<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 30, 1996
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
EINSTEIN BROS. BAGELS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 5812 84-1294908
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
INCORPORATION OR CODE NUMBER)
ORGANIZATION)
1526 COLE BOULEVARD, SUITE 200
GOLDEN, COLORADO 80401
TELEPHONE (303) 202-9300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
PAUL A. STRASEN
VICE PRESIDENT AND GENERAL COUNSEL
EINSTEIN BROS. BAGELS, INC.
1526 COLE BOULEVARD, SUITE 200
GOLDEN, COLORADO 80401
TELEPHONE (303) 202-3463
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
AMY S. POWERS DAVID A. SCHUETTE
BELL, BOYD & LLOYD MAYER, BROWN & PLATT
THREE FIRST NATIONAL PLAZA 190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60602 CHICAGO, ILLINOIS 60603
TELEPHONE: (312) 372-1121 TELEPHONE: (312) 782-0600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
CALCULATION OF REGISTRATION FEE
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- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
AMOUNT MAXIMUM PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE (2) FEE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per 2,955,000
share shares $20.00 $59,100,000 $20,380
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- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 330,000 shares of Common Stock which may be purchased pursuant to
an over-allotment option granted by the Company to the Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
EINSTEIN BROS. BAGELS, INC.
CROSS REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED
BY ITEMS OF PART I OF FORM S-1.
<TABLE>
<CAPTION>
REGISTRATION STATEMENT CAPTION OR LOCATION
ITEM NUMBER AND CAPTIONS IN PROSPECTUS
------------------------ -------------------
<C> <S>
1.Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.. Outside Front Cover Page
2.Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front and Outside Back Cover Pages;
Additional Information
3.Summary Information, Risk Factors, and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk Factors
4.Use of Proceeds........................... Use of Proceeds; Management's Discussion
and Analysis of Financial Condition and
Results of Operations
5.Determination of Offering Price........... Outside Front Cover Page; Underwriting
6.Dilution.................................. Dilution
7.Selling Security Holders.................. *
8.Plan of Distribution...................... Outside Front Cover Page; Concurrent
Offerings; Underwriting
9.Description of Securities to be Description of Capital Stock
Registered..............................
10.Interests of Named Experts and Counsel.... *
11.Information with Respect to the Outside Front Cover Page; Prospectus
Registrant.............................. Summary--The Company; Risk Factors;
Dividend Policy; Capitalization; Selected
Historical and Pro Forma Consolidated
Financial and Store Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain
Transactions; Relationship with Boston
Chicken; Principal Stockholders and
Securities Ownership of Management; Shares
Eligible for Future Sale; Financial
Statements
12.Disclosure of Commission Position on
Indemnification for Securities Act *
Liabilities.............................
</TABLE>
- --------
*Item inapplicable or answer is negative and omitted from Prospectus.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 30, 1996
PROSPECTUS
2,625,000 SHARES
[EINSTEIN [NOAH'S NEW YORK BAGELS LOGO]
BROS. EINSTEIN/NOAH BAGEL CORP.
BAGELS COMMON STOCK
LOGO]
-----------
All of the shares of Common Stock offered hereby are being issued and sold by
Einstein/Noah Bagel Corp. (the "Company"). Of the 2,625,000 shares offered
hereby, 2,200,000 shares are being offered in an Initial Public Offering and
425,000 shares are being offered in a non-underwritten Concurrent Public
Offering by the Company directly to certain persons or entities, including
officers of each of the Company and Boston Chicken, Inc. ("Boston Chicken").
Shares of Common Stock offered in the Concurrent Public Offering are being
offered at a price equal to the initial public offering price per share, net of
underwriting discount.
Concurrent with the sale of the shares offered hereby, the Company will sell
an additional 2,000,000 shares of Common Stock in a Concurrent Private
Placement to Boston Chicken at a price equal to the initial public offering
price per share, net of underwriting discount. Following the Offerings, Boston
Chicken is expected to beneficially own approximately 62.6% of the outstanding
shares of Common Stock.
Prior to the Offerings, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price will be between $18.00 and $20.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price.
Application will be made to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "ENBX," subject to notice of
issuance.
SEE "RISK FACTORS" AT PAGE 7 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE COMMON STOCK.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
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<S> <C> <C> <C>
Per Share--Initial Public Offering. $ $ $
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Per Share--Concurrent Public
Offering.......................... $ $ $
- --------------------------------------------------------------------------
Total (3).......................... $ $ $
</TABLE>
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- --------------------------------------------------------------------------------
(1) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including certain liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $800,000.
(3) The Company has granted the several Underwriters an option for 30 days to
purchase up to 330,000 additional shares of Common Stock, solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discount, and Proceeds to Company will be
$ , $ , and $ , respectively. See "Underwriting."
-----------
The shares of Common Stock offered in the Initial Public Offering are being
offered by the several Underwriters, subject to prior sale, when, as and if
issued to and accepted by the Underwriters, subject to the approval of certain
legal matters by counsel for the Underwriters. The Underwriters reserve the
right to withdraw, cancel or modify such offer and to reject orders in whole or
in part. It is expected that delivery of the shares of Common Stock will be
made in New York, New York on or about , 1996.
-----------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
MONTGOMERY SECURITIES
-----------
The date of this Prospectus is , 1996.
<PAGE>
[PICTURES OF EINSTEIN BROS. BAGELS STORES AND NOAH'S NEW YORK BAGELS STORES
AND VARIOUS MENU ITEMS]
Einstein Bros.(TM), Noah's Bagels(R) and Noah's New York Bagels(R) are
trademarks owned by the Company.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and
financial statements, including the notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated, the information in this Prospectus (i)
gives effect to the Company's name change from Einstein Bros. Bagels, Inc. to
Einstein/Noah Bagel Corp., which is being submitted to stockholders of the
Company for their approval, (ii) gives effect to a 225-for-1 stock split
approved by the board of directors of the Company on May 28, 1996, which is
subject to approval by the stockholders of the Company of an increase in the
number of authorized shares of Common Stock of the Company, (iii) assumes the
conversion by Boston Chicken, Inc. ("Boston Chicken") of its convertible loan
to the Company into 15,307,421 shares of Common Stock, (iv) assumes the
conversion of 6,250 shares of preferred stock, par value $.01 per share, of
the Company into 411,185 shares of Common Stock and (v) assumes no exercise of
the over-allotment option granted by the Company to the Underwriters. Although
this Prospectus assumes the conversion by Boston Chicken of its convertible
loan upon the Company's request, such conversion has not yet occurred. Boston
Chicken has, however, announced its intention to convert the loan absent any
change in circumstances, conditioned upon approval of its board of directors
and the termination of the moratorium period under its loan agreement with the
Company. Unless the context suggests otherwise, references in this Prospectus
to the "Company" mean Einstein/Noah Bagel Corp., its predecessors, and its and
their subsidiaries. References herein to the "Offerings" include the 2,200,000
shares being offered in an initial public offering through the Underwriters
(the "Initial Public Offering"), the 425,000 shares being offered concurrently
in a non-underwritten public offering to certain persons or entities,
including officers of each of the Company and Boston Chicken (the "Concurrent
Public Offering") and the 2,000,000 shares being offered concurrently to
Boston Chicken in a private placement (the "Concurrent Private Placement") and
references herein to the "Concurrent Offerings" include the Concurrent Public
Offering and the Concurrent Private Placement. See "--The Offerings,"
"Concurrent Offerings" and "Underwriting."
THE COMPANY
The Company operates and franchises specialty retail stores that feature
fresh-baked bagels, cream cheeses, coffee and other related products,
primarily under the Einstein Bros. Bagels and Noah's New York Bagels brand
names. As of May 21, 1996, there were 152 stores in operation systemwide, of
which 66 were Company-operated and 86 were operated by area developers
financed in part by the Company. Such financing generally permits the Company
in certain circumstances to convert its loan into a majority equity interest
in the area developer. As of May 21, 1996, the Company had entered into area
development agreements that provide for the development of 582 additional
stores, the majority of which are scheduled to open over the next three years.
The Company estimates that there will be between 275 and 300 stores in
operation systemwide by the end of 1996.
The Company's principal business objective is to become the leading
specialty retailer of fresh-baked bagels and related products in the United
States and to ultimately support and extend its consumer brands through
alternate distribution channels, such as wholesale and contract food service.
The Company believes that there is an opportunity to develop a significant
multi-unit specialty retail business based on fresh-baked bagels because of
the growth in per capita consumption of bagels and the fragmented state of the
current retail bagel market. To achieve its specialty retail objectives, the
Company and its area developers employ a concentrated market development
strategy that is designed to create strong local brand awareness. The Company
believes this strategy will allow it and its area developers to more
efficiently leverage marketing, development and operations resources, while
establishing a strong competitive position in each targeted market. The
Company initially plans to segregate development of its Einstein Bros. Bagels
and Noah's New York Bagels stores on a geographic basis; however, the Company
intends to test the development and operation of both brands within the same
trade area.
Einstein Bros. Bagels stores feature both traditional and creative bagels
baked fresh throughout the day and offered to customers in an inviting store
environment that combines the authentic tastes of a bagel bakery with the
comfortable setting of a neighborhood meeting place. Each Einstein Bros.
Bagels store blends function, style and customer comfort with simple,
contemporary colors and furnishings in a relaxed social atmosphere. In
addition to a distinctive variety of fresh-baked bagels, Einstein Bros. Bagels
stores offer a broad selection of specialty cream cheeses, premium coffee
products and an array of creative soups, salads and sandwiches. The stores'
atmosphere and products are enhanced by a service philosophy designed to
develop customer loyalty, so
3
<PAGE>
that visiting an Einstein Bros. Bagels store becomes part of the customer's
daily or weekly routine. The first Einstein Bros. Bagels store opened in June
1995 in Ogden, Utah and as of May 21, 1996, there were 65 stores operating
under the brand in 11 states. The Company currently expects that it and its
area developers will develop Einstein Bros. Bagels stores primarily outside of
the West Coast area.
Noah's New York Bagels stores are authentic kosher bagel bakeries featuring
bagels baked fresh throughout the day, cream cheese "shmears", kosher dairy
deli items, including fish salads and four varieties of lox, and selected New
York deli-style beverages. Noah's New York Bagels stores recreate the mood and
feeling of a turn-of-the-century New York bakery. A key element of the Noah's
New York Bagels brand is involvement on a store-by-store basis as a committed
and conscientious member of the community. The first Noah's New York Bagels
store opened in Berkeley, California in 1989 and as of May 21, 1996, there were
51 stores operating under the brand in three states. The Company currently
expects that it and its area developers will develop Noah's New York Bagels
stores primarily on the West Coast.
The Company was established in early 1995 as Progressive Bagel Concepts, Inc.
and launched its business through the acquisition of three regional bagel
retailers. The Company's formation was facilitated by Boston Chicken, which, in
addition to providing convertible and non-convertible loan financing, has
supported, and will continue to support, the Company's growth with multi-unit
retail infrastructure and systems pursuant to fee service agreements.
Subsequently, the Company changed its name to Einstein Bros. Bagels, Inc.,
developed the Einstein Bros. Bagels brand and acquired two West Coast bagel
retailers, including Noah's New York Bagels, Inc. ("Noah's"). In May 1996, the
board of directors of the Company approved the change of the Company's name to
Einstein/Noah Bagel Corp. to reflect its dual brand development strategy. Such
name change is subject to the approval of the stockholders of the Company. The
Company and its area developers intend to convert stores currently operating
under all other brand names to either Einstein Bros. Bagels stores or Noah's
New York Bagels stores over the next 12 to 18 months.
The Company's executive offices are located at 1526 Cole Boulevard, Suite
200, Golden, Colorado 80401 and its telephone number is (303) 202-9300.
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES CERTAIN RISKS. SEE
"RISK FACTORS."
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered hereby:
Initial Public Offering...... 2,200,000 shares
Concurrent Public Offering... 425,000 shares
Common Stock offered in the
Concurrent Private Placement.. 2,000,000 shares
Common Stock to be outstanding
after the Offerings(1)........ 27,634,000 shares
Use of Proceeds................ To finance the development of additional stores
and to repay indebtedness utilized for the
acquisition and development of stores. See "Use
of Proceeds."
Proposed Nasdaq National Market
Symbol........................ ENBX
</TABLE>
- --------
(1) Includes 15,307,421 shares of Common Stock issuable upon the conversion by
Boston Chicken of its convertible loan (the "Loan Conversion"), 411,185
shares of Common Stock issuable upon the conversion of 6,250 shares of
Series A Preferred Stock, $.01 par value per share, of the Company (the
"Preferred Shares") at a contractual conversion price equal to 80% of an
assumed initial public offering price of $19.00 per share (being the mid-
point of the proposed initial public offering price range) (the "Preferred
Conversion") and 1,721,250 shares of Common Stock subject to repurchase by
the Company (the "Repurchase Shares"), which repurchase obligation
terminates upon consummation of the Offerings. See "Relationship with Boston
Chicken--Loan Agreement," "Description of Capital Stock" and Note 12 of
Notes to the Company's Audited Consolidated Financial Statements included
elsewhere herein. References herein to the "Transactions" include the Loan
Conversion, the Preferred Conversion and the termination of the Company's
repurchase obligation with respect to the Repurchase Shares. Excludes
5,143,318 shares of Common Stock issuable upon exercise of outstanding stock
options (vested and unvested) and warrants.
4
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND STORE DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF STORES)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
MARCH 24, 1995 DECEMBER 26, 1994 QUARTER
(INCEPTION) THROUGH THROUGH (16 WEEKS) ENDED
DECEMBER 31, 1995 DECEMBER 31, 1995 APRIL 21, 1996(1)
------------------- ----------------- ----------------------
ACTUAL PRO FORMA(2) ACTUAL PRO FORMA(3)
------------------- ----------------- -------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Total revenue........... $ 26,423 $ 70,388 $ 22,379 $ 25,683
Income (loss) from
operations(4)(5)....... (56,867) (59,709) (812) (1,966)
Net income (loss)(4)(5). $(57,431) $(68,142) $ (2,859) $ (1,941)
======== ======== ======== ========
Net income (loss) per
common and equivalent
share................ $ (5.62) $ (2.66) $ (0.27) $ (0.07)
======== ======== ======== ========
Weighted average
number of common and
equivalent shares
outstanding during
the period........... 10,195 25,522 10,215 25,522
======== ======== ======== ========
STORE DATA (UNAUDITED):
Systemwide revenue(6)... $ 26,986 $ 71,263 $ 29,764 $ 33,088
======== ======== ======== ========
Number of stores in
operation at period
end:
Company-operated...... 47 84 61 61
Area developers....... 13 13 77 77
-------- -------- -------- --------
Total................. 60 97 138 138
======== ======== ======== ========
<CAPTION>
APRIL 21, 1996(1)
----------------------
AS
ACTUAL ADJUSTED(7)
-------- ------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital............................................... $ 643 $ 81,567
Notes receivable.............................................. 38,298 38,298
Total assets.................................................. 171,257 252,181
Long-term debt(8)............................................. 178,162 --
Stockholders' equity (deficit)................................ (25,290) 195,299
</TABLE>
- -------
(1) The Company's fiscal year is the 52/53-week period ending on the last
Sunday in December and normally consists of 13 four-week periods. The first
quarter consists of four periods, and each of the remaining three quarters
consists of three periods, with the first, second and third quarters ending
16 weeks, 28 weeks and 40 weeks, respectively, into the fiscal year.
(2) Giving pro forma effect to the acquisition of Brackman Brothers, Inc.,
Bagel & Bagel, Inc., Offerdahl's Bagel Gourmet, Inc., Baltimore Bagel Co.
and Noah's and the Loan Conversion as of December 26, 1994 (deemed to be
the beginning of the Company's 1995 fiscal year). See the Company's
Unaudited Pro Forma Consolidated Financial Statements and Notes thereto
contained elsewhere herein.
(3) Giving pro forma effect to the acquisition of Noah's and the Loan
Conversion as of the beginning of the Company's 1996 fiscal year. See the
Company's Unaudited Pro Forma Consolidated Financial Statements and Notes
thereto contained elsewhere herein.
(4) Includes for the pro forma quarter (16 weeks) ended April 21, 1996
approximately $954,000 of stock option expense attributable to the
acceleration of the vesting of compensatory stock options issued by Noah's
for such period. The vesting acceleration occurred immediately prior to the
acquisition of Noah's by the Company. See Note 5 of Notes to the Company's
Unaudited Pro Forma Consolidated Financial Statements included elsewhere
herein.
(5) Includes a $40,558,000 write-off of intangible assets and excess purchase
price over fair value of net assets acquired for the period from March 24,
1995 (inception) through December 31, 1995. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--March 24,
1995 (inception) to December 31, 1995--Results of Operations" and Note 13
of Notes to the Company's Audited Consolidated Financial Statements
included elsewhere herein.
(6) Includes gross revenue for all stores operated by the Company and its area
developers. Gross revenue excludes sales taxes.
(7) Adjusted to give effect to the Offerings at an assumed initial public
offering price of $19.00 per share (being the mid-point of the proposed
initial public offering price range) and the application of the net
proceeds therefrom and to give effect to the Transactions. See
"Capitalization."
(8) Includes at April 21, 1996, $11,852,000 attributable to the Repurchase
Shares and $7,813,000 attributable to the Preferred Shares. See Note 12 of
Notes to the Company's Audited Consolidated Financial Statements included
elsewhere herein.
5
<PAGE>
THE COMPANY
The Company operates and franchises specialty retail stores that feature
fresh-baked bagels, cream cheeses, coffee and other related products,
primarily under the Einstein Bros. Bagels and Noah's New York Bagels brand
names. As of May 21, 1996, there were 152 stores in operation systemwide, of
which 66 were Company-operated and 86 were operated by area developers
financed in part by the Company. Such financing generally permits the Company
in certain circumstances to convert its loan into a majority equity interest
in the area developer. As of May 21, 1996, the Company had entered into area
development agreements that provide for the development of 582 additional
stores, the majority of which are scheduled to open over the next three years.
The Company estimates that there will be between 275 and 300 stores in
operation systemwide by the end of 1996.
The Company was incorporated in Delaware in February 1995 under the name
Progressive Bagel Concepts, Inc. In March 1995, the Company launched its
business through the acquisition of three regional bagel retailers, Brackman
Brothers, Inc. of Salt Lake City, originally founded in 1988 ("Brackman"),
Bagel & Bagel, Inc. of Kansas City, originally founded in 1988 ("Bagel &
Bagel"), and Offerdahl's Bagel Gourmet, Inc. of Fort Lauderdale, originally
founded in 1989 ("Offerdahl's"), and in August 1995, acquired Baltimore Bagel
Co. of San Diego, originally founded in 1981 ("Baltimore Bagel") (collectively
the "Founding Companies"). The Company issued 1,959,152 shares of Common Stock
and the Preferred Shares to the owners of the Founding Companies in such
transactions. Also in March 1995, the Company raised approximately $20.8
million in a private placement of Common Stock to investors and entered into a
series of agreements with Boston Chicken, including a convertible secured loan
agreement pursuant to which Boston Chicken agreed to loan to the Company up to
$80.0 million (subsequently increased to $120.0 million). Boston Chicken
further facilitated the Company's formation and continues to facilitate the
Company's growth by providing multi-unit retail infrastructure and systems
pursuant to fee service agreements. The relationship between the Company and
Boston Chicken, including the terms of the loan agreement, is described more
fully under "Relationship with Boston Chicken." See also "Certain
Transactions."
After formation, the Company assembled a management team comprised of
individuals from the Founding Companies and Boston Chicken, as well as other
professionals experienced in rapid multi-unit retail growth. The Company also
launched a project that resulted in the development of the initial Einstein
Bros. Bagels brand and store. As part of the development project, management
analyzed (i) the Founding Companies' stores, including brand positionings,
product offerings, operational service systems and atmosphere, (ii) the
competitive environment and (iii) the preferences of consumers across the
United States. The Einstein Bros. Bagels brand and store were first tested in
Ogden, Utah in June 1995 and, based on extensive consumer research, were
revised throughout the summer of 1995, resulting in the current brand
positioning, product offering and store design.
In the fall of 1995, the Company developed and launched its area developer
program, which incorporates aspects of the area developer program utilized by
Boston Chicken. The Company believes that having a relatively small group of
area developers, each led by a management group with substantial multi-unit
retail food service experience and short- and long-term incentives tied to
performance, is a superior means to achieve market leadership than either
direct Company ownership of all stores or more traditional franchising
approaches which utilize a larger number of franchisees. As of May 21, 1996,
the Company had entered into area development agreements with five entities
that provide for the development of 668 stores, 86 of which were open as of
such date. The Company expects to enter into similar agreements with
additional entities during 1996 and, in connection with such transactions,
expects to sell to such entities Company-operated stores, if any, in the
territories covered by such agreements.
In 1995, after the development of the Einstein Bros. Bagels brand, the
Company decided to convert its existing stores operating under the Brackman
Bros., Bagel & Bagel, Offerdahl's Bagel Gourmet and Baltimore Bagel Co. brand
names to the Einstein Bros. Bagels brand. The Company and its area developer
for the Salt Lake City market completed conversion of nine Brackman Bros.
stores located in the Salt Lake City area to Einstein Bros. Bagels stores in
March 1996. The Company and its area developers intend to convert stores
currently operating under all other brand names to either Einstein Bros.
Bagels stores or Noah's New York Bagels stores over the next 12 to 18 months.
The Company acquired Noah's, the leading West Coast bagel retailer, in
February 1996, enabling the Company to achieve a strong base of operations on
the West Coast and to add a second premier consumer brand, Noah's New York
Bagels. In connection with the transaction, certain stockholders of Noah's,
including Noah Alper, the founder of Noah's, and members of Noah's management,
acquired 855,225 shares of Common Stock, and Mr. Alper became Vice Chairman of
the Board.
6
<PAGE>
RISK FACTORS
Prospective purchasers of the shares of Common Stock offered hereby should
consider carefully the specific factors set forth below as well as the other
information contained in this Prospectus in evaluating an investment in the
Common Stock.
LIMITED OPERATING HISTORY AND RECENT LOSSES
The Company commenced operations in March 1995 and has a limited operating
history upon which investors may evaluate the Company's performance. As of May
21, 1996, the Company and its area developers operated 152 stores, 36 of which
were operating under brands other than Einstein Bros. Bagels or Noah's New
York Bagels. Approximately 89 of the stores operated by the Company and its
area developers have been open for less than one year and an additional 27 of
such stores have been open for less than two years. Consequently, operating
results achieved to date may not be indicative of the results that may be
achieved in the future by any new or existing store. The Company has incurred
significant operating losses to date and there can be no assurance that the
Company will be profitable in the future, or that, if profitability is
achieved, it will be sustained. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's Audited
Consolidated Financial Statements and the Notes thereto.
COMPETITION; EASE OF ENTRY INTO BUSINESS
The food service industry is intensely competitive with respect to food
quality, concept, convenience, location, customer service and value. In
addition, there are many well-established food service competitors with
substantially greater financial and other resources than the Company and with
substantially longer operating histories than the Company. Many of such
competitors are less dependent than the Company on a single, primary product.
The Company believes that it competes with other bagel retailers and bakeries,
specialty coffee retailers, doughnut shops, fast-food restaurants,
delicatessens, take-out food service companies, supermarkets and convenience
stores. The Company believes that competition in the retail bagel market will
increase as large retail bagel companies attract additional capital, new
competitors enter the market and bagel retailers compete for market share. In
addition, the Company believes that the start-up costs associated with retail
bagel and similar food service establishments are not a significant impediment
to entry into the retail bagel business. See "Business--Competition."
RAPID EXPANSION
The Company intends to expand primarily by developing additional bagel
stores through its area developer network, although the Company and its area
developers may also acquire existing bagel stores or other properties. As of
May 21, 1996, the Company had entered into area development agreements with
five entities that provide for the opening of 668 stores, 86 of which were
open as of such date. By the end of 1996, the Company expects to have between
275 and 300 stores in operation systemwide. Such expansion will require the
addition of management, facilities, systems and personnel. Failure to acquire
necessary resources on a cost-effective basis could have a material adverse
effect on the results of operations and financial condition of the Company and
its area developers. There can be no assurance that the Company and its area
developers will be able to achieve their development and operating goals,
manage expanding operations effectively, or maintain or accelerate growth. In
addition, there can be no assurance of the viability of any of the Company's
brands in a particular geographic region or locale. See "Business--Expansion
Strategy."
AVAILABILITY OF CAPITAL
The Company anticipates that it and its area developers will have a
continuing need for additional financing for the development of stores and for
bagel and cream cheese production capacity, the amount of which is dependent
primarily on the number of stores opened, the cost of such stores, store
operating results and production capacity requirements. The Company's capital
requirements will also depend on the amount and timing of borrowings under the
loan agreements between the Company and its existing and future area
7
<PAGE>
developers. The Company and its area developers may seek additional funds from
public or private offerings of debt or equity securities or other types of
financing. There can be no assurance that the Company and its area developers
will be able to raise such funds on satisfactory terms when needed. See "Use
of Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources," "Business--Expansion
Strategy" and "Business--Area Developer Financing."
DEPENDENCE ON AREA DEVELOPERS
The Company's success is dependent to a significant extent upon its area
developers and the manner in which they operate and develop their stores. The
opening and success of stores are dependent on a number of factors, including
the availability of suitable sites, the negotiation of acceptable lease or
purchase terms for such sites, permitting and regulatory compliance, the
ability to meet construction schedules, the ability to hire and train
qualified personnel, the financial and other capabilities of the Company and
its area developers, and general economic and business conditions. Not all of
the foregoing factors are within the control of the Company or its area
developers. There can be no assurance that area developers will have access to
financial resources necessary to open the stores required by their development
schedules or that such area developers will successfully develop or operate
stores in their development areas in a manner consistent with the Company's
concepts and standards. See "Business--Area Developer Financing."
The Company has extended secured debt financing to its area developers
pursuant to which the Company has agreed to lend an aggregate of approximately
$119.0 million, of which approximately $35.8 million had been advanced as of
May 21, 1996. These loans subject the Company to the risks of being a secured
lender. The Company anticipates that its area developers will incur
substantial net losses during their expansion phases, which is anticipated to
result in negative net worth for such area developers. The Company believes
that such losses will be recovered as expansion moderates and development
costs correspondingly diminish, store investment costs decrease, operational
efficiencies increase as a result of overall system maturity and operational
experience, advertising efficiencies commence and average weekly store revenue
increases. However, there can be no assurance that such events will occur or
that such losses will be recovered. The failure of an area developer to
achieve a sufficient level of profitability subsequent to the completion of
its expansion phase could have a material adverse impact on the Company's
financial position and results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business--
Expansion Strategy" and Note 11 of Notes to the Company's Audited Consolidated
Financial Statements.
DEPENDENCE ON BOSTON CHICKEN
The Company's success is highly dependent on its continued relationship with
Boston Chicken. The Company and Boston Chicken are parties to various
agreements, pursuant to which Boston Chicken has agreed to provide to the
Company certain accounting and administration, real estate and computer and
communications services. In addition, Boston Chicken has agreed to make
available to the Company a non-convertible loan of up to $14.0 million, none
of which was outstanding as of May 21, 1996. The termination of any of these
agreements, the loss of any of these services or a material adverse change in
Boston Chicken's business or financial condition could have a material adverse
effect on the Company. See "Relationship with Boston Chicken."
CONTROL BY AND CONFLICTS OF INTEREST WITH BOSTON CHICKEN
After consummation of the Offerings, Boston Chicken will beneficially own
approximately 62.6% of the outstanding shares of Common Stock of the Company
(or 61.9% if the Underwriters' over-allotment option is exercised in full). In
addition, in connection with the Concurrent Private Placement, the Company
intends to grant to Boston Chicken an option that would permit it to maintain
ownership of shares of Common Stock having up to 52% of the voting power of
all of the outstanding shares of capital stock of the Company having the power
generally to vote in the election of directors. By reason of its holdings and
such option, Boston Chicken will be able to control the affairs and policies
of the Company, elect the Company's board of directors and approve or
disapprove any matter submitted to a vote of the stockholders, including
certain fundamental corporate transactions requiring stockholder approval. In
addition, concentrated ownership of the Company could affect
8
<PAGE>
the potential applicability to the Company of personal holding company tax in
certain circumstances. See "Certain Transactions," "Principal Stockholders and
Securities Ownership of Management" and "Relationship with Boston Chicken."
The Concurrent Private Placement Agreement expected to be entered into
between the Company and Boston Chicken prohibits the Company from taking
certain actions without the consent of Boston Chicken as long as such option to
Boston Chicken has not terminated, including altering any rights attaching to
the Common Stock, offering or issuing any equity securities or debt securities
convertible into equity securities, in either case other than Common Stock,
distributing assets or securities of the Company having a fair market value in
excess of 10% of the Company's consolidated gross assets or consolidated gross
revenues measured as of the immediately preceding fiscal year end, and filing a
petition in bankruptcy.
In addition to existing agreements between the Company and Boston Chicken,
the Company may enter into additional or modified agreements, arrangements and
transactions with Boston Chicken. While the Company expects that any such
future arrangements and transactions will be determined through negotiation
between the two companies, there can be no assurance that conflicts of interest
will not occur with respect to such future business dealings and similar
corporate matters. Conflicts may arise in connection with product offerings,
consumer and market focus, recruiting, site selection and issuances of
additional securities by the Company. There can be no assurance that any such
conflicts will be resolved in a manner favorable to the Company or its minority
stockholders.
LIMITED SOURCES OF BAGEL DOUGH AND CREAM CHEESE SUPPLY
The Company's development plans require that the Company rapidly develop
significant bagel dough production capacity from internal or external sources.
To date, the Company has met its bagel dough production requirements through a
combination of local fresh dough commissaries owned and operated by the Company
or its area developers, two frozen dough production facilities operated by the
Company, and a frozen dough production facility owned and operated by a third-
party baking company that has committed certain capacity to the Company. The
Company intends to enter into a long-term supply agreement with such third-
party baking company for an increase in the amount of its commitment and
intends to arrange for the construction and financing of a new production
facility to meet anticipated dough requirements in excess of the capacity of
its existing sources.
Any interruption of existing or planned production capacity at any plant or
commissary could have a material adverse effect on the ability of the Company
or its area developers to supply bagels to their stores. In addition, until the
new production facility is completed, stores in certain markets will be wholly
dependent for frozen bagel dough on a single production facility owned and
controlled by the third-party baking company. The construction of a new
production facility will require management of various factors, such as site
selection, permitting, environmental and land use requirements, plant design
and construction, and financing, some of which are outside of the Company's
control, that could adversely impact the cost or timing of completion.
The Company also purchases from a single supplier certain proprietary cream
cheeses and spreads sold in Einstein Bros. Bagels stores. Any interruption of
such supply or the inability of the Company to obtain sufficient additional
capacity to meet its requirements could have a material adverse effect on the
Company's ability to supply its proprietary cream cheese to certain bagel
stores. See "Business--Vendors."
RISKS ASSOCIATED WITH THE FOOD SERVICE INDUSTRY
Food service businesses are often affected by changes in consumer tastes,
national, regional and local economic conditions, demographic trends, traffic
patterns, the cost and availability of labor, purchasing power, availability of
products and the type, number and location of competing restaurants. Multi-unit
food service chains such as the Company can also be substantially adversely
affected by publicity resulting from food quality, illness, injury or other
health concerns or operating issues stemming from one store or a limited number
of stores, whether or not the Company is liable. In addition, factors such as
increased costs of goods, labor and employee benefits costs, regional weather
conditions and the potential scarcity of experienced management and hourly
9
<PAGE>
employees may also adversely affect the food service industry in general and
the results of operations and financial condition of the Company and its area
developers in particular.
GOVERNMENT REGULATION
The restaurant industry is subject to numerous federal, state and local
government regulations, including those relating to the preparation and sale
of food and building and zoning requirements. The Company and its area
developers are also subject to laws governing their relationship with
employees, including minimum wage requirements, overtime, working and safety
conditions and citizenship requirements. In addition, the Company is subject
to regulation by the Federal Trade Commission and must comply with certain
state laws which govern the offer, sale and termination of franchises and the
refusal to renew franchises. The failure to obtain or retain food licenses or
approvals to sell franchises, or increases in employee benefits costs or other
costs associated with employees, could adversely affect the Company and its
area developers. See "Business--Government Regulation."
ABSENCE OF PRIOR PUBLIC MARKET AND POTENTIAL VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for shares of the
Common Stock and there can be no assurance that an active trading market will
develop or, if developed, will be sustained. The initial public offering price
of the Common Stock will be determined through negotiations with the
representatives of the Underwriters (the "Representatives") by a committee of
the Company's board of directors composed of members who have agreed not to
purchase shares of Common Stock in the Offerings. See "Underwriting" for the
factors to be considered in determining the initial public offering price of
the shares of Common Stock offered hereby. The market price of the Common
Stock could be subject to significant fluctuations in response to the
Company's operating results and other factors, and there can be no assurance
that the market price of the Common Stock will bear any relationship to, or
will not decline below, the initial public offering price.
ANTI-TAKEOVER EFFECT OF CHARTER AND STATUTORY PROVISIONS
Boston Chicken's ownership interest in the Company and the terms of certain
provisions in the Company's Restated Certificate of Incorporation and Amended
and Restated Bylaws may have the effect of discouraging a change in control of
the Company. Such provisions include the requirement that all stockholder
action must be effected at a duly-called annual or special meeting of
stockholders and the requirement that stockholders follow an advance
notification procedure for stockholder nominations of candidates for the board
of directors and to present other stockholder business to be considered at any
meeting of stockholders. In addition, the board of directors has the
authority, without further action by the stockholders, to issue up to 20
million shares of preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, and to issue authorized but
unissued shares of Common Stock up to a maximum of 200 million shares. The
issuance of preferred stock or additional shares of Common Stock could have
the effect of delaying, deferring or preventing a change in control of the
Company, even if such change in control would be beneficial to the Company's
stockholders. See "Principal Stockholders and Securities Ownership of
Management," "Relationship with Boston Chicken" and "Description of Capital
Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have approximately
27,634,000 shares of Common Stock outstanding. The Company intends to file,
shortly after the completion of the Offerings, a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
approximately 7,000,000 of these shares of Common Stock pursuant to which
certain stockholders may resell their shares of Common Stock in the public
market. The holders of approximately of such shares have agreed that they
will not sell such shares for a period of 180 days from the date of this
Prospectus, subject to certain exceptions, without the consent of Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"). In addition, the
persons purchasing shares of Common Stock in the Concurrent Public Offering
have agreed that they will not sell such shares for a period of 365 days from
the date of this Prospectus, subject to certain exceptions, without
10
<PAGE>
the consent of Merrill Lynch. The Company also intends to register under the
Securities Act all shares reserved for issuance under its stock option plans,
fewer than 10% of which will be vested and exercisable within 180 days of the
date of this Prospectus. See "Management--1995 Stock Option Plan" and
"Management--Directors Plan." In connection with the Concurrent Private
Placement, the Company expects to enter into a registration agreement with
Boston Chicken, pursuant to which the Company will grant to Boston Chicken
certain demand and piggyback registration rights under the Securities Act with
respect to shares purchased in the Concurrent Private Placement and other
shares owned by Boston Chicken. Boston Chicken has agreed with the
Representatives not to sell shares purchased in the Concurrent Private
Placement for a period of 365 days from the date of this Prospectus and not to
sell other shares owned by it for a period of 180 days from the date of this
Prospectus, subject in each case to certain exceptions, without the consent of
Merrill Lynch. In addition, the Company may file a registration statement
covering shares of Common Stock for issuance in connection with potential
future acquisitions and resales thereof by the recipients, although no such
acquisitions are currently pending. Shares so registered could not be sold in
the public market for a period of 180 days from the date of this Prospectus,
subject to certain exceptions, without the consent of Merrill Lynch. No
predictions can be made as to the effect, if any, that market sales of such
shares or the availability of such shares for sale will have on the market
price for shares of Common Stock prevailing from time to time. Sales of
substantial amounts of shares of Common Stock in the public market following
the Offerings could adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of equity securities or securities convertible into equity securities. See
"Concurrent Offerings," "Certain Transactions--Registration Rights,"
"Relationship with Boston Chicken--Concurrent Private Placement Agreement and
Registration Agreement" and "Shares Eligible for Future Sale."
TRADEMARKS
The Company owns a number of federal trademark and service mark
registrations and the Company has federal trademark applications pending for
additional trademarks and service marks. However, the Company has not yet
obtained federal registrations for certain of the trademarks or service marks
used in its business and there can be no assurance that any such registrations
will be obtained. In addition, the Company is aware of the use by other
persons in certain geographic areas of names and marks which may be deemed to
be similar to the Einstein Bros. or Noah's New York Bagels brands. There can
be no assurance that such marks will be available for use by the Company and
its area developers in all locations or that the Company will be able to
assure the exclusive use of such marks by the Company and its area developers.
See "Business--Trademarks and Other Proprietary Rights."
ABSENCE OF DIVIDENDS OR DISTRIBUTIONS
The Company has never paid cash dividends on its Common Stock and does not
anticipate paying any cash dividends in the foreseeable future. In addition,
the Company's secured revolving credit facility contains a prohibition on the
payment of cash dividends. See "Dividend Policy."
DILUTION
Investors purchasing shares of Common Stock in the Initial Public Offering
will experience immediate and substantial dilution in the net tangible book
value per share of the Common Stock from the initial public offering price as
compared to the increase in net tangible book value per share that will accrue
to existing stockholders. Based on an initial public offering price of $19.00
per share (being the mid-point of the proposed initial public offering price
range), such dilution would have been equal to $14.92 per share as of April
21, 1996. Investors in the Common Stock of the Company purchased prior to the
Initial Public Offering (including Boston Chicken's investment as a result of
the Loan Conversion) paid an average price per share of $7.66 for an aggregate
83.1% equity interest in the Company compared to investors in the Concurrent
Public Offering and the Concurrent Private Placement, who, considered
together, will have paid an average price per share of $17.67 based on such
assumed initial public offering price, net of estimated underwriting discount,
for an aggregate 8.9% interest in the Company, and new investors in the
Initial Public Offering, who will have paid an average price per share of
$19.00 based on such assumed initial public offering price for an aggregate
8.0% equity interest in the Company. See "Dilution."
11
<PAGE>
CONCURRENT OFFERINGS
Concurrently with the shares offered hereby in the Initial Public Offering,
certain persons or entities, including officers of each of the Company and
Boston Chicken, are being offered the opportunity to purchase 425,000 shares
of Common Stock in the Concurrent Public Offering, and Boston Chicken is being
offered the opportunity to purchase 2,000,000 shares of Common Stock in the
Concurrent Private Placement, in each case, at a price equal to the initial
public offering price per share, net of underwriting discount. The
consummation of each of the Initial Public Offering, the Concurrent Public
Offering and the Concurrent Private Placement is conditioned upon the
consummation of the other Offerings. Any such sales will also be conditioned
on the participants in the Concurrent Public Offering and Boston Chicken
agreeing not to sell shares of Common Stock purchased in the Concurrent Public
Offering and the Concurrent Private Placement, respectively, for a period of
365 days after the date of this Prospectus, subject to certain exceptions,
without the consent of Merrill Lynch. See "Certain Transactions--Concurrent
Public Offering," "Relationship with Boston Chicken--Concurrent Private
Placement Agreement and Registration Agreement," "Shares Eligible for Future
Sale," and "Underwriting." None of the members of the committee of the board
of directors who will negotiate the initial public offering price of the
Common Stock with the Representatives will be purchasers in the Offerings.
USE OF PROCEEDS
The net proceeds to the Company from the Initial Public Offering, the
Concurrent Public Offering and the Concurrent Private Placement are estimated
to be approximately $80.9 million ($86.8 million if the Underwriters' over-
allotment option is exercised in full) assuming an initial public offering
price of $19.00 per share (being the mid-point of the proposed initial public
offering price range) after deduction of estimated underwriting discount and
offering expenses. The Company intends to use substantially all of such net
proceeds for store development and for repaying borrowings under the Company's
secured revolving credit facility. The use of proceeds for development of new
stores includes development of Company-operated stores and loaning of funds to
area developers to finance development of stores. See "Business."
As of May 21, 1996, the Company had $40.7 million outstanding under its
secured revolving credit facility, which amount was used to repay a bridge
loan from Boston Chicken incurred in connection with the development and
acquisition of stores and for general corporate purposes. See "Relationship
with Boston Chicken--Loan Agreement." Borrowings under the secured revolving
credit facility bear interest at either the lender's base rate (currently 8
1/4% per annum) plus 1.0% or, at the Company's option, the rate offered in the
interbank Eurodollar market for one-, two- or three-month dollar deposits
offered by the lender plus 3.0%. Any borrowings outstanding under the
Company's secured revolving credit facility are payable on April 30, 1998.
Pending use of the net proceeds as set forth above, they will be invested in
short-term interest-bearing instruments. To the extent that the net proceeds,
the secured revolving credit facility and funds from operations are
insufficient to finance the Company's expansion plans, the Company intends to
seek additional funds for this purpose from future public or private offerings
of debt or equity securities, although there can be no assurance that the
Company will be able to raise such funds on satisfactory terms when needed.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock and the board of
directors intends to continue a policy of retaining earnings to finance its
growth and for general corporate purposes. In addition, the Company's secured
revolving credit facility contains a prohibition on payment of any cash
dividends, and the Company does not anticipate paying any such dividends in
the foreseeable future.
12
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at April
21, 1996 and as adjusted to give effect to (i) the issuance of 15,307,421
shares of Common Stock upon the Loan Conversion, (ii) the issuance of 411,185
shares of Common Stock upon the Preferred Conversion and (iii) the termination
of the Company's repurchase obligation with respect to the Repurchase Shares
(collectively, the "Transactions"), and as further adjusted to give effect to
the Offerings at an assumed initial public offering price of $19.00 per share
(being the mid-point of the proposed initial public offering price range) and
the application of the net proceeds therefrom. See "Relationship with Boston
Chicken--Loan Agreement," "Description of Capital Stock" and Note 12 of Notes
to the Company's Audited Consolidated Financial Statements included elsewhere
herein. This table should be read in conjunction with the Company's Audited
Consolidated Financial Statements and the Notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS FURTHER
ACTUAL AT AS ADJUSTED FOR ADJUSTED
APRIL 21, 1996 THE TRANSACTIONS FOR THE OFFERINGS
-------------- ---------------- -----------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Short-term debt.............. $ -- $ -- $ --
=========== =========== ========
Revolving credit facility
(1)......................... $ 38,497 $ 38,497 $ --
Convertible loan from Boston
Chicken..................... 120,000 -- --
Repurchase shares............ 11,852 -- --
Preferred stock, par value
$.01 per share, 20,000,000
shares authorized; 6,250
shares of Series A Preferred
Stock issued and
outstanding; no shares
issued and outstanding as
adjusted.................... 7,813 -- --
----------- ----------- --------
Total long-term debt....... 178,162 38,497 --
Stockholders' equity
(deficit):
Preferred stock, 20,000,000
shares authorized; no
shares issued and
outstanding............... -- -- --
Common Stock, par value
$.01 per share,
200,000,000 shares
authorized; 5,353,128
shares issued and
outstanding; 22,792,984
shares issued and
outstanding as adjusted
for the Transactions;
27,417,984 shares issued
and outstanding as further
adjusted for the
Offerings................. 54 228 274
Additional paid-in capital. 34,946 174,437 255,315
Deficit.................... (60,290) (60,290) (60,290)
----------- ----------- --------
Total stockholders'
equity (deficit)........ (25,290) 114,375 195,299
----------- ----------- --------
Total capitalization..... $ 152,872 $ 152,872 $195,299
=========== =========== ========
</TABLE>
- --------
(1) The balance outstanding as of April 21, 1996 represents the amount drawn
under the Company's bridge loan from Boston Chicken. In May 1996, the
Company repaid such indebtedness with proceeds from its secured revolving
credit facility.
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<PAGE>
DILUTION
The net tangible deficit of the Company at April 21, 1996 was approximately
$108.7 million or $20.30 per share. Net tangible book value (deficit) per
share represents the amount of total tangible assets less total liabilities of
the Company, divided by the number of shares of Common Stock outstanding.
Net tangible book value dilution per share represents the difference between
the amount paid by purchasers of shares of Common Stock in the Offerings and
the pro forma net tangible book value per share of Common Stock immediately
after completion of the Offerings. After giving effect to the Transactions and
the Offerings at an assumed initial public offering price of $19.00 per share
(being the mid-point of the proposed initial public offering price range), and
after deducting estimated underwriting discount and offering expenses, the pro
forma net tangible book value of the Company at April 21, 1996 would have been
approximately $111.9 million, or $4.08 per share. This represents an immediate
increase in such net tangible book value of $24.38 per share to stockholders
as of April 21, 1996 and an immediate dilution of $14.92 per share to
investors purchasing shares in the Initial Public Offering, as illustrated in
the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.......... $19.00
Net tangible deficit per share before the Offerings.... $(20.30)
Increase in net tangible book value per share
attributable to the Transactions...................... 21.66
Additional increase in net tangible book value per
share attributable to investors in the Offerings...... 2.72
-------
Pro forma net tangible book value per share after the
Offerings............................................... 4.08
------
Net tangible book value dilution per share to investors
in the Initial Public Offering.......................... $14.92
======
</TABLE>
The following table summarizes on a pro forma basis at April 21, 1996 the
differences between existing stockholders, investors in the Concurrent
Offerings and investors in the Initial Public Offering with respect to the
number of shares of Common Stock purchased from the Company, the total
consideration paid and the average consideration paid per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)..... 22,792,984 83.1% $174,665,000 67.4% $ 7.66
Investors in the Concurrent
Private Placement........... 2,000,000 7.3 35,340,000 13.6 17.67
Investors in the Concurrent
Public Offering............. 425,000 1.6 7,509,750 2.9 17.67
Investors in the Initial
Public Offering............. 2,200,000 8.0 41,800,000 16.1 19.00
---------- ----- ------------ -----
Total ..................... 27,417,984 100.0% $259,314,750 100.0% $ 9.46
========== ===== ============ =====
</TABLE>
- --------
(1) Includes 15,307,421 shares of Common Stock issuable upon the Loan
Conversion and 411,185 shares of Common Stock issuable upon the Preferred
Conversion based on an assumed initial public offering price of $19.00 per
share (being the mid-point of the proposed initial public offering price
range). See "Relationship with Boston Chicken" and "Description of Capital
Stock." Excludes 5,143,318 shares of Common Stock subject to issuance upon
exercise of outstanding stock options (vested and unvested) and warrants.
See Note 12 of Notes to the Company's Audited Consolidated Financial
Statements.
The Average Price Per Share for investors in the Concurrent Offerings is
less than the Average Price Per Share for investors in the Initial Public
Offering because no underwriting discount will be paid on account of shares
sold in the Concurrent Offerings. The net proceeds per share to the Company,
however, will be identical for all shares sold in each of the Offerings.
Although the foregoing tables assume that the Loan Conversion will be
consummated upon the Company's request to Boston Chicken, such conversion has
not yet occurred. Boston Chicken has, however, announced its intention to
consummate the Loan Conversion absent any change in circumstances, conditioned
upon approval of its board of directors and the termination of the moratorium
period under its loan agreement with the Company.
14
<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND STORE DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF STORES)
The following table sets forth selected historical and pro forma consolidated
financial and store data for the Company. These data should be read in
conjunction with "Management's Discussion and Analysis of Results of Operations
and Financial Condition" and the historical and pro forma consolidated
financial statements and related notes thereto of the Company. The historical
financial statements of the Company for the period from March 24, 1995
(inception) through December 31, 1995 have been audited by Arthur Andersen LLP,
independent accountants, whose report thereon appears elsewhere herein. The
financial data for the quarter (16 weeks) ended April 21, 1996 is unaudited,
but in the opinion of management, include all adjustments (consisting of normal
recurring adjustments) necessary to present fairly the Company's consolidated
financial position and results of operations. Interim results are not
necessarily indicative of results for subsequent periods or the full year.
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
MARCH 24, 1995 DECEMBER 26, QUARTER (16 WEEKS)
(INCEPTION) THROUGH 1994 THROUGH ENDED
DECEMBER 31, 1995 DECEMBER 31, 1995 APRIL 21, 1996(1)
------------------- ----------------- ---------------------
ACTUAL PRO FORMA(2) ACTUAL PRO FORMA(3)
------------------- ----------------- ------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS
OF OPERATIONS DATA:
Revenue:
Company-operated
stores................ $ 25,685 $ 69,650 $18,397 $21,701
Royalties and
franchise related
fees.................. 738 738 3,982 3,982
-------- -------- ------- -------
Total revenue........ 26,423 70,388 22,379 25,683
Cost of products sold... 8,239 25,085 5,490 6,608
Salaries and
benefits(4)............ 13,531 29,547 9,128 11,489
General and
administrative
expenses............... 20,962 34,907 8,573 9,552
Write-off of intangible
assets and excess
purchase price over
fair value of net
assets acquired(5)..... 40,558 40,558 -- --
-------- -------- ------- -------
Loss from operations.... (56,867) (59,709) (812) (1,966)
Other income (expenses),
net.................... (564) (8,433) (2,047) 25
-------- -------- ------- -------
Net loss................ $(57,431) $(68,142) $(2,859) $(1,941)
======== ======== ======= =======
Net loss per common
and equivalent share.. $ (5.62) $ (2.66) $ (0.27) $ (0.07)
======== ======== ======= =======
Weighted average
number of common and
equivalent shares
outstanding during
the period............ 10,195 25,522 10,215 25,522
======== ======== ======= =======
STORE DATA (UNAUDITED):
Systemwide revenue(6)... $ 26,986 $ 71,263 $29,764 $33,088
======== ======== ======= =======
Number of stores in
operation at period
end:
Company-operated....... 47 84 61 61
Area developers........ 13 13 77 77
-------- -------- ------- -------
Total................ 60 97 138 138
======== ======== ======= =======
<CAPTION>
APRIL 21, 1996(1)
---------------------
AS
DECEMBER 31, 1995 ACTUAL ADJUSTED(7)
------------------- ------- ------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Working capital......... $ 41 $ 643 $81,567
Notes receivable........ 7,267 38,298 38,298
Total assets............ 36,584 171,257 252,181
Long-term debt(8)....... 58,875 178,162 --
Stockholders' equity
(deficit).............. (34,709) (25,290) 195,299
</TABLE>
- --------
(1) The Company's fiscal year is the 52/53-week period ending on the last
Sunday in December and normally consists of 13 four-week periods. The first
quarter consists of four periods, and each of the remaining three quarters
consists of three periods, with the first, second and third quarters ending
16 weeks, 28 weeks and 40 weeks, respectively, into the fiscal year.
(2) Giving pro forma effect to the acquisition of Brackman, Bagel & Bagel,
Offerdahl's, Baltimore Bagel and Noah's and the Loan Conversion as of
December 26, 1994 (deemed to be the beginning of the Company's 1995 fiscal
year). See the Company's Unaudited Pro Forma Consolidated Financial
Statements and Notes thereto contained elsewhere herein.
(3) Giving pro forma effect to the acquisition of Noah's and the Loan
Conversion as of the beginning of the Company's 1996 fiscal year. See the
Company's Unaudited Pro Forma Consolidated Financial Statements and Notes
thereto contained elsewhere herein.
(4) Includes for the pro forma quarter (16 weeks) ended April 21, 1996
approximately $954,000 of stock option expense attributable to the
acceleration of the vesting of compensatory stock options issued by Noah's
for such period. The vesting acceleration occurred immediately prior to the
acquisition of Noah's by the Company. See Note 5 of Notes to the Company's
Unaudited Pro Forma Consolidated Financial Statements included elsewhere
herein.
(5) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--March 24, 1995 (inception) to December 31, 1995--
Results of Operations" and Note 13 of Notes to the Company's Audited
Consolidated Financial Statements included elsewhere herein.
(6) Includes gross revenue for all stores operated by the Company and its area
developers. Gross revenue excludes sales taxes.
(7) Adjusted to give effect to the Offerings at an assumed initial public
offering price of $19.00 per share (being the mid-point of the proposed
initial public offering price range) and the application of the net
proceeds therefrom and to give effect to the Transactions. See
"Capitalization."
(8) Includes at December 31, 1995, $11,062,000 attributable to the Repurchase
Shares and $7,813,000 attributable to the Preferred Shares. Includes at
April 21, 1996, $11,852,000 attributable to the Repurchase Shares and
$7,813,000 attributable to the Preferred Shares. See Note 12 of Notes to
the Company's Audited Consolidated Financial Statements included elsewhere
herein.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company commenced operations in March 1995 through the acquisition of
three regional bagel retailers, with subsequent acquisitions in August 1995
and February 1996. The Company sold certain acquired stores in 1995 and 1996
to area developers financed in part by the Company. To date, the predominant
source of the Company's revenue has been derived from sales at Company-
operated stores. However, because the Company has sold, and intends to
continue to sell, substantially all of the Company-operated stores to its area
developers and also intends to continue to expand its business primarily
through such area developers, the Company anticipates that its future revenue
will be increasingly derived from royalties, franchise-related fees and
interest income. Consequently, comparisons of operating results to date may
not be meaningful.
The Company currently estimates that there will be between 275 and 300
stores in operation systemwide by the end of 1996. This rapid expansion
significantly affects the comparability of results of operations from period
to period in a number of ways. Store revenue is not as high in the first
periods following opening as it is in later periods and revenue for any new
store is also highly dependent on the proximity of other stores and
competitors, the size of the store and its visibility. Further, the cost of
products sold is generally higher as a percentage of revenue for newly opened
stores than for more mature stores because of inefficiencies caused by less
experienced employees and a lack of store-specific operating history from
which to predict daily food production needs. Moreover, in order to support
its expansion program, the Company is continuing to develop its corporate
support center, and accordingly, certain related expenditures will be higher
as a percentage of revenue in earlier periods than in later comparable
periods. In addition, the Company's rapid expansion significantly affects its
liquidity and capital requirements.
MARCH 24, 1995 (INCEPTION) TO DECEMBER 31, 1995
Results of Operations
Revenue. Total revenue for the period ended December 31, 1995 was $26.4
million, consisting of $25.7 million from sales at Company-operated stores and
$0.7 million from royalties and franchise-related fees. At December 31, 1995,
the Company had 47 Company-operated stores compared to 13 stores owned by area
developers.
Costs and Expenses. Cost of products sold (which consists of food and paper
costs at stores and commissary expenses) were $8.2 million for the period
ended December 31, 1995. Salaries and benefits (which includes salaries and
benefits for both store employees and support center employees) were $13.5
million and general and administrative expenses (which includes both store
expenses and support center expenses) were $21.0 million for the period ended
December 31, 1995. Such expenses resulted from the operations of Company-
operated stores and the development and operation of the Company's support
center.
In addition, after the acquisition of the Founding Companies, the Company
launched a development project, pursuant to which management analyzed (i) the
Founding Companies' stores, including brand positionings, product offerings,
operational service systems and atmosphere, (ii) the competitive environment
and (iii) the preferences of consumers across the United States. The project
resulted in the development of the Einstein Bros. Bagels brand and store. In
connection with, and as a result of, the development of the Einstein Bros.
Bagels brand and store, management determined to discontinue the use of the
intangible assets acquired in the acquisition of the Founding Companies,
including trademarks, trade dress and recipes. Consequently, during the period
ended December 31, 1995, the Company wrote-off $40.6 million of such assets.
The write-off resulted from the discontinuation of the use of these assets and
management's evaluation of the lack of recoverability of the costs thereof.
16
<PAGE>
Other Expense. The Company incurred other expense of $0.6 million for the
period ended December 31, 1995, consisting principally of interest expense of
$1.3 million on the Company's loan agreement with Boston Chicken, offset by
other income of $0.7 million resulting from gains recognized on the sale of
marketable equity securities.
QUARTER ENDED APRIL 21, 1996 COMPARED TO THE PERIOD BEGINNING MARCH 24, 1995
(INCEPTION) AND ENDED APRIL 16, 1995
Results of Operations
Revenue. Total revenue increased $21.0 million to $22.4 million for the
quarter ended April 21, 1996 from $1.4 million for the period ended April 16,
1995. Revenue from Company-operated stores increased $17.0 million to $18.4
million for the quarter ended April 21, 1996 from $1.4 million for the period
ended April 16, 1995. The increase in revenue from Company-operated stores was
due to the short operating period in the first quarter of the Company's first
fiscal year of operations resulting in a combination of a higher average number
of Company-operated stores open and a higher number of operating weeks in the
current reporting period. There were 61 Company-operated stores at April 21,
1996 compared to 24 stores at April 16, 1995.
Royalty and franchise-related fees were $4.0 million for the quarter ended
April 21, 1996. There were no such fees in the comparable period last year.
There were 77 stores operated by area developers as of April 21, 1996.
Cost of Products Sold. Cost of products sold increased $5.1 million to $5.5
million for the quarter ended April 21, 1996, compared with $0.4 million for
the comparable period last year. The increase was due to the short operating
period in the first quarter of the Company's first fiscal year of operations
resulting in a combination of a higher average number of Company-operated
stores open and a higher number of operating weeks in the current reporting
period.
Salaries and Benefits. Salaries and benefits increased $8.5 million to $9.1
million for the quarter ended April 21, 1996, compared with $0.6 million for
the comparable period last year. The increase was due to the short operating
period in the first quarter of the Company's first fiscal year of operations
resulting in an increase in the number of employees at Company-operated stores
due to a higher average number of stores open during the current period, an
increase in the number of employees at the Company's support center necessary
to support systemwide expansion, and a higher number of operating weeks in the
current reporting period.
General and Administrative. General and administrative expenses increased
$8.1 million to $8.6 million for the quarter ended April 21, 1996, compared
with $0.5 million for the comparable period last year. The increase was due to
the short operating period in the first quarter of the Company's first fiscal
year of operations resulting in an increase in the number of Company-operated
stores due to a higher average number of stores open during the current period,
an increase in expenses at the Company's support center necessary to support
systemwide expansion, and a higher number of operating weeks in the current
reporting period.
Other Expense. The Company incurred other expense of $2.2 million for the
quarter ended April 21, 1996 compared to other expense of $0.1 million for the
comparable period last year. The increase reflects higher interest expense
attributable to the borrowings under the Company's loan agreement and bridge
loan with Boston Chicken, offset by gains recognized on the sale of marketable
equity securities.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company's primary capital requirements relate to the development of
stores, principally in the form of partial financing for its area developers.
The remainder of the Company's capital requirements relate primarily to
investments in, and operation of, its corporate support center necessary to
support the increase in the number
17
<PAGE>
of stores in operation systemwide. For the period ended December 31, 1995 and
the quarter ended April 21, 1996, the Company expended approximately $22.4
million and $48.5 million, respectively, relating to store development and
expended approximately $2.4 million and $0.1 million, respectively, on its
corporate support center. In addition, in February 1996, the Company acquired
all of the outstanding capital stock of Noah's for $100.9 million in cash.
The Company has entered into convertible secured loan agreements with its
area developers whereby the area developer may draw on a revolving line of
credit, with certain limitations, in order to provide partial funding for
store development and working capital. As of December 31, 1995 and April 21,
1996, the Company had made secured loan commitments aggregating approximately
$16.0 million and $89.5 million, respectively, of which approximately $3.5
million and $32.6 million, respectively, had been advanced. These area
developers had contributed capital aggregating $4.0 million at December 31,
1995. The contributed capital at April 21, 1996 was $24.0 million, consisting
of $22.4 million in cash and $1.6 in promissory notes. The Company anticipates
fully funding its commitments pursuant to its loan agreements with these area
developers, increasing such loan commitments and entering into additional loan
commitments with other area developers. The Company is currently negotiating
such agreements for the Los Angeles, San Francisco, Sacramento, Seattle,
Portland and Philadelphia markets. The Company anticipates its current and
future area developers will incur substantial net losses during their
expansion stage, which is anticipated to result in negative net worth for its
area developers. The Company believes that such losses will be recovered as
expansion moderates and development costs correspondingly diminish, store
investment costs decrease, operational efficiencies increase as a result of
overall system maturity and operational experience, advertising efficiencies
commence and average weekly store revenue increases. However, there can be no
assurance that such events will occur or that such losses will be recovered.
The failure of an area developer to achieve a sufficient level of
profitability subsequent to completion of its expansion phase could have a
material adverse impact on the Company's financial position and results of
operations.
In connection with entering into new area development agreements, the
Company has sold, and intends to continue to sell, Company-operated stores
located in areas covered by such area development agreements to the respective
area developer. In 1995, the Company sold 13 Company-operated stores to one of
its area developers and during the quarter ended April 21, 1996, the Company
sold 46 Company-operated stores and related assets to three of its area
developers. The aggregate proceeds from the sale of these stores and related
assets were approximately $5.5 million in 1995 and $25.1 million in the
quarter ended April 21, 1996. There were no material gains or losses
recognized as a result of these sales. The Company is currently negotiating
such agreements for the Los Angeles, San Francisco, Sacramento, Seattle and
Portland markets.
Capital Resources
For the period ended December 31, 1995, the Company's primary sources of
capital included $20.8 million from the sale of shares of Common Stock and
$40.0 million from borrowings under its loan agreement with Boston Chicken.
For the quarter ended April 21, 1996, the Company generated approximately
$13.0 million from the sale of shares of Common Stock, $80.0 million from
borrowings under its loan agreement with Boston Chicken and $38.5 million from
borrowings under its bridge loan from Boston Chicken. The aggregate amount
available under the loan agreement with Boston Chicken was increased from
$80.0 million to $120.0 million in February 1996. In March 1996, the bridge
loan from Boston Chicken was increased from $25.0 million to $40.0 million. In
May 1996, Boston Chicken and the Company amended the loan agreement to add a
$14.0 million non-convertible loan facility. See "Relationship with Boston
Chicken--Loan Agreement."
Boston Chicken has announced its intention to convert its $120.0 million
convertible loan to the Company into 15,307,421 shares of Common Stock absent
any change in circumstances, conditioned upon approval of its board of
directors and the termination of the moratorium period under the loan
agreement.
In May 1996, the Company and Bank of America Illinois, as agent for the
lenders, entered into a $45.0 million secured revolving credit facility. Loans
made under the secured revolving credit facility bear interest at the lender's
base rate plus 1.0% or, at the Company's option, the rate offered in the
interbank Eurodollar market
18
<PAGE>
for one-, two- or three-month dollar deposits offered by the lender plus 3.0%.
As of May 21, 1996, the Company had $40.7 million outstanding under the
secured revolving credit facility, the proceeds of which were primarily
utilized to repay its bridge loan from Boston Chicken. The borrowings under
the secured revolving credit facility are due in April 1998. In connection
with the consummation of the secured revolving credit facility, Boston Chicken
agreed to subordinate its loan to the Company to the loan under the secured
revolving credit facility and to release its security interest in the assets
of the Company. The secured revolving credit facility contains certain
financial covenants and restrictions on other borrowings, and prohibits the
payment of cash dividends on the Common Stock. See Note 7 to the Company's
Unaudited Financial Statements for the Quarter ended April 21, 1996 included
elsewhere herein.
At May 21, 1996, the Company had $14.0 million available under its non-
convertible loan facility with Boston Chicken. Boston Chicken is permitted,
under its bank credit facility, to loan to the Company, and the Company is
permitted, under its secured revolving credit facility, to borrow from Boston
Chicken, up to an aggregate of $50.0 million.
The Company anticipates it will have a continuing need for additional
financing to continue systemwide expansion. The timing of the Company's
capital requirements will be affected by the number of Company-operated and
area developer stores opened, operational results of the stores, and the
amount and timing of borrowings under the loan agreements between the Company
and its existing and future area developers. As the Company's capital
requirements increase, the Company will seek additional funds from public or
private offerings of debt or equity securities. There can be no assurance that
the Company will be able to raise such capital on satisfactory terms when
needed.
19
<PAGE>
BUSINESS
GENERAL
The Company operates and franchises specialty retail stores that feature
fresh-baked bagels, cream cheeses, coffee and other related products,
primarily under the Einstein Bros. Bagels and Noah's New York Bagels brand
names. As of May 21, 1996, there were 152 stores in operation systemwide, of
which 66 were Company-operated and 86 were operated by area developers
financed in part by the Company. Such financing generally permits the Company
in certain circumstances to convert its loan into a majority equity interest
in the area developer. As of May 21, 1996, the Company had entered into area
development agreements that provide for the development of 582 additional
stores, the majority of which are scheduled to open over the next three years.
The Company estimates that there will be between 275 and 300 stores in
operation systemwide by the end of 1996.
BUSINESS STRATEGY
The Company's principal business objective is to become the leading
specialty retailer of fresh-baked bagels and related products in the United
States and to ultimately support and extend its consumer brands through
alternate distribution channels, such as wholesale and contract food service.
The Company believes that there is an opportunity to develop a significant
multi-unit specialty retail business based on fresh-baked bagels because of
the growth in per capita consumption of bagels and the fragmented state of the
current retail bagel market. Key elements of the Company's strategy include:
Distinctive Consumer Brands. The Company believes that its Einstein Bros.
Bagels and Noah's New York Bagels brands are distinct within the retail bagel
market and have their own respective competitive advantages in key areas,
including store design and atmosphere, products and customer and community
service. The Company intends to build initial brand awareness by developing
stores that foster customer loyalty and are an integral part of the local
community. Marketing methods, including the use of broadcast media, will be
used to further enhance brand awareness and facilitate extension of the brands
into new geographic areas and ultimately into alternate distribution channels.
Local Market Focus. The Company believes that a concentrated, rapid
development of stores into select markets is the best strategy for
establishing a competitive position as the preferred provider of fresh-baked
bagels. By focusing on select markets, the Company and its area developers
intend to leverage marketing, development and operations resources and
accelerate attainment of the critical mass necessary to achieve media spending
efficiency.
Area Developer Organization. The Company's strategy of concentrated
development in local markets is supported by area developers financed in part
by the Company. The Company believes that having a relatively small group of
area developers, each led by a management group with substantial multi-unit
retail food service experience and short- and long-term incentives tied to
performance, is a superior means to achieve market leadership than either
direct Company ownership of all stores or more traditional franchising
approaches which utilize a larger number of franchisees. As a result of
providing convertible financing to its area developers, the Company generally
will have, after a moratorium period (typically two years) and after the area
developer has completed not less than 80% of its area development commitment
(or in the event of certain defaults), the right to acquire a majority equity
interest in such area developers. See "--Expansion Strategy" and "--Area
Developer Financing."
Relationship with Boston Chicken. The Company's formation and growth have
been significantly advanced by its relationship with Boston Chicken. Boston
Chicken has provided (i) significant capital financing, (ii) multi-unit retail
infrastructure and systems, including accounting and administration, real
estate and computer and communications services and systems, pursuant to fee
service agreements, and (iii) assistance in recruiting experienced area
developer candidates. The Company believes that the multi-unit retail
infrastructure and services provided to date and in the future by Boston
Chicken allow the Company to focus its energy and resources on brand and store
development. See "Relationship with Boston Chicken." In addition, the Company
is implementing certain key business strategies that it believes have been
important to Boston Chicken's development of the Boston Market(TM) brand.
20
<PAGE>
Production Efficiencies. The Company believes that its use of proprietary
frozen bagel dough products for both the Einstein Bros. Bagels and Noah's New
York Bagels brands provides significant operational and developmental
advantages. Products for both brands have been developed so that they can be
produced in large, centrally located plants and efficiently packaged and
shipped to stores, where they are baked fresh. The Company believes that its
centralized production allows for a more consistent, superior bagel product
and permits more rapid development, production and deployment of a variety of
new products into stores systemwide. Similarly, the Company believes that its
long-term supply agreement with, and option to acquire, Doc's Cheese Company,
L.L.C. ("Doc's"), in Logan, Utah, provides additional product quality and cost
advantages. See "--Vendors." Doc's has developed a proprietary process that
blends fresh, natural ingredients directly into the cream cheese as it is
being produced, unlike flavored cream cheeses created by adding flavors to
already processed plain cream cheese. In addition, the Doc's product has an
extended refrigerated shelf life enabling the Company to gain centralized
production efficiencies. While the Company currently intends to retain
proprietary product recipes for each of the Einstein Bros. Bagels and Noah's
New York Bagels brands' bagel and cream cheese products, the Company believes
that the use of common production facilities for the two brands could offer
certain additional manufacturing and distribution efficiencies.
Community Involvement. The Company believes that a key component in
developing both the Einstein Bros. Bagels and Noah's New York Bagels brands is
a strong local and community-based effort that encourages a close relationship
between each store and its community. The Company and its area developers
utilize community involvement as a means of providing charitable service, as
well as building brand awareness and loyalty. Stores are typically designed to
complement their respective communities by adapting to the surrounding
neighborhood and architecture, incorporating local motifs and themes.
EXPANSION STRATEGY
Geographic and Brand Focus. The Company's current expansion strategy for
Einstein Bros. Bagels and Noah's New York Bagels is based on geographic
segregation of the brands. Noah's New York Bagels is the leading West Coast
bagel retailer, and the Company currently intends to continue expansion of
this brand primarily on the West Coast. The Company and its area developers
have moved aggressively to penetrate targeted designated market areas ("DMAs")
throughout the rest of the United States with the Einstein Bros. Bagels brand,
and the Company currently intends to continue the expansion of this brand
primarily outside of the West Coast. However, the Company intends to test the
development and operation of both brands within the same trade area. The
Company estimates that there will be between 275 and 300 stores in operation
systemwide by the end of 1996.
As of May 21, 1996, in addition to 116 Einstein Bros. Bagels and Noah's New
York Bagels stores, the Company and its area developers were operating 36
bagel stores under the Bagel & Bagel, Offerdahl's Bagel Gourmet and Baltimore
Bagel Co. brands. As part of the Company's expansion strategy, it and its area
developers intend to convert all such stores to either Einstein Bros. Bagels
stores or Noah's New York Bagels stores over the next 12 to 18 months. The
Company and its area developer for the Salt Lake City market completed
conversion of nine Brackman Bros. stores to Einstein Bros. Bagels stores in
March 1996.
Area Developer Organizations. The Company's strategy of concentrated
development of local markets is supported by area developers financed in part
by the Company. The Company currently expects that by the end of 1996 all
stores within the system, including Noah's New York Bagels stores, will be
owned and operated by area developers, except for stores located in the San
Diego market, for which the Company does not plan to seek an area developer.
The Company believes that having a relatively small group of area developers,
each led by a management group with substantial multi-unit retail food service
experience and short- and long-term incentives tied to performance, is a
superior means to achieve market leadership than either direct Company
ownership of all stores or more traditional franchising approaches which
utilize a larger number of franchisees. As a result of providing convertible
financing to its area developers, the Company generally will have, after a
moratorium period (typically two years) and after the area developer has
completed not less than 80% of its area development commitment (or in the
event of certain defaults), the right to acquire a majority equity interest in
such area developers. See "--Area Developer Financing."
21
<PAGE>
As of May 21, 1996, the Company had entered into area development agreements
with five entities for the development and operation of 668 Einstein Bros.
Bagels stores over the next six years (as summarized below). Eighty-six of
such stores were open as of May 21, 1996 and a majority of the additional
stores committed are scheduled to open over the next three years. The Company
expects to enter into similar agreements with at least five additional
entities during 1996 for the development of Einstein Bros. Bagels or Noah's
New York Bagels stores. The Company and its area developers currently operate
stores in 23 markets, and expect to have stores in all of the territories
currently covered by area developer agreements by the end of 1996.
<TABLE>
<CAPTION>
CURRENT ADDITIONAL
STORES STORES
AREA DEVELOPER PRIMARY DEVELOPMENT TERRITORIES OPEN(1) COMMITTED
- -------------- ------------------------------- ------- ----------
<S> <C> <C> <C>
BCE West Bagels, L.L.C.. Denver, Salt Lake City, Phoenix, Tucson,
Albuquerque, Las Vegas, Colorado Springs,
El Paso 23 88
Einstein Bros. America,
L.P.................... Chicago, Detroit, Milwaukee, Madison,
Miami, Fort Lauderdale, West Palm Beach,
Orlando, Tampa 43 227
Finest Bagels, L.L.C.... Kansas City, St. Louis, Minneapolis 16 52
Liberty Foods, L.L.C.... New York City metropolitan area 2 148
Mayfair Bagels, L.L.C... Washington, D.C., Baltimore, portions
of Virginia 2 67
--- ---
Total................. 86(2) 582
=== ===
</TABLE>
- --------
(1) Includes 11 stores operated under the Bagel & Bagel brand, and 10 stores
operated under the Offerdahl's Bagel Gourmet brand.
(2) In addition, at May 21, 1996, the Company operated 66 stores, 51 of which
were operated under the Noah's New York Bagels brand and 15 of which were
operated under the Baltimore Bagel brand.
The Company believes that rapid penetration of DMAs is superior to more
limited penetration of many DMAs for several reasons. Concentrations of stores
allow both area developers and Company personnel to gain greater expertise
concerning the trade areas within the DMA, thus improving their ability to
locate and approve sites on a more informed and efficient basis as part of a
market-wide strategy. In addition, store concentrations can permit more
efficient operations, in terms of multi-unit management, convenient employee
training, and sharing of employees, expertise and other resources within a
DMA. Concentrated DMA penetration also permits cost-efficient media
advertising to commence sooner than would be the case with a more scattered
nationwide expansion. The Company believes that media advertising increases
aggregate store revenue (which, in turn, can promote certain in-store
operating efficiencies) and is valuable in assisting the Company's area
developers to secure real estate for future sites on acceptable terms and
assists in the efficient recruiting of both management and hourly employees.
Site Selection. The Company has an extensive site selection process,
commencing with an overall market plan for each DMA that is compiled by the
Company and the relevant area developer. This market plan divides the DMA into
trade areas based on an aerial review, an extensive vehicle tour and
demographic analysis, and takes into account traffic counts, patterns and
drive times, natural and other boundaries and day-time populations. Once the
market plan is established, local real estate managers of the Company or area
developer and local real estate brokers focus on the most desirable sites in
each trade area, taking into account such factors as visibility, ready
accessibility (particularly for morning drive-time traffic), parking, signage
and adaptability of any current structure, and determine the availability of
the site and the costs relating thereto. A thorough analysis of each site,
including the foregoing types of information, photographs of the site and
neighboring area, and a proposed layout and site elevations, as well as other
materials, must be submitted to the Company for approval. Company personnel
visit each site in connection with the site approval process. In addition,
leases must contain certain terms and provisions and be approved by the
Company. The Company emphasizes neighborhood locations, including end-cap and
in-line locations with easy morning-time access from high traffic roads.
22
<PAGE>
The Company estimates that the initial investment for a Company-operated or
franchised Einstein Bros. Bagels or Noah's New York Bagels store currently
ranges from approximately $269,000 to $592,000. This estimate includes
development and franchise fees (where applicable), professional fees,
deposits, leasehold improvements, furniture, fixtures, equipment, opening
inventory and supplies, architectural and engineering fees, permit and impact
fees, grand opening expenses, computer and software expenses and initial
working capital. This estimate does not include any additional costs which may
be associated with the purchase of the site or underlying real estate. The
actual cost depends on, among other factors, the size and location of the
store, the level of pre-opening expenditures and the amount of improvements,
less any applicable construction allowance.
The Company believes that its ability to achieve rapid development growth is
dependent on (i) its ability to secure area development agreements with
qualified area developers for specific geographic regions, (ii) its and its
area developers' ability to secure suitable sites, which includes negotiating
acceptable lease terms, securing required permitting, complying with other
regulatory requirements and meeting construction schedules, (iii) the
operational and other capabilities of the Company's area developers, (iv) the
availability of capital to its area developers, (v) the ability of the Company
to manage this anticipated expansion and recruit and train personnel, and (vi)
the general economic and business environment. There can be no assurance that
the Company or its area developers will be able to achieve their goals.
The standard forms of area development agreement and franchise agreement,
and the terms of the Company's secured convertible financing to area
developers, are discussed more fully below under "--Development Agreements,"
"--Franchise Agreements" and "--Area Developer Financing."
THE EINSTEIN BROS. BAGELS BRAND
The Company developed the Einstein Bros. Bagels brand during the three-month
period following the Company's formation and opened a test store in Ogden,
Utah in June 1995. The Company continued to develop and refine the Einstein
Bros. Bagels brand and concept store during the summer and early fall of 1995
based on extensive consumer and competitor research. As of May 21, 1996, the
Company and its area developers had opened a total of 65 Einstein Bros. Bagels
stores in 11 states.
Products. The key component of the Einstein Bros. Bagels product strategy is
the Einstein Bros. bagel, which is produced utilizing a proprietary process
that allows for maximum inclusion of high quality ingredients, such as whole
blueberries, raisins and nuts. Bagels are offered in a wide variety of both
traditional and creative flavors, including Plain, Cinnamon Raisin Swirl,
Chopped Onion, Chopped Garlic, Honey Wheat, Spinach Herb, Nutty Banana, Wild
Blueberry, Dark Pumpernickel, Chocolate Chip and Vegetable. Bagels are baked
fresh throughout the day in each store using a steamed-baking process that
produces a moist and dense interior wrapped in a firm, shiny crust.
The exclusive line of Einstein Bros. Bagels cream cheeses includes Wildberry
Lite, Cheddar & Peppers, Veggie Lite, Smoked Salmon, Mendocino Sun-Dried
Tomato and Spinach Dill Lite, in addition to traditional cream cheese flavors.
Unlike flavored cream cheeses created by adding flavors to already processed
plain cream cheese, Einstein Bros. Bagels cream cheeses are created by
blending quality flavors and ingredients (such as fresh fruits and vegetables)
directly into the cream cheese during initial production. This process is
specifically designed to yield a more consistently flavored and more
spreadable cream cheese than traditional grocery store products.
The Einstein Bros. Bagels stores also offer consumers an extensive line of
beverages featuring branded coffee products. In addition to several blends of
premium drip coffee, customers can choose from a traditional offering of
espresso-based drinks, including Lattes, Cappuccinos, and Americanos, that can
be augmented with gourmet syrup flavorings. High quality herbal, green and
black teas complete the hot beverage offerings. Cold beverages featured by
Einstein Bros. Bagels stores include Cool Cat(TM) iced cappuccino drinks,
fruit teas, bottled sodas, juices and waters, and a full line of fountain
sodas.
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The Einstein Bros. Bagels menu of creative soups, salads and bagel
sandwiches offers customers a variety of lunch alternatives. Sandwiches
include signature offerings such as the Tasty Turkey, Veg-Out and Salmon-And-
The-Works, in addition to made-to-order deli sandwiches. Salads include spicy
Tabouli, Caesar, Greek and a Pasta-of-the-Week, as well as distinctive chicken
and tuna salads. The stores also offer a wide variety of soups that are
rotated and offered on a daily basis. In addition, stores feature branded
retail products that support the major menu categories, including ground and
whole bean coffee, teas, bagel chips, coffee mugs and other items.
Store Design and Atmosphere. The Einstein Bros. Bagels store is designed to
combine the authentic tastes of a bagel bakery with the comfortable setting of
a neighborhood meeting place. Each Einstein Bros. Bagels store blends
function, style and customer comfort with simple, contemporary colors and
furnishings in a relaxed social atmosphere. The look of the Einstein Bros.
Bagels store incorporates stained concrete or wood floors and eggplant-,
spruce- and mustard-colored analyene-dyed woods. Menu boards are black with
white lettering and designed to resemble chalkboards. The seating area
features cafe-style tables and wooden chairs with mismatched colors. Walls are
covered with whimsical drawings and sayings that relate to the Einstein Bros.
Bagels products. Other characteristic decorative items include a community
events calendar board that is customized to the store's neighborhood, a
bulletin board for community notices, painted Einstein Bros. Bagels logos and
a chalkboard for children.
A key component of the brand's "neighborhood feel" is its ability to blend
with local architecture by utilizing existing buildings and adapting the
Einstein Bros. Bagels trade dress to such locations. Einstein Bros. Bagels
stores are typically in leased locations of approximately 2,200 square feet
with ample parking, indoor seating for 30 to 40 customers, and, when
practical, additional outdoor seating. The Company and its area developers
generally seek sites located in neighborhood areas with seven-day-a-week
trade.
THE NOAH'S NEW YORK BAGELS BRAND
The Noah's New York Bagels brand was created in 1989 in Berkeley, California
and has evolved into the leading specialty retailer of fresh-baked bagels on
the West Coast. As of May 21, 1996, the Company operated 51 Noah's New York
Bagels stores in the San Francisco Bay Area, Sacramento, Southern California,
Portland and Seattle markets.
Products. The Noah's New York Bagels store is an authentic kosher bagel
bakery featuring 14 varieties of fresh-baked bagels, including Super Onion,
New York Rye, Whole Wheat Sesame, Egg, Garlic and Everything bagels, as well
as hand-made bialys and knishes. Noah's bagels are made from proprietary
recipes and are baked fresh throughout the day using a steamed-baking process
to create a light, moist and flavorful product.
Noah's New York Bagels stores offer 12 flavors of Noah's Shmears(TM), which
are also made from proprietary recipes utilizing a process that results in a
cream cheese product that is light and smooth while still having a rich taste.
Regular and low fat Noah's Shmears flavors include Plain, Lox, Sun-Dried
Tomato, Basil, Chive, Garlic Herb, Veggie, Walnut Raisin and Strawberry.
The Noah's New York Bagels kosher dairy deli menu includes four varieties of
lox (New York Nova, Oregon, Norwegian and Nova lox trim), and salads and
specialty items, including Seven Herb Salmon, Smoked Whitefish, Albacore Tuna
and Hummus. Beverages include premium branded coffees and traditional New York
deli-style beverages.
Store Design and Atmosphere. Noah's New York Bagels stores recreate the mood
and feeling of a turn-of-the-century New York bakery. Mosaic tilework
incorporating the Noah's New York Bagels logo is reminiscent of the tile in
many New York landmarks and subway stations. Signage, menus and literature
incorporate Yiddish words and phrases, old photos and various New York
memorabilia. The lighting, marble counters and tables, and cherry woodwork
contribute to a feeling of old-fashioned comfort.
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Particularly on weekends, the Noah's New York Bagels stores are a community
meeting place. The upbeat attitude of each Noah's New York Bagels store crew
helps set the store's atmosphere. Store crew members are encouraged to deliver
warm, personal service, as well as to participate in the Noah's New York
Bagels commitment to the community. Noah's New York Bagels stores are
typically in leased locations ranging in size from 900 to 2,500 square feet,
with newer stores being approximately 1,800 square feet. Stores include
approximately 16 seats, with additional outdoor seating in most locations.
MARKETING
The Company believes that a key component in developing both the Einstein
Bros. Bagels and Noah's New York Bagels brands is a strong local and
community-based effort that encourages a close relationship between each store
and its community. The Company and its area developers intend to utilize
community involvement as a means of providing charitable service, as well as
building brand awareness and loyalty. The Company also utilizes traditional
marketing and advertising methods including television, radio, newspapers and
other print media (including use of free-standing inserts and promotional
coupons), signage, direct mail and in-store point-of-purchase displays to
promote its brands. Both the Company-operated and area developer stores
contribute to a national advertising fund to pay for the development of
advertising material and to a local advertising fund to pay for advertising in
their respective DMAs. See "--Franchise Agreements" and Note 9 of the Notes to
the Company's Audited Consolidated Financial Statements.
VENDORS
Under a short-term supply contract with Harlan Bakeries, Inc., a bagel
manufacturer ("Harlan Bakeries"), Harlan Bakeries currently supplies up to
700,000 dozen bagels per month to the Company and its area developers from
existing production capacity. In addition, the Company intends to enter into a
series of agreements (the "Harlan Agreements") with Harlan Bagel Supply, LLC,
a sister company to Harlan Bakeries ("Harlan"), and certain parties related to
Harlan. Under the Harlan Agreements, Harlan would agree to complete the
construction of a new production facility, which is expected to become
operational in July 1996. The facility is designed to produce frozen dough for
approximately 1.4 million dozen bagels per month, which is expected to be
sufficient to supply approximately 200 Einstein Bros. Bagels stores. The
Harlan Agreements will be subject to the receipt of certain financing. Under
the Harlan Agreements, Harlan would agree to sell to the Company, its area
developers and other authorized purchasers up to 1.4 million dozen bagels per
month, expected to begin in July 1996 and continuing through June 1, 2003 for
which the Company would pay a price equal to the cost of ingredients and
packaging, absorb an agreed upon allowance for product losses, and pay a fixed
toll charge (which is subject to adjustment for inflation, changes in
formulations, specifications or procedures required by the Company or failure
of the Company, its area developers and other authorized purchasers to
purchase certain minimum numbers of bagels). The Harlan Agreements also
provide for Harlan Bakeries to change the pricing of bagels under the existing
short-term supply contract from a cost-plus formula to the pricing described
above, effective June 1, 1996. Under certain circumstances, contract purchase
amounts may be increased, which would permit Harlan to double the new
facility's capacity. The Harlan Agreements would also grant the Company an
option, exercisable at any time from December 15, 1999 through June 1, 2002,
to acquire all of the assets of Harlan at a formula price.
The Company is also a party to a cream cheese supply agreement and certain
related agreements with Doc's (the "Doc's Agreements"). Under the Doc's
Agreements, Doc's has agreed to supply the Company, its area developers and
other authorized purchasers with up to 160,000 pounds of cream cheese per week
(which the Company believes is sufficient to supply at least 350 bagel stores)
through October 2, 2000, and the Company has agreed, subject to certain
exceptions and limitations, that it, its area developers and other authorized
purchasers will purchase the lesser of such amount or 60% of their
requirements for cream cheese. Prices for Doc's products are based on Doc's
cost, adjusted as necessary to provide Doc's with sufficient cash flow to fund
principal payments on certain outstanding indebtedness. The Company has
provided certain debt financing to Doc's, primarily to fund the purchase of
cream cheese production equipment and for Doc's working capital
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needs. The Doc's Agreements also grant the Company an option, exercisable at
any time on or before October 2, 2000, to acquire all of the assets of Doc's
at a formula price based on cream cheese production volumes and production
cost.
The Company has a national account relationship with Sysco Corporation
("Sysco"), which provides for deliveries of food, paper and smallware products
to participating stores several times a week at a negotiated standardized
mark-up above cost. The Company and its area developers purchase in excess of
10% of their products and supplies from Sysco.
The Company and its area developers may be subject to shortages or
interruptions in supply caused by transportation strikes, adverse weather or
other conditions which could adversely affect the quality, availability and
cost of ingredients.
The Harlan Agreements and the Doc's Agreements are exhibits to the
Registration Statement of which this Prospectus is a part.
COMPETITION
The food service industry is intensely competitive with respect to food
quality, concept, convenience, location, customer service and value. In
addition, there are many well-established food service competitors with
substantially greater financial and other resources than the Company and with
substantially longer operating histories. Many of such competitors are less
dependent than the Company on a single, primary product. The Company believes
that it competes with other bagel retailers and bakeries, including, among
others, Bruegger's Bagel Bakery, Manhattan Bagel, Big Apple Bagel and
Chesapeake Bagel Bakery, specialty coffee retailers, doughnut shops, fast-food
restaurants, delicatessens, take-out food service companies, supermarkets and
convenience stores. The Company believes that competition in the retail bagel
market will increase as large retail bagel companies attract additional
capital, new competitors enter the market and bagel retailers compete for
market share. In addition, the Company believes that the start-up costs
associated with retail bagel and similar food service establishments are not a
significant impediment to entry into the retail bagel business. The Company
believes that its Einstein Bros. Bagels and Noah's New York Bagels brands
compete favorably in the important factors of taste, food quality,
convenience, customer service and value.
Food service businesses are often affected by changes in consumer tastes,
national, regional and local economic conditions, demographic trends, traffic
patterns, the cost and availability of labor, purchasing power, availability
of product and the type, number and location of competing restaurants. Multi-
unit food service chains such as the Company can also be substantially
adversely affected by publicity resulting from food quality, illness, injury
or other health concerns or operating issues stemming from one store or a
limited number of stores, whether or not the Company is liable. In addition,
factors such as increased costs of goods, labor and employee benefit costs,
regional weather conditions and potential scarcity of experienced management
and hourly employees may also adversely affect the food service industry in
general and the results of operations and financial condition of the Company
and its area developers in particular. The Company attempts to manage or adapt
to these factors, but some or all of these factors could cause the Company and
some or all of its area developers to be adversely affected.
DEVELOPMENT AGREEMENTS
The Company's form of area development agreement provides for the
development of a specified number of bagel stores within a defined geographic
territory in accordance with a development schedule of store opening dates.
The development schedule generally covers two to five years and contains store
operation benchmarks for the number of stores to be opened and in operation at
quarterly or semi-annual intervals. An area developer's development schedule
typically requires concurrent store development by the area developer in
multiple DMA's. Area developers initially pay a non-refundable development fee
of $5,000 per store to be developed and a non-refundable real estate services
fee of $5,000 per store to be developed. Such fees are not recognized as
income by the Company until the store is opened. The area development
agreements generally provide that the area
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developer has the right to open a specified number of stores within each DMA
during the term of the development schedule applicable to that DMA and
preclude the Company from operating or franchising bagel stores (of any brand)
within such territory, except that the Company reserves the right to engage in
certain special distribution arrangements and, in the event the area developer
chooses not to develop them, to develop target sites and conversion sites
within the specified territory. Target sites are sites which the Company
believes should be developed for competitive or market reasons regardless of
the applicable development schedule or the location of pre-existing sites.
Conversion sites are sites obtained from other companies which are suitable
for conversion to bagel stores.
Breaches of the area development agreement, including failure to meet
development schedules, may lead to termination of the limited exclusivity
provided by the agreement, renegotiation of development and franchise
provisions or termination of the right to build future stores, although such
termination will not generally affect existing franchise agreements for
developed locations unless such breaches independently constitute defaults of
the franchise agreements. Any such termination could be contested by the area
developer.
The form of area development agreement between the Company and its area
developers is an exhibit to the Registration Statement of which this
Prospectus is a part.
FRANCHISE AGREEMENTS
Once an acceptable lease for an approved store site has been executed or
real estate for a new site has been acquired, the Company and the area
developer enter into a franchise agreement under which the area developer
becomes the franchisee for the specific store to be developed at the site.
Franchise agreements typically provide for a non-refundable franchise fee of
$35,000 per store, a 5% royalty on "Royalty Base Revenue," which is defined as
gross revenue less customer refunds and coupons, the portion of employee meals
not charged to the employee and monies received by the store from other stores
directly attributable to an approved commissary operated in the store, a
national advertising fund contribution of 2% on Royalty Base Revenue, a local
advertising fund contribution of 4% on Royalty Base Revenue and a $10,000
minimum grand opening expenditure. The national and local advertising fund
contributions may each be increased by .25% per calendar year over the prior
year at the discretion of the Company. The Company's franchise and area
development agreements with respect to markets where the Company has already
commenced store development generally provide for 6% royalties.
The Company's form of franchise agreement provides that the Company may
specify computer hardware and software for use in stores, including licensed
software designated or created by or for Boston Chicken and used by the
Company and its area developers. The cost of designated computer hardware is
approximately $15,000 to $30,000 per store. The Company currently specifies
off-the-shelf computer hardware for use in stores and charges fees aggregating
$16,000 for licensed software for store systems, which fee is paid to Boston
Chicken (including $1,000 for third-party proprietary software which the area
developer is required to use) under an existing computer and communications
systems services agreement (the "Computer Services Agreement"). See
"Relationship with Boston Chicken--Computer and Communications Systems
Services Agreement." The Company's form of franchise agreement also provides
for a periodic maintenance and support fee for modifications and enhancements
made to the licensed software and certain other maintenance and support
services. The Company and its area developers pay Boston Chicken $400 per
four-week accounting period per store for these services pursuant to the
Computer Services Agreement. The Company believes that the integrated hardware
and licensed software systems used by its area developers will facilitate the
movement of knowledge, including financial, customer and employee performance
data, allowing the Company and its area developers to react more quickly in a
competitive environment.
The Company's form of franchise agreement provides for an area of limited
exclusivity surrounding the bagel store in which the Company may neither
develop nor grant to others the right to develop additional bagel stores (of
any brand), except that the Company reserves the right to engage in certain
special distribution arrangements and, in the event that the franchisee
chooses not to develop them, to develop conversion sites within the
franchisee's designated territory. Designated territories in suburban
locations are generally a one-mile radius surrounding the store, while urban
locations occasionally have a smaller (e.g., one-half mile) radius or a trade-
area-specific designated territory.
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The Company's form of franchise agreement requires that each store be
operated in accordance with the operating procedures and menu, and meet the
applicable quality, service and cleanliness standards, established by the
Company. The Company may work with a franchisee to improve substandard
performance or any items of non-compliance and may terminate any franchise
agreement if the franchisee does not comply with such standards. The Company
is specifically authorized to take accelerated action in the event that the
operations of any franchised store present a health risk. The Company believes
that maintaining superior food quality, a clean and pleasing environment and
excellent customer service are critical to the reputation and success of the
Company's brands and, therefore, intends to strictly enforce applicable
contractual requirements. Upon any termination of a franchise agreement, the
Company has the right to purchase the assets of the franchisee at the net
tangible book value of such assets.
The form of franchise agreement between the Company and its area developers
is an exhibit to the Registration Statement of which this Prospectus is a
part.
AREA DEVELOPER FINANCING
Secured Loan Agreements. The Company's area developers are generally funded
in part by a senior secured loan made by the Company that is typically
convertible into a majority equity interest in the area developer. The Company
believes that the development and operation of stores in a DMA is improved
when management is permitted to focus primarily on store development and
operations, rather than on raising capital. Accordingly, to facilitate the
development of its brands, the Company has made, and currently intends to
make, loans to area developers to provide partial financing for store
development and working capital. The maximum amount of such a loan is based on
the amount of equity investments (excluding promissory notes) made by the
members of the area developer's management, one or more equity investments
made by Bagel Store Development Funding, L.L.C., a Delaware limited liability
company ("Bagel Funding"), and equity investments made by any other investors.
The area developer financing program requires the area developer to expend
at least 75% of its equity capital contributed in cash toward developing
stores and funding working capital prior to drawing on its revolving loan,
with advances permitted during a two- or three-year draw period in a pre-
determined maximum amount generally equal to four times the amount of the area
developer's equity capital contributions (excluding promissory notes). Upon
expiration of the draw period under the loan agreement, the loan generally
converts to an amortizing term loan payable over five years in periodic
installments, with a final balloon payment. Interest is set at 1% over the
applicable reference rate of Bank of America Illinois as established from time
to time and is payable currently. The loan is secured by a pledge of
substantially all of the assets of the area developer.
Each loan agreement contains customary representations, warranties, terms
and covenants. The Company's loans to its area developers subject the Company
to the risks of being a secured lender. The Company considers each area
developer's use of loan proceeds, adherence to its store development schedule,
store performance trends, type and amount of collateral securing the loan,
prevailing economic conditions and other factors it deems relevant at the time
in evaluating whether to establish an allowance for potential loan losses. See
Note 11 of Notes to the Company's Audited Consolidated Financial Statements.
The Company may convert all or any portion of the loan amount at its
election into equity in the area developer at a conversion price that is
generally set at a 12% premium over the per unit price paid by the investors
in the area developer for their equity investment made concurrently with the
execution of the loan agreement. To the extent such loan is not fully drawn or
has been drawn and repaid, the Company has a corresponding option to acquire
at the loan conversion price the amount of additional equity it could have
acquired by conversion of the loan had the loan been fully drawn. The
Company's conversion and option rights are only exercisable after a moratorium
period (typically two years) and after the area developer has completed not
less than 80% of its store development commitment. In addition, the Company
may exercise its conversion and option rights upon the occurrence of certain
specified defaults under the area developer loan agreement. An area
developer's default of its development schedule is a default under the loan
agreement (so as to permit the
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Company to exercise its conversion and option rights) only if during the 180-
day period immediately preceding the event giving rise to the default, the area
developer had access to debt or equity capital, either directly or through
Company sources, on commercially reasonable terms for similarly situated
restaurant businesses, or income from operations, sufficient in either case to
complete its development obligations. The Company also has certain rights
regarding future financings of the area developer that allow the Company, if it
so desires, to maintain the potential for a majority interest in the area
developer upon conversion of the loan and any corresponding option exercise.
There can be no assurance, however, that the Company will exercise its future
rights to acquire an equity interest in any area developer or that such
exercise will result in a majority interest in the area developer. Any
determination to convert any area developer loan would involve a variety of
economic and operational considerations, including the status of the area
developer's market penetration, the performance of the area developer's stores,
the Company's desire to own such stores, the Company's ability to manage such
stores if necessary, and the financial impact of converting the loan. In
addition, any loan conversion or other acquisition of an equity interest in an
area developer by the Company would not be indicative of whether the Company
intended to, or would, convert or otherwise acquire an equity interest in any
other area developer.
The form of secured loan agreement between the Company and its area
developers is an exhibit to the Registration Statement of which this Prospectus
is a part.
Area Developer Equity. Members of management of each of the Company's area
developers generally make an equity investment in the area developer entity.
The amount and type of such investments vary among the area developers. At May
21, 1996, the aggregate amount of investments by management of the Company's
five area developers was $0.5 million in cash and approximately $2.1 million in
full recourse, secured, interest-bearing promissory notes. Future investments
by management or others could include contributions of assets.
In addition to equity investments provided by an area developer's management,
Bagel Funding may make one or more equity investments in the Company's area
developers. Bagel Funding was formed in December 1995 to invest in area
developers of the Company. Bagel Funding has received total capital commitments
aggregating $90.0 million, $45.0 million of which has been contributed to Bagel
Funding and the balance of which is payable to Bagel Funding at such times on
or after October 1, 1996 and on or before December 31, 1998 as Bagel Funding's
manager or managers make one or more capital calls. As of May 21, 1996, Bagel
Funding had invested a total of approximately $29.9 million in area developers.
Bagel Funding has the right to require each area developer to redeem Bagel
Funding's equity interest in the area developer (the "Bagel Funding Put") at a
pre-determined formula purchase price based on the store level cash flow of the
area developer in the event (i) the Company acquires a majority interest in the
area developer pursuant to the exercise of its conversion or option rights
under the area developer's secured loan agreement, (ii) the Company's
conversion and option rights expire unexercised and the Company has not
consented to a public offering of the area developer, or (iii) the Company does
not acquire a majority interest in an area developer pursuant to the exercise
of the Company's conversion or option rights, such rights have expired under
the secured loan agreement and the Company has not consented to a request by
the area developer to terminate its area development and franchise agreements
with the Company. In the event the area developer does not redeem Bagel
Funding's equity interest when required to do so, the Company will be obligated
to purchase from Bagel Funding its equity interest in the area developer at the
same price applicable to the area developer.
The form of Fourth Amended and Restated Limited Liability Company Agreement
of Bagel Funding and the form of agreement between the Company and Bagel
Funding relating to the contingent repurchase obligation of the Company with
respect to the Bagel Funding Put (including the terms of the formula purchase
price for the Bagel Funding Put) are exhibits to the Registration Statement of
which this Prospectus is a part.
The Company is currently the manager of Bagel Funding. Certain directors and
executive officers of each of the Company and Boston Chicken have made, or have
committed to make, equity investments in Bagel Funding aggregating
approximately $21.7 million. See "Certain Transactions--Bagel Store Development
Funding."
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TRADEMARKS AND OTHER PROPRIETARY RIGHTS
The Company owns a number of trademarks and service marks that have been
registered with the United States Patent and Trademark Office, including
Noah's New York Bagels(R), Noah's Bagels(R), A Taste of Old New York(R),
Shmear 'Em(R) and Protect Your Bagels, Put Lox on Them(R). In addition, the
Company has federal trademark applications pending for a number of trademarks
and service marks, including Just Say Noah's(TM), Noah's Shmears(TM),
Einstein's(TM), Einstein Bros.(TM), Poppies(TM), The Coffee Table(TM),
Bubbler(TM), Cool Cat(TM), Little Monsters(TM), Fresh & Holesome(TM), Veggie
Confetti(TM), The Veg-Out(TM), Bagelmeister(TM) and Boomerang(TM), as well as
certain logos used by the Company. The Company has applied to register Noah's
New York Bagels(R) in more than 30 foreign countries and to register
Einstein's in more than 20 foreign countries. The Company has not yet obtained
federal registrations for any of the trademarks or service marks used in
connection with the Einstein Bros. Bagels stores and products and there can be
no assurance that any such registrations will be obtained. Peach State
Restaurants, Inc. ("Peach State") has filed a federal trademark application
for the name Einstein's for restaurant services and has filed an opposition to
the Company's application for Einstein's. Although the Company's application
was filed first, Peach State may be able to establish prior use of the
trademark in an area including Atlanta, which may confer the right to obtain a
federal concurrent use registration. A concurrent use registration proceeding
in the United States Patent and Trademark Office could result in significant
delay in any receipt by the Company of certain federal trademark registrations
it is seeking. In addition, Hebrew University of Jerusalem, which claims
certain rights to the name Albert Einstein, has obtained an extension of time
to file an opposition to the Company's application for Einstein's and has
filed oppositions to the Company's trademark applications in three foreign
countries, although the Company does not use (and does not intend to use,
absent a licensing agreement or other consent of Hebrew University of
Jerusalem) Albert Einstein's first name, likeness or scientific formulae or
theories in connection with the Einstein Bros. Bagels brand.
The Company is aware of the use by other persons or entities in certain
geographic areas of names and marks which may be deemed to be similar to
certain of the Company's marks. Some of these persons or entities (including
Peach State, which operates a restaurant under the name Einstein's in Atlanta)
may have prior rights to such marks in their respective localities. There can
be no assurance that the Company's marks will be available for use by the
Company and its area developers in all locations.
The Company considers its intellectual property rights to be important to
its business and its policy is to actively defend and enforce such rights.
GOVERNMENT REGULATION
Stores, commissaries and other production facilities operated by the Company
and its area developers are required to comply with federal, state and local
government laws and regulations applicable to food production and consumer
food service businesses generally, including those relating to the preparation
and sale of food, minimum wage requirements, overtime, working and safety
conditions and citizenship requirements, as well as regulations relating to
zoning, construction, health, business licensing and employment. An increase
in employee benefit costs or other costs associated with employees, such as
minimum wage requirements, could adversely affect the Company.
Certain states and the Federal Trade Commission require a franchisor to
transmit specified disclosure statements to potential franchisees before
granting a franchise. Additionally, some states require the franchisor to
register its franchise with the state or qualify for certain statutory or
discretionary exemptions from registration before it may offer a franchise.
The Company believes that its Uniform Franchise Offering Circular (together
with any applicable state versions or supplements) complies with both the
Federal Trade Commission guidelines and all applicable state laws regulating
franchising in those states in which it has offered franchises. The Company's
Uniform Franchise Offering Circular, which contains the base forms of the
Company's current area development, franchise and area developer financing
agreements, is an exhibit to the Registration Statement of which this
Prospectus is a part.
30
<PAGE>
PROPERTIES/LEASING
The Company's support center facility is located in approximately 14,000
square feet of leased space in Golden, Colorado. The Company is currently
negotiating with Boston Chicken for the lease of larger, alternative space that
is nearing completion in Golden, Colorado to meet its future needs. The Company
also leases office space in San Leandro and San Diego, California for use as
support centers for the Company's Noah's New York Bagels and Baltimore Bagels
brands, respectively. The Company also intends to establish an office in Los
Angeles, California.
The Company and its wholly owned subsidiaries lease the land and buildings
for all Company-operated stores. In addition, the Company and its subsidiaries
may lease land or buildings that they sublease or assign to area developers.
While the Company expects its area developers primarily to continue to lease
sites in the future, the Company or its area developers may also purchase land
and/or buildings for stores to the extent acceptable terms are available. The
majority of the Company's stores are located in retail community shopping
centers, community business districts or freestanding locations.
Stores leased by the Company are typically leased under "triple net" leases
that require the Company to pay its proportionate share of real estate taxes,
maintenance costs and insurance premiums. In some cases, in addition to base
rent, the Company pays percentage rent based on sales in excess of specified
amounts. Generally, the Company's store leases have initial terms of five years
with options to renew for three additional five-year periods at market rates.
The Company owns commissaries in or near Salt Lake City, Utah and San Diego,
California and leases dough production facilities in San Leandro and Whittier,
California. The facility in Salt Lake City also contains office space for the
use of operational personnel of the Company's area developer in the Salt Lake
City area and is presently the subject of an environmental remediation program,
all of the costs of which are being paid by the former shareholders of
Brackman. The Company leases facilities used as commissaries in or near Fort
Lauderdale, Florida and Kansas City, Kansas. The Company also leases a facility
in Parker, Colorado which it currently uses as a test commissary. The Company
may lease or sublease its commissaries and related office space to area
developers.
EMPLOYEES
At May 6, 1996, the Company had approximately 1,675 employees, including
approximately 75 employed at its support center offices in Golden, Colorado,
approximately 100 employed at zone offices or commissaries, approximately 100
employed at production facilities, and approximately 1,400 employed at bagel
stores operated by the Company. None of the Company's employees are represented
by a labor union or covered by a collective bargaining contract; however,
Teamsters Union Local 853 has unsuccessfully sought to organize Noah's delivery
drivers and Noah's production employees at the San Leandro production facility.
The Company's delivery drivers voted against union representation in an
election held in 1994, after which the union filed certain unfair labor
practice charges against Noah's. The union and Noah's have appealed to the
National Labor Relations Board a ruling of an administrative law judge denying
most of the unfair labor practice charges and ordering that a new election be
held. A petition to have an election among production employees at the San
Leandro facility has been stayed pending resolution of similar unfair labor
practice charges. There can be no assurance that efforts to organize such
employees will not succeed or that other efforts to organize employees of the
Company will not be made or will not succeed, if made. Representation of any of
the Company's employees by any labor union could result in significantly
increased employee-related costs which could adversely affect the Company or
its business operations. The Company believes that its relationships with its
employees are generally good.
LEGAL PROCEEDINGS
The Company, like others in the food service business, is from time to time
the subject of complaints, threat letters, or litigation from customers
alleging illness, injury, or other food quality, health or operational
concerns. Adverse publicity resulting from such allegations may materially
adversely affect the Company and one or more
31
<PAGE>
of its brands, regardless of whether such allegations are valid or whether the
Company is liable. In addition, the Company also encounters complaints and
allegations from former or prospective employees or others from time to time,
as well as other matters which are common for businesses similar to the
Company's. The Company does not believe that any such matters of which it is
aware are material to the Company individually or in the aggregate, but matters
may arise which could adversely affect the Company or its business operations.
See "--Trademarks and Other Proprietary Rights" and "--Employees."
In the course of enforcing its rights under existing area development and
franchise agreements, the Company may also be the subject from time to time of
complaints, threat letters or litigation concerning the proper interpretation
and application of these agreements, particularly in the event of a default or
termination of area development or franchise rights. No such matters are
currently pending.
INSURANCE
The Company currently has the types and amounts of insurance coverage that it
considers appropriate for a company in its business. While management believes
that its insurance coverage is adequate, if the Company was held liable for
amounts exceeding the limits of its insurance coverage or for claims outside
the scope of its insurance coverage, the Company's business, results of
operations and financial condition could be materially adversely affected.
32
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Kyle T. Craig(1)(2) 48 Chairman of the Board
Noah C. Alper 49 Vice Chairman of the Board
Mark R. Goldston 41 President, Chief Executive Officer and Director
David G. Stanchak 38 Vice President, Chief Development Officer and Director
Michael Beaudoin 34 Vice President and Chief Financial Officer
Jeffrey L. Butler 34 President of Einstein Bros. Bagels Concept
Glenn L. Bacheller 42 President of Noah's New York Bagels Concept
Joel M. Alam 38 Vice President and Secretary
Paul A. Strasen 39 Vice President and General Counsel
Scott A. Beck(1)(2) 38 Director
M. Laird Koldyke 34 Director
Gail A. Lozoff 46 Director and Vice President--Design and Merchandising
John H. Muehlstein,
Jr.(1) 41 Director
John A. Offerdahl 31 Director and Vice President--Operations, Southeast Zone
Lloyd D. Ruth 49 Director
</TABLE>
- --------
(1) Member of the Stock Option Committee of the board of directors. After
completion of the Offerings, the Stock Option Committee will consist of two
members of the board of directors, each of whom will be "disinterested
persons" (as such term is defined under Rule 16b-3 of the Securities
Exchange Act of 1934 (the "Exchange Act")).
(2) Mr. Craig has informed the Company that he intends to resign as Chairman of
the Board of the Company upon the Loan Conversion but will remain as a
member of the board of directors. The Company expects that at such time,
Scott Beck will be elected as Chairman of the Board of the Company.
Messrs. Craig, Stanchak and Beck were elected to the board of directors as
designees of Boston Chicken, Messrs. Koldyke, Muehlstein and Ruth were elected
to the board of directors as designees of investors in the Company's March 1995
private placement and Messrs. Offerdahl and Daniel V. Colangelo (the Company's
former President and Chief Executive Officer and formerly a director) and Ms.
Lozoff were elected to the board of directors as designees of Offerdahl's,
Brackman and Bagel & Bagel, respectively. Boston Chicken and Brackman did not
designate nominees for the 1996 election of directors and the private placement
investors designated Messrs. Koldyke, Muehlstein and Ruth for such election.
All such contractual designation rights have expired or will expire upon the
consummation of an initial public offering of the Common Stock. See "Risk
Factors--Control by and Conflicts of Interest with Boston Chicken."
Prior to completion of the Offerings, the board of directors of the Company
will form an Executive Committee, Compensation Committee and Audit Committee.
All directors are elected to serve until the next annual meeting of
stockholders and until their successors are elected and qualified. Officers
serve at the pleasure of the board of directors.
Mr. Craig has been Chairman of the Board of the Company since June 1995.
Prior thereto, he served as a director and Vice President of the Company from
the date the Company was incorporated in February 1995 until his appointment as
Chairman. Mr. Craig also served as the Chief Concept Officer of Boston Chicken
from April 1994 through June 1995. From November 1993 until April 1994, he was
President of KFC-Brand Development,
33
<PAGE>
a unit of KFC Corp. in Louisville, Kentucky, and from April 1990 until
November 1993, he was President of KFC-USA, also a unit of KFC Corp. in
Louisville, Kentucky. KFC Corp. is a wholly owned subsidiary of PepsiCo, Inc.
Mr. Alper became the Company's Vice Chairman of the Board in March 1996. Mr.
Alper founded Noah's in 1989 and served as its Chairman of the Board until
March 1996.
Mr. Goldston became President and Chief Executive Officer and a director of
the Company in April 1996. Since January 17, 1996, Mr. Goldston has also been
employed by Boston Chicken to undertake various special projects for Boston
Chicken. From July 1994 to April 1996, Mr. Goldston was the Chairman and Chief
Executive Officer of The Goldston Group, a strategic advisory firm which
advises high-growth companies on improving performance and creating operating
leverage and efficiencies. From October 1991 to June 1994, Mr. Goldston served
as President and Chief Operating Officer of L.A. Gear, Inc. From September
1989 to October 1991, Mr. Goldston was a principal of Odyssey Partners, L.P.,
an investment firm, and from September 1988 to September 1989 served as Chief
Marketing Officer of Reebok Inc.
Mr. Stanchak became a director and Vice President and Chief Development
Officer of the Company in March 1995. From June 1992 until March 1995, he
served as a Senior Vice President of Boston Chicken, and from August 1989
until June 1992, Mr. Stanchak was the National Director of Real Estate and
Real Estate Legal Counsel for Blockbuster Entertainment Corporation
("Blockbuster").
Mr. Beaudoin became the Company's Vice President and Chief Financial Officer
in July 1995, after serving as Assistant to the Chairman of Boston Chicken
from February 1995. From December 1992 to February 1995, he held several
positions with NewLeaf Entertainment (a joint venture between Blockbuster and
IBM), including Vice President of Finance, Marketing and Operations. From June
1990 through November 1992, Mr. Beaudoin was an Associate and Limited Partner
of Pfingsten Partners, L.P., a private equity investment firm in Deerfield,
Illinois.
Mr. Butler became President of Einstein Bros. Bagels Concept in May 1996.
From January 1996 until May 1996, Mr. Butler served as Chief Operating Officer
of the Company. Prior thereto, he was employed by BC Great Lakes, L.L.C., an
area developer of Boston Chicken ("BC Great Lakes"), since June of 1995, and
also served as President of the managing member of BC Heartland, L.L.C., also
a Boston Chicken area developer, since August 1995. From June 1993 until June
1995, Mr. Butler served as President and Chief Executive Officer of the
general partner of BC Detroit L.P., a predecessor of BC Great Lakes. From
January 1992 to June 1993, Mr. Butler served as Vice President--Human
Resources of Boston Chicken. Prior thereto, Mr. Butler was an independent
consultant from July 1991 until January 1992 and was Regional Director of
Operations for Blockbuster in San Diego and Orange County, California from
April 1990 until June 1991.
Mr. Bacheller became President of Noah's New York Bagels Concept in May
1996. Since December 1995, Mr. Bacheller has also been President and Chief
Executive Officer of Noah's. From December 1992 until November 1995, Mr.
Bacheller was President of Baskin Robbins Incorporated and prior thereto, he
was Vice President--Marketing of Dunkin' Donuts Incorporated.
Mr. Alam became Vice President and Secretary in April 1995. From January
1994 to April 1995, he was Vice President and Associate General Counsel of
Boston Chicken and from May 1993 to January 1994 he was Assistant General
Counsel of Boston Chicken. Prior thereto, Mr. Alam was an associate at the
Chicago law firm of Bell, Boyd & Lloyd from 1986 to May 1993.
Mr. Strasen became Vice President and General Counsel of the Company in
April 1995. Prior thereto, he was a partner at the Chicago law firm of Bell,
Boyd & Lloyd from 1988 to April 1995.
Mr. Beck became a director of the Company in March 1995. He has been Chief
Executive Officer and a director of Boston Chicken since June 1992 and served
as Chairman of Boston Chicken from such time until December 1995 when he
became Co-Chairman. He was Vice Chairman of the Board of Blockbuster in Fort
34
<PAGE>
Lauderdale, Florida from September 1989 until January 1992, and Chief Operating
Officer of Blockbuster from September 1989 to January 1991. Since 1980, Mr.
Beck also has been President of Pace Affiliates, Inc., an investment banking
firm he founded.
Mr. Koldyke became a director of the Company in March 1995. Mr. Koldyke has
served as a general partner of the Frontenac Company ("Frontenac"), a venture
capital company, in Chicago, Illinois since 1989.
Ms. Lozoff became a director and Vice President--Design and Merchandising of
the Company in April 1995, after working with Bagel & Bagel, which she founded
in June 1988. Ms. Lozoff also served as President and Chief Executive Officer
of Bagel & Bagel from May 1992 to April 1995.
Mr. Muehlstein became a director of the Company in March 1995. Since 1986, he
has been a partner at the Chicago law firm of Pedersen & Houpt.
Mr. Offerdahl became a director and Vice President--Operations, Southeast
Zone of the Company in March 1995, after working with Offerdahl's, which he
founded in 1989. Mr. Offerdahl served as the Chairman and Chief Executive
Officer of Offerdahl's from December 1989 until March 1995. From May 1986 until
September 1994, Mr. Offerdahl played professional football for the Miami
Dolphins in the National Football League.
Mr. Ruth became a director of the Company in March 1995. Since January 1987,
he has been a general partner at Marquette Management Partners, a venture
capital company, in Deerfield, Illinois.
MANAGEMENT COMPENSATION
The Company was incorporated in February 1995 and did not conduct any
operations prior to that time. The only executive officer of the Company who
earned more than $100,000 in salary and bonus during fiscal year 1995 was
Daniel V. Colangelo, the Company's former President and Chief Executive Officer
who served in that capacity during fiscal year 1995 (the "named executive
officer"). Mr. Colangelo's total cash compensation during fiscal year 1995
consisted of $103,462 in salary and $47,375 in bonus.
On March 24, 1995, the Company entered into a three-year employment agreement
with Mr. Colangelo, pursuant to which he became the President of the Company's
Rocky Mountain Division and a director of the Company. Mr. Colangelo was later
promoted to President and Chief Executive Officer of the Company. Under the
employment agreement, Mr. Colangelo was entitled to receive an annual salary of
$125,000 and reimbursement for reasonable business expenses. In addition,
during 1995, Mr. Colangelo was granted options to purchase 50,979 shares of
Common Stock under the Plan (defined herein) at an exercise price of $5.88 per
share. See "--Option Grants in Last Fiscal Year."
In March 1996, Mr. Colangelo's employment agreement was terminated and the
Company entered into a consulting agreement with him in connection with his
resignation as President and Chief Executive Officer and a director of the
Company. Pursuant to the consulting agreement, Mr. Colangelo will, upon the
Company's request, provide information, advice and assistance to the Company
concerning matters that were within the scope of his knowledge and expertise
during the course of his employment by the Company. The consulting agreement
has a term of one year and is automatically renewed for successive one-year
periods unless terminated by either party upon 30 days' prior written notice.
Under the consulting agreement, Mr. Colangelo receives $100,000 per year and is
entitled to reimbursement for his related reasonable business expenses. In
addition, the options granted during 1995 to Mr. Colangelo under the Plan were
deemed vested and were exercised by him in January 1996. Mr. Colangelo also
retained options granted in January 1996 under the Plan to purchase an
aggregate of 37,931 shares of Common Stock at an exercise price of $6.59 per
share, which options were granted in January 1996 and vest in accordance with
the Plan's vesting schedule during the term of his consulting agreement.
The Company has also entered into employment and consulting agreements with
certain of its other current executive officers and others. See "Certain
Transactions--Employment and Consulting Agreements."
35
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of stock options made to
the named executive officer during the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PERCENT OF TOTAL PRICE APPRECIATION
OPTIONS GRANTED EXERCISE FOR OPTION TERM(2)
DATE OF OPTIONS TO EMPLOYEES OR BASE EXPIRATION ----------------------
NAME GRANT GRANTED(1) IN FISCAL YEAR PRICE DATE 5% 10%
- ---- ------- ---------- ---------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Daniel V. Colangelo..... 3/24/95 25,491 1.2% $5.88 3/24/05 $ 94,337 $ 239,068
5/16/95 16,992 0.8 5.88 5/16/05 62,886 159,428
7/25/95 8,496 0.4 5.88 7/25/05 31,443 79,746
</TABLE>
- --------
(1) Options granted to Mr. Colangelo in 1995 were deemed fully vested in
January 1996 in connection with his resignation as President and Chief
Executive Officer of the Company. See "--Management Compensation."
(2) These amounts represent certain assumed annual rates of appreciation
calculated from the exercise price, as required by the rules of the
Securities and Exchange Commission. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the future
performance of the Common Stock. There can be no assurance that the
amounts reflected in this table will be achieved.
DIRECTOR COMPENSATION
In addition to annual grants under the Directors Plan (as defined herein),
directors who are not officers or employees of, or consultants to, the Company
receive $500 cash compensation for each board of directors meeting at which
they are present and for each committee meeting at which they are present not
held in conjunction with a meeting of the board of directors. Outside
directors are also reimbursed for their expenses for each board and committee
meeting attended.
The Company has also entered into employment and consulting agreements with
certain of its directors who are also current executive or other officers of
the Company. See "Certain Transactions--Employment and Consulting Agreements."
1995 STOCK OPTION PLAN
General. The board of directors has adopted the 1995 Employee Stock Option
Plan, effective February 16, 1995, as subsequently amended (the "Plan"). On
May 28, 1996, the Plan was amended and restated by the board of directors (as
so amended and restated, the "Amended Plan"). The Amended Plan is being
submitted to the stockholders of the Company for approval by written consent
prior to completion of the Offerings.
The purpose of the Amended Plan is to benefit the Company by offering
certain present and future employees, officers and consultants of the Company
and its subsidiaries, if any, a favorable opportunity to become holders of
Common Stock over a period of years, thereby giving them a long-term stake in
the growth and prosperity of the Company and encouraging the continuance of
their involvement with the Company. Under the Amended Plan, eligible persons
may be granted options to purchase an aggregate of not more than 5,500,000
shares of Common Stock. An aggregate of approximately 1,785,000 shares of
Common Stock are currently available for option grants under the Amended Plan.
Such options are not intended to be treated as incentive stock options as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
After completion of the Offerings, the Amended Plan will be administered by
the Stock Option Committee (the "Committee"), which will consist of two
members of the board of directors, each of whom will be "disinterested
persons" (as such term is defined under Rule 16b-3 of the Exchange Act).
36
<PAGE>
The Committee may grant options under the Amended Plan to eligible
employees, officers, and consultants of the Company and its subsidiaries
selected initially and from time to time thereafter by the Committee based on
the importance of their services; provided, however, that the maximum number
of shares subject to all options granted to any individual in any calendar
year shall in no event exceed 300,000. Eligible individuals may be selected
individually or by groups or categories, as determined by the Committee in its
discretion.
Options granted under the Amended Plan have a term of 10 years, subject to
earlier expiration if the optionee's service terminates, and no options under
the Amended Plan may be granted after February 1, 2005. Options may not be
transferred other than by will, by the laws of descent and distribution, or
pursuant to a qualified domestic relations order. In the event that such
restriction on transferability pursuant to Section 16 of the Exchange Act is
no longer required, the Committee has the discretion to permit the assignment
or transfer of an option on such terms and conditions as the Committee may
deem necessary or appropriate or as otherwise required by or deemed advisable
under applicable law.
Options granted under the Amended Plan become exercisable with respect to
10% of the total number of shares subject to the option on the first
anniversary of the date of grant, an additional 20% on the second anniversary
of the date of grant, an additional 30% on the third anniversary of the date
of grant and the balance on the fourth anniversary of the date of grant. The
Committee has the discretion to accelerate the exercisability of any option
subject to such terms and conditions as the Committee deems necessary,
including a requirement that the optionee grant the Company an option to
repurchase all or a portion of the shares issued upon exercise of the
accelerated option for their fair market value on the date of grant. If an
option expires or is terminated or canceled unexercised as to any shares, such
shares may be optioned again. Shares subject to options may be made available
from unissued or reacquired shares of Common Stock.
In the event the relationship between the Company and an officer, employee
or consultant who is an optionee is terminated for any reason other than
death, permanent disability or retirement, such optionee's option shall expire
and all rights to purchase shares pursuant thereto shall terminate on the date
of termination, except that, to the extent any option or portion thereof is
exercisable on the date of termination, such option (or portion thereof) may
be exercised for a period of 15 days after such termination (or until the
scheduled termination of the option, if earlier); provided, however, that,
with respect to any option held by such optionee, the Committee may, in its
sole discretion, accelerate exercisability, permit continued vesting in
accordance with the vesting schedule set forth in the Amended Plan or permit
exercisability beyond the 15-day period referenced above (but in no event
beyond its specified term), subject to such terms and conditions, if any, as
determined by the Committee in its sole discretion.
In the event of termination of said relationship because of death or
permanent disability (as that term is defined in Section 22(e)(3) of the Code,
as now in effect or as subsequently amended), the option may be exercised in
full (to the extent not previously exercised) without regard to the vesting
schedule set forth in the Amended Plan, by the optionee or, if he or she is
not living, by his or her heirs, legatees or legal representative, as the case
may be, during its specified term prior to two years after the date of death
or permanent disability. In the event of termination of employment because of
early, normal or deferred retirement under an approved retirement program of
the Company (or other plan or arrangement as may be approved by the Committee,
in its discretion, for this purpose), the option may be exercised by the
optionee (or, if he or she dies after such retirement, by his or her heirs,
legatees or legal representative, as the case may be), to the extent that any
portion thereof would be exercisable on the date of such retirement (or with
respect to such greater portion as determined by the Committee), at any time
during its specified term prior to one year after the date of such retirement.
Except as otherwise determined by the Committee, upon the termination of a
relationship between the Company or any subsidiary and a consultant who is an
optionee, such optionee's option shall expire and all rights to purchase
shares pursuant thereto shall terminate.
The exercise price of options granted under the Amended Plan is the fair
market value of the shares of Common Stock on the date of the grant. The
exercise price is payable in cash, by check, by a promissory note in
37
<PAGE>
a form specified by the Committee and payable to the Company no later than 15
business days after the exercise date, or, if approved by the Committee, by
shares of Common Stock or by a combination of these payment methods. In the
event that shares of Common Stock are changed by a stock dividend, split or
combination of shares, merger, consolidation or reorganization of the Company
with any other corporation or corporations in which holders of the Common Stock
receive other securities, or any other relevant change in the capitalization of
the Company, a proportionate or equitable adjustment will be made to the number
or kind of shares subject to the Amended Plan and to the exercise price.
The Committee may require an optionee to satisfy any tax withholding
obligation upon exercise and may permit an eligible participant (or any
beneficiary or person entitled to act) to elect to pay a portion or all of the
amount requested by the Company for such taxes with respect to such option, at
such time and in such manner as the Committee shall deem to be appropriate
(including, but not limited to, authorizing the Company to withhold, or
agreeing to surrender to the Company on or about the date such tax liability is
determinable, Common Stock, other securities or property, or other forms of
payment, or any combination thereof, owned by such participant, or a portion of
such forms of payment that would otherwise be distributed, or has been
distributed, as the case may be, pursuant to such option to such participant,
having a fair market value equal to the amount of such taxes).
The Committee may amend or discontinue the Amended Plan at any time, provided
that no amendment or discontinuance may, without the consent of the optionee,
change or impair any option previously granted or, without the approval of
stockholders, materially increase the benefits accruing to participants under
the Amended Plan, materially increase the number of securities which may be
issued under the Amended Plan, or materially modify the requirements as to
eligibility for participation in the Amended Plan.
The Amended Plan provides that, unless otherwise determined by the Committee
in its sole discretion, options granted prior to May 28, 1996 shall be governed
by the Plan as it was in effect prior to such date.
Federal Income Tax Consequences of the Amended Plan. The following is a brief
summary of the current federal income tax rules relevant to stock options
issued under the Amended Plan. These rules are subject to change in the future.
Options granted or to be granted under the Amended Plan are, or will be, non-
qualified stock options ("NQO"). In general, an optionee will not recognize any
taxable income, and the Company will not be entitled to a deduction, upon the
grant of an NQO. Upon the exercise of an NQO where the exercise price is paid
in cash, the optionee will recognize ordinary income (subject to wage and
employment tax withholding) equal to the excess of the fair market value of the
shares acquired over the option exercise price. The amount of such excess is
generally determined by reference to the fair market value of the Common Stock
on the date of exercise. An optionee's basis in the underlying stock received
will equal such stock's fair market value on the date of exercise. The Company
will be entitled to a deduction (subject to the $1 million cap described below,
if applicable) equal to the ordinary income taxable to the optionee in the year
of exercise.
Upon the sale of shares acquired pursuant to the exercise of an NQO, such
optionee will recognize capital gain or loss equal to the difference between
the selling price of the shares and the optionee's basis in the shares. Such
capital gain or loss will be long-term gain or loss if the optionee has held
the shares for more than one year. The Company will not be entitled to any
deduction with respect to any capital gain recognized by the optionee.
If an optionee surrenders previously acquired shares of Common Stock, however
acquired, in payment of all or part of the option exercise price of an NQO, the
optionee will not, as a result of such delivery, recognize gain or loss for
federal income tax purposes on the shares surrendered. The optionee's tax basis
in, and holding period for, the previously acquired stock surrendered will
carry over to an equal number of the shares of Common Stock received on a
share-for-share basis. The fair market value of the shares received in excess
of the shares surrendered will constitute compensation taxable to the optionee
as ordinary income. The tax basis for
38
<PAGE>
such shares will equal their fair market value and such shares' holding period
for federal income tax purposes begins on the date of exercise. The Company
will be entitled to a tax deduction (subject to the $1 million cap described
below, if applicable) equal to the compensation income recognized by the
optionee.
A publicly held corporation may not, subject to certain exceptions, deduct
for federal income tax purposes in any taxable year certain compensation paid
to certain executives in excess of $1 million for each such executive (the "$1
million cap"). The Company believes that under recently promulgated
regulations the $1 million cap will be inapplicable to options granted under
the Amended Plan.
Options Granted under the Plan and the Amended Plan. As of May 28, 1996, the
Company had options outstanding for an aggregate of 3,419,068 shares of Common
Stock under the Plan at exercise prices ranging from $5.88 to $10.52 per
share, with a weighted average exercise price of approximately $6.46 per
share. As of such date, no shares of Common Stock had been issued under the
Amended Plan. The following table sets forth certain information with respect
to options granted under the Plan (whether or not exercised) through May 28,
1996:
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING
NAME AND POSITION OPTIONS GRANTED UNDER THE PLAN
----------------- ------------------------------
<S> <C>
Daniel V. Colangelo, former President and Chief
Executive Officer............................. 88,910
All current executive officers as a group (11
persons)...................................... 849,242
All directors who are not executive officers as
a group (4 persons)........................... 0
All eligible employees who are not executive
officers or associates thereof and consultants
as a group.................................... 2,777,084
</TABLE>
DIRECTORS PLAN
General. On May 28, 1996, the board of directors of the Company adopted a
1996 Stock Option Plan for Non-Employee Directors (the "Directors Plan"),
which is being submitted to the stockholders of the Company for approval by
written consent prior to completion of the Offerings. On May 28, 1996, options
to purchase an aggregate of 4,318 shares of Common Stock were granted under
the Directors Plan to each of Messrs. Scott Beck, Koldyke, Muehlstein and Ruth
at an exercise price of $11.58 per share. The Directors Plan is administered
by the board of directors.
Options under the Directors Plan may only be granted to directors of the
Company who are not officers or employees of the Company. Options may be
granted with respect to a total of not more than 100,000 shares of Common
Stock under the Directors Plan, subject to antidilution and other adjustments.
Such options are not intended to be treated as incentive stock options as
defined in Section 422 of the Code. Each option granted under the Directors
Plan is for a term of ten years, subject to earlier termination if the
optionee's service as a director terminates. If an option expires or is
terminated or canceled unexercised as to any shares, such released shares may
again be optioned. Options which have been granted become exercisable after
the end of one year from the date of grant.
Pursuant to the Directors Plan, options for shares having a fair market
value of $50,000 at the date of grant, as determined in good faith by the
board of directors on such date, are granted at the time of each election or
re-election of eligible directors to the Board, except that the initial grants
of options under the Directors Plan were made on the date of adoption of the
Directors Plan by the board of directors, which option grants are subject to
approval of the Directors Plan by the stockholders of the Company. The
exercise price is payable in cash, by check, by a promissory note in a form
specified by the board of directors and payable to the Company no later than
15 business days after the exercise date or, if approved by the board of
directors, by shares of Common Stock of the Company or by a combination of
these methods.
If tenure as a director with the Company or any of its subsidiaries is
terminated for any reason other than death, permanent disability or
resignation, such director's option shall expire and all rights to purchase
shares under it shall terminate 15 days after such termination (or until the
scheduled termination of the option, if earlier). In the event of death or
permanent disability, an exercisable option may be exercised in full by the
optionee or, if he is not living, by his or her heirs, legatees, or legal
representative, as the case may be, during its specified
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term prior to two years after the date of death or permanent disability;
provided, however, that in the event an optionee hereunder should die or
become permanently disabled prior to the end of one year of service as a
director of the Company, then such optionee's option shall become immediately
exercisable as of the date of such death or permanent disability and shall be
exercisable for a period of two years after such date. In the event of
resignation, an exercisable option may be exercised by the optionee (or, if he
or she dies within three months after such termination, by his or her heirs,
legatees, or legal representative, as the case may be), at any time during its
specified term prior to three months after the date of such resignation.
No option is transferable by the optionee otherwise than by will or the laws
of descent and distribution or pursuant to a qualified domestic relations
order, and each option shall be exercisable during an optionee's lifetime only
by him.
The board of directors may amend or discontinue the Directors Plan at any
time, provided, however, that the Directors Plan may not be amended more than
once every six months except to comport with relevant changes in the law, and
provided further that no such amendment or discontinuation shall (a) change or
impair any option previously granted without the consent of the optionee, or
(b) without the approval of stockholders, (i) increase the maximum number of
shares which may be purchased by all optionees, (ii) change the purchase price
of any option, or (iii) change the option period or increase the time
limitations on the grant of options.
Federal Income Tax Consequences of the Directors Plan. The federal income
tax consequences relating to stock options under the Directors Plan are the
same as those relating to stock options issued under the Amended Plan. See "--
1995 Stock Option Plan--Federal Income Tax Consequences of the Amended Plan."
Copies of the Amended Plan and the Directors Plan are exhibits to the
Registration Statement of which this Prospectus is a part.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The board of directors has approved the terms of compensation paid and to be
paid to the Company's executive officers for fiscal years 1995 and 1996.
During the year ended December 31, 1995, the following persons served as
members of the Stock Option Committee of the board of directors: Scott Beck,
Kyle Craig and John Muehlstein.
Currently, no executive officer of the Company serves as a member of the
compensation committee or as a director of any other entity, one of whose
executive officers serves on the compensation committee or is a director of
the Company. Following the Loan Conversion, it is expected that Scott Beck
will become Chairman of the Board of the Company. Mr. Beck is Co-Chairman of
the Board and Chief Executive Officer of Boston Chicken. Mr. Beck does not
serve on the compensation committee of Boston Chicken's board of directors.
CERTAIN TRANSACTIONS
FORMATION OF THE COMPANY AND SUBSEQUENT ACQUISITIONS
In March 1995, the Company acquired the operations of Brackman, Bagel &
Bagel and Offerdahl's, and in connection with such acquisitions, issued
1,959,152 shares of Common Stock valued at $5.88 per share to the owners of
such companies. Concurrently with the acquisitions, the Company also raised
approximately $20.8 million in a private placement of its Common Stock to
investors (including approximately $5.2 million of such amount that was
purchased, directly or indirectly, by officers and directors of each of the
Company and Boston Chicken). These transactions are separately described
below.
On March 24, 1995, pursuant to an agreement to contribute shares, the
Company acquired all of the outstanding capital stock of Brackman, of which
Daniel V. Colangelo, the Company's former President and Chief Executive
Officer, was a shareholder (the "Brackman Acquisition"). The consideration
paid by the Company consisted of 573,750 shares of Common Stock and 488,236
shares of Boston Chicken common stock, which shares of Boston Chicken common
stock were purchased by the Company for a cash purchase price of
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$17.00 per share, pursuant to a stock purchase agreement between the Company
and Boston Chicken dated as of March 24, 1995. See "Relationship with Boston
Chicken--Other Relationships Between Boston Chicken and the Company."
Following the Brackman Acquisition, Mr. Colangelo entered into an employment
agreement with the Company, pursuant to which he became President--Rocky
Mountain Zone and a director of the Company. See "Management--Management
Compensation."
On March 24, 1995, pursuant to an agreement to contribute assets, the
Company acquired all of the assets, properties and business of Bagel & Bagel,
of which Richard Lozoff, Gail Lozoff's spouse, was the sole shareholder (the
"Bagel & Bagel Acquisition"). The consideration paid by the Company consisted
of 573,750 shares of Common Stock and 323,530 shares of Boston Chicken common
stock, which shares of Boston Chicken common stock were purchased by the
Company for a cash purchase price of $17.00 per share, pursuant to a stock
purchase agreement between the Company and Boston Chicken dated as of March
24, 1995. See "Relationship with Boston Chicken--Other Relationships between
Boston Chicken and the Company." Following the Bagel & Bagel Acquisition, Ms.
Lozoff entered into an employment agreement with the Company, pursuant to
which she became Vice President--Design and Merchandising and a director of
the Company. See "--Employment and Consulting Agreements."
On March 31, 1995, pursuant to an agreement to contribute assets, the
Company acquired substantially all of the assets, properties and business of
Offerdahl's, of which John Offerdahl was a majority shareholder (the
"Offerdahl's Acquisition"). The consideration paid by the Company consisted of
811,652 shares of Common Stock and 331,852 shares of Boston Chicken common
stock, which shares of Boston Chicken common stock were purchased by the
Company for a cash purchase price of $16.875 per share, pursuant to a stock
purchase agreement between the Company and Boston Chicken dated as of March
31, 1995. See "Relationship with Boston Chicken--Other Relationships between
Boston Chicken and the Company." Following the Offerdahl's Acquisition, Mr.
Offerdahl entered into an employment agreement with the Company, pursuant to
which he became Vice President--Operations, Southeast Zone and a director of
the Company. In addition, Mr. Offerdahl's spouse, Lynnora Offerdahl, entered
into a consulting agreement with the Company. See "--Employment and Consulting
Agreements."
On March 24, 1995, the Company entered into Subscription Agreements pursuant
to which certain investors, including Messrs. Craig, Stanchak, Beaudoin,
Butler and Beck, Mr. Alam and his spouse, PJS Bagel Investing, L.L.C., an
entity controlled by Mr. Strasen and his spouse ("PJS"), OBG Holdings, Inc.
(formerly Offerdahl's), of which Mr. Offerdahl and his spouse are majority
stockholders ("OBG"), Frontenac VI, Limited Partnership ("Frontenac"), of
which Mr. Koldyke is a general partner, Marquette Venture Partners II, L.P.
("Marquette") and MVP II Affiliates Fund, L.P. ("MVP II"), the general partner
of each of which is an entity of which Mr. Ruth is a general partner, and
Pedersen Bagel Investments Joint Venture ("Pedersen Bagel"), of which Mr.
Muehlstein is a general partner, purchased 1,618,972 shares of Common Stock at
$5.88 per share.
In February 1996, the Company acquired all of the outstanding stock of
Noah's for an aggregate purchase price of $100.9 million in cash. In
connection with the transaction, certain former shareholders of Noah's,
including Noah Alper, Vice Chairman of the Board, and other members of Noah's
management purchased 855,225 shares of Common Stock at a purchase price of
$10.52 per share.
REGISTRATION RIGHTS
The Company is a party to an amended and restated registration rights
agreement dated as of February 1, 1996 (the "Stockholder Registration
Agreement") with certain stockholders of the Company, including Messrs. Craig,
Alper, Stanchak, Beaudoin, Butler, Beck, Bacheller and Colangelo, as well as
Mr. Alam and his spouse, PJS, OBG, Frontenac, Marquette, MVP II and B&B
Holdings, Inc. (formerly Bagel & Bagel), of which Ms. Lozoff's spouse is the
sole stockholder ("B&B"), and with Boston Chicken (with respect to the shares
of Common Stock into which its loan to the Company is convertible). Pursuant
to such agreement, the Company granted to such stockholders and Boston Chicken
certain piggyback registration rights under the Securities Act with respect to
shares of Common Stock owned by them (or issuable in connection with Boston
Chicken's convertible loan) (the "Registrable Securities"). In addition, the
Company is obligated to file, within 13 months after the completion of an
initial public offering, a registration statement under the Securities Act
that would
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include the Registrable Securities then held by such stockholders and Boston
Chicken, permitting them to make public resales of the Registrable Securities.
The Company expects to file such registration statement shortly after the
completion of the Offerings. Pursuant to the Stockholder Registration
Agreement, each holder of Registrable Securities has agreed not to sell, for a
specified period of time, up to 30% of the Registrable Securities held by such
holder. See "Shares Eligible for Future Sale." The Company expects to enter
into the Boston Chicken Registration Agreement (defined below) that will
supersede the rights of Boston Chicken under the Stockholder Registration
Agreement. Prior to completion of the Offerings, the Company will request that
the parties to the Stockholder Registration Agreement waive the provision of
such agreement prohibiting the Company from granting registration rights
superior to those granted under the agreement, and consent to the grant by the
Company to Boston Chicken of superior registration rights pursuant to the
Boston Chicken Registration Agreement. See "--Concurrent Public Offering,"
"Relationship with Boston Chicken--Concurrent Private Placement Agreement and
Registration Agreement" and "Shares Eligible for Future Sale."
CONCURRENT PUBLIC OFFERING
In the Concurrent Public Offering, the Company is offering to certain
persons or entities, including officers of each of the Company and Boston
Chicken, the opportunity to purchase an aggregate of 425,000 shares of Common
Stock at a price equal to the initial public offering price per share, net of
underwriting discount. In the Concurrent Public Offering, executive officers
and directors of the Company (none of whom are members of the committee of the
Company's board of directors who will negotiate the initial public offering
price with the Representatives) are expected to purchase an aggregate of
of such shares of Common Stock as follows: Mr. Craig-- ; Mr.
Alper-- ; Mr. Goldston-- ; Mr. Stanchak-- ; Mr. Beaudoin--
; Mr. Butler-- ; Mr. Bacheller-- ; Mr. Alam-- ; Mr.
Strasen-- ; Mr. Scott Beck-- ; Mr. Koldyke-- ; Ms. Lozoff--
; Mr. Muehlstein-- ; Mr. Offerdahl-- ; and Mr. Ruth--
. Certain officers and directors of Boston Chicken are expected to
purchase in the Concurrent Public Offering an aggregate of shares of
Common Stock.
BAGEL STORE DEVELOPMENT FUNDING
In December 1995, Bagel Funding was formed under the name Einstein Bros.
Equity Funding, L.L.C. with the objective of raising $90.0 million to invest
in existing and proposed area developers of the Company. Bagel Funding has
received total capital commitments aggregating such amount, $45.0 million of
which has been contributed to Bagel Funding and the balance of which is
payable to Bagel Funding at such times on or after October 1, 1996 and on or
before December 31, 1998 as the manager or managers of Bagel Funding make one
or more capital calls. Through May 21, 1996, Bagel Funding had invested a
total of $29.9 million in area developers of the Company. Pursuant to certain
agreements with Bagel Funding, the Company has agreed to purchase Bagel
Funding's equity interests in area developers of the Company in certain
circumstances. See "Business--Area Developer Financing." No fees were paid to
the Company in its capacity as manager in 1995. The Company will be entitled
to receive fees of $500,000 and $50,000 for serving as manager of Bagel
Funding during 1996 and 1997, respectively.
The Company's term as manager of Bagel Funding expires on April 20, 1997,
although the Company may be removed prior to such time for cause by action of
more than two-thirds in interest of Bagel Funding's members and may be removed
for any reason at fiscal year-end by action of more than four-fifths in
interest of Bagel Funding's members. Prior to the expiration of the Company's
term as manager, Bagel Funding also has a three-person advisory committee, the
members of which were nominated by the Company and approved by a majority in
interest of Bagel Funding's members. None of the members of the advisory
committee are officers, directors or employees of the Company. The advisory
committee is required to approve any sale by Bagel Funding of an interest in
an area developer and to determine the manner in which Bagel Funding's
interests in an area developer should be voted on any merger, consolidation,
sale of all or substantially all of the assets of the area developer or
amendment of its governing documents. The advisory committee is also available
to consult with the manager with respect to any matters requested by the
manager concerning Bagel Funding's investments and has the power to resolve
any questions with respect to potential conflicts of interest between Bagel
Funding and the manager that may be presented to it by the manager.
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Effective April 21, 1997, or at such earlier time as the Company ceases to
be the manager of Bagel Funding, each of the members of the advisory committee
will become a manager of Bagel Funding and collectively will constitute the
three-person board of managers. At such time the advisory committee of Bagel
Funding will disband and all authority previously vested in the advisory
committee will be vested in the board of managers. In addition, when the
Company ceases to be the manager of Bagel Funding, the equity interests of
Bagel Funding in the Company's area developers will automatically be converted
from nonvoting equity interests to voting equity interests, which will have
the power to select the manager or general partner, as applicable, of each of
the Company's area developers.
Bagel Funding has also acquired from the Company, for an aggregate purchase
price of $45,000, warrants to acquire 1,012,500 shares of Common Stock of the
Company having an exercise price of $6.47 per share (the "Bagel Funding
Warrants"). The Bagel Funding Warrants have a term of five years. In the event
the total capital ultimately contributed to Bagel Funding is less than $90.0
million or Bagel Funding is dissolved prior to the time all remaining capital
commitments have been called, the number of shares purchasable upon exercise
of the Bagel Funding Warrants will be adjusted based on the total amount of
capital contributed or committed to be contributed to Bagel Funding less the
amount of cash to be distributed to the members of Bagel Funding upon such
dissolution. In the event of such a dissolution, the amount of capital
committed to be contributed to Bagel Funding shall be deemed to be zero. Such
adjustments to the number of shares covered by the Bagel Funding Warrants, if
any, will be made by the Company (i) at the time that Bagel Funding may no
longer accept additional capital subscriptions, (ii) at such time, if any, as
any member of Bagel Funding fails to honor its commitment to contribute
capital and (iii) immediately prior to any dissolution of Bagel Funding that
occurs prior to the time all committed capital has been contributed to Bagel
Funding, but only if the Warrants have not been distributed by Bagel Funding.
Bagel Funding is required to distribute the Bagel Funding Warrants to its
members on the later of (i) six months after the date of the closing of an
underwritten initial public offering of the Company or (ii) four months after
all committed capital has been contributed to Bagel Funding, but in no event
later than the date that is six months prior to the expiration date of the
Bagel Funding Warrants.
Messrs. Scott Beck, Butler, Muehlstein, Ruth and Stanchak each own a direct
equity interest in Bagel Funding. Such interests aggregate approximately 7.8%
of the outstanding equity interest in Bagel Funding. Certain officers and
directors of Boston Chicken, excluding Scott Beck, own direct equity interests
in Bagel Funding. Such interests aggregate approximately 16.3% of the
outstanding equity interest in Bagel Funding.
INTERESTS IN AREA DEVELOPERS BY CERTAIN PERSONS
BCE West Bagels, L.L.C. Effective November 26, 1995, the Company entered
into a convertible secured loan agreement and an area development agreement
with BCE West Bagels, L.L.C. ("Old BCE West") for the development of the
following DMAs: Phoenix (excluding portions of California included in the
Phoenix DMA); Tucson; Albuquerque/Santa Fe; Denver (excluding portions of
South Dakota included in the Denver DMA); Colorado Springs; Las Vegas; and El
Paso. Also effective November 26, 1995, the Company entered into a convertible
secured loan agreement and an area development agreement with BCE SLC Bagels,
L.L.C. ("BCE SLC") for the development of the Salt Lake City DMA. At the time
of the consummation of such transactions, Lawrence Beck, Scott Beck's father,
was the majority equity owner of Old BCE West and BCE SLC. In connection with
the execution of such agreements, the Company sold to Old BCE West and BCE SLC
the Company-operated stores and other assets located in certain of such DMAs
at net book value for an aggregate purchase price of $1,432,519 and
$3,719,625, respectively, pursuant to asset sale agreements, and entered into
a franchise agreement for each such store. The Company realized no significant
gain or loss on such sales. The Company believes that the terms of the
agreements entered into with Old BCE West and BCE SLC are as favorable to the
Company as the terms that could be negotiated with unrelated third parties.
On December 29, 1995, Lawrence Beck sold to Bagel Funding 1,750,000 units of
membership interest in each of Old BCE West and BCE SLC for an aggregate
purchase price of approximately $3.5 million. The Company understands that
Lawrence Beck did not realize any significant gain or loss on such sales.
Lawrence Beck retained a minority equity interest in each of Old BCE West and
BCE SLC, and an entity controlled by him remained the manager of each such
entity.
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Effective January 29, 1996, BCE SLC acquired the assets of Old BCE West, BCE
SLC was renamed BCE West, L.L.C. ("BCE West") and Old BCE West was dissolved.
For the Company's 1995 fiscal year and the quarter ended April 21, 1996, BCE
West (together with its predecessor, Old BCE West) paid to the Company an
aggregate of $2,308,714 and $486,553, respectively, in development, franchise,
royalty, real estate, software license, software maintenance, miscellaneous
and accounting fees and deposits. For the quarter ended April 21, 1996, BCE
West paid $80,200 in national and $135,266 in local advertising fund
contributions. In addition, for such period, BCE West paid to the Company
$193,734 in interest on its loan from the Company.
Finest Bagels, L.L.C. Effective January 1, 1996, the Company entered into a
convertible secured loan agreement and an area development agreement with
Finest Bagels, L.L.C. ("Finest") for the development of the following DMAs:
St. Louis; Kansas City; and Minneapolis/St. Paul. Bagel Funding is the
majority equity owner of Finest. In connection with the execution of such
agreements, the Company sold to Finest the Company-operated stores and other
assets located in certain of those DMAs at net book value for an aggregate
purchase price of $6,216,545, pursuant to an asset sale agreement, and entered
into a franchise agreement with Finest for each such store. The Company
realized no significant gain or loss on such sale. For the Company's first
quarter ended April 21, 1996, Finest paid to the Company an aggregate of
$1,613,001 in development, franchise, royalty, real estate, software license,
software maintenance, miscellaneous and accounting fees and deposits. For the
quarter ended April 21, 1996, Finest paid $54,350 in national and $109,830 in
local advertising fund contributions. In addition, for such period, Finest
paid to the Company $74,717 in interest on its loan from the Company. The
Company believes that the terms of the agreements entered into with Finest are
as favorable to the Company as terms of agreements that could be negotiated by
the Company with unrelated third parties.
Einstein Bros. America, L.P. Effective March 25, 1996, the Company entered
into a convertible secured loan agreement and an area development agreement
with Einstein Bros. America, L.P. ("EBA") for the development of the following
DMAs: Milwaukee; Chicago; Detroit; Madison; Tampa/St. Petersburg/Sarasota;
Orlando/Daytona Beach/Melbourne; Ft. Myers/Naples; Miami/Ft. Lauderdale; and
West Palm Beach/Ft. Pierce. Bagel Funding is the majority equity owner of EBA.
In connection with the execution of such agreements, the Company sold to EBA
the Company-operated stores and other assets located in certain of those DMAs
at net book value for an aggregate purchase price of $18,622,026, pursuant to
an asset sale agreement, and entered into a franchise agreement with EBA for
each such store. The Company realized no significant gain or loss on such
sale. For the Company's first quarter ended April 21, 1996, EBA paid to the
Company an aggregate of $5,392,331 in development, franchise, real estate
fees, deposits and reimbursement of expenses. The Company believes that the
terms of the agreements entered into with EBA are as favorable to the Company
as terms of agreements that could be negotiated by the Company with unrelated
third parties. EBA is currently negotiating the sale by it of certain of its
stores and area development rights in the Milwaukee, Chicago, Detroit and
Madison DMAs to a new area developer of the Company.
Mayfair Bagels, L.L.C. On April 1, 1996, the Company entered into a
convertible secured loan agreement and an area development agreement with
Mayfair Bagels, L.L.C. ("Mayfair") for the development of a portion of the
Baltimore and Washington, D.C. DMAs. Bagel Funding is the majority equity
owner of Mayfair. In connection with the execution of such agreements, the
Company sold to Mayfair certain assets located in certain of those DMAs at net
book value for an aggregate purchase price of $249,084, pursuant to an asset
sale agreement. The Company realized no significant gain or loss on such sale.
For the Company's first quarter ended April 21, 1996, Mayfair paid to the
Company an aggregate of $860,000 in deposits and reimbursement of expenses.
The Company believes that the terms of the agreements entered into with
Mayfair are as favorable to the Company as terms of agreements that could be
negotiated by the Company with unrelated third parties.
Liberty Foods, L.L.C. Effective May 6, 1996, the Company entered into a
convertible secured loan agreement and an area development agreement with
Liberty Foods, L.L.C. ("Liberty") for the development of the New York DMA.
Bagel Funding is the majority equity owner of Liberty. In connection with the
execution of such agreements, the Company sold to Liberty the Company-operated
store and certain assets located in the DMA at net book value for an aggregate
purchase price of $869,743, pursuant to an asset sale agreement and
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entered into a franchise agreement with Liberty for such store. The Company
realized no significant gain or loss on such sale. The Company believes that
the terms of agreements entered into with Liberty are as favorable to the
Company as terms of agreements that could be negotiated by the Company with
unrelated third parties.
BCE West, Finest, Mayfair and EBA are each represented by Pedersen & Houpt,
a law firm in which John Muehlstein, Jr., a director of the Company, is a
partner.
AREA DEVELOPER WARRANTS
On January 15, 1996, in connection with the formation of the Company's
prospective area developers, the Company issued to eleven such entities
warrants to acquire an aggregate of 1,237,050 shares of Common Stock of the
Company, each at an exercise price per share of $6.47, as follows: BCE SLC
(now named BCE West)--85,050 shares; Finest--77,175 shares; Great Lakes
Bagels, L.L.C. ("Great Lakes")--108,225 shares; Liberty--100,350 shares;
Mayfair--77,175 shares; NJ Rose Bagels, L.L.C. ("NJ Rose")--92,700 shares;
NNYB, L.L.C. ("NNYB")--270,000 shares; P&L Bagels, L.L.C. ("P&L")--100,350
shares; P&L II Bagels, L.L.C. ("P&L II")--156,150 shares; R&A Bagels ("R&A")--
92,700 shares; and Texas Bagels, L.L.C.--77,175 shares. The warrants issued to
Great Lakes and R&A were transferred to EBA in connection with EBA's
transactions with the Company. See "--Interests in Area Developers by Certain
Persons." Each warrant becomes exercisable by the holder thereof during the
five-day period commencing on the date of entering into an area development
agreement and secured loan agreement with the Company, and is exercisable only
in its entirety. If an area development agreement and secured loan agreement
are not entered into prior to July 15, 1997, each warrant expires as of such
date. Lawrence Beck owns a majority equity interest in each of P&L and P&L II.
As of May 21, 1996, each of the warrants granted to BCE West, Finest, Great
Lakes, Liberty, Mayfair, and R&A had been exercised.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company has entered into a consulting agreement with Mr. Colangelo in
connection with his resignation as President and Chief Executive Officer of
the Company. See "Management--Management Compensation."
On March 24, 1995, the Company entered into an employment agreement with Ms.
Lozoff, pursuant to which Ms. Lozoff became Vice President--Design and
Merchandising and a director of the Company. The employment agreement
terminates August 1, 1998. Ms. Lozoff receives an annual salary of $125,000
and reimbursement of reasonable business expenses. In addition, at the time
she entered into the employment agreement, Ms. Lozoff was granted options to
purchase 42,483 shares of Common Stock under the Plan with an exercise price
of $5.88 per share.
On March 31, 1995, the Company entered into an employment agreement with Mr.
Offerdahl, pursuant to which Mr. Offerdahl became Vice President of
Operations--Southeast Zone and a director of the Company. The employment
agreement terminates August 1, 1998. Mr. Offerdahl receives an annual salary
of $125,000 per year and reimbursement of reasonable business expenses. In
addition, at the time he entered into the employment agreement, Mr. Offerdahl
was granted options to purchase 42,483 shares of Common Stock under the Plan
with an exercise price of $5.88 per share.
On March 31, 1995, the Company entered into a consulting agreement with
Lynnora Offerdahl, Mr. Offerdahl's spouse, pursuant to which she provides
information, advice and assistance concerning product development, restaurant
design and general projects for the Company. The one-year consulting agreement
is automatically renewed for additional one year periods unless terminated by
either party upon 60 days' prior written notice. Ms. Offerdahl receives a
monthly salary of $5,000 and reimbursement of reasonable business expenses. In
addition, at the time she entered into the consulting agreement, Ms. Offerdahl
was granted options to purchase 42,483 shares of Common Stock under the Plan
with an exercise price of $5.88 per share.
On April 5, 1996, Mr. Goldston was elected President and Chief Executive
Officer and a director of the Company. The Company has agreed to pay to Mr.
Goldston a base salary of $360,000 per year, with a guaranteed
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bonus of $400,000 for fiscal year 1996. For fiscal year 1997, Mr. Goldston
will be eligible for a $400,000 bonus, his receipt of which will be based upon
the achievement of mutually agreed upon reasonable performance goals. In
addition, the Company granted to Mr. Goldston options under the Plan to
purchase 114,030 shares of Common Stock at an exercise price of $10.52 per
share. Beginning in fiscal year 1997, and for each year thereafter as long as
he remains an employee of the Company, Mr. Goldston will be eligible for an
annual stock option grant under the Amended Plan to purchase, at a minimum,
that number of shares of Common Stock that have an aggregate exercise price of
$800,000. In connection with his employment, Mr. Goldston also purchased
28,508 shares of Common Stock at a price of $10.52 per share.
Effective January 17, 1996, Boston Chicken employed Mr. Goldston to
undertake various special projects for Boston Chicken. As an employee of
Boston Chicken, Mr. Goldston receives an annual salary of $40,000 and is
eligible to participate in Boston Chicken's employee stock option plan. Mr.
Goldston has been granted options under that plan to purchase 100,000 shares
of Boston Chicken common stock at an exercise price of $27.9375 per share.
Boston Chicken has agreed to structure Mr. Goldston's future projects so that
his employment with Boston Chicken will not interfere with his duties with the
Company.
In addition, in consideration for certain consulting services rendered to
Boston Chicken by Mr. Goldston and the consulting firm of which Mr. Goldston
was a principal, Boston Chicken has paid $1,818,086 for consulting services
rendered during fiscal years 1995 and 1996 and granted an option (outside of
the Boston Chicken employee option plan) to purchase 100,000 shares of Boston
Chicken common stock at an exercise price of $16.00 per share. Boston Chicken
has also granted to Mr. Goldston an option to purchase from Boston Chicken
344,673 shares of Common Stock at an exercise price of $6.38 per share.
BOWANA AVIATION, INC.
During the 1995 fiscal year, the Company from time to time used airplanes
owned by a company controlled by Scott Beck and Lawrence Beck, for which the
Company incurred aggregate rental expense of $85,874 in such fiscal year. The
Company believes that the terms of its use of the planes were at least as
favorable to the Company as those it could have obtained from an unaffiliated
party. The Company is currently negotiating an agreement with Boston Chicken,
pursuant to which the Company will enter into subleases with Boston Chicken
entitling the Company to the non-exclusive use of aircraft leased by Boston
Chicken from unaffiliated leasing companies. See "Relationship with Boston
Chicken--Other Relationships Between Boston Chicken and the Company."
LOANS TO EXECUTIVE OFFICERS
On August 9, 1995, the Company made a loan to Kyle T. Craig, Chairman of the
Board, in the principal amount of $400,000, the proceeds of which were used by
Mr. Craig to pay off a loan from Boston Chicken. Interest on the principal
amount of the Company's loan to Mr. Craig accrues at the reference rate
announced by Bank of America Illinois from time to time plus 1%. The principal
balance of the loan and all accrued but unpaid interest thereon are due and
payable upon demand.
On March 31, 1995, in connection with the Company's acquisition of the
assets of Offerdahl's (now known as OBG) the Company made a non-recourse loan
to OBG in the principal amount of $437,497, the proceeds of which were used to
purchase an aggregate of 74,345 shares of Common Stock, which shares secure
the payment of principal and interest under such loan. Also on March 31, 1995,
the Company made a non-recourse loan to OBG in the principal amount of
$1,312,500, the proceeds of which were used to purchase an equity interest in
BC Equity Funding, L.L.C., a Delaware limited liability company which invests
in Boston Chicken area developers ("BCEF"), which equity interest secures the
payment of principal and interest under such loan. Each loan described above
accrues interest on the principal amount at the reference rate announced by
Bank of America Illinois from time to time plus 1%. The principal balance of
each loan and all accrued but unpaid interest thereon are due and payable on
April 15, 2001, but may be required to be repaid earlier under certain
circumstances.
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<PAGE>
Also in connection with the Company's acquisition of the assets of
Offerdahl's, on each of April 15, 1995, June 15, 1995, September 15, 1995 and
January 15, 1996, the Company made an interest-free loan to OBG in the
principal amount of $46,100, and on April 15, 1996, the Company made an
additional interest-free loan to OBG in the principal amount of $1,502,276.
The proceeds of each such loan were used to satisfy income tax obligations
arising from the acquisition. Each such loan is secured by units of membership
interest in BCEF owned by OBG. The principal balance of each loan and all
accrued but unpaid interest thereon are due and payable on April 15, 2001, but
may be required to be repaid in whole or in part under certain circumstances.
OTHER RELATIONSHIPS
Blind Faith, Inc., of which Ms. Lozoff and her spouse are the sole
shareholders, leases to the Company the land and building on which a store is
located. The Company subleases such land and building to one of its area
developers. The annual rental payments under the lease and sublease, each of
which terminates in May 2009, aggregate $72,000.
CERTAIN TRANSACTIONS WITH BOSTON CHICKEN
See "Risk Factors--Dependence on Boston Chicken," "Risk Factors--Control by
and Conflicts of Interest with Boston Chicken" and "Relationship with Boston
Chicken."
47
<PAGE>
PRINCIPAL STOCKHOLDERS AND SECURITIES OWNERSHIP OF MANAGEMENT
OWNERSHIP OF COMPANY COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of May 6, 1996 (after giving effect to the Loan
Conversion) and as adjusted for the sale by the Company of the shares in the
Offerings by each person known by the Company to be the beneficial owner of 5%
or more of the outstanding Common Stock, by each of the Company's directors
and the named executive officer and by all directors and executive officers of
the Company as a group. The beneficial ownership reflected in the following
table is calculated in accordance with Section 13(d) of the Exchange Act.
Unless otherwise indicated, ownership includes sole voting and investment
power. As of such date, there were approximately 110 record holders of Common
Stock. See "Concurrent Offerings" and "Capitalization."
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES
OWNED BEFORE THE SHARES BENEFICIALLY
OFFERINGS (AFTER TO BE OWNED AFTER
GIVING EFFECT TO THE PURCHASED THE
LOAN CONVERSION)(1) IN THE OFFERINGS(1)
-----------------------CONCURRENT --------------
NAMES(2) NUMBER PERCENT OFFERINGS NUMBER PERCENT
-------- ------------ -------------------- ------ -------
<S> <C> <C> <C> <C> <C>
Boston Chicken, Inc.(3)........ 15,307,421 68.3% %
Daniel V. Colangelo............ 351,354 1.6
Kyle T. Craig.................. 47,581 *
Noah Alper..................... 93,600 *
Mark R. Goldston(4)............ 145,697 *
David G. Stanchak.............. 25,491 *
Scott A. Beck(5)............... 99,576 *
M. Laird Koldyke(6)............ 424,827 1.9
Gail Lozoff(7)................. 577,998 2.6
John H. Muehlstein, Jr.(8)..... 678,661 3.0
John A. Offerdahl(9)........... 894,493 4.0
Lloyd D. Ruth(10).............. 212,414 *
All directors and executive
officers as a group (excluding
Mr. Colangelo)(15 persons).... 3,344,638 14.8% %
</TABLE>
- --------
*Less than 1%.
(1) Includes shares subject to options granted by the Company which are
exercisable within 60 days of May 6, 1996 as follows: Mr. Craig--5,098;
Ms. Lozoff--4,248; Mr. Stanchak--4,248; Mr. Offerdahl--4,248; and all
executive officers and directors as group--26,338.
(2) Unless otherwise indicated, the address of such person is c/o
Einstein/Noah Bagel Corp., 1526 Cole Boulevard, Suite 200, Golden,
Colorado 80401. The address for each of Boston Chicken and Scott Beck is
14103 Denver West Parkway, Golden, Colorado 80401-4086.
(3) Includes 524,844 shares of Common Stock on which Boston Chicken has
granted options to purchase such shares to certain individuals (including
Mr. Goldston), of which options to purchase 178,447 shares of Common
Stock are exercisable within 60 days of May 6, 1996. Includes 510,246
shares of Common Stock owned by BCEF, of which Boston Chicken is the
manager. See "Relationship with Boston Chicken--Loan Agreement."
(4) Includes 117,189 shares of Common Stock subject to options from Boston
Chicken which were currently exercisable as of May 6, 1996.
(5) Excludes the aggregate number of shares of Common Stock shown above as
owned by Boston Chicken that may be deemed to be beneficially owned by
Scott Beck because he may be deemed to be an affiliate of Boston Chicken.
Mr. Beck disclaims any beneficial ownership of such shares.
(6) Includes 424,827 shares of Common Stock held by Frontenac, the general
partner of which is an entity of which Mr. Koldyke is a general partner.
Frontenac's address is 135 S. La Salle Street, Suite 3500, Chicago,
Illinois 60603.
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<PAGE>
(7) Includes 573,750 shares of Common Stock held by B&B (formerly Bagel &
Bagel), of which Ms. Lozoff's spouse is the sole stockholder. The address
for B&B is 8595 College Boulevard, No. 150, Overland Park, Kansas 66210.
(8) Represents shares of Common Stock held by Pedersen Bagel, of which Mr.
Muehlstein is a general partner. Pedersen Bagel's address is 161 N. Clark
St., Suite 3100, Chicago, Illinois 60601.
(9) Includes 885,997 shares of Common Stock held by OBG and 4,248 shares
beneficially owned by Mr. Offerdahl's spouse, which are subject to
options from the Company that were exercisable as of May 6, 1996. OBG's
address is 963 Shotgun Road, Sunrise, Florida 33326.
(10) Includes 206,514 shares of Common Stock held by Marquette and 5,900
shares of Common Stock held by MVP II, the general partner of each of
which is an entity of which Mr. Ruth is a general partner. The address
for each of Marquette and MVP II is 520 Lake Cook Road, Suite 450,
Deerfield, Illinois 60015.
PERSONAL HOLDING COMPANY TAX
Under Section 541 of the Internal Revenue Code, a personal holding company
is subject to a 39.6% tax on its undistributed personal holding company income
(the "PHC Tax"). In order to be considered a personal holding company in any
taxable year, a corporation must satisfy two tests. First, at any time during
the last half of the taxable year more than 50% in value of its outstanding
stock must be owned, directly or indirectly, by or for not more than five
individuals (the "Stock Ownership Test"). Second, at least 60% of its adjusted
gross income for the taxable year must be personal holding company income,
which generally consists of passive forms of income such as dividends,
interest, rents and royalties, as defined for tax purposes, but not including
income from the provision of services (the "Income Test"). Although the
ownership of Boston Chicken is attributed to its stockholders for purposes of
such calculation, certain attribution rules that are included as part of the
Stock Ownership Test could result in the Stock Ownership Test being satisfied
in the case of the Company. The Company believes that the nature of its
activities and its expected sources of income during 1996 will be such that
the Income Test will not be satisfied and consequently that the PHC Tax will
not apply for its 1996 taxable year. Because the Company intends to utilize
area developers financed in part by the Company from which it will receive
interest and certain royalty income, there can be no assurance that the
Company will not meet the Income Test in future years.
49
<PAGE>
OWNERSHIP OF BOSTON CHICKEN COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of Boston Chicken's common stock as of May 6, 1996 by the Company's
directors and the named executive officer and all directors and executive
officers as a group. The beneficial ownership reflected in the following table
is calculated in accordance with Section 13(d) of the Exchange Act. Unless
otherwise indicated, ownership includes sole voting and investment power.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY
OWNED(1)(2)
-----------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
------------------------ --------- -------
<S> <C> <C>
Daniel V. Colangelo.......................................... 0 *
Kyle T. Craig................................................ 75,173 *
Mark R. Goldston............................................. 50,000 *
David G. Stanchak............................................ 427,730 *
Noah Alper................................................... 0 *
Scott A. Beck................................................ 6,564,410 10.3%
M. Laird Koldyke............................................. 0 *
Gail Lozoff (3).............................................. 291,177 *
John H. Muehlstein, Jr....................................... 5,000 *
John A. Offerdahl (4)........................................ 77,589 *
Lloyd D. Ruth................................................ 0 *
All directors and executive officers as a group (excluding
Mr. Colangelo) (15 persons)................................. 7,931,788 12.5%
</TABLE>
- --------
*Less than 1%.
(1) Includes shares subject to options which are exercisable within 60 days of
May 6, 1996 as follows: Mr. Scott Beck--543,025; Mr. Craig--48,025; Mr.
Goldston--50,000; Mr. Stanchak--108,424; and all executive officers and
directors as a group (including such individuals)--897,902. Options
granted to Messrs. Craig and Stanchak by Boston Chicken continue to vest
pursuant to their respective consulting agreements with Boston Chicken.
(2) Excludes an aggregate of 4,360,687 additional shares of common stock of
Boston Chicken beneficially owned by BC Midwest Trust and certain
partnerships, which shares may be deemed to be beneficially owned by Scott
Beck by virtue of his ownership of shares of BC Midwest, Inc., the trustee
of BC Midwest Trust and the general partner of such partnerships. Mr. Beck
disclaims beneficial ownership with respect to all of such shares because
such shares exceed his pecuniary interest of 2,350,663 shares as a
beneficiary of BC Midwest Trust, as a limited partner of such partnerships
and as a stockholder of BC Midwest, Inc.
(3) Represents shares owned by B&B.
(4) Represents shares owned by OBG.
50
<PAGE>
RELATIONSHIP WITH BOSTON CHICKEN
During 1994 and 1995 Boston Chicken spent substantial amounts of time and
resources investigating the potential of the bagel business. In March 1995,
Boston Chicken made an investment in the Company in the form of a convertible
secured loan and sold to the Company at net book value certain assets and
certain know-how and agreements. At that time Boston Chicken and the Company
also entered into fee service agreements pursuant to which Boston Chicken
provides the Company with certain multi-unit retail infrastructure support,
including accounting and administration services, real estate services and
computer and communications services. Any of the foregoing agreements may be
changed at any time, as may be agreed by Boston Chicken and the Company. See
"Risk Factors--Control by and Conflicts of Interest with Boston Chicken."
The loan agreement between Boston Chicken and the Company, as well as each of
the other agreements referred to above, are summarized below and are attached
as exhibits to the Registration Statement of which this Prospectus is a part.
LOAN AGREEMENT
On March 24, 1995, Boston Chicken made a senior secured convertible loan to
the Company, secured by substantially all of the Company's and its
subsidiaries' assets, pursuant to which the Company could draw on a line of
credit, with certain limitations, in order to provide partial funding for store
development and working capital. In February 1996, in connection with the
Noah's acquisition, Boston Chicken increased the amount available under the
loan from $80.0 million to $120.0 million. Also in February 1996, Boston
Chicken provided a $25.0 million bridge loan to the Company (later increased to
$40.0 million), which was repaid by the Company upon the closing of the
Company's secured revolving credit facility. On May 9, 1996, Boston Chicken and
the Company amended the convertible loan agreement to include a $14.0 million
non-convertible facility. As of May 21, 1996, $120.0 million was outstanding
under the convertible loan and no borrowings were outstanding under the non-
convertible loan. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 7 of Notes to the Company's
Audited Consolidated Financial Statements.
Boston Chicken may satisfy its funding obligations under the loan agreement
in cash or in shares of Boston Chicken common stock. Boston Chicken has agreed
to guarantee the price of any shares of Boston Chicken common stock delivered
to the Company in satisfaction of Boston Chicken's funding obligations and
thereafter sold by the Company, provided that certain conditions regarding the
timing and manner of such sales are satisfied. As of May 21, 1996 Boston
Chicken had issued to the Company, and the Company had sold in the over-the-
counter market, through Merrill Lynch acting as broker, 2,701,615 shares of
registered Boston Chicken common stock for aggregate proceeds of approximately
$88.0 million.
Boston Chicken's convertible loan to the Company is convertible at any time,
after the earlier of April 1, 1997 or acceleration due to a default on the loan
or an initial public offering by the Company, and up to the later of full
repayment of the loan or a specified date in 2003, into a majority equity
interest in the Company. The initial $80.0 million of the loan is convertible
into Common Stock at a conversion price of $6.38 per share, and the remaining
$40.0 million is convertible into Common Stock at a conversion price of $14.42
per share. To the extent the loan is not fully drawn or has been drawn and
repaid, Boston Chicken has a corresponding option to acquire at the conversion
price the amount of additional equity it could have acquired by conversion of
the loan had the loan been fully drawn. Such option expires six months after
the loan's final maturity date.
In April 1996, Boston Chicken sold a $4 million undivided interest in the
convertible loan to BCEF pursuant to a participation agreement. BCEF's interest
in the convertible loan includes the pro rata participation by BCEF in the
principal, interest and security of the loan and the conversion and option
rights of Boston Chicken under such loan. In connection with the conversion and
option rights, two-thirds of BCEF's participation interest is convertible into
Common Stock at a conversion price of $6.38 per share and the remaining one-
third has a conversion price of $14.42 per share. BCEF has no independent right
to exercise any conversion or option rights with respect to its participation
interest, or to cause Boston Chicken to exercise such conversion or option
rights.
51
<PAGE>
In the event Boston Chicken exercises the conversion or option rights on
behalf of itself and BCEF, any shares of Common Stock acquired by BCEF may not
be transferred by BCEF without providing Boston Chicken prior notice and the
opportunity to purchase such shares for, at the option of Boston Chicken, cash
or registered shares of Boston Chicken common stock. Certain executive
officers and directors of the Company own in the aggregate less than 10% of
the outstanding equity interests of BCEF.
In connection with the closing of the Company's secured revolving credit
facility with Bank of America Illinois, Boston Chicken agreed to subordinate
all of its loans to the Company, both convertible and non-convertible, to all
indebtedness under the Company's secured revolving credit facility, and
further agreed to release its security interest in the assets of the Company.
Such subordination does not affect Boston Chicken's ability to convert its
convertible loan into Common Stock.
Although the foregoing tables assume that the Loan Conversion will be
consummated upon the Company's request to Boston Chicken, such conversion has
not yet occurred. Boston Chicken has, however, announced its intention to
consummate the Loan Conversion absent any change in circumstances, conditioned
upon approval of its board of directors and the termination of the moratorium
period under its loan agreement with the Company.
CONCURRENT PRIVATE PLACEMENT AGREEMENT AND REGISTRATION AGREEMENT
Concurrent with the consummation of the Initial Public Offering and the
Concurrent Public Offering, the Company expects to enter into a concurrent
private placement agreement with Boston Chicken (the "Concurrent Private
Placement Agreement"), pursuant to which Boston Chicken would purchase
2,000,000 shares of Common Stock at the initial public offering price per
share, net of underwriting discount. The Concurrent Private Placement
Agreement includes customary terms and provisions, representations and
warranties and indemnification obligations. In addition, the Concurrent
Private Placement Agreement would permit Boston Chicken to maintain ownership
of shares of Common Stock having up to 52% of the voting power of all of the
outstanding shares of capital stock of the Company having the power generally
to vote in the election of directors pursuant to an option (the "BCI Option")
to purchase newly issued shares of Common Stock for cash or registered shares
of Boston Chicken common stock at a per share exercise price equal to the (i)
the weighted average price per share at which the Common Stock was issued or
sold in a transaction pursuant to which the BCI Option becomes exercisable, in
the case of a transaction in which such price per share is readily
ascertainable, or (ii) in all other cases, the average of the closing sale
prices for the Common Stock on the Nasdaq National Market (or such other
principal exchange or market on which the Common Stock may then be trading)
for the five trading days ending on the fifth trading day prior to the date of
the transaction pursuant to which the BCI Option becomes exercisable, but
subject in each case to adjustments for issuances of shares of Common Stock in
connection with recapitalizations, dividends, stock splits, consolidations of
shares and other diluting events. In the event payment is made in registered
shares of Boston Chicken common stock, Boston Chicken will guarantee the price
at which those shares can be sold at the market within a limited time period.
The BCI Option will terminate if (i) Boston Chicken sells or transfers shares
of Common Stock and as a result owns less than a majority of the then
outstanding shares of the Company's voting stock or (ii) the percentage of
outstanding shares of voting stock of the Company owned by Boston Chicken is
reduced below 50% other than as a result of Boston Chicken's voluntary sale or
transfer of shares of Common Stock and Boston Chicken fails to acquire a
sufficient number of shares of Common Stock so that it owns at least a
majority of the then outstanding shares of voting stock of the Company by July
31 of the calendar year next following the calendar year in which such
reduction occurs. In addition, the percentage ownership level of 52% is
subject to reduction to the extent voluntary sales or transfers by Boston
Chicken reduce its ownership of the outstanding shares of voting stock of the
Company to less than 52% but do not otherwise result in termination of the BCI
Option. The Concurrent Private Placement Agreement prohibits the Company from
taking certain actions without the consent of Boston Chicken as long as the
BCI Option has not terminated, including altering any rights attaching to the
Common Stock, offering or issuing any equity securities or debt securities
convertible into equity securities, in either case other than Common Stock,
distributing assets or securities of the Company having a fair market value in
excess of 10% of the Company's consolidated gross assets or consolidated gross
revenues measured as of the immediately preceding fiscal year end, and filing
a petition in bankruptcy.
52
<PAGE>
In connection with the Concurrent Private Placement Agreement, the Company
also expects to enter into a registration agreement with Boston Chicken (the
"Boston Chicken Registration Agreement"), pursuant to which the Company would
grant to Boston Chicken five demand and unlimited piggyback registration
rights under the Securities Act with respect to the shares of Common Stock
purchased by Boston Chicken in the Concurrent Private Placement or otherwise
owned by it, including shares of Common Stock subject to the BCI Option for
which the Company will bear substantially all of the expenses in connection
with such registrations (other than underwriting discounts or commissions).
The Boston Chicken Registration Agreement will supersede the rights of Boston
Chicken under the Stockholder Registration Agreement. Boston Chicken's demand
registration rights under the Boston Chicken Registration Agreement are not
exercisable by it until the earlier of (i) the date on which the Company
requests the effectiveness of the resale registration statement under the
Stockholder Registration Agreement or (ii) 13 months after the closing of the
Offerings. In addition, the Company has agreed in connection with Boston
Chicken's first demand registration, to waive the requirement of the
Stockholder Registration Agreement, if it is still applicable, that the
holders of the Registrable Securities agree not to sell up to 30% of such
Registrable Securities for certain periods and Boston Chicken has agreed to
consent to such waiver. The execution of the Concurrent Private Placement
Agreement and the Boston Chicken Registration Agreement will be subject to the
waiver of certain provisions of the Stockholder Registration Agreement by, and
the consent of, the holders of at least 75% of the Registrable Securities. The
Company intends to request such waiver and consent prior to the consummation
of the Offerings. See "Certain Transactions--Registration Rights" and "Shares
Eligible for Future Sale."
The Concurrent Private Placement Agreement and the Boston Chicken
Registration Agreement are exhibits to the Registration Statement of which
this Prospectus is a part.
ASSIGNMENT AND REIMBURSEMENT AGREEMENT
On March 24, 1995, Boston Chicken and the Company entered into an assignment
and reimbursement agreement, pursuant to which Boston Chicken assigned to the
Company certain intellectual property rights relating to the development,
manufacture and sale of bagels and bagel-related products (the "Bagel Rights")
and certain rights under contracts to which Boston Chicken was a party,
including Boston Chicken's rights under a lease of office space in Golden,
Colorado that is currently used as the Company's support center (the "Bagel
Contracts"). The Company paid to Boston Chicken an aggregate of $1,160,334 in
consideration for certain assets and Boston Chicken's assignment of the Bagel
Rights and the Bagel Contracts, and in reimbursement of certain costs and
expenses paid by Boston Chicken in connection with the development and
creation of the Company and certain of its relationships, the development or
acquisition of the Bagel Rights, the negotiation of the Bagel Contracts and
the costs associated with transferring certain employees from Boston Chicken
to the Company. The Company also agreed to assume Boston Chicken's liabilities
and obligations under the Bagel Contracts and in connection with the other
activities performed by Boston Chicken for which the Company reimbursed Boston
Chicken.
ACCOUNTING AND ADMINISTRATION SERVICES AGREEMENT
On March 24, 1995, Boston Chicken and the Company entered into an accounting
and administration services agreement, subsequently amended and restated in
May 1996 to incorporate minor changes to such agreement (the "Accounting and
Administration Services Agreement"), pursuant to which Boston Chicken has
agreed to assist the Company, its subsidiaries and its area developers in
performing certain services, including maintaining accounting records,
performing accounting activities, preparing financial reports, administering
options, establishing and administering employee benefits, human resources,
insurance and recordkeeping services, assisting with lease negotiations,
maintaining lease files and complying with reporting obligations thereunder,
and providing certain other administrative support services.
In consideration for such assistance, the Company has agreed to pay to
Boston Chicken (i) a base fee of $30,000 for each four-week accounting period,
and (ii) a supplemental base fee of $4,500 for each accounting
53
<PAGE>
period for services to each franchisee or subsidiary of the Company (each such
franchisee or subsidiary being herein sometimes referred to as an "Entity"),
which fees may be increased cumulatively not more than 10% per fiscal year by
Boston Chicken. The Accounting and Administration Services Agreement also
provides for a per store fee to be paid by each Entity, ranging from $850 per
four-week accounting period, in the case of an Entity operating fewer than
twelve bagel stores, to $350 per four-week accounting period for an Entity
operating more than 200 bagel stores (which range of per store fees may be
reduced to a range from $700 to $250 upon compliance with certain reporting
requirements, administrative procedure compliance requirements and timeliness
deadlines established by Boston Chicken). The Company has also agreed to
reimburse Boston Chicken for all non-ordinary, out-of-pocket expenses incurred
by Boston Chicken or its affiliates in connection with the Accounting and
Administration Services Agreement. All such expenses in excess of $50,000 must
be approved by the Company prior to being incurred. Pursuant to the Accounting
and Administration Services Agreement, the Company paid to Boston Chicken in
fiscal year 1995 fees aggregating $489,750.
The Accounting and Administration Services Agreement has a term of three
years and may be terminated by the Company or Boston Chicken upon 180 days'
prior written notice. In addition, Boston Chicken may terminate the agreement
without notice 15 days after giving notice of non-payment of the fees provided
for in the agreement, unless such non-payment is cured within such 15-day
period.
FINANCIAL SERVICES AGREEMENT
On March 24, 1995, Boston Chicken and the Company entered into a financial
services agreement, (as amended, the "Financial Services Agreement"), pursuant
to which Boston Chicken agreed to provide certain financial services to the
Company and its area developers, including identification and analysis of
possible transactions and related financial and strategic advice, assistance
in budget and forecast preparation, consultations and advice as to
presentations, discussions and disclosures to financial analysts and the
financial press, and advice concerning crisis management and control. In
consideration for such financial services, the Company agreed to pay to Boston
Chicken financial services fees aggregating $500,000 for fiscal year 1995 and
approximately $96,000 for fiscal year 1996. The Company also agreed to
reimburse Boston Chicken for all non-ordinary, out-of-pocket expenses incurred
by Boston Chicken or its affiliates in connection with the Financial Services
Agreement. All such expenses in excess of $50,000 were required to be approved
by the Company prior to being incurred. The Financial Services Agreement was
terminated effective as of May 20, 1996.
REAL ESTATE SERVICES AGREEMENT
On March 24, 1995, Boston Chicken and the Company entered into a real estate
services agreement, subsequently amended and restated in May 1996 to make
minor changes to such agreement (the "Real Estate Services Agreement"),
pursuant to which Boston Chicken has agreed to assist the Company, its
subsidiaries and its area developers in conducting certain real estate-related
activities, including site analysis, advisory services regarding customer
trade area studies and other real estate matters. In consideration for such
real estate services, the Company has agreed to pay a general real estate
advisory fee of $5,000 for each bagel store location proposed to be owned,
operated, leased or franchised by the Company or any of its area developers or
subsidiaries, which fee may be increased cumulatively not more than 10% per
fiscal year by Boston Chicken. The Company has also agreed that the Company
and its subsidiaries will pay Boston Chicken's regular fees for customer area
trade studies, market development plans, and demographic and census reports,
charts and maps (which fees are subject to change from time to time by Boston
Chicken). The Company has also agreed to reimburse Boston Chicken for all non-
ordinary, out-of-pocket expenses incurred by Boston Chicken or its affiliates
in connection with the Real Estate Services Agreement. All such expenses in
excess of $50,000 must be approved by the Company prior to being incurred.
Pursuant to the Real Estate Services Agreement, the Company paid to Boston
Chicken in fiscal year 1995 fees aggregating $280,000.
The Real Estate Services Agreement has a term of three years and may be
terminated by the Company or Boston Chicken upon 180 days' prior written
notice. In addition, Boston Chicken may terminate the agreement without notice
15 days after giving notice of non-payment of the fees provided for in the
agreement, unless such non-payment is cured within such 15-day period.
54
<PAGE>
COMPUTER AND COMMUNICATIONS SYSTEMS SERVICES AGREEMENT
On March 24, 1995, Boston Chicken and the Company entered into the Computer
Services Agreement, subsequently amended and restated in May 1996 to make
certain changes to such agreement, pursuant to which (i) the Company has
agreed to acquire communications and computer systems or hardware specified or
required from time to time by Boston Chicken for use by the Company and its
subsidiaries and area developers, (ii) Boston Chicken has licensed the Company
to use retail store-level computer software programs and certain other
computer software programs in connection with various support and control
functions (which the Company has agreed to use exclusively, along with other
software specified by Boston Chicken), and (iii) Boston Chicken has agreed to
provide certain computer and communications support services. In consideration
for such license and provision of services, the Company has agreed to pay, and
to cause each of its subsidiaries and area developers to pay, to Boston
Chicken a one-time license fee of $15,000 per bagel store. In addition, the
Company and any other entity installing specific software must pay an annual
fee of $78,000 for certain real estate software, an annual fee of $78,000 for
certain Lotus Notes Database(R) templates and an annual fee of $78,000 for
certain structured report software. In addition, the Company has agreed to pay
to Boston Chicken, for data center and network service operations and support
of certain infrastructure programs, $750,000 for each of the 1996, 1997 and
1998 fiscal years and 0.25% of net systemwide revenue of the Company, its
subsidiaries and its area developers (excluding the revenue derived from
Noah's New York Bagels stores) for each of the 1999 and 2000 fiscal years. The
Company has also agreed to pay, and to cause each of its subsidiaries and area
developers to pay, to Boston Chicken a software maintenance and support
service fee of $400 for each of Boston Chicken's four-week accounting periods
for each installed copy of certain software licensed from Boston Chicken,
which fee may be increased by Boston Chicken at any time at its option. The
Company has also agreed to compensate Boston Chicken at hourly rates for
performance of support services not otherwise covered by the foregoing fees
and to incur certain additional amounts as may be needed to modify, enhance or
replace computer or communications systems or computer software, some of which
amounts may be payable to Boston Chicken. The Company has also agreed to
reimburse Boston Chicken for certain costs and expenses incurred by Boston
Chicken in connection with the Computer Services Agreement. Pursuant to the
Computer Services Agreement, the Company, its subsidiaries and area developers
paid to Boston Chicken in fiscal year 1995 fees aggregating $234,823.
The Computer Services Agreement has a term of five years and may be
terminated by the Company or Boston Chicken upon one year prior written
notice. In addition, Boston Chicken may terminate the agreement without notice
15 days after giving notice of non-payment of the fees provided for in the
agreement, unless such non-payment is cured within such 15-day period.
OTHER RELATIONSHIPS BETWEEN BOSTON CHICKEN AND THE COMPANY
Pursuant to subscription agreements and certain other agreements entered
into upon the formation of the Company, the stockholders of the Company agreed
to vote their shares in favor of three persons designated by Boston Chicken as
directors of the Company. The Company currently has ten directors, including
the following designees of Boston Chicken: Scott Beck, Kyle Craig and David
Stanchak. Boston Chicken did not designate nominees for the 1996 election of
directors. In addition, certain officers of the Company were previously
officers or employees of Boston Chicken. See "Management."
The Company has from time to time purchased from Boston Chicken shares of
Boston Chicken common stock for delivery by the Company in connection with
acquisitions of other businesses by the Company. In addition to shares of
Boston Chicken common stock funded by Boston Chicken under the loan agreement,
during the period from March 24, 1995 through August 10, 1995, the Company
also purchased an aggregate of 1,298,958 shares of Boston Chicken common stock
in connection with such acquisitions, having an aggregate market value,
measured as of the respective dates such shares were acquired, of
approximately $23.4 million. See "Certain Transactions--Formation of the
Company and Subsequent Acquisitions." The Company may from time to time
acquire shares of common stock, or other securities, of Boston Chicken for
such purposes in the future. See also "--Loan Agreement."
55
<PAGE>
In connection with the formation of the Company, the Company granted options
to purchase an aggregate of 224,292 shares of Common Stock to certain officers
and employees of Boston Chicken at an exercise price of $5.88 per share.
The Company is currently negotiating two subleases with Boston Chicken,
pursuant to which the Company will be entitled to the non-exclusive use of
three airplanes leased by Boston Chicken from unaffiliated leasing companies.
Under the subleases, the Company will be obligated to pay its proportionate
share of Boston Chicken's lease payments, maintenance and related costs, based
on the Company's use of the airplanes. The Company expects that such subleases
will be terminable by either party upon 30 days' notice.
See also "Risk Factors--Dependence on Boston Chicken," "Risk Factors--Control
by and Conflicts of Interest with Boston Chicken" and "Certain Transactions."
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 200 million shares of
Common Stock, $.01 par value per share, and 20 million shares of preferred
stock, $.01 par value per share (the "Preferred Stock"). Upon completion of the
Offerings, approximately 27,634,000 shares of Common Stock and no shares of
Preferred Stock will be issued and outstanding. The following description is a
summary of the provisions of the Company's Restated Certificate of
Incorporation (the "Certificate of Incorporation"), and its Amended and
Restated Bylaws (the "Bylaws"), copies of which are exhibits to the
Registration Statement of which this Prospectus is a part.
COMMON STOCK
Except as required by law or by the Certificate of Incorporation, holders of
Common Stock are entitled to one vote for each share held of record on all
matters submitted to a vote of the holders of Common Stock. The holders of
Common Stock are not entitled to cumulative voting rights with respect to the
election of directors and are not permitted to act by written consent. Subject
to preferences that may be applicable to any then outstanding Preferred Stock,
holders of Common Stock are entitled to receive ratably such dividends as may
be declared by the board of directors out of funds legally available therefor.
See "Dividend Policy." In the event of a liquidation, dissolution, or winding
up of the Company, holders of the Common Stock are entitled to share ratably in
all assets remaining after payment of liabilities and the liquidation
preference of any then outstanding Preferred Stock. Holders of Common Stock
have no preemptive rights and have no right to convert their Common Stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are, and
the Common Stock to be outstanding upon consummation of the Offerings will be,
fully paid and nonassessable. The board of directors may issue additional
authorized shares of Common Stock without further action by the stockholders.
PREFERRED STOCK
The board of directors has the authority, without further action by the
stockholders, to issue up to 20 million shares of Preferred Stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, and the number of shares constituting any
series or the designation of such series. However, pursuant to the Certificate
of Incorporation, the holders of Preferred Stock would not have cumulative
voting rights with respect to the election of directors. The issuance of
Preferred Stock could adversely affect the voting power of holders of Common
Stock and could have the effect of delaying, deferring, or preventing a change
in control of the Company.
On August 10, 1995, the Company issued the Preferred Shares in connection
with the acquisition of Baltimore Bagel. Each of the Preferred Shares has a
liquidation preference of $1,000 and pays annual dividends of $60. Upon
completion of the Offerings, each Preferred Share will automatically be
converted into that number of shares of Common Stock derived by dividing $1,000
plus accrued and unpaid dividends by 80% of the initial
56
<PAGE>
public offering price per share. The Preferred Shares are redeemable at the
option of the Company at any time after February 10, 1999, at a price per
share equal to $1,250 plus accrued and unpaid dividends. In addition, a
majority of the holders of the Preferred Shares may require the Company to
redeem one-third of such shares on each of February 28, 1998, May 1, 1998 and
August 1, 1998, at a price per share of $1,250 plus accrued and unpaid
dividends. The Preferred Shares are also redeemable by the holders in the
event the Company has failed to pay three consecutive quarterly dividends at a
price of $1,250 per share plus accrued and unpaid dividends.
The Company has no present plan to issue any additional shares of Preferred
Stock.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is LaSalle National
Trust, N.A.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offerings, there has been no market for the Common Stock of the
Company. No predictions can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of shares of Common Stock
for future sale, will have on the market price for shares prevailing from time
to time. Sales of substantial amounts of Common Stock in the public market
following the Offerings could adversely affect the market price of the Common
Stock.
Upon completion of the Offerings, the Company will have approximately
27,634,000 shares of Common Stock outstanding (approximately 27,964,000 shares
if the Underwriters' over-allotment option is exercised in full). The shares
of Common Stock offered in the Initial Public Offering and the Concurrent
Public Offering will be freely tradable (other than by an "affiliate" of the
Company as such term is defined in the Securities Act) without restriction or
registration under the Securities Act, except that the purchasers in the
Concurrent Public Offering will have agreed not to sell shares so purchased
for a period of 365 days from the date of this Prospectus. The 2,000,000
shares of Common Stock offered to Boston Chicken in the Concurrent Private
Placement will be, and the shares of Common Stock purchased by the existing
stockholders of the Company were, issued and sold by the Company in private
transactions ("Restricted Shares") and may not be resold unless registered
under the Securities Act (which registration is contemplated as described
below in the case of Restricted Securities held by certain existing
stockholders) or sold in accordance with an exemption therefrom, such as Rule
144, Rule 144A or Rule 701 thereunder. In addition, Boston Chicken will have
agreed with the Representatives not to sell shares of Common Stock purchased
in the Concurrent Private Placement for a period of 365 days from the date of
this Prospectus.
In general, under Rule 144 as currently in effect, a holder of Restricted
Shares who beneficially owns shares that were not acquired from the Company or
an affiliate of the Company within the previous two years would be entitled to
sell in the public market within any three-month period a number of shares
that does not exceed the greater of (i) one percent of the then outstanding
shares of Common Stock or (ii) the average weekly trading volume of the Common
Stock on the Nasdaq National Market during the four calendar weeks immediately
preceding the date on which notice of the sale is filed with the Securities
and Exchange Commission (the "Commission"). Sales pursuant to Rule 144 are
also subject to certain other requirements relating to manner of sale, notice
and the availability of current public information about the Company. A person
who is deemed not to have been an affiliate of the Company at any time during
the three months immediately preceding a sale and who beneficially owns shares
that were not acquired from the Company or an affiliate of the Company within
the past three years is entitled to sell such shares under Rule 144(k) without
regard to the foregoing limitations. Rule 144A under the Securities Act
permits the immediate sale by the holders of Restricted Shares issued prior to
completion of the Offerings of all or a portion of their shares to certain
"qualified institutional buyers" as defined in Rule 144A.
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally issued by the Company to its employees,
directors, officers, consultants or advisers prior to completion of the
Offerings, pursuant to written compensatory
57
<PAGE>
benefit plans or written contracts relating to the compensation of such
persons. Securities issued in reliance on Rule 701 are Restricted Shares and,
beginning 90 days after the date of this Prospectus (unless subject to the
contractual lockup restrictions described in "Underwriting"), may be sold by
non-affiliates subject only to the manner of sale provisions of Rule 144, and
by affiliates under Rule 144 without compliance with its two-year minimum
holding period requirement.
Pursuant to the Stockholder Registration Agreement, certain stockholders of
the Company were granted piggyback registration rights under the Securities
Act with respect to shares of Common Stock owned by them (the "Registrable
Securities"). In addition, the Company is obligated to file, within 13 months
after the completion of an initial public offering, a registration statement
under the Securities Act which would include the Registrable Securities then
held by such stockholders, pursuant to which the holders thereof would be able
to make public resales of the Registrable Securities. The Company intends to
file such registration statement shortly after the completion of the Offerings
with respect to approximately 7,000,000 shares of Common Stock owned by such
stockholders and others, pursuant to which they may resell such shares in the
public market. Pursuant to the Stockholder Registration Agreement, each holder
of Registrable Securities has agreed not to sell up to 30% of the Registrable
Securities held by such holder, for a period ending on the later of (i) the
date that the Registrable Securities are permitted to be sold by the holders
thereof pursuant to Rule 144 under the Securities Act and (ii) the six-month
anniversary of the effective date of the registration statement filed by the
Company pursuant to which such holders may make public resales. In addition,
the holders of approximately of such shares have agreed that they
will not sell such shares for a period of 180 days from the date of this
Prospectus, subject to certain exceptions, without the consent of Merrill
Lynch.
Boston Chicken is a party to the Stockholder Registration Agreement;
however, in connection with the Concurrent Private Placement, the Company
expects to enter into the Boston Chicken Registration Agreement (which will
supersede Boston Chicken's rights under the Stockholder Registration
Agreement). Pursuant to the Boston Chicken Registration Agreement, the Company
will grant to Boston Chicken five demand and unlimited piggyback registration
rights under the Securities Act with respect to the shares of Common Stock
owned by Boston Chicken, including shares of Common Stock subject to the BCI
Option, for which the Company will bear substantially all of the expenses
(other than underwriting discounts or commissions). The demand registration
rights are not exercisable by Boston Chicken until the earlier of (i) the date
on which the Company requests the effectiveness of the resale registration
statement under the Stockholder Registration Agreement or (ii) 13 months after
completion of the Offerings. In addition, the Company has agreed, in
connection with Boston Chicken's first demand registration, to waive the
requirement of the Stockholder Registration Agreement that the holders of the
Registrable Securities agree not to sell up to 30% of such Registrable
Securities for certain periods and Boston Chicken has agreed to consent to
such waiver. The execution of the Concurrent Private Placement Agreement and
Boston Chicken Registration Agreement will be subject to the waiver of certain
provisions of the Stockholder Registration Agreement by, and the consent of,
the holders of at least 75% of the Registrable Securities under the
Stockholder Registration Agreement, which agreement prohibits the Company from
granting any registration rights superior to those granted in such agreement.
See "Certain Transactions--Registration Rights" and "Relationship with Boston
Chicken--Concurrent Private Placement Agreement and Registration Agreement."
The Company intends to register under the Securities Act all shares subject
to outstanding options and all shares reserved for issuance under the Amended
Plan and the Directors Plan. All shares purchased in the future under such
plans will be available for resale in the public market without restriction,
except that affiliates must comply with the provisions of Rule 144 other than
the holding period requirement. In addition, the Company may file a
registration statement covering shares of Common Stock for issuance in
connection with potential future acquisitions and resales thereof by the
recipients, although no such acquisitions are currently pending. Shares so
registered could not be sold in the public market for a period of 180 days
from the date of this Prospectus, subject to certain exceptions, without the
consent of Merrill Lynch.
58
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in a purchase agreement (the
"Purchase Agreement"), the Company has agreed to sell to each of the
underwriters named below (the "Underwriters"), and each of the Underwriters,
for whom Merrill Lynch, Alex. Brown & Sons Incorporated and Montgomery
Securities are acting as representatives (the "Representatives"), have
severally agreed to purchase from the Company the respective number of shares
of Common Stock set forth opposite its name below at the initial public
offering price less the underwriting discount set forth on the cover page of
this Prospectus. In the Purchase Agreement, the several Underwriters have
agreed, subject to the terms and conditions set forth therein, to purchase all
of the shares of Common Stock offered hereby if any of such shares are
purchased. In the event of default by an Underwriter, the Purchase Agreement
provides that, in certain circumstances, the purchase commitments of the
nondefaulting Underwriters may be increased or the Purchase Agreement may be
terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...........................................
Alex. Brown & Sons Incorporated.................................
Montgomery Securities...........................................
---------
Total...................................................... 2,200,000
=========
</TABLE>
The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock in the Initial Public Offering
to the public initially at the price to the public set forth on the cover page
of this Prospectus, and to certain dealers (who may include the Underwriters)
at such price less a concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other dealers. After the Initial Public
Offering contemplated hereby, the offering price and other selling terms may
be changed by the Representatives.
The Company and the Underwriters have agreed to reserve up to 220,000 shares
of Common Stock offered in the Initial Public Offering for sale by the
Underwriters to certain individuals and entities, including eligible employees
and area developers of the Company and Boston Chicken, and other entities or
persons related to the Company or such entities or persons, and members of
their families. The price of such shares to such persons will be the initial
public offering price set forth on the cover of this Prospectus. The number of
shares available to the general public will be reduced to the extent those
persons and entities purchase reserved shares. Any reserved shares of Common
Stock not purchased by such persons or entities will be offered by the
Underwriters to the public on the same basis as the other shares of Common
Stock offered hereby in the Initial Public Offering. Participants in the
reserved share program have agreed not to make any disposition of such shares
of Common Stock for a period of 30 days after the date of this Prospectus
without the consent of Merrill Lynch.
The obligations of the several Underwriters to pay for and accept delivery
of the shares of Common Stock offered in the Initial Public Offering are
subject to approval of certain legal matters by counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all the shares
of Common Stock offered in
59
<PAGE>
the Initial Public Offering (other than the shares of the Common Stock covered
by the over-allotment option described below) if any are taken. Purchasers in
the Initial Public Offering are purchasing shares of Common Stock from the
Underwriters subsequent to the Underwriters' purchase of such shares from the
Company and not directly from the Company.
Prior to the Offerings, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock
will be determined by negotiations between a committee of the Company's board
of directors composed of members who have agreed not to purchase shares of
Common Stock in the Offerings and the Representatives. Among the factors to be
considered in such negotiations are the prevailing market conditions, the
results of operations of the Company in recent periods, the market
capitalizations and stages of development of other companies which the Company
and the Representatives believe to be comparable to the Company, estimates of
the business potential of the Company, the prospects for earnings, the present
state of the Company's development and other factors deemed relevant.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of
330,000 additional shares of Common Stock at the initial public offering price
set forth on the cover page hereof, less the underwriting discount. The
Underwriters may exercise such option only to cover over-allotments, if any,
made in connection with the sale of Common Stock offered hereby. To the extent
that the Underwriters exercise such option, each of the Underwriters will have
a firm commitment, subject to certain conditions, to purchase approximately
the same percentage thereof which the number of shares of Common Stock to be
purchased by it shown in the above table is of the 2,200,000 shares of Common
Stock offered in the Initial Public Offering. If purchased, the Underwriters
will offer such additional shares on the same terms as those on which shares
in the Initial Public Offering are being offered.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act.
The Company and its directors, executive officers and certain other
stockholders (including Boston Chicken) have agreed that they will not offer,
sell, contract to sell, or otherwise dispose of any shares of Common Stock or
any shares convertible or exchangeable into any shares of Common Stock for a
period of 180 days from the date of this Prospectus without the prior written
consent of Merrill Lynch, except that the Company may, without such consent,
(i) issue shares upon the exercise of options granted pursuant to the Amended
Plan and the Directors Plan and (ii) issue up to 1,000,000 shares pursuant to
potential acquisitions, which shares, when issued, will be subject to
restrictions on resale for a period of 180 days from the date of this
Prospectus. In addition, each of the foregoing persons (including Boston
Chicken) purchasing shares of Common Stock in the Concurrent Offerings has
agreed, subject to certain exceptions, not to sell such shares for a period of
365 days from the date of this Prospectus without the prior written consent of
Merrill Lynch.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
Charles A. Lewis, Vice Chairman--Investment Banking of Merrill Lynch & Co.
and his family beneficially own 292,275 shares of Common Stock.
LEGAL MATTERS
Certain legal matters in connection with the validity of the shares of
Common Stock offered hereby will be passed upon for the Company by Bell, Boyd
& Lloyd, Chicago, Illinois. Mayer, Brown & Platt, Chicago, Illinois, is acting
as counsel for the Underwriters in connection with certain legal matters
relating to the sale of the shares of Common Stock offered hereby.
60
<PAGE>
EXPERTS
The consolidated balance sheet of Einstein/Noah Bagel Corp. and subsidiaries
as of December 31, 1995 and the related consolidated statements of operations,
stockholders' deficit and cash flows for the period from March 24, 1995
(inception) through December 31, 1995 included in this Prospectus and the
related financial statement schedule included elsewhere in the Registration
Statement of which this Prospectus is a part, have been included herein in
reliance on the reports of Arthur Andersen LLP, independent accountants, given
on the authority of that firm as experts in accounting and auditing.
The consolidated financial statements of Noah's New York Bagels, Inc. as of
December 31, 1994 and December 30, 1995 and for each of the three fiscal years
in the period ended December 30, 1995 included in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein and have been so included in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
The financial statements of Bagel & Bagel, Inc. for the year ended December
27, 1994 and the period from December 28, 1994 to March 23, 1995 included in
this Prospectus have been audited by Mayer Hoffman McCann L.C., independent
auditors, as stated in their reports appearing herein and have been so included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The combined financial statements of Offerdahl's Bagel Gourmet, Inc. and
Affiliates for the years ended December 31, 1993 and 1994 and for the period
from January 1, 1995 to April 2, 1995 included in this Prospectus have been
included herein in reliance upon the reports of Arthur Andersen LLP,
independent accountants, given upon the authority of that firm as experts in
accounting and auditing.
The financial statements of Baltimore Bagel Co. for the years ended December
31, 1994 and for the period from January 1, 1995 to August 10, 1995 included in
this Prospectus have been included herein in reliance upon the reports of
Arthur Andersen LLP, independent accountants, given upon the authority of that
firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington, D.C. a Registration
Statement on Form S-1 (the "Registration Statement") under the Securities Act
with respect to the Common Stock offered hereby. As used herein, the term
"Registration Statement" means the initial Registration Statement and any and
all amendments thereto. This Prospectus omits certain information contained in
said Registration Statement as permitted by the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement,
including the exhibits thereto. Statements herein concerning the contents of
any contract or other document are not necessarily complete. In each instance
such contract or other document has been filed with the Commission as an
exhibit to the Registration Statement of which this Prospectus is a part.
As a result of the Initial Public Offering and the Concurrent Public
Offering, the Company will become subject to the informational requirements of
the Exchange Act, and in accordance therewith will file reports and other
information with the Commission. Reports, registration statements, proxy
statements, and other information filed or to be filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the Commission's Regional Offices: 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, New York, New York 10048. Copies of such materials can be obtained at
prescribed rates from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549.
61
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
Report of Independent Public Accountants.................................. F-3
Consolidated Financial Statements:
Consolidated Balance Sheet at December 31, 1995......................... F-4
Consolidated Statement of Operations for the period from March 24, 1995
(inception) through December 31, 1995.................................. F-5
Consolidated Statement of Stockholders' Deficit for the period from
March 24, 1995 (inception) through December 31, 1995................... F-6
Consolidated Statement of Cash Flows for the period from March 24, 1995
(inception) through December 31, 1995.................................. F-7
Notes to Audited Consolidated Financial Statements...................... F-8
Consolidated Balance Sheets at December 31, 1995 and April 21, 1996..... F-19
Consolidated Statements of Operations for the period from March 24, 1995
(inception) through April 16, 1995 and for the quarter ended April 21,
1996................................................................... F-20
Consolidated Statements of Cash Flows for the period from March 24, 1995
(inception) through April 16, 1995 and for the quarter ended April 21,
1996................................................................... F-21
Notes to Unaudited Consolidated Financial Statements.................... F-22
NOAH'S NEW YORK BAGELS, INC.
Independent Auditors' Report.............................................. F-25
Consolidated Financial Statements:
Consolidated Balance Sheets at December 31, 1994 and December 30, 1995.. F-26
Consolidated Statements of Operations for the fiscal years ended
December 31, 1993, December 31, 1994 and December 30, 1995............. F-27
Consolidated Statements of Shareholders' Equity (Deficit) for the fiscal
years ended December 31, 1993, December 31, 1994 and December 30, 1995. F-28
Consolidated Statements of Cash Flows for the fiscal years ended
December 31, 1993, December 31, 1994 and December 30, 1995............. F-29
Notes to Audited Consolidated Financial Statements...................... F-30
BAGEL & BAGEL, INC.
Report of Independent Public Accountants.................................. F-36
Financial Statements:
Statements of Operations for the fiscal year ended December 27, 1994 and
for the period from December 28, 1994 through March 23, 1995........... F-37
Statements of Cash Flows for the fiscal year ended December 27, 1994 and
for the period from December 28, 1994 through March 23, 1995........... F-38
Notes to Audited Financial Statements................................... F-39
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
OFFERDAHL'S BAGEL GOURMET, INC. AND AFFILIATES
Report of Independent Public Accountants.................................. F-41
Combined Financial Statements:
Combined Statements of Operations for the fiscal years ended December
31, 1993 and December 31, 1994 and for the period from January 1, 1995
through April 2, 1995.................................................. F-42
Combined Statements of Cash Flows for the fiscal years ended December
31, 1993 and December 31, 1994 and for the period from January 1, 1995
through April 2, 1995.................................................. F-43
Notes to Audited Combined Financial Statements.......................... F-44
BALTIMORE BAGEL CO.
Report of Independent Public Accountants.................................. F-45
Financial Statements:
Statements of Operations for the years ended December 31, 1993 and
December 31, 1994 and for the period from January 1, 1995 through
August 10, 1995........................................................ F-46
Statements of Cash Flows for the years ended December 31, 1993 and 1994
and for the period from January 1, 1995 through August 10, 1995........ F-47
Notes to Financial Statements........................................... F-48
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Financial Information of Einstein/Noah
Bagel Corp............................................................... F-49
Unaudited Pro Forma Consolidated Statement of Operations for the fiscal
year ended December 31, 1995............................................. F-50
Unaudited Pro Forma Consolidated Statement of Operations for the quarter
ended April 21, 1996..................................................... F-51
Notes to Unaudited Pro Forma Consolidated Financial Statements............ F-52
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Einstein/Noah Bagel Corp.:
We have audited the accompanying consolidated balance sheet of Einstein/Noah
Bagel Corp. (a Delaware corporation) and subsidiaries as of December 31, 1995,
and the related consolidated statements of operations, stockholders' deficit
and cash flows for the period from inception (March 24, 1995) through December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides 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 Einstein/Noah Bagel Corp.
and subsidiaries as of December 31, 1995, and the results of their operations
and their cash flows for the period from inception (March 24, 1995) through
December 31, 1995 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 7, 1996 (except
with respect to the
matters discussed in
Notes 1, 11, 12 and
15, as to which the
date is May 28, 1996)
F-3
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
ASSETS
- ------
<S> <C>
Current Assets:
Cash and cash equivalents....................................... $ 5,368
Accounts receivable............................................. 1,327
Inventory....................................................... 883
Deposits........................................................ 1,492
Prepaid expenses and other current assets....................... 217
-------
Total current assets.......................................... 9,287
Property and Equipment, net....................................... 19,410
Notes Receivable.................................................. 7,267
Other Assets, net................................................. 620
-------
Total assets.................................................. $36,584
=======
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -------------------------------------
Current Liabilities:
Accounts payable................................................ $ 5,633
Accrued expenses................................................ 2,968
Deferred franchise revenue...................................... 645
-------
Total current liabilities..................................... 9,246
Convertible Debt.................................................. 40,000
Deferred Franchise Revenue........................................ 265
Other Noncurrent Liabilities...................................... 2,907
Repurchase Common Stock Shares--1,721,250 shares issued and
outstanding...................................................... 11,062
Series A Preferred Stock--6,250 shares issued and outstanding..... 7,813
Commitments
Stockholders' Deficit:
Preferred Stock--$.01 par value; 20,000,000 shares authorized;
no shares issued and outstanding............................... --
Common Stock--$.01 par value; 200,000,000 shares authorized;
3,848,607 shares issued and outstanding........................ 38
Additional paid-in capital...................................... 22,684
Accumulated deficit............................................. (57,431)
-------
Total stockholders' deficit................................... (34,709)
-------
Total liabilities and stockholders' deficit................... $36,584
=======
</TABLE>
The accompanying notes to the consolidated financial statements are an
integral part of this statement.
F-4
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MARCH 24, 1995 (INCEPTION) THROUGH DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<S> <C>
Revenue:
Company-operated stores............................................ $ 25,685
Royalties and franchise-related fees............................... 738
--------
26,423
Costs and Expenses:
Cost of products sold.............................................. 8,239
Salaries and benefits.............................................. 13,531
General and administrative......................................... 20,962
Write-off of intangible assets and excess purchase price over fair
value of net assets acquired...................................... 40,558
--------
Total costs and expenses........................................... 83,290
--------
Loss from Operations................................................. (56,867)
Other Income (Expense):
Interest expense, net.............................................. (1,281)
Other income, net.................................................. 717
--------
Total other expense.............................................. (564)
========
Net loss........................................................... $(57,431)
========
Net loss per common and equivalent share........................... $ (5.62)
========
Weighted average number of common and equivalent shares
outstanding....................................................... 10,195
========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of this statement.
F-5
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM MARCH 24, 1995 (INCEPTION) THROUGH DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
Common Stock
Balance at inception............................................... $ --
Issuance of common stock........................................... 38
--------
Balance at December 31, 1995....................................... $ 38
========
Additional paid-in capital
Balance at inception............................................... $ --
Issuance of common stock, net of offering cost of $500............. 22,051
Dividends on Series A preferred stock and accretion of dividends on
repurchase shares................................................. (1,077)
Expense recognized for warrants issued............................. 1,710
--------
Balance at December 31, 1995....................................... $ 22,684
========
Accumulated deficit
Balance at inception............................................... $ --
Net loss........................................................... (57,431)
--------
Balance at December 31, 1995....................................... $(57,431)
========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of this statement.
F-6
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MARCH 24, 1995 (INCEPTION) THROUGH DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net loss........................................................... $(57,431)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.................................... 1,389
Warrant expense.................................................. 1,710
Write-off of intangible assets and excess purchase price over
fair value of net assets acquired............................... 40,558
Gain on the sale of marketable equity securities..................... (719)
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable................................................ (680)
Accounts payable and accrued expenses.............................. 1,778
Deferred franchise revenue......................................... 910
Other assets and liabilities....................................... 173
--------
Net cash used in operating activities............................ (12,312)
Cash Flows from Investing Activities:
Purchase of property and equipment................................. (18,109)
Proceeds from sale of property and equipment....................... 5,519
Purchase of marketable equity securities, net of proceeds from
sales............................................................. (22,682)
Purchase of other assets........................................... (621)
Issuance of notes receivable....................................... (10,569)
Repayment of notes receivable...................................... 3,831
--------
Net cash used in investing activities............................ (42,631)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock............................. 20,311
Proceeds from convertible debt..................................... 91,060
Repayment of convertible debt...................................... (51,060)
--------
Net cash provided by financing activities........................ 60,311
--------
Net Increase in Cash and Cash Equivalents............................ 5,368
Cash and Cash Equivalents, inception................................. --
--------
Cash and Cash Equivalents, end of year............................... $ 5,368
========
Supplemental Cash Flow Information:
Interest Paid...................................................... $ 1,107
========
Supplemental Schedule of Non-Cash Activities:
Exchange of Series A preferred stock, repurchase common stock,
common stock and marketable equity securities for net assets
acquired.......................................................... $ 42,742
========
Issuance of common stock for note receivable....................... $ 437
========
Accretion of dividends on repurchase common stock.................. $ 933
========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of this statement.
F-7
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Einstein Bros. Bagels, Inc. and subsidiaries, formerly Progressive Bagel
Concepts, Inc. (the "Company"), operate and franchise specialty retail stores
in the United States that feature fresh-baked bagels, proprietary cream
cheeses, specialty coffees and teas, and creative soups, salads and
sandwiches. At December 31, 1995, there were 60 stores in operation
systemwide, consisting of 47 Company-operated stores and 13 franchise stores.
In 1995, the Company sold 13 Company-operated stores to newly-formed area
developers of the Company. Subject to the provisions of the applicable
franchise agreements, the Company is obligated to allow franchisees to utilize
the Company's trademarks, copyrights, recipes, operating procedures and other
elements of its systems in the operation of franchised stores. In May 1996,
the board of directors of the Company approved the change of the Company's
name to Einstein/Noah Bagel Corp. Such name is subject to the approval of the
stockholders of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation.
Fiscal Year
The Company's fiscal year is the 52/53 week period ending on the last Sunday
in December.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and on deposit, and highly
liquid instruments purchased with maturities of three months or less.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of food, paper products and supplies.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation and
amortization. The provision for depreciation and amortization has been
calculated using the straight-line method. The following represent the useful
lives over which the assets are depreciated and amortized:
<TABLE>
<S> <C>
Buildings and improvements.................................... 15-30 years
Furniture, fixtures and equipment............................. 6-8 years
Pre-opening expenses.......................................... 1 year
</TABLE>
Property and equipment additions include acquisitions of buildings and
equipment, costs incurred in the development and construction of new stores
and major improvements to existing stores. Expenditures for maintenance and
repairs are charged to expense as incurred. Pre-opening costs consist
primarily of salaries and other direct expenses incurred in connection with
the set-up, initial stocking of stores, initial training of employees and
general management activities incurred prior to the opening of new stores.
F-8
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Long-Lived Assets
The Company has adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" to evaluate the recoverability of long-lived assets and
assets to be disposed of.
Revenue Recognition
Revenue from Company-operated stores is recognized in the period related
food and beverage products are sold. Royalties are recognized in the same
period that related franchised store revenue is generated. Revenue derived
from initial franchise fees and area development fees is recognized when the
franchised store opens. Interest is recognized as earned. The components of
royalties and franchise-related fees for fiscal 1995 are as follows (in
thousands of dollars):
<TABLE>
<S> <C>
Initial franchise and area development fees......................... $520
Royalties........................................................... 35
Other............................................................... 183
----
Total royalties and franchise-related fees.......................... $738
====
</TABLE>
Per Share Data
Net loss per common share is computed by dividing net loss, adjusted for
dividends on Series A preferred stock, by the weighted average number of
common shares outstanding during the period and common stock and common stock
equivalent shares issued within one year prior to the effective date of the
Company's initial public offering at a price or exercise price less than the
initial public offering price. The common stock equivalents have been reduced
by the number of shares of common stock which could be purchased with the
proceeds from the assumed exercise of the options and warrants, including tax
benefits assumed to be realized.
Stock Options
Employee stock options are accounted for pursuant to APB No. 25.
Employee Benefit Plan
The Company has a 401(k) plan to which the Company makes no contributions.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.
F-9
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENT DATA
Accounts receivable are net of an allowance for doubtful accounts of $81,000
at December 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
(IN THOUSANDS OF
DOLLARS)
<S> <C>
Property and equipment consists of:
Land.................................................. $ 123
Buildings and improvements............................ 12,083
Furniture, fixtures and equipment..................... 7,544
Pre-opening expenses.................................. 401
-------
20,151
Less: Accumulated depreciation and amortization....... (741)
-------
Total property and equipment, net................... $19,410
=======
Accrued expenses consist of:
Accrued payroll and fringe benefits................... $ 876
Accrued interest...................................... 325
Accrued other......................................... 1,767
-------
Total accrued expenses.............................. $ 2,968
=======
Interest expense, net consists of:
Interest expense...................................... $ 1,432
Interest income....................................... (151)
-------
Total interest expense, net......................... $ 1,281
=======
</TABLE>
4. ACQUISITIONS
In 1995, the Company issued 1,721,250 shares of common stock subject to
repurchase by the Company with a value of $10.1 million, 6,250 shares of
Series A preferred stock with a value of $7.8 million, 237,902 shares of
common stock with a value of $1.4 million, and other marketable equity
securities with a value of $23.4 million, in connection with the acquisition
of the common stock of Brackman Brothers, Inc. ("Brackman") and certain net
assets of Bagel & Bagel, Inc. ("Bagel & Bagel"), Baltimore Bagel Co.
("Baltimore Bagel") and Offerdahl's Bagel Gourmet, Inc. ("Offerdahl's"). The
acquisitions have been accounted for as purchases, and, accordingly, the
purchase prices were allocated to assets and liabilities based upon a
preliminary evaluation of their fair values at the dates of the acquisitions.
Final allocations will be determined in fiscal 1996.
The following represents the unaudited pro forma results of operations as if
all of the above-noted business combinations had occurred at the beginning of
the Company's fiscal year (in thousands of dollars):
<TABLE>
<S> <C>
Revenue........................................................... $38,065
Net loss.......................................................... 57,255
Net loss per share................................................ $ 5.59
</TABLE>
The pro forma information given above does not purport to be indicative of
the results that actually would have been obtained if the operations were
combined as of the beginning of the Company's fiscal year, and is not intended
to be a projection of future results or trends.
F-10
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
Cash and Cash Equivalents
The carrying value approximates fair value due to the length of maturity of
the investments.
Notes Receivable
The estimated fair value of the Company's notes receivable, including the
conversion option (Notes 6 and 11), is based on the discounted value of future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings.
Convertible Debt
The estimated fair value of the Company's convertible debt, including the
conversion option (see Note 7), is based on the discounted value of future
payments using the current rate at which a similar loan would be made to a
company with similar credit ratings.
Common Stock Subject to Repurchase
The estimated fair value of the Company's common stock subject to repurchase
by the Company is based on the price of other common stock equity transactions
near December 31, 1995.
Series A Preferred Stock
The estimated fair value of the Company's Series A preferred stock is based
on the discounted value of future cash flows using interest rates which would
be applicable to similar instruments held in companies with similar credit
ratings.
The estimated fair values of the Company's financial instruments are as
follows (in thousands of dollars):
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
--------------- ----------
<S> <C> <C>
Cash and cash equivalents...................... $ 5,368 $ 5,368
Notes receivable............................... 7,267 7,267
Convertible debt............................... 40,000 40,000
Repurchase common stock........................ 11,062 11,142
Series A preferred stock....................... 7,813 7,813
</TABLE>
6. NOTES RECEIVABLE
The following table summarizes the primary components of notes receivable as
of December 31, 1995 (in thousands of dollars):
<TABLE>
<S> <C>
Due from area developers (Note 11)................................ $3,538
Notes receivable from stockholder................................. 1,888
Term loans........................................................ 1,108
Revolving loan.................................................... 226
Other............................................................. 507
------
$7,267
======
</TABLE>
F-11
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Notes receivable from stockholder bear interest at 1% over the applicable
reference rate of Bank of America Illinois. Principal and interest are due
April 2001. The notes are collateralized by various assets.
Term loans bear interest based upon the reference rate plus 1%. Principal is
due in annual installments with balloon payments required through various
dates through 2001. The loans are collateralized by various assets.
The revolving loan provides a credit facility to a vendor of up to $400,000
through October 2000 with interest payable currently based upon the reference
rate plus 1%. The loan is collateralized by various assets.
7. DEBT
The Company has entered into a secured loan agreement (the "Agreement")
providing borrowings through March 1998, pursuant to which Boston Chicken,
Inc. ("Boston Chicken") provides debt financing and, in turn, obtains the
right to convert all or any portion of the loan into shares of common stock of
the Company. In January 1996, Boston Chicken increased the available
borrowings under the Agreement from $80.0 million to $120.0 million. The
ownership percentage represented by the shares of common stock to be acquired
upon conversion (or exercise of the option, as provided below) is dependent
upon total equity and rights outstanding, but would represent a majority
ownership in certain instances. The loan may be converted at any time after
the earlier of April 1997, the completion of an initial public offering, or
the Company being in default of the loan and until October 2003. Additionally,
during this same period, to the extent the loan is not fully drawn or has been
drawn and repaid, Boston Chicken has the option to acquire at the loan
conversion price, as defined, the amount of additional equity it could have
acquired by conversion of the loan had the loan been fully drawn. The loan is
collateralized by substantially all of the assets of the Company and a pledge
of the common stock of its subsidiaries. The Agreement contains various
restrictive covenants including restricting cash dividends and limiting
additional indebtedness. Interest is based upon the reference rate of Bank of
America Illinois plus 1% and is payable currently. In April 1998, the loan
converts to an amortizing term loan payable through May 2003, with a final
balloon payment.
Principal maturities on the outstanding balance as of December 31, 1995 were
as follows (in thousands of dollars):
<TABLE>
<S> <C>
1998.............................................................. $ 3,077
1999.............................................................. 4,000
2000.............................................................. 4,000
Thereafter........................................................ 28,923
-------
$40,000
=======
</TABLE>
In connection with the acquisition of Noah's New York Bagels, Inc.
("Noah's") in February 1996 (Note 15), Boston Chicken provided the Company
with a non-convertible bridge loan facility of up to $40.0 million.
F-12
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES
As of December 31, 1995, the Company had cumulative federal and state tax
operating loss carryforwards available to reduce future taxable income of
approximately $11.1 million which begin to expire in 2010.
The primary components that comprise the net deferred tax asset as of
December 31, 1995 are as follows (in thousands of dollars):
<TABLE>
<S> <C>
Deferred tax assets:
Accounts payable and accrued expenses......................... $ 218
Deferred franchise revenue.................................... 355
Other noncurrent liabilities.................................. 220
Write-off of intangible assets that are amortizable for tax... 4,961
Net operating loss............................................ 4,224
Other......................................................... 1,380
--------
Total deferred tax assets................................... 11,358
Deferred tax liabilities:
Property and equipment........................................ (489)
Other assets.................................................. (116)
--------
Total deferred tax liabilities.............................. (605)
--------
Net deferred tax asset...................................... 10,753
Valuation allowance............................................. (10,753)
--------
Net deferred tax asset.......................................... $ --
========
</TABLE>
The increase in the valuation allowance of $10,753,000 from inception through
December 31, 1995, is due to uncertainty regarding the realization of the
related tax benefits.
9. NATIONAL AND LOCAL ADVERTISING FUNDS
The Company administers a National Advertising Fund to which Company-operated
stores and franchised stores make contributions based on individual franchise
agreements (2% of net revenue). Collected amounts are spent primarily on
developing marketing and advertising materials for use systemwide. Such amounts
are not segregated from the cash resources of the Company, but the National
Advertising Fund is accounted for separately and not included in the financial
statements of the Company.
The Company maintains Local Advertising Funds that provide comprehensive
advertising and sales promotion support for stores in particular markets.
Contributions are made by both Company-operated and franchised stores
(currently 4% of net revenue). The Company disburses funds and accounts for all
transactions related to such Local Advertising Funds. Such amounts are not
segregated from the cash resources of the Company, but are accounted for
separately and are not included in the financial statements of the Company.
10. COMMITMENTS
The Company leases sites for its stores, commissaries and office space. Lease
terms are generally five years with two or three five-year renewal options. The
Company also subleases sites to its area developers. The sublease terms to area
developers are negotiated at arms length on commercially reasonable terms. The
Company is contingently liable for all lease costs including common area
maintenance charges. Most of the leases contain escalation clauses and common
area maintenance charges.
F-13
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a schedule of future minimum rental payments which are
required under operating leases that have initial or remaining noncancellable
lease terms in excess of one year and sublease proceeds as of December 31,
1995 (in thousands of dollars):
<TABLE>
<CAPTION>
MINIMUM SUBLEASE NET MINIMUM
RENTAL PAYMENTS PROCEEDS RENTAL PAYMENTS
--------------- -------- ---------------
<S> <C> <C> <C>
1996............................. $ 3,495 $ 822 $ 2,673
1997............................. 2,908 597 2,311
1998............................. 2,686 590 2,096
1999............................. 2,403 560 1,843
2000............................. 1,587 529 1,058
Thereafter....................... 3,046 1,352 1,694
------- ------ -------
$16,125 $4,450 $11,675
======= ====== =======
</TABLE>
The net rental expense under operating leases, primarily for Company-
operated stores, was approximately $1,909,000 for the period from March 24,
1995 (inception) through December 31, 1995.
In December 1995, Bagel Store Development Funding, L.L.C. ("Bagel Funding"),
formerly Einstein Bros. Equity Funding, L.L.C., was formed with the objective
of raising $90.0 million to invest in existing and proposed area developers.
Through December 31, 1995, Bagel Funding had raised approximately $40.0
million (including an aggregate of $20.0 million in subscription receivables)
and had invested a total of $3.5 million in area developers. In March 1996,
Bagel Funding raised the remainder of anticipated funds, so that the funds
raised equalled the $90.0 million (including an aggregate of $45.0 million in
subscription receivables). Bagel Funding can require an area developer to
redeem Bagel Funding's equity interest at a formula price in the event the
Company acquires a majority interest in the area developer, and if the area
developer fails to do so, the Company will be required to purchase Bagel
Funding's unredeemed equity interest at the formula price. In the event the
Company's conversion and/or option rights expire unexercised under the area
developer's secured loan agreement with the Company, as originally in effect,
Bagel Funding will have the right to require, subject to the Company's prior
consent, that the area developer undertake a firm commitment underwritten
public offering of equity of the area developer. In the event the Company does
not consent to a public offering, the area developer can be required to
purchase Bagel Funding's unredeemed equity interest in the area developer at a
formula price and if the area developer fails to do so, the Company will be
required to purchase Bagel Funding's unredeemed equity interest. Also, in the
event the Company does not acquire a majority interest in the area developer
pursuant to the Company's conversion and/or option rights prior to the time
such rights expire unexercised under the area developer's secured loan
agreement with the Company, as originally in effect, Bagel Funding will have
the right to request that the area developer seek to terminate its area
development and franchise agreements with the Company. If the Company does not
consent to such termination, the area developer can be required to redeem
Bagel Funding's equity interest in the area developer at a formula price, and
if the area developer fails to do so, the Company will be required to purchase
Bagel Funding's unredeemed equity interest.
The Company has entered into a supply agreement relating to the purchase of
certain minimum levels of cream cheese, which expires in October 2000, or
earlier in certain circumstances. The agreement requires the Company, its
subsidiaries, area developers and other authorized purchasers to purchase the
lesser of 160,000 pounds of cream cheese per week or 60% of their requirements
for cream cheese (excluding certain requirements that may be satisfied through
other commitments and certain requirements of acquired companies). The price
per pound is determined over the term of the contract based upon production
costs.
11. AREA DEVELOPER FINANCING
The Company currently offers partial financing to its area developers for
use in expansion of their operations. These financing arrangements permit the
Company to obtain an equity interest in the area developer
F-14
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
at a predetermined price after a moratorium (generally two years) and after the
area developer has completed not less than 80% of its area development
commitment (or in the event of certain defaults) on conversion of the loan into
equity. The maximum loan amount is established to give the Company majority
ownership of the area developer upon conversion (or option exercise, as
described further below) provided the Company exercises its right to
participate in any intervening financing of the area developer.
Area developer financing requires the developer to expend at least 75% of its
contributed capital toward developing stores prior to drawing on the revolving
loan account, with draws permitted during a three-year draw period in a pre-
determined maximum amount equal to four times the amount of the area
developer's equity capital. Upon expiration of the draw period, the loan
converts to an amortizing term loan payable over five years in periodic
installments, with a final balloon payment. Interest is set at 1% over the
applicable reference rate of Bank of America Illinois from time to time and is
payable each four-week period. The loan is secured by a pledge of substantially
all of the assets of the area developer.
(a) Loan Conversion Option
All or any portion of the loan amount may be converted at the Company's
election at any time after the expiration of a specified moratorium period
(generally two years) and after the area developer has completed not less than
80% of its area development commitment (or in the event of certain defaults)
into equity in the area developer at the conversion price set forth in such
loan agreement, generally at a 12% premium over the per equity unit price paid
by the investors in the area developer for the equity investment made
concurrently with the execution of the loan agreement. To the extent such loan
is not fully drawn or has been drawn and repaid, the Company has a
corresponding option to acquire at the loan conversion price the amount of
additional equity it could have acquired by conversion of the loan had it been
fully drawn.
There can be no assurance the Company will or will not convert any loan
amount or exercise its option at such time as it may be permitted to do so and,
if it does convert, that such conversion will constitute a majority interest in
the area developer.
(b) Commitments to Extend Area Developer Financing
The following table summarizes as of December 31, 1995 credit commitments for
area developer financing (in thousands of dollars):
<TABLE>
<S> <C>
Number of area developers receiving financing.................... 2
Loan commitments................................................. $16,000
Unused loans..................................................... 12,462
-------
Loans outstanding (included in Notes Receivable)................. $ 3,538
=======
Allowance for loan losses........................................ $ --
=======
</TABLE>
The principal maturities on the aforementioned notes receivable are as
follows (in thousands of dollars):
<TABLE>
<S> <C>
1998............................................................... $ 82
1999............................................................... 354
2000............................................................... 354
Thereafter......................................................... 2,748
------
$3,538
======
</TABLE>
F-15
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(c) Credit Risk and Allowance for Loan Losses
The allowance for credit losses is maintained at a level that in
management's judgment is adequate to provide for estimated possible loan
losses. The amount of the allowance is based on management's review of each
area developer's use of loan proceeds, stage of development, adherence to its
store development schedule, store performance trends, type and amount of
collateral securing the loan, prevailing economic conditions, and other
factors which management deems relevant at the time. Based upon this review
and analysis, no allowance was required as of December 31, 1995.
12. STOCKHOLDERS' EQUITY
Common Stock
On May 28, 1996, the Company approved a 225-for-one split of the Company's
common stock, subject to stockholder approval of the Company's Restated
Certificate of Incorporation, in the form of a stock dividend. Per share
amounts, the number of common shares and capital accounts have been restated
to give retroactive effect to the stock split.
The Company issued 3,536,361 shares of common stock at the time of its
formation, which provided net proceeds of approximately $20.8 million.
Preferred Stock
In connection with the acquisition of the net assets of Baltimore Bagel, the
Company issued 6,250 shares of Series A preferred stock. The Series A
preferred stock has a liquidation preference of $1,000 per share, pays annual
dividends of $60 per share, and is automatically convertible into common stock
of the Company in an initial public offering with the number of shares of
common stock received being equal to $1,000 plus accrued and unpaid dividends
divided by 80% of the gross offering price per share to the public.
The Series A preferred stock is redeemable by the Company at any time after
February 10, 1999, at a price per share equal to $1,250 plus accrued and
unpaid dividends. A majority of the holders may require the Company to redeem
one-third of the shares of Series A preferred stock on each of February 28,
1998, May 1, 1998 and August 1, 1998, at a price of $1,250 plus accrued and
unpaid dividends. The holders of the Series A preferred stock may also require
redemption in the event the Company has failed to pay three consecutive
quarterly dividends.
Common Stock Subject to Repurchase
Pursuant to the purchase agreements (see Note 4), the Company has agreed
that, in the event it has not completed an initial public offering of its
common stock resulting in gross proceeds of at least $15.0 million by
specified dates or Boston Chicken's ownership of, or right to acquire an
ownership interest in, the Company's common stock falls below 25%, the holders
of common stock subject to repurchase by the Company can require the Company
to redeem such shares of common stock at their fair market value, but not less
than a specified floor price per share. The difference between the
consideration paid per share and the greater of the fair market value of the
shares or the floor price per share is being accreted to the shares as a
dividend over the life of the put option.
Warrants
The Company sold warrants to purchase 1,012,500 shares of common stock of
the Company to Bagel Funding. The warrants have an exercise price of $6.47 per
common share and expire in 2000. The market value of the warrants was recorded
as an expense and credited to additional paid-in capital during fiscal 1995.
F-16
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock Option Plan
The Company has a stock option plan (the "Plan") under which options to
purchase up to 3,600,000 shares of common stock, subsequently increased to
5,500,000 shares of common stock, may be granted to certain employees and
officers of, and consultants to, the Company. The option price is equal to the
fair market value of the stock on the date of the grant and each option has a
term of ten years. Options granted under the Plan generally vest at a rate of
10% at the end of the first year, an additional 20% at the end of the second
year, an additional 30% at the end of the third year, with the balance vesting
at the end of the fourth year from the date of the grant.
Activity under the option plan through December 31, 1995 was as follows:
<TABLE>
<CAPTION>
OPTION
PRICE PER
SHARES SHARE
--------- -----------
<S> <C> <C>
Granted........................................... 2,090,248 $5.88-$6.47
Cancelled......................................... (16,778) 5.88
--------- -----------
Outstanding as of December 31, 1995............... 2,073,470 $5.88-$6.47
========= ===========
Exercisable as of December 31, 1995............... 29,738 $ 5.88
========= ===========
</TABLE>
As of December 31, 1995, the Company had 17,146,125 shares of common stock
reserved for issuance upon exercise of options and warrants and conversion of
Boston Chicken's loan into common stock. In addition, the Company has
contractually agreed to reserve a sufficient number of shares of common stock
for issuance to the holder of the Series A preferred stock upon conversion.
13. WRITE-OFF OF INTANGIBLE ASSETS
After the acquisition of Brackman, Bagel & Bagel, Offerdahl's and Baltimore
Bagel (collectively the "Founding Companies"), the Company launched a
development project, pursuant to which management analyzed (i) the Founding
Companies' stores, including brand positionings, product offerings,
operational service systems and atmosphere, (ii) the competitive environment
and (iii) the preferences of consumers across the United States. The project
resulted in the development of the Einstein Bros. Bagels brand and store. In
connection with, and as a result of, the development of the Einstein Bros.
Bagels brand and store, management determined to discontinue the use of the
intangible assets acquired in the acquisition of the Founding Companies,
including trademarks, trade dress and recipes. Consequently, in the third
quarter of 1995, the Company wrote-off $40.6 million of such assets (Note 4).
The write-off resulted from the discontinuation of the use of these assets and
management's evaluation of the lack of recoverability of the related costs.
14. RELATED-PARTY TRANSACTIONS
Certain officers and directors of Boston Chicken have an equity interest in
the Company. For the Company's 1995 fiscal year, the Company paid to Boston
Chicken approximately $1.2 million for the purchase of furniture, equipment
and other miscellaneous assets and approximately $3.0 million in software
license, software maintenance, real estate, financial advisory, accounting
fees and interest on its loan with Boston Chicken.
Certain officers and directors of the Company are officers and investors in
Bagel Funding and had invested $8.4 million in Bagel Funding at December 31,
1995. The Company is the manager of Bagel Funding. No fees were paid to the
Company in its capacity as manager during 1995.
The Company has entered into secured loan and area developer agreements with
certain area developers in which certain directors and officers and members of
their families have a direct or indirect equity interest. The
F-17
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
Company received from these entities approximately $2.3 million in development,
franchise, royalty, management services and interest in fiscal 1995. The
Company has also sold to these entities, stores, inventory, equipment and other
miscellaneous assets for which it received approximately $5.5 million in 1995.
During 1995, the Company paid $85,874 to Bowana Aviation, Inc. ("Bowana") for
the Company's use of an aircraft owned by Bowana. A director and a member of
his family (both stockholders of the Company) own Bowana. The Company believes
that the amounts charged are at rates comparable to those charged by third
parties.
15. SUBSEQUENT EVENTS
In February 1996, the Company acquired Noah's, the largest regional bagel
retailer on the West Coast, for approximately $100.9 million, including
approximately $83.7 million of excess purchase price over the fair value of net
assets acquired.
Through April 1996, the Company sold stores, stores in development and their
related net assets to three newly formed area developers of the Company for
approximately $25.1 million, which approximated the net book value of the
assets sold.
In May 1996, the Company entered into a secured revolving credit facility
providing for borrowings of up to $45.0 million through April 30, 1998.
Borrowing under the facility may be either floating rate loans with interest at
the lender's base rate plus 1.0% or, at the Company's option, the rate offered
in the interbank Eurodollar market for one-, two-, or three-month dollar
deposits offered by the lender plus 3.0%. In addition, a commitment fee of .25%
of the average daily unused portion of the loan is required. The facility
contains covenants, among others, restricting other borrowings, prohibiting
cash dividends, and requires the Company to maintain minimum interest coverage
and cash flow ratios, specified store level sales, and a minimum capital level.
F-18
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, APRIL 21,
1995 1996
------------ -----------
(UNAUDITED)
ASSETS
- ------
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................... $ 5,368 $ 2,912
Accounts receivable................................. 1,327 5,334
Inventory........................................... 883 1,408
Deposits............................................ 1,492 3,319
Prepaid expenses and other current assets........... 217 634
-------- --------
Total current assets.............................. 9,287 13,607
Property and Equipment, net........................... 19,410 34,564
Notes Receivable...................................... 7,267 38,298
Excess of Purchase Price Over Net Assets Acquired,
net.................................................. -- 83,397
Other Assets, net..................................... 620 1,391
-------- --------
Total assets...................................... $ 36,584 $171,257
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable.................................... $ 5,633 $ 5,418
Accrued expenses.................................... 2,968 6,556
Deferred franchise revenue.......................... 645 990
-------- --------
Total current liabilities......................... 9,246 12,964
Convertible Debt...................................... 40,000 120,000
Long-term Debt........................................ -- 38,497
Deferred Franchise Revenue............................ 265 1,595
Other Noncurrent Liabilities.......................... 2,907 3,826
Repurchase Common Stock Shares--1,721,250 shares
issued and outstanding............................... 11,062 11,852
Series A Preferred Stock--6,250 shares issued and
outstanding.......................................... 7,813 7,813
Commitments
Stockholders' Deficit:
Preferred Stock--$.01 par value; 20,000,000 shares
authorized; no shares issued and outstanding....... -- --
Common Stock--$.01 par value; 200,000,000 shares
authorized issued and outstanding, 3,848,607 shares
in 1995 and 5,353,128 shares in 1996............... 38 54
Additional paid-in capital.......................... 22,684 34,946
Accumulated deficit................................. (57,431) (60,290)
-------- --------
Total stockholders' deficit....................... (34,709) (25,290)
-------- --------
Total liabilities and stockholders' deficit....... $ 36,584 $171,257
======== ========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-19
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION
(MARCH 24, 1995)
THROUGH QUARTER ENDED
APRIL 16, 1995 APRIL 21, 1996
--------------------- --------------
<S> <C> <C>
Revenue:
Company-operated stores................. $1,423 $18,397
Royalties and franchise-related fees.... -- 3,982
------ -------
1,423 22,379
Costs and Expenses:
Cost of products sold................... 438 5,490
Salaries and benefits................... 643 9,128
General and administrative.............. 522 8,573
------ -------
Total costs and expenses.............. 1,603 23,191
------ -------
Loss from Operations...................... (180) (812)
Other Income (Expense):
Interest expense, net................... (80) (3,333)
Other income, net....................... -- 1,286
------ -------
Total other expense................... (80) (2,047)
------ -------
Net loss.................................. $ (260) $(2,859)
====== =======
Net loss per common and equivalent share.. $(0.03) $ (0.27)
====== =======
Weighted average number of common and
equivalent shares oustanding............. 9,968 10,215
====== =======
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-20
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 24, 1995
(INCEPTION)
THROUGH QUARTER ENDED
APRIL 16, 1995 APRIL 21, 1996
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss......................................... $ (260) $ (2,859)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization.................. 67 1,456
Gain on sale of marketable equity securities... -- (1,267)
Changes in assets and liabilities, net of
effect of acquisitions:
Accounts receivable.......................... 454 (3,710)
Accounts payable and accrued expenses........ (1,673) (2,440)
Deferred franchise revenue................... -- 1,660
Other assets and liabilities................. 24 (2,923)
-------- ---------
Net cash used in operating activities........ (1,388) (10,083)
Cash Flows from Investing Activities:
Purchase of property and equipment............. (389) (17,557)
Proceeds from sale of property and equipment... -- 25,088
Acquisition of Noah's New York Bagels, Inc..... -- (100,902)
Net proceeds (purchases) from investment in
marketable equity securities.................. (21,465) 1,267
Purchase of other assets....................... (59) (744)
Issuance of notes receivable................... (2,041) (39,003)
Repayment of notes receivable.................. -- 7,972
-------- ---------
Net cash used in investing activities........ (23,954) (123,879)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock......... 20,183 13,009
Proceeds from debt............................. 34,637 208,929
Repayment of debt.............................. (26,533) (90,432)
-------- ---------
Net cash provided by financing activities.... 28,287 131,506
-------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents..................................... 2,945 (2,456)
Cash and Cash Equivalents, beginning of period... -- 5,368
-------- ---------
Cash and Cash Equivalents, end of period......... $ 2,945 $ 2,912
======== =========
</TABLE>
The accompanying notes to the consolidated financial statements are an integral
part of these statements.
F-21
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements have been prepared by Einstein/Noah
Bagel Corp. (the "Company") and are unaudited except for the consolidated
balance sheet at December 31, 1995. The financial statements have been
prepared in accordance with the instructions for Form 10-Q and, therefore, do
not necessarily include all information and footnotes required by generally
accepted accounting principles. In the opinion of the Company, all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the Company's consolidated financial position, results of operations and cash
flows as of April 21, 1996 and for all periods presented have been made. The
statements are subject to year-end audit adjustment. A description of the
Company's accounting policies and other financial information is included in
the audited consolidated financial statements included elsewhere herein. The
consolidated results of operations for the quarter ended April 21, 1996 are
not necessarily indicative of the results expected for the full year.
2. AREA DEVELOPER FINANCING
The Company currently offers partial financing to its area developers for
use in expansion of their operations. These financing arrangements permit the
Company to obtain an equity interest in the area developer at a predetermined
price after a moratorium (generally two years) and after the area developer
has completed not less than 80% of its area development commitment (or in the
event of certain defaults) on conversion of the loan into equity. The maximum
loan amount is established to give the Company majority ownership of the area
developer upon conversion (or option exercise, as described further below)
provided the Company exercises its right to participate in any intervening
financing of the area developer.
Area developer financing requires the area developer to expend at least 75%
of its contributed capital toward developing stores prior to drawing on the
revolving loan account, with draws permitted during a three-year draw period
in a pre-determined maximum amount equal to four times the amount of the area
developer's equity capital. Upon expiration of the draw period, the loan
converts to an amortizing term loan payable over five years in periodic
installments, with a final balloon payment. Interest is set at 1% over the
applicable reference rate of Bank of America Illinois from time to time and is
payable each four-week period. The loan is secured by a pledge of
substantially all of the assets of the area developer.
(a) Loan Conversion Option
All or any portion of the loan amount may be converted at the Company's
election at any time after the expiration of a specified moratorium (generally
two years) and after the area developer has completed not less than 80% of its
area development commitment (or in the event of certain defaults) into equity
in the area developer at the conversion price set forth in such loan
agreement, generally at a 12% premium over the per equity unit price paid by
the investors in the area developer for the equity investment made
concurrently with the execution of the loan agreement. To the extent such loan
is not fully drawn or has been drawn and repaid, the Company has a
corresponding option to acquire at the loan conversion price the amount of
additional equity it could have acquired by conversion of the loan, had it
been fully drawn.
There can be no assurance the Company will or will not convert any loan
amount or exercise its option at such time as it may be permitted to do so
and, if it does convert, that such conversion will constitute a majority
interest in the area developer.
F-22
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(b) Commitments to Extend Area Developer Financing
The following table summarizes credit commitments for area developer
financing (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31, APRIL 21,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
Number of area developers receiving financing... 2 4
Loan commitments................................ $16,000 $89,500
Unused Loans.................................... 12,462 56,934
------- -------
Loans outstanding (included in Notes
Receivable).................................... $ 3,538 $32,566
======= =======
Allowance for loan losses....................... $ -- $ --
======= =======
</TABLE>
(c) Credit Risk and Allowance for Loan Losses
The allowance for credit losses is maintained at a level that in
management's judgment is adequate to provide for estimated possible loan
losses. The amount of the allowance is based on management's review of each
area developer's use of loan proceeds, stage of development, adherence to its
store development schedule, store performance trends, type and amount of
collateral securing the loan, prevailing economic conditions, and other
factors which management deems relevant at the time. Based upon this review
and analysis, no allowance was required as of December 31, 1995 and April 21,
1996.
3. STOCK SPLIT
On May 28, 1996, the board of directors of the Company approved a 225-for-
one stock split of the Company's common stock, subject to stockholder approval
of the Company's Restated Certificate of Incorporation, in the form of a stock
dividend. Per share amounts, the number of common shares, and capital accounts
have been restated to give retroactive effect to the stock split.
4. ROYALTIES AND FRANCHISE-RELATED FEES
The components of royalties and franchise-related fees are comprised of the
following (in thousands of dollars):
<TABLE>
<CAPTION>
QUARTER ENDED
APRIL 21, 1996
--------------
(UNAUDITED)
<S> <C>
Royalties.................................................. $ 680
Initial franchise and area developer fees.................. 2,600
Interest income............................................ 423
Other...................................................... 279
------
$3,982
======
</TABLE>
F-23
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
5. ACQUISITION
In February 1996, the Company acquired Noah's New York Bagel's, Inc. for
approximately $100.9 million. The acquisition has been accounted for as a
purchase, and, accordingly, the purchase price was allocated to assets and
liabilities based upon a preliminary evaluation of their fair values at the
date of the acquisition. The preliminary allocation resulted in approximately
$83.7 million of excess purchase price over fair value of net assets acquired,
which is being amortized over 35 years. A final allocation will be determined
in fiscal 1996.
The following represents the unaudited pro forma results of operations as if
the combination had occurred at the beginning of the Company's fiscal year (in
thousands of dollars):
<TABLE>
<S> <C>
Revenue........................................................... $25,683
Net loss.......................................................... 4,712
Net loss per share................................................ $ 0.45
</TABLE>
The pro forma information given above does not purport to be indicative of
the results that actually would have been obtained if the operations were
combined as of the beginning of the Company's fiscal year, and is not intended
to be a projection of future results or trends.
6. COMMITMENTS
In December 1995, Bagel Store Development Funding, L.L.C. ("Bagel Funding"),
formerly Einstein Bros. Equity Funding, L.L.C., ("Bagel Funding") was formed
to invest in existing and proposed area developers. Through April 21, 1996,
Bagel Funding had raised $90.0 million (including an aggregate of $45.0
million in subscriptions receivable) and had invested a total of $21.9 million
in area developers. Bagel Funding can require an area developer to redeem
Bagel Funding's equity interest at a formula price in the event the Company
acquires a majority interest in the area developer, and if the area developer
fails to do so, the Company will be required to purchase Bagel Funding's
unredeemed equity interest. In the event the Company's conversion and/or
option rights expire unexercised under the area developer's secured loan
agreement with the Company, as originally in effect, Bagel Funding will have
the right to require, subject to the Company's prior consent, that the area
developer undertake a firm commitment underwritten public offering of equity
of the area developer. In the event the Company does not consent to a public
offering, the area developer can be required to purchase Bagel Funding's
unredeemed equity interest in the area developer at a formula price and if the
area developer fails to do so, the Company will be required to purchase Bagel
Funding's unredeemed equity interest. Also, in the event the Company does not
acquire a majority interest in the area developer pursuant to the Company's
conversion and/or option rights prior to the time such rights expire
unexercised under the area developer's secured loan agreement with the
Company, as originally in effect, Bagel Funding will have the right to request
that the area developer seek to terminate its area developer and franchise
agreements with the Company. If the Company does not consent to such
termination, the area developer can be required to redeem Bagel Funding's
equity interest in the area developer at a formula price, and if the area
developer fails to do so, the Company will be required to purchase Bagel
Funding's unredeemed equity interest.
7. SUBSEQUENT EVENT
In May 1996, the Company entered into a secured revolving credit facility
providing for borrowings of up to $45.0 million through April 30, 1998.
Borrowing under the facility may be either floating rate loans with interest
at the lender's base rate plus 1.0% or, at the Company's option, the rate
offered in the interbank Eurodollar market for one-, two-, or three-month
dollar deposits offered by the lender plus 3.0%. In addition, a commitment fee
of .25% of the average daily unused portion of the loan is required. The
facility contains covenants, among others, restricting other borrowings,
prohibiting cash dividends, and requires the Company to maintain minimum
interest coverage and cash flow ratios, specified store level sales and a
minimum capital level. In May 1996, the Company utilized $39.6 million to
repay the outstanding bridge loan from Boston Chicken, Inc. The Company's
balance sheet as of April 21, 1996, gives effect to this refinancing as if it
occurred as of the balance sheet date.
F-24
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Noah's New York Bagels, Inc.:
We have audited the accompanying consolidated balance sheets of Noah's New
York Bagels, Inc. (the "Company") as of December 31, 1994 and December 30,
1995, and the related consolidated statements of operations, shareholders'
equity (deficit) and cash flows for each of the three fiscal years in the
period ended December 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1994 and
December 30, 1995, and the results of their operations and cash flows for each
of the three fiscal years in the period ended December 30, 1995 in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
San Francisco, California
May 7, 1996
F-25
<PAGE>
NOAH'S NEW YORK BAGELS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND DECEMBER 30, 1995
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1994 1995
------- -------
ASSETS
- ------
<S> <C> <C>
Current Assets:
Cash and cash equivalents.................................. $ 1,726 $ 1,630
Accounts receivable........................................ 239 550
Inventory.................................................. 255 652
Prepaid expenses........................................... 657 963
------- -------
Total current assets..................................... 2,877 3,795
Property and Equipment....................................... 9,631 19,847
Other Assets................................................. 752 926
------- -------
Total Assets............................................. $13,260 $24,568
======= =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' DEFICIT
- -------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable........................................... $ 1,296 $ 3,439
Accrued payroll............................................ 455 831
Other accrued expenses..................................... 178 328
Current portion of long-term debt.......................... 211 1,005
------- -------
Total current liabilities................................ 2,140 5,603
Long-Term Debt:
Related parties............................................ 4,480 --
Bank....................................................... 3,378 10
Deferred Credits............................................. 270 309
Redeemable Preferred Stock (liquidation preference of $6,573
in 1994 and $23,891 in 1995)................................ 3,331 20,325
Shareholders' Deficit:
Common stock, no par value: authorized, 38,000,000 shares;
issued and outstanding, 5,359,219 shares in 1994 and
5,365,197 shares in 1995.................................. 387 858
Accumulated deficit........................................ (726) (1,566)
Unearned compensation...................................... -- (971)
------- -------
Total shareholders' deficit.............................. (339) (1,679)
------- -------
Total Liabilities and Shareholders' Deficit.............. $13,260 $24,568
======= =======
</TABLE>
See notes to consolidated financial statements.
F-26
<PAGE>
NOAH'S NEW YORK BAGELS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993 AND 1994 AND DECEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994 1995
------ ------- -------
<S> <C> <C> <C>
Net Sales............................................ $8,148 $17,530 $32,323
Costs and Expenses:
Cost of sales...................................... 3,122 6,704 12,118
Salaries and benefits.............................. 2,504 6,340 12,388
General and administrative expenses................ 1,877 4,728 8,561
------ ------- -------
Total Costs and Expenses........................... 7,503 17,772 33,067
------ ------- -------
Income (Loss) from Operations........................ 645 (242) (744)
Interest Expense--Net (including interest expense of
$--, $352 and $326)................................. (168) (331) (79)
Other Income (Expense)............................... (17) 20 (17)
------ ------- -------
Net Income (Loss).................................... $ 460 $ (553) $ (840)
====== ======= =======
</TABLE>
See notes to consolidated financial statements.
F-27
<PAGE>
NOAH'S NEW YORK BAGELS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ACCUMULATED
---------------- EARNINGS UNEARNED
SHARES AMOUNT (DEFICIT) COMPENSATION TOTAL
--------- ------ ----------- ------------ -------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993.. 922,222 $ 16 $ 203 $ -- $ 219
Dividends Declared.......... -- -- (836) -- (836)
Net Income.................. -- -- 460 -- 460
Issuance of Common Stock for
Acquisition................ 1,180,000 717 -- -- 717
--------- ----- ------- ----- -------
Balance at January 1, 1994.. 2,102,222 733 (173) -- 560
Recapitalization............ 3,219,028 -- -- -- --
Stock Options Exercised..... 37,969 1 -- -- 1
Accretion of Redeemable
Preferred Stock............ -- (347) -- -- (347)
Net Loss.................... -- -- (553) -- (553)
--------- ----- ------- ----- -------
Balance at December 31,
1994....................... 5,359,219 387 (726) -- (339)
Stock Options Exercised..... 5,978 1 -- -- 1
Accretion of Redeemable
Preferred Stock............ -- (520) -- -- (520)
Compensatory Stock Option
Grants..................... -- 990 -- (990) --
Amortization of Unearned 19
Compensation............... -- -- -- 19
Net Loss.................... -- -- (840) -- (840)
--------- ----- ------- ----- -------
Balance at December 30,
1995....................... 5,365,197 $ 858 $(1,566) $(971) $(1,679)
========= ===== ======= ===== =======
</TABLE>
See notes to consolidated financial statements.
F-28
<PAGE>
NOAH'S NEW YORK BAGELS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993 AND 1994 AND DECEMBER 30, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)................................. $ 460 $ (553) $ (840)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................... 289 863 1,966
Noncash compensation expense..................... -- -- 19
Deferred credits................................. 50 220 39
Other............................................ -- 276 184
Changes in assets and liabilities:
Accounts receivable............................. (74) (71) (311)
Inventory....................................... (70) (138) (397)
Prepaid expenses................................ (39) (582) (306)
Other assets.................................... (32) (94) (205)
Accounts payable and accrued expenses........... 498 1,190 2,669
------- ------- --------
Net cash provided by operating activities...... 1,082 1,111 2,818
Cash Flows from Investing Activities--
Purchases of property and equipment............... (1,996) (7,578) (12,160)
Cash Flows from Financing Activities:
Borrowings from related parties................... 1,250 5 5,191
Proceeds from issuance of short-term debt......... -- 2,000 --
Proceeds from issuance of redeemable preferred
stock, net....................................... -- 2,970 7,123
Net borrowings (repayments) under line-of-credit
agreements....................................... 95 3,550 (2,550)
Repayments of long-term debt...................... (113) (315) (24)
Repayments related party debt..................... -- (104) (495)
Stock options exercised........................... -- 15 1
Dividends paid.................................... (207) (167) --
------- ------- --------
Net cash provided by financing activities...... 1,025 7,954 9,246
------- ------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents....................................... 111 1,487 (96)
Cash and Cash Equivalents at Beginning of Year..... 128 239 1,726
------- ------- --------
Cash and Cash Equivalents at End of Year........... $ 239 $ 1,726 $ 1,630
======= ======= ========
Other Cash Flow Information--Interest paid......... $ 119 $ 313 $ 400
======= ======= ========
Supplemental Information of Noncash Transactions:
Acquisition of P&A Ventures, Inc.--common stock
issued........................................... $ 717 $ -- $ --
Dividends paid with notes payable................. 462 -- --
Conversion of promissory note to series B
redeemable preferred stock....................... -- -- 5,283
Conversion of related party debt to Series B
redeemable preferred stock....................... -- -- 4,068
</TABLE>
See notes to consolidated financial statements.
F-29
<PAGE>
NOAH'S NEW YORK BAGELS, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993 AND 1994 AND DECEMBER 30, 1995
1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Business--Noah's New York Bagels, Inc. (the "Company") produces high quality
bagels, cream cheeses and salads and sells them, along with a variety of
sandwiches, beverages and other delicatessen items, primarily through Company-
owned and operated restaurants on the West Coast. In addition, the Company
operates a wholesale business selling bagels and cream cheeses directly to
various grocers, delicatessens and restaurants.
Recapitalization--In April 1994, the Company effected a recapitalization
whereby each outstanding share of common stock (2,102,222 shares) converted
into 2.53125 shares of common stock (3,291,028 shares) and 0.84375 shares of
Series A convertible preferred stock (1,773,750 shares).
Change in Fiscal Year End--In 1995 the Company changed its year end from
December 31 to the Saturday closest to December 31. As a result fiscal 1995
ended December 30, 1995.
Cash and Cash Equivalents--The Company classifies as cash equivalents all
highly liquid investments, primarily composed of money market accounts and
certificate of deposits with a maturity of three months or less, which are
convertible to a known amount of cash and carry an insignificant risk of change
in value.
Inventory, primarily raw ingredients and food held for resale, is stated at
the lower of cost (first-in, first-out method) or market.
Property and Equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets ranging from
3 to 10 years. Amortization of improvements to leased properties is based upon
the term of the applicable lease or the estimated useful lives of such assets,
whichever is shorter.
Income Taxes--Effective May 3, 1994, the Company converted from an S-
Corporation to a C-Corporation subject to federal and state income taxes.
Pre-opening costs consist of direct costs of hiring and training the initial
workforce and other direct costs associated with opening a new store. Such
costs are amortized over a twelve-month period commencing with the store
opening.
Deferred Rent--Certain of the Company's lease agreements provide for
scheduled rent increases during the lease term, or for rental payments
commencing at a date other than initial occupancy. Provision is made for the
excess of operating lease rentals computed on a straight-line basis over the
lease term, over cash rentals paid.
Accounting Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles 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 revenue and expenses
during the reporting period. Actual results could differ from those estimates.
Impact of New Accounting Standards--The Company will adopt Statement of
Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed Of in 1996. The
adoption of SFAS No. 121 is expected to have no material affect on the
Company's consolidated financial statements.
F-30
<PAGE>
NOAH'S NEW YORK BAGELS, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Fair Value of Financial Instruments--In accordance with SFAS No. 107,
"Disclosure About Fair Value of Financial Instruments," the carrying value of
the Company's current assets and liabilities approximate their estimated fair
value.
The Company is required to adopt "SFAS" No. 123, Accounting for Stock-Based
Compensation in fiscal 1996. SFAS No. 123 establishes accounting and disclosure
requirements using a fair value based method of accounting for stock based
employee compensation plans. Under SFAS No. 123 the Company may either adopt
the new fair value based accounting method or continue the intrinsic value
based method under APB 25. Accounting for Stock issued to Employees and provide
pro forma disclosures of net earnings as if the accounting provisions of SFAS
No. 123 had been adopted. The Company plans to adopt only the disclosure
requirements of SFAS No. 123; therefore such adoption will have no effect on
the Company's consolidated net earnings or cash flows.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31 and December
30, respectively (in thousands):
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Leasehold improvements.................................. $ 5,002 $11,248
Equipment............................................... 3,875 7,422
Furniture and fixtures.................................. 808 2,076
Construction in progress................................ 1,116 2,187
------- -------
Total............................................... 10,801 22,933
Less accumulated depreciation and amortization.......... (1,170) (3,086)
------- -------
Property and equipment--net............................. $ 9,631 $19,847
======= =======
</TABLE>
3. BANK LINE OF CREDIT
At December 30, 1995 the Company had a line of credit agreement with a bank
that provides for unsecured borrowings up to $12,000,000 through January 1,
2002 of which $1,000,000 was outstanding and was repaid in February 1996.
Interest on borrowings under this agreement are at varying rates, based on the
bank's prime rate or at a fixed rate.
Long-term debt at December 31 and December 30, respectively, consists of the
following (in thousands):
<TABLE>
<CAPTION>
1994 1995
------ -------
<S> <C> <C>
Line of credit........................................... $3,550 $ 1,000
Other.................................................... 39 15
------ -------
Total................................................ 3,589 1,015
Less current portion..................................... (211) (1,005)
------ -------
Total................................................ $3,378 $ 10
====== =======
</TABLE>
Minimum principal payments are as follows (in thousands):
<TABLE>
<S> <C>
1996............................................................... $1,005
1997............................................................... 5
1998............................................................... 5
------
Total.......................................................... $1,015
======
</TABLE>
F-31
<PAGE>
NOAH'S NEW YORK BAGELS, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. NOTES PAYABLE TO RELATED PARTIES
During 1995, $4,068,000 of related party debt (including $83,000 of accrued
interest) was converted into Series B preferred stock and $495,000 was repaid.
Notes payable to related parties at December 31, 1994 consisted of convertible
subordinated notes of $3,330,000 issued to shareholders bearing interest at 8%;
subordinated notes issued to shareholders of $655,000 bearing interest at 10%;
a promissory note issued to shareholders of $475,000 bearing interest at 10%;
and S-Corporation distribution notes of $20,000 payable in installments of
principal and interest at 10%.
5. INCOME TAXES
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes, and
(b) net operating loss carryforwards.
Significant components of the Company's net deferred taxes at December 31 and
December 30, respectively, are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
---- -----
<S> <C> <C>
Deferred tax assets:
Federal operating tax loss carryforward.................... $227 $ 619
State operating tax loss carryforward...................... 24 75
Nondeductible accruals..................................... 95 92
---- -----
Total.................................................... $346 $ 786
==== =====
Deferred tax liabilities:
Preopening stores expense.................................. $149 $ 197
Depreciation............................................... 118 245
Other...................................................... 34 44
---- -----
Total.................................................... 301 486
---- -----
Net deferred tax assets...................................... 45 300
Less valuation allowance..................................... (45) (300)
---- -----
Total.................................................... $ -- $ --
==== =====
</TABLE>
A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. As it is more likely
than not that sufficient taxable income will not be generated in future periods
to utilize the deferred tax assets, a valuation allowance has been recorded.
During 1995 the valuation allowance increased by $255,000 and during 1994 the
valuation allowance increased by $45,000.
As of December 30, 1995, the Company had a net operating loss carryforward
for federal income tax purposes of approximately $1,821,000 and a net operating
loss carryforward for state tax purposes of approximately $1,214,000.
Subsequent to year end, there was a change in ownership of the Company (Note
9). Certain provisions of the 1986 Tax Reform Act have significantly limited
the use of the Company's net operating loss carryforwards under the change in
ownership provisions of Section 382 of the Internal Revenue Code. Federal NOL's
expire beginning 2009; state NOL's expire beginning 1999.
F-32
<PAGE>
NOAH'S NEW YORK BAGELS, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. REDEEMABLE PREFERRED STOCK
Changes in redeemable preferred stock are as follows (in thousands):
<TABLE>
<CAPTION>
SERIES A SERIES B
-------------- --------------
SHARES DOLLARS SHARES DOLLARS TOTAL
------ ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1993.............. -- $ -- -- $ -- $ --
Recapitalization (Note 1).............. 1,774 -- -- -- --
Issuance of Series A for cash.......... 1,500 2,970 -- -- 2,970
Stock options exercised................ 12 14 -- -- 14
Accretion to redemption value.......... -- 347 -- -- 347
----- ------ ----- ------- -------
Balance at December 31, 1994........... 3,286 3,331 -- -- 3,331
Issuance of Series B for cash.......... -- -- 2,121 7,550 7,550
Conversion of related party debt to
Series B (Note 4)..................... -- -- 1,143 4,068 4,068
Conversion of promissory note to Series
B..................................... -- -- 1,481 5,283 5,283
Costs of issuing Series B.............. -- -- -- (427) (427)
Accretion to redemption value.......... -- 520 -- -- 520
----- ------ ----- ------- -------
Balance at December 30, 1995........... 3,286 $3,851 4,745 $16,474 $20,325
===== ====== ===== ======= =======
</TABLE>
In March 1995, the Company amended and restated its Articles of Incorporation
to authorize the issuance of 76,000,000 shares including 38,000,000 shares of
common stock and 38,000,000 shares of preferred stock. Of the 38,000,000 shares
of preferred stock, 3,375,000 shares are designated Series A convertible
redeemable preferred stock and 4,904,425 shares are designated as Series B
cumulative convertible redeemable preferred stock.
In March 1995, the Company issued $5,191,000 of 5.90% convertible promissory
notes to a shareholder. In September 1995, the entire unpaid principal balance
of $5,191,000 and accrued interest of $92,000 automatically converted into
1,481,219 shares of the Company's Series B cumulative convertible redeemable
preferred stock.
Liquidation Preferences--Upon liquidation, the holders of Series A
convertible redeemable preferred stock and Series B cumulative convertible
redeemable preferred stock are entitled to receive a preferential payment of
$2.00 per share and $3.56 per share, respectively, before payments are made to
the holders of common stock.
Dividends and Dividend Preferences--If declared by the Board of Directors of
the Company, the holders of Series A cumulative convertible redeemable
preferred stock are entitled to receive dividends at a rate per annum of $.16
per share. If declared by the Board of Directors of the Company, dividends
accrue and accumulate on Series B cumulative convertible redeemable preferred
stock at a rate of $.2848 per share, per annum. Through December 31, 1995, no
dividends have been declared.
Conversion Rights--All series of preferred stock are convertible into common
stock on a one-for-one basis, as adjusted, based on the issuance of common
stock, options, warrants or other securities convertible into common stock.
Preferred Stock Redemption--Series A convertible redeemable preferred stock
is redeemable at the option of the holder under certain conditions beginning
March 31, 2001 at a per share price of $2.00, plus an amount equal to all
accrued but unpaid dividends. Series B cumulative convertible redeemable
preferred stock is redeemable at the option of the holder under certain
conditions beginning March 31, 2001 at a per share price of $3.56, plus an
amount equal to the total of all accrued but unpaid dividends. The preferred
stock is being accreted to its minimum redemption value.
F-33
<PAGE>
NOAH'S NEW YORK BAGELS, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. STOCK OPTION PLANS
Under Company's stock option plans, the Company may grant incentive and
nonqualified options to purchase up to 2,053,750 shares of common stock and
101,250 shares of Series A Preferred Stock. Options vest ratably over five
years, are exercisable up to ten years and are generally granted at an exercise
price that approximates fair market value at the date of grant, as determined
by the Board of Directors.
A summary of stock option transactions follows:
<TABLE>
<CAPTION>
NUMBER
OF STOCK OPTION PRICE
OPTIONS PER SHARE
--------- ------------
<S> <C> <C>
Outstanding at December 31, 1993
Granted......................................... 844,500 $ .20
Canceled........................................ (7,500) .20
Outstanding at December 31, 1994.................. 837,000 .20
Granted......................................... 977,075 .20-.50
Exercised....................................... (5,978) .20
Canceled........................................ (103,247) .20-.50
--------- ---------
Outstanding at December 30, 1995.................. 1,704,850 $.20-$.50
========= =========
</TABLE>
At December 30, 1995, stock options available for grant were 45,158 and
approximately 170,000 options were exercisable.
During 1995, the Company granted options with exercise prices below market
value. The difference between the market value and the exercise price will be
recognized as compensation expense over the five year vesting period.
Compensation expense in 1995 related to such options was $19,000. Immediately
prior to the acquisition of the Company in February 1996 (see Note 9), certain
options were accelerated and exercised. Accordingly, the unamortized
compensation expense of $971,000 at December 30, 1995, will be recognized as
compensation expense in 1996.
8. LEASES
The Company leases restaurant, office and production facilities under
operating lease agreements that expire at various dates, with options to extend
through 2016. In addition to minimum rental payments, certain of the leases
require contingent payments based on sales levels. The Company also pays real
estate taxes, insurance and maintenance expenses related to these leases. Net
rental expense for all operating leases was as follows (in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ------
<S> <C> <C> <C>
Minimum rentals......................................... $309 $638 $1,409
Contingent rentals and other charges.................... -- 40 40
---- ---- ------
$309 $678 $1,449
==== ==== ======
</TABLE>
F-34
<PAGE>
NOAH'S NEW YORK BAGELS, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
The aggregate future minimum lease payments under all non-cancelable lease
agreements are as follows (in thousands):
<TABLE>
<S> <C>
1996............................................................. $ 3,305
1997............................................................. 4,213
1998............................................................. 4,074
1999............................................................. 3,982
2000............................................................. 3,749
Thereafter....................................................... 15,167
-------
Total minimum lease commitments.............................. 34,490
Less sublease rentals............................................ (160)
-------
Total minimum lease commitments.............................. $34,330
=======
</TABLE>
9. SUBSEQUENT EVENT
In February 1996, all outstanding preferred and common stock of the Company
was acquired by Einstein/Noah Bagel Corp. for approximately $100.9 million in
cash.
F-35
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Bagel & Bagel, Inc.:
We have audited the accompanying statements of operations and cash flows for
the year ended December 27, 1994 and the period from December 28, 1994 to
March 23, 1995 of Bagel & Bagel, Inc. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 results of operations and cash flows of Bagel &
Bagel, Inc. for the year ended December 27, 1994 and the period from December
28, 1994 to March 23, 1995 in conformity with generally accepted accounting
principles.
MAYER HOFFMAN McCANN L.C.
Kansas City, Missouri
April 26, 1996
F-36
<PAGE>
BAGEL & BAGEL, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 27, 1994 AND THE PERIOD FROM
DECEMBER 28, 1994 TO MARCH 23, 1995
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
DECEMBER 27, DECEMBER 28, 1994
1994 TO MARCH 23, 1995
------------ -----------------
<S> <C> <C>
Net Sales........................................ $5,858,908 $1,887,424
Cost and Expenses:
Cost of products sold.......................... 2,369,512 735,691
Salaries and benefits.......................... 1,534,138 534,759
General and administrative..................... 1,704,667 653,430
---------- ----------
Total costs and expenses..................... 5,608,317 1,923,880
---------- ----------
Income (Loss) from Operations.................... 250,591 (36,456)
---------- ----------
Other Expense:
Interest expense............................... (133,331) (79,093)
Other expense, net............................. (249,000) (14,277)
---------- ----------
Total other expense.......................... (382,331) (93,370)
---------- ----------
Net Loss......................................... $ (131,740) $ (129,826)
========== ==========
</TABLE>
The accompanying notes to the financial statements are an integral part of
these statements.
F-37
<PAGE>
BAGEL & BAGEL, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 27, 1994 AND FOR THE PERIOD FROM
DECEMBER 28, 1994 TO MARCH 23, 1995
<TABLE>
<CAPTION>
YEAR ENDED PERIOD FROM
DECEMBER DECEMBER 28, 1994
27, 1994 TO MARCH 23, 1995
----------- -----------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss...................................... $ (131,740) $ (129,826)
Adjustments to reconcile loss to net cash
provided by operating activities:
Depreciation and amortization............... 375,742 139,478
Changes in assets and liabilities:
Accounts receivable....................... 1,469 63,053
Inventories............................... (186,994) 20,349
Prepaid expenses and other current assets. (9,242) 34,587
Accounts payable and accrued expenses..... 683,417 (115,568)
----------- -----------
Net cash provided by operating
activities............................. 732,652 12,073
Cash Flows from Investing Activities:
Purchase of property and equipment............ (2,087,859) (525,019)
Purchase of other assets...................... (11,464) --
----------- -----------
Net cash used in investing activities... (2,099,323) (525,019)
Cash Flows from Financing Activities:
Increase in short-term obligations............ 632,679 2,038,652
Proceeds from long-term obligations........... 903,420 101,180
Repayment of long-term obligations............ (125,894) (1,672,197)
----------- -----------
Net cash provided by financing
activities............................. 1,410,205 467,635
----------- -----------
Net increase (decrease) in Cash................. 43,534 (45,311)
Cash, beginning of period....................... 210,340 253,874
----------- -----------
Cash, end of period............................. $ 253,874 $ 208,563
=========== ===========
Supplemental Cash Flow Information:
Interest Paid................................. $ 84,880 $ 12,701
=========== ===========
</TABLE>
The accompanying notes to the financial statements are an integral part of
these statements.
F-38
<PAGE>
BAGEL & BAGEL, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
The Company operates a chain of bagel stores in the Kansas City metropolitan
area.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property and Equipment
The provision for depreciation and amortization has been calculated using the
straight-line and accelerated methods. The following represents the useful
lives over which the assets are depreciated and amortized:
<TABLE>
<S> <C>
Leasehold improvements.......................................... 8 years
Furniture, fixtures, and equipment.............................. 5-7 years
</TABLE>
Expenditures for maintenance and repairs are expensed as incurred.
Revenue Recognition
Revenue from sales is recognized in the period the related food and beverage
products are sold.
Income Taxes
The Company is organized as a Subchapter S corporation for federal and state
income tax purposes. Any taxable income or loss is the responsibility of the
individual stockholders.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles 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 revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassification
Certain items in the financial statements for the year ended December 27,
1994 have been reclassified to conform with the presentation of the period
ended March 23, 1995.
3. COMMITMENTS AND CONTINGENCIES
The Company leases its corporate offices, store premises and commissary under
various noncancelable operating lease agreements. Lease terms are generally
five years with renewal options ranging from one to ten years. Most of these
leases contain escalation clauses and common area maintenance charges. Total
rent expense was approximately $306,000 for the year ended December 27, 1994
and $100,000 for the period ended March 23, 1995, including contingent rental
expense of approximately $101,000 for the year ended December 27, 1994 and
$23,000 for the period ended March 23, 1995.
On December 13, 1994, the Company suffered a fire at one of its retail
locations, resulting in the involuntary conversion of the equipment, inventory
and leasehold improvements therein. The Company retains insurance
F-39
<PAGE>
BAGEL & BAGEL, INC.
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
coverage at the replacement value which is deemed to be in excess of the net
book value of the assets lost. As the claim for recovery from insurance is
probable of realization, no loss has been recorded in the financial statements
for the year ended December 27, 1994. In addition, as the amount of the
insurance proceeds to be collected is uncertain, no gain has been recorded in
the financial statements for the year ended December 27, 1994 and the period
ended March 23, 1995. If the final insurance proceeds exceed the net book
value of the assets lost, a gain may result which would be recorded at that
time.
4. RELATED-PARTY TRANSACTIONS
The Company leases certain facilities from an entity controlled by the sole
stockholder. Total rent paid under this lease was $8,307 for the year ended
December 27, 1994 and $18,000 for the period ended March 23, 1995.
5. SALE OF ASSETS
In March 1995, the Company sold substantially all of its net assets in
exchange for consideration with a market value of approximately $8.9 million.
F-40
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Offerdahl's Bagel Gourmet, Inc.
and Affiliates:
We have audited the accompanying combined statements of operations and cash
flows of Offerdahl's Bagel Gourmet, Inc. and Affiliates (Florida corporations)
for the years ended December 31, 1993 and 1994 and the period from January 1,
1995 to April 2, 1995. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 results of operations and cash flows of Offerdahl's
Bagel Gourmet, Inc. and Affiliates for the years ended December 31, 1993 and
1994 and the period from January 1, 1995 to April 2, 1995 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado
April 24, 1996
F-41
<PAGE>
OFFERDAHL'S BAGEL GOURMET, INC. AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994 AND THE PERIOD
FROM JANUARY 1, 1995 TO APRIL 2, 1995
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER PERIOD FROM
31, JANUARY 1, 1995
---------------------- TO
1993 1994 APRIL 2, 1995
---------- ---------- ---------------
<S> <C> <C> <C>
Net Sales............................... $2,691,161 $4,785,116 $1,712,091
Cost and Expenses:
Cost of products sold................. 1,167,075 2,082,739 1,010,311
Salaries and benefits................. 761,466 1,525,307 776,739
General and administrative............ 487,359 1,014,670 227,585
---------- ---------- ----------
Total costs and expenses............ 2,415,900 4,622,716 2,014,635
---------- ---------- ----------
Income (loss) from Operations........... 275,261 162,400 (302,544)
Other Income (Expense):
Interest expense...................... -- (585) (6,058)
Interest income....................... -- 295 --
Other income (expense)................ (2,909) 23,749 365
---------- ---------- ----------
Total other income (expense)........ (2,909) 23,459 (5,693)
---------- ---------- ----------
Net Income (Loss)....................... $ 272,352 $ 185,859 $ (308,237)
========== ========== ==========
</TABLE>
The accompanying notes to the financial statements are an integral part of
these statements.
F-42
<PAGE>
OFFERDAHL'S BAGEL GOURMET, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994 AND FOR THE PERIOD
FROM JANUARY 1, 1995 TO APRIL 2, 1995
<TABLE>
<CAPTION>
YEARS ENDED PERIOD FROM
DECEMBER 31, JANUARY 1, 1995
-------------------- TO APRIL 2,
1993 1994 1995
--------- --------- ---------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)...................... $ 272,352 $ 185,859 $(308,237)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization........ 120,091 232,158 68,321
Changes in assets and liabilities:
Accounts receivable................ (35,804) 35,842 (17,420)
Inventories........................ (46,770) (48,527) 7,592
Prepaid expenses and other current
assets............................ (13,965) (27,352) (9,969)
Accounts payable and accrued
expenses.......................... 111,424 84,834 879,557
Other.............................. (43,367) (57,974) (28,848)
--------- --------- ---------
Net cash provided by operating
activities...................... 363,961 404,840 590,996
Cash Flows from Investing Activities:
Purchases of property and equipment.... (600,775) (800,205) (458,380)
--------- --------- ---------
Net cash used in investing
activities...................... (600,775) (800,205) (458,380)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock. 547,005 760,000 28,080
Distributions to stockholders.......... (235,000) (570,000) (32,000)
Proceeds from long-term obligations.... -- 250,000 --
Repayment of long-term obligations..... -- -- (250,000)
--------- --------- ---------
Net cash provided by (used in)
financing activities............ 312,005 440,000 (253,920)
--------- --------- ---------
Net increase (decrease) in Cash.......... 75,191 44,635 (121,304)
Cash, beginning of period................ 128,316 203,507 248,142
--------- --------- ---------
Cash, end of period...................... $ 203,507 $ 248,142 $ 126,838
========= ========= =========
Supplemental Cash Flow Information:
Interest Paid.......................... $ -- $ -- $ 6,643
========= ========= =========
</TABLE>
The accompanying notes to the financial statements are an integral part of
these statements.
F-43
<PAGE>
OFFERDAHL'S BAGEL GOURMET, INC. AND AFFILIATES
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Offerdahl's Bagel Gourmet, Inc. and Affiliates (the "Company") operates a
chain of bagel stores in Southern Florida.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination
The accompanying combined financial statements include the accounts of
Offerdahl's Bagel Gourmet Inc., Bagel Gourmet (Sheridan), Inc., Bagel Gourmet
(Weston), Inc., Bagel Gourmet (Pembroke), Inc., Bagel Gourmet (Boynton), Inc.,
Bagel Gourmet (Promenade), Inc., Bagel Gourmet, Inc., and Bagel Gourmet
Production, Inc. Bagel Gourmet, Inc. was formed in 1993 through the merger of
Bagel Gourmet (Sheridan), Inc., Bagel Gourmet (Pembroke), Inc., Bagel Gourmet
(Boynton), Inc., Bagel Gourmet (Promenade), Inc. and Bagel Gourmet (Weston),
Inc., with Bagel Gourmet (Weston), Inc. as the surviving corporation. Bagel
Gourmet (Weston), Inc. then changed its name to Bagel Gourmet, Inc.
Offerdahl's Bagel Gourmet, Inc. was formed December 31, 1994 through the
merger of Bagel Gourmet Production, Inc. and Bagel Gourmet, Inc. All the
companies are under common control. All material intercompany accounts and
transactions have been eliminated in combination.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property and Equipment
The provision for depreciation and amortization has been calculated using
the straight-line method. The following represents the useful lives over which
the assets are depreciated and amortized:
<TABLE>
<S> <C>
Leasehold improvements........................................ 10-15 years
Furniture, fixtures, and equipment............................ 5-7 years
</TABLE>
Expenditures for maintenance and repairs are expensed as incurred.
Revenue Recognition
Revenue from sales is recognized in the period the related food and beverage
products are sold.
Income Taxes
The Company is organized as a Subchapter S corporation for federal and state
income tax purposes. Any taxable income or loss is the responsibility of the
individual stockholders.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.
3. COMMITMENTS
The Company leases its corporate offices, store premises and commissary
under various noncancelable operating lease agreements. Lease terms are
generally five years with two or three five-year renewal options. Most of
these leases contain escalation clauses and common area maintenance charges.
Total rent expense was approximately $168,000 in 1993, $264,000 in 1994, and
$97,000 from January 1, 1995 through April 2, 1995.
4. SALE OF ASSETS
In March 1995, the Company sold certain of its net assets in exchange for
consideration with a market value of approximately $10.4 million.
F-44
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Baltimore Bagel Co.:
We have audited the accompanying statements of operations and cash flows of
Baltimore Bagel Co. (a California corporation) for the years ended December 31,
1993 and 1994 and the period from January 1, 1995 to August 10, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 results of operations and cash flows of Baltimore
Bagel Co. for the years ended December 31, 1993 and 1994 and the period from
January 1, 1995 to August 10, 1995 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado
April 24, 1996
F-45
<PAGE>
BALTIMORE BAGEL CO.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994 AND THE PERIOD FROM
JANUARY 1, 1995 TO AUGUST 10, 1995
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31, PERIOD FROM
---------------------- JANUARY 1, 1995
1993 1994 TO AUGUST 10, 1995
---------- ---------- ------------------
<S> <C> <C> <C>
Net Sales............................ $6,365,586 $7,714,995 $5,760,017
Cost and Expenses:
Cost of products sold.............. 1,887,879 2,378,824 1,857,310
Salaries and benefits.............. 2,550,276 2,623,055 2,033,937
General and administrative......... 1,762,373 2,138,286 1,614,783
---------- ---------- ----------
Total costs and expenses......... 6,200,528 7,140,165 5,506,030
---------- ---------- ----------
Income from Operations............... 165,058 574,830 253,987
Other Income (Expense):
Interest expense................... (40,101) (36,106) (13,100)
Interest income.................... 11,667 12,766 16,261
Other income (expense), net........ (80) 29,743 (21,027)
---------- ---------- ----------
Total other income (expense)..... (28,514) 6,403 (17,866)
---------- ---------- ----------
Net Income........................... $ 136,544 $ 581,233 $ 236,121
========== ========== ==========
</TABLE>
The accompanying notes to the financial statements are an integral part of
these statements.
F-46
<PAGE>
BALTIMORE BAGEL CO.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993 AND 1994 AND FOR THE PERIOD FROM
JANUARY 1, 1995 TO AUGUST 10, 1995
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31, PERIOD FROM
-------------------- JANUARY 1, 1995
1993 1994 TO AUGUST 10, 1995
--------- --------- ------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income.......................... $ 136,544 $ 581,233 $ 236,121
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization..... 206,353 205,828 148,926
Loss on disposal of property and
equipment........................ 26,417 -- 16,619
Changes in assets and liabilities:
Accounts receivable............. (3,140) (8,956) 3,254
Inventories..................... (18,263) (1,097) 823
Prepaid expenses and other
current assets................. 4,518 (25,815) 16,677
Accounts payable and accrued
expenses....................... 21,703 67,220 42,713
Other assets.................... -- (4,950) 10,343
--------- --------- ---------
Net cash provided by operating
activities................... 374,132 813,463 475,476
Cash Flows from Investing Activities:
Purchases of property and equipment. (46,464) (480,908) (217,774)
Proceeds from sale of property and
equipment.......................... -- -- 29,004
--------- --------- ---------
Net cash used in investing
activities................... (46,464) (480,908) (188,770)
Cash Flows from Financing Activities:
Distributions to stockholders....... -- -- (823,950)
Proceeds from long-term obligations. 364,123 436,566 149,880
Repayment of long-term obligations.. (375,621) (764,837) (105,381)
--------- --------- ---------
Net cash used in financing
activities................... (11,498) (328,271) (779,451)
--------- --------- ---------
Net increase (decrease) in cash and
equivalents.......................... 316,170 4,284 (492,745)
Cash and equivalents, beginning of
period............................... 172,291 488,461 492,745
--------- --------- ---------
Cash and equivalents, end of period... $ 488,461 $ 492,745 $ --
========= ========= =========
Supplemental Cash Flow Information:
Interest Paid....................... $ 40,101 $ 36,106 $ 13,100
========= ========= =========
</TABLE>
The accompanying notes to the financial statements are an integral part of
these statements.
F-47
<PAGE>
BALTIMORE BAGEL CO.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
The Company operates a chain of bagel stores in southern California.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property and Equipment
The provision for depreciation and amortization has been calculated using
the straight-line method. The following represents the useful lives over which
the assets are depreciated and amortized:
<TABLE>
<S> <C>
Leasehold improvements......................................... 5-18 years
Furniture, fixtures, and equipment............................. 3-7 years
</TABLE>
Expenditures for maintenance and repairs are expensed as incurred.
Revenue Recognition
Revenue from sales is recognized in the period the related food and beverage
products are sold.
Income Taxes
The Company is organized as a Subchapter S corporation for federal and state
income tax purposes. Any taxable income or loss is the responsibility of the
individual stockholders.
Employee Benefit Plan
The Company has a 401(k) plan for which all full-time employees participate.
Company contributions were approximately $4,800 in 1993, $11,300 in 1994, and
$4,700 for the period ended August 10, 1995.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles 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 revenue and expenses during the
reporting period. Actual results could differ from those estimates.
3. COMMITMENTS
The Company leases its corporate offices, store premises and commissary
under various noncancelable operating lease agreements. Lease terms are
generally five years with one or two five-year renewal options. Most of these
leases contain escalation clauses and common area maintenance charges. Total
rent expense was approximately $479,500 in 1993, $535,900 in 1994, and
$473,500 for the period ended August 10, 1995.
4. RELATED-PARTY TRANSACTIONS
The Company leases its corporate offices from an entity controlled by the
stockholders. Total rent paid under this lease was approximately $79,900 in
1993, $81,100 in 1994, and $59,700 for the period ended August 10, 1995.
5. SALE OF ASSETS
In August 1995, the Company sold substantially all of its net assets in
exchange for consideration with a market value of approximately $11.8 million.
F-48
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION OF EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
The pro forma consolidated statement of operations for the fiscal year ended
December 31, 1995 gives effect to the acquisitions of Noah's New York Bagel's,
Inc., Bagel & Bagel, Inc., Baltimore Bagel Co., Brackman Brothers, Inc., and
Offerdahl's Bagel Gourmet, Inc. as of December 26, 1994 (the beginning of the
Company's 1995 fiscal year). The pro forma consolidated statement of
operations for the quarter ended April 21, 1996 gives effect to the
acquisition of Noah's New York Bagel's Inc. as of January 1, 1996 (the
beginning of the Company's 1996 fiscal year). The pro forma consolidated
financial statements are based upon the assumptions set forth in the
accompanying notes to such statements. The pro forma adjustments are based
upon available information and assumptions that management believes are
reasonable under the circumstances.
The pro forma consolidated financial statements should be read in
conjunction with the related historical financial statements and are not
necessarily indicative of the results that would have actually occurred had
the acquisitions been consummated on the dates or for the periods indicated or
which may occur in the future.
F-49
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NOAH'S NEW
YORK OFFERDAHL'S BRACKMAN
EINSTEIN/NOAH BAGELS, BAGEL & BALTIMORE BAGEL BROTHERS,
BAGEL CORP. INC. BAGEL, INC. BAGEL CO. GOURMET, INC. INC. PRO FORMA UNAUDITED
(HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL) ADJUSTMENTS PRO FORMA
------------- ----------- ----------- ----------- ------------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Company-operated
stores......... $ 25,685 $32,323 $1,887 $5,760 $1,712 $2,283 $ 69,650
Royalties and
franchise-
related fees... 738 -- -- -- -- -- 738
-------- ------- ------ ------ ------ ------ --------
26,423 32,323 1,887 5,760 1,712 2,283 70,388
Costs and
Expenses:
Cost of products
sold........... 8,239 12,118 736 1,857 1,010 1,125 25,085
Salaries and
benefits....... 13,531 12,388 535 2,034 777 282 29,547
General and
administrative. 20,962 8,561 653 1,615 228 497 2,391 (1) 34,907
Write-off of
intangible
assets and
excess purchase
price over fair
value of net
assets
acquired....... 40,558 -- -- -- -- -- 40,558
-------- ------- ------ ------ ------ ------ --------
Total costs and
expenses........ 83,290 33,067 1,924 5,506 2,015 1,904 130,097
-------- ------- ------ ------ ------ ------ --------
Income (Loss)
from Operations. (56,867) (744) (37) 254 (303) 379 (59,709)
Other Income
(Expense):
Interest income
(expense), net.. (1,281) (79) (79) 3 (6) -- (9,090)(2) (10,532)
Other income
(expense), net.. 717 (17) (14) (21) -- -- 665
-------- ------- ------ ------ ------ ------ --------
Total other
expense........ (564) (96) (93) (18) (6) -- (9,867)
-------- ------- ------ ------ ------ ------ --------
Income (Loss)
Before Income
Taxes........... (57,431) (840) (130) 236 (309) 379 (69,576)
Provision for
Income Taxes.... -- -- -- -- -- 98 98 (3) --
-------- ------- ------ ------ ------ ------ --------
Net Income
(Loss).......... $(57,431) $ (840) $ (130) $ 236 $ (309) $ 281 $(69,576)
======== ======= ====== ====== ====== ====== ========
Net loss per
common and
equivalent
share........... $ (5.62) $ (6.80)
======== ========
Weighted average
number of common
and equivalent
shares
outstanding..... 10,195 10,215 (4)
======== ========
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of this statement.
F-50
<PAGE>
EINSTEIN/NOAH BAGEL CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED APRIL 21, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NOAH'S NEW
EINSTEIN/NOAH YORK BAGELS,
BAGEL CORP. INC. PRO FORMA UNAUDITED
(HISTORICAL) (HISTORICAL) ADJUSTMENTS PRO FORMA
------------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Revenue:
Company-operated stores..... $18,397 $3,304 $21,701
Royalties and franchise-
related fees............... 3,982 -- 3,982
------- ------ -------
22,379 3,304 25,683
Costs and Expenses:
Cost of products sold....... 5,490 1,118 6,608
Salaries and benefits(5).... 9,128 2,361 11,489
General and administrative.. 8,573 795 184 (1) 9,552
------- ------ -------
Total costs and expenses.. 23,191 4,274 27,649
------- ------ -------
Loss from Operations.......... (812) (970) (1,966)
Other Income (Expense):
Interest expense, net....... (3,333) (4) (699)(2) (4,036)
Other income, net........... 1,286 4 1,290
------- ------ -------
Total other expense....... (2,047) -- (2,746)
------- ------ -------
Net Loss...................... $(2,859) $ (970) $(4,712)
======= ====== =======
Net loss per common and
equivalent share............. $ (0.27) $ (0.45)
======= =======
Weighted average number of
common and equivalent shares
outstanding.................. 10,215 10,215
======= =======
</TABLE>
The accompanying notes to the consolidated financial statements
are an integral part of this statement.
F-51
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. To record amortization on the intangible assets acquired in connection with
the acquisition of Noah's New York Bagel's, Inc. (Noah's) over a 35-year
period.
2. To adjust interest expense to reflect the acquisition of Noah's as of the
beginning of the Company's fiscal year.
3. To adjust the provision for income taxes based upon the consolidated loss.
4. The pro forma weighted average number of shares for 1995 gives effect to
the issuance of 1,959,152 shares of common stock and 6,250 shares of Series
A preferred stock deemed to be issued as of December 26, 1994 (the
beginning of the Company's 1995 fiscal year) pursuant to the acquisition of
the common stock of Brackman Brothers, Inc. and certain net assets of Bagel
& Bagel, Inc., Baltimore Bagel Co. and Offerdahl's Bagel Gourmet, Inc. and
10,474,596 shares of common stock pursuant to the issuance of stock options
and warrants issued, and shares of common stock sold, through April 21,
1996. The options and warrants issued, and shares of common stock sold, are
deemed outstanding for the entire reporting period pursuant to Staff
Accounting Bulletin No. 83.
5. Noah's salaries and benefits include approximately $954,000 of stock option
expense attributable to the acceleration of the vesting of compensatory
stock options. The acceleration of the vesting occurred immediately before
the acquisition of Noah's by Einstein/Noah Bagel Corp.
F-52
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDER-
WRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITA-
TION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE COMMON STOCK OF-
FERED HEREBY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HERE-
UNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMA-
TION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
The Company............................................................... 6
Risk Factors.............................................................. 7
Concurrent Offerings...................................................... 12
Use Of Proceeds........................................................... 12
Dividend Policy........................................................... 12
Capitalization............................................................ 13
Dilution.................................................................. 14
Selected Historical and Pro Forma Consolidated Financial and Store Data... 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 16
Business.................................................................. 20
Management................................................................ 33
Certain Transactions...................................................... 40
Principal Stockholders and Securities Ownership of Management............. 48
Relationship with Boston Chicken.......................................... 51
Description of Capital Stock.............................................. 56
Shares Eligible For Future Sale........................................... 57
Underwriting.............................................................. 59
Legal Matters............................................................. 60
Experts................................................................... 61
Additional Information.................................................... 61
Index to Financial Statements............................................. F-1
</TABLE>
---------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDI-
TION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UN-
DERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2,625,000 SHARES
EINSTEIN/NOAH BAGEL CORP.
[EINSTEIN BROS. BAGELS LOGO]
[NOAH'S NEW YORK BAGELS LOGO]
COMMON STOCK
---------------
P R O S P E C T U S
---------------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS
INCORPORATED
MONTGOMERY SECURITIES
, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be borne by the
Company in connection with the registration, issuance, and distribution of the
securities being registered hereby, other than underwriting discounts and
commissions. All amounts are estimates except the SEC registration fee, the
NASD filing fee, and the Nasdaq listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 20,380
NASD filing fee................................................. 6,410
Nasdaq listing fee.............................................. 17,500
Transfer agent and registrar's fee and expenses................. 10,000
Blue Sky fees and expenses...................................... 25,000
Printing and engraving expenses................................. 200,000
Legal fees and expenses......................................... 350,000
Accounting fees and expenses.................................... 150,000
Miscellaneous................................................... 27,710
--------
Total....................................................... $800,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law authorizes
indemnification of directors, officers, employees, and agents of the Company;
allows the advancement of costs of defending against litigation; and permits
companies incorporated in Delaware to purchase insurance on behalf of
directors, officers, employees, and agents against liabilities whether or not
in the circumstances such companies would have the power to indemnify against
such liabilities under the provisions of the statute.
The Company's Restated Certificate of Incorporation provides for
indemnification of the Company's officers and directors to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law. The Company
intends to obtain directors and officers insurance covering its executive
officers and directors.
The Company's Restated Certificate of Incorporation eliminates, to the
fullest extent permitted by Delaware law, liability of a director to the
Company or its stockholders for monetary damages for a breach of such
director's fiduciary duty of care except for liability where a director (a)
breaches his or her duty of loyalty to the Company or its stockholders, (b)
fails to act in good faith or engages in intentional misconduct or knowing
violation of law, (c) authorizes payment of an illegal dividend or stock
repurchase, or (d) obtains an improper personal benefit. While liability for
monetary damages has been eliminated, equitable remedies such as injunctive
relief or rescission remain available. In addition, a director is not relieved
of his or her responsibilities under any other law, including the federal
securities laws.
Insofar as indemnification by the Company for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers, and controlling persons of the Company pursuant to the
foregoing provisions, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On March 24, 1995, in connection with the formation of the Company, the
Company issued to the shareholders of Brackman Bros., Inc. ("Brackman") and to
Bagel & Bagel, Inc. ("Bagel & Bagel") an aggregate of 1,147,500 shares of
Common Stock as partial consideration for all of the outstanding shares of
Brackman and substantially all of the assets of Bagel & Bagel. On such date,
the Company also sold to certain
II-1
<PAGE>
accredited investors an aggregate of 3,536,361 shares of Common Stock for
$20.8 million in cash. The above-mentioned securities were sold without
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act and Rule 506 of Regulation D promulgated under the Securities
Act.
On March 31, 1995, in connection with the formation of the Company, the
Company issued to Offerdahl's Bagel Gourmet, Inc. ("Offerdahl's") an aggregate
of 885,996 shares of Common Stock as partial consideration for substantially
all of the assets of Offerdahl's and a non-recourse promissory note in the
aggregate amount of $437,497. Such securities were sold without registration
under the Securities Act in reliance on Section 4(2) of the Securities Act and
Rule 506 of Regulation D promulgated under the Securities Act.
On August 10, 1995, the Company issued to the shareholder of Baltimore Bagel
Co. ("Baltimore Bagel") an aggregate of 6,250 shares of Series A Preferred
Stock in connection with the merger of Baltimore Bagel into a wholly owned
subsidiary of the Company. Such shares were issued without registration under
the Securities Act in reliance on Section 4(2) of the Securities Act and Rule
506 of Regulation D promulgated under the Securities Act.
On December 29, 1995, the Company sold a warrant to purchase an aggregate of
1,012,500 shares of Common Stock to Bagel Store Development Funding, L.L.C.,
formerly known as Einstein Bros. Equity Funding, L.L.C., at an exercise price
of $6.47 per share. The cash purchase price for the warrant was $45,000. Such
warrant was sold without registration under the Securities Act in reliance on
Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated
under the Securities Act.
On January 15, 1996, the Company sold warrants to purchase an aggregate of
1,237,050 shares of Common Stock to certain accredited investors at an
exercise price of $6.47 per share. The aggregate purchase price for the
warrants was $1,100, which purchase price was paid by delivery of promissory
notes from the accredited investors. An aggregate of 540,675 shares of Common
Stock have been issued pursuant to the exercise of certain of such warrants
for an aggregate exercise price of $3,499,900. Such warrants, and the shares
of Common Stock issued upon exercise thereof, were sold without registration
under the Securities Act in reliance on Section 4(2) of the Securities Act and
Rule 506 of Regulation D promulgated under the Securities Act.
On February 1, 1996, the Company sold to certain accredited investors (all
of whom were former shareholders of Noah's New York Bagels, Inc.) an aggregate
of 855,225 shares of Common Stock for a cash purchase price of $10.52 per
share. Such shares were issued without registration under the Securities Act
in reliance on Section 4(2) of the Securities Act and Rule 506 of Regulation D
promulgated under the Securities Act.
On April 5, 1996, the Company sold to Mark A. Goldston, President and Chief
Executive Officer and a director of the Company, 28,508 shares of Common Stock
for a cash purchase price of $10.52 per share. Such shares were sold without
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act in reliance on Rule 506 of Regulation D promulgated under the
Securities Act.
On May 28, 1996, in connection with entering into its secured revolving
credit facility, the Company issued a warrant to purchase an aggregate of
15,375 shares of Common Stock to one accredited investor at an exercise price
of $11.58. Such warrant was issued without registration under the Securities
Act and Rule 506 of Regulation D promulgated under the Securities Act.
Since its inception, the Company has granted options for 3,719,555 shares of
Common Stock pursuant to its 1995 Stock Option Plan, as amended, at exercise
prices ranging from $5.88 to $11.58 per share, of which options to purchase
296,169 shares of Common Stock have been exercised. Such options were issued
without registration under the Securities Act in reliance on Section 4(2) and
Rule 701 promulgated under the Securities Act.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The exhibits to the Registration Statement are listed in the Exhibit
Index which appears elsewhere in this Registration Statement and is hereby
incorporated herein by reference.
(b) Financial Statement Schedules:
<TABLE>
<S> <C>
Schedule II--Valuation and Qualifying Accounts........................... II-6
</TABLE>
All other schedules are omitted because of the absence of the condition under
which they are required or because the information is included in the
consolidated financial statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the Underwriters,
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Company pursuant to the provisions described under Item 14 above or otherwise,
the Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer, or controlling person of
the Company in the successful defense of any action, suit, or proceeding) is
asserted against the Company by such director, officer, or controlling person
in connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT, OR AMENDMENT THERETO, TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN GOLDEN,
COLORADO, ON MAY 30, 1996.
Einstein Bros. Bagels, Inc.
/s/ Mark R. Goldston
By: _________________________________
Mark R. Goldston
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT, OR AMENDMENT THERETO, HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
IN THE CAPACITIES INDICATED ON MAY 30, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Mark R. Goldston President, Chief Executive Officer and
___________________________________________ Director (Principal Executive Officer)
Mark R. Goldston
/s/ Michael Beaudoin Vice President and Chief Financial Officer
___________________________________________ (Principal Financial and Accounting
Michael Beaudoin Officer)
/s/ Noah Alper Director
___________________________________________
Noah Alper
/s/ Scott A. Beck Director
___________________________________________
Scott A. Beck
/s/ Kyle T. Craig Director
___________________________________________
Kyle T. Craig
/s/ M. Laird Koldyke Director
___________________________________________
M. Laird Koldyke
/s/ Gail Lozoff Director
___________________________________________
Gail Lozoff
/s/ John H. Muehlstein, Jr. Director
___________________________________________
John H. Muehlstein, Jr.
/s/ John A. Offerdahl Director
___________________________________________
John A. Offerdahl
/s/ Lloyd D. Ruth Director
___________________________________________
Lloyd D. Ruth
/s/ David G. Stanchak Director
___________________________________________
David G. Stanchak
</TABLE>
II-4
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Einstein/Noah Bagel Corp.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Einstein/Noah Bagel Corp. and
subsidiaries as of December 31, 1995 for the period from March 24, 1995
(inception) to December 31, 1995 included in this Registration Statement and
have issued our report thereon dated March 7, 1996 (except with respect to the
matters discussed in Notes 1, 11, 12 and 15, as to which the date is May 28,
1996). Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in
Part II, Item 16 of this Registration Statement is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This supplemental schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Denver, Colorado
March 7, 1996
II-5
<PAGE>
SCHEDULE II
EINSTEIN/NOAH BAGEL CORP.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
CLASSIFICATIONS OF PERIOD EXPENSES DEDUCTIONS PERIOD
--------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Period from March 24, 1995
(inception)
through December 31, 1995:
Allowance for Doubtful Accounts.. $ -- $81,000 $ -- $81,000
</TABLE>
II-6
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT* PAGE**
------- ----------------------- ----
<C> <S> <C>
1 Form of Purchase Agreement with Underwriters.
2.1(a) Agreement to Contribute Shares dated February 17, 1995 among
the Company, Brackman Brothers, Inc. ("Brackman") and the
shareholders of Brackman (the "Brackman Agreement").
2.1(b) Amendment to Agreement to Contribute Shares dated March 24,
1995 among the Company, Brackman and the shareholders of
Brackman (the "Amendment to Brackman Agreement").
2.2 Agreement to Contribute Assets dated March 2, 1995 among the
Company, Bagel & Bagel, Inc. and Richard Lozoff (the "Bagel
& Bagel Agreement").
2.3 Agreement to Contribute Assets dated March 23, 1995 among the
Company, Offerdahl's Bagel Gourmet, Inc. ("Offerdahl's") and
the stockholders of Offerdahl's (the "Offerdahl's
Agreement").
2.4 Agreement and Plan of Merger dated August 10, 1995 among the
Company, Baltimore Bagel Co., BBC Acquiring Corporation and
Michael E. Brau and Rachel C. Brau, individually and as
trustees of the Brau Living Trust dated January 23, 1990
(the "Baltimore Bagel Agreement").
2.5 Merger Agreement dated as of January 22, 1996, as amended,
among the Company, NNYB Acquisition Corporation, Noah's New
York Bagels, Inc. ("Noah's"), and the shareholders and
optionholders of Noah's (the "Noah's Agreement").
3.1*** Restated Certificate of Incorporation of the Company
("Certificate of Incorporation").
3.2 Amended and Restated Bylaws of the Company ("Bylaws").
4.1*** Certificate of Incorporation (included in Exhibit 3.1).
4.2 Bylaws (included in Exhibit 3.2).
4.3*** Certificate representing Common Stock.
4.4 Amended and Restated Registration Rights Agreement dated
February 1, 1996 by and among the Company and certain
stockholders of the Company.
4.5 Form of Concurrent Private Placement Agreement between Boston
Chicken, Inc. ("Boston Chicken") and the Company
("Concurrent Private Placement Agreement").
4.6 Form of Registration Agreement between Boston Chicken and the
Company.
5.1*** Opinion of Bell, Boyd & Lloyd.
10.1 Amended and Restated Loan Agreement dated May 17, 1996
between Boston Chicken, Inc. ("Boston Chicken") and the
Company.
</TABLE>
- --------
*In the case of incorporation by reference to documents filed by Boston
Chicken under the Securities Exchange Act of 1934, as amended, Boston
Chicken's file number under that Act is 0-22802.
**This information appears only in the manually signed original of the
Registration Statement.
***To be filed by amendment.
Exhibit-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT* PAGE**
------- ----------------------- ----
<C> <S> <C>
10.2 Form of Concurrent Private Placement Agreement (included in
Exhibit 4.5).
10.3(a) Secured Demand Note of the Company dated January 30, 1996
payable to Boston Chicken ("Secured Demand Note")
(incorporated by reference to Exhibit 10.23(d) Boston
Chicken's 1995 annual report on Form 10-K).
10.3(b) First Amendment to Secured Demand Note dated as of March 7,
1996.
10.4 Brackman Agreement and Amendment to Brackman Agreement
(included in Exhibits 2.1(a) and 2.1(b) hereof).
10.5 Bagel & Bagel Agreement (included in Exhibit 2.2 hereof).
10.6 Offerdahl's Agreement (included in Exhibit 2.3 hereof).
10.7 Baltimore Bagel Agreement (included in Exhibit 2.4 hereof).
10.8 Noah's Agreement (included in Exhibit 2.5 hereof).
10.9 Credit Agreement dated as of May 17, 1996 among the Company,
the Lenders named therein, and Bank of America Illinois, as
Agent.
10.10*** Amended and Restated 1995 Stock Option Plan of the Company.
10.11*** 1996 Non-Employee Director Stock Option Plan of the Company.
10.12 Amended and Restated Accounting and Administration Services
Agreement dated as of May 28, 1996 between Boston Chicken
and the Company.
10.13(a) Financial Services Agreement dated as of March 24, 1995
between Boston Chicken and the Company ("Financial Services
Agreement") (incorporated by reference to Exhibit 10.15 to
Boston Chicken's 1994 annual report on Form 10-K).
10.13(b) First Amendment to Financial Services Agreement dated as of
March 7, 1996.
10.13(c) Financial Services Agreement Termination Agreement effective
as of May 20, 1996.
10.14 Amended and Restated Real Estate Services Agreement dated as
of May 28, 1996 between Boston Chicken and the Company.
10.15 Amended and Restated Computer and Communications Systems
Services Agreement dated as of May 28, 1996 between Boston
Chicken and the Company.
10.16 Assignment and Reimbursement Agreement dated March 24, 1995
between Boston Chicken and the Company.
10.17(a) Employment Agreement dated March 24, 1995 between Daniel V.
Colangelo and the Company.
10.17(b) Amendment to Employment Agreement and Transition and
Consulting agreement dated January 16, 1996 between Daniel
V. Colangelo and the Company, as amended March 6, 1996.
10.18 Letter Agreement dated April 5, 1996 between Mark R.
Goldston and the Company.
10.19 Employment Agreement dated March 24, 1995 between Gail
Lozoff and the Company.
</TABLE>
- --------
*In the case of incorporation by reference to documents filed by Boston
Chicken under the Securities Exchange Act of 1934, as amended, Boston
Chicken's file number under that Act is 0-22802.
**This information appears only in the manually signed original of the
Registration Statement.
***To be filed by amendment.
Exhibit-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT* PAGE**
------- ----------------------- ----
<C> <S> <C>
10.20 Secured Loan Agreement dated October 2, 1995 between Doc's
Cheese Company, L.L.C. ("Doc's") and the Company.
10.21(+) Supply Agreement dated October 2, 1995 between Doc's and the
Company.
10.22 License Agreement dated October 2, 1995 between Doc's and
the Company.
10.23 Option agreement dated October 2, 1995 between Doc's and the
Company.
10.24*** Form of Project and Approved Supplier Agreement among Harlan
Bagel Supply Company, Harlan Bakeries, Inc. and the
Company.
10.25*** Form of Option Agreement among Harlan Bagel Supply Company,
Hal P. Harlan, Hugh P. Harlan, Doug H. Harlan and the
Company (included in Exhibit 10.24).
10.26*** Form of Right of First Refusal Agreement among Harlan
Bakeries, Inc., Hal P. Harlan, Hugh P. Harlan, Doug H.
Harlan and the Company (included in Exhibit 10.24).
10.27 Aircraft dry leases dated January 16, 1996 between the
Company and Bowana Aviation, Inc.
10.28 Form of Fourth Amended and Restated Limited Liability
Company Agreement of Bagel Store Development Funding,
L.L.C. ("Bagel Funding").
10.29 Warrant Purchase Agreement dated as of December 29, 1995
between the Company and Bagel Funding (including form of
warrant to purchase 1,012,500 shares of Common Stock).
10.30 Form of agreement between the Company and Bagel Funding
relating to the Company's purchase of Bagel Funding's
interests in area developers.
10.31*** Form of Area Development Agreement between the Company and
its Area Developers (included in Exhibit 99).
10.32*** Form of Franchise Agreement between the Company and its Area
Developers (included in Exhibit 99).
10.33*** Form of Secured Loan Agreement between the Company and its
Area Developers (included in Exhibit 99).
10.34 Employment Agreement dated March 31, 1995 between John A.
Offerdahl and the Company.
11 Statement re: Computation of Loss Per Share.
21.1 Subsidiaries of the Company.
23.1 Consent of Arthur Andersen LLP with respect to the Audited
Consolidated Financial Statements of the Company.
23.2 Consent of Deloitte & Touche LLP with respect to the Audited
Consolidated Financial Statements of Noah's New York
Bagels, Inc.
23.3 Consent of Mayer Hoffman McCann L.C. with respect to the
Audited Financial Statements of Bagel & Bagel, Inc.
23.4 Consent of Arthur Andersen LLP with respect to the Audited
Combined Financial Statements of Offerdahl's Bagel Gourmet,
Inc.
23.5 Consent of Arthur Andersen LLP with respect to the Audited
Financial Statements of Baltimore Bagel Co.
23.6*** Consent of Bell, Boyd & Lloyd (included in Exhibit 5.1).
27 Financial Data Schedule
99*** Uniform Franchise Offering Circular.
</TABLE>
- --------
*In the case of incorporation by reference to documents filed by Boston
Chicken under the Securities Exchange Act of 1934, as amended, Boston
Chicken's file number under that Act is 0-22802.
**This information appears only in the manually signed original of the
Registration Statement.
***To be filed by amendment.
(+)Confidential treatment requested.
Exhibit-3
<PAGE>
Exhibit 1
EINSTEIN/NOAH BAGEL CORP.
(a Delaware corporation)
___ Shares of Common Stock
(Par Value $0.01 Per Share)
PURCHASE AGREEMENT
------------------
July __, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Alex. Brown & Sons Incorporated
Montgomery Securities
as Representatives of the several Underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Einstein/Noah Bagel Corp., a Delaware corporation (the "Company"), confirms
its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters," which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch, Alex, Brown & Sons Incorporated and Montgomery
Securities are acting as representatives (in such capacity, the
"Representatives"), with respect to the issue and sale by the Company and the
purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares of Common Stock, par value $0.01 per share, of the
Company ("Common Stock") set forth in said Schedule A, and with respect to the
grant by the Company to the Underwriters, acting severally and not jointly, of
the option described in Section 2(b) hereof to purchase all or any part of ___
additional shares of Common Stock to cover over-allotments, if any. The
aforesaid ___ shares of Common Stock (the "Initial Securities") to be purchased
by the Underwriters and all or any part of the ___ shares of Common Stock
subject to the option
<PAGE>
described in Section 2(b) hereof (the "Option Securities") are hereinafter
called, collectively, the "Securities."
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered.
The Company and the Underwriters agree that up to _____ shares of the
Securities to be purchased by the Underwriters (the "Reserved Securities") shall
be reserved for sale by the Underwriters to certain individuals and entities,
including eligible employees and area developers of the Company and Boston
Chicken, Inc., and other entities or persons related to the Company or such
entities or persons, and members of their families (the "Reserved Share
Participants"), as part of the distribution of the Securities by the
Underwriters, subject to the terms of this Agreement, the applicable rules,
regulations and interpretations of the National Association of Securities
Dealers, Inc. and all other applicable laws, rules and regulations. To the
extent that such Reserved Securities are not so purchased by the Reserved Share
Participants, such Reserved Securities may be offered to the public as part of
the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-______) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will
prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations. The information included in such prospectus that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information." Each prospectus used before such registration statement became
effective, and any prospectus that omitted, as applicable, the Rule 430A
Information, that was used after such effectiveness and prior to the execution
and delivery of this Agreement, is herein called a "preliminary prospectus."
Such registration statement, including the exhibits thereto and schedules, if
any, at the time it became effective and including the Rule 430A Information, as
applicable, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and
-2-
<PAGE>
after such filing the term "Registration Statement" shall include the Rule
462(b) Registration Statement. The final prospectus in the form first furnished
to the Underwriters for use in connection with the offering of the Securities is
herein called the "Prospectus." For purposes of this Agreement, all references
to the Registration Statement, any preliminary prospectus, the Prospectus or any
amendment or supplement to any of the foregoing shall be deemed to include the
copy filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval system ("EDGAR").
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company represents
and warrants to each Underwriter as of the date hereof and agrees with each
Underwriter, as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the date hereof, the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and did not and will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading. Neither the Prospectus nor any amendments or supplements
thereto, at the time the Prospectus or any such amendment or supplement was
issued and at the Closing Time (and, if any Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or Prospectus
made in reliance upon
-3-
<PAGE>
and in conformity with information furnished to the Company in writing by
any Underwriter through Merrill Lynch expressly for use in the Registration
Statement or Prospectus.
Each preliminary prospectus and the prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and, if
applicable, each preliminary prospectus and the Prospectus delivered to the
Underwriters for use in connection with this offering was identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements included in the
Registration Statement and the Prospectus, together with the related
schedules and notes, present fairly the financial position, where
applicable, of the respective entity to which such financial statements
relate (including, where applicable, the consolidated subsidiaries of such
entity) at the dates indicated and, where applicable, the statement of
operations, stockholders' equity and cash flows of such entity (including,
where applicable, the consolidated subsidiaries of such entity) for the
periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles ("GAAP") applied
on a consistent basis throughout the periods involved. The supporting
schedules, if any, included in the Registration Statement present fairly in
accordance with GAAP the information required to be stated therein. The
pro forma financial statements and the related notes thereto included in
the Registration Statement and the Prospectus present fairly the
information shown therein, have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements and have been properly compiled on the bases described therein.
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or
-4-
<PAGE>
in the earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business (a "Material Adverse Effect"), (B) there
have been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as
one enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock, except for cash dividends paid on the Company's Series A Preferred
Stock.
(v) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect.
(vi) Good Standing of Subsidiaries. Each subsidiary of the Company
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect; all of the issued and
outstanding capital stock of each such subsidiary has been duly authorized
and validly issued, is fully paid and non-assessable and is owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity, other than
the pledge of such stock pursuant to the Company's secured revolving bank
credit agreement dated May 17, 1996 with Bank of America Illinois, as agent
for the lenders named therein (the "Credit Agreement"). The only
subsidiaries of the Company are the subsidiaries listed on Exhibit 21.1 to
the Registration Statement.
-5-
<PAGE>
(vii) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectus or
pursuant to the exercise of convertible securities or options referred to
in the Prospectus and except for the Repurchase Shares (as defined in the
Prospectus). The shares of issued and outstanding capital stock have been
duly authorized and validly issued and are fully paid and non-assessable;
none of the outstanding shares of capital stock of the Company was issued
in violation of the preemptive or other similar rights of any
securityholder of the Company.
(viii) Authorization of Agreement. This Agreement has been duly
executed and delivered by the Company.
(ix) Authorization and Description of Securities. The Securities
have been duly authorized for issuance and sale to the Underwriters
pursuant to this Agreement and, when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration set forth
herein, will be validly issued and fully paid and non-assessable; the
Common Stock conforms to all statements relating thereto contained in the
Prospectus; and the issuance of the Securities is not subject to the
preemptive or other similar rights of any securityholder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor any
of its subsidiaries is in violation of its charter or by-laws or in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which it or
any of them may be bound, or to which any of the property or assets of the
Company or any subsidiary is subject (collectively, "Agreements and
Instruments") except for such defaults that would not result in a Material
Adverse Effect; and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein and
in the Registration Statement (including the issuance and sale of the
Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use of Proceeds") and
compliance by the Company with its obligations hereunder have been duly
authorized by all necessary corporate action and do not and will not,
-6-
<PAGE>
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined below) under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any
subsidiary pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens, charges or encumbrances that
would not result in a Material Adverse Effect), nor will such action result
in any violation of the provisions of the charter or by-laws of the Company
or any subsidiary or any applicable law, statute, rule, regulation,
judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any subsidiary or any of their assets, properties or operations.
As used herein, a "Repayment Event" means any event or condition which
gives the holder of any note, debenture or other evidence of indebtedness
(or any person acting on such holder's behalf) the right to require the
repurchase, redemption or repayment of all or a portion of such
indebtedness by the Company or any subsidiary.
(xi) Absence of Labor Dispute. Except as disclosed in the
Prospectus, no labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, has been threatened.
(xii) Absence of Proceedings. Except as disclosed in the Prospectus,
there is no action, suit, proceeding, inquiry or investigation before or
brought by any court or governmental agency or body, domestic or foreign,
now pending, or, to the knowledge of the Company, threatened, against or
affecting the Company or any subsidiary, which is required to be disclosed
in the Registration Statement, or which the Company reasonably believes is
likely to result in a Material Adverse Effect, or which the Company
reasonably believes is likely to materially and adversely affect the
properties or assets thereof or the consummation of the transactions
contemplated in this Agreement or the performance by the Company of its
obligations hereunder; the aggregate of all pending legal or governmental
proceedings to which the Company or any subsidiary is a party or of which
any of their respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement or the
Prospectus or to be filed as
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exhibits thereto which have not been so described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or reasonably believe that they can acquire on
reasonable terms, the patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other intellectual
property (collectively, "Intellectual Property") currently employed by them
in connection with the business now operated by them, and, except as
disclosed in the Prospectus, neither the Company nor any of its
subsidiaries has received any notice or, to the best of their respective
knowledge, is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances which would render any Intellectual Property
invalid or inadequate to carry on the business of the Company or any of its
subsidiaries, and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except such as have been already obtained
or as may be required under the 1933 Act or the 1933 Act Regulations or
state securities laws.
(xvi) Possession of Licenses and Permits. The Company and its
subsidiaries possess such certificates, permits, licenses, approvals,
consents and other authorizations (collectively, "Governmental Licenses")
issued by the appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business now operated by them,
except where the failure to so possess such Government Licenses would not,
singly or in the aggregate, have a Material Adverse Effect; the Company and
its subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to comply would
not, singly or in the aggregate, have a Material Adverse Effect; all of the
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Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xvii) Compliance with Cuba Act. The Company has complied with, and
is and will be in compliance with, the provisions of that certain Florida
act relating to disclosure of doing business with Cuba, codified as Section
517.075 of the Florida statutes, and the rules and regulations thereunder
or is exempt therefrom.
(xviii) Registration Rights. There are no persons with registration
or other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the
1933 Act, except as described in the Registration Statement.
(xix) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act").
(b) Officer's Certificates. Any certificates signed by any officer of the
Company or any of its subsidiaries delivered to the Representatives or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each Underwriter, severally and not jointly, and each
Underwriter, severally and not jointly, agrees to purchase from the Company, at
the price per share set forth in Schedule B, the number of Initial Securities
set forth in Schedule A opposite the name of such Underwriter, plus any
additional number of Initial Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10 hereof.
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(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriters, severally
and not jointly, to purchase up to an additional ___ shares of Common Stock at
the price per share set forth in Schedule B, less an amount per share equal to
any dividends or distributions declared by the Company and payable on the
Initial Securities but not payable on the Option Securities. The option hereby
granted will expire 30 days after the date hereof and may be exercised in whole
or in part from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the
Initial Securities upon notice by the Representatives to the Company setting
forth the number of Option Securities as to which the several Underwriters are
then exercising the option and the time and date of payment and delivery for
such Option Securities. Any such time and date of delivery (a "Date of
Delivery") shall be determined by the Representatives, but shall not be later
than five full business days after the exercise of said option, nor in any event
prior to the Closing Time, as hereinafter defined. If the option is exercised
as to all or any portion of the Option Securities, each of the Underwriters,
acting severally and not jointly, will purchase that proportion of the total
number of Option Securities then being purchased which the number of Initial
Securities set forth in Schedule A opposite the name of such Underwriter bears
to the total number of Initial Securities, subject in each case to such
adjustments as the Representatives in their discretion shall make to eliminate
any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for the Initial Securities
shall be made at the office of Bell, Boyd & Lloyd, Three First National Plaza,
Chicago, Illinois, and delivery of certificates for the Initial Securities shall
be made against payment therefor at the office of Merrill Lynch, Merrill Lynch
World Headquarters, North Tower, World Financial Center, New York, New York
10281-1305, or (in either case) at such other place as shall be agreed upon by
the Representatives and the Company, at 10:00 A.M. (Eastern time) on the third
(fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day)
business day after the date hereof (unless postponed in accordance with the
provisions of Section 10), or such other time not later than ten business days
after such date as shall be agreed upon by the Representatives and the Company
(such time and date of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for such Option
Securities shall be made at the above-mentioned office, or (in either case) at
such other place
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as shall be agreed upon by the Representatives and the Company, on each Date of
Delivery as specified in the notice from the Representatives to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the Representatives for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. It is understood that
each Underwriter has authorized the Representatives, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Initial Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the purchase
price for the Initial Securities or the Option Securities, if any, to be
purchased by any Underwriter whose funds have not been received by the Closing
Time or the relevant Date of Delivery, as the case may be, but such payment
shall not relieve such Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and registered
in such names as the Representatives may request in writing at least one full
business day before the Closing Time or the relevant Date of Delivery, as the
case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. (Eastern time)
on the business day prior to the Closing Time or the relevant Date of Delivery,
as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests.
The Company, subject to Section 3(b), will comply with the requirements of
Rule 430A, as applicable, and will notify the Representatives immediately,
and confirm the notice in writing, (i) when any post-effective amendment to
the Registration Statement shall become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the
receipt of any comments from the Commission, (iii) of any request by the
Commission for any amendment to the Registration Statement or any amendment
or supplement to the Prospectus or for additional information, and (iv) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary
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prospectus, or of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, or of the initiation or threatening
of any proceedings for any of such purposes. The Company will promptly
effect the filings necessary pursuant to Rule 424(b) and will take such
steps as it deems necessary to ascertain promptly whether the form of
prospectus transmitted for filing under Rule 424(b) was received for filing
by the Commission and, in the event that it was not, it will promptly file
such prospectus. The Company will make every reasonable effort to prevent
the issuance of any stop order and, if any stop order is issued, to obtain
the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Representatives
notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)) or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectus
and will furnish the Representatives with copies of any such documents a
reasonable amount of time prior to such proposed filing or use, as the case
may be, and will not file or use any such document to which the
Representatives or counsel for the Underwriters shall reasonably object;
provided that such objection shall not prevent the filing of any such
amendment or supplement which, in the opinion of counsel for the Company,
is required to be filed by the requirements of the 1933 Act or the 1933 Act
Regulations.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Representatives and counsel for the Underwriters,
without charge, signed copies of the Registration Statement as originally
filed and of each amendment thereto (including exhibits filed therewith or
incorporated by reference therein) and signed copies of all consents and
certificates of experts, and will also deliver to the Representatives,
without charge, a conformed copy of the Registration Statement as
originally filed and of each amendment thereto (without exhibits) for each
of the Underwriters. The copies of the Registration Statement and each
amendment thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus
as such Underwriter reasonably requested, and the Company hereby consents
to the
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use of such copies by the Underwriters or any dealer for the purposes
permitted by the 1933 Act. The Company will furnish to each Underwriter,
without charge, during the period when the Prospectus is required to be
delivered under the 1933 Act or the Securities Exchange Act of 1934 (the
"1934 Act"), such number of copies of the Prospectus (as amended or
supplemented) as such Underwriter may reasonably request. If applicable,
the Prospectus and any amendments or supplements thereto furnished to the
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement and in the Prospectus. If at any time when a prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Securities, any event shall occur or condition shall exist as a result of
which it is necessary, to amend the Registration Statement or amend or
supplement the Prospectus in order that the Prospectus will not include any
untrue statements of a material fact or omit to state a material fact
necessary in order to make the statements therein not misleading in the
light of the circumstances existing at the time it is delivered to a
purchaser, or if it shall be necessary, at any such time to amend the
Registration Statement or amend or supplement the Prospectus in order to
comply with the requirements of the 1933 Act or the 1933 Act Regulations,
the Company will promptly prepare and file with the Commission, subject to
Section 3(b), such amendment or supplement as may be necessary to correct
such statement or omission or to make the Registration Statement or the
Prospectus comply with such requirements, and the Company will furnish to
the Underwriters such number of copies of such amendment or supplement as
the Underwriters may reasonably request.
(f) Blue Sky Qualifications. The Company will use its reasonable best
efforts, in cooperation with the Underwriters, to qualify the Securities
for offering and sale under the applicable securities laws of such states
and other jurisdictions (domestic or foreign) as the Representatives may
designate and to maintain such qualifications in effect for so long as may
be required to complete the distribution of the Securities or as otherwise
required by law; provided, however, that the Company shall not be obligated
to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in
which it is not
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<PAGE>
so qualified or to subject itself to taxation in respect of doing business
in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company
will file such statements and reports as may be required by the laws of
such jurisdiction to continue such qualification in effect for so long as
may be required to complete the distribution of the Securities or as
otherwise required by law.
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds received
by it from the sale of the Securities in the manner specified in the
Prospectus under "Use of Proceeds."
(i) Listing. The Company will use its reasonable best efforts to
effect and maintain the quotation of the Securities on the Nasdaq National
Market and will file with the Nasdaq National Market all documents and
notices required by the Nasdaq National Market of companies that have
securities that are traded in the over-the-counter market and quotations
for which are reported by the Nasdaq National Market.
(j) Restriction on Sale of Securities. During a period of 180 days
from the date of the Prospectus, the Company will not, without the prior
written consent of Merrill Lynch, (i) directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant
to purchase or otherwise transfer or dispose of any share of Common Stock
or any securities convertible into or exercisable or exchangeable for
Common Stock or file any registration statement under the 1933 Act with
respect to any of the foregoing or (ii) enter into any swap or any other
agreement or any transaction that transfers, in whole or in part, directly
or indirectly, the economic consequence of ownership of the Common Stock,
whether any such swap or transaction described in clause (i) or (ii) above
is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the
Securities to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or the
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conversion of a security outstanding on the date hereof and referred to in
the Prospectus, (C) any shares of Common Stock issued or options to
purchase Common Stock granted pursuant to existing employee benefit plans
of the Company referred to in the Prospectus, (D) any shares of Common
Stock issued in connection with the Concurrent Private Placement or the
Concurrent Public Offering (as such terms are defined in the Prospectus),
or (E) any shares of Common Stock issued in connection with acquisitions
(provided that the number of shares of Common Stock issued in connection
with such acquisitions does not exceed [1,000,000] and are subject to
restrictions on transfer for a period of 180 days from the date of the
Prospectus).
(k) Reporting Requirements. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant
to the 1934 Act within the time periods required by the 1934 Act and the
rules and regulations of the Commission thereunder.
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, reproduction and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon the
sale, issuance or delivery of the Securities to the Underwriters, (iv) the fees
and disbursements of the Company's counsel, accountants and other advisors, (v)
the qualification of the Securities under securities laws in accordance with the
provisions of Section 3(f) hereof, including filing fees and the reasonable fees
and disbursements of counsel in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing
and delivery to the Underwriters of copies of each preliminary prospectus and of
the Prospectus and any amendments or supplements thereto, (vii) the preparation,
printing and delivery to the Underwriters of copies of the Blue Sky Survey and
any supplement thereto, (viii) the fees and expenses of any transfer agent or
registrar for the Securities (ix) the filing fees incident to the review by the
National Association of Securities Dealers, Inc. (the "NASD") of the terms of
the sale of the Securities and (x) the fees and
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expenses incurred in connection with the inclusion of the Securities in the
Nasdaq National Market.
(b) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of
their reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any subsidiary delivered
pursuant to the provisions hereof, to the performance by the Company of its
covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, shall have
become effective and at Closing Time no stop order suspending the
effectiveness of the Registration Statement shall have been issued under
the 1933 Act or proceedings therefor initiated or threatened by the
Commission, and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
counsel to the Underwriters. A prospectus containing the Rule 430A
Information shall have been filed with the Commission in accordance with
Rule 424(b) (or a post-effective amendment providing such information shall
have been filed and declared effective in accordance with the requirements
of Rule 430A).
(b) Opinion of Counsel for Company. At Closing Time the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Bell, Boyd & Lloyd, counsel for the Company, in form and
substance reasonably satisfactory to counsel for the Underwriters, together
with signed or reproduced copies of such letter for each of the other
Underwriters to the effect set forth in Exhibit A hereto.
(c) Opinion of Counsel for Underwriters. At Closing Time the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Mayer, Brown & Platt, counsel for the Underwriters,
together with signed or reproduced copies of such letter for each of the
other Underwriters with respect to the matters set forth in (i), (ii), (v),
(vi) (solely as to preemptive or other similar
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rights arising by operation of law or under the charter or by-laws of the
Company), (viii) to (x), inclusive, (xi), (xiii) (solely as to the
information in the Prospectus under "Description of Capital Stock") and the
penultimate paragraph of Exhibit A hereto. In giving such opinion such
counsel may rely, as to all matters governed by the laws of jurisdictions
other than the law of the State of New York, the federal law of the United
States and the General Corporation Law of the State of Delaware, upon the
opinions of counsel satisfactory to the Representatives. Such counsel may
also state that, insofar as such opinion involves factual matters, they
have relied, to the extent they deem proper, upon certificates of officers
of the Company and its subsidiaries and certificates of public officials.
(d) Officers' Certificate. At Closing Time there shall not have been,
since the date hereof or since the respective dates as of which information
is given in the Prospectus, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, and the
Representatives shall have received a certificate of the President or a
Vice President of the Company and of the chief financial or chief
accounting officer of the Company, in their capacities as officers of the
Company and not individually, dated as of Closing Time, to the effect that,
to the best of their knowledge based on reasonable investigation, (i) there
has been no such material adverse change, (ii) the representations and
warranties in Section 1(a) hereof are true and correct with the same force
and effect as though expressly made at and as of Closing Time, (iii) the
Company has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied hereunder at or prior to Closing
Time, and (iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or are contemplated by the Commission.
(e) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Representatives shall have received from Arthur Andersen LLP
a letter dated such date, in form and substance satisfactory to the
Representatives with signed or reproduced copies of such letter for each of
the other Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial
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statements and certain financial information contained in the Registration
Statement and the Prospectus.
(f) Bring-down Comfort Letter. At Closing Time the Representatives
shall have received from Arthur Andersen LLP a letter, dated as of Closing
Time, to the effect that they reaffirm the statements made in the letter
furnished pursuant to subsection (e) of this Section, except that the
specified date referred to shall be a date not more than three business
days prior to Closing Time.
(g) Approval of Listing. At Closing Time the Securities shall have
been approved for inclusion in the Nasdaq National Market, subject only to
official notice of issuance.
(h) Lock-up Agreements. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form
of Exhibit B hereto signed by the persons listed on Schedule C hereto.
(i) Closing of Concurrent Private Placement and Concurrent Public
Offering. At Closing Time, the simultaneous closing of the Concurrent
Private Placement and the Concurrent Public Offering.
(j) Conditions to Purchase of Option Securities. In the event that
the Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations
and warranties of the Company contained herein and the statements in any
certificates furnished by the Company or any subsidiary of the Company
hereunder shall be true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the Representatives shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company, in
their capacities as officers of the Company and not individually,
confirming that the certificate delivered at the Closing Time pursuant
to Section 5(d) hereof remains true and correct as of such Date of
Delivery.
(ii) Opinion of Counsel for Company. The favorable opinion of Bell,
Boyd & Lloyd, counsel for the Company, in form and substance
reasonably satisfactory to counsel for the Underwriters, dated such
Date of Delivery, relating to the Option Securities to be purchased on
such Date of Delivery and otherwise to the
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same effect as the opinion required by Section 5(b) hereof.
(iii) Opinion of Counsel for Underwriters. The favorable opinion of
Mayer, Brown & Platt, counsel for the Underwriters, dated such Date of
Delivery, relating to the Option Securities to be purchased on such
Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from Arthur Andersen LLP,
in form and substance satisfactory to the Representatives and dated
such Date of Delivery, substantially in the same form and substance as
the letter furnished to the Representatives pursuant to Section 5(f)
hereof, except that the "specified date" in the letter furnished
pursuant to this paragraph shall be a date not more than five days
prior to such Date of Delivery.
(k) Additional Documents. At Closing Time and at each Date of
Delivery counsel for the Underwriters shall have been furnished with such
documents and opinions as they may reasonably require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as
herein contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection
with the issuance and sale of the Securities as herein contemplated shall
be reasonably satisfactory in form and substance to the Representatives and
counsel for the Underwriters.
(l) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of Option
Securities, on a Date of Delivery which is after the Closing Time, the
obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representatives by notice to the
Company at any time at or prior to Closing Time or such Date of Delivery,
as the case may be, and such termination shall be without liability of any
party to any other party except as provided in Section 4 and except that
Sections 6 and 7 shall survive any such termination and remain in full
force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Company agrees to indemnify and
hold harmless each Underwriter and each person, if
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any, who controls any Underwriter within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information, if
applicable, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged
untrue statement of a material fact contained in any preliminary prospectus
or the Prospectus (or any amendment or supplement thereto), or the omission
or alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of the failure of Reserved Share
Participants to pay for and accept delivery of Reserved Securities which
were subject to a properly confirmed agreement to purchase, such loss
measured by the difference between the net amount realized by the
Underwriters upon resale of the Securities and the initial public offering
price thereof;
(iii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) below) any such settlement is effected with the written consent of the
Company; and
(iv) against any and all expenses whatsoever, as incurred (including
the reasonable fees and disbursements of counsel chosen by Merrill Lynch),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i), (ii)
or (iii) above;
-20-
<PAGE>
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto), including the 430A Information, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment or
supplement thereto); and provided further, that, insofar as this indemnity
agreement relates to any untrue statement or omission, or any alleged untrue
statement or omission, made in a preliminary prospectus, but eliminated or
remedied in the Prospectus, it shall not inure to the benefit of an Underwriter
(or to the benefit of any person who controls such Underwriter) if a copy of the
Prospectus was not delivered by such Underwriter to the person asserting the
claim arising from such untrue statement or omission, or such alleged untrue
statement or omission at or prior to the time required by the 1933 Act, if the
delivery thereof would have constituted a defense to the claim asserted by such
person.
(b) Indemnification of Company, Directors and Officers. Each Underwriter
severally agrees to indemnify and hold harmless the Company, its directors, each
of its officers who signed the Registration Statement, and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration Statement
(or any amendment thereto), including the Rule 430A Information, if applicable,
or any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by such Underwriter through Merrill Lynch expressly for use in
the Registration Statement (or any amendment thereto) or such preliminary
prospectus or the Prospectus (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability which it may have otherwise than on
account of this indemnity agreement. An indemnifying party may participate at
its own expense in the defense of any such action. If it so elects within a
reasonable time after receipt of such notice, an indemnifying party, jointly
with any other indemnifying parties receiving such notice, may
-21-
<PAGE>
assume the defense of such action, with counsel chosen by it and approved by the
indemnified parties defendant in such action, unless such indemnified parties
reasonably object to such assumption on the ground that there may be legal
defenses available to them which are different from or in addition to those
available to such indemnifying party. If an indemnifying party assumes the
defense of such action, the indemnifying parties shall not be liable for any
fees and expenses of counsel for the indemnified parties incurred thereafter in
connection with such action. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel retained for local procedural and practice matters) separate from their
own counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Section 6 (whether or not the
indemnified parties are actual or potential parties thereto), unless such
settlement, compromise or consent (i) includes an unconditional release of each
indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim, (ii) does not include a statement as to or
an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party, (iii) does not impugn the reputation of any indemnified party
and (iv) does not restrict any indemnified party from engaging in any activity.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for reasonable fees and expenses of counsel, such indemnifying
party agrees that it shall be liable for any settlement of the nature
contemplated by Section 6(a)(iii) effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
SECTION 7. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company submitted pursuant hereto and identified
as such, shall remain operative and in full force and effect, regardless of any
-22-
<PAGE>
investigation made by or on behalf of any Underwriter or controlling person, or
by or on behalf of the Company, and shall survive delivery of the Securities to
the Underwriters.
SECTION 8. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by written notice to the Company, at any time at or prior to Closing
Time (i) if there has been, since the time of execution of this Agreement or
since the respective dates as of which information is given in the Prospectus,
any material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any material adverse
change in the financial markets in the United States, any outbreak of
hostilities or escalation thereof or other calamity or crisis, in each case the
effect of which is such as to make it, in the judgment of the Representatives,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or limited by the Commission or the Nasdaq National Market, or if
trading generally on the American Stock Exchange or the New York Stock Exchange
or in the Nasdaq National Market has been suspended or limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices have
been required, by any of said exchanges or by such system or by order of the
Commission, the National Association of Securities Dealers, Inc. or any other
governmental authority, or (iv) if a banking moratorium has been declared by
either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 6 and
7 shall survive such termination and remain in full force and effect.
SECTION 9. Default by One or More of the Underwriters. If one or more of
the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have the right, within
24 hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representatives shall not have
completed such arrangements within such 24-hour period, then:
-23-
<PAGE>
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the non-
defaulting Underwriters shall be obligated, severally and not jointly, to
purchase the full amount thereof in the proportions that their respective
underwriting obligations hereunder bear to the underwriting obligations of
all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceed 10% of the number of
Securities to be purchased on such date, this Agreement or, with respect to
any Date of Delivery which occurs after the Closing Time, the obligation of
the Underwriters to purchase and of the Company to sell the Option
Securities to be purchased and sold on such Date of Delivery shall
terminate without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either the Representatives or the Company shall have the
right to postpone Closing Time or the relevant Date of Delivery, as the case may
be, for a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 10.
SECTION 10. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives c/o Merrill Lynch at 5500
Sears Tower, Chicago, Illinois 60606, Attention: Charles A. Lewis, Vice
Chairman - Investment Banking; and notices to the Company shall be directed to
it at 1526 Cole Boulevard, Suite 200, Golden, Colorado 80401, Attention: Paul
Strasen, General Counsel.
SECTION 11. Parties. This Agreement shall inure to the benefit of and be
binding upon the Underwriters and the Company and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation, other than the Underwriters
and the Company and their respective successors and the controlling persons and
officers and directors referred to in Section 6 and their heirs and legal
representatives, any legal or equitable
-24-
<PAGE>
right, remedy or claim under or in respect of this Agreement or any provision
herein contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the Underwriters and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 12. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 13. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all
-25-
<PAGE>
counterparts, will become a binding agreement between the Underwriters and the
Company in accordance with its terms.
Very truly yours,
EINSTEIN/NOAH BAGEL CORP.
By
-------------------------------------
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
ALEX. BROWN & SONS INCORPORATED
MONTGOMERY SECURITIES
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By
-------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
-26-
<PAGE>
SCHEDULE A
Number of
Initial
Name of Underwriter Securities
- ------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................
Alex. Brown & Sons Incorporated...........................
Montgomery Securities.....................................
--------
Total ..............................................
========
Sch A - 1
<PAGE>
SCHEDULE B
EINSTEIN/NOAH BAGEL CORP.
___Shares of Common Stock
(Par Value $0.01 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $______.
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $______, being an amount equal to the initial
public offering price set forth above less $______ per share; provided that the
purchase price per share for any Option Securities purchased upon the exercise
of the over-allotment option described in Section 2(b) shall be reduced by an
amount per share equal to any dividends or distributions declared by the Company
and payable on the Initial Securities but not payable on the Option Securities.
Sch B - 1
<PAGE>
SCHEDULE C
List of persons and entities
subject to lock-up
Sch C - 1
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus.
(iii) To the best of our knowledge and information, the Company is duly
qualified as a foreign corporation to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing of property or the conduct of business, except where
the failure so to qualify or to be in good standing would not result in a
Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the Purchase Agreement or pursuant to reservations, agreements or employee
benefit plans referred to in the Prospectus or pursuant to the exercise of
convertible securities or options referred to in the Prospectus, and except for
the Repurchase Shares); the shares of issued and outstanding capital stock of
the Company have been duly authorized and validly issued and are fully paid and
non-assessable.
(v) The Securities have been duly authorized for issuance and sale to
the Underwriters pursuant to the Purchase Agreement and, when issued and
delivered by the Company pursuant to the Purchase Agreement against payment of
the consideration set forth in the Purchase Agreement, will be validly issued
and fully paid and non-assessable.
(vi) The issuance of the Securities is not subject to preemptive or other
similar rights arising by operation of law, under the charter or by-laws of the
Company or, to the best of their knowledge and information, otherwise.
(vii) Each subsidiary of the Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
A-1
<PAGE>
Prospectus and, to the best of our knowledge and information, is duly qualified
as a foreign corporation to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a Material
Adverse Effect; all of the issued and outstanding capital stock of each such
subsidiary has been duly authorized and validly issued, is fully paid and non-
assessable and, to the best of our knowledge and information, is owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity (other than the
pledge of stock pursuant to the Credit Agreement).
(viii) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(ix) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in the manner and within
the time period required by Rule 424(b); and, to the best of our knowledge and
information, no stop order suspending the effectiveness of the Registration
Statement has been issued under the 1933 Act and no proceedings for that purpose
have been instituted or are pending or threatened by the Commission.
(x) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information, as applicable, the Prospectus and each
amendment or supplement to the Registration Statement and Prospectus as of their
respective effective or issue dates (other than the financial statements and
supporting schedules included therein or omitted therefrom, as to which we need
express no opinion) complied as to form in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations.
(xi) The form of certificate used to evidence the Common Stock complies
in all material respects with all applicable statutory requirements, with any
applicable requirements of the charter and by-laws of the Company.
(xii) To the best of our knowledge and information, there is not pending
or threatened any action, suit, proceeding, inquiry or investigation, to which
the Company or any subsidiary is a party, or to which the property of the
Company or any subsidiary is subject, before or brought by any court or
governmental agency or body, domestic or foreign, which might reasonably be
expected to result in a Material Adverse Effect, or which might reasonably be
expected to materially and adversely
A-2
<PAGE>
affect the properties or assets thereof or the consummation of the transactions
contemplated in the Purchase Agreement or the performance by the Company of its
obligations thereunder.
(xiii) The information in the Prospectus under "Description of Capital
Stock" and "_____________" and in the Registration Statement under item 15, to
the extent that it constitutes matters of law, summaries of legal matters, the
Company's charter and bylaws or legal proceedings, or legal conclusions, has
been reviewed by us and is correct in all material respects.
(xiv) To the best of our knowledge and information, there are no
franchises, contracts, indentures, mortgages, loan agreements, notes, leases or
other instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto,
and the descriptions thereof or references thereto are correct in all material
respects.
(xv) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign (other than under the 1933 Act and the
1933 Act Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which we need express
no opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Purchase Agreement or for the offering, issuance
or sale of the Securities.
(xvi) To the best of our knowledge and information, the execution,
delivery and performance of the Purchase Agreement and the consummation of the
transactions contemplated in the Purchase Agreement (including the issuance and
sale of the Securities) and compliance by the Company with its obligations under
the Purchase Agreement do not and will not, whether with or without the giving
of notice or lapse of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined in Section 1(a)(x) of the Purchase
Agreement) under or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any subsidiary
pursuant to any contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or any other agreement or instrument, known to us, to
which the Company or any subsidiary is a party or by which it or any of them may
be bound, or to which any of the property or assets of the Company or any
subsidiary is subject (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not have a Material Adverse Effect), nor will
such action result in any violation of the provisions of the charter or by-laws
of the
A-3
<PAGE>
Company, or any applicable law, statute, rule, regulation, judgment, order, writ
or decree, known to us, of any government, government instrumentality or court,
domestic or foreign, having jurisdiction over the Company or any subsidiary or
any of their respective properties, assets or operations.
(xvii) The Company is not an "investment company" as such term is defined
in the 1940 Act.
(xviii) The issuance, sale and delivery of shares of Common Stock by the
Company to Boston Chicken, Inc. in the Concurrent Private Placement is exempt
from the registration requirements of the 1933 Act.
Nothing has come to our attention that would lead us to believe that the
Registration Statement or any amendment thereto, including the Rule 430A
Information (if applicable), (except for financial statements and schedules and
other financial data included therein or omitted therefrom, as to which we need
make no statement), at the time such Registration Statement or any such
amendment became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectus or any
amendment or supplement thereto (except for financial statements and schedules
and other financial data included therein or omitted therefrom, as to which we
need make no statement), at the time the Prospectus was issued, at the time any
such amended or supplemented prospectus was issued or at the Closing Time,
included or includes an untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely, as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
A-4
<PAGE>
[FORM OF LOCK-UP FROM DIRECTORS, OFFICERS OR OTHER
STOCKHOLDERS PURSUANT TO SECTION 5(i)]
Exhibit B
_________________ , 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated,
Alex. Brown & Sons Incorporated
Montgomery Securities
as Representatives of the several
Underwriters to be named in the
within-mentioned Purchase Agreement
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Re: Proposed Public Offering by Einstein/Noah Bagel Corp.
-----------------------------------------------------
Dear Sirs:
The undersigned, a stockholder [and an officer and/or director] of
Einstein/Noah Bagel Corp., a Delaware corporation (the "Company"), understands
that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), Alex. Brown & Sons Incorporated and Montgomery Securities
propose to enter into a Purchase Agreement (the "Purchase Agreement") with the
Company providing for the public offering of shares (the "Securities") of the
Company's common stock, par value $0.01 per share (the "Common Stock"). In
recognition of the benefit that such an offering will confer upon the
undersigned as a stockholder [and an officer and/or director] of the Company,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the undersigned agrees with each underwriter to
be named in the Purchase Agreement that, during a period of 180 days from the
date of the Purchase Agreement, the undersigned will not, without the prior
written consent of Merrill Lynch, directly or indirectly, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant for the sale of,
or otherwise dispose of or transfer any shares of the Company's Common Stock or
any securities convertible into or exchangeable or exercisable
B-1
<PAGE>
for Common Stock, whether now owned or hereafter acquired by the undersigned or
with respect to which the undersigned has or hereafter acquires the power of
disposition or (ii) enter into any swap or any other agreement or any
transaction that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any such swap or
transaction is to be settled by delivery of Common Stock or other securities, in
cash or otherwise.
Very truly yours,
Signature:_______________________
Print Name:______________________
B-2
<PAGE>
Exhibit 2.1(a)
AGREEMENT TO CONTRIBUTE SHARES
BY AND AMONG
THE SHAREHOLDERS OF
BRACKMAN BROTHERS, INC.
AS TRANSFERORS
AND
PROGRESSIVE BAGEL CONCEPTS, INC.
AS TRANSFEREE
AND
BRACKMAN BROTHERS, INC.
DATED: FEBRUARY 17, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
CONTRIBUTION ............................................................. 3
1.1 Contribution of Contributed Shares ............................... 3
ARTICLE 2
SHARES TO BE ISSUED IN
EXCHANGE FOR CONTRIBUTION ................................................ 3
2.1 Shares to be Issued in Exchange for Contribution ................. 3
2.2 Assignment of and Assumption of Certain Agreements
Respecting the BCI Shares ........................................ 3
2.3 Put Option Respecting the Exchange Shares ........................ 5
2.4 Tax Loans and Additional Payment ................................. 8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EACH TRANSFEROR ........................ 11
3.1 Authority ........................................................ 11
3.2 Binding Effect ................................................... 11
3.3 No Conflict ...................................................... 12
3.4 Ownership of Contributed Shares .................................. 12
3.5 Acquisition of BCI Shares and Exchange Shares .................... 12
3.6 Brokers and Finders .............................................. 16
3.7 Private Placement Memorandum ..................................... 16
3.8 Organization; Qualification ...................................... 18
3.9 No Conflict ...................................................... 18
3.10 Contributed Shares ............................................... 19
3.11 Financial Statements ............................................. 19
3.12 Liabilities ...................................................... 20
3.13 Events Since December 31, 1994 ................................... 20
3.14 Intentionally Omitted ............................................ 21
3.15 Litigation ....................................................... 22
3.16 Taxes ............................................................ 22
3.17 Title ............................................................ 22
3.18 Subsidiaries ..................................................... 22
3.19 Corporate Records ................................................ 23
3.20 Real Property .................................................... 23
3.21 Licenses and Permits ............................................. 30
3.22 Compliance With Laws ............................................. 30
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
3.23 Environmental Matters ............................................ 31
3.24 Labor Relations .................................................. 32
3.25 Employee Benefit Plans ........................................... 33
3.26 Bank Accounts .................................................... 33
3.27 Contracts ........................................................ 34
3.28 Proprietary Rights of the Company ................................ 38
3.39 Insurance ........................................................ 39
3.30 Guarantees ....................................................... 39
3.31 Brokers, Finders and Experts ..................................... 39
3.32 Computer Software ................................................ 39
3.33 Business Records ................................................. 40
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TRANSFEREE ............................. 40
4.1 Good Standing .................................................... 40
4.2 Corporate Authority .............................................. 40
4.3 Binding Effect ................................................... 41
4.4 No Conflict ...................................................... 41
4.5 Capitalization ................................................... 41
4.6 BCI Shares ....................................................... 42
4.7 Exchange Shares .................................................. 42
4.8 Litigation ....................................................... 42
4.9 Acquisition of Contributed Shares ................................ 43
4.10 Initial Capitalization ........................................... 43
ARTICLE 5
ADDITIONAL COVENANTS, AGREEMENTS AND
ACKNOWLEDGEMENTS ......................................................... 43
5.1 Restrictions on Transfer of Exchange Shares ...................... 43
5.2 Legends on Exchange Shares ....................................... 45
5.3 Confidential Information ......................................... 46
5.4 Restrictive Covenant ............................................. 47
5.5 Remedies; Waiver ................................................. 49
5.6 Acknowledgement of Dual Representation ........................... 50
5.7 Acknowledgement of Related Party Transactions .................... 50
5.8 Subsequent Audited Financials .................................... 51
5.9 Directors ........................................................ 51
5.10 Conduct of Business Prior to Closing ............................. 52
5.11 Access Pending Closing ........................................... 55
5.12 Consents of Third Parties ........................................ 55
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5.13 Interim Financial Statements ..................................... 56
5.14 Election of Directors ............................................ 56
5.15 Confidentiality; Transferee Restrictive Covenant ................. 56
5.16 Investor Offering ................................................ 59
5.17 Public Disclosure ................................................ 59
5.18 Closing .......................................................... 60
ARTICLE 6
CONDITIONS TO TRANSFEREE'S OBLIGATION TO CLOSE ........................... 60
6.1 Accuracy of Representations and Warranties
and Compliance with Obligations .................................. 60
6.2 Deliveries ....................................................... 61
6.3 Registration Rights Agreement .................................... 61
6.4 Employment Agreements ............................................ 61
6.5 Payoff of Line of Credit ......................................... 61
6.6 Cancellation of Employee Options ................................. 61
6.7 Cancellation of Shareholders Agreements .......................... 62
6.8 Title Insurance .................................................. 62
ARTICLE 7
CONDITIONS TO OBLIGATION OF TRANSFERORS TO CLOSE ......................... 62
7.1 Accuracy of Representations and Warranties and
Compliance with Obligations ...................................... 62
7.2 Investor Offering ................................................ 63
7.3 BCI Loan Agreement ............................................... 63
7.4 Employment Agreements ............................................ 63
7.5 Board of Directors' Approval ..................................... 63
7.6 Deliveries ....................................................... 64
7.7 Registration Rights Agreement .................................... 64
7.8 Assignment of Rights ............................................. 64
7.9 Election of Daniel V. Colangelo as Director ...................... 64
ARTICLE 8
TERMINATION .............................................................. 64
8.1 Termination Rights ............................................... 64
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 9
CLOSING AND CLOSING DELIVERIES ........................................... 65
9.1 Closing .......................................................... 65
9.2 Action To Be Taken by Transferors ................................ 65
9.3 Action To Be Taken by Transferee ................................. 67
9.4 Form of Documents ................................................ 68
9.5 Further Assurances ............................................... 68
ARTICLE 10
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
COVENANTS ................................................................ 69
ARTICLE 11
INDEMNIFICATION .......................................................... 70
11.1 Indemnification by Transferors ................................... 70
11.2 Indemnification by Transferee .................................... 72
11.3 Special Environmental Indemnity .................................. 73
11.4 Transferor's Special Indemnities ................................. 75
ARTICLE 12
MISCELLANEOUS ............................................................ 77
12.1 Written Agreement to Govern ...................................... 77
12.2 Severability ..................................................... 78
12.3 Notices .......................................................... 78
12.4 Counterparts ..................................................... 79
12.5 No Third Party Beneficiaries ..................................... 79
12.6 Interpretation ................................................... 79
12.7 Construction ..................................................... 80
12.8 Schedules and Exhibits ........................................... 80
12.9 Modification ..................................................... 80
12.10 Law to Govern .................................................... 80
12.11 Time of the Essence .............................................. 81
12.12 Successors and Assigns ........................................... 81
12.13 Expenses ......................................................... 81
12.14 Second Amended and Restated Shareholders Agreement of the
Shareholders of Brackman Brothers, Inc. .......................... 81
</TABLE>
iv
<PAGE>
SCHEDULES AND EXHIBITS
Exhibit I - Stock Purchase Agreement With BCI Registration Rights
Agreement
Exhibit 2.4 - Promissory Note
Exhibit 6.3 - Registration Rights Agreement
Exhibit 6.4 - Employment Agreements
Exhibit 7.3 - BCI Loan Agreement
Exhibit 9.2(f) - Opinion of Parsons Behle & Latimer
Exhibit 9.3(d) - Opinion of Rudnick & Wolfe
Schedule I - Transferors and Contributed Shares
Schedule 3.3 - Conflicts
Schedule 3.4 - Shareholder Agreements
Schedule 3.5(c) - BCI Information
Schedule 3.8 - Officers and Directors of the Company
Schedule 3.9 - Conflicts
Schedule 3.10 - Options
Schedule 3.11 - Financial Statements
Schedule 3.12 - Liabilities
Schedule 3.13 - Events since December 31, 1994
Schedule 3.15 - Litigation
Schedule 3.17 - Liens
Schedule 3.18 - Subsidiary
Schedule 3.20(a) - Owned Real Property
Schedule 3.20(b) - Leased Real Property
Schedule 3.20(c) - Disclosures Regarding Real Property
Schedule 3.23 - Environmental Matters
Schedule 3.24 - Labor Relations
Schedule 3.25 - Employee Benefit Plans
Schedule 3.26 - Bank Accounts
Schedule 3.27 - Contracts
Schedule 3.28 - Proprietary Rights
Schedule 3.29 - Insurance
Schedule 3.30 - Guarantees
Schedule 3.32 - Computer Software
Schedule 11.4 - Personal Guarantees of Transferors
v
<PAGE>
AGREEMENT TO CONTRIBUTE SHARES
THIS AGREEMENT TO CONTRIBUTE SHARES ("Agreement") is made and entered into
this 17th day of February, 1995 by and among those individuals listed on
Schedule I hereto ("Transferors") and PROGRESSIVE BAGEL CONCEPTS, INC., a
Delaware corporation ("Transferee") and BRACKMAN BROTHERS, INC., a Utah
corporation ("Brackman").
RECITALS
--------
A. Transferee has been formed for the purpose of acquiring all of the
stock of BRACKMAN BROTHERS, INC., a Utah corporation (the "Company"), which is
engaged in the business of operating retail bagel bakeries (the "Business").
B. Transferee proposes to purchase from Boston Chicken, Inc., a Delaware
corporation ("BCI") that number of shares of the common stock of BCI that will
have an aggregate market value of Eight Million Three Hundred Thousand Dollars
($8,300,000) (the "BCI Shares") pursuant to a Stock Purchase Agreement by and
between Transferee and BCI substantially in the form attached hereto as Exhibit
I ("Stock Purchase Agreement") and enter into a related registration rights
agreement with BCI substantially in form attached to the Stock Purchase
Agreement as Exhibit B thereto (the "BCI Registration Rights Agreement"); and
<PAGE>
C. Each of the Transferors owns the number of shares of the Company set
forth opposite such Transferor's name on Schedule I hereto, and the Transferors
collectively own all the issued and outstanding shares of the Company (the
"Contributed Shares").
D. Transferors desire to contribute the Contributed Shares to Transferee,
solely in exchange for the BCI Shares and 2,550 shares of common stock, par
value $.01 per share, of Transferee (such shares of Transferee to hereinafter be
referred to as the "Exchange Shares"), and Transferee desires to accept such
contribution, all on the terms and conditions set forth in this Agreement.
E. Transferors and Transferee hereby acknowledge and agree that it is
their intention that (i) the transaction contemplated hereby will close
simultaneously with the closing of the Investor Offering (as defined herein) and
(ii) that the closing of the transaction contemplated hereby and the closing of
the Investor Offering and the documentation evidencing the closing of all such
transactions be treated as an integrated unitary transaction between the parties
thereto and one plan of formation for the Transferee under Section 351 of the
Internal Revenue Code of 1986, as amended.
AGREEMENTS
----------
In consideration of the premises and the mutual agreements hereinafter set
forth, the parties agree as follows:
2
<PAGE>
ARTICLE 1
---------
CONTRIBUTION
------------
1.1 CONTRIBUTION OF CONTRIBUTED SHARES. At the Closing (as hereinafter
----------------------------------
defined), each of the Transferors shall contribute to Transferee the number of
Contributed Shares set forth opposite such Transferor's name on Schedule I
hereto.
ARTICLE 2
---------
SHARES TO BE ISSUED IN
EXCHANGE FOR CONTRIBUTION
-------------------------
2.1 SHARES TO BE ISSUED IN EXCHANGE FOR CONTRIBUTION. At the Closing,
------------------------------------------------
Transferee shall issue to Transferors for all Contributed Shares the BCI Shares
and the Exchange Shares, which shall be allocated amongst the Transferors as set
forth opposite each Transferor's name on Schedule I hereto.
2.2 ASSIGNMENT OF AND ASSUMPTION OF CERTAIN AGREEMENTS RESPECTING THE BCI
---------------------------------------------------------------------
SHARES. At the Closing, Transferee shall transfer and assign to the Transferors
- ------
and the Transferors shall accept and assume from Transferee, all of Transferee's
right, title, and interest to, and duties, obligations and remedies under, the
Stock Purchase Agreement and the BCI Registration Rights Agreement, including
without limitation:
3
<PAGE>
(a) Transferee's right under the Stock Purchase Agreement to receive
certain price guarantees from BCI with respect to resales of the BCI
Shares;
(b) the benefit of all representations and warranties made by BCI in the
Stock Purchase Agreement;
(c) Transferee's right under the BCI Registration Rights Agreement to
register the BCI Shares with the Securities and Exchange Commission;
and
(d) all other rights, obligations and remedies of Transferee under the
terms of the Stock Purchase Agreement and the BCI Registration Rights
Agreement.
Transferee shall execute and deliver such further instruments of transfer and
assignment and take such other actions as the Transferors or the terms of the
Stock Purchase Agreement and the BCI Registration Rights Agreement may require
in order to effectively assign, transfer and vest in the Transferors all right,
title and interest in and to the Stock Purchase Agreement and the BCI
Registration Rights Agreement assigned hereby and the benefits intended to be
conveyed thereby and to facilitate the consummation of all transactions
contemplated therein.
Nothing contained in this Agreement shall be deemed to expand or limit the
rights and remedies of the Transferors against BCI as compared to the rights and
remedies that
4
<PAGE>
Transferee would have had against BCI had Transferee not assigned the
Transferors such rights and remedies.
2.3 PUT OPTION RESPECTING THE EXCHANGE SHARES.
-----------------------------------------
(a) In the event that:
(i) as of February 28, 1998, Transferee has not completed an initial
public offering of its shares of common stock that results in the
receipt by the Transferee of gross proceeds of at least Fifteen
Million Dollars ($15,000,000) pursuant to a registration
statement filed pursuant to the Securities Act of 1933, as
amended (a "Qualified Public Offering"), or
(ii) at any time prior to February 28, 1998 BCI shall no longer have a
Significant Interest (as defined in subparagraph (b) below) in
Transferee other than as a result of the payment in full of all
indebtedness under, and the termination of, the BCI Loan
Agreement (as hereinafter defined),
then in either such event (each a "Trigger Date"), each Transferor
shall have the option, exercised by written notice to Transferee
given not later than fifteen (15) days after the Trigger Date, to
require Transferee to purchase all of such Transferor's Exchange
Shares then owned by him at
5
<PAGE>
their then fair market value. The fair market value of a Transferor's
Exchange Shares shall be determined by the agreement of Transferee and
such Transferor at the time, without regard to any factor relating to
the liquidity of such Exchange Shares or the fact that the
Transferor's Exchange Shares represent a minority of all of
Transferee's outstanding stock; provided, however, that in no event
shall such fair market value of an Exchange Share be less than
$1,764.71, appropriately adjusted to take into account any
dividend, stock split, combination of shares, or other relevant change
in the capitalization of the Transferee occurring prior to any
exercise of the put option. If Transferee and such Transferor are
unable to agree on the fair market value of such Transferor's Exchange
Shares, they shall mutually agree on and appoint a national firm of
certified public accountants or a reputable business valuation firm to
determine the fair market value of such Exchange Shares, and the
determination of such firm shall be final and binding on all
Transferors who have not otherwise agreed with Transferee on the
valuation. If the parties are unable to agree on a firm to perform the
valuation, then the valuation shall be performed by Alex. Brown &
Sons, Incorporated. Fees and expenses of any such firm selected
pursuant to this Section 2.3 shall be borne 50% by the Transferee and
50% by those Transferors seeking the valuation determination.
6
<PAGE>
(b) A "Significant Interest" in Transferee shall mean, at any time, BCI's
ownership of, or right to acquire ownership of (through the exercise
of its conversion and/or option rights under the BCI Loan Agreement
(as below defined) or otherwise, and whether or not such rights are
then exercisable), that number of shares of Transferee's voting common
stock or other capital stock of the Transferee possessing voting power
equal to 25% or more of the Transferee's then issued and outstanding
shares of such stock.
(c) In the event that a Transferor exercises its option granted pursuant
to this Section 2.3, Transferee shall pay such Transferor the
applicable purchase price in immediately available funds within thirty
(30) days of the determination of such price against delivery of the
Exchange Shares duly endorsed for transfer to Transferee. All of the
Exchange Shares sold to Transferee pursuant to any exercise of the put
option in this Section 2.3 shall be free and clear of all liens,
pledges, encumbrances, claims, and equities of every kind.
