALED INSTRUMENT UNDER SUCH LAWS.
14. Waiver of Jury Trial. EACH OF THE SUBORDINATING CREDITOR AND THE
--------------------
BORROWER EACH HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION
OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY
RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS. EXCEPT AS PROHIBITED BY LAW, EACH OF THE SUBORDINATING CREDITOR AND
THE BORROWER HEREBY WAIVES ANY RIGHT WHICH IT MAY HAVE TO CLAIM OR RECOVER IN
ANY LITIGATION REFERRED TO IN THE PRECEDING SENTENCE ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. EACH OF THE SUBORDINATING CREDITOR AND THE BORROWER (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR ANY BANK HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY BANK WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B)
ACKNOWLEDGES THAT THE AGENT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED HEREIN.
15. Miscellaneous. This Agreement may be executed in several counterparts
-------------
and by each party on a separate counterpart, each of which when so executed and
delivered shall be an original, and all of which together shall constitute one
instrument. In proving this Agreement, it shall not be necessary to produce or
account for more than one such counterpart signed by the party against which
enforcement is sought. The Agent, acting upon the instructions of the Required
Banks, may, in their sole and absolute discretion, waive any provisions of this
Agreement benefiting the Agent and the Banks; provided, however, that such
-------- -------
waiver shall be effective only if in writing and signed by the Agent and shall
be limited to the specific provision or provisions expressly so waived. This
Agreement shall be binding upon the successors and assigns of the Subordinating
Creditor and the Borrower and shall inure to the benefit of the Agent and the
Banks, the Agent's and the Banks' respective successors and assigns, any lender
or lenders refunding or refinancing any of the Senior Debt and their respective
successors and assigns, but shall not otherwise create any rights or benefits
for any third party. In the event that any lender or lenders refund or refinance
any of the Senior Debt, the terms "Credit Agreement", "Loan Documents", "Event
of Default" and the like shall refer mutatis mutandis to the agreements and
------- --------
instruments in favor of such lender or lenders and to the related definitions
contained therein. In the event of any inconsistency or conflict between the
Subordinated Documents and this Agreement, such inconsistency or conflict will
be governed by the terms of this Agreement and not the Subordinated Documents.
This Agreement constitutes the entire agreement between the parties pertaining
to the subject matter contained in it and supersedes all prior and
contemporaneous agreements, representations and understandings of the parties
with respect to the same, specifically including the Original Subordination
Agreement.
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
BANK: FLEET NATIONAL BANK, As Agent
By:_____________________________________
Name:
Title:
SUBORDINATING CREDITOR: EGI-FUND (01) INVESTORS, L.L.C.
By: ____________________________________
Name:
Title:
PARENT: CHART HOUSE ENTERPRISES, INC.
By: ____________________________________
Name:
Title:
BORROWER: CHART HOUSE, INC.
By:_____________________________________
Name:
Title:
GUARANTORS: CHART HOUSE ENTERPRISES OF
IDAHO, INC.
By:______________________________
Title:
CHART HOUSE ENTERPRISES OF PUERTO RICO, INC.
By:______________________________
Title:
CHART HOUSE OF ANNAPOLIS, INC.
By:______________________________
Title:
CHART HOUSE OF MARYLAND, INC.
By:______________________________
Title:
CHART HOUSE ACQUISITION, INC.
By:______________________________
Title:
BIG WAVE, INC.
By:______________________________
Title:
CORK 'N XXXXXXX, INC.
By:______________________________
Title:
ANALOS COMPANY
By:______________________________
Title:
WEST 00/xx/ XXXXXX, INC.
By:______________________________
Title:
CHART HOUSE ACQUISITION OF NEVADA, INC.
By:______________________________
Title:
CHART HOUSE ACQUISITION OF MARYLAND, INC.
By:______________________________
Title:
CERTIFICATE OF ACKNOWLEDGMENT
STATE OF ________________________________)
) ss.
COUNTY OF________________________________)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ____ day of February 2001, personally appeared ____________
to me known personally, and who, being by me duly sworn, deposes and says that
he is the ___________ of EGI-FUND (01) INVESTORS, L.L.C., and that said
instrument was signed and sealed on behalf of said limited liability company by
authority of its members, and said _________________ acknowledged said
instrument to be the free act and deed of said limited liability company.
______________________________
Notary Public
My commission expires:
Exhibit 13
A Clearer View
-------------------------------------------------------------------------------
Chart House Enterprises has sharpened its focus for 2001 and has a clearer view
of its business than at anytime in its recent past. We learned the hard way by
seeing well-choreographed strategies and aggressive expansion plans succumb to
reality. But in the end, we have emerged from a turbulent 2000 as a company in
touch with the marketplace and a renewed sense of fiscal responsibility.
Our first humbling moment came as a result of our planned closing of 11 under-
performing Chart House locations. While the pruning and pairing back of a
business can indeed be good business, it can also take a toll on the company,
its employees and loyal customers in markets no longer served. I am happy to
report that our own initiative has been successful, however, the post-closure
transition is on-gong and we continue to work hard to address any significant
repercussions.
Xxxxxx and Xxxxx'x also gave us a reality check. After a highly successful
opening of our second location in Mid-town Manhattan, we went on to open
restaurants in Atlanta, Washington, D.C. and Phoenix. Unfortunately, the
combination of construction delays and the opening of the locations with
significant pre-opening costs forced us to slow further expansion of the
concept. We also have temporarily "tabled" other plans to begin growing the
Chart House concept. We are still on course to open new Xxxxxx & Xxxxx'x
locations in West Palm Beach, Florida and Reston, Virginia in 2001. Thereafter,
we plan to revisit a realistic, but disciplined, growth strategy for both
concepts built upon their strong sales performance and the Company achieving
solid return on investment targets.
Finally, despite our best efforts, we did not create new financial wealth for
shareholders in 2000. We did, however, create inherent value within Company
operations by adding new and promising locations and strengthening our core
business.
The clearer view today is that a true transformation of a concept takes time.
The Chart House concept has emerged from a three-year repositioning to take its
place as a solid, lean, restaurant company, newly outfitted to produce profit
and long-term growth. The concept is more focused, with a stronger brand
position than it has ever enjoyed in the past. With a creative, new seafood-
focused menu that has received rave reviews from coast to coast, and spectacular
views from newly remodeled interiors, the Chart House transformation is near
complete and paying off. Indeed, one telling accomplishment of the last year
speaks volumes: Chart House experienced strong same store sales growth of 6.3%
- a clear indication that 2001 should be very bright for all of us.
What is also clear to us is that the building of a new quality concept also
takes time and an ever-watchful eye on the bottom line. The Xxxxxx and Xxxxx'x
brand has been well received and we remain optimistic about its ability to
generate solid sales much earlier in the opening cycle.
Despite high pre-opening investments, the Xxxxxx and Xxxxx'x concept has made
respectable showings in all of the markets it has entered in a relatively short
time frame. Manhattan, a renowned barometer of trends and tastes, is in love
with Xxxxxx and Xxxxx'x, and we expect this love affair to spread outside of the
island into our new markets. In a serious effort to add directly to the
Company's bottom line, we've made great strides in driving excess costs from the
Xxxxxx & Xxxxx'x pre-opening formula and have fine-tuned our operations. The
result will be more efficient entries into markets for our new Xxxxxx & Xxxxx'x
locations in 2001 and beyond.
As we look ahead to 2001, with a clearer view of our business, Chart House
Enterprises begins its 40th Anniversary with two vital concepts. Both concepts
are in-touch with America's dining tastes. Their menus are strong, their
atmospheres are exciting, and their service and guest protocols are winners.
/s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
CHART HOUSE RESTAURANTS
Coming off the introduction of an imaginative seafood menu in 1999 to the
remodeling of nearly all of its Chart House restaurants to a contemporary decor,
and the re-opening of cornerstone locations in Boston and Weehawken, the
Company's system-wide revitalization program which began two years earlier is
almost complete.
Chart House is on course and steadily building its renown as a restaurant
Serious About Seafood. A new Fresh Fish selection was added to the menu, giving
guests the opportunity to choose from eight varieties of fish prepared three
exciting ways: grilled, baked or blackened. An Alaska Seafood promotion, in the
spring, brought more rare selections, associating Chart House with the freshest,
most sought after species.
The frequent dining program, ViewPoints, continues to grow, over 200,000 members
strong. Program enhancements in 2000 included the use of electronic mail to
communicate more cost effectively and motivate loyal Chart House guests to
return on a more frequent basis.
Chart House also teamed with Transmedia/I-Dine, enabling a member base of four
million dining enthusiasts to earn rewards when eating at Chart House
restaurants nationwide.
The opportunities for growth continue for a restaurant concept with 40 years of
quality and dedication steering the way to a promising future.
XXXXXX and XXXXX'X STEAKHOUSE
From its 1996 beginning in the Flatiron district of New York, Xxxxxx and Xxxxx'x
has proven that its warm, inviting ambience, thick, juicy steaks and energetic
atmosphere, carries wide consumer appeal.
The popular see-and-be-seen spots are serving the right blend of traditional
steakhouse brawn with a spirited attitude to win over the appetites of today's
up and comers. The target demographic, ages 25-44, has a higher disposable
income, a penchant for fashionable dining spots, and a desire to see-and-be-
seen.
In cities from Atlanta to Phoenix to the nation's capitol, the concept has met
with rave reviews. "Steakhouse delivers with big, beefy portions," proclaims the
Atlanta Journal-Constitution. "You are in for a treat," chimes the Washington
Times. "This place sizzles," declares The Arizona Republic.
Chart House launched an edgy advertising campaign to differentiate the brand
from its stuffier counterparts and deliver a fresh twist on an American classic:
the steakhouse. Bold print ads, in eye-catching red and black, feature glamour
girls wearing shades with a cow reflected in the lens and a sexy pout uttering,
"meat/not meat" - a carryover from the menu. Bold radio spots reinforce the
brand's hip-factor.
Xxxxxx and Xxxxx'x appeal lies in its ability to draw from its supper-club era
elegance to delivering an energetic dining experience for today's tastes. The
concept is poised to move into new markets, while maintaining the
entrepreneurial spirit that inspired the Company to take Xxxxxx & Xxxxx'x to new
heights.
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The following table presents the results of operations for each of the fiscal
years in the three years ended December 25, 2000. The dollar amounts are in
thousands.
