EXHIBIT 10.14
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is entered into as of
this 28th day of April 1998, by and among Garden Fresh Restaurant Corp., a
Delaware corporation (the "Company") and the persons listed on EXHIBIT A
attached hereto (the "Selling Stockholders," and individually, a "Selling
Stockholder").
RECITALS
WHEREAS, the Company contemplates a proposed public offering (the
"Offering") and anticipates filing a registration statement (the
"Registration Statement") pursuant to which it will register and sell
1,300,000 primary shares of its common stock (the "Primary Shares");
WHEREAS, the Company believes that the relatively small number of
shares it has trading in the public market has historically caused it to
be generally ineligible as an investment holding for large institutional
investors which type of investment activity the Company views as important
to the trading liquidity for its Common Stock;
WHEREAS, the underwriters of the Offering (the "Underwriters") have
indicated that increasing the size of the Offering above the Primary
Shares is desirable and in the best interests of Offering and the Company;
WHEREAS, the Underwriters and the Company have had various
discussions regarding dilution and have concluded that the issuance of
significantly more than the Primary Shares, given recent trading prices
for the Common Stock of the Company, is potentially dilutive on an
earnings per share basis to the Company's currently issued and outstanding
stock;
WHEREAS, the persons that have been approached by the Company and its
Board of Directors to sell in the Offering have been advised by the
Underwriters and the Company that any stock sold by them in the Offering
will be subject to the same underwriter's discount as that paid by the
Company, which discount is materially greater than any discounts or
commissions they would incur if they sold their shares of the Company's
stock directly into the public market;
WHEREAS, pursuant to the underwriting agreement by and among the
Company, the Underwriters and the Selling Stockholders (the "Underwriting
Agreement"), the Selling Stockholders will be required to make
representations and warranties to the Underwriters and to provide
indemnification to the Underwriters; and
WHEREAS, the Company desires to increase the size of the Offering by
having the Selling Stockholders sell shares of Common Stock of the Company
in the Offering.
AGREEMENT
NOW, THEREFORE, in reliance on the foregoing recitals and in and for
the consideration and mutual covenants set forth herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties to this Agreement hereby agree as follows:
1. INDEMNIFICATION.
a. To the extent permitted by law, the Company will indemnify and
hold harmless each Selling Stockholder and each person, if any, who controls
such Selling Stockholder within the meaning of the Securities Act of 1933, as
amended (the "Securities Act") or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading, (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities
Act, the Exchange Act or any state securities law; or (iv) any breach of any
representation or warranty in or any indemnification provided under the
Underwriting Agreement, and the Company will pay to each such Selling
Stockholder or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with the investigating or defending
any such loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that
the indemnity agreement contained in this subsection 1.a shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable to any Selling Stockholder or controlling person for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Selling Stockholder or controlling person. Finally,
the Company shall not be liable for indemnity and shall have the right to
recover defense costs previously forwarded under this Section 1.a to the
extent that a court of competent jurisdiction shall have found in a final
non-appealable judgment that the Violation arose primarily from the gross
negligence or willful misconduct of the Selling Stockholder.
b. To the extent permitted by law, each Selling Stockholder will
indemnify and hold harmless the Company, each of its directors and officers
who have signed the Registration Statement, each person, if any, who controls
the Company within the meaning of the Securities Act, the other Selling
Stockholders and any controlling person of any other Selling Stockholder,
against any losses, claims, damages, or liabilities (joint or several) to
which any of
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the foregoing persons may become subject, under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs (i) in reliance upon and in conformity with written
information furnished by such Selling Stockholder expressly for use in
connection with the Offering or (ii) as a result of actions or omissions of
such Selling Stockholder which a court of competent jurisdiction finds in a
final non-appealable judgment to constitute gross negligence or willful
misconduct; and each Selling Stockholder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 1.b, in connection with investigating or defending
any such loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this subsection 1.b shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Selling Stockholder, which
consent shall not be unreasonably withheld; PROVIDED, that in no event shall
any indemnity under this subsection 1.b exceed the After Tax Net Proceeds (as
defined in the Underwriting Agreement) from the Offering received by such
Selling Stockholder.
c. Promptly after receipt by an indemnified party under this
Section 1 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; PROVIDED, HOWEVER, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the reasonable fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 1, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 1.
d. If the indemnification provided for in this Section 1 is held
by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred
to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, claim, damage,
or expense in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified party on the
other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage or expense as well as any other relevant
equitable considerations; PROVIDED, that in no event shall any contribution
by a Selling Stockholder under
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this subsection 1.d exceed the After Tax Net Proceeds from the Offering
received by such Selling Stockholder. The relative fault of the indemnifying
party and of the indemnified party shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied
by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct
or prevent such statement or omission.
e. The obligations of the Company and the Selling Stockholders
under this Section 1 shall survive the completion of the Offering.
2. EXPENSES. The Company agrees to pay all expenses incurred by the
Selling Stockholders in connection with the Offering including attorneys'
fees for legal opinions required to be rendered on behalf of the Selling
Stockholders in order for them to be able to participate in the Offering.
Notwithstanding the foregoing, each Selling Stockholder shall pay the
underwriter discounts incurred in connection with the shares sold by such
Selling Stockholder in the Offering.
3. "MARKET STAND OFF" AGREEMENT. Each Selling Stockholder hereby agrees
that, in addition to the lock-up agreement between such Selling Stockholder
and the Underwriters (the "Lock-up"), that such Selling Stockholder will not
directly or indirectly sell, offer to sell, contract to sell (including,
without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than donees who agree to be similarly
bound) any securities of the Company held by such Selling Stockholder for 30
days beyond the expiration of the Lock-up.
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4. MISCELLANEOUS.
a. AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the unanimous written consent of the Company and
the Selling Stockholders. Any amendment or waiver effected in accordance
with this paragraph shall be binding upon each Selling Stockholder and the
Company.
b. SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to
renegotiate such provisions in good faith. In the event that the parties
cannot reach a mutually agreeable and enforceable replacement for such
provision, then (a) such provision shall be excluded from this Agreement, (b)
the balance of the Agreement shall be interpreted as if such provision were
so excluded and (c) the balance of the Agreement shall be enforceable in
accordance with its terms.
c. GOVERNING LAW. This Agreement and all acts and transactions
pursuant thereto shall be governed, construed and interpreted in accordance
with the laws of the State of California, without giving effect to principles
of conflicts of laws.
d. COUNTERPARTS. This Agreement may be executed by facsimile in
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
e. TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
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The parties have executed this Agreement as of the date first above
written.
COMPANY: SELLING STOCKHOLDERS:
GARDEN FRESH RESTAURANT CORP. ------------------------------
(print name above)
By: Signature:
------------------------------ -------------------
Xxxxxxx X. Xxxx, President and
Chief Executive Officer
Name:
------------------------
(print)
Title:
-----------------------
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