(d) The put rights in this Section 2.3 may be assigned and transferred
only to Permitted Transferees (as defined below): (i) who receive the
Exchange Shares as a result of the death of a Transferor or by gift or
otherwise without consideration therefor solely for bonafide estate
planning purposes; (ii) who are permitted under Section 5.1(d) to
become holders
7
<PAGE>
of the Exchange Shares; and (iii) who agree to be bound, as evidenced
in a legally valid writing reasonably satisfactory to the Transferee,
by the restrictions and obligations imposed upon the Transferors
herein. For purposes of this Section 2.3, the term Permitted
Transferees shall mean (x) any lineal descendent or current spouse of
any Transferor; (y) any trust for the sole benefit of persons
specified in (x); or (z) any guardian, custodian or attorney-in-fact
for the sole benefit of persons specified in (x).
2.4 TAX LOANS AND ADDITIONAL PAYMENT.
--------------------------------
(a) The Transferee agrees to make a loan to each of the Transferors
(collectively, the "Loans") on April 15, 1996 in immediately available
funds in an amount equal to the Tax Payment Funding Amount of such
Transferor, if any. The Tax Payment Funding Amount of a Transferor
shall be an amount (which shall not be less than zero) equal to (i)
the Fair Market Value at the Closing of the BCI Shares received by the
Transteror at the Closing pursuant to this Agreement multiplied by the
Closing Date Tax Rate, less (ii) an amount equal to the Closing Date
Tax Rate multiplied by the aggregate sales proceeds (after sales
commissions) from sales of such BCI Shares by such Transferor on or
before April 15, 1996. For this purpose, the Closing Date Tax Rate
shall be the maximum combined statutory tax rate on the Transferor's
gain on his receipt of BCI
8
<PAGE>
Shares pursuant hereto under federal income tax law and the income tax
law of the state of the Transferor's domicile on the Closing Date
(giving effect for this purpose to the deductibility, for Federal
income tax purposes, of State income taxes paid).
(b) Each of the Loans shall be evidenced by a promissory note in the form
attached as Exhibit 2.4 hereto. Each Loan shall be due no later than
April 15, 2001. Each Transferor shall prepay the principal of his Loan
at the time of each sale of BCI Shares by such Transferor after April
15, 1996, such prepayment to be in an amount equal to the Closing Date
Tax Rate multiplied by the aggregate sales proceeds (after sales
commissions) realized from sales of such BCI Shares until such
principal has been paid in full.
(c) For purposes of this Section 2.4 the Fair Market Value of the BCI
Shares received by a Transferor at the Closing shall be equal to the
amount realized upon receipt of such shares as reported by such
Transferor on his 1995 Federal income tax return, a copy of which
shall be provided to the Transferee on or prior to April 15, 1996.
(d) Each Transferor further covenants and agrees that he shall give prompt
written notice to the Transferee of each sale of BCI Shares by him at
any time on or after the date of the Closing and on or before the date
on
9
<PAGE>
which the Loan to such Transferor has been paid in full, which notices
shall state the number of shares sold, the selling price of the shares
and the amount of any sales commissions.
(e) At any time during the period commencing on the date hereof and ending
three years after the date hereof, in the event that the Closing Date
Tax Rate exceeds the Future Tax Rate applicable to a sale by a
Transferor of BCI Shares received by the Transferor pursuant to this
Agreement, then the Transferee shall pay to the Transferor, as
additional consideration for the Contributed Shares, an amount in cash
(the "Additional Consideration") calculated as follows:
Additional Consideration = [(Fair Market Value of such BCI Shares
at Closing) x (Closing Date Tax Rate - Future Tax Rate)] +
(Additional Consideration x Future Tax Rate)
For this purpose, the Future Tax Rate applicable to a sale occurring
at any time shall be the maximum combined statutory tax rate on long-
term capital gains under Federal income tax law and the income tax law
of the state where the Transferor resides applicable to sales of
capital assets at such time (giving effect for this purpose to the
deductibility, for Federal income tax purposes, of state income taxes
paid).
10
<PAGE>
(f) In the event that any Transferor is deemed to receive any dividend or
compensation income in connection with the Loans pursuant to Section
7872 of the Code, and such income exceeds the amount of interest that
such Transferor is deemed to have paid in connection with the Loans
pursuant to Section 7872 of the Code that is deductible by such
Transferor (such excess referred to herein as the "Excess"), then the
Transferee shall pay the Transferor, as additional consideration for
the Contributed Shares, an amount in cash sufficient so that, after
deduction from the amount so paid pursuant to this Section 2.4(f) of
the income tax payable on the amount paid pursuant to this Section
2.4(f), there shall remain an amount equal to the income tax liability
on the Excess.
ARTICLE 3
---------
REPRESENTATIONS AND WARRANTIES OF EACH TRANSFEROR
-------------------------------------------------
To induce Transferee to accept the Contributed Shares, each Transferor hereby
represents and warrants to Transferee, severally and not jointly, as set forth
in Sections 3.1 through 3.7 hereof as follows:
3.1 AUTHORITY. The Transferor has the requisite power and authority to
---------
execute and deliver this Agreement and to perform his obligations hereunder.
11
<PAGE>
3.2 BINDING EFFECT. This Agreement has been duly executed and delivered by
--------------
the Transferor and constitutes the legal, valid and binding obligation of such
Transferor, enforceable against such Transferor in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally and subject to general principles of equity.
3.3 NO CONFLICT. Neither the execution and delivery of this Agreement by
-----------
such Transferor nor the performance of his obligations hereunder will conflict
with or result in a breach of any of the provisions of, or constitute a default
under any material agreement or any mortgage, indenture, lease, contract or
other instrument to which such Transferor is a party or by which such Transferor
is bound, or require the consent, approval or authorization of any person,
entity or governmental authority, or result in the violation of any law to which
such Transferor is subject.
3.4 OWNERSHIP OF CONTRIBUTED SHARES. Such Transferor owns, of record and
-------------------------------
beneficially, the number of Contributed Shares set forth opposite his name on
Schedule I hereto, free and clear of any lien, security interest, pledge,
encumbrance, restriction, charge or claim whatsoever other than such
restrictions arising out of federal and state securities laws. Except for the
shareholder agreements identified on Schedule 3.4 (the "Shareholder Agreements")
there are no outstanding options, rights, contracts, calls, puts or other
agreements to which such Transferor is a party or which are binding on such
Transferor or any other agreement providing for the disposition or acquisition
of the Contributed Shares
12
<PAGE>
owned by such Transferor (other than this Agreement). Each of the Shareholder
Agreements shall be terminated and cancelled prior to the Closing.
3.5 ACQUISITION OF BCI SHARES AND EXCHANGE SHARES. Each Transferor
---------------------------------------------
represents and warrants that:
(a) He is acquiring his BCI Shares and Exchange Shares for his own account
and not with a view to distribution or resale thereof in any
transaction which would be in violation of the Securities Act of 1933,
as amended (the "Securities Act") and rules promulgated thereunder, or
any state securities statute, has not subdivided his BCI Shares or his
Exchange Shares with, nor is he holding all or any portion of the BCI
Shares or Exchange Shares for, any other person, and agrees not to
sell, hypothecate or otherwise dispose of all or any part of his BCI
Shares or Exchange Shares unless the BCI Shares or Exchange Shares
represented thereby have been registered under the Securities Act and
applicable state or other securities laws or, in the opinion of
counsel for the Transferor, which counsel and which opinion are
reasonably satisfactory to BCI or Transferee as applicable, an
exemption from the registration requirements of the Securities Act and
such state or other laws is available.
(b) He is an "accredited investor" as defined in Regulation D promulgated
under the Securities Act or if he is not an "accredited investor":
13
<PAGE>
(i) his overall commitment to investments which are not readily
marketable is not disproportionate to his net worth, and his
investment in the BCI Shares and Exchange Shares will not cause
such overall commitment to become excessive;
(ii) he has adequate net worth and means of providing for his current
needs and personal contingencies to sustain a complete loss of
his investment in the Transferee and BCI, and he has no need for
liquidity in his investment in the BCI Shares and Exchange
Shares;
(iii) he has such knowledge and experience in financial and business
matters in general and in particular with respect to this type of
investment that he is capable of evaluating the merits and risks
of an investment in the Transferee;
(iv) he has evaluated and understands the risks and terms of investing
in Transferee and BCI; and
(v) in the case of Mr. Paul Aiken, he is a duly licensed attorney
with experience in corporate law.
14
<PAGE>
(c) He has received and carefully read the material set forth on Schedule
3.5(c) (the "BCI Information") and the Memorandum (as defined in
Section 3.7 below) including all exhibits thereto. Transferee has made
available to him and/or his attorney and/or his accountant all
documents that he or they have requested relating to an investment in
BCI and in the Transferee and has provided answers in writing to all
of his or their questions concerning the offering and an investment in
BCI and in the Transferee. In evaluating the suitability of an
investment in BCI and in the Transferee, each Transferor has not
relied upon any representations or other information (whether oral or
written) other than as set forth in the BCI Information and the
Memorandum including all exhibits thereto or as contained in any
documents or answers in writing to questions so furnished to him by
the Transferee.
(d) He recognizes that the Transferee has no financial or operating
history and that an investment in the Transferee involves a high
degree of risk, and he has taken full cognizance of and understands
all of the risk factors related to the purchase of the Exchange
Shares, including, but not limited to, those set forth under the
captions "Risk Factors" in the prospectus contained in the BCI
Information and in the Memorandum.
15
<PAGE>
(e) He has discussed with his legal, tax and financial advisors the
suitability of an investment in BCI and in the Transferee for his
particular tax and financial situation.
(f) He is acquiring his BCI Shares and his Exchange Shares without being
furnished any offering literature or prospectus other than the BCI
Information and the Memorandum (and other than any documents or
answers to questions described in sub-section 3.5(c) above).
(g) He is a bona fide resident of the State or other jurisdiction set
forth in his address on Schedule I.
3.6 BROKERS AND FINDERS. Except with respect to the services of Montgomery
-------------------
Securities (the "Broker"), the Transferor has not engaged or authorized any
broker, investment banker or third party to act on any such Transferor's behalf,
either directly or indirectly, as a broker, finder or advisor in connection
with the transaction contemplated hereby.
3.7 PRIVATE PLACEMENT MEMORANDUM. The Transferor acknowledges and agrees
----------------------------
that the Transferee is engaging in a private offering of shares of its common
stock to investors ("Investors") for an aggregate gross proceeds to Transferee
of approximately $20,000,000 in cash to capitalize the Transferee ("Investor
Offering"). Transferor also understands and acknowledges that the Transferee
has made an offering of shares of the
16
<PAGE>
Transferee to the Transferor pursuant to that certain Confidential Private
Placement Offering Memorandum dated as of February 17, 1995 (the "Memorandum")
with respect to the shares of common stock to be issued to the Transferor
pursuant to this Agreement.
The Transferor acknowledges and agrees that he has provided to the Transferee
such information as the Transferee has required in connection with the
preparation of the Memorandum including, but not limited to, information with
respect to the Company, the financial operations, financial statements and
business of the Company and other matters relating to the Company included in
the Memorandum.
The Transferor has carefully reviewed the information relating to the Company
set forth in Appendix A of the Memorandum (the "Information") and represents and
warrants as of the date of the Memorandum and as of the date hereof that the
Information does not contain an untrue statement of a material fact, and does
not omit to state a material fact necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading,
provided that Transferee and Transferor acknowledge and agree that the fact that
the Information does not contain financial statements of the Company shall not
be an omission of a material fact.
The Transferor hereby acknowledges and agrees that he has personal knowledge
of the Company and that all Information relating to the Company necessary for
his decision as to whether to invest in the Transferee was otherwise available
to him even if not included in the Memorandum. Therefore, to the extent the
Memorandum contains any untrue
17
<PAGE>
statement of a material fact relating to the Company or omits to state a
material fact relating to the Company necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, he
waives any claim against the Company, the Transferee and any affiliate, agent,
attorney for the Company and the Transferee.
REPRESENTATIONS AND WARRANTIES AS TO THE COMPANY
------------------------------------------------
To induce Transferee to accept the Contributed Shares, the Transferors (on the
basis provided in Section 11.1 below) hereby represent and warrant to Transferee
as set forth in Sections 3.8 through 3.33 hereof as follows:
3.8 ORGANIZATION; QUALIFICATION. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
Utah. The Company has all necessary corporate powers and authority to engage in
the business in which it is presently engaged (as it is presently being
conducted), to own all property now owned by it, and to lease all of the
property used by it under lease. Schedule 3.8 hereto contains a complete and
accurate list of the officers and directors of the Company.
The Company is duly qualified to do business as a foreign corporation in each
jurisdiction where it is required to be so qualified.
18
<PAGE>
3.9 NO CONFLICT. Neither the execution and delivery of this Agreement by
-----------
each Transferor nor the performance of obligations hereunder will conflict with
or result in a breach of any of the provisions of, or constitute a default
under, the articles of incorporation or by-laws of the Company, as amended to
date, or any agreement, mortgage, indenture, lease, contract or other instrument
to which the Company is a party or by which the Company is bound, or require the
consent, approval or authorization of any person, entity or governmental
authority, or result in the violation of any law to which the Company is
subject.
3.10 CONTRIBUTED SHARES. The authorized capital stock of the Company
------------------
consists of 10,000,000 shares, no par value per share, of which 32,200 are
issued and outstanding. The Contributed Shares have been duly authorized and are
validly issued, fully paid and nonassessable. Except for the stock options set
forth on Schedule 3.10 (the "Employee Options"), which Employee Options will be
cancelled prior to the Closing, there are no authorized or outstanding options,
warrants, rights, contracts, calls, puts, rights to subscribe, conversion rights
or other agreements to which the Company is a party or which are binding on the
Company or any other agreement providing for the issuance, disposition or
acquisition of any of the capital stock of the Company (other than this
Agreement). There are no authorized or outstanding stock appreciation, phantom
stock or similar rights with respect to the Company.
3.11 FINANCIAL STATEMENTS. Schedule 3.11 hereto contains a true and correct
--------------------
copy of the reviewed financial statements of the Company as at December 31,
1991,
19
<PAGE>
December 31, 1992 and December 31, 1993, and for the fiscal years then ended and
as at June 30, 1994 and for the period then ended (including balance sheets,
profit and loss statements of operation and cash flows and all footnotes
thereto), each accompanied by a review report of Company's accountants, and
monthly interim financial statements of the Company from June 30, 1994 to and
including the last day of December, 1994 (collectively the "Financial
Statements"). Each of the Financial Statements has been prepared from the
Company's books and records, and fairly presents the financial conditions and
results of operation of the Company at and as of the dates thereof. Each of the
year-end Financial Statements has been prepared in accordance with generally
accepted accounting principles utilizing methods, procedures and assumptions
which are consistent with those used in the preparation of the year-end
Financial Statements for the immediately preceding fiscal year. Each of the
Financial Statements for the period since June 30, 1994 has been prepared in
accordance with generally accepted accounting principles utilizing methods,
procedures and assumptions on a consistent basis with those utilized in the
preparation of the Financial Statements for the fiscal year ended December 31,
1993, subject to normal year-end audit adjustments which are not expected to be
material.
3.12 LIABILITIES. The Company has no liabilities (whether known or unknown,
-----------
absolute or contingent, liquidated or unliquidated and whether due or to become
due) except for (a) liabilities set forth in the balance sheet dated June 30,
1994, included in the Financial Statements including any footnotes thereto, (b)
liabilities incurred in the ordinary course of business since said balance
sheet, (c) liabilities, if any, set forth on Schedule 3.12, (d) obligations of
the Company under the Enumerated Contracts and Leases (as each such
20
<PAGE>
term is defined below), and (e) liabilities incurred in connection with the
transactions contemplated hereby.
3.13 EVENTS SINCE DECEMBER 31, 1994. Except as set forth on Schedule 3.13,
------------------------------
since December 31, 1994, there has not been:
(a) any event, occurrence or casualty adversely affecting any material
asset of the Business;
(b) any payment of bonuses or other extraordinary compensation to any
employees of the Business, any increase in the rate of compensation or
any increase in the benefits payable or to become payable to any
employees of the Business, or any other change in the terms of
employment of the employees of the Business, other than bonuses and
increases in compensation of non-executive employees made in the
ordinary course of business consistent with past practices;
(c) any sale of any of the material assets of the Business, other than
sales in the ordinary course of business;
(d) any material adverse change in the Business;
21
<PAGE>
(e) any other transaction other than in the ordinary course of the
Business, consistent with past practices, and transactions preparatory
to the transactions contemplated hereby;
(f) any dividends or other distributions to shareholders authorized or
paid; or
(g) any increase inconsistent with prior practices in the aggregate
liabilities of the Company including trade and other payables and
accruals.
3.14 INTENTIONALLY OMITTED.
---------------------
3.15 LITIGATION. The Company is not a party to any pending or, to the best
----------
of each Transferor's knowledge, threatened action, suit, claim or proceeding, or
subject to any court order, judgment or decree, except as disclosed in the notes
to the Financial Statements or on Schedule 3.15.
3.16 TAXES. The Company has filed all returns relating to Taxes (as
-----
hereinafter defined) which the Company was required to file prior to the date of
this representation (collectively, the "Tax Returns"). All Taxes owed by the
Company and which are reflected on the Tax Returns as being due have been paid.
As used herein, "Taxes" mean any federal, state, local or foreign income, gross
receipts, franchise, payroll, employment, excise, unemployment, personal
property, sales, use, value added, alternative, estimated or other tax of any
kind whatsoever, including any interest, penalty or other additions thereto.
22
<PAGE>
Proper and accurate amounts have been withheld by or on behalf of the Company
with respect to all compensation paid to employees of the Company for all
periods ending on or before the Closing Date. All deposits required with respect
to compensation paid to employees of the Company have been made in compliance
with applicable laws.
3.17 TITLE. Except as disclosed in the Financial Statements (including the
-----
notes thereto) or on Schedule 3.17, the Company has good and valid title to all
assets owned by it, free and clear of any mortgage, pledge, lien, encumbrance or
other security interest.
3.18 SUBSIDIARIES. The Company does not own any shares of or equity
------------
interest in any corporation, partnership, joint venture, association or other
entity except for its wholly owned subsidiary Brackman Brothers of Idaho, Inc.,
a Utah corporation (the "Subsidiary"), which does not and has not conducted any
activity except as set forth on Schedule 3.18.
3.19 CORPORATE RECORDS. Prior to the Closing, Transferors will have
-----------------
furnished or caused the Company to furnish to Transferee a copy of the Articles
of Incorporation (or comparable document) and all amendments thereto of the
Company and the Subsidiary, certified by the Secretary of State of the
jurisdiction of incorporation of such corporations, and a copy of the By-laws of
the Company and the Subsidiary, certified by the Secretary or Assistant
Secretary of the Company or such Subsidiary. Prior to the Closing, Transferors
will have made available to Transferee the corporate minute books of the Company
and the Subsidiary. All corporate action which has been taken by the
shareholders, Board of
23
<PAGE>
Directors or any Committee of such Board, of the Company and the Subsidiary is
fairly and accurately set forth in all material respects in the minute book of
the Company and the Subsidiary respectively. Prior to the Closing, Transferors
will have made available to Transferee the stock ledger books of the Company
and the Subsidiary. All issuances, cancellations, transfers and exchanges of
capital stock of the Company are reflected in its stock ledger books.
3.20 REAL PROPERTY.
-------------
(a) Schedule 3.20(a) correctly identifies all real property owned in fee
by the Company and all buildings thereon and all other rights,
easements and appurtenances thereto (the "Owned Real Property"),
together in each case, with a legal description of each parcel of
Owned Real Property and a description of the present use of each such
parcel of Owned Real Property. Prior to the Closing, the Transferors
will make available or cause the Company to make available a copy of
any title insurance policy or commitment or other evidence of title
issued with respect to the Owned Real Property and a copy of Company's
most recent survey thereof, if any. Except as set forth in Schedule
3.20(a):
(i) The Company's interest in the Owned Real Property is good and
marketable title, free and clear of any liens, security
interests, mortgages, encumbrances, leases, options, charges,
24
<PAGE>
easements, servitudes, agreements, claims, covenants, conditions
and restrictions of every kind and description whatsoever, other
than general real estate taxes which are not yet due and payable;
(ii) The buildings, improvements and fixtures located on the Owned
Real Property do not encroach upon the property of any third
party, and there are no encroachments upon any of the Owned Real
Property;
(iii) No person has any right of first refusal or option to acquire
title to the Owned Real Property, or any part thereof.
(b) Schedule 3.20(b) sets forth a list of all real property leased by the
Company, as lessee (the "Leased Real Property"). Prior to the Closing,
Transferors will make available or cause the Company to make available
to Transferee complete and accurate copies of the leases which are
described in Schedule 3.20(b) (the "Leases"). Except as set forth in
Schedule 3.20(b):
(i) The Leases are in full force and effect and are valid, binding
and enforceable in accordance with their respective terms, except
as the same may be limited by applicable bankruptcy,
25
<PAGE>
insolvency, reorganization, moratorium or other laws relating to
or affecting the enforcement of creditors' rights generally, now
or hereafter in effect and subject to the application of
equitable principles and the availability of equitable remedies;
(ii) No amount payable under any of the Leases is past due;
(iii) The Company has complied with all material commitments and
obligations on its part to be performed or observed under each of
the Leases on or prior to the date hereof, and, to the best of
each Transferor's knowledge, each other party under such Leases
has complied with all material commitments and obligations on its
part to be performed or observed under each of the Leases on or
prior to the date hereof;
(iv) No event of default exists under any of the Leases on the part of
the Company which default would permit the lessor to terminate
the Lease and, to the best of each Transferor's knowledge, no
event of default exists under any of the Leases on the part of
the respective lessors under the leases, nor has any event
occurred which, with the giving of notice or the passage of time,
or both, would constitute such an event of default on the part of
the Company or, to the best of each
26
<PAGE>
Transferor's knowledge, on the part of the respective lessors
under the Leases; and
(v) The Company has not assigned, mortgaged, pledged or otherwise
encumbered its interest under any of the Leases.
(c) Except for the Owned Real Property and the Leased Real Property
(collectively, the "Real Property"), no real property is used by the
Company in the conduct of the Business. Except as otherwise set forth
in Schedule 3.20(c):
(i) The improvements located on the Real Property are presently used
and operated in compliance with all requirements, licenses and
permits applicable thereto and in compliance with all applicable
federal, state, county and municipal laws, regulations,
ordinances, orders and directives, including all applicable
zoning, building, fire, pollution, health, safety and
environmental codes and all other federal, state, county and
municipal requirements, any violation of which would materially
interfere with the use of any of the Real Property as it is being
used on the date hereof (collectively "Legal Requirements"), and
in compliance with all covenants, easements, and restrictions
affecting the Real Property, any violation of which
27
<PAGE>
would materially interfere with the use of any of the Real
Property as it is being used on the date hereof, and neither such
Transferor nor any of the management employees of the Company has
received any notice, or has any knowledge of any fire, health,
safety, building, pollution, environmental, zoning or other
violation of law in respect to any parcel of the Real Property
which would materially interfere with the use of any of the Real
Property as it is being used on the date hereof, which has not
been entirely corrected to the satisfaction of the governmental
agency issuing any such notice;
(ii) There is no existing, pending, or to the best of each
Transferor's knowledge, threatened, contemplated or anticipated
(i) condemnation of any part of the Real Property, (ii) widening,
change of grade or limitation on use of streets abutting any
parcel of the Real Property, (iii) special tax or assessment to
be levied against any parcel of the Real Property, or (iv) change
in the zoning classification of any parcel of the Real Property,
the existence of any of which would materially interfere with the
use of any of the Real Property as it is being used on the date
hereof;
28
<PAGE>
(iii) There are no defects or inadequacies (other than normal wear and
tear for assets of similar age and use) in any parcel of the Real
Property or any building, improvement or fixture located thereon
which would (A) affect, in a materially adverse manner, the
insurability of the same or cause the imposition of extraordinary
premiums therefor, or (B) affect, in a materially adverse manner,
the continued operation of the Business conducted therefrom, and
neither such Transferor nor any of the management employees of
the Company has received any notice from any insurer or board of
fire underwriters requesting the performance of any repairs,
alterations or other work or change in operating procedures
relating to the Real Property which has not been fully complied
with in all material respects;
(iv) All water, sewer, gas, electric, telephone and drainage
facilities and all other utilities and public or quasi-public
improvements servicing the Real Property are, to the best of each
Transferor's knowledge, (x) installed, connected under valid
permits, in working order and adequate to service the Real
Property; and, (y) fully paid for, and the Company has no further
obligation to pay any charge for or with respect to such public
or quasi-
29
<PAGE>
public improvements except general real estate taxes and normal
usage charges;
(v) The Company has obtained all licenses, permits, easements, and
rights-of-way, including proof of dedication, that are required
from all governmental or quasi-governmental authorities having
jurisdiction over the Real Property or from any private parties,
to make use of utilities serving the Real Property and to insure
normal vehicular and pedestrian ingress and egress from the Real
Property;
(vi) There are no commissions, charges or finders' fees due and
payable pursuant to any brokerage or listing agreement or
otherwise pertaining to the Real Property;
(vii) The Company has not initiated, nor is there any existing, pending
or, to the best of each Transferor's knowledge, contemplated,
threatened or anticipated, request, application or proceeding to
alter or restrict the zoning or other use, or otherwise impose
any restriction applicable to any parcel of Real Property, the
effect of which would materially interfere with the use of any of
the Real Property as it is being used on the date hereof;
30
<PAGE>
(viii) There are no persons in possession or occupancy of the Real
Property or any part thereof other than the Company, nor are
there any persons other than Company who have possessory rights
with respect to the Real Property or any part thereof, the effect
of which would materially interfere with the use of any of the
Real Property as it is being used on the date hereof; and
(xi) The Company has no interest in, or any right or obligation to
acquire any interest in, any other real property other than the
Real Property.
3.21 LICENSES AND PERMITS. The Company has obtained all licenses and
--------------------
permits and other governmental authorizations required to conduct the Business.
All such licenses and permits are in full force and effect. No material
violation exists in respect of any such license or permit. No proceeding is
pending or, to the best of each Transferor's knowledge, threatened, to revoke or
restrict any such license or permit.
3.22 COMPLIANCE WITH LAWS. Since its inception, the Company has complied
--------------------
with all applicable laws, rules, regulations, ordinances and codes, whether
federal, state or local, where the failure so to comply could reasonably be
expected to have a material adverse effect on the Business, and no notice has
been received by the Company or any Transferor alleging such non-compliance
which remains uncured.
31
<PAGE>
3.23 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.23, to the
---------------------
best of each Transferor's knowledge the Real Property is in compliance in all
material respects with all Environmental Laws (as hereinafter defined). Neither
any of the management employees of the Company nor any Transferor has received
any written notice from any governmental unit or other person or entity
alleging that the Company or any former owner or operator of the Real Property
has not been in compliance with Environmental Laws or that the Company or any
former owner has any material liability with respect thereto. There is no claim
or administrative, regulatory or judicial proceeding existing, pending, or to
the best of each Transferor's knowledge, contemplated, threatened, or
anticipated, against the Company or any former owner or operator of the Real
Property pursuant to, or alleging any material violation of, or material
liability under, any Environmental Laws. No Hazardous Substances (as hereinafter
defined) have ever been buried, spilled, leaked, discharged, emitted, generated,
stored, used or released, by the Company at any location or, to the best of each
Transferor's knowledge, by any other party on the Real Property and, to the best
of each Transferor's knowledge, no Hazardous Substances are now present on the
Real Property at levels requiring investigation, study, removal or remediation
under, or form the basis of a claim pursuant to, any Environmental Laws, except
for immaterial quantities stored or used by the Company in the ordinary course
of the Business in accordance with all applicable Environmental Laws. The
Company has not used any part of the Real Property in connection with the
business of manufacturing, storing or transporting Hazardous Substances or as a
storage or disposal site (whether temporary or permanent) for any Hazardous
Substances, other than the storage of Hazardous Substances in quantities not
giving rise to any reporting duty which are used in the ordinary course of
32
<PAGE>
business in compliance with all applicable Environmental Laws. Except as set
forth on Schedule 3.23, there are no underground or above ground storage tanks
at the Real Property. To the best of each Transferor's knowledge, the Real
Property is not and never has been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability Information
System or any similar federal, state or local list, schedule, log, inventory or
database. Prior to the Closing, the Transferors will provide the Transferee with
copies of all environmental audits or assessments in the Company's or such
Transferor's control relating in whole or in part to the Company or the Real
Property.
As used in this Agreement, "Environmental Laws" shall mean the Federal Air
Pollution Control Act, Water Pollution Act, Resource Conservation and Recovery
Act, Solid Waste Disposal Act, Toxic Substances Control Act and Comprehensive
Environmental Response and Liability Act, and any other Federal, state or local
laws, rules, regulations, ordinances or other requirements relating to the
quality of the environment, health, safety, contamination or clean-up of
contamination. As used in this Agreement, "Hazardous Substances" shall mean any
hazardous, toxic or dangerous substance, pollutant, contaminant, waste or other
material listed or identified in or regulated under any Environmental Law; oil
and petroleum products, natural gas, natural gas liquids, liquified natural gas
and synthetic gas usable for fuel; asbestos; polychlorinated biphenyls; and
chemicals subject to the OSHA Hazard Communication Standard.
3.24 LABOR RELATIONS. The Company is not a party to or bound by any
---------------
collective bargaining agreement and, to the best of each Transferor's knowledge,
there is
33
<PAGE>
no current organizational activity with respect to the Company's employees and
there has not been such activity in the past twelve months. Except as set forth
on Schedule 3.24, no allegation, charge or complaint of age, disability, sex or
race discrimination or similar charge has been filed against the Company which
remains undismissed or undischarged and no such charge is, to the best of each
Transferor's knowledge, threatened to be filed against the Company.
3.25 EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule 3.25, the
----------------------
Company does not maintain or contribute to any "employee pension benefit plan",
as such term is defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Each employee pension benefit plan
listed on Schedule 3.25 has complied in all material respects with, and been
administered in all material respects in accordance with, the applicable
requirements of ERISA, any other applicable law and the terms of such plan. The
only "employee welfare benefit plan", as such term is defined in Section 3(1) of
ERISA, which the Company maintains or to which the Company contributes is group
health and life insurance.
3.26 BANK ACCOUNTS. Schedule 3.26 hereto contains a complete list of each
-------------
bank account, money market account, certificate of deposit and safe deposit box
maintained by the Company, giving the name and address of the institution at
which such account or box is maintained, the account number and the names of all
persons authorized to draw on such accounts or to have access thereto. The
Company does not maintain cash in any other
34
<PAGE>
location, other than daily receipts from the Business prior to their deposit in
one or more of such accounts and petty cash funds at each store and the
Company's headquarters.
3.27 CONTRACTS. Except as set forth in Schedule 3.27 hereto, there is no
---------
contract, agreement, commitment or arrangement ("Contract"), or any outstanding
unaccepted offer ("Offer"), whether written or oral, expressed or implied, fixed
or contingent, to which the Company is a party or by which it or any property or
asset of the Company is bound:
(a) evidencing or relating to any direct or indirect indebtedness for
borrowed money of the Company or any other person including, but not
limited to, loan agreements, lease-purchase arrangements, guarantees,
agreements of suretyship, agreements to purchase goods or services
(other than agreements to provide the Company with water, power,
light, sewer, gas, and telephone services, raw materials, operating
supplies, and other inventory and property purchased in the ordinary
course of business) or to supply funds or make investments or other
undertakings on which others rely in extending credit, or which is or
relates to a conditional sales contract, chattel mortgage, trust deed,
hypothecation, pledge, assignment of receivables, equipment lease
agreement, or other security arrangement with respect to personal or
movable property having a value equivalent to, or providing for
payments of, Two Thousand Five Hundred Dollars
35
<PAGE>
($2,500.00) per month or more in any such instance, or Twenty Thousand
Dollars ($20,000.00) per month in the aggregate as to all such
instances;
(b) which is or relates to a collective bargaining agreement or other
union contract;
(c) which contains or relates to covenants or other provisions concerning
confidentiality or limiting the Company's right to compete in any line
of business or with any person or in any area;
(d) which is or relates to a license agreement, either as licensor or
licensee;
(e) which provides for or relates to any sharing of profits with others or
any joint venture or similar enterprise;
(f) which is or relates to a revocable or irrevocable power of attorney or
proxy granted to any person for any purpose whatsoever;
(g) which is or relates to an employment agreement, severance agreement,
or deferred compensation agreement or which involves direct or
indirect compensation (including bonus, stock option, severance,
golden parachute, special retirement, consulting and similar
agreements) for the benefit of one or more of the current or former
directors, officers or employees of
36
<PAGE>
the Company (other than employee benefit plans and employee welfare
plans described on Schedule 3.25 hereto) or which is or relates to an
independent contractor agreement with any individual or entity
providing services to the Company;
(h) involving any remaining or unsatisfied obligation of the Company (i)
to make capital expenditures (whether through the purchase of real or
personal property or otherwise) involving Ten Thousand Dollars
($10,000.00) or more in the case of any one Contract or Offer, or
Fifty Thousand Dollars ($50,000.00) in the aggregate as to all such
Contracts or Offers; or (ii) to purchase goods in the nature of
inventory, other than in the ordinary course of business, or to supply
products or provide services, involving Fifteen Thousand Dollars
($15,000.00) or more in the case of any one Contract or Offer;
(i) which is or relates to any purchase commitment for materials,
supplies, component parts, or other items of inventory in quantities
which are materially in excess of the estimated requirements of the
Company's business during the ninety (90) day period following the
Closing Date, or at a price materially in excess of the current
reasonable market price;
(j) which provides for the indemnification of a director, officer or
employee of the Company or which is or relates to an obligation to
indemnify a
37
<PAGE>
person or entity with respect to any representation, warranty or
covenant made by the Company (other than product warranties);
(k) which is or relates to distribution, marketing, sales representative,
franchise or dealership agreements which are not cancelable without
penalty or prepayment by the Company upon thirty (30) days prior
written notice from the Company;
(l) any other agreement between any director, officer or stockholder of
the Company or any affiliate of any of them and the Company not
already listed herein; or
(m) any other material contracts or commitments not made in the ordinary
course of the Company's business.
Prior to the Closing, Transferors will deliver to Transferee, or cause the
Company to deliver to Transferee, true and correct copies of all written
Contracts and Offers and a written summary setting forth the terms and
conditions of each oral agreement required to be disclosed in the Schedules
hereto, all as presently in effect. Except as otherwise set forth in Schedule
3.27, all Contracts enumerated in Sections 3.27(a) through (m) above (the
"Enumerated Contracts") are valid and binding obligations of the Company and the
other parties thereto, in accordance with their respective terms, and are in
full force and effect in accordance with their respective terms, except as the
same may be limited by applicable
38
<PAGE>
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting the enforcement of creditors' rights generally, now or hereafter in
effect and subject to the application of equitable principles and the
availability of equitable remedies. Except as set forth in Schedule 3.27,
neither the Company nor, to the best of each Transferor's knowledge, any other
party is in default in the payment of any obligation under, or in the
performance of any material covenant or material obligation to be performed by
it pursuant to, any Enumerated Contract. Except as set forth in Schedule 3.27,
the execution, delivery and performance of this Agreement by Transferors will
neither cause the Company to be in default nor result in the termination of any
Enumerated Contract.
3.28 PROPRIETARY RIGHTS OF THE COMPANY.
---------------------------------
(a) The Company owns or has the right to use all intellectual property,
the failure to possess which would have a material adverse effect on
the business, financial condition or results of operations of the
Company. Schedule 3.28 contains a complete list of all of the
Proprietary Rights (as hereinafter defined).
(b) Except as set forth on Schedule 3.28, (i) the Company owns all right,
title and interest in and to all of the Proprietary Rights, (ii)
there have been no claims made against the Company for the assertion
of the invalidity, abuse, misuse, or enforceability of any such
rights, and there are not grounds for the same, (iii) the Company has
not received a notice of conflict with the
39
<PAGE>
asserted rights of others within the last five years, and (iv) the
conduct of the Company's business has not infringed any such rights of
others.
(c) As used herein, the term "Proprietary Rights" shall mean all
trademarks, trade names, licenses, copyrights, and applications
therefor of the Company.
3.29 INSURANCE. Schedule 3.29 hereto correctly identifies all insurance
---------
programs, insurance policies and bonds covering the Company, or any of its
respective assets, properties, operations, personnel and pending claims. The
Company has not received any notice of cancellation, termination or non-renewal
or denial of liability with respect to any such program, policy or bond.
3.30 GUARANTEES. Except as disclosed in Schedule 3.30 hereto, the Company
----------
is not a guarantor or indemnitor or otherwise liable for or in respect of any
indebtedness of any person except as an endorser of checks received by it and
deposited in the ordinary course of business.
3.31 BROKERS, FINDERS AND EXPERTS. Except with respect to the services of
-----------------------------
Montgomery Securities (the "Broker"), the Company has not engaged or authorized
any broker, investment banker or third party to act on the Company's behalf,
either directly or indirectly, as a broker, finder or advisor in connection with
the transaction contemplated hereby.
40
<PAGE>
3.32 COMPUTER SOFTWARE. Except as set forth on Schedule 3.32 hereto, all of
-----------------
the computer software used by or for the Company in the conduct of its business
(the "Software") is either (i) owned by the Company free and clear of any and
all liens, claims, equities, security interests and encumbrances whatsoever, or
(ii) used by the Company pursuant to a fully-paid license granted to the Company
by a third party pursuant to the terms of such license. Except as set forth on
Schedule 3.32, no such computer software license shall terminate or become
terminable as a result of the transaction contemplated herein. There are no
infringement suits pending or, to the best of each Transferor's knowledge,
threatened against the Company with respect to any of the Software, and no fact
or condition exists which could give rise to any such infringement suit.
3.33 BUSINESS RECORDS. Except for certain records destroyed in a flood in
----------------
1991, no material records of accounts, personnel records or other business
records related to the Business have been destroyed within the last five (5)
years and such records are in the possession of the Company.
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES OF TRANSFEREE
--------------------------------------------
To induce each Transferor to accept the Exchange Shares and the BCI Shares,
Transferee hereby represents and warrants to each Transferor as follows:
41
<PAGE>
4.1 GOOD STANDING. Transferee is a corporation duly organized, validly
-------------
existing and in good standing under the laws of the State of Delaware.
4.2 CORPORATE AUTHORITY. Transferee has the requisite corporate power and
-------------------
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement by
Transferee and the consummation by Transferee of the transactions contemplated
hereby have been duly authorized by all requisite corporate action on the part
of Transferee.
4.3 BINDING EFFECT. This Agreement has been duly executed and delivered by
--------------
Transferee and constitutes the legal, valid and binding obligation of
Transferee, enforceable against Transferee in accordance with its terms, except
to the extent that enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and subject to general principles of equity.
4.4 NO CONFLICT. Neither the execution and delivery of this Agreement by
-----------
Transferee nor the performance of its obligations hereunder will conflict with
or result in a breach of any of the provisions of, or constitute a default
under, the Certificate of Incorporation or Bylaws of Transferee, as amended to
date, or any agreement, mortgage, indenture, lease or other instrument to which
Transferee is a party or by which it is bound, or require the consent, approval
or authorization of any person, entity or governmental authority, or result in
the violation of any law to which Transferee or any of its assets is subject.
42
<PAGE>
4.5 CAPITALIZATION. As of the date hereof, the authorized capital stock of
--------------
Transferee consists of 1,000,000 shares of common stock, par value $0.01 per
share, of which none are outstanding and 200,000 shares of Preferred Stock, par
value $0.01 per share, of which none are outstanding.
4.6 BCI SHARES. At the Closing, Transferee will have good and marketable
----------
title to the BCI Shares free and clear of all security interests, pledges,
liens, encumbrances or charges of every kind, nature and description
whatsoever, provided, however, that each Transferor acknowledges that the BCI
Shares have not been registered under any applicable securities laws or
regulations.
4.7 EXCHANGE SHARES. At or before the Closing, all requisite corporate
---------------
action will have been taken to authorize Transferee to transfer the BCI Shares
and to issue the Exchange Shares to Transferors in exchange for the Contributed
Shares. The Exchange Shares will, when issued, be duly authorized, validly
issued, fully paid and nonassessable, and no stockholder of Transferee will have
any preemptive right of subscription or purchase in respect thereof. There are
no authorized or outstanding options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights or other agreements to which Transferee
is a party or which are binding on the Transferee or any other agreement
providing for the issuance, disposition or acquisition of any of the capital
stock of the Transferee, other than this Agreement and the Secured Loan
Agreement between the Transferee and BCI of even date herewith. The Transferors
acknowledge, however, that the Transferee may use shares of its capital stock to
pay for future acquisitions.
43
<PAGE>
4.8 LITIGATION. Transferee is not a party to any pending or, to the best
----------
of Transferee's knowledge, threatened action, suit, claim or proceeding,
challenging the legality of the transactions contemplated hereby or which, if
determined adversely to Transferee, could have a material adverse effect on
Transferee.
4.9 ACQUISITION OF CONTRIBUTED SHARES. Transferee is acquiring the
---------------------------------
Contributed Shares for its own account and not with a view to distribution or
resale thereof in any transaction which would be in violation of the Securities
Act and rules promulgated thereunder, or any state securities statute.
4.10 INITIAL CAPITALIZATION. In connection with its initial capitalization,
----------------------
Transferee shall not issue more than 17,000 shares of its common stock for a
per share price of not less than $1,176.47 in the Investor Offering and an
aggregate of 5,100 shares of its common stock in two additional Concept
Acquisitions (as discussed in the Memorandum); provided, however, that
Transferee may make additional Concept Acquisitions and other acquisitions, in
which additional shares of common stock of the Transferee may be issued, and
about which Transferee makes no representations.
44
<PAGE>
ARTICLE 5
---------
ADDITIONAL COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS
-----------------------------------------------------
5.1 RESTRICTIONS ON TRANSFER OF EXCHANGE SHARES. The restrictions of this
-------------------------------------------
Section 5.1 apply to any holder of the Exchange Shares. Each Transferor
acknowledges that:
(a) The Exchange Shares to be issued pursuant hereto may be owned, as of
the Closing, only in the name of and by the Transferor as indicated on
the signature page below.
(b) No federal, state or other agency has made any finding or
determination as to the adequacy or accuracy of the information set
forth in the Memorandum or as to the fairness of this offering for
investment, nor any recommendation or endorsement of the Exchange
Shares.
(c) Because the Exchange Shares have not been registered under the
Securities Act or applicable state or other securities laws, the
economic risk of the investment must be borne indefinitely by each
Transferor, and the Exchange Shares cannot be sold unless subsequently
registered under the Securities Act and such state or other laws, or
an exemption from such registration is available and such registration
under the Securities Act and
45
<PAGE>
such state or other laws is unlikely at any time in the futute; the
Transferee is not obligated to file a notification under Regulation A
of the Securities Act or a registration statement under the Securities
Act; Rule 144, adopted under the Securities Act and governing the
possible disposition of the Exchange Shares, is not currently
available or anticipated to be available in the future; the Transferee
has not covenanted to take any action necessary to make such Rule
available for a resale of the Exchange Shares; and it is not
anticipated that there will be any market for resale of the Exchange
Shares.
(d) The Exchange Shares may not be transferred unless (i) such transfer is
effected pursuant to a registration statement which has been filed
under the Securities Act and declared effective by the Securities and
Exchange Commission, or (ii) in the written opinion of counsel,
acceptable to the Transferee, such transfer may be effected under and
is in compliance with Rule 144 under the Securities Act, as in effect
on the date of such transfer, or is otherwise exempt from the
registration requirements of the Securities Act.
5.2 LEGENDS ON EXCHANGE SHARES. Each certificate evidencing the Exchange
--------------------------
Shares shall bear the following legends:
46
<PAGE>
"The shares represented by this certificate are "Restricted
Securities". As such they may not be transferred unless (i) such
transfer is effected pursuant to a registration statement which
has been filed under the Securities Act of 1933 (the "1933 Act")
and declared effective by the Securities and Exchange Commission,
or (ii) in the written opinion of counsel, acceptable to the
issuer of these shares, such transfer may be effected under and
is in compliance with Rule 144 under the 1933 Act, as in effect
on the date of such tranfer, or is otherwise exempt from the
registration requirements of the 1933 Act."
"The shares represented by this certificate are subject to certain
covenants and agreements contained in that certain Agreement to
Contribute Shares by and among the Shareholders of Brackman Brothers,
Inc. and Progressive Bagel Concepts, Inc. dated February ___, 1995,
including, but not limited to, a covenant respecting voting for
directors of the issuer of these shares."
5.3 CONFIDENTIAL INFORMATION. Company and the Transferor possess and will
------------------------
47
<PAGE>
further develop and acquire certain confidential and proprietary information and
trade secrets including, but not limited to, information, methods, techniques,
procedures and knowledge developed or to be developed, by or for the Company
respecting the Business (the "Confidential Information"). Each Transferor
acknowledges and agrees that neither he nor any other person or entity will
acquire by or through him any interest in or right to use the Confidential
Information other than his right to utilize it in the operation of the Business
as an employee of the Company, if applicable, and that the use or duplication of
the Confidential Information in any other business would constitute an unfair
method of competition with Company.
Each Transferor acknowledges and agrees that the Confidential Information is
confidential to and a valuable asset of Company, is proprietary, and includes
trade secrets of Company. Each Transferor does hereby agree, that he:
(a) will not use the Confidential Information in any other business or
capacity; and
(b) will maintain the absolute secrecy and confidentiality of the
Confidential Information; and
(c) will not make unauthorized copies of any portion of the Confidential
Information disclosed in written or other tangible form.
48
<PAGE>
Notwithstanding the foregoing, the obligations of each Transferor specified
above shall not apply to any Confidential Information which is received from
the Company which (a) is disclosed in a printed publication available to the
public, or is otherwise in the public domain through no act of the Transferor,
his agents or any person or entity which has received such Confidential
Information from or through such Transferor, (b) is approved for release by
written authorization of an officer of the Company, (c) is required to be
disclosed by proper order of a court of applicable jurisdiction after adequate
notice to the Transferee to seek a protective order therefor, the imposition of
which protective order the Transferor agrees to approve and support, (d) is
independently developed by Transferor following the Closing Date without using
any Confidential Information, or (e) in the written opinion of Transferor's
counsel, is necessary to be made by Transferor in order that Transferor not
violate any law, rule, or regulation applicable to him.
5.4 RESTRICTIVE COVENANT. Each Transferor acknowledges and agrees that the
--------------------
Transferee and the Company would be unable to protect the Confidential
Information against unauthorized use or disclosure and Transferee would be
unable to realize the benefits of this Agreement if Transferor were permitted to
engage in, hold interest in or perform services for entities conducting a
business which derives 20% or more of its revenues from the sale of bagels
and/or bagel-related products ("Competitive Business"). Each Transferor further
acknowledges and agrees that the restrictions contained in this Section 5.4 will
not hinder his activities under this Agreement or in general. Transferee has
entered into this Agreement with each Transferor on the express condition that,
with respect to the operation of the Business, each Transferor will deal
exclusively with the
49
<PAGE>
Company and Transferee. Each Transferor therefore agrees that for a period of
four (4) years from the Closing Date, he shall not directly or indirectly
anywhere in the United States:
(a) have any interest as a record or beneficial owner in any Competitive
Business provided, however, a Transferor may have an interest in any
Competitive Business as a passive investor in such Competitive
Business provided that such Competitive Business has a class of
securities which is registered under Section 12 of the Securities
Exchange Act of 1934, as amended, or which is traded on a national
securities exchange and provided further that such interest does not
exceed three percent (3%) of the outstanding equity securities of such
Competitive Business; or
(b) perform services as a director, officer, manager, employee,
consultant, representative, agent, or otherwise for any Competitive
Business; or
(c) divert or attempt to divert any business or any customers of the
Business or the Company or Transferee to any Competitive Business.
Further, each Transferor agrees that for a period of four (4) years from the
Closing Date, he will not directly or indirectly, solicit or attempt to solicit
for employment or employ any person who is employed by the Company or
Transferee, nor induce any such person to leave said employment without the
prior written consent of such person's employer.
50
<PAGE>
5.5 REMEDIES; WAIVER.
----------------
(a) Each Transferor agrees that the provisions and restrictions set forth
above in Section 5.3 and in other portions hereof are necessary to
protect the Transferee and the Company and its successors and assigns
in the protection of the business conducted by the Company. Each
Transferor agrees that damages cannot compensate the Transferee or the
Company in the event of a violation of the covenants contained in
Section 5.3 hereof, and that injunctive relief shall be essential for
the protection of the Transferee and the Company and its successors
and assigns. Accordingly, each Transferor agrees and consents that, in
the event he shall violate or breach any of said covenants the
Transferee and the Company shall be entitled to obtain (and he hereby
consents to) such injunctive relief against him, without bond, in
addition to such further or other relief as may appertain at equity or
law. The exercise or enforcement by the Transferee or the Company of
any right or remedy hereunder shall not preclude the exercise or
enforcement by the Transferee or the Company of any other right or
remedy hereunder or which the Transferee or the Company has the right
to enforce under applicable law.
(b) Failure by either party to insist upon strict compliance with any of
the terms, covenants or conditions hereof shall not be deemed a waiver
of such term, covenant or condition, nor shall any waiver or
relinquishment
51
<PAGE>
of any right or remedy hereunder at any one or more times be deemed a
waiver or relinquishment of such right or remedy at any other time or
times.
5.6 ACKNOWLEDGEMENT OF DUAL REPRESENTATION Each Transferor understands
--------------------------------------
and acknowledges that the Transferee has been represented in connection with the
offering of the Exchange Shares and other matters by the law firm of Rudnick &
Wolfe. Each Transferor acknowledges that Rudnick & Wolf has heretofore and may
hereafter represent BCI and/or its affiliates in various matters. Each
Transferor acknowledges that Rudnick & Wolfe has not been engaged to represent
any Transferor and is not representing any Transferor in connection with the
issuance to Transferor of Exchange Shares hereunder and each Transferor has, or
if deemed necessary Transferor will, obtain independent legal representation by
each in connection with the transaction contemplated hereby.
5.7 ACKNOWLEDGEMENT OF RELATED PARTY TRANSACTIONS. Each Transferor
----------------------------------------------
understands and acknowledges that the Transferee intends to engage in various
transactions with BCI and/or its affiliates as set forth in the Memorandum. Each
Transferor hereby agrees that each such transaction between the Transferee, BCI
and their respective affiliates and such other transactions as may be undertaken
between the Transferee, BCI and their respective affiliates shall not be deemed
to be invalid due solely to the participation of BCI or an affiliate thereof.
52
<PAGE>
5.8 SUBSEQUENT AUDITED FINANCIALS. Each of Daniel V. Colangelo, James W.
-----------------------------
Largay and Stephen A. Norman hereby covenant and agree with Transferee that if
Transferee shall determine that audited financial statements of the Company for
the periods prior to the Closing are necessary or advisable in connection with
an initial public offering, another transaction or offering, or otherwise, each
shall cooperate fully with the Transferee's accountants in the preparation of
such audited financial statements and each shall make such reasonable
representations and warranties to the applicable certified public accountants
which are customary in connection with the preparation of audited financial
statements.
5.9 DIRECTORS. Each Transferor covenants and agrees that until the
---------
earlier of February 28, 1998 or the completion of any Qualified Public Offering,
he will vote his Exchange Shares for the election to the Board of Directors of
Transferee of each person who is a "Founding Director", which shall initially
include Daniel V. Colangelo, and thereafter such additional persons designated,
from time to time, as Founding Directors by resolution adopted by the Board of
Directors of Transferee, three directors designated by BCI and two directors
designated by the Investors. Each Transferor covenants that he will cause each
transferee of his Exchange Shares to comply with the foregoing.
5.10 CONDUCT OF BUSINESS PRIOR TO CLOSING.
------------------------------------
(a) From the date hereof until the Closing Date, Transferors shall (i)
cause the Company to conduct its business and operations in the manner
in
53
<PAGE>
which the same have heretofore been conducted; (ii) use their
reasonable best efforts to cause the Company to (A) preserve its
business organization intact, (B) keep available the services of its
officers, employees, agents, and distributors, and (C) preserve its
relationships with customers, suppliers, and others having dealings
with the Company; (iii) cause the Company to maintain all of its
properties in customary repair, order and condition, reasonable wear
and tear excepted, and to maintain insurance of such types and in such
amounts upon all of its properties and with respect to the conduct of
its business as are in effect on the date of this Agreement; and (iv)
shall not without the prior written consent of Transferee, cause or
allow the Company to:
(A) authorize or issue any shares of its capital stock or any other
securities or declare, set aside or pay any dividend or
distribution with respect to its capital stock, or redeem,
repurchase or otherwise acquire any of its capital stock;
(B) create, incur, assume or guaranty any indebtedness for borrowed
money other than indebtedness incurred in the ordinary course of
business under the Brighton Bank revolving credit facility which
is in effect at the date hereof (the "Line of Credit");
54
<PAGE>
(C) grant any lien, pledge, security interest or other encumbrance
upon any of its assets;
(D) make any capital expenditure, which exceeds either singly, or in
the aggregate, Twenty Five Thousand Dollars ($25,000.00), except
capital expenditures incurred in the ordinary course of business
(which the parties agree that for all purposes of this Agreement
includes the opening of additional retail bagel bakeries);
(E) make any loan to or investment in, or acquire any securities or
assets of any other person or entity;
(F) except for a $20,000 bonus payable to Doug Brooks, and the
transfer of the title to a 1992 Isuzu Trooper, Serial Number
JACDH58V4N7915678 to Daniel Colangelo, increase the rate of
compensation, pay any bonus, incentive or other extraordinary
compensation or otherwise materially increase the benefits
payable or to become payable to any of its directors, officers,
employees or independent contractors (other than raises or
bonuses made in the ordinary course of business to employees who
are not directors or officers provided that such raise or bonuses
to any such employee shall not exceed ten
55
<PAGE>
percent (10%) of the base compensation of such employee in effect
at December 31, 1994), make any material changes to the terms of
employment of any of its directors, officers or employees or pay
any amount directly or indirectly to Brian O'Meara and Daniel
Tucker in consideration for the cancellation of the Employee
Options;
(G) change any accounting policies, procedures or practices employed
by it;
(H) sell any of its assets other than sales of inventory in the
ordinary course of business and sales of equipment made in the
ordinary course of business due to the replacement or abandonment
thereof;
(I) pay or discharge any long-term liability other than in accordance
with its terms other than payment in full of the Line of Credit;
(J) except in the ordinary course of business enter into any material
contract, agreement or lease which would be required to be
disclosed hereunder, make any change in any existing contracts,
agreements or leases other than in the ordinary
56
<PAGE>
course of business (or unless otherwise permitted herein), suffer
or permit any defaults to occur by the Company as tenant under
any Lease, assign any Lease or sublease any Leased Real Property;
or
(K) amend its Articles of Incorporation or By-Laws.
5.11 ACCESS PENDING CLOSING. From the date hereof to and including the
----------------------
Closing Date, Transferors shall cause the Company to permit Transferee and its
accountants and other representatives, upon reasonable notice to and approval
by Daniel V. Colangelo and without material disruption to the business of the
Company, to have the right of full and complete access to the books, records,
offices, and other facilities of Company during normal business hours, for the
purpose of making such investigation of the financial condition and operations
of the Company as Transferee or any such accountant or other representative may
reasonably deem necessary. Transferee and its representatives shall have the
right to make and utilize copies or extracts of the Company's books, records,
and other data and information for its due diligence investigation and other
purposes in connection with the transactions contemplated hereby.
5.12 CONSENTS OF THIRD PARTIES. Prior to the Closing on the Closing Date,
-------------------------
Transferors shall obtain or cause to be obtained all consents and other
approvals of all lessors, lenders, governmental authorities and other third
parties which are required to be obtained by Transferors or the Company as a
result of the transactions contemplated by this
57
<PAGE>
Agreement, which consents and approvals shall continue each applicable lease,
loan or other arrangement related to the Company on substantially identical
terms as exist on the date hereof.
5.13 INTERIM FINANCIAL STATEMENTS. From the date hereof to and including
----------------------------
the Closing Date, Transferors shall cause the Company to promptly deliver to
Transferee interim monthly balance sheets and statements of income and retained
earnings, through the end of the month immediately preceding the Closing Date.
5.14 ELECTION OF DIRECTORS. Transferee covenants and agrees to add (i)
---------------------
covenants to the Stock Subscription Agreements to be executed and delivered by
each Investor and (ii) restrictive legends to the stock certificates to be
delivered to each Investor, in each case comparable to the covenants set forth
in Section 5.9 hereof and in agreements with each additional person and on stock
certificates issued to each additional person who receives shares of common
stock of the Company in any acquisition during the period of the effectiveness
of the covenant set forth in Section 5.9 hereof.
5.15 CONFIDENTIALITY; TRANSFEREE RESTRICTIVE COVENANT. (a) From the date
-------------------------------------------------
hereof and for a period of two years thereafter, Transferee covenants and agrees
with the Transferors, that except as otherwise provided herein, Transferee will
hold in confidence, in the same manner that it holds its own confidential and
proprietary information, and will not disclose to any person, company or
organization outside of Transferee's management group and due diligence team
(which may include Representatives (as defined below)) any
58
<PAGE>
Proprietary Information (as defined below) or disclose the fact that the Company
is available for acquisition or investment. Notwithstanding anything to the
contrary contained in the prior sentence: (i) Transferee's obligations of
confidentiality hereunder shall expire upon the consummation of the Closing, and
(ii) Transferors acknowledge and agree that, to the extent the Memorandum
contains Proprietary Information, the inclusion of Proprietary Information in
the Memorandum shall not constitute a breach hereof.
The term "Proprietary Information" shall mean all information that the
Transferors or the Company provides to Transferee pursuant to this Agreement
that is confidential and proprietary to the Company. Proprietary Information
shall include any analysis, compilations, studies or other documents prepared by
Transferee's agents, consultants, employees, or other authorized
representatives, including Transferee's technical experts, legal counsel,
investment advisors, bankers and accountants ("Representatives") which contain
Proprietary Information. The obligations of Transferee specified herein shall
not apply to any Proprietary Information, including information that the Company
is considering the sale of its business, which (i) is disclosed in a printed
publication available to the public, or is otherwise in the public domain
through no act of Transferee or its Representatives or other person or entity
which has received such Proprietary Information from or through Transferee or
its Representatives, (ii) is approved for release by written authorization of an
officer of the Company, (iii) is required to be disclosed by law or regulation
or by proper order of a court of applicable jurisdiction after adequate notice
to the Company to seek a protective order therefor, the imposition of which
protective order Transferee agrees to approve and support, (iv) is independently
developed by Transferee or its Representatives.
59
<PAGE>
or (v) in the written opinion of Transferee's counsel, is necessary to be made
by Transferee in order that Transferee not violate any law rule, or regulation
applicable to it. The Company acknowledges that Transferee's compliance with
federal and state securities laws and regulations shall not be deemed a
violation of this Agreement. Transferee agrees, and agrees to cause its
Representatives, to use Proprietary Information only in connection with the Due
Diligence Investigation (as below defined). If the transaction contemplated by
this Agreement does not close, promptly following the Transferors' request
Transferee shall destroy or return to the Company all Proprietary Information.
Transferors acknowledge (A) that Transferee is exploring various concepts
similar or related to the business of the Company, (B) that Transferee may
separately enter into the business of the Company, or otherwise invest in or
purchase a competitive business, and (C) that, except as provided in Section
5.15(b) hereof, nothing herein shall prohibit or otherwise restrict such
activities.
(b) In the event Transferee shall terminate this Agreement pursuant to
Subsection 8.1(c) hereof, then for a period of two (2) years from the date of
such termination, Transferee, or any affiliate of Transferee, shall not,
directly or indirectly, engage in the business of, have any interest as a record
or beneficial owner in, or perform services for, a Competitive Business (as
defined in Section 5.4 above) anywhere in the State of Utah.
60
<PAGE>
(c) Transferee acknowledges that the Company and the Transferors
shall be entitled to injunctive relief to prevent breaches of the provisions of
Section 5.15(a) and (b) above and to enforce specifically the terms and
provisions thereof in addition to any other remedy to which the Transferors or
the Company may be entitled in law or in equity; provided, however, that neither
the Company nor the Transferors shall seek, and Transferee and its
Representatives shall not be liable for, consequential, speculative, exemplary,
or punitive damages.
5.16 INVESTOR OFFERING. Transferee will use its reasonable best efforts to
-----------------
consummate the Investor Offering on or before April 15, 1995.
5.17 PUBLIC DISCLOSURE. Except for delivery of any memorandum to, and
-----------------
discussions with potential investors in Transferee and disclosures necessary to
effect the transactions contemplated hereby, neither Transferee nor any of the
Transferors shall provide any information with respect to such transactions to
any third parties not involved in the Due Diligence Investigation except after
consultation with the other party. Further, neither party shall issue any press
release except upon consummation of the transactions contemplated by the
Agreement except with the consent of the other party, which will not be
unreasonably withheld or except as may be required to comply with the Securities
Act or applicable state laws and provided further that Transferee shall not
provide to any third parties any information concerning the consideration to be
paid to the Transferors pursuant to this Agreement, except as may be required
by law. For purposes hereof the consent of,
61
<PAGE>
and consultation with, Daniel V. Colangelo shall constitute the consent of, or
consultation with, the Transferors.
5.18 CLOSING. Each Transferor shall use his best efforts to cause the
-------
conditions specified in Article 6 hereof, and the Transferee shall use its best
efforts to cause the conditions specified in Article 7 hereof, to be satisfied
on or before the Closing Date.
ARTICLE 6
---------
CONDITIONS TO TRANSFEREE'S OBLIGATION TO CLOSE
----------------------------------------------
The obligations of Transferee hereunder to proceed with the Closing are
subject to the satisfaction on or before the Closing Date of each of the
following conditions, unless otherwise waived, in writing, by Transferee:
6.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
--------------------------------------------------------------
OBLIGATIONS. The representations and warranties of Transferors contained herein,
- -----------
and in any certificate or other writing delivered pursuant hereto or in
connection herewith shall have been true and correct in all material respects at
and as of the date hereof, and they shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made at and as of that time. Transferors shall have duly performed or complied
with all of the covenants, acts and obligations to be performed or complied with
by each of them hereunder in all material respects at or prior to the Closing.
62
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Each of the Transferors shall have delivered to the Transferee a certificate,
dated as of the Closing Date and signed by each of the Transferors, certifying
that such representations and warranties are thus true and correct, and that all
such obligations have been thus performed and complied with.
6.2 DELIVERIES. The deliveries of Transferors described in Article 9 shall
----------
have been received.
6.3 REGISTRATION RIGHTS AGREEMENT. Each of the Transferors shall have
-----------------------------
executed and delivered the Registration Rights Agreement in substantially the
form attached hereto as Exhibit 6.3 (the "Registration Rights Agreement").
6.4 EMPLOYMENT AGREEMENTS. Each of Daniel V. Colangelo, James W. Largay
---------------------
and Stephen A. Norman shall have executed and delivered to Transferee on or
prior to the Closing Date their respective employment agreements attached hereto
as Exhibit 6.4 ("Employment Agreements").
6.5 PAYOFF OF LINE OF CREDIT. The Company shall have paid off the Line of
------------------------
Credit with Brighton Bank, and the Line of Credit and all ancillary documents
thereto, including all security interests of Brighton Bank in the Company's
assets, shall have been terminated.
63
<PAGE>
6.6 CANCELLATION OF EMPLOYEE OPTIONS. Transferee shall have received
--------------------------------
evidence, satisfactory to it in its sole discretion, that the Employee Options
have been cancelled, and that the employees who had been granted such Employee
Options have released any interest in or right to such Employee Options.
6.7 CANCELLATION OF SHAREHOLDERS AGREEMENTS. Transferee shall have
---------------------------------------
received evidence, satisfactory to it in its sole discretion, that each of the
Shareholders Agreements has been terminated and is of no further force or
effect.
6.8 TITLE INSURANCE. The Transferee shall have received, with respect to
---------------
each parcel of Owned Real Property a title commitment or title update for an
owner's title insurance policy dated as of the Closing Date, with insurance over
(or deletion of) all general exceptions set forth in Schedule B of such form,
and which shall be subject in each case only to liens for real estate taxes not
yet due and payable and such other liens and imperfections of title and
encumbrances as are set forth on Schedule 3.20 attached hereto.
ARTICLE 7
---------
CONDITIONS TO OBLIGATION OF TRANSFERORS TO CLOSE
------------------------------------------------
The obligations of Transferors to proceed with the Closing are subject to the
satisfaction on or before the Closing Date of each of the following conditions,
unless otherwise waived, in writing, by Transferors.
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<PAGE>
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
--------------------------------------------------------------
OBLIGATIONS. The representations and warranties of Transferee contained herein
- -----------
and in any certificate or other writing delivered pursuant hereto or in
connection herewith shall have been true and correct in all material respects at
and as of the date hereof and they shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made at and as of that time. Transferee shall have duly performed or complied
with all of the covenants, acts and obligations to be performed or complied with
by Transferee hereunder in all material respects at or prior to the Closing.
Transferee shall have delivered to the Transferors a certificate dated as of the
Closing Date and signed by Transferee certifying that such representations and
warranties are thus true and correct, and that all such obligations have been
thus performed and complied with.
7.2 INVESTOR OFFERING. The proceeds of the Investor Offering shall have
-----------------
been received by Transferee.
7.3 BCI LOAN AGREEMENT. Transferee and BCI shall have executed a Secured
------------------
Loan Agreement substantially in the form attached as Exhibit 7.3.
7.4 EMPLOYMENT AGREEMENTS. Transferee shall have executed and delivered
---------------------
each of the Employment Agreements, and shall have executed and delivered a one
year employment agreement with Doug Brooks providing for an annual salary of
$45,000 and such other terms as are mutually agreeable to Transferee and Doug
Brooks.
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<PAGE>
7.5 BOARD OF DIRECTORS' APPROVAL. Transferee shall have delivered to
----------------------------
Transferors a certified copy of the resolutions duly adopted by the Board of
Directors of Transferee, authorizing the execution of this Agreement and the
consummation of the transactions contemplated hereby, and the election of Daniel
V. Colangelo as President - Rocky Mountain Division of the Company, and Stephen
A. Norman as Vice President - Rocky Mountain Division of the Company.
7.6 DELIVERIES. The deliveries of Transferee described in Article 9 shall
----------
have been received.
7.7 REGISTRATION RIGHTS AGREEMENT. Transferee shall have executed and
-----------------------------
delivered the Registration Rights Agreement.
7.8 ASSIGNMENT OF RIGHTS. Transferee shall have executed and delivered an
--------------------
assignment (the "Assignment"), in form reasonably acceptable to Transferors,
assigning to Transferors all of Transferee's rights under the Stock Purchase
Agreement and BCI Registration Rights Agreement.
7.9 ELECTION OF DANIEL V. COLANGELO AS DIRECTOR. Daniel V. Colangelo shall
-------------------------------------------
have been elected a director of Transferee.
66
<PAGE>
ARTICLE 8
---------
TERMINATION
-----------
8.1 TERMINATION RIGHTS. This Agreement may be terminated, abandoned or
------------------
renegotiated without limiting or waiving any other rights and remedies any party
may have at law or in equity (including the indemnification provisions hereof
which shall survive any termination hereunder), at any time prior to the
consummation of the Closing on the Closing Date (a) upon the mutual written
consent of Transferors and Transferee; (b) by either party if the Closing has
not occurred by April 15, 1995; or (c) by Transferee, if on or before two weeks
from the date hereof, it is not satisfied with its due diligence investigation
of the Company and the Company's Business ("Due Diligence Investigation").
ARTICLE 9
---------
CLOSING AND CLOSING DELIVERIES
------------------------------
9.1 CLOSING. The Closing of the transaction contemplated hereby
-------
("Closing") shall take place at 10:00 A.M. on March 15, 1995, at the offices of
BCI; provided, however, that if any of the conditions which are set forth in
Articles 6 or 7 of this Agreement has not been satisfied (or waived) by such
date, then the Closing shall take place on a subsequent date, which shall be
determined by mutual agreement of the parties hereto.
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<PAGE>
9.2 ACTION TO BE TAKEN BY TRANSFERORS. At the Closing, Transferors shall
---------------------------------
deliver the following:
(a) certified copies of the Articles of Incorporation and Bylaws of the
Company and the Subsidiary, as amended to date and certificate of good
standing of the Company and the Subsidiary from the State of Utah
dated within five days prior to the Closing Date;
(b) certificates evidencing the Contributed Shares, accompanied by duly
executed stock transfer powers assigning the same to Transferee;
(c) the minute books and stock ledger books for the Company and the
Subsidiary;
(d) all consents, waivers, approvals, authorizations or orders required to
be obtained, and evidence of the making of all filings required to be
made, by Transferors for their execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby;
(e) the results of UCC financing statements searches respecting the
Company and the Subsidiary in each state in which the Business is
conducted and tax lien and judgment searches, which show no liens or
encumbrances except those identified on Schedule 3.17;
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<PAGE>
(f) opinion of Parsons Behle & Latimer, counsel to Messrs. Colangelo,
Norman and Largay and the Company and the opinions of such other
counsel as represent other Transferors, in form attached as Exhibit
9.2(f);
(g) executed copies of the documents referenced in Article 6 hereof;
(h) resignations of such officers and directors of the Company and the
Subsidiary as the Transferee shall request;
(i) a release and waiver of each director and officer of the Company and
the Subsidiary releasing and waiving any then existing claim, whether
known or unknown, he may have against the Company or the Subsidiary in
a form reasonably satisfactory to the Transferee; provided that such
release and waiver shall not extend to valid claims by such director
or officer against the Company for indemnification agaisnt claims,
losses or expenses for which he would be entitled to indemnification
by the Company under and in accordance with its Bylaws.
9.3 ACTION TO BE TAKEN BY TRANSFEREE. At the Closing, Transferee shall
--------------------------------
deliver the following:
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<PAGE>
(a) certified copies of the Certificate of Incorporation and Bylaws of
Transferee and a certificate of good standing of Transferee from the
State of Delaware dated within five days prior to the Closing Date;
(b) a copy of the resolutions adopted by the Board of Directors of
Transferee authorizing its execution, delivery and performance of this
Agreement, certified by the Secretary or Assistant Secretary of
Transferee;
(c) all consents, waivers, approvals, authorizations or orders required to
be obtained, and evidence of the making of all filings required to be
made, by Transferee for its authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby;
(d) certificates evidencing the BCI Shares and the Exchange Shares in the
name of the applicable Transferor;
(e) opinion of Rudnick & Wolfe, counsel to Transferee, in form attached as
Exhibit 9.3(d); and
(f) executed copies of the documents referenced in Article 7 hereof.
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<PAGE>
9.4 FORM OF DOCUMENTS. All documents to be furnished at the Closing shall
-----------------
be in form and substance reasonably satisfactory to Transferors and Transferee.
9.5 FURTHER ASSURANCES. At any time at or after the Closing, the parties
------------------
shall execute and deliver such instruments, assignments and other documents as
may be reasonably necessary to convey, assign and transfer the Contributed
Shares to Transferee or otherwise carry out the purpose of this Agreement.
ARTICLE 10
----------
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS
--------------------------------------------------------
The representations and warranties contained in this Agreement and in any
instrument or document delivered pursuant to this Agreement shall survive for a
period of two years from the Closing Date and thereafter all such
representations and warranties shall be extinguished; provided however that (i)
the representation and warranty set forth in Section 3.16, shall survive until
the Statute of Limitations Date (as below defined), and (ii) the representations
and warranties set forth in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.8, and 3.10 and
Sections 4.1, 4.2, 4.3, 4.4, 4.5, 4.6 and 4.7 shall survive for an indefinite
period (the period of such survival being referred to as the ("Survival
Period")). For purposes hereof, the Statute of Limitations Date means the last
day on which the applicable governmental entity may make an assessment
respecting any Taxes as provided in the applicable statute or ordinance. Any
claim or cause of action (including, without limiting the generality of the
71
<PAGE>
foregoing, a claim for indemnification pursuant to Article 11) based upon or
arising out of any inaccurate representation or warranty made hereunder or in
any instrument or document delivered pursuant hereto must be made within the
applicable Survival Period or the party against which such claim is made shall
have no liability with respect thereto.
Nothing contained in this Article shall affect or limit the obligations of
either party to perform the obligations to be performed by it hereunder after
the Closing Date. Any covenant which by its terms is to be fully performed
prior to the Closing Date shall survive for a period of two (2) years from the
Closing Date (also the "Survival Period" with respect to such covenants).
72
<PAGE>
ARTICLE 11
----------
INDEMNIFICATION
---------------
11.1 INDEMNIFICATION BY TRANSFERORS.
------------------------------
(a) Notwithstanding anything in this Agreement to the contrary, the
indemnification obligations of the Transferors shall be an obligation
only of each individual as to all representations and warranties
contained in Sections 3.1 through 3.7 hereof, and, subject to the
limitations set forth below, the Company and Transferee shall be
entitled to recover from each of them Transferee/Company Damages (as
defined below) only in proportion to their respective shareholdings in
the Company. The indemnification obligations of Messrs. Daniel V.
Colangelo, James W. Largay and Stephen A. Norman shall be joint and
several as to all other representations, warranties and covenants
contained herein and, subject to the limitations set forth below, the
Company and Transferee shall be entitled to recover the entire amount
of any claim for transferee/Company Damages from any of them. The
indemnification obligations of Messrs. Vito Colangelo, Julius Frankel,
and Paul Aiken shall be an obligation only of each individual as to
all other representations, warranties, and covenants contained herein,
and, subject to the limitations set forth below, the Company and
Transferee shall be entitled to recover from each of
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<PAGE>
them Transferee/Company Damages only in proportion to their respective
shareholdings in the Company.
(b) The Transferors, as provided in Section 11.1(a) above, shall indemnify
and hold Company and Transferee harmless from and against all costs,
expenses, losses, damages or liabilities (including, without
limitation, reasonable attorneys' fees) incurred by Company and/or
Transferee with respect to or in connection with the following
(collectively "Transferee/Company Damages"); provided that written
--------
notice of the claim for indemnification, specifying the nature of the
claim in reasonable detail and, if known, the amount of the claim, is
received by Transferors by the end of any applicable Survival Period:
(i) the existence as of the date hereof of any fact, circumstance or
condition that makes any of the representations and warranties of
each Transferor contained in this Agreement untrue or otherwise
incorrect; and
(ii) the breach by any Transferor of any of his covenants or
agreements contained in this Agreement.
Without limiting the generality of the foregoing, with respect to the
measurement of Transferee/Company Damages, Transferee and the Company shall have
the right to be put in the same financial position as it would have been in had
each of the representations and
74
<PAGE>
warranties of each of the Transferors been true and correct and had each of the
covenants of each of the Transferors been performed in full. Notwithstanding the
foregoing, the Transferors shall not be responsible to indemnify the Company or
the Transferee for Transferor/Company Damages: (i) until the aggregate of all
Transferee/Company Damages exceeds Seventy Five Thousand Dollars ($75,000.00),
and the Transferors shall only be liable for all of the Transferee/Company
Damages in excess of such threshold; or (ii) for any Transferee/Company Damages
in excess of an aggregate of Four Million Dollars ($4,000,000); provided,
however, that such limitations shall not be applicable to Transferee/Company
Damages arising out of (a) any inaccurate representation or warranty set forth
in Sections 3.4 or 3.10 hereof, or (b) fraud or intentional misrepresentation.
11.2 INDEMNIFICATION BY TRANSFEREE. Transferee shall indemnify, defend and
-----------------------------
hold Transferors harmless from and against all costs, expenses, losses, damages
and liabilities (including, without limitation, reasonable attorneys' fees)
incurred by Transferors with respect to or in connection with the
following (collectively, the "Transferors Damages"); provided that, in the case
--------
of any claim of indemnification under clause (a) or (b) of this Section
11.2, written notice of the claim for indemnification, specifying the nature of
the claim in reasonable detail and, if known, the amount of the claim, is
received by Transferee by the end of any applicable Survival Period:
(a) the existence as of the date hereof of any fact, circumstance or
condition that makes any of the representations and warranties of
Transferee contained in this Agreement untrue or otherwise inaccurate;
and
75
<PAGE>
(b) the breach by Transferee of any of its covenants or agreements
contained in this Agreement.
Without limiting the generality of the foregoing, with respect to the
measurement of Transferors Damages, the Transferors shall have the right to be
put in the same financial position as they would have been in had each of the
representations and warranties of Transferee been true and correct and had each
of the covenants of Transferee been performed in full.
11.3 SPECIAL ENVIRONMENTAL INDEMNITY.
-------------------------------
(a) The parties acknowledge that the State of Utah Department of
Environmental Quality, Division of Environmental Response and
Remediation ("DERR") has informed the Company, pursuant to a
letter dated November 2, 1994, that action will be required to
investigate and remediate soil and groundwater contamination
caused by an underground storage tank ("UST") located on property
owned by the Company at 3541 South 300 West, Salt Lake City, Utah
(the "Commissary").
(b) As an inducement to Transferee to execute and deliver this
Agreement, the Transferors have agreed to and will, as
provided in the first paragraph of Section 11.1(a) above
76
<PAGE>
(without regard to the limitations set forth in Section 11.1(b) above)
and subject to the limitation set forth below, indemnify and hold
Company and Transferee harmless from and against all costs, expenses,
losses, damages, or liabilities (including, without limitation,
reasonable attorneys' fees) incurred by the Company and/or Transferee
in connection with all actions required by DERR or other governmental
authority (at the times and in the manner required by DERR or such
other governmental authority) in connection with the investigation and
remediation of any and all contamination on the Commissary property
caused by or related to the UST so as to fully remediate all such
contamination to the satisfaction of DERR and any other governmental
authority (collectively, "Environmental Damages").
(c) Transferee and the Company shall have the right to make demand from
time to time on Transferors for payment of any of the foregoing
amounts as such amounts are paid, suffered or incurred, without
limiting Transferee's and the Company's rights to make other and
subsequent demands on Transferors for additional amounts required to
be indemnified pursuant to this Section 11.3. In the event that
Transferors shall pay any amounts to Transferee and the Company
pursuant to this Section 11.3, Transferors shall be subrogated to the
77
<PAGE>
rights, if any, of Transferee and the Company against Mr. O.
Ross Taylor under the Transferors' oral agreement with Mr.
Taylor, pursuant to which Mr. Taylor agreed to assume
responsibility for the investigation and remediation of the
contamination caused by, or relating to, the UST; provided,
however, that (i) Transferee and the Company shall not be
required to assist Transferors in the Transferors' enforcement
of any such subrogation rights against Mr. Taylor; and (ii)
Transferors shall not have any such subrogation rights against
Mr. Taylor in the event and for so long as Transferors are in
default of any of their obligations to Transferee or the
Company under this Section 11.3.
(d) Notwithstanding the foregoing, the Transferors shall not be
responsible to indemnify the Transferee or the Company for
any Environmental Damages in excess of an aggregate of Five
Hundred Thousand Dollars ($500,000).
11.4 TRANSFEROR'S SPECIAL INDEMNITIES.
--------------------------------
(a) Transferee shall indemnify and hold harmless each Transferor
from and against any and all loss, claim, damage, liability or
expense incurred by such Transferor because such Transferor
was named personally in any claim or action, insofar as such
loss, claim, damage,
78
<PAGE>
liability or expense (or action in respect thereof) arises
out of or is based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the private
offering memorandum relating to the Investor Offering, or
(ii) the omission or alleged omission of a material fact
from the Investor Offering Memorandum that was necessary to
make the statements therein not misleading; and shall
reimburse each Transferor for any legal or other expenses
reasonably incurred by such Transferor in connection with
investigating or defending or preparing to defend against
any such claim or; provided, however, that Transferee's
indemnification obligations hereunder shall not be
applicable to the extent that any such loss, claim, damage,
liability, expense or action arises out of or is based upon
an untrue statement or alleged untrue statement or omission
or alleged omission made in the Information.
(b) Promptly after receipt by any Transferor under Section
11.4(a) of notice of any claim or the commencement of any
action, such Transferor shall, if a claim in respect thereof
may be made against Transferee under Section 11.4(a), notify
in writing Transferee of the commencement thereof. If any
such action is brought against any Transferor, and such
Transferor notifies of the commencement thereof, Transferee
shall be entitled to participate therein, and, to the extent
that it may wish, assume
79
<PAGE>
the defense thereof. In the event Transferee assumes the
defense of any such action, the Transferee shall not be
liable to such Transferor under Section 11.4(a) for any
legal or other expenses incurred by such Transferor in
connection with the defense thereof.
(c) Transferee shall indemnify and hold harmless each of Daniel V.
Colangelo, Stephen A. Norman, and James A. Largay from and
against any and all expense incurred by such individual's payment
on or in respect of any of the personal guarantees of such
individual set forth on Schedule 11.4.
11.5 Exclusive Remedies. The parties acknowledge and agree that the
------------------
indemnification provisions contained in Sections 11.1(b) and 11.2 hereof shall
be the exclusive remedies for the Transferee/Company Damages and the
Transferor's Damages, respectively, provided that nothing herein shall (i) limit
a party's remedies for fraud or intentional misrepresentation generally; or (ii)
limit a party's right to obtain injunctive relief.
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<PAGE>
ARTICLE 12
----------
MISCELLANEOUS
-------------
12.1 WRITTEN AGREEMENT TO GOVERN. This Agreement sets forth the entire
---------------------------
understanding and supersedes all prior and contemporaneous oral and written
agreements between the parties relating to the subject matter contained herein
or therein, and merges all prior and contemporaneous discussions between them.
No party shall be bound by any definition, condition, representation, warranty,
covenant or provision other than as expressly stated in this Agreement or in the
other documents referred to herein which form a part hereof.
12.2 SEVERABILITY. The parties expressly agree that it is not the intention
------------
of any party to violate any public policy, statutory or common laws, rules,
regulations, treaties or decisions of any government or agency thereof. If any
provision of this Agreement is judicially or administratively interpreted or
construed as being so in violation, such provision shall be inoperative and the
remainder of this Agreement shall remain binding upon the parties hereto.
Further, to the extent any provision hereof is deemed unenforceable by virtue of
its scope but may be enforceable by limitations thereon, the parties hereto
agree that the same shall be enforceable to the fullest extent permissible under
the laws and pubic policies applied in such jurisdiction in which the
enforcement is sought. The parties hereto hereby authorize any court of
competent jurisdiction to modify the covenants of Section 5.4 to the extent
necessary to make the same enforceable.
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<PAGE>
12.3 NOTICES. All notices, demands and other communications required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered by hand or by electronic transmission. If mailed, first
class, certified mail, postage prepaid, or sent by reliable overnight delivery
service and addressed as follows, or at such other addresses as the parties
hereto may from time to time designate in writing, such notices, requests,
demands, and other communications shall be deemed delivered three business days
after being so duly posted or the next business day if sent by overnight
delivery service:
To Transferee: Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, Colorado 80401
Attention: Kyle T. Craig
Facsimile: (303) 202-3360
With a copy to: Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601
Attention: Michael G. Brennan, Esq.
Facsimile: (312) 984-2299/236-7516
To Transferors: (See Schedule I)
With a copy to : Parsons Behle & Latimer
201 South Main Street, Suite 1800
P.O. Box 45898
Salt Lake City, Utah 84145-0898
Attention: William D. Holyoak, Esq.
Facsimile: (801) 536-6111
12.4 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute one and the same agreement.
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<PAGE>
12.5 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, expressed or
----------------------------
implied, is intended to confer upon any person, other than the parties hereto
and their successors and assigns, any rights or remedies under or by reason of
this Agreement.
12.6 INTERPRETATION. The headings in this Agreement are inserted for
--------------
convenience of reference only and shall not be a part of or control or affect
the meaning of this Agreement. Unless otherwise expressly stated herein, all
references herein to sections and paragraphs are to sections and paragraphs in
this Agreement and all references herein to Schedules or Exhibits are to
Schedules or Exhibits to this Agreement. The words "hereof", "herein",
"hereunder", "hereby" and words of similar import refer to this Agreement as a
whole and not to any particular Section or subsection of this Agreement. As used
herein, "business day" means any day other than a day on which national banks in
Utah are required or permitted to be closed. The masculine, feminine or neuter
pronouns used in this Agreement shall be interpreted without regard to gender,
and the use of the singular or plural shall be deemed to include the other where
the context so requires.
12.7 CONSTRUCTION. This Agreement shall not be construed more strictly
------------
against one party than against another merely by virtue of the fact that it
may have been prepared primarily by counsel for one of the parties, it being
recognized that all parties have contributed substantially and materially to the
preparation of this Agreement.
83
<PAGE>
12.8 SCHEDULES AND EXHIBITS. The Schedules and Exhibits referred to herein,
----------------------
and attached to this Agreement, are incorporated herein by such reference as if
fully set forth in the text hereof.
12.9 MODIFICATION. The parties to this Agreement may modify or supplement
------------
this Agreement in such manner as may be mutually agreed upon by them in writing.
12.10 LAW TO GOVERN. The validity, construction and enforceability of this
-------------
Agreement shall be governed in all respects by the laws of the State of
Delaware, without regard to its conflict of laws rules.
12.11 TIME OF THE ESSENCE. All times, wherever specified in this Agreement
--------------------
for the performance by a party of its obligations hereunder, are of the essence
of this Agreement.
12.12 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns; however, except as otherwise expressly provided herein, neither this
Agreement nor the rights or obligations of any party hereunder maybe assigned
except with the written consent of all other parties.
12.13 EXPENSES. Transferee shall, at or after the Closing, pay the fees of
--------
the Broker and of Parsons Behle & Latimer and other reasonable fees and costs
incurred by
84
<PAGE>
Transferors in connection with the negotiation of this Agreement and the
consummation of the transactions contemplated by this Agreement.
12.14 SECOND AMENDED AND RESTATED SHAREHOLDERS AGREEMENT OF THE SHAREHOLDERS
----------------------------------------------------------------------
OF BRACKMAN BROTHERS, INC.
--------------------------
(a) The parties acknowledge that the Second Amended and Restated
Shareholders Agreement of the Shareholders of Brackman Brothers, Inc.
dated October 12, 1994 (the "Brackman Shareholders Agreement")
prohibits, among other things, each Transferor from contracting to
sell or otherwise transferring for consideration any of the
Contributed Shares without first offering to sell such shares to the
Company on the same terms as a third-party offer, and if the Company
rejects such offer, offering to sell such shares to the other
Transferors on the same terms as a third-party offer.
(b) Each of the Company and Daniel V. Colangelo, Stephen A. Norman, and
James W. Largay, and each other Transferor who executes this Agreement
prior to the time at which all Transferors have executed this
Agreement (each a "Signing Transferor"), acknowledges the superiority
of the rights set forth in the Brackman Shareholders Agreement, so
that to the extent any provision of the Brackman Shareholders
Agreement conflicts with the terms of, and obligations of the Company
and the Transferors under, this Agreement, the terms of the Brackman
Shareholders Agreement shall
85
<PAGE>
control; provided, however, that to the extent a Transferor who is not
a Signing Transferor exercises his rights under the Brackman
Shareholders Agreement, the Signing Transferors agree to follow the
procedures set forth in Section 1 of the Brackman Shareholders
Agreement and sell to the Transferor exercising his rights thereunder
all of the Contributed Shares owned by the Signing Transferors in
accordance with the terms and procedures of the Brackman Shareholders
Agreement; provided, further, that if such Transferor does not
exercise such rights, or is unable to or otherwise does not effect the
purchase of all of the Contributed Shares pursuant to the terms of the
Brackman Shareholders Agreement, the Signing Transferors shall
contribute the Contributed Shares to the Transferee in accordance with
and subject to the terms and conditions of this Agreement.
(c) Each of the Signing Transferors and the Company hereby waives all
rights he or it may have under or pursuant to the Brackman
Shareholders Agreement as a consequence of the transactions
contemplated by this Agreement, and each of the Transferors and the
Company agrees that upon the Closing, the Brackman Shareholders
Agreement and all of the rights and obligations of the parties thereto
shall be automatically terminated, without further action on the part
of the Company or any of the Transferors.
86
<PAGE>
IN WITNESS WHEREOF, all of the parties hereto have caused this Agreement to be
executed on its behalf by its duly authorized officer on the day and year first
written above.
PROGRESSIVE BAGEL CONCEPTS, INC.
a Delaware Corporation
By: /s/ Kyle Craig
-------------------------------------
Its: Vice President
-------------------------------------
"Transferee"
/s/ Daniel V. Colangelo
--------------------------------------
Daniel V. Colangelo
/s/ James W. Largay
--------------------------------------
James W. Largay
/s/ Stephen A. Norman
--------------------------------------
Stephen A. Norman
/s/ Vito J. Colangelo
______________________________________
Vito J. Colangelo
/s/ Julius A. Frankel
______________________________________
Julius A. Frankel
/s/ Paul Aiken
______________________________________
Paul Aiken
Collectively, "Transferors"
BRACKMAN BROTHERS, INC.,
a Utah corporation
By: /s/ Daniel V. Colangelo
--------------------------------------
Its: President
--------------------------------------
"Brackman"
86
<PAGE>
EXHIBIT I
---------
STOCK PURCHASE AGREEMENT
------------------------
WITH BCI REGISTRATION RIGHTS AGREEMENT
--------------------------------------
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT, is made and entered into as of this ____ day of February,
1995, by and between Boston Chicken, Inc., a Delaware corporation (the
"Seller"), and Progressive Bagel Concepts, Inc., a Delaware corporation
("Buyer").
RECITALS
--------
Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, shares of common stock, $.01 par value per share, of the Seller ("Common
Stock"), upon the terms and subject to the conditions contained herein.
For and in consideration of the premises, covenants, and agreements
contained herein, the parties do covenant, agree, represent, warrant, and
stipulate as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
Section 1.1 Shares to be Acquired. Subject to the terms and conditions
---------------------
contained herein, Seller agrees to sell, assign, transfer, and convey to Buyer,
free and clear of all pledges, liens, security interests, encumbrances, or other
restrictions arising from Seller (except restrictions on resale under state or
federal securities laws), and Buyer shall purchase from Seller, that number of
shares of Common Stock equal to: (a) $8,300,000 divided by (b) the closing sales
price per share of Common Stock as quoted on the NASDAQ National Market, as
reported in The Wall Street Journal (Midwest Edition), on the business day
immediately prior to the last business day before the Closing Date (as
-1-
<PAGE>
hereinafter defined) (the "Per-Share Price"), rounded up to the nearest whole
share (the "Shares").
Section 1.2 Closing. The closing of the purchase and sale of the Shares
-------
herein described (the "Closing") shall occur on March 15, 1995, or on a
subsequent date which shall be determined by the parties (the "Closing Date"),
and shall take place at the offices of the Seller, 14103 Denver West Parkway,
Golden, CO 80401 at 10:00 a.m. Mountain time.
Section 1.3 Delivery of Shares. On the Closing Date, Seller shall deliver
------------------
to Buyer such certificate or certificates, in such denominations as Buyer may
reasonably request, representing the Shares, issued in the name of Buyer.
ARTICLE II
PURCHASE PRICE AND PAYMENT
The aggregate purchase price (the "Purchase Price") for the Shares shall be
$8,300,000.00. The Purchase Price shall be payable on the Closing Date by wire
transfer of immediately available funds to a bank or banks designated by Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Seller represents, warrants, covenants,
and agrees as follows:
Section 3.1 Capitalization: Validity of Shares. Seller has authorized
----------------------------------
capital stock consisting of 100,000,000 shares of Common Stock, of which
44,912,183 shares were
-2-
<PAGE>
issued and outstanding as of January 24, 1995, and 20,000,000 shares of $.01 par
value preferred stock, of which no shares are issued and outstanding. All of the
issued and outstanding shares of Common Stock of Seller are duly and validly
authorized and issued, fully paid and non assessable, were offered, issued, and
sold in accordance with applicable federal and state securities laws and were
not issued in violation of the preemptive rights of any stockholders of Seller.
The Shares to be issued and delivered to Buyer, when so issued and delivered,
will be duly and validly authorized and issued, fully paid and nonassessable,
free and clear of any security interest, lien, encumbrance, right, or
restriction whatsoever arising from Seller (except restrictions on resale under
state or federal securities laws). There are no outstanding options, warrants,
conversion privileges, commitments or demands of any character relating to the
Shares arising from Seller.
Section 3.2 Organization and Good Standing. Seller is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware.
Section 3.3 Authorization; Validity. Seller has full corporate power and
-----------------------
authority to enter into this Agreement and to perform all of Seller's covenants
and undertakings herein set forth, including, without limitation, the full
corporate power and authority to issue the Shares to Buyer free and clear of any
security interests, liens, encumbrances, rights, or restrictions arising from
Seller. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement is the legal, valid, and
binding obligation of Seller, enforceable in accordance with its terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, or similar laws affecting the enforcement of creditors' rights
generally, and except as enforcement of any particular remedy may be limited by
the application of equitable principles. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
(i) violate the Certificate of Incorporation or
-3-
<PAGE>
bylaws, as amended, of Seller; (ii) violate or constitute a default under any
provision of, or conflict with, or result in acceleration of any obligation
under, any mortgage, deed of trust, note, loan, lease, or agreement to which
Seller is a party or by which it or any of its properties or assets may be
bound, which violation, default, or conflict would result in a material adverse
effect on the business, assets, operations, or condition (including, without
limitation, financial) of Seller; or (iii) violate any order, ruling, decree,
judgment, arbitration award, or stipulation to which Seller is subject, which
violation would result in a material adverse effect on the business, assets,
operations or condition (including, without limitation, financial) of Seller.
Section 3.4 SEC Reports and Financial Statements. Seller is subject to the
------------------------------------
reporting requirements of Section 13 of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and has delivered to Buyer copies of all reports,
registration statements, and other filings filed by Seller with the Securities
and Exchange Commission (the "SEC") since December 26, 1993 under the 1934 Act
and any filings with the SEC under the Securities Act of 1933, as amended (the
"1933 Act") (herein collectively called the "SEC Reports"). As of the date of
this Agreement, Seller has filed all regular and periodic reports and proxy
statements required to be filed by it with the SEC. The SEC Reports taken
together in the order filed correctly describe, among other things, the
business, operations, and principal properties of Seller and its subsidiaries in
accordance with the requirements of the respective applicable report form. As of
their respective dates of filing, none of the SEC Reports contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited consolidated financial
statements included in the SEC Reports were prepared in accordance with
generally accepted accounting principles (as in effect from time to time)
applied on a consistent basis (except as may be indicated therein or in the
notes or schedules thereto) and fairly present, as of
-4-
<PAGE>
the dates thereof, the results of Seller's and its consolidated subsidiaries'
operations and changes in financial position for the periods specified, subject,
in the case of the unaudited interim financial statements, to normal year-end
audited adjustments and any other adjustments described therein or in the notes
and schedules thereto.
Section 3.5 Brokers. Seller has not dealt with any broker, finder,
-------
commission agent, or other person in connection with the purchase of the Shares
and the transactions contemplated by this Agreement and is under no obligation
to pay any broker's fee or commission in connection with such transactions.
Section 3.6 Representations and Warranties; Survival. The representations,
----------------------------------------
warranties and covenants of Seller shall survive for a period of one year from
the Closing Date. When considered together with the SEC Reports and other
information made available to Buyer, no representation, warranty, or covenant
contained in this Agreement or in any written statement delivered pursuant
hereto contains any untrue material statement, nor shall such representations,
warranties, and covenants omit any statement necessary in order to make any
material statement not misleading in light of the circumstances in which they
were made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer represents, warrants, covenants, and
agrees as follows:
Section 4.1 Organization and Good Standing. Buyer is a corporation duly
------------------------------
organized, validly existing, and in good standing under the laws of the State of
Delaware.
-5-
<PAGE>
Section 4.2 Authorization. Buyer has full corporate power and authority to
-------------
enter into this Agreement and to perform all of Buyer's covenants and
undertakings herein set forth. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been, or will
prior to the Closing Date be, duly authorized by all necessary corporate action
on the part of Buyer. This Agreement is the legal, valid and binding obligation
of Buyer, enforceable in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, moratorium, or similar laws
affecting the enforcement of creditors' rights generally, and except as
enforcement of any particular remedy may be limited by the application of
equitable principles.
Section 4.2 Investment. The Shares are being acquired by Buyer hereto not
----------
with a view to any distribution or resale thereof in any transaction which would
be in violation of the 1933 Act, and rules promulgated thereunder, or any state
securities statute. Buyer can bear the economic risk of losing its investment in
the Shares and is presently able to afford the complete loss of such investment.
Buyer has such knowledge and experience in financial and business matters so as
to be capable of evaluating the merits and risks of an investment in the Shares.
Buyer has been furnished with the SEC Reports and acknowledges that it has been
afforded the opportunity (i) to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of Seller concerning the merits
and risks of investing in the Shares and (ii) to obtain such additional
information which Seller possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy and completeness of the
information contained in the SEC Reports. Buyer acknowledges that Seller has
answered all questions and responded to all inquiries and requests for
information to Buyer's satisfaction. Buyer acknowledges that it has made,
independently and without reliance upon the Seller (other than the
representations and warranties of the Seller set forth in Article III hereof) or
any agent or representative of the Seller and based in its own independent
analysis of the Seller and
-6-
<PAGE>
such other documents and information as it has deemed appropriate, its own
investment analysis and its own business decision to enter into and consummate
this Agreement and the transactions contemplated hereby.
Section 4.4 Legend on Shares. The Buyer understands that the Shares have
----------------
not been registered under the 1933 Act or any state securities laws, and that it
must therefore bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the 1933 Act or is exempt
from registration, and that the Shares will bear substantially the following
legend:
"The shares represented by this certificate are
"Restricted Securities". As such they may not be transferred
unless (i) such transfer is effected pursuant to a
registration statement which has been filed under the
Securities Act of 1933 (the "1933 Act") and declared
effective by the Securities and Exchange Commission, or (ii)
in the written opinion of counsel, acceptable to the issuer
of these shares, such transfer may be effected under and is
in compliance with Rule 144 under the 1933 Act, as in
effect on the date of such transfer, or is otherwise exempt
from the registration requirements of the 1933 Act."
Section 4.5 Brokers. Buyer has not dealt with any broker, finder,
-------
commission agent, or other person in connection with the purchase of the Shares
and the transactions contemplated by this Agreement and is under no obligation
to pay any broker's fee or commission in connection with such transactions.
ARTICLE V
CONDITIONS; TERMINATION
Section 5.1 Conditions to Obligations of Buyer. The obligations of Buyer
----------------------------------
are, at the option of Buyer, subject to the conditions that, at the Closing
Date:
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<PAGE>
(a) Accuracy of Representations and Warranties. The
------------------------------------------
representations or warranties of Seller contained in this Agreement shall be
true and correct in all material respects.
(b) Performance by Seller. Seller shall have performed and
---------------------
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
(c) Delivery of Certificates and Opinion. Seller shall have
------------------------------------
delivered to Buyer (i) a certificate executed by the Vice Chairman or any Vice
President of Seller, as of the Closing Date, certifying to the fulfillment of
the conditions specified in subparagraphs (a) and (b) hereinabove; (ii) duly
adopted resolutions of the Board of Directors of Seller, certified by the
Secretary or any Assistant Secretary thereof as of the Closing Date, authorizing
and approving the execution of this Agreement on behalf of Seller and the
consummation of the transactions contemplated herein in accordance with its
terms; and (iii) an opinion of the General Counsel of the Seller, dated the
Closing Date, in substantially the form attached hereto as Exhibit A.
(d) No Adverse Changes. There shall have been no material adverse
------------------
change in the properties, business, or financial condition of Seller from that
reflected in the SEC Reports, and Seller shall not have suffered any substantial
loss or damage to its properties or assets not otherwise covered by insurance
that would materially and adversely affect or impair its ability to conduct its
business.
(e) Registration Rights Agreement. Seller shall have executed and
-----------------------------
delivered to Buyer that certain Registration Rights Agreement in substantially
the form attached hereto as Exhibit B (the "Registration Rights Agreement").
-8-
<PAGE>
Section 5.2 Conditions to Obligations of Seller. The obligations of Seller
-----------------------------------
hereunder are, at the option of Seller, subject to the conditions that, at the
Closing Date:
(a) Accuracy of Representations and Warranties. The
------------------------------------------
representations or warranties of Buyer contained in this Agreement shall be true
and correct in all material respects.
(b) Performance by Buyer. Buyer shall have performed and complied
--------------------
with all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or on the Closing Date.
(c) Delivery of Certificates. Buyer shall have delivered to Seller
------------------------
(i) a certificate executed by an officer of Buyer, as of the Closing Date,
certifying to the fulfillment of the conditions specified in subparagraphs (a)
and (b) hereinabove; and (ii) duly adopted resolutions of the Board of Directors
of Buyer certified by the Secretary or any Assistant Secretary thereof as of the
Closing Date, authorizing and approving the execution of this Agreement on
behalf of Buyer and the consummation of the transactions contemplated herein in
accordance with its terms.
(d) Registration Rights Agreement. Buyer shall have executed and
-----------------------------
delivered to Seller the Registration Rights Agreement.
Section 5.3 Termination. This Agreement may be terminated by Buyer on the
-----------
Closing Date if any condition precedent to Buyer's obligations hereunder is not
fulfilled on the Closing Date. Such termination shall not prejudice any claim
that Buyer may have hereunder as a consequence of any failure or default of
Seller. This Agreement may be terminated by Seller on the Closing Date if any
condition precedent to Seller's obligations hereunder is not fulfilled on the
Closing Date. Such termination shall not prejudice any claim that Seller may
have hereunder as a consequence of any failure or default of Buyer.
-9-
<PAGE>
Seller and Buyer shall apply their reasonable best efforts to fulfill all
conditions precedent necessary to consummate this Agreement.
ARTICLE VI
SHARE PRICE GUARANTEE
Section 6.1 Agreement to Guarantee. Seller agrees, on the terms and
----------------------
subject to the conditions set forth herein, to guarantee the sales price of
those Shares sold by Buyer during the Guarantee Period (as hereinafter defined)
(the "Guarantee Shares").
Section 6.2 Conditions to Share Price Guarantee. Seller's obligations
-----------------------------------
under Section 6.1 hereof are subject to the following conditions:
(a) Buyer sells the Guarantee Shares within the first twenty
trading days on which the NASDAQ National Market is open for business
immediately following the date notification by Seller to Buyer that the SEC has
declared effective the registration statement registering the Shares is received
by Buyer (the "Guarantee Period");
(b) The Guarantee Shares are sold through Merrill Lynch, Pierce,
Fenner & Smith Incorporated to one or more persons not affiliated with, related
to, or associated with Buyer, in which a good faith effort is made by Buyer to
maximize the selling price during each trading day in which Guarantee Shares are
sold;
(c) The average price per share received in such sales, net of
broker's commissions, is less than the Per-Share Price (such per-share shortfall
to be referred to as the "Per-Share Shortfall");
-10-
<PAGE>
(d) Seller receives notice from the Buyer within 14 days of the
expiration of the Guarantee Period of the amount of the Per-Share Shortfall with
copies of applicable confirmation slips attached thereto ("Notice"); and
(e) During any trading day during the Guarantee Period Buyer sells
only that number of Shares that is equal to or less than 5% of the total number
of Shares received by Buyer hereunder.
Section 6.3 Payment of Per-Share Shortfall. In the event Buyer satisfies
------------------------------
all of the conditions set forth in Section 6.2, Seller shall pay to Buyer,
within three business days of receipt of the Notice, an amount in cash equal to
the Per-Share Shortfall multiplied by the number of Guarantee Shares sold during
the Guarantee Period.
Section 6.4 Assignment of Share Price Guarantee. Buyer may, without
-----------------------------------
Seller's consent, assign its rights under this Article VI to one or more
individuals to whom it may subsequently transfer the Shares in compliance with
the 1933 Act and all applicable state securities laws; provided, however, that
such individuals may not further assign such rights without Seller's prior
written consent. To the extent that Buyer assigns its rights under this Article
VI to more than one individual, each individual shall have such rights
separately from the others with respect to the Shares transferred to him,
provided that in order to have the benefit of such rights, the individual must
satisfy all of the obligations set forth in Section 6.2 hereof, including, but
not limited to, selling, during any trading day during the Guarantee Period,
only that number of Shares that is equal to or less than 5% of the total number
of Shares transferred to him.
-11-
<PAGE>
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1 Notices. All notices, requests, demands, and other
-------
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand or by electronic
transmission. If sent by reliable overnight delivery service and addressed as
follows, or at such other addresses as the parties hereto may from time to time
designate in writing, such notices, requests, demands, and other communications
shall be deemed delivered the next business day after being so duly sent:
To Buyer: Progressive Bagel Concepts, Inc.
1526 Cole Blvd.
Suite 200
Golden, Colorado 80401
Attention: Chairman
Facsimile: (303) 202-3360
With a copy to:
Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601
Attention: Michael G. Brennan, Esq.
Facsimile: (312) 984-2299
To Seller: Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 384-5339
-12-
<PAGE>
With a copy to:
Bell, Boyd & Lloyd
Three First National Plaza
Suite 3200
70 West Madison Street
Chicago, Illinois 60602
Attention: Amy S. Powers, Esq.
Facsimile: (312) 372-2098
Section 7.2 Prior Agreements. This Agreement supersedes all prior
----------------
discussions and agreements between Buyer and Seller with respect to the purchase
of the Shares and the other matters contained herein, and this Agreement and the
agreements referred to herein contain the sole and entire agreement between the
parties hereto with respect to the transactions contemplated herein.
Section 7.3 Modifications. This Agreement may be modified or amended only
-------------
by a written instrument executed by the parties hereto.
Section 7.4 Counterparts, Headings, Etc. This Agreement may be executed
--------------------------
simultaneously in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument. The
headings herein set out are for convenience of reference only and shall not be
deemed a part of this Agreement.
Section 7.5 Assignment. Subject to compliance with the 1933 Act and all
----------
applicable state securities laws, Buyer's rights hereunder shall be assignable,
including Buyer's rights under Article VI hereof; provided, however, that such
assignee of Buyer may not further assign such rights without the prior written
consent of Seller. To the extent that Buyer assigns its rights under this
Agreement to more than one individual, each individual shall have such rights
separately from the others with respect to the Shares transferred to him.
-13-
<PAGE>
Section 7.6 Binding Effect. This Agreement shall be binding upon and shall
--------------
inure to the benefit of the parties hereto and their respective successors and
assigns.
Section 7.7 Governing Law. The validity and effect of this Agreement and
-------------
the rights and obligations of the parties hereto shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware.
Section 7.8 Further Assurances. From time to time at Buyer's request
------------------
(whether at or after the Closing) Seller will execute and deliver, at Seller's
expense, such further instruments of conveyance and transfer and will take such
other action as Buyer may reasonably request in order to more effectively vest
the Shares in Buyer.
Section 7.9 Severability. Whenever possible, each provision of this
------------
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
Section 7.10 Adjustment of Shares. Seller agrees that the formulae used in
--------------------
determining the Shares and the Per-Share Shortfall shall be appropriately
adjusted to eliminate the impact of any dividend (whether in cash, securities
or other property), stock split, reclassification, recapitalization, reverse
split, or similar event, announced or occurring with respect to the Shares and
with a record date after execution of this Agreement and before the Closing
Date.
-14-
<PAGE>
IN WITNESS WHEREOF, the parties have cause this Agreement to be executed
and their seals to be affixed all as of the day and year first above written.
BOSTON CHICKEN, INC.
By: _______________________________
Title: _______________________________
PROGRESSIVE BAGEL CONCEPTS, INC.
By: _______________________________
Title: _______________________________
-15-
<PAGE>
EXHIBIT A
OPINION OF GENERAL COUNSEL
<PAGE>
1. The Seller's authorized capital stock consists of 100,000,000
shares of Common Stock, $0.01 par value per share, and 20,000,000 shares of
preferred stock, $0.01 par value per share. All of the issued and outstanding
shares of the Seller's Common Stock have been duly and validly authorized and
issued, and are fully paid and nonassessable. The Shares have been duly and
validly authorized and issued, and are fully paid and nonassessable. The Shares
have been duly and validly authorized and issued, and are fully paid and
nonassessable, free and clear of any security interest, lien, encumbrance, right
or restriction whatsoever arising from the Seller (except restrictions on resale
under state or federal securities laws), and there are no outstanding options,
warrants, conversion privileges, commitments or demands of any character
relating to the Shares arising from the Seller.
2. The Seller is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Seller has full
corporate power and authority to enter into the Stock Purchase Agreement in
accordance with its terms and such Stock Purchase Agreement and all
transactions required thereunder have been duly authorized and approved by all
necessary corporate action of the Seller.
3. Each of the Stock Purchase Agreement and the Registration Rights
Agreement is the legal, valid and binding obligation of Seller, enforceable in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
enforcement of creditors' rights generally, and except as enforcement of any
particular remedy may be limited by the application of equitable principles.
4. Neither the execution and delivery of the Stock Purchase
Agreement or the Registration Rights Agreement nor the consummation of the
transactions contemplated thereby will (i) violate the Certificate of
Incorporation or bylaws, as amended, of the Seller; (ii) violate or constitute
an occurrence of default under any provision of, or conflict with, or result in
acceleration of any obligation under, any mortgage, deed or trust, note, loan,
lease or agreement to which it or any of its properties or assets may be bound;
or (iii) violate any order, ruling, decree, judgment, arbitration award or
stipulation to which the Seller is subject.
5. Buyer's counsel may rely on this opinion in connection with any
resale of the Shares and assignment of its rights and obligations under the
Stock Purchase Agreement and Registration Rights Agreement.
-1-
<PAGE>
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This registration rights agreement (the "Agreement") is entered into
as of February __,1995, between Boston Chicken, Inc., a Delaware corporation
("BCI"), and Progressive Bagel Concepts, Inc., a Delaware corporation ("PBC").
SECTION 1. PIGGYBACK REGISTRATION.
----------------------
(a) Registrable Securities. "Registrable Securities" shall mean those
----------------------
restricted shares of BCI common stock, $.01 par value, acquired by PBC pursuant
to the Stock Purchase Agreement of even date herewith, by and between BCI and
PBC (the "BCI Stock Purchase Agreement").
(b) Right to Piggyback. BCI hereby agrees to effect a registration of
------------------
certain of its outstanding securities, including the Registrable Securities,
under the Securities Act of 1933, as amended (the "Act"), on Form S-3 (the
"Registration Statement") within 30 days of the closing of the transactions
contemplated by the BCI Stock Purchase Agreement (the "Closing"). BCI will also
include in such Registration Statement all BCI securities ("Earlier Securities")
desired to be registered by persons or entities having superior registration
rights pursuant to that certain Second Amended and Restated Piggyback
Registration Rights Agreement dated November 8, 1993 (the "Superior Agreement"),
in accordance with the terms and conditions of the Superior Agreement (together
with the registration of the Registrable Securities, the "Piggyback
Registration").
SECTION 2. REGISTRATION PROCEDURES
-----------------------
(a) BCI will prepare and file with the Securities and Exchange
Commission (the "Commission") the Registration Statement within 30 days of the
Closing and will
<PAGE>
include therein the Registrable Securities and such Earlier Securities as comply
with the procedures of the Superior Agreement, will prepare and file all
amendments, post-effective amendments and supplements to the Registration
Statement as may be necessary under the Act and the regulations thereunder to
permit the sale of such Earlier Securities and Registrable Securities to the
public, and will use its reasonable best efforts to cause such Registration
Statement to become effective and remain effective for a period of not less than
two years or until such time as all of the securities covered by the
Registration Statement have been sold (provided that before filing the
Registration Statement, BCI will furnish to counsel selected by the holders of
Registrable Securities copies of the Registration Statement for review by such
counsel).
(b) BCI will use its reasonable best efforts to (i) register or
qualify such Earlier Securities and Registrable Securities under such other
securities or blue sky laws of such jurisdictions as any of the sellers of such
Earlier Securities and Registrable Securities (collectively, the "Sellers" and
individually, a "Seller") reasonably request, and (ii) do any and all other acts
and things which may be reasonably necessary to allow Sellers to consummate the
disposition in such jurisdictions of such Earlier Securities and Registrable
Securities owned by such Sellers' provided, however, that BCI will not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph (b), (ii)
subject itself to taxation in any such jurisdiction, or (iii) consent to general
service of process in any such jurisdiction.
(c) BCI will use its reasonable efforts to cause all such Earlier
Securities and Registrable Securities to be included for quotation on the NASDAQ
National Market.
(d) Upon the request of BCI, each Seller of Registrable Securities
will promptly furnish to BCI in writing, during the period within which BCI is
required to effect such registration, all information and affidavits as may be
reasonably requested by BCI in connection with items required to be included in
the Registration Statement, or any
-2-
<PAGE>
amendment or supplement thereto. To the extent BCI reasonably requests such
information and affidavits and the Seller does not provide such information or
affidavits in a timely manner, then, BCI's obligation to register such Seller's
Registrable Securities hereunder shall be null and void.
(e) BCI will furnish to each Seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Seller.
(f) BCI will notify each Seller of such Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such Seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
(g) BCI will provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of the Registration
Statement.
(h) BCI hereby represents and warrants that it is eligible to file
the Registration Statement on Form S-3 pursuant to the rules and regulations
pertaining thereto under the Securities Act.
SECTION 3. REGISTRATION EXPENSES. The Sellers of Registrable
---------------------
Securities under this Agreement will bear all underwriting discounts and
commissions. If
-3-
<PAGE>
any, and the fees and disbursements of their legal counsel and accountants. BCI
will bear all other expenses in connection with any registration or
qualification of the Registrable Securities pursuant to this Agreement.
SECTION 4. INDEMNIFICATION
---------------
(a) BCI agrees to indemnify, to the extent permitted by law, each
Seller of Registrable Securities, and each person, if any, who controls such
Seller within the meaning of the Act, against any and all losses, claims,
damages or liabilities to which the Sellers of Registrable Securities may become
subject under the Act or any other statute or common law by reason of its offer
and sale of Registrable Securities pursuant to the Registration Statement, and
to reimburse the Sellers of Registrable Securities for any reasonable legal or
other expenses actually and reasonably incurred in connection with investigating
any claims and defending any actions, insofar as such losses, claims, damages,
liabilities or actions arise out of, or are based upon:
(i) any untrue statement of a material fact or any alleged
untrue statement of a material fact contained in or incorporated by
reference in the Registration Statement or any post-effective
amendment thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading; or
(ii) any untrue statement of a material fact or any alleged
untrue statement of a material fact contained or incorporated by
reference in the prospectus (as amended or supplemented if BCI shall
have filed with the Commission any amendment or supplement thereto),
if used within the period during which BCI is required to keep the
Registration Statement in which such prospectus is contained current
pursuant to the terms of this Agreement, or the omission or alleged
omission to state therein a material fact necessary
-4-
<PAGE>
in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading;
provided, however, that the indemnification agreement contained herein shall not
apply to losses, claims, damages, liabilities or actions arising out of, or
based upon, any such untrue statement or any such omission or alleged omission,
if such statement or omission was made in reliance upon, and in conformity with,
information furnished to BCI by or on behalf of any Seller of Registrable
Securities for use in connection with the preparation of the Registration
Statement or any prospectus contained in the Registration Statement or any such
amendment or supplement thereto.
(b) The Sellers of Registrable Securities shall (in the same manner
and to the same extent as set forth in Section 4(a)), severally indemnify, to
the extent permitted by law, BCI, each person, if any, who controls BCI within
the meaning of the Act, and their directors and officers, if such statement or
omission was made in reliance upon and in conformity with information furnished
to BCI by or on behalf of any Seller of Registrable Securities for use in
connection with the preparation of the Registration Statement or any amendment
or supplement thereto.
(c) Any person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided, however, that any failure by a person
entitled to indemnification hereunder to give such prompt written notice shall
not adversely affect such person's rights hereunder unless such failure
prejudices the rights of the indemnifying party hereunder) and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent
-5-
<PAGE>
(but such consent will not be unreasonably withheld). An indemnifying party who
is not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of such counsel a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with respect to
such claim.
SECTION 5. REGISTRATION RIGHTS OF OTHER SECURITY HOLDERS. The
---------------------------------------------
registration rights granted pursuant to this Agreement are granted subject to
any and all registration rights granted by the Company to holders of its
securities prior to the date hereof, and no provision herein shall be
interpreted so as to be superior to, inconsistent with, or adversely effect, any
such previously granted registration rights.
SECTION 6. MISCELLANEOUS.
-------------
(a) Amendments. The provisions of this Agreement may be amended only
----------
upon the written consent of BCI and PBC, or in the event there is more than one
holder of Registrable Securities, only upon the written consent of BCI and the
holders of a majority of the Registrable Securities.
(b) Assignment. This Agreement is binding upon the parties hereto
----------
and their respective successors and assigns. Subject to compliance with the Act,
PBC's rights hereunder shall be assignable; provided, however, that such
assignee of PBC may not further assign such rights without the prior written
consent of BCI. To the extent that PBC assigns its rights under this Agreement
to more than one individual,each individual shall have such rights separately
from the others with respect to the Registrable Securities owned by him.
-6-
<PAGE>
(c) Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which will be an original and all of which taken together
will constitute one and the same agreement.
(d) Notices. All notices, requests, demands and other communications
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered if delivered by hand or by electronic
transmission. If sent by reliable overnight delivery service and addressed as
follows, or at such other addresses as the parties hereto may from time to time
designate in writing, such notices, requests, demands, and other communications
shall be deemed delivered the next business day after being so duly sent:
To BCI:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401-4086
Attn: Legal Department
To PBC:
Progressive Bagel Concepts, Inc.
1526 Cole Boulevard
Suite 200
Golden, Colorado 80401
Attn: Chairman
Facsimile: (303) 202-3360
(e) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement on the day and year first above written.
BOSTON CHICKEN, INC.
By:_____________________________
Its:____________________________
PROGRESSIVE BAGEL CONCEPTS, INC.
By:_____________________________
Its:____________________________
-8-
<PAGE>
EXHIBIT 2.4
-----------
PROMISSORY NOTE
---------------
<PAGE>
EXHIBIT 2.4
-----------
PROMISSORY NOTE
---------------
$_______ April 15, 1996
FOR VALUE RECEIVED, the undersigned, ______________ ("Maker") promises to
pay to the order of PROGRESSIVE BAGEL CONCEPTS, INC., a Delaware corporation
("Payee") with an address at 1526 Cole Boulevard, Suite 200, Golden, Colorado
80401 or at such other place as Payee may from time to time in writing
designate, in lawful money of the United States and in immediately available
funds, in principal sum of _______________ Dollars ($_______).
The principal sum shall be payable as follows: (i) on any date which Maker
sells or disposes of any or all of the Pledged Shares (as defined below)
pursuant to the Stock Pledge Agreement (as defined below) there shall be payable
a payment equal to the Closing Date Tax Rate (as defined in that certain
Agreement to Contribute Shares dated February __, 1995 by an among the
Shareholders of Brackman Brothers, Inc., Progressive Bagel Concepts, Inc, and
Brackman Brothers, Inc.) multiplied by the proceeds of such sale or disposition
(less any brokerage sales commission) up to the amount of the entire outstanding
principal hereunder as of such date; and (ii) on the Maturity Date there shall
be due and payable a final payment of the entire outstanding principal
hereunder. The "Maturity Date," as that term is used herein, shall mean the
earlier of (i) April 15, 2001; or (ii) the date upon which the entire
outstanding principal hereunder becomes due and payable by reason of the
acceleration of the maturity of this Note.
The principal of this Note may be prepaid in part or in full, without
penalty, at any time prior to the Maturity Date.
This Note is secured by, and is subject to the terms and conditions of,
that certain Stock Pledge Agreement of even date herewith between Maker and
Payee (the "Stock Pledge Agreement") and is secured by the pledge by Maker of
____________ shares of common stock in Boston Chicken, Inc., a Delaware
corporation, as described therein (the "Pledged Shares").
The following events shall constitute a default ("Default") hereunder:
(i) Failure to pay any principal hereunder when due; or
(ii) Maker makes an assignment for the benefit of creditors, becomes
insolvent or admits in writing the inability to pay its debts
as they mature or generally is not paying its debts as they
become due, or applies for,
<PAGE>
consents to or acquiesces in the appointment of a trustee,
receiver or other custodian for itself or any of its property;
or
(iii) Any bankruptcy, debt arrangement or other case or proceeding
under any bankruptcy or insolvency law, or any liquidation case
or proceeding shall be instituted by or against Maker, unless
any of the foregoing acts have been stayed, dismissed or
discharged, as the case may be, within sixty (60) days after
the occurrence thereof; or
(iv) Failure to perform or observe any other covenant or agreement
of Maker contained herein or any covenant or agreement in the
Stock Pledge Agreement; or
(v) Any representation or warranty of Maker made herein or in
connection herewith or in the Stock Pledge Agreement shall
prove to have been false or misleading in any material respect
as of the date hereof; or
(vi) The death, judgment of incompetence, dissolution, termination
of existence or business failure, as the case may be, of Maker.
Upon and after the occurrence of a Default, this Note shall, without demand,
notice or legal process of any kind, become immediately due and payable, and
Payee may proceed to exercise any other rights and remedies against Maker, or
with respect to this Note which Payee may have at law, in equity or otherwise.
Upon and after a Default, interest shall accrue on the amount of the
principal balance outstanding at an annual rate of two percent (2%) over the
"Prime Rate." The "Prime Rate" shall mean that rate of interest most recently
announced or published by the Bank of America, its successors or assigns, in
Chicago, Illinois as its prime rate or base rate for commercial loans, which
may not be the lowest interest rate charged by Bank of America. Such interest
shall be calculated at a daily rate equal to 1/360th of the annual rate stated
above and shall change with any change in the Prime Rate.
Maker waives presentment for payment, notice of dishonor, protest and
notice of protest. The remedies of Payee as provided herein or in the Stock
Pledge Agreement or any other instrument securing this Note, shall be cumulative
and concurrent, and may be pursued singularly, successively or together, at the
sole discretion of Payee, and may be exercised as often as occasion therefor
shall arise. Failure of Payee, for any period of time or on more than one
occasion, to exercise Payee's option to accelerate this Note shall not
constitute a waiver of the right to exercise the same at any time thereafter in
the event of any subsequent Default. No act of omission or commission of Payee,
including specifically any failure to exercise any right, remedy or recourse,
shall be deemed to be a waiver or release of such right, remedy or recourse or
any other right, remedy or recourse at any time. A waiver or release with
reference to any
2
<PAGE>
one event shall not be construed as a waiver or release of any subsequent event
or as a bar to any subsequent exercise of Payee's rights or remedies hereunder
and any waiver or release hereunder shall be effected only through a written
document executed by Payee and then only to the extent specifically recited
therein.
Maker shall pay on demand to Payee all attorneys' fees, court costs and all
other legal costs and expenses in connection with the collection or enforcement
of this Note.
From and after the occurrence of a Default, Payee is expressly authorized
to apply payments made under this Note as Payee may elect against any or all
amounts, or portions thereof, then due and payable hereunder or under the Stock
Pledge Agreement, including, without limitation, the outstanding principal
balance due under this Note, legal expenses or any combination of the foregoing.
Time is of the essence in this Note. Words used herein, regardless of the
number or gender specifically used, shall be deemed and construed to include any
other number, singular or plural, or any other gender, masculine, feminine or
neuter, as the context requires.
This Note may be assigned, endorsed or otherwise transferred by Payee and
shall inure to the benefit of Payee and Payee's successors, endorsee, transferee
and assigns and shall be binding upon the undersigned and its successors and
assigns.
In the event any portion of this instrument shall be considered unlawful
or unenforceable, but may be made lawful or enforceable by limitation or
reduction thereof, such portion shall be enforced to the extent of such
limitation or reduction as is necessary to render this Note lawful or
enforceable; if any such portion of this instrument may not be made lawful or
enforceable by any such limitation or reduction, such portion shall be deemed
stricken from this instrument, and the remaining part of this instrument shall
continue in full force and effect.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Delaware (without regard to conflict of laws
principles).
IN WITNESS WHEREOF, Maker has set its hand on the date first above written.
________________________________
Name:___________________________
3
<PAGE>
FORM OF STOCK PLEDGE AGREEMENT
------------------------------
THIS STOCK PLEDGE AGREEMENT (this "Agreement") is made and entered into on
April 15, 1996, by ___________________ (the "Pledgor"), in favor of PROGRESSIVE
BAGEL CONCEPTS, INC., a Delaware corporation (the "Lender").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Pledgor is the owner of the outstanding shares of stock of
Boston Chicken, Inc., a Delaware corporation, ("BCI") set forth on Schedule A
hereto (the "Pledged Shares"); and
WHEREAS, the Pledgor has executed a certain Promissory Note of even date
herewith payable to Lender (the "Note"); and
WHEREAS, the Lender has required, as a condition to extending the loan
which is evidenced by the Note, that the Pledgor (i) pledge to the Lender, and
grant to the Lender a security interest in, the Pledged Collateral (as defined
herein) and (ii) execute and deliver this Pledge Agreement in order to secure
the payment and performance by the Pledgor of the Obligations (as defined
herein).
AGREEMENT
---------
NOW THEREFORE, in consideration of the premises and in order to induce the
Lender to extend the loan evidenced by the Note, the Pledgor hereby covenants
and agrees with the Lender as follows:
SECTION 1. PLEDGE. The Pledgor hereby pledges to the Lender, and grants
------
to the Lender a continuing first priority and perfected security interest in,
the following (the "Pledged Collateral"): (a) the Pledged Shares and the
certificates representing the Pledged Shares, and all products and proceeds of
any of the Pledged Shares including, without limitation, all dividends (in cash
or in securities of BCI), cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures the payment of
------------------------
all of the obligations of the Pledgor to the Lender pursuant to the Note and
this Agreement, whether for principal, interest, fees, expenses or otherwise
(the "Obligations").
SECTIONS 3. DELIVERY OF PLEDGED SHARES. All certificates or instruments
--------------------------
representing or evidencing the Pledged Shares shall be delivered to and held by
or on behalf of
<PAGE>
the Lender pursuant hereto and shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Lender.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
------------------------------
warrants as follows:
(a) The Pledgor is the legal and beneficial owner of the Pledged
Collateral, free and clear of any lien on the Pledged Collateral.
(b) Upon the delivery to the Lender of the Pledged Collateral, the pledge
of the Pledged Collateral pursuant to this Agreement creates a valid and
perfected first priority interest in the Pledged Collateral securing the payment
of the Obligations for the benefit of the Lender.
(c) No authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required either
(i) for the pledge by the Pledgor of the Pledged Collateral pursuant to this
Agreement or for the execution, delivery or performance of this Agreement by the
Pledgor or (ii) for the exercise by the Lender of the voting or other rights
provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement (except as may be required in connection
with such disposition by laws affecting the offering and sale of securities).
(d) The Pledgor has full power and authority to enter into this Agreement
and has the right to vote, pledge and grant a security interest in the Pledged
Shares as provided by this Agreement.
(e) This Agreement has been duly authorized, executed and delivered by the
Pledgor and constitutes a legal, valid and binding obligation of the Pledgor,
enforceable against the Pledgor in accordance with its terms, except as such
enforceability may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or general principles of equity.
(f) The Pledged Shares constitute, as of the date hereof, all of the
shares of capital stock and voting securities of BCI beneficially owned by the
Pledgor.
SECTIONS 5. FURTHER ASSISTANCE. The Pledgor agrees that at any time and
------------------
from time to time, at the expense of the Pledgor, the Pledgor will promptly
execute and deliver, or cause to be executed and delivered, all stock powers,
proxies, assignments, instruments and documents and take all further action,
that is reasonably necessary, at the Lender's request, in order to perfect any
security interest granted or purported to be granted hereby or to enable the
Lender to exercise and enforce its rights and remedies hereunder with respect to
any Pledged Collateral and to carry out the provisions and purposes hereof.
2
<PAGE>
SECTION 6. VOTING RIGHTS; DIVIDENDS.
------------------------
(a) So long as no Default (as defined in the Note) shall have occurred and
be continuing, the Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Shares or any part thereof for
any purpose not inconsistent with the terms of this Agreement; provided,
--------
however, that the Pledgor shall not exercise or shall refrain from exercising
- -------
any such right if such action would have a material adverse effect on the value
of the Pledged Collateral or any part thereof or be inconsistent with or violate
any provisions of this Agreement.
(b) So long as no Default shall have occurred and be continuing, the
Pledgor shall be entitled to receive all cash dividends paid from time to time
in respect of the Pledged Shares.
(c) Any and all dividends or other distributions paid or payable in the
form of instruments and other property (other than cash dividends permitted
under Section 6(b) hereof) received, receivable or otherwise distributed in
respect of, or in exchange for, any Pledged Collateral, shall be forthwith
delivered to the Lender to hold as Pledged Collateral and shall, if received by
the Pledgor, be received in trust for the benefit of the Lender, be segregated
from the other property or funds of the Pledgor, and be forthwith delivered to
the Lender as Pledged Collateral in the same form as so received (with any
necessary endorsement).
(d) The Lender shall execute and deliver (or cause to be executed and
delivered) to the Pledgor all such proxies and other instruments as the Pledgor
may reasonably request for the purpose of enabling the Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to Section
6(a) hereof.
(e) All dividends or other distributions received by the Pledgor contrary
to the provisions of this Section 6 shall be received in trust for the benefit
of the Lender, shall be segregated from other funds of the Pledgor and shall be
forthwith paid over to the Lender as Pledged Collateral in the same form as so
received (with any necessary endorsement).
(f) Upon the occurrence and during the continuance of a Default, (i) all
rights of the Pledgor to exercise the voting and other consensual rights which
it would otherwise be entitled to exercise pursuant to Section 6(a) hereof shall
cease, and all such rights shall thereupon become vested in the Lender, which
shall thereupon have the sole right to exercise such voting and other consensual
rights and (ii) all cash dividends or other distributions payable in respect of
the Pledged Shares shall be paid to the Lender and Pledgor's right to receive
such cash payments pursuant to Section 6(b) hereof shall immediately cease.
SECTION 7. TRANSFERS AND OTHER LIENS; SALES; ADDITIONAL SHARES.
---------------------------------------------------
(a) Except as provided in Section 7(b) below, the Pledgor agrees that it
will not (i) sell or otherwise dispose of, or grant any option with respect to,
any of the Pledged Collateral
3
<PAGE>
without the prior written consent of the Lender, (ii) create or permit to exist
any lien upon or with respect to any of the Pledged Collateral, or (iii) enter
into any agreement or understanding that purports to or may restrict or inhibit
the Lender's rights or remedies hereunder, including, without limitation, the
Lender's right to sell or otherwise dispose to the Pledged Collateral.
(b) The Pledgor may sell or otherwise dispose of all or a portion of the
Pledged Shares, and the Lender shall, at the request of the Pledgor, deliver the
certificates representing the Pledged Shares to be sold or disposed to a broker
or agent of the Pledgor, which delivery shall be for the sole purpose of such
sale or disposition, only in the event that the following conditions are
satisfied; (i) an amount equal to the Closing Date Tax Rate (as defined in the
Note) multiplied by the proceeds (less any brokerage commissions) from the sale
of such Pledged Shares, up to the amount of the Obligations, shall be paid
directly to Lender, and (ii) the Pledgor has delivered to such broker or agent
who shall facilitate the sale of such Pledged Shares an irrevocable direction to
deliver such proceeds directly to the Lender, with the balance of such proceeds
to be otherwise paid as the Pledgor directs.
SECTION 8. AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby appoints
--------------------------------
the Lender the Pledgor's attorney-in-fact, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time to
time in the Lender's discretion to take any action and to execute any instrument
which the Lender may deem necessary or advisable to further perfect and protect
the security interest granted hereby, including, without limitation, to receive,
endorse and collect all instruments made payable to the Pledgor representing any
dividend, interest or principal payment or other distribution in respect of the
Pledged Collateral or any part thereof and to give full discharge for the same.
SECTION 9. AGENT MAY PERFORM. If the Pledgor fails to perform any
-----------------
agreement contained herein, the Lender may itself perform, or cause performance
of, such agreement, and the reasonable expenses of the Lender incurred in
connection therewith shall be payable by the Pledgor under Section 13 hereof.
SECTION 10. NO ASSUMPTION OF DUTIES; REASONABLE CARE. The rights and powers
----------------------------------------
granted to the Lender hereunder are being granted in order to preserve and
protect the Lender's security interest in and to the Pledged Collateral granted
hereby and shall not be interpreted to, and shall not, impose any duties on the
Lender in connection therewith. The Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Lender accords its own property, it being understood that the
Lender shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not the Lender has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
4
<PAGE>
SECTION 11. SUBSEQUENT CHANGES AFFECTING COLLATERAL. The Pledgor represents
---------------------------------------
to the Lender that the Pledgor has made its own arrangements for keeping
informed of changes or potential changes affecting the Pledged Collateral
(including, but not limited to, rights to convert, rights to subscribe, payment
of dividends, reorganization or other exchanges, tender offers and voting
rights), and the Pledgor agrees that the Lender shall have no responsibility or
liability for informing the Pledgor of any such changes or potential changes or
for taking any action or omitting to take any action with respect thereto.
SECTION 12. REMEDIES UPON DEFAULT. If any Default shall have occurred and
---------------------
be continuing, the Lender shall, in addition to all other rights given by law or
by this Agreement or otherwise, have all of the rights and remedies with respect
to the Pledged Collateral of a secured party under the Uniform Commercial Code
("Code") in effect in the State of Delaware at that time and the Lender may,
without notice and at its option, transfer or register, and the Pledgor shall
register or cause to be registered upon request therefor by the Lender, the
Pledged Collateral or any part thereof on the books of the Lender into the name
of the Lender or the Lender's nominee(s), indicating that such Pledged
Collateral is subject to the security interest hereunder. In addition, with
respect to any Pledged Collateral which shall then be in or shall thereafter
come into the possession or custody of the Lender, the Lender may sell or cause
the same to be sold at any broker's board or at public or private sale, in one
or more sales or lots, at such price or prices as the Lender may deem best, for
cash or on credit or for future delivery, without assumption of any credit risk,
all in accordance with the terms and provisions of this Agreement and the Code.
The purchaser of any or all Pledged Collateral so sold shall thereafter hold the
same absolutely, free from any claim, encumbrance or right of any kind
whatsoever. The Lender or any other Lender may, in its own name or in the name
of a designee or nominee, buy any of the Pledged Collateral at any public sale
and, if permitted by applicable law, at any private sale. All expenses
(including court costs and reasonable attorneys' fees, expenses and
disbursements) of, or incident to, the enforcement of any of the provisions
hereof shall be recoverable from the proceeds of the sale or other disposition
of the Pledged Collateral. In addition, upon the occurrence or during the
continuance of a Default, all rights of the Pledgor to exercise the voting and
other rights which it would otherwise be entitled to exercise shall cease, and
all such rights shall thereupon become vested in the Lender as provided in and
subject to the terms of Section 6(f) hereof.
SECTION 13. EXPENSES. The Pledgor will upon demand pay to the Lender the
--------
amount of any and all reasonable expenses, including, without limitation, the
reasonable fees, expenses and disbursements of its counsel, of any investment
banking firm, business broker or other selling agent and of any other experts
and agents retained by the Lender, which the Lender may incur in connection with
(i) the exercise or enforcement of any of the rights of the Lender hereunder or
(ii) the failure by the Pledgor to perform or observe any of the provisions
hereof.
SECTION 14. SECURITY INTEREST ABSOLUTE. All rights of the Lender and
--------------------------
security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and
5
<PAGE>
unconditional irrespective of: (a) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations; or (b) any
exchange, surrender, release or non-perfection of any other collateral.
SECTION 15. MISCELLANEOUS PROVISIONS.
------------------------
(a) NOTICES. All notices, demands and other communications required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered by hand or by electronic transmission. If mailed, first
class, certified mail, postage prepaid, or sent by reliable overnight delivery
service and addressed as follows, or at such other addresses as the parties
hereto may from time to time designate in writing, such notices, requests,
demands, and other communications shall be deemed delivered three business days
after being so duly posted or the next business day if sent by overnight
delivery service:
To Lender: Progressive Bagel Concepts, Inc.
1526 Cole Blvd, Suite 200
Golden, Colorado 80401
Attention: General Counsel
Telephone: (303) 278-9500
Facsimile: (303) 384-5334
To Pledgor: Insert Address
-----------------------------------
___________________________________
Telephone:_________________________
Facsimile:_________________________
(b) HEADINGS. The headings in this Agreement are for purposes of
--------
reference only and shall not affect the meaning or construction of any provision
of this Agreement.
(c) SEVERABILITY. The Provisions of this Agreement are severable, and if
------------
any clause or provision shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
in that jurisdiction only such clause or provision, or part thereof, and shall
not in any manner affect such clause or provision in any other jurisdiction or
any other clause or provision of this Agreement in any jurisdiction.
(d) INTERPRETATION OF AGREEMENT. Time is of the essence in each provision
---------------------------
of this Agreement of which time is an element. All terms not defined herein
shall have the meaning set forth in the applicable Uniform Commercial Code,
except where the context otherwise requires. Acceptance of or acquiescence in a
course of performance rendered under this Agreement shall not be relevant to
determine the meaning of this Agreement even though the accepting or acquiescing
party had knowledge of the nature of the performance and opportunity for
objection.
6
<PAGE>
(e) CONTINUING SECURITY INTEREST. This Agreement shall create a
----------------------------
continuing security interest in the Pledged Collateral and shall (i) remain in
full force and effect until payment in full of the Obligations and the
cancellation of the Note, (ii) be binding upon the Pledgor, its successors and
assigns, and (iii) inure, together with the rights and remedies of the Lender
and its successors, transferees and assigns.
(f) REINSTATEMENT. To the extent permitted by law, this Agreement shall
-------------
continue to be effective or be reinstated if at any time any amount received by
the Lender or any Lender in respect of the Obligations is rescinded or must
otherwise be restored or returned by the Lender or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Pledgor or upon the appointment if any receiver, intervenor, conservator,
trustee or similar official for the Pledgor or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
(g) SURVIVAL OF PROVISIONS. All representations, warranties and covenants
----------------------
of the Pledgor contained herein shall survive the execution and delivery of this
Agreement, and shall terminate only upon the full and final payment and
performance by the Pledgor of the Obligations secured hereby and cancellation of
the Note.
(h) WAIVERS. The Pledgor waives, and agrees that it shall not at any time
-------
insist upon, plead or in any manner whatever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, marshalling of assets
or redemption laws, or exemption, whether now or at any time hereafter in force,
which may delay, prevent or otherwise affect the performance by the Pledgor of
its obligations under this Agreement. The Pledgor hereby waives notice of
acceptance, maturity, extension of time, change in nature or form of the
Obligations, acceptance of further security, release of further security,
composition or agreement arrived at as to the amount of, or the terms of, the
Obligations, notice of adverse change in the Pledgor's financial condition or
any other fact which might materially increase the risk to the Pledgor with
respect to any of the Obligations or all other demands and notices whatsoever
and waives the benefit of all provisions of law which are or might be in
conflict with the terms of this Agreement. The Pledgor represents, warrants and
agrees that, as of the date of this Agreement, its obligations under this
Agreement are not subject to any offsets or defenses of any kind against the
Lender.
(i) AUTHORITY OF THE LENDER. The Lender shall have and be entitled to
-----------------------
exercise all powers hereunder which are specifically granted to the Lender by
the terms hereof, together with such powers as are reasonably incident thereto.
The Lender may perform any of its duties hereunder or in connection with the
Pledged Collateral by or through agents or employees and shall be entitled to
retain counsel and to act in reliance upon the advice of counsel concerning all
such matters. Neither the Lender nor any director, officer, employee, attorney
or agent of the Lender shall be liable to the Pledgor for any action taken or
omitted to be taken by it or them hereunder, except for its or their own gross
negligence or willful misconduct, nor shall the Lender be responsible for the
validity, effectiveness of sufficiency hereof or of any document
7
<PAGE>
or security furnished pursuant hereto. The Lender and its directors, officers,
employees, attorneys and agents shall be entitled to rely on any communication,
instrument or document reasonably believed by it or them to be genuine and
correct and to have been signed or sent by the proper person or persons.
(j) RELEASE; TERMINATION OF AGREEMENT. Subject to the provisions of
---------------------------------
Sections 15(g) and 15(h) hereof, this Agreement and the security interests
created hereunder shall automatically terminate upon full and final payment and
performance of all the Obligations and the cancellation of the Note.
(k) COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be deemed an original but all of
which shall together constitute one and the same agreement.
(l) WAIVER OF DAMAGES; WAIVER OF NOTICE. THE PLEDGOR AGREES THAT THE
-----------------------------------
LENDER SHALL NOT HAVE ANY LIABILITY TO THE PLEDGOR (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) WITH RESPECT TO, AND THE PLEDGOR HEREBY WAIVES, RELEASES
AND AGREES NOT TO SUE UPON ANY CLAIM FOR, ANY SPECIAL, INDIRECT, CONSEQUENTIAL
OR PUNITIVE DAMAGES SUFFERED BY THE PLEDGOR IN CONNECTION WITH, ARISING OUT OF,
OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED OR THE RELATIONSHIP
ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A JUDGMENT OF A COURT THAT IS
BINDING ON THE LENDER (WHICH JUDGMENT SHALL BE FINAL AND NOT SUBJECT TO REVIEW
ON APPEAL), THAT SUCH DAMAGES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART
OF THE LENDER CONSTITUTING WILLFUL MISCONDUCT.
8
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Lender have each caused this
Agreement to be duly executed and delivered as of the date first above written.
_____________________________________
Name:________________________________
PROGRESSIVE BAGEL CONCEPTS, INC., a
Delaware corporation
By:___________________________________
Name:_________________________________
Title:________________________________
9
<PAGE>
SCHEDULE A
----------
PLEDGED SHARES
--------------
Number of Share
Pledged Certificate
Shares Numbers
------ -------
A-1
<PAGE>
EXHIBIT 6.3
-----------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the ______ day of February
1995 (this "Agreement"), by and between PROGRESSIVE BAGEL CONCEPTS, INC., a
Delaware corporation (the "Company"), and each owner of common stock of the
Company listed on Exhibit A hereto and each owner of common stock who executes,
with the written agreement of the Company, a counterpart of this Agreement (each
referred to herein individually as an "Investor" and collectively referred to
herein as "Investors").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company has agreed to provide Investors with certain
registration rights as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to and on the terms
and conditions herein set forth, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 "Business Day" means any day on which The New York Stock Exchange is
open for trading.
1.2 "Common Stock" means the common stock, $0.1 par value, of the Company.
1.3 "Eligible Registration" means any of the first four occasions the
Company proposes to register any shares of Common Stock in any manner which
would permit registration of Eligible Shares for public sale under the
Securities Act, other than any
<PAGE>
offering described in Sections 2.1(a) through (f). If the Company terminates any
Eligible Registration prior to its effectiveness, that registration will not
constitute an Eligible Registration.
1.4 "Eligible Securities" means all or any portion of the Common Stock
owned by the Investors and all other securities issued with respect thereto by
reason of dividends, stock splits, combinations or similar transactions.
As to any proposed offer or sale of Eligible Securities, such securities
shall cease to be Eligible Securities with respect to such proposed offer or
sale when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (ii) such securities are permitted to be sold pursuant to Rule 144
(or any successor provision to such Rule) under the Securities Act (iii) such
securities shall have been otherwise transferred pursuant to an applicable
exemption under the Securities Act, new certificates for such securities not
bearing a legend restricting further transfer shall have been delivered by the
Company and such securities shall be freely transferable to the public without
registration under the Securities Act, or (iv) a written opinion of counsel of
the Company addressed to Investors to the effect that shares may be sold without
registration under the Securities Act has been delivered.
1.5 "Person" means an individual, a partnership (general or limited),
corporation, joint venture, business trust, cooperative, association or other
form of business organization, whether or not regarded as a legal entity under
applicable law, a trust (inter vivos or testamentary), an estate of a deceased,
insane or incompetent person, a quasi-governmental entity, a government or any
agency, authority, political subdivision or other instrumentality thereof, or
any other entity.
1.6 "Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement
2
<PAGE>
including, without limitation, the following: (i) the fees, disbursements and
expenses of the Company's counsel(s), accountants and experts in connection with
the registration of Eligible Securities to be disposed of under the Securities
Act; (ii) all expenses in connection with the preparation, printing and filing
of the registration statement, any preliminary prospectus or final prospectus,
any other offering document and amendments and supplements thereto and the
mailing and delivering of copies thereof to the underwriters and dealers; (iii)
the cost of printing or producing any agreement(s) among underwriters,
underwriting agreement(s) and blue sky or legal investment memoranda, any
selling agreements and any other documents in connection with the offering, sale
or delivery of Eligible Securities to be disposed of; (iv) SEC or blue sky
registration fees attributable to Eligible Securities; (v) all expenses in
connection with the qualification of Eligible Securities to be disposed of for
offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(v) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Eligible
Securities to be disposed of; and (vi) fees and expenses incurred in connection
with the listing of Eligible Securities on each securities exchange on which
securities of the same class are then listed; provided, however, that
--------
Registration Expenses with respect to any Eligible Registration pursuant to this
Agreement shall not include underwriting discounts or commissions attributable
to Eligible Securities or transfer taxes applicable to Eligible Securities.
1.7 "SEC" means the Securities and Exchange Commission.
1.8 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, all as the same shall be in effect
at the relevant time.
1.9 "Selling Investor" means any Investor requesting the registration of
Eligible Securities registered pursuant to Article 2 hereof.
3
<PAGE>
ARTICLE 2
INCIDENTAL REGISTRATION
2.1 NOTICE AND REGISTRATION. If the Company proposes to register any
-----------------------
shares of Common Stock for public sale under the Securities Act in an Eligible
Registration, it will give prompt written notice to Investors of its intention
to do so, and upon the written request of each Investor delivered to the Company
within ten (10) Business Days after the giving of any such notice by the Company
(which request shall specify the number of Eligible Securities intended to be
disposed of by the Selling Investor and the intended method of disposition
thereof) the Company will use all reasonable efforts to effect, in connection
with the registration of its Common Stock in such Eligible Registration, the
registration under the Securities Act of all Eligible Securities which the
Company has been so requested to register by the Selling Investors, to the
extent required to permit the public sale (in accordance with the intended
method or methods thereof as aforesaid) of Eligible Securities so to be
registered, provided that:
(a) if, at any time after giving such written notice of its intention
to register any Common Stock and prior to the effective date of the
registration statement filed in connection with such Eligible Registration,
the Company shall determine for any reason not to register the Common
Stock, the Company may, at its election, give written notice of such
determination to Investors and thereupon the Company shall be relieved of
its obligation to register such Eligible Securities in connection with the
registration of such Common Stock (but not from its obligation to pay
Registration Expenses to the extent incurred in connection therewith as
provided in Section 2.2);
(b) The Company will not be required to effect any registration
pursuant to this Article 2 if the Company shall have been advised in
writing by a nationally recognized independent investment banking firm
selected by the Company to act as lead underwriter in connection with the
public offering of the Common Stock by the
4
<PAGE>
Company that, in such firm's opinion, a registration of shares of common
Stock of the Investors pursuant to this Article 2 at that time may
materially and adversely affect the Company's own scheduled offering;
(c) The Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange
offers, subscription offers, dividend reinvestment plans or stock options
or other employee benefit plans.
(d) The Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to an initial public
offering of shares of Common Stock of the Company;
(e) The Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to the filing of a
registration statement for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act or any
similar rule that may be adopted by the SEC.
(f) In no event shall the Company be required to register Eligible
Securities if, in the reasonable judgment of the Company, the amount of
Eligible Securities for which registration has been requested does not
justify the effort and/or expense to the Company of effecting such
registration.
2.2 REGISTRATION EXPENSES. The Company (as between the Company and the
---------------------
Selling Investors) shall be responsible for the payment of all Registration
Expenses in connection with any registration pursuant to this Article 2.
5
<PAGE>
ARTICLE 3
REGISTRATION PROCEDURES
3.1 REGISTRATION AND QUALIFICATION.
------------------------------
(a) If and whenever the Company is required to use reasonable commercial
efforts to effect the registration of any Eligible Securities under the
Securities Act as provided in Article 2 hereof, the Company will as promptly as
is practicable register the Eligible Securities under the Securities Act and use
reasonable commercial efforts to cause the Registration Statement to become
effective;
(b) The Company shall prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective; and
comply with the provisions of the Securities Act with respect to the disposition
of all Eligible Securities until the earlier of such time as all of such
Eligible Securities have been disposed of in accordance with the intended
methods of disposition by the Selling Investors as set forth in the Registration
Statement or the expiration of thirty (30) days after such Registration
Statement has become effective; provided, however, that in the event that the
Company shall notify any Selling Investor of the happening of any event which
would cause the prospectus included as part of such Registration Statement, as
then in effect, to include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, such Selling Investor shall thereafter sell no shares under such
Registration Statement until the Company has filed an amendment or supplement to
the prospectus to cause the prospectus not to include an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light
6
<PAGE>
of the circumstances under which they were made, not misleading, and the Company
shall be obligated to continue to so amend or supplement the prospectus for such
period of time as the prospectus has for an aggregate of thirty (30) days not
included an untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and
(c) The Company may require the Selling Investors to furnish to the
Company such information regarding the Selling Investors and the distribution of
the Eligible Securities as the Company may from time to time reasonably request
in writing and as shall be required by law or by the SEC in connection with any
registration.
(d) The Company shall provide each Selling Investor a conformed copy of
the Registration Statement and each material amendment to the Registration
Statement. The Company shall provide to each Selling Investor an opportunity to
review the Registration Statement prior to the filing of the Registration
Statement with the Securities and Exchange Commission.
(e) The Company shall provide to each Selling Investor such number of
copies of such Registration Statement, each amendment and supplement thereto,
the prospectus included in such Registration Statement (including each
preliminary prospectus) and such other documents as such Selling Investor may
reasonably request in order to facilitate the disposition of the Eligible
Securities registered pursuant to such Registration Statement.
(f) The Company will provide a transfer agent and registrar for all
Eligible Securities not later than the effective date of the Registration
Statement.
7
<PAGE>
3.2 UNDERWRITING. In the event that any registration pursuant to Article
------------
2 hereof shall involve, in whole or in part, an underwritten offering, the
Company may require Eligible Securities requested to be registered pursuant to
Article 2 to be included in such underwriting on the same terms and conditions
as shall be applicable to the Common Stock being sold through underwriters under
such registration. In such case, the holders of Eligible Securities on whose
behalf Eligible Securities are to be distributed by such underwriters shall be
parties to any such underwriting agreement. Such agreement shall contain such
representations and warranties by the Selling Investors and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, indemnities and
contribution to the effect and to the extent provided in Article 4. The
representations and warranties in such underwriting agreement by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Eligible Securities.
ARTICLE 4
INDEMNIFICATION
4.1 INDEMNIFICATION. (a) In the event of any registration of any Eligible
---------------
Securities hereunder, the Company will enter into customary indemnification
arrangements to indemnify and hold harmless each Investor who exercises his
registration rights hereunder and, to the extent applicable, its directors and
officers, its partners, its trustees and each Person who controls any of such
Persons, each Person who participates as an underwriter in the offering or sale
of any Eligible Securities, and each Person, if any, who controls such
underwriter within the meaning of the Securities Act against any losses, claims,
damages, liabilities and expenses, joint or several, to which such Person may be
subject under the Securities Act or otherwise insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or based upon (i) any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
securities were registered under the Securities Act, any final
8
<PAGE>
prospectus included therein, or any amendment or supplement thereto, or any
document incorporated by reference therein, or (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
promptly reimburse each such Person for any legal or any other expenses
reasonably incurred by such Person in connection with investigating or defending
any such loss, claim, damage, liability, action or proceeding; provided that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any final
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company or such underwriter by such Selling
Investors expressly for use in the registration statement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of Investors or any such Person and shall survive the transfer of such
securities by the Investors.
(b) The Selling Investors, by virtue of exercising their registration
rights hereunder, agree and undertake to enter into customary indemnification
arrangements to severally and not jointly indemnify and hold harmless (in the
same manner and to the same extent as set forth in clause (a) of this Article 4)
the Company, each director of the Company, each officer of the Company who shall
sign such registration statement, and each Person who participates as an
underwriter in the offering or sale of such securities, each Person, if any, who
controls the Company or any such underwriter within the meaning of the
Securities Act, with respect to any statement in or omission from such
registration statement, any final prospectus included therein, or any amendment
or supplement thereto, but only to the extent that such statement or omission
was made in reliance upon and in conformity with written information furnished
by such Selling Investors to the Company expressly for use in the registration
statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such
9
<PAGE>
director, officer or controlling Person and shall survive the transfer of the
registered securities by the Selling Investors and the expiration of this
Agreement.
(c) Indemnification similar to that specified in the preceding
subdivisions of this Article 4 (with appropriate modifications) shall be given
by the Company and the Selling Investors with respect to any required
registration or other qualification of such Eligible Securities under any
federal or state law or regulation of governmental authority other than the
Securities Act.
ARTICLE 5
BENEFITS
5.1 BENEFITS OF REGISTRATION RIGHTS. Subject to the limitations of
-------------------------------
Section 2.1 hereof, Investors may severally or jointly exercise the registration
rights hereunder in such manner and in such proportion as they shall agree among
themselves.
5.2 QUALIFICATION FOR RULE 144 SALES. Upon the written request of any
--------------------------------
Investor, the Company will deliver to such Investor a written statement as to
whether it has complied with the filing requirements described in Rule
144(c)(1).
ARTICLE 6
MISCELLANEOUS
6.1 CAPTIONS. The captions or headings in this Agreement are for
--------
convenience and reference only, and in no way define, describe, extend or limit
the scope or intent of this Agreement.
6.2 SEVERABILITY. If any clause, provision or section of this Agreement
------------
shall be invalid or unenforceable, the invalidity or unenforceability of such
clause, provision or
10
<PAGE>
section shall not affect the enforceability or validity of any of the remaining
clauses, provisions or sections hereof to the extent permitted by applicable
law.
6.3 GOVERNING LAW. This Agreement shall be construed and enforced in
-------------
accordance with the internal laws of the State of Delaware, without reference to
its rules as to conflicts or choice of laws.
6.4 MODIFICATION AND AMENDMENT. This Agreement may not be changed,
--------------------------
modified, discharged or amended, except by an instrument signed by all of the
parties hereto.
6.5 NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter
--------------------------
into any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Eligible Securities in this Agreement.
6.6 COUNTERPARTS. This Agreement may be executed in counterparts, each
------------
of which shall be an original, but all of which together shall constitute one
and the same instrument.
6.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
----------------
and understanding among the parties and supersedes any prior understandings
and/or written or oral agreements among them respecting the subject matter
herein.
6.8 NOTICES. All notices, requests, demands, consents and other
-------
communications required or permitted to be given pursuant to this Agreement
shall be in writing and delivered by hand, by overnight courier delivery service
or by certified mail, return receipt requested, postage prepaid. Notices shall
be deemed given when actually received, which shall be deemed to be not later
than the next Business Day is sent by overnight courier or after five (5)
Business Days if sent by mail. Notice to Investors shall be made to the address
listed on the stock transfer records of the Company.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above written.
THE COMPANY:
PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation
By:________________________________
Name:____________________________
Title:___________________________
INVESTORS:
___________________________________
DANIEL V. COLANGELO
___________________________________
JAMES W. LARGAY
___________________________________
STEPHEN A. NORMAN
___________________________________
VITO J. COLANGELO
___________________________________
JULIUS A. FRANKEL
___________________________________
PAUL AIKEN
OTHER INVESTORS MAY EXECUTE
COUNTERPART SIGNATURE PAGES
12
<PAGE>
EXHIBIT A
---------
A-1
<PAGE>
EXHIBIT 6.4
-----------
EMPLOYMENT AGREEMENTS
---------------------
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this _____ day of February, 1995, by and between
Progressive Bagel Concepts, Inc., a Delaware corporation (hereinafter referred
to as the "Company"), and Daniel V. Colangelo (hereinafter referred to as
"Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is engaged in the business of operating retail
bakeries featuring bagels and other food items;
WHEREAS, because of the abilities and expertise of Employee in said
business, the Company desires to employ Employee; and
WHEREAS, Employee is willing to accept such employment upon the terms and
conditions stated herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee to perform the
----------
duties described herein, and Employee hereby accepts such employment on the
terms and conditions stated herein. Employee shall hold the position of
President - Rocky Mountain Division of Company, which shall at all times be
deemed to be an executive office of the Company.
<PAGE>
2. OFFICES WITH COMPANY. Employee shall be a "Founding Director" of the
--------------------
Company as defined in that certain Agreement to Contribute Shares by and among
the Company and the Shareholders of Brackman Brothers, Inc. dated as of February
___, 1995 (the "Contribution Agreement").
3. TERM OF EMPLOYMENT. Subject to the provisions for termination set
------------------
forth herein, the term of employment under this Agreement shall commence on
February _____, 1995 and shall extend for a period of three (3) years (the
"Term").
4. DUTIES OF EMPLOYEE. Employee shall perform the duties commensurate
------------------
with his position and experience as shall be assigned to him from time to time
by the Company. Employee shall perform such duties in a diligent manner, shall
devote his entire business time, attention and effort to the affairs of the
Company within the scope of his employment as is reasonably necessary for the
proper rendition of said services, shall diligently promote the interests of the
Company, and shall be just and faithful in carrying out his duties.
5. COMPENSATION. The Company shall compensate Employee for all services
------------
rendered by him hereunder as follows:
(a) salary at a yearly rate of $125,000, payable by the Company in
twenty six (26) equal installments after deducting therefrom all applicable
FICA contributions, federal and state income tax withholding, and any other
payroll taxes (subject to any increases as determined by the Board of
Directors from time to time in its sole discretion); and
(b) such stock options as may be granted to Employee pursuant to
the Company's 1995 Employee Stock Option Plan, as it may be amended from
time to
2
<PAGE>
time, a current form of which is attached hereto as Exhibit A (the "Plan")
or any other stock option plan hereinafter adopted by the Company; and
(c) as an inducement for Employee to execute this Agreement,
Employee shall receive options under the Plan to purchase that number of
shares of common stock of the Company that have a fair market value, as
determined in accordance with the terms of the Plan, of $150,000, which
options are to be granted on the date hereof; provided, however, the
options granted pursuant to this Section 5(c) shall constitute Employee's
option grant for 1995 under the Plan; provided further, that if the formula
under the Plan provides for options in excess of those granted to Employee
under Section 5(c) for 1995, Employee shall receive such additional options
at the same time that options are granted under the Plan generally to
employees for 1995.
6. BENEFITS AND VACATIONS. In addition to the compensation payable to
----------------------
Employee pursuant to Section 5 above, and all other compensation or benefits
provided for hereunder, Employee shall be entitled to such reasonable periods of
vacation, with full pay, as is consistent with the general policy as established
by the Board of Directors for executives and business exigencies of the Company,
and such benefits of a similar type and amount and to the same extent as
benefits are provided to other similarly situated employees of the Company.
Employee shall also receive a relocation expense reimbursement in an amount
approved by the Board of Directors.
3
<PAGE>
7. CONFIDENTIALITY. Employee agrees to execute and deliver such
---------------
confidentiality agreement which is to be required to be executed and delivered
by employees of the Company generally.
8. CONFLICT OF INTEREST. Employee shall take no action, or engage in
--------------------
any transaction, that could be considered to conflict with the best interests of
the Company, and shall at all times exercise his best judgment and efforts so as
to avoid taking any action, or engaging in any transaction, that might give the
appearance of being in conflict with the best interests of the Company.
9. TERMINATION.
-----------
(a) This Agreement and Employee's employment hereunder shall
immediately terminate, without further notice or action, upon the
occurrence of the death of Employee.
(b) Additionally, the Company shall have the right to terminate
this Agreement and Employee's employment with the Company hereunder,
effective upon written notice to Employee of termination stating the basis
for such termination, under the following circumstances:
(1) if Employee is permanently disabled (as defined below);
or
(2) for cause, which shall be defined as including any of
the following: (i) any misappropriation of funds or property of the
Company by Employee; (ii) Employee's conviction of a felony, or of
any crime involving moral turpitude, fraud, theft or conversion;
(iii) Employee's failure to submit to a medical examination at the
Company's expense within ten (10) business
4
<PAGE>
days after receipt of the Company's written request that Employee
submit to such examination; or (iv) a breach of any other material
provision contained in this Agreement.
(c) Employee shall be deemed to be "permanently disabled"
hereunder upon the first to occur of any of the following events:
(1) The receipt by the Company of a written certificate
from a physician approved by the Company and reasonably satisfactory
to Employee stating, that, based upon one or more examinations of
Employee by such physician, it is such physician's opinion that, for
a period of at least six (6) consecutive months from the date of
certification, Employee is and will be substantially unable to
perform his customary duties for the Company due to physical or
mental infirmity. The Company may request in writing that Employee
submit to such examinations by giving written notice thereof to
Employee.
(2) The adjudication of Employee as an incompetent or a
disabled person and the appointment of a conservator or guardian for
his person or property by a court of competent jurisdiction.
(d) Employee shall have the right to terminate this Agreement and
Employee's employment with the Company hereunder, effective upon
written notice to the Company, within thirty (30) days after the
date Employee shall first have a right to exercise a "put option"
pursuant to Section 2.3(a)(ii) of the Contribution Agreement.
5
<PAGE>
(e) If Employee is terminated by the Company for cause, as that
term is defined in Section 9(b)(2), or if Employee voluntarily terminates
his employment, the Company shall not be obligated to pay Employee any
other compensation with respect to any period after the date of such
termination, except that any unexercised stock options of Employee that are
vested on the date of termination shall continue to be exercisable in
accordance with the terms of the Plan until one year after the effective
date of such termination. All stock options that are not vested on the date
of such termination shall terminate and be of no further force and effect.
(f) If Employee dies or becomes permanently disabled during the
Term, or if Employee is terminated by the Company for any reason other than
for cause, the Company shall pay to Employee the entire amount of the cash
compensation provided for in Section 5 hereof that is payable during the
remainder of the Term payable in a lump sum cash payment within thirty (30)
days of the effective date of termination (provided that, in the case of
death or disability of Employee, the aforementioned cash payment shall be
limited to the lesser of: (i) one year's cash compensation provided for in
Section 5, and (ii) the cash compensation provided for in Section 5 for the
remaining balance of the Term), and all employee stock options granted to
Employee prior to the effective date of such termination shall vest
immediately; provided that if Employee wishes to exercise such stock
options, he must do so within the first to occur of (x) three (3) years
after the effective date of such termination or (y) the expiration date of
the option. Notwithstanding the
6
<PAGE>
foregoing, after the effective date of his termination Employee shall not
be eligible to receive any further employee stock options.
(g) Upon any termination of this Agreement or the employment of
Employee, or the expiration of this Agreement without renewal of Employee's
employment, Employee shall be deemed automatically to have resigned from
any office or directorship of the Company which he may then hold and shall
promptly deliver to the Company (without retaining any copies thereof) all
Company files and documents, forms, letterhead, business cards, computer
disks and any other written, magnetic or printed materials relating to the
business of the Company.
(h) If Employee voluntarily terminates his Employment after the six
month anniversary of the date hereof, the Company shall not have any cause
of action against Employee for a breach of this Agreement due solely to
such voluntary termination; provided, however, that nothing contained in
the previous sentence shall cancel, terminate or otherwise extinguish any
cause of action of the Company against Employee arising out of or based on
any other breach of this Agreement by Employee.
10. COVENANT RESTRICTING SOLICITATION. During the term hereof and for a
---------------------------------
period of two (2) years after Employee's employment with the Company shall
expire or terminate for any reason whatsoever, Employee shall not, directly or
indirectly, solicit or attempt to solicit for employment or employ any person
who was an employee of the Company on the date of Employee's date of termination
or any person who was an employee during the six-month period prior to such
date.
7
<PAGE>
11. COVENANT RESTRICTING COMPETITION. During the term hereof and for a
--------------------------------
period of two (2) years after his employment with the Company shall expire or
terminate for any reason whatsoever, Employee shall not, either directly or
indirectly, on his own account, or as an employee, consultant, partner, owner,
officer, director or stockholder of any other person, firm, partnership,
corporation or other entity or in any other capacity, in any way, directly or
indirectly, conduct, engage in, be connected with, have any interest in, or aid
or assist anyone in engaging in a business which derives 20% or more of its
revenues from the sale of bagels and/or bagel-related products (a "Competitive
Business"); provided, however, Employee may have an interest in any Competitive
Business as a passive investor in such Competitive Business provided such
interest does not exceed (three percent (3%) of the outstanding equity
securities of any company which has a class of securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended, or which is
traded on a national securities exchange.
12. REMEDIES. Employee agrees that the period of time provided for in
--------
Sections 10 and 11 above is the minimum period of time necessary, and that other
provisions and restrictions set forth above and in other portions hereof are
necessary, to protect the Company and its successors and assigns in the
protection of the business conducted by the Company. Employee agrees that the
services to be performed by him for the Company are special and unique, that
damages cannot compensate the Company in the event of a violation of the
restrictive covenants contained in Sections 10 and 11 hereof, and that
injunctive relief shall be essential for the protection of the Company and its
successors and assigns. Accordingly, Employee agrees and consents that, in the
event he shall violate
8
<PAGE>
or breach any of said restrictive covenants the Company shall be entitled to
obtain (and he hereby consents thereto) such injunctive relief against
Employee, without bond, in addition to such further or other relief as may
appertain at equity or law. The exercise or enforcement by the Company of any
right or remedy hereunder shall not preclude the exercise or enforcement by the
Company of any other right or remedy hereunder or which the Company has the
right to enforce under applicable law.
13. EMPLOYEE REPRESENTATIONS. Employee represents and warrants to the
------------------------
Company that (i) he is free to enter into this Agreement and (ii) this Agreement
does not violate the terms of any other agreement to which Employee is a party
or by which he is bound.
14. WAIVER. Failure by either party to insist upon strict compliance with
------
any of the terms, covenants or conditions hereof shall not be deemed a waiver of
such term, covenant or condition, nor shall any waiver or relinquishment of any
right or remedy hereunder at any one or more times be deemed a waiver or
relinquishment of such right or remedy at any other time or times.
15. SEVERABILITY. Each section, paragraph, term and provision of this
------------
Agreement, and any portion thereof, shall be considered severable and if for any
reason any such portion of this Agreement is held to be invalid, contrary to, or
in conflict with any applicable present or future law or regulation in a final,
unappealable ruling issued by any court, agency or tribunal with competent
jurisdiction in a proceeding to which the Company is a party, that ruling shall
not impair the operation of, or have any other effect upon, such other portions
of this Agreement as may remain otherwise intelligible, which shall continue
9
<PAGE>
to be given full force and effect and bind the parties hereto. Employee agrees
that if any provisions hereof shall be adjudicated to be invalid or
unenforceable in whole or in part, such modifications made to this Agreement as
a result of such adjudication shall be effective only in the particular
jurisdiction in which such adjudication is made. To the extent any provision
hereof is deemed unenforceable by virtue of its scope but may be enforceable by
limitations thereon, the parties hereto agree that the same shall be enforceable
to the fullest extent permissible under the laws and public policies applied in
such jurisdiction in which the enforcement is sought. The parties hereto hereby
authorize any court of competent jurisdiction to modify the restrictive
covenants to the extent necessary to make the same enforceable.
16. BENEFIT. This Agreement shall inure to the benefit of and be binding
-------
upon the Company, its successors and assigns. The rights and benefits of
Employee under this Agreement are personal to him, and are not subject to
voluntary or involuntary alienation, assignment or transfer by him.
17. ENTIRE AGREEMENT. This Agreement contains the entire agreement
----------------
between the parties concerning Employee's employment with the Company, and may
not be modified or rescinded except by a written agreement to such effect signed
by both parties.
18. NOTICES. All notices, requests, demands, and other communications
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or by electronic transmission. If mailed,
first class, certified mail, postage prepaid, or sent by reliable overnight
delivery service and addressed as follows, or at such other addresses as the
parties hereto may from time to time designate in writing, such
10
<PAGE>
notices, requests, demands, and other communications shall be deemed delivered
three business days after being so duly posted:
to the Company: Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Attention: Kyle T. Craig
Facsimile: (303) 202-3360
with a copy to: Rudnick & Wolfe
203 North LaSalle, Suite 1800
Chicago, IL 60601
Attention: Michael G. Brennan
Facsimile: (312) 984-2299
to Employee: Daniel V. Colangelo
495 Upper Evergreen
Summit Park, Utah 84060
with a copy to: Parsons Behle & Latimer
201 South Main Street, Suite 1800
P.O. Box 45898
Salt Lake City, Utah 84145-0898
Attention: William D. Holyoak
19. GOVERNING LAW. This Agreement and the rights and obligations of the
-------------
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Colorado applicable to contracts made and to be performed
therein.
20. CONFLICT WITH PLAN. The parties acknowledge that to the extent any
------------------
provision of this Agreement is inconsistent with any provision of the Plan, the
provisions of this Agreement shall control.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
EMPLOYEE PROGRESSIVE BAGEL CONCEPTS, INC.,
a Delaware corporation
_________________________________ By:_________________________________
Daniel V. Colangelo Its:______________________________
12
<PAGE>
EXHIBIT A
PROGRESSIVE BAGEL CONCEPTS, INC.
1995 EMPLOYEE STOCK OPTION PLAN
-------------------------------
1. STATEMENT OF PURPOSE. The purpose of this 1995 Employee Stock Option
--------------------
Plan (the "Plan") is to benefit Progressive Bagel Concepts, Inc. (the "Company")
by offering certain present and future employees, officers, and consultants of
the Company and its subsidiaries, if any, a favorable opportunity to become
holders of the $.01 par value common stock of the Company ("Common Stock") over
a period of years, thereby giving them a permanent stake in the growth and
prosperity of the Company and encouraging the continuance of their involvement
with the Company.
2. ADMINISTRATION. The plan shall be administered by a committee which
--------------
shall consist of at least two members of the Board of Directors of the Company,
whose interpretation of the terms and provisions of the Plan shall be final and
conclusive.
3. ELIGIBILITY. Options may be granted to employees of the Company and
-----------
its subsidiaries, if any, who are employed on a full time basis, and to officers
and consultants of the Company.
4. GRANTING OF OPTIONS. Options shall be granted annually to non-store
-------------------
employees of the Company (and such subsidiaries of the Company as are designated
by the Committee) with a base salary of $40,000 or more as follows: such number
of options as shall equal (x) the product of (1) the employee's base salary
multiplied times (2) the employee's base salary divided by $80,000, (y) divided
by the exercise price. Options shall be granted annually to officers of the
Company (and such subsidiaries of the Company as are designated by the
Committee) as follows: such number of options as shall equal their base salary
multiplied by one and a half and divided by the exercise price. In addition, the
Company may grant additional or separate options in such amounts as the
Committee shall determine to employees, officers, or consultants of the Company
and its subsidiaries.
The Committee may grant options under which a total of not in excess of
15,000 shares of the Common Stock may be purchased from the Company, subject to
adjustment as provided in Section 11. No option shall be granted under the Plan
subsequent to February 1, 2005. Options granted under the Plan are intended not
be treated as incentive stock options as defined in Section 422A of the Internal
Revenue Code of 1986, as amended (the "Code").
In the event that an option expires or is terminated or cancelled
unexercised as to any shares, such released shares may again be optioned
(including a grant in substitution for a cancelled option). Shares subject to
options may be made available from unissued or reacquired shares of Common
Stock.
<PAGE>
Nothing contained in the Plan or in any option granted pursuant thereto
shall confer upon any optionee any right to be continued in the employment of
the Company, or interfere in any way with the right of the Company to terminate
his or her employment at any time.
5. OPTION PRICE. The options shall be granted at an exercise price,
------------
subject to the provisions of Section 11 hereof, equal to the fair market value
at the time the option is granted, of the shares of Common Stock subject to the
option.
6. DURATION OF OPTIONS, INCREMENTS, AND EXTENSIONS. Subject to the
-----------------------------------------------
provisions of Section 9 hereof, each option shall be for a term of ten years.
Each option shall become exercisable with respect to 10% of the total number of
shares subject to the option at the end of the first year after the date of
grant, an additional 20% at the end of the second year after the date of grant,
an additional 30% at the end of third year after the date of grant and the
balance at the end of the fourth year after the date of grant (the "Vesting
Schedule"). Notwithstanding the foregoing, the Committee may in its discretion
accelerate the exercisability of any option subject to such terms and conditions
as the Committee deems necessary and appropriate to effectuate the purpose of
the Plan including, without limitation, a requirement that the optionee grant to
the Company an option to repurchase all or a portion of the number of shares
acquired upon exercise of the accelerated option for their fair market value on
the date of grant. Subject to the foregoing, all or any part of the shares to
which the right to purchase has accrued may be purchased at the time of such
accrual or at any time or times thereafter during the option period.
7. RIGHT OF COMPANY TO REPURCHASE SHARES ISSUED AS A RESULT OF
-----------------------------------------------------------
ACCELERATED, EXERCISED OPTIONS. Notwithstanding any other provision in the Plan
- ------------------------------
to the contrary:
(a) in the event that (i) the Committee, in its sole discretion,
determines that all or some portion of the vesting of an option granted
pursuant to the Plan shall be accelerated so that all or some portion of
such option may be exercised prior to the date on which it would have been
exercised pursuant to the Vesting Schedule described in Section 6 hereof,
and (ii) such option is exercised for some or all of the shares of Common
Stock subject to such option, then that portion of shares under such option
(the "Excess Shares") equal to the total number of shares under such option
less the number of shares which would have been issued if the option had
been exercised pursuant to the Vesting Schedule may not, except as provided
in paragraph (b) of this Section 7, be sold or otherwise transferred to any
third party until such date as the option for any portion of the Excess
Shares would have been exercisable if the option had been exercised
pursuant to the Vesting Schedule; and
(b) in the event the employment of the optionee (or former optionee)
with the Company is terminated for any reason other than death, permanent
disability or retirement, the Company shall have the right to purchase from
the optionee, at the option price paid by him, the Excess Shares acquired
upon the exercise of an option granted under the Plan; provided, however,
that the Company shall not make any such purchase if such purchase would
give rise to short-swing profit liability as described in Section 16 of the
Securities Exchange Act of 1934 when matched with a bona fide market
transaction. If not sooner
2
<PAGE>
exercised, the Company's right to repurchase shall expire with respect to
any portion of the Excess Shares on the date that the option for any such
portion of the Excess Shares would have become exercisable pursuant to the
Vesting Schedule.
8. EXERCISE OF OPTION. As a condition to the exercise of any option, the
------------------
fair market value of the Common Stock on the date of exercise must equal or
exceed the option price referred to in Section 5 hereof. An option may be
exercised by giving written notice to the Company, attention of the Chief
Financial Officer, specifying the number of shares to be purchased, accompanied
by the full purchase price for the shares to be purchased either in cash, by
check, by a promissory note in a form specified by the Committee and payable to
the Company no later than 15 business days after the date exercise of the
option, or, if so approved by the Committee, by shares of the Common Stock of
the Company or by a combination of these methods of payment. For this purpose,
the per share value of Common Stock of the Company shall be the fair market
value on the date of exercise. The Committee may in its discretion permit an
optionee to deliver a promissory note in a form specified by the Committee and
payable to the Company no later than the fifteenth day of April in the year
following the year of exercise of any option in payment of any withholding tax
requirements of the Company with respect to such exercise.
At any time of any exercise of any option, the Company may, if it shall
determine it necessary or desirable for any reason, require the optionee (or his
heirs, legatees, or legal representative, as the case may be) as a condition
upon the exercise thereof, to deliver to the Company a written representation of
present intention to purchase the shares for investment and not for
distribution. In the event such representation is required to be delivered, an
appropriate legend may be placed upon each certificate delivered to the optionee
upon his exercise of part or all of the option and a stop transfer order may be
placed with the transfer agent. Each option shall also be subject to the
requirement that, if at any time the Company determines, in its discretion, that
the listing, registration or qualification of the shares subject to the option
upon any securities exchange or under any state or Federal law, or the consent
or approval of any governmental regulatory body is necessary or desirable as a
condition of or in connection with, the issue or purchase of shares thereunder,
the option may be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
At the time of the exercise of any option, the Company may require, as a
condition of the exercise of such option, the optionee to pay the Company an
amount equal to the amount of tax the Company may be required to withhold to
obtain a deduction for federal income tax purposes as a result of the exercise
of such option by the optionee.
9. TERMINATION OF RELATIONSHIP - EXERCISE THEREAFTER. In the event the
-------------------------------------------------
relationship between the Company and an officer or employee who is an optionee
is terminated for any reason other than death, permanent disability or
retirement, such optionee's option shall expire and all rights to purchase
shares pursuant thereto shall terminate immediately. The Committee may, in its
sole discretion, permit any option to remain exercisable for a reasonable period
after such termination. Temporary absence from employment because of illness,
vacation,
3
<PAGE>
and approved leaves of absence shall not be considered to terminate employment
or to interrupt continuous employment.
In the event of termination of said relationship because of death or
permanent disability (as that term is defined in Section 22(e)(3) of the Code,
as now in effect or as subsequently amended), the option may be exercised to the
extent that any portion thereof would be exercisable on the date of such death
or permanent disability pursuant to the Vesting Schedule described in Section 6
hereof, by the optionee or, if he or she is not living, by his or her heirs,
legatees, or legal representative, as the case may be, at any time during its
specified term prior to one year after the date of death or permanent
disability. In the event of termination of employment because of retirement, the
option may be exercised by the optionee (or, if he or she dies after such
termination, by his or her heirs, legatees, or legal representative, as the case
may be), at any time during its specified term prior to one year after the date
of such termination, but only to the extent the option was exercisable at the
date of such termination.
10. NON-TRANSFERABILITY OF OPTIONS. During the lifetime of the optionee,
------------------------------
options shall be exercisable only by the optionee, and options shall not be
assignable or transferable by the optionee otherwise than by will or by the laws
of descent and distribution, or pursuant to a qualified domestic relations order
as defined by (a) the Code or (b) Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
11. ADJUSTMENT. The number of shares subject to the Plan and to options
----------
granted under the Plan shall be adjusted as follows: (a) in the event that the
outstanding shares of Common Stock of the Company is changed by any stock
dividend, stock split or combination of shares, the number of shares subject to
the Plan and to options granted thereunder shall be proportionately adjusted;
(b) in the event of any merger, consolidation or reorganization of the Company
with any other corporation or corporations, there shall be substituted, on an
equitable basis as determined by the Committee, for each share of Common Stock
then subject to the Plan, whether or not at the time subject to outstanding
options, the number and kind of shares of stock or other securities to which the
holders of shares of Common Stock of the Company will be entitled pursuant to
the transaction; and (c) in the event of any other relevant change in the
capitalization of the Company, the Committee shall provide for an equitable
adjustment in the number of shares of Common Stock then subject to the Plan,
whether or not then subject to outstanding options. In the event of any such
adjustment the purchase price per share shall be proportionately adjusted.
12. AMENDMENT OF PLAN. The Committee may amend or discontinue the Plan
-----------------
at any time; provided, however, that no amendment or discontinuance shall change
--------- --------
or impair any options previously granted without the consent of the optionee.
15. HOLDING PERIOD. Anything contained in the Plan to the contrary
--------------
notwithstanding, any disposition of an option otherwise permitted by the terms
of the Plan, or of the Common Stock acquired upon exercise of an option, shall
be subject to compliance with the requirements of paragraph (c)(i) of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, applicable to
such disposition, and any date, period or procedure specified or referred
4
<PAGE>
to in the Plan with respect to any such disposition shall be adjusted, if
necessary, so as to give effect to this Section 13.
14. EMPLOYMENT AND CONSULTING AGREEMENTS. Anything contained in the Plan
------------------------------------
to the contrary notwithstanding, in the event that an employment agreement or
consulting agreement entered into by the Company or a subsidiary of the Company
provides that options shall be granted under the Plan to an employee or
consultant on terms and conditions that differ from the terms and conditions set
forth herein, the terms and conditions set forth in such employment or
consulting agreement shall control.
5
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this _____ day of February, 1995, by and between
Progressive Bagel Concepts, Inc., a Delaware corporation (hereinafter referred
to as the "Company"), and Stephen A. Norman (hereinafter referred to as
"Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is engaged in the business of operating retail
bakeries featuring bagels and other food items;
WHEREAS, because of the abilities and expertise of Employee in said
business, the Company desires to employ Employee; and
WHEREAS, Employee is willing to accept such employment upon the terms and
conditions stated herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee to perform the duties
----------
described herein, and Employee hereby accepts such employment on the terms and
conditions stated herein. Employee shall hold the position of Vice President -
Rocky Mountain Division of Company, which shall at all times be deemed to be an
executive office of the Company.
<PAGE>
2. INTENTIONALLY OMITTED.
---------------------
3. TERM OF EMPLOYMENT. Subject to the provisions for termination set
------------------
forth herein, the term of employment under this Agreement shall commence on
February _____, 1995 and shall extend for a period of three (3) years (the
"Term").
4. DUTIES OF EMPLOYEE. Employee shall perform the duties commensurate
------------------
with his position and experience as shall be assigned to him from time to time
by the Company. Employee shall perform such duties in a diligent matter, shall
devote his entire business time, attention and effort to the affairs of the
Company within the scope of his employment as is reasonably necessary for the
proper rendition of said services, shall diligently promote the interests of the
Company, and shall be just and faithful in carrying out his duties.
5. COMPENSATION. The Company shall compensate Employee for all services
------------
rendered by him hereunder as follows:
(a) salary at a yearly rate of $125,000, payable by the Company in
twenty six (26) equal installments after deducting therefrom all applicable
FICA contributions, federal and state income tax withholding, and any other
payroll taxes (subject to any increases as determined by the Board of
Directors from time to time in its sole discretion); and
(b) such stock options as may be granted to Employee pursuant to the
Company's 1995 Employee Stock Option Plan, as it may be amended from time
to time, a current form of which is attached hereto as Exhibit A (the
"Plan") or any other stock option plan hereinafter adopted by the Company;
and
2
<PAGE>
(c) as an inducement for Employee to execute this Agreement, Employee
shall receive options under the Plan to purchase that number of shares of
common stock of the Company that have a fair market value, as determined in
accordance with the terms of the Plan, of $150,000, which options are to be
granted on the date hereof; provided, however, the options granted pursuant
to this Section 5(c) shall constitute Employee's option grant for 1995
under the Plan; provided further, that if the formula under the Plan
provides for options in excess of those granted to Employee under Section
5(c) for 1995, Employee shall receive such additional options at the same
time that options are granted under the Plan generally to employees for
1995.
6. BENEFITS AND VACATIONS. In addition to the compensation payable to
----------------------
Employee pursuant to Section 5 above, and all other compensation or benefits
provided for hereunder, Employee shall be entitled to such reasonable periods of
vacation, with full pay, as is consistent with the general policy as established
by the Board of Directors for executives and business exigencies of the Company,
and such benefits of a similar type and amount and to the same extent as
benefits are provided to other similarly situated employees of the Company.
Employee shall also receive a relocation expense reimbursement in an amount
approved by the Board of Directors.
7. CONFIDENTIALITY. Employee agrees to execute and deliver such
---------------
confidentiality agreement which is to be required to be executed and delivered
by employees of the Company generally.
3
<PAGE>
8. CONFLICT OF INTEREST. Employee shall take no action, or engage in any
--------------------
transaction, that could be considered to conflict with the best interests of the
Company, and shall at all times exercise his best judgment and efforts so as to
avoid taking any action, or engaging in any transaction, that might give the
appearance of being in conflict with the best interests of the Company.
9. TERMINATION.
-----------
(a) This Agreement and Employee's employment hereunder shall
immediately terminate, without further notice or action, upon the
occurrence of the death of Employee.
(b) Additionally, the Company shall have the right to terminate this
Agreement and Employee's employment with the Company hereunder, effective
upon written notice to Employee of termination stating the basis for such
termination, under the following circumstances:
(1) if Employee is permanently disabled (as defined below); or
(2) for cause, which shall be defined as including any of the
following: (i) any misappropriation of funds or property of the
Company by Employee; (ii) Employee's conviction of a felony, or
of any crime involving moral turpitude, fraud, theft or
conversion; (iii) Employee's failure to submit to a medical
examination at the Company's expense within ten (10) business
days after receipt of the Company's written request that Employee
submit to such examination; or (iv) a breach of any other
material provision contained in this Agreement.
4
<PAGE>
(c) Employee shall be deemed to be "permanently disabled" hereunder upon
the first to occur of any of the following events:
(1) The receipt by the Company of a written certificate from a
physician approved by the Company and reasonably satisfactory to Employee
stating, that, based upon one or more examinations of Employee by such
physician, it is such physician's opinion that, for a period of at least
six (6) consecutive months from the date of certification, Employee is and
will be substantially unable to perform his customary duties for the
Company due to physical or mental infirmity. The Company may request in
writing that Employee submit to such examinations by giving written notice
thereof to Employee.
(2) The adjudication of Employee as an incompetent or a disabled
person and the appointment of a conservator or guardian for his person or
property by a court of competent jurisdiction.
(d) Employee shall have the right to terminate this Agreement and
Employee's employment with the Company hereunder, effective upon written notice
to the Company, within thirty (30) days after the date Employee shall first have
a right to exercise a "put option" pursuant to Section 2.3(a)(ii) of the
Contribution Agreement.
(e) If Employee is terminated by the Company for cause, as that term is
defined in Section 9(b)(2), or if Employee voluntarily terminates his
employment, the Company shall not be obligated to pay Employee any other
compensation with
5
<PAGE>
respect to any period after the date of such termination, except that any
unexercised stock options of Employee that are vested on the date of termination
shall continue to be exercisable in accordance with the terms of the Plan until
one year after the effective date of such termination. All stock options that
are not vested on the date of such termination shall terminate and be of no
further force and effect.
(f) If Employee dies or becomes permanently disabled during the Term, or
if Employee is terminated by the Company for any reason other than for cause,
the Company shall pay to Employee the entire amount of the cash compensation
provided for in Section 5 hereof that is payable during the remainder of the
Term payable in a lump sum cash payment within thirty (30) days of the effective
date of termination (provided that, in the case of death or disability of
Employee, the aforementioned cash payment shall be limited to the lesser of: (i)
one year's cash compensation provided for in Section 5, and (ii) the cash
compensation provided for in Section 5 for the remaining balance of the Term),
and all employee stock options granted to Employee prior to the effective date
of such termination shall vest immediately; provided that if Employee wishes to
exercise such stock options, he must do so within the first to occur of (x)
three (3) years after the effective date of such termination or (y) the
expiration date of the option. Notwithstanding the foregoing, after the
effective date of his termination Employee shall not be eligible to receive any
further employee stock options.
(g) Upon any termination of this Agreement or the employment of Employee,
or the expiration of this Agreement without renewal of Employee's
6
<PAGE>
employment, Employee shall be deemed automatically to have resigned from
any office or directorship of the Company which he may then hold and shall
promptly deliver to the Company (without retaining any copies thereof) all
Company files and documents, forms, letterhead, business cards, computer
disks and any other written, magnetic or printed materials relating to the
business of the Company.
(h) If Employee voluntarily terminates his Employment after the
six month anniversary of the date hereof, the Company shall not have any
cause of action against Employee for a breach of this Agreement due solely
to such voluntary termination; provided, however, that nothing contained in
the previous sentence shall cancel, terminate or otherwise extinguish any
cause of action of the Company against Employee arising out of or based on
any other breach of this Agreement by Employee.
10. COVENANT RESTRICTING SOLICITATION. During the term hereof and for a
---------------------------------
period of two (2) years after Employee's employment with the Company shall
expire or terminate for any reason whatsoever, Employee shall not, directly or
indirectly, solicit or attempt to solicit for employment or employ any person
who was an employee of the Company on the date of Employee's date of termination
or any person who was an employee during the six-month period prior to such
date.
11. COVENANT RESTRICTING COMPETITION. During the term hereof and for a
--------------------------------
period of two (2) years after his employment with the Company shall expire or
terminate for any reason whatsoever, Employee shall not, either directly or
indirectly, on his own account, or as an employee, consultant, partner, owner,
officer, director or stockholder of any other
7
<PAGE>
person, firm, partnership, corporation or other entity or in any other capacity,
in any way, directly or indirectly, conduct, engage in, be connected with, have
any interest in, or aid or assist anyone in engaging in a business which derives
20% or more of its revenues from the sale of bagels and/or bagel-related
products (a "Competitive Business"); provided, however, Employee may have an
interest in any Competitive Business as a passive investor in such Competitive
Business provided such interest does not exceed (three percent (3%) of the
outstanding equity securities of any company which has a class of securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended,
or which is traded on a national securities exchange.
12. REMEDIES. Employee agrees that the period of time provided for in
--------
Sections 10 and 11 above is the minimum period of time necessary, and that other
provisions and restrictions set forth above and in other portions hereof are
necessary, to protect the Company and its successors and assigns in the
protection of the business conducted by the Company. Employee agrees that the
services to be performed by him for the Company are special and unique, that
damages cannot compensate the Company in the event of a violation of the
restrictive covenants contained in Sections 10 and 11 hereof, and that
injunctive relief shall be essential for the protection of the Company and its
successors and assigns. Accordingly, Employee agrees and consents that, in the
event he shall violate or breach any of said restrictive covenants the Company
shall be entitled to obtain (and he hereby consents thereto) such injunctive
relief against Employee, without bond, in addition to such further or other
relief as may appertain at equity or law. The exercise or enforcement by the
Company of any right or remedy hereunder shall not preclude the
8
<PAGE>
exercise or enforcement by the Company of any other right or remedy hereunder or
which the Company has the right to enforce under applicable law.
13. EMPLOYEE REPRESENTATIONS. Employee represents and warrants to the
------------------------
Company that (i) he is free to enter into this Agreement and (ii) this Agreement
does not violate the terms of any other agreement to which Employee is a party
or by which he is bound.
14. WAIVER. Failure by either party to insist upon strict compliance
------
with any of the terms, covenants or conditions hereof shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any right or remedy hereunder at any one or more times be
deemed a waiver or relinquishment of such right or remedy at any other time or
times.
15. SEVERABILITY. Each section, paragraph, term and provision of this
------------
Agreement, and any portion thereof, shall be considered severable and if for any
reason any such portion of this Agreement is held to be invalid, contrary to, or
in conflict with any applicable present or future law or regulation in a final,
unappealable ruling issued by any court, agency or tribunal with competent
jurisdiction in a proceeding to which the Company is a party, that ruling shall
not impair the operation of, or have any other effect upon, such other portions
of this Agreement as may remain otherwise intelligible, which shall continue to
be given full force and effect and bind the parties hereto. Employee agrees that
if any provisions hereof shall be adjudicated to be invalid or unenforceable in
whole or in part, such modifications made to this Agreement as a result of such
adjudication shall be effective only in the particular jurisdiction in which
such adjudication is made. To the extent any
9
<PAGE>
provision hereof is deemed unenforceable by virtue of its scope but may be
enforceable by limitations thereon, the parties hereto agree that the same
shall be enforceable to the fullest extent permissible under the laws and public
policies applied in such jurisdiction in which the enforcement is sought. The
parties hereto hereby authorize any court of competent jurisdiction to modify
the restrictive covenants to the extent necessary to make the same enforceable.
16. BENEFIT. This Agreement shall inure to the benefit of and be binding
-------
upon the Company, its successors and assigns. The rights and benefits of
Employee under this Agreement are personal to him, and are not subject to
voluntary or involuntary alienation, assignment or transfer by him.
17. ENTIRE AGREEMENT. This Agreement contains the entire agreement
----------------
between the parties concerning Employee's employment with the Company, and may
not be modified or rescinded except by a written agreement to such effect signed
by both parties.
18. NOTICES. All notices, requests, demands, and other communications
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or electronic transmission. If mailed,
first class, certified mail, postage prepaid, or sent by reliable overnight
delivery service and addressed as follows, or at such other addresses as the
parties hereto may from time to time designate in writing, such notices,
requests, demands, and other communications shall be deemed delivered three
business days after being so duly posted:
10
<PAGE>
to the Company: Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Attention: Kyle T. Craig
Facsimile: (303) 202-3360
with a copy to: Rudnick & Wolfe
203 North LaSalle, Suite 1800
Chicago, IL 60601
Attention: Michael G. Brennan
Facsimile: (312) 984-2299
to Employee: Stephen A. Norman
1369 East Laird Avenue
Salt Lake City, Utah 84105
with a copy to: Parsons Behle & Latimer
201 South Main Street, Suite 1800
P.O. Box 45898
Salt Lake City, Utah 84145-0898
Attention: William D. Holyoak
19. GOVERNING LAW. This Agreement and the rights and obligations of the
-------------
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Colorado applicable to contracts made and to be performed
therein.
20. CONFLICT WITH PLAN. The parties acknowledge that to the extent any
------------------
provision of this Agreement is inconsistent with any provision of the Plan, the
provisions of this Agreement shall control.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
EMPLOYEE PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation
________________________________ By:___________________________
Stephen A. Norman Its:________________________
12
<PAGE>
EXHIBIT A
PROGRESSIVE BAGEL CONCEPTS, INC.
1995 EMPLOYEE STOCK OPTION PLAN
-------------------------------
1. STATEMENT OF PURPOSE. The purpose of this 1995 Employee Stock Option
--------------------
Plan ("the Plan") is to benefit Progressive Bagel Concepts, Inc. (the "Company")
by offering certain present and future employees, officers, and consultants of
the Company and its subsidiaries, if any, a favorable opportunity to become
holders of the $.01 par value common stock of the Company ("Common Stock") over
a period of years, thereby giving them a permanent stake in the growth and
prosperity of the Company and encouraging the continuance of their involvement
with the Company.
2. ADMINISTRATION. The Plan shall be administered by a committee which
--------------
shall consist of at least two members of the Board of Directors of the Company,
whose interpretation of the terms and provisions of the Plan shall be final and
conclusive.
3. ELIGIBILITY. Options may be granted to employees of the Company and
-----------
its subsidiaries, if any, who are employed on a full time basis, and to officers
and consultants of the Company.
4. GRANTING OF OPTIONS. Options shall be granted annually to non-store
-------------------
employees of the Company (and such subsidiaries of the Company as are designated
by the Committee) with a base salary of $40,000 or more as follows: such number
of options as shall be equal (x) the product of (1) the employee's base salary
multiplied times (2) the employee's base salary divided by $80,000, (y) divided
by the exercise price. Options shall be granted annually to officers of the
Company (and such subsidiaries of the Company as are designated by the
Committee) as follows: such number of options as shall equal their base salary
multiplied by one and a half and divided by the exercise price. In addition, the
Company may grant additional or separate options in such amounts as the
Committee shall determine to employees, officers, or consultants of the Company
and its subsidiaries.
The Committee may grant options under which a total of not in excess of
15,000 shares of the Common Stock may be purchased from the Company, subject to
adjustment as provided in Section 11. No option shall be granted under the Plan
subsequent to February 1, 2005. Options granted under the Plan are intended not
to be treated as incentive stock options as defined in Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code").
In the event that an option expires or is terminated or cancelled
unexercised as to any shares, such released shares may again be optioned
(including a grant in substitution for a cancelled option). Shares subject to
options may be made available from unissued or reacquired shares of Common
Stock.
<PAGE>
Nothing contained in the Plan or in any option granted pursuant thereto
shall confer upon any optionee any right to be continued in the employment of
the Company, or interfere in any way with the right of the Company or terminate
his or her employment at any time.
5. OPTION PRICE. The options shall be granted at an exercise price,
------------
subject to the provisions of Section 11 hereof, equal to the fair market value
at the time the option is granted, of the shares of Common Stock subject to the
option.
6. DURATION OF OPTIONS, INCREMENTS, AND EXTENSIONS. Subject to the
-----------------------------------------------
provisions of Section 9 hereof, each option shall be for a term of ten years.
Each option shall become exercisable with respect to 10% of the total number of
shares subject to the option at the end of the first year after the date of the
grant, an additional 20% at the end of the second year after the date of grant,
an additional 30% at the end of the third year after the date of grant and the
balance at the end of the fourth year after the date of grant (the "Vesting
Schedule"). Notwithstanding the foregoing, the Committee may in its discretion
accelerate the exercisability of any option subject to such terms and conditions
as the Committee deems necessary and appropriate to effectuate the purpose of
the Plan including, without limitation, a requirement that the optionee grant to
the Company an option to repurchase all or a portion of the number of shares
acquired upon exercise of the accelerated option for their fair market value on
the date of grant. Subject to the foregoing, all or any part of the shares to
which the right to purchase has accrued may be purchased at the time of such
accrual or at any time or times thereafter during the option period.
7. RIGHT OF COMPANY TO REPURCHASE SHARES ISSUED AS A RESULT OF
-----------------------------------------------------------
ACCELERATED, EXERCISED OPTIONS. Notwithstanding any other provision in the Plan
- ------------------------------
to the contrary:
(a) in the event that (i) the Committee, in its sole discretion,
determines that all or some portion of the vesting of an option granted
pursuant to the Plan shall be accelerated so that all or some portion of
such option may be exercised prior to the date on which it would have been
exercised pursuant to the Vesting Schedule described in Section 6 hereof,
and (ii) such option is exercised for some or all of the shares of Common
Stock subject to such option, then that portion of shares under such option
(the "Excess Shares") equal to the total number of shares under such option
less the number of shares which would have been issued if the option had
been exercised pursuant to the Vesting Schedule may not, except as provided
in paragraph (b) of this Section 7, be sold or otherwise transferred to any
third party until such date as the option for any portion of the Excess
Shares would have been exercisable if the option had been exercised
pursuant to the Vesting Schedule; and
(b) in the event the employment of the optionee (or former
optionee) with the Company is terminated for any reason other than death,
permanent disability or retirement, the Company shall have the right to
purchase from the optionee, at the option price paid by him, the Excess
Shares acquired upon the exercise of an option granted under the Plan;
provided, however, that the Company shall not make any such purchase if
such purchase would give rise to short-swing profit liability as described
in Section 16 of the Securities Exchange Act of 1934 when matched with a
bona fide market transaction. If not sooner
2
<PAGE>
exercised, the Company's right to repurchase shall expire with respect to
any portion of the Excess Shares on the date that the option for any such
portion of the Excess Shares would have become exercisable pursuant to the
Vesting Schedule.
8. EXERCISE OF OPTION. As a condition to the exercise of any option,
------------------
the fair market value of the Common Stock on the date of exercise must equal or
exceed the option price referred to in Section 5 hereof. An option may be
exercised by giving written notice to the Company, attention of the Chief
Financial Officer, specifying the number of shares to be purchased, accompanied
by the full purchase price for the shares to be purchased either in cash, by
check, by a promissory note in a form specified by the Committee and payable to
the Company no later than 15 business days after the date of exercise of the
option, or, if so approved by the Committee, by shares of the Common Stock of
the Company or by a combination of these methods of payment. For this purpose,
the per share value of Common Stock of the Company shall be the fair market
value on the date of exercise. The Committee may in its discretion permit an
optionee to deliver a promissory note in a form specified by the Committee and
payable to the Company no later than the fifteenth day of April in the year
following the year of exercise of any option in payment of any withholding tax
requirements of the Company with respect to such exercise.
At any time of any exercise of any option, the Company may, if it shall
determine it necessary or desirable for any reason, require the optionee (or his
heirs, legatees, or legal representative, as the case may be) as a condition
upon the exercise thereof, to deliver to the Company a written representation of
present intention to purchase the shares for investment and not for
distribution. In the event such representation is required to be delivered, an
appropriate legend may be placed upon each certificate delivered to the optionee
upon his exercise of part or all of the option and a stop transfer order may be
placed with the transfer agent. Each option shall also be subject to the
requirement that, if at any time the Company determines, in its discretion, that
the listing, registration or qualification of the shares subject to the option
upon any securities exchange or under any state or Federal law, or the consent
or approval of any governmental regulatory body is necessary or desirable as a
condition of or in connection with, the issue or purchase of shares thereunder,
the option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
At the time of the exercise of any option, the Company may require, as a
condition of the exercise of such option, the optionee to pay the Company an
amount equal to the amount of tax the Company may be required to withhold to
obtain a deduction for federal income tax purposes as a result of the exercise
of such option by the optionee.
9. TERMINATION OF RELATIONSHIP - EXERCISE THEREAFTER. In the event the
-------------------------------------------------
relationship between the Company and an officer or employee who is an optionee
is terminated for any reason other than death, permanent disability or
retirement, such optionee's option shall expire and all rights to purchase
shares pursuant thereto shall terminate immediately. The Committee may, in its
sole discretion, permit any option to remain exercisable for a reasonable period
after such termination. Temporary absence from employment because of illness,
vacation,
3
<PAGE>
and approved leaves of absence shall not be considered to terminate employment
or to interrupt continuous employment.
In the event of termination of said relationship because of death or
permanent disability (as that term is defined in Section 22(e)(3) of the Code,
as now in effect or as subsequently amended), the option may be exercised to the
extent that any portion thereof would be exercisable on the date of such death
or permanent disability pursuant to the Vesting Schedule described in Section 6
hereof, by the optionee or, if he or she is not living, by his or her heirs,
legatees or legal representative, as the case may be, at any time during its
specified term prior to one year after the date of death or permanent
disability. In the event of termination of employment because of retirement, the
option may be exercised by the optionee (or, if he or she dies after such
termination, by his or her heirs, legatees, or legal representative, as the case
may be), at any time during its specified term prior to one year after the date
of such termination, but only to the extent the option was exercisable at the
date of such termination.
10. NON-TRANSFERABILITY OF OPTIONS. During the lifetime of the optionee,
------------------------------
options shall be exercisable only by the optionee, and options shall not be
assignable or transferable by the optionee otherwise than by will or by the laws
of descent and distribution, or pursuant to a qualified domestic relations order
as defined by (a) the Code or (b) Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
11. ADJUSTMENT. The number of shares subject to the Plan and to options
----------
granted under the Plan shall be adjusted as follows: (a) in the event that the
outstanding shares of Common Stock of the Company is changed by any stock
dividend, stock split or combination of shares, the number of shares subject to
the Plan and to options granted thereunder shall be proportionately adjusted;
(b) in the event of any merger, consolidation or reorganization of the Company
with any other corporation or corporations, there shall be substituted, on an
equitable basis as determined by the Committee, for each share of Common Stock
then subject to the Plan, whether or not at the time subject to outstanding
options, the number and kind of shares of stock or other securities to which the
holders of shares of Common Stock of the Company will be entitled pursuant to
the transaction; and (c) in the event of any other relevant change in the
capitalization of the Company, the Committee shall provide for an equitable
adjustment in the number of shares of Common Stock then subject to the Plan,
whether or not then subject to outstanding options. In the event of any such
adjustment the purchase price per share shall be proportionately adjusted.
12. AMENDMENT OF PLAN. The Committee may amend or discontinue the Plan
-----------------
at any time; provided, however, that no amendment or discontinuance shall change
or impair any options previously granted without the consent of the optionee.
13. HOLDING PERIOD. Anything contained in the Plan to the contrary
--------------
notwithstanding, any disposition of an option otherwise permitted by the terms
of the Plan, or of the Common Stock acquired upon exercise of an option, shall
be subject to compliance with the requirements of paragraph (c)(1) of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, applicable to
such disposition, and any date, period or procedure specified or referred
4
<PAGE>
to in the Plan with respect to any such disposition shall be adjusted, if
necessary, so as to give effect to this Section 13.
14. EMPLOYMENT AND CONSULTING AGREEMENTS. Anything contained in the Plan
------------------------------------
to the contrary notwithstanding, in the event that an employment agreement or
consulting agreement entered into by the Company or a subsidiary of the Company
provides that options shall be granted under the Plan to an employee or
consultant on terms and conditions that differ from the terms and conditions set
forth herein, the terms and conditions set forth in such employment or
consulting agreement shall control.
5
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this _____ day of February, 1995, by and between
Progressive Bagel Concepts, Inc., a Delaware corporation (hereinafter referred
to as the "Company"), and James W. Largay (hereinafter referred to as
"Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is engaged in the business of operating retail
bakeries featuring bagels and other food items;
WHEREAS, because of the abilities and expertise of Employee in said
business, the Company desires to employ Employee; and
WHEREAS, Employee is willing to accept such employment upon the terms and
conditions stated herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee to perform the
----------
duties described herein, and Employee hereby accepts such employment on the
terms and conditions stated herein. Employee shall hold the position of Director
of Operations - Rocky Mountain Division of Company.
2. INTENTIONALLY OMITTED.
---------------------
<PAGE>
3. TERM OF EMPLOYMENT. Subject to the provisions for termination set
------------------
forth herein, the term of employment under this Agreement shall commence on
February _____, 1995 and shall extend for a period of three (3) years (the
"Term").
4. DUTIES OF EMPLOYEE. Employee shall perform the duties commensurate
------------------
with his position and experience as shall be assigned to him from time to time
by the Company. Employee shall perform such duties in a diligent manner, shall
devote his entire business time, attention and effort to the affairs of the
Company within the scope of his employment as is reasonably necessary for the
proper rendition of said services, shall diligently promote the interests of the
Company, and shall be just and faithful in carrying out his duties.
5. COMPENSATION. The Company shall compensate Employee for all services
------------
rendered by him hereunder as follows:
(a) salary at a yearly rate of $80,000, payable by the Company in
twenty six (26) equal installments after deducting therefrom all applicable
FICA contributions, federal and state income tax withholding, and any other
payroll taxes (subject to any increases as determined by the Board of
Directors from time to time in its sole discretion); and
(b) such stock options as may be granted to Employee pursuant to
the Company's 1995 Employee Stock Option Plan, as it may be amended from
time to time, a current form of which is attached hereto as Exhibit A (the
"Plan") or any other stock option plan hereinafter adopted by the Company;
and
(c) as an inducement for Employee to execute this Agreement,
Employee shall receive options under the Plan to purchase that number of
shares of common
2
<PAGE>
stock of the Company that have a fair market value, as determined in
accordance with the terms of the Plan, of $100,000, which options are to be
granted on the date hereof; provided, however, the options granted pursuant
to this Section 5(c) shall constitute Employee's option grant for 1995
under the Plan; provided further, that if the formula under the Plan
provides for options in excess of those granted to Employee under Section
5(c) for 1995, Employee shall receive such additional options at the same
time that options are granted under the Plan generally to employees for
1995.
6. BENEFITS AND VACATIONS. In addition to the compensation payable to
----------------------
Employee pursuant to Section 5 above, and all other compensation or benefits
provided for hereunder, Employee shall be entitled to such reasonable periods of
vacation, with full pay, as is consistent with the general policy as established
by the Board of Directors for executives and business exigencies of the Company,
and such benefits of a similar type and amount and to the same extent as
benefits are provided to other similarly situated employees of the Company.
Employee shall also receive a relocation expense reimbursement in an amount
approved by the Board of Directors.
7. CONFIDENTIALITY. Employee agrees to execute and deliver such
---------------
confidentiality agreement which is to be required to be executed and delivered
by employees of the Company generally.
8. CONFLICT OF INTEREST. Employee shall take no action, or engage in
--------------------
any transaction, that could be considered to conflict with the best interests of
the Company, and shall at all times exercise his best judgment and efforts so as
to avoid taking any action, or
3
<PAGE>
engaging in any transaction, that might give the appearance of being in conflict
with the best interests of the Company.
9. TERMINATION.
-----------
(a) This Agreement and Employee's employment hereunder shall
immediately terminate, without further notice or action, upon the
occurrence of the death of Employee.
(b) Additionally, the Company shall have the right to terminate
this Agreement and Employee's employment with the Company hereunder,
effective upon written notice to Employee of termination stating the basis
for such termination, under the following circumstances:
(1) if Employee is permanently disabled (as defined below);
or
(2) for cause, which shall be defined as including any of
the following: (i) any misappropriation of funds or property of the
Company by Employee; (ii) Employee's conviction of a felony, or of
any crime involving moral turpitude, fraud, theft or conversion;
(iii) Employee's failure to submit to a medical examination at the
Company's expense within ten (10) business days after receipt of the
Company's written request that Employee submit to such examination;
or (iv) a breach of any other material provision contained in this
Agreement.
(c) Employee shall be deemed to be "permanently disabled"
hereunder upon the first to occur of any of the following events:
4
<PAGE>
(1) The receipt by the Company of a written certificate
from a physician approved by the Company and reasonably satisfactory
to Employee stating, that, based upon one or more examinations of
Employee by such physician, it is such physician's opinion that, for
a period of at least six (6) consecutive months from the date of
certification, Employee is and will be substantially unable to
perform his customary duties for the Company due to physical or
mental infirmity. The Company may request in writing that Employee
submit to such examinations by giving written notice thereof to
Employee.
(2) The adjudication of Employee as an incompetent or a
disabled person and the appointment of a conservator or guardian for
his person or property by a court of competent jurisdiction.
(d) Employee shall have the right to terminate this Agreement and
Employee's employment with the Company hereunder, effective upon written
notice to the Company, within thirty (30) days after the date Employee
shall first have a right to exercise a "put option" pursuant to Section
2.3(a)(ii) of the Contribution Agreement.
(e) If Employee is terminated by the Company for cause, as that
term is defined in Section 9(b)(2), or if Employee voluntarily terminates
his employment, the Company shall not be obligated to pay Employee any
other compensation with respect to any period after the date of such
termination, except that any unexercised stock options of Employee that are
vested on the date of termination shall continue
5
<PAGE>
to be exercisable in accordance with the terms of the Plan until one year
after the effective date of such termination. All stock options that are
not vested on the date of such termination shall terminate and be of no
further force and effect.
(f) If Employee dies or becomes permanently disabled during the
Term, or if Employee is terminated by the Company for any reason other than
for cause, the Company shall pay to Employee the entire amount of the cash
compensation provided for in Section 5 hereof that is payable during the
remainder of the Term payable in a lump sum cash payment within thirty (30)
days of the effective date of termination (provided that, in the case of
death or disability of Employee, the aforementioned cash payment shall be
limited to the lesser of: (i) one year's cash compensation provided for in
Section 5, and (ii) the cash compensation provided for in Section 5 for the
remaining balance of the Term), and all employee stock options granted to
Employee prior to the effective date of such termination shall vest
immediately; provided that if Employee wishes to exercise such stock
options, he must do so within the first to occur of (x) three (3) years
after the effective date of such termination or (y) the expiration date of
the option. Notwithstanding the foregoing, after the effective date of his
termination Employee shall not be eligible to receive any further employee
stock options.
(g) Upon any termination of this Agreement or the employment of
Employee, or the expiration of this Agreement without renewal of Employee's
employment, Employee shall be deemed automatically to have resigned from
any office or directorship of the Company which he may then hold and shall
promptly
6
<PAGE>
deliver to the Company (without retaining any copies thereof) all Company
files and documents, forms, letterhead, business cards, computer disks and
any other written, magnetic or printed materials relating to the business
of the Company.
(h) If Employee voluntarily terminates his Employment after the
six month anniversary of the date hereof, the Company shall not have any
cause of action against Employee for a breach of this Agreement due solely
to such voluntary termination; provided, however, that nothing contained in
the previous sentence shall cancel, terminate or otherwise extinguish any
cause of action of the Company against Employee arising out of or based on
any other breach of this Agreement by Employee.
10. COVENANT RESTRICTING SOLICITATION. During the term hereof and for a
---------------------------------
period of two (2) years after Employee's employment with the Company shall
expire or terminate for any reason whatsoever, Employee shall not, directly or
indirectly, solicit or attempt to solicit for employment or employ any person
who was an employee of the Company on the date of the Employee's date of
termination or any person who was an employee during the six-month period prior
to such date.
11. COVENANT RESTRICTING COMPETITION. During the term hereof and for a
--------------------------------
period of two (2) years after his employment with the Company shall expire or
terminate for any reason whatsoever, Employee shall not, either directly or
indirectly, on his own account, or as an employee, consultant, partner, owner,
officer, director or stockholder of any other person, firm, partnership,
corporation or other entity or in any other capacity, in any way, directly or
indirectly, conduct, engage in, be connected with, have any interest in, or aid
or
7
<PAGE>
EXHIBIT A
PROGRESSIVE BAGEL CONCEPTS, INC.
1995 EMPLOYEE STOCK OPTION PLAN
-------------------------------
1. STATEMENT OF PURPOSE. The purpose of this 1995 Employee Stock
--------------------
Option Plan ("the Plan") is to benefit Progressive Bagel Concepts, Inc. (the
"Company") by offering certain present and future employees, officers, and
consultants of the Company and its subsidiaries, if any, a favorable opportunity
to become holders of the $.01 par value common stock of the Company ("Common
Stock")over a period of years, thereby giving them a permanent stake in the
growth and prosperity of the Company and encouraging the continuance of their
involvement with the Company.
2. ADMINISTRATION. The Plan shall be administered by a committee which
--------------
shall consist of at least two members of the Board of Directors of the Company,
whose interpretation of the terms and provisions of the Plan shall be final and
conclusive.
3. ELIGIBILITY. Options may be granted to employees of the Company and
-----------
its subsidiaries, if any, who are employed on a full time basis, and to officers
and consultants of the Company.
4. GRANTING OF OPTIONS. Options shall be granted annually to non-store
-------------------
employees of the Company (and such subsidiaries of the Company as are designated
by the Committee) with a base salary of $40,000 or more as follows: such number
of options as shall equal (x) the product of (1) the employee's base salary
multiplied times (2) the employee's base salary divided by $80,000, (y) divided
by the exercise price. Options shall be granted annually to officers of the
Company (and such subsidiaries of the Company as are designated by the
Committee) as follows: such number of options as shall equal their base salary
multiplied by one and a half and divided by the exercise price. In addition, the
Company may grant additional or separate options in such amounts as the
Committee shall determine to employees, officers, or consultants of the Company
and its subsidiaries.
The Committee may grant options under which a total of not in excess of
15,000 shares of the Common Stock may be purchased from the Company, subject to
adjustment as provided in Section 11. No option shall be granted under the Plan
subsequent to February 1, 2005. Options granted under the Plan are intended not
to be treated as incentive stock options as defined in Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code").
In the event that an option expires or is terminated or cancelled
unexercised as to any shares, such released shares may again be optioned
(including a grant in substitution for a cancelled option). Shares subject to
options may be made available from unissued or reacquired shares of Common
Stock.
<PAGE>
Nothing contained in the Plan or in any option granted pursuant thereto
shall confer upon any optionee any rights to be continued in the employment of
the Company, or interfere in any way with the right of the Company to terminate
his or her employment at any time.
5. OPTION PRICE. The options shall be granted at an exercise price,
------------
subject to the provisions of Section 11 hereof, equal to the fair market value
at the time the option is granted, of the shares of Common Stock subject to the
option.
6. DURATION OF OPTIONS, INCREMENTS, AND EXTENSIONS. Subject to the
-----------------------------------------------
provisions of Section 9 hereof, each option shall be for a term of ten years.
Each option shall become exercisable with respect to 10% of the total number of
shares subject to the option at the end of the first year after the date of
grant, an additional 20% at the end of the second year after the date of grant,
an additional 30% at the end of the third year after the date of grant and the
balance at the end of the fourth year after the date of grant (the "Vesting
Schedule"). Notwithstanding the foregoing, the Committee may in its discretion
accelerate the exercisability of any option subject to such terms and conditions
as the Committee deems necessary and appropriate to effectuate the purpose of
the Plan including, without limitation, a requirement that the optionee grant
to the Company an option to repurchase all or a portion of the number of shares
acquired upon exercise of the accelerated option for their fair market value on
the date of grant. Subject to the foregoing, all or any part of the shares to
which the right to purchase has accrued may be purchased at the time of such
accrual or at any time or times thereafter during the option period.
7. RIGHT OF COMPANY TO REPURCHASE SHARES ISSUED AS A RESULT OF
-----------------------------------------------------------
ACCELERATED, EXERCISED OPTIONS. Notwithstanding any other provision in the Plan
- ------------------------------
to the contrary:
(a) in the event that (i) the Committee, in its sole discretion,
determines that all or some portion of the vesting of an option granted
pursuant to the Plan shall be accelerated so that all or some portion of
such option may be exercised prior to the date on which it would have been
exercised pursuant to the Vesting Schedule described in Section 6 hereof,
and (ii) such option is exercised for some or all of the shares of Common
Stock subject to such option, then that portion of shares under such option
(the "Excess Shares") equal to the total number of shares under such option
less the number of shares which would have been issued if the option had
been exercised pursuant to the Vesting Schedule may not, except as provided
in paragraph (b) of this Section 7, be sold or otherwise transferred to any
third party until such date as the option for any portion of the Excess
Shares would have been exercisable if the option had been exercised
pursuant to the Vesting Schedule; and
(b) in the event the employment of the optionee (or former
optionee) with the Company is terminated for any reason other than death,
permanent disability or retirement, the Company shall have the right to
purchase from the optionee, at the option price paid by him, the Excess
Shares acquired upon the exercise of an option granted under the Plan;
provided, however, that the Company shall not make any such purchase if
such purchase would give rise to short-swing profit liability as described
in Section 16 of the Securities Exchange Act of 1934 when matched with a
bona fide market transaction. If not sooner
2
<PAGE>
exercised, the Company's right to repurchase shall expire with respect to
any portion of the Excess Shares on the date that the option for any such
portion of the Excess Shares would have become exercisable pursuant to the
Vesting Schedule.
8. EXERCISE OF OPTION. As a condition to the exercise of any option,
------------------
the fair market value of the Common Stock on the date of exercise must equal or
exceed the option price referred to in Section 5 hereof. An option may be
exercised by giving written notice to the Company, attention of the Chief
Financial Officer, specifying the number of shares to be purchased, accompanied
by the full purchase price for the shares to be purchased either in cash, by
check, by a promissory note in a form specified by the Committee and payable to
the Company no later than 15 business days after the date of exercise of the
option, or, if so approved by the Committee, by shares of the Common Stock of
the Company or by a combination of these methods of payment. For this purpose,
the per share value of Common Stock of the Company shall be the fair market
value on the date of exercise. The Committee may in its discretion permit an
optionee to deliver a promissory note in a form specified by the Committee and
payable to the Company no later than the fifteenth day of April in the year
following the year of exercise of any option in payment of any withholding tax
requirements of the Company with respect to such exercise.
At any time of any exercise of any option, the Company may, if it shall
determine it necessary or desirable for any reason, require the optionee (or his
heirs, legatees, or legal representative, as the case may be) as a condition
upon the exercise thereof, to deliver to the Company a written representation of
present intention to purchase the shares for investment and not for
distribution. In the event such representation is required to be delivered, an
appropriate legend may be placed upon each certificate delivered to the optionee
upon his exercise of part or all of the option and a stop transfer order may be
placed with the transfer agent. Each option shall also be subject to the
requirement that, if at any time the Company determines, in its discretion, that
the listing, registration or qualification of the shares subject to the option
upon any securities exchange or under any state or Federal law, or the consent
or approval of any governmental regulatory body is necessary or desirable as a
condition of or in connection with the issue or purchase of shares thereunder,
the option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
At the time of the exercise of any option, the Company may require, as a
condition of the exercise of such option, the optionee to pay the Company an
amount equal to the amount of tax the Company may be required to withhold to
obtain a deduction for federal income tax purposes as a result of the exercise
of such option by the optionee.
9. TERMINATION OF RELATIONSHIP - EXERCISE THEREAFTER. In the event the
---------------------------
relationship between the Company and an officer or employee who is an optionee
is terminated for any reason other than death, permanent disability or
retirement, such optionee's option shall expire and all rights to purchase
shares pursuant thereto shall terminate immediately. The Committee may, in its
sole discretion, permit any option to remain exercisable for a reasonable period
after such termination. Temporary absence from employment because of illness,
vacation,
3
<PAGE>
and approved leaves of absence shall not be considered to terminate employment
or to interrupt continuous employment.
In the event of termination of said relationship because of death or
permanent disability (as that term is defined in Section 22(e)(3) of the Code,
as now in effect or as subsequently amended), the option may be exercised to the
extent that any portion thereof would be exercisable on the date of such death
or permanent disability pursuant to the Vesting Schedule described in Section 6
hereof, by the optionee or, if he or she is not living by his or her heirs,
legatees, or legal representative, as the case may be, at any time during its
specified term prior to one year after the date of death or permanent
disability. In the event of termination of employment because of retirement, the
option may be exercised by the optionee (or, if he or she dies after such
termination, by his or her heirs, legatees, or legal representative, as the
case may be), at any time during its specified term prior to one year after the
date of such termination, but only to the extent the option was exercisable at
the date of such termination.
10. NON-TRANSFERABILITY OF OPTIONS. During the lifetime of the optionee,
------------------------------
options shall be exercisable only by the optionee, and options shall not be
assignable or transferable by the optionee otherwise than by will or by the laws
of descent and distribution, or pursuant to a qualified domestic relations order
as defined by (a) the Code or (b) Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
11. ADJUSTMENT. The number of shares subject to the Plan and to options
----------
granted under the Plan shall be adjusted as follows: (a) in the event that the
outstanding shares of Common Stock of the Company is changed by any stock
dividend, stock split or combination of shares, the number of shares subject to
the Plan and to options granted thereunder shall be proportionately adjusted;
(b) in the event of any merger, consolidation or reorganization of the
Company with any other corporation or corporations, there shall be substituted,
on an equitable basis as determined by the Committee, for each share of Common
Stock then subject to the Plan, whether or not at the time subject to
outstanding options, the number and kind of shares of stock or other securities
to which the holders of shares of Common Stock of the Company will be entitled
pursuant to the transaction; and (c) in the event of any other relevant change
in the capitalization of the Company, the Committee shall provide for an
equitable adjustment in the number of shares of Common Stock then subject to the
Plan, whether or not then subject to outstanding options. In the event of any
such adjustment the purchase price per share shall be proportionately adjusted.
12. AMENDMENT OF PLAN. The Committee may amend or discontinue the Plan at
-----------------
any time; provided, however, that no amendment or discontinuance shall change or
-------- -------
impair any options previously granted without the consent of the optionee.
13. HOLDING PERIOD. Anything contained in the Plan to the contrary
--------------
notwithstanding, any disposition of an option otherwise permitted by the terms
of the Plan, or of the Common Stock acquired upon exercise of an option, shall
be subject to compliance with the requirements of paragraph (c)(1) of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, applicable to
such disposition, and any date, period or procedure specified or referred
4
<PAGE>
to in the Plan with respect to any such disposition shall be adjusted, if
necessary, so as to give effect to this Section 13.
14. EMPLOYMENT AND CONSULTING AGREEMENTS. Anything contained in the Plan
------------------------------------
to the contrary notwithstanding, in the event that an employment agreement or
consulting agreement entered into by the Company or a subsidiary of the Company
provides that options shall be granted under the Plan to an employee or
consultant on terms and conditions that differ from the terms and conditions set
forth herein, the terms and conditions set forth in such employment or
consulting agreement shall control.
5
<PAGE>
EXHIBIT 7.3
-----------
BCI LOAN AGREEMENT
------------------
<PAGE>
SECURED LOAN AGREEMENT
This secured loan agreement (the "Agreement") is made and entered into
this ____ day of February, 1995 between Progressive Bagel Concepts, Inc. a
Delaware corporation (the "Company"), and Boston Chicken, Inc., a Delaware
corporation ("Boston Chicken").
RECITALS
--------
The Company desires to borrow up to $80,000,000 from Boston Chicken in
order to provide funds for development of retail food service outlets
specializing in the sale of bagels and bagel related products (the "Stores"),
and Boston Chicken has agreed to make such loan to the Company, upon the terms
and subject to the conditions set forth herein.
COVENANTS
---------
In consideration of the mutual representations, warranties, and covenants
set forth herein, and in consideration of any advances made hereunder to or for
the benefit of the Company by Boston Chicken, the parties hereto agree as
follows:
ARTICLE I
THE LOAN
--------
1.1 The Loan; Promissory Note. Boston Chicken agrees, on the terms
-------------------------
and subject to the conditions hereinafter set forth, including, but not limited
to the limitation on the amount available from time to time to be borrowed set
forth in Section 1.2 hereto, to advance at any time and from time to time during
the period commencing on the date hereof and ending on March ___, 1998 (the
"Draw Loan Termination Date"), amounts requested by the Company in an aggregate
principal amount not to exceed $80,000,000 (the "Loan"), in integral multiples
of $100,000. Each advance of the Loan (an "Advance") shall be made by wire
transfer of Boston Chicken to the account of the Company or by regular check of
Boston Chicken payable to the Company and forwarded to the Company by overnight
air express to its address as set forth herein for delivery on the next regular
business day. The Loan shall be evidenced by a promissory note (the "Note") of
even date herewith in the form attached hereto as Exhibit A.
1.2 Maximum Principal Balance. The aggregate outstanding principal
-------------------------
balance of the Loan shall not exceed the following amounts at any time: (a)
$20,000,000 from the date hereof until the Company notifies Boston Chicken that
it has 40 Stores open and conducting business, (b) $40,000,000 from the date the
Company opens its 40th Store until the Company notifies Boston Chicken that it
has 80 Stores open and conducting business, (c) $60,000,000 from the date the
Company opens its 80th Store until the Company notifies Boston Chicken that it
has
<PAGE>
120 Stores open and conducting business, and (d) $80,000,000 at any time
thereafter, less, in each instance, the principal amount of conversions under
Section 1.7 and option exercises under Section 1.8 ("Maximum Principal
Balance").
1.3 The Loan Account. Boston Chicken shall maintain a loan account
----------------
on its books in which shall be recorded all advances made by Boston Chicken to
the Company pursuant to this Agreement, and all payments made by the Company
with respect to the Loan; provided, however, that failure to maintain such
account or record any advances therein shall not relieve the Company of its
obligations to repay the outstanding principal amount of the Loan, all accrued
interest thereon, and any amount payable with respect thereto in accordance with
the terms of this Agreement and the Note.
1.4 Interest Rate and Payment. (a) Interest shall accrue daily on
-------------------------
the aggregate outstanding principal balance of the Loan, for the period
commencing on the date the Loan is made until the Loan is paid in full, at a per
annum rate equal to the rate designated and announced by Bank of America
Illinois or its successor in interest (the "Bank") from time to time as its
"reference rate" in effect at its principal office in Chicago, Illinois, plus
1%. The interest rate shall be adjusted, from time to time, on the same day on
which the Bank adjusts its "reference rate." As of the date of this Agreement,
the Bank's reference rate is ___%. Interest on the outstanding principal amount
of the Loan shall be payable in arrears on the dates set forth herein and at
maturity (whether at stated maturity, by acceleration or otherwise).
(b) During the Interest Payment Period (as defined below) the
Company shall pay to Boston Chicken interest on the outstanding principal
balance of the Loan on the first day of each Retail Period, commencing on the
first day of the Retail Period immediately following the first Retail Period in
which the Company initially draws on the Loan under this Agreement through and
including the Draw Loan Termination Date (the "Interest Payment Period").
Thereafter the Company shall pay principal and interest as provided in Section
1.5.
(c) Interest shall be computed on the basis of a 360-day year
and the actual number of days elapsed.
(d) Any principal payment due under the Note not paid when due,
whether at stated maturity, by notice of repayment, by acceleration or
otherwise, shall, to the extent permitted by applicable law, thereafter bear
interest (compounded monthly and payable upon demand) at a rate which is 2% per
annum in excess of the rate of interest otherwise payable under this Agreement
in respect of such principal amount until such unpaid amount has been paid in
full (whether before or after judgment).
1.5 Repayment of the Loan. If not earlier paid with the consent of
---------------------
Boston Chicken, or if not accelerated for payment, the outstanding principal
amount of the Loan shall, at the close of business on the Draw Loan Termination
Date, thereafter become an amortized term Loan payable as follows: the principal
balance of the Loan shall be payable to Boston Chicken in
2
<PAGE>
65 substantially equal periodic installments of principal (the amount of which
periodic installments of principal shall be determined at the close of business
on the Draw Loan Termination Date based on a schedule amortizing such
outstanding principal balance of the Loan as of such date in 130 substantially
equal periodic installments of principal), plus accrued but unpaid interest, on
the first day of each of Boston Chicken's 13 consecutive four-week accounting
periods used for accounting purposes (each a "Retail Period"), commencing on the
first day of the fifth Retail Period in Boston Chicken's fiscal year 1998 and
continuing until the first day of the fifth Retail Period in Boston Chicken's
fiscal year 2003, when the entire remaining principal balance of the Loan and
all interest accrued thereon shall be due and payable.
1.6 Term of this Agreement. This Agreement shall be effective as of
----------------------
the date of its execution (the "Closing Date") and shall continue in effect
until the last to occur of (i) the exercise, expiration, or other termination of
all remaining option rights granted in Section 1.8 hereof, (ii) the exercise,
expiration, or other termination of all of the remaining conversion rights
granted in Section 1.7 hereof, (iii) the date on which there is no amount
(principal or interest) remaining outstanding under the Note and (iv) the date
on which Boston Chicken no longer has an obligation to make any advances
hereunder if the Company were to make a valid request for an advance pursuant to
and in accordance with Article III hereof.
1.7 Convertibility. (a) On the terms and subject to the conditions
--------------
set forth in the Note, any portion of the outstanding principal balance of the
Loan is convertible at the election of the holder of the Note into shares of
common stock of the Company, $.01 par value per share, at any time and from time
to time after the earlier of any acceleration of the Loan or March 15, 1996 [12
1/2 months after Closing Date] and up to the later of the date on which the
Company has properly repaid the outstanding principal balance of the Loan and
all accrued interest thereon in full or the first day of the eleventh Retail
Period in Boston Chicken's fiscal year 2003. Upon such conversion, that portion
of principal so converted shall be deemed to be paid in full upon the delivery
to the holder of the Note of a certificate or certificates representing the
proper number of shares of common stock of the Company to be issued to the
holder of the Note upon such conversion. Conversion of any portion of the
principal balance of the Loan shall not relieve the Company of its obligation to
pay any accrued but unpaid interest on the portion of the principal balance of
the Loan so converted. In no event shall interest be convertible into shares of
common stock in the Company.
(b) Upon the conversion under this Section 1.7, Boston Chicken's
obligation to make additional advances to the Company under this Agreement shall
be reduced by an amount equal to such conversion amount.
1.8 Option. (a) Boston Chicken shall have the option, at any time
------
and from time to time after the earlier of the acceleration of the Loan or March
15, 1996 [12 1/2 months after Closing Date] and up to the later of the date on
which the Company has properly repaid the outstanding principal balance of the
Loan and all accrued interest thereon in full or the first day of the eleventh
Retail Period in Boston Chicken's fiscal year 2003 to purchase at the Conversion
Price (as defined in the Note) up to that number of shares of common stock of
the Company equal
3
<PAGE>
to the (i) the Option Amount, divided by (ii) the Conversion Price (the
"Option"). For purposes of this Section 1.8, the Option Amount shall mean (x)
the Maximum Principal Balance, less (y) the sum of (1) the dollar amount of the
outstanding principal balance of the Loan (whether such amount is the result of
a reduction in principal due to the repayment of the Loan or the failure by the
Company to request advances hereunder or otherwise) and (2) the dollar amount of
all previous conversions under Section 1.7 hereof and exercises of the Option
under this Section 1.8, in each case on the date Boston Chicken notifies the
Company of its intention to exercise the Option.
(b) Upon exercise of any portion of the Option under this
Section 1.8, Boston Chicken's obligations to make additional advances to the
Company under this Agreement shall be reduced by an amount equal to the amount
of such option exercise.
1.9 One Obligation. All advances made hereunder, and all interest
--------------
accrued thereon, shall constitute one obligation of the Company secured by the
security interests granted by this Agreement and by all other security
interests, liens, claims, and encumbrances from time to time hereafter granted
to Boston Chicken by the Company.
1.10 Credit Resources. The Company acknowledges that Boston Chicken
----------------
has informed it that Boston Chicken does not currently and may not from time to
time in the future have cash, cash equivalents, and credit resources sufficient
to permit Boston Chicken to necessarily make all requested advances under this
Agreement and all other similar agreements with financed area developers and
franchisees while maintaining sufficient working capital for Boston Chicken's
operating needs, and the Company agrees that in the event Boston Chicken shall
fail to fund the Loan as and to the extent required hereby and such failure
shall constitute a breach of this Agreement (a "Funding Default"), such Funding
Default shall not (a) constitute fraud (by any person or entity, including
Boston Chicken and its Successors and Assignees) and (b) give rise to any
liability of any person or entity (other than Boston Chicken and its Successors
and Assignees) in any other tort, and the Company further agrees that it shall
be limited to its remedies in contract and in tort as specified in clause (b)
above against Boston Chicken. Boston Chicken and the Company agree that this
Section 1.10 shall not diminish or otherwise affect in any way the amount of
damages for which Boston Chicken may be liable to the Company in a contract or
non-fraud tort action for a Funding Default.
1.11 Payment Method. All payments to be made by the Company hereunder
--------------
shall be made in lawful money of the United States, in immediately available
funds, without set off, counterclaims, deduction or withholding of any type.
ARTICLE II
SECURITY AND COLLATERAL
-----------------------
2.1 Security Interest. To secure payment and performance of the
-----------------
Company's obligations hereunder and under the Note, and any and all other
indebtedness, obligations or
4
<PAGE>
liabilities of any kind of the Company to Boston Chicken, whether now existing
or hereafter arising, direct or indirect, absolute or contingent, joint and/or
several, arising by operation of law or otherwise, the Company hereby grants to
Boston Chicken a continuing security interest in and to the following property
and interests in property, whether now owned or hereafter acquired by the
Company and wheresoever located:
(a) all of the Company's real estate, accounts, equipment
(including, but not limited to machinery, furniture, fixtures, tools, vehicles,
and other tangible property), inventory, leasehold improvements, contract
rights (including its rights as lessee under all leases of real property),
general intangibles, deposit accounts, tax refunds, chattel paper, instruments,
notes, letters of credit, documents, and documents of title, capital stock or
other ownership interests of all Subsidiaries (as defined in Section 6.11
hereof), but specifically excluding the BCI Common Stock (defined in Section 5.6
hereof);
(b) all insurance proceeds of or relating to any of the
foregoing.
(c) all of the Company's books, records, and computer programs
and dates relating to any of the foregoing; and
(d) all accessories and additions to, substitutions for, and
replacements, products, and proceeds of, and of the foregoing (all of the
foregoing, and all of the security described in Sections 2.2 and 2.3, being
referred to collectively as the "Collateral").
2.2 Pledge of Stock. To evidence the security interest granted by
---------------
the Company to Boston Chicken under Section 2.1 in all capital stock of the
Subsidiaries of the Company existing on the date of this Agreement, the Company
shall execute a subsidiary stock pledge agreement substantially in the form
attached hereto as Exhibit C (the "Pledge Agreement").
2.3 Subsidiary Security Documents. (a) To secure the obligations of
-----------------------------
the Company hereunder and under the Note and all other obligations of the
Company to Boston Chicken, the Company shall cause each Subsidiary of the
Company existing on the date of this Agreement to execute and deliver to Boston
Chicken a security agreement substantially in the form attached hereto as
Exhibit D (the "Subsidiary Security Agreement").
(b) The Company shall cause each person or entity becoming a
Subsidiary of the Company form time to time to execute and deliver to Boston
Chicken, within five days after such person or entity becomes a Subsidiary, a
security agreement substantially in the form attached hereto as Exhibit D and
modified appropriately, together will all financing statements and other related
documents (including real estate mortgages) as Boston Chicken may request and
such closing documents with respect to such Subsidiary of the type described in
Article VII as Boston Chicken may request, sufficient to grant to Boston Chicken
liens and security interests in all assets of each Subsidiary of the type
described in Section 2.1. The Company shall from time to time execute and
deliver to Boston Chicken, within five days after a person or entity becomes a
Subsidiary of the Company, a stock pledge agreement substantially in the form of
Exhibit C and
5
<PAGE>
modified appropriately, pursuant to which the Company shall grant a security
interest in favor of Boston Chicken in and to all shares of capital stock of
such Subsidiary, together with the stock certificates evidencing such stock
ownership and accompanied by a stock power executed in blank. Any such pledge
agreements executed by the Company and security agreements and other documents
executed by a Subsidiary of the Company from time to time shall be included in
the term "Security Instruments" used herein and the stock and assets of such
Subsidiary covered by such Security Instruments shall be included in the term
"Collateral" used herein.
2.4 Preservation of Collateral and Perfection of Security Interests
---------------------------------------------------------------
Therein. (a) The Company shall execute and deliver to Boston Chicken,
- -------
concurrently with the execution of this Agreement, and shall execute and deliver
or cause any Subsidiary of the Company to execute and deliver to Boston Chicken
at any time or times hereafter at the request of Boston Chicken or the Agent (as
defined below), all financing statements or other documents, including mortgages
on real estate owned by the Company or its Subsidiaries and Subsidiary security
agreements (the "Security Instruments") (and pay the cost of filing or recording
the same in all public offices deemed necessary by Boston Chicken), as Boston
Chicken or the Agent may request, in forms satisfactory to Boston Chicken, and
take all further action that Boston Chicken or the Agent may request, or which
may be reasonably necessary or desirable, to perfect and keep perfected the
security interest in the Collateral granted by the Company to Boston Chicken, to
create and perfect the security interests in the assets of any Subsidiaries of
the Company provided in Section 2.3 hereof, or otherwise to protect and preserve
the Collateral and Boston Chicken's security interest therein. Should the
Company fail to do so, Boston Chicken is authorized to sign any such Security
Instruments as the Company's agent.
(b) The Company will furnish to Boston Chicken from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Boston Chicken may
reasonably request, all in reasonable detail.
(c) The Company shall notify Boston Chicken, within five days
after the occurrence thereof, of the acquisition of any property by the Company
that is not subject to the existing liens and security interests, in favor of
Boston Chicken, of any person or entity's becoming a Subsidiary, and of any
other event or condition that may require additional action of any nature in
order to create, preserve, or perfect the liens and security interests of Boston
Chicken.
(d) The Company shall, and shall cause each Subsidiary to, cause
all tangible Collateral to be maintained and preserved in the same condition,
repair and working order as when new, ordinary wear and tear excepted, and in
accordance with any manufacturer's manual.
2.5 Alternate Security and Pledge Agreements. If requested by Boston
----------------------------------------
Chicken in order for the transactions contemplated by this Agreement to comply
with the limitations and restrictions of that certain Amended and Restated
Credit Agreement, dated as of
6
<PAGE>
May 18, 1994 among Boston Chicken, the lenders named therein, and the Bank, as
agent for the lenders ("Agent"), as it may be amended from time to time (the "BC
Credit Line"), or to obtain a waiver therefrom, the Company hereby agrees that a
security interest as referred to in Section 2.1 hereof, a pledge of shares as
referred to in Section 2.2 hereof, and the additional security interests
described in Sections 2.3 and 2.4 hereof may be granted directly to the Agent
in lieu of or in addition to such grants to Boston Chicken, in which event
appropriate alterations may be made to this Article II and to the form of Pledge
Agreement, and references herein to such security, pledges, and deliveries
thereof to Boston Chicken may be deemed to refer to the Agent, as appropriate.
ARTICLE III
CONDITIONS OF ADVANCES
----------------------
Notwithstanding any other provisions contained in this Agreement, the
making of any Advance (including the initial Advance) provided for in Section
1.1 shall be conditioned upon the following:
3.1 The Company's Written Request. Boston Chicken shall have
-----------------------------
received, at least five (5) business days prior to the day an Advance is to be
made hereunder, (i) a written request from an authorized officer of the Company
for an Advance in a specific amount, (ii) a certificate of the Company
in the form attached hereto as Exhibit B, which shall be signed by the
president, chief financial officer or other authorized officer of the Company,
(iii) copies of all other documents required to be delivered to Boston Chicken
under section 5.1 below or otherwise reasonably requested.
3.2 No Material Adverse Change. No material adverse change, as
--------------------------
determined by Boston Chicken in its sole discretion, in the financial condition,
results of operations, assets, or business of the Company, shall have occurred
at any time or times subsequent to the date hereof.
3.3 No Default. Neither a Default (as that term is defined in Article
----------
VIII hereof) nor any event which, through the passage of time or the service of
notice or both, would mature into a Default (an "Event of Default") shall have
occurred and be continuing.
3.4 Representation and Warranties. The representations and warranties
-----------------------------
contained in Article IV hereof and in the Pledge Agreement and the other
Security Instruments shall be true and correct on and as of the date such
Advance is made.
3.5 Service Agreements. Each of the Service Agreements (as defined in
------------------
Section 7.3(c) hereof) between the Company and Boston Chicken shall be in full
force and effect, and no default shall have occurred or notice of termination
shall have been given thereunder.
3.6 Other Requirements. Boston Chicken shall have received, in form
------------------
and substance satisfactory to it, all certificates, consents, affidavits,
schedules, instruments, and other
7
<PAGE>
documents which the Company is obligated to provide to Boston Chicken hereunder
or which Boston Chicken may at any time reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants that:
4.1 Financial Statements. The financial statements to be
--------------------
furnished to Boston Chicken or the Agent in accordance with Section 5.1 below
will be prepared in conformity with generally accepted accounting principles
consistently applied throughout the periods involved, and will fairly present
the financial condition of the Company and its Subsidiaries at the dates thereof
and its results of operations for the periods indicated.
4.2 Capital Stock. The Company's authorized capital stock
-------------
(subject to increases in accordance with Section 5.8 hereof) consists solely of
1,200,000 shares of capital stock, of which 1,000,000 shares are common stock,
$.01 par value per share, and 200,000 shares are preferred stock, $.01 par value
per share. As of the date hereof, of the Company's authorized capital stock, (i)
____________ shares of common stock are issued and outstanding, (ii) ___________
shares of common stock are reserved for issuance upon the conversion of the Note
or exercise of the Option, and (iii) ____________ shares of common stock are
reserved for issuance upon the exercise of options granted under the Company's
1995 Employee Stock Option Plan. Such issued and outstanding shares are fully
paid and non-assessable and are free and clear of all liens, claims, and
encumbrances of any kind, other than those arising hereunder. The shares to be
issued and delivered to the holder of the Note upon any conversion of the Note
or exercise of the Option, when so issued and delivered, will be fully paid and
non-assessable and free and clear of all liens, claims, and encumbrances of any
kind. Except for options granted under the Company's 1995 Employee Stock Option
Plan and except as otherwise provided herein and in the Note, there are no
outstanding options, warrants, rights, contracts, or agreements of any kind for
the issuance or sale of any shares of capital stock of the Company or for the
issuance or sale of any other securities or obligations of the Company or for
the purchase by the Company of any of its shares.
4.3 No Material Adverse Change. Since the date hereof,
--------------------------
there has been no material adverse change in the financial condition, results of
operations, assets, or business of the Company and its Subsidiaries, taken as a
whole.
4.4 No Pending Material Litigation or Proceedings. There are
---------------------------------------------
no actions, suits, investigations or proceedings pending or, to the knowledge of
the Company or its Subsidiaries, threatened against or affecting the Company or
its Subsidiaries or the business or properties of the Company or its
Subsidiaries, in any court or before or by any governmental department,
commission, board, agency or instrumentality, or any arbitrator. Neither the
8
<PAGE>
Company nor any of its Subsidiaries is in default with respect to any order,
writ, injunction, or decree of any court or arbitrator or governmental agency.
4.5 Valid Organization; Due Authorization; Valid and Binding
--------------------------------------------------------
Agreement. (a) The Company is a corporation duly organized, validly existing,
- ---------
and in good standing under the laws of the State of Delaware, with corporate
power and authority to enter into and perform this Agreement and to issue the
Note and incur the indebtedness to be evidenced thereby. The Company is
qualified to do business as a foreign corporation and is in good standing in the
States of Utah and Colorado and in each jurisdiction in which failure to so
qualify could have a material adverse affect on its property, business,
operations, or prospects.
(b) This Agreement, the Note and the Service Agreements have
each been duly authorized by all required corporate action on the part of the
Company, and each of this Agreement, the Note and the Service Agreements has
been duly executed and delivered by the Company and constitutes the legal,
valid, and binding obligation of the Company enforceable in accordance with its
terms .
(c) The execution and delivery of this Agreement and the Note
and the performance by the Company of its obligations hereunder and thereunder
are not in contravention of any law, rule or regulation, including without
limitation Regulation G, T, U, or X of the Board of Governors of the Federal
Reserve System, and will not conflict with or result in any breach of any of the
provisions, or constitute a default under or result in the creation or
imposition of any lien or encumbrance (except as expressly provided herein) upon
any of the property of the Company pursuant to any of the provisions of the
Certificate of Incorporation or bylaws of the Company or any agreement or
instrument to which the Company is a party or by which it or its assets is
bound.
(d) No consent, authorization, approval, or other action by, and
no notice to or filing with, any governmental authority or regulatory body or
any other person, which has not been obtained or taken, is required for the
execution and delivery of, or the performance by the Company of its obligations
under, this Agreement or the Note.
4.6 Conduct of Business. Since their inception, the Company and
-------------------
each Subsidiary has conducted its business and operations in a manner consistent
with that of a multi-unit food service establishment and has not engaged in any
business other than the business of establishing, opening, and operating Stores.
4.7 Absence of Material Liabilities. Neither the Company nor any
-------------------------------
Subsidiary has any material liabilities or obligations, either accrued,
absolute, contingent, or otherwise, except (a) as set forth in its most recent
unaudited balance sheet, (b) normal liabilities and obligations incurred in the
ordinary course of business since the date of its most recent unaudited balance
sheet, and (c) obligations under contracts and agreements entered into in the
ordinary course of business.
9
<PAGE>
4.8 Tax Matters. The Company and its Subsidiaries have filed all
-----------
federal, state, and local tax returns which are required to be filed, except for
extensions duly obtained, and has paid, or made provisions for the payment of,
all taxes which have become due pursuant to such returns or pursuant to any
assessment received by the Company or any Subsidiary, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided.
4.9 Ownership of Collateral; Security Interest Priority. At the time
---------------------------------------------------
any Collateral becomes subject to a security interest of Boston Chicken
hereunder, unless Boston Chicken shall otherwise consent, (a) the Company or a
Subsidiary shall be the lawful owner of such Collateral and have the right and
authority to subject the same to the security interest of Boston Chicken, (b)
none of the Collateral shall be subject to any lien or encumbrance other than
that in favor of Boston Chicken, and (c) there shall be no effective financing
statement covering any of the Collateral on file in any public office, other
than in favor of Boston Chicken. This Agreement creates in favor of Boston
Chicken a valid and perfected first-priority security interest in the Collateral
enforceable against the Company or its Subsidiary, as the case may be, and all
third parties and secures the payment of the Company's obligations hereunder and
under the Note, and all other obligations of the Company to Boston Chicken,
whether now existing or hereafter arising, and all filings and other actions
necessary or desirable to create, preserve, or perfect such security interest
have been duly taken. Notwithstanding the foregoing provisions of this Section
4.9 clause (b) and (c) and the immediately preceding Sentence of this Section
4.9 shall not be inaccurate by reason of any purchase money security interest
(including pursuant to a financing lease) in any equipment for the Company's
Stores.
4.10 Location of Offices, Records, and Facilities. The Company's
--------------------------------------------
chief executive office and chief place of business and the office where the
Company keeps its records concerning its accounts, contract rights, chattel
papers, instruments, general intangibles, and other obligations arising out of
or in connection with the operation of its business or otherwise
("Receivables"), and all originals of all leases and other chattel paper which
evidence Receivables, are located in the State of Colorado, at the address of
the Company set forth in Section 9.4 hereof (as such address may be changed from
time to time in accordance therewith). The federal tax identification number of
the Company is ____________. The name of the Company is "Progressive Bagel
Concepts, Inc." and the Company operates under no other names other than
["Brackman Bros. Bagels"].
4.11 Location of Inventory, Fixtures, Machinery, and Equipment. (a)
---------------------------------------------------------
All Collateral consisting of inventory, fixtures, machinery, or equipment is
located in the States of Utah and Colorado and at no other locations without the
prior written consent of Boston Chicken.
(b) If the Collateral described in clause (a) is kept at leased
locations, the Company has used its best efforts to obtain appropriate landlord
lien waivers or subordination satisfactory to Boston Chicken, unless such has
been waived in writing by Boston Chicken for the particular instance.
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(c) If the Collateral described in clause (a) is warehoused, the
Company has sent appropriate warehousemen's notices, each satisfactory to Boston
Chicken, unless such has been waived by Boston Chicken for the particular
instance.
4.12 Investment Company Act. The Company is not an "investment
----------------------
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
4.13 Public Utility Holding Company Act. The Company is not a
----------------------------------
"holding company", or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.14 Subsidiaries. Schedule 4.14 hereto correctly sets forth the
------------
corporate name, jurisdiction of incorporation and ownership of each Subsidiary
of the Company. Each such Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to do business in each additional
jurisdiction where such qualification is or may be necessary under applicable
law. Each Subsidiary of the Company has all requisite corporate power to own or
lease the properties used in its business and to carry on its business as now
being conducted and as proposed to be conducted. All outstanding shares of
capital stock of each class of each Subsidiary of the Company have been validly
issued and are fully paid and nonassessable and are owned, beneficially and of
record, by the Company free and clear of any liens, except liens in favor of
Boston Chicken.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
The Company covenants and agrees that so long as this Agreement remains in
effect:
5.1 Financial Statements. (a) The Company shall cause to be
--------------------
furnished to Boston Chicken and, at Boston Chicken's request, to the Agent: (i)
as soon as practicable and in any event within 20 days after the end of each
interim calendar quarter, statements of income and cash flows of the Company and
its Subsidiaries for such period and for the period from the beginning of the
then current fiscal year to the end of such quarter and a balance sheet of the
Company and its Subsidiaries as of the end of such quarter, setting forth in
each case, in comparative form, figures for the corresponding periods in the
preceding fiscal year, certified as accurate by the chief financial officer or
treasurer of the Company, subject to changes resulting from normal, recurring
year-end adjustments; (ii) as soon as practicable and in any event within 60
days after the end of each fiscal year, statements of income and cash flows of
the Company and its Subsidiaries for such year, and a balance sheet of the
Company and its Subsidiaries as of the end of such year, setting forth in each
case, in comparative form, corresponding figures for the preceding fiscal year
and as of the end of the preceding fiscal year, audited by independent
11
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certified public accountants selected by Boston Chicken and reasonably
satisfactory to the Company; and (iii) as soon as practicable (but in any event
not more than five business days after the president or chief financial officer
of the Company obtains knowledge of the occurence of an event or the existence
of a circumstance giving rise to an Event of Default or a Default), notice of
any and all Events of Default of Defaults hereunder.
(b) All financial statements delivered to Boston Chicken, and if
applicable, the Agent pursuant to the requirements of Section 5.1(a) shall be
prepared in accordance with generally accepted accounting principles
consistently applied. Together with each delivery of financial statements
required by Section 5.1(a), the Company shall deliver to Boston Chicken an
officer's certificate stating that there exists no Default or Event of Default,
or, if any Default or Event of Default exists, specifying the nature thereof,
the period of existence thereof and what action the Company proposes to take or
has taken with respect thereto. Together with each delivery of financial
statements required by Section 5.1(a)(ii) above, the Company shall deliver to
Boston Chicken a certificate of the accountants who performed the audit in
connection with such statements stating that in making the audit necessary to
the issuance of a report on such financial statements, they have obtained no
knowledge of any Default or Event of Default, or, if such accountants have
obtained knowledge of a Default or Event of Default, specifying the nature and
period of existence thereof. Such accountants shall not be liable by reason of
any failure to obtain knowledge of any Default or Event of Default which would
not be disclosed in the ordinary course of an audit. The Company authorizes
Boston Chicken to discuss the financial condition of the Company with the
Company's independent public accountants and agrees that such discussion or
communication shall be without liability to either Boston Chicken or the
Company's independent public accountants.
5.2 Inspection. Boston Chicken, or any person designated from time to
----------
time by Boston Chicken, shall have the right, from time to time hereafter, to
call at the Company's or its Subsidiaries' place or places of business during
ordinary business hours, and, without hindrance or delay, (a) to inspect, audit,
check, and make copies of and extracts from the Company's and its Subsidiaries'
books, records, journals, orders, receipts, and any correspondence and other
data relating to the business of the Company or its Subsidiaries or to any
transactions between the parties hereto, and (b) to discuss the affairs,
finances, and business of the Company and its Subsidiaries with the officers of
the Company and its Subsidiaries.
5.3 Conduct of Business. (a) The Company shall, and shall cause each
-------------------
Subsidiary to (i) maintain its corporate existence and qualification to do
business in good standing in each jurisdiction where the failure to be so
qualified would have a material adverse effect on the financial condition of the
Company or its Subsidiaries, (ii) maintain in full force and effect all
licenses, bonds, franchises, leases, patents, contracts, and other rights
necessary to the conduct of its business, and (iii) comply with all applicable
laws and regulations of any federal, state, or local governmental authority,
including those relating to environmental matters, labor and employment laws and
employee benefit matters.
12
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(b) The Company shall, and shall cause its Subsidiaries to,
duly pay and discharge (i) all lawful claims, whether for labor, materials,
supplies, services, or anything else, which might or could, if unpaid, become a
lien or charge upon its property or assets, unless and to the extent only that
the validity thereof is being contested in good faith and by such appropriate
proceedings, (ii) all of its trade bills when due in accordance with their
original terms, and (iii) all taxes.
(c) The Company shall, and shall cause each Subsidiary to,
conduct its business and operations in a manner consistent with that of a
[multi-unit food service establishment], and shall not, and shall not permit any
Subsidiary to, engage in any business other than the business of establishing,
opening, and operating Stores in the States of Utah and Colorado.
5.4 Insurance. (a) The Company shall keep and maintain, and shall
---------
cause its Subsidiaries to keep and maintain, at their sole cost and expense, (i)
insurance on their assets for at least 80% of the full replacement value thereof
against loss or damage by fire, theft, explosion, and all other hazards and
risks ordinarily insured against by other owners or users of such properties
in similar businesses; and (ii) public liability insurance relating to the
Company's and its Subsidiaries' ownership and use of their assets.
(b) All such policies of insurance shall be in such form and in
such amounts as is customary in the case of other owners or users of like
properties in similar businessess, with insurers as shall be reasonably
satisfactory to Boston Chicken. Upon demand, the Company shall deliver to Boston
Chicken the original (or certified) copy of each policy of insurance, and
evidence of payment of all premiums for each such policy. Such policies of
insurance (except those of public liability) shall contain an endorsement in
form and substance acceptable to Boston Chicken, showing Boston Chicken as an
additional insured. Such endorsement, or an independent instrument furnished to
Boston Chicken, shall provide that all insurance companies will give Boston
Chicken at least 30 days prior written notice before any such policy or policies
of insurance shall be altered or canceled. The Company and each Subsidiary
hereby directs all insurers under such policies of insurance (except those of
public liability) to pay all proceeds payable thereunder for claims in excess of
the aggregate amount of $50,000 directly to Boston Chicken, and the Company
irrevocably appoints Boston Chicken (and all officers, employees, or agents
designated by Boston Chicken), as the Company's and the Subsidiaries' true and
lawful agent (and attorney-in-fact) for the purpose of endorsing the name of the
Company or such Subsidiary on any check, draft, instrument, or other item of
payment for such proceeds. Any proceeds received by Boston Chicken shall be
applied to the Company's obligations hereunder, and any overage shall be paid to
the Company. The Company and each Subsidiary irrevocably appoints Boston
Chicken, from and after a Default or an Event of Default, as the Company's and
each Subsidiary's true and lawful agent (and attorney-in-fact) for the purpose
of making, settling, and adjusting claims under such policies of insurance and
for making all determinations and decisions with respect to such policies of
insurance. In the event the Company or any Subsidiary at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above or to pay any premium in whole or in part relating
13
<PAGE>
thereto, then Boston Chicken, without waiving or releasing any Default or Event
of Default hereunder, may at any time or times thereafter (but shall be under no
obligation to do so) obtain and maintain such policies of insurance and pay such
premium and take any other action with respect thereto which Boston Chicken
deems advisable. All sums so disbursed by Boston Chicken, including reasonable
attorneys' fees, court costs, expenses, and other charges relating thereto,
shall be part of the Company's obligations hereunder, payable by the Company to
Boston Chicken on demand.
5.5 Notice of Suit or Adverse Change in Business. The Company shall,
--------------------------------------------
as soon as possible, and in any event within five business days after the
Company learns of the following, give written notice to Boston Chicken of (a)
any material proceeding(s) being instituted or threatened to be instituted by or
against the Company or any Subsidiary in any federal, state, or local court or
before any commission or other regulatory body (federal, state, or local), and
(b) any material adverse change in the financial condition, results of
operations, business, or assets of the Company or any Subsidiary.
5.6 Use of Proceeds. Except as otherwise authorized in writing by
---------------
Boston Chicken, the Company shall use $7,500,000 of the initial Advance of Loan
proceeds to pay the purchase price for __________ shares of Boston Chicken
common stock (the "BCI Common Stock"), which BCI Common Stock will be
immediately exchanged by the Company for _______ shares of the Company's own
common stock, and shall use the balance of the Loan proceeds solely to finance
the purchase, design, construction, and equipment of Stores and for general
working capital. The Company will not, directly or indirectly, use any part of
such proceed for the purpose of purchasing or carrying any margin stock within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System or to extend credit to any person for the purpose of purchasing or
carrying any such margin stock.
5.7 Reservation of Common Stock. The Company covenants that it will
---------------------------
at all times reserve and keep available, solely for the purpose of issuance upon
conversion of the Note or exercise of the Option, or both, such number of shares
of its common stock as would be issuable upon the conversion of, or exercise of
the Option for, the Maximum Principal Balance of the Loan. The initial
Conversion Price (subject to adjustment as provided in the Note) is $____ per
share, which equals a conversion rate (subject to adjustment as provided in the
Note) of one share of Company common stock for each $____ principal amount of
the Loan. The Company covenants that if any shares of its common stock required
to be reserved for issuance upon conversion of the Note or exercise of the
Option require registration with or approval of any government authority under
any Federal or state law before such shares may be issued upon such conversion
or exercise, the Company will, at its expense and as expeditiously as possible,
cause such shares to be duly registered or approved, as the case may be.
5.8 Rights Regarding Future Financings. If, at any time after the
----------------------------------
Closing Date through the later of the date on which the outstanding principal
balance of the Loan and all accrued interest thereon is paid in full or the
expiration of the term of the Option in accordance with the provisions of
Section 1.8 hereof, advances of debt and purchases of equity by Boston
14
<PAGE>
Chicken under this Agreement aggregate at least $__________, and the Company
determines that it requires additional financing (whether debt or equity)
(including, but not limited to, all capital-type transactions and sale/leaseback
transactions), it agrees (a) to negotiate in good faith with Boston Chicken for
a period of 60 days with regard to any portion or the entire amount (at the
option of Boston Chicken) of such financing prior to negotiating with any other
entity with regard thereto, (b) in the event the Company has engaged in good
faith negotiations under clause (a) of this Section 5.8 and such negotiations
have been unsuccessful, to notify Boston Chicken of the existence of any other
financing arrangement it proposes to consummate and the terms and conditions
thereof and grant to Boston Chicken a right of first refusal with respect to
such financing on the same terms and subject to the same conditions contained
therein and upon receipt of such notice (setting forth in detail all relevant
terms and conditions of such financing), Boston Chicken shall have 30 days
thereafter in which to agree to assume all of the financing on the same terms
and conditions, and (c) with respect to any financing other than a pure debt
financing in which the debt instrument to be offered has no equity-type
features, to grant to Boston Chicken a preemptive right to participate therein
on a fully diluted basis for a period of 60 days. As used herein the term "fully
diluted basis" shall mean Boston Chicken's ability to maintain the same
percentage equity interest in the Company (calculated by including as
outstanding the shares of common stock of the Company subject to all outstanding
options and warrants, including shares of common stock which Boston Chicken then
has a right to purchase hereunder either through conversion pursuant to Section
1.7 or the exercise of its Option pursuant to Section 1.8 hereof) after such
financing is completed as it had prior to such financing. Boston Chicken
acknowledges that the right of first negotiation as set forth in clause (a)
above does not preclude the Company from making inquiries in the relevant
marketplace to obtain information regarding the terms of a financing solely for
purposes of comparison. The failure by Boston Chicken to exercise its rights
under any provision of this Section 5.8 within the time period specified shall
be deemed to constitute a waiver of its rights under such provision.
5.9 BC Credit Line Compliance. The Company agrees that, at the time
-------------------------
that it becomes a "Subsidiary" (as defined in the BC Credit Line), if ever, it
will not incur any indebtedness or create any lien which would cause Boston
Chicken to be in default of the BC Credit Line.
5.10 BC Credit Line Representations. The Company agrees that, at the
------------------------------
time that it becomes a "Subsidiary" (as defined in the BC Credit Line), if ever,
it will conduct its business and take such action (or refrain from taking such
action) as cause to be true and correct at all relevant times the
representations or warranties applicable to a "Subsidiary" contained in the BC
Credit Line.
5.11 Company Subsidiaries. Each corporation or other entity becoming
--------------------
a Subsidiary of the Company after the date hereof will be a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation and will be duly qualified to do business in each
additional jurisdiction where such qualification is or may be necessary under
applicable law. Each Subsidiary of the Company will have all requisite corporate
power to own or lease the properties used in its business and to carry on its
business as now being
15
<PAGE>
conducted and as proposed to be conducted. All outstanding shares of capital
stock or other units of ownership interest of each class of each Subsidiary of
the Company will be validly issued and will be fully paid and nonassessable and
will be owned, beneficially and of record, by the Company or another Subsidiary
of the Company or another Subsidiary of the Company free and clear of any liens.
5.12 Place of Business. The Company will provide Boston Chicken with
-----------------
60 days' prior written notice of any proposed change in the location of its
chief executive office. The Company shall not change its name without the prior
written consent of Boston Chicken.
5.13 Location of Inventory, Fixtures, Machinery, and Equipment. (a)
---------------------------------------------------------
All Collateral consisting of inventory, fixtures, machinery, and equipment shall
at all times be located in the States of Utah and Colorado and at no other
locations without the prior written consent of Boston Chicken.
(b) If the Collateral described in clause (a) is at any time
kept at leased locations, the Company shall use its best efforts to obtain
appropriate landlord lien waivers or subordination satisfactory to Boston
Chicken, unless such has been waived in written by Boston Chicken for a
particular instance.
(c) If the Collateral described in clause (a) is at any time
warehoused, the Company shall send appropriate warehousemen's notices, each
satisfactory to Boston Chicken, unless such has been waived by Boston Chicken
for the particular instance.
ARTICLE VI
NEGATIVE COVENANTS
------------------
The Company covenants and agrees that, so long as this Agreement
remains in effect (unless Boston Chicken shall give its prior written consent
thereto):
6.1 Guarantees; etc. The Company shall not, and shall not permit any
---------------
responsible for obligations of any other person, whether by agreement to
purchase the indebtedness of any other person or through the purchase of goods,
supplies, or services, or by agreement to maintain net worth, working capital,
or other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance, or loan for the purpose of paying or discharging
any indebtedness or obligation of such other person or otherwise, except
endorsements of negotiable instruments for collection in the ordinary course of
business.
6.2 Disposal of Property. The Company shall not, and shall not
--------------------
permit any Subsidiary to, sell, lease, transfer, or otherwise dispose of any of
its properties, assets, and rights (or agree to sell, lease, transfer, or
otherwise dispose of any of its properties, assets, and rights) (including the
Collateral) to any party except in the ordinary course of business.
16
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6.3 Compensation to Stockholders. Other than (a) reasonable
----------------------------
salaries and other normal benefits (including options pursuant to the 1995
Employee Stock Option Plan) to be paid to _____________________, which salaries
and benefits must be approved by Boston Chicken, and (b) amounts paid to Don
Colangelo pursuant to that certain Employment Agreement of even date herewith
(the "Colangelo Employment Agreement"), the Company shall not make any loans to,
or pay any compensation, bonuses, fees, options, or other amounts to any
stockholder or to any of the affiliates or immediate family members of any such
stockholder. The Company shall not, without the prior written consent of Boston
Chicken, amend its 1995 Employee Stock Option Plan or the Colangelo Employment
Agreement.
6.4 Dividends and Stock Redemptions. Other than the exchange of the
-------------------------------
BCI Common Stock for shares of the Company's stock contemplated by Section 5.6
hereof, the Company shall not, directly or indirectly, (a) redeem, purchase, or
otherwise retire any of its shares of capital stock, (b) declare or pay any
dividends in any fiscal year on any of its shares of capital stock or make any
distributions of or with respect to its shares of capital stock or (c) return
capital of the Company to its stockholders.
6.5 Additional Indebtedness. Except as provided in Section 5.8
-----------------------
hereof, the Company shall not, and shall not permit any Subsidiary to, incur
additional indebtedness in excess of $5,000 as to any one item and $50,000 in
the aggregate without the consent of Boston Chicken.
6.6 Mergers, Consolidations, Acquisitions, etc. The Company shall
------------------------------------------
not, and shall not permit any Subsidiary to (a) be a party to any consolidation,
reorganization, or merger; (b) sell or otherwise transfer any part of its assets
(except in the ordinary course of business and except as part of a financing as
to which Boston Chicken has waived its rights pursuant to and in accordance with
Section 5.8 hereof); (c) except as provided in Section 5.8 hereof, effect any
change in its capital structure or in any of its business objectives, purposes,
and operations; (d) acquire any capital in or equity ownership or the assets of
another corporation, partnership, or other business organization; (e) engage in
any other business than the operation of Stores; (f) make any loan or advance to
or investments in any other person, corporation, partnership or other business
organization; or (g) liquidate or dissolve or take any action with a view toward
liquidation or dissolution.
6.7 Certificate of Incorporation and Bylaws; Stockholders Consent.
-------------------------------------------------------------
The Company shall not make any changes in or amendments to its Certificate of
Incorporation or bylaws as they are in effect as of the date hereof; except that
the Company may amend its Certificate of Incorporation solely to increase the
number of authorized shares of its common stock by the amount necessary to
consummate any financing as to which Boston Chicken has waived its rights
pursuant to and in accordance with Section 5.8 hereof. The Company shall not
permit its stockholders to take any action by written consent in lieu of a
meeting without the prior written consent of Boston Chicken.
17
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6.8 Issuance of Stock. Except for (a) shares of common stock of the
-----------------
Company which may be issued upon (i) exercise of options granted under the
Company's 1995 Employee Stock Option Plan pursuant to grants approved under
clause (b) of this Section 6.8, (ii) exercise of the Option, (iii) conversion of
any portion of the outstanding principal balance of the Loan as provided in the
Note, and (iv) consummation of any financing after advances of debt and
purchases of equity by Boston Chicken under this Agreement aggregate at least
$____________ and as to which Boston Chicken has waived its rights pursuant
to and in accordance with Section 5.8 hereof, and (b) options granted under the
Company's 1995 Employee Stock Option Plan which are approved by Boston Chicken,
in its sole discretion, the Company will not issue any additional shares of
any class of its capital stock.
6.9 Liens. The Company shall not, and shall not permit any
-----
Subsidiary to, create, incur, or suffer to exist any lien on any of the assets,
rights, revenues or property, real, personal, or mixed, tangible or intangible,
whether now owned or hereafter acquired, of the Company or any Subsidiary, other
than liens in favor of Boston Chicken and liens otherwise permitted under
Section 4.9 hereof.
6.10 Transactions with Affiliates. The Company shall not, and shall
----------------------------
not permit any Subsidiary to, become an party to, or become liable in respect
of, any contract or undertaking with any affiliate except in the ordinary course
of business and on terms not less favorable to the Company or such Subsidiary
than those which could be obtained if such contract or undertaking were an arms
length transaction with a person other than an affiliate.
6.11 Subsidiaries. The Company shall not, and shall not permit any
------------
Subsidiary to, create or otherwise invest in any corporation, partnership, or
other entity unless the Company or such Subsidiary owns directly 100% of the
issued and outstanding equity interests therein (such 100% owned entity to be
referred to herein as a "Subsidiary").
ARTICLE VII
Conditions of Closing
---------------------
Boston Chicken's obligations hereunder shall be subject to (a) the
performance by the Company prior to or on the Closing Date of all of its
covenants theretofore to be performed under this Agreement, (b) the accuracy of
the Company's representations and warranties contained in this Agreement on the
Closing Date, and (c) the satisfaction, prior to or on the Closing Date, of the
following further conditions:
7.1 Opinion of Counsel. Boston Chicken shall have received on the
------------------
Closing Date from Rudnick & Wolfe an opinion, dated the Closing Date, in the
form attached hereto as Exhibit E with all blanks appropriately completed.
7.2 Proceedings and Documents. All proceedings to be taken in
-------------------------
connection with the transaction contemplated by this Agreement and all documents
incident to such
18
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transaction shall be satisfactory in form and substance to Boston Chicken and
its counsel, and Boston Chicken shall have received all documents or other
evidence which it and its counsel may reasonably have requested in connection
with such transaction, including copies of records of all corporate proceedings
in connection with such transaction and compliance with the conditions set forth
in this Article VII, in form and substance satisfactory to Boston Chicken and
its counsel.
7.3 Executed Documents. The Company and its Subsidiaries shall have
------------------
each duly executed the following documents to which they are parties, and
shall have delivered to Boston Chicken the following:
(a) this Agreement;
(b) the Note;
(c) the Accounting and Administrative Services Agreement in
substantially the form of Exhibit F-1 hereto, the Financial
Services Agreement in substantially the form of Exhibit F-2
hereto, the Real Estate Services Agreement in substantially the
form of Exhibit F-3 hereto and the Computer and Communications
Systems Services Agreement in substantially the form of Exhibit
F-4 hereto (such service agreements, and any other service
agreements entered into between the Company and Boston Chicken
and herein collectively called the "Service Agreements");
[(d) the Investor Representation Letter set forth as Exhibit G hereto
signed by each investor in the Company;]
(e) the Pledge Agreement, together with stock certificates in form
suitable for transfer and stock powers executed in blank;
(f) the Subsidiary Security Agreement; and
(g) such financing statements or other documents for filing with
public officials with respect to the Security Instruments as
Boston Chicken may reasonably request.
7.4 No Defaults. There shall exist no Event of Default or Default.
-----------
7.5 Additional Deliveries. Boston Chicken shall have received, in
---------------------
form and substance satisfactory to it, copies of the following documents:
(a) the Company's Certificate of Incorporation, certified as
true and correct by the Secretary of State of Delaware, dated within five days
prior to the Closing Date, and certified as true and correct as of the Closing
Date by a duly authorized officer of the Company;
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<PAGE>
(b) the Company's bylaws, as are in force and effect on the
Closing Date, certified as true and correct by the Secretary of the Company;
(c) certificate of good standing and corporate existence of the
Company from the Secretary of State of the States of Delaware, Utah and Colorado
dated within five days prior to the Closing Date; and
(d) authorizing resolutions of the board of directors and
stockholders of the Company and evidence of other corporate action taken by the
Company to authorize, among other things, the execution, delivery, and
performance by the Company of this Agreement, the Note, the Service Agreements,
and the Security Instruments and the consummation of the transactions
contemplated hereby, including resolutions reserving shares of common stock for
issuance upon the conversion of the Loan and the exercise of the Option,
certified as true and correct as of the Closing Date by a duly authorized
officer of the Company.
(e) the Certificate of Incorporation for each Subsidiary,
certified as true and correct by the Secretary of State of Delaware, dated
within five days prior to the Closing Date, and certified as true and correct as
of the Closing Date by a duly authorized officer of each Subsidiary;
(f) the bylaws of each Subsidiary, as are in force and effect on
the Closing Date, certified as true and correct by the Secretary of each
Subsidiary;
(g) certificate of good standing and corporate existence of
each Subsidiary from the Secretary of State of the States of Delaware, Utah and
Colorado dated within five days prior to the Closing Date; and
(h) authorizing resolutions of the board of directors of each
Subsidiary and evidence of other corporate action taken by each Subsidiary to
authorize, among other things, the execution, delivery, and performance by the
Subsidiary of the Subsidiary Security Agreement and the consummation of the
transactions contemplated hereby, certified as true and correct as of the
Closing Date by a duly authorized officer of each Subsidiary.
7.6 Opinion of Auditors. Boston Chicken shall have received on the
-------------------
Closing Date from Boston Chicken's independent public accountants an opinion,
dated the Closing Date, in form and substance satisfactory to Boston Chicken, to
the effect that the Note and the obligations incurred hereunder are deemed to be
debt, and not equity, in accordance with generally accepted accounting
principles.
7.7 Stockholders' Equity. Boston Chicken shall have received
--------------------
evidence, satisfactory to it, that the Company has, on the Closing Date, cash or
cash equivalents of at least $___________ and stockholders' equity of at least
$__________ .
20
<PAGE>
7.8 Compliance with BC Credit Line. Boston Chicken shall (a)
------------------------------
determine in good faith that this Agreement complies with applicable
restrictions or limitations under the BC Credit Line, (b) obtain a written
waiver of noncompliance of the transactions contemplated hereby with the BC
Credit Line, or (c) deliver to Agent from the Company such pledges, collateral,
and other documentation as may be required to evidence compliance of the
transactions contemplated hereby with the BC Credit Line.
ARTICLE VIII
DEFAULT, RIGHTS AND REMEDIES OF BOSTON CHICKEN
-----------------------------------------------
8.1 Default. The occurrence of any of the following events or acts
-------
shall constitute a default ("Default"):
(a) Default in the payment when due of any portion of the
-------
principal on the Note and the continuance of such default for a period of three
days;
(b) Default in the payment when due of any portion of the
interest on the outstanding principal of the Note and the continuance of such
default for a period of 10 days;
(c) any representation or warranty now or hereafter made in this
Agreement, the Service Agreements, the Pledge Agreement, the Subsidiary Security
Agreement the Note, any other Security Instrument, or any certificate hereunder
or thereunder shall not be true, or any certificate, statement, report,
financial data, or notice furnished at any time by the Company to Boston Chicken
shall be materially inaccurate;
(d) any breach of, or failure to perform or observe, any
covenant, condition, or agreement contained in the Pledge Agreement, the
Subsidiary Security Agreement or in any other Security Instrument, which in each
case shall continue unremedied for a period of 10 calendar days following
notice thereof from Boston Chicken, provided that such grace period shall not
apply, and the Company shall be in Default immediately upon such breach, if, in
Boston Chicken's judgement, such breach may not be reasonably cured by the
Company during such cure period;
(e) the breach of, or failure to perform or observe, any
covenant, condition, or agreement contained in Sections 5.6, 6.1, 6.2, 6.4, 6.6,
6.7, 6.8, 6.10, or 6.11 of this Agreement;
(f) any breach of, or failure to perform or observe, any other
covenant, condition, or agreement contained in this Agreement of the Note which
shall continue unremedied for a period of 10 calendar days following notice
thereof from Boston Chicken, provided that such grace period shall not apply,
and the Company shall be in Default immediately upon such breach, if, in Boston
Chicken's judgement, such breach may not reasonably be cured by the Company
during such cure period;
21
<PAGE>
(g) the Company or any Subsidiary shall (i) generally not, or shall
be unable to, or shall admit in writing its inability to pay its debts as such
debts become due, (ii) make an assignment for the benefit of creditors, petition
or apply to any tribunal for the appointment of a custodian, receiver, or
trustee for it or a substantial part of its assets, (iii) commence any
proceeding under any bankruptcy, reorganization, arrangements, readjustment of
debt, dissolution, or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect, (iv) have any such petition or application filed or
any such proceeding commenced against it in which an order for relief is entered
or adjudication or appointment is made and which remains undismissed for a
period of 60 days or more, (v) by any act or omission, indicate its consent to,
approval of, or knowing acquiescence in any such petition, application, or
proceeding, or order for relief, or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties, or (vi) suffer any
such custodianship, receivership, or trusteeship to continue undischarged for a
period of 60 days or more;
(h) ________________, or his permitted successor, dies, voluntarily
terminates his employment with the Company or substantially reduces his
responsibility for the Company's operations or the Company terminates him for
any reason whatsoever and the Company does not replace him within 90 days
thereafter with an individual with multi-unit food operating experience who is
acceptable to Boston Chicken in its sole discretion;
(i) dissolution or liquidation of the Company;
(j) there occurs a material adverse change in the financial
condition, results of operation, assets, or business of the Company and its
Subsidiaries taken as a whole;
(k) the Company or any Subsidiary shall (a) fail to pay any
indebtedness for borrowed money (other than the Note) of the Company or such
Subsidiary, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and any
applicable grace periods shall have expired, or (b) fail to perform or observe
any term, covenant, or condition on its part to be performed or observed under
any agreement or instrument relating to any such indebtedness, when required to
be performed or observed, if the effect of such failure to perform or observe is
to accelerate, or to permit the acceleration, after the giving of notice, of the
maturity of such indebtedness, or (c) default in the performance or observance
of any obligations under leases of real property;
(l) one or more judgments, decrees or orders for the payment of money
in excess of $100,000 in the aggregate shall be rendered against the Company or
any of its Subsidiaries, and such judgments, decrees, or orders shall continue
unsatisfied and in effect for a period of 20 consecutive days without being
vacated, discharged, satisfied, escorted, stayed, or bonded pending appeal;
(m) the Pledge Agreement, the Subsidiary Security Agreement, any
other Security Instrument, or the security interests created under this
Agreement shall be
22
<PAGE>
terminated, invalidated, or set aside or be declared ineffective or inoperative
or in any way cease to give or provide to Boston Chicken the benefits purported
to be created thereby.
8.2 Default; Remedies. (a) In the event a Default shall exist or
-----------------
occur Boston Chicken may:
(i) terminate its obligations under this Agreement and cease
to make any further advances under Section 1.1, and shall have the right to
declare the Note due and payable in full, without demand, presentment, or notice
of any kind;
(ii) in its sole and absolute discretion, exercise any one or
more of the rights and remedies accruing to a secured party under the Uniform
Commercial Code with respect to the Collateral and any other applicable law upon
default by a debtor;
(iii) exercise its rights under the Pledge Agreement and/or the
other Security Instruments;
(iv) convert any portion of the outstanding principal balance
of the Loan into shares of common stock in the Company as provided in the Note;
(v) exercise all or a portion of the Option;
provided, however, that in the case of any event or condition described in
Section 8.1(g) with respect to the Company or any Subsidiary, Boston Chicken's
obligations under this Agreement shall automatically terminate forthwith and all
amounts owed by the Company hereunder and under the Note shall automatically
become immediately due and payable without notice, demand, presentment, protest,
diligence, notice of dishonor, or other formality, all of which are hereby
expressly waived.
(b) In connection with the exercise of Boston Chicken's rights
and remedies provided in Section 8.2(a)(ii), the Company hereby agrees to
assemble the Collateral and make it available to Boston Chicken at a place to be
designated by Boston Chicken which is reasonably convenient to both parties,
authorizes Boston Chicken to take possession of the Collateral with or without
demand and with or without process of law and to sell and dispose of the same at
public or private sale and to apply the proceeds of such sale to the costs and
expenses thereof (including reasonable attorneys' fees and disbursements
incurred by Boston Chicken) and then to the payment and satisfaction of the
Loan. Any requirement of reasonable notice shall be met if Boston Chicken sends
such notice to the Company, by registered or certified mail, at least five days
prior to the date of sale, disposition, or other event giving rise to a required
notice Boston Chicken may be the purchaser at any such sale. The Company
expressly authorizes such sale or sales of the Collateral in advance of and to
the exclusion of any sale or sales of or other realization upon any other
collateral securing the Loan. Boston Chicken shall have no obligation to
preserve rights against prior parties. The Company hereby waives as to Boston
Chicken any right of subrogation or marshaling of such Collateral and any other
collateral for the Loan. To
23
<PAGE>
this end, the Company hereby expressly agrees that any such collateral or other
security of the Company or any other party which Boston Chicken may hold, or
which may come to any of them or any of their possession, may be dealt with in
all respects and particulars as though this Agreement were not in existence. The
parties hereto further agree that public sale of the Collateral by auction
conducted in any county in which any Collateral is located or in which Boston
Chicken or the Company does business after advertisement of the time and place
thereof shall, among other manners of public and private sale, be deemed to be a
commercially reasonable disposition of the Collateral. The Company shall be
liable for any deficiency remaining after disposition of the Collateral.
(c) All of Boston Chicken's rights and remedies under this
Agreement are cumulative and nonexclusive. Any conversion of, or exercise of the
Option with respect to, less than all of the principal balance outstanding under
the Note shall not affect Boston Chicken's rights and remedies with respect to
any portion not so converted or exercised.
8.3 No Waiver. Boston Chicken's failure, at any time or times
---------
hereafter, to require the Company's strict compliance with or performance of any
provision of this Agreement shall not waive, affect, or diminish any right of
Boston Chicken thereafter to demand such strict compliance or performance
therewith. Any suspension or waiver by Boston Chicken of a Default or an Event
of Default by the Company under this Agreement or the Note shall not suspend,
waive, or affect any other Default or Event of Default by the Company under this
Agreement or the Note, whether the same is prior or subsequent thereto and
whether of the same or of a different kind or character. None of the
undertakings, agreements, warranties, covenants, and representations of the
Company contained in this Agreement or the Note and no Default or Event of
Default by the Company under this Agreement or the Note shall be deemed to have
been suspended or waived by Boston Chicken unless such suspension or waiver is
in writing signed by an officer of Boston Chicken.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 No Oral Change. This Agreement may not be changed orally, but
--------------
only by an agreement in writing and signed by the party against whom enforcement
of any waiver, change, modification, or discharge is sought.
9.2 Assignment. The Company may not assign any or its rights or
----------
delegate any of its obligations under this Agreement without Boston Chicken's
written consent. Boston Chicken may assign any of its rights or delegate any of
its obligations under this Agreement (including assignment of this Agreement,
the Note, the Pledge Agreement and the Security Instruments), (a) without notice
to the Company, (i) to any Affiliate of Boston Chicken (except the Company) or
(ii) in connection with any pledge of its assets under the BC Credit Line or
similar credit agreement and (b) with notice, but without any requirement of
consent or approval, to any other person entity (except the Company); provided,
however, that Boston Chicken shall
24
<PAGE>
not make any such assignment of its obligations unless at the time thereof
Boston Chicken reasonably believes the assignee is able to perform such
obligations. Any such assignment shall vest in the assignee all of the benefits
under the documents so assigned. For purposes of this Agreement, the term
Affiliate shall mean any person or entity which directly or indirectly controls
or is controlled by, or is under common control with, Boston Chicken.
9.3 Costs and Attorneys' Fees. (a) Except as provided in Section 2.4
-------------------------
hereof and subsection (b) or (c) of this Section 9.3, each of the parties hereto
shall pay its own expenses (including accounting fees) incident to the
negotiation and execution of this Agreement and to the consummation of the
transactions contemplated hereby.
(b) The Company shall pay all reasonable attorney's fees and
any costs and charges relating to or arising out of (1) the negotiation and
drafting of this Agreement and all related documents and (2) the enforcement
by Boston Chicken of its rights to collect any portion of the Loan.
(c) In any action not founded solely on grounds covered by
subsection (b) of this Section 9.3, the party to the action who does not prevail
shall pay to the prevailing party the court costs and reasonable attorneys fees
and other expenses (including, but not limited to, fees and expenses of expert
witnesses or consulting experts) incurred directly or indirectly by the
prevailing party in connection with its prosecution or defense of the action, as
the case may be.
9.4 Communications and Notices. All communications and notices
--------------------------
provided for in this Agreement or under the Note shall be in writing and shall
be deemed to have been duly given if delivered personally to the party to whose
attention the notice is directed or sent by overnight express, facsimile
transmission, express mail delivery service, or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:
If to the Company:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd.
Suite 200
Golden, CO 80401
Attention: Chief Executive Officer
Facsimile: ( ) -
with a copy to:
Rudnick & Wolfe
203 N. LaSalle Street
Suite 1800
25
<PAGE>
Chicago, IL 60601
Attention: Michael G. Brennan, Esq.
Facsimile: (312) 984-2299
If to Boston Chicken:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 384-5339
with a copy to:
Bell, Boyd & Lloyd
70 West Madison Street, Suite 3300
Chicago, Illinois 60602
Attention: Paul A. Strasen, Esq
Facsimile: (312) 372-2098
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given when so delivered. Any notice delivered by facsimile transmission shall be
deemed to have been given on the earlier of the date it is actually received or
one day after such transmission. Any notice delivered by overnight express
courier will be deemed to have been given on the next succeeding business day
after the day it is sent to the intended recipient at the address set forth
above, and any notice delivered by registered or certified mail or express mail
delivery service shall be deemed to have been duly given on the earlier of the
date it is actually received or three business days after it is sent to the
intended recipient at the address set forth above.
9.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
-------------
WITH AND GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAW
PROVISIONS THEREOF.
9.6 Headings. The headings of the sections of this Agreement are
--------
inserted for convenience only and shall not be deemed to constitute a part of
this Agreement.
9.7 Severability. If any provision of this Agreement or the
------------
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement
26
<PAGE>
and the application of such provision to other persons or circumstances shall
not be affected thereby, and the provisions of this Agreement shall be
severable in any such instance.
9.8 Avoidance. To the extent that Boston Chicken receives any
---------
payment on account of the Company's obligations hereunder, and any such
payment(s) and/or proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, subordinated, and/or
required to be repaid to a trustee, receiver, or any other party under any
bankruptcy law, state or federal law, common law, or equitable cause, then, to
the extent of such payment(s) or proceeds received, the Company's obligations
hereunder, or part thereof intended to be satisfied, shall be revived and
continue in full force and effect, as if such payment(s) and/or proceeds had not
been received by Boston Chicken.
9.9 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
9.10 Entire Agreement. This Agreement, the Note, the Pledge
----------------
Agreement, the Security Instruments and the exhibits to each of the foregoing
contain the entire agreement of the parties hereto with respect to the
transactions contemplated herein, and collectively supersede all prior
understandings and agreements of the parties with respect to the subject matter
hereof.
9.11 General Indemnity. In addition to the payments pursuant to
-----------------
Section 9.3, the Company agrees to indemnify, pay, and hold Boston Chicken and
any holder of the Note, and the officers, directors, employees, agents, and
affiliates of Boston Chicken and any such holder (collectively, the
"Indemnities"), harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses, and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for any of
such Indemnities in connection with any investigative, administrative, or
judicial proceeding commenced or threatened, whether or not any of such
Indemnities shall be designated a party thereto) that may be imposed on,
incurred by, or asserted against any Indemnitee, in any manner relating to or
arising out of this Agreement, the Note, the Pledge Agreement, the Subsidiary
Security Agreement, the Security Instruments and the exhibits or any other
agreements or document executed and delivered by the Company in connection
therewith, Boston Chicken's agreement to make the Loan hereunder, or the use or
intended use of the proceeds of the Loan (the "indemnified liabilities");
provided that the Company shall have no obligation to an Indemnitee hereunder
with respect to indemnified liabilities arising from the gross negligence or
willful misconduct of such Indemnitee. To the extent that the undertaking to
indemnify, pay, and hold harmless set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, the Company shall
contribute the maximum portion that it is permitted to pay under applicable law
to the payment and satisfaction of all indemnified liabilities incurred by the
Indemnities or any of them. The provisions of the undertakings and
indemnification set out in this Section 9.11 shall survive satisfaction and
payment of the Company's obligations hereunder and termination of this
Agreement.
27
<PAGE>
9.12 Limitation on Damages. Notwithstanding anything to the contrary
---------------------
herein no party hereto shall be liable for consequential, indirect, incidental,
special, speculative, or punitive damages (including, but not limited to, loss
of revenue or profit) whether such claim alleges breach of contract, tortious
conduct including, but not limited to, negligence, or any other theory, provided
that nothing herein shall limit or otherwise restrict the Company's obligation
to pay fees under the Service Agreements.
9.13 Submission to Jurisdiction. The Company agrees that any legal
--------------------------
action or proceeding with respect to this Agreement, the Note, the Pledge
Agreement, the Subsidiary Security Agreement, any Service Agreement or any
Security Instrument or the transactions contemplated hereby may be brought in
any court of the State of Colorado, or in any court of the United States of
America sitting in Colorado, and the Company hereby submits to and accepts
generally and unconditionally the jurisdiction of those courts with respect to
their respective person and property, and irrevocably consents to the service of
process in connection with any such action or proceeding by personal delivery to
the Company or by the mailing thereof by registered or certified mail, postage
prepaid to the Company at the address for the Company set forth in Section 9.4.
Nothing in this paragraph shall affect the right of Boston Chicken to service
process in any other manner permitted by law or limit the rights of Boston
Chicken to bring any such action or proceeding against the Company or property
in the courts of any other jurisdiction. The Company hereby irrevocably waives
any objection to the laying of venue of any such suit or proceeding in the above
described courts.
9.14 Waiver of Jury Trial. No party to this instrument, which
--------------------
includes any assignee, successor, heir or personal representative of a party,
shall seek a jury trial in any lawsuit, proceeding, counterclaim, or any other
litigation procedure based upon, or arising out of this Agreement, the Note, the
Pledge Agreement, the Subsidiary Security Agreement, any Service Agreement, any
Security Instrument, and related instrument, or the dealings or the relationship
between the parties. If the subject matter of any such litigation is one in
which the waiver of a jury trial is prohibited, if at all, under the controlling
law of the applicable jurisdiction, by constitutional or statutory provision, no
party hereto will present as a defense or counterclaim in such litigation any
claim which would reduce or offset any amount or rights claimed under the
provisions of this Agreement. No party will seek to consolidate any such action,
in which a jury has been waived, with any other action in which a jury trial
cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 9.14 HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY
HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS
OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR BOSTON CHICKEN IN ENTERING INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date and year first above written.
28
<PAGE>
PROGRESSIVE BAGEL CONCEPTS, INC.
By: ______________________
Title: ______________________
BOSTON CHICKEN, INC.
By: ______________________
Title: ______________________
29
<PAGE>
EXHIBIT A
CONVERTIBLE SECURED NOTE
<PAGE>
CONVERTIBLE SECURED NOTE
$80,000,000 Golden, Colorado
_______ __, 1995
FOR VALUE RECEIVED, Progressive Bagel Concepts, Inc., a Delaware
corporation (the "Company"), promises to pay to the order of Boston Chicken,
Inc., a Delaware corporation ("Boston Chicken"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as Boston Chicken may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of eighty million dollars
($80,000,000) and any interest thereon, or, if less, the aggregate unpaid amount
of the Loan made pursuant to Section 1.1 of the Loan Agreement and any interest
thereon.
This Note evidences the Loan made under, and is referred to in and is
executed and delivered pursuant to, a Secured Loan Agreement dated of even date
herewith between the Company and Boston Chicken (the "Loan Agreement"), to which
reference is hereby made for a statement of the terms and conditions under which
this Note may be repaid and accelerated and for a description of the collateral
and security securing this Note. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of the Loan for the period commencing on the date the Loan is made until
the Loan is paid in full, at a per annum rate equal to the rate designated and
announced by Bank of America Illinois or its successor in interest (the "Bank")
from time to time as its "reference rate" in effect at its principal office in
Chicago, Illinois, plus 1%. The interest rate shall be adjusted, from time to
time, on the same day on which the Bank adjusts its "reference rate." As of the
date of this Note, the Bank's reference rate is ___%. Interest on the
outstanding principal amount of the Loan shall be payable in arrears on the
first day of each Retail Period during the Interest Payment Period, as otherwise
provided herein in connection with principal payments, and at maturity (whether
by acceleration or otherwise).
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
Any principal payment due under this Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Note in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
1
<PAGE>
Except as otherwise provided in the Loan Agreement, unless
accelerated, the outstanding principal amount of the Loan shall be payable to
Boston Chicken in 65 substantially equal periodic installments of principal (the
amount of which periodic installments of principal shall be determined at the
close of business on the Draw Loan Termination Date based on a schedule
amortizing such balance in 130 substantially equal periodic installments of
principal), plus accrued but unpaid interest, on the first day of each Retail
Period, commencing on the first day of the fifth Retail Period in Boston
Chicken's fiscal year 1998 and continuing until the first day of the fifth
Retail Period in Boston Chicken's fiscal year 2003, when the entire principal
balance of the Loan and all interest accrued thereon shall be due and payable.
This Note may not be prepaid at any time without the consent of Boston
Chicken. All payments made hereunder shall be applied first to interest and then
to outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Colorado, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by the Company and any endorser or
guarantor.
ARTICLE I
CONVERSION OF NOTE
------------------
1.1 The holder of this Note shall have the right, at such holder's
option, at any time after the earlier of any acceleration of this Note or March
15, 1996 [12 1/2 months after the Closing Date] and up to the later of the date
on which the Company has properly repaid the outstanding principal balance of
the Loan and all accrued interest thereon in full or the first day of the ____
Retail Period in Boston Chicken's fiscal year 2003 to convert, subject to the
terms and provisions of this Article I, the outstanding principal balance of
this Note or any portion thereof into shares of common stock, $.01 par value per
share, of the Company (the "Common Stock"), at the price of $___ per share, or,
in the event an adjustment of such price has occurred pursuant to the provisions
of Section 1.3, then at the price as last adjusted (referred to herein as the
"Conversion Price"), upon surrender of this Note, the principal of which is so
to be converted, to the Company at any time during usual business hours together
with written notice (hereinafter referred to as "Conversion Notice") that the
holder elects to convert this Note into such shares of Common Stock in
accordance with the provisions of this Article I, and specifying the name or
names in which the certificate or certificates evidencing the shares of Common
Stock issuable upon such conversion shall be registered, together with the
addresses of the persons so named, and, if so required by the Company,
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company duly executed by the registered holder or his
attorney duly authorized in writing. In the event this Note is to be converted
in part only, the Company
2
<PAGE>
shall, upon surrender of this Note, execute and deliver to the holder thereof,
at the expense of the Company, a new Note in principal amount equal to the
unconverted portion of this Note. In no event shall accrued interest be
convertible into shares of Common Stock.
1.2 As promptly as practicable after the surrender, as herein
provided, of this Note for conversion and the receipt of the Conversion Notice
relating thereto, the Company shall deliver to or upon the written order of the
holder of this Note a certificate or certificates representing the number of
fully-paid and non-assessable shares of Common Stock of the Company into which
this Note may be converted in accordance with the provisions of this Article I
and a new Note for any unconverted portion of the principal amount hereof.
Subject to the following provisions of this Section 1.2, such conversion shall
be deemed to have been made immediately before the close of business on the date
that this Note shall have been surrendered for conversion together with the
Conversion Notice, so that the rights of the holder of this Note as a Noteholder
shall cease at such time and the person or persons entitled to receive the
shares of Common Stock upon conversion of this Note shall be treated for all
purposes as having become the record holder or holders of such shares of Common
Stock at such time, and such conversion shall be at the Conversion Price in
effect at such time; provided, however, that no such surrender on any date when
the stock transfer books of the Company shall be closed shall be effective to
constitute the person or persons entitled to receive the shares of Common Stock
upon such conversion as the record holder or holders of such shares of Common
Stock on such date, but such surrender shall be effective to constitute the
person or persons entitled to receive such shares of Common Stock as the record
holder or holders thereof for all purposes at the close of business on such next
succeeding day. If the last day for the exercise of the conversion right shall
not be a business day, then such conversion right may be exercised on the next
succeeding business day.
1.3 (a) In case of any reclassification or change of outstanding
shares of Common Stock issuable upon conversion of this Note, or in case of any
consolidation or merger of the Company with or into any partnership,
corporation, or other entity (other than a merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of outstanding shares of Common Stock, other than a change in number of
shares issuable upon conversion of this Note) or in case of any sale or
conveyance to any partnership, corporation, or other entity of the property of
the Company as an entirety or substantially as an entirety, then the holder of
this Note shall have the right thereafter to convert this Note into the kind and
amount of shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale, or conveyance by a holder
of the number of shares of Common Stock of the Company issuable upon conversion
of this Note immediately prior to such reclassification, change, consolidation,
merger, sale, or conveyance, subject to adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for herein.
(b) The Conversion Price shall be adjusted in the event the Company
shall at any time (i) make a subdivision of or combine shares of Common Stock
outstanding or (ii) pay a dividend or make a distribution in cash, in kind, or
in securities of any kind. In the event the
3
<PAGE>
Company makes a subdivision of shares of Common Stock or pays a dividend or
makes a distribution in cash, in kind, or in securities of any kind, the
Conversion Price in effect immediately prior to such action shall be
appropriately decreased, and in the event the Company shall at any time combine
the shares of Common Stock outstanding, the Conversion Price in effect
immediately prior to such combination shall be appropriately increased. An
adjustment made pursuant to this Section 1.3(b) shall, in the event of a
subdivision or combination, become effective retroactively immediately after the
effective date thereof, and shall, in the event of a dividend or distribution,
become effective retroactively immediately after the record date for the
determination of stockholders entitled thereto. Whenever the Conversion Price is
adjusted, pursuant to this Section 1.3(b), the Company shall promptly cause a
notice to be given to such holder of this Note which will state the adjusted
Conversion Price.
(c) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon conversion of this Note as herein provided, such number of shares of Common
Stock as shall be issuable upon the conversion of the entire Maximum Principal
Balance of the Loan. The Company covenants that all shares of Common Stock which
shall be so issuable shall be duly and validly issued and fully-paid and
non-assessable.
(d) The Company covenants that if any shares of Common Stock to be
issued upon conversion of this Note require registration with or approval of any
governmental authority under any federal or state law before such shares may be
issued upon conversion, the Company will, at its expense and as expeditiously as
possible, cause such shares to be duly registered or approved, as the case may
be.
(e) The issuance of certificates for shares of Common Stock upon the
conversion of this Note shall be made without charge to the converting
Noteholder for any tax in respect of the issuance of such certificates, and such
certificates shall be issued in the respective names of, or in such names as may
be directed by, the holder of this Note; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate in a name
other than that of the holder of this Note, and the Company shall not be
required to issue or deliver such certificates unless and until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the reasonable satisfaction of
the Company that such tax has been paid.
(f) Conversion of any portion of the principal balance of this Note
shall not relieve the Company of its obligation to pay any accrued but unpaid
interest on the portion of the principal balance of this Note so converted.
(g) To the extent that any portion of this Note is not converted into
shares of Common Stock, such portion shall remain a secured debt of the Company
payable in accordance with the terms of the Loan Agreement.
4
<PAGE>
ARTICLE II
ADVANCES
--------
2.1 Loan advances may be made from time to time by Boston Chicken to
the Company in the manner and on the terms and subject to the conditions set
forth in the Loan Agreement. Upon granting each loan advance, Boston Chicken
shall record the making and amount of such advance on its books in a separate
loan account, and shall also record in the loan account all payments made by the
Company with respect to the Loan. The aggregate amount of all loan advances
recorded in the loan account, less the amounts of payment of principal made by
the Company and recorded in such account, shall be the principal amount
outstanding under this Note. The loan account shall be prima facie evidence of
the unpaid amount of principal outstanding under this Note; provided, however,
that failure to maintain such account or record any advances therein shall not
relieve the Company of its obligations to repay the outstanding principal amount
of the Loan, all accrued interest thereon, and any amount payable with respect
thereto in accordance with the terms of this Note.
ARTICLE III
DEFAULT, RIGHTS AND REMEDIES OF HOLDER
--------------------------------------
3.1 The occurrence of a Default shall be a default under this Note.
Upon any default under this Note, the holder of this Note may declare this Note
due and payable in full and exercise such other rights and remedies as are
available to the holder under the Loan Agreement or applicable law.
3.2 If there is any default under this Note, and this Note is placed
in the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, the Company promises to pay to the order of the
holder hereof such holder's reasonable attorney's fees and court costs incurred
in collecting or attempting to collect or securing or attempting to secure this
Note or enforcing the holder's rights with respect to the Collateral, to the
extent allowed by the laws of the State of Colorado or any state in which any
Collateral is situated.
ARTICLE IV
MISCELLANEOUS
-------------
4.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF COLORADO APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.
5
<PAGE>
4.2 The holder of this Note may, with or without notice to any party,
and without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
(v) justifiably or otherwise, impair any of the Collateral or suspend the right
to enforce against any such Collateral, and (vi) at any time it deems it
necessary or proper, call for and, should it be made available, accept, as
additional security, the signature or signatures of additional parties or a
security interest in property of any kind or description or both.
4.3 Any provision herein, or in the Loan Agreement, or any other
document executed or delivered in connection herewith or therewith, or in any
other agreement or commitment, whether written or oral, expressed or implied, to
the contrary notwithstanding, neither Boston Chicken nor any holder hereof shall
in any event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that Boston Chicken or any holder hereof shall be
paid, as interest, a sum greater than the maximum amount permitted by applicable
law to be charged to the person primarily obligated to pay this Note at the time
in question. If any construction of this Note or the Loan Agreement, or any and
all other papers, agreements, or commitments, indicate a different right given
to Boston Chicken or any holder hereof to ask for, demand, or receive any larger
sum as interest, such is a mistake in calculation or wording which this clause
shall override and control, it being the intention of the parties that this
Note, the Loan Agreement, and all other documents executed or delivered in
connection herewith shall in all ways comply with applicable law and proper
adjustments shall automatically be made accordingly. In the event that Boston
Chicken or any holder hereof ever receives, collects, or applies as interest,
any sum in excess of the maximum amount permitted by applicable law, if any,
such excess amount shall be applied to the reduction of the unpaid principal
balance of this Note, and if this Note is paid in full, any remaining excess
shall be paid to the Company. In determining whether or not the interest paid or
payable, under any specific contingency, exceeds the maximum amount permitted by
applicable law, if any, the Company and any holder hereof shall, to the maximum
extent permitted under applicable law: (a) characterize any non-principal
payment as an expense or fee rather than as interest, and (b) "spread" the total
amount of interest throughout the entire term of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be executed in
its corporate name by the undersigned officer, thereunto duly authorized.
PROGRESSIVE BAGEL CONCEPTS, INC.
By:________________________
Title:_____________________
6
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE TO ACCOMPANY ADVANCES
<PAGE>
EXHIBIT B
---------
CERTIFICATE
The undersigned, the _____________ of Progressive Bagel Concepts, Inc. (the
"Company"), borrower under that certain Secured Loan Agreement dated February
___, 1995 (the "Loan Agreement") between the Company and Boston Chicken, Inc.
("Boston Chicken"), hereby requests an Advance of Loan proceeds in the amount of
$__________________.
In support of this request, the Company hereby represents and warrants to
Boston Chicken as follows:
1. Such Loan amount is required and will be used by the Company for the
purposes permitted under in the Loan Agreement and for no other purpose.
2. The representations and warranties contained in Article IV of the Loan
Agreement and in the Security Instruments delivered in connection therewith are
true and correct on and as of the date hereof, and will be true and correct on
the date such Advance is made.
4. No Default or Event of Default has occurred and is continuing.
5. There has been no material adverse change in the financial conditions,
results of operations, assets or business of the Company since February ___,
1995.
6. The Company has ___ Stores open and conducting business as of the date
hereof.
Capitalized terms used but not defined herein have the meanings ascribed
thereto in the Loan Agreement.
PROGRESSIVE BAGEL CONCEPTS, INC.
By:______________________
Title:___________________
Date:_____________________, 199_
<PAGE>
EXHIBIT C-1
SUBSIDIARY STOCK PLEDGE AGREEMENT
<PAGE>
SUBSIDIARY STOCK PLEDGE AGREEMENT
This Subsidiary Stock Pledge Agreement ("Pledge Agreement"), dated _____
__, 1995, is made and entered into by and between Progressive Bagel Concepts,
Inc., a Delaware corporation (the "Company") and Boston Chicken, Inc., a
Delaware corporation ("Boston Chicken").
RECITALS
--------
1. The Company owns 100% of the issued and outstanding shares of capital
stock of Brackman Bros., Inc., a ___________ corporation (the "Pledged
Subsidiary").
2. The Company has entered into a Secured Loan Agreement of even date
herewith (the "Loan Agreement") with Boston Chicken pursuant to which Boston
Chicken has agreed on the terms and subject to the conditions therein, to make a
Loan (as defined in the Loan Agreement) to the Company, which Loan is evidenced
by a promissory note of even date herewith from the Company to Boston Chicken
(the "Note").
3. As an inducement to Boston Chicken to enter into the Loan Agreement
and as a condition to the effectiveness of Boston Chicken's obligations under
the Loan Agreement, the Company has agreed, among other things, to pledge to
Boston Chicken, and grant a first-priority security interest to Boston Chicken,
in and to, 100% of the issued and outstanding capital stock of the Pledged
Subsidiary
NOW, THEREFORE, the Company and Boston Chicken have agreed as follows:
1. Certain Definitions. The capitalized terms and phrases not otherwise
-------------------
defined herein, shall have the meanings given them in the Loan Agreement, and
the following terms or phrases shall have the following meanings:
"Affiliate" shall mean, with respect to a specified person, any other
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the person specified.
"Collateral" shall mean the Pledged Shares and any other property in
which Boston Chicken acquires a security interest pursuant to this Pledge
Agreement to secure any indebtedness or other obligation of the Company to
Boston Chicken.
"Default" shall have the meaning given it in Section 10 of this Pledge
Agreement.
1
<PAGE>
"Pledged Shares" shall mean all the issued and outstanding shares of
the capital stock of the Pledged Subsidiary owned by the Company, the
certificates representing those shares and any stock powers executed by the
Company in connection with those shares.
"Secured Obligations" shall mean the obligations secured by this
Pledge Agreement described in Section 3 of this Pledge Agreement.
2. Grant of Security Interest. (a) The Company hereby grants to Boston
--------------------------
Chicken a security interest in all of its right, title, and interest in and to
the Pledged Shares. The Company further grant to Boston Chicken a security
interest in any stock rights, rights to subscribe, liquidating dividends,
dividends paid in stock, new securities, or any other property to which the
Company is or may hereafter become entitled to receive whether on account of the
Pledged Shares or otherwise. If the Company receives additional property of such
nature, it shall immediately deliver such property to Boston Chicken to be held
by Boston Chicken in the same manner as the property held pursuant to this
Pledge Agreement.
(b) The Company grants a further security interest to Boston
Chicken in the proceeds or products of any sale or other disposition of the
Pledged Shares.
3. Obligations Secured. The Security interest created hereby secures
-------------------
payment and performance of (a) the indebtedness evidenced by the Note, and all
obligations contained in the Note, (b) all of the other obligations, agreements,
covenants, and representations of the Company under the Loan Agreement whether
or not, either on the date of this Pledge Agreement or thereafter, evidenced by
any note, instrument, or other writing, and (c) any and all other indebtedness,
obligation, or liability of the Company to Boston Chicken, however evidenced,
whether existing on the date of this Pledge Agreement or arising thereafter,
direct or indirect, absolute or contingent, joint and/or several.
4. Representations and Warranties. To induce Boston Chicken to enter
------------------------------
into this Pledge Agreement, the Company represents and warrants as follows:
(a) The Company has full right, power, and capacity to enter
into and perform this Pledge Agreement; and this Pledge Agreement has been duly
authorized, executed and delivered and constitutes a legal, valid, and binding
obligation of the Company enforceable in accordance with its terms.
(b) The Company has good and marketable title to the Pledged
Shares, and the Pledged Shares are not subject to any lien, charge, pledge,
encumbrance, claim, or security interest other than the security interest
created by this Pledge Agreement.
(c) The Pledged Shares constitute one hundred percent (100%) of
the issued and outstanding equity interest of the Pledged Subsidiary.
2
<PAGE>
(d) The Pledged Shares are fully paid and nonassessable,
(e) The Company has not entered into any stock restriction or
purchase agreement with respect to the Pledged Shares which would in any way
restrict the sale, pledge, or other transfer of the Pledged Shares or of any
interest in or to the Pledged Shares.
5. Duration of Security Interest. Boston Chicken, its successors and
-----------------------------
assigns, shall hold the Pledged Shares and security interest created hereby upon
the terms of this Pledge Agreement, and this security interest shall continue
until all the Secured Obligations have been paid in full.
6. Maintaining Freedom from Liens. The Company shall keep the Pledged
------------------------------
Shares and other Collateral free and clear of liens and shall pay all amounts,
including taxes, assessments, or charges, which might result in a lien against
the Pledged Shares or other Collateral if left unpaid. If any such lien,
assessment, claim, or charge shall nevertheless exist, and the Company fails to
pay such amounts promptly, Boston Chicken may, but is not obligated to, pay such
amounts, and such payment shall be conclusive evidence of the legality or
validity thereof. The Company shall promptly reimburse Boston Chicken for any
such payments, and until reimbursement, such payments shall be a part of the
Secured Obligation.
7. Certain Rights Respecting Pledged Shares.
----------------------------------------
(a) The Company shall continue to be the owner of the Pledged
Shares and other Collateral so long as no Default has occurred and is continuing
and may collect and retain all cash dividends now or hereafter payable on or on
account of the Pledged Shares and other Collateral which are permitted under the
Loan Agreement, and, so long as no Default has occurred, may exercise voting
rights with respect to the Pledged Shares and other Collateral.
(b) The Company shall not sell, transfer, or attempt to sell or
transfer the Pledged Shares or other Collateral, or any part thereof or interest
therein, without the prior express written consent of Boston Chicken. Any such
consent of Boston Chicken shall not constitute the release by Boston Chicken of
its interest in the Pledged Shares or other Collateral, and any such sale or
transfer consented to shall transfer the Pledged Shares or other Collateral
subject to the security interest of Boston Chicken. Any such transfer shall be
subject to the transferee stockholder's agreement to be bound by the terms and
subject to the conditions of this Pledge Agreement, such agreement to be
evidenced by the transferee stockholder's execution of this Pledge Agreement.
(c) Boston Chicken, at its option upon any Default, may exercise
all voting rights and privileges whatsoever with respect to the Pledged Shares
and other Collateral, including, without limitation, the right to receive
dividends, and to that end the Company hereby constitutes any officer of Boston
Chicken as its proxy and attorney-in-fact for all purposes of voting the Pledged
Shares and other Collateral after any Default at any annual regular or special
3
<PAGE>
meeting of the Company, and this appointment shall be deemed coupled with an
interest and is and shall be irrevocable until all of the Secured Obligations
have been fully paid and terminated, and all persons whatsoever shall be
conclusively entitled to rely upon any oral or written certification of Boston
Chicken that it is entitled to vote the Pledged Shares and other Collateral
hereunder. The Company shall execute and deliver to Boston Chicken any
additional proxies and powers of attorney that Boston Chicken may desire in its
own name. In addition to any other voting rights, Boston Chicken may vote the
Pledged Shares and other Collateral to remove the directors and officers of the
Pledged Subsidiary, or any of them, and to elect new directors and officers of
the Pledged Subsidiary, who may thereafter manage the affairs of the Pledged
Subsidiary, operate its properties and carry on its business and otherwise take
any action with respect thereto as it shall deem necessary and appropriate, and
may also liquidate its business, and may authorize the borrowing of money in the
name of the Pledged Subsidiary, and the pledge of its assets to secure such
borrowing.
8. Issuance or Acquisition of New Stock or Sale of Treasury Shares;
----------------------------------------------------------------
Mergers, Sales and Other Disposition of Assets. The Company shall not permit the
- ----------------------------------------------
Pledged Subsidiary to (a) issue new shares of its capital stock, or any options,
subscription rights, or warrants with respect thereto, (b) sell any treasury
shares, (c) merge into or with or consolidate with any other entity, (d) sell or
otherwise transfer any part of its assets (except in the ordinary course of
business) or (e) liquidate or dissolve or take any action with a view toward
liquidation or dissolution, in each case without Boston Chicken's prior written
consent.
9. Delivery of Certificates and Stock Powers. Upon execution of this
-----------------------------------------
Pledge Agreement, the Company shall deliver to Boston Chicken the share
certificates representing the Pledged Shares in form suitable for transfer
together with executed blank stock powers. If for any reason the Company
acquires any interest in any additional capital stock of the Pledged Subsidiary,
the Company shall immediately deliver certificates representing that stock in
form suitable for transfer and blank stock powers to Boston Chicken to be held
by Boston Chicken in the same manner as the Pledged Shares, and such stock shall
be pledged under this Pledge Agreement and constitute a part of the Collateral.
10. Default. At the option of Boston Chicken, the occurrence of any
-------
Default (as defined in the Loan Agreement) under the Loan Agreement shall
constitute a default under this Pledge Agreement.
11. Remedies. (a) Upon the occurrence of any Default, Boston Chicken shall
--------
have all of the rights and remedies provided by law and/or by this Pledge
Agreement, including but not limited to all of the rights and remedies of a
secured party under the Uniform Commercial Code, and the Company hereby
authorizes Boston Chicken to hold such Pledged Shares or to sell all or any part
of the Pledged Shares at public or private sale and to apply the proceeds of
such sale to the costs and expenses thereof (including the reasonable attorneys'
fees and disbursements incurred by Boston Chicken) and then to the payment of
the other Secured Obligations. Boston Chicken may be the purchaser at any such
sale. The Company expressly authorizes such sale or
4
<PAGE>
sales of the Pledged Shares in advance of and to the exclusion of any sale or
sales of or other realization upon any other collateral securing indebtedness or
other obligations owed to Boston Chicken. Boston Chicken shall be under no
obligation to preserve rights against prior parties.
(b) The Company agrees and acknowledges that because there may
be no public market for the Pledged Shares and because of applicable securities
laws, a public sale of the Pledged Shares may not be possible or advisable and
sales at a private sale may be on terms less favorable than if such Pledged
Shares were sold at a public sale and may be at a price less favorable than a
public sale. The Company agrees that all such private sales made under the
foregoing circumstances shall be deemed to have been made in a commercially
reasonable manner.
12. Exercise of Remedies. The rights and remedies of Boston Chicken shall
--------------------
be deemed to be cumulative, and any exercise of any right or remedy shall not be
deemed to be an election of that right or remedy to the exclusion of any other
right or remedy. Notwithstanding the foregoing, Boston Chicken shall be entitled
to recover by the cumulative exercise of all remedies no more than the sum of
(a) the Secured Obligations remaining outstanding at the time of the exercise of
remedies, plus (b) the costs, fees, and expenses Boston Chicken is otherwise
entitled to recover.
13. Return of Collateral. Boston Chicken may at any time deliver the
--------------------
Pledged Shares or other Collateral, or any part thereof, to the Company. The
receipt by the Company of the Pledged Shares or other Collateral, or any part
thereof, shall be a complete and full discharge of Boston Chicken, and Boston
Chicken shall be discharged from any liability or responsibility with respect
thereto.
14. Communications and Notices. (a) Any requirement of the Uniform
--------------------------
Commercial Code of reasonable notice shall be met if such notice is given at
least five business days before the time of sale, disposition, or other event or
thing giving rise to the requirement of notice.
(b) All communications and notices shall be in writing and shall
be deemed to have been duly given if delivered personally to the party to whose
attention the notice is directed or sent by overnight express, facsimile
transmission, express mail delivery service, or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as set forth
in Section 9.4 of the Loan Agreement. Any party may change the address to which
notices hereunder are to be sent to it by giving written notice of such change
of address in the manner herein provided for giving notice. Any notice delivered
personally shall be deemed to have been given when so delivered. Any notice
delivered by facsimile transmission shall be deemed to have been given on the
earlier of the date it is actually received or one day after such transmission.
Any notice delivered by overnight express courier will be deemed to have been
given on the next succeeding business day after the day it is sent to the
intended recipient at the address set forth above, and any notice delivered by
registered or certified mail or express mail delivery service shall be deemed to
have been duly given on the earlier of the date it is actually
5
<PAGE>
received or three business days after it is sent to the intended recipient at
the address set forth above.
15. Further Assurances. The Company shall sign any such other documents or
------------------
instruments, and take such other action, as Boston Chicken may request to more
fully create and maintain, or to verify, ratify, or perfect the security
interest intended to be created by this Pledge Agreement.
16. Multiple Counterparts. This Pledge Agreement may be executed in two or
---------------------
more counterparts, each of which shall be deemed an original, and it shall not
be necessary in making proof of this Pledge Agreement or the terms thereof to
produce or account for more than one such counterpart.
17. Miscellaneous (a) Failure by Boston Chicken to exercise any right
-------------
shall not be deemed a waiver of that right, and any single or partial exercise
of any right shall not preclude the further exercise of that right. Every right
of Boston Chicken shall continue in full force and effect until such right is
specifically waived in writing signed by Boston Chicken.
(b) If any provision of this Pledge Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable, the
remainder of the Pledge Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby, and the provisions of
this Pledge Agreement shall be severable in any such instance.
(c) The headings of the sections of this Pledge Agreement are
inserted for convenience only and shall not be deemed to constitute a part of
this Pledge Agreement.
(d) This Pledge Agreement shall benefit Boston Chicken, its
successors and assigns, and all obligations of the Company shall bind their
successors and assigns. The Company acknowledges that Boston Chicken may assign
or otherwise transfer (in whole or in part) the Note, the Loan Agreement, or
this Pledge Agreement to any other person, and such other person shall thereupon
become vested with all of the benefits in respect thereof granted to Boston
Chicken thereunder (including the benefits under this Pledge Agreement).
(E) THIS PLEDGE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS
THEREOF.
(f) This Pledge Agreement and the Loan Agreement constitute the
entire agreement of the parties with respect to the subject matter hereof and
supersede all prior understandings with respect to the subject matter hereof. No
change, modification, addition, or
6
<PAGE>
termination of this Pledge Agreement shall be enforceable unless in writing and
signed by the party against whom enforcement is sought.
(g) The Company agrees that any legal action or proceeding with
respect to this Pledge Agreement or the transactions contemplated hereby may be
brought in any court of the State of Colorado, or in any court of the United
States of America sitting in Colorado, and the Company hereby submits to and
accepts generally and unconditionally the jurisdiction of those courts with
respect to their respective person and property, and irrevocably consents to the
service of process in connection with any such action or proceeding by personal
delivery to the Company or by the mailing thereof by registered or certified
mail, postage prepaid addressed to the Company at the address for notices as
provided in Section 14 hereof. Nothing in this paragraph shall affect the right
of Boston Chicken to serve process in any other manner permitted by law or limit
the right of Boston Chicken to bring any such action or proceeding against the
Company or property in the courts of any other jurisdiction. The Company hereby
irrevocably waives any objection to the laying of venue of any such suit or
proceeding in the above described courts.
18. Waiver of Jury Trial. No party to this instrument, which includes any
--------------------
assignee, successor, heir or personal representative of a party, shall seek a
jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, any related instrument,
or the dealings or the relationship between the parties. If the subject matter
of any such litigation is one in which the waiver of a jury trial is prohibited,
if at all, under the controlling law of the applicable jurisdiction, by
constitutional or statutory provision, no party hereto will present as a defense
or counterclaim in such litigation any claim which would reduce or offset any
amount or right claimed under the provisions of this Pledge Agreement. No party
will seek to consolidate any such action, in which a jury has been waived, with
any other action in which a jury trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 18 HAVE BEEN FULLY DISCUSSED BY THE PARTIES
HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN
ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE BANK IN ENTERING INTO THIS AGREEMENT.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto executed this Pledge Agreement to be
effective as of the date and year first above written.
PROGRESSIVE BAGEL CONCEPTS, INC.
By: _______________________
Its: ____________________
BOSTON CHICKEN, INC.
By: ________________________________
Title: ________________________________
8
<PAGE>
EXHIBIT D
SUBSIDIARY SECURITY AGREEMENT
<PAGE>
SUBSIDIARY SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of February, 1995 (this "Security
Agreement"), is made by Brackman Bros., Inc., a Delaware corporation (the
"Company"), in favor of Boston Chicken, Inc., a Delaware corporation ("Boston
Chicken").
WITNESSETH:
WHEREAS, Progressive Bagel Concepts, Inc., a Delaware corporation (the
"Borrower") has entered into a Secured Loan Agreement, dated as of February,
1995, (the "Loan Agreement"), with Boston Chicken and pursuant to which Boston
Chicken has agreed on the terms and conditions therein, to make a Loan (as
defined in the Loan Agreement) to the Borrower; and
WHEREAS, the Company is a wholly-owned subsidiary of the Borrower;
WHEREAS, as a condition to the effectiveness of Boston Chicken's
obligations under the Loan Agreement, the Company has agreed, among other
things, to grant to Boston Chicken a first-priority security interest in and to
the Collateral hereinafter described;
NOW, THEREFORE, to secure (a) the payment of the principal sum of Eighty
Million Dollars ($80,000,000), together with interest thereon, in accordance
with the terms of a promissory noted dated February ____, 1995, issued by the
Borrower pursuant to the Loan Agreement (the "Note"), (b) the performance of the
covenants herein contained and any monies expended by Boston Chicken in
connection therewith, (c) the payment of all obligations and performance of all
covenants of the Borrower under the Loan Agreement, the Pledge Agreement and all
other Security Instruments (as defined in the Loan Agreement) and any other
documents, agreements or instruments between the Borrower or the Company and
Boston Chicken given in connection therewith, and (d) any and all other
indebtedness, obligations and liabilities of any kind of the Borrower and/or the
Company to Boston Chicken now or hereafter existing, direct or indirect,
absolute or contingent, joint and/or several, secured or unsecured, arising by
operation of law or otherwise, and whether incurred by the Company as principal,
surety, endorser, guarantor, accommodation party or otherwise (all of the
aforesaid indebtedness, obligations and liabilities of the Borrower and/or the
Company being herein called the "Secured Obligations", and all of the documents,
agreements and instruments between the Company and Boston Chicken evidencing or
securing the repayment of, or otherwise pertaining to the Secured Obligations
being herein collectively called the "Operative Documents"), for value received
and pursuant to the Loan Agreement, the Company hereby grants, assigns and
transfers to Boston Chicken a security
<PAGE>
interest in and to the following described property whether now owned or
existing or hereafter acquired or arising and wherever located (all of which is
herein collectively called the "Collateral"):
(a) all of the Company's real estate, accounts, equipment (including, but
not limited to machinery, furniture, fixtures, tools, vehicles, and other
tangible property), inventory, leasehold improvements, contract rights
(including its rights as lessee under all leases of real property), general
intangibles, deposit accounts, tax refunds, chattel paper, instruments, notes,
letters of credit, documents, and documents of title;
(b) all insurance proceeds of or relating to any of the foregoing;
(c) all of the Company's books, records, and computer programs and data
relating to any of the foregoing; and
(d) all accessories and additions to, and substitutions for, and
replacements, products and proceeds of, any of the foregoing.
1. Representations, Warranties, Covenants and Agreements. The Company
-----------------------------------------------------
further represents, warrants, covenants, and agrees with Boston Chicken as
follows:
(a) Ownership of Collateral; Security Interest Priority. At the time any
---------------------------------------------------
Collateral becomes subject to a security interest of Boston Chicken hereunder,
unless Boston Chicken shall otherwise consent, the Company shall be deemed to
have represented and warranted that (i) the Company is the lawful owner of such
Collateral and has the right and authority to subject the same to the security
interest of Boston Chicken; (ii) none of the Collateral is subject to any lien
other than that in favor of Boston Chicken and there is no effective financing
statement covering any of the Collateral on file in any public office, other
than in favor of Boston Chicken. This Security Agreement creates in favor of
Boston Chicken a valid and perfected first-priority security interest in the
Collateral enforceable against the Company and all third parties and securing
the payment of the Secured Obligations and all filings and other actions
necessary or desirable to create, preserve or perfect such security interests
have been duly taken.
(b) Location of Offices, Records and Facilities. The Company's chief
-------------------------------------------
executive office and chief place of business and the office where the Company
keeps its records concerning its accounts, contract rights, chattel papers,
instruments, general intangibles and other obligations arising out of or in
connection with the sale or lease of goods or the rendering of services or
otherwise ("Receivables"), and all originals of all leases and other chattel
paper which evidence Receivables, are located in the State of ____________,
County of ____________ at ___________________________________. The Company will
provide Boston Chicken with prior written notice of any proposed change in the
location of its chief executive office and will not change the location of its
chief executive office without the prior written consent of Boston Chicken. The
federal tax identification number of the Company is
___________________________________. The name
2
<PAGE>
of the Company is ____________________, and the Company operates under no other
names [except for _________________]. The Company shall not change its name
without the prior written consent of Boston Chicken.
(c) Location of Inventory, Fixtures, Machinery and Equipment. (i) All
--------------------------------------------------------
Collateral consisting of inventory, fixtures, machinery or equipment is, and
will be, located within the Development Area (as defined in the Loan Agreement),
and at no other locations without the prior written consent of Boston Chicken.
If the Collateral described in clauses (i) or (ii) is kept at leased locations
or warehoused, the Company has obtained appropriate landlord's lien waivers or
appropriate warehousemen's notices have been sent, each satisfactory to Boston
Chicken, unless waived by Boston Chicken.
(d) Liens, Etc. The Company will keep the Collateral free at all times
----------
from any and all liens, security interests or encumbrances other than those
described in paragraph 1(a)(ii) and those consented to in writing by Boston
Chicken. The Company will not, without the prior written consent of Boston
Chicken, sell or lease, or permit or suffer to be sold or leased, any of the
Collateral except inventory which is sold or, subject to Boston Chicken's
security interest therein, is leased in the ordinary course of the Company's
business, and tangible Collateral, which is disposed of in the ordinary course
of the Company's business as being obsolete. Boston Chicken or its attorneys may
at any and all reasonable times inspect the Collateral and for such purpose may
enter upon any and all premises where the Collateral is or might be kept or
located.
(e) Insurance. The Company shall keep the tangible Collateral insured at
---------
all times against loss by theft, fire and other casualties and shall otherwise
comply with the insurance provisions set forth in Section 5.4 of the Loan
Agreement.
(f) Taxes, Etc. The Company will pay promptly, and within the time that
----------
they can be paid without interest or penalty, any taxes, assessments and similar
imposts and charges, not being contested in good faith, which are now or
hereafter may become a lien, charge or encumbrance upon any of the Collateral.
If the Company fails to pay any such taxes, assessments or other imposts or
charges in accordance with this Section, Boston Chicken shall have the option to
do so and the Company agrees to repay forthwith all amounts so expended by
Boston Chicken with interest at the default rate set forth in the Loan
Agreement.
(g) Further Assurances. The Company will do all acts and things and will
------------------
execute all financing statements and writings requested by Boston Chicken to
establish, maintain and continue a perfected and valid security interest of
Boston Chicken in the Collateral, and will promptly on demand pay all reasonable
costs and expenses of filing and recording all instruments, including the costs
of any searches deemed necessary by Boston Chicken to establish and determine
the validity and the priority of Boston Chicken's security interests. A carbon,
photographic or other reproduction of this Security Agreement or any financing
statement covering the Collateral shall be sufficient as a financing statement.
3
<PAGE>
(h) Maintenance of Tangible Collateral. The Company will cause the
----------------------------------
tangible Collateral to be maintained and preserved in the same condition,
repair and working order as when new, ordinary wear and tear excepted, and in
accordance with any manufacturer's manual, and shall forthwith, or, in the case
of any loss or damage to any of the tangible Collateral as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements made in connection therewith which are
necessary or desirable to such end. The Company shall promptly furnish to Boston
Chicken a statement respecting any loss or damage to any of the tangible
Collateral.
(i) Maintenance of Intangible Collateral. The Company shall preserve and
------------------------------------
maintain all rights of the Company and Boston Chicken in the intangible
Collateral, including without limitation the payment of all maintenance fees and
the taking of appropriate action at the Company's expense to halt the
infringement of any of the intangible Collateral.
(j) Special Rights Regarding Accounts Receivable. Boston Chicken or any of
--------------------------------------------
its agents may, at any time and from time to time in its sole discretion and
irrespective of the existence of any event of default under this Security
Agreement, verify directly with the Company's account debtors the accounts
pledged hereunder in any manner. Boston Chicken or any of its agents may, at any
time from time to time in its sole discretion, notify the Company's account
debtors of the security interest of Boston Chicken in the Collateral and/or
direct such account debtors that all payments in connection with such
obligations and the Collateral be made directly to Boston Chicken in Boston
Chicken's name. If Boston Chicken or any of its agents shall collect such
obligations directly from the Company's account debtors, Boston Chicken or any
of its agents shall have the right to resolve any disputes relating to returned
goods directly with the Company's account debtors in such manner and on such
terms as Boston Chicken or any of its agents shall deem appropriate. The Company
directs and authorizes any and all of its present and future account debtors to
comply with requests for information from Boston Chicken, Boston Chicken's
designees and agents and/or auditors, relating to any and all business
transactions between the Company and the Company's account debtors. The Company
further directs and authorizes all of its account debtors upon receiving a
notice or request sent by Boston Chicken or Boston Chicken's agents or designees
to pay directly to Boston Chicken any and all sums of money or proceeds now or
hereafter owing by the Company's account debtors to the Company, and any such
payment shall act as a discharge of any debt of such account debtor to the
Company in the same manner as if such payment had been made directly to the
Company. The Company agrees to take any and all action as Boston Chicken may
request to assist Boston Chicken in exercising the rights described in this
Section.
2. Events of Default. The occurrence of any Event of Default specified in
-----------------
the Loan Agreement shall be deemed an event of default under this Security
Agreement.
3. Remedies. Upon the occurrence of any such event of default, Boston
--------
Chicken shall have and may exercise any one or more of the rights and remedies
provided to it under this Security Agreement or any of the other Operative
Documents or provided by law, including but
4
<PAGE>
not limited to all of the rights and remedies of a secured party under the
Uniform Commercial Code, and the Company hereby agrees to assemble the
Collateral and make it available to Boston Chicken at a place to be designated
by Boston Chicken which is reasonably convenient to both parties, authorizes
Boston Chicken to take possession of the Collateral with or without demand and
with or without process of law and to sell and dispose of the same at public or
private sale and to apply the proceeds of such sale to the costs and expenses
thereof (including reasonable attorney's fees and disbursements, incurred by
Boston Chicken) and then to the payment of the indebtedness and satisfaction of
other Secured Obligations. Any requirement of reasonable notice shall be met if
Boston Chicken sends such notice to the Company, by registered or certified
mail, at least 5 days prior to the date of sale, disposition or other event
giving rise to a required notice. Boston Chicken may be the purchaser at any
such sale. The Company expressly authorizes such sale or sales of the Collateral
in advance of and to the exclusion of any sale or sales of or other realization
upon any other collateral securing the Secured Obligations. Boston Chicken shall
have no obligation to preserve rights against prior parties. The Company hereby
waives as to Boston Chicken any right of subrogation or marshaling of such
Collateral and any other collateral for the Secured Obligations. To this end,
the Company hereby expressly agrees that any such collateral or other security
of the Company or any other party which Boston Chicken may hold, or which may
come to any of them or any of their possession, may be dealt with in all
respects and particulars as though this Security Agreement were not in
existence. The parties hereto further agree that public sale of the Collateral
by auction conducted in any county in which any Collateral is located or in
which Boston Chicken or the Company does business after advertisement of the
time and place thereof shall, among other manners of public and private sale, be
deemed to be a commercially reasonable disposition of the Collateral. The
Company shall be liable for any deficiency remaining after disposition of the
Collateral.
4. Remedies Cumulative. No right or remedy conferred upon or reserved to
-------------------
Boston Chicken under any Operative Document is intended to be exclusive of any
other right or remedy, and every right and remedy shall be cumulative in
addition to every other right or remedy given hereunder or now or hereafter
existing under any applicable law. Every right and remedy of Boston Chicken
under any Operative Document or under applicable law may be exercised from time
to time and as is often as may be deemed expedient by Boston Chicken. To the
extent that it lawfully may, the Company agrees that it will not at any time
insist upon, plead, or in any manner whatever claim or take any benefit or
advantage of any applicable present or future stay, extension or moratorium law,
which may effect observance or performance of any provisions of any Operative
Document; nor will it claim, take or insist upon any benefit or advantage of any
present or future law providing for the valuation or appraisal of any security
for its obligations under any Operative Document prior to any sale or sales
thereof which may be made under or by virtue of any instrument governing the
same; nor will it, after any such sale or sales, claim or exercise any right,
under any applicable law to redeem any portion of such security so sold.
5. Conduct No Waiver. No waiver of default shall be effective unless in
-----------------
writing executed by Boston Chicken and waiver of any default or forbearance on
the part of Boston
5
<PAGE>
Chicken in enforcing any of its rights under this Security Agreement shall not
operate as a waiver of any other default or of the same default on a future
occasion or of such right.
6. Governing Law; Definitions. This Security Agreement is a contract
--------------------------
made under, and the rights and obligations of the parties hereunder shall be
governed by and construed in accordance with, the laws of the State of Colorado
applicable to contracts made and to be performed entirely within such State.
Terms used but not defined herein shall have the respective meaning ascribed
thereto in the Loan Agreement. Unless otherwise defined herein or in the Loan
Agreement, terms used in Article 9 of the Uniform Commercial Code in the State
of Colorado are used herein as therein defined on the date hereof. The headings
of the various subdivisions hereof are for convenience of reference only and
shall in no way modify any of the terms or provisions hereof.
7. Notices. All notices, demands, requests, consents and other
-------
communications hereunder shall be delivered and shall be effective in the manner
specified in Section 9.4 of the Loan Agreement.
8. Rights Not Construed as Duties. Boston Chicken neither assumes nor
------------------------------
shall it have any duty of performance or other responsibility under any
contracts in which Boston Chicken has or obtains a security interest hereunder.
If the Company fails to perform any agreement contained herein, Boston Chicken
may but is in no way obligated to itself perform, or cause performance of, such
agreement, and the expenses of Boston Chicken incurred in connection therewith
shall be payable by the Company under paragraph 12.
9. Amendments. None of the terms and provisions of this Security
----------
Agreement may be modified or amended in any way except by an instrument in
writing executed by each of the parties hereto.
10. Severability. If any one or more provisions of this Security
------------
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected, impaired or prejudiced thereby.
11. Expenses. The Company agrees to indemnify Boston Chicken from and
--------
against any and all claims, losses and liabilities growing out of or resulting
from this Security Agreement (including, without limitation, enforcement of this
Security Agreement), except claims, losses or liabilities resulting from the
Boston Chicken's gross negligence or willful misconduct.
12. Successors and Assigns; Termination. This Security Agreement shall
-----------------------------------
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until full payment and performance of the Secured
Obligations (b) be binding upon the Company, its successors and assigns and (c)
inure, together with the rights and remedies of Boston Chicken hereunder, to the
benefit of Boston Chicken and its successors, transferees and assigns. Upon the
6
<PAGE>
full payment and performance of the Secured Obligations the security interests
granted hereby shall terminate and all rights to the Collateral shall revert to
the Company. Upon any such termination, Boston Chicken will, at the Company's
expense, execute and deliver to the Company such documents as the Company shall
reasonably request to evidence such termination.
13. Submission to Jurisdiction. The Company agrees that any legal action
--------------------------
or proceeding with respect to this Security Agreement or the transactions
contemplated hereby may be brought in any court of the State of Colorado, or in
any court of the United States of America sitting in Colorado, and the Company
hereby submits to and accepts generally and unconditionally the jurisdiction of
those courts with respect to their respective person and property, and
irrevocably consents to the service of process in connection with any such
action or proceeding by personal delivery to the Company or by the mailing
thereof by registered or certified mail, postage prepaid addressed to the
Company at the address for notices as provided in Section 7 hereof. Nothing in
this paragraph shall affect the right of Boston Chicken to serve process in any
other manner permitted by law or limit the right of Boston Chicken to bring any
such action or proceeding against the Company or property in the courts of any
other jurisdiction. The Company hereby irrevocably waives any objection to the
laying of venue of any such suit or proceeding in the above described courts.
14. Waiver of Jury Trial. No party to this instrument, which includes
--------------------
any assignee, successor, heir or personal representative of a party, shall seek
a jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, any related instrument,
or the dealings or the relationship between the parties. If the subject matter
of any such litigation is one in which the waiver of a jury trial is prohibited,
if at all, under the controlling law of the applicable jurisdiction, by
constitutional or statutory provision, no party hereto will present as a defense
or counterclaim in such litigation any claim which would reduce or offset any
amount or right claimed under the provisions of this Agreement. No party will
seek to consolidate any such action, in which a jury has been waived, with any
other action in which a jury trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 14 HAVE BEEN FULLY DISCUSSED BY THE PARTIES
HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN
ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE BANK IN ENTERING INTO THIS AGREEMENT.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security Agreement to be
duly executed as of the day and year first set forth above.
[NAME OF COMPANY]
By: ______________________
Its: ______________________
8
<PAGE>
EXHIBIT E
FORM OF OPINION OF COUNSEL
<PAGE>
[Form of Opinion of Counsel]
[Date]
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Re:
Ladies and Gentlemen:
We have acted as counsel for Progressive Bagel Concepts, Inc., a
Delaware corporation (the "Company") and Brackman Bros., Inc. ( the
"Subsidiary"), in connection with the preparation, execution, and delivery of
the Documents (as hereinafter defined). This opinion is furnished to you
pursuant to Section 7.1 of the Agreement (as hereinafter defined). As used
herein, the term "State" means the State of [opining jurisdiction] and the term
"UCC" means the Uniform Commercial Code as in effect in the State on the date
hereof. Other capitalized terms used herein and not otherwise defined herein
have the meanings provided in the Agreement.
The documents we have examined in rendering this opinion are the
following:
(i) The following, collectively called the "Documents":
(a) the Secured Loan Agreement (the "Agreement"), of even date
herewith, between the Company and Boston Chicken, Inc. ("Boston Chicken");
(b) the Convertible Secured Note of the Company, of even date
herewith and delivered pursuant to the Agreement (the "Note");
(c) the Subsidiary Stock Pledge Agreement, dated of even date
herewith, between the Company and Boston Chicken delivered pursuant to the
Agreement (the "Subsidiary Pledge Agreement");
(d) the Subsidiary Security Agreement, dated of even date
herewith between Brackman Bros., Inc. and Boston Chicken pursuant to the
Agreement (the "Subsidiary Pledge Agreement");
(e) [other documents as applicable]
(ii) A certificate of the Secretary of the Company certifying as to
(A) the Certificate of Incorporation and bylaws of the Company and (B)
resolutions adopted on _________________ by the Board of Directors and
shareholders of the Company;
<PAGE>
(iii) Copies of those indentures, loan or credit agreements, leases,
guarantees, mortgages, security agreements, bonds, notes and other
agreements or instruments, and orders, writs, judgments, awards,
injunctions and decrees, which have been certified by the Secretary of the
Company as those documents which affect or purport to affect the Company's
right to borrow money under, or right to undertake and perform its
obligations under, the Documents (collectively, the "Other Agreements and
Court Orders"), a copy of which certificate is attached hereto as Exhibit
-------
A; and
-
(iv) A certificate of the Secretary of State of _________, dated
___________, attesting to the continued corporate existence and good
standing of the Company in that state.
We have also examined such other corporate documents and records, and
other certificates, opinions and instruments and have conducted such
investigation as we have deemed necessary as a basis for the opinions
expressed below. As to factual matters relevant to our opinions expressed
below, we have, without independent investigation, relied upon all of the
foregoing, upon the factual representations made by the Company in Article
IV of the Agreement, upon certificates of the officers of the Company and
of public officials, and upon public records.
Based upon the subject to the matters stated herein and upon such
investigation as we have deemed necessary, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the state of its incorporation, with
corporate power and authority to enter into the Agreement and to issue the
Note and incur the indebtedness to be evidenced thereby.
2. The Subsidiary is a corporation duly organized, validly
existing, and in good standing under the laws of the state of its
incorporation, with corporate power and authority to enter into the
Documents to which it is a party.
3. Each of the Documents to which the Company is a party has been
duly authorized by all required corporate action on the part of the
Company, and each of them has been duly executed and delivered by the
Company, and constitutes the legal, valid, and binding obligation of the
Company, enforceable against the Company in accordance with its terms.
4. Each of the Documents to which the Subsidiary is a party has
been duly authorized by all required corporate action on the part of the
Subsidiary, and each of them has been duly executed and delivered by the
Subsidiary, and constitutes the legal, valid, and binding obligation of the
Subsidiary, enforceable against the Subsidiary in accordance with its
terms.
2
<PAGE>
5. The execution and delivery of the Documents and the performance by the
Company of its obligations thereunder, will not conflict with or result in any
breach of any of the provisions of, or constitute a default under, or result in
the creation or imposition of any lien or encumbrance upon any of the properties
of the Company pursuant to the provisions of (a) its Certificate of
Incorporation or bylaws, (b) any of the Other Agreements and Court Orders, or
(c) any law, rule, or regulation including without limitation Regulation G, T, U
or X of the Board of Governors of the Federal Reserve.
6. The execution and delivery of the Documents and the performance by the
Subsidiary of its obligations thereunder, will not conflict with or result in
any breach of any of the provisions of, or constitute a default under, or
result in the creation or imposition of any lien or encumbrance upon any of the
properties of the Subsidiary pursuant to the provisions of (a) its Certificate
of Incorporation or bylaws, (b) any of the Other Agreements and Court Orders, or
(c) any law, rule, or regulation including without limitation Regulation G, T,
U or X of the Board of Governors of the Federal Reserve.
7. To the best of our knowledge, no consent, authorization, appraisal, or
other action by, and no notice to or filing with, any governmental authority or
regulatory body or any other person, which has not been obtained or taken, is
required for the execution and delivery of, or the performance by the Company or
the Subsidiary of their respective obligations under, each of the Documents.
8. Under applicable law, the Company's Certificate of Incorporation and
bylaws, and all contracts, agreements, or restrictions known by us to bind the
Company, the vote of the holders of a majority of the shares of common stock of
the Company is sufficient to elect the directors of the Company, approve the
merger, consolidation, or sale of substantially all of the assets of the
Company, or take any other action whatsoever.
9. The Company is not an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
10. The Company is not a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
11. The Agreement creates a valid security interest in your favor as
security for the payment of the obligations of the Company under the Agreement
and the Note in all of the Company's right, title, and interest in and to all
personal property (the "Code Collateral") included within the definition of the
term Collateral (as defined in the Agreement) in which a security interest can
be granted under the UCC and Non-[opining
3
<PAGE>
jurisdiction] Codes (as such term is hereinafter defined)./1/ We have
examined the financing statements (the "Financing Statements") to be filed
in the filing offices listed on Annex 1 attached hereto (the "Filing
-------
Offices") with respect to the security interests granted to Boston Chicken
pursuant to the Agreement, and upon the filing of such Financing Statements
in the Filing Offices, and assuming that the representations made in the
Agreement with respect to the location of the Code Collateral and the chief
executive office of the Company are and remain true and correct: (a) all
filings, registrations and recordings necessary to perfect the security
interest granted to you under such Agreement in respect of all Code
Collateral in which a security interest may be perfected by filing a
financing statement in the Filing Offices will have been accomplished; and
(b) the security interests granted to you pursuant to such Agreement in and
to such Code Collateral will be perfected to the extent that such security
interests may be perfected by filing financing statements in the Filing
Offices under the UCC and the Non-[opining jurisdiction] Codes.
12. The Subsidiary Security Agreement creates a valid security
interest in your favor as security for the payment of the obligations of
the Company under the Agreement and the Note in all of the Subsidiary's
right, title, and interest in and to all personal property (the "Code
Collateral") included within the definition of the term Collateral (as
defined in the Agreement) in which a security interest can be granted under
the UCC and Non-[opining jurisdiction] Codes (as such term is hereinafter
defined)./2/ We have examined the financing statements (the "Financing
Statements") to be filed in the filing offices listed on Annex I attached
-------
hereto ( the "Filing Offices") with respect to the security interests
granted to Boston Chicken pursuant to the Subsidiary Security Agreement,
and upon the filing of such Financing Statements in the Filing Offices, and
assuming that the representations made in the Subsidiary Security Agreement
with respect to the location of the Code Collateral and the chief executive
office of the Subsidiary are and remain true and correct: (a) all filings,
registrations and recordings necessary to perfect the security interest
granted to you under such Subsidiary Security Agreement in respect of all
Code Collateral in which a security interest may be perfected by filing a
financing statement in the Filing Offices will have been accomplished; and
(b) the security interests granted to you pursuant to such Subsidiary
Security Agreement in and to such Code Collateral will be perfected to the
extent that such security interests may be perfected by filing financing
statements in the Filing Offices under the UCC and the Non-[opining
jurisdiction] Codes.
13. The Pledge Agreement creates a valid security interest in your
favor as security for payment of the Secured Obligations in the Collateral
(as such terms are defined in the Pledge Agreement). Assuming the
continuous possession at all times hereafter by you of the Pledged Shares
(as defined in the Pledge Agreement) which are evidenced by instruments or
certificates, the security interests created in your favor under
___________________
1* Opinion with respect to the perfection of security interests in Non-Opining
Jurisdictions is only required when the Company has code Collateral or its chief
executive office outside of the Non-Opining Jurisdiction.
2* Opinion with respect to the perfection of security interests in Non-Opining
Jurisdictions is only required when the Company has code Collateral or its chief
executive office outside of the Non-Opining Jurisdiction.
4
<PAGE>
the Pledge Agreement with respect to such Pledged Shares constitute
perfected security interests in such Pledged Shares.
In addition to any assumptions, qualifications and other matters set
forth elsewhere herein, the opinions set forth above are subject to the
following:
(a) For the purpose of this opinion, we have assumed that the Code
Collateral exists and the Company and the Subsidiary have rights or title to
each item thereof, that all natural persons have legal capacity, that all items
submitted to us as originals are authentic and all signatures thereon are
genuine, that all items submitted to us as copies conform to the originals and
each such original or copy is complete and has been duly executed and delivered
by each party (other than the Company and the Subsidiary) pursuant to due
authorization as such party's legal, valid, and binding obligation, enforceable
against such party in accordance with its respective terms.
(b) Our opinion with respect to the legality, validity, binding
effect, and enforceability of any document or agreement is subject to the effect
of any applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium, or similar law affecting creditors' rights generally and to the
effect of general principles of equity, including (without limitation) concepts
of materiality, reasonableness, good faith, and fair dealing (regardless of
whether considered in a proceeding in equity or at law).
(c) We call your attention to the following matters (as well as
those matters set out in paragraph (d) below) as to which we express no opinion:
(i) the Company's agreement in the Agreement to indemnify you
against costs, expenses, or liability notwithstanding your acts of gross
negligence or willful misconduct;
(ii) the Company's agreements in the Agreement for payment or
reimbursement of costs, fees, and expenses or indemnification for claims,
losses, or liabilities to the extent any such provision may be determined
by a court or other tribunal to be in an unreasonable amount, to constitute
a penalty, or to be contrary to public policy;
(iii) any of the waivers or remedies contained in the Documents,
whether or not any Document deems any such waiver or remedy commercially
reasonable, if such waivers or remedies are determined (1) not to be
commercially reasonable within the meaning of the UCC, (2) to conflict with
mandatory provisions under the UCC or other applicable law, or (3) to be
taken in a manner determined to be unreasonable or not performed in good
faith or with fair dealing or with honesty in-fact;
(iv) certain other provisions contained in the Documents which may
be limited or rendered ineffective by applicable laws or judicial decisions
governing such provisions or holding their enforcement to be unreasonable
under the then-existing circumstances, but
5
<PAGE>
such laws and judicial decisions do not, in our opinion, render the
Documents invalid as a whole or leave you without remedies; or
(v) the priority or continued perfection of any security interest
or lien granted by the Company to you under any of the Documents.
(d) Our opinions set forth in paragraph 8 above are subject to the
following further qualifications, exclusions and assumptions:
(i) Our opinions are qualified by and subject to:
(A) in the case of proceeds, continuation of perfection of
your security interest therein is limited to the extent set forth in
Section 9-306 of the UCC;
(B) in the case of property which becomes collateral after
the date hereof, Section 547 of the United States Bankruptcy Code (the
"Bankruptcy Code") provides that a transfer is not made until the debtor has
rights in the property transferred, so a security interest in after-acquired
property which is security for other than a contemporaneous advance may be
treated as a voidable preference under the conditions (and subject to the
exceptions) provided by Section 547;
(C) Section 552 of the Bankruptcy Code limits the extent to
which property acquired by a debtor after the commencement of the case
under the Bankruptcy Code may be subject to a security interest arising
from a security agreement entered into by the debtor before the
commencement of such case; and
(D) Section 364 of the Bankruptcy Code provides that the
extension of secured credit after the commencement of a case under the
Bankruptcy Code requires court approval.
(ii) We express no opinion as to:
(A) the creation or perfection of any security interest in
any fixtures or property excluded from the provisions of the UCC pursuant
to 9-104; and
(B) the perfection of any security interest in accounts that
are an obligation of the Federal government or any agency or political
subdivision thereof to the extent that any applicable laws require any
actions in addition to filing of the Financing Statements.
(iii) We have assumed with your permission that:
6
<PAGE>
(A) the Company has right, title, and interest in and to the
collateral pledged by it;
(B) all items of collateral (including, without limitation,
money, shares of capital stock, or additional instruments) pledged under
the Pledge Agreement, of which possession must be obtained and retained by
a secured party in order to perfect its security interest pursuant to
Section 9-103 and 9-304 of the UCC, are in your actual or constructive
possession and not in the possession of the Company or any of its
subsidiaries, affiliates, or agents;
(C) all items of collateral constitute items which are mobile
in nature and, if installed on any property, do not constitute fixtures;
and
(D) none of the collateral consists of consumer goods, farm
products, crops, timber, minerals, or the like (including oil and gas), or
accounts resulting from the sale thereof, receivables due from any
government or agency or department thereof, beneficial interests in a trust
or a decedent's estate, letters of credit, inventory which is subject of
any negotiable documents of title, such as a negotiable bill of lading or
warehouse receipt held by anyone other than you or on your behalf, or items
which are subject to a requirement of any jurisdiction, including the
State, which provides for a registration or certificate of title or a
filing other that under the UCC.
Whenever our opinion with respect to the existence or absence of facts
is indicated to be based on our knowledge or awareness, we are referring solely
to the actual knowledge of the particular [firm name] attorneys who have
represented the Company in connection with the Documents. Except as expressly
set forth herein, we have not undertaken any independent investigation to
determine the existence or absence of such facts and no inference as to our
knowledge concerning such facts should be drawn from the fact that such
representation has been undertaken by us.
Our opinions expressed herein are limited to the laws of the State of
[opining jurisdiction], [the general corporation law of the state of the
Company's and Subsidiary's incorporation if different than the opining
jurisdiction] and the federal laws of the United States, and we do not express
any opinion herein concerning any other law except as expressly set forth in
paragraph 8 above. With respect to our opinions in paragraph 8, to the extent
our opinions are not governed by federal or [opining jurisdiction] law, our
opinions are based solely and exclusively on a review of Subsections 9-103(3),
9-203(1) and (2), 9-302(1), 9-303, 9-401(1) and 9-402(1) and (3) of the Uniform
Commercial Codes as reported by [Commerce Clearing House, Inc. in the Secured
Transactions Guide for the states listed on Annex I] (collectively, the states
listed on Annex I are sometimes referred to herein as the "Non-[opining
jurisdiction] Jurisdictions" and the Uniform Commercial Codes as adopted and in
effect in such Non-[opining jurisdiction] Jurisdictions are sometimes called the
"Non-[opining jurisdiction] Codes"). We have not reviewed, and we express no
opinion on, local custom with respect to, and any other sections
7
<PAGE>
of, the Non-[opining jurisdiction] Codes, including any provisions that are
referred to in the sections that we have reviewed which are noted above, nor
have we reviewed any other statues of the Non-[opining jurisdiction]
Jurisdictions or judicial decisions construing or interpreting the laws of the
Non-[opining jurisdiction] Jurisdictions, including the Non-[opining
jurisdiction] Codes. By rendering the opinions set forth in paragraph 8 we do
not intend to indicate that we are experts on, or qualified to render opinions
on, the laws of the Non-[opining jurisdiction] Jurisdictions. Accordingly, we
caution you that the opinions in paragraph 8 could be materially affected by
local custom, other provisions of the Non-[opining jurisdiction] Codes, other
statutes, laws, or regulations of the Non-[opining jurisdiction] Jurisdictions
or judicial decisions of courts construing or interpreting the laws of the Non-
[opining jurisdiction] Jurisdictions, including the Non-[opining jurisdiction]
Codes.
This opinion is furnished to you solely in connection with the
transactions described above and may not be relied upon by you (and to the
extent indicated in the previous sentence, your counsel) for any other purpose
or by any other person in any manner of for any purpose.
Very truly yours,
8
<PAGE>
Annex 1
UCC-1 Financing Statement filings to perfect a security interest in collateral
not constituting fixtures:
State Filing Office Reporting Publication
- ----- ------------- ---------------------
9
<PAGE>
Exhibit A
---------
CERTIFICATE
-----------
The undersigned hereby certifies that he is the duly elected Secretary of
Progressive Bagel Concepts, Inc., a Delaware corporation (the "Company"), and
further certifies that the following documents are the only documents which the
Company is a party that affect or purport to affect the Company's right to
borrow money under, or the Company's right to undertake and perform its
obligations under, the Documents (as defined in the Secured Loan Agreement,
dated ________________, between the Company and Boston Chicken, Inc.)
Date: _________________
_______________________
Secretary
<PAGE>
EXHIBIT F-1
ACCOUNTING AND ADMINISTRATIVE SERVICES AGREEMENT
<PAGE>
EXHIBIT F-2
FINANCIAL SERVICES AGREEMENT
<PAGE>
EXHIBIT F-3
REAL ESTATE SERVICES AGREEMENT
<PAGE>
EXHIBIT F-4
COMPUTERS AND COMMUNICATION SYSTEMS SERVICES AGREEMENT
<PAGE>
EXHIBIT G
INVESTOR REPRESENTATION LETTER
<PAGE>
LETTERHEAD OF INVESTOR GROUP
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Ladies and Gentlemen:
The undersigned hereby makes the following representations to Boston Chicken,
Inc. ("BCI") in connection with and as an inducement to and of the consummation
of certain transactions with Progressive Bagel Concepts, Inc., a Delaware
corporation (the "Company"):
The undersigned has conducted an investigation of the Company, including the
management and current and proposed operations of the Company, and of the
locations, characteristics, and demographics of (i) the stores ("the Stores") in
the States of ___________________, _______________, and _____________________
(the "Area"), (ii) the sites for Stores in the Area subject to executed leases
or purchase contracts (the "Leased and Contracted Sites"), and (iii) the
potential sites for Stores being negotiated in the Area (the "Sites in
Progress"), in each case to be purchased by the Company from BCI. The
undersigned has reviewed all of the documents, records, reports, and other
available material relating to the Company's operations, the Stores, the Leased
and Contracted Sites, and the Sites in Progress, and is familiar with their
content. The undersigned acknowledges that it has been given access to and has
visited and examined the Company's operations and the Stores, the Leased and
Contracted Sites, and the Sites and in Progress, and is satisfied with the
condition thereof and that all inquiries have been answered to its satisfaction.
For the purpose of conducting these investigations, the undersigned has employed
the services of its own agents, representatives, experts, and consultants. In
all matters affecting the undersigned's decision to invest in the Company, the
undersigned is relying upon the advice and opinions of its own agents,
representatives, experts, and consultants and not upon any information or
statement, oral or written, of or provided by BCI or its officers, directors,
agents, representatives, or attorneys.
Very truly yours,
<PAGE>
EXHIBIT 9.2(f)
--------------
OPINION OF PARSONS BEHLE & LATIMER
----------------------------------
<PAGE>
EXHIBIT 9.2(f)
[ON PARSONS BEHLE & LATIMER LETTERHEAD]
_________________, 1995
Progressive Bagel Concepts, Inc.
[insert address]
Attention: ________________________
Re: Transfer of shares of common stock of Brackman Brothers, Inc., a Utah
corporation (the "Company")
Dear Sirs:
We have served as counsel for the Company and for the holders of the
outstanding shares of the common stock of the Company identified on Exhibit A
attached hereto (the "Shareholders") in connection with the transfer by the
Shareholders of their shares of the common stock of the Company (the
"Contributed Shares") and have been requested by the Shareholders to render our
opinion to you in regard to certain matters related to said transaction. Any
initially capitalized terms used but not defined in this opinion shall have the
meanings assigned to such terms in that certain Agreement to Contribute Shares
by and among the Shareholders of Brackman Brothers, Inc. and Progressive Bagel
Concepts, Inc. of even date herewith (the "Agreement"). The Agreement and the
Registration Rights Agreement and the Employment Agreement (as to the respective
Shareholder who is a party to each such Employment Agreement) (as defined in the
Agreement) are referred to together herein as the "Transaction Documents."
We have examined and relied and base our opinion on originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents and records and upon such matters of law as we have deemed necessary
for the purposes of this opinion:
(i) The Articles of Incorporation, Bylaws, minute book and stock transfer
ledger of the Company; and
(ii) The Transaction Documents and all Exhibits thereto.
<PAGE>
Progressive Bagel Concepts, Inc.
____________________, 1995
Page 2
The opinions set forth herein are qualified as stated herein and are
qualified further by the following:
(a) This opinion is based upon existing laws, ordinances and
regulations in effect as of the date hereof and as they presently apply.
(b) We express no opinion as to the effect of the laws of any state
or jurisdiction other than the State of Utah and the laws of the United
States of America upon the transactions herein.
(c) In rendering the opinions set forth below, we have relied, to the
extent we believe appropriate, as to matters of fact, (i) upon certificates
or statements of public officials and of the officers of the Company and
the Shareholders and (ii) upon representations and warranties of the
Shareholders contained in the Transaction Documents and we have no
independent investigation or verification of said facts. No opinion is
being expressed as to the effect of any event, fact or circumstance of
which we have no actual knowledge.
(d) We have assumed the competency of the signatories to the
Transaction Documents, the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic
copies, and the accuracy and completeness of all records made available to
us.
(e) We have assumed that (i) the Transaction Documents have been duly
authorized, executed and delivered by the parties thereto (other than our
clients), are within their corporate powers, and are their legal, valid and
binding obligations and that they are in compliance with all applicable
laws, rules and regulations governing the conduct of their respective
businesses and this transaction, (ii) the parties to the Transaction
Documents (other than our clients) and all documents to be delivered
thereunder or in connection therewith are not subject to any statute, rule
or regulation or any impediment that requires them or our clients to obtain
the consent, or to make any declaration or filing with any governmental
authority in connection with the transactions contemplated by the
Transaction Documents, and (iii) all terms, provisions and conditions
relating to the transaction referred to in this opinion letter are
correctly and completely reflected in the Transaction Documents and all
documents to be delivered thereunder or in connection therewith.
<PAGE>
Progressive Bagel Concepts, Inc.
____________________, 1995
Page 3
(f) The opinions hereafter expressed are qualified to the extent
that: (i) the characterization of, and the enforceability of any rights or
remedies in, any agreement or instrument may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or transfer, equitable subordination, or similar laws and doctrines
affecting the rights of creditors generally and general equitable
principles; (ii) the availability of specific performance, injunctive
relief or any other equitable remedy is subject to the discretion of a
court of competent jurisdiction; and (iii) the provisions of any document,
agreement or instrument that (a) may require indemnification or
contribution for liabilities under the provisions of any Federal or state
securities laws or in respect to the neglect or wrongful conduct of the
indemnified party or its representatives or agents, (b) purport to confer,
waive or consent to the jurisdiction of any court, or (c) waive any right
granted by common or statutory law, may be unenforceable as against public
policy.
(g) In rendering our opinion in paragraph 1 below regarding the good
standing of the Company, we have relied upon a certificate of good standing
dated ___________, 1995 issued by the Division of Corporations and
Commercial Code of Utah, which we have assumed to be accurate as of the
date hereof.
(h) Whenever our opinion, with respect to the existence or absence of
facts, is qualified by the phrase "to our knowledge" or a phrase of similar
import, it indicates that during the course of our representation of the
Shareholders in connection with the subject transaction no information has
come to the attention of our attorneys who have worked on the subject
transaction which would give us current actual knowledge of the existence
or absence of such facts. However, except to the extent expressly set forth
herein, we have not undertaken any independent investigation to determine
the existence or absence of such facts, and no inference as to our
knowledge of the existence or absence of such facts should be drawn from
the fact of our representation of the Shareholders or any other matter.
Based on the foregoing, and in reliance thereon, but subject to the
assumptions, limitations and qualification expressed herein, we are of the
opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Utah.
<PAGE>
Progressive Bagel Concepts, Inc.
______________________, 1995
Page 4
2. Each of the Shareholders is of legal age and to our knowledge each of
the Shareholders otherwise has full legal capacity to enter into and perform the
Agreement and consummate the transactions contemplated hereby.
3. The Transaction Documents are valid and binding agreements of each of
the Shareholders who are parties thereto, enforceable in accordance with their
terms.
4. To our knowledge, neither the Company nor any of the Shareholders is
subject to any restriction, agreement, law, judgment or decree which would
prohibit or be violated by the execution and delivery of the Agreement or the
consummation of the transactions contemplated hereby, and no consent or approval
is required to be obtained by any of the Shareholders from any third party or
governmental agency with respect to the Agreement or the consummation of the
transactions contemplated thereby, except as disclosed in the Agreement.
5. To our knowledge, there are no actions, suits or proceedings pending
threatened against the Company, except as disclosed in the Agreement.
6. The Company is authorized to issue __________ shares of capital stock,
par value $_____ per share (the "Shares"); ninety-two percent or more of the
issued and outstanding Shares are owned of record by the Shareholders in the
amounts set forth on Exhibit A; and there are 32,200 issued and outstanding
Shares.
7. All outstanding shares of the Contributed Shares (a) are duly and
validly authorized and issued, fully paid and nonassessable; (b) have not been
issued in violation of any preemptive right of any shareholder of the Company;
and (c) to our knowledge, and except as described in the Agreement, are free and
clear of any claim, lien, encumbrance or security interest.
8. Except as described in the Agreement, there is no option, warrant,
right, call, subscription or other agreement or commitment obligating the
Company to issue or sell, or to purchase or redeem, any shares of capital stock
in the Company.
We call your attention to the fact that, although we represent the
Shareholders in connection with the subject transaction, our engagement has been
limited to specific matters as to which we have been consulted.
<PAGE>
Progressive Bagel Concepts, Inc.
______________________, 1995
Page 5
This opinion is limited to the matters stated herein. We disavow any
obligation to update this opinion or advise you of any changes in our opinion in
the event of changes in applicable laws or facts or if additional or newly
discovered information is brought to our attention. This opinion is provided to
you as a legal opinion only and not as a guaranty or warranty of the matters
discussed herein or in the documents referred to herein. No opinion may be
inferred or implied beyond the matters expressly stated herein and no portion of
this opinion may be quoted or in any other way published without the prior
written consent of the undersigned. Further, this opinion may be relied upon
only by the addressee hereof and not by any other party.
Very truly yours,
PARSONS BEHLE & LATIMER
By:____________________________________
<PAGE>
EXHIBIT A
---------
Record Holder Number of Shares
------------- ----------------
Daniel V. Colangelo
Stephen A. Norman
James W. Largay
<PAGE>
EXHIBIT 9.3(d)
--------------
OPINION OF RUDNICK & WOLFE
--------------------------
<PAGE>
[RUDNICK & WOLFE LETTERHEAD APPEARS HERE]
___________ __, 1995
(312) 368-4000
To the Transferors
identified on Exhibit A,
attached hereto
c/o Parsons, Behle & Latimer
One Utah Center
201 South Main Street, Suite 1800
Salt Lake City, Utah 84147
Attention:________________
Re: Transfer of shares of common stock of Progressive Bagel Concepts,
Inc., a Delaware corporation (the "Company") and Boston Chicken,
Inc., a Delaware corporation ("BCI")
Dear Sirs:
We have served as counsel for the Company in connection with the transfer
of certain shares of common stock of the Company (the "Exchange Shares") and
certain shares of common stock of BCI (the "BCI Shares") and have been requested
by the Company to render our opinion to you in regard to certain matters
related to said transaction. Any initially capitalized terms used but not
defined in this opinion shall have the meanings assigned to such terms in that
certain Agreement to Contribute Shares by and among the Shareholders of Brackman
Brothers, Inc. and Progressive Bagel Concepts, Inc. of even date herewith
together with the schedules and exhibits attached thereto (the "Agreement"). The
Agreement and the Registration Rights Agreement, the Employment Agreements and
the Assignment (as those are defined in the Agreement) are referred to together
as the "Transaction Documents."
We have examined and relied and base our opinion on originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents and records and upon such matters of law as we have deemed necessary
for the purposes of this opinion:
(i) The Articles of Incorporation, Bylaws, minute book and stock
transfer ledger of the Company; and
(ii) The Transaction Documents and all Exhibits thereto.
<PAGE>
The opinions set forth herein are qualified as stated therein and are
qualified further by the following:
(a) This opinion is based upon existing laws, ordinances and
regulations in effect of the date hereof and as they presently apply.
(b) We express no opinion as to the effect of the laws of any state
or jurisdiction other than the State of Illinois, the General Corporation
Law of the State of Delaware and the laws of the United States of America
upon the transactions described herein.