2000 1999 1998
------------------------------------------------------------------------------------------------------------
Amount % Amount % Amount %
------------------------------------------------------------------------------------------------------------
Revenues $141,697 100.0 $140,937 100.0 $145,188 100.0
Costs and Expenses:
Cost of Sales 46,347 32.7 45,059 32.0 47,388 32.6
Restaurant Labor 40,499 28.6 42,015 29.8 42,078 29.0
Other Operating Costs 32,640 23.0 31,930 22.6 34,955 24.1
Selling, General and Administrative 13,312 9.4 11,472 8.1 14,353 9.9
Expenses
Depreciation and Amortization 6,922 4.9 7,830 5.6 6,601 4.5
Pre-opening Costs 5,266 3.7 - - - -
Write Down of Assets and 3,810 2.7 4,890 3.5 - -
Restructuring and Unusual Charges
Loss (Gain) on Sales of Assets 278 0.2 (742) (0.5) (1,534) (1.0)
---------------------------------------------------------------
(Loss) Income from Operations (7,377) (5.2) (1,517) (1.1) 1,347 0.9
Interest Expense, net 3,049 2.2 2,023 1.4 776 0.5
---------------------------------------------------------------
(Loss) Income Before Income (10,426) (7.4) (3,540) (2.5) 571 0.4
Taxes
Provision for Income Taxes - - - - - -
---------------------------------------------------------------
Net (Loss) Income $(10,426) (7.4) $ (3,540) (2.5) $ 571 0.4
===============================================================
-1-
________________________________________________________________________________
Management believes that the most meaningful approach to analyzing operations is
through margin analysis, which requires critically reviewing the relationships
that certain costs and expenses bear to revenues. Accordingly, the discussion
below follows this approach.
________________________________________________________________________________
Fiscal years 2000, 1999 and 1998
At December 25, 2000 Chart House Enterprises, Inc. (the "Company") operated
41 Chart House restaurants (which includes the Peohe's restaurant). Of those
restaurants, one restaurant has been designated for closure. Management
estimates that this restaurant will be closed in 2001. Comparable restaurant
revenue growth (restaurants open continuously for all three years), excluding
the restaurant held for disposal, for the past three years have been:
2000 1999 1998
---- ---- ----
Comparable restaurants 6.3% 3.4% 0.3%
Revenue growth at comparable restaurants during 2000 is attributed to the
continued focus on executing a quality menu with uncompromising customer
service, and, in several locations, renewed interest following significant
remodeling. The increase in 1999 was attributable to a new menu created in 1998.
Chart House implemented this menu into all designated restaurants during a year-
long roll out which began in the third quarter 1998. Revenues were negatively
affected, temporarily, at many restaurants during the implementation period.
Total revenues increased 0.5%, or $760,000 in 2000 and decreased (2.9%), or
($4,251,000) in 1999. In 2000, comparable restaurant growth and revenues
contributed by new restaurant openings were equally offset by the permanent
closure of underperforming restaurants. The 1999 decrease from 1998 revenues
reflects the loss in revenues by disposing of several restaurants and the Solana
Beach Baking Company. These decreases were partially offset by the acquisition
of the Xxxxxx & Xxxxx'x concept and continued growth of restaurants not
identified for disposal. The table below reflects the impact, (increase or
(decrease) in thousands), on total revenues resulting from strategic decisions
implemented over the past three years.
2000 1999 1998
---------------------------
Continuing Restaurants $ 6,538 $ 3,322 $(3,298)
New Restaurant Openings (1) 10,398 - -
Xxxxxx and Xxxxx'x (acquired in Q2 1999) 3,742 6,439 -
Restaurants Held for Disposal (534) - -
Permanent Closure of Restaurants (19,384) (8,805) (2,108)
Solana Beach Baking Company (sold in 1998) - (5,207) (608)
-------- ------- -------
Total $ 760 $(4,251) $(6,014)
(1) New restaurants were open an average of five months in 2000.
Cost of sales as a percentage of revenues increased by 0.7% versus 1999. The
increase is largely due to the increase in the ratio of Xxxxxx and Xxxxx'x
restaurants to total restaurants. The menu at Xxxxxx and Xxxxx'x contains
significantly more beef items and large portion sizes. This results in higher
food costs than have typically been realized at the Chart House restaurants. The
Company anticipates continued decreases in profit margin as the proportionate
revenue contribution from Xxxxxx and Xxxxx'x increases with the growth of the
concept. The higher cost of sales percentage in 1998 is due to the 1998
implementation of the new menu which required intensive training and practice,
increasing food waste.
Restaurant labor was lower as a percentage of revenues in 2000 versus 1999,
both in hourly wages and in manager compensation, due to the sales leverage on
the fixed portion of compensation. In 1999, higher restaurant labor expense was
due to
-2-
enhanced management staffing and the addition of several catering sales
managers, as well as training expenditures related to the new menu roll out.
Other operating costs increased as a percentage of sales in 2000 versus
1999. The increase versus 1999 is largely attributable to increased rent expense
resulting from a sale-leaseback transaction, which occurred in June 2000. This
strategy allowed for proceeds of $15 million which were used to pay down loan
balances. The increase in rent affected margins by 1.5%. These increases are
somewhat offset by reduction in repair and maintenance expense. The savings in
repair and maintenance expense equated to 0.5% of sales in 2000. The 1999
decrease versus 1998 is primarily a result of significant restaurant remodeling
in both 1998 and 1999. The capital investment relieved the Company of major
ongoing repair and maintenance expenditures.
Selling, general, and administrative expenses increased as a percentage of
sales versus 1999. The increase versus 1999 reflects Company initiatives in 2000
to expand its restaurant base and build a corporate infrastructure to promote
the new concept and restaurant growth. The Company expensed $400,000 reflecting
one-time severance charges for terminated employees in 2000. Remaining increases
reflect increased insurance expenses. The decrease in 1999 in selling, general,
and administrative expenses versus 1998 are largely due to one time costs in
1998 of relocating the corporate office from Solana Beach, California to
Chicago, Illinois.
Depreciation and amortization decreased as a percentage of sales since 1999
due to the fewer number of restaurants currently in operation. Further, a sale-
leaseback entered into in June 2000 eliminated depreciation for five buildings.
Depreciation and amortization increased between 1999 and 1998 as a result of
significant capital investment in approximately 50% of the Chart House
restaurants during the latter half of 1998 and all of 1999. In addition, there
was significant incremental amortization relating to the intangible assets
acquired in the 1999 business combination.
The Company has incurred approximately $5,266,000 in expenditures during
2000 related to the opening of new restaurants. These costs primarily reflect
salaries and benefits and training costs for new employees. The Company opened
four new Xxxxxx and Xxxxx'x restaurants and re-opened two major Chart House
restaurants (Boston and Weehawken) during 2000.
The Company incurred special charges of $4,890,000 in 1999 for asset write-
downs and other charges related to the closure of eleven Chart House
restaurants. In 2000, the Company incurred an additional $3,810,000
restructuring charge reflecting incremental exit costs and asset write-downs for
the remaining restaurants identified for disposal. The restructuring charge
includes a net write-down of assets of $979,000 and an additional restructuring
charge of $2,831,000. There were no similar charges in 1998. A description of
the 2000 and 1999 special charges is detailed in "Restructuring Actions and
Special Charges".
Several asset disposals resulted in a net loss of $278,000 during 2000. Six
restaurant properties were sold in 1999 generating gains of $742,000. The 1998
results include gains on sales of non-core assets totaling $1,534,000, stemming
primarily from the sale of Solana Beach Baking Company and Company-held
investments.
Interest expense increased in 2000 as compared to 1999, reflecting a full
year interest on the $15 million term loan obtained in mid 1999.
Operating loss before taxes, gains and losses on sales, restructuring
charges, and write-downs of assets were ($6,338,000), or (4.5%) of sales in
2000. Comparable results in 1999 reflect income of $608,000, or 0.4% of sales;
and a loss of $(963,000), or (0.7%) of sales in 1998. The decrease in profits in
2000 reflects expenses incurred for opening new restaurants.
RESTRUCTURING ACTIONS AND SPECIAL CHARGES
In 1999, the Company committed to an expansion plan of both the Chart House
concept and the Xxxxxx and Xxxxx'x concept. This plan included a reorganization
of operations and, as a result, eleven restaurants were identified for disposal.
All eleven restaurants remained open through December 27, 1999. In the fourth
quarter 1999, the Company recorded $4,286,000 in asset impairment write-down,
including impairment of goodwill, and $604,000 in exit costs and severance
payments due 283 employees. By the end of 2000, ten of the eleven restaurants
identified for disposal had closed. Management anticipates closure and disposal
of the remaining restaurant in 2001.
-3-
In 2000, the Company recorded an additional restructuring charge of
$3,810,000. The charge reflects additional net asset impairment write-downs
totaling $979,000, which reflects reduction in carrying value of assets held for
disposal to zero. A restructuring charge of $2,831,000 reflects incremental exit
costs, primarily occupancy costs incurred.
The remaining restaurant identified for disposal did not contribute
significantly to the Company's consolidated income in 2000, 1999 or 1998.
OPERATING OUTLOOK
This outlook section contains a number of forward-looking statements, all of
which are based on current expectations. Actual results may differ materially.
The main operational objectives in 2001 are to focus on building brand
recognition for the Xxxxxx and Xxxxx'x concept through the execution of strong
operations, supplemented by focused marketing messages. The Chart House
restaurants reflect the strongest and most profitable group of restaurants the
Company has managed in many years. A majority of the restaurants have had recent
significant remodels and renovations and execute a quality menu to the highest
standards. Management believes that the sales growth reflects the positive
acceptance of the changes made within Chart House.
Commodity price increases, especially beef prices, will decrease profit
margins to the extent the Company is not able to pass these price increases to
the customer. Any future minimum wage increases legislated by federal and state
authorities will have a detrimental impact on labor margins. The Company
continues to evaluate efficiencies to ensure that any significant impact will
not have to be mitigated by price increases.
The Company anticipates maintaining its current level of comparable
restaurant revenue growth with consistent margins. It is feasible that new
restaurant openings will initially have a detrimental impact on total Company
margins. Personnel, both in the front and the back of the house, need to be
trained for performance at levels meeting Company standards. This training will
transpire both in currently open restaurants as well as in unopened restaurant
locations. Both situations may drive margins downward. The total impact is a
function of the number of restaurants opening and the timing of those restaurant
openings.
Results of operations in 2001 will likely see a reduction in pre-opening
expenses of approximately $4.5 million. Having opened six restaurants in 2000,
management has developed a method to ensure a high quality and cost efficient
opening for the two restaurants to be opened in 2001. Further openings are not
anticipated in 2001. The Company's focus will be to maximize its investment in
the Xxxxxx and Xxxxx'x concept. Subsequently, based on results achieved during
2001, the Company will determine its future growth model based on available
resources, and its ability to deliver adequate shareholder returns.