(c) In rendering the opinions set forth below, we have relied, to the
extent we believe appropriate, as to matters of fact, (i) upon certificates
or statements of public officials and of the officers of the Company and
(ii) upon representations and warranties of the Company contained in the
Transaction Documents and we have made no independent investigation or
verification of said facts. No opinion is being expressed as to the effect
of any event, fact or circumstance of which we have no actual knowledge.
(d) We have assumed the competency of the signatories to the
Transaction Documents, the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic
copies, and the accuracy and completeness of all records made available to
us.
(e) We have assumed that (i) the Transaction Documents have been duly
authorized, executed and delivered by the parties thereto (other than our
client), are their legal, valid and binding obligations and that they are
in compliance with all applicable laws, rules and regulations governing the
conduct of their respective businesses and this transaction, (ii) the
parties to the Transaction Documents (other than our client), and all
documents to be delivered thereunder or in connection therewith are not
subject to any statute, rule or regulation or any impediment that requires
them or our client to obtain the consent, or to make any declaration or
filing with any governmental authority in connection with the transactions
contemplated by the Transaction Documents, and (iii) all terms, provisions
and conditions relating to the transaction referred to in this opinion
letter are correctly and completely reflected in the Agreement and all
documents to be delivered thereunder or in connection therewith.
(f) The opinions hereafter expressed are qualified to the extent
that: (i) the characterization of, and the enforceability of any rights or
remedies in, any agreement or instrument may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or transfer, equitable subordination, or similar laws and doctrines
affecting the rights of creditors generally and general equitable
principles, (ii) the availability of specific performance, injunctive
relief or any other equitable remedy is subject to the discretion of a
court of competent jurisdiction; and (iii) the provisions of any document,
agreement or instrument that (a) may require indemnification or
contribution for liabilities under the provisions of any Federal or state
securities
<PAGE>
Transferors identified on
Exhibit A attached hereto
__________ __, 1995
Page 3
laws or in respect to the neglect or wrongful conduct of the indemnified
party or its representatives or agents, (b) purport to confer, waive or
consent to the jurisdiction of any court, or (c) waive any right granted by
common or statutory law, may be unenforceable as against public policy.
(g) In rendering our opinion in paragraph 1 below regarding the good
standing of the Company, we have relied upon a certificate of good
standing, dated _____, 1995 issued by the Secretary of State of Delaware,
which we have assumed to be accurate as of the date hereof.
(h) In rendering our opinions in Paragraph 7 below regarding the BCI
Shares, we have relied solely upon an opinion rendered by counsel for BCI
of even date herewith without having conducted an investigation to
determine or verify the accuracy of the opinion expressed by counsel for
BCI.
(i) Whenever our opinion, with respect to the existence or absence of
facts, is qualified by the phrase "to our knowledge" or a phrase of similar
import, it indicates that during the course of our representation of the
Company in connection with the subject transaction no information has come
to the attention of our attorneys who have worked on the subject
transaction which would give us current actual knowledge of the existence
or absence of such facts. However, except to the extent expressly set forth
herein, we have not undertaken any independent investigation to determine
the existence or absence of such facts, and no inference as to our
knowledge of the existence or absence of such facts should be drawn from
the fact of our representation of the Company or any other matter.
Based on the foregoing, and in reliance thereon, but subject to the
assumptions, limitations and qualifications expressed herein, we are of the
opinion that:
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has full
corporate power and authority to enter into and perform under the
Transaction Documents and consummate the transactions contemplated thereby.
The execution, delivery and performance of the Transaction Documents and
the consummation of the transactions contemplated thereby by the Company
have been duly authorized by all necessary corporate action and the
Transaction Documents are valid and binding agreements of the Company,
enforceable in accordance with its terms.
<PAGE>
Transferors identified on
Exhibit A attached hereto
_________ __, 1995
Page 4
2. To our knowledge, the Company is not subject to any restriction,
agreement, law, judgment or decree which would prohibit or be violated by
the execution and delivery of the Agreement or the consummation of the
transactions contemplated hereby, and no consent or approval is required to
be obtained by the Company from any third party or governmental agency with
respect to the Transaction Documents or the consummation of the
transactions contemplated thereby.
3. To our knowledge, there are no action, suits or proceedings
pending or threatened against the Company.
4. With respect to the Exchange Shares, (a) the Company is
authorized to issue ______ shares of Exchange Shares (par value $_____ per
share); (b) prior to delivery and issuance of the Exchange Shares pursuant
to the Agreement, there were no issued and outstanding shares of Exchange
Shares; and (c) except as disclosed in the Agreement and the Memoranda,
there are no other issued and outstanding shares of capital stock in the
Company.
5. Upon issuance and the delivery thereof to the Transferors
pursuant to the terms of the Agreement, the Exchange Shares (a) will be
duly and validly authorized and issued, fully paid and nonassessable; (b)
will not have been issued in violation of any preemptive right of any
shareholder of the Company; and (c) to our knowledge, and except as
described in the Agreement or the Memoranda, will be free and clear of any
claim, lien, encumbrance or security interest.
6. Except as described in the Agreement or the Memoranda, there is
no option, warrant, right, call, subscription or other agreement or
commitment obligating the Company to issue or sell, or to purchase or
redeem, any shares of the Exchange Shares.
7. [Insert opinions rendered by BCI under the Stock Purchase
Agreement with appropriate adaptations.]
We call your attention to the fact that although we represent the Company
in connection with the subject transaction, our engagement has been limited to
specific matters as to which we have been consulted.
This opinion is limited to the matters stated herein. We disavow any
obligation to update this opinion or advise you of any changes in our opinion in
the event of changes in applicable
<PAGE>
Transferors identified on
Exhibit A attached hereto
_________ __, 1995
Page 5
laws or facts or if additional or newly discovered information is brought to our
attention. This opinion is provided to you as a legal opinion only and not as a
guaranty or warranty of the matters discussed herein or in the documents
referred to herein. No opinion may be inferred or implied beyond the matters
expressly stated herein and no portion of this opinion may be quoted or in any
other way published without the prior written consent of the undersigned.
Further, this opinion may be relied upon only by the addressee hereof and not by
any other party.
Very truly yours,
RUDNICK & WOLFE
By:_________________________
cc: Joel M. Alam
bcc. Janice M. Harris
<PAGE>
EXHIBIT A
---------
THE TRANSFERORS
---------------
<PAGE>
Exhibit 2.1(b)
AMENDMENT TO AGREEMENT TO
CONTRIBUTE SHARES
-----------------
This Amendment to Agreement to Contribute Shares is made and entered into
this 24th day of March 1995 by and among Daniel V. Colangelo, James W. Largay,
Stephen A. Norman, Vito J. Colangelo, Julius A. Frankel and Paul Aiken
(collectively, "Transferors"), PROGRESSIVE BAGEL CONCEPTS, INC., a Delaware
corporation ("Transferee"), and BRACKMAN BROTHERS, INC. , a Utah corporation
("Brackman").
Recitals
--------
WHEREAS, the parties hereto have entered into that certain Agreement to
Contribute Shares dated February 17, 1995 (the "Agreement") pursuant to which,
among other things, Transferee has agreed to purchase from Transferors, and
Transferors have agreed to sell to Transferee, all of the issued and outstanding
shares of Brackman; and
WHEREAS, the parties hereto desire to amend the Agreement only on the terms
stated herein.
Agreements
----------
In consideration of the premises and mutual agreements hereinafter set
forth, the parties hereto hereby agree as follows:
1. Definitions. Initially capitalized terms used but not defined in this
Amendment shall have the meanings ascribed to such terms in the Agreement.
2. Amendment. Section 5.9 of the Agreement shall be deleted in its
entirety and in its place and stead shall be substituted the following:
Each Transferor covenants and agrees that until the earlier of February 28,
1998 or the completion of any Qualified Public Offering, he will vote his
Exchange Shares for the election to the Board of Directors of Transferee of each
person who is a "Founding Director", which shall initially include Daniel V.
Colangelo, and thereafter such additional persons designated, from time to time,
as Founding Directors by resolution adopted by the Board of Directors of
Transferee, three directors designated by BCI and three directors designated by
the Investors. Each Transferor covenants that he will cause each transferee of
his Exchange Shares to comply with the foregoing.
3. The Agreement. Subject to the amendments to the Agreement set out in
Section 2 above, the provisions of the Agreement shall remain unchanged and
shall continue to be binding and enforceable against each party hereto.
1
<PAGE>
IN WITNESS WHEREOF, all of the parties hereto have executed this Amendment
or caused this Amendment to be executed on its behalf by its duly authorized
officer on the day and year first written above.
PROGRESSIVE BAGEL CONCEPTS, INC.,
a Delaware Corporation
BY: /s/
----------------------------------
Its: Vice President
----------------------------------
"Transferee"
/s/ DANIEL V. COLANGELO
----------------------------------
Daniel V. Colangelo
/s/ JAMES W. LARGAY
----------------------------------
James W. Largay
/s/ STEPHEN A. NORMAN
----------------------------------
Stephen A. Norman
/s/ VITO J. COLANGELO
----------------------------------
Vito J. Colangelo
/s/ JULIUS A. FRANKEL
--------------------------------
Julius A. Frankel
/s/ PAUL AIKEN
---------------------------------
Paul Aiken
Collectively, "Transferors"
BRACKMAN BROTHERS, INC.,
A Utah corporation
By: /s/ DANIEL V. COLANGELO
-----------------------------
Its: President
-------------------------
"Brackman"
2
<PAGE>
Exhibit 2.2
AGREEMENT TO CONTRIBUTE ASSETS
BY AND AMONG
PROGRESSIVE BAGEL CONCEPTS, INC.,
BAGEL & BAGEL, INC.
AND
RICHARD LOZOFF
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
SECTION PAGE
- ------- ----
<S> <C>
1. CONTRIBUTION AND EXCLUDED ASSETS .......................................................................................... 2
1.A. Contributed Assets ............................................................................................. 2
1.B. Excluded Assets ................................................................................................ 4
2. CONSIDERATION TO BE EXCHANGED FOR CONTRIBUTED ASSETS ...................................................................... 4
2.A. Consideration .................................................................................................. 4
2.B. Assumed Liabilities ............................................................................................ 4
2.C. Excluded Liabilities ........................................................................................... 4
2.D. No Expansion of Third Party Rights ............................................................................. 5
2.E. Allocation of the Consideration Among the Contributed Assets .................................................. 5
3. PUT OPTION ................................................................................................................ 5
4. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR AND THE SHAREHOLDER ..................................................................................... 7
4.A. Organization, Power and Authority of the Transferor ............................................................ 7
4.B. Capital Stock of the Transferor ................................................................................ 7
4.C. The Shareholder of the Transferor .............................................................................. 7
4.D. Financial Statements of the Transferor ......................................................................... 8
4.E. Liabilities of the Transferor .................................................................................. 8
4.F. Financial Obligations .......................................................................................... 8
4.G. Tax Matters .................................................................................................... 8
4.H. Real Estate of the Transferor .................................................................................. 9
4.I. Good Title to the Contributed Assets ........................................................................... 10
4.J. [Intentionally Omitted] ........................................................................................ 10
4.K. Licenses and Permits of the Transferor ......................................................................... 10
4.L. Proprietary Rights of the Transferor ........................................................................... 10
4.M. Adequacy of the Contributed Assets; the Transferor's Relationships
with its Customers and Suppliers ............................................................................... 11
4.N. Documents of and Information with Respect to the Transferor .................................................... 11
4.0. Litigation Involving the Transferor ............................................................................ 12
4.P. The Records of the Transferor .................................................................................. 12
4.Q. No Material Adverse Change ..................................................................................... 12
4.R. Absence of Certain Acts or Events .............................................................................. 13
4.S. Compliance with Laws by the Transferor ......................................................................... 13
4.T. Environmental Matters .......................................................................................... 13
4.U. Labor Relations of the Transferor .............................................................................. 14
4.V. Employee Benefit ............................................................................................... 15
4.W. Product Liability Claims; Product Warranties and Indemnities ................................................... 15
4.X. Due Authorization; Binding Obligation .......................................................................... 15
</TABLE>
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4.Y. Accuracy of Information Furnished by the Transferor or the
Shareholder .................................................................................................... 16
4.Z. Brokers and Finders. ........................................................................................... 16
4.AA. Private Placement Memorandum ................................................................................... 16
4.AAA. Dissolution and Distributions .................................................................................. 17
4.AB. Additional Representations and
Warranties of the Shareholder .................................................................................. 18
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
TRANSFEREE ................................................................................................................ 19
5.A. Organization, Power and Authority of the Transferee ............................................................ 19
5.B. Due Authorization; Binding Obligation .......................................................................... 19
5.C. Timing of Closing .............................................................................................. 19
5.D. Covenants Regarding Exchange Shares ............................................................................ 20
6. ADDITIONAL COVENANTS, AGREEMENTS AND
ACKNOWLEDGMENTS OF THE TRANSFEROR AND THE SHAREHOLDER ..................................................................... 20
6.A. [Intentionally Omitted] ........................................................................................ 20
6.B. No Other Discussions ........................................................................................... 20
6.C. Retention and Voting of Shares ................................................................................. 20
6.D. Best Efforts ................................................................................................... 20
6.E. Restrictions on Transfer of Exchange Shares .................................................................... 21
6.F. Legends on Exchange Shares ..................................................................................... 21
6.G. Confidential Information ....................................................................................... 22
6.H. Restrictive Covenant ........................................................................................... 23
6.I. Remedies; Waiver ............................................................................................... 24
6.J. Acknowledgement of Dual Representation ......................................................................... 24
6.K. Acknowledgement of Related Party Transactions .................................................................. 24
6.L. Subsequent Audited Financials .................................................................................. 25
6.M. Directors ...................................................................................................... 25
6.N. Conduct of Business Prior to Closing ........................................................................... 25
6.0. Access Pending and After Closing ............................................................................... 27
6.P. Consents of Third Parties ...................................................................................... 27
6.Q. Interim Financial Statements ................................................................................... 28
6.R. Public Disclosure .............................................................................................. 28
6.S. Cooperation .................................................................................................... 28
6.T. Preemptive Rights .............................................................................................. 28
7. CONDITIONS TO THE OBLIGATION OF THE TRANSFEREE ............................................................................ 29
7.A. Accuracy of Representations and Warranties and Compliance
Obligations .................................................................................................... 29
7.B. Deliveries ..................................................................................................... 29
</TABLE>
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7.C. Receipt of Necessary Consents .................................................................................. 30
7.D. Registration Rights Agreement .................................................................................. 30
7.E. Employment Agreement ........................................................................................... 30
7.F. Payoff ......................................................................................................... 30
7.G. [Intentionally Omitted] ........................................................................................ 30
7.H. Due Diligence .................................................................................................. 30
7.I. Deliveries ..................................................................................................... 31
8. CONDITIONS TO OBLIGATIONS OF THE
TRANSFEROR AND THE SHAREHOLDER ............................................................................................ 31
8.A. Accuracy of Representations and
Warranties and Compliance with Obligations ..................................................................... 31
8.B. Investor Offering .............................................................................................. 31
8.C. BCI Loan Agreement ............................................................................................. 31
8.D. Employment Agreement ........................................................................................... 31
8.E. Board of Directors' Approval ................................................................................... 31
8.F. Deliveries ..................................................................................................... 32
8.G. Registration Rights Agreement .................................................................................. 32
8.H. Assignment of Rights ........................................................................................... 32
8.I. Election of Gail Lozoff ........................................................................................ 32
8.J. Closing Condition .............................................................................................. 32
9. CLOSING AND CLOSING DELIVERIES ............................................................................................ 32
9.A. Closing ........................................................................................................ 32
9.B. Action To Be Taken by Transferor and the Shareholder ........................................................... 32
9.C. Action To Be Taken By The Transferee ........................................................................... 34
9.D. Form of Documents .............................................................................................. 35
9.E. Further Assurances ............................................................................................. 35
10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
COVENANTS ................................................................................................................ 35
11. CERTAIN ACTIONS AFTER THE CLOSING ........................................................................................ 36
11.A. The Transferee to Act as Agent for the Transferor ............................................................. 36
11.B. Delivery of Property Received by the Transferor After Closing ................................................. 36
11.C. The Transferee Appointed Attorney for the Transferor .......................................................... 37
11.D. Employment by the Transferee of the Transferor's Employees .................................................... 37
11.E. Payment of Certain Assumed Liabilities ....................................................................... 37
12. INDEMNIFICATION .......................................................................................................... 38
12.A. Agreement by the Transferor and the Shareholder to Indemnify .................................................. 38
12.B. Agreement by the Transferee to Indemnify ...................................................................... 39
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13. MISCELLANEOUS ............................................................................................................ 39
13.A. Amendment and Modification .................................................................................... 39
13.B. Termination ................................................................................................... 39
13.C. Binding Effect ................................................................................................ 40
13.D. Severability .................................................................................................. 40
13.E. Entire Agreement .............................................................................................. 40
13.F. Headings ...................................................................................................... 40
13.G. Execution in Counterpart ...................................................................................... 40
13.H. Notices ....................................................................................................... 40
13.I. Governing Law ................................................................................................. 42
13.J. Construction. ................................................................................................. 42
13.K. Expenses ...................................................................................................... 43
13.L. Agreement Regarding Schedules ................................................................................. 43
</TABLE>
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AGREEMENT TO CONTRIBUTE ASSETS
------------------------------
This agreement to contribute assets (the "Agreement") is made and entered
into this 2nd day of March by and among Bagel & Bagel, Inc., a Missouri
corporation (the "Transferor"), Progressive Bagel Concepts, Inc. (the
"Transferee"), a Delaware corporation, and Richard Lozoff (referred to as the
"Shareholder").
R E C I T A L S:
- - - - - - - -
A. The Transferee is being formed for the purpose of acquiring, developing
and operating retail bagel bakeries.
B. The Transferee proposes to purchase from Boston Chicken, Inc., a
Delaware corporation ("BCI"), that number of shares of the common stock of BCI
that will have an aggregate market value of Five Million Five Hundred Thousand
Dollars ($5,500,000) (the "BCI Shares") as provided in and pursuant to a Stock
Purchase Agreement by and between the Transferee and BCI substantially in the
form attached hereto as Exhibit I ("Stock Purchase Agreement") and to enter into
a related registration rights agreement with BCI substantially in form attached
to the Stock Purchase Agreement as Exhibit B thereto (the "BCI Registration
Rights Agreement").
C. The Shareholder owns 500 shares of the common stock of the Transferor,
which shares constitute all of the issued and outstanding shares of the
Transferor.
D. The Transferor currently owns and operates seven (7) bagel shops using
the service mark "Bagel & Bagel", each of which is located in leased premises
(the "Stores") (such business is referred to herein as the "Business"). The
Transferor desires to contribute to the Transferee and the Transferee desires to
accept from the Transferor all of the net assets, properties and business of the
Transferor in exchange for the BCI Shares, that number of shares of common
stock, par value $.01 per share, of the Transferee as shall meet the provisions
of Section 5.D hereof (such shares of the Transferee are referred to herein as
the "Exchange Shares") and the assumption by the Transferee of certain
liabilities of the Transferor, all as herein provided and on the terms and
conditions hereinafter set forth.
E. The Transferor and the Transferee hereby acknowledge and agree that it
is their intention that (i) the transaction contemplated hereby will close
simultaneously with the closing of the Investor Offering (as defined herein) and
the Simultaneous Contribution (as defined herein) and (ii) the closing of the
transaction contemplated hereby and the closings of the Investor Offering and
the Simultaneous Contribution and the documentation evidencing the closing of
all such transactions be treated as an integrated unitary transaction between
the parties
<PAGE>
thereto and one plan of formation of the Transferee under Section 351 of the
Internal Revenue Code of 1986, as amended.
F. The Transferee has no present intent or plan to engage in any specific
transaction after the date hereof, the result of which would be that the shares
in the Transferee issued in connection with the Investor Offering, this
Agreement, the Simultaneous Contribution and one additional Concept Acquisition,
as that term is defined in the "Memorandum" (defined below) would, in the
aggregate, constitute less than 80% of the issued and outstanding shares of the
Transferee; provided that the Transferor acknowledges that it is the general
expectation of the parties that the Transferee will issue shares in the
Transferee in connection with future acquisitions and public and private
offerings.
COVENANTS
---------
In consideration of the mutual representations, warranties and covenants
and subject to the conditions herein contained, the parties hereto agree as
follows:
1. CONTRIBUTION AND EXCLUDED ASSETS.
1.A. Contributed Assets.
The Transferor agrees to and will sell, convey, transfer, assign and
deliver to the Transferee at the Closing (as hereinafter defined), free and
clear of all liens, mortgages, pledges, encumbrances and charges of every kind
except for liens securing the Assumed Liabilities, which liens are disclosed on
Schedule 4.I. hereto (the "Permitted Liens"), on the terms and subject to the
conditions set forth in this Agreement, all of the properties, business and
assets of the Transferor of every kind and description, real, personal and
mixed, tangible and intangible, wherever located (except those assets of the
Transferor which are specifically excluded from this transaction by Section 1.B.
hereof) as they shall exist on the date hereof (the "Closing Date") (as
hereinafter defined), whether or not appearing on the Balance Sheet (as
hereinafter defined) (collectively, the "Contributed Assets"). Without limiting
the generality of the foregoing, the Contributed Assets shall include the
following:
(1) all machinery, equipment, tools, supplies, leasehold improvements,
computer hardware and software vehicles, construction in progress,
furniture and fixtures located at the Stores and other fixed assets owned
by the Transferor (the "Contributed Fixed Assets");
(2) all inventories and raw materials of the Transferor (the
"Contributed Inventory");
2
<PAGE>
(3) all receivables of the Transferor, including, without limitation,
all trade accounts receivable arising from sales of inventory in the
ordinary course of business, notes receivable, credit card receivables,
co-op advertising receivables, income tax receivables, and insurance
proceeds receivable (the "Contributed Receivables");
(4) (a) all of the interest of and the rights and benefits accruing to
the Transferor as lessee under leases of real property and all improvements
to and buildings thereon, which leases are described in Schedule 4.H.
attached hereto (the "Purchased Leasehold Premises"), and (b) all leases or
rental agreements covering machinery, equipment, tools, supplies, vehicles,
furniture and fixtures and other fixed assets and personal property,
including without limitation those described in Schedule 1.A. attached
hereto (the leasehold rights and improvements described in clauses (a) and
(b) are collectively referred to as the "Contributed Leasehold Rights");
(5) all of the rights and benefits accruing to the Transferor under
all sales orders, sales contracts, supply contracts, purchase orders and
purchase commitments made by the Transferor in the ordinary course of
business, all other agreements to which the Transferor is a party or by
which it is bound and all other choses in action, causes of action and
other rights of every kind of the Transferor (the "Contributed Contract and
Other Rights");
(6) copies of all operating data and records of the Transferor,
including without limitation customer lists, financial, accounting and
credit records, correspondence, budgets and other similar documents and
records (the "Contributed Records");
(7) all of the Transferor's right, title and interest in and to the
proprietary rights of the Transferor, including without limitation all
trademarks, trade names, patents, patent applications, licenses thereof,
trade secrets, technology, know-how, formulae, designs and drawings,
computer software, slogans, copyrights, processes, operating rights, other
licenses and permits, and other similar intangible property and rights
relating to the products or business of the Transferor (the "Contributed
Proprietary Rights");
(8) all cash and cash equivalents and investments, whether short-term
or long-term, of the Transferor, including without limitation, certificates
of deposit, treasury bills and securities (the "Purchased Cash and
Investments");
(9) all prepaid and deferred items of the Transferor, including
prepaid rentals, insurance, taxes (other than income taxes) and unbilled
charges and deposits relating to the operations of the Transferor (the
"Purchased Prepaid Items"); and
(10) all of the Transferor's right, title and interest in and to their
respective corporate and trade names and all of the other intangibles of
the Transferor.
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<PAGE>
1.B. Excluded Assets.
Anything to the contrary in Section 1.A. notwithstanding, the Contributed
Assets shall exclude the following assets of the Transferor: (1) the
Consideration (as hereinafter defined) and the Transferor's other rights under
this Agreement; (2) any shares of capital stock of the Transferor which are
owned and held by the Transferor as treasury shares; (3) the corporate minute
books and stock records of the Transferor; and (4) any income tax deductions of
the Transferor.
2. CONSIDERATION TO BE EXCHANGED FOR CONTRIBUTED ASSETS.
2. A. Consideration.
As consideration for the Contributed Assets (the "Consideration"), the
Transferee agrees, subject to the terms, conditions and limitations set forth in
this Agreement, to and will deliver to the Transferor at the Closing the
Exchange Shares and the BCI Shares.
2.B. Assumed Liabilities.
The Transferee agrees to and will at the Closing assume and agree to pay,
discharge and perform when lawfully due those liabilities, trade payables, sales
taxes, and other obligations of the Transferor (1) reflected on the Balance
Sheet (as hereinafter defined), (2) incurred prior to the Closing by the
Transferor in the ordinary course of business after the date of the Balance
Sheet, (3) (a) under the leases, contracts, agreements or other matters set
forth or described in Schedule 2.B. and (b) every other lease, contract and oral
and written agreement (i) each having a term of five years or less, (ii) each
having aggregate annual payments of $5,000.00 or less, and (iii) which is
necessary for the operation of the Business, in each case under subsections 3(a)
and 3(b) which arise and relate to periods after the Closing Date, (4) which
arise and relate to the Transferee's operation of the Business after the Closing
Date; and (5) which are described in Sections 11.E. and 13.K. hereof (the
"Assumed Liabilities"). Also set forth on Schedule 2.B. hereto is a description
of all coupon and other promotional programs with respect to which the
Transferor has any outstanding obligations as of the Closing Date, including any
obligations to offer free or reduced price menu items and the number of reduced
price or free menu items which the Transferor is obligated to provide pursuant
to all such coupons and other promotional programs as of the Closing Date.
2.C. Excluded Liabilities.
Anything to the contrary in Section 2.B. notwithstanding, the Assumed
Liabilities shall exclude the following liabilities, contracts commitments and
other obligations of the Transferor (the "Excluded Liabilities"):
(1) the Transferor's obligations and liabilities arising under this
Agreement;
4
<PAGE>
(2) any obligation for federal, state, local or foreign income tax
liability (including interest and penalties) arising from the operations of
the Transferor up to the Closing Date, including without limitation the
liabilities, if any, shown on the Balance Sheet as "Deferred Taxes";
(3) any obligation for any transfer, sales, use or other taxes, fees
or levies (including motor vehicle sales taxes) imposed by any state or
other governmental entity on or arising out of the contribution of the
Contributed Assets pursuant hereto;
(4) any obligation or liability of the Transferor except as listed in
Section 2.B. or on Schedule 2.B.; and
(5) any liability, contract, commitment or other obligation of the
Transferor, known or unknown, fixed or contingent, the existence of which
will make any representation or warranty of the Transferor contained in or
made pursuant to this Agreement incomplete, inaccurate or untrue.
2.D. No Expansion of Third Party Rights.
The assumption by the Transferee of the Assumed Liabilities shall in no way
expand the rights or remedies of any third party against the Transferee, the
Transferor or the Shareholder as compared to the rights and remedies which such
third party would have had against the Transferor or the Shareholder had the
Transferee not assumed such liabilities. Without limiting the generality of the
preceding sentence, the assumption by the Transferee of the Assumed Liabilities
shall not create any third party beneficiary rights.
2.E. Allocation of the Consideration Among the Contributed Assets.
The Consideration shall be allocated among each of the Stores and the
Transferor's corporate office, if any, and among each item or class of the
Contributed Assets (e.g., fixtures and equipment, leasehold improvements,
goodwill) as set forth on Schedule 2.E. hereto. The Transferor, the Shareholder
and the Transferee agree that they will prepare and file their federal and any
state or local income tax returns based on such allocation of the Contribution.
The Transferor, the Shareholder and the Transferee agree that they will prepare
and file any notices or other filings required pursuant to Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code"), and that any such
notices or filings will be prepared based on such allocation of the
Consideration.
3. PUT OPTION.
(1) In the event that:
(a) as of August 1, 1998, the Transferee has not completed an initial
public offering of its shares of common stock pursuant to a registration
statement
5
<PAGE>
filed pursuant to the Securities Act of 1933, as amended the "Securities
Act") (a "Qualified Public Offering"), or
(b) at any time during the term of the Lozoff Employment Agreement
(defined below) Gail Lozoff is terminated by the Transferee without "cause"
(as defined therein),
then upon the occurrence of either such event (each a "Trigger Date"), the
Transferor shall have the option, exercised by written notice to the Transferee
given not later than fifteen (15) days after the Trigger date, to require the
Transferee to purchase all or less than all of the Exchange Shares then owned
by it for a purchase price equal to the greater of: (a) the fair market value of
such Exchange Shares; and (b) $1,959.56 per share (and aggregating
$4,996,875.00), appropriately adjusted to take into account any dividend, stock
split, combination of shares or other relevant change in the capitalization of
the Transferee occurring prior to any exercise of this put option. The fair
market value of the Transferor's Exchange Shares shall be determined by the
agreement of the Transferee and the Transferor at the time, without regard to
any factor relating to the lack of liquidity of such Exchange Share or the fact
that the Transferor's Exchange Shares represent a minority of all of the
Transferee's outstanding stock. If the Transferee and the Transferor are unable
to agree on the fair market value of the Transferor's Exchange Shares within
sixty (60) days, they shall mutually agree on and appoint a national firm of
certified public accountants or a reputable business valuation firm to determine
the fair market value of such Exchange Shares within thirty (30) days, and the
determination of such firm shall be final and binding on the Transferor. If the
parties are unable to agree on a firm to perform the valuation, then the
valuation shall be performed by Alex. Brown & Sons, Incorporated within thirty
(30) days of such request. Fees and expenses of any such firm selected pursuant
to this Section 3 shall be borne 50% by the Transferee and 50% by the Transferor
and the Transferee. Notwithstanding the foregoing, the Transferor acknowledges
and agrees that the option provided pursuant to this Section 3 may only be
exercised once, regardless of the number of Exchange Shares which are the
subject of such exercise, and that upon any such exercise, all rights set forth
in this Section 3 shall automatically expire.
(2) In the event that the Transferor exercises its option granted pursuant
to this Section 3, the Transferee shall pay the Transferor the applicable
purchase price in cash within thirty (30) days of the determination of such
price against delivery of the Exchange Shares duly endorsed for transfer to the
Transferee. All of the Exchange Shares sold to the Transferee pursuant to any
exercise of the put option in this Section 3 shall be free and clear of all
liens, pledges, encumbrances, claims and equities of every kind.
6
<PAGE>
4. REPRESENTATIONS AND WARRANTIES
OF THE TRANSFEROR AND THE SHAREHOLDER.
In order to induce the Transferee to enter into this Agreement and to
consummate the transactions contemplated hereunder, the Transferor and the
Shareholder jointly and severally make the following representations and
warranties:
4.A. Organization, Power and Authority of the Transferor.
The Transferor is a corporation duly organized and legally existing in good
standing under the laws of its state of incorporation and has full corporate
power and authority (i) to own or lease its properties and to carry on its
business as it is now being conducted, (ii) to enter into this Agreement and to
sell, convey, transfer, assign and deliver the Contributed Assets to the
Transferee as provided herein, and (iii) to carry out the other transactions and
agreements contemplated hereby. The Transferor is legally qualified to transact
business as a foreign corporation in each of the jurisdictions in which its
business or property is such as to require that it be thus qualified, and it is
in good standing in each of the jurisdictions in which it is so qualified. The
Transferor has no subsidiaries and owns no equity interest in any corporation,
partnership, joint venture, association or other entity. The Transferor is not
engaged in any business other than the Business.
4.B. Capital Stock of the Transferor.
Schedule 4.B. sets forth, with respect to the Transferor, the number of
authorized shares of its capital stock, the number of such shares which are
issued and outstanding and the number of such shares which are issued and held
in its treasury. All voting rights in the Transferor are vested exclusively in
its shares of common stock. All of the issued and outstanding shares of common
stock of the Transferor are validly authorized and issued and are fully paid and
non-assessable. There are no outstanding written warrants, options or rights of
any kind to acquire from the Transferor any shares of its common stock or
securities of any kind. The Transferor has no obligation to acquire any of its
issued and outstanding shares of common stock or any other security issued by it
from any holder thereof.
4.C. The Shareholder of the Transferor.
The Shareholder owns 500 shares of common stock of the Transferor, which
shares constitute all of the issued and outstanding shares of capital stock of
the Transferor. The Shareholder has full power, authority and capacity to enter
into this Agreement. There are no outstanding written warrants, options or
rights of any kind to acquire from the Transferor or the Shareholder any shares
of the Transferor's common stock or securities of any kind.
7
<PAGE>
4.D. Financial Statements of the Transferor.
The Transferor has previously furnished to the Transferee: (1) an audited
balance sheet at December 27, 1994 (the "Balance Sheet"); and (2) an audited
statement of income for the year ended December 27, 1994 (the "Transferor Income
Statement"), including the notes pertaining thereto (the "Financial
Statements"), of the Transferor.
The Financial Statements present fairly the consolidated financial position
of the Transferor at each of the said balance sheet dates and the results of its
operations for each of the said periods covered, and they have been prepared in
accordance with generally accepted accounting principles consistently applied
and have been certified by the President of the Transferor to such effect, such
certification being attested to by the Secretary of the Transferor and referred
to herein as the "President's Certificate."
4.E. Liabilities of the Transferor.
The Transferor has no liabilities or obligations, either accrued,
absolute, contingent or otherwise, except: (i) to the extent reflected or taken
into account in determining net worth in the Balance Sheet and not heretofore
paid or discharged; (ii) to the extent specifically set forth in any of the
schedules attached hereto or in this Agreement; and (iii) liabilities incurred
in the ordinary course of business since the date of the Balance Sheet.
4.F. Financial Obligations.
As of the date of execution of this Agreement, the Transferor has drawn
approximately $1,873,000.00 of the Line of Credit (as defined herein).
4.G. Tax Matters.
(1) The Transferor has timely filed all tax returns and reports
required to be filed by it, including without limitation all federal,
state, local and foreign tax returns, and has paid in full or made adequate
provision by the establishment of reserves for all taxes and other charges
which here become due from the Transferor. There is no tax deficiency
proposed or threatened against the Transferor. There are no tax liens upon
any property or assets of the Transferor. The Transferor has made all
required payments of estimated taxes when due in amounts sufficient to
avoid the imposition of any penalty.
(2) All taxes and other assessments and levies which the Transferor
was required by law to withhold or to collect have been duly withheld and
collected, and have been paid over to the proper governmental entity or are
being held by the Transferor in separate bank accounts for such payment,
and all such withholdings and collection and all other payments due in
connection therewith as of the date of the Balance Sheet are duly reflected
on the Balance Sheet.
8
<PAGE>
(3) The federal and state income tax returns of the Transferor have
been closed by applicable statute or examined by all appropriate tax
authorities as set forth in Schedule 4.G. Except as set forth in Schedule
4.G., there are no outstanding agreements or waivers extending the statute
of limitations applicable to any federal or state income tax returns of the
Transferor for any period.
(4) The Transferor has filed a valid election to be taxed as an S
corporation (within the meaning of Section 1361 of the Internal Revenue
Code), which filing has been in effect since the date of the incorporation
of the Transferor.
4.H. Real Estate of the Transferor.
(1) The Transferor owns no real estate.
(2) Attached hereto is an accurate list of each lease agreement with
respect to the Purchased Leasehold Premises which sets forth: (i) the lessor and
lessee thereof and the date and term of the lease governing such property; and
(ii) the location, including address, thereof. The leases covering the Purchased
Leasehold Premises are in full force and effect, and the Transferor is not in
default or breach under any such lease. No event has occurred which with the
passage of time or the giving of notice or both would cause a material breach of
or material default under any of such leases by the Transferor. To the best
knowledge of the Transferor, there is no material breach or anticipated material
breach by any other party to any such lease.
(3) The Transferor has valid leasehold interests in the Purchased Leasehold
Premises, free and clear of all liens, mortgages, pledges, encumbrances,
charges, assessments, restrictions, covenants and easements or title defects of
any nature whatsoever, except for liens set forth on Schedule 4.H., liens for
real estate taxes not yet due and payable, and such imperfections of title and
encumbrances, if any, as are not material in character, amount or extent and do
not materially detract from the value, or materially interfere with the present
use, of such properties or otherwise impair business operations in any material
respect.
(4) [Intentionally Omitted]
(5) [Intentionally Omitted]
(6) The Transferor has not received notice from any applicable governmental
authority of: (i) any condemnation proceeding with respect to any portion of the
Purchased Leasehold Premises or any access thereto, and the Transferor has no
knowledge that any such proceeding is contemplated by any governmental
authority; or (ii) any special assessment applicable to any of the Purchased
Leasehold Premises, and the Transferor has no knowledge that any such special
assessment is contemplated by any governmental authority.
9
<PAGE>
4.I. Good Title to the Contributed Assets.
(1) Except as set forth on Schedule 4.I., the Transferor has good and
marketable title to all of the Contributed Assets (other than the Purchased
Leasehold Premises), free and clear of all liens, mortgages, pledges,
encumbrances or charges of every kind, nature, and description whatsoever.
(2) [Intentionally Omitted]
(3) [Intentionally Omitted]
4.J. [Intentionally Omitted]
4.K. Licenses and Permits of the Transferor.
The Transferor possesses all licenses and required governmental or official
approvals, permits or authorizations, the failure to possess which would have a
material adverse effect on the business, financial condition or results of
operations of the Transferor. All such licenses, approvals, permits and
authorizations are in full force and effect, the Transferor is in material
compliance with their requirements, and no proceeding is pending or to the
knowledge of the Transferor threatened to revoke or amend any of them. Schedule
4.K. attached hereto contains a complete list of all such licenses, approvals,
permits and authorizations. Except as indicated on such Schedule 4.K., none of
such licenses, approvals, permits and authorizations are or will be impaired or
in any way affected by the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
4.L. Proprietary Rights of the Transferor.
(1) The Contributed Proprietary Rights include all proprietary rights,
the failure to possess which would have a material adverse effect on the
business, financial condition or results of operations of the Transferor.
(2) Except as set forth in Schedule 4.L., (i) the Transferor owns all
right, title and interest in and to all of the Contributed Proprietary
Rights, (ii) the Transferor has no knowledge of any claim made against the
Transferor asserting the invalidity, abuse, misuse, or unenforceability of
any such rights, and to the best of the Transferor's knowledge, there are
not grounds for the same, (iii) the Transferor has not received a notice of
conflict with the asserted rights of others within the last five years and
(iv) to the best of the Transferor's knowledge, the conduct of the
Transferor's business has not infringed any rights of others. The
Transferee acknowledges that the Transferor does not own any patents with
respect to its recipes.
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4.M. Adequacy of the Contributed Assets; the Transferor's Relationships
with its Customers and Suppliers.
The Contributed Assets constitute, in the aggregate, all of the property
necessary for the conduct of the business of the Transferor in the manner in
which and to the extent to which it is currently being conducted. The Transferor
knows of no written or oral communication, fact, event or action which exists or
has occurred prior to the date of this Agreement, which would tend to indicate
that any current supplier to the Transferor of items essential to the conduct of
its business, which items cannot be replaced by the Transferor at comparable
cost to the Transferor and the loss of which would have a material adverse
effect on the business or operations of the Transferor, will terminate its
business relationship with the Transferor. The Transferor does not have any
customer which accounts for over 1% of the total consolidated net revenues of
the Transferor for the year ended December 27, 1994. Except for the lease
agreement respecting the Transferor's College Boulevard Store, neither the
Transferor nor any of its affiliates (as hereinafter defined) has any direct or
indirect interest in any supplier or competitor of the Transferor, or in any
person from whom or to whom the Transferor leases real or personal property, or
in any person with whom the Transferor is doing business. The Transferor is not
restricted by agreement from carrying on its business anywhere in the world.
4.N. Documents of and Information with Respect to the Transferor.
(1) Schedule 4.N. attached hereto accurately and completely sets forth
a true and complete list of the following: (i) each policy of insurance in
force with respect to the assets and properties of the Transferor and each
of the performance or other surety bonds maintained by the Transferor in
the conduct of its business; (ii) each loan, credit agreement, guarantee,
security agreement or similar document or instrument to which the
Transferor is a party or by which it is bound; (iii) each lease of personal
property to which the Transferor is a party or by which it is bound; (iv)
any other agreement, contract or commitment to which the Transferor is a
party or by which it is bound which involves a future commitment by the
Transferor in excess of $5,000 and which has a term of five (5) years or
more; (v) the name and current annual salary of each officer or other
employee of the Transferor and the profit sharing, bonus or any other form
of compensation (other than salary) paid or payable by the Transferor to or
for the benefit of each such person for the year ended December 27, 1994,
any written employment or other written agreement of the Transferor with
any of its officers or employees and any oral employment agreement or other
agreement of the Transferor with any of its officers or corporate office
employees which, to the knowledge of the Transferor, provides for a
specific duration; (vi) the name of the officers and directors of the
Transferor; and (vii) the name of each bank in which the Transferor has an
account or safe-deposit box, the name in which the account or box is held
and the names of all persons authorized to draw thereon or to have access
thereto. The Transferor has previously furnished the Transferee with a true
and complete copy of each such agreement, contract or
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commitment listed in Schedule 4.N. There has not been any default in any
obligation to be performed by the Transferor or any other party under any
such instrument.
(2) The Transferor has provided all required performance or other
surety bonds. All premiums and other payments which have become due under
the policies of insurance listed in Schedule 4.N. have been paid in full,
all of such policies are now in full force and effect and the Transferor
has not received notice from any insurer, agent or broker of the
cancellation of, or any increase in premium to take effect after the date
hereof with respect to, any of such policies or bonds. Except as set forth
in Schedule 4.N., the Transferor has not received any notification from any
insurer, agent or broker denying or disputing any claim made by the
Transferor or denying or disputing any coverage for any such claim or the
amount of any claim. Except as set forth in Schedule 4.N., the Transferor
has no claim against any of its insurers under any of such policies pending
or anticipated and there has been no occurrence of any kind which would
give rise to any such claim.
4.O. Litigation Involving The Transferor.
Except as set forth in Schedule 4.O., there are no actions, suits, claims,
governmental investigations or arbitration proceedings pending or, to the
knowledge of the Transferor and the Shareholder, threatened against or affecting
the Transferor or any of the Contributed Assets and there is no basis known to
the Transferor or the Shareholder for any of the foregoing with respect to the
Contributed Assets. There are no orders, decrees or stipulations issued by any
federal, state, local or foreign judicial or administrative authority in any
proceeding to which the Transferor is or was a party which have a material
effect on the Business.
4.P. The Records of The Transferor.
The Transferor has previously furnished the Transferee with copies of the
Transferor's charter and all amendments thereto to date and of the Transferor's
bylaws, and such copies are correct and complete in all respects. The
Transferor's records included as part of the Contributed Assets are accurate and
complete in all material respects and there are no material matters as to which
appropriate entries have not been made in such records which are material to the
ongoing operation of the Business. A record of all action taken by the
shareholders and the board of directors of the Transferor and all minutes of its
meetings are contained in the minute books of the Transferor and are accurate
and complete. The records, book and stock ledger of the Transferor contain an
accurate and compete record of all issuances, transfers and cancellations of
shares of capital stock of the Transferor.
4.Q. No Material Adverse Change.
Since the date of the Balance Sheet, there has not been (i) any material
change in the business or properties of the Transferor, or in the financial
condition of the Transferor, other than changes occurring in the ordinary course
of business which have not had a material adverse
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effect on the business, properties financial condition, business prospects or
operating results of the Transferor, or (ii) any overtly threatened or
reasonably foreseeable prospective event or condition of any character
whatsoever which could materially and adversely affect the Contributed Assets or
the business, financial condition or results of operations of the Transferor.
4.R. Absence Of Certain Acts Or Events.
Except as disclosed in Schedule 4.R. and except for this Agreement and the
transactions contemplated hereby, since the date of the Balance Sheet, the
Transferor has not: (i) authorized or issued any of its shares of capital stock
(including any held in its treasury) or any other securities; (ii) declared or
paid any dividend or made any other distribution of or with respect to its
shares of capital stock or other securities or purchased or redeemed any shares
of its capital stock or other securities; (iii) paid any bonus or increased the
rate of compensation of any of its employees; (iv) sold or transferred any of
its assets other than in the ordinary course of business; (v) made or obligated
itself to make capital expenditures aggregating more than $5,000; (vi) made any
payment in respect of the Excluded Liabilities other than in the ordinary course
of business; (vii) incurred any material obligations or liabilities (including
any indebtedness) or entered into any material transaction; or (viii) suffered
any theft, damage, destruction or casualty loss in excess of $5,000.
4.S. Compliance With Laws By The Transferor.
(1) The Transferor is in compliance with all laws, regulations and
orders applicable to it or the Contributed Assets, the failure with which
to comply would have a material adverse effect on the Business. The
Transferor has not received notification of any asserted past or present
failure to comply with any laws and no proceeding with respect to any such
violation is contemplated.
(2) To the knowledge of the Transferor, neither the Transferor nor any
employee of the Transferor, has made any payment of funds in connection
with the business of the Transferor prohibited by law, and no funds have
been set aside to be used in connection with the business of the Transferor
for any payment prohibited by law.
4.T. Environmental Matters.
The Transferor has obtained and is in compliance in all material respects
with all Environmental Requirements and all permits, licenses and other
authorizations required for Operations by Environmental Requirements. There are
no conditions, circumstances, activities, practices, incidents, or actions
(collectively, "Conditions") resulting from the Operations and, to the best of
the Transferor's and the Shareholder's knowledge, resulting from any other
source or activity, which Conditions may reasonably form the basis of any claim
or suit against the Transferor or the Transferee nor is there any investigation,
study, removal or remediation known to the Transferor or the Shareholder which
is based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling by the Transferor, or the
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emission, discharge, release or threatened release by the Transferor into the
environment, of any pollutant, contaminant, or hazardous or toxic materials,
substances or wastes which claim, suit, investigation, study, removal or
remediation would have an adverse effect on the Transferor, the Business, or the
Contributed Assets.
"Operations" means the operations of the Transferor which have occurred or
are occurring on the Contributed Leasehold Premises since the Transferor took
possession thereof.
"Environmental Requirements" means federal, state and local laws relating
to regulations, ordinances or other requirements, pollution or protection of the
environment, including laws or provisions relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, or hazardous or
toxic materials, substances, or wastes into air, surface water, groundwater, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants, contaminants
or hazardous or toxic materials, substances, or wastes.
There are no laws, regulations, ordinances, licenses, permits, or orders
relating to environmental or worker safety matters requiring any work, repairs,
construction, or capital expenditures with respect to the Contributed Assets.
Neither the Transferor nor the Shareholder knows of any: (i) environmental
audits, assessments, or occupational health studies undertaken by the Transferor
or its agents or known to be taken by governmental agencies as to the
Operations; (ii) ground, water, soil, air, or asbestos monitoring undertaken
with respect to the Contributed Leasehold Premises; (iii) written communications
between the Transferor and any environmental agencies; or (iv) citations issued
under the Occupational Safety and Health Act (29 U.S.C. Sections 651 et seq.).
4.U. LABOR RELATIONS OF THE TRANSFEROR.
The Transferor is not a party to or bound by any collective bargaining
agreement or any other agreement with a labor union, and there has been no
effort by any labor union during the 24 months prior to the date hereof to
organize any employees of the Transferor into one or more collective bargaining
units. There is not, to the knowledge of the Transferor, pending or to the
knowledge of the Transferor threatened any labor dispute, strike or work
stoppage which materially and adversely affects or which may materially and
adversely affect the business of the Transferor or which may interfere with its
continued operation. The Transferor has not within the last 24 months committed
any unfair labor practice as defined in the National Labor Relations Act, as
amended, and there is not now pending or to the knowledge of the Transferor
threatened any charge or complaint relating to such a practice against the
Transferor. There has been no strike, walkout or work stoppage involving any of
the employees of the Transferor while employed by the Transferor during the 24
months prior to the date hereof. The Transferor is not aware that any executive
or key employee or group of employees has any plans to terminate his, her or
their employment with the Transferor.
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4.V. Employee Benefits.
Except as set forth in Schedule 4.V., the Transferor does not maintain or
contribute to any "employee pension benefit plan", as such term is defined in
Section 3(2) of the Employment Retirement Income Security Act of 1974, as
amended ("ERISA"). Each employee pension benefit plan listed on Schedule 4.V.
has complied in all material respect with, and been administered in all material
respects in accordance with, the applicable requirements of ERISA, any other
applicable law and the terms of such plan. The only "employee welfare benefit
plan," as such term is defined in Section 3(1) of ERISA, which the Transferor
maintains or to which the Transferor contributes is group health and life
insurance.
4.W. Product Liability Claims; Product Warranties And Indemnities.
Schedule 4.W. sets forth all product liability claims which are pending or
to the Transferor's knowledge threatened against the Transferor with respect to
products sold by the Transferor. Schedule 4.W. also sets forth, for each of the
last three fiscal years of the Transferor, and for the interim period ended on
the date hereof, the aggregate amount of product liability claims paid by or on
behalf of the Transferor. Except as may be contained in the promotional and
advertising materials of the Transferor, the Transferor has not extended to any
person any written product warranties, indemnities, or guarantees except those
imposed by law.
4.X. Due Authorization; Binding Obligation.
The execution, delivery and performance of this Agreement and each of the
other agreements contemplated hereby and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
of the Transferor. This Agreement has been duly executed and delivered by the
Transferor and the Shareholder and is a valid and binding obligation of the
Transferor and the Shareholder, enforceable in accordance with its terms.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will: (i) conflict with or violate any
provision of the Transferor's charter or bylaws, or of any law, ordinance or
regulation or any decree or order of any court or administrative or other
governmental body which is either applicable to, binding upon or enforceable
against the Transferor or the Shareholder; (ii) result in any breach of or
default under any mortgage, contract, agreement, indenture, will, trust or other
instrument which is either binding upon or enforceable against the Transferor,
the Shareholder or the Contributed Assets; or (iii) violate any legally
protected right arising in the operation of the Transferor's business or of any
individual or entity or give to any individual or entity (including in each case
without limitation the Shareholder) a right or claim against the Transferee or
the Contributed Assets. No consent, approval, or authorization of any
governmental authority is required for the execution, delivery and performance
of this Agreement by the Transferor or the Shareholder.
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4.Y. ACCURACY OF INFORMATION FURNISHED BY THE TRANSFEROR OR THE
SHAREHOLDER.
No representation, statement or information made or furnished by the
Transferor or the Shareholder to the Transferee, including those contained in
this Agreement and the various schedules attached hereto and the other
information and statements referred to herein and previously furnished by the
Transferor or the Shareholder to the Transferee pursuant hereto, including
without limitation, the Financial Statements, contains or shall contain any
untrue statement of a material fact or omits or shall omit any material fact
necessary to make the information contained therein not misleading.
4.Z. BROKERS AND FINDERS.
The Transferor has engaged George K. Baum & Company and the Transferor's
accountants and attorneys in connection with this transaction. Except for the
foregoing, neither the Transferor nor the Shareholder has engaged or authorized
any broker, investment banker or third party to act on the Transferor's or the
Shareholder's behalf, either directly or indirectly, as a broker, finder or
advisor in connection with the transaction contemplated hereby.
4.AA. PRIVATE PLACEMENT MEMORANDUM.
The Transferor and the Shareholder acknowledge and agree that the
Transferee is engaging in a private offering of shares of its common stock to
investors ("Investors") for an aggregate gross proceeds to the Transferee of
approximately $20,000,000 in cash to capitalize the Transferee ("Investor
Offering"). The Transferor and the Shareholder acknowledge and agree that the
Transferee has made an offering of shares of the Transferee to the owners of
another chain of retail bagel shops pursuant to a contribution agreement dated
February 17, 1995, which contribution transaction is anticipated to close
simultaneously with the closing of the transaction contemplated by this
Agreement (the "Simultaneous Contribution"). Finally, the Transferor and the
Shareholder also understand and acknowledge that the Transferee has made an
offering of shares of the Transferee to the Transferor pursuant to that certain
Confidential Private Placement Offering Memorandum dated as of February 28, 1995
(the "Memorandum") with respect to the shares of common stock to be issued to
the Transferor pursuant to this Agreement.
The Transferor and the Shareholder acknowledge and agree that they have
provided to the Transferee such information as the Transferee has required in
connection with the preparation of the Memorandum including, but not limited to,
information with respect to the Transferor, the financial operations, financial
statements and business of the Transferor and other matters relating to the
Transferor included in the Memorandum.
The Transferor and the Shareholder have carefully reviewed the information
relating to the Transferor set forth in Appendix A of the Memorandum (the
"Information") and represent and warrant as of the date of the Memorandum and as
of the date hereof that the Information does not contain an untrue statement of
a material fact, and does not omit to state a material fact
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necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.
The Shareholder hereby acknowledges and agrees that he has personal
knowledge of the Transferor and that all Information relating to the Transferor
necessary for his decision as to whether to invest in the Transferee was
otherwise available to him even if not included in the Memorandum. Therefore, to
the extent the Memorandum contains any untrue statement of a material fact
relating to the Transferor or omits to state a material fact relating to the
Transferor necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, he waives any claim
against the Transferor, the Transferee, the Contributed Assets and any
affiliate, agent, attorney for the Transferor or the Transferee.
4.AAA. DISSOLUTION AND DISTRIBUTIONS.
The Transferor and the Shareholder represent, warrant and agree:
(1) there is no existing plan or agreement which provides for the
dissolution of the Transferor;
(2) there is no existing plan of agreement which provides for a pro
rata or similar distribution of the BCI Shares to the
Shareholder, or any person who acquires shares of capital stock
of the Transferor;
(3) the Board of Directors of the Transferor shall not, within one
year after the date of the resolutions authorizing the
transactions contemplated by this Agreement, take any action
which will provide for the dissolution of the Transferor or a pro
rata or similar distribution of the BCI Shares to the Shareholder
or any person who acquires shares of capital stock of the
Transferor;
(4) the transactions contemplated by this Agreement are not part of a
pre-existing plan for distribution of the BCI Shares; and
(5) in the event that the Transferor hereafter takes any action which
provides for the dissolution of the Transferor or a pro rata or
similar distribution of the BCI Shares to the Shareholder, or any
person who acquires shares of capital stock of the Transferor,
the Transferor will obtain an opinion of counsel for the
Transferor, reasonably satisfactory to BCI or the Transferee as
applicable, stating that such action shall not cause the
transactions contemplated by this Agreement to be deemed
"offers", "offers to sell", "offers for sale" or "sales" within
the meaning of Rule 145 under the Securities Act.
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4.AB. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER.
ACQUISITION OF BCI SHARES AND EXCHANGE SHARES. The Shareholder represents
and warrants that:
(1) He is the sole shareholder of the Transferor.
(2) He is causing the Transferor to acquire the BCI Shares and the
Exchange Shares for its own account for investment and not with a view to
distribution or resale thereof in any transaction which would be in
violation of the Securities Act and rules promulgated thereunder, or any
state securities statute, has not subdivided the BCI Shares or the Exchange
Shares with, nor is it holding all or any portion of the BCI Shares or
Exchange Shares for, any other person, and agrees not to, and will cause
the Transferor not to, sell, hypothecate or otherwise dispose of all or any
part of the BCI Shares or Exchange Shares unless the BCI Shares or Exchange
Shares represented thereby have been registered under the Securities Act
and applicable state or other securities laws or, in the opinion of counsel
for the Transferor, which counsel and which opinion are reasonably
satisfactory to BCI or the Transferee as applicable, an exemption from the
registration requirements of the Securities Act and such state or other
laws is available.
(3) He is an "accredited investor" as defined in Regulation D
promulgated under the Securities Act.
(4) He has received and carefully read the material set forth on
Schedule 4.AB. (the "BCI Information") and the Memorandum including all
exhibits thereto. The Transferee has made available to him and/or his
attorney and/or his accountant all documents that he or they have requested
relating to an investment in BCI and in the Transferee and has provided
answers to all of his or their questions concerning the offering and an
investment in BCI and in the Transferee. In evaluating the suitability of
an investment in BCI and in the Transferee, the Transferor has not relied
upon any representations or other information (whether oral or written)
other than as set forth in the BCI Information and the Memorandum including
all exhibits thereto or as contained in any documents or answers in writing
to questions so furnished to him by the Transferee.
(5) He recognizes that the Transferee has no financial or operating
history and that an investment in the Transferee involves a high degree of
risk, and he has taken full cognizance of and understands all of the risk
factors related to the purchase of the Exchange Shares, including, but not
limited to, those set forth under the captions "Risk Factors" in the
prospectus contained in the BCI Information and in the Memorandum.
(6) He has discussed with his legal, tax and financial advisors the
suitability of an investment in BCI and in the Transferee for his
particular tax and financial situation.
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(7) He is causing the Transferor to acquire the BCI Shares and
Exchange Shares without being furnished any offering literature or
prospectus other than the BCI Information and the Memorandum (and other
than any documents or answers to questions described in sub-section 4.AB(4)
above).
(8) He is a bona fide resident of the State of Missouri.
5. Representations, Warranties And Covenants Of The Transferee.
In order to induce the Transferor to enter into this Agreement and to
consummate the transactions contemplated hereunder, the Transferee makes the
following representations, warranties and covenants:
5.A. Organization, Power And Authority Of The Transferee.
The Transferee is a corporation duly organized and validly existing under
the laws of the State of Delaware, with full corporate power and authority to
enter into this Agreement and perform its obligations hereunder.
5.B. Due Authorization; Binding Obligation.
The execution, delivery and performance of this Agreement and all other
agreements contemplated hereby and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate actions
of the Transferee. This Agreement has been duly executed and delivered by the
Transferee and is a valid and binding obligation of the Transferee, enforceable
in accordance with its terms. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will: (i)
conflict with or violate any provision of the articles of incorporation or
bylaws of the Transferee, or of any decree or order of any court or
administrative or other governmental body which is either applicable to, binding
upon or enforceable against the Transferee; or (ii) result in any breach of or
default under any material mortgage, contract, agreement, indenture, will, trust
or other instrument which is either binding upon or enforceable against the
Transferee.
5.C. Timing Of Closing.
The Transferee will cause the Closing of this transaction to occur within
thirty (30) days of the closings of (i) the Investor Offering and (ii) either
the Simultaneous Contribution or the acquisition of another Concept Acquisition
Candidate (as that term is defined in the Memorandum).
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5.D. COVENANTS REGARDING EXCHANGE SHARES.
The Exchange Shares shall constitute not less than 3.25% of the issued and
outstanding shares of the Transferee after giving effect to the Investor
Offering, the Simultaneous Contribution, the conversion of $80,000,000.00 under
the BCI Secured Loan Agreement into, and the exercise of all options to acquire,
shares of the Transferee pursuant to the Secured Loan Agreement and one
additional "Concept Acquisition" as that term is defined in the Memorandum.
6. ADDITIONAL COVENANTS, AGREEMENTS AND ACKNOWLEDGMENTS OF THE TRANSFEROR AND
THE SHAREHOLDER.
In order to induce the Transferee to enter into this Agreement and to
consummate the transactions contemplated hereunder, the Transferor and the
Shareholder agree with the Transferee as follows:
6.A. [Intentionally Omitted]
6.B. NO OTHER DISCUSSIONS.
He/it will not, prior to the Closing Date, enter into discussions or
negotiate with or entertain or accept the unsolicited offer of any other party
concerning the potential sale of all or any part of the assets or shares of the
transferor to, or the merger or consolidation of the Transferor with, any person
other than the Transferee.
6.C. RETENTION AND VOTING OF SHARES.
The Shareholder will vote all of the shares of common stock of the
Transferor in favor of the sale of the Contributed Assets to the Transferee at a
special meeting of the shareholders or by unanimous written consent, and he will
not, prior to the Closing Date, sell, assign, transfer, pledge, encumber or
otherwise dispose any of the shares of capital stock of the Transferor which he
owns or his voting rights with respect thereto.
6.D. BEST EFFORTS.
He/it will use his best efforts to cause to be satisfied as soon as
practicable and prior to the Closing Date all of the conditions set forth in
Section 7 to the obligation of the Transferee to accept the Contributed Assets
and to cause the Closing of this transaction to occur within thirty (30) days of
the closing of the earlier to occur of the Investor Offering and the
Simultaneous Contribution.
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6.E. Restrictions on Transfer of Exchange Shares.
The restrictions of this Section 6.E. apply to any holder of the Exchange
Shares. The Transferor and the Shareholder acknowledge that:
(1) The Exchange Shares to be issued pursuant hereto may be owned, as
of the Closing, only in the name of and by the Transferor as indicated on
the signature page below.
(2) No federal, state or other agency has made any finding or
determination as to the adequacy or accuracy of the information set forth
in the Memorandum or as to the fairness of this offering for investment,
nor any recommendation or endorsement of the Exchange Shares.
(3) Because the Exchange Shares have not been registered under the
Securities Act or applicable state or other securities laws, the economic
risk of the investment must be borne indefinitely by the Transferor, and
the Exchange Shares cannot be sold unless subsequently registered under the
Securities Act and such state or other laws, or an exemption from such
registration is available and such registration under the Securities Act
and such state or other laws is unlikely at any time in the future; the
Transferee is not obligated to file a notification under Regulation A of
the Securities Act or a registration statement under the Securities Act;
Rule 144, adopted under the Securities Act and governing the possible
disposition of the Exchange Shares, is not currently available or
anticipated to be available in the future; the Transferee has not
covenanted to take any action necessary to make such Rule available for a
resale of the Exchange Shares; and it is not anticipated that there will be
any market for resale of the Exchange Shares.
(4) The Exchange Shares may not be transferred unless (i) such
transfer is effected pursuant to a registration statement which has been
filed under the Securities Act and declared effective by the Securities and
Exchange Commission, or (ii) in the written opinion of counsel, which
counsel shall be reasonably acceptable to the Transferee, such transfer may
be effected under and is in compliance with Rule 144 under the Securities
Act, as in effect on the date of such transfer, or is otherwise exempt from
the registration requirements of the Securities Act.
6.F. Legends on Exchange Shares.
Each certificate evidencing the Exchange Shares shall bear the following
legends:
"The shares represented by this certificate are "Restricted
Securities". As such they may not be transferred unless (i) such
transfer is effected pursuant to a registration statement which
has been filed under the Securities Act of 1933 (the "1933 Act")
and declared effective by the Securities and Exchange Commission,
or
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(ii) in the written opinion of counsel, which course shall be
reasonably acceptable to the issuer of these shares, such
transfer may be effected under and is in compliance with Rule 144
under the 1933 Act, as in effect on the date of such transfer, or
is otherwise exempt from the registration requirements of the
1933 Act."
"The shares represented by this certificate are subject to
certain covenants and agreements contained in that certain
Agreement to Contribute Assets by and among Bagel & Bagel, Inc.
and Progressive Bagel Concepts, Inc. dated March 2, 1995,
including, but not limited to, a covenant respecting voting for
directors of the issuer of these shares."
6.G. Confidential Information.
The Transferor and the Shareholder possess and will further develop and
acquire certain confidential and proprietary information and trade secrets
including, but not limited to, confidential information, methods, techniques,
procedures and knowledge developed or to be developed, by or for the Transferor
and the Transferee respecting the business of the Transferor and the Transferee
(the "Confidential Information"). The Shareholder acknowledges and agrees that
neither he nor any other person or entity has acquired by or through him any
interest in or right to use the Confidential Information other than his right to
utilize it in the operation of the Transferor, and that the use or duplication
of the Confidential Information in any other business would constitute an unfair
method of competition with Transferee.
The Transferor and the Shareholder each acknowledges and agrees that the
Confidential Information is confidential to and a valuable asset of the
Transferor, is proprietary, and includes trade secrets of the Transferor. The
Transferor and the Shareholder each does hereby agree, that he/it:
(1) will not use the Confidential Information in any other business or
capacity; and
(2) will maintain the absolute secrecy and confidentiality of the
Confidential Information; and
(3) will not make unauthorized copies of any portion of the
Confidential Information disclosed in written or other tangible form.
Notwithstanding the foregoing, the obligations of the Transferor and the
Shareholder specified above shall not apply to any Confidential Information
which (i) is disclosed in a printed publication available to the public, or is
otherwise in the public domain through no act of the Shareholder or the
Transferor, his or its agents or any person or entity which has received such
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Confidential Information from or through the Shareholder or the Transferor, (ii)
is approved for release by written authorization of an officer of the
Transferee, or (iii) is required to be disclosed by proper order of a court of
applicable jurisdiction after adequate notice to the Transferee to seek a
protective order therefor, the imposition of which protective order the
Transferor and the Shareholder each agrees to approve and support.
6.H. Restrictive Covenant.
The Transferor and the Shareholder each acknowledges and agrees that the
Transferee would be unable to protect the Confidential Information against
unauthorized use or disclosure and the Transferee would be unable to realize the
benefits of this Agreement if the Transferor or the Shareholder were permitted
to engage in, hold interests in or perform services for entities conducting a
business which derives 20% or more of its revenues from the sale of bagels
and/or bagel-related products other than the Transferee (a "Competitive
Business"). The Transferor and the Shareholder acknowledge and understand that
the Transferee intends, and expects, to expand its business and the Business
throughout the United States, as further described in the Memorandum. The
Transferor and the Shareholder each further acknowledges and agrees that the
restrictions contained in this Section 6.H. will not hinder his/its activities
under this Agreement or in general. The Transferee has entered into this
Agreement with the Transferor and the Shareholder on the express condition that,
with respect to the operation of the Business, the Transferor and the
Shareholder each will deal exclusively with the Transferee with respect to the
bagel business. Each of the Transferor and the Shareholder therefore agrees that
for a period of five (5) years from the Closing Date, he/it shall not directly
or indirectly anywhere in the United States:
(1) have any interest as a record or beneficial owner in any
Competitive Business provided, however, the Transferor or the Shareholder
may have an interest in any Competitive Business as a passive investor in
such Competitive Business provided such interest does not exceed three
percent (3%) of the outstanding equity securities of any company which has
a class of securities which is registered under Section 12 of the
Securities Exchange Act of 1934, as amended, or traded on a national
securities exchange; or
(2) perform services as a director, officer, manager, employee,
consultant, representative, agent, or otherwise for any Competitive
Business; or
(3) divert or attempt to divert any business or any customers of the
Business, or the Transferee to any Competitive Business.
Further, the Transferor and the Shareholder each agrees that for a period of
five (5) years from the Closing Date, he/it will not directly or indirectly,
solicit or attempt to solicit for employment or employ any person who is
employed by the Transferee or a franchisee, developer, or affiliate of the
Transferee, at the level of Assistant Manager or above, nor induce any such
person to leave said employment without the prior written consent of such
person's employer.
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6.I. Remedies; Waiver.
(1) Each of the Transferor and the Shareholder agrees that the
provisions and restrictions set forth above in Sections 6.G. and 6.H. and
in other portions hereof are necessary to protect the Transferee and its
successors and assigns in the protection of the business to be acquired by
the Transferee pursuant to this Agreement. The Transferor and the
Shareholder each agrees that damages cannot compensate the Transferee in
the event of a violation of the covenants contained in Sections 6.G. and
6.H. hereof, and that injunctive relief shall be essential for the
protection of the Transferee and its successors and assigns. Accordingly,
the Transferor and the Shareholder each agrees and consents that,
in the event he/it shall violate or breach any of said covenants the
Transferee shall be entitled to obtain (and he/it hereby consents to) such
injunctive relief against him/it, without bond, in addition to such further
or other relief as may appertain at equity or law. The exercise or
enforcement by the Transferee of any right or remedy hereunder shall not
preclude the exercise or enforcement by the Transferee of any other right
or remedy hereunder or which the Transferee has the right to enforce under
applicable law.
(2) Failure by either party to insist upon strict compliance with any
of the terms, covenants or conditions hereof shall not be deemed a waiver
of such term, covenant or condition, nor shall any waiver or relinquishment
of any right or remedy hereunder at any one or more times be deemed a
waiver or relinquishment of such right or remedy at any other time or
times.
6.J. Acknowledgement of Dual Representation.
The Transferor and the Shareholder each understands and acknowledges that
the Transferee has been represented in connection with the offering of the
Exchange Shares and other matters by the law firm of Rudnick & Wolfe. Each of
the Transferor and the Shareholder acknowledges that Rudnick & Wolfe has
heretofore and may hereafter represent BCI and/or its affiliates in various
matters. The Transferor and the Shareholder each acknowledges that
Rudnick & Wolfe has not been engaged to represent the Transferor or the
Shareholder and is not representing the Transferor or the Shareholder in
connection with the issuance to the Transferor of the Exchange Shares hereunder
and each of the Transferor and the Shareholder has obtained, or if deemed
necessary by the Transferor or the Shareholder will obtain, independent legal
representation in connection with the transaction contemplated hereby.
6.K. Acknowledgement of Related Party Transactions.
The Transferor and the Shareholder each understands and acknowledges that
the Transferee intends to engage in various transactions with BCI and/or its
affiliates as set forth in the Memorandum and hereby agrees that each such
transaction between the Transferee, BCI and their respective affiliates and such
other transactions as may be undertaken between the Transferee, BCI and their
respective affiliates shall not be deemed to be invalid due solely to the
participation of BCI or an affiliate thereof.
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6.L. Subsequent Audited Financials.
The Transferor and the Shareholder each covenants and agrees with the
Transferee that if the Transferee shall determine that audited financial
statements of the Transferee for the periods prior to the Closing are necessary
or advisable in connection with an initial public offering, another transaction
or offering or otherwise, each shall, at the Transferee's sole expense,
cooperate fully with the Transferee's accountants in the preparation of such
audited financial statements and each shall make such reasonable representations
and warranties to the applicable certified public accountants which are
customary in connection with the preparation of audited financial statements.
6.M. Directors.
The Transferor and the Shareholder each covenants and agrees that until the
earlier of February 28, 1998 or the completion of any Qualified Public Offering,
he/it will vote his/its Exchange Shares for the election to the Board of
Directors of Transferee of each person who is a "Founding Director", which shall
initially include Gail Lozoff, and thereafter such additional persons
designated, from time to time, as Founding Directors by resolution adopted by
the Board of Directors of the Transferee, three directors designated by BCI and
three directors designated by the Investors. The Transferor and the Shareholder
each covenants that he/it will cause each transferee of his/its Exchange Shares
to comply with the foregoing.
6.N. Conduct of Business Prior to Closing.
(1) From the date hereof until the Closing Date, the Transferor shall,
and the Shareholder shall cause the Transferor to: (a) conduct its business
and operations in the manner in which the same have heretofore been
conducted; (b) use its reasonable best efforts to (i) preserve its business
organization intact, (ii) keep available the services of its officers,
employees, agents, and distributors, and (iii) preserve its relationships
with customers, suppliers, and others having dealings with the Transferor;
(c) maintain all of its properties in customary repair, order and
condition, reasonable wear and tear excepted, and maintain insurance of
such types and in such amounts upon all of its properties and with respect
to the conduct of its business as are in effect on the date of this
Agreement. Without the prior written consent of the Transferee, the
Transferor shall not, and the Shareholder shall not allow the Transferor
to:
(i) authorize or issue any shares of its capital stock or any other
securities or declare, set aside or pay any dividend or
distribution with respect to its capital stock (other than a
distribution to the Shareholder to pay income taxes on the net
income of the Transferor, not to exceed $110,000.00), or redeem,
repurchase or otherwise acquire any of its capital stock;
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(ii) create, incur, assume or guaranty any indebtedness for borrowed
money other than indebtedness incurred in the ordinary course of
business under the Exchange National Bank revolving credit
facility which is in effect at the date hereof (the "Line of
Credit");
(iii) grant any lien, pledge, security interest or other encumbrance
upon any of its assets;
(iv) make any capital expenditure which exceeds, either singly or in
the aggregate, Five Thousand Dollars ($5,000.00), except capital
expenditures incurred in the ordinary course of business (which
the parties agree that for all purposes of this Agreement
includes the opening of additional "Bagel & Bagel" retail bagel
bakeries and related commissaries and the relocation of the
Transferor's corporate headquarters, all as described on
Schedule 6.N.);
(v) make any loan to or investment in, or acquire any securities or
assets of, any other person or entity;
(vi) except for an aggregate bonus of $20,000 payable to four
employees of the Transferor, increase the rate of compensation,
pay any bonus, incentive or other extraordinary compensation or
otherwise materially increase the benefits payable or to become
payable to any of its directors, officers, employees or
independent contractors (other than raises or bonuses made in
the ordinary course of business to employees who are not
directors or officers, provided that any such raise or aggregate
bonuses to any such employee shall not exceed five percent (5%)
of the base compensation of such employee in effect at December
27, 1994), or make any material changes to the terms of
employment of any of its directors, officers or employees;
(vii) change any accounting policies, procedures or practices employed
by it;
(viii) sell any of its assets other than sales of inventory in the
ordinary course of business and sales of equipment made in the
ordinary course of business because of the replacement or
abandonment thereof;
(ix) pay or discharge any long-term liability other than in
accordance with its terms and other than payments on the Line of
Credit;
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(x) except in the ordinary course of business, and as otherwise
permitted in subsection (iv) above, enter into any material
contract, agreement, or lease of personal property, which would
be required to be disclosed hereunder, make any change in any
existing contracts, agreements or leases other than in the
ordinary course of business (or unless otherwise permitted
herein), suffer or permit any defaults to occur by the
Transferor under any contract or agreement or as tenant under
any Lease, assign any Lease or sublease any Leased Real
Property; or
(xi) amend its Articles of Incorporation or By-Laws.
(2) From the date hereof until the Closing Date, the Transferor shall
not, and the Shareholder shall not allow the Transferor to, enter into any
lease of real property without the prior written consent of the Transferee,
which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, the Transferor may enter into one or more of those certain
leases described on Schedule 6.N.; provided that each said lease agreement
entered into by the Transferor is on the terms set forth on Schedule 6.N.
6.O. Access Pending and After Closing.
From the date hereof to and including the Closing Date, and after the
Closing, the Transferor shall, and the Shareholder shall cause the Transferor
to, permit the Transferee and its accountants and other representatives, to have
the right of full and complete access to the books, records, offices, and other
facilities of the Transferor during normal business hours, for the purpose of
making such investigation of the financial condition and operations of the
Transferor as the Transferee or any such accountant or other representative may
reasonably deem necessary. The Transferee and its representatives shall have the
right to make and utilize copies or extracts of the Transferor's books, records
and other data and information for its due diligence investigation and other
purposes in connection with the transactions contemplated hereby. In the event
of the termination of this Agreement prior to the Closing of the transactions
contemplated hereby, the Transferee shall return all such copies and extracts.
The Transferor shall provide an accurate and complete copy of each lease for the
Purchased Leasehold Premises to the Transferee prior to the Closing.
6.P. Consents of Third Parties.
Prior to the Closing on the Closing Date, the Transferor and the
Shareholder shall obtain or cause to be obtained all consents and other
approvals of all lessors, lenders, governmental authorities and other third
parties which are required to be obtained by the Transferor or the Shareholder
as a result of the transactions contemplated by this Agreement, and the absence
of which would have a material adverse effect on the Transferee's operation of
the Business, which consents and approvals shall continue each applicable
arrangement related to the Business on substantially identical terms as exist on
the date hereof.
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6.Q. Interim Financial Statements.
From the date hereof to and including the Closing Date, the Transferor
shall, and the Shareholder shall cause the Transferor to, promptly deliver to
the Transferee interim monthly balance sheets and statements of income and
retained earnings, through the end of the month immediately preceding the
Closing Date.
6.R. Public Disclosure.
Except for delivery of any memorandum to, and discussions with potential
investors in the Transferee and disclosures necessary to effect the transactions
contemplated hereby, neither the Transferee, the Transferor nor the Shareholder
shall provide any information with respect to such transactions to any third
parties not involved in the due diligence investigation except after
consultation with the other party. Further, neither party shall issue any press
release except upon consummation of the transactions contemplated by the
Agreement except with the consent of the other party, which will not be
unreasonably withheld or except as may be required to comply with the Securities
Act or applicable state laws and provided further that the Transferee shall not
provide to any third parties any information concerning the consideration to be
paid to the Transferor pursuant to this Agreement, except as may be required by
law. For purposes hereof the consent of, and consultation with, the Shareholder
shall constitute the consent of, or consultation with, the Transferor.
6.S. Cooperation.
The Transferor and the Shareholder acknowledge and agree that the
Transferee will have need of information concerning the Transferor in order to
comply with applicable securities laws and regulations in connection with future
public and private debt and equity offerings by the Transferee ("Offerings").
The Transferor and the Shareholder agree that they will cooperate with the
Transferee in connection with any Offerings and that they will, at the
Transferee's expense: (1) furnish the Transferee with such information
concerning the Transferor and the Shareholder as the Transferee may reasonably
require to comply with applicable securities laws and regulations (the "B&B
Information"); (2) use diligent efforts to review, comment on, and otherwise
assist Transferee as reasonably necessary for the preparation of, descriptions
concerning the Transferor and the Shareholder to be used in connection with
Offerings; and (3) represent and warrant to the Transferee in connection with
any Offerings that the B&B Information does not contain any untrue statement of
a material fact and that the B&B Information does not omit any material fact
necessary to make the information contained therein not misleading.
6.T. Preemptive Rights.
Subject to the terms and conditions of this Section 6.T, the Transferor
shall have preemptive rights to purchase shares of the common stock of the
Transferee ("PBC Shares") at
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the time of any future issuance of PBC shares by the Transferee (the "Preemptive
Rights"). Such preemptive rights shall be subject to the following:
(1) The Transferor shall have the preemptive right to purchase (a)
that number of PBC Shares as are necessary in order for the Transferor to
maintain its ownership of 3.25% percent of the issued and outstanding PBC
Shares as described in Section 5.D. above; or (b) such lesser number of
Shares as the Transferor may in each instance elect;
(2) Notwithstanding any other provision of this Agreement, the
Preemptive Rights shall not apply to: (a) Shares issued to investors
pursuant to the Investor Offering; (b) Shares issued to third parties in
connection with acquisitions; (c) Shares issued pursuant to the
Transferee's Employee Stock Option Plan; or (d) Shares issued to BCI
pursuant to BCI's exercise of its conversion or option rights under the
Secured Loan Agreement; and
(3) Notwithstanding any other provision of this Agreement, the
Preemptive Rights shall expire immediately prior to the occurrence of a
Qualified Public Offering.
7. CONDITIONS TO THE OBLIGATION OF THE TRANSFEREE.
The obligation of the Transferee to close the transactions
contemplated by this Agreement shall be subject to the fulfillment at or
prior to the Closing Date of each of the following conditions:
7.A. Accuracy of Representations and Warranties and Compliance Obligations.
The representations and warranties of the Transferor and the Shareholder
contained in this Agreement shall have been true and correct at and as of the
date hereof, and they shall be true and correct in all material respects at and
as of the Closing Date with the same force and effect as though made at and as
of that time. The Transferor and the Shareholder shall have performed and
complied with all of their obligations required by this Agreement to be
performed or complied with at or prior to the Closing Date. The Transferor and
the Shareholder shall have delivered to the Transferee a certificate, dated as
of the Closing Date and signed by the Transferor's President and the Shareholder
certifying that such representations and warranties are thus true and correct
and that all such obligations have been thus performed and complied with (the
"President's Certificate").
7.B. Deliveries.
The deliveries of the Transferor and the Shareholder described in Section
9.B. shall have been received.
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7.C. Receipt of Necessary Consents.
All necessary consents or approvals of third parties to any of the
transactions contemplated hereby, the absence of which would materially affect
the Transferee's rights hereunder, shall have been obtained and shown by written
evidence satisfactory to the Transferee. The Transferor shall have obtained the
consent of all lessors of the Purchased Leasehold Premises to the transactions
contemplated hereby and shall have delivered written evidence thereof to the
Transferee in form satisfactory to the Transferee.
7.D. Registration Rights Agreement.
The Transferor and the Shareholder shall have executed and delivered the
Registration Rights Agreement in substantially the form attached as Exhibit
7.D. (the "Registration Rights Agreement").
7.E. Employment Agreement.
Gail Lozoff shall have executed and delivered to the Transferee the
employment agreement attached hereto as Exhibit 7.F. (the "Lozoff Employment
Agreement").
7.F. Payoff Letter.
The Transferor shall have delivered to the Transferee a payoff letter of
Exchange National Bank (the "Payoff Letter"), which letter shall provide the
amount owed to Exchange National Bank in order to pay in full all amounts owed
by the Transferee and which shall state that upon such payment, Exchange
National Bank shall release all liens in its favor with respect to the
Contributed Assets.
7.G. [Intentionally Omitted]
7.H. Due Diligence.
The Transferee shall not have discovered, in the course of its business,
financial, and legal due diligence investigation of the Transferor and the
Contributed Assets, performed during the fourteen (14) day period following the
Transferor's and the Shareholder's execution and delivery of this Agreement (the
"Due Diligence Period"), any matters which would, in the Transferee's good faith
judgment, materially adversely affect the Business or the Transferee's ability
to acquire good title to the Contributed Assets and to operate the Business as
contemplated herein. The Transferee must notify the Transferor of any such
discovery within three (3) business days of the expiration of the Due Diligence
Period.
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7.I. Deliveries.
The deliveries of the Transferor and the Shareholder described in Section
9 shall have been received.
8. CONDITIONS TO OBLIGATIONS OF THE TRANSFEROR AND THE SHAREHOLDER.
The obligations of the Transferor and the Shareholder to close the
transactions contemplated by this Agreement shall be subject to the fulfillment
at or prior to the Closing Date of each of the following conditions:
8.A. Accuracy of Representations and Warranties and Compliance with
Obligations.
The representations and warranties of the Transferee contained in this
Agreement shall have been true and correct at and as of the date hereof, and
they shall be true and correct at and as of the Closing Date with the same force
and effect as though made at and as of that time. The Transferee shall have
performed and complied with all of its obligations required by this Agreement
to be performed or complied with at or prior to the Closing Date. The Transferee
shall have delivered to the Transferor a certificate, dated as of the Closing
Date and signed by one of its Vice Presidents, certifying that such
representations and warranties are thus true and correct and that all such
obligations have been thus performed and complied with.
8.B. Investor Offering.
The proceeds of the Investor Offering shall have been received by the
Transferee.
8.C. BCI Loan Agreement.
The Transferee and BCI shall have executed a Secured Loan Agreement
substantially in the form attached as Exhibit 8.C.
8.D. Employment Agreement.
The Transferee shall have executed and delivered the Employment Agreement.
8.E. Board of Directors' Approval.
The Transferee shall have delivered to the Transferor a certified copy of
the resolutions duly adopted by the Board of Directors of the Transferee,
authorizing the execution of this Agreement and the consummation of the
transactions contemplated hereby.
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8.F. Deliveries.
The deliveries of the Transferee described in Section 9 shall have been
received.
8.G. Registration Rights Agreement.
The Transferee shall have executed and delivered the Registration Rights
Agreement.
8.H. Assignment of Rights.
The Transferee shall have executed and delivered an assignment (the
"Assignment"), in form reasonably acceptable to the Transferor,
assigning to the Transferor all of the Transferee's rights under the Stock
Purchase Agreement and BCI Registration Rights Agreement.
8.I. Election of Gail Lozoff.
Gail Lozoff shall have been elected a director of Transferee.
8.J. Closing Condition.
The Transferee shall have offered to close the transactions contemplated by
this Agreement within thirty (30) days of the closing of the earlier to occur of
the Investor Offering and the Simultaneous Contribution.
9. CLOSING AND CLOSING DELIVERIES.
9.A. Closing.
The closing of the transaction contemplated hereby ("Closing") shall take
place at 10:00 A.M. on March 15, 1995 (the "Closing Date"), at the offices of
BCI; provided, however, that if any of the conditions which are set forth in
Section 7 or Section 8 of this Agreement have not been satisfied (or waived) by
such date, then the Closing Date shall be on a subsequent date, which shall be
determined by mutual agreement of the parties hereto.
9.B. Action To Be Taken by Transferor and the Shareholder.
At the Closing, the Transferor and the Shareholder shall deliver the
following:
(1) evidence, in such form as is satisfactory to the Transferee, that
each of the conditions to the obligation of the Transferee to accept the
Contributed Assets from the Transferor which is set forth in Section 7 of
this Agreement has been satisfied;
(2) copies of the Articles of Incorporation certified by the Missouri
Secretary of State within ten (10) days prior to the Closing and Bylaws of
the Transferor certified
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by an officer of the Transferor, as amended to date and certificate of good
standing of the Transferor from the State of Missouri dated within ten (10)
days prior to the Closing Date;
(3) a duly executed amendment to the Transferor's Articles of
Incorporation, in a form which is proper for filing with the State of
Missouri, amending the Transferor's Articles of Incorporation to change the
Transferor's corporate name to a name reasonably acceptable to Transferee
which does not include "Bagel & Bagel" and any other forms and documents
which are necessary to effect such amendment to its Articles of
Incorporation and to place such amendment of record in each jurisdiction
where the Transferor is qualified to do business as a foreign corporation;
(4) a copy of the resolutions adopted by the Board of Directors and
the shareholders of the Transferor authorizing the Transferor's execution,
delivery and performance of this Agreement, certified in each case by the
Secretary or Assistant Secretary of the Transferor;
(5) such deeds, bills of sale, endorsements, assignments and other
instruments, in such form as in each case is satisfactory to the
Transferee, as shall be sufficient to vest in the Transferee good and
marketable title to the Contributed Assets, free and clear of all liens,
claims, mortgages, pledges, encumbrances, and charges of every kind, other
than the Permitted Liens;
(6) all consents, waivers, approvals, authorizations or orders
required to be obtained, and evidence of the making of all filings required
to be made, by Transferor and the Shareholder for their execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby;
(7) the President's Certificate;
(8) the results of UCC financing statement searches, dated within ten
(10) days of the Closing, and tax lien and judgment searches respecting the
Transferor in each state and county in which the Business is conducted,
which show no liens or encumbrances except those identified on Schedule
4.I.;
(9) opinion of Smith, Gill, Fisher & Butts, counsel to the Transferor
and the Shareholder, substantially in the form attached as Exhibit 9.B.(a);
(10) executed copies of the documents referenced in Section 7 hereof;
(11) a release and waiver of each director and officer of the
Transferor releasing and waiving any then existing claim, whether known or
unknown, he may have against the Transferor in a form reasonably
satisfactory to the Transferee; and
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(12) a receipt acknowledging the Transferor's receipt of the
Consideration.
9.C. Action to Be Taken By The Transferee.
At the Closing, the Transferee shall deliver the following:
(1) evidence, in such form as is satisfactory to the Transferor, that
each of the conditions to the obligations of the Transferor and the
Shareholder to contribute the Contributed Assets to the Transferee which is
set forth in Section 8 of this Agreement has been satisfied;
(2) certified copies of the Certificate of Incorporation and Bylaws of
the Transferee and a certificate of good standing of the Transferee from
the State of Delaware dated within five days prior to the Closing Date;
(3) a copy of the resolutions adopted by the Board of Directors of the
Transferee authorizing its execution, delivery and performance of this
Agreement, certified by the Secretary or Assistant Secretary of the
Transferee;
(4) all consents, waivers, approvals, authorizations or orders
required to be obtained, and evidence of the making of all filings required
to be made, by the Transferee for its authorization, execution and delivery
of this Agreement and the consummation of the transactions contemplated
hereby;
(5) certificates evidencing the BCI Shares and the Exchange Shares in
the name of the Transferor;
(6) opinion of Rudnick & Wolfe, counsel to the Transferee,
substantially in the form attached as Exhibit 9.C.(6);
(7) executed copies of the documents referenced in Section 8 hereof;
(8) the Consideration, in exchange for all the Contributed Assets;
(9) an Assignment and Assumption Agreement pursuant to which the
Transferee shall transfer and assign to the Transferor and the Transferor
shall accept and assume from the Transferee, all of the Transferee's right,
title, and interest to, and duties, obligations and remedies under, the
Stock Purchase Agreement and the BCI Registration Rights Agreement,
including without limitation:
(a) the Transferee's right under the Stock Purchase Agreement to
receive certain price guarantees from BCI with respect to resales of
the BCI Shares;
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(b) the benefit of all representations and warranties made by BCI
in the Stock Purchase Agreement;
(c) the Transferee's right under the BCI Registration Rights
Agreement to register the BCI Shares with the Securities and Exchange
Commission; and
(d) all other rights, obligations and remedies of the Transferee
under the terms of the Stock Purchase Agreement and the BCI
Registration Rights Agreement;
(10) instruments, in such form as are satisfactory to the Transferor,
as shall be sufficient to effect the assumption by the Transferee of the
Assumed Liabilities;
(11) such further instruments of transfer and assignment and the
Transferee shall take such other actions as the Transferor or the terms of
the Stock Purchase Agreement and the BCI Registration Rights Agreement may
require in order to effectively assign, transfer and vest in the Transferor
all right, title and interest in and to the Stock Purchase Agreement and
the BCI Registration Rights Agreement assigned hereby and the benefits
intended to be conveyed thereby and to facilitate the consummation of all
transactions contemplated therein;
(12) a receipt acknowledging the Transferee's receipt of the
Contributed Assets; and
(13) an Assumption Agreement pursuant to which the Transferee assumes
the Assumed Liabilities.
9.D. Form of Documents.
All documents to be furnished at the Closing shall be in form and substance
reasonably satisfactory to the Transferor, the Shareholder and the Transferee.
9.E. Further Assurances.
At any time at or after the Closing, the parties shall execute and deliver
such instruments, assignments and other documents as may be reasonably necessary
to convey, assign and transfer the Contributed Assets to the Transferee or
otherwise carry out the purpose of this Agreement.
10. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS.
The representations and warranties contained in this Agreement and in any
instrument or document delivered pursuant to this Agreement shall survive for a
period of two years from the Closing Date notwithstanding any investigation at
any time made by or on behalf of the Transferee and thereafter all such
representations and warranties shall be extinguished; provided
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however that (i) the representation and warranty set forth in Section 4.G. shall
survive until the Statute of Limitations Date (as below defined), and (ii) the
representations and warranties set forth in Sections 4.A.; 4.B.; 4.C.; 4.I.(1);
4.X.; and 4.AB shall survive for an indefinite period (the period of such
survival being referred to as the ("Survival Period")). For purposes hereof, the
Statute of Limitations Date means the last day on which the applicable
governmental entity may make an assessment respecting any taxes as provided in
the applicable statute or ordinance. Any claim or cause of action (including,
without limiting the generality of the foregoing, a claim for indemnification
pursuant to Section 12.A) based upon or arising out of any inaccurate
representation or warranty made hereunder or in any instrument or document
delivered pursuant hereto must be made within the applicable Survival Period or
the party against which such claim is made shall have no liability with respect
thereto.
Nothing contained in this Article shall affect or limit the obligations of
either party to perform the obligations to be performed by it hereunder after
the Closing Date.
11. CERTAIN ACTIONS AFTER THE CLOSING.
11.A. The Transferee to Act as Agent for the Transferor.
This Agreement shall not constitute an agreement to assign any claim,
contract, license, lease, commitment, sales order or purchaser order if any
attempted assignment of the same without the consent of the other party thereto
would constitute a breach thereof or in any way affect the rights of the
Transferor thereunder. If such consent is not obtained or if any attempted
assignment would be ineffective or would affect the Transferor's rights
thereunder so that the Transferee would not in fact receive all such rights,
then subject to the terms and conditions of Section 11.C. hereof the
Transferee shall act as the agent for the Transferor in order to obtain for the
Transferee the benefits thereunder.
11.B. Delivery of Property Received by the Transferor After Closing.
From and after the Closing the Transferee shall have the right and
authority to collect, for the account of the Transferee, all Contributed
Receivables and other items which shall be transferred or are intended to be
transferred to the Transferee as part of the Contributed Assets as provided in
this Agreement, and to endorse with the name of the Transferor any checks or
drafts received on account of any such Contributed Receivables or other items of
the Contributed Assets. The Transferor and the Shareholder agree that it will
transfer or deliver to the Transferee, promptly after the receipt thereof, any
cash or other property which the Transferor receives after the Closing Date in
respect of any claims, contracts, licenses, leases, commitments, sales orders,
purchase orders, receivables of any character or any other items transferred or
intended to be transferred to the Transferee as part of the Contributed Assets
under this Agreement.
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<PAGE>
11.C. The Transferee Appointed Attorney for the Transferor.
Effective at the Closing Date, the Transferor hereby constitutes and
appoints the Transferee, its successors and assigns, the true and lawful
attorney of the Transferor, in the name of either the Transferee or the
Transferor (as the Transferee shall determine in its sole discretion) but for
the benefit and at the expense of the Transferee (except as otherwise herein
provided), (i) to institute and prosecute all proceedings which the Transferee
may deem proper in order to collect, assert or enforce any claim, right or title
of any kind in or to the Contributed Assets as provided for in this Agreement;
(ii) to defend or compromise any and all actions, suits or proceedings in
respect of any of the Contributed Assets, and to do all such acts and things in
relation thereto as the Transferee shall deem advisable; and (iii) to take all
action which the Transferee may reasonably deem proper in order to provide for
the Transferee the benefits of the Contributed Assets where any required consent
of another party to the sale or assignment thereof to the Transferee pursuant to
this Agreement shall not have been obtained. The Transferor acknowledges that
the foregoing powers are coupled with an interest and shall be irrevocable. The
Transferee shall be entitled to retain for its own account any amounts collected
pursuant to the foregoing powers, including any amounts payable as interest in
respect thereof.
11.D. Employment by the Transferee of the Transferor's Employees.
(1) The Transferor and the Shareholder shall use their best efforts to
aid the Transferee in engaging such of the Transferor's employees as are
employed on the Closing Date whom the Transferee desires to engage after
the Closing Date.
(2) Except as set forth in subsection (3) below, the Transferee shall
have no obligation to employ any of the persons currently employed by the
Transferor or to continue, or institute any replacement or substitution
for, any vacation, severance, incentive, bonus, profit sharing, pension or
other employee benefit plan or program of the Transferor.
(3) The Transferee shall employ those corporate level employees of the
Transferor as set forth on Schedule 11.D. In the event the Transferee
terminates any such employee without cause during the twelve (12) month
period following the Closing, the Transferee shall provide each such
terminated employee with reasonable out placement assistance and severance
pay equal to three (3) months' salary.
11.E. Payment of Certain Assumed Liabilities.
(1) The Transferee shall pay, promptly after the Closing, the
following Assumed Liabilities: (a) the amounts outstanding under the Line
of Credit; (b) the amount set forth in Section 13.K.; (c) the outstanding
indebtedness owed to Richard Lozoff in the amount of $491,000.00; and (d)
the outstanding indebtedness owed to Swaden in an amount no greater than
$577,000.00.
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12. INDEMNIFICATION.
12.A. Agreement by the Transferor and the Shareholder to Indemnify.
The Transferor and the Shareholder jointly and severally agree that they
will indemnify, defend and hold the Transferee harmless in respect of the
aggregate of all indemnifiable damages (as defined below) of the Transferee. For
this purpose, "indemnifiable damages" of the Transferee means the aggregate of
all expenses, losses, costs, deficiencies, liabilities and damages (including
related counsel fees and expenses) incurred or suffered by the Transferee (i)
resulting from any inaccurate representation or warranty made by the Transferor
or the Shareholder in or pursuant to this Agreement or any document delivered in
connection herewith; (ii) resulting from any default in the performance of any
of the covenants or agreements made by the Transferor or by the Shareholder in
this Agreement or any document delivered in connection herewith; (iii) resulting
from the failure of the Transferor to pay, discharge or perform any liability or
obligation of the Transferor which is not expressly assumed by the Transferee
pursuant to this Agreement or any document delivered in connection herewith or
resulting from any dispute concerning any such liability or obligation; (iv)
resulting from any claim, suit, cause of action, investigation or proceeding
whether instituted prior to or after the Closing Date, arising out of or
relating to the conduct of the business of the Transferor prior to the Closing
Date; (v) resulting from any failure of either of the Transferor or the
Shareholder to obtain any necessary consent from any person, entity or
governmental authority to any of the transactions contemplated hereby; or (vi)
arising under any applicable bulk sales laws. Without limiting the generality of
the foregoing, with respect to the measurement of "indemnifiable damages," the
Transferee shall have the right to be put in the same financial position as it
would have been in had the events giving rise to the "indemnifiable damages" not
occurred. Notwithstanding the foregoing, neither the Transferor nor the
Shareholder shall be responsible to indemnify the Transferee: (i) until the
aggregate of all indemnifiable damages exceeds Fifty Thousand Dollars ($50,000),
and the Transferor shall only be liable for all of the indemnifiable damages in
excess of such threshold; or (ii) for any indemnifiable damages in excess of an
aggregate of Four Million Dollars ($4,000,000); provided, however, that such
limitations shall not be applicable to indemnifiable damages arising out of (a)
any inaccurate representation or warranty set forth in Sections 4.A., 4.B.,
4.C., 4.I.(1), 4.X. or 4.AB. hereof, or (b) fraud or intentional
misrepresentation.
As to any indemnifiable damages payable by the Transferor and the
Shareholder pursuant hereto, it is understood and agreed that such damages shall
be payable as follows: (i) indemnifiable damages up to $3,000,000 shall be paid
in cash; and (ii) at the option of the Transferor and the Shareholder, any
indemnifiable damages payable pursuant hereto in excess of $3,000,000 shall be
paid in cash or in Exchange Shares, provided that for purposes of payment of
indemnifiable damages in Exchange Shares, the per share price of the Exchange
Shares shall be deemed to be the greater of: (iii) $1,959.56 per share
appropriately adjusted as provided for in Section 3 hereof or (iv) the fair
market value thereof. If the Transferee and the Transferor are unable to agree
on the fair market value of the Exchange Shares, then such fair market value
shall be determined in the manner set forth in Section 3 hereof.
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12.B. Agreement by the Transferee to Indemnify.
The Transferee shall indemnify, defend and hold the Transferor and the
Shareholder harmless from and against all costs, expenses, losses, damages and
liabilities (including, without limitation, reasonable attorneys' fees) incurred
by the Transferor and the Shareholder with respect to or in connection with the
following (collectively, the "Transferor Damages"):
(1) the existence as of the date hereof of any fact, circumstance or
condition that makes any of the representations and warranties of the
Transferee contained in this Agreement untrue or otherwise inaccurate; and
(2) the breach by the Transferee of any of its covenants or agreements
contained in this Agreement.
Notwithstanding the foregoing, in the case of any claim for indemnification
under clause (1) or (2) of this Section 12.B., written notice of the claim for
indemnification, specifying the nature of the claim in reasonable detail and, if
known, the amount of the claim, must be received by the Transferee before the
end of any applicable Survival Period. Furthermore, without limiting the
generality of the foregoing, with respect to the measurement of the Transferor
Damages, the Transferor shall have the right to be put in the same financial
position as it would have been in had each of the representations and warranties
of the Transferee been true and correct and had each of the covenants of the
Transferee been performed in full.
13. MISCELLANEOUS.
13.A. Amendment and Modification.
The parties hereto may amend, modify and supplement this Agreement in such
manner as may be agreed upon by them in writing.
13.B. Termination.
(1) Anything to the contrary herein notwithstanding, this Agreement
may be terminated and the transaction contemplated hereby may be abandoned:
(a) by the mutual written consent of all of the parties hereto at
any time prior to the Closing Date;
(b) by the Transferee at any time prior to the Closing Date if
there shall be a pending or threatened action or proceeding by or
before any court or other governmental body which shall seek to
restrain prohibit or invalidate the sale of the Contributed Assets to
the Transferee or any other transaction contemplated hereby, or which
might affect the right of the Transferee to own,
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operate in their entirety or control the Contributed Assets and which,
in the judgment of the Transferee, makes it inadvisable to proceed
with the transaction contemplated by this Agreement;
(c) by any party in the event of the material breach by any other
party of any provision of this Agreement, which breach is not remedied
by the breaching party within 30 days after receipt of notice thereof
from the terminating party;
(d) by any party in the event the Closing of the transactions
contemplated hereby does not occur on or before April 15, 1995.
If this Agreement is terminated pursuant to Section 13.B.(1)(a) or (d) no
party shall have any liability for any costs, expenses, loss of anticipated
profit or any further obligation for breach of warranty or otherwise to any
other party to this Agreement. Any termination of this Agreement pursuant
to Section 13.B.(1)(b) or (c) shall be without prejudice to any other
rights or remedies of the respective parties.
In the event this Agreement is terminated as provided herein, the parties
agree the Transferor and the Transferee shall enter into a Confidentiality
Agreement substantially similar to that certain Confidentiality Agreement
dated December 22, 1994 between the Transferor and BCI.
(2) The risk of any loss to the Contributed Assets to be contributed
by the Transferor hereunder and all liability with respect to injury and
damage occurring in connection therewith shall be the sole responsibility
of the Transferor and the Shareholder until the completion of the Closing.
If any material part of the Contributed Assets shall be damaged by fire or
other casualty prior to the completion of the Closing hereunder, the
Transferee shall have the right and option:
(a) to terminate this Agreement, without liability to any party
thereto; or
(b) to proceed with the Closing hereunder, in which event such
casualty shall not constitute a breach by the Transferor or the
Shareholder of any representation, warranty or covenant in this
Agreement, and the Transferee shall be entitled to receive and retain
the insurance proceeds arising from such casualty and to be reimbursed
by the Transferor and the Shareholder for any uninsured casualty.
13.C. Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, assigns, heirs and legal
representatives.
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13.D. Severability.
The parties expressly agree that it is not the intention of any party to
violate any public policy, statutory or common laws, rules, regulations,
treaties or decisions of any government or agency thereof. If any provision of
this Agreement is judicially or administratively interpreted or construed as
being so in violation, such provision shall be inoperative and the remainder of
this Agreement shall remain binding upon the parties hereto. Further, to the
extent any provision hereof is deemed unenforceable by virtue of its scope but
may be enforceable by limitations thereon, the parties hereto agree that the
same shall be enforceable to the fullest extent permissible under the laws and
public policies applied in such jurisdiction in which the enforcement is sought.
The parties hereto hereby authorize any court of competent jurisdiction to
modify the covenants of Section 6.G. and 6.H. to the extent necessary to make
the same enforceable.
13.E. Entire Agreement.
This instrument and the exhibits and schedules attached hereto contain the
entire agreement of the parties hereto with respect to the purchase of the
Contributed Assets and the other transactions contemplated herein, and supersede
all prior understandings and agreements, letters, written or oral
representations or statements, confidentiality agreements and letters of the
parties with respect to the subject matter hereof. Any reference herein to this
Agreement shall be deemed to include the schedules and exhibits attached hereto.
13.F. Headings.
The descriptive headings in this Agreement are inserted for convenience
only and do not constitute a part of this Agreement.
13.G. Execution in Counterpart.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
13.H. Notices.
All notices, demands and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or by electronic transmission. If mailed, first class,
certified mail, postage prepaid, or sent by reliable overnight delivery service
and addressed as follows, or at such other addresses as the parties hereto may
from time to time designate in writing, such notices, requests, demands, and
other communications shall be deemed delivered three business days after being
so duly posted or the next business day if sent by overnight delivery service:
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To Transferee: Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, Colorado 80401
Attention: Kyle T. Craig
Facsimile: (303) 202-3360
With a copy to: Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601
Attention: Michael G. Brennan, Esq.
Facsimile: (312) 984-2299/
236-7516
To Shareholder: Richard Lozoff
832 W. 63rd Street
Kansas City, Missouri 64113
To Transferor: Richard Lozoff
832 W. 63rd Street
Kansas City, Missouri 64113
With a copy to: Smith, Gill, Fisher & Butts
One Kansas City Place
35th Floor
1200 Main Street
Kansas City, Missouri 64105
Attention: David S. Mouber, Esq.
Facsimile: (816) 391-7600
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice.
13.I. Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
therein.
13.J. Construction.
This Agreement shall not be construed more strictly against one party than
against another merely by virtue of the fact that it may have been prepared
primarily by counsel for one
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of the parties, it being recognized that all parties have contributed
substantially and materially to the preparation of this Agreement. References in
this Agreement to the Transferor's knowledge shall mean the knowledge of the
Shareholder, Gail Lozoff, and Ed Brownell. Any disclosure made in any provision
of this Agreement or on any one Schedule hereto shall be deemed to be made as to
any other provision of this Agreement and as to any other Schedule hereto.
13.K. Expenses.
The Transferee shall, at or after the Closing, pay the attorneys',
accountants' and investment brokers' fees incurred by the Transferor in
connection with the negotiation of this Agreement and the consummation of the
transactions contemplated by this Agreement, in the amounts specified in
Schedule 13.K. and aggregating $465,000.00.
13.L. Agreement Regarding Schedules.
The parties hereby acknowledge and agree that they have entered into this
Agreement without the Schedules described herein being attached hereto. The
Transferor shall prepare and deliver a proposed final set of Schedules to the
Transferee on or before March 8, 1994. The Transferee shall have until the close
of business on the second (2nd) full business day after its receipt of said
proposed final set of Schedules (the "Review Period") to review said Schedules
and determine whether to accept the proposed final set of Schedules or terminate
this Agreement, such determination to be communicated to the Transferee by the
expiration of the Review Period.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed as of the day and year first above written.
TRANSFEREE:
PROGRESSIVE BAGEL CONCEPTS, INC.,
a Delaware corporation
By: /s/ M. David White
--------------------------------
Its: Vice President
-----------------------------
BAGEL & BAGEL, INC., a Missouri
corporation
By: /s/ Gail Lozoff
-------------------------------
Its: President
-----------------------------
SHAREHOLDER:
/s/ Richard Lozoff
-----------------------------------
Richard Lozoff
44
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EXHIBIT I
Stock Purchase Agreement
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT, is made and entered into as of this day of ,
1995, by and between Boston Chicken, Inc., a Delaware corporation (the
"Seller"), and Progressive Bagel Concepts, Inc., a Delaware corporation
("Buyer").
R E C I T A L S:
Seller desires to sell to Buyer, and Buyer desires to purchase from Seller,
shares of common stock, $.01 par value per share, of Seller ("Common Stock"),
upon the terms and subject to the conditions contained herein.
For and in consideration of the premises, covenants, and agreements
contained herein, the parties do covenant, agree, represent, warrant, and
stipulate as follows:
ARTICLE 1
PURCHASE AND SALE OF STOCK
Section 1.1 Shares to be Acquired. Subject to the terms and conditions
contained herein, Seller agrees to sell, assign, transfer, and convey to Buyer,
free and clear of all pledges, liens, security interests, encumbrances, or other
restrictions arising from Seller (except restrictions on resale under state or
federal securities laws), and Buyer shall purchase from Seller, that number of
shares of Common Stock equal to: (a) $5,500,000 divided by (b) the closing sales
price per share of Common Stock as quoted on the NASDAQ National Market, as
reported in The Wall Street Journal (Midwest Edition), on the business day
immediately prior to the last business day before the Closing Date (as
hereinafter defined) (the "Per-Share Price"), rounded up to the nearest whole
share (the "Shares").
Section 1.2 Closing. The closing of the purchase and sale of the Shares
herein described (the "Closing") shall occur on March 15, 1995, or on a
subsequent date which shall be determined by the parties (the "Closing Date"),
and shall take place at the offices of the Seller, 14103 Denver West Parkway,
Golden, CO 80401 at 10:00 a.m. Mountain time.
Section 1.3 Delivery of Shares. On the Closing Date, Seller shall deliver
to Buyer such certificate or certificates, in such denominations as Buyer may
reasonably request, representing the Shares, issued in the name of Buyer.
<PAGE>
ARTICLE 2
PURCHASE PRICE AND PAYMENT
The aggregate purchase price (the "Purchase Price") for the Shares shall be
$5,500,000.00. The Purchase Price shall be payable on the Closing Date by wire
transfer of immediately available funds to a bank or banks designated by Seller.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Seller represents, warrants, covenants,
and agrees as follows:
Section 3.1 Capitalization; Validity of Shares. Seller has authorized
capital stock consisting of 100,000,000 shares of Common Stock, of which
44,912,183 shares were issued and outstanding as of January 24, 1995, and
20,000,000 shares of $.01 par value preferred stock, of which no shares are
issued and outstanding. All of the issued and outstanding shares of Common Stock
of Seller are duly and validly authorized and issued, fully paid and
nonassessable, were offered, issued, and sold in accordance with applicable
federal and state securities laws and were not issued in violation of the
preemptive rights of any stockholders of Seller. The Shares to be issued and
delivered to Buyer, when so issued and delivered, will be duly and validly
authorized and issued, fully paid and nonassessable, free and clear of any
security interest, lien, encumbrance, right or restriction whatsoever arising
from Seller (except restrictions on resale under state or federal securities
laws). There are no outstanding options, warrants, conversion privileges,
commitments or demands of any character relating to the Shares arising from
Seller.
Section 3.2 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
Section 3.3 Authorization; Validity. Seller has full corporate power and
authority to enter into this Agreement and to perform all of Seller's covenants
and undertakings herein set forth, including, without limitation, the full
corporate power and authority to issue the Shares to Buyer free and clear of any
security interests, liens, encumbrances, rights, or restrictions arising from
Seller. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement is the legal, valid, and
binding obligation of Seller, enforceable in accordance with its terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, or similar laws affecting the enforcement of creditors' rights
generally, and except as enforcement of any particular remedy may be limited by
the application of equitable principles. Neither the execution and delivery of
this Agreement
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nor the consummation of the transactions contemplated hereby will (i) violate
the Certificate of Incorporation or bylaws, as amended, of Seller; (ii) violate
or constitute a default under any provision of, or conflict with, or result in
acceleration of any obligation under, any mortgage, deed of trust note, loan,
lease, or agreement to which Seller is a party or by which it or any of its
properties or assets may be bound, which violation, default, or conflict would
result in a material adverse effect on the business, assets, operations, or
condition (including, without limitation, financial) of Seller; or (iii) violate
any order, ruling, decree, judgment, arbitration award, or stipulation to which
Seller is subject, which violation would result in a material adverse effect on
the business, assets, operations or condition (including, without limitation,
financial) of Seller.
Section 3.4 SEC Reports and Financial Statements. Seller is subject to the
reporting requirements of Section 13 of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and has delivered to Buyer copies of all reports,
registration statements, and other filings filed by Seller with the Securities
and Exchange Commission (the "SEC") since December 26, 1993 under the 1934 Act
and any filings with the SEC under the Securities Act of 1933, as amended (the
"1933 Act") (herein collectively called the "SEC Reports"). As of the date of
this Agreement, Seller has filed all regular and periodic reports and proxy
statements required to be filed by it with the SEC. The SEC Reports taken
together in the order filed correctly describe, among other things, the
business, operations, and principal properties of Seller and its subsidiaries in
accordance with the requirements of the respective applicable report form. As of
their respective dates of filing, none of the SEC Reports contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited consolidated financial
statements included in the SEC Reports were prepared in accordance with
generally accepted accounting principles (as in effect from time to time)
applied on a consistent basis (except as may be indicated therein or in the
notes or schedules thereto) and fairly present as of the dates thereof, the
results of Seller's and its consolidated subsidiaries' operations and changes in
financial position for the periods specified, subject in the case of the
unaudited interim financial statements, to normal year-end audited adjustments
and any other adjustments described therein or in the notes and schedules
thereto.
Section 3.5 Brokers. Seller has not dealt with any broker, finder,
commission agent, or other person in connection with the purchase of the Shares
and the transactions contemplated by this Agreement and is under no obligation
to pay any broker's fee or commission in connection with such transactions.
Section 3.6 Representations and Warranties; Survival. The representations,
warranties and covenants of Seller shall survive for a period of one year from
the Closing Date. When considered together with the SEC Reports and other
information made available to Buyer, no representation, warranty, or covenant
contained in this Agreement or in any written statement delivered pursuant
hereto contains any untrue material statement, nor shall such representations,
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<PAGE>
warranties, and covenants omit any statement necessary in order to make any
material statement not misleading in light of the circumstances in which they
were made.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer represents, warrants, covenants, and
agrees as follows:
Section 4.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
Section 4.2 Authorization. Buyer has full corporate power and authority to
enter into this Agreement and to perform all of Buyer's covenants and
undertakings herein set forth. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been, or will
prior to the Closing Date be, duly authorized by all necessary corporate action
on the part of Buyer. This Agreement is the legal, valid, and binding obligation
of Buyer, enforceable in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, moratorium, or similar laws
affecting the enforcement of creditors' rights generally, and except as
enforcement of any particular remedy may be limited by the application of
equitable principles.
Section 4.3 Investment. The Shares are being acquired by Buyer hereto not
with a view to any distribution or resale thereof in any transaction which would
be in violation of the 1933 Act, and rules promulgated thereunder, or any state
securities statute. Buyer can bear the economic risk of losing its investment in
the Shares and is presently able to afford the complete loss of such investment.
Buyer has such knowledge and experience in financial and business matters so as
to be capable of evaluating the merits and risks of an investment in the Shares.
Buyer has been furnished with the SEC Reports and acknowledges that it has been
afforded the opportunity (i) to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of Seller concerning the merits
and risks of investing in the Shares and (ii) to obtain such additional
information which Seller possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy and completeness of information
contained in the SEC Reports. Buyer acknowledges that Seller has answered all
questions and responded to all inquiries and requests for information to Buyer's
satisfaction. Buyer acknowledges that it has made, independently and without
reliance upon the Seller (other than the representations and warranties of the
Seller set forth in Article 3 hereof) or any agent or representative of the
Seller and based on its own independent analysis of the Seller and such other
documents and information as it has deemed appropriate, its own investment
analysis and its own business decision to enter into and consummate this
Agreement and the transactions contemplated hereby.
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<PAGE>
Section 4.4 Legend on Shares. The Buyer understands that the Shares have
not been registered under the 1933 Act or any state securities laws, and that it
must therefore bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the 1933 Act or is exempt
from registration, and that the Shares will bear substantially the following
legend:
"The shares represented by this certificate are "Restricted
Securities". As such they may not be transferred unless (i) such transfer
is effected pursuant to a registration statement which has been filed under
the Securities Act of 1933 (the "1933 Act") and declared effective by the
Securities and Exchange Commission, or (ii) in the written opinion of
counsel, acceptable to the issuer of these shares, such transfer may be
effected under and is in compliance with Rule 144 under the 1933 Act, as in
effect on the date of such transfer, or is otherwise exempt from the
registration requirements of the 1933 Act."
Section 4.5 Brokers. Buyer has not dealt with any broker, finder,
commission agent, or other person in connection with the purchase of the Shares
and the transactions contemplated by this Agreement and is under no obligation
to pay any broker's fee or commission in connection with such transactions.
ARTICLE 5
CONDITIONS: TERMINATION
Section 5.1 Conditions to Obligations of Buyer. The obligations of Buyer
are, at the option of Buyer, subject to the conditions that, at the Closing
Date:
(a) Accuracy of Representations and Warranties. The representations or
warranties of Seller contained in this Agreement shall be true and correct
in all material respects.
(b) Performance by Seller. Seller shall have performed and complied
with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
(c) Delivery of Certificates and Opinion. Seller shall have delivered
to Buyer (i) a certificate executed by the Vice Chairman or any Vice
President of Seller, as of the Closing Date, certifying to the fulfillment
of the conditions specified in subparagraphs (a) and (b) hereinabove; (ii)
duly adopted resolutions of the Board of Directors of Seller, certified by
the Secretary or any Assistant Secretary thereof as of the Closing Date,
authorizing and approving the execution of this Agreement on behalf of
Seller and the consummation of the transactions contemplated herein in
accordance with
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its terms; and (iii) an opinion of the General Counsel of the Seller, dated
the Closing Date, in substantially the form attached hereto as Exhibit A.
(d) No Adverse Changes. There shall have been no material adverse
change in the properties, business, or financial condition of Seller from
that reflected in the SEC Reports, and Seller shall not have suffered any
substantial loss or damage to its properties or assets not otherwise
covered by insurance that would materially and adversely affect or impair
its ability to conduct its business.
(e) Registration Rights Agreement. Seller shall have executed and
delivered to Buyer that certain Registration Rights Agreement in
substantially the form attached hereto as Exhibit B (the "Registration
Rights Agreement").
Section 5.2 Conditions to Obligations of Seller. The obligations of Seller
hereunder are, at the option of Seller, subject to the conditions that at the
Closing Date:
(a) Accuracy of Representations and Warranties. The representations or
warranties of Buyer contained in this Agreement shall be true and correct
in all material respects.
(b) Performance by Buyer. Buyer shall have performed and complied with
all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or on the Closing Date.
(c) Delivery of Certificates. Buyer shall have delivered to Seller (i)
a certificate executed by an officer of Buyer, as of the Closing Date,
certifying to the fulfillment of the conditions specified in subparagraphs
(a) and (b) hereinabove; and (ii) duly adopted resolutions of the Board of
Directors of Buyer certified by the Secretary or any Assistant Secretary
thereof as of the Closing Date, authorizing and approving the execution of
this Agreement on behalf of Buyer and the consummation of the transactions
contemplated herein in accordance with its terms.
(d) Registration Rights Agreement. Buyer shall have executed and
delivered to Seller the Registration Rights Agreement.
Section 5.3 Termination. This Agreement may be terminated by Buyer on the
Closing Date if any condition precedent to Buyer's obligations hereunder is not
fulfilled on the Closing Date. Such termination shall not prejudice any claim
that Buyer may have hereunder as a consequence of any failure or default of
Seller. This Agreement may be terminated by Seller on the Closing Date if any
condition precedent to Seller's obligations hereunder is not fulfilled on the
Closing Date. Such termination shall not prejudice any claim that Seller may
have hereunder as a consequence of any failure or default of Buyer.
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Seller and Buyer shall apply their reasonable best efforts to fulfill all
conditions precedent necessary to consummate this Agreement.
ARTICLE 6
SHARE PRICE GUARANTEE
Section 6.1 Agreement to Guarantee. Seller agrees, on the terms and subject
to the conditions set forth herein, to guarantee the sales price of those Shares
sold by Buyer during the Guarantee Period (as hereinafter defined) (the
"Guarantee Shares").
Section 6.2 Conditions to Share Price Guarantee. Seller's obligations under
Section 6.1 hereof are subject to the following conditions:
(a) Buyer sells the Guarantee Shares within the first forty-five days
immediately following the date notification by Seller to Buyer that the SEC
has declared effective the registration statement registering the Shares is
received by Buyer (the "Guarantee Period");
(b) The Guarantee Shares are sold through Merrill Lynch, Pierce,
Fenner & Smith Incorporated to one or more persons not affiliated with,
related to, or associated with Buyer, in which a good faith effort is made
by Buyer to maximize the selling price during each trading day in which
Guarantee Shares are sold;
(c) The average price per share received in such sales, net of
broker's commissions, is less than the Per-Share Price (such per-share
shortfall to be referred to as the "Per-Share Shortfall");
(d) Seller receives notice from the Buyer within 14 days of the
expiration of the Guarantee Period of the amount of the Per-Share Shortfall
with copies of applicable confirmation slips attached thereto ("Notice");
and
(e) During any trading day during the Guarantee Period Buyer sells
only that number of Shares that is equal to or less than 10% of the total
number of Shares received by Buyer hereunder.
Section 6.3 Payment of Per-Share Shortfall. In the event Buyer satisfies
all of the conditions set forth in Section 6.2, Seller shall pay to Buyer,
within three business days of receipt of the Notice, an amount in cash equal to
the Per-Share Shortfall multiplied by the number of Guarantee Shares sold during
the Guarantee Period.
Section 6.4 Assignment of Share Price Guarantee. Buyer may, without
Seller's consent assign its rights under this Article 6 to one or more
individuals to whom it may
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subsequently transfer the Shares in compliance with the 1933 Act and all
applicable state securities laws; provided, however, that such individuals may
not further assign such rights without Seller's prior written consent. To the
extent that Buyer assigns its rights under this Article 6 to more than one
individual, each individual shall have such rights separately from the others
with respect to the Shares transferred to him, provided that in order to have
the benefit of such rights, the individual must satisfy all of the obligations
set forth in Section 6.2 hereof, including, but not limited to, selling, during
any trading day during the Guarantee Period, only that number of Shares that is
equal to or less than 10% of the total number of Shares transferred to him.
ARTICLE 7
MISCELLANEOUS PROVISIONS
Section 7.1 Notices. All notices, requests, demands, and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand or by electronic
transmission. If sent by reliable overnight delivery service and addressed as
follows, or at such other addresses as the parties hereto may from time to time
designate in writing, such notices, requests, demands, and other communications
shall be deemed delivered the next business day after being so duly sent:
To Buyer: Progressive Bagel Concepts, Inc.
1526 Cole Blvd.
Suite 200
Golden, Colorado 80401
Attention: Chairman
Facsimile: (303) 202-3360
with a copy to:
Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601
Attention: Michael G. Brennan, Esq.
Facsimile: (312) 984-2299
to Seller: Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 384-5339
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with a copy to:
Bell, Boyd & Lloyd
Three First National Plaza
Suite 3200
70 West Madison Street
Chicago, Illinois 60602
Attention: Amy S. Powers, Esq.
Facsimile: (312) 372-2098
Section 7.2 Prior Agreements. This Agreement supersedes all prior
discussions and agreements between Buyer and Seller with respect to the purchase
of the Shares and the other matters contained herein, and this Agreement and the
agreements referred to herein contain the sole and entire agreement between the
parties hereto with respect to the transactions contemplated herein.
Section 7.3 Modifications. This Agreement may be modified or amended only
by a written instrument executed by the parties hereto.
Section 7.4 Counterparts, Headings, Etc. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument. The
headings herein set out are for convenience of reference only and shall not be
deemed a part of this Agreement.
Section 7.5 Assignment. Subject to compliance with the 1933 Act and
applicable state securities laws, Buyer's rights hereunder shall be assignable,
including Buyer's rights under Article 6 hereof; provided, however, that such
assignee of Buyer may not further assign such rights without the prior written
consent of Seller. To the extent that Buyer assigns its rights under this
Agreement to more than one individual, each individual shall have such rights
separately from the others with respect to the Shares transferred to him.
Section 7.6 Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
Section 7.7 Governing Law. The validity and effect of this Agreement and
the rights and obligations of the parties hereto shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware.
Section 7.8 Further Assurances. From time to time at Buyer's request
(whether at or after the Closing) Seller will execute and deliver, at Seller's
expense, such further instruments of conveyance and transfer and will take such
other action as Buyer may reasonably request in order to more effectively vest
the Shares in Buyer.
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Section 7.9 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
Section 7.10 Adjustment of Shares. Seller agrees that the formulae used in
determining the Shares and the Per-Share Shortfall shall be appropriately
adjusted to eliminate the impact of any dividend (whether in cash, securities or
other property), stock split, reclassification, recapitalization, reverse split,
or similar event, announced or occurring with respect to the Shares and with a
record date after execution of this Agreement and before the Closing Date.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and their seals to be affixed all as of the day and year first above written.
BOSTON CHICKEN, INC.
By: ____________________________
Title: _______________________
PROGRESSIVE BAGEL CONCEPTS, INC.
By: ____________________________
Title: _______________________
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EXHIBIT A
OPINION OF GENERAL COUNSEL
1. The Seller's authorized capital consists of 100,000,000 shares of Common
Stock, $0.01 par value per share, and 20,000,000 shares of preferred stock,
$0.01 par value per share. All of the issued and outstanding shares of the
Seller's Common Stock have been duly and validly authorized and issued, and are
fully paid and nonassessable. The Shares have been duly and validly authorized
and issued, and are fully paid and nonassessable, free and clear of any security
interest, lien, encumbrance, right or restriction whatsoever arising from the
Seller (except restrictions on resale under state or federal securities laws),
and there are no outstanding options, warrants, conversion privileges,
commitments or demands of any character relating to the Shares arising from the
Seller.
2. The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Seller has full corporate
power and authority to enter into the Stock Purchase Agreement in accordance
with its terms and such Stock Purchase Agreement and all transactions required
thereunder have been duly authorized and approved by all necessary corporate
action of the Seller.
3. Each of the Stock Purchase Agreement and the Registration Rights
Agreement is the legal, valid and binding obligation of Seller, enforceable in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
enforcement of creditors' rights generally, and except as enforcement of any
particular remedy may be limited by the application of equitable principles.
4. Neither the execution and delivery of the Stock Purchase Agreement or
the Registration Rights Agreement nor the consummation of the transactions
contemplated thereby will (i) violate the Certificate of Incorporation or
bylaws, as amended, of the Seller; (ii) violate or constitute an occurrence of
default under any provision of, or conflict with, or result in acceleration of
any obligation under, any mortgage, deed or trust, note, loan, lease or
agreement to which it or any of its properties or assets may be bound; or (iii)
violate any order, ruling, decree, judgment, arbitration award or stipulation to
which the Seller is subject.
5. Buyer's counsel may rely on this opinion in connection with any resale
of the Shares and assignment of its rights and obligations under the Stock
Purchase Agreement and Registration Rights Agreement.
A-1
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EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
__________, 1995, between BOSTON CHICKEN, INC., a Delaware corporation ("BCI"),
and PROGRESSIVE BAGEL CONCEPTS, INC., a Delaware corporation ("PBC").
SECTION 1. Piggyback Registration.
A. Registrable Securities. "Registrable Securities" shall mean those
restricted shares of BCI common stock, $.01 par value, acquired by PBC pursuant
to the Stock Purchase Agreement of even date herewith, by and between BCI and
PBC, with respect to PBC's purchase of that number of shares of BCI common stock
equal to $5,500,000.00 as set forth therein (the "BCI Stock Purchase
Agreement").
B. Right to Piggyback. BCI hereby agrees to effect a registration of
certain of its outstanding securities, including the Registrable Securities,
under the Securities Act of 1933, as amended (the "Act"), on Form S-3 (the
"Registration Statement") within 30 days of the closing of the transactions
contemplated by the BCI Stock Purchase Agreement (the "Closing"). BCI will also
include in such Registration Statement all BCI securities ("Earlier Securities")
desired to be registered by persons or entities having superior registration
rights pursuant to that certain Second Amended and Restated Piggyback
Registration Rights Agreement dated November 8, 1993 (the "Superior Agreement"),
in accordance with the terms and conditions of the Superior Agreement (together
with the registration of the Registrable Securities, the "Piggyback
Registration").
SECTION 2. Registration Procedures.
A. BCI will prepare and file with the Securities and Exchange Commission
(the "Commission") the Registration Statement within 30 days of the Closing and
will include therein the Registrable Securities and such Earlier Securities as
comply with the procedures of the Superior Agreement, will prepare and file all
amendments, post-effective amendments and supplements to the Registration
Statement as may be necessary under the Act and the regulations thereunder to
permit the sale of such Earlier Securities and Registrable Securities to the
public, and will use its reasonable best efforts to cause such Registration
Statement to become effective and remain effective for a period of not less than
two years or until such time as all of the securities covered by the
Registration Statement have been sold (provided that before filing the
Registration Statement, BCI will furnish to counsel selected by the holders of
Registrable Securities copies of the Registration Statement for review by such
counsel).
B. BCI will use its reasonable best efforts to (i) register or qualify such
Earlier Securities and Registrable Securities under such other securities or
blue sky laws of such jurisdictions as any of the sellers of such Earlier
Securities and Registrable Securities (collectively, the "Sellers" and
individually, a "Seller") reasonably request, and (ii) do any and
<PAGE>
all other acts and things which may be reasonably necessary to allow Sellers to
consummate the disposition in such jurisdictions of such Earlier Securities and
Registrable Securities owned by such Sellers; provided, however, that BCI will
not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this subparagraph
(b), (ii) subject itself to taxation in any such jurisdiction, or (iii) consent
to general service of process in any such jurisdiction.
C. BCI will use its reasonable efforts to cause all such Earlier Securities
and Registrable Securities to be included for quotation on the NASDAQ National
Market.
D. Upon the request of BCI, each Seller of Registrable Securities will
promptly furnish to BCI in writing, during the period within which BCI is
required to effect such registration, all information and affidavits as may be
reasonably requested by BCI in connection with items required to be included in
the Registration Statement, or any amendment or supplement thereto. To the
extent BCI reasonably requests such information and affidavits and the Seller
does not provide such information or affidavits in a timely manner, then, BCI's
obligation to register such Seller's Registrable Securities hereunder shall be
null and void.
E. BCI will furnish to each Seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Seller.
F. BCI will notify each Seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such Seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
G. BCI will provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of the Registration Statement.
H. BCI hereby represents and warrants that it is eligible to file the
Registration Statement on Form S-3 pursuant to the rules and regulations
pertaining thereto under the Securities Act.
SECTION 3. Registration Expenses. The Sellers of Registrable Securities under
this Agreement will bear all underwriting discounts and commissions, if any, and
the fees and disbursements of their legal counsel and accountants. BCI will bear
all other expenses in
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connection with any registration or qualification of the Registrable Securities
pursuant to this Agreement.
SECTION 4. Indemnification.
A. BCI agrees to indemnify, to the extent permitted by law, each Seller of
Registrable Securities, and each person, if any, who controls such Seller within
the meaning of the Act, against any and all losses, claims, damages or
liabilities to which the Sellers of Registrable Securities may become subject
under the Act or any other statute or common law by reason of its offer and sale
of Registrable Securities pursuant to the Registration Statement, and to
reimburse the Sellers of Registrable Securities for any reasonable legal or
other expenses actually and reasonably incurred in connection with investigating
any claims and defending any actions, insofar as such losses, claims, damages,
liabilities or actions arise out of, or are based upon:
(i) any untrue statement of a material fact or any alleged untrue
statement of a material fact contained in or incorporated by reference
in the Registration Statement or any post-effective amendment thereto,
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; or
(ii) any untrue statement of a material fact or any alleged untrue
statement of a material fact contained or incorporated by reference in
the prospectus (as amended or supplemented if BCI shall have filed
with the Commission any amendment or supplement thereto), if used
within the period during which BCI is required to keep the
Registration Statement in which such prospectus is contained current
pursuant to the terms of this Agreement, or the omission or alleged
omission to state therein a material fact necessary in order to make
the statements contained therein, in light of the circumstances under
which they were made, not misleading;
provided, however, that the indemnification agreement contained herein shall not
apply to losses, claims, damages, liabilities or actions arising out of, or
based upon, any such untrue statement or any such omission or alleged omission,
if such statement or omission was made in reliance upon, and in conformity with,
information furnished to BCI by or on behalf of the Seller of Registrable
Securities for use in connection with the preparation of the Registration
Statement or any prospectus contained in the Registration Statement or any such
amendment or supplement thereto.
B. The Sellers of Registrable Securities shall (in the same manner and to
the same extent as set forth in Section 4(a)), severally indemnify, to the
extent permitted by law, BCI, each person, if any, who controls BCI within the
meaning of the Act, and their directors and officers, if such statement or
omission was made in reliance upon and in conformity with information furnished
to BCI by or on behalf of any Seller of Registrable Securities for use in
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connection with the preparation of the Registration Statement or any amendment
or supplement thereto.
C. Any person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification (provided, however, that any failure by a person entitled
to indemnification hereunder to give such prompt written notice shall not
adversely affect such person's rights hereunder unless such failure prejudices
the rights of the indemnifying party hereunder) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of such counsel a conflict of interest may exist between such indemnified party
and any other of such indemnified parties with respect to such claim.
SECTION 5. Registration Rights of Other Security Holders. The registration
rights granted pursuant to this Agreement are granted subject to any and all
registration rights granted by the Company to holders of its securities prior to
the date hereof, and no provision herein shall be interpreted so as to be
superior to, inconsistent with, or adversely effect, any such previously granted
registration rights.
SECTION 6. Miscellaneous.
A. Amendments. The provisions of this Agreement may be amended only upon
the written consent of BCI and PBC, or in the event there is more than one
holder of Registrable Securities, only upon the written consent of BCI and the
holders of a majority of the Registrable Securities.
B. Assignment. This Agreement is binding upon the parties hereto and their
respective successors and assigns. Subject to compliance with the Act, PBC's
rights hereunder shall be assignable; provided, however, that such assignee of
PBC may not further assign such rights without the prior written consent of BCI.
To the extent that PBC assigns its rights under this Agreement to more than one
individual, each individual shall have such rights separately from the others
with respect to the Registrable Securities owned by him.
C. Counterparts. This Agreement may be executed in separate counterparts,
each of which will be an original and constitute one and the same agreement.
D. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when
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delivered if delivered by hand or by electronic transmission. If sent by
reliable overnight delivery service and addressed as follows, or at such other
addresses as the parties hereto may from time to time designate in writing, such
notices, requests, demands, and other communications shall be deemed delivered
the next business day after being so duly sent:
To BCI: Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401-4086
Attn: Legal Department
To PBC: Progressive Bagel Concepts, Inc.
1526 Cole Boulevard
Suite 200
Golden, Colorado 80401
Attn: Chairman
Facsimile: (303) 202-3360
E. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement on the day and year first above written.
BOSTON CHICKEN, INC.
By: _____________________________________
Its: ________________________________
PROGRESSIVE BAGEL CONCEPTS, INC.
By: _____________________________________
Its: ________________________________
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EXHIBIT 7.D
PBCI/Shareholders Registration Rights Agreement
3
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the ________________ day
of February 1995 (this "Agreement"), by and between PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation (the "Company"), and each owner of common stock of
the Company listed on Exhibit A hereto and each owner of common stock who
executes, with the written agreement of the Company, a counterpart of this
Agreement (each referred to herein individually as an "Investor" and
collectively referred to herein as "Investors").
WITNESSETH:
WHEREAS, the Company has agreed to provide Investors with certain
registration rights as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and subject to and on the
terms and conditions herein set forth, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 "Business Day" means any day on which The New York Stock Exchange is
open for trading.
1.2 "Common Stock" means the common stock, $.01 par value, of the Company.
1.3 "Eligible Registration" means any of the first four occasions the
Company proposes to register any shares of Common Stock in any manner which
would permit registration of Eligible Shares for public sale under the
Securities Act, other than any offering described in Sections 2.1(a) through
(f). If the Company terminates any Eligible Registration prior to its
effectiveness, that registration will not constitute an Eligible Registration.
1.4 "Eligible Securities" means all or any portion of the Common Stock
owned by the Investors and all other securities issued with respect thereto by
reason of dividends, stock splits, combinations or similar transactions.
As to any proposed offer or sale of Eligible Securities, such securities
shall cease to be Eligible Securities with respect to such proposed offer or
sale when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act
<PAGE>
and such securities shall have been disposed of in accordance with such
registration statement, (ii) such securities are permitted to be sold pursuant
to Rule 144 (or any successor provision to such Rule) under the Securities Act
(iii) such securities shall have been otherwise transferred pursuant to an
applicable exemption under the Securities Act, new certificates for such
securities not bearing a legend restricting further transfer shall have been
delivered by the Company and such securities shall be freely transferable to the
public without registration under the Securities Act, or (iv) a written opinion
of counsel of the Company addressed to Investors to the effect that shares may
be sold without registration under the Securities Act has been delivered.
1.5 "Person" means an individual, a partnership (general or limited),
corporation, joint venture, business trust, cooperative, association or other
form of business organization, whether or not regarded as a legal entity under
applicable law, a trust (inter vivos or testamentary), an estate of a deceased,
insane or incompetent person, a quasi-governmental entity, a government or any
agency, authority, political subdivision or other instrumentality thereof, or
any other entity.
1.6 "Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement including, without limitation, the following: (i) the fees,
disbursements and expenses of the Company's counsel(s), accountants and experts
in connection with the registration of Eligible Securities to be disposed of
under the Securities Act; (ii) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus or
final prospectus, any other offering document and amendments and supplements
thereto and the mailing and delivering of copies thereof to the underwriters and
dealers; (iii) the cost of printing or producing any agreement(s) among
underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements and any other documents in connection with the
offering, sale or delivery of Eligible Securities to be disposed of; (iv) SEC or
blue sky registration fees attributable to Eligible Securities; (v) all expenses
in connection with the qualification of Eligible Securities to be disposed of
for offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky legal investment surveys; (v)
the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Eligible
Securities to be disposed of; and (vi) fees and expenses incurred in connection
with the listing of Eligible Securities on each securities exchange on which
securities of the same class are then listed; provided, however, that
Registration Expenses with respect to any Eligible Registration pursuant to this
Agreement shall not include underwriting discounts or commissions attributable
to Eligible Securities or transfer taxes applicable to Eligible Securities.
1.7 "SEC" means the Securities and Exchange Commission.
1.8 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, all as the same shall be in effect
at the relevant time.
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1.9 "Selling Investor" means any Investor requesting the registration of
Eligible Securities registered pursuant to Article 2 hereof.
ARTICLE 2
INCIDENTAL REGISTRATION
2.1 Notice and Registration. If the Company proposes to register any shares
of Common Stock for public sale under the Securities Act in an Eligible
Registration, it will give prompt written notice to Investors of its intention
to do so, and upon the written request of each Investor delivered to the Company
within ten (10) Business Days after the giving of any such notice by the Company
(which request shall specify the number of Eligible Securities intended to be
disposed of by the Selling Investor and the intended method of disposition
thereof) the Company will use all reasonable efforts to effect, in connection
with the registration of its Common Stock in such Eligible Registration, the
registration under the Securities Act of all Eligible Securities which the
Company has been so requested to register by the Selling Investors, to the
extent required to permit the public sale (in accordance with the intended
method or methods thereof as aforesaid) of Eligible Securities so to be
registered, provided that:
(a) if, at any time after giving such written notice of its intention
to register any Common Stock and prior to the effective date of the
registration statement filed in connection with such Eligible Registration,
the Company shall determine for any reason not to register the Common
Stock, the Company may, at its election, give written notice of such
determination to Investors and thereupon the Company shall be relieved of
its obligation to register such Eligible Securities in connection with the
registration of such Common Stock (but not from its obligation to pay
Registration Expenses to the extent incurred in connection therewith as
provided in Section 2.2);
(b) The Company will not be required to effect any registration
pursuant to this Article 2 if the Company shall have been advised in
writing by a nationally recognized independent investment banking firm
selected by the Company to act as lead underwriter in connection with the
public offering of the Common Stock by the Company that, in such firm's
opinion, a registration of shares of Common Stock of the Investors pursuant
to this Article 2 at that time may materially and adversely affect the
Company's own scheduled offering;
(c) The Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange
offers, subscription offers, dividend reinvestment plans or stock opinions
or other employee benefit plans.
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<PAGE>
(d) The Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to an initial public
offering of shares of Common Stock of the Company;
(e) The Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to the filing of a
registration statement for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act or any
similar rule that may be adopted by the SEC; and
(f) In no event shall the Company be required to register Eligible
Securities if, in the reasonable judgment of the Company, the amount of
Eligible Securities for which registration has been requested does not
justify the effort and/or expense to the Company of effecting such
registration.
2.2 Registration Expenses. The Company (as between the Company and the
Selling Investors) shall be responsible for the payment of all Registration
Expenses in connection with any registration pursuant to this Article 2.
ARTICLE 3
REGISTRATION PROCEDURES
3.1 Registration and Qualification.
(a) If and whenever the Company is required to use reasonable
commercial efforts to effect the registration of any Eligible Securities
under the Securities Act as provided in Article 2 hereof, the Company will
as promptly as is practicable register the Eligible Securities under the
Securities Act and use reasonable commercial efforts to cause the
Registration Statement to become effective;
(b) The Company shall prepare and file with the SEC such amendments
and supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective; and comply with the provisions of the Securities Act
with respect to the disposition of all Eligible Securities until the
earlier of such time as all of such Eligible Securities have been disposed
of in accordance with the intended methods of disposition by the Selling
Investors as set forth in the Registration Statement or the expiration of
thirty (30) days after such Registration Statement has become effective;
provided, however, that in the event that the Company shall notify any
Selling Investor of the happening of any event which would cause the
prospectus included as part of such Registration Statement, as then in
effect, to include an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein,
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<PAGE>
in light of the circumstances under which they were made, not misleading,
such Selling Investor shall thereafter sell no shares under such
Registration Statement until the Company has filed an amendment or
supplement to the prospectus to cause the prospectus not to include an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
and the Company shall be obligated to continue to so amend or supplement
the prospectus for such period of time as the prospectus has for an
aggregate of thirty (30) days not included an untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(c) The Company may require the Selling Investors to furnish to the
Company such information regarding the Selling Investors and the
distribution of the Eligible Securities as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the SEC in connection with any registration;
(d) The Company shall provide each Selling Investor a conformed copy
of the Registration Statement and each material amendment to the
Registration Statement. The Company shall provide to each Selling Investor
an opportunity to review the Registration Statement prior to the filing of
the Registration Statement with the Securities and Exchange Commission;
(e) The Company shall provide to each Selling Investor such number of
copies of such Registration Statement, each amendment and supplement
thereto, the prospectus included in such Registration Statement (including
each preliminary prospectus) and such other documents as such Selling
Investor may reasonably request in order to facilitate the disposition of
the Eligible Securities registered pursuant to such Registration Statement;
and
(f) The Company will provide a transfer agent and registrar for all
Eligible Securities not later than the effective date of the Registration
Statement.
3.2 Underwriting. In the event that any registration pursuant to Article 2
hereof shall involve, in whole or in part, and underwritten offering, the
Company may require Eligible Securities requested to be registered pursuant to
Article 2 to be included in such underwriting on the same terms and conditions
as shall be applicable to the Common Stock being sold through underwriters under
such registration. In such case, the holders of Eligible Securities on whose
behalf Eligible Securities are to be distributed by such underwriters shall be
parties to any such underwriting agreement. Such agreement shall contain such
representations and warranties by the Selling Investors and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, indemnities and
contribution to the effect and to the extent provided in Article 4. The
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<PAGE>
representations and warranties in such underwriting agreement by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Eligible Securities.
ARTICLE 4
INDEMNIFICATION
4.1 Indemnification.
(a) In the event of any registration of any Eligible Securities
hereunder, the Company will enter into customary indemnification
arrangements to indemnity and hold harmless each Investor who exercises his
registration rights hereunder and, to the extent applicable, its directors
and officers, its partners, its trustees and each Person who controls any
of such Persons, each Person who participates as an underwriter in the
offering or sale of any Eligible Securities, and each Person, if any, who
controls such underwriter within the meaning of the Securities Act against
any losses, claims, damages, liabilities and expenses, joint or several, to
which such Person may be subject under the Securities Act or otherwise
insofar as such losses, claims, damages, liabilities or expenses (or
actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any final prospectus included therein,
or any amendment or supplement thereto, or any document incorporated by
reference therein, or (ii) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will promptly
reimburse each such Person for any legal or any other expenses reasonably
incurred by such Person in connection with investigating or defending any
such loss, claim, damage, liability, action or proceeding; provided that
the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any final prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company or such underwriter by such Selling Investors expressly for use in
the registration statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of Investors or
any such Person and shall survive the transfer of such securities by the
Investors.
(b) The Selling Investors, by virtue of exercising their registration
rights hereunder, agree and undertake to enter into customary
indemnification arrangements to severally and not jointly indemnify and
hold harmless (in the same manner and to the same extent as set forth in
clause (a) of this Article 4) the Company, each director of the
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<PAGE>
Company, each officer of the Company who shall sign such registration
statement, and each Person who participates as an underwriter in the
offering or sale of such securities, each Person, if any, who controls the
Company or any such underwriter within the meaning of the Securities Act,
with respect to any statement in or omission from such registration
statement, any final prospectus included therein, or any amendment or
supplement thereto, but only to the extent that such statement or omission
was made in reliance upon and in conformity with written information
furnished by such Selling Investors to the Company expressly for use in the
registration statement. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Company
or any such director, officer or controlling Person and shall survive the
transfer of the registered securities by the Selling Investors and the
expiration of this Agreement.
(c) Indemnification similar to that specified in the preceding
subdivisions of this Article 4 (with appropriate modifications) shall be
given by the Company and the Selling Investors with respect to any required
registration or other qualification of such Eligible Securities under any
federal or state law or regulation or governmental authority other than the
Securities Act.
ARTICLE 5
BENEFITS
5.1 Benefits of Registration Rights. Subject to the limitations of Section
2.1 hereof, Investors may severally or jointly exercise the registration rights
hereunder in such manner and in such proportion as they shall agree among
themselves.
5.2 Qualification for Rule 144 Sales. Upon the written request of any
Investor, the Company will deliver to such Investor a written statement as to
whether it has complied with the filing requirements described in Rule
144(c)(1).
ARTICLE 6
MISCELLANEOUS
6.1 Captions. The captions or headings in this Agreement are for
convenience and reference only, and in no way define, describe, extend or limit
the scope or intent of this Agreement.
6.2 Severability. If any clause, provision or section of this Agreement
shall be invalid or unenforceable, the invalidity or unenforceability of such
clause, provision or section
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<PAGE>
shall not affect the enforceability or validity of any of the remaining clauses,
provisions or sections hereof to the extent permitted by applicable law.
6.3 Governing Law. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Delaware, without reference to
its rules as to conflicts or choice of laws.
6.4 Modification and Amendment. This Agreement may not be changed,
modified, discharged or amended, except by an instrument signed by all of the
parties hereto.
6.5 No Inconsistent Agreements. The Company will not hereafter enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to the holders of Eligible Securities in this Agreement.
6.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
6.7 Entire Agreement. This Agreement constitutes the entire agreement and
understanding among the parties and supersedes understandings and/or written or
oral agreements among them respecting the subject matter herein.
6.8 Notices. All notices, requests, demands, consents and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and delivered by hand, by overnight courier delivery service
or by certified mail, return receipt requested, postage prepaid. Notices shall
be deemed given when actually received, which shall be deemed to be not later
than the next Business Day if sent by overnight courier or after five (5)
Business Days if sent by mail. Notice to Investors shall be made to the address
listed on the stock transfer records of the Company.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above written.
THE COMPANY:
PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation
By:
---------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
INVESTOR:
-------------------------------------------
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COUNTERPART EXECUTION PAGE to the Registration Rights Agreement dated as of
the day of February, 1995, by and between Progressive Bagel Concepts, Inc., a
Delaware corporation (the "Company"), and each owner of common stock of the
Company listed on Exhibit A thereto and each owner of common stock who executes,
with the written agreement of the Company, a counterpart to the Agreement.
THE COMPANY:
PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation
By:
---------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
INVESTOR:
-------------------------------------------
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EXHIBIT A
---------
A-1
<PAGE>
EXHIBIT 7.F
Lozoff and Brownell Employment Agreements
-----------------------------------------
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this ____ day of ___________ , 1995, by and
between Progressive Bagel Concepts, Inc., a Delaware corporation (hereinafter
referred to as the "Company"), and Gail Lozoff (hereinafter referred to as
"Employee").
WITNESSETH:
WHEREAS, the Company is engaged in the business of operating retail
bakeries featuring bagels and other food items;
WHEREAS, because of the abilities and expertise of Employee in said
business, the Company desires to employ Employee; and
WHEREAS, Employee is willing to accept such employment upon the terms
and conditions stated herein.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee to perform the
duties described herein, and Employee hereby accepts such employment on the
terms and conditions stated herein. Employee shall hold the position of Vice
President of the Company, which shall at all times be deemed to be an executive
office of the Company.
2. Offices with Company. Employee shall be a "Founding Director" of the
Company as defined in that certain Agreement to Contribute Assets by and among
the Company, Bagel & Bagel, Inc. and Richard Lozoff dated as of ______________,
1995 (the "Contribution Agreement"). During the term of this Agreement, the
Company shall nominate Employee to
<PAGE>
serve as a director on the Company's Board of Directors, designating her as a
"Founding Director," and not oppose her election. The foregoing obligation shall
expire on the date on which the Company completes an initial public offering of
shares of its common stock pursuant to a registration statement filed pursuant
to the Securities Act of 1933, as amended.
3. TERM OF EMPLOYMENT. Subject to the provisions for termination set
forth herein, the term of employment under this Agreement shall commence on
__________ , 1995 and shall extend until August 1, 1998 (the "Term").
4. DUTIES OF EMPLOYEE. Employee shall perform the duties commensurate
with her position and experience as shall be assigned to her from time to time
by the Company. Employee shall perform such duties in a diligent manner, shall
devote her entire business time, attention and effort to the affairs of the
Company within the scope of her employment as is reasonably necessary for the
proper rendition of said services, shall diligently promote the interests of the
Company, and shall be just and faithful in carrying out her duties. The Company
hereby agrees that the Employee shall not be required, in connection with the
performance of her duties hereunder, to obtain or maintain a residence in the
State of Colorado or otherwise relocate her primary residence.
5. COMPENSATION. The Company shall compensate Employee for all services
rendered by her hereunder as follows:
(a) salary at a yearly rate of $120,000, payable by the Company in
twenty-six (26) equal installments (subject to any increases as determined
by the Board of Directors from time to time in its sole discretion) after
deducting therefrom all applicable FICA contributions, federal and state
income tax withholding, and any other payroll taxes; and
2
<PAGE>
(b) such stock options as may be granted to Employee pursuant to the
Company's 1995 Employee Stock Option Plan, as it may be amended from time
to time, (the "Plan") or any option plan hereinafter adopted by the
Company; and
(c) as an inducement for Employee to execute this Agreement, Employee
shall receive options under the Plan to purchase that number of shares of
common stock of the Company that have a fair market value, as determined in
accordance with the terms of the Plan, of $_______________________ , which
options are to be granted on the date hereof; provided, however, the
options granted pursuant to this Section 5(c) shall constitute Employee's
option grant for 1995 under the Plan; provided further, that if the formula
under the Plan provides for options in excess of those granted to Employee
under Section 5(c) for 1995, Employee shall receive such additional options
at the same time that options are granted under the Plan generally to
employees for 1995.
6. BENEFITS, VACATIONS AND REIMBURSEMENT OF EXPENSES. In addition to
the compensation payable to Employee pursuant to Section 5 above, and all other
compensation or benefits provided for hereunder, Employee shall be entitled to
such reasonable periods of vacation, with full pay, as is consistent with the
general policy as established by the Board of Directors for executives and
business exigencies of the Company, and such benefits of a similar type and
amount and to the same extent as benefits are provided to other similarly
situated employees of the Company. Employee shall also be entitled to receive
such additional benefits to the same extent as benefits are provided to other
similarly situated employees of the Company as established by the Company's
Board of Directors from time to time. The Employee shall be
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<PAGE>
reimbursed for the reasonable business-related expenses incurred by her in
connection with the performance of her duties hereunder.
7. CONFIDENTIALITY. Employee agrees to execute and deliver such
confidentiality agreement which is to be required to be executed and delivered
by employees of the Company generally.
8. CONFLICT OF INTEREST. Employee shall take no action, or engage in
any transaction, that could be considered to conflict with the best interests of
the Company, and shall at all times exercise her best judgment and efforts so as
to avoid taking any action, or engaging in any transaction, that might give the
appearance of being in conflict with the best interests of the Company.
9. TERMINATION.
(a) This Agreement and Employee's employment hereunder shall
immediately terminate, without further notice or action, upon the
occurrence of the death of Employee.
(b) Additionally, the Company shall have the right to terminate this
Agreement and Employee's employment with the Company hereunder, effective
upon written notice to Employee of termination stating the basis for such
termination, under only the following circumstances:
(1) if Employee is permanently disabled (as defined below); or
(2) for "cause," which shall be defined as including any of the
following: (i) any misappropriation of funds or property of the
Company by Employee; (ii) Employee's conviction of a felony, or of any
crime involving
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<PAGE>
moral turpitude, fraud, theft or conversion; (iii) Employee's
failure to submit to a medical examination at the Company's expense
within twenty-one (21) days after receipt of the Company's written
request that Employee submit to such examination; or (iv) a breach of
any other material provision contained in this Agreement.
(c) Employee shall be deemed to be "permanently disabled" hereunder
upon the first to occur of any of the following events:
(1) The receipt by the Company of a written certificate from a
physician approved by the Company and reasonably satisfactory to
Employee stating that, based upon one or more examinations of Employee
by such physician, it is such physician's opinion that, for a period
of at least six (6) consecutive months from the date of certification,
Employee is and will be substantially unable to perform her customary
duties for the Company due to physical or mental infirmity. The
Company may request in writing that Employee submit to such
examinations by giving written notice thereof to Employee.
(2) The adjudication of Employee as an incompetent or a disabled
person and the appointment of a conservator or guardian for her person
or property by a court of competent jurisdiction.
(d) If Employee is terminated by the Company for cause, as that term
is defined in Section 9(b)(2), or if Employee voluntarily terminates her
employment, the Company shall not be obligated to pay Employee any other
compensation with respect
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<PAGE>
to any period after the date of such termination and all stock options
granted to Employee, whether or not vested on the date of such termination,
shall terminate and be of no further force and effect.
(e) If Employee dies or becomes permanently disabled during the Term,
or if Employee is terminated by the Company for any reason other than for
cause, the Company shall pay to Employee the entire amount of the cash
compensation provided for in Section 5 hereof that is payable during the
remainder of the Term payable in a lump sum cash payment within thirty (30)
days of the effective date of termination (provided that, in the case of
death or disability of Employee, the aforementioned cash payment shall be
limited to the lesser of: (i) one year's cash compensation provided for in
Section 5, and (ii) the cash compensation provided for in Section 5 for the
remaining balance of the Term), and all employee stock options granted to
Employee that are vested on the effective date of such termination shall
continue to be exercisable for a period of the lesser of (x) 60 days after
the effective date of such termination or (y) the expiration date of the
option. After the effective date of her termination Employee shall not be
eligible to receive any further employee stock options.
(f) Upon any termination of this Agreement or of the employment of
Employee, or the expiration of this Agreement without renewal of Employee's
employment, Employee shall be deemed automatically to have resigned from
any office or directorship of the Company which she may then hold and shall
promptly deliver to the Company (without retaining any copies thereof) all
Company files and documents,
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<PAGE>
forms, letterhead, business cards, computer disks and any other
written, magnetic or printed materials relating to the business of the
Company.
10. COVENANT RESTRICTING SOLICITATION. During the term hereof and for a
period of two (2) years after her employment with the Company, whether pursuant
to this Agreement or otherwise, shall expire or terminate for any reason
whatsoever, Employee shall not, directly or indirectly, solicit or attempt to
solicit for employment or employ any person who is an employee of the Company on
the date of Employee's date of termination or any person who was an employee
during the six-month period prior to such date.
11. COVENANT RESTRICTING COMPETITION. During the term hereof and for a
period of two (2) years after her employment with the Company, whether pursuant
to this Agreement or otherwise, shall expire or be terminated by Company for
cause, Employee shall not, either directly or indirectly, on her own account, or
as an employee, consultant, partner, owner, officer, director or stockholder of
any other person, firm, partnership, corporation or other entity or in any other
capacity, in any way, directly or indirectly, conduct, engage in, be connected
with, have any interest in, or aid or assist anyone in engaging in a business
which derives 20% or more of its revenues from the retail sale of bagels and/or
bagel-related products, or any business in which the Company is engaged at the
time of, or within one hundred eighty (180) days prior to, such expiration or
termination (a "Competitive Business"); provided, however, Employee may have an
interest in any Competitive Business as a passive investor in such Competitive
Business provided such interest does not exceed three percent (3%) of the
outstanding equity securities of any company which has a class of securities
registered under
7
<PAGE>
Section 12 of the Securities Exchange Act of 1934, as amended, or which is
traded on a national securities exchange.
12. REMEDIES. Employee agrees that the period of time provided for in
Sections 10 and 11 above is the minimum period of time necessary, and that other
provisions and restrictions set forth in Sections 10 and 11 and in other
portions of this Agreement are necessary, to protect the Company and its
successors and assigns in the protection of the business conducted by the
Company. Employee agrees that the services to be performed by her for the
Company are special and unique, that damages cannot compensate the Company in
the event of a violation of the restrictive covenants contained in Sections 10
and 11 hereof, and that injunctive relief shall be essential for the protection
of the Company and its successors and assigns. Accordingly, Employee agrees and
consents that, in the event she shall violate or breach any of said restrictive
covenants the Company shall be entitled to obtain (and she hereby consents to)
such injunctive relief against Employee, without bond, in addition to such
further or other relief as may appertain equity or law. The exercise or
enforcement by the Company of any right or remedy hereunder shall not preclude
the exercise or enforcement by the Company of any other right or remedy
hereunder or which the Company has the right to enforce under applicable law.
13. EMPLOYEE REPRESENTATIONS. Employee represents and warrants to the
Company that (i) she is free to enter into this Agreement and (ii) this
Agreement does not violate the terms of any other agreement to which Employee is
a party or by which she is bound.
14. WAVIER. Failure by either party to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any right or remedy hereunder at any one
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<PAGE>
or more times be deemed a waiver or relinquishment of such right or remedy at
any other time or times.
15. SEVERABILITY. Each section, paragraph, term and provision of this
Agreement, and any portion thereof, shall be considered severable and if for any
reason any such portion of this Agreement is held to be invalid, contrary to, or
in conflict with any applicable present or future law or regulation in a final,
unappealable ruling issued by any court, agency or tribunal with competent
jurisdiction in a proceeding to which the Company is a party, that ruling shall
not impair the operation of, or have any other effect upon, such other portions
of this Agreement as may remain otherwise intelligible, which shall continue to
be given full force and effect and bind the parties hereto. Employee agrees that
if any provisions hereof shall be adjudicated to be invalid or unenforceable in
whole or in part, such modifications made to this Agreement as a result of such
adjudication shall be effective only in the particular jurisdiction in which
such adjudication is made. To the extent any provision hereof is deemed
unenforceable by virtue of its scope but may be enforceable by limitations
thereon, the parties hereto agree that the same shall be enforceable to the
fullest extent permissible under the laws and public policies applied in such
jurisdiction in which the enforcement is sought. The parties hereto hereby
authorize any court of competent jurisdiction to modify the restrictive
covenants to the extent necessary to make the same enforceable.
16. BENEFIT. This Agreement shall inure to the benefit of and be
binding upon the Company, its successors and assigns. The rights and benefits of
Employee under this Agreement are personal to her, and are not subject to
voluntary or involuntary alienation, assignment or transfer by her.
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<PAGE>
17. ENTIRE Agreement. This Agreement contains the entire agreement
between the parties concerning Employee's employment with the Company, and may
not be modified or rescinded except by a written agreement to such effect signed
by both parties.
18. NOTICES. All notices, requests, demands, and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or by electronic transmission. If mailed,
first class, certified mail, postage prepaid, or sent by reliable overnight
delivery service and addressed as follows, or at such other addresses as the
parties hereto may from time to time designate in writing, such notices,
requests, demands, and other communications shall be deemed delivered three (3)
business days after being so duly posted:
to the Company: Progressive Bagel Concepts, Inc.
1526 Cole Blvd. Suite 200
Golden, CO 80401
Attention: Kyle T. Craig
Facsimile: (303) 202-3360
with a copy to: Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, IL 60601
Attention: Michael G. Brennan
Facsimile: (312) 984-2299
to Employee: Gail Lozoff
[address]
with a copy to: Smith, Gill, Fisher & Butts
One Kansas City Place
35th Floor
1200 Main Street
Kansas City, Missouri 64105
Attention: David S. Mouber, Esq.
Facsimile: (816) 391-7600
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<PAGE>
19. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Colorado applicable to contracts made and to be performed
therein.
20. CONFLICT WITH PLAN. The parties acknowledge that to the extent any
provision of this Agreement is inconsistent with any provision of the Plan, the
provisions of this Agreement shall control.
21. SURVIVAL. The parties acknowledge and agree that the covenants
contained in Sections 10 and 11 of this Agreement shall survive the termination
or expiration of Employee's employment with the Company, whether pursuant to
this Agreement or otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
EMPLOYEE: PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation
____________________________ By:__________________________
Gail Lozoff Its:_________________________
<PAGE>
EXHIBIT 8.C
BCI Secured Loan Agreement
5
<PAGE>
SECURED LOAN AGREEMENT
This secured loan agreement (the "Agreement") is made and entered into this
_____ day of February, 1995 between Progressive Bagel Concepts, Inc., a Delaware
corporation (the "Company"), and Boston Chicken, Inc., a Delaware corporation
("Boston Chicken").
Recitals
The Company desires to borrow up to $80,000,000 from Boston Chicken in
order to provide funds for development of retail food service outlets
specializing in the sale of bagels and bagel related products (the "Stores"),
and Boston Chicken has agreed to make such loan to the Company, upon the terms
and subject to the conditions set forth herein.
Covenants
In consideration of the mutual representations, warranties, and covenants
set forth herein, and in consideration of any advances made hereunder to or for
the benefit of the Company by Boston Chicken, the parties hereto agree as
follows:
ARTICLE I
The Loan
1.1 The Loan; Promissory Note. Boston Chicken agrees, on the terms and
subject to the conditions hereinafter set forth, including, but not limited to
the limitation on the amount available from time to time to be borrowed set
forth in Section 1.2 hereto, to advance at any time and from time to time during
the period commencing on the date hereof and ending on March , 1998 (the "Draw
Loan Termination Date"), amounts requested by the Company in an aggregate
principal amount not to exceed $80,000,000 (the "Loan"), in integral multiples
of $100,000. Each advance of the Loan (an "Advance") shall be made by wire
transfer of Boston Chicken to the account of the Company or by regular check of
Boston Chicken payable to the Company and forwarded to the Company by overnight
air express to its address as set forth herein for delivery on the next regular
business day. The Loan shall be evidenced by a promissory note (the "Note") of
even date herewith in the form attached hereto as Exhibit A.
1.2 Maximum Principal Balance. The aggregate outstanding principal balance
of the Loan shall not exceed the following amounts at any time: (a) $20,000,000
from the date hereof until the Company notifies Boston Chicken that it has 40
Stores open and conducting business, (b) $40,000,000 from the date the Company
opens its 40th Store until the Company notifies Boston Chicken that it has 80
Stores open and conducting business, (c) $60,000,000 from the date the Company
opens its 80th Store until the Company notifies Boston Chicken that it has
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120 Stores open and conducting business, and (d) $80,000,000 at any time
thereafter, less, in each instance, the principal amount of conversions under
Section 1.7 and option exercises under Section 1.8 ("Maximum Principal
Balance").
1.3 The Loan Account. Boston Chicken shall maintain a loan account on its
books in which shall be recorded all advances made by Boston Chicken to the
Company pursuant to this Agreement, and all payments made by the Company with
respect to the Loan; provided, however, that failure to maintain such account or
record any advances therein shall not relieve the Company of its obligations to
repay the outstanding principal amount of the Loan, all accrued interest
thereon, and any amount payable with respect thereto in accordance with the
terms of this Agreement and the Note.
1.4 Interest Rate and Payment. (a) Interest shall accrue daily on the
aggregate outstanding principal balance of the Loan, for the period commencing
on the date the Loan is made until the Loan is paid in full, at a per annum rate
equal to the rate designated and announced by Bank of America Illinois or its
successor in interest (the "Bank") from time to time as its "reference rate" in
effect at its principal office in Chicago, Illinois, plus 1%. The interest rate
shall be adjusted, from time to time, on the same day on which the Bank adjusts
its "reference rate." As of the date of this Agreement, the Bank's reference
rate is ___%. Interest on the outstanding principal amount of the Loan shall be
payable in arrears on the dates set forth herein and at maturity (whether at
stated maturity, by acceleration or otherwise).
(b) During the Interest Payment Period (as defined below) the Company shall
pay to Boston Chicken interest on the outstanding principal balance of the Loan
on the first day of each Retail Period, commencing on the first day of the
Retail Period immediately following the first Retail Period in which the Company
initially draws on the Loan under this Agreement through and including the Draw
Loan Termination Date (the "Interest Payment Period"). Thereafter the Company
shall pay principal and interest as provided in Section 1.5.
(c) Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
(d) Any principal payment due under the Note not paid when due, whether at
stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Agreement in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
1.5 Repayment of the Loan. If not earlier paid with the consent of Boston
Chicken, or if not accelerated for payment, the outstanding principal amount of
the Loan shall, at the close of business on the Draw Loan Termination Date,
thereafter become an amortized term Loan payable as follows: the principal
balance of the Loan shall be payable to Boston Chicken in
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65 substantially equal periodic installments of principal (the amount of which
periodic installments of principal shall be determined at the close of business
on the Draw Loan Termination Date based on a schedule amortizing such
outstanding principal balance of the Loan as of such date in 130 substantially
equal periodic installments of principal), plus accrued but unpaid interest, on
the first day of each of Boston Chicken's 13 consecutive four-week accounting
periods used for accounting purposes (each a "Retail Period"), commencing on the
first day of the fifth Retail Period in Boston Chicken's fiscal year 1998 and
continuing until the first day of the fifth Retail Period in Boston Chicken's
fiscal year 2003, when the entire remaining principal balance of the Loan and
all interest accrued thereon shall be due and payable.
1.6 Term of this Agreement. This Agreement shall be effective as of the
date of its execution (the "Closing Date") and shall continue in effect until
the last to occur of (i) the exercise, expiration, or other termination of all
remaining option rights granted in Section 1.8 hereof, (ii) the exercise,
expiration, or other termination of all of the remaining conversion rights
granted in Section 1.7 hereof, (iii) the date on which there is no amount
(principal or interest) remaining outstanding under the Note and (iv) the date
on which Boston Chicken no longer has an obligation to make any advances
hereunder if the Company were to make a valid request for an advance pursuant to
and in accordance with Article III hereof
1.7 Convertibility. (a) On the terms and subject to the conditions set
forth in the Note, any portion of the outstanding principal balance of the Loan
is convertible at the election of the holder of the Note into shares of common
stock of the Company, $.01 par value per share, at any time and from time to
time after the earlier of any acceleration of the Loan or March 15, 1996 [12 1/2
months after Closing Date] and up to the later of the date on which the Company
has properly repaid the outstanding principal balance of the Loan and all
accrued interest thereon in full or the first day of the eleventh Retail Period
in Boston Chicken's fiscal year 2003. Upon such conversion, that portion of
principal so converted shall be deemed to be paid in full upon the delivery to
the holder of the Note of a certificate or certificates representing the proper
number of shares of common stock of the Company to be issued to the holder of
the Note upon such conversion. Conversion of any portion of the principal
balance of the Loan shall not relieve the Company of its obligation to pay any
accrued but unpaid interest on the portion of the principal balance of the Loan
so converted. In no event shall interest be convertible into shares of common
stock in the Company.
(b) Upon any conversion under this Section 1.7, Boston Chicken's obligation
to make additional advances to the Company under this Agreement shall be reduced
by an amount equal to such conversion amount.
1.8 Option. (a) Boston Chicken shall have the option, at any time and from
time to time after the earlier of the acceleration of the Loan or March 15, 1996
[12 1/2 months after Closing Date] and up to the later of the date on which the
Company has properly repaid the outstanding principal balance of the Loan and
all accrued interest thereon in full or the first day of the eleventh Retail
Period in Boston Chicken's fiscal year 2003 to purchase at the Conversion Price
(as defined in the Note) up to that number of shares of common stock of the
Company equal
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to the (i) the Option Amount, divided by (ii) the Conversion Price (the
"Option"). For purposes of this Section 1.8, the Option Amount shall mean (x)
the Maximum Principal Balance, less (y) the sum of (1) the dollar amount of the
outstanding principal balance of the Loan (whether such amount is the result of
a reduction in principal due to the repayment of the Loan or the failure by the
Company to request advances hereunder or otherwise) and (2) the dollar amount of
all previous conversions under Section 1.7 hereof and exercises of the Option
under this Section 1.8, in each case on the date Boston Chicken notifies the
Company of its intention to exercise the Option.
(b) Upon exercise of any portion of the Option under this Section 1.8,
Boston Chicken's obligations to make additional advances to the Company under
this Agreement shall be reduced by an amount equal to the amount of such option
exercise.
1.9 One Obligation. All advances made hereunder, and all interest accrued
thereon, shall constitute one obligation of the Company secured by the security
interests granted by this Agreement and by all other security interests, liens,
claims, and encumbrances from time to time hereafter granted to Boston Chicken
by the Company.
1.10 Credit Resources. The Company acknowledges that Boston Chicken has
informed it that Boston Chicken does not currently and may not from time to time
in the future have cash, cash equivalents, and credit resources sufficient to
permit Boston Chicken to necessarily make all requested advances under this
Agreement and all other similar agreements with financed area developers and
franchisees while maintaining sufficient working capital for Boston Chicken's
operating needs, and the Company agrees that in the event Boston Chicken shall
fail to fund the Loan as and to the extent required hereby and such failure
shall constitute a breach of this Agreement (a "Funding Default"), such Funding
Default shall not (a) constitute fraud (by any person or entity, including
Boston Chicken and its Successors and Assignees) and (b) give rise to any
liability of any person or entity (other than Boston Chicken and its Successors
and Assignees) in any other tort, and the Company further agrees that it shall
be limited to its remedies in contract and in tort as specified in clause (b)
above against Boston Chicken. Boston Chicken and the Company agree that this
Section 1.10 shall not diminish or otherwise affect in any way the amount of
damages for which Boston Chicken may be liable to the Company in a contract or
non-fraud tort action for a Funding Default.
1.11 Payment Method. All payments to be made by the Company hereunder shall
be made in lawful money of the United States, in immediately available funds,
without set off, counterclaims, deduction or withholding of any type.
ARTICLE II
Security and Collateral
2.1 Security Interest. To secure payment and performance of the Company's
obligations hereunder and under the Note, and any and all other indebtedness,
obligations or
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liabilities of any kind of the Company to Boston Chicken, whether now existing
or hereafter arising, direct or indirect, absolute or contingent, joint and/or
several, arising by operation of law or otherwise, the Company hereby grants to
Boston Chicken a continuing security interest in and to the following property
and interests in property, whether now owned or hereafter acquired by the
Company and wheresoever located:
(a) all of the Company's real estate, accounts, equipment (including, but
not limited to machinery, furniture, fixtures, tools, vehicles, and other
tangible property), inventory, leasehold improvements, contract rights
(including its rights as lessee under all leases of real property), general
intangibles, deposit accounts, tax refunds, chattel paper, instruments, notes,
letters of credit, documents, and documents of title, capital stock or other
ownership interests of all Subsidiaries (as defined in Section 6.11 hereof), but
specifically excluding the BCI Common Stock (defined in Section 5.6 hereof);
(b) all insurance proceeds of or relating to any of the foregoing;
(c) all of the Company's books, records, and computer programs and data
relating to any of the foregoing; and
(d) all accessories and additions to, substitutions for, and replacements,
products, and proceeds of, any of the foregoing (all of the foregoing, and all
of the security described in Sections 2.2 and 2.3, being referred to
collectively as the "Collateral").
2.2 Pledge of Stock. To evidence the security interest granted by the
Company to Boston Chicken under Section 2.1 in all capital stock of the
Subsidiaries of the Company existing on the date of this Agreement, the Company
shall execute a subsidiary stock pledge agreement substantially in the form
attached hereto as Exhibit C (the "Pledge Agreement").
2.3 Subsidiary Security Documents. (a) To secure the obligations of the
Company hereunder and under the Note and all other obligations of the Company to
Boston Chicken, the Company shall cause each Subsidiary of the Company existing
on the date of this Agreement to execute and deliver to Boston Chicken a
security agreement substantially in the form attached hereto as Exhibit D (the
"Subsidiary Security Agreement").
(b) The Company shall cause each person or entity becoming a Subsidiary of
the Company from time to time to execute and deliver to Boston Chicken, within
five days after such person or entity becomes a Subsidiary, a security agreement
substantially in the form attached hereto as Exhibit D and modified
appropriately, together with all financing statements and other related
documents (including real estate mortgages) as Boston Chicken may request and
such closing documents with respect to such Subsidiary of the type described in
Article VII as Boston Chicken may request, sufficient to grant to Boston Chicken
liens and security interests in all assets of each Subsidiary of the type
described in Section 2.1. The Company shall from time to time execute and
deliver to Boston Chicken, within five days after a person or entity becomes a
Subsidiary of the Company, a stock pledge agreement substantially in the form of
Exhibit C and
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modified appropriately, pursuant to which the Company shall grant a security
interest in favor of Boston Chicken in and to all shares of capital stock of
such Subsidiary, together with the stock certificates evidencing such stock
ownership and accompanied by a stock power executed in blank. Any such pledge
agreements executed by the Company and security agreements and other documents
executed by a Subsidiary of the Company from time to time shall be included in
the term "Security Instruments" used herein and the stock and assets of such
Subsidiary covered by such Security Instruments shall be included in the term
"Collateral" used herein.
2.4 Preservation of Collateral and Perfection of Security Interests
Therein. (a) The Company shall execute and deliver to Boston Chicken,
concurrently with the execution of this Agreement, and shall execute and deliver
or cause any Subsidiary of the Company to execute and deliver to Boston Chicken
at any time or times hereafter at the request of Boston Chicken or the Agent (as
defined below), all financing statements or other documents, including mortgages
on real estate owned by the Company or its Subsidiaries and Subsidiary security
agreements (the "Security Instruments") (and pay the cost of filing or recording
the same in all public offices deemed necessary by Boston Chicken), as Boston
Chicken or the Agent may request, in forms satisfactory to Boston Chicken, and
take all further action that Boston Chicken or the Agent may request, or which
may be reasonably necessary or desirable, to perfect and keep perfected the
security interest in the Collateral granted by the Company to Boston Chicken, to
create and perfect the security interests in the assets of any Subsidiaries of
the Company provided in Section 2.3 hereof, or otherwise to protect and preserve
the Collateral and Boston Chicken's security interest therein. Should the
Company fail to do so, Boston Chicken is authorized to sign any such Security
Instruments as the Company's agent.
(b) The Company will furnish to Boston Chicken from time to time statements
and schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Boston Chicken may reasonably
request, all in reasonable detail.
(c) The Company shall notify Boston Chicken, within five days after the
occurrence thereof, of the acquisition of any property by the Company that is
not subject to the existing liens and security interests, in favor of Boston
Chicken, of any person or entity's becoming a Subsidiary, and of any other event
or condition that may require additional action of any nature in order to
create, preserve, or perfect the liens and security interests of Boston Chicken.
(d) The Company shall, and shall cause each Subsidiary to, cause all
tangible Collateral to be maintained and preserved in the same condition, repair
and working order as when new, ordinary wear and tear excepted, and in
accordance with any manufacturer's manual.
2.5 Alternate Security and Pledge Agreements. If requested by Boston
Chicken in order for the transactions contemplated by this Agreement to comply
with the limitations and restrictions of that certain Amended and Restated
Credit Agreement, dated as of
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May 18, 1994 among Boston Chicken, the lenders named therein, and the Bank as
agent for the lenders ("Agent"), as it may be amended from time to time (the "BC
Credit Line"), or to obtain a waiver therefrom, the Company hereby agrees that a
security interest as referred to in Section 2.1 hereof, a pledge of shares as
referred to in Section 2.2 hereof, and the additional security interests
described in Sections 2.3 and 2.4 hereof may be granted directly to the Agent in
lieu of or in addition to such grants to Boston Chicken, in which event
appropriate alterations may be made to this Article II and to the form of Pledge
Agreement, and references herein to such security, pledges, and deliveries
thereof to Boston Chicken may be deemed to refer to the Agent, as appropriate.
ARTICLE III
Conditions of Advances
Notwithstanding any other provisions contained in this Agreement, the
making of any Advance (including the initial Advance) provided for in Section
1.1 shall be conditioned upon the following:
3.1 The Company's Written Request. Boston Chicken shall have received, at
least five (5) business days prior to the day an Advance is to be made
hereunder, (i) a written request from an authorized officer of the Company for
an Advance in a specific amount, (ii) a certificate of the Company in the form
attached hereto as Exhibit B, which shall be signed by the president, chief
financial officer or other authorized officer of the Company, (iii) copies of
all other documents required to be delivered to Boston Chicken under section 5.1
below or otherwise reasonably requested.
3.2 No Material Adverse Change. No material adverse change, as determined
by Boston Chicken in its sole discretion, in the financial condition, results of
operations, assets, or business of the Company, shall have occurred at any time
or times subsequent to the date hereof.
3.3 No Default. Neither a Default (as that term is defined in Article VIII
hereof) nor any event which, through the passage of time or the service of
notice or both, would mature into a Default (an "Event of Default") shall have
occurred and be continuing.
3.4 Representation and Warranties. The representations and warranties
contained in Article IV hereof and in the Pledge Agreement and the other
Security Instruments shall be true and correct on and as of the date such
Advance is made.
3.5 Service Agreements. Each of the Service Agreements (as defined in
Section 7.3(c) hereof) between the Company and Boston Chicken shall be in full
force and effect, and no default shall have occurred or notice of termination
shall have been given thereunder.
3.6 Other Requirements. Boston Chicken shall have received, in form and
substance satisfactory to it, all certificates, consents, affidavits, schedules,
instruments, and other
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documents which the Company is obligated to provide to Boston Chicken hereunder
or which Boston Chicken may at any time reasonably request.
ARTICLE IV
Representations and Warranties
The Company represents and warrants that:
4.1 Financial Statements. The financial statements to be furnished to
Boston Chicken or the Agent in accordance with Section 5.1 below will be
prepared in conformity with generally accepted accounting principles
consistently applied throughout the periods involved, and will fairly present
the financial condition of the Company and its Subsidiaries at the dates thereof
and its results of operations for the periods indicated.
4.2 Capital Stock. The Company's authorized capital stock (subject to
increases in accordance with Section 5.8 hereof) consists solely of 1,200,000
shares of capital stock, of which 1,000,000 shares are common stock, $.01 par
value per share, and 200,000 shares are preferred stock, $.01 par value per
share. As of the date hereof, of the Company's authorized capital stock, (i)
shares of common stock are issued and outstanding, (ii) shares
of common stock are reserved for issuance upon the conversion of the Note or
exercise of the Option, and (iii) shares of common stock are reserved for
issuance upon the exercise of options granted under the Company's 1995 Employee
Stock Option Plan. Such issued and outstanding shares are fully paid and
non-assessable and are free and clear of all liens, claims, and encumbrances
of any kind, other than those arising hereunder. The shares to be issued and
delivered to the holder of the Note upon any conversion of the Note or exercise
of the Option, when so issued and delivered, will be fully paid and
non-assessable and free and clear of all liens, claims, and encumbrances of any
kind. Except for options granted under the Company's 1995 Employee Stock Option
Plan and except as otherwise provided herein and in the Note, there are no
outstanding options, warrants, rights, contracts, or agreements of any kind for
the issuance or sale of any shares of capital stock of the Company or for the
issuance or sale of any other securities or obligations of the Company or for
the purchase by the Company of any of its shares.
4.3 No Material Adverse Change. Since the date hereof, there has been no
material adverse change in the financial condition, results of operations,
assets, or business of the Company and its Subsidiaries, taken as a whole.
4.4 No Pending Material Litigation or Proceedings. There are no actions,
suits, investigations or proceedings pending or, to the knowledge of the Company
or its Subsidiaries, threatened against or affecting the Company or its
Subsidiaries or the business or properties of the Company or its Subsidiaries,
in any court or before or by any governmental department, commission, board,
agency or instrumentality, or any arbitrator. Neither the
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Company nor any of its Subsidiaries is in default with respect to any order,
writ, injunction, or decree of any court or arbitrator or governmental agency.
4.5 Valid Organization; Due Authorization; Valid and Binding Agreement. (a)
The Company is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware, with corporate power and
authority to enter into and perform this Agreement and to issue the Note and
incur the indebtedness to be evidenced thereby. The Company is qualified to do
business as a foreign corporation and is in good standing in the States of Utah
and Colorado and in each jurisdiction in which failure to so qualify could have
a material adverse effect on its property, business, operations, or prospects.
(b) This Agreement, the Note and the Service Agreements have each been duly
authorized by all required corporate action on the part of the Company, and each
of this Agreement, the Note and the Service Agreements has been duly executed
and delivered by the Company and constitutes the legal, valid, and binding
obligation of the Company enforceable in accordance with its terms.
(c) The execution and delivery of this Agreement and the Note and the
performance by the Company of its obligations hereunder and thereunder are not
in contravention of any law, rule or regulation, including without limitation
Regulation G, T, U, or X of the Board of Governors of the Federal Reserve
System, and will not conflict with or result in any breach of any of the
provisions, or constitute a default under or result in the creation or
imposition of any lien or encumbrance (except as expressly provided herein) upon
any of the property of the Company pursuant to any of the provisions of the
Certificate of Incorporation or bylaws of the Company or any agreement or
instrument to which the Company is a party or by which it or its assets is
bound.
(d) No consent, authorization, approval, or other action by, and no notice
to or filing with, any governmental authority or regulatory body or any other
person, which has not been obtained or taken, is required for the execution and
delivery of, or the performance by the Company of its obligations under, this
Agreement or the Note.
4.6 Conduct of Business. Since their inception, the Company and each
Subsidiary has conducted its business and operations in a manner consistent with
that of a multi-unit food service establishment and has not engaged in any
business other than the business of establishing, opening, and operating Stores.
4.7 Absence of Material Liabilities. Neither the Company nor any Subsidiary
has any material liabilities or obligations, either accrued, absolute,
contingent, or otherwise, except (a) as set forth in its most recent unaudited
balance sheet, (b) normal liabilities and obligations incurred in the ordinary
course of business since the date of its most recent unaudited balance sheet,
and (c) obligations under contracts and agreements entered into in the ordinary
course of business.
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4.8 Tax Matters. The Company and its Subsidiaries have filed all federal,
state, and local tax returns which are required to be filed, except for
extensions duly obtained, and has paid, or made provisions for the payment of,
all taxes which have become due pursuant to such returns or pursuant to any
assessment received by the Company or any Subsidiary, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided.
4.9 Ownership of Collateral; Security Interest Priority. At the time any
Collateral becomes subject to a security interest of Boston Chicken hereunder,
unless Boston Chicken shall otherwise consent, (a) the Company or a Subsidiary
shall be the lawful owner of such Collateral and have the right and authority to
subject the same to the security interest of Boston Chicken, (b) none of the
Collateral shall be subject to any lien or encumbrance other than that in favor
of Boston Chicken, and (c) there shall be no effective financing statement
covering any of the Collateral on file in any public office, other than in favor
of Boston Chicken. This Agreement creates in favor of Boston Chicken a valid and
perfected first-priority security interest in the Collateral enforceable against
the Company or its Subsidiary, as the case may be, and all third parties and
secures the payment of the Company's obligations hereunder and under the Note,
and all other obligations of the Company to Boston Chicken, whether now existing
or hereafter arising, and all filings and other actions necessary or desirable
to create, preserve, or perfect such security interest have been duly taken.
Notwithstanding the foregoing provisions of this Section 4.9, clause (b) and (c)
and the immediately preceding sentence of this Section 4.9 shall not be
inaccurate by reason of any purchase money security interest (including pursuant
to a financing lease) in any equipment for the Company's Stores.
4.10 Location of Offices, Records, and Facilities. The Company's chief
executive office and chief place of business and the office where the Company
keeps its records concerning its accounts, contract rights, chattel papers,
instruments, general intangibles, and other obligations arising out of or in
connection with the operation of its business or otherwise ("Receivables"), and
all originals of all leases and other chattel paper which evidence Receivables,
are located in the State of Colorado, at the address of the Company set forth in
Section 9.4 hereof (as such address may be changed from time to time in
accordance therewith). The federal tax identification number of the Company is
_________. The name of the Company is "Progressive Bagel Concepts, Inc." and the
Company operates under no other names other than ["Brackman Bros. Bagels"].
4.11 Location of Inventory, Fixtures, Machinery, and Equipment. (a) All
Collateral consisting of inventory, fixtures, machinery, or equipment is located
in the States of Utah and Colorado and at no other locations without the prior
written consent of Boston Chicken.
(b) If the Collateral described in clause (a) is kept at leased locations,
the Company has used its best efforts to obtain appropriate landlord lien
waivers or subordination satisfactory to Boston Chicken, unless such has been
waived in writing by Boston Chicken for the particular instance.
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(c) If the Collateral described in clause (a) is warehoused, the Company
has sent appropriate warehousemen's notices, each satisfactory to Boston
Chicken, unless such has been waived by Boston Chicken for the particular
instance.
4.12 Investment Company Act. The Company is not an "investment company", or
a company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
4.13 Public Utility Holding Company Act. The Company is not a "holding
company", or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
4.14 Subsidiaries. Schedule 4.14 hereto correctly sets forth the corporate
name, jurisdiction of incorporation and ownership of each Subsidiary of the
Company. Each such Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and is
duly qualified to do business in each additional jurisdiction where such
qualification is or may be necessary under applicable law. Each Subsidiary of
the Company has all requisite corporate power to own or lease the properties
used in its business and to carry on its business as now being conducted and as
proposed to be conducted. All outstanding shares of capital stock of each class
of each Subsidiary of the Company have been validly issued and are fully paid
and nonassessable and are owned, beneficially and of record, by the Company free
and clear of any liens, except liens in favor of Boston Chicken.
ARTICLE V
AFFIRMATIVE COVENANTS
The Company covenants and agrees that so long as this Agreement remains in
effect:
5.1 Financial Statements. (a) The Company shall cause to be furnished to
Boston Chicken and, at Boston Chicken's request, to the Agent: (i) as soon as
practicable and in any event within 20 days after the end of each interim
calendar quarter, statements of income and cash flows of the Company and its
Subsidiaries for such period and for the period from the beginning of the then
current fiscal year to the end of such quarter and a balance sheet of the
Company and its Subsidiaries as of the end of such quarter, setting forth in
each case, in comparative form, figures for the corresponding periods in the
preceding fiscal year, certified as accurate by the chief financial officer or
treasurer of the Company, subject to changes resulting from normal, recurring
year-end adjustments; (ii) as soon as practicable and in any event within 60
days after the end of each fiscal year, statements of income and cash flows of
the Company and its Subsidiaries for such year, and a balance sheet of the
Company and its Subsidiaries as of the end of such year, setting forth in each
case, in comparative form, corresponding figures for the preceding fiscal year
and as of the end of the preceding fiscal year, audited by independent
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certified public accountants selected by Boston Chicken and reasonably
satisfactory to the Company; and (iii) as soon as practicable (but in any event
not more than five business days after the president or chief financial officer
of the Company obtains knowledge of the occurrence of an event or the existence
of a circumstance giving rise to an Event of Default or a Default), notice of
any and all Events of Default or Defaults hereunder.
(b) All financial statements delivered to Boston Chicken, and if
applicable, the Agent pursuant to the requirements of Section 5.1(a) shall be
prepared in accordance with generally accepted accounting principles
consistently applied. Together with each delivery of financial statements
required by Section 5.1(a), the Company shall deliver to Boston Chicken an
officer's certificate stating that there exists no Default or Event of Default,
or, if any Default or Event of Default exists, specifying the nature thereof,
the period of existence thereof and what action the Company proposes to take or
has taken with respect thereto. Together with each delivery of financial
statements required by Section 5.1(a)(ii) above, the Company shall deliver to
Boston Chicken a certificate of the accountants who performed the audit in
connection with such statements stating that in making the audit necessary to
the issuance of a report on such financial statements, they have obtained no
knowledge of any Default or Event of Default, or, if such accountants have
obtained knowledge of a Default or Event of Default, specifying the nature and
period of existence thereof. Such accountants shall not be liable by reason of
any failure to obtain knowledge of any Default or Event of Default which would
not be disclosed in the ordinary course of an audit. The Company authorizes
Boston Chicken to discuss the financial condition of the Company with the
Company's independent public accountants and agrees that such discussion or
communication shall be without liability to either Boston Chicken or the
Company's independent public accountants.
5.2 Inspection. Boston Chicken, or any person designated from time to time
by Boston Chicken, shall have the right, from time to time hereafter, to call at
the Company's or its Subsidiaries' place or places of business during ordinary
business hours, and, without hindrance or delay, (a) to inspect, audit, check,
and make copies of and extracts from the Company's and its Subsidiaries' books,
records, journals, orders, receipts, and any correspondence and other data
relating to the business of the Company or its Subsidiaries or to any
transactions between the parties hereto, and (b) to discuss the affairs,
finances, and business of the Company and its Subsidiaries with the officers of
the Company and its Subsidiaries.
5.3 Conduct of Business. (a) The Company shall, and shall cause each
Subsidiary to (i) maintain its corporate existence and qualification to do
business in good standing in each jurisdiction where the failure to be so
qualified would have a material adverse effect on the financial condition of the
Company or its Subsidiaries, (ii) maintain in full force and effect all
licenses, bonds, franchises, leases, patents, contracts, and other rights
necessary to the conduct of its business, and (iii) comply with all applicable
laws and regulations of any federal, state, or local governmental authority,
including those relating to environmental matters, labor and employment laws and
employee benefit matters.
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(b) The Company shall, and shall cause its Subsidiaries to, duly pay and
discharge (i) all lawful claims, whether for labor, materials, supplies,
services, or anything else, which might or could, if unpaid, become a lien or
charge upon its property or assets, unless and to the extent only that the
validity thereof is being contested in good faith and by such appropriate
proceedings, (ii) all of its trade bills when due in accordance with their
original terms, and (iii) all taxes.
(c) The Company shall, and shall cause each Subsidiary to, conduct its
business and operations in a manner consistent with that of a [multi-unit food
service establishment], and shall not, and shall not permit any Subsidiary to,
engage in any business other than the business of establishing, opening, and
operating Stores in the States of Utah and Colorado.
5.4 Insurance. (a) The Company shall keep and maintain, and shall cause its
Subsidiaries to keep and maintain, at their sole cost and expense, (i) insurance
on their assets for at least 80% of the full replacement value thereof against
loss or damage by fire, theft, explosion, and all other hazards and risks
ordinarily insured against by other owners or users of such properties in
similar businesses; and (ii) public liability insurance relating to the
Company's and its Subsidiaries' ownership and use of their assets.
(b) All such policies of insurance shall be in such form and in such
amounts as is customary in the case of other owners or users of like properties
in similar businesses, with insurers as shall be reasonably satisfactory to
Boston Chicken. Upon demand, the Company shall deliver to Boston Chicken the
original (or certified) copy of each policy of insurance, and evidence of
payment of all premiums for each such policy. Such policies of insurance (except
those of public liability) shall contain an endorsement in form and substance
acceptable to Boston Chicken, showing Boston Chicken as an additional insured.
Such endorsement, or an independent instrument furnished to Boston Chicken,
shall provide that all insurance companies will give Boston Chicken at least 30
days prior written notice before any such policy or policies of insurance shall
be altered or canceled. The Company and each Subsidiary hereby directs all
insurers under such policies of insurance (except those of public liability) to
pay all proceeds payable thereunder for claims in excess of the aggregate amount
of $50,000 directly to Boston Chicken, and the Company irrevocably appoints
Boston Chicken (and all officers, employees, or agents designated by Boston
Chicken), as the Company's and the Subsidiaries' true and lawful agent (and
attorney-in-fact) for the purpose of endorsing the name of the Company or such
Subsidiary on any check, draft, instrument, or other item of payment for such
proceeds. Any proceeds received by Boston Chicken shall be applied to the
Company's obligations hereunder, and any overage shall be paid to the Company.
The Company and each Subsidiary irrevocably appoints Boston Chicken, from and
after a Default or an Event of Default, as the Company's and each Subsidiary's
true and lawful agent (and attorney-in-fact) for the purpose of making,
settling, and adjusting claims under such policies of insurance and for making
all determinations and decisions with respect to such policies of insurance. In
the event the Company or any Subsidiary at any time or times hereafter shall
fail to obtain or maintain any of the policies of insurance required above or to
pay any premium in whole or in part relating
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thereto, then Boston Chicken, without waiving or releasing any Default or Event
of Default hereunder, may at any time or times thereafter (but shall be under no
obligation to do so) obtain and maintain such policies of insurance and pay such
premium and take any other action with respect thereto which Boston Chicken
deems advisable. All sums so disbursed by Boston Chicken, including reasonable
attorneys' fees, court costs, expenses, and other charges relating thereto,
shall be part of the Company's obligations hereunder, payable by the Company to
Boston Chicken on demand.
5.5 Notice of Suit or Adverse Change in Business. The Company shall, as
soon as possible, and in any event within five business days after the Company
learns of the following, give written notice to Boston Chicken of (a) any
material proceeding(s) being instituted or threatened to be instituted by or
against the Company or any Subsidiary in any federal, state, or local court or
before any commission or other regulatory body (federal, state, or local), and
(b) any material adverse change in the financial condition, results of
operations, business, or assets of the Company or any Subsidiary.
5.6 Use of Proceeds. Except as otherwise authorized in writing by Boston
Chicken, the Company shall use _________ of the initial Advance of Loan proceeds
to pay the purchase price for ______ shares of Boston Chicken common stock (the
"BCI Common Stock"), which BCI Common Stock will be immediately exchanged by the
Company for _______ shares of the Company's own common stock, and shall use the
balance of the Loan proceeds solely to finance the purchase, design,
construction, and equipment of Stores and for general working capital. The
Company will not, directly or indirectly, use any part of such proceeds for the
purpose of purchasing or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System or to
extend credit to any person for the purpose of purchasing or carrying any such
margin stock.
5.7 Reservation of Common Stock. The Company covenants that it will at all
times reserve and keep available, solely for the purpose of issuance upon
conversion of the Note or exercise of the Option, or both, such number of shares
of its common stock as would be issuable upon the conversion of, or exercise of
the Option for, the Maximum Principal Balance of the Loan. The initial
Conversion Price (subject to adjustment as provided in the Note) is $________
per share, which equals a conversion rate (subject to adjustment as provided in
the Note) of one share of Company common stock for each $________ principal
amount of the Loan. The Company covenants that if any shares of its common stock
required to be reserved for issuance upon conversion of the Note or exercise of
the Option require registration with or approval of any governmental authority
under any Federal or state law before such shares may be issued upon such
conversion or exercise, the Company will, at its expense and as expeditiously as
possible, cause such shares to be duly registered or approved, as the case may
be.
5.8 Rights Regarding Future Financings. If, at any time after the Closing
Date through the later of the date on which the outstanding principal balance of
the Loan and all accrued interest thereon is paid in full or the expiration of
the term of the Option in accordance with the provisions of Section 1.8 hereof,
advances of debt and purchases of equity by Boston
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Chicken under this Agreement aggregate at least $________, and the Company
determines that it requires additional financing (whether debt or equity)
(including, but not limited to, all capital type transactions and sale/leaseback
transactions), it agrees (a) to negotiate in good faith with Boston Chicken for
a period of 60 days with regard to any portion or the entire amount (at the
option of Boston Chicken) of such financing prior to negotiating with any other
entity with regard thereto, (b) in the event the Company has engaged in good
faith negotiations under clause (a) of this Section 5.8 and such negotiations
have been unsuccessful, to notify Boston Chicken of the existence of any other
financing arrangement it proposes to consummate and the terms and conditions
thereof and grant to Boston Chicken a right of first refusal with respect to
such financing on the same terms and subject to the same conditions contained
therein and upon receipt of such notice (setting forth in detail all relevant
terms and conditions of such financing), Boston Chicken shall have 30 days
thereafter in which to agree to assume all of the financing on the same terms
and conditions, and (c) with respect to any financing other than a pure debt
financing in which the debt instrument to be offered has no equity-type
features, to grant to Boston Chicken a preemptive right to participate therein
on a fully diluted basis for a period of 60 days. As used herein the term "fully
diluted basis" shall mean Boston Chicken's ability to maintain the same
percentage equity interest in the Company (calculated by including as
outstanding the shares of common stock of the Company subject to all outstanding
options and warrants, including shares of common stock which Boston Chicken then
has a right to purchase hereunder either through conversion pursuant to Section
1.7 or the exercise of its Option pursuant to Section 1.8 hereof) after such
financing is completed as it had prior to such financing. Boston Chicken
acknowledges that the right of first negotiation as set forth in clause (a)
above does not preclude the Company from making inquiries in the relevant
marketplace to obtain information regarding the terms of a financing solely for
purposes of comparison. The failure by Boston Chicken to exercise its rights
under any provision of this Section 5.8 within the time period specified shall
be deemed to constitute a waiver of its rights under such provision.
5.9 BC Credit Line Compliance. The Company agrees that, at the time that it
becomes a "Subsidiary" (as defined in the BC Credit Line), if ever, it will not
incur any indebtedness or create any lien which would cause Boston Chicken to be
in default of the BC Credit Line.
5.10 BC Credit Line Representations. The Company agrees that, at the time
that it becomes a "Subsidiary" (as defined in the BC Credit Line), if ever, it
will conduct its business and take such action (or refrain from taking such
action) as to cause to be true and correct at all relevant times the
representations or warranties applicable to a "Subsidiary" contained in the BC
Credit Line.
5.11 Company Subsidiaries. Each corporation or other entity becoming a
Subsidiary of the Company after the date hereof will be a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation and will be duly qualified to do business in each
additional jurisdiction where such qualification is or may be necessary under
applicable law. Each Subsidiary of the Company will have all requisite corporate
power to own or lease the properties used in its business and to carry on its
business as now being
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conducted and as proposed to be conducted. All outstanding shares of capital
stock or other units of ownership interest of each class of each Subsidiary of
the Company will be validly issued and will be fully paid and nonassessable and
will be owned, beneficially and of record, by the Company or another Subsidiary
of the Company free and clear of any liens.
5.12 Place of Business. The Company will provide Boston Chicken with 60
days' prior written notice of any proposed change in the location of its chief
executive office. The Company shall not change its name without the prior
written consent of Boston Chicken.
5.13 Location of Inventory, Fixtures, Machinery, and Equipment. (a) All
Collateral consisting of inventory, fixtures, machinery, and equipment shall at
all times be located in the States of Utah and Colorado and at no other
locations without the prior written consent of Boston Chicken.
(b) If the Collateral described in clause (a) is at any time kept at
leased locations, the Company shall use its best efforts to obtain appropriate
landlord lien waivers or subordination satisfactory to Boston Chicken, unless
such has been waived in writing by Boston Chicken for a particular instance.
(c) If the Collateral described in clause (a) is at any time
warehoused, the Company shall send appropriate warehousemen's notices, each
satisfactory to Boston Chicken, unless such has been waived by Boston Chicken
for the particular instance.
ARTICLE VI
Negative Covenants
------------------
The Company covenants and agrees that, so long as this Agreement remains in
effect (unless Boston Chicken shall give its prior written consent thereto):
6.1 Guarantees; etc. The Company shall not, and shall not permit any
Subsidiary to, guarantee, endorse or otherwise in any way become or be
responsible for obligations of any other person, whether by agreement to
purchase the indebtedness of any other person or through the purchase of goods,
supplies, or services, or by agreement to maintain net worth, working capital,
or other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance, or loan for the purpose of paying or discharging
any indebtedness or obligation of such other person or otherwise, except
endorsements of negotiable instruments for collection in the ordinary course of
business.
6.2 Disposal of Property. The Company shall not, and shall not permit any
Subsidiary to, sell, lease, transfer, or otherwise dispose of any of its
properties, assets, and rights (or agree to sell, lease, transfer, or otherwise
dispose of any of its properties, assets, and rights) (including the Collateral)
to any party except in the ordinary course of business.
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6.3 Compensation to Stockholders. Other than (a) reasonable salaries and
other normal benefits (including options pursuant to the 1995 Employee Stock
Option Plan) to be paid to ___________________, which salaries and benefits must
be approved by Boston Chicken, and (b) amounts paid to Don Colangelo pursuant to
that certain Employment Agreement of even date herewith (the "Colangelo
Employment Agreement"), the Company shall not make any loans to, or pay any
compensation, bonuses, fees, options, or other amounts to any stockholder or to
any of the affiliates or immediate family members of any such stockholder. The
Company shall not, without the prior written consent of Boston Chicken, amend
its 1995 Employee Stock Option Plan or the Colangelo Employment Agreement.
6.4 Dividends and Stock Redemptions. Other than the exchange of the BCI
Common Stock for shares of the Company's stock contemplated by Section 5.6
hereof, the Company shall not, directly or indirectly, (a) redeem, purchase, or
otherwise retire any of its shares of capital stock, (b) declare or pay any
dividends in any fiscal year on any of its shares of capital stock or make any
distributions of or with respect to its shares of capital stock or (c) return
capital of the Company to its stockholders.
6.5 Additional Indebtedness. Except as provided in Section 5.8 hereof, the
Company shall not, and shall not permit any Subsidiary to, incur additional
indebtedness in excess of $5,000 as to any one item and $50,000 in the aggregate
without the consent of Boston Chicken.
6.6 Mergers, Consolidations, Acquisitions, etc. The Company shall not, and
shall not permit any Subsidiary to (a) be a party to any consolidation,
reorganization, or merger; (b) sell or otherwise transfer any part of its assets
(except in the ordinary course of business and except as part of a financing as
to which Boston Chicken has waived its rights pursuant to and in accordance with
Section 5.8 hereof); (c) except as provided in Section 5.8 hereof, effect any
change in its capital structure or in any of its business objectives, purposes,
and operations; (d) acquire any capital in or equity ownership or the assets of
another corporation, partnership, or other business organization; (e) engage in
any other business than the operation of Stores; (f) make any loan or advance to
or investments in any other person, corporation, partnership or other business
organization; or (g) liquidate or dissolve or take any action with a view toward
liquidation or dissolution.
6.7 Certificate of Incorporation and Bylaws; Stockholders Consent. The
Company shall not make any changes in or amendments to its Certificate of
Incorporation or bylaws as they are in effect as of the date hereof; except that
the Company may amend its Certificate of Incorporation solely to increase the
number of authorized shares of its common stock by the amount necessary to
consummate any financing as to which Boston Chicken has waived its rights
pursuant to and in accordance with Section 5.8 hereof. The Company shall not
permit its stockholders to take any action by written consent in lieu of a
meeting without the prior written consent of Boston Chicken.
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6.8 Issuance of Stock. Except for (a) shares of common stock of the Company
which may be issued upon (i) exercise of options granted under the Company's
1995 Employee Stock Option Plan pursuant to grants approved under clause (b) of
this Section 6.8, (ii) exercise of the Option, (iii) conversion of any portion
of the outstanding principal balance of the Loan as provided in the Note, and
(iv) consummation of any financing after advances of debt and purchases of
equity by Boston Chicken under this Agreement aggregate at least $________ and
as to which Boston Chicken has waived its rights pursuant to and in accordance
with Section 5.8 hereof, and (b) options granted under the Company's 1995
Employee Stock Option Plan which are approved by Boston Chicken, in its sole
discretion, the Company will not issue any additional shares of any class of its
capital stock.
6.9 Liens. The Company shall not, and shall not permit any Subsidiary to,
create, incur, or suffer to exist any lien on any of the assets, rights,
revenues or property, real, personal, or mixed, tangible or intangible, whether
now owned or hereafter acquired, of the Company or any Subsidiary, other than
liens in favor of Boston Chicken and liens otherwise permitted under Section 4.9
hereof.
6.10 Transactions with Affiliates. The Company shall not, and shall not
permit any Subsidiary to, become a party to, or become liable in respect of, any
contract or undertaking with any affiliate except in the ordinary course of
business and on terms not less favorable to the Company or such Subsidiary than
those which could be obtained if such contract or undertaking were an arms
length transaction with a person other than an affiliate.
6.11 Subsidiaries. The Company shall not, and shall not permit any
Subsidiary to, create or otherwise invest in any corporation, partnership, or
other entity unless the Company or such Subsidiary owns directly 100% of the
issued and outstanding equity interests therein (such 100% owned entity to be
referred to herein as a "Subsidiary").
ARTICLE VII
Conditions of Closing
Boston Chicken's obligations hereunder shall be subject to (a) the
performance by the Company prior to or on the Closing Date of all of its
covenants theretofore to be performed under this Agreement, (b) the accuracy of
the Company's representations and warranties contained in this Agreement on the
Closing Date, and (c) the satisfaction, prior to or on the Closing Date, of the
following further conditions:
7.1 Opinion of Counsel. Boston Chicken shall have received on the Closing
Date from Rudnick & Wolfe an opinion, dated the Closing Date, in the form
attached hereto as Exhibit E with all blanks appropriately completed.
7.2 Proceedings and Documents. All proceedings to be taken in connection
with the transaction contemplated by this Agreement and all documents incident
to such
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transaction shall be satisfactory in form and substance to Boston Chicken and
its counsel, and Boston Chicken shall have received all documents or other
evidence which it and its counsel may reasonably have requested in connection
with such transaction, including copies of records of all corporate proceedings
in connection with such transaction and compliance with the conditions set forth
in this Article VII, in form and substance satisfactory to Boston Chicken and
its counsel.
7.3 Executed Documents. The Company and its Subsidiaries shall have each
duly executed the following documents to which they are parties, and shall have
delivered to Boston Chicken the following:
(a) this Agreement;
(b) the Note;
(c) the Accounting and Administrative Services Agreement in substantially
the form of Exhibit F-1 hereto, the Financial Services Agreement in
substantially the form of Exhibit F-2 hereto, the Real Estate Services
Agreement in substantially the form of Exhibit F-3 hereto and the
Computer and Communications Systems Services Agreement in
substantially the form of Exhibit F-4 hereto (such service agreements,
and any other service agreements entered into between the Company and
Boston Chicken are herein collectively called the "Service
Agreements");
[(d) the Investor Representation Letter set forth as Exhibit G hereto
signed by each investor in the Company;]
(e) the Pledge Agreement, together with stock certificates in form
suitable for transfer and stock powers executed in blank;
(f) the Subsidiary Security Agreement; and
(g) such financing statements or other documents for filing with public
officials with respect to the Security Instruments as Boston Chicken
may reasonably request.
7.4 No Defaults. There shall exist no Event of Default or Default.
7.5 Additional Deliveries. Boston Chicken shall have received, in form and
substance satisfactory to it, copies of the following documents:
(a) the Company's Certificate of Incorporation, certified as true and
correct by the Secretary of State of Delaware, dated within five days prior to
the Closing Date, and certified as true and correct as of the Closing Date by a
duly authorized officer of the Company;
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(b) the Company's bylaws, as are in force and effect on the Closing Date,
certified as true and correct by the Secretary of the Company;
(c) certificate of good standing and corporate existence of the Company
from the Secretary of State of the States of Delaware, Utah and Colorado dated
within five days prior to the Closing Date; and
(d) authorizing resolutions of the board of directors and stockholders of
the Company and evidence of other corporate action taken by the Company to
authorize, among other things, the execution, delivery, and performance by the
Company of this Agreement, the Note, the Service Agreements, and the Security
Instruments and the consummation of the transactions contemplated hereby,
including resolutions reserving shares of common stock for issuance upon the
conversion of the Loan and the exercise of the Option, certified as true and
correct as of the Closing Date by a duly authorized officer of the Company.
(e) the Certificate of Incorporation for each Subsidiary, certified as true
and correct by the Secretary of State of Delaware, dated within five days prior
to the Closing Date, and certified as true and correct as of the Closing Date by
a duly authorized officer of each Subsidiary;
(f) the bylaws of each Subsidiary, as are in force and effect on the
Closing Date, certified as true and correct by the Secretary of each Subsidiary;
(g) certificate of good standing and corporate existence of each Subsidiary
from the Secretary of State of the States of Delaware, Utah and Colorado dated
within five days prior to the Closing Date; and
(h) authorizing resolutions of the board of directors of each Subsidiary
and evidence of other corporate action taken by each Subsidiary to authorize,
among other things, the execution, delivery, and performance by the Subsidiary
of the Subsidiary Security Agreement and the consummation of the transactions
contemplated hereby, certified as true and correct as of the Closing Date by a
duly authorized officer of each Subsidiary.
7.6 Opinion of Auditors. Boston Chicken shall have received on the Closing
Date from Boston Chicken's independent public accountants an opinion, dated the
Closing Date, in form and substance satisfactory to Boston Chicken, to the
effect that the Note and the obligations incurred hereunder are deemed to be
debt, and not equity, in accordance with generally accepted accounting
principles.
7.7 Stockholders' Equity. Boston Chicken shall have received evidence,
satisfactory to it, that the Company has, on the Closing Date, cash or cash
equivalents of at least $_______ and stockholders' equity of at least $_______.
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7.8 Compliance with BC Credit Line. Boston Chicken shall (a) determine in
good faith that this Agreement complies with applicable restrictions or
limitations under the BC Credit Line, (b) obtain a written waiver of
noncompliance of the transactions contemplated hereby with the BC Credit Line,
or (c) deliver to Agent from the Company such pledges, collateral, and other
documentation as may be required to evidence compliance of the transactions
contemplated hereby with the BC Credit Line.
ARTICLE VIII
Default, Rights and Remedies of Boston Chicken
8.1 Default. The occurrence of any of the following events or acts shall
constitute a default ("Default"):
(a) Default in the payment when due of any portion of the principal on
the Note and the continuance of such default for a period of three days;
(b) Default in the payment when due of any portion of the interest on
the outstanding principal of the Note and the continuance of such default for a
period of 10 days;
(c) any representation or warranty now or hereafter made in this
Agreement, the Service Agreements, the Pledge Agreement, the Subsidiary Security
Agreement, the Note, any other Security Instrument, or any certificate hereunder
or thereunder shall not be true, or any certificate, statement, report,
financial data, or notice furnished at any time by the Company to Boston Chicken
shall be materially inaccurate;
(d) any breach of, or failure to perform or observe, any covenant,
condition, or agreement contained in the Pledge Agreement, the Subsidiary
Security Agreement or in any other Security Instrument, which in each case shall
continue unremedied for a period of 10 calendar days following notice thereof
from Boston Chicken, provided that such grace period shall not apply, and the
Company shall be in Default immediately upon such breach, if, in Boston
Chicken's judgment, such breach may not be reasonably cured by the Company
during such cure period;
(e) the breach of, or failure to perform or observe, any covenant,
condition, or agreement contained in Sections 5.6, 6.1, 6.2, 6.4, 6.6, 6.7, 6.8,
6.10, or 6.11 of this Agreement;
(f) any breach of, or failure to perform or observe, any other
covenant, condition, or agreement contained in this Agreement or the Note which
shall continue unremedied for a period of 10 calendar days following notice
thereof from Boston Chicken, provided that such grace period shall not apply,
and the Company shall be in Default immediately upon such breach, if, in Boston
Chicken's judgment, such breach may not reasonably be cured by the Company
during such cure period;
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(g) the Company or any Subsidiary shall (i) generally not, or shall be
unable to, or shall admit in writing its inability to pay its debts as such
debts become due, (ii) make an assignment for the benefit of creditors, petition
or apply to any tribunal for the appointment of a custodian, receiver, or
trustee for it or a substantial part of its assets, (iii) commence any
proceeding under any bankruptcy, reorganization, arrangements, readjustment of
debt, dissolution, or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect, (iv) have any such petition or application filed or
any such proceeding commenced against it in which an order for relief is entered
or adjudication or appointment is made and which remains undismissed for a
period of 60 days or more, (v) by any act or omission, indicate its consent to,
approval of, or knowing acquiescence in any such petition, application, or
proceeding, or order for relief, or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties, or (vi) suffer any
such custodianship, receivership, or trusteeship to continue undischarged for a
period of 60 days or more;
(h) _______________, or his permitted successor, dies, voluntarily
terminates his employment with the Company or substantially reduces his
responsibility for the Company's operations or the Company terminates him for
any reason whatsoever and the Company does not replace him within 90 days
thereafter with an individual with multi-unit food operating experience who is
acceptable to Boston Chicken in its sole discretion;
(i) dissolution or liquidation of the Company;
(j) there occurs a material adverse change in the financial condition,
results of operations, assets, or business of the Company and its Subsidiaries
taken as a whole;
(k) the Company or any Subsidiary shall (a) fail to pay any
indebtedness for borrowed money (other than the Note) of the Company or such
Subsidiary, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and any
applicable grace periods shall have expired, or (b) fail to perform or observe
any term, covenant, or condition on its part to be performed or observed under
any agreement or instrument relating to any such indebtedness, when required to
be performed or observed, if the effect of such failure to perform or observe is
to accelerate, or to permit the acceleration, after the giving of notice, of the
maturity of such indebtedness, or (c) default in the performance or observance
of any obligations under leases of real property;
(l) one or more judgments, decrees or orders for the payment of money
in excess of $100,000 in the aggregate shall be rendered against the Company or
any of its Subsidiaries, and such judgments, decrees, or orders shall continue
unsatisfied and in effect for a period of 20 consecutive days without being
vacated, discharged, satisfied, escorted, stayed, or bonded pending appeal;
(m) the Pledge Agreement, the Subsidiary Security Agreement, any other
Security Instrument, or the security interests created under this Agreement
shall be
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terminated, invalidated, or set aside or be declared ineffective or inoperative
or in any way cease to give or provide to Boston Chicken the benefits purported
to be created thereby.
8.2 Default; Remedies. (a) In the event a Default shall exist or occur
Boston Chicken may:
(i) terminate its obligations under this Agreement and cease to make
any further advances under Section 1.1, and shall have the right to declare the
Note due and payable in full, without demand, presentment, or notice of any
kind;
(ii) in its sole and absolute discretion, exercise any one or more of
the rights and remedies accruing to a secured party under the Uniform Commercial
Code with respect to the Collateral and any other applicable law upon default by
a debtor;
(iii) exercise its rights under the Pledge Agreement and/or the other
Security Instruments;
(iv) convert any portion of the outstanding principal balance of the
Loan into shares of common stock in the Company as provided in the Note;
(v) exercise all or a portion of the Option;
provided, however, that in the case of any event or condition described in
Section 8.1(g) with respect to the Company or any Subsidiary, Boston Chicken's
obligations under this Agreement shall automatically terminate forthwith and all
amounts owed by the Company hereunder and under the Note shall automatically
become immediately due and payable without notice, demand, presentment, protest,
diligence, notice of dishonor, or other formality, all of which are hereby
expressly waived.
(b) In connection with the exercise of Boston Chicken's rights and
remedies provided in Section 8.2(a)(ii), the Company hereby agrees to assemble
the Collateral and make it available to Boston Chicken at a place to be
designated by Boston Chicken which is reasonably convenient to both parties,
authorizes Boston Chicken to take possession of the Collateral with or without
demand and with or without process of law and to sell and dispose of the same at
public or private sale and to apply the proceeds of such sale to the costs and
expenses thereof (including reasonable attorneys' fees and disbursements
incurred by Boston Chicken) and then to the payment and satisfaction of the
Loan. Any requirement of reasonable notice shall be met if Boston Chicken sends
such notice to the Company, by registered or certified mail, at least five days
prior to the date of sale, disposition, or other event giving rise to a required
notice. Boston Chicken may be the purchaser at any such sale. The Company
expressly authorizes such sale or sales of the Collateral in advance of and to
the exclusion of any sale or sales of or other realization upon any other
collateral securing the Loan. Boston Chicken shall have no obligation to
preserve rights against prior parties. The Company hereby waives as to Boston
Chicken any right of subrogation or marshaling of such Collateral and any other
collateral for the Loan. To
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this end, the Company hereby expressly agrees that any such collateral or other
security of the Company or any other party which Boston Chicken may hold, or
which may come to any of them or any of their possession, may be dealt with in
all respects and particulars as though this Agreement were not in existence. The
parties hereto further agree that public sale of the Collateral by auction
conducted in any county in which any Collateral is located or in which Boston
Chicken or the Company does business after advertisement of the time and place
thereof shall, among other manners of public and private sale, be deemed to be a
commercially reasonable disposition of the Collateral. The Company shall be
liable for any deficiency remaining after disposition of the Collateral.
(c) All of Boston Chicken's rights and remedies under this Agreement
are cumulative and nonexclusive. Any conversion of, or exercise of the Option
with respect to, less than all of the principal balance outstanding under the
Note shall not affect Boston Chicken's rights and remedies with respect to any
portion not so converted or exercised.
8.3 No Waiver. Boston Chicken's failure, at any time or times hereafter, to
require the Company's strict compliance with or performance of any provision of
this Agreement shall not waive, affect, or diminish any right of Boston Chicken
thereafter to demand such strict compliance or performance therewith. Any
suspension or waiver by Boston Chicken of a Default or an Event of Default by
the Company under this Agreement or the Note shall not suspend, waive, or affect
any other Default or Event of Default by the Company under this Agreement or the
Note, whether the same is prior or subsequent thereto and whether of the same or
of a different kind or character. None of the undertakings, agreements,
warranties, covenants, and representations of the Company contained in this
Agreement or the Note and no Default or Event of Default by the Company under
this Agreement or the Note shall be deemed to have been suspended or waived by
Boston Chicken unless such suspension or waiver is in writing signed by an
officer of Boston Chicken.
ARTICLE IX
MISCELLANEOUS
9.1 No Oral Change. This Agreement may not be changed orally, but only by
an agreement in writing and signed by the party against whom enforcement of any
waiver, change, modification, or discharge is sought.
9.2 Assignment. The Company may not assign any of its rights or delegate
any of its obligations under this Agreement without Boston Chicken's written
consent. Boston Chicken may assign any of its rights or delegate any of its
obligations under this Agreement (including assignment of this Agreement, the
Note, the Pledge Agreement and the Security Instruments), (a) without notice to
the Company, (i) to any Affiliate of Boston Chicken (except the Company) or (ii)
in connection with any pledge of its assets under the BC Credit Line or similar
credit agreement and (b) with notice, but without any requirement of consent or
approval, to any other person entity (except the Company); provided, however,
that Boston Chicken shall
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not make any such assignment of its obligations unless at the time thereof
Boston Chicken reasonably believes the assignee is able to perform such
obligations. Any such assignment shall vest in the assignee all of the benefits
under the documents so assigned. For purposes of this Agreement, the term
Affiliate shall mean any person or entity which directly or indirectly controls
or is controlled by, or is under common control with, Boston Chicken.
9.3 Costs and Attorneys' Fees. (a) Except as provided in Section 2.4 hereof
and subsection (b) or (c) of this Section 9.3, each of the parties hereto shall
pay its own expenses (including accounting fees) incident to the negotiation and
execution of this Agreement and to the consummation of the transactions
contemplated hereby.
(b) The Company shall pay all reasonable attorneys' fees and any costs and
charges relating to or arising out of (1) the negotiation and drafting of this
Agreement and all related documents and (2) the enforcement by Boston Chicken of
its rights to collect any portion of the Loan.
(c) In any action not founded solely on grounds covered by subsection (b)
of this Section 9.3, the party to the action who does not prevail shall pay to
the prevailing party the court costs and reasonable attorneys fees and other
expenses (including, but not limited to, fees and expenses of expert witnesses
or consulting experts) incurred directly or indirectly by the prevailing party
in connection with its prosecution or defense of the action, as the case may be.
9.4 Communications and Notices. All communications and notices provided for
in this Agreement or under the Note shall be in writing and shall be deemed to
have been duly given if delivered personally to the party to whose attention the
notice is directed or sent by overnight express, facsimile transmission, express
mail delivery service, or registered or certified mail, return receipt
requested, postage prepaid, and properly addressed as follows:
If to the Company:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd.
Suite 200
Golden, CO 80401
Attention: Chief Executive Officer
Facsimile: ( ) -
with a copy to:
Rudnick & Wolfe
203 N. LaSalle Street
Suite 1800
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Chicago, IL 60601
Attention: Michael G. Brennan, Esq.
Facsimile: (312) 984-2299
If to Boston Chicken:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 384-5339
with a copy to:
Bell, Boyd & Lloyd
70 West Madison Street, Suite 3300
Chicago, Illinois 60602
Attention: Paul A. Strasen, Esq.
Facsimile: (312) 372-2098
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given when so delivered. Any notice delivered by facsimile transmission shall be
deemed to have been given on the earlier of the date it is actually received or
one day after such transmission. Any notice delivered by overnight express
courier will be deemed to have been given on the next succeeding business day
after the day it is sent to the intended recipient at the address set forth
above, and any notice delivered by registered or certified mail or express mail
delivery service shall be deemed to have been duly given on the earlier of the
date it is actually received or three business days after it is sent to the
intended recipient at the address set forth above.
9.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS
THEREOF.
9.6 Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute a part of this
Agreement.
9.7 Severability. If any provision of this Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable, the
remainder of this Agreement
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and the application of such provision to other persons or circumstances shall
not be affected thereby, and the provisions of this Agreement shall be severable
in any such instance.
9.8 Avoidance. To the extent that Boston Chicken receives any payment on
account of the Company's obligations hereunder, and any such payment(s) and/or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, subordinated, and/or required to be
repaid to a trustee, receiver, or any other party under any bankruptcy law,
state or federal law, common law, or equitable cause, then, to the extent of
such payment(s) or proceeds received, the Company's obligations hereunder, or
part thereof intended to be satisfied, shall be revived and continue in full
force and effect, as if such payment(s) and/or proceeds had not been received by
Boston Chicken.
9.9 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
but one and the same instrument.
9.10 Entire Agreement. This Agreement, the Note, the Pledge Agreement, the
Security Instruments and the exhibits to each of the foregoing contain the
entire agreement of the parties hereto with respect to the transactions
contemplated herein, and collectively supersede all prior understandings and
agreements of the parties with respect to the subject matter hereof.
9.11 General Indemnity. In addition to the payments pursuant to Section
9.3, the Company agrees to indemnify, pay, and hold Boston Chicken and any
holder of the Note, and the officers, directors, employees, agents, and
affiliates of Boston Chicken and any such holder (collectively, the
"Indemnities"), harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses, and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for any of
such Indemnities in connection with any investigative, administrative, or
judicial proceeding commenced or threatened, whether or not any of such
Indemnities shall be designated a party thereto) that may be imposed on,
incurred by, or asserted against any Indemnitee, in any manner relating to or
arising out of this Agreement, the Note, the Pledge Agreement, the Subsidiary
Security Agreement, the Security Instruments and the exhibits or any other
agreements or document executed and delivered by the Company in connection
therewith, Boston Chicken's agreement to make the Loan hereunder, or the use or
intended use of the proceeds of the Loan (the "indemnified liabilities");
provided that the Company shall have no obligation to an Indemnitee hereunder
with respect to indemnified liabilities arising from the gross negligence or
willful misconduct of such Indemnitee. To the extent that the undertaking to
indemnify, pay, and hold harmless set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, the Company shall
contribute the maximum portion that it is permitted to pay under applicable law
to the payment and satisfaction of all indemnified liabilities incurred by the
Indemnities or any of them. The provisions of the undertakings and
indemnification set out in this Section 9.11 shall survive satisfaction and
payment of the Company's obligations hereunder and termination of this
Agreement.
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9.12 Limitation on Damages. Notwithstanding anything to the contrary herein
no party hereto shall be liable for consequential, indirect, incidental, special
speculative, or punitive damages (including, but not limited to, loss of revenue
or profit) whether such claim alleges breach of contract, tortious conduct
including, but not limited to, negligence, or any other theory, provided that
nothing herein shall limit or otherwise restrict the Company's obligation to pay
fees under the Service Agreements.
9.13 Submission to Jurisdiction. The Company agrees that any legal action
or proceeding with respect to this Agreement, the Note, the Pledge Agreement,
the Subsidiary Security Agreement, any Service Agreement or any Security
Instrument or the transactions contemplated hereby may be brought in any court
of the State of Colorado, or in any court of the United States of America
sitting in Colorado, and the Company hereby submits to and accepts generally and
unconditionally the jurisdiction of those courts with respect to their
respective person and property, and irrevocably consents to the service of
process in connection with any such action or proceeding by personal delivery to
the Company or by the mailing thereof by registered or certified mail, postage
prepaid to the Company at the address for the Company set forth in Section 9.4.
Nothing in this paragraph shall affect the right of Boston Chicken to service
process in any other manner permitted by law or limit the rights of Boston
Chicken to bring any such action or proceeding against the Company or property
in the courts of any other jurisdiction. The Company hereby irrevocably waives
any objection to the laying of venue of any such suit or proceeding in the above
described courts.
9.14 Waiver of Jury Trial. No party to this instrument, which includes any
assignee, successor, heir or personal representative of a party, shall seek a
jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, the Note, the Pledge
Agreement, the Subsidiary Security Agreement, any Service Agreement, any
Security Instrument, any related instrument, or the dealings or the relationship
between the parties. If the subject matter of any such litigation is one in
which the waiver of a jury trial is prohibited, if at all, under the controlling
law of the applicable jurisdiction, by constitutional or statutory provision, no
party hereto will present as a defense or counterclaim in such litigation any
claim which would reduce or offset any amount or rights claimed under the
provisions of this Agreement. No party will seek to consolidate any such action,
in which a jury has been waived, with any other action in which a jury trial
cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 9.14 HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY
HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS
OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS PROVISION IS
A MATERIAL INDUCEMENT FOR BOSTON CHICKEN IN ENTERING INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date and year first above written.
28
<PAGE>
PROGRESSIVE BAGEL CONCEPTS, INC.
By: _______________________________
Title: ____________________________
BOSTON CHICKEN, INC.
By: _______________________________
Title: ____________________________
29
<PAGE>
EXHIBIT A
CONVERTIBLE SECURED NOTE
<PAGE>
CONVERTIBLE SECURED NOTE
$80,000,000 Golden, Colorado
________ __, 1995
FOR VALUE RECEIVED, Progressive Bagel Concepts, Inc., a Delaware
corporation (the "Company"), promises to pay to the order of Boston Chicken,
Inc., a Delaware corporation ("Boston Chicken"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as Boston Chicken may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of eighty million dollars
($80,000,000) and any interest thereon, or, if less, the aggregate unpaid amount
of the Loan made pursuant to Section 1.1 of the Loan Agreement and any interest
thereon.
This Note evidences the Loan made under, and is referred to in and is
executed and delivered pursuant to, a Secured Loan Agreement dated of even date
herewith between the Company and Boston Chicken (the "Loan Agreement"), to which
reference is hereby made for a statement of the terms and conditions under which
this Note may be repaid and accelerated and for a description of the collateral
and security securing this Note. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of the Loan for the period commencing on the date the Loan is made until
the Loan is paid in full, at a per annum rate equal to the rate designated and
announced by Bank of America Illinois or its successor in interest (the "Bank")
from time to time as its "reference rate" in effect at its principal office in
Chicago, Illinois, plus 1%. The interest rate shall be adjusted, from time to
time, on the same day on which the Bank adjusts its "reference rate." As of the
date of this Note, the Bank's reference rate is __%. Interest on the outstanding
principal amount of the Loan shall be payable in arrears on the first day of
each Retail Period during the Interest Payment Period, as otherwise provided
herein in connection with principal payments, and at maturity (whether by
acceleration or otherwise).
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
Any principal payment due under this Note not paid when due, whether at
stated maturity, by notice of repayment, by acceleration or otherwise, shall, to
the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Note in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
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<PAGE>
Except as otherwise provided in the Loan Agreement, unless accelerated,
the outstanding principal amount of the Loan shall be payable to Boston Chicken
in 65 substantially equal periodic installments of principal (the amount of
which periodic installments of principal shall be determined at the close of
business on the Draw Loan Termination Date based on a schedule amortizing such
balance in 130 substantially equal periodic installments of principal), plus
accrued but unpaid interest, on the first day of each Retail Period, commencing
on the first day of the fifth Retail Period in Boston Chicken's fiscal year 1998
and continuing until the first day of the fifth Retail Period in Boston
Chicken's fiscal year 2003, when the entire principal balance of the Loan and
all interest accrued thereon shall be due and payable.
This Note may not be prepaid at any time without the consent of Boston
Chicken. All payments made hereunder shall be applied first to interest and then
to outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Colorado, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by the Company and any endorser or
guarantor.
ARTICLE I
Conversion of Note
1.1 The holder of this Note shall have the right, at such holder's
option, at any time after the earlier of any acceleration of this Note or March
15, 1996 [12 1/2 months after the Closing Date] and up to the later of the date
on which the Company has properly repaid the outstanding principal balance of
the Loan and all accrued interest thereon in full or the first day of the _____
Retail Period in Boston Chicken's fiscal year 2003 to convert, subject to the
terms and provisions of this Article I, the outstanding principal balance of
this Note or any portion thereof into shares of common stock, $.01 par value per
share, of the Company (the "Common Stock"), at the price of $_____ per share,
or, in the event an adjustment of such price has occurred pursuant to the
provisions of Section 1.3, then at the price as last adjusted (referred to
herein as the "Conversion Price"), upon surrender of this Note, the principal of
which is so to be converted, to the Company at any time during usual business
hours together with written notice (hereinafter referred to as "Conversion
Notice") that the holder elects to convert this Note into such shares of Common
Stock in accordance with the provisions of this Article I, and specifying the
name or names in which the certificate or certificates evidencing the shares of
Common Stock issuable upon such conversion shall be registered, together with
the addresses of the persons so named, and, if so required by the Company,
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company duly executed by the registered holder or his
attorney duly authorized in writing. In the event this Note is to be converted
in part only, the Company
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<PAGE>
shall, upon surrender of this Note, execute and deliver to the holder thereof,
at the expense of the Company, a new Note in principal amount equal to the
unconverted portion of this Note. In no event shall accrued interest be
convertible into shares of Common Stock.
1.2 As promptly as practicable after the surrender, as herein provided,
of this Note for conversion and the receipt of the Conversion Notice relating
thereto, the Company shall deliver to or upon the written order of the holder of
this Note a certificate or certificates representing the number of fully-paid
and non-assessable shares of Common Stock of the Company into which this Note
may be converted in accordance with the provisions of this Article I and a new
Note for any unconverted portion of the principal amount hereof. Subject to the
following provisions of this Section 1.2, such conversion shall be deemed to
have been made immediately before the close of business on the date that this
Note shall have been surrendered for conversion together with the Conversion
Notice, so that the rights of the holder of this Note as a Noteholder shall
cease at such time and the person or persons entitled to receive the shares of
Common Stock upon conversion of this Note shall be treated for all purposes as
having become the record holder or holders of such shares of Common Stock at
such time, and such conversion shall be at the Conversion Price in effect at
such time; provided, however, that no such surrender on any date when the stock
transfer books of the Company shall be closed shall be effective to constitute
the person or persons entitled to receive the shares of Common Stock upon such
conversion as the record holder or holders of such shares of Common Stock on
such date, but such surrender shall be effective to constitute the person or
persons entitled to receive such shares of Common Stock as the record holder or
holders thereof for all purposes at the close of business on such next
succeeding day. If the last day for the exercise of the conversion right shall
not be a business day, then such conversion right may be exercised on the next
succeeding business day.
1.3 (a) In case of any reclassification or change of outstanding shares
of Common Stock issuable upon conversion of this Note, or in case of any
consolidation or merger of the Company with or into any partnership,
corporation, or other entity (other than a merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of outstanding shares of Common Stock, other than a change in number of
shares issuable upon conversion of this Note) or in case of any sale or
conveyance to any partnership, corporation, or other entity of the property of
the Company as an entirety or substantially as an entirety, then the holder of
this Note shall have the right thereafter to convert this Note into the kind and
amount of shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale, or conveyance by a holder
of the number of shares of Common Stock of the Company issuable upon conversion
of this Note immediately prior to such reclassification, change, consolidation,
merger, sale, or conveyance, subject to adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for herein.
(b) The Conversion Price shall be adjusted in the event the Company
shall at any time (i) make a subdivision of or combine shares of Common Stock
outstanding or (ii) pay a dividend or make a distribution in cash, in kind, or
in securities of any kind. In the event the
3
<PAGE>
Company makes a subdivision of shares of Common Stock or pays a dividend or
makes a distribution in cash, in kind, or in securities of any kind, the
Conversion Price in effect immediately prior to such action shall be
appropriately decreased, and in the event the Company shall at any time combine
the shares of Common Stock outstanding, the Conversion Price in effect
immediately prior to such combination shall be appropriately increased. An
adjustment made pursuant to this Section 1.3(b) shall, in the event of a
subdivision or combination, become effective retroactively immediately after the
effective date thereof, and shall, in the event of a dividend or distribution,
become effective retroactively immediately after the record date for the
determination of stockholders entitled thereto. Whenever the Conversion Price is
adjusted, pursuant to this Section 1.3(b), the Company shall promptly cause a
notice to be given to such holder of this Note which will state the adjusted
Conversion Price.
(c) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon conversion of this Note as herein provided, such number of shares of Common
Stock as shall be issuable upon the conversion of the entire Maximum Principal
Balance of the Loan. The Company covenants that all shares of Common Stock which
shall be so issuable shall be duly and validly issued and fully-paid and
non-assessable.
(d) The Company covenants that if any shares of Common Stock to be
issued upon conversion of this Note require registration with or approval of any
governmental authority under any federal or state law before such shares may be
issued upon conversion, the Company will, at its expense and as expeditiously as
possible, cause such shares to be duly registered or approved, as the case may
be.
(e) The issuance of certificates for shares of Common Stock upon the
conversion of this Note shall be made without charge to the converting
Noteholder for any tax in respect of the issuance of such certificates, and such
certificates shall be issued in the respective names of, or in such names as may
be directed by, the holder of this Note; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate in a name
other than that of the holder of this Note, and the Company shall not be
required to issue or deliver such certificates unless and until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the reasonable satisfaction of
the Company that such tax has been paid.
(f) Conversion of any portion of the principal balance of this Note
shall not relieve the Company of its obligation to pay any accrued but unpaid
interest on the portion of the principal balance of this Note so converted.
(g) To the extent that any portion of this Note is not converted into
shares of Common Stock, such portion shall remain a secured debt of the Company
payable in accordance with the terms of the Loan Agreement.
4
<PAGE>
ARTICLE II
Advances
2.1 Loan advances may be made from time to time by Boston Chicken to
the Company in the manner and on the terms and subject to the conditions set
forth in the Loan Agreement. Upon granting each loan advance, Boston Chicken
shall record the making and amount of such advance on its books in a separate
loan account, and shall also record in the loan account all payments made by the
Company with respect to the Loan. The aggregate amount of all loan advances
recorded in the loan account, less the amounts of payment of principal made by
the Company and recorded in such account, shall be the principal amount
outstanding under this Note. The loan account shall be prima facie evidence of
the unpaid amount of principal outstanding under this Note; provided, however,
that failure to maintain such account or record any advances therein shall not
relieve the Company of its obligations to repay the outstanding principal amount
of the Loan, all accrued interest thereon, and any amount payable with respect
thereto in accordance with the terms of this Note.
ARTICLE III
Default, Rights and Remedies of Holder
3.1 The occurrence of a Default shall be a default under this Note.
Upon any default under this Note, the holder of this Note may declare this Note
due and payable in full and exercise such other rights and remedies as are
available to the holder under the Loan Agreement or applicable law.
3.2 If there is any default under this Note, and this Note is placed in
the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, the Company promises to pay to the order of the
holder hereof such holder's reasonable attorneys' fees and court costs incurred
in collecting or attempting to collect or securing or attempting to secure this
Note or enforcing the holder's rights with respect to the Collateral, to the
extent allowed by the laws of the State of Colorado or any state in which any
Collateral is situated.
ARTICLE IV
Miscellaneous
4.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF COLORADO APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.
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<PAGE>
4.2 The holder of this Note may with or without notice to any party,
and without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
(v) justifiably or otherwise, impair any of the Collateral or suspend the right
to enforce against any such Collateral, and (vi) at any time it deems it
necessary or proper, call for and, should it be made available, accept, as
additional security, the signature or signatures of additional parties or a
security interest in property of any kind or description or both.
4.3 Any provision herein, or in the Loan Agreement, or any other
document executed or delivered in connection herewith or therewith, or in any
other agreement or commitment, whether written or oral, expressed or implied, to
the contrary notwithstanding, neither Boston Chicken nor any holder hereof shall
in any event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that Boston Chicken or any holder hereof shall be
paid, as interest, a sum greater than the maximum amount permitted by applicable
law to be charged to the person primarily obligated to pay this Note at the time
in question. If any construction of this Note or the Loan Agreement, or any and
all other papers, agreements or commitments, indicate a different right given to
Boston Chicken or any holder hereof to ask for, demand, or receive any larger
sum as interest, such is a mistake in calculation or wording which this clause
shall override and control, it being the intention of the parties that this
Note, the Loan Agreement, and all other documents executed or delivered in
connection herewith shall in all ways comply with applicable law and proper
adjustments shall automatically be made accordingly. In the event that Boston
Chicken or any holder hereof ever receives, collects, or applies as interest,
any sum in excess of the maximum amount permitted by applicable law, if any,
such excess amount shall be applied to the reduction of the unpaid principal
balance of this Note, and if this Note is paid in full, any remaining excess
shall be paid to the Company. In determining whether or not the interest paid or
payable, under any specific contingency, exceeds the maximum amount permitted by
applicable law, if any, the Company and any holder hereof shall, to the maximum
extent permitted under applicable law: (a) characterize any non-principal
payment as an expense or fee rather than as interest, and (b) "spread" the total
amount of interest throughout the entire term of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be executed in
its corporate name by the undersigned officer, thereunto duly authorized.
PROGRESSIVE BAGEL CONCEPTS, INC.
By: ____________________________
Title: __________________________
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EXHIBIT B
FORM OF CERTIFICATE TO ACCOMPANY ADVANCES
<PAGE>
EXHIBIT B
CERTIFICATE
The undersigned, the ___________________ of Progressive Bagel Concepts,
Inc. (the "Company"), borrower under that certain Secured Loan Agreement dated
February __, 1995 (the "Loan Agreement") between the Company and Boston Chicken,
Inc. ("Boston Chicken"), hereby requests an Advance of Loan proceeds in the
amount of $_________________.
In support of this request, the Company hereby represents and warrants
to Boston Chicken as follows:
1. Such Loan amount is required and will be used by the Company for the
purposes permitted under in the Loan Agreement and for no other purpose.
2. The representations and warranties contained in Article IV of the
Loan Agreement and in the Security Instruments delivered in connection therewith
are true and correct on and as of the date hereof, and will be true and correct
on the date such Advance is made.
4. No Default or Event of Default has occurred and is continuing.
5. There has been no material adverse change in the financial
conditions, results of operations, assets or business of the Company since
February __, 1995.
6. The Company has ___ Stores open and conducting business as of the
date hereof.
Capitalized terms used but not defined herein have the meanings
ascribed thereto in the Loan Agreement.
PROGRESSIVE BAGEL CONCEPTS, INC.
By:_____________________________
Title:__________________________
Date:_______________, 199_
<PAGE>
EXHIBIT C-1
SUBSIDIARY STOCK PLEDGE AGREEMENT
<PAGE>
SUBSIDIARY STOCK PLEDGE AGREEMENT
This Subsidiary Stock Pledge Agreement ("Pledge Agreement"), dated
______ __, 1995, is made and entered into by and between Progressive Bagel
Concepts, Inc., a Delaware corporation (the "Company") and Boston Chicken, Inc.,
a Delaware corporation ("Boston Chicken").
Recitals
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1. The Company owns 100% of the issued and outstanding shares of
capital stock of Brackman Bros., Inc., a _____________ corporation (the "Pledged
Subsidiary").
2. The Company has entered into a Secured Loan Agreement of even date
herewith (the "Loan Agreement") with Boston Chicken pursuant to which Boston
Chicken has agreed on the terms and subject to the conditions therein, to make a
Loan (as defined in the Loan Agreement) to the Company, which Loan is evidenced
by a promissory note of even date herewith from the Company to Boston Chicken
(the "Note").
3. As an inducement to Boston Chicken to enter into the Loan Agreement
and as a condition to the effectiveness of Boston Chicken's obligations under
the Loan Agreement, the Company has agreed, among other things, to pledge to
Boston Chicken, and grant a first-priority security interest to Boston Chicken,
in and to, 100% of the issued and outstanding capital stock of the Pledged
Subsidiary.
NOW, THEREFORE, the Company and Boston Chicken have agreed as follows:
1. Certain Definitions. The capitalized terms and phrases not otherwise
defined herein, shall have the meanings given them in the Loan Agreement, and
the following terms or phrases shall have the following meanings.
"Affiliate" shall mean, with respect to a specified person, any other
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the person specified.
"Collateral" shall mean the Pledged Shares and any other property in
which Boston Chicken acquires a security interest pursuant to this Pledge
Agreement to secure any indebtedness or other obligation of the Company to
Boston Chicken.
"Default" shall have the meaning given it in Section 10 of this Pledge
Agreement.
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"Pledged Shares" shall mean all the issued and outstanding shares of
the capital stock of the Pledged Subsidiary owned by the Company, the
certificates representing those shares and any stock powers executed by the
Company in connection with those shares.
"Secured Obligations" shall mean the obligations secured by this Pledge
Agreement described in Section 3 of this Pledge Agreement.
2. Grant of Security Interest. (a) The Company hereby grants to Boston
Chicken a security interest in all of its right, title, and interest in and to
the Pledged Shares. The Company further grant to Boston Chicken a security
interest in any stock rights, rights to subscribe, liquidating dividends,
dividends paid in stock, new securities, or any other property to which the
Company is or may hereafter become entitled to receive whether on account of the
Pledged Shares or otherwise. If the Company receives additional property of such
nature, it shall immediately deliver such property to Boston Chicken to be held
by Boston Chicken in the same manner as the property held pursuant to this
Pledge Agreement.
(b) The Company grants a further security interest to Boston Chicken in
the proceeds or products of any sale or other disposition of the Pledged Shares.
3. Obligations Secured. The security interest created hereby secures
payment and performance of (a) the indebtedness evidenced by the Note, and all
obligations contained in the Note, (b) all of the other obligations, agreements,
covenants, and representations of the Company under the Loan Agreement whether
or not, either on the date of this Pledge Agreement or thereafter, evidenced by
any note, instrument, or other writing, and (c) any and all other indebtedness,
obligation, or liability of the Company to Boston Chicken, however evidenced,
whether existing on the date of this Pledge Agreement or arising thereafter,
direct or indirect, absolute or contingent, joint and/or several.
4. Representations and Warranties. To induce Boston Chicken to enter
into this Pledge Agreement, the Company represents and warrants as follows:
(a) The Company has full right, power, and capacity to enter into and
perform this Pledge Agreement; and this Pledge Agreement has been duly
authorized, executed and delivered and constitutes a legal, valid, and binding
obligation of the Company enforceable in accordance with its terms.
(b) The Company has good and marketable title to the Pledged Shares,
and the Pledged Shares are not subject to any lien, charge, pledge, encumbrance,
claim, or security interest other than the security interest created by this
Pledge Agreement.
(c) The Pledged Shares constitute one hundred percent (100%) of the
issued and outstanding equity interest of the Pledged Subsidiary.
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(d) The Pledged Shares are fully paid and nonassessable.
(e) The Company has not entered into any stock restriction or purchase
agreement with respect to the Pledged Shares which would in any way restrict the
sale, pledge, or other transfer of the Pledged Shares or of any interest in or
to the Pledged Shares.
5. Duration of Security Interest. Boston Chicken, its successors and
assigns, shall hold the Pledged Shares and security interest created hereby upon
the terms of this Pledge Agreement, and this security interest shall continue
until all the Secured Obligations have been paid in full.
6. Maintaining Freedom from Liens. The Company shall keep the Pledged
Shares and other Collateral free and clear of liens and shall pay all amounts,
including taxes, assessments, or charges, which might result in a lien against
the Pledged Shares or other Collateral if left unpaid. If any such lien,
assessment, claim, or charge shall nevertheless exist, and the Company fails to
pay such amounts promptly, Boston Chicken may, but is not obligated to, pay such
amounts, and such payment shall be conclusive evidence of the legality or
validity thereof. The Company shall promptly reimburse Boston Chicken for any
such payments, and until reimbursement, such payments shall be a part of the
Secured Obligations.
7. Certain Rights Respecting Pledged Shares.
(a) The Company shall continue to be the owner of the Pledged Shares
and other Collateral so long as no Default has occurred and is continuing and
may collect and retain all cash dividends now or hereafter payable on or on
account of the Pledged Shares and other Collateral which are permitted under the
Loan Agreement, and, so long as no Default has occurred, may exercise voting
rights with respect to the Pledged Shares and other Collateral.
(b) The Company shall not sell, transfer, or attempt to sell or
transfer the Pledged Shares or other Collateral, or any part thereof or interest
therein, without the prior express written consent of Boston Chicken. Any such
consent of Boston Chicken shall not constitute the release by Boston Chicken of
its interest in the Pledged Shares or other Collateral, and any such sale or
transfer consented to shall transfer the Pledged Shares or other Collateral
subject to the security interest of Boston Chicken. Any such transfer shall be
subject to the transferee stockholder's agreement to be bound by the terms and
subject to the conditions of this Pledge Agreement, such agreement to be
evidenced by the transferee stockholder's execution of this Pledge Agreement.
(c) Boston Chicken, at its option upon any Default, may exercise all
voting rights and privileges whatsoever with respect to the Pledged Shares and
other Collateral, including, without limitation, the right to receive dividends,
and to that end the Company hereby constitutes any officer of Boston Chicken as
its proxy and attorney-in-fact for all purposes of voting the Pledged Shares and
other Collateral after any Default at any annual regular or special
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meeting of the Company, and this appointment shall be deemed coupled with an
interest and is and shall be irrevocable until all of the Secured Obligations
have been fully paid and terminated, and all persons whatsoever shall be
conclusively entitled to rely upon any oral or written certification of Boston
Chicken that it is entitled to vote the Pledged Shares and other Collateral
hereunder. The Company shall execute and deliver to Boston Chicken any
additional proxies and powers of attorney that Boston Chicken may desire in its
own name. In addition to any other voting rights, Boston Chicken may vote the
Pledged Shares and other Collateral to remove the directors and officers of the
Pledged Subsidiary, or any of them, and to elect new directors and officers of
the Pledged Subsidiary, who may thereafter manage the affairs of the Pledged
Subsidiary, operate its properties and carry on its business and otherwise take
any action with respect thereto as it shall deem necessary and appropriate, and
may also liquidate its business, and may authorize the borrowing of money in the
name of the Pledged Subsidiary, and the pledge of its assets to secure such
borrowing.
8. Issuance or Acquisition of New Stock or Sale of Treasury Shares;
Mergers, Sales and Other Disposition of Assets. The Company shall not permit the
Pledged Subsidiary to (a) issue new shares of its capital stock, or any options,
subscription rights, or warrants with respect thereto, (b) sell any treasury
shares, (c) merge into or with or consolidate with any other entity, (d) sell or
otherwise transfer any part of its assets (except in the ordinary course of
business) or (e) liquidate or dissolve or take any action with a view toward
liquidation or dissolution, in each case without Boston Chicken's prior written
consent.
9. Delivery of Certificates and Stock Powers. Upon execution of this
Pledge Agreement, the Company shall deliver to Boston Chicken the share
certificates representing the Pledged Shares in form suitable for transfer
together with executed blank stock powers. If for any reason the Company
acquires any interest in any additional capital stock of the Pledged Subsidiary,
the Company shall immediately deliver certificates representing that stock in
form suitable for transfer and blank stock powers to Boston Chicken to be held
by Boston Chicken in the same manner as the Pledged Shares, and such stock shall
be pledged under this Pledge Agreement and constitute a part of the Collateral.
10. Default. At the option of Boston Chicken, the occurrence of any
Default (as defined in the Loan Agreement) under the Loan Agreement shall
constitute a default under this Pledge Agreement.
11. Remedies. (a) Upon the occurrence of any Default, Boston Chicken
shall have all of the rights and remedies provided by law and/or by this Pledge
Agreement, including but not limited to all of the rights and remedies of a
secured party under the Uniform Commercial Code, and the Company hereby
authorizes Boston Chicken to hold such Pledged Shares or to sell all or any part
of the Pledged Shares at public or private sale and to apply the proceeds of
such sale to the costs and expenses thereof (including the reasonable attorneys'
fees and disbursements incurred by Boston Chicken) and then to the payment of
the other Secured Obligations. Boston Chicken may be the purchaser at any such
sale. The Company expressly authorizes such sale or
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sales of the Pledged Shares in advance of and to the exclusion of any sale or
sales of or other realization upon any other collateral securing indebtedness or
other obligations owed to Boston Chicken. Boston Chicken shall be under no
obligation to preserve rights against prior parties.
(b) The Company agrees and acknowledges that because there may be
no public market for the Pledged Shares and because of applicable securities
laws, a public sale of the Pledged Shares may not be possible or advisable and
sales at a private sale may be on terms less favorable than if such Pledged
Shares were sold at a public sale and may be at a price less favorable than a
public sale. The Company agrees that all such private sales made under the
foregoing circumstances shall be deemed to have been made in a commercially
reasonable manner.
12. Exercise of Remedies. The rights and remedies of Boston Chicken
shall be deemed to be cumulative, and any exercise of any right or remedy shall
not be deemed to be an election of that right or remedy to the exclusion of any
other right or remedy. Notwithstanding the foregoing, Boston Chicken shall be
entitled to recover by the cumulative exercise of all remedies no more than the
sum of (a) the Secured Obligations remaining outstanding at the time of the
exercise of remedies, plus (b) the costs, fees, and expenses Boston Chicken is
otherwise entitled to recover.
13. Return of Collateral. Boston Chicken may at any time deliver the
Pledged Shares or other Collateral, or any part thereof, to the Company. The
receipt by the Company of the Pledged Shares or other Collateral, or any part
thereof, shall be a complete and full discharge of Boston Chicken, and Boston
Chicken shall be discharged from any liability or responsibility with respect
thereto.
14. Communications and Notices. (a) Any requirement of the Uniform
Commercial Code of reasonable notice shall be met if such notice is given at
least five business days before the time of sale, disposition, or other event or
thing giving rise to the requirement of notice.
(b) All communications and notices shall be in writing and shall
be deemed to have been duly given if delivered personally to the party to whose
attention the notice is directed or sent by overnight express, facsimile
transmission, express mail delivery service, or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as set forth
in Section 9.4 of the Loan Agreement. Any party may change the address to which
notices hereunder are to be sent to it by giving written notice of such change
of address in the manner herein provided for giving notice. Any notice delivered
personally shall be deemed to have been given when so delivered. Any notice
delivered by facsimile transmission shall be deemed to have been given on the
earlier of the date it is actually received or one day after such transmission.
Any notice delivered by overnight express courier will be deemed to have been
given on the next succeeding business day after the day it is sent to the
intended recipient at the address set forth above, and any notice delivered by
registered or certified mail or express mail delivery service shall be deemed to
have been duly given on the earlier of the date it is actually
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received or three business days after it is sent to the intended recipient at
the address set forth above.
15. Further Assurances. The Company shall sign any such other documents
or instruments, and take such other action, as Boston Chicken may request to
more fully create and maintain, or to verify, ratify, or perfect the security
interest intended to be created by this Pledge Agreement.
16. Multiple Counterparts. This Pledge Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Pledge Agreement or the terms thereof
to produce or account for more than one such counterpart.
17. Miscellaneous. (a) Failure by Boston Chicken to exercise any right
shall not be deemed a waiver of that right, and any single or partial exercise
of any right shall not preclude the further exercise of that right. Every right
of Boston Chicken shall continue in full force and effect until such right is
specifically waived in writing signed by Boston Chicken.
(b) If any provision of this Pledge Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable, the
remainder of the Pledge Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby, and the provisions of
this Pledge Agreement shall be severable in any such instance.
(c) The headings of the sections of this Pledge Agreement are
inserted for convenience only and shall not be deemed to constitute a part of
this Pledge Agreement.
(d) This Pledge Agreement shall benefit Boston Chicken, its
successors and assigns, and all obligations of the Company shall bind their
successors and assigns. The Company acknowledges that Boston Chicken may assign
or otherwise transfer (in whole or in part) the Note, the Loan Agreement, or
this Pledge Agreement to any other person, and such other person shall thereupon
become vested with all of the benefits in respect thereof granted to Boston
Chicken thereunder (including the benefits under this Pledge Agreement).
(E) THIS PLEDGE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS
THEREOF.
(f) This Pledge Agreement and the Loan Agreement constitute the
entire agreement of the parties with respect to the subject matter hereof and
supersede all prior understandings with respect to the subject matter hereof. No
change, modification, addition, or
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termination of this Pledge Agreement shall be enforceable unless in writing and
signed by the party against whom enforcement is sought.
(g) The Company agrees that any legal action or proceeding with
respect to this Pledge Agreement or the transactions contemplated hereby may be
brought in any court of the State of Colorado, or in any court of the United
States of America sitting in Colorado, and the Company hereby submits to and
accepts generally and unconditionally the jurisdiction of those courts with
respect to their respective person and property, and irrevocably consents to the
service of process in connection with any such action or proceeding by personal
delivery to the Company or by the mailing thereof by registered or certified
mail, postage prepaid addressed to the Company at the address for notices as
provided in Section 14 hereof. Nothing in this paragraph shall affect the right
of Boston Chicken to serve process in any other manner permitted by law or limit
the right of Boston Chicken to bring any such action or proceeding against the
Company or property in the courts of any other jurisdiction. The Company hereby
irrevocably waives any objection to the laying of venue of any such suit or
proceeding in the above described courts.
18. Waiver of Jury Trial. No party to this instrument, which includes
any assignee, successor, heir or personal representative of a party, shall seek
a jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, any related instrument,
or the dealings or the relationship between the parties. If the subject matter
of any such litigation is one in which the waiver of a jury trial is prohibited,
if at all, under the controlling law of the applicable jurisdiction, by
constitutional or statutory provision, no party hereto will present as a defense
or counterclaim in such litigation any claim which would reduce or offset any
amount or right claimed under the provisions of this Pledge Agreement. No party
will seek to consolidate any such action, in which a jury has been waived, with
any other action in which a jury trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 18 HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY
HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS
OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE BANK IN ENTERING INTO THIS AGREEMENT.
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IN WITNESS WHEREOF, the parties hereto executed this Pledge Agreement
to be effective as of the date and year first above written.
PROGRESSIVE BAGEL CONCEPTS, INC.
By: ____________________________
Its: _______________________
BOSTON CHICKEN, INC.
By: ____________________________
Title: _________________________
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EXHIBIT D
SUBSIDIARY SECURITY AGREEMENT
<PAGE>
SUBSIDIARY SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of February, 1995 (this "Security
Agreement"), is made by Brackman Bros., Inc., a Delaware corporation (the
"Company"), in favor of Boston Chicken, Inc., a Delaware corporation ("Boston
Chicken").
WITNESSETH:
WHEREAS, Progressive Bagel Concepts, Inc., a Delaware corporation (the
"Borrower") has entered into a Secured Loan Agreement, dated as of February,
1995, (the "Loan Agreement"), with Boston Chicken and pursuant to which Boston
Chicken has agreed on the terms and conditions therein, to make a Loan (as
defined in the Loan Agreement) to the Borrower; and
WHEREAS, the Company is a wholly-owned subsidiary of the Borrower;
WHEREAS, as a condition to the effectiveness of Boston Chicken's
obligations under the Loan Agreement, the Company has agreed, among other
things, to grant to Boston Chicken a first-priority security interest in and to
the Collateral hereinafter described;
NOW, THEREFORE, to secure (a) the payment of the principal sum of Eighty
Million Dollars ($80,000,000), together with interest thereon, in accordance
with the terms of a promissory note dated February _____, 1995, issued by the
Borrower pursuant to the Loan Agreement (the "Note"), (b) the performance of the
covenants herein contained and any monies expended by Boston Chicken in
connection therewith, (c) the payment of all obligations and performance of all
covenants of the Borrower under the Loan Agreement, the Pledge Agreement and all
other Security Instruments (as defined in the Loan Agreement) and any other
documents, agreements or instruments between the Borrower or the Company and
Boston Chicken given in connection therewith, and (d) any and all other
indebtedness, obligations and liabilities of any kind of the Borrower and/or the
Company to Boston Chicken now or hereafter existing, direct or indirect,
absolute or contingent, joint and/or several, secured or unsecured, arising by
operation of law or otherwise, and whether incurred by the Company as principal,
surety, endorser, guarantor, accommodation party or otherwise (all of the
aforesaid indebtedness, obligations and liabilities of the Borrower and/or the
Company being herein called the "Secured Obligations", and all of the documents,
agreements and instruments between the Company and Boston Chicken evidencing or
securing the repayment of, or otherwise pertaining to the Secured Obligations
being herein collectively called the "Operative Documents"), for value received
and pursuant to the Loan Agreement, the Company hereby grants, assigns and
transfers to Boston Chicken a security
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interest in and to the following described property whether now owned or
existing or hereafter acquired or arising and wherever located (all of which is
herein collectively called the "Collateral"):
(a) all of the Company's real estate, accounts, equipment (including, but
not limited to machinery, furniture, fixtures, tools, vehicles, and other
tangible property), inventory, leasehold improvements, contract rights
(including its rights as lessee under all leases of real property), general
intangibles, deposit accounts, tax refunds, chattel paper, instruments, notes,
letters of credit, documents, and documents of title;
(b) all insurance proceeds of or relating to any of the foregoing;
(c) all of the Company's books, records, and computer programs and data
relating to any of the foregoing; and
(d) all accessories and additions to, and substitutions for, and
replacements, products and proceeds of, any of the foregoing.
1. Representations, Warranties, Covenants and Agreements. The Company
further represents, warrants, covenants, and agrees with Boston Chicken as
follows:
(a) Ownership of Collateral; Security Interest Priority. At the time any
Collateral becomes subject to a security interest of Boston Chicken hereunder,
unless Boston Chicken shall otherwise consent, the Company shall be deemed to
have represented and warranted that (i) the Company is the lawful owner of such
Collateral and has the right and authority to subject the same to the security
interest of Boston Chicken; (ii) none of the Collateral is subject to any lien
other than that in favor of Boston Chicken and there is no effective financing
statement covering any of the Collateral on file in any public office, other
than in favor of Boston Chicken. This Security Agreement creates in favor of
Boston Chicken a valid and perfected first-priority security interest in the
Collateral enforceable against the Company and all third parties and securing
the payment of the Secured Obligations and all filings and other actions
necessary or desirable to create, preserve or perfect such security interests
have been duly taken.
(b) Location of Offices, Records and Facilities. The Company's chief
executive office and chief place of business and the office where the Company
keeps its records concerning its accounts, contract rights, chattel papers,
instruments, general intangibles and other obligations arising out of or in
connection with the sale or lease of goods or the rendering of services or
otherwise ("Receivables"), and all originals of all leases and other chattel
paper which evidence Receivables, are located in the State of __________, County
of __________ at ____________________. The Company will provide Boston Chicken
with prior written notice of any proposed change in the location of its chief
executive office and will not change the location of its chief executive office
without the prior written consent of Boston Chicken. The federal tax
identification number of the Company is ______________________. The name
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of the Company is ____________________, and the Company operates under no other
names [except for ____________________]. The Company shall not change its name
without the prior written consent of Boston Chicken.
(c) Location of Inventory, Fixtures, Machinery and Equipment. (i) All
Collateral consisting of inventory, fixtures, machinery or equipment is, and
will be, located within the Development Area (as defined in the Loan Agreement),
and at no other locations without the prior written consent of Boston Chicken.
If the Collateral described in clauses (i) or (ii) is kept at leased locations
or warehoused, the Company has obtained appropriate landlord's lien waivers or
appropriate warehousemen's notices have been sent, each satisfactory to Boston
Chicken, unless waived by Boston Chicken.
(d) Liens, Etc. The Company will keep the Collateral free at all times from
any and all liens, security interests or encumbrances other than those described
in paragraph 1(a)(ii) and those consented to in writing by Boston Chicken. The
Company will not, without the prior written consent of Boston Chicken, sell or
lease, or permit or suffer to be sold or leased, any of the Collateral except
inventory which is sold or, subject to Boston Chicken's security interest
therein, is leased in the ordinary course of the Company's business, and
tangible Collateral, which is disposed of in the ordinary course of the
Company's business as being obsolete. Boston Chicken or its attorneys may at any
and all reasonable times inspect the Collateral and for such purpose may enter
upon any and all premises where the Collateral is or might be kept or located.
(e) Insurance. The Company shall keep the tangible Collateral insured at
all times against loss by theft, fire and other casualties and shall otherwise
comply with the insurance provisions set forth in Section 5.4 of the Loan
Agreement.
(f) Taxes, Etc. The Company will pay promptly, and within the time that
they can be paid without interest or penalty, any taxes, assessments and similar
imposts and charges, not being contested in good faith, which are now or
hereafter may become a lien, charge or encumbrance upon any of the Collateral.
If the Company fails to pay any such taxes, assessments or other imposts or
charges in accordance with this Section, Boston Chicken shall have the option to
do so and the Company agrees to repay forthwith all amounts so expended by
Boston Chicken with interest at the default rate set forth in the Loan
Agreement.
(g) Further Assurances. The Company will do all acts and things and will
execute all financing statements and writings requested by Boston Chicken to
establish, maintain and continue a perfected and valid security interest of
Boston Chicken in the Collateral, and will promptly on demand pay all reasonable
costs and expenses of filing and recording all instruments, including the costs
of any searches deemed necessary by Boston Chicken to establish and determine
the validity and the priority of Boston Chicken's security interests. A carbon,
photographic or other reproduction of this Security Agreement or any financing
statement covering the Collateral shall be sufficient as a financing statement.
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(h) Maintenance of Tangible Collateral. The Company will cause the tangible
Collateral to be maintained and preserved in the same condition, repair and
working order as when new, ordinary wear and tear excepted, and in accordance
with any manufacturer's manual, and shall forthwith, or, in the case of any loss
or damage to any of the tangible Collateral as quickly as practicable after the
occurrence thereof, make or cause to be made all repairs, replacements, and
other improvements made in connection therewith which are necessary or desirable
to such end. The Company shall promptly furnish to Boston Chicken a statement
respecting any loss or damage to any of the tangible Collateral.
(i) Maintenance of Intangible Collateral. The Company shall preserve and
maintain all rights of the Company and Boston Chicken in the intangible
Collateral, including without limitation the payment of all maintenance fees and
the taking of appropriate action at the Company's expense to halt the
infringement of any of the intangible Collateral.
(j) Special Rights Regarding Accounts Receivable. Boston Chicken or any of
its agents may, at any time and from time to time in its sole discretion and
irrespective of the existence of any event of default under this Security
Agreement, verify directly with the Company's account debtors the accounts
pledged hereunder in any manner. Boston Chicken or any of its agents may, at any
time from time to time in its sole discretion, notify the Company's account
debtors of the security interest of Boston Chicken in the Collateral and/or
direct such account debtors that all payments in connection with such
obligations and the Collateral be made directly to Boston Chicken in Boston
Chicken's name. If Boston Chicken or any of its agents shall collect such
obligations directly from the Company's account debtors, Boston Chicken or any
of its agents shall have the right to resolve any disputes relating to returned
goods directly with the Company's account debtors in such manner and on such
terms as Boston Chicken or any of its agents shall deem appropriate. The Company
directs and authorizes any and all of its present and future account debtors to
comply with requests for information from Boston Chicken, Boston Chicken's
designees and agents and/or auditors, relating to any and all business
transactions between the Company and the Company's account debtors. The Company
further directs and authorizes all of its account debtors upon receiving a
notice or request sent by Boston Chicken or Boston Chicken's agents or designees
to pay directly to Boston Chicken any and all sums of money or proceeds now or
hereafter owing by the Company's account debtors to the Company, and any such
payment shall act as a discharge of any debt of such account debtor to the
Company in the same manner as if such payment had been made directly to the
Company. The Company agrees to take any and all action as Boston Chicken may
request to assist Boston Chicken in exercising the rights described in this
Section.
2. Events of Default. The occurrence of any Event of Default specified in
the Loan Agreement shall be deemed an event of default under this Security
Agreement.
3. Remedies. Upon the occurrence of any such event of default, Boston
Chicken shall have and may exercise any one or more of the rights and remedies
provided to it under this Security Agreement or any of the other Operative
Documents or provided by law, including but
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not limited to all of the rights and remedies of a secured party under the
Uniform Commercial Code, and the Company hereby agrees to assemble the
Collateral and make it available to Boston Chicken at a place to be designated
by Boston Chicken which is reasonably convenient to both parties, authorizes
Boston Chicken to take possession of the Collateral with or without demand and
with or without process of law and to sell and dispose of the same at public or
private sale and to apply the proceeds of such sale to the costs and expenses
thereof (including reasonable attorneys' fees and disbursements, incurred by
Boston Chicken) and then to the payment of the indebtedness and satisfaction of
other Secured Obligations. Any requirement of reasonable notice shall be met if
Boston Chicken sends such notice to the Company, by registered or certified
mail, at least 5 days prior to the date of sale, disposition or other event
giving rise to a required notice. Boston Chicken may be the purchaser at any
such sale. The Company expressly authorizes such sale or sales of the Collateral
in advance of and to the exclusion of any sale or sales of or other realization
upon any other collateral securing the Secured Obligations. Boston Chicken shall
have no obligation to preserve rights against prior parties. The Company hereby
waives as to Boston Chicken any right of subrogation or marshaling of such
Collateral and any other collateral for the Secured Obligations. To this end,
the Company hereby expressly agrees that any such collateral or other security
of the Company or any other party which Boston Chicken may hold, or which may
come to any of them or any of their possession, may be dealt with in all
respects and particulars as though this Security Agreement were not in
existence. The parties hereto further agree that public sale of the Collateral
by auction conducted in any county in which any Collateral is located or in
which Boston Chicken or the Company does business after advertisement of the
time and place thereof shall, among other manners of public and private sale, be
deemed to be a commercially reasonable disposition of the Collateral. The
Company shall be liable for any deficiency remaining after disposition of the
Collateral.
4. Remedies Cumulative. No right or remedy conferred upon or reserved to
Boston Chicken under any Operative Document is intended to be exclusive of any
other right or remedy, and every right and remedy shall be cumulative in
addition to every other right or remedy given hereunder or now or hereafter
existing under any applicable law. Every right and remedy of Boston Chicken
under any Operative Document or under applicable law may be exercised from time
to time and as is often as may be deemed expedient by Boston Chicken. To the
extent that it lawfully may, the Company agrees that it will not at any time
insist upon, plead, or in any manner whatever claim or take any benefit or
advantage of any applicable present or future stay, extension or moratorium law,
which may effect observance or performance of any provisions of any Operative
Document, nor will it claim, take or insist upon any benefit or advantage of any
present or future law providing for the valuation or appraisal of any security
for its obligations under any Operative Document prior to any sale or sales
thereof which may be made under or by virtue of any instrument governing the
same; nor will it, after any such sale or sales, claim or exercise any right,
under any applicable law to redeem any portion of such security so sold.
5. Conduct No Waiver. No waiver of default shall be effective unless in
writing executed by Boston Chicken and waiver of any default or forbearance on
the part of Boston
5
<PAGE>
Chicken in enforcing any of its rights under this Security Agreement shall not
operate as a waiver of any other default or of the same default on a future
occasion or of such right.
6. Governing Law; Definitions. This Security Agreement is a contract made
under, and the rights and obligations of the parties hereunder shall be governed
by and construed in accordance with, the laws of the State of Colorado
applicable to contracts made and to be performed entirely within such State.
Terms used but not defined herein shall have the respective meaning ascribed
thereto in the Loan Agreement. Unless otherwise defined herein or in the Loan
Agreement, terms used in Article 9 of the Uniform Commercial Code in the State
of Colorado are used herein as therein defined on the date hereof. The headings
of the various subdivisions hereof are for convenience of reference only and
shall in no way modify any of the terms or provisions hereof.
7. Notices. All notices, demands, requests, consents and other
communications hereunder shall be delivered and shall be effective in the manner
specified in Section 9.4 of the Loan Agreement.
8. Rights Not Construed as Duties. Boston Chicken neither assumes nor shall
it have any duty of performance or other responsibility under any contracts in
which Boston Chicken has or obtains a security interest hereunder. If the
Company fails to perform any agreement contained herein, Boston Chicken may but
is in no way obligated to itself perform, or cause performance of, such
agreement, and the expenses of Boston Chicken incurred in connection therewith
shall be payable by the Company under paragraph 12.
9. Amendments. None of the terms and provisions of this Security Agreement
may be modified or amended in any way except by an instrument in writing
executed by each of the parties hereto.
10. Severability. If any one or more provisions of this Security Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected, impaired or prejudiced thereby.
11. Expenses. The Company agrees to indemnify Boston Chicken from and
against any and all claims, losses and liabilities growing out of or resulting
from this Security Agreement (including, without limitation, enforcement of this
Security Agreement), except claims, losses or liabilities resulting from the
Boston Chicken's gross negligence or willful misconduct.
12. Successors and Assigns; Termination. This Security Agreement shall
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until full payment and performance of the Secured
Obligations (b) be binding upon the Company, its successors and assigns and (c)
inure, together with the rights and remedies of Boston Chicken hereunder, to the
benefit of Boston Chicken and its successors, transferees and assigns. Upon the
6
<PAGE>
full payment and performance of the Secured Obligations the security interests
granted hereby shall terminate and all rights to the Collateral shall revert to
the Company. Upon any such termination, Boston Chicken will, at the Company's
expense, execute and deliver to the Company such documents as the Company shall
reasonably request to evidence such termination.
13. Submission to Jurisdiction. The Company agrees that any legal action or
proceeding with respect to this Security Agreement or the transactions
contemplated hereby may be brought in any court of the State of Colorado, or in
any court of the United States of America sitting in Colorado, and the Company
hereby submits to and accepts generally and unconditionally the jurisdiction of
those courts with respect to their respective person and property, and
irrevocably consents to the service of process in connection with any such
action or proceeding by personal delivery to the Company or by the mailing
thereof by registered or certified mail, postage prepaid addressed to the
Company at the address for notices as provided in Section 7 hereof. Nothing in
this paragraph shall affect the right of Boston Chicken to serve process in any
other manner permitted by law or limit the right of Boston Chicken to bring any
such action or proceeding against the Company or property in the courts of any
other jurisdiction. The Company hereby irrevocably waives any objection to the
laying of venue of any such suit or proceeding in the above described courts.
14. Waiver of Jury Trial. No party to this instrument, which includes any
assignee, successor, heir or personal representative of a party, shall seek a
jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, any related instrument,
or the dealings or the relationship between the parties. If the subject matter
of any such litigation is one in which the waiver of a jury trial is prohibited,
if at all, under the controlling law of the applicable jurisdiction, by
constitutional or statutory provision, no party hereto will present as a defense
or counterclaim in such litigation any claim which would reduce or offset any
amount or right claimed under the provisions of this Agreement. No party will
seek to consolidate any such action, in which a jury has been waived, with any
other action in which a jury trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 14 HAVE BEEN FULLY DISCUSSED BY THE PARTIES
HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN
ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE BANK IN ENTERING INTO THIS AGREEMENT.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Security Agreement to be
duly executed as of the day and year first set forth above.
[NAME OF COMPANY]
By:
-------------------------------------
Its:
-------------------------------------
8
<PAGE>
EXHIBIT E
FORM OF OPINION OF COUNSEL
<PAGE>
[Form of Opinion of Counsel]
[Date]
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Re:
Ladies and Gentlemen:
We have acted as counsel for Progressive Bagel Concepts, Inc., a Delaware
corporation (the "Company") and Brackman Bros., Inc. (the "Subsidiary"), in
connection with the preparation, execution, and delivery of the Documents (as
hereinafter defined). This opinion is furnished to you pursuant to Section 7.1
of the Agreement (as hereinafter defined). As used herein, the term "State"
means the State of [opining jurisdiction] and the term "UCC" means the Uniform
Commercial Code as in effect in the State on the date hereof. Other capitalized
terms used herein and not otherwise defined herein have the meanings provided in
the Agreement.
The documents we have examined in rendering this opinion are the following:
(i) The following, collectively called the "Documents":
(a) the Secured Loan Agreement (the "Agreement"), of even date
herewith, between the Company and Boston Chicken, Inc. ("Boston
Chicken");
(b) the Convertible Secured Note of the Company, of even date
herewith and delivered pursuant to the Agreement (the "Note");
(c) the Subsidiary Stock Pledge Agreement, dated of even date
herewith, between the Company and Boston Chicken delivered pursuant to
the Agreement (the "Subsidiary Pledge Agreement");
(d) the Subsidiary Security Agreement, dated of even date
herewith between Brackman Bros., Inc. and Boston Chicken pursuant to
the Agreement (the "Subsidiary Security Agreement"); and
(e) [other documents as applicable]
(ii) A certificate of the Secretary of the Company certifying as to
(A) the Certificate of Incorporation and bylaws of the Company and (B)
resolutions adopted on ____________________ by the Board of Directors and
shareholders of the Company;
<PAGE>
(iii) Copies of those indentures, loan or credit agreements, leases,
guarantees, mortgages, security agreements, bonds, notes and other
agreements or instruments, and orders, writs, judgments, awards,
injunctions and decrees, which have been certified by the Secretary of the
Company as those documents which affect or purport to affect the Company's
right to borrow money under, or right to undertake and perform its
obligations under, the Documents (collectively, the "Other Agreements and
Court Orders"), a copy of which certificate is attached hereto as Exhibit
A; and
(iv) A certificate of the Secretary of State of the State of
____________________ dated _________________, attesting to the continued
corporate existence and good standing of the Company in that state.
We have also examined such other corporate documents and records, and other
certificates, opinions and instruments and have conducted such investigation as
we have deemed necessary as a basis for the opinions expressed below. As to
factual matters relevant to our opinions expressed below, we have, without
independent investigation, relied upon all of the foregoing, upon the factual
representations made by the Company in Article IV of the Agreement, upon
certificates of the officers of the Company and of public officials, and upon
public records.
Based upon and subject to the matters stated herein and upon such
investigation as we have deemed necessary, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the state of its incorporation, with
corporate power and authority to enter into the Agreement and to issue the
Note and incur the indebtedness to be evidenced thereby.
2. The Subsidiary is a corporation duly organized, validly existing,
and in good standing under the laws of the state of its incorporation, with
corporate power and authority to enter into the Documents to which it is a
party.
3. Each of the Documents to which the Company is a party has been duly
authorized by all required corporate action on the part of the Company, and
each of them has been duly executed and delivered by the Company, and
constitutes the legal, valid, and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
4. Each of the Documents to which the Subsidiary is a party has been
duly authorized by all required corporate action on the part of the
Subsidiary, and each of them has been duly executed and delivered by the
Subsidiary, and constitutes the legal, valid, and binding obligation of the
Subsidiary, enforceable against the Subsidiary in accordance with its
terms.
2
<PAGE>
5. The execution and delivery of the Documents and the performance by
the Company of its obligations thereunder, will not conflict with or result
in any breach of any of the provisions of, or constitute a default under,
or result in the creation or imposition of any lien or encumbrance upon any
of the properties of the Company pursuant to the provisions of (a) its
Certificate of Incorporation or bylaws, (b) any of the Other Agreements and
Court Orders, or (c) any law, rule, or regulation including without
limitation Regulation G, T, U or X of the Board of Governors of the Federal
Reserve.
6. The execution and delivery of the Documents and the performance by
the Subsidiary of its obligations thereunder, will not conflict with or
result in any breach of any of the provisions of, or constitute a default
under, or result in the creation or imposition of any lien or encumbrance
upon any of the properties of the Subsidiary pursuant to the provisions of
(a) its Certificate of Incorporation or bylaws, (b) any of the Other
Agreements and Court Orders, or (c) any law, rule, or regulation including
without limitation Regulation G, T, U or X of the Board of Governors of the
Federal Reserve.
7. To the best of our knowledge, no consent, authorization, appraisal,
or other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other person, which has not been
obtained or taken, is required for the execution and delivery of, or the
performance by the Company or the Subsidiary of their respective
obligations under, each of the Documents.
8. Under applicable law, the Company's Certificate of Incorporation
and bylaws, and all contracts, agreements, or restrictions known by us to
bind the Company, the vote of the holders of a majority of the shares of
common stock of the Company is sufficient to elect the directors of the
Company, approve the merger, consolidation, or sale of substantially all of
the assets of the Company, or take any other action whatsoever.
9. The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
10. The Company is not a "holding company", or a "subsidiary company"
of a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
11. The Agreement creates a valid security interest in your favor as
security for the payment of the obligations of the Company under the
Agreement and the Note in all of the Company's right, title, and interest
in and to all personal property (the "Code Collateral") included within the
definition of the term Collateral (as defined in the Agreement) in which a
security interest can be granted under the UCC and Non-[opining
3
<PAGE>
jurisdiction] Codes (as such term is hereinafter defined)./1/ We have
examined the financing statements (the "Financing Statements") to be filed
in the filing offices listed on Annex I attached hereto (the "Filing
Offices") with respect to the security interests granted to Boston Chicken
pursuant to the Agreement, and upon the filing of such Financing Statements
in the Filing Offices, and assuming that the representations made in the
Agreement with respect to the location of the Code Collateral and the chief
executive office of the Company are and remain true and correct: (a) all
filings, registrations and recordings necessary to perfect the security
interest granted to you under such Agreement in respect of all Code
Collateral in which a security interest may be perfected by filing a
financing statement in the Filing Offices will have been accomplished; and
(b) the security interests granted to you pursuant to such Agreement in and
to such Code Collateral will be perfected to the extent that such security
interests may be perfected by filing financing statements in the Filing
Offices under the UCC and the Non-[opining jurisdiction] Codes.
12. The Subsidiary Security Agreement creates a valid security
interest in your favor as security for the payment of the obligations of
the Company under the Agreement and the Note in all of the Subsidiary's
right, title, and interest in and to all personal property (the "Code
Collateral") included within the definition of the term Collateral (as
defined in the Agreement) in which a security interest can be granted under
the UCC and Non-[opining jurisdiction] Codes (as such term is hereinafter
defined)./2/ We have examined the financing statements (the "Financing
Statements") to be filed in the filing offices listed on Annex I attached
hereto (the "Filing Offices") with respect to the security interests
granted to Boston Chicken pursuant to the Subsidiary Security Agreement,
and upon the filing of such Financing Statements in the Filing Offices, and
assuming that the representations made in the Subsidiary Security Agreement
with respect to the location of the Code Collateral and the chief executive
office of the Subsidiary are and remain true and correct: (a) all filings,
registrations and recordings necessary to perfect the security interest
granted to you under such Subsidiary Security Agreement in respect of all
Code Collateral in which a security interest may be perfected by filing a
financing statement in the Filing Offices will have been accomplished; and
(b) the security interests granted to you pursuant to such Subsidiary
Security Agreement in and to such Code Collateral will be perfected to the
extent that such security interests may be perfected by filing financing
statements in the Filing Offices under the UCC and the Non-[opining
jurisdiction] Codes.
13. The Pledge Agreement creates a valid security interest in your
favor as security for payment of the Secured Obligations in the Collateral
(as such terms are defined in the Pledge Agreement). Assuming the
continuous possession at all times hereafter by you of the Pledged Shares
(as defined in the Pledge Agreement) which are evidenced by instruments or
certificates, the security interests created in your favor under
- ----------
/1/* Opinion with respect to the perfection of security interests in Non-Opining
Jurisdictions is only required when the Company has code Collateral or its
chief executive office outside of the Non-Opining Jurisdiction.
/2/* Opinion with respect to the perfection of security interests in Non-Opining
Jurisdictions is only required when the Company has code Collateral or its
chief executive office outside of the Non-Opining Jurisdiction.
4
<PAGE>
the Pledge Agreement with respect to such Pledged Shares constitute
perfected security interests in such Pledged Shares.
In addition to any assumptions, qualifications and other matters set forth
elsewhere herein, the opinions set forth above are subject to the following:
(a) For the purposes of this opinion, we have assumed that the Code
Collateral exists and the Company and the Subsidiary have rights or title to
each item thereof, that all natural persons have legal capacity, that all items
submitted to us as originals are authentic and all signatures thereon are
genuine, that all items submitted to us as copies conform to the originals and
each such original or copy is complete and has been duly executed and delivered
by each party (other than the Company and the Subsidiary) pursuant to due
authorization as such party's legal, valid, and binding obligation, enforceable
against such party in accordance with its respective terms.
(b) Our opinion with respect to the legality, validity, binding effect, and
enforceability of any document or agreement is subject to the effect of any
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium, or similar law affecting creditors' rights generally and to the
effect of general principles of equity, including (without limitation) concepts
of materiality, reasonableness, good faith, and fair dealing (regardless of
whether considered in a proceeding in equity or at law).
(c) We call your attention to the following matters (as well as those
matters set out in paragraph (d) below) as to which we express no opinion:
(i) the Company's agreement in the Agreement to indemnify you against
costs, expenses, or liability notwithstanding your acts of gross negligence
or willful misconduct;
(ii) the Company's agreements in the Agreement for payment or
reimbursement of costs, fees, and expenses or indemnification for claims,
losses, or liabilities to the extent any such provision may be determined
by a court or other tribunal to be in an unreasonable amount, to constitute
a penalty, or to be contrary to public policy;
(iii) any of the waivers or remedies contained in the Documents,
whether or not any Document deems any such waiver or remedy commercially
reasonable, if such waivers or remedies are determined (1) not to be
commercially reasonable within the meaning of the UCC, (2) to conflict with
mandatory provisions under the UCC or other applicable law, or (3) to be
taken in a manner determined to be unreasonable or not performed in good
faith or with fair dealing or with honesty in-fact;
(iv) certain other provisions contained in the Documents which may be
limited or rendered ineffective by applicable laws or judicial decisions
governing such provisions or holding their enforcement to be unreasonable
under the then-existing circumstances, but
5
<PAGE>
such laws and judicial decisions do not, in our opinion, render the
Documents invalid as a whole or leave you without remedies; or
(v) the priority or continued perfection of any security interest or
lien granted by the Company to you under any of the Documents.
(d) Our opinions set forth in paragraph 8 above are subject to the
following further qualifications, exclusions and assumptions:
(i) Our opinions are qualified by and subject to:
(A) in the case of proceeds, continuation of perfection of your
security interest therein is limited to the extent set forth in
Section 9-306 of the UCC;
(B) in the case of property which becomes collateral after the
date hereof, Section 547 of the United States Bankruptcy Code (the
"Bankruptcy Code") provides that a transfer is not made until the
debtor has rights in the property transferred, so a security interest
in after-acquired property which is security for other than a
contemporaneous advance may be treated as a voidable preference under
the conditions (and subject to the exceptions) provided by Section
547;
(C) Section 552 of the Bankruptcy Code limits the extent to which
property acquired by a debtor after the commencement of the case under
the Bankruptcy Code may be subject to a security interest arising from
a security agreement entered into by the debtor before the
commencement of such case; and
(D) Section 364 of the Bankruptcy Code provides that the
extension of secured credit after the commencement of a case under the
Bankruptcy Code requires court approval.
(ii) We express no opinion as to:
(A) the creation or perfection of any security interest in any
fixtures or property excluded from the provisions of the UCC pursuant
to 9-104; and
(B) the perfection of any security interest in accounts that are
an obligation of the Federal government or any agency or political
subdivision thereof to the extent that any applicable laws require any
actions in addition to filing of the Financing Statements.
(iii) We have assumed with your permission that:
6
<PAGE>
(A) the Company has right, title, and interest in and to the
collateral pledged by it;
(B) all items of collateral (including, without limitation,
money, shares of capital stock, or additional instruments) pledged
under the Pledge Agreement, of which possession must be obtained and
retained by a secured party in order to perfect its security interest
pursuant to Section 9-103 and 9-304 of the UCC, are in your actual or
constructive possession and not in the possession of the Company or
any of its subsidiaries, affiliates, or agents;
(C) all items of collateral constitute items which are mobile in
nature and, if installed on any property, do not constitute fixtures;
and
(D) none of the collateral consists of consumer goods, farm
products, crops, timber, minerals, or the like (including oil and
gas), or accounts resulting from the sale thereof, receivables due
from any government or agency or department thereof, beneficial
interests in a trust or a decedent's estate, letters of credit,
inventory which is subject of any negotiable documents of title, such
as a negotiable bill of lading or warehouse receipt held by anyone
other than you or on your behalf, or items which are subject to a
requirement of any jurisdiction, including the State, which provides
for a registration or certificate of title or a filing other than
under the UCC.
Whenever our opinion with respect to the existence or absence of facts is
indicated to be based on our knowledge or awareness, we are referring solely to
the actual knowledge of the particular [firm name] attorneys who have
represented the Company in connection with the Documents. Except as expressly
set forth herein, we have not undertaken any independent investigation to
determine the existence or absence of such facts and no inference as to our
knowledge concerning such facts should be drawn from the fact that such
representation has been undertaken by us.
Our opinions expressed herein are limited to the laws of the State of
[opining jurisdiction], [the general corporation law of the state of the
Company's and Subsidiary's incorporation if different than the opining
jurisdiction] and the federal laws of the United States, and we do not express
any opinion herein concerning any other law except as expressly set forth in
paragraph 8 above. With respect to our opinions in paragraph 8, to the extent
our opinions are not governed by federal or [opining jurisdiction] law, our
opinions are based solely and exclusively on a review of Subsections 9-103(3),
9-203(1) and (2), 9-302(1), 9-303, 9-401(1) and 9-402(1) and (3) of the Uniform
Commercial Codes as reported by [Commerce Clearing House, Inc. in the Secured
Transactions Guide for the states listed on Annex I] (collectively, the states
listed on Annex I are sometimes referred to herein as the "Non-[opining
jurisdiction] Jurisdictions" and the Uniform Commercial Codes as adopted and in
effect in such Non-[opining jurisdiction] Jurisdictions are sometimes called the
"Non-[opining jurisdiction] Codes"). We have not reviewed, and we express no
opinion on, local custom with respect to, and any other sections
7
<PAGE>
of, the Non-[opining jurisdiction] Codes, including any provisions that are
referred to in the sections that we have reviewed which are noted above, nor
have we reviewed any other statutes of the Non-[opining jurisdiction]
Jurisdictions or judicial decisions construing or interpreting the laws of the
Non-[opining jurisdiction] Jurisdictions, including the Non-[opining
jurisdiction] Codes. By rendering the opinions set forth in paragraph 8 we do
not intend to indicate that we are experts on, or qualified to render opinions
on, the laws of the Non-[opining jurisdiction] Jurisdictions. Accordingly, we
caution you that the opinions in paragraph 8 could be materially affected by
local custom, other provisions of the Non-[opining jurisdiction] Codes, other
statutes, laws, or regulations of the Non-[opining jurisdiction] Jurisdictions
or judicial decisions of courts construing or interpreting the laws of the
Non-[opining jurisdiction] Jurisdictions, including the Non-[opining
jurisdiction] Codes.
This opinion is furnished to you solely in connection with the transactions
described above and may not be relied upon by you (and to the extent indicated
in the previous sentence, your counsel) for any other purpose or by any other
person in any manner or for any purpose.
Very truly yours,
8
<PAGE>
Annex 1
UCC-1 Financing Statement filings to perfect a security interest in collateral
not constituting fixtures:
State Filing Office Reporting Publication
- ----- ------------- ---------------------
9
<PAGE>
Exhibit A
---------
Certificate
-----------
The undersigned hereby certifies that he is the duly elected Secretary of
Progressive Bagel Concepts, Inc., a Delaware corporation (the "Company"), and
further certifies that the following documents are the only documents to which
the Company is a party that affect or purport to affect the Company's right to
borrow money under, or the Company's right to undertake and perform its
obligations under, the Documents (as defined in the Secured Loan Agreement,
dated _____________________, between the Company and Boston Chicken, Inc.)
Date:
------------------------------
-----------------------------------------
Secretary
<PAGE>
EXHIBIT F-1
ACCOUNTING AND ADMINISTRATIVE SERVICES AGREEMENT
<PAGE>
EXHIBIT F-2
FINANCIAL SERVICES AGREEMENT
<PAGE>
EXHIBIT F-3
REAL ESTATE SERVICES AGREEMENT
<PAGE>
EXHIBIT F-4
COMPUTERS AND COMMUNICATION SYSTEMS SERVICES AGREEMENT
<PAGE>
EXHIBIT G
INVESTOR REPRESENTATION LETTER
<PAGE>
LETTERHEAD OF INVESTOR GROUP
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Ladies and Gentlemen:
The undersigned hereby makes the following representations to Boston Chicken,
Inc. ("BCI") in connection with and as an inducement to and of the consummation
of certain transactions with Progressive Bagel Concepts, Inc., a Delaware
corporation (the "Company"):
The undersigned has conducted an investigation of the Company, including the
management and current and proposed operations of the Company, and of the
locations, characteristics, and demographics of (i) the stores (the "Stores") in
the States of _____________, ___________________, and ________________ (the
"Area"), (ii) the sites for Stores in the Area subject to executed leases or
purchase contracts (the "Leased and Contracted Sites"), and (iii) the potential
sites for Stores being negotiated in the Area (the "Sites in Progress"), in each
case to be purchased by the Company from BCI. The undersigned has reviewed all
of the documents, records, reports, and other available materials relating to
the Company's operations, the Stores, the Leased and Contracted Sites, and the
Sites in Progress, and is familiar with their content. The undersigned
acknowledges that it has been given access to and has visited and examined the
Company's operations and the Stores, the Leased and Contracted Sites, and the
Sites and in Progress, and is satisfied with the condition thereof and that all
inquiries have been answered to its satisfaction. For the purpose of conducting
these investigations, the undersigned has employed the services of its own
agents, representatives, experts, and consultants. In all matters affecting the
undersigned's decision to invest in the Company, the undersigned is relying upon
the advice and opinions of its own agents, representatives, experts, and
consultants and not upon any information or statement, oral or written, of or
provided by BCI or its officers, directors, agents, representatives, or
attorneys.
Very truly yours,
<PAGE>
EXHIBIT 9.B(a)
Opinion of Smith, Gill, Fisher & Butts
<PAGE>
EXHIBIT __
[ON _____________________________ LETTERHEAD]
_________________, 1995
Progressive Bagel Concepts, Inc.
[insert address]
Attention:
Re: Transfer of assets of Bagel & Bagel, Inc., a _____________ corporation
(the "Company")
Dear Sirs:
We have served as counsel for the Company and _______________________ , the
owner of all the outstanding shares of the common stock of the Company (the
"Shareholder") in connection with the transfer by the Company of all the assets
of the Company (the "Contributed Assets") to Progressive Bagel Concepts, Inc.
("PBCI") and have been requested by the Company and the Shareholder to render
our opinion to you in regard to certain matters related to said transaction. Any
initially capitalized terms used but not defined in this opinion shall have the
meanings assigned to such terms in that certain Agreement to Contribute Assets
by and among the Company, the Shareholder and PBCI of even date herewith (the
"Agreement").
We have examined and relied and base our opinion on originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents and records and upon such matters of law as we have deemed necessary
for the purposes of this opinion:
(i) The Articles of Incorporation, Bylaws, minute book and stock transfer
ledger of the Company;
(ii) [Insert other documents]; and
<PAGE>
(iii) The Agreement and all Exhibits thereto.
The opinions set forth herein are qualified as stated herein and are
qualified further by the following:
(a) This opinion is based upon existing laws, ordinances and
regulations in effect as of the date hereof and as they presently apply.
(b) We express no opinion as to the effect of the laws of any state or
jurisdiction other than the State of ____________ and the laws of the
United States of America upon the transactions herein.
(c) In rendering the opinions set forth below, we have relied, to the
extent we believe appropriate, as to matters of fact, (i) upon certificates
or statements of public officials and of the officers of the Company and
the Shareholder and (ii) upon representations and warranties of the Company
and Shareholder contained in the Agreement and we have made no independent
investigation or verification of said facts. No opinion is being expressed
as to the effect of any event, fact or circumstance of which we have no
actual knowledge.
(d) We have assumed the competency of the signatories to the
Agreement, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic
copies, and the accuracy and completeness of all records made available to
us.
(e) We have assumed that (i) the Agreement has been duly authorized,
executed and delivered by the parties thereto (other than our clients), are
within their corporate powers, and are their legal, valid and binding
obligations and that they are in compliance with all applicable laws, rules
and regulations governing the conduct of their respective businesses and
this transaction, (ii) the parties to the Agreement (other than our
clients) and all documents to be delivered thereunder or in connection
therewith are not subject to any statute, rule or regulation or any
impediment that requires them or our clients to obtain the consent, or to
make any declaration or filing with any governmental authority in
connection with the transactions contemplated by the Agreement, and (iii)
all terms, provisions and conditions relating to the transaction referred
to in this opinion letter are correctly and completely reflected in the
Agreement and all documents to be delivered thereunder or in connection
therewith.
(f) The opinions hereafter expressed are qualified to the extent that:
(i) the characterization of, and the enforceability of any rights or
remedies in, any agreement or instrument may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or transfer, equitable subordination, or similar laws
2
<PAGE>
and doctrines affecting the rights of creditors generally and general
equitable principles; (ii) the availability of specific performance,
injunctive relief or any other equitable remedy is subject to the
discretion of a court of competent jurisdiction; and (iii) the provisions
of any document, agreement or instrument that (a) may require
indemnification or contribution for liabilities under the provisions of any
Federal or state securities laws or in respect to the neglect or wrongful
conduct of the indemnified party or its representatives or agents, (b)
purport to confer, waive or consent to the jurisdiction of any court, or
(c) waive any right granted by common or statutory law, may be
unenforceable as against public policy.
(g) In rendering our opinion in paragraph 1 below regarding the good
standing of the Company, we have relied upon a certificate of good standing
dated ________, 1995 issued by the Secretary of State of ________________,
which we have assumed to be accurate as of the date hereof.
(h) In rendering our opinion, with respect to the existence or absence
of facts, is qualified by the phrase "to our knowledge" or a phrase of
similar import, it indicates that during the course of our representation
of the Shareholders in connection with the subject transaction no
information has come to the attention of our attorneys who have worked on
the subject transaction which would give us current actual knowledge of the
existence or absence of such facts. However, except to the extent expressly
set forth herein, we have not undertaken any independent investigation to
determine the existence or absence of such facts, and no inference as to
our knowledge of the existence or absence of such facts should be drawn
from the fact of our representation of the Shareholders or any other
matter.
Based on the foregoing, and in reliance thereon, but subject to the
assumptions, limitations and qualification expressed herein, we are of the
opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of _______________ , and has full
corporate power and authority to enter into and perform the Agreement and
consummate the transactions contemplated thereby.
2. The execution, delivery and performance of the Agreement and the
consummation of the transactions contemplated thereby by the Company have been
duly authorized by all necessary corporate action and the Agreement is a legal,
valid and binding Agreement of the Company, and enforceable in accordance with
its terms.
3. The Shareholder is of legal age and to our knowledge the Shareholder
otherwise has full legal capacity to enter into and perform the Agreement and
consummate the transactions contemplated thereby.
3
<PAGE>
4. The Agreement is a legal, valid and binding agreement of the
Shareholder, enforceable in accordance with its terms.
5. The Company is authorized to issue _______ shares of capital stock, par
value $ _________ per share (the "Shares"); all of the issued and outstanding
Shares are owned of record by the Shareholder, and there are __________ issued
and outstanding Shares.
6. To our knowledge, (i) neither the Company nor its sole Shareholder is
subject to any restriction, agreement, law, order, writ, injunction, judgment or
decree which would prohibit or be violated by the execution and delivery of the
Agreement or the consummation of the transactions contemplated thereby, (ii) no
consent or approval is required to be obtained by the Company nor its sole
Shareholder from any third party or governmental agency with respect to the
Agreement or the consummation of the transactions contemplated thereby, except
as disclosed in the Agreement, (iii) the Agreement or the consummation of the
transaction contemplated thereby does not conflict with or violate the terms and
conditions of the certificate of incorporation or the bylaws of the Company, and
(iv) neither the execution, delivery nor performance of the transactions
contemplated by the Agreement, nor compliance with the terms and provisions
thereof by the Company or its sole Shareholder will conflict with, violate,
constitute a default under (or an event which upon notice or lapse of time or
both will constitute a default under) or result in any breach of any material
note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
lease, contract or other material agreement or instrument to which the Company
or the Shareholder is a party or by which it or the Contributed Assets are bound
or affected.
7. To our knowledge, there are no actions, suits, proceedings or
investigations pending or threatened against the Company or the Shareholder at
law or equity before any court, governmental agency or arbitrator which
reasonably could be expected to result in a materially adverse change in the
business or assets of the Company or which could materially adversely affect the
transactions contemplated by the Agreement, except as disclosed in the
Agreement.
8. To our knowledge, and except as described in the Agreement, the
Contributed Assets are free and clear of any claim, lien, encumbrance or
security interest.
9. Except as described in the Agreement, there is no option, right or other
agreement or commitment obligating the Company to sell the contributed Assets.
We call your attention to the fact that, although we represent the Company
and Shareholder in connection with the subject transaction, our engagement has
been limited to specific matters as to which we have been consulted.
This opinion is limited to the matters stated herein. We disavow any
obligation to update this opinion or advise you of any changes in our opinion in
the event of changes in applicable laws or facts or if additional or newly
discovered information is brought to our attention. This
4
<PAGE>
opinion is provided to you as a legal opinion only and not as a guaranty or
warranty of the matters discussed herein or in the documents referred to herein.
No opinion may be inferred or implied beyond the matters expressly stated herein
and no portion of this opinion may be quoted or in any other way published
without the prior written consent of the undersigned. Further, this opinion may
be relied upon only by the addressee hereof and not by any other party.
Very truly yours,
__________________________________
By: ______________________________
5
<PAGE>
EXHIBIT 9.C(6)
Opinion of Rudnick & Wolfe
7
<PAGE>
_________________, 1995
(312) 368-4000
Mr. Richard Lazoff
Bagel & Bagel, Inc.
___________________
___________________
Re: Transfer of shares of common stock of Progressive Bagel Concepts,
Inc., a Delaware corporation (the "Company") and Boston Chicken, Inc.,
a Delaware corporation ("BCI")
Dear Sirs:
We have served as counsel for the Company in connection with the transfer
of certain shares of common stock of the Company (the "Exchange Shares") and
certain shares of common stock of BCI (the "BCI Shares") and have been requested
by the Company to render our opinion to you in regard to certain matters related
to said transaction. Any initially capitalized terms used but not defined in
this opinion shall have the meanings assigned to such terms in that certain
Agreement to Contribute Assets by and among Bagel & Bagel, Inc., the sole
shareholder of Bagel & Bagel, Inc. ("Shareholder") and Progressive Bagel
Concepts, Inc. of even date herewith together with the schedules and exhibits
attached thereto (the "Agreement").
We have examined and relied and base our opinion on originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents and records and upon such matters of law as we have deemed necessary
for the purposes of this opinion:
(i) The Articles of Incorporation, Bylaws, minute book and stock transfer
ledger of the Company; and
(ii) The Agreement and all Exhibits thereto.
The opinions set forth herein are qualified as stated therein and are
qualified further by the following:
<PAGE>
Mr. Richard Lazoff
Bagel & Bagel, Inc.
Page 2
(a) This opinion is based upon existing laws, ordinances and
regulations in effect as of the date hereof and as they presently apply.
(b) We express no opinion as to the effect of the laws of any state or
jurisdiction other than the State of Illinois, the General Corporation Law
of the State of Delaware and the laws of the United States of America upon
the transactions described herein.
(c) In rendering the opinions set forth below, we have relied, to the
extent we believe appropriate, as to matters of fact, (i) upon certificates
or statements of public officials and of the officers of the Company and
(ii) upon representations and warranties of the Company contained in the
Agreement and we have made no independent investigation or verification of
said facts. No opinion is being expressed as to the effect of any event,
fact or circumstance of which we have no actual knowledge.
(d) We have assumed the competency of the signatories to the
Agreement, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic
copies, and the accuracy and completeness of all records made available to
us.
(e) We have assumed that (i) the Agreement has been duly authorized,
executed and delivered by the parties thereto (other than our client), are
their legal, valid and binding obligations and that they are in compliance
with all applicable laws, rules and regulations governing the conduct of
their respective businesses and this transaction, (ii) the parties to the
Agreement (other than our clients), and all documents to be delivered
thereunder or in connection therewith are not subject to any statute, rule
or regulation or any impediment that requires them or our client to obtain
the consent, or to make any declaration or filing with any governmental
authority in connection with the transactions contemplated by the
Agreement, and (iii) all terms, provisions and conditions relating to the
transaction referred to in this opinion letter are correctly and completely
reflected in the Agreement and all documents to be delivered thereunder or
in connection therewith.
(f) The opinions hereafter expressed are qualified to the extent that:
(i) the characterization of, and the enforceability of any rights or
remedies in, any agreement or instrument may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or transfer, equitable subordination, or similar laws and doctrines
affecting the rights of creditors generally and general equitable
principles; (ii) the availability of specific performance, injunctive
relief or any other equitable remedy is subject to the discretion of a
court of competent jurisdiction and (iii) the
<PAGE>
Mr. Richard Lazoff
Bagel & Bagel, Inc.
Page 3
provisions of any document, agreement or instrument that (a) may require
indemnification or contribution for liabilities under the provisions of
any Federal or state securities laws or in respect to the neglect or
wrongful conduct of the indemnified party or its representatives or
agents, (b) purport to confer, waive or consent to the jurisdiction of any
court, or (c) waive any right granted by common or statutory law, may be
unenforceable as against public policy.
(g) In rendering our opinion in paragraph 1 below regarding the good
standing of the Company, we have relied upon a certificate of good standing
dated _______________________, 1995 issued by the Secretary of State of
Delaware, which we have assumed to be accurate as of the date hereof.
(h) In rendering our opinions in Paragraph 7 below regarding the BCI
Shares, we have relied solely upon an opinion rendered by counsel for BCI
of even date herewith without having conducted an investigation to
determine or verify the accuracy of the opinion expressed by counsel for
BCI.
(i) Whenever our opinion, with respect to the existence or absence of
facts, is qualified by the phrase "to our knowledge" or a phrase of similar
import, it indicates that during the course of our representation of the
Company in connection with the subject transaction no information has come
to the attention of our attorneys who have worked on the subject
transaction which would give current actual knowledge of the existence or
absence of such facts. However, except to the extent expressly set forth
herein, we have not undertaken any independent investigation to determine
the existence or absence of such facts, and no inference as to our
knowledge of the existence or absence of such facts should be drawn from
the fact of our representation of the Company or any other matter.
Based on the foregoing, and in reliance thereon, but subject to the
assumptions, limitations and qualifications expressed herein, we are of the
opinion that:
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has full
corporate power and authority to enter into and perform under the Agreement
and consummate the transactions contemplated thereby. The execution,
delivery and performance of the Agreement and the consummation of the
transactions contemplated thereby by the Company have been duly authorized
by all necessary corporate action and the Agreement are valid and binding
agreements of the Company, enforceable in accordance with its terms.
<PAGE>
Mr. Richard Lazoff
Bagel & Bagel, Inc.
Page 4
2. To our knowledge, the Company is not subject to any restriction,
agreement, law, judgment or decree which would prohibit or be violated by
the execution and delivery of the agreement or the consummation of the
transactions contemplated hereby, and no consent or approval is required to
be obtained by the Company from any third party or governmental agency with
respect to the Agreement or the consummation of the transactions
contemplated thereby.
3. To our knowledge, there are no actions, suits or proceedings
pending or threatened against the Company.
4. With respect to the Exchange Shares, (a) the Company is authorized
to issue ________________ shares of Exchange Shares (par value $.01 per
share); (b) prior to delivery and issuance of the Exchange Shares pursuant
to the Agreement, there were no issued and outstanding shares of Exchange
Shares; and (c) except as disclosed in the Agreement and the Offering
Letter dated ____________ , 1995 and the attached Confidential Private
Placement Memorandum dated February 21, 1995, relating to the offering of
the 13,480 shares of common stock of the Company (the "Offering Letter"),
there are no other issued and outstanding shares of capital stock in the
Company.
5. Upon issuance and the delivery thereof to Bagel & Bagel, Inc.
pursuant to the terms of the Agreement, the Exchange Shares (a) will be
duly and validly authorized and issued, fully paid and nonassessable; (b)
will not have been issued in violation of any preemptive right of any
shareholder of the Company; and (c) to our knowledge, and except as
described in the Agreement or the Offering Letter, will be free and clear
of any claim, lien, encumbrance or security interest.
6. Except as described in the Agreement or the Offering Letter, there
is no option, warrant, right, call, subscription or other agreement or
commitment obligating the Company to issue or sell, or to purchase or
redeem, any shares of the Exchange Shares.
7. The BCI's authorized capital consists of 100,000,000 shares of
Common Stock, $0.01 par value per share, and 20,000,000 shares of preferred
stock, $0.01 par value per share. All of the issued and outstanding shares
of the BCI's Common Stock have been duly and validly authorized and issued,
and are fully paid and nonassessable. The BCI Shares have been duly and
validly authorized and issued, and are fully paid and nonassessable, free
and clear of any security interest, lien, encumbrance, right or restriction
whatsoever arising from the BCI (except restrictions on resale under state
or federal securities laws), and there are no outstanding options,
warrants, conversion
<PAGE>
Mr. Richard Lazoff
Bagel & Bagel, Inc.
Page 5
privileges, commitments or demands of any character relating to the Shares
arising from the Seller.
8. BCI is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. BCI has full corporate
power and authority to enter into the Stock Purchase Agreement in
accordance with its terms and such Stock Purchase Agreement and all
transactions required thereunder have been duly authorized and approved by
all necessary corporate action of the Seller.
9. Each of the Stock Purchase Agreement and the Registration Rights
Agreement is the legal, valid and binding obligation of BCI, enforceable in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
enforcement of creditors' rights generally, and except as enforcement of
any particular remedy may be limited by the application of equitable
principles.
10. Neither the execution and delivery of the Stock Purchase Agreement
or the Registration Rights Agreement nor the consummation of the
transactions contemplated thereby will (i) violate the Certificate of
Incorporation or bylaws, as amended, of the BCI; (ii) violate or constitute
an occurrence of default under any provision of, or conflict with, or
result in acceleration of any obligation under, any mortgage, deed or
trust, note, loan, lease or agreement to which it or any of its properties
or assets may be bound; or (iii) violate any order, ruling, decree,
judgment, arbitration award or stipulation to which BCI is subject.
11. Bagel & Bagel, Inc. and Richard Lozoff's counsel may rely on this
opinion in connection with any resale of the BCI Shares and assignment of
its rights and obligations under the Stock Purchase Agreement and
Registration Rights Agreement
We call your attention to the fact that, although we represent the
Company in connection with the subject transaction, our engagement has been
limited to specific matters as to which we have been consulted.
This opinion is limited to the matters stated herein. We disavow any
obligation to update this opinion or advise you of any changes in our opinion in
the event of changes in applicable laws or facts or if additional or newly
discovered information is brought to our attention. This opinion is provided
to you as a legal opinion only and not as a guaranty or warranty of the matters
discussed herein or in the documents referred to herein. No opinion may be
inferred or implied beyond the matters expressly stated herein and no portion of
this opinion may be quoted or in any other way published without the prior
written consent of the undersigned.
<PAGE>
Mr. Richard Lazoff
Bagel & Bagel, Inc.
Page 6
Further, this opinion may be relied upon only by the addressee hereof and not by
any other party.
Very truly yours,
RUDNICK & WOLFE
By: ________________________________
cc: Joel M. Alam
bcc: Janice M. Harris
JKM0230
<PAGE>
EXHIBIT A
The Transferors
<PAGE>
Exhibit 2.3
AGREEMENT TO CONTRIBUTE ASSETS
BY AND AMONG
PROGRESSIVE BAGEL CONCEPTS, INC.,
OFFERDAHL'S BAGEL GOURMET, INC.
AND
SHAREHOLDERS OF
OFFERDAHL'S BAGEL GOURMET, INC.
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
1. CONTRIBUTION AND EXCLUDED ASSETS . . . . . . . . . . . . . . . . 2
A. Contributed Assets . . . . . . . . . . . . . . . . . . . . 2
B. Excluded Assets . . . . . . . . . . . . . . . . . . . . . . 3
2. CONSIDERATION TO BE EXCHANGED FOR CONTRIBUTED ASSETS . . . . . . 4
A. Consideration . . . . . . . . . . . . . . . . . . . . . . . 4
B. Assumed Liabilities . . . . . . . . . . . . . . . . . . . . 4
C. Excluded Liabilities. . . . . . . . . . . . . . . . . . . . 4
D. No Expansion of Third Party Rights. . . . . . . . . . . . . 5
E. Section 351 Transaction; Allocation of the
Consideration Among the Contributed Assets. . . . . . . . . 5
F. Tax Loans . . . . . . . . . . . . . . . . . . . . . . . . . 6
G. Put Option. . . . . . . . . . . . . . . . . . . . . . . . . 7
3. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR AND THE
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
A. Organization, Power and Authority of the Transferor . . . . 8
B. Capital Stock of the Transferor . . . . . . . . . . . . . . 8
C. The Shareholders of the Transferor. . . . . . . . . . . . . 9
D. Financial Statements of the Transferor. . . . . . . . . . . 9
E. Liabilities of the Transferor . . . . . . . . . . . . . . . 9
F. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . 9
G. Real Estate and Contributed Leasehold Premises. . . . . . . 10
H. Good Title to and Condition of the Contributed Assets . . . 11
I. Receivables of the Transferor . . . . . . . . . . . . . . . 12
J. Lienses and Permits of the Transferor . . . . . . . . . . . 12
K. Proprietary Rights of the Transferor. . . . . . . . . . . . 12
L. Adequacy of the Contributed Assets; the Transferor's
Relationships with its Customers and Suppliers. . . . . . . 12
M. Documents of and Information with Respect to the
Transferor. . . . . . . . . . . . . . . . . . . . . . . . . 13
N. Litigation Involving the Transferor . . . . . . . . . . . . 14
O. The Records of the Transferor . . . . . . . . . . . . . . . 14
P. No Material Adverse Change. . . . . . . . . . . . . . . . . 15
Q. Absence of Certain Acts or Events . . . . . . . . . . . . . 15
R. Compliance with Laws by the Transferor. . . . . . . . . . . 15
S. Environmental Matters . . . . . . . . . . . . . . . . . . . 16
T. Labor Relations of the Transferor . . . . . . . . . . . . . 17
U. Employee Benefits . . . . . . . . . . . . . . . . . . . . . 18
V. Product Liability Claims; Product Warranties and
Indemnities . . . . . . . . . . . . . . . . . . . . . . . . 18
W. Due Authorization; Binding Obligation . . . . . . . . . . . 18
X. Accuracy of Information Furnished by the Transferor or the
Shareholders. . . . . . . . . . . . . . . . . . . . . . . . 19
Y. Brokers and Finders . . . . . . . . . . . . . . . . . . . . 19
Z. Private Placement Memorandum. . . . . . . . . . . . . . . . 19
- i -
<PAGE>
AA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEREE . . . . . . . . 22
A. Organization, Power and Authority of the Transferee . . . . 22
B. Due Authorization; Binding Obligation . . . . . . . . . . . 22
C. Percentage Interest Represented by Exchange Shares. . . . . 22
D. Capitalization. . . . . . . . . . . . . . . . . . . . . . . 23
E. BCI Shares. . . . . . . . . . . . . . . . . . . . . . . . . 23
F. Exchange Shares . . . . . . . . . . . . . . . . . . . . . . 23
G. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 24
H. Records of the Transferee . . . . . . . . . . . . . . . . . 24
5. ADDITIONAL COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS OF THE
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
A. No Disclosure . . . . . . . . . . . . . . . . . . . . . . . 24
B. No Other Discussions. . . . . . . . . . . . . . . . . . . . 25
C. Retention and Voting of Shares. . . . . . . . . . . . . . . 25
D. Reasonable Best Efforts . . . . . . . . . . . . . . . . . . 25
E. Restrictions on Transfer of Exchange Shares . . . . . . . . 25
F. Legends on Exchange Shares. . . . . . . . . . . . . . . . . 26
G. Confidential Information. . . . . . . . . . . . . . . . . . 26
H. Restrictive Covenants . . . . . . . . . . . . . . . . . . . 29
I. Remedies; Waiver. . . . . . . . . . . . . . . . . . . . . . 30
J. Acknowledgment of Dual Representation . . . . . . . . . . . 30
K. Acknowledgment of Related Party Transactions. . . . . . . . 31
L. Subsequent Audited Financials . . . . . . . . . . . . . . . 31
M. Directors . . . . . . . . . . . . . . . . . . . . . . . . . 31
N. Conduct of Business Prior to Closing. . . . . . . . . . . . 32
O. Access and Information Pending Closing. . . . . . . . . . . 33
P. Consents of Third Parties . . . . . . . . . . . . . . . . . 34
Q. Interim Financial Statements. . . . . . . . . . . . . . . . 34
R. Cooperation . . . . . . . . . . . . . . . . . . . . . . . . 34
S. Preemptive Rights . . . . . . . . . . . . . . . . . . . . . 35
T. Dissolution and Distributions . . . . . . . . . . . . . . . 35
U. Loans to Purchase Additional Transferee Shares and
Equity Funding Units. . . . . . . . . . . . . . . . . . . . 37
V. Financial Statements of the Transferee. . . . . . . . . . . 37
6. CONDITIONS TO THE OBLIGATION OF THE TRANSFEREE . . . . . . . . . 37
A. Accuracy of Representations and Warranties and
Compliance Obligations. . . . . . . . . . . . . . . . . . . 38
B. Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . 38
C. Receipt of Necessary Consents . . . . . . . . . . . . . . . 38
D. Registration Rights Agreement . . . . . . . . . . . . . . . 38
E. Employment Agreements . . . . . . . . . . . . . . . . . . . 38
F. Equity Funding Agreement. . . . . . . . . . . . . . . . . . 39
G. Execution of this Agreement by Other Shareholders . . . . . 39
- ii -
<PAGE>
7. CONDITIONS TO OBLIGATIONS OF THE TRANSFEROR AND THE
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 39
A Accuracy of Representations and Warranties and
Compliance with Obligations . . . . . . . . . . . . . . . . 39
B. Investor Offering . . . . . . . . . . . . . . . . . . . . . 40
C. Secured Loan Agreement. . . . . . . . . . . . . . . . . . . 40
D. Employment Agreements and Consulting Agreement. . . . . . . 40
E. Board of Directors' Approval. . . . . . . . . . . . . . . . 40
F. Deliveries. . . . . . . . . . . . . . . . . . . . . . . . . 40
G. Registration Rights Agreement . . . . . . . . . . . . . . . 40
H. Assignment of Rights. . . . . . . . . . . . . . . . . . . . 40
I. Election of John Offerdahl. . . . . . . . . . . . . . . . . 40
J. Equity Funding Agreement. . . . . . . . . . . . . . . . . . 40
8. CLOSING AND CLOSING DELIVERIES . . . . . . . . . . . . . . . . . 41
A. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 41
B. Action To Be Taken by Transferor and the Shareholders . . . 41
C. Action To Be Taken by The Transferee. . . . . . . . . . . . 42
D. Form of Documents . . . . . . . . . . . . . . . . . . . . . 44
E. Further Assurances. . . . . . . . . . . . . . . . . . . . . 44
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS . . . . 44
10. CERTAIN ACTIONS AFTER THE CLOSING. . . . . . . . . . . . . . . . 45
A. The Transferee to Act as Agent for the Transferor . . . . . 45
B. Delivery of Property Received by the Transferor
After Closing . . . . . . . . . . . . . . . . . . . . . . . 45
C. The Transferee Appointed Attorney for the Transferor. . . . 46
D. Employment by the Transferee of the Transferor's
Employees . . . . . . . . . . . . . . . . . . . . . . . . . 46
11. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 47
A. Agreement by the Transferor and the Shareholders to
Indemnify . . . . . . . . . . . . . . . . . . . . . . . . . 47
B. Agreement by the Transferee to Indemnify. . . . . . . . . . 48
12. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 49
A. Amendment and Modification. . . . . . . . . . . . . . . . . 49
B. Termination . . . . . . . . . . . . . . . . . . . . . . . . 49
C. Binding Effect. . . . . . . . . . . . . . . . . . . . . . . 50
D. Severability. . . . . . . . . . . . . . . . . . . . . . . . 50
E. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . 50
F. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 51
G. Execution in Counterpart. . . . . . . . . . . . . . . . . . 51
H. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 51
I. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 52
J. Construction. . . . . . . . . . . . . . . . . . . . . . . . 52
K. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 52
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<PAGE>
AGREEMENT TO CONTRIBUTE ASSETS
------------------------------
THIS AGREEMENT TO CONTRIBUTE ASSETS (the "Agreement") is made and entered
into this 23rd day of March, 1995 by and among OFFERDAHL'S BAGEL GOURMET, INC.,
a Florida corporation (the "Transferor"), PROGRESSIVE BAGEL CONCEPTS, INC., a
Delaware corporation (the "Transferee"), and the other persons whose names and
signatures appear on the signature pages hereto (the "Shareholders").
R E C I T A L S:
_ _ _ _ _ _ _ _
A. The Transferee is being formed for the purpose of acquiring,
developing and operating retail bagel bakeries.
B. On or before the Closing Date the Transferee shall purchase from
Boston Chicken, Inc., a Delaware corporation ("BCI"), that number of shares of
the common stock of BCI that will have an aggregate market value of Five Million
Six Hundred Thousand Dollars ($5,600,000) (the "BCI Shares") pursuant to a
Stock Purchase Agreement by and between the Transferee and BCI substantially in
the form attached hereto as Exhibit I (the "Stock Purchase Agreement") and to
enter into a related registration rights agreement with BCI substantially in the
form attached to the Stock Purchase Agreement as Exhibit B thereto (the "BCI
Registration Rights Agreement").
C. The Transferor currently owns and operates bagel shops using the
service mark "Offerdahl's Bagel Gourmet," each of which is located in leased
premises (the "Stores") (such business is referred to herein as the "Business").
The Transferor desires to contribute to the Transferee and the Transferee
desires to accept from the Transferor substantially all of the assets,
properties and business of the Transferor in exchange for (1) the BCI Shares,
(2) that number of shares of common stock, par value $.01 per share, of the
Transferee as shall satisfy the requirements of Section 4.C hereof (such shares
of the Transferee are referred to herein as the "Exchange Shares") and (3) the
assumption by the Transferee of certain liabilities of the Transferor, all as
herein provided and on the terms and subject to the conditions hereinafter set
forth.
D. The Transferor and the Transferee hereby acknowledge and agree that
it is their intention that the closing of the transaction contemplated hereby
and the closing of the Investor Offering (as defined herein) and the
Simultaneous Contributions (as defined herein) and the documentation evidencing
the closing of all such transactions be treated as an integrated unitary
transaction among the parties thereto and one plan of formation of the
Transferee under Section 351 of the Internal Revenue Code of 1986, as amended
(the "Code").
<PAGE>
A G R E E M E N T
- - - - - - - - -
In consideration of the mutual representations, warranties and covenants
and subject to the conditions herein contained, the parties hereto, intending to
be legally bound, agree as follows:
1. CONTRIBUTION AND EXCLUDED ASSETS.
________________________________
A. Contributed Assets.
__________________
The Transferor agrees to and will contribute, convey, transfer, assign and
deliver to the Transferee at the Closing (as hereinafter defined), free and
clear of all liens, mortgages, pledges, encumbrances and charges of every kind,
except for liens securing the Assumed Liabilities, which liens are disclosed on
Schedule 3.H. hereto (the "Permitted Liens"), on the terms and subject to the
conditions set forth in this Agreement, all of the properties, business and
assets of the Transferor of every kind and description, real, personal and
mixed, tangible and intangible, wherever located (except those assets of the
Transferor which are specifically excluded from this transaction by Section
1.B. hereof) as they shall exist at the Closing (collectively, the
"Contributed Assets"). Without limiting the generality of the foregoing, the
Contributed Assets shall include the following:
(1) all machinery, equipment, tools, supplies, leasehold
improvements, computer hardware and software, vehicles, construction in
progress, furniture and fixtures located at the Stores and other fixed assets
owned by the Transferor (the "Contributed Fixed Assets");
(2) all inventories and raw materials of the Transferor (the
"Contributed Inventory");
(3) all receivables of the Transferor other than the Shareholder
Receivables (as hereinafter defined), including, without limitation, all trade
accounts receivable arising from sales of inventory in the ordinary course of
business, notes receivable, credit card receivables, co-op advertising
receivables, and insurance proceeds receivable (the "Contributed Receivables");
(4) (a) all of the interest of, and the rights and benefits accruing
to, the Transferor as lessee under leases of real property and all improvements
thereto and buildings thereon, including, without limitation, those described in
Schedule 3.G attached hereto (the "Contributed Leasehold Premises"), and (b) all
leases or rental agreements covering machinery, equipment, tools, supplies,
vehicles, furniture and fixtures and other fixed assets and personal property,
including, without limitation, those described in Schedule 1.A attached hereto
(the leasehold rights
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<PAGE>
and improvements described in clauses (a) and (b) are collectively referred to
as the "Contributed Leasehold Rights");
(5) all of the rights and benefits accruing to the Transferor
under all sales orders, sales contracts, supply contracts, purchase orders and
purchase commitments made by the Transferor in the ordinary course of business,
all other agreements to which the Transferor is a party or by which it is bound
and all other choses in action, causes of action and other rights of every kind
of the Transferor (the "Contributed Contract and Other Rights");
(6) all operating data and records of the Transferor, including,
without limitation, customer lists, financial, accounting and credit records,
correspondence, budgets and other similar documents and records (the
"Contributed Records");
(7) all of the proprietary rights of the Transferor, including,
without limitation, all trademarks, trade names, patents, patent applications,
licenses, trade secrets, technology, know-how, formulae, designs and drawings,
computer software, slogans, copyrights, processes, operating rights, other
licenses and permits, and other similar intangible property and rights relating
to the products or business of the Transferor, and all of the proprietary rights
relating to the products or business of the Transferor that are owned by any
shareholder of the Transferor, which shall be transferred to the Transferor
prior to the Closing (the "Contributed Proprietary Rights");
(8) all cash and cash equivalents and investments, whether short-
term or long-term, of the Transferor, including, without limitation,
certificates of deposit, treasury bills and securities (the "Contributed Cash
and Investments"); and
(9) all prepaid and deferred items of the Transferor, including,
without limitation, prepaid rentals, insurance, taxes and unbilled charges and
deposits relating to the operations of the Transferor (the "Contributed Prepaid
Items").
B. Excluded Assets.
_______________
Anything to the contrary in Section 1.A. notwithstanding, the Contributed
Assets shall exclude the following assets of the Transferor: (1) the
Consideration (as hereinafter defined) and the Transferor's other rights under
this Agreement; (2) any shares of capital stock of the Transferor which are
owned and held by the Transferor as treasury shares; (3) the corporate minute
books and stock records of the Transferor; (4) the promissory notes of Sarah
Flatley dated March 13, 1995, in the principal amount of $137,500 and $76,000
and the promissory note of Mark Adelhelm in the principal amount of $76,000
(collectively, the "Shareholder Receivables"); and (5) those assets described in
Schedule 1.B.
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<PAGE>
2. CONSIDERATION TO BE EXCHANGED FOR CONTRIBUTED ASSETS
____________________________________________________
A. Consideration.
_____________
As consideration for the Contributed Assets (the "Consideration"), the
Transferee agrees to deliver to the Transferor, at the Closing, the Exchange
Shares and the BCI Shares, on the terms and subject to the conditions set forth
in this Agreement.
B. Assumed Liabilities.
___________________
As additional consideration for the Contributed Assets, the Transferee
agrees to, and will at the Closing, assume and agree to pay, discharge, satisfy
and perform in full when lawfully due those liabilities, debts, contracts,
commitments and other obligations of the Transferor (1) reflected on the Balance
Sheet (as hereinafter defined), (2) incurred prior to the Closing by the
Transferor in the ordinary course of business after the date of the Balance
Sheet, (3) under the leases, contracts and agreements set forth on Schedule 2.B.
which arise and relate to periods after the Closing Date (the "Assumed
Liabilities") and (4) constituting Transaction Expenses (as defined in Section
12.K) provided that the sum of the amount of such expenses paid by the
Transferor after the date of the Balance Sheet and prior to Closing and the
amount of such expenses assumed by the Transferee shall not exceed $235,000 (or
$260,000 if the Closing has not occurred by April 1, 1995) (collectively, the
"Assumed Liabilities"). Any and all indebtedness of the Transferor to John
Offerdahl (the "Shareholder Note"),which indebtedness as of the date hereof is
in the aggregate principal amount of $350,000, shall be paid by the Transferee
not later than the earlier of (i) thirty (30) days following the Closing Date,
or (ii) the date on which the Transferor purchases the Equity Funding Units (as
defined in Section 6.F). Also set forth on Schedule 2.B. hereto is a description
of all coupon and other promotional programs with respect to which the
Transferor has any outstanding obligations as of the Closing Date, including,
any obligations to offer free or reduced price menu items and the number of
reduced price or free menu items which the Transferor is obligated to provide
pursuant to all such coupons and other promotional programs as of the Closing
Date.
C. Excluded Liabilities.
____________________
Anything to the contrary in Section 2.B. notwithstanding, the Assumed
Liabilities shall exclude the following liabilities, contracts, commitments
and other obligations of the Transferor (the "Excluded Liabilities"):
(1) the Transferor's obligations and liabilities arising under this
Agreement;
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<PAGE>
(2) any obligation for federal, state, local or foreign income tax
liability (including, interest and penalties) arising from the operations of the
Transferor up to the Closing Date or arising out of the contribution by the
Transferor of the Contributed Assets pursuant hereto, including, without
limitation, the liabilities, if any, shown on the Balance Sheet as "Deferred
Taxes";
(3) any obligation for any transfer, sales, use or other taxes,
fees or levies (excluding motor vehicle sales taxes) imposed by any state or
other governmental entity on or arising out of the contribution of the
Contributed Assets pursuant hereto;
(4) any obligation or liability of the Transferor except as listed
in Section 2.B. or on Schedule 2.B.;
(5) any obligation or liability of the Transferor for the
Transaction Expenses (as defined in Section 12.K) incurred by it in excess of
$235,000 (except that the amount set forth in this Section 2.B(5) shall be
increased to $260,000 if the Closing has not occurred by April 1, 1995);
(6) any liability or obligation to Wayne Flatley under the Big
Apple Letter Agreement (as defined in Schedule 2.B) other than the $7,000
referred to in Schedule 2.B; and
(7) any liability, contract, commitment or other obligation of the
Transferor, known or unknown, fixed or contingent, the existence of which will
make any representation or warranty of the Transferor contained in or made
pursuant to this Agreement incomplete, inaccurate or untrue in any material
respect.
D. No Expansion of Third Party Rights.
__________________________________
The assumption by the Transferee of the Assumed Liabilities shall in no way
expand the rights or remedies of any third party against the Transferee, the
Transferor or the Shareholders as compared to the rights and remedies which such
third party would have had against the Transferor or the Shareholders had the
Transferee not assumed such liabilities. Without limiting the generality of the
preceding sentence, the assumption by the Transferee of the Assumed Liabilities
shall not create any third party beneficiary rights.
E. Section 351 Transaction; Allocation of the Consideration
________________________________________________________
Among the Contributed Assets.
____________________________
(1) The parties hereby acknowledge and agree that it is their
intention that the closing of the transaction contemplated hereby and the
closing of the Investor Offering (as defined herein) and the Simultaneous
Contributions (as defined herein) and the documentation evidencing the closing
of all such transactions be
-5-
<PAGE>
treated as an integrated unitary transaction among the parties thereto and one
plan of formation of the Transferee under Section 351 of the Code.
(2) The Consideration shall be allocated among each of the Stores and
the Transferor's corporate office, if any, and among each item or class of the
Contributed Assets (e.g., fixtures and equipment, leasehold improvements,
goodwill) as reasonably determined by mutual agreement of the parties in
compliance with applicable tax law. In the event the parties hereto do not agree
on such an allocation, such reasonable allocation shall be determined by an
independent certified public accountant selected by such parties. The
Transferor, the Shareholders and the Transferee agree that they will prepare and
file their federal and any state or local tax returns based on such allocation
of the Consideration.
F. Tax Loans.
---------
(1) The Transferee agrees to make one or more loans to the Transferor
(the "Tax Loans") in an aggregate amount equal to the Tax Payment Funding Amount
of the Transferor. The Tax Payment Funding Amount of the Transferor shall be an
amount equal to the difference between the amount of Federal and state income
taxes payable by the shareholders of the Transferor for the 1995 taxable year
and the amount of Federal and state income taxes that would have been payable by
such shareholders had the BCI Shares been received by the Transferor in a tax-
free transaction in which no Tax Loans were made and in which the PBCI Stock
Loan and the Equity Funding Loan were not made. The Tax Loans shall be made in
such amounts as may be reasonably required to permit the shareholders of the
Transferor to make estimated tax payments, in the amount of $46,100 on each of
April 15, 1995, June 15, 1995, September 15, 1995 and January 15, 1996, and the
balance to be loaned on April 15, 1996.
(2) Each of the Tax Loans shall be evidenced by a promissory note in
the form attached as Exhibit 2.F hereto (the "Tax Loan Note"), and the Tax Loan
Notes shall be secured by a pledge of the Equity Funding Units (as defined in
Section 6.F) pursuant to the form of pledge agreement attached as Exhibit 2.F(2)
hereto (the "Tax Loan Pledge Agreement").
(3) In the event that any of the shareholders of the Transferor is
deemed to receive any dividend or compensation income in connection with the Tax
Loans pursuant to Section 7872 of the Code, and such income exceeds the amount
of interest that is deemed to have been paid in connection with the Loans
pursuant to Section 7872 of the Code that is deductible by such shareholder
(such excess referred to herein as the "Excess"), then the Transferee shall pay
the Transferor, as additional consideration for the Contributed Assets, an
amount in cash sufficient so that, after
- 6 -
<PAGE>
deduction from the amount so paid pursuant to this Section 2.F(3) of the income
tax payable on the amount paid pursuant to this Section 2.F(3), there shall
remain an amount equal to the federal and state income tax liability on the
Excess.
(4) The amount of the Tax Loan to be made on April 15, 1996 shall
initially be determined by the Transferor's independent accountants, subject to
the concurrence of the Transferee. The Transferor and the Shareholders shall
furnish to the Transferee such tax and other information, including tax returns,
as the Transferee may reasonably request to permit the Transferee to ascertain
the amounts required to be loaned or otherwise paid pursuant to this Section
2.F.
G. Put Option.
__________
(1) In the event that as of May 1, 1998 (the "Trigger Date")
Transferee has not completed an initial public offering of its shares of common
stock that results in the receipt by the Transferee of gross proceeds of at
least Fifteen Million Dollars ($15,000,000) pursuant to a registration
statement filed pursuant to the Securities Act of 1933, as amended (a "Qualified
Public Offering"), then Transferor shall have the irrevocable option, exercised
by written notice to Transferee given not later than fifteen (15) days after the
Trigger Date, to require Transferee to purchase 2,550 Exchange Shares, at their
then fair market value. The fair market value of the Transferor's Exchange
Shares shall be determined by the agreement of Transferee and the Transferor at
the time, without regard to any factor relating to the liquidity of such
Exchange Shares or the fact that the Transferor's Exchange Shares represent a
minority of all of Transferee's outstanding stock; provided, however, that in no
event shall such fair market value of an Exchange Share be less than $1,764.71,
appropriately adjusted to take into account any dividend, stock split,
combination of shares, or other relevant change in the capitalization of the
Transferee occurring prior to any exercise of the put option. If Transferee and
the Transferor are unable to agree on the fair market value of the
Transferor's Exchange Shares, they shall all mutually agree on and appoint a
national firm of certified public accountants or a reputable business valuation
firm to determine the fair market value of such Exchange Shares, and the
determination of such firm shall be final and binding on the Transferor and the
Transferee. Fees and expenses of any such firm selected pursuant to this
Section 2.G shall be borne 50% by the Transferee and 50% by the Transferor.
(2) In the event that the Transferor exercises its option granted
pursuant to this Section 2.G, Transferee shall pay the Transferor the applicable
purchase price in immediately available funds within thirty (30) days of the
determination of such price against delivery of the Exchange Shares duly
endorsed for transfer to Transferee. All of the Exchange Shares sold to Trans-
- 7 -
<PAGE>
feree pursuant to the exercise of the put option in this Section 2.G shall be
free and clear of all liens, pledges, encumbrances, claims, and equities of
every kind.
(3) The option of the Transferor in this Section 2.G may be assigned
and transferred only to its Shareholders.
3. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR AND THE SHAREHOLDERS.
_____________________________________________________________________
In order to induce the Transferee to enter into this Agreement and to
consummate the transactions contemplated hereunder, the Transferor and John and
Lynnora Offerdahl (the "Majority Shareholders") jointly and severally make the
following representations and warranties in Sections 3.A through 3.Y below and
the Shareholders severally make the representations and warranties in Sections
3.Z and 3.AA below:
A. Organization, Power and Authority of the Transferor.
___________________________________________________
The Transferor is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida and has full corporate
power and authority (i) to own or lease its properties and to carry on its
business as it is now being conducted, (ii) to enter into this Agreement and to
contribute, convey, transfer, assign and deliver the Contributed Assets to the
Transferee on the terms and subject to the conditions set forth herein and (iii)
to carry out the other transactions and agreements contemplated hereby. The
Transferor is legally qualified to transact business as a foreign corporation in
each of the jurisdictions in which its business or property is such as to
require that it be so qualified, except for jurisdictions in which the failure
to be so qualified would not have a material adverse effect on the Contributed
Assets or the business, financial condition or results of operations of the
Transferor, and it is in good standing in each of the jurisdictions in which it
is so qualified. The Transferor has no subsidiaries and owns no equity interest
in any corporation, partnership, joint venture, association or other entity. The
Transferor is not engaged in any business other than the Business.
B. Capital Stock of the Transferor.
_______________________________
Schedule 3.B. sets forth, with respect to the Transferor, the number of
authorized shares of its capital stock, the number of such shares of each class
of capital stock which are issued and outstanding and the name of the record and
beneficial owners of the shares of each class and the number of shares owned by
each such owner. All voting rights in the Transferor are vested exclusively in
its shares of voting common stock. All of the issued and outstanding shares of
common stock of the Transferor are validly authorized and issued and are fully
paid and non-assessable. There
- 8 -
<PAGE>
are no outstanding warrants, options or rights of any kind to acquire from the
Transferor any shares of its common stock or securities of any kind. The
Transferor has no obligation to acquire any of its issued and outstanding shares
of common stock or any other security issued by it from any holder thereof.
C. The Shareholders of the Transferor.
----------------------------------
The Shareholders have full power, authority and capacity to enter into this
Agreement. There are no outstanding warrants, options or rights of any kind to
acquire from the Shareholders any shares of the Transferor's common stock or
securities of any kind.
D. Financial Statements of the Transferor.
--------------------------------------
The Transferor has previously furnished to the Transferee: (1) a balance
sheet at December 31, 1994 and at February 26, 1995 (the February 26, 1995
balance sheet being herein referred to as the "Balance Sheet"); and (2)
statements of income for the year ended December 31, 1994 and for the period
ended February 26, 1995 (the "Transferor Income Statement") (the "Financial
Statements"), of the Transferor.
The Financial Statements present fairly, and are true, correct, and
complete statements of, the consolidated financial position of the Transferor at
each of the said balance sheet dates and the results of its operations for each
of the said periods covered, and they have been prepared in accordance with
generally accepted accounting principles consistently applied (except that they
do not contain footnotes and except that interim financial statements are
subject to normal recurring year-end adjustments) and have been certified by an
officer of the Transferor to such effect, such certification being referred to
herein as the "Officer's Certificate."
E. Liabilities of the Transferor.
-----------------------------
The Transferor has no liabilities or obligations, either accrued, absolute,
contingent or otherwise, except: (i) to the extent reflected or taken into
account in determining net worth in the Balance Sheet and not heretofore paid or
discharged; (ii) to the extent specifically set forth in any of the schedules
attached hereto; (iii) liabilities incurred in the ordinary course of business
since the date of the Balance Sheet; and (iv) the Transaction Expenses (as
defined in Section 12.K).
F. Tax Matters.
-----------
(1) The Transferor has timely filed all tax returns and reports
required to be filed by it, including, without limitation, all federal, state,
local and foreign tax returns, and has paid in full or made adequate provision
by the establishment of reserves
- 9 -
<PAGE>
for all taxes and other charges which have become due. There is no tax
deficiency proposed or, to the best of the Transferor's knowledge, threatened
against the Transferor. There are no tax liens upon any property or assets of
the Transferor.
(2) All taxes and other assessments and levies which the Transferor
was required by law to withhold or to collect have been duly withheld and
collected, and all such withholdings and collection and all other payments due
in connection therewith as of the date of the Balance Sheet are duly reflected
on the Balance Sheet.
(3) The federal and state income tax returns of the Transferor have
been closed by applicable statute or examined by all appropriate tax authorities
as set forth in Schedule 3.F. Except as set forth in Schedule 3.F., there are
no outstanding agreements or waivers extending the statute of limitations
applicable to any federal or state income tax returns of the Transferor for any
period.
(4) The Transferor has filed a valid election to be taxed as an S
corporation (within the meaning of Section 1361 of the Code), which election has
been in effect since the date of the incorporation of the Transferor. Each
corporation that was previously merged into the Transferor had also filed a
valid election to be taxed as an S corporation, which election was continuously
in effect during the period of such corporation's existence.
G. Real Estate and Contributed Leasehold Premises.
----------------------------------------------
(1) The Transferor owns no real estate.
(2) Attached hereto as part of Schedule 3.G. is an accurate and
complete copy of each lease agreement with respect to the Contributed Leasehold
Premises which sets forth: (i) the lessor and lessee thereof and the date and
term of the lease governing such property; and (ii) the location, including,
address, thereof. The leases covering the Contributed Leasehold Premises are in
full force and effect, and the Transferor is not in default or breach under any
such lease. No event has occurred (other than with respect to the transactions
contemplated under this Agreement) which with the passage of time or the giving
of notice or both would cause a material breach of or default under any of such
leases. To the best of the Transferor's knowledge, there is no breach or
anticipated breach by any other party to any such lease.
(3) The Transferor has valid leasehold interests in the Contributed
Leasehold Premises, free and clear of all liens, mortgages, pledges,
encumbrances, charges, assessments, restrictions, covenants and easements or
title defects of any nature whatsoever, except for liens set forth on Schedule
3.G.,
- 10 -
<PAGE>
liens for real estate taxes not yet due and payable, and such imperfections of
title and encumbrances, if any, as are not material in character, amount or
extent and do not materially detract from the value, or interfere with the
present use, of such properties or otherwise impair business operations in any
material respect.
(4) The portions of the buildings located on the Contributed
Leasehold Premises that are used in the Transferor's business are each in good
operating condition, normal wear and tear excepted, and are in the aggregate
sufficient for the Transferor's current normal sales levels and business
activities as conducted there.
(5) Each parcel of the Contributed Leasehold Premises: (i) has direct
access to public roads or access to public roads by means of a perpetual access
easement, such access being sufficient to satisfy the current and reasonably
anticipated normal transportation requirements of the Transferor's business as
presently conducted at such parcel; and (ii) is served by all utilities in such
quantity and quality as are sufficient to satisfy the Transferor's current
normal sales levels and business activities as conducted there.
(6) The Transferor has not received notice of: (i) any condemnation
proceeding with respect to any portion of the Contributed Leasehold Premises or
any access thereto, and, to the best of the Transferor's knowledge, no
proceeding is contemplated by any governmental authority; or (ii) any special
assessment which may adversely affect any of the Contributed Leasehold Premises,
and, to the best of the Transferor's knowledge, no such special assessment is
contemplated by any governmental authority.
H. Good Title to and Condition of the Contributed Assets.
------------------------------------------------------
(1) Except as set forth on Schedule 3.H., the Transferor has good and
marketable title to all of the Contributed Assets (other than the Contributed
Leasehold Premises), free and clear of all liens, mortgages, pledges,
encumbrances or charges of every kind, nature, and description whatsoever.
(2) The Contributed Fixed Assets of the Transferor are in good
operating condition, normal wear and tear excepted.
(3) The Contributed Inventory consists of items of a quality and
quantity usable and saleable in the normal course of the Transferor's business
and at values in the aggregate at least equal to the values at which such items
are carried on the Transferor's books. The values of obsolete or slow-moving
inventory and inventory of below standard quality, if any, have been written
down to the lower of cost or realizable market values or have been written off.
The value at which the Contributed
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<PAGE>
Inventory is carried on the Balance Sheet reflects the normal inventory
valuation policies of the Transferor, stating inventories at the lower of cost
or market on a last-in first-out basis, all determined in accordance with
generally accepted accounting principles.
I. Receivables of the Transferor.
-----------------------------
All of the Contributed Receivables shall be good and collectible in full
within one hundred eighty (180) days after the Closing Date. None of the
receivables set forth on the Balance Sheet are income tax receivables.
J. Licenses and Permits of the Transferor.
--------------------------------------
The Transferor possesses all licenses and required governmental or official
approvals, permits or authorizations, the failure to possess which would have a
material adverse effect on the business, financial condition or results of
operations of the Transferor. All such licenses, approvals, permits and
authorizations are in full force and effect, the Transferor is in material
compliance with their requirements, and no proceeding is pending or, to the best
of the Transferor's knowledge, threatened to revoke or amend any of them.
Schedule 3.J. attached hereto contains a complete list of all such licenses,
approvals, permits and authorizations.
K. Proprietary Rights of the Transferor.
------------------------------------
(1) The Contributed Proprietary Rights include all proprietary
rights, the failure to possess which would have a material adverse effect on the
business, financial condition or results of operations of the Transferor.
Schedule 3.K. contains a complete list of all of the Contributed Proprietary
Rights.
(2) Except as set forth on Schedule 3.K., (i) the Transferor owns all
right, title and interest in and to all of the Contributed Proprietary Rights,
(ii) there have been no claims made against the Transferor asserting the
invalidity, abuse, misuse, or unenforceability of any such rights, and, to the
best of the Transferor's knowledge, there are not grounds for the same, (iii)
the Transferor has not received a notice of conflict with the asserted
proprietary rights of others within the last five years and (iv) to the best of
the Transferor's knowledge, the conduct of the Transferor's business has not
infringed any proprietary rights of others.
L. Adequacy of the Contributed Assets; the Transferor's
----------------------------------------------------
Relationships with its Customers and Suppliers.
----------------------------------------------
The Contributed Assets constitute, in the aggregate, all of the property
necessary for the conduct of the business of the
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<PAGE>
Transferor in the manner in which and to the extent to which it is currently
being conducted. The Transferor knows of no written or oral communication,
fact, event or action which exists or has occurred prior to the date of this
Agreement, which would be reasonably likely to indicate that any current
supplier to the Transferor of items essential to the conduct of its business,
which items cannot be replaced by the Transferor at comparable cost to the
Transferor and the loss of which would have a material adverse effect on the
busines or operations of the Transferor, will terminate its business
relationship with the Transferor. Except as set forth in Schedule 3.L, neither
the Transferor nor any of its affiliates has any direct or indirect interest in
any supplier or competitor of the Transferor, or in any person from whom or to
whom the Transferor leases real or personal property, or in any person with whom
the Transferor is doing business. The Transferor is not restricted by agreement
from carrying on its business anywhere in the world.
M. Documents of and Information with Respect to the Transferor.
------------------------------------------------------------
(1) Schedule 3.M. attached hereto accurately and completely sets
forth a true and complete list of the following: (i) each policy of insurance in
force with respect to the assets and properties of the Transferor and each of
the performance or other surety bonds maintained by the Transferor in the
conduct of its business; (ii) each loan, credit agreement, guarantee, security
agreement or similar document or instrument (other than the Shareholder Note) to
which the Transferor is a party or by which it is bound; (iii) each lease of
personal property to which the Transferor is a party or by which it is bound
which involves a future commitment by the Transferor in excess of $10,000; (iv)
any other agreement, contract or commitment to which the Transferor is a party
or by which it is bound which involves a future commitment by the Transferor in
excess of $10,000 and which cannot be terminated without liability on 30 days or
less notice; (v) the name and current annual salary of each officer or other
employee of the Transferor and the profit sharing, bonus or any other form of
compensation (other than salary) paid or payable by the Transferor to or for the
benefit of each such person for the year ended December 31, 1994, and any
employment or other agreement of the Transferor with any of its officers or
employees; (vi) the names of the officers and directors of the Transferor; and
(vii) the name of each bank in which the Transferor has an account or
safe-deposit box, the name in which the account or box is held and the names of
all persons authorized to draw thereon or to have access thereto. The
Transferor has previously furnished the Transferee with a true and complete copy
of each such agreement, contract or commitment listed in Schedule 3.M. There
has not been any default in any obligation to be performed by the Transferor or,
to the best of the Transferor's knowledge, any other party under any such
instrument.
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<PAGE>
(2) The Transferor carries insurance as set forth on Schedule 3.M,
and it has provided all required performance or other surety bonds. All premiums
and other payments which have become due under the policies of insurance listed
in Schedule 3.M. have been paid in full, all of such policies are now in full
force and effect and the Transferor has not received notice from any insurer,
agent or broker of the cancellation of, or any increase in premium with respect
to, any of such policies or bonds. Except as set forth in Schedule 3.M., the
Transferor has not received any notification from any insurer, agent or broker
denying or disputing any claim made by the Transferor or denying or disputing
any coverage for any such claim or the amount of any claim. Except as set forth
in Schedule 3.M., the Transferor has no claim against any of its insurers under
any of such policies pending or anticipated and, to the best of the Transferor's
knowledge, there has been no occurrence of any kind which would give rise to any
such claim.
N. Litigation Involving the Transferor.
-----------------------------------
Except as set forth in Schedule 3.N., there are no actions, suites, claims,
governmental investigations or arbitration proceedings pending or, to the best
of the Transferor's knowledge, threatened against or affecting the Transferors
or any of the Contributed Assets and, to the best of the Transferor's knowledge,
there is no basis for any of the foregoing with respect to the Contributed
Assets. There are no outstanding orders, decrees or stipulations issued by any
federal, state, local or foreign judicial or administrative authority in any
proceeding to which the Transferor is or was a party.
O. The Records of the Transferor.
-----------------------------
The Transferor has previously furnished the Transferee with copies of the
Transferor's charter and all amendments thereto to date, the Transferor's
bylaws, and all records of actions taken by, and minutes of meetings of,
shareholders and directors of Transferor, and such copies are correct and
complete in all respects. The Contributed Records are accurate and complete in
all material respects and properly reflect all transactions, properties, assets,
and liabilities of the Transferor, and there are no material matters as to which
appropriate entries have not been made in such records. A record of all action
taken by the shareholders and the board of directors of the Transferor and all
minutes of its meetings are contained in the minute books of the Transferor and
are accurate and complete. The stock ledger of the Transferor contain an
accurate and complete record of all issuances, transfers and cancellations of
shares of capital stock of the Transferor.
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<PAGE>
P. No Material Adverse Change.
--------------------------
Since the date of the Balance Sheet, except as contemplated by this
Agreement, there has not been any change in the business or properties of the
Transferor, or in the financial condition of the Transferor, other than changes
occurring in the ordinary course of business which have not had a material
adverse effect on the business, properties, financial condition, business
prospects or operating results of the Transferor.
Q. Absence of Certain Acts or Events.
---------------------------------
Except as disclosed in Schedule 3.Q., since the date of the Balance Sheet
the Transferor has not: (i) authorized or issued any of its shares of capital
stock (including, any held in its treasury) or any other securities; (ii)
declared or paid any dividend or made any other distribution of or with respect
to its shares of capital stock or other securities or purchased or redeemed any
shares of its capital stock or other securities; (iii) paid any bonus or
increased the rate of compensation of any of its employees; (iv) sold or
transferred any of its assets other than in the ordinary course of business; (v)
made or obligated itself to make capital expenditures aggregating more than
$10,000, except capital expenditures incurred in the ordinary course of
business (which the parties agree that for all purposes of this Agreement
includes the opening of additional "Offerdahl Bagel Gourmet" retail bagel
bakeries); (vi) made any payment in respect of the Excluded Liabilities other
than in the ordinary course of business; (vii) incurred any material obligations
or liabilities (including, any indebtedness) or entered into any material
transaction, except for this Agreement and the transactions contemplated hereby;
or (viii) suffered any theft, damage, destruction or casualty loss in excess of
$10,000.
R. Compliance with Laws by the Transferor.
--------------------------------------
(1) The Transferor is in compliance with all material laws,
regulations and orders applicable to it or the Contributed Assets, the
Transferor has not received notification of any asserted past or present failure
to comply with any laws and, to the best of the Transferor's knowledge, no
proceeding with respect to any such violation is contemplated.
(2) Neither the Transferor nor, to the best of the Transferor's
knowledge, any employee of the Transferor has made any payment of funds in
connection with the business of the Transferor prohibited by law, and no funds
have been set aside to be used in connection with the business of the Transferor
for any payment prohibited by law.
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<PAGE>
S. Environmental Matters.
---------------------
The Transferor has not transported, stored, treated, or disposed of, nor
has it allowed or arranged for any third parties to transport, store, handle,
treat, or dispose of Hazardous Substances or other waste to or at any location
other than a site lawfully permitted to receive such Hazardous Substances or
other waste for such purposes, nor has it performed, arranged for, or allowed by
any method or procedure such transportation, storage treatment, or disposal in
contravention of any laws or regulations or in any manner giving rise to any
liability whatsoever. The Transferor has not stored, handled, treated, or
disposed of, or allowed or arranged for any third parties to store, handle,
treat, or dispose of Hazardous Substances or other waste upon property owned or
leased by it, except as permitted by law. For purposes of this Section 3.S.,
the term "Hazardous Substances" shall include: (i) any "Hazardous Substance",
"Pollutant" or "Contaminant" as defined in the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, 42 U.S.C. Sections 9601
et seq., or the regulations promulgated thereunder ("CERCLA"); (ii) any
hazardous waste as that term is defined in applicable state or local law; (iii)
any substance containing petroleum, as that term is defined in Section 9001 (8)
of the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section
6991(8) or in 40 C.F.R. Section 280.1; or (iv) any other substance for which
any governmental entity with jurisdiction over the Contributed Leasehold
Premises requires special handling in its generation, handling, use, collection,
storage, treatment, or disposal.
To the Best of the Transferor's knowledge, there has not occurred, nor is
there currently occurring, a Release of any Hazardous Substance on, into, or
beneath the surface of any parcel of the Contributed Leasehold Premises. For
purposes of this Section 3.S., the term "Release" shall have the meaning given
it in CERCLA.
The Transferor has not shipped, transported, or disposed of, nor has it
allowed or arranged, by contract, agreement, or otherwise, for any third
parties to ship, transport, or dispose of, any Hazardous Substance or other
waste to or at a site which, pursuant to CERCLA or any similar state law, (i)
has been placed on the National Priorities List or its state equivalent, or (ii)
the Environmental Protection Agency or the relevant state agency has proposed or
is proposing to place on the National Priorities List or its state equivalent.
The Transferor has not received notice, nor does it have knowledge of any facts
which could give rise to any notice, that the Transferor is a potentially
responsible party for a federal or state environmental cleanup site or for
corrective action under CERCLA or any other applicable law or regulation. The
Transferor has not submitted nor was it required to submit any notice pursuant
to Section 103 (c) of CERCLA with respect to the Contributed Leasehold Premises.
The Transferor has not received
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<PAGE>
any written or oral request for information in connection with any federal or
state environmental cleanup site. The Transferor has not been required to nor
has it undertaken any response or remedial actions or clean-up actions of any
kind at the request of any federal, state, or local governmental entity, or at
the request of any other person or entity.
The Transferor does not use and has not used, any Underground Storage
Tanks, and there are not now nor have there ever been any Underground Storage
Tanks on the Contributed Leasehold Premises. For purposes of this Section 3.S,
the term "Underground Storage Tanks" shall have the meaning given it in the
Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.).
There is no friable asbestos in or on any of the Contributed Leasehold
Premises.
There are no laws, regulations, ordinances, licenses, permits, or orders
relating to environmental or worker safety matters requiring any work, repairs,
construction, or capital expenditures with respect to the assets or properties
of the Transferor.
Schedule 3.S. identifies: (i) all environmental audits, assessments, or
occupational health studies undertaken by the Transferor or its agents or known
to be taken by governmental agencies; (ii) the results of any ground, water,
soil, air, or asbestos monitoring undertaken with respect to the Contributed
Leasehold Premises; (iii) all written communications between the Transferor and
any environmental agencies; and (iv) all citations issued under the Occupational
Safety and Health Act (29 U.S.C. Sections 651 et seq.).
T. Labor Regulations of the Transferor.
-----------------------------------
The Transferor is not a party to or bound by any collective bargaining
agreement or any other agreement with a labor union, and there has been no
effort by any labor union during the 24 month prior to the date hereof to
organize any employees of the Transferor into one or more collective bargaining
units. There is not pending or, to the best of the Transferor's knowledge,
threatened any labor dispute, strike or work stoppage which effects or which is
reasonably likely to effect the business of the Transferor or which is
reasonable likely to interfere with its continued operations. Neither the
Transferor nor, to the best of the Transferor's knowledge, any agent,
representative or employee of the Transferor has within the last 24 months
committed any unfair labor practice as defined in the National Labor Relations
Act, as amended, and there is not now pending or, to the best of the
Transferor's knowledge, threatened any charge or complaint against the
Transferor by or with the National Labor Relations Board or any representative
thereof. There has been no strike, walkout or work stoppage involving any of
the employees of the Transferor during
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<PAGE>
the 24 months prior to the date hereof. The Transferor is not aware that any
executive or key employee or group of employees has any plans to terminate his,
her or their employment with the Transferor.
U. Employee Benefits.
-----------------
Except as set forth in Schedule 3.U., the Transferor does not maintain or
contribute to any "employee pension benefit plan", as such term is defined in
Section 3(2) of the Employment Retirement Income Security Act of 1974, as
amended ("ERISA"). Each employee pension benefit plan listed on Schedule 3.U.
has complied in all material respect with, and been administered in all material
respects in accordance with, the applicable requirements of ERISA, any other
applicable law and terms of such plan. The only "employee welfare benefit plan,"
as such term is defined in Section 3(1) of ERISA, which the Transferor maintains
or to which the Transferor contributes is group health and life insurance.
V. Product Liability Claims; Product Warranties and Indemnities.
------------------------------------------------------------
Schedule 3.V. sets forth all product liability claims which are pending or,
to the best of Transferor's knowledge, threatened against the Transferor with
respect to products sold by the Transferor. Schedule 3.V. also sets forth, for
each of the last three fiscal years of the Transferor, and for the interim
period ended on the date hereof, the aggregate amount of product liability
claims paid by or on behalf of the Transferor. The Transferor has not extended
to any person any product warranties, indemnities, or guarantees except those
imposed by law.
W. Due Authorization; Binding Obligation.
-------------------------------------
The execution, delivery and performance of this Agreement and each of the
other agreements contemplated hereby and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
of the Transferor. This Agreement has been duly executed and delivered by the
Transferor and the Shareholders and is a valid and binding obligation of the
Transferor and the Shareholders, enforceable in accordance with its terms.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will: (i) conflict with or violate any
provision of the Transferor's charter or bylaws, or conflict with or violate any
law, ordinance or regulation or any decree or order of any court or
administrative or other governmental body which is either applicable to, binding
upon or enforceable against the Transferor or the Shareholders; or (ii) except
as set forth in Schedule 3.W, result in any breach of or default under any
mortgage, contract, agreement, indenture, trust or other instrument which is
either binding upon or enforceable against the Transferor, the
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<PAGE>
Shareholders or the Contributed Assets. No consent, approval, or authorization
of any governmental authority is required for the execution, delivery and
performance of this Agreement by the Transferor or the Shareholders.
X. Accuracy of Information Furnished by the Transferor or
------------------------------------------------------
the Shareholders.
----------------
No representation, statement or information made or furnished by the
Transferor or the Shareholders to the Transferee in this Agreement and the
various schedules attached hereto contains or shall contain any untrue
statement of a material fact or omits or shall omit any material fact necessary
to make the information contained therein, taken as a whole, not misleading.
Y. Brokers and Finders.
-------------------
The Transferor has engaged Lloyd & Company and the Transferor's accountants
and attorneys in connection with this transaction. Except for the foregoing,
neither the Transferor nor any of the Shareholders has engaged or authorized any
broker, investment banker or third party to act on the Transferor's or any
Shareholder's behalf, either directly or indirectly, as a broker, finder or
advisor in connection with the transaction contemplated hereby.
Z. Private Placement Memorandum.
----------------------------
The Transferor and the Shareholders have been advised by the Transferee
that the Transferee is engaging in a private offering described in the
Memorandum (as hereinafter defined) of shares of its common stock to investors
("Investors") for aggregate gross proceeds to the Transferee of approximately
$18,600,000 in cash to capitalize the Transferee ("Investor Offering"). The
Transferor and the Shareholders have been advised by the Transferee that the
Transferee has made offerings of shares of the Transferee to the owners of two
(2) other chains of retail bagel stores pursuant to a contribution agreement
dated February 17, 1995 and a contribution agreement dated March 2, 1995, which
contribution transactions are anticipated to close simultaneously with the
closing of the Investor Offering (the "Simultaneous Contributions"). Finally,
the Transferor and the Shareholders also understand and acknowledge that the
Transferee has made an offering of shares of the Transferee to the Transferor
pursuant to that certain Confidential Private Placement Offering Memorandum
dated as of February 28, 1995 and delivered to Transferor (the "Memorandum")
with respect to the shares of common stock to be issued to the Transferor
pursuant to this Agreement.
The Transferor and the Shareholders acknowledge and agree that they have
provided to the Transferee such information as the Transferee has requested in
connection with the preparation of the
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<PAGE>
Memorandum including, but not limited to, information with respect to the
Transferor, the financial operations, financial statements and business of the
Transferor and other matters relating to the Transferor included in the
Memorandum.
The Transferor and the Shareholders have carefully reviewed the
information relating to the Transferor set forth in Appendix A of the supplement
to the Memorandum (the "Information") and represent and warrant as of the date
of the Memorandum and as of the date hereof that the Information does not
contain an untrue statement of a material fact.
Each of the Shareholders hereby acknowledges and agrees that he has
personal knowledge of the Transferor and that all Information relating to the
Transferor necessary for his decision as to whether to invest in the Transferee
was otherwise available to him even if not included in the Memorandum.
Therefore, to the extent the Memorandum contains any untrue statement of a
material fact relating to the Transferor or omits to state a material fact
relating to the Transferor necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, each of the
Shareholders waives any claim against the Transferor, the Transferee, the
Contributed Assets and any affiliate, agent, attorney for the Transferor or the
Transferee.
AA. Acquisition of BCI Shares and Exchange Shares.
---------------------------------------------
(1) The Transferor is acquiring the BCI Shares and the Exchange
Shares for its own account for investment and not with a view to distribution or
resale thereof in any transaction which would be in violation of the Securities
Act and rules promulgated thereunder, or any state securities statute, has not
subdivided the BCI Shares or the Exchange Shares with, nor is it holding all or
any portion of the BCI Shares or Exchange Shares for, any other person, and
agrees not to sell, hypothecate or otherwise dispose of all or any part of its
BCI Shares or Exchange Shares unless such BCI shares or Exchange Shares have
been registered under the Securities Act and applicable state or other
securities laws or, in the opinion of counsel for the Transferor, which counsel
and which opinion are reasonably satisfactory to BCI or Transferee, as
applicable, an exemption from the registration requirements of the Securities
Act and such state or other laws is available.
(2) The Transferor is an "accredited investor" as defined in
Regulation D promulgated under the Securities Act. Each of the Shareholders is
an "accredited investor" under the Securities Act or if he is not an "accredited
investor":
(a) his overall commitment to investments which are not readily
marketable is not disproportionate to his net worth, and his investment in the
BCI Shares and Exchange Shares will not cause such overall commitment to become
excessive;
- 20 -
<PAGE>
(b) he has adequate net worth and means of providing for his
current needs and personal contingencies to sustain a complete loss of his
investment in the Transferee and BCI, and he has no need for liquidity in his
investment in the BCI Shares and Exchange Shares;
(c) he has such knowledge and experience in financial and
business matters in general and in particular with respect to this type of
investment that he is capable of evaluating the merits and risks of an
investment in the Transferee; and
(d) he has evaluated and understands that risks and terms of
investing in Transferee and BCI.
(3) The Transferor and each of the Shareholders has received and
carefully read the material set forth on Schedule 3.AA(3) (the "BCI
Information") and the Memorandum, including all exhibits thereto. The
Transferor and each of the Shareholders have had made available to them and
their attorneys and accountants all documents that they have requested relating
to an investment in BCI and in the Transferee, and the Transferee has provided
answers to all of their questions concerning the offering and an investment in
BCI and in the Transferee. In evaluating the suitability of an investment in
BCI and in the Transferee, the Transferor has not relied upon any
representations or other information (whether oral or written) other than as set
forth in the BCI Informaton and the Memorandum including, all exhibits thereto
or as contained in any documents or answers in writing to questions so furnished
to him by the Transferee.
(4) The Transferor and each of the Shareholders recognize that the
Transferee has no financial or operating history and that an investment in the
Transferee involves a high degree of risk, and they have taken full cognizance
of and understand all of the risk factors related to the purchase of the
Exchange Shares, including, but not limited to, those set forth under the
captions "Risk Factors" in the prospectus contained in the BCI Information and
in the Memorandum.
(5) The Transferor and each of the Shareholders has discussed with
their legal, tax and financial advisors the suitability of an investment in BCI
and in the Transferee for their particular tax and financial situation.
(6) The Transferor is acquiring the BCI Shares and the Exchange
Shares without being furnished any offering literature or prospectus other than
the BCI Information and the Memorandum (and other than any documents or answers
to questions described in subsection 3.AA(3) above).
(7) Each Shareholder is a bona fide resident of the state or other
jurisdiction set forth in his address on Schedule 3.AA(7).
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<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEREE.
------------------------------------------------
In order to induce the Transferor to enter into this Agreement and to
consummate the transactions contemplated hereunder, the Transferee makes the
following representations and warranties:
A. Organization, Power and Authority of the Transferee.
---------------------------------------------------
The Transferee is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, with full corporate power
and authority to enter into this Agreement and perform its obligations
hereunder. The Transferee is legally qualified to transact business as a foreign
corporation in each of the jurisdictions in which its business or property is
such as to require that it be so qualified, except for jurisdictions in which
the failure to be so qualified would not have a material adverse effect on the
business, financial condition or results of operation of the Transferee.
B. Due Authorization; Binding Obligation.
-------------------------------------
The execution, delivery and performance of this Agreement and all other
agreements contemplated hereby and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
of the Transferee. This Agreement has been duly executed and delivered by the
Transferee and is a valid and binding obligation of the Transferee, enforceable
in accordance with its terms. Neither the execution and delivery of this
Agreement by the Transferee nor the consummation of the transactions
contemplated hereby will, as of the Closing Date, (i) conflict with or violate
any provision of the articles of incorporation or bylaws of the Transferee, or
of any decree or order of any court or administrative or other governmental body
which is either applicable to, binding upon or enforceable against the
Transferee; (ii) result in any breach of or default under any mortgage,
contract, agreement, indenture, trust or other instrument which is either
binding upon or enforceable against the Transferee, or (iii) require the
consent, approval or authorization of any governmental authority.
C. Percentage Interest Represented by Exchange Shares.
--------------------------------------------------
The Exchange Shares shall constitute not less than 4.60% of the issued and
outstanding shares of the Transferee after giving effect to (i) the consummation
of the Investor Offering, (ii) the consummation of the Simultaneous
Contributions, and (iii) the conversion of $80,000,000.00 under the BCI Secured
Loan Agreement into, and the exercise of all options under the Secured Loan
Agreement to acquire, shares of the Transferee. At the Closing, (i) assuming the
consummation of the Investor Offering (other than the Additional Transferee
Shares) and the Simultaneous Contributions, there will be issued and outstanding
18,817.17 shares of common stock of the Transferee, (ii) after giving effect to
the transactions
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<PAGE>
contemplated by this Agreement, there will be 22,754.93 issued and outstanding
shares of common stock of the Transferee, and (iii) after giving effect to the
issuance of the Exchange Shares to the Transferor hereunder, the conversion of
$80,000,000 under the BCI Secured Loan Agreement into, and the exercise of all
options under the Secured Loan Agreement to acquire, shares of the Transferee,
the Investor Offering, and the Simultaneous Contributions, there will be issued
and outstanding 78,460 shares of common stock of the Transferee.
D. CAPITALIZATION.
---------------
As of the date hereof, the authorized capital stock of the Transferee
consists of 1,000,000 shares of common stock, par value $0.01 per share, of
which none are issued or outstanding and 200,000 shares of Preferred Stock, par
value $0.01 per share, of which none are issued or outstanding.
E. BCI SHARES.
-----------
At the Closing, the Transferee will have good and marketable title to the
BCI Shares free and clear of all security interests, pre-emptive rights,
pledges, liens, encumbrances or charges of every kind, nature and description
whatsoever, except for restrictions on transfer under applicable federal and
state securities laws.