LIQUIDITY AND CAPITAL RESOURCES
(IN `000S)
2000 1999 1998
------- -------- -------
Cash from operating activities $ 552 $ 3,177 $ 3,507
Cash used for acquisition - (10,383) -
Cash used in investing activities
(other than for acquisition) (6,836) (6,474) (6,234)
Cash provided by financing activities 6,243 13,838 2,788
------- -------- -------
Net (decrease) increase in cash $ (41) $ 158 $ 61
======= ======== =======
Cash from operating activities decreased in 2000 due to the payment of more
than $5 million in pre-opening expenses, occupancy costs incurred at restaurants
held for disposal, and increased insurance costs. The Company does not
anticipate significant pre-opening expense in 2001. In 2000, the Company
received more than $2 million in lease incentives from various landlords. The
proceeds were used to fund construction of the related properties. Significant
additional lease incentives are not anticipated in the foreseeable future.
-4-
Xxxx used in investing activities in 2000 consists of capital expenditures
approaching $25 million offset by $17.8 million in proceeds from the disposal of
restaurant properties. The $11 million increase in capital expenditures from
1999 to 2000 reflects investment in four newly constructed Xxxxxx and Xxxxx'x
steakhouses. Capital expenditures in previous years reflects remodeling and
renovation of existing restaurants. The Company currently projects 2001 capital
expenditures to be $12 million of which approximately $9 million reflects
commitments on new restaurant construction and $3 million will be used for
existing restaurant capital expenditures.
Cash provided by financing activities in 2000 includes the proceeds of the
related party subordinated debt and net borrowings under the Revolving Credit
and Term Loan Agreement ("Agreement"). In 2000 the Company began making
principal payments on the $15 million term loan secured in 1999. Principal
payments on the term loan continue each quarter until its maturity in March
2004. Continued payments to the previous owners of the Xxxxxx and Xxxxx'x
concept totaled $750,000 in 2000. Payments under this agreement continue until
April 2002.
The Company requires capital principally for the construction and opening
expenses for new restaurants and for the remodeling and refurbishing of existing
restaurants. The Company's primary sources of working capital are cash flows
from operations and borrowings under the Agreement that provides up to a $17.5
million line of credit.
At the end of 2000, the Company had approximately $11.1 million in
outstanding borrowings under its line of credit, compared with $4.2 million at
the end of 1999. The incremental borrowings were used to fund the net increase
in investing activities, to fund the $1.5 million principal payments due on the
term loan, and to fund operating activities including more than $5 million in
pre-opening expenses. At the end of 2000, the Company had $4.6 million available
under its line of credit.
The Company has approximately $9 million in commitments and liabilities
stemming from construction of six new restaurants during 2000. On February 20,
2001 the Company entered into several agreements with affiliates of Samstock,
L.L.C., the Company's largest stockholder, and Xxxxxx Xxxx, the Company's
Chairman of the Board, (the "Related Parties") to secure short term and long
term financing to fund those obligations. Those agreements are described below:
. The Company secured subordinated notes ("Notes") totaling $13 million.
The Notes accrue interest at the applicable Eurodollar rate plus 16% and are
payable upon closing of the Rights Offering, referred to below, or March 31,
2005, whichever is earlier, provided that up to $5 million in borrowings may
remain outstanding following the Rights Offering. The terms of the Notes
require that the funds be used to pay construction costs. The Company has
been advanced $2 million of the $13 million in availability under the Notes
which is recorded in the accompanying consolidated balance sheet as a non-
current liability. A fee of 12% per annum is being charged on the unused
portion of the availability under the Notes. Interest accrues and is payable
when certain leverage ratios are attained. Management believes that these
ratios will not be attained and that interest will be accrued for all of
2001.
. The Company is required by the terms of the Notes to conduct a rights
offering ("Rights Offering"). Pursuant to the Rights Offering, the Company
will offer to each of its stockholders rights to purchase up to $8.5 million
of newly issued Series A senior convertible redeemable preferred stock. The
Related Parties have agreed to act as a standby purchaser to ensure the
sale, at the subscription price, of all of the Series A preferred shares
offered pursuant to the Rights Offering. The terms of the preferred stock
include 10% dividends, payable in cash or in-kind, semi-annually in arrears,
liquidation preference over common stock, and optional redemption by the
holder of all shares for a limited time six years following issuance.
Further, the preferred stock is convertible into common stock at any time on
a one-to-one basis, unless dividends are accrued but unpaid, or as shall be
adjusted to avoid undue dilution. Payment of cash dividends is not
anticipated in the foreseeable future. The proceeds of the Rights Offering
will be used to repay a portion of the Notes.
. In conjunction with the Notes, the Related Parties have executed a $5.9
million letter of credit on behalf of one of the Company's construction
vendors.
In addition, the Agreement has been amended to permit the Company to issue
the Notes, increase availability under the line of credit to $17.5 million, and
revise various financial covenants. The Agreement requires compliance with
several financial covenants including specified limits for the Company's
leverage ratio, debt service ratio, interest coverage ratio, capital
expenditures, adjusted leverage ratio, minimum EBITDA, as well as other non-
financial covenants.
The Company believes that the availability under the Notes, the proceeds
from the Rights Offering, the availability under the Agreement, and cash flow
from operations will be sufficient to fund capital expenditure commitments,
working capital needs and scheduled principal payments under the term loan.
-5-
The Company may require alternative sources of long-term financing. However,
no assurance can be given that such financing will be available or available on
terms satisfactory to the Company. Management expects to remain in compliance
with the covenants of the Agreement. The nature of the restaurant industry
creates uncertainty in the ability to maintain sales trends exhibited in the
last several quarters. Several factors, including many of which are not in the
Company's control, can affect current sales trends negatively. It is foreseeable
that these negative impacts could affect the Company's compliance with covenants
under the Agreement.
EFFECT OF INFLATION
Management does not believe inflation has had a significant effect on
Company operations during the past several years. Although the Company generally
has been able to substantially offset increases in its operating costs resulting
from inflation by increasing menu prices or making other adjustments, there can
be no assurance that it will be able to do so in the future. Although management
does not anticipate inflation having a material effect on income from restaurant
operations in 2001, future increases in labor, food or other operating costs
including utilities, could adversely affect Company operating results.
SEASONALITY AND OTHER INFORMATION
The Company's business is seasonal in nature with revenues for the second
and third quarters greater than in the first and fourth quarters.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this report may be forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
include financial projections, estimates and statements regarding plans,
objectives and expectations of the Company and its management. Examples of
certain forward-looking statements are the Company's intentions and abilities to
dispose of assets, remodel assets, or acquire assets, the intentions and
abilities to increase or decrease outstanding borrowings, the intentions and
abilities to control or mitigate changes in any operating costs, and the
intentions and abilities to maintain current levels of comparable restaurant
revenues or operating results. Although the Company believes that the
expectations reflected in all such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
achieved. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Some of the known and unknown risks, uncertainties and other
factors referred to above include, but are not limited to, the following:
changes in customer demand due to economic factors, competitive factors, pricing
pressures, availability of employees, changes in demographic trends, the ability
to open new restaurants successfully and to successfully integrate any acquired
businesses, litigation involving employment, liability and other issues, weather
and other acts of God.
-6-
Selected Financial Data
(In thousands, except per share data)
2000 1999 1998 1997 1996
====================================================================================================================================
Revenues $141,697 $140,937 $145,188 $151,202 $160,551
Impairment Write-downs and 3,810 4,890 - 43,374 7,833
Restructuring Charges
Total Operating Expenses 152,123 144,477 144,617 191,959 168,767
(Loss) Income Before Income Taxes (10,426) (3,540) 571 (40,757) (8,216)
Net (Loss) Income (10,426) (3,540) 571 (31,118) (5,423)
Net (Loss) Income Per Common Share - (.88) (.30) .05 (2.91) (.66)
Basic and Diluted (1)
Balance Sheet Data (End of Period):
Total Assets: 108,395 100,456 88,446 88,245 148,925
Current Portion of Long-Term 4,210 1,685 724 816 6,772
Indebtedness
Long-Term Indebtedness 25,908 22,413 8,470 5,746 50,499
Stockholder's Equity 45,961 56,289 59,754 59,005 71,308
Number of Restaurants at Year End 46 51 58 60 63
----------------
(1) Effective December 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (SFAS 128). The
adoption of the standard had no material impact for any of the years
presented above. For all years presented, basic and diluted earnings
per share are the same.
-7-
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)
December 25, December 27,
ASSETS 2000 1999
------------ ------------
Current Assets:
Cash and Equivalents $ 383 $ 424
Accounts Receivable, net of Allowance for Doubtful
Accounts of $226 in 2000 and $176 in 1999 3,764 2,969
Inventories 2,401 2,282
Prepaid Expenses and Other Current Assets 811 530
Current Portion of Deferred Tax Asset 77 288
-------- --------
Total Current Assets 7,436 6,493
-------- --------
Property and Equipment, at Cost:
Land - 3,904
Buildings - 15,384
Equipment 35,387 33,115
Leasehold Interests & Improvements 71,596 54,821
Construction in Progress 9,518 3,380
-------- --------
116,501 110,604
Less: Accumulated Depreciation and Amortization 39,311 42,621
-------- --------
Net Property & Equipment 77,190 67,983
Leased Property under Capital Leases, Less Accumulated
Amortization of $2,319 in 2000 and $2,329 in 1999 1,979 2,514
Other Assets, Less Accumulated Amortization of $3,860
in 2000 and $3,680 in 1999:
Goodwill 8,282 10,043
Trade Name 6,394 6,742
Non-current Portion of Deferred Tax Asset 5,303 5,092
Other Assets 1,811 1,589
-------- --------
Total Other Assets, net 21,790 23,466
-------- --------
$108,395 $100,456
======== ========
The accompanying notes are an integral part of
these consolidated balance sheets.
-8-
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 25, December 27,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
------------ ------------
Current Liabilities:
Current Portion of Long-Term Obligations $ 4,210 $ 1,685
Accounts Payable 19,596 9,711
Accrued Liabilities 12,720 10,358
-------- --------
Total Current Liabilities 36,526 21,754
Non-Current Liabilities (Excluding Current Portion):
Deferred Payments on Acquisition 250 1,000
Long-Term Debt 20,600 17,700
Long-Term Debt to Related Parties 2,000 -
Long-Term Obligations under Capital Leases 3,058 3,713
-------- --------
Total Non-Current Liabilities (Excluding Current Portion) 25,908 22,413
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock, $1.00 par value, authorized
10,000,000 shares; 0 outstanding in 2000 and 1999 - -
Common Stock, $.01 par value, authorized 30,000,000
shares; 11,795,529 and 11,775,191 shares
outstanding in 2000 and 1999, respectively 118 118
Additional Paid-In Capital 61,276 61,178
Accumulated Deficit (15,433) (5,007)
-------- --------
Total Stockholders' Equity 45,961 56,289
-------- --------
$108,395 $100,456
======== ========
The accompanying notes are an integral part of
these consolidated balance sheets.