F. EXCHANGE SHARES.
----------------
At or before the Closing, all requisite corporate action will have been
taken to authorize the Transferee to transfer the BCI Shares and to issue the
Exchange Shares to the Transferor in exchange for the Contributed Assets. The
Exchange Shares will, when issued, be duly authorized, validly issued, fully
paid and nonassessable, and will be free of any pre-emptive rights. On the date
hereof, there are no authorized or outstanding options, warrants, rights,
contracts, calls, puts, rights to subscribe, conversion rights or other
agreements to which the Transferee is a party or which are binding on the
Transferee or any other agreement providing for the issuance, disposition or
acquisition of any of the capital stock of the Transferee (collectively,
"Transferee Stock Agreements"), other than this Agreement and the agreements
governing or related to the Simultaneous Contributions, and on the date of the
Closing, there will be no Transferee Stock Agreements, other than as set forth
in this Agreement, the Secured Loan Agreement (and the related note), the
agreements governing or related to the Simultaneous Contributions, subscription
agreements in the Investor Offering, options granted under the Transferee's 1995
Employee Stock Option Plan, and any agreements that may have been entered into
for the issuance of stock in acquisitions, which will be provided to Transferor
promptly upon being entered into and prior to Closing. The Transferor
acknowledges that shares of the capital stock of the Transferee will be issued
in the Investor Offering and will be issuable pursuant to
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<PAGE>
the Secured Loan Agreement (and the related note) and pursuant to options
granted under the Transferee's 1995 Employee Stock Option Plan (a copy of which
has been provided to the Transferor) and may be issued as consideration for
future acquisitions.
G. LITIGATION.
-----------
The Transferee is not a party to any pending or, to the best of the
Transferee's knowledge, threatened action, suit, claim or proceeding,
challenging the legality of the transactions contemplated hereby or which, if
determined adversely to the Transferee, could have a material adverse effect on
the Transferee.
H. RECORDS OF THE TRANSFEREE.
--------------------------
The Transferee has previously furnished the Transferor with copies of the
Transferee's charter and all amendments thereto to date and of the Transferee's
bylaws, and such copies are correct and complete in all respects. A record of
all action taken by the shareholders and the board of directors of the
Transferee and all minutes of its meetings are contained in the minute books of
the Transferee and are accurate and complete. The stock ledger of the Transferee
contains, or will at the Closing contain, an accurate and complete record of all
issuances, transfers and cancellations of shares of capital stock of the
Transferee.
5. ADDITIONAL COVENANTS, AGREEMENTS AND ACKNOWLEDGMENTS OF THE PARTIES.
--------------------------------------------------------------------
In order to induce the parties to enter into this Agreement and to
consummate the transactions contemplated hereunder, the parties hereto agree
with the Transferee as follows:
A. NO DISCLOSURE.
--------------
Except for delivery of any memorandum to, and discussions with potential
investors in the Transferee and disclosures necessary to effect the transactions
contemplated hereby, neither the Transferee, the Transferor nor the Shareholders
shall provide any information with respect to such transactions to any third
parties not involved in the due diligence investigation except after
consultation with the other party unless required to do so by law. Further,
neither party shall issue any press release except upon consummation of the
transactions contemplated by the Agreement except with the consent of the other
party, which will not be unreasonably withheld or except as may be required to
comply with the Securities Act or applicable state laws and provided further
that the Transferee shall not provide to any third parties any information
concerning the consideration to be paid to the Transferor pursuant to this
Agreement, except as may be required by law. For purposes hereof the consent of,
and consultation with, the Shareholders shall constitute the consent of, or
consultation with, the Transferor.
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B. No Other Discussions.
--------------------
He/she/it will not, prior to the Closing Date, enter into discussions or
negotiate with or entertain or accept the unsolicited offer of any other party
concerning the potential sale of all or any part of the assets or shares of the
Transferor to, or the merger or consolidation of the Transferor with, any person
other than the Transferee.
C. Retention and Voting of Shares.
------------------------------
Each of the Shareholders will vote all of the shares of voting common stock
of the Transferor in favor of the sale of the Contributed Assets to the
Transferee at a special meeting of the shareholders of the Transferor or by
unanimous written consent, and he/she will not, prior to the Closing Date, sell,
assign, transfer, pledge, encumber or otherwise dispose any of the shares of
capital stock of the Transferor which he/she owns or his/her voting rights with
respect thereto.
D. Reasonable Best Efforts.
-----------------------
Each of the parties hereto will use reasonable best efforts to cause to be
satisfied as soon as practicable and prior to the Closing Date all of the
conditions set forth in Section 6 or Section 7 hereof to the obligations of the
parties.
E. Restrictions on Transfer of Exchange Shares.
-------------------------------------------
The restrictions of this Section 5.E. apply to any holder of the Exchange
Shares. The Transferor and each of the Shareholders acknowledges that:
(1) The Exchange Shares to be issued pursuant hereto may be
owned, as of the Closing, only in the name of and by the Transferor as indicated
on the signature page below.
(2) No federal, state or other agency has made any finding or
determination as to the adequacy or accuracy of the information set forth in the
Memorandum or as to the fairness of this offering for investment, nor any
recommendation or endorsement of the Exchange Shares.
(3) Because the Exchange Shares have not been registered under
the Securities Act or applicable state or other securities laws, the economic
risk of the investment must be borne indefinitely by the Transferor, and the
Exchange Shares cannot be sold unless subsequently registered under the
Securities Act and such state or other laws, or an exemption from such
registration is available and such registration under the Securities Act and
such state or other laws is unlikely at any time in the future; the Transferee
is not
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obligated to file a notification under Regulation A of the Securities Act or a
registration statement under the Securities Act except pursuant to the
Registration Rights Agreement; Rule 144, adopted under the Securities Act and
governing the possible disposition of the Exchange Shares, is not currently
available or anticipated to be available in the future; the Transferee has
not covenanted to take any action necessary to make such Rule available for a
resale of the Exchange Shares; and it is not anticipated that there will be any
market for resale of the Exchange Shares.
(4) The Exchange Shares may not be transferred unless (i) such
transfer is effected pursuant to a registration statement which has been filed
under the Securities Act and declared effective by the Securities and Exchange
Commission, or (ii) in the written opinion of counsel, reasonably acceptable to
the Transferee, such transfer may be effected under and is in compliance with
Rule 144 under the Securities Act, as in effect on the date of such transfer,
or is otherwise exempt from the registration requirements of the Securities
Act.
F. Legends on Exchange Shares.
--------------------------
Each certificate evidencing the Exchange Shares shall bear the following
legends:
"The shares represented by this certificate are "Restricted
Securities". As such they may not be transferred unless (i) such
transfer is effected pursuant to a registration statement which has
been filed under the Securities Act of 1933 (the "1933 Act") and
declared effective by the Securities and Exchange Commission, or
(ii) in the written opinion of counsel, acceptable to the issuer of
these shares, such transfer may be effected under and is in
compliance with Rule 144 under the 1933 Act, as in effect on the
date of such transfer, or is otherwise exempt from the registration
requirements of the 1933 Act."
"The shares represented by this certificate are subject to certain
covenants and agreements contained in that certain Agreement to
Contribute Assets by and among Offerdahl's Bagel Gourmet, Inc. and
Progressive Bagel Concepts, Inc. dated March 23, 1995, including,
but not limited to, a covenant respecting voting for directors of
the issuer of these shares."
G. Confidential Information.
------------------------
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(1) The Transferor and the Shareholders possess and will further develop
and acquire certain confidential and proprietary information and trade secrets
including, but not limited to, information, methods, techniques, procedures and
knowledge developed or to be developed, by or for the Transferor and the
Transferee respecting the business of the Transferor and the Transferee (the
"Confidential Information"). Each of the Shareholders acknowledges and agrees
that neither he/she nor any other person or entity has acquired by or through
him any interest in or right to use the Confidential Information other than
his/her right to utilize it in the operation of the Business, and that the use
or duplication of the Confidential Information in any other business would
constitute an unfair method of competition with Transferee.
The Transferor and each of the Shareholders acknowledges and agrees that
the Confidential Information is confidential to and a valuable asset of the
Transferor, is proprietary, and includes trade secrets of the Transferor. The
Transferor and each of the Shareholders does hereby agree, that he/it:
(a) will not use the Confidential Information in any other business or
capacity; and
(b) will maintain the absolute secrecy and confidentiality of the
Confidential Information; and
(c) will not make unauthorized copies of any portion of the Confidential
Information disclosed in written or other tangible form.
Notwithstanding the foregoing, the obligations of the Transferor and the
Shareholders specified above shall not apply to any Confidential Information
which (i) is disclosed in a printed publication available to the public, or is
otherwise in the public domain through no act of any of the Shareholders or the
Transferor, his/her or its agents or any person or entity which has received
such Confidential Information from or through any of the Shareholders or the
Transferor, (ii) is approved for release by written authorization of an officer
of the Transferee, (iii) is required to be disclosed by proper order of a court
of applicable jurisdiction after adequate notice to the Transferee to seek a
protective order therefor, the imposition of which protective order the
Transferor and the Shareholders each agrees to approve and support, or (iv) in
the written opinion of the Transferor's counsel, is necessary to be made by the
Transferor in order that the Transferor not violate any law, rule or regulation
applicable to it.
(2) The Transferee covenants and agrees with the Transferor, that except as
otherwise provided herein, the Transferee will hold in confidence, in the same
manner that it holds its own confidential and proprietary information, and will
not disclose to any person, company or organization outside of the Transferee's
manage-
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<PAGE>
ment group and due diligence team (which may include Representatives (as defined
below)) any Transferor Confidential Information (as defined below) or disclose
the fact that the business of the Transferor is available for acquisition or
investment. Notwithstanding anything to the contrary contained in the prior
sentence: (i) the Transferee's obligations of confidentiality hereunder shall
expire upon the consummation of the Closing, and (ii) the Transferor
acknowledges and agrees that, to the extent disclosure of the Transferor
Confidential Information is required pursuant to the offering of its shares in
the Investor Offering or the Simultaneous Contributions, such disclosure shall
not constitute a breach hereof.
The term "Transferor Confidential Information" shall mean all information
that the Transferor or its agents provide to the Transferee pursuant to this
Agreement that is confidential and proprietary to the Transferor. Transferor
Confidential Information shall include any analysis, compilations, studies or
other documents prepared by the Transferee's agents, consultants, employees, or
other authorized representatives, including the Transferee's technical experts,
legal counsel, investment advisors, bankers and accountants ("Representatives")
which contain Transferor Confidential Information. The obligations of the
Transferee specified herein shall not apply to any Transferor Confidential
Information, including information that the Company is considering the sale of
its business, which (i) is disclosed in a printed publication available to the
public, or is otherwise in the public domain through no act of the Transferee or
its Representatives or other person or entity which has received such Transferor
Confidential Information from or through the Transferee or its Representatives,
(ii) is approved for release by written authorization of an officer of the
Transferor, (iii) is required to be disclosed by law or regulation or by proper
order of a court of applicable jurisdiction after adequate notice to the
Transferor, to seek a protective order therefor, the imposition of which
protective order the Transferee agrees to approve and support, (iv) is
independently developed by the Transferee or its Representatives, or (v) in the
written opinion of the Transferee's counsel, is necessary to be made by the
Transferee in order that the Transferee not violate any law, rule or regulation
applicable to it. The Transferor acknowledges that the Transferee's compliance
with federal and state securities laws and regulations shall not be deemed a
violation of this Agreement. If the transaction contemplated by this Agreement
does not close promptly following the Transferor's request, the Transferee shall
destroy or return to the Transferor all Proprietary Information.
The Transferor acknowledges that the Transferee has advised it that the
Transferee is exploring various concepts similar or related to the business of
the Transferor, and the Transferor agrees that the Transferee may separately
enter into the business of the Transferor, or otherwise invest in or purchase a
competitive business, and the Transferor acknowledges and agrees that nothing
herein shall prohibit or otherwise restrict such activities.
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H. RESTRICTIVE COVENANTS.
----------------------
(1) The Transferor and each of the Shareholders acknowledges and agrees
that the Transferee would be unable to protect the Confidential Information
against unauthorized use or disclosure and the Transferee would be unable to
realize the benefits of this Agreement if the Transferor or any of the
Shareholders were permitted to engage in, hold interests in or perform services
for entities conducting a business which derives 20% or more of its revenues
from the sale of bagels and/or bagel-related products, other than the Transferee
(a "Competitive Business"). The Transferor and each of the Shareholders further
acknowledges and understands that the Transferee intends, and expects, to expand
its business and the Business throughout the United States, as further described
in the Memorandum. The Transferor and each of the Shareholders further
acknowledges and agrees that the restrictions contained in this Section 5.H.
will not hinder his/its activities under this Agreement or in general. The
Transferee has entered into this Agreement with the Transferor and the
Shareholders on the express condition that, with respect to the operation of the
Business, the Transferor and the Shareholders will deal exclusively with the
Transferee with respect to the bagel business. Each of the Transferor and the
Shareholders therefore agrees that for a period of five (5) years from the
Closing Date, he/it shall not directly or indirectly anywhere in the United
States:
(a) have any interest as a record or beneficial owner in any Competitive
Business provided, however, the Transferor or the Shareholders may have an
interest in any Competitive Business as a passive investor in such Competitive
Business provided such interest does not exceed three percent (3%) of the
outstanding equity securities of any company which has a class of securities
which is registered under Section 12 of the Securities Exchange Act of 1934, as
amended, or traded on a national securities exchange and provided further that
Transferee acknowledges that Sarah Flatley has certain interests in Competitive
Businesses as described in Schedule 5.H; or
(b) perform services as a director, officer, manager, employee, consultant,
representative, agent, or otherwise for any Competitive Business; or
(c) divert or attempt to divert any business or any customers of the
Business, or the Transferee to any Competitive Business.
(2) John and Lynnora Offerdahl agree that from the date hereof until 18
months after the date on which the Offerdahl name ceases to be used in bagel
stores consisting of at least 25% of the stores in a geographic area (which
shall include at least South Florida), they will not use the name "Offerdahl" in
any food service
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<PAGE>
or restaurant business in such geographic area in which they have an interest
without the prior written consent of the Transferee.
I. REMEDIES; WAIVER.
-----------------
(1) Each of the Transferor and the Shareholders agrees that the provisions
and restrictions set forth above in Sections 5.G. and 5.H. and in Section 10.D
are necessary to protect the Transferee and its successors and assigns in the
protection of the business to be acquired by the Transferee pursuant to this
Agreement. The Transferor and each of the Shareholders agrees that damages
cannot compensate the Transferee in the event of a violation of the covenants
contained in Sections 5.G., 5.H and 10.D. hereof, and that injunctive relief
shall be essential for the protection of the Transferee and its successors and
assigns. Accordingly, the Transferor and each of the Shareholders agrees and
consents that, in the event he/she/it shall violate or breach any of said
covenants the Transferee shall be entitled to obtain (and he/she/it hereby
consents to) such injunctive relief against him/her/it, without bond, in
addition to such further or other relief as may appertain at equity or law. The
exercise or enforcement by the Transferee of any right or remedy hereunder shall
not preclude the exercise or enforcement by the Transferee of any other right or
remedy hereunder or which the Transferee has the right to enforce under
applicable law.
(2) Failure by any party to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of any right or
remedy hereunder at any one or more times be deemed a waiver or relinquishment
of such right or remedy at any other time or times.
J. ACKNOWLEDGEMENT OF DUAL REPRESENTATION.
---------------------------------------
The Transferor and the Shareholders understand and acknowledge that the
Transferee has been represented in connection with the offering of the Exchange
Shares and other matters by the law firm of Rudnick & Wolfe, and that BCI has
been represented in connection with the offering of the BCI Shares, the
formation of the Transferee and other matters by the law firm of Bell, Boyd &
Lloyd. Each of the Transferor and the Shareholders acknowledges that Rudnick &
Wolfe and Bell, Boyd & Lloyd have heretofore and may hereafter represent BCI
and/or its affiliates in various matters. The Transferor and each of the
Shareholders acknowledges that neither Rudnick & Wolfe nor Bell, Boyd & Lloyd
has been engaged to represent the Transferor or any of the Shareholders and
neither of them is representing the Transferor or any of the Shareholders in
connection with the issuance to the Transferor of the Exchange Shares hereunder.
Each of the Transferor and the Shareholders has obtained, or if deemed
necessary by the Transferor or the Shareholders will obtain, independent legal
representation in connection with the transaction contemplated hereby.
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<PAGE>
K. ACKNOWLEDGMENT OF RELATED PARTY TRANSACTIONS.
---------------------------------------------
The Transferor and each of the Shareholders understands and acknowledges
that the Transferee intends to engage in various transactions with BCI and/or
its affiliates as set forth in the Memorandum and hereby agrees that each such
transaction between the Transferee, BCI and their respective affiliates and such
other transactions as may be undertaken between the Transferee, BCI and their
respective affiliates shall not be deemed to be invalid due solely to the
participation of BCI or an affiliate thereof.
L. SUBSEQUENT AUDITED FINANCIALS.
------------------------------
The Transferor and each of the Shareholders covenants and agrees with the
Transferee that if the Transferee shall determine that audited financial
statements of the Transferee for the periods prior to the Closing are necessary
or advisable in connection with an initial public offering, another transaction
or offering, or otherwise, each shall cooperate fully with the Transferee's
accountants in the preparation of such audited financial statements, at the
Transferee's expense, and each shall make such reasonable representations and
warranties to the applicable certified public accountants which are customary in
connection with the preparation of audited financial statements.
M. DIRECTORS.
----------
(1) The Transferor and each of the Shareholders covenants and agrees that
until the earlier of February 28, 1998 or the completion of any Qualified Public
Offering, (a) he/she/it will vote his/her/its Exchange Shares for the election
to the Board of Directors of Transferee of each person who is a "Founding
Director" (as designated by resolution adopted by the Board of Directors of the
Transferee), three directors designated by BCI and three directors designated by
the Investors, and (b) the Transferor and the Shareholders each covenants that
he/she/it will cause each transferee of his/hers/its Exchange Shares to comply
with the foregoing.
(2) Until the earlier of February 28, 1998 or the completion of a Qualified
Public Offering (the "Designation Period"), the Transferor (or, in the event the
Transferor ceases to exist or the Management Shareholders cease to have voting
control of the Transferor, John A. Offerdahl, or if he is not then living or
competent to act, Lynnora Offerdahl, or if she is not then living or competent
to act, Sarah Flatley, or if she is not then living or competent to act, Mark
Adelhelm) shall have the right to designate one of the Management Shareholders
as a "Founding Director," who shall be a voting member of the Board of Directors
of the Transferee. The initial designee of the Transferor hereunder shall be
John A. Offerdahl. The Transferee represents and warrants that as of the Closing
it shall have obtained the agreements of the other shareholders of the
Transferee to vote for the election of such
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"Founding Director" designee of the Transferor as a director of the Transferee
at all relevant times during the Designation Period.
N. CONDUCT OF BUSINESS PRIOR TO CLOSINGS.
--------------------------------------
(1) From the date hereof until the Closing Date, the Transferor shall, and
the Shareholders shall cause the Transferor to: (a) conduct its business and
operations in the manner in which the same have heretofore been conducted; (b)
use its reasonable best efforts to (i) preserve its business organization
intact, (ii) keep available the services of its officers, employees, agents, and
distributors, and (iii) preserve its relationships with customers, suppliers,
and others having dealings with the Transferor; (c) maintain all of its
properties in customary repair, order and condition, reasonable wear and tear
excepted, and maintain insurance of such types and in such amounts upon all of
its properties and with respect to the conduct of its business as are in effect
on the date of this Agreement. Without the prior written consent of the
Transferee, except as otherwise contemplated by this Agreement, the Transferor
shall not, and the Shareholders shall not allow the Transferor to:
(a) authorize or issue any shares of its capital stock or any other
securities or declare, set aside or pay any dividend or distribution with
respect to its capital stock, or redeem, repurchase or otherwise acquire any of
its capital stock, except that (i) the Transferor may grant warrants or options
to acquire shares of non-voting common stock, (ii) the Transferor may distribute
not more than $32,000 to its shareholders to fund the payment by them of income
taxes on the taxable income of the Transferor arising from its operations for
the period from January 1, 1995 through the Closing Date and (iii) the
Transferor may pay Transaction Expenses (as defined in Section 12.K) in an
aggregate amount not to exceed $235,000 (or $260,000 if the Closing has not
occurred by April 1, 1995);
(b) create, incur, assume or guaranty any indebtedness for borrowed money
other than the Shareholder Note;
(c) grant any lien, pledge, security interest or other encumbrance upon any
of its assets;
(d) make any capital expenditure which exceeds, either singly or in the
aggregate, Ten Thousand Dollars ($10,000.00), except capital expenditures
incurred in the ordinary course of business (which the parties agree that for
all purposes of this Agreement includes the opening of additional "Offerdahl
Bagel Gourmet" retail bagel bakeries or stores);
(e) make any loan to or investment in, or acquire any securities or assets
of, any other person or entity except for the acquisition of assets in the
ordinary course of business, and except
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that the Transferor may accept notes from optionees upon exercise of employee
stock options;
(f) increase the rate of compensation, pay any bonus, incentive or other
extraordinary compensation or otherwise materially increase the benefits payable
or to become payable to any of its directors, officers, employees or independent
contractors (other than raises or bonuses made in the ordinary course of
business to employees who are not directors or officers, provided that any such
raise or aggregate bonuses to any such employee shall not exceed five percent
(5%) of the base compensation of such employee in effect at December 31, 1994
and other than a bonus of $25,000 to each of the Management Shareholders, such
Management Shareholder bonuses to be funded at Closing by the Transferee, if
necessary, in order to avoid increasing the Shareholder Note), or make any
material changes to the terms of employment of any of its directors, officers or
employees;
(g) change any accounting policies, procedures or practices employed by it;
(h) sell any of its assets other than sales of inventory in the ordinary
course of business and sales of equipment made in the ordinary course of
business because of the replacement or abandonment thereof;
(i) pay or discharge any long-term liability other than in accordance with
its terms;
(j) except in the ordinary course of business enter into any material
contract, agreement or lease which would be required to be disclosed hereunder,
make any change in any existing contracts, agreements or leases other than in
the ordinary course of business (or unless otherwise permitted herein), suffer
or permit any defaults to occur by the Transferor under any contract or
agreement or as tenant under any Lease, assign any Lease or sublease any Leased
Real Property; or
(k) amend its Articles of Incorporation or By-Laws.
O. ACCESS AND INFORMATION PENDING CLOSING.
---------------------------------------
(1) From the date hereof to and including, the Closing Date, the Transferor
shall, and the Shareholders shall cause the Transferor to, permit the Transferee
and its accountants and other representatives, to have the right of full and
complete access to the books, records offices, and other facilities of the
Transferor during normal business hours, for the purpose of making such
investigation of the financial condition and operations of the Transferor as the
Transferee or any such accountant or other representative may reasonably deem
necessary. The Transferee and its representatives shall have the right to make
and utilize copies or extracts of the Transferor's books, records and other data
and information for its due diligence investigation and other purposes in
connection with the transactions contemplated hereby.
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(2) After the date hereof and prior to the Closing Date, the
Transferee will furnish to the Transferor a supplement to the Memorandum setting
forth information concerning recent developments with respect to the Transferee,
and the Transferee will make available to the Transferor all documents and
information which the Transferor may reasonably request in connection with its
investment in the Transferee.
P. CONSENTS OF THIRD PARTIES.
Prior to the Closing on the Closing Date, the Transferor and the
Shareholders shall use their reasonable best efforts to obtain or cause to be
obtained all consents and other approvals of all lessors, lenders, governmental
authorities and other third parties which are required to be obtained by the
Transferor or the Shareholders as a result of the transactions contemplated by
this Agreement, which consents and approvals shall continue each applicable
lease, loan or other arrangement related to the Business on substantially
identical terms as exist on the date hereof.
Q. INTERIM FINANCIAL STATEMENTS.
From the date hereof to and including, the Closing Date, the Transferor
shall, and the Shareholders shall cause the Transferor to, promptly deliver to
the Transferee interim monthly balance sheets and statements of income and
retained earnings, through the end of the month immediately preceding the
Closing Date.
R. COOPERATION.
The Transferor and each of John Offerdahl, Lynnora Offerdahl, Sarah Flatley
and Mark Adelhelm (the "Management Shareholders") acknowledges and agrees that
the Transferee will have need of information concerning the Transferor in order
to comply with applicable securities laws and regulations in connection with
future public and private debt and equity offerings by the Transferee
("Offerings"). The Transferor and each of the Management Shareholders agrees
that they will cooperate with the Transferee in connection with any Offerings
and that they will, at the Transferee's expense: (1) furnish the Transferee with
such information concerning the Transferor and the Shareholders as the
Transferee may reasonably require to comply with applicable securities laws and
regulations (the "OBG Information"); (2) use diligent efforts to review, comment
on, and otherwise assist the Transferee as reasonably necessary for the
preparation of, descriptions concerning the Transferor and the Shareholders to
be used in connection with Offerings; and (3) represent and warrant to the
Transferee in connection with any Offerings that the OBG Information does not
contain any untrue statement of a material fact and that the OBG Information
does not omit any material fact necessary to make the information contained
therein not misleading.
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S. PREEMPTIVE RIGHTS.
Subject to the terms and conditions of this Section 5.S, the Transferor
shall have preemptive rights to purchase shares of the common stock of the
Transferee ("PBC Shares") at the time of any future issuance of PBC Shares by
the Transferee (the "Preemptive Rights"). Such preemptive rights shall be
subject to the following terms and conditions:
(1) The Transferor shall have the preemptive right to purchase (a)
that number of PBC Shares as are necessary in order for 2,550 of the Exchange
Shares issued to the Transferor (as adjusted for any stock dividends, stock
splits or similar changes in capitalization), plus the number of shares acquired
pursuant to this Section 5.S (collectively, the "Covered Shares") to constitute
3.25% of the issued and outstanding PBC Shares (the "PBC Percentage Interest"),
after giving effect to the following transactions (the "PBCI Transactions"): (i)
the consummation of the Investor Offering, (ii) the consummation of the
Simultaneous Contributions, and (iii) the conversion of $80,000,000.00 under the
BCI Secured Loan Agreement into, and the exercise of all options under the
Secured Loan Agreement to acquire, shares of the Transferee; provided, however,
that, in the event the Transferor elects not to exercise its preemptive rights
hereunder with respect to any future issuance of PBC Shares covered thereby,
then, immediately following the consummation of any such future issuance of PBCI
Shares, the "PBC Percentage Interest" for purposes of this Section 5.S shall be
adjusted downward to equal a percentage determined by dividing (x) the number of
Covered Shares by (y) the number of issued and outstanding PBC Shares after
giving effect to the PBCI Transactions; or (b) such lesser number of PBC Shares
as the Transferor may elect;
(2) Notwithstanding any other provision of this Agreement, the
Preemptive Rights shall not apply to: (a) PBC Shares issued to third parties in
connection with acquisitions; (b) PBC Shares issued pursuant to the Transferee's
Employee Stock Option Plan; or (c) PBC Shares issued to BCI pursuant to BCI's
exercise of its conversion or option rights under the Secured Loan Agreement;
and
(3) Notwithstanding any other provision of this Agreement, the
Preemptive Rights shall expire on the earlier of (i) May 15, 1998, or (ii)
immediately prior to the occurrence of a Qualified Public Offerinq.
T. DISSOLUTION AND DISTRIBUTIONS.
The Transferor and the Shareholders represent, warrant and agree:
(1) there is no existing plan or agreement which provides for the
dissolution of the Transferor;
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(2) there is no existing plan or agreement which provides for a pro
rata or similar distribution of the BCI Shares, the Exchange Shares or the
Additional Transferee Shares (as hereinafter defined) to the Shareholders, or
any person who acquires shares of capital stock of the Transferor;
(3) the Board of Directors of the Transferor shall not, within two
years after the date of the closing of the transactions contemplated by this
Agreement, take any action which will provide for the dissolution of the
Transferor or a pro rata or similar distribution of the BCI Shares, the Exchange
Shares or the Additional Transferee Shares to the Shareholders or any person who
acquires shares of capital stock of the Transferor, except that the Transferor
may, subject to the provisions of clause (5) below, distribute cash to its
shareholders at any time and distribute any other assets to its shareholders
after the first anniversary of the closing of the transactions contemplated by
this Agreement, in each case so long as after any such distribution the
Transferor's net worth shall not be less than $6,000,000. Without limiting the
generality of the foregoing, the Transferor may distribute up to $1,400,000 in
cash to its shareholders within 120 days after the Closing. For purposes of
determining the Transferor's net worth, the fair market value of the
Transferor's assets shall be determined by the agreement of the Transferee and
the Transferor. If the Transferee and the Transferor are unable to agree on the
fair market value of any assets, they shall mutually agree on and appoint a
national firm of certified public accountants or a reputable business valuation
firm to determine the fair market value of such assets, and the determination of
such firm shall be final and binding on the Transferors and the Transferee. Fees
and expenses of any such firm shall be borne 50% by the Transferee and 50% by
the Transferor;
(4) the transactions contemplated by this Agreement are not part of a
pre-existing plan for distribution of the BCI Shares, the Exchange Shares or the
Additional Transferee Shares, except that nothing in this Agreement shall
prohibit the sale of the BCI Shares pursuant to a registration statement which
has been filed and declared effective under the Securities Act or in a
transaction in which the Transferor obtains an opinion of its counsel,
reasonably satisfactory to BCI, that such transaction is exempt from
registration under the Securities Act; and
(5) in the event that the Transferor hereafter takes any action which
provides for the dissolution of the Transferor or a pro rata or similar
distribution of the BCI Shares, the Exchange Shares or the Additional Transferee
Shares to the Shareholders, or any person who acquires shares of capital stock
of the Transferor, the Transferor will obtain an opinion of counsel for the
Transferor, reasonably satisfactory to BCI or the Transferee, as applicable,
stating that such action shall not cause the transactions contemplated by this
Agreement to be deemed "offers", "offers to sell",
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"offers for sale" within the meaning of Rule 145 under the Securities Act.
U. LOANS TO PURCHASE ADDITIONAL TRANSFEREE SHARES AND EQUITY FUNDING
UNITS.
At the closing the Transferee shall make two loans to the Transferor: one
in the principal amount of $437,496.69 (the "PBCI Stock Loan") and one in the
amount of $1,312,500 (the "Equity Funding Loan"). The proceeds of the PBCI Stock
Loan, together with $3.31 in cash, will be used by the Transferor to purchase
330.42 shares of common stock, par value $.01 per share, of the Transferee (the
"Additional Transferee Shares") in the Investor Offering. The PBCI Stock Loan
will be evidenced by a nonrecourse promissory note in the form set forth in
Exhibit 5.U(1) (the "PBCI Stock Note") and it will be secured by a pledge of the
Additional Transferee Shares pursuant to a pledge agreement in the form set
forth in Exhibit 5.U (2) (the "Additional Transferee Shares Pledge Agreement").
The proceeds of the Equity Funding Loan will be used by the Transferor to
purchase units of membership interest in BC Equity Funding, L.L.C., a Delaware
limited liability company (the "Additional Equity Funding Units"), in the
offering of units by Equity Funding that is occurring at the same time as the
Investor Offering. The Equity Funding Loan will be evidenced by a nonrecourse
promissory note in the form set forth in Exhibit 5.U(3) (the "Equity Funding
Note") and it will be secured by a pledge of the Additional Equity Funding Units
pursuant to a pledge agreement in the form set forth in Exhibit 5.U(4) (the
"Additional Equity Funding Units Pledge Agreement"). In the event that the
indebtedness represented by either the PBCI Stock Note or the Equity Funding
Note becomes subject to Regulation G issued by the Board of Governors of the
Federal Reserve System pursuant to the Securities Exchange Act of 1934 relating
to credit secured directly or indirectly by margin stock ("Regulation G"), the
parties hereto shall execute and deliver such forms, instruments and other
documents (and shall take such other actions) as may be necessary to ensure that
such indebtedness complies with the requirements of Regulation G.
V. FINANCIAL STATEMENTS OF THE TRANSFEREE.
For so long as the Transferor is a shareholder of the Transferee, the
Transferee shall furnish to the Transferor copies of such financial statements
of the Transferee as are prepared by the Transferee for distribution to its
shareholders generally.
6. CONDITIONS TO THE OBLIGATION OF THE TRANSFEREE.
The obligation of the Transferee to accept the Contributed Assets shall be
subject to the fulfillment at or prior to the Closing Date of each of the
following conditions:
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A. ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE OBLIGATIONS.
The representations and warranties of the Transferor and the Shareholders
contained in this Agreement shall have been true and correct in all material
respects at and as of the date hereof, and they shall be true and correct in all
material respects at and as of the Closing Date with the same force and effect
as though made at and as of that time. The Transferor and the Management
Shareholders shall have performed and complied with all of their obligations
required by this Agreement to be performed or complied with at or prior to the
Closing Date. The Transferor and the Management Shareholders shall have
delivered to the Transferee a certificate, dated as of the Closing Date and
signed by an officer of the Transferor and each of the Management Shareholders
certifying that such representations and warranties are thus true and correct in
all material respects and that all such obligations have been thus performed and
complied with (the "Transferor's Representations Certificate").
B. DELIVERIES.
The deliveries of the Transferor and the Shareholders described in Section
8 shall have been received.
C. RECEIPT OF NECESSARY CONSENTS.
All necessary consents or approvals of third parties to any of the
transactions contemplated hereby, the absence of which would materially and
adversely affect the Transferee's rights hereunder, shall have been obtained and
shown by written evidence reasonably satisfactory to the Transferee. The
Transferor shall have obtained the consent of all lessors of the Contributed
Leasehold Premises to the transactions contemplated hereby and shall have
delivered written evidence thereof to the Transferee in form reasonably
satisfactory to the Transferee.
D. REGISTRATION RIGHTS AGREEMENT.
The Transferor and the Shareholders shall have executed and delivered the
Registration Rights Agreement in substantially the form attached as Exhibit 6.D.
(the "Registration Rights Agreement").
E. EMPLOYMENT AGREEMENTS.
John Offerdahl, Sarah Flatley and Mark Adelhelm shall have executed and
delivered to the Transferee the employment agreements attached hereto as Exhibit
6.E(1) (the "Employment Agreements") and Lynnora Offerdahl shall have executed
and delivered to the Transferee the consulting agreement attached hereto as
Exhibit 6.E(2) (the "Consulting Agreement").
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F. EQUITY FUNDING AGREEMENT.
The Transferor shall have subscribed for the purchase of 4.2 units of
membership interest in Equity Funding (the "Equity Funding Units") and the
Additional Equity Funding Units and such subscription shall have been accepted
by Equity Funding, with the subscription price for the Equity Funding Units
payable not later than 45 days after the Closing Date hereunder; provided,
however, that such subscription agreement shall provide that the payment of such
subscription price shall not be required until thirty (30) trading days after
the date on which the BCI Shares are registered under the Securities Act, as
such thirty (30) trading day period may be extended pursuant to Section 6.2(a)
of the Stock Purchase Agreement (the "Equity Funding Subscription Agreement").
G. EXECUTION OF THIS AGREEMENT BY OTHER SHAREHOLDERS.
Each of the Shareholders of the Transferor that has not entered into this
Agreement on the date hereof shall have become a party hereto by executing and
delivering a counterpart signature page hereto.
7. CONDITIONS TO OBLIGATIONS OF THE TRANSFEROR AND THE SHAREHOLDERS.
The obligations of the Transferor to contribute the Contributed Assets
shall be subject to the fulfillment at or prior to the Closing Date of each of
the following conditions:
A. ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS.
The representations and warranties of the Transferee contained in this
Agreement shall have been true and correct in all material respects at and as of
the date hereof, and they shall be true and correct in all material respects at
and as of the Closing Date with the same force and effect as though made at and
as of that time. The Transferee shall have performed and complied with all of
its obligations required by this Agreement to be performed or complied with at
or prior to the Closing Date. The Transferee shall have delivered to the
Transferor a certificate, dated as of the Closing Date and signed by one of its
officers, certifying that such representations and warranties are thus true and
correct in all material respects and that all such obligations have been thus
performed and complied with (the "Transferee's Representations Certificate").
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B. INVESTOR OFFERING.
Not less than $18,162,500 in proceeds of the Investor Offering shall have
been received by the Transferee.
C. SECURED LOAN AGREEMENT.
The Transferee and BCI shall have executed a Secured Loan Agreement (and
the related services agreements between BCI and the Transferee attached as
exhibits thereto), substantially in the form attached as Exhibit 7.C and the
exhibits thereto (the "Secured Loan Agreement"), and BCI shall have funded
$20,000,000 thereunder.
D. EMPLOYMENT AGREEMENTS AND CONSULTING AGREEMENT.
The Transferee shall have executed and delivered the Employment Agreements
and the Consulting Agreement and shall have funded the bonuses to the
Management Shareholders described in Section 5.N(f).
E. BOARD OF DIRECTORS' APPROVAL.
The Transferee shall have delivered to the Transferor a certified copy of
the resolutions duly adopted by the Board of Directors of the Transferee,
authorizing the execution of this Agreement and the consummation of the
transactions contemplated hereby.
F. DELIVERIES.
The deliveries of the Transferee described in Section 8 shall have been
received.
G. REGISTRATION RIGHTS AGREEMENT.
The Transferee shall have executed and delivered the Registration Rights
Agreement.
H. ASSIGNMENT OF RIGHTS.
The Transferee shall have executed and delivered an assignment (the
"Assignment"), in form reasonably acceptable to the Transferor, assigning to the
Transferor all of the Transferee's rights under the Stock Purchase Agreement and
BCI Registration Rights Agreement.
I. ELECTION OF JOHN OFFERDAHL.
John Offerdahl shall have been elected a director of the Transferee.
J. EQUITY FUNDING AGREEMENT.
Equity Funding shall have entered into the Equity Funding Subscription
Agreement.
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8. CLOSING AND CLOSING DELIVERIES.
A. CLOSING.
The closing of the transaction contemplated hereby ("Closing") shall take
place at 10:00 A.M. on March 31, 1995 (the "Closing Date"), at the offices of
BCI; provided, however, that if any of the conditions which are set forth in
Section 6 or Section 7 of this Agreement has not been satisfied (or waived) by
such date, then the Closing Date shall be on a subsequent date, which shall be
determined by mutual agreement of the parties hereto.
B. ACTION TO BE TAKEN BY TRANSFEROR AND THE SHAREHOLDERS.
At the Closing, the Transferor and the Shareholders shall deliver the
following:
(1) evidence, in such form as is satisfactory to the Transferee, that each
of the conditions to the obligation of the Transferee to accept the Contributed
Assets from the Transferor which is set forth in Section 6 of this Agreement has
been satisfied;
(2) copies of the Transferor's Articles of Incorporation certified by the
Florida Secretary of State within ten (10) days prior to the Closing Date,
Bylaws of the Transferor, as amended to date and certified by an officer of the
Transferor, and certificate of good standing of the Transferor from the State of
Florida dated within ten days prior to the Closing Date;
(3) a duly executed amendment to the Transferor's Articles of
Incorporation, in a form which is proper for filing with the State of Florida,
amending the Transferor's Articles of Incorporation to change the Transferor's
corporate name to a name reasonably acceptable to Transferee which does not
include "Offerdahl's Bagel Gourmet" and any other forms and documents which are
necessary to effect such amendment to its Articles of Incorporation and to place
such amendment of record in each jurisdiction where the Transferor is qualified
to do business as a foreign corporation;
(4) a copy of the resolutions adopted by the Board of Directors and the
shareholders of the Transferor authorizing the Transferor's execution, delivery
and performance of this Agreement, certified in each case by the Secretary or
Assistant Secretary of the Transferor;
(5) such deeds, bills of sale, endorsements, assignments and other
instruments, in such form as in each case is satisfactory to the Transferee, as
shall be sufficient to vest in the Transferee good and marketable title to the
Contributed Assets, free and clear of all liens, claims, mortgages, pledges,
encumbrances, and charges of every kind, other than the Permitted Liens;
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(6) all consents, waivers, approvals, authorizations or orders required to
be obtained, and evidence of the making of all filings required to be made, by
the Transferor and the Shareholders for their execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby;
(7) the Officer's Certificate and the Transferor's Representations
Certificate;
(8) the results of UCC financing statement searches and tax lien and
judgment searches, all dated within ten (10) days of the Closing Date,
respecting the Transferor in each state and county in which the Business is
conducted, which shall show no liens or encumbrances except those which secure
Assumed Liabilities and those which shall have been released since the date of
the applicable search and which shall show the release of any lien of Orix
Credit Alliance, Inc. on assets of the Transferor other than those financed by
Orix;
(9) opinion of Greenberg Traurig, counsel to the Transferor and the
Shareholders, in form attached as Exhibit 8.B.(a);
(10) executed copies of the documents referenced in Section 6 hereof;
(11) a release and waiver of each director and officer of the Transferor
releasing and waiving any then existing claim, whether known or unknown, he may
have against the Transferor (other than the Shareholder Note) in a form
reasonably satisfactory to the Transferee:
(12) executed copies of the PBCI Stock Note, the Additional Transferee
Shares Pledge Agreement, the Equity Funding Note and the Additional Equity
Funding Units Pledge Agreement;
(13) an executed copy of the Assignment of Trademarks in the form attached
as Exhibit 8.B(14); and
(14) a receipt acknowledging the Transferor's receipt of the Consideration.
C. ACTION TO BE TAKEN BY THE TRANSFEREE.
At the Closing, the Transferee shall deliver the following:
(1) evidence, in such form as is satisfactory to the Transferor, that each
of the conditions to the obligations of the Transferor and the Shareholders to
contribute the Contributed Assets to the Transferee which is set forth in
Section 7 of this Agreement has been satisfied;
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(2) certified copies of the Certificate of Incorporation and Bylaws of the
Transferee and a certificate of good standing of the Transferee from the State
of Delaware dated within five days prior to the Closing Date;
(3) a copy of the resolutions adopted by the Board of Directors of the
Transferee authorizing its execution, delivery and performance of this
Agreement, certified by the Secretary or Assistant Secretary of the Transferee;
(4) all consents, waivers, approvals, authorizations or orders required to
be obtained, and evidence of the making of all filings required to be made, by
the Transferee for its authorization, execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby;
(5) duly executed certificates evidencing the BCI Shares and the Exchange
Shares in the name of the Transferor;
(6) the opinion of Rudnick & Wolfe, counsel to the Transferee, in the form
attached as Exhibit 8.C.(6)(a), the tax opinion of Rudnick & Wolfe in the form
attached as Exhibit 8.C (6)(b), and the securities law opinion of Rudnick &
Wolfe in the form attached as Exhibit 8.C(6)(c);
(7) executed copies of the documents referenced in Section 7 hereof;
(8) the Consideration, in exchange for all the Contributed Assets;
(9) an Assignment and Assumption Agreement, in a form reasonably
satisfactory to the Transferor, pursuant to which the Transferee shall transfer
and assign to the Transferor and the Transferor shall accept and assume from the
Transferee, all of the Transferee's right, title, and interest to, and duties,
obligations and remedies under, the Stock Purchase Agreement and the BCI
Registration Rights Agreement, including, without limitation:
(a) the Transferee's right under the Stock Purchase Agreement to
receive certain price guarantees from BCI with respect to resales of the BCI
Shares;
(b) the benefit of all representations and warranties made by BCI
in the Stock Purchase Agreement;
(c) the Transferee's right under the BCI Registration Rights
Agreement to register the BCI Shares with the Securities and Exchange
Commission; and
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(d) all other rights, obligations and remedies of the Transferee
under the terms of the Stock Purchase Agreement and the BCI Reqistration Rights
Agreement;
(10) instruments, in such form as are satisfactory to the Transferor, as
shall be sufficient to effect the assumption by the Transferee of the Assumed
Liabilities;
(11) such further instruments of transfer and assignment and the Transferee
shall take such other actions as the Transferor or the terms of the Stock
Purchase Agreement and the BCI Registration Rights Agreement may require in
order to effectively assign, transfer and vest in the Transferor all right,
title and interest in and to the Stock Purchase Agreement and the BCI
Registration Rights Agreement assigned hereby and the benefits intended to be
conveyed thereby and to facilitate the consummation of all transactions
contemplated therein;
(12) an Assumption Agreement, in a form reasonably satisfactory to the
Transferor, pursuant to which the Transferee assumes the Assumed Liabilities;
(13) the Transferee's Representations Certificate; and
(14) a receipt acknowledging the Transferee's receipt of the Contributed
Assets.
D. FORM OF DOCUMENTS.
All documents to be furnished at the Closing shall be in form and substance
reasonably satisfactory to the Transferor, the Shareholders, and the Transferee.
E. FURTHER ASSURANCES.
At any time at or after the Closing, the parties shall execute and deliver
such instruments, assignments and other documents as may be reasonably necessary
to convey, assign and transfer the Contributed Assets to the Transferee or
otherwise carry out the purpose of this Agreement.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS.
The representations and warranties contained in this Agreement and in any
instrument or document required to be delivered pursuant to this Agreement shall
survive for a period of two years from the Closing Date notwithstanding any
investigation at any time made by or on behalf of the Transferee and thereafter
all such representations and warranties shall be extinguished; provided however
that (i) the representation and warranty set forth in Section 3.F. shall survive
until the 60th day after the Statute of Limitations Date (as below defined) and
(ii) the representations and warranties set forth in
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Sections 3.A.; 3.B.; 3.C.; 3.H.; 3.W.; 3.X; 3.AA; 4.A; 4.B; 4.C; 4.D; 4.E; and
4.F. shall survive a period of ten years (the applicable period of survival
being referred to as the "Survival Period". For purposes hereof, the Statute of
Limitations Date means the last day on which the applicable governmental entity
may make an assessment respecting any taxes as provided in the applicable
statute or ordinance. Any claim or cause of action (including, without limiting
the generality of the foregoing, a claim for indemnification pursuant to Section
ll.A or ll.B) based upon or arising out of any inaccurate representation or
warranty made hereunder or in any instrument or document required to be
delivered pursuant to this Agreement must be made within the applicable Survival
Period or the party against which such claim is made shall have no liability
with respect thereto.
Nothing contained in this Article shall affect or limit the obligations of
either party to perform the obligations to be performed by it hereunder after
the Closing Date.
10. CERTAIN ACTIONS AFTER THE CLOSING.
A. THE TRANSFEREE TO ACT AS AGENT FOR THE TRANSFEROR.
This Agreement shall not constitute an agreement to assign any claim,
contract, license, lease, commitment, sales order or purchase order if any
attempted assignment of the same without the consent of the other party thereto
would constitute a breach thereof or in any way affect the rights of the
Transferor thereunder. If such consent is not obtained or if any attempted
assignment would be ineffective or would affect the Transferor's rights
thereunder so that the Transferee would not in fact receive all such rights,
then subject to the terms and conditions of Section lO.C. hereof the Transferee
shall act as the agent for the Transferor in order to obtain for the Transferee
the benefits thereunder.
B. DELIVERY OF PROPERTY RECEIVED BY THE TRANSFEROR AFTER CLOSING.
From and after the Closing the Transferee shall have the right and
authority to collect, for the account of the Transferee, all Contributed
Receivables and other items which shall be transferred or are intended to be
transferred to the Transferee as part of the Contributed Assets as provided in
this Agreement, and to endorse with the name of the Transferor any checks or
drafts received on account of any such Contributed Receivables or other items of
the Contributed Assets. The Transferor and each of the Shareholders agrees that
he/she/it will transfer or deliver to the Transferee, promptly after the receipt
thereof, any cash or other property which the Transferor receives after the
Closing Date in respect of any claims, contracts, licenses, leases, commitments,
sales orders, purchase orders, receivables of any character or any other items
transferred or intended to be transferred to the Transferee as part of the
Contributed Assets under this Agreement.
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C. THE TRANSFEREE APPOINTED ATTORNEY FOR THE TRANSFEROR.
Effective at the Closing Date, the Transferor hereby constitutes and
appoints the Transferee, its successors and assigns, the true and lawful
attorney of the Transferor, in the name of either the Transferee or the
Transferor (as the Transferee shall determine in its sole discretion) but for
the benefit and at the expense of the Transferee (except as otherwise herein
provided), (i) to institute and prosecute all proceedings which the Transferee
may deem proper in order to collect, assert or enforce any claim, right or title
of any kind in or to the Contributed Assets as provided for in this Agreement;
(ii) to defend or compromise any and all actions, suits or proceedings in
respect of any of the Contributed Assets, and to do all such acts and things in
relation thereto as the Transferee shall deem advisable; and (iii) to take all
action which the Transferee may reasonably deem proper in order to provide for
the Transferee the benefits of the Contributed Assets where any required consent
of another party to the sale or assignment thereof to the Transferee pursuant to
this Agreement shall not have been obtained. The Transferor acknowledges that
the foregoing powers are coupled with an interest and shall be irrevocable. The
Transferee shall be entitled to retain for its own account any amounts collected
pursuant to the foregoing powers, including, any amounts payable as interest in
respect thereof.
D. EMPLOYMENT BY THE TRANSFEREE OF THE TRANSFEROR'S EMPLOYEES.
(1) The Transferor and the Shareholders shall use their reasonable best
efforts to aid the Transferee in engaging such of the Transferor's employees as
are employed on the Closing Date whom the Transferee desires to engage after the
Closing Date. Except with the written consent of the Transferee, neither the
Transferor nor any of the Shareholders, nor any affiliate of the Transferor or
any of the Shareholders, shall solicit or cause, directly or indirectly, to be
solicited, nor attempt to induce, for a period of three years after the Closing
Date, any person employed by the Transferor at or at any time within six months
prior to the Closing Date unless such person was either not offered employment
by the Transferee or was terminated by the Transferee, (a) not to accept an
offer of employment from the Transferee, (b) if an offer is accepted, to
terminate his or her employment with the Transferee, or (c) to be employed by or
otherwise render services to the Transferor, any of the Shareholders or any of
their affiliates. As used in this Agreement, the term "affiliate" means, with
respect to a specified person, any other person which directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, the person specified.
(2) Except as provided in the Employment Agreements, the Transferee shall
have no obligation to employ any of the persons currently employed by the
Transferor or to continue, or institute any
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replacement or substitution for, any vacation, severance, incentive, bonus,
profit sharing, pension or other employee benefit plan or program of the
Transferor.
11. INDEMNIFICATION.
A. AGREEMENT BY THE TRANSFEROR AND THE SHAREHOLDERS TO INDEMNIFY.
The Transferor and each of the Shareholders agree that they will indemnify,
defend and hold the Transferee harmless in respect of the aggregate of all
indemnifiable damages (as defined below) of the Transferee. For this purpose,
"indemnifiable damages" of the Transferee means the aggregate of all expenses,
losses, costs, deficiencies, liabilities and damages (including, without
limitation, reasonable attorneys' fees and expenses) incurred or suffered by the
Transferee (i) resulting from any inaccurate representation or warranty made by
the Transferor or the Shareholders in or pursuant to this Agreement or any
document required to be delivered hereunder; (ii) resulting from any default in
the performance of any of the covenants or agreements made by the Transferor or
by the Shareholders in this Agreement or any document required to be delivered
hereunder; (iii) resulting from the failure of the Transferor to pay, discharge
or perform any liability or obligation of the Transferor which is not expressly
assumed by the Transferee pursuant to this Agreement or any document required to
be delivered in connection herewith; or (iv) resulting from any claim, suit,
cause of action, investigation or proceeding whether instituted prior to or
after the Closing Date, arising out of or relating to the conduct of the
business of the Transferor prior to the Closing Date. Without limiting the
generality of the foregoing, with respect to the measurement of "indemnifiable
damages," the Transferee shall have the right to be put in the same financial
position as it would have been in had the events giving rise to the
"indemnifiable damages" not occurred. Notwithstanding the foregoing or any other
term or provision of this Agreement, (a) only the Transferor and the Majority
Shareholders shall be obligated to indemnify, defend or hold harmless the
Transferee for indemnifiable damages resulting from inaccurate representations
and warranties and such obligation shall be joint and several; (b) the
Transferor and the Majority Shareholders shall not be obligated to indemnify,
defend or hold harmless the Transferee for indemnifiable damages resulting from
inaccurate representations and warranties (i) until the aggregate of all such
indemnifiable damages exceeds $75,000, and the Transferor and the Majority
Shareholders shall be liable for such damages only in excess of such threshold,
and (ii) in excess of an aggregate of $6,000,000; provided, however, that the
limitations set forth in this clause (ii) shall not be applicable to
indemnifiable damages arising out of (A) any inaccurate representation and
warranty set forth in Sections 3.A, 3.B, 3.C, 3.H, 3.W, 3.Y, 3.Z, 3.AA, or (B)
fraud or intentional misrepresentation; and (c) the Transferee shall use
reasonable best efforts to satisfy any claim for indemnifiable damages by
recovering such indemnifiable
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damages from the Transferor before making a claim for the recovery of such
indemnifiable damages from the Shareholders who have liability therefore.
B. AGREEMENT BY THE TRANSFEREE TO INDEMNIFY.
The Transferee shall indemnify, defend and hold the Transferor and the
Shareholders harmless from and against all "Transferor damages" of the
Transferor and the Shareholders. For this purpose, "Transferor damages" means
the aggregate of all expenses, losses, costs, deficiencies, liabilities and
damages and expenses (including, without limitation, reasonable attorneys' fees
and expenses) incurred by the Transferor and the Shareholders (i) resulting from
any inaccurate representation or warranty made by the Transferee in or pursuant
to this Agreement or any document required to be delivered hereunder; (ii)
resulting from any default in the performance of any of the covenants or
agreements made by the Transferee in this Agreement or in any document required
to be delivered hereunder; (iii) resulting from the failure of the Transferee to
pay, discharge or perform any liability or obligation of the Transferor that is
expressly assumed by the Transferee pursuant to this Agreement or any document
required to be delivered in connection herewith; (iv) resulting from any claim,
suit, cause of action, investigation or proceeding arising out of or relating to
the conduct after the Closing of the business contributed to the Transferee
hereunder, provided that such claim, suit, cause of action, investigation or
proceeding does not result from any facts or circumstances that constitute an
inaccuracy in any representation and warranty made by the Transferor or the
Shareholders in or pursuant to this Agreement or any document required to be
delivered hereunder. Without limiting the generality of the foregoing, with
respect to the measurement of the Transferor damages, the Transferor and the
Shareholders shall have the right to be put in the same financial position as
they would have been in had the events giving rise to Transferor damages not
occurred.
C. LEGAL PROCEEDINGS.
In the event Transferee, Transferor or any of the Shareholders become
involved in any legal, governmental or administrative proceeding which may
result in indemnification claims hereunder, such party shall promptly notify the
other parties in writing of such proceeding. The other parties may, at their
option and expense, defend any such proceeding if the proceeding could give rise
to an indemnification obligation hereunder. If any party elects to defend any
proceeding, such party shall have full control over the conduct of such
proceeding, although the party being indemnified shall have the right to retain
legal counsel at its own expense and shall have the right to approve any
settlement of any dispute giving rise to such proceeding, such approval not to
be withheld unreasonably by the party being indemnified; provided, that, in the
event the indemnifying party shall fail to initiate a defense of a claim within
twenty
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days of the notice to the indemnified party of a claim, the indemnified party
shall have the option to conduct the defense of such claim as it may in its
discretion deem proper. The party being indemnified shall reasonably cooperate
with the indemnifying party in such proceeding.
12. MISCELLANEOUS.
A. AMENDMENT AND MODIFICATION.
The parties hereto may amend, modify and supplement this Agreement in such
manner as may be agreed upon by them in writing.
B. TERMINATION.
(1) Anything to the contrary herein notwithstanding, this Agreement
may be terminated and the transactions contemplated hereby may be abandoned:
(a) by the mutual written consent of all of the parties hereto at
any time prior to the Closing Date;
(b) by the Transferee at any time prior to the Closing Date if
there shall be a pending or threatened action or proceeding by or before any
court or other governmental body which shall seek to restrain prohibit or
invalidate the sale of the Contributed Assets to the Transferee or any other
transaction contemplated hereby, or which might affect the right of the
Transferee to own, operate in their entirety or control the Contributed Assets
and which, in the judgment of the Transferee, makes it inadvisable to proceed
with the transaction contemplated by this Agreement;
(c) by any party in the event of the material breach by any other
party of any provision of this Agreement, which breach is not remedied by the
breaching party within 30 days after receipt of notice thereof from the
terminating party;
(d) by either the Transferor or the Transferee in the event the
Closing of the transactions contemplated hereby does not occur on or before
April 30, 1995.
If this Agreement is terminated pursuant to Section 12.B.(l)(a),
no party shall have any liability for any costs, expenses, loss of anticipated
profit or any further obligation for breach of warranty or otherwise to any
other party to this Agreement. Any termination of this Agreement pursuant to
Section 12.B.(l)(b), (c) or (d) shall be without prejudice to any other rights
or remedies of the respective parties.
(2) The risk of any loss to the properties to be sold by the
Transferor hereunder and all liability with respect to injury and
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damage occurring in connection therewith shall be the sole responsibility of the
Transferor and the Shareholders until the completion of the Closing. If any
material part of said properties shall be damaged by fire or other casualty
prior to the completion of the Closing hereunder, the Transferee shall have the
right and option:
(a) to terminate this Agreement, without liability to any party
thereto; or
(b) to proceed with the Closing hereunder, in which event such
casualty shall not constitute a breach by the Transferor or the Shareholders of
any representation, warranty or covenant in this Agreement, and the Transferee
shall be entitled to receive and retain the insurance proceeds arising from such
casualty and to be reimbursed by the Transferor and the Shareholders for any
uninsured casualty.
C. BINDING EFFECT.
Except as otherwise provided herein, this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors,
assigns, heirs and legal representatives.
D. SEVERABILITY.
The parties expressly agree that it is not the intention of any party to
violate any public policy, statutory or common laws, rules, regulations,
treaties or decisions of any government or agency thereof. If any provision of
this Agreement is judicially or administratively interpreted or construed as
being so in violation, such provision shall be inoperative and the remainder of
this Agreement shall remain binding upon the parties hereto. Further, to the
extent any provision hereof is deemed unenforceable by virtue of its scope but
may be enforceable by limitations thereon, the parties hereto agree
that the same shall be enforceable to the fullest extent permissible under the
laws and public policies applied in such jurisdiction in which the enforcement
is sought. The parties hereto hereby authorize any court of competent
jurisdiction to modify the covenants of Section 5.G., 5.H., and 10.D to the
extent necessary to make the same enforceable.
E. ENTIRE AGREEMENT.
This instrument and the exhibits and schedules attached hereto contain the
entire agreement of the parties hereto with respect to the purchase of the
Contributed Assets and the other transactions contemplated herein, and supersede
all prior understandings and agreements of the parties with respect to the
subject matter hereof. Any reference herein to this Agreement shall be deemed to
include the schedules and exhibits attached hereto.
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<PAGE>
F. HEADINGS.
The descriptive headings in this Agreement are inserted for convenience only
and do not constitute a part of this Agreement.
G. EXECUTION IN COUNTERPART.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original.
H. NOTICES.
All notices, demands and other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or by electronic transmission. If mailed, first class,
certified mail, postage prepaid, or sent by reliable overnight delivery service
and addressed as follows, or at such other addresses as the parties hereto may
from time to time designate in writing, such notices, requests, demands, and
other communications shall be deemed delivered three business days after being
so duly posted or the next business day if sent by overnight delivery service:
To the Transferee: Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, Colorado 80401
Attention: Kyle T. Craig
Facsimile: (303) 202-3360
With copies to: Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601
Attention: Michael G. Brennan, Esq.
Facsimile: (312) 984-2299/236-7516
and to:
Bell, Boyd & Lloyd
70 West Madison Street
Suite 3200
Chicago, Illinois 60602
Attention: Paul A. Strasen, Esq.
Facsimile: (312) 372-2098
To the Transferor or the Shareholders:
929 Shotgun Road
Sunrise, Florida 33326
Facsimile: (305) 475-2606
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<PAGE>
With a copy to: Greenberg Traurig
515 East Las Olas Boulevard
Suite 1500
Fort Lauderdale, Florida 33301
Attention: Daniel H. Aronson, Esq.
Facsimile: (305)765-1477
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice.
I. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
therein.
J. CONSTRUCTION.
This Agreement shall not be construed more strictly against one party than
against another merely by virtue of the fact that it may have been prepared
primarily by counsel for one of the parties, it being recognized that all
parties have contributed substantially and materially to the preparation of this
Agreement. References in this Agreement to the Transferor's knowledge shall mean
the knowledge of the Management Shareholders.
K. EXPENSES.
Subject to the Transferee's obligations under clause (4) of Section 2.B,
each party to this Agreement shall pay all of the expenses incurred by it in
connection with this Agreement, including without limitation its legal and
accounting fees and expenses, and the commissions, fees, and expenses of any
person employed or retained by it to bring about, or to represent it in, the
transactions contemplated hereby ("Transaction Expenses").
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<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be duly executed as of the day and year first above written.
TRANSFEREE:
PROGRESSIVE BAGEL CONCEPTS, INC.,
a Delaware corporation
By: /s/ KYLE CRAIG
-------------------------------
Its: VICE PRESIDENT
------------------------------
OFFERDAHL'S BAGEL GOURMET, INC.,
a Florida corporation
By: /s/ JOHN OFFERDAHL
-------------------------------
Its: PRESIDENT
------------------------------
SHAREHOLDERS:
/s/ JOHN OFFERDAHL
----------------------------------
JOHN OFFERDAHL
/s/ LYNNORA OFFERDAHL
----------------------------------
LYNNORA OFFERDAHL
/s/ JOHN A. OFFERDAHL
----------------------------------
JOHN A. OFFERDAHL, Trustee of
the JOHN A. OFFERDAHL, Grantor
Retained Annuity Trust Declaration
dated December 30, 1994
/s/ LYNNORA OFFERDAHL
----------------------------------
LYNNORA OFFERDAHL, Trustee of
the LYNNORA OFFERDAHL, Grantor
Retained Annuity Trust Declaration
dated December 30, 1994
/s/ SARAH FLATLEY
----------------------------------
SARAH FLATLEY
/s/ MARK S. ADELHELM
----------------------------------
MARK S. ADELHELM
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<PAGE>
SHAREHOLDERS (Continued):
/s/ Arnold N. Offerdahl
--------------------------------------
ARNOLD N. OFFERDAHL
/s/ Irene Elizabeth Offerdahl
--------------------------------------
IRENE ELIZABETH OFFERDAHL
/s/ Arnold N. Offerdahl
--------------------------------------
ARNOLD N. OFFERDAHL, Trustee of the
ANDREW WILLIAM OFFERDAHL Trust
dated December 30, 1994
/s/ Arnold N. Offerdahl
--------------------------------------
ARNOLD N. OFFERDAHL, Trustee of the
ALEXANDRA RUTH OFFERDAHL Trust
dated December 30, 1994
/s/ William A. Achterberg
--------------------------------------
WILLIAM A. ACHTERBERG
/s/ Vivian J. Achterberg
--------------------------------------
VIVIAN J. ACHTERBERG
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<PAGE>
EXHIBITS
--------
Exhibit I
Stock Purchase Agreement Between BCI and the
Transferee
Exhibit 2.F(1) Tax Loan Note
Exhibit 2.F(2) Tax Loan Pledge Agreement
Exhibit 5.U(1) PBCI Stock Note
Exhibit 5.U(2) Additional Transferee Shares Pledge Agreement
Exhibit 5.U(3) Equity Funding Note
Exhibit 5.U(4) Additional Equity Funding Units Pledge Agreement
Exhibit 6.D Registration Rights Agreement
Exhibit 6.E(1) Employment Agreements
Exhibit 6.E(2) Consulting Agreement
Exhibit 7.C Secured Loan Agreement
Exhibit 8.B(a) Opinion of Greenberg Traurig
Exhibit 8.B(14) Trademark Assignment of John Offerdahl
Exhibit 8.C(6)(a) Opinion of Rudnick & Wolfe
Exhibit 8.C(6)(b) Tax Opinion of Rudnick & Wolfe
Exhibit 8.C(6)(c) Securities Opinion of Rudnick & Wolfe
-1-
<PAGE>
SCHEDULES
---------
Schedule 1.A Contributed Leasehold Rights
Schedule 1.B Excluded Assets
Schedule 2.B Assumed Liabilities
Schedule 3.B Capital Stock of the Transferor
Schedule 3.F Tax Matters
Schedule 3.G Real Estate and Contributed Leasehold Premises
Schedule 3.H Title to Contributed Assets
Schedule 3.J Licenses and Permits of the Transferor
Schedule 3.K Proprietary Rights of the Transferor
Schedule 3.L Interests in Competitors
Schedule 3.M Documents and Information With Respect to the
Transferor
Schedule 3.N Litigation
Schedule 3.Q Absence of Certain Acts or Events
Schedule 3.S Environmental Matters
Schedule 3.U Employee Benefits
Schedule 3.V Product Liability
Schedule 3.W Consents
Schedule 3.AA(3) BCI Information
Schedule 3.AA(7) Residence Addresses of Shareholders
Schedule 5.H Certain Interests in Competitive Businesses
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<PAGE>
EXHIBIT I
STOCK PURCHASE AGREEMENT
------------------------
THIS AGREEMENT is made and entered into as of this ____ day of March, 1995,
by and between BOSTON CHICKEN, INC., a Delaware corporation (the "Seller"), and
PROGRESSIVE BAGEL CONCEPTS, INC., a Delaware corporation ("Buyer").
Recitals
--------
Seller desires to sell to Buyer, and Buyer desires to purchase from Seller,
shares of common stock, $.01 par value per share, of the Seller ("Common
Stock"), upon the terms and subject to the conditions contained herein.
For and in consideration of the premises, covenants, and agreements
contained herein, the parties do covenant, agree, represent, warrant, and
stipulate as follows:
ARTICLE 1.
PURCHASE AND SALE OF STOCK
--------------------------
Section 1.1 Shares to be Acquired. Subject to the terms and conditions
contained herein, Seller agrees to sell, assign, transfer, and convey to Buyer,
free and clear of all pledges, liens, security interests, encumbrances, or other
restrictions arising from Seller (except restrictions on resale under state or
federal securities laws), and Buyer shall purchase from Seller, that number of
shares of Common Stock equal to: (a) $5,600,000 divided by (b) the closing sales
price per share of Common Stock as quoted on the NASDAQ National Market, as
reported in The Wall Street Journal (Midwest Edition), on the business day
immediately prior to the last business day before the Closing Date (as
hereinafter defined) (the "Per-Share Price"), rounded up to the nearest whole
share (the "Shares").
Section 1.2 Closing. The closing of the purchase and sale of the Shares
herein described (the "Closing") shall occur on March __, 1995, or on a
subsequent date which shall be determined by the parties (the "Closing Date"),
and shall take place at the offices of the Seller, 14103 Denver West Parkway,
Golden, CO 80401 at 10:00 a.m. Mountain time.
Section 1.3 Delivery of Shares. On the Closing Date, Seller shall deliver
to Buyer such certificate or certificates, in such denominations as Buyer may
reasonably request, representing the Shares, issued in the name of Buyer.
ARTICLE 2.
PURCHASE PRICE AND PAYMENT
--------------------------
The aggregate purchase price (the "Purchase Price") for the Shares shall be
$5,600,000.00. The Purchase Price shall be payable on the Closing Date by wire
transfer of immediately available funds to a bank or banks designated by Seller.
<PAGE>
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Seller represents, warrants, covenants,
and agrees as follows:
Section 3.1 Capitalization; Validity of Shares. Seller has authorized
capital stock consisting of 100,000,000 shares of Common Stock, of which
44,912,183 shares were issued and outstanding as of January 24, 1995, and
20,000,000 shares of $.01 par value preferred stock, of which no shares are
issued and outstanding. All of the issued and outstanding shares of Common Stock
of Seller are duly and validly authorized and issued, fully paid and
nonassessable, were offered, issued, and sold in accordance with applicable
federal and state securities laws and were not issued in violation of the
preemptive rights of any stockholders of Seller. The Shares to be issued and
delivered to Buyer, when so issued and delivered, will be duly and validly
authorized and issued, fully paid and nonassessable, free and clear of any
security interest, lien, encumbrance, right, or restriction whatsoever arising
from Seller (except restrictions on resale under state or federal securities
laws). There are no outstanding options, warrants, conversion privileges,
commitments or demands of any character relating to the Shares arising from
Seller.
Section 3.2 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
Section 3.3 Authorization; Validity. Seller has full corporate power and
authority to enter into this Agreement and to perform all of Seller's covenants
and undertakings herein set forth, including, without limitation, the full
corporate power and authority to issue the Shares to Buyer free and clear of any
security interests, liens, encumbrances, rights, or restrictions arising from
Seller. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement is the legal, valid, and
binding obligation of Seller, enforceable in accordance with its terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, or similar laws affecting the enforcement of creditors' rights
generally, and except as enforcement of any particular remedy may be limited by
the application of equitable principles. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby will
(i) violate the Certificate of Incorporation or bylaws, as amended, of Seller;
(ii) violate or constitute a default under any provision of, or conflict with,
or result in acceleration of any obligation under, any mortgage, deed of trust,
note, loan, lease, or agreement to which Seller is a party or by which it or any
of its properties or assets may be bound, which violation, default, or conflict
would result in a material adverse effect on the business, assets, operations,
or condition (including, without limitation, financial) of Seller; or (iii)
violate any order, ruling, decree, judgment, arbitration award, or stipulation
to which Seller is subject, which violation would result in a material adverse
effect on the business, assets, operations or condition (including, without
limitation, financial) of Seller.
Section 3.4 SEC Reports and Financial Statements. Seller is subject to the
reporting requirements of Section 13 of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and has delivered to Buyer copies of all reports,
registration statements, and other filings filed
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<PAGE>
by Seller with the Securities and Exchange Commission (the "SEC") since December
26, 1993 under the 1934 Act and any filings with the SEC under the Securities
Act of 1933, as amended (the "1933 Act") (herein collectively called the "SEC
Reports"). As of the date of this Agreement, Seller has filed all regular and
periodic reports and proxy statements required to be filed by it with the SEC.
The SEC Reports taken together in the order filed correctly describe, among
other things, the business, operations, and principal properties of Seller and
its subsidiaries in accordance with the requirements of the respective
applicable report form. As of their respective dates of filing, none of the SEC
Reports contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
consolidated financial statements included in the SEC Reports were prepared in
accordance with generally accepted accounting principles (as in effect from time
to time) applied on a consistent basis (except as may be indicated therein or in
the notes or schedules thereto) and fairly present, as of the dates thereof, the
results of Seller's and its consolidated subsidiaries' operations and changes in
financial position for the periods specified, subject, in the case of the
unaudited interim financial statements, to normal year-end audited adjustments
and any other adjustments described therein or in the notes and schedules
thereto.
Section 3.5 Brokers. Seller has not dealt with any broker, finder,
commission agent, or other person in connection with the purchase of the Shares
and the transactions contemplated by this Agreement and is under no obligation
to pay any broker's fee or commission in connection with such transactions.
Section 3.6 Representations and Warranties; Survival. The representations,
warranties and covenants of Seller shall survive for a period of one year from
the Closing Date. When considered together with the SEC Reports and other
information made available to Buyer, no representation, warranty, or covenant
contained in this Agreement or in any written statement delivered pursuant
hereto contains any untrue material statement, nor shall such representations,
warranties, and covenants omit any statement necessary in order to make any
material statement not misleading in light of the circumstances in which they
were made.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer represents, warrants, covenants, and
agrees as follows:
Section 4.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
Section 4.2 Authorization. Buyer has full corporate power and authority
to enter into this Agreement and to perform all of Buyer's covenants and
undertakings herein set forth. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been, or will
prior to the Closing Date be, duly authorized by all necessary corporate action
on the part of Buyer. This Agreement is the legal, valid, and binding obligation
of Buyer, enforceable in accordance with its terms, except as such enforcement
may
I-3
<PAGE>
be limited by applicable bankruptcy, insolvency, moratorium, or similar laws
affecting the enforcement of creditors' rights generally, and except as
enforcement of any particular remedy may be limited by the application of
equitable principles.
Section 4.3 Investment. The Shares are being acquired by Buyer hereto not
with a view to any distribution or resale thereof in any transaction which would
be in violation of the 1933 Act, and rules promulgated thereunder, or any state
securities statute. Buyer can bear the economic risk of losing its investment in
the Shares and is presently able to afford the complete loss of such investment.
Buyer has such knowledge and experience in financial and business matters so as
to be capable of evaluating the merits and risks of an investment in the Shares.
Buyer has been furnished with the SEC Reports and acknowledges that it has been
afforded the opportunity (i) to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of Seller concerning the merits
and risks of investing in the Shares and (ii) to obtain such additional
information which Seller possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy and completeness of the
information contained in the SEC Reports. Buyer acknowledges that Seller has
answered all questions and responded to all inquiries and requests for
information to Buyer's satisfaction. Buyer acknowledges that it has made,
independently and without reliance upon the Seller (other than the
representations and warranties of the Seller set forth in Article III hereof) or
any agent or representative of the Seller and based on its own independent
analysis of the Seller and such other documents and information as it has deemed
appropriate, its own investment analysis and its own business decision to enter
into and consummate this Agreement and the transactions contemplated hereby.
Section 4.4 Legend on Shares. The Buyer understands that the Shares have
not been registered under the 1933 Act or any state securities laws, and that it
must therefore bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the 1933 Act or is exempt
from registration, and that the Shares will bear substantially the following
legend:
"The shares represented by this certificate are "Restricted
Securities". As such they may not be transferred unless (i)
such transfer is effected pursuant to a registration statement
which has been filed under the Securities Act of 1933 (the
"1933 Act") and declared effective by the Securities and
Exchange Commission, or (ii) in the written opinion of counsel,
acceptable to the issuer of these shares, such transfer may be
effected under and is in compliance with Rule 144 under the
1933 Act, as in effect on the date of such transfer, or is
otherwise exempt from the registration requirements of the
1933 Act."
Section 4.5 Brokers. Buyer has not dealt with any broker, finder,
commission agent, or other person in connection with the purchase of the Shares
and the transactions contemplated by this Agreement and is under no obligation
to pay any broker's fee or commission in connection with such transactions.
I-4
<PAGE>
ARTICLE 5.
CONDITIONS; TERMINATION
-----------------------
Section 5.1 Conditions to Obligations of Buyer. The obligations of Buyer
are, at the option of Buyer, subject to the conditions that, at the Closing
Date:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects.
(b) Performance by Seller. Seller shall have performed and complied with
all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or on the Closing Date.
(c) Delivery of Certificates and Opinion. Seller shall have delivered to
Buyer (i) a certificate executed by the Vice Chairman or any Vice President of
Seller, as of the Closing Date, certifying to the fulfillment of the conditions
specified in subparagraphs (a) and (b) hereinabove; (ii) duly adopted
resolutions of the Board of Directors of Seller, certified by the Secretary or
any Assistant Secretary thereof as of the Closing Date, authorizing and
approving the execution of this Agreement on behalf of Seller and the
consummation of the transactions contemplated herein in accordance with its
terms; and (iii) an opinion of the General Counsel of the Seller, dated the
Closing Date, in substantially the form attached hereto as Exhibit A.
(d) No Adverse Changes. There shall have been no material adverse change in
the properties, business, or financial condition of Seller from that reflected
in the SEC Reports, and Seller shall not have suffered any substantial loss or
damage to its properties or assets not otherwise covered by insurance that would
materially and adversely affect or impair its ability to conduct its business.
(e) Registration Rights Agreement. Seller shall have executed and delivered
to Buyer that certain Registration Rights Agreement in substantially the form
attached hereto as Exhibit B (the "Registration Rights Agreement").
Section 5.2 Conditions to Obligations of Seller. The obligations of Seller
hereunder are, at the option of Seller, subject to the conditions that, at the
Closing Date:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects.
(b) Performance by Buyer. Buyer shall have performed and complied with all
agreements and conditions required by this Agreement to be performed or complied
with by it prior to or on the Closing Date.
(c) Delivery of Certificates. Buyer shall have delivered to Seller (i) a
certificate executed by an officer of Buyer, as of the Closing Date, certifying
to the fulfillment of the conditions specified in subparagraphs (a) and (b)
hereinabove; and (ii) duly adopted resolutions of the Board of Directors of
Buyer certified by the Secretary or any Assistant Secretary thereof as of the
Closing Date, authorizing and approving the execution of this
I-5
<PAGE>
Agreement on behalf of Buyer and the consummation of the transactions
contemplated herein in accordance with its terms.
(d) Registration Rights Agreement. Buyer shall have executed and delivered
to Seller the Registration Rights Agreement.
Section 5.3 Termination. This Agreement may be terminated by Buyer on the
Closing Date if any condition precedent to Buyer's obligations hereunder is not
fulfilled on the Closing Date. Such termination shall not prejudice any claim
that Buyer may have hereunder as a consequence of any failure or default of
Seller. This Agreement may be terminated by Seller on the Closing Date if any
condition precedent to Seller's obligations hereunder is not fulfilled on the
Closing Date. Such termination shall not prejudice any claim that Seller may
have hereunder as a consequence of any failure or default of Buyer. Seller and
Buyer shall apply their reasonable best efforts to fulfill all conditions
precedent necessary to consummate this Agreement.
ARTICLE 6.
SHARE PRICE GUARANTEE
---------------------
Section 6.l Agreement to Guarantee. Seller agrees, on the terms and
subject to the conditions set forth herein, to guarantee the sales price of
those Shares sold by Buyer during the Guarantee Period (as hereinafter defined)
(the "Guarantee Shares").
Section 6.2 Conditions to Share Price Guarantee. Seller's obligations under
Section 6.l hereof are subject to the following conditions:
(a) Buyer sells the Guarantee Shares within the first thirty
trading days on which the NASDAQ National Market is open for business
immediately following the date notification by Seller to Buyer that the SEC has
declared effective the registration statement registering the Shares is received
by Buyer, except that such thirty trading day period shall be extended as needed
if Buyer is unable to sell Shares within such period for reasons beyond Buyer's
control (the "Guarantee Period");
(b) The Guarantee Shares are sold through Merrill Lynch, Pierce,
Fenner & Smith Incorporated to one or more persons not affiliated with, related
to, or associated with Buyer;
(c) The average price per share received in such sales, net of
broker's commissions, is less than the Per-Share Price (such per-share shortfall
to be referred to as the "Per-Share Shortfall");
(d) Seller receives notice from the Buyer within 14 days of the
expiration of the Guarantee Period of the amount of the Per-Share Shortfall with
copies of applicable confirmation slips attached thereto ("Notice"); and
(e) During any trading day during the Guarantee Period Buyer sells
only that number of Shares that is equal to or less than 3-1/3% of the total
number of Shares received by Buyer hereunder.
I-6
<PAGE>
Section 6.3 Payment of Per-Share Shortfall. In the event Buyer satisfies
all of the conditions set forth in Section 6.2, Seller shall pay to Buyer,
within three business days of receipt of the Notice, an amount in cash equal to
the Per-Share Shortfall multiplied by the number of Guarantee Shares sold during
the Guarantee Period.
Section 6.4 Assignment of Share Price Guarantee. Buyer may, without
Seller's consent, assign its rights under this Article VI to one or more persons
to whom it may subsequently transfer the Shares in compliance with the 1933 Act
and all applicable state securities laws; provided, however, that such persons
may not further assign such rights without Seller's prior written consent. To
the extent that Buyer assigns its rights under this Article VI to more than one
person, each person shall have such rights separately from the others with
respect to the Shares transferred to such person, provided that in order to have
the benefit of such rights, the person must satisfy all of the obligations set
forth in Section 6.2 hereof, including, but not limited to, selling, during any
trading day during the Guarantee Period, only that number of Shares that is
equal to or less than 5% of the total number of Shares transferred to such
person.
ARTICLE 7.
MISCELLANEOUS PROVISIONS
------------------------
Section 7.1 Notices. All notices, requests, demands, and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand or by electronic
transmission. If sent by reliable overnight delivery service and addressed as
follows, or at such other addresses as the parties hereto may from time to time
designate in writing, such notices, requests, demands, and other communications
shall be deemed delivered the next business day after being so duly sent:
To Buyer: Progressive Bagel Concepts, Inc.
1526 Cole Blvd.
Suite 200
Golden, Colorado 80401
Attention: Chairman
Facsimile: (303) 202-3360
With a copy to: Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601
Attention: Michael G. Brennan, Esq.
Facsimile: (312) 984-2299
To Seller: Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 384-5339
I-7
<PAGE>
With a copy to: Bell, Boyd & Lloyd
Three First National Plaza
Suite 3200
70 West Madison Street
Chicago, Illinois 60602
Attention: Paul A. Strasen, Esq.
Facsimile: (312) 372-2098
Section 7.2 Prior Agreements. This Agreement supersedes all prior
discussions and agreements between Buyer and Seller with respect to the purchase
of the Shares and the other matters contained herein, and this Agreement and the
agreements referred to herein contain the sole and entire agreement between the
parties hereto with respect to the transactions contemplated herein.
Section 7.3 Modifications. This Agreement may be modified or amended only
by a written instrument executed by the parties hereto.
Section 7.4 Counterparts, Headings, Etc. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument. The
headings herein set out are for convenience of reference only and shall not be
deemed a part of this Agreement.
Section 7.5 Assignment. Subject to compliance with the 1933 Act and all
applicable state securities laws, Buyer's rights hereunder shall be assignable,
including Buyer's rights under Article VI hereof; provided, however, that such
assignee of Buyer may not further assign such rights without the prior written
consent of Seller. To the extent that Buyer assigns its rights under this
Agreement to more than one individual, each individual shall have such rights
separately from the others with respect to the Shares transferred to him.
Section 7.6 Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
Section 7.7 Governing Law. The validity and effect of this Agreement and
the rights and obligations of the parties hereto shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware.
Section 7.8 Further Assurances. From time to time at Buyer's request
(whether at or after the Closing) Seller will execute and deliver, at Seller's
expense, such further instruments of conveyance and transfer and will take such
other action as Buyer may reasonably request in order to more effectively vest
the Shares in Buyer.
Section 7.9 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
I-8
<PAGE>
Section 7.10 Adjustment of Shares. Seller agrees that the formulae used in
determining the Shares and the Per-Share Shortfall shall be appropriately
adjusted to eliminate the impact of any dividend (whether in cash, securities or
other property), stock split, reclassification, recapitalization, reverse split,
or similar event, announced or occurring with respect to the Shares and with a
record date after execution of this Agreement and before the Closing Date.
BOSTON CHICKEN, INC.
By:
----------------------------
Name:
--------------------------
Its:
--------------------------
PROGRESSIVE BAGEL CONCEPTS, INC.
By:
----------------------------
Name:
--------------------------
Its:
---------------------------
I-9
<PAGE>
Exhibit A
---------
Opinion of
Donald J. Bingle, Esq.,
Vice President and General Counsel of
Boston Chicken, Inc.
<PAGE>
March ____, 1995
Progressive Bagel Concepts, Inc.
1526 Cole Boulevard
Suite 200
Golden, CO 80401
Gentlemen:
I have served as General Counsel to Boston Chicken, Inc., a Delaware
corporation ("BCI"), in connection with that certain Stock Purchase Agreement
dated March 24, 1995 (the "Stock Purchase Agreement") and that certain
Registration Rights Agreement dated March 24, 1995 (the "Registration Rights
Agreement"), in each case, by and between BCI and Progressive Bagel Concepts,
Inc., a Delaware corporation (the "Buyer"). Capitalized terms used in this
opinion and not otherwise defined herein shall have the meanings ascribed to
them in the Stock Purchase Agreement and the Registration Rights Agreement, as
the case may be. This opinion is being delivered pursuant to Section 5.1(c) of
the Stock Purchase Agreement.
In connection with this opinion, I have, or another attorney under my
supervision has, examined, and I have relied upon, the originals or copies
certified or otherwise identified to my satisfaction of such records, documents,
certificates, agreements, memoranda, and other instruments, including the Stock
Purchase Agreement and the Registration Rights Agreement and the schedules and
exhibits thereto and each document required to be executed thereunder, and have
made such inquiry of officers of BCI, as in my judgment are necessary to enable
me to render the opinions expressed below. As to factual matters, I have relied
upon and assumed the accuracy, completeness, and genuineness of (i) certificates
of public officials and officers of BCI and (ii) oral and written
representations and assurances made to me by officers and other representatives
of BCI and others. A copy of any such written representations and assurances in
my possession at the time of delivery of this opinion are attached hereto.
While I have no knowledge that any such factual matters are untrue, I have
performed no investigation or verification of such factual matters.
In rendering the opinions expressed below, I have assumed the following:
(i) all signatures (other than on behalf of BCI on the Stock Purchase Agreement
and Registration Rights Agreement, the exhibits thereto, and closing documents
thereunder)
<PAGE>
Progressive Bagel Concepts, Inc.
March ____, 1995
Page Two of Four
appearing on all documents are valid and genuine; (ii) the documents shown to me
are complete and no modifications to any thereof exist; (iii) the documents
submitted to me as certified or photostatic copies of original documents conform
to such original documents; (iv) the originals of such certified or photostatic
copies are authentic; (v) the representations and warranties as to factual
matters made by BCI in each of the Stock Purchase Agreement and Registration
Rights Agreement are true and complete as of the Closing Date with the same
force and effect as though such representations and warranties had been made on,
as of, and with reference to the Closing Date; (vi) you have received all of the
documents that you were required to receive under the Stock Purchase Agreement
and the Registration Rights Agreement; (vii) each individual who executes any
document is legally competent to do so; (viii) each party (other than BCI) that
has executed or will execute a document to which BCI is a signatory has all
requisite power and authority and has taken all necessary action duly and
validly to execute and deliver such document and to perform the transactions
contemplated thereby, and such party's obligations thereunder are its, his, or
her legal, valid, and binding obligations, enforceable against such party in
accordance with their respective terms; and (ix) each person executing any
instrument, document, or agreement on behalf of any party (other than BCI) is
duly authorized to do so.
This opinion does not relate to any law other than the laws of the General
Corporation Law of the State of Delaware and the federal laws of the United
States of America, as currently in effect, it being understood, however, that I
am not admitted to the practice of law in the State of Delaware. To the extent
that laws other than the foregoing are applicable with respect to the matters
set forth in this opinion, I have assumed that such laws are either identical
to, or would be applied in a manner consistent with, the laws of the State of
Illinois, in which state I am admitted to practice. I assume no obligation to
supplement this letter if any of the applicable laws change in any manner.
I express no opinion with respect to (i) the availability of equitable
remedies, including specific performance; (ii) the compliance or noncompliance
with state securities laws, rules, and regulations or the antifraud provisions
of state and federal laws, rules and regulations concerning the issuance of
securities; (iii) the enforceability of any documents under bankruptcy,
moratorium, fraudulent conveyance, preference, or other similar laws or
equitable principles relating to or affecting the rights of creditors generally;
(iv) the limitations on the enforceability of any document by reason of
principles of equity, whether such principles are applied by a court of equity
or a court of law; and (v) the recoverability of attorneys fees.
On the basis of, and in reliance upon, the foregoing, and subject to the
qualifications contained herein, I am of the opinion that:
<PAGE>
Progressive Bagel Concepts, Inc.
March ____, 1995
Page Three of Four
1. BCI's authorized capital stock consists of 100,000,000 shares of Common
Stock, $0.01 par value per share, and 20,000,000 shares of preferred stock,
$0.01 par value per share. All of the issued and outstanding shares of BCI's
Common Stock have been duly and validly authorized and issued, and are fully
paid and nonassessable. The Shares have been duly and validly authorized and
when issued upon receipt of the purchase price therefore in accordance with the
terms and provisions of the Stock Purchase Agreement, will be fully paid and
nonassessable, free and clear of any security interest, lien, encumbrance,
right, or restriction whatsoever arising from BCI (except restrictions on resale
under state or federal securities laws), and there are no outstanding options,
warrants, conversion privileges, commitments, or demands of any character
relating to the Shares arising from BCI.
2. BCI is a corporation duly organized, and validly existing in good
standing under the laws of the State of Delaware. BCI has full corporate power
and authority to enter into the Stock Purchase Agreement in accordance with its
terms and such Stock Purchase Agreement and all transactions required thereunder
have been duly authorized and approved by all necessary corporate action of BCI.
3. Each of the Stock Purchase Agreement and the Registration Rights
Agreement is the legal, valid and binding obligation of BCI, enforceable in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, moratorium, or similar laws affecting the
enforcement of creditors' rights generally, and except as enforcement of any
particular remedy may be limited by the application of equitable principles.
4. Neither the execution and delivery of the Stock Purchase Agreement or
the Registration Rights Agreement nor the consummation of the transactions
contemplated thereby will (i) violate the Certificate of Incorporation or
bylaws, as amended, of BCI; (ii) violate or constitute an occurrence of default
under any provision of, or conflict with, or result in acceleration of any
obligation under, any mortgage, deed of trust, note, loan, lease, or agreement
to which it or any of its properties or assets may be bound; or (iii) violate
any order, ruling, decree, judgment, arbitration award, or stipulation to which
BCI is subject.
<PAGE>
Progressive Bagel Concepts, Inc.
March _____, 1995
Page Four of Four
This opinion is furnished by me, as General Counsel for BCI, to you solely
for your benefit and pursuant to the requirements of the Stock Purchase
Agreement upon the understanding that I am not hereby assuming any professional
responsibility to any other person. This opinion may not be used for any other
purpose, and may not be circulated, exhibited, quoted, or otherwise referred to
for any purpose without my express prior written consent. The opinions
expressed in this letter are limited to the matters set forth herein, and no
other opinions should be inferred beyond the matters expressly stated herein.
Notwithstanding the foregoing, Buyer's counsel may rely on this opinion in
connection with any resale of the Shares and assignment of its rights and
obligations under the Stock Purchase Agreement and the Registration Rights
Agreement.
Very truly yours,
----------------------------
Donald J. Bingle
General Counsel
DJB/kac
<PAGE>
EXHIBIT B
---------
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
March __, 1995, between BOSTON CHICKEN, INC., a Delaware corporation ("BCI"),
and PROGRESSIVE BAGEL CONCEPTS INC., a Delaware corporation ("PBC").
SECTION 1. Piggyback Registration.
(a) Registrable Securities. "Registrable Securities" shall mean those
restricted shares of BCI common stock, $.01 par value, acquired by PBC pursuant
to the Stock Purchase Agreement of even date herewith, by and between BCI and
PBC (the "BCI Stock Purchase Agreement").
(b) Right to Piggyback. BCI hereby agrees to effect a registration of
certain of its outstanding securities, including the Registrable Securities,
under the Securities Act of 1933, as amended (the "Act"), on Form S-3 (the
"Registration Statement") within 30 days of the closing of the transactions
contemplated by the BCI Stock Purchase Agreement (the "Closing"). BCI will also
include in such Registration Statement all BCI securities ("Earlier Securities")
desired to be registered by persons or entities having superior registration
rights pursuant to that certain Second Amended and Restated Piggyback
Registration Rights Agreement dated November 8, 1993 (the "Superior Agreement"),
in accordance with the terms and conditions of the Superior Agreement (together
with the registration of the Registrable Securities, the "Piggyback
Registration").
SECTION 2. Registration Procedures.
(a) BCI will prepare and file with the Securities and Exchange Commission
(the "Commission") the Registration Statement within 30 days of the Closing and
will include therein the Registrable Securities and such Earlier Securities as
comply with the procedures of the Superior Agreement, will prepare and file all
amendments, post-effective amendments and supplements to the Registration
Statement as may be necessary under the Act and the regulations thereunder to
permit the sale of such Earlier Securities and Registrable Securities to the
public, and will use its reasonable best efforts to cause such Registration
Statement to become effective and remain effective for a period of not less than
two years or until such time as all of the securities covered by the
Registration Statement have been sold (provided that before filing the
Registration Statement, BCI will furnish to counsel selected by the holders of
Registrable Securities copies of the Registration Statement for review by such
counsel).
(b) BCI will use its reasonable best efforts to (i) register or qualify
such Earlier Securities and Registrable Securities under such other securities
or blue sky laws of such jurisdictions as any of the sellers of such Earlier
Securities and Registrable Securities (collectively, the "Sellers" and
individually, a "Seller") reasonably request, and (ii) do any and all other acts
and things which may be reasonably necessary to allow Sellers to consummate the
disposition in such jurisdictions of such Earlier Securities and Registrable
Securities owned by
<PAGE>
such Sellers; provided, however, that BCI will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subparagraph (b), (ii) subject itself to
taxation in any such jurisdiction, or (iii) consent to general service of
process in any such jurisdiction.
(c) BCI will use its reasonable efforts to cause all such Earlier
Securities and Registrable Securities to be included for quotation on the NASDAQ
National Market.
(d) Upon the request of BCI, each Seller of Registrable Securities will
promptly furnish to BCI in writing, during the period within which BCI is
required to effect such registration, all information and affidavits as may be
reasonably requested by BCI in connection with items required to be included in
the Registration Statement, or any amendment or supplement thereto. To the
extent BCI reasonably requests such information and affidavits and the Seller
does not provide such information or affidavits in a timely manner, then, BCI's
obligation to register such Seller's Registrable Securities hereunder shall be
null and void.
(e) BCI will furnish to each Seller of Registrable Securities such number
of copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Seller.
(f) BCI will notify each Seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such Seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
(g) BCI will provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of the Registration
Statement.
(h) BCI hereby represents and warrants that it is eligible to file the
Registration Statement on Form S-3 pursuant to the rules and regulations
pertaining thereto under the Securities Act.
SECTION 3. Registration Expenses. The Sellers of Registrable Securities
under this Agreement will bear all underwriting discounts and commissions, if
any, and the fees and disbursements of their legal counsel and accountants
("Registration Expenses"). BCI will bear all other expenses in connection with
any registration or qualification of the Registrable Securities pursuant to this
Agreement.
B-2
<PAGE>
SECTION 4. Indemnification.
(a) BCI agrees to indemnify, to the extent permitted by law, each Seller
of Registrable Securities, and each person, if any, who controls such Seller
within the meaning of the Act, against any and all losses, claims, damages or
liabilities to which the Sellers of Registrable Securities may become subject
under the Act or any other statute or common law by reason of its offer and sale
of Registrable Securities pursuant to the Registration Statement, and to
reimburse the Sellers of Registrable Securities for any reasonable legal or
other expenses actually and reasonably incurred in connection with investigating
any claims and defending any actions, insofar as such losses. claims, damages,
liabilities or actions arise out of, or are based upon:
(i) any untrue statement of a material fact or any alleged untrue
statement of a material fact contained in or incorporated by reference in the
Registration Statement or any post-effective amendment thereto, or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; or
(ii) any untrue statement of a material fact or any alleged untrue
statement of a material fact contained or incorporated by reference in the
prospectus (as amended or supplemented if BCI shall have filed with the
Commission any amendment or supplement thereto), if used within the period
during which BCI is required to keep the Registration Statement in which such
prospectus is contained current pursuant to the terms of this Agreement, or the
omission or alleged omission to state therein a material fact necessary in order
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the
indemnification agreement contained herein shall not apply to losses, claims,
damages, liabilities or actions arising out of, or based upon, any such untrue
statement or any such omission or alleged omission, if such statement or
omission was made in reliance upon, and in conformity with, information
furnished to BCI by or on behalf of any Seller of Registrable Securities for use
in connection with the preparation of the Registration Statement or any
prospectus contained in the Registration Statement or any such amendment or
supplement thereto.
(b) The Sellers of Registrable Securities shall (in the same manner and to
the same extent as set forth in Section 4(a)), severally indemnify, to the
extent permitted by law, BCI, each person, if any, who controls BCI within the
meaning of the Act, and their directors and officers, if such statement or
omission was made in reliance upon and in conformity with information furnished
to BCI by or on behalf of any Seller of Registrable Securities for use in
connection with the preparation of the Registration Statement or any amendment
or supplement thereto.
(c) Any person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification (provided, however, that any failure by a person entitled
to indemnification hereunder to give such prompt written notice shall not
adversely affect such person's rights hereunder unless such failure prejudices
the rights of the indemnifying party hereunder) and (ii) unless in such
B-3
<PAGE>
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of such counsel a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
SECTION 5. REGISTRATION RIGHTS OF OTHER SECURITY HOLDERS. The registration
rights granted pursuant to this Agreement are granted subject to any and all
registration rights granted by BCI to holders of its securities prior to the
date hereof, and no provision herein shall be interpreted so as to be superior
to, inconsistent with, or adversely effect, any such previously granted
registration rights.
SECTION 6. Miscellaneous.
(a) Amendments. The provisions of this Agreement may be amended only upon
the written consent of BCI and PBC, or in the event there is more than one
holder of Registrable Securities, only upon the written consent of BCI and the
holders of a majority of the Registrable Securities.
(b) Assignment. This Agreement is binding upon the parties hereto and their
respective successors and assigns. Subject to compliance with the Act, PBC's
rights hereunder shall be assignable; provided, however, that such assignee of
PBC may not further assign such rights without the prior written consent of BCI.
To the extent that PBC assigns its rights under this Agreement to more than one
person, each person shall have such rights separately from the others with
respect to the Registrable Securities owned by him.
(c) Counterparts. This Agreement may be executed in separate counterparts
each of which will be an original and all of which taken together will
constitute one and the same agreement.
(d) Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered if delivered by hand or by electronic
transmission. If sent by reliable overnight delivery service and addressed as
follows, or at such other addresses as the parties hereto may from time to time
designate in writing, such notices, requests, demands, and other communications
shall be deemed delivered the next business day after being so duly sent:
B-4
<PAGE>
To BCI:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401-4086
Attn: Legal Department
To PBC:
Progressive Bagel Concepts, Inc.
1526 Cole Boulevard
Suite 200
Golden, Colorado 80401
Attn: Chairman
Facsimile: (303) 202-3360
(e) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement on the day and year first above written.
BOSTON CHICKEN, INC.
By:
----------------------------
Its:
---------------------------
PROGRESSIVE BAGEL CONCEPTS,
INC.
By:
----------------------------
Its:
---------------------------
B-5
<PAGE>
EXHIBIT 2.F(1)
TAX LOAN NOTE
-------------
$ , 199
------------- ---------- --
FOR VALUE RECEIVED, the undersigned, OFFERDAHL'S BAGEL GOURMET, INC., a
Florida corporation ("Maker"), promises to pay to the order of PROGRESSIVE BAGEL
CONCEPTS, INC., a Delaware corporation ("Payee"), with an address at 1526 Cole
Boulevard, Suite 200, Golden, Colorado 80401 or at such other place as Payee may
from time to time in writing designate, in lawful money of the United States and
in immediately available funds, the principal sum of $__________ Dollars
($__________), without interest. This Note is one of a series of notes issued or
to be issued pursuant to Section 2.F of the Agreement to Contribute Assets dated
March __, 1995 among Progressive Bagel Concepts, Inc., Offerdahl's Bagel
Gourmet, Inc. and the shareholders of Offerdahl's Bagel Gourmet, Inc. (the
"Notes").
The principal sum shall be payable on April 15, 2001; provided, however,
that (i) there shall be mandatory prepayments of principal under the Notes in an
aggregate amount equal to 50% of the amount of cash distributed to Maker by BC
Equity Funding, L.L.C., a Delaware limited company ("Equity Funding"), in the
form of distributions, redemptions, upon liquidation or otherwise, in respect of
the Pledged Units (as hereinafter defined) or received upon the sale of the
Pledged Units or upon the sale of any assets distributed in-kind by Equity
Funding in respect of the Pledged Units (collectively, the "Cash Proceeds"),
each such prepayment to be apportioned among the Notes in proportion to their
respective outstanding principal balances and to be made within five business
days after receipt of the corresponding Cash Proceeds, and (ii) in the event the
cumulative Cash Proceeds that have been received by Maker through April 15,
2001, are not equal to at least twice the aggregate original principal amount of
the Notes, then the maturity date of the Notes shall be extended until such time
as the cumulative Cash Proceeds that have been received by Maker are equal to
twice the aggregate original principal amount of the Notes.
The principal of this Note may be prepaid in part or in full, without
penalty, at any time prior to the Maturity Date.
This Note is subject to the terms and conditions of that certain Tax Loan
Pledge Agreement of even date herewith between Maker and Payee (the "Tax Loan
Pledge Agreement") and is secured by the pledge by Maker of ______ units of
membership interest in Equity Funding, as described therein (the "Pledged
Units").
The following events shall constitute a default ("Default") hereunder:
(i) Failure to pay any principal hereunder when due; or
2.F(1)-1
<PAGE>
(ii) Maker makes an assignment for the benefit of creditors, becomes
insolvent or admits in writing the inability to pay its debts as they
mature or generally is not paying its debts as they become due, or
applies for, consents to or acquiesces in the appointment of a
trustee, receiver or other custodian for itself or any of its
property; or
(iii) Any bankruptcy, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law, or any liquidation case or
proceeding shall be instituted by or against Maker, unless any of the
foregoing acts have been stayed, dismissed or discharged, as the case
may be, within sixty (60) days after the occurrence thereof; or
(iv) Failure to perform or observe any other covenant or agreement of
Maker contained herein or any covenant or agreement in the Tax Loan
Pledge Agreement and the continuance of such failure for a period of
thirty (30) days after written notice from Payee; or
(v) Any representation or warranty of Maker made herein or in the Tax
Loan Pledge Agreement shall prove to have been false or misleading in
any material respect as of the date hereof; or
(vi) The dissolution of Maker.
Upon and after the occurrence of a Default, this Note shall, without demand,
notice or legal process of any kind, become immediately due and payable, and
Payee may proceed to exercise any other rights and remedies against Maker which
Payee may have at law, in equity or otherwise.
Upon and after a Default, interest shall accrue on the amount of the
principal balance outstanding at an annual rate equal to the "Prime Rate" plus
2%. The "Prime Rate" shall mean that rate of interest most recently announced or
published by the Bank of America Illinois, its successors or assigns, in
Chicago, Illinois as its prime rate or base rate for commercial loans, which may
not be the lowest interest rate charged by Bank of America Illinois. Such
interest shall be calculated at a daily rate equal to l/360th of the annual rate
stated above and shall change with any change in the Prime Rate.
Maker waives presentment for payment, notice of dishonor, protest and
notice of protest. The remedies of Payee as provided herein or in the Tax Loan
Pledge Agreement or any other instrument securing this Note, shall be cumulative
and concurrent, and may be pursued singularly, successively or together, at the
sole discretion of Payee, and may be exercised as often as occasion therefor
shall arise. Failure of Payee, for any period of time or on more than one
occasion, to exercise Payee's option to accelerate this Note shall not
constitute a waiver of the right to exercise the same at any time thereafter in
the event of any subsequent Default. No act of omission or commission of Payee,
including specifically any failure to exercise any right,
2.F(1)-2
<PAGE>
remedy or recourse, shall be deemed to be a waiver or release of such right,
remedy or recourse or any other right, remedy or recourse at any time. A waiver
or release with reference to any one event shall not be construed as a waiver or
release or any subsequent event or as a bar to any subsequent exercise of
Payee's rights or remedies hereunder and any waiver or release hereunder shall
be effected only through a written document executed by Payee and then only to
the extent specifically recited therein.
From and after the occurrence of a Default, Maker shall pay to Payee all
reasonable attorneys' fees, court costs and all other legal costs and expenses
in connection with the collection or enforcement of this Note.
From and after the occurrence of a Default, Payee is expressly authorized
to apply payments made under this Note as Payee may elect against any or all
amounts, or portions thereof, then due and payable hereunder or under the Tax
Loan Pledge Agreement, including, without limitation, the outstanding principal
balance due under this Note, legal expenses or any combination of the foregoing.
Words used herein, regardless of the number or gender specifically used,
shall be deemed and construed to include any other number, singular or plural,
or any other gender, masculine, feminine or neuter, as the context requires.
This Note may be assigned, endorsed or otherwise transferred by Payee and
shall inure to the benefit of Payee and Payee's successors, endorsees,
transferees and assigns and shall be binding upon the undersigned and its
successors and assigns.
In the event any portion of this instrument shall be considered unlawful or
unenforceable, but may be made lawful or enforceable by limitation or reduction
thereof, such portion shall be enforced to the extent of such limitation or
reduction as is necessary to render this Note lawful or enforceable; if any such
portion of this instrument may not be made lawful or enforceable by any such
limitation or reduction, such portion shall be deemed stricken from this
instrument, and the remaining part of this instrument shall continue in full
force and effect.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Delaware (without regard to conflict of laws
principles).
IN WITNESS WHEREOF, Maker has set its hand on the date first above written.
OFFERDAHL'S BAGEL GOURMET,
INC.
By:
-----------------------
2.F(l)-3
<PAGE>
EXHIBIT 2.F(2)
TAX LOAN PLEDGE AGREEMENT
-------------------------
THIS TAX LOAN PLEDGE AGREEMENT (this "Agreement") is made and entered into
on __________, 1995, by OFFERDAHL'S BAGEL GOURMET, INC., a Florida corporation
(the "Pledgor"), in favor of PROGRESSIVE BAGEL CONCEPTS, INC., a Delaware
corporation (the "Lender").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Pledgor is the owner of 4.2 units of membership interest in BC
Equity Funding, L.L.C., a Delaware limited liability company ("Equity Funding"),
as herein set forth (the "Pledged Units"), and
WHEREAS, the Pledgor has executed certain Promissory Notes dated as of
April 15, 1995, June 15, 1995, September 15, 1995 and April 15, 1996 payable to
Lender (the "Notes"); and
WHEREAS, the Lender has required, as a condition to extending the loan
which is evidenced by the Note, that the Pledgor (i) pledge to the Lender, and
grant to the Lender a security interest in, the Pledged Collateral (as defined
herein) and (ii) execute and deliver this Pledge Agreement in order to secure
the payment and performance by the Pledgor of the Obligations (as defined
herein).
AGREEMENT
---------
NOW THEREFORE, in consideration of the premises and in order to induce the
Lender to extend the loan evidenced by the Note, the Pledger hereby covenants
and agrees with the Lender as follows:
SECTION 1. PLEDGE. The Pledgor hereby pledges to the Lender, and grants to
the Lender a continuing first priority and perfected security interest in, the
following (the "Pledged Collateral"): (i) the Pledged Units and the certificates
representing the Pledged Units, and (ii) all products and proceeds of any of the
Pledged Units including, without limitation, all dividends (in cash or in
securities of the Lender), cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Units.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures the payment of
all of the obligations of the Pledgor to the Lender pursuant to the Note and
this Agreement, whether for principal, interest, fees, expenses or otherwise
(the "Obligations").
<PAGE>
SECTION 3. DELIVERY OF PLEDGED UNITS. All certificates or instruments
representing or evidencing the Pledged Units shall be delivered to and held by
or on behalf of the Lender pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to the
Lender.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants as follows:
(a) The Pledgor is the legal and beneficial owner of the Pledged
Collateral, free and clear of any lien.
(b) Upon the delivery to the Lender of the Pledged Collateral, the
pledge of the Pledged Collateral pursuant to this Agreement creates a valid and
perfected first priority interest in the Pledged Collateral securing the payment
of the Obligations for the benefit of the Lender.
(c) No authorization, approval, or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required either
(i) for the pledge by the Pledgor of the Pledged Collateral pursuant to this
Agreement or for the execution, delivery or performance of this Agreement by the
Pledgor or (ii) for the exercise by the Lender of the voting or other rights
provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement (except as may be required in connection
with such disposition by laws affecting the offering and sale of securities).
(d) The Pledgor has all requisite corporate power and authority to
enter into this Agreement and has the right to vote, pledge and grant a security
interest in the Pledged Shares as provided by this Agreement.
(e) This Agreement has been duly authorized, executed and delivered by
the Pledgor and constitutes a legal, valid and binding obligation of the
Pledgor, enforceable against the Pledgor in accordance with its terms, except as
such enforceability may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or general principles of equity.
SECTION 5. FURTHER ASSISTANCE. The Pledgor agrees that at any time and from
time to time, at the expense of the Lender, the Pledgor will promptly execute
and deliver, or cause to be executed and delivered, all stock powers, proxies,
assignments, instruments and documents and take all further action, that is
reasonably necessary, at the Lender's request, in order to perfect any security
interest granted or purported to be granted hereby or to enable the Lender to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral and to carry out the provisions and purposes hereof.
2.F(2)-2
<PAGE>
SECTION 6. VOTING RIGHTS; DISTRIBUTIONS.
(a) So long as no Default (as defined in the Note) shall have
occurred and be continuing, the Pledgor shall be entitled to exercise any and
all voting and other consensual rights pertaining to the Pledged Shares or any
part thereof for any purpose not inconsistent with the terms of this Agreement;
provided, however, that the Pledgor shall not exercise or shall refrain from
exercising any such right if such action would have a material adverse effect on
the value of the Pledged Collateral or any part thereof or be inconsistent with
or violate any provisions of this Agreement.
(b) So long as no Default shall have occurred and be continuing, the
Pledger shall be entitled to receive all cash distributions paid from time to
time in respect of the Pledged Shares, so long as 50% of such distributions are
applied to the prepayment of the Note.
(c) Any and all distributions paid or payable in the form of
instruments and other property (other than cash dividends permitted under
Section 6(b) hereof) received, receivable or otherwise distributed in respect
of, or in exchange for , any Pledged Collateral, shall be forthwith delivered to
the Lender to hold as Pledged Collateral and shall, if received by the Pledgor,
be received in trust for the benefit of the Lender, be segregated from the other
property or funds of the Pledgor, and be forthwith delivered to the Lender as
Pledged Collateral in the same form as so received (with any necessary
endorsement).
(d) The Lender shall execute and deliver (or cause to be executed
and delivered) to the Pledger all such proxies and other instruments as the
Pledgor may reasonably request for the purpose of enabling the Pledger to
exercise the voting and other rights which it is entitled to exercise pursuant
to Section 6(a) hereof.
(e) All distributions received by the Pledger contrary to the
provisions of this Section 6 shall be received in trust for the benefit of the
Lender, shall be segregated from other funds of the Pledgor and shall be
forthwith paid over to the Lender as Pledged Collateral in the same form as so
received (with any necessary endorsement).
(f) Upon the occurrence and during the continuance of a Default, (i)
all rights of the Pledger to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section 6(a) hereof
shall cease, and all such rights shall thereupon become vested in the Lender,
which shall thereupon have the sole right to exercise such voting and other
consensual rights and (ii) all distributions payable in respect of the Pledged
Shares shall be paid to the Lender and the Pledgor's right to receive such cash
payments pursuant to Section 6(b) hereof shall immediately cease.
SECTION 7. TRANSFERS AND OTHER LIENS; SALES; ADDITIONAL SHARES. The
Pledgor agrees that it will not (i) sell or otherwise dispose of, or grant any
option with respect to, any of the Pledged Collateral without the prior written
consent of the Lender, except that Pledgor may sell Pledged Units in any
transaction in which 50% of the net proceeds
2.F(2)-3
<PAGE>
of the sale are applied to the prepayment of the Note, provided, however, that
if 50% of the net proceeds of such sale exceed all amounts owed by the Pledgor
under the terms of the Note, the Pledgor shall be entitled to retain such excess
net proceeds, (ii) create or permit to exist any lien upon or with respect to
any of the Pledged Collateral, or (iii) enter into any agreement or
understanding that purports to or may restrict or inhibit the Lender's rights or
remedies hereunder, including, without limitation, the Lender's right to sell or
otherwise dispose of the Pledged Collateral.
SECTION 8. AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby appoints
the Lender as the Pledgor's attorney-in-fact, with full authority in the place
and stead of the Pledgor and in the name of the Pledgor or otherwise, from time
to time in the Lender's discretion to take any action and to execute any
instrument which the Lender may deem reasonably necessary or advisable to
further perfect and protect the security interest granted hereby, including,
without limitation, to receive, endorse and collect all instruments made payable
to the Pledgor representing any dividend, interest or principal payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same.
SECTION 9. AGENT MAY PERFORM. If the Pledgor fails to perform any agreement
contained herein, the Lender may itself perform, or cause performance of, such
agreement, and the reasonable expenses of the Lender incurred in connection
therewith shall be payable by the Pledgor under Section 13 hereof.
SECTION 10. NO ASSUMPTION OF DUTIES; REASONABLE CARE. The rights and powers
granted to the Lender hereunder are being granted in order to preserve and
protect the Lender's security interest in and to the Pledged Collateral granted
hereby and shall not be interpreted to, and shall not, impose any duties on the
Lender in connection therewith. The Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Lender accords its own property, it being understood that the
Lender shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not the Lender has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
SECTION 11. SUBSEQUENT CHANGES AFFECTING COLLATERAL. The Pledgor represents
to the Lender that the Pledgor has made its own arrangements for keeping
informed of changes or potential changes affecting the Pledged Collateral
(including, but not limited to, rights to convert, rights to subscribe, payment
of dividends, reorganization or other exchanges, tender offers and voting
rights), and the Pledgor agrees that the Lender shall have no responsibility or
liability for informing the Pledgor of any such changes or potential changes or
for taking any action or omitting to take any action with respect thereto.
SECTION 12. REMEDIES UPON DEFAULT. If any Default shall have occurred and
be continuing, the Lender shall, in addition to all other rights given by law or
by this Agreement
2.F(2)-4
<PAGE>
or otherwise, have all of the rights and remedies with respect to the Pledged
Collateral of a secured party under the Uniform Commercial Code ("Code") in
effect in the State of Delaware at that time and the Lender may, without notice
and at its option, transfer or register, and the Pledgor shall register or cause
to be registered upon request therefor by the Lender, the Pledged Collateral or
any part thereof on the books of the Lender into the name of the Lender or the
Lender's nominee(s), indicating that such Pledged Collateral is subject to the
security interest hereunder. In addition, with respect to any Pledged
Collateral which shall then be in or shall thereafter come into the possession
or custody of the Lender may sell or cause the same to be sold by any broker's
board or at public or private sale, in one or more sales or lots, at such price
or prices as the Lender may deem best, for cash or on credit or for future
delivery, without assumption of any credit risk, all in accordance with the
terms and provisions of this Agreement and the Code. The purchaser of any or
all Pledged Collateral so sold shall thereafter hold the same absolutely, free
from any claim, encumbrance or right of any kind whatsoever. The Lender or any
other lender may, in its own name or in the name of a designee or nominee, buy
any of the Pledged Collateral at any public sale and, if permitted by applicable
law, at any private sale. All expenses (including court costs and reasonable
attorneys' fees, expenses and disbursements) of, or incident to, the enforcement
of any of the provisions hereof shall be recoverable from the proceeds of the
sale or other disposition of the Pledged Collateral. In addition, upon the
occurrence or during the continuance of a Default, all rights of the Pledgor to
exercise the voting and other rights which it would otherwise be entitled to
exercise shall cease, and all such rights shall thereupon become vested in the
Lender as provided in and subject to the terms of Section 6(f) hereof.
SECTION 13. EXPENSES. From and after the occurrence of a Default, the
Pledgor will pay to the Lender the amount of any and all reasonable expenses,
including, without limitation, the reasonable fees, expenses and disbursements
of its counsel, of any investment banking firm, business broker or other selling
agent and of any other experts and agents retained by the Lender, which the
Lender may incur in connection with (i) the exercise or enforcement of any of
the rights of the Lender hereunder of (ii) the failure by the Pledgor to perform
or observe any of the provisions hereof.
SECTION 14. SECURITY INTEREST ABSOLUTE. All rights of the Lender and
security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of: (i) any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Obligations; or (ii) any exchange, surrender, release or non-perfection of any
other collateral.
SECTION 15. LEGEND ON PLEDGED UNITS. Each certificate evidencing the
Pledged Units shall bear the following legends:
"The shares represented by this certificate are subject to certain
covenants and agreements contained in that certain Tax Loan Pledge
Agreement by and among Offerdahl's Bagel Gourmet, Inc. and Progressive
Bagel Concepts, Inc. dated , 1995."
2.F(2)-5
<PAGE>
SECTION 16. MISCELLANEOUS PROVISIONS.
(a) Notices. All notices, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered by hand or by electronic transmission. If mailed, first
class, certified mail, postage prepaid, or sent by reliable overnight delivery
service and addressed as follows, or at such other addresses as the parties
hereto may from time to time designate in writing, such notices, requests,
demands, and other communications shall be deemed delivered three business days
after being so duly posted or the next business day if sent by overnight
delivery service:
To Lender: Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, Colorado 80401
Attention: General Counsel
Telephone: (303) 278-9500
Facsimile: (303) 384-5334
To Pledgor: Offerdahl's Bagel Gourmet, Inc.
929 Shotgun Road
Sunrise, Florida 33326
Telephone: (305) 452-1156
Facsimile: (305) 475-2606
(b) Headings. The headings in this Agreement are for purposes of reference
only and shall not affect the meaning or construction of any provision of this
Agreement.
(c) Severability. The provisions of this Agreement are severable, and if
any clause or provisions shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
in that jurisdiction only such clause or provision, or part thereof, and shall
not in any manner affect such clause or provision in any other jurisdiction or
any other clause or provision of this Agreement in any jurisdiction.
(d) Interpretation of Agreement. All terms not defined herein shall have
the meaning set forth in the Code, except where the context otherwise requires.
Acceptance of or acquiescence in a course of performance rendered under this
Agreement shall not be relevant to determine the meaning of this Agreement even
though the accepting or acquiescing party had knowledge of the nature of the
performance and opportunity for objection.
(e) Continuing Security Interest. This Agreement shall create a continuing
security interest in the Pledged Collateral and shall (i) remain in full force
and effect until payment in full of the Obligations and the cancellation of the
Note, (ii) be binding upon the Pledgor, its successors and assigns, and (iii)
inure, together with the rights and remedies of the
2.F(2)-6
<PAGE>
Lender and its successors, transferees and assigns, to the benefit of the
Lender's successors, endorsees, transferees and assigns.
(f) Reinstatement. To the extent permitted by law, this Agreement shall
continue to be effective or be reinstated if at any time any amount received by
the Lender or any Lender in respect of the Obligations is rescinded or must
otherwise be restored or returned by the Lender or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Pledgor or upon the appointment of any receiver, intervenor, conservator,
trustee or similar official for the Pledgor or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
(g) Survival of Provisions. All representations, warranties and covenants
of the Pledgor contained herein shall survive the execution and delivery of this
Agreement, and shall terminate only upon the full and final payment and
performance by the Pledgor of the Obligations secured hereby and cancellation of
the Note.
(h) Waivers. The Pledgor waives, and agrees that it shall not at any time
insist upon, plead or in any manner whatever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, marshaling of assets or
redemption laws, or exemption, whether now or at any time hereafter in force,
which may delay, prevent or otherwise affect the performance by the Pledgor of
its obligations under this Agreement. The Pledgor hereby waives notice of
acceptance, maturity, extension of time, change in nature or form of the
Obligations, acceptance of further security, release of further security,
composition or agreement arrived at as to the amount of, or the terms of, the
Obligations, notice of adverse change in the Pledgor's financial condition or
any other fact which might materially increase the risk to the Pledgor with
respect to any of the Obligations or all other demands and notices whatsoever
and waives the benefit of all provisions of law which are or might be in
conflict with the terms of this Agreement. The Pledgor represents, warrants and
agrees that, as of the date of this Agreement, its obligations under this
Agreement are not subject to any offsets or defenses of any kind against the
Lender.
(i) Authority of the Lender. The Lender shall have and be entitled to
exercise all powers hereunder which are specifically granted to the Lender by
the terms hereof, together with such powers as are reasonably incident thereto.
The Lender may perform any of its duties hereunder or in connection with the
Pledged Collateral by or through agents or employees and shall be entitled to
retain counsel and to act in reliance upon the advice of counsel concerning all
such matters. Neither the Lender nor any director, officer, employee, attorney
or agent of the Lender shall be liable to the Pledgor for any action taken or
omitted to be taken by it or them hereunder, except for its or their own gross
negligence or willful misconduct, nor shall the Lender be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Lender and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document reasonably believed by it or them to be genuine and correct and to
have been signed or sent by the proper person or persons.
2.F(2)-7
<PAGE>
(j) Release; Termination of Agreement. Subject to the provisions of
Sections 15(g) and 15(h) hereof, this Agreement and the security interests
created hereunder shall automatically terminate upon full and final payment and
performance of all the Obligations and the cancellation of the Note. Upon such
termination the Lender shall promptly return to the Pledgor the certificates
evidencing the Pledged Units, if any, and take any other steps necessary to
evidence the termination of such security interests.
(k) Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be deemed an original but all of
which shall together constitute one and the same agreement.
(1) Governing Law. The validity and effect of this Agreement and the rights
and obligations of the parties hereto shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware.
(m) WAIVER OF DAMAGES; WAIVER OF NOTICE. THE PLEDGOR AGREES THAT THE LENDER
SHALL NOT HAVE ANY LIABILITY TO THE PLEDGOR (WHETHER SOUNDING IN TORT, CONTRACT
OR OTHERWISE) WITH RESPECT TO, AND THE PLEDGOR HEREBY WAIVES, RELEASES AND
AGREES NOT TO SUE UPON ANY CLAIM FOR, ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES SUFFERED BY THE PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR
IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED OR THE RELATIONSHIP
ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A JUDGMENT OF A COURT THAT IS
BINDING ON THE LENDER (WHICH JUDGMENT SHALL BE FINAL AND NOT SUBJECT TO REVIEW
ON APPEAL), THAT SUCH DAMAGES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART
OF THE LENDER CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
2.F(2)-8
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Lender have each caused this Agreement
to be duly executed and delivered as of the date first above written.
OFFERDAHL'S BAGEL GOURMET, INC.,
a Florida corporation
By:
- ------------------------------- --------------------------------
Name:
------------------------------
Title:
- ------------------------------- -----------------------------
PROGRESSIVE BAGEL CONCEPTS, INC.,
a Delaware corporation
By:
- ------------------------------- --------------------------------
Name:
------------------------------
Title:
- ------------------------------- -----------------------------
2.F(2)-9
<PAGE>
SCHEDULE "A"
------------
PLEDGED SHARES
--------------
Number of Share Certificate Pledged Shares Numbers
- --------------------------- -------------- -------
A-1
<PAGE>
EXHIBIT 5.U(1)
NONRECOURSE PROMISSORY NOTE
$437,496.69 March __, 1995
FOR VALUE RECEIVED, the undersigned, OFFERDAHL'S BAGEL GOURMET, INC.
("Maker"), promises to pay to the order of PROGRESSIVE BAGEL CONCEPTS, INC., a
Delaware corporation ("Payee") with an address at 1526 Cole Boulevard, Suite
200, Golden, Colorado 80401 or at such other place as Payee may from time to
time in writing designate, in lawful money of the United States and in
immediately available funds, the principal sum of Four Hundred Thirty Seven
Thousand Four Hundred Ninety-Six Dollars and Sixty-Nine Cents ($437,496.69).
Interest shall accrue on principal balance outstanding at an annual rate equal
to the "Prime Rate" plus one percent (1%). The "Prime Rate" shall mean that rate
of interest most recently announced or published by the Bank of America
Illinois, its successors or assigns, in Chicago, Illinois as its prime rate or
base rate for commercial loans, which rate may not be the lowest interest rate
charged by Bank of America Illinois. Such interest shall be calculated at a
daily rate equal to 1/360th of the annual rate stated above and shall change
with any change in the Prime Rate.
The principal sum and any interest accrued thereon shall be payable on
April 15, 2001; provided, however, that (i) there shall be mandatory payments of
interest and prepayments of principal under this Note in an aggregate amount
equal to 75% of the amount of cash distributed to Maker by Payee, in the form of
dividends, distributions, redemptions, upon liquidation or otherwise, or
received upon the sale of shares of capital stock in Payee owned by Maker or
upon the sale of any assets distributed in-kind by Payee, in each case net of
the excess of all income taxes payable in respect of the amounts received over
income taxes saved by reason of the deduction of interest hereunder
(collectively, the "Net Cash Proceeds"), such payments and prepayments to be
made within five business days after the receipt of the corresponding Net Cash
Proceeds, and (ii) in the event the cumulative Net Cash Proceeds that have been
received by Maker through April 15, 2001, are not equal to at least 133 1/3% of
the aggregate principal amount of the Note and all interest accrued thereon
through such date, then the maturity date of the Note shall be extended until
such time as the cumulative Net Cash Proceeds that have been received by Maker
are equal to 133 1/3% of the original principal amount of the Note and all
interest accrued thereon through such date.
This Note is not a personal obligation of Maker and the liability of Maker
under this Note shall be limited to, and satisfied solely from, the Pledged
Shares (as herein defined).
The principal sum and any interest accrued thereon may be prepaid in
whole or in part at any time without premium or penalty at any time prior to the
Maturity Date.
<PAGE>
This Note is secured by, and is subject to the terms and conditions of,
that certain Additional Transferee Shares Pledge Agreement of even date herewith
between Maker and Payee (the "Stock Pledge Agreement") and is secured by a
pledge by Maker of 370.82 shares of common stock of Payee, as described herein
(the "Pledged Shares").
The following events shall constitute a default hereunder:
(i) Failure to pay any principal hereunder when due; or
(ii) Maker makes an assignment for the benefit of creditors,
becomes insolvent or admits in writing the inability to pay
its debts as they mature or generally is not paying its debts
as they become due, or applies for, consents to or acquiesces
in the appointment of a trustee, receiver or other custodian
for itself or any of its property; or
(iii) Any bankruptcy, debt arrangement or other case or proceeding
under any bankruptcy or insolvency law, or any liquidation
case or proceeding shall be instituted by or against Maker,
unless any of the foregoing acts have been stayed, dismissed
or discharged, as the case may be, within sixty (60) days
after the occurrence thereof; or
(iv) failure to perform or observe any other covenant or
agreement of Maker contained herein or any other covenant or
agreement in the Pledge Agreement and the continuance of such
failure for a period of thirty (30) days after written notice
from Payee;
(v) Any representation or warranty of Maker or in the Pledge
Agreement shall prove to be false or misleading in any
material respect as of the date hereof; or
(vi) the dissolution of Maker.
Upon and after the occurrence of a Default, this Note shall, without
demand, notice or legal process of any kind, become immediately due and payable,
and Payee may proceed to exercise any other rights and remedies with respect to
this Note which Payee may have at law, in equity or otherwise.
Upon and after a Default, interest shall accrue on the amount of principal
balance outstanding at an annual rate equal to the Prime Rate plus two percent
(2%).
Maker waives presentment for payment, notice of dishonor, protest and
notice of protest. The remedies of Payee as provided herein or in the Pledge
Agreement or any other instrument securing this Note, shall be cumulative and
concurrent, and may be pursued singularly, successively or together, at the sole
discretion of Payee, and may be exercised as often as
5.U(1)-2
<PAGE>
occasion therefor shall arise. Failure of the Payee, for any period of time or
on more than one occasion, to exercise Payee's option to accelerate this Note
shall not constitute a waiver of the right to exercise the same at any time
thereafter in the event of any subsequent Default. No act of omission or
commission of Payee, including specifically any failure to exercise any right or
remedy shall be deemed a waiver or release of such right or remedy or any other
right or remedy at any time. A waiver or release with reference to any one event
shall not be construed as a waiver or release of any subsequent event or as a
bar to any subsequent exercise of Payee's rights or remedies hereunder and any
waiver or release hereunder shall be effected only through a written document
executed by Payee and then only to the extent specifically recited therein.
From and after the occurrence of a Default, Maker shall pay to Payee all
reasonable attorneys' fees, court costs and all other legal costs and expenses
in connection with the collection or enforcement of this Note.
From and after the occurrence of a Default, Payee is expressly authorized
to apply payments made under this Note as Payee may elect against any or all
amounts, or portions thereof, then due and payable hereunder or under the
Pledge Agreement, including, without limitation, the outstanding principal
balance due under this Note, legal expenses or any combination of the foregoing.
This Note may be assigned, endorsed or otherwise transferred by Payee and
shall inure to the benefit of Payee and Payee's successors. endorsees,
transferees and assigns and shall be binding upon the undersigned and its
successors and assigns.
In the event any portion of this instrument shall be considered unlawful or
unenforceable, but may be made lawful or enforceable by limitation or reduction
thereof, such portion shall be enforced to the extent of such limitation or
reduction as is necessary to render this Note lawful or enforceable; if any such
portion of this instrument may not be made lawful or enforceable by any such
limitation or reduction, such portions shall be deemed stricken from this
instrument, and the remaining part of this instrument shall continue in force
and effect.
Words used herein, regardless of the number or gender specifically used,
shall be deemed and construed to include any other number, singular or plural,
or any other gender, masculine, feminine or neuter, as the context requires.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Delaware (without regard to conflict of laws
principles).
5.U(1)-3
<PAGE>
IN WITNESS WHEREOF, Maker has set its hand on the date first above written.
OFFERDAHL'S BAGEL GOURMET, INC
By:___________________________
Its:__________________________
5.U(1)-4
<PAGE>
EXHIBIT 5.U(2)
FORM OF ADDITIONAL TRANSFEREE SHARES
PLEDGE AGREEMENT
----------------
THIS FORM OF ADDITIONAL TRANSFEREE SHARES PLEDGE AGREEMENT (this "Agreement")
is made and entered into on , 1995, by OFFERDAHL'S BAGEL GOURMET, INC.,
a Florida corporation (the "Pledgor"), in favor of PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, the Pledgor is the owner of the outstanding shares of common stock of
the Lender set forth on Schedule A hereto (the "Pledged Shares"); and
WHEREAS, the Pledgor has executed a certain Promissory Note in the principal
amount of $437,496.69 of even date herewith payable to Lender (the "Note"); and
WHEREAS, the Lender has required, as a condition to extending the loan which
is evidenced by the Note, that the Pledgor (i) pledge to the Lender, and grant
to the Lender a security interest in, the Pledged Collateral (as defined herein)
and (ii) execute and deliver this Pledge Agreement in order to secure the
payment and performance by the Pledgor of the Obligations (as defined herein).
AGREEMENT
NOW THEREFORE, in consideration of the premises and in order to induce the
Lender to extend the loan evidenced by the Note, the Pledgor hereby covenants
and agrees with the Lender as follows:
SECTION 1. PLEDGE. The Pledgor hereby pledges to the Lender, and grants to the
Lender a continuing first priority and perfected security interest in, the
following (the "Pledged Collateral"): (i) the Pledged Shares and the
certificates representing the Pledged Shares, and (ii) all products and proceeds
of any of the Pledged Shares including, without limitation, all dividends (in
cash or in securities of the Lender), cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures the payment of all
of the obligations of the Pledgor to the Lender pursuant to the Note and this
Agreement, whether for principal, interest, fees, expenses or otherwise (the
"Obligations").
SECTION 3. DELIVERY OF PLEDGED SHARES. All certificates or instruments
representing or evidencing the Pledged Shares shall be delivered to and held by
or on behalf of the Lender pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be
<PAGE>
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Lender.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants as follows:
(a) The Pledgor is the legal and beneficial owner of the Pledged Collateral,
free and clear of any lien.
(b) Upon the delivery to the Lender of the Pledged Collateral, the pledge of
the Pledged Collateral pursuant to this Agreement creates a valid and perfected
first priority interest in the Pledged Collateral securing the payment of the
Obligations for the benefit of the Lender.
(c) No authorization, approval, or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required either (i) for
the pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement
or for the execution, delivery or performance of this Agreement by the Pledgor
or (ii) for the exercise by the Lender of the voting or other rights provided
for in this Agreement or the remedies in respect of the Pledged Collateral
pursuant to this Agreement (except as may be required in connection with such
disposition by laws affecting the offering and sale of securities).
(d) The Pledgor has all requisite corporate power and authority to enter into
this Agreement and has the right to vote, pledge and grant a security interest
in the Pledged Shares as provided by this Agreement.
(e) This Agreement has been duly authorized, executed and delivered by the
Pledgor and constitutes a legal, valid and binding obligation of the Pledgor,
enforceable against the Pledgor in accordance with its terms, except as such
enforceability may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or general principles of equity.
SECTION 5. FURTHER ASSISTANCE. The Pledgor agrees that at any time and from
time to time, at the expense of the Lender, the Pledgor will promptly execute
and deliver, or cause to be executed and delivered, all stock powers, proxies,
assignments, instruments and documents and take all further action, that is
reasonably necessary, at the Lender's request, in order to perfect any security
interest granted or purported to be granted hereby or to enable the Lender to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral and to carry out the provisions and purposes hereof.
SECTION 6. VOTING RIGHTS; DIVIDENDS.
(a) So long as no Default (as defined in the Note) shall have occurred and be
continuing, the Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Shares or any part thereof for
any purpose not inconsistent with the
5.U(2)-2
<PAGE>
terms of this Agreement; provided, however, that the Pledgor shall not exercise
or shall refrain from exercising any such right if such action would have a
material adverse effect on the value of the Pledged Collateral or any part
thereof or be inconsistent with or violate any provisions of this Agreement.
(b) So long as no Default shall have occurred and be continuing, the Pledgor
shall be entitled to receive all cash dividends paid from time to time in
respect of the Pledged Shares.
(c) Any and all dividends or other distributions paid or payable in the form
of instruments and other property (other than cash dividends permitted under
Section 6(b) hereof) received, receivable or otherwise distributed in respect
of, or in exchange for, any Pledged Collateral, shall be forthwith delivered to
the Lender to hold as Pledged Collateral and shall, if received by the Pledgor,
be received in trust for the benefit of the Lender, be segregated from the other
property or funds of the Pledgor, and be forthwith delivered to the Lender as
Pledged Collateral in the same form as so received (with any necessary
endorsement).
(d) The Lender shall execute and deliver (or cause to be executed and
delivered) to the Pledgor all such proxies and other instruments as the Pledgor
may reasonably request for the purpose of enabling the Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to Section
6(a) hereof.
(e) All dividends or other distributions received by the Pledgor contrary to
the provisions of this Section 6 shall be received in trust for the benefit of
the Lender, shall be segregated from other funds of the Pledgor and shall be
forthwith paid over to the Lender as Pledged Collateral in the same form as so
received (with any necessary endorsement).
(f) Upon the occurrence and during the continuance of a Default, (i) all
rights of the Pledgor to exercise the voting and other consensual rights which
it would otherwise be entitled to exercise pursuant to Section 6(a) hereof shall
cease, and all such rights shall thereupon become vested in the Lender, which
shall thereupon have the sole right to exercise such voting and other consensual
rights and (ii) all cash dividends or other distributions payable in respect of
the Pledged Shares shall be paid to the Lender and the Pledgor's right to
receive such cash payments pursuant to Section 6(b) hereof shall immediately
cease.
SECTION 7. TRANSFERS AND OTHER LIENS; SALES; ADDITIONAL SHARES. The Pledgor
agrees that it will not (i) sell or otherwise dispose of, or grant any option
with respect to, any of the Pledged Collateral without the prior written consent
of the Lender, except that Pledgor may sell Pledged Shares in any transaction in
which 75% of the Net Cash Proceeds (as defined in the Note) are applied to the
payment of principal and interest on the Note; provided, however, that if 75% of
the Net Cash Proceeds exceeds all amounts owed by the Pledgor under the terms of
the Note, the Pledgor shall be entitled to retain such excess Net Cash Proceeds,
(ii) create or permit to exist any lien upon or with respect to any of the
Pledged Collateral, or (iii) enter into any agreement or understanding that
purports to or may restrict or
5.U(2)-3
<PAGE>
inhibit the Lender's rights or remedies hereunder, including, without
limitation, the Lender's right to sell or otherwise dispose of the Pledged
Collateral.
SECTION 8. AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby appoints the
Lender as the Pledgor's attorney-in-fact, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time to
time in the Lender's discretion to take any action and to execute any instrument
which the Lender may deem reasonably necessary or advisable to further perfect
and protect the security interest granted hereby, including, without limitation,
to receive, endorse and collect all instruments made payable to the Pledgor
representing any dividend, interest or principal payment or other distribution
in respect of the Pledged Collateral or any part thereof and to give full
discharge for the same.
SECTION 9. AGENT MAY PERFORM. If the Pledgor fails to perform any agreement
contained herein, the Lender may itself perform, or cause performance of, such
agreement, and the reasonable expenses of the Lender incurred in connection
therewith shall be payable by the Pledgor under Section 13 hereof.
SECTION 10. NO ASSUMPTION OF DUTIES: REASONABLE CARE. The rights and powers
granted to the Lender hereunder are being granted in order to preserve and
protect the Lender's security interest in and to the Pledged Collateral granted
hereby and shall not be interpreted to, and shall not, impose any duties on the
Lender in connection therewith. The Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Lender accords its own property, it being understood that the
Lender shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not the Lender has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
SECTION 11. SUBSEQUENT CHANGES AFFECTING COLLATERAL. The Pledgor represents to
the Lender that the Pledgor has made its own arrangements for keeping informed
of changes or potential changes affecting the Pledged Collateral (including, but
not limited to, rights to convert, rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights), and the
Pledgor agrees that the Lender shall have no responsibility or liability for
informing the Pledgor of any such changes or potential changes or for taking any
action or omitting to take any action with respect thereto.
SECTION 12. REMEDIES UPON DEFAULT. If any Default shall have occurred and be
continuing, the Lender shall, in addition to all other rights given by law or by
this Agreement or otherwise, have all of the rights and remedies with respect to
the Pledged Collateral of a secured party under the Uniform Commercial Code
("Code") in effect in the State of Delaware at that time and the Lender may,
without notice and at its option, transfer or register, and the Pledgor shall
register or cause to be registered upon request therefor by the Lender, the
Pledged Collateral or any part thereof on the books of the Lender into the name
of the Lender or the
5.U(2)-4
<PAGE>
Lender's nominee(s), indicating that such Pledged Collateral is subject to the
security interest hereunder. In addition, with respect to any Pledged Collateral
which shall then be in or shall thereafter come into the possession or custody
of the Lender, the Lender may sell or cause the same to be sold at any broker's
board or at public or private sale, in one or more sales or lots, at such price
or prices as the Lender may deem best, for cash or on credit or for future
delivery, without assumption of any credit risk, all in accordance with the
terms and provisions of this Agreement and the Code. The purchaser of any or all
Pledged Collateral so sold shall thereafter hold the same absolutely, free from
any claim, encumbrance or right of any kind whatsoever. The Lender or any other
lender may, in its own name or in the name of a designee or nominee, buy any of
the Pledged Collateral at any public sale and, if permitted by applicable law,
at any private sale. All expenses (including court costs and reasonable
attorneys' fees, expenses and disbursements) of, or incident to, the enforcement
of any of the provisions hereof shall be recoverable from the proceeds of the
sale or other disposition of the Pledged Collateral. In addition, upon the
occurrence or during the continuance of a Default, all rights of the Pledgor to
exercise the voting and other rights which it would otherwise be entitled to
exercise shall cease, and all such rights shall thereupon become vested in the
Lender as provided in and subject to the terms of Section 6(f) hereof.
SECTION 13. EXPENSES. From and after the occurrence of a Default, the
Pledgor will pay to the Lender the amount of any and all reasonable expenses,
including, without limitation, the reasonable fees, expenses and disbursements
of its counsel, of any investment banking firm, business broker or other selling
agent and of any other experts and agents retained by the Lender, which the
Lender may incur in connection with (i) the exercise or enforcement of any of
the rights of the Lender hereunder or (ii) the failure by the Pledgor to perform
or observe any of the provisions hereof.
SECTION 14. SECURITY INTEREST ABSOLUTE. All rights of the Lender and
security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of: (i) any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Obligations; or (ii) any exchange, surrender, release or nonperfection of any
other collateral.
SECTION 15. LEGEND ON PLEDGED UNITS. Each certificate evidencing the
Pledged Units shall bear the following legends:
"The shares represented by this certificate are subject to
certain covenants and agreements contained in that certain Additional
Transferee Shares Pledge Agreement by and among Offerdahl's Bagel
Gourmet, Inc. and Progressive Bagel Concepts, Inc. dated March ,
1995."
5.U(2)-5
<PAGE>
SECTION 16. MISCELLANEOUS PROVISIONS.
(a) Notices. All notices, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered by hand or by electronic transmission. If mailed, first
class, certified mail, postage prepaid, or sent by reliable overnight delivery
service and addressed as follows, or at such other addresses as the parties
hereto may from time to time designate in writing, such notices, requests,
demands, and other communications shall be deemed delivered three business days
after being so duly posted or the next business day if sent by overnight
delivery service:
To Lender: Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, Colorado 80401
Attention: General Counsel
Telephone: (303) 278-9500
Facsimile: (303) 384-5334
To Pledgor: Offerdahl's Bagel Gourmet, Inc.
929 Shotgun Road
Sunrise, Florida 33326
Telephone: (305) 452-1156
Facsimile: (305) 475-2606
(b) Headings. The headings in this Agreement are for purposes of
reference only and shall not affect the meaning or construction of any provision
of this Agreement.
(c) Severability. The provisions of this Agreement are severable, and if
any clause or provisions shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall affect
in that jurisdiction only such clause or provision, or part thereof, and shall
not in any manner affect such clause or provision in any other jurisdiction or
any other clause or provision of this Agreement in any jurisdiction.
(d) Interpretation of Agreement. All terms not defined herein shall have
the meaning set forth in the Code, except where the context otherwise requires.
Acceptance of or acquiescence in a course of performance rendered under this
Agreement shall not be relevant to determine the meaning of this Agreement even
though the accepting or acquiescing party had knowledge of the nature of the
performance and opportunity for objection.
(e) Continuing Security Interest. This Agreement shall create a
continuing security interest in the Pledged Collateral and shall (i) remain in
full force and effect until payment in full of the Obligations and the
cancellation of the Note, (ii) be binding upon the Pledgor, its successors and
assigns, and (iii) inure, together with the rights and remedies of the Lender
and its successors, transferees and assigns, to the benefit of the Lender's
successors, endorsees, transferees and assigns.
5.U(2)-6
<PAGE>
(f) Reinstatement. To the extent permitted by law, this Agreement shall
continue to be effective or be reinstated if at any time any amount received by
the Lender or any Lender in respect of the Obligations is rescinded or must
otherwise be restored or returned by the Lender or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Pledgor or upon the appointment of any receiver, intervenor, conservator,
trustee or similar official for the Pledgor or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
(g) Survival of Provisions. All representations, warranties and covenants
of the Pledgor contained herein shall survive the execution and delivery of this
Agreement, and shall terminate only upon the full and final payment and
performance by the Pledgor of the Obligations secured hereby and cancellation of
the Note.
(h) Waivers. The Pledgor waives, and agrees that it shall not at any time
insist upon, plead or in any manner whatever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, marshaling of assets or
redemption laws, or exemption, whether now or at any time hereafter in force,
which may delay, prevent or otherwise affect the performance by the Pledgor of
its obligations under this Agreement. The Pledgor hereby waives notice of
acceptance, maturity, extension of time, change in nature or form of the
Obligations, acceptance of further security, release of further security,
composition or agreement arrived at as to the amount of, or the terms of, the
Obligations, notice of adverse change in the Pledgor's financial condition or
any other fact which might materially increase the risk to the Pledgor with
respect to any of the Obligations or all other demands and notices whatsoever
and waives the benefit of all provisions of law which are or might be in
conflict with the terms of this Agreement. The Pledgor represents, warrants and
agrees that, as of the date of this Agreement, its obligations under this
Agreement are not subject to any offsets or defenses of any kind against the
Lender.
(i) Authority of the Lender. The Lender shall have and be entitled to
exercise all powers hereunder which are specifically granted to the Lender by
the terms hereof, together with such powers as are reasonably incident thereto.
The Lender may perform any of its duties hereunder or in connection with the
Pledged Collateral by or through agents or employees and shall be entitled to
retain counsel and to act in reliance upon the advice of counsel concerning all
such matters. Neither the Lender nor any director, officer, employee, attorney
or agent of the Lender shall be liable to the Pledgor for any action taken or
omitted to be taken by it or them hereunder, except for its or their own gross
negligence or willful misconduct, nor shall the Lender be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Lender and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document reasonably believed by it or them to be genuine and correct and to
have been signed or sent by the proper person or persons.
(j) Release; Termination of Agreement. Subject to the provisions of
Sections 15(g) and l5(h) hereof, this Agreement and the security interests
created hereunder shall automatically terminate upon full and final payment and
performance of all the Obligations and the cancellation
5.U(2)-7
<PAGE>
of the Note. Upon such termination the Lender shall promptly return to the
Pledgor the certificates evidencing the Pledged Shares, and take any other steps
necessary to evidence the termination of such security interests.
(k) Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be deemed an original but all of
which shall together constitute one and the same agreement.
(l) Governing Law. The validity and effect of this Agreement and the
rights and obligations of the parties hereto shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware.
(m) WAIVER OF DAMAGES; WAIVER OF NOTICE. THE PLEDGOR AGREES THAT THE
LENDER SHALL NOT HAVE ANY LIABILITY TO THE PLEDGOR (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) WITH RESPECT TO, AND THE PLEDGOR HEREBY WAIVES, RELEASES
AND AGREES NOT TO SUE UPON ANY CLAIM FOR, ANY SPECIAL, INDIRECT, CONSEQUENTIAL
OR PUNITIVE DAMAGES SUFFERED BY THE PLEDGOR IN CONNECTION WITH, ARISING OUT OF,
OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED OR THE RELATIONSHIP
ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A JUDGMENT OF A COURT THAT IS
BINDING ON THE LENDER (WHICH JUDGMENT SHALL BE FINAL AND NOT SUBJECT TO REVIEW
ON APPEAL), THAT SUCH DAMAGES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART
OF THE LENDER CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
IN WITNESS WHEREOF, the Pledgor and the Lender have each caused this
Agreement to be duly executed and delivered as of the date first above written.
OFFERDAHL'S BAGEL GOURMET, INC.,
a Florida corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
PROGRESSIVE BAGEL CONCEPTS, INC.,
a Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
5.U(2)-8
<PAGE>
SCHEDULE A
----------
PLEDGED SHARES
Number of
Share Certificate
Pledged Shares Numbers
-------------- -------
5.U(2)-9
<PAGE>
EXHIBIT 5.U(3)
NONRECOURSE PROMISSORY NOTE
$1,312,500 March , 1995
FOR VALUE RECEIVED, the undersigned, OFFERDAHL'S BAGEL GOURMET, INC.
("Maker"), promises to pay to the order of PROGRESSIVE BAGEL CONCEPTS, INC., a
Delaware corporation ("Payee") with an address at 1526 Cole Boulevard, Suite
200, Golden, Colorado 80401 or at such other place as Payee may from time to
time in writing designate, in lawful money of the United States and in
immediately available funds, the principal sum of One Million Three Hundred and
Twelve Thousand Five Hundred Dollars ($1,312,500.00). Interest shall accrue on
the amount of principal balance outstanding at an annual rate equal to the
"Prime Rate" plus one percent (1%). The "Prime Rate" shall mean that rate of
interest most recently announced or published by the Bank of America Illinois,
its successors or assigns, in Chicago, Illinois as its prime rate or base rate
for commercial loans, which rate may not be the lowest interest rate charged by
Bank of America Illinois. Such interest shall be calculated at a daily rate
equal to 1/360th of the annual rate stated above and shall change with any
change in the Prime Rate.
The principal sum and any interest accrued thereon shall be payable on
April 15, 2001; provided, however, that (i) there shall be mandatory payments of
interest and prepayments of principal under the Note in an aggregate amount
equal to the amount of cash distributed to Maker by BC Equity Funding, L.L.C., a
Delaware limited company ("Equity Funding"), in the form of distributions,
redemptions, upon liquidation or otherwise in respect of the Equity Funding
Units (as hereinafter defined), or received upon the sale of the Equity Funding
Units or upon the sale of any assets distributed in-kind by Equity Funding in
respect of the Equity Funding Units, in each case net of the excess of all
income taxes payable in respect of the amounts received over income taxes saved
by reason of the deduction of interest hereunder (collectively, the "Net Cash
Proceeds"), such payments and prepayments to be made within five business days
after the receipt of the corresponding Net Cash Proceeds, and (ii) in the event
the cumulative Net Cash Proceeds that have been received by the Maker through
April 15, 2001, are not equal to the original principal amount of the Note, then
the maturity date of the Note shall be extended until such time as the
cumulative Net Cash Proceeds that have been received by Maker are equal to the
original principal amount of the Note and all interest accrued thereon through
such date.
This Note is not a personal obligation of Maker and the liability of Maker
under this Note shall be limited to, and satisfied solely from, the Equity
Funding Units (as herein defined).
The principal sum and any interest accrued thereon may be prepaid in whole
or in part at any time without premium or penalty at any time prior to the
Maturity Date.
<PAGE>
This Note is secured by, and is subject to the terms and conditions of,
that certain Additional Equity Funding Units Pledge Agreement of even date
herewith between Maker and Payee (the "Units Pledge Agreement") and is secured
by a pledge by Maker of 1.25 units of membership interest (the "Equity Funding
Units") in BC Equity Funding, L.L.C., a Delaware limited liability company, as
described herein.
The following events shall constitute a default hereunder:
(i) Failure to pay any principal hereunder when due; or
(ii) Maker makes an assignment for the benefit of creditors, becomes
insolvent or admits in writing the inability to pay its debts
as they mature or generally is not paying its debts as they
become due, or applies for, consents to or acquiesces in the
appointment of a trustee, receiver or other custodian for
itself or any of its property; or
(iii) Any bankruptcy, debt arrangement or other case or proceeding
under any bankruptcy or insolvency law, or any liquidation
case or proceeding shall be instituted by or against Maker,
unless any of the foregoing acts have been stayed, dismissed
or discharged, as the case may be, within sixty (60) days
after the occurrence thereof; or
(iv) failure to perform or observe any other covenant or agreement
of Maker contained herein or any other covenant or agreement in
the Units Pledge Agreement and the continuance of such failure
for a period of thirty (30) days after written notice from
Payee; or
(v) Any representation or warranty of Maker herein or in the Units
Pledge Agreement shall prove to be false or misleading in any
material respect as of the date hereof: or
(vi) the dissolution of Maker.
Upon and after the occurrence of a Default, this Note shall, without
demand, notice or legal process of any kind, become immediately due and
payable, and Payee may proceed to exercise any other rights and remedies with
respect to this Note which Payee may have at law, in equity or otherwise.
Upon and after a Default, interest shall accrue on the amount of principal
balance outstanding at an annual rate equal to the Prime Rate plus two percent
(2%).
Maker waives presentment for payment, notice of dishonor, protest and
notice of protest. The remedies of Payee as provided herein or in the Units
Pledge Agreement or any other instrument securing this Note, shall be cumulative
and concurrent, and may be pursued singularly, successively or together, at the
sole discretion of Payee, and may be exercised as often as
<PAGE>
occasion therefor shall arise. Failure of the Payee, for any period of time or
on more than one occasion, to exercise Payee's option to accelerate this Note
shall not constitute a waiver of the right to exercise the same at any time
thereafter in the event of any subsequent Default. No act of omission or
commission of Payee, including specifically any failure to exercise any right or
remedy shall be deemed a waiver or release of such right or remedy or any other
right or remedy at any time. A waiver or release with reference to any one event
shall not be construed as a waiver or release of any subsequent event or as a
bar to any subsequent exercise of Payee's rights or remedies hereunder and any
waiver or release hereunder shall be effected only through a written document
executed by Payee and then only to the extent specifically recited therein.
From and after the occurrence of a Default, Maker shall pay to Payee all
reasonable attorneys' fees, court costs and all other legal costs and expenses
in connection with the collection or enforcement of this Note.
From and after the occurrence of a Default, Payee is expressly authorized
to apply payments made under this Note as Payee may elect against any or all
amounts, or portions thereof, then due and payable hereunder or under the Units
Pledge Agreement, including, without limitation, the outstanding principal
balance due under this Note, legal expenses or any combination of the foregoing.
This Note may be assigned, endorsed or otherwise transferred by Payee and
shall inure to the benefit of Payee and Payee's successors, endorsers,
transferees and assigns and shall be binding upon the undersigned and its
successors and assigns.
In the event any portion of this instrument shall be considered unlawful or
unenforceable, but may be made lawful or enforceable by limitation or reduction
thereof, such portion shall be enforced to the extent of such limitation or
reduction as is necessary to render this Note lawful or enforceable, if any such
portion of this instrument may not be made lawful or enforceable by any such
limitation or reduction, such portion shall be deemed stricken from this
instrument, and the remaining part of this instrument shall continue in force
and effect.
Words used herein, regardless of the number or gender specifically used,
shall be deemed and construed to include any other number, singular or
plural, or any other gender, masculine, feminine or neuter, as the context
requires.
This Note shall be governed by and construed in accordance with the
internal laws of the State of Delaware (without regard to conflict of laws
principles).
IN WITNESS WHEREOF, Maker has set its hand on the date first above written.
OFFERDAHL'S BAGEL GOURMET, INC
By:____________________________
Its:___________________________
<PAGE>
EXHIBIT 5.U(4)
FORM OF ADDITIONAL EQUITY FUNDING
UNITS PLEDGE AGREEMENT
----------------------
THIS FORM OF ADDITIONAL EQUITY FUNDING UNITS PLEDGE AGREEMENT (this
"Agreement") is made and entered into on , 1995, by OFFERDAHL'S BAGEL GOURMET,
INC., a Florida corporation (the "Pledgor"), in favor of PROGRESSIVE BAGEL
CONCEPTS, INC., a Delaware corporation (the "Lender").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Pledgor is the owner of 1.25 units of membership interest in
BC Equity Funding, L.L.C., a Delaware limited liability company ("Equity
Funding"), as herein set forth (the "Pledged Units"); and
WHEREAS, the Pledgor has executed a certain Promissory Note in the
principal amount of $1,312,500 of even date herewith payable to Lender (the
"Note"); and
WHEREAS, the Lender has required, as a condition to extending the loan
which is evidenced by the Note, that the Pledgor (i) pledge to the Lender, and
grant to the Lender a security interest in, the Pledged Collateral (as defined
herein) and (ii) execute and deliver this Pledge Agreement in order to secure
the payment and performance by the Pledgor of the Obligations (as defined
herein).
AGREEMENT
---------
NOW THEREFORE, in consideration of the premises and in order to induce the
Lender to extend the loan evidenced by the Note, the Pledgor hereby covenants
and agrees with the Lender as follows:
SECTION 1. PLEDGE. The Pledgor hereby pledges to the Lender, and grants to
the Lender a continuing first priority and perfected security interest in, the
following (the "Pledged Collateral"): (i) the Pledged Units and the certificates
representing the Pledged Units, and (ii) all products and proceeds of any of the
Pledged Units including, without limitation, all distributions (in cash or in
securities of the Lender), cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Units.
SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures the payment of
all of the obligations of the Pledgor to the Lender pursuant to the Note and
this Agreement, whether for principal, interest, fees, expenses or otherwise
(the "Obligations").
<PAGE>
SECTION 3. DELIVERY OF PLEDGED UNITS. All certificates or instruments
representing or evidencing the Pledged Units, if any, shall be delivered to and
held by or on behalf of the Lender pursuant hereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
the Lender.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants as follows:
(a) The Pledgor is the legal and beneficial owner of the Pledged
Collateral, free and clear of any lien.
(b) Upon the delivery to the Lender of the Pledged Collateral, the
pledge of the Pledged Collateral pursuant to this Agreement creates a valid and
perfected first priority interest in the Pledged Collateral securing the payment
of the Obligations for the benefit of the Lender.
(c) No authorization, approval, or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required either
(i) for the pledge by the Pledgor of the Pledged Collateral pursuant to this
Agreement or for the execution, delivery or performance of this Agreement by the
Pledgor or (ii) for the exercise by the Lender of the voting or other rights
provided for in this Agreement or the remedies in respect of the Pledged
Collateral pursuant to this Agreement (except as may be required in connection
with such disposition by laws affecting the offering and sale of securities).
(d) The Pledgor has all requisite corporate power and authority to
enter into this Agreement and has the right to vote, pledge and grant a security
interest in the Pledged Units as provided by this Agreement.
(e) This Agreement has been duly authorized, executed and delivered by
the Pledgor and constitutes a legal, valid and binding obligation of the
Pledgor, enforceable against the Pledgor in accordance with its terms, except as
such enforceability may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or general principles of equity.
SECTION 5. FURTHER ASSISTANCE. The Pledgor agrees that at any time and from
time to time, at the expense of the Lender, the Pledgor will promptly execute
and deliver, or cause to be executed and delivered, all stock powers, proxies,
assignments, instruments and documents and take all further action, that is
reasonably necessary, at the Lender's request, in order to perfect any security
interest granted or purported to be granted hereby or to enable the Lender to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral and to carry out the provisions and purposes hereof.
5.U(4)-2
<PAGE>
SECTION 6. VOTING RIGHTS; DISTRIBUTIONS.
(a) so long as no Default (as defined in the Note) shall have occurred
and be continuing, the Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Units or any part thereof
for any purpose not inconsistent with the terms of this Agreement; provided,
however, that the Pledgor shall not exercise or shall refrain from exercising
any such right if such action would have a material adverse effect on the value
of the Pledged Collateral or any part thereof or be inconsistent with or violate
any provisions of this Agreement.
(b) so long as no Default shall have occurred and be continuing, the
Pledgor shall be entitled to receive all cash distributions paid from time to
time in respect of the Pledged Units, so long as such distributions are applied
to the prepayment of the Note.
(c) Any and all distributions paid or payable in the form of
instruments and other property (other than cash dividends permitted under
Section 6(b) hereof) received, receivable or otherwise distributed in respect
of, or in exchange for, any Pledged Collateral, shall be forthwith delivered to
the Lender to hold as Pledged Collateral and shall, if received by the Pledgor,
be received in trust for the benefit of the Lender, be segregated from the other
property or funds of the Pledgor, and be forthwith delivered to the Lender as
Pledged Collateral in the same form as so received (with any necessary
endorsement).
(d) The Lender shall execute and deliver (or cause to be executed and
delivered) to the Pledgor all such proxies and other instruments as the Pledgor
may reasonably request for the purpose of enabling the Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to Section
6(a) hereof.
(e) All distributions received by the Pledgor contrary to the
provisions of this Section 6 shall be received in trust for the benefit of the
Lender, shall be segregated from other funds of the Pledgor and shall be
forthwith paid over to the Lender as Pledged Collateral in the same form as so
received (with any necessary endorsement).
(f) Upon the occurrence and during the continuance of a Default, (i)
all rights of the Pledgor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section 6(a) hereof
shall cease, and all such rights shall thereupon become vested in the Lender,
which shall thereupon have the sole right to exercise such voting and other
consensual rights and (ii) all distributions payable in respect of the Pledged
Units shall be paid to the Lender and the Pledgor's right to receive such cash
payments pursuant to Section 6(b) hereof shall immediately cease.
SECTION 7. TRANSFERS AND OTHER LIENS; SALES; ADDITIONAL SHARES. The Pledgor
agrees that it will not (i) sell or otherwise dispose of, or grant any option
with respect to, any of the Pledged Collateral without the prior written consent
of the Lender, except that Pledgor may sell Pledged Units in any transaction in
which the Net Cash Proceeds (as defined in the Note) are applied to the payment
of principal and interest on the Note; provided, however, that if the Net Cash
Proceeds exceed all amounts owed by the Pledgor under
5.U(4)-3
<PAGE>
the terms of the Note, the Pledgor shall be entitled to retain such excess Net
Cash Proceeds, (ii) create or permit to exist any lien upon or with respect to
any of the Pledged Collateral, or (iii) enter into any agreement or
understanding that purports to or may restrict or inhibit the Lender's rights or
remedies hereunder, including, without limitation, the Lender's right to sell or
otherwise dispose of the Pledged Collateral.
SECTION 8. AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby appoints
the Lender as the Pledgor's attorney-in-fact, with full authority in the place
and stead of the Pledgor and in the name of the Pledgor or otherwise, from time
to time in the Lender's discretion to take any action and to execute any
instrument which the Lender may deem reasonably necessary or advisable to
further perfect and protect the security interest granted hereby, including,
without limitation, to receive, endorse and collect all instruments made payable
to the Pledgor representing any dividend, interest or principal payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same.
SECTION 9. AGENT MAY PERFORM. If the Pledgor fails to perform any agreement
contained herein, the Lender may itself perform, or cause performance of, such
agreement, and the reasonable expenses of the Lender incurred in connection
therewith shall be payable by the Pledgor under Section 13 hereof.
SECTION 10. NO ASSUMPTION OF DUTIES; REASONABLE CARE. The rights and powers
granted to the Lender hereunder are being granted in order to preserve and
protect the Lender's security interest in and to the Pledged Collateral granted
hereby and shall not be interpreted to, and shall not, impose any duties on the
Lender in connection therewith. The Lender shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Lender accords its own property, it being understood that the
Lender shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not the Lender has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
SECTION 11. SUBSEQUENT CHANGES AFFECTING COLLATERAL. The Pledgor represents
to the Lender that the Pledgor has made its own arrangements for keeping
informed of changes or potential changes affecting the Pledged Collateral
(including, but not limited to, rights to convert, rights to subscribe, payment
of dividends, reorganization or other exchanges, tender offers and voting
rights), and the Pledgor agrees that the Lender shall have no responsibility or
liability for informing the Pledgor of any such changes or potential changes or
for taking any action or omitting to take any action with respect thereto.
SECTION 12. REMEDIES UPON DEFAULT. If any Default shall have occurred and
be continuing, the Lender shall, in addition to all other rights given by law or
by this Agreement or otherwise, have all of the rights and remedies with respect
to the Pledged Collateral of a secured party under the Uniform Commercial Code
("Code") in effect in the State of Delaware at that time and the Lender may,
without notice and at its option, transfer or register, and the Pledgor shall
register or cause to be registered upon request therefor by the Lender, the
Pledged
5-U(4)-4
<PAGE>
Collateral or any part thereof on the books of the Lender into the name of the
Lender or the Lender's nominee(s), indicating that such Pledged Collateral is
subject to the security interest hereunder. In addition, with respect to any
Pledged Collateral which shall then be in or shall thereafter come into the
possession or custody of the Lender, the Lender may sell or cause the same to be
sold at any broker's board or at public or private sale, in one or more sales or
lots, at such price or prices as the Lender may deem best, for cash or on credit
or for future delivery, without assumption of any credit risk, all in accordance
with the terms and provisions of this Agreement and the Code. The purchaser of
any or all Pledged Collateral so sold shall thereafter hold the same absolutely,
free from any claim, encumbrance or right of any kind whatsoever. The Lender or
any other lender may, in its own name or in the name of a designee or nominee,
buy any of the Pledged Collateral at any public sale and, if permitted by
applicable law, at any private sale. All expenses (including court costs and
reasonable attorneys' fees, expenses and disbursements) of, or incident to, the
enforcement of any of the provisions hereof shall be recoverable from the
proceeds of the sale or other disposition of the Pledged Collateral. In
addition, upon the occurrence or during the continuance of a Default, all rights
of the Pledgor to exercise the voting and other rights which it would otherwise
be entitled to exercise shall cease, and all such rights shall thereupon become
vested in the Lender as provided in and subject to the terms of Section 6(f)
hereof.
SECTION 13. EXPENSES. From and after the occurrence of a Default, the
Pledgor will pay to the Lender the amount of any and all reasonable expenses,
including, without limitation, the reasonable fees, expenses and disbursements
of its counsel, of any investment banking firm, business broker or other selling
agent and of any other experts and agents retained by the Lender, which the
Lender may incur in connection with (i) the exercise or enforcement of any of
the rights of the Lender hereunder or (ii) the failure by the Pledgor to perform
or observe any of the provisions hereof.
SECTION 14. SECURITY INTEREST ABSOLUTE. All rights of the Lender and
security interests hereunder, and all obligations of the Pledgor hereunder,
shall be absolute and unconditional irrespective of: (i) any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Obligations; or (ii) any exchange, surrender, release or nonperfection of any
other collateral.
SECTION 15. LEGEND ON PLEDGED UNITS. Any certificate evidencing the Pledged
Units shall bear the following legends:
"The units represented by this certificate are subject to
certain covenants and agreements contained in that certain Additional
Equity Funding Units Pledge Agreement by and among Offerdahl's Bagel
Gourmet, Inc. and Progressive Bagel Concepts, Inc. dated March ,
1995."
SECTION 16. MISCELLANEOUS PROVISIONS.
(a) Notices. All notices, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered
5.U(4)-5
<PAGE>
by hand or by electronic transmission. If mailed, first class, certified mail,
postage prepaid, or sent by reliable overnight delivery service and addressed as
follows, or at such other addresses as the parties hereto may from time to time
designate in writing, such notices, requests, demands, and other communications
shall be deemed delivered three business days after being so duly posted or the
next business day if sent by overnight delivery service:
To Lender: Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, Colorado 80401
Attention: General Counsel
Telephone: (303) 278- 9500
Facsimile: (303) 384-5334
To Pledgor: Offerdahl's Bagel Gourmet, Inc.
929 Shotgun Road
Sunrise, Florida 33326
Telephone: (305) 452-1156
Facsimile: (305)475-2606
(b) Headings. The headings in this Agreement are for purposes of
reference only and shall not affect the meaning or construction of any provision
of this Agreement.
(c) Severability. The provisions of this Agreement are severable, and
if any clause or provisions shall be held invalid or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect in that jurisdiction only such clause or provision, or part thereof, and
shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision of this Agreement in any
jurisdiction.
(d) Interpretation of Agreement. All terms not defined herein shall
have the meaning set forth in the Code, except where the context otherwise
requires. Acceptance of or acquiescence in a course of performance rendered
under this Agreement shall not be relevant to determine the meaning of this
Agreement even though the accepting or acquiescing party had knowledge of the
nature of the performance and opportunity for objection.
(e) Continuing Security Interest. This Agreement shall create a
continuing security interest in the Pledged Collateral and shall (i) remain in
full force and effect until payment in full of the Obligations and the
cancellation of the Note, (ii) be binding upon the Pledgor, its successors and
assigns, and (iii) inure, together with the rights and remedies of the Lender
and its successors, transferees and assigns, to the benefit of the Lender's
successors, endorsees, transferees and assignees.
(f) Reinstatement. To the extent permitted by law, this Agreement
shall continue to be effective or be reinstated if at any time any amount
received by the Lender or any Lender in respect of the Obligations is rescinded
or must otherwise be restored or returned by the Lender or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Pledgor or upon the appointment of any receiver, intervenor, conservator,
trustee or similar
5-U(4)-6
<PAGE>
official for the Pledgor or any substantial part of its assets, or otherwise,
all as though such payments had not been made.
(g) Survival of Provisions. A11 representations, warranties and covenants of
the Pledgor contained herein shall survive the execution and delivery of this
Agreement, and shall terminate only upon the full and final payment and
performance by the Pledgor of the Obligations secured hereby and cancellation of
the Note.
(h) Waivers. The Pledgor Waives, and agrees that it shall not at any time
insist upon, plead or in any manner whatever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, marshaling of assets or
redemption laws, or exemption, whether now or at any time hereafter in force,
which may delay, prevent or otherwise affect the performance by the Pledgor of
its obligations under this Agreement. The Pledgor hereby waives notice of
acceptance, maturity, extension of time, change in nature or form of the
Obligations, acceptance of further security, release of further security,
composition or agreement arrived at as to the amount of, or the terms of, the
Obligations, notice of adverse change in the Pledgor's financial condition or
any other fact which might materially increase the risk to the Pledgor with
respect to any of the Obligations or all other demands and notices whatsoever
and waives the benefit of all provisions of law which are or might be in
conflict with the terms of this Agreement. The Pledgor represents, warrants and
agrees that, as of the date of this Agreement, its obligations under this
Agreement are not subject to any offsets or defenses of any kind against the
Lender.
(i) Authority of the Lender. The Lender shall have and be entitled to exercise
all powers hereunder which are specifically granted to the Lender by the terms
hereof, together with such powers as are reasonably incident thereto. The Lender
may perform any of its duties hereunder or in connection with the Pledged
Collateral by or through agents or employees and shall be entitled to retain
counsel and to act in reliance upon the advice of counsel concerning all such
matters. Neither the Lender nor any director, officer, employee, attorney or
agent of the Lender shall be liable to the Pledgor for any action taken or
omitted to be taken by it or them hereunder, except for its or their own gross
negligence or willful misconduct, nor shall the Lender be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Lender and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document reasonably believed by it or them to be genuine and correct and to
have been signed or sent by the proper person or persons.
(j) Release; Termination of Agreement. Subject to the provisions of Sections
15(g) and 15(h) hereof, this Agreement and the security interests created
hereunder shall automatically terminate upon full and final payment and
performance of all the Obligations and the cancellation of the Note. Upon such
termination the Lender shall promptly return to the Pledgor the certificates
evidencing the Pledged Units, if any, and take any other steps necessary to
evidence the termination of such security interests.
(k) Counterparts. This Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which,
when so
5.U(4)-7
<PAGE>
executed and delivered, shall be deemed an original but all of which shall
together constitute one and the same agreement.
(l) Governing Law. The validity and effect of this Agreement and the rights
and obligations of the parties hereto shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware.
(m) WAIVER OF DAMAGES; WAIVER OF NOTICE. THE PLEDGOR AGREES THAT THE LENDER
SHALL NOT HAVE ANY LIABILITY TO THE PLEDGOR (WHETHER SOUNDING IN TORT, CONTRACT
OR OTHERWISE) WITH RESPECT TO, AND THE PLEDGOR HEREBY WAIVES, RELEASES AND
AGREES NOT TO SUE UPON ANY CLAIM FOR, ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR
PUNITIVE DAMAGES SUFFERED BY THE PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR
IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED OR THE RELATIONSHIP
ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A JUDGMENT OF A COURT THAT IS
BINDING ON THE LENDER (WHICH JUDGMENT SHALL BE FINAL AND NOT SUBJECT TO REVIEW
ON APPEAL), THAT SUCH DAMAGES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART
OF THE LENDER CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
IN WITNESS WHEREOF, the Pledgor and the Lender have each caused this Agreement
to be duly executed and delivered as of the date first above written.
OFFERDAHL'S BAGEL GOURMET,
INC., a Florida corporation
By:
-----------------------
Name:
----------------------
Title:
---------------------
PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation
By:
-----------------------
Name:
----------------------
Title:
---------------------
5.U(4)-8
<PAGE>
EXHIBIT 6.D
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the ______ day of February
1995 (this "Agreement"), by and between PROGRESSIVE BAGEL CONCEPTS, INC., a
Delaware Corporation (the "Company"), and each owner of common stock of the
Company listed on Exhibit A hereto and each owner of common stock who executes,
with the written agreement of the Company, a counterpart of this Agreement (each
referred to herein individually as an "Investor" and collectively referred to
herein as "Investors").
W I T N E S S E T H:
--------------------
WHEREAS, the Company has agreed to provide Investors with certain registration
rights as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to and on the terms
and conditions herein set forth, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 "Business Day" means any day on which The New York Stock Exchange is open
for trading.
1.2 "Common Stock" means the common stock, $.01 par value, of the Company.
1.3 "Eligible Registration" means any of the first four occasions the Company
proposes to register any shares of Common Stock in any manner which would permit
registration of Eligible Securities for public sale under the Securities Act,
other than any offering described in Sections 2.1(a) through (f). If the Company
terminates any Eligible Registration prior to its effectiveness or if the
Investors are unable to sell at least 90% of the Eligible Securities they had
requested to sell in any Eligible Registration, that registration will not
constitute an Eligible Registration.
1.4 "Eligible Securities" means all or any portion of the Common Stock owned
by the Investors and all other securities issued with respect thereto by reason
of dividends, stock splits, combinations or similar transactions.
<PAGE>
As to any proposed offer or sale of Eligible Securities, such securities shall
cease to be Eligible Securities with respect to such proposed offer or sale when
(i) a registration statement with respect to the sale of such securities shall
have become effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement, (ii) such
securities are permitted to be sold pursuant to Rule 144 (or any successor
provision to such Rule) under the Securities Act, (iii) such securities shall
have been otherwise transferred pursuant to an applicable exemption under the
Securities Act, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company and such
securities shall be freely transferable to the public without registration under
the Securities Act, or (iv) a written opinion of counsel of the Company
addressed to Investors to the effect that shares may be sold without
registration under the Securities Act has been delivered.
1.5 "Person" means an individual, a partnership (general or limited),
corporation, joint venture, business trust, cooperative, association or other
form of business organization, whether or not regarded as a legal entity under
applicable law, a trust (inter vivos or testamentary), an estate of a deceased,
insane or incompetent person, a quasi-governmental entity, a government or any
agency, authority, political subdivision or other instrumentality thereof, or
any other entity.
1.6 "Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement including, without limitation, the following: (i) the fees,
disbursements and expenses of the Company's counsel(s), accountants and experts
in connection with the registration of Eligible Securities to be disposed of
under the Securities Act; (ii) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus or
final prospectus, any other offering document and amendments and supplements
thereto and the mailing and delivering of copies thereof to the underwriters and
dealers; (iii) the cost of printing or producing any agreement(s) among
underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements and any other documents in connection with the
offering, sale or delivery of Eligible Securities to be disposed of; (iv) SEC or
blue sky registration fees attributable to Eligible Securities; (v) all expenses
in connection with the qualification of Eligible Securities to be disposed of
for offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(vi) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Eligible
Securities to be disposed of; and (vii) fees and expenses incurred in connection
with the listing of Eligible Securities on each securities exchange on which
securities of the same class are then listed; provided, however, that
Registration Expenses with respect to any Eligible Registration pursuant to this
Agreement shall not include underwriting discounts or commissions attributable
to Eligible Securities or transfer taxes applicable to Eligible Securities.
6.D-2
<PAGE>
1.7 "SEC" means the Securities and Exchange Commission.
1.8 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, all as the same shall be in effect
at the relevant time.
1.9 "Selling Investor" means any Investor requesting the registration of
Eligible Securities registered pursuant to Article 2 hereof.
ARTICLE 2
INCIDENTAL REGISTRATION
2.1 NOTICE AND REGISTRATION. If the Company proposes to register any shares of
Common Stock for public sale under the Securities Act in an Eligible
Registration, it will give prompt written notice to Investors of its intention
to do so, and upon the written request of each Investor delivered to the Company
within ten (10) Business Days after the giving of any such notice by the Company
(which request shall specify the number of Eligible Securities intended to be
disposed of by the Selling Investor and the intended method of disposition
thereof) the Company will use all reasonable efforts to effect, in connection
with the registration of its Common Stock in such Eligible Registration, the
registration under the Securities Act of all Eligible Securities which the
Company has been so requested to register by the Selling Investors, to the
extent required to permit the public sale (in accordance with the intended
method or methods thereof as aforesaid) of Eligible Securities so to be
registered, provided that:
(a) if, at any time after giving such written notice of its intention to
register any Common Stock and prior to the effective date of the registration
statement filed in connection with such Eligible Registration, the Company shall
determine for any reason not to register the Common Stock, the Company may, at
its election, give written notice of such determination to Investors and
thereupon the Company shall be relieved of its obligation to register such
Eligible Securities in connection with the registration of such Common Stock
(but not from its obligation to pay Registration Expenses to the extent incurred
in connection therewith as provided in Section 2.2);
(b) The Company will not be required to effect any registration pursuant to
this Article 2 if the Company shall have been advised in writing by a nationally
recognized independent investment banking firm selected by the Company to act as
lead underwriter in connection with the public offering of the Common Stock by
the Company that, in such firm's opinion, a registration of shares of Common
Stock of the Investors pursuant to this Article 2 at that time may materially
and adversely affect the Company's own scheduled offering;
6.D-3
<PAGE>
(c) The Company shall not be required to effect any registration of Eligible
Securities under this Article 2 incidental to the registration of any of its
securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock options or other
employee benefit plans;
(d) The Company shall not be required to effect any registration of Eligible
Securities under this Article 2 incidental to an initial public offering of
shares of Common Stock of the Company;
(e) The Company shall not be required to effect any registration of Eligible
Securities under this Article 2 incidental to the filing of a registration
statement for an offering to be made on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act or any similar rule that may be adopted
by the SEC.
(f) In no event shall the Company be required to register Eligible Securities
if, in the reasonable judgment of the Company, the amount of Eligible Securities
for which registration has been requested does not justify the effort and/or
expense to the Company of effecting such registration.
2.2 REGISTRATION EXPENSES. The Company (as between the Company and the Selling
Investors) shall be responsible for the payment of all Registration Expenses in
connection with any registration pursuant to this Article 2.
ARTICLE 3
REGISTRATION PROCEDURES
3.1 REGISTRATION AND QUALIFICATION. (a) If and whenever the Company is
required to use reasonable commercial efforts to effect the registration of any
Eligible Securities under the Securities Act as provided in Article 2 hereof,
the Company will as promptly as is practicable register the Eligible Securities
under the Securities Act and use reasonable commercial efforts to cause the
Registration Statement to become effective;
(b) The Company shall prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective; and
comply with the provisions of the Securities Act with respect to the disposition
of all Eligible Securities until the earlier of such time as all of such
Eligible Securities have been disposed of in accordance with the intended
methods of disposition by the Selling Investors as set forth in the Registration
Statement or the expiration of thirty (30) days after such Registration
Statement has become effective; provided, however, that in the event that the
Company shall notify any Selling Investor of the happening of any event which
would cause the prospectus included as part of such Registration Statement, as
then in effect, to include an untrue statement of a material fact or omit to
state any material fact required to be
6.D-4
<PAGE>
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, such Selling Investor
shall thereafter sell no shares under the Registration Statement until the
Company has filed an amendment or supplement to the prospectus to cause the
prospectus not to include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and the Company shall be obligated for a period of time as the
prospectus has for a aggregate of thirty (30) days not included an untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(c) The Company may require the Selling Investors to furnish to the
Company such information regarding the Selling Investors and the distribution of
the Eligible Securities as the Company may from time to time reasonably request
in writing and as shall be required by law or by the SEC in connection with any
registration;
(d) The Company shall provide each Selling Investor a conformed copy
of the Registration Statement and each material amendment to the Registration
Statement. The Company shall provide to each Selling Investor an opportunity to
review the Registration Statement prior to the filing of the Registration
Statement with the Securities and Exchange Commission;
(e) The Company shall provide to each Selling Investor such number of
copies of such Registration Statement, each amendment and supplement thereto,
the prospectus included in such Registration Statement (including each
preliminary prospectus) and such other documents as such Selling Investor may
reasonably request in order to facilitate the disposition of the Eligible
Securities registered pursuant to such Registration Statement; and
(f) The Company will provide a transfer agent and registrar for all
Eligible Securities not later than the effective date of the Registration
Statement.
3.2 UNDERWRITING. In the event that any registration pursuant to Article 2
hereof shall involve, in whole or in part, an underwritten offering, the Company
may require Eligible Securities requested to be registered pursuant to Article 2
to be included in such underwriting on the same terms and conditions as shall be
applicable to the Common Stock being sold through underwriters under such
registration. In such case, the holders of Eligible Securities on whose behalf
Eligible Securities are to be distributed by such underwriters shall be parties
to any such underwriting agreement. Such agreement shall contain such
representations and warranties by the Selling Investors and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, indemnities and
contribution to the effect and to the extent provided in Article 4. The
representations and warranties in such
6.D-5
<PAGE>
underwriting agreement by, and the other agreements on the part of, the Company
to and for the benefit of such underwriters shall also be made to and for the
benefit of such holders of Eligible Securities.
ARTICLE 4
INDEMNIFICATION
4.1 INDEMNIFICATION. (a) In the event of any registration of any Eligible
Securities hereunder, the Company will enter into customary indemnification
arrangements to indemnify and hold harmless each Investor who exercises his
registration rights hereunder and, to the extent applicable, its directors and
officers, its partners, its trustees and each Person who controls any of such
Persons, each Person who participates as an underwriter in the offering or sale
of any Eligible Securities, and each Person, if any, who controls such
underwriter within the meaning of the Securities Act against any losses, claims,
damages, liabilities and expenses, joint or several, to which such Person may be
subject under the Securities Act or otherwise insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act, any final
prospectus included therein, or any amendment or supplement thereto, or any
document incorporated by reference therein, or (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
promptly reimburse each such Person for any legal or any other expenses
reasonably incurred by such Person in connection with investigating or defending
any such loss, claim, damage, liability, action or proceeding; provided that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any final
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company or such underwriter by such Selling
Investors expressly for use in the registration statement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of Investors or any such Person and shall survive the transfer of such
securities by the Investors.
(b) The Selling Investors, by virtue of exercising their registration
rights hereunder, agree and undertake to enter into customary indemnification
arrangements to severally and not jointly indemnify and hold harmless (in the
same manner and to the same extent as set forth in clause (a) of this Article 4)
the Company, each director of the Company, each officer of the Company who shall
sign such registration statement, and each Person who participates as an
underwriter in the offering or sale of such securities, each Person, if any, who
controls the Company or any such underwriter within the meaning of the
Securities Act, with respect to any statement in or omission from such
registration statement, any final prospectus included therein, or any amendment
or supplement thereto,
6.D-6
<PAGE>
but only to the extent that such statement or omission was made in reliance upon
and in conformity with written information furnished by such Selling Investors
to the Company expressly for use in the registration statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of the registered securities by the Selling Investors
and the expiration of this Agreement.
(c) Indemnification similar to that specified in the preceding
subdivisions of this Article 4 (with appropriate modifications) shall be given
by the Company and the Selling Investors with respect to any required
registration or other qualification of such Eligible Securities under any
federal or state law or regulation of governmental authority other than the
Securities Act.
ARTICLE 5
BENEFITS
5.1 BENEFITS OF REGISTRATION RIGHTS. Subject to the limitations of Section 2.1
hereof, Investors may severally or jointly exercise the registration rights
hereunder in such manner and in such proportion as they shall agree among
themselves.
5.2 QUALIFICATION FOR RULE 144 SALES. Upon the written request of any
Investor, the Company will deliver to such Investor a written statement as to
whether it has complied with the filing requirements described in Rule
144(c)(1).
ARTICLE 6
MISCELLANEOUS
6.1 CAPTIONS. The captions or headings in this Agreement are for convenience
and reference only, and in no way define, describe, extend or limit the scope or
intent of this Agreement.
6.2 SEVERABILITY. If any clause, provision or section of this Agreement shall
be invalid or unenforceable, the invalidity or unenforceability of such clause,
provision or section shall not affect the enforceability or validity of any of
the remaining clauses, provisions or sections hereof to the extent permitted by
applicable law.
6.3 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Delaware, without reference to
its rules as to conflicts or choice of laws.
6.D-7
<PAGE>
6.4 MODIFICATION AND AMENDMENT. This Agreement may not be changed, modified,
discharged or amended, except by an instrument signed by all of the parties
hereto.
6.5 NO SUPERIOR REGISTRATION RIGHTS AGREEMENTS. The Company has not entered
into, and will not hereafter enter into, any registration rights agreement with
respect to its Common Stock granting registration rights that are superior to
the registration rights granted hereby. The Company may grant registration
rights that are pari passu with the registration rights granted hereby.
6.6 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
6.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding among the parties and supersedes any prior understandings and/or
written or oral agreements among them respecting the subject matter herein.
6.8 NOTICES. All notices, requests, demands, consents and other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and delivered by hand, by overnight courier delivery service or by certified
mail, return receipt requested, postage prepaid. Notices shall be deemed given
when actually received, which shall be deemed to be not later than the next
Business Day if sent by overnight courier or after five (5) Business Days if
sent by mail. Notice to Investors shall be made to the address listed on the
stock transfer records of the Company.
6.D-8
<PAGE>
IN WlTNESS WHEREOF, the parties hereto have executed this Agreement or caused
this Agreement to be executed as of the day and year first above written.
THE COMPANY:
PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation
By:
-------------------------
Name:
-----------------------
Title:
-----------------------
INVESTORS:
------------------------------
------------------------------
------------------------------
OTHER INVESTORS MAY EXECUTE
COUNTERPART SIGNATURE PAGES
6.D-9
<PAGE>
EXHIBIT 6.E(1)(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this day of , 1995, by and between
PROGRESSIVE BAGEL CONCEPTS, INC., a Delaware corporation (hereinafter referred
to as the "Company"), and JOHN OFFERDAHL (hereinafter referred to as
"Employee").
W I T N E S S E T H:
--------------------
WHEREAS, the Company is engaged in the business of operating retail bakeries
featuring bagels and other food items;
WHEREAS, because of the abilities and expertise of Employee in said business,
the Company desires to employ Employee; and
WHEREAS, Employee is willing to accept such employment upon the terms and
conditions stated herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee to perform the duties
described herein, and Employee hereby accepts such employment on the terms and
conditions stated herein. Employee shall hold the position of Vice President of
Operations of the Company. The Employee's initial responsibilities shall include
participation in project teams involving operations systems and training, and
operations management and community relations in South Florida.
2. OFFICES WITH COMPANY. Employee shall be the initial "Founding Director"
selected by Offerdahl's Bagel Gourmet, Inc. pursuant to Section 5.M(2) of that
certain Agreement
<PAGE>
to Contribute Assets by and among the Company, Offerdahl's Bagel Gourmet, Inc.
and the shareholders of Offerdahl's Bagel Gourmet, Inc. dated as of March 22,
1995 (the "Contribution Agreement").
3. TERM OF EMPLOYMENT. Subject to the provisions for termination set forth
herein, the term of employment under this Agreement shall commence on ,
1995 and shall extend until August 1, 1998 (the "Term").
4. DUTIES OF EMPLOYEE. Employee shall perform the duties commensurate with his
position and experience as shall be assigned to him from time to time by the
Company. Employee shall perform such duties in a diligent manner, shall devote
his entire business time, attention and effort to the affairs of the Company
within the scope of his employment as is reasonably necessary for the proper
rendition of said services, shall diligently promote the interests of the
Company, and shall be just and faithful in carrying out his duties. During the
Term, it shall not be a violation of this Agreement for the Employee to (i)
serve on civic, religious or charitable boards or committees; (ii) deliver
lectures, fulfil speaking engagements or teach at educational institutions; or
(iii) manage personal investments, so long as such activities do not
significantly interfere with the performance of the Employee's responsibilities
as an employee of the Company in accordance with this Agreement. The Company
hereby agrees that the Employee shall not be required, in connection with the
performance of his duties hereunder, to obtain or maintain a residence in the
State of Colorado, or otherwise to relocate his principal residence.
5. COMPENSATION. The Company shall compensate Employee for all services
rendered by him hereunder as follows:
6.E(1)(a)-2
<PAGE>
(a) salary at a yearly rate of $125,000, payable by the Company in twenty-six
(26) equal installments (subject to any increases as determined by the Board of
Directors from time to time in its sole discretion) after deducting therefrom
all applicable FICA contributions, federal and state income tax withholding, and
any other payroll taxes;
(b) such stock options as may be granted to Employee pursuant to the Company's
1995 Employee Stock Option Plan, as it may be amended from time to time, (the
"Plan") or any option plan hereinafter adopted by the Company; and
(c) as an inducement for the Employee to execute this Agreement, the Employee
shall receive options under the Plan to purchase that number of shares of common
stock of the Company that have a fair market value, determined based on the
price per share in the Company's initial offering to investors, equal to
$250,000, which options are to be granted on the date hereof (the "Initial
Option Grant"); provided, however, the options granted pursuant to this Section
4(c) shall constitute the Employee's option grant for 1995 under the Plan.
6. BENEFITS, VACATIONS AND REIMBURSEMENT OF EXPENSES. In addition to the
compensation payable to Employee pursuant to Section 5 above, and all other
compensation or benefits provided for hereunder, Employee shall be entitled to
such reasonable periods of vacation, with full pay, as is consistent with the
general policy as established by the Board of Directors for executives and
business exigencies of the Company, and such benefits of a similar type and
amount and to the same extent as benefits are provided to other similarly
situated employees of the Company. Employee shall also be entitled to receive
such additional benefits to the same extent as benefits are provided to other
similarly situated employees of the Company as established by the Company's
Board of Directors from time to time. The Employee shall be
6.E(1)(a)-3
<PAGE>
reimbursed for the reasonable business-related expenses incurred by her in
connection with the performance of her duties hereunder.
7. CONFIDENTIALITY. Employee agrees to execute and deliver such
confidentiality agreement which is to be required to be executed and delivered
by employees of the Company generally.
8. CONFLICT OF INTEREST. Employee shall take no action, or engage in any
transaction, that could be considered to conflict with the best interests of the
Company, and shall at all times exercise his best judgment and efforts so as to
avoid taking any action, or engaging in any transaction, that might give the
appearance of being in conflict with the best interests of the Company.
9. TERMINATION.
(a) This Agreement and Employee's employment hereunder shall immediately
terminate, without further notice or action, upon the occurrence of the death of
Employee.
(b) Additionally, the Company shall have the right to terminate this
Agreement and Employee's employment with the Company hereunder, effective upon
written notice to Employee of termination stating the basis for such
termination, under only the following circumstances:
(l) if Employee is permanently disabled (as define below);
or
(2) for "cause," which shall be defined as including any of
the following: (i) any misappropriation of funds or property
of the Company by Employee; (ii) Employee's conviction of a
felony, or of any crime involving moral turpitude, fraud,
theft or conversion; (iii) Employee's failure to submit to
6.E(1)(a)-4
<PAGE>
a medical examination at the Company's expense within twenty-one (21)
days after receipt of the Company's written request that Employee
submit to such examination; or (iv) a breach of any other material
provision contained in this Agreement which is not cured within thirty
(30) days of written notice by the Company of such breach.
(c) Employee shall be deemed to be "permanently disabled" hereunder
upon the first to occur of any of the following events:
(1) The receipt by the Company of a written certificate from
a physician approved by the Company and reasonably satisfactory to
Employee stating that, based upon one or more examinations of Employee
by such physician, it is such physician's opinion that, for a period
of at least six (6) consecutive months from the date of certification,
Employee is and will be substantially unable to perform his customary
duties for the Company due to physical or mental infirmity. The
Company may request in writing that Employee submit to such
examinations by giving written notice thereof to Employee.
(2) The adjudication of Employee as an incompetent or a
disabled person and the appointment of a conservator or guardian for
his person or property by a court of competent jurisdiction.
(d) If Employee is terminated by the Company for cause, as that term is
defined in Section 9(b)(2), or if Employee voluntarily terminates his
employment (other than for Good Reason), the Company shall not be
obligated to pay Employee any other compensation with respect to any
period after the date of such termination and all stock options granted
to
6.E(1)(a)-5
<PAGE>
Employee, whether or not vested on the date of such termination, shall terminate
and be of no further force and effect. "Good Reason" shall mean (x) that the
Company (through its Board or otherwise) has (i) assigned the Employee duties
which materially diminish the Employee's level of responsibility from that
contemplated by Section 4 above without the Employee's consent; or (ii)
materially breached any of its other covenants and obligations hereunder, or (y)
Boston Chicken, Inc. ("BCI") shall no longer have a Significant Interest (as
hereinafter defined) in the Company. A "Significant Interest" in the Company
shall mean, at any time, BCI's ownership of, or right to, acquire ownership of
(through the exercise of its conversion and/or option rights under its secured
loan agreement with the Company or otherwise, and whether or not such rights are
then exercisable), that number of shares of the Company's voting common stock or
other capital stock of the Company possessing voting power equal to 25% or more
of the Company's then issued and outstanding shares of such stock. To terminate
his employment under this Agreement for Good Reason, the Employee shall give the
Company written notice of the Employee's intent to terminate his employment with
the Company for Good Reason within thirty (30) days of the applicable event or
action referred to in clause (x) or (y) above, which notice shall specify the
Employee's reasons therefor in detail. The Company shall have 30 days from its
receipt of such notice to attempt to cure any such condition giving rise to Good
Reason hereunder.
(e) If Employee dies or becomes permanently disabled during
the Term, or if Employee is terminated by the Company for any reason other
than for cause or if the Employee terminates this Agreement for Good Reason,
the Company shall pay to Employee the entire amount of the cash compensation
provided for in Section 5 hereof that is payable during the
6.E(1)(a)-6
<PAGE>
remainder of the Term payable in a lump sum cash payment within thirty (30) days
of the effective date of termination (provided that, in the case of death or
disability of Employee, the aforementioned cash payment shall be limited to the
lesser of: (i) one year's cash compensation provided for in Section 5, and (ii)
the cash compensation provided for in Section 5 for the remaining balance of the
Term), any portion of the Initial Option Grant that is not then vested shall be
accelerated and all employee stock options granted to Employee that are vested
on the effective date of such termination (including the Initial Option Grant)
shall continue to be exercisable for a period of the lesser of (x) three (3)
years after the effective date of such termination or (y) the expiration date of
the option. In addition, in the event the Employee's employment with the Company
is terminated at any time after the term of this Agreement other than for cause
(as defined above), any portion of the Initial Option Grant that is not then
vested shall be accelerated and the Initial Option Grant shall be exercisable as
set forth in the preceding sentence. After the effective date of his termination
Employee shall not be eligible to receive any further employee stock options.
(f) Upon any termination of this Agreement by the Company for
cause, Employee shall be deemed automatically to have resigned from any office
or directorship of the Company which he may then hold. Upon any termination of
Employee's employment with the Company, the Employee shall promptly deliver to
the Company (without retaining any copies thereof) all Company files and
documents, forms, letterhead, business cards, computer disks and any other
written, magnetic or printed materials relating to the business of the Company.
10. COVENANT RESTRICTING SOLICITATION. During the term hereof and for a
period of two (2) years after his employment with the Company, whether pursuant
to this Agreement or
6.E(1)(a)-7
<PAGE>
otherwise, shall expire or terminate for any reason whatsoever, Employee shall
not, directly or indirectly, solicit or attempt to solicit for employment or
employ any person who is an employee of the Company on the date of Employee's
date of termination or any person who was an employee during the six-month
period prior to such date.
11. COVENANT RESTRICTING COMPETITION. During the term hereof and for a
period of two (2) years after his employment with the Company, whether pursuant
to this Agreement or otherwise, shall expire or be terminated by Company for
cause, Employee shall not, either directly or indirectly, on his own account, or
as an employee, consultant, partner, owner, officer, director or stockholder of
any other person, firm, partnership, corporation or other entity or in any other
capacity, in any way, directly or indirectly, conduct, engage in, be connected
with, have any interest in, or aid or assist anyone in engaging in a business
which derives 20% or more of its revenues from the retail sale of bagels and/or
bagel-related products, or any business in which the Company is engaged at the
time of, or within one hundred eighty (180) days prior to, such expiration or
termination (a "Competitive Business"); provided, however, Employee may have an
interest in any Competitive Business as a passive investor in such Competitive
Business provided such interest does not exceed three percent (3%) of the
outstanding equity securities of any company which has a class of securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended,
or which is traded on a national securities exchange.
12. REMEDIES. Employee agrees that the period of time provided for in
Sections 10 and 11 above is the minimum period of time necessary, and that other
provisions and restrictions set forth in Sections 10 and 11 and in other
portions of this Agreement are necessary, to protect the Company and its
successors and assigns in the protection of the business conducted by the
6.E(1)(a)-8
<PAGE>
Company. Employee agrees that the services to be performed by him for the
Company are special and unique, that damages cannot compensate the Company in
the event of a violation of the restrictive covenants contained in Sections 10
and 11 hereof, and that injunctive relief shall be essential for the protection
of the Company and its successors and assigns. Accordingly, Employee agrees and
consents that, in the event he shall violate or breach any of said restrictive
covenants the Company shall be entitled to obtain (and he hereby consents to)
such injunctive relief against Employee, without bond, in addition to such
further or other relief as may appertain equity or law. The exercise or
enforcement by the Company of any right or remedy hereunder shall not preclude
the exercise or enforcement by the Company of any other right or remedy
hereunder or which the Company has the right to enforce under applicable law.
13. EMPLOYEE REPRESENTATIONS. Employee represents and warrants to the
Company that (i) he is free to enter into this Agreement and (ii) this Agreement
does not violate the terms of any other agreement to which Employee is a party
or by which he is bound.
14. WAIVER. Failure by either party to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment of any right or remedy hereunder at any one or more times be
deemed a waiver or relinquishment of such right or remedy at any other time
or times.
15. SEVERABILITY. Each section, paragraph, term and provision of this
Agreement, and any portion thereof, shall be considered severable and if for any
reason any such portion of this Agreement is held to be invalid, contrary to, or
in conflict with any applicable present or future law or regulation in a final,
unappealable ruling issued by any court, agency or tribunal with
6.E(1)(a)-9
<PAGE>
competent jurisdiction in a proceeding to which the Company is a party, that
ruling shall not impair the operation of, or have any other effect upon, such
other portions of this Agreement as may remain otherwise intelligible, which
shall continue to be given full force and effect and bind the parties hereto.
Employee agrees that if any provisions hereof shall be adjudicated to be invalid
or unenforceable in whole or in part, such modifications made to this Agreement
as a result of such adjudication shall be effective only in the particular
jurisdiction in which such adjudication is made. To the extent any provision
hereof is deemed unenforceable by virtue of its scope but may be enforceable by
limitations thereon, the parties hereto agree that the same shall be enforceable
to the fullest extent permissible under the laws and public policies applied in
such jurisdiction in which the enforcement is sought. The parties hereto hereby
authorize any court of competent jurisdiction to modify the restrictive
covenants to the extent necessary to make the same enforceable.
16. BENEFIT. This Agreement shall inure to the benefit of and be
binding upon the Company, its successors and assigns. The rights and benefits of
Employee under this Agreement are personal to him, and are not subject to
voluntary or involuntary alienation, assignment or transfer by him.
17. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties concerning Employee's employment with the Company, and may
not be modified or rescinded except by a written agreement to such effect signed
by both parties.
18. NOTICES. All notices, request, demands, and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or by electronic transmission. If mailed,
first class, certified mail, postage prepaid, or
6.E(1)(a)-10
<PAGE>
sent by reliable overnight delivery service and addressed as follows, or at such
other addresses as the parties hereto may from time to time designate in
writing, such notices, requests, demands, and other communications shall be
deemed delivered three (3) business days after being so duly posted:
to the Company: Progressive Bagel Concepts, Inc.
1526 Cole Blvd. Suite 200
Golden, CO 80401
Attention: Kyle T. Craig
Facsimile: (303) 202-3360
with copies to: Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, IL 60601
Attention: Michael G. Brennan
Facsimile: (312) 984-2299
and to: Bell, Boyd & Lloyd
70 West Madison Street
Suite 3200
Chicago, IL 60602
Attention: Paul A. Strasen
Facsimile: (312) 372-2098
to Employee:
with a copy to:
-------------------------------
-------------------------------
-------------------------------
19. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Colorado applicable to contracts made and to be perfommed
therein.
20. CONFLICT WITH PLAN. The parties acknowledge that to the extent any
provision of this Agreement is inconsistent with any provision of the Plan, the
provisions of this Agreement shall control.
6.E(1)(a)-11
<PAGE>
21. SURVIVAL. The parties acknowledge and agree that the covenants
contained in Sections 9(e), 10 and 11 of this Agreement shall survive the
termination or expiration of Employee's employment with the Company, whether
pursuant to this Agreement or otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
EMPLOYEE: PROGRESSIVE BAGEL CONCEPTS, INC.,
a Delaware corporation
By:
- --------------------------- --------------------------------
It:
--------------------------------
6.E(l)(a)-12
<PAGE>
EXHIBIT 6.E(1)(b)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made this day of , 1995, by and between
PROGRESSIVE BAGEL CONCEPTS, INC., a Delaware corporation (hereinafter referred
to as the "Company"), and SARAH FLATLEY (hereinafter referred to as "Employee").
W I T N E S S E T H:
-------------------
WHEREAS, the Company is engaged in the business of operating retail
bakeries featuring bagels and other food items;
WHEREAS, because of the abilities and expertise of Employee in said
business, the Company desires to employ Employee; and
WHEREAS, Employee is willing to accept such employment upon the terms and
conditions stated herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee to perform the
duties described herein, and Employee hereby accepts such employment on the
terms and conditions stated herein. Employee shall hold the position of
President -Southeast Division of the Company. The Employee's initial
responsibilities shall include development and operations management of the
Company's stores in its Southeast Division.
<PAGE>
2. TERM OF EMPLOYMENT. Subject to the provisions for termination set
forth herein, the term of employment under this Agreement shall commence on ,
1995 and shall extend until August 1, 1998 (the "Term").
3. DUTIES OF EMPLOYEE. Employee shall perform the duties commensurate
with his position and experience as shall be assigned to her from time to time
by the Company. Employee shall perform such duties in a diligent manner, shall
devote her entire business time, attention and effort to the affairs of the
Company within the scope of her employment as is reasonably necessary for the
proper rendition of said services, shall diligently promote the interests of the
Company, and shall be just and faithful in carrying out her duties. During the
Term it shall not be a violation of this Agreement for the Employee to (i) serve
on civic, religious or charitable boards or committees; (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions; or (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Employee's responsibilities as an employee
of the Company in accordance with this Agreement.
4. COMPENSATION. The Company shall compensate Employee for all
services rendered by him hereunder as follows:
(a) salary at a yearly rate of $125,000, payable by the Company in
twenty-six (26) equal installments (subject to any increases as determined by
the Board of Directors from time to time in its sole discretion) after deducting
therefrom all applicable FICA contributions, federal and state income tax
withholding, and any other payroll taxes;
(b) such stock options as may be granted to Employee pursuant to
the Company's 1995 Employee Stock Option Plan, as it may be amended from time
to time, (the "Plan") or any option plan hereinafter adopted by the Company; and
6-E(l)(b)-2
<PAGE>
(c) as an inducement for Employee to execute this Agreement,
Employee shall receive options under the Plan to purchase that number of shares
of common stock of the Company that have a fair market value, determined based
on the price per share in the Company's initial offering to investors, equal to
$250,000, which options are to be granted on the date hereof (the "Initial
Option Grant"); provided, however, the options granted pursuant to this Section
4(c) shall constitute Employee's option grant for 1995 under the Plan.
5. BENEFITS, VACATIONS AND REIMBURSEMENT OF EXPENSES. In addition to
the compensation payable to Employee pursuant to Section 4 above, and all other
compensation or benefits provided for hereunder, Employee shall be entitled to
such reasonable periods of vacation, with full pay, as is consistent with the
general policy as established by the Board of Directors for executives and
business exigencies of the Company, and such benefits of a similar type and
amount (including relocation benefits) and to the same extent as benefits are
provided to other similarly situated employees of the Company. Employee shall
also be entitled to receive such additional benefits to the same extent as
benefits are provided to other similarly situated employees of the Company as
established by the Company's Board of Directors from time to time. The Employee
shall be reimbursed for the reasonable business-related expenses incurred by her
in connection with the performance of her duties hereunder.
6. CONFIDENTIALITY. Employee agrees to execute and deliver such
confidentiality agreement which is to be required to be executed and delivered
by employees of the Company generally.
7. CONFLICT OF INTEREST. Employee shall take no action, or engage in
any transaction, that could be considered to conflict with the best interests of
the Company, and shall at all times exercise her best judgment and efforts so as
to avoid taking any action, or engaging in any
6-E(l)(b)-3
<PAGE>
transaction, that might give the appearance of being in conflict with the best
interests of the Company.
8. TERMINATION.
(a) This Agreement and Employee's employment hereunder shall immediately
terminate, without further notice or action, upon the occurrence of the death of
Employee.
(b) Additionally, the Company shall have the right to terminate this
Agreement and Employee's employment with the Company hereunder, effective
upon written notice to Employee of termination stating the basis for such
termination, under only the following circumstances:
(1) if Employee is permanently disabled (as define below); or
(2) for "cause," which shall be defined as including any of the
following: (i) any misappropriation of funds or property of the Company by
Employee; (ii) Employee's conviction of a felony, or of any crime involving
moral turpitude, fraud, theft or conversion; (iii) Employee's failure to submit
to a medical examination at the Company's expense within twenty-one (21) days
after receipt of the Company's written request that Employee submit to such
examination; or (iv) a breach of any other material provision contained in this
Agreement which is not cured within 30 days of written notice by the Company of
such breach.
(c) Employee shall be deemed to be "permanently disabled" hereunder upon
the first to occur of any of the following events:
(1) The receipt by the Company of a written certificate from a
physician approved by the Company and reasonably satisfactory to Employee
stating that, based upon one or more examinations of Employee by such physician,
it is such physician's opinion that, for a period of at least six (6)
consecutive months from the date of certification, Employee is and will
6-E(l)(b)-4
<PAGE>
be substantially unable to perform her customary duties for the Company due to
physical or mental infirmity. The Company may request in writing that Employee
submit to such examinations by giving written notice thereof to Employee.
(2) The adjudication of Employee as an incompetent or a disabled
person and the appointment of a conservator or guardian for his person or
property by a court of competent jurisdiction.
(d) If Employee is terminated by the Company for cause, as that term is
defined in Section 8(b)(2), or if Employee voluntarily terminates her employment
(other than for Good Reason), the Company shall not be obligated to pay Employee
any other compensation with respect to any period after the date of such
termination and all stock options granted to Employee, whether or not vested on
the date of such termination, shall terminate and be of no further force and
effect. "Good Reason" shall mean (x) that the Company (through its Board or
otherwise) has (i) assigned the Employee duties which materially diminish the
Employee's level of responsibility from that contemplated by Section 3 above
without the Employee's consent; or (ii) materially breached any of its other
covenants and obligations hereunder, or (y) Boston Chicken, Inc. ("BCI") shall
no longer have a Significant Interest (as hereinafter defined) in the Company. A
"Significant Interest" in the Company shall mean, at any time, BCI's ownership
of, or right to acquire ownership of (through the exercise of its conversion
and/or option rights under its secured loan agreement with the Company or
otherwise, and whether or not such rights are then exercisable) that number of
shares of the Company's voting common stock or other capital stock of the
Company possessing voting power equal to 25% or more of the Company's then
issued and outstanding shares of such stock. To terminate her employment under
this Agreement for Good Reason, the Employee shall give the Company written
notice of the
6-E(1)(b)-5
<PAGE>
Employee's intent to terminate her employment with the Company for Good Reason
within 30 days of the applicable event or action referred to in clause (x) or
(y) above, which notice shall specify the Employee's reasons therefor in detail.
The Company shall have 30 days from its receipt of such notice to attempt to
cure any such condition giving rise to Good Reason hereunder.
(e) If Employee dies or becomes permanently disabled during the Term, or if
Employee is terminated by the Company for any reason other than for cause, or if
the Employee terminates this Agreement for Good Reason, the Company shall pay to
Employee the entire amount of the cash compensation provided for in Section 4
hereof that is payable during the remainder of the Term payable in a lump sum
cash payment within thirty (30) days of the effective date of termination
(provided that, in the case of death or disability of Employee, the
aforementioned cash payment shall be limited to the lesser of: (i) one year's
cash compensation provided for in Section 4, and (ii) the cash compensation
provided for in Section 4 for the remaining balance of the Term), any portion of
the Initial Option grant that is not then vested shall be accelerated and all
employee stock options granted to Employee that are vested on the effective date
of such termination (including the Initial Option Grant) shall continue to be
exercisable for a period of the lesser of (x) three years after the effective
date of such termination or (y) the expiration date of the option. In addition,
in the event the Employee's employment with the Company is terminated at any
time after the term of this Agreement other than for cause (as defined above),
any portion of the Initial Option Grant that is not then vested shall be
accelerated and the Initial Option Grant shall be exercisable as set forth in
the preceding sentence. After the effective date of her termination Employee
shall not be eligible to receive any further employee stock options.
6-E(1)(b)-6
<PAGE>
(f) Upon any termination of this Agreement or of the employment of
Employee, or the expiration of this Agreement without renewal of Employee's
employment, Employee shall be deemed automatically to have resigned from any
office or directorship of the Company which she may then hold and shall promptly
deliver to the Company (without retaining any copies thereof) all Company files
and documents, forms, letterhead, business cards, computer disks and any other
written, magnetic or printed materials relating to the business of the Company.
9. COVENANT RESTRICTING SOLICITATION. During the term hereof and for a period
of two (2) years after his employment with the Company, whether pursuant to this
Agreement or otherwise, shall expire or terminate for any reason whatsoever,
Employee shall not, directly or indirectly, solicit or attempt to solicit for
employment or employ any person who is an employee of the Company on the date of
Employee's date of termination or any person who was an employee during the six-
month period prior to such date.
10. COVENANT RESTRICTING COMPETITION. During the term hereof and for a period
of two (2) years after his employment with the Company, whether pursuant to this
Agreement or otherwise, shall expire or be terminated by Company for cause,
Employee shall not, either directly or indirectly, on her own account, or as an
employee, consultant, partner, owner, officer, director or stockholder of any
other person, firm, partnership, corporation or other entity or in any other
capacity, in any way, directly or indirectly, conduct, engage in, be connected
with, have any interest in, or aid or assist anyone in engaging in a business
which derives 20% or more of its revenues from the retail sale of bagels and/or
bagel-related products, or any business in which the Company is engaged at the
time of, or within one hundred eighty (180) days prior to, such expiration or
termination (a "Competitive Business"); provided, however, Employee may have
6-E(1)(b)-7
<PAGE>
an interest in any Competitive Business as a passive investor in such
Competitive Business provided such interest does not exceed three percent (3%)
of the outstanding equity securities of any company which has a class of
securities registered under Section 12 of the Securities Exchange Act of 1934,
as amended, or which is traded on a national securities exchange.
11. REMEDIES. Employee agrees that the period of time provided for in Sections
9 and 10 above is the minimum period of time necessary, and that other
provisions and restrictions set forth in Sections 9 and 10 and in other portions
of this Agreement are necessary, to protect the Company and its successors and
assigns in the protection of the business conducted by the Company. Employee
agrees that the services to be performed by her for the Company are special and
unique, that damages cannot compensate the Company in the event of a violation
of the restrictive covenants contained in Sections 9 and 10 hereof, and that
injunctive relief shall be essential for the protection of the Company and its
successors and assigns. Accordingly, Employee agrees and consents that, in the
event he shall violate or breach any of said restrictive covenants the Company
shall be entitled to obtain (and he hereby consents to) such injunctive relief
against Employee, without bond, in addition to such further or other relief as
may appertain equity or law. The exercise or enforcement by the Company of any
right or remedy hereunder shall not preclude the exercise or enforcement by the
Company of any other right or remedy hereunder or which the Company has the
right to enforce under applicable law.
12. EMPLOYEE REPRESENTATIONS. Employee represents and warrants to the Company
that (i) she is free to enter into this Agreement and (ii) this Agreement does
not violate the terms of any other agreement to which Employee is a party or by
which she is bound.
13. WAIVER. Failure by either party to insist upon strict compliance with any
of the terms, covenants or conditions hereof shall not be deemed a waiver of
such term, covenant or
6-E(1)(b)-8
<PAGE>
condition, nor shall any waiver or relinquishment of any right or remedy
hereunder at any one or more times be deemed a waiver or relinquishment of such
right or remedy at any other time or times.
14. SEVERABILITY. Each section, paragraph, term and provision of this
Agreement, and any portion thereof, shall be considered severable and if for any
reason any such portion of this Agreement is held to be invalid, contrary to, or
in conflict with any applicable present or future law or regulation in a final,
unappealable ruling issued by any court, agency or tribunal with competent
jurisdiction in a proceeding to which the Company is a party, that ruling shall
not impair the operation of, or have any other effect upon, such other portions
of this Agreement as may remain otherwise intelligible, which shall continue to
be given full force and effect and bind the parties hereto. Employee agrees that
if any provisions hereof shall be adjudicated to be invalid or unenforceable in
whole or in part, such modifications made to this Agreement as a result of such
adjudication shall be effective only in the particular jurisdiction in which
such adjudication is made. To the extent any provision hereof is deemed
unenforceable by virtue of its scope but may be enforceable by limitations
thereon, the parties hereto agree that the same shall be enforceable to the
fullest extent permissible under the laws and public policies applied in such
jurisdiction in which the enforcement is sought. The parties hereto hereby
authorize any court of competent jurisdiction to modify the restrictive
covenants to the extent necessary to make the same enforceable.
15. BENEFIT. This Agreement shall inure to the benefit of and be binding upon
the Company, its successors and assigns. The rights and benefits of Employee
under this Agreement are personal to her, and are not subject to voluntary or
involuntary alienation, assignment or transfer by her.
6-E(1)(b)-9
<PAGE>
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement between the
parties concerning Employee's employment with the Company, and may not be
modified or rescinded except by a written agreement to such effect signed by
both parties.
17. NOTICES. All notices, request, demands, and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered by hand or by electronic transmission. If mailed, first
class, certified mail, postage prepaid, or sent by reliable overnight delivery
service and addressed as follows, or at such other addresses as the parties
hereto may from time to time designate in writing, such notices, requests,
demands, and other communications shall be deemed delivered three (3) business
days after being so duly posted:
to the Company: Progressive Bagel Concepts, Inc.
1526 Cole Blvd. Suite 200
Golden, CO 80401
Attention: Kyle T. Craig
Facsimile: (303) 202-3360
with copies to: Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, IL 60601
Attention: Michael G. Brennan
Facsimile: (312) 984-2299
and to: Bell, Boyd & Lloyd
70 West Madison Street
Suite 3200
Chicago, IL 60602
Attention: Paul A. Strasen
Facsimile: (312) 372-2098
to Employee:
-----------------------------
-----------------------------
-----------------------------
-----------------------------
6-E(1)(b)-10
<PAGE>
with a copy to:
--------------------------
--------------------------
--------------------------
--------------------------
18. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Colorado applicable to contracts made and to be performed
therein.
19. CONFLICT WITH PLAN. The parties acknowledge that to the extent any
provision of this Agreement is inconsistent with any provision of the Plan, the
provisions of this Agreement shall control.
20. SURVIVAL. The parties acknowledge and agree that the covenants contained
in Sections 8(e), 9 and 10 of this Agreement shall survive the termination or
expiration of Employee's employment with the Company, whether pursuant to this
Agreement or otherwise.
EMPLOYEE: PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation
- ---------------------- By:
--------------------------
Name:
------------------------
Title:
-----------------------
6-E(1)(b)-11
<PAGE>
EXHIBIT 6.E(1)(c)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made this day of , 1995, by and between
PROGRESSIVE BAGEL CONCEPTS, INC., a Delaware corporation (hereinafter referred
to as the "Company"), and MARK ADELHELM (hereinafter referred to as "Employee").
W I T N E S S E T H:
--------------------
WHEREAS, the Company is engaged in the business of operating retail bakeries
featuring bagels and other food items;
WHEREAS, because of the abilities and expertise of Employee in said business,
the Company desires to employ Employee; and
WHEREAS, Employee is willing to accept such employment upon the terms and
conditions stated herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee to perform the duties
described herein, and Employee hereby accepts such employment on the terms and
conditions stated herein. Employee shall hold the position of Vice President of
Production and Commissary Systems of the Company. The Employee's initial
responsibilities shall include helping to define and establish production
systems, logistics and national commissary systems.
<PAGE>
2. TERM OF EMPLOYMENT. Subject to the provisions for termination set forth
herein, the term of employment under this Agreement shall commence on ________ ,
1995 and shall extend until August 1, 1998 (the "Term").
3. DUTIES OF EMPLOYEE. Employee shall perform the duties commensurate with
his position and experience as shall be assigned to him from time to time by the
Company. Employee shall perform such duties in a diligent manner, shall devote
his entire business time, attention and effort to the affairs of the Company
within the scope of his employment as is reasonably necessary for the proper
rendition of said services, shall diligently promote the interests of the
Company, and shall be just and faithful in carrying out his duties. During the
Term it shall not be a violation of this Agreement for the Employee to (i) serve
on civic, religious or charitable boards or committees; (ii) deliver lectures,
fulfill speaking engagements or teach at educational institutions; or (iii)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Employee's responsibilities as an employee
of the Company in accordance with this Agreement.
4. COMPENSATION. The Company shall compensate Employee for all services
rendered by him hereunder as follows:
(a) salary at a yearly rate of $125,000, payable by the Company in twenty-six
(26) equal installments (subject to any increases as determined by the Board of
Directors from time to time in its sole discretion) after deducting therefrom
all applicable FICA contributions, federal and state income tax withholding, and
any other payroll taxes;
6.E(1)(c)-2
<PAGE>
(b) such stock options as may be granted to Employee pursuant to the Company's
1995 Employee Stock Option Plan, as it may be amended from time to time, (the
"Plan") or any option plan hereinafter adopted by the Company; and
(c) as an inducement for Employee to execute this Agreement, Employee shall
receive options under the Plan to purchase that number of shares of common stock
of the Company that have a fair market value, determined based on the price per
share in the Company's initial offering to investors, equal to $250,000, which
options are to be granted on the date hereof (the "Initial Option Grant");
provided, however, the options granted pursuant to this Section 4(c) shall
constitute Employee's option grant for 1995 under the Plan.
5. BENEFITS, VACATIONS AND REIMBURSEMENT OF EXPENSES. In addition to the
compensation payable to Employee pursuant to Section 4 above, and all other
compensation or benefits provided for hereunder, Employee shall be entitled to
such reasonable periods of vacation, with full pay, as is consistent with the
general policy as established by the Board of Directors for executives and
business exigencies of the Company, and such benefits of a similar type and
amount (including relocation benefits) and to the same extent as benefits are
provided to other similarly situated employees of the Company. Employee shall
also be entitled to receive such additional benefits to the same extent as
benefits are provided to other similarly situated employees of the Company as
established by the Company's Board of Directors from time to time. The Employee
shall be reimbursed for the reasonable business-related expenses incurred by her
in connection with the performance of her duties hereunder.
6.E(1)(c)-3
<PAGE>
6. CONFIDENTIALITY. Employee agrees to execute and deliver such
confidentiality agreement which is to be required to be executed and delivered
by employees of the Company generally.
7. CONFLICT OF INTEREST. Employee shall take no action, or engage in any
transaction, that could be considered to conflict with the best interests of the
Company, and shall at all times exercise his best judgment and efforts so as to
avoid taking any action, or engaging in any transaction, that might give the
appearance of being in conflict with the best interests of the Company.
8. TERMINATION.
(a) This Agreement and Employee' s employment hereunder shall immediately
terminate, without further notice or action, upon the occurrence of the death of
Employee.
(b) Additionally, the Company shall have the right to terminate this
Agreement and Employee's employment with the Company hereunder, effective upon
written notice to Employee of termination stating the basis for such
termination, under only the following circumstances:
(1) if Employee is permanently disabled (as define below); or
(2) for "cause," which shall be defined as including any of the
following: (i) any misappropriation of funds or property of the
Company by Employee; (ii) Employee's conviction of a felony, or of any
crime involving moral turpitude, fraud, theft or conversion; (iii)
Employee's failure to submit to a medical examination at the Company's
expense within twenty-one (21) days after receipt of the Company's
written request that Employee submit to such
6.E(1)(c)-4
<PAGE>
examination; or (iv) a breach of any other material provision
contained in this Agreement which is not cured within 30 days of
written notice by the Company of such breach.
(c) Employee shall be deemed to be "permanently disabled" hereunder
upon the first to occur of any of the following events:
(1) The receipt by the Company of a written certificate from
a physician approved by the Company and reasonably satisfactory to
Employee stating that, based upon one or more examinations of Employee
by such physician, it is such physician's opinion that, for a period
of at least six (6) consecutive months from the date of certification,
Employee is and will be substantially unable to perform his customary
duties for the Company due to physical or mental infirmity. The
Company may request in writing that Employee submit to such
examinations by giving written notice thereof to Employee.
(2) The adjudication of Employee as an incompetent or a
disabled person and the appointment of a conservator or guardian for
his person or property by a court of competent jurisdiction.
(d) If Employee is terminated by the Company for cause, as that term
is defined in Section 8(b)(2), or if Employee voluntarily terminates his
employment (other than for Good Reason), the Company shall not be obligated to
pay Employee any other compensation with respect to any period after the date of
such termination and all stock options granted to Employee, whether or not
vested on the date of such termination, shall terminate and be of no further
force and effect. "Good Reason" shall mean (x) that the Company (through its
Board
6.E(1)(c)-5
<PAGE>
or otherwise) has (i) assigned the Employee duties materially which materially
diminish the Employee's level of responsibility from that contemplated by
Section 3 above without the Employee's consent; or (ii) materially breached any
of its other covenants and obligations hereunder, or (y) Boston Chicken, Inc.
("BCI") shall no longer have a significant Interest (as hereinafter defined) in
the Company. A "Significant Interest" in the Company shall mean, at any time,
BCI's ownership of, or right to acquire ownership of (through the exercise of
its conversion and/or option rights under its secured loan agreement with the
Company or otherwise, and whether or not such rights are then exercisable), that
number of shares of the Company's voting common stock or other capital stock of
the Company possessing voting power equal to 25% or more of the Company's then
issued and outstanding shares to such stock. To terminate his employment under
this Agreement for Good Reason, the Employee shall give the Company written
notice of the Employee's intent to terminate his employment with the Company for
Good Reason within 30 days of the applicable event or action referred to in
clause (x) or (y) above, which notice shall specify the Employee's reasons
therefor in detail. The Company shall have 30 days from its receipt of such
notice to attempt to cure any such condition giving rise to Good Reason
hereunder.
(e) If Employee dies or becomes permanently disabled during the Term, or if
Employee is terminated by the Company for any reason other than for cause or if
Employee terminates this Agreement for Good Reason, the Company shall pay to
Employee the entire amount of the cash compensation provided for in Section 4
hereof that is payable during the remainder of the Term payable in a lump sum
cash payment within thirty (30) days of the effective date of termination
(provided that, in the case of death or disability of Employee, the
6.E(1)(c)-6
<PAGE>
aforementioned cash payment shall be limited to the lesser of: (i) one year's
cash compensation provided for in Section 4, and (ii) the cash compensation
provided for in Section 4 for the remaining balance of the Term), any portion of
the Initial Option Grant that is then vested shall be accelerated and all
employee stock options granted to Employee that are vested on the effective date
of such termination (including the Initial Option Grant) shall continue to be
exercisable for a period of the lesser of (x) three years after the effective
date of such termination or (y) the expiration date of the option. In addition,
in the event the Employee's employment with the Company is terminated at any
time after the term of this Agreement other than for cause (as defined above),
any portion of the Initial Option Grant that is not then vested shall be
accelerated and the Initial Option Grant shall be exercisable as set forth in
the preceding sentence. After the effective date of his termination Employee
shall not be eligible to receive any further employee stock options.
(f) Upon any termination of this Agreement or of the employment of
Employee, or the expiration of this Agreement without renewal of Employee's
employment, Employee shall be deemed automatically to have resigned from any
office or directorship of the Company which he may then hold and shall promptly
deliver to the Company (without retaining any copies thereof) all Company files
and documents, forms, letterhead, business cards, computer disks and any other
written, magnetic or printed materials relating to the business of the Company.
9. COVENANT RESTRICTING SOLICITATION. During the term hereof and for a
period of two (2) years after his employment with the Company, whether pursuant
to this Agreement or otherwise, shall expire or terminate for any reason
whatsoever, Employee shall not, directly or
6.E(1)(c)-7
<PAGE>
indirectly, solicit or attempt to solicit for employment or employ any person
who is an employee of the Company on the date of Employee's date of termination
or any person who was an employee during the six-month period prior to such
date.
10. COVENANT RESTRICTING COMPETITION. During the term hereof and for a period
of two (2) years after his employment with the Company, whether pursuant to this
Agreement or otherwise, shall expire or be terminated by Company for cause,
Employee shall not, either directly or indirectly, on his own account, or as an
employee, consultant, partner, owner, officer, director or stockholder of any
other person, firm, partnership, corporation or other entity or in any other
capacity, in any way, directly or indirectly, conduct, engage in, be connected
with, have any interest in, or aid or assist anyone in engaging in a business
which derives 20% or more of its revenues from the retail sale of bagels and/or
bagel-related products, or any business in which the Company is engaged at the
time of, or within one hundred eighty (180) days prior to, such expiration or
termination (a "Competitive Business"); provided, however, Employee may have an
interest in any Competitive Business as a passive investor in such Competitive
Business provided such interest does not exceed three percent (3%) of the
outstanding equity securities of any company which has a class of securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended,
or which is traded on a national securities exchange.
11. REMEDIES. Employee agrees that the period of time provided for in Sections
9 and 10 above is the minimum period of time necessary, and that other
provisions and restrictions set forth in Sections 9 and 10 and in other portions
of this Agreement are necessary, to protect the Company and its successors and
assigns in the protection of the business conducted by the Company. Employee
agrees that the services to be performed by him for the Company are
6.E(1)(c)-8
<PAGE>
special and unique, that damages cannot compensate the Company in the event of a
violation of the restrictive covenants contained in Sections 9 and 10 hereof,
and that injunctive relief shall be essential for the protection of the Company
and its successors and assigns. Accordingly, Employee agrees and consents that,
in the event he shall violate or breach any of said restrictive covenants the
Company shall be entitled to obtain (and he hereby consents to) such injunctive
relief against Employee, without bond, in addition to such further or other
relief as may appertain equity or law. The exercise or enforcement by the
Company of any right or remedy hereunder shall not preclude the exercise or
enforcement by the Company of any other right or remedy hereunder or which the
Company has the right to enforce under applicable law.
12. EMPLOYEE REPRESENTATIONS. Employee represents and warrants to the Company
that (i) he is free to enter into this Agreement and (ii) this Agreement does
not violate the terms of any other agreement to which Employee is a party or by
which he is bound.
13. WAIVER. Failure by either party to insist upon strict compliance with any
of the terms, covenants or conditions hereof shall not be deemed a waiver of
such term, covenant or condition, nor shall any waiver or relinquishment of any
right or remedy hereunder at any one or more times be deemed a waiver or
relinquishment of such right or remedy at any other time or times.
14. SEVERABILITY. Each section, paragraph, term and provision of this
Agreement, and any portion thereof, shall be considered severable and if for any
reason any such portion of this Agreement is held to be invalid, contrary to, or
in conflict with any applicable present or future law or regulation in a final,
unappealable ruling issued by any court, agency or tribunal with competent
jurisdiction in a proceeding to which the Company is a party, that ruling shall
not
6.E(1)(c)-9
<PAGE>
impair the operation of, or have any other effect upon, such other portions of
this Agreement as may remain otherwise intelligible, which shall continue to be
given full force and effect and bind the parties hereto. Employee agrees that if
any provisions hereof shall be adjudicated to be invalid or unenforceable in
whole or in part, such modifications made to this Agreement as a result of such
adjudication shall be effective only in the particular jurisdiction in which
such adjudication is made. To the extent any provision hereof is deemed
unenforceable by virtue of its scope but may be enforceable by limitations
thereon, the parties hereto agree that the same shall be enforceable to the
fullest extent permissible under the laws and public policies applied in such
jurisdiction in which the enforcement is sought. The parties hereto hereby
authorize any court of competent jurisdiction to modify the restrictive
covenants to the extent necessary to make the same enforceable.
15. BENEFIT. This Agreement shall inure to the benefit of and be binding upon
the Company, its successors and assigns. The rights and benefits of Employee
under this Agreement are personal to him, and are not subject to voluntary or
involuntary alienation, assignment or transfer by him.
16. ENTIRE AGREEMENT. This Agreement contains the entire agreement between the
parties concerning Employee's employment with the Company, and may not be
modified or rescinded except by a written agreement to such effect signed by
both parties.
17. NOTICES. All notices, request, demands, and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered by hand or by electronic transmission. If mailed, first
class, certified mail, postage prepaid, or sent by reliable overnight delivery
service and addressed as follows, or at such other addresses
6.E(1)(c)-10
<PAGE>
as the parties hereto may from time to time designate in writing, such notices,
requests, demands, and other communications shall be deemed delivered three (3)
business days after being so duly posted:
to the Company: Progressive Bagel Concepts, Inc.
1526 Cole Blvd. Suite 200
Golden, CO 80401
Attention: Kyle T. Craig
Facsimile: (303) 202-3360
with copies to: Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, IL 60601
Attention: Michael G. Brennan
Facsimile: (312) 984-2299
and to: Bell, Boyd & Lloyd
70 West Madison Street
Suite 3200
Chicago, IL 60602
Attention: Paul A. Strasen
Facsimile: (312) 372-2098
to Employee:
with a copy to:
18. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Colorado applicable to contracts made and to be performed
therein.
19. CONFLICT WITH PLAN. The parties acknowledge that to the extent any
provision of this Agreement is inconsistent with any provision of the Plan, the
provisions of this Agreement shall control.
6.E(1)(c)-11
<PAGE>
20. SURVIVAL. The parties acknowledge and agree that the covenants
contained in Sections 8(e), 9 and 10 of this Agreement shall survive the
termination or expiration of Employee's employment with the Company, whether
pursuant to this Agreement or othenvise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
EMPLOYEE: PROGRESSIVE BAGEL CONCEPTS, INC., a Delaware
corporation
- ----------------------- By:
--------------------------------
Its:
-------------------------------
6.E(1)(c)-12
<PAGE>
Exhibit 7.C
Revised draft 3-21-95
SECURED LOAN AGREEMENT
This secured loan agreement (the "Agreement") is made and entered into this
_______ day of March, 1995 between Progressive Bagel Concepts, Inc. a Delaware
corporation (the "Company"), and Boston Chicken, Inc., a Delaware corporation
("Boston Chicken").
Recitals
--------
The Company desires to borrow up to $80,000,000 from Boston Chicken in
order to provide funds for development of retail food service outlets
specializing in the sale of bagels and bagel related products (the "Stores"),
and Boston Chicken has agreed to make such loan to the Company, upon the terms
and subject to the conditions set forth herein.
Covenants
---------
In consideration of the mutual representations, warranties, and covenants
set forth herein, and in consideration of any advances made hereunder to or for
the benefit of the Company by Boston Chicken, the parties hereto agree as
follows.
ARTICLE I
The Loan
--------
1.1 The Loan Promissory Note. Boston Chicken agrees, on the terms
and subject to the conditions hereinafter set forth, including, but not limited
to the limitation on the amount available from time to time to be borrowed set
forth in Section 1.2 hereto, to advance at any time and from time to time during
the period commencing on the date hereof and ending on March _____, 1998 (the
"Draw Loan Termination Date"), amounts requested by the Company in an aggregate
principal amount not to exceed $80,000,000 (the "Loan"), in integral multiples
of $100,000. Each advance of the Loan (an "Advance") shall be made by wire
transfer of Boston Chicken to the account of the Company or by regular check of
Boston Chicken payable to the Company and forwarded to the Company by overnight
air express to its address as set forth herein for delivery on the next regular
business day. The Loan shall be evidenced by a promissory note (the "Note") of
even date herewith in the form attached hereto as Exhibit A.
1.2 Maximum Principal Balance. (a) The aggregate outstanding
principal balance of the Loan shall not exceed the following amounts at any
time: (i) $20,000,000 from the date hereof until the Company notifies Boston
Chicken that it has 40 Stores open and conducting business, (ii) $40,000,000
from the date the Company opens its 40th Store until the Company notifies Boston
Chicken that it has 80 Stores open and conducting business, (iii) $60,000,000
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from the date the Company opens its 80th Store until the Company notifies Boston
Chicken that it has 120 Stores open and conducting business, and (iv)
$80,000,000 at any time thereafter, less, in each instance, the principal amount
of conversions under Section 1.7 and option exercises under Section 1.8
("Maximum Principal Balance").
(b) The principal amount of the Loan outstanding at any time
shall not exceed (i) the aggregate amount of all capital contributions made to
the Company, multiplied by (ii) four.
1.3 The Loan Account. Boston Chicken shall maintain a loan account on
its books in which shall be recorded all advances made by Boston Chicken to the
Company pursuant to this Agreement, and all payments made by the Company with
respect to the Loan; provided, however, that failure to maintain such account or
record any advances therein shall not relieve the Company of its obligations to
repay the outstanding principal amount of the Loan, all accrued interest
thereon, and any amount payable with respect thereto in accordance with the
terms of this Agreement and the Note.
1.4 Interest Rate and Payment. (a) Interest shall accrue daily on the
aggregate outstanding principal balance of the Loan, for the period commencing
on the date the Loan is made until the Loan is paid in full, at a per annum rate
equal to the rate designated and announced by Bank of America Illinois or its
successor in interest (the "Bank") from time to time as its "reference rate" in
effect at its principal office in Chicago, Illinois, plus 1%. The interest rate
shall be adjusted, from time to time, on the same day on which the Bank adjusts
its "reference rate." Interest on the outstanding principal amount of the Loan
shall be payable in arrears on the dates set forth herein and at maturity
(whether at stated maturity, by acceleration or otherwise).
(b) During the Interest Payment Period (as defined below) the
Company shall pay to Boston Chicken interest on the outstanding principal
balance of the Loan on the first day of each Retail Period (as defined below).
The "Interest Payment Period" shall mean the period commencing on the first day
of the Retail Period immediately following the first Retail Period in which the
Company initially draws on the Loan under this Agreement and continue through
and including the Draw Loan Termination Date. Thereafter the Company shall pay
principal and interest as provided in Section 1.5.
(c) Interest shall be computed on the basis of a 360-day year and
the actual number of days elapsed.
(d) Any principal payment due under the Note not paid when due,
whether at stated maturity, by notice of repayment, by acceleration or
otherwise, shall, to the extent permitted by applicable law, thereafter bear
interest (compounded monthly and payable upon demand) at a rate which is 2% per
annum in excess of the rate of interest otherwise payable under this Agreement
in respect of such principal amount until such unpaid amount has been paid in
full (whether before or after judgment).
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1.5 Repayment of the Loan. (a) If not earlier paid, or if not
accelerated for payment, the outstanding principal amount of the Loan shall, at
the close of business on the Draw Loan Termination Date, thereafter become an
amortized term Loan payable as follows: the principal balance of the Loan shall
be payable to Boston Chicken in 65 substantially equal periodic installments of
principal (the amount of which periodic installments of principal shall be
determined at the close of business on the Draw Loan Termination Date based on a
schedule amortizing such outstanding principal balance of the Loan as of such
date in 130 substantially equal periodic installments of principal), plus
accrued but unpaid interest, on the first day of each of Boston Chicken's 13
consecutive four-week accounting periods used for accounting purposes (each a
"Retail Period"), commencing on the first day of the fifth Retail Period in
Boston Chicken's fiscal year 1998 and continuing until the first day of the
fifth Retail Period in Boston Chicken's fiscal year 2003, when the entire
remaining principal balance of the Loan and all interest accrued thereon shall
be due and payable.
(b) The Loan and all accrued and unpaid interest thereon may be
prepaid, without premium or penalty, at any time after April 1, 1996.
1.6 Term of this Agreement. This Agreement shall be effective as of
the date of its execution (the "Closing Date") and shall continue in effect
until the last to occur of (i) the exercise, expiration, or other termination of
all remaining option rights granted in Section 1.8 hereof, (ii) the exercise,
expiration, or other termination of all of the remaining conversion rights
granted in Section 1.7 hereof, (iii) the date on which there is no amount
(principal or interest) remaining outstanding under the Note and (iv) the date
on which Boston Chicken no longer has an obligation to make any advances
hereunder if the Company were to make a valid request for an advance pursuant to
and in accordance with Article III hereof.
1.7 Convertibility. (a) on the terms and subject to the conditions set
forth in the Note, any portion of the outstanding principal balance of the Loan
is convertible at the election of the holder of the Note into shares of common
stock of the Company, $.01 par value per share, at any time and from time to
time after the earlier of any acceleration of the Loan or April 1, 1996 and up
to the later of the date on which the Company has properly repaid the
outstanding principal balance of the Loan and all accrued interest thereon in
full or the first day of the eleventh Retail Period in Boston Chicken's fiscal
year 2003. Upon such conversion, that portion of principal so converted shall be
deemed to be paid in full upon the delivery to the holder of the Note of a
certificate or certificates representing the proper number of shares of common
stock of the Company to be issued to the holder of the Note upon such
conversion. Conversion of any portion of the principal balance of the Loan shall
not relieve the Company of its obligation to pay any accrued but unpaid interest
to the date of conversion on the portion of the principal balance of the Loan so
converted. In no event shall interest be convertible into shares of common stock
in the Company.
(b) Upon any conversion under this Section 1.7, Boston Chicken's
obligation to make additional advances to the Company under this Agreement shall
be reduced by an amount equal to such conversion amount.
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1.8 Option. (a) Boston Chicken shall have the option, at any time and
from time to time after the earlier of the acceleration of the Loan or April 1,
1996 and up to the later of the date on which the Company has properly repaid
the outstanding principal balance of the Loan and all accrued interest thereon
in full or the first day of the eleventh Retail Period in Boston Chicken's
fiscal year 2003 to purchase at the Conversion Price (as defined in the Note) up
to that number of shares of common stock of the Company equal to the (i) the
Option Amount, divided by (ii) the Conversion Price (the "Option"). For purposes
of this Section 1.8, the Option Amount shall mean (x) $80,000,000, less (y) the
sum of (1) the dollar amount of the outstanding principal balance of the Loan
(whether such amount is the result of a reduction in principal due to the
repayment of the Loan or the failure by the Company to request advances
hereunder or otherwise) and (2) the dollar amount of all previous conversions
under Section 1.7 hereof and exercises of the Option under this Section 1.8, in
each case on the date Boston Chicken notifies the Company of its intention to
exercise the Option.
(b) Upon exercise of any portion of the Option under this Section
1.8, Boston Chicken's obligations to make additional advances to the Company
under this Agreement shall be reduced by an amount equal to the amount of such
option exercise.
(c) In case of any reclassification or change of outstanding
shares of common stock issuable upon exercise of the Option, or in case of any
consolidation or merger of the Company with or into any partnership,
corporation, or other entity (other than a merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of outstanding shares of common stock, other than a change in number of
shares issuable upon exercise of the Option) or in case of any sale or
conveyance to any partnership, corporation, or other entity of the property of
the Company as an entirety or substantially as an entirety, then the holder of
the Note shall have the right thereafter to exercise the Option for the kind and
amount of shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale, or conveyance by a holder
of the number of shares of common stock of the Company issuable upon exercise of
the Option immediately prior to such reclassification, change, consolidation,
merger, sale, or conveyance, subject to adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for herein.
1.9 One Obligation. All advances made hereunder, and all interest
accrued thereon, shall constitute one obligation of the Company secured by the
security interests granted by this Agreement and by all other security
interests, liens, claims, and encumbrances from time to time hereafter granted
to Boston Chicken by the Company.
1.10 Credit Resources. (a) The Company acknowledges that Boston
Chicken has informed it that Boston Chicken does not currently and may not from
time to time in the future have cash, cash equivalents, and credit resources
sufficient to permit Boston Chicken to necessarily make all requested advances
under this Agreement and all other similar agreements with its financed area
developers and franchisees while maintaining sufficient working capital for
Boston Chicken's operating needs, and the Company agrees that in the event
Boston Chicken shall fail to fund the Loan as and to the extent required hereby
and such failure shall constitute a breach
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of this Agreement (a "Funding Default"), such Funding Default shall not (a)
constitute fraud (by any person or entity, including Boston Chicken and its
successors and assignees) or (b) give rise to any liability of any person or
entity (other than Boston Chicken and its successors and assignees) in any other
tort, and the Company further agrees that it shall be limited to its remedies in
contract and in a non-fraud tort action against Boston Chicken. Boston Chicken
and the Company agree that this Section 1.10 shall not diminish or otherwise
affect in any way the amount of damages for which Boston Chicken may be liable
to the Company in a contract or non-fraud tort action for a Funding Default.
(b) In the event a Funding Default occurs prior to such time as
$50,000,000 of the Loan has been advanced hereunder (whether all or any portion
of such $50,000,000 has been repaid by the Company), which Funding Default is
not cured widen 30 days after the occurrence thereof, the Conversion Price for
that amount of the Loan equal to the amount of the Funding Default shall be
increased to $1,482.96 per share.
1.11 Payment Method. All payments to be made by the Company hereunder
shall be made in lawful money of the United States, in immediately available
finds, without set off, counterclaims, deduction or withholding of any type. So
long as funds are still available to be drawn by the Company hereunder, the
Company hereby authorizes Boston Chicken to make Advances to pay interest on the
Loan when due hereunder.
ARTICLE II
SECURITY AND COLLATERAL
-----------------------
2.1 Security Interest. To secure payment and performance of the
Company's obligations hereunder and under the Note, and any and all other
indebtedness, obligations or liabilities of any kind of the Company to Boston
Chickens whether now existing or hereafter arising, direct or indirect, absolute
or contingent, joint and/or several, arising by operation of law or otherwise,
the Company hereby grants to Boston Chicken a continuing security interest in
and to the following property and interests in property, whether now owned or
hereafter acquired by the Company and wheresoever located:
(a) all of the Company's real estate, accounts equipment
(including, but not limited to machinery, furniture, fixtures, tools, vehicles,
and other tangible property), inventory, leasehold improvements, contract rights
(including its rights as lessee under all leases of real property), general
intangibles, deposit accounts, tax refunds, chattel paper instruments, notes,
letters of credit, documents, and documents of title, capital stock or other
ownership interests of all Subsidiaries (as defined in Section 6.11 hereof), but
specifically excluding those shares of common stock of Boston Chicken purchased
by the Company directly from Boston Chicken to be delivered by the Company in
the acquisition by the Company of all of the stock of Brackman Brothers, Inc., a
Utah corporation ("Brackman"), and of all of the assets of each of Bagel &
Bagel, Inc., a Missouri corporation ("B&B") and Offerdahl's Bagel Gourmet, Inc.,
a Florida corporation ("OBG);
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(b) all insurance proceeds of or relating to any of the
foregoing;
(c) all of the Company's books, records, and computer programs
and data relating to any of the foregoing; and
(d) all accessories and additions to, substitutions for, and
replacements, products, and proceeds of, any of the foregoing (all of the
foregoing, and all of the security described in Sections 2.2 and 2.3, being
referred to collectively as the "Collateral").
2.2 Pledge of Stock. To evidence the security interest granted by the
Company to Boston Chicken under Section 2.1 in all capital stock of the
Subsidiaries of the Company existing on the date of this Agreement, the Company
shall execute a subsidiary stock pledge agreement substantially in the form
attached hereto as Exhibit C (the "Pledge Agreement").
2.3 Subsidiary Security Documents. (a) To secure the obligations of
the Company hereunder and under the Note and all other obligations of the
Company to Boston Chicken, the Company shall cause each Subsidiary of the
Company existing on the date of this Agreement to execute and deliver to Boston
Chicken a security agreement substantially in the form attached hereto as
Exhibit D (the "Subsidiary Security Agreement").
(b) The Company shall cause each person or entity becoming a
Subsidiary of the Company from time to time to execute and deliver to Boston
Chicken, within five days after such person or entity becomes a Subsidiary, a
security agreement substantially in the form attached hereto as Exhibit D and
modified appropriately, together with all financing statements and other related
documents (including real estate mortgages) as Boston Chicken may request and
such closing documents with respect to such Subsidiary of the type described in
Article VII as Boston Chicken may request, sufficient to grant to Boston Chicken
liens and security interests in all assets of each Subsidiary of the type
described in Section 2.1. The Company shall from time to time execute and
deliver to Boston Chicken, within five days after a person or entity becomes a
Subsidiary of the Company, a stock pledge agreement substantially in the form of
Exhibit C and modified appropriately, pursuant to which the Company shall grant
a security interest in favor of Boston Chicken in and to all shares of capital
stock of such Subsidiary, together with the stock certificates evidencing such
stock ownership and accompanied by a stock power executed in blank. Any such
pledge agreements executed by the Company and security agreements and other
documents executed by a Subsidiary of the Company from time to time shall be
included in the term "Security Instruments" used herein and the stock and assets
of such Subsidiary covered by such Security Instruments shall be included in the
term "Collateral" used herein.
2.4 Preservation of Collateral and Perfection of Security Interests
Therein. (a) The Company shall execute and deliver to Boston Chicken,
concurrently with the execution of this Agreement, and shall execute and deliver
or cause any Subsidiary of the Company to execute and deliver to Boston Chicken
at any time or times hereafter at the request of Boston Chicken or the Agent (as
defined below), all financing statements or other documents, including mortgages
on real estate owned by the Company or its Subsidiaries and Subsidiary security
agreements (the
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"Security Instruments") (and pay the cost of filing or recording the same in all
public offices deemed necessary by Boston Chicken), as Boston Chicken or the
Agent may request, in forms satisfactory to Boston Chicken, and take all further
action that Boston Chicken or the Agent may request, or which may be reasonably
necessary or desirable, to perfect and keep perfected the security interest in
the Collateral granted by the Company to Boston Chicken, to create and perfect
the security interests in the assets of any Subsidiaries of the Company provided
in Section 2.3 hereof, or otherwise to protect and preserve the Collateral and
Boston Chicken's security interest therein. Should the Company fail to do so,
Boston Chicken is authorized to sign any such Security Instruments as the
Company's agent.
(b) The Company will furnish to Boston Chicken from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Boston Chicken may
reasonably request, all in reasonable detail.
(c) The Company shall notify Boston Chicken, within five days
after the occurrence thereof, of the acquisition of any property by the Company
that is not subject to the existing liens and security interests, in favor of
Boston Chicken, of any person or entity's becoming a Subsidiary, and of any
other event or condition that may require additional action of any nature in
order to create, preserve, or perfect the liens and security interests of Boston
Chicken.
(d) The Company shall, and shall cause each Subsidiary to, cause
all tangible Collateral to be maintained and preserved in the same condition,
repair and working order as when new, ordinary wear and tear excepted, and in
accordance with any manufacturer's manual.
2.5 Alternate Security and Pledge Agreements. If requested by Boston
Chicken in order for the transactions contemplated by this Agreement to comply
with the limitations and restrictions of that certain Amended and Restated
Credit Agreement, dated as of May 18, 1994 among Boston Chicken, the lenders
named therein, and the Bank, as agent for the lenders ("Agent"), as amended, and
as it may be further amended from time to time (the "BC Credit Line"), or to
obtain a waiver therefrom, the Company hereby agrees that a security interest as
referred to in Section 2.1 hereof, a pledge of shares as referred to in Section
2.2 hereof, and the additional security interests described in Sections 2.3 and
2.4 hereof may be granted directly to the Agent in lieu of or in addition to
such grants to Boston Chicken, in which event appropriate alterations may be
made to this Article II and to the form of Pledge Agreement, and references
herein to such security, pledges, and deliveries thereof to Boston Chicken may
be deemed to refer to the Agent, as appropriate, provided, however, that such
alterations shall not include terms or conditions less favorable to the Company
than the terms and conditions contained in this Agreement, the Note and the
Security Instruments on the date hereof.
2.6 Release and Termination. Upon payment in full of the outstanding
principal balance of the Loan and all accrued interest thereon and the payment
in full of all fees and expenses payable by the Company pursuant to Section 9.3
hereof, Boston Chicken shall
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promptly execute and deliver to the Company such documents, instruments,
termination statements and releases as shall be requested by the Company in
order to terminate and discharge all of the liens, security interests and
encumbrances created by or pursuant to this Agreement, the Pledge Agreement and
the Security Instruments.
ARTICLE III
CONDITIONS OF ADVANCES
----------------------
Notwithstanding any other provisions contained in this Agreement, the
making of any Advance (including the initial Advance) provided for in Section
1.1 shall be conditioned upon the following:
3.1 The Company's Written Request. Boston Chicken shall have received,
at least five (5) business days prior to the day an Advance is to be made
hereunder, (i) a written request from an authorized officer of the Company for
an Advance in a specific amount, and (ii) a certificate of the Company in the
form attached hereto as Exhibit B. which shall be signed by the president, chief
financial officer or other authorized officer of the Company.
3.2 No Material Adverse Change. No material adverse change, as
determined by Boston Chicken in its sole discretion taking into account that the
Company is in a start up mode, in the financial condition, results of
operations, assets, or business of the Company, shall have occurred at any time
or times subsequent to the date hereof.
3.3 No Default. Neither a Default (as that term is defined in Article
VIII hereof) nor any event which, through the passage of time or the service of
notice or both, would mature into a Default (an "Event of Default") shall have
occurred and be continuing.
3.4 Representation and Warranties. The representations and warranties
contained in Article IV hereof and in the Pledge Agreement and the other
Security Instruments shall be true and correct on and as of the date such
Advance is made.
3.5 Service Agreements. Each of the Service Agreements (as defined in
Section 7.3(c) hereof) between the Company and Boston Chicken shall be in full
force and effect, and no default shall have occurred or notice of termination
shall have been given thereunder.
3.6 Other Requirements. Boston Chicken shall have received, in form
and substance satisfactory to it, all certificates, consents, affidavits,
schedules, instruments, and other documents which the Company is obligated to
provide to Boston Chicken hereunder or which Boston Chicken may at any time
reasonably request.
3.7 Amount of Advances. Boston Chicken shall have received a
certificate of the Company, which shall be signed by the president or chief
financial officer of the Company, and which shall certify that the amount of the
requested Advance is the amount the Company reasonably expects (and which Boston
Chicken reasonably believes is necessary) to expend within
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the 30-day period immediately following the receipt of the Advance for working
capital purposes and to purchase, design, construct, and equip Stores in
accordance with Section 5.6 hereof that are scheduled to open within 6 months of
the Advance date or, in the case of free-standing Stores for which a building
must be constructed, 9 months from the Advance date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants that:
4.1 Financial Statements. The financial statements to be furnished to
Boston Chicken or the Agent in accordance with Section 5.1 below will be
prepared in conformity with generally accepted accounting principles
consistently applied throughout the periods involved, and will fairly present
the financial condition of the Company and its Subsidiaries at the dates thereof
and its results of operations for the periods indicated.
4.2 Capital Stock. The Company's authorized capital stock (subject to
increases in accordance with Section 5.8 hereof) consists solely of 1,200,000
shares of capital stock, of which 1,000,000 shares are common stock, $.01 par
value per share, and 200,000 shares are preferred stock, $.01 par value per
share. As of the date hereof, of the Company's authorized capital stock, (i)
_______ shares of common stock are issued and outstanding, (ii) ________ shares
of common stock are reserved for issuance upon the conversion of the Note or
exercise of the Option, and (iii) 15,000 shares of common stock are reserved for
issuance upon the exercise of options granted under the Company's 1995 Employee
Stock Option Plan. Such issued and outstanding shares are fully paid and non-
assessable and are free and clear of all liens, claims, and encumbrances of any
kind, other than those arising hereunder. The shares to be issued and delivered
to the holder of the Note upon any conversion of the Note or exercise of the
Option, when so issued and delivered, will be fully paid and non-assessable and
free and clear of all liens, claims, and encumbrances of any kind. Except for
options granted under the Company's 1995 Employee Stock Option Plan and except
as otherwise provided herein and in the Note, there are no outstanding options,
warrants, rights, contracts, or agreements of any kind for the issuance or sale
of any shares of capital stock of the Company or for the issuance or sale of any
other securities or obligations of the Company or for the purchase by the
Company of any of its shares.
4.3 No Material Adverse Change. Since the date hereof, there has been
no material adverse change in the financial condition, results of operations,
assets, or business of the Company and its Subsidiaries, taken as a whole.
4.4 No Pending Material Litigation or Proceedings. There are no
actions, suits, investigations or proceedings pending or, to the knowledge of
the Company or its Subsidiaries, threatened against or affecting the Company or
its Subsidiaries or the business or properties of the Company or its
Subsidiaries, in any court or before or by any governmental department,
commission, board, agency or instrumentality, or any arbitrator that could, in
the
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event any one of such actions, suits, investigations or proceedings was
reasonably expected to be determined adversely to the Company, have a material
adverse effect on the financial condition or results of operations of the
Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries is in default with respect to any order, writ, injunction, or
decree of any court or arbitrator or governmental agency.
4.5 Valid Organization; Due Authorization; Valid and Binding
Agreement. (a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, with corporate
power and authority to enter into and perform this Agreement and to issue the
Note and incur the indebtedness to be evidenced thereby. The Company is
qualified to do business as a foreign corporation and is in good standing in the
States of Utah, Kansas, Missouri, and Colorado and in each additional
jurisdiction in which failure to so qualify could have a material adverse affect
on its property, business, operations, or prospects, and will, within 30 days of
the Closing Date and thereafter, be qualified to do business as a foreign
corporation and will be in good standing in the States of Illinois and Florida.
(b) This Agreement, the Note and the Service Agreements have each
been duly authorized by all required corporate action on the part of the
Company, and each of this Agreement, the Note and the Service Agreements has
been duly executed and delivered by the Company and constitutes the legal,
valid, and binding obligation of the Company enforceable in accordance with its
terms.
(c) The execution and delivery of this Agreement and the Note and
the performance by the Company of its obligations hereunder and thereunder are
not in contravention of any law, rule or regulation, including without
limitation Regulation G, T, U, or X of the Board of Governors of the Federal
Reserve System, and will not conflict with or result in any breach of any of the
provisions, or constitute a default under or result in the creation or
imposition of any lien or encumbrance (except as expressly provided herein) upon
any of the property of the Company pursuant to any of the provisions of the
Certificate of Incorporation or bylaws of the Company or any agreement or
instrument to which the Company is a party or by which it or its assets is
bound.
(d) No consent, authorization, approval, or other action by, and
no notice to or filing with, any governmental authority or regulatory body or
any other person, which has not been obtained or taken, is required for the
execution and delivery of, or the performance by the Company of its obligations
under, this Agreement or the Note.
4.6 Conduct of Business. Since their inception, the Company and each
Subsidiary has conducted its business and operations in a manner consistent with
that of a multi-unit food service establishment and has not engaged in any
business other than the business of establishing, opening, and operating Stores.
4.7 Absence of Material Liabilities. Neither the Company nor any
Subsidiary has any material liabilities or obligations, either accrued,
absolute, contingent, or otherwise, except (a) as set forth in its most recent
unaudited balance sheet, (b) normal liabilities and obli-
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gations incurred in the ordinary course of business since the date of its most
recent unaudited balance sheet, and (c) obligations under contracts and
agreements entered into in the ordinary course of business.
4.8 Tax Matters. The Company and its Subsidiaries have filed all federal,
state, and local tax returns which are required to be filed, except for
extensions duly obtained, and has paid, or made provisions for the payment of,
all taxes which have become due pursuant to such returns or pursuant to any
assessment received by the Company or any Subsidiary, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided.
4.9 Ownership of Collateral; Security Interest Priority. At the time any
Collateral becomes subject to a security interest of Boston Chicken hereunder,
unless Boston Chicken shall otherwise consent, (a) the Company or a Subsidiary
shall be the lawful owner of such Collateral and have the right and authority to
subject the same to the security interest of Boston Chicken, (b) none of the
Collateral shall be subject to any lien or encumbrance other than that in favor
of Boston Chicken, and (c) there shall be no effective financing statement
covering any of the Collateral on file in any public office, other than in favor
of Boston Chicken. This Agreement creates in favor of Boston Chicken a valid and
perfected first-priority security interest in the Collateral enforceable against
the Company or its Subsidiary, as the case may be, and all third parties and
secures the payment of the Company's obligations hereunder and under the Note,
and all other obligations of the Company to Boston Chicken, whether now existing
or hereafter arising, and all filings and other actions necessary or desirable
to create, preserve, or perfect such security interest have been duly taken.
Notwithstanding the foregoing provisions of this Section 4.9, clause (b) and (c)
and the immediately preceding sentence of this Section 4.9 shall not be
inaccurate by reason of any purchase money security interest (including pursuant
to a financing lease) in any equipment for the Company's Stores or by reason of
the existence of any Permitted Encumbrances. The term "Permitted Encumbrances"
shall mean: (i) liens for taxes or assessments or other governmental charges or
levies, either not yet due and payable or to the extent that nonpayment thereof
is permitted by the terms of this Agreement; (ii) pledges or deposits securing
obligations under worker's compensation, unemployment insurance, social security
or public liability laws or similar legislation; (iii) pledges or deposits
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which the Company or any of its Subsidiaries is a party as
lessee made in the ordinary course of business; (iv) deposits securing public or
statutory obligations of the Company or any of its Subsidiaries; (v) deposits
securing or in lieu of surety, appeal or customs bonds in proceedings to which
the Company or any of its Subsidiaries is a party; (vi) any attachment or
judgment lien (all such liens not to exceed in aggregate amount $50,000), unless
the judgment it secures shall not within 60 days after the entry thereof, have
been discharged or execution thereof stayed pending appeal, or shall not have
been discharged within 10 days after the expiration of any such stay; (vii)
zoning restrictions, easements, licenses, or other restrictions on the use of
real property or other minor irregularities in title (including leasehold title)
thereto, so long as the same do not materially impair the present use, value or
marketability of such real property, leases or leasehold estates; (viii) the
encumbrances listed on that certain Commitment for Title Insurance issued by
Nations Title Insurance of New York Inc., Commitment No. C-1938, with an
Effective Date of February
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13, 1995 at 8:00 A.M. (the "Brackman Title Commitment"), (ix) liens imposed by
law, such as mechanics', materialmen's, landlord's, warehousemen's, and
carriers' liens, and other similar liens securing obligations incurred in the
ordinary course of business which are not past due for more than 30 days or
which are being contested in good faith by appropriate proceeding and for which
appropriate reserves have been established, and (x) liens listed on Schedule 4.9
hereto existing as of the date of this Agreement.
4.10 Location of Offices, Records, and Facilities. The Company's chief
executive office and chief place of business and the office where the Company
keeps its records concerning its accounts, contract rights, chattel papers,
instruments, general intangibles, and other obligations arising out of or in
connection with the operation of its business or otherwise ("Receivables"), and
all originals of all leases and other chattel paper which evidence Receivables,
are located in the State of Colorado, at the address of the Company set forth in
Section 9.4 hereof (as such address may be changed from time to time in
accordance therewith). The federal tax identification number of the Company is
84-1294908. The name of the Company is "Progressive Bagel Concepts, Inc." and
the Company and its Subsidiaries operate under no other names other than
"Brackman Bros. Bagel Bakery", "Bagel & Bagel" and "Offerdahl's Bagel Gourmet".
4.11 Location of Inventory, Fixtures, Machinery, and Equipment. (a) All
Collateral consisting of inventory, fixtures, machinery, or equipment is located
in the States of Utah, Kansas, Missouri, Florida, Illinois and Colorado and,
except for inventory in-transit, at no other locations without the prior written
consent of Boston Chicken.
(b) If the Collateral described in clause (a) is kept at leased locations, if
requested by Boston Chicken, the Company has used its best efforts to obtain
appropriate landlord lien waivers or subordination satisfactory to Boston
Chicken, unless such has been waived in writing by Boston Chicken for the
particular instance.
(c) If the Collateral described in clause (a) is warehoused, the Company has
sent appropriate warehousemen's notices, each reasonably satisfactory to Boston
Chicken, unless such has been waived by Boston Chicken for the particular
instance.
4.12 Investment Company Act. The Company is not an "investment company", or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
4.13 Public Utility Holding Company Act. The Company is not a "holding
company", or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
4.14 Subsidiaries. Schedule 4.14 hereto correctly sets forth the corporate
name, jurisdiction of incorporation and ownership of each Subsidiary of the
Company. Each such Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation and is
duly qualified to do business in each additional jurisdiction where such
qualification is or may be necessary under applicable law and where the failure
to be
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so qualified would have a material adverse effect on such Subsidiary. Each
Subsidiary of the Company has all requisite corporate power to own or lease the
properties used in its business and to carry on its business as now being
conducted and as proposed to be conducted. All outstanding shares of capital
stock of each class of each Subsidiary of the Company have been validly issued
and are fully paid and nonassessable and are owned, beneficially and of record,
by the Company free and clear of any liens, except liens in favor of Boston
Chicken.
ARTICLE V
Affirmative Covenant
--------------------
The Company covenants and agrees that so long as this Agreement remains in
effect:
5.1 Financial Statements. (a) The Company shall cause to be furnished to
Boston Chicken and, at Boston Chicken's request, to the Agent: (i) as soon as
practicable and in any event within 20 days after the end of each interim
calendar quarter, statements of income and cash flows of the Company and its
Subsidiaries for such period and for the period from the beginning of the then
current fiscal year to the end of such quarter and a balance sheet of the
Company and its Subsidiaries as of the end of such quarter, setting forth in
each case, in comparative form, figures for the corresponding periods in the
preceding fiscal year, certified as accurate by the chief financial officer or
treasurer of the Company, subject to changes resulting from normal, recurring
year-end adjustments; (ii) as soon as practicable and in any event within 60
days after the end of each fiscal year, statements of income and cash flows of
the Company and its Subsidiaries for such year, and a balance sheet of the
Company and its Subsidiaries as of the end of such year, setting forth in each
case, in comparative form, corresponding figures for the preceding fiscal year
and as of the end of the preceding fiscal year, audited by independent certified
public accountants selected by Boston Chicken and reasonably satisfactory to the
Company; and (iii) as soon as practicable (but in any event not more than five
business days after the president or chief financial officer of the Company
obtains knowledge of the occurrence of an event or the existence of a
circumstance giving rise to an Event of Default or a Default), notice of any and
all Events of Default or Defaults hereunder.
(b) All financial statements delivered to Boston Chicken, and if applicable,
the Agent pursuant to the requirements of Section 5.1(a) shall be prepared in
accordance with generally accepted accounting principles consistently applied.
Together with each delivery of financial statements required by Section 5.1(a),
the Company shall deliver to Boston Chicken an officer's certificate stating
that there exists no Default or Event of Default, or, if any Default or Event of
Default exists, specifying the nature thereof, the period of existence thereof
and what action the Company proposes to take or has taken with respect thereto.
Together with each delivery of financial statements required by Section
5.1(a)(ii) above, the Company shall deliver to Boston Chicken a certificate of
the accountants who performed the audit in connection with such statements
stating that in making the audit necessary to the issuance of a report on such
financial statements, they have obtained no knowledge of any Default or Event of
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Default, or, if such accountants have obtained knowledge of a Default or Event
of Default, specifying the nature and period of existence thereof. Such
accountants shall not be liable by reason of any failure to obtain knowledge of
any Default or Event of Default which would not be disclosed in the ordinary
course of an audit. The Company authorizes Boston Chicken to discuss the
financial condition of the Company with the Company's independent public
accountants and agrees that such discussion or communication shall be without
liability to either Boston Chicken or the Company's independent public
accountants.
5.2 Inspection. Boston Chicken, or any person designated from time to time by
Boston Chicken, shall have the right, from time to time hereafter, to call at
the Company's or its Subsidiaries' place or places of business during ordinary
business hours, and, without hindrance or delay, (a) to inspect, audit, check,
and make copies of and extracts from the Company's and its Subsidiaries' books,
records, journals, orders, receipts, and any correspondence and other data
relating to the business of the Company or its Subsidiaries or to any
transactions between the parties hereto, and (b) to discuss the affairs,
finances, and business of the Company and its Subsidiaries with the officers of
the Company and its Subsidiaries.
5.3 Conduct of Business. (a) The Company shall, and shall cause each
Subsidiary to (i) maintain its corporate existence and qualification to do
business in good standing in each jurisdiction where the failure to be so
qualified would have a material adverse effect on the financial condition of the
Company or its Subsidiaries, (ii) maintain in full force and effect all
licenses, bonds, franchises, leases, patents, contracts, and other rights
necessary to the conduct of its business, and (iii) comply with all applicable
laws and regulations of any federal, state, or local governmental authority,
including those relating to environmental matters, labor and employment laws and
employee benefit matters.
(b) The Company shall, and shall cause its Subsidiaries to, duly pay and
discharge (i) all lawful claims, whether for labor, materials, supplies,
services, or anything else, which might or could, if unpaid, become a lien or
charge upon its property or assets, unless and to the extent only that the
validity thereof is being contested in good faith and by such appropriate
proceedings, (ii) all of its trade bills when due in accordance with their
original terms, and (iii) all taxes.
(c) The Company shall, and shall cause each Subsidiary to, conduct its
business and operations in a manner consistent with that of a multi-unit food
service establishment, and shall not permit any Subsidiary to, engage in any
business other than the business of establishing, opening, and operating Stores.
5.4 Insurance. (a) The Company shall keep and maintain, and shall cause its
Subsidiaries to keep and maintain, at their sole cost and expense, (i) insurance
on their assets for at least 80% of the full replacement value thereof against
loss or damage by fire, theft, explosion, and all other hazards and risks
ordinarily insured against by other owners or users of such properties in
similar businesses similarly situated; and (ii) public liability insurance
relating to the Company's and its Subsidiaries' ownership and use of their
assets.
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(b) All such policies of insurance shall be in such form and in such amounts
as is customary in the case of other owners or users of like properties in
similar businesses, with insurers as shall be reasonably satisfactory to Boston
Chicken. Upon demand, the Company shall deliver to Boston Chicken the original
(or certified) copy of each policy of insurance, and evidence of payment of all
premiums for each such policy. Such policies of insurance (except those of
public liability) shall contain an endorsement in form and substance acceptable
to Boston Chicken, showing Boston Chicken as an additional insured. Such
endorsement, or an independent instrument furnished to Boston Chicken, shall
provide that all insurance companies will give Boston Chicken at least 30 days
prior written notice before any such policy or policies of insurance shall be
altered or canceled. The Company and each Subsidiary hereby directs all insurers
under such policies of insurance (except those of public liability) to pay all
proceeds payable thereunder for claims in excess of the aggregate amount of
$50,000 directly to Boston Chicken, and the Company irrevocably appoints Boston
Chicken (and all officers, employees, or agents designated by Boston Chicken),
as the Company's and the Subsidiaries' true and lawful agent (and attorney-in-
fact) for the purpose of endorsing the name of the Company or such Subsidiary on
any check, draft, instrument, or other item of payment for such proceeds. Any
proceeds received by Boston Chicken shall be applied to the Company's
obligations hereunder, and any overage shall be paid to the Company. The Company
and each Subsidiary irrevocably appoints Boston Chicken, from and after a
Default or an Event of Default, as the Company's and each Subsidiary's true and
lawful agent (and attorney-in-fact) for the purpose of making, settling, and
adjusting claims under such policies of insurance and for making all
determinations and decisions with respect to such policies of insurance. In the
event the Company or any Subsidiary at any time or times hereafter shall fail to
obtain or maintain any of the policies of insurance required above or to pay any
premium in whole or in part relating thereto, then Boston Chicken, without
waiving or releasing any Default or Event of Default hereunder, may at any time
or times thereafter (but shall be under no obligation to do so) obtain and
maintain such policies of insurance and pay such premium and take any other
action with respect thereto which Boston Chicken deems advisable. All sums so
disbursed by Boston Chicken, including reasonable attorneys' fees, court costs,
expenses, and other charges relating thereto, shall be part of the Company's
obligations hereunder, payable by the Company to Boston Chicken on demand.
5.5 Notice of Suit or Adverse Change in Business. The Company shall, as soon
as possible, and in any event within five business days after the Company learns
of the following, give written notice to Boston Chicken of (a) any material
proceeding(s) being instituted or threatened to be instituted by or against the
Company or any Subsidiary in any federal, state, or local court or before any
commission or other regulatory body (federal, state, or local), and (b) any
material adverse change in the financial condition, results of operations,
business, or assets of the Company or any Subsidiary.
5.6 Use of Proceeds. Except as otherwise authorized in writing by Boston
Chicken, the Company shall use the Loan proceeds solely to finance the purchase,
design, construction, and equipment of Stores and for general working capital.
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<PAGE>
The Company will not, directly or indirectly, use any part of such proceeds for
the purpose of purchasing or carrying any margin stock within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System or to
extend credit to any person for the purpose of purchasing or carrying any such
margin stock.
5.7 Reservation of Common Stock. The Company covenants that it will at all
times reserve and keep available, solely for the purpose of issuance upon
conversion of the Note or exercise of the Option, or both, such number of shares
of its common stock as would be issuable upon the conversion of, or exercise of
the Option for, $80,000,000. The initial Conversion Price (subject to adjustment
as provided in the Note) is $1,436.14 per share. The Company covenants that if
any shares of its common stock required to be reserved for issuance upon
conversion of the Note or exercise of the Option require registration with or
approval of any governmental authority under any Federal or state law before
such shares may be issued upon such conversion or exercise, the Company will, at
its expense and as expeditiously as possible, cause such shares to be duly
registered or approved, as the case may be. In addition, with respect to shares
acquired upon conversion of the Note or exercise of the Option the Company will
permit Boston Chicken to become a party to that certain Registration Rights
Agreement of even date herewith.
5.8 Rights Regarding Future Financings. Subject in all instances to the
provisions of Section 6.5 hereof, if, at any time after the Closing Date through
the later of the date on which the outstanding principal balance of the Loan and
all accrued interest thereon is paid in full or the expiration of the term of
the Option in accordance with the provisions of Section 1.8 hereof, advances of
debt and purchases of equity by Boston Chicken under this Agreement aggregate at
least $60,000,000, and the Company determines that it requires additional
financing (whether debt or equity) (including, but not limited to, all capital-
type transactions and sale/leaseback transactions), it agrees (a) to negotiate
in good faith with Boston Chicken for a period of 45 days with regard to any
portion or the entire amount (at the option of Boston Chicken) of such financing
prior to negotiating with any other entity with regard thereto, (b) in the event
the Company has engaged in good faith negotiations under clause (a) of this
Section 5.8 and such negotiations have been unsuccessful, to notify Boston
Chicken of the existence of any other financing arrangement it proposes to
consummate and the terms and conditions thereof and grant to Boston Chicken a
right of first refusal with respect to such financing on the same terms and
subject to the same conditions contained therein and upon receipt of such notice
(setting forth in detail all relevant terms and conditions of such financing),
Boston Chicken shall have 20 days thereafter in which to agree to assume all of
the financing on the same terms and conditions, and (c) with respect to any
financing other than a pure debt financing in which the debt instrument to be
offered has no equity-type features, to grant to Boston Chicken a preemptive
right to participate therein on a fully diluted basis for a period of 45 days.
As used herein the term "fully diluted basis" shall mean Boston Chicken's
ability to maintain the same percentage equity interest in the Company
(calculated by including as outstanding the shares of common stock of the
Company subject to all outstanding options and warrants, including shares of
common stock which Boston Chicken then has a right to purchase hereunder either
through conversion pursuant to Section 1.7 or the exercise of its Option
pursuant to Section 1.8 hereof)
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financing solely for purposes of comparison. The failure by Boston Chicken to
exercise its rights under any provision of this Section 5.8 within the time
period specified shall be deemed to constitute a waiver of its rights under such
provision.
5.9 BC Credit Line Compliance. The Company agrees that, at the time
that it becomes a "Subsidiary" (as defined in the BC Credit Line), if ever, it
will not incur any indebtedness or create any lien which would cause Boston
Chicken to be in default of the BC Credit Line.
5.10 BC Credit Line Representations. The Company agrees that, at the
time that it becomes a "Subsidiary" (as defined in the BC Credit Line), if ever,
it will conduct its business and take such action (or refrain from taking such
action) as to cause to be true and correct at all relevant times the
representations or warranties applicable to a "Subsidiary" contained in the BC
Credit Line.
5.11 Company Subsidiaries. Each corporation or other entity becoming a
Subsidiary of the Company after the date hereof will be a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation and will be duly qualified to do business in each
additional jurisdiction where the failure to be so qualified would have a
material adverse effect on such subsidiary. Each Subsidiary of the Company will
have all requisite corporate power to own or lease the properties used in its
business and to carry on its business as now being conducted and as proposed to
be conducted. All outstanding shares of capital stock or other units of
ownership interest of each class of each Subsidiary of the Company will be
validly issued and will be fully paid and nonassessable and will be owned,
beneficially and of record, by the Company or another Subsidiary of the Company
free and clear of any liens.
5.12 Place of Business. The Company will provide Boston Chicken with 60
days' prior written notice of any proposed change in the location of its chief
executive office. The Company shall not change its name without the prior
written consent of Boston Chicken.
5.13 Location of Inventory, Fixtures, Machinery, and Equipment. (a) All
Collateral consisting of inventory, fixtures, machinery, and equipment, other
than inventory in-transit, shall at all times be located in the States of Utah,
Kansas, Missouri, Florida, Illinois, and Colorado and, unless specifically
permitted hereunder, at no other locations without the prior written consent of
Boston Chicken.
(b) If the Collateral described in clause (a) is at any time kept
at leased locations, if requested by Boston Chicken the Company shall use its
best efforts to obtain appropriate landlord lien waivers or subordination
satisfactory to Boston Chicken, unless such has been waived in writing by Boston
Chicken for a particular instance.
(c) If the Collateral described in clause (a) is at any time
warehoused, the Company shall send appropriate warehousemen's notices, each
satisfactory to Boston Chicken, unless such has been waived by Boston Chicken
for the particular instance.
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5.14 HSR Act Compliance. In the event Boston Chicken determines that any
filing is required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") in connection with any exercise of the
conversion rights pursuant to Section 1.7 hereof or of the Option pursuant to
Section 1.8 hereof, the Company agrees to prepare and file with the Federal
Trade Commission and the United States Department of Justice within 10 business
days from the date of notice from Boston Chicken any notification required to be
filed under the HSR Act or any rules or regulations promulgated thereunder.
Boston Chicken shall pay any filing fees required under the HSR Act in
connection with such filing. Any such filing shall be true and accurate in all
material respects and responsive to the requirements of the HSR Act and any such
rules and regulations. Each of the Company and Boston Chicken shall make
available to the other party such information as may be required for the
preparation of any such notification or related reports.
ARTICLE VI
Negative Covenants
------------------
The Company covenants and agrees that, so long as this Agreement remains in
effect (unless Boston Chicken shall give its prior written consent thereto):
6.1 Guarantees; etc. The Company shall not, and shall not permit any
Subsidiary to, guarantee, endorse or otherwise in any way become or be
responsible for obligations of any other person, whether by agreement to
purchase the indebtedness of any other person or through the purchase of goods,
supplies, or services, or by agreement to maintain net worth, working capital,
or other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance, or loan for the purpose of paying or discharging
any indebtedness or obligation of such other person or otherwise, except
endorsements of negotiable instruments for collection in the ordinary course of
business and except as specifically provided in the Brackman Agreement.
6.2 Disposal of Property. The Company shall not, and shall not permit
any Subsidiary to, sell, lease, transfer, or otherwise dispose of any of its
properties, assets, and rights (or agree to sell, lease, transfer, or otherwise
dispose of any of its properties, assets, and rights) (including the Collateral)
to any party except in the ordinary course of business and except as part of a
financing as to which Boston Chicken has waived its rights pursuant to and in
accordance with Section 5.8 hereof, provided, the Company shall have the right
(a) to trade in obsolete, redundant or unnecessary equipment in connection with
the purchase of new equipment, and (b) to sell obsolete, redundant and
unnecessary equipment.
6.3 Compensation to Stockholders. Other than (a) reasonable salaries
and other normal benefits (including options pursuant to the 1995 Employee Stock
Option Plan) to be paid to employees of the Company, which salaries and benefits
must be approved by Boston Chicken, and (b) amounts to be loaned to (i) the
shareholders of Brackman pursuant to that certain Agreement to Contribute Shares
by and among the shareholders of Brackman, the
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Company and Brackman dated February 17, 1995 (the "Brackman Agreement"), and
(ii) OBG pursuant to that certain Agreement to Contribute Assets by and among
the Company, OBG and the shareholders of OBG dated March , 1995 (the "OBG
Agreement") (the loans to be made pursuant to the Brackman Agreement and the OBG
Agreement shall be hereinafter referred to as the "Permitted Loans"), the
Company shall not make any loans to, or pay any compensation, bonuses, fees,
options, or other amounts to any stockholder or to any of the affiliates or
immediate family members of any such stockholder. The Company shall not, without
the prior written consent of Boston Chicken, amend its 1995 Employee Stock
Option Plan or any employment arrangement or agreement previously approved by
Boston Chicken.
6.4 Dividends and Stock Redemptions. Other than as contemplated in the
Brackman Agreement, the OBG Agreement and that certain Agreement to Contribute
Assets by and among the Company, Bagel & Bagel, Inc. and Richard Lozoff dated
March 2, 1995, the Company shall not, directly or indirectly, (a) redeem,
purchase, or otherwise retire any of its shares of capital stock, (b) declare or
pay any dividends in any fiscal year on any of its shares of capital stock or
make any distributions of or with respect to its shares of capital stock or (c)
return capital of the Company to its stockholders.
6.5 Additional Indebtedness. Except as provided in Section 5.8 hereof,
the Company shall not, and shall not permit any Subsidiary to, incur additional
indebtedness in excess of $25,000 as to any one item and $125,000 in the
aggregate without the consent of Boston Chicken.
6.6 Mergers, Consolidations, Acquisitions, etc. The Company shall not,
and shall not permit any Subsidiary (a) to be a party to any consolidation,
reorganization, or merger; (b) except as provided in Section 5.8 hereof, effect
any change in its capital structure or in any of its business objectives,
purposes, and operations; (c) to acquire any capital in or equity ownership or
the assets of another corporation, partnership, or other business organization,
other than acquisitions, for cash but not for stock, of the assets or equity of
any entity engaged in the sale of bagels and bagel related products, for the
aggregate purchase price not to exceed $2,000,000; (d) to engage in any business
other than the operation of Stores; (e) to make any loan or advance to or
investments in any other person, corporation, partnership or other business
organization other than loans and advances to its Subsidiaries and other than
the Permitted Loans; or (f) to liquidate or dissolve or take any action with a
view toward liquidation or dissolution.
6.7 Certificate of Incorporation and Bylaws; Stockholder's Consent. The
Company shall not make any changes in or amendments to its Certificate of
Incorporation or bylaws as they are in effect as of the date hereof; except that
the Company may amend its Certificate of Incorporation solely to increase the
number of authorized shares of its common stock by the amount necessary to
consummate any financing as to which Boston Chicken has waived its rights
pursuant to and in accordance with Section 5.8 hereof. The Company shall not
permit its stockholders to take any action by written consent in lieu of a
meeting without the prior written consent of Boston Chicken.
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6.8 Issuance of Stock; Grant of Options. Except (a) for shares of
common stock of the Company which may be issued upon (i) exercise of options
granted under the Company's 1995 Employee Stock Option Plan pursuant to grants
approved under clause (b) of this Section 6.8, (ii) exercise of the Option,
(iii) conversion of any portion of the outstanding principal balance of the Loan
as provided in the Note, and (iv) consummation of any financing after advances
of debt and purchases of equity by Boston Chicken under this Agreement aggregate
at least $60,000,000 and as to which Boston Chicken has waived its rights
pursuant to and in accordance with Section 5.8 hereof, (b) for options granted
under the Company's 1995 Employee Stock Option Plan which are approved by Boston
Chicken, in its sole discretion, and (c) as contemplated in the OBG Agreement,
the Company will not issue any additional shares of any class of its capital
stock or grant any option, warrant, or similar right to acquire shares of any
class of its capital stock.
6.9 Liens. The Company shall not, and shall not permit any Subsidiary
to, create, incur, or suffer to exist any lien on any of the assets, rights,
revenues or property, real, personal, or mixed, tangible or intangible, whether
now owned or hereafter acquired, of the Company or any Subsidiary, other than
liens in favor of Boston Chicken and liens otherwise permitted under Section 4.9
hereof.
6.10 Transactions with Affiliates. The Company shall not, and shall not
permit any Subsidiary to, become a party to, or become liable in respect of, any
contract or undertaking with any Affiliate (as defined in Section 9.2 hereof)
except (a) in the ordinary course of business and on terms not less favorable to
the Company or such Subsidiary than those which could be obtained if such
contract or undertaking was an arms length transaction with a person other than
an affiliate, and (b) loans to Subsidiaries permitted under Section 6.6 and
Permitted Loans.
6.11 Subsidiaries. The Company shall not, and shall not permit any
Subsidiary to, create or otherwise invest in any corporation, partnership, or
other entity unless the Company or such Subsidiary owns directly 100% of the
issued and outstanding equity interests therein (such 100% owned entity to be
referred to herein as a "Subsidiary").
ARTICLE VII
Conditions of Closing
---------------------
Boston Chicken's obligations hereunder shall be subject to (a) the
performance by the Company prior to or on the Closing Date of all of its
covenants theretofore to be performed under this Agreement, (b) the accuracy of
the Company's representations and warranties contained in this Agreement on the
Closing Date, and (c) the satisfaction, prior to or on the Closing Date, of the
following further conditions:
7.1 Opinion of Counsel. Boston Chicken shall have received on the
Closing Date from Rudnick & Wolfe an opinion, dated the Closing Date, in the
form attached hereto as Exhibit E with all blanks appropriately completed.
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7.2 Proceedings and Documents. All proceedings to be taken in
connection with the transaction contemplated by this Agreement and all documents
incident to such transaction shall be satisfactory in form and substance to
Boston Chicken and its counsel, and Boston Chicken shall have received all
documents or other evidence which it and its counsel may reasonably have
requested in connection with such transaction, including copies of records of
all corporate proceedings in connection with such transaction and compliance
with the conditions set forth in this Article VII, in form and substance
satisfactory to Boston Chicken and its counsel.
7.3 Executed Documents. The Company and its Subsidiaries shall have
each duly executed the following documents to which they are parties, and shall
have delivered to Boston Chicken the following:
(a) this Agreement;
(b) the Note;
(c) the Accounting and Administrative Services Agreement in
substantially the form of Exhibit F-1 hereto, the Financial
Services Agreement in substantially the form of Exhibit F-2
hereto, the Real Estate Services Agreement in substantially the
form of Exhibit F-3 hereto and the Computer and Communications
Systems Services Agreement in substantially the form of Exhibit
F-4 hereto (such service agreements, and any other service
agreements entered into between the Company and Boston Chicken
are herein collectively called the "Service Agreements");
(d) the Pledge Agreement, together with stock certificates
in form suitable for transfer and stock powers executed in blank;
(e) the Subsidiary Security Agreement; and
(f) such financing statements or other documents for filing with
public officials with respect to the Security Instruments as
Boston Chicken may reasonably request.
7.4 No Defaults. There shall exist no Event of Default or Default.
7.5 Additional Deliveries. Boston Chicken shall have received, in
form and substance satisfactory to it, copies of the following documents:
(a) the Company's Certificate of Incorporation, certified as true
and correct by the Secretary of State of Delaware, dated within ten days prior
to the Closing Date, and certified as true and correct as of the Closing Date by
a duly authorized officer of the Company;
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(b) the Company's bylaws, as are in force and effect on the
Closing Date, certified as true and correct by the Secretary of the Company;
(c) certificate of good standing and corporate existence of the
Company from the Secretary of State of the States of Delaware, Utah, Missouri,
Kansas and Colorado dated within ten days prior to the Closing Date;
(d) authorizing resolutions of the board of directors and
stockholders of the Company and evidence of other corporate action taken by the
Company to authorize, among other things, the execution, delivery, and
performance by the Company of this Agreement, the Note, the Service Agreements,
and the Security Instruments and the consummation of the transactions
contemplated hereby, including resolutions reserving shares of common stock for
issuance upon the conversion of the Loan and the exercise of the Option,
certified as true and correct as of the Closing Date by a duly authorized
officer of the Company;
(e) the Certificate of Incorporation for each Subsidiary,
certified as true and correct by the Secretary of State of its state of
incorporation, dated within ten days prior to the Closing Date, and certified as
true and correct as of the Closing Date by a duly authorized officer of each
Subsidiary;
(f) the bylaws of each Subsidiary, as are in force and effect on
the Closing Date, certified as true and correct by the Secretary of each
Subsidiary;
(g) certificate of good standing and corporate existence of each
Subsidiary from the Secretary of State of Utah dated within ten days prior to
the Closing Date;
(h) authorizing resolutions of the board of directors of each
Subsidiary and evidence of other corporate action taken by each Subsidiary to
authorize, among other things, the execution, delivery, and performance by the
Subsidiary of the Subsidiary Security Agreement and the consummation of the
transactions contemplated hereby, certified as true and correct as of the
Closing Date by a duly authorized officer of each Subsidiary.
7.6 Opinion of Auditors. Boston Chicken shall have received on the
Closing Date from Boston Chicken's independent public accountants an opinion,
dated the Closing Date, in form and substance satisfactory to Boston Chicken, to
the effect that the Note and the obligations incurred hereunder are deemed to be
debt, and not equity, in accordance with generally accepted accounting
principles.
7.7 Stockholders' Equity. Boston Chicken shall have received evidence,
satisfactory to it, that the Company has, on the Closing Date, cash or cash
equivalents of at least $20,000,000 and stockholders' equity of at least
$20,000,000.
7.8 Compliance with BC Credit Line. Boston Chicken shall (a) determine
in good faith that this Agreement complies with applicable restrictions or
limitations under the BC
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Credit Line, (b) obtain a written waiver of noncompliance of the transactions
contemplated hereby with the BC Credit Line, or (c) deliver to Agent from the
Company such pledges, collateral, and other documentation as may be required to
evidence compliance of the transactions contemplated hereby with the BC Credit
Line.
ARTICLE VIII
DEFAULT, RIGHTS AND REMEDIES OF BOSTON CHICKEN
----------------------------------------------
8.1 Default. The occurrence of any of the following events or acts
shall constitute a default ("Default"):
(a) Default in the payment when due of any portion of the
principal on the Note and the continuance of such default for a period of three
days;
(b) Default in the payment when due of any portion of the
interest on the outstanding principal of the Note and the continuance of such
default for a period of 10 days;
(c) any representation or warranty now or hereafter made in this
Agreement, the Service Agreements, the Pledge Agreement, the Subsidiary Security
Agreement the Note, any other Security Instrument, or any certificate hereunder
or thereunder shall not be true in any material respect, or any certificate,
statement, report, financial data, or notice furnished at any time by the
Company to Boston Chicken shall be materially inaccurate;
(d) any breach of, or failure to perform or observe, any
covenant, condition, or agreement contained in the Pledge Agreement, the
Subsidiary Security Agreement or in any other Security Instrument, which in each
case shall continue unremedied for a period of 10 calendar days following notice
thereof from Boston Chicken, provided that such grace period shall not apply,
and the Company shall be in Default immediately upon such breach, if, in Boston
Chicken's judgment, such breach may not be reasonably cured by the Company
during such cure period;
(e) the breach of, or failure to perform or observe, any
covenant, condition, or agreement contained in Sections 5.6, 6.1, 6.2, 6.4, 6.6,
6.7, 6.8, 6.10, or 6.11 of this Agreement;
(f) any breach of, or failure to perform or observe, any other
covenant, condition, or agreement contained in this Agreement or the Note which
shall continue unremedied for a period of 10 calendar days following notice
thereof from Boston Chicken, provided that such grace period shall not apply,
and the Company shall be in Default immediately upon such breach, if, in Boston
Chicken's judgment, such breach may not reasonably be cured by the Company
during such cure period;
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(g) the Company or any Subsidiary shall (i) generally not, or
shall be unable to, or shall admit in writing its inability to pay its debts as
such debts become due, (ii) make an assignment for the benefit of creditors,
petition or apply to any tribunal for the appointment of a custodian, receiver,
or trustee for it or a substantial part of its assets, (iii) commence any
proceeding under any bankruptcy, reorganization, arrangements, readjustment of
debt, dissolution, or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect, (iv) have any such petition or application filed or
any such proceeding commenced against it in which an order for relief is entered
or adjudication or appointment is made and which remains undismissed for a
period of 60 days or more, (v) by any act or omission, indicate its consent to,
approval of, or knowing acquiescence in any such petition, application, or
proceeding, or order for relief, or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties, or (vi) suffer any
such custodianship, receivership, or trusteeship to continue undischarged for a
period of 60 days or more;
(h) intentionally omitted;
(i) dissolution or liquidation of the Company;
(j) there occurs a material adverse change in the financial
condition, results of operations, assets, or business of the Company and its
Subsidiaries taken as a whole;
(k) the Company or any Subsidiary shall (a) fail to pay any
indebtedness for borrowed money (other than the Note) of the Company or such
Subsidiary, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and any
applicable grace periods shall have expired, or (b) fail to perform or observe
any term, covenant, or condition on its part to be performed or observed under
any agreement or instrument relating to any such indebtedness, when required to
be performed or observed, if the effect of such failure to perform or observe is
to accelerate, or to permit the acceleration, after the giving of notice, of the
maturity of such indebtedness, or (c) default in the performance or observance
of any obligations under leases of real property if the effect of such default
is to permit the termination of such lease;
(l) one or more judgments, decrees or orders for the payment of
money in excess of $100,000 in the aggregate and not otherwise fully covered by
insurance shall be rendered against the Company or any of its Subsidiaries, and
such judgments, decrees, or orders shall continue unsatisfied and in effect for
a period of 30 consecutive days without being vacated, discharged, satisfied,
escorted, stayed, or bonded pending appeal;
(m) the Pledge Agreement, the Subsidiary Security Agreement, any
other Security Instrument, or the security interests created under this
Agreement shall be terminated, invalidated, or set aside or be declared
ineffective or inoperative or in any way cease to give or provide to Boston
Chicken the benefits purported to be created thereby.
8.2 Default: Remedies. (a) In the event a Default shall exist or occur
Boston Chicken may:
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(i) terminate its obligations under this Agreement and cease to
make any further advances under Section 1.1, and shall have the right to
declare the Note due and payable in full, without demand, presentment, or
notice of any kind;
(ii) in its sole and absolute discretion, exercise any one or
more of the rights and remedies accruing to a secured party under the
Uniform Commercial Code with respect to the Collateral and any other
applicable law upon default by a debtor;
(iii) exercise its rights under the Pledge Agreement and/or the
other Security Instruments;
(iv) convert any portion of the outstanding principal balance of
the Loan into shares of common stock in the Company as provided in the
Note;
(v) exercise all or a portion of the Option;
provided, however, that in the case of any event or condition described in
Section 8. l(g) with respect to the Company or any Subsidiary, Boston Chicken's
obligations under this Agreement shall automatically terminate forthwith and all
amounts owed by the Company hereunder and under the Note shall automatically
become immediately due and payable without notice, demand, presentment, protest,
diligence, notice of dishonor, or other formality, all of which are hereby
expressly waived.
(b) In connection with the exercise of Boston Chicken's rights
and remedies provided in Section 8.2(a)(ii), the Company hereby agrees to
assemble the Collateral and make it available to Boston Chicken at a place to be
designated by Boston Chicken which is reasonably convenient to both parties,
authorizes Boston Chicken to take possession of the Collateral with or without
demand and with or without process of law and to sell and dispose of the same at
public or private sale and to apply the proceeds of such sale to the costs and
expenses thereof (including reasonable attorneys' fees and disbursements
incurred by Boston Chicken) and then to the payment and satisfaction of the
Loan. Any requirement of reasonable notice shall be met if Boston Chicken sends
such notice to the Company, by registered or certified mail, at least five days
prior to the date of sale, disposition, or other event giving rise to a required
notice. Boston Chicken may be the purchaser at any such sale. The Company
expressly authorizes such sale or sales of the Collateral in advance of and to
the exclusion of any sale or sales of or other realization upon any other
collateral securing the Loan. Boston Chicken shall have no obligation to
preserve rights against prior parties. The Company hereby waives as to Boston
Chicken any right of subrogation or marshaling of such Collateral and any other
collateral for the Loan. To this end, the Company hereby expressly agrees that
any such collateral or other security of the Company or any other party which
Boston Chicken may hold, or which may come to any of them or any of their
possession, may be dealt with in all respects and particulars as though this
Agreement were not in existence. The parties hereto further agree that public
sale of the Collateral by auction conducted in any county in which any
Collateral is located or in which Boston Chicken or the Company does business
after advertisement of the time and place thereof
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shall, among other manners of public and private sale, be deemed to be a
commercially reasonable disposition of the Collateral. The Company shall be
liable for any deficiency remaining after disposition of the Collateral.
(c) All of Boston Chicken's rights and remedies under this
Agreement are cumulative and nonexclusive. Any conversion of, or exercise of the
Option with respect to, less than all of the principal balance outstanding under
the Note shall not affect Boston Chicken's rights and remedies with respect to
any portion not so converted or exercised.
8.3 No Waiver. Boston Chicken's failure, at any time or times
hereafter, to require the Company's strict compliance with or performance of any
provision of this Agreement shall not waive, affect, or diminish any right of
Boston Chicken thereafter to demand such strict compliance or performance
therewith. Any suspension or waiver by Boston Chicken of a Default or an Event
of Default by the Company under this Agreement or the Note shall not suspend,
waive, or affect any other Default or Event of Default by the Company under this
Agreement or the Note, whether the same is prior or subsequent thereto and
whether of the same or of a different kind or character. None of the
undertakings, agreements, warranties, covenants, and representations of the
Company contained in this Agreement or the Note and no Default or Event of
Default by the Company under this Agreement or the Note shall be deemed to have
been suspended or waived by Boston Chicken unless such suspension or waiver is
in writing signed by an officer of Boston Chicken.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 No Oral Change. This Agreement may not be changed orally, but only
by an agreement in writing and signed by the party against whom enforcement of
any waiver, change, modification, or discharge is sought.
9.2 Assignment. The Company may not assign any of its rights or
delegate any of its obligations under this Agreement without Boston Chicken's
written consent. Boston Chicken may assign any of its rights or delegate any of
its obligations under this Agreement (including assignment of this Agreement,
the Note, the Pledge Agreement and the Security Instruments), (a) without notice
to the Company, (i) to any Affiliate of Boston Chicken (except the Company) or
(ii) in connection with any pledge of its assets under the BC Credit Line or
similar credit agreement and (b) with notice, but without any requirement of
consent or approval, to any other person entity (except the Company); provided,
however, that Boston Chicken shall not make any such assignment of its
obligations unless at the time thereof Boston Chicken reasonably believes the
assignee is able to perform such obligations. Any such assignment shall vest in
the assignee all of the benefits under the documents so assigned. For purposes
of this Agreement, the term Affiliate of a specified person shall mean any
person or entity which directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the person specified.
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9.3 Costs and Attorneys' Fees. (a) Except as provided in Section 2.4
hereof and subsection (b) or (c) of this Section 9.3, each of the parties hereto
shall pay its own expenses (including accounting fees) incident to the
negotiation and execution of this Agreement and to the consummation of the
transactions contemplated hereby.
(b) The Company shall pay all reasonable attorneys' fees and any
costs and charges relating to or arising out of (i) the negotiation and drafting
of this Agreement and all related documents and (ii) the enforcement by Boston
Chicken of its rights to collect any portion of the Loan.
(c) In any action not founded solely on grounds covered by
subsection (b) of this Section 9.3, the party to the action who does not prevail
shall pay to the prevailing party the court costs and reasonable attorneys fees
and other expenses (including, but not limited to, fees and expenses of expert
witnesses or consulting experts) incurred directly or indirectly by the
prevailing party in connection with its prosecution or defense of the action, as
the case may be.
9.4 Communications and Notices. All communications and notices
provided for in this Agreement or under the Note shall be in writing and shall
be deemed to have been duly given if delivered personally to the party to whose
attention the notice is directed or sent by overnight express, facsimile
transmission, express mail delivery service, or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:
If to the Company:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd.
Suite 200
Golden, CO 80401
Attention: Chief Executive Officer
Facsimile: (303) 202-3360
with a copy to:
Rudnick & Wolfe
203 N. LaSalle Street
Suite 1800
Chicago, IL 60601
Attention: Michael G. Brennan, Esq.
Facsimile: (312) 984-2299
27
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If to Boston Chicken:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 384-5339
with a copy to:
Bell, Boyd & Lloyd
70 West Madison Street, Suite 3300
Chicago, Illinois 60602
Attention: Paul A. Strasen, Esq.
Facsimile: (312) 372-2098
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given when so delivered. Any notice delivered by facsimile transmission shall be
deemed to have been given on the earlier of the date it is actually received or
one day after such transmission. Any notice delivered by overnight express
courier will be deemed to have been given on the next succeeding business day
after the day it is sent to the intended recipient at the address set forth
above, and any notice delivered by registered or certified mail or express mail
delivery service shall be deemed to have been duly given on the earlier of the
date it is actually received or three business days after it is sent to the
intended recipient at the address set forth above.
9.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAW
PROVISIONS THEREOF.
9.6 Headings. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part of
this Agreement.
9.7 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby. and
the provisions of this Agreement shall be severable in any such instance.
9.8 Avoidance. To the extent that Boston Chicken receives any payment
on account of the Company's obligations hereunder, and any such payment(s)
and/or proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, subordinated, and/or required to be
repaid to a trustee, receiver, or any other party under any
28
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bankruptcy law, state or federal law, common law, or equitable cause, then, to
the extent of such payment(s) or proceeds received, the Company's obligations
hereunder, or part thereof intended to be satisfied, shall be revived and
continue in full force and effect, as if such payment(s) and/or proceeds had not
been received by Boston Chicken.
9.9 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
but one and the same instrument.
9.10 Entire Agreement. This Agreement, the Note, the Pledge Agreement,
the Security Instruments and the exhibits to each of the foregoing contain the
entire agreement of the parties hereto with respect to the transactions
contemplated herein, and collectively supersede all prior understandings and
agreements of the parties with respect to the subject matter hereof.
9.11 General Indemnity. In addition to the payments pursuant to
Section 9.3, the Company agrees to indemnify, pay, and hold Boston Chicken and
any holder of the Note, and the officers, directors, employees, agents, and
Affiliates of Boston Chicken and any such holder (collectively, the
"Indemnities"), harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses, and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for any of
such Indemnities in connection with any investigative, administrative, or
judicial proceeding commenced or threatened, whether or not any of such
Indemnities shall be designated a party thereto) that may be imposed on,
incurred by, or asserted against any Indemnitee, in any manner relating to or
arising out of this Agreement, the Note, the Pledge Agreement, the Subsidiary
Security Agreement, the Security Instruments and the exhibits or any other
agreements or document executed and delivered by the Company in connection
therewith, the Company's use and operation of the Stores, including any damage
to public or worker health and safety or the environment, Boston Chicken's
agreement to make the Loan hereunder, or the use or intended use of the proceeds
of the Loan (the "indemnified liabilities"), provided that the Company shall
have no obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of such
Indemnitee. To the extent that the undertaking to indemnify, pay, and hold
harmless set forth in the preceding sentence may be unenforceable because it
violates any law or public policy, the Company shall contribute the maximum
portion that it is permitted to pay under applicable law to the payment and
satisfaction of all indemnified liabilities incurred by the Indemnities or any
of them. The provisions of the undertakings and indemnification set out in this
Section 9.11 shall survive satisfaction and payment of the Company's obligations
hereunder and termination of this Agreement.
9.12 Limitation on Damages. Notwithstanding anything to the contrary
herein no party hereto shall be liable for consequential, indirect, incidental,
special, speculative, or punitive damages (including, but not limited to, loss
of revenue or profit) whether such claim alleges breach of contract, tortious
conduct including, but not limited to, negligence, or any other theory, provided
that nothing herein shall limit or otherwise restrict the Company's obligation
to pay fees under the Service Agreements.
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9.13 CONFIDENTIALITY. Boston Chicken will maintain as confidential any
information obtained from the Company and/or its Subsidiaries other than
information which (i) at the time of disclosure or thereafter is generally known
by the public (other than as a result of a disclosure directly or indirectly by
Boston Chicken or its agents or representatives), (ii) is available to Boston
Chicken on a non-confidential basis from a source other than the Company,
provided that such source was not at the time bound by a confidentiality
agreement with the Company or any of its Subsidiaries, or (iii) has been
independently developed by Boston Chicken.
9.14 UPDATE OF REPRESENTATIONS AND WARRANTIES. The Company shall have
the right to update from time to time Schedule 4.14 and the information
contained in Section 4.5(a) and 4.1l(a) hereof and for purposes of Sections 3.4
and 8.1(c) hereof the representations and warranties of the Company contained
in Article IV shall be deemed made as so updated.
9.15 Submission to Jurisdiction. The Company agrees that any legal
action or proceeding with respect to this Agreement, the Note, the Pledge
Agreement, the Subsidiary Security Agreement, any Service Agreement or any
Security Instrument or the transactions contemplated hereby may be brought in
any court of the State of Colorado, or in any court of the United States of
America sitting in Colorado, and the Company hereby submits to and accepts
generally and unconditionally the jurisdiction of those courts with respect to
their respective person and property, and irrevocably consents to the service of
process in connection with any such action or proceeding by personal delivery to
the Company or by the mailing thereof by registered or certified mail, postage
prepaid to the Company at the address for the Company set forth in Section 9.4.
Nothing in this paragraph shall affect the right of Boston Chicken to service
process in any other manner permitted by law or limit the rights of Boston
Chicken to bring any such action or proceeding against the Company or property
in the courts of any other jurisdiction. The Company hereby irrevocably waives
any objection to the laying of venue of any such suit or proceeding in the above
described courts.
9.16 Waiver of Jury Trial. No party to this instrument, which includes
any assignee, successor, heir or personal representative of a party, shall seek
a jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, the Note, the Pledge
Agreement, the Subsidiary Security Agreement, any Service Agreement, any
Security Instrument, any related instrument, or the dealings or the relationship
between the parties. No party will seek to consolidate any such action, in which
a jury has been waived, with any other action in which a jury trial cannot or
has not been waived.
THE PROVISIONS OF THIS SECTION 9.16 HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY
HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS
OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS PROVISION IS
A MATERIAL INDUCEMENT FOR BOSTON CHICKEN IN ENTERING lNTO THIS AGREEMENT.
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IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date and year first above written.
PROGRESSIVE BAGEL CONCEPTS, INC.
By:
----------------------------------
Title:
-------------------------------
BOSTON CHICKEN, INC.
By:
----------------------------------
Title:
-------------------------------
31
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EXHIBIT A
CONVERTIBLE SECURED NOTE
<PAGE>
CONVERTIBLE SECURED NOTE
$80,000,000 Golden, Colorado
March __, 1995
FOR VALUE RECEIVED, Progressive Bagel Concepts, Inc., a Delaware
corporation (the "Company"), promises to pay to the order of Boston Chicken,
Inc., a Delaware corporation ("Boston Chicken"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as Boston Chicken may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of eighty million dollars
($80,000,000) and any interest thereon, or, if less, the aggregate unpaid amount
of the Loan made pursuant to Section 1.1 of the Loan Agreement and any interest
thereon.
This Note evidences the Loan made under, and is referred to in and is
executed and delivered pursuant to, a Secured Loan Agreement dated of even date
herewith between the Company and Boston Chicken (the "Loan Agreement"), to which
reference is hereby made for a statement of the terms and conditions under which
this Note may be repaid and accelerated and for a description of the collateral
and security securing this Note. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal balance
of the Loan for the period commencing on the date the Loan is made until the
Loan is paid in full, at a per annum rate equal to the rate designated and
announced by Bank of America Illinois or its successor in interest (the "Bank")
from time to time as its "reference rate" in effect at its principal office in
Chicago, Illinois, plus 1%. The interest rate shall be adjusted, from time to
time, on the same day on which the Bank adjusts its "reference rate." Interest
on the outstanding principal amount of the Loan shall be payable in arrears on
the first day of each Retail Period during the Interest Payment Period, as
otherwise provided herein in connection with principal payments, and at maturity
(whether by acceleration or otherwise).
Interest shall be computed on the basis of a 360-day year and the actual
number of days elapsed.
Any principal payment due under this Note not paid when due, whether at
stated maturity, by notice of repayment, by acceleration or otherwise, shall, to
the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Note in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
Except as otherwise provided in the Loan Agreement, unless accelerated, the
outstanding principal amount of the Loan shall be payable to Boston Chicken in
65 substantially
1
<PAGE>
equal periodic installments of principal (the amount of which periodic
installments of principal shall be determined at the close of business on the
Draw Loan Termination Date based on a schedule amortizing such outstanding
principal balance of the Loan as of such date in 130 substantially equal
periodic installments of principal), plus accrued but unpaid interest, on the
first day of each Retail Period, commencing on the first day of the fifth Retail
Period in Boston Chicken's fiscal year 1998 and continuing until the first day
of the fifth Retail Period in Boston Chicken's fiscal year 2003, when the entire
principal balance of the Loan and all interest accrued thereon shall be due and
payable.
This Note may be prepaid, without premium or penalty, at any time after
April 1, 1996. All payments made hereunder shall be applied first to interest
and then to outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Colorado, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any other
formality are hereby expressly waived by the Company and any endorser or
guarantor.
ARTICLE I
Conversion of Note
------------------
1.1 The holder of this Note shall have the right, at such holder's option,
at any time after the earlier of any acceleration of this Note or April 1, 1996
and up to the later of the date on which the Company has properly repaid the
outstanding principal balance of the Loan and all accrued interest thereon in
full or the first day of the eleventh Retail Period in Boston Chicken's fiscal
year 2003 to convert, subject to the terms and provisions of this Article I, the
outstanding principal balance of this Note or any portion thereof into shares of
common stock, $.01 par value per share, of the Company (the "Common Stock"), at
the price of $1,429.16 per share, or, in the event an adjustment of such price
has occurred pursuant to the provisions of Section 1.3, then at the price as
last adjusted, or, in certain circumstances described in Section 1.10(b) of the
Loan Agreement with respect to amount of any Funding Default, the price set
forth in Section 1.10(b) of the Loan Agreement (referred to herein as the
"Conversion Price"), upon surrender of this Note, the principal of which is so
to be converted, to the Company at any time during usual business hours together
with written notice (hereinafter referred to as "Conversion Notice") that the
holder elects to convert this Note into such shares of Common Stock in
accordance with the provisions of this Article I, and specifying the name or
names in which the certificate or certificates evidencing the shares of Common
Stock issuable upon such conversion shall be registered, together with the
addresses of the persons so named, and, if so required by the Company,
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company duly executed by the registered holder or his
attorney duly authorized in writing. In the event this Note is to be converted
in part only, the Company shall, upon surrender of this
2
<PAGE>
Note, execute and deliver to the holder thereof, at the expense of the Company,
a new Note in principal amount equal to the unconverted portion of this Note. In
no event shall accrued interest be convertible into shares of Common Stock.
1.2 As promptly as practicable after the surrender, as herein provided, of
this Note for conversion and the receipt of the Conversion Notice relating
thereto, the Company shall deliver to or upon the written order of the holder of
this Note a certificate or certificates representing the number of fully-paid
and non-assessable shares of Common Stock of the Company into which this Note
may be converted in accordance with the provisions of this Article I and a new
Note for any unconverted portion of the principal amount hereof. Subject to the
following provisions of this Section 1.2, such conversion shall be deemed to
have been made immediately before the close of business on the date that this
Note shall have been surrendered for conversion together with the Conversion
Notice, so that the rights of the holder of this Note as a Noteholder shall
cease at such time and the person or persons entitled to receive the shares of
Common Stock upon conversion of this Note shall be treated for all purposes as
having become the record holder or holders of such shares of Common Stock at
such time, and such conversion shall be at the Conversion Price in effect at
such time; provided, however, that no such surrender on any date when the stock
transfer books of the Company shall be closed shall be effective to constitute
the person or persons entitled to receive the shares of Common Stock upon such
conversion as the record holder or holders of such shares of Common Stock on
such date, but such surrender shall be effective to constitute the person or
persons entitled to receive such shares of Common Stock as the record holder or
holders thereof for all purposes at the close of business on such next
succeeding day. If the last day for the exercise of the conversion right shall
not be a business day, then such conversion right may be exercised on the next
succeeding business day.
1.3 (a) In case of any reclassification or change of outstanding shares
of Common Stock issuable upon conversion of this Note, or in case of any
consolidation or merger of the Company with or into any partnership,
corporation, or other entity (other than a merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of outstanding shares of Common Stock, other than a change in number of
shares issuable upon conversion of this Note) or in case of any sale or
conveyance to any partnership, corporation, or other entity of the property of
the Company as an entirety or substantially as an entirety, then the holder of
this Note shall have the right thereafter to convert this Note into the kind and
amount of shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale, or conveyance by a holder
of the number of shares of Common Stock of the Company issuable upon conversion
of this Note immediately prior to such reclassification, change, consolidation,
merger, sale, or conveyance, subject to adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for herein.
(b) The Conversion Price shall be adjusted in the event the Company shall
at any time (i) make a subdivision of or combine shares of Common Stock
outstanding or (ii) pay a dividend or make a distribution in cash, in kind, or
in securities of any kind (including, but not limited to, any stock split). In
the event the Company makes a subdivision of shares of Common Stock or pays a
dividend or makes a distribution in cash, in kind, or in securities of any kind,
the
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<PAGE>
Conversion Price in effect immediately prior to such action shall be
appropriately decreased, and in the event the Company shall at any time combine
the shares of Common Stock outstanding, the Conversion Price in effect
immediately prior to such combination shall be appropriately increased. An
adjustment made pursuant to this Section 1.3(b) shall, in the event of a
subdivision or combination, become effective retroactively immediately after the
effective date thereof, and shall, in the event of a dividend or distribution,
become effective retroactively immediately after the record date for the
determination of stockholders entitled thereto. Whenever the Conversion Price is
adjusted, pursuant to this Section 1.3(b), the Company shall promptly cause a
notice to be given to such holder of this Note which will state the adjusted
Conversion Price.
(c) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon conversion of this Note as herein provided, such number of shares of Common
Stock as shall be issuable upon the conversion of the entire Maximum Principal
Balance of the Loan. The Company covenants that all shares of Common Stock which
shall be so issuable shall be duly and validly issued and fully-paid and non-
assessable.
(d) The Company covenants that if any shares of Common Stock to be issued
upon conversion of this Note require registration with or approval of any
governmental authority under any federal or state law before such shares may be
issued upon conversion, the Company will, at its expense and as expeditiously as
possible, cause such shares to be duly registered or approved, as the case may
be.
(e) The issuance of certificates for shares of Common Stock upon the
conversion of this Note shall be made without charge to the converting
Noteholder for any tax in respect of the issuance of such certificates, and such
certificates shall be issued in the respective names of, or in such names as may
be directed by, the holder of this Note; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate in a name
other than that of the holder of this Note, and the Company shall not be
required to issue or deliver such certificates unless and until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the reasonable satisfaction of
the Company that such tax has been paid.
(f) Conversion of any portion of the principal balance of this Note shall
not relieve the Company of its obligation to pay any accrued but unpaid interest
as of the date of conversion on the portion of the principal balance of this
Note so converted.
(g) To the extent that any portion of this Note is not converted into
shares of Common Stock, such portion shall remain a secured debt of the Company
payable in accordance with the terms of the Loan Agreement.
4
<PAGE>
ARTICLE II
ADVANCES
--------
2.1 Loan advances may be made from time to time by Boston Chicken to the
Company in the manner and on the terms and subject to the conditions set forth
in the Loan Agreement. Upon granting each loan advance, Boston Chicken shall
record the making and amount of such advance on its books in a separate loan
account, and shall also record in the loan account all payments made by the
Company with respect to the Loan. The aggregate amount of all Advances, less the
amounts of payment of principal made by the Company, shall be the principal
amount outstanding under this Note. The loan account shall be prima facie
evidence of the unpaid amount of principal outstanding under this Note;
provided, however, that failure to maintain such account or record any advances
therein shall not relieve the Company of its obligations to repay the
outstanding principal amount of the Loan, all accrued interest thereon, and any
amount payable with respect thereto in accordance with the terms of this Note.
ARTICLE III
DEFAULT, RIGHTS AND REMEDIES OF HOLDER
--------------------------------------
3.1 The occurrence of a Default shall be a default under this Note. Upon
any default under this Note, the holder of this Note may declare this Note due
and payable in full and exercise such other rights and remedies as are available
to the holder under the Loan Agreement or applicable law.
3.2 If there is any default under this Note, and this Note is placed in
the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, the Company promises to pay to the order of the
holder hereof such holder's reasonable attorneys' fees and court costs incurred
in collecting or attempting to collect or securing or attempting to secure this
Note or enforcing the holder's rights with respect to the Collateral, to the
extent allowed by the laws of the State of Colorado or any state in which any
Collateral is situated.
ARTICLE IV
MISCELLANEOUS
-------------
4.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF, THE STATE OF COLORADO APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAW
PROVISIONS THEREOF.
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<PAGE>
4.2 The holder of this Note may, with or without notice to any party, and
without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
(v) justifiably or otherwise, impair any of the Collateral or suspend the right
to enforce against any such Collateral, and (vi) at any time it deems it
necessary or proper, call for and, should it be made available, accept, as
additional security, the signature or signatures of additional parties or a
security interest in property of any kind or description or both.
4.3 Any provision herein, or in the Loan Agreement, or any other document
executed or delivered in connection herewith or therewith, or in any other
agreement or commitment, whether written or oral, expressed or implied, to the
contrary notwithstanding, neither Boston Chicken nor any holder hereof shall in
any event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that Boston Chicken or any holder hereof shall be
paid, as interest, a sum greater than the maximum amount permitted by applicable
law to be charged to the person primarily obligated to pay this Note at the time
in question. If any construction of this Note or the Loan Agreement, or any and
all other papers, agreements or commitments, indicate a different right given to
Boston Chicken or any holder hereof to ask for, demand, or receive any larger
sum as interest, such is a mistake in calculation or wording which this clause
shall override and control, it being the intention of the parties that this
Note, the Loan Agreement, and all other documents executed or delivered in
connection herewith shall in all ways comply with applicable law and proper
adjustments shall automatically be made accordingly. In the event that Boston
Chicken or any holder hereof ever receives, collects, or applies as interest,
any sum in excess of the maximum amount permitted by applicable law, if any,
such excess amount shall be applied to the reduction of the unpaid principal
balance of this Note, and if this Note is paid in full, any remaining excess
shall be paid to the Company. In determining whether or not the interest paid or
payable, under any specific contingency, exceeds the maximum amount permitted by
applicable law, if any, the Company and any holder hereof shall, to the maximum
extent permitted under applicable law: (a) characterize any non-principal
payment as an expense or fee rather than as interest, and (b) "spread" the total
amount of interest throughout the entire term of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be executed in its
corporate name by the undersigned officer, thereunto duly authorized.
PROGRESSIVE BAGEL CONCEPTS, INC.
By:
----------------------------------
Title:
-------------------------------
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<PAGE>
EXHIBIT B
FORM OF CERTIFICATE TO ACCOMPANY ADVANCES
<PAGE>
EXHIBIT B
---------
CERTIFICATE
The undersigned, the of Progressive Bagel Concepts, Inc.
(the "Company"), borrower under that certain Secured Loan Agreement dated
March , 1995 (the "Loan Agreement") between the Company and Boston Chicken,
Inc. ("Boston Chicken"), hereby requests an Advance of Loan proceeds in the
amount of $ .
In support of this request, the Company hereby represents and warrants to
Boston Chicken as follows:
1. Such Loan amount is required and will be used by the Company for the
purposes permitted under the Loan Agreement and for no other purpose.
2. The representations and warranties contained in Article IV of the Loan
Agreement and in the Security Instruments delivered in connection therewith are
true and correct on and as of the date hereof, and will be true and correct on
the date such Advance is made.
4. No Default or Event of Default has occurred and is continuing.
5. There has been no material adverse change in the financial conditions,
results of operations, assets or business of the Company since March , 1995.
6. The Company has Stores open and conducting business as of the date
hereof.
7. All of the conditions to Advances set forth in Article III of the Loan
Agreement have been satisfied.
Capitalized terms used but not defined herein have the meanings ascribed
thereto in the Loan Agreement.
PROGRESSIVE BAGEL CONCEPTS, INC.
By:
Title:
Date: , 199
<PAGE>
Schedule 4.14
Subsidiaries
------------
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation Number of Shares
- ---- ----------------------------- ----------------
<S> <C> <C>
1. Brackman Brothers, Inc. Utah 23,200
("Brackman")
2. Brackman Brothers of Utah
Idaho, Inc. (a subsidiary
of Brackman)
</TABLE>
<PAGE>
EXHIBIT C
SUBSIDIARY STOCK PLEDGE AGREEMENT
<PAGE>
SUBSIDIARY STOCK PLEDGE AGREEMENT
This Subsidiary Stock Pledge Agreement ("Pledge Agreement"), dated March ,
1995, is made and entered into by and between Progressive Bagel Concepts, Inc.,
a Delaware corporation (the "Company") and Boston Chicken, Inc., a Delaware
corporation ("Boston Chicken").
RECITALS
--------
1. The Company owns 100% of the issued and outstanding shares of capital
stock of Brackman Brothers, Inc., a Utah corporation (the "Pledged Subsidiary").
2. The Company has entered into a Secured Loan Agreement of even date
herewith (the "Loan Agreement") with Boston Chicken pursuant to which Boston
Chicken has agreed on the terms and subject to the conditions therein, to make a
Loan (as defined in the Loan Agreement) to the Company, which Loan is evidenced
by a promissory note of even date herewith from the Company to Boston Chicken
(the "Note").
3. As an inducement to Boston Chicken to enter into the Loan Agreement and
as a condition to the effectiveness of Boston Chicken's obligations under the
Loan Agreement, the Company has agreed, among other things, to pledge to Boston
Chicken, and grant a first-priority security interest to Boston Chicken, in and
to, 100% of the issued and outstanding capital stock of the Pledged Subsidiary.
NOW, THEREFORE, the Company and Boston Chicken have agreed as follows:
1. Certain Definitions. The capitalised terms and phrases not otherwise
defined herein, shall have the meanings given them in the Loan Agreement, and
the following terms or phrases shall have the following meanings:
"Affiliate" shall mean, with respect to a specified person, any other
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the person specified.
"Collateral" shall mean the Pledged Shares and any other property in which
Boston Chicken acquires a security interest pursuant to this Pledge Agreement to
secure any indebtedness or other obligation of the Company to Boston Chicken.
"Default" shall have the meaning given it in Section 10 of this Pledge
Agreement.
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<PAGE>
"Pledged Shares" shall mean all the issued and outstanding shares of
the capital stock of the Pledged Subsidiary owned by the Company, the
certificates representing those shares and any stock powers executed by the
Company in connection with those shares.
"Secured Obligations" shall mean the obligations secured by this
Pledge Agreement described in Section 3 of this Pledge Agreement.
2. Grant of Security Interest. (a) The Company hereby grants to Boston
Chicken a security interest in all of its right, title, and interest in and to
the Pledged Shares. The Company further grants to Boston Chicken a security
interest in any stock rights, rights to subscribe, liquidating dividends,
dividends paid in stock, new securities, or any other property to which the
Company is or may hereafter become entitled to receive whether on account of the
Pledged Shares or otherwise. If the Company receives additional property of such
nature, it shall immediately deliver such property to Boston Chicken to be held
by Boston Chicken in the same manner as the property held pursuant to this
Pledge Agreement.
(b) The Company grants a further security interest to Boston
Chicken in the proceeds or products of any sale or other disposition of the
Pledged Shares.
3. Obligations Secured. The security interest created hereby secures
payment and performance of (a) the indebtedness evidenced by the Note, and all
obligations contained in the Note, (b) all of the other obligations, agreements,
covenants, and representations of the Company under the Loan Agreement whether
or not, either on the date of this Pledge Agreement or thereafter, evidenced by
any note, instrument, or other writing, and (c) any and all other indebtedness,
obligation, or liability of the Company to Boston Chicken, however evidenced,
whether existing on the date of this Pledge Agreement or arising thereafter,
direct or indirect, absolute or contingent, joint and/or several.
4. Representations and Warranties. To induce Boston Chicken to enter into
this Pledge Agreement, the Company represents and warrants as follows:
(a) The Company has full right, power, and capacity to enter into
and perform this Pledge Agreement; and this Pledge Agreement has been duly
authorized, executed and delivered and constitutes a legal, valid, and binding
obligation of the Company enforceable in accordance with its terms.
(b) The Company has good and marketable title to the Pledged
Shares, and the Pledged Shares are not subject to any lien, charge, pledge,
encumbrance, claim, or security interest other than the security interest
created by this Pledge Agreement.
(c) The Pledged Shares constitute one hundred percent (100%) of the
issued and outstanding equity interest of the Pledged Subsidiary.
2
<PAGE>
(d) The Pledged Shares are fully paid and nonassessable.
(e) The Company has not entered into any stock restriction or
purchase agreement with respect to the Pledged Shares which would in any way
restrict the sale, pledge, or other transfer of the Pledged Shares or of any
interest in or to the Pledged Shares.
5. Duration of Security Interest. Boston Chicken, its successors and
assigns, shall hold the Pledged Shares and security interest created hereby upon
the terms of this Pledge Agreement, and this security interest shall continue
until all the Secured Obligations have been paid in full
6. Maintaining Freedom from Liens. The Company shall keep the Pledged
Shares and other Collateral free and clear of liens and shall pay all amounts,
including taxes, assessments, or charges, which might result in a lien against
the Pledged Shares or other Collateral if left unpaid. If any such lien,
assessment, claim, or charge shall nevertheless exist, and the Company fails to
pay such amounts promptly, Boston Chicken may, but is not obligated to, pay such
amounts, and such payment shall be conclusive evidence of the legality or
validity thereof. The Company shall promptly reimburse Boston Chicken for any
such payments, and until reimbursement, such payments shall be a part of the
Secured Obligations.
7. Certain Rights Respecting Pledged Shares.
(a) The Company shall continue to be the owner of the Pledged
Shares and other Collateral so long as no Default has occurred and is continuing
and may collect and retain all cash dividends now or hereafter payable on or on
account of the Pledged Shares and other Collateral which are permitted under the
Loan Agreement, and, so long as no Default has occurred, may exercise voting
rights with respect to the Pledged Shares and other Collateral.
(b) The Company shall not sell, transfer, or attempt to sell or
transfer the Pledged Shares or other Collateral, or any part thereof or interest
therein, without the prior express written consent of Boston Chicken. Any such
consent of Boston Chicken shall not constitute the release by Boston Chicken of
its interest in the Pledged Shares or other Collateral, and any such sale or
transfer consented to shall transfer the Pledged Shares or other Collateral
subject to the security interest of Boston Chicken. Any such transfer shall be
subject to the transferee stockholder's agreement to be bound by the terms and
subject to the conditions of this Pledge Agreement, such agreement to be
evidenced by the transferee stockholder's execution of this Pledge Agreement.
(c) Boston Chicken, at its option upon any Default, may exercise
all voting rights and privileges whatsoever with respect to the Pledged Shares
and other Collateral, including, without limitation, the right to receive
dividends, and to that end the Company hereby constitutes any officer of Boston
Chicken as its proxy and attorney-in-fact for all purposes of voting the Pledged
Shares and other Collateral after any Default at any annual regular or special
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<PAGE>
meeting of the Company, and this appointment shall be deemed coupled with an
interest and is and shall be irrevocable until all of the Secured Obligations
have been fully paid and terminated, and all persons whatsoever shall be
conclusively entitled to rely upon any oral or written certification of Boston
Chicken that it is entitled to vote the Pledged Shares and other Collateral
hereunder. The Company shall execute and deliver to Boston Chicken any
additional proxies and powers of attorney that Boston Chicken may desire in its
own name in order to exercise the rights expressly granted to Boston Chicken
under this Section 7(c). In addition to any other voting rights, Boston Chicken
may, upon any Default, vote the Pledged Shares and other Collateral to remove
the directors and officers of the Pledged Subsidiary, or any of them, and to
elect new directors and officers of the Pledged Subsidiary, who may thereafter
manage the affairs of the Pledged Subsidiary, operate its properties and carry
on its business and otherwise take any action with respect thereto as it shall
deem necessary and appropriate, and may also liquidate its business, and may
authorize the borrowing of money in the name of the Pledged Subsidiary, and the
pledge of its assets to secure such borrowing.
8. Issuance or Acquisition of New Stock or Sale of Treasury Shares;
Mergers, Sales and Other Disposition of Assets. The Company shall not permit
the Pledged Subsidiary to (a) issue new shares of its capital stock, or any
options, subscription rights, or warrants with respect thereto, (b) sell any
treasury shares, (c) merge into or with or consolidate with any other entity,
(d) sell or otherwise transfer any part of its assets (except in the ordinary
course of business) or (e) liquidate or dissolve or take any action with a
view toward liquidation or dissolution, in each case without Boston Chicken's
prior written consent.
9. Delivery of Certificates and Stock Powers. Upon execution of this
Pledge Agreement, the Company shall deliver to Boston Chicken the share
certificates representing the Pledged Shares in form suitable for transfer
together with executed blank stock powers. If for any reason the Company
acquires any interest in any additional capital stock of the Pledged
Subsidiary, the Company shall immediately deliver certificates representing
that stock in form suitable for transfer and blank stock powers to Boston
Chicken to be held by Boston Chicken in the same manner as the Pledged
Shares, and such stock shall be pledged under this Pledge Agreement and
constitute a part of the Collateral.
10. Default. At the option of Boston Chicken, the occurrence of any
Default (as defined in the Loan Agreement) under the Loan Agreement shall
constitute a default under this Pledge Agreement.
11. Remedies. (a) Upon the occurrence of any Default, Boston Chicken shall
have all of the rights and remedies provided by law and/or by this Pledge
Agreement, including but not limited to all of the rights and remedies of a
secured party under the Uniform Commercial Code, and the Company hereby
authorizes Boston Chicken to hold such Pledged Shares or to sell all or any part
of the Pledged Shares at public or private sale and to apply the proceeds of
such sale to the costs and expenses thereof (including the reasonable attorneys'
fees and disbursements incurred by Boston Chicken) and then to the payment of
the other Secured Obligations. Boston
4
<PAGE>
Chicken may be the purchaser at any such sale. The Company expressly authorizes
such sale or sales of the Pledged Shares in advance of and to the exclusion of
any sale or sales of or other realization upon any other collateral securing
indebtedness or other obligations owed to Boston Chicken. Boston Chicken shall
be under no obligation to preserve rights against prior parties.
(b) The Company agrees and acknowledges that because there may be
no public market for the Pledged Shares and because of applicable securities
laws, a public sale of the Pledged Shares may not be possible or advisable and
sales at a private sale may be on terms less favorable than if such Pledged
Shares were sold at a public sale and may be at a price less favorable than a
public sale. The Company agrees that all such private sales made under the
foregoing circumstances shall be deemed to have been made in a commercially
reasonable manner.
12. Exercise of Remedies. The rights and remedies of Boston Chicken shall
be deemed to be cumulative, and any exercise of any right or remedy shall not be
deemed to be an election of that right or remedy to the exclusion of any other
right or remedy. Notwithstanding the foregoing, Boston Chicken shall be entitled
to recover by the cumulative exercise of all remedies no more than the sum of
(a) the Secured Obligations remaining outstanding at the time of the exercise of
remedies, plus (b) the costs, fees, and expenses Boston Chicken is otherwise
entitled to recover.
13. Return of Collateral. Boston Chicken may at any time deliver the
Pledged Shares or other Collateral, or any part thereof, to the Company. The
receipt by the Company of the Pledged Shares or other Collateral, or any part
thereof, shall be a complete and full discharge of Boston Chicken, and Boston
Chicken shall be discharged from any liability or responsibility with respect
thereto.
14. Communications and Notices. (a) Any requirement of the Uniform
Commercial Code of reasonable notice shall be met if such notice is given at
least five business days before the time of sale, disposition, or other event or
thing giving rise to the requirement of notice.
(b) All communications and notices shall be in writing and shall
be deemed to have been duly given if delivered personally to the party to whose
attention the notice is directed or sent by overnight express, facsimile
transmission, express mail delivery service, or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as set forth
in Section 9.4 of the Loan Agreement. Any party may change the address to which
notices hereunder are to be sent to it by giving written notice of such change
of address in the manner herein provided for giving notice. Any notice delivered
personally shall be deemed to have been given when so delivered. Any notice
delivered by facsimile transmission shall be deemed to have been given on the
earlier of the date it is actually received or one day after such transmission.
Any notice delivered by overnight express courier will be deemed to have been
given on the next succeeding business day after the day it is sent to the
intended recipient at the address set forth above, and any notice delivered by
registered or certified mail or express mail delivers service shall be deemed to
have been duly given on the earlier of the date it is actually
5
<PAGE>
received or three business days after it is sent to the intended recipient at
the address set forth above.
15. Further Assurances. The Company shall sign any such other documents
or instruments, and take such other action, as Boston Chicken may request to
more fully create and maintain, or to verify, ratify or perfect the security
interest intended to be created by this Pledge Agreement.
16. Multiple Counterparts. This Pledge Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Pledge Agreement or the terms thereof
to produce or account for more than one such counterpart.
17. Miscellaneous. (a) Failure by Boston Chicken to exercise any right
shall not be deemed a waiver of that right, and any single or partial exercise
of any right shall not preclude the further exercise of that right. Every right
of Boston Chicken shall continue in full force and effect until such right is
specifically waived in writing signed by Boston Chicken.
(b) If any provision of this Pledge Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable, the
remainder of the Pledge Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby, and the provisions of
this Pledge Agreement shall be severable in any such instance.
(c) The headings of the sections of this Pledge Agreement are
inserted for convenience only and shall not be deemed to constitute a part of
this Pledge Agreement.
(d) This Pledge Agreement shall benefit Boston Chicken, its
successors and assigns, and all obligations of the Company shall bind their
successors and assigns. The Company acknowledges that Boston Chicken may assign
or otherwise transfer (in whole or in part) the Note, the Loan Agreement, or
this Pledge Agreement to any other person, and such other person shall
thereupon become vested with all of the benefits in respect thereof granted to
Boston Chicken thereunder (including the benefits under this Pledge Agreement).
(E) THIS PLEDGE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS
THEREOF.
(f) This Pledge Agreement and the Loan Agreement constitute the
entire agreement of the parties with respect to the subject matter hereof and
supersede all prior understandings with respect to the subject matter hereof. No
change, modification, addition, or
6
<PAGE>
termination of this Pledge Agreement shall be enforceable unless in writing and
signed by the party against whom enforcement is sought.
(g) The Company agrees that any legal action or proceeding with
respect to this Pledge Agreement or the transactions contemplated hereby may be
brought in any court of the State of Colorado, or in any court of the United
States of America sitting in Colorado, and the Company hereby submits to and
accepts generally and unconditionally the jurisdiction of those courts with
respect to its person and property, and irrevocably consents to the service of
process in connection with any such action or proceeding by personal delivery to
the Company or by the mailing thereof by registered or certified mail, postage
prepaid addressed to the Company at the address for notices as provided in
Section 14 hereof. Nothing in this paragraph shall affect the right of Boston
Chicken to serve process in any other manner permitted by law or limit the right
of Boston Chicken to bring any such action or proceeding against the Company or
property in the courts of any other jurisdiction. The Company hereby irrevocably
waives any objection to the laying of venue of any such suit or proceeding in
the above described courts.
18. Waiver of Jury Trial. No party to this instrument, which includes any
assignee, successor, heir or personal representative of a party, shall seek a
jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, any related instrument,
or the dealings or the relationship between the parties. No party will seek to
consolidate any such action, in which a jury has been waived, with any other
action in which a jury trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 18 HAVE BEEN FULLY DISCUSSED BY THE PARTIES
HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN
ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR BOSTON CHICKEN IN ENTERING INTO THIS AGREEMENT.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto executed this Pledge Agreement to be
effective as of the date and year first above written.
PROGRESSIVE BAGEL CONCEPTS, INC.
By: ____________________________
Its: ____________________________
BOSTON CHICKEN, INC.
By: ____________________________
Title: ____________________________
8
<PAGE>
EXHIBIT D
SUBSIDIARY SECURITY AGREEMENT
<PAGE>
SUBSIDIARY SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of March , 1995 (this "Security
Agreement"), is made by Brackman Brothers, Inc. a Utah corporation (the
"Company"), in favor of Boston Chicken, Inc., a Delaware corporation ("Boston
Chicken").
WITNESSETH:
WHEREAS, Progressive Bagel Concepts, Inc., a Delaware corporation (the
"Borrower") has entered into a Secured Loan Agreement, dated as of March ,
1995, (the "Loan Agreement"), with Boston Chicken and pursuant to which Boston
Chicken has agreed on the terms and conditions therein, to make a Loan (as
defined in the Loan Agreement) to the Borrower; and
WHEREAS, the Company is a wholly-owned subsidiary of the Borrower;
WHEREAS, as a condition to the effectiveness of Boston Chicken's obligations
under the Loan Agreement, the Company has agreed, among other things, to grant
to Boston Chicken a first-priority security interest in and to the Collateral
hereinafter described;
NOW, THEREFORE, to secure (a) the payment of the principal sum of Eighty
Million Dollars ($80,000,000), together with interest thereon, in accordance
with the terms of a promissory note dated March , 1995, issued by the Borrower
pursuant to the Loan Agreement (the "Note"), (b) the performance of the
covenants herein contained and any monies expended by Boston Chicken in
connection therewith, (c) the payment of all obligations and performance of all
covenants of the Borrower under the Loan Agreement, the Pledge Agreement and all
other Security Instruments (as defined in the Loan Agreement) and any other
documents, agreements or instruments between the Borrower or the Company and
Boston Chicken given in connection therewith, and (d) any and all other
indebtedness, obligations and liabilities of any kind of the Borrower and/or the
Company to Boston Chicken now or hereafter existing, direct or indirect,
absolute or contingent, joint and/or several, secured or unsecured, arising by
operation of law or otherwise, and whether incurred by the Company as principal,
surety, endorser, guarantor, accommodation party or otherwise (all of the
aforesaid indebtedness, obligations and liabilities of the Borrower and/or the
Company being herein called the "Secured Obligations", and all of the documents,
agreements and instruments between the Company and Boston Chicken evidencing or
securing the repayment of, or otherwise pertaining to the Secured Obligations
being herein collectively called the "Operative Documents"), for value received
and pursuant to the Loan Agreement, the Company hereby grants, assigns and
transfers to Boston Chicken a security interest in and to the following
described property whether now owned or existing or hereafter
<PAGE>
acquired or arising and wherever located (all of which is herein collectively
called the "Collateral"):
(a) all of the Company's real estate, accounts, equipment (including, but not
limited to machinery, furniture, fixtures, tools, vehicles, and other tangible
property), inventory, leasehold improvements, contract rights (including its
rights as lessee under all leases of real property), general intangibles,
deposit accounts, tax refunds, chattel paper, instruments, notes, letters of
credit, documents, and documents of title;
(b) all insurance proceeds of or relating to any of the foregoing;
(c) all of the Company's books, records, and computer programs and data
relating to any of the foregoing; and
(d) all accessories and additions to, and substitutions for, and replacements,
products and proceeds of, any of the foregoing.
1. Representations, Warranties, Covenants and Agreements. The Company further
represents, warrants, covenants, and agrees with Boston Chicken as follows:
(a) Ownership of Collateral; Security Interest Priority. At the time any
Collateral becomes subject to a security interest of Boston Chicken hereunder,
unless Boston Chicken shall otherwise consent, the Company shall be deemed to
have represented and warranted that (i) the Company is the lawful owner of such
Collateral and has the right and authority to subject the same to the security
interest of Boston Chicken; (ii) none of the Collateral is subject to any lien
other than that in favor of Boston Chicken and other than Permitted Encumbrances
(as defined in the Loan Agreement) and there is no effective financing statement
covering any of the Collateral on file in any public office, other than in favor
of Boston Chicken. This Security Agreement creates in favor of Boston Chicken a
valid and perfected first-priority security interest in the Collateral
enforceable against the Company and all third parties and securing the payment
of the Secured Obligations and all filings and other actions necessary or
desirable to create, preserve or perfect such security interests have been duly
taken.
(b) Location of Offices, Records and Facilities. The Company's chief executive
office and chief place of business and the office where the Company keeps its
records concerning its accounts, contract rights, chattel papers, instruments,
general intangibles and other obligations arising out of or in connection with
the sale or lease of goods or the rendering of services or otherwise
("Receivables"), and all originals of all leases and other chattel paper which
evidence Receivables, are located in the State of Utah, County of Salt Lake at
3541 South 300 West, Salt Lake City, Utah. The Company will provide Boston
Chicken with prior written notice of any proposed change in the location of its
chief executive office and will not change the location of its chief executive
office without the prior written consent of Boston Chicken. The federal tax
identification number of the Company is 87-0464584. The name of the Company is
Brackman
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Brothers, Inc., and the Company operates under no other names except for
"Brackman Bros. Bagel Bakery". The Company shall not change its name without the
prior written consent of Boston Chicken.
(c) Location of Inventory, Fixtures, Machinery and Equipment. All Collateral
consisting of inventory, fixtures, machinery or equipment is, and will be,
located within the States of Utah and Colorado, and at no other locations
without the prior written consent of Boston Chicken. If the Collateral described
in this paragraph l(c) is kept at leased locations or warehoused, the Company
has obtained appropriate landlord's lien waivers or appropriate warehousemen's
notices have been sent, each satisfactory to Boston Chicken, unless waived by
Boston Chicken.
(d) Liens, Etc. The Company will keep the Collateral free at all times from
any and all liens, security interests or encumbrances other than those described
in paragraph 1(a)(ii) hereof and in the Brackman Title Commitment and those
consented to in writing by Boston Chicken. The Company will not, without the
prior written consent of Boston Chicken, sell or lease, or permit or suffer to
be sold or leased, any of the Collateral except in the ordinary course of the
Company's business; provided, the Company shall have the right (i) to trade in
obsolete, redundant or unnecessary equipment in connection with the purchase of
new equipment, and (ii) to sell obsolete, redundant or unnecessary equipment.
Boston Chicken or its attorneys may at any and all reasonable times inspect the
Collateral and for such purpose may enter upon any and all premises where the
Collateral is or might be kept or located.
(e) Insurance. The Company shall keep the tangible Collateral insured at all
times against loss by theft, fire and other casualties and shall otherwise
comply with the insurance provisions set forth in Section 5.4 of the Loan
Agreement.
(f) Taxes, Etc. The Company will pay promptly, and within the time that they
can be paid without interest or penalty, any taxes, assessments and similar
imposts and charges, not being contested in good faith, which are now or
hereafter may become a lien, charge or encumbrance upon any of the Collateral.
If the Company fails to pay any such taxes, assessments or other imposts or
charges in accordance with this Section, Boston Chicken shall have the option to
do so and the Company agrees to repay forthwith all amounts so expended by
Boston Chicken with interest at the default rate set forth in the Loan
Agreement.
(g) Further Assurances. The Company will do all acts and things and will
execute all financing statements and writings requested by Boston Chicken to
establish, maintain and continue a perfected and valid security interest of
Boston Chicken in the Collateral, and will promptly on demand pay all reasonable
costs and expenses of filing and recording all instruments, including the costs
of any searches deemed necessary by Boston Chicken to establish and determine
the validity and the priority of Boston Chicken's security interests. A carbon,
photographic or other reproduction of this Security Agreement or any financing
statement covering the Collateral shall be sufficient as a financing statement.
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<PAGE>
(h) Maintenance of Tangible Collateral. The Company will cause the
tangible Collateral to be maintained and preserved in the same condition,
repair and working order as when new, ordinary wear and tear excepted, and in
accordance with any manufacturer's manual, and shall forthwith, or, in the case
of any loss or damage to any of the tangible Collateral as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacements, and other improvements made in connection therewith which are
necessary or desirable to such end. The Company shall promptly furnish to Boston
Chicken a statement respecting any loss or damage to any of the tangible
Collateral.
(i) Maintenance of Intangible Collateral. The Company shall preserve and
maintain all rights of the Company and Boston Chicken in the intangible
Collateral, including without limitation the payment of all maintenance fees and
the taking of appropriate action at the Company's expense to halt the
infringement of any of the intangible Collateral.
(j) Special Rights Regarding Accounts Receivable. Boston Chicken or
any of its agents may, at any time and from time to time in its sole discretion
and irrespective of the existence of any event of default under this Security
Agreement, verify directly with the Company's account debtors the accounts
pledged hereunder in any manner. Boston Chicken or any of its agents may, at any
time from time to time in its sole discretion, notify the Company's account
debtors of the security interest of Boston Chicken in the Collateral and/or
direct such account debtors that all payments in connection with such
obligations and the Collateral be made directly to Boston Chicken in Boston
Chicken's name. If Boston Chicken or any of its agents shall collect such
obligations directly from the Company's account debtors, Boston Chicken or any
of its agents shall have the right to resolve any disputes relating to returned
goods directly with the Company's account debtors in such manner and on such
terms as Boston Chicken or any of its agents shall deem appropriate. The Company
directs and authorizes any and all of its present and future account debtors to
comply with requests for information from Boston Chicken, Boston Chicken's
designees and agents and/or auditors, relating to any and all business
transactions between the Company and the Company's account debtors. The Company
further directs and authorizes all of its account debtors upon receiving a
notice or request sent by Boston Chicken or Boston Chicken's agents or designees
to pay directly to Boston Chicken any and all sums of money or proceeds now or
hereafter owing by the Company's account debtors to the Company, and any such
payment shall act as a discharge of any debt of such account debtor to the
Company in the same manner as if such payment had been made directly to the
Company. The Company agrees to take any and all action as Boston Chicken may
request to assist Boston Chicken in exercising the rights described in this
Section.
2. Events of Default. The occurrence of any Event of Default specified
in the Loan Agreement shall be deemed an event of default under this Security
Agreement.
3. Remedies. Upon the occurrence of any such event of default, Boston
Chicken shall have and may exercise any one or more of the rights and remedies
provided to it under this
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<PAGE>
Security Agreement or any of the other Operative Documents or provided by law,
including but not limited to all of the rights and remedies of a secured party
under the Uniform Commercial Code, and the Company hereby agrees to assemble the
Collateral and make it available to Boston Chicken at a place to be designated
by Boston Chicken which is reasonably convenient to both parties, authorizes
Boston Chicken to take possession of the Collateral with or without demand and
with or without process of law and to sell and dispose of the same at public or
private sale and to apply the proceeds of such sale to the costs and expenses
thereof (including reasonable attorneys' fees and disbursements, incurred by
Boston Chicken) and then to the payment of the indebtedness and satisfaction of
other Secured Obligations. Any requirement of reasonable notice shall be met if
Boston Chicken sends such notice to the Company, by registered or certified
mail, at least 5 days prior to the date of sale, disposition or other event
giving rise to a required notice. Boston Chicken may be the purchaser at any
such sale. The Company expressly authorises such sale or sales of the Collateral
in advance of and to the exclusion of any sale or sales of or other realization
upon any other collateral securing the Secured Obligations. Boston Chicken shall
have no obligation to preserve rights against prior parties. The Company hereby
waives as to Boston Chicken any right of subrogation or marshaling of such
Collateral and any other collateral for the Secured Obligations. To this end,
the Company hereby expressly agrees that any such collateral or other security
of the Company or any other party which Boston Chicken may hold, or which may
come to any of them or any of their possession, may be dealt with in all
respects and particulars as though this Security Agreement were not in
existence. The parties hereto further agree that public sale of the Collateral
by auction conducted in any county in which any Collateral is located or in
which Boston Chicken or the Company does business after advertisement of the
time and place thereof shall, among other manners of public and private sale, be
deemed to be a commercially reasonable disposition of the Collateral. The
Company shall be liable for any deficiency remaining after disposition of the
Collateral.
4. Remedies Cumulative. No right or remedy conferred upon or reserved to
Boston Chicken under any Operative Document is intended to be exclusive of any
other right or remedy, and every right and remedy shall be cumulative in
addition to every other right or remedy given hereunder or now or hereafter
existing under any applicable law. Every right and remedy of Boston Chicken
under any Operative Document or under applicable law may be exercised from time
to time and as is often as may be deemed expedient by Boston Chicken. To the
extent that it lawfully may, the Company agrees that it will not at any time
insist upon, plead, or in any manner whatever claim or take any benefit or
advantage of any applicable present or future stay, extension or moratorium law,
which may effect observance or performance of any provisions of any Operative
Document; nor will it claim, take or insist upon any benefit or advantage of any
present or future law providing for the valuation or appraisal of any security
for its obligations under any Operative Document prior to any sale or sales
thereof which may be made under or by virtue of any instrument governing the
same, nor will it, after any such sale or sales, claim or exercise any right,
under any applicable law to redeem any portion of such security so sold.
5. Conduct No Waiver. No waiver of default shall be effective unless in
writing executed by Boston Chicken and waiver of any default or forbearance on
the part of Boston
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<PAGE>
Chicken in enforcing any of its rights under this Security Agreement shall not
operate as a waiver of any other default or of the same default on a future
occasion or of such right.
6. Governing Law; Definitions. This Security Agreement is a contract made
under, and the rights and obligations of the parties hereunder shall be governed
by and construed in accordance with, the laws of the State of Colorado
applicable to contracts made and to be performed entirely within such State.
Terms used but not defined herein shall have the respective meaning ascribed
thereto in the Loan Agreement. Unless otherwise defined herein or in the Loan
Agreement, terms used in Article 9 of the Uniform Commercial Code in the State
of Colorado are used herein as therein defined on the date hereof. The headings
of the various subdivisions hereof are for convenience of reference only and
shall in no way modify any of the terms or provisions hereof.
7. Notices. All notices, demands, requests, consents and other
communications hereunder shall be delivered and shall be effective in the
manner specified in Section 9.4 of the Loan Agreement.
8. Rights Not Construed as Duties. Boston Chicken neither assumes nor
shall it have any duty of performance or other responsibility under any
contracts in which Boston Chicken has or obtains a security interest hereunder.
If the Company fails to perform any agreement contained herein, Boston Chicken
may but is in no way obligated to itself perform, or cause performance of, such
agreement, and the expenses of Boston Chicken incurred in connection therewith
shall be payable by the Company under paragraph 11.
9. Amendments. None of the terms and provisions of this Security
Agreement may be modified or amended in any way except by an instrument in
writing executed by each of the parties hereto.
10. Severability If any one or more provisions of this Security Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected, impaired or prejudiced thereby.
11. Expenses. The Company agrees to indemnify Boston Chicken from and
against any and all claims, losses and liabilities growing out of or resulting
from this Security Agreement (including, without limitation, enforcement of this
Security Agreement), except claims, losses or liabilities resulting from the
Boston Chicken's gross negligence or willful misconduct.
12. Successors and Assigns; Termination. This Security Agreement shall
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until full payment and performance of the Secured
Obligations (b) be binding upon the Company, its successors and assigns and (c)
inure, together with the rights and remedies of Boston Chicken hereunder, to the
benefit of Boston Chicken and its successors, transferees and assigns. Upon the
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<PAGE>
full payment and performance of the Secured Obligations the security interests
granted hereby shall terminate and all rights to the Collateral shall revert to
the Company. Upon any such termination, Boston Chicken will, at the Company's
expense, execute and deliver to the Company such documents as the Company shall
reasonably request to evidence such termination.
13. Submission to Jurisdiction. The Company agrees that any legal action or
proceeding with respect to this Security Agreement or the transactions
contemplated hereby may be brought in any court of the State of Colorado, or in
any court of the United States of America sitting in Colorado, and the Company
hereby submits to and accepts generally and unconditionally the jurisdiction of
those courts with respect to their respective person and property, and
irrevocably consents to the service of process in connection with any such
action or proceeding by personal delivery to the Company or by the mailing
thereof by registered or certified mail, postage prepaid addressed to the
Company at the address for notices as provided in Section 7 hereof. Nothing in
this paragraph shall affect the right of Boston Chicken to serve process in any
other manner permitted by law or limit the right of Boston Chicken to bring any
such action or proceeding against the Company or property in the courts of any
other jurisdiction. The Company hereby irrevocably waives any objection to the
laying of venue of any such suit or proceeding in the above described courts.
14. Waiver of Jury Trial. No party to this instrument, which includes any
assignee, successor, heir or personal representative of a party, shall seek a
jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, any related instrument,
or the dealings or the relationship between the parties. If the subject matter
of any such litigation is one in which the waiver of a jury trial is prohibited,
if at all, under the controlling law of the applicable jurisdiction, by
constitutional or statutory provision, no party hereto will present as a defense
or counterclaim in such litigation any claim which would reduce or offset any
amount or right claimed under the provisions of this Agreement. No party will
seek to consolidate any such action, in which a jury has been waived, with any
other action in which a jury trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 14 HAVE BEEN FULLY DISCUSSED BY THE PARTIES
HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN
ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR BOSTON CHICKEN IN ENTERING INTO THIS AGREEMENT.
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IN WITNESS WHEREOF, the Company has caused this Security Agreement to
be duly executed as of the day and year first set forth above.
[NAME OF COMPANY]
By:
--------------------------------
Its:
--------------------------------
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EXHIBIT E
FORM OF OPINION OF COUNSEL
<PAGE>
[Form of Opinion of Counsel]
[Date]
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Re:
Ladies and Gentlemen:
We have acted as counsel for Progressive Bagel Concepts, Inc., a Delaware
corporation (the "Company") and Brackman Bros., Inc. (the "Subsidiary"), in
connection with the preparation, execution, and delivery of the Documents (as
hereinafter defined). This opinion is furnished to you pursuant to Section
7.1 of the Agreement (as hereinafter defined). As used herein, the term "State"
means the State of [opining jurisdiction] and the term "UCC" means the Uniform
Commercial Code as in effect in the State on the date hereof. Other capitalized
terms used herein and not otherwise defined herein have the meanings provided in
the Agreement.
The documents we have examined in rendering this opinion are the following:
(i) The following, collectively called the "Documents":
(a) the Secured Loan Agreement (the "Agreement"), of even date
herewith, between the Company and Boston Chicken, Inc. ("Boston Chicken");
(b) the Convertible Secured Note of the Company, of even date herewith
and delivered pursuant to the Agreement (the "Note"),
(c) the Subsidiary Stock Pledge Agreement, dated of even date
herewith, between the Company and Boston Chicken delivered pursuant to the
Agreement (the "Subsidiary Pledge Agreement"),
(d) the Subsidiary Security Agreement, dated of even date herewith
between Brackman Bros., Inc. and Boston Chicken pursuant to the Agreement (the
"Subsidiary Security Agreement"); and
(e) [other documents as applicable]
(ii) A certificate of the Secretary of the Company certifying as to (A) the
Certificate of Incorporation and bylaws of the Company and (B) resolutions
adopted on _______________ by the Board of Directors and shareholders of the
Company;
<PAGE>
(iii) Copies of those indentures, loan or credit agreements, leases,
guarantees, mortgages, security agreements, bonds, notes and other
agreements or instruments, and orders, writs, judgments, awards,
injunctions and decrees, which have been certified by the Secretary of the
Company as those documents which affect or purport to affect the Company's
right to borrow money under, or right to undertake and perform its
obligations under, the Documents (collectively, the "Other Agreements and
Court Orders"), a copy of which certificate is attached hereto as Exhibit
A, and
(iv) A certificate of the Secretary of State of the State of
, dated , attesting to the continued
corporate existence and good standing of the Company in that state.
We have also examined such other corporate documents and records, and other
certificates, opinions and instruments and have conducted such investigation as
we have deemed necessary as a basis for the opinions expressed below. As to
factual matters relevant to our opinions expressed below, we have, without
independent investigation, relied upon all of the foregoing, upon the factual
representations made by the Company in Article IV of the Agreement, upon
certificates of the officers of the Company and of public officials, and upon
public records.
Based upon and subject to the matters stated herein and upon such
investigation as we have deemed necessary, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the state of its incorporation, with
corporate power and authority to enter into the Agreement and to issue the
Note and incur the indebtedness to be evidenced thereby.
2. The Subsidiary is a corporation duly organized, validly existing,
and in good standing under the laws of the state of its incorporation, with
corporate power and authority to enter into the Documents to which it is a
party.
3. Each of the Documents to which the Company is a party has been duly
authorized by all required corporate action on the part of the Company, and
each of them has been duly executed and delivered by the Company, and
constitutes the legal, valid, and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
4. Each of the Documents to which the Subsidiary is a party has been
duly authorized by all required corporate action on the part of the
Subsidiary, and each of them has been duly executed and delivered by the
Subsidiary, and constitutes the legal, valid, and binding obligation of the
Subsidiary, enforceable against the Subsidiary in accordance with its terms.
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<PAGE>
5. The execution and delivery of the Documents and the performance by
the Company of its obligations thereunder, will not conflict with or result
in any breach of any of the provisions of, or constitute a default under,
or result in the creation or imposition of any lien or encumbrance upon any
of the properties of the Company pursuant to the provisions of (a) its
Certificate of Incorporation or bylaws, (b) any of the Other Agreements and
Court Orders, or (c) any law, rule, or regulation including without
limitation Regulation G, T, U or X of the Board of Governors of the Federal
Reserve.
6. The execution and delivery of the Documents and the performance by
the Subsidiary of its obligations thereunder, will not conflict with or
result in any breach of any of the provisions of, or constitute a default
under, or result in-the creation or imposition of any lien or encumbrance
upon any of the properties of the Subsidiary pursuant to the provisions of
(a) its Certificate of Incorporation or bylaws, (b) any of the Other
Agreements and Court Orders, or (c) any law, rule, or regulation including
without limitation Regulation G, T, U or X of the Board of Governors of the
Federal Reserve.
7. To the best of our knowledge, no consent, authorization, appraisal,
or other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other person, which has not been
obtained or taken, is required for the execution and delivery of, or the
performance by the Company or the Subsidiary of their respective
obligations under, each of the Documents.
8. Under applicable law, the Company's Certificate of Incorporation
and bylaws, and all contracts, agreements, or restrictions known by us to
bind the Company, the vote of the holders of a majority of the shares of
common stock of the Company is sufficient to elect the directors of the
Company, approve the merger, consolidation, or sale of substantially all of
the assets of the Company, or take any other action whatsoever.
9. The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
10. The Company is not a "holding company", or a "subsidiary company"
of a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
11. The Agreement creates a valid security interest in your favor as
security for the payment of the obligations of the Company under the
Agreement and the Note in all of the Company's right, title, and interest
in and to all personal property (the "Code Collateral") included within the
definition of the term Collateral (as defined in the Agreement) in which a
security interest can be granted under the UCC and Non-[opining
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jurisdiction] Codes (as such term is hereinafter defined)./1/ We have
examined the financing statements (the "Financing Statements") to be filed
in the filing offices listed on Annex I attached hereto (the "Filing
Offices") with respect to the security interests granted to Boston Chicken
pursuant to the Agreement, and upon the filing of such Financing Statements
in the Filing Offices, and assuming that the representations made in the
Agreement with respect to the location of the Code Collateral and the chief
executive office of the Company are and remain true and correct: (a) all
filings, registrations and recordings necessary to perfect the security
interest granted to you under such Agreement in respect of all Code
Collateral in which a security interest may be perfected by filing a
financing statement in the Filing Offices will have been accomplished; and
(b) the security interests granted to you pursuant to such Agreement in and
to such Code Collateral will be perfected to the extent that such security
interests may be perfected by filing financing statements in the Filing
Offices under the UCC and the Non-[opining jurisdiction] Codes.
12. The Subsidiary Security Agreement creates a valid security interest
in your favor as security for the payment of the obligations of the Company
under the Agreement and the Note in all of the Subsidiary's right, title,
and interest in and to all personal property (the "Code Collateral")
included within the definition of the term Collateral (as defined in the
Agreement) in which a security interest can be granted under the UCC and
Non-[opining jurisdiction] Codes (as such term is hereinafter defined)./2/
We have examined the financing statements (the "Financing Statements") to be
filed in the filing offices listed on Annex I attached hereto (the "Filing
Offices") with respect to the security interests granted to Boston Chicken
pursuant to the Subsidiary Security Agreement, and upon the filing of such
Financing Statements in the Filing Offices, and assuming that the
representations made in the Subsidiary Security Agreement with respect to
the location of the Code Collateral and the chief executive office of the
Subsidiary are and remain true and correct: (a) all filings, registrations
and recordings necessary to perfect the security interest granted to you
under such Subsidiary Security Agreement in respect of all Code Collateral
in which a security interest may be perfected by filing a financing
statement in the Filing Offices will have been accomplished; and (b) the
security interests granted to you pursuant to such Subsidiary Security
Agreement in and to such Code Collateral will be perfected to the extent
that such security interests may be perfected by filing financing statements
in the Filing Offices under the UCC and the Non-[opining jurisdiction]
Codes.
13. The Pledge Agreement creates a valid security interest in your
favor as security for payment of the Secured Obligations in the Collateral
(as such terms are defined in the Pledge Agreement). Assuming the continuous
possession at all times hereafter by you of the Pledged Shares (as defined
in the Pledge Agreement) which are evidenced by instruments or certificates,
the security interests created in your favor under
1* Opinion with respect to the perfection of security interests in Non-Opining
Jurisdictions is only required when the Company has code Collateral or its chief
executive office outside of the Non-Opining Jurisdiction.
2* Opinion with respect to the perfection of security interests in Non-Opining
Jurisdictions is only required when the Company has code Collateral or its chief
executive office outside of the Non-Opining Jurisdiction.
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the Pledge Agreement with respect to such Pledged Shares constitute
perfected security interests in such Pledged Shares.
In addition to any assumptions, qualifications and other matters set forth
elsewhere herein, the opinions set forth above are subject to the following:
(a) For the purposes of this opinion, we have assumed that the Code Collateral
exists and the Company and the Subsidiary have rights or title to each item
thereof, that all natural persons have legal capacity, that all items submitted
to us as originals are authentic and all signatures thereon are genuine, that
all items submitted to us as copies conform to the originals and each such
original or copy is complete and has been duly executed and delivered by each
party (other than the Company and the Subsidiary) pursuant to due authorization
as such party's legal, valid, and binding obligation, enforceable against such
party in accordance with its respective terms.
(b) Our opinion with respect to the legality, validity, binding effect, and
enforceability of any document or agreement is subject to the effect of any
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium, or similar law affecting creditors' rights generally and to the
effect of general principles of equity, including (without limitation) concepts
of materiality, reasonableness, good faith, and fair dealing (regardless of
whether considered in a proceeding in equity or at law).
(c) We call your attention to the following matters (as well as those matters
set out in paragraph (d) below) as to which we express no opinion:
(i) the Company's agreement in the Agreement to indemnify you against
costs, expenses, or liability notwithstanding your acts of gross negligence
or willful misconduct;
(ii) the Company's agreements in the Agreement for payment or
reimbursement of costs, fees, and expenses or indemnification for claims,
losses, or liabilities to the extent any such provision may be determined by
a court or other tribunal to be in an unreasonable amount, to constitute a
penalty, or to be contrary to public policy;
(iii) any of the waivers or remedies contained in the Documents,
whether or not any Document deems any such waiver or remedy commercially
reasonable, if such waivers or remedies are determined (1) not to be
commercially reasonable within the meaning of the UCC, (2) to conflict with
mandatory provisions under the UCC or other applicable law, or (3) to be
taken in a manner determined to be unreasonable or not performed in good
faith or with fair dealing or with honesty in-fact;
(iv) certain other provisions contained in the Documents which may be
limited or rendered ineffective by applicable laws or judicial decisions
governing such provisions or holding their enforcement to be unreasonable
under the then-existing circumstances, but
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such laws and judicial decisions do not, in our opinion, render the
Documents invalid as a whole or leave you without remedies; or
(v) the priority or continued perfection of any security interest or
lien granted by the Company to you under any of the Documents.
(d) Our opinions set forth in paragraph 8 above are subject to the
following further qualifications, exclusions and assumptions:
(i) Our opinions are qualified by and subject to:
(A) in the case of proceeds, continuation of perfection of your
security interest therein is limited to the extent set forth in Section
9-306 of the UCC;
(B) in the case of property which becomes collateral after the date
hereof, Section 547 of the United States Bankruptcy Code (the "Bankruptcy
Code") provides that a transfer is not made until the debtor has rights in
the property transferred, so a security interest in after-acquired property
which is security for other than a contemporaneous advance may be treated
as a voidable preference under the conditions (and subject to the
exceptions) provided by Section 547;
(C) Section 552 of the Bankruptcy Code limits the extent to which
property acquired by a debtor after the commencement of the case under the
Bankruptcy Code may be subject to a security interest arising from a
security agreement entered into by the debtor before the commencement of
such case; and
(D) Section 364 of the Bankruptcy Code provides that the extension of
secured credit after the commencement of a case under the Bankruptcy Code
requires court approval.
(ii) We express no opinion as to:
(A) the creation or perfection of any security interest in any
fixtures or property excluded from the provisions of the UCC pursuant to
9-104; and
(B) the perfection of any security interest in accounts that are an
obligation of the Federal government or any agency or political subdivision
thereof to the extent that any applicable laws require any actions in
addition to filing of the Financing Statements.
(iii) We have assumed with your permission that:
6
<PAGE>
(A) the Company has right, title, and interest in and to the
collateral pledged by it;
(B) all items of collateral (including, without limitation, money,
shares of capital stock, or additional instruments) pledged under the Pledge
Agreement, of which possession must be obtained and retained by a secured
party in order to perfect its security interest pursuant to Section 9-103
and 9-304 of the UCC, are in your actual or constructive possession and not
in the possession of the Company or any of its subsidiaries, affiliates, or
agents;
(C) all items of collateral constitute items which are mobile IN
NATURE and, if installed on any property, do not constitute fixtures; and
(D) none of the collateral consists of consumer goods, farm products,
crops, timber, minerals, or the like (including oil and gas), or accounts
resulting from the sale thereof, receivables due from any government or
agency or department thereof, beneficial interests in a trust or a
decedent's estate, letters of credit, inventory which is subject of any
negotiable documents of title, such as a negotiable bill of lading or
warehouse receipt held by anyone other than you or on your behalf, or items
which are subject to a requirement of any jurisdiction, including the State,
which provides for a registration or certificate of title or a filing other
than under the UCC.
Whenever our opinion with respect to the existence or absence of facts is
indicated to be based on our knowledge or awareness, we are referring solely to
the actual knowledge of the particular [firm name] attorneys who have
represented the Company in connection with the Documents. Except as expressly
set forth herein, we have not undertaken any independent investigation to
determine the existence or absence of such facts and no inference as to our
knowledge concerning such facts should be drawn from the fact that such
representation has been undertaken by us.
Our opinions expressed herein are limited to the laws of the State of [opining
jurisdiction], [the general corporation law of the state of the Company's and
Subsidiary's incorporation if different than the opining jurisdiction] and the
federal laws of the United States, and we do not express any opinion herein
concerning any other law except as expressly set forth in paragraph 8 above.
With respect to our opinions in paragraph 8, to the extent our opinions are not
governed by federal or [opining jurisdiction] law, our opinions are based solely
and exclusively on a review of Subsections 9-103(3), 9-203(1) and (2), 9-302(1),
9-303, 9-401(1) and 9-402(1) and (3) of the Uniform Commercial Codes as reported
by [Commerce Clearing House, Inc. in the Secured Transactions Guide for the
states listed on Annex I] (collectively, the states listed on Annex I are
sometimes referred to herein as the "Non-[opining jurisdiction] Jurisdictions"
and the Uniform Commercial Codes as adopted and in effect in such Non-[opining
jurisdiction] Jurisdictions are sometimes called the "Non-[opining jurisdiction]
Codes"). We have not reviewed, and we express no opinion on, local custom with
respect to, and any other sections
7
<PAGE>
of, the Non-[opining jurisdiction] Codes, including any provisions that are
referred to in the sections that we have reviewed which are noted above, nor
have we reviewed any other statutes of the Non-[opining jurisdiction]
Jurisdictions or judicial decisions construing or interpreting the laws of the
Non-[opining jurisdiction] Jurisdictions, including the Non-[opining
jurisdiction] Codes. By rendering the opinions set forth in paragraph 8 we do
not intend to indicate that we are experts on, or qualified to render opinions
on, the laws of the Non-[opining jurisdiction] Jurisdictions. Accordingly, we
caution you that the opinions in paragraph 8 could be materially affected by
local custom, other provisions of the Non-[opining jurisdiction] Codes, other
statutes, laws, or regulations of the Non-[opining jurisdiction] Jurisdictions
or judicial decisions of courts construing or interpreting the laws of the Non-
[opining jurisdiction] Jurisdictions, including the Non-[opining jurisdiction]
Codes.
This opinion is furnished to you solely in connection with the transactions
described above and may not be relied upon by you (and to the extent indicated
in the previous sentence, your counsel) for any other purpose or by any other
person in any manner or for any purpose.
Very truly yours,
8
<PAGE>
Annex I
UCC-l Financing Statement filings to perfect a security interest in collateral
not constituting fixtures:
State Filing Office Reporting Publication
- ----- ------------- ---------------------
9
<PAGE>
Exhibit A
---------
CERTIFICATE
-----------
The undersigned hereby certifies that he is the duly elected Secretary of
Progressive Bagel Concepts, Inc., a Delaware corporation (the "Company"), and
further certifies that the following documents are the only documents to which
the Company is a party that affect or purport to affect the Company's right to
borrow money under, or the Company's right to undertake and perform its
obligations under, the Documents (as defined in the Secured Loan Agreement,
dated , between the Company and Boston Chicken, Inc.)
Date: _____________________
___________________________________
Secretary
<PAGE>
EXHIBIT F-1
ACCOUNTING AND ADMINISTRATIVE SERVICES AGREEMENT
<PAGE>
Draft 03/13/95
PROGRESSIVE BAGEL CONCEPTS, INC.
BOSTON CHICKEN INC.
ACCOUNTING AND ADMINISTRATION SERVICES AGREEMENT
------------------------------------------------
This Accounting and Administration Services Agreement ("Agreement") is
made as of the day of March, 1995, by and between Progressive Bagel Concepts,
Inc., a Delaware corporation ("PBCI"), and Boston Chicken, Inc., a Delaware
corporation ("BCI").
Recitals
--------
1. PBCI desires that BCI assist it, its subsidiaries, and its and
their franchisees in maintaining certain accounting records, performing certain
accounting activities, preparing certain financial reports required for
financial reporting purposes, handling certain option administration functions,
and employee benefit, human resources, insurance, and recordkeeping services,
and providing certain other administrative support services.