-9-
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
FISCAL YEARS ENDED
12/25/00 12/27/99 12/28/98
-------- -------- --------
Revenues $141,697 $140,937 $145,188
-------- -------- --------
Costs and Expenses:
Cost of Sales 46,347 45,059 47,388
Restaurant Labor 40,499 42,015 42,078
Other Operating Costs 32,640 31,930 34,955
Selling, General and Administrative Expenses 13,312 11,472 14,353
Depreciation and Amortization 6,922 7,830 6,601
Pre-opening Costs 5,266 - -
Write Down of Assets and Restructuring and Unusual Charges 3,810 4,890 -
Loss (Gain) on Sales of Assets 278 (742) (1,534)
-------- -------- --------
(Loss) Income from Operations (7,377) (1,517) 1,347
Interest Expense, net 3,049 2,023 776
-------- -------- --------
(Loss) Income Before Income Taxes (10,426) (3,540) 571
Provision for Income Taxes - - -
-------- -------- --------
Net (Loss) Income $(10,426) $ (3,540) $ 571
======== ======== ========
Net (Loss) Income Per Common Share - Basic and Diluted $ (0.88) $ (0.30) $ 0.05
======== ======== ========
Weighted Average Shares Outstanding 11,788 11,767 11,745
======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
-10-
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
------ ------ ---------- -------- -------------
Balance, December 29, 1997 11,727 $117 $60,926 $ (2,038) $ 59,005
Exercise of Stock Options 26 1 155 - 156
Nonemployee Director Compensation 10 - 22 - 22
Net Income - - - 571 571
------ ---- ------- -------- --------
Balance, December 28, 1998 11,763 118 61,103 (1,467) 59,754
Nonemployee Director Compensation 12 - 75 - 75
Net Loss - - - (3,540) (3,540)
------ ---- ------- -------- --------
Balance, December 27, 1999 11,775 118 61,178 (5,007) 56,289
Issuance of New Shares 21 - 98 98
Net Loss - - - (10,426) (10,426)
------ ---- ------- -------- --------
Balance, December 25, 2000 11,796 $118 $61,276 $(15,433) $ 45,961
====== ==== ======= ======== ========
The accompanying notes are an integral part of these consolidated statements.
-11-
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
FISCAL YEARS ENDED
------------------------------------------------------
12/25/00 12/27/99 12/28/98
===================================================================================================================================
Cash Flows from Operating Activities:
Net (Loss) Income $(10,426) $ (3,540) $ 571
Adjustments to Reconcile Net (Loss) Income
to Cash Flows Provided by Operating Activities:
Depreciation and Amortization 6,922 7,830 6,601
Amortization of Debt Issuance Costs 180 92 -
Common Stock Issued in lieu of Compensation - 75 22
Loss (Gain) on Retirement and Write-Down of Assets 1,257 3,544 (1,534)
Change in Net Current Liabilities:
(Increase) Decrease in Accounts Receivable (795) 306 (26)
Decrease in Refundable Income Taxes - - 537
(Increase) Decrease in Inventories (119) 152 336
(Increase) Decrease in Prepaid Expenses and
Other Assets (281) 30 (131)
Increase in Accounts Payable 3,311 923 1,513
Increase in Deferred Income 2,966 - -
(Decrease) in Accrued Liabilities (2,463) (6,235) (4,382)
------------------------------------------------------
Cash Provided by Operating Activities 552 3,177 3,507
------------------------------------------------------
Cash Flows from Investing Activities:
Expenditures for Property and Equipment (24,403) (13,839) (10,225)
(Increases) Reductions in Other Assets (268) 2 (67)
Net Proceeds from Disposition of Assets 17,835 7,363 4,058
Business Acquisition, net of cash - (10,383) -
------------------------------------------------------
Cash Used in Investing Activities (6,836) (16,857) (6,234)
------------------------------------------------------
Cash Flows from Financing Activities:
Principal Payments on Obligations under (205) (724) (818)
Capital Leases
Net Borrowings under Revolving Credit Agreement 6,900 750 3,450
Proceeds from Issuance of Debt 2,000 15,000 -
Payments of Debt (1,500) - -
Debt Issuance Costs (300) (688) -
Payments under Acquisition Agreement (750) (500) -
Proceeds from Issuance of Common Stock 98 - 156
------------------------------------------------------
Cash Provided by Financing Activities 6,243 13,838 2,788
------------------------------------------------------
(Decrease) Increase in Cash (41) 158 61
Cash, Beginning of Year 424 266 205
------------------------------------------------------
Cash, End of Year $ 383 $ 424 $ 266
======================================================
-12-
Supplemental Cash Flow Disclosure:
Cash Paid During the Year For:
Interest $ 2,539 $ 1,695 $ 735
Income Taxes $ 158 $ (395) $ (205)
Non-Cash Investing and Financing Activities:
Liabilities Incurred for Construction in Progress $ 6,574 $ 351 -
Capitalized Lease Obligations Released $ (115) $ (197) -
Deferred Payment Obligation Incurred for Business
Acquisition $ - $ 1,750 -
The accompanying notes are an integral part of these consolidated statements.
-13-
CHART HOUSE ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 25, 2000
(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
--------------------
Chart House Enterprises, Inc. and its subsidiaries, all of which are wholly
owned (hereinafter referred to as the "Company"), is engaged in the restaurant
business. The subsidiaries of the Company include:
Chart House, Inc.
Pacific Ocean Enterprises, Inc.
Big Wave, Inc.
Chart House Acquisition, Inc.
West 52nd Street, Inc.
Analos Company
Chart House Enterprises of Puerto Rico, Inc.
Chart House Enterprises of Idaho, Inc.
Chart House of Maryland, Inc.
Chart House of Annapolis, Inc.
Cork & Xxxxxxx, Inc.
Solana Beach Baking Company, Inc.
Chart House Acquisition of Maryland, Inc.
At December 25, 2000, the Company operated 40 Chart House restaurants, one
Peohe's restaurant, and five Xxxxxx and Xxxxx'x restaurants. The restaurants are
located primarily on the East and West Coasts of the United States. At December
27, 1999, the Company operated 51 restaurants.
The Company previously operated Solana Beach Baking Company, a wholesale
bakery, through October 1998. The Company sold this operation in October 1998.
Revenues were $5.2 million in 1998.
Basis of Presentation
---------------------
The Company reports fiscal years under a 52/53-week format. This reporting
method is used by many companies in the restaurant and retail industries and is
meant to improve year-to-year comparisons of operating results. Under this
method, certain years will contain 53 weeks. The determinable years are based
upon the selection of acceptable alternatives including: the last specified day
in the quarter, or a specified day closest to the calendar quarter end as the
fiscal quarter end. In 1996, the Company reported the Monday closest to the
calendar quarter end as its official fiscal quarter. In 1999, the Company
changed this alternative to the last Monday of the calendar quarter as its
official fiscal quarter end. The first three quarter ending dates in 1999 were
the same under either alternative. Fiscal year 1999 would have ended on January
3, 2000 under the previously chosen alternative. Financial information for
fiscal year 1999 without the change would have resulted in approximately $3
million in incremental revenues and no significant incremental net income.
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the accounts of
all subsidiaries of the Company. All significant intercompany balances and
transactions have been eliminated in consolidation.
-14-
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Reclassification
----------------
Certain prior year balances have been reclassified to conform to the current
year presentation.
Cash and Equivalents
--------------------
Cash and equivalents include investments that are readily convertible to
cash with an original maturity date of three months or less and are stated at
cost, which approximates fair value. The cash amount presented in Cash on the
accompanying consolidated balance sheets represents cash held at the restaurant
locations. Bank overdrafts of $7,810,000 and $5,705,000 for 2000 and 1999,
respectively, are presented net of cash on-hand at banks of $2,101,000 and
$695,000 for 2000 and 1999, respectively, in Accounts Payable on the
accompanying consolidated balance sheets.
Inventories
-----------
Inventories are valued at the lower of cost (first-in, first-out) or market,
and consist of the following (in thousands):
Dec. 25, Dec. 27,
2000 1999
-------- --------
Food and Non-Alcoholic Beverages $ 954 $ 888
Alcoholic Beverages 1,376 1,379
Merchandise 71 15
------ ------
$2,401 $2,282
====== ======
Construction in Progress
------------------------
Administrative costs incurred to construct new assets and get them ready for
their intended use are capitalized as a component of cost. These costs primarily
include salary and travel expenses for construction managers employed by the
Company. Interest costs incurred during the construction period are capitalized
and amortized once the site is ready for its intended use. Interest capitalized
in 2000 and 1999 was $198,000 and $0, respectively.
Property and Equipment and Leased Property
------------------------------------------
Depreciation and amortization are recorded for financial reporting purposes
using the straight-line method over the estimated useful lives of the assets.
Leasehold interests and improvements and leased property are amortized over the
shorter of the lease term or the asset life. The average estimated depreciable
lives for
-15-
financial reporting purposes are 30 years for buildings, 22 years for leasehold
interests and improvements and leased property, and 3 to 7 years for equipment.
Maintenance, repairs and minor purchases are expensed as incurred. Major
purchases of equipment and facilities, and major replacements and improvements
are capitalized. When assets are sold or otherwise disposed of, the cost and
related accumulated depreciation and amortization are removed from the accounts
and the resulting gains or losses are reflected in the accompanying consolidated
statements of operations as incurred.
Intangible and Other Assets
---------------------------
Goodwill represents the excess of purchase price over the fair market value
of net identifiable assets acquired. Goodwill was $8,282,000 and $10,043,000 at
December 25, 2000 and December 27, 1999, respectively; net of accumulated
amortization of $3,028,000 and $3,347,000, respectively. Xxxxxxxx recorded prior
to 1999 is being amortized using the straight-line method over 40 years.
Xxxxxxxx acquired in 1999 is being amortized using the straight-line method over
20 years. The amount of amortization expense recorded was $424,000, $420,000,
and $688,000 in 2000, 1999, and 1998, respectively. Approximately $1,325,000 in
carrying value of goodwill was written off in 2000 due to the sale of four
restaurant properties In 1999, $379,000 in carrying value of goodwill was
written off upon the sale of one restaurant and $826,000 was written down as
part of the asset write down for restaurants included in the restructuring
charges. See "Write Down of Assets and Restructuring and Unusual Charges".
The value of trade names is determined using conservative industry estimates
for returns on assets. The estimated returns are capitalized using conservative
rates common in the industry. The value of a trade name was $6,394,000 and
$6,742,000, net of accumulated amortization of $581,000 and $233,000, in 2000
and 1999, respectively is being amortized using the straight-line method over 20
years. The amount of amortization expense recorded was $348,000, $233,000, and
$0 in 2000, 1999, and 1998, respectively.
Other assets include costs of liquor licenses of $571,000 and $358,000 at
December 25, 2000 and December 27, 1999, respectively. The carrying values of
liquor licenses are recorded at the lower of cost or net realizable value and
are not being amortized. A substantial number of licenses are transferable and
were issued in California, which has a very restricted market for new licenses.
For this reason, management believes the licenses, which have indefinite legal
lives, will retain their value.
There were debt issuance costs of $847,000 and $727,000, net of accumulated
amortization of $272,000 and $92,000, included in other assets at December 25,
2000 and December 27, 1999, respectively. The amounts reflect fees paid in
conjunction with the Company's long-term debt facilities and are being amortized
over the four-year term of the facilities. The amount of amortization expense
recorded was $180,000, $92,000, and $0 in 2000, 1999, and 1998, respectively.
Long-Lived Assets
-----------------
The Company evaluates its assets and properties for impairment, in
accordance with Financial Accounting Standard Board Statement No. 121,
"Accounting for Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS No. 121"), when events or circumstances indicate that carrying amounts
may not be recoverable. In performing this analysis, the Company generally
groups assets by individual location or restaurant property. The amount of
impairment, if any, is measured by comparing future estimated cash flows to be
generated as a result of operating the particular restaurant, generally over
specified lease terms or useful lives, against the carrying value of the related
assets. The Company recorded a net impairment charge of $979,000, $4,286,000 and
$0 in 2000, 1999 and 1998, respectively as part of the asset write down for
restaurants included in the restructuring charges. See "Write Down of Assets and
Restructuring and Unusual Charges".
-16-
Fair Value of Financial Instruments
-----------------------------------
The carrying amounts of cash, accounts receivable and payable, and accrued
liabilities approximate fair value because of the short-term nature of the
items. The carrying amounts of the Company's line of credit, notes and other
payables approximate fair value either due to their short-term nature, the
variable rates associated with these debt instruments or based on current rates
offered to the Company for debt with similar characteristics.
Deferred Income
---------------
In 2000, landlords contributed $2.3 million to the Company through lease
incentives. The unamortized balance is included in Accrued Liabilities on the
accompanying consolidated balance sheet. The balance is amortized against rental
expense over the term of the lease.
Revenue Recognition
-------------------
The Company records revenues from normal recurring sales upon the
performance of services.
Fees and Royalties
------------------
The Company previously operated a Chart House restaurant in Weehawken, New
Jersey under a management agreement with the owner of the property that provided
the Company with a fee of 7% of restaurant sales. In May 1998, the restaurant
was completely destroyed by fire. The Company was named as an insured party in
a policy held by the owner of the property. The insurance policy covers lost
profits, and therefore, this business interruption did not have an impact on
1999 or 1998 operating results. Proceeds received in 1999 and 1998 for business
interruption insurance were approximately $592,000 and $388,000, respectively.
Management fees related to this operation were $592,000, $586,000 in 1999 and
1998, respectively. There were no business interruption insurance proceeds or
management fees received in 2000 due to the termination of the management
agreement.
The Company previously operated a Chart House restaurant in Baltimore,
Maryland that was closed by the property owner in 1999 for redevelopment. The
Company recorded $211,000 and $215,000 in lost profits received from the
property owner for fiscal years 2000 and 1999, respectively. No future lost
profits proceeds are anticipated.
The Company generally recognizes royalty income when the amounts are
estimable. The Company recorded approximately $124,000, $387,000, and $0, in
2000, 1999 and 1998, respectively, in royalties from a previously held
subsidiary.
Advertising
-----------
The Company records advertising expense as incurred. Advertising expense was
$1,619,000, $1,091,000 and $1,040,000 in fiscal years 2000, 1999, and 1998,
respectively.
Pre-opening Costs
-----------------
-17-
Pre-opening costs include hiring and training of employees for new
restaurants and are expensed as incurred.
Income Taxes
------------
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply in the years in which those temporary differences are expected
to be recovered or settled. A valuation allowance has been provided to reduce
deferred tax assets to the amounts expected to be realized. Remaining
realizable assets are supported by anticipated turn-around of deferred tax
liabilities and future projected taxable income.
Stock Based Compensation
------------------------
The Company has elected to account for stock based compensation under the
intrinsic value method of accounting. This method measures compensation cost as
the excess, if any, of the quoted market price of the Company's common stock at
the grant date over the amount the employee must pay for the stock. The
Company's policy is to grant stock options to purchase the Company's stock at a
price equal to fair market value at the date of grant. The compensation expense
is amortized on a straight-line basis over the vesting period of the options.
The Company has disclosed required pro forma disclosures of compensation expense
determined under the fair value method of accounting for stock based
compensation as prescribed by Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation" ("SFAS No. 123").
Net Income (Loss) Per Common Share
----------------------------------
Basic earnings per share is computed by dividing net income(loss) available
to common shareholders by the weighted average number of common shares
outstanding for the reporting period. Diluted earnings per share reflects the
potential dilution that could occur if all common stock equivalents were
outstanding. Common stock equivalents are anti-dilutive, by definition, in
periods reporting losses and, therefore, excluded from the weighted average
number of shares calculation. The number of stock options outstanding, excluded
from calculations of income (loss) per share because their impact is anti-
dilutive, was 977,681, 962,586, and 921,103 in 2000, 1999, and 1998,
respectively. Diluted earnings per share equals basic earnings per share for all
periods presented.
Segment Reporting
-----------------
Reportable operating segments are components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker in deciding how to allocate resources and in
evaluating performance. The Company believes its restaurants meet the criteria
supporting aggregation of all restaurants into one operating segment.
Derivative Instruments and Hedging Activities
---------------------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 defines derivative
instruments and requires that these items be recognized as assets or liabilities
in the statement of financial position. This statement is effective for
financial statements issued for periods
-18-
beginning June 15, 1999. However, SFAS No. 137 defers the effective date for one
year to June 15, 2000. As of December 25, 2000 the Company does not have any
derivative instruments.
(2) ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company's allowance for doubtful accounts receivable was $226,000 and
176,000 in 2000 and 1999, respectively. There were no accounts written off to
the allowance in either year and the allowance was increased by $50,000,
$140,000, and $0 in 2000, 1999, and 1998, respectively. The expense is
classified as Other Operating Costs in the accompanying consolidated statement
of operations.
(3) PROPERTY & EQUIPMENT
Depreciation expense was $3,270,000, $3,842,000, and $3,319,000 in 2000,
1999, and 1998, respectively. Included in Net Property & Equipment in the
accompanying consolidated balance sheet at December 25, 2000 and December 27,
1999 is property held for future development of $9,518,000 and $3,380,000 and
assets held for disposal of $0 and $4,769,000 respectively.
In June 2000, the Company entered into a sale-leaseback agreement whereby
land and buildings owned by the Company were sold to a third party for $15
million in proceeds and subsequently leased back to the Company pursuant to an
operating master lease. The gain on disposal of $345,000 was deferred and is
recorded in Accrued Liabilities in the accompanying consolidated balance sheet.
The gain is being amortized against future rent expense over the term of the
lease.
(4) WRITE DOWN OF ASSETS AND RESTRUCTURING AND UNUSUAL CHARGES
In 1999, the Company committed to an expansion plan of both the Chart House
concept and the Xxxxxx and Xxxxx'x concept. This plan included a reorganization
of operations and, as a result, eleven restaurants were identified for disposal.
All eleven restaurants remained open through December 27, 1999. In the fourth
quarter 1999, the Company recorded $4,286,000 in asset impairment write down,
including impairment of goodwill, and $604,000 in exit costs and severance
payments due 283 employees. The write down of assets to fair value reflected
management's estimates of proceeds upon sale less cost to sell. By the end of
2000, ten of the eleven restaurants identified for disposal had closed and three
remained held for disposal. Management anticipates closure and disposal of the
remaining restaurants in 2001.
In 2000, the Company recorded a restructuring charge of $3,810,000. The
charge reflects additional net fixed asset write-downs totaling $979,000, which
reflects reduction in carrying value of assets held for disposal to zero. The
write down of assets to fair value reflected management's estimates of proceeds
upon sale less cost to sell. A restructuring charge of $2,831,000 reflects
incremental exit costs, primarily occupancy costs, for three restaurant
properties not yet disposed of.
The restaurants identified for disposal in the 2000 plan did not contribute
significantly to the Company's income (excluding overhead allocations) in 2000,
and had contributed $266,000 and $852,000 in 1999 and 1998, respectively.
-19-
The following table illustrates the amounts paid and charged against the
liability for severance and other exit costs in 2000.
Liability at December 27, 1999 $ 604,000
Amounts Paid (1,831,000)
Incremental Charges 2,831,000
-----------
Liability at December 25, 2000 $ 1,604,000
===========
The liability at December 25, 2000 includes severance due 21 employees and
is included in Accrued Liabilities in the accompanying consolidated balance
sheets.
There were no restructuring charges in 1998.
(5) ACQUISITIONS AND DISPOSITIONS
Business Combinations
---------------------
In April 1999 the Company purchased a restaurant business located in New
York, New York d/b/a Xxxxxx and Xxxxx'x Steakhouse ("Xxxxxx and Xxxxx'x"). The
acquisition was accounted for under the purchase method of accounting. The
purchase price was $12,633,000. Of this amount approximately $10,383,000 was
paid at closing, including costs of acquisition, with the remaining $2,250,000
due in equal installments over the subsequent 36 months. The identifiable net
assets acquired included tangible net assets of $1,015,000, the value of the
trade name of $6,975,000, and the value of a non-compete agreement of $450,000.
The non-compete agreement is being amortized over its three-year term. Goodwill
of $4,193,000 representing the excess of purchase price over the fair value of
identifiable net assets acquired was recorded as a result of the acquisition.
The intangible assets are being amortized on a straight-line basis over lives of
3 to 20 years. The results of operations of Xxxxxx and Xxxxx'x are included in
the Company's consolidated results of operations from the date of acquisition,
April 22, 1999.
The following unaudited pro forma results of operations present combined year to
date historical financial information as if the acquisition occurred at the
beginning of each fiscal year. This unaudited pro forma information may not be
indicative of the results that actually would have occurred if the acquisition
had taken
-20-
place at the beginning of the periods presented, or of the future results of
operations of the Company. All information, except per share amounts, are
presented in thousands:
1999 1998
$ per share $ per share
--------------------- ---------------------
Revenues $143,749 $154,967
(Loss) Income before Extraordinary Items and
Cumulative Effects of Accounting
Changes $ (3,914) $(.33) $65 $.01
Net (Loss) Income $ (3,914) $(.33) $18 $.00
Dispositions
------------
In November 1998, the Company sold an investment in capital stock of a non-
public company to an unrelated third party. The total sale price was $1,349,000
and was received in cash. The Company recognized a net gain on the sale of
$1,080,000, which is included in the accompanying consolidated statement of
operations.