2. BCI has agreed to enter into an agreement pursuant to which BCI
would perform such services for PBCI upon the terms and subject to the
conditions hereinafter provided.
Agreements
----------
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, as well as other good and valuable consideration,
the sufficiency and receipt of which is hereby acknowledged, the parties hereby
agree as follows:
1. Accounting Services.
--------------------
1.1 Upon the terms and subject to the conditions set forth in this
Agreement, BCI shall provide to PBCI for each retail bagel store location owned,
operated, or franchised by PBCI or any subsidiary of PBCI (each a "Unit"), to
PBCI as an entity, and to each franchise or subsidiary of PBCI as an entity
(each an "Entity"), the following accounting services (the "Services"):
<PAGE>
(a) per-Unit and per-entity calculation of revenue and expenses by
accounting category per BCI's standard chart of accounts;
(b) administration and maintenance of corporate payroll, and
administration of the processing of payroll and calculation of applicable tax
and other withholdings relating to the Units or Entities through BCI's
designated payroll service bureau;
(c) administration of accounts payable (including check generation)
for each Entity;
(d) administration of recurring cash transfers between PBCI's
applicable Unit and Entity bank accounts;
(e) administration and maintenance of a general ledger trial balance,
balance sheet, income statement and certain other Entity and Unit reports by
accounting category per BCI's standard chart of accounts and consistent with
periodic reports BCI customarily prepares in the normal course of business to
manage its financial affairs, and periodic distribution of such reports using
BCI's Report Distribution System;
(f) maintenance of all accounting records supporting PBCI's and each
other Entity's financial statements (consistent with BCI's record retention
program) in reasonable fashion separate and discrete from the accounting records
of BCI; and
(g) preparation of period end reconciliations and associated period
end journal entries for all balance sheet accounts.
1.2 The Services shall not include any of the following, each of which is
the sole responsibility of PBCI or such other Entity:
(a) selection of accounting policies to be applied to PBCI's or such
other Entity's books and records; however, BCI will consistently apply the
appropriate policies selected by PBCI or such other Entity;
(b) negotiation of terms and conditions between PBCI or such other
Entity and suppliers, vendors, and others, such as remittance due dates and
discounts;
(c) quarterly review and edit of PBCI's or such other Entity's vendor
masterfile for current and accurate data; however, BCI will appropriately apply
updates to the vendor masterfile as directed by PBCI or such other Entity;
2
<PAGE>
(d) signature and final release of trade accounts payable
disbursement checks in excess of $200,000;
(e) final review and approval of annual financial statements;
(f) cash investment activities; however, BCI will initiate
and manage repetitive and/or fixed cash management activities as directed in
writing by PBCI or such other Entity;
(g) approval and coding of invoices for disbursement;
(h) preparation of budgets (except that BCI will develop a
budget process and calendar to facilitate the preparation of annual budgets by
PBCI and each other Entity); and
(i) preparation, filing, or signing of any tax returns
required to be filed by PBCI or such other Entity, with the exception of sales
and use tax returns which will be prepared, but not, however, filed or signed by
BCI.
1.3 PBCI agrees to effectively apply locally the policies and
procedures defined in BCI's Accounting Manual (and in particular Accounting
Policy and Procedures Bulletin 93-13), as the same may be modified and updated
from time to time, on a timely basis and to cause each other Entity and Unit to
do the same, which actions and compliance shall be a condition to BCI's
obligations hereunder.
1.4 PBCI agrees to utilize BCI's designated auditors and tax
consultants for annual audit and tax return preparation activities and to cause
each other Entity and Unit to do the same.
1.5 PBCI agrees to utilize BCI's designated bankers (except for Unit
bank accounts) and credit card processor for all corporate cash management
activities and to cause each other Entity and Unit to do the same.
1.6 PBCI agrees to supply BCI all information, materials, data, and
documents necessary or advisable to properly perform the Services in such form,
format, or media as BCI may reasonably request, to make available the officers
of PBCI to answer any inquiries in connection therewith, and to cooperate with
BCI in the performance of its duties and to cause each other Entity and Unit to
do the same.
3
<PAGE>
2. Administrative Services.
------------------------
2.1 Upon the terms and subject to the conditions set forth in this
Agreement, BCI shall provide to PBCI, each other Entity and Unit the following
administrative services (the "Admin. Items").
(a) Bid, negotiate, establish, and administer health, dental,
disability, life, and 401K benefit programs and accounts on behalf of PBCI and
each other Entity for each covered employee thereof.
(b) Bid, negotiate, establish, and administer a Directors and
Officers Liability Insurance program annually on behalf of PBCI and each other
Entity.
(c) Bid, negotiate, establish, and administer property,
liability, umbrella, and related insurance programs annually on behalf of PBCI
and each other Entity.
(d) Bid, negotiate, establish, and administer a Workers
Compensation insurance program annually on behalf of PBCI and each other Entity.
(e) Perform claims administration for each of the above
insurance programs.
(f) Perform claims reduction programs for each of the above
insurance programs.
(g) Set up and administer option accounts, including option
grant summaries, vesting, and option exercise bookkeeping and administration for
optionees of PBCI.
(h) Set up and maintain human resources compliance files for
PBCI.
(i) Set up and maintain equipment and facilities listings.
2.2 PBCI agrees to supply BCI all information, materials, data, and
documents necessary or advisable to properly perform the Admin. Items in such
form, format, or media as BCI may reasonably request, to make available the
officers of PBCI to answer any inquiries in connection therewith, and to
cooperate with BCI in the performance of its duties and to cause each other
Entity and Unit to do the same.
4
<PAGE>
3. Fees for Services, Admin. Items, and Expense Reimbursement.
-----------------------------------------------------------
3.1 In consideration of the Services and Admin. Items, PBCI agrees
to pay to BCI accounting and administrative fees, as follows:
(a) a base fee for services to PBCI payable by PBCI for each
four-week accounting period of BCI ("Accounting Period") of $30,000 (the "Base
Fee") (provided, however, that the Base Fee shall be $10,000 per Accounting
Period until the end of BCI's 1995 second quarter and shall be $20,000 per
Accounting Period for each Accounting Period in BCI's 1995 third quarter) and a
supplemental base fee for services to each other Entity payable by PBCI for each
Accounting Period of $4,500 per such entity, which fees may be increased
cumulatively not more than 10% per fiscal year at the sole discretion of BCI
effective upon written notice thereof;
(b) a unit fee for each Unit open and operating during all or
any portion of such Accounting Period, which unit fee shall depend on the number
of Units directly owned by a single Entity, and shall be equal to $850 per
Accounting Period for each such directly owned Unit open and operating during
all or any portion of such Accounting Period, until the Entity directly owning
such Unit opens and operates twelve or more Units;
(c) after the Entity directly owning such Units opens its
twelfth Unit and prior to the opening of the thirtieth Unit directly owned by
such Entity, the fee payable by PBCI for each Accounting Period shall be the
Base Fee plus $750 for each such directly owned Unit open and operating during
all or any portion of such Accounting Period;
(d) after the Entity directly owning such Units opens its
thirtieth Unit and prior to the opening of the fiftieth Unit directly owned by
such Entity, the fee payable by PBCI for each Accounting Period shall be the
Base Fee plus $650 for each such directly owned Unit open and operating during
all or any portion of such Accounting Period;
(e) after the Entity directly owning such Units opens its
fiftieth Unit and prior to the opening of the hundredth Unit directly owned by
such Entity, the fee payable by PBCI for each Accounting Period shall be the
Base Fee plus $550 for each such directly owned Unit open and operating during
all or any portion of such Accounting Period;
(f) after the Entity directly owning such Units opens its
hundredth Unit and prior to the opening of the two hundredth Unit directly owned
by such Entity, the fee payable by PBCI for each Accounting Period shall be the
Base Fee plus $450 for each such directly owned Unit open and operating during
all or any portion of such Accounting Period; and
5
<PAGE>
(g) after the Entity directly owning such Units opens its two
hundredth Unit and for all Units opened thereafter directly owned by such
Entity, the fee payable by PBCI for each Accounting Period shall be the Base Fee
plus $350 for each such directly owned Unit open and operating during all or any
portion of such Accounting Period.
In the event that the Units and the Entity directly owning such Units meet
certain reporting requirements, administrative procedure compliance
requirements, and timeliness deadlines as BCI may establish and announce from
time to time in its sole discretion, the unit fees set forth in (b) through (g),
above shall be reduced for such complying Entity to $700, $600, $500, $400,
$300, and $250, respectively.
3.2 In addition to the payment of fees as specified in Section 3.1
of this Agreement, PBCI shall reimburse BCI for all non-ordinary, out-of-pocket
expenses incurred by BCI or its affiliates in connection with the Services and
Admin. Items rendered by BCI hereunder, including, but not limited to, travel
expenses, legal fees, fees of experts, audit fees, tax fees, payroll service
fees, etc. All non-ordinary, out-of-pocket expenses in excess of $50,000,
however, must be approved by PBCI prior to incurring such expense. Expenses
payable under this Section 3.2 shall be paid promptly in the manner specified
for vendor payments in the ordinary course of business pursuant to this
Agreement.
4. Term of Services.
-----------------
4.1 The term of this Agreement shall be for three years from the
effective date hereof unless the parties mutually agree to extend such term;
provided that either party hereto may terminate this Agreement during the term
upon 180 days' prior written notice to the other party; and provided further
that BCI may terminate this Agreement without notice and cease rendering the
Services and Admin. Items hereunder 15 days after notice of any non-payment of
the fees and expenses provided for herein when such fees and expenses are due
and payable, unless such non-payment is cured within such 15 day period.
4.2 Termination of this Agreement shall terminate BCI's obligations to
provide the Services and Admin. Items. Upon termination of this Agreement, PBCI
shall pay to BCI the fees due BCI in accordance with Section 3.1 hereof for the
Services and Admin. Items rendered by BCI through the date of termination and
reimburse BCI in accordance with Section 3.2 hereof for expenses incurred by BCI
in connection with the Services and Admin. Items rendered by BCI through the
date of termination. Upon termination of this Agreement, BCI will reasonably
cooperate with PBCI in the archiving and retrieval of records and transition of
services at PBCI's expense.
6
<PAGE>
5. Payment of Amounts due Hereunder; Liability
5.1 BCI will calculate and PBCI hereby authorizes BCI to collect
through electronic funds transfer, at the end of each Accounting Period, the
total dollar amount of all fees and expenses due to BCI hereunder.
5.2 BCI shall not be liable for any cost, damage, expense, or loss of
PBCI, its franchisees, or their owners, partners, shareholders, officers,
members, directors, employees, suppliers, or vendors, or any other person or
entity arising or resulting, directly or indirectly, from (i) the failure of BCI
to perform any of the Services or Admin. Items for PBCI, the other Entities, the
Units, or employees of any of them, hereunder or the misperformance of any such
Services or Admin. Items, except to the extent such failure to perform or such
misperformance is the result of BCI's willful misconduct or gross negligence, in
which event Company's liability shall not exceed its fee for such Services or
Admin. Items hereunder for the Accounting Period in question (plus, in the case
of employee theft or embezzlement, the limits of BCI's insurance applicable
thereto), or (ii) reliance by PBCI, the other Entities, the Units, or employees
of any of them on any data or advice BCI may provide pursuant to this Agreement.
In no event will BCI be liable for indirect, incidental, consequential, special,
speculative, exemplary, or punitive damages (including, but not limited to, loss
of revenue or profit).
5.3 BCI MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE SERVICES OR ADMIN. ITEMS PROVIDED HEREUNDER,
INCLUDING, BUT NOT LIMITED TO, THEIR ADEQUACY, QUALITY, PERFORMANCE,
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.
6. Miscellaneous.
-------------
6.1 In performing the Services and Admin. Items set forth in this
Agreement, BCI will have neither express nor implied power to execute agreements
on behalf of PBCI, the other Entities, or their employees, or in any manner bind
PBCI, the other Entities, or their employees, as to any matter not within the
scope of this Agreement.
6.2 All notices provided for in this Agreement shall be in writing
and shall be deemed to have been duly given if delivered personally or sent by
overnight express or facsimile transmission or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:
7
<PAGE>
If to PBCI:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd.
Suite 200
Golden, CO 80401
If to BCI:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Attention: Vice President - Accounting & Administration
Facsimile: (303) 384-5340
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally or by overnight express
courier or facsimile transmission shall be deemed to have been given on the date
it is so delivered, and any notice delivered by registered or certified mail
delivery service shall be deemed to have been duly given three business days
after it is sent to the intended recipient at the address set forth above.
6.3 THIS AGREEMENT SHALL BE CONSTRETED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS
THEREOF.
6.4 A failure of any party to insist in any instance upon the strict
and punctual performance of any provision of this Agreement shall not constitute
a continuing waiver of such provision. No party shall be deemed to have waived
any rights, power, or privilege under this Agreement or any provisions hereof
unless such waiver shall have been in writing and duly executed by the party to
be charged with such waiver, and such waiver shall be a waiver only with respect
to the specific instance involved and shall in no way impair the rights of the
waiving party or the obligations of the other party or parties in any other
respect or at any other time. If any provision of this Agreement shall be
waived, or be invalid, illegal, or unenforceable, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain binding and in full
force and effect.
6.5 This Agreement may be amended or modified only by a written
instrument signed by each of the parties hereto.
8
<PAGE>
6.6 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings, either oral or written, with respect
thereto.
6.7 Nothing contained in this Agreement is intended, nor shall it be
construed, to create any rights in any person not a party to this Agreement.
6.8 This Agreement may not be assigned by PBCI without the prior
written consent of BCI. This Agreement may not be assigned by BCI without the
prior written consent of PBCI, which will not be unreasonably withheld;
provided, that BCI may assign this agreement to any affiliate of BCI without the
prior written consent of PBCI.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PROGRESSIVE BAGEL CONCEPTS, INC.
By: _________________________
Title: _________________________
BOSTON CHICKEN, INC.
By: _________________________
Title: _________________________
Vice President
9
<PAGE>
EXHIBIT F-2
FINANCIAL SERVICES AGREEMENT
<PAGE>
DRAFT 3/13/95
PROGRESSIVE BAGEL CONCEPTS, INC.
BOSTON CHICKEN, INC.
FINANCIAL SERVICES AGREEMENT
----------------------------
This Financial Services Agreement ("Agreement") is made as of the day
of March, 1995, by and between Progressive Bagel Concepts, Inc., a Delaware
corporation ("PBCI"), and Boston Chicken, Inc., a Delaware corporation ("BCI").
Recitals
--------
1. PBCI desires that BCI assist it and its subsidiaries and its and
their franchisees in conducting certain financial related activities, including
advice regarding access to capital markets, financial analysis of proposed
transactions, budget and forecast preparation, consultation with respect to
presentations to and discussions with financial analysts, consultation with
respect to likely third party reaction to alternative transaction structures and
financial transactions and disclosures, consultation with respect to crisis
control, and other financial matters.
2. BCI is willing to enter into an agreement pursuant to which BCI
would perform the desired financial services for PBCI and its subsidiaries and
its and their franchisees upon the terms and subject to the conditions
hereinafter provided.
Agreements
----------
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, as well as other good and valuable consideration,
the sufficiency and receipt of which is hereby acknowledged, the parties hereby
agree as follows:
1. Financial Services.
------------------
1.1 Upon the terms and subject to the conditions set forth in this
Agreement, BCI shall provide to PBCI and its subsidiaries and its and their
franchisees the following financial services (the "Finance Services"):
(a) identification, delineation, and analysis of potential
financial transactions, including, but not limited to, proposed issuances of
debt or equity, bank credit relationships, and proposed mergers, consolidations,
sales or purchases of assets, acquisitions, divestures, dividends, stock splits
and reclassifications, and similar transactions ("Transactions");
<PAGE>
(b) financial advice relating to PBCI and its subsidiaries and
its or their franchisees or any Transaction;
(c) advice relating to negotiations, alternative structuring,
and strategy for proposed Transactions;
(d) assistance in budget and forecast preparation;
(e) consultations and advice as to presentations, discussions, and
disclosures to financial analysts and financial press;
(f) consultation and advice as to potential investor, shareholder,
and financial press perceptions and reaction to Transactions and proposed
disclosures; and
(g) advice concerning crisis management and control.
1.2 The Finance Services shall not include any of the following, each
of which is the sole responsibility of PBCI or its respective subsidiaries
or its or their franchisees:
(a) acting as an underwriter, broker, dealer, salesman, or agent
with respect to any issuance of securities;
(b) acting as an "investment advisor" as defined by the Investment
Advisors Act;
(c) legal advice;
(d) tax or accounting advice;
(e) performing bookkeeping, accounting, or auditing functions or
services; and
(f) drafting of securities disclosure materials.
1.3 PBCI agrees to consider, and to cause each of its subsidiaries and
its or their franchisees to consider, BCI's recommendation of investment
bankers, public relations consultants, press agents, and legal advisors for
financial services.
1.4 PBCI agrees to supply BCI all information, materials, data, and
documents necessary or advisable to properly perform the Finance Services in
such form, format, or media as BCI may reasonably request, to make available
the officers of PBCI to answer any inquiries in connection therewith, and to
cooperate with BCI in the performance of its duties and to cause each of its
subsidiaries and its or their franchisees to do the same.
2
<PAGE>
2. Fees for Finance Services.
-------------------------
2.1 In consideration of the Finance Services, PBCI agrees to pay
financial services fees of $500,000, payable in four quarterly installments on
the last day of each of BCI's 1995 fiscal quarters.
2.2 In addition to the payment of fees as specified in
Section 2.1 of this Agreement, PBCI shall reimburse BCI for all non-ordinary,
out-of-pocket expenses incurred by BCI or its affiliates in connection with the
Finance Services rendered by them hereunder, including, but not limited to,
travel expenses, legal fees, fees of experts, audit fees, tax fees, payroll
service fees, etc. All non-ordinary, out-of-pocket expenses in excess of
$50,000, however, must be approved by PBCI prior to incurring such expense.
Expenses payable under this Section 2.2 shall be paid promptly in the manner
specified for vendor payments in the ordinary course of business.
3. Term of Services.
----------------
3.1 The term of this Agreement shall be for three years from the
effective date hereof unless the parties mutually agree to extend such term;
provided that either party hereto may terminate this Agreement during the term
upon 180 days' prior written notice to the other party, and provided further
that BCI may terminate this Agreement without notice and cease rendering the
Finance Services hereunder 15 days after notice of any non-payment of the fees
and expenses provided for herein when such fees and expenses are due and
payable, unless such non-payment is cured within such 15 day period.
3.2 Termination of this Agreement shall terminate BCI's
obligations to provide the Finance Services. Upon termination of this Agreement,
PBCI shall pay to BCI the fees due BCI in accordance with Section 2.1 hereof for
the Finance Services rendered by BCI through the date of termination and
reimburse BCI in accordance with Section 2.2 hereof for expenses incurred by BCI
in connection with the Finance Services rendered by BCI through the date of
termination. Upon termination of this Agreement, BCI will reasonably cooperate
with PBCI in the archiving and retrieval of records and transition of services
at PBCI's expense.
4. Payment of Amounts Due Hereunder; Liability.
-------------------------------------------
4.1 BCI will calculate and PBCI hereby authorizes BCI to collect
through electronic funds transfer, at the end of any four-week accounting period
of BCI ("Accounting Period"), the total dollar amount of all fees and expenses
due to BCI hereunder not yet paid.
4.2 BCI shall not be liable for any cost, damage, expense, or
loss of PBCI, its franchisees, or their owners, partners, shareholders,
officers, members, directors, employees, suppliers, or vendors, or any other
person or entity arising or resulting, directly or indirectly, from (i) the
failure of BCI to perform any of the Finance Services for PBCI or its
subsidiaries, its or their franchisees, Units, or employees, hereunder or the
misperformance of any such Finance Services, except to the extent such failure
to perform or such misperformance is the result of
3
<PAGE>
BCI's willful misconduct or gross negligence, in which event BCI's liability
shall not exceed its proportionate fee for such Finance Services hereunder for
the Accounting Period in question, or (ii) reliance by PBCI or its subsidiaries,
its or their franchisees, Units, or employees on any data or advice BCI may
provide to PBCI or its subsidiaries, its or their franchisees, Units, or
employees pursuant to this Agreement. PBCI represents that it will make all
material financial decisions concerning itself, its subsidiaries, its and their
franchisees, disclosures, crisis response, and Transactions through the exercise
of independent business judgment of its directors, officers, and employees and
that BCI and its owners, directors, officers, employees, and agents have no
responsibility or liability therefor. In no event will BCI be liable for
indirect, incidental, consequential, special, speculative, exemplary, or
punitive damages (including, but not limited to, loss of revenue or profit).
4.3 BCI MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE FINANCE SERVICES PROVIDED HEREUNDER,
INCLUDING, BUT NOT LIMITED TO, THEIR ADEQUACY, QUALITY, PERFORMANCE,
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.
5. Miscellaneous.
--------------
5.1 In performing the Finance Services set forth in this Agreement,
BCI will have neither express nor implied power to execute agreements on behalf
of PBCI, its subsidiaries, its or their franchisees, or their employees, or in
any manner bind PBCI, its subsidiaries, its or their franchisees, or their
employees, as to any matter not within the scope of this Agreement.
5.2 All notices provided for in this Agreement shall be in writing
and shall be deemed to have been duly given if delivered personally or sent by
overnight express or facsimile transmission or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:
If to PBCI:
Progressive Bagel Concepts, Inc.
1526 Cole Boulevard, Suite 200
Golden, CO 80401
Attention: Chief Financial Officer
Facsimile: 303-202-3360
<PAGE>
If to BCI:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Attention: Chief Financial Officer
Facsimile: (303) 384-5512
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally or by overnight express
courier or facsimile transmission shall be deemed to have been given on the date
it is so delivered, and any notice delivered by registered or certified mail
delivery service shall be deemed to have been duly given three business days
after it is sent to the intended recipient at the address set forth above.
5.3 THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF.
5.4 A failure of any party to insist in any instance upon the strict
and punctual performance of any provision of this Agreement shall not constitute
a continuing waiver of such provision. No party shall be deemed to have waived
any rights, power, or privilege under this Agreement or any provisions hereof
unless such waiver shall have been in writing and duly executed by the party to
be charged with such waiver, and such waiver shall be a waiver only with respect
to the specific instance involved and shall in no way impair the rights of the
waiving party or the obligations of the other party or parties in any other
respect or at any other time. If any provision of this Agreement shall be
waived, or be invalid, illegal, or unenforceable, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain binding and in full
force and effect.
5.5 This Agreement may be amended or modified only by a written
instrument signed BY each of the parties hereto.
5.6 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings, either oral or written, with respect
thereto.
5.7 Nothing contained in this Agreement is intended, nor shall it be
construed, to create any rights in any person not a party to this Agreement.
5.8 This Agreement may not be assigned by PBCI without the prior
written consent of BCI. This Agreement may not be assigned by BCI without the
prior written consent of PBCI, which will not be unreasonably withheld;
provided, that BCI may assign this agreement to any affiliate of BCI without the
prior written consent of PBCI.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
PROGRESSIVE BAGEL CONCEPTS, INC.
By:
-----------------------------
Title:
--------------------------
BOSTON CHICKEN, INC.
By:
-----------------------------
Title: Vice President
6
<PAGE>
EXHIBIT F-3
REAL ESTATE SERVICES AGREEMENT
<PAGE>
DRAFT 3/13/95
PROGRESSIVE BAGEL CONCEPTS, INC.
BOSTON CHICKEN, INC.
REAL ESTATE SERVICES AGREEMENT
------------------------------
This Real Estate Services Agreement ("Agreement") is made as of the day
of March, 1995, by and between Progressive Bagel Concepts, Inc., a Delaware
corporation ("PBCI"), and Boston Chicken, Inc., a Delaware corporation ("BCI").
Recitals
--------
1. PBCI desires that BCI assist it and its subsidiaries and its and
their franchisees in conducting certain real estate related activities,
including site analysis, lease negotiations, purchase negotiations, zoning and
regulatory approval assistance, and lease maintenance.
2. PBCI and BCI have entered into that certain Computer and
Communication Systems Services Agreement of even date herewith relating to,
among other things, Real Estate Programs which are designed to assist PBCI and
its subsidiaries and its and their franchisees in conducting real estate
activities.
3. BCI has agreed to enter into an additional agreement pursuant to
which BCI would perform certain real estate services for PBCI and its
subsidiaries and its and their franchisees upon the terms and subject to the
conditions hereinafter provided.
Agreements
----------
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, as well as other good and valuable consideration,
the sufficiency and receipt of which is hereby acknowledged, the parties hereby
agree as follows:
1. Real Estate Services.
---------------------
1.1 Upon the terms and subject to the conditions set forth in this
Agreement, BCI shall provide to PBCI for each retail bagel store location
proposed to be owned, operated, leased, or franchised by PBCI or any subsidiary
of PBCI (each a "Unit") the following real estate services (the "RE Services"):
(a) advisory services regarding demographic analysis and
cannibalization studies for trade areas relating to proposed and established
Units;
<PAGE>
(b) advisory services regarding other real estate matters; and
(c) maintenance of lease files and compliance with reporting
obligations thereunder.
1.2 The RE Services shall not include any of the following, each of
which is the sole responsibility of PBCI or its respective subsidiaries or its
or their franchisees:
(a) preparation of ADI maps defining trade areas;
(b) initial site selection and screening;
(c) analysis of proposed sites for Units and the demographic,
location, traffic, regulatory, visibility, accessibility, and other relevant
characteristics thereof;
(d) business determinations relating to lease and/or purchase
negotiations;
(e) lease and/or purchase negotiations for proposed Unit Sites;
(f) environmental reports relating to proposed Unit sites;
(g) legal advice; and
(h) deposit and payment coding and compliance.
1.3 PBCI agrees to consider, and to cause each of its subsidiaries and
its or their franchisees to consider, BCI's recommended real estate brokers,
regulatory compliance expediters, and legal advisors for real estate services.
1.4 PBCI agrees to supply BCI all information, materials, data, and
documents necessary or advisable to properly perform the RE Services in such
form, format, or media as BCI may reasonably request, to make available the
officers of PBCI to answer any inquiries in connection therewith, and to
cooperate with BCI in the performance of its duties and to cause each of its
subsidiaries and its or their franchisees to do the same.
2. Fees for RE Services.
--------------------
2.1 In consideration of the RE Services, PBCI agrees to pay a general
real estate advisory fee of $5,000 per Unit, which fee may be increased
cumulatively not more than 10% per fiscal year at the sole discretion of BCI
effective upon written notice thereof. PBCI and its subsidiaries and its and
their franchisees shall also pay BCI's then applicable regular fees for customer
area trade studies, market development plans, and demographic and census
reports, charts, and maps. BCI's current charges for such services are attached
hereto as Exhibit A and are subject to change from time to time in BCI's sole
discretion.
2
<PAGE>
2.2 In addition to the payment of fees as specified in Section 2.1 of
this Agreement, PBCI shall reimburse BCI for all non-ordinary, out-of-pocket
expenses incurred by BCI or its affiliates in connection with the RE Services
rendered by them hereunder, including, but not limited to, travel expenses,
legal fees, fees of experts, audit fees, tax fees, payroll service fees, etc.
All non-ordinary, out-of-pocket expenses in excess of $50,000, however, must be
approved by PBCI prior to incurring such expense. Expenses payable under this
Section 2.2 shall be paid promptly in the manner specified for vendor payments
in the ordinary course of business.
3. Term of Services.
----------------
3.1 The term of this Agreement shall be for three years from the
effective date hereof unless the parties mutually agree to extend such term;
provided that either party hereto may terminate this Agreement during the term
upon 180 days' prior written notice to the other party; and provided further
that BCI may terminate this Agreement without notice and cease rendering the RE
Services hereunder 15 days after notice of any non-payment of the fees and
expenses provided for herein when such fees and expenses are due and payable,
unless such nonpayment is cured within such 15 day period.
3.2 Termination of this Agreement shall terminate BCI's obligations to
provide the RE Services. Upon termination of this Agreement, PBCI shall pay to
BCI the fees due BCI in accordance with Section 2.1 hereof for the RE Services
rendered by BCI through the date of termination and reimburse BCI in accordance
with Section 2.2 hereof for expenses incurred by BCI in connection with the RE
Services rendered by BCI through the date of termination. Upon termination of
this Agreement, BCI will reasonably cooperate with PBCI in the archiving and
retrieval of records and transition of services at PBCI's expense.
4. Payment of Amounts Due Hereunder; Liability.
4.1 BCI will calculate and PBCI hereby authorizes BCI to collect
through electronic funds transfer, at the end of each of BCI's regular four-week
accounting periods ("Accounting Period"), the total dollar amount of all fees
and expenses due to BCI hereunder.
4.2 BCI shall not be liable for any cost, damage, expense, or loss of
PBCI, its franchisees, or their owners, partners, shareholders, officers,
members, directors, employees, suppliers, or vendors, or any other person or
entity arising or resulting, directly or indirectly, from (i) the failure of BCI
to perform any of the RE Services for PBCI or its subsidiaries, its or their
franchisees, Units, or employees, hereunder or the misperformance of any such RE
Services, except to the extent such failure to perform or such misperformance is
the result of BCI's willful misconduct or gross negligence, in which event
Company's liability shall not exceed its fee for such RE Services hereunder for
the Accounting Period in question, or (ii) reliance by PBCI or its subsidiaries,
its or their franchisees, Units, or employees on any data or advice BCI may
provide to PBCI or its subsidiaries, its or their franchisees, Units, or
employees pursuant to this Agreement. In no event will BCI be liable for
indirect, incidental, consequential, special,
3
<PAGE>
speculative, exemplary, or punitive damages (including, but not limited to, loss
of revenue or profit).
4.3 BCI MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED,
WITH RESPECT TO THE RE SERVICES PROVIDED HEREUNDER, INCLUDING, BUT NOT LIMITED
TO, THEIR ADEQUACY, QUALITY, PERFORMANCE, MERCHANTABILITY, OR FITNESS FOR A
PARTICULAR PURPOSE.
5. Miscellaneous.
--------------
5.1 In performing the RE Services set forth in this Agreement, BCI will
have neither express nor implied power to execute agreements on behalf of PBCI,
its subsidiaries, its or their franchisees, or their employees, or in any manner
bind PBCI, its subsidiaries, its or their franchisees, or their employees, as to
any matter not within the scope of this Agreement.
5.2 All notices provided for in this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
overnight express or facsimile transmission or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:
If to PBCI:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd.
Suite 200
Golden, CO 80401
If to BCI:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Attention: Senior Vice President - Real Estate
Facsimile: (303) 384-5340
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally or by overnight express
courier or facsimile transmission shall be deemed to have been given on the date
it is so delivered, and any notice delivered by registered or certified mail
delivery service shall be deemed to have been duly given three business days
after it is sent to the intended recipient at the address set forth above.
5.3 THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF COLORADO
4
<PAGE>
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE
CONFLICT OF LAW PROVISIONS THEREOF.
5.4 A failure of any party to insist in any instance upon the strict
and punctual performance of any provision of this Agreement shall not constitute
a continuing waiver of such provision. No party shall be deemed to have waived
any rights, power, or privilege under this Agreement or any provisions hereof
unless such waiver shall have been in writing and duly executed by the party to
be charged with such waiver, and such waiver shall be a waiver only with respect
to the specific instance involved and shall in no way impair the rights of the
waiving party or the obligations of the other party or parties in any other
respect or at any other time. If any provision of this Agreement shall be
waived, or be invalid, illegal, or unenforceable, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain binding and in full
force and effect.
5.5 This Agreement may be amended or modified only by a written
instrument signed by each of the parties hereto.
5.6 This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof, and supersedes all prior
agreements and understandings, either or oral or written, with respect thereto.
5.7 Nothing contained in this Agreement is intended, nor shall it be
construed, to create any rights in any person not a party to this Agreement.
5.8 This Agreement may not be assigned by PBCI without the prior
written consent of BCI. This Agreement may not be assigned by BCI without the
prior written consent of PBCI, which will not be unreasonably withheld;
provided, that BCI may assign this agreement to any affiliate of BCI without the
prior written consent of PBCI.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PROGRESSIVE BAGEL CONCEPTS, INC.
By: ____________________________________
Title: ____________________________________
BOSTON CHICKEN, INC.
By: ____________________________________
Title: Vice President
5
<PAGE>
EXHIBIT F-4
COMPUTERS AND COMMUNICATION SYSTEMS SERVICES AGREEMENT
<PAGE>
PROGRESSIVE BAGEL CONCEPTS, INC.
BOSTON CHICKEN, INC.
COMPUTER AND COMMUNICATIONS SYSTEMS SERVICES AGREEMENT
------------------------------------------------------
THIS AGREEMENT is made and entered into this _____ day of March, 1995, by and
between PROGRESSIVE BAGEL CONCEPTS, INC., a Delaware corporation ("PBCI") and
BOSTON CHICKEN, INC., a Delaware corporation (hereinafter referred to as
"BCI").
Recitals
--------
WHEREAS, PBCI is in the business of owning, operating, and, directly or
indirectly, franchising retail units ("PBCI Units") involved in the sale of
bagels, pastries, coffees, juices, jams, spreads, and related items, and
WHEREAS, BCI has developed specifications and standards for computer hardware
and software and communications systems useful in the operation of PBCI, PBCI
Units, and PBCI subsidiaries and direct and indirect franchisees.
Covenants
---------
NOW, THEREFORE, it is agreed as follows.
1. DEFINITIONS.
------------
For purposes of this Agreement, the terms listed below have the meanings
that follow them.
"Affiliate" - An "affiliate" of a person/entity is another person/entity that
directly or indirectly controls, is controlled by, or is under common control
with, such person/entity. For purposes of this definition, "control" means the
power to direct or cause the direction of the management and policies of an
entity by contract or voting power.
"Computer System" - Those brands, types, makes, and/or models of
communications and computer systems or hardware specified or required from time
to time by BCI during the term of this Agreement for use by PBCI, PBCI's
subsidiaries, and its or their franchisees, and by, between, or among PBCI
Units, including, but not limited to:
(1) back office and point of sale systems, data, audio, video, and
voice storage, retrieval, and transmission systems for use at PBCI, PBCI's
subsidiaries, and its or their franchisees, and at PBCI Units, between or
among PBCI Units, and between and among PBCI Units and BCI and/or PBCI or
its subsidiaries and its or their franchisees;
<PAGE>
(2) printers; and
(3) archival and back-up systems.
"Data Center and Network Services" - Day-to-day operations and management of
the data center resources (including hardware, human resources, utilities, and
administrative overhead) necessary to run the Infrastructure Programs (as
defined below) and Support/Control Programs (as defined below) at the BCI
Support Center.
"Infrastructure Programs" - The computer software programs developed by or for
the Company to collect, interface, validate, store, maintain, and/or report data
to and from PCBI, PCBI's subsidiaries, its or their franchisees, and/or PCBI
units. This may include general utilities to monitor and maintain PCBI's user
and computing environment, including voice and data networks.
"Licensed Program" - The retail store-level computer software programs (other
than the Support/Control Programs (as defined below)) developed by or for BCI
and designated during the term of this Agreement by BCI from time to time as
specified or required in connection with utilization of the Computer System,
which may include, without limitation, BCI's required point-of-sale,
bookkeeping, inventory, training, marketing, employee selection, operations and
financial information, collection and retrieval systems (including BCI's
required standard chart of accounts prescribed by BCI from time to time) for use
in connection with the operation of PBCI Units or the businesses of PBCI, its
subsidiaries, and its or their franchisees, including any updates, supplements,
modifications, or enhancements thereto made from time to time, all related
documentation, the tangible media upon which such programs are recorded, and the
database file structure thereof, but excluding any data or databases owned or
compiled by BCI or its Affiliates for use with the Licensed Program or otherwise
or any data generated by the use of the Licensed Program. The Licensed Program
includes, but is not limited to, store-level programs utilized by the Units for
POS and Cash Management, Customer Feedback Kiosks, Inventory Management, Order
Processing, Employee Feedback, Production Scheduling, Labor Scheduling, Ideal
Food Cost, Store Operations, and Smart Form Reporting.
"Specified Software" - Such software (other than the Licensed Program and
Support/Control Programs), programming, and services which BCI from time to time
specifies or requires for use by PBCI, its subsidiaries, its or their
franchisees, or PBCI Units in connection with utilization of the Computer
System, the Licensed Program and the Support/Control Programs.
"Support/Control Programs" - The computer software programs developed by or
for BCI and designated during the term of this Agreement by BCI from time to
time as specified or required in connection with real estate services and other
real estate functions performed by BCI pursuant to that certain Real Estate
Services Contract with PBCI of even date herewith or in connection with support,
supervision, reporting, or control of the Units by PBCI, its subsidiaries, and
its and their franchisees, and in connection with analysis, tracking,
maintenance, feedback, and
2
<PAGE>
communication functions related thereto or to the employees thereof, including,
but not limited to, Notes Databases, Structured Reporting, and related software.
2. COMPUTER SYSTEM AND SPECIFIED SOFTWARE.
2.A. ACQUISITION OF COMPUTER SYSTEM AND SPECIFIED SOFTWARE.
Within one hundred twenty (120) days after the date of this Agreement, PBCI
shall, and shall cause each of its subsidiaries and its and their franchisees
(promptly upon becoming such) to, (i) acquire the Computer System and acquire
the right to use, for the remainder of the term of this Agreement, the Specified
Software in the manner specified by BCI; (ii) obtain any and all peripheral
equipment and accessories and arrange for any and all support services that may
be necessary to enable the Computer System, the Licensed Program, the
Support/Control Programs, and the Specified Software to operate as specified by
BCI, and (iii) take all other actions (including but not limited to installation
of electrical wiring and cabling, and temperature and humidity controls) that
may be necessary to prepare the location of the Computer System so as to enable
the Computer System, the Licensed Program, the Support/Control Programs, and the
Specified Software to operate as specified by BCI, and (iv) commence using the
Computer System, the Licensed Program, the Support/Control Programs, and the
Specified Software in the manner specified by BCI. PBCI shall be responsible for
all costs associated with the foregoing, including but not limited to
transportation; installation; sales, use, excise and similar taxes; and site
preparation, and BCI shall have no liability to PBCI or to any other party in
connection with any of the foregoing. Notwithstanding the foregoing provisions
of this Section 2.A., in the event any subsidiary, franchisee, or PBCI Unit is
acquired from one or more third parties as an operating business and utilizes at
the time of acquisition a computer system, POS terminals, or other components of
a computer and communications system other than the Computer System, compliance
with this Section 2.A. shall not be required prior to the sixth month
anniversary of such acquisition.
2.B. COVENANT TO USE ONLY SPECIFIED SOFTWARE, LICENSED PROGRAM, AND THE
SUPPORT/CONTROL PROGRAMS.
PBCI acknowledges that operating non-Specified Software on the Computer System
with the Specified Software and/or the Licensed Program and Support/Control
Programs may cause errors or other interruptions to or problems with the
Specified Software and/or Licensed Program. Therefore, PBCI hereby agrees to
operate, and to cause its subsidiaries and its and their franchisees to operate,
only Specified Software, the Licensed Program, and the Support/Control Programs
on the Computer System.
2.C. MODIFICATION, ENHANCEMENTS AND REPLACEMENT OF COMPUTER SYSTEM AND
SPECIFIED SOFTWARE.
PBCI acknowledges that BCI may, during the term of this Agreement, require
PBCI, its subsidiaries, and its and their franchisees to modify, enhance and/or
replace all or any part of the
3
<PAGE>
Computer System and/or the Specified Software at their expense, and agrees,
within one hundred twenty (120) days of receipt of notice from BCI, to acquire,
or acquire the right to use for the remainder of the term of this Agreement, and
to cause its subsidiaries and its of their franchisees to so acquire, the
modified, enhanced, or replacement version of the Computer System and/or
Specified Software specified by BCI and to take any and all other actions as may
be necessary to enable the modified, enhanced, or replacement Computer System
and/or Specified Software, as well as the Licensed Program and the
Support/Control Programs to operate as specified by BCI. Any such modifications,
enhancements, and replacements may require PBCI and its subsidiaries and its or
their franchisees to incur costs to purchase, lease, and/or license new or
modified computer hardware and/or software or other equipment and to obtain
different and/or additional service and support services during the term of this
Agreement. PBCI acknowledges that BCI cannot estimate the costs of future
enhancements, modifications, and replacements to the Computer System or the
Specified Software and that the cost to PBCI and its subsidiaries and its or
their franchisees of obtaining the enhancements, modifications, and replacements
to the Computer System, Licensed Program, Support/Control Programs, or Specified
Software may not be fully amortizable over the remaining term of this
Agreement. Nonetheless, PBCI agrees to incur, and to cause its subsidiaries and
its or their franchisees to incur, such costs in connection with the Computer
System, the Licensed Program, the Support/Control Programs, and the Specified
Software and any enhancements or modifications thereto and any replacements
therefor. Within one hundred twenty (120) days after PBCI receives notice from
BCI, PBCI and its subsidiaries and its or their franchisees shall obtain and
implement any such modifications, enhancements, or replacements which BCI
designates and requires. BCI agrees to discuss modifications, enhancements, or
replacements hereunder which would require material expenditures by PBCI
(outside of the normal course of business) with PBCI so as to enable PBCI to
assess the need therefor and opportunity to make alternative suggestions or seek
renegotiation of this Agreement, provided that this sentence shall not prevent
any modification, enhancement, or replacement which BCI shall determine is not
frivolous and shall not delay any such modification, enhancement, or replacement
more than 30 days from the date otherwise required by this Section 2.C. PBCI
agrees that any modification, enhancement, or replacement which is substantially
similar to that being required by BCI of its own area developers, subsidiaries,
franchisees, or Boston Chicken/Boston Market stores is not frivolous.
3. LICENSED PROGRAM AND SUPPORT/CONTROL PROGRAMS.
3.A. GRANT OF LICENSE.
BCI hereby grants to PBCI and to any of PBCI's subsidiaries or its or their
franchisees similarly agreeing to be bound by the terms and conditions of this
Agreement a nonexclusive, nontransferable, nonassignable license to use the
Licensed Program and the Support/Control Programs subject to the following terms
and conditions:
(1) The Licensed Program and the Support/Control Programs shall be installed
and tested on the Computer System by BCI or its designee. If PBCI, its
subsidiaries, or its or their franchisees do not purchase the Computer
System from BCI, such entity must pay BCI a reasonable installation and
testing fee upon completion of
4
<PAGE>
BCI's installation and testing of the operation of the Licensed Program
and the Support/Control Programs with the Computer System. PBCI
acknowledges and agrees the current installation and testing fee of
$3,500.00 per Computer System is reasonable.
(2) Except with the prior written consent of BCI, the Licensed Program and
the Support/Control Programs shall not be operated by persons other than
PBCI, its subsidiaries, or its or their franchisees and their respective
employees, shall not be operated on equipment other than the Computer
System, shall not be used in conjunction with any other computer
applications program, and shall not be operated at locations other than
PBCI Units and the principal office of PBCI, its subsidiaries, and its or
their franchisees, provided, however, that with prior notice to BCI, the
Licensed Program and the Support/Control Programs may be operated on
equipment other than the Computer System and at a location other than as
required above to the extent required due to malfunction of the Computer
System or other cause beyond the reasonable control of PBCI, its
subsidiaries, and its or their franchisees, but not for any period longer
than seven (7) consecutive days unless otherwise agreed in writing by
BCI.
(3) The Licensed Program and the Support/Control Programs shall be used in
connection with operation of PBCI, its subsidiaries, its and their
franchisees, and the PBCI Units and shall not be used for any other
purpose.
(4) Without limiting the foregoing, PBCI shall not, and shall not allow its
subsidiaries, its or their franchisees, or their respective employees or
agents to: (a) sell, assign, lease, sublicense, pledge, grant a security
interest with respect to, market, or commercially exploit, in any way,
the Licensed Program or Support/Control Programs or any component
thereof, or any data generated by the use of the Licensed Program or
Support/Control Programs or any component thereof, (b) disclose or grant
access to the Licensed Program or Support/Control Programs, or any data
generated by the use of the Licensed Program or Support/Control Programs
or any component thereof, to any third party other than one to whom BCI
has consented in writing and who has agreed in writing with BCI to keep
the Licensed Program or Support/Control Programs confidential; (c) copy
or reproduce the Licensed Program or Support/Control Programs, or any
data generated by the use thereof or any component of the Licensed
Program or Support/Control Programs, in any manner, except to the extent
necessary for normal back-up and operating thereof; or (d) alter, modify,
or adapt the Licensed Program or Support/Control Programs, any
documentation relating thereto, or any component of the Licensed Program
or Support/Control Programs, including, but not limited to, translating,
decompiling, reverse engineering, or disassembling the Licensed Program
or Support/Control Programs.
(5) PBCI acknowledges and agrees that the Licensed Program and
Support/Control Programs and any data generated by the use of the
Licensed Program and
5
<PAGE>
Support/Control Programs is the valuable, proprietary property and trade
secret of BCI and/or its Affiliates, and PBCI agrees to use, and to cause
its subsidiaries and its or their franchisees and their respective
employees or agents to use, the utmost care to safeguard the Licensed
Program and Support/Control Programs and any data generated by the use of
the Licensed Program and Support/Control programs and to maintain the
copyright protection and the secrecy and confidentiality thereof. PBCI
shall not, and shall cause its subsidiaries and its or their franchisees
to not, undertake to patent, copyright, or otherwise assert proprietary
rights to the Licensed Program and Support/Control Programs and any data
generated by the use of the Licensed Program and Support/Control Programs
or any portion thereof. PBCI recognizes that all or part of the Licensed
Program and Support/Control Programs and any data generated by the use of
the Licensed Program and Support/Control Programs may be copyrighted and
agrees that this shall not be construed as causing the copyrighted
material to be public information. PBCI will ensure, and cause its
subsidiaries and its and their franchisees to ensure, that all copies of
the Licensed Program and Support/Control Programs and any data generated
by the use of the Licensed Program and Support/Control Programs or any
components of the Licensed Program and Support/Control Programs in its
possession contain an appropriate copyright notice under the Universal
Copyright Convention or other notice of proprietary rights specified by
BCI.
(6) PBCI shall promptly disclose, and cause its subsidiaries and its and
their franchisees to disclose, to BCI all ideas and suggestions for
modifications or enhancements of the Licensed Program and Support/Control
Programs conceived or developed by any of them, and BCI and its
Affiliates shall have the right to use and license such ideas and
suggestions. All modifications and enhancements made to the Licensed
Program and Support/Control Programs together with the copyright therein
shall be the property of BCI, without regard to the source of the
modification or enhancement, and PBCI hereby assigns, and shall cause
each of its subsidiaries and its or their franchisees to assign, all of
its right, title, and interest in any ideas, modifications, and
enhancements to BCI. PBCI agrees to execute, and to cause each of its
subsidiaries and its or their franchisees to execute, any document, in
recordable form, which BCI determines is necessary to reflect such
ownership.
(7) BCI shall have the right at all times to access the Licensed Program and
Support/Control Programs and to retrieve, analyze, and use all data in
the files for the Licensed Program and Support/Control Programs.
(8) BCI shall provide to PBCI and all of its subsidiaries and its or their
franchisees all upgrades, modifications, improvements, enhancements,
extensions, and other changes to the Licensed Program and Support/Control
Programs approved by BCI for use in connection with the operation of PBCI
Units, and PBCI and all of its subsidiaries and its or their franchisees
shall promptly implement their use. BCI may charge fees in addition to
those set forth in Section 3.B hereof.
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(9) Upon expiration or termination of this Agreement, PBCI shall allow BCI's
employees or agents to remove the Licensed Program and Support/Control
Programs from the Computer System, shall immediately return the Licensed
Program and Support/Control Programs, each component thereof, and any
data generated by the use of the Licensed Program and Support/Control
Programs to BCI, and shall immediately destroy any and all back-up or
other copies of the Licensed Program and Support/Control Programs or
parts thereof, documentation for the Licensed Program and Support/Control
Programs, and any data generated by the use of the Licensed Program and
Support/Control Programs, and other materials or information which relate
to or reveal the Licensed Program and Support/Control Programs and its
operation and any data generated by the use of the Licensed Program and
Support/Control Programs and shall cause each of its subsidiaries and its
or the franchisees to do the same.
3.B. LICENSED PROGRAM AND SUPPORT/CONTROL PROGRAMS FEES.
---------------------------------------------------
PBCI agrees to pay, and to cause each of its subsidiaries and its or their
franchisees to pay, to BCI upon installation of the Licensed Program on its
Computer System or the Computer System of any PBCI Unit, a Licensed Program fee
(the "Licensed Program Fee") in the amount of Fifteen Thousand Dollars
($15,000.00). The Licensed Program Fee shall be fully earned by BCI upon
installation of the Licensed Program on the Computer System and is non-
refundable in whole or in part.
PBCI agrees to pay, and to cause each of its subsidiaries and its or their
franchisees to pay, to BCI upon installation of the Real Estate Programs and
annually thereafter software licensing fees as follows:
(a) an annual fee of $78,000 for that portion of the Support/Control Programs
comprised of the Real Estate Workbench and ancillary reporting software ("REW
Software"), Property Administration software (Property Administration
Software"), Real Estate Log ("REL Software"), and Site Pack and other real
estate software ("SPO Software").
(b) an annual fee of $78,000 for the following Lotus Notes Database templates:
- Mail
- Project Office
- Competitive Analysis
- Customer Response
- Purchase Order
- S.E.T. Request
- Report Distribution System
- Accounting Manual
- People Directory
- Store Directory
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- Personnel
- QSC History
- Employee Feedback
(c) an annual fee of $78,000 for Structured Report Software for Monitoring
and Distributions, Summary Financial, Customer Feedback, Employee Feedback, and
Product Information.
Such licensing fee shall be fully earned by BCI upon payment and is non-
refundable in whole or in part.
3.C. DATA CENTER AND NETWORK SERVICE FEES.
PBCI agrees to pay to BCI 1% of the system-wide revenue of PBCI, its
subsidiaries, and its and their franchisees for ongoing Data Center and Network
Service Operations and support of the Infrastructure Programs through the end of
BCI's 1997 fiscal year, .8% of such system-wide revenue in BCI's 1998 fiscal
year, and .7% of such system-wide revenue in BCI's 1999 fiscal year.
3.D. SOFTWARE SUPPORT SERVICE.
During the term of this Agreement and, provided that PBCI and each of its
subsidiaries and its and their franchisees is in compliance with the terms of
this Agreement, BCI shall provide such support services as BCI deems reasonably
necessary to cause the Licensed Program and Support/Control Programs to perform
on the Computer System in accordance with the standards for the Licensed Program
and Support/Control Programs as specified from time to time by BCI. Such support
services shall not extend to (i) error corrections, operational support, and
assistance resulting from impermissibly operating non-Specified Software on the
Computer System in breach of this Agreement, (ii) software training, or (iii)
hardware maintenance. Such support service shall include non-procedural Help
Desk calls. All procedural Help Desk calls will be handled by BCI for a $25 per
call fee.
3.E. SOFTWARE SUPPORT SERVICE FEES.
For the software support service provided by BCI, PBCI agrees to pay, and
shall cause each of its subsidiaries and its or their franchisees to pay, to BCI
a software support service fee ("Licensed Program Support Fee") in the amount of
Three Hundred and Twenty Three Dollars ($323.00) for each of BCI's four-week
Accounting Periods ("Accounting Period") for each installed copy of the Licensed
Program, whether at its principal office, the offices of its subsidiaries or its
or their franchisees or at PBCI Units owned directly by it. This support and
this fee shall not include modifications, enhancements, and replacements within
the meaning of Section 3.F hereof.
For the software support service relating to the Support/Control Programs
provided by BCI, no additional fee will be charged. In the event PCBI, its
subsidiaries, or its or their
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franchisees request, and BCI, in its sole discretion, determines to perform,
other support services (e.g. software training, hardware maintenance) not
provided for in Sections 3.C, 3.D, or 3.F hereof, BCI will charge the requesting
entity $75 per hour, plus expenses, for such support services.
PBCI and its subsidiaries and its and their franchisees shall also pay
BCI's then applicable regular fees for customer area trade studies, market
development plans, and demographic and census reports, charts, and maps. All
such fees referenced herein shall be payable in advance for each period on or
before the eighth (8th) day prior to commencement of such period commencing on
the installation of the Licensed Program or the Support/Control Programs or
relevant portion thereof on the Computer System. The Licensed Program Support
Fee and Support/Control Fees may be increased by BCI from time to time, at its
sole option, upon written notice to PBCI, subject to any limitation set forth in
this Agreement.
3.F. MODIFICATION, ENHANCEMENT, AND REPLACEMENT OF LICENSED PROGRAM
--------------------------------------------------------------
AND SUPPORT/CONTROL PROGRAMS.
-----------------------------
PBCI acknowledges that BCI may, during the term of this Agreement, require
PBCI and its subsidiaries and its or their franchisees to modify, enhance and/or
replace all or any part of the Licensed Program and Support/Control Programs at
their expense, and shall, and shall cause each of its subsidiaries and its or
their franchisees, within one hundred twenty (120) days of receipt of notice
from BCI, to acquire, or acquire the right to use for the remainder of the term
of this Agreement, the modified, enhanced or replacement version of the Licensed
Program and Support/Control Programs specified by BCI and to take any and all
other actions as may be necessary to enable the modified, enhanced, or
replacement Licensed Program and Support/Control Programs to operate as
specified by BCI. Any such modifications, enhancements, and replacements may
require additional costs to purchase, lease, and/or license new or modified
computer hardware and/or software or other equipment and to obtain different
and/or additional service and support services during the term of this
Agreement. PBCI acknowledges that BCI cannot estimate the costs of future
enhancements, modifications, and replacements to the Licensed Program and
Support/Control Programs, and that the cost of obtaining the enhancements,
modifications, and replacements to the Licensed Program and Support/Control
Programs may not be fully amortizable over the remaining term of the Agreement.
Nonetheless, PBCI agrees to incur, and to cause its subsidiaries and its or
their franchisees to incur, such costs in connection with the Licensed Program
and Support/Control Programs and any enhancements or modifications thereto and
any replacements therefor. Within one hundred twenty (120) days after PBCI
receives notice from BCI, PBCI shall obtain and implement, and cause its
subsidiaries and its or their franchisees, to obtain and implement, any such
modifications, enhancements, or replacements which BCI designates and requires.
In addition to such modifications and enhancements to the Licensed Program and
Support/Control Programs as BCI may determine from time to time to require, PBCI
and its subsidiaries and its and their franchisees may request BCI to perform
additional modifications and enhancements. In the event that BCI agrees to
perform or supply such optional requested modifications or enhancements, the
requesting entity agrees to pay BCI such sum as may be agreed or, in the event
no such payment agreement is reached, BCI's aggregate costs (including
allocation of overhead,
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plus 30%, with an annual maintenance fee of 5% of such amount, and to otherwise
abide by this Agreement as if such modification or enhancement were part of the
software licensed hereby. Any such enhancement or modification shall be the
property of BCI.
3.G. WARRANTIES AND LIMITATION OF LIABILITY.
--------------------------------------
BCI represents and warrants to PBCI that: (1) BCI has all rights, titles,
licenses, and authorizations to license the Licensed Program and Support/Control
Programs to PBCI, subject only to nonexclusive licenses granted to others, and
(2) the Licensed Program and Support/Control Programs do not, and as a result of
any enhancements, improvements, or modifications provided by BCI will not, to
the best of BCI's knowledge, infringe upon any United States patent, copyright,
or other proprietary right of any third party. In the event use of the Licensed
Program or Support/Control Programs or any portion thereof as provided by BCI is
enjoined as a result of a claim by a third party of patent or copyright
infringement or violation of proprietary rights, BCI shall, in its sole
discretion, either (i) procure for PBCI and its subsidiaries and its and their
franchisees utilizing such allegedly infringing software the right to continue
use of the Licensed Program or Support/Control Programs or any portion thereof
as contemplated hereunder, or (ii) replace the Licensed Program or Support/
Control Programs or any portion thereof or modify it such that there is no
infringement of the third party's rights; and such action by BCI shall be the
sole and exclusive remedy against BCI in such event by PBCI and its subsidiaries
and its and their franchisees.
BCI does not represent or warrant, and expressly disclaims any warranty
that the Licensed Program or Support/Control Programs or Data Center and Network
Services (or Infrastructure Programs) or any portion thereof is error-free or
that the operation and use of the Licensed Program or Support/Control Programs
or Data Center and Network Services (or Infrastructure Programs) or any portion
thereof will be uninterrupted or error-free. BCI shall have no obligation or
liability for any expense or loss incurred arising from use of the Licensed
Program or Support/Control Programs or Data Center and Network Services (or
Infrastructure Programs) or any portion thereof in conjunction with any other
computer program.
EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTIES, BCI MAKES NO WARRANTIES,
EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THE LICENSED PROGRAM,
SUPPORT/CONTROL PROGRAMS, DATA CENTER AND NETWORK SERVICES (OR INFRASTRUCTURE
PROGRAMS), SUPPORT SERVICES, PROGRAM DOCUMENTATION THEREFOR, OR ANY OTHER
MATERIAL FURNISHED HEREUNDER, OR ANY COMPONENT THEREOF AND THERE ARE EXPRESSLY
EXCLUDED ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
WITH RESPECT THERETO.
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4. AGREEMENT TO BE BOUND BY THE TERMS OF SUBCOMPONENT LICENSES AND
---------------------------------------------------------------
THIRD-PARTY LICENSES.
--------------------
PBCI acknowledges that the Licensed Program and Support/Control Programs
contain third-party sub-components which BCI has the authority to license to
PBCI, its subsidiaries, and its and their franchisees as part of the Licensed
Program and Support/Control Programs pursuant to and in accordance with software
license agreements with such third-party vendors (collectively, the
"Subcomponent Licenses"). In addition, PBCI acknowledges that acquisitions by
PBCI, its subsidiaries, and its and their franchisees of all or portions of the
Computer System and the Specified Software from or through BCI are governed by
license or other agreements by and between third-party vendors and BCI, which
agreements specifically permit BCI to so sell and/or sublicense all or portions
of the Computer System and the Specified Software to PBCI, its subsidiaries, and
its or their franchisees or specifically require PBCI, its subsidiaries, and its
and their franchisees to agree to be bound by the terms thereof (either type of
license hereinafter referred to as the "Third Party Licenses"). PBCI therefore
hereby agrees, and agrees to cause its subsidiaries and its and their
franchisees, to be bound by the terms of each Subcomponent License and, to the
extent PBCI, its subsidiaries, and its and their franchisees purchases all or
portions of the Specified Software or the Computer System from or through BCI,
each relevant Third Party License, in each case as if PBCI, its subsidiaries,
and its and their franchisees was a party thereto, and agrees that the vendors
and licensors of all or portions of the Specified Software and the Computer
System and the licensors of all or portions of the Licensed Program and
Support/Control Programs (collectively, the "Vendors") are third-party
beneficiaries of this Agreement with full rights to enforce this Agreement as it
pertains to the purchased items and the Licensed Program and Support/Control
Programs. PBCI further agrees to indemnify and hold harmless BCI and each of the
Vendors from and against all costs, expenses, and damages arising out of or
based upon any breach or claim of a breach of this Agreement, the Third Party
Licenses, or Subcomponent Licenses by PBCI, its subsidiaries, and its and their
franchisees, or their respective directors, officers, employees, agents and
owners.
5. COPYRIGHTS.
-----------
5.A. OWNERSHIP OF COPYRIGHTS.
-----------------------
PBCI and BCI acknowledge and agree that (1) BCI may hereby authorize PBCI,
its subsidiaries, and its and their franchisees to use certain copyrighted or
copyrightable works (the "Copyrighted Works"), including the Licensed Program
and Support/Control Programs, (2) the Copyrighted Works are the valuable
property of BCI or its Affiliates, and (3) the rights of PBCI, its subsidiaries,
and its and their franchisees to use the Copyrighted Works are granted solely on
the condition that PBCI, its subsidiaries, and its and their franchisees comply
with the terms of this Section 5. PBCI acknowledges and agrees that BCI owns or
is the licensee of the owner of the Copyrighted Works and will further create,
acquire, or obtain licenses for certain copyrights in various works of
authorship used in connection with the operation of the Licensed Program and
Support/Control Programs, including, but not limited to, all categories of works
eligible for protection under the United States copyright law, all of which
shall be deemed to be Copyrighted Works under this Agreement. Such Copyrighted
Works include, but are not limited
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to, the manuals and other materials and information provided by BCI for use in
the operation of the Licensed Program and Support/Control Programs. BCI intends
that all works of authorship related to the Licensed Program and Support/Control
Programs which are created in the future will be owned by it or its Affiliates.
5.B. LIMITATION ON USE OF COPYRIGHTS.
-------------------------------
PBCI acknowledges that the right to use the Copyrighted Works pursuant to
this Agreement is limited to the use of such Copyrighted Works during the term
of this Agreement pursuant to and in compliance with this Agreement and all
applicable standards, specifications, and operating procedures prescribed by BCI
from time to time during the term of this Agreement, and is derived solely from
this Agreement. PBCI shall ensure, and shall cause its subsidiaries and its and
their franchisees to ensure, that all copies of Copyrighted Works used hereunder
shall bear an appropriate copyright notice under the Universal Copyright
Convention or other copyright laws prescribed by BCI specifying that BCI or an
Affiliate of BCI is the owner of the copyright. Any unauthorized use,
adaptation, publication, reproduction, preparation of derivative works,
distribution of copies (whether by sale or other transfer of ownership, or by
rental, lease, or lending), public performance of such works, or attempts to
recreate all or a portion of such Copyrighted Works shall constitute a breach of
this Agreement and an infringement of the rights of BCI in and to the
Copyrighted Works. PBCI acknowledges that this Agreement does not confer any
interest in the Copyrighted Works upon PBCI or its subsidiaries or its or their
franchisees, other than the right to use the Copyrighted Works in compliance
with this Agreement. If BCI authorizes PBCI or its subsidiaries or its or their
franchisees to prepare any adaptation, translation, or work derived from the
Copyrighted Works, or if PBCI or its subsidiaries or its or their franchisees
prepares any Copyrighted Work such as menus, advertisements, posters, or
promotional material, PBCI hereby agrees that such adaptation, translation,
derivative work, or Copyrighted Work shall be the property of BCI and PBCI
hereby assigns, and shall cause its subsidiaries and its and their franchisees
to assign, all its right, title, and interest therein to BCI. PBCI agrees to
execute, and to cause its subsidiaries and its and their franchisees to execute,
any documents, in recordable form, which BCI determines are necessary to reflect
such ownership. All such adaptations, translations, derivative works, and
Copyrighted Works to BCI for approval prior to use.
5.C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
----------------------------------------
PBCI shall immediately notify BCI of any actual or apparent infringement of
or challenge to any of the Copyrighted Works, or claim by any person of any
rights in the Copyrighted Works. PBCI shall not communicate, and shall cause
each of its subsidiaries and its and their franchisees not to communicate, with
any person other than BCI and its counsel in connection with any such
infringement, challenge, or claims. BCI shall have the sole discretion to take
such action as it deems appropriate in connection with the foregoing, and the
right to control exclusively any settlement, litigation, arbitration, or
administrative proceeding arising out of any such alleged infringement,
challenge, or claim or otherwise relating to the Copyrighted Works. PBCI agrees
to execute, and to cause each of its subsidiaries and its and their franchisees
to execute, any and all instruments and documents, render such assistance, and
do such acts and things as may, in the
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opinion of BCI's counsel, be necessary or advisable to protect and maintain the
interests of BCI in any litigation or other proceeding or to otherwise protect
and maintain the interests of BCI in the Copyrighted Works. BCI will reimburse
PBCI for the reasonable out-of-pocket expenses incurred and paid by PBCI in
complying with the requirements imposed by this Section 5.C.
5.D. DISCONTINUANCE OF USE.
---------------------
If it becomes advisable at any time in BCI's sole judgment for PBCI and/or
its subsidiaries and its and their franchisees to modify or discontinue use of
any of the Copyrighted Works and/or for PBCI and/or its subsidiaries and its and
their franchisees to use one or more additional or substitute copyrighted or
copyrightable items, PBCI agrees to immediately comply, and to cause its
subsidiaries and its and their franchisees to immediately comply, with BCI's
directions to modify or otherwise discontinue the use of the copyrighted
materials and/or to use any substitute materials specified by BCI. Neither BCI
nor its Affiliates shall have any obligation to reimburse PBCI and/or its
subsidiaries and its and their franchisees for any expenditures made by PBCI
and/or its subsidiaries and its and their franchisees to modify or discontinue
the use of any Copyrighted Work or to adopt additional or substitute copyrighted
or copyrightable items.
6. CONFIDENTIALITY.
---------------
PBCI acknowledges and agrees that the Licensed Program, Support/Control
Programs, and Infrastructure Programs and all additions, modifications, and
enhancements thereof and thereto, and all data generated from use thereof,
including but not limited to the logic, structure, and operation of the data
base file structures containing such data, and all additions, modifications, and
enhancements thereof and thereto shall be deemed to be "Confidential
Information" as defined in the Confidentiality Agreement executed by it of even
date herewith and is therefore governed by and subject to all of the terms,
conditions, and restrictions of such Confidentiality Agreement. PBCI will cause
each of its subsidiaries and its and their franchisees to execute BCI's then
currently applicable form of Confidentiality Agreement no later than
installation of the Licensed Program or any Support/Control Program at any
office or PBCI Unit owned, operated, or managed by such entity.
7. TERM.
----
The term of this Agreement shall be for five years from the execution
hereof unless the parties mutually agree to extend such term; provided that
either party hereto may terminate this Agreement during the term upon one year's
prior written notice to the other party; and provided further that BCI may
terminate this Agreement without notice and cease rendering the services
hereunder 15 days after notice of any non-payment of the fees and expenses
provided for herein when such fees and expenses are due and payable, unless such
non-payment is cured within such 15 day period.
Termination of this Agreement shall terminate licenses granted hereby and
BCI's obligations to provide services hereunder. Upon termination of this
Agreement, PBCI shall pay to
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BCI the fees due BCI through the date of termination and reimburse BCI for
expenses incurred by BCI in connection with the services rendered by BCI through
the date of termination.
8. TERMINATION; BREACH.
--------------------
In addition to termination of this Agreement as provided in Section 7
hereof, BCI may terminate this Agreement, effective upon delivery of notice of
termination to PBCI, if (1) PBCI or any of its subsidiaries or its or their
franchisees breaches any provision of this Agreement; or (2) BCI has the right
to terminate its Secured Loan Agreement with PBCI pursuant to the terms thereof
Upon termination of this Agreement, BCI will reasonably cooperate with PBCI in
archiving and retrieval of records and transition of services at PBCI's expense,
provided that this sentence shall not require BCI to license PBCI any software.
In addition, in the event that BCI terminates this Agreement, BCI will also
have the right to terminate the Real Estate Services, Financial Services, and
Accounting and Administrative Services Agreement and any similar service
agreements with PBCI and its subsidiaries and its or their franchisees, in
accordance with the terms and provisions thereof.
9. ASSIGNMENT.
----------
This Agreement and the rights and obligations arising hereunder may not be
assigned by PBCI except that its subsidiaries and its and their franchisees may
utilize the Licensed Program and Support/Control Programs upon agreeing to be
bound by the terms hereof applicable to PBCI, provided PBCI remains primarily
liable for their performance and that subsidiaries and franchisees may not
themselves avail themselves of this exception for their subsidiaries or
subfranchisees. This Agreement is fully assignable by BCI and shall inure to the
benefit of any assignee or other successor to the interests of BCI therein.
10. SEVERABILITY.
-------------
If any provision of this Agreement is declared or made invalid or
unenforceable by judicial action, legislation, or other government action, BCI
may, if it believes in its sole discretion that the continuation of this
Agreement would not be in its best interests, terminate this Agreement effective
upon sixty (60) days' written notice to PBCI. If BCI does not elect to terminate
this Agreement as aforesaid, all provisions of this Agreement shall be deemed
severable and this Agreement shall be interpreted and enforced as if all
completely invalid or unenforceable provisions were not contained herein and
partially valid and enforceable provisions shall be enforced to the extent valid
and enforceable. If any applicable and binding law or rule of any jurisdiction
requires a greater prior notice of the termination of this Agreement or the
taking of some other action not required hereunder, or if under any applicable
and binding law or rule of any jurisdiction, any provision of this Agreement or
any specification, standard, or operating procedure prescribed by BCI is invalid
or unenforceable, the prior notice and/or other action required by such law or
rule shall be substituted for the comparable provisions hereof, and BCI shall
have the right, in its sole discretion, to modify such invalid or unenforceable
provision, specification, standard, or operating procedure to the extent
required to be valid and enforceable.
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Such modifications to this Agreement shall be effective only in such
jurisdiction and this Agreement shall be enforced as originally made and entered
into in all other jurisdictions.
11. NO WAIVER OF DEFAULT.
--------------------
Either party's failure at any time to require strict performance by the
other party of any of the provisions hereof shall not waive or diminish the
right thereafter to demand strict compliance therewith or with any other
provision. Waiver of any specific default shall not waive any other default.
12. INJUNCTIVE RELIEF.
-----------------
PBCI acknowledges that BCI will be irreparably harmed by any breach hereof,
that monetary damages would be inadequate, and that BCI shall have the right to
have an injunction or other equitable remedies imposed in relief of, or to
prevent or restrain, such breach. PBCI agrees that BCI will not be required to
post a bond to obtain any injunctive relief and that the only remedy if an
injunction is entered against PBCI will be the dissolution of that injunction,
if warranted, upon due hearing (all claims for damages by reason of the wrongful
issuance of such injunction being expressly waived hereby). PBCI agrees that BCI
shall also be entitled to any and all other relief available under law or equity
for such breach.
13. RIGHTS OF PARTIES ARE CUMULATIVE.
--------------------------------
The rights of BCI and PBCI hereunder are cumulative and no exercise or
enforcement of any right or remedy hereunder shall preclude the exercise or
enforcement of any other right or remedy hereunder or to which BCI or PBCI is
entitled by law.
14. COSTS AND LEGAL FEES.
--------------------
PBCI agrees to pay for costs and legal fees incurred by BCI in connection
with this Agreement and enforcement thereof.
15. RELATIONSHIP OF PARTIES.
-----------------------
This Agreement does not create a fiduciary relationship between the parties
hereto. BCI and PBCI are and shall be independent contractors, and nothing in
this Agreement is intended to make either party a general or special agent,
joint venturer, partner, or employee of the other for any purpose.
16. GOVERNING LAW.
-------------
This agreement and the relationship between the parties hereto will be
governed by and construed in accordance with the internal laws of the State of
Colorado, except that such state's choice of law and conflicts of law rules
shall not apply and any franchise registration, disclosure,
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relationship, or similar statute which may be adopted by the State of Colorado
shall not apply unless its jurisdictional requirements are met independently
without reference to this Section 16.
17. JURISDICTION.
------------
PBCI SHALL (AND SHALL CAUSE EACH OF ITS SUBSIDIARIES AND ITS AND THEIR
FRANCHISEES TO), AND BCI MAY, AT ITS OPTION, INSTITUTE ANY ACTION ARISING OUT OF
OR RELATING TO THIS AGREEMENT IN ANY STATE COURT OF GENERAL JURISDICTION IN
JEFFERSON COUNTY, COLORADO, OR THE UNITED STATES FEDERAL DISTRICT COURT FOR THE
DISTRICT OF COLORADO, OR THE STATE COURT OF GENERAL JURISDICTION OR UNITED
STATES FEDERAL DISTRICT COURT NEAREST TO BCI'S EXECUTIVE OFFICE AT THE TIME SUCH
ACTION IS FILED. PBCI IRREVOCABLY SUBMITS (AND SHALL CAUSE EACH OF ITS
SUBSIDIARIES AND ITS AND THEIR FRANCHISEES TO IRREVOCABLY SUBMIT) TO THE
JURISDICTION OF ANY SUCH COURT AND WAIVES ANY OBJECTION IT MAY HAVE TO EITHER
THE JURISDICTION OR VENUE OF ANY SUCH COURT.
18. LIMITATION OF LIABILITY.
-----------------------
IN NO EVENT SHALL BCI BE LIABLE FOR, NOR SHALL PBCI SEEK (OR ALLOW ANY OF
ITS SUBSIDIARIES OR ITS OR THEIR FRANCHISEES TO SEEK), SPECIAL, INDIRECT,
INCIDENTAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES EVEN IF BCI HAS BEEN
ADVISED OF THE POSSIBILITY THEREOF, OR FOR ANY LOST PROFITS OR ANY CLAIM AGAINST
PBCI BY ANY OTHER PARTY. BCI'S LLABILITY HEREUNDER FOR DAMAGES SHALL IN NO EVENT
EXCEED THE TOTAL AMOUNT PAID BY PBCI FOR LICENSED PROGRAM AND REAL ESTATE
SUPPORT FEES DURING THE THREE ACCOUNTING PERIODS PRECEDING THE EVENT GIVING RISE
TO THE CLAIM FOR DAMAGES. BCI SHALL NOT BE LIABLE FOR ANY FAILURE TO PROVIDE ANY
SERVICES REQUIRED HEREUNDER IF SUCH FAILURE IS DUE TO ANY CAUSE BEYOND ITS
REASONABLE CONTROL.
19. WAIVER OF JURY TRIAL.
--------------------
BCI AND PBCI HEREBY IRREVOCABLY WAIVE TRIAL BY JURY ON ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY EITHER OF
THEM.
20. BINDING EFFECT.
--------------
This Agreement is binding upon the parties hereto and their respective
executors, administrators, heirs, assigns, and successors in interest, and shall
not be modified, except by written agreement signed by both PBCI and BCI.
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21. CONSTRUCTION.
------------
This Agreement constitutes a separate license to use the Licensed Program
and Real Estate Programs and all obligations hereunder are in addition to and
cumulative with the obligations of PBCI under all other contractual relations
with BCI. Except as otherwise provided herein, nothing in this Agreement is
intended, nor shall be deemed, to confer any rights or remedies upon any person
or legal entity not a party hereto. The headings of the several sections and
paragraphs hereof are for convenience only and do not define, limit, or construe
the contents of such sections or paragraphs. Terms used in this Agreement may be
applicable to one or more persons or entities as the case may be, and the
singular usage includes the plural and the masculine and neuter usages include
each other and the feminine. If two or more persons are at any time obligated to
BCI hereunder, whether or not as partners or joint venturers, their obligations
and liabilities to BCI shall be joint and several.
22. NOTICES.
-------
All notices permitted or required to be delivered by the provisions of this
Agreement shall be deemed so delivered at the time delivered by hand, one (1)
business day after transmission by facsimile with proof of receipt, one (1)
business day after being placed in the hands of a commercial courier service for
overnight delivery, or three (3) business days after placement in the United
States Mail by Registered or Certified Mail, Return Receipt Requested, postage
prepaid and addressed to BCI at 14103 Denver West Parkway, P.O. Box 4086,
Golden, Colorado 80401, to the attention of the President, or at its most
current principal business address of which PBCI has been notified, or to PBCI
at its most current principal business address of which BCI has been notified,
as applicable. All payments required by this Agreement shall be directed to BCI
at the above address, or to such other persons and places as BCI may direct from
time to time. Any required payment not actually received by BCI during regular
business hours on the date due shall be deemed delinquent.
BOSTON CHICKEN, INC. PROGRESSIVE BAGEL CONCEPTS, INC.
By: _______________________________ By: ________________________________
Name: _______________________________ Name: ________________________________
Title: _______________________________ Title: ________________________________
17
<PAGE>
Exhibit 8.B(a)
________ __, 1995
Progressive Bagel Concepts, Inc.
1526 Cole Boulevard
Suite 200
Golden, Colorado 80401
Attention: Mr. Kyle T. Craig
Re: Transfer of Assets of Offerdahl's Bagel Gourmet, Inc.
-----------------------------------------------------
Dear Sirs:
We have served as counsel for Offerdahl's Bagel Gourmet, Inc., a Florida
corporation (the "Company'), and John A. Offerdahl and Lynnora Offerdahl, the
owners of all of the issued and outstanding shares of voting common stock of the
Company (the "Majority Shareholders"), in connection with the proposed transfer
by the Company of substantially all the assets of the Company to Progressive
Bagel Concepts, Inc., a Delaware corporation ("Purchaser"), in accordance with
that certain Agreement to Contribute Assets (the "AGREEMENT"), dated March ___,
1995, by and among the Company, certain shareholders of the Company and
Purchaser. We have also served as special counsel to Sarah Flatley ("Flatley")
and Mark Adelhelm ("Adelhelm" and, together with Flatley and the Majority
Shareholders, the "Shareholders") solely for the purpose of rendering certain
opinions set forth herein with respect to such persons. We have been requested
by the Company and
<PAGE>
Progressive Bagel Concepts, Inc.
March , 1995
Page 2
the Shareholders to render our opinion to you pursuant to the Agreement and in
connection with the closing of the transactions contemplated thereunder. Any
capitalized terms used but not defined in this opinion have the meanings
assigned to such terms in the Agreement.
We have acted as counsel to the Company in connection with the negotiation,
execution and delivery of the Agreement and the consummation of the agreements
and transactions contemplated thereby. We were first engaged by the Company in
November 1994, and had no relationship with or knowledge of or regarding the
Company, the Shareholders or the Company's business, properties or assets prior
to such time.
As the basis for the opinions expressed herein, we have examined, considered
and relied upon the following:
1. The Agreement;
2. The following additional agreements and instruments entered into in
connection with the Agreement and the transactions contemplated thereby:
(a) the Employment Agreement dated , 1995 between John A. Offerdahl and
Purchaser; the Employment Agreement dated , 1995 between Flatley
and Purchaser; the Employment Agreement dated , 1995 between
Adelhelm and Purchaser; and the Consulting Agreement dated , 1995
between Lynnora Offerdahl and Purchaser (collectively, the "Employment
Agreements"); and
(b) the Tax Loan Note, the PBCI Stock Note and the Equity Funding Note
(collectively, the "Notes"); and
(c) the Additional Equity Funding Units Pledge Agreement, the Additional
Transferee Shares Pledge Agreement and the Tax Loan Pledge Agreement
(collectively, the "Pledge Agreements"); and
(d) the Assignment of Trademarks dated , 1995 between John A. Offerdahl
and Purchaser (the "Assignment").
3. The Articles of Incorporation, By-Laws and corporate minute book of the
Company, as such are in effect on the date hereof;
<PAGE>
Progressive Bagel Concepts, Inc.
March , 1995
Page 3
4. A certificate or other evidence of good standing of the Company issued as
of recent date by the Secretary of State of the State of Florida;
5. The contracts listed on Exhibit "A" hereto to which the Company is a party,
which the President of the Company has represented constitute all material
agreements to which the Company is a party;
6. Various representations certified to us by or on behalf of the Company and
the Shareholders with respect to the Company, the Contributed Assets, the
transactions contemplated by the Agreement and related and other matters;
and
7. Such other matters of law, and such other documents and certificates, as we
have considered necessary or appropriate for the expression of the opinions
set forth herein.
For purposes of this opinion, (i) the Agreement, the Employment Agreements,
the Assignment, the Notes and the Pledge Agreements are sometimes collectively
referred to herein as the "Transaction Agreements" and (ii) the documents,
instruments and information referred to immediately above (in clauses 1 through
7) are herein collectively referred to as the "Documents".
In rendering the opinions set forth below, and in examining the Documents, we
have assumed, without investigation, the genuineness of all signatures and the
authenticity of all Documents submitted to us as originals; the conformity to
authentic original documents of all Documents submitted to us as copies; the due
authorization, and valid execution and delivery of such Documents by the parties
thereto (other than our clients); and the veracity of all Documents. As to the
Agreement, the Assignment and the Employment Agreements, we have assumed the
requisite power and capacity of each person party thereto, and that each
agreement has been entered into at arms'-length, without fraud, duress or
coercion and for adequate consideration. As to questions of fact material to the
opinions hereinafter expressed, we have relied, without independent
investigation, upon (a) the representations and warranties of the Company and
the Shareholders made in the Transaction Agreements, (b) certificates or
statements of public officials and (c) certain representations certified to us
by or on behalf of the Company and the Shareholders with respect to the Company,
the Contributed Assets, the transactions contemplated by the Transaction
Agreements and related matters, as set forth in a certificate (the
"Certificate") which is being provided to you concurrently herewith. We have
made no examination or investigation regarding the accuracy or completeness of
any accounting, financial or statistical information referenced in or provided
pursuant to any Transaction Agreement, and express no opinion with respect
<PAGE>
Progressive Bagel Concepts, Inc.
March , 1995
Page 4
thereto. We have also assumed for purposes of the opinions expressed herein that
(x) each of the Transaction Agreements has been duly and validly authorized,
executed and delivered by the parties thereto (other than our clients), and each
is a valid and binding obligation of such other parties and (y) each such other
party is in compliance with any federal law, rule or regulation applicable
because of the nature of its business or assets and that none of the
transactions contemplated by the Transaction Agreements or any other Document
will contravene or violate any such law, rule or regulation applicable to such
other parties. We have also assumed due performance by the parties (other than
our clients) of its obligations under each Transaction Agreement, the Documents
and the agreements and instruments referred to therein.
Based upon our examination and consideration of the Documents, and in reliance
thereon, and subject to the assumptions, qualifications and limitations set
forth herein, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida, and has full corporate power
and authority to enter into and perform the Agreement, the Notes and the Pledge
Agreements and consummate the transactions contemplated thereby.
2. The execution, delivery and performance of the Agreement, the Notes and the
Pledge Agreements and the consummation of the transactions contemplated thereby
by the Company have been duly authorized by all necessary corporate action, and
the Agreement, each Note and each Pledge Agreement is a legal, valid and binding
agreement of the Company, enforceable in accordance with its terms.
3. The Shareholders, who are individuals, are of legal age and, to our
knowledge, otherwise have full legal capacity to enter into and perform the
Transaction Agreements to which they are parties and consummate the transactions
contemplated thereby.
4. The Agreement and each Employment Agreement is a legal, valid and binding
agreement of each Shareholder who is a party thereto, enforceable in accordance
with its terms.
5. The Assignment is a legal, valid and binding agreement of John A.
Offerdahl, enforceable in accordance with its terms.
6. The Company is authorized to issue (i) 15,000,000 shares of voting common
stock par value $.001 per share (the "Voting Shares"), (ii) 5,000,000 shares of
non-voting common stock, par value $.001 per share (the "Non-Voting Shares"),
and (iii) 1,000,000
<PAGE>
Progressive Bagel Concepts, Inc.
March , 1995
Page 5
shares of preferred stock, par value $.001 per share (the "Preferred Shares").
Based solely upon a review of the Company's stock books as in effect on the date
hereof, all of the issued and outstanding Voting Shares are owned of record by
John A. Offerdahl and Lynnora Offerdahl, and all of the Non-Voting Shares are
owned of record by John A. Offerdahl, Lynnora Offerdahl Arnold N. Offerdahl,
Irene E. Offerdahl, William A. Achterberg, Vivian J. Achterberg, John A.
Offerdahl, as Trustee of the John A. Offerdahl Grantor Retained Annuity Trust
dated December 30, 1994, Lynnora Offerdahl, as Trustee of the Lynnora Offerdahl
Grantor Retained Annuity Trust dated December 30, 1994, Arnold N. Offerdahl, as
Trustee of the Andrew William Offerdahl Trust dated December 30, 1994, Arnold N.
Offerdahl, as Trustee of the Alexandra Ruth Offerdahl Trust dated December 30,
1994, Flatley and Adelhelm. No Preferred Shares have been issued.
7. Based solely upon our review of the Documents, except as disclosed in the
Agreement or the Schedules thereto, (i) neither the Company nor the Shareholders
are subject to any restriction, agreement, law, order, writ, injunction,
judgment or decree which would prohibit or be violated by the execution and
delivery of the Agreement or the consummation of the transactions contemplated
thereby, (ii) no consent or approval is required to be obtained by the Company
or the Shareholders from any third party or governmental agency with respect to
the Agreement or the consummation of the transactions contemplated thereby,
except as disclosed in the Agreement or the Schedules thereto, (iii) neither the
Agreement nor the consummation of the transactions contemplated thereby
conflicts with or violates the terms and conditions of the Articles of
Incorporation or Bylaws of the Company, and (iv) neither the execution, delivery
nor performance of the transactions contemplated by the Agreement, nor
compliance with the terms and provisions thereof by the Company or the
Shareholders will conflict with, violate, constitute a default under (or an
event which upon notice or lapse of time or both will constitute a default
under) or result in any breach of any contract listed on Exhibit "A" hereto,
except as disclosed in the Agreement or the Schedules thereto.
8. Based upon (a) our review of the dockets of the Florida state court and the
federal district court located in Broward County, Florida and (b) the
Certificate, and except as otherwise disclosed in the Agreement or the Schedules
thereto, and to our knowledge, there are no actions, suits, proceedings or
investigations pending or threatened against the Company at law or equity before
any court, which reasonably could be expected to result in a material adverse
change in the business or assets of the Company or which reasonably could be
expected to materially and adversely affect the transactions contemplated by the
Agreement.
9. Based upon (a) a review of UCC-1 Financing Statements filed with the State
of Florida and Broward County, Florida, (b) a review of Federal and state tax
liens as filed
<PAGE>
Progressive Bagel Concepts, Inc.
March , 1995
Page 6
with the State of Florida and Broward County, Florida, and (c) the Certificate
and except as otherwise disclosed in the Agreement or the Schedules thereto, and
to our knowledge, the Contributed Assets are free and clear of any claim, lien,
encumbrance or security interest. [subject to final review of tax lien search to
be completed 3/24/95]
10. Based solely upon our review of the Documents and the Certificate, except
for the Agreement, there is no option, right or other agreement or commitment
obligating the Company to sell the Contributed Assets.
The opinions expressed above are based upon and subject to the following
additional assumptions, qualifications and limitations:
(a) we are licensed to practice law only in the State of Florida and do not
hold ourselves out to be experts on the laws of any jurisdiction other than
the State of Florida and the United States of America. Accordingly, the
opinions expressed herein are specifically limited solely to the laws of
the State of Florida and the federal laws of the United States of America
(based upon a review of the latest publicly available compilations
thereof).
(b) No opinion is expressed as to the enforceability of Section 5.H. of the
Agreement, the "Covenant Restricting Competition" contained in each
Employment Agreement, and no opinion is expressed as to the agreements or
obligations of the Company or any Shareholder under the Transaction
Agreements to the extent the rights, obligations, agreements or remedies
implicated thereby are subject to, affected or limited by: (1) rights of
the United States of America under the Federal Tax Lien Act of 1966; (2)
applicable liquidation, conservatorship, bankruptcy, insolvency, moratorium
reorganization or similar debtor or creditor relief laws from time to time
in effect under state or Federal law; (3) general principles of equity
(whether considered in a proceeding in equity or at law); (4) the exercise
of the discretionary powers of any court or other authority before which
may be brought any proceeding seeking equitable remedies, including,
without limitation, specific performance and injunctive relief; (5) public
policy and other limitations on indemnification and contribution arising
under Federal or state securities law; and (6) the provisions of any
document, agreement or instrument which (i) purport to confer, waive or
consent to the jurisdiction of any court or (ii) purport to waive any right
granted by common or statutory law.
(c) As used in the opinions expressed herein, the phrase "to our knowledge"
refers only to the actual knowledge of those attorneys who have given
substantive attention to the Company in connection with the negotiation,
execution and consummation of
<PAGE>
Progressive Bagel Concepts, Inc.
March , 1995
Page 7
the transactions contemplated by the Transaction Agreements. Furthermore,
"to our knowledge" as used herein does not mean, imply or include (1)
constructive notice of matters or information, or (2) except for our
specific inquiries of the Company's President and the Shareholders, as
confirmed in certificates delivered to us, and our review of the Documents,
that we have undertaken any independent investigation (except as otherwise
specifically noted herein) (i) with any persons outside of our firm, or
(ii) as to the accuracy or completeness of any factual representation,
information or other matter made or furnished in connection with the
negotiation, execution or consummation of the transactions contemplated by
the Transaction Agreements.
(d) We have assumed that (1) the parties to the Transaction Agreements
(other than our clients) and all documents to be delivered thereunder or in
connection therewith are not subject to any statute, rule or regulation or
any impediment that requires them or our clients to obtain the consent, or
to make any declaration or filing with any governmental authority in
connection with the transactions contemplated by the Transaction Agreements,
and (2) all terms, provisions and conditions relating to the transactions
referred to in this opinion letter are correctly and completely reflected in
the appropriate Transaction Agreement and all documents to be delivered
thereunder or in connection therewith.
(e) In rendering our opinion in paragraph 1 above regarding the good
standing of the Company, we have relied upon a certificate of good standing
dated , 1995 issued by the Secretary of State of Florida, which
we have assumed to be accurate as of the date hereof.
(f) We have made no examinations of, and we express no opinion as to, the
description of or perfected title to any of the properties or assets
described or included in any Transaction Agreement.
(g) The opinions expressed herein are as of the date hereof and we assume no
obligation to update or supplement such opinions to reflect any facts or
circumstances that may hereafter come to our attention or any changes in law
that may hereafter occur.
(h) This opinion is limited to the matters specifically stated herein and no
opinions may be implied or inferred beyond such matters. This opinion has
been issued solely for the benefit of Purchaser, and no other party or
entity shall be entitled to rely on this opinion, or any portion hereof,
without the express written consent of this firm. Without our prior written
consent, this opinion may not be
<PAGE>
Progressive Bagel Concepts, Inc.
March , 1995
Page 8
quoted in whole or in part or otherwise referred to in any document, filing
or report and may not be furnished to any other person or entity.
Very truly yours,
GREENBERG, TRAURIG, HOFFMAN, LIPOFF, ROSEN &
QUENTEL, P.A.
------------------------------------
<PAGE>
EXHIBIT "A"
AGREEMENTS
----------
I. CORPORATE OFFICE/PRODUCTION FACILITY LEASE
1. Lease, dated February 28, 1993, by and between Broward Lakes Business
Park Venture and Bagel Gourmet Production, Inc. (Sunrise)
II. EXISTING STORE LEASES:
1. Lease, dated May 18, 1990, by and between Arvida/JMB Partners
and Bagel Gourmet, Inc. (Weston - Ft. Lauderdale)
2. Lease, dated May 20, 1991, by and between Sheridan Plaza, L.P.
and Bagel Gourmet (Sheridan), Inc. (Hollywood)
3. Lease, dated February 24, 1992, by and between Trustees under
the Will and Estate of James Campbell, Deceased and Bagel Gourmet
(Pembroke), Inc. (Pembroke Pines)
4. Lease, dated April 19, 1993, by and between Boynton Partnership
Limited and Bagel Gourmet Boynton, Inc., as amended (Boynton Beach)
5. Lease, dated July 1, 1993, by and between Promenade Investors
and Bagel Gourmet Promenade, Inc., as amended (Bay Colony -
Ft. Lauderdale)
6. Lease, dated July 21, 1992, by and between Commercial Funding
Corp. and Boston Chicken, Inc., as amended (Boca Raton)
7. Lease, dated April 1, 1994, by and between 17th Street Square
and Bagel Gourmet, Inc. (Ft. Lauderdale)
III. LEASES OF STORES CURRENTLY UNDER CONSTRUCTION:
1. Lease, dated November 7, 1995 (signed December 6, 1994), by
and between Marc A. Neuerman and Jerome Kahn, Jr., Co-Trustees of
the VHP Grandchildren Trust, Dated September 20, 1993 and Bagel
Gourmet, Incorporated (Silver Lakes - Pembroke Pines)
A-1
<PAGE>
2. Lease, dated November 29, 1994, by and between PCT Biscayne Boulevard
Partnership and Bagel Gourmet, Inc. (Aventura)
3. Lease, executed January 31, 1995, by and between 1500 Alton Road
Corporation and Offerdahl's Bagel Gourmet, Inc. (Miami Beach)
Construction, equipment and architect contracts for the three sites under
construction.
A. Agreement, dated March 15, 1995 (unsigned), by and between
Shawe-Ager Construction, Inc. and Transferor, and related
invoices and bills relating to Alton Road Store.
B. Agreement, dated February 14, 1995, by and between Shawe-Ager
Construction, Inc. and Transferor, and related invoices and
bills relating to Silverlakes Store.
C. Agreement, dated February 23, 1995, by and between Shawe-Ager
Construction, Inc. and Transferor, and related invoices and
bills relating to Loehmans Store.
IV. OTHER LEASES AND AGREEMENTS
1. Truck Lease Service Agreement, dated as of June 16, 1993, by and
between Gator Leasing, Inc. and Offerdahl's Bagel Gourmet, Inc.
("OBG") (2 trucks leased)
V. PROMISSORY NOTES AND OTHER OBLIGATIONS
1. Demand Promissory Notes, dated December 22, 1994, between Bagel
Gourmet, Inc. and John Offerdahl, for $50,000, and between Bagel
Gourmet (Production), Inc. and John Offerdahl for $200,000.
2. Demand Promissory Notes, dated March 10, 1995, between
Offerdahl's Bagel Gourmet, Inc. and John Offerdahl, for $100,000.
3. Requirement to reimburse SunBank for any draw down on the Letter of
Credit, issued January 6, 1995 by SunBank, pursuant to Section 2 of the
General Rider to the lease dated, November 29, 1994, by and between PCT
Biscayne Boulevard Partnership and Bagel Gourmet, Inc.
A-2
<PAGE>
VI. CORPORATE DOCUMENTS AND OTHER AGREEMENTS:
1. Letter Agreement, dated July 17, 1990 by and between Big Apple
Bagel Too, Inc. and Bagel Gourmet, Inc. (check has not been canceled).
2. Shareholders' Agreement, dated December 31, 1994, by and among
OBG and the shareholders of OBG.
3. Subscription Agreement (excludes stock from certain call provisions),
dated January 23, 1995, by and between OBG and Sarah Flatley.
4. 1995 Stock Option Plan
A-3
<PAGE>
EXHIBIT 8.B(14)
ASSIGNMENT OF TRADEMARKS
------------------------
WHEREAS, John Offerdahl, a United States citizen, residing at 2340
Columbia, Fort Lauderdale, Florida 33326, United States of America
("Assignor"), is the sole and exclusive owner of the trademark
registrations and application described on Schedule A attached hereto and
made a part hereof (hereinafter the "Marks"); and
WHEREAS, Progressive Bagel Concepts, Inc., a Delaware corporation
having a principal place of business in Golden, Colorado, United States of
America ("Assignee"), desires to acquire the entire right, title and
interest in, to and under said Marks;
NOW, THEREFORE, for and in consideration of the sum of Ten Dollars
($10.00), to it in hand paid by said Assignee, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, said Assignor sells, assigns, transfers and sets over to said
Assignee, all of its right, title and interest in, to and under the
business symbolized by the Marks, together with the goodwill of the
business symbolized by the Marks, together with all rights and privileges
granted and secured thereby, including the right to sue and recover for any
past infringement, said rights to be held and enjoyed by said assignee, for
its own use and benefit and for the use and benefit of its successors,
assigns or other legal representatives as fully and entirely as the same
would have been held and enjoyed by said Assignor if this Assignment and
sale had not been made.
AND, said Assignor hereby covenants that it owns the Marks and has the
full right to convey the entire interest herein assigned.
IN TESTIMONY WHEREOF, Assignor has executed this assignment this
day of March, 1995.
JOHN OFFERDAHL
By:
---------------------------
John Offerdahl
<PAGE>
NOTARIAL CERTIFICATE
--------------------
STATE OF ____________ ) SS
COUNTY OF ___________ )
Subcribed and Sworn to before me by John Offerdahl, this day of March,
1995.
_____________________________________
Notary Public
8.B(14)-2
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Mark Registration Number Issued
- ---- ------------------- ------
<S> <C> <C>
OFFERDAHL'S BAGEL GOURMET 1,675,585 February 11, 1992
OFFERDAHL'S BAGEL GOURMET 1,684,164 April 21, 1992
BAGEL GOURMET 1,726,712 October 20, 1992
BAGEL GOURMET 1,732,196 November 10, 1992
Mark Application Number Filed
- ---- ------------------ -----
<S> <C> <C>
OFFERDAHL'S BAGEL GOURMET
And Design 74/532892 June 3, 1994
</TABLE>
8.B(14)-3
<PAGE>
[DRAFT]
Exhibit 8.C.(6)(a)
------------------
, 1995
(312) 368-4000
Offerdahl's Bagel Gourmet, Inc.
929 Shotgun Road
Sunrise, Florida 33326
Attention: John Offerdahl, President
Re: Transfer of shares of common stock of Progressive Bagel Concepts,
Inc., a Delaware corporation (the "Company") and Boston Chicken,
Inc., a Delaware corporation ("BCI")
Dear Mr. Offerdahl:
We have served as counsel for the Company in connection with the
transfer of certain shares of common stock of the Company (the "Exchange
Shares") and certain shares of common stock of BCI (the "BCI Shares") and
have been requested by the Company to render our opinion to you in regard to
certain matters related to said transaction. Any initially capitalized terms
used but not defined in this opinion shall have the meanings assigned to
such terms in that certain Agreement to Contribute Assets by and among
Offerdahl's Bagel Gourmet, Inc., the shareholders of Offerdahl's Bagel
Gourmet, Inc. ("Shareholder") and the Company of even date herewith together
with the schedules and exhibits attached thereto (the "Agreement").
For purposes of this letter, the term "Memoranda" shall mean: (i) that
certain Confidential Private Placement Memorandum dated February 28, l995;
(ii) that certain Offering Letter dated March 2, l995 delivered to
Offerdahl's Bagel Gourmet, Inc. ("OBG"); and (iii) that certain Supplement
to Confidential Private Placement Memorandum dated March 22, 1995.
We have examined and relied and base our opinion on originals or
copies, certified or otherwise identified to our satisfaction, of the following
documents and records and upon such matters of law as we have deemed necessary
for the purposes of this opinion:
(1) The Articles of Incorporation, Bylaws, minute book and stock
transfer ledger of the Company; and
<PAGE>
Mr. John Offerdahl
Offerdahl's Bagel Gourmet, Inc.
[Date]
Page 2
(ii) The Agreement and all Exhibits thereto.
The opinions set forth herein are qualified as stated therein and are
qualified further by the following:
(a) This opinion is based upon existing laws, ordinances and
regulations in effect as of the date hereof and as they presently
apply.
(b) We express no opinion as to the effect of the laws of any
state or jurisdiction other than the State of Illinois, the General
Corporation Law of the State of Delaware and the laws of the United
States of America upon the transactions described herein.
(c) In rendering the opinions set forth below, we have relied, to
the extent we believe appropriate, as to matters of fact, (i) upon
certificates or statements of public officials and of the officers of the
Company and (ii) upon representations and warranties of the Company
contained in the Agreement and we have made no independent investigation or
verification of said facts. No opinion is being expressed as to the effect
of any event, fact or circumstance of which we have no actual knowledge.
(d) We have assumed the competency of the signatories to the
Agreement, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original
documents of all documents submitted to us as certified or photostatic
copies, and the accuracy and completeness of all records made available
to us.
(e) We have assumed that (i) the Agreement has been duly
authorized, executed and delivered by the parties thereto (other than
our client), are their legal, valid and binding obligations and that
they are in compliance with all applicable laws, rules and regulations
governing the conduct of their respective businesses and this
transaction, (ii) the parties to the Agreement (other than our client),
and a11 documents to be delivered thereunder or in connection therewith are
not subject to any statute, rule or regulation or any impediment that
requires them to obtain the consent, or to make any declaration or filing
with any governmental authority in connection with the transactions
contemplated by the Agreement, and (iii) all terms, provisions and
conditions relating to the transaction referred to in this opinion
letter are correctly and completely reflected in the Agreement and all
documents to be delivered thereunder or in connection therewith.
(f) The opinions hereafter expressed are qualified to the extent
that: (i) the characterization of, and the enforceability of any rights or
remedies in, any agreement
<PAGE>
Mr. John Offerdahl
Offerdahl's Bagel Gourmet, Inc.
[Date]
Page 3
or instrument may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or transfer, equitable
subordination, or similar laws and doctrines affecting the rights of
creditors generally and general equitable principles; (ii) the availability
of specific performance, injunctive relief or any other equitable remedy is
subject to the discretion of a court of competent jurisdiction; and (iii)
the provisions of any document, agreement or instrument that (a) may
require indemnification or contribution for liabilities under the
provisions of any Federal or state securities laws or in respect to the
neglect or wrongful conduct of the indemnified party or its representatives
or agents, (b) purport to confer, waive or consent to the jurisdiction of
any court, or (c) waive any right granted by common or statutory law, may
be unenforceable as against public policy.
(g) In rendering our opinion in paragraph 1 below regarding the good
standing of the Company, we have relied upon a certificate of good
standing, dated March 16, 1995 issued by the Secretary of State of
Delaware, which we have assumed to be accurate as of the date hereof.
(h) In rendering our opinions in Paragraphs 7, 8, 9 and 10 below
regarding the BCI Shares, we have relied solely upon an opinion rendered by
Donald J. Bingle, Esq., Vice President and General Counsel of BCI, of even
date herewith (a copy of which is attached hereto as Exhibit A) without
having conducted an investigation to determine or verify the accuracy of
the opinion expressed by counsel for BCI.
(i) Whenever our opinion, with respect to the existence or absence of
facts, is qualified by the phrase "to our knowledge" or a phrase of similar
import, it indicates that during the course of our representation of the
Company in connection with the subject transaction no information has come
to the attention of our attorneys who have worked on the subject
transaction which would give us current actual knowledge of the existence
or absence of such facts. However, except to the extent expressly set forth
herein, we have not undertaken any independent investigation to determine
the existence or absence of such facts, and no inference as to our
knowledge of the existence or absence of such facts should be drawn from
the fact of our representation of the Company or any other matter.
Based on the foregoing, and in reliance thereon, but subject to the
assumptions, limitations and qualifications expressed herein, we are of the
opinion that:
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has full
corporate power and authority to enter into and perform under the Agreement
and the Stock Purchase
<PAGE>
Mr. John Offerdahl
Offerdahl's Bagel Gourmet, Inc.
[Date]
Page 4
Agreement, the Registration Rights Agreement, the Employment Agreements,
the Consulting Agreement, the Secured Loan Agreement, the Services
Agreements contemplated by the Secured Loan Agreement and the Registration
Rights Agreement between BCI and the Company respecting the BCI Shares (all
of the foregoing agreements being referred to herein as the "Transaction
Documents") and consummate the transactions contemplated by the Transaction
Documents. The execution, delivery and performance of the Transaction
Documents and the consummation of the transactions contemplated thereby by
the Company have been duly authorized by all necessary corporate action and
the Transaction Documents are valid and binding agreements of the Company,
enforceable in accordance with its terms.
2. To our knowledge, the Company is not subject to any restriction,
agreement, law, judgment or decree which would prohibit or be violated by
the execution and delivery of the Transaction Documents or the consummation
of the transactions contemplated thereby, and no consent or approval is
required to be obtained by the Company from any third party or governmental
agency with respect to the Agreement or the consummation of the
transactions contemplated thereby.
3. To our knowledge, there are no actions, suits or proceedings
pending or threatened against the Company.
4. (a) The Company is authorized to issue 1,000,000 shares of common
stock (par value $.01 per share) and 200,000 shares of preferred stock; (b)
prior to delivery and issuance of the Exchange Shares, there were no issued
and outstanding shares of the capital stock of the Company, other than the
shares issued in connection with the Investor Offering and the Simultaneous
Contributions; and (c) except as disclosed in the Transaction Documents and
the Memoranda, there are no other issued and outstanding shares of capital
stock in the Company and no options, warrants or rights to obtain shares of
capital stock in the Company, other than pursuant to the 1995 Employee
Stock Option Plan.
5. Upon issuance and the delivery thereof to OBG pursuant to
the terms of the Agreement, the Exchange Shares (a) will be duly and
validly authorized and issued, fully paid and nonassessable and free of any
preemptive right; and (b) except as described in the Transaction Documents
and the Memoranda, will be free and clear of any lien, encumbrance or
security interest and, except as described in the Transaction Documents and
the Memoranda, and to our knowledge, will be free and clear of any claims.
<PAGE>
Mr. John Offerdahl
Offerdahl's Bagel Gourmet, Inc.
[Date]
Page 5
6. Except as described in the Transaction Documents or the
Memoranda and except as may be granted pursuant to the 1995 Employee
Stock Option Plan, there is no option, warrant, right, call, subscription
or other agreement or commitment obligating the Company to issue or sell,
or to purchase or redeem, any shares of the Exchange Shares.
7. BCI's authorized capital consists of 100,000,000 shares of Common
Stock, $0.01 par value per share, and 20,000,000 shares of preferred stock,
$0.01 par value per share. The BCI Shares have been duly and validly
authorized and are fully paid and nonassessable, free and clear of any
security interest, lien, encumbrance, right or restriction whatsoever
arising from BCI (except restrictions on resale under state or Federal
securities laws), and there are no outstanding options, warrants,
conversion privileges, commitments or demands of any character relating to
the BCI Shares arising from BCI.
8. BCI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. BCI has full
corporate power and authority to enter into the Stock Purchase Agreement in
accordance with its terms and such Stock Purchase Agreement and all
transactions required thereunder have been duly authorized and approved by
all necessary corporate action of BCI.
9. Each of the Stock Purchase Agreement and the Registration
Rights Agreement is the legal, valid and binding obligation of BCI,
enforceable in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights generally.
10. Neither the execution and delivery of the Stock Purchase
Agreement or the Registration Rights Agreement nor the consummation of the
transactions contemplated thereby will (i) violate the Certificate of
Incorporation or bylaws, as, amended, of BCI; (ii) violate or constitute an
occurrence of default under any provision of, or conflict with, or result
in acceleration of any obligation under, any mortgage, deed of trust, note,
loan, lease or agreement to which it or any of its properties or assets may
be bound; or (iii) violate any order, ruling, decree, judgment, arbitration
award or stipulation to which the BCI is subject.
We call your attention to the fact that, although we represent the
Company in connection with the subject transaction, our engagement has been
limited to specific matters as to which we have been consulted.
<PAGE>
Mr. John Offerdahl
Offerdahl's Bagel Gourmet, Inc.
[Date]
Page 6
This opinion is limited to the matters stated herein. We disavow any
obligation to update this opinion or advise you of any changes in our
opinion in the event of changes in applicable laws or facts or if additional
or newly discovered information is brought to our attention. This opinion is
provided to you as a legal opinion only and not as a guaranty or warranty of
the matters discussed herein or in the documents referred to herein. No
opinion may be inferred or implied beyond the matters expressly stated
herein and no portion of this opinion may be quoted or in any other way
published without the prior written consent of the undersigned. Further,
this opinion may be relied upon only by the addressee hereof and not by any
other party.
Very truly yours,
RUDNICK & WOLFE
By: _______________________________
cc: Joel M. Alam
<PAGE>
Exhibit 8.C.(6)(b)
------------------
March __, 1995
(312) 368-4000
Progressive Bagel Concepts, Inc. Offerdahl's Bagel Gourmet, Inc.
14103 Denver West Parkway 929 Shotgun Road
Golden, Colorado 80401 Sunrise, Florida 33326
Re: Offering of 3607.34 Shares of Common Stock, $.01 Par Value Per Share,
of Progressive Bagel Concepts, Inc. to Offerdahl's Bagel Gourmet, Inc.
----------------------------------------------------------------------
Ladies and Gentlemen:
We have served as special counsel to Progressive Bagel Concepts, Inc., a
Delaware corporation (the "Company"), in connection with the offering of 3607.34
shares of common stock (the "PBC Shares") in the Company (the "OBG Acquisition")
to Offerdahl's Bagel Gourmet, Inc. ("OBG").
We have examined and relied and base our opinion on originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents and records and upon such matters of law as we have deemed necessary
for the purposes of this opinion: (i) the Confidential Private Placement
Memorandum dated February 28, 1995, describing certain terms and conditions of
the OBG Acquisition (the "Memorandum"), (ii) the Offering Letter, dated March 2,
1995 (the "Offering Letter"), (iii) the Supplement, dated March 22, 1995, to
Confidential Private Placement Memorandum, dated February 17, 1995, February 21,
1995, and February 28, 1995, Offering Letter, dated February 23, 1995, and the
Offering Letter, dated March 2, 1995 (the "Supplement"), (iv) executed copies of
the Confirmation of Investment (the "Confirmation") that was delivered to the
investors with the Supplement, (v) an executed copy of that certain Agreement to
Contribute Assets by and among OBG, the current shareholders of OBG and the
Company, dated March 23, 1995 (the "OBG Contribution Agreement"), (vi) an
executed copy of that certain Agreement to Contribute Shares by and among the
shareholders of Brackman Brothers, Inc., the Company, and Brackman Brothers,
Inc., dated February 17, 1995 (the "Brackman Contribution Agreement"), (vii) an
executed copy of that certain Agreement to Contribute Assets by and among the
Company, Bagel & Bagel, Inc. and Richard Lozoff, dated March 2, 1995 (the "B&B
Contribution Agreement"), (viii) executed copies of the
<PAGE>
Progressive Bagel Concepts, Inc.
Offerdahl's Bagel Gourmet, Inc.
[Date]
Page 2
Stock Subscription Agreement for the Investor Offering, dated March __, 1995
(the "Subscription Agreement") and (ix) an executed copy of the Company's
Articles of Incorporation as filed with the Secretary of State of the State of
Delaware on February 28, 1995.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Memorandum, the Supplement, the
Confirmation and/or the OBG Contribution Agreement, as the case may be. The
Memorandum, Offering Letter, Supplement, Confirmation, OBG Contribution
Agreement, Brackman Contribution Agreement, B&B Contribution Agreement and Stock
Subscription Agreement shall be referred to hereinafter sometimes, collectively,
as the "Offering Documents."
In our examination, we have assumed the authenticity of original documents,
the accuracy of copies, and the genuineness of signatures. We have relied upon
certificates of public officials with respect to certain factual determinations
underlying the legal conclusions set forth herein. We have not attempted to
verify independently the facts set forth on such certificate.
We have assumed for purposes of this opinion, and the Company has
represented to us, that (i) the issuance of the PBC Shares to OBG pursuant to
the OBG Acquisition and the closing of the Investor Offering, the Brackman
Acquisition and the B&B Acquisition will occur contemporaneously, although not
on the same day, but in any case all of such closings will occur within a period
of thirty days; (ii) the offer and sale of the PBC Shares have been made in
strict compliance with the terms of the Offering Documents; and (iii) the
factual statements and representations contained in this opinion, and in the
documents examined for purposes hereof that are referenced above, are true and
accurate. Nothing contrary to any of these assumptions has come to our attention
in the course of our consideration of these matters.
Whenever our opinion with respect to the existence or absence of facts, is
qualified by the phrase "to our knowledge" or a phrase of similar import, it
indicates that during the course of our representation of the Company in
connection with the subject transaction no information has come to the attention
of our attorneys who have worked on the subject transaction which would give us
current actual knowledge of the existence or absence of such facts. However,
except to the extent expressly set forth herein, we have not undertaken any
independent investigation to determine the existence or absence of such facts,
and no inference as to our knowledge of the existence or absence of such facts
should be drawn from the fact of our representation of the Company on any other
matter.
Our opinion is limited specifically to those matters expressly set forth
herein, and no opinions should be inferred as to any other matters. We are
members of the Bar of the State of Illinois and, for purposes of this opinion,
we do not hold ourselves out as experts on, nor are
<PAGE>
Progressive Bagel Concepts, Inc.
Offerdahl's Bagel Gourmet, Inc.
[Date]
Page 3
we, in rendering our opinions herein, passing on, the laws of any jurisdiction
other than the laws of the United States and the States of Illinois upon the
transactions described herein.
Notwithstanding anything contained herein to the contrary, we express no
opinion whatsoever as to the tax consequences arising from the Tax Loans or the
OBG Loans (as defined in the Supplement) which the Company has agreed to make to
OBG as described in the OBG Contribution Agreement.
You should be aware that the opinions in this letter are based upon the
statutes, regulations, judicial decisions and administrative interpretations as
in effect on the date hereof and as they currently apply. Such items are subject
to change, in some cases with retroactive effect. Any material change after the
date hereof in any of the legal grounds for our opinions could affect the
opinions set forth in this letter. No assurance can be given that such changes
will not occur.
Based upon and subject to the matters discussed in this letter, we are of
the opinion that:
(1) The contribution by OBG of its assets to the Company in exchange
for the PBC Shares and the BCI Shares pursuant to the OBG Acquisition will
be treated for federal income tax purposes as part of a transaction
governed by Section 351 of the Internal Revenue Code of 1986, as amended
(the "Code"), thereby resulting in no gain or loss to OBG, except to the
extent that (i) OBG receives money or "other property" in the OBG
Acquisition (see paragraph (2) below regarding receipt of BCI Shares) as
described in Code Section 351(b) and (ii) the liabilities of OBG assumed by
the Company pursuant to the OBG Acquisition exceed the total adjusted basis
for federal income tax purposes of the assets of OBG to be contributed to
the Company pursuant to the OBG Acquisition, as described in Code Section
357(c).
(2) The BCI Shares received by OBG pursuant to the OBG Acquisition
will represent "other property" received under Code Section 351(b) and,
therefore any realized gain of OBG arising from its contribution of assets
to the Company will be recognized for federal income tax purposes, but,
with respect to the receipt of the BCI Shares, such gain will not be in
excess of the fair market value of the BCI Shares on the date such BCI
Shares are received by OBG.
Please note that while the opinions expressed herein are based upon our
best interpretations of existing sources of law and express what we believe a
court could properly conclude if presented with these issues, no assurance can
be given that such interpretations would be followed if they became the subject
of judicial or administrative proceedings.
<PAGE>
Progressive Bagel Concepts, Inc.
Offerdahl's Bagel Gourmet, Inc.
[Date]
Page 4
We call your attention to the fact that, although we represent the Company
in connection with the subject transaction, our engagement has been limited to
specific matters as to which we have been consulted.
This opinion is limited to the matters stated herein. We disavow any
obligation to update this opinion or advise you of any changes in our opinion in
the event of changes in applicable laws or facts or if additional or
newly-discovered information is brought to our attention. This opinion is
provided to you as a legal opinion only and not as a guaranty or warranty of
the matters discussed herein or in the documents referred to herein. No opinion
may be inferred or implied beyond the matters expressly stated herein and no
portion of this opinion may be quoted or in any other way published without the
prior written consent of the undersigned. Further, this opinion may be relied
upon only by the addressees hereof and not by any other party.
Very truly yours,
RUDNICK & WOLFE
----------------------------
A Partner
<PAGE>
Exhibit 8.C.(6)(c)
------------------
[DATE]
(312) 368-4000
Offerdahl's Bagel Gourmet, Inc.
929 Shotgun Road
Sunrise, Florida 33326
Attention: John Offerdahl, Chairman
Dear Mr. Offerdahl:
We have served as counsel for Progressive Bagel Concepts, Inc., a Delaware
corporation ("PBCI"), in connection with the offer and sale of common stock of
Boston Chicken, Inc., a Delaware corporation ("BCI") ("BCI Shares") having a
fair market value of $5,600,000 and 2,550 shares of common stock of PBCI ("PBCI
Shares") pursuant to that certain Agreement to Contribute Assets by and among
PBCI, Offerdahl's Bagel Gourmet, Inc. ("OBG") and the Shareholders of OBG (the
"Agreement"), dated March 23, 1995. Collectively, the BCI Shares and PBCI Shares
are referred to herein as the "Shares". Any initially capitalized terms used but
not defined in this opinion shall have the meanings assigned to such terms in
the Agreement.
We have examined and relied and base our opinion on originals or copies,
certified or otherwise identified to our satisfaction, of the following
documents and records and upon such matters of law as we have deemed necessary
for the purposes of this opinion as follows:
(a) the Agreement;
(b) the Stock Purchase Agreement by and between BCI and PBCI (the
"Stock Purchase Agreement");
(c) the Offering Memorandum dated February 28, 1995, as supplemented
in a written supplement delivered to OBG prior to the Closing Date (the
"Memorandum"); and
(d) the opinion of Donald J. Bingle, Esq. dated as of the date hereof
and attached hereto as Exhibit A.
<PAGE>
Mr. John Offerdahl
Offerdahl's Bagel Gourmet, Inc.
March _, 1995
Page 2
The opinions set forth herein are qualified as stated herein and are
qualified further by the following:
(a) This opinion is based upon existing federal securities laws,
regulations and interpretations in effect as of the date hereof and as
they presently apply.
(b) We express no opinion as to the effect of the laws of any state or
jurisdiction other than the laws of the United States of America upon the
transactions described herein.
(c) In rendering the opinions set forth below, we have relied, to the
extent we believe appropriate (i) upon certificates or statements of the
officers of BCI and PBCI and (ii) upon the representations and warranties
contained in the Agreement and the Stock Purchase Agreement and we have
made no independent investigation or verification of said facts. No opinion
is being expressed as to the effect of any event, fact or circumstance of
which we have no actual knowledge.
(d) We have assumed the competency of the signatories to the Agreement
and Stock Purchase Agreement, the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as certified or
photostatic copies, and the accuracy and completeness of all records made
available to us.
(e) We have assumed that the execution and delivery of the Agreement
by all parties thereto (other than PBCI) and the Stock Purchase Agreement
by all parties thereto are within their respective powers, and are their
legal, valid and binding obligation(s) and that they are in compliance with
all applicable laws, rules and regulations governing the conduct of their
respective business, and the parties (other than PBCI) are not subject to
any statute, rule or regulation or any impediment that requires them to
obtain the consent, or to make any declaration or filing with any
governmental authority in connection with the transactions contemplated by
the Agreement, and all terms, provisions and conditions relating to the
transaction referred to in this opinion letter are correctly and completely
reflected in the Stock Purchase Agreement, the Agreement and the
Memorandum.
(f) We have assumed the certificates evidencing the Shares bear
restrictive legends, and appropriate stop-transfer instructions will be
noted in BCI's stock transfer books.
<PAGE>
Mr. John Offerdahl
Offerdahl's Bagel Gourmet, Inc.
March ____, 1995
Page 3
(g) We have assumed, based solely upon the representations set forth
in the Agreement, that OBG is an "accredited investor" as defined in
Regulation D promulgated under the federal Securities Act of 1933, as
amended (the "1933 Act"), and that the offer and sale of the BCI Shares to
Offerdahl's does not constitute an offer or sale of the BCI Shares to the
shareholders of Offerdahl's by virtue of Rule 145 promulgated under the
1933 Act.
(h) We have assumed that Form D will be filed with the Securities and
Exchange Commission by BCI as required under Regulation D as promulgated
under the 1933 Act.
Based on the foregoing, and in reliance thereon, but subject to the
assumptions, limitations and qualifications expressed herein, we are of the
opinion that the offering, issuance, sale and delivery of the Shares under the
circumstances contemplated by the Agreement and the Memorandum are exempt from
the registration requirements of Section 5 of the 1933 Act.
This opinion is limited to the matters stated herein. We disavow any
obligation to update this opinion or advise you of any changes in our opinion in
the event of changes in applicable laws or facts or if additional or newly
discovered information is brought to our attention. This opinion is provided to
you as a legal opinion only and not as a guaranty or warranty of the matters
discussed herein or in the documents referred to herein. No opinion may be
inferred or implied beyond the matters expressly stated herein and no portion of
this opinion may be quoted or in any other way published without the prior
written consent of the undersigned. Further, this opinion may be relied upon
only by the addressee hereof and not by any other party.
Very truly yours,
RUDNICK & WOLFE
By:
-------------------------
A Partner
<PAGE>
Exhibit A
---------
[DATE]
(303) 384-5476
Progressive Bagel Concepts, Inc.
1526 Cole Boulevard
Suite 200
Golden, Colorado 80401
Dear Sirs:
As general counsel for Boston Chicken, Inc., Delaware corporation ("BCI"),
I and attorneys under my supervision have represented BCI in connection with the
offer and sale of shares of BCI common stock ("BCI Shares") having a fair market
value of $5,600,000 pursuant to that certain Stock Purchase Agreement by and
between BCI and Progressive Bagel Concepts, Inc. ("PBCI") ("Stock Purchase
Agreement"). Any initially capitalized terms used but not defined in this
opinion shall have the meanings assigned to such terms in the Stock Purchase
Agreement.
I have examined and relied and base my opinion on originals or copies,
certified or otherwise identified to my satisfaction, of the following documents
and records and upon such matters of law as I have deemed necessary for the
purposes of this opinion as follows:
(a) the Stock Purchase Agreement;
(b) the Offering Memorandum dated February 28, 1995, as supplemented
in a written supplement delivered to Offerdahl's Bagel Gourmet, Inc.
("OBG") prior to the Closing Date (the "Memorandum"); and
(c) the Agreement to Contribute Assets by and among PBCI, Offerdahl's
Bagel Gourmet, Inc. and the Shareholders of OBG (the "Agreement").
The opinions set forth herein are qualified as stated herein and are
qualified further by the following:
<PAGE>
Progressive Bagel Concepts, Inc.
March __, 1995
Page 2
(a) This opinion is based upon existing federal securities, laws,
regulations, and interpretations in effect as of the date hereof and as
they currently apply.
(b) I express no opinion as to the effect of the laws of any state or
jurisdiction other than the laws of the United States of America upon the
transactions described herein.
(c) In rendering the opinions set forth below, I have relied, to the
extent I believe appropriate (i) upon certificates or statements of the
officers of BCI and (ii) upon the representations and warranties contained
in the Stock Purchase Agreement and the Agreement and I have made no
independent investigation or verification of said facts. No opinion is
being expressed as to the effect of any event, fact or circumstances of
which I have no actual knowledge.
(d) I have assumed the competency of the signatories to the Agreement
and Stock Purchase Agreement, the genuineness of all signatures, the
authenticity of all documents submitted to me as originals, the conformity
to originals, the conformity to original documents of all documents
submitted to me as certified or photostatic copies, and the accuracy and
completeness of all records made available to me.
(e) I have assumed that the execution and delivery of the Agreement
by all parties hereto and of the Stock Purchase Agreement by all parties
thereto (other than BCI) are within their respective powers, and are their
legal, valid and binding obligations(s) and that they are in compliance
with all applicable law, rules and regulations governing the conduct of
their respective businesses, and the parties (other than BCI) are not
subject to any statute, rule or regulation or any impediment that requires
them to obtain the consent, or to make any declaration or filing with any
governmental authority in connection with the transactions contemplated by
the Agreement, and all terms, provisions and conditions relating to the
transaction referred to in this opinion letter are correctly and completely
reflected in the Stock Purchase Agreement, the Agreement and the
Memorandum.
(f) I have assumed the certificates evidencing the BCI Shares bear
restrictive legends, and appropriate stop-transfer instructions will be
noted in BCI's stock transfer book.
(g) I have assumed, based solely upon the representations set forth
in the Stock Purchase Agreement, that PBCI is an "accredited investor" as
set forth in
<PAGE>
Progressive Bagel Concepts, Inc.
March , 1995
Page 3
Regulation D promulgated under the federal Securities Act of 1933, as
amended (the "1933 Act").
(h) I have assumed that Form D will be filed with the Securities and
Exchange Commission as required under Regulation D as promulgated under the
1933 Act.
(i) I have assumed that PBCI will dispose of BCI shares in accordance
with the Agreement in a transaction which is exempt from registration
requirements under federal securities laws and that, based solely upon the
representation set forth in the Agreement, Offerdahl's is an "accredited
investor" as defined in Regulation D under the 1933 Act.
Based on the foregoing, and in reliance thereon, but subject to the
assumptions, limitations and qualifications expressed herein, I am of the
opinion that the offering, issuance, sale and delivery of the BCI Shares under
the circumstances contemplated by the Stock Purchase Agreement is exempt from
the registration requirements of Section 5 of the 1933 Act.
This opinion is limited to the matters stated herein. I disavow any
obligation to update this opinion or advise you of any changes in our opinion in
the event of changes in applicable laws or facts or if additional or newly
discovered information is brought to our attention. This opinion is provided to
you as a legal opinion only and not as a guaranty or warranty of the matters
discussed herein or in the documents referred to herein. No opinion may be
inferred or implied beyond the matters expressly stated herein and no portion of
this opinion may be quoted or in any other way published without the prior
written consent of the undersigned. Further, this opinion may be relied upon
only by the addressee hereof and its counsel, Rudnick & Wolfe, and not by any
other party.
Very truly yours,
BOSTON CHICKEN, INC.
Donald J. Bingle, Esq.,
Vice President and General Counsel
MGB1686
<PAGE>
Exhibit 2.4
AGREEMENT AND PLAN
OF
MERGER
dated August 10, 1995
among
PROGRESSIVE BAGEL CONCEPTS, INC.,
BALTIMORE BAGEL CO.,
BBC ACQUIRING CORPORATION,
MICHAEL E. BRAU
and
RACHEL C. BRAU,
individually and
as trustees of
The Brau Living
Trust Dated January 23, 1990
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Article 1.0 The Merger........................................................................................................ 1
1.1 The Merger........................................................................................................... 1
1.2 Time and Place of the Closing ....................................................................................... 1
1.3 Procedure at the Closing ............................................................................................ 2
Article 2.0 Effect of the Merger.............................................................................................. 2
2.1 Effective Time of the Merger......................................................................................... 2
2.2 Certificate of Incorporation of PBCI Sub............................................................................. 2
2.3 Bylaws of PBCI Sub................................................................................................... 2
2.4 Directors and Off1cers of PBCI Sub................................................................................... 2
2.5 Treatment of Shares of Common Stock of the Company .................................................................. 3
2.6 Treatment of Shares of Common Stock of PBCI Sub...................................................................... 3
2.7 Treatment of the Merger for Federal Income Tax Purposes ............................................................. 3
Article 3.0 Representations and Warranties of the Company and the Shareholders ............................................... 3
3.1 Organization, Power and Authority of the Company .................................................................... 3
3.2 Due Authorization; Binding Agreement of the Company ................................................................. 3
3.3 Binding Agreement of the Shareholders ............................................................................... 4
3.4 Capital Stock of the Company ........................................................................................ 4
3.5 Ownership of Capital Stock of the Company by the Shareholders........................................................ 5
3.6 Subsidiaries of the Company ......................................................................................... 5
3.7 Financial Statements of the Company ................................................................................. 5
3.8 Liabilities of the Company........................................................................................... 5
3.9 Tax Matters ......................................................................................................... 6
3.10 Real Estate of the Company ......................................................................................... 6
3.11 Good Title to and Condition of the Company's Assets................................................................. 7
3.12 Receivables of the Company ......................................................................................... 7
3.13 Licenses and Permits of the Company ................................................................................ 7
3.14 Proprietary Rights of the Company .................................................................................. 8
3.15 Adequacy of the Company's Assets ................................................................................... 8
3.16 Documents of and Information with Respect to the Company ........................................................... 8
3.17 Insurance Covering the Company and its Assets....................................................................... 9
3.18 Litigation Involving the Company ................................................................................... 9
3.19 Records of the Company.............................................................................................. 10
3.20 No Material Adverse Change.......................................................................................... 10
3.21 Absence of Certain Acts or Events .................................................................................. 10
3.22 Compliance with Laws by the Company................................................................................. 11
3.23 Environmental Matters............................................................................................... 11
3.24 Labor Relations of the Company ..................................................................................... 12
3.25 Employee Benefits................................................................................................... 13
3.26 Products Liability.................................................................................................. 14
3.27 Accuracy of Information Furnished by the Company and the Shareholders .............................................. 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3.28 Investment Bankers' and Brokers' Fees............................................................................. 15
3.29 Acquisition of the PBCI Shares and the BCI Shares................................................................. 15
3.30 Continuity of Interest by the Shareholders........................................................................ 16
Article 4.0 Representations and Warranties of PBCI............................................................................ 16
4.1 Organization, Power and Authority of PBCI and PBCI Sub............................................................ 16
4.2 Due Authorization; Binding Agreement of PBCI and PBCI Sub......................................................... 16
4.3 Capital Stock of PBCI............................................................................................. 17
4.4 PBCI Shares....................................................................................................... 17
4.5 BCI Shares........................................................................................................ 17
4.6 Financial Statements of PBCI...................................................................................... 17
4.7 Liabilities of PBCI............................................................................................... 17
4.8 Assets of PBCI.................................................................................................... 17
4.9 Licenses and Permits of the Company............................................................................... 18
4.10 Proprietary Rights of PBCI........................................................................................ 18
4.11 Adequacy of PBCI's Assets......................................................................................... 18
4.12 Litigation Concerning PBCI ....................................................................................... 18
4.13 No Material Adverse Change........................................................................................ 18
4.14 Compliance With Laws.............................................................................................. 18
4.15 Investment Bankers' and Brokers' Fees............................................................................. 18
Article 5.0 Additional Covenants of the Company and the Shareholders Pending the Closing...................................... 19
5 1 Reasonable Best Efforts........................................................................................... 19
5 2 Conduct of Business Pending the Closing........................................................................... 19
5.3 Access to the Company's Properties and Records.................................................................... 20
5.4 Notice of Material Developments................................................................................... 20
5.5 No Disclosure..................................................................................................... 20
5.6 No Other Discussions; Retention of Shares of the Company.......................................................... 20
Article 6.0 Additional Covenants of PBCI and PBCI Sub Pending the Closing..................................................... 21
6.1 Reasonable Best Efforts........................................................................................... 21
Article 7.0 Conditions to the Obligations of PBCI and PBCI Sub................................................................ 21
7.1 Accuracy of Representations and Warranties and Compliance with Obligations........................................ 21
7.2 Opinion of Counsel................................................................................................ 21
7.3 Receipt of Necessary Consents..................................................................................... 21
7.4 Landlord Estoppel Certificates; Lease Documents................................................................... 21
7.5 Title Commitments................................................................................................. 21
7.6 No Adverse Litigation............................................................................................. 22
7.7 Absence of Dissenters............................................................................................. 22
7.8 Certificate of Non-Foreign Status................................................................................. 22
7.9 Resignations and Releases......................................................................................... 22
7.10 Due Diligence..................................................................................................... 22
7.11 BCI Stock Purchase Agreement and BCI Registration Rights Agreement................................................ 22
7.12 PBCI Registration Rights Agreement................................................................................ 22
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7.13 Employment Agreement; Consulting Agreement....................................................................... 22
7.14 Commissary Lease and Purchase Agreement.......................................................................... 22
7.15 Payment of Montgomery Securities................................................................................. 23
Article 8.0 Conditions to Obligation of the Company and the Shareholders .................................................... 23
8.1 Accuracy of Representations and Warranties and Compliance with Obligations ....................................... 23
8.2 Opinion of Counsel ............................................................................................... 23
8.3 Consent of BCI ................................................................................................... 23
8.4 No Adverse Litigation............................................................................................. 23
8.5 BCI Stock Purchase Agreement and BCI Registration Rights Agreement ............................................... 23
8.6 PBCI Registration Rights Agreement................................................................................ 24
8.7 Employment Agreement; Consulting Agreement........................................................................ 24
8.8 Commissary Lease ................................................................................................. 24
8.9 Funding of Certain Payoffs and Distributions at Closing; Payment of Bank Debt and
Certain Closing Expenses ........................................................................................ 24
Article 9.0 Certain Post-Closing Covenants Closing........................................................................... 24
9.1 Execution of Further Documents .................................................................................. 24
9.2 Restrictions on Transfer of PBCI the Shares and the PBCI Common Shares .......................................... 24
9.3 Certain Post-Closing Cooperation ................................................................................ 27
9.4 Subsequent Audited Financial Statements.......................................................................... 27
9.5 Confidential Information ........................................................................................ 27
9.6 Restrictive Covenants ........................................................................................... 28
9.7 Remedies Waiver ................................................................................................. 29
9.8 PBCI Debt Agreements............................................................................................. 29
9.9 Authorization of PBCI Common Stock............................................................................... 29
9.10 Financial Statements of PBCI..................................................................................... 29
9.11 Certificate of Satisfaction of California Franchise Tax Board ................................................... 30
Article 10.0 Indemnification.................................................................................................. 30
10.1 Agreement by the Shareholders to Indemnify ...................................................................... 30
10.2 Agreement by PBCI and PBCI Sub to Indemnify ..................................................................... 31
10.3 Legal Proceedings................................................................................................ 32
10.4 Exclusive Remedy ................................................................................................ 32
10.5 Transfer of PBCI Shares ......................................................................................... 32
Article 11.0 Miscellaneous ................................................................................................... 32
11.1 Amendment and Modification ...................................................................................... 32
11.2 Payment of Expenses ............................................................................................. 32
11.3 Termination...................................................................................................... 33
11.4 Binding Effect................................................................................................... 33
11.5 Entire Agreement ................................................................................................ 33
11.6 Headings ........................................................................................................ 34
11.7 Execution in Counterpart ........................................................................................ 34
11.8 Notices ......................................................................................................... 34
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11.9 Governing Law ...................................................................................................... 35
11.10 Publicity ......................................................................................................... 35
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AGREEMENT AND PLAN OF MERGER
This agreement and plan of merger (the "Agreement") is made and entered
into this 10th day of August, 1995 by and among Progressive Bagel Concepts,
Inc., a Delaware corporation ("PBCI"), Baltimore Bagel Co., a California
corporation (the "Company"), BBC Acquiring Corporation, a Delaware corporation
("PBCI Sub"), and Michael E. Brau and Rachel C. Brau, individually and as
trustees of the Brau Living Trust (the "Trust") dated January 23, 1990 (the
"Shareholders").
RECITALS
This Agreement provides for the merger of the Company with and into PBCI
Sub, a newly-created wholly-owned subsidiary of PBCI, with PBCI Sub being the
surviving corporation in the merger. In the merger the outstanding shares of
common stock of the Company will be converted into shares of preferred stock of
PBCI and shares of common stock of Boston Chicken, Inc., a Delaware corporation
("BCI"), on the basis provided for herein. The Merger is intended to qualify as
a tax-free reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended.
This Agreement sets forth the representations and warranties made by PBCI,
the Company and the Shareholders, sets forth certain covenants and agreements of
the parties, provides conditions to the obligations of the parties and sets
forth other provisions relating to the merger.
The board of directors and shareholders of each of the Company and PBCI Sub
have approved and adopted the merger upon the terms and subject to the
conditions set forth in this Agreement.
COVENANTS
In consideration of the mutual representations, warranties and covenants
and subject to the conditions herein contained, the parties hereto agree as
follows:
ARTICLE 1.0 THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, and in
accordance with the General Corporation Law of the State of Delaware, as amended
(the "Delaware Act"), and the General Corporation Law of the State of California
(the "California Act"), the Company shall be merged with and into PBCI Sub (the
"Merger") at the Effective Time (as hereinafter defined). Following the Merger,
PBCI Sub shall continue as the surviving corporation and the separate existence
of the Company shall cease.
1.2 TIME AND PLACE OF THE CLOSING. The closing of the Merger shall take
place at the offices of PBCI at 9:00 A.M., local time, on August 10, 1995;
provided, however, that if any of the conditions which are set forth in Articles
7.0 and 8.0 has not been satisfied or waived by said date, then the closing
shall take place on a subsequent date, which shall be determined by the mutual
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agreement of PBCI and the Company. Throughout this Agreement, such event is
referred to as the "Closing" and such date and time are referred to as the
"Closing Date."
1.3 PROCEDURE AT THE CLOSING. At the Closing, the parties agree to take the
following steps in the order listed below (provided, however, that upon their
completion all such steps shall be deemed to have occurred simultaneously):
1.3.1 The Company and the Shareholders shall deliver to PBCI and PBCI
Sub the certificates, instruments and other documents required to be
delivered by the Company pursuant to Article 7.0.
1.3.2 PBCI and PBCI Sub shall deliver to the Shareholders the
certificates, instruments and other documents required to be delivered by
the Purchaser pursuant to Article 8.0.
1.3.3 PBCI, the Company and PBCI Sub shall file with the Secretary of
State of the State of Delaware and the Secretary of State of California a
certificate of merger in the form attached hereto as Exhibit A (the
"Certificate of Merger").
1.3.4 PBCI shall deliver to the Shareholders the BCI Shares (as
hereinafter defined) and the PBCI Shares (as hereinafter defined).
ARTICLE 2.0 EFFECT OF THE MERGER
2.1 EFFECTIVE TIME OF THE MERGER. The Merger shall become effective at the
time (the "Effective Time") the Company and PBCI Sub file the Certificate of
Merger with the Secretary of State of the State of Delaware. The Merger shall
have the effect set forth in the Delaware Act and the California Act. PBCI Sub
may, at any time after the Effective Time, take any action (including executing
and delivering any document) in the name and on behalf of either the Company or
PBCI Sub in order to carry out and effectuate the transactions contemplated by
this Agreement.
2.2 CERTIFICATE OF INCORPORATION OF PBCI SUB. The Certificate of
Incorporation of PBCI Sub shall be the Certificate of Incorporation of PBCI Sub
as it exists immediately prior to the Effective Time, amended by deleting
Article FIRST thereof and substituting therefor the following new Article FIRST:
"FIRST. The name of the Corporation is Baltimore Bagel Co."
2.3 BYLAWS OF PBCI SUB. The Bylaws of PBCI Sub shall be the Bylaws of PBCI
Sub as they exist immediately prior to the Effective Time.
2.4 DIRECTORS AND OFFICERS OF PBCI SUB. The directors and officers of PBCI
Sub shall be the directors and of officers of PBCI as they exist immediately
prior to the Effective Time (retaining their respective positions and terms of
office).
2.5 TREATMENT OF SHARES OF COMMON STOCK OF THE COMPANY. At and as of the
Effective Time, the outstanding common shares of the Company shall be converted
into the right to receive (i) 6,250 shares of Series A preferred stock of PBCI
having the terms set forth in Exhibit B hereto (the aggregate number of shares
of such preferred stock deliverable in respect of all of the
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outstanding shares of common stock of the Company being herein referred to as
the "PBCI Shares"), and (ii) that number of shares of common stock of BCI that
shall be equal to $4,000,000 divided by the closing sale price per share of the
BCI common stock as quoted on the NASDAQ National Market, as reported in the
Wall Street Journal (Western Edition), on the second business day prior to the
Closing Date (the aggregate number of shares of such common stock of BCI
deliverable in respect of all of the outstanding shares of common stock of the
Company being herein referred to as the "BCI Shares"). No shares of common stock
of the Company shall after the Effective Time be deemed to be outstanding or to
have any rights other than those set forth in this Section 2.5.
2.6 TREATMENT OF SHARES OF COMMON STOCK OF PBCI SUB. At and as of the
Effective Time, each share of outstanding common stock of PBCI Sub shall remain
outstanding and unchanged.
2.7 TREATMENT OF THE MERGER FOR FEDERAL INCOME TAX PURPOSES. The Merger is
intended to qualify as a tax-free reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
parties agree to prepare and file their federal and state income tax returns in
a manner consistent with such characterization.
ARTICLE 3.0 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
In order to induce PBCI and PBCI Sub to enter into this Agreement and to
consummate the transactions contemplated hereunder, the Company and the
Shareholders jointly and severally make the following representations and
warranties:
3.1 ORGANIZATION, POWER AND AUTHORITY OF THE COMPANY. The Company is a
corporation duly organized and legally existing in good standing under the laws
of California, and has full corporate power and authority (i) to own or lease
its properties and to carry on its business as it is now being conducted, and
(ii) to enter into this Agreement and to carry out the transactions and
agreements contemplated hereby.
3.2 DUE AUTHORIZATION; BINDING AGREEMENT OF THE COMPANY. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action of the Company, including the approval of the shareholders of
the Company. This Agreement has been duly executed and delivered by the Company
and is a valid and binding obligation of the Company, enforceable in accordance
with its terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting creditors' rights
generally or general principles of equity. Neither the execution and delivery of
this Agreement by the Company nor the consummation of the transactions
contemplated hereby will at the Closing Date: (i) conflict with or violate any
provision of the articles of incorporation or bylaws of the Company or of any
decree or order of any court or administrative or other governmental body which
is either applicable to, binding upon or enforceable against the Company or the
assets and properties of the Company; or (ii) except as set forth in Schedule
3.2, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under, any mortgage, contract, agreement,
indenture or other instrument which is either binding upon or enforceable
against the Company or the assets and properties of the Company. Except for the
filing
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of the Certificate of Merger and the receipt and filing of the Tax Clearance
Certificate (as hereinafter defined), no permit, consent, approval or
authorization of, or declaration to or filing with, any regulatory or other
government authority is required in connection with the execution and delivery
of this Agreement by the Company and the consummation by it of the transactions
contemplated hereby.
3.3 BINDING AGREEMENT OF THE SHAREHOLDERS. This Agreement has been duly
executed and delivered by each of the Shareholders and is a valid and binding
obligation of each of them, enforceable in accordance with its terms, except to
the extent that such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting creditors' rights generally or general
principles of equity. Neither the execution and delivery of this Agreement by
the Shareholders nor the consummation of the transactions contemplated hereby
will at the Closing Date: (i) conflict with or violate any provision of the
articles of incorporation or bylaws of the Company, or of any law, ordinance or
regulation or any decree or order of any court or administrative or other
governmental body which is either applicable to, binding upon or enforceable
against the Shareholders or the Company or the assets and properties of the
Company; or (ii) except as set forth in Schedule 3.16, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under, any mortgage, contract, agreement, indenture, will, trust or other
instrument which is either binding upon or enforceable against the Shareholders,
the Company or the assets and properties of the Company. No permit, consent,
approval or authorization of, or declaration to or filing with, any regulatory
or other government authority is required in connection with the execution and
delivery of this Agreement by the Shareholders and the consummation by them of
the transactions contemplated hereby.
3.4 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of 10,000,000 common shares, 2,500,000 shares of which
are issued and outstanding and none of which are issued and held in its
treasury. All voting rights in the Company are vested exclusively in its shares
of common stock, and there are no voting trusts, proxies or other agreements or
understandings with respect to the voting of the capital stock of the Company.
All of the issued and outstanding shares of common stock of the Company are
validly authorized and issued, fully paid and non-assessable. Schedule 3.4 sets
forth the name and address of and the number of shares of common stock of the
Company owned by, each shareholder of record (and, if different, by each
beneficial owner) as of the date hereof. There are no outstanding warrants,
options or rights of any kind to acquire from the Company any shares of its
common stock or securities of any kind, and there are no pre-emptive rights with
respect to the issuance or sale of shares of capital stock of the Company. The
Company has no obligation to acquire any of its issued and outstanding shares of
common stock or any other security issued by it from any holder thereof.
3.5 OWNERSHIP OF CAPITAL STOCK OF THE COMPANY BY THE SHAREHOLDERS. The
Shareholders are the lawful owners of all of the shares of outstanding capital
stock of the Company and have valid marketable title thereto, free and clear of
all liens, pledges, encumbrances, security interests, restrictions on transfer
(other than restrictions under federal and state securities laws), claims and
equities of every kind. The shares of capital stock of the Company are held by
the Trust as "community trust estate" (as defined in the Trust). Except for this
Agreement, there are no
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outstanding warrants, options or rights of any kind to acquire from the
Shareholders any of the shares of outstanding capital stock of the Company.
3.6 SUBSIDIARIES OF THE COMPANY. The Company has no equity interest, and no
right or obligation to acquire an equity interest, in any other person or
entity.
3.7 FINANCIAL STATEMENTS OF THE COMPANY. Set forth in Schedule 3.7 are the
following financial statements of the Company:
3.7.1 unaudited balance sheets at December 31 of each of the years
1992, 1993, and 1994;
3.7.2 an unaudited balance sheet of the Company at June 30,1995;
3.7.3 unaudited statements of income and retained earnings and
statements of cash flow for each year in the three-year period ended
December 31, 1994; and
3.7.4 an unaudited statement of income and retained earnings of the
Company for the six-month period ended June 30, 1995.
Such financial statements present fairly the financial position of the Company
at each of the said balance sheet dates and the results of its operations for
each of the said periods covered, and they have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis except as
may be disclosed in the notes thereto. The unaudited balance sheet of the
Company at June 30, 1995 (including the notes pertaining thereto) is referred to
herein as the "1995 Balance Sheet."
3.8 LIABILITIES OF THE COMPANY. The Company has no liabilities or
obligations, either accrued, absolute, contingent or otherwise, except: (i) to
the extent reflected or taken into account in determining net worth in the 1995
Balance Sheet and not heretofore paid or discharged; (ii) to the extent clearly
disclosed and specifically set forth in or incorporated by express reference in
any of the schedules attached hereto; and (iii) normal liabilities incurred in
the ordinary course of business, consistent with prior practice, since the date
of the 1995 Balance Sheet.
3.9 TAX MATTERS.
3.9.1 The Company has timely filed all tax returns and reports
required to be filed by it, including without limitation all federal,
state, local and foreign tax returns, and has paid in full all taxes and
other charges which have become due. The amounts provided in the 1995
Balance Sheet for taxes are adequate to cover all unpaid liabilities for
all federal, state, local and foreign taxes and other charges which were
accrued through, or applicable to the period ended on, the date of the 1995
Balance Sheet, and for which the Company may be liable in its own right or
as a transferee of the assets of, or successor to, any other person or
entity. There is no tax deficiency proposed or to the best of the knowledge
of the Shareholders and the Company threatened against the Company. There
are no tax liens upon any property or assets
5
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of the Company. The Company has made all payments of estimated taxes when due in
amounts sufficient to avoid the imposition of any penalty.
3.9.2 All taxes and other assessments and levies which the Company was
required by law to withhold or to collect have been duly withheld and collected,
and have been paid over to the proper governmental entity or are being held by
the Company or its payroll service for such payment, and all such withholdings
and collection and all other payments due in connection therewith as of the date
of the 1995 Balance Sheet are duly reflected on the 1995 Balance Sheet.
3.9.3 None of the tax returns of the Company is under audit or examination
by any tax authority, and there are no outstanding agreements or waivers
extending the statute of limitations applicable to any federal or state income
tax returns of the Company for any period. The Company has previously delivered
to PBCI accurate and complete copies of all federal and state income tax returns
filed by it for taxable years ending after December 31, 1991 (and any
examination reports and statements of deficiencies assessed against or agreed to
by the Company in connection with any such returns).
3.9.4 The Company has filed a valid election to be taxed as an S
corporation (within the meaning of Section 1361 of the Code), which election has
been continuously in effect since December 1, 1988. The Company is not subject
to the build-in gains tax imposed under Section 1374 of the Code.
3.10 REAL ESTATE OF THE COMPANY.
3.10.1 Schedule 3.10 accurately and completely sets forth, with respect to
every parcel of real estate leased by the Company (the "Leasehold Premises"):
(i) the lessor and lessee thereof and the date and term of the lease governing
such property; (ii) the location, including address, thereof; and (iii) the
approximate size thereof. The Company has previously delivered to PBCI accurate
and complete copies of each of the leases covering the Leasehold Premises, and
none of such leases has been amended or modified except to the extent that such
amendments or modifications are disclosed in such copies or in Schedule 3.10.
All of the leases covering the Leasehold Premises are in full force and effect,
and the Company is not in default or breach under any such lease. No event has
occurred which with the passage of time or the giving of notice or both would
cause a material breach of or default under any such lease. None of the
Shareholders or the Company has any knowledge of any breach or anticipated
breach by the other parties to such lease.
3.10.2 The Leasehold Premises are each in reasonably good operating
condition, normal wear and tear excepted, and are in the aggregate sufficient to
satisfy the Company's current normal production and sales levels.
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3.10.3 None of the Shareholders or the Company has received notice of:
(i) any condemnation proceeding with respect to any portion of the
Leasehold Premises, and to the best of the knowledge of the Shareholders
and the Company no proceeding is contemplated by any governmental
authority; or (ii) any special assessment which may affect the Leasehold
Premises, and to the best of the knowledge of the Shareholders and the
Company no such special assessment is contemplated by any governmental
authority.
3.11 GOOD TITLE TO AND CONDITION OF THE COMPANY'S ASSETS. The Company has
good and marketable title to all of its assets and properties, free and clear of
all liens, mortgages, pledges, encumbrances or charges of every kind, nature,
and description whatsoever, except those set forth in Schedule 3.11. The
Company's fixed assets are in reasonably good operating condition, normal wear
and tear excepted. The inventory and supplies of the Company consist of items of
a quality and quantity usable and saleable in the normal course of the Company's
business at values in the aggregate at least equal to the values at which such
items are carried on its books.
3.12 RECEIVABLES OF THE COMPANY. The Company has previously delivered to
the Purchaser a complete list of all receivables of the Company as of the date
of the 1995 Balance Sheet, including accounts receivable, notes receivable and
insurance proceeds receivable. Except for the receivable due from Campbell
Distributing in the amount of $7,000, all of the receivables listed thereon or
set forth or reflected in the 1995 Balance Sheet, were, as of the dates as of
which the information is given therein, and as of the Closing Date all of the
Company's receivables will be, valid accounts receivable which are or will be
current and collectible and which have been or will be, within 90 days after the
Closing Date, collected in full except to the extent of any allowance for
uncollectible receivables set forth on the 1995 Balance Sheet. For purposes of
determining whether a receivable of a particular account party has been
collected, payments received from that account party shall be applied on a
first-in, first-out basis, except for cash on delivery payments and except as
otherwise directed by the account party in the case of disputed accounts.
3.13 LICENSES AND PERMITS OF THE COMPANY. The Company possesses all
licenses and other required governmental or official approvals, permits or
authorizations, the failure to possess which would have a material adverse
effect on the business, financial condition or results of operations of the
Company. All such licenses, approvals, permits and authorizations that are
material to the Company's business are in full force and effect, the Company is
in substantial compliance with their requirements, and no proceeding is pending
or, to the best of the knowledge of the Shareholders and the Company, threatened
to revoke or amend any of them. Schedule 3.13 contains an accurate and complete
list of all such licenses, approvals, permits and authorizations, including all
business licenses and certificates of occupancy. Except as set forth in Schedule
3.13, none of such licenses, approvals, permits and authorizations are or will
be impaired or in any way affected by the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
3.14 PROPRIETARY RIGHTS OF THE COMPANY. The Company possesses all
proprietary rights, the failure to possess which would have a material adverse
effect on the business, financial condition or results of operations of the
Company, including without limitation patents, trade secrets,
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technology, know-how, copyrights, trademarks, trade names, and rights to any of
the foregoing, to carry on its business as now being conducted without conflict
with valid proprietary rights of others. Schedule 3.14 contains an accurate and
complete list of all such proprietary rights (the "Proprietary Rights"). Except
as set forth on Schedule 3.14, (i) the Company owns all right, title and
interest in and to all of the Proprietary Rights, (ii) there have been no claims
made against the Company for the assertion of the invalidity, abuse, misuse, or
unenforceability of any of such rights, and there are no grounds for the same,
(iii) none of the Shareholders or the Company has received a notice of conflict
with the asserted rights of others within the last five years, and (iv) to the
best of the knowledge of the Company and the Shareholders, the conduct of the
Company's business has not infringed any such rights of others.
3.15 ADEQUACY OF THE COMPANY'S ASSETS. The assets and properties of the
Company constitute, in the aggregate, all of the property necessary for the
conduct of the Company's business in the manner in which and to the extent to
which it is currently being conducted. None of the Shareholders or the Company
knows of any written or oral communication, fact, event or action which exists
or has occurred within 90 days prior to the date of this Agreement, which would
tend to indicate that any current supplier to the Company of items essential to
the conduct of its business, which items cannot be replaced by the Company at
comparable cost to the Company and the loss of which would have a material
adverse effect on the business or operations of the Company, will terminate its
business relationship with the Company. Except as set forth on Schedule 3.15,
neither the Shareholders nor any Affiliate (as hereinafter defined) of any of
the Shareholders other than the Company, nor any officer, director or employee
of the Company, has any direct or indirect interest in any supplier or
competitor of the Company or in any person from whom or to whom the Company
leases real or personal property, or in any other person with whom the Company
is doing business. The Company is not restricted by agreement from carrying on
its business anywhere in the world. As used in this Agreement, the term
"Affiliate" means, with respect to a specified person, any other person which
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the persons specified.
3.16 DOCUMENTS OF AND INFORMATION WITH RESPECT TO THE COMPANY. Schedule
3.16 accurately and completely lists the following: (i) each loan, credit
agreement, guarantee, security agreement or similar document or instrument to
which the Company is a party or by which it is bound; (ii) each lease of
personal property to which the Company is a party or by which it is bound other
than personal property leases under which the annual rent payable is less than
$2,500; (iii) any other agreement, contract or commitment to which the Company
is a party or by which it is bound which involves a future commitment by the
Company in excess of $10,000 and which cannot be terminated without liability on
90 days or less notice; (iv) each power of attorney executed by or on behalf of
the Company; (v) the name and current compensation level of each employee of the
Company earning in excess of $25,000 per year and the profit sharing, bonus or
any other form of compensation paid or payable by the Company to or for the
benefit of each such person for the year ended December 31, 1994 and the current
year, and any employment or other agreement of the Company with any of its
officers or employees; (vi) the name of each of the Company's officers and
directors; and (vii) the name of each bank in which the Company has an account
or safe-deposit box, the name in which the account or box is held and the names
of all persons authorized to draw thereon or to have access thereto. The Company
has previously furnished PBCI with an accurate
8
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and complete copy of each such agreement, contract or commitment listed in
Schedule 3.16. There has not been any default in any obligation to be
performed by the Company under any such instrument.
3.17 INSURANCE COVERING THE COMPANY AND ITS ASSETS. The Company carries
insurance, which is adequate in character and amount, with reputable
insurers, covering all of its assets, properties and business, and it has
provided all required performance and other surety bonds. Schedule 3.17
accurately and completely lists each policy of insurance in force with respect
to the Company, its assets and properties, and each of the performance or
other surety bonds maintained by the Company in the conduct of its business.
All premiums and other payments which have become due under the policies of
insurance listed in Schedule 3.17 have been paid in full, all of such policies
are now in full force and effect and the Company has received no notice from
any insurer, agent or broker of the cancellation of, or any increase in premium
with respect to, any of such policies or bonds. Neither the Company nor any of
the Shareholders has received any notification from any insurer, agent or
broker denying or disputing any claim made by the Company or denying or
disputing any coverage for any such claim or the amount of any claim. The
Company has no claim against any of its insurers under any of such policies
pending or anticipated and there has been no occurrence of any kind which would
give rise to any such
3.18 LITIGATION INVOLVING THE COMPANY. Except as set forth in Schedule
3.18, there are, and have been during the period from January 1, 1992 to the
date hereof, no actions, suits, claims, governmental investigations or
arbitration proceedings pending or to the best of the knowledge of the
Shareholders or the Company threatened against or affecting the Company or any
of its assets or properties and exceeding $2,500 per action or claim, or
$10,000 in the aggregate, and, to the best of the knowledge of the
Shareholders or the Company, there is no basis for any of the foregoing. There
are no outstanding orders, decrees or stipulations issued by any federal, state,
local or foreign judicial or administrative authority in any proceeding to
which the Company is or was a party. Schedule 3.18 also sets forth the workers
compensation claims paid by the Company for the period from January 1, 1992 to
the date hereof and all such claims currently outstanding. None of the
Company's officers or directors has a claim against the Company.
3.19 RECORDS OF THE COMPANY. The Company has previously furnished the
Purchaser with copies of the Company's articles of incorporation and all
amendments thereto to date (certified by the Secretary of State of California)
and of the Company's bylaws (certified by the Company's secretary), and such
copies are correct and complete in all respects. All of the Company's
operating data and records, including without limitation financial, accounting
and credit records (the "Company Records"), are accurate and complete in all
material respects and there are no material matters as to which appropriate
entries have not been made in the Company Records. A record of all action
taken by the shareholders and the board of directors of the Company and all
minutes of their meetings are contained in the minute books of the Company and
are accurate and complete. The record books and stock ledgers of the Company
contain an accurate and complete record of all issuances, transfers and
cancellations of shares of capital stock of the Company.
3.20 NO MATERIAL ADVERSE CHANGE. Since the date of the 1995 Balance
Sheet, there have not been any changes in the business or properties of the
Company, or in its financial condition,
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other than changes permitted under this Agreement or occurring in the ordinary
course of business which in the aggregate have not had a material adverse effect
on the business, properties, financial condition, business prospects or
operating results of the Company. There is not, to the best of the knowledge of
the Shareholders or the Company, any threatened or prospective event or
condition of any character whatsoever which could materially and adversely
affect the assets, properties, business, financial condition or results of
operations of the Company.
3.21 ABSENCE OF CERTAIN ACTS OR EVENTS. Except as disclosed in Schedule
3.21, since the date of the 1995 Balance Sheet, the Company has not: (i)
authorized or issued any of its shares of capital stock (including any held in
its treasury) or any other securities; (ii) declared or paid any dividend or
made any other distribution of or with respect to its shares of capital stock or
other securities or purchased or redeemed any shares of its capital stock or
other securities except for distributions of cash and certain other assets
permitted under clause (ii) of Section 5.2.3; (iii) paid any bonus or increased
the rate of compensation of any of its employees earning in excess of $25,000
per year; (iv) sold, leased, transferred or assigned any of its assets other
than in the ordinary course of business; (v) made or obligated itself to make
capital expenditures aggregating more than $25,000; (vi) paid any of the legal,
accounting or other expenses of the Company or the Shareholders in connection
with the transactions contemplated hereby, the payment of which shall be
governed by Section 11.2; (vii) entered into any transaction or agreement with
either of the Shareholders or any person or entity related to either of them;
(viii) incurred any material obligations or liabilities (including any
indebtedness) or entered into any material transaction, except for this
Agreement and the transactions contemplated hereby; or (ix) suffered any theft,
damage, destruction or casualty loss in excess of $10,000.
3.22 COMPLIANCE WITH LAWS BY THE COMPANY. Except as set forth in Schedule
3.22, the Company is in substantial compliance with all laws, regulations and
orders applicable to the Company, its assets, properties and business. Neither
the Shareholders nor the Company has received notification of any asserted
failure to comply with any laws which has not been resolved, and to the best of
their knowledge, no proceeding with respect to any such violation is
contemplated. Neither the Company nor, to the best of the knowledge of the
Shareholders or the Company, any employee of the Company, has made any payment
of funds in connection with the business of the Company prohibited by law, and
no funds have been set aside to be used in connection with the business of the
Company for any payment prohibited by law.
3.23 ENVIRONMENTAL MATTERS.
3.23.1 The Company has not transported, stored, treated or disposed,
nor has it allowed or arranged for any third parties to transport, store,
treat or dispose of Hazardous Substances or other waste to or at any
location other than a site lawfully permitted to receive such Hazardous
Substances or other waste for such purposes, nor has it performed,
arranged for or allowed by any method or procedure such transportation,
storage, treatment or disposal in contravention of any laws or regulations.
The Company has not disposed, or allowed or arranged for any third parties
to dispose, of Hazardous Substances or other waste upon property owned or
leased by them, except as permitted by law. For purposes of this Section
3.23, the
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term "Hazardous Substances" shall have the meaning given it in the
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Sections 9601, et seq.), as amended, and the regulations promulgated
pursuant thereto ("CERCLA"), or any similar state law.
3.23.2 There has not occurred, nor is there presently occurring, a
Release of any Hazardous Substance on, into or beneath the surface of any
of the Leasehold Premises. For purposes of this Section 3.23, the term
"Release" shall mean releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing
or dumping.
3.23.3 The Company has not transported or disposed, nor has it allowed
or arranged for any third parties to transport or dispose, any Hazardous
Substance or other waste to or at a site which, pursuant to CERCLA or any
similar state law, (i) has been placed on the National Priorities List or
its state equivalent, or (ii) the Environmental Protection Agency or the
relevant state agency has proposed or is proposing to place on the National
Priorities List or its state equivalent. The Company has received no
notice, and it has no knowledge of any facts which could give rise to any
notice, that the Company is a potentially responsible party for a federal
or state environmental cleanup site or for corrective action under CERCLA
or any other applicable law or regulation. The Company has not submitted
nor was it required to submit any notice pursuant to Section 103(c) of
CERCLA with respect to the Leasehold Premises. The Company has received no
written or oral request for information in connection with any federal or
state environmental cleanup site. The Company has not undertaken (or been
requested to undertake) any response or remedial actions or clean-up
actions of any kind at the request of any federal, state or local
governmental entity, or at the request of any other person or entity.
3.23.4 The Company does not use, and has not used, any Underground
Storage Tanks, and, to the best of the knowledge of the Company and the
Shareholders, there are not now nor have there ever been Underground
Storage Tanks on the Leasehold Premises. For purposes of this Section 3.23,
the term "Underground Storage Tanks" shall have the meaning given it in the
Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.).
3.23.5 There is no friable asbestos in or on any of the Leasehold
Premises.
3.23.6 There are no laws, regulations, ordinances, licenses, permits
or orders relating to environmental or worker safety matters requiring any
work, repairs, construction or capital expenditures with respect to the
assets or properties of the Company.
3.23.7 Schedule 3.23 identifies (i) all environmental audits,
assessments or occupational health studies relating to the assets,
properties or business of the Company undertaken by governmental agencies
with respect to the Company's business or the Company or its agents; (ii)
the results of any ground, water, soil, air or
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asbestos monitoring undertaken with respect to the Leasehold Premises and
prepared by or on behalf of the Company or the Shareholders; (iii) all
written communications between the Company and any environmental agencies
within the past three years; and (iv) all citations issued to the Company
within the past three years under the Occupational Safety and Health Act
(29 U.S.C. Sections 651 et seq.).
3.23.8 For purposes of this Section 3.23, "Leasehold Premises" shall
not include the Company's Commissary Facility.
3.24 LABOR RELATIONS OF THE COMPANY. Except as set forth in Schedule 3.24,
the Company is not a party to or bound by any collective bargaining agreement or
any other agreement with a labor union, and there has been no effort by any
labor union to organize any employees of the Company into one or more collective
bargaining units. There is not pending or, to the best of the knowledge of the
Shareholders or the Company, threatened any labor dispute, strike or work
stoppage which affects or which may affect the business of the Company or which
may interfere with its continued operation. Neither the Company nor any agent,
representative or employee of the Company has committed any unfair labor
practice as defined in the National Labor Relations Act, as amended, and there
is not now pending or, to the best of the knowledge of the Shareholders or the
Company, threatened any charge or complaint against the Company by or with the
National Labor Relations Board or any representative thereof There has been no
strike, walkout or work stoppage involving any of the employees of the Company
during the five-year period prior to the date hereof. None of the Shareholders
or the Company is aware that any executive or key employee or group of employees
has any plans to terminate his, her or their employment with the Company.
3.25 EMPLOYEE BENEFITS.
3.25.1 Neither the Company, nor any corporation or business which is
now or at the relevant time was a member of a controlled group of
corporations or trades or businesses including the Company, within the
meaning of Section 414 of the Code, maintains or contributes to, or at any
time since December 31, 1989 maintained or contributed to: (i) any
non-qualified deferred compensation or retirement plans or arrangements;
(ii) any qualified defined contribution retirement plans or arrangements;
(iii) any qualified defined benefit pension plan; (iv) any other plan,
program, agreement or arrangement under which former employees of the
Company or their beneficiaries are entitled, or current employees of the
Company will be entitled following termination of employment, to medical,
health, life insurance or other benefits other than pursuant to benefit
continuation rights granted by state or federal law; or (v) any other
employee benefit, health, welfare, medical, disability, life insurance,
stock, stock purchase or stock option plan, program, agreement, arrangement
or policy, except in each case as described in Schedule 3.25 attached
hereto. The plans described in Schedule 3.25 are referred to herein as the
"Plans."
3.25.2 The administration of the Plans complies in all material
respects with the requirements of the Employee Retirement Income Security
Act of 1974 ("ERISA"), and the Plans meet any applicable requirements for
favorable tax
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treatment under the Code in both form and operation. All of the Plans which
constitute employee pension benefit plans or employee welfare plans subject
to ERISA and the trusts or other funding vehicles related to the Plans have
been maintained in compliance in both form and operation with the
requirements of ERISA including, but not limited to, the preparation and
filing of all required reports with respect to the Plans, the submission of
such reports to the appropriate governmental authorities, the timely
preparation and distribution of all required employee communications
(including without limitation any notice of plan amendment which is
required prior to the effectiveness of such amendments), the proper and
timely purchase and maintenance of required surety bonds and the proper and
timely disposition of all benefit claims. The costs of administering the
Plans, including fees for the trustee and other service providers which are
customarily paid by the Company, have been paid or will be paid prior to
the Closing or are reflected in the 1995 Balance Sheet. There have been no
prohibited transactions as defined in Section 406 of ERISA or Section 4975
of the Code with respect to any of the Plans or any parties in interest or
disqualified persons with respect to the Plans or any reduction or
curtailment of accrued benefits with respect to any of the Plans. There are
no pending or, to the best of the knowledge of the Company and the
Shareholders, threatened claims, lawsuits, or arbitrations which have been
asserted or instituted against the Plans, any fiduciaries thereof with
respect to their duties to the Plans or the assets of any of the trusts
under any of the Plans.
3.25.3 All required contributions for all Plan years ending prior to
the Closing Date have been made and adequate accruals for contributions
with respect to all current Plan years are reflected in the 1995 Balance
Sheet. The Company has no plans, programs, agreements or arrangements and
has made no other commitments to its employees, former employees or their
beneficiaries under which it has any obligation to provide any retiree or
other employee benefit payments which are not adequately funded through a
trust or other funding arrangement.
3.25.4 The Company has furnished PBCI with true and complete copies
of: (i) the Plans and any related trusts or funding vehicles, policies or
contracts and the related summary plan descriptions with respect to each
Plan; (ii) the most recent determination letters received from the Internal
Revenue Service regarding the plans and copies of any pending applications,
filings or notices with respect to any of the Plans with the Internal
Revenue Service, the Pension Benefit Guaranty Corporation, the Department
of Labor or any other governmental agency; (iii) the latest financial
statements and annual reports for each of the Plans and related trusts or
funding vehicles, policies or contracts as of the end of the most recent
plan year with respect to which the filing date for such information has
passed; (iv) copies of all corporate resolutions or other documents
pertaining to the adoption of the Plans or any amendments thereto or to the
appointment of any fiduciaries thereunder and copies of any investment
management agreement thereunder and of any fiduciary insurance policies,
surety bonds, rules, regulations or policies of the trustees or of any
committee thereunder; and (v) copies of any communications or notices
provided to
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employees or plan participants with respect to the Plans along with
information concerning the date and extent of distribution of such
communications, including without limitation notices intended to comply
with Section 606 of ERISA and Section 4980B of the Code.
3.26 PRODUCTS LIABILITY. Except as set forth in Schedule 3.18, that are no
claims (and, to the best of the knowledge of the Company and the Shareholders,
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against the Company giving
rise to any liability) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product manufactured, sold or
delivered by the Company and exceeding $2,500 per occurrence or $10,000 in the
aggregate. Schedule 3.26 sets forth, for each of the last three fiscal years of
the Company, and for the interim period ended on the date hereof, the aggregate
amount of product liability claims paid by or on behalf of the Company.
3.27 ACCURACY OF INFORMATION FURNISHED BY THE COMPANY AND THE SHAREHOLDERS.
No representation, statement or information made or furnished by the Company or
the Shareholders to PBCI, including without limitation those contained in this
Agreement and the various schedules attached hereto and the other information
and statements previously furnished by the Company and the Shareholders to the
Purchaser, contains or shall contain any untrue statement of a material fact or
omits or shall omit any material fact necessary to make the information
contained therein not misleading.
3.28 INVESTMENT BANKERS' AND BROKERS' FEES. Neither the Shareholders nor
the Company have any obligation to pay any fees or commissions to any investment
banker, broker, finder or agent with respect to the transactions contemplated by
this Agreement, except for the payment of a fee to Montgomery Securities
pursuant to an agreement with Montgomery Securities that the Company has
furnished to PBCI, the payment of which shall be governed by Section 11.2
hereof.
3.29 ACQUISITION OF THE PBCI SHARES AND THE BCI SHARES.
3.29.1 Each of the Shareholders is acquiring the PBCI Shares and the
BCI Shares for his or her own account for investment and not with a view to
distribution or resale thereof in any transaction which would be in
violation of the Securities Act of 1933, as amended (the "Securities Act"),
and the rules promulgated thereunder, or any state securities statute, has
not subdivided the PBCI Shares or the BCI Shares with, nor is he or she
holding all or any portion of the PBCI Shares or the BCI Shares for, any
other person. Each of the Shareholders agrees not to sell, hypothecate or
otherwise dispose of all or any part of the PBCI Shares, the shares of
common stock of PBCI into which the PBCI Shares are convertible (the "PBCI
Common Shares") or the BCI Shares unless such shares have been registered
under the Securities Act and applicable state or other securities laws or,
in the written opinion of counsel reasonably satisfactory to PBCI or BCI,
as applicable (the fees and expenses of which counsel shall be borne by the
selling Shareholder), an exemption from the registration requirements of
the Securities Act and such state or other laws is available.
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3.29.2 Each Shareholder is an "accredited investor" as defined in
Regulation D promulgated under the Securities Act.
3.29.3 The Shareholders have received and carefully read the material
set forth on Schedule 3.29 (the "BCI Information"). The Shareholders have
had made available to them and their attorneys and accountants all
documents that they have requested relating to an investment in PBCI and
BCI, and PBCI has provided answers to all of their questions concerning an
investment in PBCI and BCI. In evaluating the suitability of an investment
in PBCI and BCI, the Shareholders have not relied upon any representations
or other information (whether oral or written) other than as set forth in
this Agreement and the BCI Information or as contained in any documents
delivered or answers given in writing, to questions so furnished to it, by
PBCI.
3.29.4 The Shareholders have discussed with their legal, tax and
financial advisors the suitability of an investment in PBCI and BCI for
their particular tax and financial situation.
3.29.5 The Shareholders are acquiring the PBCI Shares and the BCI
Shares without being furnished any offering literature or prospectus other
than the BCI Information (and other than any documents delivered or answers
given in writing, to questions described in Section 3.29.3 above).
3.29.6 Each Shareholder is a bona fide resident of the state or other
jurisdiction set forth in his or her address on Schedule 3.4.
3.30 CONTINUITY OF INTEREST BY THE SHAREHOLDERS. None of the Shareholders
has any present plan, intention or arrangement to dispose of any of the PBCI
Shares or the PBCI Common Shares.
ARTICLE 4.0 REPRESENTATIONS AND WARRANTIES OF PBCI
In order to induce the Company and the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereunder, PBCI makes
the following representations and warranties:
4.1 ORGANIZATION, POWER AND AUTHORITY OF PBCI AND PBCI SUB. Each of PBCI
and PBCI Sub is a corporation duly organized and validly existing under the laws
of the State of Delaware, and has full corporate power and authority (i) to own
or lease its properties and to carry on its business as it is now being
conducted, and (ii) to enter into this Agreement and to carry out the
transactions and agreements contemplated hereby. Each of PBCI and PBCI Sub is
legally qualified to transact business as a foreign corporation, and is in good
standing, in all jurisdictions in which its business or property is such as to
require that it be so qualified, except where the failure to be so qualified
would not have a material adverse effect on its business, properties or
financial condition. PBCI Sub is legally qualified to transact business as a
foreign corporation, and is in good standing, in the State of California.
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4.2 DUE AUTHORIZATION; BINDING AGREEMENT OF PBCI AND PBCI SUB. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action of PBCI and PBCI Sub, except for the approval of any amendment
to the certificate of incorporation of PBCI that may be required to increase its
authorized shares of common stock in connection with the conversion of the PBCI
Shares. This Agreement has been duly executed and delivered by PBCI and PBCI Sub
and is a valid and binding obligation of each of them, enforceable in accordance
with its terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting creditors' rights
generally or general principles of equity. Neither the execution and delivery of
this Agreement by PBCI and PBCI Sub nor the consummation of the transactions
contemplated hereby will: (i) conflict with or violate any provision of the
certificate of incorporation or bylaws of PBCI or PBCI Sub or of any decree or
order of any court or administrative or other governmental body which is either
applicable to, binding upon or enforceable against PBCI, PBCI Sub, or the assets
and properties of either of them; or (ii) result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under, any
mortgage, contract, agreement, indenture or other instrument which is either
binding upon or enforceable against PBCI, PBCI Sub, or the assets and properties
of either of them. Except for the filing of the Certificate of Merger and the
receipt and filing of the Tax Clearance Certificate (as hereinafter defined), no
permit, consent, approval of authorization of, or declaration to or filing with,
any regulatory or other government authority is required in connection with the
execution and delivery of this Agreement by PBCI and PBCI Sub and the
consummation by them of the transactions contemplated hereby.
4.3 CAPITAL STOCK OF PBCI. The authorized capital stock of PBCI consists
solely of 1,000,000 shares of common stock, $.01 par value per share, 24,754.92
shares of which are issued and outstanding and none of which are issued and held
in its treasury, and 200,000 shares of preferred stock, $.01 par value, none of
which are issued.
4.4 PBCI SHARES. The PBCI Shares, when issued in the Merger, will be duly
authorized, validly issued, fully paid and nonassessable shares of preferred
stock, $.01 par value, of PBCI, and the PBCI Common Shares, when issued upon
conversion of the PBCI Shares, will be duly authorized, validly issued, fully
paid and nonassessable shares of common stock, $.01 par value, of PBCI.
4.5 BCI SHARES. At the closing PBCI will be the lawful owner of the BCI
Shares and have valid marketable title thereto, free and clear of all liens,
pledges, encumbrances, security interests, restrictions on transfer (other than
restrictions under federal and state securities laws), claims and equities of
every kind. Except for this Agreement, there are no outstanding warrants,
options or rights of any kind to acquire from PBCI any of the BCI Shares.
4.6 FINANCIAL STATEMENTS OF PBCI. PBCI has previously delivered to the
Company and the Shareholders its unaudited consolidated balance sheet at July 9,
1995 and its unaudited consolidated income statement for the period from March
24, 1995 to July 9, 1995. Such financial statements present fairly the
consolidated financial position of PBCI at such balance sheet date and the
results of its operations for the period covered, and they have been prepared in
conformity with
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generally accepted accounting principles except that such financial statements
do not reflect purchase accounting adjustments arising from the acquisitions of
the stock of Brackman Brothers, Inc., the assets of Bagel & Bagel, Inc. or the
assets of Offerdahl's Bagel Gourmet, Inc. The July 9, 1995 balance sheet is
herein sometimes referred to as the "PBCI Balance Sheet".
4.7 LIABILITIES OF PBCI. As of the date of the PBCI Balance Sheet, PBCI had
no material liabilities of a type required to be set forth on a balance sheet
prepared in accordance with generally accepted accounting principles, except as
set forth on the PBCI Balance Sheet.
4.8 ASSETS OF PBCI. PBCI has good and marketable title to all of its assets
and properties, free and clear of all liens, mortgages, pledges, encumbrances or
charges of every kind, nature and description whatsoever, except for mortgages,
pledges and security interests granted under or pursuant to the Secured Loan
Agreement (as hereinafter defined) and such liens, mortgages, pledges,
encumbrances or charges as do not have a material adverse effect on PBCI's
financial condition.
4.9 LICENSES AND PERMITS OF THE COMPANY. PBCI possesses all licenses and
other required governmental or official approvals, permits or authorizations,
the failure to possess which would have a material adverse effect on the
business, financial condition or results of operations of PBCI. All such
licenses, approvals, permits and authorizations that are material to PBCI's
business are in full force and effect, PBCI is in substantial compliance with
their requirements, and no proceeding is pending or, to the best of PBCI's
knowledge, threatened to revoke or amend any of them.
4.10 PROPRIETARY RIGHTS OF PBCI. PBCI possesses all proprietary rights, the
failure to possess which would have a material adverse effect on the business,
financial condition or results of operations of PBCI, including without
limitation patents, trade secrets, technology, know-how, copyrights, trademarks,
trade names, and rights to any of the foregoing, to carry on its business as now
being conducted without conflict with valid proprietary rights of others.
4.11 ADEQUACY OF PBCI'S ASSETS. The assets and properties of PBCI
constitute, in the aggregate, all of the property necessary for the conduct of
PBCI's business in the manner in which and to the extent to which it is
currently being conducted.
4.12 LITIGATION CONCERNING PBCI. There are on the date hereof no actions,
suits, claims, governmental investigations or arbitration proceedings pending or
to the best of the knowledge of PBCI threatened against or affecting PBCI or any
of its assets or properties which, if determined adversely to PBCI, would have a
material adverse effect on its business, financial condition or results of
operations.
4.13 NO MATERIAL ADVERSE CHANGE. Since the date of the PBCI Balance Sheet,
there have not been any changes in the business or properties of PBCI, or in its
consolidated financial condition, other than changes occurring in the ordinary
course of business which in the aggregate have not had a material adverse effect
on the business, properties or financial condition of PBCI.
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4.14 COMPLIANCE WITH LAWS. The Company is in substantial compliance with
all laws, regulations and orders applicable to PBCI, its assets, properties and
business, except where the failure so to comply would not have a material
adverse effect on the business, properties or financial condition of PBCI.
4.15 INVESTMENT BANKERS' AND BROKERS' FEES. Neither PBCI nor PBCI Sub has
any obligation to pay any fees or commissions to any investment banker, broker,
finder or agent with respect to the transactions contemplated by this Agreement.
ARTICLE 5.0 ADDITIONAL COVENANTS OF THE COMPANY AND THE SHAREHOLDERS PENDING THE
CLOSING
5.1 REASONABLE BEST EFFORTS. The Company and the Shareholders will use
reasonable best efforts to cause to be satisfied as soon as practicable and
prior to the Closing Date all of the conditions set forth in Article 7.0.
5.2 CONDUCT OF BUSINESS PENDING THE CLOSING. From and after the execution
and delivery of this Agreement and until the Closing Date, except as otherwise
provided by the prior written consent of PBCI:
5.2.1 the Company will conduct its business and operations in the
manner in which the same have heretofore been conducted and the Company
will use reasonable best efforts to (i) preserve its business organization
intact, (ii) keep available the services of its officers, employees, agents
and distributors, and (iii) preserve its relationships with customers,
suppliers and others having dealings with the Company;
5.2.2 the Company will maintain all of its properties in customary
repair, order and condition, reasonable wear and use and damage by
unavoidable casualty excepted, and to maintain insurance of such types and
in such amounts upon all of its properties and with respect to the conduct
of its business as are in effect on the date of this Agreement;
5.2.3 the Company will not (i) authorize or issue any shares of its
capital stock (including any held in its treasury) or any other securities,
(ii) declare or pay any dividend or make any other distribution of or with
respect to its shares of capital stock or other securities or purchase or
redeem any shares of its capital stock or other securities except that the
Company may distribute to the Shareholders prior to the Closing $1,245,000
in cash (including for this purpose $120,000 that was previously
distributed to the Trust), the 1992 Lexus automobile that is shown on the
books of the Company and the lease by the Company of a Mercedes automobile
(subject to the assumption by the Shareholders of the obligations of the
Company under the lease); (iii) pay any bonus or increase the rate of
compensation of any of its employees earning more than $25,000 per year or
increase the compensation of any other employees other than in the ordinary
course of business consistent with past practice; or enter into any new
employment agreement or amend any existing employment agreement; (iv) sell,
lease, transfer or assign any of its assets other than in the
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ordinary course of business; (v) make or obligate itself to make capital
expenditures aggregating more than $25,000; (vi) enter into any transaction
or agreement with either of the Shareholders or any person or entity
related to either of them; (vii) incur any material obligations or
liabilities or enter into any material transaction (for this purpose an
obligation or liability in excess of $25,000 or a transaction having a
value in excess of $25,000 shall be deemed to be material); or (viii) amend
its articles of incorporation or bylaws.
5.3 ACCESS TO THE COMPANY'S PROPERTIES AND RECORDS. From and after the
execution and delivery of this Agreement, the Company will afford to the
representatives of PBCI access, during normal business hours and upon reasonable
notice, to the Company's premises sufficient to enable PBCI to inspect the
assets and properties of the Company, and the Company will furnish to such
representatives during such period all such information relating to the
foregoing investigation as PBCI may reasonably request; provided, however, that
any furnishing of such information to PBCI and any investigation by PBCI shall
not affect the right of PBCI to rely on the representations and warranties made
by the Shareholders in or pursuant to this Agreement (although PBCI will use
reasonable best efforts to inform the Shareholders of any inaccuracy of any
representation and warranty of the Shareholders of which it is aware at the time
of the Closing), and, provided further that PBCI will hold in confidence all
documents and information concerning the Company so furnished, and, if the
Merger shall not be consummated, such confidence shall be maintained and PBCI
will not use or disclose to any person any such document or information (except
to the extent that such information can be shown to be previously available to
PBCI, publicly available or disclosed to PBCI by a person who is not obligated
to maintain the confidentiality of such information. At the request of the
Company, all information concerning the Company furnished to PBCI shall be
returned to the Company.
5.4 NOTICE OF MATERIAL DEVELOPMENTS. The Company will give prompt written
notice to PBCI of any material development affecting the assets, properties,
business, business prospects, financial condition or results of operations of
the Company, including without limitation any development which results in the
inaccuracy of any of the representations and warranties of the Company and the
Shareholders made herein. However, no disclosure pursuant to this Section 5.4
shall be deemed to amend or supplement any of such representations and
warranties, or any of the schedules hereto.
5.5 NO DISCLOSURE. Without the prior written consent of PBCI, neither the
Company nor either of the Shareholders will, prior to the Closing Date, disclose
the existence of or any term or condition of this Agreement to any person or
entity except that such disclosure may be made (i) to any person in a business
relationship with the Company or the Shareholders to whom such disclosure is
necessary in order to satisfy any of the conditions to the consummation of the
Merger which are set forth in this Agreement (including without limitation the
Company's attorneys, accountants and investment bankers), (ii) to the extent the
Company or the Shareholders believes in good faith that such disclosure is
required by law (in which case the Company and the Shareholders will consult
with PBCI prior to making such disclosure), or (iii) to employees of the
Company.
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5.6 NO OTHER DISCUSSIONS; RETENTION OF SHARES OF THE COMPANY. Neither the
Shareholders nor the Company will, prior to the Closing Date, enter into
discussions or negotiate with or entertain or accept the unsolicited offer of
any other party concerning the potential sale or exchange of all or any part of
the assets or shares of the Company to, or the merger or consolidation of the
Company with, any person other than PBCI and PBCI Sub. The Shareholders will
not, prior to the Closing Date, sell, assign, transfer, pledge, encumber or
otherwise dispose of any of the shares of capital stock of the Company owned by
them or grant to any other person in any manner whatsoever, the right to vote
such shares.
ARTICLE 6.0 ADDITIONAL COVENANTS OF PBCI AND PBCI SUB PENDING THE CLOSING
6.1 REASONABLE BEST EFFORTS. PBCI and PBCI Sub will use their reasonable
best efforts to cause to be satisfied as soon as practicable and prior to the
Closing Date all of the conditions set forth in Article 8.0.
ARTICLE 7.0 CONDITIONS TO THE OBLIGATIONS OF PBCI AND PBCI SUB
The obligations of PBCI and PBCI Sub to consummate the transactions
contemplated hereby shall be subject to the fulfillment at or prior to the
Closing Date of each of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Company and the
Shareholders contained in this Agreement shall have been true and correct at and
as of the date hereof, and they shall be true and correct at and as of the
Closing Date with the same force and effect as though made at and as of that
time. The Company and the Shareholders shall have performed and complied with
all of their obligations required by this Agreement to be performed or complied
with at or prior to the Closing Date. The Shareholders shall have delivered to
PBCI and PBCI Sub a certificate, dated as of the Closing Date and signed by each
of the Shareholders, certifying that such representations and warranties are
thus true and correct and that all such obligations have been thus performed and
complied with.
7.2 OPINION OF COUNSEL. PBCI and PBCI Sub shall have received an opinion
dated the Closing Date from Sherman & Eggers, P.C., counsel for the Company and
the Shareholders, in form and substance as set forth in Exhibit C attached
hereto.
7.3 RECEIPT OF NECESSARY CONSENTS. All necessary consents or approvals of
third parties to any of the transactions contemplated hereby (including the
consent of BCI under the secured loan agreement dated March 24, 1995 between
PBCI and BCI (the "Secured Loan Agreement") and the consents of landlords of the
Leased Premises identified on Schedule 7.3) shall have been obtained and shown
by written evidence satisfactory to PBCI.
7.4 LANDLORD ESTOPPEL CERTIFICATES; LEASE DOCUMENTS. The Company shall have
delivered to PBCI, in connection with each lease agreement governing the
Leasehold Premises, an estoppel certificate in a form satisfactory to PBCI, and
the original executed lease agreement, together with all amendments thereto. To
the extent PBCI shall have requested, prior to the Closing,
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the modification of any of the lease agreements governing the Leasehold
Premises, such lease agreements shall have been modified in a manner
satisfactory to PBCI.
7.5 TITLE COMMITMENTS. The Company shall have delivered to PBCI title
commitments covering each of the Leasehold Premises and the commissary facility
currently used by the Company (the "Commissary"), which title commitments shall
be in form and substance satisfactory to PBCI and shall be issued by a title
company satisfactory to PBCI.
7.6 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit or invalidate the Merger or any other
transaction contemplated hereby.
7.7 ABSENCE OF DISSENTERS. The Company shall have complied with the
provisions of Section 1300 of the California Act and there shall be no
dissenters.
7.8 CERTIFICATE OF NON-FOREIGN STATUS. The Shareholders shall have executed
and delivered to PBCI a certificate of non-foreign status under Section 1445 of
the Code, in form and substance as set forth in Exhibit D attached hereto.
7.9 RESIGNATIONS AND RELEASES. The Company shall have delivered to PBCI the
written resignations of the directors of the Company and the written
resignations of such officers of the Company as may be requested by PBCI. Each
of the directors and officers of the Company (other than Greg Robers) shall have
delivered to the Company a release and waiver satisfactory in form and substance
to PBCI of any claim that he or she may have against the Company.
7.10 DUE DILIGENCE. PBCI shall have completed its legal, financial and
business due diligence investigation of the Company, and the results of such
investigation shall be satisfactory to PBCI.
7.11 BCI STOCK PURCHASE AGREEMENT AND BCI REGISTRATION RIGHTS AGREEMENT.
BCI shall have executed and delivered to PBCI a stock purchase agreement in the
form attached as Exhibit E hereto (the "BCI Stock Purchase Agreement"), and PBCI
and BCI shall have entered into a registration rights agreement in the form
attached as Exhibit F hereto (the "BCI Registration Rights Agreement").
7.12 PBCI REGISTRATION RIGHTS AGREEMENT. The Shareholders shall have
executed and delivered to PBCI the registration rights agreement attached as
Exhibit G hereto (the "PBCI Registration Rights Agreement").
7.13 EMPLOYMENT AGREEMENT; CONSULTING AGREEMENT. Michael Brau shall have
executed and delivered to PBCI an employment agreement in the form attached as
Exhibit H hereto (the "Employment Agreement"), and Rachel Brau shall have
executed and delivered to PBCI a consulting agreement in the form attached as
Exhibit I hereto (the "Consulting Agreement").
7.14 COMMISSARY LEASE AND PURCHASE AGREEMENT. The Shareholders shall have
entered into a lease of the Commissary from the Shareholders to PBCI Sub on
terms and conditions
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satisfactory to PBCI, which lease shall also provide for the sale of the
Commissary to PBCI Sub on terms and conditions satisfactory to PBCI (the
"Commissary Lease and Purchase Agreement").
7.15 PAYMENT OF MONTGOMERY SECURITIES. The shareholders shall have paid
Montgomery Securities all amounts owed it in excess of the Transaction Expense
Cap (as hereinafter defined).
Article 8.0 CONDITIONS TO OBLIGATION OF THE COMPANY AND THE SHAREHOLDERS
The obligation of the Company and the Shareholders to consummate the
transactions contemplated hereby shall be subject to the fulfillment at or prior
to the Closing Date of each of the following conditions:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of PBCI contained in this
Agreement shall have been true and correct at and as of the date hereof, and
they shall be true and correct at and as of the Closing Date with the same force
and effect as though made at and as of that time. PBCI and PBCI Sub shall have
performed and complied with all of their obligations required by this Agreement
to be performed or complied with at or prior to the Closing Date. PBCI shall
have delivered to the Company and the Shareholders a certificate, dated as of
the Closing Date and signed by an officer of PBCI, certifying that such
representations and warranties are thus true and correct and that all such
obligations have been thus performed and complied with.
8.2 OPINION OF COUNSEL. The Company and the Shareholders shall have
received an opinion dated the Closing Date from Bell, Boyd & Lloyd, special
counsel for PBCI and PBCI Sub, in form and substance as set forth in Exhibit J
attached hereto.
8.3 CONSENT OF BCI. The consent of BCI to the transactions contemplated
hereby (including BCI's consent to the payment of dividends and the redemption
of the PBCI Shares in accordance with the terms thereof) shall have been
obtained and shown by written evidence satisfactory to the Company and the
Shareholders.
8.4 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit or invalidate the Merger or any other
transaction contemplated hereby.
8.5 BCI STOCK PURCHASE AGREEMENT AND BCI REGISTRATION RIGHTS AGREEMENT. BCI
and PBCI shall have executed and delivered to each other the BCI Stock Purchase
Agreement and the BCI Registration Rights Agreement, and PBCI shall have
executed and delivered to the Shareholders an assignment, in form reasonably
acceptable to the Shareholders, of PBCI's rights thereunder.
8.6 PBCI REGISTRATION RIGHTS AGREEMENT. PBCI shall have executed and
delivered to the Shareholders the PBCI Registration Rights Agreement.
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8.7 EMPLOYMENT AGREEMENT; CONSULTING AGREEMENT. PBCI shall have executed
and delivered to Michael Brau the Employment Agreement, and PBCI shall have
executed and delivered to Rachel Brau the Consulting Agreement.
8.8 COMMISSARY LEASE. PBCI Sub shall have entered into the Commissary Lease
and Purchase Agreement.
8.9 FUNDING OF CERTAIN PAYOFFS AND DISTRIBUTIONS AT CLOSING; PAYMENT OF
BANK DEBT AND CERTAIN CLOSING EXPENSES. At the time of the Closing PBCI shall
have advanced or contributed to PBCI Sub cash in an amount sufficient to permit
the payoff of all of the Company's bank debt, the payment of the amount of the
Transaction Expense Cap (as defined in Section 11.2) and the distribution by the
Company of the amounts permitted to be distributed by it pursuant to clause (ii)
of Section 5.2.3, and PBCI Sub shall have paid off such bank debt and the amount
of the Transaction Expense Cap concurrently with the Closing.
Article 9.0 CERTAIN POST-CLOSING COVENANTS CLOSING
9.1 EXECUTION OF FURTHER DOCUMENTS. From and after the Closing, upon the
reasonable request of PBCI, the Shareholders shall execute, acknowledge and
deliver all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney and assurances as may be required to convey and transfer to
and vest in PBCI Sub the assets of the Company and as may be appropriate
otherwise to carry out the transactions contemplated by this Agreement.
9.2 RESTRICTIONS ON TRANSFER OF THE PBCI SHARES AND THE PBCI COMMON SHARES.
The restrictions of this Section 9.2 apply to any holder of the PBCI Shares or
the PBCI Common Shares. Each of the Shareholders acknowledges and agrees that:
9.2.1 The PBCI Shares to be issued pursuant hereto may be owned, as of
the Closing, only in the names of and by the Shareholders.
9.2.2 No federal, state or other agency has made any finding or
determination as to the fairness of this offering for investment, nor any
recommendation or endorsement of the PBCI Shares or the PBCI Common Shares.
9.2.3 Because neither the PBCI Shares nor the PBCI Common Shares have
been registered under the Securities Act or applicable state or other
securities laws, the economic risk of the investment must be borne
indefinitely by the Shareholders, and neither the PBCI Shares nor the PBCI
Common Shares can be sold unless subsequently registered under the
Securities Act and such state or other laws, or an exemption from such
registration is available, PBCI is not obligated to file a notification
under Regulation A of the Securities Act or a registration statement under
the Securities Act, except pursuant to the PBCI Registration Rights
Agreement; Rule 144, adopted under the Securities Act and governing the
possible disposition of the PBCI Shares and the PBCI Common Shares, is not
currently available; PBCI has not covenanted to take any action necessary
to make such Rule available for a resale of
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the PBCI Shares or the PBCI Common Shares; and it is not anticipated that
there will be any market for resale of the PBCI Shares or the PBCI Common
Shares.
9.2.4 No PBCI Shares or PBCI Common Shares may be transferred unless
(i) such transfer is effected pursuant to a registration statement which
has been filed under the Securities Act and declared effective by the
Securities and Exchange Commission, or (ii) in the written opinion of
counsel reasonably satisfactory to PBCI (the fees and expenses of which
counsel shall be borne by the transferring Shareholder), an exemption from
the registration requirements of the Securities Act and applicable state or
other securities laws is available.
9.2.5.1 In the event the Shareholders or any other holder of the
PBCI Shares (a "Holder") desires to sell, transfer or otherwise
dispose of any of the PBCI Shares, whether voluntarily or by operation
of law, except for transfers to members of the Shareholders' families
or one or more trusts solely for the benefit of the Shareholders and
such family members or one or more partnerships or limited liability
companies in which the only equity holders are the Shareholders, such
family members and/or such trusts, in which transfer such permitted
transferee agrees in writing to be bound by the provisions of this
Section 9.2.5, then such Holder (the "Selling Holder") shall first
deliver written notice of its desire to do so (the "Notice") to PBCI,
in the manner prescribed in this Agreement for the giving of notice.
The Notice must specify (i) the name and address of the party to which
the Selling Holder proposes to sell or otherwise dispose of the PBCI
Shares (the "Offeror"), (ii) the number of PBCI Shares the Selling
Holder proposes to sell or otherwise dispose of (the "Offered
Shares"), (iii) the consideration per share to be delivered to the
Selling Holder for the proposed sale, transfer or disposition, and
(iv) all other material terms and conditions of the proposed
transaction.
9.2.5.2 PBCI shall thereupon have an option to purchase all of
the Offered Shares for the consideration per share and on the terms
and conditions specified in the Notice. PBCI must exercise such option
within 10 days after such Notice is deemed to have been delivered to
it, by written notice to the Selling Holder.
9.2.5.3 In the event PBCI duly exercises its option to purchase
all of the Offered Shares, the closing date of such purchase shall
take place at the office of PBCI on the date three business days after
the expiration of such 10-day period.
9.2.5.4 To the extent that the consideration proposed to be paid
by the Offeror for the Offered Shares consists of property other than
cash or a promissory note, the consideration required to be paid by
PBCI exercising its options under Section 9.2.5.2 may consist of cash
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<PAGE>
equal to the value of such property, as determined in good faith by
agreement of the Selling Holder and PBCI.
9.2.5.5 Notwithstanding anything to the contrary herein, PBCI
shall have no right to purchase any of the Offered Shares hereunder
unless PBCI exercises its option or options to purchase all of the
Offered Shares.
9.2.5.6 If PBCI fails to duly exercise its option to purchase the
Offered Shares as provided hereunder, the Selling Holder may sell the
Offered Shares to the Offeror on the terms provided in the Notice
within thirty days after the expiration of PBCI's option provided that
the Offeror, prior to the receipt of any shares, agrees in writing to
be bound by the terms of this Agreement to the same extent as the
Selling Holder is bound hereby. If the Selling Holder does not sell
the Offered Shares to the Offeror within the time period specified
herein, the Offered Shares shall once again be subject to the terms of
this Section 9.2.5.
9.2.6 The Shareholders agree that (i) they shall enter into any agreement
restricting the transfer of the PBCI Common Shares that is requested by the
underwriters in the initial public offering of shares of common stock of PBCI
and that has the same terms as those agreed upon by the directors and officers
of PBCI with respect to shares of common stock of PBCI held by them, and (ii)
that they will not sell, transfer or otherwise dispose of any of the PBCI Shares
or the PBCI Common Shares unless they have first obtained the written agreement
of the transferee of such shares to be bound by the provisions of this Section
9.2.6.
9.2.7 Each certificate evidencing the PBCI Shares and the PBCI Common
Shares shall bear the following legends:
"The shares represented by this certificate were issued without
registration under the Securities Act of 1933, as amended (the
"Securities Act"), or applicable state securities laws, in reliance
upon the exemptions contained therein. No transfer of these shares or
any interest therein may be made unless (i) such transfer is effected
pursuant to a registration statement which has been filed under the
Securities Act and declared effective by the Securities and Exchange
Commission, or (ii) in the written opinion of counsel reasonably
satisfactory to the issuer of these shares, an exemption from the
registration requirements of the Securities Act and applicable state
or other securities laws is available."
"The shares represented by this certificate are also subject to
certain covenants and agreements (including restrictions on transfer)
contained in that certain Agreement and Plan of Merger dated August
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10, 1995, by and among Progressive Bagel Concepts, Baltimore Bagel
Co., BBC Acquiring Corporation, Michael Brau and Rachel Brau,
individually and as trustees of the Brau Living Trust dated January
23, 1990."
9.3 CERTAIN POST-CLOSING COOPERATION. Each of the Shareholders acknowledges
and agrees that PBCI may have need of information concerning the Company and the
Shareholders in order to comply with applicable securities laws and regulations
in connection with future public and private debt and equity offerings by PBCI
("Offerings"). The Shareholders jointly and severally agree that they will
cooperate with PBCI in connection with any Offerings and that they will: (i)
furnish PBCI with such information concerning the Company and the Shareholders
as PBCI may reasonably require to comply with applicable securities laws and
regulations (the "Company Information"); (ii) use diligent efforts to review,
comment on, and otherwise assist PBCI as reasonably necessary for the
preparation of, descriptions concerning the Company and the Shareholders to be
used in connection with Offerings; and (iii) represent and warrant to PBCI in
connection with any Offerings that the Company Information will not contain any
untrue statement of a material fact or omit any material fact necessary to make
the information contained therein not misleading.
9.4 SUBSEQUENT AUDITED FINANCIAL STATEMENTS. Each of the Shareholders
covenants and agrees with PBCI that if PBCI shall determine that audited
financial statements of PBCI or the Company for the periods prior to the Closing
are necessary or advisable in connection with an initial public offering,
another transaction or offering, or otherwise, each shall cooperate fully with
PBCI's accountants in the preparation of such audited financial statements, at
PBCI's expense, and each shall make such reasonable representations and
warranties to the applicable certified public accounts as are customary in
connection with the preparation of audited financial statements.
9.5 CONFIDENTIAL INFORMATION.
9.5.1 The Shareholders possess and will further develop and acquire
certain confidential and proprietary information and trade secrets
including, but not limited to, information, methods, techniques, procedures
and knowledge developed or to be developed, by or for the Company and PBCI
respecting the business of the Company and PBCI (the "Confidential
Information"). Each of the Shareholders acknowledges and agrees that
neither such Shareholder nor any other person or entity has acquired by or
through such Shareholder any interest in or right to use the Confidential
Information other than the right to utilize it in the operation of the
business of PBCI and its subsidiaries, and that the use or duplication of
the Confidential Information in any other business would constitute an
unfair method of competition with PBCI.
9.5.2 Each of the Shareholders acknowledges and agrees that the
Confidential Information is confidential to and a valuable asset of PBCI,
is proprietary, and includes trade secrets of PBCI. Each of the
Shareholders hereby agrees, that such Shareholder: (i) will not use the
Confidential Information in any other business or capacity; (ii) will
maintain the absolute secrecy and confidentiality of the
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Confidential Information; and (iii) will not make unauthorized copies of
any portion of the Confidential Information disclosed in written or other
tangible form.
9.5.3 Notwithstanding the foregoing, the obligations of the
Shareholders specified above shall not apply to any Confidential
Information which (i) is disclosed in a printed publication available to
the public, or is otherwise in the public domain through no act of any of
the Shareholders, their agents or any person or entity which has received
such Confidential Information from or through either of the Shareholders,
(ii) is approved for release by written authorization of an officer of
PBCI, (iii) is required to be disclosed by proper order of a court of
applicable jurisdiction after adequate notice to PBCI to seek a protective
order therefor, the imposition of which protective order the Shareholders
agrees to approve and support, or (iv) in the written opinion of the
disclosing Shareholder's counsel, is necessary to be made by such
Shareholder in order that the Shareholder not violate any law, rule or
regulation applicable to him or her.
9.6 RESTRICTIVE COVENANTS. Each of the Shareholders acknowledges and agrees
that PBCI would be unable to protect the Confidential Information against
unauthorized use or disclosure and PBCI would be unable to realize the benefits
of this Agreement if such Shareholder were permitted to engage in, hold
interests in or perform services for entities conducting a business which
derives 20% or more of its revenues from the sale of bagels and/or bagel-related
products, other than PBCI and its subsidiaries (a "Competitive Business"). Each
of the Shareholders further acknowledges and understands that PBCI intends, and
expects, to expand its business throughout the United States. Each of the
Shareholders further acknowledges and agrees that the restrictions contained in
this Section 9.6 will not hinder his or her activities under this Agreement or
in general. PBCI has entered into this Agreement with the Shareholders on the
express condition that, with respect to the operation of the PBCI's business,
the Shareholders will deal exclusively with PBCI with respect to the bagel
business. Each of the Shareholders therefore agrees that for a period of five
(5) years from the Closing Date, he or she shall not directly or indirectly
anywhere in the United States (including without limitation every county in the
State of California): (i) have any interest as a record or beneficial owner in
any Competitive Business provided, however, the Shareholders may have an
interest in any Competitive Business as a passive investor in such Competitive
Business provided such interest does not exceed three percent (3%) of the
outstanding equity securities of any company which has a class of securities
which is registered under Section 12 of the Securities Exchange Act of 1934, as
amended, or traded on a national securities exchange; (ii) perform services as a
director, officer, manager, employee, consultant, representative, agent, or
otherwise for any Competitive Business; or (iii) divert or attempt to divert any
business or any customers of PBCI's business to any Competitive Business.
9.7 REMEDIES; WAIVER.
9.7.1 Each of the Shareholders agrees that the provisions and
restrictions set forth above in Sections 9.5 and 9.6 are necessary to
protect PBCI and its successors and assigns in the protection of the
business to be acquired by PBCI pursuant to this Agreement. Each of the
Shareholders agrees that damages cannot compensate PBCI
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in the event of a violation of the covenants contained in Sections 9.5 and
9.6 hereof, and that injunctive relief shall be essential for the
protection of PBCI and its successors and assigns. Accordingly, each of the
Shareholders agrees and consents that, in the event he or she shall violate
or breach any of said covenants PBCI shall be entitled to obtain (and he or
she hereby consents to) such injunctive relief against such Shareholder,
without bond, in addition to such further or other relief as may appertain
at equity or law. The exercise or enforcement by PBCI of any right or
remedy hereunder shall not preclude the exercise or enforcement by PBCI of
any other right or remedy hereunder or which PBCI has the right to enforce
under applicable law.
9.7.2 Failure by any party to insist upon strict compliance with any
of the terms, covenants or conditions hereof shall not be deemed a waiver
of such term, covenant or condition, nor shall any waiver or relinquishment
of any right or remedy hereunder at any one or more times be deemed a
waiver or relinquishment of such right or remedy at any other time or
times.
9.8 PBCI DEBT AGREEMENTS. PBCI agrees to use reasonable best efforts to
obtain from any lender to PBCI that is the beneficiary of negative covenants
restricting dividend or redemption payments the agreement of such lender that
PBCI may pay dividends on, and redeem, the PBCI Shares in accordance with the
terms thereof so long as any such payment or redemption does not result in
PBCI's default under any financial covenants provided for in any agreement to
which PBCI is a party.
9.9 AUTHORIZATION OF PBCI COMMON STOCK. PBCI will not issue shares of its
common stock in its initial public offering unless it has at the time of such
issuance authorized and reserved for issuance the shares of its common stock
into which the PBCI Shares are convertible.
9.10 FINANCIAL STATEMENTS OF PBCI. For so long as either of the
Shareholders holds any of the PBCI Shares, PBCI shall furnish to the
Shareholders copies of its financial statements for each of its monthly retail
periods, together with copies of such financial statements of PBCI as are
prepared by PBCI for distribution to its stockholders generally.
9.11 CERTIFICATE OF SATISFACTION OF CALIFORNIA FRANCHISE TAX BOARD. The
Shareholders shall cooperate with PBCI and the Company to permit the Company to
obtain and file in accordance with Sections 1103 and 1108(g) of the California
Act a certificate of satisfaction of the Franchise Tax Board of the State of
California with respect to the Company (the "Tax Clearance Certificate").
Article 10.0 INDEMNIFICATION
10.1 AGREEMENT BY THE SHAREHOLDERS TO INDEMNIFY. The Shareholders jointly
and severally agree that from and after the Closing they will indemnify and hold
PBCI and PBCI Sub harmless in respect of the aggregate of all PBCI Indemnifiable
Damages (as hereinafter defined). For this purpose, PBCI Indemnifiable Damages
shall mean all expenses, losses, costs, deficiencies, liabilities and damages
(including reasonable related counsel fees and expenses) incurred or suffered by
PBCI or PBCI Sub (or any successor to all or any part of the assets or business
of the Company)
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(i) resulting from any inaccurate representation or warranty made by the Company
and the Shareholders in or pursuant to this Agreement, (ii) resulting from any
default in the performance of any of the covenants or agreements made by the
Shareholders in this Agreement, or (iii) resulting from any guarantee of any
obligation or liability of the Shareholders (including without limitation the
guarantee by the Company of the indebtedness of the Shareholders to the San
Diego County Certified Development Corporation). Without limiting the generality
of the foregoing, with respect to the measurement of PBCI Indemnifiable Damages,
PBCI and PBCI Sub shall each have the right to be put in the same financial
position as it would have been in had each of the representations and warranties
of the Company and the Shareholders been true and correct, had each of the
covenants of the Shareholders been performed in full and had no such guarantee
of any of the Shareholders' obligations or liabilities existed. The foregoing
obligation to indemnify PBCI and PBCI Sub shall be subject to each of the
following principles or qualifications:
10.1.1 Each of the representations and warranties made by the Company
and the Shareholders in this Agreement or pursuant hereto, shall survive
until February 10, 1997, notwithstanding any investigation at any time made
by or on behalf of PBCI or PBCI Sub, and thereafter all such
representations and warranties shall be extinguished, provided, however,
that the representations and warranties made in Sections 3.1, 3.2, 3.3,
3.4, 3.5, 3.28 and 3.29 hereof shall in each case survive forever and those
made in Section 3.9 hereof shall in each case survive until the first
anniversary of the later of (i) the date on which the applicable period of
limitation on assessment or refund of tax has expired, or (ii) the date on
which the applicable taxable year (or portion thereof) has been closed. No
claim for the recovery of PBCI Indemnifiable Damages based upon the
inaccuracy of such representations and warranties may be asserted by PBCI
or PBCI Sub after such representations and warranties shall be thus
extinguished; provided, however, that claims first asserted in writing
within the applicable period (whether or not the amount of any such claim
has become ascertainable within such period) shall not thereafter be
barred.
10.1.2 The Shareholders shall not be liable for any claim for PBCI
Indemnifiable Damages arising out of any inaccuracy of any representation
or warranty if the aggregate amount of all such PBCI Indemnifiable Damages
does not exceed $75,000.
10.1.3 The liability of the Shareholders for claims for all PBCI
Indemnifiable Damages arising out of inaccuracies of representations and
warranties (other than the representations and warranties set forth in
Sections 3.1 through 3.5 hereof, inclusive) shall in no event exceed
$5,250,000.
10.2 AGREEMENT BY PBCI AND PBCI SUB TO INDEMNIFY. PBCI and PBCI Sub jointly
and severally agree that from and after the Closing they will indemnify and hold
the Shareholders harmless in respect of the aggregate of all Shareholder
Indemnifiable Damages (as hereinafter defined). For this purpose, Shareholder
Indemnifiable Damages shall mean all expenses, losses, costs, deficiencies,
liabilities and damages (including reasonable related counsel fees and expenses)
incurred or suffered by the Shareholders (i) resulting from any inaccurate
representation or warranty
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made by PBCI or PBCI Sub in or pursuant to this Agreement, (ii) resulting from
any default in the performance of any of the covenants or agreements made by
PBCI or PBCI Sub in or pursuant to this Agreement, or (iii) resulting from any
guarantee of any obligation or liability of the Company made by the Shareholders
with respect to leases and loans disclosed in the Schedules to this Agreement.
Without limiting the generality of the foregoing with respect to the measurement
of Shareholder Indemnifiable Damages, the Shareholders shall have the right to
be put in the same financial position as they would have been in had each of the
representations and warranties of PBCI and PBCI Sub been true and correct, had
each of the covenants of PBCI and PBCI Sub been performed in full, and had no
such guarantees of the Company's obligations or liabilities existed. The
foregoing obligation to indemnify the Shareholders shall be subject to each of
the following principles or qualifications:
10.2.1 Each of the representations and warranties made by PBCI in this
Agreement or pursuant hereto, shall survive until February 10, 1997,
notwithstanding any investigation at any time made by or on behalf of the
Shareholders, and thereafter all such representations and warranties shall
be extinguished, provided, however, that the representations and warranties
made in Sections 4.1, 4.2, 4.3, 4.4, 4.5, and 4.15, hereof shall in each
case survive forever. No claim for the recovery of Shareholder
Indemnifiable Damages based upon the inaccuracy of such representations and
warranties may be asserted by the Shareholders after such representations
and warranties shall be thus extinguished; provided, however, that claims
first asserted in writing within the applicable period (whether or not the
amount of any such claim has become ascertainable within such period) shall
not thereafter be barred.
10.2.2 PBCI shall not be liable for any claim for Shareholder
Indemnifiable Damages arising out of any inaccuracy of any representation
or warranty if the aggregate amount of all such Shareholder Indemnifiable
Damages does not exceed $75,000.
10.2.3 The liability of PBCI and PBCI Sub for claims for all
Shareholder Indemnifiable Damages arising out of inaccuracies of
representations and warranties of PBCI (other than the representations and
warranties set forth in Sections 4.1 through 4.5 hereof, inclusive) shall
in no event exceed $5,250,000.
10.3 LEGAL PROCEEDINGS. In the event PBCI or PBCI Sub, on the one hand, or
the Shareholders, on the other hand, become involved in any legal, governmental
or administrative proceeding which may result in indemnification claims
hereunder, such party shall promptly notify the other parties in writing of such
proceeding. The other parties may, at their option and expense, defend any such
proceeding if the proceeding could give rise to an indemnification obligation
hereunder. If any party elects to defend any proceeding, such party shall have
full control over the conduct of such proceeding, although the party being
indemnified shall have the right to retain legal counsel at its own expense and
shall have the right to approve any settlement of any dispute giving rise to
such proceeding, such approval not to be withheld unreasonably by the party
being indemnified; provided, that, in the event the indemnifying party shall
fail to initiate a defense of a claim within twenty days of the notice to the
indemnified party of a claim, the indemnified party
30
<PAGE>
shall have the option to conduct the defense of such claim as it may in its
discretion deem proper. The party being indemnified shall reasonably cooperate
with the indemnifying party in such proceeding.
10.4 EXCLUSIVE REMEDY. The indemnification provisions of Section 10.1 and
10.2 hereof are intended by the parties to provide the exclusive remedy for
breaches of representations and warranties made by the parties in or pursuant to
this Agreement.
10.5 TRANSFER OF PBCI SHARES. The indemnification obligations of the
Shareholders under Section 10.1 may be satisfied by the delivery of cash or PBCI
Shares (for this purpose valuing the PBCI Shares at an amount equal to their
liquidation preference), at the option of the Shareholders.
Article 11.0 MISCELLANEOUS
11.1 AMENDMENT AND MODIFICATION. The parties hereto may amend, modify and
supplement this Agreement in such manner as may be agreed upon by them in
writing, provided, however, that any amendment effected subsequent to
shareholder approval shall be subject to any restrictions set forth in the
Delaware Act and the California Act.
11.2 PAYMENT OF EXPENSES. Each party to this Agreement shall pay all of the
expenses incurred by it in connection with this Agreement, including without
limitation its legal and accounting fees and expenses, the commissions, fees and
expenses of any person employed or retained by it to bring about, or to
represent it in, the transactions contemplated hereby (the foregoing legal,
accounting and other transaction fees and expenses being herein referred to as
"Transaction Expenses"); provided, however, that (i) the Company's obligation to
pay Transaction Expenses shall be limited to $250,000 (the "Transaction Expense
Cap"), (ii) all Transaction Expenses of the Company and the Shareholders in
excess of the Transaction Expense Cap shall be paid by the Shareholders at the
Closing, and (iii) the costs of the title commitments identified in Section 7.5
shall be paid by PBCI. The Company shall pay the amount of the Transaction
Expense Cap at Closing by payment of $250,000 to Montgomery Securities.
11.3 TERMINATION. Anything to the contrary herein notwithstanding, this
Agreement may be terminated and the Merger may be abandoned:
11.3.1 by the mutual written consent of all of the parties hereto at
any time prior to the Closing Date;
11.3.2 by PBCI at any time prior to the Closing Date if there shall be
a pending or threatened action or proceeding by or before any court or
other governmental body which shall seek to restrain, prohibit or
invalidate the Merger or any other transaction contemplated hereby;
11.3.3 by PBCI in the event of the material breach by the Company or
the Shareholders of any provision of this Agreement, which breach is not
remedied by the breaching party within 30 days after receipt of notice
thereof from PBCI;
31
<PAGE>
11.3.4 by the Company in the event of the material breach by PBCI or
PBCI Sub of any provision of this Agreement, which breach is not remedied
by the breaching party within 30 days after receipt of notice thereof from
the Company; or
11.3.5 by any party hereto if the Closing has not taken place by
September 15, 1995.
If this Agreement is terminated pursuant to Sections 11.3.1, no party shall
have any liability for any costs, expenses, loss of anticipated profit or any
further obligation for breach of warranty or otherwise to any other party to
this Agreement. Any termination of this Agreement pursuant to Sections 1l.3.2,
11.3.3, 1l.3.4 or 1l.3.5 shall be without prejudice to any other rights or
remedies of the respective parties.
11.4 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, heirs
and legal representatives.
11.5 ENTIRE AGREEMENT. This instrument and the exhibits and schedules
attached hereto contain the entire agreement of the parties hereto with respect
to the purchase of the Shares and the other transactions contemplated herein,
and supersede all prior understandings and agreements of the parties with
respect to the subject matter hereof, including without limitation the
confidentiality agreement between PBCI and the Company dated June 22, 1995. The
Company further agrees, for the express benefit of BCI, that the provisions of
this Agreement governing confidentiality of information and publicity supersede
the confidentiality agreement between the Company and BCI dated January 12,
1995, and that such agreement has no further force or effect. Any reference
herein to this Agreement shall be deemed to include the schedules and exhibits
attached hereto.
11.6 HEADINGS. The descriptive headings in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
11.7 EXECUTION IN COUNTERPART. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original.
11.8 NOTICES. Any notice, request, information or other document to be
given hereunder shall be in writing. Any notice, request, information or other
document shall be deemed duly given three business days after it is sent by
registered or certified mail, postage prepaid, to the intended recipient,
addressed as follows:
If to the Company, addressed as follows:
Baltimore Bagel Co.
7007 Carroll Road
San Diego, CA 92121-2212
Attention: Michael E. Brau, President
with a copy to:
Sherman & Eggers, P.C.
32
<PAGE>
350 West Ash Street, Suite 1100
San Diego, CA 92101-3403
Attention: Lawrence M. Sherman
33
<PAGE>
If to PBCI, addressed as follows:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Attention: Chairman
with a copy to:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Attention: General Counsel
Any party may send any notice, request, information or other document to be
given hereunder using any other means (including personal delivery, courier,
messenger service, facsimile transmission, telex or ordinary mail), but no such
notice, request, information or other document shall be deemed duly given unless
and until it is actually received by the party for whom it is intended. Any
party may change the address to which notices hereunder are to be sent to it by
giving written notice of such change of address in the manner herein provided
for giving notice.
11.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (without regard to the laws of
such state governing conflicts of law or choice of laws), except that the Merger
shall be governed by and become effective in accordance with the California Act
to the extent provided for therein.
11.10 PUBLICITY. No press release or other public announcement related to
this Agreement or the transactions contemplated hereby will be issued by the
Company or the Shareholders without the prior approval of PBCI.
34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PROGRESSIVE BAGEL CONCEPTS, INC.
By /s/ Daniel V. Colangelo
------------------------------------------
BALTIMORE BAGEL CO.
By /s/ Michael E. Brau, President
------------------------------------------
BBC ACQUIRING CORPORATION
By /s/ Daniel V. Colangelo
------------------------------------------
/s/ Michael E. Brau
------------------------------------------
Michael E. Brau
/s/ Rachel C. Brau
------------------------------------------
Rachel C. Brau
35
<PAGE>
EXHIBITS
--------
Exhibit A Certificate of Merger
Exhibit B Terms of Series A Preferred Stock
Exhibit C Opinion of Sherman & Eggers
Exhibit D Certificate of Non-Foreign Status
Exhibit E BCI Stock Purchase Agreement
Exhibit F BCI Registration Rights Agreement
Exhibit G PBCI Registration Rights
Agreement
Exhibit H Michael Brau Employment
Agreement
Exhibit I Rachel Brau Consulting Agreement
Exhibit J Opinion of Bell, Boyd & Lloyd
<PAGE>
Exhibit A
CERTIFICATE OF MERGER
(Pursuant to Section 252
of the General Corporation
Law of the State of Delaware)
merging
BALTIMORE BAGEL CO.
into
BBC ACQUIRING CORPORATION
BBC ACQUIRING CORPORATION, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the name and state of incorporation of each of the constituent
corporations (the "Constituent Corporations") of the merger is as follows:
<TABLE>
<CAPTION>
State of
Name Incorporation
---- -------------
<S> <C>
Baltimore Bagel Co. California
BBC Acquiring Corporation Delaware
</TABLE>
SECOND: That an agreement of merger (the "Merger Agreement") has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with subsection (c) of Section 252 of the
General Corporation Law of the State of Delaware.
THIRD: That the name of the surviving corporation of the merger is BBC
Acquiring Corporation (the "Surviving Corporation").
FOURTH: That the certificate of incorporation of the Surviving Corporation
is amended by the Merger Agreement by deleting Article FIRST thereof and
substituting therefor the following new Article FIRST:
"FIRST: The name of the Corporation is Baltimore Bagel Co."
<PAGE>
FIFTH: That the executed Merger Agreement is on file at the principal place
of business of the Surviving Corporation. The address of the principal place of
business of the Surviving Corporation is 1526 Cole Boulevard, Suite 200, Golden,
Colorado 80401.
SIXTH: That a copy of the Merger Agreement will be furnished by the
Surviving Corporation on request and without cost to any stockholder of either
Constituent Corporation.
SEVENTH: That the authorized capital stock of Baltimore Bagel Co., a
California corporation, consists of 10,000,000 common shares.
IN WITNESS WHEREOF, BBC ACQUIRING CORPORATION has caused this certificate
to be signed by its Vice President and attested by its Secretary this day of
, 1995.
BBC ACQUIRING CORPORATION
By: ______________________________
Vice President
[Corporation Seal]
ATTEST:
By: ______________________________
Secretary
<PAGE>
Exhibit B
PROGRESSIVE BAGEL CONCEPTS, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER
SPECIAL RIGHTS OF PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
THEREOF
----------
Pursuant to Section 151 of the General Corporation
Law of the State of Delaware
Progressive Bagel Concepts, Inc., a Delaware corporation (the "Company"),
does hereby certify that the following resolution was duly adopted by a
committee duly designated by the Board of Directors of the Company in accordance
with the General Corporation Law of the State of Delaware:
RESOLVED, that the Company hereby designates 6,250 of its authorized but
unissued shares of Preferred Stock, $.01 par value, as Series A Preferred Stock,
which shall have the following designations, preferences, rights,
qualifications, limitations and restrictions in addition to those set forth in
the Certificate of Incorporation of the Company:
1. Designation; Number of Shares. 6,250 shares of Preferred Stock shall be
designated Series A Preferred Stock (hereinafter sometimes referred to as the
"Series A Preferred Stock").
2. Dividend Rights.
(a) The holders of shares of Series A Preferred Stock shall be entitled to
receive cumulative cash dividends, when and as declared by the Board of
Directors out of funds legally available therefor, at a rate of $60 per share
per annum and no more, before any dividend or distribution in cash or other
property (other than dividends payable in stock ranking junior to the Series A
Preferred Stock as to dividends and upon liquidation, dissolution or winding-up)
on any class or series of stock of the Company ranking junior to the Series A
Preferred Stock as to dividends or on liquidation, dissolution or winding-up
shall be declared or paid or set apart for payment.
(b) Dividends on the Series A Preferred Stock shall be payable, when and as
declared by the Board of Directors, on February 15, May 15, August 15, and
November 15 of each year, with the first dividend payment on November 15, 1995
(each
<PAGE>
November 15 of each year, with the first dividend payment on November 15, 1995
(each such date being herein sometimes referred to as a "Dividend Payment
Date"), except that if such date is a Saturday, Sunday or legal holiday then
such dividend shall be payable on the first immediately preceding calendar day
which is not a Saturday, Sunday or legal holiday, to holders of record as they
appear on the books of the Company 30 days prior to the applicable Dividend
Payment Date. Dividends in arrears may be declared and paid at any time, without
reference to any regular Dividend Payment Date, to holders of record on such
date as may be fixed by the Board of Directors of the Company. The amount of
dividends payable per share of Series A Preferred Stock for each dividend period
shall be computed by dividing by four the $60 annual rate.
(c) Dividends on the Series A Preferred Stock shall be cumulative and
accrue from and after the date of original issuance thereof, whether or not
declared by the Board of Directors. Accruals of dividends shall not bear
interest.
(d) All dividends paid with respect to shares of the Series A Preferred
Stock shall be paid pro rata to the holders entitled thereto.
(e) No dividend may be declared on any other class or series of stock
ranking on a parity with the Series A Preferred Stock as to dividends in respect
of any dividend period unless there shall also be or have been declared on the
Series A Preferred Stock like dividends for all quarterly periods coinciding
with or ending before such quarterly period, ratably in proportion to the
respective annual dividend rates fixed therefor.
3. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the holders of each
share of Series A Preferred Stock then outstanding shall be entitled to be paid
out of the assets of the Company available for distribution to its stockholders,
before any payment or declaration and setting apart for payment of any amount
shall be made in respect of any class or series of stock of the Company ranking
junior to the Series A Preferred Stock upon liquidation, dissolution or winding
up, an amount equal to $1000 per share plus an amount equal to all accrued and
unpaid dividends thereon, whether or not earned or declared, to and including
the date full payment shall be tendered to the holders of the Series A Preferred
Stock with respect to such liquidation, dissolution or winding up, and no more.
If upon any liquidation, dissolution, or winding up of the Company, whether
voluntary or involuntary, the assets to be distributed to the holders of the
Series A Preferred Stock and any class or series of stock of the Company ranking
on a parity with the Series A Preferred Stock upon liquidation, dissolution or
winding up shall be insufficient to permit the payment to such stockholders of
the full preferential amount payable to them, then all of such assets shall be
distributed ratably to the holders of the Series A Preferred Stock and the
holders of any class or series of stock of the Company ranking on a parity with
the Series A Preferred Stock upon liquidation, dissolution or winding up in
accordance with the amounts that would be payable in such distribution if the
amounts to which the holders of the Series A Preferred Stock and the holders of
any
2
<PAGE>
class or series of stock of the Company ranking on a parity with the Series A
Preferred Stock upon liquidation, dissolution or winding up were entitled were
paid in full.
4. AUTOMATIC CONVERSION.
(a) Each share of Series A Preferred Stock that remains outstanding on
any date that shares of Common Stock of the Company are sold in an underwritten
public offering shall automatically, and without any action on the part of the
holder thereof or the Company, be converted into the number of fully paid and
nonassessable shares of Common Stock of the Company that results from dividing
the sum of $1000, and, at the holder's option, any dividends on such share
accrued and unpaid prior to the Conversion Date, by 80% of the gross offering
price per share to the public of the common stock sold in such public offering
(the "Conversion Price"), such conversion to be effective immediately prior to
the close of business on the date of the closing of the public offering (the
"Conversion Date").
(b) All rights with respect to shares of Series A Preferred Stock
outstanding on the Conversion Date shall forthwith after the Conversion Date
terminate, except only the right of the holders of such shares to receive Common
Stock upon surrender of their certificates for the Series A Preferred Stock and
the right to receive payments of any dividends accrued and unpaid at the
Conversion Date which the holders have elected not to have converted into Common
Stock of the Company, which shall be a debt of the Company.
(c) The Company shall have no obligation to issue and deliver to any
holder of Series A Preferred Stock on such date a certificate for the number of
shares of Common Stock to which such holder shall be entitled until such time as
such holder has surrendered the certificate or certificates for such Series A
Preferred Stock, duly endorsed, at the office of the Company or any transfer
agent for the Common Stock.
(d) If any fractional interest in a share of Common Stock would, except
for the provisions of this paragraph 4(d), be deliverable upon any conversion of
the Series A Preferred Stock, the Company, in lieu of delivering such fractional
share therefor, shall pay to the holder thereof an amount in cash equal to such
fractional interest multiplied by the Conversion Price.
(e) The Company shall, not later than the Conversion Date, reserve and
have available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of the shares of Series A Preferred
Stock, such number of its shares of Common Stock as shall be sufficient to
effect the conversion of all outstanding shares of Series A Preferred Stock.
(f) In the case of any consolidation or merger of the Company with or
into another corporation (other than a merger in which the Company is the
surviving corporation) in which shares of Common Stock of the Company are
converted into (i)
3
<PAGE>
cash, (ii) stock or other securities which are traded on an established
securities market, or a combination of the consideration described in clauses
(i) and (ii) of this sentence, any shares of Series A Preferred Stock
outstanding at the time of such merger or consolidation shall be automatically
converted into consideration of the same type as that received by holders of
Common Stock of the Company (and, in the event there is more than one type of
consideration, in the same proportions as received by holders of the Common
Stock) having an aggregate value equal to 125% of the aggregate liquidation
preference of such shares of Series A Preferred Stock.
(g) In the case of any consolidation or merger of the Company with or
into another corporation (other than a merger in which the Company is the
surviving corporation) in which the shares of Common Stock of the Company are
converted into shares of common stock of the surviving corporation which are not
traded on an established securities market, the corporation resulting from such
consolidation or surviving such merger shall make adequate provision so that any
shares of Series A Preferred Stock outstanding at the time of such merger or
consolidation shall be converted into shares of preferred stock of such
surviving corporation (i) that are convertible into shares of common stock of
such corporation on the same basis as the shares of Series A Preferred Stock are
convertible into Common Stock of the Company and (ii) having the same terms as
the Series A Preferred Stock. The provisions of this Section 4(g) shall apply to
successive consolidations and mergers.
5. REDEMPTION.
(a) At any time after February 10, 1999, and from time to time
thereafter, the Company may redeem, out of funds legally available for such
purpose, any or all shares of the Series A Preferred Stock then outstanding at a
price per share equal to $1250 plus any accrued and unpaid dividends thereon as
of the date such redemption is effected. The Company shall mail written notice
of each redemption of Series A Preferred Stock pursuant to this paragraph 5(a)
to each holder of record as shown on the books of the Company 30 days prior to
the date fixed for redemption, specifying the redemption date, the number of
shares to be redeemed and the number of shares of such holder to be redeemed. In
the event the Company redeems less than all shares of the Series A Preferred
Stock then outstanding, the shares of the Series A Preferred Stock shall be
redeemed from the holders of Series A Preferred Stock pro rata (as nearly as
practicable) in proportion to the number of shares of Series A Preferred Stock
held by each of them.
(b) Except to the extent prohibited by agreements governing indebtedness
or other financing of the Company, the Company shall redeem up to one-third of
the outstanding shares of the Series A Preferred Stock in the event it receives,
at any time after each of the following dates, a notice in writing signed by the
holder or holders of a majority of the outstanding shares of Series A Preferred
Stock requesting such a redemption, which redemption shall occur on the date
specified in the notice and at a price per share equal to $1250 plus an accrued
and unpaid dividends thereon as of the
4
<PAGE>
date such redemption is effected: February 28, 1998, May 1, 1998 and August 1,
1998. Except to the extent prohibited by agreements governing indebtedness or
other financing of the Company, Company shall also redeem all of the outstanding
shares of the Series A Preferred Stock in the event it receives, at any time
after the Company has failed to pay three consecutive quarterly dividends on the
Series A Preferred Stock, a notice in writing signed by the holder or holders of
a majority of the outstanding shares of Series A Preferred Stock requesting such
a redemption, which redemption shall occur on the date specified in the notice
and at a price per share equal to $1250 plus accrued and unpaid dividends
thereon as of the date such redemption is effected. If the funds of the Company
legally available for redemption of shares of the Series A Preferred Stock are
insufficient to redeem the total number of shares to be redeemed, those funds
which are legally available shall be used to redeem the maximum possible number
of shares, which shares shall be redeemed from the holders of Series A Preferred
Stock pro rata (as nearly as practicable) in proportion to the number of shares
of Series A Preferred Stock held by each of them. As and when additional funds
of the Company are legally available for the redemption of shares, such funds
shall immediately be applied in the same manner to redeem the balance of the
shares which the Company has become obligated to redeem.
(c) In case fewer than the total number of shares represented by any
certificate are redeemed, a new certificate representing the number of
unredeemed shares will be issued to the holder thereof, without cost to such
holder, promptly after surrender of the certificate representing the redeemed
shares.
(d) No share of Series A Preferred Stock is entitled to any dividends
accruing after the date such share has been redeemed. On such date dividends
will cease to accrue, all rights of the holder of such shares as such holder
will cease, and such shares will not be deemed to be outstanding.
6. VOTING RIGHTS. Except as required by law, the Series A Preferred Stock
shall have no voting rights.
7. STATUS. Shares of Series A Preferred Stock which have been issued and
reacquired in any manner by the Company shall, upon compliance with any
applicable provisions of the General Corporation Law of the State of Delaware,
have the status of authorized and unissued shares of Preferred Stock and may be
reissued as a part of the Series A Preferred Stock or as part of a new series of
Preferred Stock or as part of any other series of Preferred Stock the terms of
which do not prohibit such reissue.
8. CHANGES IN CAPITALIZATION. The creation, authorization or issuance of
any shares of any capital stock of the Company, whether ranking junior or senior
to, or on a parity with, the shares of Series A Preferred Stock as to dividends
or upon liquidation, dissolution or winding up (any such shares being herein
referred to as "Additional Shares"), the creation, authorization or issuance of
any obligation or security convertible into or evidencing the right to purchase
any Additional Securities, the creation of any indebtedness of any kind of the
Company, or the increase or decrease in the amount of
5
<PAGE>
authorized capital stock of any class, including the Preferred Stock, or any
increase, decrease or change in the par value of any such class other than the
Series A Preferred Stock, shall not require the consent of the holders of Series
A Preferred Stock and shall not be deemed to alter or change the powers,
preferences or special rights of shares of Series A Preferred Stock so as to
affect them adversely; provided, however, that the Company shall not issue
shares designated Series A Preferred Stock after the initial issuance of shares
designated Series A Preferred Stock without the written consent of the holders
of a majority of the outstanding shares of Series A Preferred Stock.
6
<PAGE>
IN WITNESS WHEREOF, The Company has caused this certificate to be executed
by its duly authorized officers this 9th day of August, 1995.
______________________________
Vice President
Attest:
______________________________
Secretary
7
<PAGE>
Exhibit D
CERTIFICATION OF NON-FOREIGN STATUS
Section 1445 of the Internal Revenue Code provides that a transferee of a
U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform the transferee that withholding of tax is not required upon
the disposition of a U.S. real property interest by the undersigned, the
undersigned hereby certify as follows:
1. The undersigned are not nonresident aliens for purposes of U.S. income
taxation;
2. Michael E. Brau's U.S. taxpayer identifying number (Social Security
number) is ###-##-####, and Rachel C. Brau's U.S. taxpayer identifying number
(Social Security number) is ###-##-####; and
3. The undersigneds' home address is: 1121 Via Carolina, La Jolla,
California 92037.
The undersigned understand that this certification may be disclosed to the
Internal Revenue Service by transferee and that any false statement contained
herein could be punished by fine, imprisonment, or both.
Under penalties of perjury we declare that we have examined this
Certification and to the best of our knowledge and belief it is true, correct
and complete.
Dated: August 10, 1995
------------------ ------------------
Michael E. Brau Rachel C. Brau
<PAGE>
Exhibit E
STOCK PURCHASE AGREEMENT
THIS AGREEMENT, is made and entered into as of this 10th day of August,
1995, by and between Boston Chicken, Inc., a Delaware corporation (the
"Seller"), and Progressive Bagel Concepts, Inc., a Delaware corporation
("Buyer").
RECITALS
Seller desires to sell to Buyer, and Buyer desires to purchase from Seller,
shares of common stock, $.01 par value per share, of the Seller ("Common
Stock"), upon the terms and subject to the conditions contained herein.
For and in consideration of the premises, covenants, and agreements
contained herein, the parties do covenant, agree, represent, warrant, and
stipulate as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
Section 1.1 Shares to be Acquired. Subject to the terms and conditions
contained herein, Seller agrees to sell, assign, transfer, and convey to Buyer,
free and clear of all pledges, liens, security interests, encumbrances, or other
restrictions arising from Seller (except restrictions on resale under state or
federal securities laws), and Buyer shall purchase from Seller, that number of
shares of Common Stock equal to: (a) $4,000,000 divided by (b) the closing sales
price per share of Common Stock as quoted on the NASDAQ National Market, as
reported in The Wall Street Journal (Western Edition), on the business day
immediately prior to the last business day before the Closing Date (as
hereinafter defined) (the "Per-Share Price"), rounded up to the nearest whole
share (the "Shares").
Section 1.2 Closing. The closing of the purchase and sale of the Shares
herein described (the "Closing") shall occur on August 10, 1995 (the "Closing
Date") and shall take place at the offices of the Seller, 14103 Denver West
Parkway, Golden, CO 80401 at 10:00 a.m. Mountain time.
Section 1.3 Delivery of Shares. On the Closing Date, Seller shall deliver
to Buyer such certificate or certificates, in such denominations as Buyer may
reasonably request, representing the Shares, issued in the name of Buyer.
<PAGE>
ARTICLE II
PURCHASE PRICE AND PAYMENT
The aggregate purchase price (the "Purchase Price") for the Shares shall be
$4,000,000. The Purchase Price shall be payable on the Closing Date by wire
transfer of immediately available funds to a bank or banks designated by Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Seller represents, warrants, covenants,
and agrees as follows:
Section 3.1 Capitalization: Validity of Shares. Seller has authorized
capital stock consisting of 100,000,000 shares of Common Stock, of which
46,884,214 shares were issued and outstanding as of August 1, 1995, and
20,000,000 shares of $.01 par value preferred stock, of which no shares are
issued and outstanding. All of the issued and outstanding shares of Common Stock
of Seller are duly and validly authorized and issued, fully paid and
nonassessable, were offered, issued, and sold in accordance with applicable
federal and state securities laws and were not issued in violation of the
preemptive rights of any stockholders of Seller. The Shares to be issued and
delivered to Buyer, when so issued and delivered against payment there for as
provided in Article II hereof, will be duly and validly authorized and issued,
fully paid and nonassessable, free and clear of any security interest, lien,
encumbrance, right, or restriction whatsoever arising from Seller (except
restrictions on resale under state or federal securities laws). There are no
outstanding options, warrants, conversion privileges, commitments or demands of
any character relating to the Shares arising from Seller.
Section 3.2 Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
Section 3.3 Authorization; Validity. Seller has full corporate power and
authority to enter into this Agreement and to perform all of Seller's covenants
and undertakings herein set forth, including, without limitation, the full
corporate power and authority to issue the Shares to Buyer free and clear of any
security interests, liens, encumbrances, rights, or restrictions arising from
Seller. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Seller. This Agreement is the legal, valid, and
binding obligation of Seller, enforceable in accordance with its terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, fraudulent conveyance or similar laws affecting the enforcement of
creditors' rights generally,
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and except as enforcement of any particular remedy may be limited by the
application of equitable principles. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
violate the Certificate of Incorporation or bylaws, as amended, of Seller; (ii)
violate or constitute a default under any provision of, or conflict with, or
result in acceleration of any obligation under, any mortgage, deed of trust,
note, loan, lease, or agreement to which Seller is a party or by which it or any
of its properties or assets may be bound, which violation, default, or conflict
would result in a material adverse effect on the business, assets, operations,
or condition (including, without limitation, financial) of Seller; or (iii)
violate any order, ruling, decree, judgment, arbitration award, or stipulation
to which Seller is subject, which violation would result in a material adverse
effect on the business, assets, operations or condition (including, without
limitation, financial) of Seller.
Section 3.4 SEC Reports and Financial Statements. Seller is subject to the
reporting requirements of Section 13 of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and has delivered to Buyer copies of all reports,
registration statements, and other filings filed by Seller with the Securities
and Exchange Commission (the "SEC") since December 26, 1993 under the 1934 Act
and any filings with the SEC under the Securities Act of 1933, as amended (the
"1933 Act") (herein collectively called the "SEC Reports"). As of the date of
this Agreement, Seller has filed all regular and periodic reports and proxy
statements required to be filed by it with the SEC. The SEC Reports comply with
the disclosure requirements of the respective applicable report or form except
where the failure to comply would not have a material adverse effect on the
business, assets, operations or condition (including without limitation
financial) of Seller. As of their respective dates of filing, none of the SEC
Reports contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
consolidated financial statements included in the SEC Reports were prepared in
accordance with generally accepted accounting principles (as in effect from time
to time) applied on a consistent basis (except as may be indicated therein or in
the notes or schedules thereto) and fairly present, as of the dates thereof, the
results of Seller's and its consolidated subsidiaries' operations and changes in
financial position for the periods specified, subject, in the case of the
unaudited interim financial statements, to normal year-end audited adjustments
and any other adjustments described therein or in the notes and schedules
thereto.
Section 3.5 Brokers. Seller has not dealt with any broker, finder,
commission agent, or other person in connection with the purchase of the Shares
and the transactions contemplated by this Agreement and is under no obligation
to pay any broker's fee or commission in connection with such transactions.
Section 3.6 Representations and Warranties; Survival. The representations,
warranties and covenants of Seller shall survive for a period of one year from
the Closing Date. When considered together with the SEC Reports and other
information made available to Buyer, no representation, warranty, or covenant
contained in this Agreement or in any
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written statement delivered pursuant hereto contains any untrue material
statement, nor shall such representations, warranties, and covenants omit any
statement necessary in order to make any material statement not misleading in
light of the circumstances in which they were made.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer represents, warrants, covenants, and
agrees as follows:
Section 4.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
Section 4.2 Authorization. Buyer has full corporate power and authority to
enter into this Agreement and to perform all of Buyer's covenants and
undertakings herein set forth. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been, or will
prior to the Closing Date be, duly authorized by all necessary corporate action
on the part of Buyer. This Agreement is the legal, valid, and binding obligation
of Buyer, enforceable in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, moratorium, fraudulent
conveyance or similar laws affecting the enforcement of creditors' rights
generally, and except as enforcement of any particular remedy may be limited by
the application of equitable principles.
Section 4.3 Investment. The Shares are being acquired by Buyer hereto not
with a view to any distribution or resale thereof in any transaction which would
be in violation of the 1933 Act, and rules promulgated thereunder, or any state
securities statute. Buyer can bear the economic risk of losing its investment in
the Shares and is presently able to afford the complete loss of such investment.
Buyer has such knowledge and experience in financial and business matters so as
to be capable of evaluating the merits and risks of an investment in the Shares.
Buyer has been furnished with the SEC Reports and acknowledges that it has been
afforded the opportunity (i) to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of Seller concerning the merits
and risks of investing in the Shares and (ii) to obtain such additional
information which Seller possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy and completeness of the
information contained in the SEC Reports. Buyer acknowledges that Seller has
answered all questions and responded to all inquiries and requests for
information to Buyer's satisfaction. Buyer acknowledges that it has made,
independently and without reliance upon the Seller (other than the
representations and warranties of the Seller set forth in Article III hereof) or
any agent or representative of the Seller and based on its own independent
analysis of the Seller and such other documents and information as it has deemed
appropriate,
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its own investment analysis and its own business decision to enter into and
consummate this Agreement and the transactions contemplated hereby.
Section 4.4 Legend on Shares. The Buyer understands that the Shares have
not been registered under the 1933 Act or any state securities laws, and that it
must therefore bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the 1933 Act or is exempt
from registration, and that the Shares will bear substantially the following
legend:
"The shares represented by this certificate are "Restricted
Securities". As such they may not be transferred unless (i) such transfer
is effected pursuant to a registration statement which has been filed under
the Securities Act of 1933 (the "1933 Act") and declared effective by the
Securities and Exchange Commission, or (ii) in the written opinion of
counsel, acceptable to the issuer of these shares, such transfer may be
effected under and is in compliance with Rule 144 under the 1933 Act, as in
effect on the date of such transfer, or is otherwise exempt from the
registration requirements of the 1933 Act."
Section 4.5 Brokers. Buyer has not dealt with any broker, finder,
commission agent, or other person in connection with the purchase of the Shares
and the transactions contemplated by this Agreement and is under no obligation
to pay any broker's fee or commission in connection with such transactions.
ARTICLE V
CONDITIONS; TERMINATION
Section 5.1 Conditions to Obligations of Buyer. The obligations of Buyer
are, at the option of Buyer, subject to the conditions that, at the Closing
Date:
(a) Accuracy of Representations and Warranties. The representations or
warranties of Seller contained in this Agreement shall be true and correct in
all material respects.
(b) Performance by Seller. Seller shall have performed and complied
with all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or on the Closing Date.
(c) Delivery of Certificates. Seller shall have delivered to Buyer (i)
a certificate executed by the Vice Chairman or any Vice President of Seller, as
of the Closing Date, certifying to the fulfillment of the conditions specified
in subparagraphs (a) and (b) hereinabove; and (ii) duly adopted resolutions of
the Board of Directors of Seller, certified by
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certified by the Secretary or any Assistant Secretary thereof as of the Closing
Date, authorizing and approving the execution of this Agreement on behalf of
Seller and the consummation of the transactions contemplated herein in
accordance with its terms
(d) No Adverse Changes. There shall have been no material adverse
change in the properties, business, or financial condition of Seller from that
reflected in the SEC Reports, and Seller shall not have suffered any substantial
loss or damage to its properties or assets not otherwise covered by insurance
that would materially and adversely affect or impair its ability to conduct its
business.
(e) Registration Rights Agreement. Seller shall have executed and
delivered to Buyer that certain Registration Rights Agreement in substantially
the form attached hereto as Exhibit A (the "Registration Rights Agreement").
Section 5.2 Conditions to Obligations of Seller. The obligations of Seller
hereunder are, at the option of Seller, subject to the conditions that, at the
Closing Date:
(a) Accuracy of Representations and Warranties. The representations or
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects.
(b) Performance by Buyer. Buyer shall have performed and complied with
all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or on the Closing Date.
(c) Delivery of Certificates. Buyer shall have delivered to Seller (i)
a certificate executed by an officer of Buyer, as of the Closing Date,
certifying to the fulfillment of the conditions specified in subparagraphs (a)
and (b) hereinabove; and (ii) duly adopted resolutions of the Board of Directors
of Buyer certified by the Secretary or any Assistant Secretary thereof as of the
Closing Date, authorizing and approving the execution of this Agreement on
behalf of Buyer and the consummation of the transactions contemplated herein in
accordance with its terms.
(d) Registration Rights Agreement. Buyer shall have executed and
delivered to Seller the Registration Rights Agreement.
Section 5.3 Termination. This Agreement may be terminated by Buyer on the
Closing Date if any condition precedent to Buyer's obligations hereunder is not
fulfilled on the Closing Date. Such termination shall not prejudice any claim
that Buyer may have hereunder as a consequence of any failure or default of
Seller. This Agreement may be terminated by Seller on the Closing Date if any
condition precedent to Seller's obligations hereunder is not fulfilled on the
Closing Date. Such termination shall not prejudice any claim that Seller may
have hereunder as a consequence of any failure or default of Buyer. Seller and
Buyer shall apply their reasonable best efforts to fulfill all conditions
precedent necessary to consummate this Agreement.
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ARTICLE VI
SHARE PRICE GUARANTEE
Section 6.1 Agreement to Guarantee. Seller agrees, on the terms and subject
to the conditions set forth herein, to guarantee the sales price of those Shares
sold by Buyer during the Guarantee Period (as hereinafter defined) (the
"Guarantee Shares").
Section 6.2 Conditions to Share Price Guarantee. Seller's obligations under
Section 6.1 hereof are subject to the following conditions:
(a) Buyer sells the Guarantee Shares within the first forty trading
days on which the NASDAQ National Market is open for business immediately
following the date notification by Seller to Buyer that the SEC has declared
effective the registration statement registering the Shares is received by Buyer
(the "Guarantee Period");
(b) The Guarantee Shares are sold through Merrill Lynch, Pierce,
Fenner & Smith Incorporated to one or more persons not affiliated with, related
to, or associated with Buyer, in which a good faith effort is made by Buyer to
maximize the selling price;
(c) The average price per share received in such sales, net of
broker's commissions, is less than the Per-Share Price (such per-share shortfall
to be referred to as the "Per-Share Shortfall");
(d) Seller receives notice from the Buyer within 14 days of the
expiration of the Guarantee Period of the amount of the Per-Share Shortfall with
copies of applicable confirmation slips attached thereto ("Notice"); and
(e) During any trading day during the Guarantee Period Buyer sells
only that number of Shares that is equal to or less than 5% of the total number
of Shares received by Buyer hereunder.
Section 6.3 Payment of Per-Share Shortfall. In the event Buyer satisfies
all of the conditions set forth in Section 6.2, Seller shall pay to Buyer,
within three business days of receipt of the Notice, an amount in cash equal to
the Per-Share Shortfall multiplied by the number of Guarantee Shares sold during
the Guarantee Period.
Section 6.4 Assignment of Share Price Guarantee. Buyer may, without
Seller's consent, assign its rights under this Article VI to one or more
individuals to whom it may subsequently transfer the Shares in compliance with
the 1933 Act and all applicable state securities laws; provided, however, that
such individuals may not further assign such rights without Seller's prior
written consent. To the extent that Buyer assigns its rights under this Article
VI to more than one individual, each individual shall have such rights
separately from the others with respect to the Shares transferred to him,
provided that in order to have the
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benefit of such rights, the individual must satisfy all of the obligations set
forth in Section 6.2 hereof, including, but not limited to, selling, during any
trading day during the Guarantee Period, only that number of Shares that is
equal to or less than 5% of the total number of Shares transferred to him.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1 Notices. All notices, requests, demands, and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand or by electronic
transmission. If mailed, first class, certified mail, postage prepaid, or sent
by reliable overnight delivery service and addressed as follows, or at such
other addresses as the parties hereto may from time to time designate in
writing, such notices, requests, demands, and other communications shall be
deemed delivered three business days after being so duly posted:
To Buyer: Progressive Bagel Concepts, Inc.
1526 Cole Blvd.
Suite 200
Golden, Colorado 80401
Attention: Chairman
Facsimile: (303) 202-3360
With a copy to:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd.
Suite 200
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 202-3490
To Seller: Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 384-5339
Section 7.2 Prior Agreements. This Agreement supersedes all prior
discussions and agreements between Buyer and Seller with respect to the purchase
of the Shares and the other matters contained herein, and this Agreement and the
agreements referred to herein contain the sole and entire agreement between the
parties hereto with respect to the transactions contemplated herein.
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Section 7.3 Modifications. This Agreement may be modified or amended only
by a written instrument executed by the parties hereto.
Section 7.4 Counterparts, Headings, Etc. This Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument. The
headings herein set out are for convenience of reference only and shall not be
deemed a part of this Agreement.
Section 7.5 Assignment. Subject to compliance with the 1933 Act and all
applicable state securities laws, Buyer's rights hereunder shall be assignable,
including Buyer's rights under Article VI hereof.
Section 7.6 Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns.
Section 7.7 Governing Law. The validity and effect of this Agreement and
the rights and obligations of the parties hereto shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware.
Section 7.8 Further Assurances. From time to time at Buyer's request
(whether at or after the Closing) Seller will execute and deliver, at Seller's
expense, such further instruments of conveyance and transfer and will take such
other action as Buyer may reasonably request in order to more effectively vest
the Shares in Buyer.
Section 7.9 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
Section 7.10 Adjustment of Shares. Seller agrees that the formulae used in
determining the Shares and the Per-Share Shortfall shall be appropriately
adjusted to eliminate the impact of any dividend (whether in cash, securities or
other property), stock split, reclassification, recapitalization, reverse split,
or similar event, announced or occurring with respect to the Shares and with a
record date after execution of this Agreement and before the Closing Date.
Section 7.11 Accuracy of Representations. Buyer will use reasonable best
efforts to inform the Seller of any inaccuracy of any representation and
warranty of Seller of which it is aware of the time of Closing.
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IN WITNESS WHEREOF, the parties have cause this Agreement to be executed
and their seals to be affixed all as of the day and year first above written.
BOSTON CHICKEN, INC.
By: _______________________________
Title: ____________________________
PROGRESSIVE BAGEL CONCEPTS, INC.
By: _______________________________
Title: ____________________________
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Exhibit F
REGISTRATION RIGHTS AGREEMENT
This registration rights agreement (the "Agreement") is entered into as of
this day of , 1995, between Boston Chicken, Inc., a Delaware
corporation ("BCI"), and Progressive Bagel Concepts, Inc., a Delaware
corporation ("PBCI").
SECTION 1. Piggyback Registration.
(a) Registrable Securities. "Registrable Securities" shall mean those
restricted shares of BCI common stock, $.01 par value, acquired by PBCI pursuant
to the Stock Purchase Agreement of even date herewith, by and between BCI and
PBCI (the "BCI Stock Purchase Agreement").
(b) Right to Piggyback. BCI hereby agrees to effect a registration of
certain of its outstanding securities, including the Registrable Securities,
under the Securities Act of 1933, as amended (the "Act"), on Form S-3 (the
"Registration Statement") within 30 days of the closing of the transactions
contemplated by the BCI Stock Purchase Agreement (the "Closing"). BCI will also
include in such Registration Statement all BCI securities ("Earlier Securities")
desired to be registered by persons or entities having superior registration
rights pursuant to that certain Second Amended and Restated Piggyback
Registration Rights Agreement dated November 8, 1993 (the "Superior Agreement"),
in accordance with the terms and conditions of the Superior Agreement (together
with the registration of the Registrable Securities, the "Piggyback
Registration").
SECTION 2. Registration Procedures.
(a) BCI will prepare and file with the Securities and Exchange Commission
(the "Commission") the Registration Statement within 30 days of the Closing and
will include therein the Registrable Securities and such Earlier Securities as
comply with the procedures of the Superior Agreement, will prepare and file all
amendments, post-effective amendments and supplements to the Registration
Statement as may be necessary under the Act and the regulations thereunder to
permit the sale of such Earlier Securities and Registrable Securities to the
public, and will use its reasonable best efforts to cause such Registration
Statement to become effective and remain effective for a period of not less than
two years or until such time as all of the securities covered by the
Registration Statement have been sold (provided that before filing the
Registration Statement, BCI will furnish to counsel selected by the holders of
Registrable Securities copies of the Registration Statement for review by such
counsel).
<PAGE>
(b) BCI will use its reasonable best efforts to (i) register or qualify
such Earlier Securities and Registrable Securities under such other securities
or blue sky laws of such jurisdictions as any of the sellers of such Earlier
Securities and Registrable Securities (collectively, the "Sellers" and
individually, a "Seller") reasonably request, and (ii) do any and all other acts
and things which may be reasonably necessary to allow Sellers to consummate the
disposition in such jurisdictions of such Earlier Securities and Registrable
Securities owned by such Sellers; provided, however, that BCI will not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph (b), (ii)
subject itself to taxation in any such jurisdiction, or (iii) consent to general
service of process in any such jurisdiction.
(c) BCI will use its reasonable efforts to cause all such Earlier
Securities and Registrable Securities to be included for quotation on the NASDAQ
National Market.
(d) Upon the request of BCI, each Seller of Registrable Securities will
promptly furnish to BCI in writing, during the period within which BCI is
required to effect such registration, all information and affidavits as may be
reasonably requested by BCI in connection with items required to be included in
the Registration Statement, or any amendment or supplement thereto. To the
extent BCI reasonably requests such information and affidavits and the Seller
does not provide such information or affidavits in a timely manner, then, BCI's
obligation to register such Seller's Registrable Securities hereunder shall be
null and void.
(e) BCI will furnish to each Seller of Registrable Securities such number
of copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Seller.
(f) BCI will notify each Seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such Seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
(g) BCI will provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of the Registration
Statement.
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(h) BCI hereby represents and warrants that it is eligible to file the
Registration Statement on Form S-3 pursuant to the rules and regulations
pertaining thereto under the Securities Act.
SECTION 3. Registration Expenses. The Sellers of Registrable Securities
under this Agreement will bear all underwriting discounts and commissions, if
any, and the fees and disbursements of their legal counsel and accountants. BCI
will bear all other expenses in connection with any registration or
qualification of the Registrable Securities pursuant to this Agreement.
SECTION 4. Indemnification.
(a) BCI agrees to indemnify, to the extent permitted by law, each Seller of
Registrable Securities, and each person, if any, who controls such Seller within
the meaning of the Act, against any and all losses, claims, damages or
liabilities to which the Sellers of Registrable Securities may become subject
under the Act or any other statute or common law by reason of its offer and sale
of Registrable Securities pursuant to the Registration Statement, and to
reimburse the Sellers of Registrable Securities for any reasonable legal or
other expenses actually and reasonably incurred in connection with investigating
any claims and defending any actions, insofar as such losses, claims, damages,
liabilities or actions arise out of, or are based upon:
(i) any untrue statement of a material fact or any alleged untrue
statement of a material fact contained in or incorporated by reference in
the Registration Statement or any post-effective amendment thereto, or the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; or
(ii) any untrue statement of a material fact or any alleged untrue
statement of a material fact contained or incorporated by reference in the
prospectus (as amended or supplemented if BCI shall have filed with the
Commission any amendment or supplement thereto), if used within the period
during which BCI is required to keep the Registration Statement in which
such prospectus is contained current pursuant to the terms of this
Agreement, or the omission or alleged omission to state therein a material
fact necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not misleading;
provided, however, that the indemnification agreement contained herein shall not
apply to losses, claims, damages, liabilities or actions arising out of, or
based upon, any such untrue statement or
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<PAGE>
any such omission or alleged omission, if such statement or omission was made in
reliance upon, and in conformity with, information furnished to BCI by or on
behalf of any Seller of Registrable Securities for use in connection with the
preparation of the Registration Statement or any prospectus contained in the
Registration Statement or any such amendment or supplement thereto.
(b) The Sellers of Registrable Securities shall (in the same manner and to
the same extent as set forth in Section 4(a)), severally indemnify, to the
extent permitted by law, BCI, each person, if any, who controls BCI within the
meaning of the Act, and their directors and officers, if such statement or
omission was made in reliance upon and in conformity with information furnished
to BCI by or on behalf of any Seller of Registrable Securities for use in
connection with the preparation of the Registration Statement or any amendment
or supplement thereto.
(c) Any person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification (provided, however, that any failure by a person entitled
to indemnification hereunder to give such prompt written notice shall not
adversely affect such person's rights hereunder unless such failure prejudices
the rights of the indemnifying party hereunder) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of such counsel a conflict of interest may exist between such indemnified party
and any other of such indemnified parties with respect to such claim.
SECTION 5. Registration Rights of Other Security Holders. The registration
rights granted pursuant to this Agreement are granted subject to any and all
registration rights granted by the Company to holders of its securities prior to
the date hereof, and no provision herein shall be interpreted so as to be
superior to, inconsistent with, or adversely effect, any such previously granted
registration rights.
SECTION 6. Miscellaneous.
(a) Amendments. The provisions of this Agreement may be amended only upon
the written consent of BCI and PBCI, or in the event there is more than one
holder of
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Registrable Securities, only upon the written consent of BCI and the holders of
a majority of the Registrable Securities.
(b) Assignment. This Agreement is binding upon the parties hereto and their
respective successors and assigns. Subject to compliance with the Act, PBCI's
rights hereunder shall be assignable; provided, however, that such assignee of
PBCI may not further assign such rights without the prior written consent of
BCI. To the extent that PBCI assigns its rights under this Agreement to more
than one individual, each individual shall have such rights separately from the
others with respect to the Registrable Securities owned by him.
(c) Counterparts. This Agreement may be executed in separate counterparts,
each of which will be an original and all of which taken together will
constitute one and the same agreement.
(d) Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered if delivered by hand or by electronic
transmission. If sent by reliable overnight delivery service and addressed as
follows, or at such other addresses as the parties hereto may from time to time
designate in writing, such notices, requests, demands, and other communications
shall be deemed delivered the next business day after being so duly sent:
To BCI:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401-4086
Attn: General Counsel
To PBCI:
Progressive Bagel Concepts, Inc.
1526 Cole Boulevard
Suite 200
Golden, Colorado 80401
Attn: Chairman
Facsimile: (303) 202-3360
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with a copy to:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd.
Suite 200
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 202-3490
(e) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement on the day and year first above written.
BOSTON CHICKEN, INC.
By: ______________________________
Its: _____________________________
PROGRESSIVE BAGEL CONCEPTS, INC.
By: ______________________________
Its: _____________________________
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Exhibit G
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 24th day of March 1995
(this "Agreement"), by and between PROGRESSIVE BAGEL CONCEPTS, INC., a Delaware
corporation (the "Company"), and each owner of common stock of the Company
listed on Exhibit A hereto and each owner of common stock who executes, with the
written agreement of the Company, a counterpart of this Agreement (each referred
to herein individually as an "Investor" and collectively referred to herein as
"Investors").
W I T N E S S E T H:
WHEREAS, the Company has agreed to provide Investors with certain
registration rights as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to and on the terms
and conditions herein set forth. The parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 "Business Day" means any day on which The New York Stock Exchange is
open for trading.
1.2 "Common Stock" means the common stock, $.01 par value, of the Company.
1.3 "Eligible Registration" means any of the first four occasions the
Company proposes to register any shares of Common Stock in any manner which
would permit registration of Eligible Shares for public sale under the
Securities Act, other than any offering described in
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Sections 2.1(a) through (f). If the Company terminates any Eligible Registration
prior to its effectiveness or if the Investors are unable to sell at least 90%
of the Eligible Securities they had requested to sell in any Eligible
Registration, that registration will not constitute an Eligible Registration.
1.4 "Eligible Securities" means all or any portion of the Common Stock
owned by the Investors and all other securities issued with respect thereto by
reason of dividends, stock splits, combinations or similar transactions.
As to any proposed offer or sale of Eligible Securities, such securities
shall cease to be Eligible Securities with respect to such proposed offer or
sale when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement, (ii) such securities are permitted to be sold pursuant to Rule 144
(or any successor provision to such Rule) under the Securities Act, (iii) such
securities shall have been otherwise transferred pursuant to an applicable
exemption under the Securities Act, new certificates for such securities not
bearing a legend restricting further transfer shall have been delivered by the
Company and such securities shall be freely transferable to the public without
registration under the Securities Act, or (iv) a written opinion of counsel of
the Company addressed to Investors to the effect that shares may be sold without
registration under the Securities Act has been delivered.
1.5 "Person" means an individual, a partnership (general or limited),
corporation, joint venture, business trust, cooperative, association or other
form of business organization, whether or not regarded as a legal entity under
applicable law, a trust (inter vivos or testamentary), an estate of a deceased,
insane or incompetent person, a quasi-governmental entity, a government or any
agency, authority, political subdivision or other instrumentality thereof, or
any other entity.
1.6 "Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement
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including, without limitation, the following: (i) the fees, disbursements and
expenses of the Company's counsel(s), accountants and experts in connection with
the registration of Eligible Securities to be disposed of under the Securities
Act; (ii) all expenses in connection with the preparation, printing and filing
of the registration statement, any preliminary prospectus or final prospectus,
any other offering document and amendments and supplements thereto and the
mailing and delivering of copies thereof to the underwriters and dealers; (iii)
the cost of printing or producing any agreement(s) among underwriters,
underwriting agreement(s) and blue sky or legal investment memoranda, any
selling agreements and any other documents in connection with the offering, sale
or delivery of Eligible Securities to be disposed of; (iv) SEC or blue sky
registration fees attributable to Eligible Securities; (v) all expenses in
connection with the qualification of Eligible Securities to be disposed of for
offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(v) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Eligible
Securities to be disposed of; and (vi) fees and expenses incurred in connection
with the listing of Eligible Securities on each securities exchange on which
securities of the same class are then listed; provided, however, that
Registration Expenses with respect to any Eligible Registration pursuant to this
Agreement shall not include underwriting discounts or commissions attributable
to Eligible Securities or transfer taxes applicable to Eligible Securities.
1.7 "SEC" means the Securities and Exchange Commission.
1.8 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, all as the same shall be in effect
at the relevant time.
1.9 "Selling Investor" means any Investor requesting the registration of
Eligible Securities registered pursuant to Article 2 hereof.
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ARTICLE 2
INCIDENTAL REGISTRATION
2.1 Notice and Registration. If the Company proposes to register any shares
of Common Stock for public sale under the Securities Act in an Eligible
Registration, it will give prompt written notice to Investors of its intention
to do so, and upon the written request of each Investor delivered to the Company
within ten (10) Business Days after the giving of any such notice by the Company
(which request shall specify the number of Eligible Securities intended to be
disposed of by the Selling Investor and the intended method of disposition
thereof) the Company will use all reasonable efforts to effect, in connection
with the registration of its Common Stock in such Eligible Registration, the
registration under the Securities Act of all Eligible Securities which the
Company has been so requested to register by the Selling Investors, to the
extent required to permit the public sale (in accordance with the intended
method or methods thereof as aforesaid) of Eligible Securities so to be
registered, provided that:
(a) if, at any time after giving such written notice of its intention
to register any Common Stock and prior to the effective date of the
registration statement filed in connection with such Eligible Registration,
the Company shall determine for any reason not to register the Common
Stock, the Company may, at its election, give written notice of such
determination to Investors and thereupon the Company shall be relieved of
its obligation to register such Eligible Securities in connection with the
registration of such Common Stock (but not from its obligation to pay
Registration Expenses to the extent incurred in connection therewith as
provided in Section 2.2);
(b) The Company will not be required to effect any registration
pursuant to this Article 2 if the Company shall have been advised in
writing by a nationally recognized independent investment banking firm
selected by the Company to act as lead underwriter in connection with the
public offering of the Common Stock by the Company that, in such firm's
opinion, a registration of shares of common Stock of the Investors
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pursuant to this Article 2 at that time may materially and adversely affect
the Company's own scheduled offering;
(c) The Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange
offers, subscription offers, dividend reinvestment plans or stock options
or other employee benefit plans.
(d) The Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to an initial public
offering of shares of Common Stock of the Company;
(e) The Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to the filing of a
registration statement for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act or any
similar rule that may be adopted by the SEC.
(f) In no event shall the Company be required to register Eligible
Securities if, in the reasonable judgment of the Company, the amount of
Eligible Securities for which registration has been requested does not
justify the effort and/or expense to the Company of effecting such
registration.
2.2 Registration Expenses. The Company (as between the Company and the
Selling Investors) shall be responsible for the payment of all Registration
Expenses in connection with any registration pursuant to this Article 2.
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ARTICLE 3
REGISTRATION PROCEDURES
3.1 Registration and Qualification.
(a) If and whenever the Company is required to use reasonable
commercial efforts to effect the registration of any Eligible Securities
under the Securities Act as provided in Article 2 hereof, the Company will
as promptly as is practicable register the Eligible Securities under the
Securities Act and use reasonable commercial efforts to cause the
Registration Statement to become effective;
(b) The Company shall prepare and file with the SEC such amendments
and supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective; and comply with the provisions of the Securities Act
with respect to the disposition of all Eligible Securities until the
earlier of such time as all of such Eligible Securities have been disposed
of in accordance with the intended methods of disposition by the Selling
Investors as set forth in the Registration Statement or the expiration of
thirty (30) days after such Registration Statement has become effective;
provided, however, that in the event that the Company shall notify any
Selling Investor of the happening of any event which would cause the
prospectus included as part of such Registration Statement, as then in
effect, to include an untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, such Selling Investor shall thereafter sell no shares
under such Registration Statement until the Company has filed an amendment
or supplement to the prospectus to cause the prospectus not to include an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
and the Company shall be obligated to continue to so amend or supplement
the prospectus for
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such period of time as the prospectus has for an aggregate of thirty (30)
days not included an untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and
(c) The Company may require the Selling Investors to furnish to the
Company such information regarding the Selling Investors and the
distribution of the Eligible Securities as the Company may from time to
time reasonably request in writing and as shall be required by law or by
the SEC in connection with any registration.
(d) The Company shall provide each Selling Investor a conformed copy
of the Registration Statement and each material amendment to the
Registration Statement. The Company shall provide to each Selling Investor
an opportunity to review the Registration Statement prior to the filing of
the Registration Statement with the Securities and Exchange Commission.
(e) The Company shall provide to each Selling Investor such number of
copies of such Registration Statement, each amendment and supplement
thereto, the prospectus included in such Registration Statement (including
each preliminary prospectus) and such other documents as such Selling
Investor may reasonably request in order to facilitate the disposition of
the Eligible Securities registered pursuant to such Registration Statement.
(f) The Company will provide a transfer agent and registrar for all
Eligible Securities not later than the effective date of the Registration
Statement.
3.2 Underwriting. In the event that any registration pursuant to Article 2
hereof shall involve, in whole or in part, an underwritten offering, the Company
may require Eligible Securities requested to be registered pursuant to Article 2
to be included in such underwriting on the same terms and conditions as shall be
applicable to the Common Stock being sold through underwriters under such
registration. In such case, the holders of Eligible Securities on whose
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behalf Eligible Securities are to be distributed by such underwriters shall be
parties to any such underwriting agreement. Such agreement shall contain such
representations and warranties by the Selling Investors and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, indemnities and
contribution to the effect and to the extent provided in Article 4. The
representations and warranties in such underwriting agreement by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Eligible Securities.
ARTICLE 4
INDEMNIFICATION
4.1 Indemnification.
(a) In the event of any registration of any Eligible Securities hereunder,
the Company will enter into customary indemnification arrangements to indemnify
and hold harmless each Investor who exercises his registration rights hereunder
and, to the extent applicable, its directors and officers, its partners, its
trustees and each Person who controls any of such Persons, each Person who
participates as an underwriter in the offering or sale of any Eligible
Securities, and each Person, if any, who controls such underwriter within the
meaning of the Securities Act against any losses, claims, damages, liabilities
and expenses, joint or several, to which such Person may be subject under the
Securities Act or otherwise insofar as such losses, claims, damages, liabilities
or expenses (or actions or proceedings in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement of any material
fact contained in any registration statement under which such securities were
registered under the Securities Act, any final prospectus included therein, or
any amendment or supplement thereto, or any document incorporated by reference
therein, or (ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and the Company will promptly reimburse each such Person for any
legal or any other expenses reasonably incurred by such Person in connection
with investigating or defending any such loss, claim, damage, liability, action
or proceeding; provided that the
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Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any final
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company or such underwriter by such Selling
Investors expressly for use in the registration statement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of Investors or any such Person and shall survive the transfer of such
securities by the Investors.
(b) The Selling Investors, by virtue of exercising their registration
rights hereunder, agree and undertake to enter into customary indemnification
arrangements to severally and not jointly indemnify and hold harmless (in the
same manner and to the same extent as set forth in clause (a) of this Article 4)
the Company, each director of the Company, each officer of the Company who shall
sign such registration statement, and each Person who participates as an
underwriter in the offering or sale of such securities, each Person, if any, who
controls the Company or any such underwriter within the meaning of the
Securities Act, with respect to any statement in or omission from such
registration statement, any final prospectus included therein, or any amendment
or supplement thereto, but only to the extent that such statement or omission
was made in reliance upon and in conformity with written information furnished
by such Selling Investors to the Company expressly for use in the registration
statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of the registered
securities by the Selling Investors and the expiration of this Agreement.
(c) Indemnification similar to that specified in the preceding subdivisions
of this Article 4 (with appropriate modifications) shall be given by the Company
and the Selling Investors with respect to any required registration or other
qualification of such Eligible Securities under any federal or state law or
regulation of governmental authority other than the Securities Act.
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ARTICLE 5
BENEFITS
5.1 Benefits of Registration Rights. Subject to the limitations of Section
2.1 hereof, Investors may severally or jointly exercise the registration rights
hereunder in such manner and in such proportion as they shall agree among
themselves.
5.2 Qualification for Rule 144 Sales. Upon the written request of any
Investor, the Company will deliver to such Investor a written statement as to
whether it has complied with the filing requirements described in Rule
144(c)(1).
ARTICLE 6
MISCELLANEOUS
6.1 Captions. The captions or headings in this Agreement are for
convenience and reference only, and in no way define, describe, extend or limit
the scope or intent of this Agreement.
6.2 Severability. If any clause, provision or section of this Agreement
shall be invalid or unenforceable, the invalidity or unenforceability of such
clause, provision or section shall not affect the enforceability or validity of
any of the remaining clauses, provisions or sections hereof to the extent
permitted by applicable law.
6.3 Governing Law. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Delaware, without reference to
its rules as to conflicts or choice of laws.
6.4 Modification and Amendment. This Agreement may not be changed,
modified, discharged or amended, except by an instrument signed by all of the
parties hereto.
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6.5 No Superior Registration Rights Agreements. The Company has not entered
into, and will not hereafter enter into, any registration rights agreement with
respect to its Common Stock granting registration rights that are superior to
the registration rights granted hereby. The Company may grant registration
rights that are pari passu with the registration rights granted hereby.
6.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
6.7 Entire Agreement. This Agreement constitutes the entire agreement and
understanding among the parties and supersedes any prior understandings and/or
written or oral agreements among them respecting the subject matter herein.
6.8 Notices. All notices, requests, demands, consents and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and delivered by hand, by overnight courier delivery service
or by certified mail, return receipt requested, postage prepaid. Notices shall
be deemed given when actually received, which shall be deemed to be not later
than the next Business Day if sent by overnight courier or after five (5)
Business Days if sent by mail. Notice to Investors shall be made to the address
listed on the stock transfer records of the Company.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above written.
THE COMPANY:
PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation
By: /s/ Kyle T. Craig
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Name: Kyle T. Craig
----------------------------
Title: Vice President
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INVESTORS:
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DANIEL V. COLANGELO
--------------------------------------
JAMES W. LARGAY
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STEPHEN A. NORMAN
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VITO J. COLANGELO
--------------------------------------
JULIUS A. FRANKEL
--------------------------------------
PAUL AIKEN
OTHER INVESTORS MAY EXECUTE
COUNTERPART SIGNATURE PAGES
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Signature Page to Registration Rights
Agreement of Progressive Bagel Concepts, Inc.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above written.
If a Natural Person:
/s/ Daniel V. Colangelo
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(Signature)
Daniel V. Colangelo
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(Print or Type Name)
If a Corporation, Partnership,
Trust, or other Entity:
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(Print or Type Name of Entity)
By:
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(Signature)
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(Print or Type Name)
Title:
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(Print or Type)
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Signature Page to Registration Rights
Agreement of Progressive Bagel Concepts, Inc.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above written.
If a Natural Person:
/s/ Stephen A. Norman
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(Signature)
Stephen A. Norman
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(Print or Type Name)
If a Corporation, Partnership,
Trust, or other Entity:
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(Print or Type Name of Entity)
By:
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(Signature)
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(Print or Type Name)
Title:
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(Print or Type)
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Signature Page to Registration Rights
Agreement of Progressive Bagel Concepts, Inc.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above written.
If a Natural Person:
/s/ James W. Largay
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(Signature)
James W. Largay
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(Print or Type Name)
If a Corporation, Partnership,
Trust, or other Entity:
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(Print or Type Name of Entity)
By:
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(Signature)
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(Print or Type Name)
Title:
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(Print or Type)
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Signature Page to Registration Rights
Agreement of Progressive Bagel Concepts, Inc.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above
written.
If a Natural Person:
/s/ Vito J. Colangelo
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(Signature)
Vito J. Colangelo
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(Print or Type Name)
If a Corporation, Partnership,
Trust, or other Entity:
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(Print or Type Name of Entity)
By:
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(Signature)
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(Print or Type Name)
Title:
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(Print or Type)
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Signature Page to Registration Rights
Agreement of Progressive Bagel Concepts, Inc.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above
written.
If a Natural Person:
/s/ Paul Aiken
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(Signature)
Paul Aiken
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(Print or Type Name)
If a Corporation, Partnership,
Trust, or other Entity:
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(Print or Type Name of Entity)
By:
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(Signature)
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(Print or Type Name)
Title:
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(Print or Type)
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Signature Page to Registration Rights
Agreement of Progressive Bagel Concepts, Inc.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Ageement to be executed as of the day and year first above
written.
If a Natural Person:
/s/ Julius Frankel
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(Signature)
Julius Frankel
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(Print or Type Name)
If a Corporation, Partnership,
Trust, or other Entity:
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(Print or Type Name of Entity)
By:
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(Signature)
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(Print or Type Name)
Title:
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(Print or Type)
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Signature Page to Registration Rights
Agreement of Progressive Bagel Concepts, Inc.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Ageement to be executed as of the day and year first above
written.
If a Natural Person:
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(Signature)
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(Print or Type Name)
If a Corporation, Partnership,
Trust, or other Entity:
Bagel & Bagel, Inc.
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(Print or Type Name of Entity)
By: /s/ Gail A. Lozoff
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(Signature)
Gail A. Lozoff
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(Print or Type Name)
Title: President
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(Print or Type)
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Signature Page to Registration Rights Agreement
Boston Chicken, Inc. ("BCI") executes this Registration Rights Agreement
with respect to shares of PBCI that BCI may acquire upon exercise of its
conversion and/or option rights under that certain Secured Loan Agreement of
even date herewith.
BOSTON CHICKEN, INC.
By: /s/ Joel Mitz
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Its: Vice President
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EXHIBIT A
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1. Daniel V. Colangelo
2. James W. Largay
3. Stephen A. Norman
4. Vito J. Colangelo
5. Julius A. Frankel
6. Paul Aiken
7. Bagel & Bagel, Inc.
A-1
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Exhibit H
EMPLOYMENT AGREEMENT
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THIS AGREEMENT is made this 10th day of August, 1995, by and between
Progressive Bagel Concepts, Inc., a Delaware corporation (hereinafter referred
to as the "Company"), and Michael E. Brau (hereinafter referred to as
"Employee").
WITNESSETH:
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WHEREAS, the Company is engaged in the business of operating retail
bakeries featuring bagels and other food items;
WHEREAS, because of the abilities and expertise of Employee in said
business, the Company desires to employ Employee; and
WHEREAS, Employee is willing to accept such employment upon the terms and
conditions stated herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee to perform the duties
described herein, and Employee hereby accepts such employment on the terms and
conditions stated herein. Employee shall hold the position of Vice President of
Operations - Western Zone.
2. Term of Employment. Subject to the provisions for termination set forth
herein, the term of employment under this Agreement shall commence on the date
hereof and shall extend until three years from the date hereof (the "Term").
3. Duties of Employee. Employee shall perform the duties commensurate with
his position and experience as shall be assigned to him from time to time by the
Company and shall report to the President - Western Zone. Employee shall perform
such duties in a diligent manner, shall devote his entire business time,
attention and effort to the affairs of the Company within the scope of his
employment as is reasonably necessary for the proper rendition of said services,
shall diligently promote the interests of the Company, and shall be just and
faithful in carrying out his duties. The Company hereby agrees that the Employee
shall not be required, in connection with the performance of his duties
hereunder, to obtain or maintain a residence in the State of Colorado or
otherwise relocate his primary residence.
4. Compensation. (a) The Company shall compensate Employee for all services
rendered by him hereunder as follows:
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(i) Employee shall receive a salary at a yearly rate of $125,000,
payable by the Company in twenty-six (26) equal installments (subject to
any increases as determined by the Board of Directors from time to time in
its sole discretion) after deducting therefrom all applicable FICA
contributions, federal and state income tax withholding, and any other
payroll taxes;
(ii) Employee shall receive options under the Company's 1995 Stock
Option Plan (the "Plan") to purchase that number of shares of common stock
of the Company that have a fair market value, as determined in accordance
with the terms of the Plan, of $250,000, which options are to be granted on
the date hereof (such options being herein referred to as the "Initially
Granted Options"); and
(iii) Employee shall receive such stock options as may be granted to
Employee pursuant to the Plan, as it may be amended from time to time, or
any option plan hereinafter adopted by the Company; provided, however, the
options granted pursuant to Section 4(b) shall constitute Employee's option
grant for 1995 under the Plan.
(b) Notwithstanding the provisions of Section 4(a)(i) above, the $125,000
salary rate shall be reduced by the amount of any car allowance that may be
proposed by Employee and consented to by the Company, which consent will not be
unreasonably withheld.
5. Benefits, Vacations and Reimbursement of Expenses. In addition to the
compensation payable to Employee pursuant to Section 4 above, and all other
compensation or benefits provided for hereunder, Employee shall be entitled to
such reasonable periods of vacation, with full pay, as is consistent with the
general policy as established by the Board of Directors for executives and
business exigencies of the Company, and such benefits of a similar type and
amount and to the same extent as benefits are generally provided to those
officers of the Company that were previously shareholders and officers of
Brackman Brothers, Inc., Bagel & Bagel, Inc. and Offerdahl's Bagel Gourmet, Inc.
Employee shall also be entitled to receive such additional benefits to the same
extent as benefits are provided to officers of the Company generally as
established by the Company's Board of Directors from time to time. The Employee
shall be reimbursed for the reasonable business-related expenses incurred by him
in connection with the performance of his duties hereunder.
6. Confidentiality and Non-Compete Agreement. Employee agrees to execute
and deliver the standard form of confidentiality and non-compete agreement
attached hereto as Exhibit A (the "Confidentiality and Non-Compete Agreement")
and to comply with the terms thereof.
7. Conflict of Interest. Employee shall take no action, or engage in any
transaction, that could be considered to conflict with the best interests of the
Company, and shall at all times exercise his best judgment and efforts so as to
avoid taking any action, or engaging in any transaction, that might give the
appearance of being in conflict with the best interests of the Company.
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8. Termination.
(a) This Agreement and Employee's employment hereunder shall immediately
terminate, without further notice or action, upon the occurrence of the death of
Employee.
(b) Additionally, the Company shall have the right to terminate this
Agreement and Employee's employment with the Company hereunder, effective upon
written notice to Employee of termination stating the basis for such
termination, under only the following circumstances:
(1) if Employee is permanently disabled (as defined below); or
(2) for "cause," which shall be defined as including any of the
following: (i) any misappropriation of funds or property of the Company by
Employee; (ii) Employee's conviction of a felony, or of any crime involving
moral turpitude, fraud, theft or conversion; (iii) Employee's failure to
submit to a medical examination at the Company's expense within twenty-one
(21) days after receipt of the Company's written request that Employee
submit to such examination; (iv) a material breach of any other provision
contained in this Agreement; or (v) a breach of any provision of the
Confidentiality and Non-Compete Agreement.
(c) Employee shall be deemed to be "permanently disabled" hereunder upon
the first to occur of any of the following events:
(1) The receipt by the Company of a written certificate from a
physician approved by the Company and reasonably satisfactory to Employee
stating that, based upon one or more examinations of Employee by such
physician, it is such physician's opinion that, for a period of at least
six (6) consecutive months from the date of certification, Employee is and
will be substantially unable to perform his customary duties for the
Company due to physical or mental infirmity. The Company may request in
writing that Employee submit to such examinations by giving written notice
thereof to Employee.
(2) The adjudication of Employee as an incompetent or a disabled
person and the appointment of a conservator or guardian for his person or
property by a court of competent jurisdiction.
(d) If Employee is terminated by the Company for cause, as that term is
defined in Section 8(b)(2), or if Employee voluntarily terminates his
employment, the Company shall not be obligated to pay Employee any other
compensation with respect to any period after the date of such termination and
all stock options granted to Employee, whether or not vested on the date of such
termination, shall terminate and be of no further force and effect.
(e) If Employee is terminated by the Company at any time prior to the end
of the Term, for any reason other than for cause, the Company shall pay to
Employee the
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<PAGE>
portion of the cash compensation provided for in Section 4 hereof that is
payable during the remainder of the Term, if any, payable in a lump sum
cash payment within thirty (30) days of the effective date of termination,
and the Employee's medical, dental and disability benefits shall continue
until the end of the Term.
(f) If Employee is terminated by the Company at any time prior to
August 11, 1999, for any reason other than for cause, the Initially Granted
Options shall continue to vest and be exercisable in accordance with their
terms. After the effective date of his termination Employee shall not be
eligible to receive any further stock options.
(g) If Employee dies or becomes permanently disabled during the Term,
the Company shall pay to Employee any portion of the cash compensation
provided for in Section 4 hereof that is payable during the remainder of
the Term payable in a lump sum cash payment within thirty (30) days of the
effective date of termination.
(h) Upon any termination of this Agreement or of the employment of
Employee, or the expiration of this Agreement without renewal of Employee's
employment, Employee shall be deemed automatically to have resigned from
any office of the Company which he may then hold and shall promptly deliver
to the Company (without retaining any copies thereof) all Company files and
documents, forms, letterhead, business cards, computer disks and any other
written, magnetic or printed materials relating to the business of the
Company.
9. Employee Representations. Employee represents and warrants to the
Company that (i) he is free to enter into this Agreement and (ii) this Agreement
does not violate the terms of any other agreement to which Employee is a party
or by which he is bound.
10. Waiver. Failure by either party to insist upon strict compliance with
any of the terms, covenants or conditions hereof shall not be deemed a waiver of
such term, covenant or condition, nor shall any waiver or relinquishment of any
right or remedy hereunder at any one or more times be deemed a waiver or
relinquishment of such right or remedy at any other time or times.
11. Severability. Each section, paragraph, term and provision of this
Agreement, and any portion thereof, shall be considered severable and if for any
reason any such portion of this Agreement is held to be invalid, contrary to, or
in conflict with any applicable present or future law or regulation in a final,
unappealable ruling issued by any court, agency or tribunal with competent
jurisdiction in a proceeding to which the Company is a party, that ruling shall
not impair the operation of, or have any other effect upon, such other portions
of this Agreement as may remain otherwise intelligible, which shall continue to
be given full force and effect and bind the parties hereto. Employee agrees that
if any provisions hereof shall be adjudicated to be invalid or unenforceable in
whole or in part, such modifications made to this Agreement as a result of such
adjudication shall be effective only in the particular jurisdiction in which
such adjudication is made. To the extent any provision hereof is deemed
unenforceable by virtue of its scope but may be enforceable by limitations
thereon, the parties hereto agree that the same shall be enforceable to the
4
<PAGE>
fullest extent permissible under the laws and public policies applied in such
jurisdiction in which the enforcement is sought. The parties hereto hereby
authorize any court of competent jurisdiction to modify the restrictive
covenants to the extent necessary to make the same enforceable.
12. Benefit. This Agreement shall inure to the benefit of and be binding
upon the Company, its successors and assigns. The rights and benefits of
Employee under this Agreement are personal to him, and are not subject to
voluntary or involuntary alienation, assignment or transfer by him.
13. Entire Agreement. This Agreement contains the entire agreement between
the parties concerning Employee's employment with the Company, and may not be
modified or rescinded except by a written agreement to such effect signed by
both parties.
14. Notices. All notices, requests, demands, and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or by electronic transmission. If mailed,
first class, certified mail, postage prepaid, or sent by reliable overnight
delivery service and addressed as follows, or at such other addresses as the
parties hereto may from time to time designate in writing, such notices,
requests, demands, and other communications shall be deemed delivered three (3)
business days after being so duly posted:
to the Company: Progressive Bagel Concepts, Inc.
1526 Cole Blvd. Suite 200
Golden, CO 80401
Attention: Chairman
Facsimile: (303) 202-3360
with a copy to: Progressive Bagel Concepts, Inc.
1526 Cole Blvd. Suite 200
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 202-3490
to Employee: Michael E. Brau
c/o Progressive Bagel Concepts, Inc.
7007 Carroll Road
San Diego, CA 92122
Facsimile:
with a copy to: Lawrence M. Sherman
Sherman & Eggers, P.C.
350 West Ash Street
Suite 1100
San Diego, CA 92101-3403
Facsimile: (619) 231-8770
5
<PAGE>
15. Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Colorado applicable to contracts made and to be performed
therein.
16. Conflict with Plan. The parties acknowledge that to the extent any
provision of this Agreement is inconsistent with any provision of the Plan, the
provisions of this Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
EMPLOYEE: PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation
_______________________________ By: _____________________________
Michael E. Brau Its: ___________________________
6
<PAGE>
Exhibit A
PROGRESSIVE BAGEL CONCEPTS, INC.
CONFIDENTIALITY AND NON-COMPETE AGREEMENT
WHEREAS, the undersigned (the "Undersigned") is a current or prospective
employee ("Employee"), owner ("Owner") of an interest in, or supplier, agent,
researcher, consultant, service provider, or vendor ("Vendor") of, Progressive
Bagel Concepts, Inc. ("Company") and/or one or more of its affiliates,
subsidiaries, area developers, franchisees, or joint venturers (each a "Related
Party");
WHEREAS, the Undersigned has been or may be given access to certain
confidential and proprietary information of Company and/or its Related Parties
previously not available to the Undersigned;
WHEREAS, the Company and/or the Related Party signatory hereto, as the case
may be, is only willing to commence or continue its relationship with
Undersigned in the event Undersigned enters into this Agreement; and
WHEREAS, the Company and/or the Related Party signatory hereto has entered
into this Agreement with the Undersigned in order to ensure the confidentiality
of Proprietary Information in accordance with the terms of this Agreement, to
ensure that the Undersigned does not utilize such information to compete with
the Company or unfairly disadvantage the Company, and/or to protect the
investment made by the Company and/or the Related Party signatory hereto in the
training and instruction of its Employees and/or in negotiation with and
education of Owners and Vendors, as the case may be.
NOW, THEREFORE, the Undersigned hereby agrees as follows:
1. Recitals. The recitals set forth above are incorporated herein by this
reference and shall be part of this Agreement.
2. Proprietary Information. As used in this Agreement, the term
"Proprietary Information" shall mean the business concepts, recipes, food
preparation methods, equipment, operating techniques, marketing methods,
financial information, demographic and trade area information, prospective site
locations, market penetration techniques, plans, or schedules, customer
profiles, preferences, or statistics, menu breakdowns, itemized costs,
franchisee composition, territories, and development plans, and all related
trade secrets or confidential or proprietary information treated as such by the
Company and/or the Related Party signatory hereto, as the case may be, whether
by course of conduct, by letter or report, or by the use of any appropriate
proprietary stamp or legend designating such information or item to be
confidential or proprietary, by any communication to such effect made prior to
or at the time any such Proprietary Information is disclosed to the Undersigned,
or otherwise.
<PAGE>
3. Use and Disclosure of Proprietary Information. The Undersigned shall
hold all Proprietary Information in strict confidence, shall use such
Proprietary Information only for the benefit of the Company and/or the Related
Party and shall disclose such Proprietary Information only to the Undersigned's
employees and agents who have a need to know such Proprietary Information in
order to assist the Undersigned, provided such employees and agents each have
individually entered into this Agreement or a Confidentiality and Non-Compete
Agreement substantially identical hereto or are otherwise obligated by a written
agreement with the Undersigned to maintain the confidence of the Proprietary
Information, which agreement the Undersigned hereby agrees may be directly
enforced by Company and/or the Related Party signatory hereto, as the case may
be. The Undersigned shall not disclose Proprietary Information to any other
person or entity. The obligations hereunder to maintain the confidentiality of
Proprietary Information shall not expire.
4. Limitations on Obligations. The obligations of the Undersigned specified
in Section 3 shall not apply to any Proprietary Information which is received
from the Company and/or the Related Party signatory hereto, as the case may be,
which (a) is disclosed in a printed publication available to the public, or is
otherwise in the public domain through no act of the Undersigned or its
employees, agents or other person or entity which has received such Proprietary
Information from or through the Undersigned, (b) is approved for release by
written authorization of an officer of the Company and/or the Related Party
signatory hereto, as the case may be, or (c) is required to be disclosed by
proper order of a court of applicable jurisdiction after adequate notice to the
Company and/or the Related Party signatory hereto, as the case may be,
sufficient to permit them to seek a protective order therefor, the imposition of
which protective order the Undersigned agrees to approve and support.
5. Return of Documents. The Undersigned (and each employee, agent, or other
person or entity which has received such Proprietary Information from or through
the Undersigned) shall, upon the request of the Company and/or the Related Party
signatory hereto, as the case may be, return all documents and other tangible
manifestations of Proprietary Information received from the Company and/or the
Related Party signatory hereto, as the case may be, including all copies and
reproductions thereof.
6. Non-Compete. During the Applicable Term (as defined in Section 10
hereof) and for two years after the later of (i) the end of the Applicable Term
or (ii) the date on which Undersigned returns any Proprietary Information
pursuant to Section 5 hereof, Undersigned (x) agrees (1) if Undersigned is an
Employee or Vendor, not to compete against the Company and/or the Related Party
signatory hereto, as the case may be, by directly or indirectly owning,
managing, operating, controlling, being employed by, participating in, or being
connected in any manner with the ownership, management, operation, or control of
(A) any food service establishment that prepares, serves, or sells, and derives
more than 20% of its revenues from, bagels and/or bagel related products
(including but not limited to cream cheese and other spreads, bagel sandwiches
and bagel chips), or (B) any food service establishment, at least 20% of the
revenue of which is derived from coffee or any other product which accounts for
at least 15% of the revenue of any food service establishment owned or operated
by the Company and/or the Related Party signatory hereto, as the case may be, at
the time Undersigned commences or
2
<PAGE>
significantly increases its ownership, management, or other participation
therein, which food service establishment described in either (A) or (B), above,
is located within five miles of any store owned or operated by the Company
and/or the Related Party signatory hereto, as the case may be, or within any
standard metropolitan statistical area, trade area or "area of dominant
influence" (as defined by Arbitron Ratings Company) or any county in the State
of California in which the Company and/or the Related Party signatory hereto, as
the case may be, engage, or have developed specific plans to engage, in business
or (2) if Undersigned is an Owner, to comply with the confidentiality and
non-compete provisions in any applicable Area Development Agreement as if Owner
were Developer or to comply with the confidentiality and non-compete provisions
in any applicable Franchise Agreement as if Owner were Franchise Owner, in each
case within the geographic area therein specified, and (y) agrees not to solicit
employees from the Company and/or the Related Party signatory hereto, as the
case may be, it being understood that this Section 6 shall not (aa) apply to
store Employees except for managers or assistant managers, (bb) apply to
commissary Employees who are employed as delivery drivers, (cc) prevent the
Undersigned from participating as an investor, officer, or director in any
restaurant venture not covered by the foregoing applicable restrictions, or (dd)
prevent the Undersigned from investing so as to hold less than 3% of the
outstanding shares of any company which is a "reporting company" under the
Securities Exchange Act of 1934, as amended. It is the intention of the parties
that this Section 6 be interpreted so as to be valid under applicable law and,
if required for validity, any court or applicable tribunal may reduce or alter
the geographic scope and duration of this Section 6, by substitution of words or
otherwise, so as to create the broadest permissible protection to the Company
and/or the Related Party signatory hereto, as the case may be.
7. No Waiver. No delays or omissions by the Company and/or the Related
Party signatory hereto, as the case may be, in exercising any right under this
Agreement will operate as a waiver of that or any other right. A waiver or
consent given by the Company and/or the Related Party signatory hereto, as the
case may be, on any one occasion is effective only in that instance and will not
be construed as a bar to or waiver of any right on any other occasion.
8. Notices. Any notice, request, information, or other document to be
given hereunder to any of the parties by any other party shall be in writing and
delivered personally, sent by facsimile transmission or registered or certified
mail, postage prepaid, or overnight delivery service, as follows:
If to the Company, addressed to:
Progressive Bagel Concepts, Inc.
1526 Cole Boulevard
Suite 200
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 202-3490
3
<PAGE>
If to the Related Party signatory hereto, addressed to:
______________________________
______________________________
______________________________
______________________________
If to the Undersigned, addressed to:
______________________________ (Name)
______________________________ (Address)
______________________________ (City, State, Zip)
______________________________ (Attention)
______________________________ (Phone Number)
______________________________ (Fax Number)
Any party hereto may change the place at which notices are to be received
by it by the giving of notice of such change in the manner set forth above.
9. Equitable Relief. Undersigned acknowledges that Company and/or the
Related Party signatory hereto, as the case may be, will be irreparably harmed
by any breach hereof, that monetary damages would be inadequate and that Company
and/or the Related Party signatory hereto, as the case may be, shall have the
right to have an injunction or other equitable remedies imposed in relief of, or
to prevent or restrain, such breach. The Undersigned agrees that Company and/or
the Related Party signatory hereto, as the case may be, shall also be entitled
to any and all other relief available under law or equity for such breach.
10. Applicable Term. The Applicable Term of Section 6 of this Agreement
shall be (i) the term of employment in the event Undersigned is an Employee, it
being understood and acknowledged that Employee is employed at will and may be
terminated at any time by Company and/or the Related Party signatory hereto, as
the case may be, (ii) the term of the applicable Area Development Agreement or
Franchise Agreement in the event Undersigned is an Owner, or (iii) three years
in the event Undersigned is a Vendor, provided that in the case of this clause
(iii), the Applicable Term shall automatically be extended one year on each
anniversary of the date of execution hereof, unless either party has given
written notice to the other not more than 90 days prior thereto stating that
such extension shall not occur.
11. Miscellaneous.
(a) This Agreement shall not be construed to grant to the Undersigned any
patents, licenses, or similar rights to Proprietary Information
disclosed to the Undersigned hereunder, all of which rights and
interests shall be deemed to reside or be vested in the Company.
4
<PAGE>
(b) This Agreement, does not supersede, but rather is in addition to and
cumulative with, all prior agreements, written or oral, between the
parties relating to the subject matter of this Agreement. This
Agreement may not be modified, changed or discharged, in whole or in
part, except by an agreement in writing signed by the parties.
(c) This Agreement will be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
(d) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
(e) This Agreement shall be construed and interpreted in accordance with
the laws of the State of Colorado.
EXECUTED as of the _____ day of _____________________, 199_.
PROGRESSIVE BAGEL CONCEPTS, INC. UNDERSIGNED
___________________________________________
(Entity Name, if any)
By: ________________________ By: ______________________________________
Title:______________________ Print Name: ______________________________________
Print Title:______________________________________
RELATED PARTY
____________________________
(Name)
By: ________________________
Title: _____________________
5
<PAGE>
Exhibit I
CONSULTING AGREEMENT
THIS AGREEMENT is made this 10th day of August, 1995, by and between
Progressive Bagel Concepts, Inc., a Delaware corporation (hereinafter referred
to as the "Company"), and Rachel C. Brau (hereinafter referred to as
"Consultant").
WITNESSETH:
WHEREAS, the Company is engaged in the business of operating retail
bakeries featuring bagels and other food items;
WHEREAS, because of the abilities and expertise of Consultant in said
business, the Company desires to retain the services of Consultant; and
WHEREAS, Consultant is willing to provide such services upon the terms and
conditions stated herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Consultant's Status. The Consultant acknowledges that she is an
independent contractor and is not an agent or employee of the Company. The
Consultant is not authorized to act on behalf of the Company and may not enter
into any contracts or make any promises or commitments of any kind whatsoever on
behalf of the Company without express written authorization from the Chairman or
the President of the Company to do so.
2. Term. Subject to the provisions for termination set forth herein, the
term of employment under this Agreement shall commence on the date hereof and
shall extend two years from the date hereof (the "Term").
3. Scope of Work. The Consultant shall assist the Company by performing
work on general marketing projects assigned to her by the Company in its Western
Zone. The scope of the Consultant's work shall include, but not necessarily be
limited to, providing assistance to the employee or employees performing job
functions similar to those performed by Consultant and providing other advice
and assistance that reasonably falls within the Consultant's knowledge and
expertise. Consultant shall perform such duties in a diligent manner, shall
devote substantially all of her business time, attention and effort to the
affairs of the Company within the scope of her consulting engagement as is
reasonably necessary for the proper rendition of said services (subject,
however, to reasonable periods of vacation), shall diligently promote the
interests of the Company, and shall be just and faithful in carrying out her
duties. The Company hereby agrees that the
<PAGE>
Consultant shall not be required, in connection with the performance of her
duties hereunder, to obtain or maintain a residence in the State of Colorado or
otherwise relocate her primary residence.
4. Compensation. The Company shall compensate Consultant for all services
rendered by her hereunder as follows:
(a) Consultant shall receive a consulting fee of $90,000, payable by
the Company in twenty-six (26) equal installments (subject to any increases
as determined by the Board of Directors from time to time in its sole
discretion);
(b) Consultant shall receive options under the Company's 1995 Stock
Option Plan (the "Plan") to purchase that number of shares of common stock
of the Company that have a fair market value, as determined in accordance
with the terms of the Plan, of $64,800, which options are to be granted on
the date hereof (such options being herein referred to as the "Initially
Granted Options"); and
(c) Consultant shall receive such other stock options as may be
granted to Consultant pursuant to the Plan, as it may be amended from time
to time, or any option plan hereinafter adopted by the Company.
5. Benefits; Reimbursement of Expenses. In addition to the compensation
payable to Consultant pursuant to Section 4 above, and all other compensation or
benefits provided for hereunder, the Company shall pay for dependent coverage of
Consultant under the Company's medical and dental plans and the Consultant shall
be reimbursed for the reasonable business-related expenses incurred by her in
connection with the performance of her duties hereunder.
6. Confidentiality and Non-Compete Agreement. Consultant agrees to execute
and deliver the standard form of confidentiality and non-compete agreement
attached hereto as Exhibit A (the "Confidentiality and Non-Compete Agreement")
and to comply with the terms thereof.
7. Conflict of Interest. Consultant shall take no action, or engage in any
transaction, that could be considered to conflict with the best interests of the
Company, and shall at all times exercise her best judgment and efforts so as to
avoid taking any action, or engaging in any transaction, that might give the
appearance of being in conflict with the best interests of the Company.
8. Termination.
(a) This Agreement and Consultant's engagement hereunder shall
immediately terminate, without further notice or action, upon the
occurrence of the death of Consultant.
(b) Additionally, the Company shall have the right to terminate this
Agreement and Consultant's engagement with the Company hereunder, effective
upon written notice to
2
<PAGE>
Consultant of termination stating the basis for such termination, under
only the following circumstances:
(1) if Consultant is permanently disabled (as defined below); or
(2) for "cause," which shall be defined as including any of the
following: (i) any misappropriation of funds or property of the
Company by Consultant; (ii) Consultant's conviction of a felony, or of
any crime involving moral turpitude, fraud, theft or conversion; (iii)
Consultant's failure to submit to a medical examination at the
Company's expense within twenty-one (21) days after receipt of the
Company's written request that Consultant submit to such examination;
(iv) a material breach of any other provision contained in this
Agreement; or (v) a breach of any provision of the Confidentiality and
Non-Compete Agreement.
(c) Consultant shall be deemed to be "permanently disabled" hereunder
upon the first to occur of any of the following events:
(1) The receipt by the Company of a written certificate from a
physician approved by the Company and reasonably satisfactory to
Consultant stating that, based upon one or more examinations of
Consultant by such physician, it is such physician's opinion that, for
a period of at least six (6) consecutive months from the date of
certification, Consultant is and will be substantially unable to
perform her consulting duties hereunder due to physical or mental
infirmity. The Company may request in writing that Consultant submit
to such examinations by giving written notice thereof to Consultant.
(2) The adjudication of Consultant as an incompetent or a
disabled person and the appointment of a conservator or guardian for
her person or property by a court of competent jurisdiction.
(d) If Consultant is terminated by the Company for cause, as that term
is defined in Section 8(b)(2), or if Consultant voluntarily terminates her
engagement, the Company shall not be obligated to pay Consultant any other
compensation with respect to any period after the date of such termination
and all stock options granted to Consultant, whether or not vested on the
date of such termination, shall terminate and be of no further force and
effect.
(e) If Consultant's engagement is terminated by the Company at any
time prior to the end of the Term, for any reason other than for cause, the
Company shall pay to Consultant the portion of the cash compensation
provided for in Section 4 hereof that is payable during the remainder of
the Term, if any, payable in a lump sum cash payment within thirty (30)
days of the effective date of termination, and the medical and dental
benefits provided in Section 5 hereunder shall continue until the end of
the Term.
(f) If Consultant's engagement is terminated by the Company at any
time prior to August 11, 1999, for any reason other than for cause, the
Initially Granted Options shall
3
<PAGE>
continue to vest and be exercisable in accordance with their terms. After
the effective date of the termination Consultant shall not be eligible to
receive any further stock options.
(g) If Consultant dies or becomes permanently disabled during the
Term, the Company shall pay to Consultant any portion of the cash
compensation provided for in Section 4 hereof that is payable during the
remainder of the Term payable in a lump sum cash payment within thirty (30)
days of the effective date of termination.
(h) Upon any termination of this Agreement or of the engagement of
Consultant, or the expiration of this Agreement without renewal of
Consultant's engagement, Consultant shall be deemed automatically to have
resigned from any office of the Company which she may then hold and shall
promptly deliver to the Company (without retaining any copies thereof) all
Company files and documents, forms, letterhead, business cards, computer
disks and any other written, magnetic or printed materials relating to the
business of the Company.
9. Consultant Representations. Consultant represents and warrants to the
Company that (i) she is free to enter into this Agreement and (ii) this
Agreement does not violate the terms of any other agreement to which Consultant
is a party or by which she is bound.
10. Waiver. Failure by either party to insist upon strict compliance with
any of the terms, covenants or conditions hereof shall not be deemed a waiver of
such term, covenant or condition, nor shall any waiver or relinquishment of any
right or remedy hereunder at any one or more times be deemed a waiver or
relinquishment of such right or remedy at any other time or times.
11. Severability. Each section, paragraph, term and provision of this
Agreement, and any portion thereof, shall be considered severable and if for any
reason any such portion of this Agreement is held to be invalid, contrary to, or
in conflict with any applicable present or future law or regulation in a final,
unappealable ruling issued by any court, agency or tribunal with competent
jurisdiction in a proceeding to which the Company is a party, that ruling shall
not impair the operation of, or have any other effect upon, such other portions
of this Agreement as may remain otherwise intelligible, which shall continue to
be given full force and effect and bind the parties hereto. Consultant agrees
that if any provisions hereof shall be adjudicated to be invalid or
unenforceable in whole or in part, such modifications made to this Agreement as
a result of such adjudication shall be effective only in the particular
jurisdiction in which such adjudication is made. To the extent any provision
hereof is deemed unenforceable by virtue of its scope but may be enforceable by
limitations thereon, the parties hereto agree that the same shall be enforceable
to the fullest extent permissible under the laws and public policies applied in
such jurisdiction in which the enforcement is sought. The parties hereto hereby
authorize any court of competent jurisdiction to modify the restrictive
covenants to the extent necessary to make the same enforceable.
12. Benefit. This Agreement shall inure to the benefit of and be binding
upon the Company, its successors and assigns. The rights and benefits of
Consultant under this Agreement
4
<PAGE>
are personal to her, and are not subject to voluntary or involuntary alienation,
assignment or transfer by her.
13. Entire Agreement. This Agreement contains the entire agreement between
the parties concerning Consultant's engagement with the Company, and may not be
modified or rescinded except by a written agreement to such effect signed by
both parties.
14. Notices. All notices, requests, demands, and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or by electronic transmission. If mailed,
first class, certified mail, postage prepaid, or sent by reliable overnight
delivery service and addressed as follows, or at such other addresses as the
parties hereto may from time to time designate in writing, such notices,
requests, demands, and other communications shall be deemed delivered three (3)
business days after being so duly posted:
to the Company: Progressive Bagel Concepts, Inc.
1526 Cole Blvd. Suite 200
Golden, CO 80401
Attention: Chairman
Facsimile: (303) 202-3360
with a copy to: Progressive Bagel Concepts, Inc.
1526 Cole Blvd. Suite 200
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 202-3490
to Consultant: Rachel C. Brau
c/o Progressive Bagel Concepts, Inc.
7007 Carroll Road
San Diego, CA 92122
Facsimile:
with a copy to: Lawrence M. Sherman
Sherman & Eggers, P.C.
350 West Ash Street
Suite 1100
San Diego, CA 92101-3403
Facsimile: (619) 231-8770
15. Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Colorado applicable to contracts made and to be performed
therein.
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<PAGE>
16. Conflict with Plan. The parties acknowledge that to the extent any
provision of this Agreement is inconsistent with any provision of the Plan, the
provisions of this Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
CONSULTANT: PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation
By: ________________________________
____________________________
Rachel C. Brau Its: _______________________________
6
<PAGE>
Exhibit A
PROGRESSIVE BAGEL CONCEPTS, INC.
CONFIDENTIALITY AND NON-COMPETE AGREEMENT
WHEREAS, the undersigned (the "Undersigned") is a current or prospective
employee ("Employee"), owner ("Owner") of an interest in, or supplier, agent,
researcher, consultant, service provider, or vendor ("Vendor") of, Progressive
Bagel Concepts, Inc. ("Company") and/or one or more of its affiliates,
subsidiaries, area developers, franchisees, or joint venturers (each a "Related
Party");
WHEREAS, the Undersigned has been or may be given access to certain
confidential and proprietary information of Company and/or its Related Parties
previously not available to the Undersigned;
WHEREAS, the Company and/or the Related Party signatory hereto, as the case
may be, is only willing to commence or continue its relationship with
Undersigned in the event Undersigned enters into this Agreement; and
WHEREAS, the Company and/or the Related Party signatory hereto has entered
into this Agreement with the Undersigned in order to ensure the confidentiality
of Proprietary Information in accordance with the terms of this Agreement, to
ensure that the Undersigned does not utilize such information to compete with
the Company or unfairly disadvantage the Company, and/or to protect the
investment made by the Company and/or the Related Party signatory hereto in the
training and instruction of its Employees and/or in negotiation with and
education of Owners and Vendors, as the case may be.
NOW, THEREFORE, the Undersigned hereby agrees as follows:
1. Recitals. The recitals set forth above are incorporated herein by this
reference and shall be part of this Agreement.
2. Proprietary Information. As used in this Agreement, the term
"Proprietary Information" shall mean the business concepts, recipes, food
preparation methods, equipment, operating techniques, marketing methods,
financial information, demographic and trade area information, prospective site
locations, market penetration techniques, plans, or schedules, customer
profiles, preferences, or statistics, menu breakdowns, itemized costs,
franchisee composition, territories, and development plans, and all related
trade secrets or confidential or proprietary information treated as such by the
Company and/or the Related Party signatory hereto, as the case may be, whether
by course of conduct, by letter or report, or by the use of any appropriate
proprietary stamp or legend designating such information or item to be
confidential or proprietary, by any communication to such effect made prior to
or at the time any such Proprietary Information is disclosed to the Undersigned,
or otherwise.
<PAGE>
3. Use and Disclosure of Proprietary Information. The Undersigned shall
hold all Proprietary Information in strict confidence, shall use such
Proprietary Information only for the benefit of the Company and/or the Related
Party and shall disclose such Proprietary Information only to the Undersigned's
employees and agents who have a need to know such Proprietary Information in
order to assist the Undersigned, provided such employees and agents each have
individually entered into this Agreement or a Confidentiality and Non-Compete
Agreement substantially identical hereto or are otherwise obligated by a written
agreement with the Undersigned to maintain the confidence of the Proprietary
Information, which agreement the Undersigned hereby agrees may be directly
enforced by Company and/or the Related Party signatory hereto, as the case may
be. The Undersigned shall not disclose Proprietary Information to any other
person or entity. The obligations hereunder to maintain the confidentiality of
Proprietary Information shall not expire.
4. Limitations on Obligations. The obligations of the Undersigned specified
in Section 3 shall not apply to any Proprietary Information which is received
from the Company and/or the Related Party signatory hereto, as the case may be,
which (a) is disclosed in a printed publication available to the public, or is
otherwise in the public domain through no act of the Undersigned or its
employees, agents or other person or entity which has received such Proprietary
Information from or through the Undersigned, (b) is approved for release by
written authorization of an officer of the Company and/or the Related Party
signatory hereto, as the case may be, or (c) is required to be disclosed by
proper order of a court of applicable jurisdiction after adequate notice to the
Company and/or the Related Party signatory hereto, as the case may be,
sufficient to permit them to seek a protective order therefor, the imposition of
which protective order the Undersigned agrees to approve and support.
5. Return of Documents. The Undersigned (and each employee, agent, or other
person or entity which has received such Proprietary Information from or through
the Undersigned) shall, upon the request of the Company and/or the Related Party
signatory hereto, as the case may be, return all documents and other tangible
manifestations of Proprietary Information received from the Company and/or the
Related Party signatory hereto, as the case may be, including all copies and
reproductions thereof
6. Non-Compete. During the Applicable Term (as defined in Section 10
hereof) and for two years after the later of (i) the end of the Applicable Term
or (ii) the date on which Undersigned returns any Proprietary Information
pursuant to Section 5 hereof, Undersigned (x) agrees (1) if Undersigned is an
Employee or Vendor, not to compete against the Company and/or the Related Party
signatory hereto, as the case may be, by directly or indirectly owning,
managing, operating, controlling, being employed by, participating in, or being
connected in any manner with the ownership, management, operation, or control of
(A) any food service establishment that prepares, serves, or sells, and derives
more than 20% of its revenues from, bagels and/or bagel related products
(including but not limited to cream cheese and other spreads, bagel sandwiches
and bagel chips), or (B) any food service establishment, at least 20% of the
revenue of which is derived from coffee or any other product which accounts for
at least 15% of the revenue of any food service establishment owned or operated
by the Company and/or the Related Party signatory hereto, as the case may be, at
the time Undersigned commences or
2
<PAGE>
significantly increases its ownership, management, or other participation
therein, which food service establishment described in either (A) or (B), above,
is located within five miles of any store owned or operated by the Company
and/or the Related Party signatory hereto, as the case may be, or within any
standard metropolitan statistical area, trade area or "area of dominant
influence" (as defined by Arbitron Ratings Company) or any county in the State
of California in which the Company and/or the Related Party signatory hereto, as
the case may be, engage, or have developed specific plans to engage, in business
or (2) if Undersigned is an Owner, to comply with the confidentiality and
non-compete provisions in any applicable Area Development Agreement as if Owner
were Developer or to comply with the confidentiality and non-compete provisions
in any applicable Franchise Agreement as if Owner were Franchise Owner, in each
case within the geographic area therein specified, and (y) agrees not to solicit
employees from the Company and/or the Related Party signatory hereto, as the
case may be, it being understood that this Section 6 shall not (aa) apply to
store Employees except for managers or assistant managers, (bb) apply to
commissary Employees who are employed as delivery drivers, (cc) prevent the
Undersigned from participating as an investor, officer, or director in any
restaurant venture not covered by the foregoing applicable restrictions, or (dd)
prevent the Undersigned from investing so as to hold less than 3% of the
outstanding shares of any company which is a "reporting company" under the
Securities Exchange Act of 1934, as amended. It is the intention of the parties
that this Section 6 be interpreted so as to be valid under applicable law and,
if required for validity, any court or applicable tribunal may reduce or alter
the geographic scope and duration of this Section 6, by substitution of words or
otherwise, so as to create the broadest permissible protection to the Company
and/or the Related Party signatory hereto, as the case may be.
7. No Waiver. No delays or omissions by the Company and/or the Related
Party signatory hereto, as the case may be, in exercising any right under this
Agreement will operate as a waiver of that or any other right. A waiver or
consent given by the Company and/or the Related Party signatory hereto, as the
case may be, on any one occasion is effective only in that instance and will not
be construed as a bar to or waiver of any right on any other occasion.
8. Notices. Any notice, request, information, or other document to be given
hereunder to any of the parties by any other party shall be in writing and
delivered personally, sent by facsimile transmission or registered or certified
mail, postage prepaid, or overnight delivery service, as follows:
If to the Company, addressed to:
Progressive Bagel Concepts, Inc.
1526 Cole Boulevard
Suite 200
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 202-3490
3
<PAGE>
If to the Related Party signatory hereto, addressed to:
___________________________
___________________________
___________________________
___________________________
If to the Undersigned, addressed to:
___________________________ (Name)
___________________________ (Address)
___________________________ (City, State, Zip)
___________________________ (Attention)
___________________________ (Phone Number)
___________________________ (Fax Number)
Any party hereto may change the place at which notices are to be received
by it by the giving of notice of such change in the manner set forth above.
9. Equitable Relief. Undersigned acknowledges that Company and/or the
Related Party signatory hereto, as the case may be, will be irreparably harmed
by any breach hereof, that monetary damages would be inadequate and that Company
and/or the Related Party signatory hereto, as the case may be, shall have the
right to have an injunction or other equitable remedies imposed in relief of, or
to prevent or restrain, such breach. The Undersigned agrees that Company and/or
the Related Party signatory hereto, as the case may be, shall also be entitled
to any and all other relief available under law or equity for such breach.
10. Applicable Term. The Applicable Term of Section 6 of this Agreement
shall be (i) the term of employment in the event Undersigned is an Employee, it
being understood and acknowledged that Employee is employed at will and may be
terminated at any time by Company and/or the Related Party signatory hereto, as
the case may be, (ii) the term of the applicable Area Development Agreement or
Franchise Agreement in the event Undersigned is an Owner, or (iii) three years
in the event Undersigned is a Vendor, provided that in the case of this clause
(iii), the Applicable Term shall automatically be extended one year on each
anniversary of the date of execution hereof, unless either party has given
written notice to the other not more than 90 days prior thereto stating that
such extension shall not occur.
11. Miscellaneous.
(a) This Agreement shall not be construed to grant to the Undersigned any
patents, licenses, or similar rights to Proprietary Information
disclosed to the Undersigned hereunder, all of which rights and
interests shall be deemed to reside or be vested in the Company.
4
<PAGE>
(b) This Agreement, does not supersede, but rather is in addition to and
cumulative with, all prior agreements, written or oral, between the
parties relating to the subject matter of this Agreement. This
Agreement may not be modified, changed or discharged, in whole or in
part, except by an agreement in writing signed by the parties.
(c) This Agreement will be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
(d) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
(e) This Agreement shall be construed and interpreted in accordance with
the laws of the State of Colorado.
EXECUTED as of the ___ day of _____________________, 199__
PROGRESSIVE BAGEL CONCEPTS, INC. UNDERSIGNED
__________________________________
(Entity Name, if any)
By: _________________________ By: ______________________________
Title: ______________________ Print Name: ______________________________
Print Title: _____________________________
RELATED PARTY
_____________________________
(Name)
By: _________________________
Title: ______________________
5
<PAGE>
Exhibit J
August 10, 1995
Baltimore Bagel Co.
Michael E. Brau
Rachel C. Brau
7007 Carroll Road
San Diego, California 92121-2212
Ladies and Gentlemen:
We have acted as counsel for Progressive Bagel Concepts, Inc., a Delaware
corporation ("PBCI"), and BBC Acquiring Corporation, a Delaware corporation
("PBCI Sub"), in connection with the execution and delivery of an agreement and
plan of merger dated August 10, 1995 (the "Agreement"), among PBCI, Baltimore
Bagel Co., a California corporation (the "Company"), PBCI Sub, and Michael E.
Brau, and Rachel C. Brau, individually and as trustees of the Brau Living Trust
dated January 23, 1990 (the "Shareholders"). This Opinion Letter is furnished to
the Company and the Shareholders at the request of PBCI and PBCI Sub pursuant to
Section 8.2 of the Agreement. Capitalized terms used in this Opinion Letter have
the meanings ascribed to them in the Agreement or in the Accord described in the
following paragraph.
This Opinion Letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the American Bar Association
Section of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. The law covered by the opinions
expressed herein is limited to the Delaware General Corporation Law and the
federal law of the United States.
We have relied upon factual representations made by PBCI and PBCI Sub in
Article 4.0 of the Agreement.
Based upon and subject to the foregoing, we are of the opinion that:
1. Each of PBCI and PBCI Sub is a corporation validly organized and
existing in good standing under the laws of the State of Delaware.
<PAGE>
Baltimore Bagel Co.
Michael E. Brau
Rachel C. Brau
August 10, 1995
Page 2
2. Each of PBCI and PBCI Sub has the legal power and authority to execute,
deliver and perform the Agreement and PBCI has the legal power and authority to
execute, deliver and perform the PBCI Registration Rights Agreement, the
Employment Agreement, the Consulting Agreement, and the assignment by PBCI of
the BCI Stock Purchase Agreement and the BCI Registration Statement (the "PBCI
Assignment") (the PBCI Registration Rights Agreement, the Employment Agreement,
the Consulting Agreement and the PBCI Assignment hereinafter collectively
referred to as the "Ancillary Agreements and Documents").
3. PBCI's authorized capital stock consists solely of 1,000,000 shares of
common stock, $.01 par value, 24,754.92 shares of which are issued and
outstanding, and 200,000 shares of preferred stock, $.01 par value, 6,250 shares
of which will be issued and outstanding upon consummation of the transactions
contemplated by the Agreement (the "PBCI Shares"). All of the issued and
outstanding common shares of PBCI have been duly and validly authorized and
issued, and are fully paid and nonassessable. All of the PBCI Shares have been
duly and validly authorized and, when issued in accordance with the terms and
conditions of the Agreement and upon receipt by PBCI of the agreed purchase
price therefor, will be, fully paid and nonassessable. The PBCI Common Shares,
when issued upon conversion of the PBCI Shares, will be (provided that any
amendment to the certificate of incorporation of PBCI that may be required to
increase its authorized shares in connection with the conversion of the PBCI
Shares has become effective and all other action as may be necessary in
connection with such issuance has been taken), duly authorized, fully paid and
nonassessable.
4. The Agreement is enforceable against each of PBCI and PBCI Sub.
5. Each of the Ancillary Agreements and Documents is enforceable against
PBCI.
6. The execution, delivery and performance of the Agreement do not (i)
violate the Constituent Documents of PBCI, or (ii) breach, or result in a
default under, or result in the creation of any lien, charge or encumbrance on
any property or assets of PBCI contrary or pursuant to, the terms of any
existing obligation of PBCI dealing with the borrowing of money by PBCI.
7. The execution, delivery and performance of the Agreement do not (i)
violate the Constituent Documents of PBCI Sub, or (ii) breach, or result in a
default under, or result in the creation of any lien, charge or encumbrance on
any property or assets of PBCI Sub contrary or pursuant to, the terms of any
existing obligation of PBCI Sub dealing with the borrowing of money by PBCI Sub.
8. No registration with, consent or approval of, notice to, or other action
by, any governmental entity (other than the filing of the Certificate of Merger
and the receipt and filing of the Tax Clearance Certificate) is required for the
execution, delivery or performance by PBCI and PBCI Sub of the Agreement, or, if
required, such registration has been made, such consent or approval has been
obtained, such notice has been given or such other appropriate action has been
taken.
<PAGE>
Baltimore Bagel Co.
Michael E. Brau
Rachel C. Brau
August 10, 1995
Page 3
This Opinion Letter may be relied upon by you only in connection with the
Agreement and may not be used or relied upon by or published or communicated
to any other party for any purpose whatsoever, except to the extent
authorized in the Accord, without in each instance our prior written
consent.
Very truly yours,
<PAGE>
Exhibit 2.5
MERGER AGREEMENT
AMONG
NOAH'S NEW YORK BAGELS, INC.,
SHAREHOLDERS AND CERTAIN OPTIONHOLDERS
OF NOAH'S NEW YORK BAGELS, INC.,
EINSTEIN BROS. BAGELS, INC.
AND
NNYB ACQUISITION CORPORATION
DATED JANUARY 22, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1. THE MERGER; THE STOCK PURCHASE ............................... 1
1.1 The Merger ................................................... 1
1.2 Effective Time of the Merger ................................. 1
1.3 Articles of Incorporation of the Company ..................... 2
1.4 Bylaws of the Company ........................................ 2
1.5 Treatment of Shares of the Company ........................... 2
1.6 Treatment of Optionees ....................................... 2
1.7 Treatment of Shares of Common Stock of Merger Sub ............ 2
1.8 Time and Place of the Closing ................................ 2
1.9 The Merger ................................................... 2
1.10 The Stock Purchase ........................................... 3
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS CONCERNING
THE TRANSACTION .............................................. 3
2.1 Organization of Certain Shareholders; Due Authorization ...... 3
2.2 Binding Obligation ........................................... 3
2.3 Ownership of Shares of the Company By the Shareholders ....... 4
2.4 Investment Bankers' and Brokers' Fees ........................ 4
2.5 Acquisition of Purchased Shares .............................. 4
2.6 Status of Shareholders for Tax Purposes ...................... 4
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF EINSTEIN BROS. AND MERGER
SUB .......................................................... 4
3.1 Organization, Power and Authority of Einstein Bros. and Merger
Sub .......................................................... 5
3.2 Binding Obligation; Noncontravention ......................... 5
3.3 Capital Stock of Einstein Bros. .............................. 5
3.4 Capital Stock of Merger Sub .................................. 5
3.5 Certificates of Incorporation and Bylaws of Einstein Bros. and
Merger Sub ................................................... 6
3.6 Purchased Shares ............................................. 6
3.7 Financial Statements of Einstein Bros. ....................... 6
3.8 Liabilities of Einstein Bros. ................................ 6
3.9 Assets of Einstein Bros. ..................................... 6
3.10 Licenses and Permits of Einstein Bros. ....................... 6
3.11 Proprietary Rights of Einstein Bros. ......................... 6
3.12 Adequacy of Einstein Bros.' Assets ........................... 7
3.13 Litigation Concerning Einstein Bros. ......................... 7
3.14 No Material Adverse Change ................................... 7
</TABLE>
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
3.15 Compliance With Laws ......................................... 7
3.16 Investment Bankers' and Brokers' Fees ........................ 7
3.17 Products Liability ........................................... 7
3.18 Records of Einstein Bros. .................................... 7
3.19 Material Transactions ........................................ 7
3.20 Accuracy Of Information Furnished By Einstein Bros. .......... 8
3.21 Hart-Scott-Rodino Act Reporting Matters ...................... 8
ARTICLE 4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY ........ 8
4.1 Organization, Power and Authority of the Company; Binding
Obligation ................................................... 8
4.2 Capital Stock of the Company ................................. 9
4.3 Subsidiaries of the Company .................................. 9
4.4 Financial Statements of the Company .......................... 9
4.5 Liabilities of the Company ................................... 10
4.6 Tax Matters .................................................. 10
4.7 Real Estate of the Company ................................... 11
4.8 Good Title to and Condition of the Company's Assets .......... 12
4.9 Products Liability ........................................... 12
4.10 Licenses and Permits of the Company .......................... 12
4.11 Proprietary Rights of the Company ............................ 12
4.12 Adequacy of the Company's Assets; the Company's Relationships
with its Customers and Suppliers ............................. 13
4.13 Documents of and Information with Respect to the Company ..... 13
4.14 Insurance Covering the Company and its Assets ................ 14
4.15 Litigation Involving the Company ............................. 14
4.16 Records of the Company ....................................... 14
4.17 No Material Adverse Change ................................... 15
4.18 Absence of Certain Acts or Events ............................ 15
4.19 Compliance with Laws by the Company .......................... 15
4.20 Environmental Matters ........................................ 15
4.21 Labor Relations of the Company ............................... 17
4.22 Employee Benefits ............................................ 17
4.23 Accuracy of Information Furnished by the Company ............. 19
4.24 HSR Act Reporting Matters .................................... 19
</TABLE>
ii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 5. ADDITIONAL COVENANTS OF THE SHAREHOLDERS AND THE COMPANY ..... 19
5.1 Reasonable Best Efforts ...................................... 19
5.2 Conduct of Business Pending the Closing ...................... 19
5.3 Access to the Company's Stores, Properties and Records ....... 20
5.4 Notice of Material Developments .............................. 20
5.5 No Other Discussions ......................................... 20
ARTICLE 6. ADDITIONAL COVENANTS OF EINSTEIN BROS. AND MERGER SUB ........ 20
6.1 Reasonable Best Efforts ...................................... 20
6.2 Guarantee of Performance by Merger Sub ....................... 21
6.3 Conduct Of Business Pending The Closing ...................... 21
6.4 Notice Of Material Developments .............................. 21
ARTICLE 7. CONDITIONS TO THE OBLIGATION OF EINSTEIN BROS. AND MERGER
SUB .......................................................... 21
7.1 Accuracy of Representations and Warranties and Compliance with
Obligations .................................................. 21
7.2 Opinion of Counsel ........................................... 21
7.3 Receipt of Bank Consent ...................................... 22
7.4 No Adverse Litigation ........................................ 22
7.5 Resignations ................................................. 22
7.6 Employment and Consulting Agreements; Options ................ 22
7.7 Landlord Consents ............................................ 22
7.8 Qualifications, Legal Investment ............................. 22
7.9 Termination Of Certain Agreements ............................ 22
ARTICLE 8. CONDITIONS TO OBLIGATION OF THE SHAREHOLDERS AND THE COMPANY . 23
8.1 Accuracy of Representations and Warranties and Compliance with
Obligations .................................................. 23
8.2 Opinion of Counsel ........................................... 23
8.3 Einstein Bros. Registration Rights Agreement ................. 23
8.4 Election of Noah Alper ....................................... 23
8.5 Agreements with Certain Members of Noah's Management ......... 23
8.6 Receipt Of Bank Consent ...................................... 23
</TABLE>
iii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
8.7 No Adverse Litigation ........................................ 23
8.8 Landlord Consents ............................................ 24
ARTICLE 9. CERTAIN ACTIONS AFTER THE CLOSING ............................ 24
9.1 Execution of Further Documents ............................... 24
9.2 Restrictions on Transfer of Purchased Shares ................. 24
9.3 Certain Post-Closing Cooperation ............................. 25
9.4 Certain Voting Agreements .................................... 26
9.5 Confidential Information ..................................... 26
9.6 Restrictive Covenants ........................................ 27
9.7 Additional Agreements Of Starbucks, the Company And Einstein
Bros. ........................................................ 28
9.8 Additional Agreement Of Noah Alper ........................... 28
9.9 Remedies; Waiver ............................................. 29
9.10 Employee Benefit Plans ....................................... 29
ARTICLE 10. INDEMNIFICATION .............................................. 29
10.1 Agreement by the Shareholders to Indemnify ................... 29
ARTICLE 11. MISCELLANEOUS ................................................ 33
11.1 Amendment and Modification ................................... 33
11.2 Payment of Expenses .......................................... 33
11.3 Termination .................................................. 33
11.4 Binding Effect ............................................... 34
11.5 Entire Agreement ............................................. 34
11.6 Headings ..................................................... 34
11.7 Certain Defined Terms ........................................ 34
11.8 Execution in Counterpart ..................................... 34
11.9 Notices ...................................................... 35
11.10 Governing Law ................................................ 36
11.11 Amendment and Restatement .................................... 36
</TABLE>
iv.
<PAGE>
EXHIBITS
Exhibit A Form of Agreement of Merger
Exhibit B Opinion of Cooley Godward Castro Huddleson & Tatum
Exhibit C Opinion of Bell, Boyd & Lloyd
Exhibit D Form of Amended and Restated Registration Rights
Agreement
Exhibit E Form of Noah's Management Agreement
SCHEDULES
Schedule 1.1 Purchasing Shareholders
Shareholder Disclosure Schedule
Schedule 3.3 Capital Stock of Einstein Bros.
Schedule 3.4 Proprietary Rights
Schedule 3.7 Financial Statement of Einstein Bros.
Schedule 3.19 Material Transactions
Company Disclosure Schedule (including Schedule 4.22 -- Employee
Benefit Plans)
Schedule 11.9 Notice Addresses
v.
<PAGE>
MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is made and entered into as of the
22nd day of January, 1996 by and among NOAH'S NEW YORK BAGELS, INC., a
California corporation (the "Company"), the shareholders of the Company who have
executed this Agreement (collectively, the "Shareholders"), the holders of
Options (as defined in Section 1.6) who are Purchasers (as defined in Section
1.1), EINSTEIN BROS. BAGELS, INC., a Delaware corporation ("Einstein Bros.") and
NNYB ACQUISITION CORPORATION, a Delaware corporation ("Merger Sub").
RECITALS
The Shareholders own a majority of the issued and outstanding shares of
capital stock of the Company. The parties desire that Merger Sub be merged with
and into the Company, with the Company being the surviving corporation in the
merger and the outstanding shares of capital stock of the Company being
converted into cash, on the terms and subject to the conditions set forth
herein. The board of directors of each of the Company, Einstein Bros. and Merger
Sub has approved and adopted such merger on the terms and subject to the
conditions set forth herein. Immediately after such merger, certain of the
Shareholders and holders of Options desire to purchase shares of Einstein Bros.
Common Stock on the terms and subject to the conditions set forth herein.
COVENANTS
In considerations of the mutual representations, warranties and covenants
and subject to the conditions herein contained, the parties hereto agree as
follows:
ARTICLE 1. THE MERGER; THE STOCK PURCHASE
1.1 THE MERGER. At the Closing (as defined in Section 1.8), on the terms
and subject to the conditions set forth in this Agreement, and in accordance
with the General Corporation Law of the State of Delaware (the "Delaware Act")
and the General Corporation Law of the State of California (the "California
Act"), Merger Sub shall be merged with and into the Company (the "Merger").
Following the Merger, the Company shall continue as the surviving corporation
(the "Surviving Company") and the separate existence of Merger Sub shall cease.
1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become effective at
the time (the "Effective Time") the Company and Merger Sub file an agreement of
merger in the form attached as Exhibit A hereto (the "Merger Agreement") with
the Secretary of State of Delaware and the Secretary of State of California. The
Surviving Company may, at any time after the Effective Time, take any action
(including executing and delivering any document) in the name and on behalf of
either the Company or Merger Sub in order to carry out and effectuate the
transactions contemplated by this Agreement.
1.
<PAGE>
1.3 ARTICLES OF INCORPORATION OF THE COMPANY. The Articles of
Incorporation of the Surviving Company shall be the Article of Incorporation of
the Company as they exist immediately prior to the Effective Time.
1.4 BYLAWS OF THE COMPANY. The bylaws of the Surviving Company shall be
the bylaws of the Company as they exist immediately prior to the Effective Time.
1.5 TREATMENT OF SHARES OF THE COMPANY. At and as of the Effective Time,
each outstanding share of capital stock of the Company shall be converted into
the right to receive an amount in cash (the "Per Share Merger Consideration")
equal to (a) $100,900,000, less the amounts paid to persons identified in the
first sentence of Section 11.2, plus the aggregate exercise price of all Options
(as defined in Section 1.6), divided by (b) the total number of shares of
capital stock of the Company outstanding immediately prior to the Effective
Time, plus the total number of shares of capital stock subject to the Options.
1.6 TREATMENT OF OPTIONEES. Subject to obtaining the consent of the
shareholders of the Company required under Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), immediately prior to the Effective Time,
the Company shall accelerate the vesting of the options held by the optionees
identified in the Disclosure Schedule (other than options to purchase 240,000
shares of Common Stock held by Glenn Bacheller) that have not been exercised
(the "Options"). At the Effective Time, Einstein Bros. shall pay to each of such
optionees in cancellation and satisfaction of his or her Options an amount equal
to (a) the total number of shares subject to such optionee's Options, multiplied
by the Per Share Merger Consideration, less (b) the aggregate exercise price of
such optionee's Options.
1.7 TREATMENT OF SHARES OF COMMON STOCK OF MERGER SUB. At and as of the
Effective Time, each share of Common Stock of Merger Sub shall be converted into
the right to receive one share of Common Stock of the Company.
1.8 TIME AND PLACE OF THE CLOSING. The Merger shall take place at the
offices of Cooley Godward Castro Huddleson & Tatum, One Maritime Plaza, 20th
Floor, San Francisco, California at 10:00 a.m., local time, on January 31, 1996;
provided, however, that if any of the conditions which are set forth in Articles
7 and 8 have not been satisfied or waived by said date, then, subject to the
provisions of Section 11.3 hereof, such transactions shall take place on a
subsequent date, which shall be determined by the mutual agreement of Einstein
Bros. and the Company. Throughout this Agreement, the consummation of the Merger
is referred to as the "Closing" and such date and time are referred to as the
"Closing Date."
1.9 THE MERGER. At the Closing:
1.9.1 Merger Sub and the Company shall file the Merger Agreement
with the Secretary of State of California and the Secretary of State of
Delaware.
1.9.2 Einstein Bros. (a) shall cause the consideration to be paid
to the shareholders and optionholders of the Company in the manner provided
in
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Section 1.5 and Section 1.6, respectively and (b) shall pay to Alex.
Brown & Sons Incorporated and the other persons identified in the
first sentence of Section 11.2 hereof of the amounts it is instructed
in writing by the Company to pay. The parties may cause such payments
to be made by a paying agent of the Company, if Einstein Bros. so
elects, with the fees of the paying agent to be paid by Einstein Bros.
1.10 THE STOCK PURCHASE. Immediately following the Closing, and on the
terms and subject to the conditions set forth in this Agreement, the
Shareholders and holders of Options identified on Schedule 1.10 (the
"Purchasers") will purchase the number of shares of Common Stock of Einstein
Bros. set forth opposite their respective names on Schedule 1.1 under the
heading "Purchased Shares," in exchange for the cash payment set forth opposite
their respective names on Schedule 1.10 under the heading "Purchase Price," for
an aggregate of 3,801 shares of Einstein Bros. Common Stock. (Such transaction
is herein sometimes referred to as the "Purchase" and the Shares of Einstein
Bros. Common Stock so purchased are herein sometimes collectively referred to as
the "Purchased Shares.") Each Purchaser hereby authorizes Einstein Bros. to
withhold such Purchaser's Purchase Price from the consideration to be received
by such Purchaser pursuant to Sections 1.5 and 1.6.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS CONCERNING THE
TRANSACTION
In order to induce Einstein Bros. and Merger Sub to enter into this
Agreement and to consummate the transactions contemplated hereunder, except as
set forth in the Disclosure Schedule attached hereto, each Shareholder makes the
following representations and warranties:
2.1 ORGANIZATION OF CERTAIN SHAREHOLDERS; DUE AUTHORIZATION. If such
Shareholder is a corporation or a partnership, such Shareholder is duly
organized and legally existing in good standing under the laws of the
jurisdiction of its organization, with full power and authority to enter into
this Agreement and to carry out the transactions and agreements contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action of such Shareholder.
2.2 BINDING OBLIGATION. This Agreement has been duly executed and
delivered by such Shareholder and is a valid and binding obligation of such
Shareholder, enforceable in accordance with its terms, except to the extent that
such enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or general principles of
equity. Neither the execution and delivery of this Agreement by such Shareholder
nor the consummation of the transactions contemplated hereby will: (i) conflict
with or violate any decree or order of any court or administrative or other
governmental body which is either applicable to, binding upon or enforceable
against such Shareholder; or (ii) assuming, in the case of Starbucks Corporation
("Starbucks"), the satisfaction of the condition set forth in Section 8.6,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under, any mortgage,
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contract, agreement, indenture, will, trust or other instrument which is either
binding upon or enforceable against such Shareholder. No permit, consent,
approval or authorization of, or declaration to or filing with, any regulatory
or other government authority is required in connection with the execution and
delivery of this Agreement by such Shareholder and the consummation by such
Shareholder of the transactions contemplated hereby.
2.3 OWNERSHIP OF SHARES OF THE COMPANY BY THE SHAREHOLDERS. Such
Shareholder is the lawful record and beneficial owner of all of the shares of
capital stock of the Company shown as owned by such Shareholder in the
Disclosure Schedule and has valid title thereto, free and clear of all liens,
pledges, encumbrances, security interests, restrictions on transfer (other than
restrictions under federal and state securities laws), claims and equities of
every kind, except those rising under the agreements listed in the Disclosure
Schedule. Except for this Agreement and the agreements listed in the Disclosure
Schedule, there are no outstanding warrants, options or rights of any kind to
acquire from such Shareholder any of such Shares.
2.4 INVESTMENT BANKER'S AND BROKERS' FEES. Such Shareholder has no
obligation to pay any fees or commissions to any investment banker, broker,
finder or agent with respect to the transactions contemplated by this Agreement,
except its obligation under Section 11.2 hereof to pay the fees of Alex. Brown &
Sons Incorporated.
2.5 ACQUISITION OF PURCHASED SHARES. If such Shareholder is a Purchase,
such Purchaser is acquiring Purchased Shares for such Shareholder's own account
and not with a view to, or for sale in connection with, any distribution
thereof. Such Purchaser understands that the Purchased Shares will not have been
registered under the Securities Act of 1933, as amended, or under any state
securities laws, and that, except as provided in the Amended and Restated
Registration Rights Agreement (as hereinafter defined), Einstein Bros. does not
contemplate nor is Einstein Bros. legally required to file a registration
statement for the purpose of registering the PUrchased Shares under any of such
laws. Such Purchaser is an "accredited investor" as that term is defined in Rule
501 of Regulation D under the Securities Act of 1933 and confirms that all
documents, records and books pertaining to Einstein Bros. and its business have
been made available to such Purchaser and that such Purchaser has been given an
opportunity to make any further inquiries of Einstein Bros. and its
representatives that such Purchaser desires to make and that each such inquiry
has been answered, or requested information provided, to such Purchaser's
satisfaction.
2.6 STATUS OF SHAREHOLDERS FOR TAX PURPOSES. Such Shareholder is a U.S.
person (as defined in Section 7701(a)(30) of the Code).
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF EINSTEIN BROS. AND MERGER SUB.
In order to induce the Company and the Shareholders to enter into this
Agreement and to consummate the transactions contemplated hereunder, except as
set forth in the Einstein Bros. Disclosure Schedule, Einstein Bros. and Merger
Sub make the following representations and warranties:
4.
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3.1 ORGANIZATION, POWER AND AUTHORITY OF EINSTEIN BROS. AND MERGER SUB.
Each of Einstein Bros. and Merger Sub is a corporation duly organized and
validly existing in good standing under the laws of the State of Delaware, with
full corporate power and authority to enter into this Agreement and to carry out
the transactions and agreements contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
of each of Einstein Bros. and the Merger Sub.
3.2 BINDING OBLIGATION; NONCONTRAVENTION. This Agreement and the Merger
Agreement have been duly executed and delivered by each of Einstein Bros. and
Merger Sub that is a party thereto and each such agreement is a valid and
binding obligation of each of Einstein Bros. and Merger Sub that is a party
thereto, enforceable in accordance with its terms, except to the extent that
such enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally, or general principles of
equity. Neither the execution and delivery of this Agreement and the Merger
Agreement by each of Einstein Bros. and Merger Sub that is a party thereto nor
the consummation of the transactions contemplated hereby will: (i) conflict with
or violate any provision of the certificate of incorporation or bylaws of
Einstein Bros. or Merger Sub or of any decree or order of any court or
administrative or other governmental body which is either applicable to, binding
upon or enforceable against Einstein Bros. or Merger Sub; or (ii) assuming
satisfaction of the conditions set forth in Article 7.3, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under, any mortgage, contract, agreement, indenture or other instrument which is
either binding upon or enforceable against Einstein Bros. or Merger Sub.
Assuming the accuracy of the representations of the Company in Section 4.24, no
permit, consent, approval or authorization of, or declaration to or filing with,
any regulatory or other government authority is required in connection with the
execution and delivery of this Agreement and the Merger Agreement by each of
Einstein Bros. and Merger Sub that is a party thereto and the consummation of
the transactions contemplated hereby, except for the filing of the Merger
Agreement and filings under federal and state securities laws.
3.3 CAPITAL STOCK OF EINSTEIN BROS. The authorized capital stock of
Einstein Bros. consists solely of 1,000,000 shares of Common Stock, $.01 par
value per share, 24,754.92 shares of which are issued and outstanding and none
of which are issued and held in its treasury, and 200,000 shares of Preferred
Stock, $.01 par value, 6,250 shares of which are issued and designated as Series
A Preferred Stock. Except as set forth in Section 1.10 or the Einstein Bros.
Disclosure Schedule: (i) there are no outstanding warrants, options or rights of
any kind to acquire from Einstein Bros. any shares of its Common Stock or
securities of any kind, (ii) there are no preemptive rights with respect to the
issuance or sale of shares of capital stock of Einstein Bros. and (iii) there
are no voting trusts, proxies or other agreements or understandings with respect
to the voting of the capital stock of Einstein Bros.
3.4 CAPITAL STOCK OF MERGER SUB. The authorized capital stock of Merger
Sub consists solely of 100 shares of Common Stock, $.01 par value per share,
100 shares of which are issued and outstanding and none of which are issued and
held in its treasury.
5.
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3.5 CERTIFICATES OF INCORPORATION AND BYLAWS OF EINSTEIN BROS. AND
MERGER SUB. Einstein Bros. has previously delivered to the Company copies of the
certificate of incorporation and all amendments thereto to date (certified by
the Secretary of State of Delaware) and of the bylaws of each of Einstein Bros.
and Merger Sub.
3.6 PURCHASED SHARES. The Purchased Shares, when issued at the Closing,
will be duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock, $.01 per value per share, of Einstein Bros.
3.7 FINANCIAL STATEMENTS OF EINSTEIN BROS. Set forth in the Einstein
Bros. Disclosure Schedule, are the following financial statements of Einstein
Bros: (i) audited consolidated balance sheet at March 24, 1995, (ii) unaudited
consolidated balance sheet at December 31, 1995, and (iii) unaudited
consolidated statement of operations for the period from March 24, 1995 to
December 31, 1995. Such financial statements present fairly the consolidated
financial position of Einstein Bros. at each of such balance sheet dates and the
results of its operations for each of the periods covered, and they have been
prepared in conformity with generally accepted accounting principles except that
the unaudited financial statements are subject to normal recurring year end
audit adjustments, none of which will be material, and do not contain either the
statement of cash flows or the footnotes required under generally accepted
accounting principles. The December 31, 1995 balance sheet is herein sometimes
referred to as the "Einstein Bros. Balance Sheet."
3.8 LIABILITIES OF EINSTEIN BROS. As of the date of the Einstein Bros.
Balance Sheet, Einstein Bros. had no material liabilities of a type required to
be set forth on a balance sheet prepared in accordance with generally accepted
accounting principles, except as set forth on the Einstein Bros. Balance Sheet.
3.9 ASSETS OF EINSTEIN BROS. Einstein Bros. has good and marketable
title to all of its assets and properties, free and clear of all liens,
mortgages, pledges, encumbrances or charges of every kind, nature and
description whatsoever, except for mortgages, pledges and security interests
granted under or pursuant to the secured loan agreement between Boston Chicken,
Inc. ("BCI") and Einstein Bros. dated March 24, 1995, as amended, and such
liens, mortgages, pledges, encumbrances or charges as do not have a Material
Adverse Effect (as defined in Section 11.7).
3.10 LICENSES AND PERMITS OF EINSTEIN BROS. Einstein Bros. possesses all
licenses and other required governmental or official approvals, permits or
authorizations, the failure to possess which would have a Material Adverse
Effect. All such licenses, approvals, permits and authorizations that are
material to Einstein Bros.' business are in full force and effect, Einstein
Bros. is in substantial compliance with their requirements, and no proceeding is
pending or, to the Best of the Knowledge of Einstein Bros. (as defined in
Section 11.7), threatened to revoke or amend any of them.
3.11 PROPRIETARY RIGHTS OF EINSTEIN BROS. To the Best of the Knowledge of
Einstein Bros., except as set forth in the Einstein Bros. Disclosure Schedule,
Einstein Bros. possesses
6.
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all proprietary rights to carry on its business as now being conducted without
conflict with valid proprietary rights of others.
3.12 ADEQUACY OF EINSTEIN BROS.' ASSETS. The assets and properties of
Einstein Bros. constitute, in the aggregate, all of the property necessary for
the conduct of Einstein Bros.' business in the manner in which and to the extent
to which it is currently being conducted. Except as set forth in this Agreement,
Einstein Bros. is not restricted by agreement from carrying on its current
business anywhere in the world.
3.13 LITIGATION CONCERNING EINSTEIN BROS. There are on the date hereof no
actions, suits, claims, governmental investigations or arbitration proceedings
pending or to the Best of the Knowledge of Einstein Bros. threatened against or
affecting Einstein Bros. or any of its assets or properties which, if determined
adversely to Einstein Bros., would have a Material Adverse Effect.
3.14 NO MATERIAL ADVERSE CHANGE. From the date of the Einstein Bros.
Balance Sheet to the date of this Agreement, there have not been any changes in
the business or properties of Einstein Bros., or in its consolidated financial
condition, other than changes occurring in the ordinary course of business which
in the aggregate have not had a Material Adverse Effect.
3.15 COMPLIANCE WITH LAWS. Einstein Bros. is in substantial compliance
with all laws, regulations and orders applicable to it, its assets, properties
and business, except where the failure so to comply would not have a Material
Adverse Effect.
3.16 INVESTMENT BANKERS' AND BROKERS' FEES. Einstein Bros. does not have
any obligation to pay any fees or commissions to any investment banker, broker,
finder or agent with respect to the transactions contemplated by this Agreement.
3.17 PRODUCTS LIABILITY. Einstein Bros. has no liability (and to the Best
of the Knowledge of Einstein Bros. there is no basis for any liability) arising
out of any injury to individuals or property as a result of the ownership,
possession, use or consumption of any product manufactured, sold or delivered by
Einstein Bros.
3.18 RECORDS OF EINSTEIN BROS. A record of all action taken by the
stockholders and board of directors of Einstein Bros. and all minutes of their
meetings are contained in the minute books of Einstein Bros. and are accurate
and complete, except that such minute books do not contain minutes of meetings
of directors held in November, December and January. The stock records and stock
ledgers of Einstein Bros. contain an accurate and complete record of all
issuances, transfers and cancellations of shares of capital stock of Einstein
Bros .
3.19 MATERIAL TRANSACTIONS. Except as set forth in the Einstein Bros.
Disclosure Schedule, since the date of the Einstein Bros. Balance Sheet,
Einstein Bros. has not incurred any material obligations (including any
indebtedness) or entered into any material transaction, except
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in the ordinary course of business and except for this Agreement and the
transactions contemplated hereby.
3.20 ACCURACY OF INFORMATION FURNISHED BY EINSTEIN BROS. No
representation, statement or information made or furnished in writing by
Einstein Bros. to the Company or the Purchasers, including, without limitation,
those contained in this Agreement and the Einstein Bros. Disclosure Schedule,
taken as a whole, contains any untrue statement of a material fact or omits any
material fact necessary to make the representations, statements and information
made or furnished therein, in light of the circumstances in which they were
made, not misleading.
3.21 HART-SCOTT-RODINO ACT REPORTING MATTERS. Einstein Bros. is the
"ultimate parent entity" of Einstein Bros. within the meaning of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). Einstein Bros. does not have total assets, and did not record annual net
sales for its most recent fiscal year, in excess of $100,000,000, for purposes
of the HSR Act.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
In order to induce Einstein Bros. and Merger Sub to enter into this
Agreement and to consummate the transactions contemplated hereunder, except as
set forth in the Disclosure Schedule, the Company makes the following
representations and warranties:
4.1 ORGANIZATION, POWER AND AUTHORITY OF THE COMPANY; BINDING
OBLIGATION. The Company is a corporation duly organized and legally existing in
good standing under the laws of California, and has full corporate power and
authority (i) to enter into this Agreement and to carry out the transactions and
agreements contemplated hereby, and (ii) to carry on its business as it is now
being conducted. The Company is legally qualified to transact business as a
foreign corporation, and is in good standing, in the jurisdictions identified in
the Disclosure Schedule, those being the only jurisdictions in which its
business or property is such as to require that it be thus qualified. This
Agreement and the Merger Agreement have been duly authorized by all necessary
corporate action of the Company, including its board of directors and
shareholders, and each such agreement has been duly executed and delivered by
the Company and is a valid and binding obligation of the Company, enforceable in
accordance with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or general principles of equity. Neither the
execution and delivery of this Agreement and the Merger Agreement by the Company
nor the consummation of the transactions contemplated hereby will: (i) conflict
with or violate any provision of the articles of incorporation or bylaws of the
Company, or any decree or order of any court or administrative or other
governmental body which is either applicable to, binding upon or enforceable
against the Company; or (ii) except as set forth in the Disclosure Schedule,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under, any mortgage, contract, agreement, indenture, will,
trust or other instrument which is either binding upon or enforceable against
the Company or the assets and properties of the Company. Assuming the
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accuracy of the representations of Einstein Bros. in Section 3.21 hereof, no
permit, consent, approval or authorization of, or declaration to or filing with,
any regulatory or other government authority is required in connection with the
execution and delivery of this Agreement and the Merger Agreement by the Company
and the consummation by it of the transactions contemplated hereby, except for
the filing of the Merger Agreement and filings under federal and state
securities laws.
4.2 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of: 38,000,000 shares of Common Stock without par value,
of which 5,365,197 shares are issued and outstanding and none of which are
issued and held in its treasury; 38,000,000 shares of Preferred Stock without
par value, of which 3,375,000 shares are designated "Series A Preferred Stock"
(of which 3,286,406 are issued and outstanding) and 4,904,425 shares are
designated "Series B Preferred Stock" (of which 4,744,838 are issued and
outstanding). No shares of Preferred Stock are issued and held in the Company's
treasury and no other shares of capital stock are outstanding. All voting rights
in the Company are vested exclusively in its shares of Common and Preferred
stock, and, except for the agreements listed in the Disclosure Schedule, there
are no voting trusts, proxies or other agreements or understandings with respect
to the voting of the capital stock of the Company. All of the issued and
outstanding shares of Common Stock of the Company are validly authorized and
issued, fullY paid and non-assessable. The Disclosure Schedule sets forth the
name of, and the number of shares of Common Stock of the Company owned by, each
shareholder of record as of the date hereof. Except as set forth in the
Disclosure Schedule, which lists each outstanding option granted by the Company,
the name of the optionee, the number of shares subject to the option and the
plan pursuant to which such option was granted, there are no outstanding
warrants, options or rights of any kind to acquire from the Company any shares
of its Common Stock or securities of any kind, and there are no preemptive
rights with respect to the issuance or sale of shares of capital stock of the
Company. The Company has delivered to Einstein Bros. true and correct copies of
all options plans and option agreements entered into by the Company. The Company
has no obligation to acquire any of its issued and outstanding shares of Common
Stock or any other security issued by it from any holder thereof.
4.3 SUBSIDIARIES OF THE COMPANY. The Company has no equity interest or
the right or obligation to acquire an equity interest, in any other person or
entity.
4.4 FINANCIAL STATEMENTS OF THE COMPANY. Set forth in the Disclosure
Schedule are the following financial statements of the Company:
4.4.1 audited balance sheets at December 31 of each of the
years 1993 and 1994;
4.4.2 an unaudited balance sheet of the Company at November
25, 1995;
4.4.3 audited statements of operations and retained earnings
and statements of cash flow for each year in the two-year period ended
December 31, 1994; and
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4.4.4 an unaudited statement of operations of the Company for the
forty-seven week period ended November 25, 1995.
Such financial statements present fairly the financial position of the Company
at each of the said balance sheet dates and the results of its operations for
each of the said periods covered, and they have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis except as
may be disclosed in the notes thereto; provided, however, that the unaudited
financial statements are subject to normal recurring year end audit adjustments,
none of which will be material, and do not contain either the statement of cash
flows or the footnotes required under generally accepted accounting principles.
The unaudited balance sheet of the Company at November 25, 1995 is referred to
herein as the "1995 Balance Sheet."
4.5 LIABILITIES OF THE COMPANY. The Company has no liabilities or
obligations, either accrued, absolute, contingent or otherwise, except: (i) to
the extent reflected or taken into account in determining net worth in the 1995
Balance Sheet and not heretofore paid or discharged; (ii) to the extent clearly
disclosed and specifically set forth in or incorporated by express reference in
any of the schedules attached hereto; (iii) obligations incurred in the ordinary
course of business that can be terminated by the Company on not more than 30
days' notice without liability to the Company in excess of $25,000; and (iv)
liabilities incurred in the ordinary course of business, consistent with prior
practice, since the date of the 1995 Balance Sheet. The Company has no
obligation to pay any fees or commissions to any investment banker, broker,
finder or agent with respect to the transactions contemplated by this Agreement,
except for the fees of Alex. Brown & Sons Incorporated.
4.6 TAX MATTERS.
4.6.1 The Company has accurately prepared and timely filed
all tax returns and reports required to be filed by it, including
without limitation all federal, state, local and foreign tax returns,
and has paid in full all taxes and other charges which have become due
in connection therewith. The amounts provided in the 1995 Balance
Sheet for taxes are adequate to cover all unpaid liabilities for all
federal, state, local and foreign taxes and other charges in
connection therewith which were accrued through, or applicable to the
period ended, November 25, 1995 and for which the Company may be
liable in its own right or as a transferee of the assets of, or
successor to, any other person or entity. There is no tax deficiency
proposed or, to the Best of the Knowledge of the Company, threatened
against the Company. There are no tax liens upon any property or
assets of the Company except liens for current taxes not yet due and
payable. The Company has made all payments of estimated taxes when due
in amounts sufficient to avoid the imposition of any penalty.
4.6.2 All taxes and other assessments and levies which the
Company was required by law to withhold or to collect have been duly
withheld and collected, and have been paid over to the proper
governmental entity or are being held by the Company, and all such
withholdings and collections and all other payments
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due in connection therewith as of the date of the 1995 Balance Sheet
are duly reflected on the 1995 Balance Sheet.
4.6.3 The Company has not been advised that any of the tax
returns of the Company is under audit or examination by any tax
authority, and there are no outstanding agreements or waivers
extending the statute of limitations applicable to any federal or
state income tax returns of the Company for any period. The Company
has previously delivered to Einstein Bros. accurate and complete
copies of all federal and state income tax returns, examination
reports and statements of deficiencies assessed against or agreed to
by the Company.
4.6.4 The Company has not consented to have the provisions
of Section 341 (f)(2) of the Code apply, nor has the Company made any
"qualified stock purchases," as defined in Section 338 of the Code.
4.6.5 The Company is not, and has not been during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code, a
United States real property holding corporation, within the meaning of
Section 897(c)(2) of the Code.
4.6.6 To the extent the Company is obligated to make a
payment to any individual that would not be deductible to the Company
because of the provisions of Section 280G of the Code, or otherwise
makes such a payment under this Agreement, the Company shall obtain
prior to Closing consents of its shareholders sufficient so that
Section 280G shall not apply.
4.7 REAL ESTATE OF THE COMPANY.
4.7.1 The Company owns no fee interests in real estate.
4.7.2 The Disclosure Schedule accurately and completely sets
forth, with respect to every parcel of real estate leased by the
Company (the "Leasehold Premises"), the lessor and lessee thereof and
the date and term of the lease governing such property. The Company
has previously delivered to Einstein Bros. accurate and complete
copies of each of the leases covering the Leasehold Premises, and none
of such leases has been amended or modified except to the extent that
such amendments or modifications are disclosed in such copies or in
the Disclosure Schedule. All of the leases covering the Leasehold
Premises are in full force and effect, and the Company is not in
material default or breach under any such lease. No event has occurred
which with the passage of time or the giving of notice or both would
cause a material breach of or default by the Company under any such
lease. To the Best of the Knowledge of the Company, there is no breach
or anticipated breach by the other parties to such lease.
4.7.3 The Leasehold Premises are each in good operating
condition, normal wear and tear excepted. The Company's commissary is
sufficient to
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satisfy the Company's current normal production levels. The Company
has received no notice of: (i) any condemnation proceeding with
respect to any portion of the Leasehold Premises, and to the Best of
the Knowledge of the Company no proceeding is contemplated by any
governmental authority; or (ii) any special assessment which may
affect the Leasehold Premises, and to the Best of the Knowledge of the
Company no such special assessment is contemplated by any governmental
authority.
4.8 GOOD TITLE TO AND CONDITION OF THE COMPANY'S ASSETS. The Company has
good and marketable title to all of its assets and properties, free and clear of
all liens, mortgages, pledges, encumbrances or charges of every kind, nature,
and description whatsoever, except: (i) those set forth in the Disclosure
Schedule, (ii) liens for current taxes not yet due and payable, (iii) purchase
money security interests in equipment in or for use by the Company's stores,
commissaries, or corporate offices, and (iv) minor liens or encumbrances that
have no material effect on the value of the Company's assets and do not impair
the present use or marketability of such assets. The Company's fixed assets are
in good operating condition, normal wear and tear excepted. The inventory and
supplies of the Company consist of items of a quality and quantity saleable or
usable, respectively, in the normal course of the Company's business at values
in the aggregate at least equal to the values at which such items are carried on
its books, net of reserves therefor on the 1995 Balance Sheet.
4.9 PRODUCTS LIABILITY. The Company has no liability (and to the Best of
the Knowledge of the Company there is no basis for any liability) arising out of
any injury to individuals or property as a result of the ownership, possession,
use or consumption of any product manufactured, sold or delivered by the
Company.
4.10 LICENSES AND PERMITS OF THE COMPANY. The Company possesses all
licenses and other required governmental or official approvals, permits or
authorizations, the failure to possess which would have a Material Adverse
Effect. All such licenses, approvals, permits and authorizations are in full
force and effect, the Company is in compliance with their requirements, and no
proceeding is pending or, to the Best of the Knowledge of the Company,
threatened to revoke or amend any of them. None of such licenses, approvals,
permits and authorizations are or will be impaired or in any way affected by the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
4.11 PROPRIETARY RIGHTS OF THE COMPANY. To the Best of the Knowledge of
the Company, except as set forth in the Disclosure Schedule, the Company
possesses all proprietary rights, to carry on its business as now being
conducted without conflict with valid proprietary rights of others. The
Disclosure Schedule contains an accurate and complete list of all trade secrets,
technology, know-how, copyrights, common law trademarks and service marks,
trademark and service mark registrations and applications, trade names, and
rights to any of the foregoing, owned by the Company, or in which it has any
interest (collectively, "Proprietary Rights"), and each jurisdiction in which
each such Proprietary Right is registered and the number and expiration date, if
applicable, for such registration and each jurisdiction in which an application
to register such item is pending and the date such application was made. Except
12.
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as set forth on the Disclosure Schedule, (i) the Company owns full, exclusive
and unencumbered title in the United States in and to and the exclusive right to
use all of the Proprietary Rights, (except that the Company makes no
representation that its formulas and process are protectable trade secrets),
(ii) as to the registrations set forth in the Disclosure Schedule, all such
registrations are presently in full force and effect, (iii) as to the
applications for marks set forth in the Disclosure Schedule, all such
applications are presently pending with no known grounds for refusal or
outstanding officer actions; (iv) there are no legal or administrative actions,
challenges or other adverse claims or challenges pending or, to the Best of the
Knowledge of the Company, threatened against any of the Proprietary Rights and
there are no grounds for the same, (v) the Company has not entered into any
licenses regarding the Proprietary Rights or any open agreement with any third
party acknowledging any prior rights or consenting to any concurrent right of
any other party or granting any right to any other party to use any proprietary
right that is confusingly similar to any of the trademarks, service marks or
trade dress included in the Proprietary Rights and (vi) to the Best of the
Knowledge of the Company no other person or entity is using any of the
Proprietary Rights or any trademark or service mark that is confusingly similar
to any of the Proprietary Rights.
4.12 ADEQUACY OF THE COMPANY'S ASSETS; THE COMPANY'S RELATIONSHIPS WITH
ITS CUSTOMERS AND SUPPLIERS. The assets and properties of the Company
constitute, in the aggregate, all of the property necessary for the conduct of
the Company's business in the manner in which and to the extent to which it is
currently being conducted. Except for the joint venture between Starbucks and
Bagel Oasis no officer or director of the Company has any direct or indirect
interest in any customer, supplier or competitor of the Company or in any person
from whom or to whom the Company leases real or personal property, or in any
other person with whom the Company is doing business, except for the ownership
of less than 5% of a public company. The Company is not restricted by agreement
from carrying on its business anywhere in the world. All agreements, contracts,
commitments or arrangements to which the Company is a party or by which it is
bound and to which any of the Shareholders or any Affiliate (as hereinafter
defined) of any of the Shareholder (other than the Company) or any officer or
director of the Company, or any Affiliate of such person ("Affiliated Person")
is a party or by which such person is bound, have been negotiated, and, if
applicable, entered into, at arms' length, and do not contain terms or
provisions or obligate the Company on terms that are materially less favorable
to the Company than those which could be obtained if such agreement, contract,
commitment or arrangement was with a person other than an Affiliated Person. As
used in this Agreement, the term "Affiliate" means, with respect to a specified
person, any other person which directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the persons specified.
4.13 DOCUMENTS OF AND INFORMATION WITH RESPECT TO THE COMPANY. The
Disclosure Schedule accurately and completely lists the following: (i) each
loan, credit agreement, guarantee, security agreement or similar document or
instrument to which the Company is a party or by which it is bound, other than
agreements creating purchase money security interests in equipment in or for use
by the Company's stores, or commissaries or corporate offices; (ii) each lease
of personal property to which the Company is a party or by which it is bound,
other than leases under which the annual rent payable is less than $50,000;
(iii) any other
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agreement, contract or commitment to which the Company is a party or by which it
is bound which involves a future commitment by the Company in excess of $50,000
and which cannot be terminated without liability on 90 days or less notice; (iv)
each power of attorney executed by or on behalf of the Company; (v) the name and
current annual salary of each salaried employee of the Company whose current
annual salary is in excess of $50,000 and the profit sharing, bonus or any other
form of compensation (other than salary) paid or payable by the Company to or
for the benefit of each such person for the year ended December 31, 1995, and
any employment or other compensation agreement of the Company with any of its
officers or employees; (vi) the name of each of the Company's officers and
directors; and (vii) the name of each bank in which the Company has an account
or safe-deposit box, the name in which the account or box is held and the names
of all persons authorized to draw thereon or to have access thereto. The Company
has previously furnished Einstein Bros. with an accurate and complete copy of
each such agreement, contract or commitment listed in the Disclosure Schedule.
There is no continuing default under any such agreement, contract or instrument.
4.14 INSURANCE COVERING THE COMPANY AND ITS ASSETS. The Disclosure
Schedule accurately and completely lists each policy of insurance in force with
respect to the Company, its assets and properties, and each of the performance
or other surety bonds maintained by the Company in the conduct of its business.
All premiums and other payments which have become due under the policies of
insurance listed in the Disclosure Schedule have been paid in full, all of such
policies are now in full force and effect and the Company has received no notice
from any insurer, agent or broker of the cancellation of, or any increase in
premium (other than normal increases) with respect to, any of such policies or
bonds. The Company has received no notification from any insurer, agent or
broker denying or disputing any claim made by the Company or denying or
disputing any coverage for any such claim or the amount of any claim. The
Company has no claim against any of its insurers under any of such policies
pending or anticipated and, to the Best of the Knowledge of the Company, there
has been no occurrence of any kind which would give rise to any such claim.
4.15 LITIGATION INVOLVING THE COMPANY. Except as set forth in the
Disclosure Schedule there are on the date hereof no actions, suits, claims,
governmental investigations or arbitration proceedings pending or to the Best of
the Knowledge of the Company threatened against or affecting the Company or any
of its assets or properties and, to the Best of the Knowledge of the Company,
there is no basis for any of the foregoing. There are no outstanding orders,
decrees or stipulations issued by any federal, state, local or foreign judicial
or administrative authority in any proceeding to which the Company is or was a
party.
4.16 RECORDS OF THE COMPANY. The Company has previously furnished
Einstein Bros. with copies of the Company's amended and restated articles of
incorporation and all amendments thereto to date (certified by the Secretary of
State of California) and of the Company's by-laws (certified by the Company's
secretary), and such copies are correct and complete in all respects. All of the
Company's operating data and records, including without limitation customer
lists and financial, accounting and credit records (the "Company Records"), are
accurate and complete in all material respects and there are no material matters
required to be recorded in the Company records as to which appropriate entries
have not been made in the Company Records. A record
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of all action taken by the shareholders and the board of directors of the
Company and all minutes of their meetings (except the minutes of the January,
1996 meetings) are contained in the minute books of the Company and are accurate
and complete. The stock records and stock ledgers of the Company contain an
accurate and complete record of all issuances, transfers and cancellations of
shares of capital stock of the Company.
4.17 NO MATERIAL ADVERSE CHANGE. From the date of the 1995 Balance Sheet
to the date of this Agreement, there have not been any changes in the business
or properties of the Company, or in its consolidated financial condition, other
than changes occurring in the ordinary course of business which in the aggregate
have not had a Material Adverse Effect. There is not, to the Best of the
Knowledge of the Company, except for general competitive conditions or risks
common to businesses generally, any threatened event or condition of any
character whatsoever which could have a Material Adverse Effect.
4.18 ABSENCE OF CERTAIN ACTS OR EVENTS. Except as disclosed in the
Disclosure Schedule, or as contemplated by this Agreement, since the date of the
1995 Balance Sheet, the Company has not: (i) authorized or issued any of its
shares of capital stock (including any held in its treasury) or any other
securities; (ii) declared or paid any dividend or made any other distribution of
or with respect to its shares of capital stock or other securities or purchased
or redeemed any shares of its capital stock or other securities; (iii) paid any
bonus or, except in the ordinary course of business, increased the rate of
compensation of any of its employees; (iv) sold, leased, transferred or assigned
any of its assets other than in the ordinary course of business; (v) made or
obligated itself to make capital expenditures aggregating more than $50,000;
(vi) incurred any material obligations or liabilities (including any
indebtedness) or entered into any material transaction, except in the ordinary
course of business and except for this Agreement and the transactions
contemplated hereby; or (viii) suffered any theft, damage, destruction or
casualty loss not covered by insurance in excess of $50,000.
4.19 COMPLIANCE WITH LAWS BY THE COMPANY. Except as set forth in the
Disclosure Schedule, the Company is in compliance in all material respects with
all laws, regulations and orders applicable to the Company, its assets,
properties and business. The Company has received no notification of any
asserted past or present failure to comply with any laws, and to the Best of the
Knowledge of the Company, no proceeding with respect to any such violation is
contemplated. Neither the Company nor, to the Best of the Knowledge of the
Company, any employee of the Company, has made any payment of funds in
connection with the business of the Company prohibited by law, and no funds have
been set aside to be used in connection with the business of the Company for any
payment prohibited by law.
4.20 ENVIRONMENTAL MATTERS.
4.20.1 The Company has not transported, stored, treated or
disposed, nor has it allowed or arranged for any third parties to
transport, store, treat or dispose of Hazardous Substances or other
waste to or at any location other than a site lawfully permitted to
receive such Hazardous Substances or other waste for such purposes,
nor has it performed, arranged for or allowed by any
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method or procedure such transportation, storage, treatment or disposal in
contravention of any laws or regulations. The Company has not disposed, or
allowed or arranged for any third parties to dispose, of Hazardous
Substances or other waste upon property owned or leased by them, except as
permitted by law. For purposes of this Section 4.20, the term "Hazardous
Substances" shall have the meaning given it in the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Sections
9601, et seq.), as amended, and the regulations promulgated pursuant
thereto ("CERCLA"), or any similar state law.
4.20.2 There has not occurred during the Company's occupancy of any
of the Leasehold Premises, and to the Best of the Knowledge of the Company,
there has not occurred prior thereto, any Release of any Hazardous
Substance on, into or beneath the surface of such Leasehold Premises. For
purposes of this Section 4.20, the term "Release" shall mean releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping.
4.20.3 The Company has not transported or disposed, nor has it
allowed or arranged for any third parties to transport or dispose, any
Hazardous Substance or other waste to or at a site which, pursuant to
CERCLA or any similar state law, (i) has been placed on the National
Priorities List or its state equivalent, or (ii) the Environmental
Protection Agency or the relevant state agency has proposed or is proposing
to place on the National Priorities List or its state equivalent. The
Company has received no notice, and it has no knowledge of any facts which
could give rise to any notice, that the Company is a potentially
responsible party for a federal or state environmental cleanup site or for
corrective action under CERCLA or any other applicable law or regulation.
The Company has not submitted nor was it required to submit any notice
pursuant to Section 103(c) of CERCLA with respect to the Leasehold
Premises. The Company has received no written or oral request for
information in connection with any federal or state environmental cleanup
site. The Company has not undertaken (or been requested to undertake) any
response or remedial actions or clean-up actions of any kind at the request
of any federal, state or local governmental entity,or at the request of any
other person or entity.
4.20.4 The Company does not use, and has not used, any Underground
Storage Tanks, and the Company is not aware of any Underground Storage
Tanks on the Leasehold Premises. For purposed of this Section 4.20, the
term, "Underground Storage Tanks" shall have the meaning given it in the
Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.).
4.20.5 There is no asbestos in or on any of the Leasehold Premises
presently requiring remediation or abatement or which may be reasonably
expected hereafter to require such remediation or abatement.
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4.20.6 There are no laws, regulations, ordinances, licenses,
permits or orders relating to environmental or worker safety matters
presently requiring any work, repairs, construction or capital
expenditures with respect to the assets or properties of the Company,
or which may be reasonably expected hereafter to require any such
work.
4.21 LABOUR RELATIONS OF THE COMPANY. The Company is not a party to or
bound by any collective bargaining agreement or any other agreement with a labor
union, and, except as set forth in the Disclosure Schedule, there has been no
effort by any labor union to organize any employees of the Company into one or
more collective bargaining units. There is not pending or, to the best of the
knowledge of the Sellers or the Company, threatened any labor dispute, strike or
work stoppage which affects or which may affect the business of the Company or
which may interfere with its continued operation. Except as set forth in the
Disclosure Schedule, neither the Company nor, to the Best of the Knowledge of
the Company, any agent, representative or employee of the Company has committed
any unfair labor practice as defined in the National Labor Relations Act, as
amended, and there is not now pending or, to the Best of the Knowledge of the
Company, threatened any charge or complaint against the Company by or with the
National Labor Relations Board or any representative thereof. There has been no
strike, walkout or work stoppage affecting the Company involving any of the
employees of the Company during the five-year period prior to the date hereof.
To the Best of the Knowledge of the Company, no executive or key employee or
group of employees has any plans to terminate his, her or their employment with
the Company.
4.22 EMPLOYEE BENEFITS.
4.22.1 Neither the Company, nor any corporation or business
which is now or at the relevant time was a member of a controlled
group of corporations or trades or businesses including the Company,
within the meaning of Section 414 of the Code, maintains or
contributes to, or at any time has maintained or contributed to: (i)
any non-qualified deferred compensation or retirement plans or
arrangements; (ii) any qualified defined contribution retirement plans
or arrangements; (iii) any qualified defined benefit pension plan;
(iv) any other plan, program, agreement or arrangement under which
former employees of the Company or their beneficiaries are entitled,
or current employees of the Company will be entitled following
termination of employment, to medical, health, life insurance or other
benefits other than pursuant to benefit continuation rights granted by
state or federal law; or (v) any other employee benefit, health,
welfare, medical, disability, life insurance, stock, stock purchase or
stock option plan, program, agreement, arrangement or policy, except
in each case as described in the Disclosure Schedule attached hereto.
The plans described in the Disclosure Schedule are referred to herein
as the "Plans."
4.22.2 The administration of the Plans complies in all
respects with the requirements of the Employee Retirement Income
Security Act of 1974 ("ERISA"), and the Plans meet any applicable
requirements for favorable tax
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treatment under the Code in both form and operation. All of the Plans which
constitute employee pension benefit plans or employee welfare plans subject
to ERISA and the trusts or other funding vehicles related to the Plans have
been maintained in compliance in both form and operation with the
requirements of ERISA including, but not limited to, the preparation and
filing of all required reports with respect to the Plans, the submission of
such reports to the appropriate governmental authorities, the timely
preparation and distribution of all required employee communications
(including without limitation any notice of plan amendment which is
required prior to the effectiveness of such amendments), the proper and
timely purchase and maintenance of required surety bonds and the proper and
timely disposition of all benefit claims. The costs of administering the
Plans through the date of the 1995 Balance Sheet, including fees for the
trustee and other service providers which are customarily paid by the
Company, have been paid or will be paid prior to the Closing or are
reflected in the 1995 Balance Sheet. There have been no prohibited
transactions involving the Company as defined in Section 406 of ERISA or
Section 4975 of the Code with respect to any of the Plans or any parties in
interest or disqualified persons with respect to the Plans or any reduction
or curtailment of accrued benefits with respect to any of the Plans. There
are no pending or threatened claims, lawsuits, or arbitrations which have
been asserted or instituted against the Plans, any fiduciaries thereof with
respect to their duties to the Plans or the assets of any of the trusts
under any of the Plans.
4.22.3 All required contributions for all Plan years ending prior
to the Closing Date have been made and adequate accruals for contributions
with respect to all current Plan years are reflected in the 1995 Balance
Sheet. The Company has no plans, programs, agreements or arrangements and
has made no other commitments to its employees, former employees or their
beneficiaries under which it has any obligation to provide any retiree or
other employee benefit payments which are not adequately funded through a
trust or other funding arrangement.
4.22.4 The Company has furnished Einstein Bros. with true and
complete copies of: (i) the Plans and any amendments thereto and any
related or contracts and the related summary plan descriptions with respect
to each Plan, if any; (ii) the most recent determination letters received
from the Internal Revenue Service regarding the Plans, if any, and copies
of any pending applications, filings or notices with respect to any of the
Plans with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation, the Department of Labor or any other governmental agency, if
any; (iii) the policies or contracts, if any, for each of the Plans as of
the end of the most recent plan year; and (iv) copies of any communications
or notices provided to employees or plan participants with respect to the
Plans along with information concerning the date and extent or distribution
of such communications, including without limitation notices intended to
comply with Section 606 of ERISA and Section 4980B of the Code.
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4.23 ACCURACY OF INFORMATION FURNISHED BY THE COMPANY. No representation,
statement or information made or furnished in writing by the Company to Einstein
Bros., in this Agreement and the Disclosure Schedule, taken as whole, contains
any untrue statement of a material fact or omits any material fact necessary to
make the representations, statements and information made or furnished therein,
in light of the circumstances in which they were made, not misleading.
4.24 HSR ACT REPORTING MATTERS. The Company is the "ultimate parent
entity" of the Company within the meaning of the HSR Act. The Company does not
have total assets, and did not record annual net sales for its most recent
fiscal year, in excess of $100,000,000.
ARTICLE 5. ADDITIONAL COVENANTS OF THE SHAREHOLDERS AND THE COMPANY
5.1 REASONABLE BEST EFFORTS. The Idemnifying Shareholders and the
Company will use their reasonable best efforts to cause to be satisfied as soon
as practicable and prior to the Closing Date all of the conditions set forth in
Article 7 to the obligations of Einstein Bros. and Merger Sub to consummate the
Merger. The Indemnifying Shareholders will use their reasonable best efforts to
cause each of the shareholders of the Company who has not signed this Agreement
on the date hereof to sign this Agreement and become a party hereto prior to
Closing .
5.2 CONDUCT OF BUSINESS PENDING THE CLOSING. From and after the
execution and delivery of this Agreement and until the Closing Date, except as
otherwise provided with the prior written consent of Einstein Bros. or as
contemplated by this Agreement:
5.2.1 the Company will conduct its business and operations in
the manner in which the same have heretofore been conducted and use
reasonable best efforts to (i) preserve its business organization
intact, (ii) keep available the services of its officers, employees,
agents and distributors, and (iii) preserve its relationships with
customers, suppliers and others having dealings with the Company;
5.2.2 the Company will maintain all of its properties in
customary repair, order and condition, reasonable wear and use and
damage by unavoidable casualty excepted, and maintain insurance of
such types and in such amounts upon all of its properties and with
respect to the conduct of its business as are in effect on the date of
this Agreement;
5.2.3 the Company will not (i) authorize or issue any shares
of its capital shock (including any held in its treasury) or any other
securities, except pursuant to the exercise of outstanding stock
options, (ii) declare or pay any dividend or make any other
distribution of or with respect to its shares of capital stock or
other securities or purchase or redeem any shares of it's capital
stock or other securities; (iii) pay any bonus or increase the rate of
compensation of any of its employees (except pursuant to normal
policies of the Company) or enter into any new employment agreement or
amend any existing employment agreement; (iv )
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sell, lease, transfer or assign any of its assets other than in the
ordinary course of business; (v) make or obligate itself to make
capital expenditures aggregating more than $50,000; (vi) incur any
material obligations or liabilities or enter into any material
transaction; or (vii) amend its amended and restated articles of
incorporation or by-laws.
5.3 ACCESS TO THE COMPANY'S STORES, PROPERTIES AND RECORDS. From and
after the execution and delivery of this Agreement, the Company will afford to
the representatives of Einstein Bros. access, during normal business hours and
upon reasonable notice, to the Company's premises sufficient to enable Einstein
Bros. to inspect the assets and properties of the Company, and the Company shall
furnish to such representatives during such period all such information relating
to the foregoing investigation as Einstein Bros. may reasonably request;
provided, however, that any furnishing of such information to Einstein Bros. and
any investigation by Einstein Bros. shall not affect the right of Einstein Bros.
to rely on the representations and warranties made by the Company in or pursuant
to this Agreement, and, provided further that Einstein Bros. and Merger Sub will
hold in confidence all documents and information concerning the Company so
furnished, and, if the Merger shall not be consummated, such confidence shall be
maintained in accordance with the confidentiality agreement between Einstein
Bros. and the Company dated September 13, 1995.
5.4 NOTICE OF MATERIAL DEVELOPMENTS. The Company will give prompt
written notice to Einstein Bros. of any material development affecting the
assets, properties, business, business prospects, financial condition or results
of operation of the Company, including without limitation any development which
results in the inaccuracy of any of the representations and warranties of the
Company made herein. However, no disclosure pursuant to this Section 5.4 shall
be deemed to amend or supplement any of such representations and warranties, or
any of the schedules hereto.
5.5 NO OTHER DISCUSSIONS. Neither the Shareholders nor the Company will,
prior to the Closing Date, enter into discussions or negotiate with or entertain
or accept the unsolicited offer of any other party concerning the potential sale
or exchange of all or any part of the assets or shares of the Company to, other
than sales in the ordinary course of business, or the merger or consolidation or
other business combination of the Company with, any person other than Einstein
Bros.
ARTICLE 6. ADDITIONAL COVENANTS OF EINSTEIN BROS. AND MERGER SUB.
6.1 REASONABLE BEST EFFORTS. Einstein Bros. and Merger Sub will use
their reasonable best efforts to cause to be satisfied as soon as practicable
and prior to the Closing Date all of the conditions set forth in Article 8 to
the obligation of the Shareholders and the Company to consummate the Purchase
and the Merger. Einstein Bros. will use its reasonable best efforts to cause
each of its stockholders to enter into the Amended and Restated Registration
Rights Agreement (as hereinafter defined) and will indemnify and hold the
Shareholders of the Company harmless from and against any expenses, losses,
costs, deficiencies, liabilities and damages (including reasonable related
counsel fees and expenses) incurred or suffered by any
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of the shareholders (or any of their successors in interest) arising from any
claim or action of any stockholders of Einstein Bros. related to the execution
and delivery of the Amended and Restated Registration Rights Agreement or the
consummation of any of the transactions contemplated thereby without the consent
of such stockholders.
6.2 GUARANTEE OF PERFORMANCE BY MERGER SUB. Einstein Bros. agrees to
cause Merger Sub to perform all of its obligations hereunder.
6.3 CONDUCT OF BUSINESS PENDING THE CLOSING. From and after the
execution and delivery of this Agreement and until the Closing Date, except as
otherwise provided by the prior written consent of the Company, Einstein Bros.
will conduct its business and operations in the manner in which the same have
heretofore been conducted and use reasonable best efforts to (i) preserve its
business organization intact, (ii) keep available the services of its officers,
employees, agents and distributors, and (iii) preserve it relationships with
customers, suppliers and others having dealings with it.
6.4 NOTICE OF MATERIAL DEVELOPMENTS. Einstein Bros. will give prompt
written notice to the Company of any material development affecting the assets,
properties, business, business prospects, financial condition or results of
operation of Einstein Bros. including without limitation any development which
results in the inaccuracy of any of the representations and warranties of
Einstein Bros. made herein. However, no disclosure pursuant to this Section 6.4
shall be deemed to amend or supplement any of such representations and
warranties, or any of the schedules hereto.
ARTICLE 7. CONDITIONS TO THE OBLIGATION OF EINSTEIN BROS. AND MERGER SUB
The obligation of Einstein Bros. and Merger Sub to consummate the Merger
shall be subject to the satisfaction or waiver of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of the Company contained in
Section 4.1 (except as they relate to foreign qualification) and 4.2 of this
Agreement and the representations and warranties of the Shareholders in this
Agreement shall have been true and correct in all material respects at and as of
the date hereof, and they shall be true and correct in all material respects at
and as of the Closing Date with the same force and effect as though made at and
as of that time. The Company shall have performed and complied in all material
respects with all of its obligations required by this Agreement to be performed
or complied with at or prior to the Closing Date. The Company shall have
delivered to Einstein Bros. and Merger Sub a certificate, dated as of the
Closing Date and signed by the Company, certifying that such representations and
warranties are thus true and correct and that all such obligations have been
thus performed and complied with.
7.2 OPINION OF COUNSEL. Einstein Bros. shall have received an opinion
dated the Closing Date from Cooley Godward Castro Huddleson & Tatum, counsel for
the Company and the Sellers, in form and substance as set forth in Exhibit B
attached hereto.
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7.3 RECEIPT OF BANK CONSENT. BCI shall have obtained the consent of Bank
of America, N.A. to the transactions contemplated hereby .
7.4 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit or invalidate the Merger or any other
transaction contemplated hereby which, in the reasonable judgement of Einstein
Bros., make it inadvisable to proceed with the Merger.
7.5 RESIGNATIONS. The Company shall have delivered to Einstein Bros. the
written resignations of the directors of the Company.
7.6 EMPLOYMENT AND CONSULTING AGREEMENTS; OPTIONS. Each of the
employment agreements and consulting agreements to which the Company is a party
(other than the agreement between William Hughson and the Company) shall have
been terminated without liability to the Company.
7.7 LANDLORD CONSENTS. All required consents of the Company's landlords
to the transactions contemplated by this Agreement shall have been obtained;
provided, however, that Einstein Bros. and Merger Sub shall agree to waive this
condition at Closing if requested to do so by the Company, in which event the
Shareholders will indemnify Einstein Bros. for all damages it may incur as a
result of its failure to obtain such consents, unless Einstein Bros. has
requested a similar waiver from the Company and the Shareholders pursuant to
Section 8.8 hereof, in which event the Shareholders will indemnify Einstein
Bros. for one-half of such damages.
7.8 QUALIFICATIONS, LEGAL INVESTMENT. All authorizations, approvals,
filings, or permits, if any, of any governmental authority or regulatory body of
the United States, the State of California or of any other state that are
required in connection with the lawful sale or issuance of the Purchased Shares
shall have been duly obtained and shall be effective on and as of the Closing.
At the time of the Closing, the sale or issuance of the Purchased Shares shall
be legally permitted by all laws and regulations to which Einstein Bros. and the
Purchasers are subject.
7.9 TERMINATION OF CERTAIN AGREEMENTS. Each of the following agreements
shall have been terminated without liability to the Company, pursuant to
termination agreements satisfactory in form and substance to Einstein Bros.: (i)
the Series A Preferred Stock Purchase Agreement dated May 3, 1994 among the
Company, certain of its shareholders and certain purchasers, (ii) the Series B
Preferred Stock Purchase Agreement dated March 31, 1995 among the Company,
certain of its shareholders and certain purchasers; (iii) Amended and Restated
Investor Rights Agreement dated March 31, 1995 among Starbucks, the Company
and certain shareholders of the Company; (iv) the Amended and Restated Voting
Rights Agreement dated March 31, 1995 among Starbucks, the Company and certain
shareholders of the Company; (v) the Founders and Rosewood Voting Rights
Agreement dated March 31, 1995 among the Company and certain shareholders of the
Company; and (vi) the Protective Covenants
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Agreement dated March 31, 1995 among Starbucks, the Company and certain
shareholders of the Company.
ARTICLE 8. CONDITIONS TO OBLIGATION OF THE SHAREHOLDERS AND THE COMPANY.
The obligation of the Shareholders and the Company to consummate the Merger
shall be subject to the satisfaction or waiver of each of the following
conditions:
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of Einstein Bros. and Merger Sub
contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5 and 3.6 of this Agreement shall
have been true and correct in all material respects at and as of the date
hereof, and they shall be true and correct in all material respects at and as of
the Closing Date with the same force and effect as though made at and as of that
time. Einstein Bros. and Merger Sub shall have performed and complied in all
material respects with all of its obligations required by this Agreement to be
performed or complied with at or prior to the Closing Date. Einstein Bros. and
Merger Sub shall have delivered to the Shareholders a certificate, dated as of
the Closing Date and signed by an officer of Einstein Bros. and Merger Sub
certifying that such representations and warranties are thus true and correct
and that all such obligations have been thus performed and complied with.
8.2 OPINION OF COUNSEL. The Sellers shall have received an opinion,
dated the Closing Date, from Bell, Boyd & Lloyd, counsel for Einstein Bros. and
Merger Sub, in form and substance as set forth in Exhibit C attached hereto.
8.3 EINSTEIN BROS. REGISTRATION RIGHTS AGREEMENT. Einstein Bros. shall
have executed and delivered to the Purchasers an amended and restated
registration rights agreement in the form set forth in Exhibit D hereof (the
"Amended and Restated Registration Rights Agreement").
8.4. ELECTION OF NOAH ALPER. Noah Alper shall have been elected as a
director and vice chairman of Einstein Bros.
8.5 AGREEMENTS WITH CERTAIN MEMBERS OF NOAH'S MANAGEMENT. Einstein Bros.
shall have executed and delivered to each of Jim Mizes, Bob Purcell, Nancy
Hauge, Bill Schrader, Doug Troy and Barbara Musante agreements in the form set
forth in Exhibit E.
8.6 RECEIPT OF BANK CONSENT. Starbucks shall have obtained the consent
of Bank of America, N.A. to the transactions contemplated hereby.
8.7 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit or invalidate the Merger or the Purchase or any
other transaction contemplated hereby which, in the reasonable judgment of the
Company, makes it inadvisable to proceed with the Merger or the Purchase.
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8.8 LANDLORD CONSENTS. All required consents of the Company's landlords
to the transactions contemplated by this Agreement shall have been obtained;
provided, however, that the Shareholders and the Company shall agree to waive
this condition at Closing if requested to do so by Einstein Bros., in which
event the Shareholders will have no liability for the failure to obtain any such
consent, unless the Company has requested a similar waiver from Einstein Bros.
and Merger Sub pursuant to Section 7.7 hereof, in which event the Shareholders
will indemnify Einstein Bros. for one-half of all damages it may incur as a
result of the Company's failure to obtain any such consents.
ARTICLE 9. CERTAIN ACTIONS AFTER THE CLOSING
9.1 EXECUTION OF FURTHER DOCUMENTS. From and after the Closing, upon the
reasonable request of Einstein Bros., the Shareholders shall execute,
acknowledge and deliver all such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances as may be required to carry out
the transactions contemplated by this Agreement.
9.2 RESTRICTIONS ON TRANSFER OF PURCHASED SHARES. The restrictions of
this Section 9.2 apply to any holder of the Purchased Shares. Each Purchaser
acknowledges and agrees that:
9.2.1 The Purchased Shares to be issued pursuant to the
Purchase may be owned, as of the Closing, only in the names of and by
such Purchasers.
9.2.2 No federal, state or other agency has made any finding
or determination as to the fairness of the offering of the
Purchased Shares for investment, nor any recommendation or endorsement
of the Purchased Shares.
9.2.3 Because the Purchased Shares will not have been
registered under the Securities Act of 1933, as amended ("the
Securities Act"), or applicable state or other securities laws, the
economic risk of the investment must be borne indefinitely by such
Purchasers, and the Purchased Shares cannot be sold unless
subsequently registered under the Securities Act and such state or
other laws, or unless an exemption from such registration is
available; Einstein Bros. is not obligated to file a notification
under Regulation A of the Securities Act or a registration statement
under the Securities Act, except pursuant to the Amended and
Restated Registration Rights Agreement; and Rule 144, adopted under
the Securities Act and governing the possible disposition of the
Purchased Shares, is not currently available.
9.2.4 No Purchased Shares may be transferred unless (i) such
transfer is effected pursuant to a registration statement which has
been filed under the Securities Act and declared effective by the
Securities and Exchange Commission, or (ii) in the written opinion of
counsel, which opinion and counsel shall be satisfactory to Einstein
Bros. (the fees and expenses of which counsel shall be borne by the
transferring Purchaser), an exemption from the registration
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requirements of the Securities Act and applicable state or other securities
laws is available.
9.2.5 The Purchasers agree that they shall enter into an
agreement restricting the public resale of the Purchased Shares for a
period of up to 120 days, to the extent required by the underwriters
in any initial public offering of shares of Common Stock of Einstein
Bros. and that they will not sell, transfer or otherwise dispose of
any of the Purchased Shares unless they have first obtained the
written agreement of the transferee of such shares (which agreement
shall be satisfactory to Einstein Bros.) to be bound by the provisions
of this Section 9.2.5.
9.2.6 Each certificate evidencing the Purchased Shares shall
bear the following legends:
"The shares represented by this certificate were issued
without registration under the Securities Act of 1933, as
amended (the "Securities Act") or applicable state securities
laws, in reliance upon the exemptions contained therein. No
transfer of these shares or any interest therein may be made
unless (i) such transfer is effected pursuant to a registration
statement which has been filed under the Securities Act and
declared effective by the Securities and Exchange Commission,
or (ii) in the written opinion of counsel, which opinion and
counsel shall be satisfactory to the issuer of these shares, an
exemption from the registration requirements of the Securities
Act and applicable state or other securities laws is
available."
"The shares represented by this certificate are also
subject to certain covenants and agreements (including
restrictions on transfer) contained in a Merger Agreement dated
as of January 22, 1996 by and among Einstein Bros. Bagels,
Inc., Noah's New York Bagels, Inc. ("Noah's"), NNYB Acquisition
Corporation and shareholders of Noah's."
9.3 CERTAIN POST-CLOSING COOPERATION. Each of the Shareholders
acknowledges and agrees that Einstein Bros. may have need of information
concerning the Company and the Shareholders in order to comply with applicable
securities laws and regulations in connection with future public and private
debt and equity offerings by Einstein Bros. ("Offerings"). Each Purchaser agrees
that such Purchaser will cooperate with Einstein Bros. in connection with any
Offerings and that such Purchaser will furnish Einstein Bros. with such
information concerning the Company prior to the Closing Date and such Purchaser
as Einstein Bros. may reasonably require to comply with applicable securities
laws and regulations. Each Shareholder who is not a Purchaser agrees that such
Shareholder will furnish Einstein Bros. with such information concerning such
Shareholder as Einstein Bros. may reasonably require in connection with any
Offerings to comply with applicable securities laws and regulations.
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9.4 CERTAIN VOTING AGREEMENTS.
(a) Each of the Purchasers agrees that from and after the
Closing and until the earlier of February 28, 1998 or the completion of any
Qualified Public Offering, that such Purchaser shall vote (at any meeting
and in any action by written consent) such Purchaser's Purchased Shares
(and any equity or other voting securities issued or issuable directly or
indirectly with respect to such shares by way of stock dividend or stock
split or in connection with a combination of stores, recapitalization,
merger, consolidation or other reorganization) over which such Purchaser
has voting control and shall take all other actions within the control of
such Purchaser (whether in such Purchaser's capacity as a stockholder or
director of the Company or otherwise) to cause the election to the Board of
Directors of Einstein Bros. of (a) Daniel V. Colangelo, (b) Gail Lozoff,
(c) the designee of OBG Holdings, Inc. ("OBG") pursuant to Section 5.M of
the agreement to contribute assets dated March 23, 1995 by and among
Einstein Bros., OBG (formerly known as Offerdahl's Bagel Gourmet, Inc.) and
the shareholders of OBG, (d) three directors designated by BCI, and (e)
three directors designated from time to time by the holders of an aggregate
of 15,104.95 shares of Common Stock of Einstein Bros. pursuant to
subscription agreements entered into by the purchasers of such shares dated
as of March 24, 1995. For purposes of this Section 9.4(a), a "Qualified
Public Offering" means a sale in an underwritten public offering registered
under the Securities Act of 1933, as amended, of shares of Einstein Bros.'
Common Stock in which the aggregate gross proceeds are equal to at least
$15,000,000.
(b) Until the provisions of Section 9.4(a) cease to be
effective, the Shareholders shall not sell, transfer, assign, pledge or
otherwise dispose of any interest in any Purchased Shares, unless in each
case the proposed transferee has executed and delivered to Einstein Bros. a
written agreement in form satisfactory to Einstein Bros. pursuant to which
such transferee agrees to be bound by the provisions hereof with respect to
the Purchased Shares so transferred.
(c) Until the provisions of Section 9.4 of this Agreement cease
to be effective, each certificate evidencing Purchased Shares shall bear
the following legend:
"The shares of stock represented by this certificate are
subject to certain voting agreements and certain restrictions on
transfer set forth in a Merger Agreement dated as of January 22,
1996, a copy of which is available for inspection at the offices of
the Secretary of the Company."
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9.5 CONFIDENTIAL INFORMATION.
9.5.1 The Restricted Shareholders (as defined in Section 9.6)
possess certain confidential and proprietary information and trade
secrets of the Company, including, but not limited to, information,
methods, techniques, procedures and knowledge developed by or for the
Company respecting the business of the Company (the "Confidential
Information"). Each of the Restricted Shareholders acknowledges and
agrees that neither such Restricted Shareholder nor any other person
or entity has acquired by or through such Restricted Shareholder any
interest in or right to use the Confidential Information other than
the right to utilize it in the operation of the business of Einstein
Bros. and its subsidiaries, and that the use or duplication of the
Confidential Information in any other business would contribute an
unfair method of competition with Einstein Bros. and its subsidiaries.
Each of the Restricted Shareholders hereby agrees that such Restricted
Shareholder: (i) will not use the Confidential Information in any
other business or capacity; (ii) will maintain the absolute secrecy
and confidentiality of the Confidential Information; and (iii) will
not make unauthorized copies of any portion of the Confidential
Information disclosed in written or other tangible form.
9.5.2 Notwithstanding the foregoing, the obligations of the
Restricted Shareholders specified above shall not apply to any
Confidential Information which (i) is disclosed in a printed
publication available to the public, or is otherwise in the public
domain through no act of any of the Restricted Shareholders, their
agents or any person or entity which has received such Confidential
Information from or through any of the Restricted Shareholders, (ii)
is approved for release by written authorization of an officer of
Einstein Bros., (iii) is required to be disclosed by proper order of a
court of applicable jurisdiction after adequate notice to Einstein
Bros. to seek a protective order therefor, the imposition of which
protective order the Restricted Shareholders agree to approve and
support, or (iv) in the written opinion of the disclosing Restricted
Shareholder's counsel, is necessary to be made by such Restricted
Shareholder in order that the Restricted Shareholder not violate any
law, rule or regulation applicable to him or her.
9.6 RESTRICTIVE COVENANTS. Each of the Restricted Shareholders
acknowledges and agrees that Einstein Bros. would be unable to protect the
Confidential Information against unauthorized use or disclosure and Einstein
Bros. would be unable to realize the benefits of this Agreement if such
Restricted Shareholder were permitted, directly or indirectly, to engage in,
hold interests in or perform services for any entity which derives more than 15%
of its revenues from the business of selling, producing, marketing or
distributing bagels, other than Einstein Bros. and its subsidiaries and
franchisees (a "Competitive Business"). Each of the Restricted Shareholders
further acknowledges and understands that Einstein Bros. intends, and expects,
to expand its business throughout the United States. Each of the Restricted
Shareholders therefore agrees that for a period of three (3) years from the
Closing Date, such Restricted Shareholder
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shall not, and shall not permit such Restricted Shareholder's Affiliates, to
directly or indirectly, anywhere in the United States (including without
limitation every county in the State of California): (i) have any interest as a
record or beneficial owner in any Competitive Business; provided, however, the
Restricted Shareholders may have an interest in any Competitive Business as
passive investors in such Competitive Business conducted by a company which has
a class of securities which is registered under Section 12 of the Securities
Exchange Act of 1934, as amended, or traded on a national securities exchange
provided that the interest consists solely of such securities and the interest
held by any Restricted Shareholder, or any group of which any Restricted
Shareholder is a member that would be treated as a person under Section 13(d)(3)
of the Securities Exchange Act of 1934, shall in no event exceed five percent
(5%) of the total equity securities of such issuer; (ii) perform services as a
director, officer, manager, employee, consultant, representative, agent, or
otherwise for any Competitive Business; or (iii) divert or attempt to divert any
business or any customers of Einstein Bros.' business to any Competitive
Business. For purposes of this Section 9.5, the term "Restricted Shareholders"
means Noah Alper, Dan Alper and Bill Hughson.
9.7 ADDITIONAL AGREEMENTS OF STARBUCKS, THE COMPANY AND EINSTEIN BROS.
9.7.1 Until March 31, 1998, Starbucks will continue, with respect
to both the Company and Einstein Bros., to comply (and to cause its
subsidiaries to comply) with the covenants made by it in Section 3.3 of the
Amended and Restated Investor Rights Agreement dated as of March 31, 1995
by and among the Company and certain investors in the Company, whether or
not such agreement continues in effect.
9.7.2 Until March 31, 1998, the Company and Einstein Bros. will
comply (and will cause their respective subsidiaries to comply) with the
covenants made by the Company, as if made by both Einstein Bros. and the
Company, in Section 3.4 of the Amended and Restated Investor Rights
Agreement dated as of March 31, 1995 by and among the Company and certain
investors in the Company, whether or not such agreement continues in
effect.
9.7.3 At any time, Einstein Bros. may terminate its obligations
and those of the Company under Section 9.7.2 upon written notice to
Starbucks and shall terminate such obligations if a Covered Entity (as
hereinafter defined) takes any action which, if taken by Einstein Bros.,
would violate Section 9.7.2. If Einstein Bros. terminates its obligations,
then the obligations of Starbucks under Section 9.7.1 shall terminate at
the same time. "Covered Entity" shall mean (i) an entity in which BCI holds
(or has the right to acquire) a majority equity interest or (ii) an entity
in which BCI holds (or has the right to acquire) an equity interest which
would result in BCI "controlling" such entity within the meaning of such
term as it is used in Rule 405 of the Securities Act.
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9.8 ADDITIONAL AGREEMENT OF NOAH ALPER. Noah Alper hereby grants to the
Company the exclusive right to use his name, likeness and persona in the
business conducted by the Company, consistent with the manner in which it is
currently used (but without any restriction whatsoever on the use of any
trademark or service mark of the Company) and agrees that he will not any
time, without Einstein Bros.' written consent, use his name, likeness or persona
in a Competitive Business.
9.9 REMEDIES; WAIVER.
9.9.1 Einstein Bros., the Restricted Shareholders and
Starbucks (collectively, the "Restricted Persons") agree that the
provisions and restrictions set forth above in Section 9.5, 9.6, 9.7
and 9.8 applicable to such Restricted Person are necessary to protect
Einstein Bros. and Starbucks, as applicable, and their respective
successors and assigns in the protection of the business to be
acquired by Einstein Bros. pursuant to this Agreement. Each of the
Restricted Persons agrees that damages cannot compensate Einstein
Bros. or Starbucks, as applicable in the event of a violation of the
covenants contained in Section 9.5, 9.6, 9.7 or 9.8 hereof applicable
to such Restricted Person, and that injunctive relief shall be
essential for the protection of Einstein Bros. and Starbucks, as
applicable, and their respective successors and assigns. Accordingly,
each of the Restricted Persons agrees and consents that, in the event
such Restricted Person shall violate or breach any of said covenants,
Einstein Bros. or Starbucks, as applicable, shall be entitled to
obtain (and such Restricted Person hereby consents to) such injunctive
relief against such Restricted Person, without bond, in addition to
such further or other relief as may appertain at equity or law. The
exercise or enforcement by Einstein Bros. or Starbucks, as applicable,
of any other right or remedy hereunder shall not preclude the exercise
or enforcement by Einstein Bros. or Starbucks, as applicable, of any
other right or remedy hereunder or which Einstein Bros. or Starbucks,
as applicable, has the right to enforce under applicable law.
9.9.2 Failure by any party to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not be
deemed a waiver of such term, covenant or condition, nor shall any
waiver or relinquishment of any right or remedy hereunder at any one
or more times be deemed a waiver or relinquishment of such right or
remedy at any other time or times.
9.10 EMPLOYEE BENEFIT PLANS. Einstein Bros. intends that the
Plans described in Schedule 4.22 (the "Company Benefit Plans") that are in
effect at the date of this Agreement shall remain in effect until such time as
the Company's employees are allowed to participate in employee plans and benefit
arrangements of Einstein Bros. (the "Einstein Bros. Plans") or of an area
developer of Einstein Bros. who hires such employees, if such area developer is
formed.
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ARTICLE 10. INDEMNIFICATION
10.1 AGREEMENT BY THE SHAREHOLDERS TO INDEMNIFY. The Shareholders agree
that they will indemnify and hold Einstein Bros. and the Company harmless in
respect of the aggregate of all Indemnifiable Damages (as hereinafter defined).
With respect to Indemnifiable Damages arising from any inaccurate representation
or warranty made by the Company in Article 4 of this Agreement, the obligation
of the Shareholders to indemnify will be limited to the following persons:
Starbucks, Rosewood Capital, L.P., Noah Alper, Dan Alper, Robert Polsky and Bill
Hughson (collectively, the "Indemnifying Shareholders"), who shall be obligated
severally to indemnify Einstein Bros. and Merger Sub, with each such person
being obligated to indemnify for up to the following percentage of the aggregate
amount of Indemnifiable Damages: Starbucks: 28.74%; Rosewood Capital, L.P.:
29.14%; Noah Alper: 15.76%; Dan Alper: 6.32%; Robert Polsky: 10.94%; and Bill
Hughson: 9.10%. With respect to any other Indemnifiable Damages, the obligation
of the Shareholders to indemnify shall be several. For purposes of this
Agreement, Indemnifiable Damages shall mean the aggregate of all expenses,
losses, costs, deficiencies, liabilities and damages (including reasonable
related counsel fees and expenses) incurred or suffered by Einstein Bros.,
Merger Sub or the Company (or any successor to all or any part of the assets or
business of the Company) (i) resulting from any inaccurate representation or
warranty made by the Shareholders or the Company in or pursuant to this
Agreement (disregarding for this purpose the limitations on materiality set
forth in the third sentence of Section 4.7.2 and the first sentence of Section
4.19), (ii) resulting from any default in the performance of any of the
covenants or agreements made by the Shareholders in this Agreement, (iii)
resulting from any claim or action of any shareholder of the Company who has not
entered into this Agreement prior to the Closing related to the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, including without limitation any action based on the dissenters' rights
of any such shareholder under California law, or (iv) resulting from any
representation or statement made by the Company to its shareholders in
connection with the solicitation of consents to approve the Merger that, taken
as a whole, contains any untrue statement of a material fact or omits any
material fact necessary to make the representations and statements made, in
light of the circumstances in which they were made, not misleading. Without
limiting the generality of the foregoing, with respect to the measurement of
Indemnifiable Damages, Einstein Bros. and the Company shall have the right to be
put in the same financial position as they would have been in had each of the
representations and warranties of the Shareholders and the Company been true and
correct, had each of the covenants of the Shareholders been performed in full,
had there been no such claim or action described in clause (iii) of the
preceding sentence and had no misleading statement or omission been made as
described in clause (iv) of the preceding sentence. The foregoing obligation to
indemnify Einstein Bros., and the Company shall be subject to each of the
following principles or qualifications:
10.1.1 Each of the representations and warranties made by the
Shareholders and the Company in this Agreement or pursuant hereto, shall
survive for a period of one year after the Closing Date, notwithstanding
any investigation at any time made by or on behalf of Einstein Bros. or
Merger Sub, and thereafter all such representations and warranties shall be
extinguished,
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provided, however, that the representations and warranties made by the
Shareholders in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 4.1 (except to the extent
it relates to foreign qualification and except for clause (ii) of the
fourth sentence thereof) and 4.2 hereof shall in each case survive forever
(or, to the extent a claim hereunder relates to third-party claims, a
period of six months after the expiration of the statute of limitations
applicable to such claim), those made in clause (ii) of the fourth
sentence thereof shall survive for six months after the expiration of the
applicable statute of limitations and those made in Section 4.6 hereof
shall in each case survive until the first anniversary of the later of (i)
the date on which the applicable period of limitation on assessment or
refund of tax has expired, or (ii) the date on which the applicable taxable
year (or portion thereof) has been closed. No claim for the recovery of
Indemnifiable Damages based upon the inaccuracy of such representations and
warranties may be asserted by Einstein Bros. or the Company after such
representations and warranties shall be thus extinguished; provided,
however, that claims first asserted in writing within the applicable period
(whether or not the amount of any such claim has become ascertainable
within such period) shall not thereafter be barred.
10.1.2 The Sellers shall not be liable for any claim for
Indemnifiable Damages arising out of any inaccuracy of any representation
or warranty if the aggregate amount of all Indemnifiable Damages does not
exceed $250,000. For this purpose, amounts which would constitute
Indemnifiable Damages but for the limitations on materiality set forth in
the third sentence of Section 4.7.2 and the first sentence of Section 4.19
shall be taken into account in determining whether such threshold has been
met.
10.1.3 The Shareholders' liability for claims for Indemnifiable
Damages arising out of any inaccuracy of representations and warranties
shall not exceed $10,000,000 in the aggregate.
10.1.4 The limitations set forth in Sections 10.1.2 and 10.1.3
shall not apply to Indemnifiable Damages arising out of any inaccuracy of
any representation or warranty in Sections 2.1, 2.2, 2.3, 2.4, 2.5, 4.1
(except to the extent it relates to foreign qualification) or 4.2.
10.1.5 Einstein Bros. and the Company shall not be entitled to
recover Indemnifiable Damages with respect to any matter to the extent such
matter is covered by insurance, but in such event the effect of such
matter on the insurance costs of Einstein Bros. and the Company shall
also be taken into account in determining the amount of Indemnifiable
Damages.
10.1.6 Absent fraud, the provisions of this Article 10 shall
provide the exclusive remedy of Einstein Bros. and the Company for damages
arising from the inaccuracy of representations and warranties of the
Shareholders and the Company in this Agreement.
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10.1.7 In the event Einstein Bros. or the Company becomes
involved in any legal, governmental or administrative proceeding
which may result in indemnification claims hereunder and such
proceeding, if adversely determined, can reasonably be expected to
result in the payment of Indemnifiable Damages hereunder in an amount
(a) in excess of the amount of damages of the Company that would not
be recovered because of the threshold set forth in Section 10.1.2
hereof, but (b) less than the cap set forth in Section 10.1.3 hereof,
then the Indemnifying Shareholders may, at their option and expense,
defend such proceeding. If the Indemnifying Shareholders elect to
defend any such proceeding, they shall have full control over the
conduct of such proceeding, although Einstein Bros. shall have the
right to retain legal counsel and to participate in the defense of
such proceeding at its own expense and shall have the right to approve
any settlement of any dispute giving rise to such proceeding, such
approval not to be withheld unreasonably; provided that, in the event
the Indemnifying Shareholders shall fail to initiate a defense of a
claim within twenty days of the notice to the Indemnifying
Shareholders of a claim, Einstein Bros. shall have the option to
conduct the defense of such claim as it may in its discretion and in
good faith deem proper, and the Indemnifying Shareholders shall have
the right to retain legal counsel and to participate in the defense of
such proceeding at their own expense. If any proceeding, if adversely
determined, can reasonably be expected to result in an amount of
damages of the Company (x) that would not be recovered because such
amount would be less than the threshold set forth in Section 10.1.2.
hereof, or (y) that would exceed the cap set forth in Section 10.1.3
hereof, then Einstein Bros. may, at its option, defend such
proceeding. If Einstein Bros. elects to defend any such proceeding, it
shall have full control over the conduct of such proceeding, although
the Indemnifying Shareholders shall have the right to retain legal
counsel and to participate in the defense of such proceeding at their
own expense and shall have the right to approve any settlement of any
dispute giving rise to such proceeding, such approval not to be
withheld unreasonably; provided that, in the event Einstein Bros.
shall fail to initiate a timely defense of a claim, the Indemnifying
Shareholders shall have the option to conduct the defense of such
claim, and Einstein Bros. shall have the right to retain legal counsel
and to participate in the defense of such proceeding at its own expense.
10.1.8 Nothing in this Section 10.1 shall prevent Einstein Bros.
from obtaining equitable relief in any appropriate case.
10.1.9 Einstein Bros. and the Company agree to use reasonable
best efforts to give prompt written notice to the Indemnifying
Shareholders of each claim for Indemnifiable Damages which they
believe they have suffered; provided, however, that no delay in the
giving of such notice shall affect the rights of Einstein Bros., and
the Company to recover Indemnifiable Damages hereunder except to the
extent the recipient of such notice is prejudiced by such delay.
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ARTICLE 11. MISCELLANEOUS
11.1 AMENDMENT AND MODIFICATION. Subject to any restrictions set forth in
the California Act and the Delaware Act, the parties hereto may amend, modify
and supplement this Agreement in such manner as may be agreed upon in writing by
Einstein Bros., the Company and Shareholders owning on the date hereof 75% of
the aggregate number of shares of capital stock of the Company owned by all of
the Shareholders, provided, however, that (i) any amendment to Section 8.4 or
9.8 shall require only the consent of Einstein Bros. and Noah Alper, (ii) any
amendment to Section 9.5 or 9.6 shall require only the consent of Einstein Bros.
and of all Restricted Shareholders affected thereby, (iii) any amendment to
Section 9.7 shall require only the consent of Einstein Bros. and Starbucks, (iv)
any amendment to Section 9.9 shall require only the consent of Einstein Bros.
and all of the Restricted Persons affected thereby, (v) any amendment to Article
10 shall require only the consent of Einstein Bros. and all of the Indemnifying
Shareholders, (vi) any amendment to any of clauses (i) through (v) of this
Section 11.1 shall require only the consent of all of the persons identified in
such clause, and (vii) any amendment of Section 11.3.4 shall require only the
consent of Starbucks, Rosewood Capital, L.P., Noah Alper and Einstein Bros.
11.2 PAYMENT OF EXPENSES. The Shareholders shall pay all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby payable to Alex. Brown & Sons Incorporated; Cooley Godward
Castro Huddleson & Tatum, counsel for the Company; Preston Gates & Ellis,
representing Starbucks; and certain other professional advisors approved by the
Company. Einstein Bros. shall pay all of the expenses incurred by it or Merger
Sub in connection with this Agreement, including without limitation their legal
and accounting fees and expenses, and the commissions, fees and expenses of any
person employed or retained by them to bring about, or to represent them in, the
transactions contemplated hereby.
11.3 TERMINATION. Anything to the contrary herein notwithstanding, this
Agreement may be terminated and the transaction contemplated hereby may be
abandoned:
11.3.1 by the mutual written consent of all of the parties
hereto at any time prior to the Closing Date;
11.3.2 by Einstein Bros. in the event of the material breach
by the Shareholders of any provision of this Agreement, which breach
is not remedied by the breaching party within 10 days after receipt of
notice thereof from Einstein Bros.;
11.3.3 by the Shareholders in the event of the material breach
by Einstein Bros. of any provision of this Agreement, which breach is
not remedied by Einstein Bros. within 10 days after receipt of notice
thereof from Shareholders; or
11.3.4 by any party hereto if the Closing has not taken place
by the close of business on February 2, 1996.
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If this Agreement is terminated pursuant to Sections 11.3.1, no party shall
have any liability for any costs, expenses, loss of anticipated profit or any
further obligation for breach of warranty or otherwise to any other party to
this Agreement. Any termination of this Agreement pursuant to Sections 11.3.2,
11.3.3, or 11.3.4 shall be without prejudice to any other rights or remedies of
the respective parties.
11.4 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns,
heirs and legal representatives.
11.5 ENTIRE AGREEMENT. This Agreement and the exhibits and schedules
attached hereto and the confidentiality agreement between Einstein Bros. and the
Company dated September 13, 1995, contain the entire agreement of the parties
hereto with respect to the Purchase and the Merger and the other transactions
contemplated herein, and supersede all prior understandings and agreements of
the parties with respect to the subject matter hereof. Any reference herein to
this Agreement shall be deemed to include the schedules and exhibits attached
hereto.
11.6 HEADINGS. The descriptive headings in this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.
11.7 CERTAIN DEFINED TERMS. As used herein, the following terms shall
have the meanings given them below:
"BEST OF THE KNOWLEDGE OF THE COMPANY" means the knowledge of
any of Noah Alper, Dan Alper, Bob Polsky, Bill Hughson or Glenn
Bacheller and the knowledge which any of them could reasonably be
expected to have upon the exercise of reasonable diligence in the
performance of his duties or in the preparation of the Disclosure
Schedules (to the extent such person was involved in the preparation
of such Disclosure Schedules).
"BEST OF THE KNOWLEDGE OF EINSTEIN BROS." means the knowledge
of any of Einstein Bros.' executive officers and the knowledge which
any of them could reasonably be expected to have in the performance of
his duties or in the preparation of the Einstein Bros. Disclosure
Schedules (to the extent such person was involved in the preparation
of such Einstein Bros. Disclosure Schedules).
"MATERIAL ADVERSE EFFECT" means, when used with reference to
Einstein Bros., a material adverse effect on the business, financial
condition or results of operations of Einstein Bros. and its
subsidiaries, taken as a whole, and when used with reference to the
Company, a material adverse effect on its business, financial
condition or results of operations.
11.8 EXECUTION IN COUNTERPART. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
34.
<PAGE>
11.9 NOTICES. Any notice, request, information or other document to be
given hereunder shall be in writing. Any notice, request, information or other
document shall be deemed duly given when delivered personally or by courier,
when sent by facsimile transmission with confirmed receipt, or four business
days after it is sent by registered or certified mail, postage prepaid, to the
intended recipient, addressed as follows:
If to any one or more of the Shareholders, addressed to such
Shareholder at its address set forth on Schedule 11.9 hereto.
If to the Company, prior to the Closing, addressed to:
Noah's New York Bagels, Inc.
14054 Catalina Street
P.O. Box 2158
San Leandro, CA 94577-0331
Attention: Glenn Bacheller
with a copy to:
Cooley Godward Castro Huddleson & Tatum
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Attention: Christopher Westover
If to the Company after the Closing, or if to Einstein Bros. or
Merger Sub, addressed to:
Einstein Bros. Bagels, Inc.
1526 Cole Boulevard, Suite 200
Golden, CO 80401
Attention: General Counsel
with a copy to:
Bell, Boyd & Lloyd
70 W. Madison, Suite 3200
Chicago, Illinois 60602
Attention: Paul T. Metzger
Any party may send any notice, request, information or other document to be
given hereunder using any other means (including personal delivery, courier,
messenger service, facsimile transmission or ordinary mail), but no such notice,
request, information or other document shall be deemed duly given unless and
until it is actually received by the party for whom it is intended. Any party
may change the address to which notices hereunder are to be
35.
<PAGE>
sent to it by giving written notice of such change of address in the manner
herein provided for giving notice.
11.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed therein, except that the Merger shall be governed by and
become effective in accordance with the California Act to the extent provided
therein.
11.11 AMENDMENT AND RESTATEMENT. This Agreement amends and restates in its
entirety that certain Merger Agreement, dated as of January 22, 1996, among the
Company, Einstein Bros., Merger Sub and certain Shareholders.
[THIS SPACE INTENTIONALLY LEFT BLANK]
36.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
NOAH'S NEW YORK BAGELS, INC.
By /s/ Glen Bacheller
--------------------------
Title CEO
-----------------------
EINSTEIN BROS. BAGELS, INC.
By /s/ Paul A. Strasen
--------------------------
Title Vice President
-----------------------
<PAGE>
Shareholder Signature Page to Merger Agreement
/s/ Robert D. Polsky /s/ Frederic M. Alper
- ----------------------------------- ____________________________________
Daniel V. Alper and Lynn K. Alper Fred Alper
as Community Property
/s/ Robert D. Polsky /s/ Noah C. Alper /s/ Hope M. Alper
___________________________________ ____________________________________
McKaile D. Alper Noah C. Alper and Hope M. Alper,
By Robert D. Polsky Trustee or Successor Trustee under
as Attorney in fact the Alper Living Trust U/A/D July
18, 1994
/s/ Robert D. Polsky /s/ Robert D. Polsky
___________________________________ ____________________________________
Robin M. Alper Tyler M. Alper
By: Robert D. Polsky By: Robert D. Polsky
as Attorney in fact as Attorney in fact
/s/ Peter B. Breck /s/ Beverly L. Wright, Vice President
___________________________________ ____________________________________
Peter B. Breck Alex. Brown Financial Corporation
/s/ Phillip A. Clough /s/ Martin Culver
___________________________________ ____________________________________
Phillip A. Clough Martin Culver
<PAGE>
Shareholder Signature Page to Merger Agreement
/s/ Jay S. Eastman /s/ Edward S. Fitzgerald
___________________________________ ___________________________________
Jay S. Eastman Edward D. Fitzgerald
/s/ Craig J. Foley
___________________________________ ___________________________________
Craig J. Foley PWN Associates III, LLC
/s/ Authorized Signatory /s/ Matthew Holmes
___________________________________ ___________________________________
Wallace R. and Alexandra W. Hawley Matt Holmes
Revocable Living Trust U/A/D
July 30, 1992
/s/ William B. Hughson /s/ Charles F. Kahn
___________________________________ ___________________________________
William B. Hughson Charles F. Kahn
/s/ Howard Lester /s/ John R. McCraw
___________________________________ ___________________________________
Howard Lester John R. McCraw
/s/ George G.C. Parker /s/ John J. Fisher
___________________________________ ___________________________________
George G.C. Parker The Pisces Fund
By: John J. Fisher, Trustee
/s/ Jessica Polsky /s/ Robert D. Polsky
___________________________________ ----------------------------------
Jessica Polsky Robert D. Polsky and Nancy Polsky,
as Community Property
/s/ Zachary Polsky /s/ Howard Rosenberg
___________________________________ ___________________________________
Zachary Polsky Howard Rosenberg
/s/ Amanda S. Andereck /s/ Authorized Signatory
- ----------------------------------- -----------------------------------
Rosewood Capital Corporation Rosewood Capital, L.P.
By: Amanda S. Andereck,
Vice President
/s/ David F. Smith /s/ Judith A. Smith
___________________________________ ___________________________________
David F. Smith Judith A. Smith
<PAGE>
/s/ Michael L. Epstein /s/ Karen Klein
___________________________________ ___________________________________
Michael L. Epstein Karen Klein
/s/ Larry Anderson /s/ James D. Mizes
___________________________________ ___________________________________
Larry Anderson James D. Mizes
/s/ Robert M. Andrews /s/ Barbara Musante
___________________________________ ___________________________________
Robert M. Andrews Barbara Musante
/s/ Glenn Bacheller /s/ Steven James Neville
___________________________________ ___________________________________
Glenn Bacheller Steven James Neville
/s/ Signature Illegible /s/ Mark New
___________________________________ ___________________________________
Signature Illegible Mark New
/s/ Scott D. Blankenship /s/ Robert B. Purcell
___________________________________ ___________________________________
Scott D. Blankenship Robert B. Purcell
/s/ Orah P. Goldman /s/ William F. Schrader, Jr.
___________________________________ ___________________________________
Orah P. Goldman William F. Schrader, Jr.
/s/ Nancy Hauge /s/ Paul T. Soulier
___________________________________ ___________________________________
Nancy Hauge Paul T. Soulier
/s/ F. Warren Hellman /s/ Douglas E. Troy
___________________________________ ___________________________________
F. Warren Hellman Douglas E. Troy
/s/ Sheila M. Walsh
___________________________________
Sheila M. Walsh
/s/ Darren R. Weinstock
___________________________________
Darren R. Weinstock
<PAGE>
Shareholder Signature Page to Merger Agreement
/s/ Judith A. Smith /s/ Judith A. Smith
___________________________________ ___________________________________
Judith A. Smith as Custodian Judith A. Smith as Custodian
for David R. Alper for Jesse Buckner-Alper
/s/ Judith A. Smith /s/ Judith A. Smith
___________________________________ ___________________________________
Judith A. Smith as Custodian Judith A. Smith, as Trustee under
for Robert M. Alper The David R. Alper 1994 Trust
U/A/D December 22, 1994
/s/ Judith A. Smith /s/ Judith A. Smith
___________________________________ ___________________________________
Judith A. Smith, as Trustee under Judith A. Smith, as Trustee under
The Jessee Buckner-Alper 1994 Trust The Robert H. Alper 1994 Trust
U/A/D December 22, 1994 U/A/D December 22, 1994
/s/ Martin M. Casey /s/ Jeffrey S. Westmont
___________________________________ ___________________________________
Starbucks Corporation Jeffrey S. Westmont
By: Martin M. Casey,
Senior Vice President
<PAGE>
NNYB ACQUISITION CORPORATION
___________________________________ By: /s/ Joel Alam
Noah C. Alper, individually --------------------------------
Title: VICE PRESIDENT
-----------------------------
<PAGE>
SHAREHOLDER SIGNATURE PAGE TO
MERGER AGREEMENT
___________________________________
Print Shareholder Name
___________________________________
Signature Of Shareholder (or
authorized signatory, if
Shareholder is not an individual)
___________________________________
Name and Title of authorized
signatory, if Shareholder is not an
individual
<PAGE>
EXHIBIT A
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Agreement") is made as of ___________, 1996
(the "Agreement") by and between NNYB ACQUISITION CORPORATION, a Delaware
corporation and majority-owned subsidiary of Parent (as defined below) ("Sub"),
and NOAH'S NEW YORK BAGELS, INC.,a California corporation ("Target" or
"Surviving Corporation") (Target and Sub being hereinafter collectively referred
to as the "Constituent Corporations").
RECITAL
A. Einstein Bros. Bagels, Inc., a Delaware corporation ("Parent"),
Target, Sub and certain individuals have entered into a Merger Agreement dated
as of January 22, 1996 (the "Merger Agreement"), providing, among other things,
for the execution and filing of this Agreement and the merger of Sub with and
into Target upon the terms set forth in the Merger Agreement and this Agreement
(the "Merger").
B. The respective Boards of Directors of each of the Constituent
Corporations deem it advisable and in the best interests of each of such
corporations and their respective shareholders that Sub be merged with and into
Target.
AGREEMENT
The Constituent Corporations hereby agree that Sub shall be merged with and
into Target in accordance with the provisions of the laws of the State of
California and the State of Delaware, upon the terms and subject to the
conditions set forth below:
1. THE MERGER.
1.1 FILING. This Agreement, together with the officers' certificates
(the "Officers' Certificates") of each of the Constituent Corporations required
by the General Corporation Law of the State of California (the "California
Law"), shall be filed with the Secretary of State of the State of California and
the Secretary of State of the State of Delaware at the time specified in the
Merger Agreement.
1.2 MERGER. At the effective time of the Merger, Sub shall be merged
into Target and the separate corporate existence of Sub shall thereupon cease.
Target shall be the Surviving Corporation in the Merger and the separate
corporate existence of Target, with all of its purposes, objects, rights,
privileges, powers, immunities and franchises, shall continue unaffected and
unimpaired by the Merger.
1.3 FURTHER ACTION. If at any time after the effective time of the
Merger any further action is necessary or desirable to carry out the purposes of
this Agreement or to vest the
1.
<PAGE>
Surviving Corporation with the full right, title and possession to all assets,
property, rights, privileges, immunities, powers and franchises of either or
both of the Constituent Corporations, the officers and directors of the
Surviving Corporation are fully authorized in the name of either or both of the
Constituent Corporations or otherwise to take all such action.
2. MANNER OF CONVERTING SHARES OF THE CONSTITUENT CORPORATIONS.
2.1 CONVERSION OF TARGET CAPITAL STOCK. At the effective time of the
Merger, each then outstanding share of (1) Common Stock, no par value, (2)
Series A Preferred Stock, no par value, and (3) Series B Preferred Stock, no par
value, of Target (collectively, the "Target Capital Stock") (other than
Dissenting Shares (as defined in Section 2.5)) shall cease to be an existing and
issued share and shall become and be converted into, by virtue of the Merger and
without any action on the part of any person or entity, the right to receive
$_______ in cash.
2.2 SUB COMMON STOCK. At the effective time of the Merger, each then
outstanding share of common stock, $0.01 par value, of Sub shall cease to be an
existing and issued share and shall become and be converted into, by virtue of
the Merger and without any action on the part of any person or entity, one share
of Target Common Stock.
2.3 CLOSING OF TARGET TRANSFER BOOKS. At and after the effective time of
the Merger, holders of certificates representing shares of Target Capital Stock
shall cease to have any rights as shareholders of Target and the stock transfer
books of Target shall be closed with respect to shares of Target Capital Stock
issued and outstanding immediately prior to the effective time of the Merger and
no further transfer of such shares shall thereafter be made on such stock
transfer books. If, after the effective time of the Merger, valid certificates
previously representing such shares are presented to Parent or Target, they
shall be exchanged as provided in Section 2.4.
2.4 EXCHANGE OF CERTIFICATES. Promptly following the Effective Date, Parent
shall transmit to the former Target shareholders appropriate documents to be
used by them to surrender their Target Capital Stock certificates in exchange
for payment in cash in accordance with Section 2.1(a). Until so surrendered and
exchanged, each certificate for Target Capital Stock shall represent solely the
right to receive the cash amount into which the shares of Target Capital Stock
it theretofore represented have been converted pursuant to Section 2.1 (or to
perfect the holder thereof's right to receive payment for such shares pursuant
to Chapter 13 of the California Law and Section 2.5 hereof); provided, however,
that customary and appropriate certifications and indemnities allowing exchange
against lost or destroyed certificates shall be provided.
2.5 DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, shares of Target Capital Stock that are issued and outstanding
immediately prior to the Effective Date and that are held by shareholders who
have not voted such shares in favor of the Merger and who have delivered a
written demand for purchase of such shares in the manner provided in Chapter 13
of the California Law ("Dissenting Shares") shall not be canceled and converted
into cash in accordance with Section 2.1 unless and until such holder shall have
failed to perfect,
2.
<PAGE>
or shall have effectively withdrawn or lost, such holder's right to demand
purchase and payment under the California Law. If such holder shall have so
failed to perfect, or shall have effectively withdrawn or lost such right, such
holder's shares of Target Capital Stock shall thereupon be deemed to have been
canceled and converted as described in Section 2.1 at the effective time of the
Merger, and each such share shall represent solely the right to receive cash
pursuant to Section 2.1. From and after the Effective Date, no shareholder who
has demanded the purchase of shares as provided in Chapter 13 of the California
Law shall be entitled to vote such holder's shares for any purpose or to receive
payment of dividends or other distributions with respect to such holder's shares
(except dividends and other distributions payable to shareholders of record at a
date that is prior to the effective time of the Merger).
3. TERMINATION AND AMENDMENT.
3.1 TERMINATION. Notwithstanding the approval of this Agreement by the
shareholders of Sub and Target, this Agreement shall terminate automatically in
the event that the Merger Agreement is terminated as therein provided.
3.2 AMENDMENT. This Agreement may be amended by the parties hereto
at any time before or after approval hereof by the shareholders of either
Sub or Target, but, after any such approval, no amendment shall be made
that without the further approval of such shareholders would (a) have a
material adverse effect on the shareholders of either Sub or Target, or
(b) change any of the principal terms of the Agreement. This Agreement may
not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
3.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
NOAH'S NEW YORK BAGELS, INC. NNYB ACQUISITION CORPORATION
BY:________________________________ By:________________________________
William B. Hughson Paul Strasen
President and Secretary President
By:________________________________
Joel Alan
Secretary
4.
<PAGE>
NOAH'S NEW YORK BAGELS, INC.
(Surviving Corporation)
OFFICERS' CERTIFICATE
William Hughson herby certifies that:
1. He is the President and Secretary of Noah's New York Bagels, Inc., a
California corporation (the "Corporation").
2. The Agreement of Merger to which this Certificate is attached (the
"Agreement") has been duly approved by the Board of Directors of the
Corporation.
3. The Corporation has two classes of stock outstanding, designated
"Common Stock" and "Preferred Stock," respectively, of which
__________ shares of Common Stock and __________ shares of Preferred
Stock were outstanding and entitled to vote on the merger.
4. The principal terms of the Agreement were approved by the Corporation
by a vote of a number of shares of each class which equaled or
exceeded the vote required. The vote required was greater than 50% of
the outstanding shares of Common Stock and greater than 50% of the
outstanding shares of Preferred Stock.
The undersigned declares under penalty of perjury that the matters set out
in the foregoing Certificate are true of his own knowledge. Executed at San
Francisco, California on __________, 1996.
___________________________________
William Hughson
President and Secretary
<PAGE>
NNYB ACQUISITION CORPORATION
(Disappearing Corporation)
OFFICERS' CERTIFICATE
Paul Strasen and Joel Alam hereby certify that:
1. They are President and Secretary, respectively, of NNYB Acquisition
Corporation, a Delaware corporation (the "Corporation").
2. The Agreement of Merger to which this Certificate is attached (the
"Agreement") has been duly approved by the Board of Directors of the
Corporation.
3. The Corporation has one class of stock outstanding, designated
"Common Stock," of which 100 shares were outstanding and entitled to
vote on the merger.
4. The principal terms of the Agreement were approved by the Corporation
by a vote of a number of shares which equaled or exceeded the vote
required. The vote required was greater than 50% of the outstanding
shares of Common Stock.
Each of the undersigned declares under penalty of perjury that the matters
set out in the foregoing Certificate are true of his own knowledge. Executed at
San Francisco, California on __________, 1996.
___________________________________
Paul Strasen
President
___________________________________
Joel Alam
Secretary
<PAGE>
EXHIBIT B
OPINION OF COOLEY GODWARD CASTRO HUDDLESON & TATUM
_________, 1996
Einstein Bros. Bagels, Inc.
1526 Cole Boulevard, Suite 200
Golden, CO 80401
Ladies and Gentlemen:
We have acted as counsel for Noah's New York Bagels, Inc., a California
corporation (the "Company"), in connection with the Merger Agreement, dated as
of January 22, 1996 (the "Merger Agreement"), by and among the Company, Einstein
Bros. Bagels, Inc., NNYB Acquisition Corporation and certain shareholders and
optionholders of the Company. We are rendering this opinion pursuant to Section
7.2 of the Merger Agreement. Except as otherwise defined herein, capitalized
terms used but not defined herein have the respective meanings given to them in
the Merger Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Merger Agreement by the various parties and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (a) an
inquiry of attorneys within this firm who perform legal services for the
Company, (b) receipt of a certificate executed by an officer of the Company
covering such matters, and (c) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Merger Agreement), where authorization, execution and
delivery are prerequisites to the effectiveness of such documents. We have also
assumed: that all individuals executing and delivering documents had the legal
capacity to so execute and deliver; that you have received all documents you
were to receive under the Merger Agreement; that the Merger Agreement is an
obligation binding upon you; that you have filed any required California
franchise or income tax returns and have paid any required California franchise
or income taxes; and that there are no extrinsic agreements or understandings
among the parties to the Merger Agreement that would modify or interpret the
terms of the Merger Agreement or the respective rights or obligations of the
parties thereunder.
1.
<PAGE>
Einstein Bros. Bagels, Inc.
______________, 1996
Page 2
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California. We express no opinion
as to whether the laws of any particular jurisdiction apply, and no opinion to
the extent that the laws of any jurisdiction other than those identified above
are applicable to the subject matter hereof. We are not rendering any opinion as
to the substantive aspects of antitrust law or as to compliance with any
antifraud law, rule or regulation relating to securities or to the sale or
issuance thereof.
With regard to our opinion in paragraph 4 below, we have examined and relied
upon a certificate executed by an officer of the Company, to the effect that the
consideration for all outstanding shares of capital stock of the Company was
received by the Company in accordance with the provisions of the applicable
Board of Directors resolutions and any plan or agreement relating to the
issuance of such shares, and we have undertaken no independent verification with
respect thereto.
With regard to our opinion in paragraph 5 below with respect to material
defaults under any material agreement known to us, we have relied solely upon
(a) inquiries of officers of the Company, (b) a list of material agreements to
which the Company is a party, or by which it is bound, supplied to us by the
Company, a copy of which attached as Exhibit A hereto, and (c) an examination of
the items on the aforementioned list; we have made no further investigation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of California.
2. The Company has the requisite corporate power to own its property
and assets and to conduct its business as it is currently being conducted.
3. The Merger Agreement has been duly and validly authorized, executed
and delivered by the Company and constitutes a valid and binding agreement of
the Company and the Shareholders enforceable against the Company and the
Shareholders in accordance with its terms, except as enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws affecting creditors' rights, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance, and except as enforcement of Article 10 by the Company
(but not by Einstein Bros.) may be limited by applicable laws, and except that
we express no opinion with respect to Section 9.6 of the Merger Agreement.
4. Immediately prior to the Effective Time, the Company's authorized
capital stock consisted of (a) Thirty-Eight Million (38,000,000) shares of
Common Stock, without par value,
2.
<PAGE>
Einstein Bros. Bagels, Inc.
__________, 1996
Page 3
of which Five Million Three Hundred Sixty-Five Thousand One Hundred Ninety-Seven
(5,365,197) shares are issued and outstanding, and (b) Thirty-Eight Million
(38,000,000) shares of Preferred Stock, without par value, of which (a) Three
Million Three Hundred Seventy-Five Thousand (3,375,000) shares have been
designated Series A Preferred Stock, without par value, of which Three Million
Two Hundred Eighty-Six Thousand Four Hundred Six (3,286,406) shares are issued
and outstanding; and (b) Four Million Nine Hundred Four Thousand Four Hundred
Twenty-Five (4,904,425) shares have been designated Series B Preferred Stock,
without par value, of which Four Million Seven Hundred Forty-Four Thousand Eight
Hundred Thirty-Eight (4,744,838) shares are issued and outstanding. The
outstanding shares of Common Stock and Preferred Stock have been duly authorized
and validly issued and are fully paid and nonassessable. To the best of our
knowledge, immediately prior to the Effective Time, there were no options,
warrants, conversion privileges, preemptive rights or other rights presently
outstanding to purchase any of the authorized but unissued capital stock of the
Company, other than (a) the conversion privileges of the Series A Preferred
Stock and Series B Preferred Stock, (b) rights created in connection with the
transactions contemplated by the Merger Agreement, (c) options to purchase
Common Stock that were issued to employees, directors and consultants of the
Company, as described in the Disclosure Schedule of the Company.
5. The execution and delivery of the Merger Agreement by the Company
and the completion of the Merger do not violate any provision of the Company's
Amended and Restated Articles of Incorporation or Bylaws, and do not constitute
a material default under the provisions of any material agreement known to us to
which the Company is a party or by which it is bound, and do not violate or
contravene (a) any governmental statute, rule or regulation applicable to the
Company or (b) any order, writ, judgment, injunction, decree, determination or
award that has been entered against the Company and of which we are aware, the
violation or contravention of which would materially and adversely affect the
Company, its assets, financial condition or operations.
6. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any court
or administrative agency that questions the validity of the Merger Agreement or
might result, either individually or in the aggregate, in any material adverse
change in the assets, financial condition, or operations of the Company.
7. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or governmental
body in the United States required for the consummation by the Company of the
transactions contemplated by the Merger Agreement, have been made or obtained.
8. The Agreement of Merger has been duly authorized and executed by the
Company and upon the filing of the Agreement of Merger with the Secretary of
State of California and
3.
<PAGE>
Einstein Bros. Bagels, Inc.
_______________, 1996
Page 4
the State of Delaware, assuming Einstein Bros. and Merger Sub have complied with
the requirements of applicable law necessary to effect the Merger, the merger of
Merger Sub into the Company will be effective under California law.
This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
Cooley Godward Castro
Huddleson & Tatum
By:_______________________________
Christopher A. Westover
4.
<PAGE>
EXHIBIT A
MATERIAL AGREEMENTS
Business Loan Agreement between the Company and Comerica Bank.
<PAGE>
EXHIBIT C
OPINION OF BELL, BOYD & LLOYD
__________, 1996
To the "Shareholders" under the
Merger Agreement
dated as of January 22, 1996
Ladies and Gentlemen:
We have acted as counsel for Einstein Bros, Bagels, Inc., a Delaware corporation
("EBB"), in connection with the execution and delivery of the Merger Agreement
dated as of January 22, 1996 (the "Agreement"), among EBB, Noah's New York
Bagels, Inc., a California corporation ("Noah's"), NNYB Acquisition Corporation,
a Delaware corporation ("Merger Sub"), and certain of the shareholders and
optionholders of Noah's (the "Shareholders"). This Opinion Letter is furnished
to the Shareholders at the request of EBB pursuant to Section 8.2 of the
Agreement. Capitalized terms used in this Opinion Letter have the meanings
ascribed to them in the Agreement or in the Accord described in the following
paragraph.
This Opinion Letter is governed by, and shall be interpreted in accordance with,
the Legal Opinion Accord (the "Accord") of the American Bar Association Section
of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. The law covered by the opinions
expressed herein is limited to the Delaware General Corporation Law and the
federal law of the United States.
We have relied upon factual representations made by EBB and Merger Sub in
Article 3 of the Agreement.
Based upon and subject to the foregoing, we are of the opinion that:
1. Each of EBB and Merger Sub is a corporation existing in good
standing under the laws of the State of Delaware. EBB has the requisite
corporate power to own its property and to conduct its business as it is
currently being conducted.
2. Each of EBB and Merger Sub has the legal power and authority to
execute, deliver and perform the Agreement and EBB has the legal power and
authority to execute, deliver and perform the Amended and Restated Registration
Rights Agreement.
<PAGE>
To the "Shareholders" under the
Merger Agreement
__________, 1996
Page 2
3. EBB's authorized capital stock consists solely of 1,000,000 shares of
common stock, $.01 par value, 24,754.92 shares of which are issued and
outstanding, and 200,000 shares of preferred stock, $.01 par value, 6,250 shares
of which are issued and outstanding. All of the issued and outstanding shares of
EBB have been duly and validly authorized and issued and are fully paid and
nonassessable. The shares of common stock issuable to the Purchasing
Shareholders pursuant to the Agreement have been duly authorized and upon
issuance and delivery in accordance with the terms of the Agreement will be
validly issued and outstanding and, assuming receipt by EBB of the agreed
consideration therefor, will be fully paid and nonassessable. To the best of our
knowledge, there are no options, warrants, conversion privileges, presumptive
rights or other rights presently outstanding to purchase any of the authorized
but unissued capital stock of EBB, except as set forth in Schedule 3.3 to the
Agreement and in Section 1.10 of the Agreement .
4. Merger Sub's authorized capital stock consists solely of 100 shares
of common stock, $.01 par value, all of which are issued and outstanding and
owned of record by EBB.
5. The Agreement is enforceable against each of EBB and Merger Sub.
6. The Amended and Restated Registration Rights Agreement is enforceable
against EBB.
7. The execution, delivery and performance of the Agreement and the
Amended and Restated Registration Rights Agreement do not (i) violate the
Constituent Documents of EBB or Merger Sub, or (ii) breach, or result in a
default under, or result in the creation of any lien, charge or encumbrance on
any property or assets of EBB contrary or pursuant to, the terms of any existing
obligation of EBB dealing with the borrowing of money by EBB.
8. No registration with, consent or approval of, notice to, or other
action by, any governmental entity is required for the execution, delivery or
performance by EBB or Merger Sub of the Agreement or the Amended and Restated
Registration Rights Agreement, except that no opinion is expressed with respect
to the requirements of any state securities laws.
9. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against EBB or Merger Sub before any
court or administrative agency that questions the validity of the Agreement or
the Amended and Restated Registation Rights Agreement.
<PAGE>
To the "Shareholders" under the
Merger Agreement
__________, 1996
Page 3
10. The Agreement of Merger has been duly authorized and executed by
Merger Sub and upon the filing of the Agreement of Merger with the Secretary of
the State of Delaware and the Secretary of State of California, assuming Noah's
and the Shareholders have complied with the requirements of applicable law
necessary to effect the Merger, the merger of Merger Sub into Noah's will be
effective under Delaware law.
This Opinion Letter may be relied upon by you in connection with the Agreement
and may not be used or relied upon by or published or communicated to any other
party for any purpose whatsoever, except to the extent authorized in the Accord,
without in each instance our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT D
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement ("Agreement") is
made as of the _____ day of __________, 1996, by and between Einstein Bros.
Bagels Inc., a Delaware corporation (the "Company"), and each owner of
securities of the Company (and each owner of securities of any subsidiary of the
Company) listed on Exhibit A hereto and each owner of securities of the Company
who executes, with the written agreement of the Company, a counterpart of this
Agreement (each referred to herein individually as a "Stockholder" and
collectively referred to herein as "Stockholders").
Witnesseth:
Whereas, the Company has agreed to provide Stockholders with certain
registration rights as set forth herein.
Now, Therefore, in consideration of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to and on the terms
and conditions herein set forth, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 "Business Day" means any day on which The New York Stock Exchange is
open for trading .
1.2 "Common Stock" means the common stock, $.01 par value, of the
Company.
1.3 "Eligible Piggyback Registration" means any of the first four
occasions the Company proposes to register any shares of Common Stock in any
manner which would permit registration of Eligible Securities for public sale
under the Securities Act, other than any offering described in Sections 2.1(a)
through (f). If the Company terminates any Eligible Piggyback Registration prior
to its effectiveness or if the Stockholders are unable to sell at least 90% of
the Eligible Securities they had requested to sell in any Eligible Piggyback
Registration, that registration will not constitute an Eligible Piggyback
Registration.
1.4 "Eligible Securities" means all or any portion of the Common Stock
owned by the Stockholders and all other securities issued with respect thereto
by reason of dividends, stock splits, combinations or similar transactions. As
to any proposed offer of sale of Eligible Securities, such securities shall
cease to be Eligible Securities with respect to such proposed offer or sale when
(i) a registration statement with respect to the sale of such securities shall
1.
<PAGE>
have become effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement, (ii) such
securities are permitted to be sold pursuant to Rule 144 (or any successor
provision to such Rule) under the Securities Act, (iii) such securities shall
have been otherwise transferred pursuant to an applicable exemption under the
Securities Act, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company and such
securities shall be freely transferable to the public without registration under
the Securities Act, or (iv) a written opinion of counsel of the Company
addressed to the Stockholders to the effect that shares may be sold without
registration under the Securities Act has been delivered.
1.5 "Person" means an individual, a partnership (general or limited),
corporation, joint venture, business trust, cooperative, association or other
form of business organization, whether or not regarded as a legal entity under
applicable law, a trust (inter vivos or testamentary), an estate of a deceased,
insane or incompetent person, a quasi-governmental entity, a government or any
agency, authority, political subdivision or other instrumentality thereof, or
any other entity.
1.6 "Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement including, without limitation, the following: (i) the fees,
disbursements and expenses of the Company's counsel(s), accountants and experts
in connection with the registration of Eligible Securities to be disposed of
under the Securities Act; (ii) all expenses in connection with the preparation,
printing and fig of the registration statement, any preliminary prospectus or
final prospectus, any other offering document and amendments and supplements
thereto and the mailing and delivery of copies thereof to the underwriters and
dealers; (iii) the cost of printing or producing any agreement(s) among
underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements and any other documents in connection with the
offering, sale or delivery of Eligible Securities to be disposed of; (iv) SEC or
blue sky registration fees attributable to Eligible Securities; (v) all expenses
in connection with the qualification of Eligible Securities to be disposed of
for offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(vi) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Eligible
Securities to be disposed of; and (vii) fees and expenses incurred in connection
with the listing of Eligible Securities on each securities exchange on which
securities of the same class are then listed; provided, however, that
Registration Expenses with respect to any Eligible Registration pursuant to this
Agreement shall not include underwriting discounts or commissions attributable
to Eligible Securities or transfer taxes applicable to Eligible Securities.
1.7 "Resale Registration" shall have the meaning set forth in Article 3
hereof.
1.8 "SEC" means the Securities and Exchange Commission.
2.
<PAGE>
1.9 "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the relevant time.
1.10 "Selling Stockholder" means any Stockholder requesting the
registration of Eligible Securities registered pursuant to Article 2 or Article
3 hereof.
ARTICLE 2
PIGGYBACK REGISTRATIONS
2.1 NOTICE AND REGISTRATION. If the Company proposes to register any
shares of Common Stock for public sale under the Securities Act in an Eligible
Registration, it will give prompt written notice to Stockholders of its
intention to do so, and upon the written request of each Stockholder delivered
to the Company within ten (10) Business Days after the giving of any such notice
by the Company (which request shall specify the number of Eligible Securities
intended to be disposed of by the Selling Stockholder and the intended method of
disposition thereof) the Company will use all reasonable efforts to effect, in
connection with the registration of its Common Stock in such Eligible
Registration, the registration under the Securities Act of all Eligible
Securities which the Company has been so requested to register by the Selling
Stockholders, to the extent required to permit the public sale (in accordance
with the intended method or methods thereof as aforesaid) of Eligible Securities
so to be registered, provided that:
(a) if, at any time after giving such written notice of its
intention to register any Common Stock and prior to the effective date of the
registration statement filed in connection with such Eligible Registration, the
Company shall determine for any reason not to register the Common Stock, the
Company may, at its election, give written notice of such determination to
Stockholders and thereupon the Company shall be relieved of its obligation to
register such Eligible Securities in connection with the registration of such
Common Stock (but not from its obligation to pay Registration Expenses to the
extent incurred in connection therewith as provided in Section 2.2);
(b) The Company will not be required to effect any registration
pursuant to this Article 2 if the Company shall have been advised in writing by
a nationally recognized independent investment banking firm selected by the
Company to act as lead underwriter in connection with the public offering of the
Common Stock by the Company that, in such firm's opinion, a registration of
shares of Common Stock of the Stockholders pursuant to this Article 2 at that
time may materially and adversely affect the Company's own scheduled offering;
(c) The Company shall not be required to effect any registration
of Eligible Securities under this Article 2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
subscription offers, divided reinvestment plans or stock options or other
employee benefit plans.
(d) The Company shall not be required to effect any registration
of Eligible Securities under this Article 2 incidental to an initial public
offering of shares of Common Stock of the Company;
3.
<PAGE>
(e) The Company shall not be required to effect any registration
of Eligible Securities under this Article 2 incidental to the filing of a
registration statement for an offering to be made on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act or any similar rule that may
be adopted by the SEC.
(f) In no event shall the Company be required to register Eligible
Securities if, in the reasonable judgment of the Company, the amount of Eligible
Securities for which registration has been requested does not justify the effort
and/or expense to the Company of effecting such registration.
2.2 REGISTRATION EXPENSES. The Company (as between the Company and the
Selling Investors) shall be responsible for the payment of all Registration
Expenses in connection with any registration pursuant to this Article 2.
ARTICLE 3
RESALE REGISTRATION
3.1 NOTICE AND REGISTRATION. The Company hereby agree to file under the
Securities Act, within the 13-month period immediately following its initial
public offering of shares of Common Stock ("Resale Registration Period"), a
registration statement on Form S-1 or any similar long-form registration
statement or Form S-3 or any similar short-form registration statement, at its
election, to register all Eligible Securities for which the Company has received
notice of intent to register by Selling Stockholders pursuant to this Article 3,
whether in connection with a primary registration of its Common Stock or
otherwise ("Resale Registration"). The Company shall have the right to select
the timing of the Resale Registration within the Resale Registration Period.
When the Company proposes to file a registration statement for the Resale
Registration, it will give written notice to Stockholders of its intention to do
so. Each Stockholder shall have ten (10) Business Days from the receipt of such
notice to notify the Company in writing of his intention to have the Company
include in the Resale Registration his Eligible Securities (which notice shall
specify the number of Eligible Securities intended to be disposed of by the
Selling Stockholder and the intended method of disposition thereof). The Company
shall thereafter promptly prepare and file with the SEC the registration
statement to effect the Resale Registration and shall use its reasonable best
efforts to cause such registration statement to become effective.
3.2 RESTRICTIONS ON RESALE REGISTRATION. The Company shall not be
obligated to effect the Resale Registration (i) in the event that the aggregate
offering value of the Eligible Securities to be registered in the Resale
Registration does not equal or exceed $3,000,000 or (ii) within three months
after the effective date of a previous Eligible Piggyback Registration in which
Eligible Securities were registered and the Selling Stockholders selling thereon
were able to sell at least 80% of the Eligible Securities they had requested to
sell on such Eligible Piggyback Registration. In the event that the Company does
not effect a Resale Registration because the value of the Eligible Securities to
be registered in the Resale Registration does not equal or exceed $3,000,000,
the Company's obligation to file a registration statement for a Resale
Registration shall be terminated. In addition, the Company may postpone for up
to three
4.
<PAGE>
months the filing or effectiveness of a registration statement for a Resale
Registration if the Company believes that such Resale Registration would
reasonably be expected to have an adverse effect on any proposal or plan by the
Company or any of its subsidiaries to engage in any acquisition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer or similar transaction; provided, however, that immediately following such
postponement, the Company shall file or request effectiveness of the Resale
Registration notwithstanding the expiration of the Resale Registration Period.
3.3 REGISTRATION EXPENSES. The Company (as between the Company and the
Selling Stockholders) shall be responsible for the payment of all Registration
Expenses in connection with any registration pursuant to this Article 3.
3.4 HOLDBACK AGREEMENTS. Each of the Selling Stockholders in a Resale
Registration shall agree, at the request of the Company, not to effect the sale
of up to 30% of the Eligible Securities registered or to be registered by such
Selling Stockholder in the Resale Registration (such number of shares to be
determined by the Company) (collectively, "Holdback Securities") for a period
commencing on the effective date of the registration statement for the Resale
Registration and ending on the later of (i) the date that the Holdback
Securities are permitted to be sold pursuant to Rule 144 and (ii) the six month
anniversary of the effective date of the registration statement for the Resale
Registration.
ARTICLE 4
REGISTRATION PROCEDURES
4.1 REGISTRATION QUALIFICATION.
(a) If and whenever the Company is required to use reasonable
commercial efforts to effect the registration of any Eligible Securities under
the Securities Act as provided in Article 2 hereof, the Company will as promptly
as is practicable register the Eligible Securities under the Securities Act and
use reasonable commercial efforts to cause the registration statement to become
effective;
(b) The Company shall prepare and file with the SEC such
amendments and supplements to any registration statement registering Eligible
Securities and the prospectus used in connection therewith as may be necessary
to keep such registration statement effective, and comply with the provisions of
the Securities Act with respect to the disposition of all Eligible Securities,
until the earlier of such time as all of such Eligible Securities have been
disposed of in accordance with the intended methods of disposition by the
Selling Stockholders as set forth in the registration statement or (i) with
respect to an Eligible Piggyback Registration, the expiration of (30) days after
such registration statement has become effective (or, if such registration
statement relates to an underwritten offering, such longer period as in the
opinion of counsel for the underwriters a prospectus is required by law to be
delivered in connection with sales of Eligible Securities by an underwriter or
dealer), or (ii) with respect to the Resale Registration, the expiration of
three years after the date such registration statement has become effective;
provided, however, that in the event that the Company shall notify the Selling
5.
<PAGE>
Stockholders of the happening of any event which would cause the prospectus
included as part of such registration statement, as then in effect, to include
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, such
Selling Stockholder shall therafter sell no shares under such registration
statement until the Company has filed an amendment or supplement to the
prospectus to cause the prospectus not to include an untrue statement of a
material fact or omit to state any material facts required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and the Company shall be obligated to
promptly amend or supplement the prospectus so that the prospectus does not
include an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(c) The Company will use its reasonable best efforts to register
or qualify such Eligible Securities under the blue sky laws of such
jurisdictions as any Selling Stockholder reasonably requests and to do any and
all other acts which may be reasonably necessary to enable such Selling
Stockholder to consummate the disposition in such jurisdictions of the Eligible
Securities owned by such Selling Stockholder (provided that the Company will not
be required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such juridsiction, or (iii) consent to general
service of process in any such jurisdiction);
(d) The Company may require the Selling Stockholders to furnish
to the Company such information regarding the Selling Stockholders and the
distribution of the Eligible Securities as the Company may from time to time
reasonably request in writing and as shall be required by law or by the SEC in
connection with any registration;
(e) The Company shall provide to each Selling Stockholder an
opportunity to review the registration statement prior to the filing of the
registration statement with the SEC;
(f) The Company shall provide to each Selling Stockholder such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Selling Stockholder may
reasonably request in order to facilitate the disposition of the Eligible
Securities registered pursuant to such registration statement.
(g) The Company will provide a transfer agent and registrar for
all Eligible Securities not later than the effective date of the registration
statement.
4.2 UNDERWRITING. In the event that any registration pursuant to Article
2 or Article 3 hereof shall involve, in whole or in part, an underwritten
offering, the Company may require Eligible Securities requested to be registered
pursuant to Article 2 or Article 3 to be included in such underwriting on the
same terms and conditions as shall be applicable to the Common Stock being sold
through underwriters under such registration. In such case, the holders of
6.
<PAGE>
Eligible Securities on whose behalf Eligible Securities are to be distributed by
such underwriters shall be parties to any such underwriting agreement. Such
agreement shall contain such representations and warranties by the Selling
Stockholders and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnities and contribution to the effect and to the extent
provided in Article 5. The representations and warranties in such underwriting
agreement by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holders of Eligible Securities.
ARTICLE 5
INDEMNIFICATION
5.1 INDEMNIFICATION.
(a) In the event of any registration of any Eligible Securities
hereunder, the Company will enter into customary indemnification arrangements to
indemnify and hold harmless each Stockholder who exercises his registration
rights hereunder and, to the extent applicable, its directors and officers, its
partners, its trustees and each Person who controls any of such Persons, each
Person who participates as an underwriter in the offering or sale of any
Eligible Securities, and each Person, if any, who controls such underwriter
within the meaning of the Securities Act against any losses, claims, damages,
liabilities and expenses, joint or several, to which such Person may be subject
under the Securities Act or otherwise insofar as such losses, claims, damages,
liabilities or expenses (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any final prospectus
included therein, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Company will promptly reimburse
each such Person for any legal or any other expenses reasonably incurred by such
Person in connection with investigating or defending any such loss, claim,
damage, liability, action or proceeding; provided that the Company shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any final prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company or such underwriter by such Selling
Stockholders expressly for use in the registration statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of Selling Stockholders or any such Person and shall survive the
transfer of such securities by the Selling Stockholders.
(b) The Selling Stockholders, by virtue of exercising their
registration rights hereunder, agree and undertake to enter into customary
indemnification arrangements to severally and not jointly indemnify and hold
harmless (in the same manner and to the same extent as set forth in clause (a)
of this Article 5) the Company, each director of the Company,
7.
<PAGE>
each officer of the Company who shall sign such registration statement, and each
Person who participates as an underwriter in the offering or sale of such
securities, each Person, if any, who controls the Company or any such
underwriter within the meaning of the Securities Act, with respect to any
statement in or omission from such registration statement, any final prospectus
included therein, or any amendment or supplement thereto, but only to the extent
that such statement or omission was made in reliance upon and in conformity with
written information furnished by such Selling Stockholders to the Company
expressly for use in the registration statement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Company or any such director, officer or controlling Person and shall
survive the transfer of the registered securities by the Selling Stockholders
and the expiration of this Agreement
(c) Indemnification similar to that specified in the preceding
subdivisions of this Article 5 (with appropriate modifications) shall be given
by the Company and the Selling Stockholders with respect to any required
registration or other qualification of such Eligible Securities under any
federal or state law or regulation of governmental authority other than the
Securities Act.
ARTICLE 6
BENEFITS
6.1 BENEFITS OF REGISTRATION RIGHTS. Subject to the limitations of
Section 2.1 hereof, Stockholders may severally or jointly exercise the
registration rights hereunder in such manner and in such proportion as they
shall agree among themselves.
6.2 QUALIFICATION FOR RULE 144 SALES. Upon the written request of any
Stockholder, the Company will deliver to such Stockholder a written statement as
to whether it has complied with the filing requirements described in Rule
144(c)(1).
ARTICLE 7
MISCELLANEOUS
7.1 CAPTIONS. The captions or headings in this Agreement are for
convenience and reference only, and in no way define, describe, extend or limit
the scope or intent of this Agreement.
7.2 SEVERABILITY. If any clause, provision or section of this Agreement
shall be invalid or unenforceable, the invalidity or unenforceability of such
clause, provision or section shall not affect the enforceability or validity of
any of the remaining clauses, provisions or sections hereof to the extent
permitted by applicable law.
7.3 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Delaware, without reference to
its rules as to conflicts or choice of laws.
8.
<PAGE>
7.4 MODIFICATION AND AMENDMENT. This Agreement may not be changed,
modified, discharged or amended, except by an instrument signed by the holders
of at least 75% of the Eligible Securities.
7.5 NO SUPERIOR REGISTRATION RIGHTS AGREEMENT. The Company has not
entered into, and will not hereafter enter into, any registration rights
agreement with respect to its Common Stock granting registration rights that are
superior to the registration rights granted hereby. The Company may grant
registration rights that are pari pasu with the registration rights granted
hereby.
7.6 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be an original, but all of which together shall constitute one
and the same instrument.
7.7 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding among the parties and supersedes any prior understandings
and/or written or oral agreements among them respecting the subject matter
herein.
7.8 NOTICES. All notices, requests, demands, consents and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and delivered by hand, by overnight courier delivery service
or by certified mail, return receipt requested, postage prepaid. Notices shall
be deemed given when actually received, which shall be deemed to be not later
than the next Business Day if sent by overnight courier or after five (5)
Business Days if sent by mail. Notice to Stockholders shall be made to the
address listed on the stock transfer records of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above written.
EINSTEIN BROS. BAGELS, INC.
By:________________________________
Title:___________________________
STOCKHOLDER SIGNATURE PAGES
ATTACHED
9.
<PAGE>
STOCKHOLDER SIGNATURE PAGE TO
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
___________________________________
Print Stockholder Name
___________________________________
Signature of Stockholder (or
authorized signatory, if
Stockholder is not an individual)
___________________________________
Name and title of authorized
signatory, if Stockholder is not an
individual
<PAGE>
AMENDMENT TO MERGER AGREEMENT
This Amendment (the "Amendment") to Merger Agreement is made and entered
into this 1st day of February, 1996 by and among Noah's New York Bagels, Inc., a
California corporation (the "Company"), the shareholders and optionholders of
the Company who have executed this Agreement, Einstein Bros. Bagels, Inc., a
Delaware corporation ("Einstein Bros."), and NNYB Acquisition Corporation, a
Delaware corporation ("Merger Sub").
RECITALS
--------
Certain of the parties hereto are also parties, together with other
persons, to a Merger Agreement dated as of January 22, 1996 (the "Merger
Agreement"). Pursuant to Section 11.1 of the Merger Agreement, the parties
hereto have the right to amend the Merger Agreement in the manner set forth in
this Amendment. The parties to this Amendment who have not yet executed the
Merger Agreement are becoming parties hereto for the purpose of becoming a party
to the Merger Agreement as amended by this Agreement.
COVENANTS
---------
In consideration of the mutual covenants herein contained, the parties
hereto agree as follows:
1. Sections 1.5 and 1.6 of the Merger Agreement are hereby amended to read
in their entirety as follows:
1.5 TREATMENT OF SHARES OF THE COMPANY. At and as of the Effective Time,
each outstanding share of capital stock of the Company shall be converted into
the right to receive an amount in cash (the "Per Share Merger Consideration")
equal to (a) $100,900,000, less the amounts paid to persons identified in the
first sentence of Section 11.2, plus the aggregate exercise price of all Options
(as defined in Section 1.6) that have not been exercised prior to the Effective
Time, plus the aggregate exercise price received by the Company upon the
exercise of options after the acceleration of vesting provided for in Section
1.6, divided by (b) the total number of shares of capital stock of the Company
outstanding immediately prior to the Effective Time, plus the total number of
shares of capital stock subject to all unexercised Options.
1.6 TREATMENT OF OPTIONEES. Subject to obtaining the consent of the
shareholders of the Company required under Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), prior to the Effective Time the Company
shall accelerate the vesting of the options held by the optionees identified in
the Disclosure Schedule (other than options to purchase 240,000 shares of Common
Stock held by Glenn Bacheller) (the "Options"). At the Effective Time, (a)
Options that have been exercised (and as to which the exercise price has been
received by the Company) shall be ignored and the shares of Common Stock issued
upon such exercise shall be treated as provided in Section 1.5 and (b) the
Company shall pay to any optionee whose
<PAGE>
Options have not been exercised, in cancellation and satisfaction of his or her
Options, an amount equal to (i) the total number of shares subject to such
optionee's Options, multiplied by the Per Share Merger Consideration, less (b)
the aggregate exercise price of such optionee's Options.
2. Section 8.5 of the Merger Agreement is amended to read in its entirety
as follows:
8.5 AGREEMENTS WITH CERTAIN MEMBERS OF THE COMPANY'S MANAGEMENT.
Einstein Bros. shall have executed and delivered to each of Jim Mizes, Bob
Purcell, Nancy Hauge, Bill Schrader, Doug Troy, Barbara Musante and Paul Soulier
agreements in the form set forth in Exhibit E.
3. Section 9.6 of the Merger Agreement is amended to read in its entirety
as follows:
9.6 RESTRICTIVE COVENANTS. Each of the Restricted Shareholders
acknowledges and agrees that Einstein Bros. would be unable to protect the
Confidential Information against unauthorized use or disclosure and Einstein
Bros. would be unable to realize the benefit of this Agreement if such
Restricted Shareholder were permitted, directly or indirectly, to engage in,
hold interests in or perform services for any entity which derives more than 15%
of its revenues from the business of selling, producing, marketing or
distributing bagels, other than Einstein Bros. and its subsidiaries and
franchises (a "Competitive Business"). Each of the Restricted Shareholders
further acknowledges and understands that Einstein Bros. intends, and expects,
to expand its business throughout the United States. Each of the Founder
Restricted Shareholders therefore agrees that for a period of three (3) years
from the Closing Date, and each of the Management Restricted Shareholders
therefore agrees that for a period of two (2) years from the Closing Date, such
Restricted Shareholder shall not, and shall not permit such Restricted
Shareholder's Affiliates, to directly or indirectly, anywhere in the United
States (including without limitation every county in the State of California):
(i) have any interest as a record or beneficial owner in any Competitive
Business; provided, however, the Restricted Shareholders may have an interest in
any Competitive Business as passive investors in such Competitive Business
conducted by a company which has a class of securities which is registered under
Section 12 of the Securities Exchange Act of 1934, as amended, or traded on a
national securities exchange provided that the interest consists solely of such
securities and the interest held by any Restricted Shareholder, or any group of
which any Restricted Shareholder is a member that would be treated as a person
under Section 13(d)(3) of the Securities Exchange Act of 1934, shall in no event
exceed five percent (5%) of the total equity securities of such issuer; (ii)
perform services as a director, officer, manager, employee, consultant,
representative, agent or otherwise for any Competitive Business; or (iii) divert
or attempt to divert any business or any customers of Einstein Bros.' business
to any Competitive Business. For purposes of this Section 9.6, the term "Founder
Restricted Shareholders" means Noah Alper, Dan Alper and Bill Hughson, the term
"Management Restricted Shareholders" means the persons identified in Section
8.5, and the term "Restricted Shareholders" means all of the Founder Restricted
Shareholders and all of the Management Restricted Shareholders.
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4. The final sentence of Section 9.7.3 of the Merger Agreement is amended
to read in its entirety as follows: "Covered Entity" shall mean (i) an entity in
which BCI holds (or has the right to acquire) at least 35% of the equity or (ii)
an entity in which BCI holds (or has the right to acquire) an equity interest
which would result in BCI "controlling" such entity within the meaning of such
term as it is used in Rule 405 of the Securities Act."
5. The second sentence of Section 10.1 of the Merger Agreement is amended
by substituting the following percentages for the percentages set forth in the
Merger Agreement: Starbucks: 28.88%; Rosewood Capital, L.P.: 28.78%; Noah Alper:
15.84%; Dan Alper: 6.35%; Robert Polsky: 11%; and Bill Hughson: 9.15%.
6. The portion of the second sentence of Section 10.1.7 of the Merger
Agreement following the semi-colon is amended to read as follows:
"provided that, in the event the Indemnifying Shareholders shall fail to
initiate a timely defense of a claim, Einstein Bros. shall have the option to
conduct the defense of such claim as it may in its discretion and in good faith
deem proper, and the Indemnifying Shareholders shall have the right to retain
legal counsel and to participate in the defense of such proceeding at their own
expense."
The portion of the last sentence of Section 10.1.7 of the Merger Agreement
following the semi-colon is amended to read as follows:
"provided that, in the event Einstein Bros. shall fail to initiate a timely
defense of a claim, the Indemnifying Shareholders shall have the option to
conduct the defense of such claim as they may in their discretion and in good
faith deem proper, and Einstein Bros. shall have the right to retain legal
counsel and to participate in the defense of such proceeding at its own
expense."
7. Section 11.2 of the Merger Agreement is amended to read in its entirety
as follows:
11.2 PAYMENT OF EXPENSES. The Shareholders shall pay all fees and
expenses incurred by the Company or them in connection with this Agreement and
the transactions contemplated hereby, including without limitation all fees and
expenses payable to Alex. Brown & Sons Incorporated; Cooley Godward Castro
Huddleson & Tatum, counsel for the Company; Preston Gates & Ellis, representing
Starbucks; and certain other professional advisors approved by the Company. The
Shareholders have requested that Einstein Bros. pay on behalf of the
Shareholders, from the consideration to be delivered in the Merger, the sum of
$1,202,000 to Alex. Brown & Sons Incorporated. Other than the payments described
in the preceding sentence, Einstein Bros. or Merger Sub shall have no
responsibility for any fees and expenses incurred by the Company or the
Shareholders in connection with this Agreement and the transactions contemplated
hereby. Einstein Bros. shall pay all of the expenses incurred by it or Merger
Sub in connection with this Agreement, including without limitation their legal
and
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accounting fees and expenses, and the commissions, fees and expenses of any
person employed or retained by them to bring about, or to represent them in, the
transactions contemplated hereby.
8. The Company has requested from Einstein Bros. and Merger Sub and
Einstein Bros. and Merger Sub have requested from the Company and the
Shareholders a waiver of the respective conditions set forth in Sections 7.7 and
8.8 of the Merger Agreement and each of the parties hereto hereby agrees to
waive such conditions.
9. The Company represents and warrants to Einstein Bros. and Merger Sub
that the shareholders of the Company who have executed this Amendment own in the
aggregate at least 75% of the aggregate number of outstanding shares of capital
stock of the Company.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed on the day and year first above written.
NOAH'S NEW YORK BAGELS, INC.
By: /s/ Glenn Bacheller
-----------------------
Title: C.E.O.
--------------------
EINSTEIN BROS. BAGELS, INC.
By: Paul A. Strasen
-----------------------
Title: Vice President
--------------------
NNYB ACQUISITION CORPORATION
By: Paul A. Strasen
-----------------------
Title: President
--------------------
SHAREHOLDERS:
/s/ Noah C. Alper /s/ Douglas P. Troy
- ----------------------- -----------------------
Noah C. Alper Douglas Troy
/s/ Robert D. Polsky /s/ Barbara Musante
- ----------------------- -----------------------
Daniel V. Alper Barbara Musante
/s/ William B. Hughson /s/ Paul Soulier
- ----------------------- -----------------------
William B. Hughson Paul Soulier
/s/ James Mizes /s/ William Schrader
- ----------------------- -----------------------
James Mizes William Schrader
/s/ Nancy Hauge
- -----------------------
Nancy Hauge
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed on the day and year first above written.
ROSEWOOD CAPITAL, L.P.
By: /s/ Authorized Signatory
----------------------------
Title: Principal
-------------------------
STARBUCKS CORPORATION
By: /s/ Mark M. Casey
-----------------------------
Title: Senior Vice President
--------------------------
ALPER LIVING TRUST U/A/E 7/18/94
By: /s/ Noah C. Alper
-----------------------------
Noah C. Alper, Trustee
WILLIAM B. HUGHSON AND MARGARET A. HSIA REVOCABLE TRUST
By: /s/ William B. Hughson
-----------------------------
William B. Hughson, Trustee
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed on the day and year first above written.
/s/ Robert D. Polsky
------------------------
Robert D. Polsky
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<PAGE>
Exhibit 3.2
EINSTEIN BROS. BAGELS, INC.
AMENDED AND RESTATED BYLAWS
(AS OF MAY 7, 1996)
ARTICLE I
CORPORATE OFFICES
Section 1. Delaware Registered Office. The registered office of the
Company in the State of Delaware shall be in the City of Wilmington, County of
New Castle.
Section 2. Other Offices. The Company may also have offices at such
other places, both within and outside the state of Delaware, as the board of
directors may from time to time determine or the business of the Company may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place. All meetings of stockholders shall be
held at such time and place, within or outside the state of Delaware, as may be
fixed from time to time by the board of directors or specified or fixed in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of stockholders,
commencing with the year 1997, shall be held on the first Wednesday in June, if
not a legal holiday, and if a legal holiday, then on the next following business
day, at 10 a.m. mountain time, or at such other date and time as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting, at which the stockholders shall elect directors as provided in
the certificate of incorporation, and transact such other business as may
properly come before the annual meeting (a) in accordance with applicable
statutes, (b) by or at the direction of the board of directors, or (c) by any
stockholder who complies with the procedures set forth in Section 5 of this
Article II.
Section 3. Special Meetings. Special meetings of stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called only by the chairman of the board,
the president and chief executive officer, or the secretary, and shall be called
by one of such officers at the request in writing of a majority of the whole
board of directors. Such request shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 4. Notice. Written notice of a meeting, annual or special,
stating the place, date, and hour of the meeting, and in the case of a special
meeting stating the purpose or purposes for which the meeting is called, shall
be given to each stockholder entitled to vote at such meeting, not less than 10
nor more than 60 days, or if a vote of stockholders on a merger or
<PAGE>
consolidation is one of the stated purposes of the meeting, not less than 20 nor
more than 60 days before the date of the meeting.
Section 5. Stockholder Proposals, Initiatives, and Amendments. At
any annual meeting of stockholders, only such business shall be conducted as
shall have properly been brought before the meeting. If such business relates
to the nomination by a stockholder of any person for election to the board of
directors, the stockholder shall comply with the procedures set forth in Article
III, Section 2 of these bylaws. For any other business properly to be brought
before any meeting of stockholders by a stockholder, the stockholder must have
given timely notice thereof in proper written form to the secretary of the
Company. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Company not less than 60
days nor more than 90 days prior to the date of the meeting; provided, however,
that in the event that less than 70 days notice or prior public disclosure of
the date of the meeting is given or made to stockholders, for such notice by the
stockholder to be timely, it must be so received prior to the date of the
meeting and not later than the close of business on the tenth day following the
day on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever occurs first. To be in proper written form, a
stockholder's notice to the secretary shall set forth in writing as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting; (ii) the name and address,
as they appear on the Company's books, of the stockholder proposing such
business; (iii) the class and number of shares of capital stock of the Company
which are owned by the stockholder as of the record date for the meeting; and
(iv) any material interest of the stockholder in such business. The chairman of
the meeting shall have the sole authority to determine whether business was
properly brought before the meeting in accordance with the provisions of this
Section 5 of Article II and, if the chairman should determine that such business
was not so properly brought, he or she shall so declare to the meeting, and any
such business not properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing provisions of this Section 5, a stockholder who
seeks to have any proposal included in the Company's proxy statement shall
comply with any applicable requirements of Regulation 14A under the Securities
Exchange Act of 1934, as amended.
Section 6. Stockholder List. The officer who has charge of the stock
ledger of the Company shall prepare or cause to be prepared and make, at least
10 days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order and
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least 10 days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof and may be inspected by any
stockholder who is present.
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Section 7. Quorum. The holders of a majority of the stock
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at any meeting of stockholders for the
transaction of business, except as otherwise required by law or by the
certificate of incorporation. Abstentions shall be counted as present in person
or represented by proxy for purposes of determining the existence of a quorum
for purposes of this Section 7 of Article II. If, however, such quorum shall
not be present or represented at a meeting of stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
the power to adjourn the meeting from time to time, without notice other than
announcement at the meeting of the place, date, and hour of the adjourned
meeting, until a quorum shall be present or represented by proxy. At such
adjourned meeting at which a quorum shall be present or represented by proxy,
any business may be transacted which might have been transacted at the meeting
as originally notified. If the adjournment is for more than 30 days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 8. Voting. (a) When a quorum is present at any meeting, a
majority of the votes cast shall decide any question (other than the election of
directors which shall be determined by a plurality vote), unless the question is
one upon which by express provision of the Delaware General Corporation Law or
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
(b) Abstentions shall not be included in calculating the number of
votes cast on, in favor of, or in opposition to any question.
(c) Each share of common stock shall entitle the holder thereof to one
vote, in person or by proxy, at any and all meetings of the stockholders of the
Company, on all propositions before the meeting, unless a proposition is one
that is specifically designated as a proposition that requires a class vote of
the holders of preferred stock. No proxy shall be voted or acted upon after
three years from its date unless the proxy provides for a longer period.
Section 9. Meeting Procedure. The chairman of any meeting of
stockholders shall have full and complete authority over matters of procedure
and there shall be no appeal from the ruling of the chairman. If disorder or
any other event should arise which prevents continuation of the legitimate
business of the meeting, the chairman may announce the adjournment of the
meeting; and upon his or her doing so, the meeting will be immediately
adjourned. The chairman may ask or require anyone who is not a bona fide
stockholder or holder of a valid proxy, or who is disrupting or inhibiting the
orderly conduct of the meeting, to leave the meeting.
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ARTICLE III
BOARD OF DIRECTORS
Section 1. Number, Election and Term. The authorized number of
directors may be determined from time to time by a vote of a majority of the
then authorized number of directors; provided, however, that such number shall
initially be one, and provided further, that such number shall not be less than
one nor more than 11; and provided further, that such number and such minimum
and maximum may be increased pursuant to resolution of the board adopted
pursuant to the certificate of incorporation establishing any series of
preferred stock. The directors, other than those who may be elected by the
holders of any series of the preferred stock pursuant to a resolution of the
board of directors adopted pursuant to the certificate of incorporation
establishing such series, shall be elected at annual meetings of stockholders
and may be elected at any special meeting of stockholders, except as otherwise
provided herein, and each director shall hold office until a successor is
elected and qualified or until that director's earlier resignation or removal.
Except as otherwise provided in the certificate of incorporation, newly created
directorships resulting from any increase in the number of directors and any
vacancies on the board of directors resulting from death, resignation,
disqualification, removal, or other cause shall be filled by the affirmative
vote of a majority of the remaining directors then in office, even if less than
a quorum of the board, or by a sole remaining director. Any director elected in
accordance with the preceding sentence shall hold office until the next annual
meeting of stockholders. No decrease in the number of directors constituting
the board of directors shall shorten the term of any incumbent director.
Subject to the provisions of Article IX of these bylaws, if there are no
directors in office, then an election may be held in the manner provided by
statute.
Section 2. Nominations. Nominations for any election of a director
may be made by the board of directors, a committee appointed by the board of
directors, or by any stockholder entitled to vote generally in the election of
directors who complies with the procedures set forth in this Section 2 of
Article III. All nominations by stockholders must be made pursuant to timely
notice in proper written form to the secretary of the Company. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company not less than 60 days nor more than
90 days prior to the date of the meeting; provided, however that in the event
that less than 70 days notice or prior public disclosure of the date of the
meeting is given to stockholders, for such notice by the stockholder to be
timely, it must be so received prior to the date of the meeting and not later
than the close of business on the tenth day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made,
whichever occurs first. To be in proper written form, such stockholder's notice
shall set forth in writing (a) as to each person whom the stockholder proposes
to nominate for election or reelection as a director, all information relating
to such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended, including,
without limitation, such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected; and (b) as to
the stockholder giving the notice (i) the name and address, as they appear on
the Company's books, of such stockholder
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and (ii) the class and number of shares of the Company which are beneficially
owned by such stockholder. At the request of the board of directors, any person
nominated by the board of directors, or a committee appointed by the board of
directors, for election as a director shall furnish to the secretary of the
Company the information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee. The chairman of the meeting shall, if
the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by this Section 2 of
Article III, and the defective nomination shall thereupon be disregarded.
Section 3. Powers. The business and affairs of the Company shall be
managed by or under the direction of the board of directors, which may exercise
all such powers of the Company and do all such lawful acts and things as are not
by statute, the certificate of incorporation, or these bylaws directed or
required to be exercised or done by the stockholders.
Section 4. Place of Meetings. The board of directors of the Company
may hold meetings, both regular and special, either within or outside the state
of Delaware.
Section 5. Regular Meetings. A regular meeting of the board of
directors or any committee thereof may be held without notice immediately
following and at the same place as the annual meeting of stockholders. In the
event such meeting is not held at the time and place specified in the preceding
sentence, the meeting may be held at such time and place as shall be specified
in a notice given as hereinafter provided for special meetings of the board or
as shall be specified in written waivers signed by all of the directors. Other
regular meetings of the board may be held without notice at such time and at
such place as shall from time to time be determined by the board.
Section 6. Special Meetings. Special meetings of the board of
directors may be called by the chairman of the board, the president, or the
secretary and shall be called by one of such officers on the written request of
a majority of all of the directors, on not less than two days' notice to each
director, either personally or by mail, courier, facsimile transmission, or
telegram.
Section 7. Quorum. At any meeting of the board of directors a
majority of the whole board of directors shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the board of
directors, except as otherwise required by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the board of
directors, a majority of the directors present may adjourn the meeting from time
to time, without further notice, until a quorum shall be present.
Section 8. Action by Written Consent. Unless otherwise restricted by
the certificate of incorporation or these bylaws, any action required or
permitted to be taken at a meeting of the board of directors or of any committee
thereof may be taken without a meeting, if all members of the board or
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the board of directors or
committee.
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Section 9. Participation with Communications Equipment. Unless
otherwise restricted by statute, by the certificate of incorporation or these
bylaws, members of the board of directors, or of any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
of any committee, by conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
participation in a meeting by such means shall constitute presence in person at
the meeting.
Section 10. Committees of Directors. The board of directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
Company. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the board of directors.
The board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he, she, or they constitute a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution designating such committee and not limited by
the Delaware General Corporation Law, shall have and may exercise all of the
powers and authority of the board of directors in the management of the business
and affairs of the Company, and may authorize the seal of the Company to be
affixed to all papers which may require the seal. Each committee shall keep
regular minutes of its meetings and shall furnish them to the board of directors
when required.
Section 11. Compensation of Directors. Unless otherwise restricted
by the certificate of incorporation, the board of directors shall have the
authority to fix the compensation of directors. The receipt of such
compensation shall not preclude any director from serving the Company in any
other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee
meetings. The directors may be reimbursed for any expenses of attending
meetings of the board of directors and of committees of the board.
Section 12. Resignation of Directors. A resignation of a director
shall be effective upon receipt by the president of a signed written notice of
such resignation, or, should such notice contain a specified date of
resignation, at such specified date. No acceptance by the board of directors is
required for such resignation to be effective.
Section 13. Removal of Directors. Subject to the rights of holders
of any series of preferred stock, any director may be removed from office by the
affirmative vote of the holders of at least a majority of the voting power of
all shares of the Company entitled to vote generally in the election of
directors, voting together as a single class.
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ARTICLE IV
NOTICES
Section 1. Method of Giving Notice. Whenever any notice is required
to be given to any director or stockholder pursuant to the provisions of the
Delaware General Corporation Law, the certificate of incorporation, these bylaws
or the resolutions or other governing provisions of a committee of the board of
directors, it shall not be construed to mean personal notice, but such notice
may be given in writing, by mail or reputable courier service, addressed to such
director or stockholder, at his address as it appears on the records of the
Company, with postage thereon or payment therefor prepaid, and such notice shall
be deemed to be given when deposited in the United States mail or with a
reputable courier service. Notice to directors may also be given by telegram
and by telex or facsimile transmission to such number as shall appear on the
records of the Company as the number of such director and shall be deemed to be
given on the day of transmission.
Section 2. Waiver of Notice. Whenever any notice is required to be
given under any provision of the Delaware General Corporation Law, the
certificate of incorporation, these bylaws, or the resolutions or other
governing provisions of a committee of the board of directors, a written waiver
of such notice, signed by the person or persons entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to such
notice. Attendance by a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. Offices. The officers of the Company shall be elected by
the board of directors and shall be a chairman of the board, one or more vice
chairmen of the board (the number thereof to be determined by the board of
directors), a president and chief executive officer, a chief financial officer,
one or more vice presidents (the number and designation thereof to be determined
by the board of directors), a secretary, a principal accounting officer, a
general counsel, and such assistant secretaries and other officers as may be
elected or appointed by the board of directors. Any number of offices may be
held by the same person, unless the certificate of incorporation or these bylaws
otherwise provide.
Section 2. Annual Election. The board of directors at its meeting
held in conjunction with or after each annual meeting of stockholders shall
choose a president, one or more vice presidents, a secretary, a treasurer, a
controller, and a general counsel and may choose one or more vice presidents,
assistant officers, or other officers as it may deem advisable.
Section 3. Appointment of Other Officers. The board of directors may
appoint such other officers and agents as it shall deem necessary, who shall
hold their offices for such
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terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board of directors.
Section 4. Compensation of Officers. The compensation of all
officers and agents of the Company shall be fixed by or under the direction of
the board of directors.
Section 5. Term of Office, Removal, and Vacancy. Each officer shall
hold office until a successor is chosen and qualifies or until the officer's
earlier resignation or removal. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the whole board of directors. Any vacancy occurring in any office of the
Company shall be filled by the board of directors.
Section 6. Chairman of the Board. The chairman of the board shall
preside at all meetings of the stockholders and the board of directors. He or
she may sign certificates for shares of the Company and any deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, whether or not under the seal of the Company, except
in cases where the signing and execution thereof shall be expressly delegated by
the board of directors or by these bylaws to some other officer or agent of the
Company. The chairman of the board shall perform such other duties and have
such other powers as the board of directors may from time to time prescribe.
Section 7. Vice Chairman of the Board. In the absence of the
chairman of the board or in the event of his or her inability or refusal to act,
the vice chairman of the board (or if there be more than one, in order of
seniority) shall preside at all meetings of the stockholders and the board of
directors, and when so presiding, shall have all the powers of and be subject to
all the restrictions upon the chairman of the board. A vice chairman of the
board shall perform such other duties and have such other powers as the board of
directors or the chairman of the board may from time to time prescribe.
Section 8. President and Chief Executive Officer. The president and
chief executive officer shall be responsible for the general and active
management of the business of the Company. He or she may sign certificates for
shares of the Company and any deeds, mortgages, bonds, contracts, or other
instruments which the board of directors has authorized to be executed, whether
or not under the seal of the Company, except in cases where the signing and
execution thereof shall be expressly delegated by the board of directors or by
these bylaws to some other officer or agent of the Company. In the absence of
the chairman of the board and the vice chairmen of the board, or in the event of
their inability or refusal to act, the president and chief executive officer
shall preside at all meetings of the stockholders and board of directors, and
when so presiding, shall have all the powers of and be subject to all the
restrictions on the chairman of the board. In all other matters, in the absence
of the chairman of the board, or in the event of his or her inability or refusal
to act, the president and chief executive officer shall perform the duties of
the chairman of the board, and when so acting, shall have all the powers of and
be subject to all the restrictions on the chairman of the board. The president
and chief executive officer shall perform such other duties and have such other
powers as the board of directors or the chairman of the board may from time to
time prescribe.
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Section 9. Chief Financial Officer. The chief financial officer
shall be the principal financial officer of the Company and shall have general
supervision of the direction of the finances of the Company. In addition, he or
she shall have primary responsibility for the business development, partner
development, communications, legal and performance evaluation functions. The
chief financial officer shall hold the office of vice president, shall report to
the president and shall perform such other duties and have such other powers as
the board of directors, the chairman of the board or the president and chief
executive officer may from time to time prescribe.
Section 10. Vice Presidents. In the absence of the president and
chief executive officer or in the event of his or her inability or refusal to
act, the vice president (or if there be more than one, first, the executive vice
presidents, then the senior vice presidents, then the vice presidents, within
each category in the order designated, or in the absence of any designation,
then in the order of their most recent election) shall perform the duties of the
president and chief executive officer and when so acting shall have all the
powers of and be subject to all the restrictions upon the president and chief
executive officer. He or she shall have general and active management of the
business of the Company, and shall see that all orders and resolutions of the
board of directors are carried into effect. He or she may sign certificates for
shares of the Company and any deeds, mortgages, bonds, contracts, or other
instruments which the board of directors has authorized to be executed, whether
or not under the seal of the Company, except in cases where the signing and
execution thereof shall be expressly delegated by the board of directors or by
these bylaws to some other officer or agent of the Company. A vice president
who is appointed as such with respect to a particular area of responsibility or
function of the Company shall, subject to the authority of the president and
chief executive officer, perform all duties and have all authority pertaining to
the general and active management of such area or function and shall see that
all orders and resolutions of the board of directors pertaining to such area or
function are carried into effect. The vice presidents shall perform such other
duties and have such other powers as the board of directors, the chairman of the
board or the president and chief executive officer may from time to time
prescribe.
Section 11. Secretary. The secretary shall (a) attend all meetings
of the board of directors and all meetings of the stockholders and record all of
the proceedings of the meetings of the board of directors and of the
stockholders in a book to be kept for that purpose and perform like duties for
the standing committees when required, (b) give, or cause to be given, notice of
all special meetings of the board of directors and all meetings of the
stockholders, and (c) perform such other duties as may be prescribed by the
board of directors, the chairman of the board or the president and chief
executive officer. The secretary shall have custody of the corporate seal of
the Company and shall have authority to affix it to any instrument requiring the
seal, and when so affixed, the seal may be attested by the signature of such
officer. The board of directors may give general authority to any other officer
to affix the seal of the Company and to attest the affixing by signature.
Section 12. Principal Accounting Officer. The principal accounting
officer shall supervise the preparation and maintenance, on a current basis, of
such accounting books, records, and reports as may be necessary for directors,
officers, and employees of the Company to
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discharge their duties or as may be required by law. In general, he or she shall
perform all duties incident to the office of controller and other duties as the
board of directors, the chairman of the board or the president and chief
executive officer may from time to time prescribe.
Section 13. General Counsel. The general counsel shall be the chief
legal adviser of the Company as to all matters affecting the Company or its
business. In general, he or she shall perform all the duties incident to the
office of general counsel and such other duties as the board of directors, the
chairman of the board or the president and chief executive officer may from time
to time prescribe.
Section 14. Assistant Secretaries. The assistant secretary (or if in
either case there be more than one, in each case in the order determined by the
board of directors, or if there be no such determination, then in each case in
the order of their election or appointment) shall, in the absence of the
secretary, or the inability or refusal of the secretary to act, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors, the chairman of the
board or the president and chief executive officer may from time to time
prescribe.
ARTICLE VI
STOCK CERTIFICATES
Section 1. Right of Holder to Certificate. Every holder of stock in
the Company shall be entitled to have a certificate signed by, or in the name of
the Company by, the chairman of the board or the president and chief executive
officer or any vice president and the secretary or an assistant secretary or
treasurer or an assistant treasurer of the Company, certifying the number of
shares owned by the holder in the Company. If the Company shall be authorized
to issue more than one class of stock or more than one series of any class, the
powers, designations, preferences and relative, participating, optional, or
other special rights of each class of stock or series thereof and the
qualifications, limitations, or restrictions of such preferences and rights
shall be set forth in full or summarized on the face or back of the certificate
that the Company shall issue to represent such class or series of stock,
provided that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate a statement that the Company
will furnish, without charge to each stockholder who so requests, the powers,
designations, preferences and relative, participating, optional, or other
special rights of each class of stock or series thereof and the qualifications,
limitations, or restrictions of such preferences or rights.
Section 2. Facsimile Signatures. Any or all of the signatures on the
certificate may be a facsimile. In the event any officer who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer before such certificate is issued, the certificate may be
issued by the Company with the same effect as if he or she was such officer at
the date of issue.
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Section 3. Uncertificated Shares. The board of directors of the
Company may provide by resolution that some or all of any or all classes and
series of its shares shall be uncertificated shares, and may provide an election
by individual stockholders to receive certificated or uncertificated shares and
the conditions of such election, provided that such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the Company. Within a reasonable time after the registration of issuance or
transfer of uncertificated shares, the Company shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to the General Corporation Law of
Delaware or these bylaws. Except as otherwise expressly provided by law, the
rights and obligations of the holders of uncertificated shares and rights and
obligations of the holders of certificates representing shares of the same class
and series shall be identical.
Section 4. Lost Certificates. The board of directors or any
appropriate officers of the Company may direct a new certificate or certificates
to be issued in place of any certificate or certificates theretofore issued by
the Company alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issuance of a new certificate
or certificates, the board of directors or any appropriate officers of the
Company may, in its or their discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or the legal representative of the owner, to
advertise the same in such manner as it shall require or to give the Company a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Company in connection with the certificate alleged to have been
lost, stolen, or destroyed, or both.
Section 5. Registration of Transfers. Upon surrender to the Company
or the transfer agent of the Company of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignation, or authority to
transfer, the Company or its transfer agent shall issue a new certificate to the
person entitled thereto, cancel the old certificate, and record the transaction
upon its stock records.
Section 6. Record Dates. In order that the Company may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to receive payment of any dividend or other
distribution or allotment of any rights, or the stockholders entitled to
exercise any rights in respect to any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the board of directors may fix a
record date, which shall not precede the date upon which the resolution fixing
the record date is adopted by the board of directors, and which shall not be
more than 60 nor less than 10 days before the date of such meeting, nor more
than 60 days prior to any other action. If no record date is fixed by the board
of directors, (i) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be the close of business
on the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held, and (ii) the record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the
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meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 7. Registered Stockholders. The Company shall be entitled to
recognize the exclusive right of a person registered in its stock records as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its books as the owner
of shares, and shall not be bound to recognize any equitable or other claim to,
or interest in, such shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise required by law.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Company, subject to the provisions of the certificate of incorporation, if any,
may be declared by the board of directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in shares of
the capital stock of the Company, subject to the provisions of the certificate
of incorporation and requirements of law.
Section 2. Reserves. Before payment of any dividend, there may be
set aside out of any funds of the Company available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Company, or for
such other purpose as the directors shall believe conducive to the interests of
the Company, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 3. Signatures on Checks and Notes. All checks or demands for
money and notes of the Company shall be signed by such officer or officers or
such other person or persons as the board of directors may from time to time
designate, and facsimile signatures of such officer or officers shall be deemed
original signatures for purposes hereof.
Section 4. Fiscal Year. The fiscal year of the Company shall end on
the Sunday nearest, but not after, December 31 of each year.
Section 5. Seal. The corporate seal shall be inscribed with the name
of the Company and the words "Corporate Seal" and "Delaware." The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
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ARTICLE VIII
AMENDMENTS
These bylaws or any of them may be amended or supplemented in any
respect at any time, either (i) at any meeting of stockholders, provided that
any amendment or supplement proposed to be acted upon at any such meeting shall
have been described or referred to in the notice of such meeting; or (ii) at any
meeting of the board of directors, provided that no amendment or supplement
adopted by the board of directors shall vary or conflict with any amendment or
supplement adopted by the stockholders.
ARTICLE IX
EMERGENCY BYLAWS
Section 1. Emergency Directors. The board of directors, by
resolution, may provide for Emergency Directors and appoint or designate the
manner in which Emergency Directors shall be determined. To the extent provided
in said resolution and as provided by Section 110 of the Delaware General
Corporation Law, such Emergency Directors, together with any remaining Directors
able to perform their duties, shall have and may exercise the powers of the
board of directors in the management of the business and affairs of the Company,
and shall thereby be deemed to constitute the board of directors of the Company,
during any interval commencing when the board of directors shall be unable to
function by reason of vacancies occurring due to death, incapacity, or
catastrophe or other similar emergency condition, as a result of which a quorum
of the board of directors or a standing committee thereof cannot readily be
convened for action. Such Emergency Directors, including any remaining
Directors able to perform their duties, shall, during the term they are
authorized to function as provided herein, have the power to appoint such
temporary officers to fill existing vacancies as the circumstances may require,
to remove officers as the circumstances may require, to authorize the seal of
the Company to be affixed to all papers which may require it, and to take any
and all other actions as may be required and permitted in conformity with the
provisions of Section 110 of the Delaware General Corporation Law. The
Emergency Directors shall consist of any available members of the board of
directors and any other persons in such order as named by the board of directors
on any list as it may compile from time to time for purposes of appointing such
Emergency Directors. If the board of directors shall have failed to compile any
list for purposes of appointing Emergency Directors, the Emergency Directors
shall consist of (in the order specified below) any available members of the
board of directors, the President, the Executive Vice Presidents (in order of
seniority), the Senior Vice Presidents (in order of seniority), the Vice
Presidents (in order of seniority), the Secretary, the Treasurer, the Assistant
Secretaries (in order of seniority), and the Assistant Treasurers (in order of
seniority) of the Company. The chairman of the Emergency Directors shall be the
highest ranking available person on any list compiled by the board of directors
for purposes of appointing the Emergency Directors, or, if the board of
directors shall have failed to compile any such list, the highest ranking
available person of the following: the Chairman of the Board, the Vice Chairman
of the Board (or if there be more than one, the most
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senior Vice Chairman), the other most senior member of the board of directors,
the President, the most senior Executive Vice President, the most senior Senior
Vice President, the most senior Vice President, the Secretary, the Treasurer,
the most senior Assistant Secretary, and the most senior Assistant Treasurer.
Section 2. Meetings, Quorum and Vacancies. The Emergency Directors
shall meet as promptly as possible after the occurrence of the event herein
described which would activate their appointment and at such subsequent time or
times as it may designate until a board of directors has been duly elected by
the stockholders and qualified. A meeting of the Emergency Directors may be
called by any Emergency Director, notice of which meeting need be given only to
such Emergency Directors as it is feasible to reach at the time. Such Emergency
Directors shall make their own rules of procedure except to the extent otherwise
provided by resolution of the board of directors. The Emergency Directors in
attendance at the meeting shall constitute a quorum.
Section 3. Powers of Chairman. During such times as the Emergency
Directors shall be required to function pursuant to the provisions hereof, the
chairman of said Emergency Directors shall function as, and have the powers of,
the chief executive officer of the Company and shall preside at all meetings of
the stockholders and the Emergency Directors. The chairman of the Emergency
Directors shall have and exercise, subject to the direction of the Emergency
Directors, general charge and supervision over the business and affairs of the
Company.
Section 4. Other Bylaw Provisions. To the extent not inconsistent
with the provisions of this Article IX or Section 110 of the Delaware General
Corporation Law, all other provisions of these bylaws shall remain in effect
during the interval in which the Emergency Directors shall be required to
function pursuant to the provisions hereof.
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Exhibit 4.4
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT ("Agreement") is
made as of the 1st day of February, 1996, by and between EINSTEIN BROS.
BAGELS, INC., a Delaware corporation (the "Company"), and each owner of
securities of the Company (and each owner of securities of any subsidiary of the
Company) listed on Exhibit A hereto and each owner of securities of the Company
who executes, with the written agreement of the Company, a counterpart of this
Agreement (each referred to herein individually as a "Stockholder" and
collectively referred to herein as "Stockholders").
WITNESSETH:
WHEREAS, the Company has agreed to provide Stockholders with certain
registration rights as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to and on the terms
and conditions herein set forth, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 "Business Day" means any day on which The New York Stock Exchange is
open for trading
1.2 "Common Stock" means the common stock, $.01 par value, of the Company.
1.3 "Eligible Piggyback Registration" means any of the first four
occasions the Company proposes to register any shares of Common Stock in any
manner which would permit registration of Eligible Securities for public sale
under the Securities Act, other than any offering described in Sections 2.1(a)
through (f). If the Company terminates any Eligible Piggyback Registration
prior to its effectiveness or if the Stockholders are unable to sell at least
90% of the Eligible Securities they had requested to sell in any Eligible
Piggyback Registration, that registration will not constitute an Eligible
Piggyback Registration.
<PAGE>
1.4 "Eligible Securities" means all or any portion of the Common Stock
owned by the Stockholders and all other securities issued with respect thereto
by reason of dividends, stock splits, combinations or similar transactions. As
to any proposed offer or sale of Eligible Securities, such securities shall
cease to be Eligible Securities with respect to such proposed offer or sale when
(i) a registration statement with respect to the sale of such securities shall
have become effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement, (ii) such
securities are permitted to be sold pursuant to Rule 144 (or any successor
provision to such Rule) under the Securities Act, (iii) such securities shall
have been otherwise transferred pursuant to an applicable exemption under the
Securities Act, new certificates for such securities not bearing a legend
restricting further transfer shall have been delivered by the Company and such
securities shall be freely transferable to the public without registration under
the Securities Act, or (iv) a written opinion of counsel of the Company
addressed to the Stockholders to the effect that shares may be sold without
registration under the Securities Act has been delivered.
1.5 "Person" means an individual, a partnership (general or limited),
corporation, joint venture, business trust, cooperative, association or other
form of business organization, whether or not regarded as a legal entity under
applicable law, a trust (inter vivos or testamentary), an estate of a deceased,
insane or incompetent person, a quasi-governmental entity, a government or any
agency, authority, political subdivision or other instrumentality thereof, or
any other entity.
1.6 "Registration Expenses" means all expenses incident to the Company's
performance of or compliance with the registration requirements set forth in
this Agreement including, without limitation, the following: (i) the fees,
disbursements and expenses of the Company's counsel(s), accountants and experts
in connection with the registration of Eligible Securities to be disposed of
under the Securities Act; (ii) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus or
final prospectus, any other offering document and amendments and supplements
thereto and the mailing and delivering of copies thereof to the underwriters and
dealers; (iii) the cost of printing or producing any agreement(s) among
underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements and any other documents in connection with the
offering, sale or delivery of Eligible Securities to be disposed of; (iv) SEC or
blue sky registration fees attributable to Eligible Securities; (v) all expenses
in connection with the qualification of Eligible Securities to be disposed of
for offering and sale under state securities laws, including the fees and
disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(vi) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Eligible
Securities to be disposed of; and (vii) fees and expenses incurred in connection
with the listing of Eligible Securities on each securities exchange on which
securities of the same class are then listed; provided, however, that
Registration Expenses with respect to any Eligible Registration pursuant to this
Agreement shall not include underwriting discounts or commissions attributable
to Eligible Securities or transfer taxes applicable to Eligible Securities.
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1.7 "Resale Registration" shall have the meaning set forth in Article 3
hereof.
1.8 "SEC" means the Securities and Exchange Commission.
1.9 "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC thereunder, all as the same shall be in effect
at the relevant time.
1.10 "Selling Stockholder" means any Stockholder requesting the
registration of Eligible Securities registered pursuant to Article 2 or Article
3 hereof.
ARTICLE 2
PIGGYBACK REGISTRATIONS
2.1 Notice and Registration. If the Company proposes to register any
shares of Common Stock for public sale under the Securities Act in an Eligible
Registration, it will give prompt written notice to Stockholders of its
intention to do so, and upon the written request of each Stockholder delivered
to the Company within ten (10) Business Days after the giving of any such notice
by the Company (which request shall specify the number of Eligible Securities
intended to be disposed of by the Selling Stockholder and the intended method of
disposition thereof) the Company will use all reasonable efforts to effect, in
connection with the registration of its Common Stock in such Eligible
Registration, the registration under the Securities Act of all Eligible
Securities in which the Company has been so requested to register by the Selling
Stockholders, to the extent required to permit the public sale (in accordance
with the intended method or methods thereof as aforesaid) of Eligible Securities
so to be registered, provided that:
(a) if, at any time after giving such written notice of its intention to
register any Common Stock and prior to the effective date of the registration
statement filed in connection with such Eligible Registration, the Company shall
determine for any reason not to register the Common Stock, the Company may, at
its election, give written notice of such determination to Stockholders and
thereupon the Company shall be relieved of its obligation to register such
Eligible Securities in connection with the registration of such Common Stock
(but not from its obligation to pay Registration Expenses to the extent incurred
in connection therewith as provided in Section 2.2);
(b) The Company will not be required to effect any registration pursuant
to this Article 2 if the Company shall have been advised in writing by a
nationally recognized independent investment banking firm selected by the
Company to act as lead underwriter in connection with the public offering of the
Common Stock by the Company that, in such firm's opinion, a registration of
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shares of Common Stock of the Stockholders pursuant to this Article 2 at that
time may materially and adversely affect the Company's own scheduled offering;
(c) The Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to the registration of any
of its securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock options or other
employee benefit plans.
(d) The Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to an initial public
offering of shares of Common Stock of the Company;
(e) The Company shall not be required to effect any registration of
Eligible Securities under this Article 2 incidental to the filing of a
registration statement for an offering to be made on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act or any similar rule that may
be adopted by the SEC.
(f) In no event shall the Company be required to register Eligible
Securities if, in the reasonable judgment of the Company, the amount of Eligible
Securities for which registration has been requested does not justify the effort
and/or expense to the Company of effecting such registration.
2.2 Registration Expenses. The Company (as between the Company and the
Selling Investors) shall be responsible for the payment of all Registration
Expenses in connection with any registration pursuant to this Article 2.
ARTICLE 3
RESALE REGISTRATION
3.1 Notice and Registration. The Company hereby agrees to file under the
Securities Act, within the 13-month period immediately following its initial
public offering of shares of Common Stock ("Resale Registration Period"), a
registration statement on Form S-1 or any similar long-form registration
statement or Form S-3 or any similar short-form registration statement, at its
election, to register all Eligible Securities for which the Company has received
notice of intent to register by Selling Stockholders pursuant to this Article 3,
whether in connection with a primary registration of its Common Stock or
otherwise ("Resale Registration"). The Company shall have the right to select
the timing of the Resale Registration within the Resale Registration Period.
When the Company proposes to file a registration statement for the Resale
Registration, it will give written notice to Stockholders of its intention to do
so. Each Stockholder shall have ten (10)
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Business Days from the receipt of such notice to notify the Company in writing
of his intention to have the Company include in the Resale Registration his
Eligible Securities (which notice shall specify the number of Eligible
Securities intended to be disposed of by the Selling Stockholder and the
intended method of disposition thereof). The Company shall thereafter promptly
prepare and file with the SEC the registration statement to effect the Resale
Registration and shall use its reasonable best efforts to cause such
registration statement to become effective.
3.2 Restrictions on Resale Registration. The Company shall not be
obligated to effect the Resale Registration (i) in the event that the aggregate
offering value of the Eligible Securities to be registered in the Resale
Registration does not equal or exceed $3,000,000 or (ii) within three months
after the effective date of a previous Eligible Piggyback Registration in which
Eligible Securities were registered and the Selling Stockholders selling thereon
were able to sell at least 80% of the Eligible Securities they had requested to
sell on such Eligible Piggyback Registration. In the event that the Company does
not effect a Resale Registration because the value of the Eligible Securities to
be registered in the Resale Registration does not equal or exceed $3,000,000,
the Company's obligation to file a registration statement for a Resale
Registration shall be terminated. In addition, the Company may postpone for up
to three months the filing or effectiveness of a registration statement for a
Resale Registration if the Company believes that such Resale Registration would
reasonably be expected to have an adverse effect on any proposal or plan by the
Company or any of its subsidiaries to engage in any acquisition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer or similar transaction; provided, however, that immediately following such
postponement, the Company shall file or request effectiveness of the Resale
Registration notwithstanding the expiration of the Resale Registration Period.
3.3 Registration Expenses. The Company (as between the Company and the
Selling Stockholders) shall be responsible for the payment of all Registration
Expenses in connection with any registration pursuant to this Article 3.
3.4 Holdback Agreements. Each of the Selling Stockholders in a Resale
Registration shall agree, at the request of the Company, not to effect the sale
of up to 30% of the Eligible Securities registered or to be registered by such
Selling Stockholder in the Resale Registration (such number of shares to be
determined by the Company) (collectively, "Holdback Securities") for a period
commencing on the effective date of the registration statement for the Resale
Registration and ending on the later of (i) the date that the Holdback
Securities are permitted to be sold pursuant to Rule 144 and (ii) the six month
anniversary of the effective date of the registration statement for the Resale
Registration.
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ARTICLE 4
REGISTRATION PROCEDURES
4.1 Registration and Qualification.
(a) If and whenever the Company is required to use reasonable commercial
efforts to effect the registration of any Eligible Securities under the
Securities Act as provided in Article 2 hereof, the Company will as promptly as
is practicable register the Eligible Securities under the Securities Act and use
reasonable commercial efforts to cause the registration statement to become
effective;
(b) The Company shall prepare and file with the SEC such amendments and
supplements to any registration statement registering Eligible Securities and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective, and comply with the provisions of the
Securities Act with respect to the disposition of all Eligible Securities, until
the earlier of such time as all of such Eligible Securities have been disposed
of in accordance with the intended methods of disposition by the Selling
Stockholders as set forth in the registration statement or (i) with respect to
an Eligible Piggyback Registration, the expiration of thirty (30) days after
such registration statement has become effective (or, if such registration
statement relates to an underwritten offering, such longer period as in the
opinion of counsel for the underwriters a prospectus is required by law to be
delivered in connection with sales of Eligible Securities by an underwriter or
dealer), or (ii) with respect to the Resale Registration, the expiration of
three years after the date such registration statement has become effective;
provided, however, that in the event that the Company shall notify the Selling
Stockholders of the happening of any event which would cause the prospectus
included as part of such registration statement, as then in effect, to include
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, such
Selling Stockholder shall thereafter sell no shares under such registration
statement until the Company has filed an amendment or supplement to the
prospectus to cause the prospectus not to include an untrue statement of a
material fact or omit to state any material facts required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and the Company shall be obligated to
promptly amend or supplement the prospectus so that the prospectus does not
include an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(c) The Company will use its reasonable best efforts to register or
qualify such Eligible Securities under the blue sky laws of such jurisdictions
as any Selling Stockholder reasonably requests and to do any and all other acts
which may be reasonably necessary to enable such Selling Stockholder to
consummate the disposition in such jurisdictions of the Eligible
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Securities owned by such Selling Stockholder (provided that the Company will not
be required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction, or (iii) consent to general
service of process in any such jurisdiction);
(d) The Company may require the Selling Stockholders to furnish to the
Company such information regarding the Selling Stockholders and the distribution
of the Eligible Securities as the Company may from time to time reasonably
request in writing and as shall be required by law or by the SEC in connection
with any registration;
(e) The Company shall provide to each Selling Stockholder an opportunity
to review the registration statement prior to the filing of the registration
statement with the SEC;
(f) The Company shall provide to each Selling Stockholder such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Selling Stockholder may
reasonably request in order to facilitate the disposition of the Eligible
Securities registered pursuant to such registration statement.
(g) The Company will provide a transfer agent and registrar for all
Eligible Securities not later than the effective date of the registration
statement.
4.2 Underwriting. In the event that any registration pursuant to Article 2
or Article 3 hereof shall involve, in whole or in part, an underwritten
offering, the Company may require Eligible Securities requested to be registered
pursuant to Article 2 or Article 3 to be included in such underwriting on the
same terms and conditions as shall be applicable to the Common Stock being sold
through underwriters under such registration. In such case, the holders of
Eligible Securities on whose behalf Eligible Securities are to be distributed by
such underwriters shall be parties to any such underwriting agreement. Such
agreement shall contain such representations and warranties by the Selling
Stockholders and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnities and contribution to the effect and to the extent
provided in Article 5. The representations and warranties in such underwriting
agreement by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
such holders of Eligible Securities.
7
<PAGE>
ARTICLE 5
INDEMNIFICATION
5.1 Indemnification
(a) Indemnification. In the event of any registration of any Eligible
Securities hereunder, the Company will enter into the customary indemnification
arrangements to indemnify and hold harmless each Stockholder who exercises his
registration rights hereunder and, to the extent applicable, its directors and
officers, its partners, its trustees and each Person who controls any of such
Persons, each Person who participates as an underwriter in the offering or sale
of any Eligible Securities, and each Person, if any, who controls such
underwriter within the meaning of the Securities Act against any losses, claims,
damages, liabilities and expenses, joint or several, to which such Person may be
subject under the Securities Act or otherwise insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act, any final
prospectus included therein, or any amendment or supplement thereto, or any
document incorporated by reference therein, or (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
promptly reimburse each such Person for any legal or any other expenses
reasonably incurred by such Person in connection with investigating or defending
any such loss, claim, damage, liability, action or proceeding; provided that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any final
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company or such underwriter by such Selling
Stockholders expressly for use in the registration statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of Selling Stockholders or any such Person and shall survive the
transfer of such securities by the Selling Stockholders.
(b) The Selling Stockholders, by virtue of exercising their registration
rights hereunder, agree and undertake to enter into customary indemnification
arrangements to severally and not jointly indemnify and hold harmless (in the
same manner and to the same extent as set forth in clause (a) of this Article 5)
the Company, each director of the Company, each officer of the Company who shall
sign such registration statement, and each Person who participates as an
underwriter in the offering or sale of such securities, each Person, if any, who
controls the Company or any such underwriter within the meaning of the
Securities Act, with respect to any statement in or omission from such
registration statement, any final prospectus included therein, or any amendment
or supplement thereto, but only to the extent that such statement or omission
was made in reliance upon and in conformity with written information furnished
by such Selling Stockholders to the Company expressly for use in the
registration statement. Such indemnity shall
8
<PAGE>
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of the registered securities by the Selling
Stockholders and the expiration of this Agreement.
(c) Indemnification similar to that specified in the preceding
subdivisions of this Article 5 (with appropriate modifications) shall be given
by the Company and the Selling Stockholders with respect to any required
registration or other qualification of such Eligible Securities under any
federal or state law or regulation of governmental authority other than the
Securities Act.
ARTICLE 6
BENEFITS
6.1 Benefits of Registration Rights. Subject to the limitations of Section
2.1 hereof, Stockholders may severally or jointly exercise the registration
rights hereunder in such manner and in such proportion as they shall agree among
themselves.
6.2 Qualification for Rule 144 Sales. Upon the written request of any
Stockholder, the Company will deliver to such Stockholder a written statement as
to whether it has complied with the filing requirements described in Rule 144
(c)(1).
ARTICLE 7
MISCELLANEOUS
7.1 Captions. The captions or headings in this Agreement are for
convenience and reference only, and in no way define, describe, extend or limit
the scope or intent of this Agreement.
7.2 Severability. If any clause, provision or section of this Agreement
shall be invalid or unenforceable, the invalidity or unenforceability of such
clause, provision or section shall not affect the enforceability or validity of
any of the remaining clauses, provisions or sections hereof to the extent
permitted by applicable law.
7.3 Governing Law. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Delaware, without reference to
its rules as to conflicts or choice of laws.
9
<PAGE>
7.4 Modification and Amendment. This Agreement may not be changed,
modified, discharged or amended, except by an instrument signed by the holders
of at least 75% of the Eligible Securities.
7.5 No Superior Registration Rights Agreement. The Company has not
entered into, and will not hereafter enter into, any registration rights
agreement with respect to its Common Stock granting registration rights that are
superior to the registration rights granted hereby. The Company may grant
registration rights that are pari passu with the registration rights granted
hereby.
7.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
7.7 Entire Agreement. This Agreement constitutes the entire agreement and
understanding among the parties and supersedes any prior understandings and/or
written or oral agreements among them respecting the subject matter herein.
7.8 Notices. All notices, requests, demands, consents and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and delivered by hand, by overnight courier delivery service
or by certified mail, return receipt requested, postage prepaid. Notices shall
be deemed given when actually received, which shall be deemed to be not later
than the next Business Day if sent by overnight courier or after five (5)
Business Days if sent by mail. Notice to Stockholders shall be made to the
address listed on the stock transfer records of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above written.
EINSTEIN BROS. BAGELS, INC.
By: /s/ Joel Alam
-----------------------------------
Title: Vice President
------------------------------
STOCKHOLDER SIGNATURE PAGES
ATTACHED
10
<PAGE>
STOCKHOLDER SIGNATURE PAGES TO
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
/s/ Authorized Signatory /s/ Mark R. Goldston
- ------------------------------------- -------------------------------------
Bank of America Illinois, Mark R. Goldston
as trustee of the Hayden GST
Trust u/a dated 12/28/95
/s/ Mark W. Stephens
- ------------------------------------- -------------------------------------
Mark W. Stephens DNB, L.P.
/s/ David G. Wurfel /s/ Joel M. Alam
- ------------------------------------- -------------------------------------
David G. Wurfel Joel M. Alam
/s/ Bernadette M. Dennehy
-------------------------------------
Bernadette M. Dennehy
/s/ Authorized Signatory /s/ Albert S. Baldocchi
- ------------------------------------- -------------------------------------
Altgeld Management Corporation Albert S. Baldocchi
/s/ Anne M. Baldocchi
-------------------------------------
Anne M. Baldocchi
/s/ Authorized Signatory /s/ Authorized Signatory
- ------------------------------------- -------------------------------------
B.B. Investments. Ltd. B&B Holdings, Inc.
/s/ Michael J. Beaudoin /s/ Scott A. Beck
- ------------------------------------- -------------------------------------
Michael J. Beaudoin Scott A. Beck
/s/ Robert Bielinski /s/ Charles A. Brickman
- ------------------------------------- -------------------------------------
Robert Bielinski Charles A. Brickman
Trustee Under Trust dated 6/1/88
/s/ Daniel V. Colangelo /s/ Kyle T. Craig
- ------------------------------------- -------------------------------------
Daniel V. Colangelo Kyle T. Craig
/s/ Chris B. Dodge /s/ Craig J. Duchossois
- ------------------------------------- -------------------------------------
Chris B. Dodge Craig J. Duchossois
/s/ F. Warren Ellish /s/ Julius Frankel
- ------------------------------------- -------------------------------------
F. Warren Ellish Julius Frankel
/s/ Authorized Signatory /s/ Stuart Fullinwider
- ------------------------------------- -------------------------------------
Frontenac VI Limited Partnership Stuart Fullinwider
By: Frontenac Company,
its General Partner
/s/ Mark X. Hayden /s/ Theordore P. Heininger
- ------------------------------------- -------------------------------------
Mark X. Hayden Theodore P. Heininger
<PAGE>
STOCKHOLDER SIGNATURE PAGES TO
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
/s/ Barbara K. Huth /s/ Charles A. Lewis
- ------------------------------------- -------------------------------------
Barbara K. Huth Kathryn C. Lewis Trust UA 6/14/93
By: Trustee
/s/ Charles A. Lewis /s/ Jeffrey A. Klein
- ------------------------------------- -------------------------------------
Lisa A. Sebring Trust UA 6/14/93 Jeffrey A. Klein
By: Trustee
/s/ John W. Croghan /s/ Authorized Signatory
- ------------------------------------- -------------------------------------
John W. Croghan Trust dated 12/28/82 LaSalle National Trust, N.A.,
By: John W. Croghan, Trustee as Trustee for Bell, Boyd & Lloyd
Retirement Plan
Account FBO Paul A. Strasen
/s/ Lowell H. Lebermann /s/ Gerard Lewis
- ------------------------------------- -------------------------------------
Lowell H. Lebermann Gerard Lewis
/s/ Peter C. Lewis /s/ Fredrick W. Ley
- ------------------------------------- -------------------------------------
Peter C. Lewis Fredrick W. Ley
/s/ Mark Link /s/ Daniel C. Marino, Jr.
- ------------------------------------- -------------------------------------
Mark Link Daniel C. Marino, Jr.
/s/ Andrew J. Filipowski /s/ Authorized Signatory
- ------------------------------------- -------------------------------------
Andrew J. Filipowski Platinum Venture Partners II, L.P.
By: General Partner
/s/ Authorized Signatory /s/ Frederic C. Hamilton
- ------------------------------------- -------------------------------------
Platinum Venture Partners II, L.P. Frederic C. Hamilton
By: General Partner
Marquette Venture Partners /s/ Lewis Miller
II, L.P. -------------------------------------
Lewis Miller
By: Marquette General II, L.P.
its General Partner
By: JED, Limited Partnership
or LDR, Limited Partnership
its General Partners
/s/ Authorized Signatory
- -------------------------------------
a General Partner of one of the above
/s/ Authorized Signatory /s/ John Morlock
- ------------------------------------- -------------------------------------
Morgan Lewis Githens & Ahn, L.P. John Morlock
<PAGE>
STOCKHOLDER SIGNATURE PAGES TO
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
MVP II Affiliates Fund, L.P. /s/ Alfred G. Naddaff
by: Marquette General II, L.P. -------------------------------------
its General Partner Alfred G. Naddaff
By: JED, Limited Partnership
or LDR, Limited Partnership
its General Partners
/s/ Authorized Signatory
- -------------------------------------
a General Partner of one
of the above
/s/ Saad J. Nadhir /s/ Gary Thomas Naifeh
- ------------------------------------- -------------------------------------
Saad J. Nadhir Gary Thomas Naifeh
/s/ Jeffrey C. Neal /s/ Stephen A. Norman
- ------------------------------------- -------------------------------------
Jeffrey C. Neal Stephen A. Norman
/s/ John Offerdahl /s/ Edward M. Palms
- ------------------------------------- -------------------------------------
OBG Holdings, Inc. Edward M. Palms
/s/ Thomas H. Patrick /s/ John H. Muehlstein
- ------------------------------------- -------------------------------------
Thomas H. Patrick Pedersen Bagel Investment Joint Venture
/s/ Charles A. Lewis /s/ Joren C. Peterson
- ------------------------------------- -------------------------------------
Peter C. Lewis Trust U/A 6/14/93 Joren C. Peterson
By: Trustee
/s/ Paul A. Strasen /s/ Maurice Rowe
- ------------------------------------- -------------------------------------
PJS Bagel Investing, L.L.C. Maurice Rowe
By: Paul A. Strasen
Title: Member
/s/ Robert J. Schmiedeler /s/ Jeffry J. Shearer
- ------------------------------------- -------------------------------------
Robert J. Schmiedeler Jeffry J. Shearer
/s/ Thomas R. Sprague /s/ David G. Stanchak
- ------------------------------------- -------------------------------------
Thomas R. Sprague David G. Stanchak
/s/ Victoria B. Sprague
- -------------------------------------
Victoria B. Sprague
/s/ Mark G. Villalpando /s/ M. David White
- ------------------------------------- -------------------------------------
Mark G. Villalpando M. David White
<PAGE>
STOCKHOLDER SIGNATURE PAGES TO
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
/s/ Karen Rugen /s/ James W. Largay
- ------------------------------------- -------------------------------------
Karen Rugen James W. Largay
/s/ A.G. Rappaport /s/ Kathryn C. Lewis
- ------------------------------------- -------------------------------------
A.G. Rappaport Kathryn C. Lewis
/s/ Diane M. Rappaport
- -------------------------------------
Diane M. Rappaport
/s/ Mark A. Thomas /s/ Authorized Signatory
- ------------------------------------- -------------------------------------
Mark A. Thomas ALTHEO, Inc.
/s/ Nena M. Thomas
- -------------------------------------
Nena M. Thomas
/s/ Jeffrey L. Butler /s/ Shirley Morlock
- ------------------------------------- -------------------------------------
Jeffrey L. Butler Shirley Morlock
/s/ Rodney Rice /s/ Lisa A. Sebring
- ------------------------------------- -------------------------------------
Rodney Rice Lisa A. Sebring
/s/ Anthony J. Vinci /s/ Donald J. Bingle
- ------------------------------------- -------------------------------------
Anthony J. Vinci BOSTON CHICKEN, INC.
By Its: Vice President
/s/ Paula Vinci
- -------------------------------------
Paula Vinci
Triune Venture Partners, L.P. /s/ Michelle Boucher
By: Triune Venture Holdings, L.P. -------------------------------------
By: Triune, Inc. C&B Holdings, Ltd.
/s/ Kevin Shepherd By: Michelle Boucher, Secretary
- -------------------------------------
Kevin Shepherd, President
/s/ Steven R. Berrard /s/ Authorized Signatory
- ------------------------------------- -------------------------------------
Steven R. Berrard Maverick Fund USA, Ltd.
By: Maverick Capital, Ltd.
/s/ Robert D. Polsky /s/ Hope M. Alper/Noah C. Alper
- ------------------------------------- -------------------------------------
Dan and Lynne Alper, as Community The Alper Living Trust U/A/D
Property By: Hope M. Alper, Noah C. Alper
By: Robert D. Polsky, as attorney in
fact
<PAGE>
STOCKHOLDER SIGNATURE PAGES TO
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
/s/ Frederic M. Alper /s/ Michael L. Epstein
- ------------------------------------- -------------------------------------
Frederic M. Alper Michael L. Epstein
/s/ Glenn Bacheller /s/ Dan Berch
- ------------------------------------- -------------------------------------
Glenn Bacheller Dan Berch
/s/ Craig J. Foley /s/ Nancy Hauge
- ------------------------------------- -------------------------------------
Craig J. Foley Nancy Hauge
/s/ Matt Holmes /s/ William B. Hughson
- ------------------------------------- -------------------------------------
Matt Holmes The William B. Hughson &
Margaret A. Hsia
Revocable Trust
By: William B. Hughson, as trustee
/s/ Karen Klein /s/ James D. Mizes
- ------------------------------------- -------------------------------------
Karen Klein James D. Mizes
/s/ Barbara Musante /s/ George G.C. Parker
- ------------------------------------- -------------------------------------
Barbara Musante George G.C. Parker
/s/ John J. Fisher /s/ Byron K. Adams
- ------------------------------------- -------------------------------------
The Pisces Fund Rosewood Capital, L.P.
By: The 1989 Robert J. Fisher By: Byron K. Adams, Principal
Insurance Trust, General Partner
By: John J. Fisher, Trustee
/s/ William F. Schrader, Jr. /s/ Judith Smith
- ------------------------------------- -------------------------------------
William F. Schrader, Jr. Judith Smith
/s/ Martin M. Casey, Sr. /s/ Douglas E. Troy
- ------------------------------------- -------------------------------------
Starbucks Corporation Douglas E. Troy
By: Martin M. Casey, Sr.,
as Vice President
11
<PAGE>
Exhibit 4.5
____________ SHARES OF COMMON STOCK
OF
EINSTEIN/NOAH BAGEL CORP.
CONCURRENT PRIVATE PLACEMENT
AGREEMENT
DATED ______________, 1996
<PAGE>
CONCURRENT PRIVATE PLACEMENT AGREEMENT
THIS AGREEMENT is made as of ____________________, 1996, between Einstein/
Noah Bagel Corp., a Delaware corporation (the "Company"), and Boston Chicken,
Inc., a Delaware corporation (the "Purchaser"). Except as otherwise indicated
herein, capitalized terms used herein are defined in Section 6 hereof.
R E C I T A L S :
-----------------
WHEREAS, the Company is concurrently offering (i) shares of its common
stock, $.01 par value per share ("Common Stock") in an underwritten initial
public offering ("Initial Public Offering") and (ii) shares of Common Stock in a
non-underwritten public offering ("Concurrent Public Offering") (the Initial
Public Offering and Concurrent Public Offering sometimes hereinafter referred to
together as the "Public Offerings"); and
WHEREAS, the Company desires to sell to the Purchaser and the Purchaser
desires to purchase, concurrently with, and subject to, the closings of the
Public Offerings, an aggregate of 2,000,000 shares of Common Stock (the
"Shares"), for a purchase price per Share equal to $____________, the price to
public per share in the Initial Public Offering, net of underwriting discount
(the "Price Per Share"), and grant the Purchaser an option to purchase
additional shares of Common Stock in certain circumstances, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto agree as follows:
1. Purchase and Sale of Shares. Subject to the terms and conditions set
forth herein, the Company hereby agrees to issue and sell to the Purchaser, and
the Purchaser hereby agrees to purchase from the Company at the Closing (as
hereinafter defined), the Shares for an aggregate purchase price equal to the
Price Per Share multiplied by the number of Shares.
2. The Closing of the Purchase and Sale of Shares.
A. Authorization. On or before the Closing, the Company will have
authorized the issuance and sale to the Purchaser of the Shares.
B. Time and Place of Closing. The closing of the purchase and sale
of the Shares (the "Closing") will take place at the offices of Bell, Boyd &
Lloyd, 70 W. Madison Street, Chicago, Illinois, subject to the concurrent
closing of the sale of shares of Common Stock in the Public Offerings (the
"Closing Date"). At the Closing, the Company will deliver to the Purchaser a
stock certificate or stock certificates (in such denominations requested by
Purchaser at least three business days prior to the Closing) evidencing the
Shares to be purchased by the Purchaser, registered in the Purchaser's or its
nominee's name, upon payment of the purchase price thereof by wire transfer of
immediately available funds to the Company's account at Bank of America
Illinois, Chicago, Illinois.
2
<PAGE>
3. Conditions of the Purchaser's Obligation at the Closing. The
obligation of the Purchaser to purchase and pay for the Shares at the Closing is
subject to the satisfaction as of the Closing of the following conditions:
A. Closing of Initial Public Offering and Concurrent Public Offering.
The Initial Public Offering and the Concurrent Public Offering shall close
concurrently herewith, and such closings shall have occurred on or before the
end of the fifteenth business day after the date hereof.
B. Representations and Warranties; Officer's Certificate. The
representations and warranties contained in Section 5 hereof shall be accurate
at and as of the Closing as though then made. At the Closing Date there shall
not have been, since the date hereof or since the respective dates as of which
information is given in the Prospectus (as defined in Section 6 hereof), any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, and the Purchaser shall have received a certificate
of the President or a Vice President of the Company and of the chief financial
or chief accounting officer of the Company, dated as of the Closing Date to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section 5 hereof are true and correct with the
same force and effect as though expressly made at and as of Closing Date, (iii)
the Company has complied with all agreements and satisfied all conditions on its
part to be performed or satisfied hereunder at or prior to Closing Date, and
(iv) no stop order suspending the effectiveness of the Registration Statement
(as defined in Section 6 hereof) has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.
C. Registration Agreement. The Company and the Purchaser shall have
entered into a Registration Agreement in form and substance substantially
similar to Exhibit A attached hereto (the "Registration Agreement") and the
Registration Agreement shall be in full force and effect as of the Closing.
D. Blue Sky Clearances. The Company shall have timely made all
filings under applicable state securities laws, and will have taken all other
action necessary to consummate the issuance of the Shares pursuant to this
Agreement as a private placement to an accredited investor or pursuant to other
available securities registration exemptions in compliance with such laws.
E. Closing Documents. The Company shall have delivered to the
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in Sections 3A, 3B and 3C, inclusive,
have been fully satisfied;
(ii) certified copies of the resolutions duly adopted by the
Company's board of directors and, if required, by the Company's
stockholders authorizing the
3
<PAGE>
execution, delivery, and performance of this Agreement, the Registration
Agreement, and each of the other agreements contemplated hereby, and the
issuance and sale of the Shares;
(iii) certified copies of the Company's restated certificate of
incorporation and amended and restated bylaws, each as in effect at the
Closing;
(iv) copies of all third party and governmental consents,
approvals, and filings obtained in connection with the transactions
hereunder (including, without limitation, all blue sky law filings and
waivers of all preemptive rights and rights of first refusal), if any; and
(v) copies of the Prospectus and Registration Statement filed by
the Company with the Securities and Exchange Commission in connection with
the Public Offering.
F. Proceedings. All corporate and other proceedings taken or
required to be taken in connection with the transactions contemplated hereby to
be consummated at or prior to the Closing shall have been taken and all
documents incident thereto shall be satisfactory in form and substance to
counsel to the Purchaser.
G. Opinion of Company's Counsel. The Purchaser shall have received
from Bell, Boyd & Lloyd, counsel for the Company, an executed copy of its
opinion to the Purchaser, dated the date of the Closing, in form and substance
reasonably satisfactory to the Purchaser.
H. Receipt of Consents. The Purchaser shall have received the
written consent of any persons or entities whose consent is contractually
required to consummate the transactions contemplated hereby or by the
Registration Agreement.
I. Termination of Agreement.
(i) If any condition specified in this Section 3 shall not have
been fulfilled when and as required to be fulfilled, this Agreement may be
terminated by the Purchaser by notice to the Company at any time at or
prior to the Closing.
(ii) Notwithstanding anything herein to the contrary, the
Purchaser may terminate this Agreement, by written notice to the Company,
at any time at or prior to Closing Date (a) if there has been, since the
time of execution of this Agreement or since the respective dates as of
which information is given in the Prospectus, any material adverse change
in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course
of business, or (b) the underwriters in the Initial Public Offering or the
representatives of such underwriters have terminated the
4
<PAGE>
Purchase Agreement relating to the Initial Public Offering pursuant to
Section 9 of such Agreement or otherwise.
(iii) If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other
party; provided that Section 10 shall survive such termination and remain
in full force and effect.
4. Current Public Information. The Company shall at all times file all
reports required to be filed by it under the Securities Act and the Securities
Exchange Act and the rules and regulations adopted by the Securities and
Exchange Commission thereunder and shall take such further action to provide
current public information to the extent required to enable the Purchaser to
sell Restricted Securities pursuant to Rule 144 adopted by the Securities and
Exchange Commission under the Securities Act (as such rule may be amended from
time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission.
5. Representations and Warranties by the Company. The Company represents
and warrants to the Purchaser as of the date hereof, and agrees with the
Purchaser, as follows:
(i) Compliance with Registration Requirements. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule
462(b) Registration Statement and any post-effective amendments thereto
became effective and at the date hereof, the Registration Statement, the
Rule 462(b) Registration Statement and any amendments and supplements
thereto complied and will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and did not and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. Neither the Prospectus nor any
amendments or supplements thereto, at the time the Prospectus or any such
amendment or supplement was issued and at the Closing Date, included or
will include an untrue statement of a material fact or omitted or will omit
to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading. The representations and warranties in this subsection shall not
apply to statements in or omissions from the Registration Statement or
Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by the Purchaser expressly for use in
the Registration Statement or Prospectus.
Each preliminary prospectus and the prospectus filed as part of
the Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to
5
<PAGE>
Rule 424 under the 1933 Act, complied when so filed in all material
respects with the 1933 Act Regulations and, if applicable, each preliminary
prospectus and the Prospectus was identical to the electronically
transmitted copies thereof filed with the Commission pursuant to EDGAR,
except to the extent permitted by Regulation S-T.
(ii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iii) Financial Statements. The financial statements included in the
Registration Statement (as defined in Section 6 hereof) and the Prospectus
(as defined in Section 6 hereof), together with the related schedules and
notes, present fairly, where applicable, the financial position of the
respective entity to which such financial statements relate (including,
where applicable, the consolidated subsidiaries of such entity) at the
dates indicated and, where applicable, the statement of operations,
stockholders' equity and cash flows of such entity (including, where
applicable, the consolidated subsidiaries of such entity) for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement present fairly in accordance with
GAAP the information required to be stated therein. The pro forma financial
statements and the related notes thereto included in the Registration
Statement and the Prospectus present fairly the information shown therein,
have been prepared in accordance with the Commission's rules and guidelines
with respect to pro forma financial statements and have been properly
compiled on the bases described therein.
(iv) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectus, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business (a "Material Adverse Effect"), (B) there have
been no transactions entered into by the Company or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to the Company and its subsidiaries considered as
one enterprise, and (C) there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock, except for cash dividends paid on the Company's Series A Preferred
Stock.
(v) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in
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which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not result in a Material Adverse
Effect.
(vi) Good Standing of Subsidiaries. Each subsidiary of the Company
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect; all of the issued and
outstanding capital stock of each such subsidiary has been duly authorized
and validly issued, is fully paid and non-assessable and is owned by the
Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity, other than
the pledge of such stock pursuant to the Company's secured revolving bank
credit agreement dated May 17, 1996 with Bank of America Illinois, as agent
for the lenders named therein (the "Credit Agreement"). The only
subsidiaries of the Company are the subsidiaries listed on Exhibit 21.1 to
the Registration Statement.
(vii) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectus or
pursuant to the exercise of convertible securities or options referred to
in the Prospectus and except for the Repurchase Shares (as defined in the
Prospectus)). The shares of issued and outstanding capital stock have been
duly authorized and validly issued and are fully paid and non-assessable;
none of the outstanding shares of capital stock of the Company was issued
in violation of the preemptive or other similar rights of any security
holder of the Company.
(viii) Authorization of Agreement. This Agreement has been duly
executed and delivered by the Company.
(ix) Authorization and Description of Securities. The Shares have
been duly authorized for issuance and sale to the Company pursuant to this
Agreement and, when issued and delivered by the Company pursuant to this
Agreement against payment of the consideration set forth herein, will be
validly issued and fully paid and non-assessable; the Common Stock conforms
to all statements relating thereto contained in the Prospectus; and the
issuance of the Shares is not subject to preemptive or other similar rights
of any security holder of the Company.
(x) Absence of Defaults and Conflicts. Neither the Company nor any
of its subsidiaries is in violation of its charter or by-laws or in default
in the performance or
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observance of any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which it or any of them may be bound, or
to which any of the property or assets of the Company or any subsidiary is
subject (collectively, "Agreements and Instruments") except for such
defaults that would not result in a Material Adverse Effect; and the
execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated herein and compliance by the Company with
its obligations hereunder have been duly authorized by all necessary
corporate action and do not and will not, whether with or without the
giving of notice or passage of time or both, conflict with or constitute a
breach of, or default or Repayment Event (as defined below) under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any subsidiary pursuant to,
the Agreements and Instruments (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not result in a
Material Adverse Effect), nor will such action result in any violation of
the provisions of the charter or by-laws of the Company or any subsidiary
or any applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any subsidiary or any of
their assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note, debenture
or other evidence of indebtedness (or any person acting on such holder's
behalf) the right to require the repurchase, redemption or repayment of all
or a portion of such indebtedness by the Company or any subsidiary.
(xi) Absence of Labor Dispute. Except as disclosed in the
Prospectus, no labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, has been threatened.
(xii) Absence of Proceedings. Except as disclosed in the Prospectus,
there is no action, suit, proceeding, inquiry or investigation before or
brought by any court or governmental agency or body, domestic or foreign,
now pending, or, to the knowledge of the Company, threatened, against or
affecting the Company or any subsidiary, which is required to be disclosed
in the Registration Statement, or which the Company reasonably believes is
likely to result in a Material Adverse Effect, or which the Company
reasonably believes is likely to materially and adversely affect the
properties or assets thereof or the consummation of the transactions
contemplated in this Agreement or the performance by the Company of its
obligations hereunder; the aggregate of all pending legal or governmental
proceedings to which the Company or any subsidiary is a party or of which
any of their respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to the business, are, considered in the aggregate,
not likely to result in a Material Adverse Effect.
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(xiii) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits thereto which have not been so
described and filed as required.
(xiv) Possession of Intellectual Property. The Company and its
subsidiaries own or possess, or reasonably believe that they can acquire on
reasonable terms, the patents, patent rights, licenses, invention,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other intellectual
property (collectively, "Intellectual Property") currently employed by them
in connection with the business now operated by them, and, except as
disclosed in the Prospectus, neither the Company nor any of its
subsidiaries has received any notice or, to the best of their respective
knowledge, is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances which would render any Intellectual Property
invalid or inadequate to carry on the business of the Company or any of its
subsidiaries, and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or inadequacy,
singly or in the aggregate, would result in a Material Adverse Effect.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Shares hereunder or the consummation of the transactions contemplated
by this Agreement, except such as have been already obtained or as may be
required under state securities laws.
(xvi) Possession of Licenses and Permits. The Company and its
subsidiaries possess such certificates, permits, licenses, approvals,
consents and other authorizations (collectively, "Governmental Licenses")
issued by the appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business now operated by them,
except where the failure to so possess such Government Licenses would not,
singly or in the aggregate, have a Material Adverse Effect; the Company and
its subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure so to comply would
not, singly or in the aggregate, have a Material Adverse Effect; all of the
Governmental Licenses are valid and in full force and effect, except when
the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such Governmental Licenses which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
(xvii) Compliance with Cuba Act. The Company has complied with, and
is and will be in compliance with, the provisions of that certain Florida
act relating to disclosure
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of doing business with Cuba, codified as Section
517,075 of the Florida statutes, and the rules and regulations thereunder
or is exempt therefrom.
(xviii) Registration Rights. There are no persons with registration
or other similar rights to have any securities registered pursuant to the
Registration Statement or otherwise registered by the Company under the
1933 Act, except as described in the Registration Statement.
(xix) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act").
6. Definitions. For the purpose of this Agreement, the following terms
have the meanings set forth below:
"Affiliate" of any particular person or entity means any other person
or entity controlling, controlled by or under common control with such
particular person or entity.
"Fair Market Value" as of a particular date (the "valuation date"),
shall mean an amount equal to (i) the average of the closing sale price of the
shares of Common Stock on the Nasdaq National Market or, if the Common Stock is
not then listed on the Nasdaq National Market, on the principal securities
exchange, if any, on which the Common Stock is then listed for trading, on the
five consecutive trading days ending with (and inclusive of) the fifth trading
day prior to the valuation date, as reported in the Wall Street Journal (Western
Edition), or, (ii) if no sales take place on any one or more of such days on the
Nasdaq National Market or (as the case may be) such principal securities
exchange, the average of the closing bid and asked prices on such day or days as
officially reported or listed on the Nasdaq National Market or such other
principal securities exchange, or, (iii) if the Common Stock is not then listed
or admitted to trading on the Nasdaq National Market or other principal
securities exchange, the last sale price on such days if reported by a reputable
entity or system engaged in the regular reporting of securities prices. If
there is no such entity or system or the Common Stock is not publicly traded,
"Fair Market Value" shall be determined as of the valuation date by a nationally
recognized investment banking or accounting firm mutually acceptable to the
Company and the Purchaser.
"Officer's Certificate" means a certificate signed by the Company's
chairman, vice chairman, president, chief executive officer, chief financial
officer, or chief operating officer, stating that (i) the officer signing such
certificate has made or has caused to be made such investigations as are
necessary in order to permit him to verify the accuracy of the information set
forth in such certificate and (ii) to the best of such officer's knowledge, such
certificate, taken as a whole with the other documents delivered in connection
with this Agreement, does not misstate any material fact and does not omit to
state any material fact necessary to make the certificate not misleading.
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"Prospectus" means the final prospectus in the form first furnished to
the underwriters for use in connection with the Public Offerings.
"Registration Statement" means the registration statement on Form S-1
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "1933 Act") relating to the Public Offering, including the
exhibits thereto and schedules, if any, at the time it became effective and
including any information deemed part of such registration statement at the time
it became effective pursuant to paragraph (b) of Rule 430A under the 1933 Act,
including any Rule 462(b) Registration Statement.
"Rule 462(b) Registration Statement" means any registration statement
filed pursuant to Rule 462(b) under the 1933 Act.
"Subsidiary" means, with respect to any person, any corporation,
partnership, association, or other business entity of which (i) if a
corporation, a majority of the total Voting Stock is at the time owned or
controlled, directly or indirectly, by that person or one or more of the other
Subsidiaries of that person or a combination thereof, or (ii) if a partnership,
limited liability company, association or other business entity, a majority of
the partnership, limited liability company, or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by any
person or one or more subsidiaries of that person or a combination thereof. For
purposes hereof, a person or persons shall be deemed to have a majority
ownership interest in a partnership, limited liability company, association, or
other business entity if such person or persons shall be allocated a majority of
partnership, association, or other business entity gains or losses or shall be
or control the managing director, general partner or manager of such
partnership, limited liability company, association, or other business entity.
"Voting Stock" means the Common Stock and any other securities of the
Company having the power generally (and not merely upon the occurrence of a
contingency) pursuant to the Company's charter and bylaws, to vote in the
election of the Company's directors; provided, however, that the percentage of
Voting Stock held by the Purchaser for purposes relating to the Option shall not
include (i) any shares of Common Stock subject to options granted by the
Purchaser prior to the date hereof, (ii) any shares of Common Stock held by
officers, directors or employees of the Purchaser, and (iii) any shares of
Common Stock held by any person or entity that would not be counted under
generally accepted accounting principles for determining whether the Purchaser
holds a majority of the Voting Stock for consolidated financial statement
reporting purposes.
7. Consolidation Option.
A. Grant of Option; Termination.
(a) On the terms and subject to the conditions set forth herein,
the Company hereby grants to the Purchaser the cumulative, continuing option
(the "Option") to purchase (directly or through a nominee, subsidiary or
Affiliate of the Purchasaer, whose ownership, sales or transfers of Voting Stock
the Purchaser has agreed will be attributed to the
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<PAGE>
Purchaser) such number of shares of Common Stock as may be necessary, when added
to all other shares of Voting Stock owned by the Purchaser, to enable the
Purchaser to have ownership of shares of Common Stock equal to the Applicable
Percentage (as hereinafter defined) of the Company's then outstanding shares of
Voting Stock. For this purpose, the "Applicable Percentage" shall be equal to
52%, provided that if Purchaser voluntarily sells or transfers, and thereby
reduces its percentage ownership of the Company's then outstanding shares of
Voting Stock to less than 52%, then the "Applicable Percentage" shall be equal
to such lesser percentage. The Option shall be exercisable, at the price and on
the terms provided below, in whole or in part from time to time, from and after
any time when the Purchaser owns less than the Applicable Percentage of the
Company's then outstanding Voting Stock.
(b) The Option shall terminate:
i. if the Purchaser sells or transfers shares of Common
Stock and as a result owns less than a majority of the then outstanding shares
of Voting Stock (based on the most recent information given in writing by the
Company to Purchaser regarding the number of such shares outstanding prior to
such sale); or
ii. if the percentage of the outstanding shares of Voting
Stock owned by the Purchaser is reduced below 50% other than as a result of the
Purchaser's voluntary sale or transfer of shares of Common Stock and the
Purchaser fails to acquire a sufficient number of shares of Common Stock so that
the Purchaser owns at least a majority of the then outstanding shares of Voting
Stock by July 31 of the calendar year next following the calendar year in which
such reduction occurs; provided, however, that if the process of determining the
Fair Market Value of the shares of Common Stock to be purchased hereunder is
pending as of such July 31, the Option shall not terminate if such shares of
Common Stock are paid for by the Purchaser within five (5) business days after
the completion of such determination.
(c) For purposes of determining the Applicable Percentage under
Section 7A(a) and the amount of Voting Stock held by the Purchaser pursuant to
Section 7A(b) in connection with a transaction where the Purchaser effects a
voluntary sale or transfer of Common Stock simultaneously with an issuance of
Voting Stock by the Company, the Purchaser shall be deemed to have sold or
transferred such shares of Common Stock prior to the Company's issuance.
B. Purchase Price. Subject to Section 8 hereof, the purchase price
payable upon each exercise of an Option shall be an amount equal to (i) the
weighted-average price per share at which the Common Stock was issued or sold in
a transaction pursuant to which the Option becomes exercisable (as
proportionately adjusted for any stock split, dividend, combination or other
event of or similar to the type described in Section 8A occurring after such
transaction) multiplied by the number of shares of Common Stock to be purchased
upon such exercise in the case of a transaction in which such price per share is
readily ascertainable by the amount of cash paid or the value of marketable
securities or other readily tradable property exchanged for such Common Stock,
or (ii) the Fair Market Value of the Common Stock to be issued pursuant to such
Option, in all other cases. The valuation date for purposes of
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<PAGE>
determining such Fair Market Value shall be the date of the transaction pursuant
to which the Option becomes exercisable, provided that if the determination of
Fair Market Value is to be made by an investment banking or accounting firm,
such determination shall be made as of a date as near as possible, in the
judgment of such firm, to the date upon which such firm delivers its
determination to the Purchaser and the Company. Any fees and expenses payable in
connection with such determination or in connection with referring a pricing
adjustment to the auditors of the Company pursuant to Section 8A hereof shall be
paid by the Company.
C. Manner of Exercise. The Purchaser shall exercise its Option by
delivery of a written exercise notice to the Company designating a date (the
"Issue Date"), which date shall be not less than five nor more than 25 business
days from the date of such exercise notice. On the Issue Date, provided that
all applicable regulatory approvals shall have been obtained, and there are no
injunctions outstanding prohibiting such transfer or any other regulatory or
governmental impediments to such transfer (collectively, "Governmental
Impediments"), the Company shall issue to the Purchaser (or any Affiliate or
nominee designated by the Purchaser) the number of shares of Common Stock as to
which the Option has been exercised against payment of the purchase price
therefor as set forth in Section 7B hereof. If there is any Governmental
Impediment, the Issue Date shall be postponed until the tenth business day after
the first day on which no Governmental Impediment remains outstanding (and
references herein to the Issue Date shall be construed accordingly), unless the
Purchaser and the Company agree on some other date. The Purchaser's obligation
to purchase the shares of Common Stock on an Issue Date pursuant to the exercise
of its Option is conditioned, in its discretion, on (i) no Material Adverse
Effect, or (ii) any event or facts that will, with the passage of time, result
in a Material Adverse Effect, having occurred between the time Purchaser gives
notice of the exercise of its Option and the Issue Date; provided, however, that
if the Purchaser determines not purchase shares of Common Stock as a result of
the occurrence of the foregoing, the Purchaser's right to exercise its Option to
purchase the shares of Common Stock it would have purchased pursuant to such
Option exercise or otherwise shall not be adversely affected.
D. Payment of Purchase Price.
(a) The purchase price payable upon any exercise of the Option
(the "Option Exercise Price") shall be payable by, at the option of the
Purchaser, (i) in check or wire transfer in immediately available funds to an
account designated by the Company, or (ii) in that number of registered shares
of common stock, $.01 par value per share, of the Purchaser ("Purchaser Shares")
equal to the fair market value of the Common Stock to be issued pursuant to the
Option divided by the average closing sales price per share of the Purchaser
Shares quoted on the Nasdaq National Market, as reported in the Wall Street
Journal (Western Edition), for the five business days ending two business days
before the Issue Date, rounded up to the nearest whole share. Notwithstanding
the foregoing, the Purchaser's right to pay the Option Exercise Price in
Purchaser Shares is subject to any restriction on the Company contained in the
documents then governing any loan the Company has with a bank or banks;
provided, however, that such restrictions may be no more restrictive than those
contained in the Company's Secured Loan Agreement dated as of May 17, 1996 with
Bank of America Illinois, as agent, as in effect on the date hereof; and
provided, further, that the Company agrees to use its reasonable best
13
<PAGE>
efforts to obtain any necessary waivers or consents requested by the Purchaser
to allow the Option Exercise Price to be paid in Purchaser Shares.
(b) If the Option Exercise Price with respect to a particular
Option exercise is paid in Purchaser Shares and (i) the Company sells all of the
Purchaser Shares received by it with respect to such exercise within that number
of trading days commencing on the first trading day on which the Nasdaq National
Market is open for business following the Issue Date and ending on the day that
is that number of days thereafter determined by dividing the number of such
Purchaser Shares so received by 100,000 (rounding up to the next whole day),
plus two additional days (the "Guarantee Period") for cash in one or more bona
fide broker's or market maker transactions through or to Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") or as otherwise provided in any
prospectus pursuant to which the sale and the Company's resale of the Shares is
registered (the "Purchaser Prospectus") to one or more persons not affiliated
with, related to, or associated with the Company, (ii) the aggregate proceeds
from the sale of such Purchaser Shares received by the Company, net of broker's
commissions, is less than the dollar amount of the Option Exercise Price (the
"Shortfall"), and (iii) the Purchaser receives notice from the Company within 14
days of the expiration of the Guarantee Period of the amount of the Shortfall
with copies of applicable confirmation slips or other evidence reasonably
satisfactory to the Purchaser attached thereto, the Purchaser shall, within
three business days of the receipt of such notice, in it sole discretion, either
(x) pay to the Company an amount in cash equal to the Shortfall, or (y) deliver
that number of Shares determined in the manner provided in Section 7D(d) below.
(c) Notwithstanding anything herein to the contrary, the
Purchaser may not exercise its right to pay the Option Exercise Price through
the issuance of Purchaser Shares at any time that the distribution of Purchaser
Shares by the Purchaser or the resale of Purchaser Shares by the Company during
the Guarantee Period would be prohibited by law, including pursuant to Rule
10b-6 under the Securities Exchange Act of 1934, as amended (the "1934 Act").
(d) In the event the Purchaser elects to pay the Shortfall in
Purchaser Shares, the number of Purchaser Shares to be delivered to the Company
shall be determined by dividing the Shortfall by the average closing per share
sales price of the Purchaser Shares quoted on the Nasdaq National Market, as
reported in the Wall Street Journal (Western Edition), for the five (5) trading
days immediately prior to the last business day before the date on which the
Purchaser delivers the Purchaser Shares to the Company in payment of the
Shortfall. In the event the Purchaser elects to pay the Shortfall in Purchaser
Shares, the provisions of this Section 7D, as applicable, shall apply for
purposes of determining the length of a new Guarantee Period, which shall
commence on the trading day immediately following the date on which the Company
(or its representative) receives such Purchaser Shares, and other terms relating
to the sale of such Purchaser Shares, including, without limitation, any
additional Shortfall.
(e) In the event the Purchaser pays the Option Exercise Price
hereunder with Purchaser Shares, the Company agrees that (i) during any trading
day during the Guarantee Period the Company will not sell more than 100,000
Purchaser Shares; provided, that, notwithstanding the limitations on sales set
forth in this paragraph, on any day during the
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Guarantee Period, the Purchaser may permit the Company to sell all, or more than
100,000, Purchaser Shares received in payment of the Option Exercise Price
subject to the volume limitations contained from time to time in the Purchaser
Prospectus, and (ii) it will not sell any Purchaser Shares during any period
when Boston Chicken has notified the Company that the resale of the Advance may
be prohibited by Rule 10b-6 under the 1934 Act or that such resale may violate
other applicable securities laws, rules or regulations; provided, that if such
prohibition occurs during the Guarantee Period the Guarantee Period shall be
extended one full day for each day that the Company is prohibited from selling
as a result of the limitations in this Section 7D(e).
(f) The Purchaser agrees that in the event the Company is unable
to trade all or part of the Purchaser Shares permitted to be traded by the
Company on any trading day during the Guarantee Period through no fault of the
Company, the Guarantee Period shall be extended by one trading day for each such
trading day on which the Company is so unable to trade. The Company will notify
the Purchaser of such extension of the Guarantee Period by the close of business
on the third trading day following the date on which the Company is so unable to
trade.
E. New Shares Pari Passu. The shares of Common Stock to be issued
on each exercise of an Option shall rank pari passu in all respects with the
shares of Common Stock outstanding on the Issue Date applicable thereto, save
only as to any dividend, rights or distribution the record date for which shall
have occurred before the Issue Date. All shares of Common Stock issued upon an
exercise of an Option shall be subject to such limitations, and shall have such
rights and privileges, under the Company's charter and bylaws, as are applicable
generally to the Common Stock. Each share of Common Stock issued pursuant to an
exercise of an Option shall be duly authorized, validly issued and fully paid
and nonassessable, and will not be subject to any restriction under the
Company's charter or bylaws, as such may be amended from time to time, that is
not applicable to shares of Common Stock generally.
F. Share Certificates and Listing. The Company shall, promptly
after the Issue Date applicable to an exercise of an Option, cause a certificate
for the shares of Common Stock issued on such exercise to be delivered to the
Purchaser or as it may direct. The Company shall, as soon as reasonably
practicable after such issue, cause the shares so issued to be listed on the
Nasdaq National Market or principal securities exchange on which the Common
Stock is then listed for trading.
G. Reservation of Shares. The Company shall maintain reserved for
issuance at all times during the period the Option is exercisable that number of
authorized but unissued shares of Common Stock issuable upon exercise of the
Option from time to time.
H. General Indemnification Relating to Purchaser Shares.
(a) The Purchaser agrees to reimburse, to the extent permitted by
law, the Company, its directors, officers, employees and agents, and each
person, if any, who controls the Company within the meaning of the 1933 Act, for
any and all losses, claims, damages, expenses and liabilities to which they or
any of them may become subject under the 1933 Act or any other statute or common
law or otherwise by reason of its offer and sale of Purchaser Shares pursuant to
Section 7D, and to reimburse the Company for any reasonable legal or other
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expenses actually and reasonably incurred in connection with investigating any
claims and defending any actions, insofar as such losses, claims, damages,
expenses, liabilities, or actions arise out of, or are based upon:
(i) any untrue statement of a material fact or
any alleged untrue statement of a material fact contained in or incorporated by
reference in the registration statement which contains the Purchaser Prospectus
(the "Purchaser Registration Statement") or any post-effective amendment
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; or
(ii) any untrue statement of a material fact or
any alleged untrue statement of a material fact contained or incorporated by
reference in the Purchaser Prospectus (as amended or supplemented if the
Purchaser shall have filed with the Securities and Exchange Commission any
amendment or supplement thereto), if used within the period during which the
Purchaser is required to keep the Purchaser Registration Statement in which such
Purchaser Prospectus is contained current, or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which they were made, not
misleading;
provided, however, that the Purchaser's obligations contained herein shall not
apply to losses, claims, damages, expenses, liabilities, or actions arising out
of, or based upon any such untrue statement or any such omission or alleged
omission, if such statement or omission was made in reliance upon, and in
conformity with, information relating to the Company furnished to the Purchaser
by the Company expressly for use in connection with the preparation of the
Purchaser Registration Statement or any prospectus contained in the Purchaser
Registration Statement or any such amendment or supplement thereto.
(b) The Company shall (in the same manner and to the same
extent as set forth in subsection (a) above), reimburse, to the extent permitted
by law, the Purchaser, its directors, officers, employees and agents, and each
person, if any, who controls the Purchaser within the meaning of the 1933 Act,
if such statement or omission was made in reliance upon and in conformity with
information relating to the Company furnished to the Purchaser by the Company
expressly for use in connection with the preparation of the Purchaser
Registration Statement or the Purchaser Prospectus or any amendment or
supplement thereto.
(c) Any person entitled to reimbursement hereunder will (i)
give written notice to the reimbursing party of any claim with respect to which
it seeks reimbursement within 14 days of the person entitled to reimbursement
paying the Reimbursable Expenses (provided, however, that any failure by a
person entitled to reimbursement hereunder to give such prompt written notice
shall not adversely affect such person's rights hereunder unless and then only
to the extent that such failure prejudices the rights of the reimbursing party
hereunder) and (ii) unless in such party's reasonable judgment a conflict or
interest between such party and the reimbursing parties may exist with respect
to such claim, permit such reimbursing party to assume the defense of such claim
with counsel reasonably satisfactory to the party being
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reimbursed. If such defense is assumed, the reimbursing party will not be
subject to any liability for any settlement made by the party being reimbursed
without its consent (but such consent will not be unreasonably withheld). A
reimbursing party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties being reimbursed by such reimbursing party with respect
to such claim, unless in the reasonable judgment of such counsel a conflict of
interest may exist between such party being reimbursed and any other of such
reimbursed parties with respect to such claim.
(d) (i) If the reimbursement provided for in Sections 7H(a)
and (b) is unavailable to or insufficient to hold harmless the party being
reimbursed under paragraphs (a) or (b) hereof in respect of any losses, claims,
damages, expenses or liabilities referred to therein, then each applicable
reimbursing party, in lieu of reimbursing such party, shall contribute to the
amount paid or payable by such party being reimbursed as a result of such
losses, claims, damages, expenses, or liabilities in such proportion as is
appropriate to reflect the relative fault of the Purchaser and the Company in
connection with the statements or omissions which resulted in such losses,
claims, damages, expenses, or liabilities. The relative fault of the Purchaser
and the Company 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 Purchaser or by the
Company, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, expenses, and
liabilities referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such party in connection with investigating
or defending any action or claim.
(ii) The Purchaser and the Company agree that it would
not be just and equitable if contribution pursuant to this Section 7H were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The Purchaser agrees to reimburse the Company, within 14
days after receipt of written evidence of payment thereof, for the reasonable
legal fees and expenses incurred by the Company in connection with the sale of
any Purchaser Shares received pursuant to Section 7D.
8. Certain Corporate Actions.
A. Capitalization Issues, Distributions, Sub-division and
Consolidation. If, at any time on or after the first trading day by reference to
which the Fair Market Value of the Common Stock is determined for the purposes
of any exercise of an Option and before the Issue Date relating to such
exercise, the Company shall announce that it proposes to issue of shares of
Common Stock by way of recapitalization or to declare, pay or make any dividend
or other distribution (whether in cash or other property), to make any sub-
division of the outstanding shares of Common Stock into a larger number of
shares or to consolidate the outstanding shares
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of Common Stock into a smaller number of shares, then the Company and the
Purchaser shall consult to determine whether, and to what extent, any adjustment
should be made to the number of shares of Common Stock to be issued on the
exercise of its Option and/or to the purchase price payable therefor, in the
light of all the facts and circumstances relating to such proposed
recapitalization, dividend or other distribution, sub-division or consolidation
(including, without limitation, the impact thereof on the sales prices of the
Common Stock on the trading days relevant to the determination of Fair Market
Value and the relationship of "ex" recapitalization, dividend, sub-division or
consolidation dates and/or the record or effective date thereof with such
trading days and/or with the Issue Date relating to such exercise). If the
parties disagree on the question of adjustment, either or both of them may refer
the matter to the Company's independent auditors to determine the same. In
making such determination, such auditors shall act as experts and not as
arbitrators and their determination shall, in the absence of manifest error, be
conclusive and binding. In arriving at their determination, they shall be
empowered to take, pay for and rely upon such independent advice or opinion
(including, without limitation, as to the impact of the proposed
recapitalization, dividend or other distribution, sub-division or consolidation
on the said sales prices of the Common Stock) as they consider appropriate.
B. Certain Diluting Events. If the Company shall (i) issue or sell any
shares of Common Stock for a consideration per share less than the Fair Market
Value thereof as of the date of issuance, or (ii) issue any share of Common
Stock pursuant to warrants, options, rights or convertible securities at a price
or a conversion, exercise, exchange or subscription rate less than the Fair
Market Value thereof as of the date of issuance (each a "Diluting Event"), and
as a result thereof the Option becomes exercisable, the purchase price payable
upon the exercise of the Option shall be reduced to a price equivalent to the
lesser of the Fair Market Value of the shares of Common Stock acquired upon the
exercise of such Option (as determined pursuant to Section 7B hereof) and the
weighted average price at which such shares were issued in Diluting Events. For
purposes hereof, "Diluting Event" shall not include (i) any issuance of shares
of Common Stock pursuant to employee benefit plans, stock option plans or stock
options approved by the Company's Board of Directors, (ii) any issuance of
shares of Common Stock to officers or employees of the Company in an aggregate
amount not to exceed $1 million in any calendar year, (iii) any issuance of
shares of Common Stock pursuant to warrants, options, rights or convertible
securities at a price greater than or equal to the Fair Market Value of the
Common Stock on the date the Company sold or issued, or agreed to sell or issue,
such warrants, options, rights or convertible securities, or (iv) any offer of
shares of Common Stock pro rata to all holders of Common Stock on equal terms
and conditions.
C. Restrictions on the Company. As long as the Option has not
terminated, the Company shall not, without the prior consent of the Purchaser:
(i) alter any rights attaching to the Common Stock;
(ii) make any offer or issue or sell any equity securities, or any
debt securities convertible into equity securities, in either case other
than Common Stock;
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(iii) make any distribution of assets or securities if the fair market
value of the assets so distributed or represented by such securities as of
the year-end next preceding the distribution date, or the annual revenues
of the business represented by such assets or securities for such year
exceed 10% of the consolidated gross assets of the Company as of such date
or, as the case may be, of the consolidated gross revenues of the Company
for such year, as disclosed by its then most recently audited consolidated
financial statements;
(iv) make or permit any Subsidiary to make an assignment for the
benefit of creditors or admit in writing its inability to pay its debts
generally as they become due; or
(v) petition or apply, or permit any Subsidiary to petition or apply,
to any tribunal for the appointment of a custodian, trustee, receiver or
liquidator of the Company or any Subsidiary or of any substantial part of
the assets of the Company or any Subsidiary, or commence any proceeding
(other than a proceeding for the voluntary liquidation and dissolution of a
Subsidiary) relating to the Company or any Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation law of any jurisdiction; or, if any such petition or
application is filed, or any such proceeding is commenced, against the
Company or any Subsidiary, by any act of the Company or Subsidiary indicate
its approval thereof, consent thereto or acquiescence therein.
9. Purchasers' Investment Representations.
--------------------------------------
The Purchaser hereby represents to the Company that:
(i) the Purchaser is acquiring the Shares solely for investment
for its own account and not with a view to, or for sale in connection with,
a public distribution in violation of the federal securities laws, and
acknowledges that each certificate for Shares purchased hereunder will be
imprinted with a legend in substantially the following form:
"The securities represented by this certificate were originally
issued on __________________, 1996, and have not been registered
under the Securities Act of 1933, as amended (the "Act"), and may
not be sold, transferred, or assigned unless registered under the
Act or an opinion of counsel or other documentation reasonably
satisfactory to the Company is obtained to the effect that such
sale, transfer, or assignment is exempt from the registration
requirements of the Act."
(ii) the Purchaser has the financial ability to bear the economic
risk of an investment in the Shares, has adequate means of providing for
its current needs and contingencies, has no need for liquidity in such
investment and could afford a complete loss of such investment; and
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(iii) the Purchaser is an "accredited investor" as defined in
Rule 501(a) of Regulation D of the Securities Act; and
(iv) the Purchaser has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks
of its investment in the Shares; and
(v) the Purchaser expressly acknowledges receipt of the
Prospectus and acknowledges and agrees that the Purchaser has read and
understood the information contained therein; and
(vi) the Purchaser has been given full opportunity to ask
questions of and to receive answers from representatives of the Company
concerning the terms and conditions of the investment and the business of
the Company and such other information as it desires in order to evaluate
an investment in the Shares, and all such questions have been answered to
the full satisfaction of the Purchaser; and
(vii) the Purchaser understands that the Shares have not been
registered under the Act or the securities laws of any state, and are being
issued in reliance upon specific exemptions from registration thereunder,
and the Purchaser agrees that the Shares may not be sold, offered for sale,
transferred, pledged, hypothecated, or otherwise disposed of except
pursuant to (a) a registration statement with respect to such securities
which is effective under the Act and under the securities act of any
relevant state, (b) Rule 144 under the Act, or (c) any other exemption
from registration under the Act and under the securities act of any
relevant state relating to the disposition of securities, provided an
opinion of counsel is furnished, reasonably satisfactory in form and
substance to the Company, that an exemption from the registration
requirements of the Act and such state act is available. The Purchaser
understands the legal consequences of the foregoing to mean that it may be
required to bear the economic risk of its investment in the Shares for an
indefinite period of time. The Purchaser understands that any instruments
initially representing the Shares shall bear legends restricting the
transfer thereof. The Purchaser agrees not to resell or otherwise dispose
of all or any of the Shares, except as permitted by law, including, without
limitation, any and all applicable regulations under the Act and any state
law or regulations; and
(viii) the Purchaser understands that no federal or state agency
has made any finding or determination as to the fairness of an investment
in, or any recommendation or endorsement of, the Shares.
10. Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in connection
herewith will survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by the Purchaser or on its behalf, until 30 days after
audited financial statements for the Company's fiscal year 1997 are delivered to
the
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Purchaser. Nothing herein shall imply any duty of the Company after the
execution and delivery of this Agreement to update any representations or
warranties made herein.
11. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto will bind the respective successors and assigns of
the parties hereto whether so expressed or not. References herein to Purchaser
shall be deemed to include such assignees. A sale or other transfer of Shares
shall not, however, of itself without express assignment of rights or
obligations hereunder, be deemed an assignment of any such rights or
obligations.
12. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by, or
invalid under, applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
13. Counterparts. This Agreement may be executed simultaneously in
counterparts, any one of which need not contain the signature of more than one
party, but all such counterparts taken together will constitute one and the same
Agreement.
14. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
15. GOVERNING LAW. THE DELAWARE GENERAL CORPORATION LAW WILL GOVERN ALL
ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS STOCKHOLDERS. ALL
OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS
AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO WILL BE GOVERNED BY THE INTERNAL
LAW, AND NOT THE LAW OF CONFLICTS, OF COLORADO.
16. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, one day after being sent to the recipient by reputable overnight
express courier service (charges prepaid) or by facsimile transmission, or three
business days after being mailed to the recipient by certified or registered
mail, return receipt requested and postage prepared. Such notices, demands and
other communications will be sent to the Purchaser as follows:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 384-5339
and to the Company as follows:
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Einstein/Noah Bagel Corp.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 202-3490
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written
EINSTEIN/NOAH BAGEL CORP.
_____________________________
Name: _______________________
Title: ____________________
BOSTON CHICKEN, INC.
_____________________________
Name: _______________________
Title: ____________________
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<PAGE>
Exhibit 4.6
REGISTRATION AGREEMENT
----------------------
THIS AGREEMENT is made as of _____________________, 1996 between
Einstein/Noah Bagel Corp., a Delaware corporation (the "Company"), and Boston
Chicken, Inc., a Delaware corporation (the "Investor").
The parties to this Agreement are parties to a Concurrent Private
Placement Agreement of ___________________, 1996 (the "Private Placement
Agreement"). In order to induce the Investor to enter into the Private Placement
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement. The execution and delivery of this Agreement is a condition
to the Closing under the Private Placement Agreement. Unless otherwise provided
in this Agreement, capitalized terms used herein shall have the meanings set
forth in paragraph 8 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
(a) Requests for Registration. At any time after the earlier of (i)
the date on which the Company requests that the Securities and Exchange
Commission (the "SEC") declare effective the Resale Registration (as defined in
and as required by that certain Amended and Restated Registration Rights
Agreement dated as of February 1, 1996 (the "Other Registration Rights
Agreement") by and among the Company and the Stockholders named therein (such
Stockholders other than the Investor being herein sometimes referred to as the
"Other Stockholders"), and (ii) the date thirteen months after the Closing of
the Private Placement Agreement, the holders of at least 30% of the Registrable
Securities may request registration under the Securities Act of 1933, as amended
(the "Securities Act"), of all or part of their Registrable Securities on Form
S-1 or any similar long-form registration ("Long-Form Registrations"), and the
holders of at least 20% of the Registrable Securities may request registration
under the Securities Act of all or any portion of their Registrable Securities
on Form S-2 or S-3 or any similar short-form registration ("Short-Form
Registrations") if available. All registrations requested pursuant to this
paragraph 1(a) are referred to herein as "Demand Registrations." In connection
with the first Demand Registration requested hereunder, the Company agrees, for
the express benefit of the Other Stockholders, to waive any holdback imposed by
the Company pursuant to Section 3.4 of the Other Registration Rights Agreement
on the Other Stockholders whose securities are registered in the Resale
Registration, and the Investor agrees, for the express benefit of such Other
Stockholders, to consent to any such waiver, if applicable. Each request for a
Demand Registration shall specify the approximate number of Registrable
Securities requested to be registered and the anticipated per share price range
for such offering. Within ten days after receipt of any such request, the
Company shall give written notice of such requested registration to all
<PAGE>
other holders of Registrable Securities and shall include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within 15 days after the receipt of the
Company's notice.
(b) Registrations. The holders of Registrable Securities shall be
entitled to request five Demand Registrations in which the Company shall pay all
Registration Expenses; provided that the aggregate offering value of the
Registrable Securities requested to be registered in any Long-Form Registration
must equal at least $5,000,000 and in any Short-Form Registration must equal at
least $3,000,000. Unless a Long-Form Registration is requested by the holders
initially requesting registration, Demand Registrations shall be Short-Form
Registrations whenever the Company is permitted to use any applicable short
form; provided that that such holders shall not be entitled to more than two
Long-Form Registrations hereunder. After the Company has become subject to the
reporting requirements of the Securities Exchange Act, the Company shall use its
reasonable best efforts to make Short-Form Registrations on Form S-3 available
for the sale of Registrable Securities. A registration shall not count as one
of the permitted Demand Registrations until it has become effective (unless such
Demand Registration has not become effective due solely to the fault of the
holders requesting such registration), and neither the last nor any subsequent
Demand Registration shall count as one of the permitted Demand Registrations
unless the holders of Registrable Securities are able to register and sell at
least 90% of the Registrable Securities requested to be included in such
registration; provided, that in any event the Company shall pay all Registration
Expenses in connection with any registration initiated as a Demand Registration
whether or not it has become effective, and whether or not such registration has
counted as one of the permitted Demand Registrations (unless such Demand
Registration does not become effective due solely to the fault of the holders
requesting such registration).
(c) Priority on Demand Registrations. The Company shall not include
in any Demand Registration any securities which are not Registrable Securities
without the prior written consent of the holders of at least a majority of the
Registrable Securities included in such registration. If a Demand Registration
is an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such offering,
exceeds the number of Registrable Securities and other securities, if any, which
can be sold in an orderly manner in such offering within a price range
acceptable to the holders of a majority of the Registrable Securities initially
requesting registration, the Company shall include in such registration prior to
the inclusion of any securities which are not Registrable Securities the number
of Registrable Securities requested to be included which in the opinion of such
underwriters can be sold in an orderly manner within the price range of such
offering, pro rata among the respective holders thereof on the basis of the
amount of Registrable Securities owned by each such holder.
(d) Restrictions on Long-Form Registrations. The Company shall not be
obligated to effect any Long-Form Registration within 120 days after the
effective date of a previous Long-Form Registration or a registration in which
the holders of Registrable Securities were given piggyback rights pursuant to
paragraph 2 and in which there was no reduction in the number of Registrable
Securities requested to be included. The Company may postpone for up to
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<PAGE>
120 days the filing or the effectiveness of a registration statement for a
Demand Registration if the Company's board of directors determines in its
reasonable good faith judgment that such Demand Registration would reasonably be
expected to have a material adverse effect on any proposal or plan by the
Company or any of its Subsidiaries to engage in any acquisition of assets (other
than in the ordinary course of business) or any merger, consolidation, tender
offer, reorganization or similar transaction; provided that in such event, the
holders of Registrable Securities initially requesting such Demand Registration
shall be entitled to withdraw such request and, if such request is withdrawn,
such Demand Registration shall not count as one of the permitted Demand
Registrations hereunder and the Company shall pay all Registration Expenses in
connection with such registration. The Company may delay a Demand Registration
hereunder only once in any twelve-month period.
(e) Selection of Underwriters. The holders of a majority of the
Registrable Securities initially requesting registration hereunder shall have
the right to select the investment banker(s) and manager(s) to administer the
offering, if any, subject to the Company's approval which shall not be
unreasonably withheld.
(f) Other Registration Rights. Except as provided in this Agreement,
the Company shall not hereafter grant to any Persons the right to request the
Company to register any equity securities of the Company, or any securities
convertible or exchangeable into or exercisable for such securities, without the
prior written consent of the holders of a majority of the Registrable
Securities; provided that the Company may grant rights to other Persons to (i)
participate in Piggyback Registrations so long as such rights are subordinate
to the rights of the holders of Registrable Securities with respect to
such Piggyback Registrations and (ii) request registrations so long as the
holders of Registrable Securities are entitled to participate in any such
registrations with such Persons pro rata on the basis of the number of shares
owned by each such holder.
2. Piggyback Registrations.
(a) Right to Piggyback. Commencing on the date on which the holders
of Registrable Securities are first entitled to request a Demand Registration
pursuant to paragraph 1(a) above, whenever the Company proposes to register any
of its securities under the Securities Act (other than pursuant to a Demand
Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
shall give prompt written notice (in any event within three business days after
its receipt of notice of any exercise of demand registration rights other than
under this Agreement) to all holders of Registrable Securities of its intention
to effect such a registration and shall include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within such 15-day period. Notwithstanding the
foregoing, the Company shall not be required to effect any registration of
Registrable Securities under this paragraph 2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock option or other
employee benefit plans, or incidental to the filing of a registration statement
for an offering to be made on a delayed or continuous basis pursuant to Rule
415(a)(1)(viii) under the Securities Act or any similar rule that may be adopted
by the SEC.
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<PAGE>
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the Company, the Company will include in such registration (i)
first, the securities the Company proposes to sell, (ii) second, the Registrable
Securities requested to be included in such registration, pro rata among the
holders of such Registrable Securities on the basis of the number of shares
owned by each such holder, and (iii) third, other securities requested to be
included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the holders initially requesting
such registration, the Company shall include in such registration (i) first, the
securities requested to be included therein by the holders requesting such
registration, (ii) second, the Registrable Securities requested to be included
in such registration, pro rata among the holders of such Registrable Securities
on the basis of the number of shares owned by each such holder, and (iii) third,
other securities requested to be included in such registration.
(e) Selection of Underwriters. If any Piggyback Registration is an
underwritten secondary registration on behalf of the holders of the Company's
securities, the selection of investment banker(s) and manager(s) for the
offering must be reasonably acceptable to the holders of a majority of the
Registrable Securities included in such Piggyback Registration. Such approval
will be assumed unless notice to the contrary is given by the holders of a
majority of the Registrable Securities included in such Piggyback Registration
to the Company within ten days of such holders' receipt of notice of selection
by the Company.
(f) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous registration
has not been withdrawn or abandoned, the Company shall not, without the prior
written consent of the holders of a majority of the Registrable Securities
(which consent shall not be unreasonably withheld), file or cause to be effected
any other registration for the underwritten offering, issue or sale of any of
its equity securities or securities convertible or exchangeable into or
exercisable for its equity securities under the Securities Act (except on Form
S-8 or any successor form), whether on its own behalf or at the request of any
holder or holders of such securities, until a period of at least 90 days has
elapsed from the effective date of such previous registration.
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<PAGE>
3. Holdback Agreements.
(a) Each holder of Registrable Securities shall not effect any public
sale or distribution (including sales pursuant to Rule 144) of equity securities
of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, during the seven days prior to and the 180-day
period (or such shorter period as the underwriters managing the registered
public offering may permit) beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which
Registrable Securities are included (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(b) In connection with any underwritten registration, the Company (i)
shall not effect any public sale or distribution of its equity securities, or
any securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and during the 90-day period (or such
longer period as may be requested by the underwriters managing the registered
public offering) beginning on the effective date of any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such
underwritten registration or pursuant to registrations on Form S-8 or any
successor form), unless the underwriters managing the registered public offering
otherwise agree, and (ii) shall use its reasonable best efforts to cause each
holder of at least 2% (on a fully-diluted basis) of its Common Stock, or any
securities convertible into or exchangeable or exercisable for Common Stock,
purchased from the Company at any time after the date of this Agreement (other
than in a registered public offering or pursuant to stock options granted under
a stock option plan primarily for employees, officers or directors) to agree not
to effect any public sale or distribution (including sales pursuant to Rule 144)
of any such securities during such period (except as part of such underwritten
registration, if otherwise permitted), unless the underwriters managing the
registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall furnish to the counsel
selected by the holders of a majority of the Registrable Securities covered by
such registration statement copies of all such documents proposed to be filed);
(b) notify each holder of Registrable Securities of the effectiveness
of each registration statement filed hereunder and prepare and file with the
Securities and Exchange Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period of not less
than nine months and comply with the provisions of the Securities Act with
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<PAGE>
respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its reasonable best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller; provided, however, that the Company shall not
be required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction;
(e) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company will prepare
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the Nasdaq Stock Market National
Market System automated quotation system and, if so listed, use its reasonable
best efforts to secure designation of all such Registrable Securities covered by
such registration statement as a Nasdaq "national market system security" within
the meaning of Rule 11Aa2-1 of the Securities Exchange Act of 1934, as amended,
or, failing that, to secure Nasdaq authorization for such Registrable Securities
and, without limiting the generality of the foregoing, to arrange for at least
two market makers to register as such with respect to such Registrable
Securities with the NASD;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other reasonable actions as the
holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite
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or facilitate the disposition of such Registrable Securities (including
effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and
(k) permit any holder of Registrable Securities which holder, in its
sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to request the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included; and
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its reasonable best efforts promptly to
obtain the withdrawal of such order; and
(m) use its reasonable best efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the sellers thereof to consummate the disposition of such Registrable
Securities; and
(n) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the holders of a majority of the
Registrable Securities being sold reasonably request (provided that such
Registrable Securities constitute at least 10% of the securities covered by such
registration statement).
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5. Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), shall be borne as provided in this
Agreement, except that the Company shall, in any event, pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any liability insurance and
the expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration and each Piggyback
Registration, the Company shall reimburse the holders of Registrable Securities
included in such registration for the reasonable fees and disbursements of one
counsel chosen by the holders of a majority of the Registrable Securities
initially requesting such registration and for the reasonable fees and
disbursements of each additional counsel retained by any holder of Registrable
Securites for the purpose of rendering a legal opinion on behalf of such holder
in connection with any underwritten Demand Registration or Piggyback
Registration.
(c) To the extent Registration Expenses are not required to be paid by
the Company, each holder of securities included in any registration hereunder
shall pay those Registration Expenses allocable to the registration of such
holder's securities so included, and any Registration Expenses not so allocable
shall be borne by all sellers of securities included in such registration in
proportion to the aggregate selling price of the securities to be so registered.
6. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law,
each holder of Registrable Securities, its officers, directors, employees,
agents, and each Person who controls such holder (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by such holder expressly for
use therein or by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished such holder with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company shall indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the holders of
Registrable Securities.
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(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, shall indemnify the Company, its
officers, directors, employees, agents, and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue statement
of material fact contained in the registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in any information or
affidavit so furnished in writing by such holder; provided that the obligation
to indemnify shall be individual to each holder and shall be limited to the net
amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification (provided that the failure to give prompt notice
shall not impair any Person's right to indemnification hereunder to the extent
such failure has not prejudiced the indemnifying party) and (ii) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and shall survive the transfer of securities.
7. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
holder of Registrable Securities included in any underwritten registration shall
be required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder
and such holder's intended method of distribution) or to undertake any
indemnification
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obligations to the Company or the underwriters with respect thereto, except as
otherwise provided in paragraph 6 hereof.
8. Definitions.
(a) "Person" means any individual, corporation, partnership, limited
liability company, joint venture, trust, sole proprietorship, or other entity,
business association or organization.
(b) "Registrable Securities" means (i) any shares of common stock,
$0.01 par value per share ("Common Stock"), of the Company issued pursuant to
the Private Placement Agreement, (ii) any shares of Common Stock issued or
issuable with respect to the shares of Common Stock referred to in clause (i)
above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, and (iii) any other shares of Common Stock held by Persons
holding securities described in clauses (i) and (ii) above (including, without
limitation, any shares of Common Stock acquired pursuant to the Private
Placement Agreement or conversion of convertible debt). Notwithstanding the
foregoing, the Company shall not be required to include in any Demand
Registration or any Piggyback Registration any Registrable Securities that are
then eligible to be sold pursuant to Rule 144(k) under the Securities Act. As
to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when they have been distributed to the public pursuant to
a offering registered under the Securities Act or sold to the public through a
broker, dealer or market maker in compliance with Rule 144 under the Securities
Act (or any similar rule then in force). For purposes of this Agreement, a
Person shall be deemed to be a holder of Registrable Securities, and the
Registrable Securities shall be deemed to be in existence, whenever such Person
has the right to acquire directly or indirectly such Registrable Securities
(upon conversion or exercise in connection with a transfer of securities or
otherwise, but disregarding any restrictions or limitations upon the exercise of
such right), whether or not such acquisition has actually been effected, and
such person shall be entitled to exercise the rights of a holder of Registrable
Securities hereunder.
(c) Unless otherwise stated, other capitalized terms contained herein
have the meanings set forth in the Private Placement Agreement.
9. Miscellaneous.
(a) No Inconsistent Agreements. Except as permitted in paragraph 1(g)
hereof, the Company shall not hereafter enter into any agreement with respect to
its securities which is inconsistent with or violates the rights granted to the
holders of Registrable Securities in this Agreement.
(b) Adjustments Affecting Registrable Securities. The Company shall
not take any action, or permit any change to occur, with respect to its
securities which would adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would adversely affect the
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marketability of such Registrable Securities in any such registration
(including, without limitation, effecting a stock split or a combination of
shares).
(c) Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of the Company, Investor (as long as the Investor holds any
Registrable Securities) and holders of at least a majority of any other
outstanding Registrable Securities.
(e) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of
purchasers or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
(f) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(g) Counterparts. This Agreement may be executed simultaneously in
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
Agreement.
(h) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
(i) Governing Law. The Delaware General Corporation Law shall govern
all issues and questions concerning the relative rights of the Company and its
stockholders. All other issues and questions concerning the construction,
validity, interpretation and enforcement of this Agreement and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Colorado, without giving effect to any choice of law or
conflict of law rules or provisions that would cause the application of the laws
of any jurisdiction other than the State of Colorado.
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(j) Notices. All notices, demands or other communications to be given
or delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, one day after being sent to the recipient by reputable overnight
courier service (charges prepaid) or sent via facsimile transmission, and three
days after being mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications will be sent to the Investor at the address indicated below and
to the Company at the address indicated below:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 384-5339
Einstein/Noah Bagel Corp.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 202-3490
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(k) Effect on Prior Rights. This Agreement supersedes and replaces
in all respects the Investor's and the Company's rights and obligations with
respect to each other (and only with respect to each other) contained in the
Other Registration Rights Agreement.
(l) Notice of Transfer. The Investor and any other holder of
Registrable Securities agrees to notify the Company of any transfers of
Registrable Securities; provided, however, that any failure to give such notice
shall not adversely affect the rights to which any holder or transferee of
Registrable Securities would otherwise be entitled hereunder.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
EINSTEIN/NOAH BAGEL CORP.
By ___________________________________
Name:
Title:
BOSTON CHICKEN, INC.
By ____________________________________
Name:
Title:
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Exhibit 10.1
AMENDED AND RESTATED LOAN AGREEMENT
This amended and restated loan agreement (the "Agreement") is made and
entered into this 17th day of May, 1996 between Einstein Bros. Bagels, Inc., a
Delaware corporation (the "Company"), and Boston Chicken, Inc., a Delaware
corporation ("Boston Chicken").
RECITALS
--------
The Company and Boston Chicken have previously entered into that
certain Secured Loan Agreement dated March 24, 1995 (as amended, the "Original
Loan Agreement").
The Company and Boston Chicken desire that the
Original Loan Agreement be further amended and restated.
COVENANTS
---------
In consideration of the mutual representations, warranties, and
covenants set forth herein, and in consideration of any advances made hereunder
to or for the benefit of the Company by Boston Chicken, the parties hereto agree
as follows:
ARTICLE I
THE LOAN
--------
1.1 The Loans; Funding Alternatives; Promissory Notes. (a) Boston
Chicken agrees, on the terms and subject to the conditions set forth herein, to
advance at any time and from time to time during the period commencing on the
date hereof and ending on June 14, 1998 (the "Draw Loan Termination Date"),
amounts requested by the Company in an aggregate principal amount not to exceed
$134,000,000 (the "Loan"), in integral multiples of $100,000. The Loan shall be
evidenced by two separate promissory notes, one amended and restated convertible
promissory note of even date herewith in the original principal amount of
$120,000,000, in the form attached hereto as Exhibit A-1 (the "Convertible
Note") and one nonconvertible promissory note of even date herewith in the
original principal amount of $14,000,000 in the form attached hereto as Exhibit
A-2 (the "Nonconvertible Note") (the Convertible Note and the Nonconvertible
Note are herein together referred to as the "Notes"). Advances of the Loan shall
be made under the Convertible Note and the Nonconvertible Note as determined by
Boston Chicken in its sole discretion. The portion of the Loan evidenced by the
Convertible Note is sometimes herein referred to as the "Convertible Loan" and
that portion of the Loan evidenced by the Nonconvertible Note is sometimes
herein referred to as the "Nonconvertible Loan".
<PAGE>
(b) Each advance of the Loan (an "Advance") shall be made, at the sole
option of Boston Chicken but subject to the limitations set forth in subsection
(d) below, (i) in cash by wire transfer of immediately available funds to the
account of the Company, or (ii) in that number of registered shares of common
stock, $.01 par value per share, of Boston Chicken (the "Shares") equal to the
Advance amount divided by the average closing sales price per share of the
Shares quoted on the Nasdaq National Market, as reported in the Wall Street
Journal (Western Edition), for the five business days ending two business days
before the date such Advance is to be made, rounded up to the nearest whole
share (the "Advance Shares").
(c) In the event an Advance is made in Shares and (i) the Company
sells all of the Advance Shares received by it with respect to a particular
Advance within the first seven (7) trading days on which the Nasdaq National
Market is open for business following the date such Advance is made in Shares
(the "Guarantee Period") for cash in one or more bona fide broker's or market
maker transactions through or to Merrill Lynch, Pierce, Fenner & Smith
Incorporated or as otherwise provided in that certain prospectus pursuant to
which the sale and the Company's resale of the Shares is registered (the
"Prospectus") to one or more persons not affiliated with, related to, or
associated with the Company, (ii) the aggregate proceeds from the sale of such
Advance Shares received by the Company, net of broker's commissions, is less
than the dollar amount of the Advance funded with such Advance Shares (the
"Shortfall"), and (iii) Boston Chicken receives notice from the Company within
14 days of the expiration of the Guarantee Period of the amount of the Shortfall
with copies of applicable confirmation slips or other evidence reasonably
satisfactory to Boston Chicken attached thereto, Boston Chicken shall, within
three business days of the receipt of such notice, in it sole discretion, either
(x) pay to the Company an amount in cash equal to the Shortfall, or (y) deliver
that number of Shares determined in the manner provided in Section 1.1(e) below.
Boston Chicken and the Company agree that the payment of such shortfall shall
constitute a reduction in the price per share at which the Company has acquired
the Shares, for financial reporting and tax purposes.
(d) Notwithstanding anything herein to the contrary, (i) the aggregate
amount of all Advances made hereunder by the issuance of Shares shall not exceed
(A) the Convertible Loan Maximum Principal Balance (as defined in Section 1.2)
available to be drawn by the Company hereunder, less (B) the outstanding
principal amount of the Convertible Loan as of August 30, 1995, and (ii) Boston
Chicken may not exercise its right to fund an Advance through the issuance of
Shares at any time that the distribution of Shares by Boston Chicken or the
resale of Shares by the Company during the Guarantee Period would be prohibited
by law, including pursuant to Rule 10b-6 under the Securities Exchange Act of
1934, as amended (the "1934 Act").
(e) In the event Boston Chicken elects to pay the Shortfall in Shares,
the number of Shares to be delivered to the Company shall be determined by
dividing the Shortfall by the closing per share sales price of the Shares quoted
on the Nasdaq National Market, as reported in the Wall Street Journal (Western
Edition), on the second business day before the date on which Boston Chicken
delivers the Shares to the Company (or its representative), rounded up to the
nearest whole share. In the event Boston Chicken elects to pay the Shortfall in
Shares, such Shares shall be deemed to be Advance Shares and the provisions of
Section 1.1(c) and Section 5.5, as
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<PAGE>
applicable, shall apply for purposes of determining the length of a new
Guarantee Period, which shall commence on the trading day immediately following
the date on which the Company (or its representative) receives such Shares, and
other terms relating to the sale of such Shares.
1.2 Maximum Principal Balance. The aggregate outstanding principal
balance of the Convertible Loan shall not exceed $120,000,000, less the
principal amount of conversions under Section 1.7 and option exercises under
Section 1.8 ("Convertible Loan Maximum Principal Balance"). The aggregate
outstanding principal balance of the Nonconvertible Loan shall not exceed
$14,000,000 ("Nonconvertible Loan Maximum Principal Balance"). The "Maximum
Principal Balance" of the Loan shall not exceed the sum of the Convertible Loan
Maximum Principal Balance and the Nonconvertible Loan Maximum Principal Balance.
1.3 The Loan Account. Boston Chicken shall maintain a loan account
on its books in which shall be recorded all advances made by Boston Chicken to
the Company pursuant to this Agreement, and all payments made by the Company
with respect to the Loans; provided, however, that failure to maintain such
account or record any advances therein shall not relieve the Company of its
obligations to repay the outstanding principal amount of the Loan, all accrued
interest thereon, and any amount payable with respect thereto in accordance with
the terms of this Agreement and the Notes.
1.4 Interest Rate and Payment. (a) Interest shall accrue daily on
the aggregate outstanding principal balance of the Loans, for the period
commencing on the date any Advance is made until such Advance is paid in full,
at a per annum rate equal to the rate designated and announced by Bank of
America Illinois or its successor in interest (the "Bank") from time to time as
its "reference rate" in effect at its principal office in Chicago, Illinois,
plus 1%. The interest rate shall be adjusted, from time to time, on the same
day on which the Bank adjusts its "reference rate." Interest on the outstanding
principal amount of the Loans shall be payable in arrears on the dates set forth
herein and at maturity (whether at stated maturity, by acceleration or
otherwise).
(b) During the Interest Payment Period (as defined below) the Company
shall pay to Boston Chicken interest on the outstanding principal balance of the
Loans on the first day of each Retail Period (as defined below). The "Interest
Payment Period" shall mean the period commencing on the first day of the Retail
Period immediately following the first Retail Period in which the Company
initially draws on the Loans under this Agreement and continue through and
including the Draw Loan Termination Date. Thereafter the Company shall pay
principal and interest as provided in Section 1.5.
(c) Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
(d) Any principal payment due under the Notes not paid when due,
whether at stated maturity, by notice of repayment, by acceleration or
otherwise, shall, to the extent permitted by applicable law, thereafter bear
interest (compounded monthly and payable upon demand) at a rate which is 2% per
annum in excess of the rate of interest otherwise payable
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<PAGE>
under this Agreement in respect of such principal amount until such unpaid
amount has been paid in full (whether before or after judgment).
1.5 Repayment of the Loan. (a) If not earlier paid, or if not
accelerated for payment, the outstanding principal amount of the Loan shall, at
the close of business on the Draw Loan Termination Date, thereafter become an
amortized term Loan payable as follows: the principal balance of the Loan shall
be payable to Boston Chicken in 65 substantially equal periodic installments of
principal (the amount of which periodic installments of principal shall be
determined at the close of business on the Draw Loan Termination Date based on a
schedule amortizing such outstanding principal balance of the Loan as of such
date in 130 substantially equal periodic installments of principal), plus
accrued but unpaid interest, on the first day of each of Boston Chicken's 13
consecutive four-week accounting periods used for accounting purposes (each a
"Retail Period"), commencing on the first day of the seventh Retail Period in
Boston Chicken's fiscal year 1998 and continuing until the first day of the
sixth Retail Period in Boston Chicken's fiscal year 2003, when the entire
remaining principal balance of the Loan and all interest accrued thereon shall
be due and payable.
(b) The Loan and all accrued and unpaid interest thereon may be
prepaid, without premium or penalty, at any time.
1.6 Term of this Agreement. This Agreement shall be effective as of
the date of its execution (the "Closing Date") and shall continue in effect
until the last to occur of (i) the exercise, expiration, or other termination of
all remaining option rights granted in Section 1.8 hereof, (ii) the exercise,
expiration, or other termination of all of the remaining conversion rights
granted in Section 1.7 hereof, (iii) the date on which there is no amount
(principal or interest) remaining outstanding under the Notes and (iv) the date
on which Boston Chicken no longer has an obligation to make any advances
hereunder if the Company were to make a valid request for an advance pursuant to
and in accordance with Article III hereof.
1.7 Convertibility. (a) On the terms and subject to the conditions
set forth in the Convertible Note, any portion of the outstanding principal
balance of the Convertible Loan is convertible at the election of the holder of
the Convertible Note into shares of common stock of the Company, $.01 par value
per share, at any time and from time to time after the earlier of(i) any
acceleration of the Loan, (ii) April 1, 1997, or (iii) an initial public
offering of shares of common stock of the Company registered pursuant to the
Securities Act of 1933, as amended, with the Securities and Exchange Commission,
and up to the later of the date on which the Company has properly repaid the
outstanding principal balance of the Loans and all accrued interest thereon in
full or the first day of the twelfth Retail Period in Boston Chicken's fiscal
year 2003. Upon conversion, that portion of principal so converted shall be
deemed to be paid in full upon the delivery to the holder of the Convertible
Note of a certificate or certificates representing the proper number of shares
of common stock of the Company to be issued to the holder of the Convertible
Note upon such conversion. Conversion of any portion of the principal balance
of the Convertible Loan shall not relieve the Company of its obligation to pay
any accrued but unpaid interest to the date of conversion on the portion of the
principal balance of the
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<PAGE>
Convertible Loan so converted. In no event shall interest be convertible into
shares of common stock in the Company.
(b) Upon any conversion under this Section 1.7, Boston Chicken's
obligation to make additional advances to the Company under this Agreement shall
be reduced by an amount equal to such conversion amount.
1.8 Option. (a) Boston Chicken shall have the option, at any time
and from time to time after the earlier of (i) any acceleration of the Loans,
(ii) April 1, 1997, or (iii) an initial public offering of shares of common
stock of the Company registered pursuant to the Securities Act of 1933, as
amended, with the Securities and Exchange Commission, and up to the later of the
date on which the Company has properly repaid the outstanding principal balance
of the Loans and all accrued interest thereon in full or the first day of the
twelfth Retail Period in Boston Chicken's fiscal year 2003 to purchase at the
Conversion Price (as defined in the Convertible Note) up to that number of
shares of common stock of the Company equal to the (i) the Option Amount,
divided by (ii) the Conversion Price (the "Option"). For purposes of this
Section 1.8, the Option Amount shall mean (x) the Convertible Loan Maximum
Principal Balance, less (y) the sum of (1) the dollar amount of the outstanding
principal balance of the Convertible Loan (whether such amount is the result of
a reduction in principal due to the repayment of the Convertible Loan or the
failure by the Company to request advances hereunder or otherwise) and (2) the
dollar amount of all previous conversions under Section 1.7 hereof and exercises
of the Option under this Section 1.8, in each case on the date Boston Chicken
notifies the Company of its intention to exercise the Option.
(b) Upon exercise of any portion of the Option under this Section 1.8,
Boston Chicken's obligations to make additional advances to the Company under
this Agreement shall be reduced by an amount equal to the amount of such option
exercise.
(c) In case of any reclassification or change of outstanding shares of
common stock issuable upon exercise of the Option, or in case of any
consolidation or merger of the Company with or into any partnership,
corporation, or other entity (other than a merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of outstanding shares of common stock, other than a change in number of
shares issuable upon exercise of the Option) or in case of any sale or
conveyance to any partnership, corporation, or other entity of the property of
the Company as an entirety or substantially as an entirety, then the holder of
the Note shall have the right thereafter to exercise the Option for the kind and
amount of shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale, or conveyance by a holder
of the number of shares of common stock of the Company issuable upon exercise of
the Option immediately prior to such reclassification, change, consolidation,
merger, sale, or conveyance, subject to adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for herein.
1.9 Intentionally omitted.
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1.10 Credit Resources. The Company acknowledges that Boston Chicken
has informed it that Boston Chicken does not currently and may not from time to
time in the future have cash, cash equivalents, and credit resources sufficient
to permit Boston Chicken to necessarily make all requested advances under this
Agreement and all other similar agreements with its financed area developers and
franchisees while maintaining sufficient working capital for Boston Chicken's
operating needs, and the Company agrees that in the event Boston Chicken shall
fail to fund the Loans as and to the extent required hereby and such failure
shall constitute a breach of this Agreement (a "Funding Default"), such Funding
Default shall not (a) constitute fraud (by any person or entity, including
Boston Chicken and its successors and assignees) or (b) give rise to any
liability of any person or entity (other than Boston Chicken and its successors
and assignees) in any other tort, and the Company further agrees that it shall
be limited to its remedies in contract and in a non-fraud tort action against
Boston Chicken. Boston Chicken and the Company agree that this Section 1.10
shall not diminish or otherwise affect in any way the amount of damages for
which Boston Chicken may be liable to the Company in a contract or non-fraud
tort action for a Funding Default.
1.11 Payment Method. (a) All payments to be made by the Company
hereunder shall be made in lawful money of the United States, in immediately
available funds, without setoff, counterclaim, deduction or withholding of any
type.
(b) So long as funds are available to be borrowed by the Company
hereunder, the Company authorizes Boston Chicken (i) to make daily Advances on
behalf of the Company under the Loan Agreement in accordance with Boston
Chicken's customary practices and procedures to provide funds to the Company to
cover payables, intercompany charges, and other charges previously approved by
the Company, and regardless of whether the Company has specifically requested
such advance and without waiver of any rights of Boston Chicken hereunder, and
(ii) to make Advances hereunder from time to time to pay interest on the Loans
if the Company does not pay interest when due.
ARTICLE II
RESERVED
--------
ARTICLE III
CONDITIONS OF ADVANCES
----------------------
Notwithstanding any other provisions contained in this Agreement, the
making of any Advance (including the initial Advance) provided for in Section
1.1 shall be conditioned upon the following:
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3.1 The Company's Written Request. Boston Chicken shall have
received, at least five (5) business days prior to the day an Advance is to be
made hereunder, (i) a written request from an authorized officer of the Company
for an Advance in a specific amount, and (ii) a certificate of the Company in
the form attached hereto as Exhibit B, which shall be signed by the president,
chief financial officer or other authorized officer of the Company.
3.2 No Material Adverse Change. No material adverse change, as
determined by Boston Chicken in its sole discretion taking into account that the
Company is in a start up mode, in the financial condition, results of
operations, assets, or business of the Company, shall have occurred at any time
or times subsequent to the date hereof.
3.3 No Default. Neither a Default (as that term is defined in
Article VIII hereof) nor any event which, through the passage of time or the
service of notice or both, would mature into a Default (an "Event of Default")
shall have occurred and be continuing.
3.4 Representation and Warranties. The representations and
warranties contained in Article IV hereof shall be true and correct on and as of
the date such Advance is made.
3.5 Service Agreements. Each of various service agreements between
the Company and Boston Chicken, each dated March 24, 1995 (the "Service
Agreements") between the Company and Boston Chicken shall be in full force and
effect, and no default shall have occurred or notice of termination (other than
a mutual termination) shall have been given thereunder.
3.6 Other Requirements. Boston Chicken shall have received, in form
and substance satisfactory to it, all certificates, consents, affidavits,
schedules, instruments, and other documents which the Company is obligated to
provide to Boston Chicken hereunder or which Boston Chicken may at any time
reasonably request.
3.7 Amount of Advances. (a) Boston Chicken shall have received a
certificate of the Company, which shall be signed by the president or chief
financial officer of the Company, and which shall certify that the amount of the
requested Advance is the amount the Company reasonably expects to expend within
the 30-day period immediately following the receipt of the Advance for working
capital purposes and to purchase, design, construct and equip bagel stores
operated under one of the trademarks owned by the Company or any of its
Subsidiaries (the "Stores") that are scheduled to open within 6 months of the
Advance date or, in the case of free-standing Stores for which a building must
be constructed, 9 months from the Advance date. Such certificate, including the
estimated amounts set forth therein, shall be satisfactory to Boston Chicken in
its reasonable discretion.
(b) Anything herein to the contrary notwithstanding, the Company may
request an Advance hereunder in an amount in excess of the limitations set forth
in subsection (a) above (an "Excess Cash Advance"), provided that (i) Boston
Chicken may, in its sole discretion, refuse to fund such Excess Cash Advance
unless such Advance is funded through
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the issuance of Shares, and (ii) the Company may not request an Excess Cash
Advance at any time that the Company would own Shares with an aggregate value
equal to or greater than $15,000,000.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants that:
4.1 Financial Statements. The financial statements to be furnished
to Boston Chicken pursuant hereto will be prepared in conformity with generally
accepted accounting principles consistently applied throughout the periods
involved, and will fairly present the financial condition of the Company and its
Subsidiaries at the dates thereof and its results of operations for the periods
indicated.
4.2 Capital Stock. The Company's authorized stock consists of
1,200,000 shares of capital stock, of which 1,000,000 shares are common stock,
$.01 par value per share and 200,000 shares are preferred stock, $.01 par value
per share. As of May 15, 1996, of the Company's authorized capital stock, (a)
32,014.2302 shares of common stock are issued and outstanding, (b) 68,032.99
shares of common stock are reserved for issuance upon the conversion of the Note
or exercise of the Option, (c) 16,325 shares of common stock are reserved for
issuance upon the exercise of options granted under the Company's Amended and
Restated 1995 Stock Option Plan, and (d) 6,250 shares of series A convertible
preferred stock are issued and outstanding. Such issued and outstanding shares
are fully paid and non-assessable and are free and clear of all liens, claims
and encumbrances of any kind. The shares to be issued and delivered to the
holder of the Note upon any conversion of the Note or exercise of the Option,
when so issued and delivered, will be fully paid and non-assessable and free and
clear of all liens, claims and encumbrances of any kind. Except for (i) options
granted under the Company's Amended and Restated 1995 Stock Option Plan, (ii) a
warrant issued to Einstein Bros. Equity Funding, L.L.C. to purchase 4,500 shares
of common stock for an exercise price of $1,456.48 per share pursuant to that
certain warrant certificate dated December 29, 1995, (iii) warrants to purchase
up to 3,095 shares in the aggregate of common stock for an exercise price of
$1,456.48 per share issued to area developers and prospective area developers of
the Company, (iv) a warrant that may be issued to BA Securities, Inc. to
purchase 83.3333 shares of common stock for an exercise price of $2,604.58 per
share pursuant to that certain warrant certificate dated May 17, 1996, and (v)
as otherwise provided herein and in the Convertible Note, there are no
outstanding options, warrants, rights, contracts or agreements of any kind for
the issuance or sale of any shares of capital stock of the Company or for the
issuance or sale of other securities or obligations of the Company or for the
purchase by the Company of any of its shares.
4.3 No Material Adverse Change. Since the date hereof, there has
been no material adverse change in the financial condition, results of
operations, assets, or business of the Company and its Subsidiaries, taken as a
whole.
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4.4 No Pending Material Litigation or Proceedings. There are no
actions, suits, investigations or proceedings pending or, to the knowledge of
the Company or its Subsidiaries, threatened against or affecting the Company or
its Subsidiaries or the business or properties of the Company or its
Subsidiaries, in any court or before or by any governmental department,
commission, board, agency or instrumentality, or any arbitrator that is
reasonably expected to be determined adversely to the Company and would have a
material adverse effect on the financial condition or results of operations of
the Company or any of its Subsidiaries. Neither the Company nor any of its
Subsidiaries is in default with respect to any order, writ, injunction, or
decree of any court or arbitrator or governmental agency which would have a
material adverse effect on the financial condition or results of operations of
the Company or any of its Subsidiaries.
4.5 Valid Organization; Due Authorization; Valid and Binding
Agreement. (a) The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, with corporate
power and authority to enter into and perform this Agreement and to issue the
Notes and incur the indebtedness to be evidenced thereby. The Company is
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which failure to so qualify could have a material adverse
affect on its property, business, operations, or prospects.
(b) This Agreement and the Notes have each been duly authorized
by all required corporate action on the part of the Company, and each of this
Agreement and the Notes has been duly executed and delivered by the Company and
constitutes the legal, valid, and binding obligation of the Company enforceable
in accordance with its terms.
(c) The execution and delivery of this Agreement and the Notes
and the performance by the Company of its obligations hereunder and thereunder
are not in contravention of any law, rule or regulation, including without
limitation Regulation G, T, U, or X of the Board of Governors of the Federal
Reserve System, and will not conflict with or result in any breach of any of the
provisions, or constitute a default under or result in the creation or
imposition of any lien or encumbrance (except as expressly provided herein) upon
any of the property of the Company pursuant to any of the provisions of the
Certificate of Incorporation or bylaws of the Company or any agreement or
instrument to which the Company is a party or by which it or its assets is
bound.
(d) No consent, authorization, approval, or other action by, and
no notice to or filing with, any governmental authority or regulatory body or
any other person, which has not been obtained or taken, is required for the
execution and delivery of, or the performance by the Company of its obligations
under, this Agreement or the Notes.
4.6 Conduct of Business. Since their inception, the Company and each
Subsidiary has conducted its business and operations in a manner consistent with
that of a multi-unit food service establishment and has not engaged in any
business other than the business of establishing, opening, and operating Stores.
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4.7 Absence of Material Liabilities. Neither the Company nor any
Subsidiary has any material liabilities or obligations, either accrued,
absolute, contingent, or otherwise, except (a) as set forth in its most recent
unaudited balance sheet, (b) normal liabilities and obligations incurred in the
ordinary course of business since the date of its most recent unaudited balance
sheet, and (c) obligations under contracts and agreements entered into in the
ordinary course of business.
4.8 Tax Matters. The Company and its Subsidiaries have filed all
federal, state, and local tax returns which are required to be filed, except for
extensions duly obtained, and has paid, or made provisions for the payment of,
all taxes which have become due pursuant to such returns or pursuant to any
assessment received by the Company or any Subsidiary, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided.
4.9 Investment Company Act. The Company is not an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
4.10 Public Utility Holding Company Act. The Company is not a
"holding company", or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.11 Subsidiaries. Schedule 4.11 hereto correctly sets forth the
corporate name, jurisdiction of incorporation and ownership of each Subsidiary
of the Company. Each such Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly qualified to do business in each additional
jurisdiction where such qualification is or may be necessary under applicable
law and where the failure to be so qualified would have a material adverse
effect on such Subsidiary. Each Subsidiary of the Company has all requisite
corporate power to own or lease the properties used in its business and to carry
on its business as now being conducted and as proposed to be conducted. All
outstanding shares of capital stock of each class of each Subsidiary of the
Company have been validly issued and are fully paid and nonassessable and are
owned, beneficially and of record, by the Company free and clear of any liens,
except liens in favor of Bank of America Illinois, as Agent under the
Einsteins/BofA Credit Agreement (as defined in Section 5.1).
ARTICLE V
COVENANTS
---------
So long as this Agreement remains in effect:
5.1 Incorporation of covenants by reference. The Company covenants
and agrees that, from and after the Closing Date until all obligations of the
Company have been paid
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in full, it shall duly keep, perform and observe each and every covenant set
forth in Article V of that certain Secured Credit Agreement dated as of May 17,
1996 among the Company, the Lenders named therein and Bank of America Illinois,
as Agent and Issuing Lender, as the same may be amended from time to time (the
"Einsteins/BofA Credit Agreement"). All of such covenants, together with the
related definitions and ancillary provisions and schedules, are hereby
incorporated into this Agreement by reference, mutatis mutandis, as if such
terms were set forth in this Agreement in full, without regard to any
termination of the Einsteins/BofA Credit Agreement, without regard to the
expiration of any commitment thereunder and without regard to the final payment
in full of any obligations of the Company or any other person or entity
thereunder. If an event is the subject of both a covenant incorporated herein by
reference and another covenant set forth in this Agreement, the Company shall
comply with the covenant that imposes the stricter requirement. The waiver by
the Lenders of any default or breach of any covenant under the Einsteins/BofA
Credit Agreement shall constitute a waiver by Boston Chicken of such default or
breach hereunder.
5.2 Reservation of Common Stock. The Company covenants that it will
at all times reserve and keep available, solely for the purpose of issuance upon
conversion of the Convertible Note or exercise of the Option, or both, such
number of shares of its common stock as would be issuable upon the conversion
of, or exercise of the Option for, $120,000,000. The Company covenants that if
any shares of its common stock required to be reserved for issuance upon
conversion of the Convertible Note or exercise of the Option require
registration with or approval of any governmental authority under any Federal or
state law before such shares may be issued upon such conversion of exercise, the
Company will, at its expense and as expeditiously as possible, cause such shares
to be duly registered or approved, as the case may be.
5.3 Rights Regarding Future Financings. If, at any time after the
Closing Date through the later of the date on which the outstanding principal
balance of the Loans and all accrued interest thereon is paid in full or the
expiration of the term of the Option in accordance with the provisions of
Section 1.8 hereof, the Company determines that it requires additional financing
(whether debt or equity) (including, but not limited to, all capital-type
transactions and sale/leaseback transactions), it agrees (a) to negotiate in
good faith with Boston Chicken for a period of 45 days with regard to any
portion or the entire amount (at the option of Boston Chicken) of such financing
prior to negotiating with any other entity with regard thereto, (b) in the event
the Company has engaged in good faith negotiations under clause (a) of this
Section 5.3 and such negotiations have been unsuccessful, to notify Boston
Chicken of the existence of any other financing arrangement it proposes to
consummate and the terms and conditions thereof and grant to Boston Chicken a
right of first refusal with respect to such financing on the same terms and
subject to the same conditions contained therein and upon receipt of such notice
(setting forth in detail all relevant terms and conditions of such financing),
Boston Chicken shall have 20 days thereafter in which to agree to assume all of
the financing on the same terms and conditions, and (c) with respect to any
financing other than a pure debt financing in which the debt instrument to be
offered has no equity-type features, to grant to Boston Chicken a preemptive
right to participate therein on a fully diluted basis for a period of 45 days.
As used herein the term "fully diluted basis" shall mean Boston Chicken's
ability to maintain the same percentage equity interest in the Company
(calculated by including as outstanding the shares of
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common stock of the Company subject to all outstanding options and warrants,
including shares of common stock which Boston Chicken then has a right to
purchase hereunder either through conversion pursuant to Section 1.7 or the
exercise of its Option pursuant to Section 1.8 hereof) after such financing is
completed as it had prior to such financing. Boston Chicken acknowledges that
the right of first negotiation as set forth in clause (a) above does not
preclude the Company from making inquiries in the relevant marketplace to obtain
information regarding the terms of a financing solely for purposes of
comparison. The failure by Boston Chicken to exercise its rights under any
provision of this Section 5.3 within the time period specified shall be deemed
to constitute a waiver of its rights under such provision. Notwithstanding
anything herein to the contrary, the rights of Boston Chicken under clauses (a)
and (b) above shall not apply in the event (x) Boston Chicken assigns the Loans
or its obligations to make the Loans hereunder and (y) the Company desires
thereafter to obtain debt financing the proceeds of which will be used to prepay
the Loans in full.
5.4 HSR Act Compliance. In the event Boston Chicken determines that
any filing is required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") in connection with any exercise of the
conversion rights pursuant to Section 1.7 hereof or of the Option pursuant to
Section 1.8 hereof, the Company agrees to prepare and file with the Federal
Trade Commission and the United States Department of Justice within 10 business
days from the date of notice from Boston Chicken any notification required to be
filed under the HSR Act or any rules or regulations promulgated thereunder.
Boston Chicken shall pay any filing fees required under the HSR Act in
connection with such filing. Any information about the Company or its
Subsidiaries contained in such filing shall be true and accurate in all material
respects and responsive to the requirements of the HSR Act and any such rules
and regulations. Each of the Company and Boston Chicken shall make available to
the other party such information as may be required for the preparation of any
such notification or related reports.
5.5 Sale of Shares. In the event Boston Chicken funds any Advance
hereunder with Shares, the Company agrees that (a) promptly upon the receipt by
the Company of the cash proceeds from the sale of all or any number of such
Shares, the Company shall pay to Boston Chicken the net cash proceeds from the
sale of such Shares in an amount up to the principal amount of the Loan then
outstanding hereunder, which will be applied by Boston Chicken to repayment of
such principal amount, (b) in determining if and when to sell the Shares,
neither Scott Beck nor any executive officer of Boston Chicken nor any director
of the Company designated by Boston Chicken shall have any responsibility for or
input into such selling decisions, (c) during any trading day during the
Guarantee Period the Company will not sell a number of Shares equal to or
greater than 50,000 Shares provided, that notwithstanding the limitations on
sales set forth in this paragraph, on any day during the Guarantee Period,
Boston Chicken may permit the Company to sell all or more than 50,000 Shares
received with respect to a particular Advance subject to the volume limitations
contained from time to time in the Prospectus, and (d) it will not sell any
Shares received in respect of an Advance during any period when Boston Chicken
has notified the Company in writing that the resale of the Shares would be
prohibited by Rule 10b-6 under the 1934 Act; provided, that if such prohibition
occurs
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during the Guarantee Period the Guarantee Period shall be extended one full day
for each day that the Company is prohibited from selling as a result of the
limitations in this Section 5.5.
5.6 Certificate of Incorporation and Bylaws; Stockholder's Consent.
The Company shall not make any changes in or amendments to its Certificate of
Incorporation or bylaws as they are in effect as of the date hereof; except that
the Company may amend its Certificate of Incorporation solely to increase the
number of authorized shares of its common stock by the amount necessary to
consummate any financing as to which Boston Chicken has waived its rights
pursuant to and in accordance with Section 5.3 hereof. The Company shall not
permit its stockholders to take any action by written consent in lieu of a
meeting without the prior written consent of Boston Chicken.
5.7 Issuance of Stock; Grant of Options. Except (a) for shares of
common stock of the Company which may be issued upon (i) exercise of options
granted under the Company's Amended and Restated 1995 Stock Option Plan pursuant
to grants approved under clause (b) of this Section 5.6, (ii) exercise of the
Option, (iii) conversion of any portion of the outstanding principal balance of
the Convertible Loan as provided in the Convertible Note, and (iv) consummation
of any financing as to which Boston Chicken has waived its rights pursuant to
and in accordance with Section 5.3 hereof, and (b) for options granted under the
Company's Amended and Restated 1995 Stock Option Plan which are approved by
Boston Chicken, in its sole discretion, the Company will not issue any
additional shares of any class of its capital stock or grant any option,
warrant, or similar right to acquire shares of any class of its capital stock.
5.8 Notices. The Company shall deliver to Boston Chicken copies of
all notices and other written communications sent or received by the Company
under or in connection with the Einsteins/BofA Credit Agreement within 2
business days after receipt thereof, including without limitation any notice of
default or breach thereunder, provided, that the Company shall not be obligated
to furnish to Boston Chicken recurring or routine communications relating to
collateral or perfection of security interests under the Einsteins/BofA Credit
Agreement.
ARTICLE VI
RESERVED
--------
ARTICLE VII
CONDITIONS OF CLOSING
---------------------
Boston Chicken's obligations hereunder shall be subject to (a) the
performance by the Company prior to or on the Closing Date of all of its
covenants theretofore to be performed under this Agreement, (b) the accuracy of
the Company's representations and warranties
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contained in this Agreement on the Closing Date, and (c) the satisfaction, prior
to or on the Closing Date, of the following further conditions:
7.1 Opinion of Counsel. Boston Chicken shall have received on the
Closing Date from Holme Roberts & Owen, L.L.C. an opinion, dated the Closing
Date, in the form and substance satisfactory to Boston Chicken.
7.2 Proceedings and Documents. All proceedings to be taken in
connection with the transaction contemplated by this Agreement and all documents
incident to such transaction shall be satisfactory in form and substance to
Boston Chicken and its counsel, and Boston Chicken shall have received all
documents or other evidence which it and its counsel may reasonably have
requested in connection with such transaction, including copies of records of
all corporate proceedings in connection with such transaction and compliance
with the conditions set forth in this Article VII, in form and substance
satisfactory to Boston Chicken and its counsel.
7.3 Executed Documents. The Company shall have each duly executed
the following documents to which they are parties, and shall have delivered to
Boston Chicken the following:
(a) this Agreement; and
(b) the Notes.
7.4 No Defaults. There shall exist no Event of Default or Default.
7.5 Additional Deliveries. Boston Chicken shall have received, in
form and substance satisfactory to it, copies of the following documents:
(a) the Company's Certificate of Incorporation, certified as true
and correct by the Secretary of State of Delaware, dated within ten days prior
to the Closing Date, and certified as true and correct as of the Closing Date by
a duly authorized officer of the Company;
(b) the Company's bylaws, as are in force and effect on the
Closing Date, certified as true and correct by the Secretary of the Company;
(c) copies of certificates of good standing and corporate
existence of the Company from the Secretary of State of Delaware and such other
states where failure to qualify would result in a material adverse change in the
financial condition of the Company and its Subsidiaries;
(d) authorizing resolutions of the board of directors of the
Company and evidence of other corporate action taken by the Company to
authorize, among other things, the execution, delivery, and performance by the
Company of this Agreement and the Notes and the consummation of the transactions
contemplated hereby, including resolutions reserving
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shares of common stock for issuance upon the conversion of the Convertible Loan
and the exercise of the Option, certified as true and correct as of the Closing
Date by a duly authorized officer of the Company; and
(e) a copy of the Einsteins/BofA Credit Agreement, certified as
true and correct and in full force and effect by the Secretary of the Company.
7.6 Opinion of Auditors. Boston Chicken shall have received on the
Closing Date from Boston Chicken's independent public accountants an opinion,
dated the Closing Date, in form and substance satisfactory to Boston Chicken, to
the effect that the Notes and the obligations incurred hereunder are deemed to
be debt, and not equity, in accordance with generally accepted accounting
principles.
7.7 Stockholders' Equity. Boston Chicken shall have received
evidence, satisfactory to it, that the Company has, on the Closing Date,
stockholders' equity of at least $33,500,000.
7.8 Compliance with BC Credit Line. Boston Chicken shall determine
in good faith that this Agreement complies with applicable restrictions or
limitations under the Amended and Restated Credit Agreement among Boston
Chicken, the lenders named therein and Bank of America Illinois, as Agent (the
"BC Credit Line").
ARTICLE VIII
DEFAULT, RIGHTS AND REMEDIES OF BOSTON CHICKEN
----------------------------------------------
8.1 Default. The occurrence of any of the following events or acts
shall constitute a default ("Default"):
(a) Default in the payment when due of any portion of the
principal on either of the Notes and the continuance of such default for a
period of three days;
(b) Default in the payment when due of any portion of the
interest on the outstanding principal of either of the Notes and the continuance
of such default for a period of 10 days;
(c) any representation or warranty now or hereafter made in this
Agreement, the Service Agreements, the Notes, or any certificate hereunder or
thereunder shall not be true in any material respect as of the date given or
deemed given, or any certificate, statement, report, financial data, or notice
furnished at any time by the Company to Boston Chicken shall be materially
inaccurate as of the date given or deemed given;
(e) intentionally omitted;
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(f) any breach of, or failure to perform or observe, any other
covenant, condition, or agreement contained in this Agreement or the Notes which
shall continue unremedied for a period of 10 calendar days following notice
thereof from Boston Chicken;
(g) the Company or any Subsidiary shall (i) generally not, or
shall be unable to, or shall admit in writing its inability to pay its debts as
such debts become due, (ii) make an assignment for the benefit of creditors,
petition or apply to any tribunal for the appointment of a custodian, receiver,
or trustee for it or a substantial part of its assets, (iii) commence any
proceeding under any bankruptcy, reorganization, arrangements, readjustment of
debt, dissolution, or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect, (iv) have any such petition or application filed or
any such proceeding commenced against it in which an order for relief is entered
or adjudication or appointment is made and which remains undismissed for a
period of 60 days or more, (v) by any act or omission, indicate its consent to,
approval of, or knowing acquiescence in any such petition, application, or
proceeding, or order for relief, or the appointment of a custodian, receiver, or
trustee for all or any substantial part of its properties, or (vi) suffer any
such custodianship, receivership, or trusteeship to continue undischarged for a
period of 60 days or more;
(h) intentionally omitted;
(i) dissolution or liquidation of the Company;
(j) intentionally omitted;
(k) the Company or any Subsidiary shall (a) fail to pay any
indebtedness for borrowed money (other than the Notes) of the Company or such
Subsidiary, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and any
applicable grace periods shall have expired, the effect of which is to cause the
acceleration of the maturity of such indebtedness prior to its expressed or
stated maturity, or (b) fail to perform or observe any term, covenant, or
condition on its part to be performed or observed under any agreement or
instrument relating to any such indebtedness, when required to be performed or
observed, the effect of which is to cause the acceleration of the maturity of
such indebtedness prior to its expressed or stated maturity, or (c) default in
the performance or observance of any obligations under leases of real property
if the effect of such default is to permit the termination of such lease;
(l) one or more judgments, decrees or orders for the payment of
money in excess of $100,000 in the aggregate and not otherwise fully covered by
insurance shall be rendered against the Company or any of its Subsidiaries, and
such judgments, decrees, or orders shall continue unsatisfied and in effect for
a period of 45 consecutive days without being vacated, discharged, satisfied,
escorted, stayed, or bonded pending appeal.
8.2 Default; Remedies. (a) In the event a Default shall exist or
occur Boston Chicken may:
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(i) terminate its obligations under this Agreement and cease to
make any further advances under Section 1.1, and shall have the right to
declare the Notes due and payable in full, without demand, presentment, or
notice of any kind;
(ii) convert any portion of the outstanding principal balance of
the Loan into shares of common stock in the Company as provided in the
Notes;
(iii) exercise all or a portion of the Option;
provided, however, that in the case of any event or condition described in
Section 8.1(g) with respect to the Company or any Subsidiary, Boston Chicken's
obligations under this Agreement shall automatically terminate forthwith and all
amounts owed by the Company hereunder and under the Notes shall automatically
become immediately due and payable without notice, demand, presentment, protest,
diligence, notice of dishonor, or other formality, all of which are hereby
expressly waived.
(b) All of Boston Chicken's rights and remedies under this
Agreement are cumulative and nonexclusive. Any conversion of, or exercise of the
Option with respect to, less than all of the principal balance outstanding under
the Convertible Note shall not affect Boston Chicken's rights and remedies with
respect to any portion not so converted or exercised.
8.3 No Waiver. Boston Chicken's failure, at any time or times
hereafter, to require the Company's strict compliance with or performance of any
provision of this Agreement shall not waive, affect, or diminish any right of
Boston Chicken thereafter to demand such strict compliance or performance
therewith. Any suspension or waiver by Boston Chicken of a Default or an Event
of Default by the Company under this Agreement or the Notes shall not suspend,
waive, or affect any other Default or Event of Default by the Company under this
Agreement or the Notes, whether the same is prior or subsequent thereto and
whether of the same or of a different kind or character. None of the
undertakings, agreements, warranties, covenants, and representations of the
Company contained in this Agreement or the Notes and no Default or Event of
Default by the Company under this Agreement or the Notes shall be deemed to have
been suspended or waived by Boston Chicken unless such suspension or waiver is
in writing signed by an officer of Boston Chicken.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 No Oral Change. This Agreement may not be changed orally, but
only by an agreement in writing and signed by the party against whom enforcement
of any waiver, change, modification, or discharge is sought.
9.2 Assignment. The Company may not assign any of its rights or
delegate any of its obligations under this Agreement without Boston Chicken's
written consent. Boston
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Chicken may assign any of its rights or delegate any of its obligations under
this Agreement (including assignment of this Agreement and the Notes), (a)
without notice to the Company, (i) to any Affiliate of Boston Chicken (except
the Company) or (ii) in connection with any pledge of its assets under the BC
Credit Line or similar credit agreement and (b) with notice, but without any
requirement of consent or approval, to any other person entity (except the
Company); provided, however, that Boston Chicken shall not make any such
assignment of its obligations unless at the time thereof Boston Chicken
reasonably believes the assignee is able to perform such obligations. Any such
assignment shall vest in the assignee all of the benefits under the documents so
assigned. For purposes of this Agreement, the term Affiliate of a specified
person shall mean any person or entity which directly, or indirectly through one
or more intermediaries, controls or is controlled by, or is under common control
with, the person specified.
9.3 Costs and Attorneys' Fees. (a) Except as provided in subsection
(b) or (c) of this Section 9.3, each of the parties hereto shall pay its own
expenses (including accounting fees) incident to the negotiation and execution
of this Agreement and to the consummation of the transactions contemplated
hereby.
(b) The Company shall pay all reasonable attorneys' fees and any
costs and charges relating to or arising out of (i) the negotiation and drafting
of this Agreement and all related documents and (ii) the enforcement by Boston
Chicken of its rights to collect any portion of the Loan.
(c) In any action not founded solely on grounds covered by
subsection (b) of this Section 9.3, the party to the action who does not prevail
shall pay to the prevailing party the court costs and reasonable attorneys fees
and other expenses (including, but not limited to, fees and expenses of expert
witnesses or consulting experts) incurred directly or indirectly by the
prevailing party in connection with its prosecution or defense of the action, as
the case may be.
9.4 Communications and Notices. All communications and notices
provided for in this Agreement or under the Notes shall be in writing and shall
be deemed to have been duly given if delivered personally to the party to whose
attention the notice is directed or sent by overnight express, facsimile
transmission, express mail delivery service, or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:
If to the Company:
Einstein Bros. Bagels, Inc.
1526 Cole Blvd.
Suite 200
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 202-3490
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If to Boston Chicken:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 384-5339
with a copy to:
Bell, Boyd & Lloyd
70 West Madison Street, Suite 3300
Chicago, Illinois 60602
Attention: Amy S. Powers
Facsimile: (312) 372-2098
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given when so delivered. Any notice delivered by facsimile transmission shall be
deemed to have been given on the earlier of the date it is actually received or
one day after such transmission. Any notice delivered by overnight express
courier will be deemed to have been given on the next succeeding business day
after the day it is sent to the intended recipient at the address set forth
above, and any notice delivered by registered or certified mail or express mail
delivery service shall be deemed to have been duly given on the earlier of the
date it is actually received or three business days after it is sent to the
intended recipient at the address set forth above.
9.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAW
PROVISIONS THEREOF.
9.6 Headings. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part of
this Agreement.
9.7 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, and
the provisions of this Agreement shall be severable in any such instance.
9.8 Avoidance. To the extent that Boston Chicken receives any
payment on account of the Company's obligations hereunder, and any such
payment(s) and/or proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, subordinated, and/or
required to be repaid to a trustee, receiver, or any other party under any
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bankruptcy law, state or federal law, common law, or equitable cause, then, to
the extent of such payment(s) or proceeds received, the Company's obligations
hereunder, or part thereof intended to be satisfied, shall be revived and
continue in full force and effect, as if such payment(s) and/or proceeds had not
been received by Boston Chicken.
9.9 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
9.10 Entire Agreement. This Agreement and the Notes and the exhibits
to each of the foregoing contain the entire agreement of the parties hereto with
respect to the transactions contemplated herein, and collectively supersede all
prior understandings and agreements of the parties with respect to the subject
matter hereof.
9.11 General Indemnity. In addition to the payments pursuant to
Section 9.3, the Company agrees to indemnify, pay, and hold Boston Chicken and
any holder of the Notes, and the officers, directors, employees, agents, and
Affiliates of Boston Chicken and any such holder (collectively, the
"Indemnities"), harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses, and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for any of
such Indemnities in connection with any investigative, administrative, or
judicial proceeding commenced or threatened, whether or not any of such
Indemnities shall be designated a party thereto) that may be imposed on,
incurred by, or asserted against any Indemnitee, in any manner relating to or
arising out of this Agreement, the Notes and the exhibits or any other
agreements or document executed and delivered by the Company in connection
therewith, the Company's use and operation of the Stores, including any damage
to public or worker health and safety or the environment, Boston Chicken's
agreement to make the Loan hereunder, or the use or intended use of the proceeds
of the Loan (the "indemnified liabilities"); provided that the Company shall
have no obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of such
Indemnitee. To the extent that the undertaking to indemnify, pay, and hold
harmless set forth in the preceding sentence may be unenforceable because it
violates any law or public policy, the Company shall contribute the maximum
portion that it is permitted to pay under applicable law to the payment and
satisfaction of all indemnified liabilities incurred by the Indemnities or any
of them. The provisions of the undertakings and indemnification set out in this
Section 9.11 shall survive satisfaction and payment of the Company's obligations
hereunder and termination of this Agreement.
(b) Boston Chicken agrees to reimburse, to the extent permitted by
law, the Company, its directors, officers, employees and agents, and each
person, if any, who controls the Company within the meaning of the Securities
Act of 1933, as amended (the "1933 Act"), for any and all losses, claims,
damages, expenses and liabilities to which they or any of them may become
subject under the Act or any other statute or common law or otherwise by reason
of its offer and sale of Shares, and to reimburse the Company for any reasonable
legal or other expenses actually and reasonably incurred in connection with
investigating any claims and
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defending any actions, insofar as such losses, claims, damages, expenses,
liabilities, or actions arise out of, or are based upon:
(i) any untrue statement of a material fact or any alleged untrue
statement of a material fact contained in or incorporated by reference in the
registration statement which contains the Prospectus (the "Registration
Statement") or any post-effective amendment thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; or
(ii) any untrue statement of a material fact or any alleged
untrue statement of a material fact contained or incorporated by reference in
the Prospectus (as amended or supplemented if Boston Chicken shall have filed
with the Securities and Exchange Commission any amendment or supplement
thereto), if used within the period during which Boston Chicken is required to
keep the Registration Statement in which such Prospectus is contained current,
or the omission or alleged omission to state therein a material fact necessary
in order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading;
provided, however, that Boston Chicken's obligations contained herein shall not
apply to losses, claims, damages, expenses, liabilities, or actions arising out
of, or based upon any such untrue statement or any such omission or alleged
omission, if such statement or omission was made in reliance upon, and in
conformity with, information relating to the Company furnished to Boston Chicken
by the Company expressly for use in connection with the preparation of the
Registration Statement or any prospectus contained in the Registration Statement
or any such amendment or supplement thereto.
(c) The Company shall (in the same manner and to the same extent as
set forth in subsection (b) above), reimburse, to the extent permitted by law,
Boston Chicken, its directors, officers, employees and agents, and each person,
if any, who controls Boston Chicken within the meaning of the Act, if such
statement or omission was made in reliance upon and in conformity with
information relating to the Company furnished to Boston Chicken by the Company
expressly for use in connection with the preparation of the Registration
Statement or the Prospectus or any amendment or supplement thereto.
(d) Any person entitled to reimbursement hereunder will (i) give
written notice to the reimbursing party of any claim with respect to which it
seeks reimbursement within 14 days of the person entitled to reimbursement
paying the Reimbursable Expenses (provided, however, that any failure by a
person entitled to reimbursement hereunder to give such prompt written notice
shall not adversely affect such person's rights hereunder unless and then only
to the extent that such failure prejudices the rights of the reimbursing party
hereunder) and (ii) unless in such party's reasonable judgment a conflict or
interest between such party and the reimbursing parties may exist with respect
to such claim, permit such reimbursing party to assume the defense of such claim
with counsel reasonably satisfactory to the party being reimbursed. If such
defense is assumed, the reimbursing party will not be subject to any liability
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for any settlement made by the party being reimbursed without its consent (but
such consent will not be unreasonably withheld). A reimbursing party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
being reimbursed by such reimbursing party with respect to such claim, unless in
the reasonable judgment of such counsel a conflict of interest may exist between
such party being reimbursed and any other of such reimbursed parties with
respect to such claim.
(e) (i) If the reimbursement provided for in Section 9.11(b) and
(c) is unavailable to or insufficient to hold harmless the party being
reimbursed under paragraphs (b) or (c) hereof in respect of any losses, claims,
damages, expenses or liabilities referred to therein, then each applicable
reimbursing party, in lieu of reimbursing such party, shall contribute to the
amount paid or payable by such party being reimbursed as a result of such
losses, claims, damages, expenses, or liabilities in such proportion as is
appropriate to reflect the relative fault of Boston Chicken and the Company in
connection with the statements or omissions which resulted in such losses,
claims, damages, expenses, or liabilities. The relative fault of Boston Chicken
and the Company 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 Boston Chicken or by
the Company, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages, expenses,
and liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
(ii) Boston Chicken and the Company agree that it would not
be just and equitable if contribution pursuant to this Section were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(f) Boston Chicken agrees to reimburse the Company, within 14 days
after receipt of written evidence of payment thereof, for the reasonable legal
fees and expenses incurred by the Company in connection with the sale of the
Advance Shares.
9.12 Limitation on Damages. Notwithstanding anything to the contrary
herein no party hereto shall be liable for consequential, indirect, incidental,
special, speculative, or punitive damages (including, but not limited to, loss
of revenue or profit) whether such claim alleges breach of contract, tortious
conduct including, but not limited to, negligence, or any other theory, provided
that nothing herein shall limit or otherwise restrict the Company's obligation
to pay fees under the Service Agreements.
9.13 Confidentiality. Boston Chicken will maintain as confidential
any information obtained from the Company and/or its Subsidiaries other than
information which (i) at the time of disclosure or thereafter is generally known
by the public (other than as a result of a
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disclosure directly or indirectly by Boston Chicken or its agents or
representatives), (ii) is available to Boston Chicken on a non-confidential
basis from a source other than the Company, provided that such source was not at
the time bound by a confidentiality agreement with the Company or any of its
Subsidiaries, or (iii) has been independently developed by Boston Chicken.
9.14 Intentionally omitted.
9.15 Submission to Jurisdiction. The Company agrees that any legal
action or proceeding with respect to this Agreement, the Notes, or the
transactions contemplated hereby may be brought in any court of the State of
Colorado, or in any court of the United States of America sitting in Colorado,
and the Company hereby submits to and accepts generally and unconditionally the
jurisdiction of those courts with respect to their respective person and
property, and irrevocably consents to the service of process in connection with
any such action or proceeding by personal delivery to the Company or by the
mailing thereof by registered or certified mail, postage prepaid to the Company
at the address for the Company set forth in Section 9.4. Nothing in this
paragraph shall affect the right of Boston Chicken to service process in any
other manner permitted by law or limit the rights of Boston Chicken to bring any
such action or proceeding against the Company or property in the courts of any
other jurisdiction. The Company hereby irrevocably waives any objection to the
laying of venue of any such suit or proceeding in the above described courts.
9.16 Waiver of Jury Trial. No party to this instrument, which
includes any assignee, successor, heir or personal representative of a party,
shall seek a jury trial in any lawsuit, proceeding, counterclaim, or any other
litigation procedure based upon, or arising out of this Agreement, the Notes,
any Service Agreement, any related instrument, or the dealings or the
relationship between the parties. No party will seek to consolidate any such
action, in which a jury has been waived, with any other action in which a jury
trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 9.16 HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY
HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS
OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS PROVISION IS
A MATERIAL INDUCEMENT FOR BOSTON CHICKEN IN ENTERING INTO THIS AGREEMENT.
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IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date and year first above written.
EINSTEIN BROS. BAGELS, INC.
By: /s/ Paul A. Strasen
--------------------------
Title: Vice President
BOSTON CHICKEN, INC.
By: /s/ Donald J. Bingle
--------------------------
Title: Vice President
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EXHIBIT A
CONVERTIBLE NOTE
<PAGE>
RIGHTS OF THE HOLDER TO RECEIVE PAYMENT HEREUNDER ARE SUBJECT TO A SUBORDINATION
AGREEMENT DATED MAY 17, 1996 EXECUTED BY BOSTON CHICKEN, INC. IN FAVOR OF BANK
OF AMERICA ILLINOIS, AS AGENT FOR CERTAIN LENDERS
AMENDED AND RESTATED CONVERTIBLE NOTE
$120,000,000 Golden, Colorado
May 17, 1996
FOR VALUE RECEIVED, Einstein Bros. Bagels, Inc., a Delaware
corporation (the "Company"), promises to pay to the order of Boston Chicken,
Inc., a Delaware corporation ("Boston Chicken"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as Boston Chicken may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of one hundred twenty million
dollars ($120,000,000) and any interest thereon, or, if less, the aggregate
unpaid amount of the Loan made pursuant to Section 1.1 of the Loan Agreement and
any interest thereon.
This Amended and Restated Convertible Secured Note (the "Note")
evidences the Loan made under, and is referred to in and is executed and
delivered pursuant to, an Amended and Restated Loan Agreement dated as of May
17, 1996 between the Company and Boston Chicken (the "Loan Agreement"), to which
reference is hereby made for a statement of the terms and conditions under which
this Note may be repaid and accelerated. This Note is issued in exchange and
replacement for, and evidences the same indebtedness incurred to the date hereof
under, the Amended and Restated Convertible Secured Note dated March 7, 1996,
which, in turn was issued in exchange and replacement for, and evidences the
same indebtedness incurred to the date hereof under, the Amended and Restated
Convertible Secured Note dated January 30, 1996 which, in turn was issued in
exchange and replacement for, and evidenced the same indebtedness incurred to
the date thereof under, that certain Convertible Secured Note dated as of March
24, 1995 from the Company in favor of Boston Chicken (the "Prior Notes"). The
indebtedness evidenced by the Prior Notes is continuing indebtedness, and
nothing herein shall be deemed to constitute a payment, settlement, or novation
of the Prior Notes, or the release of, or otherwise adversely affect, any rights
of Boston Chicken against the undersigned, any guarantor, surety, or other party
primarily or secondarily liable for such indebtedness. Capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the Loan
Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of the Loan for the period commencing on the date the Loan is made until
the Loan is paid in full, at a per annum rate equal to the rate designated and
announced by Bank of America Illinois or its successor in interest (the "Bank")
from time to time as its "reference rate" in effect at its principal
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office in Chicago, Illinois, plus 1%. The interest rate shall be adjusted, from
time to time, on the same day on which the Bank adjusts its "reference rate."
Interest on the outstanding principal amount of the Loan shall be payable in
arrears on the first day of each Retail Period during the Interest Payment
Period, as otherwise provided herein in connection with principal payments, and
at maturity (whether by acceleration or otherwise).
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
Any principal payment due under this Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Note in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
Except as otherwise provided in the Loan Agreement, unless
accelerated, the outstanding principal amount of the Loan shall be payable to
Boston Chicken in 65 substantially equal periodic installments of principal (the
amount of which periodic installments of principal shall be determined at the
close of business on the Draw Loan Termination Date based on a schedule
amortizing such outstanding principal balance of the Loan as of such date in 130
substantially equal periodic installments of principal), plus accrued but unpaid
interest, on the first day of each Retail Period, commencing on the first day of
the seventh Retail Period in Boston Chicken's fiscal year 1998 and continuing
until the first day of the sixth Retail Period in Boston Chicken's fiscal year
2003, when the entire principal balance of the Loan and all interest accrued
thereon shall be due and payable.
This Note may be prepaid, without premium or penalty, at any time.
All payments made hereunder shall be applied first to interest and then to
outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Colorado, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by the Company and any endorser or
guarantor.
ARTICLE I
CONVERSION OF NOTE
------------------
1.1 The holder of this Note shall have the right, at such holder's
option, at any time after the earlier of (i) any acceleration of the Loan, (ii)
April 1, 1997, or (iii) an initial public offering of shares of common stock of
the Company registered pursuant to the Securities Act of
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1933, as amended, with the Securities and Exchange Commission, and up to the
later of the date on which the Company has properly repaid the outstanding
principal balance of the Loan and all accrued interest thereon in full or the
first day of the twelfth Retail Period in Boston Chicken's fiscal year 2003 to
convert, subject to the terms and provisions of this Article I, the outstanding
principal balance of this Note or any portion thereof into shares of common
stock, $.01 par value per share, of the Company (the "Common Stock"), at the
price of (a) $1,436.14 per share, for any conversion of (or Option exercise (as
provided in the Loan Agreement) for) the first $80,000,000 of principal amount
of the Loan and (b) $3,244.65 per share for any conversion of (or Option
exercise for) the remaining principal amount of the Loan, or in each case, in
the event an adjustment of such price has occurred pursuant to the provisions of
Section 1.3, then at the price as last adjusted (referred to herein as the
"Conversion Price"), upon surrender of this Note, the principal of which is so
to be converted, to the Company at any time during usual business hours together
with written notice (hereinafter referred to as "Conversion Notice") that the
holder elects to convert this Note into such shares of Common Stock in
accordance with the provisions of this Article I, and specifying the name or
names in which the certificate or certificates evidencing the shares of Common
Stock issuable upon such conversion shall be registered, together with the
addresses of the persons so named, and, if so required by the Company,
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company duly executed by the registered holder or his
attorney duly authorized in writing. In the event this Note is to be converted
in part only, the Company shall, upon surrender of this Note, execute and
deliver to the holder thereof, at the expense of the Company, a new Note in
principal amount equal to the unconverted portion of this Note. In no event
shall accrued interest be convertible into shares of Common Stock.
1.2 As promptly as practicable after the surrender, as herein
provided, of this Note for conversion and the receipt of the Conversion Notice
relating thereto, the Company shall deliver to or upon the written order of the
holder of this Note a certificate or certificates representing the number of
fully-paid and non-assessable shares of Common Stock of the Company into which
this Note may be converted in accordance with the provisions of this Article I
and a new Note for any unconverted portion of the principal amount hereof.
Subject to the following provisions of this Section 1.2, such conversion shall
be deemed to have been made immediately before the close of business on the date
that this Note shall have been surrendered for conversion together with the
Conversion Notice, so that the rights of the holder of this Note as a Noteholder
shall cease at such time and the person or persons entitled to receive the
shares of Common Stock upon conversion of this Note shall be treated for all
purposes as having become the record holder or holders of such shares of Common
Stock at such time, and such conversion shall be at the Conversion Price in
effect at such time; provided, however, that no such surrender on any date when
the stock transfer books of the Company shall be closed shall be effective to
constitute the person or persons entitled to receive the shares of Common Stock
upon such conversion as the record holder or holders of such shares of Common
Stock on such date, but such surrender shall be effective to constitute the
person or persons entitled to receive such shares of Common Stock as the record
holder or holders thereof for all purposes at the close of business on such next
succeeding day. If the last day for the exercise of the conversion right shall
not be a business day, then such conversion right may be exercised on the next
succeeding business day.
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1.3 (a) In case of any reclassification or change of outstanding
shares of Common Stock issuable upon conversion of this Note, or in case of any
consolidation or merger of the Company with or into any partnership,
corporation, or other entity (other than a merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of outstanding shares of Common Stock, other than a change in number of
shares issuable upon conversion of this Note) or in case of any sale or
conveyance to any partnership, corporation, or other entity of the property of
the Company as an entirety or substantially as an entirety, then the holder of
this Note shall have the right thereafter to convert this Note into the kind and
amount of shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale, or conveyance by a holder
of the number of shares of Common Stock of the Company issuable upon conversion
of this Note immediately prior to such reclassification, change, consolidation,
merger, sale, or conveyance, subject to adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for herein.
(b) The Conversion Price shall be adjusted in the event the Company
shall at any time (i) make a subdivision of or combine shares of Common Stock
outstanding or (ii) pay a dividend or make a distribution in cash, in kind, or
in securities of any kind (including, but not limited to, any stock split). In
the event the Company makes a subdivision of shares of Common Stock or pays a
dividend or makes a distribution in cash, in kind, or in securities of any kind,
the Conversion Price in effect immediately prior to such action shall be
appropriately decreased, and in the event the Company shall at any time combine
the shares of Common Stock outstanding, the Conversion Price in effect
immediately prior to such combination shall be appropriately increased. An
adjustment made pursuant to this Section 1.3(b) shall, in the event of a
subdivision or combination, become effective retroactively immediately after the
effective date thereof, and shall, in the event of a dividend or distribution,
become effective retroactively immediately after the record date for the
determination of stockholders entitled thereto. Whenever the Conversion Price is
adjusted, pursuant to this Section 1.3(b), the Company shall promptly cause a
notice to be given to such holder of this Note which will state the adjusted
Conversion Price.
(c) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon conversion of this Note as herein provided, such number of shares of Common
Stock as shall be issuable upon the conversion of the entire Maximum Principal
Balance of the Loan. The Company covenants that all shares of Common Stock which
shall be so issuable shall be duly and validly issued and fully-paid and non-
assessable.
(d) The Company covenants that if any shares of Common Stock to be
issued upon conversion of this Note require registration with or approval of any
governmental authority under any federal or state law before such shares may be
issued upon conversion, the Company will, at its expense and as expeditiously as
possible, cause such shares to be duly registered or approved, as the case may
be.
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(e) The issuance of certificates for shares of Common Stock upon the
conversion of this Note shall be made without charge to the converting
Noteholder for any tax in respect of the issuance of such certificates, and such
certificates shall be issued in the respective names of, or in such names as may
be directed by, the holder of this Note; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificate in a name
other than that of the holder of this Note, and the Company shall not be
required to issue or deliver such certificates unless and until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the reasonable satisfaction of
the Company that such tax has been paid.
(f) Conversion of any portion of the principal balance of this Note
shall not relieve the Company of its obligation to pay any accrued but unpaid
interest as of the date of conversion on the portion of the principal balance of
this Note so converted.
(g) To the extent that any portion of this Note is not converted into
shares of Common Stock, such portion shall remain a secured debt of the Company
payable in accordance with the terms of the Loan Agreement.
ARTICLE II
ADVANCES
--------
2.1 Loan advances may be made from time to time by Boston Chicken to
the Company in the manner and on the terms and subject to the conditions set
forth in the Loan Agreement. Upon granting each loan advance, Boston Chicken
shall record the making and amount of such advance on its books in a separate
loan account, and shall also record in the loan account all payments made by the
Company with respect to the Loan. The aggregate amount of all Advances, less the
amounts of payment of principal made by the Company, shall be the principal
amount outstanding under this Note. The loan account shall be prima facie
evidence of the unpaid amount of principal outstanding under this Note;
provided, however, that failure to maintain such account or record any advances
therein shall not relieve the Company of its obligations to repay the
outstanding principal amount of the Loan, all accrued interest thereon, and any
amount payable with respect thereto in accordance with the terms of this Note.
ARTICLE III
DEFAULT, RIGHTS AND REMEDIES OF HOLDER
--------------------------------------
3.1 The occurrence of a Default shall be a default under this Note.
Upon any default under this Note, the holder of this Note may declare this Note
due and payable in full and exercise such other rights and remedies as are
available to the holder under the Loan Agreement or applicable law.
5
<PAGE>
3.2 If there is any default under this Note, and this Note is placed
in the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, the Company promises to pay to the order of the
holder hereof such holder's reasonable attorneys' fees and court costs incurred
in collecting or attempting to collect or securing or attempting to secure this
Note.
ARTICLE IV
MISCELLANEOUS
-------------
4.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF COLORADO APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.
4.2 The holder of this Note may, with or without notice to any party,
and without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
and (v) at any time it deems it necessary or proper, call for and, should it be
made available, accept, as additional security, the signature or signatures of
additional parties or a security interest in property of any kind or description
or both.
4.3 Any provision herein, or in the Loan Agreement, or any other
document executed or delivered in connection herewith or therewith, or in any
other agreement or commitment, whether written or oral, expressed or implied, to
the contrary notwithstanding, neither Boston Chicken nor any holder hereof shall
in any event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that Boston Chicken or any holder hereof shall be
paid, as interest, a sum greater than the maximum amount permitted by applicable
law to be charged to the person primarily obligated to pay this Note at the time
in question. If any construction of this Note or the Loan Agreement, or any and
all other papers, agreements or commitments, indicate a different right given to
Boston Chicken or any holder hereof to ask for, demand, or receive any larger
sum as interest, such is a mistake in calculation or wording which this clause
shall override and control, it being the intention of the parties that this
Note, the Loan Agreement, and all other documents executed or delivered in
connection herewith shall in all ways comply with applicable law and proper
adjustments shall automatically be made accordingly. In the event that Boston
Chicken or any holder hereof ever receives, collects, or applies as interest,
any sum in excess of the maximum amount permitted by applicable law, if any,
such excess amount shall be applied to the reduction of the unpaid principal
balance of this Note, and if this Note is paid in full, any remaining excess
shall be paid to the Company. In determining whether or not the interest paid or
payable, under any specific contingency, exceeds
6
<PAGE>
the maximum amount permitted by applicable law, if any, the Company and any
holder hereof shall, to the maximum extent permitted under applicable law: (a)
characterize any non-principal payment as an expense or fee rather than as
interest, and (b) "spread" the total amount of interest throughout the entire
term of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be executed in
its corporate name by the undersigned officer, thereunto duly authorized.
EINSTEIN BROS. BAGELS, INC.
By:
---------------------------
Title:
---------------------------
7
<PAGE>
EXHIBIT A-2
AMENDED AND RESTATED
NONCONVERTIBLE NOTE
<PAGE>
RIGHTS OF THE HOLDER TO RECEIVE PAYMENT HEREUNDER ARE SUBJECT TO A SUBORDINATION
AGREEMENT DATED MAY 17, 1996 EXECUTED BY BOSTON CHICKEN, INC. IN FAVOR OF BANK
OF AMERICA ILLINOIS, AS AGENT FOR CERTAIN LENDERS
AMENDED AND RESTATED
NONCONVERTIBLE NOTE
$14,000,000 Golden, Colorado
May 17, 1996
FOR VALUE RECEIVED, Einstein Bros. Bagels, Inc., a Delaware
corporation (the "Company"), promises to pay to the order of Boston Chicken,
Inc., a Delaware corporation ("Boston Chicken"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as Boston Chicken may from time to time
designate in writing, in lawful money of the United States of America and in
immediately available funds, the principal sum of fourteen million dollars
($14,000,000) and any interest thereon, or, if less, the aggregate unpaid amount
of the Nonconvertible Loan (herein called the "Loan") made pursuant to Section
1.1 of the Loan Agreement and any interest thereon.
This Nonconvertible Secured Note (the "Note") evidences the Loan made
under, and is referred to in and is executed and delivered pursuant to, an
Amended and Restated Loan Agreement of even date herewith between the Company
and Boston Chicken (the "Loan Agreement"), to which reference is hereby made for
a statement of the terms and conditions under which this Note may be repaid and
accelerated. This Note is issued in exchange and replacement for, and evidences
the same indebtedness incurred to the date hereof under, the Nonconvertible
Secured Note dated May 9, 1996 from the Company in favor of Boston Chicken (the
"Prior Note"). The indebtedness evidenced by the Prior Note is continuing
indebtedness, and nothing herein shall be deemed to constitute a payment,
settlement, or novation of the Prior Note, or the release of, or otherwise
adversely affect, any rights of Boston Chicken against the undersigned, any
guarantor, surety, or other party primarily or secondarily liable for such
indebtedness. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of the Loan for the period commencing on the date the Loan is made until
the Loan is paid in full, at a per annum rate equal to the rate designated and
announced by Bank of America Illinois or its successor in interest (the "Bank")
from time to time as its "reference rate" in effect at its principal office in
Chicago, Illinois, plus 1%. The interest rate shall be adjusted, from time to
time, on the same day on which the Bank adjusts its "reference rate." Interest
on the outstanding principal
<PAGE>
amount of the Loan shall be payable in arrears on the first day of each Retail
Period during the Interest Payment Period, as otherwise provided herein in
connection with principal payments, and at maturity (whether by acceleration or
otherwise).
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
Any principal payment due under this Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Note in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
Except as otherwise provided in the Loan Agreement, unless
accelerated, the outstanding principal amount of the Loan shall be payable to
Boston Chicken in 65 substantially equal periodic installments of principal (the
amount of which periodic installments of principal shall be determined at the
close of business on the Draw Loan Termination Date based on a schedule
amortizing such outstanding principal balance of the Loan as of such date in 130
substantially equal periodic installments of principal), plus accrued but unpaid
interest, on the first day of each Retail Period, commencing on the first day of
the seventh Retail Period in Boston Chicken's fiscal year 1998 and continuing
until the first day of the sixth Retail Period in Boston Chicken's fiscal year
2003, when the entire principal balance of the Loan and all interest accrued
thereon shall be due and payable.
This Note may be prepaid, without premium or penalty, at any time. All
payments made hereunder shall be applied first to interest and then to
outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Colorado, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by the Company and any endorser or
guarantor.
Loan advances may be made from time to time by Boston Chicken to the
Company in the manner and on the terms and subject to the conditions set forth
in the Loan Agreement. Upon granting each loan advance, Boston Chicken shall
record the making and amount of such advance on its books in a separate loan
account, and shall also record in the loan account all payments made by the
Company with respect to the Loan. The aggregate amount of all Advances, less the
amounts of payment of principal made by the Company, shall be the principal
amount outstanding under this Note. The loan account shall be prima facie
evidence of the unpaid amount of principal outstanding under this Note;
provided, however, that failure to
2
<PAGE>
maintain such account or record any advances therein shall not relieve the
Company of its obligations to repay the outstanding principal amount of the
Loan, all accrued interest thereon, and any amount payable with respect thereto
in accordance with the terms of this Note.
The occurrence of a Default shall be a default under this Note. Upon
any default under this Note, the holder of this Note may declare this Note due
and payable in full and exercise such other rights and remedies as are available
to the holder under the Loan Agreement or applicable law.
If there is any default under this Note, and this Note is placed in
the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, the Company promises to pay to the order of the
holder hereof such holder's reasonable attorneys' fees and court costs incurred
in collecting or attempting to collect or securing or attempting to secure this
Note.
THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF, THE STATE OF COLORADO APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAW
PROVISIONS THEREOF.
The holder of this Note may, with or without notice to any party, and
without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
and (v) at any time it deems it necessary or proper, call for and, should it be
made available, accept, as additional security, the signature or signatures of
additional parties or a security interest in property of any kind or description
or both.
Any provision herein, or in the Loan Agreement, or any other document
executed or delivered in connection herewith or therewith, or in any other
agreement or commitment, whether written or oral, expressed or implied, to the
contrary notwithstanding, neither Boston Chicken nor any holder hereof shall in
any event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that Boston Chicken or any holder hereof shall be
paid, as interest, a sum greater than the maximum amount permitted by applicable
law to be charged to the person primarily obligated to pay this Note at the time
in question. If any construction of this Note or the Loan Agreement, or any and
all other papers, agreements or commitments, indicate a different right given to
Boston Chicken or any holder hereof to ask for, demand, or receive any larger
sum as interest, such is a mistake in calculation or wording which this clause
shall override and control, it being the intention of the parties that this
Note, the Loan
3
<PAGE>
Agreement, and all other documents executed or delivered in connection herewith
shall in all ways comply with applicable law and proper adjustments shall
automatically be made accordingly. In the event that Boston Chicken or any
holder hereof ever receives, collects, or applies as interest, any sum in excess
of the maximum amount permitted by applicable law, if any, such excess amount
shall be applied to the reduction of the unpaid principal balance of this Note,
and if this Note is paid in full, any remaining excess shall be paid to the
Company. In determining whether or not the interest paid or payable, under any
specific contingency, exceeds the maximum amount permitted by applicable law, if
any, the Company and any holder hereof shall, to the maximum extent permitted
under applicable law: (a) characterize any non-principal payment as an expense
or fee rather than as interest, and (b) "spread" the total amount of interest
throughout the entire term of this Note.
IN WITNESS WHEREOF, the Company has caused this Note to be executed in
its corporate name by the undersigned officer, thereunto duly authorized.
EINSTEIN BROS. BAGELS, INC.
By:
-------------------------
Title: Vice President
4
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE TO ACCOMPANY ADVANCES
<PAGE>
EXHIBIT B
---------
CERTIFICATE
The undersigned, the ________________ of Einstein Bros. Bagels, Inc. (the
"Company"), borrower under that certain Amended and Restated Loan Agreement
dated May ___, 1996 (the "Loan Agreement") between the Company and Boston
Chicken, Inc. ("Boston Chicken"), hereby requests an Advance of Loan proceeds in
the amount of $____________________.
In support of this request, the Company hereby represents and warrants to
Boston Chicken as follows:
1. Such Loan amount is required and will be used by the Company for the
purposes permitted under the Loan Agreement and for no other purpose.
2. The representations and warranties contained in Article IV of the Loan
Agreement are true and correct on and as of the date hereof, and will be true
and correct on the date such Advance is made.
3. No Default or Event of Default has occurred and is continuing.
4. All of the conditions to Advances set forth in Article III of the Loan
Agreement have been satisfied.
Capitalized terms used but not defined herein have the meanings ascribed
thereto in the Loan Agreement.
EINSTEIN BROS. BAGELS, INC.
By:
-------------------------
Title:
----------------------
Date: __________________________, 199__
<PAGE>
Exhibit 10.3(b)
FIRST AMENDMENT TO SECURED DEMAND NOTE
This First Amendment to Secured Demand Note (the "First Amendment") is made
and entered into as of the 7th day of March, 1996 by and between Einstein Bros.
Bagels, Inc., a Delaware corporation (the "Company"), and Boston Chicken, Inc.,
a Delaware corporation ("Boston Chicken").
RECITALS
--------
A. Company has heretofore executed that certain Secured Demand Note dated
January 30, 1996 (the "Note") payable to the order of Boston Chicken in the
original principal amount of $25,000,000.
B. Company and Boston Chicken have agreed to increase the principal amount
of the Note to $40,000,000, and desire to execute this First Amendment to
evidence such increase.
NOW, THEREFORE, in consideration of the mutual promises set forth below and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Boston Chicken and the Company agree as follows:
1. The Note is hereby amended by deleting all references to
"$25,000,000" and "twenty five million dollars" therefrom and substituting
"$40,000,000" and "forty million dollars", respectively in place thereof.
2. This First Amendment shall become effective when the Company and
Boston Chicken shall have each executed and delivered this First Amendment.
3. The Company represents and warrants to Boston Chicken that: (a) the
execution, delivery and performance of this First Amendment have been duly
authorized by all necessary action and will not require any consent or approval
of its shareholders, violate any provisions of any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award presently in effect
having applicability to it or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or its properties may be bound or affected;
(b) this First Amendment is the legal, valid and binding obligation of the
Company, enforceable against it in accordance with the terms thereof; and (c) no
default has occurred and is continuing or exists under the Note, as amended
hereby, as of the effective date hereof.
4. The Note, as amended hereby, is hereby ratified and confirmed and
remain in full force and effect in accordance with their respective terms.
<PAGE>
5. The Company agrees to pay and save Boston Chicken harmless from
liability for the payment of all costs and expenses arising in connection with
this First Amendment.
6. This First Amendment shall be governed by and construed in accordance
with the laws of the State of Colorado.
7. The First Amendment may be executed in two or more counterparts, each of
which together shall constitute the same agreement.
IN WITNESS WHEREOF, each of the undersigned has, through its duly
authorized officers, executed this First Amendment as of the day and year first
above written.
Borrower:
EINSTEIN BROS. BAGELS, INC.,
a Delaware corporation
By: /s/ Paul A. Strasen
-----------------------
Its: Vice President
-----------------------
Lender:
BOSTON CHICKEN, INC., a Delaware
corporation
By: /s/ Donald J. Bingle
---------------------------
Its: Vice President
---------------------------
2
<PAGE>
Exhibit 10.9
================================================================================
SECURED CREDIT AGREEMENT
dated as of May 17, 1996
among
EINSTEIN BROS. BAGELS, INC.,
THE LENDERS NAMED HEREIN
and
BANK OF AMERICA ILLINOIS
as Agent and Issuing Lender
================================================================================
<PAGE>
The following Table of Contents has been inserted for convenience only and does
not constitute a part of this Agreement.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS..................... 1
1.1. Defined Terms........................................ 1
1.2. Accounting Terms..................................... 15
ARTICLE II AMOUNT AND TERMS OF THE REVOLVING LOAN.............. 15
2.1. Revolving Loan Commitment............................ 15
2.2. Borrowing Procedure.................................. 16
2.3. Funding Reliance..................................... 18
2.4. Interest............................................. 19
2.5. Commitment Fee....................................... 20
2.6. Revolving Note....................................... 20
2.7. Prepayments; Reduction of Commitment................. 21
2.8. Mandatory Prepayments................................ 22
2.9. Method of Payment.................................... 22
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
2.10. Use of Proceeds..................................... 22
2.11. Sharing of Payments................................. 22
2.12. Increased Costs..................................... 23
2.13. Change in Rate of Return............................ 24
2.14. Basis for Determining Interest Rate Inadequate
or Unfair........................................ 25
2.15. Changes in Law Rendering Certain Loans Unlawful..... 26
2.16. Funding Losses...................................... 26
2.17. Right of Lenders to Fund Through Other Offices...... 26
2.18. Discretion of Lenders as to Manner of Funding....... 27
2.19. Mitigation of Circumstances; Replacement of
Affected Lender.................................. 27
2.20. Conclusiveness of Statements; Survival of
Provisions....................................... 28
ARTICLE IIA THE LETTERS OF CREDIT.............................. 28
2.1A LC Commitment........................................ 28
2.2A Request for Issuance of Letters of Credit............ 28
2.3A Expiration........................................... 29
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
2.4A Participation........................................ 29
2.5A Notification of Demand for Payment................... 29
2.6A Funding by Issuing Lender............................ 29
2.7A Non-Conforming Demand For Payment.................... 29
2.8A Return of Letter of Credit........................... 30
2.9A Reimbursement Agreement of the Borrower.............. 30
2.10A Funding By Lenders.................................. 30
2.11A Return of Funds Related to Non-Conforming
Demand........................................... 31
2.12A Obligation to Reimburse for or Participate in
Letter of Credit Payments........................ 31
2.13A Mandatory Payment to Agent of LC Obligations........ 32
2.14A Fees................................................ 32
2.15A Voluntary Reduction of the LC Commitments........... 33
2.16A Cash Collateral..................................... 33
2.17A Making of Payments.................................. 33
ARTICLE III CONDITIONS......................................... 34
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
3.1. Condition Precedent to Agreement..................... 34
3.2. Conditions Precedent to All Revolving Loans and
Letters of Credit................................ 37
ARTICLE IV REPRESENTATIONS AND WARRANTIES...................... 38
4.1. Incorporation, Good Standing, and Due
Qualification.................................... 38
4.2. Corporate Power and Authority........................ 38
4.3. Legally Enforceable Agreement........................ 39
4.4. Financial Statements................................. 39
4.5. Other Agreements..................................... 40
4.6. Litigation........................................... 40
4.7. No Defaults on Outstanding Judgments or Orders....... 41
4.8. Governmental and Regulatory Approvals................ 41
4.9. Ownership and Liens.................................. 41
4.10. Subsidiaries etc.................................... 41
4.11. ERISA............................................... 41
4.12. Real Property....................................... 41
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.13. Hazardous Materials................................. 42
4.14. Taxes............................................... 42
4.15. Debt................................................ 43
4.16. General Franchisee Information...................... 43
4.17. Collateral Information.............................. 43
4.18. Investment Company Act.............................. 44
4.19. Public Utility Holding Company Act.................. 44
ARTICLE V AFFIRMATIVE COVENANTS................................ 44
5.1. Maintenance of Existence............................. 44
5.2. Maintenance of Records............................... 44
5.3. Maintenance of Properties............................ 44
5.4. Conduct of Business.................................. 45
5.5. Maintenance of Insurance............................. 45
5.6. Compliance With Laws................................. 45
5.7. Right of Inspection.................................. 45
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5.8. Reporting Requirements............................... 46
5.9. Environmental Laws................................... 50
5.10. Notes, Certificates and Other Collateral............ 50
5.11. Subsidiary Defaults................................. 51
5.12. Annual Clean-Up..................................... 51
ARTICLE VI NEGATIVE COVENANTS................................. 52
6.1. Liens................................................ 52
6.2. Debt................................................. 54
6.3. Mergers, Etc......................................... 55
6.4. Leases............................................... 55
6.5. Sale and Leaseback................................... 56
6.6. Dividends............................................ 56
6.7. Sale of Assets....................................... 57
6.8. Investments.......................................... 58
6.9. Guaranties, Etc...................................... 59
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6.10. Transactions With Affiliate......................... 60
6.11. Subsidiary, Etc..................................... 61
6.12. Real Property....................................... 61
6.13. Financed Franchisee Loan Documents.................. 62
6.14. Subordinated Debt................................... 62
6.15. Use of Proceeds; Margin Regulations................. 63
6.16. Take or Pay Contracts............................... 63
ARTICLE VII FINANCIAL COVENANTS................................ 63
7.1. Store Revenue........................................ 63
7.2. Interest Coverage Ratio.............................. 63
7.3. Total Capital (Junior)............................... 64
7.4. Consolidated Senior Debt to Total Capital Ratio...... 64
7.5. Maximum Senior Indebtedness to EBITDAL............... 64
ARTICLE VIII EVENTS OF DEFAULT................................. 65
8.1. Events of Default.................................... 65
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
8.2. Effect of Event of Default........................... 70
ARTICLE IX THE AGENT........................................... 70
9.1. Authorization and Action............................. 70
9.2. Liability of the Agent to the Lenders................ 71
9.3. Bank of America Illinois and Affiliates.............. 71
9.4. Lender Credit Decision............................... 72
9.5. Indemnification...................................... 72
9.6. Successor Agent...................................... 73
ARTICLE X MISCELLANEOUS........................................ 73
10.1. Waivers and Amendments.............................. 73
10.2. Notices, Etc........................................ 74
10.3. No Waiver; Remedies................................. 74
10.4. Successors and Assigns.............................. 75
10.5. Assignments and Participations; Information......... 75
10.6. Costs, Expenses, and Taxes.......................... 76
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
10.7. Right of Setoff..................................... 76
10.8. Governing Law....................................... 77
10.9. Severability of Provisions.......................... 77
10.10. Headings........................................... 77
10.11. SUBMISSION TO JURISDICTION; WAIVER OF VENUE........ 77
10.12. General Indemnity.................................. 78
10.13. WAIVER OF JURY TRIAL............................... 79
10.14. SERVICE OF PROCESS................................. 79
10.15. Counterparts....................................... 79
10.16. Entire Agreement................................... 79
</TABLE>
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<PAGE>
SCHEDULES
Schedule 1.1(A) Requirements for Financed Franchisee Loan Documents
Schedule 1.1(B) Commitments
Schedule 4.10 Subsidiaries, etc.
Schedule 4.12 Real Property
Schedule 4.15 Debt
Schedule 4.16 Financed Franchisee Information
Schedule 4.17 Collateral Information
Schedule 6.1 Liens
Schedule 6.9 Guaranties
EXHIBITS
EXHIBIT A Form of Revolving Note ((S) 2.6)
EXHIBIT B Form of Borrowing Request ((S)2.2(1))
EXHIBIT C Form of Continuation/Conversion Notice ((S)2.2(2))
EXHIBIT D-1 Form of Opinion of Counsel for the Borrower and the Subsidiaries
((S)3.1)
EXHIBIT D-2 Form of Opinion of Counsel for BCI ((S)3.1)
EXHIBIT E Form of Guaranty ((S)3.1)
EXHIBIT F-1 Form of Security Agreement ((S)1.1)
EXHIBIT F-2 Form of Trademark Security Agreement ((S)1.1)
EXHIBIT F-3 Form of Collateral Assignment Servicing
Agreements ((S)1.1)
EXHIBIT G Form of Pledge Agreement ((S)1.1)
EXHIBIT H Form of Collateral Assignment of Lease ((S)1.1)
EXHIBIT I Form of Landlord's Consent ((S)1.1)
EXHIBIT J Form of Collateral Assignment of Loan ((S)1.1)
EXHIBIT K Form of BCI Subordination Agreement ((S)1.1)
-x-
<PAGE>
SECURED CREDIT AGREEMENT
THIS SECURED CREDIT AGREEMENT dated as of May 17, 1996, among EINSTEIN
BROS. BAGELS, INC., a Delaware corporation (the "Borrower"), the lenders whether
as original signatories or pursuant to Section 10.5 party hereto (herein,
together with any assignees thereof, collectively called the "Lenders" and each
individually called a "Lender") and BANK OF AMERICA ILLINOIS (together with any
successor thereto, "Bank of America Illinois"), as agent for the Lenders (herein
in such capacity, together with any successors thereto in such capacity, called
the "Agent") and as Issuing Lender (as hereinafter defined).
WHEREAS, the Borrower desires to obtain Commitments from the Lenders
pursuant to which Revolving Loans will be made and Letters of Credit will be
issued to the Borrower from time to time prior to the Termination Date;
WHEREAS, the Lenders are willing on the terms and subject to the
conditions hereinafter set forth (including Article III), to extend such
Commitments and make such Loans and issue such Letters of Credit to the
Borrower.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
Section 1.1. Defined Terms. As used in this Agreement the following
terms have the following meanings (terms defined in the singular to have the
same meaning when used in the plural and vice versa):
"Affected Lender" - See Section 2.15.
"Affiliate" means any Person other than a Financed Franchisee: (1)
which directly or indirectly controls, or is
<PAGE>
controlled by, or is under common control with, the Borrower or a Subsidiary;
(2) which directly or indirectly beneficially owns or holds, at the time of
determination, outstanding shares representing ten percent (10%) or more of any
class of capital stock, partnership units or other equity interests of the
Borrower or any Subsidiary (including, on a fully diluted basis, any options,
warrants and other rights to acquire capital stock, partnership units or other
equity interests which are exercisable at the time of determination, but
excluding any options, warrants and other rights to acquire capital stock,
partnership units or other equity interests which are not then exercisable); or
(3) ten percent (10%) or more of the capital stock, partnership units or other
equity interests of which (calculated in accordance with the foregoing Clause
(2)) is directly or indirectly beneficially owned or held by the Borrower or a
Subsidiary. For purposes of this definition only, the term control means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise; provided, that for
purposes hereof, the existence of a Franchise Agreement, Area Development
Agreement or similar agreement between the Borrower and a Person shall not, by
itself, evidence that such Person is controlled by the Borrower nor shall the
Financed Franchisee Loan Documents executed by a Franchisee evidence that such
Franchisee is an Affiliate of the Borrower prior to the acquisition by the
Borrower of an equity interest therein of in excess of ten percent (10%),
whether such acquisition occurs by conversion of debt, exercise of any equity
option, or otherwise (including acquisition by foreclosure following an
acceleration under the Financed Franchisee Loan Documents).
"Agent" - see Preamble.
"Agreement" means this Secured Credit Agreement, as amended,
supplemented, modified, restated, refinanced, refunded or renewed from time to
time.
"Authorized Officer" means any one of the following officers of the
Borrower: Chairman, President and Chief Executive Officer, Vice President or
Chief Financial Officer.
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"Bank of America Illinois" - see Preamble.
"BCI" means Boston Chicken, Inc., a Delaware corporation.
"BCI Control Stock" means common stock of BCI registered with the
Securities and Exchange Commission which is acquired by the Borrower in exchange
for the issuance by the Borrower to BCI of the Borrower's common stock.
"BCI Convertible Debt" means the Debt incurred pursuant to an Amended
and Restated Loan Agreement dated as of May 17, 1996, between the Borrower and
BCI, as lender, pursuant to which BCI agreed to make an unsecured convertible
loan to the Borrower in the maximum principal amount of $120,000,000, as such
Amended and Restated Loan Agreement is in effect on the Effective Date.
"BCI Exempted Stock" means common stock of BCI registered with the
Securities and Exchange Commission which is issued to the Borrower in lieu of
funding a borrowing under the BCI Convertible Debt with immediately available
funds.
"BCI Subordination Agreement" means a Subordination Agreement executed
by BCI with respect to the BCI Convertible Debt in substantially the form of
Exhibit K.
"Beneficiary" means any beneficiary under any Letter of Credit.
"Borrowing" means, on any Borrowing Date, a borrowing hereunder
consisting of Revolving Loans made to the Borrower at the same time by the
Lenders pursuant to Section 2. A Borrowing may be a Floating Rate Borrowing or
a Eurodollar Borrowing.
"Borrowing Date" means any Business Day specified in a notice pursuant
to Section 2.2 as a date on which the Borrower requests the Lenders to make
Revolving Loans hereunder.
"Borrowing Request" see Section 2.2.
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"Business Day" means any day other than a Saturday, Sunday, or other
day on which commercial banks in Chicago, Illinois are authorized or required to
close under the laws of the State of Illinois.
"Capital Lease" means all leases which have been or should be
capitalized on the books of the lessee in accordance with GAAP.
"Change of Control" means any time BCI shall fail to own or have the
right to acquire (whether or not presently exercisable) at least 50.1% of the
voting stock of the Borrower.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all property which is subject to, or is to be
subject to, the Lien granted by each Security Agreement, each Trademark Security
Agreement, the Collateral Assignment of Servicing Agreements, the Pledge
Agreement, any Collateral Assignment of Lease, any Landlord's Consent, any
Collateral Assignment of Loan or any other Loan Documents.
"Collateral Assignment of Lease" means a Collateral Assignment of
Tenant's Rights in Lease in substantially the form of Exhibit H to be delivered
by the Borrower under the terms of this Agreement.
"Collateral Assignment of Loan" means a Collateral Assignment of Loan
Documentation in substantially the form of Exhibit J to be delivered by the
Borrower under the terms of this Agreement.
"Collateral Assignment of Servicing Agreements" means the Collateral
Assignment of Servicing Agreements substantially in the form of Exhibit F-3, to
be delivered by the Borrower under the terms of this Agreement.
"Collateral Documents" means each Security Agreement, each Trademark
Security Agreement, the Collateral Assignment of Servicing Agreements, each
Pledge Agreement, each Collateral
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Assignment of Lease and Landlord's Consent, each Collateral Assignment of Loan
and each mortgage or deed of trust delivered from time to time in connection
with this Agreement.
"Commitment" means, at any time as to any Lender, collectively such
Lender's Loan Commitment and LC Commitment then in effect.
"Commitment Amount" means $45,000,000, as such amount may be reduced
from time to time pursuant to Section 2.7.
"Computation Period" means, with respect to the Borrower's (1) 4th
Retail Period, 1996, such Retail Period, (2) 5th Retail Period, 1996, the 4th
and 5th Retail Periods, 1996, (3) 6th Retail Period, 1996, the 4th, 5th and 6th
Retail Periods, 1996 and (4) fiscal quarters ending thereafter, such fiscal
quarter.
"Consolidated Interest Charges" means, for any period, the cash
interest expense (excluding all imputed interest related to any Capital Lease)
of the Borrower and its consolidated Subsidiaries for such period.
"Continuation/Conversion Notice" see Section 2.2.
"Debt" means with respect to any Person at any date, without
duplication: (1) indebtedness or liability for borrowed money, or for the
deferred purchase price of property or services (including trade obligations)
owed by such Person; (2) obligations of such Person as lessee under Financial
Leases; (3) current liabilities of such Person in respect of unfunded vested
benefits under any Plan; (4) obligations under letters of credit issued for the
account of such Person; (5) all obligations arising under bankers' acceptance
facilities issued for the account of such Person; (6) all guaranties by such
Person of the Debt or of operating leases of a third party, endorsements (other
than for collection or deposit in the ordinary course of business), and other
contingent obligations of such Person to purchase primarily for the purpose of
enabling a third party to make payment of Debt or payments with respect to
operating leases of such third party, to provide funds for payment of the Debt
or
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<PAGE>
of operating leases of a third party, to supply funds to invest in a third
party, or otherwise to assure a creditor of a third party against loss with
respect to the Debt or operating leases of such third party; (7) obligations
secured by any Lien on property owned by such Person, whether or not the
obligations have been assumed; and (8) obligations in respect of Hedging
Agreements.
"Default" means any of the events specified in Section 8.1, whether or
not any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Dollars" and the sign "$" shall mean lawful money of the United
States of America.
"EBITDAL" means, for each Computation Period, the product of (1) (a)
the consolidated net earnings of the Borrower and its consolidated Subsidiaries
plus (b) the aggregate amounts actually deducted in determining such net
earnings for such period in respect of (i) gross interest charges (including all
accrued and unpaid interest on Subordinated Debt), and (ii) provision for income
taxes, amortization and depreciation plus (c) to the extent not otherwise
included in net earnings, gross rental payments made by Financed Franchisees or
other sublessees under Financial Leases divided by (b) the number of Retail
Periods which occur in such Computation Period, multiplied by (2) thirteen (13).
"Effective Date" - see Section 3.1.
"Environmental Laws" means any and all federal, state, local laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges, releases
or threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment including, without
limitation, ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal,
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transport, or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
"Equity Issuance" means any issuance or sale (whether pursuant to a
public or private offering) by the Borrower of any shares of any class of its
capital stock, or any warrants, options or other rights with respect to shares
of any class of such capital stock.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published governmental
interpretations thereof.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with the Borrower would be treated as a single
employer under Section 4001 of ERISA.
"Eurocurrency Reserve Percentage" means, with respect to any
Eurodollar Loan for any Interest Period, a percentage (expressed as a decimal)
equal to the daily average during such Interest Period, as prescribed by the
Federal Reserve Board, for determining the aggregate maximum reserve
requirements (including all basic, supplemental, marginal and other reserves)
applicable to "Eurocurrency liabilities" pursuant to Regulation D or any other
then-applicable regulation of the Federal Reserve Board which prescribes reserve
requirements applicable to "Eurocurrency liabilities," as defined in Regulation
D, as applicable to the class of banks of which the Agent is a member. Without
limiting the effect of the foregoing, the Eurocurrency Reserve Percentage shall
reflect any other reserves required to be maintained by the Agent against (i)
any category of liabilities that includes deposits by reference to which the
Eurodollar Rate (Reserve Adjusted) is to be determined, or (ii) any category of
extensions of credit or other assets that includes Eurodollar Loan. For
purposes of this Agreement, any Eurodollar Loan hereunder shall be deemed to be
"Eurocurrency liabilities," as defined in Regulation D, and, as such, shall be
deemed to be subject to such reserve requirements without the benefit of, or
credit for, proration, exceptions or offsets which may be available to the Agent
from time to time under Regulation D.
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<PAGE>
"Eurodollar Loan" or "Eurodollar Borrowing" means any Revolving Loan
which bears interest at a rate determined by reference to the Eurodollar Rate
(Reserve Adjusted).
"Eurodollar Margin" - see Section 2.4(1)(b).
"Eurodollar Rate" means, with respect to any Eurodollar Loan for any
Interest Period, the rate per annum equal to the average (rounded upward, if
necessary, to the next higher 1/16 of 1%) rate per annum at which Dollar
deposits in immediately available funds are offered by the Lending Office of the
Agent two Business Days prior to the beginning of such Interest Period to prime
banks in the interbank eurodollar market as at or about the relevant local time
of such Lending Office, for delivery on the first day of such Interest Period,
for the number of days comprised therein and in an amount equal or comparable to
the amount of the Eurodollar Loan of the Agent for such Interest Period. As used
herein, "relevant local time" shall mean 11:00 A.M., London time, when the
Lending Office of the Agent is located in Europe, or 10:00 A.M., New York time,
when such Lending Office is located in North America or otherwise outside of
Europe.
"Eurodollar Rate (Reserve Adjusted)" means, with respect to any
Eurodollar Loan for any Interest Period, a rate per annum (rounded upward, if
necessary, to the nearest 1/100 of 1%) determined pursuant to the following
formula:
Eurodollar Rate = Eurodollar Rate
---------------
(Reserve Adjusted) 1-Eurocurrency
Reserve Percentage
"Event of Default" means any of the events specified in Section 8.1;
provided, that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, has been satisfied.
"Federal Funds Rate" means at any time an interest rate per annum
equal to the weighted average of the rates for overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published
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<PAGE>
for such day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the quotations for
such day for such transactions received by the Issuing Lender from three Federal
funds brokers of recognized standing selected by it, it being understood that
the Federal Funds Rate for any day which is not a Business Day shall be the
Federal Funds Rate for the next preceding Business Day.
"Financed Franchisee" means Doc's Cheese Company, L.L.C., a Delaware
limited liability company, and any Franchisee (other than a Subsidiary);
provided that each such Person has duly executed and delivered Financed
Franchisee Loan Documents.
"Financed Franchisee Loan Documents" means loan documents entered into
between the Borrower, as lender, and a Franchisee, as borrower, which, taken as
a whole, meet each of the requirements set forth on Schedule 1.1(A) (except for
paragraphs (1) and (2) of such Schedule 1.1(A) with respect to the Financed
Franchisee Loan Documents executed by Doc's Cheese Company, L.L.C.).
"Financed Subsidiary" means any Subsidiary which (1) is a Franchisee
and (2) was formerly a Financed Franchisee.
"Financed Subsidiary Loan Documents" means loan documents entered into
between the Borrower, as lender, and a Financed Subsidiary, as borrower, which
provide for loans that are secured by a perfected Lien (subject only to the
types of Liens described in Clauses (1) through (11) of Section 6.1) on all of
the assets of the Financed Subsidiary including, without limitation, all real
and personal property of such Financed Subsidiary and all leasehold interests of
such Financed Subsidiary (unless after such Financed Subsidiary's best efforts
(which shall not require unreasonable efforts) such Financed Subsidiary is
unable to obtain the consent of the respective landlord for such leasehold to
the extent such consent is required); it being understood that such loan
documents may permit the Borrower to subordinate the indebtedness evidenced by
such loan documents and its perfected Lien securing such indebtedness to the
loan and Lien of a third party lender (to the
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extent such third party loan is permitted pursuant to Section 6.2(6)), provided,
that the Borrower shall not agree to subordinate to the loan and Lien of such
third party lender (a) any of its rights of payment from the Financed Subsidiary
arising with respect to royalties, leases or software or (b) prior to a payment
default under the indebtedness owed by such Financed Subsidiary to a third party
lender, the interest payments on the indebtedness evidenced by such loan
documents.
"Financial LC Commitment Fee"- see Section 2.14A(1)(b).
"Financial Lease" means with respect to any Person at any date, any
Capital Lease of such Person and any operating lease of such Person entered into
outside of the ordinary course of business.
"Financial Lease Debt" as of any date means (1) with respect to any
Capital Lease under which the Borrower or any of its Subsidiaries is the lessee,
the principal amount thereof as of such date as determined in accordance with
GAAP; and (2) with respect to any other Financial Lease under which the Borrower
or any of its Subsidiaries is the lessee, the present value (using a market rate
of interest) as of such date of all remaining rental payments of the Borrower or
such Subsidiary under such Financial Leases.
"Financial Lease Payments" means, for any period, all payments made by
the Borrower or any of its Subsidiaries with respect to Financial Leases during
such period.
"Financial Letter of Credit" means any Letter of Credit determined by
the Issuing Lender to be a "financial guaranty-type standby letter of credit" as
defined in footnote 13 to Appendix A to the Risk Based Capital Guidelines issued
by the Comptroller of the Currency.
"Fixtures" means all fixtures of the Borrower, each Subsidiary, and
each Financed Franchisee of every description and all substitutions and
replacements of any thereof which are not by law or by contract the property of
any landlord of real property to which such fixtures are attached.
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"Floating Rate" means the higher of (i) the rate of interest announced
by Bank of America Illinois from time to time at its Head Office as its
reference rate, which rate is not intended to be the lowest rate of interest
charged by Bank of America Illinois to its borrowers, and (ii) the Federal Funds
Rate plus 1/2 of 1% per annum.
"Floating Rate Loan" or "Floating Rate Borrowing" means any Revolving
Loan which bears interest at a rate determined by reference to the Floating
Rate.
"Franchisee" means any Person (excluding the Borrower but including
any Subsidiary) who is party to a then existing Franchise Agreement, Area
Development Agreement or similar agreement with the Borrower or who is otherwise
authorized to operate a Store.
"GAAP" means generally accepted accounting principles in the United
States applied by the Borrower consistent with past practice (subject to changes
in accounting policies permitted by such generally accepted accounting
principles which have been or are contemporaneously disclosed in writing to each
Lender).
"Guaranty" means a guaranty issued by a Subsidiary in favor of the
Agent for the benefit of the Lenders in substantially the form of Exhibit E.
"Head Office" means the principal office of Bank of America Illinois
at 231 South LaSalle Street, Chicago, IL 60697 or such other place as designated
by the Agent.
"Hedging Agreement" means any interest rate, currency or commodity
swap agreement, interest rate cap agreement, interest rate collar agreement, or
other agreement or arrangement designed to protect a Person against fluctuations
in interest rates, currency exchange rates or commodity prices.
"Interest Period" see Section 2.4(3).
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"IPO" means an issuance of the Borrower's common stock in an initial
public offering registered with the Securities and Exchange Commission.
"Issuing Lender" means Bank of America Illinois, in its capacity as
the issuer of Letters of Credit for the Borrower's account pursuant to the terms
of this Agreement.
"Landlord's Consent" means a Landlord's Consent, in substantially the
form of Exhibit I.
"LC Administrative Fees" - see Section 2.14A(2).
"LC Application" means a letter of credit application in the form then
used by the Issuing Lender for the type of letter of credit requested (with
appropriate adjustments to indicate that any letter of credit issued thereunder
is to be issued pursuant to, and subject to the terms and conditions of, this
Agreement).
"LC Commitment" - see Section 2.1A.
"LC Commitment Fees" means collectively, the Financial LC Commitment
Fee and the Non-Financial LC Commitment Fee.
"LC Obligations" means any and all obligations of every description of
the Borrower in connection with the Letters of Credit issued pursuant to this
Agreement, including without limitation all reimbursement obligations (whether
absolute or contingent) under this Agreement, and all obligations in respect of
related fees or expenses.
"Lenders" or "Lender" shall have the meaning assigned to such term in
the Preamble.
"Lending Office" means, with respect to any Lender, any office
designated (whether or not notice is given to the Borrower) by such Lender in
its sole discretion as a Lending Office for purposes hereunder. A Lender may
designate separate Lending Offices for the purposes of making, maintaining or
continuing Floating Rate Loans, or Eurodollar Loans and, with
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respect to Eurodollar Loans, such Lending Office may be a foreign branch or an
affiliate of such Lender or such Lender's holding company.
"Letters of Credit" - see Section 2.1A.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement, or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing).
"Loan Commitment" means, at any time as to any Lender, obligations to
make Revolving Loans to the Borrower pursuant to Section 2.1 in an aggregate
amount, for each Lender, not to exceed the respective amount set forth opposite
such Lender's name on Schedule 1.1(B) for such point in time.
"Loan Documents" means this Agreement, the Revolving Note, each
Guaranty, each LC Application, the BCI Subordination Agreement, the Collateral
Documents and all other agreements, instruments and documents delivered from
time to time to the Agent or the Issuing Lender with respect to this Agreement
or with respect to any liabilities arising in connection herewith.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
"Material Adverse Change" means a material adverse change in the
condition (financial or otherwise), business, operations or prospects of the
Borrower and its Subsidiaries, taken as a whole.
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"Maximum Amount" means the amount equal to (i)(A) at any time, through
the last day of the Borrower's third fiscal quarter, 1996, four times EBITDAL,
and (B) at any time thereafter, three times EBITDAL, in each case, for the most
recently ended Computation Period for which the Lenders have received the
certificate described in Section 5.8(4), minus (ii) Senior Indebtedness (other
than Revolving Loans) then outstanding.
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of
ERISA and covered by Title IV of ERISA which covers employees of the Borrower or
any ERISA Affiliate.
"Net Proceeds" means the excess of (i) the gross cash proceeds
received by the Borrower as a result of any Equity Issuance, over (ii) all
reasonable fees and expenses (including underwriting discounts and legal,
investment banking and accounting and other professional fees) and disbursements
actually incurred in connection therewith.
"Net Worth" means, at any time, the sum of the total of stockholders'
equity (including capital stock, additional paid-in capital and retained
earnings after deducting treasury stock) of the Borrower and its consolidated
Subsidiaries, calculated in accordance with GAAP.
"Non-Financial LC Commitment Fee"- see Section 2.14A(1)(a).
"Non-Financial Letters of Credit" means any standby Letter of Credit
other than a Financial Letter of Credit.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Percentage" means, at any time as to any Lender, the percentage of
the Commitment Amount which such Lender's Commitment represents at such time.
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"Permitted Sale Leaseback Debt" means Debt incurred in connection with
any sale and subsequent leaseback of personal property and fixtures consummated
in accordance with a lease of equipment for bagel and cream cheese production
with Harlan Bakeries, Inc. or any of its Affiliates; provided, that the
aggregate outstanding amount of such Debt shall not at any one time exceed
$6,500,000 and the terms and conditions of such lease and related documentation
shall be in such form and substance acceptable to the Required Lenders.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority, or other entity of whatever nature.
"Plan" means any plan (as defined in Section 3(3) of ERISA and covered
by ERISA) established, maintained, or to which contributions have been made by
the Borrower or any ERISA Affiliate.
"Pledge Agreement" means any Pledge Agreement in substantially the
form of Exhibit G, delivered by the Borrower or a Subsidiary under the terms of
this Agreement.
"Prohibited Transaction" means any non-exempt transaction set forth in
Section 406 of ERISA or Section 4975 of the Code.
"Reportable Event" means any of the events set forth in Section 4043
of ERISA other than those events as to which the 30-day notice period is waived
under the regulations thereunder.
"Required Lenders" means Lenders whose aggregate Commitments represent
greater than 50% of the Commitment Amount, or if the Commitments have terminated
or expired, greater than 50% of the aggregate Revolving Loans outstanding at
such time; provided, that: (1) Required Lenders shall never be less than two
Lenders; (2) for purposes of amending, waiving or otherwise modifying the
provisions of Article 7, Required Lenders shall mean Lenders whose aggregate
Commitments represent greater than 66 2/3% of the Commitment Amount; (3) for
purposes of amending,
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waiving or otherwise modifying the provisions of Sections 6.1 or 6.2 to permit
any additional Debt of the Borrower or any Subsidiary secured by a Lien or Liens
on the assets of the Borrower or any Subsidiary, Required Lenders shall mean all
Lenders; and (4) for purposes of waiving or curing a Default or Event of
Default, changing the rate of interest or fees, releasing Collateral or
extending the Termination Date of this Agreement, Required Lenders shall mean
all Lenders.
"Retail Period" means any of the thirteen consecutive four-week
periods used by the Borrower for accounting purposes which begin on or about the
Monday after the last Sunday in December of each year and ending on the last
Sunday in December of the next year.
"Revolving Loan(s)" shall have the meaning assigned to such term in
Section 2.1.
"Revolving Note" shall have the meaning assigned to such term in
Section 2.6.
"Security Agreement" means any Security Agreement in substantially the
form of Exhibit F-1, delivered by the Borrower and each Subsidiary under the
terms of this Agreement.
"Senior Indebtedness" means the aggregate principal amount of
Revolving Loans plus the aggregate amount of all Financial Lease Debt.
"Significant Subsidiary" means a Subsidiary, including its
Subsidiaries, which meets either of the following conditions:
(1) The Borrower's and its other Subsidiaries' investments in and
advances to the Subsidiary exceed 10 percent of the total assets of the
Borrower and its Subsidiaries consolidated as of the end of the most
recently completed fiscal year; or
(2) The Borrower's and its other Subsidiaries' proportionate share of
the total assets (after intercompany eliminations) of the Subsidiary
exceeds 10
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percent of the total assets of the Borrower and its Subsidiaries
consolidated as of the end of the most recently completed fiscal year.
"Special Purpose Subsidiary" means any Subsidiary (which is not a
Franchisee): (1) of which the Borrower owns, directly or indirectly through one
or more intermediaries, or both, all of the issued and outstanding voting stock,
general partner's interests or other equity interests having ordinary voting
power to elect the board of directors or other managers of such Subsidiary; (2)
which has executed and delivered to the Agent a Guaranty and all other documents
which are set forth in Section 3.1(6); and (3) the only assets of which are real
property and leases of real property (in which such Subsidiary is the landlord)
to the extent permitted by Section 6.7; it is acknowledged that Brackman
Brothers, Inc., a Utah corporation, shall be deemed a "Special Purpose
Subsidiary" but that, solely with respect to its real property owned as of the
Effective Date, it shall not be required to deliver to the Agent the documents
set forth in Section 3.1(6).
"Store" means a bagel store operated under one of the trademarks owned
by the Borrower or any of its Subsidiaries.
"Subordinated Debt" means Debt of the Borrower which (1) is
subordinated in priority of payment to the Debt of the Borrower under this
Agreement and the Revolving Note in a manner consistent with the BCI
Subordination Agreement and (2) shall not mature prior to the Termination Date;
the Lenders acknowledge that, (a) prior to the conversion thereof into equity,
the BCI Convertible Debt shall constitute "Subordinated Debt", and (b) any other
Debt owed to BCI by the Borrower existing as of the Effective Date and covered
by the terms and conditions of the BCI Subordination Agreement shall constitute
"Subordinated Debt."
"Subsidiary" means, as to the Borrower, a Person (other than an
individual) of which shares of stock, partnership units or other equity
interests having ordinary voting power (other than shares having such power only
by reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such Person are at the time owned, or the
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management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by the Borrower, provided, however, that
"Subsidiary" shall not include any Person in which the Borrower does not own,
directly or indirectly through one or more intermediaries, an equity interest.
"Subsidiary Default" shall have the meaning assigned to such term in
Section 8.1(8).
"Termination Date" means April 30, 1998; provided, that if the
Borrower has not received at least $50,000,000 of aggregate Net Proceeds between
the Effective Date and August 31, 1996 then "Termination Date" means August 31,
1996.
"Total Capital" means, at any time, the sum of (i) Net Worth at such
time, plus (2) the principal amount of all Subordinated Debt then outstanding,
plus (3) the principal amount of all Revolving Loans then outstanding.
"Trademark Security Agreement" means any Trademark Security Agreement
substantially in the form of Exhibit F-2, to be delivered by the Borrower and
each Subsidiary under the terms of this Agreement.
"Type" - see Section 2.1(2). The Types of Loans or Borrowings under
this Agreement are: Floating Rate Loans or Borrowings and Eurodollar Loans or
Borrowings.
"Wholly-Owned Subsidiary" means any Subsidiary of which the Borrower
owns, directly or indirectly through one or more intermediaries, or both, all of
the issued and outstanding voting stock.
SECTION 1.2. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with that
applied in the preparation of the financial statements referred to in Section
4.4, and all financial data prepared by the Borrower and submitted pursuant to
this Agreement shall be prepared in accordance with such principles except for
the financial data submitted pursuant to Section 5.8(1) and such other financial
data which the Borrower expressly states has not been prepared in accordance
with such principles.
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ARTICLE II
AMOUNT AND TERMS OF THE REVOLVING LOAN
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SECTION 2.1. Revolving Loan Commitment.
(1) Subject to the terms and conditions set forth in this Agreement
and the other Loan Documents, each of the Lenders, severally and for itself
alone, agrees to make loans to the Borrower on a revolving basis (herein
collectively called the "Revolving Loans," and individually called a "Revolving
Loan") from time to time from the Effective Date to but not including the
Termination Date, at such times and in an amount equal to such Lender's
Percentage of such aggregate amounts as the Borrower may request from all of the
Lenders. The aggregate principal amount of Revolving Loans which any Lender
shall be committed to have outstanding to the Borrower, when added to the amount
of such Lender's participation in the Letters of Credit issued and outstanding
pursuant to Section 2.1A or drawn and not reimbursed pursuant to Section 2.9A,
shall not exceed at any time the lesser of (a) the amount set forth opposite
such Lender's name on Schedule 1.1(B) hereto, and (b) such Lender's Percentage
of the then existing Maximum Amount. The aggregate principal amount of all
Revolving Loans which all the Lenders shall be committed to have outstanding to
the Borrower, when added to the aggregate face amount of Letters of Credit
issued and outstanding pursuant to Section 2.1A or drawn and not reimbursed
pursuant to Section 2.9A, shall not at any one time exceed the lesser of (a) the
Commitment Amount then in effect, and (b) the then existing Maximum Amount. In
the event the aggregate outstanding principal balance of all Revolving Loans
plus the aggregate face amount of Letters of Credit issued and outstanding or
drawn and not reimbursed at any one time exceeds the lesser of (a) the
Commitment Amount, and (b) the then existing Maximum Amount, the Borrower shall,
unless all the Lenders shall otherwise consent, without notice or demand of any
kind, immediately make such repayments of the Revolving Loans or pledge cash
collateral to the Agent (pursuant to documentation reasonably satisfactory to
the Required Lenders, the Issuing Lender and the Agent) in an amount equal to
such excess or take such other actions as shall be necessary to eliminate such
excess. All Revolving Loans shall be repaid by the Borrower on the Termination
Date, unless paid or payable sooner pursuant to the provisions of this
Agreement.
(2) Various Types of Loans. Each Revolving Loan shall be either a
Floating Rate Loan or a Eurodollar Loan (each being herein called a "Type" of
Revolving Loan), as the Borrower shall
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specify in the related Borrowing Request or Continuation/Conversion Notice
pursuant to Section 2.2. Floating Rate Loans and Eurodollar Loans may be
outstanding at the same time, provided that (a) in the case of Eurodollar Loans,
not more than ten (10) different Interest Periods shall be outstanding at any
one time for all such Loans, and (b) the Borrower shall specify Revolving Loans
and Interest Periods such that no payment or prepayment of any principal on any
Revolving Loan shall result in a breakage of any Interest Period.
SECTION 2.2. Borrowing Procedure.
(1) Any Authorized Officer of the Borrower may request a Revolving
Loan on behalf of the Borrower after the Effective Date and prior to the
Termination Date in United States dollars on any Business Day by giving the
Agent telephonic, telex or facsimile notice (which notice shall be irrevocable
once given and shall be promptly confirmed in writing if given telephonically)
in the form of Exhibit B ("Borrowing Request") or such other form as shall be
acceptable to the Agent. Each Borrowing Request must be received by the Agent
prior to 10:00 A.M., Chicago time, on the proposed date of such Borrowing (which
must be a Business Day) in the case of Floating Rate Loans and prior to 12:00
Noon, Chicago time, three (3) Business Days prior to the proposed date of such
Borrowing (which must be a Business Day) in the case of Eurodollar Loans and in
each case shall specify (a) the principal amount of such Borrowing, (b) the
proposed date of Borrowing (which must be a Business Day), (c) the Type of
Borrowing and (d) in the case of a Eurodollar Borrowing, the initial Interest
Period for such Borrowing. Promptly upon receipt of such Borrowing Request, the
Agent shall advise each Lender thereof. On the date of a proposed Borrowing,
each Lender shall provide the Agent at the Head Office with immediately
available funds in an amount equal to such Lender's Percentage of the principal
amount of the proposed Borrowing specified in the Borrowing Request. Each
Floating Rate Loan shall be in a principal amount of $100,000 or an integral
multiple thereof (or such lesser amount equal to the unadvanced portion of the
Commitment Amount available under Section 2.1(1)); each Eurodollar Loan shall be
in a principal amount of $500,000 or an integral multiple of $250,000 (or such
lesser amount equal
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to the unadvanced portion of the Commitment Amount available under Section
2.1(1)). All Borrowings shall be pro rata among the Lenders in accordance with
their respective Commitments. Not later than 1:00 P.M., Chicago time, on the
proposed date of Borrowing specified in the Borrowing Request, subject to the
satisfaction of the applicable conditions precedent set forth in Article III
hereof, the Agent shall make the proceeds of each Revolving Loan available to
the Borrower by causing an amount of immediately available funds equal to the
principal amount of such Revolving Loan to be credited to the account of the
Borrower at Bank of America Illinois unless otherwise required pursuant to the
terms of this Agreement.
(2) Conversion and Continuation of Loans. Subject to Section 2.16,
the Borrower may, by delivery to the Agent of a notice ("Continuation/Conversion
Notice") in the form of Exhibit C attached hereto with appropriate insertions,
before 10:00 A.M., Chicago time, three (3) Business Days (or in the case of
Clause (i) below, one (1) Business Day) prior to conversion or continuation,
convert or continue Revolving Loans as follows: (i) convert Eurodollar Loans
into Floating Rate Loans, (ii) convert Floating Rate Loans into Eurodollar
Loans, and (iii) continue a Eurodollar Loan into a subsequent Interest Period of
the same duration or of any other duration permitted hereunder, subject to the
following:
(a) the Interest Period applicable to any Eurodollar Loan resulting
from a conversion shall be specified by the Borrower in the
Continuation/Conversion Notice delivered pursuant to this Section;
provided, however, that if no such Interest Period shall be specified, the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. If the Borrower shall not have given timely notice to continue
any Eurodollar Loan into a subsequent Interest Period and shall not
otherwise have given notice to convert such Eurodollar Loan, such
Eurodollar Loan unless repaid pursuant to the terms hereof shall
automatically be converted into a Floating Rate Loan;
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(b) if less than all Revolving Loans at the time outstanding shall be
converted or continued, such conversion or continuation shall be made pro
rata among the Lenders, as applicable, in accordance with the respective
principal amounts of Revolving Loans of such Type (and having the same
Interest Period) held by such Lenders immediately prior to such conversion
or continuation;
(c) in the case of a conversion or continuation of less than all
Revolving Loans, the aggregate principal amount of such Revolving Loans
converted or continued shall be not less than $500,000 or any larger
integral multiple of $250,000;
(d) if any Eurodollar Loan is converted at a time other than the last
day of an Interest Period applicable thereto, the Borrower shall at the
time of conversion pay any loss or expense (including, without limitation,
breakage losses and expenses) associated therewith pursuant to Section
2.16;
(e) any portion of a Eurodollar Loan required to be paid on any
principal payment date occurring in less than one month after the end of
the then-current Interest Period applicable to such Loan shall be
automatically converted at the end of such Interest Period into a Floating
Rate Loan.
Notwithstanding the foregoing, so long as any Default or Event of Default shall
exist, no Revolving Loans shall be converted to or continued as Eurodollar
Loans.
SECTION 2.3. Funding Reliance. Unless the Agent shall have been
notified by telephone, confirmed in writing, by any Lender by 9:00 A.M. (or
12:00 Noon with respect to Floating Rate Loans), Chicago time, on the day of a
Borrowing that such Lender will not make available the amount which would
constitute its Percentage of such Borrowing on the date specified therefor, the
Agent may assume, subject to the satisfactory fulfillment by the Borrower of the
conditions precedent set forth in Article III, that such
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Lender has made such amount available to the Agent and, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If and to the
extent that such Lender shall not have made such amount available to the Agent,
such Lender and the Borrower severally agree to repay the Agent forthwith on
demand the sum of (1) such corresponding amount together with interest thereon,
for each day from the date the Agent made such amount available to the Borrower
to the date such amount is repaid to the Agent (a) by such Lender, at the
Federal Funds Rate from time to time in effect, or (b) by the Borrower, at the
interest rate applicable at the time to the Revolving Loans comprising such
borrowing, plus (2) a compensatory amount equal to $200.
SECTION 2.4. Interest.
(1) Interest Rates. With respect to each Revolving Loan, the
Borrower hereby promises to pay interest on the unpaid principal amount thereof
for the period commencing on the date of such Revolving Loan until such
Revolving Loan is paid in full, as follows:
(a) At all times while such Revolving Loan is a Floating Rate Loan,
at a rate per annum equal to the Floating Rate from time to time in effect
plus (i) 1.00% or (ii) in the event the Borrower receives aggregate Net
Proceeds from the IPO and any substantially concurrent private placement of
the Borrower's common stock of at least $50,000,000 (with at least
$30,000,000 of such Net Proceeds coming directly from the IPO) prior to
August 31, 1996, 0.5%; any reduction in the margin pursuant to the
foregoing Clause (ii) shall be effective as of the date the Borrower
receives such Net Proceeds; and
(b) At all times while such Revolving Loan is a Eurodollar Loan, for
each Interest Period, at a rate per annum equal to the Eurodollar Rate
(Reserve Adjusted) applicable to such Interest Period, plus 3.00% (the
"Eurodollar Margin").
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(2) Interest Payment Dates. Accrued interest on each Floating Rate
Loan shall be due and payable quarterly in arrears on the first Business Day of
each of March, June, September and December of each year and at maturity.
Accrued interest on each Eurodollar Loan shall be payable on the last day of
each Interest Period relating to such Loan and at maturity. After maturity,
accrued interest on all Loans shall be payable on demand.
(3) Interest Periods. Each "Interest Period" for a Eurodollar Loan
shall commence on the date such Eurodollar Loan was made or converted from a
Loan of a different Type, or on the expiration of the immediately preceding
Interest Period for such Eurodollar Loan, and shall end on the date which is 1,
2 or 3 months thereafter, as the Borrower may specify pursuant to Section
2.2(1) or (2) hereof. Each "Interest Period" for a Eurodollar Loan which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (unless such next succeeding Business Day is the first
Business Day of a calendar month, in which case such Interest Period shall end
on the next preceding Business Day).
(4) Setting and Notice of Rates. The applicable Eurodollar Rate for
each Interest Period shall be determined by the Agent, and notice thereof shall
be given by the Agent promptly to the Borrower and each Lender. Each
determination of the applicable Eurodollar Rate by the Agent shall be conclusive
and binding upon the parties hereto, in the absence of demonstrable error. If
the Agent is unable to determine such a rate, the provisions of Section 2.14
shall apply. The Agent shall, upon written request of the Borrower or any
Lender, deliver to the Borrower or such Lender a statement showing the
computations used by the Agent in determining any applicable Eurodollar Rate
hereunder.
(5) Default Interest. Any principal payments on the Loans not paid
when due, whether at stated maturity, by notice of repayment, by acceleration or
otherwise, shall, to the extent permitted by applicable law, thereafter bear
interest (compounded monthly and payable upon demand) at a rate which is 2% per
annum in excess of the rate of interest otherwise payable under this
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Agreement in respect of such principal amount until such unpaid amount has been
paid in full (whether before or after judgment).
SECTION 2.5. Commitment Fee. The Borrower agrees to pay a non-
refundable unused commitment fee at the rate of .50% per annum on the average
daily amount by which the Commitment Amount exceeds the outstanding Revolving
Loans plus the undrawn face amount of the Letters of Credit, for the period
commencing on the date hereof and continuing to but not including the
Termination Date, payable quarterly in arrears on the first Business Day of
March, June, September and December of each year and at maturity, payable to the
Agent for the account of each Lender in accordance with such Lender's
Percentage.
SECTION 2.6. Revolving Note. All Revolving Loans made by each Lender
under this Agreement shall be evidenced by, and repaid with interest in
accordance with, a single promissory note of the Borrower in substantially the
form of Exhibit A duly completed, in the principal amount of Forty Five Million
Dollars ($45,000,000.00), payable to the Agent for the benefit of the Lenders
(the "Revolving Note"). The Agent is hereby authorized by the Borrower and each
Lender to endorse on the schedule attached to the Revolving Note the amount of
each Revolving Loan and of each payment of principal received by the Agent on
account of the Revolving Loans, which endorsement shall, in the absence of
demonstrable error, be conclusive as to the outstanding balance of the Revolving
Loans made by the Lenders; provided, however, that the failure to make such
notation with respect to any Revolving Loan or payment shall not limit or
otherwise affect the obligations of the Borrower or the Lender under this
Agreement or the Revolving Note.
SECTION 2.7. Prepayments; Reduction of Commitment. (1) The Borrower
may prepay at any time the Revolving Note in whole or in part without premium or
penalty with accrued interest to the date of such prepayment on the amount
prepaid; provided, that (a) any prepayment of a Eurodollar Loan shall be made
subject to the Borrower's payment obligations set forth in Section 2.16 and (b)
each partial prepayment shall be in a principal amount not less than twenty-five
thousand Dollars ($25,000), in which event, subject to the terms and conditions
set forth in this Agreement
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and the other Loan Documents, such prepaid amount may be reborrowed hereunder in
a Revolving Loan to the extent outstanding amounts hereunder shall not exceed
the Commitment Amount at such time. Amounts prepaid hereunder may be reborrowed.
(1) The Borrower shall have the right, at any time from time to time,
without premium or penalty, to permanently reduce the Commitment Amount
hereunder; provided that any such reduction in the Commitment Amount shall
reduce the Commitment of each Lender pro rata based on its Percentage; and
provided further that no such reduction shall reduce the Commitment Amount to an
amount less than the sum of the then outstanding Revolving Loans and the
aggregate face amount of Letters of Credit issued and outstanding pursuant to
Section 2.1A (other than Letters of Credit with respect to which the Borrower
has pledged cash collateral to the Agent) or drawn and not reimbursed pursuant
to Section 2.9A. The right of the Borrower to voluntarily reduce the Commitment
Amount shall be exercisable by delivery of written notice (including by
facsimile) or telephonic notice (thereafter promptly confirmed in writing) to
the Agent prior to 12:00 noon, Chicago time, at least two Business Days prior to
the proposed reduction in the Commitment Amount, which notice shall specify the
amount by which the Borrower proposes to reduce the Commitment Amount and the
proposed date of such reduction.
SECTION 2.8. Mandatory Prepayments. The Borrower shall promptly
prepay Revolving Loans in an aggregate principal amount equal to the excess, if
any, of the Revolving Loans then outstanding plus the aggregate face amount of
Letters of Credit issued and outstanding or drawn and not reimbursed over the
Maximum Amount.
SECTION 2.9. Method of Payment. The Borrower shall make each payment
under this Agreement and under the Revolving Note not later than 12:00 Noon,
Chicago time, on the date when due in lawful money of the United States to the
Agent for the account of the Lenders pro rata according to their respective
Percentages. The Agent shall promptly remit to each Lender its pro rata share
(based on its Percentage) of all such payments received in collected funds by
the Agent for the benefit of such Lender. The Borrower hereby authorizes the
Agent, if and to the extent
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payment is not made when due under this Agreement or under the Revolving Note,
to charge from time to time against any account of the Borrower with the Agent
any amount so due. Whenever any payment to be made under this Agreement or under
the Revolving Note shall be stated to be due on a day that is not a Business
Day, such payment shall be made on the next succeeding Business Day, and such
extension of time in such case shall be included in the computation of the
payment of interest. All payments under Sections 2.13 and 2.14 shall be made by
the Borrower directly to the Lender or Lenders entitled thereto. All interest
payable hereunder shall be calculated on the basis of a year of 360 days for the
actual number of days lapsed; provided, that, interest with respect to Floating
Rate Loans and fees shall be calculated on the basis of a year of 365 (or 366 as
applicable) days for the actual number of days lapsed.
SECTION 2.10. Use of Proceeds. The proceeds of the Revolving Loans
shall be used by the Borrower (i) to refinance the Debt outstanding to BCI on
the Effective Date under the Demand Note dated January 30, 1996, as amended as
of March 7, 1996, made by the Borrower and payable to BCI, and (ii) for general
corporate purposes, including the payment of fees and expenses arising under any
of the Loan Documents. The Borrower will not, directly or indirectly, use any
part of such proceeds for the purpose of purchasing or carrying any Margin Stock
or to extend credit to any Person for the purpose of purchasing or carrying any
such Margin Stock.
SECTION 2.11. Sharing of Payments.
(1) If any Lender shall obtain any payment or other recovery (whether
voluntary, involuntary, by application of offset or otherwise) on account
of any Revolving Loan in excess of its pro rata share (based on its
Percentage) of payments and other recoveries obtained by all Lenders of
Revolving Loans on account of principal of and interest on Revolving Loans,
such Lender shall purchase from the other Lenders such participations in
the Revolving Loans as shall be necessary to cause such purchasing Lender
to share the excess payment or other recovery ratably with each of
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them; provided, however, that if all or any portion of the excess payment
or other recovery is thereafter recovered from such purchasing Lender, the
purchase shall be rescinded and each Lender which has sold a participation
to the purchasing Lender shall repay to the purchasing Lender the purchase
price to the ratable extent of such recovery together with an amount equal
to such selling Lender's ratable share (according to the proportion of (a)
the amount of such selling Lender's required repayment to the purchasing
Lender to (b) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered.
(2) The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to Section 2.11(1) may, to the fullest extent
permitted by law, exercise all of its rights of payment with respect to
such participation as fully as if such Lender were the direct creditor of
the Borrower in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a setoff pursuant to Section 10.7, such Lender shall, to
the extent practicable, exercise its rights in respect to such secured
claim in a manner consistent with the rights of the Lenders entitled under
this Section to share in the benefits of any recovery of such secured
claim.
SECTION 2.12. Increased Costs. If after the date hereof, (1)
Regulation D of the Board of Governors of the Federal Reserve System, or (2) the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or any Lending Office of
such Lender) with any request or directive (whether or not having the force of
law) or any such authority, central bank or comparable agency,
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(a) shall subject any Lender (or any Lending Office of such Lender)
to any tax, duty or other charge with respect to its Eurodollar Loans or
its obligation to make Eurodollar Loan, its LC Obligations or its
obligation to issue Letters of Credit, or shall change the basis of
taxation of payments to any Lender of the principal of or interest on its
Eurodollar Loans or any other amounts due under this Agreement in respect
of its Eurodollar Loans or its obligation to make Eurodollar Loans or its
LC Obligations (except for changes in the rate of tax on the overall gross
or net income of such Lender or its Lending Office); or
(b) shall impose, modify or deem applicable any reserve (including,
without limitation, any reserve imposed by the Board of Governors of the
Federal Reserve System, but excluding any reserve included in the
determination of interest rates pursuant to Section 1), special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender (or any Lending Office of such Lender);
or
(c) shall impose on any Lender (or its Lending Office) any other
condition affecting its Eurodollar Loans or the LC Obligations;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D referred to above, to impose a cost on) such Lender (or any
Lending Office of such Lender) of making or maintaining any Eurodollar Loan, any
Letter of Credit or the LC Commitment or to reduce the amount of any sum
received or receivable by such Lender (or the Lending Office or such Lender)
under this Agreement or under its Revolving Loans with respect thereto, then
upon demand by such Lender (which demand shall be made within 45 days after such
Lender has actual knowledge of such additional cost or reduced sum receivable
and shall be accompanied by a statement setting forth the basis of such demand),
the Borrower shall pay directly to such Lender such additional amount or amounts
as will reimburse such Lender for such increased cost or such reduction.
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SECTION 2.13. Change in Rate of Return. If, after the date hereof,
any change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any law or regulation, directive, guideline,
decision or request (whether or not having the force of law) of any court,
central bank, regulator or other governmental authority affects or would affect
the amount of capital required or expected to be maintained by any Lender or any
person controlling such Lender, and such Lender reasonably determines that the
rate of return on its or such controlling person's capital as a consequence of
its Commitments or the Loans or the Letters of Credit made by such Lender is
reduced to a level below that which such Lender or such controlling person could
have achieved but for the occurrence of any such circumstance, then, in any such
case the Borrower shall, upon demand by such Lender (which demand shall be made
within 45 days after such Lender has actual knowledge of such increase in
capital or reduction in rate of return) pay directly to such Lender additional
amounts sufficient to compensate such Lender or such controlling person for such
reduction in rate of return. A statement of such Lender as to any such
additional amount or amounts shall be prepared in good faith (including
calculations thereof in reasonable detail) and shall, in the absence of manifest
error, be conclusive and binding on the Borrower. In determining such amount,
such Lender may use any method of averaging and attribution that it shall deem
reasonably applicable. Each Lender shall notify the Borrower of any event of
which it has knowledge, occurring after the date hereof, which will entitle such
Lender to compensation pursuant to this Section 2.13.
SECTION 2.14. Basis for Determining Interest Rate Inadequate or
Unfair. If with respect to any Interest Period:
(1) the Agent is advised by any Lender that deposits in Dollars (in
the applicable amounts) are not being offered to such Lender in the
relevant market for such Interest Period, or the Agent otherwise determines
(which determination shall be binding and conclusive on all parties) that
by reason of circumstances affecting the interbank eurodollar market
adequate and reasonable
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means do not exist for ascertaining the applicable Eurodollar Rate; or
(2) any Lender advises the Agent that the Eurodollar Rate (Reserve
Adjusted), as determined by the Agent, will not adequately and fairly
reflect the cost to such Lender of maintaining or funding such Loans for
such Interest Period, or that the making or funding of Eurodollar Loans has
become impracticable as a result of an event occurring after the date of
this Agreement which in the opinion of such Lender materially changes such
Loans,
then, so long as such circumstances shall continue: (a) the Agent shall
promptly notify the other parties thereof, (b) no Lender shall be under any
obligation to make or convert into Eurodollar Loan, and (c) on the last day of
the then current Interest Period for Eurodollar Loans, such Eurodollar Loans
shall, unless then repaid in full, automatically convert to Floating Rate Loans.
If conditions subsequently change so that the foregoing conditions no longer
exist, the Agent in the case of Clause (1) or such Lender in the case of Clause
(2) will promptly notify the Borrower and the Lenders thereof, and upon the
receipt of such notice, the obligations of all Lenders to make or continue
Eurodollar Loan shall be reinstated.
SECTION 2.15. Changes in Law Rendering Certain Loans Unlawful. In
the event, after the date hereof, that any change in (including the adoption of
any new) applicable laws or regulations, or any change in the interpretation of
applicable laws or regulations by any governmental or other regulatory body
charged with the administration thereof, should make it unlawful for a Lender or
the Lending Office of such Lender ("Affected Lender") to make, maintain or fund
Eurodollar Loans, then (a) the Affected Lender shall promptly notify each of the
other parties hereto, (b) the obligation of all Lenders to make or convert into
Eurodollar Loans shall, upon the effectiveness of such event, be suspended for
the duration of such unlawfulness, and (c) on the last day of the current
Interest Period for each Eurodollar Loan (or, in any event, if the Affected
Lender so requests, on such earlier date as may be required by the relevant law,
regulation or interpretation), such Eurodollar Loan shall, unless then repaid
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in full, automatically convert to Floating Rate Loans. If conditions
subsequently change so that the foregoing conditions no longer exist, such
Lender will promptly notify the Borrower and the other Lenders thereof, and upon
the receipt of such notice, the obligations of all Lenders to make or continue
Eurodollar Loans shall be reinstated.
SECTION 2.16. Funding Losses. The Borrower hereby agrees that upon
demand by any Lender (which demand shall be accompanied by a statement setting
forth the basis for the calculations of the amount being claimed) the Borrower
will indemnify such Lender against any net loss or expense which such Lender may
sustain or incur (including, without limitation, any net loss or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such Lender to fund or maintain Eurodollar Loans), as reasonably
determined by such Lender, as a result of (a) any payment or prepayment or
conversion of any Eurodollar Loan of such Lender on a date other than the last
day of an Interest Period for such Eurodollar Loan, or (b) any failure of the
Borrower to borrow or convert any Revolving Loans on a date specified therefor
in a Borrowing Request or Continuation/Conversion Notice pursuant to this
Agreement. For this purpose, all notices to the Agent pursuant to this Agreement
shall be deemed to be irrevocable.
SECTION 2.17. Right of Lenders to Fund Through Other Offices. Each
Lender may, if it so elects, fulfill its Commitment as to any Eurodollar Loan by
causing its Lending Office to make such Loan, provided that in such event for
the purposes of this Agreement, such Eurodollar Loan shall be deemed to have
been made by such Lender and the obligation of the Borrower to repay such
Eurodollar Loan shall nevertheless be to such Lender and shall be deemed held by
it, to the extent of such Eurodollar Loan, for the account of such branch or
affiliate.
SECTION 2.18. Discretion of Lenders as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of its
Revolving Loans in any manner it sees fit, it being understood, however, that
for the purposes of this Agreement all determinations hereunder shall be made as
if such
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Lender had actually funded and maintained each Eurodollar Loan during each
Interest Period for such Revolving Loan through the purchase of deposits having
a maturity corresponding to such Interest Period and bearing an interest rate
equal to the Eurodollar Rate, for such Interest Period.
SECTION 2.19. Mitigation of Circumstances; Replacement of Affected
Lender. (1) Each Lender shall promptly notify the Borrower and the Agent of any
event of which it has knowledge which will result in, and will promptly
thereafter use all reasonable commercial efforts available to it (and not, in
such Lender's good faith judgment, otherwise disadvantageous to such Lender) to
mitigate or avoid, (i) any obligation by the Borrower to pay any amount pursuant
to Section 2.12 or 2.13 or (ii) the occurrence of any circumstances of the
nature described in Section 2.14 or 2.15 (and, if any Lender has given notice of
any such event described in Clause (i) or (ii) above and thereafter such event
ceases to exist, such Lender shall promptly so notify the Borrower and the
Agent). Without limiting the foregoing, each Lender will designate a different
Lending Office if such designation will avoid (or reduce the cost to the
Borrower of) any event described in Clause (i) or (ii) of the preceding sentence
and such designation will not, in such Lender's reasonable judgment, be
otherwise materially disadvantageous to such Lender.
(2) At any time any Lender is an Affected Lender, the Borrower may replace
such Affected Lender as a party to this Agreement with one or more other bank(s)
or financial institution(s) reasonably satisfactory to the Agent, such bank(s)
or financial institution(s) to have a Commitment in such amounts as shall be
reasonably satisfactory to the Agent (and upon notice from the Borrower such
Affected Lender shall assign, without recourse or warranty, its Commitment, its
Revolving Loans, and all of its other rights and obligations hereunder to such
replacement bank(s) or other financial institution(s) for a purchase price equal
to the sum of the principal amount of the Revolving Loans so assigned, all
accrued and unpaid interest thereon, its ratable share of all accrued and unpaid
non-use fees, any amounts payable under Section 2.16 as a result of such Lender
receiving payment of any Eurodollar Loan prior to the end
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of an Interest Period therefor and all other obligations owed to such Affected
Lender hereunder).
SECTION 2.20. Conclusiveness of Statements; Survival of Provisions.
Determinations and statements of any Lender pursuant to Sections 2.12, 2.13,
2.14, 2.15 or 2.16 shall be conclusive absent demonstrable error. The
provisions of Sections 2.12, 2.13 and 2.14 shall survive termination of this
Agreement.
ARTICLE IIA
THE LETTERS OF CREDIT
SECTION 2.1A LC Commitment. Subject to the terms and conditions set
forth in this Agreement and the other Loan Documents, the Issuing Lender agrees
for itself and the Lenders to issue from time to time before the Termination
Date such standby letters of credit (such letters of credit being herein
collectively called "Letters of Credit" and individually a "Letter of Credit")
as the Borrower may request, it being understood that, pursuant to Section 2.4A,
concurrently with the issuance of each such Letter of Credit, each Lender shall
be deemed to have automatically purchased from the Issuing Lender a
participation in such Letter of Credit. The aggregate face amount of all
Letters of Credit issued and outstanding pursuant to this Section 2.1A and all
Letters of Credit drawn and not reimbursed pursuant to Section 2.9A shall not at
any one time exceed $8,000,000 (or such reduced amount as may be fixed by the
Borrower pursuant to Section 2.15A). The foregoing commitment of each Lender is
herein called its "LC Commitment" and collectively the "LC Commitments."
SECTION 2.2A Request for Issuance of Letters of Credit. The Borrower
shall give the Agent and the Issuing Lender at least five (5) Business Days'
prior written notice of a request for issuance of each Letter of Credit, each
such request to be accompanied by an LC Application duly executed by the
Borrower and in all respects in form and substance satisfactory to the Agent and
the Issuing Lender, together with such other documentation as the Agent or the
Issuing Lender may reasonably
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request in support thereof. The Agent shall promptly notify each Lender of the
Borrower's request that such Letter of Credit be issued.
SECTION 2.3A Expiration. Each Letter of Credit shall expire on or
before the Termination Date unless the Borrower shall have pledged cash
collateral to the Agent therefor in an amount, and pursuant to documentation,
reasonably satisfactory to the Issuing Lender and the Agent.
SECTION 2.4A Participation. Concurrently with the issuance of each
Letter of Credit, the Issuing Lender shall be deemed to have sold and
transferred to each other Lender, and each Lender shall be deemed irrevocably
and unconditionally to have automatically purchased and received from the
Issuing Lender, without recourse or warranty, an undivided interest and
participation, to the extent of such other Lender's Percentage, in such Letter
of Credit and the Borrower's related LC Obligations.
SECTION 2.5A Notification of Demand for Payment. The Issuing Lender
shall promptly notify the Agent, who shall in turn promptly notify the Borrower
and each Lender of the amount of each demand for payment under a Letter of
Credit and of the date on which such payment is to be made.
SECTION 2.6A Funding by Issuing Lender. With respect to each demand
for payment pursuant to a Letter of Credit, the Issuing Lender shall, promptly
following its receipt thereof, examine all documents purporting to represent
such demand to ascertain that the same appear on their face to be in conformity
with the terms and conditions of such Letter of Credit. If the Issuing Lender
determines that a demand for payment under a Letter of Credit conforms to the
terms and conditions of such Letter of Credit, then the Issuing Lender shall
make payment to the Beneficiary in accordance with the terms of such Letter of
Credit.
SECTION 2.7A Non-Conforming Demand For Payment. If, after
examination of a demand for payment under a Letter of Credit, the Issuing Lender
shall have determined that such demand
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does not conform to the terms and conditions of such Letter of Credit, then the
Issuing Lender shall, as soon as reasonably practicable, give notice to the
related Beneficiary and to the Borrower to the effect that demand was not in
accordance with the terms and conditions of such Letter of Credit, stating the
reasons therefor and that the relevant document is being held at the disposal of
the Beneficiary or is being returned to the Beneficiary, as the Issuing Lender
may elect. The Beneficiary may attempt to correct any such non-conforming demand
for payment under such Letter of Credit if, and to the extent that, the
Beneficiary is entitled (without regard to the provisions of this sentence) and
able to do so.
SECTION 2.8A Return of Letter of Credit. With respect to each Letter
of Credit, the Issuing Lender shall have the right, provided the Issuing Lender
is not then in default under such Letter of Credit by reason of its having
wrongfully failed to honor a demand for payment previously made by a Beneficiary
under such Letter of Credit, to require such Beneficiary to surrender such
Letter of Credit to the Issuing Lender on the stated expiration date. The
Borrower agrees, if necessary, to use its best efforts to cause the Beneficiary
to surrender such Letter of Credit.
SECTION 2.9A Reimbursement Agreement of the Borrower. The Borrower
hereby unconditionally and irrevocably agrees to reimburse the Issuing Lender
for each payment or disbursement made by the Issuing Lender under a Letter of
Credit honoring a demand for payment made by the Beneficiary thereunder, in each
case on the date that such payment or disbursement is made. Subject to
Borrower's ability to satisfy the conditions precedent set forth in Section 3.2,
if any amount shall not be reimbursed by the Borrower on the date of such
payment or disbursement, the Borrower automatically shall be deemed to have
requested as of the immediately preceding Business Day a Floating Rate Revolving
Loan pursuant to Section 2.2 in the amount of such payment or disbursement
(which need not be in the principal amount of $100,000 or an integral multiple
thereof); provided, that if at the time of such request Revolving Loans are not
then available to the Borrower, such request shall not be granted and the
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Borrower's reimbursement obligations set forth above shall remain in place.
SECTION 2.10A Funding By Lenders. If the Issuing Lender makes any
payment or disbursement under any Letter of Credit and the Borrower has not
reimbursed the Issuing Lender in full for such payment or disbursement or a
Revolving Loan in the amount of such payment or disbursement has not been made
pursuant to Section 2.9A, on the date on which payment is made under a Letter of
Credit, or if any reimbursement received by the Issuing Lender from the Borrower
is or must be returned or rescinded upon or during any bankruptcy or
reorganization of the Borrower or otherwise, each other Lender shall provide the
Agent, for the account of the Issuing Lender at the Head Office with immediately
available funds in an amount equal to such Lender's Percentage of the amount of
such payment or disbursement. If and to the extent any Lender shall not have
made such amount available to the Agent on any such date, such Lender agrees to
pay interest on such amount to the Agent, for the account of the Issuing Lender,
forthwith on demand for each day from and including the date on which such
payment was made to but excluding the date such amount is made available to the
Agent for the account of the Issuing Lender. Such interest shall be determined
at a rate per annum equal to the Federal Funds Rate from time to time in effect,
based upon a year of 360 days.
SECTION 2.11A Return of Funds Related to Non-Conforming Demand. If
the Issuing Lender does not disburse funds to the Beneficiary for any reason
after the Agent has received such funds from any Lender pursuant to Section
2.10A, the Issuing Lender shall promptly return such funds to the Agent, who
shall promptly return such funds to such other Lenders, together with interest
on such funds from and including the date on which the Agent received such funds
to but excluding the day on which the Agent so returns such funds to the other
Lenders at the Federal Funds Rate for each such day, based upon a year of 360
days.
SECTION 2.12A Obligation to Reimburse for or Participate in Letter of
Credit Payments. The Borrower's obligation to reimburse the Issuing Lender for
payments made by
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the Issuing Lender under any Letter of Credit honoring a demand for payment by
the Beneficiary thereunder, and each Lender's obligation to participate in and
make available to the Agent its Percentage of such payments in accordance with
this Agreement, shall be irrevocable, absolute and unconditional under any and
all circumstances including, without limitation, any of the following
circumstances:
(1) any lack of legality, validity, regularity or enforceability of
this Agreement, any Letter of Credit or any other Loan Document;
(2) the existence of any claim, setoff, defense or other right which
the Borrower may have or have had at any time against any Beneficiary, the
Agent, the Issuing Lender any other Lender, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting) or any
other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Borrower and the
Beneficiary of any Letter of Credit);
(3) any draft, certificate or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(4) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Loan Documents;
(5) payment by the Issuing Lender under any Letter of Credit against
presentation of a draft or certificate or other document that does not
comply with the terms of such Letter of Credit unless such payment by the
Issuing Lender constituted gross negligence or willful misconduct of the
Issuing Lender; or
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(6) the occurrence of any Default or Event of Default;
provided, however, that the Borrower shall not be obligated to reimburse the
Issuing Lender for, and no Lender shall be obligated to participate in, any
wrongful payment made by the Issuing Lender under any Letter of Credit as a
result of acts or omissions constituting gross negligence or willful misconduct
on the part of the Issuing Lender or any of its officers, employees or agents.
SECTION 2.13A Mandatory Payment to Agent of LC Obligations. The
Borrower agrees that, on any termination of the LC Commitments pursuant to
Section 2.15A or Section 8.2, it will pay to the Agent for the account of the
Issuing Lender and the other Lenders in Dollars and in same day funds an amount
equal to the amount of all LC Obligations, whether or not the related Letter of
Credit has been drawn (which amount shall be retained by the Agent in a separate
collateral account as security for the LC Obligations and the outstanding
principal amount of the Revolving Note, all interest thereon, and all other
amounts payable under this Agreement and the other Loan Documents) plus the then
aggregate accrued amount of unpaid fees arising under Section 2.14A.