In October 1998, the Company sold all of the assets of the Solana Beach
Baking Company to an unrelated third party. The total sale price was $865,000
and was received in cash. The Company recognized a net gain on the sale of
$388,000, which is included in the accompanying consolidated statement of
operations.
(6) ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
December 25, December 27,
2000 1999
------------ ------------
Deferred Income $ 2,966 $ -
Unredeemed Gift Certificates 2,256 2,834
Payroll and Related Expenses 2,235 1,917
Exit Costs 1,604 604
Insurance 1,192 1,294
Other 2,467 3,709
------- -------
$12,720 $10,358
======= =======
(7) INCOME TAXES
The provision for income taxes consists of the following components (in
thousands):
-21-
Fiscal Years Ended
-------------------------
2000 1999 1998
------- ----- -------
Current:
State $(1,018) $(395) $ (501)
Federal (4,598) (88) (2,261)
------- ----- -------
Total Current: (5,616) (483) (2,762)
Deferred:
State 1,018 395 501
Federal 4,598 88 2,261
------- ----- -------
Total Deferred: 5,616 483 2,762
------- ----- -------
Provision for Income Taxes $ - $ - $ -
======= ===== =======
-22-
The income tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities are as follows (in thousands):
December 25, December 27,
2000 1999
------------ ------------
Deferred Tax Assets:
Excess of Book Expense over Tax Expense
Related to Restructuring Charges $ 1,701 $ 1,559
Excess of Book Expense over Tax Expense
Related to Fixed Asset Write-Downs 5,995 7,303
Excess of Book Expense over Tax Expense
Related to Capitalized Leases 522 455
Deferred Tax Credits, including Targeted Jobs
and FICA Credit Carry Forwards 4,334 3,732
Net Operating Loss Carry Forwards 11,526 3,307
Compensation and Other Benefits Not
Deducted Until Paid - 67
Other Deferred Costs 546 445
-------- -------
Deferred Tax Assets 24,624 16,868
-------- -------
Deferred Tax Liabilities:
Excess of Tax Depreciation Over
Book Depreciation (8,121) (5,369)
Compensation and Benefits (236) -
State Income Taxes (78) (21)
-------- -------
Deferred Tax Liabilities (8,435) (5,390)
-------- -------
Net Deferred Tax Assets 16,189 11,478
Deferred Tax Asset Valuation Allowance (10,809) (6,098)
-------- -------
Net Deferred Tax Assets $ 5,380 $ 5,380
======== =======
Gross operating loss carryforwards were $29,936,000 and $8,589,000 as of
December 25, 2000 and December 27, 1999, respectively. Operating loss carry
forwards expire annually beginning in the year 2018. Tax credits expire in
various years beginning in the year 2010.
-23-
The provision for income taxes reconciles to the amounts computed by
applying the Federal statutory rate to income before tax as follows (in
thousands):
Fiscal Years Ended
--------------------------
2000 1999 1998
------- ------- -----
Statutory Federal Income Tax
(Benefit) Provision $(3,545) $(1,204) $ 194
Keyman's Insurance 3 - -
Amortization of Goodwill 74 95 95
State Income Taxes, Net of
Federal Benefit (406) (77) 113
Deferred Tax Asset Valuation
Allowance 4,711 2,153 566
Meals and Entertainment 34 28 27
FICA Tax Credit, net (871) (995) (995)
------- ------- -----
Provision for Income Taxes $ - $ - $ -
======= ======= =====
(8) LONG-TERM DEBT
Long-term debt of the Company is as follows (in thousands):
December 25, December 27,
2000 1999
------------ ------------
Term loan payable to bank under Revolving Credit and Term Loan
Agreement, interest payable at LIBOR (6.66% at December 25,
2000 and 5.47% at December 27, 1999) plus 4% in 2000 and 3% in
1999 $13,500 $15,000
Outstanding line of credit under Revolving Credit and Term Loan
Agreement, interest payable at prime (9.5% at December 25,
2000 and 8.5% at December 27, 1999) plus 2.25% in 2000 and 11,100 4,200
1.25% in 1999
Subordinated Note payable to related party, interest payable at
LIBOR plus 16% 2,000 -
-----------------------
Total outstanding debt 26,600 19,200
Less: amount classified as current (4,000) (1,500)
-----------------------
Total long-term debt $22,600 $17,700
=======================
In April 1999, the Company paid off the outstanding balance of an existing
revolving credit agreement and entered into a Revolving Credit and Term Loan
Agreement ("Agreement") with the same bank, along with other lending
institutions. This Agreement provided for a revolving line of credit of up to
$25 million and a term loan of $15 million, each of which mature on March 31,
2004. The interest rates on the revolving and term facilities were at the
Company's option, prime interest rate, plus a maximum of 1.25% or LIBOR, plus a
maximum of 3.00%, respectively. The Company was required to pay a facility fee
of .50% per annum on the unused portion of the commitment, $20.8 million at
December 27, 1999. The Agreement required compliance with several financial
covenants including specified limits for the Company's leverage ratio,
consolidated net worth, debt service ratio, interest coverage ratio, and capital
expenditures as well as other non-financial covenants. All of the Company's
assets and the capital stock and assets of each of its subsidiaries were pledged
as security to the banks in accordance with the terms of the Agreement.
The Agreement was amended effective December 24, 2000. The Agreement, as
amended, provides for a revolving line of credit of up to $17.5 million and a
term loan of $15 million, each of which mature on March 31, 2004. The interest
rates on the revolving and term facilities are at the Company's option, prime
interest rate,
-24-
plus a maximum of 2.25% or LIBOR, plus a maximum of 4.00%, provided that a
portion of the Term Loan in the aggregate amount of $5 million bears interest at
LIBOR plus 14% until a certain financial ratio is attained. During the fourth
quarter 2000, the Company maintained the ratio requiring payment at the higher
interest rate. The incremental interest accrued is not material. The Company is
required to pay a facility fee of .50% per annum on the unused portion of the
commitment. At December 25, 2000, the unused portion of the commitment was
approximately $4.6 million. The Agreement requires compliance with several
financial covenants including specified limits for the Company's leverage ratio,
debt service ratio, interest coverage ratio, capital expenditures, adjusted
leverage ratio, minimum EBITDA, as well as other non-financial covenants. The
Agreement, as amended, affirms that the bank cures or waives any events of
default during the fourth quarter 2000 and the Company is in compliance with the
terms of the Agreement as of December 25, 2000. All of the Company's assets and
the capital stock and assets of each of its subsidiaries are pledged as security
to the banks in accordance with the terms of the Agreement.
In November 2000, a related party loaned the Company $2 million pursuant to
an unsecured note. See "Related Party Transactions". Amounts outstanding under
the note are subordinated to amounts owing under the Agreement. The proceeds
were used to fund working capital requirements as well as scheduled principal
payments on the term loan. The terms of this note have been amended and restated
and are further discussed in "Subsequent Events".
The carrying values of long-term debt as of December 25, 2000 and December
27, 1999 approximate fair value. Principal payments due for each of the
following five years is as follows (in thousands):
Fiscal Years Ended
------------------
2001 $ 4,000
2002 3,000
2003 4,000
2004 13,600
2005 2,000
-------
$26,600
=======
Interest cost incurred was $3,248,000, $2,023,000, and $790,000 in 2000,
1999, and 1998, respectively. Amounts charged to expense were $3,049,000,
$2,023,000, and $790,000 in 2000, 1999, and 1998, respectively.
(9) LEASES
The Company is committed under long-term lease agreements primarily
involving land and restaurant buildings, which expire on various dates through
2022. Also, a substantial number of leases contain renewal options ranging from
five to fifty years. Certain of the leases require the payment of an additional
amount by which a percentage of annual sales exceeds annual minimum rentals. The
total amount of such contingent rentals for the fiscal years 2000, 1999 and 1998
amounted to $2,100,000, $2,029,000 and $2,147,000, respectively. Certain of the
leases contain scheduled rent increases. The Company records the minimum rent
expense on a straight-line basis over the term of the lease and defers the
amount payable in future years. The deferred rent is recorded in Accrued
Liabilities in the accompanying consolidated balance sheets.
Capital Leases
--------------
At December 25, 2000, minimum lease payments under long-term capital leases
were as follows (in thousands):
-25-
Fiscal Years Ended
------------------
2001 $ 514
2002 522
2003 457
2004 457
2005 448
Thereafter 3,980
------
Total Minimum Lease Payments 6,378
Less: Amount Representing Interest 3,110
------
Total Obligations under Capital Leases 3,268
Less: Current Portion 210
------
Long-Term Obligations under Capital Leases,
with an Average Interest Rate of 9.5% $3,058
======
Amortization of leased property under capital leases is included in
depreciation and amortization on the accompanying consolidated statements of
operations.
Operating Leases
----------------
The Company is committed under long-term operating leases to make minimum
rental payments as follows (in thousands):
Fiscal Year Ended
-----------------
2001 $ 6,658
2002 6,599
2003 6,699
2004 6,151
2005 6,111
Thereafter 33,229
-------
$65,447
=======
Minimum rental expense for all operating leases, excluding contingent rent,
for the fiscal years 2000, 1999 and 1998 was $6,335,000, $3,442,000 and
$3,468,000 respectively.
(10) EMPLOYEE BENEFIT PLANS
The Company's 401(k) Plan allows qualified employees to contribute through
payroll deductions from 1% to 10% of gross pay. The Company makes basic matching
contributions to the plan equal to 25% of the first 5% of the employee's
contribution, not to exceed $1,250 per employee per year. In addition, the
Company will make a supplemental 25% matching contribution on the first 5% of
the employees' contribution, not to exceed $1,250 per employee, per year, on a
quarterly basis if targeted financial results are achieved. Company
-26-
matching contributions and administrative costs associated with the plan were
$125,000, $133,000 and $454,000 for the fiscal years 2000, 1999, and 1998,
respectively.
(11) STOCK OPTION PLANS
In July 1989, the Board of Directors adopted and the stockholders of the
Company approved the 1989 Non-Qualified Stock Option Plan (the "1989 Plan"),
which authorized the grant of non-qualified stock options to purchase up to
250,000 shares of the Company's common stock. Under the 1989 Plan, options to
purchase 250,000 shares were granted in 1989 to certain senior management and
other employees at the fair market value of the common stock on the date of
grant. The options vested at a rate of 25% per year over four years and expire
ten years from the date of grant. In 1991 and 1995, certain of these options
were reissued which extended their expiration to 2005 as well as required
additional vesting through 1997. In 1998, the Board of Directors approved an
adjustment disallowing future grants under the 1989 Plan.