SECTION 2.14A Fees. The Borrower agrees to pay the following fees
(all such fees being non-refundable):
(1) The Borrower agrees to pay to the Agent for the account of each
Lender a fee for each (a) Non-Financial Letter of Credit (the "Non-
Financial LC Commitment Fee"), from the date of issuance thereof to the
earlier to occur of the expiration or termination thereof or the date of
final and complete payment by the Agent thereunder, at a rate per annum
equal to one-half of the Eurodollar Margin times the aggregate outstanding
face amount of each such Non-Financial Letter of Credit, and (b) Financial
Letter of Credit (the "Financial LC Commitment Fee"), from the date of
issuance thereof to the earlier to occur of the expiration or termination
thereof or the date of final
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and complete payment by the Agent thereunder, at a rate per annum equal to
the Eurodollar Margin times the aggregate outstanding face amount of each
such Financial Letter of Credit, such fees to be payable in arrears on the
last Business Day of each calendar quarter (or at such other times as the
Agent shall request, for any period prior to such date or time for which
such LC Commitment Fees shall not have been theretofore paid).
(2) The Borrower agrees to pay to the Agent for the sole account of
the Issuing Lender, an issuance fee equal to .25% of the face amount of
each Letter of Credit, payable upon the issuance thereof.
(3) The Borrower agrees to pay such other standard fees and amounts
("LC Administrative Fees") as the Issuing Lender shall customarily require
in connection with the issuance, negotiation, processing and/or
administration of Letters of Credit in similar situations, such fees to be
in addition to the fees payable under Section 2.14A(1), with respect to the
issuance and/or negotiation of each Letter of Credit.
SECTION 2.15A Voluntary Reduction of the LC Commitments. The
Borrower may from time to time on at least two (2) Business Days' prior written
notice to the Agent permanently reduce the amount of the LC Commitments to an
amount not less than the maximum amount of the Letters of Credit then
outstanding or drawn and not reimbursed. The Borrower may at any time on like
notice terminate the LC Commitments upon payment to the Agent in accordance with
Section 2.13A of all LC Obligations (whether absolute or contingent) in
connection with the Letters of Credit.
SECTION 2.16A Cash Collateral. If, on any date, the aggregate face
amount of Letters of Credit issued and outstanding or drawn and not reimbursed
shall exceed the LC Commitments, the Borrower shall pledge cash collateral to
the Agent (pursuant to documentation reasonably satisfactory to the Required
Lenders,
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the Issuing Lender and the Agent) in an amount equal to such excess.
SECTION 2.17A Making of Payments. Except as otherwise provided, all
payments (including those made pursuant to Section 2.14A or Section 2.16A) in
respect of the Letters of Credit shall be made by the Borrower to the Agent for
the account of the Lenders pro rata according to their respective Percentages of
the LC Obligations held by them. The Agent shall promptly remit to each Lender
its pro rata share (based on its Percentage) of all such payments received in
collected funds by the Agent for the benefit of such Lender. The Borrower
hereby authorizes the Agent, if and to the extent payment is not made when due
under this Agreement to charge from time to time against any account of the
Borrower with the Agent any amount so due. All such payments shall be made to
the Agent at its Head Office, not later than 12:00 Noon, Chicago time, on the
date due; and funds received after that hour shall be deemed to have been
received by the Agent on the next following Business Day. The Agent shall
promptly remit to each Lender its pro rata share (based on its Percentage) of
all such payments received in collected funds by the Agent for the account of
such Lender.
ARTICLE III
CONDITIONS PRECEDENT
--------------------
SECTION 3.1. Condition Precedent to Agreement. The terms and
provisions of this Agreement (including, without limitation, the Commitment of
each Lender hereunder) shall become effective (the "Effective Date"), on such
date upon which the Agent shall have received (i) payment from the Borrower for
the account of each Lender in accordance with such Lender's Percentage, a non-
refundable closing fee in the amount of $787,500, and (ii) each of the
following, each dated the Effective Date and in form and substance reasonably
satisfactory to the Agent and its counsel and each in sufficient number of
signed counterparts (other than in the case of the Revolving Note) to provide
one for each Lender:
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(1) Revolving Note. The Revolving Note duly executed by the
Borrower;
(2) Security Agreements. Security Agreements duly executed by the
Borrower and each Subsidiary, together with (a) duly executed financing
statements and fixture filings to be filed under the Uniform Commercial
Code of all jurisdictions necessary or, in the opinion of the Agent,
desirable to perfect the security interest created by such Security
Agreement; (b) duly executed financing statements to be filed under the
Uniform Commercial Code of all jurisdictions necessary or, in the opinion
of the Agent, desirable to assign to the Agent for the benefit of the
Lenders all of the Borrower's security interests granted to the Borrower by
Franchisees to secure Debt of such Franchisees owed to the Borrower; and
(c) evidence that the Agent's Lien on the Collateral is a first-priority
Lien subject only to such exceptions as the Agent may approve and are
permitted by this Agreement;
(3) Trademark Security Agreements. Trademark Security Agreements
duly executed by the Borrower and each Subsidiary which owns or otherwise
holds any trademarks or trademark appropriations;
(4) Collateral Assignment of Servicing Agreements. Collateral
Assignment of Servicing Agreements duly executed by the Borrower;
(5) Pledge Agreement. A Pledge Agreement duly executed by the
Borrower and any Subsidiary which owns or otherwise holds capital stock,
partnership units or other equity interests in any Person, together with
the promissory notes and certificates (and stock powers covering such
certificates) subject thereto;
(6) Real Property-Owned. A mortgage covering each parcel of real
property set forth on Schedule 4.12 as owned by the Borrower or any
Subsidiary (other than the real property owned as of the Effective Date by
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Brackman Brothers, Inc., a Utah corporation), together with (a) a 1970 ALTA
Loan Policy of Title Insurance with such endorsements as the Agent may
reasonably request, insuring the Agent for the benefit of the Lenders in an
amount equal to the appraised value (or the Borrower's cost thereof if no
appraisal is available) of such parcel and specifying the respective
mortgage as a first lien or charge upon the parcel subject only to such
items as shall have been approved by the Agent, (b) any existing surveys of
such parcel; and (c) a phase one environmental report;
(7) Financed Franchisee. A Collateral Assignment of Loan with respect
to each set of Financed Franchisee Loan Documents set forth on Schedule
1.1(A);
(8) Insurance. Evidence of the existence of insurance on all
property of the Borrower and the Subsidiaries, together with evidence
establishing the Agent as a loss payee and/or additional insured on all
related insurance policies;
(9) Certificate of the Borrower. A certificate or certificates of
the Secretary or Assistant Secretary of the Borrower certifying: (a) a
copy of the Certificate of Incorporation of the Borrower, as theretofore
amended; (b) a copy of the bylaws of the Borrower, as theretofore amended;
(c) copies of all corporate action taken by the Borrower, including
resolutions of its board of directors, authorizing the execution, delivery,
and performance of the Loan Documents by the Borrower and each other
document to be delivered pursuant to this Agreement and authorizing
borrowings by each of the Authorized Officers; and (d) the names and true
signatures of the officers of the Borrower authorized to sign the Loan
Documents to which it is a party and the other documents to be delivered by
the Borrower under this Agreement;
(10) Certified Charter and Good Standing. A certificate of the due
incorporation, legal existence
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and good standing of the Borrower in its state of incorporation, issued by
the appropriate authorities of such jurisdiction, and certificates of
Borrower's good standing and due qualification to do business, issued by
appropriate officials in any states in which the failure to so qualify
would result in a Material Adverse Change;
(11) Guaranty. A Guaranty duly executed by each Subsidiary;
(12) Certificate of each Subsidiary. A certificate or certificates
of the Secretary or Assistant Secretary of each Subsidiary certifying: (a)
a copy of the organizational documents of such Subsidiary, as theretofore
amended; (b) copies of all corporate or partnership action of such
Subsidiary taken by such Subsidiary, authorizing the execution, delivery
and performance by such Subsidiary of the Loan Documents to which it is a
party and each other document to be delivered pursuant to this Agreement;
and (c) the names and true signatures of the officers of such Subsidiary
authorized to sign the Loan Documents to which it is a party and the other
documents to be delivered by such Subsidiary under this Agreement;
(13) Certified Charter and Good Standing. A certificate of the due
organization, legal existence and good standing of each Subsidiary in its
state of organization, issued by the appropriate authorities of such
jurisdiction, and certificates of such Subsidiary's good standing and due
qualification to do business, issued by appropriate officials in any states
in which the failure to so qualify would result in a Material Adverse
Change;
(14) Opinion of counsel for Borrower and its Subsidiaries. An
opinion of Holme Roberts & Owen LLC, counsel for the Borrower and its
Subsidiaries, in substantially the form of Exhibit D-1 and as to such
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other matters as the Agent and its counsel may reasonably request;
(15) BCI Subordination. A BCI Subordination Agreement duly executed
by BCI;
(16) Certificate of BCI. A certificate or certificates of the
Secretary or Assistant Secretary of BCI certifying: (a) a copy of the
organizational documents of BCI, as theretofore amended; (b) copies of all
corporate action of BCI, authorizing the execution, delivery and
performance by BCI of the BCI Subordination Agreement and each other
document to be delivered pursuant to this Agreement; (c) the names and true
signatures of the officers of BCI authorized to sign the BCI Subordination
Agreement and the other documents to be delivered by BCI under this
Agreement; and (d) the BCI Convertible Debt (evidencing the release of the
collateral secured thereunder and the extension of the maturity date to a
date subsequent to the Termination Date);
(17) Opinion of counsel for BCI. An opinion of Donald Bingle,
Secretary and General Counsel of BCI, counsel for BCI, in substantially the
form of Exhibit D-2 and as to such other matters as the Agent and its
counsel may reasonably request;
(18) Fees. Evidence of payment of fees, costs and expenses due and
payable in connection with this Agreement (including, without limitation
such fees, costs and expenses payable to the Agent and its Affiliates); and
(19) Miscellaneous. Such other approvals, opinions or documents as
the Agent may reasonably request.
SECTION 3.2. Conditions Precedent to All Revolving Loans and Letters
of Credit. The obligation of the Lenders to make each Revolving Loan (including
the initial Revolving Loan) and of the
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Issuing Lender to issue Letters of Credit shall be subject to the further
conditions precedent that on the date of such Revolving Loan or Letter of
Credit:
(1) The following statements shall be true:
(a) The representations and warranties contained in Article IV
of this Agreement are correct in all material respects on and as of
the date of such Revolving Loan or Letter of Credit as though made on
and as of such date (except to the extent such representations and
warranties expressly refer to an earlier date); and
(b) No Default or Event of Default has occurred and is
continuing, or would result from the borrowing of such Revolving Loan
or the issuance of such Letter of Credit.
The acceptance by the Borrower of the proceeds of such Revolving Loan or
the issuance of such Letter of Credit shall constitute a representation and
warranty by the Borrower that on the date of such Revolving Loan or the
issuance of such Letter of Credit (both immediately before and after giving
effect to such Revolving Loan or the issuance of such Letter of Credit) the
statements set forth in this Section 3.2(1) are true and correct.
(2) The Agent or the Issuing Lender shall have received such other
approvals, opinions, or documents as the Agent or the Issuing Lender may
reasonably request.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the Lenders that:
SECTION 4.1. Incorporation, Good Standing, and Due Qualification.
The Borrower and each of its Subsidiaries: (1) is a corporation or partnership,
as the case may be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization or formation; (2) has the
corporate or partnership power and authority, as the case may be, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and to transact the business in which it is now engaged or
proposed to be engaged; and (3) is duly qualified as a foreign corporation or
partnership, as the case may be, and in good standing under the laws of each
other jurisdiction in which the failure to so qualify would result in a Material
Adverse Change.
SECTION 4.2. Corporate Power and Authority. The execution, delivery,
and performance by the Borrower and each Subsidiary of each of the Loan
Documents to which it is a party have been duly authorized by all necessary
corporate action and do not and will not (1) contravene or conflict with the
organizational documents of the Borrower or such Subsidiary; (2) violate any
provision of, or cause the Borrower or such Subsidiary to be in default under,
any law, rule, regulation (including, without limitation, Regulation U of the
Board of Governors of the Federal Reserve System), order, writ, judgment,
injunction, decree, determination, or award currently in effect having
applicability to the Borrower or such Subsidiary; (3) result in a breach of, or
constitute a default under, any material indenture or loan or credit agreement
or any other material agreement, lease, or instrument to which the Borrower or
such Subsidiary is a party or by which it or its properties may be bound or
affected; or (4) result in, or require, the creation or imposition of any Lien
(except as permitted pursuant to Section 6.1), upon or with respect to any of
the properties now owned or hereafter acquired by the Borrower or such
Subsidiary.
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SECTION 4.3. Legally Enforceable Agreement. This Agreement is, and
each of the other Loan Documents will be, legal, valid, and binding obligations
of the Borrower and each of the Subsidiaries (to the extent they are parties to
such Loan Documents) enforceable against the Borrower and such Subsidiary (as
applicable) in accordance with their respective terms, except to the extent that
such enforcement may be limited by applicable bankruptcy, insolvency, and other
similar laws affecting creditors' rights generally and by general principles of
equity.
SECTION 4.4. Financial Statements. The Borrower's audited
consolidated financial statements as at December 31, 1995 (for the period
beginning March 24, 1995), and the Borrower's unaudited financial statements as
at April 21, 1996 (for the period beginning January 1, 1996), have been
furnished to each Lender. These financial statements have been prepared in
conformity with GAAP and fairly present the financial condition of the Borrower
and its Subsidiaries as at such dates and the results of operations for the
periods then ended. The unaudited financial statements have been prepared in a
manner consistent (except for changes in accounting policies permitted by GAAP
which have been or are contemporaneously disclosed in writing to each Lender)
with the audited financial statements, except for the lack of normal year-end
accruals, reclassifications, and audit adjustments and financial statement
footnotes. Since the date of the most recent financial statements supplied to
each Lender pursuant to either Section 5.8(1), (2) or (3), whichever is the most
recently delivered, there has been no Material Adverse Change. No information,
exhibit, or report furnished by the Borrower to the Lenders in connection with
the negotiation of this Agreement, considered as a whole with all other
information, exhibits and reports furnished to the Lenders in connection with
the negotiation of this Agreement or any predecessor agreement, if any, at the
time it was furnished (and as modified or superseded by any information,
exhibits and reports subsequently furnished to the Lenders), contained any
material misstatement of fact or omitted to state a material fact necessary to
make the statements contained therein, in light of the circumstances in which
they were made, not materially misleading; provided, that notwithstanding
anything else contained in this Agreement, the
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Borrower makes no representation, warranty, or guaranty as to (1) any financial
projections furnished to the Lenders (it being understood that such financial
projections have been prepared by management of the Borrower on the basis of
assumptions which such management believed were reasonable as of the date of
such financial projections in light of the historical financial performance of
the business of the Borrower and of current and reasonably foreseeable business
conditions) or (2) any information supplied by Franchisees or contained in
analyst reports or other reports prepared by third parties or derived therefrom
unless in the case of this Clause (2) the Borrower has actual knowledge at the
time such information is delivered to the Lenders that such information contains
a material misstatement of fact or omits to state a material fact necessary to
make the statements contained therein, in light of the circumstances under which
they were made, not materially misleading.
SECTION 4.5. Other Agreements. Neither the Borrower nor any
Subsidiary is a party to any material indenture, loan, or credit agreement, or
to any material lease or other agreement or instrument, or subject to any
charter or corporate restriction which would be breached or accelerated by
entering into the Loan Documents or which would have a material adverse effect
on the ability of the Borrower to carry out its obligations under the Loan
Documents. Neither the Borrower nor any Subsidiary is in default in any respect
in the performance, observance, or fulfillment of any of the obligations,
covenants, or conditions contained in any agreement or instrument which would
result in a Material Adverse Change.
SECTION 4.6. Litigation. There is no pending or (to the Borrower's
knowledge) threatened action or proceeding against or affecting the Borrower or
any Subsidiary before any court, governmental agency, or arbitrator, which, in
any one case or in the aggregate, is material to the Borrower and its
Subsidiaries, taken as a whole, or would adversely affect the ability of the
Borrower or any Subsidiary (as applicable) to perform their respective
obligations under any Loan Documents (to the extent a party thereto, and other
than with respect to any Subsidiary's ability to perform its payment obligations
thereunder due to the financial wherewithal of such Subsidiary).
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SECTION 4.7. No Defaults on Outstanding Judgments or Orders. To the
best of the Borrower's knowledge, the Borrower and its Subsidiaries have
satisfied all material final judgments, and neither the Borrower nor any
Subsidiary is in default with respect to any final judgment, writ, injunction,
decree, rule, or regulation of any court, arbitrator, or federal, state,
municipal, or other governmental authority, commission, board, bureau, agency,
or instrumentality, domestic or foreign, which default would result in a
Material Adverse Change.
SECTION 4.8. Governmental and Regulatory Approvals. No
authorizations, approvals or consents of, and no filings or registrations with,
any governmental or regulatory authority or agency are necessary for the
execution, delivery or performance by the Borrower or any Subsidiary, as the
case may be, of the Loan Documents to which it is a party or for the validity or
enforceability thereof.
SECTION 4.9. Ownership and Liens. The Borrower and each Subsidiary
has title to, or valid leasehold interests in, all of its material properties
and assets, real and personal, and none of the properties and assets owned by
the Borrower or any Subsidiary and none of their leasehold interests is subject
to any Lien, except, in each case, such as may be permitted pursuant to Section
6.1 of this Agreement.
SECTION 4.10. Subsidiaries etc. Schedule 4.10 sets forth as of the
initial date of this Agreement (and as of the date of delivery pursuant to
Section 5.8(6) of any subsequent Schedule 4.10) a true and correct list of all
capital stock, partnership units or other equity interests of any Person owned
or otherwise held (including capital stock, partnership units or other equity
interests held as collateral) by the Borrower and its Subsidiaries and indicates
whether such capital stock, partnership units or other equity interests are
owned or held in some other capacity by the Borrower or such Subsidiary.
SECTION 4.11. ERISA. The Borrower and the ERISA Affiliates are in
compliance in all material respects with the applicable provisions of ERISA.
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SECTION 4.12. Real Property. Schedule 4.12 hereto sets forth, as of
the Friday immediately preceding the Effective Date (and as of the Friday
immediately preceding any date of delivery pursuant to Section 5.8(6) of any
subsequent Schedule 4.12), a complete and accurate list of (1) the address and
legal descriptions of any real property owned and the address (and, with respect
to any such subsequent Schedule 4.12, the legal description) of any real
property leased by the Borrower, each Subsidiary and each Financed Franchisee,
(2) with respect to any such subsequent Schedule 4.12, in the case of Fixtures
located on property not owned by the Borrower, a Subsidiary or a Financed
Franchisee, as the case may be, the name(s) and mailing addresses of the record
owners and legal description of such property, and (3) a list of all leases in
which any real property is leased to third parties by the Borrower, or any
Subsidiary.
SECTION 4.13. Hazardous Materials. The Borrower and each of its
Subsidiaries have obtained all permits, licenses and other authorizations which
are required under all Environmental Laws, except to the extent failure to have
any such permit, license or authorization would not result in a Material Adverse
Change. The Borrower and each of its Subsidiaries are in compliance with the
terms and conditions of all such permits, licenses and authorizations, and are
also in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law or in any regulation, code, plan,
order, decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent that any such failure
to comply would not result in a Material Adverse Change.
There have been no material environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or which are in the
possession of the Borrower or any of its Subsidiaries in relation to any
property or facility now or previously owned or leased by the Borrower or any of
its Subsidiaries which have not been made available to the Lenders.
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The Borrower has informed the Lenders in writing of all material non-
compliance of the Borrower and each of its Subsidiaries with the terms and
conditions of all (1) permits, licenses or authorizations required under all
Environmental Laws and (2) other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in any applicable Environmental Law or in any applicable regulation,
code, plan, order, decree, judgment, injunction notice or demand letter issued,
entered, promulgated or approved thereunder.
SECTION 4.14. Taxes. The Borrower and each Subsidiary have filed all
material tax returns (federal, state, and local) required to be filed and have
paid all taxes, assessments, and governmental charges and levies thereon which
it is aware are due, including interest and penalties, except to the extent the
validity thereof is being contested in good faith and by appropriate
proceedings.
SECTION 4.15. Debt. As of the date hereof, Schedule 4.15 sets forth
a complete and correct list of all credit agreements, indentures, purchase
agreements, guaranties, Capital Leases, and other investments, agreements, and
arrangements currently in effect providing for or relating to extensions of
credit (including agreements and arrangements for the issuance of letters of
credit or for bankers' acceptance financing) in respect of which the Borrower or
any Subsidiary is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question, which are
outstanding and which can be outstanding, are correctly stated, and all Liens of
any nature given or agreed to be given as security therefor are correctly
described or indicated in such Schedule.
SECTION 4.16. General Franchisee Information. Schedule 4.16 hereto
sets forth, as of the initial date of this Agreement (and as of the date of
delivery pursuant to Section 5.8(6) of any subsequent Schedule 4.16), a true and
complete list of the following information for each Franchisee:
(1) the identity of such Franchisee; and
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(2) the address of each parcel of real property owned or leased by
such Franchisee on which such Franchisee operates or plans to operate a
Store.
SECTION 4.17. Collateral Information. Schedule 4.17 hereto sets
forth, as of the initial date of this Agreement (and as of the date of delivery
pursuant to Section 5.8(6) of any subsequent Schedule 4.17), a true and complete
list of the following information:
(1) Any Debt owed by each Person to the Borrower or any Subsidiary
which is evidenced by a promissory note or other instrument (on which
Schedule the Borrower has indicated by an asterisk (a) those promissory
notes or other instruments which have not yet been delivered to the Agent
pursuant to a Pledge Agreement and (b) those Financed Franchisee Loan
Documents delivered to the Borrower by any Franchisee which have not yet
been assigned to the Lenders pursuant to a Collateral Assignment of Loan);
(2) Any Liens granted by each Person to the Borrower or any Subsidiary
to secure Debt covered by the foregoing Clause (1) and the filing offices
in which the Borrower has filed financing statements, mortgages or deeds of
trust to perfect such Liens and the acknowledgement numbers or other
recording information of such financing statements, mortgages or deeds of
trust; and
(3) Any capital stock, partnership units or other equity interests of
each Person which is owned or otherwise held (including for collateral
purposes) by the Borrower or any Subsidiary (on which Schedule the Borrower
has indicated by an asterisk those certificates evidencing such equity
interest which have not been delivered to the Agent pursuant to a Pledge
Agreement).
SECTION 4.18. Investment Company Act. Neither the Borrower nor any
of its Subsidiaries is an "investment company," or a company
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"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 4.19. Public Utility Holding Company Act. Neither the
Borrower nor any of its Subsidiaries is a "holding company," or an "affiliate"
of a "holding company" or a "subsidiary company" of a "holding company," within
the meaning of the Public Utility Holding Company act of 1935, as amended.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
Unless otherwise consented to in writing by the Required Lenders, so
long as the Revolving Note shall remain unpaid or the Lenders shall have any
Commitment under this Agreement or any Letter of Credit remains outstanding or
any LC Obligations remain unpaid, the Borrower will:
SECTION 5.1. Maintenance of Existence. Except as otherwise permitted
by Section 6.3, preserve and maintain, and cause each Subsidiary to preserve and
maintain, its corporate, partnership or other legal entity existence, as the
case may be, and good standing in the jurisdiction of its organization or
formation, and qualify and remain qualified, and cause each Subsidiary to
qualify and remain qualified, as a foreign corporation, partnership or other
legal entity, as the case may be, in each jurisdiction in which the failure to
so qualify would result in a Material Adverse Change.
SECTION 5.2. Maintenance of Records. Keep, and cause each Subsidiary
to keep, adequate records and books of account.
SECTION 5.3. Maintenance of Properties. Maintain, keep, and
preserve, and cause each Subsidiary to maintain, keep, and preserve, all of its
material properties (tangible and intangible) necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear and
tear excepted; provided, however, the Borrower and each Subsidiary may close
Stores in the ordinary course of business,
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in which event the Borrower shall give prompt written notice to each Lender.
SECTION 5.4. Conduct of Business. Continue, and cause each
Subsidiary to continue (unless causing to so continue would constitute a breach
of fiduciary duty), to engage in the operation of Stores and/or in the
franchising of Stores to other Persons (and other matters and operations
incidental to the foregoing, including, but not limited to the production of
bagels, cream cheese and other related food products, the holding of real estate
or leasehold interests for Store locations, commissaries and production
facilities and the distribution of Store supplies or inventory items), and no
other line of business; provided, that after each acquisition by the Borrower or
a Subsidiary of preexisting operating assets, the Borrower or such Subsidiary,
as the case may be, shall have a reasonable period of time in which to dispose
of any assets so acquired which do not relate, and are not being converted, to
the operation of Stores or the franchising of Stores to other Persons (and other
matters and operations incidental to the foregoing).
SECTION 5.5. Maintenance of Insurance. Maintain, and cause each
Subsidiary to maintain, insurance with commercially reasonable and reputable
insurance companies or associations in such amounts and covering such risks as
are usually carried by companies engaged in the same or a similar business and
similarly situated, which insurance may provide for reasonable deductibility
from coverage thereof.
SECTION 5.6. Compliance With Laws. Comply, and cause each Subsidiary
to comply, in all material respects with all material applicable laws, rules,
regulations, and orders, such compliance to include, without limitation, paying
before the same become delinquent all taxes, assessments, and governmental
charges imposed upon it or upon its property except to the extent the validity
thereof is being contested in good faith and by appropriate proceedings.
SECTION 5.7. Right of Inspection. At any reasonable time and from
time to time, permit the Agent and the Lenders or any agent or representative
thereof to examine and make copies of and
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abstracts from the records and books of account of, and visit the properties of,
the Borrower and any Subsidiary, and to discuss the affairs, finances, and
accounts of the Borrower and any Subsidiary with any of their respective
officers, directors and employees and the Borrower's independent accountants.
SECTION 5.8. Reporting Requirements. Furnish to the Agent (and any
Lender which requests any of the following documents):
(1) Retail Period financial statements. As soon as available and in
any event within twenty (20) days after the end of each Retail Period of
the Borrower (or in the case of the last Retail Period of each fiscal
quarter of the Borrower, within thirty (30) days after the end of such
Retail Period), consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as at the end of such Retail Period,
consolidated and consolidating statements of operations of the Borrower and
its Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such Retail Period and for the
period commencing at the end of the previous Retail Period and ending with
the end of such Retail Period, and consolidated and consolidating
statements of cash flows of the Borrower and its Subsidiaries for the
portion of the fiscal year ended with the last day of such Retail Period
and for the period commencing at the end of the previous Retail Period and
ending with the end of such Retail Period, all in reasonable detail and for
statements of operations, stating in comparative form the respective budget
figures for the corresponding period, and a "flash" report of sales by week
by unit in the most complete form as previously delivered to the Agent;
(2) Quarterly financial statements. As soon as available and in any
event within thirty (30) days after the end of each of the first three
fiscal quarters of each fiscal year of the Borrower, consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries as at the
end of such
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fiscal quarter, consolidated and consolidating statements of operations of
the Borrower and its Subsidiaries for the period commencing at the end of
the previous fiscal year and ending with the end of such fiscal quarter,
and consolidated and consolidating statements of cash flows of the Borrower
and its Subsidiaries for the portion of the fiscal year ended with the last
day of such fiscal quarter, all in reasonable detail and stating in
comparative form the respective consolidated and consolidating figures for
the corresponding date and period in the previous fiscal year and certified
by the Chief Financial Officer or any Vice President of the Borrower (in
his or her capacity as such, without personal liability therefor) as being
prepared consistent with the Borrower's audited annual financial statements
(subject to year-end adjustments and changes in accounting policies
permitted by GAAP which have been disclosed in writing to the Lenders);
(3) Annual financial statements. As soon as available and in any
event within ninety (90) days after the end of each fiscal year of the
Borrower, a consolidated and consolidating balance sheet of the Borrower
and its Subsidiaries as at the end of such fiscal year, consolidated and
consolidating statements of operations of the Borrower and its Subsidiaries
for such fiscal year, and consolidated and consolidating statements of cash
flows of the Borrower and its Subsidiaries for such fiscal year, all in
reasonable detail and stating in comparative form the respective
consolidated figures for the corresponding date and period in the prior
fiscal year and all prepared in accordance with GAAP and as to the
consolidated statements accompanied by an opinion thereon reasonably
acceptable to the Required Lenders by Arthur Andersen & Co. or other
independent accountants selected by the Borrower and reasonably acceptable
to the Required Lenders;
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(4) Certificate of no Default. Together with the financial
statements furnished by the Borrower under the preceding Clauses (2) and
(3), a certificate of the Chief Financial Officer or any Vice President of
the Borrower (in his or her capacity as such, and without personal
liability therefor) (a) certifying that to the best of his or her
knowledge no Default or Event of Default has occurred and is continuing, or
if a Default or Event of Default has occurred and is continuing, a
statement as to the nature thereof and the action which is proposed to be
taken with respect thereto, and (b) showing computations calculated as of
the last day of the fiscal period then ended demonstrating compliance with
each of the covenants contained in Article VII; provided, that with respect
to each Computation Period which does not constitute a full fiscal quarter,
the Borrower shall deliver in addition to the foregoing a certificate of
the Chief Financial Officer or any Vice President of the Borrower (in his
or her capacity as such, and without personal liability therefor) showing
computations calculated as of the last day of such Computation Period
demonstrating compliance with Section 7.5;
(5) Accountant's reports. (a) Simultaneously with the delivery of
the annual financial statements referred to in Section 5.8(3), a
certificate of the independent public accountants who audited such
statements to the effect that, in making the examination necessary for the
audit of such statements, they have obtained no knowledge of any condition
or event which constitutes a Default or Event of Default, or if such
accountants shall have obtained knowledge of any such condition or event,
specify in such certificate each such condition or event of which they have
knowledge and the nature and status thereof; and (b) promptly upon receipt
thereof, copies of any reports submitted to the Borrower or any Significant
Subsidiary by independent certified public accountants in connection with
examination of the financial
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statements of the Borrower or any Significant Subsidiary made by such
accountants;
(6) Updated Schedules. As soon as reasonably available in final form
and in any event within ten (10) days after the end of each Retail Period,
updated Schedules 4.10, 4.12, 4.16 and 4.17 hereto, which updated schedules
shall be deemed as of the date of delivery to amend and restate in their
entirety the previously delivered Schedules 4.10, 4.12, 4.16 and 4.17;
(7) Notice of litigation. Promptly after the commencement thereof,
notice of all actions, suits, and proceedings before any court or
governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting the Borrower or any
Subsidiary, which, in any one case or in the aggregate, are material to the
Borrower and its Subsidiaries taken as a whole, or adversely affect the
ability of the Borrower to perform its obligations under the Loan
Documents;
(8) Notice of Defaults and Events of Default. Immediately after the
Borrower becomes aware of the occurrence of a Default or Event of Default
arising from any lease entered into in connection with the incurrence of
Permitted Sale Lease Back Debt, and as soon as possible and in any event
within three (3) Business Days after the Borrower becomes aware of the
occurrence of any Default or Event of Default, a written notice setting
forth the details of such Default or Event of Default and the action which
is proposed to be taken by the Borrower with respect thereto;
(9) ERISA reports. Promptly after the filing or receiving thereof,
copies of all substantive reports, including annual reports, and notices
which the Borrower or any Subsidiary files with or receives from the PBGC
or the U.S. Department of Labor under ERISA;
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and as soon as possible and in any event within thirty (30) days after the
Borrower or any Subsidiary knows or has reason to know that any Reportable
Event or Prohibited Transaction has occurred with respect to any Plan or
that the PBGC or the Borrower or any Subsidiary has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan, the
Borrower will deliver to the Agent a certificate of the Chief Financial
Officer or Vice President -Finance of the Borrower (in his or her capacity
as such and with no personal liability therefor) setting forth details as
to such Reportable Event or Prohibited Transaction or Plan termination and
the action the Borrower proposes to take with respect thereto;
(10) Reports to other creditors. Promptly after the furnishing
thereof, copies of any material statement or report furnished to any other
creditor (other than BCI) of the Borrower pursuant to the terms of any
indenture, loan, or credit or similar agreement and not otherwise required
to be furnished to the Agent or the Lenders pursuant to any other clause of
this Section 5.8;
(11) Proxy statements, etc. Promptly after the sending or filing
thereof, copies of all proxy statements, financial statements, and reports
which the Borrower or any Subsidiary sends to its stockholders, and copies
of all regular, periodic, and special reports, and all registration
statements which the Borrower or any Subsidiary files with the Securities
and Exchange Commission (or any governmental authority which may be
substituted therefor) or with any national securities exchange;
(12) Financed Franchisee Loan Documents. Promptly after the
execution and delivery by a Financed Franchisee of any Financed Franchisee
Loan Documents, copies of such Financed Franchisee Loan Documents;
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(13) Financed Franchisee and Financed Subsidiary financial
statements. As soon as available and in any event within thirty (30) days
after the end of each of the first three fiscal quarters of each fiscal
year of each Financed Franchisee and each Financed Subsidiary, and as soon
as available and in any event within ninety (90) days after the end of each
fiscal year of each Financed Franchisee and each Financed Subsidiary,
balance sheets of each such Financed Franchisee and each such Financed
Subsidiary as at the end of such fiscal quarter or fiscal year, statements
of operations of each such Financed Franchisee and each such Financed
Subsidiary for the period commencing at the end of the previous fiscal year
and ending with the end of such fiscal quarter or fiscal year, and
statements of cash flows of each such Financed Franchisee and each such
Financed Subsidiary for the portion of the fiscal year ended with the last
day of such fiscal quarter or fiscal year, all in reasonable detail and
stating in comparative form the respective figures for the corresponding
date and period in the previous fiscal year and either (A) certified by the
Chief Financial Officer or Vice President - Finance of the Borrower (in his
or her capacity as such, without personal liability therefor) as being, to
the best of such officer's knowledge, prepared in accordance with GAAP or
(B) certified to the Lenders by the chief financial officer or treasurer of
such Financed Franchisee or Financed Subsidiary as accurate, subject to
changes resulting from normal, recurring year-end adjustments; and
(14) General information. Such other information respecting the
condition or operations, financial or otherwise, of the Borrower or any
Subsidiary as the Agent or any Lender may from time to time reasonably
request.
SECTION 5.9. Environmental Laws. Use and operate, and cause each
Subsidiary to use and operate, all of its facilities and properties in material
compliance with all Environmental Laws, keep all necessary permits, approvals,
certificates, licenses and
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other authorizations relating to environmental matters in effect and remain in
material compliance therewith, and handle all hazardous substances in material
compliance with all applicable Environmental Laws, except to the extent the
failure to comply with the foregoing would not result in a Material Adverse
Change; and provide such information and certifications which the Agent or any
Lender may reasonably request from time to time to evidence compliance with this
Section.
SECTION 5.10. Notes, Certificates and Other Collateral. Commencing
on the Effective Date, deliver to the Agent (1) promptly and in no event more
than ten (10) Business Days after receipt (a) all promissory notes and other
instruments evidencing any Debt owed by any Person to the Borrower or any
Subsidiary, other than with respect to any notes and other instruments
evidencing Debt in an aggregate principal amount not to exceed at any one time
outstanding $125,000 and in an individual principal amount not to exceed at any
one time outstanding $20,000, and (b) all certificates (together with duly
executed stock powers) evidencing capital stock, partnership units or other
equity interests of any Person (other than capital stock issued by the Borrower)
which are owned or otherwise held (including capital stock, partnership units or
other equity interests held as collateral) by the Borrower or any Subsidiary;
and, simultaneously with the delivery of such promissory notes, instruments or
certificates, an updated Attachment 1 to the respective Pledge Agreement
indicating, as appropriate, such Person as a "Pledged Note Issuer" and/or a
"Pledged Share Issuer" (as such terms are defined in the Pledge Agreement) and
(2) promptly upon execution and delivery of any Financed Franchisee Loan
Documents, an updated Schedule 1.1(B) to the Collateral Assignment of Loan which
shall include reference to such Financed Franchisee Loan Documents. All such
promissory notes, instruments and certificates shall be held by the Agent in
accordance with, and subject to, the respective Pledge Agreement; provided, that
the Agent's interest therein shall not exceed the interest of the Borrower or
such Subsidiary, as the case may be, therein and shall terminate and be promptly
released in accordance with the documentation by which the Borrower or such
Subsidiary holds such interest; and provided further that the Agent shall take
such action with respect to the foregoing
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promissory notes, instruments and certificates as the Borrower or such
Subsidiary may reasonably instruct (so long as such action is either mandatory
pursuant to the documentation by which the Borrower or such Subsidiary holds
such promissory notes, instruments or certificates, if held as Collateral, or is
consistent with the terms of this Agreement and the other Loan Documents) in
order to comply with the terms of the documentation by which the Borrower or
such Subsidiary holds such interest.
SECTION 5.11. Subsidiary Defaults. Upon the occurrence of any
Subsidiary Default, allow the Agent to participate in any negotiations conducted
between the affected Subsidiary and the lender of the affected indebtedness.
SECTION 5.12. Annual Clean-Up. For a period of not less than sixty
(60) consecutive days during each rolling period of thirteen (13) Retail
Periods, reduce the aggregate outstanding principal amount of Revolving Loans
plus accrued interest thereon to zero.
ARTICLE VI
NEGATIVE COVENANTS
------------------
From and after the date hereof, so long as the Revolving Note shall
remain unpaid or any Lender shall have any Commitment under this Agreement or
any Letter of Credit remains outstanding or any LC Obligations remain unpaid,
the Borrower will not:
SECTION 6.1. Liens. Create, incur, assume, or suffer to exist, or
permit any Subsidiary to create, incur, assume, or suffer to exist (unless
failure to so permit would constitute a breach of fiduciary duty), any Lien upon
or with respect to any of its properties, now owned or hereafter acquired,
except:
(1) Liens in existence on the Effective Date and described in
Schedule 6.1;
(2) As to property which is Collateral, any Liens in favor of the
Agent arising under the Collateral Documents;
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(3) Liens securing obligations of a Subsidiary to the Borrower or a
Wholly-Owned Subsidiary;
(4) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or, if due and payable, if they are being
contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
(5) Liens imposed by law, such as mechanics', repairmen's,
materialmen's, landlords', warehousemen's, and carriers' Liens, and other
similar Liens, securing obligations incurred in the ordinary course of
business which are not past due for more than thirty (30) days or which
are being contested in good faith by appropriate proceedings and for which
appropriate reserves have been established;
(6) Liens under workmen's compensation, unemployment insurance,
social security, or similar legislation;
(7) Liens, deposits, or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory
obligations, surety, stay, appeal, indemnity, performance or other similar
bonds, or other similar obligations arising in the ordinary course of
business;
(8) Judgment and other similar Liens arising in connection with court
proceedings, provided, that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings;
(9) Easements, rights-of-way, restrictions, and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use, and
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enjoyment by the Borrower or any Subsidiary of the property or assets
encumbered thereby in the normal course of its business or materially
impair the value of the property subject thereto;
(10) Liens securing Debt of the types permitted by Clauses (6) and
(10) of Section 6.2; provided, that in the case of such Clause (10) such
Liens only attach to the assets which are the subject of such Permitted
Sale Leaseback Debt and general intangible interests associated therewith;
and
(11) Purchase money Liens on any property owned or hereafter acquired
or the assumption of any Lien on property existing at the time of such
acquisition, or a Lien incurred in connection with any conditional sale or
other title retention agreement or a Capital Lease, provided, that:
(a) Any property subject to any of the foregoing is acquired by
the Borrower or any Subsidiary in the ordinary course of its
respective business and the Lien on any such property is created
contemporaneously with or prior to such acquisition;
(b) The obligation secured by any Lien so created, assumed, or
existing shall not exceed ninety percent (90%) of the lesser of cost
or fair market value as of the time of acquisition of the property
covered thereby to the Borrower or Subsidiary acquiring the same;
(c) Each such Lien shall attach only to the property so acquired
and fixed improvements thereon; and
(d) The Debt of the Borrower which is secured by such Liens plus
the Debt of all Subsidiaries secured by such Liens arising
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after such Persons become Subsidiaries shall not exceed at any time
outstanding in the aggregate $500,000.
SECTION 6.2. Debt. Create, incur, assume, or suffer to exist, or
permit any Subsidiary to create, incur, assume, or suffer to exist (unless
failure to so permit would constitute a breach of fiduciary duty), any Debt,
except:
(1) Debt of the Borrower under this Agreement or the Revolving Note;
(2) Debt described in Schedule 4.15, but no renewals, extensions, or
refinancings thereof;
(3) Accounts payable to trade creditors for goods or services which
are not aged more than ninety (90) days from billing date incurred in the
ordinary course of business and paid within the specified time, unless
contested in good faith and by appropriate proceedings;
(4) Debt of any Subsidiary to the Borrower provided such Debt
complies with any applicable requirements set forth in Section 6.8;
(5) Debt of the Borrower arising with respect to Borrower's
commitment to provide funds to any Financed Franchisee or to any Financed
Subsidiary so long as such commitment to provide funds complies with the
requirements set forth in Section 6.8;
(6) Debt which constitutes indebtedness for borrowed money owed by a
Financed Franchisee to a Person other than the Borrower which indebtedness
is in existence on the date such Financed Franchisee becomes a Financed
Subsidiary, and any renewal, extension or refinancing of such Debt,
provided, that as of and after giving effect to such Financed Franchisee
becoming a Financed Subsidiary no Default or Event of Default shall exist
or be continuing, and provided further, that the outstanding principal
amount of such
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Debt shall at no time exceed the principal amount of such Debt outstanding
on the date such Financed Franchisee becomes a Financed Subsidiary;
(7) Debt which is secured by Liens of the type described in Clause
(11) of Section 6.1;
(8) Debt of the type permitted by Sections 6.4 and 6.9;
(9) the BCI Convertible Debt, as it may be extended from time to
time;
(10) Permitted Sale Leaseback Debt;
(11) Debt incurred in connection with Hedging Agreements entered into
by the Company or any Subsidiary;
(12) other unsecured Subordinated Debt owed to BCI; and
(13) Unsecured Debt not of the type described in the foregoing
Clauses (1) through (12) in an aggregate principal amount not to exceed at
any one time $250,000
SECTION 6.3. Mergers, Etc. Merge or consolidate with, or sell,
assign, lease, liquidate, dissolve or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to any Person, or acquire all
or substantially all of the assets or the business of any Person, or permit any
Subsidiary to do so (unless failure to so permit would constitute a breach of
fiduciary duty), except that: (1) any Subsidiary may merge into or consolidate
with or transfer assets to the Borrower or a Wholly-Owned Subsidiary, provided,
that in the case of a Subsidiary which is a Special Purpose Subsidiary the only
assets of the Subsidiary so merged, consolidated or transferred shall be assets
of the type permitted pursuant to the definition of "Special Purpose
Subsidiary"; (2) any Wholly-Owned Subsidiary may be dissolved; (3) the Borrower
or any Subsidiary may acquire all or substantially all of the assets or the
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business of any Person, provided that in the case of a Special Purpose
Subsidiary the only assets so acquired shall be of a type permitted pursuant to
the definition of "Special Purpose Subsidiary", and provided further, that as of
and after giving effect to such acquisition no Default or Event of Default shall
exist or be continuing; and (4) the Borrower may acquire capital stock,
partnership units or other equity interests of a Financed Franchisee or a
Subsidiary in compliance with Clause (2) of Section 6.8.
SECTION 6.4. Leases. Create, incur, assume, or suffer to exist, or
permit any Subsidiary to create, incur, assume, or suffer to exist (unless
failure to so permit would constitute a breach of fiduciary duty), any
obligation as lessee for the rental or hire of any real or personal property,
except: (1) operating leases of personal property and Capital Leases which do
not give rise to any Lien except those permitted by Section 6.1 and leases which
would be Capital Leases except that because of their immateriality GAAP does not
require them to be capitalized on the books of the lessee; (2) leases existing
on the date of this Agreement and any extensions or renewals thereof; (3) any
leases of real property entered into after the Effective Date on which the
Borrower or a Franchisee operates or plans to operate a Store or which the
Borrower or any Subsidiary uses or intends to use for office space, commissary
or production facilities or similar purposes; provided, however, that (a) with
respect to any leases to which the Borrower or any Subsidiary is a party and the
term of which exceeds six months, the Borrower or such Subsidiary, as the case
may be, shall have theretofore delivered to the Agent a Collateral Assignment of
Lease and such financing statements as the Agent shall reasonably request as
necessary to perfect the Agent's security interest in all Fixtures and leasehold
improvements (unless despite the best efforts of the Borrower or such
Subsidiary, as the case may be, (which shall not require unreasonable action)
such Collateral Assignment and financing statements have not been consented to
by the Landlord, where such consent is required by such lease) duly executed by
the Borrower or such Subsidiary, as the case may be, and used its best efforts
(which shall not require unreasonable efforts) to obtain a Landlord's Consent
executed by the landlord thereof, which Landlord's Consent, if any, shall be
delivered to the Agent,
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together with such other documentation as shall be necessary in the reasonable
determination of the Agent to effect the assignment of the rights, title and
interest of the Borrower or such Financed Subsidiary, as the case may be, in and
to such leased real property and (b) within one year from the rent commencement
date for such lease, the Borrower or a Franchisee shall be operating a Store,
office, commissary or production facility on the premises covered by such lease
unless the operation of such Store is delayed due to local zoning, licensing or
permitting issues, acts of God or other matters which are not within the control
of the Borrower or Franchisee, as the case may be; and (4) leases between the
Borrower and any Subsidiary or between any Subsidiaries.
SECTION 6.5. Sale and Leaseback. Sell, transfer, or otherwise
dispose of, or permit any Subsidiary to sell, transfer, or otherwise dispose of
(unless failure to so permit would constitute a breach of fiduciary duty), any
real or personal property or fixtures to any Person and thereafter directly or
indirectly lease back the same or similar property, except in connection with
the incurrence of Permitted Sale Leaseback Debt.
SECTION 6.6. Dividends. Declare or pay, or permit any of its
Subsidiaries (other than any of its Wholly-Owned Subsidiaries) to declare or
pay, any dividends; or purchase, redeem, retire, or otherwise acquire for value
any of its capital stock now or hereafter outstanding; or make any distribution
of assets to its stockholders as such whether in cash, assets, or obligations of
the Borrower; or allocate or otherwise set apart any sum for the payment of any
dividend or distribution on, or for the purchase, redemption, or retirement of,
any shares of its capital stock; or make any other distribution by reduction of
capital or otherwise in respect of any shares of its capital stock; or permit
any of its Subsidiaries (other than any of its Wholly-Owned Subsidiaries or
unless failure to so permit would constitute a breach of fiduciary duty) to do
any of the foregoing or to purchase or otherwise acquire for value any stock of
the Borrower or another Subsidiary (other than a Wholly-Owned Subsidiary);
provided, that (1) the Borrower may declare and deliver dividends and make
distributions payable solely in capital stock of the Borrower and (2) the
Borrower may make scheduled dividend payments or
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redemptions on its Series A Preferred Stock as long as no Default or Event of
Default has occurred and is continuing or would have resulted from the payment
of such dividend or redemption if such dividend was paid or redemption made on
the last day of the most recent fiscal period of the Borrower for which
financial statements have been delivered to the Agent pursuant to Section 5.8(2)
or (3), as the case may be.
SECTION 6.7. Sale of Assets. Sell, lease, assign, transfer, or
otherwise dispose of, or permit any Subsidiary to sell, lease, assign, transfer,
or otherwise dispose of (unless failure to so permit would constitute a breach
of fiduciary duty), any of its now owned or hereafter acquired assets
(including, without limitation, shares of stock and indebtedness of
Subsidiaries, receivables, and leasehold interests), except: (1) for assets
disposed of in the ordinary course of business or in connection with the
incurence of Permitted Sale Leaseback Debt; (2) the sale or other disposition of
assets no longer used or useful in the conduct of its business; (3) that any
Subsidiary may sell, lease, assign, or otherwise transfer its assets to the
Borrower or any Wholly-Owned Subsidiary unless in the case of a Subsidiary which
is a Special Purpose Subsidiary, such assets are not of a type permitted
pursuant to the definition of "Special Purpose Subsidiary"; (4) that the
Borrower or any Subsidiary may sell, lease, assign or otherwise transfer to a
Franchisee any real property, leasehold interests or personal property
associated with the operation of Stores, offices, commissaries or production
facilities; provided that such sale, lease, assignment or transfer is on
commercially reasonable terms negotiated at arms' length and that after giving
effect to such sale, lease, assignment or transfer no Default or Event of
Default shall exist or be continuing; (5) any issuances or sales of the capital
stock, partnership units or other equity interests of any Subsidiary or other
Person permitted pursuant to Section 6.11; (6) other dispositions by the
Borrower or any Subsidiary not of the type described in the foregoing Clauses
(1) through (5) provided that the aggregate amount of all such dispositions
shall not exceed $250,000 during the term of this Agreement; and (7) the
Borrower may sell the BCI Exempted Stock and the BCI Control Stock in accordance
with Clause (5) of Section 6.8.
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SECTION 6.8. Investments. Make, or permit any Subsidiary to make
(unless failure to so permit would constitute a breach of fiduciary duty), any
loan or advance to any Person, or purchase or otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, any capital stock, obligations, or
other securities of, make any capital contribution to, or otherwise invest in or
acquire any interest in any Person except: (1) loans and advances made by the
Borrower to (a) Financed Franchisees; provided, that (i) the initial loans or
advances to any Financed Franchisee are or have been made pursuant to Financed
Franchisee Loan Documents, (ii) such loans or advances are evidenced by
promissory notes duly pledged to the Agent under the Pledge Agreement, (iii) all
such loans and advances to Financed Franchisees shall be secured in the manner
described in paragraph (3) of Schedule 1.1(A), (iv) all Liens in favor of the
Borrower securing such loans and advances are duly perfected within 30 days of
the initial loan or advance to such Financed Franchisee, and (v) the aggregate
principal amount of all loans and advances made by the Borrower to any Financed
Franchisee under the Financed Franchisee Loan Documents shall not exceed at any
time an amount equal to the products of four (4) multiplied by the aggregate
amount of all capital contributions theretofore made to such Financed
Franchisee; (b) Financed Subsidiaries; provided, that (i) such loans and
advances are made pursuant to Financed Subsidiary Loan Documents, (ii) such
loans or advances are evidenced by promissory notes duly pledged to the Agent
under the Pledge Agreement and (iii) all Liens in favor of the Borrower securing
such loans and advances are duly perfected prior to the initial loan or advance
thereunder; (c) Wholly-Owned Subsidiaries, provided that (i) such loans and
advances are evidenced by promissory notes duly pledged to the Agent under the
Pledge Agreement and (ii) such Wholly-Owned Subsidiary shall have duly executed
and delivered to the Agent a Guaranty and a Security Agreement, together with
duly executed financing statements and fixture filings to be filed under the
Uniform Commercial Code of all jurisdictions necessary or, in the opinion of the
Agent, desirable to perfect the security interest created by such Security
Agreement; and (d) loans and advances to Financed Franchisees arising from
Permitted Sale Leaseback Debt to the extent the subleasing by the Borrower to a
Financed Franchisees (or Harlan Bakeries, Inc. or any of its Affiliates)
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in connection with Permitted Sale Leaseback Debt may be regarded as a loan or
advance; (2) the acquisition by the Borrower of the capital stock, partnership
units or other equity interests of any Financed Franchisees, Financed
Subsidiaries or Subsidiary; provided, that (a) in the case of a Financed
Franchisee such Financed Franchisee is not then in default of any payment amount
in aggregate in excess of $50,000 to the Borrower under the respective Financed
Franchisee Loan Documents and (b) as of and after giving effect to such
acquisition no Default or Event of Default shall exist or be continuing; (3)
loans and advances made by the Borrower to an employee; provided, that such
loans and advances are (a) consistent with past practices and (b) do not exceed
an aggregate principal amount at any one time outstanding of $100,000 with
respect to such employee or of $250,000 with respect to all employees of the
Borrower; (4) strategic investments consisting of purchases or other
acquisitions of capital stock, obligations or other securities of any Person or
capital contributions to or other investments or acquisitions of any interest in
any Person made by the Borrower solely in exchange for its capital stock, as
approved by the Board of Directors of the Borrower, provided, that such
strategic investments are reasonably related to the Borrower's existing business
at the time of such investment; (5) the acquisition of BCI Exempted Stock and
BCI Control Stock provided such stock is not owned for more than fifteen (15)
Business Days; (6) direct obligations of (or obligations fully guaranteed or
insured by) the United States or any agency thereof with maturities of one year
or less from the date of acquisition; (7) certificates of deposit with
maturities of one year or less from the date of acquisition issued by any
commercial bank having capital and surplus in excess of One-Hundred Million
Dollars ($100,000,000); (8) commercial paper and variable and fixed rate notes
issued by any commercial bank having capital and surplus in excess of One
Hundred Million Dollars ($100,000,000); (9) commercial paper and variable rate
notes issued by, or guaranteed by, any industrial or financial company with a
short term commercial paper rating of at least A-2 or the equivalent thereof by
Standard & Poor's Corporation or at least P-2 or the equivalent thereof by
Moody's Investors Service, Inc., and in each case maturing within one year after
the date of acquisition; (10) stock, obligations, or securities received in
settlement of debts (created in the
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ordinary course of business) owing to the Borrower or any Subsidiary; and (11)
loans or advances not of the type described in the foregoing Clauses (1) through
(10) in an aggregate principal amount not to exceed at any one time $100,000.
SECTION 6.9. Guaranties, Etc. Assume, guarantee, endorse, or
otherwise be or become directly or contingently responsible or liable, or permit
any Subsidiary to assume, guarantee, endorse, or otherwise be or become directly
or contingently responsible or liable (unless failure to so permit would
constitute a breach of fiduciary duty) for obligations of any Person (including,
but not limited to, an agreement to purchase any obligation, stock, assets,
goods, or services primarily for the purpose of enabling such Person to make
payment of such obligations, or to supply or advance any funds, assets, goods,
or services primarily for such purpose, or to maintain or cause such Person to
maintain a minimum working capital or net worth, or otherwise to assure the
creditors of any Person against loss), except (1) guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; (2) guaranties in existence on the Effective Date
and described in Schedule 6.9; (3) primary liability for leases transferred to
Financed Franchisees in accordance with Clause (4) of Section 6.7; (4) other
guaranties of the lease payments of Franchisees and guaranties of Franchisee's
liabilities arising under Hedging Agreements to which such Franchisee is a
party, provided that as of the date such guaranty is issued and after giving
effect to such guaranty, the sum of the aggregate amount of payments due under
all such leases described in the foregoing Clause (3) (other than with respect
to properties leased by Noah's New York Bagels, Inc. on the Effective Date)
during the twelve-month period succeeding such date plus 20% of the aggregate
notational amount as of such date of all such Hedging Agreements shall not
exceed $1,000,000; and (5) guaranties of Debt permitted solely by Clause (13) of
Section 6.2.
SECTION 6.10. Transactions With Affiliate. Enter into any
transaction, including, without limitation, the purchase, sale, or exchange of
property or the rendering of any service, with any Financed Franchisee or
Affiliate, or permit any Subsidiary to enter into any transaction, including,
without limitation, the
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purchase, sale, or exchange of property or the rendering of any service, with
any Financed Franchisee or Affiliate, except pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business and upon fair and
reasonable terms not materially less favorable to the Borrower or such
Subsidiary than similar transactions entered into with a Person not a Financed
Franchisee or Affiliate; provided that, the foregoing shall not prohibit any
transaction effected in accordance with the respective Financed Franchisee Loan
Documents.
SECTION 6.11. Subsidiary, Etc.
(1) Create, acquire or otherwise permit to exist any Subsidiaries
other than: (a) Special Purpose Subsidiaries; (b) Financed Subsidiaries; and (c)
Wholly-Owned Subsidiaries acquired in conformity with Section 6.8; provided,
that (i) with respect to any Subsidiary described in Clause (b) of this Section
6.11(1), in the event the Borrower shall directly or indirectly acquire all of
the issued and outstanding voting stock (other than qualifying shares of
directors), general partners interests or other equity interests having ordinary
voting power to elect the board of directors or other managers of such
Subsidiary, promptly and in no event later than 10 Business Days after such
acquisition such Subsidiary shall execute and deliver to the Agent a Guaranty,
and (ii) promptly and in no event later than 10 Business Days after such
creation or acquisition all certificates evidencing the shares so created or
acquired are pledged to the Agent pursuant to a Pledge Agreement and
simultaneously with the delivery of such certificates the Borrower or such
Subsidiary, as the case may be, delivers an updated Attachment I to the
respective Pledge Agreement indicating such Subsidiary or other Person as a
"Pledged Share Issuer";
(2) Sell or otherwise dispose of any shares of the capital stock,
partnership units or other equity interests of any Subsidiary or other Person or
permit any Subsidiary to issue any additional shares of its capital stock,
partnership units or other equity interest, other than: (1) in connection with
stock splits, stock dividends or similar issuances, (2) directors qualifying
shares or (3) shares, partnership units or other units
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issued (a) for fair consideration, (b) to the Borrower upon exercise of the
Borrower's conversion rights, options, first refusal rights or preemptive rights
provided in the Financed Franchisee Loan Documents or otherwise, or (c) to
employees of such Subsidiary upon exercise of employee stock, unit or other
equity options; provided, that in the case of the foregoing Clause (2)(c), at
the time such options are granted the exercise price is not less than the fair
market value of such stock, unit or other equity interest and, provided, further
that after giving effect to the issuance of stock, units or other equity
interest upon exercise of such options, the issuer would continue to be a
Subsidiary.
SECTION 6.12. Real Property. Purchase or otherwise acquire, or
permit any Subsidiary to purchase or otherwise acquire, title to any real
property (excluding leasehold improvements) without the prior written consent of
the Required Lenders, except that (1) the Borrower, any Financed Subsidiary or
any Special Purpose Subsidiary may purchase or acquire real property on which
Stores, offices, commissaries or production facilities are to be operated, (2)
the Borrower or any Subsidiary may purchase or acquire real property to be used
for office space or similar purposes, and (3) the Borrower, any Financed
Subsidiary and any Special Purpose Subsidiary may purchase or acquire real
property in connection with an acquisition permitted pursuant to Clause (3) of
Section 6.3; provided that in each case, (i) the Agent shall have a first
perfected lien on such real property together with an ALTA Loan Policy of Title
Insurance including such endorsements as the Agent may reasonably request,
insuring the Agent in an amount equal to the appraised value (or the Borrower's
cost thereof if no appraisal is available) of such parcel and subject only to
such items as shall have been approved by the Agent, (ii) Lenders shall be
reasonably satisfied that at the time of the acquisition thereof, such real
property is in material compliance with all Environmental Laws and meets such
other conditions as the Lenders may reasonably require and (iii) at no time
shall the book value of all real property owned by the Borrower on a
consolidated basis (less the book value of any leasehold improvements thereon)
exceed an aggregate amount equal to one percent (1%) of the Borrower's then
total consolidated assets.
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SECTION 6.13. Financed Franchisee Loan Documents. Amend, modify or
otherwise waive in any respect the terms, conditions or provisions of any
Financed Franchisee Loan Document if but for such amendment, modification or
waiver and any previous amendments, modifications or waivers, the Financed
Franchisee party to such Financed Franchisee Loan Documents would have
outstanding payment defaults aggregate in excess of $50,000 thereunder or if
such amendment, modification or waiver would otherwise cause such documents to
no longer meet each of the requirements set forth on Schedule 1.1(A).
SECTION 6.14. Subordinated Debt. Make any payment or prepayment
with respect to any Subordinated Debt, except that prior to an Event of Default,
(i) interest may be paid on Subordinated Debt, and (ii) Subordinated Debt and
interest thereon may be converted into equity of the Borrower or may be prepaid
solely from the proceeds of a substantially contemporaneous issuance of equity
or Subordinated Debt of the Borrower; provided, that within fifteen (15)
Business Days of the receipt of any BCI Exempted Stock, the Borrower may prepay
principal of the BCI Convertible Debt by an amount equal to the net cash
proceeds received from the disposition of such BCI Convertible Stock.
SECTION 6.15. Use of Proceeds; Margin Regulations. Use (or suffer
or permit any Subsidiary to use) any portion of the Revolving Loan proceeds or
any Letter of Credit, directly or indirectly, (i) to purchase or carry Margin
Stock, (ii) to repay or otherwise refinance indebtedness of the Borrower or
others incurred to purchase or carry Margin Stock, (iii) to extend credit for
the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any
security in any transaction that is subject to Section 13 or 14 of the
Securities Exchange Act of 1934, and regulations promulgated thereunder. The
proceeds of the Revolving Loans and the Letters of Credit are to be used solely
for the purposes set forth in and permitted by Section 2.10.
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SECTION 6.16. Take or Pay Contracts. Enter, and will not permit any
of its Subsidiaries to enter, into or be a party to any arrangement for the
purchase of materials, supplies, other property or services if such arrangement
by its express terms requires that payment be made by the Borrower or such
Subsidiary regardless of whether such materials, supplies, other property or
services are delivered or furnished to it.
ARTICLE VII
FINANCIAL COVENANTS
-------------------
So long as the Revolving Note shall remain unpaid or any Lender shall
have any Commitment under this Agreement or any Letter of Credit remains
outstanding or any LC Obligations remain unpaid, the Borrower will:
SECTION 7.1. Store Revenue. Maintain during each Retail Period
ending after the second fiscal quarter of the Borrower's 1996 fiscal year, an
average weekly gross revenue during such Retail Period per Store for all Stores
(whether operated by the Borrower or a Franchisee) of not less than: (1) in the
case of each Retail Period occurring within one year after the Effective Date,
$12,000 and (2) at all times thereafter, $14,000; provided that, for purposes of
the certificate to be delivered pursuant to Section 5.8(4), the Borrower shall
demonstrate compliance with this Section 7.1 by calculating the average weekly
gross revenue during each Retail Period per Store for all Stores for each Retail
Period occurring during the fiscal period covered by such certificate.
SECTION 7.2. Interest Coverage Ratio. Maintain as of the last day of
each fiscal quarter of the Borrower set forth below, a ratio of (1) EBITDAL for
such fiscal quarter to (2) Consolidated Interest Charges plus Financial Lease
Payments for such fiscal quarter of not less than the ratio set forth below
opposite such fiscal period:
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Prior to any conversion of the BCI Convertible Debt into equity:
Fiscal Quarter/Year Interest Coverage Ratio
------------------- -----------------------
2nd, 3rd and 4th, 1996 1.00:1.00
1st and 2nd, 1997 1.50:1.00
3rd, 1997 2.00:1.00
4th, 1997 2.25:1.00
thereafter 2.50:1.00
After any conversion of the BCI Convertible Debt into equity:
Fiscal Quarter/Year Interest Coverage Ratio
------------------- -----------------------
2nd, 1996 1.00:1.00
3rd and 4th, 1996 2.00:1.00
thereafter 2.50:1.00
It being understood that prior to September 1, 1996, interest with respect to
the Subordinated Debt owed to BCI from the Borrower shall be excluded from the
calculation set forth in this Section 7.2.
SECTION 7.3. Total Capital (Junior). Maintain at all times during
each fiscal quarter of the Borrower set forth below (but tested as of the last
day of such fiscal quarter), Total Capital (excluding the principal amount of
all Revolving Loans then outstanding) of not less than the sum of (1) all Net
Proceeds received after the Effective Date plus (2) the amount set forth below
opposite such fiscal period:
Fiscal Quarter/Year Total Capital
------------------- -------------
3rd, 4th, 1996 $105,000,000
1st, 2nd, 3rd, 4th 1997 $115,000,000
thereafter $130,000,000
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SECTION 7.4. Consolidated Senior Debt to Total Capital Ratio.
Maintain at all times (but tested as of the last day of each fiscal period of
the borrower) a ratio of (1) Senior Indebtedness to (2) Total Capital of not
greater than .40:1.00.
SECTION 7.5. Maximum Senior Indebtedness to EBITDAL. Maintain as of
the last day of each Computation Period occurring during the fiscal quarters of
the Borrower set forth below, a ratio of Senior Indebtedness to EBITDAL for such
Computation Period of not less than the ratio set forth below opposite the
respective fiscal period in which such Computation Period occurs:
Fiscal Quarter/Year Senior Indebtedness
------------------- -------------------
to EBITDAL
----------
2nd and 3rd, 1996 4.00:1.00
thereafter 3.00:1.00
ARTICLE VIII
EVENTS OF DEFAULT
-----------------
SECTION 8.1. Events of Default. If any of the following events
("Events of Default") shall occur:
(1) The Borrower should fail to pay (a) the principal of, or interest
or fee on, the Revolving Note as and when due and payable and in the case
of interest or fees such failure shall continue for two (2) Business Days
or (b) any reimbursement obligation, interest or fee with respect to any LC
Obligation which is not satisfied by a deemed disbursement of a Floating
Rate Revolving Loan or otherwise as provided under Section 2.9A and such
failure shall continue for seven (7) Business Days;
(2) Any representation or warranty made or deemed made (pursuant to
Sections 3.2(1)(a) or 5.8(6)) by the Borrower in this Agreement or any
other Loan Document or which is contained in any certificate, document,
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opinion, or financial or other statement furnished at any time under or in
connection with any Loan Document shall prove, in light of the
circumstances under which it was made, to have been incorrect in any
material respect on or as of the date made or deemed made;
(3) The Borrower or any Subsidiary shall fail to perform or observe
any term, covenant or agreement contained in Sections 6.3, 6.6, 6.9, 6.10,
6.12, 6.13, and 6.14 of this Agreement applicable thereto;
(4) The Borrower or any Subsidiary shall fail to perform or observe
any term, covenant or agreement contained in Sections 6.1, 6.2, 6.5, 6.7,
6.8, 6.11, 7.1 through 7.5, 10.6 or 10.12 of this Agreement and such
failure shall continue for four (4) Business Days after the earlier of
discovery, notification or final calculation thereof applicable thereto;
(5) The Borrower or any Subsidiary shall fail to perform or observe
any other term, covenant, or agreement contained in any Loan Document
applicable thereto (other than the Revolving Note and those Sections
referenced in the foregoing Clauses (3) and (4)) on its part to be
performed or observed and such failure shall continue for fifteen (15)
Business Days following notice thereof from the Agent or the Required
Lenders;
(6) the Borrower or any Subsidiary shall (a) fail to make any payment
of principal, interest, premium, rents or fees with respect to any
indebtedness for borrowed money (other than the
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Revolving Note) of the Borrower or such Subsidiary in an amount in excess
of $100,000, when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) and any applicable grace periods shall
have expired, or (b) fail to perform or observe any term, covenant, or
condition on its part to be performed or observed under any agreement or
instrument relating to any indebtedness for borrowed money (other than the
Revolving Note) of the Borrower or such Subsidiary in an amount in excess
of $100,000, when required to be performed or observed, if the effect of
such failure to perform or observe is to accelerate, or to permit the
acceleration, after the giving of notice, of the maturity of such
indebtedness, unless such failure to perform or observe shall be waived by
the holder of such indebtedness or Financial Lease Debt without any
material payment or other material accommodation on the part of the
Borrower or such Subsidiary; or any such indebtedness or Financial Lease
Debt shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof;
[(7) THIS CLAUSE IS INTENTIONALLY RESERVED]
(8) The Borrower or any of its Significant Subsidiaries (a) shall
generally not, or shall be unable to, or shall admit in writing its
inability to pay its debts as such debts become due; or (b) shall make an
assignment for the benefit of creditors, petition or apply to any tribunal
for the appointment of a custodian, receiver, or trustee for it or a
substantial part of its assets; or (c) shall commence any proceeding under
any bankruptcy, reorganization, arrangements, readjustment of debt,
dissolution, or liquidation law or statute of any jurisdiction, whether now
or hereafter in effect; or (d) shall have any such petition or application
filed or any such proceeding commenced against it in which an order for
relief is entered or adjudication or appointment is made and which remains
undismissed for a period of sixty (60) days or more; or (e) by any act or
omission shall indicate its consent to, approval of, or knowing
acquiescence in any such petition, application, or proceeding, or order for
relief, or the appointment of a custodian, receiver, or trustee for all or
any substantial part of its properties; or (f) shall suffer any such
custodianship, receivership, or trusteeship to continue undischarged for a
period of sixty (60) days or more (the foregoing Events of Defaults set
forth in
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this Section 8.1(8) with respect to any Subsidiary, each a "Subsidiary
Default");
(9) Any Financed Franchisee shall fail to pay any sum owed to the
Borrower in connection with indebtedness for borrowed money (including any
interest or premium thereon) in an aggregate amount in excess of $100,000
when due (whether by scheduled maturity, required prepayment, acceleration,
demand, or otherwise) and any applicable grace period shall have expired;
(10) The Borrower shall fail to perform or observe any term, covenant
or agreement contained in Article VII of this Agreement as of the end of
the most recent fiscal period for which financial statements have been
delivered to the Lenders pursuant to Section 5.8(2) or (3), as adjusted to
reflect any loss, reserve, writeoffs or contingency for any event described
in this Section 8.1(10), as calculated on a preliminary basis as of no
later than the fifth Business Day following the occurrence of any of the
following events: Any Financed Franchisee (a) shall generally not, or
shall be unable to, or shall admit in writing its inability to pay its
debts as such debts become due; or (b) shall make an assignment for the
benefit of creditors, petition or apply to any tribunal for the appointment
of a custodian, receiver, or trustee for it or a substantial part of its
assets; or (c) shall commence any proceeding under any bankruptcy,
reorganization, arrangements, readjustment of debt, dissolution, or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (d) shall have any such petition or application filed or any
such proceeding commenced against it in which an order for relief is
entered or adjudication or appointment is made and which remains
undismissed for a period of sixty (60) days or more; (e) by any act or
omission shall indicate its consent to, approval of, or knowing
acquiescence in any such petition, application, or proceeding, or order for
relief, or the appointment
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of a custodian, receiver, or trustee for all or any substantial part of its
properties; or (f) shall suffer any such custodianship, receivership, or
trusteeship to continue undischarged for a period of sixty (60) days or
more;
(11) One or more judgments, decrees, or orders for the payment of
money in excess of $100,000 in the aggregate shall be rendered against the
Borrower or any of its Subsidiaries, and such judgments, decrees, or orders
shall continue unsatisfied and in effect for a period of twenty (20)
consecutive days without being vacated, discharged, satisfied, escrowed,
stayed or bonded pending appeal;
(12) Any of the following events occur or exist with respect to the
Borrower or any ERISA Affiliate: (a) any Prohibited Transaction involving
any Plan; (b) any Reportable Event with respect to any Plan; (c) the filing
under Section 4041 of ERISA of a notice of intent to terminate any Plan or
the termination of any Plan; (d) any event or circumstance that might
reasonably constitute grounds entitling the PBGC to institute proceedings
under Section 4042 of ERISA for the termination of, or for the appointment
of a trustee to administer, any Plan, or the institution by the PBGC of any
such proceedings; (e) complete or partial withdrawal under Section 4201 or
4204 of ERISA from a Multiemployer Plan or the reorganization, insolvency,
or termination of any Multiemployer Plan; and in each case above, such
event or condition, together with all other events or conditions, if any,
would be reasonably likely in the opinion of the Agent to subject the
Borrower to any tax, penalty, or other liability to a Plan, a Multiemployer
Plan, the PBGC, or otherwise (or any combination thereof) which in the
aggregate exceed $100,000 and such event or condition remains unsatisfied
after fifteen (15) Business Days from its initial occurrence or results in
a Lien (subject to Liens permitted under Section 6.1) on Borrower's assets;
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(13) (a) the Security Agreement or the Trademark Security Agreement
shall at any time after its execution and delivery and for any reason
(other than due to the action or inaction of the Agent or its attorneys or
agents) cease: (i) to create a valid security interest in and to the
property purported to be subject to such Security Agreement or Trademark
Security Agreement, as the case may be, (subject to Liens permitted under
Section 6.1), or (ii) to be in full force and effect or shall be declared
null and void, or the validity or enforceability thereof shall be contested
by the Borrower or any Subsidiary, as the case may be, or the Borrower or
any Subsidiary, as the case may be, shall deny it has any further liability
or obligation under or shall fail to perform any of its material
obligations under such Security Agreement or Trademark Security Agreement,
as the case may be (subject to any applicable grace periods set forth
therein), or (b) the Agent's Lien granted under any Collateral Document
shall cease to be a first-priority Lien subject only to such exceptions as
are permitted in this Agreement; or
(14) The Pledge Agreement shall, at any time after its execution and
delivery and for any reason (other than due to the action or inaction of
the Agent or its attorneys or agents) cease (a) to create a valid security
interest in and to the instruments, capital stock, partnership units and
other equity interests purported to be subject to such Pledge Agreement
(subject to the Liens permitted under Section 6.1) or (b) to be in full
force and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by the Borrower, or the Borrower
shall deny it has any further liability or obligation under or shall fail
to perform its material obligations under the Pledge Agreement (subject to
any applicable grace periods set forth therein);
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(15) Any Guaranty shall, at any time after its execution and delivery
and for any reason cease to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by the respective Subsidiary, or the respective Subsidiary shall
deny it has any further liability or obligation under or shall fail to
perform its material obligations under such Guaranty (subject to any
applicable grace periods set forth therein);
(16) The BCI Subordination Agreement shall, at any time after its
execution and delivery and for any reason cease to be in full force and
effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by BCI, or BCI shall deny it has
any further liability or obligation under or shall fail to perform its
material obligations under the BCI Subordination Agreement; or
(17) There shall occur a Material Adverse Change; or
(18) There shall occur a Change of Control.
SECTION 8.2. Effect of Event of Default. If any Event of Default
described in Section 8.1(8) shall occur, automatically the Commitment of each of
the Lenders and the agreement of the Issuing Lender to issue Letters of Credit
hereunder shall immediately terminate and the outstanding principal amount of
the Revolving Note, all interest thereon and all other amounts payable under
this Agreement and the other Loan Documents shall become immediately due and
payable; and, in the case of any other Event of Default, the Agent may (or
shall, upon the written request of the Required Lenders), by notice to the
Borrower, (1) declare the Commitment of each of the Lenders and the agreement of
the Issuing Lender to issue Letters of Credit to be terminated, and (2) declare
the outstanding principal amount of the Revolving Note, all interest thereon,
and all other amounts payable under this Agreement and the other Loan Documents
to be forthwith due and payable, whereupon the Revolving Note, all such
interest, and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest, or further
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notice of any kind, all of which are hereby expressly waived by the Borrower.
The Agent shall promptly notify each Lender of such declaration, but failure to
notify the Lenders shall not impair the effect of such declaration.
ARTICLE IX
THE AGENT
SECTION 9.1. Authorization and Action. Each Lender hereby (subject
to Section 9.6) appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers to the extent provided herein or in
any document or instrument delivered hereunder or in connection herewith,
together with such other action as may be reasonably incidental thereto
(including, without limitation, the execution and delivery of any releases and
other instruments which the Agent is hereby authorized and obligated to make in
connection with any Collateral that is sold or otherwise disposed of by the
Borrower in accordance with the express terms and conditions of this Agreement
and the other Loan Documents). As to matters not expressly provided for by this
Agreement (including, without limitation, enforcement or collection of this
Agreement or any Loan Document) the Agent shall not be required to exercise any
discretion, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders and such instructions shall be binding upon all Lenders.
Under no circumstances shall the Agent be required to take any action which
exposes the Agent to personal liability or which is contrary to this Agreement
or to the Loan Documents or applicable law.
SECTION 9.2. Liability of the Agent to the Lenders. Neither the
Agent nor any of its directors, officers, agents or employees shall be liable to
any Lender for any action taken or omitted to be taken by it or them under or in
connection with this Agreement and the Loan Documents, except for its or their
own gross negligence or willful misconduct. Without limiting the generality of
the foregoing, the Agent (1) may treat any Lender
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as such until the Agent receives an executed Assignment Agreement entered into
between a Lender and an Assignee pursuant to Section 10.5 hereof; (2) may
consult with legal counsel (including counsel for the Borrower), independent
public accountants and other experts or consultants selected by it; (3) shall
not be liable for any action taken or omitted to be taken in good faith by the
Agent in accordance with the advice of counsel, accountants, consultants or
experts; (4) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any recitals, statements, warranties or
representations, whether written or oral, made in or in connection with this
Agreement or the Loan Documents; (5) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, obligations,
covenants or conditions of this Agreement on the part of the Borrower or to
inspect the property (including, without limitation, any books and records) of
the Borrower; provided, that with respect to the foregoing the Agent shall use
reasonable efforts to perform the duties of an administrative agent under a
credit agreement of similar content and form; (6) shall not be responsible to
any Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement, any Loan Document, any
support or security, or any other document furnished in connection with any of
the foregoing; and (7) shall incur no liability under or in respect of this
Agreement or any Loan Document by action upon any written notice, statement,
certificate, order, telephone message, facsimile or other document which the
Agent believes in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person.
SECTION 9.3. Bank of America Illinois and Affiliates. With respect
to Loans made by it Letters of Credit issued by it, Bank of America Illinois
shall have the same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though it were not
the Agent or the Issuing Lender; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include Bank of America Illinois in its
individual capacities. Bank of America Illinois and its Affiliates may accept
deposits from, lend money to, act as trustee under indentures of, and generally
engage in any kind of
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business with, the Borrower and any of its Subsidiaries and any Person who may
do business with or own securities of the Borrower or any such Subsidiary, all
as if Bank of America Illinois was not the Agent or the Issuing Lender and
without any duty to account therefor to the Lenders.
SECTION 9.4. Lender Credit Decision. Each Lender acknowledges that
it has, independently and without reliance upon the Agent or any other Lender
and based on the financial statements referred to in Section 4.4 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 9.5. Indemnification. The Lenders agree to indemnify the
Agent (to the extent not reimbursed by the Borrower), ratably according to their
Percentages, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by, or
assessed against the Agent in any way relating to or arising out of this
Agreement or the other Loan Documents, or any action taken or omitted by the
Agent under this Agreement or the other Loan Documents; provided, that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct; and provided
further, that no Lender shall be liable for any portion of any out-of-pocket
expenses incurred by Agent which would otherwise be paid by the Borrower
hereunder but for Agent's waiver of such expenses. Without limiting any of the
foregoing, each Lender agrees to reimburse the Agent promptly upon demand for
its Percentage of any out-of-pocket expenses (including reasonable counsel fees)
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment, waiver or enforcement (whether through
negotiations, legal proceedings or otherwise)
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of, or legal advice in respect of rights or responsibilities under this
Agreement or any other Loan Document to the extent that the Agent is not
reimbursed for such expenses by the Borrower. All obligations provided for in
this Section 9.5 shall survive termination of this Agreement.
SECTION 9.6. Successor Agent. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Borrower and may be removed
at any time with or without cause by the Required Lenders upon thirty (30) days'
prior written notice to the Agent. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor Agent (which Agent
shall be approved by the Borrower, which approval shall not be unreasonably
withheld). If no successor Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment within 30 days after the
retiring Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring Agent, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent (which Agent shall be approved by the
Borrower, which approval shall not be unreasonably withheld) which shall be
either a Lender or a commercial bank having a combined capital and surplus of at
least $250,000,000. Upon the acceptance of any appointment as Agent hereunder
by a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations in
its capacity as Agent under this Agreement. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement.
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ARTICLE X
MISCELLANEOUS
-------------
SECTION 10.1. Waivers and Amendments. The provisions of this
Agreement and of each of the other Loan Documents may from time to time be
amended, modified or waived, if such amendment, modification or waiver is in
writing and consented to by the Borrower and the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given and; provided, further, that no such amendment,
modification or waiver:
(a) which would modify any requirement hereunder that any particular
action be taken by all Lenders or by the Required Lenders, shall be
effective without the consent of each Lender;
(b) which would modify this Section 10.1, change the definition of
"Required Lenders," change any Percentage for any Lender (except pursuant
to an assignment agreement), reduce any fees, extend the Termination Date,
or subject any Lender to any additional obligations, shall be effective
without the consent of each Lender;
(c) which would extend the due date for, or reduce the amount of, any
payment or prepayment of principal of or interest on any Loan or any Letter
of Credit Obligation, shall be effective without the consent of each
Lender;
(d) which would affect adversely the interests, rights or obligations
of the Agent (in such capacity), shall be effective without consent of the
Agent; or
(e) shall release any Subsidiary from its obligations under its
respective Guaranty.
Upon the effectiveness of any consent, amendment, modification or waiver under
this Agreement, the Agent shall promptly give each
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Lender hereto written notice (including a description) of such consent,
amendment, modification or waiver.
SECTION 10.2. Notices, Etc. All notices and other communications
provided for under this Agreement and under the other Loan Documents to which
the Borrower is a party shall be in writing (including telegraphic, telex or
facsimile communication) and mailed or telecommunicated or delivered to the
address of the respective party as set forth on the signature pages hereto (or,
if applicable, the Supplemental Signature Pages, as executed by such Party); or,
as to each party, at such other address as shall be designated by such party in
a written notice to the other party complying as to delivery with the terms of
this Section 10.2. All such notices and communications shall, when mailed or
telecommunicated, be effective upon the earlier of actual receipt, or one (1)
Business Day after transmitted by telex and the appropriate answerback received,
transmitted by facsimile or delivered to the telegraph company, respectively,
addressed as aforesaid, except that notices to the Agent pursuant to the
provisions of Article II shall not be effective until received by the Agent.
SECTION 10.3. No Waiver; Remedies. No failure on the part of any
party to exercise, and no delay in exercising, any right, power, or remedy under
any Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any Loan Documents preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law.
SECTION 10.4. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Borrower and the Lenders and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights under any Loan Document to which the Borrower is a
party without the prior written consent of the Agent and all the Lenders and the
rights of the Lenders to make assignments or grant participations are subject to
the provisions of Sections 10.5 and 10.6.
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SECTION 10.5. Assignments and Participations; Information. Each
Lender may (without the Borrower's consent) grant participations in or (subject
to the consent of the Borrower, which consent shall not be unreasonably
withheld) sell, assign, transfer or otherwise dispose of, at any time and from
time to time hereafter, such Lender's rights, titles, interests, remedies,
powers and/or duties under this Agreement or any other Loan Document, or of any
portion of any thereof, (each Person to whom such participation is to be made
being herein referred to as a "Participant" and each Person to whom such
assignment, transfer or disposition is to be made being herein referred to as an
"Assignee"). Each Lender may furnish any information concerning Borrower in the
possession of such Lender from time to time to Assignees of the rights and/or
obligations of such Lender hereunder and to Participants in any Revolving Loan
or Letter of Credit (including prospective Assignees and Participants);
provided, that such Lender shall obtain Borrower's consent (which shall not be
unreasonably withheld) and a confidentiality agreement from such Assignee or
Participant in a form reasonably acceptable to the Borrower running to the
Borrower's benefit prior to disclosing any non-public information to any
prospective Participant or Assignee. Each Lender may furnish information in
response to credit inquiries consistent with general banking practice. Such
Lender shall promptly notify Borrower and Agent of such Lender's grant of any
participation in or sale, assignment, transfer or other disposition of this
Agreement or any other Loan Document, or of any portion of any thereof and in
connection with any sale or assignment shall pay to the Agent for the Agent's
account a non-refundable assignment fee equal to $2,500. Borrower shall use its
reasonable efforts (at no out-of-pocket cost to the Borrower) to assist each
Lender in its efforts to sell assignments and participations. In the case of an
assignment by a Lender of any portion of its Commitment hereunder, following
receipt by Agent of the foregoing notice and assignment fee, Schedule 1.1(B)
hereto shall be deemed automatically amended to reflect such assignment and the
Agent shall promptly distribute to the Lenders a revised Schedule 1.1(B) as so
amended.
Notwithstanding anything in the foregoing to the contrary, (1) no
Participant shall have any direct rights hereunder, (2) the Borrower, the Agent,
the Issuing Lender and
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the Lenders, other than the assigning or selling Lender, shall deal solely with
the assigning or selling Lender and shall not be obligated to extend any rights
or make any payment to, or seek any consent of, the Participant, (3) no
participation shall relieve the assigning or selling Lender of any of its other
obligations hereunder and such Lender shall remain solely responsible for the
performance thereof, and (4) no Participant, other than an affiliate of the
assigning or selling Lender, shall be entitled to require such Lender to take or
omit to take any action hereunder, except that such Lender may agree with such
Participant that such Lender will not, without Participant's consent, take any
action which would adversely affect any principal, interest or fee in which the
Participant has an ownership or beneficial interest including, without
limitation, extending the due date for, or reducing the amount of, or waiving,
any payment or prepayment of principal or interest on any Loans, any
reimbursement obligations with respect to Letters of Credit or any fee payable
hereunder or extend the Termination Date.
SECTION 10.6. Costs, Expenses, and Taxes. The Borrower agrees to pay
on demand all reasonable costs and expenses in connection with the preparation,
execution, delivery, filing, recording, and administration of any of the Loan
Documents, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Agent, and local counsel who may be retained by said
counsel in connection with perfecting security interests, with respect thereto,
and all costs and expenses, if any, in connection with the enforcement of any of
the Loan Documents. In addition, the Borrower shall pay any and all stamp and
other taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing, and recording of any of the Loan Documents and the
other documents to be delivered under any such Loan Documents, and agrees to
save each Lender harmless from and against any and all liabilities with respect
to or resulting from any delay attributed to the Borrower in paying or omission
to pay such taxes and fees.
SECTION 10.7. Right of Setoff. Upon the occurrence and during the
continuance of any Event of Default, each Lender is hereby authorized at any
time and from time to time, without notice to
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the Borrower (any such notice being expressly waived by the Borrower), to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of the Borrower against any
and all of the obligations of the Borrower now or hereafter existing under this
Agreement or the Revolving Note or any other Loan Document, irrespective of
whether or not the Agent shall have made any demand under this Agreement or the
Revolving Note or such other Loan Document and although such obligations may be
unmatured. Each Lender agrees promptly to notify the Borrower after any such
setoff and application; provided, that the failure to give such notice shall not
affect the validity of such setoff and application. The rights of each Lender
under this Section 10.7 are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which the Lenders may have.
SECTION 10.8. Governing Law. This Agreement and the Revolving Note
shall be governed by, and construed in accordance with, the laws of the State of
Illinois without regard to its conflict of laws provisions.
SECTION 10.9. Severability of Provisions. Any provision of any Loan
Document which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 10.10. Headings. Article and Section headings in the Loan
Documents are included in such Loan Documents for the convenience of reference
only and shall not constitute a part of the applicable Loan Documents for any
other purpose.
SECTION 10.11. SUBMISSION TO JURISDICTION; WAIVER OF VENUE. THE
BORROWER, ON BEHALF OF ITSELF AND EACH SUBSIDIARY (A) HEREBY IRREVOCABLY SUBMITS
TO THE JURISDICTION OF ANY ILLINOIS STATE OR FEDERAL COURT SITTING IN CHICAGO,
ILLINOIS OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS, AND THE BORROWER HEREBY IRREVOCABLY
AGREES
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THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH ILLINOIS STATE OR FEDERAL COURT AND (B) AGREES NOT TO
INSTITUTE ANY LEGAL ACTION OR PROCEEDING AGAINST THE AGENT, ANY LENDER OR THE
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR PROPERTY OF ANY THEREOF, ARISING OUT
OF OR RELATING TO THIS AGREEMENT, IN ANY COURT OTHER THAN AS HEREINABOVE
SPECIFIED IN THIS SECTION 10.11. THE BORROWER, ON BEHALF OF ITSELF AND EACH
SUBSIDIARY, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUCH
ACTION OR PROCEEDING (WHETHER BROUGHT BY THE BORROWER, ANY SUBSIDIARY, THE
AGENT, ANY LENDER OR OTHERWISE) IN ANY COURT HEREINABOVE SPECIFIED IN THIS
SECTION 10.11 AS WELL AS ANY RIGHT IT MAY NOW OR HEREAFTER HAVE, TO REMOVE ANY
SUCH ACTION OR PROCEEDING, ONCE COMMENCED, TO ANOTHER COURT ON THE GROUNDS OF
FORUM NON CONVENIENS OR OTHERWISE. THE BORROWER ON BEHALF OF ITSELF AND EACH
SUBSIDIARY AGREES THAT A FINAL, NON-APPEALABLE JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
SECTION 10.12. General Indemnity. In addition to the payment of
expenses pursuant to Section 10.6, Borrower agrees to indemnify, pay and hold
the Agent, the Issuing Lender and each Lender, and the officers, directors,
employees, agents, and affiliates of the Agent, the Issuing Lender and each
Lender (collectively, the "Indemnitees"), harmless from and against any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, the reasonable fees and disbursements
of counsel for any of such Indemnitees in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
any of such Indemnitees shall be designated a party thereto) that may be imposed
on, incurred by, or asserted against any Indemnitee, in any manner relating to
or arising out of this Agreement, any other Loan Document or any other
agreements executed and delivered by the Borrower in connection herewith, the
Lenders' agreement to make the Revolving Loans hereunder, the Issuing Lender's
agreement to issue Letters of Credit, or the use or intended use of the proceeds
of any of the Revolving Loans or
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the LC Obligations (the "indemnified liabilities"); provided, that Borrower
shall have no obligation to an Indemnitee hereunder with respect to indemnified
liabilities arising from the gross negligence or willful misconduct of such
Indemnitee or from any action between the Agent, the Issuing Lender or any
Lender against an officer, director or employee of the Agent, the Issuing Lender
or such Lender. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it
violates any law or public policy, the Borrower shall contribute the maximum
portion that it is permitted to pay under applicable law to the payment and
satisfaction of all indemnified liabilities incurred by the Indemnitees or any
of them. The provisions of the undertakings and indemnification set out in this
Section 10.12 shall survive satisfaction and payment of Borrower's obligations
hereunder and termination of this Agreement.
SECTION 10.13. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND
EACH OF THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING
ANY RIGHTS UNDER THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR UNDER ANY OTHER
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR THEREWITH, OR ARISING FROM ANY BANKING RELATIONSHIP
EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION,
PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY;
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT ENTERING INTO THIS
AGREEMENT.
SECTION 10.14. SERVICE OF PROCESS. THE BORROWER, THE AGENT, AND THE
LENDERS HEREBY IRREVOCABLY CONSENT TO SERVICE OF PROCESS BY MEANS OF CERTIFIED
MAIL AT THE ADDRESS PROVIDED FOR IN SECTION 10.2. NOTHING IN THIS AGREEMENT
WILL AFFECT THE RIGHT OF THE LENDERS, THE AGENT OR THE BORROWER TO SERVE SERVICE
OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 10.15. Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which, when so executed, shall be
deemed an original, and all of said counterparts taken together shall be deemed
to constitute but one and the same instrument.
-96-
<PAGE>
SECTION 10.16. Entire Agreement. This Agreement, together with the
other Loan Documents, embodies the entire agreement and understanding among the
Borrower, the Lenders and the Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
-97-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
EINSTEIN BROS. BAGELS, INC.
/s/ Paul A. Strasen
By:_______________________________
Name: Paul A. Strasen
Title: Vice President
1526 Cole Boulevard
Suite 200
Golden, CO 80401
Telephone: (303) 202-3463
Facsimile: (303) 202-3490
BANK OF AMERICA ILLINOIS, as Agent
/s/ David A. Johanson
By:_______________________________
Name: David A. Johanson
Title: Vice Presidnet
231 South LaSalle Street
Chicago, Illinois 60697
Attn: David Johanson
Telephone: (312) 828-7933
Facsimile: (312) 974-9102
BANK OF AMERICA ILLINOIS, as a Lender, and as
Issuing Lender
/s/ Marcia Clausen
By:_______________________________
Name: Marcia Clausen
Title: Vice President
231 South LaSalle Street
Chicago, Illinois 60697
-98-
<PAGE>
LASALLE NATIONAL BANK
/s/ John C. Thurston
By:_______________________________
Name: John C. Thurston
Title: Loan Officer
120 South LaSalle Street
Chicago, Illinois 60602
Attn: Bruce Hague
Telephone: (312) 781-8665
Facsimile: (312) 750-6225
HARRIS TRUST AND SAVINGS BANK
/s/ John M. Dillon
By:_______________________________
Name: John Dillon
Title: Vice President
111 West Monroe Street,
Floor 2 West
Chicago, Illinois 60690
Attn: Emerging Majors - Illinois
Telephone: (312) 461-6780
Facsimile: (312) 461-2591
-99-
<PAGE>
EXHIBIT A
---------
FORM OF REVOLVING NOTE
$45,000,000 May __, 1996
FOR VALUE RECEIVED, the undersigned promises to pay to the order of
Bank of America Illinois, in its capacity as agent for the ratable benefit of
the Lenders (as hereinafter defined) (the "Agent") at its principal office in
Chicago, Illinois, the principal amount of FORTY FIVE MILLION DOLLARS
($45,000,000) or, if less, the aggregate unpaid principal amount of all
Revolving Loans (as defined in the Credit Agreement hereinafter referenced)
outstanding, as duly shown in the records of the Agent or, at the Agent's
option, on the schedule attached hereto (and any continuation thereof), on the
Termination Date.
The undersigned also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, in
either event at the rates per annum and on the dates specified in the Credit
Agreement.
Payments of both principal and interest are to be made in lawful money
of the United States of America in immediately available funds.
This Note is the Revolving Note described in, and is subject to the
terms and provisions of, the Secured Credit Agreement, dated as of May __, 1996
(as the same may at any time be amended, modified or supplemented from time to
time, the "Credit Agreement"), among the undersigned, the lenders who are or
from time to time become party thereto (the "Lenders") and Bank of America
Illinois, as Agent for the Lenders. Terms used herein and not otherwise defined
herein are used herein as defined in the Credit Agreement.
Reference is hereby made to the Credit Agreement for a statement of
the prepayment rights and obligations of the
<PAGE>
undersigned and for a statement of the terms and conditions under which the due
date of this Note may be accelerated. Upon the occurrence of any Event of
Default as specified in the Credit Agreement, the principal balance hereof and
the interest accrued hereon may be declared to be forthwith due and payable, and
any indebtedness of the Lenders or other holder hereof to the undersigned may be
appropriated and applied hereon.
In addition to and not in limitation of the foregoing and the
provisions of the Credit Agreement, the undersigned further agrees, subject only
to any limitation imposed by applicable law, to pay all expenses, including
reasonable attorneys' fees and legal expenses, incurred by the holder of this
Note in endeavoring to collect any amounts payable hereunder which are not paid
when due, whether by acceleration or otherwise.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
* * * * *
<PAGE>
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.
EINSTEIN BROS. BAGELS, INC.
By:______________________________
Name:____________________________
Title:___________________________
<PAGE>
Schedule attached to Revolving Note dated May __, 1996 of EINSTEIN BROS. BAGELS,
INC., payable to the order of BANK OF AMERICA ILLINOIS in its capacity as Agent
for the ratable benefit of the Lenders.
Date of Loan, Interest
Continuation or Interest Amount of Rate Per Amount of Notation
Conversion Period Loan Annum Repayment Made By
- --------------- -------- --------- -------- --------- --------
<PAGE>
EXHIBIT B
---------
FORM OF BORROWING REQUEST
Bank of America Illinois
individually and as Agent
for the Lenders
231 South LaSalle Street
Chicago, Illinois 60697
Attention: David Johanson
Ladies and Gentlemen:
This Borrowing Request is delivered to you pursuant to Section 2.2(1)
of the Secured Credit Agreement, dated as of May __, 1996 (as amended or
modified, the "Credit Agreement"), among Einstein Bros. Bagels, Inc., a Delaware
corporation (the "Borrower"), the lenders that are or from time to time become
party thereto (the "Lenders") and Bank of America Illinois, as agent for the
Lenders (in such capacity, the "Agent"). Unless otherwise defined herein,
capitalized terms used herein have the meanings provided in the Credit
Agreement.
The Borrower hereby requests that a Revolving Loan be made in the
aggregate principal amount of $______________ on __________ __, 19__ as a
[Floating Rate Loan] [Eurodollar Loan having an Interest Period of
_______months].
The Borrower hereby certifies and warrants that on the date the
Revolving Loan requested hereby is made, after giving effect to the making of
such Revolving Loan:
(a) No Default or Event of Default has occurred and is continuing or
will result from the borrowing of such Revolving Loan.
(b) The representations and warranties of the Borrower contained in
the Credit Agreement are true and correct with the same effect as though
made on the date hereof (except to the extent such representations and
warranties expressly refer to an earlier date).
The Borrower agrees that if prior to the time of the Revolving Loan
requested hereby any matter certified to herein by it will not be true and
correct at such time as if then made, it will immediately so notify the Agent.
Except to the extent, if any, that prior to the time of the Revolving Loan
requested hereby the Agent shall receive written notice to the contrary from the
Borrower, each matter certified to herein shall be deemed once again to be
certified as true and correct at the date of such Revolving Loan as if then made
(except to the extent such
-1-
<PAGE>
representations and warranties expressly refer to an earlier date).
Please make the proceeds of the Revolving Loan available in accordance
with the instructions set forth on Annex I attached hereto.
-2-
<PAGE>
The Borrower has caused this Borrowing Request to be executed and
delivered, and the certification and warranties contained herein to be made, by
an Authorized Officer this ____ day of _____________, 19__.
EINSTEIN BROS. BAGELS, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE>
ANNEX I
Instructions
------------
-4-
<PAGE>
EXHIBIT C
---------
FORM OF CONTINUATION/CONVERSION NOTICE
BANK OF AMERICA ILLINOIS
individually and as Agent
for the Lenders
231 South LaSalle Street
Chicago, Illinois 60697
Attention: David Johanson
Ladies and Gentlemen:
This Continuation/Conversion Notice is delivered to you pursuant to
Section 2.2(2) of the Secured Credit Agreement, dated as of May __, 1996 (as
amended or modified, the "Credit Agreement"), among Einstein Bros. Bagels, Inc.,
a Delaware corporation (the "Borrower"), the lenders that are or from time to
time become party thereto (the "Lenders"), and Bank of America Illinois, as
agent for the Lenders (in such capacity, the "Agent"). Unless otherwise defined
herein, capitalized terms used herein have the meanings provided in the Credit
Agreement.
The Borrower hereby requests that on , 19 ,
(1) $ of the presently outstanding
principal amount of the Revolving Loans originally made
on , 19 ,
(2) and all presently being maintained as
[Floating Rate Loans] [Eurodollar Loans],
(3) be [converted into] [continued as],
(4) [Floating Rate Loans] [Eurodollar Loans having an
Interest Period of months] .
The Borrower hereby certifies and warrants that on the date the
conversion or continuation herein requested is made, after giving effect to the
making of such conversion or continuation no Default or Event of Default has
occurred and is continuing or will result from the conversion or continuation
herein requested.
Except to the extent, if any, that prior to the time of the
continuation or conversion requested hereby the Agent shall receive written
notice to the contrary from the Borrower, each matter certified to herein shall
be deemed to be certified at the date of such continuation or conversion as if
then made.
The Borrower has caused this Continuation/Conversion Notice to be
executed and delivered, and the certification and
-1-
<PAGE>
warranties contained herein to be made, by an Authorized Officer this ___ day of
_________, 19__.
EINSTEIN BROS. BAGELS, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
<PAGE>
EXHIBIT D
---------
FORM OF OPINION OF COUNSEL
[Attach copy of Opinion]
-1-
<PAGE>
EXHIBIT E
---------
FORM OF GUARANTY
FOR VALUE RECEIVED and in consideration of any loan or other financial
accommodation heretofore or hereafter at any time made or granted to Einstein
Bros. Bagels, Inc., a Delaware corporation (hereinafter called the "Borrower"),
by the lenders (the "Lenders") who are or may become party to that certain
Secured Credit Agreement, dated as of May __, 1996 (as amended or modified, the
"Credit Agreement," capitalized terms used herein and not otherwise defined
herein have the respective meanings assigned thereto in the Credit Agreement)
among the Borrower, the Lenders and Bank of America Illinois, as agent for the
Lenders (herein, in such capacity, together with any successor thereto in such
capacity, called the "Agent"), the undersigned hereby unconditionally guarantees
the full and prompt payment when due, whether at stated maturity, by required
prepayment, declaration, demand, acceleration or otherwise (including amounts
that would become due but for the operation of the automatic stay under section
362(a) of the Bankruptcy Code (11 U.S.C.(S) 362(a)), and at all times
thereafter, of all obligations of the Borrower to the Lenders and the Agent
which arise out of or in connection with the Credit Agreement, the Revolving
Note or the other Loan Documents howsoever created, arising or evidenced,
whether direct or indirect, joint or several, absolute or contingent, or now or
hereafter existing, or due or to become due (all such obligations being
hereinafter collectively called the "Liabilities"), and the undersigned further
agrees to pay all reasonable expenses (including attorneys' fees and legal
expenses) paid or incurred by the Lenders and the Agent in endeavoring to
collect the Liabilities, or any part thereof, and in enforcing this guaranty.
1. The undersigned agrees that, in the event of the dissolution or
insolvency of the Borrower, the undersigned or any Significant Subsidiary, or
the general failure to pay, or admission in writing of the inability of the
Borrower, the undersigned or any Significant Subsidiary to pay debts as they
become due, or an assignment by the Borrower, the undersigned or any Significant
Subsidiary for the benefit of creditors, or the institution of any proceeding by
or against the Borrower, the undersigned or any Significant Subsidiary alleging
that the Borrower, the undersigned or such Significant Subsidiary is insolvent
or unable to pay debts as they mature, and if such event shall occur at a time
when any of the Liabilities may not then be due and payable, the undersigned
will pay to the Agent for the benefit of the Lenders forthwith the full amount
which would be payable hereunder by the undersigned if all Liabilities were then
due and payable.
2. To secure all obligations of the undersigned hereunder, the Agent
for the benefit of the Lenders shall have a lien upon and security interest in
(and may during the continuance of any Event of Default, without demand or
notice of
-1-
<PAGE>
any kind, at any time and from time to time when any amount shall be due and
payable by the undersigned hereunder, appropriate and apply toward the payment
of such amount, in such order of application as the Agent may elect) any and all
balances, credits, deposits, accounts or moneys of or in the name of the
undersigned now or hereafter maintained with the Agent or any Lender and any and
all property of every kind or description of or in the name of the undersigned
now or hereafter, for any reason or purpose whatsoever, in the possession or
control of, or in transit to, the Agent or the Lenders or any agent or bailee
for the Agent or the Lenders.
3. This guaranty shall in all respects be a continuing, absolute and
unconditional guaranty, and shall remain in full force and effect
(notwithstanding, without limitation, the dissolution of the undersigned) until
all of the Liabilities have been paid in full, subject to discontinuance as to
the undersigned only upon actual receipt by the Agent of written notice from the
undersigned, or any person duly authorized and acting on behalf of the
undersigned, of the discontinuance hereof as to the undersigned; provided,
however, that no such notice of discontinuance shall affect or impair any of the
agreements and obligations of the undersigned hereunder with respect to any and
all Liabilities existing prior to the time of actual receipt of such notice by
the Agent, any and all Liabilities created or acquired thereafter pursuant to
any previous commitments made by the Agent or the Lenders, any and all
extensions or renewals of any of the foregoing, any and all interest on any of
the foregoing, and any and all expenses paid or incurred by the Agent and the
Lenders in endeavoring to collect any of the foregoing and in enforcing this
guaranty against the undersigned; and all of the agreements and obligations of
the undersigned under this guaranty shall, notwithstanding any such notice of
discontinuance, remain fully in effect until all such Liabilities (including any
extensions or renewals of any thereof) and all such interest and expenses shall
have been paid in full.
4. The undersigned further agrees that, if at any time all or any
part of any payment theretofore applied by the Agent or the Lenders to any of
the Liabilities is or must be rescinded or returned by the Agent or the Lenders
for any reason whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of the Borrower), such Liabilities shall, for the
purposes of this guaranty, to the extent that such payment is or must be
rescinded or returned, be deemed to have continued in existence, notwithstanding
such application by the Agent or the Lenders, and this guaranty shall continue
to be effective or be reinstated, as the case may be, as to such Liabilities,
all as though such application by the Agent or the Lenders had not been made.
5. The Agent may, from time to time, whether before or after any
discontinuance of this guaranty, at its sole discretion and without notice to
the undersigned, take any or all of the
-2-
<PAGE>
following actions: (a) retain or obtain a security interest in any property to
secure any of the Liabilities or any obligation hereunder, (b) retain or obtain
from another Person the primary or secondary obligation of any obligor or
obligors, in addition to the undersigned, (c) extend or renew for one or more
periods (whether or not longer than the original period), or alter or exchange,
any of the Liabilities, or release or compromise any obligation of the
undersigned hereunder with respect to any of the Liabilities, (d) release its
security interest in, or surrender, release or permit any substitution or
exchange for, all or any part of any property securing any of the Liabilities or
any obligation hereunder, and (e) during the continuance of any Event of Default
resort to the undersigned for payment of any of the Liabilities, whether or not
the Agent (i) shall have resorted to any property securing any of the
Liabilities or any obligation hereunder or (ii) shall have proceeded against any
other obligor primarily or secondarily obligated with respect to any of the
Liabilities (all of the actions referred to in preceding clauses (i) and (ii)
being hereby expressly waived by the undersigned).
6. Any amounts received by the Agent from whatsoever source on
account of the Liabilities may be applied by it toward the payment of such of
the Liabilities, and in such order of application, as the Agent may from time to
time elect.
7. No payment made by or for the account of the undersigned pursuant
to this guaranty shall entitle the undersigned by subrogation or otherwise to
any payment by the Borrower or from or out of any property of the Borrower and
the undersigned shall not exercise any right or remedy against the Borrower or
any property of the Borrower by reason of any performance by the undersigned of
this guaranty. Until the indefeasible payment in full of the Liabilities and
termination of each Lender's Commitment, the undersigned waives, to the fullest
extent permitted by law, all rights of the undersigned against the Borrower,
arising out of any payment by the undersigned under this guaranty, whether
arising by way of any subrogation, contribution, reimbursement or otherwise and
agrees that, to the extent that any such rights may not be waived under
applicable law, it will contribute such rights to the Borrower as a capital
contribution concurrently with the arising of such rights.
8. The undersigned hereby expressly waives: (a) notice of the
acceptance by the Agent of this guaranty, (b) notice of the existence or
creation or non-payment of all or any of the Liabilities, (c) presentment,
demand, notice of dishonor, protest and all other notices whatsoever, and (d)
all diligence in collection or protection of or realization upon the Liabilities
or any thereof, any obligation hereunder, or any security for or guaranty of any
of the foregoing.
-3-
<PAGE>
9. The Lenders may, from time to time, without notice to the
undersigned, assign or transfer any or all of the Liabilities or any interest
therein subject to Section 10.5 of the Credit Agreement; and, notwithstanding
any such assignment or transfer or any subsequent assignment or transfer
thereof, such Liabilities shall be and remain Liabilities for the purposes of
this guaranty, and each and every immediate and successive assignee or
transferee of any of the Liabilities or of any interest therein shall, to the
extent of the interest of such assignee or transferee in the Liabilities, be
entitled to the benefits of this guaranty to the same extent as if such assignee
or transferee were a Lender.
10. The undersigned hereby warrants to the Agent and the Lenders that
the undersigned now has and will continue to have independent means of obtaining
information concerning the affairs, financial condition and business of the
Borrower. The Agent and the Lenders shall not have any duty or responsibility
to provide the undersigned with any credit or other information concerning the
affairs, financial condition or business of the Borrower which may come into the
Agent's or the Lender's possession.
11. The undersigned hereby warrants and agrees that: (a) the
undersigned is a [corporation][partnership] duly existing and in good standing
under the laws of ______________ and the undersigned is duly qualified and in
good standing and authorized to do business in each jurisdiction where, because
of the nature of its activities or properties, such qualification is required,
(b) the undersigned has full power and authority to execute and deliver this
guaranty, (c) the execution, delivery and performance by the undersigned of this
guaranty are within the undersigned's powers, have been duly authorized by all
necessary action, have received all necessary governmental approval (if any
shall be required), and do not and will not contravene or conflict with any
provision of law or of the organizational documents of the undersigned or of any
agreement binding upon the undersigned, (d) this guaranty is the legal, valid
and binding obligation of the undersigned enforceable against the undersigned in
accordance with its terms, except as enforceability may be limited by bankruptcy
or other laws relating to or affecting creditors' rights generally or by
equitable principles, and (e) this guaranty will directly or indirectly benefit
the undersigned.
12. No delay on the part of the Agent in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
the Agent of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy; nor shall any modification
or waiver of any of the provisions of this guaranty be binding upon the Agent
except as expressly set forth in a writing duly signed
-4-
<PAGE>
and delivered on behalf of the Agent for the benefit of the Lenders. No action
of the Agent permitted hereunder shall in any way affect or impair the rights of
the Agent and the obligations of the undersigned under this guaranty. For the
purposes of this guaranty, Liabilities shall include all obligations of the
Borrower to the Agent and the Lenders, notwithstanding any right or power of the
Borrower or anyone else to assert any claim or defense as to the invalidity or
unenforceability of any such obligation, and no such claim or defense shall
affect or impair the obligations of the undersigned hereunder. The obligations
of the undersigned under this guaranty shall be absolute and unconditional
irrespective of any circumstance whatsoever which might constitute a legal or
equitable discharge or defense of the undersigned. The undersigned hereby
acknowledges that there are no conditions to the effectiveness of this guaranty.
13. This guaranty shall be binding upon the undersigned, and upon any
successors and assigns of the undersigned.
14. THIS GUARANTY HAS BEEN DELIVERED AT CHICAGO, ILLINOIS, AND SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE
OF ILLINOIS WITHOUT GIVING EFFECT TO ITS PRINCIPLES OF CHOICE OF LAW. WHEREVER
POSSIBLE EACH PROVISION OF THIS GUARANTY SHALL BE INTERPRETED IN SUCH MANNER AS
TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS
GUARANTY SHALL BE PROHIBITED BY OR INVALID UNDER SUCH LAW, SUCH PROVISION SHALL
BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
GUARANTY.
15. The undersigned hereby irrevocably agrees that any legal action
or proceeding pertaining to this guaranty may be brought in the courts of the
State of Illinois, County of Cook, or of the United States of America for the
Northern District of Illinois. The undersigned hereby irrevocably agrees that
service of process in such action or proceeding may be made either by mailing,
by registered or certified mail, postage prepaid, a copy of the summons or
complaint, or other legal process in such action or proceeding to the
undersigned at the address shown on the signature page hereof. Service of
process in any such action or proceeding, effected as aforesaid, shall be
effective upon receipt by the undersigned and shall be deemed personal service
upon the undersigned and shall be legal and binding upon the undersigned for all
purposes. The undersigned hereby waives, to the fullest extent permitted by
law, any objection it may now or hereafter have to the laying of venue in any
such action or proceeding in any such court as well as any right it may now or
hereafter have to remove any such action or proceeding, once
-5-
<PAGE>
commenced, to another court on the grounds of forum non conveniens or otherwise.
16. THE UNDERSIGNED HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (A) UNDER THIS
GUARANTY OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (B) ARISING FROM
ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
-6-
<PAGE>
SIGNED AND DELIVERED this ___ day of _______, 199_.
[GUARANTOR]
By:_____________________________________
Title:
Address: ______________________________
______________________________
<PAGE>
EXHIBIT F-1
-----------
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is dated as of May __, 1996
and is made by [EINSTEIN BROS. BAGELS, INC., a Delaware corporation] [BRACKMAN
BROTHERS, INC., a Utah corporation] [BALTIMORE BAGEL CO., a Delaware
corporation] [NOAH'S NEW YORK BAGELS, INC., a California corporation]
("Grantor"), in favor of and for the benefit of BANK OF AMERICA ILLINOIS, as
Agent (the "Agent").
RECITALS
WHEREAS, [Einstein Bros. Bagels, Inc., a Delaware corporation (the
"Borrower")] [Grantor] has entered into that certain Secured Credit Agreement
dated as of May __, 1996 (said Credit Agreement, as it may hereafter be amended,
supplemented, restated or otherwise modified from time to time, being the
"Credit Agreement"; capitalized terms defined therein and not otherwise defined
herein being used herein as therein defined) with the Agent and the Lenders
party thereto, pursuant to which the Lenders have agreed to make Revolving Loans
to the [Borrower] [Grantor], subject to the terms and conditions of the Credit
Agreement;
[WHEREAS, the Grantor will derive substantial direct and indirect
benefits from the making of the Revolving Loans under the Credit Agreement;]/*/
WHEREAS, the Grantor desires to secure all obligations of the
[Borrower] [Grantor] now or hereafter existing under the Credit Agreement, and
the other Loan Documents;
WHEREAS, the Grantor desires to grant pledges and security interests
in its personal property in favor of the Lenders; and
WHEREAS, it is a condition precedent to the effectiveness of the
Credit Agreement, that the Grantor shall have granted the security interest
contemplated by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce the Lenders to make Revolving Loans, the
parties hereto agree as follows:
- ----------------
/*/ Insert for Subsidiary Security Agreements.
-1-
<PAGE>
SECTION 1. Grant of Security. The Grantor hereby assigns and pledges
to the Agent for the benefit of the Lenders, and hereby grants to the Agent for
the benefit of the Lenders, a security interest in, all of the Grantor's right,
title and interest in and to the following, in each case whether now or
hereafter existing or in which the Grantor now has or hereafter acquires an
interest and wherever the same may be located (the "Collateral") to secure the
Secured Obligations (as defined in Section 2):
(a) All equipment in all of its forms (including, but not limited to,
all machinery, all processing, distribution, selling, data processing and
office equipment, all furniture, fixtures, trade fixtures and all other
goods other than Inventory, and all parts thereof and all accessions
thereto) and all documents of title representing any of the above (any and
all such equipment, parts and accessions being the "Equipment");
(b) All inventory in all of its forms, including, but not limited to,
(i) all goods held for sale or lease or to be furnished under contracts of
service or so leased or furnished, (ii) all raw materials, work in process,
finished goods, supplies and materials used or consumed in the processing,
packing, shipping, advertising, selling, leasing, furnishing or production
of such inventory or otherwise used or consumed in the Grantor's business,
(iii) goods in which the Grantor has an interest in mass or a joint or
other interest or right of any kind, whether in the possession of the
Grantor or of a bailee or other Person for sale, storage, transit,
processing, use or otherwise, and (iv) goods which are returned to or
repossessed or shipped in transit by the Grantor and all additions and
accessions thereto and replacements thereof, (all such inventory,
accessions and products being the "Inventory");
(c) All rights and claims to the payment or receipt of money or other
forms of consideration of any kind, including, but not limited to, any and
all such rights and claims in, to and under, all accounts, contracts
(including without limitation all Hedging Agreements), contract rights,
chattel paper, instruments, general intangibles, guaranties, credit
agreements in which the Grantor acts as lender, letters of credit,
documents, drafts, acceptances, tax refunds, rights to performance,
judgments taken on any rights or claims otherwise included in this clause
(c) and all rights in, to and under all security agreements, leases and
other contracts securing or otherwise relating to
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any such rights and claims to the payment or receipt of money or other
forms of consideration (any and all such rights and claims to the payment
or receipt of money or other forms of consideration being the "Payment
Rights," any and all such leases, security agreements and other contracts
being the "Related Contracts");
(d) To the extent assignable, all books, records, ledger cards,
files, correspondence, computer programs, tapes, disks and related data
processing software (owned by the Grantor or in which it has an interest)
that at any time evidence or contain information relating to any of the
Collateral or are otherwise necessary or helpful in the collection thereof
or realization thereupon;
(e) All plant fixtures, business fixtures and other fixtures and
storage and office facilities, and all additions and accessions thereto and
replacements thereof and products thereof;
(f) all leases of real and personal property in which the Grantor is
lessee unless the lease related thereto restricts the Grantor's right to
grant a security interest therein;
(g) All now existing or hereafter acquired trademarks and trademark
applications and registrations (including, without limitation, all of
Grantor's rights, titles and interests in the United States and throughout
the world, in and to all of its currently owned or hereafter acquired
trademarks, registrations of trademarks and applications for registration,
together with the goodwill of the business symbolized by such trademarks,
and to all income, royalties, damages and payments now and hereafter due
and/or payable under or based on such trademarks, and in and to all rights
to sue, collect and retain damages and payments for past and further
infringements and violations of the rights thereof), trade names, patent
applications, patents, copyrights, rights and interests in copyrights and
works protectable by copyright, trade secrets, inventions, designs,
franchises, customer lists, and other confidential information relating to
the business of the Grantor owned by the Grantor or held by the Grantor
pursuant to licenses, to the extent permitted by such licenses, including,
by way of illustration and not limitation, each and every kind of know-how
practice by the Grantor and its employees; the names and addresses of, and
credit and other business information concerning, the Grantor's past,
present or future customers as they may exist from time to time;
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the prices at which the Grantor sells merchandise; estimating and cost
procedures; profit margins; policies and procedures pertaining to the sale
and design of equipment, components, devices and services furnished by the
Grantor; information concerning suppliers and agents and franchises of the
Grantor; and manner of operation, business plans, pledges, projections, and
all other information of any kind or character, whether or not reduced in
writing, with respect to the conduct by the Grantor of its business not
generally known by the public;
(h) All deposit accounts of the Grantor, including, without
limitation, deposit accounts maintained with the Lenders;
(i) All proceeds of any and all of the foregoing Collateral and, to
the extent not otherwise included, all payments under insurance (whether or
not the Agent is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect
to any of the foregoing Collateral. For purposes of this Agreement, the
term "proceeds" includes whatever is receivable or received when Collateral
or proceeds are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes, without
limitation, all rights to payment, including returned premiums, with
respect to any insurance relating thereto.
Notwithstanding the foregoing, Collateral shall not include (i) any Equipment or
general intangibles acquired in connection with the incurrence of Permitted Sale
Lease Back Debt, or (ii) contractual rights arising from the Agreement to
Contribute Shares, dated February 17, 1995, among the shareholders of Brackman
Brothers, Inc. and Einstein Bros. Bagels Inc. (f/k/a Progressive Bagel Concepts,
Inc.).
SECTION 2. Security for Obligations. This Agreement secures and the
Collateral is collateral security for the prompt payment or performance in full
when due, whether at stated maturity, by acceleration or otherwise (including
the payment of amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S)
362(a)) of all obligations of every nature of the Borrower [and the Grantor] now
or hereafter existing under the Credit Agreement, the other Loan Documents and
any promissory note or other document or instrument delivered pursuant thereto
and all amendments, extensions or renewals thereof or hereof, whether for
principal, interest (including, without limitation, interest that, but for the
filing of a petition in bankruptcy
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with respect to the Grantor, would accrue on such obligations), fees, expenses
or otherwise, whether now existing or hereafter arising, voluntary or
involuntary, whether or not jointly owed with others, direct or indirect,
absolute or contingent, liquidated or unliquidated, and whether or not from time
to time decreased or extinguished and later increased, created or incurred and
all or any portion of such obligations that are paid, to the extent all or any
part of such payment is avoided or recovered directly or indirectly from the
Agent or the Lenders as a preference, fraudulent transfer or otherwise (all such
obligations being the "Underlying Debt"), and all obligations of every nature of
the Grantor now or hereafter existing under this Agreement (all such obligations
of the Grantor, together with the Underlying Debt, being the "Secured
Obligations").
SECTION 3. The Grantor Remains Liable. Anything herein to the
contrary notwithstanding, (a) the Grantor shall remain liable under any
contracts and agreements included in the Collateral, to the extent set forth
therein, to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the Agent
of any of the rights hereunder shall not release the Grantor from any of its
duties or obligations under the contracts and agreements included in the
Collateral and (c) the Agent shall not have any obligation or liability under
any contracts and agreements included in the Collateral by reason of this
Agreement, nor shall the Agent be obligated to perform any of the obligations or
duties of the Grantor thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder by reason of this Agreement.
SECTION 4. Representations and Warranties. The Grantor represents
and warrants as follows:
(a) Binding Obligation. This Agreement is the legally valid and
binding obligation of the Grantor, enforceable against it in accordance
with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or
limiting creditors' rights generally and to general principles of equity.
(b) Location of Equipment and Inventory. All of the Equipment and
Inventory is located at the places specified in Schedule I hereto.
(c) Delivery of Certain Collateral. All chattel paper and notes and
other instruments (excluding checks) comprising any and all items of
Collateral have been delivered to the Agent duly endorsed and accompanied
by duly executed instruments of transfer or assignment in blank.
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(d) Payment Rights Valid. To the best of its knowledge, each Payment
Right constitutes the legally valid and binding obligation of the party
obligated to pay the same (the "Account Debtor"). Each such Payment Right
complies in all material respects with the provisions of all applicable
laws and regulations, whether federal, state or local, applicable thereto
(including, without limitation, any usury law, the Federal Truth in Lending
Act and Regulation C of the Federal Reserve System). None of the Payment
Rights is evidenced by a promissory note, or other debt instrument other
than a check, that has not been delivered to the Agent (except to the
extent any such promissory notes are expressly excluded from the delivery
requirements hereunder pursuant to Section 5.10(a) of the Credit
Agreement).
(e) Ownership of Collateral. Except for (i) the security interest
created by this Agreement, (ii) Liens otherwise permitted under Section 6.1
of the Credit Agreement, and (iii) junior Liens on property held as
collateral by the Grantor pursuant to the Financed Franchisee Loan
Documents; provided that such junior Liens secure purchase money Debt of
the lienor, the Grantor owns the Collateral free and clear of any Lien.
Except such as may have been filed in favor of the Agent relating to this
Agreement or as otherwise permitted under Section 6.1 of the Credit
Agreement, no effective financing statement or other instrument similar in
effect covering all or any part of the Collateral is on file in any filing
or recording office.
(f) Perfection. This Agreement creates a valid security interest in
the Collateral (subject to such Liens as are permitted by the Credit
Agreement), securing the payment of the Secured Obligations.
(g) Governmental Authorizations. Other than those authorizations and
approvals which have been obtained or which may be required upon the
exercise by the Agent of its rights and remedies hereunder (e.g., permits
which must be renewed upon a change in control), no authorization, approval
or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either (i) for the grant by the
Grantor of the security interest granted hereby or for the execution,
delivery or performance of this Agreement by the Grantor or (ii) for the
perfection of the Agent's rights and remedies hereunder (except as may have
been taken by or
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at the direction of the Grantor or except as stayed under applicable law).
(h) Other Information. All information heretofore, herein or
hereafter supplied to the Agent or any Lender by or on behalf of the
Grantor with respect to the Collateral is accurate and complete in all
material respects.
(i) Office Locations; Fictitious Names. The chief place of business,
the chief executive office and the office where the Grantor keeps its books
and records are as follows: ________________________________. The Grantor
does not do business under any trade-name or fictitious business name other
than "______________________".
(j) Incorporation of Credit Agreement Representations and Warranties.
Each representation and warranty of the Grantor set forth in Article IV of
the Credit Agreement is true and correct in all material respects and such
representations and warranties are hereby incorporated herein by this
reference with the same effect as though set forth in their entirety
herein.
(k) Consignments etc. None of the Inventory or Equipment is stored
with a bailee, warehouseman, consignee or similar third party.
SECTION 5. Further Assurances. (a) The Grantor agrees that from time
to time, at the expense of the Grantor, the Grantor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be reasonably necessary or desirable, or that the Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral. Without
limiting the generality of the foregoing, the Grantor will: (i) at the
reasonable request of the Agent, mark conspicuously each of its records
pertaining to the Collateral, each chattel paper included in the Payment Rights
and each Related Contract with a legend, in form and substance satisfactory to
the Agent, indicating that such Collateral is subject to the security interest
granted hereby; (ii) if any Payment Right shall be evidenced by a promissory
note (except to the extent any such promissory note is expressly excluded from
the delivery requirements hereunder pursuant to Section 5.10(a) of the Credit
Agreement) or other instrument or chattel paper, deliver and pledge to the Agent
hereunder such note or instrument or chattel paper duly endorsed and accompanied
by duly executed instruments of transfer or
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assignment, all in form and substance satisfactory to the Agent; (iii) at the
reasonable request of the Agent, deliver and pledge to the Agent for the benefit
of the Lenders all promissory notes and other instruments and all original
counterparts of chattel paper constituting Collateral duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to the Agent; (iv) execute and file such financing or
continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Agent may request, in order
to perfect and preserve the security interests granted or purported to be
granted hereby; (v) at any reasonable time, upon demand by the Agent or any
Lender exhibit Collateral to and allow inspection of the Collateral by the Agent
or any Lender, or persons designated by the Agent or such Lender; and (vi) at
the Agent's request, appear in and defend any action or proceeding that may
affect the Grantor's title to or the Agent's security interest in the
Collateral.
(b) The Grantor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of the Grantor, to the extent
permitted under applicable law. A carbon, photographic or other reproduction of
this Agreement or a financing statement signed by the Grantor shall be
sufficient as a financing statement.
(c) The Grantor will furnish to the Agent and the Lenders from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as the Agent
may reasonably request, all in reasonable detail.
SECTION 6. Covenants of Grantor. The Grantor shall:
(a) Not use or permit any Collateral to be used unlawfully or in
violation of any provision of this Agreement, any policy of insurance
covering the Collateral or any applicable statute, regulation or ordinance
in such manner as could reasonably be expected to result in a material
adverse change in the condition (financial or otherwise), business
operations or prospects of the Grantor and its Subsidiaries, taken as a
whole;
(b) Notify the Agent of any change in the Grantor's name, identity or
corporate structure prior to such change;
(c) Give the Agent 30 days' prior written notice of any change in the
Grantor's chief place of business; and
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(d) Pay promptly when due all property and other taxes, assessments
and governmental charges or levies imposed upon, and all claims (including
claims for labor, materials and supplies) against, the Collateral, except
to the extent the validity thereof is being contested in good faith;
provided that the Grantor shall in any event pay such taxes, assessments,
governmental charges or levies not later than five days prior to the date
of any proposed sale of which it receives due notice under any judgment,
writ or warrant of attachment entered or filed against the Grantor as a
result of the failure to make such payment.
SECTION 7. Special Covenants With Respect to Equipment and Inventory.
The Grantor shall:
(a) Keep the Equipment and Inventory (other than as may be sold in
the ordinary course of business) at the places therefor specified on
Schedule I hereto or, upon 30 days' prior written notice to the Agent, at
such other places in jurisdictions where the Agent shall have had full and
fair opportunity to take all action that may be reasonably necessary or
desirable or that the Agent may reasonably request in order to perfect and
protect any security interest granted or purported to be granted hereby or
to enable the Agent to exercise and enforce its rights and remedies
hereunder with respect to such Equipment and Inventory;
(b) Cause the Equipment to be maintained and preserved in a
commercially reasonable condition, repair and working order, ordinary wear
and tear excepted, in accordance with the Grantor's past practices, and
shall forthwith, or in the case of any loss or damage to any of the
Equipment as quickly as practicable after the occurrence thereof, make or
cause to be made all repairs, replacements, and other improvements in
connection therewith that are necessary or desirable to such end, in the
ordinary course of business and in accordance with the Grantor's past
practices. The Grantor shall furnish to the Agent simultaneously with the
delivery of the financial statements in accordance with Section 5.8(1) of
the Credit Agreement a statement respecting any material loss or damage to
the Equipment, as a whole, to the extent such material loss or damage is
not otherwise reflected in such financial statements;
(c) Maintain in accordance with the Grantor's past practices
commercially reasonable records of the Inventory, itemizing and describing
the kind, type and quantity of Inventory;
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(d) If any Inventory is in possession or control of any of the
agents, bailees or processors of the Grantor and if the aggregate book
value of all such Inventory for all of the Grantor exceeds $100,000 and in
any event upon the occurrence and during the continuance of an Event of
Default, instruct such agent, bailee or processor to hold all such
Inventory for the account of the Agent and subject to the instructions of
the Agent; and
(e) Not store any Inventory or Equipment with a bailee, warehouseman,
consignee or similar third party without the Agent's written consent, which
will not be unreasonably withheld or delayed.
SECTION 8. Insurance. (a) The Grantor will maintain or cause to be
maintained, with commercially reasonable and reputable insurers, insurance with
respect to its properties and business and the properties and business of its
Subsidiaries against loss or damage of the kinds customarily insured by
corporations of established reputation engaged in the same or similar businesses
and similarly situated, of such types and in such amounts as are customarily
carried under similar circumstances by such other corporations. Such insurance
shall include, without limitation, property damage insurance and liability
insurance. Each policy for property damage insurance shall provide for all
losses (except for losses of less than $100,000 per occurrence) to be paid
jointly to the Agent and the Grantor. Each policy shall in addition (i) name
the Grantor and the Agent as insured parties thereunder (without any
representation or warranty by or obligation upon the Agent) as their interests
may appear, (ii) contain an agreement by the insurer that any loss in excess of
$100,000 thereunder shall be payable jointly to the Agent and the Grantor
notwithstanding any action, inaction or breach of representation or warranty by
the Grantor, (iii) have attached thereto a lender's loss payable endorsement or
its equivalent, in form and substance acceptable to the Agent, (iv) provide that
there shall be no recourse against the Agent or the Lenders for payment of
premiums or other amounts with respect thereto, and (v) provide that at least 30
days' prior written notice of cancellation, material amendment, reduction in
scope or limits of coverage or of lapse shall be given to the Agent by the
insurer. The Grantor shall, if so requested by the Agent, deliver to the Agent
original or duplicate policies of such insurance and, as often as the Agent may
reasonably request, but not more than once per fiscal quarter of the Grantor, a
report of one or more reputable insurance brokers with respect to such
insurance. Further, the Grantor shall, at the request of the Agent, duly execute
and deliver instruments of assignment of such insurance policies to comply with
the requirements of Section 5(a) and cause the respective insurers to
acknowledge notice of such assignment.
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(b) Reimbursement under any liability insurance maintained by the
Grantor pursuant to this Section 8 may be paid directly to the Person who shall
have incurred liability covered by such insurance. In the case of any loss
involving damage to Equipment and Inventory when subsection (c) of this Section
8 is not applicable, the Grantor may make or cause to be made the necessary
repairs to or replacements of such Equipment and Inventory, and if the Grantor
so chooses to repair or replace such Equipment any proceeds of insurance
maintained by the Grantor with respect thereto pursuant to this Section 8 shall
be paid by the Agent to the Grantor as reimbursement for the costs of such
repairs or replacements.
(c) Upon (i) the occurrence and during the continuance of any Event
of Default, or (ii) the actual or constructive total loss (in excess of $50,000
per occurrence) of any Equipment, or Inventory to the extent such Equipment or
Inventory cannot be repaired or replaced, all insurance payments in respect of
such Equipment and Inventory shall be paid to and applied by the Agent as
specified in Section 17.
SECTION 9. Special Covenants With Respect to Payment Rights and
Related Contracts.
(a) The Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Payment Rights and Related Contracts at the location therefor specified in
Section 4 or, upon 30 days' prior written notice to the Agent, at such other
locations in a jurisdiction where the Agent has had full and fair opportunity to
take all action that may be reasonably necessary or desirable or that the Agent
may reasonably request in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Agent to exercise and
enforce its rights and remedies hereunder with respect to such Payment Rights
and Related Contracts. The Grantor will hold and preserve such records and will
permit representatives of the Agent or any Lender at any time during normal
business hours to inspect and make abstracts from such records and the Grantor
agrees to render to the Agent or any Lender, at the Grantor's cost and expense,
such clerical and other assistance as may be reasonably requested with regard
thereto. Promptly upon the written request of the Agent, the Grantor shall
deliver to the Agent complete and correct copies of each Related Contract.
(b) The Grantor shall, for not less than 5 years from the date on
which such Payment Right arose, maintain (i) complete records of each Payment
Right, including records of all payments received, credits granted and
merchandise returned and (ii) all material documentation relating thereto.
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(c) The Grantor shall duly fulfill all obligations on its part to be
fulfilled under or in connection with the Payment Rights and the Related
Contracts and shall do nothing to impair the rights of the Agent therein,
provided the Grantor may declare a breach or default of any agreement
constituting or underlying the Payment Rights and Related Contracts to the
extent a breach or default has occurred.
(d) Except as otherwise provided in this subsection (d) of this
Section 9, the Grantor shall continue to collect, at its own expense, all
amounts due or to become due the Grantor under the Payment Rights and Related
Contracts. In connection with such collections, the Grantor may take (and, at
the Agent's direction, shall take) such action as may be necessary or advisable
to enforce collection of the Payment Rights; provided, however, that the Agent
shall have the right at any time, upon the occurrence and during the continuance
of an Event of Default and upon written notice to the Grantor of its intention
to do so, to notify the account debtors or obligors under any Payment Rights of
the assignment of such Payment Rights to the Agent and to direct such account
debtors or obligors to make payment of all amounts due or to become due to the
Grantor thereunder directly to the Agent and, upon such notification and at the
expense of the Grantor, to enforce collection of any such Payment Rights and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as the Grantor might have done. After receipt by the
Grantor of the notice from the Agent referred to in the proviso to the preceding
sentence, (i) all amounts and proceeds (including checks and other instruments)
received by the Grantor in respect of the Related Contracts and the Payment
Rights shall be received in trust for the benefit of the Agent hereunder, shall
be segregated from other funds of any of the Grantor and shall be forthwith paid
over or delivered to the Agent in the same form as so received (with any
necessary endorsement) to be held as cash collateral and applied as provided in
Section 17, and (ii) the Grantor shall not adjust, settle or compromise the
amount or payment of any Payment Right, or release wholly or partly any account
debtor or obligor thereof, or allow any credit or discount thereon.
SECTION 10. Deposit Accounts. Upon the occurrence and during the
continuance of an Event of Default, the Agent may exercise dominion and control
over, and refuse to permit further withdrawals (whether of money, securities,
instruments or other property) from deposit accounts maintained with the Agent
constituting part of the Collateral.
SECTION 11. License of Patents, Trademarks and Trade Names. The
Grantor hereby assigns (to the extent assignable), transfers, conveys to the
Agent effective upon the occurrence and during the continuance of any Event of
Default, the nonexclusive right and license to use all trademarks, trade names,
copyrights,
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patents or technical processes owned or used by the Grantor that relate to the
Collateral, together with any goodwill associated therewith, all to the extent
necessary to enable the Agent to use, possess and realize on the Collateral and
any successor or assign to enjoy the benefits of the Collateral. This right and
license shall inure to the benefit of all successors, assigns and transferees of
the Agent and its successors, assigns and transferees, whether by voluntary
conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise. Such right and license is granted free of charge,
without requirement that any monetary payment whatsoever be made to the Grantor.
SECTION 12. Transfers and Other Liens. The Grantor shall not:
(a) Sell, assign (by operation of law or otherwise) or otherwise
dispose of any of the Collateral in any manner prohibited by the Credit
Agreement.
(b) Except for (i) the security interest created by this Agreement,
(ii) the Liens permitted under Section 6.1 of the Credit Agreement, and
(iii) junior Liens on property held as collateral by the Grantor pursuant
to the Financed Franchisee Loan Documents (provided that such junior Liens
secure purchase money Debt of the lienor), create or suffer to exist any
Lien upon or with respect to any of the Collateral to secure the
indebtedness or other obligations of any person or entity.
SECTION 13. Agent Appointed Attorney-in-Fact. The Grantor hereby
irrevocably appoints the Agent the Grantor's attorney-in-fact, with full
authority in the place and stead of the Grantor and in the name of the Grantor,
the Agent or otherwise, from time to time upon the occurrence and continuation
of an Event of Default in the Agent's discretion to take any action and to
execute any instrument that the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be maintained by the
Grantor or paid to the Agent pursuant to Section 8,
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral,
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(c) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clauses (a) and (b) above,
(d) to file any claims or take any action or institute any
proceedings that the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Agent with respect to any of the Collateral,
(e) to pay or discharge taxes or Liens, levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by the Agent in
its sole discretion, and such payments made by the Agent to become
obligations of the Grantor to the Agent, due and payable immediately
without demand,
(f) to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with accounts and
other documents relating to the Collateral,
(g) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Agent were the absolute owner thereof for all
purposes, and to do, at the Agent's option and the Grantor's expense, at
any time, or from time to time, all acts and things that the Agent deems
necessary to protect, preserve or realize upon the Collateral and the
Agent's security interest therein, in order to effect the intent of this
Agreement, all as fully and effectively as the Grantor might do.
SECTION 14. Agent May Perform. If the Grantor fails to perform any
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the reasonable expenses of the Agent incurred in
connection therewith shall be payable by the Grantor under Section 18.
SECTION 15. Agent's Duties and Liabilities.
(a) The powers conferred on the Agent hereunder are solely to protect
its interest and the interests of the Lenders in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Agent shall have no duty as
to any Collateral or as to the taking of any necessary steps
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to preserve rights against prior parties or any other rights pertaining to
any Collateral. The Agent shall be deemed to exercise reasonable care in
the custody and preservation of such Collateral if such Collateral is
accorded treatment substantially equal to that which the Agent accords its
own property.
(b) The Agent shall not be liable to the Grantor (i) for any loss or
damage sustained by it, or (ii) for any loss, damage, depreciation or other
diminution in the value of any of the Collateral, that may occur as a
result of, in connection with or that is in any way related to (x) any
exercise by the Agent of any right or remedy under this Agreement or (y)
any other act of or failure to act by the Agent, except to the extent that
the same shall be determined by a judgment of a court of competent
jurisdiction to be the result of acts or omissions on the part of the Agent
constituting gross negligence or willful misconduct.
(c) NO CLAIM MAY BE MADE BY THE GRANTOR AGAINST THE AGENT, OR ANY
LENDER OR THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR
AGENTS FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES IN RESPECT OF
ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR IS BASED ON
CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH, ARISING OUT OF
OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND RELATIONSHIP
ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH; AND THE GRANTOR HEREBY EXPRESSLY WAIVES, RELEASES AND
AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT
ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR.
SECTION 16. Remedies. If any Event of Default shall have occurred
and be continuing, the Agent may exercise in respect of the Collateral, (a) all
the rights and remedies it has as a secured party on default under the Uniform
Commercial Code of the State of Illinois (the "Code") (whether or not the Code
applies to the affected Collateral), (b) all of the rights and remedies provided
for in this Agreement, the Credit Agreement and any other agreement between the
Grantor, the Lenders and the Agent, as applicable, and (c) such other rights and
the remedies as may be provided by law or otherwise (such rights and remedies of
the Agent to be cumulative and non-exclusive). If an Event of Default shall
have occurred and be continuing, the Agent also may (i) require the Grantor to,
and the Grantor hereby agrees that it will at its expense and upon request of
the Agent forthwith, assemble all or part of Collateral as directed by the Agent
and make it available to the Agent at a place to be designated by the Agent that
is reasonably convenient to such parties, (ii) enter
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<PAGE>
onto the property where any Collateral is located and take possession thereof
with or without judicial process, (iii) prior to the disposition of the
Collateral, store, process, repair or recondition the Collateral or otherwise
prepare the Collateral for disposition in any manner to the extent the Agent
deems appropriate, (iv) take possession of the Grantor's premises or place
custodians in exclusive control thereof, remain on such premises and use the
same and any equipment of the Grantor for the purpose of completing any work in
process, taking any actions described in the preceding clause (iii) and
collecting any Secured Obligation and (v) without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale of which the Grantor has received reasonable notice, at any of
the Agent's offices or elsewhere, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as the Agent may deem
commercially reasonable. The Grantor agrees that, at least ten days' notice to
the Grantor of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The Agent
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.
The Agent may retain any directors, officers and employees of the
Grantor, in each case upon such terms as the Agent and any such person may
agree, notwithstanding the provisions of any employment, confidentiality or non-
disclosure agreement between any such person and the Grantor, and the Grantor
hereby waives its rights under any such agreement and consent to each such
retention.
SECTION 17. Application of Proceeds. Except as expressly provided
elsewhere in this Agreement, all proceeds received by the Agent in respect of
any sale of, collection from or other realization upon all or any part of the
Collateral may, in the discretion of the Agent, be held by the Agent as
Collateral for, and/or then, or at any other time thereafter applied, in full or
in part by the Agent against the Secured Obligations in the following order of
priority:
FIRST: To the payment of all reasonable costs and expenses of such
sale, collection or other realization and all other expenses, liabilities
and advances made or incurred by the Agent in connection therewith and all
amounts for which the Agent is entitled to indemnification hereunder and
all advances made by the Agent hereunder for the account of the Grantor and
for the payment of all costs and expenses paid or incurred
-16-
<PAGE>
by the Agent in connection with the exercise of any right or remedy
hereunder, all in accordance with Section 18;
SECOND: To the ratable payment in full of the Secured Obligations
owing to the Lenders; and
THIRD: After payment in full of the amounts specified in the
preceding paragraphs, to the payment to or upon the order of the Grantor,
or whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
All applications of proceeds to the Secured Obligations shall be
applied to the payment of interest before application of payment to principal.
SECTION 18. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Agent and Lenders from and
against any and all claims, losses and liabilities growing out of or resulting
from this Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting from the Agent's
and/or any such Lender's, as the case may be, gross negligence or willful
misconduct.
(b) The Grantor will upon demand pay to the Agent and/or any Lender,
as the case may be, the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of such Person's counsel and of any experts
and agents, that the Agent and/or any Lender, as the case may be, may incur in
connection with (i) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral after the
occurrence of an Event of Default, (ii) the exercise or enforcement of any of
the rights of the Agent or any Lender, as the case may be, hereunder after the
occurrence of an Event of Default or (iii) the failure by the Grantor to perform
or observe any of the provisions hereof.
SECTION 19. Other Waivers by the Grantor, Etc.
The Grantor waives any right to require the Agent to (a) proceed
against any Person, including, without limitation, any Account Debtor; (b)
proceed against or exhaust any collateral held from any other Person; (c) pursue
any other remedy in the Agent's power; or (d) make or give any presentments,
demands for performance, notices of nonperformance, protests, notices of
protests or notices of dishonor in connection with any obligation or evidences
of indebtedness held by the Agent as collateral, or
-17-
<PAGE>
in connection with any obligations or evidences of indebtedness that constitute
in whole or in part the Underlying Debt, or in connection with the creation of
new or additional indebtedness.
The Grantor waives any defense arising by reason of, and agrees that
the rights of the Agent and the obligations of the Grantor hereunder shall be
absolute and unconditional irrespective of, (a) any disability or other defense
of any other Person; (b) the unenforceability or cessation from any cause
whatsoever, other than the indefeasible payment in full, of the Underlying Debt;
(c) the application by the Grantor of the proceeds of any Underlying Debt for
purposes other than the purposes represented by the Grantor to the Agent or
intended or understood by the Agent; (d) any right to deferral or modification
of the Grantor's obligations hereunder by reason of any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding; (e)
to the fullest extent permitted by law, any defense or benefit that may be
derived from or afforded by law that limits the liability of or exonerates
guarantors or sureties; (f) any election of remedies by the Agent that destroys
the Grantor's subrogation rights or the Grantor's right to proceed against any
other Person for reimbursement, including without limitation the loss of rights
the Grantor may suffer by reason of any rights, power or remedies of the Grantor
in connection with any anti-deficiency laws or any other laws limiting,
qualifying or discharging the Underlying Debt; and (g) any other circumstance
that might otherwise constitute a defense available to, or a discharge of, any
other Person in respect of the Underlying Debt.
Until the indefeasible payment in full of all of the liabilities and
obligations under the Credit Agreement (including without limitation the
liabilities and payment obligations relating to the Revolving Loans) and
termination of each Lender's Commitment, the Grantor waives any right to enforce
any remedy that the Agent now has or may hereafter have against any other
Person, and waives any benefit of, or any right to participate in, any security
whatsoever now or hereafter held by the Agent.
SECTION 20. Waiver of Hearing. The Grantor expressly waives any
constitutional or other right to a judicial hearing prior to the time the Agent
takes possession or disposes of the Collateral as provided in Section 16 hereof.
SECTION 21. Waiver of Jury Trial. THE GRANTOR AND THE AGENT HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including,
without limitation, contract claims, tort claims, breach of duty claims, and all
other common law and statutory
-18-
<PAGE>
claims. The Grantor and the Agent each acknowledge that this waiver is a
material inducement for the Grantor and the Agent to enter into a business
relationship, that the Grantor and the Agent have already relied on the waiver
in entering into this Agreement and that each will continue to rely on the
waiver in their related future dealings. The Grantor and the Agent further
warrant and represent that each has reviewed this waiver with its legal counsel,
and that each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT. In the event of litigation, this Agreement may be filed as a written
consent to a trial by the court.
SECTION 22. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Collateral and shall (a) remain in
full force and effect until the indefeasible payment in full of the Secured
Obligations and termination of each Lender's Commitment, (b) be binding upon the
Grantor, its successors and assigns and (c) inure, together with the rights and
remedies of the Agent hereunder, to the benefit of the Agent, the Lenders and
their respective successors, transferees and assigns. Upon the indefeasible
payment in full of the Secured Obligations and termination of each Lender's
Commitment, the security interest granted hereby shall terminate and all rights
to the Collateral shall revert to the Grantor. Upon any such termination, the
Agent will, at the Grantor's expense, execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such termination
and shall terminate its financing statements with regard to the Collateral
wherever filed.
SECTION 23. Amendments; Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by the Grantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Agent and the Grantor, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 24. Notices, Etc. All notices and other communications
provided for under this Agreement shall be in writing (including telegraphic,
telex or facsimile communication) and mailed or telecommunicated or delivered at
the address of such party set forth in the Credit Agreement; or, as to each
party, at such other address as shall be designated by such party in a written
notice to the other party complying as to delivery with the terms of this
Section 24. All such notices and communications shall, when mailed or
telecommunicated, be effective upon the earlier of actual receipt or three (3)
Business Days after deposited in the mails, or one (1) Business
-19-
<PAGE>
Day after transmitted by telex and the appropriate answerback received,
transmitted by facsimile or delivered to the telegraph company, respectively,
addressed as aforesaid.
SECTION 25. Consent to Jurisdiction and Service of Process. Each of
the Grantor and the Agent hereby submits to the nonexclusive jurisdiction of the
state courts of the State of Illinois and the federal courts located in the
Northern District of Illinois for all matters arising under this Agreement and
related documents. Service of process sufficient for personal jurisdiction in
any action against the Grantor in Illinois may be made by registered or
certified mail, return receipt requested, to the address specified pursuant to
Section 24.
SECTION 26. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF ILLINOIS WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. Unless
otherwise defined herein or in the Credit Agreement, terms used in Article 9 of
the Code as in effect in the State of Illinois are used herein as therein
defined.
SECTION 27. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement or be given any substantive effect.
SECTION 28. Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation and in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 29. No Other Writing. This writing is intended by the
Grantor and the Agent as the final expression of this Agreement and is also
intended, together with the Credit Agreement (and the other Exhibits thereto,
including the Revolving Note) as a complete and exclusive statement of the terms
of their agreement with respect to the matters covered hereby. No course of
dealing, course of performance or trade usage, and no parol evidence of any
nature, shall be used to supplement or modify and terms of this Agreement.
There are no conditions to the full effectiveness of this Agreement.
SECTION 30. Counterparts. This Agreement may be executed in one or
more counterparts, each of which when so executed shall be deemed an original,
but all such counterparts together shall constitute but one and the same
instrument.
SECTION 31. Confidentiality. Prior to an Event of Default, to the
extent any of the Collateral constitutes or
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<PAGE>
consists of trade secrets or other confidential or proprietary information of
the Borrower, Agent, Lenders and any party acquiring the Collateral upon the
exercise of the remedies provided in this Agreement, shall not use or disclose
such Collateral in any manner inconsistent with the business of the Borrower,
and shall maintain and preserve the confidentiality thereof to the extent
necessary to maintain such Collateral as trade secrets under the Uniform Trade
Secrets Act and similar statues and rules of law pertaining to trade secrets and
confidential and proprietary information.
SECTION 32. Rights Exercisable. Notwithstanding anything else to the
contrary herein, Agent's rights hereunder are limited to whatever rights Grantor
has with respect to the Collateral.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the Grantor and the Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
[EINSTEIN BROS. BAGELS, INC.]
[BRACKMAN BROTHERS, INC.]
[BALTIMORE BAGEL CO.]
[NOAH'S NEW YORK BAGELS, INC.]
By:________________________________
Title:
BANK OF AMERICA ILLINOIS, as Agent
By:________________________________
Title:
<PAGE>
SCHEDULE I
TO SECURITY AGREEMENT/*/
Locations of Equipment:
Each of the locations set forth Schedule 4.12 of the Credit Agreement
(other than those locations designated by an "*" on such Schedule 4.12) and
each of the locations set forth on Annexes I-6, I-7 and I-8 to such
Schedule 4.12.
Locations of Inventory:
Each of the locations set forth Schedule 4.12 of the Credit Agreement
(other than those locations designated by an "*" on such Schedule 4.12) and
each of the locations set forth on Annexes I-6, I-7 and I-8 to such
Schedule 4.12.
- ----------------
/*/ Modify as appropriate.
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<PAGE>
EXHIBIT F-2
-----------
TRADEMARK SECURITY AGREEMENT
THIS TRADEMARK SECURITY AGREEMENT (this "Agreement") is dated as of
May __, 1996 and is made by [EINSTEIN BROS. BAGELS, INC., a Delaware
corporation] [BRACKMAN BROTHERS, INC., a Utah corporation] [BALTIMORE BAGEL CO.,
a Delaware corporation] [NOAH'S NEW YORK BAGELS, INC., a California corporation]
("Grantor"), in favor of and for the benefit of BANK OF AMERICA ILLINOIS, as
Agent (the "Agent").
RECITALS
WHEREAS, [Einstein Bros. Bagels, Inc., a Delaware corporation (the
"Borrower")] [Grantor] has entered into that certain Secured Credit Agreement
dated as of May __, 1996, (said Credit Agreement, as it may hereafter be
amended, supplemented, restated or otherwise modified from time to time, being
the "Credit Agreement"; capitalized terms defined therein and not otherwise
defined herein being used herein as therein defined) with the Agent and the
Lenders party thereto, pursuant to which the Lenders have agreed to make
Revolving Loans to [Borrower] [Grantor], subject to the terms and conditions of
the Credit Agreement;
[WHEREAS, the Grantor will derive substantial direct and indirect
benefits from the making of the Revolving Loans under the Credit Agreement;
and]/*/
WHEREAS, to secure the repayment of all amounts under the Credit
Agreement and other Loan Documents, Grantor has granted to the Agent for the
benefit of the Lenders a valid security interest in and to all of its now
existing and hereafter acquired general intangibles, including, without
limitation, all of its now existing and hereafter arising trade secrets, patents
and patent applications, trademarks and trademark applications, tradenames, and
copyrights.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to
- ----------------
/*/ Insert for Subsidiary Agreements.
-1-
<PAGE>
induce the Lenders to make Revolving Loans, the parties hereto agree as follows:
1. To secure the payment and performance of all indebtedness and
other obligations and liabilities of [Borrower and] Grantor to the Lenders of
every kind and description, whether direct or indirect, absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
under or in connection with the Credit Agreement and other Loan Documents,
Grantor hereby grants to the Agent for the benefit of the Lenders a valid,
enforceable security interest in all of Grantor's rights, titles and interests
in the United States and throughout the world, in and to all of its currently
owned or hereafter acquired trademarks, registrations of trademarks and
applications for registration, together with the goodwill of the business
symbolized by such trademarks, including without limitation, those United States
trademark registrations and applications for trademark registrations on Schedule
A attached hereto and made a part hereof, and to all income, royalties, damages
and payments now and hereafter due and/or payable under or based on such
trademarks, and in and to all rights to sue, collect and retain damages and
payments for past and future infringements and violation of the rights thereof
(hereinafter all of the foregoing trademarks, registrations of trademarks and
applications for trademark registrations are sometimes individually and/or
collectively referred to as the "Trademarks").
2. Grantor warrants and represents to and covenants with the Agent
that except as disclosed to the Agent and the Banks in a letter dated as of the
date of this Agreement:
(a) Grantor is the present owner of the entire right, title and
interest in and to the Trademarks that are the subject of registrations on
Schedule A, and, to the best of its knowledge, has good and indefeasible
title thereto.
(b) Except pursuant to Area Development Agreements, Franchise
Agreements, and similar agreements and as otherwise disclosed in writing by
Grantor to the Agent, the Trademarks (excluding non-United States
Trademarks) are free and clear of all security interests, liens, claims and
encumbrances, except those permitted by the Credit Agreement.
(c) Except pursuant to Area Development Agreements, Franchise
Agreements and similar agreements and as otherwise disclosed in writing by
Grantor to the Agent, Grantor has not granted any license, rights and
privileges in or to the Trademarks to any party, except the Agent.
-2-
<PAGE>
(d) To the best of Grantor's knowledge, Grantor may use the
Trademarks that are the subject of registrations on Schedule A free and
clear of the infringement of the rights of others.
(e) Except as otherwise disclosed in writing by Grantor to the Agent,
Grantor has no outstanding threats of action and has not commenced and is
not about to commence any suit or action against others in connection with
the violation or enforcement of the rights of Grantor in the Trademarks.
(f) The Trademarks on Schedule A constitute all of the United States
registrations and applications for the Trademarks owned by Grantor.
(g) Grantor has not and will not make any agreement or assignment in
conflict with this Agreement.
3. To the best of Grantor's knowledge, the trademark applications
have been duly and properly filed, and the trademark registrations filed and
issued, and the Trademarks which are the subject of registrations on Schedule A
are valid and enforceable.
4. Grantor shall not take any action, nor permit any action to be
taken by others subject to Grantor's control, including licensees, or fail to
take any action regarding any matter of which the Grantor has knowledge, which
would affect the validity and enforcement of the Trademarks, or impair the value
of the Trademarks or the goodwill of the business associated therewith, except
Grantor may discontinue or abandon the use of the Trademarks and any
applications and registrations therefor it determines in accordance with its
reasonable business judgment, such discontinuance or abandonment is desirable or
necessary.
5. Subject to the other provisions of this Agreement, Grantor shall
assume and continue, at its own cost and expense, through counsel of its own
choice and acceptable to the Agent, full and complete responsibility for the
prosecution, issuance, enforcement, maintenance, renewal or any other actions in
connection with the Trademarks.
6. Grantor promptly shall notify the Agent, in writing, of any
material suit, action or proceeding brought against it relating to, concerned
with or affecting the Trademarks or infringement of another trademark, and
shall, on written request, deliver to the Agent a copy of all pleadings, papers,
orders or decrees theretofore and thereafter filed in any such suit, action or
proceeding, and shall keep the Agent fully advised in writing of the progress of
any such suit.
-3-
<PAGE>
7. Grantor shall provide the Agent semi-annually with a listing of
all new applications for trademarks (together with a listing of the issuance of
registrations on any previous applications), which new applications and issued
trademark registrations shall be subject to the terms and conditions of the
Credit Agreement and this Agreement and come within the term "Trademarks" as set
forth herein. Grantor shall, together with the list, provide the Agent, on
written request, with duly executed documents in a form acceptable to counsel
for the Agent and suitable for recording, which documents grant a valid
enforceable security interest to the Agent for the benefit of the Lenders as in
Paragraph 1 hereof, and subject to all the terms of this Agreement and the
Credit Agreement.
8. Grantor shall provide the Agent, at least annually, with a
complete status report of all the Trademarks, and upon written request by the
Agent, shall deliver to counsel for the Agent copies of any trademark
applications and other non-privileged documents concerned with or related to the
adoption, use, prosecution, protection, maintenance, renewal, enforcement or
issuance of the Trademarks.
9. In order to protect and continue the goodwill of the business
associated with and symbolized by the Trademarks, and to avoid deception to the
public as to the nature and quality of the goods on which the Trademarks are
employed by Grantor, Grantor shall conduct its business in accordance with the
requirements of production, quality and service of the goods in the market as in
the past, and shall at all times use its reasonable best efforts to maintain the
quality of the goods sold or distributed on which the Trademarks are employed
commensurate with at least the same or better quality and past practices of
Grantor.
10. The occurrence of either of the following shall constitute an
Event of Default under this Agreement: (a) if Grantor shall fail or neglect to
perform, keep or observe any material term, provision, condition, covenant,
warranty or representation contained in this Agreement which is required to be
performed, kept or observed by Grantor, and the same is not cured within 15
Business Days after written notice thereof from the Agent to Grantor; or (b)
occurrence of an Event of Default under the Credit Agreement. Grantor hereby
appoints and designates the Agent its sole attorney to take any such action
after an Event of Default as the Agent deems necessary under the circumstances,
and Grantor shall pay all fees and expenses in connection with such action by
its attorney so appointed and designated.
11. From and after an Event of Default hereunder and the continuance
thereof, the Agent may grant licenses, rights or other privileges in, or
otherwise take whatever action with
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<PAGE>
respect to the Trademarks that the Agent deems necessary or appropriate under
the circumstances. In addition, from and after an Event of Default hereunder
and during the continuance thereof, the Agent shall have all of the rights,
remedies and benefits of a secured party under applicable law, including without
limitation, all of the rights, remedies and benefits of a secured party under
the Uniform Commercial Code, whether or not the Uniform Commercial Code is
applicable.
12. Should any part or provision of this Agreement be held
unenforceable or conflicting with the law of any jurisdiction the validity of
the remaining parts or provisions hereof shall not be affected thereby.
13. Grantor agrees, on written request by the Agent, now and during
the term of this Agreement to do all such acts as may be necessary or
appropriate in order to carry out the intent and purpose of this Agreement, and
to protect the interest of the Lenders in the Trademarks.
14. The term of this Agreement shall correspond to the term of the
Credit Agreement and this Agreement shall remain in full force and effect until
the Credit Agreement is terminated or cancelled in accordance with the terms
thereof.
15. Upon payment in full of all obligations of the Grantor arising
under or in connection with the Credit Agreement and other Loan Documents and
the termination of each of the Lender's Commitment thereunder, the Agent agrees
to release and take such further action as may be necessary of advisable to
evidence such release and termination of its security interest set forth herein.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
[EINSTEIN BROS. BAGELS, INC.]
[BRACKMAN BROTHERS, INC.]
[BALTIMORE BAGEL CO.]
[NOAH'S NEW YORK BAGELS, INC.]
ATTEST:
By:_______________________________
Title:_________________________
- --------------------------
Secretary
BANK OF AMERICA ILLINOIS, as Agent
By:_______________________________
Title:_________________________
<PAGE>
SCHEDULE A
----------
Trademarks
----------
Trademark Serial # Reg. # Date Issued
- --------- -------- --------- -----------
Trademark Applications
----------------------
Trademark Serial # Date Applied For
- --------- -------- ----------------
-7-
<PAGE>
EXHIBIT F-3
-----------
COLLATERAL ASSIGNMENT OF SERVICING AGREEMENTS
THIS COLLATERAL ASSIGNMENT OF SERVICING AGREEMENTS (this "Agreement")
is dated as of May __, 1996, and is made by EINSTEIN BROS. BAGELS, INC., a
Delaware corporation ("Borrower"), in favor of and for the benefit of BANK OF
AMERICA ILLINOIS, as Agent (the "Agent").
RECITALS
WHEREAS, the Borrower has entered into that certain Secured Credit
Agreement dated as of May __, 1996, (said Credit Agreement, as it may hereafter
be amended, supplemented, restated or otherwise modified from time to time,
being the "Credit Agreement"; capitalized terms defined therein and not
otherwise defined herein being used herein as therein defined) with the Agent
and the Lenders party thereto, pursuant to which the Lenders have agreed to make
Revolving Loans to the Borrower, subject to the terms and conditions of the
Credit Agreement;
WHEREAS, the Borrower desires to grant pledges and security interests
in its personal property in favor of the Agent; and
WHEREAS, it is a condition precedent to the making of Revolving Loans
by the Lenders under the Credit Agreement, that the Borrower shall have granted
the security interest contemplated by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce the Lenders to make Revolving Loans, the
parties hereto agree as follows:
SECTION 1 Grant of Security. The Borrower hereby assigns and pledges
to the Agent for the benefit of the Lenders, and hereby grants to the Agent for
the benefit of the Lenders, a security interest in, all of the following, in
each case whether now or hereafter existing or in which the Borrower now has or
hereafter acquires an interest (the "Collateral") to secure the Secured
Obligations (as defined in Section 2):
1.1 all right, title and interest in, to and under each of the
documents, instruments and agreements
-1-
<PAGE>
set forth on Schedule I hereto (the "Assigned Servicing Agreements");
1.2 all records relating thereto; and
1.3 All proceeds of any and all of the foregoing Collateral. For
purposes of this Agreement, the term "proceeds" includes whatever is
receivable or received when Collateral or proceeds are collected, exchanged
or otherwise disposed of, whether such disposition is voluntary or
involuntary.
SECTION 2 Security for Obligations. This Agreement secures and the
Collateral is collateral security for the prompt payment or performance in full
when due, whether at stated maturity, by acceleration or otherwise (including
the payment of amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S)
362(a)) of all obligations of every nature of the Borrower now or hereafter
existing under the Credit Agreement, the other Loan Documents and any promissory
note or other document or instrument delivered pursuant thereto and all
amendments, extensions or renewals thereof or hereof, whether for principal,
interest (including, without limitation, interest that, but for the filing of a
petition in bankruptcy with respect to the Borrower, would accrue on such
obligations), fees, expenses or otherwise, whether now existing or hereafter
arising, voluntary or involuntary, whether or not jointly owed with others,
direct or indirect, absolute or contingent, liquidated or unliquidated, and
whether or not from time to time decreased or extinguished and later increased,
created or incurred and all or any portion of such obligations that are paid, to
the extent all or any part of such payment is avoided or recovered directly or
indirectly from the Agent or the Lenders as a preference, fraudulent transfer or
otherwise (all such obligations being the "Underlying Debt"), and all
obligations of every nature of the Borrower now or hereafter existing under this
Agreement (all such obligations of the Borrower, together with the Underlying
Debt, being the "Secured Obligations").
SECTION 3 The Borrower Remains Liable. Anything herein to the
contrary notwithstanding, (a) the Borrower shall remain liable under any
contracts and agreements included in the Collateral, to the extent set forth
therein, to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the Agent
of any of the rights hereunder shall not release the Borrower from any of its
duties or obligations under the contracts and agreements included in the
Collateral and (c) the Agent shall not have any obligation or liability under
any contracts and agreements included in the Collateral by reason of this
Agreement, nor shall the Agent be obligated to perform any
-2-
<PAGE>
of the obligations or duties of the Borrower thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder by reason of this
Agreement.
SECTION 4 Representations and Warranties. The Borrower represents
and warrants as follows:
4.1 Binding Obligation. This Agreement is the legally valid and
binding obligation of the Borrower, enforceable against it in accordance
with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or
limiting creditors' rights generally and to general principles of equity.
4.2 Underlying Rights Valid. To the best of its knowledge, each of
the Assigned Servicing Agreements constitutes the legally valid and binding
obligation of the party obligated to make payment thereunder. Each of the
Assigned Servicing Agreements complies in all material respects with the
provisions of all applicable laws and regulations, whether federal, state
or local, applicable thereto.
4.3 Ownership of Collateral. Except for the security interest
created by this Agreement and Liens otherwise permitted under Section 6.1
of the Credit Agreement, the Borrower owns the Collateral free and clear of
any Lien. Except such as may have been filed in favor of the Agent
relating to this Agreement or as otherwise permitted under Section 6.1 of
the Credit Agreement, no effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file in
any filing or recording office.
4.4 Perfection. This Agreement creates a valid security interest in
the Collateral (subject only to such Liens as are permitted by the Credit
Agreement), securing the payment of the Secured Obligations.
4.5 Governmental Authorizations. Other than those authorizations and
approvals which have been obtained or which may be required upon the
exercise by the Agent of its rights and remedies hereunder (e.g., permits
which must be renewed upon a change in control), no authorization, approval
or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either (i) for the grant by the
Borrower of the security interest granted hereby or for the execution,
delivery or performance of this Agreement by the Borrower or
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(ii) for the perfection by the Agent of its rights and remedies hereunder
(except as may have been taken by or at the direction of the Borrower or
except as stayed under applicable law).
4.6 Other Information. All information heretofore, herein or
hereafter supplied to the Agent by or on behalf of the Borrower with
respect to the Collateral is accurate and complete in all material
respects.
4.7 Assignment of Servicing Agreements. The agreements listed on
Schedule I hereto are in full force and effect and no default with respect
to the undersigned has occurred thereunder.
4.8 Incorporation of Credit Agreement Representations and Warranties.
Each representation and warranty of the Borrower set forth in Article IV of
the Credit Agreement is true and correct in all material respects and such
representations and warranties are hereby incorporated herein by this
reference with the same effect as though set forth in their entirety
herein.
SECTION 5 Further Assurances. The Borrower agrees that from time to
time, at the expense of the Borrower, the Borrower will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be reasonably necessary or desirable, or that the Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral.
SECTION 6 Agent Appointed Attorney-in-Fact. The Borrower hereby
irrevocably appoints the Agent the Borrower's attorney-in-fact, with full
authority in the place and stead of the Borrower and in the name of the
Borrower, the Agent or otherwise, from time to time upon the occurrence and
continuation of a Default in the Agent's discretion to take any action and to
execute any instrument that the Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:
6.1 to file any claims or take any action or institute any
proceedings that the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Agent with respect to any of the Collateral,
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6.2 generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Agent were the absolute owner thereof for all
purposes, and to do, at the Agent's option and the Borrower's expense, at
any time, or from time to time, all acts and things that the Agent deems
necessary to protect, preserve or realize upon the Collateral and the
Agent's security interest therein, in order to effect the intent of this
Agreement, all as fully and effectively as the Borrower might do.
SECTION 7 Agent May Perform. If the Borrower fails to perform any
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the reasonable expenses of the Agent incurred in
connection therewith shall be payable by the Borrower under Section 11.
SECTION 8 Agent's Duties and Liabilities.
8.1 The powers conferred on the Agent hereunder are solely to protect
its interest and the interests of the Lenders in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Agent shall have no duty as
to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any
Collateral. The Agent shall be deemed to exercise reasonable care in the
custody and preservation of such Collateral if such Collateral is accorded
treatment substantially equal to that which the Agent accords its own
property.
8.2 The Agent shall not be liable to the Borrower (i) for any loss or
damage sustained by it, or (ii) for any loss, damage, depreciation or other
diminution in the value of any of the Collateral, that may occur as a
result of, in connection with or that is in any way related to (x) any
exercise by the Agent of any right or remedy under this Agreement or (y)
any other act of or failure to act by the Agent, except to the extent that
the same shall be determined by a judgment of a court of competent
jurisdiction to be the result of acts or omissions on the part of the Agent
constituting gross negligence or willful misconduct.
8.3 NO CLAIM MAY BE MADE BY THE BORROWER AGAINST THE AGENT, ANY
LENDER OR THEIR RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES,
ATTORNEYS OR AGENTS FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES IN
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RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR IS
BASED ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH, ARISING
OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND
RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION THEREWITH; AND THE BORROWER HEREBY EXPRESSLY
WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH
DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO
EXIST IN ITS FAVOR.
SECTION 9 Remedies. If any Event of Default shall have occurred and
be continuing, the Agent may exercise in respect of the Collateral, (a) all the
rights and remedies it has as a secured party on default under the Uniform
Commercial Code of the State of Illinois (the "Code") (whether or not the Code
applies to the affected Collateral), (b) all of the rights and remedies provided
for in this Agreement, the Credit Agreement and any other agreement between the
Borrower, the Agent and the Lenders, (c) in the case where a default also exists
under the Assigned Servicing Agreements, exercise any one or more of Borrower's
rights and remedies arising in connection with such Assigned Servicing
Agreements and (d) such other rights and the remedies as may be provided by law
or otherwise (such rights and remedies of the Agent to be cumulative and non-
exclusive).
SECTION 10 Application of Proceeds. Except as expressly provided
elsewhere in this Agreement, all proceeds received by the Agent in respect of
any sale of, collection from or other realization upon all or any part of the
Collateral may, in the discretion of the Agent, be held by the Agent as
Collateral for, and/or then, or at any other time thereafter applied, in full or
in part by the Agent against the Secured Obligations in the following order of
priority:
FIRST: To the payment of all reasonable costs and expenses of such
collection or other realization and all other expenses, liabilities and
advances made or incurred by the Agent in connection therewith and all
amounts for which the Agent is entitled to indemnification hereunder and
all advances made by the Agent hereunder for the account of the Borrower
and for the payment of all costs and expenses paid or incurred by the Agent
in connection with the exercise of any right or remedy hereunder, all in
accordance with Section 11;
SECOND: To the ratable payment in full of the Secured Obligations
owing to the Lenders; and
THIRD: After payment in full of the amounts specified in the
preceding paragraphs, to the payment
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to or upon the order of the Borrower, or whomsoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may
direct, of any surplus then remaining from such proceeds.
All applications of proceeds to the Secured Obligations shall be
applied to the payment of interest before application of payment to principal.
SECTION 11 Indemnity and Expenses.
11.1 The Borrower agrees to indemnify the Agent and the Lenders from
and against any and all claims, losses and liabilities growing out of or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities resulting from the Agent's
and/or any such Lender's, as the case may be, gross negligence or willful
misconduct.
11.2 The Borrower will upon demand pay to the Agent and/or any
Lender, as the case may be, the amount of any and all reasonable expenses,
including the reasonable fees and disbursements of such Person's counsel and of
any experts and agents, that the Agent and/or any Lender, as the case may be,
may incur in connection with (i) the custody, preservation, use or operation of,
or the sale of, collection from, or other realization upon, any of the
Collateral after the occurrence of an Event of Default, (ii) the exercise or
enforcement of any of the rights of the Agent and/or any Lender, as the case may
be, hereunder after the occurrence of an Event of Default or (iii) the failure
by the Borrower to perform or observe any of the provisions hereof.
SECTION 12 Other Waivers by the Borrower, Etc.
The Borrower waives any right to require the Agent to (a) proceed
against any Person; (b) proceed against or exhaust any collateral held from any
other Person; (c) pursue any other remedy in the Agent's power; or (d) make or
give any presentments, demands for performance, notices of nonperformance,
protests, notices of protests or notices of dishonor in connection with any
obligation or evidences of indebtedness held by the Agent as collateral, or in
connection with any obligations or evidences of indebtedness that constitute in
whole or in part the Underlying Debt, or in connection with the creation of new
or additional indebtedness.
The Borrower waives any defense arising by reason of, and agrees that
the rights of the Agent and the obligations of the Borrower hereunder shall be
absolute and unconditional irrespective of, (a) any disability or other defense
of any other Person; (b) the unenforceability or cessation from any cause
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whatsoever, other than the indefeasible payment in full, of the Underlying Debt;
(c) the application by the Borrower of the proceeds of any Underlying Debt for
purposes other than the purposes represented by the Borrower to the Agent or
intended or understood by the Agent; (d) any right to deferral or modification
of the Borrower's obligations hereunder by reason of any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding; (e)
to the fullest extent permitted by law, any defense or benefit that may be
derived from or afforded by law that limits the liability of or exonerates
guarantors or sureties; (f) any election of remedies by the Agent that destroys
the Borrower's subrogation rights or the Borrower's right to proceed against any
other Person for reimbursement, including without limitation, the loss of rights
the Borrower may suffer by reason of any rights, power or remedies of the
Borrower in connection with any anti-deficiency laws or any other laws limiting,
qualifying or discharging the Underlying Debt; and (g) any other circumstance
that might otherwise constitute a defense available to, or a discharge of, any
other Person in respect of the Underlying Debt.
Until the indefeasible payment in full of all of the Secured
Obligations and termination of each Lender's Commitment, the Borrower waives any
right to enforce any remedy that the Agent now has or may hereafter have against
any other Person, and waives any benefit of, or any right to participate in, any
security whatsoever now or hereafter held by the Agent.
SECTION 13 Waiver of Hearing. The Borrower expressly waives any
constitutional or other right to a judicial hearing prior to the time the Agent
takes possession or disposes of the Collateral as provided in Section 9 hereof.
SECTION 14 Waiver of Jury Trial. THE BORROWER AND THE AGENT HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including,
without limitation, contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. The Borrower and the Agent each
acknowledge that this waiver is a material inducement for the Borrower and the
Agent to enter into a business relationship, that the Borrower and the Agent
have already relied on the waiver in entering into this Agreement and that each
will continue to rely on the waiver in their related future dealings. The
Borrower and the Agent further warrant and represent that each has reviewed this
waiver with its legal counsel, and that each knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY
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TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT. In the event of litigation, this Agreement may be filed as a written
consent to a trial by the court.
SECTION 15 Continuing Security Interest. This Agreement shall create
a continuing security interest in the Collateral and shall (a) remain in full
force and effect until the indefeasible payment in full of the Secured
Obligations and termination of each Lender's Commitment, (b) be binding upon the
Borrower, its successors and assigns and (c) inure, together with the rights and
remedies of the Agent hereunder, to the benefit of the Agent and its successors,
transferees and assigns. Upon the indefeasible payment in full of the Secured
Obligations and termination of each Lender's Commitment, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the Borrower. Upon any such termination, the Agent will, at the Borrower's
expense, execute and deliver to the Borrower such documents as the Borrower
shall reasonably request to evidence such termination and shall terminate its
financing statements with regard to the Collateral wherever filed.
SECTION 16 Amendments; Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by the Borrower herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Agent and the Borrower, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
Notwithstanding anything contained herein to the contrary, the Borrower may
amend, modify or terminate any of Assigned Servicing Agreements without the
consent of the Agent.
SECTION 17 Notices, Etc. All notices and other communications
provided for under this Agreement shall be in writing (including telegraphic,
telex or facsimile communication) and mailed or telecommunicated or delivered at
the address of such party set forth in the Credit Agreement; or, as to each
party, at such other address as shall be designated by such party in a written
notice to the other party complying as to delivery with the terms of this
Section 17. All such notices and communications shall, when mailed or
telecommunicated, be effective upon actual receipt, or one (1) Business Day
after transmitted by telex and the appropriate answerback received, transmitted
by facsimile or delivered to the telegraph company, respectively, addressed as
aforesaid.
SECTION 18 Consent to Jurisdiction and Service of Process. Each of
the Borrower and the Agent hereby submits to the nonexclusive jurisdiction of
the state courts of the State of Illinois and the federal courts located in the
Northern District of Illinois for all matters arising under this Agreement and
related documents. Service of process sufficient for personal
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jurisdiction in any action against the Borrower in Illinois may be made by
registered or certified mail, return receipt requested, to the address specified
pursuant to Section 17.
SECTION 19 GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF ILLINOIS WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. Unless
otherwise defined herein or in the Credit Agreement, terms used in Article 9 of
the Code as in effect in the State of Illinois are used herein as therein
defined.
SECTION 20 Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement or be given any substantive effect.
SECTION 21 Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation and in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 22 No Other Writing. This writing is intended by the
Borrower and the Agent as the final expression of this Agreement and is also
intended, together with the Credit Agreement (and the other Exhibits thereto,
including the Revolving Note) as a complete and exclusive statement of the terms
of their agreement with respect to the matters covered hereby. No course of
dealing, course of performance or trade usage, and no parol evidence of any
nature, shall be used to supplement or modify and terms of this Agreement.
There are no conditions to the full effectiveness of this Agreement.
SECTION 23 Counterparts. This Agreement may be executed in one or
more counterparts, each of which when so executed shall be deemed an original,
but all such counterparts together shall constitute but one and the same
instrument.
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IN WITNESS WHEREOF, the Borrower and the Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
EINSTEIN BROS. BAGELS, INC.
By:____________________________
Title:
BANK OF AMERICA ILLINOIS, as
Agent
By:_____________________________
Title:
Notwithstanding any provisions contained
in any of the Assigned Servicing Agreements,
the undersigned acknowledges and consents
to this Agreement and the assignment
contemplated hereby.
BOSTON CHICKEN, INC.
_____________________________
Title:
<PAGE>
SCHEDULE I
TO COLLATERAL ASSIGNMENT OF SERVICING AGREEMENTS
Description of Assigned Servicing Agreements:
1. Accounting and Administration Services Agreement made as of March 24, 1995,
as the same may be amended, restated, and/or modified from time to time, by
and between Progressive Bagel Concepts, Inc. and Boston Chicken, Inc.
2. Computer and Communications Systems Service Agreement, made and entered
into March 24, 1995, as the same may be amended, restated, and/or modified
from time to time, by and between Progressive Bagel Concepts, Inc. and
Boston Chicken, Inc.
3. Financial Services Agreement, made and entered into March 24, 1995, as the
same may be amended, restated and/or modified from time to time, by and
between Progressive Bagel Concepts, Inc. and Boston Chicken, Inc.
4. Real Estate Services Agreement, made and entered into March 24, 1995, as
the same may be amended, restated and/or modified from time to time, by and
between Progressive Bagel Concepts, Inc. and Boston Chicken, Inc.
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EXHIBIT G
---------
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of May __,
1996 made by EINSTEIN BROS. BAGELS, INC., a DELAWARE corporation (the
"Pledgor"), in favor of BANK OF AMERICA ILLINOIS, INC., as Agent (the "Agent").
W I T N E S S E T H:
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WHEREAS, the Pledgor has entered into that certain Secured Credit
Agreement, dated as of May __, 1996 (said Credit Agreement, as it may hereafter
be amended, supplemented, restated or otherwise modified from time to time,
being the "Credit Agreement") with the Agent and the lenders party thereto (the
"Lenders"), pursuant to which the Lenders have agreed to make Revolving Loans
(as defined herein) to the Pledgor, subject to the terms and conditions of the
Credit Agreement;
WHEREAS, as a condition precedent to the making of the Revolving Loans
by the Lenders under the Credit Agreement, the Pledgor is required to execute
and deliver this Pledge Agreement; and
WHEREAS, the Pledgor has duly authorized the execution, delivery and
performance of this Pledge Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Lenders
to make Revolving Loans to the Pledgor pursuant to the Credit Agreement, the
Pledgor agrees, for the benefit of the Lenders, as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Terms. The following terms when used in this
Pledge Agreement, including its preamble and recitals, shall have the following
meanings (such definitions to be equally applicable to the singular and plural
forms thereof):
"Agent" is defined in the preamble.
"Collateral" is defined in Section 2.1.
"Credit Agreement" is defined in the first recital.
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"Distributions" means all stock dividends, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, and other
distributions (whether similar or dissimilar to the foregoing) on or with
respect to any Pledged Shares or other shares of capital stock constituting
Collateral, but shall not include Dividends.
"Dividends" means cash dividends and cash distributions with respect
to any Pledged Shares made out of capital surplus.
"Lenders" is defined in the first recital.
"Pledge Agreement" is defined in the preamble.
"Pledged Affiliate Shares" means all shares of capital stock or other
equity interest of any Pledged Share Issuer with respect to which the Pledgor is
record owner and which are delivered by the Pledgor to the Agent as Pledged
Property hereunder, and all of the certificates and instruments representing
such shares of capital stock or other equity interest.
"Pledged Debtor Shares" means all shares of capital stock or other
equity interest of any Pledged Share Issuer with respect to which the Pledgor
has been granted a Lien to secure certain Debt owed by some third party Person
to the Pledgor and which are delivered to the Agent as Pledged Property
hereunder, all of the certificates and instruments representing such shares of
capital stock or other equity interest.
"Pledged Note Issuer" means each Person identified in Item A of
Attachment 1 (hereto as such Attachment 1 shall be updated by any substitute
Attachment 1 delivered by Pledgor pursuant to Section 5.10 of the Credit
Agreement) as the issuer of the Pledged Note identified opposite the name of
such Person.
"Pledged Notes" means all promissory notes of any Pledged Note Issuer
which are delivered by the Pledgor to the Agent as Pledged Property hereunder,
as such promissory notes, in accordance with Section 4.5, are amended, modified,
or supplemented from time to time and together with any promissory note of any
Pledged Note Issuer taken in extension or renewal thereof or substitution
therefor.
"Pledged Property" means all Pledged Shares, all Pledged Notes, and
all other pledged shares of capital stock or promissory notes, all other
securities, all assignments of any amounts due or to become due, all other
instruments which are now being delivered by the Pledgor to the Agent or may
from time to time hereafter be delivered by the Pledgor to the Agent for the
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purpose of pledge under this Pledge Agreement or any other Loan Document, and
all proceeds of any of the foregoing.
"Pledged Share Issuer" means each Person identified in Item B of
Attachment 1 hereto (as such Attachment 1 shall be updated by any substitute
Attachment 1 delivered by Pledgor pursuant to Section 5.10 of the Credit
Agreement) as the issuer of the Pledged Shares identified opposite the name of
such Person.
"Pledged Shares" means all Pledged Affiliate Shares and all Pledged
Debtor Shares; provided, however Pledged Shares shall not include stock issued
by the Pledgor.
"Pledgor" is defined in the preamble.
"Secured Obligations" is defined in Section 2.2.
"U.C.C." means the Uniform Commercial Code as in effect in the State
of Illinois, as the same may be amended from time to time.
SECTION 1.2 Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Pledge Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.
SECTION 1.3 U.C.C. Definitions. Unless otherwise defined herein or
the context otherwise requires, terms for which meanings are provided in the
U.C.C. are used in this Pledge Agreement, including its preamble and recitals,
with such meanings.
ARTICLE II
PLEDGE
SECTION 2.1 Grant of Security Interest. The Pledgor hereby pledges,
hypothecates, assigns, charges, mortgages, delivers, and transfers to the Agent
for the benefit of the Lenders, and hereby grants to the Agent for the benefit
of the Lenders, a continuing security interest in, all of the following property
(the "Collateral"):
(a) all promissory notes of each Pledged Note Issuer identified in
Item A of Attachment 1 hereto (as such Attachment I shall be updated by any
substitute Attachment I delivered by Pledgor pursuant to Section 5.10 of
the Credit Agreement);
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(b) all other Pledged Notes issued from time to time;
(c) all Pledged Shares identified in Item B of Attachment 1 hereto
(as such Attachment I shall be updated by any substitute Attachment I
delivered by Pledgor pursuant to Section 5.10 of the Credit Agreement);
(d) all other Pledged Shares issued from time to time;
(e) all other Pledged Property, whether now or hereafter delivered to
the Agent in connection with this Pledge Agreement;
(f) all Dividends, Distributions, interest, and other payments and
rights with respect to any Pledged Property to which Pledgor is entitled or
entitled to receive a security interest; and
(g) all proceeds of any of the foregoing.
SECTION 2.2 Security for Obligations. This Pledge Agreement secures
the payment in full of all obligations of every nature of the Pledgor now or
hereafter existing under the Credit Agreement, the Revolving Note and each other
Loan Document, whether for principal, interest, costs, fees, expenses, or
otherwise (all such obligations of the Pledgor being the "Secured Obligations").
SECTION 2.3 Delivery of Pledged Property; Registration of Pledge,
Transfer, etc. All certificates or instruments representing or evidencing any
Collateral, including all Pledged Shares and all Pledged Notes (except to the
extent any such Pledged Notes are expressly excluded from the delivery
requirements hereunder pursuant to Section 5.10(a) of the Credit Agreement),
shall be delivered to and held by or on behalf of the Agent pursuant hereto,
shall be in suitable form for transfer by delivery, and shall be accompanied by
all necessary instruments of transfer or assignment, duly executed in blank.
Prior to the delivery thereof to the Agent, such certificates or instruments
shall be held by the Pledgor separate and apart from its other property and in
express trust for the Agent. To the extent Pledgor has such rights, the Agent
shall have the right, at any time after a Default shall have occurred and be
continuing and without notice to the Pledgor, to transfer to, or to register in
the name of the Agent or any of its nominees, any or all of the Pledged
Affiliate Shares, subject only to the revocable rights of the Pledgor specified
in clause (c) of Section 4.4. In addition, to the extent Pledgor has such
rights, the Agent shall have the
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right at any time after a Default shall have occurred and be continuing to
exchange certificates or instruments representing or evidencing any Pledged
Affiliate Shares for certificates or instruments of smaller or larger
denominations.
SECTION 2.4 Dividends and Interest. (a) In the event that any
Dividend to which Pledgor is entitled or entitled to receive a security interest
is to be paid on any Pledged Share at a time when no Event of Default has
occurred and is continuing, and the proceeds of such Dividend have not
previously been required to be applied to any of the Secured Obligations, such
proceeds may be paid directly to the Pledgor.
(b) In the event that any payment of interest or principal to which Pledgor is
entitled or entitled to receive a security interest is to be paid on any Pledged
Note at a time when no Event of Default has occurred and is continuing, and the
proceeds of such payment have not previously been required to be applied to any
of the Secured Obligations, such proceeds may be paid directly to the Pledgor.
SECTION 2.5 Continuing Security Interest; Transfer of Note. This
Pledge Agreement shall create a continuing security interest in the Collateral
and shall
(a) remain in full force and effect until payment in full of all
Secured Obligations and the termination of all Commitments,
(b) be binding upon the Pledgor and its successors, transferees and
assigns, and
(c) inure to the benefit of the Agent, the Lenders and their
respective successors, transferees, and assigns.
Without limiting the foregoing clause (c), pursuant to the terms of the Credit
Agreement, the Lenders may assign, or otherwise transfer (in whole or in part)
their ratable portion of the Revolving Note or any Revolving Loan held by them
to any other Person or entity, and such other Person or entity shall thereupon
become vested with all the benefits in respect thereof granted to the Lenders
under any Loan Document (including this Pledge Agreement) or otherwise. Upon
the payment in full of the Secured Obligations and the termination of each
Lender's Commitment, the security interest granted herein shall terminate and
all rights to the Collateral shall revert to the Pledgor. Upon any such
termination, the Agent will, at the Pledgor's sole expense, deliver to the
Pledgor, without any representations or warranties of any kind whatsoever, all
certificates and instruments representing or evidencing all Pledged Shares and
all Pledged Notes, together with all other Collateral held by the Agent
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hereunder, and execute and deliver to the Pledgor, at the Pledgor's sole
expense, such documents as the Pledgor shall reasonably request to evidence such
termination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants unto the Agent, as at the date of
each pledge and delivery hereunder (including each pledge and delivery of
Pledged Shares and each pledge and delivery of a Pledged Note) by the Pledgor to
the Agent of any Collateral, as follows:
SECTION 3.1 Ownership, No Liens, etc. The Pledgor is the legal and
beneficial owner of, and has good and marketable title to (and has full right
and authority to pledge and assign) all the Collateral (other than Pledged
Debtor Shares and Dividends, Distributions and Proceeds therefrom), free and
clear of all liens, security interests, options, or other charges or
encumbrances, except any lien or security interest permitted under Section 6.1
of the Credit Agreement. The Pledgor has a valid, perfected, first priority
security interest in the Pledged Debtor Shares and all proceeds thereof, subject
to the exceptions set forth in Section 6.1 of the Credit Agreement.
SECTION 3.2 As to Pledged Shares. In the case of any Pledged
Affiliate Shares constituting such Collateral, all of such Pledged Affiliate
Shares are duly authorized and validly issued, fully paid, and non-assessable.
SECTION 3.3 As to Pledged Notes. To the best of Pledgor's knowledge,
in the case of each Pledged Note, all of such Pledged Notes have been duly
authorized, executed, endorsed, issued and delivered (except to the extent any
such Pledged Notes are expressly excluded from the delivery requirements
hereunder pursuant to Section 5.10(a) of the Credit Agreement), and are the
legal, valid and binding obligation of the issuers thereof enforceable against
such issuers in accordance with their respective terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors' rights and to general principles of
equity. None of the Pledged Notes are in default with respect to the obligor's
payment obligation.
SECTION 3.4 Authorization, Approval, etc. Except as may have been
obtained, no authorization, approval, or other action by, and no notice to or
filing with, any governmental authority, regulatory body or any other Person is
required either
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(a) for the pledge by the Pledgor of any Collateral pursuant to this
Pledge Agreement or for the execution, delivery, and performance of this
Pledge Agreement by the Pledgor, or
(b) for the exercise by the Agent of the voting or other rights
provided for in this Pledge Agreement, or, except with respect to any
Pledged Shares, as may be required in connection with a disposition of such
Pledged Shares by laws affecting the offering and sale of securities
generally, the remedies in respect of the Collateral pursuant to this
Pledge Agreement.
ARTICLE IV
COVENANTS
SECTION 4.1 Protect Collateral; Further Assurances, etc. The Pledgor
will not sell, assign, transfer, pledge, or encumber in any other manner the
Collateral (except (i) in favor of the Agent hereunder, and (ii) prior to an
Event of Default, in connection with the exercise of any remedy the Pledgor has
against any third party borrower which has pledged such Collateral to the
Pledgor as security). The Pledgor will warrant and take reasonable action to
defend the right and title herein granted unto the Agent in and to the
Collateral (and all right, title, and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. The Pledgor agrees
that at any time, and from time to time, at the expense of the Pledgor, the
Pledgor will promptly execute and deliver all further instruments, and take all
further action, that may be necessary or desirable, or that the Agent may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Agent to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
SECTION 4.2 Stock Powers, etc. The Pledgor agrees that all Pledged
Shares (and all other shares of capital stock constituting Collateral) delivered
by the Pledgor pursuant to this Pledge Agreement will be accompanied by duly
executed undated blank stock powers, or other equivalent instruments of transfer
acceptable to the Agent. The Pledgor will, from time to time upon the request
of the Agent, promptly deliver to the Agent such stock powers, instruments, and
similar documents, satisfactory in form and substance to the Agent, with respect
to the Collateral as the Agent may reasonably request and will, from time to
time upon the request of the Agent after the occurrence of any Event of Default
and during the continuance thereof to the extent of any right to do such,
promptly transfer any Pledged
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Affiliate Shares into the name of any nominee designated by the Agent.
SECTION 4.3 Continuous Pledge. Subject to Section 2.4, the Pledgor
will, at all times, keep pledged to the Agent pursuant hereto all Pledged Shares
and all other shares of capital stock constituting Collateral, all Dividends and
Distributions with respect thereto to which the Pledgor is entitled, or entitled
to receive a security interest in, all Pledged Notes, all proceeds received by
the Agent or the Pledgor with respect to the Pledged Notes, and all other
Collateral and other securities, instruments, proceeds, and rights from time to
time received by or distributable to the Pledgor in respect of any Collateral.
SECTION 4.4 Voting Rights; Dividends, etc. The Pledgor agrees to
deliver (properly endorsed where required hereby or requested by the Agent) to
the Agent:
(a) after an Event of Default shall have occurred and be continuing,
promptly upon receipt thereof by the Pledgor and without any request
therefor by the Agent, all Dividends and Distributions (to which the
Pledgor is entitled or entitled to receive a security interest therein) and
all interest, all other cash payments, and all proceeds of the Collateral,
all of which shall be held by the Agent as additional Collateral for use in
accordance with Section 6; and
(b) after an Event of Default shall have occurred and be continuing,
promptly upon request of the Agent, such proxies and other documents as may
be necessary to allow the Agent to exercise any voting power to which the
Pledgor is entitled with respect to any share of capital stock (including
Pledged Shares) constituting Collateral;
provided, however, that unless an Event of Default shall have occurred and be
continuing, the Pledgor shall be entitled:
(c) to exercise, in its reasonable judgment, but in a manner which
would not have a material adverse effect on the value of the Pledged
Shares, and in a manner not inconsistent with the terms of the Credit
Agreement or any other Loan Document (including this Pledge Agreement) the
voting power and all other incidental rights of ownership with respect to
any Pledged Shares or other shares of capital stock constituting Collateral
(subject to the Pledgor's obligation to deliver to the Agent such Pledged
Shares and other shares in pledge hereunder); and
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(d) to the prompt receipt of all Dividends in accordance with Section
2.4.
All Dividends, Distributions, interest, cash payments, and proceeds which may at
any time and from time to time be held by the Pledgor but which the Pledgor is
then obligated to deliver to the Agent, shall, until delivery to the Agent, be
held by the Pledgor separate and apart from its other property in trust for the
Agent. The Agent agrees that unless an Event of Default shall have occurred and
be continuing, the Agent shall, upon the written request of the Pledgor,
promptly deliver such proxies and other documents, if any, as shall be
reasonably requested by the Pledgor which are necessary to allow the Pledgor to
exercise any voting power to which the Pledgor is entitled with respect to any
share of capital stock (including Pledged Shares) constituting Collateral;
provided, however, that no vote shall be cast, or consent, waiver, or
ratification given, or action taken by the Pledgor that would impair any
Collateral or be inconsistent with or violate any provision of the Credit
Agreement or any other Loan Document (including this Pledge Agreement).
SECTION 4.5 Additional Undertakings. The Pledgor will not, without
the prior written consent of the Agent, which will not be unreasonably withheld
or delayed:
(a) enter into any agreement materially amending, supplementing, or
waiving any provision of any Pledged Note (including any underlying
instrument pursuant to which such Pledged Note is issued) or compromising
or releasing or extending the time for payment of any obligation of the
maker thereof, provided that the Pledgor may exercise its rights to convert
debt or exercise options for equity in any Financed Franchisee at any time
permitted by the Credit Agreement; or
(b) take or omit to take any action the taking or the omission of
which would result in any material impairment or alteration of any
obligation of the maker of any Pledged Note or other instrument
constituting Collateral.
ARTICLE V
THE AGENT
SECTION 5.1 Agent Appointed Attorney-in-Fact. The Pledgor hereby
irrevocably appoints the Agent the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time upon the occurrence and during the continuance
of a Default in the Agent's discretion, to take any action and to
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execute any instrument which the Agent may deem necessary or advisable to
accomplish the purposes of this Pledge Agreement, including without limitation:
(a) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or
in respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above; and
(c) to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Agent with respect to any of the Collateral.
SECTION 5.2 Agent May Perform. If the Pledgor fails to perform any
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the expenses of the Agent incurred in connection
therewith shall be payable by the Pledgor pursuant to Section 6.3.
SECTION 5.3 Reasonable Care. The Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, however, the Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral, if it
takes such action for that purpose as the Pledgor reasonably requests in writing
at times other than upon the occurrence and during the continuance of any Event
of Default, but failure of the Agent to comply with any such request at any time
shall not in itself be deemed a failure to exercise reasonable care.
ARTICLE VI
REMEDIES
SECTION 6.1 Certain Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Agent may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to
it, all the rights and remedies of a secured party on default under the
U.C.C. (whether or not the U.C.C. applies to the affected Collateral) and
also may sell the Collateral or any part thereof after reasonable notice to
the Pledgor in one or more parcels at public or
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private sale or broker's board, at any of the Agent's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as
the Agent may deem commercially reasonable. The Pledgor agrees that the
Agent or any Lender shall be entitled to bid for or purchase any or all of
the Collateral at any such sale. The Pledgor agrees that at least ten
days' notice to the Pledgor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. The Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Agent may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.
(b) The Agent may (to the extent Pledgor could do so or has done so)
(i) transfer all or any part of the Collateral into the name of
the Agent or its nominee, with or without disclosing that such
Collateral is subject to the lien and security interest hereunder,
(ii) notify the parties obligated on any of the Collateral to
make payment to the Agent of any amount due or to become due
thereunder,
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof,
or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party
with respect thereto,
(iv) endorse any checks, drafts, or other writings in the
Pledgor's name to allow collection of the Collateral,
(v) take control of any proceeds of the Collateral, and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.
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SECTION 6.2 Application of Proceeds. Except as expressly provided
elsewhere in this Agreement, all proceeds received by the Agent in respect of
any sale of, collection from or other realization upon all or any part of the
Collateral may, in the discretion of the Agent, be held by the Agent as
Collateral for, and/or then, or at any other time thereafter applied, in full or
in part by the Agent against the Secured Obligations in the following order of
priority:
FIRST: To the payment of all reasonable costs and expenses of such
sale, collection or other realization and all other expenses, liabilities
and advances made or incurred by the Agent in connection therewith and all
amounts for which the Agent is entitled to indemnification hereunder and
all advances made by the Agent hereunder for the account of the Pledgor and
for the payment of all costs and expenses paid or incurred by the Agent in
connection with the exercise of any right or remedy hereunder, all in
accordance with Section 6.3;
SECOND: To the ratable payment in full of the Secured Obligations
owing to the Lenders; and
THIRD: After payment in full of the amounts specified in the
preceding paragraphs, to the payment to or upon the order of the Pledgor,
or whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
All applications of proceeds to the Secured Obligations shall be
applied to the payment of interest before application of payment to principal.
SECTION 6.3 Indemnity and Expenses. The Pledgor hereby indemnifies
and holds harmless the Agent and the Lenders from and against any and all
claims, losses, and liabilities growing out of or resulting from this Pledge
Agreement (including enforcement of this Pledge Agreement), except claims,
losses, or liabilities resulting from the Agent's and/or any such Lender's, as
the case may be, gross negligence or willful misconduct. Upon demand, the
Pledgor will pay to the Agent and/or any Lender, as the case may be, the amount
of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and agents, which the Agent
and/or any Lender, as the case may be, may incur in connection with:
(a) the administration of this Pledge Agreement, the Credit Agreement
and each other Loan Document;
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(b) the custody, preservation, use, or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Agent or
any Lender, as the case may be, hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
SECTION 6.4 Rights Exercisable. Notwithstanding anything else to the
contrary herein, Agent's rights hereunder are limited to whatever rights Pledgor
has with respect to the Collateral.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.1 Loan Document. This Pledge Agreement is a Loan Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof, including Article IX thereof.
SECTION 7.2 Amendments, etc. No amendment to or waiver of any
provision of this Pledge Agreement nor consent to any departure by the Pledgor
herefrom shall in any event be effective unless the same shall be in writing and
signed by the Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it is given.
SECTION 7.3 Obligations Not Affected. The obligations of the Pledgor
under this Pledge Agreement shall remain in full force and effect without regard
to, and shall not be impaired or affected by:
(a) any amendment or modification or addition or supplement to the
Credit Agreement, any Note, any other Loan Document, any instrument
delivered in connection therewith, or any assignment or transfer thereof;
(b) any exercise, non-exercise, or waiver by the Agent of any right,
remedy, power, or privilege under or in respect of, or any release of any
guaranty or collateral provided pursuant to, this Pledge Agreement, the
Credit Agreement, or any other Loan Document;
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(c) any waiver, consent, extension, indulgence, or other action or
inaction in respect of this Pledge Agreement, the Credit Agreement, or any
other Loan Document or any assignment or transfer of any thereof; or
(d) any bankruptcy, insolvency, reorganization,arrangement,
readjustment, composition, liquidation, or the like, of the Pledgor or any
other Person, whether or not the Pledgor shall have notice or knowledge of
any of the foregoing.
SECTION 7.4 Protection of Collateral. The Agent may from time to
time, at its option, perform any act which the Pledgor agrees hereunder to
perform and which the Pledgor shall fail to perform after being requested in
writing so to perform (it being understood that no such request need be given
after the occurrence and during the continuance of an Event of Default) and the
Agent may from time to time take any other action which the Agent reasonably
deems necessary for the maintenance, preservation or protection of any of the
Collateral or of its security interest therein.
SECTION 7.5 Notices, Etc. All notices and other communications
provided for under this Pledge Agreement shall be in writing (including
telegraphic, telex or facsimile communication) and mailed or telecommunicated or
delivered at the address of such party set forth in the Credit Agreement; or, as
to each party, at such other address as shall be designated by such party in a
written notice to the other party complying as to delivery with the terms of
this Section 7.5. All such notices and communications shall, when mailed or
telecommunicated, be effective upon actual receipt, or one (1) Business Day
after transmitted by telex and the appropriate answerback received, transmitted
by facsimile or delivered to the telegraph company, respectively, addressed as
aforesaid.
SECTION 7.6 Section Captions. Section captions used in this Pledge
Agreement are for convenience of reference only, and shall not affect the
construction of this Pledge Agreement.
SECTION 7.7 Severability. Wherever possible each provision of this
Pledge Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Pledge Agreement shall
be prohibited by or invalid under such law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Pledge
Agreement.
Section 7.8 LAW. THIS PLEDGE AGREEMENT HAS BEEN DELIVERED AT
CHICAGO, ILLINOIS, AND SHALL BE CONSTRUED IN
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ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF ILLINOIS
WITHOUT GIVING EFFECT TO ITS PRINCIPLES OF CHOICE OF LAW.
SECTION 7.9 Submission to Jurisdiction. Pledgor hereby irrevocably
agree that any legal action or proceeding pertaining to this Pledge Agreement
may be brought in the courts of the State of Illinois, County of Cook, or of the
United States of America for the Northern District of Illinois. The Pledgor
hereby irrevocably agrees that service of process in such action or proceeding
may be made either by mailing, by registered or certified mail, postage prepaid,
a copy of the summons or complaint, or other legal process in such action or
proceeding to the Pledgor at the address specified pursuant to Section 7.5.
Service of process in any such action or proceeding, effected as aforesaid,
shall be effective upon receipt by the Pledgor or such agent and shall be deemed
personal service upon the Pledgor and shall be legal and binding upon the
Pledgor for all purposes, notwithstanding any failure by the Pledgor's agent to
forward copies of such process to the Pledgor. The Pledgor hereby waives, to
the fullest extent permitted by law, any objection it may now or hereafter have
to the laying of venue in any such action or proceeding in any such court as
well as any right it may now or hereafter have to remove any such action or
proceeding, once commenced, to another court on the grounds of forum non
conveniens or otherwise.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the day and year first above written.
EINSTEIN BAGELS BROS., INC.
By _____________________________
Title:
BANK OF AMERICA ILLINOIS, as
Agent
By _____________________________
Title:
<PAGE>
ATTACHMENT 1
to
Pledge Agreement
Pledged Notes
- -------------
See items described on part (1) "Debt" of Schedule 4.17 of the Credit Agreement,
which is incorporated herein by this reference.
Item B. Pledged Shares
--------------
See items described on part (3) "Capital Stock, Partnership Interests or Other
Equity Interests" of Schedule 4.17 of the Credit Agreement, which is
incorporated herein by this reference.
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EXHIBIT H
---------
COLLATERAL ASSIGNMENT OF TENANT'S RIGHTS IN LEASE
-------------------------------------------------
THIS COLLATERAL ASSIGNMENT OF TENANT'S RIGHTS IN LEASE (this "Assignment")
is made as of the ___ day of ___________, 199_ by EINSTEIN BAGEL BROS., INC., a
Delaware corporation ("Borrower"), to BANK OF AMERICA ILLINOIS, as Agent for the
Lenders (herein, together with its successors and assigns in such capacity,
called "Agent").
W I T N E S S E T H:
-------------------
WHEREAS, Lenders now and from time to time hereafter shall make loans,
advances and/or financial accommodations to or for the benefit of Borrower
pursuant to a certain Secured Credit Agreement dated as of May __, 1996, among
Borrower, Lenders, and Agent (which agreement, together with all renewals,
amendments or replacements, is referred to as the "Credit Agreement"; terms used
herein and not otherwise defined herein shall have the meaning assigned thereto
in the Credit Agreement); and
WHEREAS, Borrower has entered into a commercial lease with [-]
("Landlord") dated [-] for occupancy of the property commonly known as [-] and
legally described on Exhibit A attached hereto and made a part hereof (the
"Premises") (which lease, together with all renewals, amendments, or
replacements, all of the Borrower's rights and remedies thereunder, and all
proceeds payable under any policy of insurance covering loss resulting from
untenantability caused by destruction or damage to the Premises, is hereinafter
referred to as the "Lease"). The Lease is additional security for all of
Borrower's obligations to Agent or Lenders arising under or in connection with
the Credit Agreement and the other Loan Documents (the "Liabilities").
NOW, THEREFORE, for and in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. The Assignment. In order to induce Lenders to make advances under the
Credit Agreement and as additional security for the payment of the Liabilities
and for the performance and observance of all the agreements contained herein,
in the Credit Agreement and in the other Loan Documents, Borrower does hereby
set over, and transfer to Agent, upon the terms and conditions hereinafter
contained, a continuing collateral security interest in the Lease, together with
all the right, title and interest of Borrower therein and thereto, to have and
to hold the same unto Agent, its successors and assigns, forever, or for such
shorter period as hereinafter may be indicated, as additional security for the
payment of the Liabilities and for the performance and observance of all the
agreements contained in the Credit Agreement.
2. Warranties, Representations and Covenants. Borrower hereby covenants,
represents, warrants and agrees as follows:
A. At all times, but not more than two times per year unless there has
been an Event of Default, Agent shall have the right to verify the validity,
amount of or any other matter relating to the Lease, by mail, telephone,
telegraph or otherwise, in the name of Borrower, Agent, any or all of the
Lenders, a nominee of Agent, or any or all of said names, all in accordance with
the terms and conditions of the Lease.
B. Unless Agent notifies Borrower in writing that it dispenses with any
one or more of the following requirements, Borrower shall: (i) inform Agent, in
writing, of any assertion of any material defaults, claims, offsets or
counterclaims under the Lease; and (ii) not permit or agree to any
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termination or surrender, or to any material extension, settlement or amendment
or modification of, the Lease.
C. The Lease is in full force and effect; a complete and correct copy of
the Lease has been furnished to Agent; Borrower is the lessee under the Lease
and has good right to collaterally assign its interest in the same (subject,
however, to the rights, if any, of the Landlord to consent to such collateral
assignment); no other person, firm or corporation has any right, title or
interest therein except as expressly set forth herein; and Borrower has not
previously sold, assigned, transferred, mortgaged or pledged its interest in the
Lease to any other person or entity, except for any subleases described in
Schedule 2C hereto.
D. Borrower has and shall: (i) observe, perform and discharge, duly and
punctually, all the obligations, terms, covenants, conditions and warranties of
the Lease, on the part of Borrower to be kept, observed and performed, if any
such failure to keep, observe or perform could result in the termination of the
Lease; and (ii) give prompt notice to Agent of any failure on the part of
Borrower to observe, perform and discharge same. Borrower has and shall: (i)
appear in and defend any action or proceeding arising under, occurring out of,
or in any manner connected with the Lease or the obligations, duties or
liabilities of Borrower and/or Landlord thereunder; (ii) upon request by Agent,
will do so in the name and behalf of Agent but at the expense of Borrower; and
(iii) pay all costs and expenses of Agent, including reasonable attorneys' fees
in any action or proceeding in which Agent may appear.
E. Borrower has entered or will enter into occupancy of the Premises in
accordance with the terms and conditions of the Lease; to the best of Borrower's
knowledge, Landlord is not in default in performing or complying with any of its
obligations under the Lease to the best of Borrower's knowledge; Landlord has
completed, or will complete within the time period provided in the Lease, all
improvements required by the terms of the Lease; and to the best of Borrower's
knowledge, the Premises are, or will be within the due course of construction
completion, open for the use of Borrower, its customers, employees and invitees.
F. Neither Lenders nor Agent shall not be liable in any way for any
injury or damage to person or property sustained by any person or persons, firm
or corporation in or about the Premises nor shall Lenders or Agent assume any
obligation, duty or liability under the Lease.
G. Borrower hereby agrees to indemnify and hold Agent and Lenders
harmless of, from and against any and all liability, loss, damage or expense
which Agent or Lenders may or might incur by reason of this Agreement. Should
Agent or Lenders incur any such liability, loss, damage or expense, the amount
thereof (including reasonable attorneys' fees) shall be payable by Borrower
immediately upon demand, shall bear interest (at the rate due on monies after a
default) from the date of payment by Agent or Lenders thereof until repaid by
Borrower, and shall be secured hereby.
H. The failure of Agent to avail itself of any of the terms, covenants
and conditions of this Assignment for any period of time or at any time or
times, shall not be construed or deemed to be a waiver by Agent of any of its
rights and remedies hereunder. The rights and remedies of Agent under this
Assignment are and shall be cumulative and in addition to any and all rights and
remedies available to Agent or Lenders under the Credit Agreement.
I. Upon payment in full of all of the Liabilities, this Assignment shall
become and be void and of no further effect, and Agent shall, upon demand by
Borrower, execute a release to be filed of record.
J. This Assignment was executed and delivered in, and, except as
otherwise specifically stated in any given paragraph hereof, shall be governed
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as to validity, interpretation, construction, effect and in all other respects
by the laws and decisions of the State of Illinois.
3. Power of Attorney. Upon the occurrence of an Event of Default under the
terms of the Credit Agreement, Borrower further irrevocably appoints Agent as
Borrower's attorney-in-fact to exercise any or all of Borrower's rights in, to,
and under the Lease and to do any or all other acts, in Borrower's name or in
the Agent's own name, that Borrower could do under the Lease, with the same
force and effect as if this Assignment had not been made.
4. Exercise of Rights. Upon the occurrence of an Event of Default under the
terms of the Credit Agreement, Agent, in its sole discretion, may do any one or
more of the following, subject to the terms and conditions contained in the
Lease:
A. Enter upon, take possession of, manage and operate the Premises or any
part thereof pursuant to the terms and conditions of the Lease, and Borrower
agrees to surrender possession of the same.
B. If such Event of Default under the Credit Agreement occurs due to
Borrower's default under the Lease, Agent may cure any such default under the
Lease within the curative times provided in the Lease, or any longer period
granted to Agent by Landlord.
C. Exercise any and all rights and remedies afforded to Agent or Lenders
under the Credit Agreement, the other Loan Documents and the Uniform Commercial
Code and any and/all other applicable provisions of law, including the right to
sell Borrower's interest in the Lease at a public or private sale.
5. Successors and Assigns. This Agreement shall inure to the benefit of and
be binding on Borrower and Agent and the successors and assigns of each.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly exercised the day and year
first above written.
EINSTEIN BAGEL BROS., Inc., a Delaware
corporation
By: _______________________________________
Its __________ President
Attest: ___________________________________
Its __________ Secretary
[CORPORATE SEAL]
STATE OF ILLINOIS )
) SS:
COUNTY OF ____________________)
I, the undersigned, a Notary Public in and for said County, in the State
aforesaid, DO HEREBY CERTIFY that ______________________________, personally
known to me to be the __________ President of EINSTEIN BAGEL BROS., INC., a
Delaware corporation, and ______________________________, personally known to me
to be the __________ Secretary of said corporation, and personally known to me
to be the same persons whose names are subscribed to the foregoing instrument,
appeared before me this day in person and severally acknowledged that as such
__________ President and __________ Secretary, they signed, sealed and delivered
said instrument as __________ President and __________ Secretary of said
corporation, and caused the corporate seal of said corporation to be affixed
thereto, pursuant to authority, given by the Board of Directors of said
corporation as their free and voluntary act, and as the free and voluntary act
and deed of said corporation, for the uses and purposes therein set forth.
Given under my hand and official seal, this _____ day of [-], 19[-].
_____________________________________
Notary Public
My Commission Expires: ____________________
This Instrument Prepared In Chicago, Illinois By
and After Recording Return To:
[-]
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
<PAGE>
EXHIBIT A
---------
[ATTACHED TO AND MADE A PART OF A COLLATERAL ASSIGNMENT OF TENANT'S RIGHTS IN
LEASE DATED [-] BETWEEN EINSTEIN BAGEL BROS., INC. AND BANK OF AMERICA
ILLINOIS, AS AGENT FOR LENDERS]
STORE NO:
- --------
ADDRESS:
- -------
PERMANENT TAX INDEX NUMBER:
- --------------------------
LEGAL DESCRIPTION:
- -----------------
-5-
<PAGE>
EXHIBIT I
---------
LANDLORD'S CONSENT
------------------
THIS LANDLORD'S CONSENT (this "Agreement") is executed and delivered by [-]
("Landlord") to BANK OF AMERICA ILLINOIS, as Agent for Lenders (herein, together
with its successors and assigns in such capacity, called "Agent"), with
reference to the following facts:
A. EINSTEIN BROS. BAGELS, INC., a Delaware corporation ("Borrower"), is
the lessee under a Lease Agreement dated [-] (which lease, together with all
renewals, amendments or replacements, is referred to as the "Lease") concerning
the property commonly known as [-] and legally described on Exhibit A attached
hereto and made a part hereof (the "Premises").
B. Borrower, certain financial institutions (the "Lenders"), and Agent
have entered into a Secured Credit Agreement dated as of May __, 1996 (which
agreement, together with all renewals, amendments or replacements, is referred
to as the "Credit Agreement"; terms used herein and not otherwise defined herein
shall have the meaning assigned thereto in the Credit Agreement) providing for
Lenders to lend money to or for the benefit of Borrower. To secure Borrower's
obligations to Lenders under the Loan Documents ("Borrower's Liabilities"),
Borrower has granted to Agent a first priority security interest in and to all
inventory, equipment, furnishings, fixtures, books and records now owned or
hereafter acquired by Borrower (the "Collateral"), all or some of which is now
or hereafter may be located at the Premises.
For valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Landlord covenants and agrees with Agent as follows:
1. Landlord waives all rights which Landlord now has, or hereafter may
have, under the laws of the State of [-] or by virtue of the Lease or Borrower's
occupation of the Premises, to levy or distrain for rent or for any monetary
obligation arising by reason of default under the Lease, or to assert any lien,
right, claim or title to the Collateral. Landlord acknowledges that Agent's
security interest in the Collateral pursuant to the Loan Documents is superior
to any lien, right, claim or title which Landlord now has or hereafter may have
or assert in or to the Collateral.
2. For purposes of this Agreement, Landlord agrees that the Collateral
shall consist of all of the Borrower's removable personal property on or about
the Premises, which shall not be deemed fixtures. Collateral shall not include
any leasehold improvements which are permanently attached to the Premises or
which are owned by Landlord.
3. If Borrower defaults under the Loan Documents, Agent may remove the
Collateral or any part thereof from the Premises in accordance with the terms
and conditions of the Loan Documents or statutory law without objection or
interference by Landlord and in such case Landlord will make no claim or demand
against the Collateral. In the event of any such default by Borrower, Landlord
agrees that, at Agent's option, the Collateral may remain at the Premises for a
period not exceeding one (1) month following the default, provided Agent pays
rent to Landlord for the Premises at the same rate imposed upon Borrower.
4. If Borrower defaults in the payment or performance of any obligations
under the Lease and Landlord serves notice thereof, Landlord shall give Agent
written notice thereof and twenty (20) days after the date of such notice to
cure the same on behalf of Borrower. Written notice shall be delivered to Agent
by registered or certified mail, postage prepaid, at 231 South LaSalle Street,
Chicago, Illinois 60697, Attn: David Johanson, Vice President.
5. Landlord acknowledges that, concurrently herewith, Borrower is
assigning to Agent Borrower's interest in the Lease pursuant to a Collateral
Assignment of Tenant's Rights in Lease. Landlord represents that the Lease is
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<PAGE>
in full force and effect and that, as of the date hereof, Borrower is not in
default thereunder nor, to Landlord's knowledge, has any event occurred which,
with the passage of time or the giving of notice or both, would constitute an
event of default thereunder. Landlord consents to such assignment and agrees
that upon written notice from Agent that a default has occurred under any of the
Loan Documents, all rights under the Lease otherwise exercisable by Borrower may
be exercised by Agent. Until a default under the Loan Documents has occurred
and Agent has agreed to assume the obligations of Borrower under the Lease,
Landlord shall look solely to Borrower for payment of all sums due under the
Lease and for compliance with the terms and provisions of the Lease.
6. Agent may, without affecting the validity of this Agreement, extend,
amend or in any way modify the terms of payment or performance of any of
Borrower's Liabilities, without the consent of Landlord and without giving
notice thereof to Landlord.
7. This Agreement shall inure to the benefit of the successors and
assigns of Agent and shall be binding upon the heirs, personal representatives,
successors and assigns of Landlord.
8. This Agreement shall be governed by the internal laws of the State of
[-] without reference to principles of choice of law.
9. Neither this Agreement nor Agent's security interest in the Collateral
shall be deemed a mortgage of or lien upon Landlord's fee title to the Premises.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered as
of the day and year first above written.
_______________________________________
(Landlord)
If corporation: By: ___________________________________
Its __________ President
[CORPORATE SEAL] Attest: _______________________________
Its __________ Secretary
If partnership: By: ___________________________________
Its General Partner
If individual: _______________________________________
Print Name: ___________________________
_______________________________________
Print Name: ___________________________
This Instrument Prepared In Chicago, Illinois By
and After Recording Return To:
[-]
McDermott, Will & Emery
227 West Monroe Street
Chicago, Illinois 60606
-3-
<PAGE>
PARTNERSHIP ACKNOWLEDGEMENT
---------------------------
State of ____________________)
) ss.
County of ___________________)
I, __________________________, a Notary Public in and for said County, in
the State aforesaid, do hereby certify that ____________________________,
personally known to me to be a general partner of _________________________, a
____________________ partnership, and personally known to me to be the same
person whose name is subscribed to the foregoing instrument, appeared before me
this day in person and severally acknowledged that he signed and delivered the
said instrument as a partner of said partnership, pursuant to due power and
authority, as his free and voluntary act ad as the free and voluntary act and
deed of said partnership, for the uses and purposes therein set forth.
Given under my hand and seal this _____ day of _____________________,
19_____.
_______________________________________
Notary Public
My Commission Expires: ____________________
<PAGE>
CORPORATE ACKNOWLEDGEMENT
-------------------------
State of ____________________)
) ss.
County of ___________________)
I, __________________________, a Notary Public in and for said County, in
the State aforesaid, do hereby certify that ____________________________,
personally known to me to be the __________ President of __________________, a
____________________ corporation, and personally known to me to be the same
person whose name is subscribed to the foregoing instrument, appeared before me
this day in person and severally acknowledged that as such officer he signed and
delivered the said instrument, and caused the corporate seal to be affixed
thereto, pursuant to authority given by the Board of Directors of said
corporation, as his free and voluntary act and as the free and voluntary act and
deed of said corporation, for the purposes therein set forth.
Given under my hand and seal this _____ day of ______________________,
19_____.
_______________________________________
Notary Public
My Commission Expires: ____________________
<PAGE>
INDIVIDUAL ACKNOWLEDGEMENT
--------------------------
State of ____________________)
) ss.
County of ___________________)
I, __________________________, a Notary Public in and for said County, in
the State aforesaid, do hereby certify that ____________________________,
personally known to me to be the same person(s) whose name(s) is/are subscribed
to the foregoing instrument, appeared before me this day in person and
acknowledged that he/she signed and delivered said instrument as his/her free
and voluntary act and deed for the purposes therein set forth.
Given under my hand and seal this _____ day of_______________________,
19_____.
_______________________________________
Notary Public
My Commission Expires: ____________________
<PAGE>
Exhibit A
---------
LEGAL DESCRIPTION OF PREMISES
STORE NO:
- --------
ADDRESS:
- -------
PERMANENT TAX INDEX NUMBER:
- --------------------------
LEGAL DESCRIPTION:
- -----------------
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<PAGE>
EXHIBIT J
---------
COLLATERAL ASSIGNMENT OF LOAN DOCUMENTATION
THIS COLLATERAL ASSIGNMENT OF LOAN DOCUMENTATION (this "Agreement") is
dated as of May __, 1996, and is made by EINSTEIN BROS. BAGELS, INC., a Delaware
corporation ("Borrower"), in favor of and for the benefit of BANK OF AMERICA
ILLINOIS, as Agent (the "Agent").
RECITALS
WHEREAS, the Borrower has entered into that certain Secured Credit
Agreement dated as of May __, 1996, (said Credit Agreement, as it may hereafter
be amended, supplemented, restated or otherwise modified from time to time,
being the "Credit Agreement"; capitalized terms defined therein and not
otherwise defined herein being used herein as therein defined) with the Agent
and the Lenders party thereto, pursuant to which the Lenders have agreed to make
Revolving Loans to the Borrower, subject to the terms and conditions of the
Credit Agreement;
WHEREAS, the Borrower desires to grant pledges and security interests
in its personal property in favor of the Agent; and
WHEREAS, it is a condition precedent to the making of Revolving Loans
by the Lenders under the Credit Agreement, that the Borrower shall have granted
the security interest contemplated by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce the Lenders to make Revolving Loans, the
parties hereto agree as follows:
SECTION 1 Grant of Security. The Borrower hereby assigns and pledges
to the Agent for the benefit of the Lenders, and hereby grants to the Agent for
the benefit of the Lenders, a security interest in, all of the following, in
each case whether now or hereafter existing or in which the Borrower now has or
hereafter acquires an interest (the "Collateral") to secure the Secured
Obligations (as defined in Section 2):
1.1 all right, title and interest in, to and under each of the
documents, instruments and agreements set forth on Schedule I hereto (the
"Assigned Loan
-1-
<PAGE>
Documents") (as such Schedule I shall be updated by any substitute Schedule
I delivered by the Borrower pursuant to Section 5.10 of the Credit
Agreement);
1.2 all accessions to any of the foregoing and all substitutions,
renewals, improvements and replacements of and additions thereto; and
1.3 All proceeds of any and all of the foregoing Collateral. For
purposes of this Agreement, the term "proceeds" includes whatever is
receivable or received when Collateral or proceeds are collected, exchanged
or otherwise disposed of, whether such disposition is voluntary or
involuntary.
SECTION 2 Security for Obligations. This Agreement secures and the
Collateral is collateral security for the prompt payment or performance in full
when due, whether at stated maturity, by acceleration or otherwise (including
the payment of amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S)
362(a)) of all obligations of every nature of the Borrower now or hereafter
existing under the Credit Agreement, the other Loan Documents and any promissory
note or other document or instrument delivered pursuant thereto and all
amendments, extensions or renewals thereof or hereof, whether for principal,
interest (including, without limitation, interest that, but for the filing of a
petition in bankruptcy with respect to the Borrower, would accrue on such
obligations), fees, expenses or otherwise, whether now existing or hereafter
arising, voluntary or involuntary, whether or not jointly owed with others,
direct or indirect, absolute or contingent, liquidated or unliquidated, and
whether or not from time to time decreased or extinguished and later increased,
created or incurred and all or any portion of such obligations that are paid, to
the extent all or any part of such payment is avoided or recovered directly or
indirectly from the Agent or the Lenders as a preference, fraudulent transfer or
otherwise (all such obligations being the "Underlying Debt"), and all
obligations of every nature of the Borrower now or hereafter existing under this
Agreement (all such obligations of the Borrower, together with the Underlying
Debt, being the "Secured Obligations").
SECTION 3 The Borrower Remains Liable. Anything herein to the
contrary notwithstanding, (a) the Borrower shall remain liable under any
contracts and agreements included in the Collateral, to the extent set forth
therein, to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the exercise by the Agent
of any of the rights hereunder shall not release the Borrower from any of its
duties or obligations under the contracts and agreements included in the
Collateral and (c) the
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<PAGE>
Agent shall not have any obligation or liability under any contracts and
agreements included in the Collateral by reason of this Agreement, nor shall the
Agent be obligated to perform any of the obligations or duties of the Borrower
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder by reason of this Agreement.
SECTION 4 Representations and Warranties. The Borrower represents
and warrants as follows:
4.1 Binding Obligation. This Agreement is the legally valid and
binding obligation of the Borrower, enforceable against it in accordance
with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or
limiting creditors' rights generally and to general principles of equity.
4.2 Delivery of Certain Collateral. All notes and other instruments
comprising any and all items of Collateral have been delivered to the Agent
duly endorsed and accompanied by duly executed instruments of transfer or
assignment in blank.
4.3 Payment Rights Valid. To the best of its knowledge, each of the
Assigned Loan Documents constitutes the legally valid and binding
obligation of the party obligated to make payment thereunder. Each of the
Assigned Loan Documents complies in all material respects with the
provisions of all applicable laws and regulations, whether federal, state
or local, applicable thereto (including, without limitation, any usury law,
the Federal Truth in Lending Act and Regulation C of the Federal Reserve
System). None of the Assigned Loan Documents is evidenced by a promissory
note, or other debt instrument, that has not been delivered to the Agent.
4.4 Ownership of Collateral. Except for the security interest
created by this Agreement and Liens otherwise permitted under Section 6.1
of the Credit Agreement, the Borrower owns the Collateral free and clear of
any Lien. Except such as may have been filed in favor of the Agent
relating to this Agreement or as otherwise permitted under Section 6.1 of
the Credit Agreement, no effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file in
any filing or recording office.
4.5 Perfection. This Agreement creates a valid security interest in
the Collateral (subject to such
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<PAGE>
Liens as are permitted by the Credit Agreement), securing the payment of
the Secured Obligations.
4.6 Governmental Authorizations. Other than those authorizations and
approvals which have been obtained or which may be required upon the
exercise by the Agent of its rights and remedies hereunder (e.g., permits
which must be renewed upon a change in control), no authorization, approval
or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required either (i) for the grant by the
Borrower of the security interest granted hereby or for the execution,
delivery or performance of this Agreement by the Borrower or (ii) for the
perfection by the Agent of its rights and remedies hereunder (except as may
have been taken by or at the direction of the Borrower or except as stayed
under applicable law).
4.7 Other Information. All information heretofore, herein or
hereafter supplied to the Agent by or on behalf of the Borrower with
respect to the Collateral is accurate and complete in all material
respects. Without limiting the foregoing, Schedule I hereto sets forth a
true, accurate and complete list of all of the Financed Franchisee Loan
Documents in effect as of the Effective Date.
4.8 Incorporation of Credit Agreement Representations and Warranties.
Each representation and warranty of the Borrower set forth in Article IV of
the Credit Agreement is true and correct in all material respects and such
representations and warranties are hereby incorporated herein by this
reference with the same effect as though set forth in their entirety
herein.
SECTION 5 Further Assurances. The Borrower agrees that from time to
time, at the expense of the Borrower, the Borrower will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be reasonably necessary or desirable, or that the Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral.
SECTION 6 Agent Appointed Attorney-in-Fact. The Borrower hereby
irrevocably appoints the Agent the Borrower's attorney-in-fact, with full
authority in the place and stead of the Borrower and in the name of the
Borrower, the Agent or otherwise, from time to time upon the occurrence and
continuation
-4-
<PAGE>
of a Default in the Agent's discretion to take any action and to execute any
instrument that the Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation:
6.1 to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral,
6.2 to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (a) above,
6.3 to file any claims or take any action or institute any
proceedings that the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Agent with respect to any of the Collateral,
6.4 generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though the Agent were the absolute owner thereof for all
purposes, and to do, at the Agent's option and the Borrower's expense, at
any time, or from time to time, all acts and things that the Agent deems
necessary to protect, preserve or realize upon the Collateral and the
Agent's security interest therein, in order to effect the intent of this
Agreement, all as fully and effectively as the Borrower might do.
SECTION 7 Agent May Perform. If the Borrower fails to perform any
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the reasonable expenses of the Agent incurred in
connection therewith shall be payable by the Borrower under Section 11.
SECTION 8 Agent's Duties and Liabilities.
8.1 The powers conferred on the Agent hereunder are solely to protect
its interest and the interests of the Lenders in the Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the
safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Agent shall have no duty as
to any Collateral or as to the taking of any necessary steps to preserve
rights against prior parties or any other rights pertaining to any
Collateral. The Agent shall be deemed to exercise reasonable care in the
custody and preservation of such Collateral if such Collateral
-5-
<PAGE>
is accorded treatment substantially equal to that which the Agent accords
its own property.
8.2 The Agent shall not be liable to the Borrower (i) for any loss or
damage sustained by it, or (ii) for any loss, damage, depreciation or other
diminution in the value of any of the Collateral, that may occur as a
result of, in connection with or that is in any way related to (x) any
exercise by the Agent of any right or remedy under this Agreement or (y)
any other act of or failure to act by the Agent, except to the extent that
the same shall be determined by a judgment of a court of competent
jurisdiction to be the result of acts or omissions on the part of the Agent
constituting gross negligence or willful misconduct.
8.3 NO CLAIM MAY BE MADE BY THE BORROWER AGAINST THE AGENT, ANY
LENDER OR THEIR RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES,
ATTORNEYS OR AGENTS FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES IN
RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM THEREFOR IS
BASED ON CONTRACT, TORT OR DUTY IMPOSED BY LAW) IN CONNECTION WITH, ARISING
OUT OF OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED AND
RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT
OCCURRING IN CONNECTION THEREWITH; AND THE BORROWER HEREBY EXPRESSLY
WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY SUCH CLAIM FOR ANY SUCH
DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO
EXIST IN ITS FAVOR.
SECTION 9 Remedies. If any Event of Default shall have occurred and
be continuing, the Agent may exercise in respect of the Collateral, (a) all the
rights and remedies it has as a secured party on default under the Uniform
Commercial Code of the State of Illinois (the "Code") (whether or not the Code
applies to the affected Collateral), (b) all of the rights and remedies provided
for in this Agreement, the Credit Agreement and any other agreement between the
Borrower, the Agent and the Lenders, (c) in the case where a default also exists
under the Assigned Loan Documents, exercise any one or more of Borrower's rights
and remedies arising in connection with such Assigned Loan Documents and (d)
such other rights and the remedies as may be provided by law or otherwise (such
rights and remedies of the Agent to be cumulative and non-exclusive).
SECTION 10 Application of Proceeds. Except as expressly provided
elsewhere in this Agreement, all proceeds received by the Agent in respect of
any sale of, collection from or other realization upon all or any part of the
Collateral may, in the discretion of the Agent, be held by the Agent as
Collateral for, and/or then, or at any other time thereafter
-6-
<PAGE>
applied, in full or in part by the Agent against the Secured Obligations in the
following order of priority:
FIRST: To the payment of all reasonable costs and expenses of such
collection or other realization and all other expenses, liabilities and
advances made or incurred by the Agent in connection therewith and all
amounts for which the Agent is entitled to indemnification hereunder and
all advances made by the Agent hereunder for the account of the Borrower
and for the payment of all costs and expenses paid or incurred by the Agent
in connection with the exercise of any right or remedy hereunder, all in
accordance with Section 11;
SECOND: To the ratable payment in full of the Secured Obligations
owing to the Lenders; and
THIRD: After payment in full of the amounts specified in the
preceding paragraphs, to the payment to or upon the order of the Borrower,
or whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.
All applications of proceeds to the Secured Obligations shall be
applied to the payment of interest before application of payment to principal.
SECTION 11 Indemnity and Expenses.
11.1 The Borrower agrees to indemnify the Agent and the Lenders from
and against any and all claims, losses and liabilities growing out of or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities resulting from the Agent's
or the any such Lender's, as the case may be, gross negligence or willful
misconduct.
11.2 The Borrower will upon demand pay to the Agent and/or any
Lender, as the case may be, the amount of any and all reasonable expenses,
including the reasonable fees and disbursements of such Person's counsel and of
any experts and agents, that the Agent and/or any Lender, as the case may be,
may incur in connection with (i) the custody, preservation, use or operation of,
or the sale of, collection from, or other realization upon, any of the
Collateral after the occurrence of an Event of Default, (ii) the exercise or
enforcement of any of the rights of the Agent and/or any Lender, as the case may
be, hereunder after the occurrence of an Event of Default or (iii) the failure
by the Borrower to perform or observe any of the provisions hereof.
-7-
<PAGE>
SECTION 12 Other Waivers by the Borrower, Etc.
The Borrower waives any right to require the Agent to (a) proceed
against any Person; (b) proceed against or exhaust any collateral held from any
other Person; (c) pursue any other remedy in the Agent's power; or (d) make or
give any presentments, demands for performance, notices of nonperformance,
protests, notices of protests or notices of dishonor in connection with any
obligation or evidences of indebtedness held by the Agent as collateral, or in
connection with any obligations or evidences of indebtedness that constitute in
whole or in part the Underlying Debt, or in connection with the creation of new
or additional indebtedness.
The Borrower waives any defense arising by reason of, and agrees that
the rights of the Agent and the obligations of the Borrower hereunder shall be
absolute and unconditional irrespective of, (a) any disability or other defense
of any other Person; (b) the unenforceability or cessation from any cause
whatsoever, other than the indefeasible payment in full, of the Underlying Debt;
(c) the application by the Borrower of the proceeds of any Underlying Debt for
purposes other than the purposes represented by the Borrower to the Agent or
intended or understood by the Agent; (d) any right to deferral or modification
of the Borrower's obligations hereunder by reason of any bankruptcy,
reorganization, arrangement, moratorium or other debtor relief proceeding; (e)
to the fullest extent permitted by law, any defense or benefit that may be
derived from or afforded by law that limits the liability of or exonerates
guarantors or sureties; (f) any election of remedies by the Agent that destroys
the Borrower's subrogation rights or the Borrower's right to proceed against any
other Person for reimbursement, including without limitation, the loss of rights
the Borrower may suffer by reason of any rights, power or remedies of the
Borrower in connection with any anti-deficiency laws or any other laws limiting,
qualifying or discharging the Underlying Debt; and (g) any other circumstance
that might otherwise constitute a defense available to, or a discharge of, any
other Person in respect of the Underlying Debt.
Until the indefeasible payment in full of all of the Secured
Obligations and termination of each Lender's Commitment, the Borrower waives any
right to enforce any remedy that the Agent now has or may hereafter have against
any other Person, and waives any benefit of, or any right to participate in, any
security whatsoever now or hereafter held by the Agent.
SECTION 13 Waiver of Hearing. The Borrower expressly waives any
constitutional or other right to a judicial hearing prior to the time the Agent
takes possession or disposes of the Collateral as provided in Section 9 hereof.
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<PAGE>
SECTION 14 Waiver of Jury Trial. THE BORROWER AND THE AGENT HEREBY
AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including,
without limitation, contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. The Borrower and the Agent each
acknowledge that this waiver is a material inducement for the Borrower and the
Agent to enter into a business relationship, that the Borrower and the Agent
have already relied on the waiver in entering into this Agreement and that each
will continue to rely on the waiver in their related future dealings. The
Borrower and the Agent further warrant and represent that each has reviewed this
waiver with its legal counsel, and that each knowingly and voluntarily waives
its jury trial rights following consultation with legal counsel. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
SECTION 15 Continuing Security Interest. This Agreement shall create
a continuing security interest in the Collateral and shall (a) remain in full
force and effect until the indefeasible payment in full of the Secured
Obligations and termination of each Lender's Commitment, (b) be binding upon the
Borrower, its successors and assigns and (c) inure, together with the rights and
remedies of the Agent hereunder, to the benefit of the Agent and its successors,
transferees and assigns. Upon the indefeasible payment in full of the Secured
Obligations and termination of each Lender's Commitment, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
the Borrower. Upon any such termination, the Agent will, at the Borrower's
expense, execute and deliver to the Borrower such documents as the Borrower
shall reasonably request to evidence such termination and shall terminate its
financing statements with regard to the Collateral wherever filed.
SECTION 16 Amendments; Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by the Borrower herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Agent and the Borrower, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 17 Notices, Etc. All notices and other communications
provided for under this Agreement shall be in writing (including telegraphic,
telex or facsimile communication)
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<PAGE>
and mailed or telecommunicated or delivered at the address of such party set
forth in the Credit Agreement; or, as to each party, at such other address as
shall be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section 17. All such notices
and communications shall, when mailed or telecommunicated, be effective upon
actual receipt, or one (1) Business Day after transmitted by telex and the
appropriate answerback received, transmitted by facsimile or delivered to the
telegraph company, respectively, addressed as aforesaid.
SECTION 18 Consent to Jurisdiction and Service of Process. Each of
the Borrower and the Agent hereby submits to the nonexclusive jurisdiction of
the state courts of the State of Illinois and the federal courts located in the
Northern District of Illinois for all matters arising under this Agreement and
related documents. Service of process sufficient for personal jurisdiction in
any action against the Borrower in Illinois may be made by registered or
certified mail, return receipt requested, to the address specified pursuant to
Section 17.
SECTION 19 GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF
THE STATE OF ILLINOIS WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. Unless
otherwise defined herein or in the Credit Agreement, terms used in Article 9 of
the Code as in effect in the State of Illinois are used herein as therein
defined.
SECTION 20 Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement or be given any substantive effect.
SECTION 21 Severability. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation and in any other
jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 22 No Other Writing. This writing is intended by the
Borrower and the Agent as the final expression of this Agreement and is also
intended, together with the Credit Agreement (and the other Exhibits thereto,
including the Revolving Note) as a complete and exclusive statement of the terms
of their agreement with respect to the matters covered hereby. No course of
dealing, course of performance or trade usage, and no parol evidence of any
nature, shall be used to supplement or modify and terms of this Agreement.
There are no conditions to the full effectiveness of this Agreement.
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<PAGE>
SECTION 23 Counterparts. This Agreement may be executed in one or
more counterparts, each of which when so executed shall be deemed an original,
but all such counterparts together shall constitute but one and the same
instrument.
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<PAGE>
IN WITNESS WHEREOF, the Borrower and the Agent have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
EINSTEIN BROS. BAGELS, INC.
a Delaware corporation
By:________________________________
Title:
BANK OF AMERICA ILLINOIS, as Agent
By:________________________________
Title:
<PAGE>
SCHEDULE I
TO SECURITY AGREEMENT
Description of Loan Documents:
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<PAGE>
EXHIBIT K
---------
SUBORDINATION AGREEMENT
WHEREAS, Einstein Bros. Bagels, Inc. (hereinafter, together with its
successors and assigns, called "Borrower"), may from time to time hereafter
become indebted to the undersigned and Borrower has requested, and may from time
to time hereafter request, the banks party to that certain Secured Credit
Agreement dated as of May ___, 1996 (as amended, modified, restated, refinanced
or otherwise replaced from time to time, the "Credit Agreement") among the
Borrower, the lenders from time to time party thereto (the "Lenders") and Bank
of America Illinois, as agent for such Lenders (in such capacity, the "Agent")
to make or agree to make loans, advances or other financial accommodations to
Borrower.
NOW, THEREFORE, to induce the Lenders, from time to time, to make or
agree to make loans, advances or other financial accommodations (including,
without limitation, renewals or extensions of any loans or advances heretofore
or hereafter made) to Borrower, and for other valuable consideration, receipt
whereof is hereby acknowledged, the undersigned agrees as follows:
1. All obligations of Borrower, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent or now or
hereafter existing, or due or to become due, are hereinafter called
"Liabilities." All Liabilities arising under the Credit Agreement are
hereinafter called "Senior Liabilities"; and all Liabilities to the undersigned
with respect to indebtedness or liabilities for borrowed money are hereinafter
called "Junior Liabilities"; it being expressly understood and agreed that the
term "Senior Liabilities," as used herein, shall include, without limitation,
any and all interest accruing on any of the Senior Liabilities after the
commencement of any proceedings referred to in paragraph 5 hereof,
notwithstanding any provision or rule of law which might restrict the rights of
the Lenders, as against Borrower or anyone else, to collect such interest. The
terms "Default" and "Event of Default" shall have the respective meanings
assigned thereto in the Credit Agreement.
2. The undersigned will, from time to time, (a) promptly notify the
Agent of the creation of any Junior Liabilities and of the issuance of any
promissory note or other instrument to evidence any Junior Liabilities, (b) upon
request by the Agent, cause any Junior Liabilities which are not evidenced by a
promissory note or other instrument of Borrower to be so evidenced, and (c)
type, write or otherwise conspicuously imprint on each promissory note or other
instrument evidencing the junior liabilities the following legend: "RIGHTS OF
THE
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<PAGE>
HOLDER TO RECEIVE PAYMENT HEREUNDER ARE SUBJECT TO A SUBORDINATION AGREEMENT
DATED MAY __, 1996 EXECUTED BY BOSTON CHICKEN, INC. IN FAVOR OF BANK OF AMERICA
ILLINOIS, AS AGENT FOR CERTAIN LENDERS DESCRIBED THEREIN."
3. The payment of all Junior Liabilities (other than with respect
the Secured Demand Note in the principal amount of $25,000,000, dated January
30, 1996, made by the Borrower and payable to Boston Chicken, Inc., a Delaware
corporation, as amended to increase the principal amount to $40,000,000 pursuant
to an amendment dated as of March 7, 1996) shall be postponed and subordinated
to the payment in full of all Senior Liabilities, and no payments or other
distributions whatsoever in respect of any Junior Liabilities shall be made, nor
shall any property or assets of Borrower be applied to the purchase or other
acquisition or retirement of any Junior Liabilities. Notwithstanding the
foregoing, unless prohibited by Section 4 below, the Borrower may (i) make
scheduled interest payments with respect to the Junior Liabilities, and (ii)
make prepayments expressly permitted by Section 6.14(ii) of the Credit
Agreement.
4. (a) Upon the happening and continuing of any Default in respect
of the payment of the Senior Liabilities (a "Payment Default"), no direct or
indirect payment or distribution shall be made by the Borrower on account of the
principal of or interest on or other amounts constituting Junior Liabilities,
unless and until (i) such Payment Default shall have been cured or waived by the
Required Lenders (as such term is defined in the Credit Agreement) or shall have
ceased to exist or (ii) the Required Lenders shall have waived in writing the
application of this paragraph 4(a).
(b) Without limiting the effect of paragraph 4(a), upon the
happening and continuing of any Event of Default (other than a Payment Default)
with respect to the Senior Liabilities (a "Non-Payment Default"), then upon
written notice thereof given to the Borrower by the Required Lenders ("Payment
Blockage Notice"), no direct or indirect payment or distribution shall be made
by the Borrower on account of the principal of or interest on or other amounts
consisting Junior Liabilities unless and until (i) such Non-Payment Default
shall have been cured or waived by the Required Lenders or shall have ceased to
exist or (ii) the Required Lenders shall have waived in writing the application
of this paragraph 4(b) to such Non-Payment Default; provided, however, that (A)
this paragraph 4(b) shall not prevent the making of any payment for more than
179 days after a Payment Blockage Notice shall have been given or deemed to have
been given ("Payment Blockage Period") unless the Senior Liabilities in respect
of which such Default or Event of Default exists has been declared due and
payable in their entirety, in which case no payment or distribution may be made
until such acceleration has been rescinded or annulled and (B) not more than one
effective
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<PAGE>
Payment Blockage Notice shall be given within a period of 360 consecutive days;
provided, that if a Payment Blockage Period is terminated pursuant to subsection
(i) above, then one additional Payment Blockage Notice may be given within such
360-day period; provided, further, that in the event such additional Payment
Blockage Notice is given, the Payment Blockage Period with respect thereto shall
not be longer than a period equal to 179 days minus the number of days elapsed
during which the original Payment Blockage Period (which was terminated pursuant
to subsection (i) above) was in effect, so that there shall be a period of at
least 181 consecutive days in each 360-day period when no Payment Blockage
Period is in effect.
(c) Notwithstanding the foregoing, the undersigned agrees that
any waiver of any Default or Event of Default by the Lenders under the Credit
Agreement shall also be deemed a waiver by the undersigned with respect to any
such similar default in connection with the Junior Liabilities.
5. In the event of any dissolution winding up, liquidation,
readjustment, reorganization or other similar proceedings relating to Borrower
or to its creditors, as such, or to its property (whether voluntary or
involuntary partial or complete, and whether in bankruptcy, insolvency or
receivership, or upon an assignment for the benefit of creditors, or any other
marshalling of the assets and liabilities of Borrower, or any sale of all or
substantially all of the assets of Borrower, or otherwise), the Senior
Liabilities shall first be paid in full before the undersigned shall be entitled
to receive and to retain any payment or distribution in respect of the Junior
Liabilities, and, in order to implement the foregoing, (a) all payments and
distributions of any kind or character in respect of the Junior Liabilities to
which the undersigned would be entitled if the Junior Liabilities were not
subordinated, or subordinated and pledged or assigned, pursuant to this
Agreement shall be made directly to the Agent for the benefit of the Lenders,
and (b) the undersigned shall promptly file a claim or claims, in the form
required in such proceedings, for the full outstanding amount of the Junior
Liabilities and shall cause said claim or claims to be approved and all payments
and other distributions in respect thereof to be made directly to the Agent for
the benefit of the Lenders.
6. In the event that the undersigned receives any payment or other
distribution of any kind or character from Borrower or from any other source
whatsoever in respect of any of the Junior Liabilities, other than as expressly
permitted by the terms of this Agreement, such payment or other distribution
shall be received in trust for the Lenders and promptly turned over by the
undersigned to the Agent for the benefit of the Lenders. The undersigned will
mark its books and records, and cause Borrower to mark its books and records, so
as to clearly indicate that the
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<PAGE>
Junior Liabilities are subordinated in accordance with the terms of this
Agreement, and will cause to be clearly inserted in any promissory note or other
instrument which at any time evidences any of the Junior Liabilities a statement
to the effect that the payment thereof is subordinated in accordance with the
terms of this Agreement. The undersigned will execute such further documents or
instruments and take such further action as the Agent may reasonably from time
to time request to carry out the intent of this Agreement.
7. The undersigned hereby waives (a) notice of acceptance by the
Agent and the Lenders of this Agreement; (b) notice of the existence or creation
or non-payment of all or any of the Senior Liabilities; and (c) all diligence in
collection or protection of or realization upon the Senior Liabilities or any
thereof or any security therefor.
8. The undersigned will not without the prior written consent of the
Agent (a) cancel, waive, forgive, transfer or assign, or subordinate to any
Liabilities other than the Senior Liabilities, any Junior Liabilities or any
rights in respect thereof; (b) take any collateral security for any Junior
Liabilities; or (c) commence, or join with any other creditor in commencing, any
bankruptcy, reorganization or insolvency proceedings with respect to Borrower.
Notwithstanding the foregoing, the undersigned may exercise conversion rights
with respect to the Liabilities.
9. This Agreement shall in all respects be a continuing agreement and
shall remain in full force and effect (notwithstanding, without limitation, the
dissolution of the undersigned or that at any time or from time to time all
Senior Liabilities may have been paid in full), subject to discontinuance only
upon receipt by the Agent of written notice from the undersigned, or any person
duly authorized and acting on behalf of the undersigned, of the discontinuance
hereof provided, however, that no such notice of discontinuance shall affect or
impair any of the agreements and obligations of the undersigned hereunder with
respect to any and all Senior Liabilities existing prior to the time of receipt
of such notice by the Agent, any and all Senior Liabilities created or acquired
thereafter pursuant to any previous commitments made by the Lenders, any and all
extensions or renewals of any of the foregoing, any and all interest accruing on
any of the foregoing and any and all expenses paid or incurred by the Agent or
any Lender in endeavoring to collect or realize upon any of the foregoing or any
security thereof, and all of the agreements and obligations of the undersigned
under this Agreement shall, notwithstanding any such notice of discontinuance,
remain fully in effect until all such Senior Liabilities (including any
extensions or renewals of any thereof and all such interest and expenses) shall
have been paid in full.
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<PAGE>
10. The Agent and the Lenders may, from time to time, subject to the
terms of the Credit Agreement, whether before or after any discontinuance of
this Agreement, without notice to the undersigned, assign or transfer any or all
of the Senior Liabilities or any interest thereon, and, notwithstanding any such
assignment or transfer or any subsequent assignment or transfer thereof, such
Senior Liabilities shall be and remain Senior Liabilities for the purposes of
this Agreement, and every immediate and successive assignee or transferee of any
of the Senior Liabilities or of any interest therein shall, to the extent of the
interest of such assignee or transferee in the Senior Liabilities, be entitled
to the benefits of this Agreement to the same extent as if such assignee or
transferee were the Agent or a Lender.
11. The Agent and the Lenders shall not be prejudiced in their rights
under this Agreement by any act or failure to act of Borrower or the
undersigned, or any noncompliance of Borrower or the undersigned with any
agreement or obligation, regardless of any knowledge thereof which the Agent or
a Lender may have or with which the Agent or a Lender may be charged, and no
action of the Agent or a Lender permitted hereunder shall in any way affect or
impair the rights of the Agent and the Lenders and the obligations of the
undersigned under this Agreement.
12. No delay on the part of the Agent or the Lenders in the exercise
of any right or remedy shall operate as a waiver thereof and no single or
partial exercise by the Agent or the Lenders of any right or remedy shall
preclude other or further exercise thereof or the exercise of any other right or
remedy nor shall any modification or waiver of any of the provisions of this
Agreement be binding upon the Agent or the Lenders except as expressly set forth
in a writing duly signed and delivered on behalf of the Agent and the Lenders.
13. This Agreement shall be binding upon the undersigned and upon the
successors and assigns of the undersigned. If more than one party shall execute
this Agreement, the term "undersigned" as used herein shall mean all parties
executing this Agreement and each of them, and all such parties shall be jointly
and severally obligated hereunder.
14. This Agreement shall be construed in accordance with and governed
by the laws of the State of Illinois. Wherever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been made and delivered at
Chicago, Illinois this ___ day of May, 1996.
BOSTON CHICKEN, INC.
By:___________________________
Title:________________________
The undersigned Borrower hereby acknowledges receipt of a copy of the
foregoing Subordination Agreement, waives notice of acceptance thereof by the
Agent and the Lenders, and agrees to be bound by the terms and provisions
thereof, to make no payments or distributions contrary to the terms and
provisions thereof, and to do every other act and thing necessary or appropriate
to carry out such terms and provisions.
Dated: May __, 1996 EINSTEIN BROS. BAGELS, INC.
By:___________________________
Title:________________________
<PAGE>
Exhibit 10.12
EINSTEIN BROS. BAGELS, INC.
BOSTON CHICKEN, INC.
AMENDED AND RESTATED
ACCOUNTING AND ADMINISTRATION SERVICES AGREEMENT
------------------------------------------------
This Amended and Restated Accounting and Administration Services Agreement
("Agreement") is made as of the 28th day of May, 1996, by and between Einstein
Bros. Bagels, Inc., a Delaware corporation ("EBBI") (formerly Progressive Bagel
Concepts, Inc.), and Boston Chicken, Inc., a Delaware corporation ("BCI").
RECITALS
--------
1. EBBI desires that BCI assist it, its subsidiaries, and its and their
franchisees in maintaining certain accounting records, performing certain
accounting activities, preparing certain financial reports required for
financial reporting purposes, handling certain option administration functions,
and employee benefit, human resources, insurance, and recordkeeping services,
and providing certain other administrative support services.
2. BCI and EBBI entered into that certain Accounting and Administration
Services Agreement dated March 24, 1995. BCI has agreed to amend and restate
such agreement pursuant to which BCI would perform such services for EBBI upon
the terms and subject to the conditions hereinafter provided.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, as well as other good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the parties hereby
agree as follows:
1. Accounting Services.
-------------------
1.1 Upon the terms and subject to the conditions set forth in this
Agreement, BCI shall provide to EBBI for each retail bagel store location owned,
operated, or franchised by EBBI or any subsidiary of EBBI (each a "Unit"), to
EBBI as an entity, and to each franchise or subsidiary of EBBI as an entity
(each an "Entity"), the following accounting services (the "Services"):
(a) per-Unit and per-Entity calculation of revenue and expenses by
accounting category per BCI's standard chart of accounts;
<PAGE>
(b) administration and maintenance of corporate payroll, and
administration of the processing of payroll and calculation of applicable tax
and other withholdings relating to the Units or Entities through BCI's
designated payroll service bureau;
(c) administration of accounts payable (including check
generation) for each Entity;
(d) administration of recurring cash transfers between EBBI's
applicable Unit and Entity bank accounts;
(e) maintenance of lease files and compliance with reporting and
disbursement obligations thereunder;
(f) administration and maintenance of a general ledger trial
balance, balance sheet, income statement and certain other Entity and Unit
reports by accounting category per BCI's standard chart of accounts and
consistent with periodic reports BCI customarily prepares in the normal course
of business to manage its financial affairs, and periodic distribution of such
reports using BCI's Report Distribution System;
(g) maintenance of all accounting records supporting EBBI's and
each other Entity's financial statements (consistent with BCI's record retention
program) in reasonable fashion separate and discrete from the accounting records
of BCI; and
(h) preparation of period end reconciliations and associated
period end journal entries for all balance sheet accounts.
1.2 The Services shall not include any of the following, each of which
is the sole responsibility of EBBI or such other Entity:
(a) selection of accounting policies to be applied to EBBI's or
such other Entity's books and records; however, BCI will consistently apply the
appropriate policies selected by EBBI or such other Entity;
(b) negotiation of terms and conditions between EBBI or such
other Entity and suppliers, vendors, and others, such as remittance due dates
and discounts;
(c) quarterly review and edit of EBBI's or such other Entity's
vendor masterfile for current and accurate data; however, BCI will appropriately
apply updates to the vendor masterfile as directed by EBBI or such other Entity;
(d) signature and final release of trade accounts payable
disbursement checks in excess of $200,000;
2
<PAGE>
(e) final review and approval of annual financial statements;
(f) cash investment activities; however, BCI will initiate and
manage repetitive and/or fixed cash management activities as directed in writing
by EBBI or such other Entity;
(g) approval and coding of invoices for disbursement;
(h) preparation of budgets (except that BCI will develop a budget
process and calendar to facilitate the preparation of annual budgets by EBBI and
each other Entity); and
(i) preparation, filing, or signing of any tax returns required
to be filed by EBBI or such other Entity, with the exception of sales and use
tax returns which will be prepared, but not, however, filed or signed by BCI.
1.3 EBBI agrees to effectively apply locally the policies and
procedures defined in BCI's Accounting Manual (and in particular Accounting
Policy and Procedures Bulletin 93-13), as the same may be modified and updated
from time to time, on a timely basis and to conform to the configurations and
standard chart of accounts of BCI and to cause each other Entity and Unit to do
the same, which actions and compliance shall be a condition to BCI's obligations
hereunder. In the event that EBBI or other Entities and Units deviate from such
policies, procedures, configurations, or standard chart of accounts, EBBI shall
reimburse BCI for all costs and expenses incurred as a result of such deviation.
1.4 EBBI agrees to utilize BCI's designated auditors and tax
consultants for annual audit and tax return preparation activities and to cause
each other Entity and Unit to do the same.
1.5 EBBI agrees to utilize BCI's designated bankers (except for Unit
bank accounts) and credit card processor for all corporate cash management
activities and to cause each other Entity and Unit to do the same.
1.6 EBBI agrees to supply BCI all information, materials, data, and
documents necessary or advisable to properly perform the Services in such form,
format, or media as BCI may reasonably request, to make available the officers
of EBBI to answer any inquiries in connection therewith, and to cooperate with
BCI in the performance of its duties and to cause each other Entity and Unit to
do the same.
3
<PAGE>
2. Administrative Services.
-----------------------
2.1 Upon the terms and subject to the conditions set forth in this
Agreement, BCI shall provide to EBBI, each other Entity and Unit the following
administrative services (the "Admin. Items").
(a) Bid, negotiate, and establish (but not administer) health,
dental, disability, life, and 401K benefit programs and accounts on behalf of
EBBI and each other Entity for each covered employee thereof.
(b) Bid, negotiate, establish, and administer a Directors and
Officers Liability Insurance program annually on behalf of EBBI.
(c) Bid, negotiate, establish, and administer property,
liability, umbrella, and related insurance programs annually on behalf of EBBI
and each other Entity.
(d) Bid, negotiate, establish, and administer a Workers
Compensation insurance program annually on behalf of EBBI and each other Entity.
(e) Perform claims reduction programs for each of the above
insurance programs.
(f) Set up and administer option accounts, including option grant
summaries, vesting, and option exercise bookkeeping and administration for
optionees of EBBI.
(g) Perform year-end accrual analyses for health, dental, and
FLEX Plans on behalf of EBBI and each other Entity.
(h) Bid, negotiate, establish, and administer office supply
services for EBBI.
(i) Bid, negotiate, establish, and administer express mail
services for EBBI.
(j) Research, negotiate, and purchase office furniture and
equipment for EBBI.
(k) Assist with internal moves and cubicle reconfiguration for
EBBI.
(l) Negotiate, establish, and administer document retrieval,
destruction, and off-site storage services for EBBI.
4
<PAGE>
2.2 EBBI agrees to supply BCI all information, materials, data, and
documents necessary or advisable to properly perform the Admin. Items in such
form, format, or media as BCI may reasonably request, to make available the
officers of EBBI to answer any inquiries in connection therewith, and to
cooperate with BCI in the performance of its duties and to cause each other
Entity and Unit to do the same.
3. Fees for Services, Admin. Items, and Expense Reimbursement.
----------------------------------------------------------
3.1 In consideration of the Services and Admin. Items, EBBI agrees to
pay to BCI accounting and administrative fees, as follows:
(a) a base fee for services to EBBI payable by EBBI for each
four-week accounting period of BCI ("Accounting Period") of $30,000 (the "Base
and a supplemental base fee for services to each other Entity payable by EBBI
for each Accounting Period of $4,500 per such entity, which fees may be
increased cumulatively not more than 10% per fiscal year at the sole discretion
of BCI effective upon written notice thereof;
(b) a unit fee for each Unit open and operating during all or any
portion of such Accounting Period, which unit fee shall depend on the number of
Units directly owned by a single Entity, and shall be equal to $850 per
Accounting Period for each such directly owned Unit open and operating during
all or any portion of such Accounting Period, until the Entity directly owning
such Unit opens and operates twelve or more Units;
(c) after the Entity directly owning such Units opens its twelfth
Unit and prior to the opening of the thirtieth Unit directly owned by such
Entity, the fee payable by EBBI for each Accounting Period shall be the Base Fee
plus $750 for each such directly owned Unit open and operating during all or any
portion of such Accounting Period;
(d) after the Entity directly owning such Units opens its
thirtieth Unit and prior to the opening of the fiftieth Unit directly owned by
such Entity, the fee payable by EBBI for each Accounting Period shall be the
Base Fee plus $650 for each such directly owned Unit open and operating during
all or any portion of such Accounting Period;
(e) after the Entity directly owning such Units opens its
fiftieth Unit and prior to the opening of the hundredth Unit directly owned by
such Entity, the fee payable by EBBI for each Accounting Period shall be the
Base Fee plus $550 for each such directly owned Unit open and operating during
all or any portion of such Accounting Period;
(f) after the Entity directly owning such Units opens its
hundredth Unit and prior to the opening of the two hundredth Unit directly owned
by such Entity, the fee payable by EBBI for each Accounting Period shall be the
Base Fee plus $450 for
5
<PAGE>
each such directly owned Unit open and operating during all or any portion of
such Accounting Period; and
(g) after the Entity directly owning such Units opens its two
hundredth Unit and for all Units opened thereafter directly owned by such
Entity, the fee payable by EBBI for each Accounting Period shall be the Base Fee
plus $350 for each such directly owned Unit open and operating during all or any
portion of such Accounting Period.
In the event that the Units and the Entity directly owning such Units meet
certain reporting requirements, administrative procedure compliance
requirements, and timeliness deadlines as BCI may establish and announce from
time to time in its sole discretion, the unit fees set forth in (b) through (g),
above shall be reduced for such complying Entity to $700, $600, $500, $400,
$300, and $250, respectively.
3.2 In addition to the payment of fees as specified in Section 3.1 of
this Agreement, EBBI shall reimburse BCI for all non-ordinary, out-of-pocket
expenses incurred by BCI or its affiliates in connection with the Services and
Admin. Items rendered by BCI hereunder, including, but not limited to, travel
expenses, legal fees, fees of experts, audit fees, tax fees, payroll service
fees, etc. All non-ordinary, out-of-pocket expenses in excess of $50,000,
however, must be approved by EBBI prior to incurring such expense. Expenses
payable under this Section 3.2 shall be paid promptly in the manner specified
for vendor payments in the ordinary course of business pursuant to this
Agreement.
3.3 In addition to the Services and Admin. Items, BCI may agree in its
sole discretion to provide other accounting and administrative services to EBBI
from time to time of a nature not specifically delineated herein on such terms
and for such fees as shall be mutually determined by BCI and EBBI
4. Term of Services.
----------------
4.1 The term of this Agreement shall expire on March 26, 1998, unless
the parties mutually agree to extend such term; provided that either party
hereto may terminate this Agreement during the term upon 180 days' prior written
notice to the other party; and provided further that BCI may terminate this
Agreement without notice and cease rendering the Services and Admin. Items
hereunder 15 days after notice of any non-payment of the fees and expenses
provided for herein when such fees and expenses are due and payable, unless such
non-payment is cured within such 15 day period.
4.2 Termination of this Agreement shall terminate BCI's obligations to
provide the Services and Admin. Items. Upon termination of this Agreement, EBBI
shall pay to BCI the fees due BCI in accordance with Section 3.1 hereof for the
Services and Admin. Items rendered by BCI through the date of termination and
reimburse BCI in accordance with Section 3.2 hereof for expenses incurred by BCI
in connection with the Services and Admin. Items
6
<PAGE>
rendered by BCI through the date of termination. Upon termination of this
Agreement, BCI will reasonably cooperate with EBBI in the archiving and
retrieval of records and transition of services at EBBI's expense.
5. Payment of Amounts due Hereunder; Liability.
-------------------------------------------
5.1 BCI will calculate and EBBI hereby authorizes BCI to collect
through electronic funds transfer, at the end of each Accounting Period, the
total dollar amount of all fees and expenses due to BCI hereunder.
5.2 BCI shall not be liable for any cost, damage, expense, or loss of
EBBI, its franchisees, or their owners, partners, shareholders, officers,
members, directors, employees, suppliers, or vendors, or any other person or
entity arising or resulting, directly or indirectly, from (i) the failure of BCI
to perform any of the Services or Admin. Items for EBBI, the other Entities, the
Units, or employees of any of them, hereunder or the misperformance of any such
Services or Admin. Items, except to the extent such failure to perform or such
misperformance is the result of BCI's willful misconduct or gross negligence, in
which event Company's liability shall not exceed its fee for such Services or
Admin. Items hereunder for the Accounting Period in question (plus, in the case
of employee theft or embezzlement, the limits of BCI's insurance applicable
thereto), or (ii) reliance by EBBI, the other Entities, the Units, or employees
of any of them on any data or advice BCI may provide pursuant to this Agreement.
In no event will BCI be liable for indirect, incidental, consequential, special,
speculative, exemplary, or punitive damages (including, but not limited to, loss
of revenue or profit).
5.3 BCI MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE SERVICES OR ADMIN. ITEMS PROVIDED HEREUNDER,
INCLUDING, BUT NOT LIMITED TO, THEIR ADEQUACY, QUALITY, PERFORMANCE,
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE.
6. Miscellaneous.
-------------
6.1 In performing the Services and Admin. Items set forth in this
Agreement, BCI will have neither express nor implied power to execute agreements
on behalf of EBBI, the other Entities, or their employees, or in any manner bind
EBBI, the other Entities, or their employees, as to any matter not within the
scope of this Agreement.
6.2 All notices provided for in this Agreement shall be in writing
and shall be deemed to have been duly given if delivered personally or sent by
overnight express or facsimile transmission or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:
7
<PAGE>
If to EBBI:
Einstein Bros. Bagels, Inc.
1526 Cole Blvd.
Suite 200
Golden, CO 80401
Attention: Chief Financial Officer
If to BCI:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Attention: Senior Vice President - Accounting & Administration
Facsimile: (303) 384-5340
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally or by overnight express
courier or facsimile transmission shall be deemed to have been given on the date
it is so delivered, and any notice delivered by registered or certified mail
delivery service shall be deemed to have been duly given three business days
after it is sent to the intended recipient at the address set forth above.
6.3 THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF.
6.4 A failure of any party to insist in any instance upon the strict
and punctual performance of any provision of this Agreement shall not constitute
a continuing waiver of such provision. No party shall be deemed to have waived
any rights, power, or privilege under this Agreement or any provisions hereof
unless such waiver shall have been in writing and duly executed by the party to
be charged with such waiver, and such waiver shall be a waiver only with respect
to the specific instance involved and shall in no way impair the rights of the
waiving party or the obligations of the other party or parties in any other
respect or at any other time. If any provision of this Agreement shall be
waived, or be invalid, illegal, or unenforceable, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain binding and in full
force and effect.
6.5 This Agreement may be amended or modified only by a written
instrument signed by each of the parties hereto.
8
<PAGE>
6.6 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings, either or oral or written, with respect
thereto.
6.7 Nothing contained in this Agreement is intended, nor shall it be
construed, to create any rights in any person not a party to this Agreement.
6.8 This Agreement may not be assigned by EBBI without the prior
written consent of BCI. This Agreement may not be assigned by BCI without the
prior written consent of EBBI, which will not be unreasonably withheld;
provided, that BCI may assign this agreement to any affiliate of BCI without the
prior written consent of EBBI.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
EINSTEIN BROS. BAGELS, INC.
By: /s/ Paul Strasen
Title: Vice President
BOSTON CHICKEN, INC.
By: /s/ Donald J. Bingle
Title: Vice President
9
<PAGE>
Exhibit 10.13(b)
FIRST AMENDMENT TO
FINANCIAL SERVICES AGREEMENT
This First Amendment to Financial Services Agreement ("First Amendment") is
made and entered into as of this 7th day of March, 1996 by and between Einstein
Bros. Bagels, Inc., a Delaware corporation, formerly known as Progressive Bagel
Concepts, Inc. (the "Company") and Boston Chicken, Inc., a Delaware corporation
("Boston Chicken").
RECITALS
--------
A. The Company and Boston Chicken are parties to a Financial Services
Agreement dated as of March 24, 1995 (the "Services Agreement").
B. The Company has requested that Boston Chicken amend that certain
Secured Loan Agreement dated as of March 24, 1995, as amended, between the
Company and Boston Chicken (the "Loan Agreement"), to extend the date on which
Boston Chicken shall have the right to convert any portion of the outstanding
principal balance of the Loan (as defined in the Loan Agreement) into shares of
common stock of the Company or exercise the Option (as defined in the Loan
Agreement).
C. In consideration for Boston Chicken agreeing to amend the Loan
Agreement as provided above, the Company agrees to amend certain provisions of
the Services Agreement) to provide that the Company shall pay additional service
fees to Boston Chicken during Boston Chicken's 1996 fiscal year.
COVENANTS
---------
Based upon the above recitals, the parties agree as follows:
1.1 Amendment. Upon satisfaction by the Company of the conditions set
forth in Section 3.1 hereof, the Services Agreement shall be amended as of the
date hereof as follows:
(1) All references in the Services Agreement and all documents delivered in
connection therewith to "Progressive Bagel Concepts, Inc." and "PBCI" are deemed
references to "Einstein Bros. Bagels, Inc." and "EBBI," respectively.
(2) Section 2.1 of the Services Agreement is hereby amended by deleting it
in its entirety and replacing it to read as follows:
2.1 In consideration of the Finance Services, EBBI agrees to pay financial
services fees of (i) $500,000 for Finance Services rendered by BCI in 1995,
<PAGE>
payable in four quarterly installments on the last day of each of BCI's
1995 fiscal quarters, and (ii) $250,000 for Finance Services rendered by
BCI in 1996, payable in four quarterly installments on the last day of each
of BCI's 1996 fiscal quarters.
2.1 Effect of Amendment. From and after the effective date hereof,
reference in the Services Agreement and all other documents executed pursuant to
the Services Agreement (as each of the foregoing is amended hereby or pursuant
hereto) to the Services Agreement shall be deemed to be references to the
Services Agreement as amended hereby.
3.1 Effective Date; Conditions. This First Amendment shall not become
effective until:
(1) The Company shall have delivered to Boston Chicken, in form and
substance satisfactory to Boston Chicken, resolutions of the board of
directors authorizing the execution, delivery and performance by the
Company of this First Amendment, and such other resolutions as the Company
deems necessary or desirable to consummate the transactions contemplated
herein; and
(2) The Company shall have delivered to Boston Chicken such other
documents and instruments as Boston Chicken may reasonably request in
connection herewith.
4.1 Representations. To induce Boston Chicken to enter into this First
Amendment, the Company represents to Boston Chicken as of the date hereof that
this First Amendment has been duly authorized by all required action on the part
of the Company, and this First Amendment has been duly executed and delivered by
the Company and constitutes the legal, valid, and binding obligation of the
Company enforceable in accordance with its terms.
5.1 Definitions; Ratification. Any term used but not defined herein or in
the exhibits hereto shall have the meaning ascribed thereto in the Services
Agreement. Except as expressly contemplated herein, the Services Agreement and
all related certificates and other documents, are hereby ratified and confirmed
and shall remain in full force and effect.
6.1 GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAW
PROVISIONS THEREOF.
7.1 Counterparts. This First Amendment may be executed in counterparts,
each of which shall be deemed an original, but each of which together shall
constitute but one and the same instrument.
2
<PAGE>
8.1 Headings. The headings of the sections of this First Amendment are
inserted for convenience only and shall not be deemed to constitute a part of
this First Amendment.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment to
be effective on the date provided herein.
BOSTON CHICKEN, INC. EINSTEIN BROS. BAGELS, INC.
By: /s/ Donald J. Bingle By: /s/ Joel Alam
-------------------- -----------------------
Title: Vice President Title: Vice President
-------------------- -----------------------
4
<PAGE>
EXHIBIT 10.13(c)
FINANCIAL SERVICES AGREEMENT
TERMINATION AGREEMENT
This agreement (the "Termination Agreement") is effective as of May 20,
1996 (the "Effective Date") by and between Boston Chicken, Inc., a Delaware
corporation ("Boston Chicken") and Einstein Bros. Bagels, Inc., a Delaware
corporation (the "Company").
RECITALS
A. The Company and Boston Chicken are parties to a Financial Services
Agreement dated as of March 24, 1995, as amended by that First Amendment to
Financial Services Agreement dated as of March 7, 1996 (the "Services
Agreement").
B. The parties mutually desire to terminate the Services Agreement as of
the date hereof.
COVENANTS
In consideration of the foregoing and the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
1. Upon the Effective Date, the Services Agreement shall terminate and be
of no further force or effect and except as provided in Section 3.2 of the
Services Agreement, neither the Company nor Boston Chicken shall have any
further obligation or rights thereunder.
2. This Termination Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
3. This Termination Agreement contains the entire agreement of the parties
hereto with respect to the subject matter hereof and supersedes all prior
understandings and agreements of the parties with respect thereto.
4. This Termination Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Termination
Agreement as of the date first above written.
BOSTON CHICKEN, INC.
By: /s/ Donald J. Bingle
-------------------------
Donald J. Bingle
Vice President
EINSTEIN BROS. BAGELS, INC.
By: /s/ Joel Alam
--------------------------
Title: Vice President
2
<PAGE>
Exhibit 10.14
EINSTEIN BROS. BAGELS, INC.
BOSTON CHICKEN, INC.
AMENDED AND RESTATED
REAL ESTATE SERVICES AGREEMENT
------------------------------
This Amended and Restated Real Estate Services Agreement ("Agreement") is
made as of the 28th day of May, 1996, by and between Einstein Bros. Bagels,
Inc., a Delaware corporation ("EBBI") (formerly Progressive Bagel Concepts,
Inc.), and Boston Chicken, Inc., a Delaware corporation ("BCI").
RECITALS
--------
1. EBBI desires that BCI assist it and its subsidiaries and its and their
franchisees in conducting certain real estate related activities, including site
analysis, lease negotiations, purchase negotiations, zoning and regulatory
approval assistance, and lease maintenance.
2. EBBI and BCI have entered into that certain Amended and Restated
Computer and Communication Systems Services Agreement of even date herewith
relating to, among other things, Real Estate Programs which are designed to
assist EBBI and its subsidiaries and its and their franchisees in conducting
real estate activities.
3. BCI and EBBI entered into that certain Real Estate Services Agreement
dated March 24, 1995. BCI has agreed to amend and restate such agreement
pursuant to which BCI would perform certain real estate services for EBBI and
its subsidiaries and its and their franchisees upon the terms and subject to the
conditions hereinafter provided.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, as well as other good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the parties hereby
agree as follows:
1. Real Estate Services.
--------------------
1.1 Upon the terms and subject to the conditions set forth in this
Agreement, BCI shall provide to EBBI for each retail bagel store location
proposed to be owned, operated, leased, or franchised by EBBI or any subsidiary
of EBBI (each a "Unit") the following real estate services (the "RE Services"):
<PAGE>
(a) advisory services regarding demographic analysis and
cannibalization studies for trade areas relating to proposed and established
Units; and
(b) advisory services regarding other real estate matters.
1.2 The RE Services shall not include any of the following, each of
which is the sole responsibility of EBBI or its respective subsidiaries or its
or their franchisees:
(a) preparation of ADI maps defining trade areas;
(b) initial site selection and screening;
(c) analysis of proposed sites for Units and the demographic,
location, traffic, regulatory, visibility, accessibility, and other relevant
characteristics thereof;
(d) business determinations relating to lease and/or purchase
negotiations;
(e) lease and/or purchase negotiations for proposed Unit Sites;
(f) environmental reports relating to proposed Unit sites;
(g) legal advice; and
(h) deposit and payment coding and compliance.
1.3 EBBI agrees to consider, and to cause each of its subsidiaries and
its or their franchisees to consider, BCI's recommended real estate brokers,
regulatory compliance expediters, and legal advisors for real estate services.
1.4 EBBI agrees to supply BCI all information, materials, data, and
documents necessary or advisable to properly perform the RE Services in such
form, format, or media as BCI may reasonably request, to make available the
officers of EBBI to answer any inquiries in connection therewith, and to
cooperate with BCI in the performance of its duties and to cause each of its
subsidiaries and its or their franchisees to do the same.
2. Fees for RE Services.
--------------------
2.1 In consideration of the RE Services, EBBI agrees to pay a general
real estate advisory fee of $5,000 per Unit, which fee may be increased
cumulatively not more than 10% per fiscal year at the sole discretion of BCI
effective upon written notice thereof. EBBI and its subsidiaries and its and
their franchisees shall also pay BCI's then applicable regular fees for customer
area trade studies, market development plans, and demographic and census
reports, charts, and maps. BCI's current charges for such services are attached
hereto as Exhibit A and are subject to change from time to time in BCI's sole
discretion.
2
<PAGE>
2.2 In addition to the payment of fees as specified in Section 2.1 of
this Agreement, EBBI shall reimburse BCI for all non-ordinary, out-of-pocket
expenses incurred by BCI or its affiliates in connection with the RE Services
rendered by them hereunder, including, but not limited to, travel expenses,
legal fees, fees of experts, audit fees, tax fees, payroll service fees, etc.
All non-ordinary, out-of-pocket expenses in excess of $50,000, however, must be
approved by EBBI prior to incurring such expense. Expenses payable under this
Section 2.2 shall be paid promptly in the manner specified for vendor payments
in the ordinary course of business.
3. Term of Services.
----------------
3.1 The term of this Agreement expire on March 26, 1998, unless the
parties mutually agree to extend such term; provided that either party hereto
may terminate this Agreement during the term upon 180 days' prior written notice
to the other party; and provided further that BCI may terminate this Agreement
without notice and cease rendering the RE Services hereunder 15 days after
notice of any non-payment of the fees and expenses provided for herein when such
fees and expenses are due and payable, unless such non-payment is cured within
such 15 day period.
3.2 Termination of this Agreement shall terminate BCI's obligations to
provide the RE Services. Upon termination of this Agreement, EBBI shall pay to
BCI the fees due BCI in accordance with Section 2.1 hereof for the RE Services
rendered by BCI through the date of termination and reimburse BCI in accordance
with Section 2.2 hereof for expenses incurred by BCI in connection with the RE
Services rendered by BCI through the date of termination. Upon termination of
this Agreement, BCI will reasonably cooperate with EBBI in the archiving and
retrieval of records and transition of services at EBBI's expense.
4. Payment of Amounts Due Hereunder; Liability.
-------------------------------------------
4.1 BCI will calculate and EBBI hereby authorizes BCI to collect
through electronic funds transfer, at the end of each of BCI's regular four-week
accounting periods ("Accounting Period"), the total dollar amount of all fees
and expenses due to BCI hereunder.
4.2 BCI shall not be liable for any cost, damage, expense, or loss of
EBBI, its franchisees, or their owners, partners, shareholders, officers,
members, directors, employees, suppliers, or vendors, or any other person or
entity arising or resulting, directly or indirectly, from (i) the failure of BCI
to perform any of the RE Services for EBBI or its subsidiaries, its or their
franchisees, Units, or employees, hereunder or the misperformance of any such RE
Services, except to the extent such failure to perform or such misperformance is
the result of BCI's willful misconduct or gross negligence, in which event
Company's liability shall not exceed its fee for such RE Services hereunder for
the Accounting Period in question, or (ii) reliance by EBBI or its subsidiaries,
its or their franchisees, Units, or employees on any data or advice BCI may
provide to EBBI or its subsidiaries, its or their franchisees, Units, or
employees pursuant to this Agreement. In no event will BCI be liable for
indirect, incidental, consequential,
3
<PAGE>
special, speculative, exemplary, or punitive damages (including, but not limited
to, loss of revenue or profit).
4.3 BCI MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR
IMPLIED, WITH RESPECT TO THE RE SERVICES PROVIDED HEREUNDER, INCLUDING, BUT NOT
LIMITED TO, THEIR ADEQUACY, QUALITY, PERFORMANCE, MERCHANTABILITY, OR FITNESS
FOR A PARTICULAR PURPOSE.
5. Miscellaneous.
-------------
5.1 In performing the RE Services set forth in this Agreement, BCI
will have neither express nor implied power to execute agreements on behalf of
EBBI, its subsidiaries, its or their franchisees, or their employees, or in any
manner bind EBBI, its subsidiaries, its or their franchisees, or their
employees, as to any matter not within the scope of this Agreement.
5.2 All notices provided for in this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
overnight express or facsimile transmission or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:
If to EBBI:
Einstein Bros. Bagels, Inc.
1526 Cole Blvd.
Suite 200
Golden, CO 80401
If to BCI:
Boston Chicken, Inc.
14103 Denver West Parkway
Golden, CO 80401
Attention: Senior Vice President - Real Estate
Facsimile: (303) 384-5340
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally or by overnight express
courier or facsimile transmission shall be deemed to have been given on the date
it is so delivered, and any notice delivered by registered or certified mail
delivery service shall be deemed to have been duly given three business days
after it is sent to the intended recipient at the address set forth above.
5.3 THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF COLORADO
4
<PAGE>
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE
CONFLICT OF LAW PROVISIONS THEREOF.
5.4 A failure of any party to insist in any instance upon the strict
and punctual performance of any provision of this Agreement shall not constitute
a continuing waiver of such provision. No party shall be deemed to have waived
any rights, power, or privilege under this Agreement or any provisions hereof
unless such waiver shall have been in writing and duly executed by the party to
be charged with such waiver, and such waiver shall be a waiver only with respect
to the specific instance involved and shall in no way impair the rights of the
waiving party or the obligations of the other party or parties in any other
respect or at any other time. If any provision of this Agreement shall be
waived, or be invalid, illegal, or unenforceable, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain binding and in full
force and effect.
5.5 This Agreement may be amended or modified only by a written
instrument signed by each of the parties hereto.
5.6 This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings, either or oral or written, with respect
thereto.
5.7 Nothing contained in this Agreement is intended, nor shall it be
construed, to create any rights in any person not a party to this Agreement.
5.8 This Agreement may not be assigned by EBBI without the prior
written consent of BCI. This Agreement may not be assigned by BCI without the
prior written consent of EBBI, which will not be unreasonably withheld;
provided, that BCI may assign this agreement to any affiliate of BCI without the
prior written consent of EBBI.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
EINSTEIN BROS. BAGELS, INC.
By: /s/ Paul A. Strasen
------------------------
Title: Vice President
---------------------
BOSTON CHICKEN, INC.
By: /s/ Donald J. Bingle
------------------------
Title: Vice President
5
<PAGE>
Exhibit 10.15
EINSTEIN BROS. BAGELS, INC.
BOSTON CHICKEN, INC.
AMENDED AND RESTATED
COMPUTER AND COMMUNICATIONS SYSTEMS SERVICES AGREEMENT
------------------------------------------------------
This Amended and Restated Computer and Communications Systems Services
Agreement ("Agreement") is made and entered into this 28th day of May, 1996, by
and between Einstein Bros. Bagels, Inc., a Delaware corporation ("EBBI")
(formerly Progressive Bagel Concepts, Inc.) and Boston Chicken, Inc., a Delaware
corporation ("BCI").
RECITALS
--------
1. EBBI is in the business of owning, operating, and, directly or
indirectly, franchising retail units ("EBBI Units") involved in the sale of
bagels, pastries, coffees, juices, jams, spreads, and related items.
2. BCI has developed specifications and standards for computer hardware and
software and communications systems useful in the operation of EBBI, EBBI Units,
and EBBI subsidiaries and direct and indirect franchisees.
3. BCI and EBBI entered into that certain Computer and Communications
Systems Services Agreement dated March 24, 1995 and BCI has agreed to amend and
restate such agreement pursuant to which BCI would perform services for EBBI
upon the terms and subject to the conditions hereinafter provided.
COVENANTS
---------
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, as well as other good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the parties hereby
agree as follows.
1. DEFINITIONS.
-----------
For purposes of this Agreement, the terms listed below have the meanings
that follow them.
"AFFILIATE" - An "affiliate" of a person/entity is another person/entity
that directly or indirectly controls, is controlled by, or is under common
control with, such person/entity. For purposes of this definition, "control"
means the power to direct or cause the direction of the management and policies
of an entity by contract or voting power.
<PAGE>
"COMPUTER SYSTEM" - Those brands, types, makes, and/or models of
communications and computer systems or hardware specified or required from time
to time by BCI during the term of this Agreement for use by EBBI, EBBI's
subsidiaries, and its or their franchisees, and by, between, or among EBBI
Units, including, but not limited to:
(1) back office and point of sale systems, data, audio, video, and
voice storage, retrieval, and transmission systems for use at EBBI, EBBI's
subsidiaries, and its or their franchisees, and at EBBI Units, between or
among EBBI Units, and between and among EBBI Units and BCI and/or EBBI or
its subsidiaries and its or their franchisees;
(2) printers; and
(3) archival and back-up systems.
"DATA CENTER AND NETWORK SERVICES" - Day-to-day operations and management
of the data center resources (including hardware, human resources, utilities,
and administrative overhead) necessary to run the Infrastructure Programs (as
defined below) and Support/Control Programs (as defined below) at the BCI
Support Center.
"INFRASTRUCTURE PROGRAMS" - The computer software programs developed by or
for BCI to collect, interface, validate, store, maintain, and/or report data to
and from EBBI, EBBI's subsidiaries, its or their franchisees, and/or EBBI Units.
This may include general utilities to monitor and maintain EBBI's user and
computing environment, including voice and data networks.
"LICENSED PROGRAM" - The retail store-level computer software programs
(other than the Support/Control Programs (as defined below)) developed by or for
BCI and designated during the term of this Agreement by BCI from time to time as
specified or required in connection with utilization of the Computer System,
which may include, without limitation, BCI's required point-of-sale,
bookkeeping, inventory, training, marketing, employee selection, operations and
financial information, collection and retrieval systems (including BCI's
required standard chart of accounts prescribed by BCI from time to time) for use
in connection with the operation of EBBI Units or the businesses of EBBI, its
subsidiaries, and its or their franchisees, including any updates, supplements,
modifications, or enhancements thereto made from time to time, all related
documentation, the tangible media upon which such programs are recorded, and the
database file structure thereof, but excluding any data or databases owned or
compiled by BCI or its Affiliates for use with the Licensed Program or otherwise
or any data generated by the use of the Licensed Program. The Licensed Program
includes, but is not limited to, store-level programs utilized by the EBBI Units
for POS and Cash Management, Customer Feedback Kiosks, Inventory Management,
Order Processing, Employee Feedback, Production Scheduling, Labor Scheduling,
Ideal Food Cost, Store Operations, and Smart Form Reporting.
"SPECIFIED SOFTWARE" - Such software (other than the Licensed Program and
Support/Control Programs), programming, and services which BCI from time to time
specifies or requires for use by EBBI, its subsidiaries, its or their
franchisees, or EBBI Units in connection
2
<PAGE>
with utilization of the Computer System, the Licensed Program and the
Support/Control Programs.
"SUPPORT/CONTROL PROGRAMS" - The computer software programs developed by or
for BCI and designated during the term of this Agreement by BCI from time to
time as specified or required in connection with real estate services and other
real estate functions performed by BCI pursuant to that certain Amended and
Restated Real Estate Services Contract with EBBI of even date herewith or in
connection with support, supervision, reporting, or control of the EBBI Units by
EBBI, its subsidiaries, and its and their franchisees, and in connection with
analysis, tracking, maintenance, feedback, and communication functions related
thereto or to the employees thereof, including, but not limited to, Notes
Databases, Structured Reporting, and related software.
2. COMPUTER SYSTEM AND SPECIFIED SOFTWARE.
--------------------------------------
2.A. ACQUISITION OF COMPUTER SYSTEM AND SPECIFIED SOFTWARE.
-----------------------------------------------------
Within one hundred twenty (120) days after the date of this Agreement, EBBI
shall, and shall cause each of its subsidiaries and its and their franchisees
(promptly upon becoming such) to, (i) acquire the Computer System and acquire
the right to use, for the remainder of the term of this Agreement, the Specified
Software in the manner specified by BCI; (ii) obtain any and all peripheral
equipment and accessories and arrange for any and all support services that may
be necessary to enable the Computer System, the Licensed Program, the
Support/Control Programs, and the Specified Software to operate as specified by
BCI, and (iii) take all other actions (including but not limited to installation
of electrical wiring and cabling, and temperature and humidity controls) that
may be necessary to prepare the location of the Computer System so as to enable
the Computer System, the Licensed Program, the Support/Control Programs, and the
Specified Software to operate as specified by BCI; and (iv) commence using the
Computer System, the Licensed Program, the Support/Control Programs, and the
Specified Software in the manner specified by BCI. EBBI shall be responsible for
all costs associated with the foregoing, including but not limited to
transportation; installation; sales, use, excise and similar taxes; and site
preparation, and BCI shall have no liability to EBBI or to any other party in
connection with any of the foregoing. Notwithstanding the foregoing provisions
of this Section 2.A., in the event any subsidiary of EBBI, and its franchisee,
or EBBI Unit is acquired from one or more third parties as an operating business
and utilizes at the time of acquisition a computer system, POS terminals, or
other components of a computer and communications system other than the Computer
System, compliance with this Section 2.A. shall not be required prior to the
sixth month anniversary of such acquisition or such longer period as the parties
hereto otherwise mutually agree.
2.B. COVENANT TO USE ONLY SPECIFIED SOFTWARE, LICENSED PROGRAM, AND THE
------------------------------------------------------------------
SUPPORT/CONTROL PROGRAMS.
------------------------
EBBI acknowledges that operating non-Specified Software on the Computer
System with the Specified Software and/or the Licensed Program and
Support/Control Programs may cause errors or other interruptions to or problems
with the Specified Software and/or Licensed
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Program. Therefore, EBBI hereby agrees to operate, and to cause its subsidiaries
and its and their franchisees to operate, only Specified Software, the Licensed
Program, and the Support/Control Programs on the Computer System.
2.C. MODIFICATION, ENHANCEMENT, AND REPLACEMENT OF COMPUTER SYSTEM AND
-----------------------------------------------------------------
SPECIFIED SOFTWARE.
------------------
EBBI acknowledges that BCI may, during the term of this Agreement, require
EBBI, its subsidiaries, and its and their franchisees to modify, enhance and/or
replace all or any part of the Computer System and/or the Specified Software at
their expense, and agrees, within one hundred twenty (120) days of receipt of
notice from BCI, to acquire, or acquire the right to use for the remainder of
the term of this Agreement, and to cause its subsidiaries and its or their
franchisees to so acquire, the modified, enhanced, or replacement version of the
Computer System and/or Specified Software specified by BCI and to take any and
all other actions as may be necessary to enable the modified, enhanced, or
replacement Computer System and/or Specified Software, as well as the Licensed
Program and the Support/Control Programs to operate as specified by BCI. Any
such modifications, enhancements, and replacements may require EBBI and its
subsidiaries and its or their franchisees to incur costs to purchase, lease,
and/or license new or modified computer hardware and/or software or other
equipment and to obtain different and/or additional service and support services
during the term of this Agreement. EBBI acknowledges that BCI cannot estimate
the costs of future enhancements, modifications, and replacements to the
Computer System or the Specified Software and that the cost to EBBI and its
subsidiaries and its or their franchisees of obtaining the enhancements,
modifications, and replacements to the Computer System, Licensed Program,
Support/Control Programs, or Specified Software may not be fully amortizable
over the remaining term of this Agreement. Nonetheless, EBBI agrees to incur,
and to cause its subsidiaries and its or their franchisees to incur, such costs
in connection with the Computer System, the Licensed Program, the
Support/Control Programs, and the Specified Software and any enhancements or
modifications thereto and any replacements therefor. Within one hundred twenty
(120) days after EBBI receives notice from BCI, EBBI and its subsidiaries and
its or their franchisees shall obtain and implement any such modifications,
enhancements, or replacements which BCI designates and requires. BCI agrees to
discuss modifications, enhancements, or replacements hereunder which would
require material expenditures by EBBI (outside of the normal course of business)
with EBBI so as to enable EBBI to assess the need therefor and opportunity to
make alternative suggestions or seek renegotiation of this Agreement, provided
that this sentence shall not prevent any modification, enhancement, or
replacement which BCI shall determine is not frivolous and shall not delay any
such modification, enhancement, or replacement more than 30 days from the date
otherwise required by this Section 2.C. EBBI agrees that any modification,
enhancement, or replacement which is substantially similar to that being
required by BCI of its own area developers, subsidiaries, franchisees, or Boston
Chicken/Boston Market stores is not frivolous.
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3. LICENSED PROGRAM AND SUPPORT/CONTROL PROGRAMS.
---------------------------------------------
3.A. GRANT OF LICENSE.
----------------
BCI hereby grants to EBBI and to any of EBBI's subsidiaries or its or their
franchisees similarly agreeing to be bound by the terms and conditions of this
Agreement a nonexclusive, nontransferable, nonassignable license to use the
Licensed Program and the Support/Control Programs subject to the following terms
and conditions:
(1) The Licensed Program and the Support/Control Programs shall be
installed and tested on the Computer System by BCI or its designee. If
EBBI, its subsidiaries, or its or their franchisees do not purchase
the Computer System from BCI, such entity must pay BCI a reasonable
installation and testing fee upon completion of BCI's installation and
testing of the operation of the Licensed Program and the
Support/Control Programs with the Computer System. EBBI acknowledges
and agrees the current installation and testing fee of $3,500.00 per
Computer System is reasonable.
(2) Except with the prior written consent of BCI, the Licensed Program and
the Support/Control Programs shall not be operated by persons other
than EBBI, its subsidiaries, or its or their franchisees and their
respective employees, shall not be operated on equipment other than
the Computer System, shall not be used in conjunction with any other
computer applications program, and shall not be operated at locations
other than EBBI Units and the principal office of EBBI, its
subsidiaries, and its or their franchisees; provided, however, that
with prior notice to BCI, the Licensed Program and the Support/Control
Programs may be operated on equipment other than the Computer System
and at a location other than as required above to the extent required
due to malfunction of the Computer System or other cause beyond the
reasonable control of EBBI, its subsidiaries, and its or their
franchisees, but not for any period longer than seven (7) consecutive
days unless otherwise agreed in writing by BCI.
(3) The Licensed Program and the Support/Control Programs shall be used in
connection with operation of EBBI, its subsidiaries, its and their
franchisees, and the EBBI Units and shall not be used for any other
purpose.
(4) Without limiting the foregoing, EBBI shall not, and shall not allow
its subsidiaries, its or their franchisees, or their respective
employees or agents to: (a) sell, assign, lease, sublicense, pledge,
grant a security interest with respect to, market, or commercially
exploit, in any way, the Licensed Program or Support/Control Programs
or any component thereof, or any data generated by the use of the
Licensed Program or Support/Control Programs or any component thereof;
(b) disclose or grant access to the Licensed Program or
Support/Control Programs, or any data generated by the use of the
Licensed Program or Support/Control Programs or any component thereof,
to any third party other than
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one to whom BCI has consented in writing and who has agreed in writing
with BCI to keep the Licensed Program or Support/Control Programs
confidential; (c) copy or reproduce the Licensed Program or
Support/Control Programs, or any data generated by the use thereof or
any component of the Licensed Program or Support/Control Programs, in
any manner, except to the extent necessary for normal back-up and
operating thereof; or (d) alter, modify, or adapt the Licensed Program
or Support/Control Programs, any documentation relating thereto, or
any component of the Licensed Program or Support/Control Programs,
including, but not limited to, translating, decompiling, reverse
engineering, or disassembling the Licensed Program or Support/Control
Programs.
(5) EBBI acknowledges and agrees that the Licensed Program and
Support/Control Programs and any data generated by the use of the
Licensed Program and Support/Control Programs is the valuable,
proprietary property and trade secret of BCI and/or its Affiliates,
and EBBI agrees to use, and to cause its subsidiaries and its or their
franchisees and their respective employees or agents to use, the
utmost care to safeguard the Licensed Program and Support/Control
Programs and any data generated by the use of the Licensed Program and
Support/Control Programs and to maintain the copyright protection and
the secrecy and confidentiality thereof. EBBI shall not, and shall
cause its subsidiaries and its or their franchisees to not, undertake
to patent, copyright, or otherwise assert proprietary rights to the
Licensed Program and Support/Control Programs and any data generated
by the use of the Licensed Program and Support/Control Programs or any
portion thereof. EBBI recognizes that all or part of the Licensed
Program and Support/Control Programs and any data generated by the use
of the Licensed Program and Support/Control Programs may be
copyrighted and agrees that this shall not be construed as causing the
copyrighted material to be public information. EBBI will ensure, and
cause its subsidiaries and its and their franchisees to ensure, that
all copies of the Licensed Program and Support/Control Programs and
any data generated by the use of the Licensed Program and
Support/Control Programs or any components of the Licensed Program and
Support/Control Programs in its possession contain an appropriate
copyright notice under the Universal Copyright Convention or other
notice of proprietary rights specified by BCI.
(6) EBBI shall promptly disclose, and cause its subsidiaries and its and
their franchisees to disclose, to BCI all ideas and suggestions for
modifications or enhancements of the Licensed Program and
Support/Control Programs conceived or developed by any of them, and
BCI and its Affiliates shall have the right to use and license such
ideas and suggestions. All modifications and enhancements made to the
Licensed Program and Support/Control Programs together with the
copyright therein shall be the property of BCI, without regard to the
source of the modification or enhancement, and EBBI hereby assigns,
and shall cause each of its subsidiaries and its or their franchisees
to assign, all of its right, title, and interest in any ideas,
modifications, and enhancements to BCI. EBBI agrees to
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execute, and to cause each of its subsidiaries and its or their
franchisees to execute, any document, in recordable form, which BCI
determines is necessary to reflect such ownership.
(7) BCI shall have the right at all times to access the Licensed Program
and Support/Control Programs and to retrieve, analyze, and use all
data in the files for the Licensed Program and Support/Control
Programs.
(8) BCI shall provide to EBBI and all of its subsidiaries and its or their
franchisees all upgrades, modifications, improvements, enhancements,
extensions, and other changes to the Licensed Program and
Support/Control Programs approved by BCI for use in connection with
the operation of EBBI Units, and EBBI and all of its subsidiaries and
its or their franchisees shall promptly implement their use. BCI may
charge fees in addition to those set forth in Section 3.B hereof.
(9) Upon expiration or termination of this Agreement, EBBI shall allow
BCI's employees or agents to remove the Licensed Program and
Support/Control Programs from the Computer System, shall immediately
return the Licensed Program and Support/Control Programs, each
component thereof, and any data generated by the use of the Licensed
Program and Support/Control Programs to BCI, and shall immediately
destroy any and all back-up or other copies of the Licensed Program
and Support/Control Programs or parts thereof, documentation for the
Licensed Program and Support/Control Programs, and any data generated
by the use of the Licensed Program and Support/Control Programs, and
other materials or information which relate to or reveal the Licensed
Program and Support/Control Programs and its operation and any data
generated by the use of the Licensed Program and Support/Control
Programs and shall cause each of its subsidiaries and its or the
franchisees to do the same.
3.B. LICENSED PROGRAM AND SUPPORT/ CONTROL PROGRAMS FEES.
---------------------------------------------------
EBBI agrees to pay, and to cause each of its subsidiaries and its or their
franchisees to pay, to BCI upon installation of the Licensed Program on its
Computer System or the Computer System of any EBBI Unit, a Licensed Program fee
(the "Licensed Program Fee") in the amount of Fifteen Thousand Dollars
($15,000.00). The Licensed Program Fee shall be fully earned by BCI upon
installation of the Licensed Program on the Computer System and is non-
refundable in whole or in part.
EBBI agrees to pay, and to cause each of its subsidiaries and its or their
franchisees to pay, to BCI upon installation of the Real Estate Programs (as
defined below) and annually thereafter software licensing fees as follows:
(a) an annual fee of $78,000 for that portion of the Support/Control
Programs comprised of the Real Estate Workbench and ancillary reporting software
("REW Software"), Property Administration software (Property Administration
Software"), Real Estate Log ("REL
7
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Software"), and Site Pack and other real estate software ("SPO Software")
(collectively, the "Real Estate Programs")
(b) an annual fee of $78,000 for the following Lotus Notes Database
templates:
- Mail
- Project Office
- Competitive Analysis
- Customer Response
- Purchase Order
- S.E.T. Request
- Report Distribution System
- Accounting Manual
- People Directory
- Store Directory
- Personnel
- QSC History
- Employee Feedback
(c) an annual fee of $78,000 for Structured Report Software for Monitoring
and Distributions, Summary Financial, Customer Feedback, Employee Feedback, and
Product Information.
Such licensing fee shall be fully earned by BCI upon payment and is non-
refundable in whole or in part.
3.C. DATA CENTER AND NETWORK SERVICE FEES.
------------------------------------
EBBI agrees to pay to BCI for ongoing Data Center and Network Service
Operations and support of the Infrastructure Programs an annual fee of $750,000
for each of BCI's 1996, 1997, and 1998 fiscal years, .25% of the system-wide
revenue, net of coupons and discounts, of EBBI, its subsidiaries, and its and
their franchisees (excluding the revenue derived from the Noah's New York Bagel
stores) for BCI's 1999 fiscal year, and .25% of the system-wide revenue, net of
coupons and discounts, of EBBI, its subsidiaries, and its and their franchisees
(excluding the revenue derived from the Noah's New York Bagels stores) for BCI's
2000 fiscal year.
3.D. SOFTWARE SUPPORT SERVICE.
------------------------
During the term of this Agreement and, provided that EBBI and each of its
subsidiaries and its and their franchisees is in compliance with the terms of
this Agreement, BCI shall provide such support services as BCI deems reasonably
necessary to cause the Licensed Program and Support/Control Programs to perform
on the Computer System in accordance with the standards for the Licensed Program
and Support/Control Programs as specified from time to time by BCI. Such support
services shall not extend to (i) error corrections, operational support, and
assistance resulting from impermissibly operating non-Specified Software on the
Computer System in breach of this Agreement, (ii) software training, or (iii)
hardware maintenance. Such support
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service shall include non-procedural Help Desk calls. All procedural Help Desk
calls will be handled by BCI for a $25 per call fee.
3.E. SOFTWARE SUPPORT SERVICE FEES.
-----------------------------
For the software support service provided by BCI, EBBI agrees to pay, and
shall cause each of its subsidiaries and its or their franchisees to pay, to BCI
a software support service fee ("Licensed Program Support Fee") in the amount of
Four Hundred Dollars ($400.00) for each of BCI's four-week Accounting Periods
("Accounting Period") for each installed copy of the Licensed Program, whether
at its principal office, the offices of its subsidiaries or its or their
franchisees or at EBBI Units owned directly by it. This support and this fee
shall not include modifications, enhancements, and replacements within the
meaning of Section 3.F hereof.
For the software support service relating to the Support/Control Programs
provided by BCI, no additional fee will be charged. In the event EBBI, its
subsidiaries, or its or their franchisees request, and BCI, in its sole
discretion, determines to perform, other support services (e.g. software
training, hardware maintenance) not provided for in Sections 3.C, 3.D, or 3.F
hereof, BCI will charge the requesting entity $75 per hour, plus expenses, for
such support services.
EBBI and its subsidiaries and its and their franchisees shall also pay
BCI's then applicable regular fees for customer area trade studies, market
development plans, and demographic and census reports, charts, and maps. All
such fees referenced herein shall be payable in advance for each period on or
before the eighth (8th) day prior to commencement of such period commencing on
the installation of the Licensed Program or the Support/Control Programs or
relevant portion thereof on the Computer System. The Licensed Program Support
Fee and Support/Control Fees may be increased by BCI from time to time, at its
sole option, upon written notice to EBBI, subject to any limitation set forth in
this Agreement.
3.F. MODIFICATION, ENHANCEMENT, AND REPLACEMENT OF LICENSED PROGRAM AND
------------------------------------------------------------------
SUPPORT/ CONTROL PROGRAMS.
-------------------------
EBBI acknowledges that BCI may, during the term of this Agreement, require
EBBI and its subsidiaries and its or their franchisees to modify, enhance and/or
replace all or any part of the Licensed Program and Support/Control Programs at
their expense, and shall, and shall cause each of its subsidiaries and its or
their franchisees, within one hundred twenty (120) days of receipt of notice
from BCI, to acquire, or acquire the right to use for the remainder of the term
of this Agreement, the modified, enhanced or replacement version of the Licensed
Program and Support/Control Programs specified by BCI and to take any and all
other actions as may be necessary to enable the modified, enhanced, or
replacement Licensed Program and Support/Control Programs to operate as
specified by BCI. Any such modifications, enhancements, and replacements may
require additional costs to purchase, lease, and/or license new or modified
computer hardware and/or software or other equipment and to obtain different
and/or additional service and support services during the term of this
Agreement. EBBI
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acknowledges that BCI cannot estimate the costs of future enhancements,
modifications, and replacements to the Licensed Program and Support/Control
Programs, and that the cost of obtaining the enhancements, modifications, and
replacements to the Licensed Program and Support/Control Programs may not be
fully amortizable over the remaining term of the Agreement. Nonetheless, EBBI
agrees to incur, and to cause its subsidiaries and its or their franchisees to
incur, such costs in connection with the Licensed Program and Support/Control
Programs and any enhancements or modifications thereto and any replacements
therefor. Within one hundred twenty (120) days after EBBI receives notice from
BCI, EBBI shall obtain and implement, and cause its subsidiaries and its or
their franchisees, to obtain and implement, any such modifications,
enhancements, or replacements which BCI designates and requires. In addition to
such modifications and enhancements to the Licensed Program and Support/Control
Programs as BCI may determine from time to time to require, EBBI and its
subsidiaries and its and their franchisees may request BCI to perform additional
modifications and enhancements. In the event that BCI agrees to perform or
supply such optional requested modifications or enhancements, the requesting
entity agrees to pay BCI such sum as may be agreed or, in the event no such
payment agreement is reached, BCI's aggregate costs (including allocation of
overhead, plus 30%, with an annual maintenance fee of 5% of such amount, and to
otherwise abide by this Agreement as if such modification or enhancement were
part of the software licensed hereby. Any such enhancement or modification shall
be the property of BCI.
3.G. WARRANTIES AND LIMITATION OF LIABILITY.
--------------------------------------
BCI represents and warrants to EBBI that: (1) BCI has all rights, titles,
licenses, and authorizations to license the Licensed Program and Support/Control
Programs to EBBI, subject only to nonexclusive licenses granted to others; and
(2) the Licensed Program and Support/Control Programs do not, and as a result of
any enhancements, improvements, or modifications provided by BCI will not, to
the best of BCI's knowledge, infringe upon any United States patent, copyright,
or other proprietary right of any third party. In the event use of the Licensed
Program or Support/Control Programs or any portion thereof as provided by BCI is
enjoined as a result of a claim by a third party of patent or copyright
infringement or violation of proprietary rights, BCI shall, in its sole
discretion, either (i) procure for EBBI and its subsidiaries and its and their
franchisees utilizing such allegedly infringing software the right to continue
use of the Licensed Program or Support/Control Programs or any portion thereof
as contemplated hereunder, or (ii) replace the Licensed Program or
Support/Control Programs or any portion thereof or modify it such that there is
no infringement of the third party's rights; and such action by BCI shall be the
sole and exclusive remedy against BCI in such event by EBBI and its subsidiaries
and its and their franchisees.
BCI does not represent or warrant, and expressly disclaims any warranty
that the Licensed Program or Support/Control Programs or Data Center and Network
Services (or Infrastructure Programs) or any portion thereof is error-free or
that the operation and use of the Licensed Program or Support/Control Programs
or Data Center and Network Services (or Infrastructure Programs) or any portion
thereof will be uninterrupted or error-free. BCI shall have no obligation or
liability for any expense or loss incurred arising from use of the Licensed
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Program or Support/Control Programs or Data Center and Network Services (or
Infrastructure Programs) or any portion thereof in conjunction with any other
computer program.
EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTIES, BCI MAKES NO WARRANTIES,
EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THE LICENSED PROGRAM,
SUPPORT/CONTROL PROGRAMS, DATA CENTER AND NETWORK SERVICES (OR INFRASTRUCTURE
PROGRAMS), SUPPORT SERVICES, PROGRAM DOCUMENTATION THEREFOR, OR ANY OTHER
MATERIAL FURNISHED HEREUNDER, OR ANY COMPONENT THEREOF AND THERE ARE EXPRESSLY
EXCLUDED ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
WITH RESPECT THERETO.
4. AGREEMENT TO BE BOUND BY THE TERMS OF SUBCOMPONENT
LICENSES AND THIRD-PARTY LICENSES.
---------------------------------
EBBI acknowledges that the Licensed Program and Support/Control Programs
contain third-party sub-components which BCI has the authority to license to
EBBI, its subsidiaries, and its and their franchisees as part of the Licensed
Program and Support/Control Programs pursuant to and in accordance with software
license agreements with such third-party vendors (collectively, the
"Subcomponent Licenses"). In addition, EBBI acknowledges that acquisitions by
EBBI, its subsidiaries, and its and their franchisees of all or portions of the
Computer System and the Specified Software from or through BCI are governed by
license or other agreements by and between third-party vendors and BCI, which
agreements specifically permit BCI to so sell and/or sublicense all or portions
of the Computer System and the Specified Software to EBBI, its subsidiaries, and
its or their franchisees or specifically require EBBI, its subsidiaries, and its
and their franchisees to agree to be bound by the terms thereof (either type of
license hereinafter referred to as the "Third Party Licenses"). EBBI therefore
hereby agrees, and agrees to cause its subsidiaries and its and their
franchisees, to be bound by the terms of each Subcomponent License and, to the
extent EBBI, its subsidiaries, and its and their franchisees purchases all or
portions of the Specified Software or the Computer System from or through BCI,
each relevant Third Party License, in each case as if EBBI, its subsidiaries,
and its and their franchisees was a party thereto, and agrees that the vendors
and licensors of all or portions of the Specified Software and the Computer
System and the licensors of all or portions of the Licensed Program and
Support/Control Programs (collectively, the "Vendors") are third-party
beneficiaries of this Agreement with full rights to enforce this Agreement as it
pertains to the purchased items and the Licensed Program and Support/Control
Programs. EBBI further agrees to indemnify and hold harmless BCI and each of the
Vendors from and against all costs, expenses, and damages arising out of or
based upon any breach or claim of a breach of this Agreement, the Third Party
Licenses, or Subcomponent Licenses by EBBI, its subsidiaries, and its and their
franchisees, or their respective directors, officers, employees, agents and
owners.
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5. COPYRIGHTS.
----------
5.A. OWNERSHIP OF COPYRIGHTS.
-----------------------
EBBI and BCI acknowledge and agree that (1) BCI may hereby authorize EBBI,
its subsidiaries, and its and their franchisees to use certain copyrighted or
copyrightable works (the "Copyrighted Works"), including the Licensed Program
and Support/Control Programs, (2) the Copyrighted Works are the valuable
property of BCI or its Affiliates, and (3) the rights of EBBI, its subsidiaries,
and its and their franchisees to use the Copyrighted Works are granted solely on
the condition that EBBI, its subsidiaries, and its and their franchisees comply
with the terms of this Section 5. EBBI acknowledges and agrees that BCI owns or
is the licensee of the owner of the Copyrighted Works and will further create,
acquire, or obtain licenses for certain copyrights in various works of
authorship used in connection with the operation of the Licensed Program and
Support/Control Programs, including, but not limited to, all categories of works
eligible for protection under the United States copyright law, all of which
shall be deemed to be Copyrighted Works under this Agreement. Such Copyrighted
Works include, but are not limited to, the manuals and other materials and
information provided by BCI for use in the operation of the Licensed Program and
Support/Control Programs. BCI intends that all works of authorship related to
the Licensed Program and Support/Control Programs which are created in the
future will be owned by it or its Affiliates.
5.B. LIMITATION ON USE OF COPYRIGHTS.
-------------------------------
EBBI acknowledges that the right to use the Copyrighted Works pursuant to
this Agreement is limited to the use of such Copyrighted Works during the term
of this Agreement pursuant to and in compliance with this Agreement and all
applicable standards, specifications, and operating procedures prescribed by BCI
from time to time during the term of this Agreement, and is derived solely from
this Agreement. EBBI shall ensure, and shall cause its subsidiaries and its and
their franchisees to ensure, that all copies of Copyrighted Works used hereunder
shall bear an appropriate copyright notice under the Universal Copyright
Convention or other copyright laws prescribed by BCI specifying that BCI or an
Affiliate of BCI is the owner of the copyright. Any unauthorized use,
adaptation, publication, reproduction, preparation of derivative works,
distribution of copies (whether by sale or other transfer of ownership, or by
rental, lease, or lending), public performance of such works, or attempts to
recreate all or a portion of such Copyrighted Works shall constitute a breach of
this Agreement and an infringement of the rights of BCI in and to the
Copyrighted Works. EBBI acknowledges that this Agreement does not confer any
interest in the Copyrighted Works upon EBBI or its subsidiaries or its or their
franchisees, other than the right to use the Copyrighted Works in compliance
with this Agreement. If BCI authorizes EBBI or its subsidiaries or its or their
franchisees to prepare any adaptation, translation, or work derived from the
Copyrighted Works, or if EBBI or its subsidiaries or its or their franchisees
prepares any Copyrighted Work such as menus, advertisements, posters, or
promotional material, EBBI hereby agrees that such adaptation, translation,
derivative work, or Copyrighted Work shall be the property of BCI and EBBI
hereby assigns, and shall cause its subsidiaries and its and their franchisees
to assign, all its right, title, and interest therein to BCI. EBBI agrees to
execute, and to cause its subsidiaries and its and their
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franchisees to execute, any documents, in recordable form, which BCI determines
are necessary to reflect such ownership. All such adaptations, translations,
derivative works, and Copyrighted Works to BCI for approval prior to use.
5.C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
----------------------------------------
EBBI shall immediately notify BCI of any actual or apparent infringement of
or challenge to any of the Copyrighted Works, or claim by any person of any
rights in the Copyrighted Works. EBBI shall not communicate, and shall cause
each of its subsidiaries and its and their franchisees not to communicate, with
any person other than BCI and its counsel in connection with any such
infringement, challenge, or claims. BCI shall have the sole discretion to take
such action as it deems appropriate in connection with the foregoing, and the
right to control exclusively any settlement, litigation, arbitration, or
administrative proceeding arising out of any such alleged infringement,
challenge, or claim or otherwise relating to the Copyrighted Works. EBBI agrees
to execute, and to cause each of its subsidiaries and its and their franchisees
to execute, any and all instruments and documents, render such assistance, and
do such acts and things as may, in the opinion of BCI's counsel, be necessary or
advisable to protect and maintain the interests of BCI in any litigation or
other proceeding or to otherwise protect and maintain the interests of BCI in
the Copyrighted Works. BCI will reimburse EBBI for the reasonable out-of-pocket
expenses incurred and paid by EBBI in complying with the requirements imposed by
this Section 5.C.
5.D. DISCONTINUANCE OF USE.
---------------------
If it becomes advisable at any time in BCI's sole judgment for EBBI and/or
its subsidiaries and its and their franchisees to modify or discontinue use of
any of the Copyrighted Works and/or for EBBI and/or its subsidiaries and its and
their franchisees to use one or more additional or substitute copyrighted or
copyrightable items, EBBI agrees to immediately comply, and to cause its
subsidiaries and its and their franchisees to immediately comply, with BCI's
directions to modify or otherwise discontinue the use of the copyrighted
materials and/or to use any substitute materials specified by BCI. Neither BCI
nor its Affiliates shall have any obligation to reimburse EBBI and/or its
subsidiaries and its and their franchisees for any expenditures made by EBBI
and/or its subsidiaries and its and their franchisees to modify or discontinue
the use of any Copyrighted Work or to adopt additional or substitute copyrighted
or copyrightable items.
6. CONFIDENTIALITY.
---------------
EBBI acknowledges and agrees that the Licensed Program, Support/Control
Programs, and Infrastructure Programs and all additions, modifications, and
enhancements thereof and thereto, and all data generated from use thereof,
including but not limited to the logic, structure, and operation of the data
base file structures containing such data, and all additions, modifications, and
enhancements thereof and thereto shall be deemed to be "Confidential
Information" as defined in the Confidentiality Agreement executed by it of even
date herewith and is therefore governed by and subject to all of the terms,
conditions, and restrictions of such
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Confidentiality Agreement. EBBI will cause each of its subsidiaries and its and
their franchisees to execute BCI's then currently applicable form of
Confidentiality Agreement no later than installation of the Licensed Program or
any Support/Control Program at any office or EBBI Unit owned, operated, or
managed by such entity.
7. TERM.
----
The term of this Agreement shall expire on March 26, 2000, unless the
parties mutually agree to extend such term; provided that either party hereto
may terminate this Agreement during the term upon one year's prior written
notice to the other party; and provided further that BCI may terminate this
Agreement without notice and cease rendering the services hereunder 15 days
after notice of any non-payment of the fees and expenses provided for herein
when such fees and expenses are due and payable, unless such non-payment is
cured within such 15 day period.
Termination of this Agreement shall terminate licenses granted hereby and
BCI's obligations to provide services hereunder. Upon termination of this
Agreement, EBBI shall pay to BCI the fees due BCI through the date of
termination and reimburse BCI for expenses incurred by BCI in connection with
the services rendered by BCI through the date of termination.
8. TERMINATION; BREACH.
-------------------
In addition to termination of this Agreement as provided in Section 7
hereof, BCI may terminate this Agreement, effective upon delivery of notice of
termination to EBBI, if (1) EBBI or any of its subsidiaries or its or their
franchisees breaches any provision of this Agreement; or (2) BCI has the right
to terminate its Secured Loan Agreement dated as of March 24, 1995, as amended,
with EBBI pursuant to the terms thereof. Upon termination of this Agreement, BCI
will reasonably cooperate with EBBI in archiving and retrieval of records and
transition of services at EBBI's expense, provided that this sentence shall not
require BCI to license EBBI any software.
In addition, in the event that BCI terminates this Agreement, BCI will also
have the right to terminate the Real Estate Services and Accounting and
Administrative Services Agreement and any similar service agreements with EBBI
and its subsidiaries and its or their franchisees, in accordance with the terms
and provisions thereof.
9. ASSIGNMENT.
----------
This Agreement and the rights and obligations arising hereunder may not be
assigned by EBBI except that its subsidiaries and its and their franchisees may
utilize the Licensed Program and Support/Control Programs upon agreeing to be
bound by the terms hereof applicable to EBBI, provided EBBI remains primarily
liable for their performance and that subsidiaries and franchisees may not
themselves avail themselves of this exception for their subsidiaries or sub-
franchisees. This Agreement is fully assignable by BCI and shall inure to the
benefit of
14
<PAGE>
any assignee or other successor to the interests of BCI therein.
10. SEVERABILITY.
------------
If any provision of this Agreement is declared or made invalid or
unenforceable by judicial action, legislation, or other government action, BCI
may, if it believes in its sole discretion that the continuation of this
Agreement would not be in its best interests, terminate this Agreement effective
upon sixty (60) days' written notice to EBBI. If BCI does not elect to
terminate this Agreement as aforesaid, all provisions of this Agreement shall be
deemed severable and this Agreement shall be interpreted and enforced as if all
completely invalid or unenforceable provisions were not contained herein and
partially valid and enforceable provisions shall be enforced to the extent valid
and enforceable. If any applicable and binding law or rule of any jurisdiction
requires a greater prior notice of the termination of this Agreement or the
taking of some other action not required hereunder, or if under any applicable
and binding law or rule of any jurisdiction, any provision of this Agreement or
any specification, standard, or operating procedure prescribed by BCI is invalid
or unenforceable, the prior notice and/or other action required by such law or
rule shall be substituted for the comparable provisions hereof, and BCI shall
have the right, in its sole discretion, to modify such invalid or unenforceable
provision, specification, standard, or operating procedure to the extent
required to be valid and enforceable. Such modifications to this Agreement shall
be effective only in such jurisdiction and this Agreement shall be enforced as
originally made and entered into in all other jurisdictions.
11. NO WAIVER OF DEFAULT.
--------------------
Either party's failure at any time to require strict performance by the
other party of any of the provisions hereof shall not waive or diminish the
right thereafter to demand strict compliance therewith or with any other
provision. Waiver of any specific default shall not waive any other default.
12. INJUNCTIVE RELIEF.
-----------------
EBBI acknowledges that BCI will be irreparably harmed by any breach hereof,
that monetary damages would be inadequate, and that BCI shall have the right to
have an injunction or other equitable remedies imposed in relief of, or to
prevent or restrain, such breach. EBBI agrees that BCI will not be required to
post a bond to obtain any injunctive relief and that the only remedy if an
injunction is entered against EBBI will be the dissolution of that injunction,
if warranted, upon due hearing (all claims for damages by reason of the wrongful
issuance of such injunction being expressly waived hereby). EBBI agrees that
BCI shall also be entitled to any and all other relief available under law or
equity for such breach.
13. RIGHTS OF PARTIES ARE CUMULATIVE.
--------------------------------
The rights of BCI and EBBI hereunder are cumulative and no exercise or
enforcement of any right or remedy hereunder shall preclude the exercise or
enforcement of any other right or remedy hereunder or to which BCI or EBBI is
entitled by law.
14. COSTS AND LEGAL FEES.
--------------------
EBBI agrees to pay for costs and legal fees incurred by BCI in connection
with this Agreement and enforcement thereof.
15. RELATIONSHIP OF PARTIES.
-----------------------
This Agreement does not create a fiduciary relationship between the parties
hereto. BCI and EBBI are and shall be independent contractors, and nothing in
this Agreement is intended to make either party a general or special agent,
joint venturer, partner, or employee of the other for any purpose.
16. GOVERNING LAW.
-------------
This agreement and the relationship between the parties hereto will be
governed by and construed in accordance with the internal laws of the State of
Colorado, except that such state's choice of law and conflicts of law rules
shall not apply and any franchise registration, disclosure, relationship, or
similar statute which may be adopted by the State of Colorado shall not apply
unless its jurisdictional requirements are met independently without reference
to this Section 16.
15
<PAGE>
17. JURISDICTION.
------------
EBBI SHALL (AND SHALL CAUSE EACH OF ITS SUBSIDIARIES AND ITS AND THEIR
FRANCHISEES TO), AND BCI MAY, AT ITS OPTION, INSTITUTE ANY ACTION ARISING OUT OF
OR RELATING TO THIS AGREEMENT IN ANY STATE COURT OF GENERAL JURISDICTION IN
JEFFERSON COUNTY, COLORADO, OR THE UNITED STATES FEDERAL DISTRICT COURT FOR THE
DISTRICT OF COLORADO, OR THE STATE COURT OF GENERAL JURISDICTION OR UNITED
STATES FEDERAL DISTRICT COURT NEAREST TO BCI'S EXECUTIVE OFFICE AT THE TIME SUCH
ACTION IS FILED. EBBI IRREVOCABLY SUBMITS (AND SHALL CAUSE EACH OF ITS
SUBSIDIARIES AND ITS AND THEIR FRANCHISEES TO IRREVOCABLY SUBMIT) TO THE
JURISDICTION OF ANY SUCH COURT AND WAIVES ANY OBJECTION IT MAY HAVE TO EITHER
THE JURISDICTION OR VENUE OF ANY SUCH COURT.
18. LIMITATION OF LIABILITY.
-----------------------
IN NO EVENT SHALL BCI BE LIABLE FOR, NOR SHALL EBBI SEEK (OR ALLOW ANY OF
ITS SUBSIDIARIES OR ITS OR THEIR FRANCHISEES TO SEEK), SPECIAL, INDIRECT,
INCIDENTAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES EVEN IF BCI HAS BEEN
ADVISED OF THE POSSIBILITY THEREOF, OR FOR ANY LOST PROFITS OR ANY CLAIM AGAINST
EBBI BY ANY OTHER PARTY. BCI'S LIABILITY HEREUNDER FOR DAMAGES SHALL IN NO EVENT
EXCEED THE TOTAL AMOUNT PAID BY EBBI FOR LICENSED PROGRAM AND REAL ESTATE
SUPPORT FEES DURING THE THREE ACCOUNTING PERIODS PRECEDING THE EVENT GIVING RISE
TO THE CLAIM FOR DAMAGES. BCI SHALL NOT BE LIABLE FOR ANY FAILURE TO PROVIDE
ANY SERVICES REQUIRED HEREUNDER IF SUCH FAILURE IS DUE TO ANY CAUSE BEYOND ITS
REASONABLE CONTROL.
19. WAIVER OF JURY TRIAL.
--------------------
BCI AND EBBI HEREBY IRREVOCABLY WAIVE TRIAL BY JURY ON ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY EITHER OF
THEM.
20. BINDING EFFECT.
--------------
This Agreement is binding upon the parties hereto and their respective
executors, administrators, heirs, assigns, and successors in interest, and shall
not be modified, except by written agreement signed by both EBBI and BCI.
21. CONSTRUCTION.
------------
This Agreement constitutes a separate license to use the Licensed Program
and Real Estate Programs and all obligations hereunder are in addition to and
cumulative with the obligations of EBBI under all other contractual relations
with BCI. Except as otherwise provided herein, nothing in this Agreement is
intended, nor shall be deemed, to confer any rights or remedies upon any person
or legal entity not a party hereto. The headings of the several sections and
paragraphs hereof are for convenience only and do not define, limit, or construe
the contents of such sections or paragraphs. Terms used in this Agreement may
be applicable to one or more persons or entities as the case may be, and the
singular usage includes the plural and the masculine and neuter usages include
each other and the feminine. If two or more persons are at any time obligated
to BCI hereunder, whether or not as partners or joint venturers, their
obligations and liabilities to BCI shall be joint and several.
22. NOTICES.
-------
All notices permitted or required to be delivered by the provisions of this
Agreement shall be deemed so delivered at the time delivered by hand, one (1)
business day after transmission by facsimile with proof of receipt, one (1)
business day after being placed in the hands of a commercial courier service for
overnight delivery, or three (3) business days after placement in the United
States Mail by Registered or Certified Mail, Return Receipt Requested, postage
prepaid and addressed to BCI at 14103 Denver West Parkway, P.O. Box 4086,
Golden, Colorado 80401, to the attention of the President, or at its most
current principal business address of which EBBI has been notified, or to EBBI
at its most current principal business address of which BCI has been notified,
as applicable. All payments required by this Agreement shall be directed to BCI
at the above address, or to such other persons and places as BCI may direct from
time to time. Any required payment not actually received by BCI during regular
business hours on the date due shall be deemed delinquent.
BOSTON CHICKEN, INC. EINSTEIN BROS. BAGELS, INC.
By: /s/ Donald J. Bingle By: /s/ Paul A. Strasen
--------------------------- ---------------------------
Name: Donald J. Bingle Name: Paul A. Strasen
------------------------- -------------------------
Title: Vice President Title: Vice President
------------------------ ------------------------
16
<PAGE>
EXHIBIT 10.16
PROGRESSIVE BAGEL CONCEPTS, INC.
BOSTON CHICKEN, INC.
ASSIGNMENT AND REIMBURSEMENT AGREEMENT
This Assignment Reimbursement Agreement (the "Agreement") is made and entered
into this 24th day of March, 1995 by and between Progressive Bagel Concepts,
Inc., a Delaware corporation ("PBCI"), and Boston Chicken, Inc., a Delaware
corporation ("BCI")
WHEREAS, BCI has certain rights in certain processes, methods, formulae,
information, inventions, know-how, trade secrets, trademarks, service marks,
copyrights, logos, slogans, and trade names used in, or relating to, the
development, manufacture and/or sale of bagels and bagel-related products (the
"Bagel Rights"); and
WHEREAS, BCI has, prior to the date hereof, entered into certain
agreements, contracts and commitments and incurred certain expenses (a) in
connection with its research concerning the development, manufacture, and sale
of bagels and bagel-related products and (b) otherwise in connection with the
bagel business (the "Bagel Contracts"); and
WHEREAS, PBCI desires to acquire whatever right, title, and interest in,
to and under the Bagel Rights and Bagel Contracts that BCI currently possesses;
and
WHEREAS, BCI officers, employees, and consultants have expended time and
energy relating to the Bagel Rights and the Bagel Contracts and to the formation
and structuring of PBCI and its relationships with others, its acquisition
targets, and BCI, which efforts have benefited and may continue to benefit PBCI;
and
WHEREAS, certain BCI employees may go to work for PBCI and PBCI desires
to compensate BCI for the training, benefits, and replacement costs associated
with such employee transitions; and
WHEREAS, BCI has agreed to assign to PBCI all of its rights in and to
the Bagel Contracts and Bagel Rights, and PBCI has agreed to reimburse BCI for
the costs and expenses incurred by BCI through the date hereof in the
development and negotiation thereof, as well as in connection with the formation
and structuring of PBCI and its relationships with others and in connection with
transferring employees, subject to the terms and conditions of this Agreement;
<PAGE>
NOW, THEREFORE, the parties agree as follows:
1. Assignment of Bagel Rights and Bagel Contracts. BCI hereby assigns,
transfers, conveys, and delivers to PBCI all of its right, title, and interest
in and to the Bagel Rights and Bagel Contracts as they exist on the date hereof.
2. Reimbursement of Expenses; Adjustment Amount. Coincident with the execution
of this Agreement, PBCI shall pay to or for the account of BCI, by wire
transfer, $701,847.51 which amount represents the costs and expenses paid by BCI
in connection with the development and creation of PBCI and certain of its
relationships, the development and/or acquisition of the Bagel Rights and the
negotiation of the Bagel Contracts through February 19, 1995, and costs
associated with transferring employees. Schedule 1 hereto sets forth the
calculation of such amount. In addition, PBCI agrees to pay to or for the
account of BCI, in installments from time to time as determined, an amount equal
to the costs and expenses paid or incurred by BCI in connection with the
development and creation of PBCI and certain of its relationships, the
development and/or acquisition of the Bagel Rights and the negotiation of the
Bagel Contracts from and including February 19, 1995 through the date hereof,
and costs associated with transferring employees from the employ of BCI to the
employ of PBCI, all in accordance with BCI's standard chart of accounts and
generally accepted accounting principles (the "Adjustment Amount").
3. Assumed Liabilities. PBCI shall also assume and be responsible for, and
agrees to pay, discharge, and perform when lawfully due in accordance with their
respective terms, the liabilities and obligations of BCI under the Bagel
Contracts set forth on Exhibit A hereto or in connection with the activities
performed by BCI for which reimbursement is being paid by PBCI (the "Assumed
Liabilities"). BCI represents and warrants to its knowledge that there are no
Bagel Contracts which have not been disclosed on Exhibit A hereto.
4. Indemnification. PBCI hereby agrees to indemnify and hold harmless BCI in
respect of, and defend with counsel of PBCI's choice reasonably acceptable to
BCI, any cost, charge, expense, fee, or claim arising out of the failure of PBCI
to pay or discharge in full any of the Assumed Liabilities.
5. Payment of Adjustment Amount. PBCI hereby agrees to pay to BCI the full
amount of each component or installment of the Adjustment Amount by wire
transfer or by delivery of a certified or bank cashier's check to or for the
account of BCI promptly after the determination thereof, or if authorized by
PBCI, BCI may debit PBCI's account for the full amount of each component of the
Adjustment Amount.
2
<PAGE>
6. Assignment Without Consent. Notwithstanding anything in this Agreement to
the contrary, this Agreement shall not constitute an assignment of any Bagel
Contract if an attempted assignment thereof, without the consent of a third
party thereto, would constitute a breach thereof or in any way adversely affect
the rights of PBCI thereunder. If such consent is not obtained, or if an attempt
at an assignment thereof would be ineffective or would affect the rights of BCI
thereunder so that PBCI would not in fact receive all such rights, BCI will
cooperate with PBCI in any reasonable arrangement designed to provide for PBCI
the benefits under such Bagel Contracts, including enforcement for the benefit
of PBCI of any and all rights of BCI against a third party thereto arising out
of the breach or cancellation by such third party or otherwise.
7. No Expansion of Third Party Rights. The assumption of the Bagel Contracts
by PBCI and the transfer thereof by BCI shall in no way expand the rights or
remedies of any third party against PBCI or BCI as compared to the rights and
remedies which such third party would have had against BCI had PBCI not assumed
such liabilities. Without limiting the generality of the preceding sentence, the
assumption by PBCI of the Assumed Liabilities shall not create any third party
beneficiary rights.
8. Further Assurances. From and after the date hereof, upon the reasonable
request of PBCI, BCI shall execute, acknowledge, and deliver all such further
acts, bills of sale, assignments, transfers, conveyances, powers of attorney,
and assurances as may be required to convey and transfer to and vest in PBCI the
Bagel Rights and Bagel Contracts, and as may be reasonably appropriate otherwise
to carry out the transactions contemplated herein.
9. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto with respect to (i) the purchase by PBCI of the Bagel Rights and
the Bagel Contracts, and (ii) reimbursement to BCI of certain costs and
expenses, and supersedes all prior understandings and agreements of the parties
with respect to the subject matter hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed therein, without regard to the conflicts of laws principles
thereof.
3
<PAGE>
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
PROGRESSIVE BAGEL CONCEPTS, INC.
/s/ Joel Alam
By: _________________________________
Vice President
Title: _________________________________
BOSTON CHICKEN, INC.
/s/ Kyle T. Craig
By: _________________________________
Vice President
Title: _________________________________
4
<PAGE>
SCHEDULE I
TO ASSIGNMENT AND
REIMBURSEMENT AGREEMENT
BCI CHARGES TO PBCI THROUGH FEBRUARY 19, 1995
Store Cash 1,100.00
PROJECTS:
Name & logo 47,443.68
Wells test store 51,385.26
Bagel project 267,164.90
Fixed assets 10,464.93
Development in progress 324,288.74
==========
701,847.51
5
<PAGE>
Exhibit A
BAGEL CONTRACTS
- ---------------
1. Lease dated February 1, 1995 by and between Denver West Office Building No.
3 Venture and Boston Chicken, Inc.
2. Progressive Bagel Concepts, Inc. has supplier relationships relating to its
operation of The Bagel Shop in Harwood Heights, Illinois, none of which
relationships are in the form of written agreements or bind Progressive Bagel
Concepts, Inc. to future purchases.
<PAGE>
Exhibit 10.17(a)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 24th day of March, 1995, by and between
Progressive Bagel Concepts, Inc., a Delaware corporation (hereinafter referred
to as the "Company"), and Daniel V. Colangelo (hereinafter referred to as
"Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is engaged in the business of operating retail
bakeries featuring bagels and other food items;
WHEREAS, because of the abilities and expertise of Employee in said
business, the Company desires to employ Employee; and
WHEREAS, Employee is willing to accept such employment upon the terms and
conditions stated herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee to perform the duties
----------
described herein, and Employee hereby accepts such employment on the terms and
conditions stated herein. Employee shall hold the position of President - Rocky
Mountain Division of Company, which shall at all times be deemed to be an
executive office of the Company.
<PAGE>
2. OFFICES WITH COMPANY. Employee shall be a "Founding Director" of the
---------------------
Company as defined in that certain Agreement to Contribute Shares by and among
the Company and the Shareholders of Brackman Brothers, Inc. dated as of February
17, 1995 (the "Contribution Agreement").
3. TERM OF EMPLOYMENT. Subject to the provisions for termination set
------------------
forth herein, the term of employment under this Agreement shall commence on
March 24, 1995 and shall extend for a period of three (3) years (the "Term").
4. DUTIES OF EMPLOYEE. Employee shall perform the duties commensurate
------------------
with his position and experience as shall be assigned to him from time to time
by the Company. Employee shall perform such duties in a diligent manner, shall
devote his entire business time, attention and effort to the affairs of the
Company within the scope of his employment as is reasonably necessary for the
proper rendition of said services, shall diligently promote the interests of the
Company, and shall be just and faithful in carrying out his duties.
5. COMPENSATION. The Company shall compensate Employee for all services
------------
rendered by him hereunder as follows:
(a) salary at a yearly rate of $125,000, payable by the Company in
twenty six (26) equal installments after deducting therefrom all applicable
FICA contributions, federal and state income tax withholding, and any other
payroll taxes (subject to any increases as determined by the Board of
Directors from time to time in its sole discretion); and
(b) such stock options as may be granted to Employee pursuant to the
Company's 1995 Employee Stock Option Plan, as it may be amended from time
to
2
<PAGE>
time, a current form of which is attached hereto as Exhibit A (the "Plan")
or any other stock option plan hereinafter adopted by the Company; and
(c) as an inducement for Employee to execute this Agreement, Employee
shall receive options under the Plan to purchase that number of shares of
common stock of the Company that have a fair market value, as determined in
accordance with the terms of the Plan, of $150,000, which options are to be
granted on the date hereof; provided, however, the options granted pursuant
to this Section 5(c) shall constitute Employee's option grant for 1995
under the Plan; provided further, that if the formula under the Plan
provides for options in excess of those granted to Employee under Section
5(c) for 1995, Employee shall receive such additional options at the same
time that options are granted under the Plan generally to employees for
1995.
6. BENEFITS AND VACATIONS. In addition to the compensation payable to
----------------------
Employee pursuant to Section 5 above, and all other compensation or benefits
provided for hereunder, Employee shall be entitled to such reasonable periods of
vacation, with full pay, as is consistent with the general policy as established
by the Board of Directors for executives and business exigencies of the Company,
and such benefits of a similar type and amount and to the same extent as
benefits are provided to other similarly situated employees of the Company.
Employee shall also receive a relocation expense reimbursement in an amount
approved by the Board of Directors.
3
<PAGE>
7. CONFIDENTIALITY. Employee agrees to execute and deliver such
---------------
confidentiality agreement which is to be required to be executed and delivered
by employees of the Company generally.
8. CONFLICT OF INTEREST. Employee shall take no action, or engage in any
--------------------
transaction, that could be considered to conflict with the best interests of
the Company, and shall at all times exercise his best judgment and efforts so as
to avoid taking any action, or engaging in any transaction, that might give the
appearance of being in conflict with the best interests of the Company.
9. TERMINATION.
-----------
(a) This Agreement and Employee's employment hereunder shall
immediately terminate, without further notice or action, upon the
occurrence of the death of Employee.
(b) Additionally, the Company shall have the right to terminate this
Agreement and Employee's employment with the Company hereunder, effective
upon written notice to Employee of termination stating the basis for such
termination, under the following circumstances:
(1) if Employee is permanently disabled (as defined below); or
(2) for cause, which shall be defined as including any of the
following: (i) any misappropriation of funds or property of the
Company by Employee; (ii) Employee's conviction of a felony, or of any
crime involving moral turpitude, fraud, theft or conversion; (iii)
Employee's failure to submit to a medical examination at the Company's
expense within ten (10) business
4
<PAGE>
days after receipt of the Company's written request that Employee
submit to such examination; or (iv) a breach of any other material
provision contained in this Agreement.
(c) Employee shall be deemed to be "permanently disabled" hereunder
upon the first to occur of any of the following events:
(1) The receipt by the Company of a written certificate from a
physician approved by the Company and reasonably satisfactory to
Employee stating, that, based upon one or more examinations of
Employee by such physician, it is such physician's opinion that, for a
period of at least six (6) consecutive months from the date of
certification, Employee is and will be substantially unable to perform
his customary duties for the Company due to physical or mental
infirmity. The Company may request in writing that Employee submit to
such examinations by giving written notice thereof to Employee.
(2) The adjudication of Employee as an incompetent or a disabled
person and the appointment of a conservator or guardian for his person
or property by a court of competent jurisdiction.
(d) Employee shall have the right to terminate this Agreement and
Employee's employment with the Company hereunder, effective upon written
notice to the Company, within thirty (30) days after the date Employee
shall first have a right to exercise a "put option" pursuant to Section
2.3(a)(ii) of the Contribution Agreement.
5
<PAGE>
(e) If Employee is terminated by the Company for cause, as that term
is defined in Section 9(b)(2), or if Employee voluntarily terminates his
employment, the Company shall not be obligated to pay Employee any other
compensation with respect to any period after the date of such termination,
except that any unexercised stock options of Employee that are vested on
the date of termination shall continue to be exercisable in accordance with
the terms of the Plan until one year after the effective date of such
termination. All stock options that are not vested on the date of such
termination shall terminate and be of no further force and effect.
(f) If Employee dies or becomes permanently disabled during the Term,
or if Employee is terminated by the Company for any reason other than for
cause, the Company shall pay to Employee the entire amount of the cash
compensation provided for in Section 5 hereof that is payable during the
remainder of the Term payable in a lump sum cash payment within thirty (30)
days of the effective date of termination (provided that, in the case of
death or disability of Employee, the aforementioned cash payment shall be
limited to the lesser of: (i) one year's cash compensation provided for in
Section 5, and (ii) the cash compensation provided for in Section 5 for the
remaining balance of the Term), and all employee stock options granted to
Employee prior to the effective date of such termination shall vest
immediately; provided that if Employee wishes to exercise such stock
options, he must do so within the first to occur of (x) three (3) years
after the effective date of such termination or (y) the expiration date of
the option. Notwithstanding the
6
<PAGE>
foregoing, after the effective date of his termination Employee shall not
be eligible to receive any further employee stock options.
(g) Upon any termination of this Agreement or the employment of
Employee, or the expiration of this Agreement without renewal of Employee's
employment, Employee shall be deemed automatically to have resigned from
any office or directorship of the Company which he may then hold and shall
promptly deliver to the Company (without retaining any copies thereof) all
Company files and documents, forms, letterhead, business cards, computer
disks and any other written, magnetic or printed materials relating to the
business of the Company.
(h) If Employee voluntarily terminates his Employment after the six
month anniversary of the date hereof, the Company shall not have any cause
of action against Employee for a breach of this Agreement due solely to
such voluntary termination; provided, however, that nothing contained in
the previous sentence shall cancel, terminate or otherwise extinguish any
cause of action of the Company against Employee arising out of or based on
any other breach of this Agreement by Employee.
10. COVENANT RESTRICTING SOLICITATION. During the term hereof and for a
---------------------------------
period of two (2) years after Employee's employment with the Company shall
expire or terminate for any reason whatsoever, Employee shall not, directly or
indirectly, solicit or attempt to solicit for employment or employ any person
who was an employee of the Company on the date of Employee's date of termination
or any person who was an employee during the six-month period prior to such
date.
7
<PAGE>
11. COVENANT RESTRICTING COMPETITION. During the term hereof and for a
--------------------------------
period of two (2) years after his employment with the Company shall expire or
terminate for any reason whatsoever, Employee shall not, either directly or
indirectly, on his own account, or as an employee, consultant, partner, owner,
officer, director or stockholder of any other person, firm, partnership,
corporation or other entity or in any other capacity, in any way, directly or
indirectly, conduct, engage in, be connected with, have any interest in, or aid
or assist anyone in engaging in a business which derives 20% or more of its
revenues from the sale of bagels and/or bagel-related products (a "Competitive
Business"); provided, however, Employee may have an interest in any Competitive
Business as a passive investor in such Competitive Business provided such
interest does not exceed (three percent (3%) of the outstanding equity
securities of any company which has a class of securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended, or which is
traded on a national securities exchange.
12. REMEDIES. Employee agrees that the period of time provided for in
--------
Sections 10 and 11 above is the minimum period of time necessary, and that other
provisions and restrictions set forth above and in other portions hereof
are necessary, to protect the Company and its successors and assigns in the
protection of the business conducted by the Company. Employee agrees that the
services to be performed by him for the Company are special and unique, that
damages cannot compensate the Company in the event of a violation of the
restrictive covenants contained in Sections 10 and 11 hereof, and that
injunctive relief shall be essential for the protection of the Company and its
successors and assigns. Accordingly, Employee agrees and consents that, in the
event he shall violate
8
<PAGE>
or breach any of said restrictive covenants the Company shall be entitled to
obtain (and he hereby consents thereto) such injunctive relief against Employee,
without bond, in addition to such further or other relief as may appertain at
equity or law. The exercise or enforcement by the Company of any right or remedy
hereunder shall not preclude the exercise or enforcement by the Company of any
other right or remedy hereunder or which the Company has the right to enforce
under applicable law.
13. EMPLOYEE REPRESENTATIONS. Employee represents and warrants to the
------------------------
Company that (i) he is free to enter into this Agreement and (ii) this Agreement
does not violate the terms of any other agreement to which Employee is a party
or by which he is bound.
14. WAIVER. Failure by either party to insist upon strict compliance with
------
any of the terms, covenants or conditions hereof shall not be deemed a waiver of
such term, covenant or condition, nor shall any waiver or relinquishment of any
right or remedy hereunder at any one or more times be deemed a waiver or
relinquishment of such right or remedy at any other time or times.
15. SEVERABILITY. Each section, paragraph, term and provision of this
------------
Agreement, and any portion thereof, shall be considered severable and if for any
reason any such portion of this Agreement is held to be invalid, contrary to, or
in conflict with any applicable present or future law or regulation in a final,
unappealable ruling issued by any court, agency or tribunal with competent
jurisdiction in a proceeding to which the Company is a party, that ruling shall
not impair the operation of, or have any other effect upon, such other portions
of this Agreement as may remain otherwise intelligible, which shall continue
9
<PAGE>
to be given full force and effect and bind the parties hereto. Employee agrees
that if any provisions hereof shall be adjudicated to be invalid or
unenforceable in whole or in part, such modifications made to this Agreement as
a result of such adjudication shall be effective only in the particular
jurisdiction in which such adjudication is made. To the extent any provision
hereof is deemed unenforceable by virtue of its scope but may be enforceable by
limitations thereon, the parties hereto agree that the same shall be enforceable
to the fullest extent permissible under the laws and public policies applied in
such jurisdiction in which the enforcement is sought. The parties hereto hereby
authorize any court of competent jurisdiction to modify the restrictive
covenants to the extent necessary to make the same enforceable.
16. BENEFIT. This Agreement shall inure to the benefit of and be binding
-------
upon the Company, its successors and assigns. The rights and benefits of
Employee under this Agreement are personal to him, and are not subject to
voluntary or involuntary alienation, assignment or transfer by him.
17. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
----------------
the parties concerning Employee's employment with the Company, and may not be
modified or rescinded except by a written agreement to such effect signed by
both parties.
18. NOTICES. All notices, requests, demands, and other communications
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or by electronic transmission. If mailed,
first class, certified mail, postage prepaid, or sent by reliable overnight
delivery service and addressed as follows, or at such other addresses as the
parties hereto may from time to time designate in writing, such
10
<PAGE>
notices, requests, demands, and other communications shall be deemed delivered
three business days after being so duly posted:
to the Company: Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Attention: Kyle T. Craig
Facsimile: (303) 202-3360
with a copy to: Rudnick & Wolfe
203 North LaSalle, Suite 1800
Chicago, IL 60601
Attention: Michael G. Brennan
Facsimile: (312) 984-2299
to Employee: Daniel V. Colangelo
495 Upper Evergreen
Summit Park, Utah 84060
with a copy to: Parsons Behle & Latimer
201 South Main Street, Suite 1800
P.O. Box 45898
Salt Lake City, Utah 84145-0898
Attention: William D. Holyoak
19. GOVERNING LAW. This Agreement and the rights and obligations of the
-------------
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Colorado applicable to contracts made and to be performed
therein.
20. CONFLICT WITH PLAN. The parties acknowledge that to the extent any
------------------
provision of this Agreement is inconsistent with any provision of the Plan, the
provisions of this Agreement shall control.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
EMPLOYEE PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation
/s/ Daniel V. Colangelo By: /s/ Kyle Craig
- -------------------------------- --------------------------------
Daniel V. Colangelo Its: Vice President
-----------------------------
12
<PAGE>
EXHIBIT A
PROGRESSIVE BAGEL CONCEPTS, INC.
1995 EMPLOYEE STOCK OPTION PLAN
-------------------------------
1. STATEMENT OF PURPOSE. The purpose of this 1995 Employee Stock Option
--------------------
Plan (the "Plan") is to benefit Progressive Bagel Concepts, Inc. (the "Company")
by offering certain present and future employees, officers, and consultants of
the Company and its subsidiaries, if any, a favorable opportunity to become
holders of the $.01 par value common stock of the Company ("Common Stock") over
a period of years, thereby giving them a permanent stake in the growth and
prosperity of the Company and encouraging the continuance of their involvement
with the Company.
2. ADMINISTRATION. The plan shall be administered by a committee which
--------------
shall consist of at least two members of the Board of Directors of the Company,
whose interpretation of the terms and provisions of the Plan shall be final and
conclusive.
3. ELIGIBILITY. Options may be granted to employees of the Company and
-----------
its subsidiaries, if any, who are employed on a full time basis, and to officers
and consultants of the Company.
4. GRANTING OF OPTIONS. Options shall be granted annually to non-store
-------------------
employees of the Company (and such subsidiaries of the Company as are designated
by the Committee) with a base salary of $40,000 or more as follows: such number
of options as shall equal (x) the product of (1) the employee's base salary
multiplied times (2) the employee's base salary divided by $80,000, (y) divided
by the exercise price. Options shall be granted annually to officers of the
Company (and such subsidiaries of the Company as are designated by the
Committee) as follows: such number of options as shall equal their base salary
multiplied by one and a half and divided by the exercise price. In addition, the
Company may grant additional or separate options in such amounts as the
Committee shall determine to employees, officers, or consultants of the Company
and its subsidiaries.
The Committee may grant options under which a total of not in excess of
15,000 shares of the Common Stock may be purchased from the Company, subject to
adjustment as provided in Section 11. No option shall be granted under the Plan
subsequent to February 1, 2005. Options granted under the Plan are intended not
be treated as incentive stock options as defined in Section 422A of the Internal
Revenue Code of 1986, as amended (the "Code").
In the event that an option expires or is terminated or cancelled
unexercised as to any shares, such released shares may again be optioned
(including a grant in substitution for a cancelled option). Shares subject to
options may be made available from unissued or reacquired shares of Common
Stock.
<PAGE>
Nothing contained in the Plan or in any option granted pursuant thereto
shall confer upon any optionee any right to be continued in the employment of
the Company, or interfere in any way with the right of the Company to terminate
his or her employment at any time.
5. OPTION PRICE. The options shall be granted at an exercise price,
------------
subject to the provisions of Section 11 hereof, equal to the fair market value
at the time the option is granted, of the shares of Common Stock subject to the
option.
6. DURATION OF OPTIONS, INCREMENTS, AND EXTENSIONS. Subject to the
-----------------------------------------------
provisions of Section 9 hereof, each option shall be for a term of ten years.
Each option shall become exercisable with respect to 10% of the total number of
shares subject to the option at the end of the first year after the date of
grant, an additional 20% at the end of the second year after the date of grant,
an additional 30% at the end of third year after the date of grant and the
balance at the end of the fourth year after the date of grant (the "Vesting
Schedule"). Notwithstanding the foregoing, the Committee may in its discretion
accelerate the exercisability of any option subject to such terms and conditions
as the Committee deems necessary and appropriate to effectuate the purpose of
the Plan including, without limitation, a requirement that the optionee grant to
the Company an option to repurchase all or a portion of the number of shares
acquired upon exercise of the accelerated option for their fair market value on
the date of grant. Subject to the foregoing, all or any part of the shares to
which the right to purchase has accrued may be purchased at the time of such
accrual or at any time or times thereafter during the option period.
7. RIGHT OF COMPANY TO REPURCHASE SHARES ISSUED AS A RESULT OF
-----------------------------------------------------------
ACCELERATED, EXERCISED OPTIONS. Notwithstanding any other provision in the Plan
- ------------------------------
to the contrary:
(a) in the event that (i) the Committee, in its sole discretion,
determines that all or some portion of the vesting of an option granted
pursuant to the Plan shall be accelerated so that all or some portion of
such option may be exercised prior to the date on which it would have been
exercised pursuant to the Vesting Schedule described in Section 6 hereof,
and (ii) such option is exercised for some or all of the shares of Common
Stock subject to such option, then that portion of shares under such option
(the "Excess Shares") equal to the total number of shares under such option
less the number of shares which would have been issued if the option had
been exercised pursuant to the Vesting Schedule may not, except as provided
in paragraph (b) of this Section 7, be sold or otherwise transferred to any
third party until such date as the option for any portion of the Excess
Shares would have been exercisable if the option had been exercised
pursuant to the Vesting Schedule; and
(b) in the event the employment of the optionee (or former optionee)
with the Company is terminated for any reason other than death, permanent
disability or retirement, the Company shall have the right to purchase from
the optionee, at the option price paid by him, the Excess Shares acquired
upon the exercise of an option granted under the Plan; provided, however,
that the Company shall not make any such purchase if such purchase would
give rise to short-swing profit liability as described in Section 16 of the
Securities Exchange Act of 1934 when matched with a bona fide market
transaction. If not sooner
2
<PAGE>
exercised, the Company's right to repurchase shall expire with respect to
any portion of the Excess Shares on the date that the option for any such
portion of the Excess Shares would have become exercisable pursuant to the
Vesting Schedule.
8. EXERCISE OF OPTION. As a condition to the exercise of any option, the
------------------
fair market value of the Common Stock on the date of exercise must equal or
exceed the option price referred to in Section 5 hereof. An option may be
exercised by giving written notice to the Company, attention of the Chief
Financial Officer, specifying the number of shares to be purchased, accompanied
by the full purchase price for the shares to be purchased either in cash, by
check, by a promissory note in a form specified by the Committee and payable to
the Company no later than 15 business days after the date exercise of the
option, or, if so approved by the Committee, by shares of the Common Stock of
the Company or by a combination of these methods of payment. For this purpose,
the per share value of Common Stock of the Company shall be the fair market
value on the date of exercise. The Committee may in its discretion permit an
optionee to deliver a promissory note in a form specified by the Committee and
payable to the Company no later than the fifteenth day of April in the year
following the year of exercise of any option in payment of any withholding tax
requirements of the Company with respect to such exercise.
At any time of any exercise of any option, the Company may, if it shall
determine it necessary or desirable for any reason, require the optionee (or his
heirs, legatees, or legal representative, as the case may be) as a condition
upon the exercise thereof, to deliver to the Company a written representation of
present intention to purchase the shares for investment and not for
distribution. In the event such representation is required to be delivered, an
appropriate legend may be placed upon each certificate delivered to the optionee
upon his exercise of part or all of the option and a stop transfer order may be
placed with the transfer agent. Each option shall also be subject to the
requirement that, if at any time the Company determines, in its discretion, that
the listing, registration or qualification of the shares subject to the option
upon any securities exchange or under any state or Federal law, or the consent
or approval of any governmental regulatory body is necessary or desirable as a
condition of or in connection with, the issue or purchase of shares thereunder,
the option may be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
At the time of the exercise of any option, the Company may require, as a
condition of the exercise of such option, the optionee to pay the Company an
amount equal to the amount of tax the Company may be required to withhold to
obtain a deduction for federal income tax purposes as a result of the exercise
of such option by the optionee.
9. TERMINATION OF RELATIONSHIP - EXERCISE THEREAFTER. In the event the
-------------------------------------------------
relationship between the Company and an officer or employee who is an optionee
is terminated for any reason other than death, permanent disability or
retirement, such optionee's option shall expire and all rights to purchase
shares pursuant thereto shall terminate immediately. The Committee may, in its
sole discretion, permit any option to remain exercisable for a reasonable period
after such termination. Temporary absence from employment because of illness,
vacation,
3
<PAGE>
and approved leaves of absence shall not be considered to terminate employment
or to interrupt continuous employment.
In the event of termination of said relationship because of death or
permanent disability (as that term is defined in Section 22(e)(3) of the Code,
as now in effect or as subsequently amended), the option may be exercised to the
extent that any portion thereof would be exercisable on the date of such death
or permanent disability pursuant to the Vesting Schedule described in Section 6
hereof, by the optionee or, if he or she is not living, by his or her heirs,
legatees, or legal representative, as the case may be, at any time during its
specified term prior to one year after the date of death or permanent
disability. In the event of termination of employment because of retirement, the
option may be exercised by the optionee (or, if he or she dies after such
termination, by his or her heirs, legatees, or legal representative, as the case
may be), at any time during its specified term prior to one year after the date
of such termination, but only to the extent the option was exercisable at the
date of such termination.
10. NON-TRANSFERABILITY OF OPTIONS. During the lifetime of the optionee,
------------------------------
options shall be exercisable only by the optionee, and options shall not be
assignable or transferable by the optionee otherwise than by will or by the laws
of descent and distribution, or pursuant to a qualified domestic relations order
as defined by (a) the Code or (b) Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
11. ADJUSTMENT. The number of shares subject to the Plan and to options
----------
granted under the Plan shall be adjusted as follows: (a) in the event that the
outstanding shares of Common Stock of the Company is changed by any stock
dividend, stock split or combination of shares, the number of shares subject to
the Plan and to options granted thereunder shall be proportionately adjusted;
(b) in the event of any merger, consolidation or reorganization of the Company
with any other corporation or corporations, there shall be substituted, on an
equitable basis as determined by the Committee, for each share of Common Stock
then subject to the Plan, whether or not at the time subject to outstanding
options, the number and kind of shares of stock or other securities to which the
holders of shares of Common Stock of the Company will be entitled pursuant to
the transaction; and (c) in the event of any other relevant change in the
capitalization of the Company, the Committee shall provide for an equitable
adjustment in the number of shares of Common Stock then subject to the Plan,
whether or not then subject to outstanding options. In the event of any such
adjustment the purchase price per share shall be proportionately adjusted.
12. AMENDMENT OF PLAN. The Committee may amend or discontinue the Plan
-----------------
at any time; provided, however, that no amendment or discontinuance shall change
--------- --------
or impair any options previously granted without the consent of the optionee.
15. HOLDING PERIOD. Anything contained in the Plan to the contrary
--------------
notwithstanding, any disposition of an option otherwise permitted by the terms
of the Plan, or of the Common Stock acquired upon exercise of an option, shall
be subject to compliance with the requirements of paragraph (c)(i) of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, applicable to
such disposition, and any date, period or procedure specified or referred
4
<PAGE>
to in the Plan with respect to any such disposition shall be adjusted, if
necessary, so as to give effect to this Section 13.
14. EMPLOYMENT AND CONSULTING AGREEMENTS. Anything contained in the Plan
------------------------------------
to the contrary notwithstanding, in the event that an employment agreement or
consulting agreement entered into by the Company or a subsidiary of the Company
provides that options shall be granted under the Plan to an employee or
consultant on terms and conditions that differ from the terms and conditions set
forth herein, the terms and conditions set forth in such employment or
consulting agreement shall control.
5
<PAGE>
Exhibit 10.17(b)
AMENDMENT TO
EMPLOYMENT AGREEMENT
AND
TRANSITION AND CONSULTING AGREEMENT
This amendment to employment agreement and transition and consulting
agreement ("Agreement") is entered into this 16th day of January, 1996 by and
between Daniel V. Colangelo ("Colangelo") and Einstein Bros. Bagels, Inc. (the
"Company").
RECITALS
--------
Colangelo is a party to an Employment Agreement with the Company dated
March 24, 1995 ("Employment Agreement"), and currently serves as President and
Chief Executive Officer of the Company. The parties now mutually desire to have
Colangelo transition from a full-time employee of the Company to a part-time
consultant to the Company. Therefore, in consideration of the mutual covenants
hereinafter set forth the parties hereto agree as follows:
1. AMENDMENT TO EMPLOYMENT AGREEMENT: TRANSITION PERIOD.
----------------------------------------------------
(a) Section 3 of the Employment Agreement is hereby deleted in its
entirety, and the following Section 3 is hereby inserted in lieu thereof:
Term of Employment. Subject to the provisions for
------------------
termination set forth herein, the term of employment
under this Agreement shall commence on March 24, 1995
and shall continue through April 30, 1996 (the "Term").
(b) During the period commencing on the date hereof through and
including April 30, 1996 (the "Transition Period"), Colangelo shall continue to
serve as President and Chief Executive Officer of the Company under the terms of
the Employment Agreement at the salary in effect on the date hereof. During the
Transition Period Colangelo shall, in addition to the duties currently being
performed by him, assist the Company in the transition to a new President and
Chief Executive Officer.
2. CONSULTING AGREEMENT.
--------------------
(a) Commencing on May 1, 1996, the Company shall engage Colangelo to
render certain consulting services to the Company on a project and as needed
basis. Subject to Section 2(d) below, the term of consultation shall be for a
period of one year, and shall continue thereafter for successive periods of one
year each unless terminated by either party upon written notice given no later
than 30 days prior to the anniversary date ("Consulting Term"). Except as
provided in Section 2(c) below, such consulting services shall not exceed 40
hours per calendar month. The Company agrees that Colangelo shall not be
required, in connection with the performance of his duties hereunder, to
maintain a residence in the State of Colorado, and acknowledges that Colangelo
is relocating his primary residence to Utah. During the Consulting Term,
Colangelo shall use his best efforts to advance the business and welfare of the
Company, its subsidiaries and affiliates, and to discharge any other duties
assigned to him. He shall not
<PAGE>
intentionally take any action against the best interests of the Company or of
any subsidiary or affiliate of the Company. He shall perform faithfully and
competently such duties as may be assigned to him from time to time.
(b) The Company shall pay or cause to be paid to Colangelo for his
services hereunder during the Consulting Term an annual consultation fee of
$100,000. Such fee shall be paid to Colangelo in arrears in twenty-six equal
installments. In addition, the Company shall reimburse Colangelo for all
reasonable business expenses incurred by him in rendering the consulting
services hereunder consistent with the Company's travel and entertainment policy
then in effect, upon receipt of appropriate supporting documentation.
(c) In the event the Company requests Colangelo to render consulting
services in excess of 40 hours per calendar month during the Consulting Term
(although Colangelo shall have no obligation to do so), and Colangelo renders
such services, the Company shall pay to Colangelo a consulting fee of $225 per
hour for each hour of additional services rendered, and shall reimburse
Colangelo for all reasonable business expenses incurred by him in rendering such
additional consulting services hereunder consistent with the Company's travel
and entertainment policy then in effect, upon receipt of appropriate supporting
documentation.
(d) (i) During the Consulting Term, this Agreement:
(A) shall terminate automatically, without notice or action
on the occurrence of Colangelo's death; and
(B) may be terminated by the Company for "cause", which
shall be defined as Colangelo's breach of (x) any provision of the
Confidentiality Agreement dated March 24, 1995, a copy of which is attached
hereto as Exhibit A, (y) Sections 10 or 11 of the Employment Agreement or (z)
Sections 5.3, 5.4 or 5.8 of the Agreement to Contribute Shares by and among the
Shareholders of Brackman Brothers, Inc., as Transferors, and Progressive Bagel
Concepts, Inc., as Transferee, and Brackman Brothers, Inc. dated February 17,
1995 (the "Contribution Agreement").
(ii) If the Company terminates Colangelo for cause, as that term
is defined in Section 2(d)(i)(B), if Colangelo voluntarily terminates this
Agreement, or if this Agreement is not renewed as provided in Section 2(a)
hereof, the Company shall not be obligated to Colangelo for any fees with
respect to any period after the date of such termination and all stock options
granted to Colangelo that are not vested on the date of such termination shall
terminate and be of no further force and effect. All stock options that are
vested on the effective date of such termination (other than the Initial Option
Grants (as defined below)) shall continue to be exercisable for a period of one
year thereafter.
(iii) If Colangelo dies during the Consulting Term, or if this
Agreement is terminated by the Company for any reason other than for cause, the
Company shall pay to Colangelo (or his estate, in the event of death) the entire
amount of the consulting fees payable to him during the remainder of the one
year Consulting Term in effect on the date of such termination, payable in a
lump sum cash payment within 30 days of the effective date of such termination,
and all stock options granted to Colangelo (other than the Initial Option
Grants) that are vested on the
2
<PAGE>
effective date of such termination shall continue to be exercisable for a period
of one year thereafter. In addition, if this Agreement is terminated by the
Company for any reason other than for cause, then the stock options that would
have vested during the applicable one year Consulting Term in which the
Agreement is so terminated shall vest immediately upon the effective date of
such termination and shall continue to be exercisable for a period of one year
thereafter. All remaining unvested stock options shall expire. By way of
example, in the event that this Agreement is terminated by the Company for any
reason other than for cause on December 15, 1997 (during the second one-year
Consulting Term), the stock options that would have vested on January 16, 1998
(20%) shall vest and be exercisable until December 15, 1998. The stock options
that would have vested on January 16, 1999 and January 16, 2000 shall expire.
(e) Colangelo shall be considered an independent contractor for
purposes of this Section 2 and shall not be an agent or employee of the Company.
3. STOCK OPTIONS.
-------------
(a) Effective the date hereof, the options to purchase 113.29 shares
of common stock of the Company ("Common Stock"), 75.52 shares of Common Stock
and 37.76 shares of Common Stock previously granted to Colangelo under the
Company's Amended and Restated 1995 Stock Option Plan ("Plan") on March 24,
1995, May 16, 1995 and July 25, 1995, respectively (collectively, the "Initial
Option Grants"), shall be immediately vested and exercisable until the later of
(i) the one year anniversary date of termination of this Agreement for any
reason, or (ii) January 16, 1999, and the Company hereby waives its rights to
repurchase the shares subject to the Initial Option Grants contained in Section
7 of the Plan.
(b) During the Transition Period, Colangelo shall receive a stock
option grant under the Plan to purchase that number of shares of Common Stock
that have an aggregate exercise price of $250,000, such grant to be subject to
the terms and conditions of the Plan and of this Agreement.
4. RESIGNATION. Colangelo hereby resigns as President and Chief
-----------
Executive Officer of the Company effective May 1, 1996.
5. MUTUAL RELEASES.
---------------
(a) Colangelo, for himself and his successors, assigns and legal
representatives does hereby release and forever discharge the Company, and its
employees, agents, officers, directors, shareholders, and affiliated
organizations, including Boston Chicken, Inc. ("BCI"), and their respective
heirs, successors and assigns (collectively, the "Colangelo Released Parties"),
of and from any and all rights, causes of action, claims, suits and demands
whatsoever, in law or in equity, whether presently known or unknown, foreseen
or unforeseen, to the fullest extent permitted by law, which he has, had or may
in the future have, against the Colangelo Released Parties by reason of any
matter, cause or thing arising prior to the date hereof (excluding matters,
causes or things arising under the Contribution Agreement and under the real
property lease by and between Woodman Associates, L.L.C. and the Company for the
store located at 9th and 9th in Salt Lake City), and covenants not to bring suit
against the Colangelo Released Parties on any such matter.
3
<PAGE>
(b) The Company, for itself and its successors, assigns and legal
representatives does hereby release and forever discharge Colangelo, and his
heirs, representatives, successors and assigns (collectively, the "Company
Released Parties"), of and from any and all rights, causes of action, claims,
suits and demands whatsoever, in law or in equity, whether presently known or
unknown, foreseen or unforeseen, to the fullest extent permitted by law, which
it has, had or may in the future have, against the Company Released Parties by
reason of any matter, cause or thing arising prior to the date hereof (excluding
matters, causes or things arising under the Contribution Agreement and under the
real property lease by and between Woodman Associates, L.L.C. and the Company
for the store located at 9th and 9th in Salt Lake City), and covenants not to
bring suit against the Company Released Parties on any such matter.
6. OWNERSHIP OF WORK PERMIT. Colangelo agrees that any and all ideas,
------------------------
improvements and inventions conceived, created, or first reduced to practice in
the performance of work under the Employment Agreement or under this Agreement
shall be the sole and exclusive property of the Company. Colangelo further
agrees that the Company is and shall be vested with all rights, title and
interest, including patent, copyright, trade secret and trademark rights, in his
work product under the Employment Agreement and under this Agreement. Colangelo
shall execute all papers including patent applications, invention assignments
and copyright assignments, and otherwise shall assist the Company at the
Company's expense and as reasonably shall be required to perfect in the Company
the rights, title and other interests in his work product expressly granted to
the Company under this Agreement.
7. RETURN OF COMPANY PROPERTY. Colangelo agrees that upon termination of
--------------------------
this Agreement for any reason he shall keep no Company documents of any kind
whatsoever, and agrees to promptly return any such documents after such
termination upon the request of the Company.
8. SEVERABILITY. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of the Agreement.
9. DESCRIPTIVE HEADINGS. The descriptive headings used herein are
--------------------
inserted for convenience only and do not constitute a part of this Agreement.
10. GOVERNING LAW. This Agreement and the rights and obligations of the
-------------
parties hereto shall be governed, construed and enforced in accordance with the
laws of the State of Colorado applicable to contracts made and to be performed
herein.
11. COMPLETE AGREEMENT. This Agreement embodies the complete agreement and
------------------
understanding between the parties with respect to the subject matter hereof, and
supersedes and preempts any prior understandings, agreement or representations
by or between the parties, written or oral, which may have related to the
subject matter, except that the Employment Agreement, as amended hereby, shall
remain in effect until April 30, 1996, and Sections 10, 11, 12, 13, 14, 15, 16
and 19 of the Employment Agreement shall survive until April 30, 1998.
4
<PAGE>
12. COUNTERPARTS. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original.
13. AMENDMENT. The parties hereto may amend, modify and supplement this
---------
Agreement in such manner as may be agreed upon by them in writing.
14. NOTICES. Any notice, request, demand or other communication to be
-------
delivered hereunder shall be in writing and shall be deemed to have been duly
given upon the earlier of actual delivery or three business days after being
mailed by certified or registered mail, return receipt requested and postage
prepaid, addressed to the appropriate party as follows (or to such other address
of the receiving party as shall be given to the sending in the manner provided
herein for the giving of notices):
If to the Company:
Einstein Bros. Bagels, Inc.
1526 Cole Boulevard, Suite 200
Golden, Colorado 80401
Attention: General Counsel
If to Colangelo:
Daniel V. Colangelo
495 Upper Evergreen Drive
Park City, Utah 84060
with a copy to:
Ken P. Jones
Parsons Davies Kinghorn & Peters
185 South State Street, Suite 700
Salt Lake City, Utah 84111
15. BOARD OF DIRECTORS APPROVAL. This Agreement and the Company's
---------------------------
obligations hereunder shall be subject to the approval of the Company's board of
directors and the Stock Option Committee of the Company's board of directors.
16. MISCELLANEOUS. The Company agrees that it shall not be a breach of
-------------
Section 5.4 of the Contribution Agreement or Section 10 of the Employment
Agreement for Colangelo to solicit and hire for his own business purposes
Stephen A. Norman and/or James W. Largay so long as such employment does not
interfere with such individuals' performance of their services under their
respective agreements with the Company.
5
<PAGE>
In witness whereof, the parties hereto have executed this Agreement as of
the date first above written.
EINSTEIN BROS. BAGELS, INC.
By: /s/ JOEL ALAM
____________________________
Title: Vice President
_________________________
/s/ DANIEL V. COLANGELO
________________________________
Daniel V. Colangelo
6
<PAGE>
EXHIBIT A
<PAGE>
PROGRESSIVE BAGEL CONCEPTS, INC.
CONFIDENTIALITY AND NON-COMPETE AGREEMENT
WHEREAS, the undersigned (the "Undersigned") is a current or prospective
employee ("Employee"), owner ("Owner") of an interest in, or supplier, agent,
researcher, consultant, service provider, or vendor ("Vendor") of, Progressive
Bagel Concepts, Inc. ("Company") and/or one or more of its affiliates,
subsidiaries, area developers, franchisees, or joint venturers (each a "Related
Party");
WHEREAS, the Undersigned has been or may be given access to certain
confidential and proprietary information of Company and/or its Related Parties
previously not available to the Undersigned;
WHEREAS, the Company and/or the Related Party signatory hereto, as the case
may be, is only willing to commence or continue its relationship with
Undersigned in the event Undersigned enters into this Agreement; and
WHEREAS, the Company and/or the Related Party signatory hereto has entered
into this Agreement with the Undersigned in order to ensure the confidentiality
of Proprietary Information in accordance with the terms of this Agreement, to
ensure that the Undersigned does not utilize such information to compete with
the Company or unfairly disadvantage the Company, and/or to protect the
investment made by the Company and/or the Related Party signatory hereto in the
training and instruction of its Employees and/or in negotiation with and
education of Owners and Vendors, as the case may be.
NOW, THEREFORE, the Undersigned hereby agrees as follows:
1. Recitals. The recitals set forth above are incorporated herein by this
--------
reference and shall be part of this Agreement.
2. Proprietary Information. As used in this Agreement, the term
-----------------------
"Proprietary Information" shall mean the business concepts, recipes, food
preparation methods, equipment, operating techniques, marketing methods,
financial information, demographic and trade area information, prospective site
locations, market penetration techniques, plans, or schedules, customer
profiles, preferences, or statistics, menu breakdowns, itemized costs,
franchisee composition, territories, and development plans, and all related
trade secrets or confidential or proprietary information treated as such by the
Company and/or the Related Party signatory hereto, as the case may be, whether
by course of conduct, by letter or report, or by the use of any appropriate
proprietary stamp or legend designating such information or item to be
confidential or proprietary, by any communication to such effect made prior to
or at the time any such Proprietary Information is disclosed to the Undersigned,
or otherwise.
<PAGE>
3. Use and Disclosure of Proprietary Information. The Undersigned shall
---------------------------------------------
hold all Proprietary Information in strict confidence, shall use such
Proprietary Information only for the benefit of the Company and/or the Related
Party and shall disclose such Proprietary Information only to the Undersigned's
employees and agents who have a need to know such Proprietary Information in
order to assist the Undersigned, provided such employees and agents each have
individually entered into this Agreement or a Confidentiality and Non-Compete
Agreement substantially identical hereto or are otherwise obligated by a written
agreement with the Undersigned to maintain the confidence of the Proprietary
Information, which agreement the Undersigned hereby agrees may be directly
enforced by Company and/or the Related Party signatory hereto, as the case may
be. The Undersigned shall not disclose Proprietary Information to any other
person or entity. The obligations hereunder to maintain the confidentiality of
Proprietary Information shall not expire.
4. Limitations on Obligations. The obligations of the Undersigned
--------------------------
specified in Section 3 shall not apply to any Proprietary Information which is
received from the Company and/or the Related Party signatory hereto, as the case
may be, which (a) is disclosed in a printed publication available to the public,
or is otherwise in the public domain through no act of the Undersigned or its
employees, agents or other person or entity which has received such Proprietary
Information from or through the Undersigned, (b) is approved for release by
written authorization of an officer of the Company and/or the Related Party
signatory hereto, as the case may be, or (c) is required to be disclosed by
proper order of a court of applicable jurisdiction after adequate notice to the
Company and/or the Related Party signatory hereto, as the case may be,
sufficient to permit them to seek a protective order therefor, the imposition of
which protective order the Undersigned agrees to approve and support.
5. Return of Documents. The Undersigned (and each employee, agent, or
-------------------
other person or entity which has received such Proprietary Information from or
through the Undersigned) shall, upon the request of the Company and/or the
Related Party signatory hereto, as the case may be, return all documents and
other tangible manifestations of Proprietary Information received from the
Company and/or the Related Party signatory hereto, as the case may be, including
all copies and reproductions thereof.
2
<PAGE>
7. No Waiver. No delays or omissions by the Company and/or the Related
---------
Party signatory hereto, as the case may be, in exercising any right under this
Agreement will operate as a waiver of that or any other right. A waiver or
consent given by the Company and/or the Related Party signatory hereto, as the
case may be, on any one occasion is effective only in that instance and will not
be construed as a bar to or waiver of any right on any other occasion.
8. Notices. Any notice, request, information, or other document to be
-------
given hereunder to any of the parties by any other party shall be in writing and
delivered personally, sent by facsimile transmission or registered or certified
mail, postage prepaid, or overnight delivery service, as follows:
If to the Company, addressed to:
Progressive Bagel Concepts, Inc.
1526 Cole Boulevard
Suite 200
Golden, Colorado 80401
Attention: General Counsel
Facsimile: (303) 202-3490
3
<PAGE>
If to the Related Party signatory hereto, addressed to:
_____________________________
_____________________________
_____________________________
_____________________________
If to the Undersigned, addressed to:
Dan Colangelo (Name)
-----------------------------
522 Highland Ave (Address)
-----------------------------
Boulder, Colorado 80302 (City, State, Zip)
-----------------------------
(Attention)
_____________________________
(303) 447-0283 (Phone Number)
-----------------------------
(Fax Number)
_____________________________
Any party hereto may change the place at which notices are to be received
by it by the giving notice of such change in the manner set forth above.
9. Equitable Relief. Undersigned acknowledges that Company and/or the
----------------
Related Party signatory hereto, as the case may be, will be irreparably harmed
by any breach hereof, that monetary damages would be inadequate and that Company
and/or the Related Party signatory hereto, as the case may be, shall have the
right to have an injunction or other equitable remedies imposed in relief of,
or to prevent or restrain, such breach. The Undersigned agrees that Company
and/or the Related Party signatory hereto, as the case may be, shall also be
entitled to any and all other relief available under law or equity for such
breach.
11. Miscellaneous.
-------------
(a) This Agreement shall not be construed to grant to the Undersigned
any patents, licenses, or similar rights to Proprietary
Information disclosed to the Undersigned hereunder, all of which
rights and interests shall be deemed to reside or be vested in
the Company.
4
<PAGE>
(b) This Agreement, does not supersede, but rather is in addition to
and cumulative with, all prior agreements, written or oral,
between the parties relating to the subject matter of this
Agreement. This Agreement may not be modified, changed or
discharged, in whole or in part, except by an agreement in
writing signed by the parties.
(c) This Agreement will be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
(e) This Agreement shall be construed and interpreted in accordance
with the laws of the State of Colorado.
EXECUTED as of the 29th day of June, 1995.
---- ---- -
PROGRESSIVE BAGEL CONCEPTS, INC. UNDERSIGNED
/s/ Daniel V. Colangelo
-------------------------------
(Entity Name, if any)
By: /s/ Paul A. Strasen By: _________________________
---------------------
Title: Vice President Print Name: /s/ Daniel V. Colangelo
--------------------- -------------------------
Print Title: President
-------------------------
RELATED PARTY
_____________________________
(Name)
By: _______________________
Title: _______________________
5
<PAGE>
FIRST AMENDMENT
TO
AMENDMENT TO EMPLOYMENT AGREEMENT
AND
TRANSITION AND CONSULTING AGREEMENT
This first amendment to amendment to employment agreement and transition
and consulting agreement is entered into as of this 6th day of March, 1996 by
and between Daniel V. Colangelo ("Colangelo") and Einstein Bros. Bagels, Inc.
(The "Company").
Recitals
--------
Colangelo and the Company are parties to an Amendment to Employment
Agreement and Transition and Consulting Agreement dated January 16, 1996 (the
"Original Agreement"). The parties now mutually desire to amend the Original
Agreement to, among other things, provide that the Consulting Term (as defined
in the Original Agreement) shall commence on March 7, 1996 and provide for
Colangelo's resignation as President and Chief Executive Officer and as a member
of the Board of Directors of the Company. Capitalized terms not defined herein
shall have the meanings ascribed to them in the Original Agreement.
Covenants
---------
In consideration of the mutual covenants hereinafter set forth the parties
hereto agree as follows:
1. Amendments.
-- -----------
(a) Section 1 of the Original Agreement is hereby amended by deleting
the references to "April 30, 1996" in both places in which it appears and
inserting in lieu thereof in both places "March 6, 1996".
(b) Section 2 of the Original Agreement is hereby amended by deleting
the reference to "May 1, 1996" in the first sentence thereof and inserting in
lieu thereof "March 7, 1996".
(c) Section 4 of the Original Agreement is hereby amended by deleting
the reference to "May 1, 1996" and inserting in lieu thereof "March 6, 1996".
(d) Section 11 of the Original Agreement is hereby amended by
deleting the references to "April 30, 1996" and April 30, 1998" and inserting in
lieu thereof "March 6, 1996" and "March 6, 1998", respectively.
<PAGE>
2. Board Resignation. Colangelo hereby resigns as a director of the
-- ------------------
Company effective March 6, 1996, and the Company hereby accepts such
resignation.
3. Effect Of Amendment. From and after the effective date hereof,
-- -------------------
references in the Original Agreement and all documents executed in connection
therewith to the Original Agreement shall be deemed references to the Original
Agreement as amended hereby.
EINSTEIN BROS. BAGELS, INC.
By: /s/ Joel Alam
________________________
Title: Vice President
_____________________
/s/ Daniel V. Colangelo
____________________________
Daniel V. Colangelo
<PAGE>
Exhibit 10.18
April 5, 1996
Mr. Mark Goldston
The Goldston Group
2049 Century Park East, Suite 1100
Los Angeles, California 90067
Dear Mark:
Einstein Bros. Bagels, Inc. (the "Company") is pleased to confirm its offer
to employ you as its President and Chief Executive Officer. We contemplate that
you will commence employment with the Company on or about the date of this
letter.
Your compensation for this position will have three components: base
salary, bonus and stock options. Your annual base salary will be $360,000,
subject to periodic review by the Board of Directors of the Company. You will
receive a bonus of $400,000 for fiscal year 1996, payable in periodic
installments during fiscal year 1996, and you will be eligible for a $400,000
bonus for fiscal year 1997, the receipt of which will be based upon the
achievement of mutually agreed upon reasonable performance goals.
As part of your compensation you will also receive an initial grant of
options under the Company's Amended and Restated 1995 Stock Option Plan (the
"Plan") to purchase 506.8 shares of common stock at an exercise price of
$2,367.80 per share (or assuming that the Company declares a 290:1 stock split
prior to and in connection with a public offering, 146,971 shares of common
stock at an exercise price of $8.165 per share). This initial $1,200,000 grant
will represent your annual grant for fiscal year 1996. Beginning in fiscal year
1997, you will receive an annual grant of options under the Plan (or a successor
plan) to purchase, at a minimum, that number of shares of common stock of the
Company that have an aggregate exercise price of $800,000. The initial option
grant and all subsequent option grants will be subject to the terms and
conditions of the Plan, including the vesting schedule contained in the Plan.
<PAGE>
Mr. Mark Goldston
April 5, 1996
Page 2
Upon commencement of your employment with the Company and for a period of
30 days thereafter, you will have the opportunity to purchase up to that number
of shares of common stock of the Company that have an aggregate fair market
value of $300,000. This is an investment opportunity and, unlike options, is not
subject to vesting conditions.
As an employee of the Company, you will be eligible to participate in the
employee benefit plans that the Company offers to similarly situated executive
officers. You can obtain a description of the benefit plans currently being
offered by the Company by calling Holly Bateman at (303) 202-3416.
It is understood that you will continue to live in California with an
Einstein Bros. office there as well as commute to an office in Golden. You will
operate throughout the organization and company with the full use of corporate
aircraft for all your duties and travels.
We at Einstein Bros. are extremely excited about the opportunity to have
you become a part of our team. Although we are justifiably proud of what we have
accomplished in such a short period of time, we are looking to you to help us
build the world's leading bagel company.
Please do not hesitate to call me if you have any questions. Welcome to our
team!
Very truly yours,
Michael J. Beaudoin
ACCEPTED
- -----------------------------
Mark Goldston
Dated:
-----------------------
<PAGE>
Exhibit 10.19
EMPLOYMENT AGREEMENT
-----------------------
THIS AGREEMENT is made this 24th day of March, 1995, by and between
Progressive Bagel Concepts, Inc., a Delaware corporation (hereinafter referred
to as the "Company"), and Gail Lozoff (hereinafter referred to as "Employee").
WITNESSETH:
WHEREAS, the Company is engaged in the business of operating retail
bakeries featuring bagels and other food items;
WHEREAS, because of the abilities and expertise of Employee in said
business, the Company desires to employ Employee; and
WHEREAS, Employee is willing to accept such employment upon the terms and
conditions stated herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee to perform the duties
described herein, and Employee hereby accepts such employment on the terms and
conditions stated herein. Employee shall hold the position of Vice President of
the Company, which shall at all times be deemed to be an executive office of the
Company.
2. OFFICES WITH COMPANY. Employee shall be a "Founding Director" of the
Company as defined in that certain Agreement to Contribute Assets by and among
the Company, Bagel &
<PAGE>
Bagel, Inc. and Richard Lozoff dated as of March 2, 1995 (the "Contribution
Agreement"). During the term of this Agreement, the Company shall nominate
Employee to serve as a director on the Company's Board of Directors, designating
her as a "Founding Director," and not oppose her election. The foregoing
obligation shall expire on the date on which the Company completes an initial
public offering of shares of its common stock pursuant to a registration
statement filed pursuant to the Securities Act of 1933, as amended.
3. TERM OF EMPLOYMENT. Subject to the provisions for termination set forth
herein, the term of employment under this Agreement shall commence on the date
hereof and shall extend until August 1, 1998 (the "Term").
4. DUTIES OF EMPLOYEE. Employee shall perform the duties commensurate with
her position and experience as shall be assigned to her from time to time by the
Company. Employee shall perform such duties in a diligent manner, shall devote
her entire business time, attention and effort to the affairs of the Company
within the scope of her employment as is reasonably necessary for the proper
rendition of said services, shall diligently promote the interests of the
Company, and shall be just and faithful in carrying out her duties. The Company
hereby agrees that the Employee shall not be required, in connection with the
performance of her duties hereunder, to obtain or maintain a residence in the
State of Colorado or otherwise relocate her primary residence.
5. Compensation. The Company shall compensate Employee for all services
rendered by her hereunder as follows:
2
<PAGE>
(a) salary at a yearly rate of $120,000, payable by the Company in twenty-
six (26) equal installments (subject to any increases as determined by the Board
of Directors from time to time in its sole discretion) after deducting therefrom
all applicable FICA contributions, federal and state income tax withholding, and
any other payroll taxes; and
(b) such stock options as may be granted to Employee pursuant to the
Company's 1995 Employee Stock Option Plan, as it may be amended from time to
time (the "Plan"), or any option plan hereinafter adopted by the Company; and
(c) as an inducement for Employee to execute this Agreement, Employee shall
receive options under the Plan to purchase that number of shares of common stock
of the Company that have a fair market value, as determined in accordance with
the terms of the Plan, of $250,000.00, which options are to be granted on the
date hereof; provided, however, the options granted pursuant to this Section
5(c) shall constitute Employee's option grant for 1995 under the Plan; provided
further, that if the formula under the Plan provides for options in excess of
those granted to Employee under Section 5(c) for 1995, Employee shall receive
such additional options at the same time that options are granted under the Plan
generally to employees for 1995.
6. BENEFITS, VACATIONS AND REIMBURSEMENT OF EXPENSES. In addition to the
compensation payable to Employee pursuant to Section 5 above, and all other
compensation or benefits provided for hereunder, Employee shall be entitled to
such reasonable periods of vacation, with full pay, as is consistent with the
general policy as established by the Board of Directors for
3
<PAGE>
executives and business exigencies of the Company, and such benefits of a
similar type and amount and to the same extent as benefits are provided to other
similarly situated employees of the Company. Employee shall also be entitled to
receive such additional benefits to the same extent as benefits are provided to
other similarly situated employees of the Company as established by the
Company's Board of Directors from time to time. The Employee shall be reimbursed
for the reasonable business-related expenses incurred by her in connection with
the performance of her duties hereunder.
7. CONFIDENTIALITY. Employee agrees to execute and deliver such
confidentiality agreement which is to be required to be executed and delivered
by employees of the Company generally.
8. CONFLICT OF INTEREST. Employee shall take no action, or engage in any
transaction, that could be considered to conflict with the best interests of the
Company, and shall at all times exercise her best judgment and efforts so as to
avoid taking any action, or engaging in any transaction, that might give the
appearance of being in conflict with the best interests of the Company.
9. TERMINATION.
(a) This Agreement and Employee's employment hereunder shall
immediately terminate, without further notice or action, upon the
occurrence of the death of Employee.
(b) Additionally, the Company shall have the right to terminate this
Agreement and Employee's employment with the Company hereunder, effective
upon written notice to
4
<PAGE>
Employee of termination stating the basis for such termination, under only the
following circumstances:
(1) if Employee is permanently disabled (as defined below); or
(2) for "cause," which shall be defined as including any of the
following: (i) any misappropriation of funds or property of the Company by
Employee; (ii) Employee's conviction of a felony, or of any crime involving
moral turpitude, fraud, theft or conversion; (iii) Employee's failure to
submit to a medical examination at the Company's expense within twenty-one
(21) days after receipt of the Company's written request that Employee
submit to such examination; or (iv) a breach of any other material
provision contained in this Agreement.
(c) Employee shall be deemed to be "permanently disabled" hereunder upon
the first to occur of any of the following events:
(1) The receipt by the Company of a written certificate from a
physician approved by the Company and reasonably satisfactory to Employee
stating that, based upon one or more examinations of Employee by such
physician, it is such physician's opinion that, for a period of at least
six (6) consecutive months from the date of certification, Employee is and
will be substantially unable to perform her customary duties for the
Company due to physical or mental infirmity. The Company may request in
writing that Employee submit to such examinations by giving written notice
thereof to Employee.
5
<PAGE>
(2) The adjudication of Employee as an incompetent or a disabled
person and the appointment of a conservator or guardian for her person or
property by a court of competent jurisdiction.
(d) If Employee is terminated by the Company for cause, as that term is
defined in Section 9(b)(2), or if Employee voluntarily terminates her
employment, the Company shall not be obligated to pay Employee any other
compensation with respect to any period after the date of such termination and
all stock options granted to Employee, whether or not vested on the date of such
termination, shall terminate and be of no further force and effect.
(e) If Employee dies or becomes permanently disabled during the Term, or if
Employee is terminated by the Company for any reason other than for cause, the
Company shall pay to Employee the entire amount of the cash compensation
provided for in Section 5 hereof that is payable during the remainder of the
Term payable in a lump sum cash payment within thirty (30) days of the effective
date of termination (provided that, in the case of death or disability of
Employee, the aforementioned cash payment shall be limited to the lesser of: (i)
one year's cash compensation provided for in Section 5, and (ii) the cash
compensation provided for in Section 5 for the remaining balance of the Term),
and all employee stock options granted to Employee that are vested on the
effective date of such termination shall continue to be exercisable for a period
of the lesser of (x) 60 days after the effective date of such termination or (y)
the expiration date of the option. After the
6
<PAGE>
effective date of her termination Employee shall not be eligible to receive
any further employee stock options.
(f) Upon any termination of this Agreement or of the employment of
Employee, or the expiration of this Agreement without renewal of Employee's
employment, Employee shall be deemed automatically to have resigned from any
office or directorship of the Company which she may then hold and shall promptly
deliver to the Company (without retaining an copies thereof) all Company files
and documents, forms, letterhead, business cards, computer disks and any other
written, magnetic or printed materials relating to the business of the Company.
10. COVENANT RESTRICTING SOLICITATION. During the term hereof and for a period
of two (2) years after her employment with the Company, whether pursuant to this
Agreement or otherwise, shall expire or terminate for any reason whatsoever,
Employee shall not, directly or indirectly, solicit or attempt to solicit for
employment or employ any person who is an employee of the Company on the date of
Employee's date of termination or any person who was an employee during the six-
month period prior to such date.
11. COVENANT RESTRICTING COMPETITION. During the term hereof and for a period
of two (2) years after her employment with the Company, whether pursuant to this
Agreement or otherwise, shall expire or be terminated by Company for cause,
Employee shall not, either directly or indirectly, on her own account, or as an
employee, consultant, partner, owner, officer, director or stockholder of any
other person, firm, partnership, corporation or other entity or in any other
7
<PAGE>
capacity, in any way, directly or indirectly, conduct, engage in, be connected
with, have any interest in, or aid or assist anyone in engaging in a business
which derives 20% or more of its revenues from the retail sale of bagels and/or
bagel-related products, or any business in which the Company is engaged at the
time of, or within one hundred eighty (180) days prior to, such expiration or
termination (a "Competitive Business"); provided, however, Employee may have an
interest in any Competitive Business as a passive investor in such Competitive
Business provided such interest does not exceed three percent (3%) of the
outstanding equity securities of any company which has a class of securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended,
or which is traded on a national securities exchange.
12. REMEDIES. Employee agrees that the period of time provided for in Sections
10 and 11 above is the minimum period of time necessary, and that other
provisions and restrictions set forth in Sections 10 and 11 and in other
portions of this Agreement are necessary, to protect the Company and its
successors and assigns in the protection of the business conducted by the
Company. Employee agrees that the services to be performed by her for the
Company are special and unique, that damages cannot compensate the Company in
the event of a violation of the restrictive covenants contained in Sections 10
and 11 hereof, and that injunctive relief shall be essential for the protection
of the Company and its successors and assigns. Accordingly, Employee agrees and
consents that, in the event she shall violate or breach any of said restrictive
covenants the Company shall be entitled to obtain (and she hereby consents to)
such injunctive relief against Employee, without bond, in addition to such
further or other relief as may appertain equity or law.
8
<PAGE>
The exercise or enforcement by the Company of any right or remedy hereunder
shall not preclude the exercise or enforcement by the Company of any other right
or remedy hereunder or which the Company has the right to enforce under
applicable law.
13. EMPLOYEE REPRESENTATIONS. Employee represents and warrants to the Company
that (i) she is free to enter into this Agreement and (ii) this Agreement does
not violate the terms of any other agreement to which Employee is a party or by
which she is bound.
14. WAIVER. Failure by either party to insist upon strict compliance with any
of the terms, covenants or conditions hereof shall not be deemed a waiver of
such term, covenant or condition, nor shall any waiver or relinquishment of any
right or remedy hereunder at any one or more times be deemed a waiver or
relinquishment of such right or remedy at any other time or times.
15. SEVERABILITY Each section, paragraph, term and provision of this
Agreement, and any portion thereof, shall be considered severable and if for any
reason any such portion of this Agreement is held to be invalid, contrary to, or
in conflict with any applicable present or future law or regulation in a final,
unappealable ruling issued by any court, agency or tribunal with competent
jurisdiction in a proceeding to which the Company is a party, that ruling shall
not impair the operation of, or have any other effect upon, such other portions
of this Agreement as may remain otherwise intelligible, which shall continue to
be given full force and effect and bind the parties hereto. Employee agrees that
if any provisions hereof shall be adjudicated to be invalid or unenforceable in
whole or in part, such modifications made to this Agreement as a result of such
9
<PAGE>
adjudication shall be effective only in the particular jurisdiction in which
such adjudication is made. To the extent any provision hereof is deemed
unenforceable by virtue of its scope but may be enforceable by limitations
thereon, the parties hereto agree that the same shall be enforceable to the
fullest extent permissible under the laws and public policies applied in such
jurisdiction in which the enforcement is sought. The parties hereto hereby
authorize any court of competent jurisdiction to modify the restrictive
covenants to the extent necessary to make the same enforceable.
16. BENEFIT. This Agreement shall inure to the benefit of and be binding upon
the Company, its successors and assigns. The rights and benefits of Employee
under this Agreement are personal to her, and are not subject to voluntary or
involuntary alienation, assignment or transfer by her.
17. ENTIRE AGREEMENT. This Agreement contains the entire agreement between the
parties concerning Employee's employment with the Company, and may not be
modified or rescinded except by a written agreement to such effect signed by
both parties.
18. NOTICES. All notices, requests, demands, and other communications required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered by hand or by electronic transmission. If mailed, first
class, certified mail, postage prepaid, or sent by reliable overnight delivery
service and addressed as follows, or at such other addresses as the parties
hereto may from time to time designate in writing, such notices, requests,
demands, and other communications shall be deemed delivered three (3) business
days after being so duly posted:
10
<PAGE>
to the Company: Progressive Bagel Concepts, Inc.
1526 Cole Blvd. Suite 200
Golden, CO 80401
Attention: Kyle T. Craig
Facsimile: (303) 202-3360
with a copy to: Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, IL 60601
Attention: Michael G. Brennan
Facsimile: (312) 984-2299
to Employee: Gail Lozoff
[address]
with a copy to: Smith, Gill, Fisher & Butts
One Kansas City Place
35th Floor
1200 Main Street
Kansas City, Missouri 64105
Attention: David S. Mouber, Esq.
Facsimile: (816) 391-7600
1. GOVERNING LAW. This Agreement and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with the laws of the
State of Colorado applicable to contracts made and to be performed therein.
2. CONFLICT WITH PLAN. The parties acknowledge that to the extent any
provision of this Agreement is inconsistent with any provision of the Plan, the
provisions of this Agreement shall control.
11
<PAGE>
3. SURVIVAL. The parties acknowledge and agree that the covenants contained in
Sections 10 and 11 of this Agreement shall survive the termination or expiration
of Employee's employment with the Company, whether pursuant to this Agreement or
otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
EMPLOYEE: PROGRESSIVE BAGEL CONCEPTS,
INC., a Delaware corporation
/s/ Gail Lozoff /s/ Kyle Craig
__________________________ By: _______________________
Gail Lozoff Its: Vice President
12
<PAGE>
Exhibit 10.20
SECURED LOAN AGREEMENT
This secured loan agreement (the "Agreement") is made and entered into
as of this 2nd day of October, 1995 between Progressive Bagel Concepts, Inc. a
Delaware corporation (PBCI), and Doc's Cheese Company, L.L.C., a Delaware
limited liability company ("DCC").
Recitals
--------
This Agreement is being entered into to provide the following four separate
credit facilities to DCC: (i) a working capital credit facility in the maximum
principal amount of $400,000, (ii) a term loan in the maximum principal amount
of 1,079,944.02; (iii) a term loan in the principal amount of $310,055.98; and
(iv) a term loan in the principal amount of $150,000.
Covenants
---------
In consideration of the mutual representations, warranties, and covenants
set forth herein, and in consideration of any advances made hereunder to or for
the benefit of DCC by PBCI, the parties hereto agree as follows:
ARTICLE I
THE REVOLVER LOAN
-----------------
1.1 The Revolving Credit Facility; Revolver Note. PBCI agrees, on
the terms and subject to the conditions hereinafter set forth, including but not
limited to the conditions to loan advances set forth in Article V hereof and the
limitation on the amount available from time to time to be borrowed set forth in
Section 3.1 hereof, to advance no more than once per week during the period
commencing on the date hereof and ending on the fifth anniversary of the date
hereof (the "Maturity Date"), amounts requested by DCC in an aggregate principal
amount not to exceed $400,000 (the "Revolver Loan"), in integral multiples of
$25,000. Each advance of the Revolver Loan (an "Advance") shall be made by wire
transfer of PBCI to the account of DCC or by regular check of PBCI payable to
DCC and forwarded to DCC by overnight air express to its address as set forth
herein for delivery on the next regular business day. The Revolver Loan shall be
evidenced by a promissory note (the "Revolver Note") of even date herewith in
the form attached hereto as Exhibit A.
1.2 Purposes of Revolver Loan. Proceeds of the Revolver Loan shall
be used by DCC to provide working capital for DCC.
1.3 Payment of Interest. DCC shall pay to PBCI interest, in arrears,
at the rate set forth in Section 3.3 hereof, on the outstanding unpaid principal
balance of the Revolver Loan on the first day of each of PBCI's 13 consecutive
four-week accounting periods used for accounting purposes (each a "Retail
Period") commencing on the first day of the Retail Period
<PAGE>
immediately following the first Retail Period in which DCC initially draws on
the Revolver Loan under this Agreement and continuing through and including the
Maturity Date.
1.4 Repayment of the Revolver Loan. If not earlier paid or if not
accelerated for payment, DCC shall pay to PBCI the outstanding principal balance
of the Revolver Loan and all accrued but unpaid interest thereon on the Maturity
Date.
ARTICLE II
THE TERM LOANS
--------------
2.1 The Term Loans; Term Notes. (a) PBCI agrees, on the terms and
subject to the conditions hereinafter set forth, including but not limited to
the conditions to loan advances set forth in Aricle V hereof and the limitation
on the amount to be borrowed set forth in Section 3.1 hereof, to make the
following loans to DCC:
(i) Term loan A in the principal amount not to exceed
$1,079,944.02;
(ii) Term loan B in the principal amount of $310,055.98; and
(iii) Term loan C in the principal amount of $150,000.
(b) The term loans provided for in this Section 2.1 shall be
made by wire transfer of PBCI to the account of DCC or by regular check of PBCI
payable to DCC and forwarded to DCC by overnight air express to its address as
set forth herein for delivery on the next regular business day.
TERM LOAN A
-----------
2.2 Term Loan A. PBCI agrees to advance at any time and from time to
time during the period commencing on the date hereof and ending on March 31,
1996 (the "Draw Loan Termination Date"), amounts requested by DCC in an
aggregate principal amount not to exceed $1,079,944.02 ("Term Loan A"), in
integral multiples of $25,000. Term Loan A shall be evidenced by a promissory
note in the form attached hereto as Exhibit B ("Term Loan A Note").
2.3 Purpose of Term Loan A. Proceeds of Term Loan A shall be used by
DCC to acquire equipment (the "Equipment") to be used by DCC in the business of
producing cream cheese, cream cheese-related products and spreads pursuant to
the supply agreement of even date herewith between PBCI and DCC (the "Supply
Agreement"), and to repay $322,165.72 of existing secured indebtedness assumed
by DCC pursuant to that certain Purchase Agreement of even date herewith by and
among DCC and Heart to Heart Foods, Inc., a Utah corporation ("HTH"), and the
shareholders of HTH whose names and signatures are set forth on the signature
pages thereto ("Purchase Agreement").
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2.4 Payment of Interest. DCC shall pay to PBCI interest, in arrears,
at the rate set forth in Section 3.3 hereof, on the outstanding unpaid principal
balance of Term Loan A on the first day of each Retail Period commencing on the
first day of the Retail Period immediately following the first Retail Period in
which DCC initially draws on Term Loan A under this Agreement and continuing
through and including the Draw Loan Termination Date. Thereafter DCC shall pay
principal and interest as provided in Section 2.5.
2.5 Repayment of Loan. If not earlier paid or if not accelerated for
payment, the outstanding principal amount of Term Loan A shall, at the close of
business on the Draw Loan Termination Date, be payable as follows: (i)
$929,944.02 of the outstanding principal balance (or if less, then that amount)
shall be payable to PBCI in 61 substantially equal periodic installments of
principal, plus accrued but unpaid interest, with the first such payment due on
the Draw Loan Termination Date and with subsequent payments due on the first day
of each Retail Period thereafter, with the balance due and payable on the
Maturity Date; and (ii) the remainder of the outstanding principal balance (but
in no event more than $150,000) shall be payable to PBCI in 26 substantially
equal periodic installments of principal, plus accrued but unpaid interest, with
the first such payment due on the Maturity Date and with subsequent payments due
on the first day of each Retail Period thereafter, with the balance due and
payable on the seventh anniversary of the date hereof.
Term Loan B
-----------
2.6 Term Loan B. PBCI agrees to make, on the date hereof, a loan to
DCC in the principal amount of $310,055.98 ("Term Loan B"), to be evidenced by a
promissory note in the form attached hereto as Exhibit C ("Term Loan B Note").
2.7 Purpose of Term Loan B. Proceeds of Term Loan B shall be loaned
by DCC to HTH pursuant to that certain secured loan agreement of even date
herewith by and between DCC and HTH ("HTH Loan Agreement"), the proceeds of
which HTH will use to repay in full all secured indebtedness of HTH not assumed
by DCC pursuant to the Purchase Agreement.
2.8 Repayment of Term Loan B. If not earlier paid or if not
accelerated for payment, the outstanding principal amount of Term Loan B shall
be payable to PBCI in 65 sustantially equal period installments of principal,
plus accrued but unpaid interest at the rate set forth in Section 3.3 hereof,
with the first such payment due on the first day of the 12th Retail Period in
PBCI's fiscal year 1995 and with subsequent payments due on the first day of
each Retail Period thereafter, with the balance due and payable on the Maturity
Date.
Term Loan C
-----------
2.9 Term Loan C. PBCI agrees to make a loan to DCC, at the closing of
the transaction set forth in Section 5.4 hereof, in the principal amount of
$150,000 ("Term Loan C"),
3
<PAGE>
to be evidenced by a promissory note in the form attached hereto as Exhibit D
("Term Loan C Note").
2.10 Purpose of Term Loan C. Proceeds of Term Loan C shall be loaned
by DCC to Berkley Ward pursuant to a secured loan agreement by and between DCC
and Berkley Ward in form and substance satisfactory to PBCI in its sole
discretion.
2.11 Repayment of Term Loan C. If not earlier paid or if not
accelerated for payment, the outstanding principal amount of Term Loan C shall
be payable to PBCI on the fifth anniversary of the date hereof.
2.12 Payment of Interest. DCC shall pay to PBCI interest, in
arrears, at the rate set forth in Section 3.3 hereof, on the outstanding unpaid
principal balance of Term Loan C on the first day of each Retail Period with the
first such payment due on October 30, 1995.
ARTICLE III
General Provisions
------------------
3.1 Maximum Principal Balances. The aggregate outstanding principal
balance of the Revolver Loan, Term Loan A, Term Loan B and Term Loan C, shall
not exceed $400,000, $1,079,944.02, $310,055.98 and $150,000, respectively.
3.2 The Loan Account. PBCI shall maintain a loan account on its
books in which shall be recorded all advances and loans made by PBCI to DCC
pursuant to this Agreement, and all payments made by DCC with respect to the
Revolver Loan and Term Loan A, Term Loan B and Term Loan C (collectively, the
"Loans"); provided, however, that failure to maintain such account or record any
advances or loans therein shall not relieve DCC of its obligations to repay the
outstanding principal amount of the Loans, all accrued interest thereon, and any
amount payable with respect thereto in accordance with the terms of this
Agreement and the Revolver Note, the Term Loan A Note, the Term Loan B Note and
the Term Loan C Note (collectively, the "Notes").
3.3 Interest Rate. (a) Interest shall accrue daily on the aggregate
outstanding principal balance of the Loans, for the period commencing on the
date the Loans are made until the Loans are paid in full, at a per annum rate
equal to the rate designated and announced by Bank of America Illinois or its
successor in interest (the "Bank") from time to time as its "reference rate" in
effect at its principal office in Chicago, Illinois, plus 1%. The interest rate
shall be adjusted, from time to time, on the same day on which the Bank adjusts
its "reference rate." As of the date of this Agreement, the Bank's reference
rate is 8.75%. Interest on the outstanding principal amount of the Loans shall
be payable in arrears on the dates set forth herein and at maturity (whether at
stated maturity, by acceleration or otherwise).
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<PAGE>
(b) Interest shall be computed on the basis of a 360-day year and
the actual number of days elapsed.
(c) Any principal payment due under the Notes not paid when due,
whether at stated maturity, by notice of repayment, by acceleration or
otherwise, shall, to the extent permitted by applicable law, thereafter bear
interest (compounded monthly and payable upon demand) at a rate which is 2% per
annum in excess of the rate of interest otherwise payable under this Agreement
in respect of such principal amount until such unpaid amount has been paid in
full (whether before or after judgment).
3.4 Term of this Agreement. This Agreement and all covenants and
agreements of DCC hereunder shall be effective as of the date of its execution
(the "Closing Date") and shall continue in effect until the last to occur of,
(i) the date on which there is no amount (principal or interest) remaining
outstanding under the Notes and (ii) the date on which PBCI no longer has an
obligation to make any advances hereunder if DCC were to make a valid request
for an advance pursuant to and in accordance with Article V hereof.
3.5 One Obligation. All advances and loans made hereunder, and all
interest accrued thereon, shall constitute one obligation of DCC secured by the
security interests granted by this Agreement and by all other security
interests, liens, claims, and encumbrances from time to time hereafter granted
to PBCI by DCC.
3.6 Credit Resources. DCC acknowledges that PBCI has informed it
that PBCI does not currently and may not from time to time in the future have
cash, cash equivalents, and credit resources sufficient to permit PBCI to
necessarily make all requested advances and Loans under this Agreement while
maintaining sufficient working capital for PBCI's operating needs, and DCC
agrees that in the event PBCI shall fail to fund any of the Loans as and to the
extent required hereby and such failure shall constitute a breach of this
Agreement (a "Funding Default"), such Funding Default shall not (a) constitute
fraud (by any person or entity, including PBCI and its successors and assignees)
or (b) give rise to any liability of any person or entity (other than PBCI and
its successors and assignees) in any other tort, and DCC further agrees that it
shall be limited to its remedies in contract and in a non-fraud tort action
against PBCI. PBCI and DCC agree that this Section 3.6 shall not diminish or
otherwise affect in any way the amount of damages for which PBCI may be liable
to DCC in a contract or non-fraud tort action for a Funding Default.
3.7 Payment Method. All payments to be made by DCC hereunder shall
be made in lawful money of the United States, in immediately available funds,
without set off, counterclaims, deduction or withholding of any type. So long
as funds are still available to be drawn by DCC under the Revolver Loan or Term
Loan A, DCC hereby authorizes PBCI to make advances to pay interest on the Loans
when due hereunder.
3.8 Prepayment. Any of the Loans and all accrued and unpaid interest
thereon may be prepaid without premium or penalty, at any time.
5
<PAGE>
ARTICLE IV
SECURITY AND COLLATERAL
-----------------------
4.1 Security Interest. To secure payment and performance of DCC's
obligations hereunder and under the Notes, and any and all other indebtedness,
obligations or liabilities of any kind of DCC to PBCI, whether now existing or
hereafter arising, direct or indirect, absolute or contingent, joint and/or
several, arising by operation of law or otherwise, DCC hereby grants to PBCI a
continuing security interest in and to the following property and interests in
property, whether now owned or hereafter acquired by DCC and wheresoever
located:
(a) all of DCC 's real estate, accounts, equipment (including,
but not limited to machinery, furniture, fixtures, tools, vehicles, and other
tangible property), inventory, leasehold improvements, contract rights
(including its rights as lessee under all leases of real property), general
intangibles, deposit accounts, tax refunds, chattel paper, instruments, notes,
letters of credit, documents, and documents of title;
(b) all insurance proceeds of or relating to any of the
foregoing;
(c) all of DCC 's books, records, and computer programs and data
relating to any of the foregoing; and
(d) all accessories and additions to, substitutions for, and
replacements, products, and proceeds of, any of the foregoing (all of the
foregoing, and all of the security described in Sections 4.2, being referred to
collectively as the "Collateral").
4.2 Pledge of Membership Interests. To evidence the security
interest granted by all of the members of DCC ("Members") to PBCI in all the
issued and outstanding units of membership interest in DCC now or hereafter
owned by the Members ("Units"), PBCI and the Members of DCC (the "Members")
shall execute a pledge agreement substantially in the form attached hereto as
Exhibit E (the "Pledge Agreement").
4.3 Preservation of Collateral and Perfection of Security Interests
Therein. (a) DCC shall execute and deliver to PBCI, concurrently with the
execution of this Agreement, and shall execute and deliver to PBCI at any time
or times hereafter at the request of PBCI or the Agent (as defined below), all
financing statements or other documents, including mortgages on real estate
owned by DCC (the "Security Instruments") (and pay the cost of filing or
recording the same in all public offices deemed necessary by PBCI), as PBCI or
the Agent may request, in forms satisfactory to PBCI, and take all further
action that PBCI or the Agent may request, or which may be reasonably necessary
or desirable, to perfect and keep perfected the security interest in the
Collateral granted by DCC to PBCI or otherwise to protect and preserve the
Collateral and PBCI's security interest therein. Should DCC fail to do so, PBCI
is authorized to sign any such Security Instruments as DCC's agent.
6
<PAGE>
(b) DCC will furnish to PBCI from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as PBCI may reasonably request, all in
reasonable detail.
(c) DCC shall notify PBCI, within five days after the occurrence
thereof, of the acquisition of any property by DCC that is not subject to the
existing liens and security interests in favor of PBCI and of any other event or
condition that may require additional action of any nature in order to create,
preserve, or perfect the liens and security interests of PBCI.
(d) DCC shall cause all tangible Collateral to be maintained and
preserved in the same condition, repair and working order as when new, ordinary
wear and tear excepted, and in accordance with any manufacturer's manual.
4.4 Alternate Security and Pledge Agreements. If requested by PBCI
in order for the transactions contemplated by this Agreement to comply with the
limitations and restrictions of any applicable agreement between PBCI and its
lenders and any banks designated as agent for the lenders ("Agent"), as amended
from time to time, or to obtain a waiver therefrom, DCC hereby agrees that a
security interest as referred to in Section 4.1 hereof and a pledge of Units as
referred to in Section 4.2 hereof may be granted directly to the Agent in lieu
of or in addition to such grants to PBCI, in which event appropriate alterations
may be made to this Article IV and to the forms of the other Security
Agreements, and references herein to such security, pledges, and deliveries
thereof to PBCI may be deemed to refer to the Agent, as appropriate.
4.5 Release and Termination. Upon payment in full of the outstanding
principal balance of the Loans and all accrued interest thereon and the payment
in full of all fees and expenses payable by DCC pursuant to Section 11.4 hereof,
PBCI shall promptly execute and deliver to DCC such documents, instruments,
termination statements and releases as shall be requested by DCC in order to
terminate, release, reconvey and discharge all of the liens, security interests
and encumbrances created by or pursuant to this Agreement, the Pledge Agreement
and the Security Instruments.
ARTICLE V
CONDITIONS OF ADVANCES
----------------------
5.1 General Provisions Applicable to all Loans. Notwithstanding any
other provisions contained in this Agreement, PBCI's obligations to make (i) any
Advance under the Revolver Loan, (ii) any advance under Term Loan A, (iii) Term
Loan B and (iv) Term Loan C, shall be conditioned upon the satisfaction of the
following conditions:
7
<PAGE>
(a) No material adverse change, as determined by PBCI in its sole
discretion, in the financial condition, results of operations, assets, or
business of DCC, shall have occurred at any time or times subsequent to the date
thereof.
(b) Neither a Default (as that term is defined in Article X
hereof) nor any event which, through the passage of time or the service of
notice or both, would mature into a Default (an "Event of Default") shall have
occurred and be continuing.
(c) The representations and warranties contained in Article VI
hereof and in the Pledge Agreement and the other Security Instruments shall be
true and correct on and as of the date such Advance or Loan is made.
(d) DCC shall be in compliance with the terms of the Supply
Agreement.
(e) PBCI shall have received, in form and substance satisfactory
to it, all certificates, consents, affidavits, schedules, instruments, and other
documents which DCC is obligated to provide to PBCI hereunder or which PBCI may
at any time reasonably request.
5.2 Specific Conditions for Revolver Loan. In addition to DCC's
satisfaction of the conditions set forth in Section 5.1 hereof, PBCI's
obligations to make any Advance (including the initial Advance) shall be
conditioned upon the satisfaction of the following conditions:
(a) PBCI shall have received, at least seven days prior to the
day an Advance is to be made under the Revolver Loan, (i) a written request from
a manager of DCC for an Advance in a specified amount, (ii) a certificate of DCC
in the form attached hereto as Exhibit F, which shall be signed by a manager of
DCC, and (iii) copies of all other documents required to be delivered to PBCI
under Section 7.1 below or otherwise reasonably requested.
(b) DCC shall have less than $50,000 in cash or cash equivalents
on hand as of the date of the notice referred to in this Section 5.2.
5.3 Specific Conditions for Term Loan A. In addition to DCC's
satisfaction of the conditions set forth in Section 5.1 hereof, PBCI's
obligations to make any advance (including the initial advance) under Term Loan
A, shall be conditioned upon the satisfaction of the following conditions:
(a) PBCI shall have received, at least seven days prior to the
day an advance is to be made under Term Loan A, (i) a written request from a
manager of DCC for an advance in a specified amount, (ii) a certificate of DCC
in the form attached hereto as Exhibit G, which shall be signed by a manager of
DCC, and (iii) copies of all other documents required to be delivered to PBCI
under Section 7.1 below or otherwise reasonably requested.
(b) PBCI shall have received a certificate of DCC, which shall be
signed by a manager of DCC, and which shall certify that the amount of the
requested advance under
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<PAGE>
Term Loan A is the amount necessary to repay the indebtedness assumed pursuant
to the Purchase Agreement or to purchase Equipment described in such
certificate. Any such Equipment purchases and the amounts thereof, must be
approved by PBCI.
5.4 Specific Conditions for Term Loan C. In addition to DCC's
satisfaction of the conditions set forth in Section 5.1 hereof, PBCI's
obligations to make Term Loan C shall be conditioned upon the satisfaction of
the following conditions:
(a) Berkley Ward shall have entered into a purchase agreement
with Jay Ward, in form and substance satisfactory to PBCI in its sole
discretion, pursuant to which Berkley Ward is obligated to purchase from Jay
Ward, and Jay Ward is obligated to sell to Berkley Ward, 77,090 of Jay Ward's
shares of common stock in HTH at a per-share price of $1.50.
(b) Berkley Ward shall have executed and delivered to DCC a
promissory note in form and substance satisfactory to PBCI in its sole
discretion, evidencing the loan to Berkley Ward of the proceeds of Term Loan C
for the purchase of all or a portion of Jay Ward's equity interest in HTH ("Ward
Note").
(c) The closing of the transactions contemplated in this Section
5.4 shall occur no later than 30 days from the date hereof.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
------------------------------
DCC represents and warrants that:
6.1 Financial Statements. The financial statements to be furnished
to PBCI or the Agent in accordance with Section 7.1 below will be prepared in
conformity with generally accepted accounting principles consistently applied
throughout the periods involved, and will fairly present the financial condition
of DCC at the dates thereof and its results of operations for the periods
indicated.
6.2 Membership Interest. As of the date hereof there are outstanding
466,196 Units, there are no outstanding options, warrants, rights, contracts, or
agreements of any kind for the issuance or sale of any units of membership
interest in DCC or for the issuance or sale of any other securities or
obligations of DCC or for the purchase by DCC of any of its units of membership
interest.
6.3 No Material Adverse Change. Since the date hereof, there has
been no material adverse change in the financial condition, results of
operations, assets, or business of DCC, taken as a whole.
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6.4 No Pending Material Litigation or Proceedings. There are no
actions, suits, investigations or proceedings pending or, to the knowledge of
DCC, threatened against or affecting DCC or the business or properties of DCC,
in any court or before or by any governmental department, commission, board,
agency or instrumentality, or any arbitrator. DCC is not in default with respect
to any order, writ, injunction, or decree of any court or arbitrator or
governmental agency.
6.5 Valid Organization; Due Authorization; Valid and Binding
Agreement. (a) DCC is a limited liability company duly organized, validly
existing, and in good standing under the laws of the State of Delaware, with
power and authority to enter into and perform this Agreement and to issue the
Notes and incur the indebtedness to be evidenced thereby. DCC is qualified to do
business and is in good standing in each jurisdiction in which failure to so
qualify could have a material adverse affect on its property, business,
operations, or prospects.
(b) This Agreement and the Notes have each been duly authorized
by all required action on the part of DCC and each of this Agreement and the
Revolver Note, the Term Loan A Note and the Term Loan B Note has been, and the
Term Loan C Note will be, duly executed and delivered by DCC and the Revolver
Note, the Term Loan A Note, and the Term Loan B Note each constitutes, and the
Term Loan C Note will constitute when executed, the legal, valid, and binding
obligation of DCC enforceable in accordance with its terms.
(c) The execution and delivery of this Agreement and the Revolver
Note, the Term Loan A Note and the Term Loan B Note and the performance by DCC
of its obligations hereunder and thereunder are not, and the execution and
delivery of the Term Loan C Note and the performance of its obligations
thereunder will not be, in contravention of any law, rule or regulation,
including without limitation Regulation G, T, U, or X of the Board of Governors
of the Federal Reserve System, and will not conflict with or result in any
breach of any of the provisions, or constitute a default under or result in the
creation or imposition of any lien or encumbrance (except as expressly provided
herein) upon any of the property of DCC pursuant to any of the provisions of the
Certificate of Formation or limited liability agreement of DCC or any agreement
or instrument to which DCC is a party or by which it or its assets is bound.
(d) No consent, authorization, approval, or other action by, and
no notice to or filing with, any governmental authority or regulatory body or
any other person, which has not been obtained or taken, is required for the
execution and delivery of, or the performance by DCC of its obligations under,
this Agreement or the Notes.
6.6 Conduct of Business. Since its inception, DCC has not engaged in
any business other than the business of producing cream cheese.
6.7 Absence of Material Liabilities. DCC has no material liabilities
or obligations, either accrued, absolute, contingent, or otherwise, except (a)
as set forth in its most recent unaudited balance sheet, (b) normal liabilities
and obligations incurred in the ordinary
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course of business since the date of its most recent unaided balance sheet, and
(c) obligations under contracts and agreements entered into in the ordinary
course of business.
6.8 Tax Matters. (a) DCC has filed all federal, state, and local tax
returns which are required to be filed, except for extensions duly obtained, and
has paid, or made provisions for the payment of, all taxes which have become due
pursuant to such returns or pursuant to any assessment received by DCC, except
such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided.
(b) DCC will be recognized for tax purposes as a partnership
within the meaning of Section 7701(a)(2) of the Internal Revenue Code of 1986,
as amended ("Code"), and DCC is not a "publicly traded partnership" within the
meaning of Section 7704 of the Code.
6.9 Ownership of Collateral; Security Interest Priority. At the time
any Collateral becomes subject to a security interest of PBCI hereunder, unless
PBCI shall otherwise consent, (a) DCC shall be the lawful owner of such
Collateral and have the right and authority to subject the same to the security
interest of PBCI, (b) none of the Collateral shall be subject to any lien or
encumbrance other than that in favor of PBCI, and (c) there shall be no
effective financing statement covering any of the Collateral on file in any
public office, other than in favor of PBCI. This Agreement creates in favor of
PBCI a valid and perfected first-priority security interest in the Collateral
enforceable against DCC and all third parties and secures the payment of DCC 's
obligations hereunder and under the Note, and all other obligations of DCC to
PBCI, whether now existing or hereafter arising, and all filings and other
actions necessary or desirable to create, preserve, or perfect such security
interest have been duly taken. Notwithstanding the foregoing provisions of this
Section 6.9, clause (b) and (c) and the immediately preceding sentence of this
Section 6.9 shall not be inaccurate by reason of any purchase money security
interest (including pursuant to a financing lease) in any equipment purchased by
DCC with PBCI's consent.
6.10 Location of Offices, Records, and Facilities. DCC 's chief
executive office and chief place of business and the office where DCC keeps its
records concerning its accounts, contract rights, chattel papers, instruments,
general intangibles, and other obligations arising out of or in connection with
the operation of its business or otherwise ("Receivables"), and all originals of
all leases and other chattel paper which evidence Receivables, are located in
the State of Utah, at the address of DCC set forth in Section 11.5 hereof (as
such address may be changed from time to time in accordance therewith). The
federal tax identification number of DCC is 87-0546726. The name of DCC is
"Doc's Cheese Company, L.L.C." and DCC operates under no other names.
6.11 Location of Inventory, Fixtures, Machinery, and Equipment. (a)
All Collateral consisting of inventory, fixtures, machinery, or equipment is
located at the address of DCC set forth in Section 11.5 hereof and at no other
locations without the prior written consent of PBCI.
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(b) If the Collateral described in clause (a) is kept at leased
locations, DCC has used its best efforts to obtain appropriate landlord lien
waivers or subordination satisfactory to PBCI, unless such has been waived in
writing by PBCI for the particular instance.
(c) If the Collateral described in clause (a) is warehoused, DCC
has sent appropriate warehousemen's notices, each reasonably satisfactory to
PBCI, unless such has been waived by PBCI for the particular instance.
6.12 Investment Company Act. DCC is not an "investment company", or a
company "controlled" by an "investment company", within the meaning of the
Investment Company Act of 1940, as amended.
6.13 Public Utility Holding Company Act. DCC is not a "holding
company", or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
6.14 Subsidiaries. DCC has no Subsidiaries as of the date of this
Agreement.
ARTICLE VII
AFFIRMATIVE COVENANTS
---------------------
DCC covenants and agrees that so long as this Agreement remains in
effect:
7.1 Financial Statements. (a) DCC shall cause to be furnished to
PBCI and, at PBCI's request, to the Agent: (i) as soon as practicable and in
any event within 20 days after the end of each Retail Period, statements of
income and cash flows of DCC for such period and for the period from the
beginning of the then current fiscal year to the end of such Retail Period and a
balance sheet of DCC as of the end of such Retail Period, setting forth in each
case, in comparative form, figures for the corresponding periods in the
preceding fiscal year, certified as accurate by a manager or by the chief
financial officer or treasurer of DCC, subject to changes resulting from normal,
recurring year-end adjustments; (ii) as soon as practicable and in any event
within 60 days after the end of each fiscal year, statements of income and cash
flows of DCC for such year, and a balance sheet of DCC as of the end of such
year, setting forth in each case, in comparative form, corresponding figures for
the preceding fiscal year and as of the end of the preceding fiscal year,
audited by independent certified public accountants selected by PBCI and
reasonably satisfactory to DCC; and (iii) as soon as practicable (but in any
event not more than five business days after the president of DCC obtains
knowledge of the occurrence of an event or the existence of a circumstance
giving rise to an Event of Default or a Default), notice of any and all Events
of Default or Defaults hereunder.
(b) All financial statements delivered to PBCI, and if
applicable, the Agent pursuant to the requirements of Section 7.1(a) shall be
prepared in accordance with generally accepted accounting principles
consistently applied. Together with each delivery of
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financial statements required by Section 7.1(a), DCC shall deliver to PBCI an
officer's certificate stating that there exists no Default or Event of Default,
or, if any Default or Event of Default exists, specifying the nature thereof,
the period of existence thereof and what action DCC proposes to take or has
taken with respect thereto. Together with each delivery of financial statements
required by Section 7.1(a)(ii) above, DCC shall deliver to PBCI a certificate of
the accountants who performed the audit in connection with such statements
stating that in making the audit necessary to the issuance of a report on such
financial statements, they have obtained no knowledge of any Default or Event of
Default, or, if such accountants have obtained knowledge of a Default or Event
of Default, specifying the nature and period of existence thereof. Such
accountants shall not be liable by reason of any failure to obtain knowledge of
any Default or Event of Default which would not be disclosed in the ordinary
course of an audit. DCC authorizes PBCI to discuss the financial condition of
DCC with DCC 's independent public accountants and agrees that such discussion
or communication shall be without liability to either PBCI or DCC 's independent
public accountants.
7.2 Inspection. PBCI, or any person designated from time to time by
PBCI, shall have the right, from time to time hereafter, to call at DCC's place
or places of business during ordinary business hours, and, without hindrance or
delay, (a) to inspect, audit, check, and make copies of and extracts from DCC 's
books, records, journals, orders, receipts, and any correspondence and other
data relating to the business of DCC or to any transactions between the parties
hereto, and (b) to discuss the affairs, finances, and business of DCC with the
officers of DCC, its independent certified public accountants and any of its
consultants.
7.3 Conduct of Business. (a) DCC shall (i) maintain its existence
and qualification to do business in good standing in each jurisdiction where the
failure to be so qualified would have a material adverse effect on the financial
condition of DCC, (ii) maintain in full force and effect all licenses, bonds,
franchises, leases, patents, contracts, and other rights necessary to the
conduct of its business, and (iii) comply with all applicable laws and
regulations of any federal, state, or local governmental authority, including
those relating to environmental matters, labor and employment laws and employee
benefit matters.
(b) DCC shall duly pay and discharge (i) all lawful claims,
whether for labor, materials, supplies, services, or anything else, which might
or could, if unpaid, become a lien or charge upon its property or assets, unless
and to the extent only that the validity thereof is being contested in good
faith and by such appropriate proceedings, (ii) all of its trade bills when due
in accordance with customary practice, and (iii) all taxes.
(c) DCC shall conduct its business and operations in a manner
consistent with that of an establishment for the production of cream cheese,
cream cheese-related products and spreads ("Products").
7.4 Insurance. (a) DCC shall keep and maintain at its sole cost and
expense, (i) insurance on their assets for at least 100% of the full replacement
value (or the full insurable value) thereof against loss or damage by fire,
theft, explosion, and all other hazards and risks ordinarily insured against by
other owners or users of such properties in similar businesses
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similarly situated; and (ii) comprehensive general liability insurance relating
to DCC's ownership and use of its assets, including premises and operations
coverage, owners and contractors protective coverage, products and completed
operations coverage, full blanket contractual coverage, broad form property
damage coverage, and a waiver of any and all right of subrogation against PBCI.
(b) All such policies of insurance shall be in such form and in
such amounts as is customary in the case of other owners or users of like
properties in similar businesses, with insurers as shall be reasonably
satisfactory to PBCI. Upon demand, DCC shall deliver to PBCI the original (or
certified) copy of each policy of insurance, and evidence of payment of all
premiums for each such policy. Such policies of insurance (except those of
public liability) shall contain an endorsement in form and substance acceptable
to PBCI, showing PBCI as an additional insured, and shall contain an endorsement
providing that DCC's policies are primary with respect to PBCI and that any
other insurance maintained by PBCI is excess and non-contributing. Such
endorsement, or an independent instrument furnished to PBCI, shall provide that
all insurance companies will give PBCI at least 30 days prior written notice
before any such policy or policies of insurance shall be altered or canceled.
DCC hereby directs all insurers under such policies of insurance (except those
of public liability) to pay all proceeds payable thereunder for claims in excess
of the aggregate amount of $50,000 directly to PBCI, and DCC irrevocably
appoints PBCI (and all officers, employees, or agents designated by PBCI), as
DCC's true and lawful agent (and attorney-in-fact) for the purpose of endorsing
the name of DCC on any check, draft, instrument, or other item of payment for
such proceeds. Any proceeds received by PBCI shall be applied to DCC's
obligations hereunder, and any overage shall be paid to DCC. DCC irrevocably
appoints PBCI, from and after a Default or an Event of Default, as DCC's true
and lawful agent (and attorney-in-fact) for the purpose of making, settling, and
adjusting claims under such policies of insurance and for making all
determinations and decisions with respect to such policies of insurance. In the
event DCC at any time or times hereafter shall fail to obtain or maintain any of
the policies of insurance required above or to pay any premium in whole or in
part relating thereto, then PBCI, without waiving or releasing any Default or
Event of Default hereunder, may at any time or times thereafter (but shall be
under no obligation to do so) obtain and maintain such policies of insurance and
pay such premium and take any other action with respect thereto which PBCI deems
advisable. All sums so disbursed by PBCI, including reasonable attorneys' fees,
court costs, expenses, and other charges relating thereto, shall be part of
DCC's obligations hereunder, payable by DCC to PBCI on demand.
7.5 Notice of Suit or Adverse Change in Business. DCC shall, as soon
as possible, and in any event within five business days after DCC learns of the
following, give written notice to PBCI of (a) any material proceeding(s) being
instituted or threatened to be instituted by or against DCC or HTH in any
federal, state, or local court or before any commission or other regulatory body
(federal, state, or local), and (b) any material adverse change in the financial
condition, results of operations, business, or assets of DCC or HTH.
7.6 Use of Proceeds. Except as otherwise authorized in writing by
PBCI, DCC shall use the proceeds of the Loans for the purposes set forth in
Article I and Article II hereof. DCC will not, directly or indirectly, use any
part of such proceeds for the purpose of
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purchasing or carrying any margin stock within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System or to extend credit to any
person for the purpose of purchasing or carrying any such margin stock.
7.7 Additional Members. DCC agrees to cause each person other than
PBCI becoming a member of DCC from time to time after the date of the Pledge
Agreement to execute and deliver to PBCI, within five business days after such
person becomes a member of DCC, a copy of the Pledge Agreement.
7.8 Place of Business. DCC will provide PBCI with 60 days' prior
written notice of any proposed change in the location of its chief executive
office. DCC shall not change its name without the prior written consent of PBCI.
7.9 Location of Inventory, Fixtures, Machinery, and Equipment. (a)
All Collateral consisting of inventory, fixtures, machinery, and equipment,
shall at all times be located at the address of DCC set forth in Section 11.5
hereof, and at no other locations without the prior written consent of PBCI.
(b) If the Collateral described in clause (a) is at any time kept
at leased locations, DCC shall use its best efforts to obtain appropriate
landlord lien waivers or subordination satisfactory to PBCI, unless such has
been waived in writing by PBCI for a particular instance.
(c) If the Collateral described in clause (a) is at any time
warehoused, DCC shall send appropriate warehousemen's notices, each satisfactory
to PBCI, unless such has been waived by PBCI for the particular instance.
7.10 Documents and Notices of HTH. DCC shall provide to PBCI,
promptly following receipt by DCC, copies of all documents, communications and
notices delivered to DCC under the HTH Loan Agreement, including but not limited
to, financial statements of HTH (periodic and annual) and any notice of default.
ARTICLE VIII
NEGATIVE COVENANTS
------------------
DCC covenants and agrees that, so long as this Agreement remains in
effect (unless PBCI shall give its prior written consent thereto):
8.1 Guarantees; etc. DCC shall not guarantee, endorse or otherwise
in any way become or be responsible for obligations of any other person, whether
by agreement to purchase the indebtedness of any other person or through the
purchase of goods, supplies, or services, or by agreement to maintain net worth,
working capital, or other balance sheet
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covenants or conditions, or by way of stock purchase, capital contribution,
advance, or loan for the purpose of paying or discharging any indebtedness or
obligation of such other person or otherwise, except endorsements of negotiable
instruments for collection in the ordinary course of business and except as
specifically contemplated by Term Loan A, Term Loan B and Term Loan C.
8.2 Disposal of Property. DCC shall not sell, lease, transfer, or
otherwise dispose of any of its properties, assets, and rights (or agree to
sell, lease, transfer, or otherwise dispose of any of its properties, assets,
and rights) (including the Collateral) to any party except in the ordinary
course of business and except as contemplated in that certain Option Agreement
of even date herewith by and among PBCI, DCC and the Members ("Option
Agreement").
8.3 Compensation to Members. Other than (i) reasonable salaries and
other normal benefits to be paid to Berkley Ward, which salaries and benefits
must be approved by PBCI, (ii) distributions required to be made by Section 6.2
of DCC's limited liability company agreement, (iii) the funding of the
transactions for which the proceeds of Term Loan B and Term Loan C are to be
used, (iv) as contemplated in the Employment Agreement of even date herewith by
and between C. Reed Ernstrom and DCC (the "Ernstrom Employment Agreement"), and
(v) salary adjustments approved by PBCI, which approval shall not be
unreasonably withheld, DCC shall not make any loans to, or pay any compensation,
bonuses, fees, options, or other amounts to any member or to any of the
affiliates or immediate family members of any such member. DCC shall not,
without the prior written consent of PBCI, amend the Ernstrom Employment
Agreement or enter into or amend any other employment arrangement or agreement.
8.4 Distributions and other Transactions. DCC shall not, directly or
indirectly, (a) redeem, purchase, or otherwise retire any of its units of
membership interest, (b) make any distributions to its members other than
distributions required to be made by Section 6.2 of DCC's limited liability
company agreement, or (c) return capital of DCC to its members.
8.5 Additional Indebtedness; Capital Expenditures; Material
Transactions.
(a) Other than the indebtedness to be assumed and discharged by
DCC pursuant to the Purchase Agreement, DCC shall not incur additional
indebtedness in excess of $5,000 as to any one item and $50,000 in the aggregate
without the consent of PBCI.
(b) DCC shall not make or obligate itself to make capital
expenditures aggregating more than $10,000, other than capital expenditures
approved pursuant to Section 5.3(b), or incur any material obligations or
liabilities or enter into any material transaction other than in the ordinary
course of business of producing Products.
8.6 Mergers, Consolidations, Acquisitions, etc. Other than as
contemplated in the Option Agreement, the License Agreement of even date
herewith by and between PBCI and DCC ("License Agreement") and the Supply
Agreement, and other than pursuant to the transactions for which the proceeds of
Term Loan B and Term Loan C are to be used, DCC shall not (a) be a party to any
consolidation, reorganization, or merger; (b) sell or otherwise transfer
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any part of its assets except in the ordinary course of business; (c) effect any
change in its capital structure or in any of its business objectives, purposes,
and operations; (d) acquire any capital in or equity ownership of another
corporation, partnership, or other business organization; (e) engage in any
business other than the production of cream cheese; or (f) liquidate or dissolve
or take any action with a view toward liquidation or dissolution.
8.7 Amendments to Documents; Foreclosure on HTH Loan.
(a) DCC shall not make any changes in or amendments to, or in
the case of the documents set forth in clauses (ii), (iii) and (iv) below, waive
any provision or breach of or default under, the following documents as they are
in effect as of the date hereof, without the prior written consent of PBCI: (i)
its Certificate of Formation or limited liability company agreement, (ii) the
Ernstrom Employment Agreement, (iii) the Ward Note, (iv) the HTH Loan Agreement
(and any ancillary document thereto) and (v) the Purchase Agreement (and any
ancillary document thereto)
(b) DCC shall not foreclose on the loan made to HTH pursuant to
the HTH Loan Agreement without the prior written consent of PBCI.
8.8 Issuance of Units of Membership Interests; Grant of Options. DCC
will not issue any additional units of membership interest or grant any option,
warrant, or similar right to acquire units membership interest.
8.9 Liens. DCC shall not create, incur, or suffer to exist any lien
on any of the assets, rights, revenues or property, real, personal, or mixed,
tangible or intangible, whether now owned or hereafter acquired, of DCC, other
than liens in favor of PBCI and liens otherwise permitted under Section 6.9
hereof.
8.10 Transactions with Affiliates. DCC shall not become a party to, or
become liable in respect of, any contract or undertaking with any Affiliate (as
defined in Section 11.3 hereof) except in the ordinary course of business and on
terms not less favorable to DCC than those which could be obtained if such
contract or undertaking was an arms length transaction with a person other than
an affiliate.
8.11 Investments. DCC shall not create or otherwise invest in any
corporation, partnership, or other entity.
ARTICLE IX
CONDITIONS OF CLOSING
---------------------
PBCI's obligations hereunder shall be subject to (a) the performance
by DCC prior to or on the Closing Date of all of its covenants therefore to be
performed under this Agreement, (b) the accuracy of DCC 's representations and
warranties contained in this
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Agreement on the Closing Date, and (c) the satisfaction, prior to or on the
Closing Date, of the following further conditions:
9.1 Opinion of Counsel. (a) PBCI shall have received on the Closing
Date from Parsons Behle & Latimer an opinion, dated the Closing Date, in the
form attached hereto as Exhibit H with all blanks appropriately completed.
(b) PBCI shall have received on the Closing Date from Parsons
Behle & Latimer an opinion, dated the Closing Date, that DCC will be taxed as a
partnership within the meaning of Section 7701(a)(2) of the Code and that DCC
will not be a "publicly traded partnership" within the meaning of Section 7704
of the Code.
9.2 Proceedings and Documents. All proceedings to be taken in
connection with the transactions contemplated by this Agreement and all
documents incident to such transactions shall be satisfactory in form and
substance to PBCI and its counsel, and PBCI shall have received all documents or
other evidence which it and its counsel may reasonably have requested in
connection with such transaction, including copies of records of all proceedings
in connection with such transaction and compliance with the conditions set forth
in this Article IX, in form and substance satisfactory to PBCI and its counsel.
9.3 Executed Documents. DCC, and to the extent applicable, the
Members, shall have each duly executed the following documents to which they are
parties, and shall have delivered to PBCI the following:
(a) this Agreement;
(b) the Revolver Note, the Term Loan A Note and the Term Loan B
Note;
(c) the Pledge Agreement;
(d) the License Agreement;
(e) the HTH Loan Agreement;
(f) the Supply Agreement.
(g) the sublease with PBCI;
(h) the Option Agreement;
(i) the Ernstrom Employment Agreement;
(j) a letter from Members regarding continuation of the
existence of DCC in certain circumstances; and
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(k) such financing statements or other documents for filing with
public officials with respect to the Security Instruments as
PBCI may reasonably request.
9.4 No Defaults. There shall exist no Event of Default or Default.
9.5 Additional Deliveries. PBCI shall have received, in form and
substance satisfactory to it, copies of the following documents:
(a) DCC's Certificate of Formation, certified as true and
correct by the Secretary of State of Delaware, dated within ten days prior to
the Closing Date, and certified as true and correct as of the Closing Date by a
manager of DCC;
(b) DCC's limited liability company agreement, as in force and
effect on the Closing Date, certified as true and correct by a manager of DCC;
(c) certificate of good standing of DCC from the Secretary of
State of Delaware dated within ten days prior to the Closing Date; and
(d) authorizing resolutions of the managers and members of DCC
and evidence of other action taken by DCC to authorize, among other things, the
execution, delivery, and performance by DCC of this Agreement, the Notes and the
Security Instruments and the consummation of the transactions contemplated
hereby, including resolutions authorizing DCC to enter into the Supply
Agreement, the License Agreement, the Option Agreement, the Ernstrom Employment
Agreement, the HTH Loan Agreement, and all other documents contemplated herein
and therein, certified as true and correct as of the Closing Date by a manager
of DCC.
9.6 Opinion of Auditors. PBCI shall have received on the Closing
Date from PBCI's independent public accountants an opinion, dated the Closing
Date, in form and substance satisfactory to PBCI, to the effect that the Notes
and the obligations incurred hereunder are deemed to be debt, and not equity, in
accordance with generally accepted accounting principles.
9.7 Tangible Net Worth. PBCI shall have received evidence,
satisfactory to it, that DCC has, on the Closing Date, tangible net worth of at
least $50,000.
9.8 Compliance with PBCI Credit Agreements. PBCI shall have
determined that this Agreement complies with applicable restrictions or
limitations under any lending arrangements or credit agreements to which PBCI is
a party or obtained a written waiver of noncompliance of the transactions
contemplated hereby with such agreements.
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ARTICLE X
DEFAULT, RIGHTS AND REMEDIES OF PBCI
------------------------------------
10.1 Default. The occurrence of any of the following events or acts
shall constitute a default ("Default"):
(a) Default in the payment when due of any portion of the
principal on any of the Notes and the continuance of such default for a period
of three days;
(b) Default in the payment when due of any portion of the
interest on the outstanding principal of any of the Notes and the continuance of
such default for a period of 10 days;
(c) any representation or warranty now or hereafter made in this
Agreement, the Pledge Agreement, any of the Notes, any other Security
Instrument, or any certificate hereunder or thereunder shall not be true, or any
certificate, statement, report, financial data, or notice furnished at any time
by DCC to PBCI shall be materially inaccurate;
(d) any breach of, or failure to perform or observe, any
covenant, condition, or agreement contained in the Pledge Agreement, or in any
other Security Instrument, which in each case shall continue unremedied for a
period of 10 calendar days following notice thereof from PBCI, provided that
such grace period shall not apply, and DCC shall be in Default immediately upon
such breach, if, in PBCI's judgment, such breach may not be reasonably cured by
DCC during such cure period;
(e) the breach of, or failure to perform or observe, any
covenant, condition, or agreement contained in Sections 7.6, 8.1, 8.2, 8.4, 8.6,
8.7, 8.8, 8.10, or 8.11 of this Agreement;
(f) any breach of, or failure to perform or observe, any other
covenant, condition, or agreement contained in this Agreement or any of the
Notes, which shall continue unremedied for a period of 10 calendar days
following notice thereof from PBCI, provided that such grace period shall not
apply, and DCC shall be in Default immediately upon such breach, if, in PBCI's
judgment, such breach may not reasonably be cured by DCC during such cure
period;
(g) DCC shall (i) generally not, or shall be unable to, or shall
admit in writing its inability to pay its debts as such debts become due, (ii)
make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver, or trustee for it or a
substantial part of its assets, (iii) commence any proceeding under any
bankruptcy, reorganization, arrangements, readjustment of debt, dissolution, or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect, (iv) have any such petition or application filed or any such proceeding
commenced against it in which an order for relief is entered or adjudication or
appointment is made and which remains undismissed for a period of 60 days or
more, (v) by any act or omission, indicate its consent to, approval of, or
knowing acquiescence in any such petition, application, or proceeding, or order
for relief, or the
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appointment of a custodian, receiver, or trustee for all or any substantial part
of its properties, or (vi) suffer any such custodianship, receivership, or
trusteeship to continue undischarged for a period of 60 days or more;
(h) C. Reed Ernstrom dies, voluntarily terminates his employment
with DCC or substantially reduces his responsibilities for DCC's operations or
DCC terminates him for any reason whatsoever and DCC does not replace him within
90 days thereafter with an individual who is acceptable to PBCI in its sole
discretion;
(i) DCC's default under, or breach of any provision of, the
Supply Agreement, the License Agreement, the Option Agreement or the sublease
with PBCI;
(j) dissolution or liquidation of DCC;
(k) there occurs a material adverse change in the financial
condition, results of operations, assets, or business of DCC taken as a whole;
(l) DCC shall (i) fail to pay any indebtedness for borrowed money
(other than the Notes) of DCC, or any interest or premium thereon, when due
(whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise) and any applicable grace periods shall have expired, or (ii) fail to
perform or observe any term, covenant, or condition on its part to be performed
or observed under any agreement or instrument relating to any such indebtedness,
when required to be performed or observed, if the effect of such failure to
perform or observe is to accelerate, or to permit the acceleration, after the
giving of notice, of the maturity of such indebtedness, or (iii) default in the
performance or observance of any obligations under leases of real property if
the effect of such default is to permit the termination of such lease;
(m) one or more judgments, decrees or orders for the payment of
money in excess of $100,000 in the aggregate and not otherwise fully covered by
insurance shall be rendered against DCC, and such judgments, decrees, or orders
shall continue unsatisfied and in effect for a period of 20 consecutive days
without being vacated, discharged, satisfied, escorted, stayed, or bonded
pending appeal; or
(n) the Pledge Agreement, any other Security Instrument, or the
security interests created under this Agreement shall be terminated,
invalidated, or set aside or be declared ineffective or inoperative or in any
way cease to give or provide to PBCI the benefits purported to be created
thereby.
10.2 Default; Remedies. (a) In the event a Default shall exist
or occur PBCI may:
(i) terminate its obligations under this Agreement and cease to
make any further advances or loans under Articles I and II, and shall have
the right to declare
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any or all of the Notes due and payable in full, without demand,
presentment, or notice of any kind;
(ii) in its sole and absolute discretion, exercise any one or
more of the rights and remedies accruing to a secured party under the
Uniform Commercial Code with respect to the Collateral and any other
applicable law upon default by a debtor;
(iii) exercise its rights under the Pledge Agreement and/or the
other Security Instruments;
provided, however, that in the case of any event or condition described in
Section 10.1(g) with respect to DCC, PBCI's obligations under this Agreement
shall automatically terminate forthwith and all amounts owed by DCC hereunder
and under the Notes shall automatically become immediately due and payable
without notice, demand, presentment, protest, diligence, notice of dishonor, or
other formality, all of which are hereby expressly waived
(b) In connection with the exercise of PBCI's rights and remedies
provided in Section 10.2(a)(ii), DCC hereby agrees to assemble the Collateral
and make it available to PBCI at a place to be designated by PBCI which is
reasonably convenient to both parties, authorizes PBCI to take possession of the
Collateral with or without demand and with or without process of law and to sell
and dispose of the same at public or private sale and to apply the proceeds of
such sale to the costs and expenses thereof (including reasonable attorneys'
fees and disbursements incurred by PBCI) and then to the payment and
satisfaction of the Loans. Any requirement of reasonable notice shall be met if
PBCI sends such notice to DCC, by registered or certified mail, at least five
days prior to the date of sale, disposition, or other event giving rise to a
required notice. PBCI may be the purchaser at any such sale. DCC expressly
authorizes such sale or sales of the Collateral in advance of and to the
exclusion of any sale or sales of or other realization upon any other collateral
securing the Loans. PBCI shall have no obligation to preserve rights against
prior parties. DCC hereby waives as to PBCI any right of subrogation or
marshaling of such Collateral and any other collateral for the Loan. To this
end, DCC hereby expressly agrees that any such collateral or other security of
DCC or any other party which PBCI may hold, or which may come to any of them or
any of their possession, may be dealt with in all respects and particulars as
though this Agreement were not in existence. The parties hereto further agree
that public sale of the Collateral by auction conducted in any county in which
any Collateral is located or in which PBCI or DCC does business after
advertisement of the time and place thereof shall, among other manners of public
and private sale, be deemed to be a commercially reasonable disposition of the
Collateral. DCC shall be liable for any deficiency remaining after disposition
of the Collateral.
(c) All of PBCI's rights and remedies under this Agreement are
cumulative and nonexclusive.
10.3 No Waiver. PBCI's failure, at any time or times hereafter, to
require DCC's strict compliance with or performance of any provision of this
Agreement shall not waive, affect, or diminish any right of PBCI thereafter to
demand such strict compliance or performance
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therewith. Any suspension or waiver by PBCI of a Default or an Event of Default
by PBCI under this Agreement or any of the Notes shall not suspend, waive, or
affect any other Default or Event of Default by DCC under this Agreement or any
of the Notes, whether the same is prior or subsequent thereto and whether of the
same or of a different kind or character. None of the undertakings, agreements,
warranties, covenants, and representations of DCC contained in this Agreement or
the Note and no Default or Event of Default by DCC under this Agreement or the
Notes shall be deemed to have been suspended or waived by PBCI unless such
suspension or waiver is in writing signed by an officer of PBCI.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 No Oral Change. This Agreement may not be changed orally, but
only by an agreement in writing and signed by the party against whom enforcement
of any waiver, change, modification, or discharge is sought.
11.2 Assignment. DCC may not assign any of its rights or delegate any
of its obligations under this Agreement without PBCI's written consent, which
consent may be withheld in PBCI's sole discretion. PBCI may assign any of its
rights or delegate any of its obligations under this Agreement (including
assignment of this Agreement, any of the Notes, the Pledge Agreement and the
Security Instruments). Any such assignment shall vest in the assignee all of
the benefits under the documents so assigned.
11.3 Certain Definitions. For purposes of this Agreement, the term
"Affiliate" of a specified person shall mean any person or entity which
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.
11.4 Costs and Attorneys' Fees. (a) Except as provided in Section
2.3 hereof and subsection (b) or (c) of this Section 11.4, each of the parties
hereto shall pay its own expenses (including accounting fees) incident to the
negotiation and execution of this Agreement and to the consummation of the
transactions contemplated hereby.
(b) DCC shall pay all reasonable attorneys' fees and any costs
and charges relating to or arising out of (i) the negotiation and drafting of
this Agreement and all related documents and (ii) the enforcement by PBCI of its
rights to collect any portion of the Loans.
(c) In any action not founded solely on grounds covered by
subsection (b) of this Section 11.4, the party to the action who does not
prevail shall pay to the prevailing party the court costs and reasonable
attorney's fees and other expenses (including, but not limited to, fees and
expenses of expert witnesses or consulting experts) incurred directly or
indirectly by
23
<PAGE>
the prevailing party in connection with its prosecution or defense of the
action, as the case may be.
11.5 Communications and Notices. All communications and notices
provided for in this Agreement or under the Note shall be in writing and shall
be deemed to have been duly given if delivered personally to the party to whose
attention the notice is directed or sent by overnight express, facsimile
transmission, express mail delivery service, or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:
If to DCC:
Doc's Cheese Company, L.L.C.
761 South 200 West
Richmond, Utah 84333
Attention: Reed Ernstrom
Facsimile: (801) 258-5279
with a copy to:
Parsons Behle & Latimer
201 South Main Street, Suite 1800
Salt Lake City, Utah 84111
Attention: William D. Holyoak, Esq.
Facsimile:
If to PBCI:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Attention: Chairman
Facsimile: (303) 202-3490
with a copy to:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 202-3490
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given when so delivered. Any notice delivered by facsimile transmission shall
be deemed to have been given on the earlier of the date
24
<PAGE>
it is actually received or one day after such transmission. Any notice delivered
by overnight express courier will be deemed to have been given on the next
succeeding business day after the day it is sent to the intended recipient at
the address set forth above, and any notice delivered by registered or certified
mail or express mail delivery service shall be deemed to have been duly given on
the earlier of the date it is actually received or three business days after it
is sent to the intended recipient at the address set forth above.
11.6 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAW
PROVISIONS THEREOF.
11.7 Headings. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part of
this Agreement.
11.8 Severability. If any provision of this Agreement or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, and
the provisions of this Agreement shall be severable in any such instance.
11.9 Avoidance. To the extent that PBCI receives any payment on
account of DCC 's obligations hereunder, and any such payment(s) and/or proceeds
or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, subordinated, and/or required to be repaid to a
trustee, receiver, or any other party under any bankruptcy law, state or federal
law, common law, or equitable cause, then, to the extent of such payment(s) or
proceeds received, DCC obligations hereunder, or part thereof intended to be
satisfied, shall be revived and continue in full force and effect, as if such
payment(s) and/or proceeds had not been received by PBCI.
11.10 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.
11.11 Entire Agreement. This Agreement, the Notes, the Pledge
Agreement, the Security Instruments and the exhibits to each of the foregoing
contain the entire agreement of the parties hereto with respect to the
transactions contemplated herein, and collectively supersede all prior
understandings and agreements of the parties with respect to the subject matter
hereof.
11.12 General Indemnity. In addition to the payments pursuant to
Section 11.3, DCC agrees to indemnify, pay, and hold PBCI and any holder of any
of the Notes, and the officers, directors, employees, agents, and Affiliates of
PBCI and any such holder (collectively, the "Indemnities"), harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses, and disbursements of any
kind or nature whatsoever (including, without limitation, the reasonable fees
and disbursements
25
<PAGE>
of counsel for any of such Indemnities in connection with any investigative,
administrative, or judicial proceeding commenced or threatened, whether or not
any of such Indemnities shall be designated a party thereto) that may be imposed
on, incurred by, or asserted against any Indemnitee, in any manner relating to
or arising out of this Agreement, any of the Notes, the Pledge Agreement, the
Security Instruments and the exhibits or any other agreements or document
executed and delivered by DCC in connection therewith, including any damage to
the health and safety of DCC's workers or the environment, PBCI's agreement to
make the Loans hereunder, or the use or intended use of the proceeds of the
Loans (the "indemnified liabilities"); provided that DCC shall have no
obligation to an Indemnitee hereunder with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of such Indemnitee. To
the extent that the undertaking to indemnify, pay, and hold harmless set forth
in the preceding sentence may be unenforceable because it violates any law or
public policy, DCC shall contribute the maximum portion that it is permitted to
pay under applicable law to the payment and satisfaction of all indemnified
liabilities incurred by the Indemnities or any of them. The provisions of the
undertakings and indemnification set out in this Section 11.12 shall survive
satisfaction and payment of DCC 's obligations hereunder and termination of this
Agreement.
11.13 Limitation on Damages. Notwithstanding anything to the
contrary herein no party hereto shall be liable for consequential, indirect,
incidental, special, speculative, or punitive damages (including, but not
limited to, loss of revenue or profit) whether such claim alleges breach of
contract, tortious conduct including, but not limited to, negligence, or any
other theory.
11.14 Submission to Jurisdiction. DCC agrees that any legal action or
proceeding with respect to this Agreement, the Notes, the Pledge Agreement or
any Security Instrument or the transactions contemplated hereby may be brought
in any court of the State of Colorado, or in any court of the United States of
America sitting in Colorado, and DCC hereby submits to and accepts generally and
unconditionally the jurisdiction of those courts with respect to their
respective person and property, and irrevocably consents to the service of
process in connection with any such action or proceeding by personal delivery to
DCC or by the mailing thereof by registered or certified mail, postage prepaid
to DCC at the address for DCC set forth in Section 11.5. Nothing in this
paragraph shall affect the right of PBCI to serve process in any other manner
permitted by law or limit the rights of PBCI to bring any such action or
proceeding against DCC or property in the courts of any other jurisdiction. DCC
hereby irrevocably waives any objection to the laying of venue of any such suit
or proceeding in the above described courts.
11.15 Waiver of Jury Trial. No party to this instrument, which
includes any assignee, successor, heir or personal representative of a party,
shall seek a jury trial in any lawsuit, proceeding, counterclaim, or any other
litigation procedure based upon, or arising out of this Agreement, the Notes,
the Pledge Agreement, any Security Instrument, any related instrument, or the
dealings or the relationship between the parties. No party will seek to
consolidate any such action, in which a jury has been waived, with any other
action in which a jury trial cannot or has not been waived.
26
<PAGE>
THE PROVISIONS OF THIS SECTION 11.15 HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO
PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR PBCI IN ENTERING INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date and year first above written.
PROGRESSIVE BAGEL CONCEPTS, INC.
By: /s/ C. Reed Ernstrom
_______________________________
Title:
_____________________________
DOC'S CHEESE COMPANY, L.L.C.
By: /s/ Paul Strasen
_______________________________
Title:
____________________________
27
<PAGE>
EXHIBITS
Exhibit A Revolver Note
Exhibit B Term Loan A Note
Exhibit C Term Loan B Note
Exhibit D Term Loan C Note
Exhibit E Pledge Agreement
Exhibit F Form of Certificate to Accompany Revolver Advances
Exhibit G From of Certificate to Accompany Term Loan A Advance
Exhibit H Opinion of DCC's Counsel
28
<PAGE>
EXHIBIT A
REVOLVER NOTE
<PAGE>
REVOLVER NOTE
$400,000.00 Golden, Colorado
As of October 2, 1995
FOR VALUE RECEIVED, Doc's Cheese Company, L.L.C., a Delaware limited
liability company ("DCC"), promises to pay to the order of Progressive Bagel
Concepts, Inc., a Delaware corporation ("PBCI"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as PBCI may from time to time designate
in writing, in lawful money of the United States of America and in immediately
available funds, the principal sum of four hundred thousand dollars
($400,000.00) and any interest thereon, or, if less, the aggregate unpaid amount
of the Revolver Loan made pursuant to Section 1.1 of the Loan Agreement and any
interest thereon.
This Revolver Note ("Note") evidences the Revolver Loan made under,
and is referred to in and is executed and delivered pursuant to, a Secured Loan
Agreement dated of even date herewith between DCC and PBCI (the "Loan
Agreement"), to which reference is hereby made for a statement of the terms and
conditions under which this Note may be repaid and accelerated and for a
description of the collateral and security securing this Note. Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of the Revolver Loan for the period commencing on the date the Revolver
Loan is made until the Revolver Loan is paid in full, at a per annum rate equal
to the rate designated and announced by Bank of America Illinois or its
successor in interest (the "Bank") from time to time as its "reference rate" in
effect at its principal office in Chicago, Illinois, plus 1%. The interest rate
shall be adjusted, from time to time, on the same day on which the Bank adjusts
its "reference rate." As of the date of the Note, the Bank's reference rate is
8.75%. Interest on the outstanding principal amount of the Revolver Loan shall
be payable in arrears on the first day of each Retail Period commencing on the
first day of the Retail Period immediately following the first Retail Period in
which DCC initially draws on the Revolver Loan and continuing through and
including the Maturity Date.
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
Any principal payment due under this Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Note in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
<PAGE>
If not earlier paid or if not accelerated for payment, DCC shall pay
to PBCI the outstanding principal balance of the Revolver Loan and all accrued
but unpaid interest thereon on the Maturity Date.
This Note may be prepaid, without premium or penalty, at any time.
All payments made hereunder shall be applied first to interest and then to
outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Colorado, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by PBCI and any endorser or
guarantor.
ARTICLE I
ADVANCES
--------
1.1 Revolver Loan Advances may be made from time to time by PBCI to
DCC in the manner and on the terms and subject to the conditions set forth in
the Loan Agreement. Upon granting each Advance, PBCI shall record the making
and amount of such Advance on its books in a separate loan account, and shall
also record in the loan account all payments made by DCC with respect to the
Revolver Loan. The aggregate amount of all Advances, less the amounts of
payment of principal made by DCC, shall be the principal amount outstanding
under this Note. The loan account shall be prima facie evidence of the unpaid
amount of principal outstanding under this Note; provided, however, that failure
to maintain such account or record any Advances therein shall not relieve DCC of
its obligations to repay the outstanding principal amount of the Revolver Loan,
all accrued interest thereon, and any amount payable with respect thereto in
accordance with the terms of this Note.
ARTICLE II
DEFAULT, RIGHTS AND REMEDIES OF HOLDER
--------------------------------------
2.1 The occurrence of a Default shall be a default under this Note.
Upon any default under this Note, the holder of this Note may declare this Note
due and payable in full and exercise such other rights and remedies as are
available to the holder under the Loan Agreement or applicable law.
2.2 If there is any default under this Note, and this Note is placed
in the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, DCC promises to pay to the order of the holder
hereof such holder's reasonable attorneys' fees and court costs incurred in
collecting or attempting to collect or securing or attempting to secure
<PAGE>
this Note or enforcing the holder's rights with respect to the Collateral, to
the extent allowed by the laws of the State of Colorado or any state in which
any Collateral is situated.
ARTICLE III
MISCELLANEOUS
-------------
3.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF COLORADO APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.
3.2 The holder of this Note may, with or without notice to any party,
and without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
(v) justifiably or otherwise, impair any of the Collateral or suspend the right
to enforce against any such Collateral, and (vi) at any time it deems it
necessary or proper, call for and, should it be made available, accept, as
additional security, the signature or signatures of additional parties or a
security interest in property of any kind or description or both.
3.3 Any provision herein, or in the Loan Agreement, or any other
document executed or delivered in connection herewith or therewith, or in any
other agreement or commitment, whether written or oral, expressed or implied, to
the contrary notwithstanding, neither PBCI nor any holder hereof shall in any
event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that PBCI or any holder hereof shall be paid, as
interest, a sum greater than the maximum amount permitted by applicable law to
be charged to the person primarily obligated to pay this Note at the time in
question. If any construction of this Note or the Loan Agreement, or any and
all other papers, agreements or commitments, indicate a different right given to
PBCI or any holder hereof to ask for, demand, or receive any larger sum as
interest, such is a mistake in calculation or wording which this clause shall
override and control, it being the intention of the parties that this Note, the
Loan Agreement, and all other documents executed or delivered in connection
herewith shall in all ways comply with applicable law and proper adjustments
shall automatically be made accordingly. In the event that PBCI or any holder
hereof ever receives, collects, or applies as interest, any sum in excess of the
maximum amount permitted by applicable law, if any, such excess amount shall be
applied to the reduction of the unpaid principal balance of this Note, and if
this Note is paid in full, any remaining excess shall be paid to DCC. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the maximum amount permitted by applicable law, if any,
PBCI and any holder hereof shall, to the maximum extent permitted under
applicable
<PAGE>
law: (a) characterize any non-principal payment as an expense or fee
rather than as interest, and (b) "spread" the total amount of interest
throughout the entire term of this Note.
IN WITNESS WHEREOF, DCC has caused this Note to be executed in its
corporate name by the undersigned officer, thereunto duly authorized.
DOC'S CHEESE COMPANY,L.L.C.
By: ____________________________________
Title: ____________________________________
<PAGE>
EXHIBIT B
TERM LOAN A NOTE
<PAGE>
TERM LOAN A NOTE
$1,079,944.02 Golden, Colorado
As of October 2, 1995
FOR VALUE RECEIVED, Doc's Cheese Company, L.L.C., a Delaware limited
liability company ("DCC"), promises to pay to the order of Progressive Bagel
Concepts, Inc., a Delaware corporation ("PBCI"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as PBCI may from time to time designate
in writing, in lawful money of the United States of America and in immediately
available funds, the principal sum of one million, seventy nine thousand, nine
hundred and forty four dollars and two cents ($1,079,944.02) and any interest
thereon, or, if less, the aggregate unpaid amount of the Loan made pursuant to
Section 2.1 of the Loan Agreement and any interest thereon.
This Term Loan A Note ("Note") evidences Term Loan A made under, and
is referred to in and is executed and delivered pursuant to, a Secured Loan
Agreement dated of even date herewith between DCC and PBCI (the "Loan
Agreement"), to which reference is hereby made for a statement of the terms and
conditions under which this Note may be repaid and accelerated and for a
description of the collateral and security securing this Note. Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of Term Loan A for the period commencing on the date Term Loan A is made
until Term Loan A is paid in full, at a per annum rate equal to the rate
designated and announced by Bank of America Illinois or its successor in
interest (the "Bank") from time to time as its "reference rate" in effect at its
principal office in Chicago, Illinois, plus 1%. The interest rate shall be
adjusted, from time to time, on the same day on which the Bank adjusts its
"reference rate." As of the date of the Note, the Bank's reference rate is
8.75%. Interest on the outstanding principal amount of Term Loan A shall be
payable in arrears on the first day of each Retail Period commencing on the
first day of the Retail Period immediately following the first Retail Period in
which DCC initially draws on Term Loan A, as otherwise provided herein in
connection with principal payments, and at maturity (whether by acceleration or
otherwise).
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
Any principal payment due under this Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Note in
<PAGE>
respect of such principal amount until such unpaid amount has been paid in full
(whether before or after judgment).
If not earlier paid or if not accelerated for payment: (i) $929,944.02
of the outstanding principal amount of Term Loan A shall be payable to PBCI in
61 substantially equal periodic installments of principal, plus accrued but
unpaid interest, with the first such payment due on the Draw Loan Termination
Date and with subsequent payments and on the first day of each Retail Period
thereafter, with the balance due and payable on the Maturity Date; and (ii) the
remainder of the outstanding principal balance of Term Loan A (but in no event
more than $150,000) shall be payable to PBCI in 26 substantially equal periodic
installments of principal, plus accrued but unpaid interest, with the first such
payment due on the Maturity Date and with subsequent payments due on the first
day of each Retail Period thereafter, with the balance due and payable on the
seventh anniversary of the date hereof.
This Note may be prepaid without premium or penalty, at any time. All
payments made hereunder shall be applied first to interest and then to
outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Colorado, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by PBCI and any endorser or
guarantor.
ARTICLE I
Advances
--------
1.1 Term Loan A advances may be made from time to time by PBCI to DCC
in the manner and on the terms and subject to the conditions set forth in the
Loan Agreement. Upon granting each loan advance, PBCI shall record the making
and amount of such advance on its books in a separate loan account, and shall
also record in the loan account all payments made by DCC with respect to Term
Loan A. The aggregate amount of all advances, less the amounts of payment of
principal made by DCC, shall be the principal amount outstanding under this
Note. The loan account shall be prima facie evidence of the unpaid amount of
principal outstanding under this Note; provided, however, that failure to
maintain such account or record any advances therein shall not relieve DCC of
its obligations to repay the outstanding principal amount of Term Loan A, all
accrued interest thereon, and any amount payable with respect thereto in
accordance with the terms of this Note.
<PAGE>
ARTICLE II
Default, Rights and Remedies of Holder
--------------------------------------
2.1 The occurrence of a Default shall be a default under this Note.
Upon any default under this Note, the holder of this Note may declare this Note
due and payable in full and exercise such other rights and remedies as are
available to the holder under the Loan Agreement or applicable law.
2.2 If there is any default under this Note, and this Note is placed
in the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, DCC promises to pay to the order of the holder
hereof such holder's reasonable attorneys' fees and court costs incurred in
collecting or attempting to collect or securing or attempting to secure this
Note or enforcing the holder's rights with respect to the Collateral, to the
extent allowed by the laws of the State of Colorado or any state in which any
Collateral is situated.
ARTICLE III
Miscellaneous
-------------
3.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF COLORADO APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.
3.2 The holder of this Note may, with or without notice to any party,
and without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
(v) justifiably or otherwise, impair any of the Collateral or suspend the right
to enforce against any such Collateral, and (vi) at any time it deems it
necessary or proper, call for and, should it be made available, accept, as
additional security, the signature or signatures of additional parties or a
security interest in property of any kind or description or both.
3.3 Any provision herein, or in the Loan Agreement, or any other
document executed or delivered in connection herewith or therewith, or in any
other agreement or commitment, whether written or oral, expressed or implied, to
the contrary notwithstanding, neither PBCI nor any holder hereof shall in any
event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that PBCI or any holder hereof shall be paid, as
interest, a sum greater than the maximum amount permitted by applicable law to
be charged to the person primarily obligated to pay this Note at the time in
question. If any construction of this
<PAGE>
Note or the Loan Agreement, or any and all other papers, agreements or
commitments, indicate a different right given to PBCI or any holder hereof to
ask for, demand, or receive any larger sum as interest, such is a mistake in
calculation or wording which this clause shall override and control, it being
the intention of the parties that this Note, the Loan Agreement, and all other
documents executed or delivered in connection herewith shall in all ways comply
with applicable law and proper adjustments shall automatically be made
accordingly. In the event that PBCI or any holder hereof ever receives,
collects, or applies as interest, any sum in excess of the maximum amount
permitted by applicable law, if any, such excess amount shall be applied to the
reduction of the unpaid principal balance of this Note, and if this Note is paid
in full, any remaining excess shall be paid to DCC. In determining whether or
not the interest paid or payable, under any specific contingency, exceeds the
maximum amount permitted by applicable law, if any, PBCI and any holder hereof
shall, to the maximum extent permitted under applicable law: (a) characterize
any non-principal payment as an expense or fee rather than as interest, and (b)
"spread" the total amount of interest throughout the entire term of this Note.
IN WITNESS WHEREOF, DCC has caused this Note to be executed in its
corporate name by the undersigned officer, thereunto duly authorized.
DOC'S CHEESE COMPANY, L.L.C.
By: ____________________________________
Title: ____________________________________
<PAGE>
EXHIBIT C
TERM LOAN B NOTE
<PAGE>
TERM LOAN B NOTE
$310,055.98 Golden, Colorado
As of October 2, 1995
FOR VALUE RECEIVED, Doc's Cheese Company, L.L.C., a Delaware limited
liability company ("DCC"), promises to pay to the order of Progressive Bagel
Concepts, Inc., a Delaware corporation ("PBCI"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as PBCI may from time to time designate
in writing, in lawful money of the United States of America and in immediately
available funds, the principal sum of three hundred and ten thousand, fifty five
dollars and ninety eight cents ($310,055.98) and any interest thereon.
This Term Loan B Note ("Note") evidences Term Loan B made under, and
is referred to in and is executed and delivered pursuant to, a Secured Loan
Agreement dated of even date herewith between DCC and PBCI (the "Loan
Agreement"), to which reference is hereby made for a statement of the terms and
conditions under which this Note may be repaid and accelerated and for a
description of the collateral and security securing this Note. Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of Term Loan B for the period commencing on the date hereof until Term
Loan B is paid in full, at a per annum rate equal to the rate designated and
announced by Bank of America Illinois or its successor in interest (the "Bank")
from time to time as its "reference rate" in effect at its principal office in
Chicago, Illinois, plus 1%. The interest rate shall be adjusted, from time to
time, on the same day on which the Bank adjusts its "reference rate." As of the
date of the Note, the Bank's reference rate is 8.75%. Interest on the
outstanding principal amount of the Loan shall be payable in connection with
principal payments and at maturity (whether by acceleration or otherwise).
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
Any principal payment due under this Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Note in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
<PAGE>
If not earlier paid or if not accelerated for payment, the outstanding
principal amount of Term Loan B shall be payable to PBCI in 65 substantially
equal periodic installments of principal, plus accrued but unpaid interest, with
the first such payment due on the first day of the 12th Retail Period in PBCI's
fiscal year 1995 and with subsequent payments due on the first day of each
Retail Period thereafter, with the balance due and payable on the Maturity Date.
This Note may be prepaid without premium or penalty, at any time. All
payments made hereunder shall be applied first to interest and then to
outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Colorado, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by PBCI and any endorser or
guarantor.
ARTICLE I
Default, Rights and Remedies of Holder
--------------------------------------
1.1 The occurrence of a Default shall be a default under this Note.
Upon any default under this Note, the holder of this Note may declare this Note
due and payable in full and exercise such other rights and remedies as are
available to the holder under the Loan Agreement or applicable law.
1.2 If there is any default under this Note, and this Note is placed
in the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, DCC promises to pay to the order of the holder
hereof such holder's reasonable attorneys' fees and court costs incurred in
collecting or attempting to collect or securing or attempting to secure this
Note or enforcing the holder's rights with respect to the Collateral, to the
extent allowed by the laws of the State of Colorado or any state in which any
Collateral is situated.
ARTICLE II
Miscellaneous
-------------
2.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF COLORADO APPLICABLE TO
CONTRACTS MADE AND TO BE
<PAGE>
PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
2.2 The holder of this Note may, with or without notice to any party,
and without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
(v) justifiably or otherwise, impair any of the Collateral or suspend the right
to enforce against any such Collateral, and (vi) at any time it deems it
necessary or proper, call for and, should it be made available, accept, as
additional security, the signature or signatures of additional parties or a
security interest in property of any kind or description or both.
2.3 Any provision herein, or in the Loan Agreement, or any other
document executed or delivered in connection herewith or therewith, or in any
other agreement or commitment, whether written or oral, expressed or implied, to
the contrary notwithstanding, neither PBCI nor any holder hereof shall in any
event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that PBCI or any holder hereof shall be paid, as
interest, a sum greater than the maximum amount permitted by applicable law to
be charged to the person primarily obligated to pay this Note at the time in
question. If any construction of this Note or the Loan Agreement, or any and all
other papers, agreements or commitments, indicate a different right given to
PBCI or any holder hereof to ask for, demand, or receive any larger sum as
interest, such is a mistake in calculation or wording which this clause shall
override and control, it being the intention of the parties that this Note, the
Loan Agreement, and all other documents executed or delivered in connection
herewith shall in all ways comply with applicable law and proper adjustments
shall automatically be made accordingly. In the event that PBCI or any holder
hereof ever receives, collects, or applies as interest, any sum in excess of the
maximum amount permitted by applicable law, if any, such excess amount shall be
applied to the reduction of the unpaid principal balance of this Note, and if
this Note is paid in full, any remaining excess shall be paid to DCC. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the maximum amount permitted by applicable law, if any,
PBCI and any holder hereof shall, to the maximum extent permitted under
applicable law: (a) characterize any non-principal payment as an expense or fee
rather than as interest, and (b) "spread" the total amount of interest
throughout the entire term of this Note.
<PAGE>
IN WITNESS WHEREOF, DCC has caused this Note to be executed in its
corporate name by the undersigned officer, thereunto duly authorized.
DOC'S CHEESE COMPANY, L.L.C.
By: ____________________________________
Title: ____________________________________
<PAGE>
EXHIBIT D
TERM LOAN C NOTE
<PAGE>
TERM LOAN C NOTE
$150,000.00 Golden, Colorado
As of October 2, 1995
FOR VALUE RECEIVED, Doc's Cheese Company, L.L.C., a Delaware limited
liability company ("DCC"), promises to pay to the order of Progressive Bagel
Concepts, Inc., a Delaware corporation ("PBCI"), pursuant to the Loan Agreement
(as hereinafter defined) at such place as PBCI may from time to time designate
in writing, in lawful money of the United States of America and in immediately
available funds, the principal sum of one hundred, fifty thousand dollars
($150,000.00) and any interest thereon.
This Term Loan C Note ("Note") evidences Term Loan C made under, and
is referred to in and is executed and delivered pursuant to, a Secured Loan
Agreement dated of even date herewith between DCC and PBCI (the "Loan
Agreement"), to which reference is hereby made for a statement of the terms and
conditions under which this Note may be repaid and accelerated and for a
description of the collateral and security securing this Note. Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Loan Agreement.
Interest shall accrue daily on the aggregate outstanding principal
balance of Term Loan C for the period commencing on the date hereof until Term
Loan C is paid in full, at a per annum rate equal to the rate designated and
announced by Bank of America Illinois or its successor in interest (the "Bank")
from time to time as its "reference rate" in effect at its principal office in
Chicago, Illinois, plus 1%. The interest rate shall be adjusted, from time to
time, on the same day on which the Bank adjusts its "reference rate." As of the
date of the Note, the Bank's reference rate is 8.75%. Interest on the
outstanding principal amount of the Term Loan C shall be payable on the first
day of each Retail Period with the first such payment due on October 30, 1995.
Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.
Any principal payment due under this Note not paid when due, whether
at stated maturity, by notice of repayment, by acceleration or otherwise, shall,
to the extent permitted by applicable law, thereafter bear interest (compounded
monthly and payable upon demand) at a rate which is 2% per annum in excess of
the rate of interest otherwise payable under this Note in respect of such
principal amount until such unpaid amount has been paid in full (whether before
or after judgment).
If not earlier paid or accelerated for payment, the outstanding
principal amount of Term Loan C shall be payable to PBCI on the fifth
anniversary of the date hereof.
<PAGE>
This Note may be prepaid without premium or penalty at any time. All
payments made hereunder shall be applied first to interest and then to
outstanding principal.
If payment hereunder becomes due and payable on a Saturday, Sunday, or
legal holiday, under the laws of the State of Colorado, the due date thereof
shall be extended to the next succeeding business day.
Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by PBCI and any endorser or
guarantor.
ARTICLE I
DEFAULT, RIGHTS AND REMEDIES OF HOLDER
--------------------------------------
1.1 The occurrence of a Default shall be a default under this Note.
Upon any default under this Note, the holder of this Note may declare this Note
due and payable in full and exercise such other rights and remedies as are
available to the holder under the Loan Agreement or applicable law.
1.2 If there is any default under this Note, and this Note is placed
in the hands of an attorney for collection, or is collected through any court,
including any bankruptcy court, DCC promises to pay to the order of the holder
hereof such holder's reasonable attorneys' fees and court costs incurred in
collecting or attempting to collect or securing or attempting to secure this
Note or enforcing the holder's rights with respect to the Collateral, to the
extent allowed by the laws of the State of Colorado or any state in which any
Collateral is situated.
ARTICLE II
MISCELLANEOUS
-------------
2.1 THIS NOTE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF COLORADO APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.
2.2 The holder of this Note may, with or without notice to any party,
and without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Note (i) extend the time for
payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Note, (iii) suspend the right
to enforce this Note with respect to any persons, (iv) change, exchange, or
release any property in which the holder has any interest securing this Note,
(v) justifiably or otherwise, impair any of the Collateral or suspend the right
to enforce against any such
<PAGE>
Collateral, and (vi) at any time it deems it necessary or proper, call for and,
should it be made available, accept, as additional security, the signature or
signatures of additional parties or a security interest in property of any kind
or description or both.
2.3 Any provision herein, or in the Loan Agreement, or any other
document executed or delivered in connection herewith or therewith, or in any
other agreement or commitment, whether written or oral, expressed or implied, to
the contrary notwithstanding, neither PBCI nor any holder hereof shall in any
event be entitled to receive or collect, nor shall any amounts received
hereunder be credited, so that PBCI or any holder hereof shall be paid, as
interest, a sum greater than the maximum amount permitted by applicable law to
be charged to the person primarily obligated to pay this Note at the time in
question. If any construction of this Note or the Loan Agreement, or any and
all other papers, agreements or commitments, indicate a different right given to
PBCI or any holder hereof to ask for, demand, or receive any larger sum as
interest, such is a mistake in calculation or wording which this clause shall
override and control, it being the intention of the parties that this Note, the
Loan Agreement, and all other documents executed or delivered in connection
herewith shall in all ways comply with applicable law and proper adjustments
shall automatically be made accordingly. In the event that PBCI or any holder
hereof ever receives, collects, or applies as interest, any sum in excess of the
maximum amount permitted by applicable law, if any, such excess amount shall be
applied to the reduction of the unpaid principal balance of this Note, and if
this Note is paid in full, any remaining excess shall be paid to DCC. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the maximum amount permitted by applicable law, if any,
PBCI and any holder hereof shall, to the maximum extent permitted under
applicable law: (a) characterize any non-principal payment as an expense or fee
rather than as interest, and (b) "spread" the total amount of interest
throughout the entire term of this Note.
IN WITNESS WHEREOF, DCC has caused this Note to be executed in its
corporate name by the undersigned officer, thereunto duly authorized.
DOC'S CHEESE COMPANY, L.L.C.
By: ____________________________________
Title: ____________________________________
47
<PAGE>
EXHIBIT E
PLEDGE AGREEMENT
<PAGE>
PLEDGE AGREEMENT
This Pledge Agreement ("Pledge Agreement"), dated as of October 2, 1995, is
made and entered into by and between Progressive Bagel Concepts, Inc., a
Delaware corporation ("PBCI") and all of the members of Doc's Cheese Company,
L.L.C., a Delaware limited liability ("DCC"), and their spouses listed on the
signature pages hereof and any other persons who, after the date of this Pledge
Agreement, become members of DCC and their spouses (collectively, the
"Members").
RECITALS
--------
1. The Members own 100% of the issued and outstanding units of membership
interest in DCC, in the amounts set forth on Schedule A hereto.
2. DCC has entered into a Secured Loan Agreement of even date herewith
(the "Loan Agreement") with PBCI pursuant to which PBCI has agreed on the terms
and subject to the conditions therein, to make the Loans (as defined in the Loan
Agreement) to DCC, which Loans are evidenced by separate promissory notes from
DCC to PBCI (the "Notes").
3. As an inducement to PBCI to enter into the Loan Agreement and as a
condition to the effectiveness of PBCI 's obligations under the Loan Agreement,
the Members have agreed, among other things, to pledge to PBCI, and grant a
first-priority security interest to PBCI, in and to, 100% of the issued and
outstanding units of membership interest in DCC.
NOW, THEREFORE, PBCI and the Members have agreed as follows:
1. Certain Definitions. The capitalized terms and phrases not otherwise
defined herein, shall have the meanings given them in the Loan Agreement, and
the following terms or phrases shall have the following meanings:
"Affiliate" shall mean, with respect to a specified person, any other
person that directly, or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, the person specified.
"Collateral" shall mean the Pledged Units and any other property in
which PBCI acquires a security interest pursuant to this Pledge Agreement to
secure any indebtedness or other obligation of DCC to PBCI.
"Default" shall have the meaning given it in Section 10 of this Pledge
Agreement.
<PAGE>
"Pledged Units" shall mean all the issued and outstanding units of
membership interest in DCC now or hereafter owned by the Members, any
certificates representing those units and any separate assignments executed by
the Members in connection with those units.
"Secured Obligations" shall mean the obligations secured by this
Pledge Agreement described in Section 3 of this Pledge Agreement.
2. Grant of Security Interest. (a) The Members hereby grant to PBCI a
security interest in all of their respective right, title, and interest in and
to the Pledged Units whether now owned or hereafter acquired. The Members
further grant to PBCI a security interest in any rights, distributions,
liquidating distributions, new securities, or any other property to which the
Members are or may hereafter become entitled to receive whether on account of
the Pledged Units or otherwise other than distributions permitted pursuant to
the provisions of Section 8.4 of the Loan Agreement. If the Members receive
additional property of such nature, they shall immediately deliver such property
to PBCI to be held by PBCI in the same manner as the property held pursuant to
this Pledge Agreement.
(b) The Members grant a further security interest to PBCI in the
proceeds or products of any sale or other disposition of the Pledged Units.
3. Obligations Secured. The security interest created hereby secures
payment and performance of (a) the indebtedness evidenced by any one or all of
the Notes, and all obligations contained in any one or all of the Notes, (b) all
of the other obligations, agreements, covenants, and representations of DCC
under the Loan Agreement whether or not, either on the date of this Pledge
Agreement or thereafter, evidenced by any note, instrument, or other writing,
and (c) any and all other indebtedness, obligation, or liability of DCC to PBCI,
however evidenced, whether existing on the date of this Pledge Agreement or
arising thereafter, direct or indirect, absolute or contingent, joint and/or
several.
4. Representations and Warranties. To induce PBCI to enter into this
Pledge Agreement, each of the Members represents and warrants as follows:
(a) The Member has full right, power, and capacity to enter into
and perform this Pledge Agreement; and this Pledge Agreement has been duly
authorized, executed and delivered and constitutes a legal, valid, and binding
obligation of the Member enforceable in accordance with its terms.
(b) The Member has good and marketable title to the Pledged
Units, and the Pledged Units are not subject to any lien, charge, pledge,
encumbrance, claim, or security interest other than the security interest
created by this Pledge Agreement.
(c) The Pledged Units constitute one hundred percent (100%) of
the issued and outstanding equity interest in DCC.
<PAGE>
(e) The Member has not entered into any restriction or purchase
agreement with respect to the Pledged Units which would in any way restrict the
sale, pledge, or other transfer of the Pledged Units or of any interest in or to
the Pledged Units.
5. Duration of Security Interest. PBCI, its successors and assigns,
shall hold the Pledged Units and security interest created hereby upon the terms
of this Pledge Agreement, and this security interest shall continue until all
the Secured Obligations have been paid in full.
6. Maintaining Freedom from Liens. The Members shall keep the Pledged
Units and other Collateral free and clear of liens and shall pay all amounts,
including taxes, assessments, or charges, which might result in a lien against
the Pledged Units or other Collateral if left unpaid. If any such lien,
assessment, claim, or charge shall nevertheless exist, and the Members fail to
pay such amounts promptly, PBCI may, but is not obligated to, pay such amounts,
and such payment shall be conclusive evidence of the legality or validity
thereof. The Members shall promptly reimburse PBCI for any such payments, and
until reimbursement, such payments shall be a part of the Secured Obligations.
7. Certain Rights Respecting Pledged Units.
(a) The Members shall continue to be the owner of the Pledged
Units and other Collateral so long as no Default has occurred and is continuing
and may collect and retain all cash distributions now or hereafter payable on or
on account of the Pledged Units and other Collateral which are permitted under
the Loan Agreement, and, so long as no Default has occurred, may exercise voting
rights with respect to the Pledged Units and other Collateral.
(b) The Members shall not sell, transfer, or attempt to sell or
transfer the Pledged Units or other Collateral, or any part thereof or interest
therein, without the prior express written consent of PBCI. Any such consent of
PBCI shall not constitute the release by PBCI of its interest in the Pledged
Units or other Collateral, and any such sale or transfer consented to shall
transfer the Pledged Units or other Collateral subject to the security interest
of PBCI. Any such transfer shall be subject to the transferee's agreement to be
bound by the terms and subject to the conditions of this Pledge Agreement, such
agreement to be evidenced by the transferee's execution of this Pledge
Agreement.
(c) PBCI, at its option upon any Default, may exercise all voting
rights and privileges whatsoever with respect to the Pledged Units and other
Collateral, including, without limitation, the right to receive distributions,
and to that end the Members hereby constitute any officer of PBCI as their proxy
and attorney-in-fact for all purposes of voting the Pledged Units and other
Collateral after any Default at any annual regular or special meeting of DCC,
and this appointment shall be deemed coupled with an interest and is and shall
be irrevocable until all of the Secured Obligations have been fully paid and
terminated, and all persons whatsoever shall be conclusively entitled to rely
upon any oral or written certification of
<PAGE>
PBCI that it is entitled to vote the Pledged Units and other Collateral
hereunder. The Members shall execute and deliver to PBCI any additional proxies
and powers of attorney that PBCI may desire in its own name in order to exercise
the rights expressly granted to PBCI under this Section 7(c). In addition to any
other voting rights, PBCI may, upon any Default, vote the Pledged Units and
other Collateral to remove the managers of DCC, or any of them, and to appoint
new managers of DCC, who may thereafter manage the affairs of DCC, operate its
properties and carry on its business and otherwise take any action with respect
thereto as it shall deem necessary and appropriate, and may also liquidate its
business, and may authorize the borrowing of money in the name of DCC, and the
pledge of its assets to secure such borrowing.
8. Issuance or Acquisition of New Units; Mergers; Sales and Other
Disposition of Assets. Except as otherwise provided in the Loan Agreement, the
Members shall not permit DCC to (a) issue any units of membership interest, (b)
merge into or with or consolidate with any other entity, (c) sell or otherwise
transfer any part of its assets (except in the ordinary course of business) or
(d) liquidate or dissolve or take any action with a view toward liquidation or
dissolution, in each case without PBCI's prior written consent.
9. Delivery of Certificates. Upon execution of this Pledge Agreement,
the Members shall deliver to PBCI any certificates representing the Pledged
Units in form suitable for transfer together with executed blank forms of
assignment. If for any reason any of the Members acquires any interest in any
units of membership interest in DCC such Member shall immediately deliver any
certificates representing forms of assignment in form suitable for transfer and
blank forms of assignment to PBCI to be held by PBCI in the same manner as the
Pledged Units, and such units shall be pledged under this Pledge Agreement and
constitute a part of the Collateral.
10. Default. At the option of PBCI, the occurrence of any Default (as
defined in the Loan Agreement) under the Loan Agreement shall constitute a
default under this Pledge Agreement.
11. Remedies. (a) Upon the occurrence of any Default, PBCI shall have
all of the rights and remedies provided by law and/or by this Pledge Agreement,
including but not limited to all of the rights and remedies of a secured party
under the Uniform Commercial Code, and the Members hereby authorize PBCI to hold
such Pledged Units or to sell all or any part of the Pledged Units at public or
private sale and to apply the proceeds of such sale to the costs and expenses
thereof (including the reasonable attorneys' fees and disbursements incurred by
PBCI) and then to the payment of the other Secured Obligations. PBCI may be the
purchaser at any such sale. The Members expressly authorize such sale or sales
of the Pledged Units in advance of and to the exclusion of any sale or sales of
or other realization upon any other collateral securing indebtedness or other
obligations owed to PBCI. PBCI shall be under no obligation to preserve rights
against prior parties.
<PAGE>
(b) The Members agree and acknowledge that because there may be
no public market for the Pledged Units and because of applicable securities
laws, a public sale of the Pledged Units may not be possible or advisable and
sales at a private sale may be on terms less favorable than if such Pledged
Units were sold at a public sale and may be at a price less favorable than a
public sale. The Members agree that all such private sales made under the
foregoing circumstances shall be deemed to have been made in a commercially
reasonable manner.
(c) PBCI acknowledges that with respect to each Member the Loans
are non-recourse so that in any action or proceeding brought under the Loan
Agreement or on the Notes, or in any claim arising hereunder or thereunder, the
Members shall not be individually liable to the holder of the Notes for the
payment of the Loans and the Notes above and beyond the proceeds received from
the sale of the Collateral, and PBCI agrees to waive, with respect to each
Member, any right to seek or obtain any deficiency or similar judgment against
the Members.
12. Exercise of Remedies. The rights and remedies of PBCI shall be deemed
to be cumulative, and any exercise of any right or remedy shall not be deemed to
be an election of that right or remedy to the exclusion of any other right or
remedy. Notwithstanding the foregoing, PBCI shall be entitled to recover by the
cumulative exercise of all remedies no more than the sum of (a) the Secured
Obligations remaining outstanding at the time of the exercise of remedies, plus
(b) the costs, fees, and expenses PBCI is otherwise entitled to recover.
13. Return of Collateral. PBCI may at any time deliver the Pledged Units
or other Collateral, or any part thereof, to the Members. The receipt by the
Members of the Pledged Units or other Collateral, or any part thereof, shall be
a complete and full discharge of PBCI, and PBCI shall be discharged from any
liability or responsibility with respect thereto.
14. Communications and Notices. (a) Any requirement of the Uniform
Commercial Code of reasonable notice shall be met if such notice is given at
least five business days before the time of sale, disposition, or other event or
thing giving rise to the requirement of notice.
(b) All communications and notices shall be in writing and shall
be deemed to have been duly given if delivered personally to the party to whose
attention the notice is directed or sent by overnight express, facsimile
transmission, express mail delivery service, or registered or certified mail,
return receipt requested, postage prepaid, and properly addressed as follows:
If to the Members:
the addresses shown on the signature pages
<PAGE>
If to PBCI:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Attention: Chairman
Facsimile: (303) 202-3490
with a copy to:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Attention: General Counsel
Facsimile: (303) 202-3490
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given when so delivered. Any notice delivered by facsimile transmission shall
be deemed to have been given on the earlier of the date it is actually received
or one day after such transmission. Any notice delivered by overnight express
courier will be deemed to have been given on the next succeeding business day
after the day it is sent to the intended recipient at the address set forth
above, and any notice delivered by registered or certified mail or express mail
delivery service shall be deemed to have been duly given on the earlier of the
date it is actually received or three business days after it is sent to the
intended recipient at the address set forth above.
15. Further Assurances. The Members shall sign any such other documents
or instruments, and take such other action, as PBCI may request to more fully
create and maintain, or to verify, ratify, or perfect the security interest
intended to be created by this Pledge Agreement.
16. Multiple Counterparts. This Pledge Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Pledge Agreement or the terms thereof
to produce or account for more than one such counterpart.
17. Miscellaneous (a) Failure by PBCI to exercise any right shall not be
deemed a waiver of that right, and any single or partial exercise of any right
shall not preclude the further exercise of that right. Every right of PBCI
shall continue in full force and effect until such right is specifically waived
in writing signed by PBCI.
<PAGE>
(b) If any provision of this Pledge Agreement or the application
thereof to any person or circumstance is held invalid or unenforceable, the
remainder of the Pledge Agreement and the application of such provision to other
persons or circumstances shall not be affected thereby, and the provisions of
this Pledge Agreement shall be severable in any such instance.
(c) The headings of the sections of this Pledge Agreement are
inserted for convenience only and shall not be deemed to constitute a part of
this Pledge Agreement.
(d) This Pledge Agreement shall benefit PBCI, its successors and
assigns, and all obligations of the Members shall bind their successors and
assigns. The Members acknowledge that PBCI may assign or otherwise transfer (in
whole or in part) any or all of the Notes, the Loan Agreement, or this Pledge
Agreement to any other person, and such other person shall thereupon become
vested with all of the benefits in respect thereof granted to PBCI thereunder
(including the benefits under this Pledge Agreement).
(E) THIS PLEDGE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF COLORADO APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF LAWS PROVISIONS
THEREOF.
(f) This Pledge Agreement and the Loan Agreement constitute the
entire agreement of the parties with respect to the subject matter hereof and
supersede all prior understandings with respect to the subject matter hereof. No
change, modification, addition, or termination of this Pledge Agreement shall be
enforceable unless in writing and signed by the party against whom enforcement
is sought.
(g) To the extent any spouse of a Member is deemed, under
applicable law or otherwise, to have an interest in the Collateral, such spouse
hereby waives, relinquishes, and forever releases such interest in such
Collateral and agrees that such Collateral is subject to all of the terms and
provisions of this Pledge Agreement, especially, without limitation, Sections 10
and 11 hereof, and further agrees to be bound by the terms and provisions hereof
and to execute, acknowledge, and deliver such further assignments, transfers,
Unit powers, Unit certificates, conveyances, powers of attorney, and assurances
as may be required to sell the Pledged Units as provided in Section 11 hereof,
and as may be otherwise appropriate to carry out the transactions contemplated
by this Pledge Agreement.
(h) Each of the Members agree that any legal action or
proceeding with respect to this Pledge Agreement or the transactions
contemplated hereby may be brought in any court of the State of Colorado, or in
any court of the United States of America sitting in Colorado, and each of the
Members hereby submits to and accepts generally and unconditionally the
jurisdiction of those courts with respect to its person and property, and
irrevocably consents
<PAGE>
to the service of process in connection with any such action or proceeding by
personal delivery to each of the Members or by the mailing thereof by registered
or certified mail, postage prepaid addressed to each of the Members at the
address for notices as provided in Section 14 hereof. Nothing in this paragraph
shall affect the right of PBCI to serve process in any other manner permitted by
law or limit the right of PBCI to bring any such action or proceeding against
the Members or property in the courts of any other jurisdiction. Each of the
Members hereby irrevocably waives any objection to the laying of venue of any
such suit or proceeding in the above described courts.
18. Waiver of Jury Trial. No party to this instrument, which includes any
assignee, successor, heir or personal representative of a party, shall seek a
jury trial in any lawsuit, proceeding, counterclaim, or any other litigation
procedure based upon, or arising out of this Agreement, any related instrument,
or the dealings or the relationship between the parties. If the subject matter
of any such litigation is one in which the waiver of a jury trial is prohibited,
if at all, under the controlling law of the applicable jurisdiction, by
constitutional or statutory provision, no party hereto will present as a defense
or counterclaim in such litigation any claim which would reduce or offset any
amount or right claimed under the provisions of this Pledge Agreement. No party
will seek to consolidate any such action, in which a jury has been waived, with
any other action in which a jury trial cannot or has not been waived.
THE PROVISIONS OF THIS SECTION 18 HAVE BEEN FULLY DISCUSSED BY THE PARTIES
HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY HAS IN
ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR PBCI IN ENTERING INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto executed this Pledge Agreement to be
effective as of the date and year first above written.
PROGRESSIVE BAGEL CONCEPTS, INC.
By: ____________________________________
Its: ____________________________________
MEMBERS
Signature pages attached
<PAGE>
Schedule A
To
Pledge Agreement
----------------
Pledged Units at October 2, 1995
No. of Units Member
------------ ------
17,200 Brian L. Ernstrom
164,000 C. Anthon Ernstrom
82,664 C. Reed Ernstrom
79,422 Berkley J. Ward
122,910 C.J. Ward and Karon Ward,
as joint tenants
<PAGE>
EXHIBIT F
FORM OF CERTIFICATE TO ACCOMPANY REVOLVER ADVANCES
<PAGE>
REVOLVER CERTIFICATE
The undersigned, the ________________ of Doc's Cheese Company, L.L.C., a
limited liability company ("DCC"), under that certain Secured Loan Agreement
dated as of October 2, 1995 (the "Loan Agreement") between DCC and Progressive
Bagel Concepts, Inc. ("PBCI"), hereby requests an Advance of Revolver Loan
proceeds in the amount of $____________________ to be made on ____________,
19___.
In support of this request, DCC hereby represents and warrants to PBCI as
follows:
1. The amount of the Advance is required and will be used by DCC for the
purposes permitted under Section 1.2 of the Loan Agreement and for no other
purpose.
2. The representations and warranties contained in Article VI of the Loan
Agreement and in the Security Instruments delivered in connection therewith are
true and correct on and as of the date hereof, and will be true and correct on
the date such Advance is made.
3. No Default or Event of Default has occurred or is continuing.
4. All of the conditions to Advances set forth in Article V of the Loan
Agreement have been satisfied.
5. There has been no material adverse change in the financial condition,
results of operations, assets or business of DCC since October 2, 1995.
6. DCC has less than $50,000 in cash and cash equivalents on hand as of
the date of this certificate.
Capitalized terms used but not defined herein have the meanings ascribed
thereto in the Loan Agreement.
DOC'S CHEESE COMPANY, L.L.C.
By: ______________________________
Title: ______________________________
Date: __________________________, 199__
<PAGE>
EXHIBIT G
FORM OF CERTIFICATE TO ACCOMPANY TERM LOAN A ADVANCES
<PAGE>
TERM LOAN A CERTIFICATE
The undersigned, the ________________ of Doc's Cheese Company, L.L.C., a
limited liability company ("DCC"), under that certain Secured Loan Agreement
dated as of October 2, 1995 (the "Loan Agreement") between and Progressive Bagel
Concepts, Inc. ("PBCI"), hereby requests an advance of Term Loan A proceeds in
the amount of $____________________ to be made on ____________, 19___.
In support of this request, DCC hereby represents and warrants to PBCI as
follows:
1. The amount of the advance is required and will be used by DCC for the
following purposes and for no other purpose:
2. The representations and warranties contained in Article VI of the Loan
Agreement and in the Security Instruments delivered in connection therewith are
true and correct on and as of the date hereof, and will be true and correct on
the date such advance is made.
3. No Default or Event of Default has occurred or is continuing.
4. All of the conditions to advances set forth in Article V of the Loan
Agreement have been satisfied.
5. There has been no material adverse change in the financial condition,
results of operations, assets or business of DCC since October 2, 1995.
Capitalized terms used but not defined herein have the meanings ascribed
thereto in the Loan Agreement.
DOC'S CHEESE COMPANY, L.L.C.
By: ______________________________
Title: ______________________________
Date: __________________________, 199__
<PAGE>
EXHIBIT H
FORM OF OPINION OF COUNSEL
<PAGE>
[Form of Opinion of Counsel]
[Date]
Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, CO 80401
Re: Doc's Cheese Company, L.L.C.
Ladies and Gentlemen:
We have acted as counsel for Doc's Cheese Company, L.L.C. a Delaware
limited liability company (the "Company") in connection with the preparation,
execution, and delivery of the Documents (as hereinafter defined). This opinion
is furnished to you pursuant to Section 7.1 of the Agreement (as hereinafter
defined). As used herein, the term "State" means the State of [opining
jurisdiction] and the term "UCC" means the Uniform Commercial Code as in effect
in the State on the date hereof. Other capitalized terms used herein and not
otherwise defined herein have the meanings provided in the Agreement.
The documents we have examined in rendering this opinion are the
following:
(i) The following, collectively called the "Documents":
(a) the Secured Loan Agreement (the "Agreement"), of even date
herewith, between the Company and Progressive Bagel Concepts, Inc.
("PBCI");
(b) the Secured Note of the Company, of even date herewith and
delivered pursuant to the Agreement (the "Note");
(c) the Pledge Agreement, dated of even date herewith, between
all of the members of the Company and PBCI delivered pursuant to the
Agreement (the "Pledge Agreement");
(d) the Supply Agreement, of even date herewith, by and between
the Company and PBCI, (the "Supply Agreement");
(e) the Option Agreement, of even date herewith, by and between
the Company, PBCI and the members of the Company (the "Option Agreement");
and
(f) the License Agreement, of even date herewith, by and between
the Company and PBCI (the "License Agreement").
<PAGE>
(ii) A certificate of a manager of the Company certifying as to (A)
the Certificate of Formation and the limited liability company agreement of
the Company and (B) resolutions adopted on ________________ by the managers
and members of the Company;
(iii) Copies of those indentures, loan or credit agreements, leases,
guarantees, mortgages, security agreements, bonds, notes and other
agreements or instruments, and orders, writs, judgments, awards,
injunctions and decrees, which have been certified by a manager of the
Company as those documents which affect or purport to affect the Company's
right to borrow money under, or right to undertake and perform its
obligations under, the Documents (collectively, the "Other Agreements and
Court Orders"), a copy of which certificate is attached hereto as Exhibit
A; and
(iv) A certificate of the Secretary of State of the State of
Delaware, dated ________________, attesting to the continued existence and
good standing of the Company in that state.
We have also examined such other corporate documents and records, and
other certificates, opinions and instruments and have conducted such
investigation as we have deemed necessary as a basis for the opinions expressed
below. As to factual matters relevant to our opinions expressed below, we have,
without independent investigation, relied upon all of the foregoing, upon the
factual representations made by the Company in Article IV of the Agreement, upon
certificates of the officers of the Company and of public officials, and upon
public records.
Based upon and subject to the matters stated herein and upon such
investigation as we have deemed necessary, we are of the opinion that:
1. The Company is a limited liability company duly organized, validly
existing, and in good standing under the laws of the state of Delaware,
with power and authority to enter into the Agreement, to issue the Note and
incur the indebtedness to be evidenced thereby and to enter into the other
Documents.
2. Each of the Documents to which the Company is a party has been duly
authorized by all required corporate action on the part of the Company, and
each of them has been duly executed and delivered by the Company, and
constitutes the legal, valid, and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
3. The execution and delivery of the Documents and the performance by
the Company of its obligations thereunder, will not conflict with or result
in any breach of any of the provisions of, or constitute a default under,
or result in the creation or imposition of any lien or encumbrance upon any
of the properties of the Company
<PAGE>
pursuant to the provisions of (a) its Certificate of Formation or limited
liability company agreement, (b) any of the Other Agreements and Court
Orders, or (c) any law, rule, or regulation including without limitation
Regulation G, T, U or X of the Board of Governors of the Federal Reserve.
4. To the best of our knowledge, no consent, authorization, appraisal,
or other action by, and no notice to or filing with, any governmental
authority or regulatory body or any other person, which has not been
obtained or taken, is required for the execution and delivery of, or the
performance by the Company of its obligations under, each of the Documents.
5. The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
6. The Company is not a "holding company", or a "subsidiary company"
of a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
7. The Agreement creates a valid security interest in your favor as
security for the payment of the obligations of the Company under the
Agreement and the Note in all of the Company's right, title, and interest
in and to all personal property (the "Code Collateral") included within the
definition of the term Collateral (as defined in the Agreement) in which a
security interest can be granted under the UCC and Non-Utah Codes (as such
term is hereinafter defined)./1/ We have examined the financing statements
(the "Financing Statements") to be filed in the filing offices listed on
Annex I attached hereto (the "Filing Offices") with respect to the security
interests granted to PBCI pursuant to the Agreement, and upon the filing of
such Financing Statements in the Filing Offices, and assuming that the
representations made in the Agreement with respect to the location of the
Code Collateral and the chief executive office of the Company are and
remain true and correct: (a) all filings, registrations and recordings
necessary to perfect the security interest granted to you under such
Agreement in respect of all Code Collateral in which a security interest
may be perfected by filing a financing statement in the Filing Offices will
have been accomplished; and (b) the security interests granted to you
pursuant to such Agreement in and to such Code Collateral will be perfected
to the extent that such security interests may be perfected by filing
financing statements in the Filing Offices under the UCC and the Non-Utah
Codes.
___________________________
1* Opinion with respect to the perfection of security interests in Non-
Opining Jurisdictions is only required when PBCI has code Collateral or its
chief executive office outside of the Non-Opining Jurisdiction.
<PAGE>
8. The Pledge Agreement creates a valid security interest in your
favor as security for payment of the Secured Obligations in the Collateral
(as such terms are defined in the Pledge Agreement). The security interests
created in your favor under the Pledge Agreement with respect to such
Pledged Units constitute perfected security interests in such Pledged
Units.
In addition to any assumptions, qualifications and other matters set
forth elsewhere herein, the opinions set forth above are subject to the
following:
(a) For the purposes of this opinion, we have assumed that the Code
Collateral exists and the Company has rights or title to each item thereof, that
all natural persons have legal capacity, that all items submitted to us as
originals are authentic and all signatures thereon are genuine, that all items
submitted to us as copies conform to the originals and each such original or
copy is complete and has been duly executed and delivered by each party (other
than the Company) pursuant to due authorization as such party's legal, valid,
and binding obligation, enforceable against such party in accordance with its
respective terms.
(b) Our opinion with respect to the legality, validity, binding
effect, and enforceability of any document or agreement is subject to the effect
of any applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium, or similar law affecting creditors' rights generally and to the
effect of general principles of equity, including (without limitation) concepts
of materiality, reasonableness, good faith, and fair dealing (regardless of
whether considered in a proceeding in equity or at law).
(c) We call your attention to the following matters (as well as
those matters set out in paragraph (d) below) as to which we express no opinion:
(i) the Company's agreement in the Agreement to indemnify you
against costs, expenses, or liability notwithstanding your acts of gross
negligence or willful misconduct;
(ii) the Company's agreements in the Agreement for payment or
reimbursement of costs, fees, and expenses or indemnification for claims,
losses, or liabilities to the extent any such provision may be determined
by a court or other tribunal to be in an unreasonable amount, to constitute
a penalty, or to be contrary to public policy;
(iii) any of the waivers or remedies contained in the Documents,
whether or not any Document deems any such waiver or remedy commercially
reasonable, if such waivers or remedies are determined (1) not to be
commercially reasonable within the meaning of the UCC, (2) to conflict with
mandatory provisions under the UCC or other applicable law, or (3) to be
taken in a manner determined to be unreasonable or not performed in good
faith or with fair dealing or with honesty in-fact;
<PAGE>
(iv) certain other provisions contained in the Documents which may be
limited or rendered ineffective by applicable laws or judicial decisions
governing such provisions or holding their enforcement to be unreasonable under
the then-existing circumstances, but such laws and judicial decisions do not,
in our opinion, render the Documents invalid as a whole or leave you without
remedies; or
(v) the priority or continued perfection of any security interest or
lien granted by the Company to you under any of the Documents.
(d) Our opinions set forth in paragraph 7 above are subject to the
following further qualifications, exclusions and assumptions:
(i) Our opinions are qualified by and subject to:
(A) in the case of proceeds, continuation of perfection of your
security interest therein is limited to the extent set forth in Section 9-306 of
the UCC;
(B) in the case of property which becomes collateral after the
date hereof, Section 547 of the United States Bankruptcy Code (the "Bankruptcy
Code") provides that a transfer is not made until the debtor has rights in the
property transferred, so a security interest in after-acquired property which is
security for other than a contemporaneous advance may be treated as a violable
preference under the conditions (and subject to the exceptions) provided by
Section 547;
(C) Section 552 of the Bankruptcy Code limits the extent to which
property acquired by a debtor after the commencement of the case under the
Bankruptcy Code may be subject to a security interest arising from a security
agreement entered into by the debtor before the commencement of such case; and
(D) Section 364 of the Bankruptcy Code provides that the
extension of secured credit after the commencement of a case under the
Bankruptcy Code requires court approval.
(ii) We express no opinion as to:
(A) the creation or perfection of any security interest in any
fixtures or property excluded from the provisions of the UCC pursuant to 9-104;
and
(B) the perfection of any security interest in accounts that are
an obligation of the Federal government or any agency or political subdivision
thereof to the extent that any applicable laws require any actions in addition
to filing of the Financing Statements.
<PAGE>
(iii) We have assumed with your permission that:
(A) the Company has right, title, and interest in and to the
collateral pledged by it;
(B) all items of collateral (including, without limitation,
money, shares of capital stock, or additional instruments) pledged under
the Pledge Agreement, of which possession must be obtained and retained by
a secured party in order to perfect its security interest pursuant to
Section 9-103 and 9-304 of the UCC, are in your actual or constructive
possession and not in the possession of the Company or any of its
subsidiaries, affiliates, or agents;
(C) all items of collateral constitute items which are mobile in
nature and, if installed on any property, do not constitute fixtures; and
(D) none of the collateral consists of consumer goods, farm
products, crops, timber, minerals, or the like (including oil and gas), or
accounts resulting from the sale thereof, receivables due from any
government or agency or department thereof, beneficial interests in a trust
or a decedent's estate, letters of credit, inventory which is subject of
any negotiable documents of title, such as a negotiable bill of lading or
warehouse receipt held by anyone other than you or on your behalf, or items
which are subject to a requirement of any jurisdiction, including the
State, which provides for a registration or certificate of title or a
filing other than under the UCC.
Whenever our opinion with respect to the existence or absence of facts
is indicated to be based on our knowledge or awareness, we are referring solely
to the actual knowledge of the particular attorneys of our firm who have
represented PBCI in connection with the Documents. Except as expressly set forth
herein, we have not undertaken any independent investigation to determine the
existence or absence of such facts and no inference as to our knowledge
concerning such facts should be drawn from the fact that such representation has
been undertaken by us.
Our opinions expressed herein are limited to the laws of the State of
Utah, the Limited Liability Company Act of the State of Delaware and the federal
laws of the United States, and we do not express any opinion herein concerning
any other law except as expressly set forth in paragraph 7 above. With respect
to our opinions in paragraph 7, to the extent our opinions are not governed by
federal or Utah law, our opinions are based solely and exclusively on a review
of Subsections 9-103(3), 9-203(1) and (2), 9-302(1), 9-303, 9-401(1) and
9-402(1) and (3) of the Uniform Commercial Codes as reported by Commerce
Clearing House, Inc. in the Secured Transactions Guide for the states listed on
Annex I (collectively, the states listed on Annex I are sometimes referred to
herein as the "Non-Utah Jurisdictions" and the Uniform Commercial Codes as
adopted and in effect in such Non-Utah Jurisdictions are sometimes called
<PAGE>
the "Non-Utah Codes"). We have not reviewed, and we express no opinion on, local
custom with respect to, and any other sections of, the Non-Utah Codes, including
any provisions that are referred to in the sections that we have reviewed which
are noted above, nor have we reviewed any other statutes of the Non-Utah
Jurisdictions or judicial decisions construing or interpreting the laws of the
Non-Utah Jurisdictions, including the Non-Utah Codes. By rendering the opinions
set forth in paragraph 8 we do not intend to indicate that we are experts on, or
qualified to render opinions on, the laws of the Non-Utah Jurisdictions.
Accordingly, we caution you that the opinions in paragraph 7 could be materially
affected by local custom, other provisions of the Non-Utah Codes, other
statutes, laws, or regulations of the Non-Utah Jurisdictions or judicial
decisions of courts construing or interpreting the laws of the Non-Utah
Jurisdictions, including the Non-Utah Codes.
This opinion is furnished to you solely in connection with the
transactions described above and may not be relied upon by you (and to the
extent indicated in the previous sentence, your counsel) for any other purpose
or by any other person in any manner or for any purpose.
Very truly yours,
<PAGE>
Annex 1
UCC-1 Financing Statement filings to perfect a security interest in collateral
not constituting fixtures:
State Filing Office Reporting Publication
- ----- ------------- ---------------------
<PAGE>
Exhibit A
---------
Certificate
-----------
The undersigned hereby certifies that he is a duly elected Manager of Doc's
Cheese Company, L.L.C., a Delaware limited liability company (the "Company"),
and further certifies that the following documents are the only documents to
which the Company is a party that affect or purport to affect the Company's
right to borrow money under, or the Company's right to undertake and perform its
obligations under, the Documents (as defined in the Secured Loan Agreement,
dated _______________, 1995 between the Company and Progressive Bagel Concepts,
Inc.)
Date: __________________
_________________________
Secretary
<PAGE>
Exhibit 10.21
SUPPLY AGREEMENT
This supply agreement (the "Agreement") is made and entered into this 2nd
day of October, 1995 by and between Progressive Bagel Concepts, Inc., a Delaware
corporation ("PBCI"), and Doc's Cheese Company, L.L.C., a Delaware limited
liability company ("DCC").
RECITALS
--------
PBCI desires to purchase from DCC and to arrange for its subsidiaries and
franchisees to purchase from DCC, and DCC desires to sell to PBCI and PBCI's
subsidiaries and franchisees, certain of the requirements of PBCI and such
subsidiaries and franchisees for cream cheese, cream cheese-related products,
and spreads, all on the terms and subject to the conditions hereinafter set
forth.
COVENANTS
---------
In consideration of the premises and the manual covenants and agreements
herein contained, the parties here to agree as follows:
ARTICLE 1.0 DEFINITIONS
1.1 DEFINITIONS. As used herein the following terms shall have the
meaning given them below:
[
]*
"PBCI Franchisee" shall mean a franchisee of PBCI.
"PBCI Subsidiary" shall mean a wholly-owned subsidiary of PBCI.
"Production Facility" shall mean DCC's production facility at 761 South 200
West, Richmond, Utah.
"Products" shall mean (i) cream cheese, (ii) cream cheese-related products
and (iii) spreads mutually agreed upon by PBCI and DCC.
"Retail Period" shall mean one of PBCI's 13 consecutive four-week
accounting periods used for accounting purposes.
"Retail Quarter" shall mean, for the first Retail Quarter of each fiscal
year, the four consecutive Retail Periods ending with the fourth Retail Period
and, for the second, third and fourth Retail Quarters of each fiscal year, the
three consecutive Retail Periods ending with each of the seventh, tenth and
thirteenth Retail Period, respectively.
* Confidential treatment requested.
<PAGE>
"Term" shall mean the period commencing on the date hereof and continuing
until the first to occur of (i) the fifth anniversary of the date hereof, (ii)
the date of the Closing of the exercise by PBCI of the option granted pursuant
to the option agreement of even date herewith between PBCI, DCC and the members
of DCC, or (iii) the agreement in writing of PBCI and DCC to terminate this
Agreement.
ARTICLE 2.0 PURCHASE AND SALE OF THE PRODUCTS
2.1 On the terms and subject to the conditions set forth herein, and
during the Term hereof, DCC agrees to sell to PBCI, PBCI Subsidiaries and PBCI
Franchisees, and PBCI agrees to purchase from DCC, and to arrange for PBCI
Subsidiaries and PBCI Franchisees to purchase from DCC, Products produced by DCC
at the Production Facility.
2.2 PBCI, PBCI Subsidiaries and PBCI Franchisees shall notify DCC from
time to time of the quantity of Products they wish to purchase from DCC by
placing purchase orders with DCC. Each order shall be filled by DCC within a
commercially reasonable time period specified in the order. PBCI, either on its
own or in combination with PBCI Subsidiaries and PBCI Franchisees, shall
purchase from DCC (a) in each Retail Quarter through and including the third
Retail Quarter in 1996 Products having a volume (measured in pounds) not less
than the lesser of (i) 60% of the requirements of PBCI, PBCI Subsidiaries and
PBCI Franchisees for the Products to be purchased during such Retail Quarter for
bagel stores operated by PBCI and PBCI Subsidiaries and PBCI Franchisees under
the EINSTEINS name or under the name of any other concept that may hereafter be
adopted by PBCI as its predominant concept ("Einsteins Stores"), excluding bagel
stores which may be subject to contractual commitments to purchase cream cheese,
cream cheese-related products, and spreads from other sources which commitments
are assumed by PBCI, PBCI Subsidiaries or PBCI Franchisees in connection with
the acquisition of such stores ("Cream Cheese Commitments"), or (ii) the product
of .16 million pounds of Products and the number of weeks in such Retail
Quarter, and (b) in each Retail Quarter commencing with the fourth Retail
Quarter in 1996 and thereafter Products having a volume (measured in pounds) not
less than the lesser of (i) 60% of the requirements of PBCI, PBCI Subsidiaries
and PBCI Franchisees for the Products to be purchased during such Retail Quarter
for bagel stores operated by PBCI, PBCI Subsidiaries and PBCI Franchisees,
excluding bagel stores which are subject to Cream Cheese Commitments and
excluding bagel stores acquired by PBCI, PBCI Subsidiaries or PBCI Franchisees
from third parties within the one-year period prior to the commencement of such
Retail Quarter, or (ii) the product of .16 million pounds of Products and the
number of weeks in such Retail Quarter.
2.3 DCC shall not be obligated to sell to PBCI, PBCI Subsidiaries and PBCI
Franchisees in any Retail Quarter Products having a volume (measured in pounds)
in excess of .16 million pounds of Products and the number of weeks in such
Retail Quarter; provided however, that prior to the end of the first Retail
Quarter in 1996, DCC shall not be obligated to sell to PBCI, PBCI Subsidiaries
and PBCI Franchisees an amount in excess of 57,600 pounds of Products per week.
2
<PAGE>
2.4 DCC may lease to Heart to Heart Foods, Inc., a Utah corporation
("HTH") production equipment located at the Production Facility, provided that
such equipment may be used by HTH only to the extent such use does not interfere
with DCC's performance of its obligations hereunder.
2.5 The Products shall be produced (a) using such formulations as PBCI
shall specify from time to time (the "Formulations"), (b) in accordance with
such size, weight and other specifications as PBCI shall establish from time to
time (the "Specifications"), and (c) in accordance with such manufacturing
procedures as PBCI shall specify from time to time (the "Procedures"). All
Formulations, Specifications and Procedures are subject to change upon notice
from PBCI to DCC at any time. PBCI agrees to use reasonable best efforts to
consult with DCC from time to time regarding any changes to the Formulations,
Specifications and Procedures that it may be considering. All Formulations,
Specifications and Procedures shall be owned by PBCI. PBCI also agrees that DCC
shall have a royalty-free, non-exclusive license to use any technology, know-how
or trade secrets developed for PBCI by C. Anthon Ernstrom, C. Reed Ernstrom or
Berkley J. Ward during the term hereof, which license shall be solely for use by
DCC in fulfilling its obligations under this Supply Agreement and which license
shall terminate upon the termination of this Agreement.
2.6 The Products shall be packaged using such packaging materials and
labeling as shall be determined by PBCI. DCC agrees to maintain an inventory of
such packaging materials and labels as directed by PBCI. All trademarks and
trade dress appearing on packaging and labeling (including without limitation
the trademark "Doc's") shall be the exclusive property of PBCI but DCC shall
have a royalty-free nonexclusive license to use such trademarks and trade dress
in packaging and labeling the Products for sale to PBCI hereunder.
2.7 Products supplied hereunder shall be shipped F.O.B. the Production
Facility, and ownership and risk of loss with respect to the Products supplied
hereunder shall pass to PBCI or the PBCI Subsidiary or PBCI Franchisee when
delivered to a carrier at the F.O.B. point.
2.8 Payment terms shall be as mutually agreed by DCC, on the one hand, and
PBCI and the PBCI Franchisees (or distributors referred to in Section 2.9), that
purchase Products from DCC, on the other hand. In no event shall PBCI be
construed as a guarantor of payment (or any other obligation) of any PBCI
Franchisee or any food service distributor to DCC.
2.9 Notwithstanding any other provision of this Agreement to the contrary,
PBCI may at any time arrange for the Products to be sold to PBCI, PBCI
Subsidiaries and PBCI Franchisees through one or more food service distributors.
In such event (i) orders may be placed with DCC by such distributors, rather
than by PBCI, PBCI Subsidiaries or PBCI Franchisees, and the obligation to pay
for the Products delivered to any distributor shall be solely that of the
distributor and not the obligation of PBCI or any PBCI Subsidiary or PBCI
Franchisee, (ii) orders placed by such distributors shall be taken into account
in determining whether the commitment in Section 2.2 has been satisfied, (iii)
the other provisions of Article 2.0 governing the purchase and sale of the
Products, including Sections 2.5, 2.6, 2.7 and 2.8, shall govern the production
and sale of such Products, (iv) the provisions of Article 3.0 shall govern the
pricing of
3
<PAGE>
the Products to the distributor, and (v) the product warranties in Article 4.0,
the covenants in Article 5.0, and the indemnification and insurance provisions
in Article 6.0 shall be made for the benefit of PBCI or the PBCI Subsidiary or
PBCI Franchisee that ultimately purchases the Products, notwithstanding the
purchase and sale by a distributor.
ARTICLE 3.0 PRICING
3.1 The Products shall be sold to PBCI, PBCI Subsidiaries, PBCI
Franchisees and food service distributors referred to in Section 2.9 [
]* determined in the manner provided in Exhibit A and adjusted in the manner
provided for herein. Set forth in Exhibit B is [ ]* of the Products as of
the date hereof. [ ]* shall be redetermined as of the end of each Retail
Quarter during the Term, the prices based upon such redetermination shall take
effect beginning with the first invoice following such redetermination, and the
prices paid for Products invoiced during such preceding Retail Quarter shall be
redetermined, with an appropriate payment or credit to be made to reflect such
retroactive price adjustment.
3.2 [ ]* shall be determined based upon a [ ]* for
each Retail Quarter which shall be prepared by the Company and accompanied by
the report of Cook & Dorigatti, or such other firm of independent accountants as
shall be selected from time to time by PBCI, which firm shall be reasonably
acceptable to DCC. Each Statement of Costs shall be delivered to PBCI within
fifteen business days after the end of the Retail Quarter to which it relates,
shall include the information required by Exhibit A and shall be accompanied by
a report of such accountants in the form set forth in Exhibit C.
3.3 DCC shall provide to PBCI and the accountants referred to in Section
3.2 all information requested by them in order to permit the preparation of the
report referred to in Section 3.2 and the determination of [ ]* therefrom.
DCC shall also permit PBCI and such accountants to have access to its books and
records at any time upon reasonable notice during normal business hours.
3.4 PBCI may charge DCC for various costs incurred by PBCI in connection
with research and development, product development, procurement or other costs
related to the development, production, distribution and sale of the Products,
and such costs shall be included in determining Total Expenses in DCC's Retail
Quarter income statements.
ARTICLE 4.0 PRODUCT WARRANTIES
4.1 DCC warrants to PBCI and all PBCI Subsidiaries and PBCI Franchisees
that purchase Products from DCC that:
4.1.1 each shipment of Products supplied hereunder shall be
manufactured in accordance with the provisions of Section 2.5 hereof, shall be
of good and merchantable quality and shall be fit for the purposes for which
they are intended to be used;
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* Confidential treatment requested.
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4.1.2 none of the Products supplied hereunder shall be adulterated or
misbranded within the meaning of the Federal Food Drug and Cosmetics Act, as
amended, except to the extent misbranding may arise from the use of PBCI's
Formulations or Specifications, and none of such products will be an article
which may not be introduced into interstate commerce under the provisions of
Section 404, 409 or 706 of that Act;
4.1.3 none of the Products supplied hereunder shall be adulterated or
misbranded within the meaning of any applicable provision of any state or
municipal law, which provision is similar to any provision of the Federal Food,
Drug and Cosmetics Act, as amended, except to the extent misbranding may arise
from the use of PBCI's Formulations or Specifications,;
4.1.4 all ingredients used in the manufacture of the Products
supplied hereunder will be permissible for use in the Products under applicable
laws and regulations;
4.1.5 the sale or use of the Products does not and will not infringe
any United States or foreign patent, trade secret or other similar right of any
third party.
The foregoing warranties shall survive inspection and acceptance of any of
the Products, and payment therefor, by PBCI, PBCI Subsidiaries and PBCI
Franchisees.
ARTICLE 5.0 COMPLIANCE WITH LAWS; INSPECTION
5.1 DCC agrees to comply with all governmental laws, regulations and
orders applicable to its operations under this Agreement, and to bear any and
all taxes, fees or other governmental charges applicable to such operations.
5.2 DCC agrees to permit representatives of PBCI to inspect the Production
Facility at any time to assure compliance with the terms of this Agreement,
provided that PBCI agrees to use reasonable best efforts to assure that such
inspections do not interfere with normal business operations.
ARTICLE 6.0 INDEMNIFICATION AND INSURANCE
6.1 DCC agrees to indemnify and hold PBCI and all PBCI Subsidiaries and
PBCI Franchisees that purchase Products harmless from and against all expenses,
losses, costs, deficiencies, liabilities and damages (including related counsel
fees) incurred or suffered by them resulting from: (a) any breach of any
representation or warranty made by DCC in or pursuant to this Agreement; (b) any
default in the performance of any of the covenants or agreements made by the DCC
in this Agreement; (c) any claim or action by any consumer or any other third
party arising out of the production or sale of the Products (including any
claims or actions for personal injury and any products liability claims or
action), provided, however, that DCC shall have no obligation to indemnify PBCI
or any PBCI Subsidiary or PBCI Franchisee with respect of any claim or action to
the extent with claim or action arises out of the alteration, handling or
misbranding of Products after they have been delivered to PBCI or any PBCI
Subsidiary or PBCI
5
<PAGE>
Franchisee; (d) any claim or action brought by any federal, state, local or
foreign governmental agency in connection with the production or sale of the
Products (including without limitation any claim or action under any law or
regulation relating to public health, the sale of food and drugs, and the safe
conduct of business), provided, however, that DCC shall have no obligation to
indemnify PBCI or any PBCI Subsidiary or PBCI Franchisee with respect to any
claim or action to the extent such claim or action arises out of the alteration,
handling or misbranding of Products after they have been delivered to PBCI or
any PBCI Subsidiary or PBCI Franchisee; or (e) any infringement or claim of
infringement by DCC of any patent, trade secret or any other similar right of
any third party.
6.2 PBCI agrees to indemnify and hold DCC harmless from and against all
expenses, losses, costs, deficiencies, liabilities and charges (including
related counsel fees) incurred or suffered by it resulting from any claim or
action by any consumer or other third party or any federal, state, local or
foreign governmental agency to the extent it arises out of the alteration,
handling or misbranding of Products by PBCI or PBCI Subsidiaries.
6.3 DCC represents and warrants that it carries policies of comprehensive
general liability insurance, including products liability insurance, with a
combined single limit of $20,000,000, and that PBCI has been named as an
additional insured on all such policies, that such policies maintained by DCC
contain an endorsement (a) providing that DCC's policies are primary relative to
PBCI or any PBCI Subsidiary or PBCI Franchisee, (b) providing that any other
insurance maintained by PBCI or any PBCI Subsidiary or PBCI Franchisee is excess
and non-contributing, and (c) waiving any and all rights of subrogation against
PBCI, PBCI Subsidiaries and PBCI Franchisees, that all premiums which have
become due on such policies have been paid, that such policies are in full force
and effect, and that such policies may not be canceled, changed or allowed to
lapse through non-renewal, failure to pay premiums or otherwise except upon not
less than 60 days' prior written notice to DCC and PBCI. DCC has previously
delivered to PBCI complete and accurate copies of such policies, together with
satisfactory evidence of the coverage of PBCI as an additional insured, and will
hereafter provide PBCI with copies of any renewal or replacement policies as
issued. DCC agrees to maintain such policies in full force and effect, in the
amount set forth above, throughout the term of this Agreement and for a period
of five years thereafter, and to maintain PBCI as an additional insured under
such policies.
ARTICLE 7.0 MISCELLANEOUS
7.1 PBCI and DCC may amend, modify and supplement this Agreement in such
manner as may be agreed upon by them in writing.
7.2 Each party to this Agreement shall pay all of the expenses incurred by
it in connection with this Agreement, including without limitation its legal and
accounting fees and expenses, and the commission, fees and expenses of any
person employed or retained by it to bring about, or to represent it in, the
transactions contemplated hereby.
6
<PAGE>
7.3 This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. In addition, each of
the PBCI Subsidiaries and PBCI Franchisees shall be express third party
beneficiaries of the provisions hereof.
7.4 This instrument and the exhibits attached hereto contain the entire
agreement of the parties hereto with respect to the purchase and sale of the
Products and the other transactions contemplated herein, and supersede all prior
understandings and agreements of the parties with respect to the subject matter
hereof. Any reference herein to this Agreement shall be deemed to include the
exhibits attached hereto. In the event of any inconsistency between this
Agreement and any purchase order, confirmation or similar document or instrument
of PBCI, any PBCI Subsidiary or PBCI Franchisee or DCC, this Agreement shall
govern.
7.5 The descriptive headings in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
7.6 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
7.7 Any notice, request, information or other document to be given
hereunder shall be in writing. Any notice, request, information or the document
shall be deemed duly given three business days after it is sent by registered or
certified mail, postage prepaid, to the intended recipient, addressed as
follows:
If to DCC, addressed as follows:
Doc's Cheese Company, L.L.C.
761 South 200 West
Richmond, Utah 84333
Attention: C. Reed Ernstrom
with a copy to:
Parsons Behle & Latimer
201 South Main Street
Suite 1800
Salt Lake City, Utah 84111
Attention: William D. Holyoak, Esq.
If to PBCI, addressed as follows:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, Colorado 80401
Attention: Chairman
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with a copy to:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, Colorado 80401
Attention: General Counsel
Any party may send any notice, request, information or other document to be
given hereunder using any other means (including personal delivery, courier,
messenger service, facsimile transmission, telex or ordinary mail), but no such
notice , request, information or other document shall be deemed duly given
unless and until it is actually received by the party for whom it is intended.
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice.
7.8 This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado applicable to contracts made and to be
performed wholly therein.
7.9 No press release or other public announcement related to this
Agreement or the transactions contemplated hereby will be issued by DCC without
the prior approval of PBCI.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PROGRESSIVE BAGEL CONCEPTS, INC.
By /s/ Paul A. Strasen
----------------------------------
DOC'S CHEESE COMPANY, L.L.C.
By /s/ C. Reed Ernstrom
-----------------------------------
8
<PAGE>
EXHIBITS
--------
Exhibit A [ ]*
Exhibit B [ ]*
Exhibit C [ ]*
* Confidential treatment requested.
<PAGE>
EXHIBIT A
---------
[
]*
*Confidential treatment requested.
<PAGE>
EXHIBIT B
---------
[
]*
*Confidential treatment requested.
<PAGE>
EXHIBIT C
---------
[
<PAGE>
]*
*Confidential treatment requested.
<PAGE>
Exhibit 10.22
LICENSE AGREEMENT
This license agreement ("Agreement") is made and entered into this 2nd day
of October, 1995 by and between Progressive Bagel Concepts, Inc., a Delaware
corporation ("PBCI"), and Doc's Cheese Company, L.L.C., a Delaware limited
liability company ("DCC").
RECITALS
--------
DCC owns certain proprietary rights that are used or useable in the
business of producing cream cheese and related products (the "Business"). PBCI
desires to obtain from DCC, and DCC is willing to grant to PBCI, an exclusive
license to use the proprietary information.
COVENANTS
---------
In consideration of the mutual representations and covenants and subject to
the conditions herein contained, the parties hereto agree as follows:
1.0 LICENSE
1.1 GRANT OF LICENSE. Subject to the conditions herein contained DCC hereby
grants to PBCI a royalty-free license (the "License") to the DCC Proprietary
Information. For purposes of this Agreement, "DCC Proprietary Information" shall
mean all inventions, patents, trade secrets, technology, know-how, formulae,
recipes, designs and drawings, copyrights, processes, operating rights and
similar intangible property and rights owned by DCC, and all inventions, whether
or not patentable, trade secrets, technology, know-how, formulae, recipes,
designs and drawing, copyrights, processes, operating rights and similar
intangible property and rights developed solely by DCC or jointly with others or
acquired by DCC at any time during the term of this Agreement. DCC shall not
grant any other license of the DCC Proprietary Information during the term of
this Agreement.
1.2 SUBLICENSES. PBCI shall have the right, without DCC's consent, to
sublicense the DCC Proprietary Information at any time or from time to time, to
any one or more persons or entities, on such terms as may be determined by PBCI
in its sole discretion; provided, however, that (a) no sublicense shall permit
the grant of further sublicenses by the sublicensee, (b) any such sublicense
shall terminate no later than the Termination Date, (c) any sublicensee shall
enter into a confidentiality agreement for the benefit of PBCI and HTH that
contains substantially the same terms as are contained in Sections 2.1 and 2.2
hereof, and (d) any sublicense shall permit the sublicensee to use the DCC
Proprietary Information only for the production of cream cheese, cream-cheese
related products and spreads for sale to PBCI, PBCI Subsidiaries and PBCI
Franchisees (and food service distributors that sell such products to PBCI, PBCI
Subsidiaries and PBCI Franchisees) (any of whom may sell or distribute such
products in any channel of distribution whatsoever).
<PAGE>
2.0 COVENANTS
2.1 CONFIDENTIAL INFORMATION.
2.1.1 PBCI acknowledges and agrees that the DCC Proprietary Information is
confidential to and a valuable asset of DCC, is proprietary and includes
trade secrets of DCC. PBCI hereby agrees that, subject to its rights to
sublicense the DCC Proprietary Information, it shall (i) maintain the
confidentiality of the DCC Proprietary Information; and (ii) return all
copies of the DCC Proprietary Information disclosed in written or other
tangible form upon the Termination Date (unless this Agreement terminates
by reason of the Asset Purchase (as hereinafter defined)).
2.1.2 Notwithstanding the foregoing, the obligations of PBCI specified
above shall not apply to any DCC Proprietary Information which (i) is
disclosed in a printed publication available to the public, or is otherwise
in the public domain through no act of PBCI, its agents or any person or
entity which has received such DCC Proprietary Information from or through
PBCI; (ii) is approved for release by written authorization of a manager of
DCC; (iii) is required to be disclosed by proper order of a court of
applicable jurisdiction after adequate notice to DCC to seek a protective
order therefor, the imposition of which protective order PBCI agrees to
approve and support; or (iv) in the written opinion of PBCI's counsel, is
necessary to be made by PBCI in order that PBCI does not violate any law,
rule or regulation applicable to it.
2.1.3 DCC acknowledges and agrees that (i) PBCI may file a copy of this
Agreement with the Securities and Exchange Commission in connection with
the filing of, and as an exhibit to, a registration statement under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, and (ii) such filing shall not be deemed to be a breach of or
otherwise be prohibited by this Agreement.
2.2 REMEDIES; WAIVER. PBCI agrees that the provisions and restrictions set
forth above in Section 2.1 are necessary to protect DCC and its successors and
assigns in the protection of its business. PBCI agrees that damages cannot
compensate DCC in the event of violation of the covenants contained in Section
2.1 hereof, and that injunctive relief shall be essential for the protection of
DCC and its successors and assigns. Accordingly, PBCI agrees and consents that,
in the event it shall violate or breach any of said covenants, DCC shall be
entitled to obtain injunctive relief against PBCI in addition to such further or
other relief as may appertain at equity or law. The exercise or enforcement by
DCC of any right or remedy hereunder shall not preclude the exercise or
enforcement by DCC of any other right or remedy hereunder of which DCC has the
right to enforce under applicable law; provided, however, that in no event shall
PBCI be liable for consequential, indirect, incidental, speculative or punitive
damages in any lawsuit, proceeding, counterclaim or any other litigation
procedure based upon, or arising out of this Agreement, or the dealings or the
relationship between the parties hereto.
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<PAGE>
2.3 TECHNICAL ASSISTANCE. DCC agrees to provide to PBCI, during the term
of this Agreement, whether or not in connection with any sublicense of the DCC
Proprietary Information, such technical assistance as is necessary for PBCI to
realize the benefits of the License. Such technical assistance shall include,
but not be limited to, the services of Reed Ernstrom and other employees of, and
consultants to, DCC. PBCI agrees to reimburse DCC for all reasonable out-of-
pocket expenses incurred by DCC in connection with providing such technical
assistance in accordance with PBCI's travel and entertainment policy in effect
from time to time upon submission of an itemized statement of expenses supported
by receipts for any such expenses.
3.0 TERM
3.1 TERM OF LICENSE. This Agreement and the license granted
hereunder shall terminate upon the earlier of (i) the fifth anniversary hereof
and (ii) the date PBCI purchases the assets of DCC (the "Asset Purchase")
pursuant to the Option Agreement of even date herewith by and between PBCI, DCC
and the members of DCC, as it may be amended from time to time (the "Termination
Date").
4.0 MISCELLANEOUS
4.1 INFRINGEMENT. DCC shall promptly notify PBCI of any infringement or
threatened infringement by a third party of any DCC Proprietary Information or
any challenge to the validity of or DCC's ownership of the DCC Proprietary
Information or any claim by any person of any rights in the DCC Proprietary
Information which shall become known to it. DCC shall not communicate with any
person other than PBCI and its counsel in connection with any such infringement,
challenge or claims. PBCI shall have the sole discretion to take such action as
it deems appropriate in connection with the foregoing, and the right to control
exclusively any settlement, litigation, arbitration or administrative proceeding
arising out of any such alleged infringement, challenge or claim or otherwise
relating to the DCC Proprietary Information. DCC agrees to execute any and all
instruments and documents, render such assistance, and do such acts and things
as may, in the opinion of PBCI's counsel, be necessary or advisable to protect
and maintain the interests of PBCI in any litigation or other proceeding or to
otherwise protect and maintain the interests of PBCI in the DCC Proprietary
Information.
4.2 AMENDMENT AND MODIFICATION. The parties hereto may amend, modify and
supplement this Agreement in such manner as may be agreed upon by them in
writing.
4.3 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, heirs
and legal representatives.
4.4 ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties hereto with respect to the license of the DCC Proprietary Information
and the other transactions
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contemplated herein, and supersedes all prior understandings and agreements of
the parties with respect to the subject matter hereof.
4.5 HEADINGS. The descriptive headings in this Agreement are inserted for
convenience only and do not constitute a party of this Agreement.
4.6 EXECUTION IN COUNTERPART. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
4.7 NOTICES. Any notice, request, information or other document to be
given hereunder to either of the parties by the other party shall be in writing
and delivered personally or sent by certified mail, postage prepaid, as follows:
If to DCC, addressed to:
Doc's Cheese Company, L.L.C.
761 South 200 West
Richmond, Utah 84333
Attention: C. Reed Ernstrom
with a copy to:
Parsons Behle & Latimer
201 South Main Street
Suite 1800
Salt Lake City, Utah 84111
Attention: William D. Holyoak, Esq.
If to PBCI, addressed to:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd.
Suite 200
Golden, Colorado 80401
Attention: General Counsel
Any party may change the address to which notices hereunder are to be sent to it
by giving written notice of such change of address in the manner herein provided
for giving notice. Any notice delivered personally shall be deemed to have been
given on the date it is so delivered, and any notice delivered by registered or
certified mail shall be deemed to have been given on the date it is received.
4.8 GOVERNING LAW. This Agreement shall be governed by any construed in
accordance with the laws of the State of Colorado applicable to contracts made
and to be performed therein.
4
<PAGE>
4.9 PUBLICITY. No press release or other public announcement related to
this Agreement or the transactions contemplated hereby will be issued by DCC
without the prior written approval of PBCI.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
DOC'S CHEESE COMPANY, L.L.C.
By: /s/ C. Reed Ernstrom
---------------------------
Title:
--------------------------
PROGRESSIVE BAGEL CONCEPTS, INC.
By: /s/ Paul Strasen
----------------------------
Title:
---------------------------
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<PAGE>
Exhibit 10.23
OPTION AGREEMENT
DATED OCTOBER 2, 1995
AMONG
PROGRESSIVE BAGEL CONCEPTS, INC.
DOC'S CHEESE COMPANY, L.L.C.,
C. ANTHON ERNSTROM,
C. REED ERNSTROM,
JAY L. WARD AND KARON WARD,
AS JOINT TENANTS,
BRIAN L. ERNSTROM
AND
BERKLEY J. WARD
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article 1.0 The Option.................................................................. 1
1.1 The Option.................................................................. 1
1.2 Payment for the Grant of the Option......................................... 2
1.3 Exercise of the Option...................................................... 2
1.4 Regulatory Compliance....................................................... 2
1.5 Purchase Price upon Exercise of the Option.................................. 3
1.6 Valuation of PBCI Stock or BCI Stock........................................ 3
1.7 Closing of Option Exercise.................................................. 3
1.8 Procedure at each Closing................................................... 3
Article 2.0 Representations and Warranties of DCC and the Members....................... 4
2.1 Organization, Power and Authority of DCC.................................... 4
2.2 Due Authorization; Binding Agreement of DCC................................. 5
2.3 Binding Agreement of the Members............................................ 5
2.4 Membership Interests in DCC................................................. 5
2.5 Ownership of Units by the Members........................................... 6
2.11 Good Title to and Condition of DCC's Assets................................ 6
2.26 Accuracy of Information Furnished by DCC and the Members................... 6
2.27 Investment Bankers' and Brokers' Fees...................................... 6
Article 3.0 Representations and Warranties of PBCI...................................... 6
3.1 Organization, Power and Authority of PBCI................................... 6
3.2 Due Authorization; Binding Agreement of PBCI................................ 6
3.3 Investment Bankers' and Brokers' Fees....................................... 7
Article 4.0 Additional Covenants of DCC and the Prior to the Termination................ 7
4.1 Reasonable Best Efforts..................................................... 7
4.2 Conduct of Business......................................................... 7
4.3 Access to DCC's Properties and Records...................................... 7
4.4 Notice of Material Developments............................................. 8
4.5 No Disclosure............................................................... 8
4.6 No Other Discussions; Retention of Units.................................... 8
Article 5.0 Conditions to the Closing of the Option Exercise by PBCI.................... 8
5.1 Accuracy of Representations and Warranties and Compliance with Obligations.. 8
5.2 HSR Act Waiting Period...................................................... 9
5.3 Receipt of Necessary Consents............................................... 9
5.4 No Adverse Litigation....................................................... 9
5.5 No Material Adverse Change.................................................. 9
Article 6.0 Certain Additional Covenants................................................ 9
6.1 Execution of Further Documents.............................................. 9
6.2 Cooperation of DCC and the Members.......................................... 9
</TABLE>
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<TABLE>
<S> <C>
6.3 Subsequent Audited Financial Statements..................................... 9
6.4 Confidential Information.................................................... 11
6.6 Restrictive Covenants....................................................... 11
6.6 Remedies Waiver............................................................. 12
6.7 Grant of PBCI Options....................................................... 12
Article 7.0 Indemnification............................................................. 13
7.1 Agreement by the Members to Indemnify....................................... 13
Article 8.0 Miscellaneous............................................................... 14
9.1 Amendment and Modification.................................................. 14
9.2 Payment of Expenses......................................................... 15
9.3 Binding Effect.............................................................. 15
9.4 Entire Agreement............................................................ 15
9.5 Headings.................................................................... 15
9.6 Execution in Counterpart.................................................... 15
9.7 Notices..................................................................... 15
9.8 Governing Law............................................................... 17
9.9 Publicity................................................................... 17
</TABLE>
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<PAGE>
OPTION AGREEMENT
This option agreement (the "Agreement") is made and entered into this 2nd day
of October, 1995 by and among Progressive Bagel Concepts, Inc., a Delaware
corporation ("PBCI"), Doc's Cheese Company, L.L.C., a Delaware limited liability
company ("DCC"), C. Anthon Ernstrom, C. Reed Ernstrom, C. Jay Ward and Karon
Ward, as joint tenants, Brian L. Ernstrom, and Berkley J. Ward (collectively,
the "Members").
RECITALS
PBCI desires to obtain an option to acquire all of the assets of DCC, and DCC
desires to grant such an option, all on the terms and subject to the conditions
set forth herein.
COVENANTS
In consideration of the mutual representations, warranties and covenants and
subject to the conditions herein contained, the parties hereto agree as follows:
ARTICLE 1.0 THE OPTION
1.1 THE OPTION. Upon the terms and subject to the conditions hereof, DCC
hereby grants to PBCI an irrevocable option (the "Option") to purchase, at the
purchase price provided for in Section 1.5 hereof, all of the assets of DCC
other than DCC's loan to Heart to Heart Foods, Inc. ("HTH") pursuant to the
secured loan agreement of even date herewith (the "HTH Loan Agreement") between
DCC and HTH (the "HTH Loan") and DCC's loan, if any, to Berkeley Ward (the "Ward
Loan") permitted to be made pursuant to Section 2.10 of the secured loan
agreement of even date herewith between PBCI and DCC (the "Secured Loan
Agreement") (the assets subject to the option being herein sometimes referred to
as the "Option Assets"). Without limiting the generality of the foregoing, the
Option Assets shall include:
1.1.1 all of DCC's machinery, equipment, tools, supplies, leasehold
improvements, construction in progress, furniture and fixtures, and other
fixed assets;
1.1.2 all inventories and raw materials of DCC;
1.1.3 all receivables of DCC;
1.1.4 all real estate owned by DCC and all of the interest of, and the
rights and benefits accruing to, DCC as lessee under all leases of real
property and all improvements thereto and buildings thereon, and all leases
or rental agreements covering machinery, equipment, tools, supplies,
vehicles, furniture and fixtures and other fixed assets or personal property;
1.1.5 all of the rights and benefits accruing to DCC under all sales
orders, sales contracts, supply contracts, purchase orders and purchase
commitments made by DCC in the
<PAGE>
ordinary course of business, all other agreements to which DCC is a party
or by which it is bound (including, without limitation, the purchase
agreement of even date herewith between HTH, the shareholders of HTH and
DCC (the "HTH Purchase Agreement")) and all other choses in action, causes
of action and other rights of every kind;
1.1.6 all operating data and records of DCC, including, without
limitation, customer lists, financial, accounting and credit records,
correspondence, budgets and other similar documents and records;
1.1.7 all of the proprietary rights of DCC, including, without
limitation, all trademarks, trade names, patents, patent applications,
licenses, trade secrets, technology, know-how, formulae, designs and
drawings, computer software, slogans, copyrights, processes, operating
rights, other licenses and permits, and other similar intangible property
and rights; and
1.1.8 all cash and investments, and all prepaid and deferred items of
HTH, including, without limitation, prepaid rentals, insurance, taxes and
unbilled charges and deposits.
The Option shall be exercisable at any time on or after the date
hereof and on or before the fifth anniversary of the date hereof (the
"Termination Date").
1.2 PAYMENT FOR THE GRANT OF THE OPTION. In consideration for the grant of
the Option, PBCI is paying an aggregate of $10,000 in cash to DCC, concurrently
with the execution and delivery of this Agreement.
1.3 EXERCISE OF THE OPTION. In the event that PBCI elects to exercise the
Option it shall give written notice of such exercise to DCC in the manner
provided herein for the giving of notice, which notice shall specify the
consideration which PBCI elects to deliver upon the Closing (as hereinafter
defined), which may consist of shares of common stock of PBCI ("PBCI Stock") in
the event PBCI has completed an initial public offering of PBCI Stock, shares of
common stock ("BCI Stock") of Boston Chicken, Inc. ("BCI"), cash, or any
combination of the foregoing, having an aggregate value equal to the Equity
Purchase Price (as defined in Section 1.5). In the event PBCI elects to deliver
upon the Closing shares of PBCI Stock or shares of BCI Stock, such shares shall
be registered under the Securities Act of 1933, as amended (the "1933 Act"), or,
at PBCI's option, such shares shall be subject to an offer on the part of the
issuer to enter into an agreement on customary terms to file a registration
statement to register such shares under the 1933 Act within 30 days after the
Closing Date.
1.4 REGULATORY COMPLIANCE. Upon the exercise of the Option each of the
parties shall promptly prepare and file with the Federal Trade Commission
("FTC") and the United States Department of Justice ("Justice Department") any
notification required to be filed with respect to the transactions contemplated
hereby under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 as
amended, or any rules or regulations thereunder (the "HSR Act"). Each party
represents and warrants to the other parties hereto that any such filing made by
it shall be true and accurate in all material respects and shall conform to the
requirements of the HSR Act. Each party shall promptly complete and file any
required responses to requests by the FTC or the Justice Department for
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<PAGE>
additional data and information. Each party shall also make available to the
other parties hereto such information relative to its business, assets and
property as may be required for the preparation of such notifications and
reports.
1.5 PURCHASE PRICE UPON EXERCISE OF THE OPTION. The purchase price paid by
PBCI upon the exercise of the Option shall consist of: (i) PBCI Stock, BCI
Stock, cash or any combination of the foregoing (determined in accordance with
Section 1.3) having an aggregate value equal to the DCC Value, reduced by the
sum of (A) the amount of the outstanding principal and accrued interest on the
Term Loan B Note (as defined in the Secured Loan Agreement), if any, (B) the
amount of the outstanding principal and accrued interest on the Term Loan C Note
(as defined in the Secured Loan Agreement), if any, and (C) $150,000 (the amount
referred to in this clause (i) being herein referred to as the "Equity Purchase
Price"), (ii) the extinguishment of the outstanding indebtedness under the
Secured Loan Agreement and (iii) the assumption by PBCI of DCC's accounts
payable, accrued expenses, outstanding indebtedness for money borrowed and
contractual obligations, except that PBCI shall not be obligated to assume any
liability or obligation the existence of which constitutes a breach of any
representation and warranty made by DCC or the Members in this Agreement, made
by HTH or its shareholders in the HTH Purchase Agreement or made by DCC in the
Secured Loan Agreement or incurred in violation of any covenants or agreements
of DCC made in this Agreement or in the Secured Loan Agreement (such liabilities
to be assumed by PBCI being herein referred to as the "Assumed Liabilities").
For this purpose, the "DCC Value" at any date shall be determined in the manner
set forth in Exhibit A.
1.6 ALLOCATION OF PURCHASE PRICE AMONG OPTION ASSETS. The purchase price
for the Option Assets shall be allocated among each item or class of the Option
Assets as determined by PBCI. DCC and PBCI agree that they will prepare and file
their federal and any state or local income tax returns based on such allocation
of the purchase price. DCC and PBCI agree that they will prepare and file any
notices or other filings required pursuant to Section 1060 of the Internal
Revenue Code of 1986, and that any such notices of filings will be prepared
based on such allocation of the purchase price.
1.7 VALUATION OF PBCI STOCK OR BCI STOCK. PBCI Stock or BCI Stock delivered
upon the Closing (as hereinafter defined) shall be deemed to have a value equal
to the average closing sales price per share of such stock as quoted on the
NASDAQ National Market, as reported in the Wall Street Journal (Western
Edition), or as quoted on such other market or exchange on which such shares are
traded, for the ten consecutive trading days ending on the second business day
prior to the Closing Date (as hereinafter defined).
1.8 CLOSING OF OPTION EXERCISE. The closing of the exercise of the Option
shall take place at the offices of PBCI at 9:00 A.M., local time, on the fifth
business day after the date of the notice of such exercise referred to in
Section 1.3, or, if later, the second business day after the satisfaction or
waiver of all conditions to the exercise of the Option provided for in Article
5.0 hereof. Throughout this Agreement, such event is referred to as "Closing"
and such date and time are referred to as "Closing Date".
1.9 PROCEDURE AT THE CLOSING. At the Closing: (i) DCC shall execute and
deliver to PBCI instruments of assignment in form and substance satisfactory to
PBCI sufficient to convey to
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PBCI all right, title and interest of DCC in and to the Option Assets, all
necessary consents or approvals of third parties (including any governmental
entities) to the transactions contemplated hereby, subscription agreements of
DCC and the Members satisfactory in form and substance to PBCI, in the event
PBCI has elected to deliver PBCI Stock or BCI Stock at the Closing, and an
opinion of Parsons Behle & Latimer, or other counsel reasonably acceptable to
PBCI, dated as of the Closing Date and in a form reasonably acceptable to PBCI,
to the effect that: (A) DCC is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full power and authority to own or lease its properties, to carry on its
business as it is being conducted and to convey the Option Assets to PBCI
pursuant to this Agreement, (B) DCC is qualified to do business as a foreign
limited liability company, and is in good standing, under the laws of the State
of Utah, (C) the instruments of transfer and assignment delivered by DCC are
adequate to convey all rights of DCC in and to the Option Assets to PBCI, (D)
the sale of the Option Assets has been duly authorized by all necessary action
of DCC under Delaware law, its certificate of formation and its limited
liability company agreement, (E) the sale of the Option Assets will not conflict
with or violate any provision of the certificate of formation or limited
liability company agreement of DCC, conflict with or violate any Utah or Federal
law, rule or regulation, or any order, judgment or decree applicable to DCC or
the Members or by which any of DCC's properties are affected, or result in a
breach of, or constitute a default (or any event which with notice or lapse of
time would become a default) under, or give to others any rights of first
refusal, termination, amendment, acceleration or cancellation of, or result in
the creation of any lien or encumbrance on any of the Option Assets pursuant to,
any notice, bond, mortgage, indenture contract, agreement, lease or other
instrument or obligation known to such counsel by which DCC or any of the
Members is bound or by which any of the DCC's properties are affected, (F) the
sale of the Option Assets will not, require any consent, approval, exemption,
authorization or permit of, filing with or notification, or other action by, any
court, administrative agency or governmental or regulatory authority, under any
provision of Utah or Federal law, except for such consents and approvals as
shall have been obtained and (G) to such counsel's knowledge, there are no
actions, suits, proceedings or governmental inquiries pending or threatened
against DCC or any of the Members seeking to prevent the consummation of the
transactions contemplated by this Agreement or which could reasonably be
expected to have a material adverse effect on the Option Assets or the ability
of DCC and the Members to perform their obligations under this Agreement, and
(ii) PBCI shall deliver to DCC the purchase price and an instrument of
assumption in form and substance satisfactory to DCC, assuming the Assumed
Liabilities.
ARTICLE 2.0 REPRESENTATIONS AND WARRANTIES OF DCC AND THE MEMBERS
In order to induce PBCI to enter into this Agreement and to consummate the
transactions contemplated hereunder, DCC and the Members jointly and severally
make the following representations and warranties:
2.1 ORGANIZATION, POWER AND AUTHORITY OF DCC. The Company is a limited
liability company duly organized and legally existing in good standing under the
laws of Delaware, and has full corporate power and authority to own or lease its
properties and to carry on its business as it is now being conducted and to
enter into this Agreement and to carry out the transactions and agreements
contemplated hereby. DCC is legally qualified to transact business, and is in
good
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standing, in any jurisdictions in which its business or property is such as
to require that it be thus qualified, except where the failure to be so
qualified would not have a material adverse effect on its business, properties
or financial condition.
2.2 DUE AUTHORIZATION; BINDING AGREEMENT OF DCC. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action of DCC,
including the approval of the members of DCC. This Agreement has been duly
executed and delivered by DCC and is a valid and binding obligation of DCC,
enforceable in accordance with its terms. Neither the execution and delivery of
this Agreement by DCC nor the consummation of the transactions contemplated
hereby will: (i) conflict with or violate any provision of the certificate of
formation or limited liability company agreement of DCC or of any decree or
order of any court or administrative or other governmental body which is either
applicable to, binding upon or enforceable against DCC or the assets and
properties of DCC; or (ii) result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify or cancel, or require any notice under, any mortgage,
contract, agreement, indenture or other instrument which is either binding upon
or enforceable against DCC or the assets and properties of DCC. No permit,
consent, approval or authorization of, or declaration to or filing with, any
regulatory or other government authority is required in connection with the
execution and delivery of this Agreement by DCC and the consummation by it of
the transactions contemplated hereby.
2.3 BINDING AGREEMENT OF THE MEMBERS. This Agreement has been duly
executed and delivered by each of the Members and is a valid and binding
obligation of each of them, enforceable in accordance with its terms. Neither
the execution and delivery of this Agreement by the Members nor the
consummation of the transactions contemplated hereby will: (i) conflict with
or violate any provision of the certificate of formation or limited liability
company agreement of DCC, or of any law, ordinance or regulation or any decree
or order of any court or administrative or other governmental body which is
either applicable to, binding upon or enforceable against the Members or DCC
or the assets and properties of DCC; or (ii) result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify or cancel, or require any notice under, any
mortgage, contract, agreement, indenture, will, trust or other instrument
which is either binding upon or enforceable against the Members, DCC or the
assets and properties of DCC. No permit, consent, approval or authorization
of, or declaration to or filing with, any regulatory or other government
authority is required in connection with the execution and delivery of this
Agreement by the Members and the consummation by them of the transactions
contemplated hereby.
2.4 MEMBERSHIP INTERESTS IN DCC. All voting rights in DCC are vested
exclusively in its units of membership interest (the "Units"), and there are no
voting trusts, proxies or other agreements or understandings with respect to the
voting of the Units of DCC. DCC has previously furnished to PBCI copies of DCC's
certificate of formation and DCC's limited liability company agreement, and such
copies are correct and complete in all respects. There are no outstanding
warrants, options or rights of any kind to acquire from DCC any membership
interests or securities of any kind, and there are no pre-emptive rights with
respect to the issuance or sale of membership
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interests of DCC. DCC has no obligation to acquire any of its issued and
outstanding membership interests or any other security issued by it from any
holder thereof.
2.5 OWNERSHIP OF UNITS BY THE MEMBERS. The Members are the lawful owners
of all of the outstanding Units of DCC and have valid marketable title thereto,
free and clear of all liens, pledges, encumbrances, security interests,
restrictions on transfer, claims and equities of every kind, other than
restrictions under federal and state securities laws and the pledge of the Units
under the Secured Loan Agreement. There are no outstanding warrants, options or
rights of any kind to acquire from the Members any of the Units.
2.6 TITLE TO DCC'S ASSETS. DCC has good and marketable title to all of its
assets and properties, free and clear of all liens, mortgages, pledges,
encumbrances or charges of every kind, nature, and description whatsoever,
except for the security interests granted to PBCI in the Secured Loan Agreement,
and upon the closing PBCI will acquire good and marketable title to the Option
Assets, free and clear of all liens, mortgages, pledges, encumbrances or charges
of every kind, nature and description whatsoever, except for such liens,
mortgages, pledges, encumbrances or charges as shall have been approved by PBCI
in writing.
2.7 ACCURACY OF INFORMATION FURNISHED BY DCC AND THE MEMBERS. No
representation, statement or information made or furnished by DCC or the Members
to PBCI, including without limitation those contained in this Agreement and the
various schedules attached hereto and the other information and statements
previously furnished by DCC and the Members to PBCI, when taken as a whole,
contains or shall contain any untrue statement of a material fact or omits or
shall omit any material fact necessary to make the information contained therein
not misleading.
2.8 INVESTMENT BANKERS' AND BROKERS' FEES. Neither the Members nor DCC
have any obligation to pay any fees or commissions to any investment banker,
broker, finder or agent with respect to the transactions contemplated by this
Agreement.
ARTICLE 3.0 REPRESENTATIONS AND WARRANTIES OF PBCI
In order to induce DCC and the Members to enter into this Agreement and to
consummate the transactions contemplated hereunder, PBCI makes the following
representations and warranties:
3.1 ORGANIZATION, POWER AND AUTHORITY OF PBCI. PBCI is a corporation
duly organized and validly existing under the laws of the State of Delaware,
and has full corporate power and authority to own or lease its properties and
to carry on its business as it is now being conducted and to enter into this
Agreement and to carry out the transactions and agreements contemplated hereby.
3.2 DUE AUTHORIZATION; BINDING AGREEMENT OF PBCI. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action of PBCI. This Agreement has been duly executed and
delivered by PBCI and is a valid and binding obligation of PBCI, enforceable
in accordance with its terms. Neither the execution and delivery of this
Agreement by PBCI nor the
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consummation of the transactions contemplated hereby will: (i) conflict with or
violate any provision of the certificate of incorporation or bylaws of PBCI or
of any decree or order of any court or administrative or other governmental body
which is either applicable to, binding upon or enforceable against PBCI, or its
assets and properties; or (ii) result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under, any
mortgage, contract, agreement, indenture or other instrument which is either
binding upon or enforceable against PBCI, or its assets and properties. No
permit, consent, approval of authorization of, or declaration to or filing with,
any regulatory or other government authority is required in connection with the
execution and delivery of this Agreement by PBCI and the consummation by them of
the transactions contemplated hereby.
3.3 INVESTMENT BANKERS' AND BROKERS' FEES. PBCI has no obligation to pay
any fees or commissions to any investment banker, broker, finder or agent with
respect to the transactions contemplated by this Agreement.
ARTICLE 4.0 ADDITIONAL COVENANTS OF DCC AND THE MEMBERS PRIOR TO THE
TERMINATION DATE
4.1 REASONABLE BEST EFFORTS. DCC and the Members will use reasonable best
efforts to cause to be satisfied as soon as practicable and prior to the Closing
Date all of the conditions set forth in Article 5.0.
4.2 CONDUCT OF BUSINESS. From and after the execution and delivery of
this Agreement and until the earlier of the Closing Date or the Termination
Date, except as otherwise provided by the prior written consent of PBCI:
4.2.1 DCC will use reasonable best efforts to (i) preserve its
business organization intact, (ii) keep available the services of its
officers, employees, and agents, and (iii) preserve its relationships
with suppliers and others having dealings with DCC; and
4.2.2 DCC will maintain all of its properties in customary repair,
order and condition, reasonable wear and use and damage by unavoidable
casualty excepted, and maintain insurance of such types and in such amounts
upon all of its properties and with respect to the conduct of its
business as are required by the Secured Loan Agreement.
4.3 ACCESS TO DCC'S PROPERTIES AND RECORDS. From and after the execution
and delivery of this Agreement and until the earlier of the Closing Date or the
Termination Date, DCC will afford to the representatives of PBCI access, during
normal business hours and upon reasonable notice, to DCC's premises and books
and records sufficient to enable PBCI to inspect the assets and properties of
DCC and to determine DCC's Annual Production Level and Production Cost (each as
defined in Exhibit A hereof), and DCC will furnish to such representatives
during such period all such information relating to the foregoing investigation
as PBCI may reasonably request; provided, however, that any furnishing of such
information to PBCI and any investigation by PBCI shall not affect the right of
PBCI to rely on the representations and warranties made by DCC and the Members
in or pursuant to this Agreement. Without limiting the generality of the
foregoing, DCC
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shall furnish to PBCI, within fifteen business days after the end of each Retail
Quarter and within fifteen business days after any notice of exercise of the
Option, a statement setting forth the DCC Value, the Annual Production Level and
the Production Cost (each as defined in Exhibit A hereof) determined as of the
end of such Retail Quarter (or as of the applicable date under Exhibit A, in the
event of the exercise of the Option), which statement shall be prepared in
accordance with Exhibit A and shall set forth with specificity the calculation
of Production Cost.
4.4 NOTICE OF MATERIAL DEVELOPMENTS. From and after the execution and
delivery of this Agreement and until the earlier of the Closing Date or the
Termination Date, DCC will give prompt written notice to PBCI of any material
development affecting the assets, properties, business, business prospects,
financial condition or results of operations of DCC, including without
limitation any development which results in the inaccuracy of any of the
representations and warranties of DCC and the Members made herein.
4.5 NO DISCLOSURE. Without the prior written consent of PBCI, neither DCC
nor any of the Members will, prior to the earlier of the Closing Date or the
Termination Date, disclose the existence of or any term or condition of this
Agreement to any person or entity except that such disclosure may be made (i) to
any person in a business relationship with DCC to whom such disclosure is
necessary in order to satisfy any of the conditions or obligations which are set
forth in this Agreement, and (ii) to the extent DCC believes in good faith that
such disclosure is required by law (in which case DCC will consult with PBCI
prior to making such disclosure).
4.6 NO OTHER DISCUSSIONS; RETENTION OF UNITS. Neither the Members nor
DCC will, prior to the earlier of the Closing Date or the Termination Date,
enter into discussions or negotiate with or entertain or accept the
unsolicited offer of any other party concerning the potential sale or
exchange of all or any part of the assets of or interests in DCC to, or the
merger or consolidation of DCC with, any person other than PBCI. The Members
will not, prior to the earlier of the Closing Date or the Termination Date,
sell, assign, transfer, pledge, encumber or otherwise dispose of any of the
Units owned by them or assign to any other person in any manner whatsoever
any of their rights under DCC's limited liability company agreement, except
that the Members may pledge their interests in DCC to PBCI.
ARTICLE 5.0 CONDITIONS TO THE CLOSING OF THE OPTION EXERCISE BY PBCI
The obligation of PBCI to purchase the assets of DCC upon the exercise
of the Option shall be subject to the fulfillment or waiver by PBCI at or
prior to the Closing Date each of the following conditions:
5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES AND COMPLIANCE WITH
OBLIGATIONS. The representations and warranties of DCC and the Members contained
in this Agreement shall have been true and correct at and as of the date hereof,
and they shall be true and correct at and as of the Closing Date with the same
force and effect as though made at and as of that time. DCC and the Members
shall have performed and complied with all of their obligations required by this
Agreement to be performed or complied with at or prior to the Closing Date. The
Members shall have delivered to PBCI a certificate, dated as of the Closing Date
and signed by each of the
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Members, certifying that such representations and warranties are thus true and
correct and that all such obligations have been thus performed and complied
with.
5.2 HSR ACT WAITING PERIOD. Any waiting period imposed by the HSR Act with
respect to the exercise of the Option shall have expired or been terminated.
5.3 RECEIPT OF NECESSARY CONSENTS. All necessary consents or approvals of
third parties to any of the transactions contemplated hereby, shall have been
obtained and shown by written evidence satisfactory to PBCI.
5.4 NO ADVERSE LITIGATION. There shall not be pending or threatened any
action or proceeding by or before any court or other governmental body which
shall seek to restrain, prohibit or invalidate the purchase of the assets of DCC
or any other transaction contemplated hereby, and no injunction or other order
prohibiting the purchase of the Option Assets or any other transaction
contemplated hereby shall have been entered by any court or other governmental
body.
5.5 NO MATERIAL ADVERSE CHANGE. Since the date of the exercise of the
Option, there shall have been no changes in the business or properties of DCC,
or in its financial condition, other than changes which in the aggregate shall
not have had a material adverse effect.
5.6 DELIVERY OF COST AND PRODUCTION INFORMATION. DCC shall have delivered
to PBCI any information required to have been delivered to PBCI pursuant to
Section 4.3 hereof.
ARTICLE 6.0 CERTAIN ADDITIONAL COVENANTS
6.1 EXECUTION OF FURTHER DOCUMENTS. From and after the Closing, upon the
reasonable request of PBCI, DCC and the Members shall execute, acknowledge and
deliver all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney and assurances as may be required to convey and transfer to
and vest in PBCI the Option Assets and as may be appropriate otherwise to carry
out the transactions contemplated by this Agreement.
6.2 COOPERATION OF DCC AND THE MEMBERS. Each of the Members acknowledges
and agrees that PBCI may have need of information concerning DCC and the Members
in order to comply with applicable securities laws and regulations in connection
with future public and private debt and equity offerings by PBCI ("Offerings").
The Members jointly and severally agree that they will cooperate with PBCI in
connection with any Offerings and that they will, at PBCI's expense: (i)
furnish PBCI with such information concerning DCC and the Members as PBCI may
reasonably require to comply with applicable securities laws and regulations
(the "Company Information"); (ii) use diligent efforts to review, comment on,
and otherwise assist PBCI as reasonably necessary for the preparation of,
descriptions concerning DCC and the Members to be used in connection with
Offerings; and (iii) represent and warrant to PBCI in connection with any
Offerings that DCC Information will not contain any untrue statement of a
material fact or omit any material fact necessary to make the information
contained therein not misleading.
6.3 SUBSEQUENT AUDITED FINANCIAL STATEMENTS. Each of the Members
covenants and agrees with PBCI that if PBCI shall determine that audited
financial statements of PBCI or DCC for
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the periods prior to the Closing are necessary or advisable in connection with
an initial public offering, another transaction or offering, or otherwise, each
shall cooperate fully with PBCI's accountants in the preparation of such audited
financial statements, at PBCI's expense, and each shall make such reasonable
representations and warranties to the applicable certified public accounts as
are customary in connection with the preparation of audited financial
statements.
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6.4 CONFIDENTIAL INFORMATION.
6.4.1 The Members possess certain confidential and proprietary
information and trade secrets including, but not limited to, information,
methods, techniques, procedures and knowledge developed by or for DCC
respecting the business of DCC (the "Confidential Information"). Each of
the Members acknowledges and agrees that neither such Member nor any other
person or entity has acquired by or through such Members any interest in or
right to use the Confidential Information other than the right to utilize
it in the operation of the businesses of DCC and PBCI, and that the use or
duplication of the Confidential Information in any other business would
constitute an unfair method of competition with DCC and PBCI.
6.4.2 Each of the Members acknowledges and agrees that the
Confidential Information is confidential to and a valuable asset of DCC, is
proprietary, and includes trade secrets of DCC. Each of the Members hereby
agrees that such Member: (i) will not use the Confidential Information in
any other business or capacity; (ii) will maintain the absolute secrecy and
confidentiality of the Confidential Information; and (iii) will not make
unauthorized copies of any portion of the Confidential Information
disclosed in written or other tangible form.
6.4.3 Notwithstanding the foregoing, the obligations of the Members
specified above shall not apply to any Confidential Information which (i)
is disclosed in a printed publication available to the public, or is
otherwise in the public domain through no act of any of the Members, their
agents or any person or entity which has received such Confidential
Information from or through either of the Members, (ii) is approved for
release by written authorization of an officer of PBCI, (iii) is required
to be disclosed by proper order of a court of applicable jurisdiction after
adequate notice to PBCI to seek a protective order therefor, the imposition
of which protective order the Members agrees to approve and support, or
(iv) in the written opinion of the disclosing Member's counsel, is
necessary to be made by such Member in order that the Member not violate
any law, rule or regulation applicable to him.
6.5 RESTRICTIVE COVENANTS. Each of the Members acknowledges and agrees
that from and after the Closing Date, if any, PBCI would be unable to protect
the Confidential Information against unauthorized use or disclosure and PBCI
would be unable to realize the benefits of this Agreement if such Member were
permitted to engage in, hold interests in or perform services for entities other
than PBCI conducting a business which derives any of its revenues from the
production or sale of cream cheese, cream cheese-related products, or spreads (a
"Competitive Business"). Each of the Members further acknowledges and
understands that PBCI intends, and expects, to expand its business throughout
the United States. Each of the Members further acknowledges and agrees that the
restrictions contained in this Section 6.5 will not hinder his activities under
this Agreement or in general. Each of the Members therefore agrees that for a
period commencing on the Closing Date, if any, and continuing until the fifth
anniversary of the Closing Date, he shall not directly or indirectly anywhere in
the United States: (i) have any interest as a record or beneficial owner in any
Competitive Business provided, however, the Members may
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have an interest in any Competitive Business as a passive investor in such
Competitive Business provided such interest does not exceed three percent (3%)
of the outstanding equity securities of any company which has a class of
securities which is registered under Section 12 of the Securities Exchange Act
of 1934, as amended, or traded on a national securities exchange; (ii) perform
services as a director, officer, manager, employee, consultant, representative,
agent, or otherwise for any Competitive Business; or (iii) divert or attempt to
divert any business or any customers of PBCI's business to any Competitive
Business. PBCI acknowledges and agrees that if it does not exercise the Option
the Members shall not have any obligation under this Section 6.5.
6.6 REMEDIES; WAIVER.
6.6.1 Each of the Members agrees that the provisions and restrictions
set forth above in Sections 6.4 and 6.5 are necessary to protect PBCI and
its successors and assigns in the protection of the Option Assets PBCI is
entitled to acquire pursuant to this Agreement. Each of the Members agrees
that damages cannot compensate PBCI in the event of a violation of the
covenants contained in Sections 6.4 and 6.5 hereof, and that injunctive
relief shall be essential for the protection of PBCI and its successors and
assigns. Accordingly, each of the Members agrees and consents that, in the
event he shall violate or breach any of said covenants PBCI shall be
entitled to obtain (and he hereby consents to) such injunctive relief
against such Member, without bond, in addition to such further or other
relief as may appertain at equity or law. The exercise or enforcement by
PBCI of any right or remedy hereunder shall not preclude the exercise or
enforcement by PBCI of any other right or remedy hereunder or which PBCI
has the right to enforce under applicable law.
6.6.2 Failure by any party to insist upon strict compliance with any
of the terms, covenants or conditions hereof shall not be deemed a waiver
of such term, covenant or condition, nor shall any waiver or relinquishment
of any right or remedy hereunder at any one or more times be deemed a
waiver or relinquishment of such right or remedy at any other time or
times.
6.7 GRANT OF PBCI OPTIONS. PBCI agrees that C. Anthon Ernstrom, C. Reed
Ernstrom and employees of DCC other than Reed Ernstrom (the "Eligible
Recipients") shall receive on the date hereof and on each anniversary of the
date hereof prior to the earlier of the Closing Date or the Termination Date,
options under PBCI's 1995 Stock Option Plan (the "Plan") to purchase that number
of shares of common stock of PBCI that have a fair market value, as determined
in accordance with the terms of the Plan, of $250,000 for all such persons taken
together (the "Stock Options"). The grant of each of the Stock Options shall be
subject to the execution and delivery by the person receiving such Stock Options
of a consulting agreement with PBCI and a confidentiality and non-compete
agreement with PBCI, in form and substance satisfactory to PBCI. The Stock
Options shall be allocated among the Eligible Recipients in such manner as may
be determined by the managers of DCC and approved by PBCI.
6.8 EMPLOYMENT BY PBCI OF DCC'S EMPLOYEES. DCC shall use its best efforts
to aid PBCI in engaging such of its employees as are employed on the Closing
Date, if any, whom PBCI desires to engage after the Closing Date, and except
with the written consent of PBCI, neither DCC
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nor any Affiliate (as hereinafter defined) of DCC shall employ, for a period of
three years after the Closing Date, any person employed by DCC at or at any time
within six months prior to the Closing Date unless such person was either not
offered employment by PBCI or was terminated by PBCI. As used in this Agreement,
the term "Affiliate" means, with respect to a specified person, any other person
which directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.
6.9 NO OBLIGATION OF PBCI TO EMPLOY. PBCI shall have no obligation to
employ any of the persons employed by DCC at the time of the Closing, if any, or
to continue, or institute any replacement or substitution for, any vacation,
severance, incentive, bonus, profit sharing, pension or other employee benefit
plan or program of DCC.
ARTICLE 7.0 INDEMNIFICATION
7.1 AGREEMENT BY DCC AND THE MEMBERS TO INDEMNIFY. Subject to the
qualifications and limitations set forth in this Section 7.1, DCC and the
Members jointly and severally agree that from and after the Closing, if any,
they will indemnify and hold PBCI harmless in respect of the aggregate of all
PBCI Indemnifiable Damages (as hereinafter defined). For this purpose, PBCI
Indemnifiable Damages shall mean the aggregate of all expenses, losses, costs,
deficiencies, liabilities and damages (including related counsel fees and
expenses) incurred or suffered by PBCI (or any successor to all or any part of
the assets or business of DCC) (i) resulting from any inaccurate representation
or warranty made by DCC and the Members in or pursuant to this Agreement, (ii)
resulting from any default in the performance of any of the covenants or
agreements made by DCC or the Members in this Agreement, (iii) resulting from
any inaccurate representation and warranty made by DCC in the Secured Loan
Agreement, (iv) resulting from any default in the performance of any of the
covenants or agreements made by DCC in the Secured Loan Agreement, or (v)
resulting from the failure of DCC to pay, discharge or perform any liability or
obligation that is not required to be assumed by PBCI hereunder ("Excluded
Liabilities"). Without limiting the generality of the foregoing, with respect to
the measurement of PBCI Indemnifiable Damages, PBCI shall have the right to be
put in the same financial position as it would have been in had each of the
representations and warranties of DCC and the Members been true and correct, had
each of the covenants and agreements of DCC and the Members been performed in
full and had each of the Excluded Liabilities been paid or performed in full.
The obligation of DCC and the Members to indemnify PBCI shall be subject to the
following qualifications and limitations:
7.1.1 DCC and the Members shall not be obligated to indemnify PBCI
for PBCI Indemnifiable Damages resulting from any inaccurate representation
or warranty made by DCC and the Members in or pursuant to this Agreement
until the aggregate of all such PBCI Indemnifiable Damages, taken together
with all Purchaser Indemnifiable Damages (as defined in Section 6.1 of the
HTH Purchase Agreement) resulting from any inaccurate representation or
warranty made by HTH and its shareholders under the HTH Purchase Agreement,
exceeds $25,000, and then DCC and the Members shall only be liable for such
excess.
7.1.2 The obligation of the Members to indemnify PBCI for PBCI
Indemnifiable Damages resulting from any inaccurate representation or
warranty made by DCC and the
13
<PAGE>
Members in or pursuant to this Agreement or made by DCC in the Secured Loan
Agreement, resulting from any default in the performance of the covenants
or agreements made by DCC in Section 7.3 of the Secured Loan Agreement or
resulting from the failure of DCC to pay, discharge or perform any Excluded
Liabilities and for Purchaser Indemnifiable Damages (as defined in Section
6.1 of the HTH Purchase Agreement) resulting from any inaccurate
representation and warranty made by HTH and its shareholders in the HTH
Purchase Agreement or from the failure of HTH to pay, discharge or perform
any Excluded Liabilities (as defined in the HTH Purchase Agreement), shall
not exceed the DCC Value, less the amounts actually recovered by PBCI from
HTH and DCC in respect of all matters covered by the limitations set forth
in this Section 7.1.2.
7.1.3 The limitations set forth in Sections 7.1.1 and 7.1.2 shall not
apply to PBCI Indemnifiable Damages arising from the inaccuracy of the
representations and warranties set forth in Sections 2.1, 2.2, 2.3. 2.4,
2.5 or 2.8 hereof.
7.2 AGREEMENT BY PBCI TO INDEMNIFY. PBCI agrees that from and after the
Closing, if any, it will indemnify and hold DCC and the Members harmless in
respect of the aggregate of all DCC Indemnifiable Damages (as hereinafter
defined). For this purpose, DCC Indemnifiable Damages shall mean the aggregate
of all expenses, losses, costs, deficiencies, liabilities and damages (including
related counsel fees and expenses) incurred or suffered by DCC or the Members
(i) resulting from any inaccurate representation or warranty made by PBCI in or
pursuant to this Agreement, or (ii) resulting from any default in the
performance of any of the covenants or agreements made by PBCI in this
Agreement. Without limiting the generality of the foregoing, with respect to the
measurement of DCC Indemnifiable Damages, DCC and the Members shall each have
the right to be put in the same financial position as they would have been in
had each of the representations and warranties of PBCI been true and correct and
had each of the covenants and agreements of PBCI been performed in full.
7.3 LEGAL PROCEEDINGS. In the event DCC, the Members or PBCI become
involved in any legal, governmental or administrative proceeding which may
result in indemnification claims hereunder, such party shall promptly notify the
other parties in writing of such proceeding. The other parties may, at their
option and expense, defend any such proceeding if the proceeding could give rise
to an indemnification obligation hereunder. If any party elects to defend any
proceeding, such party shall have full control over the conduct of such
proceeding, although the party being indemnified shall have the right to retain
legal counsel at its own expense and shall have the right to approve any
settlement of any dispute giving rise to such proceeding, such approval not to
be withheld unreasonably by the party being indemnified; provided, that, in the
event the indemnifying party shall fail to initiate a defense of a claim within
twenty days of the notice to the indemnified party of a claim, the indemnified
party shall have the option to conduct the defense of such claim as it may in
its discretion deem proper. The party being indemnified shall reasonably
cooperate with the indemnifying party in such proceeding.
ARTICLE 8.0 MISCELLANEOUS
8.1 AMENDMENT AND MODIFICATION. The parties hereto may amend, modify and
supplement this Agreement in such manner as may be agreed upon by them in
writing.
14
<PAGE>
8.2 PAYMENT OF EXPENSES. Each party to this Agreement shall pay all of
the expenses incurred by it in connection with this Agreement, including without
limitation its legal and accounting fees and expenses, provided, however, that
DCC shall in no event incur aggregate expenses in excess of $35,000 in
connection with the transactions contemplated by this Agreement, the Secured
Loan Agreement, the HTH Purchase Agreement and the HTH Loan Agreement.
8.3 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns, heirs
and legal representatives.
8.4 ENTIRE AGREEMENT. This instrument and the exhibits attached hereto
contain the entire agreement of the parties hereto with respect to the option to
purchase the Option Assets and the other transactions contemplated herein, and
supersede all prior understandings and agreements of the parties with respect to
the subject matter hereof. Any reference herein to this Agreement shall be
deemed to include the exhibits attached hereto.
8.5 HEADINGS. The descriptive headings in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
8.6 EXECUTION IN COUNTERPART. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
8.7 NOTICES. Any notice, request, information or other document to be
given hereunder shall be in writing. Any notice, request, information or other
document shall be deemed duly given three business days after it is sent by
registered or certified mail, postage prepaid, to the intended recipient,
addressed as follows:
If to DCC, addressed as follows:
Doc's Cheese Company, L.L.C.
761 South 200 West
Richmond, Utah 84333
Attention: C. Reed Ernstrom
with a copy to:
Parsons Behle & Latimer
201 South Main Street
Suite 1800
Salt Lake City, Utah 84111
Attention: William D. Holyoak, Esq.
If to PBCI, addressed as follows:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, Colorado 80401
15
<PAGE>
Attention: Chairman
16
<PAGE>
with a copy to:
Progressive Bagel Concepts, Inc.
1526 Cole Blvd., Suite 200
Golden, Colorado 80401
Attention: General Counsel
Any party may send any notice, request, information or other document to be
given hereunder using any other means (including personal delivery, courier,
messenger service, facsimile transmission, telex or ordinary mail), but no such
notice, request, information or other document shall be deemed duly given unless
and until it is actually received by the party for whom it is intended. Any
party may change the address to which notices hereunder are to be sent to it by
giving written notice of such change of address in the manner herein provided
for giving notice.
8.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to contracts made
and to be performed wholly therein.
8.9 PUBLICITY. No press release or other public announcement related to
this Agreement or the transactions contemplated hereby will be issued by DCC or
the Members without the prior approval of PBCI.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PROGRESSIVE BAGEL CONCEPTS, INC.
By: /s/
----------------------------------
DOC'S CHEESE COMPANY, L.L.C.
By: /s/
----------------------------------
/s/ C. Anthon Ernstrom
----------------------------------
C. Anthon Ernstrom
/s/ C. Reed Ernstrom
----------------------------------
C. Reed Ernstrom
/s/ C. Jay Ward
----------------------------------
/s/ Karon Ward
----------------------------------
C. Jay Ward and Karon Ward,
as joint tenants
/s/ Brian L. Ernstrom
----------------------------------
Brian L. Ernstrom
/s/ Berkley J. Ward
----------------------------------
Berkley J. Ward
18
<PAGE>
EXHIBITS
--------
Exhibit A Determination of DCC Value
<PAGE>
Exhibit A
DETERMINATION OF DCC VALUE
--------------------------
DCC Value will be an amount not less that $1,000,000 nor more than $4,000,000
determined based on DCC's Annual Production Level and Production Cost, as
follows:
<TABLE>
<CAPTION>
DCC Value
---------
(all $ in millions, except for Production Cost and price of milk fat per pound)
Production Cost
Annual ----------------------------------------------------
Production x or in
Level excess of x x -10% x - 20% x - 30%
- ----- ----------- ------ ------- -------
<S> <C> <C> <C> <C>
1.7mm lbs or less $1.00 $1.33 $1.67 $2.00
3.3mm lbs $1.25 $1.67 $2.08 $2.50
5.0mm lbs $1.50 $2.00 $2.50 $3.00
6.7mm lbs $1.75 $2.33 $2.92 $3.50
8.3mm lbs or more $2.00 $2.67 $3.33 $4.00
</TABLE>
"Annual Production Level" is the quantity of Products (as defined in the
supply agreement of even date herewith between PBCI and DCC (the "Supply
Agreement")) produced by DCC in the four Retail Quarters (as defined in the
Supply Agreement) ending with the Retail Quarter immediately preceding the
Retail Quarter in which the Option is exercised (or, if DCC has been producing
Products under the Supply Agreement for a shorter period, the amount produced in
such shorter period, commencing on the date hereof and ending on the last day of
the last Retail Period (as defined in the Supply Agreement) prior to the Retail
Period in which the Option is exercised, which amount shall be annualized by
multiplying it by a fraction the numerator of which is 13 and the denominator of
which is the number of Retail Products in such shorter period) per DCC's
Production Log.
"Production Cost" is the numeric average of the per pound costs of
producing Products for each of the four Retail Quarters ending with the Retail
Quarter immediately preceding the Retail Quarter in which the Option is
exercised (or, if DCC has been producing Products under the Supply Agreement for
a shorter period, the numeric average of the per pound costs of producing
Products for each of the Retail Periods in such shorter period, commencing on
the date hereof and ending on the last day of the last Retail Period prior to
the Retail Period in which the option is exercised). For this purpose, per pound
cost shall be determined in the same manner as DCC Cost (as defined in the
Supply Agreement), adjusted as follows: (I) there shall not be credited the
Total Net Cash Deficit (as defined in the Supply Agreement) or debited the Net
Cash Surplus (as defined in the Supply Agreement), (II) there shall be excluded
all research and development expenses, (III) there shall be excluded all charges
made by PBCI pursuant to Section 3.4 of the Supply Agreement, and (IV) there
shall be excluded the $50,000 payment provided for in Section 5.5 of the HTH
Purchase Agreement, if made.
2
<PAGE>
X shall be equal to $1.3925 on the date hereof (determined on a milk fat
price of $1.167 per pound per formula hereinafter set forth). X shall be
adjusted for each Retail Quarter (of, if applicable, Retail Period) hereafter by
substituting for such milk fat price of $1.167 per pound the price obtained by
the following formula:
[((AA + .07)/.805) + (AA x 1.30) + .01]/2
Where AA is the average of the Chicago Grade AA Market Butter Price for
each of the weeks in the Retail Quarter (of, if applicable, Retail Period).
The DCC Value between points shown will be interpolated on a straight-line
basis.
3
<PAGE>
Exhibit 10.27
AIRCRAFT DRY LEASE
This Lease of aircraft is made, effective as of January 16, 1996, by and
between Bowana Aviation, Inc., referred to as "Lessor", and Einstein Bros.
Bagels, Inc., referred to as "Lessee."
Recitals
--------
The parties recite that:
A. Lessor owns a 1980 Learjet Model 35A, Serial No. 35A-366 and currently
registered as N350DA, hereinafter referred to as the "Aircraft." The Aircraft is
available for use by a qualified Lessee; and
B. Lessee desires to lease the Aircraft under such terms and conditions as
are mutually satisfactory to the parties.
The parties agree as follows:
SECTION ONE
LEASE OF AIRCRAFT
For One Dollar and no/100 ($1.00) and other valuable consideration, Lessor
agrees to lease the Aircraft to Lessee. Lessee has fully inspected the Aircraft
and has knowledge that it is in good condition and repair, and Lessee is
satisfied with and has accepted the Aircraft in such condition and repair.
SECTION TWO
TERM
This lease shall commence on the date hereof and may be terminated by
either party upon thirty (30) days written notice.
SECTION THREE
INSURANCE
At all times during the term of this Lease, the Lessor shall cause to be
carried and maintained casualty insurance with respect to the Aircraft for the
actual fair market value thereof. The Lessor shall be liable for the premium
therefor. The Lessor shall also cause to be carried and maintained public
liability insurance with respect to the Aircraft in amounts and against risk
comparable to similar insurance carried with respect to similar Aircraft.
The Lessor shall cause to be carried and maintained, at Lessor's cost,
third party aircraft liability insurance, passenger legal liability insurance
and property damage liability insurance during the term hereof in the amounts
set forth below. Lessor shall also bear the cost of paying any deductible amount
on any policy of insurance in the event of a claim or loss. Any policies of
<PAGE>
insurance carried in accordance with this agreement: (i) shall name the Lessee
as an additional insured; (ii) the underwriter thereof shall agree to waive any
right of subrogation against Lessee; (iii) shall provide that in respect of the
interests of Lessor, such policies of insurance shall not be invalidated by any
action or inaction of the Lessee or any other person and shall inure the Lessor
(subject to the limits of liability and war risk exclusion set forth in such
policies) regardless of any breach or any violation of any warranty,
declarations or conditions contained in such policies by the Lessee or any other
person; and (iv) shall provide that if the insurers cancel insurance for any
reason whatsoever, or the same is allowed to lapse for nonpayment of premium, or
if there is any material change in policy terms and conditions, such a
cancellation, lapse or change shall not be effective as to the Lessor. Each
liability policy shall be primary without right of contribution from any other
insurance which is carried by the Lessee or the Lessor and shall expressly
provide that all of the provisions thereof, except the limits of liability,
shall operate in the same manner as if there were a separate policy covering
each insured. The Lessor shall arrange for evidence of appropriate coverage as
to the Aircraft and to the satisfaction of the requirements set forth above to
be given by its insurance brokers to the Lessee.
This Aircraft Dry Lease Agreement shall be submitted for approval to the
insurance carrier for each policy on the Aircraft.
SECTION FOUR
RESTRICTIONS ON USE
Lessee may operate the Aircraft only for the purposes, and within the
geographical limits, set forth in the insurance policy or policies obtained in
compliance with Sections Three and Four of this agreement. The Aircraft shall be
operated at all times in accordance with the flight manual and all
manufacturer's suggested operating procedures. Furthermore, Lessee shall not use
the aircraft in violation of any foreign, federal, state, territorial or
municipal law or regulation and shall be solely responsible for any fines,
penalties or forfeitures occasioned by any violation by the Lessee. If such
fines or penalties are imposed on Lessor and paid by Lessor, Lessee shall
reimburse Lessor for the amount thereof within thirty (30) days of receipt by
Lessee of written demand from Lessor. Lessee will not base the Aircraft, or
permit it to be based, outside the limits of the United States of America,
without the written consent of Lessor.
The Aircraft shall be flown only by certificated and qualified pilots and
shall be maintained only by certificated and qualified mechanics. In the event
the insurance on the Aircraft would be invalidated because Lessee is unable to
obtain certificated and qualified pilots and mechanics, Lessee shall not operate
the Aircraft until such time as certificated and qualified pilots and mechanics
are obtained and insurance on the Aircraft is made valid.
The Lessee will not directly or indirectly create, incur, assume or suffer
to exist any lien on or with respect to the Aircraft. The Lessee will promptly,
at its own expense, take such action as may be necessary to discharge any lien
not excepted above if the same shall arise at any time.
2
<PAGE>
SECTION FIVE
INSPECTION BY LESSOR
Lessee agrees to permit Lessor or any authorized agent to inspect the
Aircraft at any reasonable time and to furnish any information in respect to the
Aircraft and its use that Lessor may reasonably request.
SECTION SIX
ALTERATIONS
Except in accordance with other written agreements subsequent to the date
of this Agreement between Lessee and Lessor regarding maintenance of the
Aircraft, Lessee shall not have the right to alter, modify or make additions or
improvements to the Aircraft without the written permission of Lessor. All such
alterations, modifications, additions and improvements as are so made shall
become the property of Lessor and shall be subject to all of the terms of this
agreement.
SECTION SEVEN
TITLE
The registration of, and title to, the Aircraft shall be in the name of the
Lessor, and the Aircraft, at all times during the term of this agreement, or any
extension, shall bear United States registration markings. All responsibility
and obligations in regard to the operation of the Aircraft as above owned,
registered and marked shall be borne by the Lessee (and any other lessees of the
Aircraft) during the term of this Lease.
SECTION EIGHT
PAYMENT OF TAXES
Lessor shall pay or cause to be paid all taxes incurred by reason of
ownership of the Aircraft during the term of this agreement, including personal
property taxes. Lessor shall pay all taxes associated with the use of the
Aircraft, including landing fees, fuel taxes and any other taxes or fees which
may be assessed against a specific flight by the Lessee.
SECTION NINE
ASSIGNMENT
Lessee shall not assign this Lease or any interest in the Aircraft, or
sublet the Aircraft, without prior written consent of Lessor. Subject to the
foregoing, this Lease inures to the benefit of, and is binding on, the heirs,
legal representatives, successors and assigns of the parties.
SECTION TEN
ACCIDENT AND CLAIM
Lessee shall immediately notify Lessor of each accident involving the
Aircraft, which notification shall specify the time, place and nature of the
accident or damage, the names and
3
<PAGE>
addresses of parties involved, persons injured, witnesses and owners of
properties damaged, and such other information as may be known. Lessee shall
advise Lessor of all correspondence, papers, notices and documents whatsoever
received by Lessee in connection with any claim or demand involving or relating
to the Aircraft or its operation, and shall aid in any investigation instituted
by Lessor and in the recovery of damages from third persons liable therefor.
SECTION ELEVEN
RETURN OF AIRCRAFT TO LESSOR
On the termination of the Lease by expiration or otherwise, Lessee shall
return the Aircraft to Lessor at Jeffco Airport in Broomfield, Colorado, in as
good operating condition and appearance as when received, ordinary wear, tear
and deterioration excepted, and shall indemnify Lessor against any claim for
loss or damage occurring prior to the actual physical delivery of the Aircraft
to Lessor.
SECTION TWELVE
MODIFICATION OF AGREEMENT; GOVERNING LAW
This agreement constitutes the entire understanding between the parties,
and any change or modification must be in writing and signed by both parties.
This agreement is entered into under, and is to be construed in accordance with,
the laws of the State of Colorado.
SECTION THIRTEEN
INDEMNIFICATION
Each party hereto agrees to indemnify and hold harmless the other against
all losses, including costs, attorneys fees and expenses by reason of claims for
injury to or death of persons and loss of or damage to property arising out of
or in any manner connected with the possession, use or operation of the Aircraft
by such party, or any breach by such party of any covenant or warranty made
herein.
SECTION FOURTEEN
TRUTH IN LEASING STATEMENT
This Aircraft, a 1980 Learjet Model 35A, Manufacturer's Serial No. 35A-366,
currently registered with the FAA as N350DA has been maintained and inspected
under FAR 91 for the twelve-month period preceding the signing of this
agreement.
The Aircraft will be maintained and inspected under FAR 91 for operations
to be conducted under this Lease. During the duration of this Lease, Lessee is
considered responsible for operational control of this Aircraft.
The "Instructions for Compliance with Truth in Leasing Requirements"
attached hereto are incorporated herein by reference.
4
<PAGE>
An explanation of the factors bearing on operational control and of the
pertinent federal aviation regulations can be obtained from the nearest FAA
Flight Standards District Office.
I, the undersigned lessee, Kyle T. Craig, Chairman of the Lessee, certify
that I am responsible for operational control of the aircraft when it is
operated pursuant to this dry lease, and that I understand my responsibilities
for compliance with applicable federal aviation regulations.
IN WITNESS WHEREOF, the parties have executed this Lease Agreement.
BOWANA AVIATION, INC.
/s/ Scott Beck
- ----------------------------------- -----------------------------------
Scott Beck, President Date and time of execution
EINSTEIN BROS. BAGELS, INC.
/s/ Kyle T. Craig 11:45 AM 1-18-96
- ----------------------------------- -----------------------------------
Date and time of execution
5
<PAGE>
INSTRUCTIONS FOR COMPLIANCE WITH
"TRUTH IN LEASING" REQUIREMENTS
1. Mail a copy of the contract to the following address via certified mail,
return receipt requested immediately upon the execution of the Agreement:
(14 C.F.R. 91.23 requires that the copy be sent within 24 hours after it is
signed.)
Federal Aviation Administration
Aircraft Registration Branch
Attn: Technical Section
P. O. Box 25724
Oklahoma City, Oklahoma 73125
2. Telephone the nearest Flight Standards District Office at least 48 hours
prior to the first flight under this Agreement.
3. Carry a copy of the contract in the aircraft at all times.
<PAGE>
AIRCRAFT DRY LEASE
This Lease of aircraft is made, effective as of January 16, 1996, by and
between Bowana Aviation, Inc., referred to as "Lessor", and Einstein Bros.
Bagels, Inc., referred to as "Lessee."
Recitals
--------
The parties recite that:
A. Lessor owns a 1979 Learjet Model 35A, Serial No. 35A-249 and currently
registered as N300DA, hereinafter referred to as the "Aircraft." The Aircraft is
available for use by a qualified Lessee; and
B. Lessee desires to lease the Aircraft under such terms and conditions as
are mutually satisfactory to the parties.
The parties agree as follows:
SECTION ONE
LEASE OF AIRCRAFT
For One Dollar and no/100 ($1.00) and other valuable consideration, Lessor
agrees to lease the Aircraft to Lessee. Lessee has fully inspected the Aircraft
and has knowledge that it is in good condition and repair, and Lessee is
satisfied with and has accepted the Aircraft in such condition and repair.
SECTION TWO
TERM
This lease shall commence on the date hereof and may be terminated by
either party upon thirty (30) days written notice.
SECTION THREE
INSURANCE
At all times during the term of this Lease, the Lessor shall cause to be
carried and maintained casualty insurance with respect to the Aircraft for the
actual fair market value thereof. The Lessor shall be liable for the premium
therefor. The Lessor shall also cause to be carried and maintained public
liability insurance with respect to the Aircraft in amounts and against risk
comparable to similar insurance carried with respect to similar Aircraft.
The Lessor shall cause to be carried and maintained, at Lessor's cost,
third party aircraft liability insurance, passenger legal liability insurance
and property damage liability insurance during the term hereof in the amounts
set forth below. Lessor shall also bear the cost of paying any deductible amount
on any policy of insurance in the event of a claim or loss. Any policies of
<PAGE>
insurance carried in accordance with this agreement: (i) shall name the Lessee
as an additional insured; (ii) the underwriter thereof shall agree to waive any
right of subrogation against Lessee; (iii) shall provide that in respect of the
interests of Lessor, such policies of insurance shall not be invalidated by any
action or inaction of the Lessee or any other person and shall inure the Lessor
(subject to the limits of liability and war risk exclusion set forth in such
policies) regardless of any breach or any violation of any warranty,
declarations or conditions contained in such policies by the Lessee or any other
person; and (iv) shall provide that if the insurers cancel insurance for any
reason whatsoever, or the same is allowed to lapse for nonpayment of premium, or
if there is any material change in policy terms and conditions, such a
cancellation, lapse or change shall not be effective as to the Lessor. Each
liability policy shall be primary without right of contribution from any other
insurance which is carried by the Lessee or the Lessor and shall expressly
provide that all of the provisions thereof, except the limits of liability,
shall operate in the same manner as if there were a separate policy covering
each insured. The Lessor shall arrange for evidence of appropriate coverage as
to the Aircraft and to the satisfaction of the requirements set forth above to
be given by its insurance brokers to the Lessee.
This Aircraft Dry Lease Agreement shall be submitted for approval to the
insurance carrier for each policy on the Aircraft.
SECTION FOUR
RESTRICTIONS ON USE
Lessee may operate the Aircraft only for the purposes, and within the
geographical limits, set forth in the insurance policy or policies obtained in
compliance with Sections Three and Four of this agreement. The Aircraft shall be
operated at all times in accordance with the flight manual and all
manufacturer's suggested operating procedures. Furthermore, Lessee shall not use
the aircraft in violation of any foreign, federal, state, territorial or
municipal law or regulation and shall be solely responsible for any fines,
penalties or forfeitures occasioned by any violation by the Lessee. If such
fines or penalties are imposed on Lessor and paid by Lessor, Lessee shall
reimburse Lessor for the amount thereof within thirty (30) days of receipt by
Lessee of written demand from Lessor. Lessee will not base the Aircraft, or
permit it to be based, outside the limits of the United States of America,
without the written consent of Lessor.
The Aircraft shall be flown only by certificated and qualified pilots and
shall be maintained only by certificated and qualified mechanics. In the event
the insurance on the Aircraft would be invalidated because Lessee is unable to
obtain certificated and qualified pilots and mechanics, Lessee shall not operate
the Aircraft until such time as certificated and qualified pilots and mechanics
are obtained and insurance on the Aircraft is made valid.
The Lessee will not directly or indirectly create, incur, assume or suffer
to exist any lien on or with respect to the Aircraft. The Lessee will promptly,
at its own expense, take such action as may be necessary to discharge any lien
not excepted above if the same shall arise at any time.
2
<PAGE>
SECTION FIVE
INSPECTION BY LESSOR
Lessee agrees to permit Lessor or any authorized agent to inspect the Aircraft
at any reasonable time and to furnish any information in respect to the Aircraft
and its use that Lessor may reasonably request.
SECTION SIX
ALTERATIONS
Except in accordance with other written agreements subsequent to the date of
this agreement between Lessee and Lessor regarding maintenance of the Aircraft,
Lessee shall not have the right to alter, modify or make additions or
improvements to the Aircraft without the written permission of Lessor. All such
alterations, modifications, additions and improvements as are so made shall
become the property of Lessor and shall be subject to all of the terms of this
agreement.
SECTION SEVEN
TITLE
The registration of, and title to, the Aircraft shall be in the name of the
Lessor, and the Aircraft, at all times during the term of this agreement, or any
extension, shall bear United States registration markings. All responsibility
and obligations in regard to the operation of the Aircraft as above owned,
registered and marked shall be borne by the Lessee (and any other lessees of the
Aircraft) during the term of this Lease.
SECTION EIGHT
PAYMENT OF TAXES
Lessor shall pay or cause to be paid all taxes incurred by reason of ownership
of the Aircraft during the term of this agreement, including personal property
taxes. Lessor shall pay all taxes associated with the use of the Aircraft,
including landing fees, fuel taxes and any other taxes or fees which may be
assessed against a specific flight by the Lessee.
SECTION NINE
ASSIGNMENT
Lessee shall not assign this Lease or any interest in the Aircraft, or sublet
the Aircraft, without prior written consent of Lessor. Subject to the foregoing,
this Lease inures to the benefit of, and is binding on, the heirs, legal
representatives, successors and assigns of the parties.
SECTION TEN
ACCIDENT AND CLAIM
Lessee shall immediately notify Lessor of each accident involving the
Aircraft, which notification shall specify the time, place and nature of the
accident or damage, the names and
3
<PAGE>
addresses of parties involved, persons injured, witnesses and owners of
properties damaged, and such other information as may be known. Lessee shall
advise Lessor of all correspondence, papers, notices and documents whatsoever
received by Lessee in connection with any claim or demand involving or relating
to the Aircraft or its operation, and shall aid in any investigation instituted
by Lessor and in the recovery of damages from third persons liable therefor.
SECTION ELEVEN
RETURN OF AIRCRAFT TO LESSOR
On the termination of the Lease by expiration or otherwise, Lessee shall
return the Aircraft to Lessor at Jeffco Airport in Broomfield, Colorado, in as
good operating condition and appearance as when received, ordinary wear, tear
and deterioration excepted, and shall indemnify Lessor against any claim for
loss or damage occurring prior to the actual physical delivery of the Aircraft
to Lessor.
SECTION TWELVE
MODIFICATION OF AGREEMENT; GOVERNING LAW
This agreement constitutes the entire understanding between the parties,
and any change or modification must be in writing and signed by both parties.
This agreement is entered into under, and is to be construed in accordance with,
the laws of the State of Colorado.
SECTION THIRTEEN
INDEMNIFICATION
Each party hereto agrees to indemnify and hold harmless the other against
all losses, including costs, attorneys fees and expenses by reason of claims for
injury to or death of persons and loss of or damage to property arising out of
or in any manner connected with the possession, use or operation of the Aircraft
by such party, or any breach by such party of any covenant or warranty made
herein.
SECTION FOURTEEN
TRUTH IN LEASING STATEMENT
This Aircraft, a 1979 Learjet Model 35A, Manufacturer's Serial No. 35A-
249, currently registered with the FAA as N300DA has been maintained and
inspected under FAR 91 for the twelve-month period preceding the signing of this
agreement.
The Aircraft will be maintained and inspected under FAR 91 for operations
to be conducted under this Lease. During the duration of this Lease, Lessee is
considered responsible for operational control of this Aircraft.
The "Instructions for Compliance with Truth in Leasing Requirements"
attached hereto are incorporated herein by reference.
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An explanation of the factors bearing on operational control and of the
pertinent federal aviation regulations can be obtained from the nearest FAA
Flight Standards District Office.
I, the undersigned lessee, Kyle T. Craig, Chairman of the Lessee, certify
that I am responsible for operational control of the aircraft when it is
operated pursuant to this dry lease, and that I understand my responsibilities
for compliance with applicable federal aviation regulations.
IN WITNESS WHEREOF, the parties have executed this Lease Agreement.
BOWANA AVIATION, INC.
/s/ Scott Beck
_____________________________________ _____________________________________
Scott Beck, President Date and time of execution
EINSTEIN BROS. BAGELS, INC.
/s/ Kyle Craig 11:45 A.M. 1-18-96
_____________________________________ _____________________________________
Date and time of execution
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INSTRUCTIONS FOR COMPLIANCE WITH
"TRUTH IN LEASING" REQUIREMENTS
1. Mail a copy of the contract to the following address via certified
mail, retum receipt requested immediately upon the execution of the Agreement:
(14 C.F.R. 91.23 requires that the copy be sent within 24 hours after it is
signed.)
Federal Aviation Administration
Aircraft Registration Branch
Attn: Technical Section
P. O. Box 25724
Oklahoma City, Oklahoma 73125
2. Telephone the nearest Flight Standards District Office at least 48
hours prior to the first flight under this Agreement.
3. Carry a copy of the contract in the aircraft at all times.
<PAGE>
Exhibit 10.28
FORM OF FOURTH AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
BAGEL STORE DEVELOPMENT FUNDING, L.L.C.
(FORMERLY KNOWN AS
EINSTEIN BROS. EQUITY FUNDING, L.L.C.)
This Fourth Amended and Restated Limited Liability Company Agreement
of Bagel Store Development Funding, L.L.C. (formerly known as Einstein Bros.
Equity Funding, L.L.C.) (the "Company") is made as of ____ __, 1996, among the
Persons whose names and signatures are set forth on the signature pages hereto.
RECITALS
The Company was formed pursuant to the Delaware Limited Liability
Company Act, 6 Del.C. (S)18-101, et seq., as amended from time to time (the
"Delaware Act"), on December 7, 1995. Additional Members were admitted to the
Company on December 29, 1995 and March 8, 1996 pursuant to an Amended and
Restated Limited Liability Company Agreement dated as of December 29, 1995 and a
Second Amended and Restated Limited Liability Company Agreement dated as of
March 8, 1996. The Members entered into a Third Amended and Restated Limited
Liability Company Agreement dated as of March 29, 1996 to provide for certain
changes in the manner and time of making additional Capital Contributions by the
Members.
The parties hereto desire to continue the Company as a limited
liability company under the Delaware Act and to provide for certain changes in
the governance and operations of the Company.
COVENANTS
In consideration of the agreements and obligations set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINED TERMS
SECTION 1.1 DEFINITIONS. Unless the context otherwise requires, the
terms defined in this Article I shall, for the purposes of this Agreement, have
the meanings herein specified.
"Additional Funding" has the meaning given it in Section 4.1.1.
"Additional Funding Obligation" has the meaning given it in Section
4.1.1.
"Affiliate" means with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by, or is under common control
with, the specified Person. As used in this definition, the term "control"
means the possession, directly or indirectly, of the
<PAGE>
Power to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities, by contract or
otherwise.
"Agreement" means this Limited Liability Company Agreement, as
amended, modified, supplemented or restated from time to time.
"Area Developer" means a Person who has entered into an area
development agreement with Bagel Corp. and in whom Bagel Corp. has made an
investment in the form of convertible debt.
"Assignee" means any Person who is an assignee of a Member's interest
in the Company, or part thereof, and who does not become a Member pursuant to
Section 13.1 hereof.
"Bagel Corp." means Einstein/Noah Bagel Corp., a Delaware
corporation.
"Bankruptcy" has the meaning given it in Section 18-101 of the
Delaware Act.
"BCI" means Boston Chicken, Inc., a Delaware corporation.
"Capital Account" means, with respect to any Member or Assignee, the
account maintained for such Member or Assignee in accordance with the provisions
of Section 4.4 hereof.
"Capital Contribution" means, with respect to any Member, the
aggregate amount of money actually contributed to the Company pursuant to
Section 4.1 hereof with respect to the Units held by such Member. In the case
of a Member or Assignee who acquires an interest in the Company by virtue of an
assignment in accordance with the terms of this Agreement, "Capital
Contribution" has the meaning set forth in Section 4.4.1 hereof.
"Cause" for the removal of Bagel Corp. as Manager means (i) a failure
by Bagel Corp. as Manager to make any distribution when required by the terms of
this Agreement, (ii) a failure by Bagel Corp. as Manager to deliver to the
Members the financial statements and other information required to be delivered
by Section 10.1.2 or (iii) any other violation of this Agreement by Bagel Corp.
as Manager.
"Certificate" means the Certificate of Formation and any and all
amendments thereto and restatements thereof filed on behalf of the Company with
the office of the Secretary of State of the State of Delaware pursuant to the
Delaware Act.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section of the Code refers not only to
such specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Company" means Bagel Store Development Funding, L.L.C., the limited
liability company heretofore formed under the name Einstein Bros. Equity
Funding, L.L.C. and continued under and pursuant to the Delaware Act and this
Agreement.
"Covered Person" means a Member, any Manager, any Affiliate of a
Member or of any Manager, any officers, directors, shareholders, partners,
employees, representatives or agents of a Member, any Manager or their
respective Affiliates, any member of the Advisory Committee or designated
alternate to the Advisory Committee, or any officer, employee or agent
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of the Company or its Affiliates, including without limitation Bagel Corp. and
its officers, directors, shareholders and employees at any time that Bagel Corp.
is providing services to the Company.
"Delaware Act" means the Delaware Limited Liability Company Act, 6
Del.C. (S) 18-101, et seq., as amended from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Member" means a Member which is (i) an "Employee Benefit Plan"
within the meaning of and subject to the provisions of ERISA, (ii) a "Plan"
within the meaning of and subject to Section 4975 of the Code or (iii) an entity
the assets of which constitute assets of an Employee Benefit Plan or a Plan
under Department of Labor Regulations 29 C.F.R. Section 2510.3-101.
"Fiscal Year" means the accounting period selected by the Manager or
Managers or any portion of such period for which the Company is required to
allocate Profits, Losses and other items of Company income, gain, loss or
deduction pursuant to Article VIII hereof.
"Gross Asset Value" means, with respect to any asset, such asset's
adjusted basis for federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed by a Member
to the Company shall be the gross fair market value of such asset, as
agreed to by the contributing Member and the Manager or Managers;
(ii) the Gross Asset Value of all Company assets shall be adjusted to
equal their respective gross fair market values, as determined by the
Manager or Managers, as of the following times: (a) the acquisition of an
additional interest in the Company by any new or existing Member in
exchange for more than a de minimis Capital Contribution; (b) the
distribution by the Company to a Member or Assignee of more than a de
minimis amount of Company assets as consideration for an interest in the
Company; and (c) the liquidation of the Company within the meaning of
Treasury Regulation Section 1.704-1(b)(2)(ii)(g); provided, however, that
adjustments pursuant to clause (a) and clause (b) of this sentence shall be
made only if the Manager or Managers reasonably determine that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Members and Assignees in the Company; and
(iii) the Gross Asset Value of any Company asset distributed to any
Member or Assignee shall be the gross fair market value of such asset on
the date of distribution, as determined by the distributee Member or
Assignee and the Manager or Managers.
"Liquidating Trustee" has the meaning set forth in Section 14.3
hereof.
"Majority Vote" means, with respect to any group of Members as of any
particular time, the vote of Members in such group whose Units at such time
exceed one-half of the outstanding Units of all Members in such group at such
time and whose Capital Account balances at such time exceed one-half of the
outstanding Capital Account balances of all Members in such group at such time,
in each case ignoring any Units or Capital Account balances held by Assignees.
"Manager" or "Managers" means the Person or Persons designated by the
Members in Article VI hereof as the manager of the Company within the meaning of
the
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Delaware Act and shall include all successors appointed pursuant to the
provisions of this Agreement. References to the "Manager", the "Managers" or the
"Manager or Managers" shall all be construed to refer to the Person or Persons
then serving as Managers of the Company.
"Member" means any Person named as a member of the Company on Schedule
A hereto and includes any Person admitted as a Substitute Member pursuant to the
provisions of this Agreement, and "Members" means two or more of such Persons
when acting in their capacities as members of the Company. For purposes of the
Delaware Act, the Members shall constitute one class or group of members.
"Other Business Entity" has the meaning given it in Section 18-209 of
the Delaware Act.
"Permitted Temporary Investments" means Treasury securities, bank
certificates of deposit and time deposits, in each case having a maturity of one
year or less, commercial paper or money-market instruments.
"Person" includes any individual, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company, or other legal entity or organization.
"Profits" and "Losses" means, for each Fiscal Year, an amount equal to
the Company's taxable income or loss for such Fiscal Year, determined in
accordance with Section 703(a) of the Code (but including in taxable income or
loss, for this purpose, all items of income, gain, loss or deduction required to
be stated separately pursuant to Section 703(a)(1) of the Code), with the
following adjustments:
(i) any income of the Company exempt from federal income tax and not
otherwise taken into account in computing Profits or Losses pursuant to
this definition shall be added to such taxable income or loss;
(ii) any expenditures of the Company described in Section 705(a)(2)(B)
of the Code (or treated as expenditures described in Section 705(a)(2)(B)
of the Code pursuant to Treasury Regulation Section 1.704-1 (b)(2)(iv)(i))
and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be subtracted from such taxable income or
loss;
(iii) in the event the Gross Asset Value of any Company asset is
adjusted in accordance with paragraph (ii) or paragraph (iii) of the
definition of "Gross Asset Value" above, the amount of such adjustment
shall be taken into account as gain or loss from the disposition of such
asset for purposes of computing Profits or Losses; and
(iv) gain or loss resulting from any disposition of any asset of the
Company with respect to which gain or loss is recognized for federal income
tax purposes shall be computed by reference to the Gross Asset Value of the
asset disposed of, notwithstanding that the adjusted tax basis of such
asset differs from its Gross Asset Value.
"Substitute Member" means a Person who is admitted to the Company as a
Member pursuant to Section 13.1 hereof, and who is named as a Member on Schedule
A to this Agreement.
"Tax Matters Partner" has the meaning set forth in Section 11.1
hereof.
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"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Unit" means an interest in the Company representing such fractional
part of the interest of all Members and Assignees pursuant to this Agreement as
is equal to one divided by the total number of Units.
ARTICLE II
CONTINUATION AND TERM
SECTION 2.1 CONTINUATION.
2.1.1 The Members hereby agree to continue the Company as a
limited liability company under and pursuant to the provisions of the
Delaware Act and agree that the rights, duties and liabilities of the
Members and the Managers shall be as provided in the Delaware Act,
except as otherwise provided herein.
2.1.2 The name and mailing address of each Member and Assignee
shall be listed on Schedule A attached hereto. The Manager or
Managers shall update Schedule A from time to time as necessary to
accurately reflect the information therein. Any amendment or revision
to Schedule A made in accordance with this Agreement shall not be
deemed an amendment to this Agreement. Any reference in this
Agreement to Schedule A shall be deemed to be a reference to Schedule
A as amended and in effect from time to time.
SECTION 2.2 NAME. The name of the Company continued hereby is Bagel
Store Development Funding, L.L.C. The business of the Company may be conducted
upon compliance with all applicable laws under any other name designated by the
Managers. The Managers may amend the Certificate to change the name of the
Company to any name designated by the Managers.
SECTION 2.3 TERM. The term of the Company commenced on the date the
Certificate was filed in the office of the Secretary of State of the State of
Delaware and shall continue until December 31, 2005, unless dissolved before
such date in accordance with the provisions of this Agreement.
SECTION 2.4 REGISTERED AGENT AND OFFICE. The Company's registered
agent and office in Delaware shall be The Corporation Trust Company, Corporation
Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. At any time, the
Managers may designate another registered agent and/or registered office.
SECTION 2.5 PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Company shall be at 1526 Cole Boulevard, Suite 200, Golden, CO
80401-4086. Upon ten days notice to the Members, the Managers may change the
location of the Company's principal place of business.
SECTION 2.6 QUALIFICATION IN OTHER JURISDICTIONS. The Managers may
cause the Company to be qualified, formed or registered under assumed or
fictitious name statutes or
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similar laws in any jurisdiction in which the Company transacts business. Any
Manager, as an authorized person, within the meaning of the Delaware Act, may
execute, deliver and file any certificates (and any amendments and/or
restatements thereof) necessary for the Company to qualify to do business in a
jurisdiction in which the Company may wish to conduct business.
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY
SECTION 3.1 PURPOSE. The Company is formed for the object and
purpose of, and the nature of the business to be conducted and promoted by the
Company is, (i) investing in equity securities of Area Developers, (ii)
investing in warrants to purchase shares of Bagel Corp. and (iii) engaging in
any and all activities necessary or incidental to the foregoing and any other
legal business.
SECTION 3.2 POWERS OF THE COMPANY. The Company shall have the power
and authority to take any and all actions necessary, appropriate, proper,
advisable, incidental or convenient to or for the furtherance of the purpose set
forth in Section 3.1, including, but not limited to, the power:
(a) to conduct its business, carry on its operations and have and
exercise the powers granted to a limited liability company by the
Delaware Act in any state, territory, district or possession of the
United States, or in any foreign country that may be necessary,
convenient or incidental to the accomplishment of the purposes of the
Company;
(b) subject to the provisions of Section 3.1, to purchase, take,
receive, subscribe for or otherwise acquire, own, hold, vote, use,
employ, sell, mortgage, lend, pledge or otherwise dispose of, and
otherwise use and deal in and with, shares or other interests in or
obligations of Area Developers and Bagel Corp., or rights to acquire
any of the foregoing;
(c) to purchase, take, receive, subscribe for or otherwise
acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge or
otherwise dispose of, and otherwise use and deal in and with Permitted
Temporary Investments;
d) to enter into, perform and carry out contracts of any kind,
including, without limitation, contracts with any Manager or any
Member or any Affiliate of any of them, or any agent of the Company
necessary to, in connection with, convenient to, or incidental to the
accomplishment of the purpose of the Company;
(e) to lend money;
(f) to sue and be sued, complain and defend, and participate in
administrative or other proceedings, in its name;
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(g) to elect and designate one or more managers of the Company in
accordance with Article VI hereof and to appoint officers, employees
and agents of the Company, and define their duties and fix their
compensation;
(h) to indemnify any Person in accordance with the Delaware Act;
(i) to cease its activities and cancel its Certificate;
(j) to negotiate, enter into, renegotiate, extend, renew,
terminate, modify, amend, waive, execute, acknowledge or take any
other action with respect to any contract or security agreement in
respect of any assets of the Company;
(k) to borrow money and issue evidences of indebtedness, and to
secure the same by a mortgage, pledge or other lien on the assets of
the Company;
(l) to take actions to protect and preserve the Company's assets,
including insuring the business and assets of the Company against
risks;
(m) to hold Company assets in the name of the Company or in the
name of one or more nominees;
(n) to open one or more bank accounts in the name of the Company
or in any other name in which the Company's funds are to be held, make
deposits therein, draw funds therefrom and deal in or with the
Company's funds;
(o) to make distributions of the Company's funds or assets to the
Members as provided for by this Agreement;
(p) to make such income tax elections as may be appropriate or
desirable, as contemplated by the Code and the Treasury Regulations;
prepare and file tax returns for the Company with federal, state and
local authorities; file amendments to such returns; participate in
audits of such returns; consent to extensions relating to such
returns; execute documents relating to the settlement of tax
proceedings involving the Company or its tax returns; participate in
administrative and judicial proceedings, including appeals, relating
to the Company's tax returns or its tax liabilities; and settle issues
relating to the Company's federal and, to the extent required, state
and local income tax returns even though the Members rather than the
Company shall be subject to tax as so determined;
(q) to pay, collect, compromise, litigate, arbitrate or otherwise
adjust or settle any and all other claims or demands of or against the
Company or to hold such proceeds against the payment of contingent
liabilities; and
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(r) to make, execute, acknowledge and file any and all documents
or instruments necessary, convenient or incidental to the
accomplishment of the purposes of the Company.
ARTICLE IV
CAPITAL CONTRIBUTIONS,
UNITS, CAPITAL ACCOUNTS AND ADVANCES
SECTION 4.1 CAPITAL CONTRIBUTIONS.
4.1.1 Each Member has contributed to the capital of the Company
the amount set forth opposite the Member's name on Schedule A attached
hereto. In addition, each Member agrees to contribute to the Company
in the future the aggregate amount set forth opposite such Member's
name on Schedule A under the heading Additional Capital Subscription
at the time or times called for by the Manager or Managers on not less
than 30 days written notice (a "Capital Call"). The Manager or
Managers may not require that any portion of the Additional Capital
Subscription be paid on a date earlier than October 1, 1996 or later
than December 31, 1998 and may not require that the total amount of
the Additional Capital Subscription be paid in more than two
installments, each of which shall be for at least 20% of the Members'
aggregate Additional Capital Subscriptions. The making of each such
additional Capital Contribution is referred to herein as an
"Additional Funding" and the amount each Member is obligated to
contribute at an Additional Funding is referred to as such Member's
"Additional Funding Obligation."
4.1.2 Until March 31, 1996, the Manager may admit additional
Members or accept increased Capital Contributions from Members;
provided that all Capital Contributions shall be on the same terms.
No revaluation of the Company's assets shall be made in connection
with such admission or increase, it being the intention to treat all
such Members as if admitted on the date of this Agreement.
4.1.3 The Members agree that the prompt payment of each
Additional Funding Obligation is of the essence of this Agreement,
that failure of any Member to make such payments will cause injury to
the Company and the other Members and that the amount of damages
caused by such injury will be extremely difficult to calculate.
Accordingly, the Members agree that if a Member fails to pay any of
such Member's Additional Funding Obligations within three days of the
date it is due, or such longer period as the Manager or Managers may
in its or their sole discretion determine (but in no event longer than
45 days), the Company shall treat such defaulting Member's interest in
future Profits of the Company as terminated; and such defaulting
Member shall be entitled to receive from the Company only the amount
of such Member's Capital Account at the time of such default (reduced
by any future allocation of Losses to such Member), such amount to be
payable without interest at the expiration of the term of the Company.
Upon
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such default, the defaulting Member shall cease to have any rights as
a Member except as described in the preceding sentence.
4.1.4 Notwithstanding Section 4.1.3, if at any time before a
date on which any Additional Funding Obligation is payable any ERISA
Member shall obtain and deliver to the Managers an opinion of
independent legal counsel, which counsel and opinion are acceptable to
the Managers (which acceptance the Managers shall not unreasonably
withhold) to the effect that such Member is an ERISA Member and there
is a material likelihood that the payment of such Additional Funding
Obligation would either (i) cause or constitute a prohibited
transaction under Section 406 of ERISA or Section 4975 of the Code or
(ii) cause the assets of the Company to constitute plan assets for
purposes of ERISA, then such Member shall be released from any further
obligation to pay such Additional Funding Obligation.
4.1.5 Upon any default described in Section 4.1.3 or any release
described in Section 4.1.4, the Managers may designate any person to
assume the entire unpaid balance of the Additional Funding Obligation
(and the future Additional Funding Obligation, if any) of the
defaulting or released Member and become a Member entitled to share in
the profits and losses of the Company as determined pursuant to this
Agreement. The Managers agree to offer the opportunity to pay such
Additional Funding Obligation to the Members who are not in default or
released, pro rata to their Capital Contributions, prior to offering
such opportunity to third parties. Any Member who fails to accept
such offer in writing within fifteen (15) days after it is made shall
be deemed to have rejected the offer.
4.1.6 The remedies provided in this Section 4.1 are in addition
to and not in limitation of any other right or remedy of the Company
provided by law or under this Agreement. In the event of any legal
proceedings relating to default by a Member, if the Company shall
prevail, such Member shall pay (i) all costs and expenses incurred by
the Company, including attorneys' fees, and (ii) interest on the
unpaid Additional Funding Obligation at a per annum rate equal to the
lesser of the maximum interest rate permitted by law or the rate of
interest publicly announced from time to time by Bank of America
Illinois, Chicago, Illinois (or its successor in interest), as its
Prime Rate (or its equivalent) for United States Dollar loans, plus
4%.
SECTION 4.2 UNITS. A Member or Assignee's interest in the Company
shall be represented by the "Unit" or "Units" held by such Member or Assignee.
Each Member or Assignee's respective Units shall be set forth on Schedule A
attached hereto. Each Member hereby agrees that its interest in the Company and
in its Units shall for all purposes be personal property. A Member or Assignee
has no interest in specific Company property.
SECTION 4.3 STATUS OF CAPITAL CONTRIBUTIONS.
4.3.1 No Member or Assignee shall have the right to withdraw its
Capital Contribution or Capital Account or to receive any interest,
salary or drawing with respect to its Capital Contributions or its
Capital Account or for
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services rendered on behalf of the Company or otherwise in its
capacity as a Member or Assignee, except as otherwise specifically
provided in this Agreement.
4.3.2 Except as otherwise provided herein and by applicable
state law, the Members shall be liable only to make their Capital
Contributions (including the Additional Funding Obligations) pursuant
to Section 4.1 hereof, and no Member or Assignee shall be required to
lend any funds to the Company or, after a Member's Capital
Contributions (including the Additional Funding Obligations) have been
fully paid pursuant to Section 4.1 hereof, to make any additional
Capital Contributions to the Company. No Member or Assignee shall
have any personal liability for the repayment of any Capital
Contribution of any other Member or Assignee.
SECTION 4.4 CAPITAL ACCOUNTS.
4.4.1 An individual Capital Account shall be established and
maintained for each Member. The original Capital Account established
for any Member or Assignee who acquires an interest in the Company by
virtue of an assignment in accordance with the terms of this Agreement
shall be in the same amount as, and shall replace, the Capital Account
of the assignor of such interest, and, for purposes of this Agreement,
such Member or Assignee shall be deemed to have made the Capital
Contributions made by the assignor of such interest (or made by such
assignor's predecessor in interest) and to have assumed the
obligation, if any, to pay the Additional Funding Obligations of the
assignor of such interest (or the obligation of such assignor's
predecessor in interest); provided, however, that the assignor of such
interest shall not be relieved of the obligation to pay the Additional
Funding Obligations until such Additional Funding Obligations are in
fact paid by such Member or Assignee. To the extent such Member or
Assignee acquires less than the entire interest in the Company of the
assignor of the interest so acquired by such Member or Assignee, the
original Capital Account of such Member or Assignee and its Capital
Contributions and obligation to pay the Additional Funding Obligations
shall be in proportion to the interest it acquires, and the Capital
Account of the assignor who retains a partial interest in the Company,
and the amount of its Capital Contributions shall be reduced in
proportion to the interest it retains.
4.4.2 The Capital Account of each Member or Assignee shall be
maintained in accordance with the following provisions:
(a) to such Member or Assignee's Capital Account there shall
be credited such Member or Assignee's Capital Contributions, such
Member or Assignee's distributive share of Profits and the amount
of any Company liabilities that are assumed by such Member or
Assignee or that are secured by any Company assets distributed to
such Member or Assignee;
(b) to such Member or Assignee's Capital Account there shall
be debited the amount of cash and the Gross Asset Value of any
Company assets distributed to such Member or Assignee pursuant to
any provision
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of this Agreement, such Member or Assignee's distributive share
of Losses and the amount of any liabilities of such Member or
Assignee that are assumed by the Company or that are secured by
any property contributed by such Member or Assignee to the
Company; and
(c) in determining the amount of any liability for purposes
of this Section 4.4.2, there shall be taken into account Section
752(c) of the Code and any other applicable provisions of the
Code and the Treasury Regulations.
SECTION 4.5 ADVANCES. If any Member or Assignee shall advance any
funds to the Company in excess of its Capital Contributions, the amount of such
advance shall neither increase its Capital Account nor entitle it to any
increase in its share of the distributions of the Company. The amount of any
such advance shall be a debt obligation of the Company to such Member or
Assignee and shall be repaid to it by the Company with interest at a per annum
rate equal to the lesser of (i) the rate of interest publicly announced from
time to time by Bank of America Illinois, Chicago, Illinois (or its successor in
interest), as its Prime Rate (or its equivalent) for United States Dollar Loans,
plus 1%, and (ii) the maximum rate permitted by applicable law, and upon such
other terms and conditions as shall be mutually determined by such Member or
Assignee and the Manager or Managers. Any such advance shall be payable and
collectible only out of Company assets, and the other Members and Assignees
shall not be personally obligated to repay any part thereof.
ARTICLE V
MEMBERS
SECTION 5.1 POWERS OF MEMBERS. The Members shall have the power to
exercise any and all rights or powers granted to the Members pursuant to the
express terms of this Agreement. The Members shall also have the power to
authorize the Manager or Managers, by Majority Vote of the Members, to possess
and exercise any right or power not already vested in the Managers pursuant to
Section 6.4 or any other provision of this Agreement. The Members shall not
have the power to bind the Company.
SECTION 5.2 PARTITION. Each Member waives, until termination of the
Company, any and all rights that it may have to maintain an action for partition
of the Company's property.
SECTION 5.3 RESIGNATION OF MEMBERS. A Member may not resign from the
Company without the written consent of the Manager or Managers.
SECTION 5.4 ADVISORY COMMITTEE.
5.4.1 The Company shall have an Advisory Committee consisting of
three persons, as determined by the Manager, none of whom shall be an
officer, director or employee of Bagel Corp. or BCI. The members of
the Advisory Committee shall be nominated by the Manager and approved
by a Majority Vote of Members. Replacement members of the Advisory
Committee shall be selected in the same manner. The Members hereby
agree that the members of the Advisory Committee on the date of this
Agreement shall be Perry J. Lewis, J. Christopher Reyes and Alberto
Finol. The Advisory Committee shall (i)
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determine, at the time such right becomes exercisable, whether the
Company should exercise any right held by it to cause an Area
Developer to purchase from the Company the Company's equity interest
in such Area Developer, (ii) determine, at the time such right becomes
exercisable, whether the Company should exercise any right held by it
to require an Area Developer to undertake an underwritten public
offering, (iii) determine, at the time such right becomes exercisable,
whether the Company should exercise any right held by it to require an
Area Developer to seek to terminate its area development agreement and
franchise agreements with Bagel Corp., (iv) determine whether the
Company should sell its equity interest in an Area Developer to such
Area Developer or Bagel Corp. at a price different from the "Put
Price" as defined in the governing documents of the Area Developer at
the time the Company acquired its equity interest, (v) consult with
the Manager with respect to any matters requested by the Manager
concerning the Company's investments, (vi) resolve any questions with
respect to potential conflicts of interest between the Company, on the
one hand, and the Manager, on the other hand, as may be presented by
the Manager to the Advisory Committee, (vii) whenever the Company
holds equity interests in an Area Developer which entitle the Company
to vote with respect to (a) the election of the Manager of the Area
Developer, (b) the approval or disapproval of any merger,
consolidation or sale of substantially all of the assets of such Area
Developer or (c) an amendment to the governing documents of the Area
Developer, determine the manner in which the Company should vote such
equity interests and (viii) perform such other functions and have such
other powers as are expressly provided for in this Agreement.
5.4.2 The Advisory Committee shall have the authority to adopt
rules and procedures, not inconsistent with this Agreement, relating
to the conduct of its affairs. All actions taken by the Advisory
Committee shall be authorized by a majority of the Advisory Committee
members then serving as members. Each member of the Advisory
Committee shall be entitled to designate from time to time an
alternate and such alternate may attend any and all meetings of the
Advisory Committee and otherwise may act in the place and stead of
such member with the same authority and effect as such member.
Members of the Advisory Committee and their alternates shall receive
no fees from the Company for their services, but shall be entitled to
reimbursement from the Company for reasonable travel, lodging and
similar expenses incurred in connection therewith.
5.4.3 The members of the Advisory Committee shall exercise their
best judgment in carrying out their functions for the Company. The
members of the Advisory Committee shall not be liable to the Company
or any Member for any mistakes of judgment or for losses due to such
mistakes or by reason of any act or omission performed or omitted in
good faith and in a manner reasonably believed to be within the scope
of authority conferred on such Advisory Committee by this Agreement.
5.4.4 From and after the time that Bagel Corp. ceases to be the
Manager pursuant to Article VI hereof, the Advisory Committee shall be
disbanded and shall have no further authority with respect to the
Company.
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ARTICLE VI
MANAGERS
SECTION 6.1 DESIGNATION OF MANAGERS. The management of the Company's
business shall be vested in one or more Managers designated by the Members as
hereinafter provided. A Manager may be but need not be a Member. The Members
hereby agree to continue Bagel Corp. as the initial Manager, and Bagel Corp.
agrees to be bound by the terms and conditions of this Agreement. Bagel Corp.
shall be the Manager for a term ending on April 20, 1997.
SECTION 6.2 DESIGNATION OF SUCCESSOR MANAGERS. The Members hereby
agree that, effective April 21, 1997 or at such earlier time as Bagel Corp.
ceases to be the Manager of the Company as a result of its removal or
resignation as provided in this Agreement, the members of the Advisory Committee
immediately prior to the time it is disbanded pursuant to Section 5.4.4 hereof
shall each become, without further action by the Members, a Manager of the
Company and a member of the Board of Managers. The Board of Managers shall act
as provided in Section 6.3 hereof. Each of the members of the Advisory Committee
named in Article V has executed a copy of this Agreement accepting and agreeing
to the terms and conditions of this Agreement and to serve as a Manager and a
member of the Board of Managers as provided herein. In the event that any
replacement members of the Advisory Committee are selected as provided in
Article V, each such member shall be required as a condition of becoming a
member of the Advisory Committee to execute a copy of this Agreement accepting
and agreeing to the terms and conditions of this Agreement and to serve as a
Manager and a member of the Board of Managers as provided herein. On or about
April 1 of each year commencing in 1998, the Board of Managers will submit the
names of its nominees for Managers to the Members. Each nominee who is elected
by a Majority Vote of the Members shall serve as a Manager and a member of the
Board of Managers until he dies, resigns, is removed as provided herein or
becomes unable to fulfill the duties of a Manager and member of the Board of
Managers or (if such Manager is not renominated by the Board of Managers or
fails to be elected by a Majority Vote of the Members) until a successor is
elected by a Majority Vote of the Members. In the event of a vacancy as the
result of the death, resignation, removal or incapacity of a member of the Board
of Managers, the remaining members of the Board of Managers shall promptly
submit the name of its nominee as a successor Manager to the Members. Such
nominee shall become a Manager and a member of the Board of Managers if he
receives a Majority Vote of the Members. If any nominee at any time fails to
receive a Majority Vote of the Members, the Board of Managers shall submit the
name of a different nominee to the Members. No Manager may be an officer,
director or employee of Bagel Corp. or of BCI.
SECTION 6.3 ACTION BY THE BOARD OF MANAGERS. After Bagel Corp.
ceases to be the Manager of the Company, the successor Managers shall act
collectively as the Board of Managers, which shall consist of three Managers.
The Board of Managers may act by a majority vote of its members at a meeting
(which may be conducted by conference telephone) or by a written consent signed
by a majority of its members. Notice of any action taken by a consent signed by
less than all of the members of the Board of Managers shall be given to any
member who did not sign such consent. Each member of the Board of Managers and
any officer of the Company shall be authorized to execute any document or take
any action on behalf of the Company if such document or action has been approved
by the Board of Managers. The Board of Managers may make additional rules to
facilitate its management of the Company.
SECTION 6.4 POWER AND AUTHORITY OF THE MANAGERS. Subject to the
limitations expressly set forth in this Agreement, the business and affairs of
the Company shall be managed by the Managers, and, except as provided in Section
5.4 hereof, the Managers shall have full authority to act for and to bind the
Company in all matters in connection with or
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relating to the Company's business, including, without limitation, directing the
investment of the Company's assets in Area Developers in the sole discretion of
the Managers. No Person dealing with the Company shall be required to inquire as
to the authority of any Manager or any officer of the Company to take any action
on behalf of the Company.
SECTION 6.5 LIMITATIONS ON THE MANAGERS' POWERS. Notwithstanding the
provisions of Section 6.4, the Managers shall not have the power to take any of
the following actions unless such actions have been approved by a Majority Vote
of the Members (and, in the case of an amendment to this Agreement, such
additional approvals as are required by Section 7.2 hereof):
(a) to make investments other than (i) Permitted Temporary
Investments, (ii) shares or other interests in or obligations of Area
Developers and Bagel Corp. or (iii) rights to acquire any of the
foregoing;
(b) to cause the Company to merge with, or consolidate into,
another Delaware limited liability company or Other Business Entity;
(c) to amend this Agreement; or
(d) to dissolve the Company except as provided in Section 14.2
hereof.
SECTION 6.6 MANAGEMENT FEES AND REIMBURSEMENT.
6.6.1 While Bagel Corp. is the Manager it shall receive from the
Company a one-time fee in the amount of $500,000 payable in four equal
quarterly installments not later than the end of each 1996 fiscal
quarter of the Manager and a management fee of $50,000 for the first
calendar quarter of 1997, payable not later than the end of such
quarter.
6.6.2 Beginning at the time that the members of the Board of
Managers become the successor Managers, each member of the Board of
Managers shall receive an annual management fee equal to $33,333,
payable in equal quarterly installments not later than the end of each
calendar quarter.
6.6.3 The Company shall reimburse each Manager for all ordinary
and necessary out-of-pocket expenses incurred by the Manager on behalf
of the Company, including without limitation any fees and expenses (i)
incurred in connection with the organization of the Company, (ii)
incurred in connection with any investment made by the Company or
(iii) paid to Bagel Corp. for services rendered to the Company after
Bagel Corp. has ceased to be the Manager.
6.6.4 Management fees paid pursuant to Section 6.6.1 or Section
6.6.2 and amounts reimbursed pursuant to Section 6.6.3 shall be
treated as expenses of the Company and shall not be deemed to
constitute a distributive share of Profits or a distribution to any
Manager.
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SECTION 6.7 REMOVAL OF MANAGER. While Bagel Corp. is the Manager it
may be removed with Cause at any time by a vote of Members holding more than
two-thirds of the outstanding Units, ignoring for this purpose any Units held by
Assignees. Bagel Corp. may be removed as the Manager without Cause at the end
of any Fiscal Year upon not less than 90 day prior written notice by a vote of
Members holding more than four-fifths of the outstanding Units. If the removal
of Bagel Corp. is for Cause, the removal shall not be effective unless and until
the Members voting to remove Bagel Corp. as the Manager shall have given Bagel
Corp. a written notice specifying the basis for the removal and Bagel Corp.
shall not have acted to remedy such basis within 60 days after such notice is
given. Once Bagel Corp. has ceased to be the Manager, any member of the Board
of Managers may be removed at any time, with or without Cause, by a vote of
Members holding more than two-thirds of the outstanding Units.
SECTION 6.8 RESIGNATION OF MANAGER. Any Manager may resign at any
time upon notice to the Members.
SECTION 6.9 OFFICERS. The Company shall have a president, one or
more vice presidents, a secretary and such assistant secretaries and other
officers as shall be determined by the Managers, and the authority and duties of
each officer shall be determined by the Managers. All officers shall be
appointed by the Managers and may be removed at any time by the Managers with or
without cause. Officers shall not be entitled to receive compensation from the
Company for serving as officers. The initial officers of the Company shall be:
Michael Beaudoin, President; David White, Vice President; Mark Hayden, Vice
President; Paul Strasen, Vice President and Assistant Secretary; and Joel Alam,
Vice President and Secretary.
ARTICLE VII
MEETINGS; AMENDMENTS; MERGER
OR CONSOLIDATION
SECTION 7.1 MEETINGS OF THE MEMBERS.
7.1.1 Meetings of the Members may be called by the Managers and
shall state the location of the meeting and the nature of the business
to be transacted. Notice of any such meeting shall be given to all
Members not less than seven business days nor more than thirty days
prior to the date of such meeting. Members may vote in person or by
proxy at such meeting. Whenever a vote, consent or approval of
Members is permitted or required under this Agreement, such vote,
consent or approval may be given at a meeting of Members or may be
given in accordance with the procedure prescribed in Section 7.1.5.
Except as otherwise expressly provided in this Agreement, the Majority
Vote of the Members shall be required to constitute the act of the
Members.
7.1.2 For the purpose of determining the Members entitled to
vote on, or to vote at, any meeting of the Members or any adjournment
thereof, the Managers may fix, in advance, a date as the record date
for any such determination. Such date shall not be more than thirty
days nor less than ten business days before any such meeting.
7.1.3 Each Member may authorize any Person to act for it by
proxy on all matters in which a Member is entitled to participate,
including waiving notice of any meeting, or voting or participating at
a meeting. Every proxy must be
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signed by the Member or its attorney-in-fact. No proxy shall be valid
after the expiration of eleven months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the Member executing it.
7.1.4 Each meeting of Members shall be conducted by the Managers
or by such other Person that the Managers designate.
7.1.5 Any action which may be taken at a meeting of Members may
be taken without a meeting, without prior notice and without a vote,
if a consent or consents in writing, setting forth the action so
taken, shall be signed by Members having not less than the minimum
number of votes that would be necessary to authorize or take such
action at a meeting and shall be delivered to the Company by delivery
to its registered office, its principal place of business or to an
officer or agent of the Company having custody of the books in which
proceedings of Members are recorded. Delivery made to the Company's
registered office shall be by hand or by certified or registered mail,
return receipt requested.
SECTION 7.2 AMENDMENTS. Except as provided in Section 14.2, any
amendment to this Agreement shall be adopted and be effective as an amendment
hereto only if it receives the approval of the Manager or Managers and a
Majority Vote of the Members; provided, however, that no such amendment shall
(i) extend the term of the Company beyond that permitted by Section 2.3, (ii)
change the purpose of the Company from that set forth in Section 3.1, (iii)
alter the Capital Account of any Member, (iv) change the allocation provisions
of Article VIII hereof, (v) alter the respective interests of the Members in
distributions made by the Company, (vi) increase the liabilities of any Member
beyond those provided for in Section 12.1, (vii) cause the Company to cease to
qualify as a limited liability company under the Delaware Act or (viii) amend
this Section 7.2 to delete or alter any of clauses (i) through (viii), in each
case without the consent of any Member adversely affected thereby, and, in the
case of an amendment described in clause (i), (ii) or (vii), without the consent
of all of the Members and, in the case of an amendment affecting the provisions
of Sections 4.1, 6.7 or 9.1, without the consent of Members owning two-thirds of
the Units.
SECTION 7.3 MERGER OR CONSOLIDATION. The Company may merge with, or
consolidate into, one or more other Delaware limited liability companies or
Other Business Entities only with the approval of the Managers and a Majority
Vote of the Members.
ARTICLE VIII
ALLOCATIONS
SECTION 8.1 PROFITS AND LOSSES. Subject to the allocation rules of
Section 8.2 hereof, Profits and Losses for any Fiscal Year shall be allocated
among the Members and Assignees in proportion to the number of Units held by
each of them; provided, however, that if any Member's interest in Profits has
been terminated pursuant to Section 4.1.3, Profits shall be allocated among the
Members other than the defaulting Member in accordance with their respective
Units and Losses shall be allocated among all of the Members, including the
defaulting Member, in accordance with their respective Units.
SECTION 8.2. ALLOCATION RULES.
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8.2.1 In the event Members are admitted to the Company pursuant
to this Agreement after March 31, 1996, the Profits or Losses
allocated to the Members and Assignees for each Fiscal Year during
which Members are so admitted shall be allocated among the Members and
Assignees in proportion to the number of Units each holds from time to
time during such Fiscal Year in accordance with Section 706 of the
Code, using any convention permitted by law and selected by the
Managers.
8.2.2 For purposes of determining the Profits, Losses or any
other items allocable to any period, Profits, Losses and any such
other items shall be determined on a daily, monthly or other basis, as
determined by the Managers using any method that is permissible under
Section 706 of the Code and the Treasury Regulations thereunder.
8.2.3 Except as otherwise provided in this Agreement, all items
of Company income, gain, loss, deduction and any other allocations not
otherwise provided for shall be divided among the Members and
Assignees in the same proportions as they share Profits and Losses for
the Fiscal Year in question.
SECTION 8.3 TAX ALLOCATIONS.
8.3.1 In accordance with Section 704(c) of the Code and the
Treasury Regulations thereunder, income, gain, loss and deduction with
respect to any property contributed to the capital of the Company
shall, solely for income tax purposes, be allocated among the Members
and Assignees so as to take account of any variation between the
adjusted basis of such property to the Company for federal income tax
purposes and its initial Gross Asset Value (computed in accordance
with Section 1.1 hereof).
8.3.2 In the event the Gross Asset Value of any Company asset is
adjusted pursuant to paragraph (ii) of the definition of "Gross Asset
Value" contained in Section 1.1 hereof, subsequent allocations of
income, gain, loss and deduction with respect to such asset shall take
account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Asset Value in the same
manner as under Section 704(c) of the Code and the Treasury
Regulations thereunder.
8.3.3 Any elections or other decisions relating to allocations
under this Section 8.3, including the selection of any allocation
method permitted under proposed Treasury Regulation Section 1.704-
1(c), shall be made by the Managers in any manner that reasonably
reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 8.3 are solely for purposes of federal, state
and local taxes and shall not affect, or in any way be taken into
account in computing, any Member or Assignee's Capital Account or
share of Profits, Losses, other items or distributions pursuant to any
provision of this Agreement.
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ARTICLE IX
DISTRIBUTIONS
SECTION 9.1 DISTRIBUTIONS. Except as otherwise provided in Article
XIV (relating to the dissolution of the Company) or in this Section 9.1, all
distributions shall be made at such times and in such amounts as shall be
determined by the Managers. All distributions shall be made to the Members and
Assignees in proportion to the number of Units held by each of them. Any
distribution of Capital Contributions that have never been invested in any Area
Developer may be made only if the Managers have received written notice from
Bagel Corp. that no further opportunities to invest in any Area Developer will
be available for a period of at least six months. Except as provided in the
next sentence, any distributions of cash received by the Company with respect to
its equity interest in any Area Developer, whether or not denominated as tax
distributions, shall be promptly distributed by the Company to the Members. The
proceeds (whether in the form of cash or capital stock of Bagel Corp. or BCI) of
any redemption or sale (net of any expenses of such redemption or sale and after
payment of any expenses described in Section 6.6) of any equity interest in an
Area Developer owned by the Company shall be distributed promptly to the
Members; provided, however, that, to the extent that they do not exceed the
amount of capital invested by the Company in the redeeming Area Developer, the
net proceeds of any such redemption or sale occurring on or before June 30, 1997
may be re-invested in accordance with the provisions of Section 3.1 if the
Managers determine to do so. Any warrant or other right held by the Company to
acquire stock of Bagel Corp. shall be distributed to the Members and Assignees
on the later of the date that is (i) six months after the closing of the initial
underwritten public offering of shares of common stock of Bagel Corp. or any
successor to Bagel Corp. or (ii) four months after the payment of the last
Additional Funding Obligation, but in no event later than the date that is six
months prior to the expiration date of such warrant or other right.
SECTION 9.2 WITHHELD TAXES. All amounts withheld pursuant to the
Code or any provision of any state or local tax law with respect to any Member
or Assignee shall be treated as a Distribution to the respective Member or
Assignee pursuant to this Article IX for all purposes of this Agreement, except
to the extent such amount exceeds the amount distributed (or treated as
distributed) pro rata to the Members and Assignees in accordance with their
Units, which excess shall be treated as a loan to the respective Member or
Assignee and shall be repaid by the respective Member or Assignee receiving such
loan at the time that the Company is required to pay over such amount to any
federal, state or local government. The Managers are authorized to withhold
from distributions, or with respect to allocations, to the Members or Assignees
and to pay over to any federal, state or local government any amounts required
to be so withheld pursuant to the Code or any provision of any other federal,
state or local law and shall allocate such amounts to those Members or Assignees
with respect to which such amounts were withheld. If the Managers conclude that
the Company is required to withhold any amount as described in the preceding
sentence, it shall provide prompt written notice to the Members and Assignees of
the reasons it believes that the Company is required to so withhold and an
explanation of the calculation of the amounts withheld or to be withheld. For
purposes of this Section 9.2, the Company may assume that any Member or Assignee
who fails to provide to the Company satisfactory evidence of his tax status for
United States federal income tax purposes is a foreign person. Each Member
agrees to provide written notice to the Company within sixty days of any change
in such Member's tax status for United States federal income tax purposes.
SECTION 9.3 LIMITATIONS ON DISTRIBUTIONS. Notwithstanding any
provision to the contrary contained in this Agreement, the Company shall not
make a distribution to any Member or Assignee on account of its interest in the
Company if such distribution would violate Section 18- 607 of the Delaware Act
or other applicable law.
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ARTICLE X
BOOKS AND RECORDS
SECTION 10.1 BOOKS, RECORDS AND FINANCIAL STATEMENTS.
10.1.1 At all times during the continuance of the Company, the
Company shall maintain, at its principal place of business, separate
books of account for the Company that shall show a true and accurate
record of all costs and expenses incurred, all charges made, all
credits made and received and all income derived in connection with
the operation of the Company's business in accordance with generally
accepted accounting principles consistently applied, and, to the
extent inconsistent therewith, in accordance with this Agreement.
Such books of account, together with a copy of this Agreement and of
the Certificate, shall at all times be maintained at the principal
place of business of the Company and shall be open to inspection and
examination at reasonable times by each Member and its duly authorized
representative for any purpose reasonably related to such Member's
interest in the Company. The books of account and the records of the
Company shall be examined by and reported upon as of the end of each
Fiscal Year by a firm of independent certified public accountants
selected by the Managers.
10.1.2 The Managers shall prepare and maintain, or cause to be
prepared and maintained, the books of account of the Company and shall
use their best efforts to cause the following documents to be
transmitted to each Member at the times hereinafter set forth:
(a) Within four months after the close of each Fiscal Year,
the following financial information:
(i) an audited balance sheet of the Company as of the
beginning and close of such Fiscal Year;
(ii) an audited statement of Company Profits and Losses
for such Fiscal Year; and
(iii) a statement of such Member's Capital Account as
of the close of such Fiscal Year, and changes therein during
such Fiscal Year.
(iv) a statement showing the Store Level Cash Flow (as
defined in the confidential private placement memorandum of
the Company and Bagel Corp. dated December 13, 1995 and the
supplement thereto dated January 31, 1996) of each of the
Area Developers in which the Company has an equity
investment, based upon information received by the Company
from the Area Developers.
(b) Within three months after the close of each Fiscal Year,
a statement indicating such Member's share of each item of
Company
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income, gain, loss, deduction or credit for such Fiscal Year for
income tax purposes.
10.1.3 All information contained in any statement or other
document distributed to any Member pursuant to Section 10.1.2 shall be
deemed accurate, binding and conclusive with respect to such Member
unless written objection is made thereto by such Member to the Company
within 20 business days after the receipt of such statement or other
document by such Member.
SECTIONS 10.2 ACCOUNTING METHOD. For both financial and tax
reporting purposes and for purposes of determining Profits and Losses, the books
and records of the Company shall be kept on the accrual method of accounting
applied in a consistent manner and shall reflect all Company transactions and be
appropriate and adequate for the Company's business.
SECTION 10.3 CONFIDENTIALITY. Each Member and each Manager hereby
covenant and agree that so long as such Member holds Units, or so long as such
Manager serves as a Manager, and for a period of three years thereafter, such
Member or Manager will hold in confidence all financial and other information
concerning the Company, Bagel Corp. and the Area Developers in which the Company
is an investor and will not, without the prior consent of Bagel Corp., disclose
any of such information to any person. The preceding sentence shall not apply
to information which (i) is disclosed in a printed publication available to the
public, or is otherwise in the public domain through no act of such Member or
Manager or the employees or agents of such Member or Manager or other person or
entity which has received such information from or through such Member or
Manager or (ii) is required to be disclosed by proper order of a court of
applicable jurisdiction after adequate notice to Bagel Corp. sufficient to
permit Bagel Corp. to seek a protective order therefor, the imposition of which
protective order such Member or Manager agrees to approve and support. Each
Member or Manager acknowedges that Bagel Corp. and the Area Developers are
intended third party beneficiaries of the covenants in this Section 10.3 and can
enforce such covenants directly against such Member and Manager.
ARTICLE XI
TAX MATTERS
SECTION 11.1 TAX MATTERS PARTNER.
11.1.1 The Managers are hereby authorized to designate a Member
of the Company to serve as the tax matters partner of the Company for
purposes of Section 6231(a)(7) of the Code (the "Tax Matters
Partner"). The Tax Matters Partner shall have the power to manage and
control, on behalf of the Company, any administrative proceeding at
the Company level with the Internal Revenue Service relating to the
determination of any item of Company income, gain, loss, deduction or
credit for federal income tax purposes. The Tax Matters Partner may
be a Manager if the Manager is a Member.
11.1.2 The Tax Matters Partner shall, within ten days of the
receipt of any notice from the Internal Revenue Service in any
administrative proceeding at the
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Company level relating to the determination of any Company item of
income, gain, loss, deduction or credit, mail a copy of such notice to
each Member and Assignee.
11.1.3 The Managers may at any time hereafter designate a new
Tax Matters Partner; provided, however, that only a Member may be
designated as the Tax Matters Partner of the Company.
SECTION 11.2 RIGHT TO MAKE TAX ELECTIONS. The Managers may, in their
discretion, make or revoke, on behalf of the Company, any tax election under the
Code or the Treasury Regulations, or under state, local or foreign law.
ARTICLE XII
LIABILITY, EXCULPATION AND INDEMNIFICATION
SECTION 12.1 LIABILITY.
12.1.1 Except as otherwise provided by the Delaware Act, the
debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations
and liabilities of the Company, and no Covered Person shall be
obligated personally for any such debt, obligation or liability of the
Company solely by reason of being a Covered Person.
12.1.2 Except as otherwise expressly required by law, a Member,
in its capacity as such, shall have no liability in excess of (i) the
amount of its Capital Contributions, (ii) its share of any assets and
undistributed profits of the Company, (iii) its obligation to make
other payments expressly provided for in this Agreement, and (iv) the
amount of any distributions wrongfully distributed to it.
SECTION 12.2 EXCULPATION.
12.2.1 No Covered Person shall be liable to the Company or any
other Covered Person for any loss, damage or claim incurred by reason
of any act or omission performed or omitted by such Covered Person in
good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of authority conferred on such Covered
Person by this Agreement, except that a Covered Person shall be liable
for any such loss, damage or claim incurred by reason of such Covered
Person's gross negligence or willful misconduct.
12.2.2 A Covered Person shall be fully protected in relying in
good faith upon the records of the Company and upon such information,
opinions, reports or statements presented to the Company by any Person
as to matters the Covered Person reasonably believes are within such
other Person's professional or expert competence and who has been
selected with reasonable care by or on behalf of the Company,
including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, Profits or Losses or any other
facts pertinent
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to the existence and amount of assets from which distributions to
Members might properly be paid.
SECTION 12.3 DUTIES OF COVERED PERSONS.
12.3.1 In accordance with Section 18-1101(c)(2) of the Delaware
Act the duties and liabilities of the Managers and the Members, in
their capacities as such, shall be limited to those set forth in this
Agreement.
12.3.2 To the extent that a Covered Person has duties and
liabilities relating to the Company or its Members or to any other
Covered Person, a Covered Person acting under this Agreement shall not
be liable to the Company or its Members or to any other Covered Person
for its good faith reliance on the provisions of this Agreement. The
provisions of this Agreement, to the extent that they restrict the
duties and liabilities of a Covered Person otherwise existing at law
or in equity, are agreed by the parties hereto to replace such other
duties and liabilities of such Covered Person.
12.3.3 The Members expressly acknowledge that Bagel Corp. and
its Affiliates have or will have area development, franchise, lending,
real estate and other relationships with the Area Developers in which
the Company will invest and that Bagel Corp. will have a conflict of
interest in making determinations as Manager as to the Area Developers
in which the Company will invest, the amount of any such investment
and any negotiated terms of such investment. The Members hereby (i)
agree that Bagel Corp. may act in its own interest in making
determinations as Manager in any situation in which such a conflict is
present, (ii) ratify and approve all such determinations made by Bagel
Corp. as Manager, (iii) waive any rights they have or may receive by
reason of such conflicts of interest or such determinations made by
Bagel Corp. as Manager and any right to receive notice of or
disclosure concerning any such conflicts of interest or
determinations, and (iv) covenant not to sue Bagel Corp. in connection
with any such determinations or any matter or thing based upon or
arising out of any such determinations.
12.3.4 Whenever in this Agreement a Covered Person is permitted
or required to make a decision (i) in its "discretion" or under a
grant of similar authority or latitude, the Covered Person shall be
entitled to consider any such interests and factors as it desires,
including its own interests, and shall have no duty or obligation to
give any consideration to any interest of or factors affecting the
Company or any other Person, or (ii) in its "good faith" or under
another express standard, the Covered Person shall act under such
express standard and shall not be subject to any other or different
standard imposed by this Agreement or other applicable law.
SECTION 12.4 INDEMNIFICATION. To the fullest extent permitted by
applicable law, a Covered Person shall be entitled to indemnification from the
Company for any loss, damage or claim incurred by such Covered Person by reason
of any act or omission performed or omitted by such Covered Person in good faith
on behalf of the Company and in a manner reasonably believed to be within the
scope of authority conferred on such Covered Person by this Agreement, except
that no Covered Person shall be entitled to be indemnified in respect of any
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loss, damage or claim incurred by such Covered Person by reason of gross
negligence or willful misconduct with respect to such acts or omissions;
provided, however, that any indemnity under this Section 12.4 shall be provided
out of and to the extent of Company assets only, and no Covered Person shall
have any personal liability on account thereof.
SECTION 12.5 EXPENSES. To the fullest extent permitted by applicable
law, expenses (including legal fees) incurred by a Covered Person in defending
any claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Company prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Company of an undertaking by or
on behalf of the Covered Person to repay such amount if it shall be determined
that the Covered Person is not entitled to be indemnified as authorized in
Section 12.4 hereof.
SECTION 12.6 OUTSIDE BUSINESSES. Any Member, Manager or Affiliate
thereof may engage in or possess an interest in other business ventures of any
nature or description, independently or with others, similar or dissimilar to
the business of the Company, and the Company, the Members and the Managers shall
have no rights by virtue of this Agreement in and to such independent ventures
or the income or profits derived therefrom, and the pursuit of any such venture,
even if competitive with the business of the Company, shall not be deemed
wrongful or improper. No Member, Manager or Affiliate thereof shall be
obligated to present any particular investment opportunity to the Company even
if such opportunity is of a character that, if presented to the Company, could
be taken by the Company, and any Member, Manager or Affiliate thereof shall have
the right to take for its own account (individually or as a partner or
fiduciary) or to recommend to others any such particular investment opportunity.
ARTICLE XIII
ASSIGNABILITY AND SUBSTITUTE MEMBERS
SECTION 13.1 ASSIGNABILITY OF UNITS.
13.1.1 No Member may assign the whole or any part of its Units
or other interests in the Company without the approval of the Managers
and a Majority Vote of all Members other than the assigning Member,
which approval and favorable vote may be given or withheld in the sole
and absolute discretion of the Managers and each such other Member.
If the required approval and favorable vote is obtained for any such
assignment, such assignment shall, nevertheless, not entitle the
Assignee to become a Substitute Member or to be entitled to exercise
or receive any of the rights, powers or benefits of a Member other
than the right to receive distributions to which the assigning Member
would be entitled, unless the assigning Member designates, in a
written instrument delivered to the other Members, its Assignee to
become a Substitute Member and such designation is approved by the
Managers and a Majority Vote of all Members other than the Assignee,
which approval and favorable vote may be given or withheld in the sole
and absolute discretion of the Managers and each such other Member;
and provided further, that such Assignee shall not become a Substitute
Member without having first executed an instrument reasonably
satisfactory to the other Members accepting and agreeing to the terms
and conditions of this Agreement, including a counterpart signature
page to this Agreement, and without having paid to the Company a fee
sufficient to cover all reasonable expenses of the Company in
connection with such Assignee's admission as a Substitute Member. If
a Member assigns all of its interest in the Company and the Assignee
of such interest is entitled to become a Substitute Member pursuant to
this Section, such Assignee shall be admitted to the Company effective
immediately prior to the
23
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effective date of the assignment, and, immediately following such
admission, the assigning Member shall cease to be a member of the
Company. In such event, the Company shall not dissolve if the business
of the Company is continued without dissolution in accordance with
Section 14.2(iii) hereof.
13.1.2 Notwithstanding anything to the contrary herein, (i) the
Managers shall not cause or permit Units to become traded on an
established securities market and (ii) the Managers shall withhold
their consent to any Transfer that, to the Managers' knowledge after
reasonable inquiry, would otherwise be accomplished by a trade on a
secondary market (or the substantial equivalent thereof). For
purposes of this subsection the terms "traded on an established
securities market" and "secondary market (or the substantial
equivalent thereof)" shall have the meanings set forth in Sections
469(k)(2) and 7704 of the Code and any regulations promulgated
thereunder that are in effect at the time of the proposed Transfer.
SECTION 13.2 RECOGNITION OF ASSIGNMENT BY COMPANY. No assignment, or
any part thereof, that is in violation of this Article XIII shall be valid or
effective, and neither the Company nor the Members shall recognize the same for
the purpose of making distributions pursuant to Section 9.1 hereof with respect
to such Company interest or part thereof. Neither the Company nor the
nonassigning Members shall incur any liability as a result of refusing to make
any such distributions to the assignee of any such invalid assignment.
SECTION 13.3 INDEMNIFICATION. In the case of an assignment or
attempted assignment of an interest in the Company that has not received the
consents required by Section 13.1 hereof, the parties engaging or attempting to
engage in such assignment shall be liable to indemnify and hold harmless the
Company, the Managers, the other Members and the respective Covered Persons of
the Company, the Managers and the other Members from all costs, liabilities and
damages that any of such indemnified Persons may incur (including, without
limitation, incremental tax liability and lawyers' fees and expenses) as a
result of such assignment or attempted assignment and efforts to enforce the
indemnity granted hereby.
SECTION 13.4 EFFECTIVE DATE OF ASSIGNMENT. Any valid assignment of a
Member's interest in the Company, or part thereof, pursuant to the provisions of
Section 13.1 hereof shall be effective as of the close of business on the last
day of the calendar month in which the other Members give their written consent
to such assignment (or the last day of the calendar month in which such
assignment occurs, if later). The Company shall, from the effective date of such
assignment, thereafter pay all further distributions on account of the Company
interest (or part thereof) so assigned, to the Assignee of such interest, or
part thereof. As between any Member and its Assignee, Profits and Losses for
the Fiscal Year of the Company in which such assignment occurs shall be
apportioned for federal income tax purposes in accordance with any convention
permitted under Section 706(d) of the Code and selected by the Managers in their
discretion.
ARTICLE XIV
DISSOLUTION, LIQUIDATION AND TERMINATION
SECTION 14.1 NO DISSOLUTION. The Company shall not be dissolved by
the admission of Substitute Members in accordance with the terms of this
Agreement.
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SECTION 14.2 EVENTS CAUSING DISSOLUTION. The Company shall be
dissolved and its affairs shall be wound up only upon the occurrence of any of
the following events:
(i) the expiration of the term of the Company, as provided in
Section 2.3 hereof;
(ii) the approval of the Managers and a Majority Vote of the
Members to dissolve the Company;
(iii) the Bankruptcy of a Member, unless, within 90 days after
the occurrence of such an event, there is given the approval of the
Managers and there is obtained a Majority Vote of the Members other
than such Member to continue the business of the Company;
(iv) the entry of a decree of judicial dissolution under Section
18-802 of the Delaware Act; or
(v) by the Managers at any time that the assets of the Company
consist only of cash, Permitted Temporary Investments, a warrant to
purchase stock of Bagel Corp., stock of Bagel Corp., stock of BCI or
any combination of the foregoing.
Each Member shall give to the Company prompt written notice of the Bankruptcy of
such Member. From and after the time that the Company receives an opinion of
counsel to the Managers to the effect that the provisions of clause (iii) above
are no longer necessary to cause the Company to be classified as a partnership
for federal income tax purposes, this Section 14.2 shall be amended without
further action of the Members to eliminate such clause (iii) and to renumber
clauses (iv) and (v) as clauses (iii) and (iv).
SECTION 14.3 NOTICE OF DISSOLUTION. Upon the dissolution of the
Company, the Person or Persons approved by a Majority Vote of the Members to
carry out the winding up of the Company (the "Liquidating Trustee") shall
promptly notify the Members of such dissolution.
SECTION 14.4 LIQUIDATION. Upon dissolution of the Company, the
Liquidating Trustee shall immediately commence to wind up the Company's affairs;
provided, however, that a reasonable time shall be allowed for the orderly
liquidation of the assets of the Company and the satisfaction of liabilities to
creditors so as to enable the Members to minimize the normal losses attendant
upon a liquidation. The Members and Assignees shall continue to share Profits
and Losses during liquidation in the same proportions, as specified in Article
VIII hereof, as before liquidation. Each Member shall be furnished with a
statement prepared by the Company's certified public accountants that shall set
forth the assets and liabilities of the Company as of the date of dissolution.
The proceeds of liquidation shall be distributed, as realized, in the following
order and priority:
(i) to creditors of the Company, including the Managers or
Members or Assignees who are creditors, to the extent otherwise
permitted by law, in satisfaction of the liabilities of the Company
(whether by payment or the making
25
<PAGE>
of reasonable provision for payment thereof), other than liabilities
for distributions to Members or Assignees; and
(ii) to distribute to the Members and Assignees the remaining
proceeds of liquidation in accordance with their Capital Account
balances, after giving effect to all Capital Contributions,
distributions and allocations for all periods. If any Member is owed
a Capital Account balance pursuant to Section 4.1.3, such Member shall
share in the remaining proceeds of liquidation in the proportion that
such Member's Capital Account balance determined in accordance with
Section 4.1.3 compares to the aggregate Capital Account balances of
all of the other Members, but such Member shall not be entitled to
receive more than the amount determined in accordance with Section
4.1.3.
SECTION 14.5 TERMINATION. The Company shall terminate when all of
the assets of the Company, after payment of or due provision for all debts,
liabilities and obligations of the Company, shall have been distributed to the
Members and Assignees in the manner provided for in this Article XIV, and the
Certificate shall have been canceled in the manner required by the Delaware Act.
SECTION 14.6 CLAIMS OF THE MEMBERS. The Members and Assignees shall
look solely to the Company's assets for the return of their Capital
Contributions, and if the assets of the Company remaining after payment of or
due provision for all debts, liabilities and obligations of the Company are
insufficient to return such Capital Contributions, the Members and Assignees
shall have no recourse against the Company or any other Member or the Manager.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 NOTICES. All notices provided for in this Agreement
shall be in writing, duly signed by the party giving such notice, and shall be
sent by Federal Express or other reliable overnight courier, sent by fax or
mailed by registered or certified mail, return receipt requested, as follows:
(i) if given to the Company, in care of the Managers at the
address of the Company's principal place of business, with a copy to
Bagel Corp. at its mailing address set forth on Schedule A attached
hereto;
(ii) if given to the Managers, at their mailing addresses set
forth on Schedule A attached hereto, with a copy to Bagel Corp.; or
(iii) if given to any Member at the address set forth opposite
its name on Schedule A attached hereto, or at such other address as
such Member may hereafter designate by written notice to the Company.
Each such notice shall be deemed to have been given upon the earlier of the
receipt of such notice by the intended recipient thereof, two days after it is
sent by Federal Express or other reliable overnight courier or sent by fax, or
five days after it is mailed by registered or certified mail, return receipt
requested.
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SECTION 15.2 FAILURE TO PURSUE REMEDIES. The failure of any party to
seek redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.
SECTION 15.3 CUMULATIVE REMEDIES; LIMITATION ON DAMAGES. The rights
and remedies provided by this Agreement are cumulative and the use of any one
right or remedy by any party shall not preclude or waive its right to use any or
all other remedies. Said rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise.
Notwithstanding anything to the contrary herein, no party hereto shall be liable
for consequential, indirect, incidental, special, speculative, exemplary or
punitive damages (including, but not limited to, loss of revenue or profit)
whether such claim alleges breach of contract, tortious conduct including, but
not limited to, negligence, or any other theory.
SECTION 15.4 BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of all of the parties and, to the extent permitted by
this Agreement, their successors, legal representatives and assigns.
SECTION 15.5 CAPTIONS. The captions herein are inserted for
convenience of reference only and shall not affect the construction of this
Agreement.
SECTION 15.6 PRONOUNS AND PLURALS. Whenever the context may require,
any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
SECTION 15.7 SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
SECTION 15.8 COUNTERPARTS. This Agreement may be executed in any
number of counterparts with the same effect as if all parties hereto had signed
the same document. All counterparts shall be construed together and shall
constitute one instrument.
SECTION 15.9 INTEGRATION. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.
SECTION 15.10 GOVERNING LAW. This Agreement and the rights of the
parties hereunder shall be interpreted in accordance with the laws of the State
of Delaware, and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MEMBERS:
By:
-----------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-----------------------------------
Name:
-----------------------------
Title:
----------------------------
By:
-----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE>
This Agreement is accepted and agreed to by:
MANAGER:
EINSTEIN/NOAH BAGEL CORP.
By:
-------------------------------
Name:
-------------------------
Title:
------------------------
MEMBERS OF THE ADVISORY COMMITTEE:
- -------------------------
Perry J. Lewis
- -------------------------
J. Christopher Reyes
- -------------------------
Alberto Finol
<PAGE>
SCHEDULE A
----------
MANAGER
Name Mailing Address
- ---- ---------------
Einstein Bros. Bagels, Inc. 1526 Cole Boulevard
Suite 200
Golden, CO 80401 [?]
MEMBERS
Initial Additional
Mailing Capital Capital Number
Name Address Contribution Subscription of Units
- ---- ------- ------------ ------------ --------
ASSIGNEES
Mailing Capital Number
Name Address Contribution of Units
- ---- ------- ------------ --------
<PAGE>
EXHIBIT 10.29
WARRANT PURCHASE AGREEMENT
This warrant purchase agreement (the "Agreement") is made and entered into
as of this 29th day of December, 1995 by and between Einstein Bros. Bagels,
Inc., a Delaware corporation (the "Company"), and Einstein Bros. Equity Funding,
L.L.C., a Delaware limited liability company (the "Fund").
RECITALS
The Company desires to sell to the Fund, and the Fund desires to purchase
from the Company, on the terms and conditions hereinafter set forth, a warrant
to purchase 4,500 shares of common stock, $.01 par value, of the Company. The
number of shares subject to the warrant may be adjusted as provided herein.
COVENANTS
In consideration of the mutual representations, warranties and covenants
and subject to the conditions herein contained, the parties hereto agree as
follows:
1.0 PURCHASE AND SALE OF WARRANT
1.1 The Company agrees to sell, transfer, assign and deliver to the
Fund at the Closing (as defined herein), and the Fund agrees to purchase and
accept from the Company, on the terms and subject to the conditions set forth in
this Agreement, a warrant (the "Warrant") to purchase 4,500 shares of common
stock, $.01 par value, of the Company, upon the terms and conditions set forth
in the Warrant. The shares purchasable upon exercise of the warrant are
hereinafter referred to as the "Shares". The Warrant will be in the form
previously agreed to by the parties.
1.2 As consideration for the Warrant, the Fund agrees, on the terms
and subject to the conditions set forth in this Agreement, to pay to or for the
account of Seller in cash an amount equal to the product of $10 and the number
of Shares purchasable upon exercise of the warrant (the "Purchase Price").
1.3 The number of Shares purchasable upon exercise of the Warrant has
been initially determined on the assumption that the Fund will receive total
capital contributions of $90,000,000 which it will use to purchase the Warrant,
invest in certain financed area developers of the Company and pay certain fees
and expenses. In the event that (i) the total capital contributions received by
the Fund are less or more than $90,000,000 or (ii) the Fund is dissolved prior
to the Second Funding (as defined in the Amended and Restated Limited Liability
Company Agreement of the Fund dated as of December 29, 1995), the number of
Shares purchasable upon exercise of the Warrant shall be adjusted by multiplying
the 4,500 Shares by a fraction the numerator of which is the "Amount Invested or
Available for Investment" and the denominator of which is $90,000,000. The
"Amount Invested or Available for Investment" shall mean the total amount of
capital contributed or committed to be contributed to the Fund less the amount
of cash to be distributed to the Members of the Fund upon a dissolution prior to
the Second Funding. In the event of such a dissolution, the amount of capital
committed to be contributed to the Fund shall be zero. Such adjustments, if
any, shall be made by the Company (i) at the time that the Fund may no longer
accept additional capital subscriptions, (ii) at such time, if any, as any
Member of the Fund fails to honor its commitment
<PAGE>
to contribute capital and (iii) immediately prior to any dissolution of the Fund
that occurs prior to the Second Funding. Any such adjustment shall be
cumulative, taking into account all facts which have occurred prior to the
making of such adjustment. Upon the making of any such adjustment, (i) the
Company shall prepare a new Warrant, showing the adjusted number of Shares
purchasable upon exercise of the Warrant, (ii) the Fund shall surrender its old
Warrant in exchange for the new Warrant and (iii) the Company shall return to
the Fund or the Fund shall pay to the Company any difference between the
Purchase Price paid at the Closing (as defined in Article II) and the adjusted
Purchase Price determined by multiplying $10 by the number of Shares purchasable
upon exercise of the new Warrant. Upon the distribution of the Warrant by the
Fund to its Members, the adjustment provisions of this Section 1.3 shall be of
no further force and effect.
2.0 CLOSING
2.1 The closing of the purchase and sale of the Warrant shall take
place at the offices of the Fund in Golden, Colorado at 10:00 A.M., local time,
on December 29, 1995, or at such other place or on such other date as may be
mutually agreed by the parties. Throughout this Agreement, such event is
referred to as the "Closing" and such date and time are referred to as the
"Closing Date."
2.2 At the Closing:
2.2.1 The Company shall deliver to the Fund:
2.2.1.1 a duly executed Warrant;
2.2.1.2 a certificate of good standing of the Company,
certified as of a date not more than five business days prior to
the Closing Date by the Secretary of State of Delaware;
2.2.1.3 a certified copy of the Certificate of
Incorporation of the Company, certified as of a date not more
than five business days prior to the Closing Date by the
Secretary of State of Delaware, and a certified copy of the
bylaws of the Company, certified as of the Closing Date by the
Company's secretary or assistant secretary; and
2.2.1.4 a certified copy of resolutions duly adopted by
the Company's board of directors (i) authorizing the issuance of
the Warrant and (ii) authorizing the execution, delivery and
performance of this Agreement and any other agreements
contemplated hereby.
2.2.2 The Fund shall pay to the Company the Purchase Price by
wire transfer of immediately available funds to an account designated
by the Company.
3.0 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Fund to enter into this Agreement and to
purchase the Warrant, the Company represents and warrants to the Fund as
follows:
2
<PAGE>
3.1 The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Company has the
requisite power and authority, and all material licenses, permits and
authorizations necessary, to own its property and assets and to transact the
business in which it is engaged or presently proposes to engage. The Company is
qualified to do business in all states except where the failure to be qualified
would not have a material adverse effect on the business, financial condition,
or results of operations of the Company
3.2 The Company has the power to execute, deliver, and perform its
obligations under the terms of this Agreement, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement and the other agreements and transactions contemplated hereby. Each of
this Agreement and any other agreements contemplated hereby has been duly
executed and delivered by the Company and is a valid and legally binding
obligation of the Company, enforceable in accordance with its terms.
3.3 The authorized capital stock of the Company consists solely of
1,200,000 shares of capital stock, of which 1,000,000 shares are common stock,
par value $.01 per share, and 200,000 shares are preferred stock, par value $.01
per share. As of the date hereof, of the Company's authorized capital stock, (i)
24,754.92 shares of common stock are issued and outstanding and (ii) 6,250
shares of Series A preferred stock are issued and outstanding. All of the issued
and outstanding shares of common stock and preferred stock of the Company are
validly authorized and issued, fully paid and non-assessable. Except for (i) the
rights of the Fund hereunder, (ii) the rights set forth in the Secured Loan
Agreement dated March 24, 1995, as amended (the "Secured Loan Agreement"),
between the Company and Boston Chicken, Inc., a Delaware corporation ("BCI"),
(iii) the conversion rights, if any, of the holders of outstanding shares of the
Company's preferred stock, and (iv) the rights of optionees under the Company's
1995 Stock Option Plan, there are no outstanding warrants, options or rights of
any kind to acquire from the Company any shares of its capital stock or
securities of any kind. Except as provided in Section 6.T of the agreement to
contribute assets dated March 2, 1995 among the Company, Bagel & Bagel, Inc. and
Richard Lozoff (the "B&B Agreement") and in Section 5.S of the agreement to
contribute assets dated March 23, 1995 among the Company, Offerdahl's Bagel
Gourmet, Inc. ("OBG") and the shareholders of OBG (the "OBG Agreement"), there
are no pre-emptive or similar rights with respect to the issuance or sale of
shares of capital stock of the Company. Except as provided in (i) Section 2.3 of
the agreement to contribute shares dated February 17, 1995 by and among the
Company, Brackman Brothers, Inc. and the shareholders of Brackman Brothers,
Inc., (ii) in Section 3 of the B&B Agreement and (iii) in Section 2.G of the OBG
Agreement, and except for any provisions requiring redemption of the Company's
outstanding preferred stock, the Company has no obligation to acquire any of its
issued and outstanding shares of capital stock or any other security issued by
it from any holder thereof. The Company has previously delivered to the Fund
true and correct copies of its certificate of incorporation and bylaws, together
with all amendments thereto through the date hereof.
3.4 The Company has taken all necessary corporate action to cause the
Shares, when issued upon exercise of the Warrant, to be validly authorized and
issued, fully paid and non-assessable.
3.5 Neither the execution, delivery and performance of this Agreement
or the Warrant by the Company, nor the consummation by it of the transactions
contemplated hereby or thereby, will, to the best knowledge of the Company,
violate any applicable law or regulation, or any order, writ, injunction, or
decree of the United States or any court, arbitrator, or governmental or
regulatory official, body, subdivision, instrumentality, agency or authority,
whether federal, state or local ("Governmental Body"), or will conflict or be
inconsistent with or result in any breach of any of the terms, covenants,
conditions or provisions of, or constitute a default under, any agreement to
which the Company is a party or by which it is bound, or result
3
<PAGE>
in the creation of any liens, claims, charges, securitiy interests, restrictions
on transfer (other than restrictions under federal and state securities laws),
options, warrants voting trusts and any other encumbrances of any kind
whatsoever ("Encumbrances") upon any of the property or assets of the Company or
result in the acceleration of, create in any party the right to accelerate,
terminate, modify or cancel, or require any notice under, the terms of any
license, permit, mortgage, deed of trust, lease, agreement or other instrument
to which the Company is a party or by which it is bound, or violate any of the
provisions of the certificate of incorporation or by-laws of the Company. No
permit, consent, approval, or authorization of, or declaration to or filing
with, any Governmental Body or any other person which has not already been
obtained is necessary for the execution and delivery by the Company of this
Agreement or the Warrant or for the consummation by the Company of the
transactions contemplated hereby and thereby.
3.6 The Company is not in material default under or in material
violation of any provision of any agreement to which it is a party. The Company
is in material compliance with all applicable laws and applicable regulations,
and all orders, writs, injunctions and decrees of all Governmental Bodies to
which it is subject or by which it is bound.
3.7 There are no actions, suits, investigations or proceedings
pending or threatened against or affecting the Company or its assets by or
before any Governmental Body or any other tribunal that could have a material
adverse effect on the consummation of the transactions contemplated hereby.
3.8 The Company has no obligation to pay any fees or commissions to
any investment banker, broker, finder or agent with respect to the transactions
contemplated by this Agreement or by the Warrant.
4.0 REPRESENTATIONS AND WARRANTIES OF THE FUND
In order to induce the Company to enter into this Agreement and to
sell the Warrant, the Fund represents and warrants as follows:
4.1 The Fund is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware. The Fund
has the power to execute, deliver and perform its obligations under the terms of
this Agreement, and has taken all necessary action to authorize the execution,
delivery and performance of this Agreement.
4.2 This Agreement has been duly executed and delivered by the Fund
and is a valid and legally binding obligation of the Fund, enforceable in
accordance with its terms. Neither the execution and delivery of this Agreement
by the Fund nor the consummation by it of the transactions contemplated hereby,
will violate any applicable law or regulation, or any order, writ, injunction,
or decree of any Governmental Body, or will conflict or be inconsistent with or
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, any agreement to which the Fund is a party or
by which it is bound, or result in the creation of any Encumbrance upon any of
the property or assets of the Fund or result in the acceleration of, create in
any party the right to accelerate, terminate, modify or cancel, or require any
notice under, the terms of any license, permit, mortgage, deed of trust, lease,
agreement or other instrument to which the Fund is a party or by which it is
bound, or violate any of the provisions of the certificate of formation or
limited liability company agreement of the Fund. No permit, consent, approval or
authorization of, or declaration to or filing with, any Governmental Body or any
other person is required in connection with the execution and delivery of this
Agreement by the Fund and the consummation by it of the transactions
contemplated hereby.
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<PAGE>
4.3 The Fund has no obligation to pay any fees or commissions to any
investment banker, broker, finder or agent with respect to the transactions
contemplated by this Agreement or by the Warrant.
4.4 The Fund understands that neither the Warrant nor the Shares have
been registered under the Securities Act of 1933 and, therefore, cannot be sold
or transferred unless either they are subsequently registered under such Act (as
well as under any applicable state securities laws) or an exemption from such
registration is available.
4.5 The Fund is an accredited investor within the meaning of
Regulation D under the Securities Act of 1933.
5.0 COVENANTS OF THE COMPANY
The Company covenants and agrees that so long as the Warrant (or any
portion thereof) is outstanding, it will perform and observe the following
covenants:
5.1 The Company will maintain books of account in accordance with
generally accepted accounting principles applied on a consistent basis, keep
full and complete financial records and furnish to the Fund, within 90 days
after the end of each fiscal year, a copy of the balance sheet of the Company as
at the end of such year, together with statements of operations, stockholders'
equity and cash flows of the Company for such year, audited and certified by
independent public accountants of recognized national standing and reasonably
satisfactory to the Fund, prepared in accordance with generally accepted
accounting principles consistently applied.
5.2 The Company shall, upon reasonable prior notice to the Company,
permit authorized representatives of the Fund to visit and inspect any of the
properties of the Company including its books of account (and to make copies
thereof and take extracts therefrom at the Fund's expense), and to discuss the
affairs, finances and accounts of the Company with its officers, administrative
employees and independent accountants.
5.3 At all times after the Company has filed a registration statement
with the Securities and Exchange Commission pursuant to the requirements of
either the Securities Act of 1933 or the Securities Exchange Act of 1934, and
such registration statement has become effective, the Company shall file all
reports required to be filed by it under the Securities Act of 1933 and the
Securities Exchange Act of 1934 and the rules and regulations adopted by the
Securities and Exchange Commission thereunder and shall take such further action
as any holder or holders of the Shares may reasonably request, all to the extent
required to enable such holders to sell Shares pursuant to Rule 144 adopted by
the Securities and Exchange Commission under the Securities Act of 1933 (as such
rule may be amended from time to time) or any similar rule or regulation
hereafter adopted by the Securities and Exchange Commission. Upon request, the
Company shall deliver to any holder of Shares a written statement as to whether
it has complied with such requirements.
6.0 COVENANTS OF THE FUND
6.1 The Fund covenants and agrees that so long as it holds any of the
Warrants, and for a period of three years thereafter, it will hold in confidence
all financial and other information concerning the Company received by it and
will not, without the prior consent of the Company, disclose any of such
information to any person other than the Members of the Fund, who have agreed to
hold such information confidential and not disclose it to any other person. The
preceeding sentence shall not apply to information which (i) is disclosed in a
printed
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<PAGE>
publication available to the public, or is otherwise in the public domain
through no act of the Fund or its employees, agents or other person or entity
which has received such information from or through the Fund or (ii) is required
to be disclosed by proper order of a court of applicable jurisdiction after
adequate notice to the Company sufficient to permit the Company to seek a
protective order therefor, the imposition of which protective order the Fund
agrees to approve and support.
7.0 INDEMNIFICATION
7.1 The Company agrees to indemnify, defend and hold harmless the
Fund and its manager, officers, employees and agents, and the directors,
officers, employees and agents of its manager (collectively, the "Fund
Indemnified Persons"), from and against all losses, claims, damages,
liabilities, expenses (including legal fees and expenses), judgments, fines,
settlements and other amounts incurred or suffered by the Fund or the Fund
Indemnified Persons and arising out of the inaccuracy of any of the
representations and warranties made by the Company in this Agreement or any
breach by the Company of this Agreement. The Fund agrees that neither it nor the
Fund Indemnified Persons shall seek against the Company or the Company
Indemnified Persons (as defined below), nor shall the Company or the Company
Indemnified Persons be liable for, any consequential, punitive, special or
exemplary damages for any breach of this Agreement or the agreements and
transactions contemplated hereby.
7.2 The Fund agrees to indemnify, defend and hold harmless the
Company and its officers, directors, employees and agents (the "Company
Indemnified Persons") from and against all losses, claims, damages, liabilities,
expenses (including legal fees and expenses), judgments, fines, settlements and
other amounts incurred or suffered by the Company or the Company Indemnified
Persons and arising out of the inaccuracy of any of the representations and
warranties made by the Fund in this Agreement or any breach by the Fund of this
Agreement. The Company agrees that neither it nor the Company Indemnified
Persons shall seek against the Fund or the Fund Indemnified Persons, nor shall
the Fund or the Fund Indemnified Persons be liable for, any consequential,
punitive, special or exemplary damages for any breach of this agreement or the
agreements and transactions contemplated hereby.
7.3 Any party entitled to indemnification hereunder will give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification and, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of such counsel a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
8.0 MISCELLANEOUS
8.1 The representations, warranties, covenants and indemnification
agreements contained herein are continuing in nature and shall survive the
execution and delivery of this Agreement and the Closing, regardless of any
investigation made by or on behalf of any party to this Agreement.
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<PAGE>
8.2 The parties hereto may amend, modify and supplement this
Agreement in such manner as may be agreed upon by them in writing.
8.3 Each party to this Agreement shall pay all of the expenses
incurred by it in connection with this Agreement, including without limitation
its legal and accounting fees and expenses, and the commissions, fees and
expenses of any person employed or retained by it to bring about, or to
represent it in, the transactions contemplated hereby.
8.4 This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
8.5 This instrument and the form of Warrant contain the entire
agreement of the parties hereto with respect to the purchase of the Warrant, and
supersede all prior understandings and agreements of the parties with respect to
the subject matter hereof.
8.6 The descriptive headings in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
8.7 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
8.8 All notices provided for in this Agreement shall be in writing,
duly signed by the party giving such notice, and shall be sent by FedEx or other
reliable overnight courier, sent by fax or mailed by registered or certified
mail, return receipt requested, as follows:
If to the Company, addressed to such party at:
Einstein Bros. Bagels, Inc.
1526 Cole Boulevard
Suite 200
Golden, Colorado 80401-4086
Attention: General Counsel
If to the Fund, addressed to:
Einstein Bros. Equity Funding, L.L.C.
c/o Einstein Bros. Bagels, Inc.
1526 Cole Boulevard
Suite 200
Golden, Colorado 80401-4086
Attention: General Counsel
Each notice shall be deemed to have been given upon the earlier of the receipt
of such notice by the intended recipient thereof, two days after it is sent by
FedEx or other reliable overnight courier or sent by fax, or five days after it
is mailed by registered or certified mail, return receipt requested.
8.9 This Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado applicable to contracts made and to be
performed therein.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
EINSTEIN BROS. BAGELS, INC.
By: /s/ Paul A. Strasen
_________________________
Name: Paul A. Strasen
_______________________
Its: Vice President
________________________
EINSTEIN BROS. EQUITY FUNDING, L.L.C.
By: EINSTEIN BROS. BAGELS,
INC.
Its: Manager
By: /s/ Paul A. Strasen
______________________
Name:
Its:
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<PAGE>
The security represented by this certificate was originally issued on
December 29, 1995, and has not been registered under the Securities
Act of 1933, as amended. The transfer of such security is subject to
the conditions specified in the Warrant Purchase Agreement, dated as
of December 29, 1995 (as amended and modified from time to time),
between the issuer hereof (the "Company") and Einstein Bros. Equity
Funding, L.L.C. and the Company reserves the right to refuse the
transfer of such security until such conditions have been fulfilled
with respect to such transfer. Upon written request, a copy of such
conditions shall be furnished by the Company to the holder hereof
without charge.
EINSTEIN BROS. BAGELS, INC.
WARRANT CERTIFICATE TO PURCHASE
SHARES OF COMMON STOCK
----------------------
Date of Issuance: December 29, 1995 Certificate W-EF-1
FOR VALUE RECEIVED, Einstein Bros. Bagels, Inc., a Delaware corporation
(the "Company"), hereby grants to Einstein Bros. Equity Funding, L.L.C. or its
registered assigns (the "Registered Holder") the right to purchase from the
Company 4,500 shares of the Company's Common Stock, $.01 par value, at a price
per share of $1,456.48 (as adjusted from time to time in accordance herewith,
the "Exercise Price"). The number of shares of the Company's Common Stock
purchasable upon exercise of this Warrant is subject to adjustment as provided
in the Warrant Purchase Agreement dated as of December 29, 1995 between the
Company and Einstein Bros. Equity Funding, L.L.C.
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
1A. Exercise Period. The Registered Holder may exercise, in whole or in
part, the purchase rights represented by this Warrant at any time and from time
to time during the period commencing on Date of Issuance of this Warrant set
forth above and ending on the fifth anniversary of the Date of Issuance (the
"Exercise Period").
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when the Company
has received all of the following items (the "Exercise Time"):
<PAGE>
(a) a completed Exercise Agreement, as described in paragraph 1C
below, executed by the person exercising all or part of the purchase
rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the name of the Purchaser,
an Assignment or Assignments in the form set forth in Exhibit I hereto
evidencing the assignment of this Warrant to the Purchaser, in which case
the Registered Holder shall have complied with the provisions set forth in
Section 5 hereof; and
(d) cash (payable by wire transfer of same day funds or a certified
or bank cashier's check) in an amount equal to the product of the Exercise
Price multiplied by the number of shares of Company Common Stock being
purchased upon such exercise (the "Aggregate Exercise Price").
(ii) Certificates for shares of Common Stock, if any, purchased upon
exercise of this Warrant shall be delivered by the Company to the Purchaser as
soon as reasonably practicable after the Exercise Time. Unless this Warrant has
expired or all of the purchase rights represented hereby have been exercised,
the Company shall prepare a new Warrant, substantially identical hereto,
representing the rights formerly represented by this Warrant which have not
expired or been exercised and shall, as soon as reasonably practicable, deliver
such new Warrant to the person designated for delivery in the Exercise
Agreement.
(iii) The shares of Common Stock issuable upon the exercise of this
Warrant shall be deemed to have been issued to the Purchaser at the Exercise
Time, and the Purchaser shall be deemed for all purposes to have become the
record holder of such shares of Common Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Common Stock, if any,
upon exercise of this Warrant shall be made without charge to the Registered
Holder or the Purchaser for any issuance tax in respect thereof or other cost
incurred by the Company in connection with such exercise and the related
issuance of shares of Common Stock. Each share of Common Stock issuable upon
exercise of this Warrant shall, when issued, be duly and validly issued and free
from all taxes, liens and charges.
(v) The Company shall assist and cooperate with any Registered Holder or
Purchaser required to make any governmental filings or obtain any governmental
approvals prior to or in connection with any exercise of this Warrant
(including, without limitation, making any filings required to be made by the
Company).
(vi) The Company shall take all such actions as may be necessary to
assure that all such shares of Common Stock may be so issued without violation
of any applicable law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Common Stock of the Company or
their equivalents may be listed (except for official notice of issuance which
shall be immediately delivered by the Company upon such issuance).
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(vii) Notwithstanding any other provision hereof, if an exercise of any
portion of this Warrant is to be made in connection with a registered public
offering of the Company, the sale of the Company or pursuant to Section 3
hereof, the exercise of any portion of this Warrant may, at the election of the
Registered Holder hereof, be conditioned upon the consummation of the public
offering, the sale or the event referred to in the notice described in Section
3, in which case such exercise shall not be deemed to be effective until the
consummation of such transaction.
(viii) Unless the shares of Common Stock to be issued upon exercise of
this Warrant have been registered under the Securities Act of 1933, as amended,
the certificates for such shares shall contain the following legends:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended ("Securities Act"), and may not be
resold or transferred unless registered under the Securities Act or unless the
Company has received an opinion of counsel, which counsel and opinion are
satisfactory to it, that the proposed transfer will not violate the registration
requirements of the Securities Act."
"The securities represented by this certificate are subject to (a) the
restrictions on transfer and other terms and provisions contained in the Warrant
Purchase Agreement dated as of December 29, 1995 between the Company and
Einstein Bros. Equity Funding, L.L.C. (the "LLC"), a copy of which is on file at
the office of each of the Company and the LLC and (b) certain voting agreements
and certain restrictions on transfer set forth in the Warrant issued by the
Company on December 29, 1995, a copy of which is on file at the office of the
Company."
(ix) Each Purchaser who receives shares of the Company's Common Stock
upon exercise of this Warrant agrees that from and after the Exercise Time and
until the earlier of February 28, 1998 or the completion of any Qualified Public
Offering, such Purchaser shall vote (at any meeting and in any action by written
consent) all such shares of Common Stock (and any equity or other voting
securities issued or issuable directly or indirectly with respect to such shares
by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization) over
which such Purchaser has voting control and shall take all other actions within
the control of such Purchaser (whether in such Purchaser's capacity as a
stockholder or director of the Company or otherwise) to cause the election to
the Board of Directors of the Company of (a) Daniel V. Colangelo, (b) Gail
Lozoff, (c) the designee of OBG Holdings, Inc. ("OBG") pursuant to Section 5.M
of the agreement to contribute assets dated March 23, 1995, by and among the
Company, OBG (formerly known as Offerdahl's Bagel Gourmet, Inc.) and the
shareholders of OBG, (d) three directors designated by Boston Chicken, Inc., and
(e) three directors designated from time to time by the holders of an aggregate
of 15,104.95 shares of Common Stock pursuant to subscription agreements entered
into by the purchasers of such shares dated as of March 24, 1995. For purposes
of this paragraph (ix), a "Qualified Public Offering" means a sale in an
underwritten public offering registered under the Securities Act of 1933, as
amended, of shares of the Company's Common Stock in which the aggregate gross
proceeds are equal to at least $15,000,000. Until the provisions of this
paragraph (ix) cease to be effective, a Purchaser shall not sell, transfer,
assign, pledge or
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<PAGE>
otherwise dispose of any interest in any shares of Common Stock, unless in each
case the proposed transferee has executed and delivered to the Company a written
agreement in form satisfactory to the Company pursuant to which such transferee
agrees to be bound by the provisions hereof with respect to the shares of Common
Stock so transferred.
1C. Exercise Agreement. Upon any exercise of this Warrant, the Exercise
Agreement shall be substantially in the form set forth in Exhibit II hereto,
except that if the shares of Common Stock are not to be issued in the name of
the person in whose name this Warrant is registered, the Exercise Agreement
shall also state the name of the person to whom the shares of Common Stock are
to be issued, and if the number of shares of Common Stock to be issued does not
include all the shares of Common Stock purchasable hereunder, it shall also
state the name of the person to whom a new Warrant for the unexercised portion
of the rights hereunder is to be delivered. Such Exercise Agreement shall be
dated the actual date of execution thereof.
Section 2. Adjustment of Exercise Price and Number of Shares. In order to
prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 2,
and the number of shares of Common Stock obtainable upon exercise of this
Warrant shall be subject to adjustment from time to time as provided in this
Section 2.
2A. Subdivision or Combination of Shares of Common Stock. If the Company
at any time subdivides (by any split, dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock obtainable upon exercise of this Warrant shall be proportionately
increased. If the Company at any time combines (by reverse split or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Common Stock obtainable upon exercise of this Warrant shall be proportionately
decreased.
2B. Reorganization, Reclassification, Consolidation, Merger or Sale. The
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
as follows: (a) in the event of any merger, consolidation or reorganization of
the Company with any other corporation or corporations, there shall be
substituted, on an equitable basis, for each such share of Common Stock the
number and kind of shares of stock or other securities to which the holders of
shares of Common Stock of the Company will be entitled pursuant to the
transaction; and (b) in the event of any other relevant change in the
capitalization of the Company, an equitable adjustment shall be provided in the
number of shares of Common Stock. In the event of any such adjustment the
purchase price per share shall be proportionately adjusted.
2C. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions,
then the Company shall make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock obtainable upon exercise of this Warrant so
as to protect the rights of the holders of the Warrants;
4
<PAGE>
provided that no such adjustment shall increase the Exercise Price or decrease
the number of shares of Common Stock.
2D. Notices.
(i) Immediately upon any adjustment of the Exercise Price or the
number of shares of Common Stock issuable upon exercise of this Warrant, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the Registered Holder at
least 10 days prior to the date on which the Company intends to (A) make any
distribution with respect to the shares of Common Stock other than routine
quarterly dividends, (B) make any pro rata subscription offer to holders of
shares of Common Stock or (C) consummate any transaction described in Section 2B
or 2C or any dissolution or liquidation.
Section 3. Intention to Exercise. If the Company gives a notice described
in paragraph (ii) of Section 2D and the Registered Holder informs the Company in
writing within 5 days of receipt of such notice that it intends to exercise the
Warrant in whole or in part, the Company shall not make or consummate the event
described in such notice before the earlier of (i) the completion of the
exercise of the Warrant in whole or in part or (ii) 10 days after the date the
Registered Holder informs the Company of its intention to exercise. If the
event described in such notice is the liquidation of the Company, whether or not
the Registered Holder responds to such notice, the Company shall pay to the
Registered Holder the payment or payments (net of the Exercise Price), if any,
that would have been made to such Registered Holder on the shares of Common
Stock had this Warrant been exercised in full immediately prior to the
liquidation.
Section 4. No Voting Rights; Limitations of Liability. This Warrant shall
not entitle the holder hereof to any voting rights or other rights as a holder
of shares of Common Stock in the Company. No provision hereof, in the absence of
affirmative action by the Registered Holder to purchase shares of Common Stock,
and no enumeration herein of the rights or privileges of the Registered Holder
shall give rise to any liability of such holder for the Exercise Price of Shares
of Common Stock acquirable by exercise hereof or as a holder of shares of Common
Stock in the Company.
Section 5. Warrant Transferable. Subject to the transfer conditions
referred to in the legend endorsed hereon, this Warrant and all rights hereunder
are transferable, in whole or in part, without charge to the Registered Holder,
upon surrender of this Warrant with a properly executed Assignment (in the form
of Exhibit I hereto) at the principal office of the Company.
Section 6. Warrant Exchangeable for Different Denominations. This Warrant
is exchangeable, upon the surrender hereof by the Registered Holder at the
principal office of the Company, for new Warrants of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new Warrants shall
represent such portion of such rights as is designated by the Registered Holder
at the time of such surrender. The date the Company initially issues this
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of the
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<PAGE>
number of times new certificates representing the unexpired and unexercised
rights formerly represented by this Warrant shall be issued. All Warrants
representing portions of the rights hereunder are referred to herein as the
"Warrants."
Section 7. Replacement. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the Registered Holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Company (provided that
if the holder is a financial institution or other institutional investor its own
agreement shall be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Company shall (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind representing
the same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 8. Notices. Except as otherwise expressly provided herein, all
notices referred to in this Warrant shall be in writing, duly signed by the
party giving such notice, and shall be delivered personally, sent by Federal
Express or other reputable overnight courier service (charges prepaid), sent by
fax or sent by registered or certified mail, return receipt requested, postage
prepaid, as follows: (i) if given to the Company, at its principal executive
offices and (ii) if given to the Registered Holder of this Warrant, at such
holder's address as it appears in the records of the Company (unless otherwise
indicated by any such holder). Each such notice shall be deemed to have been
given upon the earlier of the receipt of such notice by the intended recipient
thereof, two days after it is sent by Federal Express or other reliable
overnight courier or sent by fax, or five days after it is mailed by registered
or certified mail, return receipt requested.
Section 9. Amendment and Waiver. Except as otherwise provided herein, the
provisions of the Warrants may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Registered
Holders of Warrants representing a majority of the shares of Common Stock
obtainable upon exercise of the Warrants; provided that no such action may
change the Exercise Price of the Warrants or the number or class of shares of
Common Stock obtainable upon exercise of each Warrant without the written
consent of all of the Registered Holders of Warrants.
Section 10. Descriptive Headings; Governing Law. The descriptive headings
of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The laws of the
State of Delaware shall govern all issues concerning the relative rights of the
Company and the Registered Holder of this Warrant.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated the Date of Issuance hereof.
EINSTEIN BROS. BAGELS, INC.
By:
------------------------------------
Name:
Its:
[Corporate Seal]
Attest:
- ----------------------------------
Secretary
7
<PAGE>
EXHIBIT I
ASSIGNMENT
----------
FOR VALUE RECEIVED, _________________________________ hereby sells, assigns
and transfers all of the rights of the undersigned under the attached Warrant
(Certificate No. W-EF-_____________) with respect to the number of shares of
Common Stock covered thereby set forth below, unto:
Names of Assignee Address Number of Units
- ------------------- ------- ---------------
Dated: Signature _______________________________
Witness ________________________________
<PAGE>
EXHIBIT II
EXERCISE AGREEMENT
------------------
To: Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. W-EF-___________), hereby agrees to purchase __________
shares of Common Stock covered by such Warrant and makes payment herewith in
full therefor at the price per share provided by such Warrant.
Signature______________________________
Address________________________________
<PAGE>
Exhibit 10.30
MODEL
AGREEMENT BETWEEN
EINSTEIN/NOAH BAGEL CORP.
AND
BAGEL STORE DEVELOPMENT FUNDING, L.L.C.
This agreement (the "Agreement") is made as of ______ ___, 199_ by and
between Bagel Store Development Funding, L.L.C., a Delaware limited liability
company (the "Fund"), and Einstein/Noah Bagel Corp., a Delaware corporation
("ENBC").
RECITALS
The Fund desires to make an equity investment in [Area Developer], a
Delaware limited liability company and an ENBC area developer (the "Developer").
To induce the Fund to make such investment, ENBC is willing to enter into this
agreement pursuant to which ENBC will be obligated to purchase such equity
interest in certain cases, all on the terms and subject to the conditions set
forth herein.
COVENANTS
In consideration of the foregoing and the mutual covenants and agreements
contained herein, ENBC and the Fund hereby agree as follows:
1. DEFINED TERMS. As used herein, the following terms shall have the
meanings given them below:
"Business Day" shall mean a day on which Federal and state chartered
banks in Denver, Colorado are open for commercial banking business.
"Company Value" means the amount equal to the product of (i) the
income from operations of the Developer (computed in accordance with generally
accepted accounting principles) before general and administrative expenses,
depreciation and amortization, but after franchise royalties and marketing
expenses (including without limitation contributions to national and local
advertising funds), for the highest of the three fiscal quarters prior to the
quarter in which the Conversion Right or the ENBC Option (each as defined in the
Governing Documents) is exercised with the result that ENBC own a majority of
the outstanding Units of the Developer (or, if applicable, the quarter in which
ENBC fails to consent to an Incorporation and Public Offering or to a
Termination requested pursuant to, and as defined in, the Governing Documents),
adjusted by adding back to income from operations any amounts deducted therefrom
representing rental expense with respect to capital leases and leases that are
not classified as capital leases for financial accounting purposes but that are
intended to be treated as secured borrowings under applicable commercial law and
annualized by dividing
<PAGE>
such amount by the number of weeks in such quarter and multiplying the result by
52, multiplied by (ii) 6.5, less (iii) any indebtedness (other than any
convertible loan from Einstein Bros.) of the Developer outstanding at the time
the Conversion Right or the ENBC Option is exercised (or, if applicable, the
time at which ENBC fails to consent to an Incorporation and Public Offering or
Termination, as the case may be), including without limitation the imputed
principal amount of any lease financing (including for this purpose capital
leases as well as leases that are not classified as capital leases for financial
accounting purposes but that are intended to be treated as secured borrowings
under applicable commercial law), plus (iv) any cash balances of the Developer
at such time, including without limitation any cash paid by ENBC upon the
exercise of the ENBC Option or that would be payable by ENBC upon the exercise
of the ENBC Option (to the extent of the number of Units of the Developer, if
any, remaining outstanding under the ENBC Option less the number of Units of the
Developer, if any, which would be issuable upon the conversion of any
convertible debt from ENBC that has not yet been converted) and any amount
payable to the Developer upon exercise of options outstanding pursuant to the
Developer's Option Plan.
"Developer" shall mean [Area Developer]., a Delaware limited liability
company.
"ENBC" shall mean Einstein/Noah Bagel Corp., a Delaware corporation.
"Fund" shall mean Bagel Store Development Funding, L.L.C., a Delaware
limited liability company.
"Governing Documents" shall mean Developer's certificate of formation
and limited liability company agreement.
"Put Price" means the Company Value divided by the total number of
outstanding Units of the Developer at the time of the determination of the Put
Price, including for this purpose any Units of the Developer issuable upon
exercise of any options outstanding pursuant to the Developer's Option Plan or
upon exercise of the ENBC Option or the Conversion Right, if the ENBC Option and
the Conversion Right have not expired.
"Units" shall mean the units of membership interest in the Developer
that may be owned by the Fund.
"Units of the Developer" shall mean the units of membership interest
in the Developer.
"Unit Purchase Agreement" shall mean the Unit Purchase Agreement dated
the same date as this Agreement pursuant to which the Fund is purchasing an
equity interest in the Developer.
2. PURCHASE OF UNITS BY ENBC IN EVENT OF DEVELOPER'S FAILURE TO
REDEEM. In the event that the Developer fails for any reason to timely redeem
any Units that are required to be redeemed pursuant to the terms of the
Governing Documents, then, subject to the provisions of Section 3 hereof,
ENBC shall purchase from the Fund, and the Fund shall
2
<PAGE>
sell to ENBC, that number of the Units which are not redeemed for a purchase
price equal to the Put Price in effect at the closing of such purchase. Subject
to the provisions of Section 3 hereof, the closing date for the purchase of
Units pursuant to this Section 2 shall be no later than 45 calendar days after
the date the redemption of the Units would have occurred had such redemption
occurred as required by the Governing Documents, or if such date is not a
Business Day, the first Business Day thereafter. The closing shall be held at
the principal offices of ENBC. At the closing, (i) ENBC shall pay the purchase
price for the Units being purchased in cash by wire transfer of immediately
available funds to an account designated by the Fund or, at ENBC's option, by
delivery of registered shares of common stock of ENBC (if ENBC is then a
publicly-traded corporation) or of Boston Chicken, Inc., a Delaware corporation
("BCI"), in either case having a fair market value equal to the Put Price, or a
combination of cash and such shares of common stock of ENBC or BCI equal in the
aggregate to the Put Price, as determined by ENBC, and (ii) the Fund shall
deliver to ENBC an assignment of the Units in a form satisfactory to ENBC. For
purposes of this Section 2, the value of shares of ENBC or BCI common stock
delivered shall be determined as provided in the Governing Documents.
3. GOVERNMENTAL CONSENTS OR APPROVALS. In the event any sale of the
Units by the Fund to ENBC hereunder is subject to any requirement that ENBC or
the Fund shall have obtained any consent to or approval of such transaction from
any governmental authority, then (i) it shall be a condition to the respective
obligations of ENBC and the Fund to consummate such transaction that such
consent or approval shall have been given, and (ii) if such consent or approval
has not been given prior to the closing date otherwise specified herein, the
closing date shall be changed to the second Business Day following the date on
which such consent or approval is given.
4. REPRESENTATIONS AND WARRANTIES OF ENBC. ENBC represents and
warrants to the Fund that:
(a) ENBC is a corporation duly organized and validly existing in good
standing under the laws of the State of Delaware, with full power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action of ENBC. This Agreement has
been duly executed and delivered by and constitutes a valid and binding
obligation of ENBC, enforceable in accordance with its terms.
(c) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) conflict
with or violate any provision of the certificate or incorporation or bylaws
of ENBC or any decree or order of any court or administrative or other
governmental body which is either applicable to, binding upon or
enforceable against ENBC;
3
<PAGE>
(ii) result in any breach of or default under any mortgage, contract,
agreement, indenture, trust or other instrument which is either binding
upon or enforceable against ENBC; or (iii) breach or violate any provision
of any law or regulation applicable to ENBC.
5. REPRESENTATIONS AND WARRANTIES OF THE FUND. The Fund represents
and warrants to ENBC that:
(a) The Fund is a limited liability company duly organized and validly
existing in good standing under the laws of the State of Delaware, with
full power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby.
(b) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary action of members and managers of the Fund.
This Agreement has been duly executed and delivered by the Fund and
constitutes a valid and binding obligation of the Fund enforceable in
accordance with its terms.
(c) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will: (i) conflict
with or violate any provision of the certificate of formation or limited
liability company agreement of the Fund or any decree or order of any court
or administrative or other governmental body which is either applicable to,
binding upon or enforceable against the Fund; (ii) result in any breach of
or default under any mortgage, contract, agreement, indenture, trust or
other instrument which is either binding upon or enforceable against the
Fund; or (iii) breach or violate any provision of any law or regulation
applicable to the Fund.
(d) The Fund is the sole record and beneficial owner of the Units,
free and clear of all liens, pledges, encumbrances, and claims of every
kind. There are no outstanding warrants, options or rights of any kind to
acquire from the Fund any of the Units, there are no restrictions (other
than those arising from federal and state securities laws) on, and there
are no agreements relating to, the transfer of any of the Units other than
this Agreement. The assignment of the Units to ENBC in accordance with
this Agreement will vest title to the Units in ENBC, free and clear of all
liens, pledges, encumbrances, and claims of every kind except those arising
by virtue of any agreement or arrangement entered into by ENBC.
6. CHANGE OF TERMS OF UNITS. The Fund agrees that it will not vote
in favor of, or otherwise consent or agree to, any amendment of the Governing
Documents that would change in any manner whatsoever the voting powers,
designations, preferences, rights, qualifications, restrictions, limitations or
other terms or provisions of the Units without the prior written consent of
ENBC, and the Fund further agrees that it will not transfer the Units
4
<PAGE>
unless it has first obtained the written agreement of the proposed transferee to
be bound by the provisions of this Section 6.
7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
respective representations, warranties, covenants and agreements of the parties
shall survive the consummation of the transactions contemplated hereby.
8. AMENDMENT AND MODIFICATION. The parties hereto may amend, modify
and supplement this Agreement only by an instrument in writing executed by each
party to this Agreement.
9. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns.
10. ENTIRE AGREEMENT. This instrument contains the entire agreement
of the parties hereto with respect to the subject matter hereof and supersedes
all prior understandings and agreements of the parties with respect thereto.
11. HEADINGS. The descriptive headings in this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
12. EXECUTION IN COUNTERPART. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
13. EXPENSES. Each of the parties to this Agreement shall pay all of
the expenses incurred by it in connection with this Agreement, including without
limitation its legal and accounting fees. The Fund shall pay any transfer taxes
arising out of the sale of Units to ENBC pursuant to this Agreement.
14. BROKERS' COMMISSIONS. Each party to this Agreement shall
indemnify and hold harmless the other party from the commission, fee or claim of
any person, firm or corporation employed or retained or claiming to be employed
or retained by it to bring about, or to represent it in, the transactions
contemplated thereby.
15. NOTICES. Any notice, request, information or other document to
be given thereunder to any of the parties by any other party shall be in writing
and delivered personally or sent by FedEx or other carrier, transmitted by fax,
or sent registered or certified mail, postage prepaid, as follows:
If to the Fund, addressed to:
Bagel Store Development Funding, L.L.C.
c/o Einstein/Noah Bagel Corp.
1526 Cole Boulevard, Suite 200
Golden, CO 80401-4086
Attention: General Counsel
5
<PAGE>
If to ENBC, addressed to:
Einstein/Noah Bagel Corp.
1526 Cole Boulevard, Suite 200
Golden, CO 80401-4086
Attention: General Counsel
Each notice shall be deemed to have been given upon the earlier of the receipt
of such notice by the intended recipient thereof, two days after it is sent by
FedEx or other reliable overnight courier or sent by fax, or five days after it
is mailed by registered or certified mail, return receipt requested.
16. LIMITATIONS ON DAMAGES. Notwithstanding anything to the contrary
herein, no party hereto shall be liable for consequential, indirect, incidental,
special, speculative or punitive damages (including, but not limited to, loss of
revenue or profit) whether such claim alleges breach of contract, tortious
conduct including, but not limited to, negligence, or any other theory.
17. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado applicable to contracts
made and to be performed therein.
6
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first above written.
BAGEL STORE DEVELOPMENT FUNDING, L.L.C.
By: EINSTEIN/NOAH BAGEL CORP.
Its Manager
By: ______________________________
Title:____________________________
EINSTEIN/NOAH BAGEL CORP.
By: ______________________________
Title:____________________________
7
<PAGE>
EXHIBIT 10.34
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made this 31st day of March, 1995, by and between
PROGRESSIVE BAGEL CONCEPTS, INC., a Delaware corporation (hereinafter referred
to as the "Company"), and JOHN OFFERDAHL (hereinafter referred to as
"Employee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is engaged in the business of operating retail
bakeries featuring bagels and other food items;
WHEREAS, because of the abilities and expertise of Employee in said
business, the Company desires to employ Employee; and
WHEREAS, Employee is willing to accept such employment upon the terms and
conditions stated herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company hereby employs Employee to perform the duties
----------
described herein, and Employee hereby accepts such employment on the terms and
conditions stated herein. Employee shall hold the position of Vice President of
Operations of the Company. The Employee's initial responsibilities shall include
participation in project teams involving operations systems and training, and
operations management and community relations in South Florida.
2. OFFICES WITH COMPANY. Employee shall be the initial "Founding
--------------------
Director" selected by Offerdahl's Bagel Gourmet, Inc. pursuant to Section 5.M(2)
of that certain Agreement
<PAGE>
to Contribute Assets by and among the Company, Offerdahl's Bagel Gourmet, Inc.
and the shareholders of Offerdahl's Bagel Gourmet, Inc. dated as of March 23,
1995 (the "Contribution Agreement").
3. TERM OF EMPLOYMENT. Subject to the provisions for termination set
------------------
forth herein, the term of employment under this Agreement shall commence on the
date hereof and shall extend until August 1, 1998 (the "Term").
4. DUTIES OF EMPLOYEE. Employee shall perform the duties commensurate
------------------
with his position and experience as shall be assigned to him from time to time
by the Company. Employee shall perform such duties in a diligent manner, shall
devote his entire business time, attention and effort to the affairs of the
Company within the scope of his employment as is reasonably necessary for the
proper rendition of said services, shall diligently promote the interests of the
Company, and shall be just and faithful in carrying out his duties. During the
Term, it shall not be a violation of this Agreement for the Employee to (i)
serve on civic, religious or charitable boards or committees; (ii) deliver
lectures, fulfill speaking engagements or teach at educational institutions; or
(iii) manage personal investments, so long as such activities do not
significantly interfere with the performance of the Employee's responsibilities
as an employee of the Company in accordance with this Agreement. The Company
hereby agrees that the Employee shall not be required, in connection with the
performance of his duties hereunder, to obtain or maintain a residence in the
State of Colorado, or otherwise to relocate his principal residence.
5. COMPENSATION. The Company shall compensate Employee for all services
------------
rendered by him hereunder as follows:
-2-
<PAGE>
(a) salary at a yearly rate of $125,000, payable by the Company in
twenty-six (26) equal installments (subject to any increases as determined by
the Board of Directors from time to time in its sole discretion) after deducting
therefrom all applicable FICA contributions, federal and state income tax
withholding, and any other payroll taxes;
(b) such stock options as may be granted to Employee pursuant to the
Company's 1995 Employee Stock Option Plan, as it may be amended from time to
time, (the "Plan") or any option plan hereinafter adopted by the Company; and
(c) as an inducement for the Employee to execute this Agreement, the
Employee shall receive options under the Plan to purchase that number of shares
of common stock of the Company that have a fair market value, determined based
on the price per share in the Company's initial offering to investors, equal to
$250,000, which options are to be granted on the date hereof (the "Initial
Option Grant"); provided, however, the options granted pursuant to this Section
4(c) shall constitute the Employee's option grant for 1995 under the Plan.
6. BENEFITS, VACATIONS AND REIMBURSEMENT OF EXPENSES. In addition to the
-------------------------------------------------
compensation payable to Employee pursuant to Section 5 above, and all other
compensation or benefits provided for hereunder, Employee shall be entitled to
such reasonable periods of vacation, with full pay, as is consistent with the
general policy as established by the Board of Directors for executives and
business exigencies of the Company, and such benefits of a similar type and
amount and to the same extent as benefits are provided to other similarly
situated employees of the Company. Employee shall also be entitled to receive
such additional benefits to the same extent as benefits are provided to other
similarly situated employees of the Company as established by the Company's
Board of Directors from time to time. The Employee shall be
-3-
<PAGE>
reimbursed for the reasonable business-related expenses incurred by her in
connection with the performance of her duties hereunder.
7. CONFIDENTIALITY. Employee agrees to execute and deliver such
---------------
confidentiality agreement which is to be required to be executed by employees of
the Company generally.
8. CONFLICT OF INTEREST. Employee shall take no action, or engage in any
--------------------
transaction, that could be considered to conflict with the best interests of the
Company, and shall at all times exercise his best judgment and efforts so as to
avoid taking any action, or engaging in any transaction, that might give the
appearance of being in conflict with the best interests of the Company.
9. TERMINATION.
-----------
(a) This Agreement and Employee's employment hereunder shall
immediately terminate, without further notice or action, upon the occurrence of
the death of Employee.
(b) Additionally, the Company shall have the right to terminate this
Agreement and Employee's employment with the Company hereunder, effective upon
written notice to Employee of termination stating the basis for such
termination, under only the following circumstances:
(1) if Employee is permanently disabled (as define below);
or
(2) for "cause," which shall be defined as including any of
the following: (i) any misappropriation of funds or property of the
Company by Employee; (ii) Employee's conviction of a felony, or of any
crime involving moral turpitude, fraud, theft or conversion; (iii)
Employee's failure to submit to
-4-
<PAGE>
a medical examination at the Company's expense within twenty-one (21)
days after receipt of the Company's written request that Employee
submit to such examination; or (iv) a breach of any other material
provision contained in this Agreement which is not cured within thirty
(30) days of written notice by the Company of such breach.
(c) Employee shall be deemed to be "permanently disabled" hereunder
upon the first to occur of any of the following events:
(1) The receipt by the Company of a written certificate
from a physician approved by the Company and reasonably satisfactory
to Employee stating that, based upon one or more examinations of
Employee by such physician, it is such physician's opinion that, for a
period of at least six (6) consecutive months from the date of
certification, Employee is and will be substantially unable to perform
his customary duties for the Company due to physical or mental
infirmity. The Company may request in writing that Employee submit to
such examinations by giving written notice thereof to Employee.
(2) The adjudication of Employee as an incompetent or a
disabled person and the appointment of a conservator or guardian for
his person or property by a court of competent jurisdiction.
(d) If Employee is terminated by the Company for cause, as that term
is defined in Section 9(b)(2), or if Employee voluntarily terminates his
employment (other than for Good Reason), the Company shall not be obligated to
pay Employee any other compensation with respect to any period after the date of
such termination and all stock options granted to
-5-
<PAGE>
Employee, whether or not vested on the date of such termination, shall terminate
and be of no further force and effect. "Good Reason" shall mean (x) that the
Company (through its Board or otherwise) has (i) assigned the Employee duties
which materially diminish the Employee's level of responsibility from that
contemplated by Section 4 above without the Employee's consent; or (ii)
materially breached any of its other covenants and obligations hereunder, or (y)
Boston Chicken, Inc. ("BCI") shall no longer have a Significant Interest (as
hereinafter defined) in the Company. A "Significant Interest" in the Company
shall mean, at any time, BCI's ownership of, or right to, acquire ownership of
(through the exercise of its conversion and/or option rights under its secured
loan agreement with the Company or otherwise, and whether or not such rights are
then exercisable), that number of shares of the Company's voting common stock or
other capital stock of the Company possessing voting power equal to 25% or more
of the Company's then issued and outstanding shares of such stock. To terminate
his employment under this Agreement for Good Reason, the Employee shall give the
Company written notice of the Employee's intent to terminate his employment with
the Company for Good Reason within thirty (30) days of the applicable event or
action referred to in clause (x) or (y) above, which notice shall specify the
Employee's reasons therefor in detail. The Company shall have 30 days from its
receipt of such notice to attempt to cure any such condition giving rise to Good
Reason hereunder.
(e) If Employee dies or becomes permanently disabled during the Term,
or if Employee is terminated by the Company for any reason other than for cause
or if the Employee terminates this Agreement for Good Reason, the Company shall
pay to Employee the entire amount of the cash compensation provided for in
Section 5 hereof that is payable during the
-6-
<PAGE>
remainder of the Term payable in a lump sum cash payment within thirty (30) days
of the effective date of termination (provided that, in the case of death or
disability of Employee, the aforementioned cash payment shall be limited to the
lesser of: (i) one year's cash compensation provided for in Section 5, and (ii)
the cash compensation provided for in Section 5 for the remaining balance of the
Term), any portion of the Initial Option Grant that is not then vested shall be
accelerated and all employee stock options granted to Employee that are vested
on the effective date of such termination (including the Initial Option Grant)
shall continue to be exercisable for a period of the lesser of (x) three (3)
years after the effective date of such termination or (y) the expiration date of
the option. In addition, in the event the Employee's employment with the Company
is terminated at any time after the term of this Agreement other than for cause
(as defined above), any portion of the Initial Option Grant that is not then
vested shall be accelerated and the Initial Option Grant shall be exercisable as
set forth in the preceding sentence. After the effective date of his termination
Employee shall not be eligible to receive any further employee stock options.
(f) Upon any termination of this Agreement by the Company for cause,
Employee shall be deemed automatically to have resigned from any office or
directorship of the Company which he may then hold. Upon any termination of
Employee's employment with the Company, the Employee shall promptly deliver to
the Company (without retaining any copies thereof) all Company files and
documents, forms, letterhead, business cards, computer disks and any other
written, magnetic or printed materials relating to the business of the Company.
10. COVENANT RESTRICTING SOLICITATION. During the term hereof and for a
---------------------------------
period of two (2) years after his employment with the Company, whether pursuant
to this Agreement or
-7-
<PAGE>
otherwise, shall expire or terminate for any reason whatsoever, Employee shall
not, directly or indirectly, solicit or attempt to solicit for employment or
employ any person who is an employee of the Company on the date of Employee's
date of termination or any person who was an employee during the six-month
period prior to such date.
11. COVENANT RESTRICTING COMPETITION. During the term hereof and for a
--------------------------------
period of two (2) years after his employment with the Company, whether pursuant
to this Agreement or otherwise, shall expire or be terminated by Company for
cause, Employee shall not, either directly or indirectly, on his own account, or
as an employee, consultant, partner, owner, officer, director or stockholder of
any other person, firm, partnership, corporation or other entity or in any other
capacity, in any way, directly or indirectly, conduct, engage in, be connected
with, have any interest in, or aid or assist anyone in engaging in a business
which derives 20% or more of its revenues from the retail sale of bagels and/or
bagel-related products, or any business in which the Company is engaged at the
time of, or within one hundred eighty (180) days prior to, such expiration or
termination (a "Competitive Business"); provided, however, Employee may have an
interest in any Competitive Business as a passive investor in such Competitive
Business provided such interest does not exceed three percent (3%) of the
outstanding equity securities of any company which has a class of securities
registered under Section 12 of the Securities Exchange Act of 1934, as amended,
or which is traded on a national securities exchange.
12. REMEDIES. Employee agrees that the period of time provided for in
--------
Sections 10 and 11 above is the minimum period of time necessary, and that other
provisions and restrictions set forth in Sections 10 and 11 and in other
portions of this Agreement are necessary, to protect the Company and its
successors and assigns in the protection of the business conducted by the
-8-
<PAGE>
Company. Employee agrees that the services to be performed by him for the
Company are special and unique, that damages cannot compensate the Company in
the event of a violation of the restrictive covenants contained in Sections 10
and 11 hereof, and that injunctive relief shall be essential for the protection
of the Company and its successors and assigns. Accordingly, Employee agrees and
consents that, in the event he shall violate or breach any of said restrictive
covenants the Company shall be entitled to obtain (and he hereby consents to)
such injunctive relief against Employee, without bond, in addition to such
further or other relief as may appertain equity or law. The exercise or
enforcement by the Company of any right or remedy hereunder shall not preclude
the exercise or enforcement by the Company of any other right or remedy
hereunder or which the Company has the right to enforce under applicable law.
13. EMPLOYEE REPRESENTATIONS. Employee represents and warrants to the
------------------------
Company that (i) he is free to enter into this Agreement and (ii) this Agreement
does not violate the terms of any other agreement to which Employee is a party
or by which he is bound.
14. WAIVER. Failure by either party to insist upon strict compliance
------
with any of the terms, covenants or conditions hereof shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment or any right or remedy hereunder at any one or more times be
deemed a waiver or relinquishment of such right or remedy at any other time or
times.
15. SEVERABILITY. Each section, paragraph, term and provision of this
------------
Agreement, and any portion thereof, shall be considered severable and if for any
reason any such portion of this Agreement is held to be invalid, contrary to, or
in conflict with any applicable present or future law or regulation in a final,
unappealable ruling issued by any court, agency or tribunal with
-9-
<PAGE>
competent jurisdiction in a proceeding to which the Company is a party, that
ruling shall not impair the operation of, or have any other effect upon, such
other portions of this Agreement as may remain otherwise intelligible, which
shall continue to be given full force and effect and bind the parties hereto.
Employee agrees that if any provisions hereof shall be adjudicated to be invalid
or unenforceable in whole or in part, such modifications made to this Agreement
as a result of such adjudication shall be effective only in the particular
jurisdiction in which such adjudication is made. To the extent any provision
hereof is deemed unenforceable by virtue of its scope but may be enforceable by
limitations thereon, the parties hereto agree that the same shall be enforceable
to the fullest extent permissible under the laws and public policies applied in
such jurisdiction in which the enforcement is sought. The parties hereto hereby
authorize any court of competent jurisdiction to modify the restrictive
covenants to the extent necessary to make the same enforceable.
16. BENEFIT. This Agreement shall inure to the benefit of and be binding
-------
upon the Company, its successors and assigns. The rights and benefits of
Employee under this Agreement are personal to him, and are not subject to
voluntary or involuntary alienation, assignment or transfer by him.
17. ENTIRE AGREEMENT. This Agreement contains the entire agreement
----------------
between the parties concerning Employee's employment with the Company, and may
not be modified or rescinded except by a written agreement to such effect signed
by both parties.
18. NOTICES. All notices, request, demands, and other communications
-------
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or by electronic transmission. If mailed,
first class, certified mail, postage prepaid, or
-10-
<PAGE>
sent by reliable overnight delivery service and addressed as follows, or at such
other address as the parties hereto may from time to time designate in writing,
such notices, requests, demands, and other communications shall be deemed
delivered three (3) business days after being so duly posted:
to the Company: Progressive Bagel Concepts, Inc.
1526 Cole Blvd. Suite 200
Golden, CO 80401
Attention: Kyle T. Craig
Facsimile: (303) 202-3360
with copies to: Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, IL 60601
Attention: Michael G. Brennan
Facsimile: (312) 984-2299
and to: Bell, Boyd & Lloyd
70 West Madison Street
Suite 3200
Chicago, IL 60602
Attention: Paul A. Strasen
Facsimile: (312) 372-2098
to Employee: John Offerdahl
3016 Birkdale Street
Fort Lauderdale, Florida 33332
Facsimile: (305) 384-7615
with a copy to: Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A.
515 East Las Olas Boulevard
Suite 1500
Fort Lauderdale, Florida 33301
Attention: Daniel H. Aronson, Esq.
Facsimile: (305) 765-1477
- 11 -
<PAGE>
19. GOVERNING LAW. This Agreement and the rights and obligations of the
-------------
parties hereunder shall be governed by and construed in accordance with the laws
of the State of Colorado applicable to contracts made and to be performed
therein.
20. CONFLICT WITH PLAN. The parties acknowledge that to the extent any
------------------
provision of this Agreement is inconsistent with any provision of the Plan, the
provisions of this Agreement shall control.
21. SURVIVAL. The parties acknowledge and agree that the covenants
--------
contained in Sections 9(e), 10 and 11 of this Agreement shall survive the
termination or expiration of Employee's employment with the Company, whether
pursuant to this Agreement or otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
EMPLOYEE: PROGRESSIVE BAGEL CONCEPTS, INC., A
Delaware corporation
/s/ John Offerdahl By: /s/ Kyle Craig
- -------------------- --------------------------------
John Offerdahl Its: Vice President
-------------------------------
-12-
<PAGE>
EXHIBIT 11
STATEMENT RE COMPUTATION OF LOSS PER SHARE
(In thousands)
<TABLE>
<CAPTION>
Period from Period from
inception (March 24, inception (March 24,
1995) through 1995) through Quarter Ended
December 31, 1995 April 16, 1995 April 21, 1996
-------------------- -------------------- --------------
<S> <C> <C> <C>
Primary earnings per share:
Weighted average number of shares outstanding....... 7,681 7,454 7,701
Incremental shares pursuant to Staff Accounting
Bulletin No. 83................................... 2,514 2,514 2,514
------ ----- ------
Adjusted primary weighted average number of
common and equivalent shares outstanding.......... 10,195 9,968 10,215
====== ===== ======
Fully diluted earnings per share:
Weighted average number of shares outstanding....... 7,681 7,454 7,701
Incremental shares pursuant to Staff Accounting
Bulletin No. 83................................... 2,514 2,514 2,514
------ ----- ------
Adjusted fully diluted weighted average number of
common and equivalent shares outstanding.......... 10,195 9,968 10,215
====== ===== ======
</TABLE>
<PAGE>
Exhibit 21.1
SUBSIDIARIES
Baltimore Bagel Co.
Brackman Brothers, Inc.
Brackman Brothers of Idaho, Inc.
Noah's New York Bagels, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated March 7, 1996 (except with respect to the matters discussed
in Notes 1, 11, 12, and 15, as to which the date is May 28, 1996), on our
audit of the consolidated financial statements of Einstein/Noah Bagel Corp. We
also consent to the references to our firm under the captions "Experts" and
"Selected Financial Data."
ARTHUR ANDERSEN LLP
Denver, Colorado
May 29, 1996
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement on Form S-1 of Einstein
Bros. Bagels, Inc. of our report dated May 7, 1996 on the consolidated
financial statements of Noah's New York Bagels, Inc. appearing in the
Prospectus, which is a part of this Registration Statement and to the
reference to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
San Francisco, California
May 29, 1996
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement on Form S-1 of
Einstein/Noah Bagel Corp. of our report dated April 26, 1996 on the financial
statements of Bagel & Bagel, Inc. appearing in the Prospectus, which is a part
of this Registration Statement and to the reference to us under the heading
"Experts" in such Prospectus.
MAYER HOFFMAN McCANN L.C.
Kansas City, Missouri
May 29, 1996
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our report dated April 24, 1996, on our audit of the combined financial
statements of Offerdahl's Bagel Gourmet, Inc. and Affiliates. We also consent
to the references to our firm under the caption "Experts."
ARTHUR ANDERSEN LLP
Denver, Colorado
May 29, 1996
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report dated April 24, 1996, on our audit of the financial statements of
Baltimore Bagel Co. We also consent to the references to our firm under the
caption "Experts."
ARTHUR ANDERSEN LLP
Denver, Colorado
May 29, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Company's 1995 Audited Financial Statements and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> MAR-24-1995
<PERIOD-END> DEC-31-1995
<CASH> 5,368
<SECURITIES> 0
<RECEIVABLES> 1,408
<ALLOWANCES> 81
<INVENTORY> 883
<CURRENT-ASSETS> 9,287
<PP&E> 20,151
<DEPRECIATION> 741
<TOTAL-ASSETS> 36,584
<CURRENT-LIABILITIES> 9,246
<BONDS> 51,062
<COMMON> 38
7,813
0
<OTHER-SE> (34,747)
<TOTAL-LIABILITY-AND-EQUITY> 36,584
<SALES> 25,685
<TOTAL-REVENUES> 26,423
<CGS> 8,239
<TOTAL-COSTS> 83,290
<OTHER-EXPENSES> (717)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,281
<INCOME-PRETAX> (57,431)
<INCOME-TAX> 0
<INCOME-CONTINUING> (57,431)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (57,431)
<EPS-PRIMARY> (5.62)
<EPS-DILUTED> (5.62)
</TABLE>