In February 1992, the Board of Directors adopted, and stockholders approved,
the 1992 Stock Option Plan (the "1992 Plan"), which authorized the grant of non-
qualified options to purchase up to 310,000 shares of the Company's common
stock. The options under the 1992 Plan were awarded at exercise prices equal to
the fair market value of the common stock at the date of grant. Through 1998,
management and other employees were granted stock options to purchase an
aggregate of 377,000 shares of common stock (which included option grants for
shares totaling 70,500 related to previously granted and forfeited options). The
options vest at a rate of 20% per year over five years and expire ten years from
the date of grant. In 1998, the Board of Directors approved an adjustment
disallowing future grants under the 1992 Plan.
In May 1996, the Board of Directors adopted, and stockholders approved, the
1996 Stock Option Plan (the "1996 Plan"), which authorizes the grant of non-
qualified stock options to employees to purchase up to 1,000,000 shares of the
Company's common stock. Options were granted in 1998 and 1999 to employees at
exercise prices ranging from $4.19 to $8.63 per share, the fair market value at
the date of grant. The options granted generally vest at a rate of 20% per year
over five years and expire ten years from the date of grant. Some options vest
five years from the date of grant or earlier if the fair market value of the
Company's stock achieves certain levels in accordance with the 1996 Plan. There
are 349,775 options available for future grant under the 1996 Plan as of
December 25, 2000.
In 1998, options to purchase a total of 10,000 shares of common stock were
granted to directors following the Company's annual meeting of shareholders
under the 1996 Nonemployee Director Stock Compensation Plan. The options were
granted at the fair market value on the date of grant. The options vest over a
two-year period and expire ten years from the date of grant. In 2000, options to
purchase 33,020 shares of common stock were granted to directors following the
Company's annual meeting of shareholders under the 2000 Nonemployee Director
Equity Compensation Plan. The options were granted at the fair market value on
the date of grant. The options vest five years from the date of grant or earlier
if the fair market value of the Company's stock achieves certain levels in
accordance with the terms of the plan. The options expire ten years from the
date of grant. See "Stockholders' Equity".
An option to purchase 160,000 shares of common stock was granted to an
officer of the Company in March 1998 at a price of $7.00, the fair market value
on the date of grant. This option grant, which is not covered under the
Company's option plans, was subsequently approved at the annual stockholders'
meeting in May 1998, and expires ten years from date of grant.
There have been no charges to operations with respect to options granted in
the 2000, 1999, and 1998 fiscal years.The following table summarizes stock
option transactions for the fiscal years 1998, 1999 and 2000:
-27-
Weighted Average
ISO Plan/ 2000 Exercise
Other 1989 Plan 1992 Plan 1996 Plan Director Total Shares Price Per Share
--------- --------- --------- --------- -------- ------------ ----------------
Outstanding
December 29, 1997 112,500 37,000 74,600 406,100 - 630,200 $7.46
Granted 170,000 - - 491,000 - 661,000 $6.80
Exercised - (3,500) (19,900) (1,630) - (25,030) $6.21
Forfeited - (18,050) (29,200) (294,990) - (342,240) $7.81
------- ------- ------- -------- -------- ---------
Outstanding,
December 28, 1998 282,500 15,450 25,500 600,480 - 923,930 $6.83
Granted - - - 287,500 - 287,500 $4.71
Exercised - - - - - -
Forfeited - (11,200) (16,500) (178,275) - (205,975) $7.62
------- ------- ------- -------- -------- ---------
Outstanding at
December 27, 1999 282,500 4,250 9,000 709,705 - 1,005,455 $6.12
Granted - - - 90,000 33,020 123,020 $5.59
Exercised - - - - - -
Forfeited (7,500) (2,500) (3,000) (164,910) - (177,910) $6.00
------- ------- ------- -------- -------- ---------
Outstanding at
December 25, 2000 275,000 1,750 6,000 634,795 33,020 950,565 $6.07
======= ======= ======== ======== ========= =======
Exercisable at
December 28, 1998 106,250 15,450 20,000 40,510 - 182,210 $7.03
======= ======= ======== ======== ========= =======
Exercisable at
December 27, 1999 157,500 4,250 9,000 123,425 - 294,175 $6.79
======= ======= ======== ======== ========= =======
Exercisable at
December 25, 2000 195,000 1,750 6,000 237,827 - 440,577 $6.41
======= ======= ======== ======== ========= =======
The following table summarizes information concerning outstanding and
exercisable stock options as of December 25, 2000:
Shares Covered by Options Weighted Average Exercise Price Weighted Average
Range of --------------------------------------------------------------------------------------
Exercise Prices Outstanding Exercisable Outstanding Exercisable Remaining Contractual Life
---------------------------------------------------------------------------------------------------------
$4.19-$6.25 454,705 131,897 $ 4.98 $ 4.84 8.62
$6.50-$8.63 491,860 304,680 $ 7.01 $ 7.00 6.95
$12.88 4,000 4,000 $12.88 $12.88 3.14
--------------------------------------------------------------------------------------
Total 950,565 440,577 $ 6.07 $ 6.41 7.73
======================================================================================
-28-
The Company applies Accounting Principles Board Opinion No. 25, ("Accounting
for Stock Issued to Employees"), and related interpretations in accounting for
its employee stock option plans and, accordingly, does not recognize
compensation expense. Had the Company elected to recognize compensation expense
based on the fair value at the grant date for options granted under the plans
consistent with the methodology prescribed under SFAS No. 123, the Company's net
income (loss) and per share amounts would reflect the following pro forma
amounts (in thousands):
2000 1999 1998
-------- ------- -----
Net (Loss) Income
As Reported $(10,426) $(3,540) $ 571
Pro Forma $(10,960) $(3,924) $ 209
Net (Loss) Income
Per Common Share:
As Reported $ (.88) $ (.30) $ .05
Pro Forma $ (.93) $ (.33) $ .02
Weighted average fair value
of options granted $ 2.85 $ 2.59 $2.93
The fair value of each option is estimated on the date of grant based on the
Black-Scholes option pricing model using the following assumptions:
Expected stock price volatility 52% 49% 47%
Risk-free interest rates 4.9% 6.3% 4.8%
Expected lives 6.0 years 6.0 years 4.0 years
Dividend yield 0.0% 0.0% 0.0%
In accordance with SFAS 123, pro forma amounts reflect only options granted
since fiscal year 1996 and not the options granted prior to 1996 from the 1989
Plan and 1992 Plan. Therefore, the full impact of calculating compensation cost
for stock options is not reflected in the pro forma results set forth above
because compensation cost is reflected over the options' vesting period and
compensation cost for options granted prior to fiscal year 1996 is not
considered. In addition, these amounts may not be representative of the impact
on net income and earnings per share in future years due to future grants and
vesting requirements.
(12) STOCKHOLDERS' EQUITY
The Company's preferred stock may be issued in one or more series and the
Board of Directors may fix the designation, powers, preferences, rights,
qualifications, limitations and restrictions of each class or series so
authorized.
In May 1996, the Board of Directors adopted and stockholders of the Company
approved the 1996 Nonemployee Director Stock Compensation Plan. The plan
provides the right for each nonemployee director, at his or her election, to
receive Company common stock and stock options in lieu of cash compensation and
the automatic grant to each participating director of an option to purchase
2,500 shares of common stock as of the date of each annual meeting of
shareholders. The options vest ratably over 2 years and expire ten years from
the date of grant. There are a total of 50,000 shares reserved for issuance
under the plan. A total of 12,630, and 10,122 shares of common stock were issued
to directors under this plan in 1999 and 1998, respectively.
-29-
In May 2000, the Board of Directors adopted and stockholders of the Company
approved the 2000 Nonemployee Director Equity Compensation Plan. The plan
provides the right for each nonemployee director, at his or her election, to
receive either Company stock units or stock options in lieu of cash
compensation. The options vest five years from the date of grant or earlier if
the fair market value of the Company's stock achieves certain levels, in
accordance with the plan. Up to 400,000 shares of common stock are authorized
for issuance under the plan.
(13) RELATED PARTY TRANSACTIONS
Related party transactions with EGI Risk Services, Inc., EGI Corporate
Investments, Inc., Lettuce Entertain You Enterprises, Inc., and Xxxxxxxxx and
Xxxxxxxxxxx, P.C. totaled $484,000, $1,638,000, and $2,103,000 in 2000, 1999,
and 1998, respectively. The transactions were entered into in the normal course
of business and involve insurance brokerage, and consulting and legal services.
The Company has entered into a marketing agreement with Transmedia, Inc., a
related party. The terms of the agreement provide that the Company receive $1.1
million in cash, and remit to Transmedia, Inc. an agreed upon percentage of
revenues derived from Transmedia members dining in the Company's restaurants.
The agreement can be terminated by either party once the Company has remitted
$2.2 million to Transmedia, Inc. Of this amount, $1.1 million had been advanced
in cash to the Company and is recorded in Accounts Payable in the accompanying
consolidated balance sheet. The remaining commitment of $1.1 million is for
goods and services and is contingent upon revenues derived from Transmedia
members dining in the Company's restaurants. Transmedia, Inc. provides web and
print promotional services that are designed to create incentives for members to
dine at the Company's restaurants, especially during the Company's restaurants'
non-peak hours. The Company believes that a sufficient number of Transmedia
members will dine in the Company's restaurants during 2001 to require the
remittance of the full commitment under the agreement.
The Company has received proceeds in the form a note from a related party.
Additional information is in "Subsequent Events".
The relationships stem from one or more members of the Company's Board of
Directors maintaining influential management positions at or within these
organizations.
(14) COMMITMENTS AND CONTINGENCIES
The Company periodically is a defendant in cases incidental to its business
activities. While any litigation or investigation has an element of uncertainty,
the Company believes that the outcome of any of these matters will not have a
materially adverse effect on its financial condition or operations.
The Company maintains letters of credit primarily to cover insurance
reserves. At December 25, 2000, outstanding letters of credit amounted to
$1,812,500.
The Company has guaranteed a certain bank debt obligation of third parties
with maximum potential liability totaling $4,000,000 as of December 25, 2000. A
liability of $967,000 is recorded in Accrued Liabilities in the accompanying
consolidated balance sheets as of December 25, 2000 and December 27, 1999. This
balance will be released, if unused, when the guarantee terminates in 2004.
Third party guarantees at December 27, 1999 were $5,035,000.
-30-
The Company is contingently liable, in certain circumstances, for certain
lease obligations of properties subleased to third parties. Certain properties,
previously occupied and operated by the Company, have been subleased where the
Company is liable for lease payments should the sublessee default. The Company
is not aware of any monetary or material default under its sublessee
arrangements.
The Company is committed to pay $400,000 in consideration of the standby
purchaser's commitment under the Rights Offering discussed in "Subsequent
Events."
(15) SUBSEQUENT EVENTS
On February 20, 2001 the Company entered into several agreements with
affiliates of Samstock, L.L.C., the Company's largest shareholder, and Xxxxxx
Xxxx, the Company's Chairman of the Board, ("Related Parties"), to secure short
term and long term financing. Those agreements are described below:
. The Company secured subordinated notes ("Notes") totaling $13 million.
The Notes accrue interest at the applicable Eurodollar rate plus 16% and are
payable upon closing of the Rights Offering, referred to below, or March 31,
2005, whichever is earlier; however, up to $5 million in borrowings may
remain outstanding following the Rights Offering. The terms of the Notes
require that the funds be used to pay construction costs. At December 25,
2000, the Company had been advanced $2 million of the $13 million in
availability under the Notes which is recorded in long-term debt to related
parties in the accompanying consolidated balance sheets. A fee of 12% per
annum is being charged on the unused portion of the availability under the
Notes. Interest is payable at maturity or when certain leverage ratios are
attained. Management believes these ratios will not be maintained and that
interest will be accrued for all of 2001.
. The Company is required by the terms of the Notes to conduct a rights
offering ("Rights Offering"). Pursuant to the Rights Offering, the Company
will offer to each of its stockholders rights, on a pro rata basis, to
purchase up to $8.5 million of newly-issued Series A senior convertible
redeemable preferred stock. The Related Parties have agreed to act as a
standby purchaser to ensure the sale, at the subscription price, of all of
the preferred stock offered pursuant to the Rights Offering. The
consideration for this commitment is $400,000. The terms of the preferred
stock include 10% dividends payable, in cash or in-kind, semi-annually in
arrears, liquidation preference over common stock, and optional redemption
by the holder of all shares for a limited time six years following issuance.
Further, the preferred stock is convertible into common stock at any time on
a one-to-one basis, unless dividends are accrued but unpaid, or as shall be
adjusted to avoid undue dilution. The proceeds of the Rights Offering will
be used to repay a portion of the Notes.
. In conjunction with the Notes, the Related Parties have executed a $5.9
million letter of credit on behalf of one of the Company's construction
vendors.
Additionally, the Agreement has been amended effective December 24, 2000 to
allow the Company to issue the Notes, increase availability under the line of
credit to $17.5 million, and revise various financial and non-financial
covenants. The Agreement requires compliance with several financial covenants
including specified limits for the Company's leverage ratio, debt service ratio,
interest coverage ratio, capital expenditures, adjusted leverage ratio, minimum
EBITDA, as well as other non-financial covenants.
-31-
(16) SUMMARY OF UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following is a summary of the unaudited quarterly results of operations
for 2000 and 1999 (in thousands, except per share data):
2000 Quarter Ended
----------------------------------------------------------------------------------------
March 27 June 26 September 25 December 25
--------- --------- ------------- ------------
Revenues $32,880 $35,792 $37,079 $35,946
------- ------- ------- -------
Costs and Expenses:
Cost of Sales 10,740 12,034 12,054 11,519
Restaurant Labor 9,513 9,712 11,187 10,087
Other Operating Costs 7,175 8,004 8,552 8,909
Pre-opening Costs 235 1,593 1,404 2,034
Selling, General and Administrative
Expenses 3,239 2,929 3,364 3,780
Depreciation and Amortization 1,670 1,612 1,736 1,904
Write Down of Assets and
Restructuring and Unusual Charges - 460 1,900 1,450
(Gain) Loss on Sales of Assets - (141) 177 242
Interest Expense 545 667 799 1,038
------- ------- ------- -------
Total Costs and Expenses 33,117 36,870 41,173 40,963
------- ------- ------- -------
Loss Before Income Taxes (237) (1,078) (4,094) (5,017)
Provision for Income Taxes - - - -
------- ------- ------- -------
Net Loss $ (237) $(1,078) $(4,094) $(5,017)
======= ======= ======= =======
Net Loss Per Share $ (.02) $ (.09) $ (.35) $ (.43)
======= ======= ======= =======
Weighted Average Shares Outstanding 11,775 11,786 11,795 11,796
======= ======= ======= =======
-32-
(16) SUMMARY OF UNAUDITED QUARTERLY FINANCIAL INFORMATION - (CONTINUED)
1999 Quarter Ended
------------------------------------------------------------------------------------------------------------
March 29 June 28 September 27 December 27
Revenues $34,631 $37,329 $36,040 $32,937
------- ------- ------- -------
Costs and Expenses:
Cost of Sales 11,099 11,810 11,416 10,734
Restaurant Labor 10,406 11,056 10,518 10,035
Other Operating Costs 7,904 8,155 7,825 8,046
Selling, General and
Administrative Expenses 2,986 3,142 2,905 2,439
Depreciation and Amortization 1,837 2,034 1,996 1,963
Gains on Sales of Assets - (742) - -
Write-down of Assets and Restructuring - - - 4,890
and Unusual Charges
Interest Expense 275 328 803 617
------- ------- ------- -------
Total Costs and Expenses 34,507 35,783 35,463 38,724
------- ------- ------- -------
Income (Loss) Before Income Taxes 124 1,546 577 (5,787)
Provision (Benefit) for Income Taxes - - - -
Net Income (Loss) $ 124 $ 1,546 $ 577 $(5,787)
===========================================================
Net Income (Loss) Per Share $ .01 $ .13 $ .05 $ (.49)
===========================================================
Weighted Average Shares Outstanding 11,763 11,763 11,767 11,775
===========================================================
-33-
BOARD OF DIRECTORS
XXXXXXX X. XXXXX
Chief Executive Officer,
Women's United Soccer Association
XXXXX XXXXXX XXXXX
President and Chief Executive Officer,
Telemat Ltd.
XXXXXXX X. XXXXXXXXXXXX XXX
Partner,
Diefenderfer, Xxxxxx, Xxxxx & Xxxx
XXXXXXX X. XXXXX
Managing Director,
Equity Group Investments, L.L.C.
XXXXXX XXXXXXXXX
Vice Chairman of the Board and Chief Executive Officer,
Real Estate Roundtable
XXXXXXX XXXXXXX
President and Chief Executive Officer,
Lettuce Entertain You Enterprises, Inc.
XXXXXX X. XXXXXXX
President and Chief Executive Officer,
Chart House Enterprises, Inc.
XXXXXX XXXX - Chairman
Chairman of the Board,
Equity Group Investments, L.L.C.
INDEPENDENT PUBLIC ACCOUNTANTS
Xxxxxx Xxxxxxxx LLP
Chicago, Illinois
TRANSFER AGENT & REGISTRAR
EquiServe
P.O. Box 8040
Boston, MA 02266-8040
(000) 000-0000
xxx.xxxxxxxxx.xxx
ANNUAL MEETING
The Company's annual meeting of
stockholders will be held Wednesday,
May 16, 2001 at 10:00 a.m. at:
Xxx Xxxxx Xxxxxxxx Xxxxxx
Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
-34-
Report of Independent Public Accountants
To the Board of Directors and Stockholders of Chart House Enterprises, Inc.:
We have audited the accompanying consolidated balance sheets of Chart House
Enterprises, Inc. (a Delaware corporation) and subsidiaries as of December 25,
2000 and December 27, 1999, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three fiscal
years in the period ended December 25, 2000. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Chart House Enterprises, Inc.
and subsidiaries as of December 25, 2000 and December 27, 1999, and the results
of their operations and their cash flows for each of the three fiscal years in
the period ended December 25, 2000 in conformity with accounting principles
generally accepted in the United States.
Xxxxxx Xxxxxxxx LLP
Chicago, Illinois
February 21, 2001
COMPANY OFFICERS
XXXXXX X. XXXXXXX
President and Chief Executive Officer
XXXXX X. XXXXX
Vice President--Purchasing
XXX XXXXXXXX
Vice President - Operations
XXXXX X. XXXXXXXXXX
Vice President - General Counsel
XXXXX XXXXXXX
Vice President--Human Resources
XXXXXXX XXXXXXXX
Senior Vice President-- Operations
CORPORATE OFFICES
000 XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
(000) 000-0000
-35-
THE COMPANY
Chart House Enterprises, Inc., based in Chicago, Illinois, operates 40 Chart
House restaurants, one Peohe's restaurant, and five Xxxxxx and Xxxxx'x
steakhouses which are full-service dinner houses located in 17 states and the
District of Columbia.
COMMON STOCK INFORMATION
The Company's Common Stock is listed on the New York Stock Exchange under the
trading symbol CHT. On February 28, 2001, there were approximately 600 holders
of record of the Company's Common Stock. The Company has not paid any cash
dividends on its Common Stock and does not anticipate paying cash dividends in
the foreseeable future. The following table sets forth the quarterly high and
low sales prices for a share of the Company's Common Stock for the two most
recent fiscal years.
2000 HIGH LOW
------------------------------------------------------
First Quarter 6 3/16 4 1/16
Second Quarter 6 1/16 5 1/8
Third Quarter 5 15/16 5 1/4
Fourth Quarter 5 7/8 4 3/16
1999 HIGH LOW
------------------------------------------------------
First Quarter 6 1/4 4
Second Quarter 6 11/16 4
Third Quarter 7 7/16 5 5/16
Fourth Quarter 6 4 1/8
SEC FORM 10-K REPORT
A copy of the Company's annual report to the Securities and Exchange Commission
on Form 10-K is available without charge to stockholders and may be obtained by
writing to:
Chart House Enterprises, Inc.
000 XxXxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
STOCKHOLDER MAILING LIST
The Company maintains a direct mailing list to ensure that stockholders whose
shares are held in the name of a brokerage firm, bank or other person may
receive corporate reports on a timely basis. If you would like your name added
to this list, please send us your request in writing.
-36-
CHART HOUSE ENTERPRISES, INC. Exhibit 21
SUBSIDIARIES AS OF DECEMBER 25, 2000
Name State of Incorporation Trade Name
---- ---------------------- ----------
Chart House, Inc. Delaware Chart House, Xxxxx's
Big Wave, Inc. Delaware
(formerly known as Islands Delaware
Restaurants, Inc.)
Chart House Acquisition, Inc. Delaware Xxxxxx and Xxxxx'x
West 52nd/ Street, Inc. Delaware Xxxxxx and Xxxxx'x
Chart House of Annapolis, Inc. Delaware Chart House
Chart House of Maryland, Inc. Delaware Chart House
Chart House Enterprises of
Puerto Rico, Inc. Louisiana
Analos Company Delaware
Cork n Xxxxxxx Delaware
Pacific Ocean Enterprises, Inc. Delaware
Chart House Enterprises of
Idaho, Inc. Delaware Chart House
Chart House Acquisition of
Nevada, Inc. Delaware
Chart House Acquisition of
Maryland, Inc. Delaware Xxxxxx and Xxxxx'x
